REG - PressureTechnologies - 2023 Interim Results
27/06/2023 07:15
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RNS Number : 9583D Pressure Technologies PLC 27 June 2023
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 June 2023
Pressure Technologies plc
("Pressure Technologies", the "Company" or the "Group")
2023 Interim Results
Pressure Technologies (AIM: PRES), the specialist engineering group, is
pleased to announce its unaudited interim results for the 26 weeks to 1 April
2023.
Financial Highlights
● Group revenue increased 45% to £13.8 million (2022: £9.5 million)
● Gross profit up 76% to £3.7 million at 27% margin (2022: £2.1 million at 22%
margin)
● Adjusted EBITDA(1) profit of £0.3 million (2022: EBITDA loss of £1.2
million)
● Adjusted operating loss(2) of £0.5 million (2022: loss of £2.1 million)
● Reported loss before tax of £1.4 million (2022: loss of £2.3 million)
● Reported basic loss per share of 3.9p (2022: loss per share of 6.0p) and
Adjusted basic loss per share(3) of 2.3p (2022: loss per share of 5.7p)
● Net debt(4) of £3.7 million (2022: £5.4 million; 1 October 2022: £3.5
million); Net bank borrowings, excluding asset finance lease liabilities and
right of use asset lease liabilities, of £0.9 million (2022: £2.7 million; 1
October 2022: £0.6 million)
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, bank borrowings, asset finance
lease liabilities and right of use asset lease liabilities
Group Highlights
● Improving trading conditions during the first half of FY23 driven by major
defence contract placement and continued recovery in the oil and gas market
against the backdrop of more resilient economic conditions.
● Group revenue in the first half of FY23 of £13.8 million (2022: £9.5
million), representing like-for-like growth of 45% and underpinning a return
to Adjusted EBITDA profitability of £0.3m (2022: loss of £1.2 million).
● Order intake of £34.3 million for the eight months ended May 2023 (eight
months ended May 2022: £17.4 million) was 97% higher than the corresponding
period last year and supports a current order book of £28.1 million at May
2023 (May 2022: £16.6 million), the highest level for more than five years.
● Fundraising of £2.1 million (net of expenses) in December 2022 used to
support the Group's short-term working capital requirements and provide a
bridge to profitable, cash-generative trading following placement of a major
defence contract in February 2023.
● Bank borrowings were reduced by £0.5 million in the period to £1.9 million
(1 October 2022: £2.4 million).
● The refinancing of the debt facilities of the Group has not progressed as
quickly as originally expected. The Board continues to explore refinancing
options for the Group and is engaged in constructive discussions with
potential lenders. Based on these discussions, the Board has a reasonable
expectation that the refinancing can be completed in the remainder of calendar
year 2023.
● Following a marketing process, the Board has decided not to divest Precision
Machined Components at this time due to improving conditions in the oil and
gas market and will revisit strategic options for the division later in the
year.
Chesterfield Special Cylinders ("CSC")
● CSC revenue in the first half of FY23 of £8.8 million (2022: £6.3 million),
driven by defence work in the second quarter and progress in hydrogen markets,
underpinning improved EBITDA profitability.
● Defence revenue of £7.0 million (2022: £5.0 million), reflecting strong
order book and new contract placements for submarine and surface ship projects
for UK and overseas navies.
● Largest ever contract award of £18.2 million announced in February 2023 to
supply safety-critical pressure vessels for major UK naval new construction
programme over three years to 2025.
● Hydrogen revenue increased to £1.3 million (2022: £0.5 million), driven
equally by sales of new refuelling station storage and periodic inspection,
testing and recertification services for hydrogen road trailers.
● Enquiry levels for Integrity Management services increased sharply during the
first half of FY23, driven by growing activity in the offshore and hydrogen
energy markets.
● CSC order intake of £22.3 million in the eight months ended May 2023 (eight
months ended May 2022: £12.4 million) supports a current order book of
£19.2m million at the end of May 2023 (May 2022: £14.2 million), the highest
order book level seen in the last five years, providing strong revenue cover
for the remainder of FY23 and good visibility into FY24.
● Operational improvements in the Sheffield facility are delivering increased
capacity and efficiency for hydrogen cylinder and road trailer new build,
inspection and testing services.
Precision Machined Components ("PMC")
● PMC revenue in the first half of FY23 of £4.9 million (2022: £3.2 million),
reflecting recovery in the oil and gas market and underpinning a return to
EBITDA profitability.
● PMC order intake strengthened significantly in the first half of FY23 and
reached £12.0 million in the 8 months ended May 2023 (8 months ended May
2022: £5.0 million), supporting a current order book of £8.9 million at the
end of May 2023 (May 2022: £2.4 million), the highest order book level seen
in the last five years, providing strong revenue cover for the remainder of
FY23.
