Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil equipment & services 23 October 2013 Plexus Holdings plc (Plexus or the Group) Preliminary Results for the year to 30 June 2013 Plexus Holdings plc, the AIM quoted oil and gas engineering services business and owner of the proprietary POS-GRIP® method of wellhead engineering, announces its preliminary results for the year ending 30 June 2013.
Results · Record revenue, EBITDA, profit before tax and profit after tax · 29.7% increase in revenue to £25.57m (2012: £19.71m) · 38.3% increase in profit before tax to £4.27m (2012: £3.09m) · 25.7% increase in profit after tax to £3.06m (2012: £2.43m) · 21.8% increase in EBITDA to £7.60m (2012: £6.24m) · 23.6% increase in basic earnings per share to 3.69p (2012: 2.99p) Highlights · Strong sales revenues as a result of POS-GRIP® friction-grip rental wellhead equipment continuing to gain market share following contract wins with a number of new international oil and gas operators, and existing customers · Growing evidence of heightened awareness for the need to adopt the best available and safest technology (‘BAST’) driven by regulator and industry bodies leading to calls for initiatives to solve long term challenges such as subsea annulus monitoring and management · Further industry support secured for on-going Joint Industry Project (‘JIP’) for the development of the new Plexus POS-GRIP HGSS™ subsea wellhead design, with Total E&P Recherche Developpement SAS (‘Total’) signing up as an additional consulting partner alongside existing partners Eni S.p.A.

(‘Eni’), Maersk Oil North Sea UK Ltd (‘Maersk’), Shell International Exploration and Production B.V.

(‘Shell’), Tullow Oil plc (‘Tullow’), and Wintershall Noordzee B.V.

(‘Wintershall’) · Secured initial High Pressure/High Temperature (‘HP/HT’) contracts from three new customers totalling £3.7m: Lotos Exploration and Production Norge AS (‘Lotos’) for £1.0m, Lundin Norway AS (‘Lundin’) for £2.0m, and Glencore Exploration Cameroon Ltd (‘Glencore’) for £0.7m · HP/HT contract wins with existing customers included Talisman Energy Inc.

(‘Talisman’) for £1.15m, Maersk for £1.5m, Gaz de France Suez E&P UK Ltd (‘GDF’) for £1.0m, and Det Norske Oljeselskap ASA (‘DetNor’) for £2.0m · Additional 4 year multi-well contract secured with Brunei Shell Petroleum Sdn Bhd (‘Shell Brunei’) for the supply of standard pressure and HP/HT exploration wellhead equipment with an initial value of circa £2.0m · Post period end secured a first time contract with new customer Eni Australia Limited (‘Eni Aus’) for the supply of standard pressure equipment, an HP/HT contract from Statoil Petroleum AS (‘Statoil’) for £2.5m, a standard pressure contract for Centrica Energy Norway (‘Centrica’) for £0.75m, and an additional standard pressure contract for BG International Egypt (‘BG Egypt’) for £0.35m · Post period end acquisition of a 25% interest in a private manufacturer of specialist oil and gas equipment for a consideration of £0.73m · Post period end, HP/HT Tie-Back has successfully completed the full ‘internals’ testing cycle and will be shortly completing the ‘externals’ testing requirements after which we will begin to engage through the sales team with the industry · Initiatives underway to strengthen Plexus presence in the important Asian region, particularly Singapore, Malaysia, and Brunei with new subsidiaries incorporated in Singapore and Brunei · Capital investment, primarily in additional wellhead rental inventory sets, increased by 76.2% to £8.14m (2012: £4.62m) · Research and Development (‘R&D’) spend, excluding costs of building new test fixtures, increased by 22.0% to £1.46m (2012: £1.20m) · Renewal of bank facilities in October 2013 of £5m credit facility on a three year revolving basis with an additional £1m overdraft on a yearly term · The Board is today proposing a 10% increased final dividend of 0.55p per share (2012: 0.5p), which will be subject to shareholder approval at the Annual General Meeting (‘AGM’) to be held on 5th December 2013.

That follows on from the 12.8% increase in the interim dividend (to 0.44p) making a total dividend for the financial year of 0.99p per share.

If approved the final dividend will be paid on 13th December 2013 to all members appearing on the register of members on the record date 1st November 2013.

The ex-dividend date for the shares is 30th October 2013
For further information please visit www.posgrip.com or contact: Ben van Bilderbeek Plexus Holdings PLC Tel: 020 7795 6890 Graham Stevens Plexus Holdings PLC Tel: 020 7795 6890 Jon Fitzpatrick Cenkos Securities PLC Tel: 020 7397 8900 Ken Fleming Cenkos Securities PLC Tel: 0131 220 6939 Felicity Edwards St Brides Media & Finance Ltd Tel: 020 7236 1177 Frank Buhagair St Brides Media & Finance Ltd Tel: 020 7236 1177
Chief Executive Ben van Bilderbeek said: “It is once again pleasing to be able to report an excellent set of financial results achieved in a year that was particularly active for Plexus, which delivered record revenues, profits, and earnings per share.

This strong on-going progress means that I am delighted to announce that the Board proposes a 10% increase in the final dividend of 0.55p per share for the year ended 30 June 2013, which will be submitted for approval at the Annual General Meeting. “The strong year on year growth in revenues is an important indicator of the momentum that we are continuing to build in a market dominated by a small number of large multi-national oil service companies.

I have always believed in the superior nature of our proprietary patented POS-GRIP friction-grip method of engineering when compared to conventional technology, and at a time when the industry is calling for solutions to problems such as long term wellhead integrity including seal life, monitoring, and pressure management, this belief can only strengthen.

The number of new and repeat orders that we have reported, and expect to report in the current year with major oil and gas operators around the world is an endorsement of our technology and the multiple benefits and advantages that our equipment offers customers in terms of safety, functionality, and cost and time savings. “Post the 2010 Gulf of Mexico incident there is an increased awareness among regulators and operators of the need for improved safety procedures, the selection of BAST equipment, and of heightened standards and practices.

I should note that as has been widely reported, July 2013 marked twenty five years since the Piper Alpha tragedy, and this anniversary highlights the need to focus on safety with a renewed sense of purpose.

