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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Pressure Technologies Plc | LSE:PRES | London | Ordinary Share | GB00B1XFKR57 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 37.50 | 36.00 | 39.00 | 37.50 | 36.50 | 37.50 | 10,000 | 08:00:10 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Fluid Powr Cylindrs,actuatrs | 31.94M | -679k | -0.0219 | -17.12 | 11.65M |
From Apr 2019 to Apr 2024
TIDMPRES
RNS Number : 6342R
Pressure Technologies PLC
13 December 2016
13 December 2016
Pressure Technologies plc
("Pressure Technologies" or the "Group")
2016 Audited Preliminary Results
Pressure Technologies (AIM: PRES), the specialist engineering group, announces its preliminary results for the year ended 1 October 2016.
John Hayward CEO, Pressure Technologies said:
"The year has seen both the rebuilding of our Alternative Energy Division, following its restructuring in 2015, and the completion of the restructuring of our Manufacturing Divisions. The Group is far more resilient, with Manufacturing Divisions now structured to be profitable in the current market and an Alternative Energy Division on the brink of a breakthrough to sustainable revenues and profits.
"Significant progress in diversification has been made in the Cylinders Division and we continue to seek out new products and markets for the EP and PMC Divisions. The acquisition of Martract Ltd in December 2016 will assist with this process."
Financial
-- Revenue of GBP35.8 million (2015*: GBP53.8 million ) -- Adjusted operating loss** GBP(0.4) million (2015*: GBP3.8 million profit)
-- Adjusted operating profit** in the Manufacturing Divisions GBP2.2 million (2015: GBP6.7 million)
-- Adjusted operating loss** in Alternatively Energy slightly ahead of market expectation at GBP(1.1) million with H1 GBP0.9 million and H2 GBP0.2 million (2015: GBP(1.1) million)
-- Annualised savings of GBP5.4 million achieved from restructuring over the last two years -- Net debt reduced to GBP6.6 million (2015: GBP7.1 million) -- Adjusted loss per share (2.6)p (2015 restated: earning per share of 18.1p) -- Profit after tax GBP0.6 million (2015: GBP1.2 million) -- Final dividend nil (2015: 5.6p)
* represented to show results of the Engineered Products US operation as discontinued
** before acquisition costs, amortisation and exceptional charges and credits
Operational
-- Revenues from oil and gas reduced to 43% (2015: 57%) -- Manufacturing Divisions gross margins held up at 31% (2015: 32.2%) -- Manufacturing Divisions aligned to be profitable at volumes seen in the second half -- Al-Met won largest ever order of $1.2 million -- Post year end strategic acquisition of Martract Limited -- Alternative Energy has GBP14.2 million of upgrader orders carried over for delivery in 2017
For further information, please contact:
Pressure Technologies plc Tel: 0114 257 3622 John Hayward, Chief Executive www.pressuretechnologies.com Jo Allen, Group Finance Director Keeley Clarke, Investor Relations Cantor Fitzgerald Europe (Nominated Tel: 020 7894 8337 Adviser and Broker) Philip Davies / Will Goode Tavistock Tel: 020 7920 3150 Simon Hudson
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 www.chesterfieldcylinders.com
-- Kelley GTM Manufacturing, Amarillo, USA - 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
Chairman's Statement
The last 12 months have been incredibly busy for the Group, as we realigned our manufacturing businesses to remain profitable at the current volumes from the oil and gas sector, whilst working to build the order book for Alternative Energy. For the first time in the Group's history, less than half, 43%, of our revenues came from the oil and gas sector, with alternative energy and defence making significant contributions of 32% and 18% respectively.
The underlying qualities of our manufacturing divisions and the swift management action taken at the beginning of the downturn in the oil and gas market are evidenced by the results from these divisions, which overall remained both profitable and cash generative.
Post year-end we added another business to the Precision Machined Components Division (PMC), Martract Limited, which is a strong strategic fit, strengthens our existing market position and gives significant opportunity to penetrate new markets.
There continues to be substantial potential for the Alternative Energy Division. That said, it had a somewhat frustrating year, suffering from contract award delays and some legacy costs which adversely impacted revenues and profits. However, as a result of much hard work, it is encouraging to report that we ended the year with an upgrader order book value of GBP14.2 million, which is GBP11.5 million higher than the same point last year.
The speed and degree of change across the Group would not have been possible without the dedication and commitment of our employees at all levels. As a specialist engineering Group we rely on the skills of our employees to maintain our reputation for quality and integrity. On behalf of the Board, I would like to take this opportunity to thank them all for their continued hard work and support.
Results
Following the closure of Engineered Product's US manufacturing facility in September, the results for the year only show the continuing operations and the prior year comparison has been represented. On this basis, revenues for the Group fell by over 33% to GBP35.8 million (2015: GBP53.8 million) as our manufacturing businesses continued to face declining sales volume from the oil and gas market. Anticipated volume from our Alternative Energy Division, which is unaffected by the oil and gas market, did not materialise in the period due to delays to certain projects and delayed contract awards. The impact on adjusted operating profit was a loss of GBP0.4 million (2015: GBP3.8 million profit).
Net asset value was GBP34.8 million (2015: GBP36.3 million) and operating cash generation was GBP4.4 million (2015: GBP7.9 million) after reorganisation costs. At the year-end, net debt was GBP6.6 million (2015: GBP7.1 million). Given the reduction in revenues and that the final deferred consideration for Roota of GBP2.5 million was paid out of cash, along with other non-operating cash inflows of GBP0.4 million, this result is pleasing and reflects the underlying disciplines in place.
Restructuring and redundancy costs in the period were GBP0.7 million (2015: GBP0.7 million) giving total annualised savings of GBP3.8 million, bringing the total annualised savings since October 14 to GBP GBP5.4 million.
Given the Board's outlook for oil and gas for 2017 and with the enlarged Alternative Energy Division still to deliver a profit, the Board has taken the decision that a final dividend will not be paid this year and as no interim dividend was paid there is no dividend payment for the year (2015: 8.4p).
Outlook
The Group will continue its growth strategy, combining acquisitions and organic growth. Our Manufacturing Divisions are firmly focused on expanding revenues outside the oil and gas sector and the medium-term aim is to have a better balance of business within these Divisions, as well as realising the potential of the Alternative Energy Division, which has different market drivers to the rest of the Group.
In the oil and gas market, global oil demand is forecast to marginally increase by 1.5% in 2017 to 96.89 million barrels per day (mbpd) driven by demand from non-OECD Asia. Before OPEC's recently announced output reductions, global oil production was projected to remain essentially steady at 95.69mbpd in 2017. However, any projection is fraught with uncertainty. The cuts may only have a small impact on global oil production growth, since compliance by some states has historically proven to be highly unreliable. The recent increase in drilling activity seen in USA shale oil fields, spurred on by a relatively stable oil price of around $50 barrel, may well give rise to increasing output, thereby pinning prices at today's levels. Rex Tillerson, CEO at Exxon Mobile, recently commented that production from USA shale regions will keep oil prices subdued in the medium term.
