Final Results

RNS Number : 1829Z

Pressure Technologies PLC

09 December 2014

 



Embargoed for release at 07.00 hours                                                                                                 9 December 2014

PRELIMINARY RESULTS 2014

Pressure Technologies plc ("Pressure Technologies" or the "Group") announces its preliminary results for the year ended 27 September 2014.

Financials:

·     Record revenue of £54.0 million (2013: £34.4 million) - up 57%

·     Underlying operating profit* of £7.8 million (2013: £3.3 million) - up 138%

·     Operating profit of £5.6 million (2013: £2.9 million) - up 93%

·     Basic earnings per share increased to 28.5p (2013: 19.4p) - up 47%

·     Progressive dividend policy: final dividend up 8% to 5.6p per share giving total dividend for the year of 8.4p per share (2013: 7.8p)

·     Balance sheet strengthened further with net funds of £5.8 million (2013: £4.0 million)

* before acquisition costs, amortisation on acquired businesses and exceptional costs

Highlights:

·     Record revenues and profits with all divisions growing in the year

·     Successful share placing in March, raising £16.1 million net

·     Strategy of product and market diversification to reduce impact of cyclicality in the oil and gas industry continues apace:
- Acquisition of Roota Engineering, March
- Acquisition of Greenlane Biogas and Quadscot, post year-end

·     Engineered Products division is now the largest contributor to revenue and profit

·     New organisational structure with four divisions and divisional MDs to be introduced in 2015

·     Strong management teams and market positions across all the Group's businesses driving growth

·     New financial year began with order book 14% higher than the prior year

Alan Wilson, Chairman of Pressure Technologies, said:

"The Group will continue its growth strategy of combining acquisitions and organic growth.  The priority with recent acquisitions is to complete their successful integration, but we may pursue further acquisitions if the right opportunities present themselves.

Continued organic growth must be viewed against a background of low global economic growth, geopolitical tensions and oil price uncertainty.  Whilst it is pleasing to report that the Group ended the year with a like for like order book 14% higher than last year, we expect a reduction in sales into the deepwater oil and gas market in Cylinders, but continued growth through our other divisions as a result of our market position and the full year contribution of recent acquisitions.  The Board views current market conditions with caution, but we start 2015 in a much stronger and more balanced position overall, so I am optimistic about the year ahead."

-Ends-

For further information, please contact:

Pressure Technologies plc John Hayward, Chief Executive James Lister, Group Finance Director	Today:  020 7920 3150 Thereafter:  0114 257 3616 www.pressuretechnologies.com
Tavistock Communications Cat Valentine / Keeley Clarke / Emma Blinkhorn	Tel:  [phone]
Charles Stanley Securities (Nomad and broker) Philip Davies / Carl Holmes	Tel: [phone]

COMPANY DESCRIPTION

Company description - www.pressuretechnologies.com

With its head office in Sheffield and its origins going back to 1897, Pressure Technologies is a growing, profitable, dividend paying, AIM listed, leading designer and manufacturer of speciality engineering solutions for high-pressure systems serving large global markets. The company is building a highly profitable group of companies, specialising in technology for the containment and control of liquids and gases in pressure systems through a combination of organic initiatives and acquisitions.

Pressure Technologies has three divisions, Cylinders, Engineered Products and Alternative Energy,serving four markets: oil and gas, defence, industrial gases and alternative energy.

Cylinders

·      Chesterfield Special Cylinders, Sheffield, IPO cornerstone in 2007 www.chesterfieldcylinders.com

·      Kelley GTM Manufacturing, Amarillo - 40% stake acquired by the Group in December 2013 with an option to acquire a further 40% in 2015 www.kelleygtm.com

Engineered Products

·      Al-Met, Mid Glamorgan, acquired in 2010 www.almet.co.uk

·      Hydratron, Manchester and Houston, acquired in 2010 www.hydratron.co.uk

·      Roota Engineering, Rotherham, acquired in March 2014 www.roota.co.uk

·      Quadscot, acquired in October 2014 www.quadscot.co.uk

Alternative Energy

·      Chesterfield BioGas, Sheffield, founded in 2008 www.chesterfieldbiogas.co.uk

·      Greenlane, acquired in October 2014 www.greenlanebiogas.com

CHAIRMAN'S STATEMENT

This has been an excellent year for Pressure Technologies in all respects, with the Group delivering record sales and profits. The Group received strong support from existing and new investors, who backed a successful share placing which raised £16.1 million in March. The Board has already put these funds to work in support of its strategy to continue broadening the Group's market presence in selective growth markets.  Roota Engineering was acquired in March, using £10.5 million of the placing proceeds and we completed the groundwork for the acquisitions of Greenlane and Quadscot immediately after close of the financial year. A strategic investment in Kelley GTM, a US-based manufacturer and developer of composite cylinder technology, was also completed in January to widen our market and knowledge base in one of our core technologies.

Results

The Group ended the year strongly with revenue at £54.0 million (2013: £34.4 million). Underlying operating profits more than doubled to £7.8 million (2013: £3.3 million), yielding a strong return on sales of 14.5% (2013: 9.5%). As a measure of consistency and solidity throughout the Group, it is encouraging to note that all three operating Divisions recorded improved sales and profits.

The Group's balance sheet continued to strengthen on the back of improved trading results and acquisitions, with a year-end net asset value of £36.5 million (2013: £17.5 million) and £5.8 million of net cash (2012: £4.0 million).  The Board is continuing its progressive dividend policy and proposes an 8% increase in the final dividend to 5.6p per share (2013: 5.2p), giving a total dividend for the year of 8.4p (2013: 7.8p), which will be paid on 17 March 2015 to those shareholders on the share register on 20 February 2015.

Trading and Market Conditions

We started the year with strong order books and overall market conditions were mostly favourable for Pressure Technologies' companies. Our two Divisions that are dominated by the upstream oil & gas industry, Cylinders and Engineered Products, enjoyed an increasing order intake trend during the first three quarters, with a gradual decline in order intake thereafter in line with market changes. Nonetheless, both Divisions finished the year with order books higher, or similar to, last year-end levels.

Our Alternative Energy division generated a strong order intake, particularly during the second-quarter, ending the year with an order book 30% higher than the comparable figures from last year. There are substantial market opportunities for expansion, particularly now that we have secured Greenlane Biogas as part of the Group.

Following the addition of Roota, Greenlane Biogas and Quadscot to the Group, we are changing our organisation structure and adding a Precision Machined Components Division, which comprises Al-Met, Roota and Quadscot. The two Hydratron companies will form the Engineered Products Division, whilst Alternative Energy will include Chesterfield Biogas ("CBG") and Greenlane. The Cylinders Division remains unchanged.

The Board's strategy to reduce the impact of cyclicality in the oil and gas industry, primarily via acquisition, has lessened the historic dependence on large contracts for major capital assets. The Group's diverse product portfolio and broader industrial focus now encompasses smaller capital projects and consumables. Pressure Technologies is now a more balanced Group and the contribution from each Division will be quite different in this new financial year, in comparison to last year, where revenues were dominated by Cylinders and Engineered Products. In the future, we expect that each of Precision Machined Components, Engineered Products and Alternative Energy will drive the Group's growth, with Cylinders enhancing Group profitability.

The Group has grown rapidly in the last year. We have increased Group staff to manage this growth, introducing a Director of Strategy Development and supporting commercial and financial expertise to maintain appropriate corporate governance and control. The Board has been careful to acquire companies with strong management teams and we are very pleased with the quality of senior management that has been added to the Group since the Spring.

Outlook

The Group will continue its growth strategy of combining acquisitions and organic growth. The priority with recent acquisitions is to complete their successful integration, but we may pursue further acquisitions if the right opportunities present themselves.