The Cullen Inquiry twenty five years ago transformed the approach to oil and gas safety in the North Sea and helped propel UK standards to be recognised as some of the best in the world.

Nevertheless, as the Oil & Gas UK Piper 25 Conference held in June reminded the audience there is no room for complacency.

Such a warning is wholly appropriate because although operators are required to demonstrate a safety case that they have reduced the risks of operation to ‘as low as reasonably practical’ (‘ALARP’), there is still room for ambiguity with regard to certain key practices and equipment selection options.

For example, unlike POS-GRIP wellheads which are known as “through the blow out preventer (‘BOP’)”, some designs of surface wellheads require the blowout preventers to be removed to allow access to install the casing hanger and annulus seal assembly.

I have been saying for over twenty five years that such a practice is dangerous, unless absolutely necessary, as there is a risk that the well may become unstable which can lead to an uncontrolled major blowout incident, as indeed happened with the Montara well offshore Australia in 2009.

The Health and Safety Executive (‘HSE’) and Oil & Gas UK state that the use of such a wellhead, “should be discouraged” and “should not be used.”.

I maintain that clearer direction is warranted and that “should” ought to in fact be “must”.

The need for such clearer industry guidelines is something we are actively encouraging, and I will once again be communicating these messages later this month when presenting at the Oil & Gas iQ “HP/HT Wells Summit 2013”. “In addition to our organic operational activities we continue to actively pursue various strategic initiatives.

The HP/HT Tie-Back system design up to 20,000 psi JIP is progressing well and subject to final testing, we are preparing to initiate sales promotion activity.

Meanwhile, although the design process of the HGSS subsea wellhead design JIP has been completed, in response to industry demands we are now considering accelerating the inclusion of annulus monitoring, one of the target features which has gained prominence alongside instant casing lock down, as evidenced by a recent call made by the Industry Technology Facilitator (‘ITF’).

With regard to on-going sales and marketing initiatives, we are putting in place a strategy to expand our sales activities in Asia, including Australia, and this is already generating a number of exciting opportunities. “I believe our proprietary patented technology places us in a unique position to benefit from industry demands both in terms of safety and operational capability.

This is particularly the case for HP/HT and X-HP/HT where the Chairman of BG Group, one of our customers, only last month wrote that “HP/HT subsea well systems will be a game-changer in terms of cost and reliability”.

We agree with such comments and fully expect to be able to play an important role in such future developments, which is why the Board remains confident about the future and our ability to continue to deliver significant value to shareholders over the comings years.”
Summary of Results for the year ended 30 June 2013
2013 2012
£’000 £’000 Revenue 25,566 19,706 EBITDA – before the effect of IFRS 2 7,598 6,238 EBITDA – after the effect of IFRS 2 7,457 5,987 Profit before taxation 4,269 3,088 Basic earnings per share (pence) 3.69 2.99
Chairmans Statement Business progress I am pleased to report that the Group made significant progress during the year, both at the operational and financial level.

The increase in activity levels seen in the first half accelerated into the second half, resulting in a 29.7% increase in turnover to £25.57m for the year to 30 June 2013 (2012: £19.71m), a 21.8% increase in EBITDA to £7.59m (2012: £6.24m), a 38.3% increase in profit before tax to £4.27m (2012: £3.09m), and a 25.7% increase in profit after tax to £3.06m (2012: £2.43m), delivering a 23.6% increase in basic earnings per share of 3.69p (2012: 2.99p).

The increase in sales revenues was driven by a combination of repeat and new business contract wins for our exploration rental wellheads, particularly for the more technically challenging HP/HT applications where our reputation continues to grow.

Importantly industry support for our proprietary POS-GRIP friction-grip method of engineering is gaining momentum not only in terms of rental contract wins, but also in terms of our strategic initiatives, particularly our new HGSS subsea wellhead design JIP, which saw Total join a number of other major operating companies as a consulting partner. Strategy As can be seen from the strong set of financial results, Plexus has made excellent progress across all aspects of our business, in terms of organic sales of our POS-GRIP wellhead rental equipment in the North Sea and other regions around the world, and also with regards to a range of strategic initiatives associated with extending the range of applications that our patented friction-grip method of engineering can be designed for.

Importantly, all the activity undertaken during the year under review further raises the profile and awareness of our technology and the many safety and operational advantages that it delivers. It is important to highlight that the market share penetration, primarily in the jack-up drilling sector, that we have achieved to date with a range of blue chip international oil and gas operators, has been achieved by winning business from major multi-national competitors.

Our ability to do this is made possible by the fact that our proprietary wellhead technology is superior when compared against established conventional technology, particularly for HP/HT fields.

The industry is now clearly recognising that the range of features that we have built into our designs is more relevant than ever, especially with wellhead integrity a priority in a heightened safety and regulatory environment. POS-GRIP wellhead technology is unique.

As a result we are focused on ensuring that the industry, whether customers, competitors, or regulators understand what our core wellhead design features offer.

These include not lifting the BOP for all surface drilling applications; casing and casing tubing hangers being able to be locked down ‘instantly’ and with sufficient capacity; and seals that do not lose integrity throughout the life cycle of the well.

Crucially we maintain that we are able to provide a wellhead that can meet enhanced test standards that reflect ‘true’ field life conditions and match the accepted higher standards of premium couplings, ensuring the wellhead is not the weak link in the well architecture ‘chain’.

These are simple but powerful messages and ones where more than ever before common sense and logic is beginning to prevail, for example in relation to the ‘instant’ locking down of casing which industry best practice calls for, because an unlocked casing has the potential to lift, destroying the annular seals and with it the integrity of the well.

It is therefore very surprising that before the 2010 Gulf of Mexico incident it was common practice to leave off locking rings on subsea wellheads and hence leave the casings unlocked.

The reason for this is that most subsea locking devices are difficult to deploy and are unreliable, hence why they can by choice be left off meaning that the operator relies instead on a lockdown sleeve which is run at the end of the drilling process.

Clearly such practices are risky, and a new technology such as ours that is aiming to resolve such issues for subsea wellheads is we believe exactly the sort of ‘game changer’ that is being demanded. The growing realisation and acknowledgement that conventional equipment and methods need to be revised and improved, particularly for HP/HT and subsea environments has been widely reported.

