TIDMPRES
RNS Number : 2608A
Pressure Technologies PLC
23 May 2023
23 May 2023
Pressure Technologies plc
("Pressure Technologies", "the Company" or "the Group")
2022 Full-Year Results
Pressure Technologies (AIM: PRES), the specialist engineering
group, announces its preliminary results for the 52 weeks to 1
October 2022, which are in line with the Group revenue and adjusted
operating loss* previously announced by the Company on 21 March
2023.
As announced on 21 March 2023 and on 27 April 2023, the
publication of the Company's Annual Report and Accounts for this
period ("FY22 Annual Report") was delayed due the additional time
required by the Company to correct a historic error related to the
accounting treatment of certain long-term customer contracts since
FY19, and the additional time required by the Company's auditor to
finalise its audit report, which has now been completed. The
audited Annual Report and Accounts has been published on the
Company's website and will be posted to shareholders on Wednesday
24 May 2023.
As previously announced, results for the period reflect a GBP1.2
million increase in operating losses over the GBP1.4 million
adjusted operating loss* notified in the earlier trading update on
15 November 2022, as a net result of correcting the application of
IFRS 15 to certain long-term contracts in FY22 and in the prior
periods FY19, FY20 and FY21. As a consequence, there will be a
corresponding increase in reported profits of GBP2.3 million over
the remaining lives of the relevant contracts in FY23, FY24 and
FY25, while contract profitability over the entire duration of the
contracts and the quantum and timing of cash flows remain
unchanged.
Financial Results
-- Revenue of GBP24.9 million (2021: GBP25.3 million)
-- Adjusted operating loss* of GBP2.6 million (2021: GBP1.5 million
operating loss***)
-- Adjusted EBITDA loss** of GBP0.9 million (2021: GBP0.1 million
EBITDA profit** ***)
-- Loss before taxation of GBP4.0 million (2021: GBP5.0 million
loss before taxation***)
-- Basic loss per share of 13.0p (2021: loss per share 14.8p***)
-- Net debt**** reduced to GBP3.5 million (2021: GBP5.0 million***)
* Operating loss excluding amortisation, impairments and other
exceptional costs.
** EBITDA profit/loss excluding impairments and other exceptional
costs.
*** Comparative period financial results for 2021 have been
restated. See Note 2 to the financial statements.
**** Net debt includes gross borrowings, asset finance leases,
right of use asset leases, less cash and cash equivalents.
Group Highlights
-- Difficult trading conditions throughout the FY22 period reflected
the challenging economic climate, supply chain disruptions
and cost inflationary pressures impacting the Group's operations,
customers and suppliers.
-- Progress has continued against strategic priorities, while
operational improvements and strengthened management underpin
confidence in the outlook for the Group.
Chesterfield Special Cylinders
-- Defence revenue increased to GBP13.5 million (2021: GBP11.1
million), reflecting the strong order book and new contract
placements for submarine and surface ship projects for UK
and overseas navies.
-- Largest ever contract award of GBP18.2 million announced in
February 2023 to supply safety-critical pressure vessels for
major UK naval new construction project, with three-year manufacturing
programme to 2025.
-- Hydrogen revenue increased to GBP2.4 million (2021: GBP2.2
million), while low order intake for refuelling station storage
reflected the impact of industry-wide supply chain issues
and cost inflation on customer projects.
-- Operational improvements in the Sheffield facility are delivering
increased capacity and efficiency for hydrogen cylinder and
road trailer new build, inspection and testing services.
-- Integrity Management revenue increased to GBP1.8 million (2021:
GBP1.5 million), with strong performance in the first half,
largely offset by postponed naval deployments in the second
half.
-- Enquiry levels for Integrity Management services from offshore
services customers increased sharply during the first half
of FY23, driven by growing activity in the oil and gas market.
Precision Machined Components
-- Revenue increased to GBP7.3 million (2021: GBP6.4 million),
reflecting the recovery of order intake later than expected
in the fourth quarter of FY22.
-- Order intake strengthened significantly during the first half
of FY23, with order intake of GBP4.3 million in March 2023,
the division's highest ever monthly order intake.
-- Divisional order book of GBP7.6 million at the end of April
2023 is the highest order book level on record (April 2022:
GBP2.2 million).
Strategic Progress
-- Revolving credit facility with Lloyds Bank plc amended in
October 2022 and facility term extended to March 2024.
-- Review of funding options to replace the Lloyds Bank facility
with new, more flexible arrangements continues. Refinancing
expected to complete by the end of June 2023.
-- Net proceeds of GBP2.1 million from Placing and Retail Offer
in December 2022 to provide short-term working capital, whilst
longer term financing options are being progressed.
-- Chris Webster, Chief Operating Officer, joined the business
in April 2022, providing strong leadership and delivering
operational and performance improvements across all sites.
-- Steve Hammell, Chief Financial Officer, joined the business
on 2 May 2023, bringing considerable financial knowledge and
experience from several senior leadership roles.
-- Richard Staveley, a representative of Harwood Capital LLP
joins the Board as Non-Executive Director on 23 May 2023,
bringing considerable investment knowledge and experience.
Outlook
-- Strong defence order book and pipeline for high-value naval
contracts underpin confidence in FY23 performance for Chesterfield
Special Cylinders.
-- Opportunities for the supply of new hydrogen storage and demand
for hydrogen transportation systems continue to develop, despite
delays in the hydrogen energy supply chain.
-- Increasing demand for in-situ and factory-based inspection,
testing and recertification services for hydrogen static storage
and road trailers present exciting growth opportunities.
-- Continuing strength of order intake and recovery to modest
EBITDA profit for the first half of FY23 underpin the full-year
outlook for Precision Machine Components, as order book visibility
improves for the first half of FY24.
-- Robust order book, strengthened executive team and clear strategic
focus underpin medium to long-term opportunities and the Board's
confidence in meeting market expectations for FY23.
General Meeting
The Company held its Annual General Meeting ("AGM") on Friday 31
March 2023. However, as a result of the delay to the publication of
the FY22 Annual Report, resolutions relating to the approval of the
FY22 Annual Report and to directors' remuneration were withdrawn
from the agenda of the AGM, with the intention of those resolutions
being the subject of a later General Meeting.
The General Meeting to consider the previously withdrawn
resolutions will take place on Tuesday 13 June 2023 at 09:30 am at
the offices of Singer Capital Markets, 1 Bartholomew Lane, London
EC2N 1AX.
Notice of FY23 Interim Results
The Company will publish its unaudited interim results for the
half year ended 1 April 2023 by the end of June 2023.
For further information, please contact:
Pressure Technologies plc Tel: 0330 015 0710
Chris Walters, Chief Executive PressureTechnologies@houston.co.uk
Singer Capital Markets (Nomad Tel: 0207 496 3000
and Broker)
Rick Thompson/Asha Chotai
Houston (Financial PR and Investor Tel: 0204 529 0549
Relations)
Kay Larsen / Ben Robinson
COMPANY DESCRIPTION
www.pressuretechnologies.com
With its head office in Sheffield, Pressure Technologies was
founded on its leading market position as a designer and
manufacturer of high-integrity, safety-critical components and
systems serving global supply chains in oil and gas, defence,
industrial and hydrogen energy markets.
The Company has two divisions, Chesterfield Special Cylinders
and Precision Machined Components.
Chesterfield Special Cylinders (CSC) - www.chesterfieldcylinders.com
-- Chesterfield Special Cylinders, Sheffield, includes CSC Deutschland GmbH.
Precision Machined Components (PMC) - www.pt-pmc.com
-- Precision Machined Components includes the Al-Met, Roota Engineering and Martract sites.
Chair's statement
FY22 was a challenging period for the Group, as results were
impacted by a combination of defence contract delays, operational
and supply chain disruption and slower than expected recovery in
the oil and gas market. The Group incurred increased operating
losses for the full year, as performance in the second half fell
significantly below the level anticipated. I am pleased to say that
market conditions have improved considerably in FY23, and we have
made significant operational improvements to ensure that the Group
benefits from strong orderbooks in both divisions.
I apologise for the delay in issuing these FY22 results. Late in
the auditor's review of the financial statements, it was determined
that the accounting methodology adopted in Chesterfield Special
Cylinders since FY19 for large, multi-year naval contracts with a
specific customer was incorrect in respect of the timing of cost
and profit recognition. The correction of this error impacted the
previously reported results for FY21, which have been restated, and
also reduced operating profit for FY22 below our previous
expectations, albeit with a corresponding increase in the expected
profit contributions from these contracts in FY23 and FY24. These
corrections and restatements impact the timing of profit
recognition over the life of the contract, but do not change
overall contract profitability, nor do they affect the value or
timing of future cash flows.
On 6 February 2023, we announced the award of a GBP18.2 million
major defence contract, underpinning the defence orderbook and
outlook for Chesterfield Special Cylinders in FY23 and FY24. We are
also encouraged by diversification opportunities for pressure
system inspection and testing services, including Integrity
Management field deployments and cylinder reconditioning and
recertification services. These activities cover established
defence and offshore markets, while new opportunities are
developing for industrial gas and hydrogen storage
applications.