Outlook
● Improved second-half performance expected for CSC, driven by high-value
defence contract milestones, Integrity Management deployments and hydrogen
energy projects.
● Despite delays in the broader hydrogen supply chain, opportunities continue to
be developed for the supply of new hydrogen storage and transportation systems
for refuelling and decarbonisation applications.
● 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.
● Recovery of financial performance in PMC expected to strengthen in second half
driven by increasing order intake as OEM customers report a stronger oil and
gas market outlook, supporting improving profitability.
● The order book of the Group is robust, underpinning a stronger performance in
the second half of FY23. However, this will require further strong
improvements in operational and supply chain performance and confirmation of
the expected increase in Integrity Management activity, all of which represent
material uncertainties.
● Accordingly, the Board therefore believes that full-year FY23 Adjusted EBITDA
is more likely to be in the range £2.2 million to £2.5 million, which would
represent significant progress as compared to FY22 (Adjusted EBITDA Loss of
£0.9 million).
Chris Walters, Chief Executive of Pressure Technologies plc, commented:
"Significantly improved performance in the first half of FY23 reflects the
strong defence order book in Chesterfield Special Cylinders and the continued
recovery of oil and gas market trading conditions in Precision Machined
Components.
In Chesterfield Special Cylinders, the order book reached the highest level on
record following an £18.2 million contract award to supply air pressure
vessels for a major UK naval new construction programme. This order was the
largest ever for the division, providing good visibility of high-value work
through the remainder of FY23 and into FY24.
Despite delays in the hydrogen energy supply chain over the past year, we
remain well positioned in this 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.
In Precision Machined Components, the recovery of order intake levels during
the first half of the year is expected to continue throughout the second half,
as OEM customers report an increasingly positive oil and gas market outlook.
In light of these improving conditions, the Board has decided not to divest
PMC at this time and will revisit strategic options for the business later in
the year.
Both of our divisions have strong and growing order books, our executive team,
including Chief Financial Officer and Chief Operating Officer, is complete and
we see the opportunity for revenue growth and margin improvement across 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
Steve Hammell, Chief Financial Officer
Singer Capital Markets (Nomad and Broker) Tel: 0207 496 3000
Rick Thompson / Asha Chotai
Houston (Financial PR and Investor Relations) Tel: 0204 529 0549
Kay Larsen /Ben Robinson pressuretechnologies@houston.co.uk
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 has made significant progress in the first half of FY23
as reflected in these interim results. Revenue has increased significantly in
the period alongside an increase in new orders, driven by a major new UK
defence contract and recovery in the oil and gas market.
Chesterfield Special Cylinders
Chesterfield Special Cylinders ("CSC") has built momentum in the period
following receipt of its largest ever contract award of £18.2 million to
supply safety-critical pressure vessels for a major UK naval new construction
programme, with a three-year manufacturing programme to 2025. Operational
performance on this contract was strong in the second quarter driving revenue
recognition.
CSC remains well positioned in the emerging market for hydrogen storage and
transportation. Order placement from established and new customers was slower
than expected during the first half of FY23, influenced by constraints and
delays in the broader supply chain for components required in the generation
and compression of hydrogen for refuelling and decarbonisation projects.
Despite these delays, CSC delivered hydrogen revenues of £1.3 million (2022:
£0.5 million) from several refuelling station projects and from periodic
inspection, testing and recertification services carried out on existing
hydrogen storage systems and road trailers.
CSC order intake in the eight months ended May 2023 was £22.3 million (eight
months ended May 2022: £12.4 million) supporting a current order book of
£19.2 million at the end of May 2023 (May 2022: £14.2 million), the highest
order book level seen in the last five years. The order book provides strong
revenue cover for the remainder of FY23 and good visibility into FY24.
CSC has made strong progress on its operational excellence improvements in the
period. Organisational changes have been made to strengthen the operations
team, with new appointments and governance to improve multi-functional working
through a focussed project management approach. A continuous improvement
roadmap has been developed and deployment is on-track through a dedicated
team.
Furthermore, equipment maintenance processes have been strengthened with the
appointment of new technicians and the roll-out of software to track
equipment reliability and enable the development of focussed improvements.
Further system developments are in the implementation stage which will drive
productivity and margins. Solid progress has been made in CSC to improve
reliability and repeatability to customers, which in-turn delivers
improved forecast accuracy so that forward efforts and plans can focus on
cost control and margin enhancement.
Precision Machined Components
Since 2020, our Precision Machined Components ("PMC") division has felt the
significant impact of the Covid-19 pandemic. However, we are now seeing the
early stages of recovery in oil and gas markets and are encouraged by the
steady growth in order intake for the division, which has traded in-line with
expectations throughout the first half of FY23 and returned to EBITDA
profitability.