Continued organic growth must be viewed against a background of low global economic growth, geopolitical tensions and oil price uncertainty. Whilst it is pleasing to report that the Group ended the year with a like for like order book 14% higher than last year, we expect a reduction in sales into the deepwater oil and gas market in Cylinders, but continued growth through our other divisions as a result of our market position and the full year contribution of recent acquisitions. The Board views current market conditions with caution, but we start 2015 in a much stronger and more balanced position overall, so I am optimistic about the year ahead.

Alan Wilson

Chairman

9 December 2014

GROUP STRUCTURE AND MARKETS

During the period under review, the Group was organised into three divisions:

Cylinders

Engineered Products

Alternative Energy.

These divisions serve four markets:

Oil and Gas

Defence

Industrial Gases

Alternative Energy.

Group structure

The Cylinder division is comprised of wholly owned subsidiary, Chesterfield Special Cylinders Ltd ("CSC"), based in Sheffield, and associate company Kelley GTM based in Amarillo, Texas, USA. Chesterfield Special Cylinders was the core of the Group at IPO on AIM in 2007.

The Engineered Products division has been constructed from acquisitions made since 2010. During the period under review, this comprised precision machining companies, Al-Met, based near Cardiff and Roota Engineering, based in Rotherham, and pump and pressure test and control systems manufacturer Hydratron, based in Altrincham and Houston, Texas, USA. Al-Met was acquired in the 2010 financial year, Hydratron in 2011 and Roota Engineering in March 2014.

Immediately after year-end, a further precision machining company, Quadscot, based near Glasgow, was acquired. As a result of this latest acquisition, the division will be split into two: Precision Machined Components and Engineered Products and the Group will report as four divisions with effect from the start of the current financial year.

During the period under review the Alternative Energy division was solely comprised of Chesterfield BioGas, an organically grown business started by the Group in 2008 using licensed technology to enter the emerging market for equipment to upgrade biogas to create biomethane in the UK (see Markets below). Immediately after the period end, the Group acquired the business and assets of Greenlane Biogas creating a global presence in the biogas upgrading market with subsidiaries in the UK, Canada and New Zealand.

Historically, the divisions have been heavily directed from Group Head Office. The growth of the Group in recent months means this is no longer viable and a new four division structure has been developed to tackle this.  Each division will be headed by a Managing Director, supported by a dedicated Finance Director. The move towards a new divisional structure has already begun and will be fully implemented during the 2015 financial year. Some of the new positions created will be filled by talented managers from within the Group, augmented by external hires where necessary. Divisional Managing Directors will report to the Chief Executive.

Markets

Oil and Gas

	2014	2013	2012	2011	2010
Revenue £m	39.6	27.6	24.0	15.4	13.8
% of Group revenues	73%	80%	79%	67%	64%

As the largest market for the Group, the oil and gas market provides the prime focus for both the Cylinder and Engineered Products divisions. In the Cylinders division, CSC supplies a range of ultra-large high-pressure cylinders for motion compensation systems on drillships, semi-submersible drilling rigs, floating cranes and diving support vessels. It has also developed inspection services to inspect cylinders in-situ on rigs and vessels, marketed under the Integrity Management brand.

In the Engineered Products division, Al-Met and Roota supply a range of components for flow control and downhole tools. Hydratron supplies a range of high-pressure pumps, power units, control panels and test rigs.

The five-year revenue profile shows the positive impact of diversification through acquisition. In 2010, CSC accounted for 85% of turnover, centred on the supply of equipment into large capital infrastructure projects. In 2014, CSC's sales only accounted for 32% of the Group total, with the balance being generated by the Engineered Products division, supplying into much smaller capital projects and consumable equipment.

Overall market conditions were favourable for Pressure Technologies companies during most of the year. The price of Brent crude oil, our primary market indicator, remained above US$100 per barrel until mid-June 2014, underpinned by a forecast increase of 0.8% in global oil demand during 2014, reaching 91.53 million barrels per day. Declining demand from quarter-three onwards, as a result of lower than expected global economic growth, has since caused a significant reduction in the oil price, reaching a four-year low in December. As a result of our strong order backlog, the oil price dip did not materially impact sales during our second-half year of trading.

The reduction in spending by major oil companies, mentioned in the interim report, continued into the second half of 2014, with firms such as Royal Dutch Shell and Exxon Mobil turning to asset sales and spending cuts, thereby delivering higher shareholder returns as opposed to production growth.

The medium and long-term outlook remains favourable. There is general agreement amongst market commentators that the world demand for energy is set to grow by over 50% between 2010 and 2035. According to OPEC projections, energy from renewable sources is forecast to provide around 3% of global demand by 2035, whilst biomass and nuclear could account for 9% and 6% respectively. Consequently, energy derived from fossil fuels will continue to make up over 80% of world demand in 2035.

Whilst the long-term demand for more energy seems beyond doubt, the short-term picture is uncertain. At the present time, there are three major factors that make market forecasting rather difficult: the much reported oil price war between the USA and Saudi Arabia, lower global economic growth than expected and geopolitical tensions in several countries such as: Iraq, Iran, Libya, Egypt, Tunisia, Nigeria, Syria, Yemen, Somalia and Ukraine.

This general air of uncertainty has resulted in major development projects being postponed, or re-engineered to reduce costs. Day rates and utilisation of semi-submersible drilling rigs have been in decline for the past year, as new rigs come to market and oil companies delay drilling programmes until there is more market certainty. At year-end, there was a 10% reduction in the number of semi-submersibles and drillships due for delivery in the next 3-4 years compared to last year. 

The impact of these developments in the market differs across the Group and is discussed in the business review.

Defence

	2014	2013	2012	2011	2010
Revenue £m	3.5	3.8	2.2	4.5	3.7
% of Group revenues	7%	11%	7%	19%	17%

This is the second largest market for CSC, which has specialist capability in the manufacture of high-pressure cylinders for submarines, surface vessels and military aircraft.  Work done over the last decade to expand the customer base for naval applications has reduced the "lumpiness" of defence revenue and there is a good forward visibility on projects in Germany, South Korea and the UK. Although defence budgets around the world are under pressure, submarine build programmes have continued.

The market is less sensitive to competition due to the complexity of products, quality requirements and the bureaucratic overhead. However, countries, such as the USA, have regulations which protect indigenous suppliers. CSC is the major supplier in the naval market to NATO and NATO friendly nations with the exception of the USA.

There are significant medium term opportunities, the largest of which is the UK's Trident replacement programme for which we are working with defence OEMs on initial, small-scale prototypes.

Integrity Management services are widely used in the UK naval sector and are now being offered on overseas naval contracts.

Industrial Gases

	2014	2013	2012	2011	2010
Revenue £m	2.3	1.8	3.9	2.3	3.5
% of Group revenues	4%	5%	13%	10%	16%

The major driver for the Industrial Gases market is GDP growth. Our principal markets are Europe and the UK, so recent years have seen low capital expenditure from the gas majors and little infrastructure development. CSC supplies a range of high-pressure trailers and bulk storage packs into the market. Hydratron supplies test systems for pressure components (e.g. valves, hoses, transducers).

In the medium term, significant growth is expected in the market for Hydrogen as a fuel source. This market will be at pressures significantly above the normal 200-300 bar range for standard industrial gases. Demands of this market suit the product range of both CSC and Hydratron and, for cylinders, are at pressures that most competitors lack proven capability.

