2023 Full-Year Results
30 January 2024
Pressure Technologies plc
("Pressure Technologies" or "the Company" or "the Group")
2023 Full-Year Results
Pressure Technologies plc (AIM: PRES), the specialist engineering group, is pleased to announce its audited results for the 52 weeks to 30 September 2023 ("FY23"), which are in line with the Group revenue and Adjusted EBITDA1 previously announced by the Company on 3 October 2023.
The audited Annual Report and Financial Statements will be published on the Company's website today.
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Financial Highlights
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1 Adjusted EBITDA is earnings / loss before interest, tax, depreciation, amortisation and other exceptional costs 2 Adjusted operating profit / loss is operating profit/loss before amortisation and other exceptional costs 3 Adjusted basic earnings / loss per share is reported earnings per share before amortisation and other exceptional costs 4 Net debt comprises cash and cash equivalents, bank borrowings, asset finance lease liabilities and right of use asset lease liabilities
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Group Highlights
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FY23 has been a year of significant progress for the Group with market conditions and order intake improving considerably alongside delivery of operational improvements, facilitating a return to profitability in both divisions.
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Group revenue in FY23 of £32.0 million (2022: £24.9 million), representing like-for-like growth of 29% and underpinning a return to Adjusted EBITDA profitability of £2.1 million (2022: loss of £0.9 million).
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Order intake of £43.0 million in FY23 (2022: £24.6 million) was 75% higher than prior year and supported a year-end order book of £20.7 million (2022: £10.4 million), the highest level for more than five years.
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Having considered the improved trading environment and outlook for the PMC division, the Board decided to realise value through the divestment of PMC. The Group has appointed advisors to handle the sale process which was launched in December 2023.
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The proceeds of the sale of PMC are intended to repay the new Term Loan facility and fund strategic investment opportunities at CSC to support its growth in the hydrogen energy sector.
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Bank borrowings were reduced by £1.5 million in the year to £0.9 million (2022: £2.4 million), facilitated by the improved trading performance and a fundraising of £2.1 million (net of expenses) in December 2022.
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Subsequent to the year-end, in November 2023, the Group refinanced its existing debt facilities with Lloyds Bank by arranging a new Term Loan facility of £1.5 million with Rockwood Strategic plc and Peter Gyllenhammar AB, two of its major shareholders. The new Term Loan facility provides a financing bridge to the sale of PMC and is repayable upon a successful sale of the division. |
Chesterfield Special Cylinders ("CSC")
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CSC revenue FY23 of £20.7 million (2022: £17.6 million), driven by defence work, including the major naval contract won in February 2023, underpinning improved margin performance and a significant increase in divisional Adjusted EBITDA to £3.9 million (2022: £1.1 million).
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Defence revenue of £17.2 million (2022: £13.5 million), reflecting strong order book and new contract placements for submarine and surface ship projects for UK and overseas navies.
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Largest ever contract award of £18.2 million announced in February 2023 to supply safety-critical pressure vessels for major UK naval new construction programme over three years to 2025.
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Hydrogen revenue was subdued at £2.1 million (2022: £2.4 million) due to broader industry supply chain constraints and was driven equally by sales of new refuelling station storage solutions and periodic inspection, testing and recertification services for hydrogen road trailers.
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Enquiry levels for Integrity Management services increased sharply during FY23, driven by growing activity in the offshore and hydrogen energy markets. Subsequent to year-end, CSC has commenced work on a significant Integrity Management contract for a major defence customer.
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CSC order intake in FY23 of £24.6 million (2022: £15.7 million) supports a year-end order book of £11.3 million (2022: £7.4 million), providing good revenue visibility into FY24.
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Operational improvements in the Sheffield facility are delivering increased capacity and efficiency for hydrogen cylinder and road trailer new build, inspection and testing services. |
Precision Machined Components ("PMC")
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PMC revenue in FY23 of £11.3 million (2022: £7.3 million), reflecting strong recovery in the oil and gas market.
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PMC returned to profitability in the year with divisional Adjusted EBITDA in FY23 of £0.1 million (2022: loss of £0.3 million).
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PMC order intake strengthened significantly in FY23 and reached £18.4 million for the year (2022: £8.9 million), an increase of over 100%, supporting a year-end order book of £9.4 million (2022: £3.0 million), the highest order book level seen in the last five years, providing strong revenue cover into FY24.
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Major customers of PMC have continued to report increased activity levels during the first quarter of FY24. |
Outlook
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CSC will continue to focus on delivery of current high-value defence contract milestones during the financial year ending 30 September 2024 ("FY24") and expects to pass the peak of activity on these contracts in the third quarter.
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CSC then expects to re-balance its revenue profile across UK defence programmes, global defence programmes and the hydrogen energy market in the second half of FY24, with each of these markets presenting significant opportunities over the medium-term.
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During this transitional period, CSC revenue is expected to decline slightly on FY23 levels with a consequent reduction in divisional profitability in FY24.
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Despite delays in the broader hydrogen supply chain, CSC is well positioned to secure several identified projects in FY24 and remains positive about its prospects in the hydrogen energy market for new build storage and transport solutions and for the through-life inspection, testing and recertification of hydrogen systems over the medium and longer term.
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The announcement by UK Government in December 2023 of £90 million of funding for 11 new hydrogen projects as part of the first Hydrogen Allocation Round (HAR1) is a positive development providing opportunities for CSC over the next 2 years.
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Further improvement of financial performance in PMC is expected based on the strong order book and improving operational performance.
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Given these divisional trends, the Board expects the Group's full-year FY24* revenue and Adjusted EBITDA to be in-line with current market expectations (revenue of £34 million and Adjusted EBITDA of £2.1 million).
* FY24 outlook includes CSC and PMC, on the basis that PMC is not sold in FY24 and remains a continuing operation
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Chris Walters, Chief Executive of Pressure Technologies plc, commented:
"Significantly improved performance in FY23 reflects the strong defence order book in Chesterfield Special Cylinders and the continued recovery of oil and gas market trading conditions in Precision Machined Components.
In Chesterfield Special Cylinders, the order book reached the highest level on record following an £18.2 million contract award to supply air pressure vessels for a major UK naval new construction programme. This order was the largest ever for the division, providing good visibility of high-value work into FY24.
Despite delays in the hydrogen energy supply chain over the past year, we remain well positioned in this emerging market to supply static and mobile hydrogen storage solutions, and to provide the through-life inspection, testing and recertification services for these safety-critical systems over the medium and longer term. The announcement in December 2023 by UK Government of the first Hydrogen Allocation Round is positive for the market and presents opportunities for CSC over the next two years.
In Precision Machined Components, the recovery of order intake levels was very strong in the year facilitating a return to profitability for the division. In light of these improving conditions, the Board decided to divest PMC and launched the sale process in December 2023. We are targeting completion of the sale in the third quarter of FY24, with the sale proceeds to be used to repay the new term loan recently arranged with two of our major shareholders and to fund the development of CSC in the hydrogen energy market.
We have a clear focus on shareholder value and the delivery of strategic objectives for the Group in FY24."
Annual General Meeting
The Annual General Meeting of the Company will take place on Thursday 21 March 2024 at 09:30 am at the offices of Singer Capital Markets, 1 Bartholomew Lane, London EC2N 2AX.
Notice of FY24 Interim Results
The Company expects to publish its unaudited interim results for the half year ending 30 March 2024 by the end of May 2024.
For further information, please contact:
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Pressure Technologies plc Chris Walters, Chief Executive Steve Hammell, Chief Financial Officer |
Tel: 0333 015 0710 company.secretary@pressuretechnologies.co.uk |
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Singer Capital Markets (Nomad and Broker) Rick Thompson / Asha Chotai |
Tel: 0207 496 3000 |
COMPANY DESCRIPTION
With its head office in Sheffield, the Pressure Technologies Group was founded on its leading market position as a designer and manufacturer of high-integrity, safety-critical components and systems serving global supply chains in oil and gas, defence, industrial and hydrogen energy markets.
The Group has two divisions:
· Chesterfield Special Cylinders (CSC) - www.chesterfieldcylinders.com
· Precision Machined Components (PMC) - www.pt-pmc.com
o Includes the Al-Met, Roota Engineering and Martract sites.
Chair's statement
Pressure Technologies plc (the "Company") and its subsidiaries (together "the Group") are globally recognised as a leading provider of safety-critical pressure containment and control products and services to customers in the defence, energy and industrials sectors who operate in highly demanding environments. The operating divisions of the Group are Chesterfield Special Cylinders ("CSC") and Precision Machined Components ("PMC"). The Annual Report and Financial Statements and this announcement cover the financial year ended 30 September 2023 ("FY23").
FY23 has been a year of significant progress for the Group. Market conditions and order intake have improved considerably, we have made significant operational improvements, facilitating a return to profitability in both divisions, and we have reduced our debt levels and restructured our financing. This provides a solid foundation to deliver on our strategic priorities in the year ahead.
I am pleased to report that in FY23 we won new orders of £43.0 million (FY22: £24.6 million), an increase of 75%.