The Board's views concur with those of Tillerson and our Manufacturing Divisions are structured to continue making profits in the current market environment, with a focus to diversify outside of oil and gas markets.
The Cylinders Division has long-term defence market orders and the prospect of further growth in this sector from future UK, Australian and US submarine build programmes. Short-term growth will be derived from the expansion of the division's service offerings, particularly our unique Integrity Management service, which brings laboratory level inspection direct to site.
The Precision Machined Components and Engineered Products Divisions will continue to take opportunities to expand customer and geographic focus within the oil and gas market, but will also expand into other market sectors going forward. The acquisition of Martract Limited, will assist with this process given that 60% of its business is from a range of industries outside of oil and gas.
In the near-term, Alternative Energy remains an exciting area of growth for the Group. The global market for biogas upgrading is growing at a combined annual rate of nearly 30%, driven predominantly by Government regulations and greenhouse gas emission targets. Greenlane is a well-known established global brand and as one of the only companies to offer three of the main upgrading technologies, we are well positioned to realise our potential over the medium-term. With a strong order book for 2017 and a considerable pipeline of follow-on projects the Board expects the potential within this division to be realised.
The Board remain confident in the medium to long-term prospects for the Group.
Alan Wilson
Chairman
13 December 2016
BUSINESS REVIEW
The year has seen both the rebuilding of our Alternative Energy Division, following its restructuring in 2015, and the completion of the restructuring of our Manufacturing Divisions. The Group is far more resilient, with Manufacturing Divisions now aligned to be profitable in the current market and an Alternative Energy Division on the brink of a breakthrough to sustainable revenues and profits.
Whilst oil and gas remained the major market for the Group's products, accounting for 43% of Group revenues in the year, this was a marked reduction from 2015 where 57% of revenues were to this market. The five-year picture shows:
Hot Features
Premium
2016 2015 2014 2013 2012
Oil and gas market
revenue % 43% 57% 72% 79% 77%
Revenue GBPm 15.5 30.8 36.7 25.4 21.9
Expansion of the Alternative Energy Division and further diversification in our Manufacturing Divisions will see this trend continue in 2017.
The key points for the year are:
Manufacturing Divisions
The Group's manufacturing Divisions have made significant additional cost reductions in the year, the full benefits of which will be realised in 2017. Headcount has been reduced by a further 77 employees, making an overall decrease of 44% since October 2014. Whilst cuts have been significant, key skills have been retained, so there will not be any adverse impact on quality and service. The Divisions are structured to be profitable in the current oil market climate and will continue to diversify their customer base and end markets.
Precision Machined Components Division ("PMC")
2016 2015 2014 2013 2012
Revenue GBPm 10.7 18.8 13.0 6.4 4.8
Adjusted operating
profits GBPm 1.4 4.5 3.0 1.0 0.1
This Division comprises Al-Met, Roota Engineering and Quadscot Precision Engineers. 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 product in a range of high-alloy materials.
PMC's revenues are almost wholly derived from the oil and gas market, so have been impacted by reductions in customer spending. However, Al-Met's world-class lead-times and Roota's niche capability for machining complex geometrical shapes in unforgiving materials have given both increased market share and developed new customers in the falling market. Quadscot has experienced more difficult trading conditions, due to its reliance on making components for subsea oil exploration and production, plus a larger pool of competitors chasing volume at low prices. However, in-sourcing component manufacture from Chesterfield Special Cylinders and Hydratron has given Quadscot some cushion against the downturn. The Division is profitable at current order levels.
Headcount reduction has continued in PMC, as we aligned costs with current order levels. Since its October 2014 peak, headcount has been reduced by 49% (2015: 22%). At the same time, technical capability has been strengthened through recruitment, which is yielding improvements in processes and, when volumes recover, will give rise to significant productivity gains as the division has significant latent capacity.
Customer ordering patterns remain unpredictable, but do not appear to be subject to further deterioration. Al-Met took a $1.2 million order, its largest ever, for an oil and gas project in the Middle-East for delivery in 2017, but this was exceptional in an otherwise subdued market. This order was previously reported as a water industry project but it became apparent during order fulfilment that it was for the oil industry.
The oil and gas market will remain very important to the division, which has market leading capabilities to manufacture highly complex components to exacting tolerances in demanding materials. These capabilities are important to the market irrespective of activity levels. However, the division continues to seek out opportunities for diversification away from the oil and gas market. In the longer-term work done to obtain "Fit for Nuclear" accreditation should translate into incremental revenues and the division continues to seek entry points into the defence, aerospace and automotive markets.
The purchase of Martract Ltd in December 2016, as well as being immediately earnings enhancing, brings several benefits, such as expanding relationships with existing customers, reducing order delivery lead-times through vertical integration within the Division and giving access to non-oil and gas markets.
Capital expenditure was GBP0.3 million, principally on equipment to improve productivity with the major spend in the year centred on Roota. No major capital expenditure is required in 2017, unless new customer demand requires investment to extend the current product range.
Engineered Products Division ("EP")
2016 2015 2014 2013 2012
Revenue GBPm 4.1 6.7 8.1 7.3 6.9
Adjusted operating
(loss)/profit
GBPm (0.3) 0.1 1.6 1.1 1.1
The EP 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's products are typically capital equipment purchases, so sales have been severely impacted by the downturn in the oil and gas sector where budgets have seen major cutbacks.
At the start of the year, the Division comprised Hydratron Ltd, based in Altrincham in the UK, plus a satellite facility, Hydratron Inc, based in Houston Texas. During 2016, it became apparent that this US manufacturing facility was too small to achieve meaningful market penetration, so a distributor was appointed in September to handle sales. Key operational staff and inventories were transferred to the distributor and international sales and design staff relocated back to the UK. This has the double advantage of eliminating fixed costs, whilst unlocking much larger market opportunities in the Americas.
The UK operation has been radically restructured. Since October 2014, headcount has been reduced by 64%, the majority of which was in the year under review (2015: 28%). The whole business is in the process of implementing a lean operating system to reduce lead times and costs. Breakeven sales levels have been reduced in the year from over GBP700,000 per month to under GBP400,000. Delivery lead times for standard pumps and power packs have been reduced from over two months to under two weeks and in some cases next day delivery. A review of core competencies has resulted in external sourcing of clamping systems for test benches which significantly reduces costs whilst at the same time expands the product range.
Revenues have been constrained by its limited geographical reach. Strong distribution channels exist in the UK, USA, Arabian Gulf, Australia and Singapore, but this leaves a significant number of regions to be targeted. Consequently, the business is focused on expanding sales channels and new distribution agreements have recently been concluded for South and West Africa and Italy. Other regions will be included in due course.
Cylinder Division
2016 2015 2014 2013 2012
Revenue GBPm 9.5 14.3 21.4 17.3 16.3
Adjusted operating
profits GBPm 1.1 2.1 3.8 3.6 2.3
Chesterfield Special Cylinders ("CSC"), supplies a range of high-pressure cylinder systems into the defence, oil and gas and industrial gases markets. The principal reduction in revenues in the year was due to a further GBP4 million fall in sales into the oil and gas market. Over the last two years, revenues from this sector have reduced by GBP15 million, as the market for Air Pressure Vessels ("APVs") used in motion compensation systems has to all intent and purpose disappeared. Major recovery in this market depends on orders being placed for new drillships and semi-submersible drilling rigs, which is highly unlikely as long as current market conditions continue. The remainder of the decline in the year was due to reduced defence sales, partially offset by growth in service projects.
