TIDMPRES
RNS Number : 6256L
Pressure Technologies PLC
14 January 2021
14 January 2021
Pressure Technologies plc
("Pressure Technologies" or "the Group")
2020 Preliminary Results
Pressure Technologies (AIM: PRES), the specialist engineering
group, announces its preliminary results for the 53 weeks to 3
October 2020.
Financial Results
-- Revenue of GBP25.4 million (2019: GBP28.3 million)
-- Gross profit of GBP5.3 million (2019: GBP9.2 million)
-- Adjusted operating loss* of GBP2.4 million (2019: GBP2.2
million operating profit)
-- Loss before taxation of GBP20.0 million includes GBP13.9
million non-cash exceptional impairment (2019: GBP0.5 million
operating loss)
-- Net operating cash inflow** of GBP 1.7 million (2019: GBP0.6
million)
-- Total net debt*** reduced to GBP7.4 million (28 September
2019: GBP11.4 million)
-- Bank facility extended to 30 November 2022
-- Fundraising of GBP7.5 million (before expenses) from existing
and new shareholders successfully completed in December
2020.
* operating loss excluding amortisation, impairments and other
exceptional costs.
** before cash outflow for exceptional costs and excluding cash
flows associated with discontinued operations
*** total net debt includes gross borrowings, asset finance
leases, right of use asset leases, less cash and cash
equivalents
Group Highlights
Results
-- Group revenue reflects challenging trading conditions,
Covid-19 disruption and the deferral of a major defence
contract from Q4 FY20 into Q1 FY21
-- Adjusted operating loss driven by lower than expected gross
margins in both divisions, the deferral of major defence
contract revenue in Chesterfield Special Cylinders (CSC)
and poor operational performance in Precision Machined
Components (PMC)
-- PMC restructuring, site consolidation and other cost-saving
measures were taken promptly in the second half of the
year to address the impact of worsening oil and gas market
conditions
-- Impairment of PMC goodwill and other intangibles driven
by challenging oil and gas market conditions, which are
expected to continue throughout 2021
Strategic Progress
-- Board strengthened with a new Chairman and two new NEDs
-- Further strategic progress made in diversifying the PMC
customer base and securing long-term strategic supply agreements
with major OEMs for a wider range of specialised components
-- Diversification of end markets in CSC continues to reduce
the historical dependence on the oil and gas sector, resulting
in a strong order book for defence and nuclear power customers,
with a second contract in excess of GBP3 million awarded
by EDF Energy in September 2020 to supply several nuclear
power stations in the UK with nitrogen storage packages
for delivery through to mid-2021
-- Growth continues for CSC in the fast-developing hydrogen
energy market, with five refuelling station contracts secured
in December 2020 for existing and new customers with a
total value of around GBP0.5 million
-- Fifth consecutive year of strong growth in CSC's Integrity
Management services, despite delayed deployments throughout
the year due to Covid-19 travel restrictions. Positive
outlook in defence, nuclear power, offshore services and
hydrogen energy markets
-- Fundraising of GBP7.5 million before expenses in December
2020 provides a stronger balance sheet and the resources
to capitalise on opportunities in the hydrogen energy market
and to accelerate growth in Integrity Management services.
Chris Walters, Chief Executive of Pressure Technologies
commented:
" Whilst these results reflect an extraordinarily challenging
year, the operational changes and strategic progress made since
2019 put the Group in a stronger position to face the impact of the
Covid-19 pandemic and depressed oil and gas market throughout FY20.
I would like to thank all our employees for their continued hard
work and commitment through this period.
We anticipate at least a further year of similarly challenging
conditions in the oil and gas market, but the consolidation of
sites, operational improvements, diversification of the customer
base and new long-term strategic supply agreements position the
Precision Machined Components division well for a return to
profitability when market conditions recover.
Following a well-supported fundraising, we now have the balance
sheet strength and resources to capitalise on the significant
growth prospects for Chesterfield Special Cylinders in the hydrogen
energy market and to accelerate growth in our Integrity Management
services business.
First-quarter trading was in line with management expectations
and we were delighted to secure five new hydrogen refuelling
station contracts in December from a growing pipeline of
opportunities with new and established customers.
Whilst we remain cautious regarding oil and gas market
conditions, the increasing momentum in hydrogen and the strong
orderbook for defence and nuclear customers underpin the Board's
confidence in the outlook for 2021 and beyond."
S
For further information, please contact:
Pressure Technologies plc Tel: 0330 015 0710
Chris Walters, Chief Executive PressureTechnologies@houston.co.uk
N+1 Singer (Nomad and Broker) Tel: 0207 496 3000
Mark Taylor / Carlo Spingardi
Houston (Financial PR and Investor Tel: 0204 529 0549
Relations)
Kate Hoare / Anushka Mathew /
Ben Robinson
Chairman's statement
Whilst 2020 has without doubt been a unique and challenging
year, I have been impressed by and am proud of the response of the
entire team at Pressure Technologies.
We entered this year with a clear vision for growth and strong
momentum against our strategic plans and priorities. The Covid-19
pandemic has brought significant headwinds to our markets and
operations, which is reflected in our financial performance, but I
am pleased to report that we have made further progress against
these plans and priorities.
The investments made since 2019 have underpinned growing
diversification across both divisions this year. Strengthened
engineering, sales and production capabilities have supported new
customer acquisitions and further penetration in our target
markets, helping place the Group in a stronger position to cope
with the ongoing uncertainty, particularly in oil and gas
markets.
From the onset of the pandemic in March, we were quick to take
decisive action, prioritising the safety and wellbeing of our teams
whilst ensuring business continuity and maintaining active
communications with customers and colleagues across all our sites
throughout the crisis. The investments made across our teams and
operations, particularly in management, HR and IT have been
fundamental to our ability to deliver this effective response and I
would personally like to thank all of our colleagues for the
leadership and commitment they have shown throughout the year.
Results
Covid-19 and the resulting macro-economic uncertainty has been
felt in varying degrees across our markets throughout the year and
it has also impacted performance. This has been compounded by
slower operational progress than anticipated in some areas of the
business.
Overall Group revenue decreased to GBP25.4 million (2019:
GBP28.3 million) resulting in an adjusted operating loss for the
year of GBP2.4 million (2019: GBP2.2 million adjusted operating
profit). The Group made a loss before taxation of GBP20.0 million
(2019: GBP0.5 million) which included amortisation, impairment and
exceptional costs totalling GBP17.6 million.
The phasing of major defence contracts in our Chesterfield
Special Cylinders ("CSC") division and the deferral of revenue and
profit of a major contract from late in the year into FY21,
overshadowed what was otherwise a good performance for CSC,
particularly for our Integrity Management services business, which
delivered its fifth consecutive year of growth. The diversification
of end markets in CSC continues to reduce the historical dependence
on the oil and gas sector and we have been particularly pleased
with the good progress made in the rapidly developing hydrogen
energy market, which presents significant growth opportunities for
the Group.
Precision Machined Components ("PMC") division delivered revenue
of GBP14.2 million (2019: GBP14.4 million), but reported an
operating loss of GBP0.7 million (2019: GBP1.9 million operating
profit) driven by lower than expected gross margins and higher
indirect overhead and depreciation costs resulting from the growth
investment made since 2019. Poor operational performance in the
first half of the year failed to improve in the pandemic-impacted
second half. This was compounded by a depressed oil price, which
resulted in continued disruption and uncertainty for customers and
the deferral of project spend, significantly impacting order
intake. Prudent steps have been taken to stabilise and protect
capability in this area of the business, ensuring PMC is positioned
for market recovery.
Strengthened Balance Sheet
The Group has maintained tight control of costs throughout the
year with proactive steps taken to preserve cash, including further
site consolidation and management restructuring where appropriate.
We are also pleased to have received strong support from our bank
who, since the year end, has approved amendments to and an
extension of the Group's Revolving Credit Facility (RCF) to the end
of November 2022 with updated financial covenants.
On 18 December 2020, the Group was also pleased to successfully
complete a GBP7.5 million (before expenses) fundraise from new and
existing shareholders to support exciting growth opportunities for
CSC in the hydrogen energy market and in the Integrity Management
services business. The fundraise also provides additional balance
sheet strength for the Group.
Board
I was delighted to join the Board of Pressure Technologies in
January 2020 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. In March
2020, Neil MacDonald retired from the Board and I would like to
thank Neil for his service to the Group since his appointment in
June 2013.
In October 2020, we announced that Group CFO, Joanna Allen had
stepped down from the Board after five years with the Group and
that Group Financial Controller, James Locking had been appointed
Interim Group Finance Director in a non-Board position. I would
like to thank Joanna for her contribution and service during her
five years with the business.
As part of our plans to further strengthen the Board and
reinforce governance and culture, the Group was pleased to announce
the appointment of Tim Cooper as Non-Executive Director in January
2020 and the appointment of Mike Butterworth as Non-Executive
Director and Chair of the Audit and Risk Committee in June 2020.
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 Group's strategy remains focused on the diversification,
continued development, and organic growth of both divisions.
In PMC, our priority remains to stabilise and protect the
consolidated operations, complete operational efficiency
improvements and maintain service levels for our growing base of
OEM customers, as we seek to conserve cash and recover
profitability.
CSC entered FY21 with a strong order book and we will continue
to drive the operational improvements that underpin margin growth
from established defence, energy and industrial contracts. The
successful fundraising will enable us to strengthen our
capabilities across this division to realise the significant growth
opportunities, particularly in the exciting hydrogen energy
market.