We are very well positioned in the emerging market for hydrogen
storage and transportation. However, order placement by established
and new customers was slower than expected during FY22 and the
first half of FY23, influenced by constraints and delays in the
supply chain for components required in the generation and
compression of hydrogen for refuelling and decarbonisation
projects. Despite these delays, we are confident of securing
several contracts in the second half of 2023 and remain positive
about the prospects for Chesterfield Special Cylinders in the
hydrogen energy market for new build storage and transport
solutions, and for the through-life inspection, testing and
recertification of hydrogen systems over the medium and longer
term.
Since 2020, our Precision Machined Components division has felt
the significant impact of the Covid-19 pandemic and the downturn in
oil and gas markets and the division was loss making in FY22. We
are pleased and encouraged by the steady recovery in order intake
and order book development for the division, which has traded in
line with expectations throughout the first half of FY23 and
returned to profitability at the end of the second quarter, as we
realised the benefits of increased volumes and the operational
improvements made over the past few years. OEM customers continue
to forecast strong recovery in demand for specialised components
for oil and gas exploration and production projects over the next
three to five years. On 27 March 2023, we announced a record GBP3.0
million order from an established international OEM customer for
the supply of flow control components and subassemblies. Order
intake has continued to grow in line with customer sentiment and
project activity, further strengthening the divisional order book
for FY23 and well into the first half of FY24.
Improved trading and a stronger market outlook have presented
the Group with the potential opportunity to divest Precision
Machined Components activities in order to raise funds and support
strategic priorities within Chesterfield Special Cylinders. This
opportunity is being actively pursued and all options under
consideration will seek to deliver optimum shareholder value.
On 6 December 2022 we completed a GBP2.1 million equity
fundraise with support from institutional and retail shareholders.
The funds raised have provided important flexibility and liquidity
during the first half of FY23 as a bridge to stronger cash
generation from major contracts in Chesterfield Special Cylinders
and the return to profitability in Precision Machined Components.
Ernst & Young LLP continues to support the Group with the
review of funding options to replace the Lloyds Bank facility with
new arrangements that provide increased liquidity, greater
flexibility and the required working capital to support the Group's
strategic plans. We expect to complete the refinancing project in
the second calendar quarter of 2023.
In April 2022 we were pleased to welcome Chris Webster to the
Group as Chief Operating Officer. Chris has brought considerable
operational experience to the business through his thirty-year
career in manufacturing and has already made a positive impact
across all sites, improving production efficiencies, supply chain
controls and project management that all support improved
forecasting and underpin our growth plans.
On 17 January 2023, we announced the appointment of Steve
Hammell as Chief Financial Officer. Steve joined the business on 2
May 2023 and will join the Board from 23 May 2023, immediately
after publication of the FY22 accounts. Steve takes over from James
Locking who left the Board on 3 March 2023. We would like to thank
James for his contribution and service to the business over the
past four years and wish him every success for the future. Further
to our announcement made on 21 March 2023, I am pleased to confirm
that Richard Staveley will also join the Board from 23 May
2023.
With strong a strong order book, a strengthened executive team
and clear strategic focus for the Group, we are excited about
opportunities in the medium to long term and remain confident in
meeting full-year market expectations for FY23.
Nick Salmon
Chair
Business and financial review
Overview
Difficult trading conditions throughout the year reflected the
challenging global economic climate, supply chain disruptions and
cost inflationary pressures on the Group's operations, customers
and suppliers, and resulted in an unsatisfactory financial
performance. However, good progress has continued against strategic
priorities in defence, oil and gas and hydrogen energy markets
while operational improvements and strengthened management team
underpin confidence in the outlook for the Group.
Overall Group revenue for the year was GBP24.9 million (2021:
GBP25.3 million) and the adjusted operating loss for the year was
GBP2.6 million (2021: adjusted loss of GBP1.5 million). The Group
made a loss before taxation of GBP4.0 million (2021: loss of GBP5.0
million).
Restated
GBP million 2022 2021 2020 2019 2018
Group revenue 24.9 25.3 25.4 28.3 21.1
------ --------- ------- ------ ------
Oil & Gas 7.9 6.1 14.9 16.3 12.4
------ --------- ------- ------ ------
Defence 13.5 11.1 5.1 9.1 6.4
------ --------- ------- ------ ------
Industrial 1.1 5.9 5.2 2.2 2.3
------ --------- ------- ------ ------
Hydrogen Energy 2.4 2.2 0.2 0.7 -
------ --------- ------- ------ ------
Group operating (loss)/profit
before amortisation, impairments
and exceptional administration
charges (2.6) (1.5) (2.4) 2.2 1.0
------ --------- ------- ------ ------
Group loss before taxation (4.0) (5.0) (20.0) (0.5) (1.7)
------ --------- ------- ------ ------
Chesterfield Special Cylinders
Restated
GBP million 2022 2021 2020 2019 2018
Revenue 17.6 18.9 11.2 13.9 9.9
------ --------- ------ ----- -----
Oil and Gas 1.0 0.3 1.0 2.2 1.4
------ --------- ------ ----- -----
Defence 13.5 11.1 5.1 9.1 6.4
------ --------- ------ ----- -----
Industrial 0.7 5.3 4.9 1.9 2.1
------ --------- ------ ----- -----
Hydrogen Energy 2.4 2.2 0.2 0.7 -
------ --------- ------ ----- -----
Gross margin 29% 30% 26% 36% 35%
------ --------- ------ ----- -----
Operating profit/(loss) before
amortisation, impairments and
exceptional administration charges 0.4 2.0 (0.1) 2.1 1.1
------ --------- ------ ----- -----
Profit/(loss) before taxation (0.1) 0.8 (1.0) 2.1 1.0
------ --------- ------ ----- -----
Chesterfield Special Cylinders (CSC) delivered revenue of
GBP17.6 million (FY21: GBP18.9 million) and an adjusted operating
profit of GBP0.4m (FY21: GBP2.0 million). A restatement of the
Consolidated statement of comprehensive income for the year ended 2
October 2021 has been undertaken to correct an error which related
to the incorrect treatment of certain contract accounting
transactions (see Note 2).
Revenue in the first three quarters of the year reflected the
expected timing of major defence contract placement and phasing of
contract milestones. However, the fourth quarter was significantly
below expectations due to a combination of unexpected customer
delays, supply chain disruption and the unplanned outage of key
equipment, delaying significant revenue into the first half of
FY23. Similarly, several Integrity Management deployments planned
for the second half were delayed by customers into FY23 and FY24.
Input costs from raw materials and energy-intensive processes
increased significantly throughout the year, further impacting
margins where the costs could not be recovered through price
escalations and permitted contract variations within the
period.
The operating profitability for CSC in FY22 was GBP1.2 million
below the value that was notified in the trading update on 15
November 2022 as a result of the correction of an historic
incorrect application of IFRS 15, the accounting standard that
deals with the accounting treatment of long-term customer
contracts. This is detailed in Note 2 to the financial
statements.
On 6 February 2023, the Group announced the major contract
placement by a major UK naval customer for pressure vessel
manufacturing for a new construction project. Worth GBP18.2
million, this contract is the largest ever awarded to CSC. Progress
has commenced against early contract milestones and pressure
vessels will be delivered to the customer over the next three
years.
Major contracts with naval customers, both in the UK and in
France, underpinned a strong order book of GBP22.2 million at the
end of January 2023 and will contribute to significant revenue and
margin recovery in FY23. The opportunities pipeline provides good
visibility of future UK and overseas navy new construction and
refit programmes.
Demand for Integrity Management field services increased
steadily through the first half of the year and was anticipated to
grow further throughout the second half. However, the postponement
of several naval vessel deployments from the second half into FY23
and FY24 resulted in full-year revenue of GBP1.8 million (2021:
GBP1.5 million).
Growth opportunities for Integrity Management services remain
strong in key markets of defence, offshore services, nuclear and
industrial ground storage. Enquiry levels from offshore services
customers increased sharply at the end of the first quarter of
FY23, driven by growing activity in the market to support offshore
oil and gas projects.
Revenue from hydrogen projects in the year was GBP2.4 million
(2021: GBP2.2 million), reflecting a pause in order placement by
customers during the year due to supply chain issues that affected
lead times for manufactured components and the uncertainty due to
cost inflation.
Whilst increasing lead times for electrolysers and hydrogen
compression systems are affecting refuelling and decarbonisation
project schedules, the opportunities pipeline continues to develop
for hydrogen ground storage and road trailers in the UK and Europe.
The growing road trailer opportunity reflects the increasing demand
for the flexible and cost-effective transportation of hydrogen, in
which CSC is well placed to deliver solutions for established
operators and new entrants.
Throughout the year, CSC continued to raise the profile of its
hydrogen capabilities, products and services during events and
exhibitions held in France, Spain, Germany and the UK. Based on
market evaluation and evolving customer requirements, we are
developing solutions for higher storage pressures and efficient
road trailer designs, while in-situ testing and factory
reconditioning of hydrogen storage and transportation systems
present additional exciting growth opportunities for CSC.
Operational improvements in the Sheffield facility have delivered
increased capacity and efficiency for hydrogen road trailer
assembly, reconditioning, inspection and testing services and we
remain focused on delivering improved revenue and contract margins
from these growth areas.
