Final Results

RNS Number : 6373S
Pressure Technologies PLC
04 December 2012
 



4 December 2012

 

PRELIMINARY RESULTS 2012

Pressure Technologies plc ("Pressure Technologies","PT" or the "Group") is pleased to announce its preliminary results for the year ended 29 September 2012.

 

Financials:

 

•    Record revenue of £30.4 million (2011: £23.1 million)

•    Operating profit post acquisition costs and related amortisation at £1.8 million (2011: £0.7 million)

•    Pre-tax profit of £1.8 million (2011: £0.6 million)

•    Basic earnings per share of 11.2p (2011: 3.5p)

•    Adjusted earnings per share of 12.5p (2011:6.2p)

•    Operating cash flow of £1.9 million (2011: £0.9m)

•    Year end net funds of £2.7 million (2011: £2.9 million)

•    Proposed final dividend of 5.0p per share (2011: 4.8p), giving a total dividend of 7.5p per share (2011: 7.2p)

 

Operations:

 

Better balanced

 

•    Engineered Products - poised to become largest part of the Group

•    Cylinders - significant increase in rig and drillship activity and strong growth in service offerings

•    Alternative Energy - ready for rapid expansion with 2013 being the crucial year

 

Growing

 

•    Strong order books and pipeline for Cylinders and Engineered Products

•    Alternative Energy pipeline strong with number and size of projects increasing

•    Focus on growing higher margin services in Cylinders

•    New products planned for Engineered Products

•    Engineered Products focus on "On Time In Full" delivery to take market share

•    Seeking selective acquisition opportunities

Richard Shacklady, Chairman of Pressure Technologies, said:  "The Engineered Products Division is poised for further growth; the facility in North America has been re-structured and is positioned to take advantage of a buoyant US market for its well control products. Additionally, the seabed well control equipment market has rebounded after a period of stagnation and orders from this sector are particularly buoyant. 

 

"Having rebounded strongly in 2012 we expect growth in the Cylinder Division to moderate this year, not least due to increased competition from the Far East in the oil and gas market. However, the business does benefit from having a large forward order book, market leadership in the defence sector and growth positions into diversified markets.

 

"We will continue to seek acquisitions that suit our profile and will fit into and enhance the Engineered Products Division. It is now positioned both geographically and in product range to become a significant player in the oilfield control and equipment sector and we believe it is proving to be a platform for growth."

 

 

For further information, please contact:

 

Pressure Technologies plc

John Hayward, Chief Executive

James Lister, Group Finance Director

 

Today:  020 7920 3150

Thereafter:  0114 242 7500

www.pressuretechnologies.co.uk

Tavistock Communications

Catriona Valentine

Keeley Clarke

 

Tel:  020 7920 3150

www.rawlingsfinancial.co.uk

Charles Stanley Securities

Nominated Adviser and Broker

Philip Davies

Carl Holmes

 

Tel:  020 7149 6942

 

Company description:

 

Pressure Technologies is an AIM listed, leading designer and manufacturer of speciality engineering solutions for high pressure systems serving large global markets. The Group is organised into three divisions: Cylinders, Engineered Products and Alternative Energy.

 

Engineered Products: This division comprises Al-Met Limited ("Al-Met") and the Hydratron group of companies ("Hydratron").

 

Al-Met is a niche manufacturer of specialised, precision engineered valve wear parts used in the oil and gas industries, which was acquired by Pressure Technologies in February 2010. Its products are used in high-pressure choke and flow control valves, designed to regulate flow volumes in extremely demanding applications in the subsea and surface oil and gas industries. The business, which was established in 1985, has developed a leading edge capability in precision machining carbides, high grade stainless steels and super alloys.

 

Hydratron, acquired in October 2010, designs, manufactures and sells a range of air operated high pressure hydraulic pumps, gas boosters, power packs, hydraulic control panels and test rigs. Hydratron has sales and manufacturing companies in Altrincham, UK, and Houston, USA and a spread of third party distributors in key locations around the world. Formed in 1981, Hydratron has since established itself as a leading supplier of quality high pressure equipment to the oil and gas industries. The full range of Hydratron products may be viewed at www.hydratron.co.uk.

 

Cylinders: Chesterfield Special Cylinders Limited ("CSC") designs, manufactures and offers retesting and refurbishment services for a range of speciality high pressure, seamless steel gas cylinders for global energy and defence markets. The business is conducted under the "Chesterfield" brand which is a long established name in the cylinders and specialised pressure vessel market.

 

Alternative Energy: Chesterfield BioGas Limited was formed in November 2008 following the signing of a co-operation agreement with Greenlane® Biogas Limited, the world leader in biogas upgrading. This gives Pressure Technologies exclusive rights to market and manufacture Greenlane® equipment in the UK and Eire. Chesterfield BioGas provides turnkey solutions for the cleaning, storage and dispensing of biomethane for injection into the gas grid or use as a vehicle fuel.

 

 

 

 

CHAIRMAN'S STATEMENT

 

I am pleased to report that the Group has delivered a much improved performance for the year ended 29 September 2012, with a continuation of the recovery previously reported in the first half interim statement. 

 

We begin the new financial year with solid order books in our two main divisions, Engineered Products and Cylinders, and a number of contracts stretching beyond the current financial year, underpinning our confidence in the medium term prospects for the Group.  Whilst the oil and gas market remains the largest sector for the Group, the businesses are now better balanced both by product sector and customer geographic location. 