An important manifestation of such developments is the establishment by the USA Bureau of Safety and Environmental Enforcement (‘BSEE’) of the independent Ocean Energy Safety Institute (‘OESI’).

The U.S.

Department of the Interior announced in May that the OESI will assess best international practices, and that importantly it will form a balanced panel of technical experts to make recommendations to the BSEE on issues relating to BAST.

In particular, “this will include making recommendations on candidate technologies for evaluation and estimated budgets and timelines for such technologies”, and will “work with standards organisations to develop testing protocols”.

We see these changes as very positive, particularly as they begin to address the controlling influence that the American Petroleum Institute (‘API’) has had over wellhead standards for many years, which we have always maintained has acted as a brake on the adoption of new and superior technology.

I make no apologies for illustrating the clear need for these changes by quoting from the U.S.

National Commission that reported directly to President Obama on the Gulf of Mexico spill.

The report stated that, based on meetings and discussions with leading members of the oil and gas industry, “…it is clear that API’s ability to serve as a reliable standard-setter for drilling safety is compromised by its role as the industry’s principal lobbyist and public policy advocate.” The Report goes onto say that, “According to statements made by industry officials to the Commission, API’s proffered safety and technical standards were a major casualty of this conflicted role”, and that, “API proposed safety standards have increasingly failed to reflect “best industry practices” and have instead expressed the “lowest common denominator” ”. Our ability to communicate these messages and the important role that Plexus can play in addressing these issues all stems from the fact that as far as we are concerned the wellhead is ‘Job 1’.

This is behind the growth that we are seeing, and gives us the confidence to invest further in developing our IP, and the funding of new initiatives such as our two current JIPs.

Furthermore we are experiencing an increased level of interest in our views and technology.

For example Plexus has been invited to speak at the Oil & Gas iQ “HP/HT Wells Summit 2013” on pioneering techniques and technology in HP/HT drilling and completions, which includes looking at gaps in available technologies.

Events such as these, and the growing emphasis on preventing incidents through the use of superior engineering design methodology and practices is not difficult to find high level support for.

It was only in 2010 that ExxonMobil’s Rex Tillerson said to Congress that the emphasis must be on preventing blowouts in the first place “because when they happen, we’re not very well equipped to deal with them”.

Such focus on safety issues extends to academic institutions.

For this reason we continue to sponsor the “Plexus Industrial Safety Lecture” with the University of Aberdeen Industrial Psychology Research Centre.

This year’s speaker was Professor Patrick Hudson PhD of the Universiteit Leiden, Netherlands who is one of the world’s leading authorities on the human factors of safety management, who gave a lecture in August titled “The Macondo Blowout: A Systemic Analysis”.

The nature of such safety driven developments was clearly summarised at a European Drilling Engineering Association event in September 2013 at which Plexus was invited to present a paper – “Quality assurance and well integrity”.

The event discussed the industry pushing wells to longer reach, higher temperatures, higher pressures, while at the same time the public pressure and demand for minimising environmental impact and maximizing safety has become stronger, which is why there is such a push for new and improved well integrity related features. A specific example of such needs was a research ‘call’ in June 2013 by the ITF, a not for profit organisation owned by major international oil and gas operators and service companies, whose objectives are to identify technology needs, foster innovation and facilitate the development and implementation of new technologies.

The call, which we have responded to, seeks solutions to deal with subsea annulus pressure management, a major issue for the industry for many years, and which we believe POS-GRIP technology is uniquely able to address.

Annulus management capability is sought to deal with sustained casing pressure (‘SCP’) situations that can be caused when fluid is trapped between the cement seal lower down the annulus and the casing hanger seal in the wellhead heats up during production, leading to well control incidents.

On surface applications access to the casing annuli is readily available, but to date such annulus management facilities and capabilities are simply not available subsea.

It is key innovative solutions such as these that we are engineering into our new HGSS subsea wellhead design.

The issue with current subsea wellheads is that unlike operating on the surface, one cannot readily and safely provide penetrations through the wellhead body to gain access to the various casing annuli.

The POS-GRIP engineering method however will be designed to provide removable seal sleeves in the wellhead bore to open and close porting systems which remain within the wellhead shell, and these monitoring ports can eventually be directed through the tubing hanger into the subsea tree, providing operators with continuous access to selected casing annuli. The HGSS JIP project has been underway for nearly eighteen months and now, with the addition of Total, has the support of six major oil and gas operators, as well as the interest of others.

A number of key milestones have been reached.

Our HG® annular seal system, which is at the heart of our technology, has been qualified to 20,000 psi at 375OF.

Our target is to qualify the system to a standard that exceeds the requirements as defined by the API, which for the first time will match the integrity of premium casing couplings.

The activation method for POS-GRIP mechanisms has been finalised, the non-requirement for wearbushings has been agreed by JIP members, and simple non rotational casing hanger running tools have been developed.

The manufacture of test fixtures is expected to commence end of calendar year 2013 into first quarter 2014, with system testing expected to be completed during the third quarter of 2014 calendar year.

As the project progresses additional opportunities arise to extend the initial scope and features of the JIP, and as was seen with the ITF call the renewed emphasis on addressing SCP and annulus pressure management has encouraged us to look sooner at providing monitoring, bleed-off, and an ability to remediate both the B and C annuli. Our second on-going JIP that I would like to report on is our unique up to 20,000 psi Tie-Back Connector which has the support of Maersk.

This product has been designed to enable for the first time HP/HT exploration and pre-drilled production wells to be converted to either subsea or platform producing wells.

Conventional wellhead technology is not able to offer such a solution as it uses threaded connections which cannot be reliably engaged and disengaged in a subsea controlled, remote, HP/HT environment.

The connector has been tested successfully with external pressures at 350OF and the final test procedures are now underway.

Once testing is complete the next step will be a field trial.

We remain excited about this additional POS-GRIP application and its scope for operators to make significant cost and capex savings.

Currently exploration and pre-drilled production wells are abandoned after costs ranging between £50m and £200m have been incurred, and the anticipated first time user of the system estimates a saving for such a well in the region of £80m. The common thread that runs through all these various strategic opportunities is our ability to design and develop POS-GRIP patented friction-grip method of engineering equipment.

