PressureTechnologies - Sale of PMC and Board Changes
27/09/2024 15:40
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RNS Number : 0852G Pressure Technologies PLC 27 September 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.
27 September 2024
Pressure Technologies plc
("Pressure Technologies" or "the Company" or "the Group")
Sale of Precision Machined Components Division and Board Changes
Pressure Technologies plc (AIM: PRES), the specialist engineering group, is
pleased to announce that it has exchanged contracts and agreed the sale of PT
Precision Machined Components Limited ("PMC" or "the Division") to Raghu Vamsi
Machine Tools Private Limited ("Purchaser"), a manufacturer of precision
engineered components based in India, for an initial enterprise value of £6.2
million with the potential to increase to £7.7 million dependent on the
future performance of the Division (the "Sale" or "Transaction"). Further
details on the consideration structure are set out in the paragraph titled
Sale Terms, Enterprise Value and Cash Consideration below.
Rationale for the Transaction
PMC manufactures highly specialised components for use in safety-critical
subsea and surface flow control applications, serving global oil and gas OEM
customers through its Al-Met, Roota Engineering and Martract operations in the
UK.
As previously announced, PMC was identified as non-core by the Group, with a
shift in strategic focus to the development and growth of the Group's
principal division, Chesterfield Special Cylinders ("CSC").
The Sale simplifies the corporate structure of the Group and leaves CSC as its
only operating business. The Board is now focused strategically on the
development and growth of CSC in defence and hydrogen energy markets and in
through-life Integrity Management services. The Group will provide further
updates on the strategic outlook for CSC together with final results for the
financial year ending 30 September 2024.
Contracts for the Sale have been executed and exchanged between the Company
and the Purchaser today and the Transaction is expected to complete no later
than 8 October 2024, upon receipt of the Sale proceeds by the Company.
The proceeds of the Sale will be used to repay the outstanding balance of
£1.0 million of the Group's Term Loan, which was raised in November 2023 from
two of its major shareholders. The balance of the proceeds will provide
increased working capital headroom and enable investment to support growth
opportunities at CSC, including those in the developing hydrogen energy sector
and the global defence market.
Sale Terms, Enterprise Value and Cash Consideration
Pressure Technologies has agreed to sell PMC for an initial enterprise value
of £6.2 million, including net debt of £3.4 million, resulting in an initial
equity value of £2.8 million. The net debt, comprising cash balances of £0.5
million less finance lease liabilities of £0.9 million, right of use asset
lease liabilities of £1.0 million and a debt balance of £2.0 million payable
by PMC to Pressure Technologies ("PMC Debt"), will be assumed by the
Purchaser's group.
The initial equity value will be satisfied by cash on completion of £2.8
million. In addition, the PMC Debt is to be redeemed in full at completion by
a cash payment of £2.0 million. Pressure Technologies will therefore receive
total cash proceeds at completion of £4.8 million. The settlement of cash
proceeds is subject to a locked-box mechanism customary for a transaction of
this type.
The Company is also eligible to receive additional cash consideration from the
Purchaser dependent on the future performance of the Division up to a maximum
of £1.5 million ("Variable Consideration"). The Variable Consideration is to
be calculated on the basis of the audited Adjusted EBITDA(1) of the Division
for the year ending 30 September 2025 ("the Performance Period") and would be
payable by the Purchaser during the first calendar quarter of 2026.
The Variable Consideration is payable if the Division's Adjusted EBITDA for
the Performance Period reaches a minimum threshold of £2.0 million and
increases progressively for higher levels of Adjusted EBITDA up to a maximum
threshold of £4.25 million. Variable Consideration of £0.2 million is
payable at the minimum threshold rising to £1.5 million at the maximum
threshold. In the event the maximum Variable Consideration of £1.5 million
becomes payable, the total enterprise value for the Division would increase
from the initial enterprise value of £6.2 million to the maximum receivable
of £7.7 million.
Financial Effect of the Sale
The Sale will significantly strengthen the balance sheet of the Group.
