OIL well technology firm Plexus Holdings has signalled more job cuts could be in prospect after it reduced staff numbers by around 50 per cent and plunged into the red in the latest year amid the downturn in the key North Sea market.
The Aberdeen-based firm lost £6.9 million before tax in the year to June after making a record profit of £5.9m in the preceding year.
Plexus reduced employee numbers by 48 per cent, to 81 from 157, during the year under a programme that also included cuts in salaries.
The company said this had been carefully planned to get it in shape to cope with the fall in oil and gas market activity triggered by a crude price slump which may have some way to run.
Chief executive Ben van Bilderbeek noted: “The only certainty that can be used for planning purposes is that no one can truly claim to know how long or damaging the current cyclical downturn will be.”
The company’s results statement highlighted the scale of the challenges facing oil services firms in the North Sea following the fall in the crude price, from $115 per barrel in June 2014 to around $50/bbl.
Experts have forecast the number of jobs lost in the UK industry since 2014 will reach 120,000 by the end of the year.
Aim-listed Plexus has relied on supplying wellheads for use in North Sea exploration for much of its income.
But it noted there had been an unprecedented fall in exploration activity in the area, which is a relatively expensive region for oil and gas firms to work in.
The company said the cost reduction programme completed last year was carefully planned to ensure that the lower level of sales anticipated for the foreseeable future will support the reduced headcount and cost structure.
However, Plexus added: “If necessary further adjustments will be made.”
A spokesperson for the company said: “There are no plans for any further job cuts at this stage but like all others in the sector Plexus is looking for an upturn in 2017 and is keeping things under review.”
Plexus said its directors believe it is prudent to continue the suspension of dividend payments given current trading conditions.
While Plexus reckons oil and gas market activity will pick up eventually, as existing fields run dry, the company is trying to reduce its reliance on the North Sea exploration market.
Plexus made some progress with efforts to develop new markets during the year to June when its struck supply deals with firms in Asia and Russia.
The company raised £8m equity funding from Jereh China and around £3.5m from Gusar of Russia. It also completed a £6m share placing with support from new and existing shareholders.
On the prospect of the UK leaving the European Union following the Brexit vote, Plexus said: “Our current thinking is that staff recruitment when activity levels pick up is not currently a major concern, and weaker Sterling actually makes our products and services cheaper to customers outside of the UK.”
The company added: “If we need to manufacture more equipment for rent or sale, the cost of raw material, and in particular steel may increase if Sterling’s weakness continues.”
Total revenues fell to £11.2m in the year to June, from £28.5m.
North Sea sales slumped to £1.2m from £10.6m.
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