Precision Machined Components
GBP million 2022 2021 2020 2019 2018
Revenue 7.3 6.4 14.2 14.4 11.2
------ ------ ------ ------ ------
Oil and gas 6.9 5.7 13.9 14.0 11.0
------ ------ ------ ------ ------
Industrial 0.4 0.7 0.3 0.4 0.2
------ ------ ------ ------ ------
Gross margin 18% 11% 17% 29% 33%
------ ------ ------ ------ ------
Operating (loss)/profit before
amortisation, impairments and
other exceptional charges (1.1) (1.6) (0.7) 1.9 1.5
------ ------ ------ ------ ------
Loss before taxation (1.3) (2.3) (4.3) (0.3) (0.3)
------ ------ ------ ------ ------
Precision Machined Components (PMC) delivered revenue of GBP7.3
million (2021: GBP6.4 million) and an adjusted operating loss of
GBP1.1 million (2021: GBP1.6 million loss).
As expected, and reflecting an increased oil price, the PMC
order book built during the year and by the end of September 2022
had reached its highest level since May 2020. However, an
unexpected temporary slowdown in order placement over the summer
period, together with supply chain delays and cost increases,
resulted in lower revenue and a significantly greater adjusted
operating loss than anticipated for the full year.
Order intake recovered later in the fourth quarter of FY22 and
further strengthened during the first half of FY23. Divisional
order intake of GBP4.3 million in March 2023, the division's
highest ever monthly order intake, and GBP1.1 million in April
2023, underpinned a closing order book of GBP7.6 million at the end
of April 2023, the highest ever order book level for the division
(April 2022: GBP2.2 million). As expected, the division returned to
profitable trading in the second quarter of FY23.
At Roota Engineering, the demand for subsea well intervention
tools, valve assemblies and control module components is expected
to grow further as major OEM customers including Aker, Expro,
Halliburton and Schlumberger, plus several new specialist
customers, continue to report a stronger oil and gas market outlook
for 2023 and are investing heavily in their global manufacturing
capacity to support growth in oil and gas production, principally
from South America, West Africa, US Gulf of Mexico, Middle East and
North Sea regions. The recovery of revenue and profitability has
been supported by successful recruitment, skills development and
specialist engineering software, increasing the capacity to meet
the growing demand and extended product range for a broader
customer base.
At Al-Met, a slower than expected recovery in demand for
production drilling and flow control components and a higher cost
base driven by the necessary protection of core capabilities and
retention of the skilled workforce resulted in a loss for the year.
However, OEM customers, Schlumberger and Baker Hughes are
forecasting a strong and sustained recovery in demand for subsea
trees and flow control components throughout 2023 and beyond. Order
intake levels for these components increased steadily through the
first half of FY23, with Baker Hughes placing their first
significant orders for precision choke components since June 2020,
as major subsea and surface production engineering contracts
restart.
Al-Met has remained focused on the improvement of operational
performance, efficiency, and competitiveness in readiness for the
recovering order book and is well positioned amongst very few
European competitors. On 27 March 2023, the Group announced that
Al-Met had been awarded a record GBP3.0 million order from an
established international OEM customer for the supply of flow
control components and subassemblies used in high-pressure extreme
service oil and gas applications.
This unprecedented order for Al-Met and the continuing momentum
in PMC order intake underpin the FY23 full-year outlook for the
division and also provide substantial order book coverage and
visibility for the first half of FY24.
On 15 November 2022, the Group announced that an improved
trading environment and outlook created the potential opportunity
to divest PMC activities in order to raise funds to progress
strategic priorities, particularly within Chesterfield Special
Cylinders. The project is underway and is progressing as planned
with support from advisors, KPMG LLP. All options under
consideration will seek to deliver optimum shareholder value.
Financial review
Prior year restatement
The comparative period financial statements for 2021 have been
restated to correct an incorrect application of IFRS 15, 'Revenue
from Contracts with Customers'. The restatement impacts the timing,
but not the overall quantum, of profits from multi-year contracts
and has no cashflow impacts (either quantum or timing). An
explanation of the restatement and tables showing the impact on the
comparative period financial statements is included in Note 2 to
the financial statements.
Financing and cash flow
Operating cash outflow before movements in working capital was
GBP2.2 million (2021: GBP1.0 million outflow, restated). After a
net working capital inflow of GBP3.0 million (2021: GBP5.1 million
outflow, restated), cash generated from operations was GBP0.8
million (2021: GBP6.1 million used by operations). Key movements
within working capital include an inflow of GBP0.9 million of
deferred PAYE and VAT due to HMRC, in order to preserve cash flow
in the final quarter of the year.
Cash outflows in the year in respect of exceptional
administration costs (see Note 6) were GBP0.8 million (2021: GBP0.6
million).
Cash inflow from investing activities includes proceeds of
GBP1.6 million from the sale and leaseback of the Roota site in
July 2022.
Central costs
Unallocated central costs (before exceptional administration
costs) were GBP2.0 million (2021: GBP1.9 million). In respect of
the Group's various share option plans there was a net cost in the
year of GBP0.1 million (2021: GBP0.1 million).
Asset impairments and amortisation
The Group tests annually for impairment, or more frequently if
there are indicators that intangible and tangible fixed assets
might be impaired. The difficult general economic environment and
the recent uncertainties in the oil and gas market, PMC's key end
market, are considered to be an indicator that the carrying value
of our intangible and tangible assets in PMC and CSC, the Group's
cash generating units (CGU), may be impaired.
The Group has considered a range of economic conditions for the
divisions over the next three years. These economic conditions,
together with reasonable and supportable trading assumptions, have
been used to estimate the future cash inflows and outflows for both
divisional CGUs over the next three years. The assumptions
underlying these forecasts are detailed in these financial
statements.
The review concluded that no impairment was required in these
financial statements. Amortisation costs were GBP0.1 million (2021:
GBP0.2 million).
The Group holds freehold land and buildings, including CSC's
main facility at Meadowhall Road, Sheffield. As part of discussions
with the Group's bankers during the year, the Directors obtained
two valuations from two independent chartered surveyors of this
this freehold land and buildings, which indicated that no
impairment of this asset was required.
Exceptional administration costs
Exceptional administration costs of GBP1.0 million principally
included costs associated with the refinancing of the Group's
banking facilities of GBP0.3 million, the final costs of GBP0.2
million related to ongoing software licencing for the cancelled ERP
system impaired in the prior financial year, and other legal and
associated costs relating to the surrender of property leases with
non-utilised sites under tenancy arrangements of GBP0.3 million.
There were other costs of GBP0.2 million for several other matters
that included a historical settlement dispute and an obsolete stock
write off, both in the CSC division.
Taxation
The tax charge for the year was GBP0.1 million (2021: tax credit
GBP0.8 million). The current year tax charge was impacted by a
GBP0.6 million under provision in respect of the prior year (2021:
over provision GBP0.1 million).
Corporation tax refunded in the year totalled GBP0.1 million
(2021: GBPnil). Taxes relating to overseas territories are
minimal.
Foreign exchange
The Group now has no material exposure to movements in foreign
exchange rates related to both transactional trading and
translation of overseas assets and liabilities.
In the year under review, the principal exposure which arose
from trading activities was to movements in the value of the Euro
and the US Dollar relative to Sterling. As the Group companies both
buy and sell in overseas currencies, particularly the Euro and the
US Dollar, there is a degree of natural hedging already in place.
Where appropriate, and where the timing of future cash flows are
able to be reliably estimated, forward contracts can be taken out
to cover exposure.
Loss per share and dividends
Basic loss per share was 13.0 pence (2021: 14.8 pence). Adjusted
loss per share was 10.2 pence (2021: 4.9 pence).
No dividends were paid in the year (2021: nil) and no dividends
have been declared in respect of the year ended 1 October 2022
(2021: nil). Distributable reserves in the parent company totalled
GBP6.3 million at year end (2021: GBP8.6 million).
Statement of financial position
Intangible assets (at net book value) decreased by GBP0.1
million to GBPnil (2021: GBP0.1 million). Amortisation in the year
was GBP0.1 million (2021: GBP0.2 million).
Net current assets (being current assets less current
liabilities) decreased to GBP3.0 million (2021: GBP5.2 million,
restated). Non-current liabilities of GBP2.8 million (2021: GBP3.6
million) have decreased by GBP0.8 million, as a result of the
reduction in lease liabilities, deferred taxation liabilities and
other payables.
Net assets decreased by 24% to GBP12.1 million (2021: GBP16.0
million, restated) and net asset value per share decreased to 39
pence (2021: 56 pence).
Bank facility, borrowings and liquidity
Net debt at 1 October 2022 was GBP3.5 million (2021: GBP5.0
million). The decrease was driven primarily by cash proceeds of
GBP1.6 million from the sale and leaseback of the Roota Engineering
site in July 2022. This enabled the repayment of GBP2.4 million of
the Group's drawings under the revolving credit facility (RCF)
reducing drawn debt to GBP2.4 million at the year end (2021: GBP4.8
million).