Sir Roy Gardner
Chairman
Business review
The important management and operational changes made since 2019
positioned us well to cope with the significant challenges faced
over the past year. I am extremely proud of our teams and their
response during unprecedented circumstances and encouraged by the
further progress made with organisational culture, this being key
to continuous improvement and the delivery of sustainable
growth.
Whilst slower than expected turnaround of operational
performance and depressed oil and gas markets have impacted
profitability, the strategic progress made to date across the Group
is driving increased diversification in the customer base,
positioning the business for sustainable long-term growth and
ensuring that we are well placed to capitalise on exciting
opportunities in some of our key markets.
Performance
Overall Group revenue for the year was GBP25.4 million (2019:
GBP28.3 million), down 10% and reflecting challenging trading
conditions, Covid-19 disruption and the deferral of revenue and
profit for a major defence contract into FY21.
GBP million revenue 2020 2019 2018 2017
Group Revenue 25.4 28.3 21.2 18.8
------- ------ ------ ------
Oil & Gas 14.9 16.3 12.4 10.6
------- ------ ------ ------
Defence 5.1 9.1 6.4 6.4
------- ------ ------ ------
Industrial Gases 5.2 2.2 2.4 1.8
------- ------ ------ ------
Hydrogen Energy 0.2 0.7 - -
------- ------ ------ ------
Group Operating (Loss) /
Profit before amortisation,
impairments and other exceptional
charges (2.4) 2.2 1.0 1.6
------- ------ ------ ------
Group Loss before taxation (20.0) (0.5) (1.7) (1.4)
------- ------ ------ ------
An adjusted operating loss of GBP2.4 million (2019: GBP2.2
million operating profit) was driven by lower than expected gross
margins in both divisions, the deferral of revenue relating to a
major defence contract into FY21 in CSC and poor operational
performance in PMC. The Group made a loss before taxation of
GBP20.0 million (2019: GBP0.5 million) which included amortisation,
impairment and exceptional costs totalling GBP17.6 million.
Divisional Review
Chesterfield Special Cylinders (CSC)
GBP million revenue 2020 2019 2018 2017
Revenue 11.2 13.9 9.9 8.4
------ ----- ----- -----
Oil and Gas 1.0 2.2 1.4 0.8
------ ----- ----- -----
Defence 5.1 9.1 6.4 6.4
------ ----- ----- -----
Industrial Gases 4.9 1.9 2.1 1.2
------ ----- ----- -----
Hydrogen Energy 0.2 0.7 - -
------ ----- ----- -----
Gross Margin 26% 36% 35% 41%
------ ----- ----- -----
Operating (Loss) / Profit
before amortisation, impairments
and other exceptional charges (0.1) 2.1 1.1 1.1
------ ----- ----- -----
(Loss)/profit before taxation (1.0) 2.1 1.0 1.0
------ ----- ----- -----
Return on Revenue 0% 15% 11% 13%
------ ----- ----- -----
Divisional revenue for the year was down 19% to GBP11.2 million
(2019: GBP13.9 million), predominantly due to the phasing of a
major defence contract into FY21 which drove lower overall gross
margin performance. Overall divisional gross margin decreased to
26% (2019: 36%), resulting in an operating loss of GBP0.1 million
(2019: GBP2.1 million operating profit) and a return on revenue of
0% (2019: 15%).
Total defence market revenue decreased by 44% to GBP5.1 million
representing 46% of divisional sales. Revenue for the supply of
ultra-large cylinders to UK defence contracts reduced to GBP3.5
million down by 15% (2019: GBP4.1 million) with the first
deliveries to the UK Ministry of Defence's Dreadnought class
submarine programme made during this period for long-standing
customer BAE Systems. A major order covering the long lead time raw
material milestone for the second Dreadnought boat in the series
was secured in June 2020, but the revenue and profit for this order
was deferred from the fourth quarter of FY20 into the first quarter
of FY21.
Revenue for export naval contracts decreased by 50% to GBP1.6
million (2019: GBP3.2 million). Revenue includes bespoke, safety
critical systems supplied to Naval Group for French and Brazilian
naval submarine programmes. New contracts to supply highly
specialised cylinders for early warning radar systems were secured
with Thales and the UK Ministry of Defence for delivery in
FY21.
Despite several contracts secured in late 2019, demand for oil
and gas related projects has deteriorated sharply due to depressed
oil prices and reduced capital spend in the sector, with several
ultra-large cylinder prospects being deferred to late 2021 and
beyond. Total oil and gas market revenue decreased by 55% to GBP1.0
million (2019: GBP2.2million), representing 9% of divisional sales
and reflecting the progress CSC continues to make in reducing its
historical dependence on the oil and gas sector, with the
diversification of end markets. Delivery was successfully completed
for the semi-submersible drilling unit projects in Singapore for
new customer MH Wirth.
Industrial gases market revenue increased significantly to
GBP4.9 million (2019: GBP1.9 million), representing 44% of the
divisional revenue, with the successful completion of the first
contract with EDF Energy for the supply of high-pressure nitrogen
storage solutions to nuclear power stations in the UK, including
Heysham, Torness and Hartlepool sites. As previously announced, a
second contract in excess of GBP3 million was awarded by EDF Energy
in September 2020 to supply several other nuclear power stations in
the UK with a series of nitrogen storage packages for delivery
through to mid-2021. This second order demonstrates the strength of
relationship with EDF Energy and the expertise of CSC in producing
bespoke seismically qualified modular designs for these
safety-critical projects. In May 2020, CSC was also pleased to be
awarded a GBP0.6 million revenue contract by 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.
Opportunities remain strong in the fast-developing hydrogen
energy market, with CSC completing three contracts for transport
refuelling high-pressure storage for new customers including ITM
Power, Haskel Hydrogen Systems and McPhy Energy, delivering
revenues of GBP0.2 million. Whilst this represented just 1% of
divisional sales in the year, it demonstrated the design,
engineering and through-life support capabilities that uniquely
position CSC with major players in this market. As further
testament to this, CSC signed a five-year framework agreement with
Shell Hydrogen in the first half of the year, becoming the approved
supplier of Type 1 steel cylinders to Shell-branded hydrogen
refuelling stations across Europe.
Despite Covid-19 travel restrictions from March onwards,
Integrity Management services delivered a fifth consecutive year of
strong growth, with total revenue up a record 93% to GBP2.3 million
(2019: GBP1.2 million). Notwithstanding the deferral of several UK
deployments, revenue from in-situ inspection and recertification
projects for UK submarine and surface vessel fleets primarily drove
this growth, more than doubling to GBP1.4 million. This reflected
support for critical infrastructure projects during the Covid-19
outbreak, with successful revalidation of high-pressure systems
onboard aircraft carriers HMS Queen Elizabeth and HMS Prince of
Wales. Overseas non-naval revenues declined by 50% to GBP0.1
million and despite new contract wins for in-situ revalidation
projects on offshore production units and diving support vessels in
Azerbaijan and Dubai, Covid-19 enforced travel restrictions caused
disruption and delays, with the deferral of several deployments
into 2021.
Investment plans for the division were delivered during the
year, with a second advanced machining centre becoming operational
in July, delivering substantial improvements to efficiency and
quality performance. The delivery and commissioning of an advanced
robotic ultrasonic test facility was delayed due to Covid-19
restrictions, but installation commenced in November and the system
will become fully operational early in FY21.
Precision Machined Components (PMC)
GBP million revenue 2020 2019 2018 2017
Revenue 14.2 14.4 11.2 10.4
------ ------ ------ -----
Oil and Gas 13.9 14.0 11.0 9.8
------ ------ ------ -----
Industrial Gases 0.3 0.4 0.2 0.6
------ ------ ------ -----
Gross Margin 17% 29% 33% 35%
------ ------ ------ -----
Operating (Loss) / Profit
before amortisation, impairments
and other exceptional
charges (0.7) 1.9 1.5 1.8
------ ------ ------ -----
(Loss)/profit before taxation (4.3) (0.3) (0.3) 0.1
------ ------ ------ -----
Return on Revenue (5)% 13% 13% 18%
------ ------ ------ -----
Although divisional revenue for the year was broadly unchanged
on the prior year at GBP14.2 million (2019: GBP14.4 million), PMC
reported an operating loss of GBP0.7 million (2019: GBP1.9 million
operating profit), driven by lower than expected gross margins, as
poor operational performance in the first half of the year failed
to improve in the second half. Operating profit was further
impacted by higher indirect overhead and depreciation costs
resulting from the growth investment made since 2019, whilst
restructuring and site consolidation steps taken in the second half
had only a minimal impact on the full year costs.
Overall divisional gross margin reduced to 17% (2019: 29%),
impacted by delayed output of new large complex components and the
late commissioning of new machining centres in the first half of
the year and by the onboarding of new customers, Covid-19
disruption across the supply chain and lower utilisation levels in
the second half. Return on revenue was (5)% compared to 13% last
year.
The depressed oil price has resulted in continued disruption and
uncertainty for our oil and gas OEM customers and the deferral of
project spend. Consequently, order intake in the second half fell
sharply and the divisional order book at the start of FY21 was less
than half the pre-pandemic value six months earlier. Performance
and market outlook also resulted in an impairment review of the
goodwill and other intangible assets of the PMC division as they
relate to Al-Met, Quadscot, Roota and Martract subsidiaries,
acquired by the Group between 2010 and 2016. Lower than previously
considered growth rates and higher risk-factored discount rates
applied to future cash flows have resulted in a non-cash
exceptional impairment to goodwill and other intangible assets of
GBP13.9 million.