Whether our equipment designs are for the surface or subsea the on-going development and protection of our intellectual property (‘IP’) is key, which is why we continue to invest in R&D and patents.

As a result the time spent by our engineers on R&D increased 25.1% during the year.

Meanwhile patent filing activity costs increased 235.1% year on year, as we extended our patent activities, particularly in the subsea arena, where the HGSS JIP has generated a number of innovative features and improvements which also apply across all our POS-GRIP and HG seal technology.

It should be noted that the strength of our patent suite and extensive know-how built up over many years underpins our sales and profits, and for this reason the start of the ‘Patent Box’ tax regime from the 1st April 2013 is particularly relevant.

This legislation has been introduced to encourage innovation, and a key benefit is a lower effective rate of corporation tax on profits attributable to UK or European patents.

This is a transitional arrangement, but subject to tax computations and qualification we would expect shareholders to benefit as the corporation tax rate on applicable profits reduces to circa 15% and then 10% by 2017. None of this progress would of course be possible without our ability to recruit and retain skilled staff across all areas of the business including engineering, finance, human resources, marketing, operations, and sales.

This focus has enabled us to increase our headcount by 19.5% year on year, whilst successfully maintaining a fast moving ‘can do’ culture that fits well with an innovative company, and which we believe sets us apart from our competitors.

Employee development and satisfaction is important to our company, and a Plexus Management Development programme has now been implemented for all supervisors and managers, whilst also bolstering technical training for Field Service Technicians and enhancing onshore training facilities.

Such personnel initiatives are a key part of building, developing, and improving the infrastructure needed to support the growth of our organic and strategic initiatives.

As we look to expand our product range, and explore the possibility of creating one or more additional rental inventory ‘hubs’, we took the opportunity post period end to acquire a 25% interest in a private UK engineering company, a manufacturer of specialist oil and gas equipment for a consideration of £0.73m.

We believe this is a sound investment which will help support the anticipated growing need for manufacturing capacity. Regarding our bank facilities I am pleased to report that we continue to operate comfortably within our established bank facilities with Bank of Scotland Corporate, which have recently been renewed at last year’s level of £6.0m. Staff On behalf of the Board, I would like to thank all our employees for their dedication and hard work during another successful year that has not only delivered another set of record financial results but which, importantly and necessarily, has also seen us increase our staff numbers from 113 at the beginning of July 2012 to 135 at the end of June 2013 and 142 currently as we continue to expand our business activities particularly in the HP/HT rental wellhead market and progress various on-going strategic initiatives. Outlook It is clear that a number of important macro dynamics are supporting us in our quest for our equipment to become a new and superior standard that can in time become the industry’s wellhead of choice.

Our ability to deliver enhanced safety, time savings, and operational efficiencies at the surface, particularly for HP/HT wells, together with our belief that we will also in due course be offering the market a unique combination of design features for subsea exploration and production wells such as instant casing hanger lockdown, long term metal-to-metal seals, annulus pressure monitoring, all combine to ensure a positive outlook for Plexus. One such dynamic is record global expenditure by oil and gas companies as reported by Barclays in their June “Global 2013 E&P Spending Update”.

Barclays believes the industry is “in the early stages of a strong sustained upcycle”.

Longer term prospects are also healthy, and only this month Peter Voser the CEO of Royal Dutch Shell, predicted that demand for energy will double over the next 50 years spurred by rapid industrialisation of China and across Asia.

We look forward to benefitting accordingly, and are developing plans to accelerate sales in key regions such as Asia, including Australia.

Following the incorporation of new subsidiaries in Singapore and Brunei to compliment Plexus Malaysia, we are strengthening our relationships in the region with both customers and local manufacturing and engineering companies, and we are also looking to establish a local inventory of rental equipment. A second important element which we believe improves our outlook further is the growing regulatory pressure emanating particularly from the USA, for example the formation of the OESI, to pursue the use of BAST equipment and technology.

For a number of reasons we believe that our POS-GRIP wellhead designs have the ability to be promoted as the BAST option, particularly as we believe we can match our wellhead standards to those required for premium couplings so that the wellhead can no longer be described as the ‘weak link’.

We see such developments as evidence that the industry is finally moving away from treating the wellhead as a “commodity item”, and is the reason why the industry is actively pursuing new and innovative engineering solutions, and why our subsea wellhead JIP is so well supported by a range of major international oil companies. All of these positive indicators are reasons why we look forward to the future with confidence and believe that the long term prospects and outlook for Plexus are excellent.

As a result we believe shareholder value will continue to grow over time.

Such progress will be achieved through organic growth, combined with the increasing prospect of securing potential alliance partners and licencees for our technology, as we begin to focus on opportunities to make our surface production wellhead applications, and our emerging subsea exploration and production applications, more widely available.

The 10% increase in our final dividend is a further demonstration of the Board’s confidence in the future. J Jeffrey Thrall Non-Executive Chairman 22 October 2013
Chief Executives Review Plexus has delivered another record set of results and made excellent progress throughout the period with a particularly active second half of the year that led to a profit upgrade announcement at the end of July 2013.

These results were achieved during a period where the oil price volatility that existed during the prior year settled to a point where the Brent Crude price per barrel was reported as ranging from USD$92 at the beginning of the financial year to USD$100 at the end.

Looking forward Barclays in its “Global 2013 E&P Spending Update” reported that exploration and production companies were basing their spending budgets on oil prices of USD$101 for Brent. These more positive macro trading conditions, together with the growing recognition of the range of features that our POS-GRIP friction-grip method of engineering can deliver to the operator, resulted in a number of new contracts for our rental sales from both existing and new customers in different regions around the world.

Such progress stems from the benefits of our unique technology in terms of operational performance, time savings, and enhanced safety which are particularly relevant for HP/HT applications, an area which once again saw the most growth.

As a result sales increased across all of our key geographic regions including the UK continental shelf (‘UKCS’) where sales rose by 5.4% to £9.66m, and the European Continental Shelf where sales rose by 2.1% to £7.16m.