The demand for subsea well intervention tools, valve assemblies and control
module components has continued to grow during the first half of the year with
a sharp improvement noted in April and May 2023. Roota Engineering OEM
customers, including Aker, Expro, Halliburton and Schlumberger, continue to
report a stronger oil and gas market outlook for the second half of 2023 and
are investing heavily in their global manufacturing capacity to support growth
in oil and gas production, principally from Middle East, South America, North
Sea, US Gulf of Mexico and Australasia regions. There is also growing demand
for well de-commissioning projects in the North Sea.
Business Review (continued)
Roota Engineering order intake in the eight months ended May 2023 was £4.2
million (eight months ended May 2022: £2.9 million) supporting a current
order book of £2.7 million at May 2023 (May 2022: £1.3 million).
Demand for production drilling and flow control components, supported by a
strong and sustained recovery in subsea tree new build capex, is also expected
to grow across 2023 and beyond for major subsea and
surface production projects. Al-Met OEM customers, including Schlumberger and
Baker Hughes, report increasing investment to support oil and gas production
in Middle East, South America, North Sea, US Gulf of Mexico, Canada and
South-East Asia regions.
The recovery of order intake at Al-Met was particularly strong in the first
half of the year. Order intake in the eight months ended May 2023 was £7.8
million (eight months ended May 2022: £2.1 million) supporting a current
order book of £6.2 million at May 2023 (May 2022: £1.1 million), which
includes over £3.0 million already secured for delivery in the first half of
FY24.
Overall PMC order intake in the eight months ended May 2023 was £12.0 million
(eight months ended May 2022: £5.0 million) supporting a current order book
of £8.9 million at the end of May 2023 (May 2022: £2.4 million), the highest
order book level seen in the last five years. The order book provides strong
revenue cover for the remainder of FY23.
In November 2022, the Board announced that an improved trading environment and
outlook created the potential opportunity to divest PMC in order to raise
funds to progress strategic priorities in CSC. As part of this process, a
number of offers to acquire PMC were received but none were at a level that
the Board felt appropriately reflected the value of the business, particularly
in light of the improved outlook for the oil and gas market and the recent
strong order intake of PMC. As a result, the Board has decided not to divest
PMC at this time and will revisit strategic options for the business later in
the year.
Equity Raising
On 6 December 2022, the Group completed a £2.1 million equity fundraise with
support from institutional and retail shareholders. The funds raised provided
important flexibility and liquidity during the first half of FY23 and a bridge
to profitable, cash-generative trading driven by the commencement of major
defence contracts in CSC and recovering order intake in PMC.
Outlook
The Group is well positioned in the defence and emerging hydrogen energy
sectors and expects to benefit from recovery in the oil and gas market. Based
on the strong current order book, the Group is well placed to drive revenue
growth in the second half of FY23 and beyond although this will be critically
dependent on the rate at which improved production and supply chain
performance can be delivered. Given the supply chain challenges experienced in
the period, the Board recognises that this remains a risk to the delivery of
the expected stronger performance in the second half of FY23 as delivery
milestones, and hence revenue, could be deferred into FY24.
The Board therefore believes that full-year FY23 Adjusted EBITDA is more
likely to be in the range £2.2 million to £2.5 million, which would
represent significant progress as compared to FY22 (Adjusted EBITDA Loss of
£0.9 million).
Chris Walters
Chief Executive
27 June 2023
Financial Review
Revenue & Profitability
Improving market conditions in the oil and gas market and strong new defence
orders have underpinned a significant improvement in performance in the first
half of FY23. Revenue of £13.8 million was 45% higher than the corresponding
period last year (2022: £9.5 million) and has helped drive gross profit to
£3.7 million at 27% margin (2022: £2.1m at 22% margin).
The gross margin improvement has been driven by the higher level of activity
and throughput in both CSC and PMC, improving asset utilisation, and a benefit
of £0.4 million in the period in relation to the adoption of the amended IFRS
15 treatment for certain long-term contracts disclosed in the FY22 Annual
Report.
Overhead costs increased slightly in the period to £4.2 million (2022: £4.1
million) with a strict focus on cost control largely offsetting inflationary
pressures.
The Group reported an operating loss of £0.5 million (2022: loss of £2.0
million) in the period. Allowing for depreciation charges of £0.8 million
(2022: £0.8 million), the Group returned to an Adjusted EBITDA profit of
£0.3 million in the period (2022: loss of £1.2 million), demonstrating a
strong turnaround in underlying financial performance.
Exceptional costs of £0.7 million were incurred in the period (2022: £0.1
million) in relation to reorganisation costs, the extension of its banking
facilities with Lloyds Bank in October 2022 and the strategic review of PMC.
