More annual reports from Poseidon Nickel:
2023 ReportA N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T A N N U A L R E P O R T 2 0 1 5 2 0 1 5 2 0 1 5 2 0 1 5 2 0 1 5 S A F E R P E R F O R M A N C E F A S T E R S E R V I C E R E D U C E D C O S T S P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 Changing global drilling standards in the oil and gas industry by delivering in novative equipment and services which dramatically improve safety and reduce costs. P L E X U S H O L D I N G S PL C I S L I S T E D O N T H E A I M M A R K E T O F T H E LO N D O N S TO C K E XC H A N G E ( AI M : P O S) C O N T E N T S P L E X U S AT A G L A N C E B U S I N E S S R E V I E W F Y 2 0 1 5 H i g h l i g h t s P l e x u s a t a G l a n c e P O S - G R I P / P r o d u c t O f f e r i n g S t a r S a f e t y S T R AT E G I C R E P O R T P r i n c i p a l A c t i v i t y F i n a n c i a l R e s u l t s O p e r a t i o n s R e v i e w S t r a t e g y a n d F u t u r e D e v e l o p m e n t s K e y P e r f o r m a n c e I n d i c a t o r s 2 4 6 9 2 8 2 8 3 5 3 9 4 3 C E O M e s s a g e C h a i r m a n ’ s S t a t e m e n t 1 2 1 7 FINANCIAL STATEMENTS C o n s o l i d a t e d S t a t e m e n t o f C o m p r e h e n s i v e I n c o m e C o n s o l i d a t e d S t a t e m e n t o f F i n a n c i a l P o s i t i o n C o n s o l i d a t e d S t a t e m e n t o f C h a n g e s i n E q u i t y C o n s o l i d a t e d S t a t e m e n t o f C a s h F l o w s N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s 6 6 6 7 6 8 6 9 7 0 I n d e p e n d e n t A u d i t o r ’s R e p o r t 1 0 0 CORPORATE GOVERNANCE B o a r d o f D i r e c t o r s D i r e c t o r s ’ R e p o r t C o r p o r a t e G o v e r n a n c e R e p o r t R e m u n e r a t i o n C o m m i t t e e R e p o r t S t a t e m e n t o f D i r e c t o r s ’ R e s p o n s i b i l i t i e s 4 8 5 0 5 3 5 6 6 1 P a r e n t C o m p a n y S t a t e m e n t o f F i n a n c i a l P o s i t i o n P a r e n t C o m p a n y S t a t e m e n t o f C h a n g e s i n E q u i t y P a r e n t C o m p a n y S t a t e m e n t o f C a s h F l o w s N o t e s t o t h e P a r e n t C o m p a n y F i n a n c i a l S t a t e m e n t s Inde pendent Auditor ’s Report 62 C o m p a n y I n f o r m a t i o n 1 0 2 1 0 3 1 0 4 1 0 5 1 1 5 238506 Plexus p001-p009.indd 1 10/11/2015 23:46 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 2 F I N A N C I A L R E S U L T S ● R e c o r d r e v e n u e , E B I T D A , p r o f i t b e f o r e t a x a n d p r o f i t a f t e r t a x ● P AT i n c r e a s e d 18.8% t o £5.43m ( 2 0 1 4 : £ 4 . 5 7 m a s r e s t a t e d ) ● R e v e n u e s i n c r e a s e d 5.6% t o £28.53m ( 2 0 1 4 : £ 2 7. 0 2 m ) ● E B I T D A i n c r e a s e d 5.7% t o £9.53m ( 2 0 1 4 : £ 9 . 0 2 m ) ● P B T i n c r e a s e d 10.5% t o £5.94m ( 2 0 1 4 : £ 5 . 3 8 m ) ● E P S i n c r e a s e 17.5% t o 6.40p ( 2 0 1 4 : 5 . 4 4 p a s r e s t a t e d ) ● F i n a l d i v i d e n d p r o p o s e d i n c r e a s e o f 182.3% t o 1.75p p e r s h a r e ( 2 0 1 4 : 0 . 6 2 p ) C O R P O R A T E H I G H L I G H T S ● G r o w i n g g l o b a l a w a r e n e s s o f b o t h P l e x u s a n d t h e s a f e t y a n d o p e r a t i o n a l b e n e f i t s o f P O S - G R I P ® t e c h n o l o g y ● J e r e h , C h i n a ( n e w l i c e n c i n g p a r t n e r ) s u b s c r i b e d f o r 5 % i s s u e d s h a r e c a p i t a l o f P l e x u s f o r £ 8 . 0 4 m ● S i z e o f A b e r d e e n o p e r a t i o n a l h e a d q u a r t e r s d o u b l e d - £ 2 . 4 m a c q u i s i t i o n o f a c i r c a 3 6 , 0 0 0 s q . f t w o r k s h o p a n d o f f i c e f a c i l i t y f r o m B a k e r H u g h e s ● P r e s e n t e d a t t w o m a j o r o i l a n d g a s c o n f e r e n c e s - “ W o r l d O i l H P / H T D r i l l i n g a n d C o m p l e t i o n s C o n f e r e n c e ” i n H o u s t o n , Te x a s , a n d t h e “ H P / H T W e l l s S u m m i t 2 0 1 5 ” i n L o n d o n ● W o n t h e “ C o m m i t m e n t t o I n n o v a t i v e U s e o f R e s e a r c h a n d D e v e l o p m e n t ” a w a r d a t t h e 1 1 t h a n n u a l N o r t h e r n S t a r B u s i n e s s A w a r d s 2 0 1 4 , i n A b e r d e e n ● S t r e n g t h e n e d B o a r d w i t h t h e a p p o i n t m e n t o f C h a r l e s J o n e s a s a n o n - e x e c u t i v e d i r e c t o r ● B a n k f a c i l i t i e s r e n e w e d p o s t p e r i o d e n d w i t h t h e B a n k o f S c o t l a n d ● £ 5 m r e v o l v i n g c r e d i t f a c i l i t y o n 3 y r. t e r m ● A d d i t i o n a l £ 1 m o v e r d r a f t o n a y e a r l y t e r m P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p001-p009.indd 2 10/11/2015 23:46 H I G H L I G H T S F Y 2 0 1 5 3 O P E R A T I O N A L H I G H L I G H T S ● S t r o n g f i n a n c i a l p e r f o r m a n c e d r i v e n b y c o r e b u s i n e s s r e n t i n g p r o p r i e t a r y P O S - G R I P ® f r i c t i o n - g r i p w e l l h e a d e x p l o r a t i o n e q u i p m e n t - c o n t r a c t s s e c u r e d i n c l u d e : ● ● ● ● ● ● ● ● ● £ 0 . 6 m C e n t r i c a f o r N o r t h S e a £ 0 . 9 m D e t N o r s k e i n N o r w a y S i g n i f i c a n t c o n t r a c t w i t h B G G r o u p f o r N o r t h S e a £ 1 . 9 m o r d e r w i t h u n d i s c l o s e d c u s t o m e r f o r N o r t h S e a £ 1 . 5 m f o r B r u n e i S h e l l i n B r u n e i U S $ 0 . 8 m f o r C a r d o n I V i n V e n e z u e l a £ 1 . 0 m P r e m i e r O i l N o r g e A S f o r N o r t h S e a £ 1 . 2 5 m M a e r s k f o r N o r t h S e a £ 3 . 3 m n e w c u s t o m e r To t a l i n N o r w a y ● A c c e l e r a t i o n o f p l a n n e d i n t e r n a t i o n a l e x p a n s i o n t h r o u g h s t r a t e g i c i n i t i a t i v e s : ● ● ● M a j o r C h i n e s e l i c e n c e a g r e e m e n t s i g n e d w i t h J e r e h F o r m a t i o n o f a n e w M a l a y s i a n J o i n t V e n t u r e c o m p a n y S e c u r e d M a l a y s i a n P E T R O N A S l i c e n c e ● £ 1 . 5 m d i s p o s a l o f 2 5 % s h a r e h o l d i n g i n t e r e s t i n p r i v a t e m a n u f a c t u r i n g c o m p a n y ● R e s e a r c h a n d d e v e l o p m e n t a n d n e w p r o d u c t i n n o v a t i o n : ● L a u n c h e d n e w P y t h o n ™ S u b s e a W e l l h e a d – J I P p a r t n e r s i n c l u d e B G , e n i , M a e r s k , R o y a l D u t c h S h e l l , T O TA L , Tu l l o w O i l , W i n t e r s h a l l a n d S e n e r g y ● £ 0 . 8 m a g r e e m e n t w i t h C e n t r i c a f o r n e w P O S - S E T C o n n e c t o r ™ f o r g r o w i n g a b a n d o n m e n t m a r k e t ● ● ● C o l l a b o r a t i o n w i t h A q u a t e r r a t o d e v e l o p H P / H T d u a l m a r i n e r i s e r s H P / H T T i e - B a c k c o n n e c t o r p r o d u c t b e i n g m a r k e t e d t o t h e i n d u s t r y C a p i t a l i n v e s t m e n t i n a d d i t i o n a l P O S - G R I P r e n t a l w e l l h e a d a s s e t s f o r e x p l o r a t i o n w a s £ 2 . 5 3 m ( 2 0 1 4 : £ 2 . 3 2 m ) ● R & D s p e n d i n c r e a s e d b y 4 6 . 7 % t o £ 3 . 4 7 m ( 2 0 1 4 : £ 2 . 3 7 m ) 238506 Plexus p001-p009.indd 3 10/11/2015 23:46 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 4 P L E X U S A T A G L A N C E O U R V I S I O N O U R S T R A T E G Y T o bu i ld Plexus in to a l eadin g international wel lh e ad engi neerin g com pany s u pp lying POS- GR IP frict io n-grip techn ol ogy as the best in c las s and s afest we llh ead e q ui p ment across ex pl orati on, pr oduc ti on and su b s ea. A ccelerate the adop tion of PO S-GRIP technology by the wider oil and gas market through organic growth, global expansion, forming strategic partners and licencing agreements as well as new product development and innovat ion to generate additional revenue streams. MIES O F S C O N E L A AFER + C O S T E S D R I V E C LIENT LOYALTY E I V T C E F F L E V ERAGING GROUP SKILL S N E W PRODUCTS S D A E O C P E O L E V E D G N I C N E C I L + N W ELL H IO T A R O L P X E L A T N E R E R O C Y G O L O N H C E T S S A L C N I T S E B S D RODUCTION WELLHEA SA L E S P S E L A S Y T R E P O R G L O B A L E X P A N S I O N B U I L D I N G P L E X U S B R A N D O P E R A T I N G R E S P O NSIBLY C H A L L E N G I N G E X I S T I N G W E L L H E A D S T A N D A R D S + S L A T N E R E L P A U INTELLECT D E V E L O PING PEOPLE S A E R C IN EMIUM COUPLINGS STANDARDS MATCHIN G P R P L E X U S B U S I N E S S M O D E L P L E X U S ’ B U S I N E S S M O D E L P lex u s operates a r en tal su pply busines s Plexus has a strong and experienced B oard and mo de l for its proprietary POS- GR I P® wellhead management structure with which to d rive gr owth. equ i pmen t pri m arily for th e e xp loration jack- Our Board has a diverse skill set allowing each u p m arket, sells in to th e pr od u ct i on wellhead member to help deliver on Plexu s’ vision which is marke t and w ill so on rent an d s ell into the to be at the forefront of wellhead technology and s ubs e a wel lhead m arket . C e n t ral to Plexus’ establish our patented and best in class POS- reven ue busin es s m od el i s R &D and new GRIP technology as a new ind us try standard for pro du c t i nnovat ion . Recen t e xam ples includ e wellhead d esign, thanks to it s products which t he lau nch of th e Pytho n Su bs ea w ellhead, POS- offer multiple benefits and advan tag es in te rms GR I P C onnect or and Mari ne Ri s e rs . Plex us is of improved safety, functionality, operational als o l ooki ng t o ac celerate its g l ob al expansion efficiency, and cost and time s av ings. t hr ou gh l i cenci ng and st rat egi c p ar tnership s. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p001-p009.indd 4 10/11/2015 23:46 5 G L O B A L E X P A N S I O N W e continue to receive enquiries from across for jack-up d rilling exploration activities. In ter ms th e gl o be from oil and gas operators that are of sales achieved during financial year 2 015, a co nsi deri ng POS-GRIP technolog y for its u nique strong p erformance was seen in Eur ope which, tec hn ic al, safety and time saving cap abilities. excluding the UK, grew 110 % and accounted for E xpandi ng fro m ou r dominant p osition in the 51% of sales as comp ared to the UK North Sea No rth S ea i nto n ew ge ograph ical areas is cen tral which grew by 7% and accounted for 37 % of to ou r growt h strategy, esp ecially at a time wh en sales. Sales in the rest of world accounted for th e No rth Sea is u nder p ress ur e f rom a low oil 12% of sales, of which Asia comprised 9.2% an pri ce. Our prim ary revenue st ream is derived increase of 22% against last year. fro m o ur POS -GRIP fric tion grip wellhead s ys tems G O M U K C S A S I A & R U S S I A Th e Gulf of Mexico account s for t he majority of oil and ga s on the Cont inental prod uction Ou ter S helf. Th e p ropos ed 2 017- 20 22 offs hore lease program me is also project ed t o u nlock ap proximat ely 80 pe rcen t of estimated u n d i s c o v e r e d t e c h n i c a l l y recoverable oil and gas resources on the OCS. A M E R I C A S We secu red our firs t contract with a Sou th Ame rican com p any C ardon IV (a 5 0:5 0 j oin t ventu re be tween e ni and Rep so l) for an e xplorat ion well in Ven ezuela. R E G I O N A L B A S E S H E A D Q U A R T E R S L I C E N C I N G A G R E E M E N T P E R C E N T A G E O F G R O U P R E V E N U E S A L E S F Y 2 0 1 5 We have successful ly secured a l eading market share of the HP/HT explo ratio n well head jack- up in the N orth Sea regio n sup plying our POS-GRIP equip ment to many o f the lead ing oi l and g as o perato rs that o perate in the area. We have iden tified these as reg ions with signific ant grow th potent ial. We have an acti ve dialogue with regards to licen cing an d strategic partn ership s to help acce lerat e the dep loyments of POS -GRIP in the se r egions inc ludin g the J ereh Chi nese licenc ing agreement in July 2015. E U R O P E A U S T R A L A S I A Thi s was our larg est g rowth re gio n in terms o f revenues for 2015, com prisi ng o f N orway, Denmar k, and the Netherlands. It represented a 51% share with the majority of co ntract w ins bei ng secured in N orway. With our headquarters in Aberdeen, where we have recently d oubled our o perati onal capacity, Euro pe will continue to rem ain a focus fo r Plexus and POS-G RIP N orth Sea contract w ins. In 2014, Plexus secur ed its third POS-G RIP su pply contract in the Australian regi on. IBISWo rld has forecast revenues of $40.3 bi lli on for the Australian oil and g as industry fo r 2015 and expects a grow th rate of 12.8 per cent year o n year, with revenues expected to ju mp to $45.4 bi lli on for 2016. 238506 Plexus p001-p009.indd 5 10/11/2015 23:46 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 6 P O S G R I P / P R O D U C T O F F E R I N G POS-GRIP Technology i s a p at ente d me t ho d o f eng i nee ri n g w hich has th e potenti al for a wi de ra nge o f a pp li ca t i o ns b o t h w i t hi n and ou ts ide t he oil and gas ind us t ry. Fo r t he up s t rea m o i l an d gas markets POS-GRIP ha s b een d e velo pe d t o de li ve r a met ho d o f wellhead engineering whi ch is s a fe r, fa s t e r an d mo re co s t ef fe c tive to use for drilling ac ti vit i es ac ros s ex p lo ra t i o n, p ro d uc t i o n a nd s ub sea. P O S - G R I P T E C H N O L O G Y A N D H G ® S E A L S P OS -G R I P is bas ed on t wo ve ry s i m pl e engineering c on c epts – el asti city of m at e ri als and friction. Ever y o b ject moves a smal l am ou n t wh en a force is appl ied to it , and PO S-GRIP u s es this to f lex a h igh pres sure body in and ou t w i thin th e elastic ran ge. In well heads, POS-GR IP c an replace t he c o nven t io nal l oad shoulde r or s l i ps to creat e a h igh - l oad hanger su ppor t m e ch an is m which is adju st abl e, fu ll-bo re, fu lly el as t i c, and p rovides in s t ant , hi gh-c apaci ty l oc kd ow n. H G s eals are robust metal -to -m e tal seals which c an be m achi ne d direc tl y in to th e h ang er, an d are en er gised by u se of an ex te rnal PO S-GRIP me ch ani sm. E xternal ac ti vati on r esult s in direct c o nt ro l of con tac t stresses at t he s ealing su rface, le adin g to exc ep tio nal reliab ili ty an d r epeatability. Th i s s i mpl e and el egan t s eal i n g m echan ism has been q u ali fied for X-HPHT servi ce u sing valid ation c ri te ria wel l above and be yond s tand ard in dustry s eal perfo rman ce verifi cat ion re q ui r ement s. P OS - GR IP Tech nolo gy and HG s e al s have alread y been appl ied to a w ide ran ge o f wellhead and c o nn ec to r pr oduc ts, w here th e s i mp licity of t he s ys tem result s i n rob us t p ro du cts which are s afer t o o perate, c heaper t o in s t all an d offer u n prec edent ed int egr ity for th e l i fe of f ield . P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 P L E X U S P O S - G R I P ® T E C H N O L O G Y 238506 Plexus p001-p009.indd 6 10/11/2015 23:46 7 S U R F A C E W E L L H E A D S P O S - G R I P E X P L O R A T I O N W E L L H E A D S Y S T E M S Well integrity and safety i s criti cal wh en dr il l ing exploratio n wells. Pl exus has p i onee red th e use of a ‘thr ough the BOP ’ we ll head syste ms for jack-up exp loration d rill ing . A we lcom e benef it fro m this desi gn ph iloso phy i s tim e and cost saving s. Our wel lhead syste m save s a BOP li ft for every c asing str in g i nstal l ed to conventi onal systems. Thi s compar ed P O S - G R I P H G P R O D U C T I O N W E L L H E A D S for equ ipment l ong i s Integrity of ter m esse nt ial pro ducti on well s, where many hundreds of pressure and temperature cycle s can b e see n th roughout the l ife of a fie ld. PO S-GRIP HG Produc tion Wellheads are d esig ne d an d ti me saves o ne to four d ays per w ell, do wn sig ni fic ant ge ne rating co st red uc tions, and i n many c ases can make th e rental co st negati ve for the cust omer. The systems are available from existing stock o n a rental b asis, for red uci ng customers. le ad times tested to mee t worst case c ondi ti on s, an d pr ovid e the safest p ossibl e sol uti on du ri ng dr il li ng and pr oducti on. As well as offer ing the hi ghest st andards in safety and i nteg rity, HG Pr oduct i on Well heads are desig ne d to be quic k and sim pl e to in stall . The throug h the BOP design co mb ined wit h ex tremely simpl e hang ers and ru nnin g tool s can generate d ays of ti me-savi ng s per well. The systems are availab le for sale and requi re mini mal mai ntenanc e d uring fi el d li fe. T E R S U S ™ M U D L I N E S Y S T E M S The Plexus range of Tersus Mud lin e Su spen sion Systems is designed wi th pr oacti ve well contr ol and safe ty in mi nd. Where ver p ossib le , all pr ocedures are carried out u nd e r ful l BOP pro tect ion, which is sad ly not the c ase wi th most o ther commercially avai lab le syste ms. Mudline Systems are often thoug ht of as being cheap and si mple, bu t si gnif i cant value can be add ed thr oug h d esig n detai ls whi ch enhanc e safety, c reate savi ngs and redu ce risk. For ex amp le, the Ple xus Tersus- TRT combi ned TA Cap is safer to use and q ui cke r to instal l than mul ti c ap option s. The Tersus PCT system has the po tential fo r huge saving s by all owi ng the r ec overy of HP/ HT ex plorati on wel ls, and enabl i ng p re-d ril ling of H P/HT de ve lop ment wells. T E R S U S P C T H P / H T T I E - B A C K C O N N E C T O R Our HP/HT up to 20, 000 p si is an Tie-B ack Connec tor, innovati ve and uni que produ ct sponsored b y Maersk. The Tie-B ack Connector fe atur es our metal-to-metal HG seals and for the first time all ows HP/HT expl orati on and p re- dr il led pro duction wells to b e converted to ei ther subsea or p latform p rod uc ing wells del i ve ring sig nifican t saving s in terms o f cap ital exp enditure an d the acce leration of br ingi ng a well into prod uc ti on. At a time when the i ndustry i s focusing str ongly on cost and cape x savi ng op p ort un ities the bene fits of such an inn ovati ve p rodu ct are cl ear, and w e are mar keting t hi s p rodu ct on the basis that it is the only meth od avail abl e of achi eving a re mote casing c onne ction with the same in teg rity and capac it ie s as premi um casing c oupli ngs. 238506 Plexus p001-p009.indd 7 10/11/2015 23:46 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 due to the remote loc ati on of th e w ellh ead. Pl exus has therefore combi ne d th e safety and rel iab ili ty b en efi ts of POS-G RIP an d HG seali ng into a well he ad syst em which is rob ust and ful ly tested to meet the co ndit ions ex pecte d i n de epwater and HP /HT we ll s. As wel l as offer ing the hi gh est st andards in safety and i nte grity, the Pyt hon su bsea wel lhead is desi gned to b e sim p le wh ilst del i ve ring i nstant c asing hange r lo ck down . Many are el iminate d, resul ting i n e nha nced rel iability and fewer tri ps. Time savings d uri ng d ril lin g are up to four days in shall ow water, an d u p to 12 days p er d ee pwater well , c omp ared t o conventi onal systems. c onventi onal com p onent s 8 S U B S E A W E L L H E A D S P Y T H O N S U B S E A W E L L H E A D Wellhead equipment is criti cal for the safe drilling and pr oduction of sub sea w el ls. Lo ng ter m per fo rman ce and in teg ri ty are cr uc i al, M 2 S S U B S E A W E L L H E A D S M2S wellheads are des ig ne d t o b e jac k-up deploye d and enab le the conve rsi on of pr e- drilled well s us ing mud lin e e qui pm en t to subsea pro duction. M2S syste ms u se POS- GRIP and HG sealing to provid e many of th e unique safety features and be nefi t s of Pl ex us’ othe r sur face and subsea POS-GRIP p ro ducts. M2S benefits f rom the ad justab le n ature of POS-GRIP to enable M udl ine Tie b ack Tool s to be easily re- connected t o the mu dl in e the stri ngs are preci sel y hangers befor e tensio ned and locked into p lac e i n the hi g h press ure subsea well head housi ng . T hi s saves time and r educe s the risk of p ro bl em s, to maxi mise value for our users. P O S - S E T C O N N E C T O R retai ns bend and load cap abi lit i es at 80% of p ip e str eng th, for the safe st po ssi ble re- establ ishment of we ll control . The POS-SET Connec tor is desig ne d to re-connect to bare c onductor pi pe for well r e-entry or permanent abandonment operati ons. It cr eates a sol id c onnection with re liabl e seali ng dir ectly against the pip e, and POS-SE T can acc ommodate l arg e variati on s i n di ameter, wall thic kness and oval i ty wh ich can be expe rienc ed with c onducto r p i pe , whil e cr eating a dir ect seal ing and l oad -bearin g int erface. Thi s w id e window of op eration ti eback pr oblems are min im ised, means result ing in mo re cost-effec tive op e ration s. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p001-p009.indd 8 10/11/2015 23:46 A T P L E X U S W E A R E C O M M I T T E D T O P R O V I D I N G O U R P E O P L E W I T H T H E K N O W L E D G E A N D R E S O U R C E S T O M A K E T H E W O R K P L A C E A S A F E E N V I R O N M E N T , B O T H O N A N D O F F S H O R E . S A F E T Y I S A T T H E F O R E F R O N T O F W H A T W E D O A S P A R T O F O U R D A I L Y W O R K I N G L I F E ; I T I S A S H A R E D C O M M I T M E N T B A S E D O N T A K I N G P E R S O N A L R E S P O N S I B I L I T Y F O R O U R A C T I O N S T O M A K E A P O S I T I V E I M P A C T O N O U R E N V I R O N M E N T A N D O N A L L O F T H O S E A R O U N D U S . St ar S afety i s t he global um br ella und er w hi ch w e co mmu ni cate and promote all of ou r safety i nformat ion and initiat ives helping to su ppo rt posi tive s afety b ehaviours and S T A R S A F E T Y 9 Case St udy During FY 2015 we were delighted to achieve the accreditation and approval by the Offshore Petroleum Industry Training Organisation (‘OPITO’) for our competency management sy stem known as Competency@Plexus. OPITO is glob ally recognised and the accred itation is continually requested by our customers during tender and contract reviews ke ep sa fe ty at t he forefront of every thing staff, policies, procedures an d the shar ing w e d o. of best practice and lessons learned. Recent audits by Lloyds Register Quality Assurance We create trans parency for safety issues, and (‘LRQA’), the world leading independent a han ds- on appr oac h to safety leadership provider of Business Assurance serv ices, and behaviou rs. T hrou gh effective training, demonstrate that we are operating to the ro bust systems and processes , and a focus recognised industry and national standards. on con ti nual i mp rove ment, we all live our safety cu lt ure. Ou r QHS E sys te m is c ertified to BS EN I SO 9 00 1: 20 08 and B S OHSA S 18001:2007 and we st ri ve for c ontin uous improvement throug h 238506 Plexus p001-p009.indd 9 10/11/2015 23:46 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 “P lexus ’ long-term goal is to deve lo p POS-GRIP techn ol ogy as a n ew in dus try standard for wellhead design” P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 10 238506 Plexus p010-p011 (Business Review).indd 10 10/11/2015 23:48 B U S I N E S S R E V I E W Contents C E O M E S S A G E C H A I R M A N ’ S S T A T E M E N T 1 2 1 7 11 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p010-p011 (Business Review).indd 11 10/11/2015 23:48 “A S A C O M PA N Y W E P R I D E O U R S E LV E S O N O U R M A N AG E M E N T A N D E N G I N E E R I N G E XC E L L E N C E . I W O U L D L I K E TO E X T E N D T H E B OA R D ’ S G R AT I T U D E TO O U R D E D I C AT E D W O R K F O R C E W H I C H I N C L U D E S S O M E O F T H E M O S T TA L E N T E D O I L A N D G A S E N G I N E E R S I N T H E I N D U S T RY TO DAY.” 12 C E O M E S S A G E “I am de li gh ted to report another set of record fi nan ci al resul ts i n ter ms of revenues, margins, and prof it abil ity. This perform ance is all th e more i mpr essi ve as it has been ach i eved dur in g w hat has been , and co nt in ue s to be a di ff ic ul t tradin g cyc le for the gl obal oi l and g as sec tor, dri ven by th e sig nific ant fall i n th e oi l pri ce an d re lated geopo li ti cal ci rc ums tanc es. Despi te the chal len ging backd rop, th e year un der revi ew h as been a tran sformat io nal one for superior nature of technology and our the technology is being increasingly recognised by important role it will p lay in both regulator s and the coming years, not only operators. H owever in our traditional European conventional technology has market, but glob ally as we known limitations and we look to continue to increase maintain that for a variety our international footprint. of technical reasons Following this strong wellheads have been, and performance, we are pleased continue to be the weak link to report a 182% increase in in the well architecture the final dividend to 1.75p chain which I b elieve needs per share which includes a addressing. special dividend payment to deliver an additional return to shareholders supported by our current strong cash position. “Specifically there is a massive divide between qualif ication test standards to which wellheads and their casing hangers (the last Pl exus in term s of new “Our proprietary POS-GRIP connection of the casing st rategi c and pro duct wellhead systems meet the pipe) and annular seals have devel opme nt s. We c onti nue critical safety and historically been held by to devel op the Com pany into performance demands common industry test a l eadi ng in te rn ati onal required of wellhead standards as compared to w ell he ad engi neering technology across co mpany su ppl ying the best pressure spectrums. all As those required for premium casing couplings, i n cl ass an d safe st w ellh ead exploration and production (notwithstanding that both equi pm ent ac ross of oil and gas continues to products effectively do the expl orati on, pr odu ctio n and pursue ever deeper and same job in a well). Further su bsea arenas, utili sin g our more complex formations, our design makes the casing propr ie tar y pate nt ed POS- particularly for HP/HT hanger a much simpler GRIP m etho d o f e ngi neering. environments, the need for object, which rather than As su ch w e re mai n as innovative, safe and being made up of as many co nfi den t as ever in the effective wellhead as twenty parts is made P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p012-p025 (Business Review).indd 12 10/11/2015 23:51 from a si ngle piece, standards set at levels to as happens in the field. It is si gni fi c ant ly red uc in g the which they can comply, even therefore disappointing that nu m ber of ins tal l ati on steps if not applicable to ‘real operators are planning to required by conventional world’ conditions. sys tem s. Therefore on the rely on these absolutely critical seal systems in basi s of current test “I maintain that in the oil subsea applications that st andard l evel s, all su bsea and gas industry key may in the future operate ann ul ar s eal s currentl y used standard setters have under 20,000 to 30,000 psi i n th e mar ket are a weak managed to d o both where gas pressures. The l in k, and on e t hat in su bsea wellheads and wellhead importance of meaningful appl ic ati ons i s neve r truly seals are concerned. Firstly and realistic testing was tes ted afte r ins tal lati on, and they managed to convince underlined recently by Sir w hi ch fu rtherm ore has no the regulator that casing James Dyson who was m eans of m onit or ing for hangers and their seals only quoted as saying, “It seems i nteg ri ty and remedial need three temperature and that industry is r ife with i nterven ti on . pressure cycles to be proven manufacturers engineer ing suitable for use forever and to f ind their way ar ound “For t hese reas on s it is very a day. Conversely, as pert in ent and to pical for us operating conditions have th at th e r ec ent Vol ks wagen moved onto HP/HT ‘em i ss ion s ri ggi ng’ sc andal conditions, casing coupling has throw n a spotl ight on (under pressure of end th e ve rac ity o f l aboratory users), have now advanced tes t st andar ds. This to more than 1,700 test develo pin g s to ry s up ports cycles. Secondly, casing w hat I have be en s aying for hangers and annular seals a l ong t im e and dem on strates are tested in f ixtures which to m e that wh en test have no connection to ‘real st andards an d operating world’ conditions. Rather co ndi ti ons move b eyond than testing the full w hat techn ology can assemblies as a system, ach i eve, then m an ager s and annular seals are allowed to tests, rather than engineering better, more efficient technology. This behaviour is seriously misleading customers”. This statement is of course in relation to a consumer product and its relative performance, whereas in our industry we should be placing safety and the environment first and foremost, which should lead to the genuine desire to only use the best and safest en gin eers wi l l c on spi re to be qualified as a single available technology. arti fi ci al ly m eet st andards so such that component, in specially configured fixtures, which “The significant time and qual i fi cati on te st s c an be eliminates movement and cost savings that we can pass ed w ith inferior without any axial and deliver are of course so lu ti ons , or i ndeed industry bending loads b eing ap plied extremely relevant to a th en lobbi es to have test during pressure cycle testing trading environment where S T R A T E G I C M I L E S T O N E S Contract Win - Cardon IV South America Contract Win - Premier Oil Norge £1.0m Collab oration Agreement Aquaterra Shell Brunei £1.5m Contract Win Maersk Oil £1.25m Agreement with COSL, RST & Jereh 2015 2016 Framework Agreement - Jereh Python Subsea Wellhead Launch Licen ce Agreement Signed - Jereh Contract Win Total £3.3m New Product Win POS-SET Connector - Centrica PETRONAS Licen ce Secured 13 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p012-p025 (Business Review).indd 13 10/11/2015 23:51 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 14 C E O M E S S A G E operators are l oo kin g to minds will soon find out how dri ve dow n th e cost s o f new to arbitrage the two. To this proj ec ts by 20 -30 %. This end it is positive that m eans that at the s urface standard setters are and su bsea, PO S-GRIP beginning to recognise that tec hn ol ogy s im ply sets a new standards are required st andard no other we llh ead to address the new more tec hn ol ogy can m atch. challeng ing d rilling E nco uragi ngly i t h as been conditions and enhanced repo rted th at fol low ing the regulatory scrutiny, and we Vol kswagen in ci dent believe that we are already E urop ean regulat or s want to in a position to meet these bri ng i n real wo rl d tests by in a way that conventional 2 01 8 t hat lo ok at em issions wellhead designs cannot. opportunities. In line with this and following establishment of the our Malaysian and Singaporean hubs, we have substantially built on our existing position in the Asian region where we have achieved a number of significant milestones throughout 2014 and 2015. “Post-period end in July 2015 we had a flurr y of activity starting with the signing of a pivotal licencing agreement with Yantai Jer eh Oilfield Services G roup Co., Ltd (‘Jereh’), a leading Chinese oil services provider to facilitate the rental, sale, and manufacture of our wellhead equipment into the important Chinese, wider Asian, Brazilian, Indian and Middle Eastern oil and gas markets. I see this latest agreement as an important build ing block for the transition of Plexus from being a niche supplier of specialist rental exploration wellhead equipment into the main stream volume market, allowing us to engineer and manufacture our best in class high standards whilst capitalising on b eing able to reduce operator ’s costs. Alongside this fir st major licencing agreement a share from cars on the road, rath er than in l aborato ries, and I bel ieve t hat the oil and gas i ndu st ry regu lators sh ou ld be takin g a si milar st ance i n relati on to w ell he ad s eal test st andards and m etho dol ogy. Perhaps th e regul ators ar e fin ally begi n ni ng to re alis e, as a j ourn al ist rece nt ly reported, th at arti fic ial o ut comes oft en s tar t i n laboratories, and th e gap bet ween a w ell- desi gn ed test and r eality nee d not be hu ge, b ut b right “In tandem with positioning subscription agreement was Plexus as the supplier of also entered into, and choice in the standard another entity in the Jereh pressure and HP/HT Group subscribed in July exploration markets in post period end for 5 % of Europe, we have also been the issued share capital of highly active during the past Plexus for a consideration of year in beginning to more £8.04m. actively market our products into new operating regions in line with our strategy to significantly increase the global reach of our wellhead equipment, significant offering g rowth “This was closely followed by a collaboration agreement with China O ilfield Serv ices Limited (‘COSL’) a major integrated oilfield serv ice solution provider which is P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p012-p025 (Business Review).indd 14 10/11/2015 23:51 m ajo rity ow ned by Chi nese partnership enters the placed to continue to st ate ow ne d com pany second decade this year, let increase our global reach. CN OOC Group, Red Sea us seize the opportunity, Tec hno lo gi es Ltd, a l eading and work together to usher oi l fi eld des ign an d se rvices in an even brighter future co mpany i n S outh E ast Asia, for China-UK relationship”. and Jereh. Th is wi l l s ee all For such reasons I am very parti es expl ore com mercial excited about our new oppo rtu ni ti es for shallow relationship with Jereh water subsea an d crossover which only commenced in w ell h ead produ ctio n systems July, and I am confident fo r o il and gas fi el d ac tivities that Jereh’s considerab le i n Ch i na. manufacturing