Significantly higher indirect costs and depreciation following
two years of growth investment were not fully offset by the
proactive steps taken early in the second half of the year to limit
the impact of trading conditions on the division. These actions
included closure of the persistently loss-making Quadscot
operation, management restructuring and the implementation of other
cost saving and cash preservation measures, whilst seeking to
protect core capability.
Whilst the consolidation of the Quadscot operation and order
book into Roota through the peak of Covid-19 disruption took longer
than expected and adversely impacted divisional margins and
customer delivery schedules, this transition has now resulted in a
lower cost base and increased utilisation of capacity across the
remaining sites.
Further progress was made during the year with diversifying the
customer base and extending our range of precision machined
components for specialised oil and gas applications. This includes
long-term strategic supply agreements being signed or under
negotiation with key OEM customers, demonstrating their confidence
in PMC's products and service levels as they seek to consolidate
their approved supplier lists.
A stronger sales team and maturing sales processes have
underpinned increased sales effectiveness and better customer
relationship management. The investment in new production
management systems and the use of data to drive production
scheduling and customer reporting is starting to deliver
improvements, most notably to on-time delivery performance. The
investment in production engineering capability and new advanced
machining centres have also helped deliver significant time and
cost savings in the production of familiar and new component
designs, which will contribute to improved margins and
competitiveness through shorter lead times.
Reliance on the division's top three customers by revenue has
also reduced from 78% to 69% demonstrating further progress in
reducing customer concentrations. 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.
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.
Our Strategy
In March 2019, we set out a vision for growth in three phases
and were pleased with the steady progress being made in the first
two phases. However, the Covid-19 pandemic significantly impacted
the business environment, including working conditions, operational
performance, end markets and the global economy. We have adapted
and remain ready to further adjust our focus and resources to
protect the business, progress our strategy and take advantage of
future opportunities.
The Covid-19 pandemic and slower than expected improvement in
operational performance have contributed to delayed progress in
Phase 1 - Refocus, which we now expect to extend to the end of
2021, in line with the anticipated slow recovery of oil and gas
market conditions and the impact of this on our PMC division. We
expect Phase 2 - Deliver Organic Growth, to accelerate through
opportunities for CSC in the fast-developing hydrogen energy
market, driving the need for investment that was supported by the
successful fundraising in December 2020.
Outlook
Chesterfield Special Cylinders
Significant expansion and diversification of CSC's customer base
was achieved this year especially into the hydrogen energy
transport refuelling market and nuclear power generation market.
Strategic partnerships across the supply chain have enabled
significant reduction in lead times and the ongoing deepening of
existing customer relationships is a clear testament to the
strategic progress made by the division in a difficult operating
and trading environment.
Trading in the first few months of FY21 has continued in line
with our expectations. The order book for the year ahead remains
strong, with higher-margin projects, including the deferred BAE
Systems contract, weighted to the first half of the year.
CSC will continue to drive the operational improvements that
underpin margin growth from established defence and industrial
contracts, while strengthening capability and readiness for further
growth in Integrity Management services. Periodic inspection
regimes will require product revalidations as current travel
restrictions are lifted and the Group expects to see continued
growth in Integrity Management services in defence, nuclear power
generation and hydrogen energy sectors, where risk management and
asset availability are paramount.
Hydrogen energy storage remains an area of strategic focus and
significant future growth potential for the Group. The progress
already made in this rapidly developing market is expected to
continue as governments increasingly acknowledge the role of
hydrogen in the overall energy mix, with its contribution to
meeting net zero carbon targets in transportation and in the
decarbonising industry. In addition to the transport refuelling
station projects successfully completed or currently in production,
CSC has a strong pipeline of opportunities with new and existing
partners, including the five-year framework agreement with Shell
Hydrogen. These opportunities are supported by the ongoing
development of products and services to reduce through-life cost
and risk for the operators of static and mobile hydrogen storage.
Whilst progress to date has been encouraging, hydrogen energy is
still a developing technology and, as with all immature market
sectors, there inevitably remains uncertainty as to the timing and
scale of growth.
In December 2020, we were pleased to secure contracts for five
further hydrogen refuelling stations with existing customer Haskel,
new customer Framatome and a major new US customer for their
European projects.
Precision Machined Components
Our priority remains to stabilise and protect the consolidated
operations, complete operational improvements and maintain service
levels for our growing base of OEM customers, as we seek to
conserve cash and recover profitability. We anticipate at least a
further year of challenging trading conditions in a depressed oil
and gas market and will continue to appraise opportunities to
diversify our specialist engineering capability in other
sectors.
Fundraising
On 18 December 2020 the Group was pleased to successfully
complete a GBP7.5 million (before expenses) fundraise from new and
existing shareholders to support exciting growth opportunities for
CSC in the hydrogen energy market and in the Integrity Management
services business.
The investment provides us with the resources to capitalise on
the significant growth prospects in the hydrogen energy market and
to accelerate growth in our Integrity Management services business.
The stronger balance sheet will also provide resilience through the
difficult oil and gas market trading conditions, demonstrate
strength when developing partnerships and negotiating major
contracts, and provide flexibility to take advantage of emerging
opportunities.
Chris Walters
Chief Executive
Our Covid-19 response
1. Business as usual with caution and all sites operational.
Notwithstanding the many challenges faced on account of the
pandemic, the businesses worked effectively to ensure business
continuity given our status as a supplier to customers who support
UK Critical National Infrastructure and Defence Contracts.
Despite a certain level of operational disruption during the
lockdown period in the UK, staff absence levels stayed relatively
low, enabling us to keep all sites open and operational, with staff
working on the basis of 'business as usual, with caution'.
We continue to support our customers, maintaining close
communication and remaining focused on delivering orders safely and
to the best of our abilities.
The oil and gas markets remain depressed, causing ongoing
uncertainty for our oil and gas customers in particular, some of
whom have deferred project spend, causing pricing pressure
throughout the supply chain. We remain focused on the
diversification of our customer portfolio to mitigate this, in line
with our growth strategy. Integrity Management Services continues
to be impacted by the travel restrictions, especially with overseas
non-naval contracts, although some UK based naval contracts
remained on track due to critical defence and infrastructure
requirements.
2. Keeping employees safe whilst supporting UK Critical National Infrastructure
At the onset of the Covid-19 pandemic in March, we undertook
swift, decisive actions to protect the health, safety and wellbeing
of our teams.
We wrote and implemented specific precautions, policies and
guidelines which 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 safeguarding employees who met
vulnerable and extremely vulnerable category criteria.
During this difficult period, we successfully maintained
regular, open communications with colleagues working both on site
and at home, significantly enhanced due to the investments made in
the last year in our central group functions including Human
Resources and IT infrastructure.
3. Protecting our financial strength
To protect our financial strength, we took a number of prudent
measures to stabilise operations, manage cost and conserve cash and
core capability.
We enjoy a strong and supportive relationship with our bank and
post the financial year end were pleased to secure amendments and
an extension to our facility to 30 November 2022 with updated
financial covenant targets. In December 2020, we also successfully
completed a fundraising from new and existing shareholders to raise
GBP7.5 million (before expenses).
We continue to monitor the Covid-19 situation closely and will
adapt as necessary in order to continue servicing our customers
whilst protecting our people.
Chris Walters
Chief Executive
Financial review
Highlights
Group Revenue Group Adjusted Group loss
Down 10% to operating loss(*) before taxation
GBP25.4m at GBP2.4m at GBP20.0m
(2019: GBP28.3m) (2019: GBP2.2m operating (2019: GBP0.5m operating
profit) loss)
Return on Revenue(**) Net operating cash Closing Total
down 17.3ppt inflow(***) Net Debt(****)
to -9.4% GBP1.7m GBP7.4m
(2019: 7.9%) (2019: GBP0.6m) (2019: GBP11.4m)
=========================== ===========================
* Operating loss excluding amortisation, impairments and other
exceptional costs.
** Adjusted operating loss divided by revenue
*** before cash outflow for exceptional costs and excluding cash
flows associated with discontinued operations
**** total net debt includes gross borrowings, asset finance
leases, right of use asset leases, less cash and cash
equivalents
Our financial priority this year has been to minimise the impact
of Covid-19 on the Group with proactive measures to reduce costs
and to conserve cash while continuing to invest in making further
strategic progress against our focus areas for growth.
Tougher trading conditions and Covid-19 disruption, which
particularly impacted the Precision Machined Components division
(PMC) as well as the deferral of a defence contract with
Chesterfield Special Cylinders (CSC) into the year ended 2 October
2021 resulted in a reduction in Group revenue for the year to
GBP25.4 million (2019: GBP28.3 million) and an adjusted operating
loss for the year of GBP2.4 million (2019: GBP2.2 million operating
profit). The Group made a loss before taxation of GBP20.0 million
(2019: GBP0.5 million), which included amortisation, impairment and
other exceptional costs of GBP17.6 million.
However, the investments made in the previous year in equipment,
infrastructure and technology to add capacity and capability have
been instrumental in supporting business continuity across our
operations during the Covid-19 crisis.
CSC revenue decreased by 19% to GBP11.2 million (2019: GBP13.9
million) and the division made an adjusted operating loss of GBP0.1
million (2019: GBP2.1 million operating profit). PMC revenue
decreased by 1% to GBP14.2 million (2019: GBP14.4 million) and the
division made an adjusted operating loss of GBP0.7 million (2019:
GBP1.9 million operating profit).
The current trading performance and medium-term outlook of our
OEM customers regarding the depressed oil and gas market resulted
in an impairment review of the goodwill and other intangible assets
of the PMC division as they relate to Al-Met, Quadscot, Roota and
Martract subsidiaries, acquired by the Group between 2010 and 2016.