Cashflow
The Group reported a net cash outflow of £0.8 million in the period (2022:
outflow of £1.9 million). This was driven by reported EBITDA of £0.3
million, exceptional costs of £0.7 million, working capital outflows (£1.1
million), capital expenditure (£0.6 million), interest costs (£0.2 million)
and debt repayments (£0.6 million), partially offset by the net proceeds of
the equity raising (£2.1 million) in December 2022.
The equity raising involved the issue of 7,600,000 new ordinary shares at an
issue price of 30 pence per share and has provided essential financial
flexibility in the period. These funds also supported the purchase of a new
milling machine at PMC for £0.5 million in the period.
The cash balance at the end of the period was £1.0 million (1 October 2022:
£1.8 million). Net debt, which comprises cash, bank borrowings, finance lease
liabilities and right of use asset lease liabilities, at the end of the period
was £3.7 million (1 October 2022: £3.5 million). Net bank borrowings, which
comprises cash and bank borrowings only, at the end of the period was £0.9
million (1 October 2022: £0.6 million).
Prior Year Adjustment
During the preparation of the Annual Report & Accounts for the year ended
1 October 2022, the Group reviewed its accounting policy and past accounting
treatment in respect of a small number of long-term defence contracts within
CSC and it was identified that this accounting treatment was not in compliance
with IFRS 15.
As a result, the comparative period financial statements have been restated.
As at 2 October 2021 and 2 April 2022, the impact of the restatement was to
reduce total equity by £1,054,000. The restatement had no impact on profit
recognition in the 26 weeks ended 1 April 2023 or the 26 weeks ended 2 April
2022.
These accounting adjustments only impact the timing of profit recognition
under these specific contracts.
They do not impact the total profitability of the contracts, the net debt
position of the Group at any date,
Financial Review (continued)
the future cash generation profile of the Group, nor the underlying trading or
operations of the business.
Refinancing of Debt Facilities and Amendment of Lloyds Bank Facilities
The Board has been engaged in discussions with a number of prospective lenders
to provide asset-backed lending facilities and alternative financing to enable
the full repayment of the existing facilities of Lloyds Bank and provide
working capital headroom to support the strategic development of the Group.
These discussions have progressed more slowly than expected and have not
concluded at this time. The Board continues to explore options for refinancing
and is engaged in constructive discussions with potential lenders which will
require more time to conclude.
The current debt facilities provided by Lloyds Bank have been amended this
month such that the final maturity date of the facilities has been brought
forward from 31 March 2024 to 31 December 2023, with Lloyds having agreed to
waive the financial covenant tests due on 30 June 2023 under the facilities.
The Lloyds facility is expected to support the financing requirements of the
Group over the period to 31 December 2023 although the liquidity and covenant
headroom during this period remains limited.
After December 2023 the Group is likely to require additional working capital
facilities, depending on operational and financial performance, to ensure it
meets its financial obligations as they fall due. Given the on-going
constructive discussions with potential lenders, the Board has a reasonable
expectation that adequate financing can be secured during the remainder of the
calendar year 2023.
Auditor
Grant Thornton resigned as auditors to the Group on 23 May 2023 following the
signing of the FY22 Annual Report and Accounts. They confirmed that there were
no matters connected with their ceasing to hold office which they considered
should be brought to the attention of the shareholders or creditors of the
Group. The Board has commenced the process to appoint new auditors and will
update in due course.
Steve Hammell
Chief Financial Officer
27 June 2023
Condensed Consolidated Statement of Comprehensive Income
For the 26 weeks ended 1 April 2023
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
1 April 2 April 1 October
2023 2022 2022
Notes £'000 £'000 £'000
4 13,765 9,492 24,939
Revenue
Cost of sales (10,051) (7,437) (19,680)
Gross profit 3,714 2,055 5,259
Administration expenses (4,230) (4,110) (7,883)
Operating loss before amortisation, impairments and other exceptional costs (516) (2,055) (2,624)
Separately disclosed items of administrative expenses: - (64) (101)
Amortisation
Other exceptional costs 6 (704) (41) (968)
Operating loss (1,220) (2,160) (3,693)
Finance costs (180) (140) (292)
Loss before taxation (1,400) (2,300) (3,985)
Taxation 7 - 437 (52)
Loss for the period attributable to owners of the parent (1,400) (1,863) (4,037)
Other comprehensive income/(expense) to be reclassified to profit or loss in
subsequent periods
Currency exchange differences on translation of foreign operations 6 42 (5)
Total comprehensive expense for the period attributable to the owners of the (1,394) (1,821) (4,042)
parent
Loss per share - basic and diluted
From loss for the period 8 (3.9)p (6.0)p (13.0)p