and commercial skills will blend “I am especially proud to report on the launch of our new Python subsea wellhead at SPE Offshore Europe Conference & Exhibition 2015 (‘OE2015’), Europe’s biggest oil and gas trade show. This was the result of over four years of r esear ch and development supported by our Joint I ndustr y “Th e i mpo rt ance of China well with our technology to Partners, BG, eni, Royal and Ch i nese trad ing partners create considerable value Dutch Shell, Maersk , Total, has o f co urse been brought for both companies over the Wintershall, Tullow Oil, i nto sh arp foc us du ring the coming years. rec ent fi ve day vi sit in Senergy, and Oil States Industries Inc. The new Sep tem ber to C hi na b y “A third Asian develop ment Python Subsea Wellhead has Geo rge Os borne who at the end of July 2015, was been designed to address dec lare d that t he UK should the announcement that we key technical issues and not be running away from had secured in August 2014 requirements highlighted by “The yea r u nder revi ew has been a tran sformat io nal o ne for Plex us in terms of new strategic an d produc t develo pmen ts.” regulators following the GOM incident in April 2010 and to achieve a new best in class standard for subsea wellheads. Entering the global subsea market has always been part of our strategy to expand the Company ’s suite of POS- GRIP wellhead equipment into larger fast growing markets. Subsea exploration and production has grown rapidly since 200 0 in ter ms Ch i na, t hat Bri tain sh ou ld be a local Petronas licence to of total expenditure from “Ch i na’s best partner i n the supply our POS-GRIP USD$7billion to We st ”, an d that we should equipment in Malaysia approximately USD$45billion “cr eate a gol de n dec ade for through PPA. As a result of in 2014. According to a bot h of ou r countrie s”. I these three major strategic report by Rystad Energy in ce rtai nl y ec ho t hose moves, and on-going May 2014 this str ong growth sen ti m en ts and t his m onth’s relationship building is expected to continue, m il es ton e s tat e v isit b y the initiatives in other areas of with subsea expenditure Ch i nes e Presi den t Mr Xi regional importance such as forecast to grow by an Ji npi ng fur th er unde rlined the Gulf of Mexico (‘GOM’) annual rate of 15% to th e s cal e of these and Russia, (where in the USD$115 billion by 2020, oppo rtun iti es when the coming years, and of course making it a highly attractive Pres iden t sai d “As an old subject to sanctions the market, and one that Ch i nes e adag e goes, Arctic will become very demands new technology oppo rtun ity m ay kno ck just important requiring the very and engineering solutions. on ce; grab i t before i t slip s best and most convenient We anticipate that our away ”, and that as “China- wellhead sealing technology) ground-breaking technology, UK co mprehen sive s trategic I believe that we are ideally as it moves from prototype 15 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p012-p025 (Business Review).indd 15 10/11/2015 23:51 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 to produ ct w il l be r eady for Connector for the updating our valued 16 offs hor e depl oym ent in a decommissioning market, shareholders on our latest tri al w el l du rin g the s ec ond are clearly exponential and organic and strategic hal f of 2 016 an d we look we believe that we will developments throughout fo rward to updat ing the continue to attract new the rest of 2015 and m arket fu rther. customers worldwide either beyond.” directly or through licensees “Fi nal ly as a Com pany we as the wider industry places B E N V A N B I L D E R B E E K pri de our selve s on our increasing emphasis on the m anagem en t and develop ment of HP/HT engi n eeri ng exc el lence . I reserves. I look forward to C H I E F E X E C U T I V E 27 October 2015 w oul d like to exte nd the B oard’s grati tu de to our dedi cat ed w or kforce w hich i nc lu des s ome o f t he most tal ent ed o il an d gas engi n eers i n the i ndu stry to day. Wi thout our te am we w oul d no t be ab le to win m il es ton e con tract s wh ere on ly the best equipm ent will su ff ic e such as w ith the rec ent ly anno unc ed £3.3m co ntrac t wi th Total fo r the So lar is wel l offshore N orway fo r w h ic h our tec h no logy was s peci fic ally ch os en , and w hi ch i s thou ght wil l be the hi gh est pressu re w ell ever dri l led in the North Sea at up to 1 7,00 0 to 19,0 00 psi. Th e futu re opp ortu ni ties for Pl exus, i n both our c ore m arkets and wi th anc illary new POS -GRIP developments su ch as ou r PO S-SET P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p012-p025 (Business Review).indd 16 10/11/2015 23:51 17 17 C H A I R M A N ’ S S T A T E M E N T B U S I N E S S P R O G R E S S financial year and I am also the securing of a Petronas I am pl eased to rep ort that delighted to say that this licence to enable the supply period and post period end of equipment in Malaysia; desp it e chal l en ging trad ing were the most active since entering into a collaboration co ndi ti ons the Group we were admitted to the with Aquater ra for the del i vere d an excel lent set of London AIM market, and supply of HP/HT marine res ul ts whi l st mak ing strong have laid firm found ations risers; and impor tantly the progress in terms of for our future expansion official launch of our new ope rat io nal , financial, and both geographically and in Python subsea wellhead at st rategi c developments. terms of new p roduct OE2015 last month in Th is perform anc e resulted in development. It is clear to Aberdeen. a 5 .6% i ncrease in revenue me tha t industry interest in to £ 2 8.53 m fo r the year to our proprietary POS-GRIP O V E R V I E W 3 0 Ju ne 2 015 (2014: friction-grip method of £ 27.0 2 m) wi th th e UK and engineering is increasing in European revenues tangible ways beyond our i ncr easin g by 4 9 .2%; a 5.7% traditional organic jack-up i ncr ease in EBITDA to exploration rental wellhead £ 9.5 3m (2 01 4: £9.02m); a business. Examples of such 1 0.5 % i nc re ase in profit exciting initiatives which I before tax to £ 5.94m (2014: w i l l e x p a n d o n i n c l u d e B G £ 5.3 8m ); and a 18.8% joining our Python subsea i ncr ease in profit after tax wellhead JIP; first contract to £5 .43 m (2 014: £4.57m) for our new PO S-SET he lpe d by a lo wer effective Connector prod uct to tax rate, del iveri ng a 17.5% facilitate decommissioning i ncr ease i n bas ic earnings and aband onment; securing per s hare o f 6.4 0p (2014: of a major licensee in China 5 .44 p). Such key financial (Jereh); a collaboration with perform anc e in dicators are COSL for the development of cou rse onl y part of the and supply of a shallow pro gress made during the subsea wellhead for China; T he 2015 financial year has seen Plexus achieve a number of signif icant milestones, not least, in terms of establishing strategic partnerships and investing time and resources into research develop ment for and new product innovation, which we believe will help us further cement our position as the best in class supplier of wellhead equipment to the oil and gas industry, not just for jack-up exploration but also in due course for surface production and B B U S I N N E E S S S S R R E E V V I I E W S S SS S SSSS S S S S S T T T T T T T T T TTTTTTT T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p012-p025 (Business Review).indd 17 10/11/2015 23:51 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 18 C H A I R M A N ’ S S T A T E M E N T “ I N A D D I T I O N TO S E T T I N G O U R S I G H T S O N A S I A N , R U S S I A N A N D C I S E X PA N S I O N I N T H E N E A R - T E R M , W E A R E A L S O LO O K I N G TO T H E A M E R I C A N A N D G O M M A R K E T S A S PA R T O F O U R demonstrates our confidence in the superior natur e of our POS-GRIP technology and its ability to become a new global standard. In terms of rental sales and revenues for the financial year, we have b een focussed on expanding beyond our traditional UK North Sea market, winning more contracts in Europe and pursuing new business opportunities in Afr ica, Australia, North America and Asia. Our sales mix illustrates the continued importance of both the UKCS LO N G E R -T E R M S T R AT E GY F O R and the European G R O W T H AC R O S S E X P LO R AT I O N , P R O D U C T I O N A N D S U B S E A”. Continental Shelf (‘ECS’) in the North Sea where sales to offshore Norway, the Netherlands and Denmark were particularly strong and subsea. This progress market. Our surface increased by 53.1%, 89.3% ho wever can no t b e exploration offshore and 1, 217% respectively co ns idered i n is ol ation, and wellhead customer base compared to the same period i t is im portant to no te that continues to grow, and in the prior year. We believe th e variou s m acro and includes many of the world ’s that the tax structures for geopo li ti cal neg ati ves that largest global oil and gas example in Norway w e i den ti fi ed t hi s tim e last companies to which we encourage exploration ye ar p er sist , not only in added new customers Total drilling as a result of term s of th e muc h reduced and Cardon IV (a 50:50 JV allowances available where oi l pri ce but al so i n term s of between Repsol and eni) ‘dry ’ wells are concerned. redu ced operators capex during the year. Of these oil With Brent Crude trading at spen d and c ons ume r dem and and gas companies we have circa USD$50 per barrel , l evel s. serviced over 400 wells following publication of the globally offering our Wood Review, we hope that Si nc e o ur adm i ss ion to AIM customers standard pressure the latest tax incentive at t he en d of 200 5, Pl exus wellheads and HP/HT changes in the UKCS, as has gro wn in t er ms of wellheads, and we estimate announced in the UK revenu es and profitabi lity that we hold a c. 10% market Government ’s 2015 Budget th rough our POS- GRIP share of the c.USD$400m which outlined measur es su rface expl oratio n j ack-up global jack-up exploration worth £1.3bn over five year s w ell he ad rental bus in ess market, as compared to the aimed at boosting flagging m odel . Thi s grow th has b een vast majority of the markets North Sea oil production by su pporte d by n ec essary on- in the North Sea which 15% by the end of the goi n g investme nt in R&D, underlines the significant decade, will have a similar pers onn el, ren tal w ell head growth opportunity within positive impact which Plexus i nven tory, and i nfras tructure this arena. Our recognition will benefit from. HP/HT bot h i n the U K and of the imp ortance of equipment r evenues i nc reasi ngl y w orldwid e investment, and in particular continued to account for w here we are looki ng to R&D, and the willingness to over 85% of all sales and, as grow sal es b eyo nd our commit to it clearly such field conditions are the tradi ti on al North Sea most technically challenging, P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p012-p025 (Business Review).indd 18 10/11/2015 23:51 dem on strates t he tec hnical Plexus and Jereh, a world- activities which, from 2012 advantages offer ed by our class supplier of oil and gas to 2018, has been estimated pro priet ary POS -GRIP field equipment and services to amount to USD$146bn. fri ct io n- gri p method of with a market cap of c. Indeed not so long ago en gin eeri ng a nd we llhead USD$4bn, operating in more Infield indicated that equ ipm ent des ign . than 60 countries, share the operations in Asia are 19 As well as the significant contract wins for our POS- GRIP surface exploration jack-up over the period, the two other areas where we have invested significant time and resources over the past year is our continued expansion into Asia, and on- going product innovation which saw us enter a new ambition of delivering oil increasingly moving and gas drilling equipment exploration and production and services, which are best into deeper waters in a bid in class in terms of safety, to boost oil and gas performance and reliability. production, and that as a By incorporating our result Malaysia, Indonesia, patented POS-GRIP India, and China are technology, the licencing becoming major subsea agreement will push the industry hotspots attracting boundaries in terms of a range of operators from wellhead performance and national oil companies such safety standards to facilitate as CNOOC and ONGC, to lucrative market post period end following launch of the our uniquely superior Python Subsea Wellhead which addresses a number of issues identified following the Gulf of Mexico incident in 2010. Our expansion Asian has been demonstrated over three “ Secured our first contract for our ne w POS-SET Connector product to facilitate decommissioning and abandonment” international oil companies such as Shell and Chevron. As such whilst we will continue to expand our global presence we believe this licence agreement can over time generate substantial revenues from the partnership with Jereh, who have an exceptional track record as licensees for major significant news events the rental, sale, and partners around the world. which have been explained manufacture of Plexus’ by our CEO Ben Van wellhead equipment into the In line with our Asian Bilderbeek in his CEO major Chinese, wider Asian, expa nsion we wer e also commentary. Most notably Brazilian, Indian and Middle delighted to report the was the post period end Eastern oil and gas markets. formation of a new Malaysian signing of our first licencing This relationship will be company PPA in conjunction agreement with a major focused not just on rental with a local Malaysian oil Chinese oil and gas field wellhead exploration and gas partner, IPS. PPA services company Jereh in activities, but also on surface was formed to create a fully July 2015. Licencing has production and shallow operational Plexus Asian been central to Plexus’ water subsea, and business hub with the aim of growth strategy as a way to connectors. In terms of supplying POS-G RIP penetrate the global market positive market growth wellhead equipment and whist maintaining our best in opportunities, according to services to the Australian, class service, brand Infield, the energy analysts, Brunei, I ndonesian, reputation and indeed strong China and wider Asia is in Malaysian, Thai, and patent protection where we the process of implementing Singaporean oil and gas have a growing patent suite the largest regional offshore exploration and production in place to protect our POS- capital expenditure markets. This was signed in GRIP technology. friction-grip programme for oil and gas August 2014 and as further progress have since been B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p012-p025 (Business Review).indd 19 10/11/2015 23:51 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 20 C H A I R M A N ’ S S T A T E M E N T “ The o rganic jack- u p ren ta l business is n ow b e ing focused on Asi a, Russia and potentially No rth America” grant ed a l ocal Pet ro nas 2015. The Python launch l ic enc e post period end to wa s attended by Fergus m anu factur e and su pply Ewing, the Scottish Minister Pl exu s’ POS- GRIP w ell head for Business, Energy and equ ipm ent. The secu ri ng of Tourism where he stated, su ch a li ce nc e has been “this new technology will vi ewe d as a maj or m ile st one allow oil and gas companies fo r our c ompany and we around the world to increase bel i eve thi s w il l pos iti on us the safety and reliability of w ell to sec ure ad di tional their operations and it is a bus in ess an d c on tract wins great testament to the skills i n thi s re gion. and knowledge of Ben Van Bilderbeek and his team ”. In additi on to our The Python Subsea launch i ntern ati onal expansion had been supported by pl ans a defi ni ng m ome nt of Plexus’ joint industry Pl exu s’ year was t he lau nch partners which include BG, of the Python Subsea eni, Maersk, Royal Dutch Well h ead durin g E urope’s Shell, Total, Wintershall, bi ggest Oi l an d Gas trade Senergy and Tullow O il. sh ow, OE2 01 5, in S eptember Interestingly it was the industry that came to Plexus post the 2010 Macondo disaster to ask us to help design a safer, new best in class standard for subsea wellheads. The patented POS-GRIP fr iction-grip method of engineer ing offers ‘instant casing hanger lockdown’ and is used to secure hangers with HG Seals which provide direct, metal-to-metal, weld- quality, high integr ity sealing. Many components used in competing conventional subsea wellhead designs such as lock rings and wear bushings are eliminated, resulting in enhanced reliability and fewer installation trips to the sea bed by seven to ten trips on a complex well which will likely save operators using the Py thon Subsea wellhead between USD$2-10m per wellhead. Python’s formal launch marked the first commercial availability of our POS-GRIP enabled subsea wellhead system, and Plexus is P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p012-p025 (Business Review).indd 20 10/11/2015 23:51 Ca s e Stu d y M O V I N G I N T O S U B S E A In Septe mber 2015 , w e l aun ched o ur si mpl e and tech nol ogic ally su peri or POS-GR IP Pyth on We ll he ad. Subsea Th e paten ted tec hnol ogy was en gineered to ach i eve be st in c lass and safest standar d fo r su bsea well heads w it h th at featu res al so reduc e co sts and d eliver operati onal effi cien cy fo r o perato rs. The paten ted tec hnol ogy was in devel opm en t fo r four year s pr ior to i ts l aun ch, in respons e to the G ulf of Mexic o i nc iden t that oc curred i n 2 011 and deve loped as a j oi nt i nd us try proj ec t supp ort ed by i nte rn ati on al o il m ajo rs incl udi ng BG, eni , Maersk, Oi l S tates Indu stri es , Royal Dut ch Shel l, S en er gy, TOTA L, Tul lo w Oil and Wi ntershall an d Pl exus an ti ci pates th at Pyth on w il l b e ready for offshore depl oym en t in a tr ial w ell dur ing the se cond hal f o f cal endar year 2 01 6. confid ent that Python will be and commercially attractive ready for offshore prototype markets. deployment in a trial well during 2016, where the next steps will be finding an operator to secure this first deployment. In tandem with securing strategic partnerships for future international growth and new product development, the continuing Further to the launch of our communication of our unique Python Subsea Wellhead and offering is equally as expa nsion into new target important to Plexus’ future markets, we have also been success. The Board, working on the extension of management team and POS-GRIP friction technology dedicated engineers invest and other new product areas. significant time into These products include: a communicating and educatin g low cost wellhead system for the wider oil and gas industry. the volume production Such activities included market - WellTree™ which we attending and presenting at are currently working on with the ‘World Oil HP/HT Drilling Jereh; this is in addition to and Completions Conference’ products such as the HP/HT in Houston, Texas, and in Tie-Back connector where we London at the ‘Oil and Gas iQ previously signed a joint “HP/HT Wells Summit 2014 industry p roject with Maersk, and 2015’, as well as which for the first time allows important events such as the the reconnection of St Petersburg International production casing to HP/HT Economic Forum in June, and exploration and production the Beijing China wells which is now being International Offshore Oil & marketed; the new POS-SET Gas Exhibition in March. Connector which is designed to enable operators to re- STAFF establish a connection onto rough conductor casing for the abandonment market, O n behalf of the B oard, I would like to thank all our where the market for employees for their permanent plugging and dedication and hard wor k abandonment of wells is during another successful increasing in the North Sea year. This has not only and beyond and could be an delivered another set of important new revenue record financial results, but stream for the Comp any; and has importantly taken us into the recent agreement with the subsea market with the Aquaterra to jointly supp ly launch of our new Python HP/HT dual barrier marine subsea wellhead at OE2015 risers utilising Plexus’ PO S- in September 2015, and will GRIP technolog y to provid e a in the near future accelerate safer, technically superior our goal of also becoming a and cost efficient solution for major supplier to the surface the use on jack-up rigs. All of production wellhead market. these product innovations Such efforts by all our staff are in line with Plexus’ contributed to Plexus strategy to extend our POS- achieving a significant GRIP product reach into new milestone with the award, post period end, of the 21 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p012-p025 (Business Review).indd 21 10/11/2015 23:51 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 22 C H A I R M A N ’ S S T A T E M E N T gl obal l y r ec ogni sed OPITO interacting with US oil and challenging given the approval for o ur Comp etency gas operators and service significant reduction in the Managem en t Sys tem (‘C MS’) companies, industry bodies, oil price and related on- kno wn as Com pet en c y@ and regulators, particularly going economic pressures Pl exus. Thi s is a qu alifi cation in relation to the subsea which surround the oil and th at our cust ome rs request arena. dur in g the te nde r and co ntrac t revi ew proc ess, OUTLOOK espe ci all y in re spo nse to the fi ndi ngs from the Deepwater Hori zon in ci den t in 20 10. I remain confident about the major growth gas ind ustry and the support services underpinning it, and this cannot be ignored. This is especially the case in the UK North Sea which traditionally has been an Furt herm or e i n September opportunities available to important market for us, 2 01 4 I was del ig ht ed to see Plexus and our on-going and as recently as September th at ou r team ’s effo rts led ability to market our 2015 Oil and Gas UK to Pl exus winnin g the proprietary POS-GRIP based reported that “exploration “Co m mi tme nt t o In novative wellhead equip ment as a for new resources has fallen Us e of Res ear ch and new and superior standard to its lowest level since the Development ” award at the for the industry. We are in 1970s” and that capital No rther n Star Bu siness no doubt that we can expenditure will pr obably Awards 2014. Such work ultimately penetrate all decline by £2bn to £4bn un derpi ns t he on -going wellhead markets from annually to 2017. Looking devel opme nt an d app li cation surface to sub sea, both forwards, the UK North Sea of our pro pri et ary fric ti on- organically and in should not be written off gri p m ethod of e ng ineeri ng. conjunction with partners just yet. Last year ’s Wood I w oul d also l i ke to wel come and licensees around the Review of the North Sea as a n on-execu tive di re ctor world. Notwithstanding our estimated that there were Ch arl es Jones who j oi ned year on year growth and still between 12bn and 24bn th e B oard i n Se pte mber indeed record FY 2015 barrels of oil that could still 2 01 4 and who w ill be financial results, FY 2016 be pumped in UK territorial advi si ng Plexus in re spe ct of trading conditions are more wa ters compared to 45bn P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p012-p025 (Business Review).indd 22 10/11/2015 23:51 barrel s of c rude extract ed to S U P P LY G A P : M I L L I O N S B A R R E L O I L E Q U I V A L E N T A D A Y date – l ogi c dic tat es there is Source: EIA estimates, April 2015 m uc h dri l li ng ac tivity to co me. More enco uraging ly in recent w eeks th er e has b een a m ore pos it ive s en time nt with regards to oil price forecasts from a number of sources i ncl u di ng UBS Wealth Managem ent an d B arc lays. On ly t hi s m onth a B arclays anal ys t repor t argu ed that w it h pric es at the ir c urrent hi st ori c l ow l eve ls, energy co mpan i es w ill not be su ffi c ien tl y enc ou rag ed to co nti n ue t o pr odu ce oil , and w it h “capex expected t o fall 2 0% global ly in 2 01 5 and a fu rth er 5 -1 0% in 2016, the st age is se t for a supply cr unc h”, meani ng that after “so me excess st oc ks are us ed u p i n 20 1 6 an d 2017, 110 105 100 95 90 85 80 75 70 65 60 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Required Incremental Production Current Sources of Production Speaking to sharehold ers in strategies would certainly The Hague Mr van Beurd en be favourable in ter ms of said we “will need sustained the growth outlook for and substantial (oil) Plexus, and indeed the wider investment to support oil and gas sector as a whole economic growth” and that as exploration drilling the world could face a activity would inevitably catastrophic 70m barrel per increase. w e beli eve the price day shortfall in crude by apprec iati on seen thereafter 2040. According to the i s l ikel y to be pe rm an ent ”. International Energy Agency Su ch s en ti m ent i s further who said glob al energ y en dorsed by th e in dustry demand will increase by i t s e l f, w i t h S h e ll C E O B e n 40% through to 2040, and van B eu rde n dec laring an influential Exxon rep ort “ A berd een ope ratio n al hea dquarte rs d o ubl ed with the acqu is itio n in Sep 201 4 of a circa 36,00 0 s q .ft wo rk s ho p and o ff ice fa ci li t y” rec entl y that the w orl d faces further estimates that world an en er gy c ris is u nless population will increase i nvest m en t in fossil fuels by 30% from 2010 to pro duct io n i s mai nt ained 2040, with global GDP rising bec ause of th e dramatic by circa 140%. The i ncr ease i n dem and t hat will achievement of hig her oil come from 3bn people prices, alongside our emerging from poverty over international growth and th e next fe w dec ades. new product development Our vision is to become a leading international oil and gas wellhead and related equipment engineer ing company, supplying the best in class and safest POS- GRIP wellhead equipment for exploration, production and subsea applications around the world. In a global market d ominated by a few large multi-national oil service and wellhead supply companies, Plexus reputation is growing, and the awareness of our ability to meet the demand for and provide critical innovative solutions required from wellhead technology, particularly for H P/HT applica tions is evidenced by a number of important collaborations that we entered into over the last twelve months. As extracting hard-to-reach oil and gas goes d eeper and becomes more complex, innovative, 23 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p012-p025 (Business Review).indd 23 10/11/2015 23:51 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 24 C H A I R M A N ’ S S T A T E M E N T safe and effect ive w ellh ead Arctic opportunity is given the high profile import tec hn ol ogy is ever more enormous, and this was replacement programme i mpo rtant , and i ndeed clear to see from a recent that is currently underway ess enti al , par ti cu larl y for report for the Secretary of in Russia, and wher e last l ocat io ns suc h as th e Arctic Energy in Washington by the November Vladimir M arkov, w here s afety i s param ount, US National Petroleum the head of gas giant and w here w ell heads cannot Council in March 2015 titled Gazprom was quoted as afford to be th e w eak link in “Arctic Potential – Realizing saying that within the next th e sys te m. the Promise of U.S. Arctic two to three years “we can Wi th t hi s vi si on i n m in d, the expan si on o f the organic ja ck-u p rental b us in es s is no w being fo cused on Asia, Oil and Gas Resources” substitute up to 90% of all which highlig hted two imports, considering the important statistics. Firstly government has begun that most of the Arctic develop ing production of its offshore oil and gas own complex equ ipment ”. Ru ss ia and poten ti all y North potential lies in water Am eri c a, i ncl udin g fostering depths of less than 100 In addition to setting our l ic ens in g agree ments with metres, and that the Russian sights on Asian, Russian and th e li ke s of J ereh . Whilst Arctic shelf is even CIS expansion in the near- ou r r ental sale s show ed an shallower. Secondly, that term, we are also looking to i ncr ease du ri ng t he last when analysing the g lob al the North American and fi nan ci al ye ar in t er ms of arctic conventional oil and GOM markets as part of our E uro pean an d Asian sales, gas resource potential by longer-term strategy for ou r next areas of geographic country in terms of “billion growth across exploration, fo cu s w i ll be Rus sia and the barrels of oil equivalent ”, production and subsea. This CI S co untri es w he re I Russia towers above the longer-term strategy will be bel i eve si gnifi cant other major players. In boosted by our active oppo rtu ni ti es exis t Pl exu s’ e qui pme nt for and terms of ranked estimated billions of barrels Russia presence in Houston where we have appointed a new tec hn ol ogy, particu larl y in wa s estimated at a massive USA non-executive director the Arctic where the 287, USA 94, Greenland 39, to the Board, Char les Jones, sel ec ti on o f n ew, enabling Cana da 34, and Norway 25. who has over 30 years of and safer tech nolog y w ill be I believe the opp ortunity is senior management and param oun t. The sc ale of the additionally comp elling board experience in the US P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p012-p025 (Business Review).indd 24 10/11/2015 23:51 25 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S en ergy sec tor, and h ave also these new prod uct challenges for the industry I rec entl y en gaged the develop ments and marketing am confident of Plexus’ long ser vic es o f Mr Law rence initiatives which include the term future prospects and Ru ci ns ki , w ho previ ously launch of the new and our ability to deliver he ld the po si ti on o f D irector, superior Python subsea significant shareholder Sal es a nd Marketing fo r the wellhead; our surface value from our patented Gl obal S ubsea bu si ne ss of production wellhead POS-GRIP technology. I FMC Tech nol ogie s Inc., and WellTree; HP/HT Tie-Back would like to extend my w il l acti vel y promo te our JIP connector; and the new gratitude to my fellow Board tec hn ol ogy to A me rican POS-SET Connector. To members, Plexus ope rat ors . B oth Ch arles and support such future management team, office Law renc e w i ll be ad vising initiatives, and as an support and our excellent and ass isti ng t he Plexus indication of our confidence engineers, without whom, team i n r el ati on to potential in the future we doubled the our significant progress to US c om merc ial and li cencing size of our Aberdeen date would not be possible. partn ers. operational headq uarters with the acquisition in As wel l as expandi ng Pl exus September 2014 of a circa through new regional 36,000 sq.ft work shop and J J E F F R E Y T H R A L L oppo rtu ni ti es, as alread y facility from Baker Hughes N O N - E X E C U T I V E st ated n ew pro duct for £2.4m. i nnovati on i s jus t as central to our gro wth st rategy. We therefore look forward to updat i ng s harehol der s on For the reasons outlined in my statement, despite widely reported on-going C H A I R M A N 27 October 2015 238506 Plexus p012-p025 (Business Review).indd 25 10/11/2015 23:51 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 “At the surface and subsea, POS-GRIP technology simply sets a standard no other wellhead technology can match.” P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 Contents P R I N C I P A L A C T I V I T Y F I N A N C I A L R E S U L T S O P E R A T I O N S R E V I E W S T R A T E G Y A N D F U T U R E D E V E L O P M E N T S K E Y P E R F O R M A N C E I N D I C A T O R S 2 8 2 8 3 5 3 9 4 3 26 238506 Plexus p026-p027 (Strategic Report).indd 26 10/11/2015 23:54 S T R A T E G I C R E P O R T 27 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p026-p027 (Strategic Report).indd 27 10/11/2015 23:54 28 S T R A T E G I C R E P O R T “ POS-GRIP technolog y is b ein g increasingly recognise d by the industry, and the va rio us initiatives and agreements that we entered into during th e year clearly supp ort our view tha t th e POS-GRIP friction-gr ip method of engineering technolo gy ha s many more ap plication s beyond ou r tradi tional organic ja ck- u p e xploration activities, in par tic ular subsea.” P R I N C I P A L A C T I V I T Y Th e Group markets a patented met hod of en gin eeri ng for oi l and gas field wellh eads and c onnec tors , n am ed PO S-GRIP, which i nvol ve s deform ing one tub ular memb er agai nst an other wit hi n the elast ic rang e to effect gri ppin g and sealing. This su perior m etho d of engi neering for wellheads offers a Plexus is now actively pursuin g or ganically and with international partners such as Jereh, China. The Directors b elieve that the Company ’s proprietary tech nology has additional wide ranging app lications both within and outside the oil and gas industr y. F I N A N C I A L R E S U L T S nu m ber of i mpo rt ant advantag es to op erators, parti c ul arly for H P/ HT applications an d can R e v e n u e i ncl u de i mpr oved tec h nical p erformance, i mproved in te gri ty of m et al seals , s ig nif icant i nst all ati on tim e s avi ng s, reduced operat ing co sts an d en hanc ed safety. Revenues predomi nantly derive from the rental of POS- GRIP w ell he ads for j ack-up exp loration, al tho ugh th e rang e of co mmercial and safety ben efi ts of POS -GRI P also app ly to surface pro duct io n and s ubs ea wellheads wh ich are si gni fi c ant ly bi gger market sectors wh ich Revenue for the year was £28. 53m, up 5.6% from £27.02m in the previous year. The growth in sales was supp orted by a number of on-going and new contra ct wins both from existing and new customers around the world. Geographically, a particularly strong year on year p erformance was seen in Europe excluding the UK which grew 1 10% as compared to the UK North Sea which grew by 7% and accounted for 37. 