TIDMPRES
RNS Number : 4433W
Pressure Technologies PLC
27 April 2016
27 April 2016
Pressure Technologies plc
("Pressure Technologies" or the "Group")
Update on Recent Trading
The Board of Pressure Technologies plc (AIM: PRES) today issues
a trading update following the end of the six month's period to 2
April 2016.
As highlighted at the AGM in mid-February, the difficult trading
conditions in the oil and gas market continued into the first
quarter of 2016. Whilst the Board indicated that no significant
pick up was expected this year, the Group's businesses dependent on
the industry have since experienced a further, substantial decline
in orders in quarter two, which has been complicated by
unpredictable demand and very short lead times.
Despite some recovery in oil prices, the outlook is for a slow
recovery, particularly as oil inventories remain at historic highs.
Capital expenditure for oil exploration and production remains
under pressure with further cuts possible this year and we now
anticipate the pick up in this market to be delayed into 2017.
Whilst we continue to align costs to trading conditions, there
is no escaping the effect the prolonged downturn is having and the
difficulty in trying to call the "bottom" of this cyclical
downturn. On the other hand, prospects for Alternative Energy
remain positive, but the timing of contracts are a significant
factor in determining the outturn for the full-year.
Reflecting the Board's continued caution, we therefore now
anticipate that the result for the year ending 1 October 2016 will
be substantially below current market expectations.
The Board has continued to take measures to ensure the Group
remains cash positive, including a further significant reduction in
headcount, alongside a commitment to productivity efficiencies that
are already yielding improvements. The preservation of our key core
skills remains paramount; consequently we have seen gains in market
share, as a result of market pressures on some of our competitors
and our dependability and reputation for delivering quality
products on time and in full.
The Board remains confident in the medium to long-term prospects
for the Group and believes that when the oil and gas market returns
it will present considerable opportunities. In the meantime, we
will take whatever measures are necessary to ensure the resilience
of our businesses whilst continuing to invest in the future of the
Group and implement the strategic objectives to broaden our
customer, technology and industrial base.
Divisional review
Precision Machined Components
Since the AGM we have seen an overall decline in the quantity
and predictability of orders in the division. Headcount has been
reduced in all three businesses and the division remains
profitable, but we anticipate that it will be behind expectations
for the year.
Headcount reduction has been severest in Quadscot, whose primary
end market is subsea oil exploration and production, an area that
has been particularly hard hit by capital expenditure reductions
and delays. Despite this, Quadscot is winning more than its market
share of available orders.
Whilst Roota has also been affected by lower order levels, it
has recently secured several new customers.
Al-Met's world-class lead times continue to see it punching
above its weight in securing wear part orders. The business has
also benefitted from increased productivity from previous
investment in new machining equipment and management systems.
Engineered Products
Hydratron continues to suffer from the decline in discretionary
spend in the oil and gas market and this, coupled with the ongoing
restructure of this business, has had a significant effect on the
profitability of this division. Consequently, the division will be
loss making in the first-half, but following the restructuring and
the implementation of lean manufacturing, we expect it to be close
to breakeven in the second-half and to return to profit as volumes
increase.
Cylinders
The oil and gas market for CSC, as expected, shows no signs of
recovery for the foreseeable future, however the business continues
to increase defence work and service provision. Given the long lead
times for this division, which give us good visibility, we expect
it to be broadly in line with expectations at the full-year.
Alternative Energy
We are pleased with the progress in this division since the
completion of the planned restructuring and particularly with the
improving level of new orders.
Having started the current financial year with contracts
totalling GBP2.8 million, we have since secured contracts for a
further two projects in the UK and three in North America,
totalling GBP8.4 million. This includes a first order for equipment
to clean biogas to pipeline standards meeting California's
stringent rule 30 regulations.
There are currently a further 13 projects, four in the UK, four
in Europe and five in North America, which are in final negotiation
and where Greenlane is either the preferred bidder or one of two
potential suppliers. Four of these projects are with existing
customers.
Project completion lead times are of the order of seven to nine
months and revenues and profits are recognised at key stages of the
project, therefore, as previously highlighted, the timing of
orders, including delivery, has a significant impact on the
full-year result for the division and the Group. The revenue and
profits from certain projects, which were expected to fall in the
fourth quarter of the current financial year will probably fall
into the first quarter of next year. This means that results for
the current year will be below market expectations.
Beyond the current year there remains a substantial pipeline of
projects in all areas. It is pleasing to note that our New Zealand
subsidiary is now receiving enquiries from Australasia and South
East Asia and we anticipate that these markets will develop over
the next 18 months.
For further information, please contact:
Pressure Technologies plc Tel: 0114 257 3622
John Hayward, Chief Executive www.pressuretechnologies.com
Joanna Allen, Group Finance
Director
Keeley Clarke, Investor Relations
Tavistock Tel: 020 7920 3150
Simon Hudson
Cantor Fitzgerald Europe (Nominated Tel: 020 7894 8337
Adviser and Broker)
Philip Davies / Will Goode
COMPANY DESCRIPTION
Company description - www.pressuretechnologies.com
With its head office in Sheffield, Pressure Technologies was
founded on its leading market position as a designer and
manufacturer of high-pressure systems serving the global energy,
defence and industrial gases markets. Today it continues to serve
those markets from a broader engineering base with specialist
precision engineering businesses and has a worldwide presence in
Alternative Energy as the global leader in biogas upgrading. On
this foundation, the company is building a highly profitable group
of companies through a combination of organic initiatives and
acquisitions.
Pressure Technologies has four divisions, Precision Machined
Components, Engineered Products, Cylinders and Alternative Energy,
serving four markets: oil and gas, defence, industrial gases and
alternative energy.
Precision Machined Components
-- Al-Met, Mid Glamorgan, acquired in 2010 www.almet.co.uk
-- Roota Engineering, Rotherham, acquired in March 2014 www.roota.co.uk
-- Quadscot, Glasgow, acquired in October 2014 www.quadscot.co.uk
Engineered Products
-- Hydratron, Manchester and Houston, acquired in 2010 www.hydratron.com
Cylinders
-- Chesterfield Special Cylinders, Sheffield, IPO cornerstone in
2007 www.chesterfieldcylinders.com
-- Kelley GTM Manufacturing, Amarillo - 40% stake acquired by
the Group in December 2013 www.kelleygtm.com
Alternative Energy
-- Chesterfield BioGas, Sheffield, founded in 2008. Renamed
Greenlane Biogas UK on 5 June 2015.
-- Greenlane, Vancouver, Canada and Auckland, New Zealand,
acquired in October 2014 www.greenlanebiogas.com
This information is provided by RNS
The company news service from the London Stock Exchange
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