TIDMPRES
RNS Number : 7162Q
Pressure Technologies PLC
23 June 2020
23 June 2020
Pressure Technologies plc
("Pressure Technologies" or the "Group")
2020 Interim Results
Pressure Technologies (AIM: PRES), the specialist engineering
group, announces its interim results for the 26 weeks to 28 March
2020.
Financial Highlights*
-- Group revenue of GBP13.9 million (2019: GBP14.5 million)
-- Gross profit of GBP4.0 million (2019: GBP5.0 million)
-- Adjusted operating loss of GBP(0.1) million (2019: profit
GBP1.3 million)
-- Reported loss before tax of GBP(1.5) million (2019:
profit GBP0.1 million)
-- Reported basic loss per share of (5.9)p (2019: earnings
per share 1.6p)
-- Adjusted operating cash inflow** of GBP1.4 million (2019:
outflow GBP1.6 million)
-- Bank facility drawn at GBP9.3 million (2019: GBP10.8
million)
-- Bank facility covenants relaxed to give flexibility
during period of Covid-19 uncertainty
-- Post period end GBP0.6 million cash proceeds from the
sale of 2.5 million shares in Greenlane Renewables Inc.
* All results presented for continuing operations only
** Continuing operations only excluding cash outflow for
exceptional costs
Operational Highlights
-- Overall Group revenue was significantly lower than prior
year period due to phasing of large defence contracts and
the impact of Covid-19 restrictions in March 2020
-- Strong order intake in PMC underpinned a 12% increase in
external revenue, while operational delivery issues and increased
indirect costs adversely impacted margin performance
-- Significant improvement of on-time delivery performance in
PMC, with lower levels of overdue orders, shorter lead times
and higher customer satisfaction levels
-- PMC order book in excess of GBP5.0 million at the half-year
end, but recent intake levels lower than run rate, with uncertainty
in oil and gas markets expected to continue through the second
half
-- Loss-making Quadscot site closed in June 2020, with orderbook
and customers transferred and consolidated into other PMC
sites
-- Growing diversification and sustainability in both divisions,
with further progress made in new customer acquisitions,
long-term supplier agreements and new market development
-- Five-year framework agreement secured by CSC with Shell to
become their approved supplier of ultra-large cylinders for
hydrogen refuelling stations across Europe
-- Continued investment in people and HR practices, helping
to drive cultural change that is delivering stronger colleague
engagement and improvements to customer service
-- Current capital investment programme completed, with GBP1.2
million spent across both divisions on new machining centres
and IT infrastructure
Chris Walters, Chief Executive of Pressure Technologies
commented:
"The operational changes and strategic progress made over the
past year have put the Group in a stronger position to face the
challenges and uncertainty in the current trading environment.
The impact of Covid-19 continues to be felt to varying degrees
across our markets. Strong order books in both divisions at the
half year are encouraging, but it remains difficult to foresee how
the pandemic and an uncertain oil and gas market will impact
performance throughout the remainder of the year, particularly in
the PMC division.
Management actions will seek to preserve cash and core
capability in the business, without undermining the strategic and
operational progress already made in both divisions to establish
resilience and a foundation for future growth. New long-term
strategic supply agreements with key customers demonstrate the
progress being made and we remain focussed on advancing further
with the Group's strategic plans .
I am proud to see the tremendous commitment and hard work of our
teams across the Group as we continue to support business
continuity for our customers during this period."
For further information, please contact:
Pressure Technologies plc Tel: 0114 257 3616 PressureTechnologies@houston.co.uk
Chris Walters, Chief Executive
Joanna Allen, Chief Financial
Officer
N+1 Singer (Nomad and Broker) Tel: 0207 496 3000
Mark Taylor / Carlo Spingardi
Houston (Financial PR and Investor Tel: 0203 701 7660
Relations)
Kate Hoare / Anushka Mathew /
Ben Robinson
COMPANY DESCRIPTION
www.pressuretechnologies.com
With its head office in Sheffield, the Pressure Technologies
Group was founded on its leading market position as a designer and
manufacturer of high-integrity, safety-critical components and
systems serving global supply chains in oil and gas, defence,
industrial gases and hydrogen energy markets.
The Group 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 and Chesterfield Special Cylinders Inc.
Precision Machined Components (PMC) - www.pt-pmc.com
-- Precision Machined Components includes the Al-Met, Roota
Engineering, Quadscot Precision Engineers and Martract brands.
CHAIRMAN'S STATEMENT
Having joined the Board of Pressure Technologies in January
2020, my first few months as Chairman have given me a good insight
into this business as we continue to navigate through unprecedented
times. Pressure Technologies has a long heritage in the markets
that it serves and under new leadership the Group has outlined a
clear growth strategy to realise its significant potential and good
progress is being made.
Covid-19 has brought challenges to nearly all global industries
and few businesses are immune. I would like to acknowledge the hard
work of our employees and the support from our valued customers and
suppliers. Businesses and their employees are being truly tested
and I have been impressed and reassured by the leadership and the
commitment shown by all colleagues to maintain safety and business
continuity throughout this recent period.
While the crisis has resulted in economic headwinds and
uncertainty for some of our markets and customers, t he operational
changes and strategic progress made over the past year have helped
put the Group in a stronger position to cope with the
uncertainty.
TRADING REVIEW
Overall Group revenue for the period was GBP13.9 million (2019:
GBP14.5 million), gross profit GBP4.0 million (2019: GBP5.0
million) resulting in an overall adjusted operating loss of GBP0.1
million (2019: profit GBP1.3 million).
The Chesterfield Special Cylinders division (CSC) delivered
revenue of GBP6.3 million (2019: GBP7.7 million) and an adjusted
operating profit of GBP0.4 million (2019: GBP1.4 million), both in
line with expectations and reflecting the phasing of large defence
contracts between half-year periods. Gross margin of 33% (2019:
39%) reflected the expected margins for sectors supplied in the
period and at the period end GBP2.8m of contracted revenue remains
to be invoiced on projects which are in progress. Return on sales
was 7% (2019: 18%).