Lower than previously considered growth rates and higher
risk-factored discount rates, than assumed at the half year,
applied to future cash flows have resulted in a non-cash
exceptional impairment to goodwill and other intangible assets of
GBP13.9 million. In addition, in the company only accounts of
Pressure Technologies plc a write down of GBP26.5 million was made
with respect to the valuation of its investment in PT Precision
Machined Components Limited, the holding company which owns the
subsidiary companies that comprise the operations of the PMC
division.
On 3 October 2020, total net debt (which now includes right of
use asset leases following the adoption of IFRS 16) reduced to
GBP7.4 million (28 September 2019: GBP11.4 million). The Group's
GBP12.0 million RCF was drawn at GBP6.8 million (28 September 2019:
GBP10.8 million). Cash and cash equivalents increased to GBP3.4
million (28 September 2019: GBP2.2 million) taking net RCF debt
down to GBP3.4 million (28 September 2019: GBP8.6 million). Lease
liabilities on 3 October 2020 increased to GBP4.1 million (28
September 2019: GBP2.8 million), mainly as a result of right of use
asset liabilities brought in under the adoption of IFRS 16.
The significant reduction in total net debt was driven
principally by the receipt in February 2020 of a GBP2.1 million
repayment of the Greenlane Renewables Inc. Promissory Note with
associated interest and the receipt in June and July 2020 of GBP3.1
million from the sale of the shareholding in Greenlane Renewables
Inc. Receipt of the outstanding Promissory Note balance of GBP3.1
million is expected in June 2021.
The Group's existing RCF of GBP12 million at the year end, was
put in place in December 2019 for two years through to December
2021. In December 2020 the Group extended its facility through to
30 November 2022 with a GBP9 million facility through to 1 July
2021 and then GBP7 million for the remainder of the term.
In addition, the Group undertook a fundraising through the issue
on 18 December 2020 of 12,471,998 new ordinary shares which raised
cash proceeds, net of expenses, of approximately GBP7.0
million.
Trading results
CSC
Revenue decreased by 19% on the prior year primarily due to the
phasing of major defence contracts, which was further compounded by
the deferral of revenue on a significant defence contract from Q4
FY20 into Q1 FY21.
As a result, gross profit has decreased to GBP2.9 million (2019:
GBP5.0 million), with a 10.0ppt reduction in gross margin.
An adjusted operating loss before amortisation, impairments and
other exceptional costs of GBP0.1 million resulted in FY20 (2019:
GBP2.1 million adjusted operating profit) and there has been a
15.1ppt decrease in the return on revenue in the year to 0.0%
(2019: 15.1%).
Contracts that were categorised as 'recognised over time' and
still in progress at the end of the year had a value of GBP6.5
million of future revenue on these contracts relating to as yet
unfulfilled performance obligations which are due for delivery in
2021.
PMC
PMC revenue has decreased just over 1% primarily due to the
deterioration in oil and gas markets as a result of the Covid-19
pandemic. The division also saw lower than expected gross margins
as poor operational performance in the first half of the year
failed to improve in the second half of the year.
Gross profit decreased by 41.4% and there was a 11.8ppt
reduction in gross margin, compared to 2019 at 29.1%, primarily due
to the sharply reduced order intake in the second half of the year
as our oil and gas OEM customers deferred project spend against the
backdrop of a depressed oil price causing continued uncertainty and
disruption in the market. Margins were also impacted by the longer
than expected consolidation process of the Quadscot operation and
order book into our Roota facility, although we have now made good
progress in lowering the cost base and increasing capacity
utilisation across other sites.
The division reported an adjusted operating loss before
amortisation, impairments and other exceptional costs of GBP0.7
million which represents a return on revenue of -4.6%, a 17.6ppt
reduction from 2019.
Central costs
Unallocated central costs (before other exceptional charges)
were GBP1.7 million (2019: GBP1.7 million). The profit on the sale
of the investment in PT US Inc. and its 40% holding in Kelley GTM
and its assets totalling GBP0.3 million has been treated as an
exceptional Finance Cost and is shown in Note 2 to these financial
statements.
In respect of the Group's various share option plans there was a
net cost in the year of GBP0.1 million, (2019: net cost of GBP0.1
million).
Asset impairments and amortisation
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 Covid-19
pandemic 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 one of the Group's
cash generating units (CGU) - the Precision Machined Components
(PMC) division - is impaired. In light of the pandemic and the very
difficult trading conditions and outlook for the oil and gas
market, PMC's key end-market, the Group has considered a range of
economic conditions for the sectors 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 review concluded that an impairment was required of GBP13.9
million, comprising GBP9.5 million of goodwill, GBP2.1 million of
intellectual property, GBP2.2 million of non-contractual customer
relationships and GBP0.1 million of software items, which has
therefore been included, as a non-cash exceptional item, in these
financial statements. Amortisation costs were GBP2.0 million (2019:
GBP1.8 million) and have also been treated as a non-cash
exceptional item.
Disposal of investments and carrying value of other financial
assets
Greenlane Renewables Inc:
On 3 July 2020 the Group entered into a Framework Agreement with
Greenlane Renewables Inc. ("Greenlane"), Creation Partners LLP
("Creation") and Brad Douville (the "Framework Agreement") and
immediately sold a total of 7,663,920 common shares and the
underlying common shares of 5,094,765 share purchase warrants in
Greenlane Renewables Inc. (the "PT Securities"). The PT Securities
had been issued to PT in connection with the disposal in the prior
year of its wholly owned subsidiary PT Biogas Holdings Limited.
Together with the sale of 2,525,610 common shares in Greenlane on
10 June 2020, the Group realised cash proceeds of GBP3.1 million
from these sales.
As a result of the Framework Agreement, Greenlane's outstanding
principal on the Promissory Note owed to the Group (the "Promissory
Note") was reduced to approximately GBP3.1 million and the maturity
date was advanced from 3 June 2023 to 30 June 2021.
The profit on sale of the shareholding of GBP1.9 million and the
consequent modification in the value of the Promissory Note of
GBP1.0 million have been treated as exceptional Finance Costs and
are shown in note 2 to these financial statements.
The Group's only remaining interest in Greenlane Renewables Inc
is the Promissory Note, details of which can be found in Note 9 to
these financial statements.
PT US Inc:
At the beginning of the year the Group indirectly held a 40%
investment in Kelley GTM, LLC, through its 100% subsidiary PT US
Inc. The principal activity of Kelly GTM, LLC is the manufacture of
high-pressure vessels for gas transport solutions. Kelley GTM, LLC
is based in Amarillo, Texas. The investment in Kelley GTM, LLC was
fully written down in the period ended 3 October 2015.
In May 2020 the Group sold the entire share capital of PT US Inc
for a consideration of US$50,000 along with 5 GTM transport modules
for US$250,000. We therefore no longer have any interests in Kelly
GTM, LLC. The total profit on sale of this associate has been
treated as exceptional Finance Costs and is shown in note 2 to
these financial statements.
Other exceptional items
Reorganisation and redundancy costs in the year were GBP0.4
million (2019: GBP0.5 million), which predominantly relate to
termination payments made on the resignation of the previous CFO
and divisional PMC management reorganisation costs.
An inventory write off in PMC relating to obsolete stock items
totalled GBP0.5 million and other head office costs totalled GBP0.4
million in the year.
The Group closed its Quadscot operation in June 2020 after five
consecutive years of loss making and closure costs both incurred
and provided for, totalled GBP0.7 million in the year.
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. On 13 January 2020, the
Group was sentenced to a fine of GBP0.7 million along with
prosecution costs of GBP0.2 million. The fine is due to be paid
over five six-monthly instalments of GBP140,000 commencing on 31
January 2021.
Taxation
The tax credit for the year was GBP1.1 million (2019: GBP0.1
million).
The current year tax charge has benefitted from a GBP0.1 million
overprovision in respect of the prior year. Deferred tax reflects a
GBP1.0 million credit relating to the charge in respect of the
impairment of intangible assets.
R&D tax benefits in respect of 2020 are expected to be
around GBP1.1 million (2019: GBP1.2 million).
Corporation tax refunded in the year totalled GBP0.2 million
(2019: GBP0.2 million), which relates to the UK. Taxes relating to
overseas territories are minimal.
Foreign Exchange
The Group has exposure to movements in foreign exchange rates
related to both transactional trading and translation of overseas
investments.
In the year under review, the principal exposure which arose
from trading activities, was to movements in the value of the Euro,
the Canadian Dollar 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 hedge already in place.
Following the disposal of the Alternative Energy Division in the
prior year the overall exposure of the Group to currency
fluctuations in respect of trading has reduced considerably. The
Group is however more exposed to the transactional impact of the
Canadian Dollar in respect of the Greenlane Renewables Promissory
Note, 50% of which is denominated in that currency. Where
appropriate, and where the timing of future cash flows are able to
be reliably estimated, forward contracts are taken out to cover
exposure.
As at 3 October 2020 there were no forward contracts in place
(2019: none).
Financing, cash flow and leverage
Operating cash outflow before movements in working capital was
GBP3.3 million (2019: GBP2.6 million inflow). After a net working
capital inflow of GBP5.0 million (2019: GBP2.0 million outflow),
cash generated from operations was GBP1.7 million (2019: GBP0.6
million). Key movements within working capital include the timing
flows of major CSC contracts including received milestone payments
with respect to the Dreadnought Boatset 2 Programme materials,
whereby supplier payments moved to after the year end. In addition,
the inflow from net working capital includes around GBP1.0 million
from deferred payments of PAYE and VAT to HMRC, due to Covid-19
relief, across the Group that have been moved into 2021 to be paid
on an agreed instalment timescale.
