PressureTechnologies - 2024 Interim Results
25/06/2024 07:00
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RNS Number : 6636T Pressure Technologies PLC 25 June 2024
The information contained within this announcement is deemed by the Group to
constitute inside information as stipulated under the UK version of the EU
Market Abuse Regulation (2014/596) which is part of UK law by virtue of the
European Union (Withdrawal) Act 2018, ("MAR"), and is disclosed in accordance
with the Group's obligations under Article 17 of MAR. Upon the publication of
this announcement via a Regulatory Information Service, this inside
information will be considered to be in the public domain.
25 June 2024
Pressure Technologies plc
("Pressure Technologies", the "Company" or the "Group")
2024 Interim Results
Pressure Technologies (AIM: PRES), the specialist engineering group, is
pleased to announce its unaudited interim results for the 26 weeks to 30 March
2024.
Financial Highlights
● Group revenue of £15.0 million (2023: £13.8 million)
● Gross profit of £3.2 million at 22% margin (2023: £3.7 million at 27%
margin)
● Adjusted EBITDA(1) of £0.1 million (2023: EBITDA of £0.3 million)
● Adjusted operating loss(2) of £0.7 million (2023: loss of £0.5 million)
● Reported loss before tax of £1.2 million (2023: loss of £1.4 million)
● Reported basic loss per share of 3.2p (2023: loss per share of 3.9p) and
Adjusted basic loss per share(3) of 2.7p (2023: loss per share of 2.3p)
● Net debt(4) of £3.3 million (2023: £3.7 million; 30 September 2023: £2.4
million); Net borrowings, excluding asset finance and right of use asset lease
liabilities, of £0.9 million (2023: £0.9 million; 30 September 2023: £nil)
1 Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation
and other exceptional costs
2 Adjusted operating loss is operating loss before amortisation and other
exceptional costs
3 Adjusted basic loss per share is reported earnings per share before
amortisation and other exceptional costs
4 Net debt comprises cash and cash equivalents, borrowings, asset finance
lease liabilities and right of use asset lease liabilities
Group Highlights
● Resilient market conditions during the first half of FY24 with new defence
contract placements and continued growth in the oil and gas market against the
backdrop of more stable economic conditions.
● Group revenue of £15.0 million (2023: £13.8 million) and Adjusted EBITDA of
£0.1 million (2023: £0.3 million) in the first half of FY24.
● Order intake of £16.6 million for the 26 weeks ended March 2024 (2023: £29.3
million, including major UK naval order of £18.2 million) supports a current
order book of £21.9 million at March 2024 (2023: £25.7 million).
● As previously announced, the sale process for the Precision Machined
Components ("PMC") division was launched in December 2023 with a number of
non-binding indicative offers received in March 2024. Subsequently, the Board
has engaged with selected potential acquirers and has received final offers
for the business. A preferred acquirer has been identified who is currently
conducting final due diligence with a target completion of the transaction in
August 2024.
● In November 2023, the Group refinanced its existing debt facilities with
Lloyds Bank by arranging a new Term Loan facility of £1.5 million with
Rockwood Strategic plc and Peter Gyllenhammar AB, two of its major
shareholders, providing a financing bridge to the sale of PMC.
● The proceeds of the sale of PMC are intended to repay the new Term Loan
facility and fund strategic investment opportunities at Chesterfield Special
Cylinders ("CSC") to support its growth in the hydrogen energy sector.
● Net debt in the first half of FY24 increased by £0.9 million to £3.3 million
(2023: £2.4 million) due to exceptional costs, capital expenditure and
financing costs. Net borrowings, excluding asset finance and right of use
asset lease liabilities, was £0.9 million (2023: £0.9 million; 30 September
2023: £nil).
Chesterfield Special Cylinders ("CSC")
● CSC revenue of £6.5 million (2023: £8.8 million) and Adjusted EBITDA of
£0.1 million (2023: £1.1 million) in the first half of FY24, driven by the
deferral of revenue on major defence contracts into future years and by
operational delays during the period, including unplanned downtime on
process-critical equipment between October 2023 and December 2023.
● Defence revenue of £5.5 million (2023: £7.0 million), with the peak of
high-value milestones for UK submarine and surface ship programmes passed in
the second quarter.
● Major new contract award announced in March 2024 to supply safety-critical
pressure vessels for a major Australian naval new construction programme.
● Hydrogen revenue of £0.6 million (2023: £1.3 million), due to delays in new
order placement for hydrogen storage projects in the UK and a lower rate of
road trailer inspection and testing in the first half.
● New contract award announced in March 2024 to supply high-pressure steel
cylinder packages to Cheesecake Energy Limited, a UK developer of sustainable
thermal and compressed air energy storage systems, for a pilot project funded
by the Department for Energy Security & Net Zero.
● Integrity Management services revenue increased sharply during the first half
of FY24 to £2.0 million (2023: £0.5 million), driven by growing activity
with UK defence customers.
● CSC order intake of £10.3 million in the 26 weeks ended March 2024 (2023:
£20.9 million, including major UK naval order of £18.2 million) supports a
current order book of £14.9 million at the end of March 2024 (2023: £19.4
million), providing strong revenue cover for the remainder of FY24.
● Operational improvements in the Sheffield facility continue to deliver
increased capacity and efficiency for hydrogen storage and road trailer new
build, inspection and testing services.
Precision Machined Components ("PMC")
● PMC revenue in the first half of FY24 increased by 73% to £8.5 million (2023:
£4.9 million), reflecting growth in the oil and gas market and strong
operational performance, supporting consistent delivery against customer
commitments.
● PMC gross margin also improved in the period to 20% (2023: 18%) due to the
higher volume of throughput.
● PMC Adjusted EBITDA in the first half of FY24 of £0.8 million (2023: £0.2
million), a much-improved level of profitability.
● PMC order intake was £6.3 million in the 26 weeks ended March 2024 (2023:
£8.4 million), supporting a current order book of £7.0 million at the end of
March 2024 (2023: £6.3 million) and providing strong revenue cover for the
remainder of FY24.