 

The strength of the Group's balance sheet underpins the Board's strategy for the growth of the Group. Our prime objective is to penetrate select growth market sectors which offer synergies to our core businesses and provide niche, design and technology driven, high margin products for critical applications, through organic development programmes or by acquisition.

 

Results

 

Group revenues for the year ended 29 September 2012 increased almost 32% to a record £30.4 million from £23.1 million in 2011.  Profit before taxation saw a threefold increase to £1.8 million from £0.6 million in 2011, giving basic earnings per share of 11.2p compared to 3.5 p.

 

We continue to maintain a strong balance sheet through focussing on operating cash and working capital controls across the Group's Divisions and net cash at the year end was £2.7 million, after outflows of £0.8 million on deferred acquisition costs, compared to £2.9 million in 2011.

 

Given our strong balance sheet and confidence in the medium term prospects for the Group, the Board is proposing a final dividend of 5.0 pence per share, giving a total of 7.5 pence per share for the year. This represents an increase of 4% over 2011.  If approved, the final dividend will be paid on 8 March 2013 to shareholders on the register at the close of business on 15 February 2013.

 

The Board is committed to maintaining a progressive dividend policy.

 

Trading

 

Demand from the global offshore oil and gas drilling operators has continued to firm-up, reflecting a return to higher levels of exploration and production by the major oil and gas producers, in particular, and activity levels generally across the wider industry.

 

The Group has significant interests in two sectors of this market; deepwater oil and gas drilling equipment and oilfield well head equipment and controls, including the rapidly developing subsea well head equipment sector.

 

Our Engineered Products Division, which supplies the oilfield well head controls and equipment sectors has continued to benefit from sustained high levels of oil and gas production both onshore and offshore.  The subsea well head equipment sector experienced a period of flat demand for some six months and is now moving ahead strongly with new offshore fields moving into the production phase. 

 

The Cylinder Division has seen in a significant increase in rig and drillship activity and in the defence sector we maintain our market leading position at home whilst increasing sales into overseas defence programmes.  Further business has been secured from overseas navies and, in the UK, we have taken orders for BAE's Astute boat 6 submarine.  As the UK MoD source for in-service and after market cylinder maintenance and support for the Royal Navy, we have responsibility for the management of through-life capability for all high pressure cylinders including in-situ inspection.

 

Our facilities in the industrial gases storage and transportation market have been further developed, resulting in record levels of activity in this sector and growing  penetration of new accounts. This in turn provides the platform for further growth on the back of compressed natural gas (CNG) and hydrogen being recognised across Europe as alternatives to traditional fuels.

 

We continue to believe that the best long term prospects for the Group lie in the global energy markets and particularly in the equipment required for exploration and production of hydrocarbons.

 

In our Alternative Energy Division, Chesterfield BioGas has been very active throughout the year promoting and tendering for biogas upgrade plant and enjoys a high profile in this market.  Demand for UK biogas upgrade plant is still in early phase development with, so far, limited conversion from the project stage, which is very active, into firm orders. 

 

Our second biogas upgrading installation, however, will be completed in the 1st Quarter of the coming financial year and we are expecting to see a number of the outstanding major quotations converted into firm orders for delivery in mid 2013 and beyond.

 

The Board believes that there is major UK potential for this technology in the longer term. However regular reviews on the division's progress are being undertaken and we recognise that 2013 is a crucial year for Chesterfield BioGas.

 

Prospects

 

The Engineered Products Division is ready to deliver  further growth; the facility in North America has been re-structured and is very well positioned to take advantage of a buoyant US market for its well control products. Additionally, the seabed well control equipment market has rebounded after a period of stagnation and orders from this sector are particularly buoyant. 

 

Having recovered strongly in 2012, we expect growth in the Cylinder Division to moderate this year, not least due to increased competition from the Far East in the oil and gas market. However, the business does benefit from having a large forward order book, market leadership in the defence sector and growth positions into diversified markets.

 

We will continue to seek acquisitions that suit our profile and will fit into and enhance the Engineered Products Division. It is now positioned both geographically and in product range to become a significant player in the oilfield control and equipment sector and we believe it is proving to be a platform for growth.

 

 

Richard L. Shacklady

Chairman

4 December 2012

 

 

 

CHIEF EXECUTIVE'S STATEMENT

 

Pressure Technologies has made considerable progress in the last 12 months. We have delivered better results and have made improvements across the Group to create a more balanced business portfolio.   This is highlighted by the expansion of sales in the Engineered Products Division and the development of new service offerings in the Cylinder Division.

 

PT is growing and that growth is now better balanced across the Group's divisions and markets. 

The key points for the year are:

 

Cylinder Division

 

£m

2012

2011

Sales

16.3

11.0

Operating Profits

  2.3

  1.5

Net Assets

  6.8

  6.9

 

 

Chesterfield Special Cylinders ("CSC") grew strongly, as a direct result of the resurgence in the building of deepwater semi-submersible oil rigs and drill ships, following a prolonged downturn, caused, initially, by the global financial crisis and exacerbated by the crisis of confidence following the sinking of Deepwater Horizon in the Gulf of Mexico in 2010.