Alternative Energy

	2014	2013	2012	2011	2010
Revenue £m	8.6	1.2	0.3	0.9	0.7
% of Group revenues	16%	4%	1%	4%	3%

Through its subsidiary CBG, the Group specialises in technology for the upgrading of biogas produced from the anaerobic digestion of organic waste. A typical composition for biogas could be 65% methane, 35% carbon dioxide and traces of Hydrogen Sulphide and Siloxanes. A biogas upgrader removes the majority of carbon dioxide and trace gases to give 98-99% pure methane, termed biomethane. Biomethane can then be injected into the natural gas grid, or may be used as a vehicle fuel as a substitute for diesel or petrol. The principal market in the UK is for upgraded biogas to be put into the gas grid, termed Biogas to Grid ("BtG").

CBG was an early entrant into the BtG market having the licence to provide proven upgrading technology from Greenlane Biogas, New Zealand, for the UK market.  CBG completed the first BtG project in the 2011 financial year at Didcot in Oxfordshire. The UK market has been slow to develop for three major reasons:

1)    The Gas industry is very cautious and was unwilling to accept evidence from successful European projects as proof that the technology was suitable for the UK. The installation at Didcot helped to dispel this caution.

2)    BtG competes against Combined Heat and Power ("CHP") as a use of biogas. Although burning raw biogas in a CHP engine to create electricity is a less energy efficient process, CHP had the advantage that it was heavily subsidised, so there was little incentive to invest in BtG.  The Renewable Heat incentive ("RHI") corrected this situation, but took over two years from inception to passing into law in 2012.  Following the release of the RHI, a second BtG project was completed at the beginning of the 2013 financial year.

3)    The Health and Safety Executive ("HSE") was concerned over the allowable levels of oxygen in biomethane and insisted on a full review, which resulted in levels being brought into line with the rest of Europe in 2013. Prior to this all projects were approved on a case by case basis.

The HSE action in 2013 opened up the market as demonstrated by the 2014 step up in sales. However, the market is still highly sensitive to the level of incentive/subsidy and a recent delay in publishing the results of a review of the RHI has slowed down the receipt of new orders in the UK.

Immediately after the 2014 financial year-end, the Group purchased the business and assets of Greenlane Biogas, giving us a global presence in the biogas upgrading market.  Greenlane's experience mirrors that of CBG in that high activity markets are generally incentivised.  Particularly active markets for Greenlane are USA, Canada, Brazil and France.

BUSINESS REVIEW

The past year has seen another material step change in our businesses. Once again, the Group delivered improved results and diversification continued apace. Our three divisions, Cylinders, Engineered Products and Alternative Energy, experienced growth in revenue and operating profit. The Group is much better balanced and with a significant contribution from the Alternative Energy division reducing the dependence on the oil and gas market. The March 2014 acquisition of Roota Engineering, coupled with growth at Al-Met and Hydratron, ensured that the Engineered Products division overtook Cylinders on revenue and operating profit, giving a much better balance in Group revenue across the oil and gas sector cycle.

With a placing on AIM in the year and two major acquisitions immediately after year-end, this has been an incredibly busy year for the Group.

The key points for the year are:

Cylinders Division

	2014	2013	2012	2011	2010
Revenue £m	21.4	17.3	16.3	11.3	19.1
Operating profits £m	3.8	3.6	2.3	1.4	4.8

Chesterfield Special Cylinders ("CSC") had another good year, underpinned by significant volume growth in its principal market, the supply of Air Pressure Vessels ("APVs") for motion compensation systems in the deep water oil and gas market. This volume growth was achieved after agreeing significant price reductions to maintain a market presence against stiff competition from South Korea. The impact of competition in this market is amply demonstrated by the reduction in margins in 2014, where revenues were 38% higher compared to 2010 at which time CSC had almost a 100% share of the market.

The general air of uncertainty in the oil and gas sector has resulted in major development projects being postponed, or re-engineered to reduce costs. Day rates and utilisation of semi-submersible drilling rigs have been in decline for the past year, as new rigs come to market and oil companies delay drilling programmes until there is more market certainty. At year-end, there was a 10% reduction in the number of semi-submersibles and drillships due for delivery in the next 3-4 years compared to last year.  Order intake for this market has slowed markedly and we continue to expect lower revenues in the current financial year as a result.

Defence sales were slightly down on the prior year due to the phasing of submarine build programmes. Further contracts were won in the UK, Germany and South Korea, which give a solid foundation to the defence order book for the next two years.

Sales of services were in line with last year, with an increase in Integrity Management sales being masked by a reduction in factory based retest work, due to a slower industrial gases market and a reduction in specialist cleaning due to phasing of the Astute submarine programme. Integrity Management is now being offered on overseas naval contracts and has built steadily in the UK defence and the oil and gas markets.

The market for new high-pressure gas trailers has continued to be depressed. We did, however, complete orders for two new state-of-the-art compressed natural gas ("CNG") trailers. These trailers, developed with a major industrial gases company, were designed and built by CSC using lightweight, composite cylinders supplied by Worthington. As previously stated, as the use of alternative fuels such as CNG and hydrogen increases, we expect the market for this type of trailer and large high-pressure storage facilities to increase. This view is backed by third-party market research. CSC remains actively engaged in this market through its German subsidiary, CSC Deutschland GmbH.

Capital spend in the year of £1 million was centred on forging equipment for ultra-large cylinders. This is due to enter production in January 2015. A further £0.7 million is planned for 2015 to complete this investment.

In January 2014, the Group took a 40% stake in Kelley GTM ("KGTM") a manufacturer of packaged, type II composite, welded ultra-large cylinders known as GTMs (Gas Transportation Modules). This start-up business is focused on the sale of GTMs into the onshore oil and gas market, for the delivery of CNG to displace diesel fuel on drilling rigs and for the capture of gas currently burned in flares at oil wells. US environmental legislation will eventually lead to a total ban of flaring at oil wells. That said, development of the market has been slower than anticipated and the Group has taken a cautious approach to the valuation of its £2.4 million investment in KGTM.

The Group has the option in 2015 to increase its stake in the business to 80%. The decision to exercise and the cost of doing so is dependent on the performance of KGTM in calendar years 2014 and 2015.

Engineered Products Division

	2014	2013	2012	2011	2010
Revenue £m	24.1	16.0	13.9	11.2	2.0
Operating profits £m	4.0	1.6	1.0	1.0	0.0

As forecast, the division became the largest in the Group both in terms of revenue and operating profits. Progress is illustrated by the five-year performance with Al-Met acquired part-way through 2010, Hydratron at the beginning of 2011 and Roota Engineering acquired in March 2014.  A further acquisition, Quadscot, was made shortly after the year-end and the division will be split in 2015 with Al-Met, Roota and Quadscot forming the Precision Machined Components division and the Hydratron businesses in the UK and USA in the Engineered Products division. It is pleasing to note that Hydratron and Al-Met achieved a payback on initial investment during 2014; both have now contributed more in terms of profit before taxation and amortisation charges than they cost to buy.

Hydratron manufactures 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. Roota and Quadscot make a wide range of components for oil and gas pressure systems and downhole tools with Roota generally focusing on larger, longer products and Quadscot focusing on smaller product in a range of high alloy materials.

Market conditions for the division started the year well, with OEMs reporting record order intake and profits during 2013.  However, the market became somewhat subdued during the second-half of 2014 as oil companies began to delay major projects for the reasons stated earlier. Nonetheless, the underlying order book for Engineered Products ended the year at the same level as last year.

The Hydratron businesses had record sales and profits with its US subsidiary making a full-year profit for the first time. The project to reduce the level of in-house manufacture of components in the UK to free up additional space for assembly of pumps and systems was completed in the year and increased the space available by 50%, whilst giving a saving on the cost of components.

Hydratron is an order of magnitude smaller than its major competitors, so growth is possible even in a slowing market by taking market share. This will be the focus for 2015, particularly in the USA, where our market presence is very small. There will also be a continued focus on product development particularly in automation of control panels and component test systems.