Condensed Consolidated Statement of Financial Position
As at 1 April 2023
Unaudited Restated*
26 weeks ended Unaudited Audited
1 April 26 weeks ended 52 weeks ended
2023 2 April 1 October
2022 2022
Notes £'000 £'000 £'000
Non-current assets
Intangible assets - 152 -
Property, plant and equipment and right of use assets 10,961 12,477 11,197
Deferred tax asset 663 1,138 663
11,624 13,767 11,860
Current assets
Inventories 4,765 4,578 4,566
Trade and other receivables 8,137 12,487 9,331
Cash and cash equivalents 9 1,039 1,326 1,783
Current tax asset 58 435 58
13,999 18,826 15,738
Total assets 25,623 32,593 27,598
Current liabilities
Trade and other payables (7,342) (10,452) (9,477)
Borrowings - revolving credit facility 9 (1,907) - (2,407)
Lease liabilities 9 (526) (1,028) (839)
(9,775) (11,480) (12,723)
Non-current liabilities
Other payables (22) (62) (32)
Borrowings - revolving credit facility 9 - (4,000) -
Lease liabilities 9 (2,293) (1,732) (2,037)
Deferred tax liabilities (703) (1,066) (703)
(3,018) (6,860) (2,772)
Total liabilities (12,793) (18,340) (15,495)
Net assets 12,830 14,253 12,103
Equity
Share capital 10 1,933 1,553 1,553
Share premium account 10 1,699 - -
Translation reserve (259) (218) (265)
Retained earnings 9,457 12,918 10,815
Total equity 12,830 14,253 12,103
*A restatement of the Condensed Consolidated Statement of Financial Position
as at 2 April 2022 has been undertaken to correct an error which related to
the incorrect treatment of certain contract accounting transactions (see Note
13).
Condensed Consolidated Statement of Changes in Equity
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
Shares issued 380 1,699 - - 2,079
Share based payments - - - 42 42
380 1,699 - 42 2,121
Transactions with owners
Loss for the period - - - (1,400) (1,400)
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
For the 26 weeks ended 2 April 2022
Share Share Translation reserve Retained earnings Total
capital premium equity
account
£'000 £'000 £'000 £'000 £'000
Balance at 2 October 2021 (audited) 1,553 - (260) 15,784 17,077
Prior period adjustment - - - (1,054)
(1,054)
Restated* balance at 2 October 2021 (audited) 1,553 - (260) 14,730 16,023
- - - 51
Share based payments 51
Transactions with owners - - - 51 51
- - - (1,863) (1,863)
Loss for the period
Exchange differences arising on retranslation of foreign operations - - 42 - 42
Total comprehensive income/(expense) - - 42 (1,863) (1,821)
Restated* balance at 2 April 2022 (unaudited) 1,553 - (218) 12,918 14,253
Condensed Consolidated Statement of Changes in Equity (continued)
For the 52 weeks ended 1 October 2022
Share Share Translation reserve Total
capital premium Retained earnings equity
account
£'000 £'000 £'000 £'000 £'000
Balance at 2 October 2021 (audited) 1,553 - (260) 15,784 17,077
- - - (1,054)
Prior period adjustment (1,054)
Restated* balance at 2 October 2021 (audited) 1,553 - (260) 14,730 16,023
- - - 122
Share based payments 122
Transactions with owners - - - 122 122
Loss for the period - - - (4,037) (4,037)
Exchange differences arising on translating foreign operations - - (5) (5)
-
Total comprehensive expense - - (5) (4,037) (4,042)
Balance at 1 October 2022 (audited) 1,553 - (265) 10,815 12,103
*A restatement of the Condensed Consolidated Statement of Changes in Equity as
at 2 October 2021 and 2 April 2022 has been undertaken to correct an error
which related to the incorrect treatment of certain contract accounting
transactions (see Note 13).
Condensed Consolidated Cash Flow Statement
For the 26 weeks ended 1 April 2023
Unaudited Unaudited
26 weeks ended 26 weeks ended Audited
1 April 2 April 52 weeks ended
2023 2022 1 October
2022
£'000 £'000 £'000
Cash flows from operating activities
Loss after tax (1,400) (1,863) (4,037)
Adjustments for:
Depreciation of property, plant and equipment 778 849 1,678
Finance costs - net 180 140 292
Amortisation of intangible assets - 64 101
Exchange differences 6 42 -
Profit on disposal of property, plant and equipment - - (327)
Share option costs 42 51 122
Income tax (credit)/charge - (437) 52
Release of grants - - (66)
Changes in working capital:
Increase in inventories (199) (870) (859)
(Increase)/decrease in trade and other receivables 1,194 (3,425) (269)
Increase/(decrease) in trade and other payables (2,145) 4,799 4,132
Cash flows from operating activities (1,544) (650) 819
Finance costs paid net of interest income received (180) (140) (292)
Corporation tax refunded - 414 138
Net cash (outflow)/inflow from operating activities (1,724) (376) 665
Cash flows from investing activities
Purchase of property, plant and equipment (542) (364) (536)
Proceeds from disposal of fixed assets and assets held for sale - 217 2,063
Net cash (outflow)/inflow from investing activities (542) (147) 1,527
Financing activities
Repayment of lease liabilities (411) (595) (1,260)
New finance leases 354 - -
Repayment of borrowings (500) (773) (2,366)
Shares issued 2,079 - -
Net cash inflow/(outflow) from financing activities 1,522 (1,368) (3,626)
(744) (1,891) (1,434)
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period 1,783 3,217 3,217
Cash and cash equivalents at end of period 1,039 1,326 1,783
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 1 April 2023 and were approved by the Board of Directors on 26
June 2023.