● The sale process for the PMC division has progressed on-track, supported by
its much-improved level of performance during the period, with a target
completion in August 2024.
Outlook
● CSC performance in the second half of FY24 is expected to be stronger than the
first half, with higher revenue driven by existing defence contracts, new
activity from recent contract wins, increased hydrogen trailer deliveries and
a continuation of the much-improved revenue from Integrity Management
services.
● However, a shortfall in CSC performance is expected for the full-year, driven
by the deferral of a portion of UK defence contract revenues to future years
and operational delays in the first half, further impacted by delayed order
placement for new hydrogen storage contracts due to the UK general election,
now expected later in FY24.
● Recent announcements of significant funding from UK Government to support the
development of new hydrogen production, storage and distribution hubs across
the country provide significant opportunities for CSC in the supply of new
hydrogen storage and transportation systems for refuelling and decarbonisation
applications.
● In addition, demand for in-situ and factory-based inspection, testing and
recertification services for hydrogen storage and road trailers presents an
exciting growth opportunity across an expanding customer base.
● PMC momentum is expected to continue in the second half driven by the strong
order book and on-going operational improvements, supporting higher margins
and profitability.
● Order books in CSC and PMC underpin the outlook of the Group in the second
half of FY24. Given the current divisional trends and performance outlook, the
Board expects the Group's full-year FY24* Adjusted EBITDA to be not less than
£1.0 million.
* FY24 outlook includes CSC and PMC, on the basis that PMC is not sold in FY24
and remains a continuing operation
Chris Walters, Chief Executive of Pressure Technologies plc, commented:
"The first half of FY24 saw a mixed performance across the Group.
PMC performed well in the period, with much-improved revenue and
profitability, underpinned by operational improvements and capital investment.
We expect this momentum to continue throughout the second half.
Performance at CSC was impacted by the deferral of UK defence contract
revenues into future years and by operational delays, including unplanned
downtime for process-critical equipment in the first quarter. Whilst we expect
significantly stronger performance from CSC in the second half of the year,
the shortfall in first-half performance will not be fully recovered in the
second half, while full-year performance will be further impacted by delayed
order placement for new hydrogen storage contracts due to the UK general
election, now expected later in FY24.
However, we remain well positioned in the emerging market to supply static and
mobile hydrogen storage solutions, and to provide the through-life inspection,
testing and recertification services for these safety-critical systems over
the medium and longer term. We have been encouraged by the recent
announcements from UK Government to provide funding for the development of new
hydrogen production, distribution and storage hubs in the next two years which
present significant opportunities for CSC over the medium-term.
Order books in CSC and PMC underpin the outlook for the Group in the second
half of FY24. Given the current divisional trends and performance outlook,
we now expect full-year FY24 Adjusted EBITDA to be not less than £1.0
million.
We completed the refinancing of our debt facilities in the first half,
supported by two of our major shareholders, and the sale process for PMC is
progressing well. We have identified a preferred buyer for the division, with
a target completion in August 2024, which will provide a solid foundation to
pursue the strategic priorities of the Group."
Additional Information
The person responsible for arranging release of this announcement on behalf of
the Company is Steve Hammell, Chief Financial Officer.
For further information, please contact:
Pressure Technologies plc Tel: 0333 015 0710
Chris Walters, Chief Executive company.secretary@pressuretechnologies.co.uk
Steve Hammell, Chief Financial Officer
Singer Capital Markets (Nomad and Broker) Tel: 0207 496 3000
Rick Thompson / Asha Chotai
COMPANY DESCRIPTION
www.pressuretechnologies.com (http://www.pressuretechnologies.com/)
With its head office in Sheffield, the Pressure Technologies Group was founded
on its leading market position as a designer and manufacturer of
high-integrity, safety-critical components and systems serving global supply
chains in oil and gas, defence, industrial and hydrogen energy markets.
The Group has two divisions:
· Chesterfield Special Cylinders (CSC) -
www.chesterfieldcylinders.com (http://www.chesterfieldcylinders.com/)
· Precision Machined Components (PMC) - www.pt-pmc.com
(http://www.pt-pmc.com/)
o Includes the Al-Met, Roota Engineering and Martract sites.
Business Review
Pressure Technologies saw a mixed level of performance across its two
divisions in the first half of FY24. The PMC division has reported
much-improved financial and operational performance. However, performance in
the CSC division was impacted by the deferral of contract revenue into future
years and by operational delays, albeit against the backdrop of positive order
intake, increasing demand for Integrity Management services and encouraging
developments in the hydrogen energy market.
Chesterfield Special Cylinders
Chesterfield Special Cylinders ("CSC") delivered revenue of £6.5 million
(2023: £8.8 million) in the first half of FY24. This lower than expected
performance was driven by the deferral of UK defence contract revenues into
future years and by internal operational delays, including unplanned downtime
on process-critical equipment between October 2023 and December 2023, and
delays to delivery of finished products across the second quarter. Actions
were taken promptly to address the disruption from these issues and
performance is expected to improve considerably in the second half of the
year.
Order intake in the 26 weeks ended March 2024 was £10.3 million (2023: £20.9
million), above management's expectations, supporting a current order book of
£14.9 million at the end of March 2024 (2023: £19.4 million) and providing
strong revenue cover for the remainder of FY24. In the period, CSC was
successful in securing new contracts to supply cylinders to an Australian
naval programme and for the supply of cylinder packages to Cheesecake Energy,
a new customer in the green energy market. As previously stated, FY24 is a
transitional year for CSC due to the approaching completion of the current
large UK defence programme. The division is now working on a number of future
international opportunities, including qualification to supply US defence
programmes.