In October 2022, the Group's RCF was amended and its facility
term was extended from September 2023 to March 2024, with the
facility reducing from GBP2.4 million to GBP1.9 million in March
2023 and then GBP0.9 million in September 2023. Leverage (net debt
to adjusted EBITDA) and interest cover covenants, tested quarterly,
recommenced on the first testing date of 30 September 2022 through
to the end of the facility. The September 2022 test period was
waived. The December 2022 test period was deferred until January
2023 and subsequently waived. The financial covenant tests for
March and June 2023 were amended to reflect the impact of the IFRS
15 contract accounting restatement noted above.
Ernst & Young LLP continues to support the Group with the
review of funding options to replace the Lloyds Bank facility with
new arrangements that provide increased liquidity, greater
flexibility and the required working capital to support the Group's
strategic plans. We expect to complete the refinancing project in
the second calendar quarter of 2023.
On 15 November 2022, the Group announced the results of a
Placing and Retail Offer. The GBP2.1 million net proceeds are
supporting short term working capital requirements, whilst longer
term financing options are progressed.
Going concern
The Group currently has a very strong order book reflecting both
the recent award of a major GBP18.2 million, multi-year contract
for a major UK naval new construction programme, and the recent
significantly improved trading in the Precision Machined Components
division resulting in an order book of GBP7.6 million at the end of
April 2023, the highest ever order book level for the division.
Forecasts have been prepared covering the sixteen month going
concern period and these demonstrate that the Group can operate
within its existing financial facilities and has sufficient
headroom in its financial covenants. While the level of cash
reserves is relatively low for the period to the end of July 2023,
the level is forecast to improve substantially for the remainder of
the forecast period. However, the possibility of delays to the
performance on the large naval contract in CSC, particularly if
combined with other trading downsides, and the relative lack of
headroom and flexibility in the Group's fully drawn facility with
Lloyds Bank for which a replacement financing is not yet in place,
gives rise to material uncertainties, as defined in the accounting
standard, relating to events and circumstances which may cast
significant doubt over the Group's ability to continue as a going
concern.
However, taking into account the very low likelihood of material
delays in the large naval contract, the ability of the Group to
mitigate, partially or fully, the impact of any such delays, the
Board's expectation that it will obtain alternative financing to
replace the Lloyds Bank facility in the second calendar quarter of
2023, and the ongoing work to explore longer term opportunities to
strengthen the Group's balance sheet and cash position, the
Directors consider that the Group has sufficient financial headroom
to be able to continue its operations for the foreseeable future.
Therefore, these financial statements have been prepared on a going
concern basis.
Outlook
Despite the disappointing results in FY22, the Board is
confident in underlying market opportunities and trading conditions
and expects a return to profitability and cash generation in
FY23.
The strong defence order book for UK and overseas naval
contracts underpins confidence in FY23 and FY24 performance for
CSC. Despite delays in the hydrogen energy supply chain,
opportunities for the supply of new hydrogen storage and road
trailers continue to develop in the UK and Europe, while in-situ
testing and factory reconditioning of hydrogen storage and
transportation systems present exciting growth opportunities for
Integrity Management services beyond existing defence, offshore and
industrial markets.
Following a return to profitability for PMC at the end of the
second half of FY23, increasing demand from OEM customers and the
continuing momentum in order intake underpin the FY23 full-year
outlook and provide substantial order book coverage and visibility
for the first half of FY24. As previously announced, this improved
trading environment and outlook has created a potential opportunity
to divest PMC activities in order to fund strategic priorities,
particularly within Chesterfield Special Cylinders. All options
under consideration for PMC will seek to deliver optimum
shareholder value.
The Board is confident in meeting FY23 market expectations and
excited about the opportunities and prospects for the business in
the medium and longer term.
Chris Walters
Chief Executive
Consolidated statement of comprehensive income
For the 52 week period ended 1 October 2022
Restated
Notes 52 weeks 52 weeks
ended ended
1 October 2 October
2022 2021
------ ----------- -----------
GBP'000 GBP'000
------ ----------- -----------
Revenue 1 24,939 25,284
------ ----------- -----------
Cost of sales (19,680) (19,347)
------ ----------- -----------
Gross profit 5,259 5,937
------ ----------- -----------
Administration expenses (7,883) (7,460)
------ ----------- -----------
Operating loss before amortisation,
impairment and exceptional administration
costs (2,624) (1,523)
------ ----------- -----------
Separately disclosed items of administration
expenses:
------ ----------- -----------
Amortisation 5 (101) (224)
------ ----------- -----------
Impairment 5 - (1,773)
------ ----------- -----------
Exceptional administration costs 6 (968) (1,044)
------
Total administration expenses (9,848) (10,501)
------
Operating loss (3,693) (4,564)
------ ----------- -----------
Finance costs 3 (292) (412)
------ ----------- -----------
Loss before taxation 4 (3,985) (4,976)
------ ----------- -----------
Taxation 7 (52) 772
------ ----------- -----------
Loss for the period attributable
to the owners of the parent (4,037) (4,204)
------ ----------- -----------
Other comprehensive (expense)/income
to be reclassified to profit or loss
in subsequent periods:
Currency exchange differences on
translation of foreign operations (5) 33
------ ----------- -----------
Total other comprehensive (expense)/income (5) 33
------ ----------- -----------
Total comprehensive expense for
the period attributable to the owners
of the parent (4,042) (4,171)
------ ----------- -----------
Basic loss per share
------ ----------- -----------
From loss for the period 8 (13.0)p (14.8)p
------ ----------- -----------
Diluted loss per share
------ ----------- -----------
From loss for the period 8 (13.0)p (14.7)p
------ ----------- -----------
A restatement of the Consolidated statement of comprehensive
income for the year ended 2 October 2021 has been undertaken to
correct an error which related to the incorrect treatment of
certain contract accounting transactions (see Note 2).
Consolidated statement of financial position
As at 1 October 2022
Restated Restated
Notes 1 October 2 October 3 October
2022 2021 2020
-------- ------------ ----------- -----------
GBP'000 GBP'000 GBP'000
-------- ------------ ----------- -----------
Non-current assets
-------- ------------ ----------- -----------
Intangible assets - 101 325
-------- ------------ ----------- -----------
Property, plant and equipment 11,197 13,100 14,910
-------- ------------ ----------- -----------
Deferred tax asset 663 1,138 464
-------- ------------ ----------- -----------
11,860 14,339 15,699
-------- ------------ ----------- -----------
Current assets
-------- ------------ ----------- -----------
Inventories 4,566 3,708 4,976
-------- ------------ ----------- -----------
Trade and other receivables 9,331 9,061 7,067
-------- ------------ ----------- -----------
Cash and cash equivalents 1,783 3,217 3,416
-------- ------------ ----------- -----------
Asset held for sale - 195 580
-------- ------------ ----------- -----------
Other financial assets - - 3,074
-------- ------------ ----------- -----------
Current tax 58 414 -
-------- ------------ ----------- -----------
15,738 16,595 19,113
-------- ------------ ----------- -----------
Total assets 27,598 30,934 34,812
-------- ------------ ----------- -----------
Current liabilities
-------- ------------ ----------- -----------
Trade and other payables (9,477) (5,474) (9,659)
-------- ------------ ----------- -----------
Borrowings - revolving credit facility 9 (2,407) (4,773) -
-------- ------------ ----------- -----------
Lease liabilities 10 (839) (1,110) (1,209)
-------- ------------ ----------- -----------
(12,723) (11,357) (10,868)
-------- ------------ ----------- -----------
Non-current liabilities
-------- ------------ ----------- -----------
Other payables (32) (241) (538)
-------- ------------ ----------- -----------
Borrowings - revolving credit facility 9 - - (6,773)
-------- ------------ ----------- -----------
Lease liabilities 10 (2,037) (2,245) (2,843)
-------- ------------ ----------- -----------
Deferred tax liabilities (703) (1,068) (752)
-------- ------------ ----------- -----------
(2,772) (3,554) (10,906)
-------- ------------ ----------- -----------
Total liabilities (15,495) (14,911) (21,774)
-------- ------------ ----------- -----------
Net assets 12,103 16,023 13,038
-------- ------------ ----------- -----------
Equity
-------- ------------ ----------- -----------
Share capital 1,553 1,553 930
-------- ------------ ----------- -----------
Share premium account - - 26,172
-------- ------------ ----------- -----------
Translation reserve (265) (260) (293)
-------- ------------ ----------- -----------
Retained earnings 10,815 14,730 (13,771)
-------- ------------ ----------- -----------
Total equity 12,103 16,023 13,038
-------- ------------ ----------- -----------
A restatement of the Consolidated statement of financial
position as at 2 October 2021 and 3 October 2020 has been
undertaken to correct an error which related to the incorrect
treatment of certain contract accounting transactions (see Note
2).