On 6 February 2023, we announced the award of a £18.2 million major defence contract, propelling CSC order intake in FY23 to £24.6 million (FY22: £15.7 million). Moreover, PMC order intake was £18.4 million (FY22: £8.9 million), an increase of over 100%, and has accelerated since March 2023 when we won a record £3.0 million order from an established international OEM customer for the supply of flow control components and sub-assemblies. The OEM customers of PMC continue to forecast strong recovery in demand for specialised components for oil and gas exploration and production projects over the next three to five years. The order book of the Group at the end of the year was £20.7 million (FY22: £10.4 million), positioning the Group well for FY24.
The Group delivered much improved financial performance in FY23. Group revenue was £32.0 million (FY22: £24.9 million), facilitating a return to profitability with Adjusted EBITDA of £2.1 million (FY22: Adjusted EBITDA loss of £0.9 million). The turnaround in performance started in the first half of the year and accelerated in the final quarter as the full benefits of our investments in operational efficiency and continuous improvement in our manufacturing facilities were realised.
CSC performed very strongly in FY23, reporting revenue of £20.7 million (FY22: £17.6 million) and Adjusted EBITDA of £3.9 million (FY22: £1.1 million), delivering an operating margin of 19%. The rapid improvement in profitability was driven by the major defence contract won in the year which continues to provide order cover into FY24. We are also encouraged by diversification opportunities for pressure system inspection and testing services, including Integrity Management field deployments and cylinder reconditioning and recertification services. These activities cover established defence and offshore markets, while new opportunities are developing for industrial gas and hydrogen storage applications.
CSC is also very well positioned in the emerging market for hydrogen storage and transportation. However, order placement by established and new customers was slower than expected during FY23, influenced by constraints and delays in the supply chain for components required in the generation and compression of hydrogen for refuelling and decarbonisation projects. Despite these delays, we are hopeful of securing several contracts during FY24 and remain positive about our prospects in the hydrogen energy market for new build storage and transport solutions and for the through-life inspection, testing and recertification of hydrogen systems over the medium and longer term.
PMC delivered a significant turnaround in performance in FY23, reporting revenue of £11.3 million (FY22: £7.3 million) and Adjusted EBITDA of £0.1 million (FY22: Adjusted EBITDA loss of £0.3 million), achieving a return to full-year profitability. The final quarter of FY23 was particularly strong, with a substantial increase in activity levels following the surge in order intake mid-way through the year. Conditions in the oil and gas market have improved further during the second half of the year, supported by a rising oil price, such that PMC exited FY23 with an order book of £9.4 million (FY22: £3.0 million), the highest level seen in the last 5 years. The division is well placed to carry this momentum into FY24.
Having considered the current trading environment, improved outlook and positive developments being made by PMC, the Board has decided that the timing is now favourable to realise value through the divestment of the PMC division.
The Group has appointed advisors to handle the sale process which was launched in December 2023. The sale process is expected to run for approximately 6 months into the third quarter FY24. The proceeds of the sale are intended to repay the new Term Loan facility and fund strategic investment opportunities at CSC to support its growth in the hydrogen energy sector.
The Group has strengthened its financing position considerably during the year. On 6 December 2022, we completed a £2.1 million equity fundraise with support from institutional and retail shareholders. The funds raised provided important flexibility and liquidity during the first half of FY23 as a bridge to stronger cash generation from major contracts in CSC and the return to profitability in PMC, whilst supporting a debt repayment of £0.5 million to Lloyds Banking Group in March 2023. With the improvement in trading performance and cashflow delivered in the second half of the year, a further debt repayment of £1.0 million was made on 30 September 2023, reducing the balance payable to Lloyds to £0.9 million.
Subsequent to the year-end, on 14 November 2023, the Group exited its existing Revolving Credit Facility, provided by Lloyds, by arranging a new Term Loan facility of £1.5 million with Rockwood Strategic plc and Peter Gyllenhammar AB, two of its major shareholders. The new Term Loan facility provides a financing bridge to the sale of PMC and is repayable upon a successful sale of the division. In conjunction with the provision of the new Term Loan, Rockwood
Chair's statement (continued)
and Gyllenhammar were issued with 1,933,358 warrants in aggregate (representing 5% of the issued share capital) to subscribe for ordinary shares in the Company at a price of 32 pence per share.
During the year, the Board also strengthened the Executive team. In April 2022, we welcomed Chris Webster to the Group as Chief Operating Officer. Chris has brought considerable operational experience to the business based on his 30 year career in manufacturing and has delivered positive, controlled change across all sites, improving production efficiencies, supply chain controls and project management disciplines. These operational improvement initiatives have been critical to returning the Group to profitability and improving its financial position.
On 17 January 2023, we announced the appointment of Steve Hammell as Chief Financial Officer. Steve joined the Board in May 2023 and brings considerable financial expertise to the Group based on his 25 year career in corporate finance and industry. Since arriving, he has led the appointment of new auditors, improved our forecasting procedures, driven the successful refinancing process and initiated the sale process for PMC.
I am also pleased that Richard Staveley of Rockwood Strategic plc, a major shareholder in the Company, joined the Board as a non-executive director from 23 May 2023 and played a central role in delivering the refinancing.
The Group will continue to prioritise investment in the skills and development of its people. The Board are mindful that the capabilities of CSC and PMC are dependent on building the qualifications and experience of our employees and has therefore remained committed to its apprenticeship programme, growing the skilled workers of the future. The Board also emphasises improvement in its health and safety and environmental performance, investing in safety enhancing projects. We continue to place a high premium on our technical and engineering expertise that underpins the performance of our products and services for the benefit of our customers.
With a much stronger order book, a strengthened Executive team and clear strategic priorities for the Group, we are very excited about the opportunities presented to the Group as we look into 2024.
Nick Salmon
Chair
30 January 2024
Business and financial review
Group
FY23 has been a year of significant progress for the Group. Market conditions and order intake improved consistently as the year progressed and we made significant operational improvements, facilitating a return to trading profitability.
New order intake in FY23 was £43.0 million (FY22: £24.6 million), an increase of 75%. On 6 February 2023, we announced the award of a £18.2 million major defence contract, propelling CSC order intake in FY23 to £24.6 million (FY22: £15.7 million). Moreover, PMC order intake was £18.4 million (FY22: £8.9 million), an increase of over 100%, and has accelerated since March 2023 when we won a record £3.0 million order from an established international OEM customer.
The turnaround in financial performance started in the first half of the year and accelerated in the final quarter as the full benefits of our investments in operational efficiency and continuous improvement in our manufacturing facilities were realised.
Group revenue for the year was £32.0 million (2022: £24.9 million) and Adjusted EBITDA was £2.1 million (2022: Adjusted EBITDA loss of £0.9 million). The Group reported adjusted operating profit for the year of £0.6 million (2022: adjusted operating loss of £2.6 million).
The order book of the Group at the end of the year was £20.7 million (FY22: £10.4 million), positioning the Group well for FY24.
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£ million |
2023 |
2022 |
2021
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2020 |
2019 |
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Group Revenue |
32.0 |
24.9 |
25.3 |
25.4 |
28.3 |
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Defence |
17.2 |
13.5 |
11.1 |
5.1 |
9.1 |
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Hydrogen Energy |
2.1 |
2.4 |
2.2 |
0.2 |
0.7 |
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Oil & Gas |
11.8 |
7.9 |
6.1 |
14.9 |
16.3 |
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Industrial |
0.9 |
1.1 |
5.9 |
5.2 |
2.2 |
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Group Gross margin |
28% |
21% |
23% |
21% |
32% |
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Group Adjusted EBITDA |
2.1 |
(0.9) |
0.1 |
(0.8) |
3.5 |
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Group Operating profit / (loss) before amortisation, impairments and exceptional costs |
0.6 |
(2.6) |
(1.5) |
(2.4) |
2.2 |
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Group Loss before taxation |
(1.1) |
(4.0) |
(5.0) |
(20.0) |
(0.5) |
The Group reported a loss before taxation of £1.1 million (2022: loss of £4.0 million) due to exceptional costs of £1.3 million (2022: £1.0 million) and finance costs of £0.4 million (2022: £0.3 million).
The exceptional costs related to professional fees incurred in the proposed refinancing of the banking facilities of the Group during the year, corporate finance advisory fees exploring the potential sale of PMC in the first half of the year and the costs of re-organising the senior management of the Group.
Business and financial review (continued)
Chesterfield Special Cylinders
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£ million |
2023 |
2022 |
2021 |
2020 |
2019 |
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Revenue |
20.7 |
17.6 |
18.9 |
11.2 |
13.9 |
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Defence |
17.2 |
13.5 |
11.1 |
5.1 |
9.1 |
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Hydrogen Energy |
2.1 |
2.4 |
2.2 |
0.2 |
0.7 |
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Oil and Gas |
0.9 |
1.0 |
0.3 |
1.0 |
2.2 |
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Industrial |
0.5 |
0.7 |
5.3 |
4.9 |
1.9 |
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Gross margin |
34% |
26% |
30% |
26% |
36% |
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Adjusted EBITDA |
3.9 |
1.1 |
2.6 |
0.5 |
2.6 |
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Operating profit / (loss) before amortisation, impairments and exceptional costs |
3.1 |
0.4 |
2.0 |
(0.1) |
2.1 |
Chesterfield Special Cylinders ("CSC") delivered revenue of £20.7 million (FY22: £17.6 million) and Adjusted EBITDA of £3.9 million (2022: 1.1 million), a much improved performance in the year. The division reported adjusted operating profit of £3.1 million (FY22: £0.4 million).