CSC remains well positioned in the emerging market for pressurised hydrogen
storage and transportation. Order placement from our mature pipeline of
opportunities with established and new customers was slower than expected
during the first half of FY24, influenced by delayed UK project funding
decisions and by constraints in the broader supply chain for components
required in the generation and compression of hydrogen for refuelling and
decarbonisation projects. As a result of these delayed order placements,
alongside lower delivery of existing hydrogen trailer orders, CSC delivered
reduced hydrogen revenues of £0.6 million (2023: £1.3 million) in the first
half.
The Board has noted recent announcements from UK Government ("UKG") that it
expects hydrogen to play a vital role in decarbonising business and transport
as the UK progresses to meet its net zero targets and is committed to provide
funding support to position the UK as a global leader in the hydrogen
industry. The first Hydrogen Allocation Round ("HAR1") has confirmed 11
projects across the UK for the production of hydrogen, with £90 million of
funding from the Net Zero Hydrogen Fund ("NZHF") announced in December 2023
for the construction of these facilities. Furthermore, in February 2024, UKG
announced further funding of £21 million from the NZHF (Strand 2) for 7
projects to produce and distribute low carbon hydrogen for buses, trucks and
trains.
These UK hydrogen projects, backed by funding from UKG, are now active and
being developed to relatively short timeframes, with the first projects
expected to be operational in 2025 and 2026. CSC has developed commercial
relationships with several of these new projects thereby providing a pipeline
of opportunities over the next two years.
Demand for Integrity Management services, covering the in-situ periodic
inspection, testing and recertification of in-situ cylinders in service, has
been much stronger in the first half. Integrity Management revenue increased
sharply to £2.0 million (2023: £0.5 million) and has contributed strongly to
gross margin performance. Integrity Management is a low capital intensity and
repeatable service and its growth and development into existing defence,
hydrogen and offshore customers remains a strategic priority over the
medium-term.
Precision Machined Components
Precision Machined Components (PMC) delivered revenue of £8.5 million (2023:
£4.9 million) and Adjusted EBITDA of £0.8 million (2023: £0.2 million) in
the first half of FY24. This very strong performance was driven by the strong
order intake from the oil and gas market in FY23 and a much-improved level of
operational performance in the period.
Order intake was £6.3 million in the 26 weeks ended March 2024 (2023: £8.4
million, including major OEM order of £3.0 million). The current order book
of £7.0 million at the end of March 2024 (2023: £6.3 million) provides
strong revenue
Business Review (continued)
cover for the remainder of FY24. Moreover, OEM customers continue to forecast
strong recovery in demand for specialised components for oil and gas
exploration and production projects over the next three to five years.
At Roota Engineering, the demand for subsea well intervention tools, valve
assemblies and control module components increased strongly in the first half.
Major OEM customers, including Expro, Halliburton, Schlumberger and Aker,
continue to report a stronger oil and gas market outlook for 2024 and are
investing heavily in their global manufacturing capacity to support growth in
oil and gas production, principally from South America, West Africa, US Gulf
of Mexico, Middle East and North Sea regions.
Operational performance at Roota has been supported by successful recruitment,
skills development and investment in new advanced machining centres,
increasing capacity and efficiency to meet the growing demand and extended
product range for a broader customer base. Margin performance has also been
resilient across all product lines, supporting improved levels of
profitability.
Al-Met remained focused on the improvement of operational performance,
efficiency and product margins in the first half and is benefited from the
recovery in demand from key OEM customers for choke valve components and
subassemblies. The momentum established by the significant ramp-up of activity
in the fourth quarter of FY23 continued in the first half of FY24. Capital
investment made in the first half is now driving operational efficiencies and
reducing dependency on sub-contractors, while the significant increase in
production volumes is helping to drive raw material cost savings. The margin
benefits of these improvements are expected to be realised in the second half
of FY24, supporting Al-Met's expected return to profitability.
Sale of PMC
Following the improvement in trading conditions in the oil and gas market last
year, the sale process for the PMC division was launched in December 2023. As
previously announced, a number of non-binding indicative offers were received
for the division in March 2024.
Subsequently, the Board has engaged with selected potential acquirers and has
received final offers for the division. A preferred acquirer has been
identified who is currently conducting final due diligence. The Board is
targeting completion of the transaction in August 2024.
Outlook
During FY24, CSC expects to pass the peak of activity on current high-value
defence contract milestones and will seek to re-balance its revenue profile
across global defence programmes and the hydrogen energy market, with each of
these markets presenting significant opportunities over the medium-term.
During this transitional period, CSC revenue is expected to decline on FY23
levels with a consequent reduction in divisional profitability in FY24.
Whilst we expect significantly stronger performance from CSC in the second
half of the year, the shortfall in first-half performance will not be fully
recovered in the second half, while full-year performance will be further
impacted by delayed order placement for new hydrogen storage contracts due to
the UK general election, now expected later in FY24.
PMC continues to see increasing demand from its global OEM customers and
improving operational performance. The strong first-half result and robust
order book provides high confidence in a much-improved full-year FY24
performance for the division. As previously announced, this improved trading
environment underpins the Board's decision to divest PMC.
Order books in CSC and PMC underpin the outlook for the Group in the second
half of FY24. Given the current divisional trends and performance outlook, we
now expect full-year FY24* Adjusted EBITDA to be not less than £1.0 million.
* FY24 outlook includes CSC and PMC, on the basis that PMC is not sold in FY24
and remains a continuing operation
Chris Walters
Chief Executive
25 June 2024
Financial Review
Revenue & Profitability
The Group made solid progress in the first half of FY24, with revenue of
£15.0 million being 9% higher than the corresponding period last year (2023:
£13.8 million). This was driven by a strong performance at PMC, where revenue
increased by 73% to £8.5 million (2023: £4.9 million), reflecting
much-improved conditions in the oil and gas market and continued improvement
in operational performance in the period.
However, revenue at CSC declined to £6.5 million (2023: £8.8 million) in the
first half of FY24, due to operational disruption and delays. Theses issues
were temporary in nature and the Board expects CSC to deliver significantly
more revenue in the second half of the year. The order book of CSC remains
strong at £14.9 million and provides strong revenue visibility for the
remainder of the year.