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 1 April 2023
("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 has
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 1 October 2022. The principal accounting
policies of the Group have remained unchanged from those set out in the
Group's 2022 annual report and financial statements. The Principal Risks and
Uncertainties of the Group are also set out in the Group's 2022 annual report
and financial statements and are unchanged in the period.
The financial information for the 26 weeks ended 1 April 2023 and 2 April 2022
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 2022 financial statements for the 52 weeks ended 1 October 2022
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 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 current revolving credit facility (RCF) with Lloyds Bank was
amended in June 2023. The facility reduces from £1.9 million to £0.9
million on 30 September 2023 and now expires on 31 December 2023. The covenant
test on 30 June 2023 has been waived and the final testing date is 30
September 2023. The Board is currently engaged in constructive discussions
with potential lenders in order to refinance the Lloyds Bank facilities and
has a reasonable expectation that new financing arrangements can be secured
before the expiry of the Lloyds Bank facility on 31 December 2023.
Management have produced forecasts for the period up to September 2024 for all
business units, taking account of reasonably plausible changes in trading
performance and market conditions, which have been reviewed by the Directors.
In particular, the forecasts reflect both (i) the award of a major, multi-year
contract for the Chesterfield Special Cylinders division to supply air
pressure vessels for a major UK naval new construction program, which was
announced on 6 February 2023, and also (ii) the recent significantly improved
trading in the Precision Machined Components division as oil and gas markets
recover, following unprecedented order intake levels which have resulted in an
order book of £8.9 million at the end of May 2023, the highest order book
level seen in the last five years for the division. The base case forecast
demonstrates that the Group is projected to:
· generate profits and cash in the current financial year and
beyond;
· has headroom in financial covenants over the period up to the
expiry of the Lloyds RCF on 31 December 2023; and
· generates sufficient cash to repay the tranche of the RCF on 30
September 2023 and the final repayment of the facility on 31 December 2023 and
has sufficient cash reserves beyond 31 December 2023 to manage without the RCF
or an alternative financing facility. While the level of cash reserves is low
for the first quarter of calendar year 2024, the level is forecast to improve
substantially for the remainder of the forecast period.
The Group has also developed downside scenarios, which include consideration
of the recent track record of not always achieving budgets. The downside
scenario demonstrates the Group's dependence on the performance of large
contracts (including the large
3. Going concern (continued)
naval contract) noted above due to their materiality to the Group's overall
results. Management have modelled the downside scenario based on reasonably
possible delays in the large naval contract. By their nature, the achievement
of performance milestones under these types of contract can be subject to
uncertainties and delays have occurred on similar contracts in the past. These
uncertainties include 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 limited control of
the latter two factors. The achievement of performance milestones enables the
Group to recognise revenue and profits under the contract and typically
initiates invoicing to, and subsequent cash collection from, the customer.
As a result, these delays, whilst typically not impacting the financial
performance of the contract over its entire duration, can lead to material
delays in the timing of profit recognition and cash receipts between periods.
Given the size of the recent naval contract, any delays and unforeseen events
could have a material impact on the Group's cash reserves and covenant
compliance.
In the event of delays in the contract, 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. Work on this contract has already commenced and, to
date, whilst the contract is progressing in line with our contractual
commitments, some minor delays have arisen, principally due to supply issues
with components from third parties and the work of subcontractors.
Given the expiry of the RCF on 31 December 2023 and the step down in its
quantum in September 2023, the Group is currently exploring several actions to
strengthen the Group's financial position. In particular, the Group is
currently working with an advisor to support the Group's review of funding
options, including asset-backed and alternative financing lenders, in order to
replace the Lloyds Bank RCF with new arrangements that will provide the Group
with increased facility headroom and flexibility. These discussions are taking
longer than was originally anticipated but management expect these discussions
to be completed by the time of the expiry of the Lloyds Bank RCF on 31
December 2023. In addition to pursuing these refinancing opportunities, the
Group is also currently exploring the refinancing of the Group's freehold
property at Meadowhall Road, Sheffield.
