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Pressure Technologies PLC
13 June 2017
 

 

 

 13 June 2017

 

Pressure Technologies plc

("Pressure Technologies" or the "Group")

 

2017 Interim Results

 

Pressure Technologies (AIM: PRES), the specialist engineering group, announces its interim results for the 26 weeks to 1 April 2017, which show improving momentum across the Group.  

 

John Hayward, CEO of Pressure Technologies, said:

"Our Manufacturing Divisions are now experiencing an upward trajectory in sales revenue and profits.  Several strands of market and product development should provide the momentum to maintain this progress.

"The restructured Alternative Energy Division has a solid platform on which to grow.  Whilst timing of orders continues to be a source of frustration there are clear signs, particularly in North America, that significant market growth can be expected over the remainder of the decade."

Financial

●    Revenue of £17.7 million (2016*: £16.2 million)

●    Adjusted operating loss** at £(0.8) million (2016*: £(0.7) million)

●    Reported loss before tax of £(2.6) million (2016*: profit £0.9 million)

●    Adjusted earnings per share loss of (6.3)p (2016*: (7.1)p)

●    Reported basic earnings per share loss of  (15.9)p (2016*: 8.3p)

●    Operational cash generation*** of £2.2 million (2016: £2.4 million)

●    Net debt at £8.6 million (2016: £6.1 million)

 

* re-presented to show results of the Engineered Products US operation as discontinued

** before acquisition costs, amortisation and exceptional charges and credits 

***before payment of redundancy and reorganisation costs

 

Operational

●     Further improved gross margin in the PMC division as investment in productivity efficiencies come to fruition, which coupled with a slightly stronger order book, give confidence for the full-year results

●     Martract Ltd acquired on 7 December 2016, integration on plan and contributing as expected

●     Secured order book for Alternative Energy biogas upgrading projects totalling £10.1 million

●     Cylinders defence order book increases to £11.2 million to 2020 and a record profit contribution from Integrity Management Services

 

For further information, please contact:

 

Pressure Technologies plc

John Hayward, Chief Executive

Joanna Allen, Group Finance Director

Keeley Clarke, Investor Relations

 

Today Tel: 020 7920 3150

Thereafter, Tel: 0114 257 3622

www.pressuretechnologies.com

Cantor Fitzgerald Europe (Nominated Adviser and Broker)

Tel: 020 7894 7000

Philip Davies / Will Goode

 

Tavistock

Simon Hudson

 

Tel: 020 7920 3150

 

COMPANY DESCRIPTION

 

Company description - www.pressuretechnologies.com

With its head office in Sheffield, Pressure Technologies was founded on its leading market position as a designer and manufacturer of high-pressure systems serving the global energy, defence and industrial gases markets. Today it continues to serve those markets from a broader engineering base with specialist precision engineering businesses and has a worldwide presence in Alternative Energy as a global leader in biogas upgrading. On this foundation, the company is building a highly profitable group of companies through a combination of organic initiatives and acquisitions.

Pressure Technologies has four divisions, Precision Machined Components, Engineered Products, Cylinders and Alternative Energy, serving four markets: oil and gas, defence, industrial gases and alternative energy.

Precision Machined Components

●     Al-Met, Mid Glamorgan, acquired in 2010 www.almet.co.uk

●     Roota Engineering, Rotherham, acquired in March 2014 www.roota.co.uk

●     Quadscot, Glasgow, acquired in October 2014 www.quadscot.co.uk

●     Martract Limited, Barton-on-Humber, acquired in December 2016 www.martract.co.uk

Engineered Products

●     Hydratron, Manchester, acquired in 2010 www.hydratron.com

Cylinders

●     Chesterfield Special Cylinders, Sheffield, IPO cornerstone in 2007 and includes,  CSC Deutschland Gmbh, which is based in Dorsten, Germany and Chesterfield Special Cylinders Inc. which is based in Houston, USA www.chesterfieldcylinders.com

 

Alternative Energy

●     Greenlane Biogas, Sheffield, UK; Vancouver, Canada and; Auckland, New Zealand acquired in October 2014 www.greenlanebiogas.com

 



 

CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT

Overview

Against a backdrop of an improved, but still challenging macro oil and gas environment, we are pleased to report encouraging progress in our Manufacturing and Alternative Energy Divisions.

Action taken by OPEC in cutting production has stabilised oil prices which has created sufficient confidence within the market for some growth in investment, albeit small.  This is now filtering through to our Manufacturing Divisions, particularly Precision Machined Components.

