MedservRegis p.l.c.Statement of the Directors pursuant to Capital Markets Rule 5.68
Regulatory and environmental risk: The Group operates in twelve jurisdictions which are highly regulated, and all have their own unique compliance frameworks. Environmental risks arise from exposures to activities that may cause or be affected by environmental degradation, such as pollution. An infringement in any of these laws and regulations may have significant liabilities and tarnish the Group’s brands, being Medserv, Regis and METS.Oil price: Oil service companies tend to have greater volatility of earnings than oil majors, given their sensitivity to the capital spending plans of oil explorers, which wax and wane with oil prices. Similar to other players in the industry, an increase in oil prices would directly benefit the Company from increased services required by oil companies in preparation of the oil exploration, development and production. On the other hand, as oil prices decline, energy production companies focus their efforts on increasing operating efficiencies, these actions apply downward pressure on the rates charged by drillers, oilfield services companies, and other suppliers such as the Company. Accordingly, the Company’s profit margins may be tightened due to such weakened demand for the services offered and heightened industry competition to maintain market share. The Group is always striving to reduce this risk by investing in countries where cost of oil production is low, primarily in the Middle East and Africa. Also, the Group’s strategy is to increase the number of services offered.
Financial performance
The Group’s turnover for the year amounted to €29,924,554. The Adjusted Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA) of the Group amounted to €5,304,677. After recognising depreciation amounting to €4,327,724 and net provision for impairment losses on property, plant and equipment amounting to €5,158,514, the Group sustained an operating loss amounting to €7,426,064. After adding the net finance income amounting to €36,265, and the share of profit of equity-accounted investees of €29,101, the Group registered a loss before tax of €7,360,698. Loss for the year after accounting for taxation and profit from discontinued operation, net of tax, amounted to €7,202,667.
Cash generation from operations remained stable across the entire Group and during the year amounted to €6,579,652.
The Group’s EBITDA performance improved in the second half of the year compared to the first half particularly due to a general improvement in the business environment as the COVID19 pandemic began to wind down and demand for energy increased. Additionally, the award of new contracts in Egypt contributed further to this improved performance.
Revenue
The Group’s revenue was generated as follows:
Integrated Logistics Support Services (ILSS)
Oil Country Tubular Goods (OCTG)
Cost of sales and administrative expenses
The cost of sales of the Group for the year amounted to €22,526,528. Cost of sales also include the amortisation of the intangible assets amounting to €1,145,241 which consist mainly of customer relationships.
Other income amounting to €2,286,320 is mainly made up of the foreign exchange differences during the year. Other expenses mainly include the impairment losses on property, plant and equipment, goodwill and intangible assets totalling to €7,228,675 and loss on disposal of property, plant and equipment of €388,933. The increase in administrative expenses over last year is mainly due to the professional fees in relation to the acquisition. In addition,