Cash outflow in the year in respect of other exceptional costs
(see Note 5) was GBP1.5 million (2019: GBP1.6 million). This
excludes the inventory write down and asset impairments which were
non cash-flow exceptional items and the HSE fine none of which was
paid in the year but deferred to future periods for payment.
During the year the Group received GBP5.2 million exceptional
cash inflow relating to its interests in Greenlane Renewables Inc.
following the sale for GBP3.1 million of its entire holding of
common shares and underlying share purchase warrants and a
repayment of GBP2.1 million of the Promissory Note.
Total net debt, including right of use asset leases following
the adoption of IFRS 16, was GBP7.4 million (2019: GBP11.4
million), the decrease driven primarily by exceptional receipts of
GBP5.2 million from the Group's interests in Greenlane Renewables
Inc. and other working capital inflows. This enabled the repayment
of GBP4.0 million of the Group's GBP12 million revolving credit
facility ("RCF") reducing drawn debt to GBP6.8 million at the year
end (2019: GBP10.8 million).
The decrease in adjusted EBITDA more than off-set the decrease
in net debt which means the Net Debt to Adjusted EBITDA leverage
ratio included as a covenant in the RCF facility increased to 3.8:1
at 3 October 2020 (2019: 1.8:1). The Group's existing RCF at the
year end, was put in place in December 2019 for two years through
to December 2021. In December 2020 the Group extended its facility
through to 30 November 2022 with a GBP9 million facility through to
1 July 2021 and then GBP7 million for the remainder of the
term.
The key financial covenant in the amended RCF remains the
leverage covenant, which is tested quarterly, and has a maximum
permitted net debt to adjusted EBITDA ratio of 5.5:1 for the two
quarterly test dates of December 2020 and March 2021, a ratio of
3.5:1 in June 2021 reducing to a maximum of 3:1 by September 2021
and for the remainder of the term. Following the fundraising in
December 2020 (see note 14), is it expected that these covenants
may be subject to amendment following discussions with the
bank.
(Loss)/earnings per share and dividends
Adjusted loss per share was 6.4 pence (2019: 7.8 pence adjusted
earnings per share). Basic loss per share was 101.5 pence (2019:
2.1 pence).
No dividends were paid in the year (2019: nil) and no dividends
have been declared in respect of the year ended 3 October 2020
(2019: nil). Distributable reserves in the parent company decreased
as a result of the write down of the investment in PT PMC Limited
and as at the year end are negative GBP20.6 million (2019: GBP6.8
million positive reserve).
Pressure Technologies plc, the company, has GBP26.2 million of
share premium as at year end. On 17 December 2020, the Company
received shareholder approval to convert the share premium, under a
capital reduction, into a distributable reserve. This process
requires Court Approval. An application to the Courts has been made
but the timing of the process is currently uncertain.
Statement of financial position
Goodwill and intangible assets (at net book value) decreased by
GBP15.8 million to GBP0.3 million (2019: GBP16.1 million)
principally as a result of the GBP13.9 million impairment of the
PMC CGU. Amortisation in the year was GBP2.0 million (2019: GBP1.8
million).
The consolidation of the Quadscot operation and order book into
the Roota Engineering facility took place in June 2020. The
property at Quadscot is owned and was marketed for sale with
immediate effect. As at 3 October 2020 the Group was expecting to
sell all 3 conjoined units, either separately or as a whole, within
the next financial year and therefore in the statement of financial
position is showing the market value of the properties of GBP0.6
million as an "Asset held for sale" under current assets.
Net current assets (being current assets less current
liabilities), excluding RCF borrowings, decreased to GBP8.5 million
(2019: GBP9.1 million). Non-current liabilities of GBP10.9 million
have increased by GBP7.1 million, primarily as a result of GBP6.8
million of RCF borrowings. In the prior year the RCF borrowings
were classified as current liabilities. However, following the
recent renegotiation of the RCF which now extends to 30 November
2022, they are classified as non-current liabilities as at 3
October 2020.
Net assets decreased by 59% to GBP13.3 million (2019: GBP32.1
million) and net asset value per share decreased to 72 pence (2019:
176 pence).
Chris Walters
Director
Consolidated statement of comprehensive income
For the 53 week period ended 3 October 2020
Notes 53 weeks 52 weeks
ended ended
3 October 28 September
2020 2019
GBP'000 GBP'000
------ ----------- --------------
Revenue 1 25,403 28,291
------ ----------- --------------
Cost of sales (20,054) (19,119)
------ ----------- --------------
Gross profit 5,349 9,172
------ ----------- --------------
Administration expenses (7,728) (6,938)
------ ----------- --------------
Operating (loss)/profit before amortisation,
impairments and other exceptional
costs (2,379) 2,234
------ ----------- --------------
Separately disclosed items of administrative
expenses:
------ ----------- --------------
Amortisation 4 (1,958) (1,832)
------ ----------- --------------
Impairments 4 (13,878) -
------ ----------- --------------
Other exceptional charges 5 (2,751) (450)
------ ----------- --------------
Operating loss (20,966) (48)
------ ----------- --------------
Finance income/(costs) 2 977 (467)
------ ----------- --------------
Loss before taxation 3 (19,989) (515)
------ ----------- --------------
Taxation 6 1,113 126
------ ----------- --------------
Loss for the period from continuing
operations (18,876) (389)
------ ----------- --------------
Discontinued operations
------ ----------- --------------
Loss for the period from discontinued
operations - (1,203)
------ ----------- --------------
Loss for the period attributable
to the owners of the parent (18,876) (1,592)
------ ----------- --------------
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods:
Currency exchange differences on
translation of foreign operations (13) (140)
------ ----------- --------------
Exchange differences on translation
of discontinued foreign operations - 325
------ ----------- --------------
Total Other Comprehensive Income (13) 185
------ ----------- --------------
Total comprehensive expense for
the period attributable to the owners
of the parent (18,889) (1,407)
------ ----------- --------------
Basic loss per share
------ ----------- --------------
From continuing operations 7 (101.5)p (2.1)p
------ ----------- --------------
From discontinued operations 7 - (6.5)p
------ ----------- --------------
From loss for the period (101.5)p (8.6)p
------ ----------- --------------
Diluted loss per share
------ ----------- --------------
From continuing operations 7 (101.5)p (2.1)p
------ ----------- --------------
From discontinued operations 7 - (6.5)p
------ ----------- --------------
From loss for the period (101.5)p (8.6)p
------ ----------- --------------
Consolidated statement of financial position
As at 3 October 2020
Notes 3 October 28 September
2020 2019
GBP'000 GBP'000
------ ---------- -------------
Non-current assets
------ ---------- -------------
Goodwill 8 - 9,510
------ ---------- -------------
Intangible assets 325 6,598
------ ---------- -------------
Property, plant and equipment 14,910 14,042
------ ---------- -------------
Deferred tax asset 464 278
------ ---------- -------------
Other financial assets 9 - 7,350
------ ---------- -------------
15,699 37,778
------ ---------- -------------
Current assets
------ ---------- -------------
Inventories 5,487 5,115
------ ---------- -------------
Trade and other receivables 11,543 9,541
------ ---------- -------------
Cash and cash equivalents 3,416 2,208
------ ---------- -------------
Asset held for sale 580 -
------ ---------- -------------
Other financial assets 9 3,074 -
------ ---------- -------------
Current tax - 95
------ ---------- -------------
24,100 16,959
------ ---------- -------------
Total assets 39,799 54,737
------ ---------- -------------
Current liabilities
------ ---------- -------------
Trade and other payables (14,370) (7,360)
------ ---------- -------------
Borrowings - revolving credit facility 10 - (10,800)
------ ---------- -------------
Lease Liabilities 11 (1,209) (656)
------ ---------- -------------
(15,579) (18,816)
------ ---------- -------------
Non-current liabilities
------ ---------- -------------
Other payables (538) (158)
------ ---------- -------------
Borrowings - revolving credit facility 10 (6,773) -
------ ---------- -------------
Lease Liabilities 11 (2,843) (2,116)
------ ---------- -------------
Deferred tax liabilities (752) (1,561)
------ ---------- -------------
(10,906) (3,835)
------ ---------- -------------
Total liabilities (26,485) (22,651)
------ ---------- -------------
Net assets 13,314 32,086
------ ---------- -------------
Equity
------ ---------- -------------
Share capital 930 930
------ ---------- -------------
Share premium account 26,172 26,172
------ ---------- -------------
Translation reserve (293) (280)
------ ---------- -------------
Retained earnings (13,495) 5,264
------ ---------- -------------
Total equity 13,314 32,086
------ ---------- -------------
Consolidated statement of changes in equity
For the 53 week period ended 3 October 2020
Share
Share premium Translation Retained Total
Notes capital account reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ------------ ---------- ---------
Balance at 29 September
2018 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)
--------- --------- ------------ ---------- ---------
Other comprehensive
expense:
Exchange differences
on translating foreign
operations - - (140) - (140)
--------- --------- ------------ ---------- ---------
Other comprehensive
income:
Exchange differences
on translation of
discontinued foreign
operations - - 325 - 325
--------- --------- ------------ ---------- ---------
Total comprehensive
income/(expense) - - 185 (1,592) (1,407)
--------- --------- ------------ ---------- ---------
Balance at 28 September
2019 930 26,172 (280) 5,264 32,086
--------- --------- ------------ ---------- ---------
Share based payments - - - 117 117
--------- --------- ------------ ---------- ---------
Transactions with
owners - - - 117 117
--------- --------- ------------ ---------- ---------
Loss for the period
- continuing operations - - - (18,876) (18,876)
--------- --------- ------------ ---------- ---------
Other comprehensive
expense:
Exchange differences
on translating foreign
operations - - (13) - (13)
--------- --------- ------------ ---------- ---------
Total comprehensive
expense - - (13) (18,876) (18,889)
--------- --------- ------------ ---------- ---------
Balance at 3 October
2020 930 26,172 (293) (13,495) 13,314
--------- --------- ------------ ---------- ---------