Alternative Energy has had a much improved first half, buoyed by its opening order book and, overall in the Group, despite a number of challenges, there is a feeling of gathering momentum.

Group revenues for the 26 weeks to 1 April 2017 were improved by £1.5 million to £17.7 million (2016: £16.2 million). This reflects a period-on-period increase in Alternative Energy and an improvement in the Manufacturing Divisions, over the low point in the second half of 2016. 

The adjusted operating loss was broadly flat at £0.8 million (2016: £(0.7) million) as the revenue increase from Alternative Energy is at a lower margin.

Manufacturing Divisions

Our three Manufacturing Divisions: Precision Machined Components, Engineered Products and Cylinders are now emerging from a sustained period of retrenchment and re-organisation arising from the oil and gas market downturn.

For Precision Machined Components and Engineered Products, the drivers of development in the business remain principally tied to the oil and gas sector.  For Cylinders, development is driven by the defence market and the provision of value added services, particularly Integrity Management.

Precision Machined Components Division


H1 2017

H2 2016

H1 2016

FY 2016

Revenue

£5.0m

£4.8m

£6.5m

£11.3m

Operating profit*

£0.9m

£0.4m

£1.0m

£1.4m

 

This division comprises Al-Met, Roota Engineering, Quadscot Precision Engineers and Martract, which was acquired in December 2016. Al-Met produces wear resistant components in a range of high-alloy steels and tungsten carbides for use in high-pressure choke and flow control valves, designed to regulate flow volumes in extremely demanding applications in the subsea and surface oil and gas industries. Roota and Quadscot make a wide range of components for oil and gas pressure systems and downhole tools, with Roota generally focusing on larger, longer products and Quadscot on smaller products manufactured in a range of high-alloy materials. Martract specialises in grinding and lapping ball and seat assemblies and gate valves which is highly complementary to the division enabling it to offer a product that is unmatched by any known competitor.

The first-half of the financial year witnessed a change in trend in customer ordering patterns.  The previous unpredictable pattern has been replaced by some level of consistency, particularly at Roota and Al-Met, where there has been no further deterioration in volumes.  Sales revenues, excluding Martract, were 1.7% ahead of the second-half of 2016. 

Quadscot remains affected by reduced investment levels in the subsea sector and low-ball competitor pricing, but is beginning to benefit by winning orders from new customers outside its core oil services customer base.

In a risk averse market, the strength of the Pressure Technologies Group is seen as an asset by the division's customers.  A number of competitors have gone out of business and there is clear evidence of major customers placing orders with the division due to the Group's financial stability and the ability to supply out of multiple locations, thereby minimising supply chain risk.

A divisional Business Development Director was appointed in March to expand the customer base and has immediately focused on higher added value components for specialist manufacturers within the oil and gas supply chain.  This approach is already yielding positive results.

Integration of Martract is proceeding to plan.  This acquisition has strengthened the division's position in the supply of High Velocity Oxygen Fuel ("HVOF") coated balls for very high pressure ball valve applications.  The service we provide is unmatched in terms of product quality and lead-time.  The diverse nature of Martract's customer base, with over 60% of turnover outside the oil and gas market, gives significant medium-term opportunity to cross-sell the capabilities of the rest of the division into these new markets.

Operationally, more predictable volumes have resulted in improvements in gross margin as the benefits of the latent capacity created by investment in new technology and improved productivity are being realised.  Capital investment is focused on supporting customer quality requirements and production efficiencies, with asset finance continuing to be an attractive cash neutral method of financing the purchase of new equipment.

The immediate outlook for the division remains positive and, following the significant restructuring in recent years, we are now recruiting additional skilled millers and turners to take advantage of incremental volumes.

Engineered Products Division


H1 2017

H2 2016

H1 2016

FY 2016

Revenue

£1.7m

£2.0m

£2.1m

£4.1m

Operating profit*

£(0.3)m

£0.0m

£(0.3)m

£(0.3)m

 

The division manufactures a range of Hydratron-branded air-operated high-pressure hydraulic pumps, gas boosters, power packs, hydraulic control panels and test rigs, mainly for use in the oil and gas sector. 

 

The division continues to be impacted by reduced capital expenditure and discretionary spend from its core oil and gas market customers and sales in the first-half  were 15% lower than in the second-half of 2016.  Losses were limited by the action taken to reduce costs and the implementation of "lean" management systems in 2016.  It is encouraging to note that high sales in March proved the predicted monthly break-even level of around £380,000.  This represents a 45% reduction in break-even level achieved in 18 months with improvements in both gross margin and overhead costs.

