TIDMPRES
RNS Number : 3613I
Pressure Technologies PLC
30 August 2016
30 August 2016
Pressure Technologies plc
("Pressure Technologies" or the "Group")
Update on Recent Trading
The Board of Pressure Technologies plc (AIM: PRES), the
specialist engineering group, today issues an update on recent
trading and expectations for the year ending 2 October 2016.
Trading in our three manufacturing divisions, Cylinders,
Precision Machined Components and Engineered Products, overall
continues to be in line with market expectations and despite the
ongoing challenges of the oil and gas market there have been some
positive developments.
Since we announced the interim results in June, our Alternative
Energy Division has secured a further GBP8.5 million of firm
contracts and a conditional award of a contract for GBP6.5 million
to add to the GBP10 million that were signed in the first half of
the year. This includes two projects that will use our new Kauri
plant, the world's largest volume single upgrader.
As we have highlighted previously, the outturn for the current
year is dependent on the timing of contracts in this division. It
is now clear that delays both in award and commencement on a number
of these contracts, particularly in the USA, will have a
significant impact on the expected results for the year as a whole,
albeit that the 2017 financial year will be positively impacted as
a result. In addition to these delays, we have also encountered
some unanticipated additional legacy costs and margin erosion on a
first of type project in North America. These factors, coupled with
R&D spend that has been charged to the profit and loss account
as part of our tax planning, will swing the division from a profit
to a loss that will materially impact the Group result.
We now anticipate that the full year result at Group level will
be a loss against a market expectation of a profit.
Manufacturing divisions
Set against the background of continued weakness in the oil and
gas market it is pleasing to note that the Precision Machined
Components Division has increased market share by securing a number
of new customers and diversifying into new markets since the
interim announcement in June. This is evidenced by our South Wales
subsidiary, Al-Met, which has recently won its single largest ever
order of US$1.2 million from the water industry for delivery in
quarter one of our 2017 financial year.
We have continued to focus on productivity and cost reduction
whilst maintaining our core skills. Further headcount reductions
have been made, particularly in the Engineered Products Division,
although the full benefit of these has not yet been seen as volumes
declined further in the second half. We are in the process of
transferring the business and staff of the Engineered Products
Houston sales and maintenance office to a third-party distributor.
This move widens the scope of potential sales for the division from
the Texas and Louisiana region to the whole of North America,
without the attendant costs of maintaining a satellite facility.
The transfer is due to be completed by early September and one off
costs of GBP0.7 million are anticipated in the current financial
year.
The Cylinder Division continues to be underpinned by its focus
on the defence market and its integrity management service. It is
also in the process of gaining US Department of Transportation
approvals for its latest generation of transportable jumbo
cylinders, which will open up access to the North American
industrial gases market at a time where we are cost competitive
against our major competitors in that market.
Alternative Energy
As highlighted above, whilst the progress within this division
has been pleasing in terms of new contract wins the timing of
revenue recognition has slipped from the current year to the 2017
financial year, in part due to delays in customers securing project
finance. Around GBP16 million of contracts, including the
conditional contract, will be carried over for completion in the
2017 financial year.
The issues surrounding additional legacy costs and margin
erosion on a first of type project in North America, which also
impacted profitability, have now been addressed.
The division continues to invest heavily in R&D with major
projects on the Kauri, a low cost version of the small Kanuka
upgrader, membrane and California rule 30 natural gas composition
compliance. For reasons of tax efficiency these are now being
expensed rather than posted to the balance sheet.
Banking and cash
The Board continues to monitor cash flow as a priority. The
final payment of GBP2.3 million deferred conditional consideration
in respect of Roota was paid in July but this will be compensated
for by operational cash generation and receipts from major
contracts which have been paid or are due before the year end. The
Group therefore expects to meet its banking covenant tests at the
financial year end.
Outlook
Looking to the 2017 financial year, trading conditions in the
oil and gas market continue to be challenging and while the market
is balancing, the outlook for recovery is slow. We therefore
anticipate that trading in our manufacturing divisions will remain
around its current level throughout the next financial year.
The bow wave of contracts for Alternative Energy is very
encouraging and with customer financing issues resolved on the
current contracts, the Group expects significant progress in 2017.
The balance of the GBP26 million immediate project pipeline for our
core markets reported in the interim statement is still to be
converted to orders. The prospective pipeline beyond this remains
strong across the UK, Europe and North America and we expect the
division to be a major profit generator for the Group in 2017 and
beyond.
The Board remains confident in the medium to long-term prospects
for the Group and believes that when the oil and gas market returns
it will present considerable opportunities. In the meantime, we
will take whatever measures are necessary to ensure the resilience
of our businesses whilst continuing to invest in the future of the
Group and implement the strategic objectives to broaden our
customer, technology and industrial base.
For further information, please contact:
Pressure Technologies plc Tel: 0114 257 3622
John Hayward, Chief Executive www.pressuretechnologies.com
Joanna Allen, Group Finance
Director
Keeley Clarke, Investor Relations
Tavistock Tel: 020 7920 3150
Simon Hudson
Cantor Fitzgerald Europe (Nominated Tel: 020 7894 8337
Adviser and Broker)
Philip Davies / Will Goode
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 the 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
Engineered Products
-- Hydratron, Manchester and Houston, acquired in 2010 www.hydratron.com
Cylinders
-- Chesterfield Special Cylinders, Sheffield, IPO cornerstone in
2007 www.chesterfieldcylinders.com
-- Kelley GTM Manufacturing, Amarillo - 40% stake acquired by
the Group in December 2013 www.kelleygtm.com
Alternative Energy
-- Chesterfield BioGas, Sheffield, founded in 2008. Renamed
Greenlane Biogas UK on 5 June 2015.
-- Greenlane, Vancouver, Canada and Auckland, New Zealand, acquired in October 2014
www.greenlanebiogas.com
This information is provided by RNS
The company news service from the London Stock Exchange
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