Strong order intake within the Precision Machined Components
division (PMC) over the past six months across a broadening
customer base underpinned a 12% increase in external revenue to
GBP7.6 million (2019: GBP6.8 million). Despite this progress, a
significant delay to the output of new large complex components,
the onboarding of new customers and the late commissioning of new
machining centres adversely impacted gross margins in the first
quarter. Recovery of output and margin performance in the second
quarter was slower than expected and gross margin reduced to 25%
for the first half (2019: 31%). This, along with higher indirect
costs from the investment in sales and engineering functions,
resulted in a significantly lower adjusted operating profit of
GBP0.3 million (2019: GBP0.8 million) and return on sales was 4%
(2019: 11%).
Over the past six months, we have continued to demonstrate the
strategic potential in both divisions, with increased sales from
existing customers across a broader product range, new customer
acquisitions and major contract wins in target markets.
CHESTERFIELD SPECIAL CYLINDERS
Significant management changes in December 2019 have already
helped drive operational improvements, better customer service and
stronger colleague engagement across the division.
We continue to make good progress with UK and export naval
contracts, which will see us supply bespoke, safety critical
systems for the UK's Dreadnought submarine and Type-26 frigate
programmes as well as the French navy's Barracuda programme. In
June 2020, CSC has secured an order for the supply of cylinders to
the Dreadnought class submarine programme, covering the raw
material milestone for the second boat set which confirms
commitment from UK MOD and BAE Systems to the programme.
Allied to this activity, is our market development of
prospective Asian customers, including a collaboration on a
significant new build submarine programme.
We remain on track to complete the significant contract with EDF
Energy for the supply of high-pressure nitrogen storage solutions
to four UK nuclear power stations. This sector remains a focus area
for further growth, with good prospects in the pipeline.
Despite several opportunities in late 2019, the oil and gas
market has deteriorated sharply, with several ultra-large cylinder
prospects being deferred to 2021 and beyond. Further progress was
made during the period in the hydrogen refuelling market, which
remains an area of strategic focus and significant growth
potential. Recent contract wins for McPhy Energy and Haskel
Hydrogen Systems represent continued market penetration within this
growing market.
In May 2020, CSC was also pleased to be awarded a GBP0.6 million
revenue contract by a new customer, Parker, to provide ultra-large
cylinders for a major wastewater treatment project in Abu Dhabi.
This significant contract represents a new market for CSC's
ultra-large cylinders and through-life support services.
As testament to the progress made in this sector, since the
period end we were pleased to have signed a five-year framework
agreement with Shell, under which CSC becomes the approved supplier
of Type 1 steel cylinders to prospective operators of Shell-branded
hydrogen refuelling stations across Europe. While the number of
potential refuelling stations to be built over the next few years
remains uncertain, the selection of CSC as preferred supplier is a
major strategic step.
Integrity Management services performed well during the period,
with new contract wins for in-situ revalidation projects and
testing of diving support vessels in Azerbaijan and Dubai. These
services are highly valued by existing customers and have
tremendous growth potential in the UK and worldwide. However,
Covid-19 enforced travel restrictions towards the end of March 2020
caused disruption and delays, with the deferral of several
deployments, albeit some UK defence related deployments have been
able to continue in line with supporting national infrastructure
during the Covid-19 outbreak. We anticipate that Covid-19
restrictions will continue to impact performance in the second half
of the year, but periodic inspection regimes will require
revalidation once travel restrictions are safely lifted.
PRECISION MACHINED COMPONENTS
The operating result in the period was disappointing, however we
continue to make strategic progress across this division as changes
made over the past year deliver operational improvements. The
divisional leadership structure and new management appointments are
driving important cultural change that is more focused on
performance and customer service.
A stronger sales team and maturing sales processes have
underpinned increased sales effectiveness and better customer
relationship management. This has been evidenced primarily through
an increase in sales revenue and order intake in the period, but
also through positive customer feedback and new customer
acquisition. At the end of the first half of the year, the PMC
order book value was in excess of GBP5.0 million however intake has
fluctuated in Q3 and there is uncertainty in orderbook development
which is expected to continue through the second half.
Investment in new skills and systems for production planning,
engineering, quality control and purchasing functions are starting
to show returns through operational efficiencies, better
utilisation, cost savings and margin improvements, significantly
improving on-time delivery performance for key customers during the
period.
Oil and gas remains the primary market for this division and
excellent progress has been made to extend and diversify the
customer base within this market. We have made further progress
over the period in strengthening our relationships with our major
OEM customers in these markets and remain focused on achieving key
supplier status to these accounts as they look to rationalise their
supplier base.
Dominance of the top three customers by revenue has also reduced
from 83% to 69% over the last two years. Diversification of product
scope also continues, with a far broader range of components now
being delivered to established and newly acquired customers. With
the current low oil price impacting demand for drilling and
exploration projects, we have increased our focus on
decommissioning opportunities and accelerated our evaluation of new
geographies and adjacent markets, such as renewable energy, nuclear
power and defence, where we have an established customer base with
CSC.
In December 2019, we reported that further changes had been made
to improve operational and financial performance at the Quadscot
Precision Engineers facility in Blantyre, South Lanarkshire, after
more than four years of loss-making performance. These changes
failed to deliver significant improvement and the decision was
taken to consolidate Quadscot's operations, order book and
customers into the Roota Engineering facility in Rotherham, South
Yorkshire. This decision followed a period of collective staff
consultation that concluded on 12 June 2020 and the site is now
closed.
BALANCE SHEET AND LIQUIDITY
As at 28 March 2020 the Group's GBP12.0 million Revolving Credit
Facility (RCF) was drawn at GBP9.3 million, down from GBP10.8
million at 28 September 2019. Cash and cash equivalents increased
in the period to GBP2.6 million (28 September 2019: GBP2.2 million)
taking the net RCF debt down from GBP8.6 million at 28 September
2019 to GBP6.7 million at 28 March 2020. The reduction in net RCF
debt is predominantly due to the receipt in February 2020 of a
GBP2.1 million repayment of the Greenlane Renewables Inc.
Promissory Note and associated interest which was used to repay a
tranche of drawn RCF. Positive operating cash inflow has been
partially utilised in net capital investment of GBP0.7 million,
leaving a GBP0.4 million increase in cash and cash equivalents in
the period.
Finance leases at 28 March 2020 totalled GBP2.9 million, up
slightly from GBP2.8 million at 28 September 2019 with further
leases of GBP0.5 million for key capital equipment in PMC off-set
by lease repayments in the period.