Of particular note however was the performance of the rest of the world which accounted for 34.2% of all sales, nearly double the 17.9% reported in the 2012 financial year.

The key growth regions were seen in Australia where sales increased 584.7% over last year, Africa where sales increased by 170.3%, and encouragingly the Asian region continued last year’s momentum and delivered a year on year sales increase of 125.6%.

Our growing confidence in the Asian region where we are developing commercial relationships in Brunei, Malaysia, and Singapore, has led us to incorporate subsidiaries in both Singapore and Brunei and we will be looking to secure warehouse and office space in Singapore and recruit associated staff during the current 2014 financial year. The contract wins secured from existing and new customers in relation to our core rental exploration wellhead business activities all help to underpin our future order book, and demonstrate the broadening base of our organic business model.

The most significant developments during the period were as follows: ● October 2012 – a further four years contract with Shell Brunei for the supply of HP/HT and standard pressure wellhead systems for a multi-well exploration programme in Brunei.

Initial value estimated at £2.0m ● October 2012 – Talisman contract for a standard pressure and an HP/HT well with a value of £1.15m in the Norwegian North Sea ● October 2012 – new customer win with Lotos for the supply of HP/HT wellhead equipment in the Norwegian North Sea with a value of £1.0m ● October 2012 – new customer win with Lundin, another Norwegian operator, for two HP/HT wells with a value of £2.0m ● January 2013 – new customer win for the supply of HP/HT wellhead equipment to Glencore in Cameroon initially for one well with a value of circa £0.7m ● February 2013 – contract extension with Maersk for the supply of HP/HT equipment with an initial value of £1.5m ● May 2013 – continuing business with GDF for the supply of one HP/HT wellhead system for the UK North Sea with a value of £1.0m ● June 2013 – additional contract signed with DetNor for £2.0m for two HP/HT wells to be drilled in Norwegian Continental Shelf – new contract for 2 wells Post year end wellhead rental exploration activity has continued to remain buoyant.

This activity level has validated the decision to significantly increase capital expenditure particularly in relation to the addition of ten HP/HT wellhead sets during the financial year: ● July 2013 – new customer win with Eni Aus for a standard pressure wellhead system with an initial value of circa £280k and an option for continuing use which could lead to a further three wells.

This was the third customer secured in Australia following on from Apache Energy Australia and Santos Ltd, and bodes well for future business in the region ● July 2013 – award of new contract from Statoil for two HP/HT wells in the Norwegian Continental Shelf with a value of approximately £2.5m.

Statoil are recognised as operating at the pinnacle of operational and equipment safety standards and requirements, and we believe that Plexus’ equipment fits such criteria ● September 2013 – HP/HT Tie-Back has successfully completed the full ‘internals’ testing cycle and will be shortly completing the ‘externals’ testing requirements after which we will begin to engage through the sales team with the industry ● October 2013 – award of a new standard pressure well contract from Centrica Energy Norway for £0.75m, and an additional standard pressure well contract for BG Egypt for £0.35m In support of current and anticipated future growth, Plexus acquired post period end the whole issued share capital of a private company which holds a 25% interest in a private UK engineering company which is a manufacturer of specialist oil and gas equipment for a consideration of £0.73m.

At the current time Plexus continues to choose not to own its own manufacturing facility, and therefore this strategic investment compliments our on-going growth strategy as it helps to support our capital equipment needs whether these are for increased organic wellhead rental inventory, or for new engineering and prototype development capacity for our on-going JIP’s. In addition to our expanding organic business activities which centre on the rental of exploration wellhead equipment around the world, it is clear to us that significant commercial opportunities exist for our proprietary POS-GRIP technology particularly in the subsea and surface production wellhead market sectors.

What unites all these opportunities is an increasing global awareness of the technical challenges posed by the need to explore and produce from ever more complex and hostile environments, and in particular in deeper formations where extreme HP/HT conditions exist.

These challenges were of course brought into sharp focus following the 2010 Gulf of Mexico incident, and the ramifications of the lessons learned are still very much being felt today, especially in terms of increased regulation and the call for the introduction of higher industry standards and improved safety procedures and equipment, including for wellheads.

In the USA these initiatives have in part come together under one banner known as the need for identifying and using BAST. Plexus believes that it is uniquely placed to address such considerations where the wellhead is concerned and in the future where HP/HT wells will require limits of up to 30,000 psi and/or temperatures of up to 500OF.

There has clearly therefore never been a more important time for wellhead standards to be raised, and indeed for wellheads to have an ability to match the standards of premium couplings, which is not the case at the moment.

In our opinion, this currently leaves the wellhead as the weak link in the well architecture chain, unacceptable in light of the dangers that are now so much better understood.

Only recently Oil and Gas iQ, in advance of the 9th Annual HP/HT Wells Summit 2013 at which I will be presenting, highlighted that HP/HT wells have become more numerous as conventional reserves become depleted, and identified the biggest challenges faced by HP/HT operators as well control and intervention.

Crucially for Plexus the area with the single largest knowledge gap is seals where our technology excels.

Indeed only recently the vice president for drilling and completion for Total, when being interviewed about critical challenges, said that HP/HT “remains a frontier technology” and that “it makes us review all or many of our standard practices”.

As POS-GRIP wellheads are able to offer operators superior long term metal-to-metal seal performance together with a range of other unique safety and time saving features, we are confident in our ability to set and achieve such evolving and more stringent standards, and in the process continue to gain market share. Such key industry issues and concerns, following the 2010 Gulf of Mexico incident, acted as the catalyst for Plexus originally being asked to bring our wellhead technology from the surface to subsea, leading to the establishment of our JIP to develop a new superior subsea wellhead.

The goal is for the new HGSS subsea wellhead design to address the main technical issues and requirements highlighted by regulators and incorporating into our wellhead design a combination of safety and performance features never before seen in a subsea wellhead.

The project is progressing well and the design concept has been finalised in terms of the original scope.

We are now considering expanding the scope of the original design to incorporate new and evolving industry requirements.

Importantly the JIP continues to gain support from the industry and major international oil companies including Maersk, Shell, Wintershall, Tullow and Eni.

I was very pleased to welcome Total, the major worldwide French oil and gas operator, as a new consulting partner last December.