 

Air Pressure Vessels ("APVs") for motion compensation systems on 10 drillship projects were delivered in the year, compared to three in 2011. We currently have orders for seven projects in 2013, compared to six at the same stage last year. However, market dynamics have changed considerably and margins are under acute pressure from Asian competition, particularly South Korea, and we expect to see a declining market share for projects built in South Korean shipyards. This is compounded by a weaker Euro, as sales into this market are Euro denominated.

 

We are, however, actively pursuing opportunities with a number of new entrants into the motion compensation system market, who need the design expertise of CSC. Opportunities will also open up away from South Korea, as Brazil expands shipyard capacity to build oil rigs and drillships.

 

As expected, sales into the naval defence market were materially lower than in 2011, as a result of the phasing of projects rather than a downturn in the market. In August, CSC won the contract to supply the high pressure cylinders for the sixth Astute class submarine, HMS Agamemnon, which will be delivered over 2013 and 2014. The order for cylinders for the seventh and final Astute class submarine is expected in 2013 for delivery over 2014 and 2015 and we have begun preliminary design work on the cylinders for the Trident replacement.

 

We have continued focus on expanding our customer base in the naval defence market and have strengthened our design team with an experienced naval cylinder designer. Building on our expertise on cleanliness standards developed for the oil and gas industry, we won a contract from BAE to supply a service cleaning cylinders for oxygen containment. This demonstrated CSC's technical capabilities and its flexibility. The process was developed and capital equipment was procured and installed in a six week period to meet an urgent customer requirement. CSC is now planning to market this service to other potential customers, building oxygen systems. The contract to maintain the Royal Navy's stores of high pressure cylinders, won last year, has expanded rapidly with a number of planned submarine refit projects increasing the value of this contract, as well as giving more opportunity to sell in-situ inspection services.

 

The Small Cylinder market stabilised in the year with an increase in military aerospace spending, which improved margins in this market. The military market has been more resilient than we forecast and in August we were awarded the contract to supply steel high pressure cylinders on the initial build programme of the F22 Raptor. The development of the type IV composite has been successfully completed but, as yet, we have not identified a new commercial platform into which this can be built and consequently we have amortised the £224,000 development costs incurred to date. This was always viewed as a long term development and we are well placed to move into the composite market as new opportunities arise. 

 

The high pressure trailer market saw a reduction in reconditioning and refurbishment due to the phasing of statutory inspection within the BOC trailer fleet but we supplied two new trailers to Air Liquide and Linde France. Overall sales were slightly higher and margins slightly lower, as a result of the material content in the new trailers. CSC's new sales manager in Germany has made significant inroads with the large industrial gases companies in Europe. This, coupled with the financial instability of a major European competitor, puts CSC in a strong position in this market.  With the forecast growth of the market for the transportation and bulk storage of hydrogen and CNG, the medium and long term prospects for this market are very promising.

 

Our in-situ inspection service grew fourfold in the year and we have a team solely dedicated to the development of this offering. Immediate opportunities for growth exist in the defence and oil and gas markets. In the medium term, the increase of high pressure bulk storage of hydrogen and compressed natural gas for alternative fuels will be a source for further growth. In-situ inspection creates a new revenue stream from the knowledge base of CSC. It is a high margin service offering, which is not subject to the pricing pressures created by our low cost competitors in the ultra large cylinder manufacturing market.

 

Manufacturing continued to focus on "lean" initiatives. A major review of trailer build was carried out, creating  significant improvements in strip down and build times. A similar initiative is underway on the ultra-large finishing line. These initiatives are team based, owned and run by the shopfloor employees working on the product. Further investment was made in CSC's IT systems with the introduction of a more sophisticated finite capacity scheduling system and shop floor data capture. This allows efficient real time planning of resources to further improve efficiency. The major items of capital spend in the year were the oxygen cleaning facility and replacement overhead cranes. Together, these accounted for 50% of the total capital spend of £446,000. The balance was investment in a number of process improvements, particularly in the forging and washing processes.  Capital expenditure in 2013 is expected to be at a similar level to 2012 with the major focus being on process efficiency.

 

The key issue for CSC is to develop high added value service offerings quickly, to offset the effects of margin erosion from low cost competitors and the weak Euro. The business has the energy, the expertise and the people to achieve this effectively.

 

Engineered Products Division

 

£m

2012

2011

Sales

13.9

11.2

Operating Profits

  1.0

  1.0

Net Assets

  7.7

  6.5

 

 

The division is comprised of Hydratron Ltd in Altrincham, Hydratron Inc in Houston, Texas and Al-Met Ltd in Pontyclun, South Wales. The Hydratron businesses manufacture a range of air operated high pressure hydraulic pumps, gas boosters, power packs, hydraulic control panels and test rigs mainly for use in the oil and gas sector. Al-Met produces wear resistant components in a range of high alloy steels and tungsten carbides for use in high-pressure choke and flow control valves, designed to regulate flow volumes in extremely demanding applications in the subsea and surface oil and gas industries.

 

Hydratron Ltd had an excellent year with sales growing by one third and operating profits doubling. The sales, design and development teams were strengthened during the year. New products launched in the year included a 30,000 psi pump for very high pressure testing applications, a helium leak test gas booster system capable of injecting precise concentrations of helium and a pulse test system for testing aerospace pressure transducers. The latter project involved the recruitment of an electronics engineer, giving the business self-sufficiency in the design and development of automated plc controlled systems. Several new product opportunities have been identified and an additional full time development engineer is being sought to speed up the development cycle.