IFRS 16 was adopted in the period and as a result GBP1.2 million
of 'Right-of-use asset' debt has been recognised in respect of the
leases, predominantly in respect of property, that were previously
classed as operating leases.
Total net borrowings, excluding right of use assets, has
therefore reduced to GBP9.6 million at 28 March 2020 from GBP11.4
million at 28 September 2019.
We continue to be in regular and constructive dialogue with
Lloyds Bank regarding ongoing facility requirements and the impact
of Covid-19 disruption on operations and the leverage covenant,
which is tested quarterly. In support of the Group, Lloyds Bank
have agreed a waiver of the June 2020 test and an increase in the
test point for the September and December 2020 quarter ends, to
give additional headroom given the uncertainty in the outlook for
EBITDA and associated cash flow.
The Directors have assessed the risks presented by Covid-19 and
reforecast the original 2020 Budget and the 2021 and 2022
Projections ("the forecasts") to reflect the current and likely
future impact of Covid-19 on the Group's operations and financial
results.
These baseline forecasts reflect:
-- Limited impact of Covid-19 on the CSC division, other than a
significant temporary reduction in the level of Integrity
Management business due to UK and global travel restrictions and
potential supply chain disruption
-- Some reductions in the level of activity across the PMC
division as a result of Covid-19, reflecting the impact of a
reduction in revenue, supply chain disruption and some limited
employee absence
-- The enactment of a number of cash deferral measures
Throughout the forecast period, the Group generates underlying
operating profit and is cash-generative, and along with the
amendments to the RCF, therefore believe there is sufficient
liquidity and covenant headroom for the foreseeable future.
On 15 June 2020, the Group received un-forecast cash proceeds of
GBP0.6 million from the sale of 2,525,610 shares in Greenlane
Renewables Inc. ('Greenlane') which has further reduced the drawn
RCF debt at 22 June 2020 to GBP8.9 million. The Group continues
with its strategy to liquidate its remaining investment in
Greenlane at the earliest opportunity.
COVID-19
As a supplier to customers who support UK Critical National
Infrastructure and Strategic Defence Contracts, we have worked hard
to ensure business continuity whilst maintaining our primary focus
on safeguarding the health and wellbeing of our teams.
We have written and implemented specific policies which have
successfully allowed us to adapt working practices to meet UK
government guidelines on workforce protection, enabling social
distancing across all our facilities, encouraging working from home
wherever roles permit and promoting employee health and wellbeing
across the business. Investments made in our central group
functions including Human Resources and IT infrastructure over the
course of the previous year have underpinned the support we have
been able to offer our teams through this difficult period,
reinforced by regular and open communications with colleagues
working both on site and at home.
Whilst both divisions experienced some early operational
disruption and capacity issues during March as the UK entered
lockdown, we have been able to keep all sites open and operational,
working on the basis of 'business as usual, with caution'.
It remains difficult to predict the duration and severity of the
impact that Covid-19 will have on the business. We have continued
to support our customers, maintaining close dialogue with them
throughout the period and remain focused on safely delivering their
orders. However, our Integrity Management business in the CSC
division continues to be impacted by the domestic and international
travel restrictions which have resulted in the postponement of
several deployments. Whilst some domestic deployments are now
resuming as UK lockdown restrictions begin to lift, these will
continue to be limited due to the necessary ongoing health and
safety constraints.
This uncertainty is compounded by a depressed oil price which
has resulted in some oil and gas customers deferring project spend
and applying pricing pressure throughout the supply chain. We
continue to monitor this closely and remain focused on the
diversification of our customer portfolio, in line with our growth
strategy.
Whilst this uncertainty remains, we are taking a number of
prudent measures to manage cost and conserve cash and core
capability in the business without undermining the progress already
made in both divisions to establish resilience and a foundation for
future growth in strategic focus areas. We continue to review
possible scenarios should there be further changes to trading
conditions and will take actions should the market conditions
require us to do so.
HEALTH AND SAFETY
On 26 November 2019, the Group confirmed that its CSC business
had been found guilty of a charge brought by the Health &
Safety Executive (HSE) pursuant to Section 2 of the Health and
Safety at Work Act 1974 following a fatal accident in June 2015. On
13 January 2020, the Group was sentenced to a fine of GBP0.7
million along with prosecution costs of GBP0.2 million. The Company
has been given by the Court a period of four years over which to
pay the combined fine and costs, which it will do from operational
cash flows. The Group fully respects the verdict of the jury and
deeply regrets the events that resulted in the death of our
colleague and long-standing employee John Townsend, which has left
a terrible gap in the lives of his family, friends and colleagues,
with whom our deepest sympathies remain.
This tragic incident occurred over five years ago in June 2015
and in the period since then we have made significant changes and
improvements to the way we operate at the CSC site and across all
Group sites. The health and safety of our people is of paramount
importance and these enhanced measures, which are being
consistently applied across the business, will help ensure that
this is continually reinforced throughout every area of our
operations. We will continually assess our health and safety
measures and implement changes where necessary.
Following several key Health and Safety personnel appointments
across the PMC business last year, we have been pleased to see
significant improvements in our health and safety maturity and KPIs
for the division. The appointment of a new Health and Safety
Manager at CSC at the end of the period completes the strengthening
of our Quality, Health, Safety and Environmental teams and supports
effective safety leadership that underpin our commitment to the
highest safety standards across the Group.
BOARD
I was delighted to join the Board of Pressure Technologies in
January 2020. The Group has a long heritage in its core markets,
and I look forward to working with the Executive team and my fellow
Non-Executive Directors as the Group continues to make further
progress against its strategy for growth. I would particularly like
to thank Neil MacDonald for his services to the group since his
appointment in June 2013 and wish him well on his retirement from
the Board.
As part of our plans to further strengthen the Board and
reinforce governance, the Group was pleased to announce the
appointment of Tim Cooper as Non-Executive Director in January 2020
and today confirms that Mike Butterworth will join the Board as
Non-Executive Director and Chair of the Audit and Risk Committee
with immediate effect. Both Tim and Mike bring complementary skills
and experience which will be invaluable as we grow the business and
realise its significant potential.
OUTLOOK
The impact of Covid-19 continues to be felt to varying degrees
across our markets and uncertainty remains over the pace of
recovery and possible operational disruption. Both divisions remain
in close contact with customers and suppliers and we will continue
to take all appropriate steps to maintain business continuity and
safely deliver customer orders.