CSC's order intake in FY23 was £24.6 million (FY22: £15.7 million), an increase of 57%. This supported a year-end order book of £11.3 million (2022: £7.4 million), positioning the division well for FY24.
The recovery in revenue, to the highest level seen in the last 5 years, was driven by work for the defence sector. On 6 February 2023, the Group announced the major contract placement by a major UK naval customer for pressure vessel manufacturing for a new construction project. This contract, valued at £18.2 million, is the largest ever awarded to CSC and will be delivered to the customer over three years. Activity on the contract commenced immediately upon placement and accelerated in the final quarter of FY23, driving revenue and Adjusted EBITDA for the year.
CSC was also active on contracts for global defence customers in France and Australia during the year. We expect revenue from global defence to increase further in FY24.
Revenue for Integrity Management field services from defence customers was below expectations in the year at £1.2 million (2022: 1.8 million) due to the postponement of several naval vessel deployments. However, we expect Integrity Management to resume profitable growth in FY24.
The significant increase in defence revenue, up 27% on prior year, was the main driver of the improvement in gross margin to 34% (2022: 26%), reflecting CSC's strong competitive position in the defence supply chain.
Growth opportunities for Integrity Management services more generally remain strong in key markets of defence, offshore services, nuclear and industrial ground storage. Enquiry levels from offshore services customers increased sharply during FY23, driven by growing activity in the market to support offshore oil and gas projects. Integrity Management has the potential to provide recurring revenue streams at attractive margins and is a key strategic priority for FY24.
Revenue from hydrogen projects in the year was £2.1 million (2022: £2.4 million), reflecting lower order placement by customers during the year due to broader supply chain challenges, including performance issues with electrolysers and extended lead times for gas compression systems.
Whilst these supply chain issues for electrolysers and gas compression systems are affecting refuelling and decarbonisation project schedules, the opportunities pipeline continues to develop for hydrogen ground storage and road trailers in the UK and Europe.
Business and financial review (continued)
The growing road trailer opportunity reflects the increasing demand for the flexible and cost-effective transportation of hydrogen, in which CSC is well placed to deliver solutions for established operators and new entrants. In addition, in-situ testing and factory reconditioning of hydrogen storage and transportation systems present additional exciting growth opportunities for CSC. Throughout the year, CSC continued to raise the profile of its hydrogen capabilities, products and services during events and exhibitions held in the UK and Europe.
Based on market evaluation and evolving customer requirements, we are currently developing solutions for higher storage pressures and efficient road trailer designs. Operational improvements in the Sheffield facility have delivered increased capacity and efficiency for hydrogen road trailer assembly and for reconditioning, inspection and testing services and we remain focused on delivering improved revenue and contract margins from these growth areas.
In December 2023, UK Government announced the award of £90 million of funding for the construction of 11 UK hydrogen projects as part of the first Hydrogen Allocation Round (HAR1). The first projects are expected to be operational in 2025. CSC has developed commercial relationships with a number of these new UK projects providing a pipeline of opportunities for the next two years.
Precision Machined Components
|
£ million |
2023 |
2022 |
2021 |
2020 |
2019 |
|
Revenue |
11.3 |
7.3 |
6.4 |
14.2 |
14.4 |
|
Oil and Gas |
10.9 |
6.9 |
5.7 |
13.9 |
14.0 |
|
Industrial |
0.4 |
0.4 |
0.7 |
0.3 |
0.4 |
|
Gross margin |
17% |
11% |
11% |
17% |
29% |
|
Adjusted EBITDA |
0.1 |
(0.3) |
(0.8) |
0.2 |
2.6 |
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Operating (loss) / profit before amortisation, impairments and exceptional costs |
(0.6) |
(1.1) |
(1.6) |
(0.7) |
1.9 |
Precision Machined Components (PMC) delivered revenue of £11.3 million (2022: £7.3 million) and Adjusted EBITDA of £0.1 million (2022: Adjusted EBITDA loss of £0.3 million). The division reported an adjusted operating loss of £0.6 million (2022: adjusted operating loss of £1.1 million). This is an encouraging performance during a critical recovery period for the oil and gas sector and positions the division well for FY24.
PMC's order intake in FY23 was £18.4 million (FY22: £8.9 million), an increase of over 100%. This supported a year-end order book of £9.4 million (2022: £3.0 million), substantially above prior year and at the highest level seen in the last 5 years, providing strong revenue visibility into FY24.
Order intake from the oil and gas sector accelerated from March 2023 following a record £3.0 million order from an established international OEM customer. Moreover, the OEM customers of PMC continue to forecast strong recovery in demand for specialised components for oil and gas exploration and production projects over the next three to five years.
At Roota Engineering, the demand for subsea well intervention tools, valve assemblies and control module components has recovered strongly as major OEM customers including Expro, Halliburton, Schlumberger and Aker continue to report a stronger oil and gas market outlook for 2024 and are investing heavily in their global manufacturing capacity to support growth in oil and gas production, principally from South America, West Africa, US Gulf of Mexico, Middle East and North Sea regions. The recovery of Roota's revenue and profitability has been supported by successful recruitment, skills development and specialist engineering software, increasing the capacity to meet the growing demand and extended product range for a broader customer base. This supported a significant step-up in activity levels at Roota in the third and fourth quarters of FY23 with resilient margins reported.
Al-Met has remained focused on the improvement of operational performance, efficiency and competitiveness and is well positioned for a recovery in demand for precision, high-pressure valve control components. On 27 March 2023, the Group announced that Al-Met had been awarded an unprecedented order of £3.0 million from an
international OEM customer for the supply of flow control components and sub-assemblies used in high-pressure extreme service oil and gas applications.
This order supported a significant ramp-up of activity in the fourth quarter of FY23 at Al-Met. However, Al-Met's margins have remained challenged during this recovery phase and are not expected to show material improvement until the middle of FY24. To support this recovery in margins, the Group has prioritised capital investment at Al-Met that reduces dependency on sub-contractors and drives raw material savings.
Business and financial review (continued)
On 24 October 2023, the Group announced that having considered the current trading environment, improved outlook and the improved financial performance of PMC in the second half of FY23, the timing was favourable to realise value through the divestment of the PMC division. The Board has appointed DSW Corporate Finance to handle the sale process which was launched in December 2023.
Central Costs
|
£ million |
2023 |
2022 |
2021 |
2020 |
2019 |
|
Cash costs |
(1.9) |
(1.7) |
(1.7) |
(1.4) |
(1.6) |
|
Depreciation |
(0.1) |
(0.2) |
(0.2) |
(0.2) |
(0.1) |
|
Operating loss |
(2.0) |
(1.9) |
(1.9) |
(1.6) |
(1.7) |
Central costs include the following items:
· the employment costs of the Board of Directors;
· the employment costs of central staff who undertake group-wide activities;
· administration costs incurred by Directors and central staff;
· the regulatory costs of operating as a public limited company quoted on the London Stock Exchange; and
· depreciation of assets held centrally.
Central cash costs increased to £1.9 million in the year (2022: £1.7 million) due to inflationary cost pressures.
Financial review
Financial performance
Revenue & Profitability
Record new defence orders and improving market conditions in the oil and gas market have underpinned a significant improvement in performance in FY23. Group revenue of £31.9 million was 28% higher than last year (2022: £24.9 million) and has helped drive gross profit to £8.9 million at 28% margin (2022: £5.3 million at 21% margin).
The Group's gross margin improvement has been driven by achievement of high-value milestones on UK defence contracts, boosting CSC gross margin to 34% (2022: 26%). In addition, the higher level of activity and throughput at PMC, improving asset utilisation, has increased PMC gross margins to 17% (2022: 11%), contributing to the increase in Group margins.
Overhead costs increased in the year to £8.4 million (2022: £7.9 million). This increase has been driven by the need to re-build the capability of the organisation following the Covid-19 pandemic in order to maximise future growth opportunities in CSC and PMC. The overhead base has also been impacted by the high levels of cost inflation experienced during the year driving increased IT, recruitment, marketing and travel costs.
The Group reported adjusted operating profit of £0.6 million (2022: adjusted operating loss of £2.6 million) in the year. Allowing for depreciation charges of £1.5 million (2022: £1.7 million), the Group delivered Adjusted EBITDA of £2.1 million in the year (2022: Adjusted EBITDA loss of £0.9 million), demonstrating the strong turnaround in underlying financial performance.
Exceptional costs
Exceptional costs of £1.3 million (2022: £1.0 million) were incurred in the year relating to professional fees incurred in the proposed refinancing of the banking facilities of the Group during the year, corporate finance advisory fees in relation to the potential sale of PMC in the first half of the year and the costs of re-organising the senior management of the Group.
Impairment Review
The Group tests annually for impairment, in accordance with IAS 36, if there are indicators that intangible or tangible fixed assets might be impaired.
The impairment methodology identifies two Cash Generating Units ("CGU's") within the Group, being CSC and PMC. Each CGU is assessed for potential indicators of impairment, including internal or external factors or events that
could reduce the recoverable value of the fixed assets of the Group. If indicators of impairment are identified, a full impairment review is undertaken to determine the recoverable amount of the CGU.