2% of total P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p028-p045 (Strategic Report).indd 28 10/11/2015 23:56 29 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 1 5 k s i H P / H T W E L L H E A D I N S T A L L A T I O N sal es , an i nc rease of 7.1% on th e prior year. It is rel evan t to note that the UK North Sea has e xperi enc ed a sl ow down in activ ity, and as hi gh ligh ted l ast year in the Wood Rev iew C E O B E N V A N B I L D E R B E E K th ere i s a need for add itional incen tives to en cou rage th e pu rs ui t of remaining oil an d gas re serves wh ic h last year the Office of B udget Res pon si bili ty estimated as up to growth in HP/HT revenue resulted from 2 4bn barr el s re mai ni ng eq uat ing t o 30-40 contracts for a numb er of exis ting and new ye ars of product ion. customers including Statoil, Maersk, G DF Suez, and ConocoPhillips. Standard pressur e Th e rent al of expl oration wellh ead and equipment sales increased b y 13.3% to rel ated equi pme nt and services ag ain £1.94m from £1.71m in the p rior year, and acc ou nted fo r ap proxi mately 95% of reven ue accounted for 6.8% of total sales. Sales refl ec tin g the fac t that t he Comp any ’s org anic relating to services provided to support bus in ess mode l is foc used on the supply of existing production wellhead installations ja ck-u p rental su rface exploration wellhead totalled £0.10m compared to £0.35m last equ ipm ent and s ervic es . Lookin g to t he future year. This year revenues of £0.02m were th e Co mpany ’s ado pte d strategy is to b road en generated by engineering and testing i ts w el lhead eq ui pme nt p rodu ct rang e to compared to £0.37m last year with the begi n to addre ss th e surface p roduction, balance of revenues made up of £1.24 m for su bsea, and dec ommissioning m arket s rebillable expenses comp ared to £1.29m last bot h i n the North S ea and internationally. year for items such as freig ht, shipping and Pl exu s’ w ell head d esig ns are already proven equipment hire. D espite the widely r epor ted fo r prod uc ti on we lls, a signif icantly larger cyclical downturn driven by the major fall in m arket th an j ack-u p rental exploration . The oil and gas prices, we continued to invest gl obal jac k-up dri llin g market is relatively for the future and increased our capital sm al l at c .USD$400 m, whereas the global expenditure on rental assets t o £2.53m as w ell h ead m arket is es timated at USD$4.5bn . compared to £2.32m in the prior year, a year Im port antly we lau nc hed last month ou r on year increase of 9.1%. ne w Pyt ho n subs ea wellhead following an exten si ve an d succ essful tes t programme M a r g i n and w here we ant ic ipate having a prototyp e i n the fi eld som e ti me i n calend ar year 2016. HP/HT r en tal equ ipm en t and related service co nti n ued to ac count for th e majority of sal es re venues, risin g to £25.23m up f rom £ 23 .30 m l ast ye ar, an increase of 8. 3%, and ac coun ted for 8 8.4% of total sales, co mpare d to 8 6. 2% i n the prior year. The Gross margins have slightly reduced at 69.9% (compared to 71.1% in the prev ious year) as a result of lower margin mudline equipment sales and contract mix. The majority of rental activity sales continued to be HP/HT which deliver higher mar gins than lower pressure equipment contracts. 238506 Plexus p028-p045 (Strategic Report).indd 29 10/11/2015 23:56 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 30 O v e r h e a d e x p e n s e s In l i ne w it h t he in cr eas ed level of sales activity an d th e in curr in g of in cr eased overhead ass oci ated w ith th e buil d out of an in tern ational g rowth s trat egy, p art icu lar ly in relation to As ia wh ere year on year revenues increased 22.4%, total overh eads in crease d to £14.9 3m fro m £ 13.9 3m in th e p rev ious year. T he ad d itional overhead relates t o ad dit ion al infrastructure and personne l to sup port the organic b us iness and the ad dit ion al act ivities sur rounding and su pporti ng ne w p roduct develop ment and inves tment . Incre ased overh ead spe nd was abl e to be co n troll ed rel ative to sales and accoun ted for 52 .3% of reven ues compared to 5 1.5 % for the p rior year. Overhead s taff cos ts red uced t o £ 7.53m from £8. 17m partly due to re lat ed R&D allo cat ion and reduced b onus levels, wh ils t t he emp loye e he adcount at the ye ar-en d was 1 5 7 com pared to 144 for t he prior year, an in crease of 9. 0%. Other items w hi ch i ncreased year o n year as a res ult of t he increas ed act ivity levels, st aff increases, and expan si on of i nfrastruct ure were con tract staff, train in g, h ealth and s afety, overseas base co sts , advertis ing and m arketing , professional fees , and travel and s ubs is ten ce. E B I T D A E BITDA for t he year (before IFRS 2 s hare b ased paymen t charg es of £0 .02m ) was £9.53m, co mpar ed to £9.0 2m (before IFRS 2 share b ased p ay ment ch arg es of £0.0 3m) the prev ious ye ar, an i nc rease of 5.7% . EBITD A marg in for the year was con sist ent at 33. 4% as com pared to 3 3.4 % l ast year. T he E BITDA performance is the result of maint ained operat ion al e fficiencies, co upl ed wi th the hi ghe r marg in s as sociated with HP/HT ren tal act iv ity where t he proprietar y nat ure of the Plexu s POS-GRIP fr ict ion -g rip tech nology enab le s Plexus t o delive r superior perform anc e in terms of enhanced s afety, time saving s, a nd op erat ion al efficien cie s. EBITDA i s cal cu lated as follo ws : Operati ng profi t Add back : – Depr ec iat io n – A mo rti satio n – Lo ss on di spos al – S hare based paym en ts charges – S hare of pro fit of ass ociate – G ain on dispos al o f as sociate – Rou ndi ng E BIT DA 2 0 1 5 £ ’ 0 0 0 5,020 3,070 811 20 21 236 352 1 2 0 1 4 £ ’ 0 0 0 5,279 2,748 657 95 26 215 – (1) 9,531 9,019 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p028-p045 (Strategic Report).indd 30 10/11/2015 23:56 31 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S T E S T B A Y F A C I L I T I E S P r o f i t b e f o r e t a x Profi t befo re t ax increased to a record £ 5.9 4m com pared to a profit last year of £ 5.3 8m , an i ncrease of 10.5%. This increase has been ac hie ved after absorb ing higher deprec iat ion and am ortisation ch arg es of £ 3.8 8m , up from £ 3.4 0m last year, the larg est O F F S H O R E O P E R A T I O N S co mpo nent bei ng depreciation of ren tal in respect of prior year ’s tax charge. ass ets w hi ch i n cr eas ed by 2. 2%, ref lect in g Excluding this amount would have increased th e co nti nu ed i nve st ment in P lexu s’ wellh ead the effective tax rate to 15% (2014:11% ren tal inve ntory. Sh are of profit of associate measured after amending for adjustments in co ntr ibu te d £ 0.24m an d the d isp osal of the respect of prior year ’s tax charge). ass oci ate prov ided a gain of £0.35m while fi nan ce in com e in c ludes a gain of £0.51m It is currently anticipated t hat for the rel ati ng to the derec og nition of a financial foreseeable future, the Group will continue l iabi l i ty. The pr ofit before tax is s tated af ter to report an effective tax rate that is lower an IFRS 2 char ge fo r share bas ed p ay ments than the prevailing UK corporat ion tax rate. un der repo rtin g s tan dard IFRS 2; the ch arg e This lower effective rate will depend upon fo r t he fu ll year is £0. 02m compared to the continuing eligibility to claim enhanced £ 0.0 3m last year. T a x The Group shows an income tax expense of £0.51m for the year as compared to £0.80m for the prior year. The Group has an effective tax rate for the year of 9% (2014: 15%) which is below UK corporation tax rates. The effective rate of tax was lower due to a reduced tax charge arising as a result of SME enhanced R&D tax credits, which arise from the Group’s significant R&D programme. Following the preparation of the prior year ’s financial statements Plexus engaged external consultants to assess the level of the R&D claim that could be made for the 2014 financial year. This resulted in a higher level of claim being made than anticipated. As a result a credit of £393k is recognised in these financial statements as an adjustment R&D tax credits as part of the on-going R&D programme and the expected potential reductions in tax rates arising from the Patent Box tax regime. The prior year tax charge has been restated by £475k relating to a tax credit ar ising on the exercise of share options. This credit was originally recognised in the Consolidated Statement of Comprehensive Income whereas, in accordance with IAS 12 Income Taxes, the am ount should have more approp riately been recognised directly in Equity. Full details relating to the restatement are disclosed in note 2 to the financial statements. 238506 Plexus p028-p045 (Strategic Report).indd 31 10/11/2015 23:56 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 32 E P S Th e Group r eports bas ic earning s p er share of 6.4 0p c ompared to 5.4 4p in t he p rior year, an i nc rease of 17.5%. C a s h a n d S t a t e m e n t o f F i n a n c i a l P o s i t i o n Th e st atement o f financ ial p osition ref lects th e i nvestme nt in operation s du ring t he ye ar and i n par tic u lar on-going capital expen ditu re . The n et boo k valu e of p rop erty, pl ant and equ ipm en t in cluding it ems in t he co urs e of co nstruct ion increased to £17.15m co mpare d to £1 3.28m last year. Cap ital expen ditu re o n t angib le ass ets increased to £ 7.02 m c om pare d to £3.02m las t year i ncl u di ng the acquis iti on of a 36,000 sq. ft w ork s ho p an d o ffic e facility in Aberdeen i n S eptem ber 201 4 for £2.40m. Th e net boo k val ue of i ntangi ble assets, including IP ri ghts and R&D, increased by 26. 1% to £ 13 .17 m c om pared to £10.44m las t year. Capi tal expen diture o n intangib les totalled £ 3.5 4m c ompar ed t o £ 2.40m last year, an i ncr ease o f 4 7.5 %, of which imp ort antly 6 8.3 % rel ated to addi tions in respect of th e Pyth on subsea w ell head JIP. Receivables i ncr eased t o £ 7. 30 m co mpared t o £6. 46m l ast ye ar. Net bo rrowi ngs closed at £2.95m (bank l oan s o f £6 .28m l ess cash and cash equ ival en ts o f £3. 33m ) comp ared to net cas h at bank of £2 .35m last year (cash an d cas h equi val ent s of £ 6.3 5m less ban k loan s of £ 4.00m ) r efl ectin g net cash outf low for th e year of £ 5.30m (net decrease in cas h of £ 3.0 2m per S tateme nt of Cash F lows p lus n et i ncr ease i n bank bo rrowings of £2.28m). This cl os in g cash pos iti on was after ab sorbing a ne ar do ubli ng o f total c apital ex pen diture of £ 10 .56 m (2 0 14: £ 5.4 2m) of which £3.02m rel ated to the addi ti onal work shop and offi ce faci l ity, and disposing in June a 2 5% s harehol di ng i nterest in a p rivate UK oil and gas equipment manufactur ing and engineering company b ased in Sc otland for £1.5m cash. The Group ’s cash position changed materially p ost per iod end with the subscription by Jereh for new or dinary shares representing 5% of the issued share capital of Plexus for circa £ 8m net of expenses as part of the ter ms of the Licencing Agreement transaction also entered into post period end with Jere h. Post period end, the Group’s bank facilities have been renewed with Bank of Scotland Corporate and comp rise £6m working capital lending facilities, and a £1.5m five year te rm loan which was entered into during the last financial year to p art fund the acquisition of the additional Aberdeen facilities and which currently stands at £1.275m. These facilities combined with cash balances ar e anticipated to be adequate to meet on-going capital expend iture, R&D and related pr oject commitments. I n t e l l e c t u a l P r o p e r t y ( ‘ I P ’ ) The Group carries in its statemen t of financial position goodwill and intang ible assets of £13.93m, an increase of 24.4% from £11.20m last year, reflecting the Group’s on-going investment in and commitment to the development of its propriet ary POS-GRI P technology, the most important elements of which continued to be in relation to the POS-GRIP friction-grip method of engineering and the new Python subsea wellhead d evelopment JIP. The Directors have considered whether there have be en any indications of impairment of its IP and have concluded , following a d etailed asset impairment review, that there h ave been no such indications. The Directors ther efore consider the current carrying values to be appropriate. Indications of impair ment ar e considered annually. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p028-p045 (Strategic Report).indd 32 10/11/2015 23:56 P O S - G R I P W E L L H E A D O N R I G R e s e a r c h a n d D e v e l o p m e n t R&D expendi tu re con ti nues to b e an important and n ecessar y i nves tment in protecting , develo pin g, and b road ening the rang e of appl ic ati ons for our p roprietary PO S-GRIP fri ct io n- gri p metho d of eng ineering and rel ated IP. A s Steph en Boyle th e RBS Ch ief E con omi st re cently sai d when ad dr essin g t he oi l an d gas i ndu st ry i n Ab erdeen, “Dou bling dow n on i nnovat ion and produ ctivity are bec om ing o f greater importance than ever before”, and we certainly subs cribe to th at sentim e nt . Indeed Plex us ’ R&D rel ated acti vity p rio r to and during t he ye ar cu lm i nat ed in the achievement of a nu m ber o f mi le st on es and con tract s which w oul d not have be en possib le without such i nvest m en t an d re lated prod uct d eveloping and te sti ng. Of part icular note in relation t o ou r o rgani c bus iness a new cus tomer Total awarded a £3.3 m co nt ract for the supply of j ack-up dri l lin g we llhead equipmen t for a Ul tra HP/HT (17,000 – 19, 000p si) gas expl oratio n wel l i n the North Sea, offshore No rway w here Pl exus was iden tified as the m ost su it able su ppli er due to the un ique abi li ty to o ffer a th ro ugh the BOP cap ability w hi le s upporti ng cas ing at th e ocean floor on it s pro pri et ary mu dline han ger system. As we ll as ne w and s uperior app licat ion s rel ated to ou r organi c jack-up exp loration dri l li n g busi nes s, we also gained traction w it h a num be r o f ne w R&D driven p roduct develo pm en ts . On e of these is our POS-SET Co nn ecto r w hic h is d es igned to re-establish a con nec ti on onto rou gh conductor casin g previ ou sl y cut above th e seabed to facilitate T E S T B A Y A B E R D E E N tie-back or aband onment operations. Further p roof of the unique advantages and capabilities of our friction-grip technology is the fact that full scale testing has show n that our connector can achieve 80% of the bending and tensile strength of the parent pipe, which is significantly better than conventional connector options can achieve. This could be a significant opportunity for Plexus, and Oil and Gas UK have stated that well plugging and abandonment expenditure could total £4. 5bn from 2013 t o 2022 . This product follows on from our previously announced HP/HT Tie-Back connector which for the first time allows the reconnection of production casing to pre-dr illed HP/H T exploration and production wells to the same standards as casing couplings . Full pr oduct develop ment and qualification testing has been completed , and as this pr oduc t can deliver significant time and cost savings to an operator interest continues to be shown by the industry. A second product extension is a post p eriod end collaboration with Aquater ra to jointly supply HP/HT dual barr ie r mar ine risers utilising Plexus’ POS-GRI P technology to provide a safer, technically supe rior and cost efficient solution for us e on jack-up rigs, initially in the North Sea market. What is important here in terms of the uniquely 33 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p028-p045 (Strategic Report).indd 33 10/11/2015 23:56 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 34 en abli ng c apabili tie s of POS-GRIP is that I F R S 2 ( S h a r e B a s e d P a y m e n t s ) IFRS 2 charg es have been in clu ded in the accounts, in line with rep orting standards. The fair value of share based payments has been computed indep endently b y spec ialist consultants and is amortised evenly over the expected vesting period from the date of grant. The cha rge for the year was £0.02m which compares to £0.03m las t year. D i v i d e n d s The Company announced on 24 Marc h 2015 the payment of an increased interim dividend of 0.51p per share which was approved for payment on 22 April 2015. In further recognition of the Group’s on- going progress and confid ence in the future the Directors have decid ed to propose a 182.3% increase in the final div idend of 1.75p per share for the year end ing 30 June 2015 compared to 0.62p last year, making a total dividend for the financial year of 2.26p. The final dividend has b een enhanc ed this year in recognition of the G roup’s strong balance sheet and cash p osition, and will be recommended for formal approval at the Annual General Meeting to be held on 10 Decemb er 2015. Subject to this the dividend will be paid on 16 December 2015 to all members appearing on the register of members on the record date 6 November 2015. The ex-dividend date for the shares is 5 November 2015. w hi ls t mari ne ris ers exist for low pressure appl ic ati ons, as wel l as cer tain besp oke he avy wall hi gher pre ss ure risers, the ‘Du al B arri er High Press ur e Riser ’ will b e t he f irst i n th e in dustry fo r HP/HT wells . The maj ority of o ur R&D expe ndi tu re has b een r elat ed to the im portant subs ea market and pos t peri od end w e anno un c ed a collab oration agreem ent wi th CN OOC and RST to ex plore co mm erci al opportun ities for shallow water su bsea an d c ro ssover wellhead p rod uction sys tem s for oi l and gas activities in China w hi ch fi ts w ell w i th our st rateg ic focus on A si an opportu ni ties. Finally our most si gni fi c ant R&D dri ven p roject, the new Pyth on subsea w ellh ead JI P, not on ly gai ned BG as an addit ional and valuable JIP m em ber, but t he c ompleted desig n was offi ci al l y l aun ch ed at OE2015, Europ e’s bi ggest o il and gas sh ow last month. Py thon has been desi gn ed to a new b est in class and safest standard for subs ea wellheads, and is en gin eered to be s im ple, whils t offer in g a range of u ni que and su perior techn olog ically advance d features, i nc luding ‘instant casing han ger l ock dow n’, an d secures hangers with HG seal s w hi ch provi de direct, metal-to- m etal , wel d- qu ali ty, high integ rity s ealing. Un i quel y, m any com plex comp onents used i n co mpeti ng c onvent ional sub sea wellh ead desi gn s such as lo ck rin gs, lock down s leeves and wear bus hi ngs ar e elim in ated, which res ul ts in great er re liability an d fewer i nst all ati on tri ps. R&D spend increased by 2 8.9 %, inc ludi ng the c o st of build ing new tes t fi xtu res, t o £4. 12 m from £3.19m in th e prio r year, an d will continue d urin g the 2 01 5/ 1 6 fi nan cial year as the Pyt hon s ub sea JIP ne ars co m pletion and th e POS-GRIP pro duct expands in to the surfa ce production and c onne ctors m arket s ectors. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p028-p045 (Strategic Report).indd 34 10/11/2015 23:56 35 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S A B E R D E E N O P E R A T I O N S T E S T P R O C E D U R E O P E R A T I O N S R E V I E W Th e m ain operation al developmen ts during th e year were of both an org anic an d T E S T B A Y F A C I L I T I E S an i nt ernati onal st rategic natu re. As the repu tat ion of o ur proprietary PO S-GRIP fri ct io n- gri p me th od of engineering con tinu es to gr ow an d as ou r tar get market exp and s f rom ou r tradi ti onal jac k- up exploration sector to su rfac e produc ti on an d subsea exp loration and rel ated new pro duct developments, it is i mpo rtant that our operational cap abilities acr oss al l dis ci pl ines, wheth er b uildin gs , pl ant, and equ ipm en t or personnel are able • November 2014 – £0. 9m Det Nor ske, Norway orders HP/HT equipment for an oil and gas ap praisal well offshor e Norway and is the seventh Det Norske well to use Plexus equipme nt since 2012 to su pport s uch develop ments. O ur ability to • January 2015 – £1.6m contract with co nti n ue to inves t in operations during the Shell Brunei und er an existing four year ye ar was dri ven b y our core j ack-up drilling contract which runs to 2016 for three bus in ess and co nt rac ts awarded b y existin g additional exploration wells and new cus to m ers th e most s ign if ican t of w hi ch w ere as fo llo ws: • April 2015 – USD$0.8m new customer contract Cardon IV in new ter ritor y • Ju ly 20 14 – £0 .6m additional well ord er Venezuela awarded for the supply of si gne d w ith Centrica to supply s urface equipment for a development well w ell h ead and mudline equipment offshore Venezuela ser vic es for So uthern North Sea expl oratio n • May 2015 – £1.0m Premier Oil Nor ge order HP/HT wellhead equipment for • August 2014 – £1.0m order from an exploration well in the N orwegian Det Nor ske for the supp ly of HP/HT Central North Sea equ ipm ent fo r an oil and g as app rais al w ell o ffs ho re Nor way with a value of £ 1.0 m • May 2015 – £1.25m third well equipment order from Maersk Oil under a contract signed in 2014 for an offshor e well in • Oc tober 2 0 14 – si gnificant ord er sig ned the Danish sector of the Nor th Sea w it h B G Gr oup to supply HP/HT s ur face w ell h ead and mudline equipment services for a standard pressure expl oratio n wel l in the UKCS • June 2015 – £3.3m ultra H P/HT wellhead equipment order rece ived from new customer Total for potentially the highest pressure well ever drilled • Novem ber 2 01 4 – £1.9m HP/HT wellhead in the North Sea estimated at 17,000 – equ ipm ent order fo r an exploration well 19,000psi, offshore Norway i n th e UKC S fr om a major oil an d gas ope rat or 238506 Plexus p028-p045 (Strategic Report).indd 35 10/11/2015 23:56 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 36 To date our core org anic jack-up exp loration into the Malaysian market and we hope over bus in ess , an d ass ociated on-g oin g time will act as a springboard to becoming i nvest m en t i n w ellh ead rent al inventor y a major supplier of wellhead equipment in to geth er w ith th e i nfrastructure, s ys tems, the region. To support these plans Plexus is and processes ne ede d to su pport it have slowly building the number of employees in co nti n ued to generate the majority of ou r the region, and will also be sending more revenu es. Howe ver as t h e North Sea b egan personnel to China from Aberdeen to support to experi ence a sig nificant and widely the training and knowledge transfer process repo rted sl ow dow n, i t was ess ential that with Jereh at its headquarters in Yantai. It w e i ncr eas ed o ur effo rts to ext end our is anticipated that the Singapore business i ntern ati onal pre se nc e. As such , we secur ed unit will in the future establish its ability to a m aj or l ic ensi ng ag ree ment with our new refurbish and inspect wellhead equipment for m ajo r tradi ng part ne r J ereh for China and servicing the local market, which simplifies ot her i m portan t terr itori es p ost per iod end. logistics from Aberdeen and reduces costs, In ternat io nal growth continued with wells whilst being able to offer customers a more w on i n Br unei w ith S hell Br unei, an d our responsive service. fi rst ventur es i nto C h ina with Shell Chin a, and in to Ve nezu ela wit h Card on IV (a 50:50 In anticipation of future growth, not only Jo in t Vent ure be tw een Repsol, S. A. and eni internationally but also in Europe we doubled S.p.A ). The o peratio nal base in Sing ap ore the size of our operational head quarters in su pport ed we lls in South Eas t Asia an d Dyce, Aberdeen through the purchase of i nvest m en t i n p ersonn el and inf ras tructure a circa 36,000 sq.ft work shop and off ice pos it io ns Sin gapor e as a hu b to supp ort facility for £2.4m. The new facility is situated ant ic ipat ed growth in the region. Sup ply immediately adjacent to the ex is ting 36,500 ch ai n rati on ali sation and emphasis on for ging sq.ft site in Ab erdeen, and was previously partn ersh ips w ith o ur su ppliers has res ulted occupied by leading oil services company i n reduc ti on of overal l risk and cos ts in the Baker Hughes. This major increase in Plexus’ cr it ic al areas of our sup ply chain. operational capacity is necessary not only for supporting our rental wellhead b usiness, but Further emphasis was placed on Asia with the also to ensure that we are able to support formation of a new Malaysian company PPA and respond to greater anticipated activity in conjunction with a local Malaysian oil and associated with our recently launc hed gas partner, IPS. The establishment of PPA is Python subsea wellhead , and other new a key milestone in Plexus’ strategy to create product developments such as the POS-SET a fully operational Asian business presence Connector. At a time when cost control and to increase the supply of our pioneering POS- indeed cost savings are param ount w ithin GRIP wellhead equipment and services to the the industry, the additional space will also important Australian, Brunei, Indonesian, enable Plexus to consolidate its wor k facilitie s Malaysian, Thai, and Singaporean oil and gas in Aberdeen, thereb y significan tly impr oving exploration and production markets. At the our logistical efficiencies especially due to time of the establishment of PPA the key task the close proximity of our existing building. was the necessity to obtain a local Petronas licence, and importantly post period end As reviewed in the R&D section of in July PPA was awarded the licence. The our Strategic Report, as a proprietar y licence enables PPA to manufacture and technology led b usiness investment, time supply Plexus’ POS-GRIP wellhead technology and effort continually go into engineering P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p028-p045 (Strategic Report).indd 36 10/11/2015 23:56 37 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S S T O R A G E F A C I L I T I E S i mproveme nts and new invent ion s. Dur in g t he ye ar a n umb er of s uch product develo pm en t i nit iati ves cam e to f ruit ion and have now eit he r arrived at a p oint P O S - G R I P I N V E N T O R Y w here act ive promoti on to the wid er global m arket plac e can b egin , for example, our HP/ HT Ti e-B ack pr odu c t ori ginally s pon sored by Maersk as w el l as ou r POS-SET Conn ector Staff and staff develop ment is essential for to fac il i tate aband on ment which has already our current and future success. During the been ordered by Ce ntrica; or will be able year there was further focus on re cr uitment to be mar kete d in the near futur e such with year end total employee numbers as ou r ne w Pyth on s ubsea wellhead . Su ch increasing from 144 to 157. As we expand develo pm en ts h ave to be prop erly s up p orted , our business internationally and suppor t and ou r abi li ty t o respond to t echnical the development of our op era tional base in en qui ri es and t he phys ical deploy ment and Singapore, we have recruited a number of i nst all ati on of eq uipm ent is key, and we local personnel each of which have enjoyed therefore ensure that appropriate training, a significant induction and train ing period in m etho ds, pro cedu res and systems are in the UK to supp ort an effective transition of pl ace, and con ti nu ally reviewed t o meet our established working practices in the region. cu sto m er expectatio ns and requirements. Particular emphasis was placed on our sales An i n teresti ng de velopment that we have and marketing capabilities and a new sales rec entl y seen du rin g the current cycle of strategy based around more forwar d looking l ow o il pri ces an d focus on cos t saving s, market data for forthcoming projects was and w hi ch i s rele vant t o the uniq ue natu re implemented post period end. This initiative of ou r tech nol ogy and product d esigns, is is already showing positive signs of enabling on e w here operators’ eng ineers are looking us to engage with customers at an early m ore c losel y at te chn ology that can offer stage of their well planning and equipment a range o f tec hnic al benefits fr om featur es specification and selection pr ocess. su ch as mo ni to rin g, tog ether with simp licity Legislative changes have featured heav ily and avoi dance of ‘ in the field prob lem s’ during this period and in par ticular, we cau sed by convent ion al wellhead equip ment met our pension auto enrolment targets as th at c an arise for example from t he u se of stipulated by government. The role of field l ock ri ngs and lock do wn sleeves. The more service technicians within Plexus is one of the co mpl i cated n atu re of conventional wellhead most pivotal roles within the organisation, equ ipm ent des igns can lead to sign if ican t being integral to the safe operation of our co st penal ti es whether direct or in direct equipment and the d irect inter face with th rou gh delaye d or l os t production. We hope our customers. The focus on training and th is wi l l prove pos iti ve for Plex us in the competence within this group remains a l ong- term . key targ et for the business, bolster ed by 238506 Plexus p028-p045 (Strategic Report).indd 37 10/11/2015 23:56 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 38 a new assessm ent centre led recru it ment staff numbers and infrastructure. The pro cess w hic h su ccess fully saw five new IT infrastructure has underg one major fi el d serv ice tech nici ans being recr uited . In networking and telecommunicatio n upgrades rec ogni ti on of t he im portance that we place to support the continued growth of Plexus on su ch in iti atives at a time wh en safety internationally. These up grades are required i s so key for th e i ndu stry, we were also to ensure delivery of flexible an d integrated del i ghte d to ac hieve a m ajor milestone with business information systems. T he bespoke the accreditation and approval by Offshore nature of our in-house softwa re d evelopment Pet rol eum I ndus try Training Organisat ion allows the IT department to q uick ly r eact to (‘OPITO’ ) for our comp etency management the ever changing demands of the busine ss. sys tem (‘CMS’ ) kn ow n as Competen cy@ It provides important information for Pl exu s. OPITO is g lob all y recog nised and the decision making, p roviding managers access acc redi tati on i s c on ti nu ally requ ested d ur in g to accurate business data for planning ten der and c ontract revi ews b y cu stomer s. and analysis. The recent upd ates to our sales system have given better v isibility Heal th and Safety i s a key op erational of worldwide sales op portunities to both di sci pl i ne an d Pl exus re mains fu lly com mitted the sales team and senior management. to del i verin g t he hi ghest safety stand ard s. Plexus is committed to ensuring a safe We co nti nue t o manage our safety risks and secure electronic environment and as th rou gh assessm en t, implementation of a wide range of cyber risks are an ever co ntr ol s, c onti nual m onitoring, an d hiring evolving and on-going risk for all companies and devel opi ng staff to m eet the competen cy the IT department is working towar ds ISO l evel s requi red. We enco urage our p erson nel 27001:2013 accreditation which will help to get i nvol ved, have c onfidence to intervene ensure that both internal and exter nal and t o c hal lenge any un safe act or condition risks a re minimised. Certification provides and t o en sure transparent rep orting of customers and key stakeholders with the i nci den ts that meets our desired s afety confidence that security ris ks are taken cu l ture . Recen t au dits by Lloyd s Regis ter and addressed seriously. The cer tification Qu ali ty Assu ran ce (‘ LRQ A’), th e world process is rigorous and is exp ected to be l eadi ng i ndependen t pr ovid er of Bus iness completed in financial quarter 4 2016 . As su ran ce servic es d em onstra te that we are ope rat in g to the re cognised ind ustry and Finally, Plexus has to d ate, chosen not to nat io nal st andar ds, with our ISO 90001 and own its own manufacturing capacity but B S OHSA 1 800 1 c er ti ficat ion maintained. We it had previously acquired a 25% inter est rec ogni se that th e health and well-b ein g in a private UK engineering company of our e mpl oye es i s a crucial feature of which manufactures specia list oil and ou r HSE and HR st rat egy, and bu ild ing on gas equipment. As Plexus becomes mor e ou r achi eveme nt o f our Bronze and Silver international, and with stronger relationships Healthy Working Lives Awards presented developing with partners such as Jereh in i n 2 01 3, we recei ved during the year our China and IPS in Malaysia it was decided Heal thy Worki ng Live s G old Award . that higher cost base UK manu factur ing was non-core and this interest wa s disposed of IT s ervi ces and supp ort are of course in June 2015. ess enti al for any m odern b us iness and i nvest m en t in IT has continued in b oth P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p028-p045 (Strategic Report).indd 38 10/11/2015 23:56 39 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S E X P A N D I N G I N T O G L O B A L M A R K E T S S T R A T E G Y A N D F U T U R E D E V E L O P M E N T S T e c h n o l o g y Pl exu s’ un iqu e an d patented POS-GRIP fri ct io n- gri p tec hn ol ogy has wid e rang ing appl ic ati ons both wi thin and outside of th e oi l and gas ind us tr y. It is imp ortant to rem em ber t hat POS -GRIP is a method of en gin eeri ng an d no t a produ ct in its own ri ght , and wh er