Despite strong order books in both divisions at the half year,
it remains difficult to predict the length and depth that the
impact of Covid-19 and oil and gas market uncertainty will have on
performance throughout the remainder of the year.
The PMC order book is currently valued in excess of GBP4.0
million. Order intake since the half-year end has been lower than
run rate, but we are encouraged by recent levels of enquiry and
pipeline development alongside new strategic supply agreements with
key OEM customers. With a solid defence order book and recent major
orders from target sectors, the outlook for CSC remains positive,
notwithstanding the delays to Integrity Management projects due to
Covid-19 restrictions.
Whilst the Board continues to review possible scenarios and
determine the actions we may take as the outlook becomes clearer,
market forecasts remain withdrawn. Management actions will seek to
preserve cash and core capability in the business without
undermining the progress already made in both divisions to
establish resilience and a foundation for future growth in
strategic focus areas.
The Group remains focussed on delivering further progress
against its strategic plans as the year progresses.
Sir Roy Gardner
Chairman
Condensed Consolidated Statement of Comprehensive Income
For the 26 weeks ended 28 March 2020
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
Notes GBP'000 GBP'000 GBP'000
Revenue from continuing operations 4 13,901 14,484 28,291
Cost of sales (9,924) (9,440) (19,119)
Gross profit 3,977 5,044 9,172
Administration expenses (4,038) (3,696) (6,938)
Operating (loss)/profit before amortisation
and exceptional charges (61) 1,348 2,234
Separately disclosed items of administrative
expenses:
Amortisation 5 (932) (911) (1,832)
Other exceptional charges 6 (956) (122) (450)
Operating (loss)/profit from continuing
operations (1,949) 315 (48)
Finance costs (102) (226) (467)
Other financial items 7 578 - -
(Loss)/profit before taxation from
continuing operations (1,473) 89 (515)
Taxation 8 372 209 126
(Loss)/profit for the period from
continuing operations (1,101) 298 (389)
Discontinued operations
Loss for the period from discontinued
operations - (2,338) (1,203)
Loss for the period attributable
to owners of the parent (1,101) (2,040) (1,592)
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss:
Currency transaction differences
on translation of foreign operations (10) 117 (140)
Other comprehensive income not to
be reclassified to profit or loss
in subsequent periods:
Exchange differences on translation
of discontinued foreign operations - - 325
Total comprehensive income for the
period attributable to the owners
of the parent (1,111) (1,923) (1,407)
Basic (loss)/earnings per share
From continuing operations 9 (5.9)p 1.6p (2.1)p
From discontinued operations 9 - (12.6)p (6.5)p
From loss for the period (5.9)p (11.0)p (8.6)p
Diluted (loss)/earnings per share
From continuing operations 9 (5.9)p 1.6p (2.1)p
From discontinued operations 9 - (12.6)p (6.5)p
From loss for the period (5.9)p (11.0)p (8.6)p
Condensed Consolidated Statement Of Financial Position
As at 28 March 2020
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 10 9,510 9,510 9,510
Intangible assets 10 5,715 7,298 6,598
Property, plant and equipment and
right of use assets 10 15,711 12,355 14,042
Deferred tax asset 278 402 278
Asset held for sale - 6,801 -
Other long-term financial assets 5,928 - 7,350
37,142 36,366 37,778
Current assets
Inventories 6,665 4,276 5,115
Trade and other receivables 12,284 8,244 9,541
Cash and cash equivalents 11 2,598 4,363 2,208
Current tax 221 28 95
21,768 16,911 16,959
Total assets 58,910 53,277 54,737
Current liabilities
Trade and other payables (12,325) (6,389) (7,360)
Borrowings - asset finance and right
of use asset leases 11 (1,026) (365) (656)
Borrowings - revolving credit facility 11 - - (10,800)
Current tax liabilities - (1) -
(13,351) (6,755) (18,816)
Non-current liabilities
Other payables (698) (178) (158)
Borrowings - asset finance and right
of use asset leases 11 (3,102) (1,571) (2,116)
Borrowings - revolving credit facility 11 (9,319) (11,800) -
Deferred tax liabilities (1,411) (1,449) (1,561)
(14,530) (14,998) (3,835)
Total liabilities (27,881) (21,753) (22,651)
Net assets 31,029 31,524 32,086
Equity
Share capital 930 930 930
Share premium account 26,172 26,172 26,172
Translation reserve (290) (348) (280)
Retained earnings 4,217 4,770 5,264
Total equity 31,029 31,524 32,086
Condensed Consolidated Statement of Changes in Equity
For the 26 weeks ended 28 March 2020
Profit
Share and
Share premium Translation loss Total
capital account reserve account equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 28 September 2019 (audited) 930 26,172 (280) 5,264 32,086
Share based payments - - - 54 54
Transactions with owners - - - 54 54
Loss for the period - continuing
operations - - - (1,101) (1,101)
Exchange differences arising on
retranslation of foreign operations - - (10) - (10)
Total comprehensive income - - (10) (1,101) (1,111)
Balance at 28 March 2020 (unaudited) 930 26,172 (290) 4,217 31,029
For the 26 weeks ended 30 March 2019
Profit
Share and
Share premium Translation loss Total
capital account reserve account equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 29 September 2018 (audited) 930 26,172 (465) 6,756 33,393
Share based payments - - - 54 54
Transactions with owners - - - 54 54
Profit for the period - continuing
operations - - - 298 298
Loss for the period - discontinued
operations - - - (2,338) (2,338)
Exchange differences arising on
retranslation of foreign operations - - 117 - 117
Total comprehensive income - - 117 (2,040) (1,923)
Balance at 30 March 2019 (unaudited) 930 26,172 (348) 4,770 31,524
Condensed Consolidated Statement of Changes in Equity
(continued)
For the 26 weeks ended 28 March 2020
Share Profit
Share premium Translation and loss Total
capital account reserve account equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 29 September 2018 (audited) 930 26,172 (465) 6,756 33,393
Share based payments - - - 100 100
Transactions with owners - - - 100 100
Loss for the period - continuing
operations - - - (389) (389)
Loss for the period - discontinued
operations - - - (1,203) (1,203)
Exchange differences arising on
translating foreign operations - - (140) - (140)
Exchange differences on translation
of discontinued foreign operations - - 325 - 325
Total comprehensive income - - 185 (1,592) (1,407)
Balance at 28 September 2019 (audited) 930 26,172 (280) 5,264 32,086