Business and financial review (continued)
The recoverable amount of a CGU is determined using a discounted cashflow model that is based upon a five-year forecast period. The forecast takes into account the firm order book, sales pipeline and market opportunities of the CGU, together with expected gross margin performance and consideration of the cost base, planned capital expenditure and estimated working capital needs of the CGU. A long-term growth assumption is applied beyond the five-year forecast period. The future cashflows are then discounted to a present, recoverable value by applying a risk-adjusted pre-tax discount rate.
As detailed further in note 2 to the accounts, an impairment review was undertaken for each of CSC and PMC. The review concluded that no impairment was required in these financial statements.
The Group holds freehold land and buildings, including CSC's main facility at Meadowhall Road, Sheffield. As part of discussions with the Group's bankers during the year, the Directors obtained two valuations from two independent chartered surveyors of this freehold land and buildings, which indicated that no impairment of this asset was required.
Taxation
The tax credit for the year was £0.4 million (2022: tax charge £0.1 million). The current year tax credit was principally due to a £0.4 million receipt in respect of R&D tax credit claims submitted in the year in respect of FY21 and FY22.
Corporation tax refunded in the year totalled £0.4 million (2022: £0.1 million).
Loss per share
Basic loss per share was 1.8 pence (2022: loss per share 13.0 pence). Allowing for add-back of exceptional costs and amortisation charges, adjusted earnings per share was 0.8 pence (2022: adjusted loss per share of 10.2 pence).
Dividends
No dividends were paid in the year (2022: nil) and no dividends have been declared in respect of the year ended 30 September 2023 (2022: nil). Distributable reserves in the parent company totalled £2.6 million at year end (2022: £5.7 million).
Operating cash flow, capital expenditure and cash flow before financing
Operating cash flow was £1.2 million (2022: £1.8 million), driven by Adjusted EBITDA of £2.1 million (2022: Adjusted EBITDA loss of £0.9 million), accounting add-backs of £0.3 million (2022: deductions of £0.3 million) and working capital outflows of £1.2 million (2022: inflows of £3.0 million). Key movements within working capital in the year included the build-up of inventory across the Group as a result of the increased activity in the second half of the year.
Capital expenditure in the year was £0.6 million (2022: £0.5 million) incurred principally to replace plant and equipment for productive use. Proceeds from the disposal of fixed assets was £0.2 million (2022: £2.1 million from sale and leaseback of property).
Allowing for exceptional costs of £1.3 million (2022: £1.0 million), finance costs of £0.4 million (2022: £0.3 million) and corporation tax refunds of £0.4 million (2022: £0.1 million), cash flow before financing was an outflow of £0.5 million (2022: inflow of £2.2 million).
Financing and liquidity
On 6 December 2022, the Group completed a £2.1 million equity fundraise (net of transaction costs) with support from institutional and retail investors. The funds raised provided important flexibility and liquidity during the first half of FY23 and a bridge to profitable, cash-generative trading driven by the commencement of major defence contracts in CSC and recovering order intake in PMC.
The cash balance at 30 September 2023 was £0.9 million (2022: £1.8 million). The reduction in cash of £0.9 million was driven by the equity fundraise of £2.1 million, the cash outflow before financing of £0.5 million, the repayment of borrowings of £1.5 million and the repayment of lease liabilities of £1.0 million.
Net debt at 30 September 2023 was £2.4 million (2022: £3.5 million). The reduction in net debt of £1.1 million was driven by the equity fundraise of £2.1 million, partially offset by the cash outflow before financing of £0.5 million and new lease liabilities of £0.5 million.
Subsequent to the end of FY23, on 14 November 2023, the Group exited its existing debt facilities provided by Lloyds Banking Group by arranging a new Term Loan facility of £1.5 million with Rockwood Strategic plc and Peter
Gyllenhammar AB, two of its major shareholders. The new Term Loan is committed for a period of 5 years and is secured against the assets of the Group.
Business and financial review (continued)
In conjunction with the provision of the new Term Loan, Rockwood and Gyllenhammar were issued with 1,933,358 warrants in aggregate (representing 5% of the issued share capital) to subscribe for ordinary shares in the Company at a price of 32 pence per share, representing a 20% premium to the closing share price on 23 October 2023 (being the day prior to the announcement of the new facility). The warrants may be exercised at any time in the 5 years following drawdown of the new facility and continue to be exercisable in the event the facility is repaid before its final expiry.
Going concern
These financial statements have been prepared on the going concern basis.
The Directors have prepared financial projections for the period to September 2025 and these demonstrate that the Group can operate within its existing financing facilities and meet is financial obligations as they fall due.
The base case projections recognise that the Group remains dependent on the profitability of CSC which is currently dependent on large UK defence contracts. During the projection period, CSC is expected to undergo a period of transition, with revenue from UK defence contracts falling and revenue from the hydrogen energy market and global defence customers expected to increase. Over the short-term, this is expected to result in lower revenues and earnings for CSC, which is factored into the financial projections. The base case projections also recognise the much improved performance of PMC and the more favourable outlook for the oil and gas market.
The Directors have also developed downside scenarios and have modelled reasonably possible delays to delivery of UK defence milestones and delays to placement of major orders from new hydrogen customers. In the event of such delays, the Group would look to mitigate the impact, partially or fully, by pulling forward contracted work from other customers, and through normal working capital management and other cash preservation initiatives.
Reflecting management's confidence in delivering large UK defence contracts and winning new hydrogen contracts, and having refinanced its debt facilities in November 2023, the Directors have concluded that the Group does have sufficient financial resources to meet its obligations as they fall due for the next 12 months and no material uncertainty relating to Going Concern has been identified.
Outlook
During FY24, CSC expects to pass the peak of activity on current high-value defence contract milestones and will seek to re-balance its revenue profile across global defence programmes and the hydrogen energy market, with each of these markets presenting significant opportunities over the medium-term. During this transitional period, CSC revenue is expected to decline slightly on FY23 levels with a consequent reduction in divisional profitability in FY24.
PMC continues to see increasing demand from customers and improving operational performance. The momentum in order intake provides significant confidence in delivering an improved full-year FY24 performance for the PMC division. As previously announced, this improved trading environment underpins the decision of the Board to divest PMC.
Given these divisional trends, the Board expects the Group's full-year FY24* revenue and Adjusted EBITDA to be in-line with current market expectations (revenue of £34 million and Adjusted EBITDA of £2.1 million).
* FY24 outlook includes CSC and PMC, on the basis that PMC is not sold in FY24 and remains a continuing operation
Chris Walters
Chief Executive
30 January 2024
Consolidated statement of comprehensive income
For the 52 week period ended 30 September 2023
|
|
|
|
|
|
|
|
Notes |
52 weeks ended 30 September 2023 |
52 weeks ended 1 October 2022 |
|
|
|
|
£'000 |
£'000 |
|
|
|
|
|
|
|
|
Revenue |
1 |
31,944 |
24,939 |
|
|
|
|
|
|
|
|
Cost of sales |
|
(23,001) |
(19,680) |
|
|
|
|
|
|
|
|
Gross profit |
|
8,943 |
5,259 |
|
|
|
|
|
|
|
|
Administration expenses |
|
(8,398) |
(7,883) |
|
|
|
|
|
|
|
|
Operating profit / (loss) before amortisation and exceptional costs |
|
545 |
(2,624) |
|
|
Separately disclosed items of administration expenses: |
|
|
|
|
|
Amortisation |
5 |
- |
(101) |
|
|
Exceptional costs |
6 |
(1,255) |
(968) |
|
|
Total administration expenses |
|
(9,653) |
(8,952) |
|
|
|
|
|
|
|
|
Operating loss |
|
(710) |
(3,693) |
|
|
Finance costs |
3 |
(406) |
(292) |
|
|
|
|
|
|
|
|
Loss before taxation |
4 |
(1,116) |
(3,985) |
|
|
Taxation |
7 |
437 |
(52) |
|
|
|
|
|
|
|
|
Loss for the period attributable to the owners of the parent |
|
(679) |
(4,037) |
|
|
|
|
|
|
|
|
Other comprehensive income / (expense) to be reclassified to profit or loss in subsequent periods: Currency exchange differences on translation of foreign operations |
|
12 |
(5) |
|
|
|
|
|
|
|
|
Total other comprehensive income / (expense) |
|
|
12 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive expense for the period attributable to the owners of the parent |
|
(667) |
(4,042) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share |
|
|
|
|
|
From loss for the period |
8 |
(1.8)p |