The fall in defence sales was a result of phasing on submarine projects, rather than any softening in the market and the defence orderbook and pipeline remains healthy. CSC remains the established leader in sales to NATO and NATO-friendly nations outside the USA.
After 18 months of operation, our sales team in the USA continues to make good progress in entering the US defence and commercial markets. Entry into a new market typically takes three to five years and progress is in line with management expectations. Inspectors from the US Department of Transportation conducted a certification audit at CSC in the summer and we now have all the required approvals to sell into the US transportable gases market.
Sales of services increased by 28% year-on-year, with the start of a new cycle of trailer reconditioning and a further increase in the Integrity Management service. Revenues from Integrity Management increased by 14% to just over GBP1.0 million, primarily due to increased activity in the defence sector. Services now account for 25% of sales and approximately 28% of the Divisional gross margin (2015: 13% and 17% respectively).
Headcount reduction in CSC has been less marked than in PMC and EP, as significant overhead is required to support the defence and services revenue streams. The business operates in highly specialised markets with few people worldwide having relevant skills and experience. That said, the division has reduced headcount by 15% over the period since October 2014 (2015: 6%) and significant work has been carried out to improve productivity and eliminate waste.
The year's capital expenditure of GBP0.4 million was spread across a range of productivity, process and health and safety projects. Capital expenditure for 2017 is anticipated to be similar to 2016.
Alternative Energy Division
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 upgrader market is driven by environmental subsidy rather than oil and gas prices, giving a welcome source of sales diversification for the Group. Unlike our three manufacturing Divisions, AE subcontracts manufacturing to a number of specialists that are located close to installation sites. This avoids the fixed costs of maintaining manufacturing facilities and gives the flexibility to move production to suit customer needs.
2016 2015 2014 2013 2012
Revenue GBPm 11.3 14.0 8.4 1.1 0.2
Adjusted operating
result GBPm (1.1) (1.1) 1.1 (0.5) (0.5)
The Division was transformed by the purchase of the business and certain assets of its technology provider, Greenlane, in October 2014 and now trades under that name. This has given the Division a worldwide platform for selling biogas upgrading technology, trading out of the UK, Canada and New Zealand. In 2012, the Division accounted for 1% of Group revenues, in 2016 it accounted for 32% of Group revenues (2015: 26%).
Following major restructuring of the Division in 2015, the past year has focused on rebuilding the order book and it is pleasing to note upgrader contracts worth GBP20.8 million were secured. However, due to customer enforced delays, the full financial benefit of these contracts will not be realised until 2017. As a result of this, plus additional costs on legacy contracts, the Division was loss making for the year.
Development activity was spread across projects for water wash technology, pressure swing adsorption ("PSA") and membrane technologies making the division the only "technology agnostic" provider of upgrader equipment in the market. Consequently, Greenlane can offer its customers the most appropriate solution for each project. Developments in water-wash technology have been at both ends of the processing size range. At the high-volume end, the new Kauri water wash upgrader is capable of processing up to 5,000 cubic meters of biogas per hour and is the largest system on the market. At the low-volume end of the market, the Kanuka Gen 2.0 is a low-cost value engineered upgrader designed for entry level projects, with volumes of up to 300 cubic metres of biogas per hour. Greenlane has orders for both models for delivery in 2017. Two PSA systems are currently being installed in North America and several membrane systems have been quoted.
Over GBP14 million of upgrader orders were carried over for delivery in 2017, destined for the North American, UK and European markets. The pipeline of potential contracts with a medium to high probability of securing orders in the first-half of the year is in excess of GBP13 million. The division's business model is to focus on markets where subsidies and incentives are certain. Market activity continues to grow in the USA, Canada, Brazil, the UK, the Netherlands and France and we are concentrating our efforts in these areas and Italy where the market activity is just beginning.
The operational businesses in the Division have a target of covering 100% of their fixed costs through maintenance contracts. In 2016, the UK and Europe achieved 30% coverage and the North American business 7%. The lower coverage in North America is a combination of lack of development of the market and customer's preferring to maintain their own equipment.
Capital expenditure for the year was less than GBP0.1 million, whilst GBP0.2 million will be invested this year, primarily in new business systems.
People
Continuing weakness in the oil and gas market resulted in a second wave of redundancies in the manufacturing divisions. These redundancies have been backed up by investment in equipment and working practices to ensure that the flexibility and ability to expand as market conditions improve have not been lost. As ever, we have been careful to ensure that we have retained our core skills.
Our apprentice and graduate training schemes have continued. I am pleased to report that one of our CSC apprentices won apprentice of the year at the Made in Sheffield Awards, another former apprentice was awarded a 1(st) class honours degree in engineering and the finance director of the PMC Division has been awarded an MBA with distinction, all sponsored by the Group.
There will be a focus in 2017 on succession planning and management training. The Group has a cadre of young talent that will form part of the next generation of senior management. It is crucial to the Group's long-term success that we nurture and develop these people, as well as developing the skills of our existing senior management teams.
Summary and outlook
This was another busy year for the Group as the restructuring and rebuilding begun in 2015 in all important respects was completed, resulting in a much better balanced mix of revenues from the oil and gas, defence and alternative energy markets.
The oil and gas market will remain an important revenue and profit generator for the Group. However, we also expect to make further progress in diversifying our manufacturing divisions to reduce the dominance that the oil and gas market has in Group results. Significant progress in diversification has been made in the Cylinders Division and we continue to seek out new products and markets for the EP and PMC Divisions. The acquisition of Martract Ltd in December 2016 will assist with this process.
The value of firm contracts for 2017 in Alternative Energy is very encouraging. The prospective new orders 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 have taken and will continue to take the action necessary to ensure the resilience of our businesses whilst continuing to invest in the future of the Group and implement strategic objectives to broaden our customer, technology and industrial base.
John Hayward
Chief Executive
13 December 2016
FINANCIAL REVIEW
Overview
I am pleased to present the results in what has been an incredibly busy year of change and consolidation for the Group.
The financial results show a clear difference emerging between the Manufacturing Divisions, which are higher margin, book and ship with short working capital cycle and Alternative Energy, which is lower margin long term contracting with much higher individual value projects characterised by a variable working capital profile.
Much work has been done over the year to maintain cash generation and this achievement has enabled continued investment in capital assets during the year and a strategic acquisition post year-end.
Manufacturing
Overall the Manufacturing Divisions continued to perform in line with the latest market expectations and there have been some positive developments in the year.
In September the closure of the Engineered Products US manufacturing facility was completed as part of the Group restructuring and this is presented as a discontinued operation under IFRS5 "Non-current Assets Held for Sale and Discontinued Operations" and the 2015 results have been represented accordingly. This operation had been loss making for the last two years and it had become clear that it was not of a sufficient scale to penetrate the US market effectively and should be closed. Further details of this are given in Note 8 to the financial statements.