Condensed Consolidated Cash Flow Statement
For the 26 weeks ended 28 March 2020
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit after tax - continuing
operations (1,101) 298 (389)
Loss after tax - discontinued operations - (2,338) (1,203)
Adjustments for:
Depreciation of property, plant and
equipment 855 656 1,377
Finance costs - net 102 226 467
Amortisation of intangible assets 932 911 2,390
Profit on disposal of property, plant
and equipment (10) (35) -
Gain on revaluation of equity investment (578) - -
Share option costs 54 54 100
Income tax credit (372) (209) (126)
Changes in working capital:
Increase in inventories (1,550) (472) (1,234)
(Increase)/decrease in trade and other
receivables (2,457) (124) 402
Increase/(decrease) in trade and other
payables 4,532 (697) (1,156)
Increase in other long-term payables 700 - -
Cash flows from operating activities 1,107 (1,730) 628
Finance costs paid net of interest income
received (115) (201) (464)
Income tax refunded 96 35 159
Cash flows from discontinued operations - 301 (2,534)
Net cash inflow/(outflow) from operating
activities 1,088 (1,595) (2,211)
Cash flows from investing activities
Purchase of property, plant and equipment (1,246) (597) (3,693)
Proceeds from disposal of fixed assets 5 35 -
Proceeds from disposal of other long-term
financial assets 2,000 - -
Cash inflow on disposal of subsidiaries
net of cash disposed of - - 1,277
Net cash from/(used) in investing activities 759 (562) (2,416)
Financing activities
Proceeds from new borrowings - 500 -
Proceeds from lease financing 514 - 2,002
Repayment of borrowings (1,971) (120) (1,307)
Net cash (outflow)/inflow from financing
activities (1,457) 380 695
Net increase/(decrease) in cash and
cash equivalents 390 (1,777) (3,932)
Cash and cash equivalents at beginning
of period 2,208 6,140 6,140
Cash and cash equivalents at end of
period 2,598 4,363 2,208
Notes to the Condensed Consolidated Interim Financial
Statements
1. Basis of preparation and statement of compliance with
IFRS
The Group's interim results for the 26 weeks ended 28 March 2020
are prepared in accordance with the Group's accounting policies
which are based on the recognition and measurement principles of
International Financial Reporting Standards ("IFRS") as adopted by
the EU and effective from 29 September 2019. As permitted, this
interim report has been prepared in accordance with the AIM rules
and not in accordance with IAS 34 "Interim financial reporting" and
therefore the interim information is not in full compliance with
IFRS. The principal accounting policies of the Group have remained
unchanged from those set out in the Group's 2019 annual report and
financial statements, with the exception of the adoption of IFRS 16
'Leases' as detailed below. The Principal Risks and Uncertainties
of the Group are also set out in the Group's 2019 annual report and
financial statements and, with the exception of risks arising from
the Covid-19 pandemic, are unchanged in the period.
The Group's 2019 financial statements for the 52 weeks ended 28
September 2019 were prepared under IFRS. The auditor's report on
these financial statements was unmodified and did not contain
statements under Sections 498(2) or (3) of the Companies Act 2006
and they have been filed with the Registrar of Companies.
The Directors have assessed the risks presented by Covid-19 and
reforecast the original 2020 Budget and the 2021 and 2022
Projections ("the forecasts") to reflect the current and likely
future impact of Covid-19 on the Group's operations and financial
results. These baseline forecasts reflect:
-- Limited impact of Covid-19 on the CSC division, other than a
significant temporary reduction in the level of Integrity
Management business due to UK and global travel restrictions and
potential supply chain disruption
-- Some reductions in the level of activity across the PMC
division as a result of Covid-19, reflecting the impact of a
reduction in revenue, supply chain disruption and some limited
employee absence
-- The enactment of a number of cash deferral measures
Throughout the forecast period, the Group generates underlying
operating profit and is cash-generative.
On 10 December 2019, the Group agreed a two-year revolving
credit facility with Lloyds Bank plc for a maximum amount of GBP12
million up to 9 December 2020 and GBP10 million up to 9 December
2021. This facility included, inter alia, three financial covenants
to be tested quarterly, namely (i) Net debt (on a pre-IFRS 16
basis) to Adjusted EBITDA ('Leverage Covenant'), (ii) Net finance
costs (on a pre-IFRS 16 basis) to Adjusted EBITDA, and (iii) CAPEX
covenant. In response to the Covid-19 situation, on 26 May 2020 the
Group agreed with Lloyds Bank plc the following changes to the
financial covenants:
-- the testing of the leverage covenant as at 30 June 2020 to be waived
-- the Leverage Covenant as at 30 September and 31 December 2020
to be relaxed to a maximum of 5.0 times (from a maximum of 3.25
times and 3.0 times respectively). The covenant would revert back
to the previously agreed level of a maximum of 3.0 times
thereafter
-- the Net finance cost to EBITDA and Capex covenants remain unchanged
-- the amount of the facility remains unchanged
Based on the baseline reforecasts prepared on the assumptions
described above and severe but plausible downside scenario
modelling for the PMC division, for the period at least 12 months
from the signing of this interim financial information, the Group's
net debt would remain within the amount of the facility and the
Group would operate within the revised financial covenants.
On 15 June 2020, the Group received un-forecast cash proceeds of
GBP0.6 million from the sale of 2,525,610 shares in Greenlane
Renewables Inc. ("Greenlane"). The Group continues with its
strategy to liquidate its remaining investment in Greenlane at the
earliest opportunity.
On the basis of the above, including consideration as to the
ongoing uncertainty as to the future impact of the Covid-19
pandemic, the Group believes it has sufficient headroom to be able
to continue its operations for the foreseeable future. The
Directors believe that the Group is in a position to manage its
financing and other business risks satisfactorily and have a
reasonable expectation that the Group will have adequate resources
to continue in operation for at least 12 months from the signing
date of this interim financial information. They therefore consider
it appropriate to adopt the going concern basis of accounting in
preparing the financial statements.