 

The assembly section of the business was reorganised to split standard product assembly from the bespoke systems. This has improved the efficiency of both areas. Due to the pace of growth in the business, the Operations Manager role is to be split in January with the incumbent becoming Technical Manager responsible for design, engineering and logistics and a new, experienced lean manufacturing engineer joining as Manufacturing Manager responsible for the machining and assembly areas.

 

Due to the nature of the business, little capital expenditure is required. IT systems will be upgraded in 2013 but beyond that no other major spend is planned.

 

Hydratron has an excellent reputation for its design and build ability. This, allied to a strong sales team, augmented by a distributor network in key market locations and the general level of market activity, gives grounds for optimism of further progress in 2013.

 

Hydratron Inc, after a good first half, failed to deliver its second half order book profitably, despite a 50% increase in sales. We did not have sufficient management resources of the right calibre in the business which has now been remedied. An experienced general manager was appointed in October 2012 with the remit to grow the business profitably. Being located in Houston, the business is situated close to all the major oilfield wellhead equipment and control system manufacturers and is, therefore, in a prime location from which to grow. It has already established a reputation for the same design and build capability as its UK sister company and is expected to make significant progress in 2013.

 

Al-Met had a challenging year. Sales were at the same level as 2011 but the phasing of these was very heavily skewed with low sales in the first half and a strong third quarter which tailed off into the fourth quarter. Concurrently, market forecasts and customer orders for 2013 were showing a significant increase. The decision was taken to hold the level of the shopfloor workforce and strengthen the management and engineering team with lean manufacturing specialists ahead of this increase. As a result of these factors, operating profits were down two thirds on 2011. The expected growth has materialised, following these changes, and the year end order book was 73% higher than at September 2011 and production schedules are full through to the end of February 2013. An additional afternoon shift has subsequently been recruited to meet the increased loading and reduce overtime.

 

There are two major reasons for this growth. A significant proportion of Al-Met's turnover is wear parts for subsea tree valves. This market is growing rapidly as more deepwater oil wells come on stream. Market forecasts and customer feedback suggest a 40% increase in this market in 2013 and continued growth into 2014. Also, a UK competitor ceased production in October which has compounded the increase.

 

As a division, it was disappointing that operating profits did not grow year on year. Increased profits at Hydratron Ltd were offset by the reduction in profitability at Al-Met and losses at Hydratron Inc. The outlook for 2013 is good and I expect the benefits of the changes made in 2012 to feed through into improved profits in 2013. The organic growth opportunities for this division are immediate and we expect Engineered Products to become the largest division of the Group, in terms of sales revenues, within the next eighteen months.

 

Additionally, we are pursuing a number of acquisition opportunities to add further breadth to the product range of the division.

 

In the medium to long term, on time in full delivery ("OTIF") remains the key to success for the division. Specific targeting of customers has proved that where delivery OTIF is met, order intake improves. In the current buoyant environment, this advantage is masked by general growth but, as our companies are significantly smaller than their competitors, we expect to take market share, even when markets are declining, if we can consistently deliver OTIF.

 

 

Alternative Energy

 

£m

2012

2011

Sales

   0.2

   0.9

Operating Profits

 (0.5)

 (0.5)

Net Assets

   1.6

   1.7

 

 

This was an important year for Chesterfield BioGas ("CBG"), our start-up alternative energy equipment business. An order was secured for an upgrader, our second into the biogas to grid ("BtG") market. This was due for installation in September 2012 but a road accident, which occurred during delivery, damaged the equipment and delayed installation to October. But for this, operating losses would have been halved in the year. More importantly, confirmation by Government of the structure of the Renewable Heat Incentive ("RHI") for BtG has increased the number and size of potential projects.

 

In previous years, CBG has been quoting a handful of small, "pilot" projects with larger projects only at the feasibility stage. Now, quotations are more numerous and the project size has increased to fully commercial sized plants as large utility companies look to enter the market. This matches the pattern experienced in other countries, where adoption of this technology is more advanced.

 

Summary and outlook

 

2012 was a turning point for PT, as we returned to growth and delivered market expectations. The result was underpinned by recovery in the Cylinder Division's main market and the Group's other two divisions making significant progress.  This progress, which has created a better balanced Group, is yet to be reflected in bottom line performance.

 

Looking to 2013, the Cylinder Division will face stiffer competition in its core oil and gas market and the challenge is to speed up the development of high added value services and new customers. There is significant potential for revenue growth in the Engineered Products Division, which this year must lead to bottom line growth. The Alternative Energy Division, Chesterfield BioGas, appears set for major growth and 2013 will be the crucial year for this business.

 

The clear message is that Pressure Technologies delivered in 2012; it is a better balanced Group, growing strongly in market sectors where its expertise is recognised and valued, seeking opportunities for further expansion through selective acquisitions. 

 

 

John Hayward

Chief Executive

4 December 2012

 

 

FINANCE DIRECTOR'S REPORT

 

Overview

 

The Group's revenue grew to £30.4m (2011: £23.1m). The growth was driven principally by a recovery in CSC's oil and gas business, where sales increased from £4.3m to £10.9m, and growth in the Engineered Products division.

 

Operating profit increased from £0.7m to £1.8m mainly as a result of the benefits to CSC from operational gearing following the recovery in the level of their business with the oil & gas sector. Historically, the Group has benefited from a high market share for cylinders used in deep water motion compensation systems but, with increasing competition, pricing and volume pressures are expected to be a feature going forward.