The higher volume of production at PMC facilitated an improvement in its gross
profit to £1.7 million at 20% margin (2023: £0.9 million at 18% margin).
However, the lower levels of activity at CSC saw its gross profit fall to
£1.5 million at 24% margin (2023: £2.8 million at 32% margin). Both
divisions experienced increased direct labour costs in the period due to
increased headcount and recent inflationary pressures, impacting margins.
The Group reported gross profit of £3.2 million at 22% margin (2023: £3.7m
at 27% margin) in the first half of FY24.
Overhead costs decreased in the period to £3.9 million (2023: £4.2 million)
with a strict focus on cost control and achieving reductions in the costs of
operating as a listed company offsetting inflationary pressures.
The Group reported an operating loss of £0.7 million (2023: loss of £0.5
million) in the period. Allowing for depreciation charges of £0.8 million
(2023: £0.8 million), the Group reported Adjusted EBITDA of £0.1 million in
the period (2023: profit of £0.3 million).
Exceptional costs of £0.2 million were incurred in the period (2023: £0.7
million) in relation to the arrangement of the new Term Loan in November 2023
and the sale process for PMC.
Refinancing
On 14 November 2023, the Group exited its existing debt facilities provided by
Lloyds Banking Group by arranging a new Term Loan facility of £1.5 million
with Rockwood Strategic plc and Peter Gyllenhammar AB, two of its major
shareholders. The new Term Loan is committed for a period of 5 years and is
secured against the assets of the Group. The Term Loan is repayable in full
upon a successful sale of the PMC division. The new loan was drawn in full and
used to repay Lloyds in full, settle transaction costs and to provide general
working capital headroom.
In conjunction with the provision of the new Term Loan, Rockwood and
Gyllenhammar were issued with 1,933,358 warrants in aggregate (representing 5%
of the issued share capital) to subscribe for ordinary shares in the Company
at a price of 32 pence per share, representing a 20% premium to the closing
share price on 23 October 2023 (being the day prior to the announcement of the
new facility). The warrants may be exercised at any time in the 5 years
following drawdown of the new facility and continue to be exercisable in the
event the facility is repaid before its final expiry.
Cashflow
The Group reported a net cash outflow of £0.3 million in the period (2023:
outflow of £0.8 million). This was driven by Adjusted EBITDA of £0.1
million, exceptional costs of £0.2 million, working capital inflows (£0.2
million), capital expenditure (£0.4 million), interest costs (£0.2 million)
and debt repayments (£1.3 million), partially offset by the new term loan
drawdown (£1.5 million) in November 2023.
The cash balance at the end of the period was £0.6 million (30 September
2023: £0.9 million). Net debt, which comprises cash, borrowings, finance
lease liabilities and right of use asset lease liabilities, at the end of the
period was £3.3 million (30 September 2023: £2.4 million). Net borrowings,
which comprises cash and borrowings only, at the end of the period was £0.9
million (30 September 2023: nil).
Financial Review (continued)
Impairment Reviews
The Group tests periodically for impairment, in accordance with IAS 36, if
there are indicators that tangible fixed assets might be impaired.
The impairment methodology identifies two Cash Generating Units ("CGU's")
within the Group, being CSC and PMC. Each CGU is assessed for potential
indicators of impairment, including internal or external factors or events
that
could reduce the recoverable value of the fixed assets of the Group. If
indicators of impairment are identified, a full impairment review is
undertaken to determine the recoverable amount of the CGU.
An impairment review was undertaken for each of CSC and PMC as at 30 March
2024. The review concluded that no impairment was required in these Interim
Results.
The Group holds freehold land and buildings, including CSC's main facility at
Meadowhall Road, Sheffield. As part of discussions with the Group's bankers
during last year, the Directors obtained two valuations from two independent
chartered surveyors of this freehold land and buildings, which indicated that
no impairment of this asset was required.
Steve Hammell
Chief Financial Officer
25 June 2024
Condensed Consolidated Statement of Comprehensive Income
For the 26 weeks ended 30 March 2024
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
30 March 1 April 30 September
2024 2023 2023
Notes £'000 £'000 £'000
5 15,038 13,765 31,944
Revenue
Cost of sales (11,799) (10,051) (23,001)
Gross profit 3,239 3,714 8,943
Administration expenses (3,942) (4,230) (8,398)
Operating (loss) / profit before exceptional costs (703) (516) 545
Separately disclosed items of administrative expenses: (232) (704) (1,255)
Exceptional costs 6
Operating loss (935) (1,220) (710)
Finance costs (238) (180) (406)
Loss before taxation (1,173) (1,400) (1,116)
Taxation 7 (55) - 437
Loss for the period attributable to owners of the parent (1,228) (1,400) (679)
Other comprehensive income to be reclassified to profit or loss in subsequent
periods
Currency exchange differences on translation of foreign operations - 6 12
Total comprehensive expense for the period attributable to the owners of the (1,228) (1,394) (667)
parent
Loss per share - basic and diluted
From loss for the period 8 (3.2)p (3.9)p (1.8)p
Condensed Consolidated Statement of Financial Position
As at 30 March 2024
Unaudited Unaudited
26 weeks ended 26 weeks ended Audited
30 March 1 April 52 weeks ended
2024 2023 30 September
2023
Notes £'000 £'000 £'000
Non-current assets
Property, plant and equipment and right of use assets 10,360 10,961 10,287
Deferred tax asset 805 663 700
11,165 11,624 10,987
Current assets
Inventories 5,753 4,765 5,570
Trade and other receivables 7,730 8,137 9,384
Cash and cash equivalents 10 594 1,039 945
Current tax asset 58 58 58
14,135 13,999 15,957
Total assets 25,300 25,623 26,944
Current liabilities
Trade and other payables (8,122) (7,342) (9,326)