Revenue in the continuing operations has been significantly impacted by the lower oil and gas market volumes and fell to GBP24.4 million (2015: GBP39.8 million). This is particularly marked in the PMC Division, which experienced a 43% reduction from the prior year.
Gross Profit Margin held up at 31% (2015: 32.2%). The first half of the year was stronger than the second half, which was impacted by competitive pricing pressures in PMC and the mix of work in CSC. The success of the restructuring of the Engineered Products Division is evidenced by the 4.2ppt improvement in year-on -year gross margin.
Operating profit in the Manufacturing Divisions (before acquisition costs, amortisation and exceptional charges) reduced to GBP2.2 million (2015: GBP6.7 million). The return on sales (RoS) was adversely impacted by the significant sales volume reduction, decrease in gross margin and comparatively higher fixed cost in the first half whilst the restructuring was ongoing. This is now largely complete and the divisions have been scaled down to be profitable at the low volumes experienced in the second half. The impact of this is a 4ppt improvement in RoS in the second half.
Cash generation is, and remains, strong in the Manufacturing Divisions with an operating cash inflow of GBP5.2 million (before exceptional redundancy costs) demonstrating the underlying stability and strength in this part of the Group.
Alternative Energy
As noted in the August trading update statement delays both in timing of award and the commencement on a number of contracts, particularly in the USA, have had a significant impact on the expected results for the year as a whole. The Operating Loss (before acquisition costs, amortisation and exceptional charges) was GBP1.1 million, slightly ahead of the latest market expectation for the year (2015: Loss GBP1.1 million).
In addition to the slippage of sales, we also encountered some unanticipated, additional legacy costs (GBP0.4 million) and margin erosion on a first of type project in North America. As a result gross margin fell to 17.4% for the full year (2015: 20.8%). Profitability improved over the year with the first half loss of GBP0.9 million reducing to GBP0.2 m in the second half, as the phasing of work and momentum in order award and commencement picked up.
The Group continued to invest in technology in the Alternative Energy Division and R&D costs of GBP0.2 million have been expensed in the year (2015: GBP0.7 million).
The remaining provision for deferred consideration of GBP3.3 million (net of foreign currency losses on revaluation) was released in the first half. The delays in the timing of orders and operating loss means the relevant businesses are no longer expected to hit the future trigger points for the earn-out payments which are fixed with the financial year. Given this is a non-trading item it has been presented as an exceptional item, in accordance with Group's accounting policies.
As the Alternative Energy Division grows the short-term challenge is managing the working capital requirement. Individual projects are planned to be at least working capital neutral throughout, however, given the size of the contracts and associated invoicing milestones the cash flows can be variable and disconnected from the profit recognition. The Division was cash generative in the year generating GBP0.9 million operating cash inflow, despite the losses, as a result of the phasing of the contracts in the second half (2015: operating cash inflow GBP0.2 million).
Central costs
Unallocated central costs (before acquisition costs, amortisation on acquired businesses and exceptional charges and credits) were GBP1.5 million (2015: GBP1.8 million). This reduction reflects the Group wide focus on cost reduction and combining of roles as part of the group wide restructuring.
Foreign Exchange
The Group has a number of major exposures to movements in foreign exchange rates related to both transactional trading and translation of overseas investments.
In the year under review, the principal exposures which arose from trading activities, were to movements in the value of the Euro and the US Dollar relative to Sterling. As the Group companies both buy and sell in overseas currencies, particularly the Euro and the US Dollar, there is a degree of natural hedge already in place. In the Alternative Energy division the currency exposure is actively managed at the outset of a project and appropriate forward contracts taken out to cover the majority of the exposure. As at 1 October 2016 there were no forward contracts in place (2015: GBP26k).
In 2016 a net gain of GBP0.7 million (2015: GBP0.2 million) has been recognised in adjusted operating profit in respect of realised and unrealised transactions in Euro, US Dollar, Canadian Dollar and New Zealand Dollar. A loss of GBP0.5 million (2015: GBP0.4 million gain) has been recorded below adjusted operating profit in respect of the retranslation of the deferred consideration liability denominated in New Zealand Dollars.
At the present time no cover is held against the value of overseas investments or intercompany loans with overseas entities as these are expected to be held for the long term and over the next year dividend flows are not expected to be significant.
Taxation
The tax credit for the year was GBP1.0 million (2015: GBP0.1 million). The loss before tax, effect of the change in tax rates in the year and adjustments in respect of prior years have all contributed to the significant credit in the current year.
The applicable current tax rate for the year is 20% (2015: 20.5%). The reduction in rate of tax and the utilisation of losses have resulted in a lower effective tax rate than the current rate of tax.
Corporation tax refunded in the year totalled GBP0.5 million (2015: tax paid GBP1.8 million), all of which relates to the UK.
Funding and cash flow
Net debt reduced to GBP6.6 million (2015: GBP7.1 million) as the strong cash generation in the Manufacturing Divisions combined with the Alternative Energy Division to generate net operating cash inflow of GBP5.1 million, before restructuring costs of GBP0.7 million (2015: net cash inflow GBP7.9 million). Net debt would have been in line with market expectation had a number of significant expected receipts in the AE Division been received before the balance sheet date. Operating cash generation in second half was stronger (GBP2.7 million vs GBP2.4 million in the first half) before exceptional redundancy costs due to the profitability of the Manufacturing Divisions.
Cash conversion (cash inflow from operating activities divided by adjusted operating profit) in the Manufacturing Divisions was a ratio of 2.4:1. The losses in AE and overall Group operating loss (before acquisition costs, amortisation and exceptional charges) mean a group cash conversion ratio is not calculated this year (2015: 2.41:1).
Non-trading cash flows reflect the continued investment in the business through capital expenditure of GBP0.9m and payment of the final Roota acquisition deferred consideration of GBP2.5 million, along with the final 2015 dividend payment GBP0.8 million.
The Group complied with all financial covenants on the banking facilities during the year.
Post balance sheet events
On 7 December 2016 the Group acquired the entire issued share capital of UK based Martract Limited. The maximum total consideration for the Acquisition was GBP4.3 million on a cash free, debt free basis, comprising an initial cash consideration of GBP3.7 million plus cash balances ("Initial Consideration") and a conditional deferred payment of up to GBP0.6 million ("Additional Consideration"). The Additional consideration payable in respect of the 12 month period following the Acquisition (the "Earn-out Period") is dependent on the future EBITDA performance of Martract. The Initial Consideration will be met from the Group's existing bank facilities and cash.