 

Critical to the future success of the division is the expansion of the distributor network and product range, both of which are progressing well. The product range has been extended to higher pressure valve test systems through a partnership with Italcontrol, a specialist in high-pressure clamping systems and a first order has recently been completed. New distributors have been appointed to cover South and West Africa, Italy, India, Russia, Azerbaijan and Thailand.  Further expansion of the distributor network is anticipated in the second-half.

 

In response to an increase in the level of enquiries the engineered systems sales team has been expanded and the current order intake for the third-quarter is at break-even levels.  Operations have a significant level of latent capacity and increases in sales above break-even level should result in the generation of high incremental profits.

 

As the division outsourced component manufacture in 2016, capital equipment expenditure requirements are low.  There is, however, a requirement for continuing product development in the order of 5% to 7% of sales per year.

 

Cylinders Division


H1 2017

H2 2016

H1 2016

FY 2016

Revenue

£3.1m

£4.7m

£4.8m

£9.5m

Operating profit*

£(0.6)m

£0.9m

£0.2m

£1.1m

 

Chesterfield Special Cylinders ("CSC"), supplies a range of high-pressure cylinder systems into the defence, oil and gas and industrial gases markets.

 

The defence market is now the mainstay of the business with a firm order book of £11.2 million through to 2020. Further orders are anticipated in the near future for the Dreadnought class submarine build programme (Trident replacement). Work continues to break into the US defence and commercial markets trading through Chesterfield Cylinders Inc. The first-half result has been, as expected, impacted by the phasing of the delivery of large defence orders, pushing both revenue and profit into the second-half.

 

The requirement for cylinders in the oil and gas market remains subdued, but we continue to take small orders for floating crane and diving support projects.  There is no expectation of an increase in drillship or semi-submersible rigs in the near future and our efforts in this market remain focused on Integrity Management ("IM") services.  Other commercial markets present opportunities for "one-off" projects which require the division's design and build capabilities.  Recent contract wins have included an order for the Indian Space programme.

 

Our IM and retest services are now extensively employed in the UK defence sector and the division has also experienced an upturn in orders for the retest of high-pressure gases trailers in the UK industrial gases market.  It made a record profit contribution in the period and further progress is expected in the second-half.

 

Capital expenditure is focused on completion of the ultra-large forge project and process improvements.

 

The current year is underpinned by the second-half defence order book and growth in sales of services.  The medium-term outlook remains strong without a recovery in orders from the oil and gas market.



 

 

Alternative Energy Division


H2 2016

H1 2016

FY 2016

Revenue

£8.0m

£8.1m

£3.2m

£11.3m

Operating profit/loss*

£0.1m

£(0.2)m

£(0.9)m

£(1.1)m

 

The division is a designer and supplier of equipment used to upgrade biogas produced by the anaerobic digestion of organic waste to high-quality methane, which is suitable either for injection into the gas grid, or used as vehicle fuel.

 

The division entered the year with an order book for biogas upgraders of £14 million, around half of which has been delivered in the period and a return to profit has been achieved.  Gross margins improved from the second-half of 2016, which was affected by legacy contract losses. The first order was received for our Kauri upgrader, the world's largest single upgrader plant capable of processing 5,000 m3/hr of biogas, an extension to an existing Totara+ upgrader order. Also, the first order for the second generation, entry level, Kanuka upgrader, for processing up to 300 m3/hr of biogas, is in final commissioning.

There remains a significant pipeline of good quality sales opportunities but order placement has been frustratingly slow due to external factors.  In the UK, a proposed change to Renewable Heat Incentive which favoured biogas upgrading, was initially delayed by a drafting error in the legislation and is now delayed by the general election.  In North America, several potential orders are delayed due to customer issues around project funding.  The secured order book for Alternative Energy biogas upgrading projects totals £10.1 million for delivery over the second-half and into 2018.  As ever, the final result for the year will depend on the timing of securing further orders in the second-half.  What is certain, is that the division will post a result considerably better than in 2016.

During the first half of this year a full review of the management structure was conducted. The existing regional structure resulted in duplication of several roles and was creating ineffectiveness across the division.  An immediate headcount reduction of 12 people has been achieved and redundancy costs are shown as exceptional items in the results.