Borrowings - term loan/revolving credit facility 10 (500) (1,907) (907)
Lease liabilities 10 (603) (526) (697)
(9,225) (9,775) (10,930)
Non-current liabilities
Other payables - (22) (12)
Borrowings - term loan 10 (1,000) - -
Lease liabilities 10 (1,828) (2,293) (1,704)
Deferred tax liabilities (872) (703) (712)
(3,700) (3,018) (2,428)
Total liabilities (12,925) (12,793) (13,358)
Net assets 12,375 12,830 13,586
Equity
Share capital 11 1,933 1,933 1,933
Share premium account 11 1,699 1,699 1,699
Translation reserve (253) (259) (253)
Retained earnings 8,996 9,457 10,207
Total equity 12,375 12,830 13,586
Condensed Consolidated Statement of Changes in Equity
For the 26 weeks ended 30 March 2024
Share Share Translation reserve Retained earnings Total
capital premium equity
account
£'000 £'000 £'000 £'000 £'000
Balance at 30 September 2023 (audited) 1,933 1,699 (253) 10,207 13,586
Share based payments - - - 17 17
Transactions with owners - - - 17 17
Loss for the period - - - (1,228) (1,228)
Total comprehensive expense - - - (1,228) (1,228)
Balance at 30 March 2024 (unaudited) 1,933 1,699 (253) 8,996 12,375
For the 26 weeks ended 1 April 2023
Share Share Translation reserve Retained earnings Total
capital premium equity
account
£'000 £'000 £'000 £'000 £'000
Balance at 1 October 2022 (audited) 1,553 - (265) 10,815 12,103
380 1,699 - 2,079
Shares issued -
Share based payments - - - 42 42
Transactions with owners 380 1,699 - 42 2,121
- - - (1,400) (1,400)
Loss for the period
Exchange differences arising on retranslation of foreign operations - - 6 - 6
Total comprehensive income / (expense) - - 6 (1,400) (1,394)
Balance at 1 April 2023 (unaudited) 1,933 1,699 (259) 9,457 12,830
Condensed Consolidated Statement of Changes in Equity (continued)
For the 52 weeks ended 30 September 2023
Share Share Translation reserve Total
capital premium Retained earnings equity
account
£'000 £'000 £'000 £'000 £'000
Balance at 1 October 2022 (audited) 1,553 - (265) 10,815 12,103
380 1,699 - 2,079
Shares issued -
Share based payments - - - 71 71
Transactions with owners 380 1,699 - 71 2,150
Loss for the period - - - (679) (679)
Exchange differences arising on translating foreign operations - - 12 12
-
Total comprehensive income / (expense) - - 12 (679) (667)
Balance at 30 September 2023 (audited) 1,933 1,699 (253) 10,207 13,586
Condensed Consolidated Cash Flow Statement
For the 26 weeks ended 30 March 2024
Notes Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks ended
ended ended 30 September
30 March 1 April 2023
2024 2023
£'000 £'000 £'000
Operating activities
Operating cashflow 9 304 (840) 1,223
Exceptional costs (232) (704) (1,255)
Finance costs paid (238) (180) (406)
Income tax refunded - - 408
Net cash outflow from operating activities (166) (1,724) (30)
Investing activities
Proceeds from sale of fixed assets 15 - 178
Purchase of property, plant and equipment (382) (188) (576)
Net cash outflow from investing activities (367) (188) (398)
Net cash outflow before financing (533) (1,912) (428)
Financing activities
Shares issued (net of transaction costs) - 2,079 2,079
Repayment of borrowings (907) (500) (1,500)
New term loan 1,500 - -
Repayment of lease liabilities (411) (411) (989)
Net cash outflow from financing activities 182 1,168 (410)
Net decrease in cash and cash equivalents (351) (744) (838)
Cash and cash equivalents at beginning of period 945 1,783 1,783
Cash and cash equivalents at end of period 594 1,039 945
Bank borrowings - (1,907) (907)
Term loan (1,500) - -
Lease liabilities (2,431) (2,819) (2,401)
Net Debt 10 (3,337) (3,687) (2,363)
Notes to the Condensed Consolidated Interim Financial Statements
1. General information
Pressure Technologies plc is incorporated in England and Wales and is quoted
on AIM, a market operated by the London Stock Exchange.
These unaudited interim condensed consolidated financial statements for the 26
weeks ended 30 March 2024 were approved by the Board of Directors on 24 June
2024.
These financial statements may contain certain statements about the future
outlook of Pressure Technologies plc. Although the Directors believe their
expectations are based on reasonable assumptions, any statements about future
outlook may be influenced by factors that could cause actual outcomes and
results to be materially different.
2. Basis of preparation
The Group's unaudited interim results for the 26 weeks ended 30 March 2024
("Interim Results") are prepared in accordance with the Group's accounting
policies which are based on the recognition and measurement principles of the
UK-adopted International Accounting Standards in conformity with the
requirements of the Companies Act 2006. As permitted, the Interim Results have
been prepared in accordance with the AIM rules and not in accordance with IAS
34 "Interim financial reporting" and therefore the interim information is not
in full compliance with International Accounting Standards.
The interim condensed consolidated financial statements are prepared under the
historical cost convention as modified to include the revaluation of certain
financial instruments. The accounting policies adopted in the preparation of
the interim condensed consolidated financial statements are consistent with
those followed in the preparation of the Group's annual consolidated financial
statements for the year ended 30 September 2023. The principal accounting
policies of the Group have remained unchanged from those set out in the
Group's 2023 annual report and financial statements. The Principal Risks and
Uncertainties of the Group are also set out in the Group's 2023 annual report
and financial statements and are unchanged in the period.
The financial information for the 26 weeks ended 30 March 2024 and 1 April
2023 has not been audited and does not constitute full financial statements
within the meaning of Section 434 of the Companies Act 2006.
The Group's 2023 financial statements for the 52 weeks ended 30 September 2023
were prepared under UK-adopted International Accounting Standards. The
auditor's report on these financial statements was unqualified 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.