Joanna Allen
Finance Director
13 December 2016
CONSOLIDATION STATEMENT OF COMPREHENSIVE INCOME
For the 52 week period ended 1 October 2016
Notes 52 weeks ended 53 weeks ended
1 October 3 October
2016 2015
GBP'000 GBP'000
Revenue 1 35,753 53,816
Cost of sales (26,211) (38,056)
Gross profit 9,542 15,760
Administration expenses (9,923) (11,942)
Operating (loss)/profit before acquisition costs, amortisation and
exceptional charges and
credits 1 (381) 3,818
Separately disclosed items of administrative expenses:
Amortisation and acquisition related exceptional items 3 1,123 (291)
Other exceptional charges and credits 4 (798) (425) Operating (loss)/profit (56) 3,102 Finance income 32 15 Finance costs (335) (457) Exceptional costs in relation to the option on and loan to KGTM 5 - (1,408) Share of losses of associate 12 - (151) (Loss)/profit before taxation 2 (359) 1,101 Taxation 7 1,002 121 Profit for the period from continuing operations 643 1,222 Discontinued operations Loss for the year from discontinued operations 6 (1,331) (523) (Loss)/profit for the period attributable to owners of the parent (688) 699 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Currency translation differences on translation of foreign operations (426) (10) Total comprehensive income for the period attributable to the owners of the parent (1,114) 689 Basic earnings per share From continuing operation 8 4.4p 8.5p From discontinued operations 8 (9.2)p (3.6)p From (loss)/profit for the period (4.8)p 4.9p Diluted earnings per share From continuing operations 8 4.4p 8.4p From discontinued operations 8 (9.2)p (3.6)p From (loss)/profit for the period (4.8)p 4.8p
CONSOLIDATED BALANCE SHEET
As at 1 October 2016
Notes 1 October 3 October
2016 2015
GBP'000 GBP'000
Non-current assets
Goodwill 10 15,020 15,020
Intangible assets 11 11,329 13,451
Property, plant and equipment 13,765 14,348
Deferred tax asset 17 544 270
Investment in associates 12 - -
40,658 43,089
Current assets
Inventories 5,210 7,414
Trade and other receivables 13 11,279 13,539
Cash and cash equivalents 6,073 3,459
Derivative financial instruments - 26
Current tax asset - 82
22,562 24,520
Total assets 63,220 67,609
Current liabilities
Trade and other payables 14 (12,069) (13,025)
Borrowings 15 (242) (337)
Current tax liabilities (258) -
(12,569) (13,362)
Non-current liabilities
Other payables 14 (1,398) (5,078)
Borrowings 15 (12,411) (10,236)
Deferred tax liabilities 17 (2,027) (2,592)
(15,836) (17,906)
Total liabilities (28,405) (31,268)
Net assets 34,815 36,341
Equity
Share capital 724 721
Share premium account 21,620 21,539
Translation reserve (401) 25
Retained earnings 12,872 14,056
Total equity 34,815 36,341
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 52 week period ended 1 October 2016
Profit
Share and
Notes Share premium Translation loss Total
capital account reserve account equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 27
September 2014 718 21,463 35 14,313 36,529
Dividends - - - (1,209) (1,209)
Share based
payments - - - 253 253
Shares issued 3 76 - - 79
Transactions
with owners 3 76 - (956) (877)
Profit for the
period - - - 699 699
Other comprehensive
income:
Exchange differences
on translating
foreign operations - - (10) - (10)
Total comprehensive
income - - (10) 699 689
Balance at 3
October 2015 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 724 21,620 (401) 12,872 34,815
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 52 week period ended 1 October 2016
Notes 52 weeks 53 weeks
ended ended
1 October 3 October
2016 2015
GBP'000 GBP'000
Operating activities
Cash flows from operating activities 18 4,405 7,925
Finance costs paid (228) (220)
Income tax refund / (paid) 504 (1,770)
Net cash inflow from operating
activities 4,681 5,935
Investing activities
Proceeds from sale of fixed
assets 84 181
Purchase of property, plant
and equipment (883) (6,250)
Cash outflow on purchase of
subsidiaries net of cash acquired - (9,648)
Cash outflow on payment of
deferred consideration (2,500) (2,000)
Net cash used in investing
activities (3,299) (17,717)
Financing activities
New borrowings 2,300 10,000
Repayment of borrowings (342) (185)
Dividends paid (810) (1,209)
Shares issued 84 79
Receipt of government grants - 200
Net cash from financing activities 1,232 8,885
Net increase / (decrease) in
cash and cash equivalents 2,614 (2,897)
Cash and cash equivalents at
beginning of period 3,459 6,356
Cash and cash equivalents at
end of period 6,073 3,459
NOTES
Accounting policies
Basis of preparation
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 of the Companies Act 2006. It has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) adopted for use in the European Union, including IFRIC interpretations issued by the International Accounting Standards Board, and in accordance with the AIM rules and is not therefore in full compliance with IFRS. The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2015 annual report. The financial statements have been prepared under the historical cost convention, except for derivative financial instruments which are carried at fair value.
The financial information for the period ended 1 October 2016 was approved by the Board on 12 December 2016 and has been extracted from the Group's financial statements upon which the auditor's opinion is unmodified and does not include a statement under section 498(2) or (3) of the Companies Act 2006.
The statutory accounts for the period ended 1 October 2016 will be posted to shareholders at least 21 days before the Annual General Meeting and made available on our website www.pressuretechnologies.com. In due course, they will be delivered to the Registrar of Companies. The statutory accounts for the period ended 3 October 2015 have been delivered to the Registrar of Companies.
Going concern
The consolidated financial statements have been prepared on a going concern basis.
Management has produced forecasts for all business units which have been reviewed and approved by the Directors. These demonstrate the Group is forecast to generate profits and cash in 2016/2017 and beyond and that the Group has sufficient cash reserves and bank facilities to enable the Group to meet its obligations as they fall due for a period of at least 12 months from when these financial statements have been signed. Management have modelled the financial covenants in the forecasts and no breach is expected.
As such, the Directors are satisfied that the Company and Group have adequate resources to continue to operate for the foreseeable future. For this reason they continue to adopt the going concern basis for preparing the financial statements.
1. Segmental analysis
The financial information by segment detailed below is frequently reviewed by the Chief Executive who has been identified as the Chief Operating Decision Maker (CODM). The manufacturing and Alternative Energy divisions are distinct due to the nature of the underlying businesses and as such are grouped on that basis.
For the 52 week period ended 1 October 2016
Precision
Machined Engineered Manufacturing Alternative
Cylinders Components Products sub total Energy Central costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
- total 9,538 11,319 4,163 25,020 11,335 - 36,355
- revenue from
other segments - (576) (23) (599) (3) - (602)
Revenue from
external
customers 9,538 10,743 4,140 24,421 11,332 - 35,753
Gross Profit 3,226 3,350 994 7,570 1,972 - 9,542
Operating profit
/ (loss) before
acquisition
costs,
amortisation on
acquired
businesses and
exceptional
charges and
credits 1,053 1,398 (291) 2,160 (1,060) (1,481) (381)
Acquisition
related
exceptional
items and
amortisation
(charges) /
credits* - (1,462) - (1,462) (703) 3,288 1,123
Other
exceptional
charges (84) (359) (333) (776) (22) - (798)
Operating profit
/ (loss) 969 (423) (624) (78) (1,785) 1,807 (56)
Exceptional
costs in
relation to the
option on and
loan to KGTM - - - - - - -
Share of losses
of associate - - - - - - -
Net finance
(costs) /
income - (11) - (11) 29 (321) (303)
Profit / (loss)
before tax 969 (434) (624) (89) (1,756) 1,486 (359)
Segmental net
assets ** 7,132 22,153 2,868 32,153 13,876 (11,214) 34,815
Other segment
information:
Capital
expenditure 419 268 140 827 92 42 961
Depreciation 330 822 128 1,280 95 102 1,477
Amortisation - 1,462 - 1,462 703 1 2,166
*Includes fees associated with making acquisitions.