(13.0)p |
|
|
|
|
|
|
|
|
Diluted loss per share |
|
|
|
|
|
From loss for the period |
8 |
(1.8)p |
(13.0)p |
|
|
|
|
|
|
|
Consolidated statement of financial position
|
As at 30 September 2023 |
|
|
|
|
|
|
|||
|
|
Notes |
30 September 2023 |
1 October 2022 |
|
|
||||
|
|
|
£'000 |
£'000 |
|
|
||||
|
Non-current assets |
|
|
|
|
|
||||
|
Property, plant and equipment |
|
10,287 |
11,197 |
|
|
||||
|
Deferred tax asset |
|
700 |
663 |
|
|
||||
|
|
|
|
|
|
|
||||
|
|
|
10,987 |
11,860 |
|
|
||||
|
|
|
|
|
|
|
||||
|
Current assets |
|
|
|
|
|
||||
|
Inventories |
|
5,570 |
4,556 |
|
|
||||
|
Trade and other receivables |
|
9,384 |
9,331 |
|
|
||||
|
Cash and cash equivalents |
|
945 |
1,783 |
|
|
||||
|
Current tax |
|
58 |
58 |
|
|
||||
|
|
|
|
|
|
|
||||
|
|
|
15,957 |
15,738 |
|
|
||||
|
|
|
|
|
|
|
||||
|
Total assets |
|
26,944 |
27,598 |
|
|
||||
|
|
|
|
|
|
|
||||
|
Current liabilities |
|
|
|
|
|
||||
|
Trade and other payables |
|
(9,326) |
(9,477) |
|
|
||||
|
Borrowings - revolving credit facility |
9 |
(907) |
(2,407) |
|
|
||||
|
Lease liabilities |
10 |
(697) |
(839) |
|
|
||||
|
|
|
|
|
|
|
||||
|
|
|
(10,930) |
(12,723) |
|
|
||||
|
|
|
|
|
|
|
||||
|
Non-current liabilities |
|
|
|
|
|
||||
|
Other payables |
|
(12) |
(32) |
|
|
||||
|
Lease liabilities |
10 |
(1,704) |
(2,037) |
|
|
||||
|
Deferred tax liabilities |
|
(712) |
(703) |
|
|
||||
|
|
|
|
|
|
|
||||
|
|
|
(2,428) |
(2,772) |
|
|
||||
|
|
|
|
|
|
|
||||
|
Total liabilities |
|
(13,358) |
(15,495) |
|
|
||||
|
|
|
|
|
|
|
||||
|
Net assets |
|
13,586 |
12,103 |
|
|
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
Equity |
|
|
|
|
|
||||
|
Share capital |
|
1,933 |
1,553 |
|
|
||||
|
Share premium account |
|
1,699 |
- |
|
|
||||
|
Translation reserve |
|
(253) |
(265) |
|
|
||||
|
Retained earnings |
|
10,207 |
10,815 |
|
|
||||
|
|
|
|
|
|
|
||||
|
Total equity |
|
13,586 |
12,103 |
|
|
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
Consolidated statement of changes in equity
For the 52 week period ended 30 September 2023
|
|
Notes |
Share capital |
Share premium account |
Translation reserve |
Retained earnings |
Total equity |
|||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||
|
|
|
|
|
|
|
|
|||
|
Balance at 2 October 2021 |
|
1,553 |
- |
(260) |
15,784 |
17,077 |
|||
|
Prior period adjustment* |
14 |
- |
- |
- |
(1,054) |
(1,054) |
|||
|
|
|
|
|
|
|
|
|||
|
Restated balance at 2 October 2021 |
|
1,553 |
- |
(260) |
14,730 |
16,023 |
|||
|
|
|
|
|
|
|
|
|||
|
Share based payments |
|
- |
- |
- |
122 |
122 |
|||
|
|
|
|
|
|
|
|
|||
|
Transactions with owners |
|
- |
- |
- |
122 |
122 |
|||
|
|
|
|
|
|
|
|
|||
|
Loss for the period |
|
- |
- |
- |
(4,037) |
(4,037) |
|||
|
Other comprehensive expense: Exchange differences on translating foreign operations |
|
- |
- |
(5) |
- |
(5) |
|||
|
|
|
|
|
|
|
|
|||
|
Total comprehensive expense |
|
- |
- |
(5) |
(4,037) |
(4,042) |
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
Balance at 1 October 2022 |
|
1,553 |
- |
(265) |
10,815 |
12,103 |
|||
|
|
|
|
|
|
|
|
|||
|
Shares issued |
|
380 |
1,699 |
- |
- |
2,079 |
|||
|
Share based payments |
|
- |
- |
- |
71 |
71 |
|||
|
|
|
|
|
|
|
|
|||
|
Transactions with owners |
|
380 |
1,699 |
- |
71 |
2,150 |
|||
|
|
|
|
|
|
|
|
|||
|
Loss for the period |
|
- |
- |
- |
(679) |
(679) |
|||
|
Other comprehensive income: Exchange differences on translating foreign operations |
|
- |
- |
12 |
- |
12 |
|||
|
|
|
|
|
|
|
|
|||
|
Total comprehensive income / (expense) |
|
- |
- |
12 |
(679) |
(667) |
|||
|
|
|
|
|
|
|
|
|||
|
Balance at 30 September 2023 |
|
1,933 |
1,699 |
(253) |
10,207 |
13,586 |
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
*A restatement of the Consolidated statement of changes in equity for the year ended 2 October 2021 was undertaken to correct an error which related to the incorrect treatment of certain contract accounting transactions (see Note 14).
Consolidated statement of cash flows
For the 52 week period ended 30 September 2023
|
|
Notes |
52 weeks ended 30 September 2023 |
52 weeks ended 1 October 2022 |
|
|
|
£'000 |
£'000 |
|
Operating activities |
|
|
|
|
Operating cashflow |
11 |
1,223 |
1,787 |
|
Exceptional costs |
|
(1,255) |
(968) |
|
Finance costs paid |
|
(406) |
(292) |
|
Income tax refunded |
|
408 |
138 |
|
|
|
|
|
|
Net cash (outflow) / inflow from operating activities |
|
(30) |
665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
Proceeds from sale of fixed assets |
|
178 |
2,063 |
|
Purchase of property, plant and equipment |
|
(576) |
(536) |
|
|
|
|
|
|
Net cash (outflow) / inflow from investing activities |
|
(398) |
1,527 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (outflow) / inflow before financing |
|
(428) |
2,192 |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Shares issued (net of transaction costs) |
|
2,079 |
- |
|
Repayment of borrowings |
|
(1,500) |
(2,366) |
|
Repayment of lease liabilities |
|
(989) |
(1,260) |
|
|
|
|
|
|
Net cash outflow from financing activities |
|
(410) |
(3,626) |
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(838) |
(1,434) |
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
1,783 |
3,217 |
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
945 |
1,783 |
|
|
|
|
|
|
Bank borrowings |
|
(907) |
(2,407) |
|
Lease liabilities |
|
(2,401) |
(2,876) |
|
|
|
|
|
|
Net Debt |
12 |
(2,363) |
(3,500) |
|
|
|
|
|
|
|
|
|
|
Accounting Policies
1. Basis of preparation
The consolidated financial statements have been prepared in accordance with UK-adopted International Accounting Standards, in conformity with the requirements of the Companies Act 2006. The financial statements are made up to the Saturday nearest to the period end for each financial period.
Pressure Technologies plc, company number 06135104, is incorporated and domiciled in the United Kingdom. The registered office address is Pressure Technologies Building, Meadowhall Road, Sheffield, South Yorkshire, S9 1BT.
The Group has applied all accounting standards and interpretations issued relevant to its operations for the period ended 30 September 2023. The consolidated financial statements have been prepared on a going concern basis.
The summary accounts set out above do not constitute statutory accounts as defined by Section 434 of the UK Companies Act 2006. The summarised consolidated statement of comprehensive income, the summarised consolidated balance sheet at 30 September 2023, the summarised consolidated statement of comprehensive income, the summarised consolidated statement of changes in equity and the summarised consolidated statement of cash flows for the period then ended have been extracted from the Group's 2023 statutory financial statements upon which the auditor's opinion is unqualified and did not contain a statement under either sections 498(2) or 498(3) of the Companies Act 2006. The audit report for the period ended 30 September 2023 did not contain statements under sections 498(2) or 498(3) of the Companies Act 2006.
The statutory financial statements for the period ended 30 September 2023 were approved by the directors on 29 January 2024 but have not yet been delivered to the Registrar of Companies. The statutory financial statements for the period ended 1 October 2022 have been delivered to the Registrar of Companies.
2. Going concern
The financial statements have been prepared on a going concern basis. The Group and Company's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Group Strategic Report. The principal risks and uncertainties are set out on pages 19 to 23 of the financial statements.
The Directors must consider and determine whether the Group has sufficient financial resources to meet its obligations as they fall due for a period of not less than 12 months from the date of approval of these accounts.
In making this assessment, the Directors have considered a range of factors, including the prospects for the markets the Group serves; the position and intentions of competitors; the customer base of the Group and any reliance on a small number of customers; the supply chain of the Group and any reliance on key suppliers; staff attrition and the risk of losing any key members of staff; any actual or threatened litigation; relationships with HMRC and regulators; historic, current and projected financial performance and cash flow; relationships with debt and equity funders and the likely availability of external funding; and the plans and intentions of management. The Directors have also considered the economic backdrop and geopolitical risks to economic activity from the Russia-Ukraine conflict and instability in the Middle East.
In undertaking their assessment, the Directors have prepared financial projections for a period of at least 12 months from the date of approval of these accounts. The current economic conditions have introduced additional uncertainty into the Directors assessment, such that future potential outcomes are more difficult to estimate. The Directors have therefore considered a number of sensitivities to their projections to quantify potential downside risks to future financial performance.
On 14 November 2023, the Group exited its Revolving Credit Facility with Lloyds Bank by raising a new term loan facility ("the Facility") of £1.5 million from two of its major shareholders. The Facility is committed for a period of five years and is not subject to any financial covenant tests. The Facility is subject to capital repayments of £0.5 million during the projection period which have been factored into the Directors' assessment.