 

The Group seeks to target niche markets with good growth prospects and uses return on revenue as a key performance indicator. Our aim is a target return of 15% before taking account of the cost of acquiring subsidiaries and the subsequent amortisation of the intangible assets so acquired. The Alternative Energy Division is also excluded from this target as it is still considered to be in start-up mode. Using this measure we achieved an 8.1% return in 2012 (2011: 6.7%) with the expectation that this can be raised further with the benefits of lean manufacturing and operational gearing.

 

Foreign exchange

 

PT operates in international markets and accordingly accepts contracts denominated in currencies other than Sterling.

 

Whilst the level of exposure at any point in time is dependent on the nature of individual contracts, the Group usually has a partial hedge in place as both purchases and sales are made in Euro and also to a lesser extent in US dollars. With the Group's manufacturing activities being based mainly in the UK, management estimates that a 5% weakening of the Euro against Sterling would cost the Group circa £0.2m in profit before tax in any one year. The effect on the Group of movements in the US dollar to Sterling exchange rate, as long as it is within normal parameters, is not significant.

 

At the end of September 2012, the Group had contracts in place to sell Euros 3.5m at an average exchange rate of 1.26 to £ (2011: nil)

 

Treatment of acquisition related costs in the engineered products division

 

The Board intends to grow the Group both organically and by acquisition and consequently both goodwill and intangible assets are expected to be a recurring theme within the annual financial statements.

 

In the interest of clarity, acquisition costs and the amortisation of intangible assets resulting from acquisitions is shown separately in the Income statement. The relevant costs for the last two years, all of which relate to the engineering products division, are as follows:

 


2012

£m


2011

£m

Cost of acquiring Hydratron

 

-


0.1

Amortisation of intangible assets acquired with

Al-Met and Hydratron

 


 

0.3

Total

0.2


0.4

 

 

The remaining carrying value of these intangible assets totalling £0.5m will be amortised over the next three years.

 

The effect on earnings per share of these adjustments is:

 


2012

 


2011

 

Earnings per share as reported

 

11.2p


3.5p

Adjustment for acquisition costs and related amortisation

 

1.3p


2.7p

Adjusted earnings per share

12.5p


6.2p

 

Amortisation of other intangible assets

 

The cost of the Chesterfield BioGas licence and distribution agreement with Greenlane Biogas is being amortised over a period of 15 years; this being the period over which significant revenues are expected to be generated.

 

Development costs incurred in the Cylinder Division in 2011, totalling £0.2m, have been expensed in 2012, as these costs no longer meet the recognition requirements of IAS 38.

 

Taxation

 

The effective tax rate for the group in 2012 was 28.5% (2011 30.6%), which is higher than the UK standard rate of 25% due to the effect of unrelieved losses in the US.

 

Cash flow

 

The Group has a strong balance sheet with net funds of £2.7m (2011: £2.9m) and an unused overdraft facility of £2m.

 

The movement in cash flow can be summarised as follows:

 


2012

£m


2011

£m

Earnings before interest, tax, depreciation

and amortisation (EBITDA)

2.9


1.5

Movement in working capital  

(0.4)


1.6

Capital expenditure (net of disposals)

(0.6)


(1.2)

Development costs capitalised

-


(0.2)

Extension of biogas licence

 

-


(0.8)

Operating cash flow

 

1.9


0.9

Acquisition of Hydratron




      (2012: deferred consideration paid)

(0.8)


(2.8)

UK Corporation tax paid

(0.5)


(0.9)

Dividends paid

(0.8)


(0.8)

Net movement           

(0.2)


(3.6)

 

 

 

Cash flow in 2012 was strongly positive at the operational level.

 

The build up of working capital reflects the recovery in activity in CSC and growth in the engineering products division.

 

Net capital expenditure at £0.6m was in-line with the depreciation charge.

 

The deferred consideration of £0.8m re the acquisition of Hydratron was paid during 2012. There are no further deferred consideration payments to be made for either Al-Met or Hydratron.

 

The acquisition of Hydratron cost a total of £3.6m, comprising purchase consideration of £3.3m and £0.3m of borrowings assumed on takeover. In addition £0.1m of acquisition costs were expensed through the Income Statement in 2011.

 

It is pleasing to note that in both of the last two years our acquisitions have generated profits of over £1 million on an initial outlay of £5.8 million (including net borrowings assumed).

 

 

James Lister

Group Finance Director

4 December 2012

 

 

 

Consolidated statement of comprehensive income

For the period ended 29 September 2012

 

Notes

52 weeks ended

29 September

2012

52 weeks ended

1 October

2011

 

 

£'000

£'000

 

 



 

 

 

 

Revenue

2

30,442

23,129

 

 

 

 

Cost of sales

 

(22,704)

(16,835)

 

 

              

              

Gross profit

 

7,738

6,294

 

 

 

 

Administration expenses

 

(5,978)

(5,645)

 

 

              

              

Operating profit pre acquisition costs and related amortisation

2

1,950

1,031

Acquisition costs and related amortisation

2

(190)

(382)

 

 

              

              

Operating profit post acquisition costs and related amortisation

 

1,760

649

Finance income

 

27

8

Finance costs

 

(9)

(79)

 

 

              

              

Profit before taxation

 

1,778

578

Taxation

3

(507)

(177)

 

 

              

              

Profit for the period

 

 

1,271

 

401

Exchange differences on translating foreign operations

 

 

9

 

(3)

 

 

              

              

Total comprehensive income for

the period attributable to the owners of the parent

 

 

1,280

 

398

 

 

              

              

 

 

 

 

Earnings per share - basic

4

11.2p

3.5p

- diluted

4

11.2p

3.5p

 

 

              

              

 

 

 

 

 

All the above results are from continuing operations.