The precision machining businesses have an advantage over both Hydratron and CSC, as many of the products they manufacture are consumables, so there is an ongoing requirement for replacement parts from oil and gas production. This, coupled with the full-year effect of ownership of Roota and Quadscot, should give further progress in the current year. Critical to this is on-time, in-full delivery on sales orders, which all the businesses have a focus on. Capital expenditure on new machining equipment will almost double in 2015, from just over £1 million in 2014 to around £2 million. This will be mainly financed through leasing, on favourable terms, to smooth cash flows.

Once again, we have significant organic growth potential, which we will vigorously pursue and we need to ensure we bed-in the latest acquisitions, but we will also continue looking for acquisition opportunities to expand the range of products in both Precision Machined Components and Engineered Products.

Alternative Energy

	2014	2013	2012	2011	2010
Revenue £m	8.4	1.1	0.2	0.9	0.7
Operating profits £m	1.1	(0.5)	(0.5)	(0.5)	(0.3)

2014 was the year when Chesterfield BioGas("CBG") delivered on its long-term goal. CBG sells a range of equipment for cleaning raw biogas produced by anaerobic digestion of organic waste. The cleaning process uses water to strip-out unwanted gases, such as carbon dioxide, producing almost pure methane, known as biomethane, which is then injected into the UK natural gas grid. In the energy sector, this is termed Biogas to Grid ("BtG"). The technology was licensed from Greenlane Biogas, a leading developer and global supplier of patented technology for upgrading raw biogas to high purity biomethane.

CBG was the first company in the UK to provide equipment for BtG at Didcot in 2010. In October 2012, CBG delivered its second BtG project to a waste processing site in Stockport and this was the reason for the increase in sales over 2012. The market was slow to grow due to a combination of delays in releasing the Renewable Heat Incentive ("RHI") and regulatory hurdles to large-scale injection of biomethane into the UK gas grid. These were overcome in 2013, resulting in the transformational increase in the business in 2014.

As well as delivering on revenue and profits, CBG enjoyed a strong order intake, particularly during the second-quarter, ending the year with an order book 30% higher than the comparable figure from last year.

The Board continues to see substantial market opportunities for CBG, which justified our acquisition of the business and assets of Greenlane Biogas when the opportunity occurred at the end of the financial year. This move significantly strengthens our market position, by giving us access to the full range of project execution skills from design through to plant hook-up and commissioning and a world-wide market. Greenlane has subsidiaries in New Zealand, Canada and Europe. The European business covers Europe and the Middle East. It is now managed out of the UK by CBG and will rebrand to Greenlane during 2015. The Canadian business covers North and South America. The New Zealand business will focus on sales into new markets in Australasia, South East Asia and China.

People

The depth and breadth of senior management in the Group has been significantly enhanced by recent acquisitions. This, together with our ongoing commitment to strengthening our existing senior management through training, development and targeted recruitment, is key to the successful progress of the Group. Introduction of the new structure in 2015, with divisional Managing Directors is necessary to maintain the progress of Group companies due to the size and complexity of the Group.

In support of changes at the senior levels, our graduate and apprentice recruitment programmes move forward rapidly. At the financial year-end the Group had six graduate trainees and 14 apprentices out of a total work force of 278. The acquisition of Quadscot brings a further 11 apprentices into the Group. Greenlane does not have any apprentices but it has the highest concentration of graduate and post-graduate qualified staff in the Group.

Summary and outlook

This was a notable year for the Group, not just because of the record revenue and operating profit, but growth in Engineered Products and Alternative Energy, coupled with recent acquisitions means, that the Group is much better balanced both in its oil and gas market sales and across its wider markets. The current financial year will be tougher due to the slowdown in the oil and gas market, but we still expect to see growth in the Group as a whole due to this diversification. This is a very exciting time for Pressure Technologies.

John Hayward

Chief Executive

9 December 2014

FINANCIAL REVIEW

Review of financial performance in 2013/14

Revenue

Revenue grew by 57% to £54.0 million (2013: £34.4 million) with growth seen across all three divisions. Revenue in the Alternative Energy division grew by £7.3 million as a result of work on four (2013: one) projects for biomethane upgrade units. Revenue in the Engineered Products division includes £5.8 million following the acquisition of Roota Engineering in March.

Profitability

The movement in profitability between the two years was as follows:

	2014	2013
	£m	£m
Earnings before interest, taxation, depreciation and amortisation ("EBITDA") (Stated before charging acquisition costs of £0.9 m (2013:£0.2m) and provisions associated with the Group's option in and loan to KGTM of £0.7m (2013: £nil)	8.7	4.0
Depreciation	(0.8)	(0.6)
Amortisation - Chesterfield BioGas licence	(0.1)	(0.1)
	________	_______
Operating profit before acquisition costs, amortisation re acquired businesses and provisions associated with the Group's option in and loan to KGTM	7.8	3.3
Amortisation charges arising from the acquisition of Al-Met and Hydratron	(0.2)	(0.2)
Amortisation charge arising from the acquisition of Roota Engineering	(0.5)	-
Acquisition costs	(0.9)	(0.2)
Provisions associated with the Group's option in and loan to KGTM	(0.7)	-
Share of KGTM's results	(0.2)	-
	________	________
Profit before taxation	5.3	2.9

The Group seeks to target niche markets which offer the prospect of both high margins and significant growth.

The Group uses return on revenue as a key performance indicator. This indicator is set before taking into account the cost of acquiring businesses and the subsequent amortisation charge on the intangible assets so acquired, and this year, the provisions associated with the Group's option in and loan to KGTM as detailed more fully below in the section on Corporate activity during 2013/14.

Disclosure of acquisition related costs and amortisation charges for acquired businesses

Growth is expected to be achieved both by organic means and by acquiring businesses which are themselves then capable of achieving significant growth. As a consequence, acquisition costs, goodwill and intangible assets are expected to be a recurring theme within the Group's financial statements.

In accordance with International Financial Reporting Standard (IFRS) 3, the cost of market research and professional fees in relation to possible acquisitions is expensed in the year in which it is incurred.

The remaining carrying value of the intangible assets with respect to the 2010 acquisitions of Al-Met and Hydratron of £0.1 million (2013: £0.3 million) will be fully amortised in 2014/15. It is pleasing to report that in the four years since these businesses were bought they have now contributed more in terms of profit before taxation and amortisation charges than they cost to buy.

The annual amortisation charge in respect of Roota Engineering is expected to be £0.9 million per annum for the next seven years.

The effect of acquisition costs, the amortisation charge that relates to acquired businesses and provisions associated with the Group's investment in KGTM had a significant effect on earnings per share as the table below shows:

	2014	2013	2014	2013
	£'000	£'000	Earnings per share	Earnings per share
Earnings as reported	3,711	2,200	28.5p	19.4p
Adjustment for:
Acquisition costs	862	220	6.6p	1.9p
Amortisation charge on acquired businesses	694	187	5.3p	1.6p
Deferred tax release on amortisation charge	(138)	(37)	(1.0p)	(0.3p)
Provisions made against option in and loan to KGTM	718	-	5.5p	-
	_______	________	________	________
Adjusted ("Normalised") earnings	5,847	2,570	44.9p	22.6p
Weighted average number of shares in issue in the period			13,025,349	11,361,221

Given the significance to the Group of the acquisition of Roota Engineering and of the acquisitions completed shortly after the financial year-end, the Board intends to publish both reported and normalised earnings per share figures in future.

Taxation

The effective tax rate for the Group in 2014 was 30.6% (2013: 23.6%). Adjusting to exclude acquisition related costs of £0.9 million and the provisions made against the investment in KGTM of £0.7 million for which no tax relief is available, the effective tax rate would have been 23.6%.

