PressureTechnologies - Full-Year Trading Update
27/09/2022 07:00
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RNS Number : 7017A Pressure Technologies PLC 27 September 2022
Pressure Technologies plc
("Pressure Technologies" or the "Group")
Full-Year Trading Update
Pressure Technologies (AIM: PRES), the specialist engineering group, provides
a trading update for the 52 weeks ending 1 October 2022.
The results for the first half of the year, which were announced on 28 June
2022, indicated an adjusted operating loss(1) of £2.1 million for the first
half, but with a much stronger performance expected for the second half of the
year, on the basis of a strong order book in the Chesterfield Special
Cylinders division and an expected recovery in order intake in the Precision
Machined Components division. However, whilst the second half of the year is
expected to show an adjusted operating profit(1), the recovery has been
significantly below that anticipated at the half year and the Group is now
expecting to report an adjusted operating loss for the full year.
Chesterfield Special Cylinders (CSC)
In CSC, progress on major defence contracts in the fourth quarter was impacted
by a combination of unexpected customer delays, supply chain disruption and
the unplanned outage of key equipment, delaying significant revenue into the
first half of FY23. Similarly, several Integrity Management deployments
planned for the second half have been delayed by customers into FY23 and
beyond. Input costs from raw materials and energy-intensive processes
increased significantly throughout the year, further impacting margins where
the costs could not be recovered through price escalations and permitted
contract variations within the period.
However, the outlook for CSC in FY23 remains positive, supported by an order
book of £5.9 million, major defence contract placements expected in the first
quarter, and a strong pipeline of defence contracts, Integrity Management
deployments and hydrogen storage and transportation projects.
Hydrogen revenue for FY22 is expected to be £2.7 million (2021: £2.2
million) and the current opportunities pipeline underpins confidence in
further significant hydrogen revenue growth in FY23, weighted towards the
second half of the year.
Precision Machined Components (PMC)
In PMC, there was an unexpected slowdown in order placement from oil and gas
customers over the summer period, which recovered later in the fourth quarter.
Together with supply chain delays and cost increases, the temporary slowdown
resulted in lower revenue and a significantly greater adjusted operating
loss(1) than anticipated for the full year.
Order intake since the summer holiday period has been strong and the PMC order
book at the beginning of FY23 is expected to be around £3.3 million (2021:
£1.8 million). OEM customers forecast continued recovery in demand for
specialised components for oil and gas exploration and production projects
into 2023 and beyond. This is reflected in the expected fourth quarter FY22
order intake of around £3.0 million, the highest quarterly intake since April
2020. The Board now expects PMC to return to profitability in the second
quarter of FY23.
Banking Facilities
The Group's revolving credit facility with Lloyds Bank currently runs to 30
June 2023 and at the end of FY22 is expected to be fully drawn at £2.4
million (2 October 2021: £4.8 million drawn). The net debt position, which
includes asset finance and right of use lease liabilities, at the end of FY22
is expected to be around £3.9 million (2 October 2021: £4.9 million).
As a result of the expected adjusted operating loss for the full year, the
Group now anticipates that it will not be able to meet the requirements of the
two existing financial covenants contained within the current facility.
These covenants relate to leverage and interest cover and a first test is
currently required at the end of October based on full-year performance to 30
September 2022. The Group is currently in constructive dialogue with Lloyds
Bank regarding these covenants and ongoing facility requirements.
Ernst & Young LLP continues to support the Group with the review of
funding options to replace the Lloyds Bank facility with new arrangements that
provide increased liquidity, greater flexibility and the required working
capital to support the Group's strategic investment in CSC, in particular for
growth opportunities in hydrogen energy.
Outlook
Notwithstanding the disappointing trading performance for FY22, the Board is
confident in underlying market opportunities and expects a return to
profitability and positive cash generation in FY23. The positive outlook for
the Group in the medium and longer term is underpinned by a strong defence
orderbook and pipeline, the completion of projects deferred from FY22,
improving order placement in PMC over recent weeks and exciting opportunities
in hydrogen storage and transportation.
1 Adjusted operating profit/(loss) is operating profit/(loss) before
amortisation, impairments and other exceptional costs
For further information, please contact:
Pressure Technologies plc Tel: 0330 015 0710
Chris Walters, Chief Executive PressureTechnologies@houston.co.uk (about%3Ablank)
James Locking, Chief Financial Officer
Singer Capital Markets (Nomad and Broker) Tel: 0207 496 3000
Mark Taylor / Asha Chotai
Houston (Financial PR and Investor Relations) Tel: 0204 529 0549
Kay Larsen / Ben Robinson
The information contained within this announcement is deemed by the Company 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, as amended and supplemented from time to
time.
COMPANY DESCRIPTION
www.pressuretechnologies.com (about%3Ablank)
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 and Precision
Machined Components.
Chesterfield Special Cylinders (CSC) - www.chesterfieldcylinders.com
(about%3Ablank)
● Chesterfield Special Cylinders, Sheffield, includes CSC Deutschland GmbH.
Precision Machined Components (PMC) - www.pt-pmc.com (about%3Ablank)
● Precision Machined Components includes the Al-Met, Roota Engineering and
Martract sites.
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