e t he re is an op por tunity for th e tec hnol ogy to imp rove upon conventional pro duct s, we lo ok to i ntegrate POS-GRIP into th e produ ct so th at t he benefits together w it h HG seal ing can be realised. In simp le term s POS-G RIP tech nology is b ased on a ve ry s i mpl e c onc ept . A comp ressive force i s appl i ed on the out si de of a wellhead or pi pe, to fl ex it in wards. As th e bore of the ve ssel m oves in war ds, it makes contact with an i nn er pi pe (or han ger) on t he in sid e. Su ff ic ie nt c ontact force is generated to fix th e in ner m ember (hanger) in place through fri ct io n betw ee n the two componen ts . The Co m pany ’s strategy is primarily focused on del i veri ng th e hi ghest standard of wellhead desi gn fo r the u pstream oil and gas markets , w hi ch i s al ready proven to b e u niq uely advantageou s i n term s of sa fety featu res, ope rat io nal effic ienc y, and cost saving s for ja ck-u p dril l in g HP/HT applications where Pl exu s has the majo rity market s hare in the No rth Sea. POS-GRIP wellhead designs deliver many advantages over conventional “slip and seal” and “mandrel hanger ” wellhead technologies for surface exploration and production activities, and in due course for subsea operation with our new Python subsea wellhead. These include larger metal-to- metal seal areas, virtual elimination of movement between parts, fewer components, simplified design and assembly, enhanced corrosion resistance, simpler manufacture, long term integrity, annulus management, and reduced installation cost. In particular our subsea wellhead eliminates the need for wearbushings, pack-offs, lock-rings, and lockdown sleeves, whilst delivering instant rigid lock-down in all directions whilst being fully reversible for ease of workover, side-tracking or abandonment. At a time when unconventional HP/HT and deep- water reservoir developments are growing in importance, the oil and gas industry is facing increasing technical challenges to meet rigorous regulatory and health and safety requirements, while having to ensure the commerciality of operations during the current volatile oil price environment. POS- GRIP wellheads address many of these challenges, whilst also being able to deliver significant cost savings which in the case of our new subsea wellhead design have been independently estimated at up to USD$10m for a deep-water well. In our view, 238506 Plexus p028-p045 (Strategic Report).indd 39 10/11/2015 23:56 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 40 Plexus’ equipment sets a new standard and, B u s i n e s s M o d e l a n d M a r k e t s having secured a leading position in jack- up exploration drilling, is well placed to break into the significantly larger and more mainstream volume production wellhead and subsea markets, particularly in conjunction with partners such as our new licensee Jereh. Th e su per io ri ty and pot en tial of our PO S-GRIP tec hn ol ogy i s b ein g in creasing ly recog nised by t he i ndus tr y, and the various initiatives and agreem en ts t hat we entered in to during th e year w i th a range o f industry partners su ch as Jereh, C OSL, and Aq uaterra clearly su pport our vie w th at t he POS-GRIP f riction- gri p method of engi n eering techn olog y has many m o re applic ations b eyond our tradi ti on al organ ic jack-up ex plorat ion act i vi t ies . Of co ur se as w ith any major ‘game ch angi ng’ te chnolo gy that has the potential to becom e a n ew st and ard, ther e have to be so un d an d gen uine reasons for cus tomers sel ec ti ng our e quip ment. Apart from our operati onal ti me sav ing and r elat ed safety bene fit s, at the engin ee ring level we b elieve th at o ur techn ol ogy can uniq uely raise the i ntegr ity o f w el lhe ad testing and sealing to th at of pr em i um c ou pli ngs, which supports ou r cl ai m that well he ads should not be, an d i ndeed now do n ot need to b e, th e ‘weak link’ i n the wel l ar chit ec ture chain. In s up por t of th ese i mpo rtant prin cip les an in d ept h repor t co mm i ssi on ed by th e Company from OTM Co ns ul ti ng In c, (‘OT M’), an inter national i ndepen den t engin ee ring cons ultancy, co nc lu ded t hat Ple xus wellhead s usin g its HG m etal seals , offer the “bes t possible seal i ng perfo rm an ce through a metal-to- m etal seal th at none of t he exist ing design s can matc h. Mo reove r, sealing performance is not affected by pressure/temperature cycl es as there are n o movable comp onents”. OTM c onc lu des th at aft er evaluatin g POS- GRIP s eali ng tech nolog y ag ain st existing co mpe ti ng te chn olo gies, “it is the b est and safest tech nol ogy d ue to its en han ced safety perform ance”. Plexus’ traditional market has been the supply of adjustable ren tal wellhead equipment and associated running tools for jack-up exploration drilling in th e UKCS. The exploration wellhead contracts ar e supplied from a rental fleet inventory, the majority of which are HP/HT wellheads as these ar e increasingly demanded not j ust for HP/ HT drilling but also for sta nd ard pressure wells where added benefits are appreciated. Initially this was only for stand ard pressure equipment of 10,000 psi or less, but with the development of POS-G RIP HP/HT equipment, Plexus has secured n ear ly 10 0% of the UKCS market, and commands a large share of the European North Sea thanks to the sup erior nature of its technology. The rental business has since expand ed globally into other territories such as Australia, Brunei, Cameroon, China, Eg yp t, Malaysia, and Venezuela. Plexus also p rovides serv ic e technicians who install and maintain our equipment at various stag es during the drilling of a well. The Company ’s focus on rent al ex ploration allows customers to experience for themselves the many benef its of POS- GRIP technolog y on temporary exploration wells, rather than those used for pr oduc tion where typically the wellhead eq uipme nt is in place for the life of the well. However with new partner Jereh we are working closely to develop a Plexus POS-GRIP sur face production wellhead suitable for the volume Chinese land market. In addition re nting out equipment from a growing inventory enables Plexus to outsource all of its wellhead manufacturing to a select numb er of third parties, and as a result avoid h aving to invest in and d evelop in-house manufac tur ing capabilities with attendant fixed overheads. Such a strategy led to the d ispos al of a 25 % shareholding interest in a privat e UK oil and gas equip ment manufacturing company. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p028-p045 (Strategic Report).indd 40 10/11/2015 23:56 41 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S P O S - G R I P 1 5 k s i H P / H T E X P L O R A T I O N W E L L H E A D S Y S T E M Th e j ack-up wellh ead exploration market there is an industry wide push for savings at i s esti m ated to be w orth cir ca USD $400m all levels of drilling operations. With this in per annu m. B y co ntras t the combined value mind, it is compelling that Plexus’ equipment of t he gl obal e xpl oration and p rod uction generates material cost sav ings for the w ell h ead market was estima ted b y OTM at operator, while at the same t ime deliver ing US D$4.5 bn i n 20 14. C learly th e s ize of the a superior wellhead solution. I mportantly, m arket s that Ple xus i s only now beg innin g Plexus’ surface jack-up wellheads can be to address is far i n excess of its t rad itional supplied at a rental cost that equates to or gani c busi ness, an d even with the well less than the time savings for the operator, repo rted dec lin e i n capex by t he operating thereby making them cost negative. co mpan i es the u psi de of moving into these Similarly, our new Python subs ea we llhead m arket secto rs i s subs tantial. As a resu lt, will also deliver substantial cost savings i n t andem w i th c ont inuing to gr ow the jack- benefits, and we hope to b e ab le to r un the up ren tal bu sine ss i n bo th its t rad itional and first prototype in the second half of calendar ne w market t er rit or ies , Plexus is focused in year 2016. Cost saving and safety features parti c ul ar on expandin g into th e mainstream such as these underpin the va lue of Plexus’ vo l ume pr oductio n wel lheads market, and IP and underpins Plexus’ growth potential as th e i nc re asi ngly imp ortant s ub sea m arket. it enters new international markets directly In t he cas e of th e sub sea market Dou glas - or through licensees. Westw ood expe cts deep-water cap ex t o ris e pos t 2 01 6, and s ee s expenditu re gr owing by S t r a t e g y a n d t h e F u t u r e al mo st 6 9% c ompar ed with the preceding fi ve year period , totalling USD $210bn betw een 2 01 5 and 2019, d riven b y Af rica and th e Am eric as w hi ch account for 82% of cape x. In l ig ht of vol ati le o il markets which saw B rent Crude fall d uring the f inancial year from circa USD$112 on 1 July 2014 to circa US D$6 3 on 3 0 Ju ne 2015, op erator s are i ncr easin gly focu se d on securing sig nificant co st s av in gs across their op erations, an d Plexus has p ioneered a safer, more cost effective, reliable and technically super ior wellhead utilising POS-GRIP technology which we rent to many lead in g oil and gas operators worldwide for surface exploration jack-up drilling activities. Having battled with incumbent suppliers which have dominated the industry for d ecades, (where for example just five comp anies account for over 90% of the subsea wellhead business), Plexus’ wellhead equipment is gaining traction and major operators awaren ess of our 238506 Plexus p028-p045 (Strategic Report).indd 41 10/11/2015 23:56 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 42 w ell h ead system s is i nc reasing. To date our In an effort to continue to g row inter national equ ipm ent has been u sed in over 400 wells revenues as a p roportion of sales, and in w orl dw ide by t he likes of BG, BHP Billiton, particular access the growth of the Asian B P, Con oco Phi l lips , Mae rsk, Sh ell, Stat oil, HP/HT market, we have establish ed an Asian Pet ronas , Tul lo w Oil, and Wintersh all, which hub with offices in Singap ore and Malay sia w e bel ieve i s a tes tame nt to the commercial as we seek to further p osition our selves in st rengt h o f Ple xus ’ offering. a number of countries including Australia, Brunei, Indonesia, Malaysia, Singapor e Pl exu s’ l ong-term go al is to develop PO S-GRIP and Thailand. With this in mind, we are tec hn ol ogy as a new in dustry s tandard for working to re-locate a p ropor tion of our w ell h ead des ign , and t o continu e to d evelop wellhead renta l equipment to Singapore to addi ti onal n ew p rod uc ts , which will also offer support and strengthen our cu rrent regional m ul ti pl e benefit s an d advantages in terms of rela tionships a nd broaden our cu stomer base i mproved safety, func tionality, and cost and outside of the UK. ti m e s avi ngs. For exam ple Plexu s’ connector tec hn ol ogy i s ideal for high integ rity, low Importantly, a s well as estab lishing new fat igu e con nector ap plications. Wellhead regional hubs, and pursuing licencing co nn ecto rs , ri ser con ne ctors, sub sea jum per agreements and strategic partners as a key co nn ecto rs , pi pelin e c onnectors , and even part of strateg y to continue increasing our ve ssel m oori ng c on nectors can all b enefit global footprint, post period en d we se cured fro m t he s im pli city o f POS-GRIP. A key factor Jereh as a licencing partner in China; and i n many o f th es e c om m ercial op por tunities secured a Petronas Licence in M alaysia i s our superior me tal-to-metal sealing through our joint venture entity. We ar e also capabi l ity w i th u npreced ented reliab ility, an d in active dialogue with reg ard s expansion tru e w eld qual i ty seal ing , resu lt ing from t he into Russia and CIS countries as par t of hu ge am o un t of preload that we g enerate our wider focus on b ecoming less re liant on w hi ch preven ts any possible movement at the declining North Sea area and seizing a th e seal i nterface over the life of th e field . foothold in major and emerg ing oil and gas We bel i eve we h ave m erely scrat ched the economies. su rfac e despi te the excellent growth seen to In addition to our future strategy to date , and that des pit e the current ind ustry accelerate the adoption of our POS-GRIP w ide sl owdo wn we beli eve that we can still technology by the wider oil and gas mar ket m ake i nro ads i nto t he sizeable mar kets th at through licencing agreements, we are also to date w e have not ad dressed. As a company developing new p roduct lines to generate w e ar e i mpl emen tin g a strategy t o expand new revenue streams for Plexus . The launch fro m a do mi nant pos iti on in t he Nort h Sea of our Python Subsea Wellhea d mar ks such i nto ne w geographi cal areas, as evid enced a step. As mentioned the formal launch by th e growt h we h ave r eported in FY 2015 marked the first commercial availability i n Eu rope and Asia. of our POS-GRIP enabled subs ea wellhead system, where we are looking to deploy a prototype offshore d uring the second half of P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p028-p045 (Strategic Report).indd 42 10/11/2015 23:56 43 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S P O S - G R I P I N V E N T O R Y cal en dar year 2 016. With over six majors , i ncl u di ng the li ke s of B G, eni, Maers k, Sh ell, and Tot al, h avi ng suppo rted the development of t he wel lh ead an d its launch at OE2015, T E S T B A Y F A C I L I T I E S w e are acti vel y worki ng toward s find ing an ope rat or to s ecu re t his first d eployment by ei th er o ne o f t he original JIP partn ers or an other op erator. In terms of market wellhead. All of these prod uct innovations co mpe tit ors the re are five maj or su pp lier s of are in line with Plexus’ stra tegy to extend su bsea wel lhe ad s, th es e are Aker, Cameron, our POS-GRIP product reach into new and Dri l lQ ui p, FMC , and GE who are all maj or commercially attractive markets . Successful m ul ti -bi ll i on do llar c orporations . However R&D activity lead s to new inventions, product w it h a un ique techn ol ogy tha t is safer an d designs, and IP. Plexus continues to pursue m ore c ost e ffec ti ve we have a powerful s tory an active strategy of protecting existing to t el l and th e p rogress we have made to and securing new IP and p atents, and we date dem ons trates h ow large the poten tial have a number of exciting and we be lieve i s fo r fu ture growth and value creation. The valuable patent applications reg iste red or in su bsea system s m arket had b een estimated the process of being applied for. to be value d at US D$ 41.6bn between 2009- 2 01 3, in cl udi ng su bsea trees , manifolds , w ell h eads , pu mps, cho kes and valves . T he K E Y P E R F O R M A N C E I N D I C A T O R S su bsea wel lh ead market is therefor e a The Directors monitor the performance of the su b-s ec tor o f t hi s market, which brok ing Group b y reference to certain financial and ho use Num is has es ti mated to be valued non-financial key p erformance indicators. at c.U SD$1 0- 12b n bet ween 2014-2017. If The financial indicators include r evenue, Pyth on i s suc cessful l y commercialised this EBITDA, profit and earning s per share. w oul d be a si gnifi cant s tep toward s achieving Non-financial indicators include H ealth and ou r st rategy of i nc reasing ad opt ion and Safety statistics, equip ment ut ilisation rate , brand awareness of our POS-GRIP product geographical diversity of customer revenues, gi ven the market s iz e at hand . R&D spend i s also c en tral to our st rateg y of i nvest in g ti me and c apital into new product develo pm en t. E xc lu ding the cost of b uilding tes t fixt ur es R&D sp end increased 46.7% to £ 3.4 7m durin g the l ast financial year. R&D has been s pen t o n su ch products as WellTree, th e HP/ HT T ie-B ack connector, th e new POS-SE T C onn ec tor and the Py thon subs ea effectiveness of a range of research and development initiatives for example in rela tion to new p atent and proprietary intellectual prop erty activity, and employee headcount and turnover rates. 238506 Plexus p028-p045 (Strategic Report).indd 43 10/11/2015 23:56 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 44 P r i n c i p a l R i s k s a n d R i s k M a n a g e m e n t Th ere ar e a num ber of poten tial r is ks and un cer taint ies th at c ould have an impact on th e Group’s pe rfor manc e which includ e the fo ll o wi ng. ( a ) P o l i t i c a l a n d e n v i r o n m e n t a l r i s k s We participate in a global market where the oil and gas reserves and their extraction and oil and gas prices can be severely impacted by changes in the political, operational, and These may include unforeseen equipment design issues, test delays during a contract and final testing and delayed acceptances of deliveries, which could lead to possible abortive expenditure and write downs, reputational risk and potential customer claims or onerous contractual terms. Such risks may materially impact on the Gr oup. To mitigate this risk the Group continues to invest in d eveloping and proving the technology and has a policy of on-going training of our own personnel and where appropriate our customers. environmental landscape, particularly in ( c ) C o m p e t i t i v e r i s k relation to climate change and CO 2 emissions relating to the oil and gas industry. The introduction of sanctions is one example of such a risk, and in extreme circumstances even regime change, and a volatile oil price is another where a severe fall in oil prices can have a significant adverse impact on customers’ drilling activities and associated capital expenditure. As a supplier to the industry we in turn can be adversely affected by such events which can disrupt the markets, and affect our ability to execute work for customers and/or collect payment for services performed. To help address such risks, the Group has continued to broaden its geographic footprint and customer base and The Group operates in highly competitive markets and often competes d irectly with large multi-national corporation s who have greater resources and ar e more established. Product innovation or technical advances by competitors could adversely affect the Group and lead to a slower take up of the Group’s proprietary technology. To mitigate this risk Plexus maintains an ex tensive suite of patents and trademarks, and actively continues to d evelop and imp rove its IP to ensure that it continues to be able to offer unique superior wellhead design solutions. ( d ) O p e r a t i o n a l applies a stringent approach to credit control. Shortage of experienced pers onne l in the oil ( b ) T e c h n o l o g y Th e Group i s s til l at a re latively early stage i n t he com mercial isat ion, marketin g an d appl ic ati on of i ts PO S-GRIP f rict ion -grip tec hn ol ogy beyo nd jack-up rent al exp loration w ell h ead equ ipm en t, both with reg ard to expan ding in to t he s urface prod uct ion an d su bsea m arkets, as we ll as new p rod uct develo pm en t. Current and fut ure contracts m ay be adver sely affec ted b y techn olog y rel ated fact ors outs ide the Grou p’s con trol. and gas industry is widely recognised and could deprive Plexus of key personnel necessary for operational activities and r esearch and development initiatives. To mitig ate this r isk Plexus has developed effective r ecr uitment and training procedures, wh ich combined with the appeal of working in a company with unique technology and engineering solutions has enabled us to continue to grow our staff numbers, and achieve to date a low rate of turnover of personnel. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p028-p045 (Strategic Report).indd 44 10/11/2015 23:56 ( e ) L i q u i d i t y a n d f i n a n c e R i s k a s s e s s m e n t r e q u i r e m e n t s The Board has established an on-going In an eco nom ic c limate t hat remains process for identifying, evaluating and vo l ati le an d u np red ictable it has become managing the significant risks faced by the i ncr easin gly po ss ible for both exist ing an d Group. One of the Board’s control documents pot ent ial sou rc es of finance to b e closed is a detailed “Risks assessment & management to busi ness es fo r a var iety of reasons t hat document ” which categorises risks in terms have n ot been an iss ue in the past. Some of of – business (including IT ), compliance, th ese m ay even r elat e to the lend er itself in finance, cash, debtors, fixed assets, other term s o f i ts o wn cap ital ratios an d lendin g debtors/prepayments, creditors, legal, and capac i ty. Al thou gh th is is a p otential risk personnel. These risks are assessed on a th e Grou p took ap pro priate steps d uring the regular basis and could be associated with ye ar to m iti gate this risk by successfully a variety of internal and external sources ren ewi ng an d extendi ng its b ank facilit ies including regulatory requirements, disruption w it h B ank o f S co tl and. The Grou p is required to information systems, control breakdowns to m eet certain fi nan ci al criteria ag reed as and social, ethical, environmental and health covenan ts in con nectio n with it s ban k loans and safety issues. and m onthl y management account s are prepared and re vi ewed against the covenant requirements to ensure that the Group’s obl i gati ons c an be met. ( f ) C r e d i t Th e mai n c redit ris k is attributab le to Ben van Bilderbeek trade re ceivables . As the maj ority of the Chief Executive Gro up’s cu st ome rs are larg e international oil 27 October 2015 co mpan i es th e r isk of non-p ay ment is much redu ced, and t he refor e is more likely to be rel ated to cl i en t satis faction and/or trade san cti o ns. Cu stome r p ayments can involve exten ded peri od of ti mes es pecially fr om co un tri es w here exc hange cont rol regulations can delay t he transfe r of funds out sid e th ose coun trie s. The Group has cred it ris k m anageme nt polic ies in place and exposure to c redit ri sk i s mo nitored continuously. 45 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p028-p045 (Strategic Report).indd 45 10/11/2015 23:56 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 “POS-GRIP method of engineering offers ‘instant casing hanger lockdown’ and is used to secure hangers with HG Seals which provide direct, metal-to-metal, weld-quality, high integrity sealing.” P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p046-p047 (Corporate Governance).indd 46 10/11/2015 23:57 C O R P O R A T E G O V E R N A N C E Contents B O A R D O F D I R E C T O R S D I R E C T O R S ’ R E P O R T 4 8 5 0 C O R P O R A T E G O V E R N A N C E 5 3 R E P O R T R E M U N E R A T I O N C O M M I T T E E R E P O R T S T A T E M E N T O F D I R E C T O R S ’ R E S P O N S I B I L I T I E S 5 6 6 1 I N D E P E N D E N T A U D I T O R ’ S 6 2 R E P O R T 47 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p046-p047 (Corporate Governance).indd 47 10/11/2015 23:57 48 B O A R D O F D I R E C T O R S J e r o m e J e f f r e y T h r a l l B B A M B A has been involved in a range of industr ies as ( a g e d 6 5 ) , N o n - E x e c u t i v e C h a i r m a n a director, investor and advisor, and over seen Jeff joi ned Thrall Ent erp rises, In c. (‘TEI’), a fam i ly ow ned h ol ding comp any headquartered i n Ch ic ago, USA, in 1980 as vice p resid ent of co rporate develo pment of TEI’s subs idiary, Nazdar Co mpany, a manufacturer and di stri bu to r of i nk je t, s creen prin ting , flexo i nks and suppl ies. Jeff was named Presid ent of TE I i n 19 95 . Jeff is also Managing D irector of GS I Techn ol ogi es, a printer of functional el ectr oni c produ cts and ind ustrial g rap hics. Pri or t o j oin in g TEI, Jeff ’s p rofes sional car eer inc lude d a nu mber of app ointmen ts i n investm en t bank ing, commercial lend in g and adm i nist rat ion . B e r n a r d H e r m a n v a n B i l d e r b e e k B S c M . E n g ( a g e d 6 7 ) , C h i e f E x e c u t i v e B en foun ded th e Plexu s business in 1986. He has m ore than 40 years’ experience in the i ndu stry in bot h engin eeri ng and management ro les and pr evi ou sly h eld senior pos it ion s w it h Vetco Offsh ore Ind ustries, Dril-Qu ip, and Ingram Cac tu s. Following a career at Vetc o, wh er e B en r os e to the position of Gen eral Manager of U K Engineering , h e went a number of acquisitions and d isposals, as well as the implementation of turn around and growth strategies. Graham is a non- executive director of Netplay TV PLC, the AIM listed largest UK intera ctive TV gaming company. He was previously a non-executive director of NRX Global Inc. the worldwide leader in Asset Information M anage ment solutions used by lead ing companies in asset intensive industries, including oil and gas. C r a i g F r a n c i s B r y c e H e n d r i e M . E n g ( O x o n ) ( a g e d 4 2 ) , T e c h n i c a l D i r e c t o r After gaining a Masters Deg ree in Enginee ring Science from the University of Oxfor d, Craig began his career with ICI plc in 1996 as a machines engineer. He joined Plex us in 1 998 and was instrumental in the developme nt, testing and analysis of the original POS- GRIP prod ucts. As Technical Dir ector, Craig is responsible for overseeing new technology and concept development, pr oduct te sting and analysis, as well as pursuing new applications for POS-GRIP technology both internally and externally. on t o fou nd hi s ow n oil and gas consultancy, G e o f f r e y E d m u n d T h o m p s o n VB C C on sul tants, i n 19 82. During this t ime, B S c ( H o n s ) M . E n g ( a g e d 6 1 ) , hi s c li ents i nclu ded Amoco, Marat hon O il, N o n - E x e c u t i v e D i r e c t o r FMC Co rpo rat ion and D ril -Q uip. In 1986, Ben fo und ed Pl exus and went on to merg e th e w ell h ead di vis io n of h is company with In gram Cac tu s wh er e he bec ame Presid ent Eastern Hem is phere. In 1996 Ben regained the Pl exu s Oce an Systems Limited nam e th roug h w hi ch POS-GR IP te ch nology was invented and th en devel oped and commer cialised for th e oi l serv ic es we llh ead equipment market. G r a h a m P a u l S t e v e n s B A ( H o n s ) ( a g e d 5 7 ) , F i n a n c e D i r e c t o r Geoff has over 40 years’ exp erie nce in the international oil and gas ar ena. Geoff ’s expertise lies in the field of well equipment and well design, including Hig h Pressur e High Temperature wellhead equipme nt technology. He is currently contracted as an independent consultant to Maers k Oil UK for their Culzean HP/HT development, having been, until recently, a Principal Drilling Equipment Eng ineer with Maersk Oil in Denmark. Prior to this, Geoff was contrac ted as an indep endent consultant for 31 year s Grah am has br oad experience in f inancial, advising international operators and oil co rporate, and operational management service companies including a numbe r of w it hi n both pub lic and private compan ies Shell Group Operating Companies on we ll i ncl u di ng J Sai nsbu ry plc , BSM Group Limited , equipment and all mechanical aspects of Sketch l ey Gro up plc , and Fii Group plc. H e well desig n and technology. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p048-p049 (Board of Directors).indd 48 11/11/2015 00:02 C h r i s t o p h e r J a m e s W a t t s F r a s e r B A ( H o n s ) O B E ( a g e d 5 2 ) , N o n - E x e c u t i v e D i r e c t o r Ch ri sto pher has expe rience in manag ing l arge, diverse corporate projects in complex bus i nes s envir on ments on a g lob al scale. His w ide -rangi ng caree r includes t wo terms as a Memb er o f Par liam ent, as well as a nu mber of years as a man agement consultant an d co rporate advis or. C h ristopher also foun ded and ra n an i nter national marketing and co mm u ni catio ns gro up, which had clients in th e o i l and gas sector. C h a r l e s E d w a r d J o n e s B S c M . E n g ( A g e 5 6 ) , N o n - E x e c u t i v e D i r e c t o r Ch arl es has over 30 years of senior m anagem en t an d Board experience in the ene rgy secto r. In 2007, Charles was CEO of Hou sto n-based Fo ru m Oilfield Technolog y, a gl obal o il fi eld products company which he s ucc es sful ly me rge d with three other co mpan ies i n 201 0 to create Forum Energ y Tech no logi es (N Y SE: FET ) and where he rem ai ned as Pres ident until 2013. Prior to Fo rum, Charl es was COO of privately ow ned Hy dri l Comp any LP, wh ere he played a l eadi ng role i n the U S based d rilling an d dow n hol e pro duct s company ’s IPO in 2000 and s ubseque nt s ale for USD$2.1 billion. B efor e j oi ni ng Hyd ril, Charles s erved as Di rect or o f Su bse a B usinesses for Cooper Ca mero n Cor poratio n where he develop ed th e gl obal su bsea production b usiness. Ch arl es i s a form er Chairman of the Pet rol eum E qui pme nt Sup pliers Association, a Di s ti nguis hed Alumn i of the Cullen Colleg e of E ngi neeri ng at the University of Hous ton and graduate of the Advanced Manag ement Program at Harvard B us iness Sch ool. 49 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p048-p049 (Board of Directors).indd 49 11/11/2015 00:02 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 50 D I R E C T O R S ’ R E P O R T Th e di rector s present their annual r eport R E S U L T S A N D D I V I D E N D S to geth er wi th the audited finan cial st atem en ts for the year ended 30 June 2015. B U S I N E S S R E V I E W A revi ew of the d evelopment an d performance dur in g th e ye ar c on si stent with the size and c ompl exity of the b usines s t ogether w it h co mm entary on fu ture d evelop ment s The results for the year, showing a profit before taxation of £5. 94m (2014: £5.37m), are set out on pag e 66. The directors have proposed a final dividend for the year ended 30 June 2015 of 1.75p per share (2014: 0.62p). i ncl u di ng t he mai n trends and factors C O R P O R A T E G O V E R N A N C E l ikel y to affect the business is g iven in the Ch ai rman’s Stat em en t o n p age 17 and th e St rategic Report on page 28. I n ad dit ion th e St rat egi c Re por t on page 28 in clu des This is the subject of a separate report se t out on page 48. referen ces to and additi onal ex planations of R E L A T E D P A R T Y T R A N S A C T I O N S am oun ts i ncl uded in th e annu al accounts . Wh ere gui del i nes make reference t o th e Details of related p arty transactions ar e se t provi si on of key pe rfor mance in dicators the out in Note 27 in the financial st atements. di rect ors are of th e o pini on certain financial and n on- fin anc ial ind icators in clu ded in the F I N A N C I A L I N S T R U M E N T S A N D R I S K hi gh li ghts o n page s 2 and 3, th e Strategic M A N A G E M E N T Report o n page 28, and the Director s’ Rep ort on page 5 0 m eet this requiremen t. T he The Group maintains a commercial objective di rect ors have pr ovi ded a descr iption of the of contracting in sterling when ever possible . pri nc ipal ri sks an d u nce rtaint ies facing the In circumstances where this is not possible, Gro up in t he St rat egi c Report on page 44. the Group converts foreign currency R E S E A R C H A N D D E V E L O P M E N T balances into sterling on receipt so far as they will not be used for future payme nts in the foreign currency. The Group maintains Th e Gr oup acti vely en gages in an on-going risk management policies which are set out res earch and de velopment pr ogramme in more detail in note 23 to the accounts. desi gn ed to expand and develop th e range of com me rc ial applic ations deriving f rom i ts propri et ary POS-GRIP technology. G O I N G C O N C E R N For the year r es earch and develop ment The directors, having made appr opriate expen ditur e i nc ludi ng the cost of build ing enquiries, believe that the Group has new t est fixt ures t ot alled £4.12m (2014: adequate resources to continue in operational £ 3.1 9m ), bei ng am oun ts exp ensed throug h existence for the foreseeab le future. The th e St ate ment of Com pre hensive I ncome and Group continues to adopt the going concern cap it ali sed on the St atement of Financial basis in preparing the financial s tate ments. Po si ti on duri ng the year. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p050-p052 (Directors' Report).indd 50 11/11/2015 00:02 D I R E C T O R S ’ I N T E R E S T S Th e dir ec tors who s erved during th e year and to the d ate of th is r eport are list ed below. Th e i nt erests of th e dir ectors who held off ice d uring the year in t he sh ares of t he Com pany at 3 0 Jun e 2 015 were as follows: J. J effr ey Thral l 1 B e n va n B i l d e r b e e k 2 Grah am Steven s Crai g Hendrie Geo ff T hom pson Ch ri sto pher Fraser Ch arl es Edward Jones N U M B E R O F N U M B E R O F O R D I N A R Y O R D I N A R Y S H A R E S S H A R E S O F 1 P E A C H O F 1 P E A C H 2 0 1 5 2 0 1 4 42,704,001 58,700, 001 42,704,001 58,700 ,001 15,100 12,600 – 10,000 – 15,100 12,600 – 10,000 – 1. J. Je ffre y T hrall, has an ind ir ect b enef ic ial intere st in a c o m pany whic h c on tr ols 32 .47 7% of Mutual Hold ings L imi te d. T he num ber o f s hares held by M utual Hold in gs L imit ed in th e Co mp any at 30 J une 2 015 was 42,700 ,00 1 (20 14: 42,700, 001). A dd itio nally, J. J effr e y Thrall h old s 4, 0 00 sh are s dir ec tly. 2. Be n van B ilde rbe e k is on e o f the b enef iciar ie s o f a tr ust whic h co ntr o ls 5 9.9 62% of t he shares of Mutual H ol dings L im ited and the e ntire issue d s hare c ap ital of OF M I nve stm en t Lim ite d. At 30 J une 2 015 , Mutual H ol dings L imit ed he ld 42,700 ,00 1 shar es and O FM Inves tme nt Lim it ed he ld 1 6,00 0,00 0. R E T I R E M E N T A N D R E - E L E C T I O N Mr. Hen dri e an d Mr. Fraser will retire by rot ation at the Annual General Meet ing and, being el igi bl e, wi l l offer t he mselves for re-elect ion . S U B S T A N T I A L S H A R E H O L D I N G S A N D I N T E R E S T S S h a r e s At t he date o f this An nual Report th e Company is aware of the following shareholdings in exc ess of 3 % o f t he C ompany ’s is su ed or dinary share cap ital: Mutu al Ho ldin gs Lim it ed 42,700, 001 OFM I nvestme nt Li mi te d 15,069,767 St ate Street Nom inees Limited 9,709, 694 Jere h Internat ional (Hong Kong ) Co., Ltd 4, 468,537 Hargreave Hal e Nomi nees Limited 4, 163, 024 % I S S U E D S H A R E C A P I T A L 47.8% 16.9% 10.9% 5.0% 4.7% 51 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p050-p052 (Directors' Report).indd 51 11/11/2015 00:02 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 52 E X E C U T I V E 2 0 0 5 S H A R E O P T I O N is no relevant audit information of which S C H E M E A N D N O N - E X E C U T I V E 2 0 0 5 the Company ’s auditor is unaware; and each S H A R E O P T I O N S C H E M E director has taken steps tha t he ought to Deta il s o f th e E xec utive and Non-Execu tive Sc hem es c an be foun d in the Remu nerat ion have taken as a director to make himself aware of any relevant audit in formation and to establish that the Comp any ’s auditor is Co m mi ttee Repo rt on page 56. aware of that information. E M P L O Y E E S A N N U A L G E N E R A L M E E T I N G Pl exu s is a n on-dis criminat ory employer w hi ch ai m s to eli mi nate unfair dis crimination, haras sm ent, vic ti mis ation and b ullying. T he Co m pany i s com m itt ed t o ens uring th at all i ndi vi dual s are tr eat ed fairly, with res pect The Annual General Meeting of the Company will be held on 10 Decemb er 201 5. The Notice convening the meeting can be found at the back of these financial statements. and are val ued irr es pective of disability, In addition to the ordinary business of the race, gender, he alth, s ocial class, s ex ual meeting which is set out in the proposed preferenc e, mar ital status, nationality, resolutions numbered 1 to 7 (inclusive) there rel i gi on, em ployment status , ag e or are three items of special business, namely m em bership or non-m embersh ip of a trad e the proposed resolutions numbered 8, 9 and un i on. E V E N T S S U B S E Q U E N T T O 3 0 J U N E 2 0 1 5 Su bseq ue nt to th e ye ar end, th e Company en tered into a Sub sc ri ption Ag reement wit h 10, the effects of which are to renew the authority given to the directors to allot shares in the capital of the Company, to authorise the Company to make market purchases, of shares and, to dis-apply pre-emption rights. Your attention is drawn to the Notes on each of these resolutions at the foot of the Notice Jer eh Intern ation al (Hong Kong ) Co. L td . and to the Notes generally. (“Jere h”) date d 1s t July 2015. Und er the Su bsc ri pti on Agr ee ment, Jereh s ub scrib ed fo r 5 % of the enlar ged share capital of th e Co m pany; the n um ber of shares subscrib ed fo r was 4,4 68,537 at a price of 180p p er sh are. T he total num ber of shar es in is su e fo ll o wi ng th is su bscr iption, and as at the date of t hi s re por t, i s 89 ,3 70,733. Additionally, as part o f t he S ubs cript ion Agreement, Jer eh has th e ri ght to n om in ate one Non-Executive Di rect or to th e Bo ard. Pursuant to this rig ht, th e proce ss of appoi nt ing the nominee is w ell advanced. A U D I T O R S Crowe Clark Whitehill LLP has indicated its willingness to be reappointed as statutor y auditor. In accordance with Section 4 89 of the Act, two resolutions for the re-appointme nt of Crowe Clark Whitehill LLP as auditor of the Company and authorising the director s to determine its remuneration will be proposed at the forthcoming Annual General Meeting. C O M P A N Y N U M B E R D I S C L O S U R E O F I N F O R M A T I O N T O Wales under Company Number 033229 28. The Company is registered in England and A U D I T O R S Th e di rector s wh o held office at the date of approval o f thi s Dir ec tors’ Report conf irm Ben van Bilderbeek that, so far as they are each aware, there Chief Executive 27 October 2015 By order of the Board P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p050-p052 (Directors' Report).indd 52 11/11/2015 00:02 C O R P O R A T E G O V E R N A N C E R E P O R T 53 I N T R O D U C T I O N A U D I T C O M M I T T E E Al th oug h the rul es of AIM do n ot requir e the The Audit Committee compris es two Non- Co m pany to c ompl y w ith the UK C orporate executive Directors, J. Jeffrey Thrall and Governan ce Code (the ‘ Code’), th e Company Christopher Fraser and is sched uled to meet fu ll y s upports t he principles set ou t in the twice a year. It is the Audit Committee’s Co de and wi l l atte mpt to comp ly wher ever role to provide formal and transparent pos si ble , gi ven bo th the size and resources arrangements for considering how to apply avai l able to the C ompany. financial reporting and internal control best T H E B O A R D Th e B oard of D ire ctors comprises three E xecu ti ve Di rectors and four ind ependent No n-e xe cuti ve D irect ors, one of wh om is the Ch ai rman. Th e B oard m ee ts re gularly throug hout t he ye ar and r ec ei ves a Board pack in res pect practice, whilst maintaining an appr opr iate rela tionship with the ind ependent auditor s of the Group. In order to com ply with best practice that at least one member has relevant financial exp erience, the Chairman of the Board sits on the Audit Committee. During the year to 30 June 2015 the Audit Committee met on two occasion s. of e ach meetin g t oge ther with any other R E M U N E R A T I O N C O M M I T T E E m ateri al deeme d n ec es sary for the Board to di sch arge i ts du tie s. The Board is responsible The Remuneration Committee compr ises two fo r form ul atin g, r evi ewi ng and approving t he Non-executive D irectors, J. Jeffrey Thrall and Gro up’s strategy, bu dgets, major items of Christopher Fraser and meets at least once expen ditu re an d ac qui sitions. a year. It is the Remuneration Committee’s Dur in g the year t o 30 June 2015 th e Board policy on Executive remuneration and to m et a total of twel ve ti mes. set remuneration packages for individual role to establish a formal and transparent Directors. B O A R D C O M M I T T E E S Th e B oard has establi shed two committees; During the year to 30 June 2015 the Remuneration Committee met on three Au di t a nd Rem un eratio n each h av ing written occasions. term s o f del egated res ponsibilities. It i s co nsi de re d that the compos ition and si ze of the B oard does not warrant the appoi nt m en t of a Nominations Committee and appoi ntme nts are dealt with by the w hol e of t he B oard . B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p053-p055 (Corp Gov).indd 53 11/11/2015 00:04 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 54 B O A R D A N D C O M M I T T E E M E E T I N G A T T E N D A N C E Th e t able bel ow sh ow s t he attend ance recor d of ind ividual d ir ector s at Board mee tings and co mm i tt ee s of w hi ch the y are members. B O A R D A U D I T R E M U N E R A T I O N C O M M I T T E E C O M M I T T E E E L I G I B L E A T T E N D E D E L I G I B L E A T T E N D E D E L I G I B L E A T T E N D E D T O A T T E N D T O A T T E N D T O A T T E N D 12 12 12 12 12 12 11 8 11 12 9 7 7 7 2 – – – – 2 – 2 – – – – 2 – 3 – – – – 3 – 3 – – – – 3 – J. Jeffrey Thrall B en van B i lderbe e k Grah am Steven s Crai g Hendrie Geo ff T hom pson Ch ri sto pher Fraser Ch arl es Jones A P P O I N T M E N T O F N O N - E X E C U T I V E D I R E C T O R Ch arl es Jones was appoi nted as a Non-executive Direct or on 18 Sept emb er 2 014. As required by Art i cl e 69 .(B) o f the Comp any ’s Art icles of As sociation, Ch arles Jone s r etir ed at the An nu al General Me et ing held on 11 December 2014 and, b eing elig ib le, offer ed himself for re- elec ti on. T he r es olu tion to re-elect him as a direct or was pass ed wit hout dissent. R E T I R E M E N T A N D R E - E L E C T I O N Crai g Hen dri e and C hristopher Fras er are to ret ire by rotat ion at t h e Ann ual G eneral Meeting and, bei ng eli gi bl e, will offer t hemselves for re-election. S H A R E H O L D E R R E L A T I O N S Th e Com pany me et s with it s ins titu tional shareh old ers and an aly st s as ap propriate and en cou rages co mmu ni cation with pr ivate sharehold ers via t he AGM. In ad dit ion , t he Company us es the annu al re por t and accoun ts , int erim s tat ement and web site (www.p lexusplc.com ) to provi de furthe r info rm ation to s har eholders. H E A L T H A N D S A F E T Y Th e C om pany is active in asses sing and minimising the r is ks in all ar eas of t he business and edu cati ng the w orkforc e to provide as safe a wor king environm ent as p os sible. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p053-p055 (Corp Gov).indd 54 11/11/2015 00:04 F I N A N C I A L R E P O R T I N G The Group maintains appropr iate insurance Th e di rec tors have a commitment to best pract ic e for th e Group’s external finan cial cover in respect of legal actions against the Directors as well as against mate rial loss or claims against the Group and reviews the repo rti ng i n o rde r t o p resent a balanced adequacy of the cover regularly. and com prehensibl e assessmen t of t he Gro up’s fi nanc ial posit ion and p ros pects t o The Group has established procedures i ts sh arehol de rs , em ployees, cust omers, whereby employees may in con fidence raise su ppli er s and o th er third par ties. This concerns rela ting to matters of potential co mm i tm ent en com passes all pub lis hed fraud or other imp roprieties , as well as i nfo rm at ion i nc ludi ng b ut not limited to the health and safety issues. ye ar e nd and in teri m financial stat ements , regu l atory n ew s an nouncemen ts and other publ i c i nfo rm ati on . The Statement of Di rect ors’ Responsi bili ties for preparing th e acc ou nts may be fou nd on pag e 61. I N T E R N A L C O N T R O L A N D R I S K M A N A G E M E N T R E S E R V E D M A T T E R S The board has a formal sched ule of matters reserved for its decision which includes the setting of Company goals, objectives, budgets and other plans. Boar d paper s, comprising an agenda and formal r eports and briefing pap ers, are sent to the directors in Th e Bo ard is respons ible for t he s ys tems advance of each meeting. All directors have of i nt ernal co ntrol and for reviewing their access to independent professional adv ice at effect i ven es s. Su ch s ys tems ar e desig ned to the Company ’s exp ense, if requ ired, as well m anage rather than el i minate ris ks and can as to the advice and services of the company provi de o nly r eas on able and n ot abs olu te secretary. R I S K A S S E S S M E N T The Board has estab lished an on-going process for identifying, evaluating and managing the sig nificant risks faced by the Group. The risks are assessed on a regular basis and could be associated with a variety of internal and external sources including regulatory requirements, disruption to information systems, control br eakdowns and social, ethical, environmen tal and health and safety issues. ass uranc e again st mat erial mis -s tat ement or l oss . Eac h year, o n b ehalf of the Board , the Au di t Com m ittee reviews the effect iveness of th ese sy st em s . Th is is achieved p rimarily by co nsi deri ng th e ri sks p otentially affecting th e Gro up and dis cus si ons with th e exter nal audi to rs. Th e G ro up does n ot currently h ave an i ntern al audi t fun ctio n due to the small s ize of th e admi ni st rative function an d th e h igh l evel of Di rect or review and auth orisat ion of tran sac ti on s. A com prehensi ve bu dgeting p rocess is co mpl eted onc e a year and is rev iewed and co mm en ded by t he Audit Committ ee for approval by t he B oard. The Group’s res ults , as c om pared a gai nst b udg et, are rep orted t o th e B oard o n a month ly basis and d is cus sed i n detai l at each m ee ti ng of the Board . 55 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p053-p055 (Corp Gov).indd 55 11/11/2015 00:04 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 56 R E M U N E R A T I O N C O M M I T T E E R E P O R T I N T R O D U C T I O N Co m pan ie s t radin g o n AIM are not required to provide a fo rm al remuneration report. How ever, in l i ne w ith c u rrent best p ractice th is report provi des information to enab le a gre ater l evel of u nderstanding as t o how Di rect ors’ rem uneration is det ermined . Th e Rem unerati on C o mmittee of the Boar d i s re sponsi bl e for c onsidering D irectors ’ rem un erati on pac kages a nd makes its rec om mendati ons to the Board . The Co m mi ttee c om pr ises two Non-executive Di rect ors J. Je ffrey Thrall and Christopher Fraser, and is requ ire d to meet at least on ce a year. R E M U N E R A T I O N P O L I C Y Th e Gr ou p’s poli cy is t o attract, retain and m oti vate hi gh cali bre e xecut ives cap able of ach i evi ng the Group’s objectives. Executive Di rect ors re ceive sal aries, annual bonuses (as and w hen appropriate), med ical cover, and pensi on sc hem e c on t ribution s which ar e i nten ded to be c om petit ive within t he s ector i n wh i ch the Gro up op erates. Th e C om mi ttee determines t he p olicy of the overall remu neration p ackag e for E xecu ti ve Di re ctors and ot her senior exec uti ves . B asic salaries and benef its of all em pl oye es ar e reviewed every year, and the Gr oup an d th e Comm ittee as part of th is annual process seeks advice f rom extern al rem un erati on con sult ants. In revi ew i ng s alar ies , c on siderat ion is given to pers onal performanc e, the Group ’s overall perform anc e and external comparative i nfo rm at ion. An annual performance bonus is payable to Executive Directors and senior staff, and each year an exercise is under taken, again in conjunction with external remuneration consultants to look at market comparisons, benchmarks, relative performance as well as consideration of strategic prog ress in addition to simply financial ones. Comparator group analyses includes oil and gas exploration companies with broad ly similar mar ket capitalisations and numbers of employees, as well as oil and gas service companies where althoug h the market capitalisation range is wide it is relevant as t hese are the sort of companies with which Plexus may compete for talent. A further comparator group for the Committee to consider is the F TSE AIM 100. S E R V I C E C O N T R A C T S The Executive Directors have ser vice agreements with the Company dated 25 November 2005 sub ject t o termination upon twelve months’ notice being given by either party. P E N S I O N S The Group offers a contributor y group stakeholder pension scheme, into which the Group makes matching contributions up to a pre-agreed level of b ase salary ; the scheme is open to Executive D irectors and permanent emp loyees. Directors may choose to have contributions paid into ex isting personal pension plans. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p056-p060 (Remuneration Committee).indd 56 11/11/2015 00:05 N O N - E X E C U T I V E D I R E C T O R S Th e N on-execu ti ve Ch airman, J. Jeff rey Th rall, entered in to a Letter of App oin tm ent with the Co m pany dated 25 November 2005 for an in itial term th roug h t o th e fir st AG M and having been re-ele cted as a director either party can terminat e u pon t hr ee mont hs’ notice being gi ven . The su bsequen tl y appointed Non-executive D irect ors, G eoff T homp son, Christopher Fraser and Ch arl es Jo nes, entered into t heir Letters of Ap point ment with the Com pany date d 8 Jun e 2 010, 15 March 2012 and 18 September 2014 r esp ect ively, an d, having been re- elec ted as a d irect or at the AGMs h eld in 2010, 2012 and 20 14 r esp ectively, are subject to t he sam e term inatio n conditions as applicable to Mr T hrall. D I R E C T O R S ’ R E M U N E R A T I O N Deta il s of Di rect or s’ remuneration for the year ar e set out below: S H O R T - T E R M P O S T - S H A R E - E M P L O Y E E B E N E F I T S E M P L O Y - B A S E D M E N T P A Y M E N T B E N E F I T S S A L A R Y B E N E F I T S P E N S I O N I F R S 2 & F E E S ( I N C L . A N N U A L B O N U S ) £ £ £ C H A R G E F O R S H A R E O P T I O N S 2 0 1 5 T O T A L £ 2 0 1 4 T O T A L £ Ex ecu tive Directo rs B en van Bi lderb eek 732,263 12,891 – Grah am Steven s 354,365 9, 286 26,050 Crai g Hendrie 249,899 881 24, 875 Non -ex ec ut ive Direct ors J. J effr ey Thral l Geo ff T hom pson Ch ri sto pher Fraser Ch arl es Jones 32,500 20,000 30,000 34,976 – – – – – – – – £ – – – – – 21,016 – 745,154 649,116 389,701 358,218 275,655 342,046 32,500 20,0 00 51,016 34,976 32,500 20,000 54,016 – Total 1,454,003 23,058 50,925 21,016 1,549,002 1,455,896 57 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p056-p060 (Remuneration Committee).indd 57 11/11/2015 00:05 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 58 D I R E C T O R S ’ I N T E R E S T I N S H A R E O P T I O N S Th e opt io ns and awards have b een granted p ur su ant to th e Exe cu t ive 2 005 Share Option Sc hem e an d No n-E xec utive 2005 Share Option Scheme to th e followin g Direct ors: E X E C U T I V E 2 0 0 5 S H A R E O P T I O N S C H E M E NAME NO OF GRANTED LAPSED EXERCISED NO OF OPTIONS GRANTED LAPSED OPTI ONS AT DURING DURING DURING AT 30/06/14 DURING DURING 30/ 06/13 13/14 13/14 13/14 14/15 14/15 B. van B ilderbeek 3 88, 304 B. van Bilderbeek B. van Bilderbeek B. van Bilderbeek G. Stevens G. Stevens G. Stevens G. Stevens C. Hendr ie C. Hendr ie C. Hendr ie C. Hendr ie 65, 902 33 2, 110 16 9, 642 254, 407 43,177 217,795 101,042 254, 407 43,177 217,795 105,853 – – – – – – – – – – – – – – – – – – – – – – – – ( 194,152) – – – (116,000) – – – – – – – 194, 152 65,902 332,110 169,642 138, 407 43,177 217,795 101,042 254, 407 43,177 217,795 105,853 – – – – – – – – – – – – – – – – – – – – – – – – NAME EXERCISED NO OF DATE OF NO OF EXPIRY DATE EXERCISE D URING OPTIONS AT GRANT OPTIONS 14/15 30/06/15 VESTED AT 30/06/15 B. van B ilderbeek B. van Bilderbeek B. van Bilderbeek B. van Bilderbeek G. Stevens G. Stevens G. Stevens G. Stevens C. Hendr ie C. Hendr ie C. Hendr ie C. Hendr ie – – – – – – – – – – – – 194, 152 09/12/05 194, 152 08/12/25 65, 902 20/06/07 65, 902 19/06/17 332, 110 17/12/09 332,110 16/12/19 169, 642 25/03/11 169, 642 24/03/21 138, 407 09/12/05 138, 407 08/12/25 43, 177 20/06/07 43, 177 19/06/17 0.385 217,795 17/12/09 217,795 16/12/19 101, 042 25/03/11 101, 042 24/03/21 254, 407 09/12/05 254, 407 08/12/25 43, 177 20/06/07 43, 177 19/06/17 217,795 17/12/09 217,795 16/12/19 105, 853 25/03/11 105, 853 24/03/21 0.41 0.60 0.59 0.385 0.41 0.60 PRICE (£) 0.59 0.385 0.41 0.60 0.59 Th e fol l ow ing direc to rs made g ains on exercise of option s in t he curr ent and pr ior year: B. van Bi lderbeek: £nil (2014: £355k) G. St even s: £n il (2 014 : £212k) P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p056-p060 (Remuneration Committee).indd 58 11/11/2015 00:05 N O N - E X E C U T I V E 2 0 0 5 S H A R E O P T I O N S C H E M E NAME NO OF GRANTED LAPSED EXERCISED NO OF OPTIONS GRANTED LAPSED OPTIONS AT DURING DURING DURING AT 30/06/14 DURING DURING 30/06/13 13/14 13/14 13/14 14/15 14/15 J. Thrall G. Thomps on C. Fraser 40,169 100,000 100,000 – – – – – – – – – 40,169 100, 000 100,000 – – – – – – NAME EXERCISED NO OF DATE OF NO OF EXPIRY DATE EXERCISE DURING OPTIONS AT GRANT OPTIONS 14/15 30/06/15 VESTED AT 30/06/15 J. Thrall G. Thomps on C. Fras er – – – 40, 169 09/12/05 40,169 08/12/25 100, 000 08/06/10 100, 000 07/06/20 100, 000 05/07/12 66, 666 04/07/22 PRICE (£) 0.59 0.60 1.18 No o pti ons are e xpec te d to lapse at the AGM . 59 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p056-p060 (Remuneration Committee).indd 59 11/11/2015 00:05 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 60 Th e exerci se o f th e o ptions grant ed on 5 July 2012 are s ub ject to t he following ve sting co ndi ti ons bei ng satis fi ed: D ate Optio n ca pa ble of exerc ise Number of Shares over which Opt ion could be capable of exercise depending on TSR Growth 1 4 days after Com pany AGM following end Up to 1⁄3 of Shares under Option of Fi rst Assess m en t Pe riod – 1 July 2012 to 3 0 Jun e 201 3 1 4 days after Company AGM followin g end Up to 1⁄3 of Shares under Option of Se con d Asse ss ment Period – 1 J uly 2013 to 3 0 J une 2 01 4 1 4 days after Company AGM following end Up to 1⁄3 of Shares under Option of T hi rd Ass es sm ent Period – 1 July 2014 to 3 0 Ju ne 2 0 15 1 4 days after Company AGM following end Up to all Shares under Option LESS Annual of C om plete Ass es sm ent Period – 1 July Shares already capable of exercis e. 2 01 2 to 30 June 201 5 Th e l ow est mi d- market price of the Company ’s s hares in t he year to 30 J un e 201 5 was 1 65.5 p on 9 Febr uary 2015, and the high in the p eriod to 30 Jun e 2015 was 2 95.3 8p on 5 July 201 4. Th e mi d-m arket pric e on 30 Jun e 2015 was 220p. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p056-p060 (Remuneration Committee).indd 60 11/11/2015 00:05 S T A T E M E N T O F D I R E C T O R S ’ R E S P O N S I B I L I T I E S 61 The directors are responsible for preparing The directors are resp onsible for kee ping th e Dir ec tors’ Report, Strateg ic Report and proper accounting records that disclose th e fi nanc ial stateme nt s in accordance with with reasonable accuracy at any time the appl ic able law and re gulations. financial position of the parent company and enable them to ensure that its f inancial Company law requires the directors to statements comply with the Companies prepare financ ial st atements for each Act 2006. They have a general responsibility fi nan ci al year. U nde r t hat law th e directors for taking such step s as are reasonably open have el ected to pr epare th e f inancial to them to safeguard the assets of the gr oup st atem en ts i n ac c ord ance with app licab le and to prevent and detect fraud and other l aw an d In tern ati on al Financial Report ing irregularities. St andards (IFR Ss) as ad opt ed by the European Union and, as regards the Parent Under applicab le law the directors are further Co m pany fin ancial st atements , as ap plied responsible for ensuring tha t the Strategic i n ac cordanc e wit h the p rovision s of th e Report and the Report of the Directors and Co m pani es Ac t 20 06 . Under comp any law other information included in the Annual th e di rec tors m ust no t approve t he f inancial Report and Financial Statements is pr epar ed st atem en ts u nl es s th ey are sat is fied that in accordance with applicable law in the th ey gi ve a true and fai r view of the state of United Kingdom. affai rs of the Co mpany and of the Group and of the profi t of th e Group for th at p eriod. The directors are responsib le for the In prepar in g these fin ancial s tatements, t he maintenance and integrity of the c or porate directors are required to: • sel ec t s ui tabl e ac counting p olicies and th en appl y them c onsistently; and financial information included on the Group’s website (www.plexusplc.com). The work carried out by the auditor s does not involve the consideration of these matters • m ake j udgem en ts and estimat es t hat and, accordingly, the auditors accept no are reaso nable and prudent; responsibility for any changes that may have • st ate that th e financial statements co mpl y w ith I FRSs as adop ted by t he E uro pean Un io n; occurred in the accounts since they were initially presented on the web site. Legislation in the UK governing the p reparation and dissemination of financial statements may • prepare the financial statement s on differ from legislation in other jurisdictions. th e goi ng con cern basis unless it is i nappropr iate to presume that t he group By order of the Board and th e parent company will contin ue i n bus i ness. Ben van Bilderbeek Chief Executive 27 October 2015 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p061 (Statement of Dir Resp).indd 61 11/11/2015 00:05 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 62 I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E S H A R E H O L D E R S O F P L E X U S H O L D I N G S P L C We have au di te d the group f in ancial statements in accordance with applicable st atem en ts of Pl exus Holdings plc for the law and International Standard s on Auditing ye ar ended 3 0 Ju ne 20 15 which compris e the (UK and Ireland). Those standards require Co ns ol i dated Stat em en t of Comp rehen sive us to comply with the Audit in g Prac tices In com e, th e Consol idated Stat emen t Board’s Ethical Standard s for Aud itors. of Fin anci al Posit ion, the C ons olid ated St atem ent of Ch anges in Equity, the Co ns ol i dated S tat em ent of Cas h Flows an d th e relat ed notes nu mbered 1 to 2 8. Th e fi nanc ial reporti ng framework that has been appl ied in their preparation is appl ic able l aw an d In ternational F inancial Report in g St and ards (IFRSs) as adopted by th e Eu ropean Un ion. Th is report i s m ade sol ely to the comp any ’s m em bers, as a body, in accord ance wit h Ch apter 3 o f Part 1 6 of the C ompan ies Act 2 00 6. Our audit wo rk has been und ertaken so th at we mi ght s tat e to the comp any ’s m em bers those matters we are req uired to s tate to the m in an auditor ’s report and fo r no othe r purp os e. To the fullest extent perm i tt ed by law, we do not accep t or ass um e respons ibil ity to anyon e other th an th e co mpany and t he co mpany ’s member s as a body, for our audi t w ork, for this rep ort, or fo r the o pi ni ons we h ave formed . S C O P E O F T H E A U D I T O F T H E F I N A N C I A L S T A T E M E N T S An audit involves obtaining evid ence about the amounts and disclosures in the f inancial statements sufficient to give reasonable assurance that the financial statements ar e free from material misstatement, whether caused by fraud or error. This inc ludes an assessment of: whether the accounting policies are app ropriate to the company ’s circumstances and have been consistently applied and adequately d isclosed; the reasonableness of significant accounting estimates ma de by the director s; and the overall p resentation of the financial statements. We read all the financial and non-financial information in the Directors’ Report, Chairman’s Statement, Strategic Report, Corporate Governance Report, Remuneration Committee Rep ort and any other surround information to identify material R E S P E C T I V E R E S P O N S I B I L I T I E S O F inconsistencies with the aud ited Financial D I R E C T O R S A N D A U D I T O R S Statements and to identify any infor mation that is apparently materially incorrect based As expl ai ned m ore ful ly in the Statemen t on, or materially inconsistent with, the of Di rectors ’ Respo ns ibilities, t he d irectors knowledge acquired by us in performing the are r esponsi bl e for t he preparation of the audit. If we become aware of any apparent fi nan ci al stat em ents and for being satis fied material misstatements or inconsistencies th at th ey gi ve a tru e and fair view. Our we consider the imp lications for our report. res po ns ibi li ty i s t o audit th e f inancial P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p062-p063 (Auditor's Rep).indd 62 11/11/2015 00:06 O P I N I O N O N F I N A N C I A L M A T T E R S O N W H I C H W E A R E S T A T E M E N T S R E Q U I R E D T O R E P O R T B Y In o ur opin io n th e fi nan cial statements: • gi ve a true and fair view of the state of the grou p’s affairs as at 30 J une 2 01 5 and of i ts profit for the year then en ded; • have been properly prepared in acc ordan ce wi th IFRSs as ad opted by th e Eu ropean Un ion; and • have been prepared in accordance with th e requ ir em ent s of the Companies Act 2 00 6. O P I N I O N O N O T H E R M A T T E R P R E S C R I B E D B Y T H E C O M P A N I E S A C T 2 0 0 6 In o ur opi ni on th e in formation given in the Di rect ors’ Report and Strateg ic Rep ort for the fi nan ci al year fo r whic h the gr oup f inancial st atem en ts are prepare d is cons isten t with th e group fina ncial statements . E X C E P T I O N We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • certain disclosures of Director s’ remuneration sp ecified b y law are not made; or • we have not received all the information and explanations we require for our audit. O T H E R M A T T E R We have reported separately on the parent company financial statements of Plexus Holdings plc for the year end ed 3 0 J une 2015. Matthew Stallabrass Senior Statutory Auditor for and on behalf of Crowe Clark Whitehill LLP, Statu tory Auditor London 27 October 2015 63 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p062-p063 (Auditor's Rep).indd 63 11/11/2015 00:06 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 “Res earch and Development (‘R&D’ ) spend , excluding cos t of bu ilding test fixt ures, in creas ed by 46 .7 % to £3.47 m” P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p064-p065 (Financial State).indd 64 11/11/2015 00:06 F I N A N C I A L S T A T E M E N T S Contents C O N S O L I D A T E D S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S 6 6 6 7 6 8 6 9 7 0 I N D E P E N D E N T A U D I T O R ’ S R E P O R T 1 0 0 P A R E N T C O M P A N Y S T A T E M E N T 1 0 2 O F F I N A N C I A L P O S I T I O N P A R E N T C O M P A N Y S T A T E M E N T O F 1 0 3 C H A N G E S I N E Q U I T Y P A R E N T C O M P A N Y S T A T E M E N T O F 1 0 4 C A S H F L O W S N O T E S T O T H E P A R E N T C O M P A N Y 1 0 5 F I N A N C I A L S T A T E M E N T S C O M P A N Y I N F O R M A T I O N 1 1 5 65 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p064-p065 (Financial State).indd 65 11/11/2015 00:06 66 C O N S O L I D A T E D S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E RE VENUE Co st o f s ales F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 5 N O T E S 2 0 1 5 £ ’ 0 0 0 3 28,526 (8,581 ) 2 0 1 4 £ ’ 0 0 0 A s r e s t a t e d 27,024 (7,817) GRO SS PR OFIT 19,9 45 19,207 Adm i ni strati ve expe ns es (14,925) (13,9 28) O PE RA TING P R OFIT Fin anc e i nc ome Fin anc e c osts Sh are of pr ofit of as soci ate Gai n o n di sposal of ass ociate P RO FIT B EFOR E TA X ATION Inc om e t ax expe ns e P RO FIT FO R T HE YEA R ATTRIBUTABLE TO TH E OWNERS OF THE PARENT Oth er com prehensive income TO TA L CO MPR EHE NSI VE INCOME FOR TH E Y EAR AT TRIB UTA BLE TO THE 5 7 8 14 14 9 5,020 512 (182) 236 352 5,938 (509) 5,2 79 5 (124) 2 15 – 5,37 5 (804) 5,429 – 4,5 71 – OWNER S O F THE P ARENT 5,429 4,5 71 EA R NINGS P ER SHA RE 11 B a s i c Di l uted A ll in co me arise s from c ont inuing op erations 6.40p 6.16p 5 .44p 5 .21p P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p066-p069.indd 66 11/11/2015 00:07 C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N 67 A SSE TS Go odw il l Int angi ble assets Inves tm ent i n as soci ate Prope rty, pl ant and eq uipment Deferred tax ass et s TO TA L NO N- CURR ENT ASSETS Inventories Trade an d o th er r ec ei vab les Ca sh and cash equi valents TO TA L CU RRENT A SSETS TO TA L A SSE TS EQ UI TY AND L IA BILITIES Ca ll ed up share cap ital Share premium account Sh are based paym en ts reserve Retai ned ear ni ngs TO TA L E QUITY AT TR IBUTABLE TO EQUITY HO LD ER S OF THE P A RENT LIA B IL ITIES Deferred tax l iabili tie s B ank l oans TO TA L NO N- CURR ENT LIABILITIES Trade an d o th er payables Cu rren t in com e tax l i abilities B ank l oans TO TA L CU RRENT LI ABILITIES TO TA L L IAB ILI TIES N O T E S 12 13 14 15 9 16 17 19 19 20 9 23 18 23 A T 3 0 J U N E 2 0 1 5 2 0 1 5 £ ’ 0 0 0 767 13,167 – 17,154 – 2 0 1 4 £ ’ 0 0 0 7 60 10,437 9 41 13,284 751 31,0 88 26,173 6,55 1 7,30 1 3,32 8 17,1 80 48,2 68 849 20,141 1,862 15,628 5,256 6,463 6,353 1 8,072 44,245 8 49 20,138 2,4 76 11,117 38,480 34,580 212 5,975 6,187 3,296 5 300 3,601 9,788 – 4,0 00 4,0 00 5,4 82 1 83 – 5,665 9,665 TO TA L E QUITY AND LIABILITIES 48,268 44,245 Th ese f inan ci al stateme nts were app roved an d au thorised for issue by t he board of director s on 2 7 October 2015 and were s ign ed on its beh alf by: B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S B van Bilder beek Director Co mpany Number: 0 3322928 G Stevens Director P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p066-p069.indd 67 11/11/2015 00:07 68 C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 5 C A L L E D U P S H A R E S H A R E R E T A I N E D S H A R E P R E M I U M B A S E D E A R N I N G S T O T A L £ ’ 0 0 0 C A P I T A L £ ’ 0 0 0 A C C O U N T P A Y M E N T S £ ’ 0 0 0 £ ’ 0 0 0 R E S E R V E A s r e s t a t e d £ ’ 0 0 0 BALA NCE AS A T 30 JU NE 201 3 8 2 8 1 7 , 2 88 2 , 7 4 1 6, 33 5 27 , 192 Total comprehensive income for the year Share based payment s reserve charge Transfer of sha re based payments reserve charge on exercise of opti ons Tax credi t recognised di rectly in equity Issue of ordinary shares (net of issue costs) Net deferred tax movement on share opti ons Di vidends – – – – – – – – 2 1 2 , 85 0 – – – – – 2 6 (5 9 9) – – 3 0 8 – 4,5 7 1 4,57 1 – 5 9 9 4 7 5 – – (8 63 ) 2 6 – 47 5 2,8 71 30 8 ( 86 3) BALA NCE AS A T 30 JU NE 201 4 8 4 9 2 0 , 1 38 2 ,4 76 1 1, 11 7 34 , 580 Total comprehensive income for the year Share based payment s reserve charge Transfer of sha re based payments reserve charge on exerci se of options Tax credi t recognised directly in equi ty Transfer of share based payments reserve charge on lapse of options Issue of ordinary shares (net of issue costs) Net deferred tax movement on share opti ons Di vidends – – – – – – – – – – – – – 3 – – 5 , 42 9 5,4 29 – 2 1 (1 ) – – 1 2 (3 8 ) 3 8 – (5 9 6 ) – – – (9 59 ) 21 – 2 – 3 ( 59 6) (959 ) BALA NCE AS A T 30 JU NE 201 5 8 4 9 2 0 , 1 4 1 1 , 8 6 2 1 5 , 6 2 8 38, 4 8 0 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p066-p069.indd 68 11/11/2015 00:07 C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S 