Corporation tax (all of which relates to the UK), paid during 2014 totalled £1.7 million.

Accounting Policies

The Group adopted International Accounting Standard (IAS) 11 on accounting for "Construction contracts" for the first time this year. Revenue and profits on such projects are now taken in proportion to the stage of completion of each contract. Adoption of the standard had no effect on the comparative figures, as there were no such projects in existence at that time. At the end of the current financial year three projects were in progress and following the acquisition of Greenlane immediately after the financial year-end, such contracts will henceforth form a much larger part of Group revenue.

Management of foreign exchange exposure

The Group has two major exposures to movements in foreign exchange rates. Historically these have mainly related to trading in international markets but increasingly and particularly with the Greenlane acquisition which was completed post the year-end, the Group is now also exposed to currency movements with respect to the value of its overseas investments.

In the year under review, the principal exposure, which arose from trading activities, was to movements in the value of the Euro and US$ relative to Sterling. As Group companies both buy and sell in overseas currencies, particularly the Euro, there is a degree of natural hedge already in place. At the transactional level, where exchange movements are quickly realised, foreign exchange contracts are taken out to cover the majority of this exposure. As at the 27 September contracts were in place to cover the forward sale of Euro's 2.9 million and US$0.7 million.

At the present time no cover is held against the value of overseas investments as these are expected to be held for the long term and over the next year dividend flows are not expected to be significant.

Corporate activity during 2013/14

The Group completed two investments during the year with the first being funded from existing cash resources and the second via a share placing.

Investment in and loan provided to KGTM

In December the Group announced that it would, effective from 1 January 2014, be making a strategic investment to acquire a 40% stake in KGTM at a cost of US$0.5 million (£0.3 million). As part of the investment package the Group also agreed to provide a working capital loan of US$3.5 million (£2.1 million) and was granted an option to acquire a further 40% stake. Pressure Technologies has a "one off" ability to exercise this option within a period of 90 days from receipt of the audited results for 2014.

The price of exercising the option is dependent on the level of profitability in calendar years 2014 and 2015 with a minimum exercise price of US$5 million and maximum of US$16 million if key profitability targets are met. As detailed below, the target for 2014 will not be met so the maximum exercise price, based on hitting the performance target for 2015, is now US$11 million.

KGTM is a leading manufacturer of gas transportation modules ("GTMs") which utilise a standard 20 foot ISO container to transport gas cost effectively. The business is based in Amarillo, Texas. Whilst the rate of order enquiries is steadily increasing, the rate of conversion of these into firm orders has, to date, been behind expectations. The Group's share of KGTM's losses for the nine months to the end of September of £0.2 million is included within the Group's Consolidated Statement of Comprehensive Income.

In light of the above trading performance and the knock on effect on future year's profitability from the delay in building up production levels, the Board has taken a cautious view in assessing the carrying value of its investment in KGTM. A provision of £0.4 million has been made against the value placed on the option at inception and a provision of £0.3 million has been made against the carrying value of the loan provided to KGTM. These provisions, which in aggregate total £0.7 million, represent one third of the total value of the loan provided to KGTM. In addition, no credit has been taken for any interest receivable on the loans made.

Purchase of Roota Engineering

In March the Group purchased 100% of the share capital of Roota Engineering Ltd for an initial consideration of £9.0 million (plus surplus cash balances of £1.5 million) with additional deferred consideration of up to £4.5 million based on the financial performance of the business over the two year period following acquisition. Further details on this acquisition can be found in note 16.

Share placing

The financing of the initial purchase consideration for the acquisition of Roota Engineering was financed by a vendor placing of 1,856,174 new ordinary shares at a price of 575 pence per share. At the same time 1,048,174 new ordinary shares were also placed, again at a price of 575 pence per share, to raise £6.0 million Gross for corporate purposes. Net of expenses, the Group raised £16.1 million from the share placing.

Cash flow

The Group started the year with cash of £4.0 million and ended the year with cash (net of borrowings) of £5.8 million.

The table below sets out the main movements during the year in the net cash position of the Group:

	2014 £m	2013 £m
Earnings before interest, tax, depreciation and amortisation (EBITDA)	7.1	3.8
Movement in working capital	(3.8)	(0.2)
Capital expenditure (net of disposals)	(2.2)	(0.8)
	________	________
Operating cash flow	1.1	2.8
UK Corporation tax paid	(1.7)	(0.6)
Dividend paid	(1.0)	(0.9)
Share issues	16.2	-
Investment in and loan to KGTM	(2.4)	-
Purchase of Roota Engineering (net of cash acquired)	(7.6)	-
Loan advanced to Greenlane Biogas Holdings Limited	(2.8)	-
	________	________
Net movement	1.8	1.3

The Group delivered a strong trading performance with EBITDA of £7.1 million. Revenue in the final quarter of the financial year at £18.5m was particularly strong with £5.7 million of revenue recognised in the Alternative Energy division. As a result of this strong trading performance, year-end trade receivables are at a much higher level than normal, resulting in an adverse movement in working capital during the year.

Capital expenditure at £2.2 million was higher than in recent years with expenditure of £1.0 million in the Cylinders division and £1.3 million in the Engineered Products division.

The Group raised £16.1 million in a placing of shares to finance both the acquisition of Roota Engineering and to provide resources to finance future acquisitions and internal growth opportunities. The Group invested £2.4 million in KGTM in January 2014 and advanced £2.8 million to Greenlane Biogas Holdings Limited by way of a secured loan prior to completion of the acquisition on 1 October.

Events after the reporting period

Banking facilities

Immediately after the financial year-end the Group concluded a new four year banking facility with Bank of Scotland (part of the Lloyds banking group). The facility, which is available until 30 September 2018, comprises a £15 million multi-currency revolving credit facility and an accordion feature that allows the total revolving credit facility to be expanded by a further £10 million.

Acquisition of Greenlane

On 1 October 2014 the Group completed the acquisition of the business and assets of Greenlane Biogas Holdings Ltd and its various subsidiaries. The maximum total consideration is NZ$25 million (£12.4 million) comprising an initial consideration of NZ$12.0 million (£6.0 million) with additional deferred payments split over four years of up to a maximum of NZ$13.0 million (£6.4 million). The initial consideration is being met from the Group's existing cash resources.

Acquisition of Quadscot Holdings Ltd

On 1 October 2014 the Group acquired 100% of the share capital of Quadscot Holdings Ltd for an initial consideration of £7.3m (plus cash balances acquired) and deferred consideration up to a maximum of £3.0 million based on the financial performance of the business over the two years immediately following acquisition.

The acquisition was funded by drawing on £7.0m from the Group's new banking facility with the balance funded from the Group's existing cash resources.

Ongoing financial management of the Group

Following recent corporate activity the Group has grown considerably in size and further growth is planned. Against this background, the finance function in each division is being strengthened with the appointment of an operationally focused finance director. The small head office finance team will concentrate on corporate reporting, the review of divisional performance, acquisitions appraisal, treasury and taxation matters.

James Lister

Group Finance Director

9 December 2014

Consolidated statement of comprehensive income

For the 52 week period ended 27 September 2014

	Notes	52 weeks ended 27 September 2014	52 weeks ended 28 September 2013
		£'000	£'000
Revenue	2	54,015	34,383
Cost of sales		(38,277)	(24,088)
Gross profit		15,738	10,295
Administration expenses		(7,904)	(7,012)
Operating profit pre acquisition costs, amortisation on acquired businesses and exceptional costs	2	7,834	3,283
Separately disclosed items of administrative expenses:
Acquisition costs and amortisation on acquired businesses	4	(1,556)	(407)
Exceptional costs in relation to the option on and loan to KGTM	3	(718)	-
Operating profit		5,560	2,876
Finance income		32	11
Finance costs		(60)	(9)
Share of losses of associate	10	(183)	-
Profit before taxation	3	5,349	2,878
Taxation	5	(1,638)	(678)
Profit for the period attributable to owners of the parent		3,711	2,200
Other comprehensive income Items that may be reclassified subsequently to profit or loss: Currency translation differences on translation of foreign operations		10	19
Total comprehensive income for the period attributable to the owners of the parent		3,721	2,219
Earnings per share - basic	6	28.5p	19.4p
- diluted	6	27.9p	19.2p

All of the above results are from continuing operations.