** Segmental net assets comprise the net assets of each division adjusted to reflect the elimination of the cost of investment in subsidiaries and the provision of financing loans provided by Pressure Technologies plc.
For the 53 week period ended 3 October 2015
Precision
Machined Engineered Manufacturing Alternative Central
Cylinders Components Products sub total Energy costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
- total 14,343 18,815 6,687 39,845 13,971 - 53,816
- revenue - - - - - - -
from other
segments
Revenue from
external
customers 14,343 18,815 6,687 39,845 13,971 - 53,816
Gross Profit 5,289 6,250 1,311 12,850 2,910 - 15,760
Operating
profit /
(loss)
before
acquisition
costs,
amortisation
on acquired
businesses
and
exceptional
charges and
credits 2,111 4,512 122 6,745 (1,142) (1,785) 3,818
Acquisition
related
exceptional
items and
amortisation
(charges) /
credits* - (1,425) (135) (1,560) (720) 1,989 (291)
Other
exceptional
charges 297 - (263) 34 (309) (150) (425)
Operating
profit /
(loss) 2,408 3,087 (276) 5,219 (2,171) 54 3,102
Exceptional
costs in
relation to
the option
on and loan
to KGTM - - - - - (1,408) (1,408)
Share of
losses of
associate (151) - - (151) - - (151)
Net finance
(costs) /
income - (30) 2 (28) 3 (417) (442)
Profit /
(loss)
before tax 2,257 3,057 (274) 5,040 (2,168) (1,771) 1,101
Segmental net
assets ** 7,452 23,671 4,594 35,717 11,321 (10,697) 36,341
Other segment
information:
Capital
expenditure 1,254 1,058 110 2,422 123 3,757 6,302
Depreciation 318 770 104 1,192 93 85 1,370
Amortisation - 1,425 135 1,560 720 - 2,280
There has been no significant trading between the segments in the period.
*Includes fees associated with making acquisitions.
** Segmental net assets comprise the net assets of each division adjusted to reflect the elimination of the cost of investment in subsidiaries and the provision of financing loans provided by Pressure Technologies plc.
The following table provides an analysis of the Group's revenue by geographical destination.
Revenue 2016 2015
GBP'000 GBP'000
United Kingdom 17,235 29,211
Europe 7,817 8,929
Rest of the World 10,701 15,676
35,753 53,816
The Group's largest customer contributed 7% to the Group's revenue (2015: 12%) and is reported within the Precision Machined Components segment. No customers contributed more than 10% in the period to 1 October 2016 (2015: 1).
The following table provides an analysis of the Group's revenue by market.
Revenue 2016 2015
GBP'000 GBP'000
Oil and gas 15,527 30,822
Defence 6,469 7,471
Industrial gases 2,372 1,502
Alternative energy 11,385 14,021
35,753 53,816
The above table is provided for the benefit of shareholders. It is not provided to the PT board or the CODM on a regular monthly basis and consequently does not form part of the divisional segmental analysis.
The following table provides an analysis of the carrying amount of non-current assets and additions to property, plant and equipment.
2016 2015
Rest United Rest
United of the Kingdom of the Total
Kingdom World Total World
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current
assets 40,295 77 40,372 42,954 135 43,089
Additions
to property,
plant and
equipment 859 102 961 6,191 111 6,302
2. Profit before taxation
Profit before taxation is stated after charging / (crediting):
2016 2015
GBP'000 GBP'000
Depreciation of property, plant
and equipment - owned assets 1,387 1,271
Depreciation of property, plant
and equipment - assets under finance
lease and hire purchase agreements 90 99
Loss / (Profit) on disposal of fixed
assets 9 (10)
Amortisation of intangible assets
acquired on business combinations 2,166 2,280
Amortisation of grants receivable (99) (104)
Staff costs (see note 10) 12,911 16,366
Cost of inventories recognised as
an expense 20,538 27,615
Operating lease rentals:
- Land and buildings 323 638
- Machinery and equipment 90 94
R&D costs 200 700
Foreign currency gain (711) (215)
Share based payments 314 253
3. Amortisation and acquisition related exceptional items
2016 2015
GBP'000 GBP'000
Amortisation of intangible assets (2,166) (2,280)
Acquisition costs - (177)
Deferred consideration write back 3,766 1,749
Foreign currency (loss) / gain on
revaluation of deferred consideration
liability (477) 417
1,123 (291)
The deferred consideration write back relates to the deferred consideration arising from the acquisition of the Greenlane Group of Companies. The payment of this consideration is contingent on the future results of the acquired entities. The Directors have reviewed forecasts in relation to Greenlane and consider that it is unlikely that the consideration will be paid, and as such it has been released. Given the magnitude of the release and the fact that it is non-trading, the Directors consider it appropriate to disclose this as an exceptional item.
The revaluation of deferred consideration liability relates to the exchange differences calculated on the deferred consideration arising from the acquisition of The Greenlane Group, which was denominated in New Zealand Dollars, before it was written back. Given the large balance and therefore the effect on the results of the Group, the Directors consider it appropriate to disclose this foreign exchange movement as an exceptional item.
4. Other exceptional (charges) / credits
2016 2015
GBP'000 GBP'000
Reorganisation and redundancy (732) (747)
Costs in relation to HSE investigation (66) -
Release of rent provision - 322
(798) (425)
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. Further details on the HSE investigation can be seen in note 19.
The release of the rent provision related to a provision made in relation to IAS 17 with regards to the lease held by Chesterfield Special Cylinders at the Meadowhall site. Following the purchase of the site by the Group in January 2015, this provision was no longer required and was consequently released. Given its non-recurring nature it was disclosed as an exceptional item.
5. Exceptional costs - KGTM write off
2016 2015
GBP'000 GBP'000
Exceptional provisions in relation
to the option on and loans to KGTM - 1,408
The exceptional costs in the prior year in relation to the options on and loans to KGTM relate to provisions made by the Board against the balance of the loans receivable from KGTM, an associated company. Due to the uncertainty of repayment, the entire balance of the loan outstanding was provided for.
6. Results of discontinued operation
2016 2015
GBP'000 GBP'000
Revenue 1,267 1,754
Expenses (1,865) (2,277)
Operating Profit pre-exceptional
costs (598) (523)
Exceptional costs:
Reorganisation and redundancy (278) -
Impairment of assets on closure (455) -
Loss before taxation (1,331) (523)
Taxation - -
Profit for the year (1,331) (523)
Due to the oil and gas market conditions that continued into the second half of the accounting period, as part of the groups restructuring, the US operation of the engineered products division was closed during the year. The manufacturing facilities were wound down and fully closed in early September.