69 CASH FLOW S FROM OPERA TI NG A CTI V I TI ES Profi t before taxation Adjustment s for: Depreciation, amortisation a nd im p ai r m e nt c har g e s Loss on disposal of property, p lan t and e q u ip m e nt Charge for share based paym e nt s Investment income Interest expense Share of result in associ ate Gain on di sposal of associate Di vidend received from asso ciat e Changes in working capit al: (Increase)/decrease in i nven t or i e s Increase in trade and other r e ce ivab l e s (Decrease)/increase in trade and o the r p ayab l e s CASH GENERATED FROM OPER A TI NG A C TI V ITI ES Income taxes pai d F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 5 N O T E S 2 0 1 5 £ ’ 0 0 0 5 , 93 8 3 , 88 1 2 0 2 1 (5 1 2 ) 1 8 2 (2 3 6 ) (3 5 2 ) 3 7 (1 , 29 5 ) (8 3 8 ) (1 , 67 8 ) 5 , 16 8 (3 1 8 ) 2 0 1 4 £ ’ 0 0 0 5,37 5 3 ,405 9 5 2 6 (5) 12 4 (2 15) – – 7 76 (1,54 1) 2 56 8,2 96 (35 3) NET CASH GENERA TED F ROM OP ER A TI NG A CTI V I TI ES 4 , 85 0 7,94 3 CASH FLOW S FROM INVESTI NG A C TI V I TI ES Acquisition of associate Proceeds from disposal of associ ate Acquisition of subsi diary Purchase of intangibl e assets Purchase of property, plant an d eq u i p m en t Proceeds of sale of property, pl ant and eq u i p m en t Interest received – 1 , 49 2 (7 ) (3 , 5 41 ) (7 , 01 6 ) 5 6 4 (726 ) – – (2,40 3) (3,01 6) 57 5 NET CASH USED IN INVESTIN G AC TIV I TI ES (9 , 0 12 ) (6,08 3) CASH FLOW S FROM FINA NCI N G A CT IV IT IE S Drawdown of loans Repayment of loans Net proceeds from issue of new ordinary share s Proceeds from share options exercised Interest paid Equity dividends pai d NET CASH GENERA TED F ROM FI NA N CIN G ACT IV I TI ES NET (DECREASE)/INCREASE IN CA SH A ND CASH EQ UI VA LE NT S 2 1 Cash and cash equivalents at 1 Ju ly 2 01 4 2 , 50 0 (2 2 5 ) – 3 (1 8 2 ) (9 5 9 ) 1 , 13 7 (3 , 0 25 ) 6 , 35 3 CASH AND CA SH EQU IVA LENT S A T 3 0 JU NE 2 0 1 5 2 2 3 , 32 8 – – 2,33 0 5 41 (124 ) (863 ) 1,88 4 3,74 4 2 ,609 6 ,353 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p066-p069.indd 69 11/11/2015 00:07 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 70 N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S 1 . S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S Th e fol lo wi ng ac c ou ntin g p olicies have been app lied cons ist en t ly in d ealin g wit h items which are co nsi dered material i n relation to the financial information. a . B a s i s o f p r e p a r a t i o n Th e c on sol idated fin ancial statements have been prepared in accordan ce wit h In te rnational Fin anc ial Report ing Standards (IF RS) an d in terp reta tions iss ued by t he International Ac co unt in g Stand ards Bo ard as ad opt ed by the Europ ean Union and th erefore comply with th e EU IAS Regul ati on and are in accord ance with the Compan ie s Act 200 6. Th e Direc to rs h ave cons idered those st and ard s and inter pret at ion s, wh ich h ave not been appl ie d in th e fin ancial statemen ts bu t are relevant to th e Gr ou p’s op erat ion s, that are in i ssu e bu t not yet effec ti ve and do not cons id er that any will h ave a m ater ial impact on the future results of the Group. Th e G roup fi nan ci al s tat ements are pr esent ed in s terling and all value s are rounded to the ne arest th ousand p ou nds excep t where otherwis e ind icat ed. Th e fi nanci al i nformat ion has b een prepared und er the h istor ical cost conve ntion except where fair value adjustments are required. Th e di rec to rs, h avi ng made app rop riate enquiries , have carefu lly con sidere d th e availability of wo rkin g c apital alon g with future ord ers an d s atisf ied t hem selve s t hat th e Gr oup has adequ ate resou rc es t o continue in operational existence for t h e for eseeab le future. The Gro up con tinu es to adopt the going concern b asis in p rep aring t he financial s tat ements. Co st of sal es i nc ludes sa lary and r elat ed costs for s ervice per sonn el, an d dep reciation and refurbi shm ent costs on rental as sets. b . G o i n g c o n c e r n Th e Group’s acti vit ies and an outline of th e develop ment s tak in g place in relation to its pro duct s, s er vi ces an d m arketplace are consid ered in the St rat egic Review on pag es 2 8 to 45 al on g w i th an exp lanat ion of revenue, t rad ing results and cash flows. No te 23 to the Financ ial Statements sets out th e comp any ’s financial risks and the managem ent of c apit al ris ks. At th e year end, th e Gro up had b ank facilit ies of £7.275m co mprising a £5m re volving credi t fac i li ty r epayable i n Se ptember 2016, a £1m overdraft repayable on de mand, and a te rm l oan fac i li ty w hic h h ad a bal ance of £1.275m, and which is repayable in quarterly instalm ents of £ 75 k wi th th e f inal repay ment due b y September 2019. Po st peri od end, th e Gr oup’s cash p osition chang ed materially with the subscription by Je reh fo r n ew ordi nary sh are s represen ting 5% of t he issued s hare capit al of P lexus for ci rc a £ 8m P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 70 11/11/2015 00:08 ne t o f expenses . Furthermore, th e Grou p’s bank facilities have been r enewed with Bank of Sc otl an d Co rpo rate and compris e of a £5m revolving cr edit facility, a £1m ove rdraft, and the rem ai nder of th e fi ve year term loan run ning until Septemb er 2019 . Toget her w ith th e profit able trading of the busines s, these fun ds and facilit ie s ar e anticipated to pr ov ide su ffic ient funding for th e fores eeable futu re. Ac co rdi ngly, afte r c areful enq uiry and review of availa ble fin ancial infor mat ion, including pro jec ti ons of pr ofit ability and cash flows for the p eriod t o 31 O ct ober 20 16, t he Directors bel i eve that the com pany has ad equate resou rces to con tinu e t o ope rate for t he foresee able fu tur e and that i t i s therefore app rop riate t o continue to a dopt th e going concer n basis of acc ou nti ng in the preparation of t he cons olid ated and company fin ancial st at ements. c . B a s i s o f c o n s o l i d a t i o n Th e gr oup fi nanc ial statements consolidate the financial s tatem ent s of Plexus Holdings plc and th e enti tie s it cont rols (its subs idiaries) d rawn up to 30 Ju ne each year. C on t rol comprises th e powe r t o govern the financial and operat ing p olicies of t he inves tee s o as to obtain ben efi t fro m i ts ac ti viti es and is ach ieved th roug h d irect and in direct own ership of voting ri ght s; cu rr en tly exe rc isab le or convertible pot ential voting r ight s; or b y way of contractual agreem ent. Subs idiar ies are consolid ated from the d ate of th eir acq uisition , being the date on w hi c h the group obt ains cont rol, and continue to be cons olidat ed u nt il t he d ate that such co ntr ol ceases. The fi nancial statemen ts of subs idiaries are prepared for the same reporting ye ar as the parent co mpany, us ing consis tent accounting policies. All inte rcompany balanc es and t ransact io ns, i nclu ding unrealis ed p rof its ar is ing from intra group transactions, have been eli m inat ed in fu ll. Unrealised losses are eliminated unle ss the transaction pr ovide s evi den ce o f an im pairment of the asset tran sferred . Wi th in t wel ve month s of the d ate of acq uisition of a su bsidiary undertaking a re-assessm ent is m ade of th e fai r value of the a sset s an d liabilities acq uired in orde r to asse ss any provisional val ues u sed i n i nit ial accounting . Th e fin anci al st ate ments of th e Company and it s s ub sid iaries are prepared in sterling (the fu nc ti onal c ur rency ), w hich is the cu rren cy that bes t reflect s the e conomic substanc e of the un derl yi ng e vent s and circumstances r elevant to the Group. Transactions and balances i n fo rei gn cur rencie s are converted into sterling in accord ance wit h t he principles se t forth by IA S 21 (“The E ffec ts of Changes in Foreig n Exchange Rates”) . Accordingly, transactions and bal anc es h ave been c onverted as follows: • Mone tary ass et s and liabilities – at th e rate of exchan ge applicable at the balance sheet date; and • Inc om e and expen se items – at exchang e rates app licab le as of the date of recognition of th ose item s. Non-monetary items are conver ted at the rate of exchange used to co nvert th e rel ate d b alance sheet items i.e. at the tim e of t he transact ion. Exchange gai ns and lo sses from the aforementioned conversion are recognise d in the consoli date d st atem ent o f c om prehensive in come. 71 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 71 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 72 d . A s s o c i a t e An as so ci ate is an entity over wh ich the g roup is in a p osition to exer cise sign ificant influence th rou gh parti cip ation in the finan cial and operating policy decisions of t h e inves te e, but that i s not a su bsi di ary or a jointly controlled entity. Th e re sul ts, assets and liab ilities of an as sociate are incorp orated in t he se financial st atem en ts usin g t he eq uity met hod of accoun ting . Und er t he equ ity met hod , th e investment i n an a ss oci ate e ntity i s carried in the b alance sheet at cos t, plu s pos t-acq uisit ion changes i n t he gro up’s share o f n et ass ets of t he as sociate, less dist rib ut ion s received and less any i mpai rm ent in valu e of t he investment. Th e group in come s tat emen t r efle ct s t he g roup’s share of t he resul ts aft er tax o f the as sociate ent ity. The g roup s tat emen t of oth er comprehensive i nco m e refl ec ts t he group’s share of any in come and ex pen se r ecog nised by th e associate en ti ty out side p rofi t an d loss. Fin anc ial statem ents of associate entities are prep ared for th e same r eport ing year as the gro up. Where n ec es sary, ad justmen ts are mad e to thos e fin ancial st at emen ts t o bring the acc ou nti ng poli ci es u se d into line with those of t he g rou p. Un real is ed gai ns on transactions between the grou p and its associate ent it ies ar e eliminated to the ext en t of th e group ’s interest in the associat e en tit ies . Un realised los ses are also el im i na te d unl ess th e t ransaction p rovides ev idence of an imp air ment of t he asse t t ransferr ed. Th e gr ou p ass es ses investmen ts in ass ociate entities for imp airmen t wh enever events or ch anges in c irc um s tan ces ind icat e that the carr ying valu e m ay n ot be r ecoverable. If any su ch i ndi cati on of im pairment exists, the carryin g amou nt of th e invest men t is compared with i ts recove rabl e amo unt, being t he hig her of its fair value less cost s t o sell and value in use. Wh ere the c arr yi ng amo unt exceeds the recoverab le amount , th e inves tm ent is written down to i ts recoverabl e amo unt. Th e group ceas es to u se the eq uity method of accoun ting on th e dat e from wh ich it no longer has jo in t c ontr ol ove r, o r sig nificant influen ce in the associate, or wh en th e int ere st become s he ld for sale. e . R e v e n u e Reven ue repr es en ts the amounts (exclu ding valu e ad ded t ax) derived fr om wellhead r entals and s al es of we llh eads , plus as sociated equ ipment and serv ices . Income from rental contracts is recognised ov er the period of the rental on a straight- l in e bas is . I nco me from eq uipmen t sales is recog nised followin g p rodu ct accept ance by the cu sto m er. Inc ome from services is recognis ed over the p eriod of p erfor mance of the serv ices. In com e fro m c on struc tio n contracts is recog nised in accord ance with p aragrap h ( n) be low. f . I n c o m e t a x e s a n d d e f e r r e d t a x a t i o n Th e i nc ome tax expe nse for the period comp rises current and deferr ed t ax. Tax is recognised i n t he in com e st ate ment, excep t to the extent that it relat es t o it ems r ecognise d in other co mpre hensi ve inco me or d irectly in equ ity. In th is cas e, the t ax is also re cog nised in othe r co mpre hensi ve inc om e or directly in equ ity, respectively. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 72 11/11/2015 00:08 Th e cu rr en t i nc ome tax charg e is calcu lated on the b as is of th e t ax laws enacted or su bstan tively enact ed at the balance sheet d ate in the count ries wh ere th e company and i ts su bsi diari es operate and generate t axable income. Manag emen t per iod ically evaluates pos it io ns taken i n tax returns with res pect t o s ituat ion s in wh ich app licable t ax r egulation i s su bje ct to i nterpretation. It es tab lis hes p rovisions wh ere ap pr op riat e on the basis of am oun ts expe cted to be paid to the t ax authorit ies . Deferred in com e tax is recog nised , using t he liability met hod, on tem porary differ ences ari si ng betw een the tax b ases of as sets and liab ilities and th eir car rying amounts in the co nso l idated fin anc ial statemen ts . Deferred in com e tax is determined using tax rates (and laws) t h at h ave been enacted or su bstan tively enac te d by the balance s heet d ate and are exp ected t o ap ply wh en the r elated deferred i nc om e t ax asset is realised or the d eferred income tax liab ility is settled. Deferred i nc ome t ax assets are recognised only to the ext ent th at it is pr obable that future taxabl e profi t w ill be availab le against wh ich the temp orary differ ences can be utilise d. As set ou t in n ote 20 th e group operates a share op tion sch eme. Wh ere t he mar ket price of th e s hares at the year-end exceeds the opt ion p rice there is a pot ent ial t ax d eduction. This i s tre ated as a deferre d tax ass et. Th e por tion of the exp ecte d fu tu re t ax d eduction which i s l ess than or equ al to the associated cumulat ive IFRS2 char ge is recogn ised in the incom e st atem en t. Th e b alance of the credit is recog nised d irectly in eq uity. g . G o o d w i l l Purc has ed goodw i ll (representing the exces s of the fair value of t he cons id erat ion given over th e fai r val ue of the s eparable as set s acquir ed) arising on b us in ess com binat ions in respect of acq uis iti ons is c apit alised. Go odw il l is not am orti sed, it is meas ur ed at cost less any accu mu lat ed imp airment losse s. Go odw il l i s re vi ewe d for impairmen t at least annually. Th e recoverable am ou nt of th e good will has b een d eterm in ed on a valu e in us e basis. Th e key ass umpt ions on which th e valuation is b ased are t hat : • • • In dustry acc ept ance will res ult in continued growth of the business; Pri ces wi l l rise wi th inflation; and St aff wage in flati on will be hig her th an general inf lation but will n ot r is e in line with sal es . Th ese assum ptions w ere determined fr om the director s’ k nowledg e an d e xp erience . Th e cas h fl ows are b ased upon an 11 year period which is t he p eriod cover ed b y the re levant pate nts , and, in acc ordance with his torical tren ds and cur ren t expect ations , a revenue gro wt h rate of 5 -10% has been applied to periods beyond th e cur ren t b ud get . T he company ’s Weigh ted Averag e Cost of Capital for d iscounting pu rp oses has been measu red at 8.6 5%. The cas hfl ow s are bas ed u pon approved b udg ets for the followin g 12 mont hs , b eyond this they are bas ed upon man age ment ’s exp ectations of fut ure developm ent s. 73 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 73 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 74 Managem ent reg ul arly assesses the s ensit iv ity of t he key a ssu mpt ions and th e probability th at any o f th em w ould change to the deg ree that th e carry in g value would exceed the rec overabl e am oun t. h . I n t a n g i b l e a s s e t s a n d a m o r t i s a t i o n Pat ents are re co rde d in itially at cost and amortis ed on a s t raig ht line b asis over 20 year s w hi ch re prese nt s th e l ife of the patent. The Group op erates a policy of cont inual patent en hanc ement i n or der that technolog y enhancements an d m od ificat ion s ar e incorporated w it hi n th e r egi st ered patent, thereby protecting the valu e of t echn olog y advances for a full 2 0 year perio d. In tel lec tual Pr ope rty rig hts are initially record ed at cost an d amor tised over 2 0 years on a strai ght l i ne bas is. Th e tech nology defined by the In tellect ual Pr operty is believed to be abl e t o generate income streams for the Gr oup for many years ; key Int elle ct u al Pr operty i s prot ec ted by pat en ts ; the lowest common denominator in ter ms of econom ic life of the i ntan gibl e assets is the l ife of the original patents an d th erefor e th e life of t he Inte llectual Prop erty has be en m atch ed to the remaining life of t he p aten ts pr otect ing it. Develo pm en t expe ndi tu re is capitalised in resp ect of develop men t of pat ent able technology at c ost i ncl udi ng an all ocation of own time when s uch exp end itu re is incu rre d on separately i dent ifi abl e t ec hnol ogy and its futu re recoverability can reason ably b e regar ded as assure d. Any expenditu re carri ed forward is amortised on a straigh t lin e b asis over it s us eful economic l ife, wh ic h th e di re ct or s consider to b e 20 years. Co m puter s oftwar e i s amortised over 2 to 5 years on a straigh t lin e b asis. In al l cases the amortis ation p eriod r epresent s t he exp ected us efu l life of th e as set. Am or ti satio n is c harged to the Admin is trative Expenses lin e of t he Stat emen t of C ompr ehensive Income. E xpendi ture on re se arc h and d evelopment, which does not me et t he cap it alisation cr iter ia, is w ri tt en off to th e Statement of Comp reh ensive Income in th e p eriod in which it is incur red. Th e carryi ng val ue of i ntangible ass ets is reviewed on an on-goin g b asis by t he dir ector s and, where appr opr iate, provis ion is mad e for any ind icat ion of imp air men t in value . Wher e i mpai rm ent ari se s, the recoverab le amou nt of the as set is es timat ed in ord er t o d eter mine the exten t of the i mp airm ent loss (if any). Wh ere it is not pos sible t o est imat e t he recoverable am oun t o f an i ndi vidual asset, an est imat e is mad e of th e recoverab le amou nt of the cash- gen erati ng un it to w hi ch the a ss et b elon gs. Th e r ecoverabl e am oun t is the h igher of fair valu e les s cost s t o sell an d value in use. In ass ess in g val ue in us e, t he est imated futu re cash flows are discoun te d t o t heir p rese nt value us in g a disco unt rat e t hat reflects the curr ent market as sess men ts of th e t im e value of m oney and th e r isks s pecific to the ass et. If the recoverab le amou nt of an asse t is estimated to be less than its carrying amount, the carrying amou nt of th e as set is r educed to its rec overabl e am oun t. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 74 11/11/2015 00:08 Th e key ass umpt ions on which th e valuation is b ased are t hat : • • • In dustry acc ept ance will res ult in continued growth of the business; Pri ces wi l l rise wi th inflation; and St aff wage in flati on will be hig her th an general inf lation but will n ot r is e in line with sal es . Th ese assum ptions w ere determined fr om the director s’ k nowledg e an d e xp erience . Th e cash flo ws ar e based upon an 11 year period , the remainin g life of t he Intellectual Prop erty, and a r evenue growth rate of 5-10% h as b een applied t o p eriods be yond the cu rren t budget. The c ompany ’s Weighted Average Cos t of C apital for d is cou nt ing purposes has been measured at 8.65%. The cashf lows are bas ed up on app roved b ud gets for the fo ll o wi ng 12 m on ths , beyond this th ey are based u pon man agem ent ’s expect ations of future develo pm en ts . It wo ul d requi re a s ub stantial movement (over 30% ) in any of th ese assu mp tions before th ere wo ul d be any i mpairment to in tan gib le assets. An im pair ment l os s is recognis ed immed iately in the Stat ement of Comp reh ensive Income. i . P r o p e r t y , p l a n t a n d e q u i p m e n t Prop erty, plant an d equipment are s tat ed at cost les s accu mu lat ed dep reciation. Cost repre sen ts the c os t o f acq uisition or cons truction, includ in g t he direct cost of financing the acqu i si tio n or c on stru c tion until the asset comes into use. Deprec iat ion i s pr ovi ded to write off t he cost or valuation of p roper ty, plan t and equipment l ess t he e stim ated r es idual value by equ al in st almen ts over t heir est im ate d u seful econom ic l ives as fol l ow s: B u i l d i n g s Over the remaining life of the lease on the land on which the build ing is constructed Tenan t im proveme nt s Over th e remaining life of the lease of the re levant building E qui pment 7% – 50% per annum Moto r vehi cl es 20% per annum Th e expect ed u se fu l lives and residual values of p rop erty, plant and equipme nt ar e r ev ie we d on an an nual basis and, if necess ary, chang es in useful life or residual value are accounte d fo r prospect ive ly. Th e carry ing val ue o f p roperty, plant and eq uip ment is revie wed for im pairment whenever events or c hanges i n ci rcumstances ind icate th e carry ing value may not be recove rable. An i tem o f property, pl ant and equip ment is d erecogn ised upon disposal or whe n no future eco nom i c benefits are expected to arise from the con tinue d use of t he asset. Any gain or l oss ari si ng on derecognition of th e as set (calculated as the difference betwe en the ne t di spos al pro ceed s and the carrying amount of the item) is included in t he S tate ment of Co mpr eh ensi ve Inc om e in the p eriod the item is d erecognised. 75 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 75 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 76 j . C a s h a n d c a s h e q u i v a l e n t s Cas h an d c ash equival en ts comprise cash balances and call dep osits . B ank overdrafts that are repayabl e on d em and form an in tegral part of the Grou p’s cash man agem ent and are i ncl u ded as a compo nent of cash and cash equivalent s for t h e p urp ose of th e statem ent of cas h fl ows . k . F o r e i g n c u r r e n c i e s Tra nsac tion s in forei gn currencies are recorded usin g th e rat e of exchan ge r uling at the date of the transac tio n. Monetary ass ets and liab ilities d en om in at ed in for eign curre ncies are trans lated us ing th e contracted rate or th e rate of exchan ge r ulin g at t he st atem ent of fi nan ci al posi ti on date and the g ains or los ses on trans lat ion ar e includ ed in th e Statem ent of C om pr eh ensi ve In com e. Th e fun cti onal c urre nc y of the Group is pou nd s ster ling. l . L e a s e s Operati ng lease ren tal s are charg ed to the Statement of Comp reh ens ive In com e on a straight l in e basi s over t he peri od of the leas e. As sets held un der finan ce leases are recognised as ass ets of t he Gr ou p at their fair value or, if lower, at the p re sent value of t he minimum lease paymen ts, each determin ed at the inception of th e leas e. T he corre spon ding liability to the l esso r is i ncl uded in th e statement of f inancial pos ition as a fin ance leas e ob ligation. Lease paymen ts are appo rt ioned between f inance charg es and red uct ion of t he leas e obligation so as to ac hi eve a constant rate of interest on the remain in g balan ce of th e liability. Finance ch arges are c harged di re ctly against income. m . I n v e n t o r y Inve nto ry i s s tat ed at the lower of cost and net realis able value. Cost is det ermined on a fi rst i n fi rst out basis and includ es all direct costs incu rre d and att ribu tab le production ove rheads. Net realis able valu e is bas ed on estimated s ellin g p rice allowing for all fur ther co sts t o com pletio n and dispos al. n . C o n s t r u c t i o n c o n t r a c t s a n d w o r k i n p r o g r e s s Th e am ount of pro fit attributab le to th e s tag e of comp letion of a lon g t erm contract is rec ogni sed w hen the o utcome of t he cont ract can be fores een wit h re asonab le certainty. Reven ue for su ch c ontrac ts is s tated at t he cost app rop riate to t heir st age of com pletion plus attri but abl e pr ofit s, l es s amou nts recognis ed in p reviou s years. Prov is ion is made for any l oss es as s oon as they ar e for eseen. Co ntrac t wo rk in pr ogr es s is st ated at cost s incurred , less th ose tran sferred to t he Stateme nt of C ompr eh en si ve I nc ome, after deduct ing for eseeable los ses an d paymen t s on account not m atch ed w i th r evenue. Co ns truc ti on w ork in progress is includ ed in d ebtors and represent revenue recognised in exc ess of pay ments on accou nt. W here p ay ments on account exceed revenue a pay ment rec ei ved on acc ou nt is establis hed and included within cred itors. Th e s tage o f comp leti on for con tract s is d etermined according t o the le ve l of pr ogre ss of eac h i tem that is in clude d in the contract and the estimated cost to com plet e. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 76 11/11/2015 00:08 o . P e n s i o n s Th e G roup offers a c on tributor y Group stakeholder p ension s ch eme, int o wh ich t he G roup will m ake matc hin g co ntrib utions up to a pr e-ag reed level of base salary; th e sch eme is open to exec uti ve di rectors an d permanent employees. Director s may choose to have contributions pai d in to per sonal pe ns ion p lans. p . D i v i d e n d s Di vi dends ar e rec ogn ised when they become legally payab le. In t he cas e of int erim dividends to equi ty shar eh ol ders , this is when th ey are paid. In t he cas e of final d ivid ends, this is w hen approved by th e shareholders at th e AGM . Divid ends u npaid at t he statement of fi nan ci al po si ti on date are on ly recognised as a liab ility at t hat dat e t o t he extent that th ey are appro pri atel y authoris ed and are n o long er at th e discret ion of the Company. Un pai d divi den ds th at do not meet thes e criteria are d isclosed in t h e not es to the financial st atem en ts. q . C l a s s i f i c a t i o n o f f i n a n c i a l i n s t r u m e n t s i s s u e d b y t h e G r o u p In acco rdanc e wi th IAS 32, finan cial instruments iss ued by the Group are treated as equity (i.e . form i ng part of shareholders ’ fun ds) only to the extent t hat t hey me et the following tw o c ondi tio ns: (a) th ey i n cl ude no c ontractual ob lig ations u pon th e Comp any ( or Group as the case may be) t o del iver cash or other finan cial assets or to exchang e financial asset s or financi al l iab il i ti es wi th ano ther party under conditions th at are p otent ially unfavourable to the Co mpany (or Gr ou p); and (b) w here t he ins tr um ent will or may b e settled in the Company ’s own equity instrume nts, i t i s ei the r a n on-derivative that includes no oblig ation to d eliver a variable number of the Co mpany ’s ow n equity instruments or is a der ivative that will be se tt led by the Com pany exc han gin g a fi xed amount of cash or other f inancial as sets for a fixed number of i ts ow n eq ui ty i nstruments. To the ext en t t hat this definition is not met, th e p roceeds of issue are classified as a fi nanc ial liabi li ty. Where the ins trument so class if ied takes the legal form of the Co mpany ’s own sh ares, the amounts present ed in th ese f ina ncial stat em ents for called up s hare capi tal and share p remium account exclude am ount s in relation to those shares. Fin anc e pay men ts associated with financial liab ilities are dealt with as part of finance ch arges. Finan ce p ayments associated with f inancial ins trum ents that are classifie d as part of shar eh old ers’ funds (s ee divid end s policy ), are dealt wit h as appropr iations i n th e r econc il i ati on of movements in s har eholders’ fund s. r . S h a r e b a s e d p a y m e n t s Th e G roup i ssues share options to d ir ectors an d employees , which are m easur ed at fair value at the dat e of gran t. The fair value of the equity settled opt ions det er mined at the grant date is expens ed on a straig ht line b asis over the vesting per iod bas ed on an estimate of th e n um ber o f opt ion s that will actually vest. Th e Grou p has ad opt ed a St ochastic model 77 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 77 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 78 to c alc ul ate the fair value of opt ion s, which enab les th e Total Sh areh old er Retur n ( TSR) perform anc e condi tion attached to the awards to be fact or ed in to th e fair valu e calculation. s . M a n a g e m e n t o f c a p i t a l Th e Gro up’s cap ital is composed of sh are cap ital an d retain ed e arning s along with a share premium account. The share premium account r epresents amounts received for shar es issued i n exc ess of t he n omin al share cap ital les s any iss ue cost s. Th e Group’s obj ec ti ve wh en managin g capit al is to safegu ard its ability to con tinu e as a going co nc ern so that it c an continue to p rov ide ret urns to s har eh old ers . Th e Group sets t he amount of cap ital in p roportion to it s asses smen t of t he risks that it fac es. The Gr oup m an ages the capit al s tructure and makes ad ju st men ts t o it in the light of ch anges i n e con om ic conditions and t he ris k characteristics of th e u nd erlying ass ets. In order to m ai ntai n or adj us t the cap ital s tructu re t he Group may adju st th e am ou nt of dividends pai d or issu e ne w eq ui ty. t . S i g n i f i c a n t j u d g e m e n t s m a d e b y m a n a g e m e n t E sti m ates an d judge ments are contin ually evaluated and are based on hist orical experience and o ther fact or s, inc lu ding exp ectations of fut ure event s t hat are be lieved t o be reasonable un der th e ci rc ums tan ces. u . K e y a s s u m p t i o n s a n d s o u r c e s o f e s t i m a t i o n E mpl oyee share o pti ons are valued in accord ance with a Stochas tic model and judgement i s r equired r egard ing th e choice of some of the in pu ts t o t he mod el. W h ere doubts have exi sted, m anagemen t have g one with the ad vice of exp ert s. Var iat ions in th e e stimated i npu ts wo uld vary the charg es to the consolidated s tatemen t of compr ehen sive income . Full deta il s of the m odel and inp uts are pr ovid ed in note 20. Th e es ti mated li fe of th e Group ’s rental assets for d epreciat ion purposes is of significance to the finan ci al s tat em ents. The life us ed is with reference to enginee ring e xpe rience of the probabl e physi cal and commercial lifesp ans of the assets. Change s to these e st im ate s can res ul t i n si gni fic ant vari ations in the carry ing value and amount s charge d to the consolidated st atem ent o f c om preh en sive income in sp ecif ic p eriods . Th e esti mat ed life of th e Group’s In tellectual Property is estim ate d wit h refere nce to the l ifespan of the p atents which p rot ect the knowled g e and th eir forecast income generation. Ch anges to th es e estim ates can result in sig nificant variations in the carrying value and am oun ts ch arged to th e c onsolidated st atement of comprehensive income in specifi c per iods. Provi si ons r equ ire m an agement est im ates an d judg ements. Provision has bee n made against sl ow m oving i nventory b ased up on historical exp erience of the viability of the older parts as tech nol ogic al im provements have been mad e. C hanges to t hese e st im ates can r esult i n s ign ifi can t var iati ons in th e carrying value an d amounts charged t o the consolidated st atem ent o f c om preh en sive income in sp ecif ic p eriods . Wh en measur in g g ood will and intang ible as sets for impairme nt a range of assumptions ar e requ ir ed and these are detailed ab ove in the Goodwill and Intangible Asset notes above. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 78 11/11/2015 00:08 2 . P R I O R P E R I O D A D J U S T M E N T Th e c om parati ve s fo r the year end ed 30 Ju ne 2014 have been ad ju st ed to correct the acc ou nti ng treatme nt in relation t o a tax credit received of £47 5k arising on the exer cise of sh are opti on s. T hi s cred it was originally recog nised wit hin ‘Income Tax Expense’ in the Co ns ol i dated S tat em ent of C omprehens ive I ncome wh ereas t he amoun t s hould have been rec ogni sed dir ec tl y in E quity in accordance wit h IAS 12 In com e Taxes. T his adj ustm ent ar ose fo ll o wi ng a revi ew o f the Group ’s Ann ual Rep ort and Account s for th e year en ded 30 June 2 01 4 by th e Fi nanc ial Reporting Coun cil’s Con duct C om mittee. Th e e ffec t o f th e restatement in the year to 30 June 2014 h as been t o in crease the income tax expe nse wi th in t he Consolidated St atement of Comprehen sive In come by £475k , thereby redu ci ng pr ofi t after t ax by the s ame amount. This has had t he effect of d ecreasing basic and di lu ted earn ings p er sh are to 5.44p and 5.21p respectively (bas ic earnin gs per shar e: 6.0 1p; di lu ted earni ngs per share: 5.75p as orig inally rep orted). Th is adjustm ent has had no imp act on net ass ets , tax payable, or t he cas h flow statem ent of th e prior year and no impact on op ening reserves in either t he curr ent or t he pr ior pe riod. 3 . R E V E N U E B Y G E O G R A P H I C A L A R E A UK Europe Rest o f Worl d 2 0 1 5 £ ’ 0 0 0 10,591 14,4 71 3,46 4 28,5 26 2 0 1 4 £ ’ 0 0 0 9,892 6,905 10,227 27,024 Th e r evenue in format ion above is b ased on the location of the custome r. 4 . S E G M E N T R E P O R T I N G Th e Gr oup deri ves revenue from th e sale of its POS-GRI P t echn olog y an d associated pro duct s, t he rent al of wellhead s utilising the POS-GRI P te ch nology and serv ice incom e pri nc ipal l y der ive d i n assisting wit h the commissionin g and on-going ser vice req uireme nts of ou r equ ipm en t. Th es e income s treams are all derived fr om t he ut ilis ation of th e technology w hi ch t he Grou p be lieves is its only s egm en t. Per IFRS 8 , th e o perating segmen t is bas ed on internal rep ort s abou t comp onents of the gro up, w hic h are re gu larly reviewed an d u sed by the board of direct ors being the Chief Operati ng Deci si on Maker (“CODM”). Al l of the Grou p’s non- current assets are held in t he UK. 79 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 79 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 80 Th e fol l ow ing cus to mers each account for more than 10% of th e G roup ’s reven ue: Cu sto me r 1 Cu sto me r 2 Cu sto me r 3 Cu sto me r 4 Cu sto me r 5 2 0 1 5 £ ’ 0 0 0 4,224 4,175 3,593 3,356 3,342 5 . G R O U P O P E R A T I N G P R O F I T Prof it o n ordin ary activi ti es before taxat ion is stat ed af ter ch arg in g/( cr edit in g). D e p r e c i a t i o n o f t a n g i b l e a s s e t s Am o rti sati on o f i nt angi ble assets: – In tel l ectual pro per ty rights – Rese ar ch and deve lop ment – C om puter software Operat in g l ease c h arges: – l an d an d bui ldi ngs – o th er For eign currenc y exc hange loss /(g ain) Los s on di spo sal of pro perty, plant and eq uip ment Di rect ors’ em ol ume nt s Inven to ries reco gni se d as expense Inven to ry w rit e d ow n pr ovision A u d i t o r s ’ r e m u n e r a t i o n : Fees p ayabl e t o th e Comp any ’s auditors for: Th e au dit of the Com pany ’s annual accoun ts Th e au dit of the Com pany ’s sub sid iary pu rsuant to leg islation Au di t rel ate d assu ran ce services Total audi t fe es 2 0 1 5 £ ’ 0 0 0 3,070 329 454 28 554 147 68 20 1,55 2 2,36 8 105 10 30 3 43 2 0 1 4 £ ’ 0 0 0 6 92 2,2 65 3,57 6 1,7 12 1,64 2 2 0 1 4 £ ’ 0 0 0 2,74 8 330 3 08 19 5 21 91 (35) 95 1,456 2,016 200 16 30 2 48 Key m anageme nt are considered to be the Board of Dire ct ors and details of Dir ectors’ rem un eratio n are gi ven in the remun eration rep ort on page 56 and t his form s part of the fi nan ci al statem ents. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 80 11/11/2015 00:08 6 . S T A F F N U M B E R S A N D C O S T S Th e ave rage num ber of persons, includ ing execu tive d irectors , d ur in g th e year was: Managem en t Tech ni cal Adm i ni strati ve Th e aggr egat e payr oll costs of thes e persons were as follows: Wag es and sal aries So ci al se curi ty c os ts Pen si on co ntri but ions to d efined contribution plans Sh are based paym en ts 2 0 1 5 N u m b e r 2 0 1 4 N u m b e r 12 104 38 154 2 0 1 5 £ ’ 0 0 0 10,005 867 443 21 11 1 00 31 1 42 2 0 1 4 £ ’ 0 0 0 9,973 7 49 355 24 11,336 11,101 Detai l s of Di rectors remuneration is given in the remunera tion re port on page 56 and this fo rm s part o f the fin anc ial statements. 7 . F I N A N C E I N C O M E Oth er i nterest Dere cogni ti on o f fin ancial lia bility 2 0 1 5 £ ’ 0 0 0 4 508 512 2 0 1 4 £ ’ 0 0 0 5 – 5 Th e derec ogni ti on of a financial liability of £508k (2014: nil) relate s at t he end of a contract w here n o l egal li abi lity remains. This is a n on-cash transaction. 8 . F I N A N C E C O S T S On ban k l oans an d overdraft Oth er i nterest 2 0 1 5 £ ’ 0 0 0 182 – 182 2 0 1 4 £ ’ 0 0 0 119 5 1 24 81 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 81 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 82 9 . I N C O M E T A X E X P E N S E ( i ) T h e t a x a t i o n c h a r g e f o r t h e y e a r c o m p r i s e s : U K C O R P O R A T I O N T A X : C urrent tax on i nc om e for the year A dju stme nt i n respect of prior years F O R E I G N T A X C urrent tax on i nc om e for the year A dju stme nt i n respect of prior years T O T A L C U R R E N T T A X D E F E R R E D T A X : Or igi n ati on an d reve rsal of timing d ifferences includ ing s hare optio ns A dju stme nt i n respect of prior years T O T A L D E F E R R E D T A X T O T A L T A X C H A R G E Th e e ffec ti ve rate of t ax is 9% (2014: 15%) 2 0 1 5 £ ’ 0 0 0 2 0 1 4 £ ’ 0 0 0 A s r e s t a t e d 353 (483) (130) 958 (350) 6 08 263 9 272 142 286 81 367 509 81 13 94 7 02 (42) 1 44 102 8 04 ( i i ) F a c t o r s a f f e c t i n g t h e t a x c h a r g e f o r t h e y e a r Profi t o n o rdi nary acti vities b efore tax 5,938 5,37 5 Tax on p rofi t at st andar d rate of UK corporat ion tax of 2 0.7 5% (2 014 : 22 .5 %) E ffects o f: 1,232 1,2 09 E xpe ns es no t d edu ctibl e for tax purposes 187 217 Inc om e fr om and gain on sale of associate not subject to t ax Dere cogni ti on o f fin anci al lia bility not subj ect to tax E ffect of R&D tax cr edi ts E ffect of change in t ax rate Tax adju stm en ts on share b ased payments For eign tax rates Adj us tm en ts i n respect of prior year Total ta x char ge (122) (105) (521) (10) 1 240 (393) 509 (48 ) – (279 ) (128) 26 – (193) 804 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 82 11/11/2015 00:08 83 2 0 1 5 £ ’ 0 0 0 2 0 1 4 £ ’ 0 0 0 A s r e s t a t e d ( i i i ) M o v e m e n t i n d e f e r r e d t a x l i a b i l i t y / ( a s s e t ) b a l a n c e Deferred tax ass et at beg inning of year Ch arge to Statem en t of Comprehens ive Income Deferred tax movem ent on sha re options recognis ed i n equi ty (751) 367 (545) 102 596 (308) Deferred tax l iabili ty/(asset) at end of year 212 (751) ( i v ) D e f e r r e d t a x l i a b i l i t y / ( a s s e t ) b a l a n c e Th e de ferred tax l i ability/(asset) balance is made up of the following item s: Di fferen ce betw een depreciation an d capital allowan ces Sh are based paym en ts Tax l oss es 1,60 0 (1,361) (27) 1,232 (1,956) (27) Deferred tax l iabili ty/(asset) at end of year 212 (751) 1 0 . D I V I D E N D S Ordinary Shares Int eri m pai d for t he pe riod to 31 Decemb er 2014 of 0.51p (20 14 : 0.48 p) per sh are Ordinary Shares Fin al di vi den d for t he year ended 30 June 2015 of 2 0 1 5 £ ’ 0 0 0 2 0 1 4 £ ’ 0 0 0 433 407 1 .75 p (20 14: 0.62p ) per sha re 1,564 5 26 Th e propos ed fi nal div idend has n ot b een accrued at the state ment of financial position date i n acc ordance wi th IFR S. B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 83 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 84 1 1 . E A R N I N G S P E R S H A R E 2 0 1 5 £ ’ 0 0 0 2 0 1 4 £ ’ 0 0 0 A s r e s t a t e d Profi t a ttri butable to sharehold ers 5,429 4,5 71 We igh ted averag e nu mber of s har es in issue 84,896,300 83,991,918 Di l uti on effe cts of sh are schemes 3,20 5,091 3,7 28,09 8 N u m b e r N u m b e r Di l uted wei ghted average numb er of sh ares in iss ue 88,101,391 87,720,016 B asi c earni ngs per s har e Di l uted earni ngs p er sh are 6.40 p 6.16p 5.44p 5 .21p B asi c earni ngs per share is calculat ed on the results attribut able t o ordinary shares div ided by th e w eigh ted averag e number of shares in issue du ring t he ye ar. Di l uted earni ngs p er sh are calculat ion s includ e additional shares to reflect t he dilutive effect of em pl oyee sh are sch emes and s hare option schemes . Th e c omparative year EPS has been restated in accordance wit h note 2 to t he f inancial st atem ents. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 84 11/11/2015 00:08 1 2 . G O O D W I L L CO ST As at 1 Jul y 2 013 Addi ti o ns As at 30 June 2014 Addi ti o ns A S AT 30 JUNE 2 015 IM PA IRME NT As at 1 Jul y 2 013 As at 30 June 2014 A S AT 30 JUNE 2 015 NET B OOK VA LUE A S AT 30 JUNE 2 015 As at 30 June 2014 No te 1(g) provide s information on the Good will. 85 £ ’ 0 0 0 760 – 760 7 767 – – – 767 760 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 85 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 86 1 3 . I N T A N G I B L E F I X E D A S S E T S I N T E L L E C - P A T E N T C O M P U T E R T U A L A N D O T H E R S O F T W A R E P R O P E R T Y D E V E L O P - £ ’ 0 0 0 T O T A L £ ’ 0 0 0 £ ’ 0 0 0 6,440 – 6,440 – M E N T £ ’ 0 0 0 5, 353 2,367 7,720 3,473 190 36 226 68 11,983 2,40 3 14,386 3,541 CO ST As at 1 Jul y 2 013 Addi ti o ns As at 30 June 2014 Addi ti o ns A S AT 30 JUNE 2 015 6,440 11,193 294 17,927 A MO RT ISA TI ON As at 1 Jul y 2 013 Ch arge for the year As at 30 June 2014 Ch arge for the year 2,362 330 2,692 329 781 308 1,089 454 149 19 168 28 3,292 657 3,949 811 A S AT 30 JUNE 2 015 3,02 1 1,543 196 4, 760 NET B OOK VA LUE A S AT 30 JUNE 2 015 3,41 9 9,650 98 13, 167 As at 30 June 2014 3,748 6,631 58 1 0,437 Pat ent and other devel opment costs are in tern ally generated. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 86 11/11/2015 00:08 1 4 . I N V E S T M E N T S In cl uded wi thin th e co nsolidated group accounts are the followin g su bsidiary an d associated un dertaki ngs: S U B S I D I A R Y C O U N T R Y O F N A T U R E O F B U S I N E S S P E R C E N T A G E U N D E R T A K I N G R E G I S T R A - T I O N O F O R D I N A R Y S H A R E S H E L D Pl exus Oce an Scotland Supply of wellh eads and 100% Sys tem s Li mi te d associated equipment for oil and gas drilling Pl exus Li mi ted Scotland D ormant Pl exus Hol din gs USA Investment Holding USA, Inc. Pl exus Oce an USA Investment Holding Sys tem s U S, L LC Pl exus Deepwater USA Dormant Tech no logi es Li mi ted 100% 100% 100% 100% Pl exus Response Turks and Commercial exploitation of 100% Ser vic es Lim it ed Caicos Islands subsea applications Pl exus Subs ea Turks and Commercial exploitation of 100% Int erna ti on al Lim it ed Caicos Islands subsea applications Pl exus Oce an Malaysia Supply of wellheads an d 100% Sys tem s (Mal aysia) associated equipment for oil Sdn B hd and gas drilling Pl exus Oce an Brunei Supply of wellheads and 100% Sys tem s (Bru nei) Sdn B hd associated equip ment for oil and gas drilling Pl exus Oce an Singapore Supply of wellheads and 100% Sys tem s (Si ngapore ) associated equipment for oil Pte. Ltd . and gas drilling Afrotel Corporation Turks and Investment Holding 100% Ltd Caicos Islands A S S O C I A T E C O U N T R Y O F N A T U R E O F B U S I N E S S P E R C E N T A G E U N D E R T A K I N G R E G I S T R A - T I O N O F O R D I N A R Y S H A R E S H E L D K SW E ngi ne er in g Scotland Manufacturer of specialis t oil 25% (disposed Li mi t ed and gas equipment of in the year) Th e gr oup’s investm ents are unlisted . 87 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 87 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 88 Th e sum m ary fin anci al in formation of the Grou p’s ass ociate, extract ed on a 100% basis from th e acco unts pr epar ed under IF RS for the year end ed 30 Jun e are as follows : No n-c urrent As se ts Cu rren t Assets No n-c urrent Li abilit ies Cu rren t Li abi li ties Reven ue Profi t a nd to tal com pre hensive income V A L U E O F A S S O C I A T E I N V E S T M E N T Inves tm ent i n as soci ate at 30 J une 2014 Sh are of pr ofit of as soci ate in the year Di vide nd r ec ei ved from associate Gai n o n di sposal of ass ociate Proc eeds from dis posal of associate INVESTM ENT IN ASSOCIATE AT 30 JUNE 20 15 1 1 M O N T H S 1 1 M O N T H S T O T O 3 1 M A Y 3 0 J U N E 2 0 1 5 £ ’ 0 0 0 N/A N/A N/A N/A 8,394 944 2 0 1 4 £ ’ 0 0 0 5,223 3,24 1 2,561 2,4 76 8,15 8 862 £ ’ 0 0 0 941 236 (37) 352 (1,492) – Th e in terest in ass oc iat e wa s pu rchas ed on 22 July 2013 and disposed of on 25 J une 2015, hen ce 1 1 mo nths resu lts are d isclosed. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 88 11/11/2015 00:08 2 – – 44 11 – 3,016 – (535 ) 27,101 7,016 – – (7) (54 0) 1 5 . P R O P E R T Y , P L A N T A N D E Q U I P M E N T B U I L D - T E N A N T E Q U I P - A S S E T S M O T O R I N G S I M P R O V E - M E N T U N D E R V E H I C L E S £ ’ 0 0 0 M E N T S £ ’ 0 0 0 C O N S T R U C - £ ’ 0 0 0 T O T A L £ ’ 0 0 0 £ ’ 0 0 0 T I O N £ ’ 0 0 0 CO ST As at 1 Jul y 2 013 972 Addi ti o ns Tran sfers Di spo sal s 2 – – 353 77 – – 430 2,505 2,904 (2, 904) (535) – 22,594 659 42 24,620 As at 30 June 2014 974 430 25, 393 Addi ti o ns Tran sfers Di spo sal s A S AT 3,405 – – 2 – – 1, 544 2,140 (533) 260 2,054 (2, 140) 30 JUNE 2015 4,379 43 2 28,5 44 1 74 48 33,577 DEP RE CIATIO N As at 1 Jul y 2 013 325 Ch arge for the year On di spo sal s As at 30 June 2014 Ch arge for the year On di spos als 80 – 405 153 – A S AT 76 50 – 11,028 2,612 (383) 126 13,257 56 – 2, 854 (461) – – – – – – 23 11,452 6 – 29 7 ( 3) 2,74 8 ( 383) 13,817 3,070 (464 ) 30 JUNE 2015 558 18 2 15,6 50 – 33 16,423 NET B OOK VA LUE A S AT 30 JU NE 2015 3,821 250 12 ,894 17 4 15 17,154 As at 30 June 2014 569 304 12, 136 260 15 13 ,284 89 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 89 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 90 1 6 . I N V E N T O R I E S Raw materi als an d cons umables Work in progress Fin is hed goo ds and goo ds for resale 1 7 . T R A D E A N D O T H E R R E C E I V A B L E S Trade r ec ei vables Prepaym en ts an d o th er amounts Th e age in g of trade rece ivables at the year end was: No t past du e Pas t due 0-3 0 days Pas t due 30+ days 2 0 1 5 £ ’ 0 0 0 2,265 124 4,16 2 6,55 1 2 0 1 5 £ ’ 0 0 0 6,562 739 7,30 1 5,24 8 1,02 2 292 6,562 2 0 1 4 £ ’ 0 0 0 1,621 296 3 ,339 5,256 2 0 1 4 £ ’ 0 0 0 5,74 3 720 6,463 2,200 2,646 8 97 5,7 43 Trade and o ther recei vables are class ified as loans and r eceivables and are held at amor tised co st. Th e c arrying valu e ap prox imates fair value. 1 8 . T R A D E A N D O T H E R P A Y A B L E S Trade payables No n trade payabl es and accrued expenses 2 0 1 5 £ ’ 0 0 0 1,430 1,866 3,296 Th e m atur ity o f agei ng of trad e and other payables at the ye ar e nd was: Due w i thi n 30 d ays Due i n 3 0 – 90 d ays Due i n 9 0 days – 6 months Due i n 6 m onth s – On e year 1,699 870 727 – 3,296 2 0 1 4 £ ’ 0 0 0 1,77 7 3,7 05 5,48 2 2,0 31 568 2,88 3 – 5,4 82 Trade and o ther payab les are class if ied as other f in ancial liab ilities and are held at amor tised co st. Th e c arrying valu e ap prox imates fair value. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 90 11/11/2015 00:08 1 9 . S H A R E C A P I T A L 2 0 1 5 £ ’ 0 0 0 2 0 1 4 £ ’ 0 0 0 A UTH ORISED : E qui ty: 11 0,0 00, 000 (2014: 110,000,000) O rd inary shares of 1 p eac h 1,100 1,10 0 A LLO TT ED, CA LLE D UP AND FULLY PAID : E qui ty: 84,90 2 ,196 (2014: 84,892,673) Ordin ary sh ares of 1 p eac h 849 849 S H A R E I S S U E D U R I N G N U M B E R O F S H A R E S H A R E T H E Y E A R : S H A R E S C A P I T A L P R E M I U M At 30 June 20 1 4 On 1 2 Fe bru ary 201 5 At 3 0 Jun e 2 015 84,892,673 9,523 84,902,196 £ ’ 0 0 0 849 – 849 £ ’ 0 0 0 20,138 3 T O T A L £ ’ 0 0 0 20 ,9 87 3 20,141 20,990 Dur in g th e peri od th e Group issued new shares as a res ult of t he following t ransactions: N U M B E R O F P R I C E P E R A G G R E G A T E T O T A L S H A R E S S H A R E N O M I N A L A G G R E G A T E V A L U E V A L U E £ £ 12 F EB RUA RY 2015 – S hare optio ns 9,523 38.5p 95 3,666 Th e e xcess net proceeds have b een cred ited to the share prem ium account . 2 0 . S H A R E B A S E D P A Y M E N T S Sh are optio ns h ave been granted t o su bs cribe for ordinary shares, which are exercisable betw een 20 06 and 202 5 at prices rang ing f rom £0.385 to £ 1. 18. At 30 Jun e 201 5, the re were 4,07 7,73 9 o ption s ou ts tanding. Th e C om pany h as an un approved s hare opt ion s cheme for the direct or s an d emp loyees of the Gro up. Optio ns are exercisab le at the qu oted mid-market pr ice of th e C ompany ’s share s on th e dat e of grant. The op tions may vest in three eq ual p ortions , at th e end of each of three ass ess men t perio ds, provided t hat the op tion holder is st ill em ployed b y t he G roup at vesting date an d that the Total Sharehold er Retu rn ( TSR) per forman ce con ditions are satisfie d. Opti on s that do n ot m eet the TSR criter ia at the f irst available vest ing dat e may vest at the en d of th e co mpl et e assessment period, p rovided that t he compou nd ed TSR per form ance is m et ove r t he co m plete assessment p eriod. Vested but un exer cis ed op tions ordinar ily expire on t he tent h ann ive rs ary of the dat e of g rant. The option s a re equ ity settled . On 9 Jul y 2 0 15 th e directors approved an amen dmen t to t he ru les of t he scheme such th at th e C ompany is permitted to ex tend the exercise p eriod for op t ion s gran ted under the 91 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 91 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 92 sc hem e by a furth er te n years. Subsequently on 9 July 2015 th e Comp any en te red into dee ds of amen dment w ith Ben van Bild erb eek, Graham Steven s, C raig Hen drie, J. Jeffrey Thrall and on e em ploye e in res pect of options grant ed to t hem on 9 D ece mber 20 05 u nd er t he scheme, to en able each hol der to exercise these p articular options up u nt il 8 Decemb er 2025, subject to al l other term s of th e scheme rules. Deta il s of the s hare opt ions out st and ing during t he year are as follows: N O O F 2 0 1 5 N O O F 2 0 1 5 S H A R E S W E I G H T E D S H A R E S W E I G H T E D A V E R A G E E X E R C I S E P R I C E A V E R A G E E X E R C I S E P R I C E Ou tst anding at the beginning of t he peri od 4,172,540 0.53 5,300,522 0.52 Gran ted durin g the peri od Lapse d due to fai l ur e to meet TS R c rit eria during th e period For fei ted durin g t he pe riod by – – – – – – l eavi n g empl oyme nt (85,278) 0.56 (24,389) E xerci s ed duri ng the period (9,523) 0.385 (1,103,593) Ou tst andin g at the en d of the p eriod 4,077,739 0.53 4,172,540 E xerci s abl e at th e en d of the period 4, 044,405 0.52 4,105,873 – – 0 .59 0.4 9 0.53 0.52 Th e w ei ghted average share price at the time of exercise was £1.81 ( 2014: £2.77). Th e aggregate of th e es timated fair values of the op tions g rant ed that are out st andi ng at 3 0 Ju ne 201 5 i s £ 740k (2 014: £755k). The inp uts to the Stochastic model for the computation of t he fai r val ue of t he o ptions are as follows: Sh are pric e at date of grant Opti on exerci se pri ce at date of grant E xpected vol atil ity E xpe cte d term Risk-free interest rate E xpected divi dend yi eld varies from varies from varies from varies from varies from £0.385 to £1.18 £0. 385 to £1.18 35.7% to 76.6 % 4.5 years to 6.3 year s 0.4% to 5.7% 0% to 1.7% At the ti me of grantin g t he old er op tions , in the abs ence of sufficient historical shar e pr ice data fo r the C om pany, expected volatility was calculat ed by analysing the m edian shar e pr ice vo l at i li ty for si m ilar com panies prior to grant for the period of the expected term . Since then su ff ic ie nt hist oric al s har e price data h as been built u p to enable the expected volatility to be base d upon t he Co mp any ’s own sh are price volatility. The expe ct ed term used has be en adj ust ed based on t he management ’s b est estimate for the effects of non-transferability, exerc is e restric ti ons an d behav iou ral consid erations. The risk-fre e inte rest rate is taken as th e i mpl i ed yi eld at grant availab le on governmen t securitie s with a rem aining ter m equal to th e average expec ted term. At the time of granting the olde r options, no dividends had been pai d and th e directors did not envisage paying one therefore the dividend yi el d was 0 %. Si nc e then the dir ec tors have introduced a divid end p olicy and at the time of the grants awarded the expe ct ed divid end yield var ies b etween 1. 2% t o 1.7%. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 92 11/11/2015 00:08 Th e St ochas ti c m odel for the fair value of the op tions incorp orates t he T SR crit eria into the m easu rement of fai r val ue. Th e G roup has recogn ised an exp ense in the current year of £2 1k (20 14: £26k) towards equ ity settl ed s hare based paymen ts. Th e w eight ed average contract ual life of the sh are op tions ou t stan ding at t he end of the peri od i s 3 years and 11 month s. 2 1 . R E C O N C I L I A T I O N O F N E T C A S H F L O W T O M O V E M E N T I N N E T C A S H / ( D E B T ) (Decr eas e)/i nc rease i n cash in t he year Ca sh i nfl ow fro m inc rease in net deb t Movem ent in n et c ash /(debt) in year Net cash /(debt ) at start of year Net (debt)/ cash at en d of year 2 2 . A N A L Y S I S O F N E T C A S H / ( D E B T ) 2 0 1 5 £ ’ 0 0 0 (3,025) (2,275) (5,300 ) 2,353 (2,947) 2 0 1 4 £ ’ 0 0 0 3,7 44 – 3,744 (1,391) 2,3 53 Cas h i n han d an d at bank B ank l oans Total A T B E G I N N I N G O F Y E A R £ ’ 0 0 0 6,353 (4,000) 2,353 C A S H F L O W £ ’ 0 0 0 (3, 025) (2,275) (5, 300) A T E N D O F Y E A R £ ’ 0 0 0 3,328 (6,275) (2,94 7) 2 3 . F I N A N C I A L I N S T R U M E N T S A N D R I S K M A N A G E M E N T T r e a s u r y m a n a g e m e n t Th e Gr oup’s ac tivit ies give rise to a n umb er of differen t finan cial r is ks: m arket r isk ( including fo rei gn cu rr en cy e xch ange risk, interest rate risk and p rice r is k), cred it risk and liquidity ri sk. T he Grou p’s m anagement regu larly mon it ors the risk s and p ote nt ial exposu res to which th e Gr oup i s exp osed and seek s to take action , wher e ap p ropr iat e, t o m in im is e any potential adverse im pact on the Group’s performan ce. Ri sk m anagement is carried out by Man agemen t in line with t he Gr oup’s Treas ur y policies. Th e G roup’s Treas ur y policies cover sp ecific ar eas, s uch as for eig n exch ange r isk, inter est rate ri sk and i nves tment of excess cas h. The Gr oup ’s p olicy does not p erm it entering into spe cul ati ve tra ding o f fi nancial ins truments and this p olicy h as be en ap plied t hr oughout the ye ar. 93 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 93 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 94 ( a ) M a r k e t r i s k s ( i ) F o r e i g n c u r r e n c y e x c h a n g e r i s k Th e G roup i s exposed to foreig n exch ang e risk arisin g from various currencies. In order to prot ect the Group’s s tat ement of finan cial posit ion fr om moveme nts in e xchange rates, the Gro up co nverts fo re ign c urrency b alances into sterling on receipt so far as t hey wi ll not be us ed fo r fu tu re paym ents in the foreign currency. Th e Group careful l y m on itors the economic and political situation in the count ries in which i t opera tes to ens ur e ap propriat e action is taken t o minimise any foreign currency exposure. Th e Group’s m ain forei gn exchange risk relates to movem en ts in t he sterling/US dollar and st erl in g/eur o e xch ange rates. Movements in these rates imp act the translat ion of US dollar and e uro den om inat ed net assets . As th e Gr oup d oes not use foreig n exchang e hedg es, the consolidat ed state ment of co mpr ehensi ve inc ome would be affected by a gain/loss of approxim ately £241k (20 14: £ (4 8)k) by a reasonab ly possib le 10 p ercent age point fluctuat ion down/up in t he e xchange rate betw een st er lin g an d the US d ollar, and by a g ain/loss of approxim ately £79 k ( 2014: £ 18 k) by a r eas on ably possib le 10 p ercent age p oin t fluctu ation down/up in t he exchange rate be tween sterli ng an d the euro, b y a gain/loss of app roxim ate ly £38k (2014: £18 k) by a reas onabl y po ssibl e 10 percentag e p oin t f lu ctuat ion d own/up in the exchange rate betwee n st erl in g an d the Malaysi an Ringg it. ( i i ) I n t e r e s t r a t e r i s k Th e G roup fina nc es its operations through a mix ture of ret ain ed pr ofit s and b ank bor rowings. Th e Group borrows i n sterling at f loat ing rates of interes t. Th e Group is als o expo sed to interest rat e risk on cash held on d eposit . Th e G roup’s policy i s to m axi mi se the re tu rn on cash d epos its whilst ens ur in g th at cash is d eposited with a fi nan ci al in stit utio n with a credit rating of ‘AA’ or b etter. Th e c ons ol i dated income statement wou ld be affected by gain /los s £ 48k (2014 : £40k ) by a reas onably possi ble 1 percentage point change d own/u p in LIB OR in te rest rat es on a full ye ar bas is . ( i i i ) P r i c e r i s k Th e Grou p is n ot e xposed to any s ignif icant p rice risk in relat ion t o it s finan cial instruments. ( b ) C r e d i t r i s k Th e Gr oup’s c re dit ris k primarily relates to its trade r eceivab les . Resp onsib ility for managing cr edit risk s l ies w it h th e Group’s managemen t. A c ust om er evalu ation is typically obt ained from an ap p rop riate cr edit rat ing ag ency. Wher e requ i red, appr opriat e trade fin ance ins truments s uch as lett ers of cre dit, bond s, guarante es and c redi t i nsu ran ce w i ll be used to manage cred it r is k. Th e G roup’s m ajor c us to mers are typ ically large compan ies wh ich h ave str ong credit ratings ass ign ed by int er national credit rat in g ag encies. Wh ere a cus tome r d oes not h ave sufficiently P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 94 11/11/2015 00:08 st rong c redit rat ing s, alternative forms of security such as th e trad e fin ance instruments referred to above m ay be obtain ed. The Grou p’s cu st omer base is con cen t rated on a few m ajo r com pani es but m anag em ent believe that the calibre of t h ese com panies me ans that no m ateri al cr edi t r isk provision is required. Managem ent review trade receivables across t he Group based on receivab le d ays calculations to ass ess per fo rm ance . There is sign if ican t manag ement focus on receivables that ar e over due. A ll re ce ivable s are with large corporations with g ood cre dit history with which the ent ity has no t exper ien ced any recoverability issues in the past. No debtor allowance has been pr ovi ded fo r wi th in the a ccou nts. Am o unt s depos ited w ith banks an d other f inancial institutions also give rise t o cre dit r isk. Th is ri sk i s managed by limiting the ag gregat e amou nt of exposure to any such institution by referenc e to the ir rati ng and by regular rev iew of t hese ratings. The possibility of materi al l oss in t hi s way is c on si dered unlikely. Th e c urren cy c om po si tion of trade receivable at th e year end was: St erl in g US Dol lar Euro Au stral ian Do llar s ( c ) L i q u i d i t y r i s k 2 0 1 5 £ ’ 0 0 0 4,605 1,777 180 – 2 0 1 4 £ ’ 0 0 0 5,37 6 65 108 194 6,56 2 5,743 Th e Gro up has hi st or ic ally financed its operations th rough equ ity finance and bank bor rowings. Th e Group h as co ntin ue d with its policy of ens urin g that t her e ar e s ufficien t funds available to me et the expe cted funding requ irements of the Grou p’s op erat ion s and investment oppo rtu ni ti es. Th e Gro up monitors its liquid ity pos ition th rou gh cash flow forecasting. Based on th e c urrent out look the Group has su ff icient fund ing in place to me et its fut u re obligations. 95 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 95 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 96 F i n a n c i a l a s s e t s a n d l i a b i l i t i e s Th e i nt er es t rat e an d cu rrency profiles of the Group ’s f in ancial ass et s at 30 June were as fo ll o ws : F L O A T I N G N O N - B O O K R A T E S I N T E R E S T A N D F A I R £ ’ 0 0 0 B E A R I N G £ ’ 0 0 0 V A L U E £ ’ 0 0 0 30 JUNE 2015 Ca sh and li qui d resou rc es – Sterling – US Dollar – Euro – Malaysian Ringgit – Singapore Dollars 1,589 560 616 – – 2,765 30 JUNE 2014 Ca sh and li qui d resou rc es – Sterling 5,051 – US Dollar – Euro – Malaysian Ringgit – Brunei Dollar 38 72 – – – 73 – 381 109 563 – 45 – 1,589 633 616 381 109 3,32 8 5,051 83 72 1,142 1,142 5 5 5,161 1,192 6,353 At 3 0 Jun e 201 5 th e Group had £3,328k of cash. The averag e rat e of interest e arne d in the ye ar is o n a flo atin g rate basis and ranged b etween 0% and 0.1% on sterling de posits. Ca sh i s categor ised as l oans and receivables . Th e Grou p has faci liti es of £7, 275k that are secured by a fixed and floating charge over the ass ets of the G roup. At 30 June 2015 the Grou p had drawn £6,275k on t hose facilities. The i nter est payabl e i s o n a floatin g rate b asis and rang ed b etween 3.0% and 3.1% in the year. Th e facil ity c omp rises of a £5, 000k r evolving cred it facility repayable in Septe mber 2016, a bal anc e of £1,27 5k ou ts tanding on a term loan repayab le over the period to September 2019 and a £ 1,00 0k over draft repayab le on d emand . P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 96 11/11/2015 00:08 Th e i nterest rate an d c urrency profiles of the Group ’s finan cial liabilit ies at 30 J une 2015 are as foll ow s: F L O A T I N G N O N - B O O K R A T E S I N T E R E S T A N D F A I R £ ’ 0 0 0 B E A R I N G £ ’ 0 0 0 30 JUNE 2015 B ank revo lvi ng credi t facility – Sterlin g B ank term l oan – S terling 5,000 1,275 30 JUNE 2014 B ank revo lvi ng credi t facility – Sterlin g 4,000 – – – V A L U E £ ’ 0 0 0 5,000 1,27 5 4,000 Matur ity o f Fin anc ial Liabilities: D U E D U E D U E W I T H I N B E T W E E N A F T E R T O T A L £ ’ 0 0 0 2 – 5 5 Y E A R S 30 J UNE 2015 B ank revol vi ng credit facility – Sterling B ank term l oan – S terling Total 30 J UNE 2014 1 Y E A R £ ’ 0 0 0 – 300 300 Y E A R S £ ’ 0 0 0 5, 000 975 5,975 B ank revol vi ng credit facility – Sterling – 4, 000 £ ’ 0 0 0 – – – – 5,000 1,27 5 6,27 5 4,000 B ank borrow ings ar e other financial liab ilities wh ich are measured at amor tised cost. Th e c arryi ng valu e app roximates fair value. 2 4 . O P E R A T I N G L E A S E C O M M I T M E N T S / F I N A N C I A L C O M M I T M E N T S Operati ng l eas e com mi tments wh ere th e group is the les see The Group has the following total future lease payments under non-cancellable operating leases: Wi th in o ne year Wi th in t wo to fi ve year s Aft er fi ve years 2 0 1 5 £ ’ 0 0 0 334 378 – 712 2 0 1 4 £ ’ 0 0 0 386 1 75 – 561 97 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S Th e Group had no c apit al commitment s as at 30 Jun e 2015 ( 2014: The Group had a capital co mm i tm en t to ac quire a facility for £2, 400k ). P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 97 11/11/2015 00:08 98 2 5 . C O N T I N G E N T L I A B I L I T I E S Th e Group had no c on tingent liab ilities as at 30 Jun e 2015 ( 30 Jun e 20 14: £n il) . 2 6 . P O S T B A L A N C E S H E E T E V E N T S Su bseq ue nt to t he year e nd , the Company en tered in to a Su bs cript ion Agr eemen t with Jereh In ternat io nal (Ho ng Kon g) Co. Ltd. (“Jereh”) d ated 1st J uly 20 15. Un der th e Subscription Ag reeme nt, Jereh su bscribed for 5% of the enlarged sh ar e capit al of th e C ompany; the nu m ber of sha res s ubsc ribed for was 4, 468,537 at a p rice of 180p pe r sh are. The total nu m ber o f shares in issue following this subs cription , an d as at t he dat e of this repor t, i s 89 ,3 70,7 3 3. 2 7 . R E L A T E D P A R T Y T R A N S A C T I O N S C o n t r o l At 30 June 2015, Plexus Holdings plc was controlled by Mutual Holdings Limited, a company incorporated in the Turks and Caicos Islands. Subsequent to the issue of shares as detailed in Note 26 above, Mutual Holdings Limited no longer owns a controlling interest in the Company. U l t i m a t e p a r e n t c o m p a n y At 3 0 Jun e 2 0 15, t he ul timate p arent company was M ut ual Holding s Lim it ed , a company i nco rporated in t he Turks and C aicos Is lands. Sub sequent to th e issu e of sh ares as detailed in No te 26 above, Mut ual Hold ings L imited no long er own s a cont rollin g int erest in the Company and t here is no ul tim ate parent company. Th e Grou p i s not cons olid ated into M utual H old ing s L im it ed. No ot her g rou p financial st atem en ts incl ude th e results of th e C om pany. The f inancial s tat emen ts of Mut ual Holdings Li mi te d are not availab le to the p ub lic. T r a n s a c t i o n s Dur in g t he year th e G roup had the following t ransactions wit h relat ed par ties: Purc hase of goo ds and services f rom O ther Related Parties Paya bles to Other Relat ed Parties 2 0 1 5 £ ’ 0 0 0 448 29 2 0 1 4 £ ’ 0 0 0 426 – Oth er rel ated parties were @ SI PP (Pension Trustees) Limited, OF M Holdings Limited and Pl exus Properti es Int ernational Limited . The transactions rela ted to accomm odat io n, r ent and rel ate d c harges. @ SIPP (Pension Trus tees) Limited are the trustees of Ben van Bil der be ek’s pens i on fu nd. OFM Ho ldings L imit ed is a t rust of wh ich Ben van Bilderbe ek’s family ar e bene fic iar ies. Pl exus Prop erties International L imited is a company in which B en van B il derbeek’s fam ily are s hareh old ers . Al l o f t hese tran sac tion s were between either Plex us O cean Syste ms Lim ite d or P lexus Oc ean Sys tem s In te rn ation al L imited and the relevant related party. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 98 11/11/2015 00:08 2 8 . G E N E R A L I N F O R M A T I O N Th ese fin anci al statements a re for Plex us Holdings p lc (“t he company”) an d subsidiary un dertaki ngs. Th e company is regis tered , and domiciled , in En gland and Wales and i nco rporated un der the Companies Act 2006. The nature of t he comp any ’s operations and its pri nc ipal ac ti vi ti es are set out in the st rateg ic rep ort on pa ge 28 an d t he d ir ector s’ repor t on pag e 5 0. 