Consolidated balance sheet

As at 27 September 2014

	Notes	27 September	28 September
		2014	2013
		£'000	£'000
Non-current assets
Goodwill	8	7,081	1,964
Intangible assets	9	6,960	1,221
Property, plant and equipment		7,802	4,767
Deferred tax asset	14	155	138
Trade and other receivables	11	1,575	163
Investment in associates	10	123	-
		23,696	8,253
Current assets
Inventories		8,819	7,206
Trade and other receivables	11	20,561	8,705
Cash and cash equivalents Derivative financial instruments		6,356 43	4,044 71
		35,779	20,026
Total assets		59,475	28,279
Current liabilities
Trade and other payables	12	(16,453)	(9,236)
Borrowings		(180)	-
Current tax liabilities		(1,183)	(448)
		(17,816)	(9,684)
Non-current liabilities
Other payables	12	(2,909)	(593)
Borrowings		(324)	-
Deferred tax liabilities	14	(1,897)	(538)
		(5,130)	(1,131)
Total liabilities		(22,946)	(10,815)
Net assets		36,529	17,464
Equity
Share capital		718	568
Share premium account		21,463	5,387
Translation reserve		35	25
Retained earnings		14,313	11,484
Total equity		36,529	17,464

Consolidated statement of changes in equity

For the 52 week period ended 27 September 2014

	Notes	Share capital	Share premium account		Translation reserve	Profit and loss account	Total equity
		£'000	£'000		£'000	£'000	£'000
Balance at 29 September 2012		568	5,378		6	10,103	16,055
Dividends	7	-	-		-	(863)	(863)
Share based payments		-	-		-	44	44
Shares issued		-	9		-	-	9
Transactions with owners		-	9		-	(819)	(810)
Profit for the period		-	-		-	2,200	2,200
Other comprehensive income: Exchange differences on translating foreign operations		-	-		19	-	19
Total comprehensive income		-	-		19	2,200	2,219
Balance at 28 September 2013		568	5,387		25	11,484	17,464
Dividends	7	-	-		-	(991)	(991)
Share based payments		-	-		-	109	109
Shares issued		150	16,076		-	-	16,226
Transactions with owners		150	16,076		-	(882)	15,344
Profit for the period		-	-		-	3,711	3,711
Other comprehensive income: Exchange differences on translating foreign operations		-	-		10	-	10
Total comprehensive income		-	-		10	3,711	3,721
Balance at 27 September 2014		718	21,463		35	14,313	36,529

Consolidated statement of cash flows

For the 52 week period ended 27 September 2014

	Notes	52 weeks ended 27 September 2014	52 weeks ended 28 September 2013
		£'000	£'000
Operating activities
Cash flows from operating activities	15	3,411	3,544
Finance costs paid		(7)	(8)
Income tax paid		(1,766)	(558)
Net cash inflow from operating activities		1,638	2,978
Investing activities
Interest received		19	-
Proceeds from sale of fixed assets		155	9
Purchase of property, plant and equipment		(1,792)	(776)
Cash outflow on purchase of subsidiary net of cash acquired		(7,630)	-
Cash outflow on investment in associate		(306)	-
Cash outflow on loans made to associate		(2,147)	-
Cash outflow on third party loans		(2,782)
Net cash used in investing activities		(14,483)	(767)
Financing activities
Repayment of borrowings		(78)	(6)
Dividends paid		(991)	(863)
Shares issued		16,226	9
Net cash inflow / (outflow) from financing activities		15,157	(860)
Net increase in cash and cash equivalents		2,312	1,351
Cash and cash equivalents at beginning of period		4,044	2,693
Cash and cash equivalents at end of period		6,356	4,044

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 27 September 2014. The consolidated financial statements have been prepared on a going concern basis.

Management has produced forecasts for all business units, which have been reviewed by the Directors. These demonstrate the Group is forecast to generate profits and cash in 2014/2015 and beyond and that the Group has sufficient cash reserves to enable the Group to meet its obligations as they fall due for a period of at least 12 months from when these financial statements have been signed.

As such, the Directors are satisfied that the Company and Group have adequate resources to continue to operate for the foreseeable future. For this reason they continue to adopt the going concern basis for preparing the financial statements.

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

Changes in accounting policies

In the period, the Group adopted IFRS 13, "Fair value measurement". The impact of this has been to include increased disclosure on the measurement basis of items initially recognised, or carried, at fair value.

In prior years, the Group did not have any material construction contracts in place at the reporting date. Given the contracts in place in the Alternative Energy division as at the reporting date, IAS 11 has been applied for the first time in the current financial period.

2.   Segment analysis

The financial information by segment detailed below is frequently reviewed by the Chief Executive who has been identified as the Chief Operating Decision Maker (CODM).

For the 52 week period ended 27 September 2014

	Cylinders	Engineered Products	Alternative Energy	Unallocated Amounts**	Total
	£'000	£'000	£'000	£'000	£'000
Revenue
- from external customers	21,443	24,133	8,439	-	54,015
Operating profit / (loss) before acquisition costs, amortisation on acquired businesses and exceptional costs	3,791	4,649	1,094	(1,700)	7,834
Acquisition costs*	-	-	-	(862)	(862)
Amortisation in relation to intangible assets acquired on business combinations	-	(694)	-	-	(694)
Provisions in relation to the option on and loans to KGTM	-	-	-	(718)	(718)
Operating profit / (loss)	3,791	3,955	1,094	(3,280)	5,560
Share of losses of associate	(183)	-	-	-	(183)
Net finance income/(costs)	11	(2)	2	(39)	(28)
Profit / (loss) before tax	3,619	3,953	1,096	(3,319)	5,349
Segmental net assets ***	7,336	22,716	2,767	3,710	36,529
Other segment information:
Capital expenditure	1,040	1,266	40	28	2,374
Depreciation	312	451	37	4	804
Amortisation	-	694	70	-	764

*Acquisition costs include fees associated with making acquisitions.

**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.

52 week period ended 28 September 2013

	Cylinders	Engineered Products	Alternative Energy	Unallocated Amounts**	Total
	£'000	£'000	£'000	£'000	£'000
Revenue
- from external customers	17,306	15,942	1,135	-	34,383
Operating profit / (loss) before acquisition costs, amortisation on acquired businesses and exceptional costs	3,558	1,562	(480)	(1,357)	3,283
Acquisition costs*	-	-	-	(220)	(220)
Amortisation in relation to intangible assets acquired on business combinations	-	(187)	-	-	(187)
Operating profit / (loss)	3,558	1,375	(480)	(1,577)	2,876
Net finance income/(costs)	7	(2)	-	(3)	2
Profit / (loss) before tax	3,565	1,373	(480)	(1,580)	2,878
Segmental net assets ***	6,940	7,728	153	2,643	17,464
Other segment information:
Capital expenditure	396	362	6	12	776
Depreciation	295	309	34	8	646
Amortisation	-	187	70	-	257

* Acquisition costs include fees associated with making acquisitions.

**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.

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

Revenue	2014	2013
	£'000	£'000
United Kingdom	25,730	10,639
Europe	7,658	5,690
Rest of the World	20,627	18,054
	54,015	34,383

The UK is the entity's country of domicile with revenue of £25,730,000 (2013: £10,639,000) being obtained during the period.