 



Consolidated balance sheet

As at 29 September 2012

 

 

Notes

29 September

1 October

 

 

2012

2011

 

 

£'000

£'000

 

 

 

 

Non-current assets

 

 

 

Goodwill

 

1,964

1,964

Intangible assets

6

1,478

1,962

Property, plant and equipment

 

4,654

4,649

Deferred tax asset

 

110

245

Trade and other receivables

 

152

324

 

 

              

              

 

 

8,358

9,144

 

 

              

              

Current assets

 

 

 

Inventories

 

6,922

5,012

Trade and other receivables

 

7,257

6,471

Cash and cash equivalents

 

2,693

2,939

 

 

              

              

 

 

16,872

14,422

 

 

              

              

Total assets

2

25,230

23,566

 

 

              

              

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

 

(7,651)

(6,260)

Derivative financial instruments

 

(23)

-

Borrowings

 

(6)

(33)

Current tax liabilities

 

(252)

(190)

 

 

              

              

 

 

(7,932)

(6,483)

 

 

              

              

 

 

 

 

Non-current liabilities

 



Other payables

 

(655)

(744)

Borrowings

 

-

(9)

Deferred tax liabilities

 

(588)

(792)

 

 

              

              

 

 

(1,243)

(1,545)

 

 

              

              

Total liabilities

 

(9,175)

(8,028)

 

 

              

              

Net assets

 

16,055

15,538

 

 

              

              

 

 

 

 

Equity

 

 

 

Share capital

 

568

567

Share premium account

 

5,378

5,369

Translation reserve

 

6

(3)

Retained earnings

 

10,103

9,605

 

 

              

              

Total equity

2

16,055

15,538

 

 

              

              

 

 

 

 

 



Consolidated statement of changes in equity

For the period ended 29 September 2012

 

 

Share

capital

Share

premium

account

Profit and

loss

account

Translation reserve

Total

equity

 

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

Balance at 2 October 2010

567

5,341

9,999

-

15,907

 






Dividends

-

-

(816)

-

(816)

Share based payments

-

-

21

-

21

Shares issued

-

28

-

-

28

 

              

              

              

              

              

Transactions with owners

-

28

(795)

-

(767)

 

            

            

            

            

            

 

Profit for the period

-

-

401

-

401

Exchange differences on translating foreign operations

-

-

-

(3)

(3)

 

              

              

              

              

              

Total comprehensive income

-

-

401

(3)

398

 

              

              

              

              

              

Balance at 1 October 2011

567

5,369

9,605

(3)

15,538

 

 






Dividends

-

-

(829)

-

(829)

Share based payments

-

-

56

-

56

Shares issued

1

9

-

-

10

 

              

              

              

              

              

Transactions with owners

1

9

(773)

-

(763)

 

            

            

            

            

            

 

Profit for the period

-

-

1,271

-

1,271

Exchange differences on translating foreign operations

-

-

-

9

9

 

             

             

             

             

             

Total comprehensive income

-

-

1,271

9

1,280

 

               

               

               

               

               

Balance at 29 September 2012

568

5,378

10,103

6

16,055

 

               

               

               

               

               

 

 

 

 

 

 

 

 



Consolidated statement of cash flows

For the period ended 29 September 2012

 

 

Notes

52 weeks ended

29 September

2012

52 weeks

ended

1 October

2011

 

 

£'000

£'000

Operating activities

 



Cash flows from operating activities

7

2,573

3,095

Finance costs paid

 

(9)

(23)

Income tax paid

 

(514)

(896)

 

 

              

              

Net cash inflow from operating activities

 

2,050

2,176

 

 

              

              

 

 

 

 

Investing activities

 

 

 

Interest received

 

2

8

Proceeds from sale of fixed assets

 

84

-

Purchase of property, plant and equipment

 

(727)

(1,147)

Purchase of licence and distribution agreement

 

-

(800)

Development costs incurred

 

-

(234)

Purchase of subsidiary net of cash and cash equivalents

 

-

(2,164)

Deferred purchase consideration

 

(800)

-

 

 

              

              

Net cash used in investing activities

 

(1,441)

(4,337)

 

 

              

              

 

 

 

 

Financing activities

 

 

 

Repayment of borrowings

 

(36)

(725)

Dividends paid

 

(829)

(816)

Shares issued

 

10

28

 

 

              

              

Net cash outflow from financing activities

 

(855)

(1,513)

 

 

              

              

 

 

 

 

Net decrease in cash and cash equivalents

 

(246)

(3,674)

Cash and cash equivalents at beginning of period

 

2,939

6,613

 

 

              

              

Cash and cash equivalents at end of period

 

2,693

2,939

 

 

              

              

 

 

 

 

 



Notes

 

1.   Accounting policies

 

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union and IFRIC interpretations issued by the International Accounting Standards Board and the Companies Act 2006.

 

The Group has applied all accounting standards and interpretations issued relevant to its operations for the period ended 29 September 2012. The consolidated financial statements have been prepared on a going concern basis.

