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Plexus Holdings – another warning as conditions remain “challenging”

By Steve Moore | Tuesday 16 May 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

A “Trading Update” announcement from Plexus Holdings (POS) includes early that “although Plexus continues to pursue a number of specific opportunities in the North Sea and overseas, where discussions are progressing well, some of these are taking longer than anticipated to conclude” and that “a number of encouraging new contracts are currently being negotiated and are now likely to be concluded early in the next financial year, to June 2018”. Uh oh.

The result is a current year “further material reduction of revenues”, though the company seeks to emphasise that following a “successful cost cutting and efficiency drive programme… the impact on EBITDA and LBT is expected to be less significant”.

Hmmm, this is still though clearly a profit warning – although the company further seeks to reassure that it “remains in a robust financial position” and considers its “POS-GRIP technology enables the company to deliver best in class solutions to the industry and, notwithstanding these ongoing difficult trading conditions, the directors are confident of improving results for Plexus during FY18”.

Half year results to 31st December 2016 showed a loss of £2.5 million on revenue of £3.8 million (-44% on the corresponding 2015 period) and net cash of £10.1 million. The company does thus look to have a bit of time, but the stated ‘confidence’ comes with it also admitted “the expected uplift in exploration activity being slower than anticipated”.

The shares have fallen back to around 60p – and, although at least this time there wasn’t big share slides in advance, they currently continue to look best avoided.

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