Other factors which could negatively impact the forecasts include:
· Failure to win additional contracts in the Chesterfield Special
Cylinders division for hydrogen energy projects due to market factors outside
the control of the Group;
· Weaker revenue from Integrity Management deployments due to
customer delays; and
· The recent improvement in the Precision Machined Components
divisional revenue and order book not continuing going forward due to weaker
than expected oil and gas market conditions.
The Group believes that these factors are individually less likely to be
material to the achievement of the forecasts than potential delays in the
large naval contract, but in the event that they occur, together with large
naval contract delays, they may have a negative impact on covenant compliance
and cash flow at certain test dates in the forecast period.
The possibility of material delays to the performance of contracts (naval
contract in particular) and a replacement financing facility not yet being in
place gives rise to material uncertainties, as defined in accounting
standards, relating to events and circumstances which may cast significant
doubt about the Group's ability to continue as a going concern and to realise
its assets and discharge its liabilities in the normal course of business.
Reflecting management's confidence in delivering large contracts and
successfully replacing their financing facility, the Group continue to adopt
the going concern basis in preparing these interim condensed financial
statements. Management have concluded that the Group will be able to continue
in operation and meet their liabilities as they fall due over the period to
September 2024. Consequently, these financial statements do not include any
adjustments that would be required if the going concern basis of preparation
were to be inappropriate.
4. Segmental analysis of Revenue and Operating Loss
Revenue by destination Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
1 April 2 April 1 October
2023 2022 2022
£'000 £'000 £'000
United Kingdom 9,441 6,482 16,126
Europe 2,779 1,462 6,715
Rest of the World 1,545 1,548 2,098
13,765 9,492 24,939
Revenue by sector
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
1 April 2 April 1 October
2023 2022 2022
£'000 £'000 £'000
Oil and Gas 4,938 3,105 7,953
Defence 7,211 5,047 13,483
Industrial 322 785 1,099
Hydrogen Energy 1,294 555 2,404
13,765 9,492 24,939
Revenue by activity
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
1 April 2 April 1 October
2023 2022 2022
£'000 £'000 £'000
Cylinders 8,835 6,247 17,583
Precision Machined Components 4,930 3,245 7,356
13,765 9,492 24,939
4. Segmental analysis of Revenue and Operating Loss (continued)
Revenue recognition
The Group's pattern of revenue recognition is as follows:
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
1 April 2 April 1 October
2023 2022 2022
£'000 £'000 £'000
Sale of goods transferred at a point in time 6,559 5,513 10,357
Sale of goods transferred over time 6,350 2,696 12,584
Rendering of services 856 1,283 1,998
13,765 9,492 24,939
Operating loss by activity
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
1 April 2 April 1 October
2023 2022 2022
£'000 £'000 £'000
Cylinders 768 (250) 409
Precision Machined Components (181) (825) (1,100)
Manufacturing subtotal 587 (1,075) (691)
Unallocated central costs (1,103) (980) (1,933)
Operating loss before amortisation, impairment and other exceptional costs (516) (2,055) (2,624)
Amortisation and impairment - (64) (101)
Other exceptional costs (note 6) (704) (41) (968)
Operating loss (1,220) (2,160) (3,693)
Finance costs (180) (140) (292)
Loss before taxation (1,400) (2,300) (3,985)
The Operating (loss)/profit by activity is stated before the allocation of
Group management charges, which are included within 'Unallocated central
costs'.
5. Earnings before Interest, Taxation, Depreciation and Amortisation
(EBITDA)
Earnings before interest, taxation, depreciation, and amortisation (EBITDA) is
as follows:
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
1 April 2 April 1 October
2023 2022 2022
£'000 £'000 £'000
Adjusted EBITDA (pre-exceptionals) 262 (1,206) (946)
Other exceptional costs (note 6) (704) (41) (968)
EBITDA (442) (1,247) (1,914)
Depreciation (778) (849) (1,678)
Amortisation and impairments - (64) (101)
Finance costs (180) (140) (292)
Loss before taxation (1,400) (2,300) (3,985)
6. Other 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
1 April 2 April 1 October
2023 2022 2022
£'000 £'000 £'000
Reorganisation and redundancy (201) (65) -
Refinancing of Group banking facilities (176) (344)
Professional fees in relation to banking facilities (98) - -
Professional fees in relation to strategic review of PMC (229) - -
Reversal of impairment/(impairment) of inventory and work in progress - 89 (121)
Property costs - - (280)
Reversal of inventory provision - - 91
Final settlement for ERP system costs - - (193)
Historical contract settlement - - (88)
Other plc costs - (65) (33)
(704) (41) (968)
7. Taxation
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
1 April 2 April 1 October
2023 2022 2022
£'000 £'000 £'000
Current tax credit - 435 58
Deferred taxation credit/(charge) - 2 (110)
Taxation credit/(charge) to the income statement - 437 (52)
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.