Management have produced projections for the period up to September 2025 for the Group, CSC and PMC, taking account of reasonably plausible changes in trading performance and market conditions, which have been reviewed by the Directors. In particular, the projections reflect that:
· the Group remains principally dependent on profitability at CSC;
· CSC is currently dependent on large UK defence contracts for its profitability. During the projection period, CSC is expected to undergo a period of transition, with revenue from UK defence contracts falling and revenue from the hydrogen energy market and global defence customers increasing. Over the short-term, this is expected to result in lower revenues and earnings for CSC, which is factored into the financial projections. However, there remain both internal and external risks to CSC's performance over the projection period;
· the recent significantly improved trading in the PMC division as oil and gas markets recover, following unprecedented order intake levels which have resulted in an order book of £9.4 million as at 30 September 2023, the highest ever order book level for the division.
Accounting policies (continued)
2. Going concern (continued)
The base case forecast demonstrates that the Group is projected to:
· generate profits and cash in the current financial year and beyond; and
· generate sufficient cash to meet capital repayments under the Facility.
Management has also developed downside scenarios, which include consideration of the recent track record of not always achieving budgets. The downside scenario recognises the Group's dependence on the performance of large contracts (for example the large naval contract) noted above due to their materiality to the Group's overall results and the requirement for CSC to win significant new contracts from the hydrogen energy market.
Management have modelled the downside scenario based on reasonably possible delays to:
· Delivery of UK defence milestones and revenue recognition
Achievement of milestones on these types of contracts can be subject to uncertainties including in-house operational delays and inefficiencies, delays in the supply of material and components by suppliers, and delays in the performance of work by subcontractors. The Group often has very limited control of the latter two factors.
· Delays to placement of major orders from new hydrogen customers
Hydrogen energy is an emerging green energy market. Major UK and European projects have already been subject to significant delays which have impacted FY23 performance. Placement of major orders from new hydrogen customers is subject to uncertainties.
Other factors which could negatively impact the projections include:
· Weaker revenue from Integrity Management deployments due to customer delays; and
· The recent improvement in PMC revenue and order book not being sustained going forward due to weaker than expected oil and gas market conditions.
The Group believes that these other factors are individually less likely to be material to the achievement of the projections than potential delays in UK defence milestones and hydrogen orders, but in the event that they occur together with these risks, they may have a negative impact on cash flow at certain points in the projection period.
In the event of the delays identified above, the Group would look to mitigate the impact, partially or fully, by pulling forward contracted work from other customers, and through normal working capital management and other cash preservation initiatives. It should also be noted that work on the major UK defence contract has already commenced and, to date, no material problems or delays have arisen and the contract is progressing in line with our contractual obligations. The contract has also largely passed through the phase in which the supply of materials and components and the use of third-party contractors, over whom the Group has significantly less control, is at its highest.
The Directors also note that the Group has net current assets of £5.0 million at 30 September 2023.
Reflecting management's confidence in delivering large UK defence contracts and winning new hydrogen contracts, and having already refinanced its debt facilities, the Directors have concluded that the Group does have sufficient financial resources to meet its obligations as they fall due for the next 12 months and no material uncertainty relating to Going Concern has been identified.
The Group and Parent Company continue to adopt the going concern basis in preparing these financial statements. Consequently, these financial statements do not include any adjustments that would be required if the going concern basis of preparation were to be inappropriate.
3. New standards adopted in 2023
No new standards were applied during the year.
4. Amendments to IFRSs that are mandatorily effective for future years
At the date of the authorisation of these financial statements, several new, but not yet effective, standards and amendments to existing standards, and interpretations have been published by the IASB. None of these standards or amendments to existing standards have been adopted early by the Group. Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of pronouncement. The impact of new standards, amendments and interpretations not adopted in the year have not been disclosed as they are not expected to have a material impact on the Group's financial statements.
Notes to the consolidated financial statements
1. Segment analysis
The financial information by segment detailed below is frequently reviewed by the Chief Executive who has been identified as the Chief Operating Decision Maker (CODM).
For the 52 week period ended 30 September 2023
|
|
Cylinders |
Precision Machined Components |
All other segments |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
Revenue from external customers* |
20,667 |
11,277 |
- |
31,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit / (loss) |
7,042 |
1,939 |
(38) |
8,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
3,854 |
82 |
(1,847) |
2,089 |
|
|
|
|
|
|
|
|
|
Depreciation |
(710) |
(717) |
(117) |
(1,544) |
|
|
|
|
|
|
|
|
|
Operating profit / (loss) before amortisation and exceptional costs |
3,144 |
(635) |
(1,964) |
545 |
|
|
|
|
|
|
|
|
|
Exceptional costs |
(236) |
(57) |
(962) |
(1,255) |
|
|
|
|
|
|
|
|
|
Operating profit / (loss) |
2,908 |
(692) |
(2,926) |
(710) |
|
|
|
|
|
|
|
|
|
Net finance costs |
(69) |
(145) |
(192) |
(406) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) before tax |
2,839 |
(837) |
(3,118) |
(1,116) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental net assets** |
10,477 |
1,971 |
1,138 |
13,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment information: |
|
|
|
|
|
|
Taxation credit / (charge) |
254 |
189 |
(6) |
437 |
|
|
Capital expenditure - property, plant and equipment |
243 |
813 |
35 |
1,091 |
|
* Revenue from external customers is stated after deducting inter-segment revenue of £671,000 for Precision Machined Components.
** Segmental net assets comprise the net assets of each division adjusted to reflect the elimination of the cost of investment in subsidiaries and the provision of financing loans provided by Pressure Technologies plc.
Notes to the consolidated financial statements (continued)
1. Segment analysis (continued)
For the 52 week period ended 1 October 2022
|
|
Cylinders |
Precision Machined Components |
All other segments |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
Revenue from external customers* |
17,583 |
7,356 |
- |
24,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit / (loss) |
4,521 |
838 |
(100) |
5,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
1,088 |
(310) |
(1,724) |
(946) |
|
|
|
|
|
|
|
|
|
Depreciation |
(679) |
(790) |
(209) |
(1,678) |
|
|
|
|
|
|
|
|
|
Operating profit / (loss) before amortisation and exceptional costs |
409 |
(1,100) |
(1,933) |
(2,624) |
|
|
|
|
|
|
|
|
|
Amortisation |
- |
(161) |
60 |
(101) |
|
|
Exceptional (costs) / income |
(403) |
50 |
(615) |
(968) |
|
|
|
|
|
|
|
|
|
Operating profit / (loss) |
6 |
(1,211) |
(2,488) |
(3,693) |
|
|
|
|
|
|
|
|
|
Net finance costs |
(37) |
(73) |
(182) |
(292) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before tax |
(31) |
(1,284) |
(2,670) |
(3,985) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental net assets** |
7,330 |
2,596 |
2,177 |
12,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment information: |
|
|
|
|
|
|
Taxation credit / (charge) |
50 |
(151) |
49 |
(52) |
|
|
Capital expenditure - property, plant and equipment |
559 |
526 |
47 |
1,132 |
|
* Revenue from external customers is stated after deducting inter-segment revenue of £nil for Precision Machined Components.
** Segmental net assets comprise the net assets of each division adjusted to reflect the elimination of the cost of investment in subsidiaries and the provision of financing loans provided by Pressure Technologies plc. The FY22 Segmental net assets for Precision Machined Components and Other Segments have been restated due to a re-allocation of eliminating entries.
Notes to the consolidated financial statements (continued)
1. Segment analysis (continued)
The Group's revenue disaggregated by primary geographical markets is as follows:
|
Revenue |
2023 |
2022 |
||||
|
|
Cylinders |
Precision Machined Components |
Total |
Cylinders |
Precision Machined Components |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
United Kingdom |
17,862 |
4,937 |
22,799 |
12,406 |
3,720 |
16,126 |
|
France |
1,025 |
87 |
1,112 |
2,958 |
68 |
3,026 |
|
Norway |
696 |
246 |
942 |
885 |
272 |
1,157 |
|
USA |
2 |
1,593 |
1,595 |
3 |
1,071 |
1,074 |
|
Romania |
- |
2,281 |
2,281 |
- |
972 |
972 |
|
Italy |
- |
537 |
537 |
- |
764 |
764 |
|
Taiwan |
158 |
- |
158 |
393 |
- |
393 |
|
Netherlands |
75 |
- |
75 |
359 |
- |
359 |
|
Germany |
140 |
- |
140 |
272 |
- |
272 |
|
Singapore |
- |
816 |
816 |
- |
21 |
21 |
|
Australia |
277 |
188 |
465 |
19 |
142 |
161 |
|
Rest of Europe |
128 |
28 |
156 |
157 |
8 |
165 |
|
Rest of World |
304 |
564 |
868 |
131 |
318 |
449 |
|
|
|
|
|
|
|
|
|
|
20,667 |
11,277 |
31,944 |
17,583 |
7,356 |
24,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year, there was one customer who contributed to over 10% of total Group revenue. This customer accounted for revenue of £13.6 million (42.5%), within the Cylinders segment (2022: two customers, £5.2 million (20.9%) and £2.6 million (10.5%), both reported in the Cylinders segment).