99 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 99 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 100 I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E S H A R E H O L D E R S O F P L E X U S H O L D I N G S P L C We h ave audit ed th e parent company statements in accordance with applicable fi nan ci al stateme nt s of Plex us Holding s law and International Standard s on Auditing pl c for th e year e nded 30 June 2015 which (UK and Ireland). Those standards require co mpri se the Parent C ompany St atement us to comply with the Audit in g Prac tices of Fi n an ci al Pos iti on , t he Par ent Comp any Board’s Ethical Standard s for Aud itors. St atem ent of Ch anges in Eq uity, th e Paren t Co m pany Stateme nt of Cash Flows and th e rel ated no te s nu mbered 1 to 13. Th e fi nanc ial reportin g framewor k that has been appl ied in their preparation is appl ic able l aw an d In ternational F inancial Report in g Stan dards (IFRSs) as adop ted by th e Euro pean Uni on and as ap p lied i n ac cordanc e wit h the p rovision s of th e Co m pani es Ac t 2 006. Th is report i s m ade sol ely to the comp any ’s m em bers, as a body, in accord ance wit h Ch apter 3 o f Part 1 6 of the C ompan ies Act 2 00 6. Our audit wo rk has been und ertaken so th at we mi ght s tat e to the comp any ’s m em bers those matters we are req uired to s tate to the m in an auditor ’s report and fo r no othe r purp os e. To the fullest extent perm i tt ed by law, we do not accep t or ass um e respons ibil ity to anyon e other th an th e co mpany and t he co mpany ’s member s as a body, for our audi t w ork, for this rep ort, or fo r the o pi ni ons we h ave formed . S C O P E O F T H E A U D I T O F T H E F I N A N C I A L S T A T E M E N T S An audit involves obtaining evid ence about the amounts and disclosures in the f inancial statements sufficient to give reasonable assurance that the financial statements ar e free from material misstatement, whether caused by fraud or error. This inc ludes an assessment of: whether the accounting policies are app ropriate to the company ’s circumstances and have been consistently applied and adequately d isclosed; the reasonableness of significant accounting estimates ma de by the director s; and the overall p resentation of the financial statements. We read all the financial and non- financial information in the Dir ectors’ Report, Chairman’s Statement, Strategic Report, Corporate Governance Repor t, Remuneration Committee Rep ort and other surround information to identify material inconsistencies with the aud ited Financial R E S P E C T I V E R E S P O N S I B I L I T I E S O F Statements and to identify any infor mation D I R E C T O R S A N D A U D I T O R S that is apparently materially incorrect based As expl ai ned m ore ful ly in the Statemen t knowledge acquired by us in performing the of Di rectors ’ Respo ns ibilities, t he d irectors audit. If we become aware of any apparent are r esponsi bl e for t he preparation of the material misstatements or inconsistencies fi nan ci al stat em ents and for being satis fied we consider the imp lications for our report. on, or materially inconsistent with, the th at th ey gi ve a tru e and fair view. Our res po ns ibi li ty i s t o audit th e f inancial P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 100 11/11/2015 00:08 O P I N I O N O N F I N A N C I A L M A T T E R S O N W H I C H W E A R E S T A T E M E N T S R E Q U I R E D T O R E P O R T B Y In ou r o pini on th e parent comp any f inancial st atem en ts: • gi ve a true and fair view of the state of th e com pany ’s affairs as at 30 J une 2 01 5; • have been properly prepared in acc ordan ce wi th IFRSs as ad opted by th e Eu ropean U nion and as app lied in acc ordan ce w i th the provision s of the E X C E P T I O N We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or Co m pani es Ac t 2 006; and • the parent company f inancial • have been prepared in accordance with th e requ ir em ent s of the Companies Act 2 00 6. statements are not in agreement with the accounting records and returns; or • certain disclosures of director s’ remuneration sp ecified b y law are not Opi ni o n on other m atter prescribed b y the made; or Co m pani es Ac t 2 006 In o ur opi ni on th e in formation given in the Di rect ors’ Report an d Strategic Rep ort for th e fi nanc ial year for which the f inancial • we have not received all the information and explanations we require for our audit. st atem en ts are prepare d is cons isten t with O T H E R M A T T E R th e fin anci al stat em en ts. We have reported separately on the group financial statements of Plexus Holdings plc for the year ended 30 June 2015. Matthew Stallabrass Senior Statutory Auditor for and on behalf of Crowe Clark Whitehill LLP, Statu tory Auditor London 27 October 2015 101 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 101 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 102 P A R E N T C O M P A N Y S T A T E M E N T O F F I N A N C I A L P O S I T I O N N O T E S A SSE TS Int angi ble assets Investments TO TA L NO N- CURR ENT ASSETS Trade an d o th er r ec ei vables Ca sh at bank and in h and TO TA L CU RRENT A SSETS TO TA L A SSE TS EQ UI TY AND L IA BILITIES Ca ll ed up share cap ital Share premium account Sh are based paym en ts reserve Retai ned ear ni ngs TO TA L E QUITY AT TR IBUTABLE TO EQUITY HOLDERS O F TH E CO MP A NY LIA B IL ITIES Deferred tax l iabili tie s TO TA L NO N- CURR ENT LIABILITIES Trade an d o th er payable s Cu rren t in com e tax l i abilities TO TA L CU RRENT LI AB ILITIES TO TA L L IAB ILI TIES 4 5 6 9 8 8 7 A T 3 0 J U N E 2 0 1 5 2 0 1 5 £ ’ 0 0 0 12,450 8,294 2 0 1 4 £ ’ 0 0 0 9,700 8,294 20,744 17,994 4,57 5 9 4,222 786 4,584 5,008 25,3 28 2 3,002 849 849 20,141 2 0,138 864 2,689 892 330 24,543 2 2,209 595 595 190 – 190 785 147 147 64 6 – 646 793 TO TA L E QUITY AND LIABILITIES 25,328 2 3,002 Th ese f inan ci al stateme nts were app roved an d au thorised for issue by t he board of director s on 2 7 October 2015 and were s ign ed on its beh alf by: B van Bilder beek Director Co mpany Number: 0 3322928 G Stevens Director P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 102 11/11/2015 00:08 P A R E N T C O M P A N Y S T A T E M E N T O F C H A N G E S I N E Q U I T Y 103 F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 5 CALLED SH ARE SH ARE RETAINED TOTA L UP SH ARE PREMIUM BASED EARNINGS £’000 CAPITAL ACCOUNT PAYMENTS £’000 £’000 £’000 RESERVE As restated B AL ANCE AS A T 30 JUNE 201 3 828 1 7,28 8 Total c ompreh en si ve i ncome fo r the year Sh are based paym en ts res erve c harge Tran sfer of sh are bas ed payments res erve c harge on exer cise of options Tax cr edi t reco gni sed directly in equity – – – – – – – – Is sue o f o rdi nar y sh ares 21 2,850 Net deferred t ax m ove ment on sh are opti ons Di vide nds – – – – £’000 9 30 (6 78) 1 8,36 8 – 1,529 1,529 26 – 26 (214) – – 150 – 214 128 – 1 28 – 2,8 71 – 150 (863) (863 ) B AL ANCE AS AT 3 0 JUNE 201 4 849 20,1 3 8 892 330 22, 209 Tot al co mprehens ive in come fo r the peri od Sh are based paym en ts reserve charge Tran sfer of sh are bas ed payments – – res erve c harge on exer cise of options – Tran sfer of sh are bas ed payments ch arge on l apse of options – Is sue o f o rdi nar y sh ares (net of is su e costs) Deferred tax movem ent relating t o sh are opti ons Di vide nds – – – – – – – – – – 21 – (24) 3 (25) – 3,294 3 ,294 – – 24 – 21 – – – 3 – (25) (959) (959 ) B AL ANCE AS AT 3 0 JUNE 201 5 849 20,1 4 1 864 2 ,689 24, 543 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 103 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 104 P A R E N T C O M P A N Y S T A T E M E N T O F C A S H F L O W S CA SH FL OW S FR OM O PERATING ACTIVITIES Profi t b efore taxati on Adj us tm en ts for: A mo rtisat ion C harge for sh are based payments Investment income Ch anges i n working cap i tal: In cre ase in trade an d other receivab les In cre ase/ (dec re ase ) in trade and oth er p ayab les CA SH GE NE RAT ED FROM OPERATIONS Inc om e t axes pai d A T 3 0 J U N E 2 0 1 5 N O T E S 2 0 1 5 £ ’ 0 0 0 2 0 1 4 £ ’ 0 0 0 3,71 7 1,775 723 21 578 26 (624) (104) (353) (1,184) 52 (62) 3,536 1,029 – – NET CASH GENER A TE D FROM OPERATIONS 3,53 6 1,029 CA SH FL OW S FR OM INVESTING ACTIVITIES Purc hase of in tan gibl e assets Interest received (3,473 ) (2,36 7) 116 104 NET CASH USE D I N INVESTING ACTIVITIES (3,357 ) (2,26 3) CA SH FL OW S FR OM FINANCING ACTIVITIES Net proceeds from issue of new ordinary shares Proceeds from share options exercised E qui ty di vi den ds paid – 3 (959) 2,330 54 1 (863) NET CASH (USE D IN)/GENERATED F ROM FINANCING ACTI VITI ES (956) 2,008 NET (D ECRE ASE )/ INCREASE IN CASH AN D CA SH E QU IVALE NT S Ca sh and cash equi valents at 1 July 2014 (777) 786 774 1 2 CA SH AND CA SH EQ UI VALENTS AT 30 JUNE 20 15 9 9 786 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 104 11/11/2015 00:08 N O T E S T O T H E P A R E N T C O M P A N Y F I N A N C I A L S T A T E M E N T S 105 1 . S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S Th e fol lo wi ng ac c ou ntin g p olicies have been app lied cons ist en t ly in d ealin g wit h items which are co nsi dered material in relation to the financial information. a . B a s i s o f p r e p a r a t i o n Th e c om pany fin anci al statement s have been prepared in accor dan ce with I nternational Fin anc ial Report ing Standards (IF RS) an d in terp reta tions iss ued by t he International Ac co unt in g S tandards B oard as adop ted by the European Union an d t hey ther efore comply w it h A rtic le 4 of the EU IAS Regulation an d are in accord ance with th e Comp anies Act 2 006. Th e Direc to rs h ave considered those st and ard s and inter pret at ion s, wh ich h ave not been appl ie d i n t he fin ancial statement s bu t are relevant to the C ompany ’s operat ions, that are in i ssu e bu t not yet effec tive and do not cons id er that any will h ave a m ater ial impact on the fu tur e resu lts of the Company. Th e Co mpany fi nanc ial statements are p resented in sterling and all values ar e rounded to the ne arest th ousand p ou nds excep t where otherwis e ind icat ed. Th e fin anci al in form atio n has b een p rep ared un der th e hist orical cost conven tion. Th e di rector s, havin g made a pp rop riate enquir ies , believe th at t h e Comp any h as ade quate res ourc es to c on tinu e in operat ion al exist ence for the fores eeable fut ur e. T he Company co nti n ues to adopt the going con cern bas is in prep aring t he fin ancial st ate ment s. b . I n c o m e t a x e s a n d d e f e r r e d t a x a t i o n Th e i nc ome tax expe nse for the period comp rises current and deferr ed t ax. Tax is recognised i n t he in com e st ate men t, excep t to the extent that it relat es t o it ems r ecognise d in other co mpre hensi ve inco me or d irectly in equ ity. In th is cas e, the t ax is also re cog nised in othe r co mpre hensi ve inc om e or directly in equ ity, respectively. Th e cu rr en t i nc ome tax charg e is calcu lated on the b as is of th e t ax laws enacted or su bstan tively enact ed at the balance sheet d ate in the count ries wh ere th e company and i ts su bsi diari es operate and generate t axable income. Manag emen t per iod ically evaluates pos it io ns taken i n tax returns with res pect t o s ituat ion s in wh ich app licable t ax r egulation i s su bje ct to i nterpretation. It es tab lis hes p rovisions wh ere ap pr op riat e on the basis of am oun ts expe cted to be paid to the t ax authorit ies . Deferred in com e tax is recog nised , using t he liability met hod, on tem porary differ ences ari si ng betw een the tax b ases of as sets and liab ilities and th eir car rying amounts in the co nso l idated fin anc ial statemen ts . Deferred in com e tax is determined using tax rates (and laws) t h at h ave been enacted or su bstan tively enac te d by the balance s heet d ate and are exp ected t o ap ply wh en the r elated deferred i nc om e t ax asset is realised or the d eferred income tax liab ility is settled. B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 105 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 106 Deferred i nc ome t ax assets are recognised only to the ext ent th at it is pr obable that future taxabl e profi t w ill be availab le against wh ich the temp orary differ ences can be utilise d. As set o ut i n note 20 of the group accoun ts, the com pany operat es a s hare op tion scheme . Wh ere t he m arket pri ce of the s hares at t he year-end exceeds t he opt ion pr ice there is a pot ent ial tax dedu ction. This is treated as a deferred tax asset . Th e p or tion of t he expected fu tur e t ax deduct ion wh ich is less than or equal to the ass ociat ed cu mulat ive I FRS2 charge i s rec ognis ed i n the in come st atement . The balance of the cred it is recogn ised dir ectly in equ ity. c . I n t a n g i b l e a s s e t s a n d a m o r t i s a t i o n Pat ents are re co rde d in itially at cost and amortis ed on a s t raig ht line b asis over 20 year s w hi ch re prese nt s th e l ife of the patent. The Group op erates a policy of cont inual patent en hanc ement i n or der that technolog y enhancements an d m od ificat ion s ar e incorporated w it hi n th e r egi st ered patent, thereby protecting the valu e of t echn olog y advances for a full 2 0 year perio d. In tel lec tual Pr ope rty rig hts are initially record ed at cost an d amor tised over 2 0 years on a strai ght l i ne bas is. Th e tech nology defined by the In tellect ual Pr operty is believed to be abl e t o generate income streams for the Gr oup for many years ; key Int elle ct u al Pr operty i s prot ec ted by pat en ts ; the lowest common denominator in ter ms of econom ic life of the i ntan gibl e assets is the l ife of the original patents an d th erefor e th e life of t he Inte llectual Prop erty has be en m atch ed to the remaining life of t he p aten ts pr otect ing it. Develo pm en t expe ndi tu re is capitalised in resp ect of develop men t of pat ent able technology at c ost i ncl udi ng an all ocation of own time when s uch exp end itu re is incu rre d on separately i dent ifi abl e t ec hnol ogy and its futu re recoverability can reason ably b e regar ded as assure d. Any expenditu re carri ed forward is amortised on a straigh t lin e b asis over it s us eful economic l ife, wh ic h th e di re ct or s consider to b e 20 years. Am or ti satio n is c harged to the Admin is trative Expenses lin e of t he Stat emen t of C ompr ehensive Income. E xpendi ture on re se arc h and d evelopment, which does not me et t he cap it alisation cr iter ia, is w ri tt en off to th e Statement of Comp reh ensive Income in th e p eriod in which it is incur red. Th e carryi ng val ue of i ntangible ass ets is reviewed on an on-goin g b asis by t he dir ector s and, w here appr opr iate , p rovision is mad e for any imp airmen t in valu e. It would require a su bstan tial m ovem en t (over 30%) in the assumptions employed in valuat ion s b efore there w oul d be any i mp airm en t to in tangible asset s. d . I n v e s t m e n t s Th e i nves tm ent i n su bsi diary and ass ociate u nd ertaking s is st ated at cost less p rovision for i mpai rm ent. C os t is the amount of cash paid or the fair value of t he con sideration given to acqu ire the i nves tm ent. Income from such inves tmen ts is recogn is ed on ly t o the extent th at the Com pany r ec ei ves dis trib ut ion s from accumulat ed p rofits of t he inve ste e com pany ari si ng aft er th e dat e o f acquis ition. D istributions received in exces s of such profit i.e. from pre-acquisition reserves are r eg ard ed as a recovery of inves tm ent and are recognised as a redu ct io n of th e co st o f the inves tment. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 106 11/11/2015 00:08 e . C a s h a n d c a s h e q u i v a l e n t s Cas h an d c ash equival ents comprise cash balances and call dep osits . B ank overdrafts that are r epayable o n d em and form an in tegral part of th e Comp any ’s cash man agem ent and ar e i ncl u ded as a compo nent of cash and cash equivalent s for t h e p urp ose of th e statem ent of cas h fl ows . f . F o r e i g n c u r r e n c i e s Tra nsac tion s in forei gn currencies are recorded usin g th e rat e of exchan ge r uling at the date of the transac tio n. Monetary ass ets and liab ilities d en om in at ed in for eign curre ncies are trans lated us ing th e contracted rate or th e rate of exchan ge r ulin g at t he statem ent of fi nan ci al posi ti on date and the g ains or los ses on trans lat ion ar e includ ed in th e Statem ent of C om pr eh ensi ve In come. g . P e n s i o n s Th e G roup offers a c on tributor y Group stakeholder p ension s ch eme, int o wh ich t he G roup will m ake matc hin g co ntrib utions up to a pr e-ag reed level of base salary; th e sch eme is open to exec uti ve di rectors an d permanent employees. Director s may choose to have contributions pai d i n to perso nal pe ns ion p lans. Prior to 1 July 2007, the G roup offer ed a basic stakeholder pen si on schem e, int o which the Group d id not make employer con tr ib ut ion s; none of the di rect ors or em ployee s were memb ers. h . D i v i d e n d s Di vi dends ar e rec ogn ised when they become legally payab le. In t he cas e of int erim dividends to equi ty shar eh ol ders , this is when th ey are paid. In t he cas e of final d ivid ends, this is w hen approved by th e shareholders at th e AGM . Divid ends u npaid at t he statement of fi nan ci al po si ti on date are on ly recognised as a liab ility at t hat dat e t o t he extent that th ey are appro pri atel y authoris ed and are n o long er at th e discret ion of the Company. Un pai d divi den ds th at do not meet thes e criteria are d isclosed in t h e not es to the financial st atem en ts. i . C l a s s i f i c a t i o n o f f i n a n c i a l i n s t r u m e n t s i s s u e d b y t h e G r o u p In acco rdanc e wi th IAS 32, finan cial instruments iss ued by the Group are treated as equity (i.e . form i ng part of shareholders ’ fun ds) only to the extent t hat t hey me et the following tw o c ondi tio ns: (a) th ey i n cl ude no c ontractual ob lig ations u pon th e Comp any ( or Group as the case may be) t o del iver cash or other finan cial assets or to exchang e financial asset s or financi al l iab il i ti es wi th ano ther party under conditions th at are p otent ially unfavourable to the Co mpany (or Gr ou p); and (b) w here t he ins tr um ent will or may b e settled in the Company ’s own equity instrume nts, i t i s ei the r a n on-derivative that includes no oblig ation to d eliver a variable number of the Co mpany ’s ow n equity instruments or is a der ivative that will be se tt led by the Com pany exc han gin g a fi xed amount of cash or other f inancial as sets for a fixed number of i ts ow n eq ui ty i nstruments. To the ext en t t hat this definition is not met, th e p roceeds of issue are classified as a fi nanc ial liabi li ty. Where the ins trument so class if ied takes the legal form of the 107 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 107 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 108 Co mpany ’s own sh ares, the amounts p resen ted in t hese f ina ncial stat em ents for calle d up s hare capi tal and share premiu m account exclud e am ount s in relation to those shares. Fin anc e pay men ts associated with f inancial liabilities are dealt with as part of finance ch arges. Finan ce payments as sociated with financial in strum ents that are classified as part of shar eh old ers’ funds (see d ividends p olicy), are dealt wit h as appropriations in th e r econc il i ati on of movement s in sharehold ers’ funds. j . S h a r e b a s e d p a y m e n t s Th e Co mpany is su es share op tions to d irectors and emp loyees, wh ich are meas ured at fair valu e at th e date o f grant. The fair valu e of the equity settled opt ions de ter mined at the grant date is expens ed on a straig ht line b asis over the ves ting p eriod b ased on an estim ate of t he n umber of opt ions that will actu ally vest. Th e Grou p h as adopt ed a Stoch astic mode l to c alc ul ate the fair value of opt ion s, which enab les th e Total Sh areh old er Retur n ( TSR) perform anc e condi tion attached to the awards to be fact or ed in to th e fair valu e calculation. k . K e y a s s u m p t i o n s a n d s o u r c e s o f e s t i m a t i o n E mpl oyee share o pti ons are valued in accord ance with a Stochas tic model and judgement i s r equired r egard ing th e choice of some of the in pu ts t o t he mod el. W h ere doubts have exi sted, man agem ent h ave gone with the advice of exp er ts. Fu ll det ails of t he model and i npu ts are provid ed in n ote 20 t o th e Grou p accounts. Th e es ti mated life of th e Company ’s Intellectual Prop erty is es timat ed wit h reference to the l ifespan o f the patents which p rotect th e kn owled ge an d th eir for ecast income generation. Wh en m easuri ng Intel lec tual Prop erty for im pairmen t a rang e of as sum ptions are requir ed and t hese are de tail ed i n the I ntangib le Ass ets note above. 2 . P R I O R P E R I O D A D J U S T M E N T Th e c om parati ve s fo r the year end ed 30 Ju ne 2014 have been ad ju st ed to correct the acc ou nti ng treatme nt in relation t o a tax credit received of £12 8k arising on t he exer cise of sh are opti on s. T hi s cred it was originally recog nised wit hin ‘Income Tax Expense’ in the Co ns ol i dated S tat em ent of C omprehens ive I ncome wh ereas t he amoun t s hould have been rec ogni sed dir ec tl y in E quity in accordance wit h IAS 12 In com e Taxes. T his adj us tm ent ar ose fo ll o wi ng a revi ew o f th e Group ’s Ann ual Rep ort and Account s for th e year en ded 30 June 2 01 4 by th e Fi nanc ial Re porting Coun cil’s Con duct C om mittee. Th e e ffec t o f th e restatement in the year to 30 June 2014 h as been t o in crease the income tax expe nse wi th in t he C onsolidated St atement of Comprehen sive In come by £128k , thereby redu ci ng profi t after t ax by the s ame amount. Th is adjustm ent has had no imp act on net ass ets , tax payable, or t he cas h flow statem ent of th e prior year and no im pact on op ening reserves in either t he curr ent or t he pr ior pe riod. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 108 11/11/2015 00:08 3 . P R O F I T F O R T H E Y E A R As pe rm itt ed by s ec ti on 480(4) of t he Companies Act 2006, th e par ent com pany ’s Statem ent of Co m prehensive Inc ome has not been included in t hese finan cial st ate ment s. The par ent co mpany ’s profit after tax for the year was £3,294k (2014: pr ofit of £1,5 29k as r estated). 4 . I N T A N G I B L E F I X E D A S S E T S CO ST As at 1 Jul y 2 013 Addi ti o ns As a t 30 Jun e 20 14 Addi ti o ns I N T E L L E C T U A L P A T E N T A N D P R O P E R T Y O T H E R £ ’ 0 0 0 D E V E L O P M E N T £ ’ 0 0 0 5,086 2,367 7,453 3,473 4,171 – 4,171 – T O T A L £ ’ 0 0 0 9,2 57 2,367 11,624 3,473 A S AT 30 JU NE 2015 4,171 10,9 26 15, 097 A MO RT ISA TI ON As at 1 Jul y 2 013 Ch arge for the year As at 30 June 2014 Ch arge for the year 833 270 1,103 270 513 308 821 453 1,346 578 1,924 723 A S AT 30 JUNE 2 015 1,37 3 1,274 2, 647 NET B OOK VA LUE A S AT 30 JUNE 2 015 As at 30 June 2014 2,79 8 3,068 9,652 6,632 12,450 9,700 Pat ent and other devel opment costs are in tern ally generated. 109 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 109 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 110 5 . I N V E S T M E N T S Su bsi di ary un der taki ngs As at 1 Jul y 2 013 As at 30 June 2014 As at 30 June 2015 £ ’ 0 0 0 8,294 8,294 8,294 Th e C om pany ’s su bsi diary and as sociated un der takin gs are: S U B S I D I A R Y C O U N T R Y O F N A T U R E O F B U S I N E S S P E R C E N T A G E U N D E R T A K I N G R E G I S T R A - T I O N O F O R D I N A R Y S H A R E S H E L D Pl exus Oce an Scotland Supp ly of wellheads 100% Sys tem s Li mi te d and associated equipment for oil and gas drilling Pl exu s Li mi ted Scotlan d Dor mant Pl exus Hol din gs USA Investment Holding USA, Inc. Pl exus Oce an Sy st em s USA Investment Hold ing US, LLC Pl exu s Deepwat er USA Dormant Tech no logi es Li mi ted 100% 100% 100% 100% Pl exu s Response Turks an d Commer cial exp loit at ion of 100% Ser vi ces Lim i te d C aicos Is land s s ub sea ap p lications Pl exu s Su bse a Turks and Commercial ex ploit at ion of 100% In ternat io nal Li mi ted C aicos Islan ds su bsea ap plications Pl exu s Oc ean Sys te ms Malaysia Sup ply of wellh eads and 100% (Mal aysi a) Sdn B h d associated equipment for oil and gas drilling Pl exu s Oc ean Sys te ms Brunei Supply of wellheads and 100% (Br une i) Sdn B hd associated equip ment for oil and gas drilling Pl exu s Oc ean Sys te ms Singapore Supp ly of wellhead s an d 100 % (Si ngapor e) Pt e. Ltd. associated equip ment for oil Af rotel C orporati on Turks and Caicos Inves tment Hold in g 100% Ltd Islands and gas drilling P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 110 11/11/2015 00:08 6 . T R A D E A N D O T H E R R E C E I V A B L E S Recei vabl es du e from group compan ies Prepaym en ts an d o th er amounts 2 0 1 5 £ ’ 0 0 0 4,472 103 4,57 5 2 0 1 4 £ ’ 0 0 0 4,1 87 35 4,222 Trade and o ther recei vables are classified as loans and receivables and are held at amor tised co st. Th e c arrying valu e app roximates fair value. Recei vabl es due from g roup compan ies relat es to an amount due from a subsidiar y which is no t i mp aired an d carri es no cr edit risk. Prepaymen ts relate t o prepaid am ounts for ser vice s to be con sum ed over the next 12 months. There is no indication of im pairme nt of any of th ese amo unts. 7 . T R A D E A N D O T H E R P A Y A B L E S Trade payables No n trade payabl es and accrued exp enses Th e m atur ity o f agei ng of trade and non trade p ayables at th e year en d was: Due w i thi n 30 d ays Due i n 3 0 – 90 d ays Due i n 9 0 days – 6 months Due i n 6 m onth s – On e year 2 0 1 5 £ ’ 0 0 0 43 147 190 43 147 – – 190 2 0 1 4 £ ’ 0 0 0 20 6 26 646 20 42 584 – 6 46 Trade and o ther payab les are class if ied as other f in ancial liab ilities and are held at amor tised co st. Th e c arrying valu e ap prox imates fair value. 111 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 111 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 112 8 . S H A R E C A P I T A L 2 0 1 5 £ ’ 0 0 0 2 0 1 4 £ ’ 0 0 0 A UTH ORISED : E qui ty: 11 0,0 00, 000 (2014: 110,000,000) O rd inary shares of 1 p eac h 1,100 1,1 00 A LLO TT ED, CA LLE D U P AND FULLY PAID : E qui ty: 84,91 1 ,719 (2014: 84, 892,673) Or dinary shares of 1 p eac h S H A R E I S S U E N U M B E R O F D U R I N G S H A R E S T H E Y E A R : At 3 0 Jun e 2 014 84,892,673 On 1 2 Febr uar y 2015 9,523 AT 3 0 JUN E 201 5 84,911,719 S H A R E C A P I T A L £ ’ 0 0 0 849 – 849 849 849 S H A R E P R E M I U M £ ’ 0 0 0 T O T A L £ ’ 0 0 0 20,138 20,987 4 4 20,142 2 0,991 Dur in g th e peri od th e Group issued n ew shares as a result of t he following t ransac tions: N U M B E R O F P R I C E P E R A G G R E G A T E T O T A L S H A R E S S H A R E N O M I N A L A G G R E G A T E V A L U E V A L U E £ £ 12 FEB RUAR Y 201 5 – S hare optio ns 9,523 38. 5p 95 3,666 Th e e xcess net proceeds have b een cred ited to the share prem ium account . 9 . R E C O N C I L I A T I O N O F N E T C A S H F L O W T O M O V E M E N T I N N E T C A S H Movem ent in n et c ash i n year Net cash at start o f ye ar Net cash at en d of year 2 0 1 5 £ ’ 0 0 0 (777) 786 9 2 0 1 4 £ ’ 0 0 0 7 74 12 786 1 0 . F I N A N C I A L I N S T R U M E N T S A N D R I S K M A N A G E M E N T Th e C o mpany ’s ac ti vit ies give rise to a numb er of differen t fin ancial r is ks: mar ket risk (in cl udi ng fo reign cu rr ency exch ang e risk, int erest rate r is k and pr ice risk), credit r isk and l i qui dity ri sk. The C omp any ’s manag ement reg ularly monit ors t he r isks an d potential expos ures to wh ic h the C omp any is exposed and seeks t o ta ke act ion , where appr opriate, to m in i mi se any potenti al ad verse impact on the C om pany ’s p erfor mance. Ri sk m anageme nt is carried out by Management in lin e wit h th e C om pany ’s Treasur y policies. Th e Com pany ’s Treasury p olicies cover specific areas , such as for eign exchan ge risk , inte rest P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 112 11/11/2015 00:08 rate r is k and investm en t of excess cash . Th e Comp any ’s policy does n ot per mit enter ing into spe cul ati ve tra ding o f fi nancial ins truments and this p olicy h as be en ap plied t hr oughout the ye ar. ( a ) M a r k e t r i s k s ( i ) F o r e i g n c u r r e n c y e x c h a n g e r i s k Th e Com pany i s exp osed to foreign exchang e risk aris ing fr om various cu rr encies. In or der to prot ect the Com pany ’s statement of finan cial position fr om movemen ts in e xchange rates, th e Co mpany co nver ts foreign currency b alances in to s terling on receipt so far as they will no t be used for fut ur e payment s in th e foreig n currency. Th e C om pany care fully monitors t he econ omic and political sit uat ion in th e coun tr ies in which i t ope rat es to ensu re approp riate action is taken to minimise any foreig n curr ency exposure . Th e Com pany ’s m ain foreign exchange r isk relates to movemen t s in t he sterling/US. Movem ents i n this rat e impacts the tran slation of US d ollar den om in at ed net liabilities. A reason ably pos si bl e 10% fluctuation up /d own in t he exch ang e rat e bet we en ster ling and th e US dol lar w oul d res ult in a corresp ondin g gain/loss in t he st at emen t of com prehensive i nco m e of appr oximat el y £nil ( 2014: £58k). ( i i ) I n t e r e s t r a t e r i s k Th e Co mpany is als o exposed to inter est rate risk on cas h h eld on d eposit . Th e Company ’s pol i cy i s to m axim is e t he return on cash dep osits whilst en su ring t hat cas h is de posite d with a fi nanc ial i nsti tutio n with a credit rating of ‘AA’ or b etter. ( i i i ) P r i c e r i s k Th e C ompany is n ot exposed to any sig nificant price r isk in relat ion t o it s finan cial instrum ents. ( b ) C r e d i t r i s k Th e Com pany ’s credit risk primarily relat es to its inter-company loan s and in ter-company rec eivabl es. Managem ent believe that no ris k p rovision is req uired for imp airment. Am ou nts depo si ted w it h banks and other f inancial ins titu tions als o g ive rise t o cr edit risk. Th is ri sk is m anag ed by limiting th e ag g regate amount of exp osur e t o any su ch institution by referen ce to th ei r rat in g and by reg ular r eview of thes e ratin gs. T he pos sibility of m ater ial l oss i n this way i s co nsidered unlikely. ( c ) L i q u i d i t y r i s k Th e Co mpany has h istorically f inanced its operations t hrou gh eq uity finan ce and the flow of i nt er-c om pany loan r epayments. The Company h as cont inue d wit h its policy of ensuring th at t here are suffici en t funds availab le to meet the exp ect ed fu nd in g req uirem ents of the Co m pany ’s operati on s and inves tment opp ort unit ies . The Comp any mon it ors its liquidity pos it io n th rou gh c ash flow forecastin g. Based on t he cu rren t ou tlook t he C ompany has su ffi c ien t fu ndi ng in place to meet its future ob ligations. Th e bank faci li ty p rov ided to th e Group includes a fixed and float in g ch arge over the assets of th e Com pany. 113 B U S I N E S S R E V I E W S T R A T E G I C R E P O R T C O R P O R A T E G O V E R N A N C E F I N A N C I A L S T A T E M E N T S 238506 Plexus p070-p116 Notes.indd 113 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 114 1 1 . O P E R A T I N G L E A S E C O M M I T M E N T S / F I N A N C I A L C O M M I T M E N T S Th e Com pany had no c apital commitments as at 30 June 2 015 (201 4: £n il). 1 2 . C O N T I N G E N T L I A B I L I T I E S Th e Com pany had no c on tingent liabilities as at 30 J une 2015 (201 4: £n il). 1 3 . R E L A T E D P A R T Y T R A N S A C T I O N S C o n t r o l At 30 Jun e 20 1 5, Plexu s Hold in gs p lc was cont rolled b y Mu tu al Holdin gs Limit ed, a com pany i nco rporated in t he Turks and C aicos Is lands. Sub sequent to th e issu e of sh ares as detailed in No te 2 6 to the group accounts , Mut ual Hold ing s Limited no lon ger owns a cont rolling inte rest i n the C om pany. U l t i m a t e p a r e n t c o m p a n y At 3 0 Jun e 2 0 15, t he ul timate p arent company was M ut ual Holding s Lim it ed , a company i nco rporated in t he Turks and C aicos Is lands. Sub sequent to th e issu e of sh ares as detailed in No te 2 6 to the gr ou p accounts, Mu tual Holdin gs Limited n o longe r owns a con tr olling interest i n the C om pany and there is no ult imate parent company. Th e Co mpany is not consolidated in to Mutual Hold ings L im it ed . No oth er g roup financial st atem en ts incl ude th e results of th e C om pany. The f inancial s tat emen ts of Mut ual Holdings Li mi te d are not availab le to the p ub lic. T r a n s a c t i o n s Dur in g th e year t he C ompany had th e following trans actions with relat ed part ies: Recei vabl es from Su bsi diary Und ertaking s 2 0 1 5 £ ’ 0 0 0 4,472 2 0 1 4 £ ’ 0 0 0 4,1 87 Recei vabl es from S ubs idiary Undert aking s repr esent the balances receivable on loans provi ded to s ubsidi aries. P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 114 11/11/2015 00:08 C O M P A N Y I N F O R M A T I O N 115 Di rect ors Jerome Jeffrey Thrall† (Non-Executive Chairman) Bernard Herman van Bilderbeek (Chief Executive) Graham Paul Stevens (Finance Direct or) Craig Francis Bryce Hend rie ( Techn ical D irector) Geoffrey Edmund Thompson (Non-Executive Director ) Christopher James Watts Fraser† (Non-Executive Director ) Charles Edward Jones (Non-Executive D irector) † Memb er of Aud it and Remuneratio n c om mittee s Regis tered Offi c e 42-50 Hersham Road Walton-on-Thames Surrey KT12 1RZ Co m pany N um ber 03322928 Co m pany S ecretary No mi nat ed Advis er an d Broker Publ i c Rel ati ons Au di tor So li c it ors to t he C om pany Regis trars Douglas Armour FCIS Equiniti David Venus Limited 42-50 Hersham Road Walton-on-Thames Surrey KT12 1RZ Cen kos Securities p lc 66 Hanover Street Edinburgh EH2 1EL 6.7.8 Tokenhouse Yard London EC2R 7AS St Brides Partners 3 St Michael’s Alley London EC3V 9DS Crowe Clark Whitehill LLP St Bride’s House 10 Salisbury Sq uare London EC4Y 8EH Fox W illiams LLP Ten Dominion Street London EC4M 2EE Ledingham Chalmers LLP 52-54 Rose Street Aberdeen AB10 1HA SLC Registrars 42-50 Hersham Road Walton-on-Thames Surrey KT12 1RZ 238506 Plexus p070-p116 Notes.indd 115 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 238506 Plexus p070-p116 Notes.indd 116 11/11/2015 00:08 P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 D E S I G N E D B Y S T B R I D E S P A R T N E R S P L E X U S 2 0 1 5 © C O P Y R I G H T . A L L R I G H T S R E S E R V E D P L E X U S H O L D I N G S P L C A N N U A L R E P O R T 2 0 1 5 W W W . P L E X U S P L C . C O M
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