Revenue of £28,285,000 (2013: £23,744,000) has been generated overseas.

The Group's largest customer contributed 23% to the Group's revenue (2013: 34%) which is reported within the Cylinders segment. No other customer contributed more than 10% in the year to 27 September 2014 (2013: nil).

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

Revenue	2014	2013
	£'000	£'000
Oil and gas	39,607	27,640
Defence Industrial gases	3,478 2,309	3,793 1,793
Alternative energy	8,621	1,157
	54,015	34,383

3. Profit before taxation

Profit before taxation is stated after charging / (crediting):

	2014	2013
	£'000	£'000
Depreciation of property, plant and equipment - owned assets	783	646
Depreciation of property, plant and equipment - assets under finance lease and hire purchase agreements	21	-
(Profit) / loss on disposal of fixed assets	(7)	8
Amortisation of intangible assets - licence and distribution agreement	70	70
Amortisation of grants receivable	(107)	(39)
Staff costs	9,670	6,904
Cost of inventories recognised as an expense	28,581	16,327
Operating lease rentals:
- Land and buildings	644	627
- Machinery and equipment	67	66
Foreign currency (profit) / loss	(26)	275

Exceptional costs

The exceptional costs of £718,000 relate to a provision made against the value of the option held to acquire a further 40% of KGTM of £388,000 and a provision made against the loan issued to KGTM of £330,000.

The Group calculated at inception that the option had a maximum value of £388,000, being the difference between the fair value of the equity investment, the loan receivable and the amount paid to KGTM. The Board consider that due to uncertainty around take up of the option, the option has a £nil value at the reporting date. As such, the provision against the value in the option is recorded in the consolidated statement of comprehensive income.

In addition, the directors have taken a cautious view on the carrying value of the loan receivable from KGTM. An additional £330,000 has been charged to the consolidated statement of comprehensive income as a provision against the loan.

Given the magnitude of the amounts and the fact that they are non-trading items, they are disclosed separately on the face of the consolidated statement of comprehensive income as exceptional items.

4.   Acquisition costs and amortisation on acquired businesses

	2014	2013
	£'000	£'000
Amortisation of intangible assets arising on a business combination	694	187
Acquisition costs	862	220
	1,556	407

5.   Taxation

	2014	2013
	£'000	£'000
Current tax
Current tax expense	1,737	775
Over provision in respect of prior years	(34)	(19)
	1,703	756
Deferred tax
Origination and reversal of temporary differences	(65)	(74)
(Over) / under provision in respect of prior years	-	(4)
Total taxation charge	1,638	678

Corporation tax is calculated at 22% (2013: 23.5%) of the estimated assessable profit for the period. Deferred tax is calculated at 20% (2013: 20%).

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

	2014 £'000	2013 £'000
Profit before taxation	5,349	2,878
Theoretical tax at UK corporation tax rate 22% (2013: 23.5%)	1,177	676
Effects of:
- non-deductible expenses	301	39
- disallowable acquisition costs	190	52
- Research and development allowance	-	(115)
- adjustments in respect of prior years	(34)	(23)
- effect of unrealised overseas (profits) / losses	(12)	121
- change in taxation rates	16	(72)
Total taxation charge	1,638	678

6. 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.

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.

	2014 £'000	2013 £'000
Profit after tax	3,711	2,200
	No.	No.
Weighted average number of shares - basic	13,025,349	11,361,221
Dilutive effect of share options	263,283	78,069
Weighted average number of shares - diluted	13,288,632	11,439,290
Basic earnings per share	28.5p	19.4p
Diluted earnings per share	27.9p	19.2p

7. Dividends

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

		Rate	Date	Shares in issue	2014	2013
					£'000	£'000
Final 2011/12		5.0p	8 March 2013	11,362,249	-	568
Interim 2012/13 Final 2012/13 Interim 2013/14		2.6p 5.2p 2.8p	8 August 2013 7 March 2014 8 August 2014	11,362,249 11,362,249 14,268,733	- 591 400	295 - -
					991	863

At 27 September 2014 the 2013/14 final dividend had not been approved by Shareholders and consequently this has not been included as a liability. The proposed dividend of 5.6p per share will, if approved at the AGM, be paid on 17 March 2015, at a total cost of £804,000.  The associated Record Date is 20 February 2015 and the shares will become Ex-Dividend on 19 February 2015.

8. Goodwill

		Total £'000
Cost and gross carrying amount
At 29 September 2012 and 28 September 2013		1,964
Acquired through business combinations (note 16)		5,117
As at 27 September 2014		7,081
Engineered Products division	Date of acquisition	Original cost £'000
Al-Met Limited	February 2010	272
The Hydratron Group	October 2010	1,692
Roota Engineering Limited	March 2014	5,117
		7,081

Goodwill arising on consolidation represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. The Group has three separate cash generating units (CGUs) all held within the Engineered Products division, Al Met Limited, The Hydratron Group and Roota Engineering Limited.

9.   Intangible assets

	Licence and distribution agreement	Development expenditure	Customer order book	Non contractual customer relationships		Total
	£'000	£'000	£'000	£'000		£'000
Cost
At 29 September 2012 and 28 September 2013	1,200	234	197	937		2,568
Acquired through business combination	-	-	-	6,503		6,503
Disposed of in the period	-	(234)	(197)	-		(431)
At 27 September 2014	1,200	-	-	7,440		8,640
Amortisation
At 30 September 2012	253	234	197	406		1,090
Charge for the period	70	-	-	187		257
At 28 September 2013	323	234	197	593		1,347
Charge for the period	70	-	-	694		764
Disposed of in the period	-	(234)	(197)	-		(431)
At 27 September 2014	393	-	-	1,287		1,680
Net book value
At 27 September 2014	807	-	-	6,153		6,960
At 28 September 2013	877	-	-	344		1,221

Remaining useful economic life at 27 September 2014	12 years	-	-	7 years

10. Investments in associates

	£'000
As at 29 September 2013	-
Investments made in the year	306
Share of profits / (losses)	(183)
As at 27 September 2014	123

On 1 January 2014, the Group made a strategic investment to acquire 40 per cent of the common stock of GTM Manufacturing, LLC, a leading manufacturer of high-pressure vessels for gas transport solutions based in Amarillo, Texas. The company subsequently changed its name to Kelley GTM, LLC. The Group also acquired an option to purchase a further 40% of the company. This option can only be exercised by the Group and is exercisable for 90 days after the publication of the audited accounts for KGTM for the financial year-end 31 December 2014.

The Group's share (being 40%) of the revenues and losses of KGTM are £1,374,000 and (£183,000) respectively. As at the reporting date, the Group's share of the non-current assets is £281,000, and its share of the current assets is £331,000. The Group's share of the current liabilities is £281,000 and its share of the non-current liabilities is £4,143,000. The non-current liabilities held by KGTM relate chiefly to loans provided by the Group and other shareholders.

KGTM has a year-end date of 31 December. The period for which the results of KGTM have been included in the Group's financial statements is from 1 January 2014 to 27 September 2014.

11. Trade and other receivables

	2014	2013
	£'000	£'000
Current
Trade receivables	13,924	6,796
Amounts due from customers for construction contract work	383	-
Other receivables	5,012	399
Prepayments and accrued income	1,242	1,510
	20,561	8,705

	2014	2013
	£'000	£'000
Non-current
Loans to associated companies	1,436	-
Accrued income	139	163
	1,575	163

The loan to the associated company above relates to a loan made as part of the investment in KGTM. This loan is held within trade and other receivables. This is held at its discounted fair value of £1,766,000, less a provision made of £330,000. The discounting of the loan has been made over a three year period. The actual rate of interest is 4.5% and the discounting is made with reference to a theoretical market rate of 12%.