3. Going concern
The Directors have considered and assessed whether the Group will be able to
meet its obligations as they fall due for the period of at least 12 months
from the date of these Interim Results. These interim condensed financial
statements have been prepared on a going concern basis. The Group's business
activities, together with the factors likely to affect its future development,
performance and position, are set out in the Group's 2023 annual report and
financial statements.
In making this assessment, the Directors have considered a range of factors,
including the prospects for the markets the Group serves; the position and
intentions of competitors; the customer base of the Group and any reliance on
a small number of customers; the supply chain of the Group and any reliance on
key suppliers; staff attrition and the risk of losing any key members of
staff; any actual or threatened litigation; relationships with HMRC and
regulators; historic, current and projected financial performance and cash
flow; relationships with debt and equity funders and the likely availability
of external funding; and the plans and intentions of management. The Directors
have also considered the economic backdrop and geopolitical risks to economic
activity from the Russia-Ukraine conflict and instability in the Middle East.
In undertaking their assessment, the Directors have prepared financial
projections for a period of at least 12 months from the date of approval of
these Interim Results. The current economic conditions have introduced
additional uncertainty into the Directors' assessment, such that future
potential outcomes are more difficult to estimate. The Directors have
therefore considered a number of sensitivities to their projections to
quantify potential downside risks to future financial performance.
On 14 November 2023, the Group exited its Revolving Credit Facility with
Lloyds Bank by raising a new term loan facility ("the Term Loan") of £1.5
million from two of its major shareholders. The Term Loan is committed for a
period of five years and is not subject to any financial covenant tests. The
Term Loan is subject to capital repayments of £0.5 million during the
projection period which have been factored into the Directors' assessment.
Management has produced projections for the period up to September 2025 for
the Group, CSC and PMC, taking account of reasonably plausible changes in
trading performance and market conditions, which have been reviewed by the
Directors. In particular, the projections reflect:
· that the Group is less dependent on profitability at CSC
following a significant improvement in performance at PMC;
· that CSC is currently dependent on large defence contracts for
its profitability. During the projection period, CSC is expected to undergo a
period of transition, with revenue from UK defence contracts falling and
revenue from the hydrogen energy market and global defence customers
increasing. Over the short-term, this is expected to result in lower revenues
and earnings for CSC, which is factored into the financial projections.
Moreover, there remain both internal and external risks to CSC's performance
over the projection period;
· the recent significantly improved trading performance in the PMC
division is expected to continue based on positive prospects for the oil and
gas market.
The base case forecast demonstrates that the Group is projected to:
· generate profits and cash in the current financial year and
beyond; and
· generate sufficient cash to meet scheduled capital repayments due
under the Term Loan.
Management has also developed downside scenarios, which include consideration
of the recent track record of not always achieving budgets. The downside
scenario recognises the Group's dependence on the performance of large defence
contracts noted above due to their materiality to the Group's overall results
and the requirement for CSC to win significant new contracts from the hydrogen
energy market.
Management has modelled the downside scenario based on reasonably possible
delays to:
· Delivery of defence milestones and revenue recognition
Achievement of milestones on these types of contracts can be subject to
uncertainties including in-house operational delays and inefficiencies, delays
in the supply of material and components by suppliers, and delays in the
performance of work by subcontractors. The Group often has very limited
control of the latter two factors.
· Delays to placement of major orders from new hydrogen customers
Hydrogen energy is an emerging green energy market. Major UK and European
projects have already been subject to significant delays which have impacted
performance in FY23 and the first half of FY24. Placement of major orders from
new hydrogen customers is subject to uncertainties, including the potential
impact of a change in UK Government following the general election on 4 July
2024.
Other factors which could negatively impact the projections include:
· weaker revenue from Integrity Management deployments due to
customer delays;
· operational performance shortfall at CSC on non-defence
contracts; and
· the recent improvement in financial and operational performance
at PMC not being sustained going forward.
The Group believes that these other factors are individually less likely to be
material to the achievement of the projections than potential delays in
defence contract milestones and hydrogen orders, but in the event that they
occur together with these risks, they may have a negative impact on cash flow
at certain points in the projection period.
In the event of the delays identified above the Group's cash resources could
become limited. However, the Group would look to mitigate the impact,
partially or fully, by pulling forward contracted work from other customers,
and through normal working capital management and other cash preservation
initiatives.
The Directors also note that the Group has net current assets of £4.9 million
at 30 March 2024.
Reflecting management's confidence in delivering large defence contracts and
winning new hydrogen contracts, and having already refinanced its debt
facilities, the Directors have concluded that the Group does have sufficient
financial resources to meet its obligations as they fall due for the next 12
months and no material uncertainty relating to going concern has been
identified.
The Group continues to adopt the going concern basis in preparing these
Interim Results. Consequently, these Interim Results do not include any
adjustments that would be required if the going concern basis of preparation
were to be inappropriate.
4. Sale of Precision Machined Components ("PMC") division
The principal activity of the PMC division is the manufacture of valve
components for high pressure applications used mainly in the oil and gas
sector. The division operates through its three main operating entities of
Roota Engineering Limited, Martract Limited and Al-Met Limited.
The Board decided to sell the entire PMC division in October 2023, following
recovery in the oil and gas sector, in order to fund strategic investment
opportunities at Chesterfield Special Cylinders to support its growth in the
hydrogen energy sector.
The sale process was launched in in December 2023 and, as previously
announced, a number of non-binding indicative offers were received for the
division in March 2024. Subsequently, the Board has engaged with selected
potential acquirers and received final offers for the division in April 2024.
A preferred acquirer was identified who reached in-principle agreement to
acquire the PMC division in June 2024. This party is currently conducting due
diligence and negotiating legal documentation. The Board is targeting
completion of the transaction in August 2024.
The PMC division is classified as a reportable segment in accordance with
"IFRS8 - Operating Segments". Disclosure of the financial performance of the
PMC division is included in Note 5 of these Interim Results.