Beyond the immediate pipeline, there is strong evidence of growing demand for biogas production and upgrading.  This is particularly marked in the US, where government departments estimate that nearly 11,000 sites are ripe for development.  Whilst only a proportion of these will be suitable for large-scale biogas upgrading it is a clear indication of the growth potential over the remainder of the decade.

Financial Review

The comparison figures for 2016 have been re-presented to show results of the Engineered Products US operation as discontinued.

Redundancy and reorganisation costs of £0.4 million relate to Alternative Energy, as detailed above, and changes to the team structure at head office.  Total annualised payroll savings of £6.1m have been achieved from restructuring over the last two and a half years.

Cash generated in the period from operations (before the cost of redundancy) was £2.2 million (2016: £2.4 million) and closing net debt was £8.6 million (2016: £6.1 million). The most significant non-trading cash item was the acquisition of Martract Limited which was a £3.6 million net cash outflow made in part from cash and further utilisation of the existing revolving credit facility.  All banking covenants were complied with.

While there are signs of improvements in our core oil and gas markets and some positive momentum in Alternative Energy, the Board's view is, that until the trends are more established, it is still too early to reinstate the dividend.

Outlook

A combination of improvements in market dynamics and the benefits of the restructuring the Group carried out over recent years are beginning to show in the financial results.

 

Our manufacturing divisions are now experiencing an upward trajectory in sales revenue and profits.  Several strands of market and product development should provide the momentum to maintain this progress.

 

The restructured Alternative Energy Division has a solid platform on which to grow.  Whilst timing of orders continues to be a source of frustration there are clear signs, particularly in North America, that significant market growth can be expected over the remainder of the decade.

 

The Board is pleased with progress to date and remains confident in the prospects for the Group.

 

Alan Wilson

Chairman

 

13 June 2017

John Hayward

Chief Executive

 

 

 

*before acquisition costs, amortisation and exceptional charges and credits



 

Condensed Consolidated Statement of Comprehensive Income

For the 26 weeks ended 1 April 2017

 



Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016

 


Notes

£'000

£'000

£'000

 

Revenue

2

17,733

16,217

35,753

 

Cost of sales


(13,509)

 (11,431)

(26,211)

 

Gross profit


4,224

4,786

9,542

 






 

Administration expenses


(4,985)

(5,528)

(9,923)

 

Operating loss before acquisition costs, amortisation and exceptional charges and credits


(761)

(742)

(381)






Separately disclosed items of administrative expenses:

Amortisation and acquisition related exceptional items

 

3

(1,285)

 

2,195

 

1,123

Other exceptional charges

4

(421)

(326)

(798)

Operating (loss) / profit


(2,467)

1,127

(56)






Finance income


-

-

32

Finance costs


(124)

(208)

(335)

 

(Loss) / Profit before taxation


(2,591)

919

(359)

 






 

Taxation

5

284

281

1,002

 

(Loss)/profit for the period from continuing operations


(2,307)

1,200

643

 






 

Discontinued operations





 

 Loss for the year from discontinued operations


-

(197)

(1,331)

 

(Loss) / profit for the period attributable to owners of the parent


(2,307)

1,003

(688)

 






 

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss:





Currency transaction differences on translation of foreign operations


-

(157)

(426)

Total comprehensive income for the period attributable to the owners of the parent


(2,307)

846

(1,114)

 






 

(Loss) / earnings per share from continuing operations





 

(Loss) / earnings per share basic

6

(15.9)p

8.3p

4.4p

 

(Loss) / earnings per share diluted

6

(15.9)p

8.1p

4.4p

 



 

Condensed Consolidated Balance Sheet

As at 1 April 2017

 



Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


Notes

£'000

£'000

£'000

Non-current assets





Goodwill


16,062

15,020

15,020

Intangible assets


13,913

12,368

11,329

Property, plant and equipment


13,249

14,043

13,765

Deferred tax asset


502

271

544



                

                

                



43,726

41,702

40,658



                

                

                

Current assets





Inventories


5,245

6,622

5,210

Trade and other receivables


8,818

9,485

11,279

Cash and cash equivalents

7

7,415

4,333

6,073



                

                

                



21,478

20,440

22,562



                

                

                



                

                

                

Total assets


65,204

62,142

63,220



                

                

                

Current liabilities





Trade and other payables


(12,854)

(9,322)

(12,069)

Deferred consideration


(589)

(2,500)

-

Borrowings

7

(210)

(293)

(242)

Current tax liabilities


(340)

(45)

(258)



                

                

                



(13,993)

(12,160)

(12,569)



                

                

                

Non-current liabilities





Other payables


(281)

(832)