Other receivables due within one year includes £2,782,000 advanced to Greenlane Biogas Holdings Limited on a secured basis.

12. Trade and other payables

	2014	2013
	£'000	£'000
Amounts due within 12 months
Trade payables	4,930	2,903
Progress billings on construction contracts in excess of work completed	2,331	-
Other tax and social security	1,096	329
Accruals, deferred income and other payables	6,111	6,004
Deferred consideration	1,985	-
Total due within 12 months	16,453	9,236
Amounts due after 12 months
Deferred consideration	2,432	-
Other payables	313	337
Deferred income	164	256
Total due after 12 months	2,909	593

13. Construction contracts

Construction contracts are accounted for in accordance with IAS 11, 'Construction Contracts'. The position on individual contracts is held as 'Amounts due from customers for contract work' within trade and other receivables or as 'Progress billings on construction contracts in excess of work completed' within trade and other payables as applicable.

	2014 £'000	2013 £'000
Costs incurred and profit recognised to date	8,348	-
Less: Progress billings	(10,296)	-
Net balance sheet position for ongoing contracts	(1,948)	-

14. Deferred tax

The following are the major deferred tax assets / (liabilities) recognised by the Group and movements thereon during the current and prior reporting period.

	Accelerated tax depreciation	Intangible assets	Short term temporary differences	Share option costs	Operating lease incentives	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 29 September 2012	(466)	(122)	17	13	80	(478)
Credit / (charge) to income	(4)	54	34	6	(12)	78
At 28 September 2013	(470)	(68)	51	19	68	(400)
Credit/(charge) to income	(81)	138	(19)	30	(3)	65
Acquired through business combinations	(106)	(1,301)	-	-	-	(1,407)
At 27 September 2014	(657)	(1,231)	32	49	65	(1,742)

The net deferred tax balance has been analysed as follows in the consolidated balance sheet:

	2014	2013
	£'000	£'000
Non-current asset Deferred tax asset	155	138
Non-current liabilities Deferred tax liabilities	(1,897)	(538)
	(1,742)	(400)

15. Consolidated cash flow statement

	2014	2013
	£'000	£'000
Profit after tax	3,711	2,200
Adjustments for:
Finance costs / (income) - net	28	(2)
Depreciation of property, plant and equipment	804	646
Amortisation of intangible assets	764	257
Share option costs	109	44
Income tax expense	1,638	678
Loss/(profit) on derivative financial instruments	28	(71)
(Profit)/loss on disposal of fixed assets	(7)	8
Exceptional charges associated with Kelley GTM	718	-
Loss on investment in associate	183	-
Changes in working capital:
(Increase) in inventories	(440)	(284)
(Increase) in trade and other receivables	(7,449)	(1,448)
Increase in trade and other payables	3,324	1,516
Cash flows from operating activities	3,411	3,544

16. Business combinations

The table below summarises the consideration paid for Roota Engineering Limited and the fair value of the assets and liabilities acquired.

	Book value £'000	Intangible assets recognised on acquisition £'000	Fair value uplift on acquisition £'000	Fair value £'000
Recognised amounts of identifiable assets acquired and liabilities assumed:
Property plant and equipment	1,424	-	191	1,615
Intangible assets	-	6,503	-	6,503
Inventories	1,173	-	-	1,173
Trade and other receivables	1,583	-	-	1,583
Cash and cash equivalents	2,848	-	-	2,848
Trade and other payables	(1,792)	-	-	(1,792)
Current tax liabilities	(798)	-	-	(798)
Deferred tax liabilities	(68)	(1,301)	(38)	(1,407)
	4,370	5,202	153	9,725
Goodwill				5,117
Total consideration				14,842
Satisfied by:
Cash				10,478
Deferred cash consideration				4,364
				14,842
Net cash outflow arising on acquisition
Initial cash consideration				10,478
Cash and cash equivalents acquired				(2,848)
				7,630

The intangible assets acquired with the business comprise £6,503,000 in relation to non-contractual customer relationships.

The goodwill arising on the acquisition of Roota is mainly attributable to the skills and talent of the workforce and the anticipated value of new business that the operation is capable of securing.

The revenue included in the consolidated statement of comprehensive income since 5 March 2014 contributed by Roota was £5,814,000. Roota also contributed profit of £1,612,000 over the same period.

Had Roota been consolidated since 28 September 2013, the consolidated statement of income would show pro-forma revenue of £57,608,000 and profit before taxation of £6,345,000.

The amount of contingent consideration recognised at the acquisition date was £4,500,000, discounted to fair value. This contingent consideration is payable should Roota meet profit targets as set out in the agreement. The directors expect that all profit targets will be met and that the maximum consideration of £4,500,000 will become payable.

17. Related party transactions

During the period the Group issued a loan of $3,500,000 to an associate company, KGTM. This loan was made at an interest rate of 4.5% which is considered to be below the market rate of a company such as KGTM. As such, the loan is discounted to determine fair value on initial recognition. The fair value of the loan after discounting is £1,766,000. A provision has also been applied against this loan of £330,000 bringing the carrying value to £1,436,000.

18. Events after the reporting period

The Group entered into three key transactions after the reporting date of 27 September 2014.

1)   The Group agreed new bank facilities with Bank of Scotland, part of Lloyds Banking Group the Company's current bankers on the 30 September 2014. The facilities comprise a £15.0 million multi-currency revolving credit facility, available to the Company until 30 September 2018. In addition, the new facility also contains an accordion feature that allows the total revolving credit facility to expand by a further £10.0 million.

2)   On 1 October 2014, Pressure Technologies plc completed the purchase of the business and certain assets of New Zealand based Greenlane Biogas Holdings Limited and those of its various subsidiary companies. The maximum total consideration for the Acquisition is NZ$25 million (£12.4 million), comprising an initial consideration of NZ$12.0 million (£6.0million) with additional deferred payments, split over four years, of up to a maximum of NZ$13.0 million (£6.4 million), based on the future financial performance of Greenlane. The Directors consider that the business combination is highly complementary to its existing subsidiary in the Alternative Energy division.

3)   On 1 October 2014, the Pressure Technologies plc purchased the entire issued share capital of Quadscot Holdings Limited, a provider of high quality computer controlled and conventional precision engineering and machining services primarily to the oil, gas and petrochemical industries. The maximum total consideration for the Acquisition is £10.3 million (plus cash balances), comprising an initial cash consideration of £7.3 million (plus cash balances) with additional deferred payments, split over two years, of up to a maximum of £3.0 million, based on the future financial performance of Quadscot. The Directors believe that Quadscot has significant opportunities to expand and extend its customer base following a recent large scale expansion of its manufacturing facilities.

Due to the proximity of the above business combinations to the reporting date, the initial accounting for these transactions has still to be completed, and consequently details of the amounts of assets and liabilities acquired and fair value of contingent consideration are not disclosed within these financial statements.

19. Notice of Annual General Meeting

The Annual General Meeting of the Company will be held at Chesterfield Special Cylinders, Meadowhall Rd, Sheffield, South Yorkshire S9 1BT on Thursday 12 February 2014 at 12 noon. For those shareholders attending the Annual General Meeting, there will be an opportunity to see the operations at Roota Engineering once the formal business of the meeting has been concluded.

20. 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 27 September 2014 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 27 September 2014 will be posted to shareholders at least 21 days before the Annual General Meeting and made available on our website www.pressuretechnologies.com. In due course, they will be delivered to the Registrar of Companies. The statutory accounts for the period ended 28 September 2013 have been delivered to the Registrar of Companies.

 

END

 

 

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