Consolidated statement of changes in equity
For the 52 week period ended 1 October 2022
Share
Share premium Translation Retained Total
Notes capital account reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ----------------- --------- ------------ ---------- --------
Balance at 3 October
2020 930 26,172 (293) (13,495) 13,314
--- ----------------- --------- ------------ ---------- --------
Prior period adjustment 2 - - - (276) (276)
--- ----------------- --------- ------------ ---------- --------
Restated balance at
3 October 2020 930 26,172 (293) (13,771) 13,038
--- ----------------- --------- ------------ ---------- --------
Share issued 623 6,401 - - 7,024
--- ----------------- --------- ------------ ---------- --------
Share based payments - - - 132 132
--- ----------------- --------- ------------ ---------- --------
Capital reduction transfer - (32,573) - 32,573 -
--- ----------------- --------- ------------ ---------- --------
Transactions with owners 623 (26,172) - 32,705 7,156
--- ----------------- --------- ------------ ---------- --------
Loss for the period - - - (3,426) (3,426)
--- ----------------- --------- ------------ ---------- --------
Prior period adjustment 2 - - - (778) (778)
--- ----------------- --------- ------------ ---------- --------
Other comprehensive
income:
Exchange differences
on translating foreign
operations - - 33 - 33
--- ----------------- --------- ------------ ---------- --------
Total comprehensive
income/ (expense) - - 33 (4,204) (4,171)
--- ----------------- --------- ------------ ---------- --------
Restated balance at
2 October 2021 1,553 - (260) 14,730 16,023
--- ----------------- --------- ------------ ---------- --------
Share based payments - - - 122 122
--- ----------------- --------- ------------ ---------- --------
Transactions with owners - - - 122 122
--- ----------------- --------- ------------ ---------- --------
Loss for the period - - - (4,037) (4,037)
--- ----------------- --------- ------------ ---------- --------
Other comprehensive
expense:
Exchange differences
on translating foreign
operations - - (5) - (5)
--- ----------------- --------- ------------ ---------- --------
Total comprehensive
expense - - (5) (4,037) (4,042)
--- ----------------- --------- ------------ ---------- --------
Balance at 1 October
2022 1,553 - (265) 10,815 12,103
--- ----------------- --------- ------------ ---------- --------
A restatement of the Consolidated statement of changes in equity
for the years ended 2 October 2021 and 3 October 2020 has been
undertaken to correct an error which related to the incorrect
treatment of certain contract accounting transactions (see Note
2).
Consolidated statement of cash flows
For the 52 week period ended 1 October 2022
Notes 52 weeks 52 weeks
ended ended
1 October 2 October
2022 2021
GBP'000 GBP'000
------ ----------- -----------
Operating activities
------ ----------- -----------
Cash flows from operating activities 11 819 (6,166)
------ ----------- -----------
Finance costs paid (292) (412)
------ ----------- -----------
Income tax refunded 138 -
------ ----------- -----------
Net cash inflow/(outflow) from operating
activities 665 (6,578)
------ ----------- -----------
Investing activities
------ ----------- -----------
Proceeds from sale of fixed assets 2,063 477
------ ----------- -----------
Proceeds from repayment of promissory
note - 3,074
------ ----------- -----------
Purchase of property, plant and equipment (536) (1,325)
------ ----------- -----------
Net cash inflow from investing activities 1,527 2,226
------ ----------- -----------
Financing activities
------ ----------- -----------
Repayment of borrowings (2,366) (2,000)
------ ----------- -----------
Repayment of lease liabilities (1,260) (1,805)
------ ----------- -----------
Shares issued net of transaction costs - 7,024
------ ----------- -----------
Proceeds from asset financing - 934
------ ----------- -----------
Net cash (outflow)/inflow from financing
activities (3,626) 4,153
------ ----------- -----------
Net decrease in cash and cash equivalents (1,434) (199)
------ ----------- -----------
Cash and cash equivalents at beginning
of period 3,217 3,416
------ ----------- -----------
Cash and cash equivalents at end of
period 1,783 3,217
------ ----------- -----------
Notes
Basis of preparation
The consolidated financial statements have been prepared in
accordance with UK-adopted International Accounting Standards, in
conformity with the requirements of the Companies Act 2006. The
Company has elected to prepare its parent company financial
statements in accordance with Financial Reporting Standard 101 (FRS
101). The financial statements are made up to the Saturday nearest
to the period end for each financial period.
Pressure Technologies plc, company number 06135104, is
incorporated and domiciled in the United Kingdom. The registered
office address is Pressure Technologies Building, Meadowhall Road,
Sheffield, South Yorkshire, S9 1BT.
The Group has applied all accounting standards and
interpretations issued relevant to its operations for the period
ended 1 October 2022. The consolidated financial statements have
been prepared on a going concern basis.
The summary accounts set out above do not constitute statutory
accounts as defined by Section 434 of the UK Companies Act 2006.
The summarised consolidated statement of comprehensive income, the
summarised consolidated balance sheet at 1 October 2022, the
summarised consolidated statement of comprehensive income, the
summarised consolidated statement of changes in equity and the
summarised consolidated statement of cash flows for the period then
ended have been extracted from the Group's 2022 statutory financial
statements upon which the auditor's opinion is unqualified,
includes an emphasis of matter in respect of going concern, and did
not contain a statement under either sections 498(2) or 498(3) of
the Companies Act 2006. The audit report for the period ended 2
October 2021 did not contain statements under sections 498(2) or
498(3) of the Companies Act 2006. The statutory financial
statements for the period ended 2 October 2021 have been delivered
to the Registrar of Companies. The 1 October 2022 accounts were
approved by the directors on 22 May 2023, but have not yet been
delivered to the Registrar of Companies.
Going concern
The financial statements have been prepared on a going concern
basis. The Group and Company's business activities, together with
the factors likely to affect its future development, performance
and position, are set out in the Group Strategic Report. The
Financial Reporting Council issued its "Annual Review of Corporate
Reporting 2020/21" in October 2021. The Directors have considered
this when preparing these financial statements.
On 21 October 2022, the Group's Revolving Credit Facility (RCF)
with Lloyds Bank was amended and its facility term was extended
from 30 June 2023 to 31 March 2024, with the facility reducing from
GBP2.4 million to GBP1.9 million on 31 March 2023 and then to
GBP0.9 million on 30 September 2023. Leverage (net debt to adjusted
EBITDA) and interest cover covenants, tested quarterly, recommenced
on the first testing date of 30 September 2022 through to the end
of the facility. The next testing date is 30 June 2023. Final
repayment of this facility is required on 31 March 2024.
Management have produced forecasts for the period up to
September 2024 for all business units, taking account of reasonably
plausible changes in trading performance and market conditions,
which have been reviewed by the Directors. In particular, the
forecasts reflect both (i) the award of a major, multi-year
contract for the Chesterfield Special Cylinders division to supply
air pressure vessels for a major UK naval new construction program,
which was announced on 6 February 2023, and also (ii) the recent
significantly improved trading in the Precision Machined Components
division as oil and gas markets recover, following unprecedented
order intake levels which have resulted in an order book of GBP7.6
million at the end of April 2023, the highest ever order book level
for the division. The base case forecast demonstrates that the
Group is projected to:
-- generate profits and cash in the current financial year and beyond:
-- has headroom in financial covenants over the period up to the
expiry of the RCF on 31 March 2024, and;
-- generates sufficient cash to repay the tranches of the RCF on
30 September 2023 and 31 March 2024 and has sufficient cash
reserves beyond 1 April 2024 to manage without the RCF or an
alternative financing facility. While the level of cash reserves is
relatively low for the period to the end of July 2023, the level is
forecast to improve substantially for the remainder of the forecast
period.
The Group has also developed downside scenarios, which include
consideration of the recent track record of not always achieving
budgets. The downside scenario demonstrates the Group's dependence
on the performance of large contracts (for example the large naval
contract) noted above due to their materiality to the Group's
overall results. Management have modelled the downside scenario
based on reasonably possible delays in the large naval contract. By
their nature, the achievement of performance milestones under these
types of contract can be subject to uncertainties, and delays have
occurred to similar contracts in the past. These uncertainties
include in-house operational delays and inefficiencies, delays in
the supply of material and components by suppliers, and delays in
the performance of work by subcontractors. The Group often has very
limited control of the latter two factors. The achievement of
performance milestones enables the Group to recognise revenue and
profits under the contract and typically initiates invoicing to,
and subsequent cash collection from, the customer.
As a result, these delays, whilst typically not impacting the
financial performance of the contract over its entire duration, can
lead to material delays in the timing of profit recognition and
cash receipts between periods. Given the size of the particular
naval contract, any delays and unforeseen events could have a
material impact on the Group's cash reserves and covenant
compliance, particularly in the first three months of the forecast
period when the level of cash reserves is relatively low.
Notes (continued)
In the event of delays in the contract, the Group would look to
mitigate the impact, partially or fully, by pulling forward
contracted work from other customers, and through normal working
capital management and other cash preservation initiatives. It
should also be noted that work on this contract has already
commenced and, to date, no material problems or delays have arisen
and the contract is progressing in line with our contractual
obligations. The contract has also largely passed through the phase
in which the supply of materials and components and the use of
third-party contractors, over whom the Group has significantly less
control, is at its highest. Nonetheless, this remains a key risk
for the business and management are exploring financing options to
provide the required flexibility in the event of such downside
scenarios.