(1,398)

Borrowings

7

(15,756)

(10,105)

(12,411)

Deferred tax liabilities


(2,496)

(2,440)

(2,027)



                

                

                



(18,533)

(13,377)

(15,836)



                

                

                



                

                

                

Total liabilities


(32,526)

(25,537)

(28,405)



                

                

                



                

                

                

Net assets


32,678

36,605

34,815



                

                

                

Share capital


725

724

724

Share premium account


21,637

21,620

21,620

Translation reserve


(401)

(132)

(401)

Profit and loss account


10,717

14,393

12,872



                

                

                

Total equity


32,678

36,605

34,815



                

                

              



 

Condensed Consolidated Statement of Changes in Equity

For the 26 weeks ended 1 April 2017


Share

capital

Share

premium

account

Translation reserve

Profit and

loss

account

Total

equity


£'000

£'000

£'000

£'000

£'000







Balance at 1 October 2016 (audited)

724

21,620

(401)

12,872

34,815







Dividends

-

-

-

-

-

Share based payments

-

-

-

152

152

Shares issued

1

17

-

-

18


              

              

              

              

              

Transactions with owners

1

17

-

152

170


              

              

              

              

              







Loss for the period

-

-

-

(2,307)

(2,307)

Exchange differences arising on retranslation of foreign operations

-

-

-

-

-


              

              

              

              

              

Total comprehensive income

-

-

-

(2,307)

(2,307)


              

              

              

              

              

Balance at 1 April 2017 (unaudited)

725

21,637

(401)

10,717

32,678


               

               

               

               

               







 

 

For the 26 weeks ended 2 April 2016

 


Share

capital

Share

premium

account

Translation reserve

Profit and

loss

account

Total

equity


£'000

£'000

£'000

£'000

£'000







Balance at 3 October 2015 (audited)

721

21,539

25

14,056

36,341







Dividends

-

-

-

(810)

(810)

Share based payments

-

-

-

144

144

Shares issued

3

81

-

-

84


              

              

              

              

              

Transactions with owners

3

81

-

(666)

(582)


              

              

              

              

              







Profit for the period

-

-

-

1,003

1,003

Exchange differences arising on retranslation of foreign operations

-

-

(157)

-

(157)


              

              

              

              

              

Total comprehensive income

-

-

(157)

1,003

846


              

              

              

              

              

Balance at 2 April 2016 (unaudited)

724

21,620

(132)

14,393

36,605


               

               

               

               

               









 

Condensed Consolidated Statement of Changes in Equity (continued)

For the 52 weeks ended 1 October 2016

 


Share

capital

Share

premium

account

Translation reserve

 

Profit and loss account

Total

Equity


£'000

£'000

£'000

£'000

£'000







Balance at 3 October 2015(audited)

721

21,539

25

14,056

36,341







Dividends

-

-

-

(810)

(810)

Share based payments

-

-

-

314

314

Shares issued

3

81

-

-

84


              

              

              

              

              

Transactions with owners

3

81

-

(496)

(412)


              

              

              

              

              







Loss  for the period

-

-

-

(688)

(688)

Other comprehensive income:

Exchange differences on translating foreign operations

-

-

(426)

 

-

(426)


              

              

              

              

              

Total comprehensive income

-

-

(426)

(688)

(1,114)


              

              

              

              

              

Balance at 1 October 2016 (audited)

724

21,620

(401)

 

12,872

34,815


               

               

               

               

               

 



 

Condensed Consolidated Cash Flow Statement

For the 26 weeks ended 1 April 2017

 


Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000

Cash flows from operating activities




(Loss)/profit after tax

(2,307)

1,003

(688)

Adjustments for:




Depreciation of property, plant and equipment

683

686

1,477

Finance costs - net

124

208

303

Amortisation of intangible assets

1,202

1,094

2,166

(Profit)/loss on disposal of property, plant and equipment

-

(4)

8

Share option costs

152

144

314

Income tax credit

(284)

(281)

(1,002)

Loss on derivative financial instruments

-

26

26

Exceptional deferred consideration released and revaluation

-

(3,289)

(3,289)

Exceptional impairment of assets

-

-

464





Changes in working capital:




(Increase)/decrease in inventories

(16)

792

1,749

Decrease in trade and other receivables

2,617

1,325

1,948

(Decrease)/increase in trade and other payables

(427)

393

929


              

              

              

Cash flows from operating activities

1,744

2,097

4,405





Finance costs paid

(124)

(133)

(228)