The following table provides an analysis of the Group's revenue by market.
|
Revenue |
2023 |
2022 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Oil and gas |
11,751 |
7,953 |
|
Defence |
17,188 |
13,483 |
|
Industrial |
938 |
1,099 |
|
Hydrogen energy |
2,067 |
2,404 |
|
|
|
|
|
|
31,944 |
24,939 |
|
|
|
|
|
|
|
|
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 |
2023 |
2022 |
||
|
|
Cylinders |
Precision Machined Components |
Cylinders |
Precision Machined Components |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
Sale of goods transferred at a point in time |
3,843 |
10,903 |
3,336 |
7,021 |
|
Sale of goods transferred over time |
15,397 |
- |
12,584 |
- |
|
Rendering of services |
1,427 |
374 |
1,663 |
335 |
|
|
|
|
|
|
|
|
20,667 |
11,277 |
17,583 |
7,356 |
|
|
|
|
|
|
Notes to the consolidated financial statements (continued)
1. Segment analysis (continued)
The following aggregated amounts of transaction values relate to the performance obligations from existing contracts that are unsatisfied or partially unsatisfied as at 30 September 2023:
|
Revenue expected in future periods |
2023 |
|
|
£'000 |
|
|
|
|
Sale of goods - Cylinders |
7,826 |
|
|
|
The asset and liability balances in relation to existing contracts as at 30 September 2023 are disclosed in Note 10.
2. Impairment review
The Group tests annually for impairment, in accordance with IAS 36, if there are indicators that intangible or tangible fixed assets might be impaired.
The impairment methodology identifies two Cash Generating Units ("CGU's") within the Group, being CSC and PMC. Each CGU is assessed for potential indicators of impairment, including internal or external factors or events that could reduce the recoverable value of the fixed assets of the Group. If indicators of impairment are identified, a full impairment review is undertaken to determine the recoverable amount of the CGU.
The Directors exercise their judgment in determining the recoverable amount of a CGU, involving the use of estimates in relation to the future prospects of the CGU.
The recoverable amount of a CGU is determined using a discounted cashflow model that is based upon a five-year forecast period. The forecast takes into account the firm order book, sales pipeline and market opportunities of the CGU, together with expected gross margin performance and consideration of the cost base, planned capital expenditure and estimated working capital needs of the CGU. A long-term growth assumption is applied beyond the five-year forecast period. The future cashflows are then discounted to a present, recoverable value by applying a risk-adjusted pre-tax discount rate.
If the recoverable value of a CGU is less than the carrying value of its balance sheet, then an impairment charge may be required. The carrying value of the balance sheet is determined by application of the accounting policies of the Group.
In this reporting period, the Directors exercised their judgment on the basis of information available at 30 September 2023.
CSC Impairment Review
In FY23 CSC's revenues were heavily weighted towards the UK defence sector. In the next year, CSC is expected to transition towards the global defence and hydrogen energy markets, reducing some of its dependency on UK defence contracts. CSC is expected to generate lower revenue and earnings over the short-term with the rate of growth of revenue and the level of achievable margins from these new markets subject to risk over the medium-term.
This change in the composition of CSC's revenues and the requirement to penetrate new markets is considered a potential indicator of asset impairment. Therefore, an impairment review has been conducted on CSC.
The Directors have assumed that CSC is successful in winning significant new contracts in the hydrogen energy market. However, the Directors expect that gross margin generation on hydrogen contracts may be somewhat lower than UK defence contracts which moderates the growth of Adjusted EBITDA in the forecast period.
The future cashflows of CSC have been extrapolated in perpetuity at a rate of 5% and discounted at a risk-adjusted pre-tax discount rate of 16%. On this basis, the recoverable value of CSC is estimated to be £18.9 million. The carrying
value of the net assets of CSC at 30 September 2023, adjusting for cash, intercompany and deferred tax balances, was £8.2 million. On this basis, an impairment charge is not required.
The Directors have considered sensitivities to the future cashflows of CSC, in particular a significantly reduced level of hydrogen revenue in the period FY26-FY28, thereby reducing the value of CSC into perpetuity. Based on this sensitivity, the recoverable value of CSC is estimated to be £9.5 million. On this basis, an impairment charge is still not required.
The Directors have concluded that CSC does not require an impairment charge for FY23 in relation to the carrying value of its assets or the carrying value of its investment in its subsidiaries.
Notes to the consolidated financial statements (continued)
2. Impairment Review (continued)
PMC Impairment Review
PMC is heavily exposed to the oil and gas sector which is subject to significant geopolitical influences giving rise to periods of short-term volatility. From a longer-term perspective, the oil and gas sector is expected to undergo gradual but consistent decline, exhibiting "sunset" characteristics as major Western economies transition towards low carbon and green energy sources to deliver on net-zero commitments. This trend is likely to limit the long-term planning horizon for the Oil & Gas sector to a 20-30 year period. These external factors are considered to be potential indicators of asset impairment. Therefore, an impairment review has been conducted on PMC.
In FY23 PMC's revenues recovered strongly in the final quarter of the year based on a much higher rate of manufacturing activity. Based upon the robust order book and much more positive outlook for the oil and gas sector, PMC is expected to be able to maintain this increased rate of activity and grow in-line the broader global oil and gas market over the period FY25-FY28.
The future cashflows of PMC have been extrapolated beyond the forecast period for a further 20 years only, given that the oil and gas sector is expected to exhibit sunset characteristics over the medium- to long-term. The future cashflows have been subject to growth of 6% pa for the period FY29-FY38 and to a rate of decline of 2% pa for the period to FY39-FY48. Thereafter, no further cashflows are assumed.
The future cashflows of PMC have been discounted at a risk-adjusted pre-tax discount rate of 18%. On this basis, the recoverable value of PMC is estimated to be £9.1 million. The carrying value of the net assets of PMC at 30 September 2023, adjusting for cash, intercompany and deferred tax balances, was £5.8 million. On this basis, an impairment charge is not required.
The Directors have considered sensitivities to the future cashflows of PMC, in particular rate of growth in the period FY26-FY28, reducing the value of PMC in the extrapolation period to FY48. Based on this sensitivity, the recoverable value of PMC is estimated to be £6.6 million. On this basis, an impairment charge is still not required.
The Directors have concluded that PMC does not require an impairment charge for FY23 in relation to the carrying value of its assets or the carrying value of its investment in its subsidiaries.
Group Impairment Review
At Group level, the above assessments support a total recoverable value of £28.0 million. Allowing for assets held centrally of £1.9 million, the carrying value of the net assets of the Group, adjusting for cash, intercompany and deferred tax balances, was £15.9 million. On this basis, an impairment charge is not required.
On the basis of the sensitivities noted above, the total recoverable value of the Group falls to £16.1 million. On this basis, an impairment charge is still not required.
The Directors have concluded that the Group does not require an impairment charge for FY23 in relation to the carrying value of its assets or the carrying value of its investment in its subsidiaries.
The Directors are not aware of any other matters that would necessitate changes to their key estimates.
3. Finance costs
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Interest receivable |
(2) |
- |
|
Interest payable on bank loans and overdrafts |
193 |
168 |
|
Interest payable on lease liabilities |
171 |
124 |
|
Other interest payable |
44 |
- |
|
|
|
|
|
|
406 |
292 |
|
|
|
|
|
|
|
|
Notes to the consolidated financial statements (continued)
4. Loss before taxation
Loss before taxation is stated after charging / (crediting):
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Depreciation of property, plant and equipment - owned assets |
1,057 |
1,114 |
|
Depreciation of property, plant and equipment - leased assets |
487 |
564 |
|
Loss/(profit) on disposal of fixed assets |
170 |
(327) |
|
Amortisation of intangible assets |
- |
101 |
|
Amortisation of grants receivable |
(20) |
(66) |
|
Staff costs - excluding share based payments |
11,018 |
9,234 |
|
Cost of inventories recognised as an expense |
12,089 |
12,463 |
|
Share based payments |
71 |
122 |
|
|
|
|
Included in the (profit)/loss on disposal of fixed assets in 2022 is a £401,000 profit relating to the sale and leaseback of the property at Roota Engineering Limited, part of the Precision Machined Components division.
5. Amortisation of intangible assets
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Amortisation of intangible assets |
- |
101 |
|
|
|
|
|
|
- |
101 |
|
|
|
|
6. Exceptional costs
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Debt advisory services to refinance banking facilities |
373 |
344 |
|
Debt advisory services on behalf of Lloyds Banking Group |
131 |
- |
|
Corporate finance services |
313 |
- |
|
Property costs |
- |
280 |
|
Final settlement for ERP system costs |
- |
193 |
|
Reorganisation costs |
309 |
- |
|
Historical contract settlement |
10 |
88 |
|
Write-down of obsolete historic inventory |
111 |
121 |
|
Reversal of inventory provision from prior year |
(3) |
(91) |
|
New Long-Term Incentive Plan set up costs |
- |
33 |
|
Other |
11 |
- |
|
|
|
|
|
|
1,255 |
968 |
|
|
|
|
Property costs relate to two closed sites of a formerly owned entity. The leases relating to this former entity have been surrendered and no further costs were incurred in FY23.