Total’s contribution to the on-going project is welcomed and it is hoped that in the future they will become an end user of the HGSS wellhead. It is once again pleasing to be able to report that the efforts by the Plexus team, together with increased levels of investment in R&D and IP have not only continued to develop and enhance our core POS-GRIP technology but have delivered a record set of financial results for shareholders.

Revenues increased 29.7% year on year resulting in sales of £25.57m, with rental of HP/HT exploration equipment accounting for the majority at £22.01m, an increase of 36.6% over the prior year.

The continued growth in our HP/HT business, where the benefits of our technology can be most easily demonstrated, helped to maintain gross margins at a level of 71.0% as compared to 70.9% last year, while EBITDA increased by 21.8% to £7.60m from £6.24m.

Profits before tax increased by 38.3% to £4.27m compared to £3.09m last year and profit after tax increased 25.7% to £3.06m, against £2.43m last year.

Sales by territory reflected the increasing global nature of our business activities with the UK accounting for 38% of sales compared to 46% last year, Europe 28%, Africa 13%, Asia 12%, Australia 8% and Americas 1%. As industry interest in, and customer support for, our equipment continues to grow, it is essential that the necessary level of investment is made in personnel and infrastructure to support operations in the field.

In a critical industry such as oil and gas it would be unacceptable to grow sales and not be able to properly execute, especially where a new and fast emerging technology is in many cases being tried for the first time by customers.

Expenditure has therefore increased across a range of activities, including human resources, particularly in relation to recruitment and training, and IT hardware and software.

Management information systems have been further developed, and inventory management, workflow and equipment scheduling have also been upgraded.

Overhead costs therefore increased to £13.77m from £10.78m in the previous year, and our employee headcount increased by 19.5% to 135 at the year end, compared to 113 in the prior year, and currently stands at 142.

This increase follows on from a 24.2% increase in the prior year, and in view of the widely recognised tightness of the oil and gas labour market demonstrates the effectiveness of our HR department, and the attractiveness of our technology and company prospects to potential candidates.

Looking to the future and the need to expand our sales capacity in terms of hardware rather than simply infrastructure, we continued our capital expenditure programme, the largest element of which was the addition of new rental wellhead sets at £5.72m.

Total year on year capex spend increased by 76.2% to £8.14m compared to £4.62m last year.

An additional area of investment is R&D where spend (inclusive of new test fixtures) totalled £1.90m, a 38.1% increase over £1.38m in the prior year which demonstrates the progress we are making both with regard to the continual development of our POS-GRIP technology and new applications. The strong progress made at both the organic and strategic level has enabled us to engage with a wider industry audience covering engineering, corporate, and public relations.

The resultant raised profile and market presence is ensuring that we are being offered a greater number of opportunities to present our views and technology, and this can only help the future prospects for our superior wellhead technology being seen as a new, superior, and necessary standard.

In addition to a number of speeches, events, and submissions that we were invited to and engaged with, we once again exhibited at the bi-annual “Offshore Europe” tradeshow in Aberdeen in September 2013.

Our stand featured our new HGSS subsea technology and once again provided a good opportunity to promote our technology to a range of interested parties that included industry, operators, and regulators. Although separate from day to day Plexus activities, I should mention that, as a reflection of the achievements of all of the Plexus team, I was pleased to receive in January the “Entrepreneur of the Year 2013” award at the annual Grant Thornton Quoted Company Awards, and more importantly to also receive in February the award for “Best Oil & Gas Plc” at the annual Stock Market Wire Awards 2013.

Such awards are not of course our priority but I view them as recognition of the flair, professionalism, and dedication of all of our personnel.

In addition they also provide further encouragement and proof that the message we are bringing both to the financial markets and the oil and gas industry itself, is one that is increasingly being heard as we all work hard to become a new global wellhead standard not only for surface applications, but in due course for subsea. In summary I am very pleased to be able to report another strong set of results.

It is particularly gratifying that the hard work and significant investment over the last few years has once again been successfully translated into record sales and profits after tax.

Importantly for our long term growth prospects, our loyal customer base continued to generate repeat business whilst at the same time we added three new customers during the financial year, and one post year end.

This strong performance funds the continuing development of our proprietary IP, and other important on-going strategic initiatives, in particular our HP/HT Tie-Back JIP, and our HGSS subsea wellhead design JIP where in the current year we are moving to the stage of purchasing raw material for the subsea test fixture.

An important backdrop to these operational activities is the potentially game changing need for oil and gas service companies to be able to design and supply drilling equipment that can perform in the most challenging conditions, particularly the evermore complex and hostile HP/HT and Ultra-HP/HT environments where we can demonstrate that our POS-GRIP technology is uniquely advantageous.

This need is being driven by both operators and regulators and opens up significant commercial opportunities for innovative companies such as Plexus, where the BAST concept creates more of a ‘level playing field’ when being considered against conventional equipment which is now being increasingly questioned in terms of its ability to provide important features such as subsea annulus management functionality.

To address such technical challenges the industry recognises the need for a new type of subsea wellhead which can give access to the annuli.

This is precisely the opportunity that we at Plexus are vigorously pursuing and which encouraged us to look at bringing forward the subsea annular monitoring feature as part of the current HGSS design.

To further underpin these organic and strategic opportunities it is very positive that oil and gas company spending continues to increase not only in the UKCS but also globally.

Barclays in its recent “Global 2013 E&P Spending Update” confirmed that oil and gas companies will spend a record USD$678 billion on exploration and production (‘E&P’) in 2013, a 10% increase on the previous year.

The report offered a bullish outlook on the energy industry with oil demand continuing to outstrip supply driving up exploration activity levels.

Closer to home Malcolm Webb, CEO of Oil & Gas UK, has said that new tax allowances have encouraged investment in the UKCS and that it is expected that it will total an all-time record of £13.5bn in 2013, almost three times that of 2009.

Such positive economic drivers can only be welcomed, and will further help us achieve our goal of Plexus becoming an increasingly important supplier to the industry that can deliver a new and superior standard of wellhead, not only independently, but also in time with the support of suitable partners and licencees. Ben van Bilderbeek Chief Executive 22 October 2013
Financial Review Revenue Revenue for the year was £25.57m, up 29.7% from £19.71m in the previous year, resulting from a strong sales performance led by a series of on-going and new contract wins both from existing and importantly, a number of new customers around the world.