Income tax refunded

185

247

504


              

              

_______

Net cash from operating activities

1,805

2,211

4681


              

              

              

Cash flows from investing activities




Purchase of property, plant and equipment

(88)

(443)

(883)

Proceeds from sale of fixed assets

-

7

84

Cash outflow on purchase of subsidiaries net of cash acquired

(3,597)

-

-

Cash outflow on payment of deferred consideration

-

-

(2500)


              

              

              

Net cash used in investing activities

(3,685)

(436)

(3,299)


              

              

              

Financing activities




New borrowings

3,350

-

2,300

Repayment of borrowings

(145)

(175)

(342)

Shares issued

17

84

84

Dividends paid

-

(810)

(810)


______

______

______

Net cash used for financing activities

3,222

(901)

1,232


              

              

              

Net increase in cash and cash equivalents

1,342

874

2,614





Cash and cash equivalents at beginning of period

6,073

3,459

3,459


              

              

              

Cash and cash equivalents at end of period

7,415

4,333

6,073


               

               

               



 

Notes to the Condensed Consolidated Interim Financial Statements

 

1.  Basis of preparation

 

The Group's interim results for the 26 weeks ended 1 April 2017 are prepared in accordance with the Group's accounting policies which are based on the recognition and measurement principles of International Financial Reporting Standards ("IFRS") as adopted by the EU and effective, or expected to be adopted and effective, at 30 September 2017. As permitted, this interim report has been prepared in accordance with the AIM rules and not in accordance with IAS34 "Interim financial reporting" and therefore the interim information is not in full compliance with IFRS. The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2016 annual report and financial statements.

 

The Group's 2016 financial statements for the 52 weeks ended 1 October 2016 were prepared under IFRS. The auditor's report on these financial statements was unmodified and did not contain statements under Sections 498(2) or (3) of the Companies Act 2006 and they have been filed with the Registrar of Companies.

 

The consolidated financial statements are prepared under the historical cost convention as modified to include the revaluation of financial instruments.

 

The financial information for the 26 weeks ended 1 April 2017 and 2 April 2016 has not been audited or reviewed and does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006. The unaudited interim financial statements were approved by the Board of Directors on 13 June 2017.

 

2.  Segmental analysis

 

Revenue by destination

 


Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000





United Kingdom

6,785

8,178

17,235

Other EU

2,674

2,183

7,817

Rest of World

8,274

5,856

10,701


                

                

              


17,733

16,217

35,753


                

                

                

 

Revenue by sector

 


Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000





Oil and gas

6,774

9,279

15,527

Defence

1,909

2,930

6,469

Industrial gases

1,017

828

2,372

Alternative energy

8,033

3,180

11,385


                

                

                


17,733

16,217

35,753


                

                

                

 



 

2.  Segmental analysis (continued)

 

Revenue by activity

 


Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000





Cylinders

3,108

4,768

9,538

Precision Machined Components

5,014

6,564

11,319

Engineered Products

1,731

2,132

4,163

Intra divisional

(136)

(398)

(602)


_______

_______

_______

Manufacturing subtotal

9,717

13,066

24,418





Alternative Energy

8,016

3,151

11,335


                

                

                


17,733

16,217

35,753


                

                

                









(Loss)/profit from continuing operations before taxation by activity

Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000





Cylinders

(627)

204

1,053

Precision Machined Components

866

1,001

1,398

Engineered Products

(284)

(297)

(291)


_______

_______

_______

Manufacturing subtotal

(45)

908

2,160





Alternative Energy

91

(880)

(1,060)

Unallocated central costs

(807)

(770)

(1,481)


_______

_______

_______





Operating loss pre acquisition costs & related amortisation

(761)

(742)

(381)





Acquisition related exceptional items and amortisation

(1,285)

2,195

1,123

Other exceptional charges (see note 4)

(421)

(326)

(798)


                

_______

_______

Operating (Loss)/profit

(2,467)

1,127

(56)





Finance costs

(124)

(208)

(303)


_______

_______

_______





(Loss)/profit before tax

(2,591)

919

(359)


_______

_______

_______

 

The (loss)/profit before taxation by activity is stated before the allocation of Group management charges.

