On 30 August 2021, MedservRegis plc (“MedservRegis”) published its interim financial statements covering the six-month period ended 30 June 2021.
It is important to highlight that these financial results are not comparable with those reported by Medserv plc in the first six months of 2020. On 25 June 2021, Medserv plc completed a share-for-share exchange with Regis Holdings Limited (“Regis”), resulting in Medserv plc owning 100% of the share capital and voting rights in Regis. Thereafter, Medserv plc changed its name to MedservRegis plc, reflecting the merger of the two companies into a single entity.
From a legal and taxation perspective, Medserv plc was considered as the acquiring entity. However, since the acquisition had the features of a ‘reverse acquisition’, the transaction had therefore to be accounted for as a ‘reverse acquisition’ from a consolidated perspective, where Regis was the accounting acquirer, and Medserv plc was the legal acquirer.
As a result of the above, the interim financial statements covering the six-month period ended 30 June 2021 represent a continuation of Regis’ financial statements except for the capital structure. While the Condensed Consolidated Interim Statement of Financial Position as at 30 June 2021 represents the consolidation of both the formerly Medserv Group and the acquired Regis Group, on the other hand, the Condensed Consolidated Interim Statements of Profit or Loss and Other Comprehensive Income and Cash Flows for the six-month period ended 30 June 2021 do not include the performance results of the formerly Medserv Group given that the share-for-share exchange took place close to the reporting date of 30 June 2021. Instead, the Condensed Consolidated Interim Statements of Profit or Loss and Other Comprehensive Income and Cash Flows consist of the results of Regis Group for the full six-month period ended 30 June 2021.
During the period under review, revenues amounted to €6.03 million (H1 2020: €6.32 million) reflecting the income generated by Regis from: (i) the provision of ‘Integrated Logistics Support Services’ (€5 million) in Sub-Saharan Africa (namely Angola, Mozambique, South Africa, and Uganda); and (ii) ‘Trading Activity’ (€1.03 million) which comprises the trading and exportation of agricultural commodities and supplies principally in South Africa.
On the expenditure side, net operating costs amounted to €6.53 million (H1 2020: €8.88 million) which however includes a one-time impairment loss on financial assets of €1.33 million. This impairment charge relates to a trade receivable balance that was already considered in the determination of the value of the consideration for the share-for-share exchange.
Despite the extraordinary impairment charge, the operating loss reported in the period under review amounted to €0.5 million which is lower than the operating loss of €2.56 million recorded by Regis in H1 2020. Excluding depreciation and amortisation charges of €0.28 million, as well as a one-time impairment loss on property, plant and equipment of €0.17 million (relating to the sale of a vessel owned by Regis which had already been considered in the determination of the value of the consideration for the share-for-share exchange), MedservRegis recorded a negative EBITDA of €0.06 million (H1 2020: negative EBITDA of €1.26 million).
The financial performance of MedservRegis was boosted by a finance income amounting to €1.27 million which, in the main, was due to foreign exchange gains. After accounting for a €0.03 million share of profit of equity-accounted investees (which comprise interests in associates and a joint venture), MedservRegis reported a pre-tax profit of €0.79 million (H1 2020: pre-tax loss of €2.48 million). The tax charge for the period under review amounted to €0.09 million, thus leading to a net profit from continued operations of €0.71 million. Meanwhile, MedservRegis also recorded a one-time non-cash profit of €1.15 million related to the transfer out by Regis of a number of non-core businesses prior to the transaction with Medserv plc. As a result, the net profit for the period under review amounted to €1.86 million compared to the net loss of €3.18 million in H1 2020.
The Statement of Financial Position as at 30 June 2021 (reflecting the assets and liabilities of Medserv plc and Regis, together as one entity) shows that total assets amounted to just under €171 million mostly comprising of right-of-use assets (€61.2 million); property, plant and equipment (€38.4 million); intangible assets and goodwill (€25.7 million); trade and other receivables (€19.3 million); and cash balances (€9.82 million).
On the other hand, total liabilities amounted to €98.5 million mostly comprising of bonds (€50.1 million); bank borrowings (€9.04 million); and lease liabilities (€18 million).
Total equity of MedservRegis amounted to €72.5 million compared to €4.29 million for Medserv plc on a standalone basis as at 31 December 2020. The gearing ratio (calculated as total debt divided by total debt plus total assets) as at 30 June 2021 of MedservRegis stood at 51.6% whilst the net debt to equity multiple stood at 0.93 times.
In their commentary, the Directors of MedservRegis explained that demand for energy increased in 2021 reflecting the improved economic outlook. However, the expected recovery in demand is dependent on the pandemic being successfully contained. International Energy Companies (“IECs”) are beginning to schedule their onshore and offshore drilling programmes. This allows logistics service companies such as MedservRegis to obtain visibility on these projects. Some of the largest energy projects scheduled for the coming five years are in the Middle East, Sub-Saharan Africa, Mediterranean rim countries and the Guyana/Suriname basin. MedservRegis is strategically positioned in these markets to service these projects from a geographical perspective but more importantly from a quality service offering.
The EBITDA performance of MedservRegis is expected to improve in the second half of the year compared to the first six months. This is underpinned by the resumption of drilling activity in Cyprus and Egypt and the upturn in supply chain logistics and engineering activity in the Middle East and projects in Mozambique. A further positive contributor is work orders received from international contractors who have been awarded projects related to the development of wells and the construction of the world’s longest heated pipeline in Uganda scheduled to commence later in 2021.
The participation of MedservRegis in these projects is secured by long-term contracts with several IECs and their multinational contractors. The Group is also at an advanced stage of signing a facility in the Misurata Free Zone to create a service hub for the oil and gas Libyan market by using Misurata Free Zone as a gateway for onshore drilling activity across Libya. The concept is that the logistics service hub in the Misurata Freezone will include workshops and machine shops certified by international premium licenses held by MedservRegis and affiliated partners.
MedservRegis continues to participate in international tenders to secure new work within its global reach. The Group has maintained a presence in the Guyana-Suriname basin and is negotiating strategic alliances with developers of port facilities to act as the operator of the logistics shore bases which will be required by the IECs and service contractors. Additionally, the Group is supporting non-oil & gas logistics work across its operating regions, including logistics for the graphite mining industry in Mozambique and other industries.
This current environment demands a new operating model of better collaboration across the people and material supply chains. Whilst focusing on the continued integration of operations, MedservRegis will continue to seek and work with other strategic players within its supply chain in order to provide fully integrated solutions to customers.
Despite the current headwinds in the industry, MedservRegis is poised for growth and the driver for this growth is the significant economic development of the countries in which the Group operates in today. In the meantime, MedservRegis is also evaluating its borrowings to optimise its finance costs. The target is to return the Group to a profitable position thus enabling the resumption of dividend payments.