 

The financial statements have been prepared under the historical cost convention, except for derivative financial instruments which are carried at fair value.

 

 

2.   Segment analysis

 

The financial information by segment detailed below is frequently reviewed by the Chief Executive.

 

For the period ended 29 September 2012

 

 

 

Cylinders

Engineered

Products

Alternative

Energy

Unallocated

Amounts**

 

Total

 

£'000

£'000

£'000

£'000

£'000

Revenue

 

 

 

 

 

- from external customers

16,306

13,912

224

-

30,442


              

              

              

              

              

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before acquisition costs

2,303

1,017

(494)

(876)

1,950

Acquisition costs*

-

(190)

-

-

(190)


              

              

              

              

              

Operating profit / (loss)

2,303

827

(494)

(876)

1,760

 

 

 

 

 

 

Net finance income/(costs)

26

(8)

-

-

18


              

              

              

              

              

 

 

 

 

 

 

Profit / (loss) before tax

2,329

819

(494)

(876)

1,778

 

              

              

              

              

              

 

 

 

 

 

 

Segmental net assets ***

6,815

7,703

1,632

(95)

16,055

 

              

              

              

              

              

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other segment information:

 

 

 

 

 

Capital expenditure

446

275

6

-

727

Depreciation

275

331

33

-

639

Amortisation

224

190

70

-

484

 

*Acquisition costs include the amortisation of intangible assets acquired through an acquisition.

 

**Unallocated amounts include central costs, central assets and unallocated consolidation adjustments.

 

*** 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.



 

2.   Segment analysis (continued)

 

Period ended 1 October 2011

 

 

Cylinders

 

Engineered Products

Alternative

Energy

Unallocated Amounts**

Total

 

£'000

£'000

£'000

£'000

£'000

Revenue

 

 

 

 

 

- from external customers

11,052

11,161

916

-

23,129

- from other segments

209

-

-

(209)

-

 

              

              

              

              

              

Segment revenues

11,261

11,161

916

(209)

23,129

 

              

              

              

              

              

 

 

 

 

 

 

Operating profit / (loss) before acquisition costs

1,440

1,048

(456)

(1,001)

1,031

Acquisition costs*

-

(382)

-

-

(382)

 

              

              

              

              

              

 

 

 

 

 

 

Operating profit / (loss)

1,440

666

(456)

(1,001)

649

 

 

 

 

 

 

Net finance income/(costs)

(55)

(21)

1

4

(71)

 

              

              

              

              

              

Profit / (loss) before tax

1,385

645

(455)

(997)

578

 

              

              

              

              

              

 

 

 

 

 

 

Segmental net assets ***

6,932

6,486

1,719

401

15,538

 

              

              

              

              

              

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other segment information:

 

 

 

 

 

Capital expenditure

504

411

232

-

1,147

Depreciation

248

248

22

-

518

Amortisation

10

288

83

-

381

 

 

*Acquisition costs include the amortisation of intangible assets acquired through an acquisition and fees associated with acquiring the entity.

 

**Unallocated amounts include central costs, central assets and unallocated consolidation adjustments.

 

*** 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.

 



 

2.   Segment analysis (continued)

 

The following table provides an analysis of the Group's revenue by geographical destination.

 

Revenue

2012

2011

 

£'000

£'000

 

 

 

United Kingdom

10,307

11,828

Europe

4,275

4,850

Rest of the World

15,860

6,451


              

              


30,442

23,129


              

              

 

The Group's largest customer contributed 38% to the Group's revenue (2011: 13%) which is reported within the Cylinders segment. No other customer contributed more than 10% in the year to 29 September 2012.

The second largest customer in the year to 1 October 2011 contributed 12% to the Group's revenue which is reported within the Engineered Products segment. No other customer contributed more than 10% in the year to 1 October 2011.

 

The following table provides an analysis of the Group's revenue by market.

 

Revenue

2012

2011

 

£'000

£'000

 

 

 

Oil and gas

24,051

15,402

Defence

Industrial gases

2,190

3,888

4,472

2,339

Alternative energy

313

916


              

              


30,442

23,129


              

              

 

 

The following table provides an analysis of the carrying amount of segment assets, additions to property, plant and equipment for 2012. 

 

 

 

United Kingdom

Rest of the World

Total

 

 

£'000

£'000

£'000

 

 

 

 

 

Total assets

 

24,217

1,013

25,230

Additions to property, plant and equipment

 

706

21

727

 

 

There were no additions of intangible assets for 2012.

 

 

The following table provides an analysis of the carrying amount of segment assets, additions to property, plant and equipment and intangible assets for 2011. 

 

 

 

United Kingdom

Rest of the World

Total

 

 

£'000

£'000

£'000

 

 

 

 

 

Total assets

 

22,786

780

23,566

Additions to property, plant and equipment

 

1,147

-

1,147

Additions to intangible assets

 

1,800

-

1,800

 

 



 

3.   Taxation

 

2012

2011

 

£'000

£'000

Current tax

 

 

Current tax expense

578

227

(Over) / Under provision in prior years

(2)

19

 

              

              

 

576

246

Deferred tax

 

 

Origination and reversal of temporary differences

(76)

(69)

Under provision in prior years

6

-

 

              

              

Total taxation charge

507

177

 

              

              

 

Corporation tax is calculated at 25% (2011: 27%) of the estimated assessable profit for the period. Deferred tax is calculated at 23% (2011: 26%).