 



 

2.  Segmental analysis (continued)

 

Earnings before interest, taxation, depreciation, and amortisation (EBITDA)

 


Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000





Adjusted EBITDA

(78)

(74)

1,066





Acquisition costs and related exceptional items

(83)

3,289

3,289

Other exceptional charges (see note 4)

(421)

(326)

(798)


                

                

                





EBITDA

(582)

2,889

3,557


             

                

                





Depreciation

(683)

(668)

(1,447)

Amortisation re: acquired businesses

(1,202)

(1,094)

(2,166)

Interest

(124)

(208)

(303)


                

                

                





(Loss)/profit before tax

(2,591)

919

(359)


                

                

                

 

Amortisation on acquired businesses as set out above consists of the amortisation charged on intangible assets acquired as a result of business combinations in both current and previous periods.

 

3. Acquisition related exceptional items and amortisation

 

Acquisition related exceptional items and amortisation of intangible assets are shown separately in the Condensed Consolidated Statement of Comprehensive Income. A breakdown of those costs can be seen below.

 


Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000





Amortisation of intangible assets arising on a business combination

(1,202)

(1,094)

(2,166)

Acquisition costs

(83)

-

-

Deferred consideration write back

-

3,766

3,766

Foreign currency loss on revaluation of deferred consideration liability

-

(477)

(477)


                

                

                


(1,285)

2,195

1,123


                

                

                

 

The deferred consideration write back for the 26 weeks ended 2 April 2016 related to the deferred consideration arising from the acquisition of The Greenlane Group. The payment of this consideration is contingent on the future results of the acquired entities. The Directors reviewed forecasts in relation to The Greenlane Group and considered that it was unlikely that the consideration would be paid, and as such it was released. Given the magnitude of the release and the fact that it is non-trading, the Directors considered it appropriate to disclose this as an exceptional item.

 

The revaluation of deferred consideration liability related to the exchange differences calculated on the deferred consideration arising from the acquisition of The Greenlane Group, which is denominated in NZ$ before it was written back. Given the large balance and therefore the effect on the results of the Group, the Directors considered it appropriate to disclose this foreign exchange movement as an exceptional item.

 

4. Other exceptional charges

 

Items that are material either because of their size or their nature, or that are non-recurring are considered as exceptional items and are disclosed separately on the face of the Consolidated Statement of Comprehensive Income.

 

An analysis of the amounts presented as exceptional items in these financial statements is given below:

 


Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000

Reorganisation and redundancy

(401)

(257)

(732)

Costs in relation to HSE investigation

(20)

(69)

(66)


                

                

                


(421)

(326)

(798)


                

                

                

 

The reorganisation costs relate to costs of restructuring across the Group. They are recognised in accordance with IAS 19.

 

Costs in relation to the HSE investigation are costs borne by the Group as a direct result of the accident at Chesterfield Special Cylinders which are not recoverable through insurance. Given the non-trading nature of these costs, the Directors consider it appropriate to disclose this as an exceptional item.

 

 

5.  Taxation

 


Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000





Current tax

(125)

(127)

(163)

Deferred taxation

(159)

(154)

(839)


                

                

                

Taxation credited to the income statement

(284)

(281)

(1,002)


                

                

                

 

The tax charge differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits of the consolidated entities.

 



 

6.  Earnings/(loss) per ordinary share from continuing operations

 

The calculation of basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

 

The calculation of diluted earnings per share is based on basic earnings per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive options.

 

Adjusted earnings per share shows earnings per share, adjusting for the impact of acquisition costs, the amortisation charged on intangible assets acquired as a result of business combinations, any exceptional items, and for the estimated tax impact, if any, of those costs. Adjusted earnings per share is based on the profits as adjusted divided by the weighted average number of shares in issue.

 

 


Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000





(Loss)/profit after tax for basic and diluted earnings per share

(2,307)

1,200

643


                

                

                

(Loss)/profit after tax for adjusted earnings per share:








(Loss)/profit after tax as above

(2,307)

1,200

643

Acquisition costs

83

-


Amortisation in relation to intangible assets acquired on business combinations

1,202

1,094

2,166

Deferred consideration write back

-

(3,766)

(3,766)

Foreign currency loss on revaluation of deferred consideration liability

-

477

477

Other exceptional charges

421

326

798

Tax movement thereon

(317)

(358)

(688)


                

                

                

Loss after tax for adjusted earnings per share

(918)

(1,027)

(370)


                

                

                

 

 

 

 

 




Number of

Shares

Number of shares

Number of shares





Weighted average number of shares in issue

14,474,848

14,427,199

14,449,195





Dilutive effect of options

3,766

353,996

1,983


                

                

                

Diluted weighted average number of shares

14,478,614

14,781,195

14,451,178


                

                

                





(Loss)/earnings  per share - basic

(15.9)p

8.3p

4.4p


                

                

                





(Loss)/earnings per share - diluted

(15.9)p

8.1p

4.4p


                

                

                





Adjusted loss per share - basic

(6.3)p

(7.1)p

(2.6)p


                

                

                


In the current period the Group has recorded a loss after tax and therefore the options are antidilutive.