Consolidated statement of cash flows
For the 53 week period ended 3 October 2020
Notes 53 weeks 52 weeks
ended ended
3 October 28 September
2020 2019
GBP'000 GBP'000
------ ----------- --------------
Operating activities
------ ----------- --------------
Cash flows from operating activities 13 1,707 628
------ ----------- --------------
Finance costs paid (188) (464)
------ ----------- --------------
Income tax refunded 213 159
------ ----------- --------------
Cash flows from discontinued operations - (2,534)
------ ----------- --------------
Net cash inflow/(outflow) from operating
activities 1,732 (2,211)
------ ----------- --------------
Investing activities
------ ----------- --------------
Proceeds from sale of financial assets 3,145 -
held at FVTPL
------ ----------- --------------
Proceeds from sale of associate 297 -
------ ----------- --------------
Proceeds from sale of fixed assets 268 -
------ ----------- --------------
Proceeds from repayment of Promissory 2,000 -
Note
------ ----------- --------------
Purchase of property, plant and equipment (2,103) (3,693)
------ ----------- --------------
Cash inflow on disposal of subsidiaries
net of cash disposed of - 1,277
------ ----------- --------------
Net cash from/(used in) investing activities 3,607 (2,416)
------ ----------- --------------
Financing activities
------ ----------- --------------
Repayment of borrowings (4,250) (1,000)
------ ----------- --------------
Proceeds from new borrowings 223 -
------ ----------- --------------
Repayment of lease liabilities (1,301) (307)
------ ----------- --------------
Proceeds from asset financing 1,197 2,002
------ ----------- --------------
Net cash (used in)/from financing activities (4,131) 695
------ ----------- --------------
Net increase/(decrease) in cash and
cash equivalents 1,208 (3,932)
------ ----------- --------------
Cash and cash equivalents at beginning
of period 2,208 6,140
------ ----------- --------------
Cash and cash equivalents at end of
period 3,416 2,208
------ ----------- --------------
Notes
Basis of preparation
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined by
section 434 of the Companies Act 2006. It has been prepared in
accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS) adopted for use
in the European Union, including IFRIC interpretations issued by
the International Accounting Standards Board, and in accordance
with the AIM rules and is not therefore in full compliance with
IFRS. The principal accounting policies of the Group, with the
exception of new accounting standards adopted in the period, have
remained unchanged from those set out in the Group's 2019 annual
report. The financial statements have been prepared under the
historical cost convention, except for derivative financial
instruments which are carried at fair value.
The financial information for the period ended 3 October 2020
was approved by the Board on 13 January 2021 and has been extracted
from the Group's financial statements upon which the auditor's
opinion is unmodified and does not include a statement under
section 498(2) or (3) of the Companies Act 2006.
The statutory accounts for the period ended 3 October 2020 will
be posted to shareholders at least 21 days before the Annual
General Meeting and made available on our website
www.pressuretechnologies.com. In due course, they will be delivered
to the Registrar of Companies. The statutory accounts for the
period ended 28 September 2019 have been delivered to the Registrar
of Companies.
Going concern
The financial statements have been prepared on a going concern
basis. The 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 "Guidance on the Going Concern Basis of Accounting
and Reporting on Solvency and Liquidity Risks" in 2016. The
Directors have considered this when preparing these financial
statements.
The Group's existing revolving credit facility (RCF) of GBP12
million at the year end, was put in place in December 2019 for two
years through to December 2021 (see note 10). In December 2020 the
Group extended its facility through to 30 November 2022 with a GBP9
million facility through to 1 July 2021 and then GBP7 million for
the remainder of the term. In addition, in December 2020 the Group
undertook a fundraising through the issue of new shares which
raised cash proceeds, net of expenses, of approximately GBP7
million.
Management have produced forecasts for the period up to January
2022 for all business units, taking account of reasonably plausible
changes in trading performance and market conditions, which have
been reviewed by the Directors. These reasonably plausible changes
include the continued impact of the Covid-19 pandemic and the
impact of the currently depressed oil and gas market. The forecasts
demonstrate that the Group is forecast to generate profits and cash
in 2020/2021 and beyond and that the Group has sufficient cash
reserves and headroom in financial covenants to enable the Group to
meet its obligations as they fall due for a period of at least 12
months from the date when these financial statements have been
signed.
After undertaking the assessments they have and considering the
uncertainties set out above, the Directors have a reasonable
expectation that the Group has adequate resources to continue to
operate for the foreseeable future and for these reasons they
continue to adopt the going concern basis in preparing the
financial statements.
New Standards adopted in 2020
-- IFRS 16 'Leases'
IFRS 16 'Leases' replaces 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 adoption of this new Standard has resulted in the Group
recognising a right-of-use asset and related lease liability in
connection with all former operating leases except for those
identified as low-value or having a remaining lease term of less
than 12 months from the date of initial application.
The new Standard has been applied using the modified
retrospective approach. 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 arrangements that were
previously not identified as lease under IAS 17 and IFRIC 4.
The Group 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 as 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 following is a reconciliation of total operating lease
commitments at 28 September 2019 (as disclosed in the financial
statements to 28 September 2019) to the lease liabilities
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 (17)
Total lease liabilities before discounting 1,331
Discounted using incremental borrowing rate (125)
Total lease liabilities recognised under IFRS 16
at 29 September 2019 1,206
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 53 week period ended 3 October 2020
Precision
Machined Central
Cylinders Components costs Total
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ --------- ---------
Revenue from external customers 11,218 14,185 - 25,403
------------ ------------ --------- ---------
Gross profit/(loss) 2,912 2,461 (24) 5,349
------------ ------------ --------- ---------
Operating loss before amortisation,
impairments and other exceptional
costs (58) (656) (1,665) (2,379)
------------ ------------ --------- ---------
Amortisation and impairment (88) (1,788) (13,960) (15,836)
------------ ------------ --------- ---------
Other exceptional charges (827) (1,752) (172) (2,751)
------------ ------------ --------- ---------
Operating loss (973) (4,196) (15,797) (20,966)
------------ ------------ --------- ---------
Net finance (costs)/income (31) (89) 1,097 977
------------ ------------ --------- ---------
Loss before tax (1,004) (4,285) (14,700) (19,989)
------------ ------------ --------- ---------
Segmental net assets/(liabilities)
* 7,160 12,079 (5,925) 13,314
------------ ------------ --------- ---------
For the 53 week period ended
3 October 2020
------------ ------------ --------- ---------
Other segment information:
------------ ------------ --------- ---------
Capital expenditure - property,
plant and equipment 1,287 793 23 2,103
------------ ------------ --------- ---------
Depreciation 641 880 205 1,726
------------ ------------ --------- ---------
Amortisation 88 1,788 82 1,958
------------ ------------ --------- ---------
* 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.
For the 52 week period ended 28 September 2019
Precision
Machined Central
Cylinders Components costs Total
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ --------- --------
Revenue
------------ ------------ --------- --------
- total 13,860 14,449 - 28,309
------------ ------------ --------- --------
- revenue from other
segments - (18) - (18)
------------ ------------ --------- --------
Revenue from external
customers 13,860 14,431 - 28,291
------------ ------------ --------- --------
Gross profit/(loss) 4,996 4,198 (22) 9,172
------------ ------------ --------- --------
Operating profit/(loss)
before amortisation,
impairments and other
exceptional costs 2,089 1,879 (1,734) 2,234
------------ ------------ --------- --------
Amortisation - (1,750) (82) (1,832)
------------ ------------ --------- --------
Other exceptional charges - (398) (52) (450)
------------ ------------ --------- --------
Operating profit/(loss) 2,089 (269) (1,868) (48)
------------ ------------ --------- --------
Net finance costs (15) (30) (422) (467)
------------ ------------ --------- --------
Profit/(loss) before
tax 2,074 (299) (2,290) (515)
------------ ------------ --------- --------
Segmental net assets/(liabilities)
* 7,946 54,403 (30,263) 32,086
------------ ------------ --------- --------
Other segment information:
------------ ------------ --------- --------
Capital expenditure -
property, plant and equipment 1,359 2,080 13 3,452
------------ ------------ --------- --------
Depreciation 505 733 119 1,357
------------ ------------ --------- --------
Amortisation - 1,750 82 1,832
------------ ------------ --------- --------
* 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.
The Group's revenue disaggregated by primary geographical
markets is as follows:
Revenue 2020 2019
Precision Precision
Machined Machined
Cylinders Components Total Cylinders Components Total
------------ ------------ -------- ------------ ------------ --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ -------- ------------ ------------ --------
United Kingdom 8,509 7,544 16,053 8,388 7,411 15,799
------------ ------------ -------- ------------ ------------ --------
Europe 1,895 3,678 5,573 2,701 4,467 7,168
------------ ------------ -------- ------------ ------------ --------
Rest of the
World 814 2,963 3,777 2,771 2,553 5,324
------------ ------------ -------- ------------ ------------ --------
11,218 14,185 25,403 13,860 14,431 28,291
------------ ------------ -------- ------------ ------------ --------
The Group's largest customer, which is reported within the
Cylinders segment, contributed 13% to the Group's revenue (2019:
13% reported in the Precision Machined Components segment).