Given the expiry of the RCF on 31 March 2024 and the step down
in its quantum in September 2023, the Group is currently exploring
several actions to strengthen the Group and the Company's financial
position. In particular, the Group is currently working with an
advisor to support the Group's review of funding options, including
asset-backed lenders as well as high street banking institutions,
in order to replace the Lloyds Bank RCF with new arrangements that
will provide the Group with increased facility headroom and
flexibility. These discussions are ongoing and management expect
this to complete in the second calendar quarter of 2023. In
addition to pursuing refinancing opportunities, the Group is also
currently exploring other longer-term opportunities to strengthen
the Group's balance sheet and cash position, including divesting of
non-core activities and the refinancing of the Group's freehold
property at Meadowhall Road, Sheffield.
Other factors which could negatively impact the forecasts
include:
-- Failure to win additional contracts in the Chesterfield
Special Cylinders division for hydrogen energy projects due to
market factors outside the control of the Group
-- Weaker revenue from Integrity Management deployments due to customer delays; and
-- The recent improvement in the Precision Machined Components
divisional revenue and order book not continuing going forward due
to weaker than expected oil and gas market conditions.
The Group believes that these factors are individually less
likely to be material to the achievement of the forecasts than
potential delays in the large naval contract, but in the event that
they occur together with large naval contract delays they may have
a negative impact on covenant compliance and cash flow at certain
test dates in the forecast period.
The possibility of material delays to the performance of
contracts (naval contract in particular) and a replacement
financing facility not yet being in place gives rise to material
uncertainties, as defined in accounting standards, relating to
events and circumstances which may cast significant doubt about the
Group's and Parent Company's ability to continue as a going concern
and to realise its assets and discharge its liabilities in the
normal course of business.
Reflecting management's confidence in delivering large contracts
and successfully replacing their finance facility, the Group and
Parent Company continue to adopt the going concern basis in
preparing these financial statements. Management have concluded
that the Group and Parent Company will be able to continue in
operation and meet their liabilities as they fall due over the
period to September 2024. Consequently, these financial statements
do not include any adjustments that would be required if the going
concern basis of preparation were to be inappropriate.
New standards adopted in 2022
No new standards were applied during the year.
Amendments to IFRSs that are mandatorily effective for the
current year
At the date of the authorisation of these financial statements,
several new, but not yet effective, standards and amendments to
existing standards, and interpretations have been published by the
IASB. None of these standards or amendments to existing standards
have been adopted early by the Group. Management anticipates that
all relevant pronouncements will be adopted for the first period
beginning on or after the effective date of pronouncement. The
impact of new standards, amendments and interpretations not adopted
in the current year have not been disclosed as they are not
expected to have a material impact on the Group's financial
statements.
Notes to the consolidated financial statements
1. 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 1 October 2022
Precision
Machined All other
Cylinders Components segments Total
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ ---------- --------
Revenue from external
customers 17,583 7,356 - 24,939
------------ ------------ ---------- --------
Gross profit/(loss) 4,521 838 (100) 5,259
------------ ------------ ---------- --------
Operating profit/(loss)
before amortisation and
exceptional administration
costs 409 (1,100) (1,933) (2,624)
------------ ------------ ---------- --------
Amortisation - (161) 60 (101)
------------ ------------ ---------- --------
Exceptional administration
(costs)/income (403) 50 (615) (968)
------------ ------------ ---------- --------
Operating profit/(loss) 6 (1,211) (2,488) (3,693)
------------ ------------ ---------- --------
Net finance costs (37) (73) (182) (292)
------------ ------------ ---------- --------
Profit/(loss) before tax (31) (1,284) (2,670) (3,985)
------------ ------------ ---------- --------
Segmental net assets/(liabilities)
* 7,330 7,708 (2,935) 12,103
------------ ------------ ---------- --------
Other segment information:
------------ ------------ ---------- --------
Capital expenditure - property,
plant and equipment 559 526 47 1,132
------------ ------------ ---------- --------
Depreciation 679 790 209 1,678
------------ ------------ ---------- --------
Amortisation - 101 - 101
------------ ------------ ---------- --------
* Segmental net assets/(liabilities) 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.
Notes to the consolidated financial statements (continued)
1. Segment analysis (continued)
Restated for the 52 week period ended 2 October 2021
Precision
Machined All other
Cylinders Components segments Total
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ ---------- ---------
Revenue 18,877 6,407 - 25,284
------------ ------------ ---------- ---------
Gross profit/(loss) 5,324 696 (83) 5,937
------------ ------------ ---------- ---------
Operating profit/(loss)
before amortisation, impairment
and exceptional administration
costs 2,056 (1,647) (1,932) (1,523)
------------ ------------ ---------- ---------
Amortisation and impairment (916) (56) (1,025) (1,997)
------------ ------------ ---------- ---------
Exceptional administration
costs (250) (501) (293) (1,044)
------------ ------------ ---------- ---------
Operating profit/(loss) 890 (2,204) (3,250) (4,564)
------------ ------------ ---------- ---------
Net finance costs (82) (85) (245) (412)
------------ ------------ ---------- ---------
Profit/(loss) before tax 808 (2,289) (3,495) (4,976)
------------ ------------ ---------- ---------
Segmental net assets/(liabilities)
* 7,515 9,352 (844) 16,023
------------ ------------ ---------- ---------
Other segment information:
----------------- ------------ ---------- ---------
Capital expenditure -
property, plant and equipment 795 487 217 1,499
----------------- ------------ ---------- ---------
Depreciation 632 818 205 1,655
----------------- ------------ ---------- ---------
Amortisation 87 56 81 224
----------------- ------------ ---------- ---------
* Segmental net assets/(liabilities) 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.
A restatement of the Segmental analysis for the year ended 2
October 2021 has been undertaken to correct an error which related
to the incorrect treatment of certain contract accounting
transactions (see Note 2).
Notes to the consolidated financial statements (continued)
1. Segment analysis (continued)
The Group's revenue disaggregated by primary geographical
markets is as follows:
Revenue 2022 2021
Precision Precision
Machined Machined
Cylinders Components Total Cylinders Components Total
------------ ------------ -------- ------------ ------------ --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ -------- ------------ ------------ --------
United Kingdom 12,406 3,720 16,126 15,270 2,950 18,220
------------ ------------ -------- ------------ ------------ --------
France 2,958 68 3,026 1,164 - 1,164
------------ ------------ -------- ------------ ------------ --------
Norway 885 272 1,157 23 306 329
------------ ------------ -------- ------------ ------------ --------
USA 3 1,071 1,074 - 798 798
------------ ------------ -------- ------------ ------------ --------
Romania - 972 972 - 916 916
------------ ------------ -------- ------------ ------------ --------
Italy - 764 764 - 776 776
------------ ------------ -------- ------------ ------------ --------
Taiwan 393 - 393 - - -
------------ ------------ -------- ------------ ------------ --------
Netherlands 359 - 359 164 - 164
------------ ------------ -------- ------------ ------------ --------
Germany 272 - 272 616 - 616
------------ ------------ -------- ------------ ------------ --------
Switzerland - - - 748 - 748
------------ ------------ -------- ------------ ------------ --------
South Korea - - - 294 - 294
------------ ------------ -------- ------------ ------------ --------
Rest of Europe 157 8 165 8 171 179
------------ ------------ -------- ------------ ------------ --------
Rest of World 150 481 631 590 490 1,080
------------ ------------ -------- ------------ ------------ --------
17,583 7,356 24,939 18,877 6,407 25,284
------------ ------------ -------- ------------ ------------ --------
During the year, there were two customers who each contributed
to over 10% of total Group revenue. These revenues were GBP5.2
million (20.9%) and GBP3.0 million (12.0%), both within the
Cylinders segment (2021: two customers, GBP6.7 million (26.3%) and
GBP3.8 million (15.0%), both reported in the Cylinders
segment).
The following table provides an analysis of the Group's revenue
by market.
Revenue 2022 2021
GBP'000 GBP'000
-------- --------
Oil and gas 7,953 6,076
-------- --------
Defence 13,483 11,070
-------- --------
Industrial 1,099 5,949
-------- --------
Hydrogen energy 2,404 2,189
-------- --------
24,939 25,284
-------- --------
The above table is provided for the benefit of shareholders. It
is not provided to the PT Board or the CODM on a regular monthly
basis and consequently does not form part of the divisional
segmental analysis.
The Group's revenue disaggregated by pattern of revenue
recognition and category is as follows:
Revenue 2022 2021
Precision Precision
Machined Machined
Cylinders Components Cylinders Components
------------ ------------ ------------ ------------
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ ------------ ------------
Sale of goods transferred
at a point in time 3,336 7,021 1,080 6,006
------------ ------------ ------------ ------------
Sale of goods transferred
over time 12,584 - 15,594 -
------------ ------------ ------------ ------------
Rendering of services 1,663 335 2,203 401
------------ ------------ ------------ ------------
17,583 7,356 18,877 6,407
------------ ------------ ------------ ------------
Notes to the consolidated financial statements (continued)
1. Segment analysis (continued)
The following aggregated amounts of transaction values relate to
the performance obligations from existing contracts that are
unsatisfied or partially unsatisfied as at 1 October 2022:
Revenue expected in future periods 2023
GBP'000
--------
Sale of goods - Cylinders 4,601
--------
The following table provides an analysis of the carrying amount
of non-current assets and additions to property, plant and
equipment, all of which is held within the United Kingdom.