 

7. Reconciliation of net borrowings

 


Unaudited

26 weeks

ended

1 April

2017

Unaudited

26 weeks

ended

2 April

2016

Audited

52 weeks

ended

1 October

2016


£'000

£'000

£'000





Cash and cash equivalents

7,415

4,333

6,073

Bank borrowings

(15,000)

(10,000)

(12,300)

Finance leases

(966)

(398)

(353)


                

                

                

Net borrowings

(8,551)

(6,065)

(6,580)


                

                

                





 

 

8. Contingent liabilities

 

Following the fatal accident at Chesterfield Special Cylinders ("CSC") in June 2015, whilst the police have confirmed no charges for manslaughter will be brought, the HSE investigation remains ongoing. On 1st February 2016 the Sentencing Council's new "Health and Safety Offences, Corporate Manslaughter and Food Safety and Hygiene Offences Definitive Guideline" (2016) came into force.

The guidelines set a range of fines dependent on the levels of harm and culpability. These levels are assessed by the Judge when sentencing and not at the time of charges being brought. We continue to cooperate fully with the HSE and we have engaged an independent expert to investigate the root cause of the accident. Until this investigation is complete neither CSC's legal adviser nor the HSE are in a position to assess what charges may be brought. As a result of this and the nature of the sentencing guidelines it is not possible to determine with any degree of certainty what, if any, financial penalties may be levied on CSC or any other group company as a result of this investigation. At such time as the quantum and likelihood of any penalty is able to be reliably determined further disclosure or provision will be made in accordance with IAS37 "Provisions, Contingent Liabilities and Contingent Assets"

 



 

9. Business combinations

               

On 7 December 2016, the Group acquired 100% of the issued share capital of Martract Limited for an initial consideration of £3,997,056, plus maximum deferred consideration of £600,000.

 

In calculating goodwill below, the contingent consideration is held at fair value of £583,000. This has been estimated based on future earnings. The fair value estimate is based on a discount rate of 3% and assumes that £583,000 of deferred consideration is payable.

 

Martract specialises  in spherical grinding that ensures the perfect sphericality of a ball valve, such that it will seal in any position, through the opening and closing process and is based in Barton-upon-Humber. The transaction has been accounted for by the acquisition method of accounting.

 

The table below summarises the consideration paid for Martract and the fair value of the assets and liabilities acquired.

 


Book value

Intangible assets recognised on acquisition

Fair Value Adj

Fair Value


£'000

£'000

£'000

£'000

Recognised amounts of identifiable

assets acquired and liabilities assumed:    





Property plant and equipment

16

-


16

Intangible assets

-

3,740


3,740

Inventories

19

-


19

Trade and other receivables

162

-

363

525

Cash and cash equivalents

400

-


400

Trade and other payables

(101)

-

(363)

(464)

Current tax liabilities

(25)

-


(25)

Deferred tax liabilities

-

(673)


(673)


_______

_______

_______

________


471

3,067

-

3,538


_______

_______

_______

________






Goodwill




1,042






Total consideration




4,580





_______

Satisfied by:





Initial Cash




3,634

Retention cash




363

Deferred cash consideration




583





_______





4,580





_______

Net cash outflow arising on acquisition





Initial & retention cash consideration




3,997

Cash and cash equivalents acquired             




(400)





_______

Initial consideration less net cash acquired




3,597





_______

 

The intangible assets acquired with the business comprise £944,000 in relation to non-contractual customer relationships and £2,796,000 in relation to the manufacturing intellectual property.

 

The fair value adjustment relates to an Employment Related Securities liability that arose as a result of the vendors shareholder restructuring immediately prior to completion. This liability was funded by the vendors of Martract Limited.

 

10.  Dividends

 

The final dividend for the 53 weeks ended 3 October 2015 of 5.6p per share was paid on 18 March 2016.

No interim dividend for the 52 week period ended 1 October 2016 was paid.

No final dividend for the 52 week period ended 1 October 2016 was paid.

No interim dividend for the 52 week period ending 30 September 2017 is proposed.

 

A copy of the Interim Report will be sent to shareholders shortly and will be available on the Company's website: www.pressuretechnologies.com


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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