The following table provides an analysis of the Group's revenue
by market.
Revenue 2020 2019
GBP'000 GBP'000
-------- --------
Oil and gas 14,901 16,272
-------- --------
Defence 5,142 9,118
-------- --------
Industrial gases 5,219 2,175
-------- --------
Hydrogen energy 141 726
-------- --------
25,403 28,291
-------- --------
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 2020 2019
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 2,465 13,736 8,996 14,431
------------ ------------ ------------ ------------
Sale of goods transferred
over time 4,958 - 1,739 -
------------ ------------ ------------ ------------
Rendering of services 3,795 449 3,125 -
------------ ------------ ------------ ------------
11,218 14,185 13,860 14,431
------------ ------------ ------------ ------------
The following aggregated amounts of transaction values relate to
the performance obligations from existing contracts that are
unsatisfied or partially unsatisfied as at 3 October 2020:
Revenue expected in future periods 2021
GBP'000
--------
Sale of goods - Cylinders 6,457
--------
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.
2020 2019
GBP'000 GBP'000
---- -------- --------
Non-current assets 15,699 37,778
-------- --------
Additions to property,
plant and equipment 3,434 3,452
-------- --------
2. Finance income/(costs)
2020 2019
GBP'000 GBP'000
-------- --------
Interest receivable 419 -
-------- --------
Interest payable on bank loans and overdrafts (455) (421)
-------- --------
Interest payable on lease liabilities (153) (46)
-------- --------
Profit on sale of associate 297 -
-------- --------
Profit on sale of shareholding in GRN Inc. 1,895 -
-------- --------
Modification of Promissory Note receivable (1,026) -
-------- --------
977 (467)
-------- --------
In May 2020, the Group sold its holding in PT US Inc. and Kelley
GTM, LLC of which it owned 40%. The proceeds for the sale of the
entity was $50,000 and the sale of the assets of the business was
$250,000, which translated to GBP297,000 of profit on sale of
associate.
In June and July 2020, the Group sold its 21% shareholding in
Greenlane Renewables, Inc. for cash proceeds, net of related
expenses, of GBP3,145,000 generating a profit on sale of
GBP1,895,000. At the same time, the Group recorded a related
modification of GBP1,026,000 in the carrying value of the
Promissory Note which formed part of the consideration on sale of
the Alternative Energy division in the prior period.
3. Loss before taxation
Loss before taxation is stated after charging/(crediting):
2020 2019
GBP'000 GBP'000
-------- --------
Depreciation of property, plant and equipment
- owned assets 1,376 1,291
-------- --------
Depreciation of property, plant and equipment
- leased assets 350 66
-------- --------
Profit on disposal of fixed assets (61) -
-------- --------
Amortisation of intangible assets acquired
on business combinations 1,958 1,832
-------- --------
Amortisation of grants receivable (40) (40)
-------- --------
Staff costs - excluding share based payments 10,995 9,765
-------- --------
Cost of inventories recognised as an expense 12,448 13,921
-------- --------
Operating lease rentals:
-------- --------
- Land and buildings - 360
-------- --------
- Machinery and equipment 19 62
-------- --------
Foreign currency loss 69 10
-------- --------
Share based payments 117 100
-------- --------
4. Amortisation and Impairments
2020 2019
GBP'000 GBP'000
--------- --------
Amortisation of intangible assets (1,958) (1,832)
--------- --------
Goodwill and intangible assets impairment (13,878) -
--------- --------
(15,836) (1,832)
--------- --------
The Covid-19 pandemic, current trading performance and
medium-term outlook of our OEM customers regarding the depressed
oil and gas market has driven an impairment review of the goodwill
and other intangible assets of the PMC division as they relate to
Al-Met, Quadscot, Roota and Martract subsidiaries, acquired by the
Group between 2010 and 2016. Lower than previously considered
growth rates and higher risk-factored discount rates, than assumed
at the half year, applied to future cash flows have resulted in a
non-cash exceptional impairment to goodwill of GBP9.5 million (see
note 8) and other intangible assets of GBP4.4 million.
5. Other exceptional charges
2020 2019
GBP'000 GBP'000
-------- --------
Reorganisation and redundancy (424) (450)
-------- --------
Impairment of inventory and work in progress (504) -
-------- --------
Costs in relation to HSE fine (700) -
-------- --------
Closure of Precision Machined Components facility (690) -
(Quadscot)
-------- --------
Other costs (inc. bank refinancing and legal (433) -
costs)
-------- --------
(2,751) (450)
-------- --------
The reorganisation and redundancy costs (which are recognised in
accordance with IAS 19) relate to costs of restructuring across the
Group, the divisional split is given in Note 1.
6. Taxation
2020 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----------------- -------------- ----------------
Total Continuing Discontinued Total
---------------- ----------------- -------------- ----------------
Current tax credit
---------------- ----------------- -------------- ----------------
Over provision in respect of
prior years (118) (220) (79) (299)
---------------- ----------------- -------------- ----------------
(118) (220) (79) (299)
---------------- ----------------- -------------- ----------------
Deferred tax (credit)/expense
---------------- ----------------- -------------- ----------------
Origination and reversal of
temporary differences (43) (133) (133)
---------------- ----------------- -------------- ----------------
Impairment of intangible assets (1,013) - - -
---------------- ----------------- -------------- ----------------
Under provision in respect
of prior years 61 227 227
---------------- ----------------- -------------- ----------------
(995) 94 94
---------------- ----------------- -------------- ----------------
Total taxation credit (1,113) (126) (79) (205)
---------------- ----------------- -------------- ----------------
Corporation tax is calculated at 19% (2019: 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 profit per
the consolidated statement of comprehensive income as follows:
2020 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
Total Continuing Discontinued Total
---------- ------------ -------------- ----------
Loss before taxation (19,989) (515) (1,282) (1,797)
---------- ------------ -------------- ----------
Theoretical tax at UK corporation
tax rate 19% (2019: 19%) (3,798) (98) (243) (341)
---------- ------------ -------------- ----------
Effect of charges/(credits):
---------- ------------ -------------- ----------
* non-deductible expenses 74 51 1 52
---------- ------------ -------------- ----------
2,970 - - -
* non-deductible exceptional items
---------- ------------ -------------- ----------
- research and development
allowance (204) (118) - (118)
---------- ------------ -------------- ----------
* adjustments in respect of prior years (57) 7 (79) (72)
---------- ------------ -------------- ----------
* non-taxable profit on disposal - - (293) (293)
---------- ------------ -------------- ----------
* effect of unrealised losses on discontinued
operations - - 535 535
---------- ------------ -------------- ----------
* effect of discontinued operations translation rates - 62 - 62
---------- ------------ -------------- ----------
31 - - -
* differences in deferred tax rates
---------- ------------ -------------- ----------
* losses not previously recognised now utilised (129) (30) - (30)
---------- ------------ -------------- ----------
Total taxation credit (1,113) (126) (79) (205)
---------- ------------ -------------- ----------
7. 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 options.
On 18 December 2020 the Group undertook a fundraising through
the issue of 12,471,998 new ordinary shares (see note 14) which
would have materially impacted the number of shares outstanding at
the end of the period, if the transaction had happened in the
reporting period.
For the 53 week period ended 3 October 2020
Total
GBP'000
Loss after tax (18,876)
-----------
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 loss per share (101.5)p
-----------
Diluted loss per share (101.5)p
-----------
The Group adjusted loss per share is calculated as follows:
Loss after tax (18,876)
Amortisation and Impairments (see note
4) 15,836
---------
Other exceptional charges (see note
5) 2,751
---------
Theoretical tax effect of the above
adjustments (895)
---------
Adjusted loss (1,184)
---------
Adjusted loss per share (6.4)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.
The theoretical tax effect is based on 19% of adjustments for
amortisation and other exceptional charges incurred.
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.
----------- ------------- -----------
18,595,165
----------- ------------- -----------
Weighted average number of shares
- basic 9,234
----------- ------------- -----------
Dilutive effect of share options
----------- ------------- -----------
18,604,399
----------- ------------- -----------
Weighted average number of shares
- diluted
----------- ------------- -----------
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
----------- ------------- -----------
The Group adjusted loss per share is calculated as follows:
Continuing Discontinued Total
GBP'000 GBP'000 GBP'000
Loss after tax (389) (1,203) (1,592)
----------- ------------- ---------
Amortisation (see note 4) 1,832 558 2,390
----------- ------------- ---------
Other exceptional charges (see note
5) 450 (1,401) (951)
----------- ------------- ---------
Theoretical tax effect of the above
adjustments (434) (428) (862)
----------- ------------- ---------
Adjusted earnings/(loss) 1,459 (2,474) (1,015)
----------- ------------- ---------
Adjusted earnings/(loss) per share 7.8p (13.3)p (5.5)p
----------- ------------- ---------
8. Goodwill
Total
GBP'000
Cost and gross carrying amount
----------
At 29 September 2018 14,370
----------
Removed upon business disposal (4,860)
----------
At 28 September 2019 9,510
----------
Impairment (9,510)
----------
At 3 October 2020 -
----------
Goodwill arising on consolidation represents the excess of the
fair value of the consideration given over the fair value of the
identifiable net assets acquired. All of the goodwill arose in
respect of acquisitions in the Precision Machined Components
division made in prior years.
The Group tests annually for impairment, under IAS 36, or more
frequently if there are indicators that goodwill might be impaired.