The consolidated financial statements are prepared under the
historical cost convention as modified to include the revaluation
of financial instruments.
The financial information for the 26 weeks ended 28 March 2020
and 30 March 2019 has not been audited or reviewed and does not
constitute full financial statements within the meaning of Section
434 of the Companies Act 2006. The unaudited interim financial
statements were approved for issue by the Board of Directors on 22
June 2020.
2. New Standards adopted as at 29 September 2019
IFRS 16 'Leases' replaced IAS 17 'Leases' along with three
interpretations (IFRIC 4 'Determining whether an Arrangement
contains a Lease', SIC 15 'Operating Leases-Incentives' and SIC 27
'Evaluating the Substance of Transactions Involving the Legal Form
of a Lease'). The new Standard has been applied using the modified
retrospective approach, with the cumulative effect of adopting IFRS
16 being recognised in equity as an adjustment to the opening
balance of retained earnings for the current period. Prior periods
have not been restated.
For contracts in place at the date of initial application, the
Group has elected to apply the definition of a lease from IAS 17
and IFRIC 4 and has not applied IFRS 16 to the arrangements that
were previously not identified as lease under IAS 17 and IFRIC
4.
The Group has elected not to include initial direct costs in the
measurement of the right-of-use asset for operating leases in
existence at the date of initial application of IFRS 16, being 29
September 2019. At this date, the Group has also elected to measure
the right-of-use assets at an amount equal to the lease liability
adjusted for any prepaid or accrued lease payments that existed at
the date of transition.
Instead of performing an impairment review on the right-of-use
assets at the date of initial application, the Group has relied on
its historic assessment as to whether leases were onerous
immediately before the date of initial application of IFRS 16.
On transition, for leases previously accounted for as operating
leases with a remaining lease term of less than 12 months and for
leases of low-value assets, the Group has applied the optional
exemptions to not recognise right-of-use assets but to account for
the lease expense on a straight-line basis over the remaining lease
term.
For those leases previously classified as finance leases, the
right-of-use asset and lease liability are measured at the date of
initial application at the same amounts under IAS 17 immediately
before the date of initial application.
On transition to IFRS 16 the weighted average incremental
borrowing rate applied to lease liabilities recognised under IFRS
16 was 4.25%.
The Group has benefited from the use of hindsight for
determining a lease term when considering options to extend and
terminate leases.
The following is a reconciliation between total operating lease
commitments as at 28 September 2019 to the leases recognised at 29
September 2019:
GBP'000
Total operating lease commitments disclosed
at 28 September 2019 1,348
Recognition exemptions:
* leases with remaining lease terms of less than 12
months (16)
Total lease liabilities recognised under
IFRS 16 at 29 September 2019 1,332
2.1 Standards and interpretations not yet applied
The following standards and amendments that are effective for
the first time in 2020 and could be applicable to the Group
are:
-- IFR IC 23 - Uncertainty over Income Tax Treatments
-- IFRS 9 - Prepayment Features with Negative compensation (Amendments to IFRS 9)
-- IAS 28 - Long-Term Interests in Associates and Joint-Ventures (Amendments to IAS 28)
These amendments do not have a significant impact on these
interim financial statements and therefore the disclosures have not
been made.
3. Significant accounting policies
The interim financial statements have been prepared in
accordance with the accounting policies adopted in the Group's most
recent annual financial statements for the 52 weeks ended 28
September 2019, except for the effects of applying IFRS 16.
3.1 Leases
As described in Note 2, the Group has applied IFRS 16 using the
modified retrospective approach and therefore comparative
information has not been restated. This means comparative
information is still reported under IAS 17 and IFRIC 4.
3.1 Leases (continued)
Accounting policy applicable from 29 September 2019
The Group as a lessee
For any new contracts entered into on or after 29 September
2019, the Group considers whether a contract is, or contains a
lease. A lease is defined as 'a contract, or part of a contract,
that conveys the right to use an asset (the underlying asset) for a
period of time in exchange for consideration'. To apply this
definition the Group assesses whether the contract meets three key
evaluations which are whether:
-- the contract contains an identified asset, which is either
explicitly identified in the contract or implicitly specified by
being identified at the time the asset is made available to the
Group
-- the Group has the right to obtain substantially all of the
economic benefits from use of the identified asset throughout the
period of use, considering its rights within the defined scope of
the contract
-- the Group has the right to direct the use of the identified
asset throughout the period of use. The Group assesses whether it
has the right to direct 'how and for what purpose' the asset is
used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use
asset and a lease liability on the balance sheet. The right-of-use
asset is measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct costs
incurred by the Group, an estimate of any costs to dismantle and
remove the asset at the end of the lease, and any lease payments
made in advance of the lease commencement date (net of any
incentives received).
The Group depreciates the right-of-use assets on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease
term. The Group also assesses the right-of-use asset for impairment
when such indicators exist.
At the commencement date, the Group measures the lease liability
at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that
rate is readily available or the Group's incremental borrowing
rate.
Subsequent to initial measurement, the liability will be reduced
for payments made and increased for interest. It is remeasured to
reflect any reassessment or modification, or if there are changes
in in-substance fixed payments.
When the lease liability is remeasured, the corresponding
adjustment is reflected in the right-of-use asset, or profit and
loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and
leases of low-value assets using the practical expedients. Instead
of recognising a right-of-use asset and lease liability, the
payments in relation to these are recognised as an expense in
profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have
been included in property, plant and equipment and lease
liabilities have been included in borrowings.
Accounting policy applicable before 29 September 2019
The Group as a lessee
Finance leases
Management applies judgment in considering the substance of a
lease agreement and whether it transfers substantially all the
risks and rewards, incidental to ownership of the leased asset. Key
factors considered include the length of the lease term in relation
to the economic life of the asset, the present value of the minimum
lease payments in relation to the asset's fair value, and whether
the Group obtains ownership of the asset at the end of the lease
term.
For leases of land and buildings, the minimum lease payments are
first allocated to each component based on the relative fair values
of the respective lease interests. Each component is then evaluated
separately for possible treatment as a finance lease, taking into
consideration the fact that land normally has an indefinite
economic life.
See the accounting policy note in the year-end financial
statements for the depreciation methods and useful lives for assets
held under finance leases. The interest element of lease payments
is charged to profit or loss, as finance costs over the period of
the lease.