Particularly strong year on year performance was seen in Africa, Asia, and Australia. The rental of exploration wellhead and related equipment and services accounted for over 95% of revenue which was slightly increased from last year and continues to reflect the fact that the company’s business model is centred on the supply of rental exploration equipment and services as opposed to sold production well equipment.

Looking to the future, whilst the company’s rental equipment activities continue to expand around the world attention is beginning to be brought to bear on addressing additional wellhead market opportunities whether organically or in conjunction with potential partners, particularly the volume surface production wellhead market, and the fast expanding exploration and production subsea market.

Once again HP/HT rental equipment sales category generated the largest year on year sales increase rising to £22.01m up from £16.11m last year, an increase of 36.6%, and accounted for 86.1% of total sales.

The robust HP/HT revenue growth resulted from the increase in demand from both existing customers and three new customers in Lotos, Lundin, and Glencore, and post year end Eni Aus, and is supported by the increased wellhead inventory capacity made possible by the significant step up in capital expenditure, which in the year to end June 2013 resulted in ten more HP/HT wellhead sets, an increase of 40%.

Standard pressure equipment sales reduced by 9.6% to £2.13m from £2.35m in the prior year, and accounted for 8.3% of total sales.

This trend reflected a period of reduced exploration activity in the UKCS as previously reported by Oil & Gas UK, although according to Oil & Gas UK this decline is anticipated to reverse between 2013 and 2015 as access to finance shows signs of easing, although conversely access to drilling rigs remains a serious constraint on activity.

This year, no revenues were generated by engineering and testing as opposed to £0.70m last year as customer support for the development of our technology consisted during the year of time and expertise commitment by a number of international oil companies as consulting partners to our on-going new subsea JIP. Margin Gross margins have essentially remained unchanged at 71.0% compared to 70.9% in the previous year as the higher percentage of HP/HT rental activity sales continued to deliver higher margins than low pressure equipment contracts. Overhead expenses As sales and product development activities continue to expand in absolute and global reach terms overhead expenses increased to provide the necessary additional infrastructure and personnel to support the organic and on-going new product development initiatives.

This resulted in total overheads increasing to £13.78m from £10.78m in the previous year, of which overhead staff costs was the most significant and increased to £8.09m from £6.77m, reflecting the need to ensure that the Group’s increased sales activity levels are able to be executed in line with customer and company operational requirements.

In relation to staff levels and their associated costs the employee headcount at the year end increased to 135 compared to 113 for the prior year, an increase of 19.5%.

Other items which increased significantly year on year as a result of the increased activity levels, staff increases, and expansion of infrastructure were overseas base costs, heat and light, freight and courier, professional fees, training, health and safety, and travel and subsistence. EBITDA EBITDA for the year (before IFRS2 share based payment charges of £0.14m) was ahead of recently upgraded market expectations at £7.60m, increased from £6.24m (before IFRS2 share based payment charges of £0.25m) the previous year, an increase of 21.8%.

EBITDA margin for the year was marginally lower at 29.7% as compared to 31.6% last year.

The continued strength of the company’s EBITDA performance is the result of a combination of higher margins associated with HP/HT rental activity and the proprietary nature of the Plexus POS-GRIP friction-grip technology which supports a pricing model supported by the ability to deliver superior performance in terms of enhanced safety, time savings, and operational efficiencies. Profit before tax Profit before tax increased significantly to a record £4.27m compared to a profit last year of £3.09m, an increase of 38.3%, and was ahead of recently upgraded market expectations.

This increase has been achieved after absorbing higher depreciation and amortisation charges of £2.96m, up from £2.71m last year, the largest component being depreciation of rental assets, reflecting the on-going investment in Plexus’ wellhead rental inventory.

The profit before tax is stated after an IFRS2 charge for share based payments under reporting standard IFRS 2; the charge for the full year is £0.14m compared to £0.25m last year. Tax Group UK Corporation Tax resulted in a tax charge of £1.21m for the year as compared to £0.66m for the prior year.

The Group has an effective tax rate of 28% (2012: 21%) which is above UK corporation tax rates mostly as a result of deferred tax adjustments in respect of prior years accelerated capital allowances. EPS The Group reports basic earnings per share of 3.69p compared to 2.99p in the prior year, an increase of 23.6%. Cash and Statement of Financial Position The statement of financial position reflects the growth in operations during the year and in particular a significant increase in capital expenditure.

The net book value of property, plant and equipment including items in the course of construction increased by 44.0% to £13.17m compared to £9.14m last year.

Importantly capital expenditure on tangible assets totalled £6.65m compared to £3.47m last year, an increase of 91.6%.

This record increased investment level reflects the company’s confidence in the future, particularly in relation to the £5.72m spend on the addition of ten more HP/HT wellhead equipment sets, bringing the HP/HT rental fleet to 35 from 25 last year.

Receivables decreased to £4.92m as compared to £6.06m which reflects the contractual nature of the business and is in no way a reflection on the quality of the debtor book.

Net bank borrowings closed at £1.39m compared to £0.26m last year reflecting net cash outflow for the year of £1.13m after absorbing a significant increase in total capital expenditure of £9.63m (2012: £4.62m).

Although this compares to net cash inflow of £0.30m last year it should be noted that last year included the receipt of £1.68m from the placing of new shares in January 2012.

The Group has decided to retain its existing £6.0m lending facilities structure with Bank of Scotland Corporate, and these facilities are anticipated to be more than adequate to meet on-going capital expenditure, R&D, and related project commitments. Intellectual Property The Group carries in its statement of financial position goodwill and intangible assets of £9.45m, an increase of 10.9% from £8.52m last year, reflecting the Group’s on-going investment in the development of its POS-GRIP technology and in particular patent development fee costs which increased 235.1% year on year, the most important element of which was in relation to the new subsea wellhead development project.

The Directors have considered whether there have been any indications of impairment and have concluded that there have been no such indications.

The Directors therefore consider the current carrying values to be appropriate.

