On 27 May 2021, Medserv plc published an Interim Report providing an overview of the company’s performance during the first three months of 2021 as well as the forecasts up to 30 June 2021.
Medserv explained that revenues in Q1 2021 amounted to €5.9 million which, in turn, is 33% lower when compared to the same period in 2020. The reduction in business was mostly due to the contraction in ILSS activity as revenues generated by this segment dropped to €2.7 million from €4.6 million in Q1 2020 reflecting the postponement of various offshore drilling projects in the Mediterranean basin in view of the pandemic. Similarly, the OCTG segment also experienced lower demand as revenues slipped to €3.1 million from €4.1 million in Q1 2020. In this respect, Medserv noted that a rebound in activity is expected to be registered in Q2 2021. In fact, the forecasts for the first six months of 2021 show that Medserv is anticipating OCTG revenues to climb to €7.7 million which, however, would still be 11.5% lower than the amount of €8.7 million in OCTG revenues recorded in H1 2020. On the other hand, ILSS revenues are anticipated to amount to €10.7 million in H1 2021 which, in turn, is 11.5% higher than the figure of €9.6 million recorded in H1 2020.
Overall, although EBITDA dropped to €1 million in Q1 2021 compared to €1.5 million in the same period last year, the EBITDA remained virtually flat at around 17%. Furthermore, given the projected increase in business in Q2 2021, EBITDA is expected to surge by almost 55% to €4.8 million compared to €3.1 million in H1 2020. The improvement in business is also anticipated to lead to a stronger EBITDA margin of 25.8% compared to 16.7% in H1 2020.
In its announcement, Medserv explained that the results for H1 2021 will continue being impacted by the COVID-19 pandemic particularly in the offshore drilling projects. In fact, offshore drilling activity in Libya is still suspended, in Cyprus, drilling activity has been postponed to H2 2021, whilst offshore drilling in Egypt is expected to resume in Q3 2021.
The results for the rest of 2021 are expected to improve with EBITDA per quarter to be better than the previous quarter. Major projects for which Medserv is already contracted are expected to resume in the majority of its operating regions before year end with increased activity and volume in year 2022. These energy projects are of a long-term nature and require ILSS throughout the project life cycle.
Medserv also noted that it is maintaining its growth trajectory as apart from establishing a footprint in the Sub-Saharan region through the proposed transaction with Regis Holdings Limited, Medserv continues to participate in tendering opportunities both in Suriname and neighbouring countries.
Meanwhile, Medserv referred to the proposed merger with Regis Holdings Ltd which, subject to shareholder approval during the upcoming AGM scheduled to be held on 11 June 2021 and other completion conditions, is expected to be concluded by 30 June 2021. The transaction will see the consolidation of two similar groups operating in two different geographical markets, thus strengthening the new company’s market position and broaden its geographical footprint in strategic locations around the Mediterranean region, the Middle East, Sub-Sahara Africa and Suriname. The transaction will also allow Medserv to restructure its capital position as its gearing level will reduce markedly, offering the company various options to finance its growth.
Medserv concluded by noting that despite the turmoil experienced in these last twelve months, it continued to strengthen its business pipeline both organically and through acquisition. The company’s objective is to continue to deliver value to its customers whilst pursuing a new operating model of better collaboration and integration across all the players within the supply chain. The introduction of new equity and increase of energy demands in parallel with the recoverability of the global economy should enable Medserv to improve its financial performance and return to profits.