2016 2015
GBP'000 GBP'000
Cash flows from discontinued operations
Net cash used in operating activities (679) (150)
Net cash used from investing activities 27 (40)
Net cash used from financing activities 783 135
Net cash flows for the year 131 (55)
7. Taxation
2016 2015
GBP'000 GBP'000
Current tax
Current tax (credit)/expense - 269
Over provision in respect of prior
years (163) (79)
(163) 190
Deferred tax
Origination and reversal of temporary
differences (839) (307)
Over provision in respect of prior
years - (4)
(839) (311)
Total taxation credit (1,002) (121)
Corporation tax is calculated at 20% (2015: 20.5%) of the estimated assessable profit for the period. Deferred tax is calculated at the rate expected to be substantively enacted when the temporary differences unwind (2015: 20%).
The charge for the period can be reconciled to the profit per the consolidated statement of comprehensive income as follows:
2016 2015
GBP'000 GBP'000
Profit before taxation (359) 1,101
Theoretical tax at UK corporation
tax rate 20% (2015: 20.5%) (72) 226
Effect of (credits) / charges:
* non-deductible expenses and other timing differences 131 (46)
* disallowable release of deferred consideration (658) (369)
- other disallowable acquisition
costs - 126
- Research and development allowance (54) (23)
* adjustments in respect of prior years (160) (83)
* effect of unrealised overseas 126 46
* change in taxation rates (315) 2
Total taxation credit (1,002) (121)
8. Earnings per ordinary share
Basic and diluted earnings per share have been calculated based on the net profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the period.
The calculation of the 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 adjusted earnings per share is also calculated based on the basic weighted average number of shares.
The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive options.
For the 52 week period ended 1 October 2016
Continuing Discontinued Total
GBP'000 GBP'000 GBP'000
Profit after tax 643 (1,331) (688)
No.
Weighted average number of
shares - basic 14,449,195
Dilutive effect of share options 1,983
Weighted average number of
shares - diluted 14,451,178
Basic earnings per share 4.4p (9.2)p (4.8)p
Diluted earnings per share 4.4p (9.2)p (4.8)p
The Group adjusted earnings per share is calculated as follows:
Profit after tax 643 (1.331) (688) Amortisation and acquisition related exceptional items (1,123) - (1,123) Other exceptional charges and credits 798 278 1,076 Impairment of assets on closure - 455 455 Theoretical tax effect of above adjustments (688) (56) (744) Adjusted earnings (370) (654) (1,024) Adjusted earnings per share (2.6)p (4.5)p (7.1)p
For the 53 week period ended 3 October 2015
Continuing Discontinued Total
GBP'000 GBP'000 GBP'000
Profit after tax 1,222 (523) 699
No.
Weighted average number of
shares - basic 14,378,392
Dilutive effect of share options 144,690
Weighted average number of
shares - diluted 14,523,082
Basic earnings per share 8.5p (3.6)p 4.9p
Diluted earnings per share 8.4p (3.6)p 4.8p
The Group adjusted earnings per share is calculated as follows:
Profit after tax 1,222 (523) 699 Amortisation and acquisition related exceptional items 291 - 291 Other exceptional charges and credits 425 - 425 Exceptional costs in relation to the option on and loan to KGTM 1,408 - 1,408 Theoretical tax effect of above adjustments (739) - (739) Adjusted earnings 2,607 (523) 2,084 Adjusted earnings per share 18.1p (3.6)p 14.5p
9. Dividends
The following dividend payments have been made on the ordinary 5p shares in issue:
Rate Date Shares 2016 2015
in issue
GBP'000 GBP'000
17 March
Final 2013/14 5.6p 2015 14,377,130 - 805
Interim 7 August
2014/15 2.8p 2015 14,414,930 - 404
18 March
Final 2014/15 5.6p 2016 14,471,481 810 -
810 1,209
No dividends have been declared or proposed in respect of the year ended 1 October 2016.
10. Goodwill
Total
GBP'000
Cost and gross carrying amount
At 27 September 2014 7,081
Acquired through business combinations 7,939
At 3 October 2015 15,020
Acquired through business combinations -
At 1 October 2016 15,020
==========
Original
cost
Date of acquisition GBP'000
Precision Machined components
Al-Met Limited February 2010 272
Roota Engineering Limited March 2014 5,117
The Quadscot Group October 2014 3,079
Engineered products
Hydratron Limited October 2010 1,692
Alternative Energy
The Greenlane Group October 2014 4,860
15,020
========
Goodwill arising on consolidation represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. The Group has Goodwill in relation to 5 acquisitions: Al Met Limited, The Hydratron Group, Roota Engineering Limited, The Quadscot Group and The Greenlane Group.
11. Intangible assets
Licence Non
and contractual
distribution Software customer
agreement Licenses Technology relationships Total
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 27 September
2014 1,200 - - 7,440 8,640
Acquired
through
business
combination - - 5,316 4,262 9,578
Disposed
of in the
period (1,200) - - - (1,200)
At 3 October
2015 - - 5,316 11,702 17,018
Additions - 44 - - 44
Acquired
through
business
combination - - - - -
Disposed
of in the
period - - - - -
At 1 October
2016 - 44 5,316 11,702 17,062
Amortisation
At 27 September
2014 393 - - 1,287 1,680
Charge for
the period - - 720 1,560 2,280
Disposed
of in the
period (393) - - - (393)
At 3 October
2015 - - 720 2,847 3,567
Charge for
the period - 1 703 1,462 2,166
Disposed
of in the
period - - - - -
At 1 October
2016 - 1 1,423 4,309 5,733
Net book
value
At 1 October
2016 - 43 3,893 7,393 11,329
At 3 October
2015 - - 4,596 8,855 13,451
Remaining
useful economic
life at
1 October
2016 - 3 years 6 years 5 years
There are no internally generated fixed assets
12. Investments in associates
GBP'000
At 27 September 2014 123
Investments made in the year -
Share of profits / ( losses) (123)
As at 3 October 2015 -
Investments made in the year -
Share of profits / ( losses) -
As at 1 October 2016 -
Note that the share of losses of associates as set out in the Consolidated Statement of Comprehensive Income in the prior year were set first against the investment and then against the value of other receivables from KGTM, as shown below. The remaining value of these receivables was provided against as set out in note 5.
2016 2015
GBP'000 GBP'000
Amount of losses set against investment - 123
Amount of losses set against other
receivables from KGTM - 28
- 151
The group's share of the results of its principal associates and its aggregated assets (including goodwill) and liabilities, are as follows:
Country Interest
of incorporation Assets Liabilities Revenues Loss held
GBP'000 GBP'000 GBP'000 GBP'000 %
At 3 October
2015
Kelley GTM,
LLC. USA 578 (5,273) 793 (741) 40
At 1 October
2016
Kelley GTM,
LLC. USA 473 (6,202) 918 (195) 40
KGTM has a year-end date of 31 December. The period for which the results of KGTM have been shown in the table above is from 4 October 2015 to 1 October 2016. The group's share of the results of KGTM are not included in the group's financial statements as the investment and loans made to KGTM are fully written down and there is no legal or constructive obligation to recognise any further losses and no further payments have been made on behalf of the associate.