 

The charge for the period can be reconciled to the profit per the consolidated statement of comprehensive income as follows:

 


2012

£'000

2011

£'000




Profit before taxation

1,778

578


               

               




Theoretical tax at UK corporation tax rate 25% (2011: 27%)

444

156

Effects of:



- non-deductible expenses

(2)

5

- adjustments in respect of prior years

4

19

- effect of unrealised overseas losses

64

-

- change in taxation rates

(3)

(3)


              

              

Total taxation charge

507

177


              

              

 

 

 

 

4.   Earnings per ordinary share

 

Basic and diluted earnings per share have been calculated based on the net profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the period.

 

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

 

 

4.   Earnings per ordinary share  (continued)

 

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive options.

 

 

2012

£'000

2011

£'000

 

 

 

Profit after tax

1,271

401

 

                 

                 

 

 

 

 

No.

No.

 

 

 

Weighted average number of shares - basic

11,350,099

11,342,907

Dilutive effect of share options

-

21,215

 

                 

                 

Weighted average number of shares - diluted

11,350,099

11,364,122


                 

                 


 

 

Basic earnings per share

11.2p 

3.5p

Diluted earnings per share

11.2p

3.5p

 

 

5.   Dividends

 

The following dividend payments have been made on the ordinary 5p Shares in issue:

 

 

Rate

Date

Shares in issue

2012

2011

 

 

 

 

£'000

£'000

 

 

 

 

 

 

Final 2009/10

4.8p

11 March 2011

11,349,544

-

                544

Interim 2010/11

2.4p

10 August 2011

11,349,544

-

                272

Final 2010/11

4.8p

9 March 2012

11,356,199

545

-

Interim 2011/12

2.5p

6 August 2012

11,356,199

284

-

 

 

 

 

             

             

 

 

 

 

829

816

 

 

 

 

                

                

 

At 29 September 2012, the 2011/12 final dividend had not been approved by Shareholders and consequently this has not been included as a liability. The proposed dividend of 5.0p per share is expected to be paid on 8 March 2013 at a total cost of £568,000.

 

 

 

6.   Intangible assets

 

Licence and

distribution

agreement

Development expenditure

Customer

order book

Non

Contractual

customer

relationships

 

 

 

 

Total

 

£'000

£'000

£'000

£'000

 

£'000

Cost

 

 

 

 

 

 

 

At 2 October 2010

400

-

107

261

 

768

 

Additions

800

234

90

676

 

1,800

 

                 

                 

                 

                 

 

                 

At 1 October 2011 and 29 September 2012

1,200

234

197

937

 

2,568

 

                 

                 

                 

                 

 

                 

 

Amortisation

 

 

 

 

 

 

 

At 2 October 2010

100

-

90

35

 

225

 

Charge for the period

83

10

107

181

 

381

 

                 

                 

                 

                 

 

                 

At 1 October 2011

183

10

197

216

 

606

 

Charge for the period

70

50

-

190

 

310

 

Impairment losses

-

174

-

-

 

174

 

                 

                 

                 

                 

 

                 

At 29 September 2012

253

234

197

406

 

1,090

 

                 

                 

                 

                 

 

                 

 

Net book value







At 29 September 2012

947

-

-

531

 

1,478

 

                 

                 

                 

                 

 

                 








At 1 October 2011

1,017

224

-

721

 

1,962

 

                 

                 

                 

                 

 

                 

 

An impairment loss of £174,000 (2011: £nil) was recognised for development expenditure reducing the value to £nil at the year end. All amortisation and impairment charges are included in the Consolidated statement of comprehensive income.

 

7.   Consolidated cash flow statement

 

2012

2011

 

£'000

£'000

 

 

 

Profit after tax

1,271

401

Adjustments for:

 

 

Finance costs / (income) - net

(18)

71

Depreciation of property, plant and equipment

639

518

Amortisation of intangible assets

484

381

Share option costs

56

21

Income tax expense

507

177

Loss/(profit) on derivative financial instruments

23

(21)

Foreign exchange movement

9

(3)

Profit on disposal of fixed assets

(1)

-

 

 

 

Changes in working capital:

 

 

(Increase) in inventories

(1,910)

(235)

(Increase) / decrease in trade and other receivables

(589)

1,235

Increase  in trade and other payables

2,102

550

 

                

                

Cash flows from operating activities

2,573

3,095


                

                

 

 

 

 

8. Notice of Annual General Meeting

 

The Annual General Meeting of the Company will be held at the offices of Hydratron Ltd, Stuart Road, Broadheath, Cheshire WA15 5GJ on Tuesday 12 February 2013 at 10:00 am. For those shareholders attending the Annual General Meeting, there will be an opportunity to see the operations at Hydratron Ltd once the formal business of the meeting has been concluded.

 

9. Preliminary statement

 

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 and 435 of the Companies Act 2006. The financial information for the period ended 29 September 2012 has been extracted from the Group's financial statements upon which the auditor's opinion is unqualified and does not include any statement under section 498(2) or 493(2) of the Companies Act 2006.

 

The statutory accounts for the period ended 29 September 2012 will be posted to shareholders at least 21 days before the Annual General Meeting and made available on our website www.pressuretechnologies.co.uk. In due course they will be delivered to the Registrar of Companies. The statutory accounts for the period ended 1 October 2011 have been delivered to the Registrar of Companies.

 


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