Following receipt of the £4.8 million cash proceeds at completion and
allowing for repayment of the Term Loan of £1.0 million and payment of
transaction fees and management incentives, the Group is expected to have a
net cash balance of £2.3 million comprising a cash balance of approximately
£2.9 million and debt balances of £0.6 million, which include finance lease
liabilities of £0.3 million and right of use asset lease liabilities of £0.3
million.
For the financial year ended 30 September 2023, the last audited period prior
to announcement of the Transaction, PMC reported revenue of £11.3 million,
Adjusted EBITDA(1) of £0.1 million and loss before tax of £0.8 million. At
30 March 2024, PMC reported net assets of £2.2 million.
The Company has agreed with the Purchaser that it will provide management
support to PMC during the Performance Period which will be partly funded by
the Purchaser.
Board Changes
Steve Hammell, Chief Financial Officer, will step down from the Board and
leave the Group on 31 October 2024. During his tenure, Steve has implemented
significant improvements in the Group's financial controls and reporting and
leaves the Group in a stronger financial position, having managed the PMC sale
process to a successful conclusion. This executive management change by
mutual agreement recognises the considerable reduction in the scale and
complexity of Group operations following the sale of PMC. The Board is
currently undertaking a review of its finance capability and resources to
determine the appropriate and most cost effective structure moving forward.
The Board would like to thank Steve for his significant contribution to the
Group over the last eighteen months and wishes him all the best for the
future.
Chris Walters, Chief Executive of Pressure Technologies plc, commented:
"We are delighted to announce the sale of PMC to Raghu Vamsi Machine Tools and
look forward to seeing the continued progress of the business under its new
ownership, where plans for strategic development and growth present exciting
opportunities for the combined businesses, their global customers and their
employees.
The completion of this strategic divestment will allow us to focus our
resources on the development and growth of Chesterfield Special Cylinders in
defence and hydrogen energy markets and in the provision of through-life
inspection, testing and recertification services over the medium and longer
term.
The initial enterprise value of £6.2 million provides good value for PMC at
its underlying asset value, with the initial cash proceeds of £4.8 million
substantially strengthening the balance sheet of the Group and enabling us to
repay the Term Loan raised last year. In addition, we are also eligible to
receive further consideration up to £1.5 million if PMC continues to perform
well during its first year under new ownership.
As he steps down from the Board, I would like to thank Steve Hammell for his
significant contribution to the Group over the past eighteen months and wish
him all the best in the future."
Vamsi Vikas Ganesula, Managing Director of Raghu Vamsi Machine Tools,
commented:
"We are delighted with the strategic acquisition of the PMC business from
Pressure Technologies. The respected brands of Al-Met, Roota Engineering and
Martract will complement our existing engineering businesses and deliver
strong operational and commercial synergies as we continue to expand our
international footprint.
We are very excited by the opportunities presented in the global oil and gas
market with the blue chip customer base of PMC and will now work closely with
our new colleagues in the UK to develop the long-term manufacturing capability
and reach of our combined businesses."
Notes:
1 Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation and other exceptional costs.
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 DESCRIPTIONS
www.pressuretechnologies.com (http://www.pressuretechnologies.com/)
Pressure Technologies plc is based in Sheffield and operates through its
wholly subsidiary Chesterfield Special Cylinders ("CSC"). CSC is a market
leading designer, manufacturer and provider of safety-critical, high-pressure
containment products and services to a global customer base in the defence,
hydrogen energy, oil & gas and industrial markets. For more information on
CSC, please visit www.chesterfieldcylinders.com
(http://www.chesterfieldcylinders.com/)
www.raghuvamsi.com (https://raghuvamsi.com/)
Raghu Vamsi Machine Tools Private Limited ("RVMT") is part of the Raghu Vamsi
Group. Founded in 2004, the company and its subsidiaries design, develop and
manufacture precision engineering components and subassemblies for global
customers in aerospace, defence, oil and gas, medical and industrial markets.
RVMT's capabilities include CNC machining, engineering, sheet metal
fabrication, composites manufacturing, electronics and electromechanical
subassemblies, welding and specialised surface coatings.
Through it operations in India and the United States of America, the company
exports and supplies to various global OEMs including Halliburton, Baker
Hughes, Schlumberger, Boeing, GE Aviation, Honeywell, Rolls Royce, Collins
Aerospace and many more.
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