The recoverable amounts of the cash generating units (CGUs) are
determined from value in use calculations, using a four year
forecast and applying a discount rate of 13.0% to the Precision
Machined Components division (2019: 14.7%). The 2020 assessment,
following the reorganisation of the individual PMC businesses into
an integrated division, has been carried out at the divisional
level.
The forecast has been approved by management and the Board of
Directors, and is based on a bottom up assessment of costs and uses
the known and estimated pipeline of orders to determine revenue.
The forecasts used for years two to four assume 2% revenue growth,
however no long-term rate of growth or inflation is incorporated
into perpetuity at the end of year four.
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.
After applying sensitivity analysis in respect of the results
and future cash flows, in particular for presumed growth rates and
discount rates, management believes that a full impairment is
required for the goodwill relating to the Precision Machined
Components division.
Management is not aware of any other matters that would
necessitate changes to its key estimates.
9. Other Financial Assets
Amounts due within 12 months 2020 2019
GBP'000 GBP'000
--------- --------
Promissory Note 3,074 -
--------- --------
Total due within 12 months 3,074 -
--------- --------
Amounts due after 12 months
--------- --------
Listed Security - 1,250
--------- --------
Promissory Note - 6,100
--------- --------
Total due after 12 months - 7,350
--------- --------
As at the beginning of the year, the Group held a listed
security asset which related entirely to its 21% shareholding in
Greenlane Renewables Inc. and a Promissory Note which formed part
of the consideration on the sale of the Alternative Energy division
in the prior year. The voting rights of the shares held by the
Group were restricted so the Group considered that it did not have
significant influence over GRN and did not account for the
investment as an associate entity in the prior year.
The fair value of the shareholding in Greenlane Renewables Inc.
as at 28 September 2019 was determined by reference to published
price quotations in an active market (classified as level 1 in the
fair value hierarchy). In June and July 2020, the Group sold its
21% shareholding in Greenlane Renewables, Inc. for cash proceeds,
net of related expenses, of GBP3,145,000 generating a profit on
sale of GBP1,895,000 which has been reflected as an exceptional
credit within Finance income/(costs) in the current year (see note
2).
The Promissory Note held at the start of the year was valued at
amortised cost. The original term of the note was four years with a
repayment date of no later than 3 June 2023 at Greenlane Renewables
Inc. discretion. In February 2020, a prepayment of GBP2.1 million
was received. Interest is charged at 7% on the outstanding
Promissory Note rolled up into the principal unless a trigger event
occurs under the terms of the Note which causes interest payments
to be satisfied in cash. On initial recognition the value was
assessed to be the face value. The note is denominated 50% in GBP
and 50% in Canadian dollars. The asset was held solely to collect
associated cash flows which related to principal and interest
only.
In June and July 2020, the Group sold its 21% shareholding in
Greenlane Renewables Inc. Linked to disposal of this shareholding
during the year the terms of the related attached Promissory Note
were amended to reduce the value of the Note and to accelerate the
repayment date for the outstanding amount to 30 June 2021. As a
result, a modification of GBP1,026,298 has been reflected as an
exceptional charge within Finance income/(costs) in the current
year (see note 2).
The new Promissory note is classified as being held at fair
value through profit and loss as its value at the point of the
modification was linked to the value at which the Greenlane
Renewables Inc. shareholding was sold, thereby failing the solely
payments of principal and interest test. The fair value has been
assessed at the year end and is reflected in the value shown in the
table above.
10. Borrowings
2020 2019
GBP'000 GBP'000
Current
--------- ---------
Revolving credit facility - 10,800
--------- ---------
2020 2019
GBP'000 GBP'000
--------- ---------
Non-current
--------- ---------
Revolving credit facility 6,773 -
--------- ---------
Total borrowings 6,773 10,800
--------- ---------
During the period, the bank loans drawn under the Revolving
Credit Facility (RCF) had an average annual interest rate of 2%
above LIBOR.
During the period the Group had in place a GBP12 million RCF
which was drawn GBP6.8 million at the year end date. 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 & machinery assets to which they
relate.
The Group's existing RCF at the year end, was put in place in
December 2019 for two years through to December 2021. In December
2020 the Group extended its facility through to 30 November 2022
with a GBP9 million facility through to 1 July 2021 and then GBP7
million for the remainder of the term.
The key financial covenant in the amended RCF remains the
leverage covenant, which is tested quarterly, and has a maximum
permitted net debt to adjusted EBITDA ratio of 5.5:1 for the two
quarterly test dates of December 2020 and March 2021, a ratio of
3.5:1 in June 2021 reducing to a maximum of 3:1 by September 2021
and for the remainder of the term. Following the fundraising in
December 2020 (see note 14), is it expected that these covenants
may be subject to amendment following discussions with the
bank.
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 long-term borrowing facilities are as
follows:
2020 2019
GBP'000 GBP'000
--------- --------
Due within one year:
--------- --------
Revolving credit facility - 10,800
--------- --------
Due for settlement after one year:
--------
Revolving credit facility 6,773 -
--------- --------
The Group has the following undrawn borrowing facilities:
2020 2019
GBP'000 GBP'000
--------- --------
Expiring within one year - 4,200
--------- --------
Expiring beyond one year 5,227 -
--------- --------
Subsequent to year end, as described above the RCF was reduced
from GBP12 million to GBP9 million through to 1 July 2021 and then
GBP7 million for the remainder of the term to 30 November 2022.
11. Lease Liabilities
Lease liabilities are presented in the statement of financial
position as follows:
2020 2019
GBP'000 GBP'000
-------- --------
Current
-------- --------
Asset finance lease liabilities 955 656
-------- --------
Right of use asset lease liabilities 254 -
-------- --------
1,209 656
-------- --------
Non-current
-------- --------
Asset finance lease liabilities 2,003 2,116
-------- --------
Right of use asset lease liabilities 840 -
-------- --------
2,843 2,116
-------- --------
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.
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 3 October 2020 were as
follows:
Within one Over one to
year five years Total
GBP'000 GBP'000 GBP'000
----------- ------------ --------
3 October 2020
----------- ------------ --------
Lease payments 1,335 3,012 4.347
----------- ------------ --------
Finance costs (126) (169) (295)
----------- ------------ --------
Net present value 1,209 2,843 4,052
----------- ------------ --------
Within one Over one to
year five years Total
GBP'000 GBP'000 GBP'000
----------- ------------ --------
28 September 2019
----------- ------------ --------
Lease payments 799 2,411 3,210
----------- ------------ --------
Finance costs (143) (295) (438)
----------- ------------ --------
Net present value 656 2,116 2,772
----------- ------------ --------
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. In addition, certain
variable lease payments are not permitted to be recognised as lease
liabilities and are expensed as incurred and are disclosed in
operating lease commitments.
12. Net Debt Reconciliation
2020 2019
GBP'000 GBP'000
Debt - Revolving credit facility (see note 10) (6,773) (10,800)
--------- ---------
Debt - Asset finance leases (see note 11) (2,958) (2,772)
--------- ---------
Debt - Right of use asset leases (see note 11) (1,094) -
--------- ---------
Cash and cash equivalents 3,416 2,208
--------- ---------
Net debt (7,409) (11,364)
--------- ---------
Equity 13,314 32,086
--------- ---------
The Directors believe that Net Debt, which measures the Group's
overall level of indebtedness, is relevant to an understanding of
the Group's financial performance.
13. Consolidated cash flow statement
2020 2019
GBP'000 GBP'000
--------- --------
Loss after tax - continuing operations (18,876) (389)
--------- --------
Loss after tax - discontinued operations - (1,203)
--------- --------
Adjustments for:
--------- --------
Finance costs - net 189 467
--------- --------
Depreciation of property, plant and equipment 1,726 1,377
--------- --------
Amortisation of intangible assets 1,958 2,390
--------- --------
Share option costs 117 100
--------- --------
Income tax credit (1,113) (126)
--------- --------
Profit on disposal of property, plant and (61) -
equipment
--------- --------
Profit on sale of PT US Inc. associate (297) -
--------- --------
Profit on disposal of shareholding in Greenlane (1,895) -
Renewables Inc.
Modification of Promissory Note receivable 1,026 -
--------- --------
Impairment of goodwill and intangible assets 13,878 -
--------- --------
Changes in working capital:
--------- --------
Increase in inventories (372) (1,234)
--------- --------
(Increase)/decrease in trade and other receivables (2,002) 402
--------- --------
Increase/(decrease) in trade and other payables 7,429 (1,156)
--------- --------
Cash flows from operating activities 1,707 628
--------- --------
14. Subsequent events
The Company's existing RCF of GBP12 million at the year end, was
put in place in December 2019 for two years through to December
2021 (see note 10). In December 2020 the Company extended its
facility through to 30 November 2022 with a GBP9 million facility
through to 1 July 2021 and then GBP7 million for the remainder of
the term. In addition, the Company undertook a fundraising through
the issue on 18 December 2020 of 12,471,998 new ordinary shares
which raised cash proceeds, net of expenses, of approximately GBP7
million.
Pressure Technologies plc, the company, has GBP26.2 million of
share premium as at year end. On 17 December 2020, the Company
received shareholder approval to convert the share premium, under a
capital reduction, into a distributable reserve. This process
requires Court Approval. An application to the Courts has been made
but the timing of the process is currently uncertain.
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END
FR BJMMTMTABTAB
(END) Dow Jones Newswires
January 14, 2021 02:00 ET (07:00 GMT)
Pressure Technologies (LSE:PRES)
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Pressure Technologies (LSE:PRES)
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