5. Segmental analysis of Revenue, Adjusted EBITDA and Operating Loss
Revenue by destination Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
United Kingdom 10,219 9,441 22,799
Europe 2,119 2,779 5,243
Rest of the World 2,700 1,545 3,902
15,038 13,765 31,944
Revenue by sector
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
Oil and Gas 8,680 4,938 11,751
Defence 5,472 7,211 17,188
Industrial 279 322 938
Hydrogen Energy 607 1,294 2,067
15,038 13,765 31,944
Revenue recognition
The Group's pattern of revenue recognition is as follows:
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
Sale of goods transferred at a point in time 10,866 6,559 14,746
Sale of goods transferred over time 2,358 6,350 15,397
Rendering of services 1,814 856 1,427
15,038 13,765 31,944
5. Segmental analysis of Revenue, Adjusted EBITDA and Operating Loss
(continued)
For the 26 week period ended 30 March 2024 (unaudited)
Precision Machined Components All other segments
Cylinders Total
£'000 £'000 £'000 £'000
Revenue from external customers* 6,506 8,532 - 15,038
Gross profit 1,526 1,713 - 3,239
Adjusted EBITDA 126 793 (875) 44
Depreciation (339) (362) (46) (747)
Operating (loss) / profit before exceptional costs (213) 431 (921) (703)
Exceptional costs (19) (14) (199) (232)
Operating (loss) / profit (232) 417 (1,120) (935)
Net finance costs (24) (99) (115) (238)
Profit / (loss) before tax (256) 318 (1,235) (1,173)
Segmental net assets** 10,213 2,156 6 12,375
Other segment information:
Taxation (charge) / credit (16) (140) 101 (55)
Capital expenditure - property, plant and equipment
143 551 127 821
* Revenue from external customers is stated after deducting inter-segment
revenue of £131,000 for Precision Machined Components.
** 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.
5. Segmental analysis of Revenue, Adjusted EBITDA and Operating Loss
(continued)
For the 26 week period ended 1 April 2023 (unaudited)
Precision Machined Components All other segments
Cylinders Total
£'000 £'000 £'000 £'000
Revenue from external customers* 8,835 4,930 - 13,765
Gross profit 2,809 905 - 3,714
Adjusted EBITDA 1,119 187 (1,044) 262
Depreciation (351) (368) (59) (778)
Operating profit / (loss) before exceptional costs 768 (181) (1,103) (516)
Exceptional costs (60) (54) (590) (704)
Operating profit / (loss) 708 (235) (1,693) (1,220)
Net finance costs (20) (61) (99) (180)
Profit / (loss) before tax 688 (296) (1,792) (1,400)
Segmental net assets** 7,916 2,193 2,721 12,830
Other segment information:
Taxation credit / (charge) - - - -
Capital expenditure - property, plant and equipment
33 507 9 549
* Revenue from external customers is stated after deducting inter-segment
revenue of £221,000 for Precision Machined Components.
** 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.
5. Segmental analysis of Revenue, Adjusted EBITDA and Operating Loss
(continued)
For the 52 week period ended 30 September 2023 (audited)
Precision Machined Components All other segments
Cylinders Total
£'000 £'000 £'000 £'000
Revenue from external customers* 20,667 11,277 - 31,944
Gross profit / (loss) 7,042 1,939 (38) 8,943
Adjusted EBITDA 3,854 82 (1,847) 2,089
Depreciation (710) (717) (117) (1,544)
Operating profit / (loss) before exceptional costs 3,144 (635) (1,964) 545
Exceptional costs (236) (57) (962) (1,255)
Operating profit / (loss) 2,908 (692) (2,926) (710)
Net finance costs (69) (145) (192) (406)
Profit / (loss) before tax 2,839 (837) (3,118) (1,116)
Segmental net assets** 10,477 1,971 1,138 13,586
Other segment information:
Taxation credit / (charge) 254 189 (6) 437
Capital expenditure - property, plant and equipment
243 813 35 1,091
* Revenue from external customers is stated after deducting inter-segment
revenue of £671,000 for Precision Machined Components.
** 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.
6. Exceptional costs
Items that are incurred outside the normal course of business and/or that are
non-recurring are considered as exceptional costs and are disclosed separately
on the face of the Condensed Consolidated Statement of Comprehensive Income.
An analysis of the amounts presented as exceptional costs is as follows:
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
Arrangement of Term Loan (111) - -
Debt advisory services to refinance banking facilities - (176) (373)
Debt advisory services on behalf of Lloyds Banking Group (15) (98) (131)
Corporate finance services (73) (229) (313)
Reorganisation costs (33) (201) (309)
Write-down of obsolete historic inventory - - (111)
Reversal of inventory provision from prior year - - 3
Historical contract settlement - - (10)
Other plc costs - - (11)
(232) (704) (1,255)
7. Taxation
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
Current tax credit - - 409
Deferred taxation (charge) / credit (55) - 28
Taxation (charge) / credit to the income statement (55) - 437
The taxation charge in the period relates to an increase in the net deferred
tax liability of the Group. This is driven by an increase in deferred tax
liabilities in relation to accelerated tax depreciation partially offset by an
increase in deferred tax asset recognition in relation to unused losses.
8. Loss per ordinary share
The calculation of basic loss per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in
issue during the period.
The calculation of diluted loss per share is based on basic loss per share,
adjusted to allow for the issue of shares on the assumed conversion of all
dilutive share options.
Adjusted loss per share shows loss per share after adjusting for the impact of
amortisation charges, impairment charges and any other exceptional items, and
for the estimated tax impact, if any, of those costs. Adjusted loss per share
is based on the loss as adjusted divided by the weighted average number of
shares in issue.
8. Loss per ordinary share (continued)
For the 26 week period ended 30 March 2024
£'000
Loss after tax (1,228)
Number of Shares ('000)
Weighted average number of shares - basic 38,667
Dilutive effect of share options 277
Weighted average number of shares - diluted 38,944
Loss per share - basic and diluted (3.2)p
The effect of anti-dilutive potential shares is not disclosed in accordance
with IAS 33.