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.
The Group adjusted loss per share is calculated as follows:
Loss after tax (1,400)
Other exceptional items (note 5) 704
Theoretical tax effect of above adjustments (134)
Adjusted loss (830)
Adjusted basic loss per share (2.3)p
8. Loss per ordinary share (continued)
For the 26 week period ended 2 April 2022
£'000
Loss after tax (1,863)
Number of Shares ('000)
Weighted average number of shares - basic 31,067
Dilutive effect of share options 702
Weighted average number of shares - diluted 31,769
Loss per share - basic and diluted (6.0)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 (1,863)
Amortisation and impairments 64
Other exceptional items (note 5) 41
Theoretical tax effect of above adjustments (19)
Adjusted loss (1,777)
Adjusted basic loss per share (5.7)p
For the 52 week period ended 1 October 2022
£'000
Loss after tax (4,037)
Number of Shares ('000)
Weighted average number of shares - basic 31,067
Dilutive effect of share options 661
Weighted average number of shares - diluted 31,728
Loss per share - basic and diluted (13.0)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:
For the 52 week period ended 1 October 2022
£'000
Loss after tax (4,037)
Amortisation 101
Other exceptional items (note 5) 968
Theoretical tax effect of above adjustments (203)
Adjusted loss (3,171)
Adjusted basic loss per share (10.2)p
9. Reconciliation of net debt
Unaudited Unaudited Audited
1 April 2 April 1 October
2023 2022 2022
£'000 £'000 £'000
Cash and cash equivalents 1,039 1,326 1,783
Bank borrowings (1,907) (4,000) (2,407)
Net bank borrowings excluding lease liabilities (868) (2,674) (624)
Asset finance lease liabilities (1,386) (1,886) (1,364)
Right of use asset lease liabilities (1,433) (874) (1,512)
Net debt (3,687) (5,434) (3,500)
As at 1 April 2023, the Group's bank borrowings was a revolving credit
facility provided by Lloyds Bank with a drawn balance of £1.9 million (1
October 2022: £2.4 million drawn) and an expiry date of 31 March 2024. The
revolving credit facility was amended in June 2023 and now has an expiry date
of 31 December 2023.
10. Called up share capital and share premium
Unaudited Audited Unaudited Audited
1 April 1 October 1 April 1 October
2023 2022 2023 2022
Shares Share Capital Share Capital
Shares No. £'000 £'000
No.
Allotted, issued and fully paid
Ordinary shares of 5p each 38,667,163 31,067,163 1,933 1,553
Share Premium
£'000
Share Premium account
At 2 April 2022 and 1 October 2022 -
Shares issued 1,699
At 1 April 2023 1,699
On 6 December 2022, the Group issued 7,600,000 new ordinary shares 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.
11. Dividends
No final or interim dividend was paid for the 52-week period ended 1 October
2022. No interim dividend is declared for the 26-week period ended 1 April
2023.
12. Related party transactions
There were no related party transactions in the 26 week periods to 1 April
2023 and 2 April 2022.
13. Prior year adjustment - Restatement in respect of IFRS 15 "Revenue from
Contracts with Customers"
During the preparation of the Annual Report & Accounts for the year ended
1 October 2022, the Group reviewed its accounting policy and past accounting
treatment in respect of a small number of long-term defence contracts within
CSC.
Since FY19, the Group has consistently applied an accounting treatment whereby
revenue for these specific defence contracts was recognised using an 'Output'
methodology under IFRS 15, 'Revenue from Contracts with Customers' ("IFRS
15"), with costs being accrued to achieve a uniform profit margin throughout
the multi-year life of the contracts, resulting in cost deferrals at financial
period ends. Whilst this cost treatment impacted the timing of profit
recognition between financial periods, it had no impact on either the total
profitability of the contracts over their entire lives, nor the quantum or
timing of cash flows.
During the preparation of the Annual Report & Accounts for the year ended
1 October 2022, it was noted that this accounting treatment is not in
compliance with IFRS 15, which requires that all costs incurred in the period
relating to the contract should be immediately expensed. This means that cost
deferral to achieve a uniform contract profit margin, as historically adopted
by the Group, is not permitted.
13. Prior year adjustment - Restatement in respect of IFRS 15 "Revenue from
Contracts with Customers" (continued)
As a result, the comparative period financial statements have been restated.
As at 2 October 2021 and 2 April 2022, the impact of the restatement was to
reduce total equity by £1,054,000. The restatement had no impact on profit
recognition in the 26 weeks ended 1 April 2023 or the 26 weeks ended 2 April
2022.
These accounting adjustments only impact the timing of profit recognition
under these specific contracts. They do not impact the net debt position of
the Group at any date, the future cash generation profile of the Group, nor
the underlying trading or operations of the business.
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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