2022 2021
GBP'000 GBP'000
---- ----------- ------- -------- --------
Non-current assets 11,197 14,247
-------- --------
Additions to property,
plant and equipment 1,132 1,499
-------- --------
2. Restatement in respect of IFRS 15 "Revenue from Contracts
with Customers"
During the year, the Group reviewed its accounting policy and
past accounting treatment in respect of a small number of long-term
defence contracts within its Cylinders division.
Since FY19, the Group has consistently applied an accounting
treatment whereby revenue for these specific defence contracts was
recognised using an 'Output' methodology under IFRS 15, 'Revenue
from Contracts with Customers' ("IFRS 15"), with costs being
accrued to achieve a uniform profit margin throughout the
multi-year life of the contracts, resulting in cost deferrals at
financial period ends. Whilst this cost treatment impacted the
timing of profit recognition between financial periods, it had no
impact on either the total profitability of the contracts over
their entire lives, nor the quantum or timing of cash flows. During
the year, it was noted that this accounting treatment is not in
compliance with IFRS 15, which requires that all costs incurred in
the period relating to the contract should be immediately expensed.
This means that cost deferral to achieve a uniform contract profit
margin, as historically adopted by the Group, is not permitted. As
a result, the comparative period financial statements have been
restated as detailed in the tables below. These accounting
adjustments only impact the timing of profit recognition under
these specific contracts. They do not impact the net debt position
of the Group at any date, the future cash generation profile of the
Group, nor the underlying trading or operations of the
business.
As at, and for the year ended, 2 October 2021, the impact of the
restatement was as follows:
2021 2021 2021
Presented Adjustment Restated
---------- ----------- ---------
Income statement items:
---------- ----------- ---------
Cost of sales (18,569) (778) (19,347)
---------- ----------- ---------
Gross profit 6,715 (778) 5,937
---------- ----------- ---------
Operating loss (3,786) (778) 4,564
---------- ----------- ---------
Loss for the period attributable to the owners of the parent (3,426) (778) 4,204
---------- ----------- ---------
Balance sheet items:
---------- ----------- ---------
Inventories - Raw materials 3,000 (625) 2,375
Inventories - Work in progress 1,732 (429) 1,303
Total equity (17,077) 1,054 (16,023)
Notes to the consolidated financial statements (continued)
2. Restatement in respect of IFRS 15 "Revenue from Contracts
with Customers" (continued)
As at, and for the year ended, 3 October 2020, the impact of the
restatement was as follows:
2020 2020 2020
Presented Adjustment Restated
---------- ----------- ----------
Balance sheet items:
Inventories - Raw materials 2,749 (276) 2,473
Total equity (13,314) 276 (13,038)
Effect on FY22:
Had the restatement not been applied, the income statement
measures for the year ended 1 October 2022 set out below would have
differed by the following amounts:
Amount by which income items would have been changed:
GBP'000
Cost of sales - higher by 1,054
Gross profit - reduced by 1,054
------
Operating loss - increased by 1,054
------
Loss for the period attributable to the owners of the parent - increased by 1,054
------
3. Finance costs
2022 2021
GBP'000 GBP'000
-------- --------
Interest receivable - (40)
-------- --------
Interest payable on bank loans and overdrafts 168 332
-------- --------
Interest payable on lease liabilities 124 120
-------- --------
292 412
-------- --------
4. Loss before taxation
Loss before taxation is stated after charging/(crediting):
2022 2021
GBP'000 GBP'000
-------- --------
Depreciation of property, plant and equipment
- owned assets 1,114 956
-------- --------
Depreciation of property, plant and equipment
- leased assets 564 699
-------- --------
(Profit)/loss on disposal of fixed assets (327) 78
-------- --------
Amortisation of intangible assets 101 224
-------- --------
Amortisation of grants receivable (66) (40)
-------- --------
Staff costs - excluding share based payments 9,234 8,899
-------- --------
Cost of inventories recognised as an expense 12,463 12,821
-------- --------
Share based payments 122 132
-------- --------
Included in the (profit)/loss on disposal of fixed assets in
2022 is a GBP401,000 profit relating to the sale and leaseback of
the property at Roota Engineering Limited, part of the Precision
Machined Components division.
Notes to the consolidated financial statements (continued)
5. Amortisation and Impairment
2022 2021
GBP'000 GBP'000
-------- --------
Amortisation of intangible assets 101 224
-------- --------
Property impairment - 655
-------- --------
ERP system impairment - 1,118
-------- --------
101 1,997
-------- --------
6. Exceptional administration costs
2022 2021
GBP'000 GBP'000
-------- --------
Refinancing Group banking facilities 344 175
-------- --------
Property costs 280 206
-------- --------
Final settlement for ERP system costs 193 -
-------- --------
Reorganisation and redundancy - 425
-------- --------
Historical contract settlement 88 -
-------- --------
Impairment of inventory and work in progress 121 240
-------- --------
Reversal of inventory provision from prior (91) -
year
-------- --------
Release of bad debt provision - (168)
-------- --------
Closure of Precision Machined Components facility
(Quadscot) - 166
-------- --------
New Long-Term Incentive Plan set up costs 33 -
-------- --------
968 1,044
-------- --------
Property costs relate to two closed sites of a formerly owned
entity. The leases relating to this former entity have been
surrendered and no further costs are expected in FY23.
7. Taxation
2022 2021
GBP'000 GBP'000
--------------- ----------------
Current tax charge/(credit)
--------------- ----------------
Current tax expenses 7 -
--------------- ----------------
Over provision in respect of prior years (65) (414)
--------------- ----------------
(58) (414)
--------------- ----------------
Deferred tax charge/(credit)
--------------- ----------------
Origination and reversal of temporary differences (494) (387)
--------------- ----------------
Under provision in respect of prior years 604 29
--------------- ----------------
110 (358)
--------------- ----------------
Total taxation charge/(credit) 52 (772)
--------------- ----------------
Notes to the consolidated financial statements (continued)
Corporation tax is calculated at 19% (2021: 19%) of the
estimated assessable profit for the period. Deferred tax is
calculated at the rate applicable when the temporary differences
are expected to unwind.
The charge for the period can be reconciled to the loss per the
consolidated statement of comprehensive income as follows:
Restated
2022 2021
GBP'000 GBP'000
----- ------------------------ ----------
Loss before taxation (3,985) (4,976)
--------- ----------
Theoretical tax credit at UK
corporation tax rate 19% (2021:
19%) (757) (945)
--------- ----------
Effect of charges/(credits):
----- ----------------- --------- ----------
* non-deductible expenses 20 (3)
--------- ----------
* non-deductible exceptional items 159 393
--------- ----------
* adjustments in respect of prior years 539 (385)
--------- ----------
* difference due to correct of error in prior year - 147
--------- ----------
* change in taxation rates (34) 16
--------- ----------
* differences in deferred tax rates - (17)
--------- ----------
* losses not previously recognised now utilised 125 22
--------- ----------
Total taxation charge/(credit) 52 (772)
--------- ----------
An increase in the UK corporation tax rate to 25% was
substantively enacted in May 2021 and is due to take effect from 1
April 2023. As the most significant timing differences are not
expected to unwind until 2023 or later, the deferred tax rate was
maintained at 25% in the period.
8. Loss per ordinary share
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
adjusted earnings per share is also calculated based on the basic
weighted average number of shares.
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 share options. As the
Group made a loss after taxation for the financial year there is no
dilution to take place.
On 6 December 2022 the Group undertook a fundraising through the
issue of 7,600,000 new ordinary shares.
For the 52 week period ended 1 October 2022
Total
GBP'000
Loss after tax (4,037)
-----------
No.
-----------
Weighted average number of shares -
basic 31,067,163
-----------
Basic loss per share (13.0)p
-----------
Diluted loss per share (13.0)p
-----------
Notes to the consolidated financial statements (continued)
8. Loss per ordinary share (continued)
The Group adjusted loss per share is calculated as follows:
Total
GBP'000
Loss after tax (4,037)
---------
Amortisation (see Note 5) 101
---------
Exceptional administration costs (see
Note 6) 968
---------
Theoretical tax effect of the above
adjustments (203)
---------
Adjusted loss (3,171)
---------
Adjusted loss per share (10.2)p
---------
In the Directors' view, adjusted loss per share reflects the
ongoing performance of the business, how the business is managed on
a day to day basis, and allows for a consistent and meaningful
comparison between periods.
The theoretical tax effect is based on applying a 19% tax rate
to the adjustments for amortisation and other exceptional costs
incurred.
Restated for the 52 week period ended 2 October 2021
Total
GBP'000
Loss after tax (4,204)
-----------
No.