The total losses recognised against the investment and other receivables from KGTM for the period were GBPNil (2015: GBP151,000) leaving unrecognised losses of GBP195,000 (2015:GBP590,000).
13. Trade and other receivables
2016 2015
GBP'000 GBP'000
Current
Trade receivables 7,536 11,015
Amounts due from customers for construction
contract work 1,827 756
Other receivables 602 545
Prepayments and accrued income 1,314 1,223
11,279 13,539
The average credit period taken on the sale of goods and services was 47 days (2015: 79 days) in respect of the Group. One debtor individually accounted for over 10% of trade receivables and represented 26% of the total balance. In 2015, two debtors accounted for over 10% of trade receivables and both individually represented 10% of the total balance.
Ageing of past due but not impaired receivables:
2016 2015
GBP'000 GBP'000
Days past due:
0 - 30 days 1,310 1,221
31 - 60 days 242 539
61 - 90 days 220 129
91 - 120 days 65 77
121+ days 389 885
Total 2,226 2,851
14. Trade and other payables
2016 2015
GBP'000 GBP'000
Amounts due within 12 months
Trade payables 6,903 3,447
Progress billings on construction
contracts in excess of work completed 931 2,131
Other tax and social security 301 903
Accruals, deferred income and other
payables 3,934 4,044
Deferred consideration - 2,500
Total due within 12 months 12,069 13,025
Amounts due after 12 months
Deferred consideration - 3,531
Accruals, deferred income and other
payables 1,398 1,547
Total due after 12 months 1,398 5,078
Deferred income due after 12 months includes grant income received and customer prepayments for contracts in delivery in a number of years. There are no unfulfilled conditions or other contingencies attached to these grants.
15. Borrowings
2016 2015
GBP'000 GBP'000
Non-current
Bank borrowings 12,300 10,000
Finance lease liabilities 111 236
12,411 10,236
Current
Finance lease liabilities 242 337
242 337
Total borrowings 12,653 10,573
Bank borrowings mature in 2018 and bear average coupons of 2% above LIBOR annually.
Total borrowings include secured liabilities of GBP12.3 million. Bank borrowings are secured on the property, plant and equipment of the group. Obligations under finance leases are secured on the plant & machinery assets to which they relate.
The carrying amounts of the group's borrowings are all denominated in GBP.
The maturity profile of long-term loans is as follows:
2016 2015
GBP'000 GBP'000
Due within one year
Finance lease liabilities 242 337
Due within two to five years
Bank borrowings 12,300 10,000
Finance lease liabilities 111 236
The group has the following undrawn borrowing facilities:
2016 2015
GBP'000 GBP'000
Expiring beyond one year 2,700 5,000
The facility also includes an accordion feature option allowing for an additional facility for GBP10m subject to certain conditions set out in the agreement.
16. Construction contracts
Construction contracts are accounted for in accordance with IAS 11, 'Construction Contracts' and IAS18, 'Revenue'. The position on individual contracts is held as 'Amounts due from customers for contract work' within trade and other receivables or as 'Progress billings on construction contracts in excess of work completed' within trade and other payables as applicable.
2016 2015
GBP'000 GBP'000
Costs incurred and profit recognised
to date 16,083 14,488
Less: Progress billings (15,187) (15,863)
Net balance sheet position for ongoing
contracts 896 (1,375)
17. Deferred tax
The following are the major deferred tax assets / (liabilities) recognised by the Group and movements thereon during the current and prior reporting period.
Accelerated Short term Share Operating
tax Intangible temporary option lease Unused
depreciation assets differences costs incentives Losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 27 September 2014 (657) (1,231) 32 49 65 - (1,742)
(Charge) / Credit to income (62) 313 79 46 (65) - 311
Acquired through business
combinations (39) (852) - - - - (891)
At 3 October 2015 (758) (1,770) 111 95 - - (2,322)
(Charge) / Credit to income 40 514 (16) (29) - 330 839
At 1 October 2016 (718) (1,256) 95 66 - 330 (1,483)
The net deferred tax balance has been analysed as follows in the consolidated balance sheet:
2016 2015
GBP'000 GBP'000
Non-current asset
Deferred tax asset 544 270
Non-current liabilities
Deferred tax liabilities (2,027) (2,592)
(1,483) (2,322)
18. Consolidated cash flow statement
2016 2015
GBP'000 GBP'000
(Loss) / Profit after tax (688) 699
Adjustments for:
Finance costs - net 303 442
Depreciation of property, plant
and equipment 1,477 1,370
Amortisation of intangible assets 2,166 2,280
Share option costs 314 253
Income tax credit (1,002) (121)
Loss on derivative financial instruments 26 17
Loss / (profit) on disposal of property,
plant and equipment 8 (10)
Exceptional charges associated with
Kelley GTM - 1,408
Exceptional IFRS rent adjustment
release - (322)
Exceptional deferred consideration
released and revaluation (3,289) (2,166)
Exceptional impairment of assets 464 -
Loss on investment in associate - 151
Changes in working capital:
Decrease in inventories 1,749 1,693
Decrease in trade and other receivables 1,948 5,964
Increase / (decrease) in trade and
other payables 929 (3,733)
Cash flows from operating activities 4,405 7,925
19. 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"
20. Related party transactions
During the prior year, Pressure Technologies purchased 5 GTMs from Kelley GTM, LLC, in which the Group owns a 40% stake. These GTMs were purchased at a cost of GBP391,000 with the intention of entering them into a lease fleet of GTMs in operation, in which they remain at the period end. The GTMs owned by the Pressure Technologies Group are disclosed within property, plant and equipment at their carrying value. The transaction was completed on an arm's length basis.
The Group also has loans outstanding from Kelley GTM, LLC of $3,500,000. The Directors consider that the recoverability of these loans is not certain and therefore have made full provision against the full value of the loans in the prior year.
21. Events after the reporting period
The Group entered into a key transaction after the reporting date of 1 October 2016.
On 7 December 2016, the Pressure Technologies plc purchased the entire issued share capital of Martract Limited. The maximum total consideration for the Acquisition is GBP4.3 million on a cash free, debt free basis, comprising an initial cash consideration of GBP3.7 million plus cash balances and a conditional deferred payment of up to GBP0.6 million. The additional consideration payable in respect of the 12 month period following the Acquisition is dependent on the future EBITDA performance of Martract.
Due to the proximity of the above business combination to the reporting date, the initial accounting for these transactions has still to be completed, and consequently details of the amounts of assets and liabilities acquired and fair value of contingent consideration are not disclosed within this preliminary announcement.
22. Notice of annual general meeting
The annual General Meeting of the Company will be held at Chesterfield Special Cylinders, Meadowhall Rd, Sheffield, South Yorkshire, S9 1BT on Tuesday 14(th) February at 11am.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR AKBDNKBDBBBD
(END) Dow Jones Newswires
December 13, 2016 02:00 ET (07:00 GMT)
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