Indications of impairment are considered annually. Research and Development R&D expenditure continues to be a key element in the Group’s development both in relation to the further development of our existing POS-GRIP equipment applications, and also with regard to new applications.

Importantly for a proprietary technology led business, the active POS-GRIP technology R&D programme includes the development and application of extensive new as well as continuation patents which has the benefit of extending the life of technology related to existing patents, as well as the registration of new ones.

As POS-GRIP is a proprietary method of engineering it has scope to be applied outside of the current surface rental exploration wellhead technologies and into associated areas such as the new HP/HT Mudline Tie-Back product JIP and the new HGSS subsea wellhead design JIP.

The Tie-Back product JIP, is nearing completion and is part way through its final testing programme and attention will turn towards the marketing of the product to the exploration and production companies so as to be able to offer the industry, for the first time, the ability to convert an HP/HT exploration well to a production well without having to abandon the well and re-drill leading to additional costs and delays.

The HGSS subsea wellhead project, launched with the encouragement of the industry post the 2010 Gulf of Mexico incident, is approximately half way through the development timetable with the manufacture of special test fixtures planned for the end of 2013, with actual testing planned between quarter one 2014 calendar year through to quarter three, with a target prototype build date of quarter two 2015.

R&D spend increased by 38.1%, including cost of building new test fixtures, to £1.91m from £1.38m in the prior year, and is expected to continue during the 2013/14 financial year as the subsea JIP progresses and the POS-GRIP product range broadens. IFRS 2 (Share Based Payments) IFRS2 charges have been included in the accounts, in line with reporting standards.

The “fair value” of share based payments has been computed independently by specialist consultants and is amortised evenly over the expected vesting period from the date of grant.

The charge for the year was £0.14m which compares to £0.25m last year. Dividends The Company announced on 27 March 2013 the payment of an increased interim dividend of 0.44p per share which was approved for payment on 26 April 2013. In further recognition of the Group’s on-going progress the Directors have decided to propose a 10% increase in the final dividend of 0.55p per share for the year ending 30 June 2013 compared to 0.5p last year, which will be recommended for formal approval at the Annual General Meeting to be held on 5 December 2013.

Subject to this the dividend will be paid on 13 December 2013. Graham Stevens Finance Director 22 October 2013
Consolidated Statement of Comprehensive Income for the year ended 30 June 2013
2013 2012
Notes £’000 £’000
Revenue 1 25,566 19,706 Cost of sales
(7,402) (5,727)
Gross profit
18,164 13,979 Administrative expenses
(13,772) (10,770)
Operating profit
4,392 3,209 Finance income
7 8 Finance costs
(130) (129)
Profit before taxation
4,269 3,088 Income tax expense 3 (1,213) (657)
Profit after taxation and comprehensive income for the year attributable to the owners of the parent
3,056
2,431
Earnings per share 5
Profit for the year attributable to Plexus Holdings shareholders
Basic
3.69p 2.99p Diluted
3.51p 2.92p
All income arises from continuing operations.
Consolidated Statement of Financial Position at 30 June 2013
2013 2012
Notes £’000 £’000
Assets
Goodwill
760 760 Intangible assets 6 8,691 7,762 Financial assets
– 60 Property, plant and equipment 7 13,168 9,145 Deferred tax asset
545 473
Total non-current assets
23,164 18,200
Inventories
6,032 6,047 Trade and other receivables
4,922 6,060 Cash and cash equivalents
2,609 3,739
Total current assets
13,563 15,846
Total Assets
36,727 34,046
Equity and Liabilities
Called up share capital 8 828 827 Share premium account
17,288 17,280 Share based payments reserve
2,741 1,726 Retained earnings
6,335 4,057
Total equity
27,192 23,890
Liabilities
Bank loans
4,000 4,000
Total non-current liabilities
4,000 4,000
Trade and other payables
5,226 5,332 Current income tax liabilities
309 824
Total current liabilities
5,535 6,156
Total liabilities
9,535 10,156
Total Equity and Liabilities
36,727 34,046
Consolidated Statement of Changes in Equity for the year ended 30 June 2013
Called Up Share Capital £’000
Share Premium Account £’000 Share Based Payments Reserve £’000
Retained Earnings £’000
Total £’000 Balance as at 1 July 2011 802 15,596 950 2,293 19,641
Total comprehensive income for the period – – – 2,431 2,431 Share based payments reserve charge – – 251 – 251 Issue of ordinary shares 25 1,975 – – 2,000 Share issue costs – (291) – – (291) Deferred tax movement on share options – – 525 – 525 Dividends – – – (667) (667)
Balance as at 30 June 2012 827 17,280 1,726 4,057 23,890
Total comprehensive income for the period – – – 3,056 3,056 Share based payments reserve charge – – 141 – 141 Issue of ordinary shares 1 8 – – 9 Deferred tax movement on share options – – 874 – 874 Dividends – – – (778) (778)
Balance as at 30 June 2013 828 17,288 2,741 6,335 27,192
Consolidated Statement of Cash Flows for the year ended 30 June 2013
2013 2012
£’000 £’000
Cash flows from operating activities
Profit before taxation
4,269 3,088
Adjustments for:
 Depreciation, amortisation and impairment charges
2,956 2,709
 Loss on disposal of property, plant and equipment
108 70
 Loss on expiry of option
60 –
 Charge for share based payments
141 251
 Investment income
(7) (8)
 Interest expense
130 129
Changes in working capital:
 Decrease/(increase) in inventories
15 (1,998)
 Decrease/(increase) in trade and other receivables
1,138 (2,517)
 (Decrease)/increase in trade and other payables
(106) 2,645
Cash generated from operating activities
8,704 4,369
Income taxes paid
(926) (426)
Net cash generated from operating activities
7,778 3,943
Cash flows from investing activities
Purchase of intangible assets
(1,491) (1,150)
Purchase of property, plant and equipment
(6,650) (3,471)
Proceeds of sale of property, plant and equipment
125 55
Net cash used in investing activities
(8,016) (4,566)
Cash flows from financing activities
Proceeds from issue of new ordinary shares
9 2,000
Transaction costs from issue of new ordinary shares
– (291)