Operating leases
All other leases are treated as operating leases. Where the
Group is a lessee, payments on operating lease agreements are
recognised as an expense on a straight-line basis over the lease
term. Associated costs, such as maintenance and insurance, are
expensed as incurred.
4. Segmental analysis and Earnings before Interest, Taxation,
Depreciation and Amortisation (EBITDA)
Revenue by destination - continuing operations
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
United Kingdom 9,230 7,696 15,799
European Union 3,492 3,294 7,168
Rest of World 1,179 3,494 5,324
13,901 14,484 28,291
Revenue by sector - continuing operations
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Oil and gas 8,137 7,704 16,272
Defence 2,021 5,384 9,118
Industrial gases 3,743 955 2,175
Hydrogen energy - 441 726
13,901 14,484 28,291
Revenue by activity - continuing operations
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Cylinders 6,272 7,651 13,860
Precision Machined Components 7,872 7,148 14,449
Intra divisional (243) (315) (18)
13,901 14,484 28,291
4. Segmental analysis and Earnings before Interest, Taxation,
Depreciation and Amortisation (EBITDA) (continued)
The Group's revenue disaggregated by pattern of revenue
recognition and category is as follows:
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Sale of goods transferred at a point
in time 8,582 13,267 23,427
Sale of goods transferred over time 3,863 406 1,739
Rendering of services 1,456 811 3,125
13,901 14,484 28,291
The following aggregated amounts of transaction values relate to
the performance obligations from existing contracts that are
unsatisfied or partially unsatisfied as at 28 March 2020:
Deliverable
within next
12 months
GBP'000
Contracted revenue yet to be invoiced - Cylinders 2,819
(Loss)/profit before taxation by activity - continuing
operations
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Cylinders 441 1,372 2,089
Precision Machined Components 330 772 1,879
Manufacturing subtotal 771 2,144 3,968
Unallocated central costs (832) (796) (1,734)
Operating (loss)/profit pre amortisation
and other exceptional charges (61) 1,348 2,234
Amortisation (note 5) (932) (911) (1,832)
Other exceptional charges (note 6) (956) (122) (450)
Operating (loss)/profit (1,949) 315 (48)
Finance costs (102) (226) (467)
Other financial items (note 7) 578 - -
(Loss)/profit before tax (1,473) 89 (515)
The Operating (loss)/profit by activity is stated before the
allocation of Group management charges which are included within
'Unallocated central costs'.
4. Segmental analysis and Earnings before Interest, Taxation,
Depreciation and Amortisation (EBITDA) (continued)
Earnings before interest, taxation, depreciation, and
amortisation (EBITDA) - continuing operations
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Adjusted EBITDA 794 2,004 3,591
Other exceptional charges (note 6) (956) (122) (450)
EBITDA (162) 1,882 3,141
Depreciation (855) (656) (1,357)
Amortisation (note 5) (932) (911) (1,832)
Interest (102) (226) (467)
Other financial items (note 7) 578 - -
(Loss)/profit before tax (1,473) 89 (515)
Amortisation on acquired businesses as set out above consists of
the amortisation charged on intangible assets acquired as a result
of business combinations in previous periods.
5. Amortisation
Amortisation of intangible assets is shown separately in the
Condensed Consolidated Statement of Comprehensive Income. A
breakdown of those costs can be seen below.
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Amortisation of intangible assets arising
on a business combination (932) (911) (1,832)
6. Other exceptional charges
Items that are material either because of their size or their
nature, or that are non-recurring are considered as exceptional
items and are disclosed separately on the face of the Condensed
Consolidated Statement of Comprehensive Income.
An analysis of the amounts presented as exceptional items in
these financial statements is given below:
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Reorganisation and redundancy (256) (122) (450)
Exceptional insurance credit 169 - -
HSE Fine (869) - -
(956) (122) (450)
The reorganisation costs relate to various costs of
restructuring across the Group. They are recognised in accordance
with IAS 19.
Given that these costs do not relate to underlying trading, the
Directors consider it appropriate to disclose these as exceptional
items.
HSE Fine
On 26 November 2019, the Group, announced that its subsidiary
Chesterfield Special Cylinders ("CSC") had been found guilty of a
charge brought by the Health & Safety Executive ("HSE")
pursuant to Section 2 of the Health and Safety at Work Act 1974
following a fatal accident in June 2015. The sentencing hearing was
held on 13 January 2020 at Sheffield Crown Court, at which a fine
of GBP700,000 was determined and prosecution costs of GBP169,499
were set. The fine is due to be paid over five six-monthly
instalments of GBP140,000 commencing 31 January 2021.
7. Other financial items
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Gain on revaluation of equity investment 578 - -
Following the application of IFRS 9, the investment in Greenlane
Renewables Inc. is categorised at Fair Value through Profit and
Loss (FVTPL). Therefore the investment has been measured at fair
value at the period end with any subsequent gain or loss being
recognised in profit or loss.
The fair value of the shareholding in Greenlane Renewables Inc.
was determined by reference to published price quotations in an
active market on the Toronto Stock Exchange (TSX-V) and using a
valuation technique to discount relevant future flows of value
beyond the period end date.
8. Taxation
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Current tax credit 221 65 (299)
Deferred taxation credit 151 144 94
Taxation credit to the income statement 372 209 (205)
9. (Loss)/earnings per ordinary share
The calculation of 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 basic
earnings per share, adjusted to allow for the issue of shares on
the assumed conversion of all dilutive options.
Adjusted earnings per share shows earnings per share, adjusting
for the impact of the amortisation charged on intangible assets
acquired as a result of business combinations and any exceptional
items, and for the estimated tax impact, if any, of those costs.
Adjusted earnings per share is based on the profits as adjusted
divided by the weighted average number of shares in issue.
For the 26 week period ended 28 March 2020
Continuing Discontinued Total
GBP'000 GBP'000 GBP'000
Loss after tax (1,101) - (1,101)
No.