The Group adjusted loss per share is calculated as follows:
Loss after tax (1,228)
Other exceptional items (note 5) 232
Theoretical tax effect of above adjustments (58)
Adjusted loss (1,054)
Adjusted basic loss per share (2.7)p
For the 26 week period ended 1 April 2023
£'000
Loss after tax (1,400)
Number of Shares ('000)
Weighted average number of shares - basic 36,134
Dilutive effect of share options 528
Weighted average number of shares - diluted 36,662
Loss per share - basic and diluted (3.9)p
The effect of anti-dilutive potential shares is not disclosed in accordance
with IAS 33.
8. Loss per ordinary share (continued)
The Group adjusted loss per share is calculated as follows:
Loss after tax (1,400)
Exceptional items (note 5) 704
Theoretical tax effect of above adjustments (134)
Adjusted loss (830)
Adjusted basic loss per share (2.3)p
For the 52 week period ended 30 September 2023
£'000
Loss after tax (679)
Number of Shares ('000)
Weighted average number of shares - basic 37,400
Dilutive effect of share options 446
Weighted average number of shares - diluted 37,846
Loss per share - basic and diluted (1.8)p
The effect of anti-dilutive potential shares is not disclosed in accordance
with IAS 33.
The Group adjusted loss per share is calculated as follows:
£'000
Loss after tax (679)
Exceptional items (note 5) 1,255
Theoretical tax effect of above adjustments (276)
Adjusted profit 300
Adjusted earnings per share 0.8p
9. Reconciliation of operating profit to operating cashflow
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
Adjusted Operating (loss) / profit (703) (516) 545
Adjustments for:
Depreciation of property, plant and equipment 747 778 1,544
Share option costs 17 42 71
Release of grants (10) - (20)
(Profit) / loss on disposal of property, plant and equipment (15) - 170
Write-off of assets under construction - - 108
Movement in translation reserve - 6 12
Changes in working capital:
Increase in inventories (183) (198) (1,003)
Decrease/(increase) in trade and other receivables 1,063 681 (53)
Decrease in trade and other payables (612) (1,633) (151)
Operating cash flow 304 (840) 1,223
10. Reconciliation of net debt
Unaudited Unaudited Audited
30 March 1 April 30 September
2024 2023 2023
£'000 £'000 £'000
Cash and cash equivalents 594 1,039 945
Bank borrowings - (1,907) (907)
Term loan (1,500) - -
Net borrowings excluding lease liabilities (906) (868) 38
Asset finance lease liabilities (1,202) (1,386) (1,072)
Right of use asset lease liabilities (1,229) (1,433) (1,329)
Net debt (3,337) (3,687) (2,363)
On 14 November 2023, the Group exited its existing Revolving Credit Facility,
provided by Lloyds Banking Group, by arranging a new Term Loan facility of
£1.5 million with Rockwood Strategic plc and Peter Gyllenhammar AB, two of
its major shareholders. The new Term Loan is committed for a period of 5 years
and is secured against the assets of the Group. The Term Loan is repayable in
full upon a successful sale of the PMC division. The new loan was drawn in
full and used to repay Lloyds in full, settle transaction costs and to provide
general working capital headroom.
In conjunction with the provision of the new Term Loan, Rockwood and
Gyllenhammar were issued with 1,933,358 warrants in aggregate (representing 5%
of the issued share capital) to subscribe for ordinary shares in the Company
at a price of 32 pence per share, representing a 20% premium to the closing
share price on 23 October 2023 (being the day prior to the announcement of the
new facility). The warrants may be exercised at any time in the 5 years
following drawdown of the new facility and continue to be exercisable in the
event the facility is repaid before its final expiry.
Rockwood Strategic plc is a quoted unit trust whose funds are managed by
Harwood Capital LLP, thereby placing it under the control of Richard Staveley,
a Non-Executive Director of the Company. Rockwood Strategic plc is therefore
considered to be a related party under "IAS 24 - Related Party Disclosures"
(see Note 13).
11. Called up share capital and share premium
Unaudited Audited Unaudited Audited
30 March 30 September 1 April 30 September
2024 2023 2023 2023
Shares Share Capital
Shares No. Share Capital £'000
No. £'000
Allotted, issued and fully paid
Ordinary shares of 5p each 38,667,163 38,667,163 1,933 1,933
Share Premium
£'000
Share Premium account
At 1 April 2023, 30 September 2023 and 30 March 2024 1,699
During the 26 week period to 30 March 2024, the Group did not issue any new
ordinary shares.
In the 26 week period to 1 April 2023, the Group issued 7,600,000 new ordinary
shares on 6 December 2022 with a nominal value of 5p each, raising £2.1
million net of expenses. Of this total, £1.7 million was allocated to the
share premium account.
12. Dividends
No final or interim dividend was paid for the 52-week period ended 30
September 2023.
No interim dividend is declared for the 26-week period ended 30 March 2024.
13. Related party transactions
During the period, the Group arranged a new Term Loan facility of £1.5
million with Rockwood Strategic plc and Peter Gyllenhammar AB, two of its
major shareholders (see Note 10). The facility was drawn in full on 14
November 2023.
Rockwood Strategic plc is a quoted unit trust whose funds are managed by
Harwood Capital LLP, thereby placing it under the control of Richard Staveley,
a Non-Executive Director of the Company. Rockwood Strategic plc is therefore
considered to be a related party under "IAS 24 - Related Party Disclosures".
As at 30 March 2024, the balance outstanding under the facility, excluding
accrued interest, was £1.5 million.
There were no related party transactions in the 26 week period to 1 April
2023.
A copy of the Interim Report will be sent to shareholders shortly and will be
available on the Company's website: www.pressuretechnologies.com
(http://www.pressuretechnologies.com) .
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