-----------
Weighted average number of shares -
basic 28,463,119
-----------
Basic loss per share (14.8)p
-----------
Diluted loss per share (14.8)p
-----------
The Group adjusted loss per share is calculated as follows:
Loss after tax (4,204)
Amortisation and Impairment (see Note
5) 1,997
--------
Exceptional administration costs (see
Note 6) 1,044
--------
Theoretical tax effect of the above
adjustments (241)
--------
Adjusted loss (1,404)
--------
Adjusted loss per share (4.9)p
--------
A restatement of the loss per ordinary share Consolidated
statement of comprehensive income for the year ended 2 October 2021
has been undertaken to correct an error which related to incorrect
treatment of certain contract accounting transactions (see Note
2).
Notes to the consolidated financial statements (continued)
9. Borrowings
2022 2021
GBP'000 GBP'000
Current
--------- ---------
Revolving credit facility 2,407 4,773
--------- ---------
During the period, the bank loans drawn under the Revolving
Credit Facility (RCF) had an average annual interest rate of 2%
above SONIA.
On 21 October 2022, the Group's Revolving Credit Facility (RCF)
was amended and its facility term was extended from September 2023
to March 2024, with the facility reducing from GBP2.4 million to
GBP1.9 million in March 2023 and then GBP0.9 million in September
2023. Leverage (net debt to adjusted EBITDA) and interest cover
covenants, tested quarterly, recommenced on the first testing date
of 30 September 2022 through to the end of the facility. The
September 2022 test period was waived. The December 2022 test
period was deferred until January 2023 and subsequently waived. The
covenants as at March and June 2023 have been amended to reflect
the impact of the IFRS 15 contract accounting restatement - see
Note 2.
The Group's RCF was drawn at GBP2.4 million at 1 October 2022 (2
October 2021: GBP4.8 million). These bank borrowings are secured on
the property, plant and equipment of the Group by way of a
debenture. Obligations under finance leases are secured on the
plant and machinery assets to which they relate.
The carrying amount of other bank borrowings is considered to be
a reasonable approximation of fair value. The carrying amounts of
the Group's borrowings are all denominated in GBP.
The maturity profile of borrowing facilities are as follows:
2022 2021
GBP'000 GBP'000
-------- --------
Due for settlement within one year:
-------- --------
Revolving credit facility 2,407 4,773
-------- --------
The Group has the following undrawn borrowing facilities at the
year end:
2022 2021
GBP'000 GBP'000
--------- --------
Expiring within one year - 1,227
--------- --------
Subsequent to year end, as noted above, the RCF was reduced to
GBP2.4 million and the facility term was extended from September
2023 to March 2024.
Notes to the consolidated financial statements (continued)
10. Lease Liabilities
Lease liabilities are presented in the statement of financial
position as follows:
2022 2021
GBP'000 GBP'000
-------- --------
Current
-------- --------
Asset finance lease liabilities 629 810
-------- --------
Right of use asset lease liabilities 210 300
-------- --------
839 1,110
-------- --------
Non-current
-------- --------
Asset finance lease liabilities 735 1,521
-------- --------
Right of use asset lease liabilities 1,302 724
-------- --------
2,037 2,245
-------- --------
The Group has leases for certain operational factory premises
and related facilities, several large items of plant and machinery
equipment, an office building, a number of motor vehicles and some
IT equipment. During the period, the Group completed a sale and
leaseback of its freehold property occupied by Roota Engineering
Limited, part of the Precision Machined Components division. The
property lease liability at the end of the period was
GBP837,000.
For right of use assets, with the exception of short-term leases
and leases of low-value underlying assets, each lease is reflected
on the balance sheet as a right-of-use asset and a lease
liability.
The Group classifies its right-of-use assets in a consistent
manner to its property, plant and equipment (see Note 14). Each
lease generally imposes a restriction that, unless there is a
contractual right for the Group to sublet the asset to another
party, the right-of-use asset can only be used by the Group. Leases
are either non-cancellable or may only be cancelled by incurring a
substantive termination fee. Some leases contain an option to
extend the lease for a further term. The Group is prohibited from
selling or pledging the underlying leased assets as security.
For leases over office buildings and factory premises the Group
must keep those properties in a good state of repair and return the
properties in their original condition at the end of the lease.
Further, the Group must insure items of property, plant and
equipment and incur maintenance fees on such items in accordance
with the lease contracts.
The lease liabilities are secured by the related underlying
assets. Future minimum lease payments at 1 October 2022 were as
follows:
Within one Over one to
year five years Total
GBP'000 GBP'000 GBP'000
----------- ------------ --------
1 October 2022
----------- ------------ --------
Lease payments 963 2,512 3,475
----------- ------------ --------
Finance costs (124) (475) (599)
----------- ------------ --------
Net present value 839 2,037 2,876
----------- ------------ --------
Within one Over one to
year five years Total
GBP'000 GBP'000 GBP'000
----------- ------------ --------
2 October 2021
----------- ------------ --------
Lease payments 1,225 2,419 3,644
----------- ------------ --------
Finance costs (115) (174) (289)
----------- ------------ --------
Net present value 1,110 2,245 3,355
----------- ------------ --------
Notes to the consolidated financial statements (continued)
10. Lease Liabilities (continued)
Lease payments not recognised as a liability
The Group has elected not to recognise a lease liability for
short term leases (leases with an expected term of 12 months or
less) or for leases of low value assets. Payments made under such
leases are expensed on a straight-line basis.
11. Consolidated cash flow statement
Restated
2022 2021
-------- ---------
GBP'000 GBP'000
-------- ---------
Loss after tax (4,037) (4,204)
-------- ---------
Adjustments for:
-------- ---------
Finance costs 292 412
-------- ---------
Depreciation of property, plant and equipment 1,678 1,655
-------- ---------
Amortisation of intangible assets 101 224
-------- ---------
Share option costs 122 132
-------- ---------
Release of grants (66) (40)
-------- ---------
Income tax charge/(credit) 52 (772)
-------- ---------
(Profit)/loss on disposal of property, plant
and equipment (327) 78
-------- ---------
Impairment - 1,484
-------- ---------
Changes in working capital:
-------- ---------
(Increase)/decrease in inventories (859) 1,268
-------- ---------
Increase in trade and other receivables (269) (1,995)
-------- ---------
Increase/(decrease) in trade and other payables 4,132 (4,408)
-------- ---------
Cash inflows/(outflows) from operating activities 819 (6,166)
-------- ---------
A restatement of the loss after tax for the year ended 2 October
2021 and of Raw materials and Work in progress as at 2 October 2021
has been undertaken to correct an error which related to the
incorrect treatment of certain contract accounting transactions
(see Note 2). This restatement had no net impact on the cash
outflow for the year ended 2 October 2021.
12. Net Debt Reconciliation
Cash
Borrowings Leases & Bank Total
GBP'000 GBP'000 GBP'000 GBP'000
------------- --------- --------- --------
Cost
------------- --------- --------- --------
At 3 October 2020 (6,773) (4,052) 3,416 (7,409)
------------- --------- --------- --------
Cash flows - - (199) (199)
------------- --------- --------- --------
Repayments 2,000 1,805 - 3,805
------------- --------- --------- --------
New facilities - asset
finance leases - (934) - (934)
------------- --------- --------- --------
New facilities - right
of use leases - (174) - (174)
------------- --------- --------- --------
At 2 October 2021 (4,773) (3,355) 3,217 (4,911)
------------- --------- --------- --------
Cash flows - - (1,434) (1,434)
------------- --------- --------- --------
Repayments 2,366 1,260 - 3,626
------------- --------- --------- --------
New facilities - right
of use leases - (1,025) - (1,025)
------------- --------- --------- --------
Surrender - right of use
leases - 244 - 244
------------- --------- --------- --------
At 1 October 2022 (2,407) (2,876) 1,783 (3,500)
------------- --------- --------- --------
Notes to the consolidated financial statements (continued)
13. Subsequent events
On 21 October 2022, the Group's Revolving Credit Facility (RCF)
was amended and its facility term was extended from September 2023
to March 2024, with the facility reducing from GBP2.4 million to
GBP1.9 million in March 2023 and then GBP0.9 million in September
2023. Leverage (net debt to adjusted EBITDA) and interest cover
covenants, tested quarterly, recommenced on the first testing date
of 30 September 2022 through to the end of the facility. The
September 2022 test period was waived. The December 2022 test
period was deferred until January 2023 and subsequently waived. The
covenants as at March and June 2023 have been amended to reflect
the impact of the IFRS 15 contract accounting restatement. See Note
2.
On 15 November 2022, the Group announced that it was exploring
longer term opportunities which included potentially divesting the
Precision Machined Components division, to strengthen the Group's
balance sheet and cash position and support the strategic
investment in the Cylinders division.
On 6 December 2022, 7,600,000 new ordinary shares with a nominal
value of 5p each, were issued as part of a fundraising which raised
cash proceeds, net of expenses, of approximately GBP2.1 million. Of
that total, GBP1.7 million was allocated to the share premium
account.
On 6 February 2023 , the Group announced the major contract
placement by a major UK naval customer for pressure vessel
manufacturing for a new construction project. Worth GBP18.2
million, this contract is the largest ever awarded to CSC. Progress
has commenced against early contract milestones and pressure
vessels will be delivered to the customer over the next three
years.
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END
FR NKBBPOBKDOPB
(END) Dow Jones Newswires
May 23, 2023 02:00 ET (06:00 GMT)
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