Weighted average number of shares -
basic 18,595,165
Dilutive effect of share options 44,974
Weighted average number of shares -
diluted 18,640,139
Basic loss per share (5.9)p - (5.9)p
Diluted loss per share (5.9)p - (5.9)p
The Group adjusted earnings per share is calculated as
follows:
Loss after tax (1,101) -(1,101)
Amortisation (note 5) 932 - 932
Other exceptional charges and credits
(note 6) 956 - 956
Gain on revaluation of equity investment
(note 7) (578) - (578)
Theoretical tax effect of above adjustments (207) - (207)
Adjusted earnings 2 - 2
Adjusted earnings per share - basic
and diluted 0.0p - 0.0p
9. (Loss)/earnings per ordinary share (continued)
For the 26 week period ended 30 March 2019
Continuing Discontinued Total
GBP'000 GBP'000 GBP'000
Profit/(loss) after tax 298 (2,338) (2,040)
No.
Weighted average number of shares -
basic 18,595,165
Dilutive effect of share options -
Weighted average number of shares -
diluted 18,595,165
Basic earnings/(loss) per share 1.6p (12.6)p (11.0)p
Diluted earnings/(loss) per share 1.6p (12.6)p (11.0)p
The Group adjusted earnings/(loss) per share is calculated as
follows:
Profit/(loss) after tax 298 (2,338) (2,040)
Amortisation (note 5) 911 418 1,329
Other exceptional charges and credits
(note 6) 122 6 128
Theoretical tax effect of above adjustments (178) (72) (250)
Adjusted earnings/(loss) 1,153 (1,986) (833)
Adjusted earnings/(loss) per share -
basic and diluted 6.2p (10.7)p (4.5)p
For the 52 week period ended 28 September 2019
Continuing Discontinued Total
GBP'000 GBP'000 GBP'000
Loss after tax (389) (1,203) (1,592)
No.
Weighted average number of shares -
basic 18,595,165
Dilutive effect of share options 9,234
Weighted average number of shares -
diluted 18,604,399
Basic loss per share (2.1)p (6.5)p (8.6)p
Diluted loss per share (2.1)p (6.5)p (8.6)p
9. (Loss)/earnings per ordinary share (continued)
The Group adjusted earnings/(loss) per share is calculated as
follows:
For the 52 week period ended 28 September 2019
Continuing Discontinued Total
GBP'000 GBP'000 GBP'000
Loss after tax (389) (1,203) (1,592)
Amortisation (note 5) 1,832 558 2,390
Other exceptional charges and credits
(note 6) 450 (1,401) (951)
Theoretical tax effect of above adjustments (434) (428) (862)
Adjusted earnings/(loss) 1,459 (2,474) (1,015)
Adjusted earnings/(loss) per share -
basic and diluted 7.8p (13.3)p (5.5)p
10. Asset Impairment Review
The Group tests annually for impairment, or more frequently if
there are indicators that goodwill, other intangibles and tangible
fixed assets might be impaired. The occurrence of the Coronavirus
is a global issue affecting every single business sector and every
country to some degree. It has already had a significant impact on
the global economy, and its impacts are expected to continue for
the foreseeable future. Consequently, the impact of the pandemic is
considered to be an indicator that the carrying value of our
intangible and tangible assets in the Group's only cash generating
unit (CGU) - the Precision Machined Components (PMC) division - may
be impaired.
In light of the pandemic, the Group has considered a range of
economic conditions for the sectors in which the Group operates
that may exist over the next three years. These economic
conditions, together with reasonable and supportable assumptions,
have been used to estimate the future cash inflows and outflows for
the PMC CGU over the next three years. The assumptions underlying
these forecasts are detailed in note 1 to these interim financial
statements.
These forecasts have been approved by management and the Board
of Directors, and are based on a bottom up assessment of costs and
uses the current and estimated future sales pipeline. The forecasts
used for years two to three assume revenue growth, but no long-term
rate of growth or inflation is incorporated into the perpetuity
calculation at the end of year three. A value in use calculation
has been calculated by applying a discount rate of 12.0% (Sep 2019:
14.7%) to the cash flows in these forecasts. The discount rate has
reduced from the prior year due to the change in the mix of the
Group's businesses following the disposal of the Alternative Energy
division in June 2019.
Management's key assumptions are based on their past experience
and future expectations of the market over the longer term. The key
assumptions for the value in use calculations are those regarding
the discount rates, growth rates and expected changes to selling
prices and direct costs. A baseline reforecast was produced
reflecting management's best estimate of the likely impact of the
pandemic on the Group's businesses, along with a more pessimistic
but plausible downside scenario in respect of the PMC division.
Carrying amount of assets allocated to the PMC CGU
28 March
2020
GBP'000
Carrying value of allocated goodwill 9,510
Carrying value of customer relationships and intellectual
property 5,097
Carrying value of tangible fixed assets 6,546
Carrying value of other intangibles 106
21,259
10. Asset Impairment Review (continued)
The value in use calculation for the PMC CGU based on the
baseline reforecast resulted in headroom of GBP0.3 million over the
total carrying value of GBP21.3 million, such that no impairment is
required for the PMC division in these interim results. The
recoverable amount is most sensitive to the assumptions regarding
expected future cash inflows and the discount rate. Given the
limited headroom, a relatively small change in the assumptions used
in the baseline forecasts for the division's profitability and/or
the discount rate applied to the cash flows could cause the
carrying value to exceed the recoverable amount, thus indicating
that an impairment may be required. This will be next reviewed at
the annual impairment test in September 2020.
11. Reconciliation of net borrowings
Unaudited Audited
Unaudited 26 weeks 52 weeks
26 weeks ended ended ended
28 March 30 March 28 September
2020 2019 2019
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 2,598 4,363 2,208
Bank borrowings (9,319) (12,300) (10,800)
Net debt excluding finance leases (6,721) (7,937) (8,592)
Finance leases (2,916) (1,436) (2,772)
Right of use asset leases (1,212) - -
Net borrowings (10,849) (9,373) (11,364)
During the period the bank committed to extend the revolving
credit facility termination date to 9 December 2021. Accordingly,
the directors have concluded that it is appropriate to present the
loan as due for repayment after one year.
12. Dividends
No final or interim dividend was paid for either of the 52 week
periods ended 29 September 2018 or 28 September 2019. No interim
dividend for the 53 week period ending 3 October 2020 is
proposed.
A copy of the Interim Report will be sent to shareholders
shortly and will be available on the Company's website:
www.pressuretechnologies.com .
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FTMPTMTJTBFM
(END) Dow Jones Newswires
June 23, 2020 02:01 ET (06:01 GMT)
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