Notes to the consolidated financial statements (continued)
7. Taxation
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Current tax credit |
|
|
|
Current tax charge |
- |
(7) |
|
Over provision in respect of prior years |
409 |
65 |
|
|
409 |
58 |
|
|
|
|
|
Deferred tax credit / (charge) |
|
|
|
Origination and reversal of temporary differences |
144 |
494 |
|
Under provision in respect of prior years |
(116) |
(604) |
|
|
28 |
(110) |
|
|
|
|
|
Total taxation credit / (charge) |
437 |
(52) |
|
|
|
|
|
|
|
|
Corporation tax is calculated at 22% (2022: 19%) of the estimated assessable profit for the period. Deferred tax is calculated at the rate applicable when the temporary differences are expected to unwind.
The charge for the period can be reconciled to the loss per the consolidated statement of comprehensive income as follows:
|
|
|
|
|
|
|
|
|
|
2023 £'000 |
2022 £'000 |
|
|
|
|
|
|
|
Loss before taxation |
|
|
(1,116) |
(3,985) |
|
|
|
|
|
|
|
Theoretical tax credit at UK corporation tax rate 22% (2022: 19%) |
|
|
246 |
757 |
|
|
|
|
|
|
|
Effect of (charges) / credits: |
|
|
|
|
|
- non-deductible expenses |
|
|
(76) |
(20) |
|
- non-deductible exceptional items |
|
|
(181) |
(159) |
|
- adjustments in respect of prior years |
|
|
293 |
(539) |
|
- unrealised (loss) / profit in overseas entities |
|
|
(4) |
34 |
|
- recognition and utilisation of losses brought forward |
|
|
159 |
(125) |
|
|
|
|
|
|
|
Total taxation credit / (charge) |
|
|
437 |
(52) |
|
|
|
|
|
|
An increase in the UK corporation tax rate to 25% was substantively enacted in May 2021 and took effect from 1 April 2023. The table above therefore uses the average rate of 22% for the current financial period.
As the most significant timing differences are not expected to unwind until 2024 or later, the deferred tax rate was maintained at 25% in the period.
Notes to the consolidated financial statements (continued)
8. Loss per ordinary share
The calculation of basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.
The calculation of diluted loss per share is based on basic loss per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive share options.
Adjusted loss per share shows loss per share after adjusting for the impact of amortisation charges and any other exceptional items, and for the estimated tax impact, if any, of those costs. Adjusted loss per share is based on the loss as adjusted divided by the weighted average number of shares in issue.
On 6 December 2022, the Group undertook a fundraising through the issue of 7,600,000 new ordinary shares.
For the 52 week period ended 30 September 2023
|
|
|
|
£'000 |
|
|
|
|
|
|
Loss after tax |
|
|
(679) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares ('000) |
|
|
|
|
|
|
Weighted average number of shares - basic |
|
|
37,400 |
|
Dilutive effect of share options |
|
|
446 |
|
|
|
|
|
|
Weighted average number of shares - diluted |
|
|
37,846 |
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted |
|
|
(1.8)p |
|
|
|
|
|
The effect of anti-dilutive potential shares is not disclosed in accordance with IAS 33.
The Group adjusted loss per share is calculated as follows:
|
|
|
|
£'000 |
|
|
|
|
|
|
Loss after tax |
|
|
(679) |
|
|
|
|
|
|
Exceptional costs (see Note 6) |
|
|
1,255 |
|
Tax effect of the above adjustments |
|
|
(276) |
|
|
|
|
|
|
Adjusted profit |
|
|
300 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share |
|
|
0.8p |
|
|
|
|
|
The tax effect is based on applying a 22% tax rate to the adjustment for exceptional costs.
Notes to the consolidated financial statements (continued)
8. Loss per ordinary share (continued)
For the 52 week period ended 1 October 2022
|
|
|
|
£'000 |
|
|
|
|
|
|
Loss after tax |
|
|
(4,037) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares ('000) |
|
|
|
|
|
|
Weighted average number of shares - basic |
|
|
31,067 |
|
Dilutive effect of share options |
|
|
661 |
|
|
|
|
|
|
Weighted average number of shares - diluted |
|
|
31,728 |
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted |
|
|
(13.0)p |
|
|
|
|
|
The effect of anti-dilutive potential shares is not disclosed in accordance with IAS 33.
The Group adjusted loss per share is calculated as follows:
|
|
|
|
£'000 |
|
|
|
|
|
|
Loss after tax |
|
|
(4,037) |
|
|
|
|
|
|
Amortisation (see Note 5) |
|
|
101 |
|
Exceptional costs (see Note 6) |
|
|
968 |
|
Tax effect of the above adjustments |
|
|
(203) |
|
|
|
|
|
|
Adjusted loss |
|
|
(3,171) |
|
|
|
|
|
|
|
|
|
|
|
Adjusted loss per share |
|
|
(10.2)p |
|
|
|
|
|
The tax effect is based on applying a 19% tax rate to the adjustments for amortisation and exceptional costs.
Notes to the consolidated financial statements (continued)
9. Borrowings
|
|
2023 £'000 |
2022 £'000 |
|
Current |
|
|
|
Revolving credit facility |
907 |
2,407 |
|
|
|
|
|
|
|
|
During the period, the bank loans drawn under the Revolving Credit Facility ("RCF") had an average annual interest rate of 3.70% above LIBOR.
On 21 October 2022, the Group's RCF was amended and its facility term was extended from September 2023 to March 2024, with the facility reducing from £2.4 million to £1.9 million in March 2023 and then £0.9 million in September 2023.
On 23 June 2023, the Group's RCF was amended and the facility expiry accelerated from March 2024 to December 2023. In addition, Lloyds Bank agreed to waive the financial covenant tests due at 30 Jun 2023.
The Group's RCF was drawn at £0.9 million at 30 September 2023 (1 October 2022: £2.4 million). These bank borrowings are secured on the property, plant and equipment of the Group (see Note 14) by way of a debenture. Obligations under finance leases are secured on the plant and machinery assets to which they relate.
The carrying amount of other bank borrowings is considered to be a reasonable approximation of fair value. The carrying amounts of the Group's borrowings are all denominated in GBP.
The maturity profile of borrowing facilities are as follows:
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
Due for settlement within one year: |
|
|
|
Revolving credit facility |
907 |
2,407 |
|
|
|
|
|
|
|
|
The Group had undrawn borrowing facilities of nil at the year-end (2022: nil).
Subsequent to year end, on 14 November 2023 the RCF was repaid in full from the proceeds of a new Term Loan facility arranged with two of the major shareholders of the Company (see Note 13).
Notes to the consolidated financial statements (continued)
10. Lease Liabilities
Lease liabilities are presented in the statement of financial position as follows:
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Current |
|
|
|
Asset finance lease liabilities |
456 |
629 |
|
Right of use asset lease liabilities |
241 |
210 |
|
|
|
|
|
|
697 |
839 |
|
|
|
|
|
|
|
|
|
Non-current |
|
|
|
Asset finance lease liabilities |
616 |
735 |
|
Right of use asset lease liabilities |
1,088 |
1,302 |
|
|
|
|
|
|
1,704 |
2,037 |
|
|
|
|
The Group has leases for certain operational factory premises and related facilities, several large items of plant and machinery equipment, an office building, a number of motor vehicles and some IT equipment.
During the prior period, the Group completed a sale and leaseback of its freehold property occupied by Roota Engineering Limited, part of the Precision Machined Components division. The property lease liability at the end of the period was £851,000 (2022: £837,000). The increase was due to finance charges being allocated to a rent-free period.
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. 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 30 September 2023 were as follows:
|
|
Within one year |
Over one to five years |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
30 September 2023 |
|
|
|
|
Lease payments |
827 |
2,141 |
2,968 |
|
Finance costs |
(130) |
(437) |
(567) |
|
|
|
|
|
|
Net present value |
697 |
1,704 |
2,401 |
|
|
|
|
|
|
|
|
|
|
|
|
Within one year |
Over one to five years |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
1 October 2022 |
|
|
|
|
Lease payments |
963 |
2,512 |
3,475 |
|
Finance costs |
(124) |
(475) |
(599) |
|
|
|
|
|
|
Net present value |
839 |
2,037 |
2,876 |
|
|
|
|
|
|
|
|
|
|
Notes to the consolidated financial statements (continued)
10. Lease Liabilities (continued)
Lease payments not recognised as a liability
The Group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis.
11. Reconciliation of operating profit to operating cashflow
|
|
|
|
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Adjusted Operating profit / (loss) |
545 |
(2,624) |
|
|
|
|
|
Adjustments for: |
|
|
|
Depreciation of property, plant and equipment |
1,544 |
1,678 |
|
Share option costs |
71 |
122 |
|
Release of grants |
(20) |
(66) |
|
Loss / (profit) on disposal of property, plant and equipment |
170 |
(327) |
|
Fixed asset write-offs |
108 |
- |
|
Movement in translation reserve |
12 |
- |
|
|
|
|
|
Changes in working capital: |
|
|
|
Increase in inventories |
(1,003) |
(859) |
|
Increase in trade and other receivables |
(53) |
(269) |
|
(Decrease) / increase in trade and other payables |
(151) |
4,132 |
|
|
|
|
|
Operating cashflow |
1,223 |
1,787 |
|
|
|
|
12. Net Debt Reconciliation
|
|
|
Cash & Bank |
Borrowings |
Leases |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
|
|
At 2 October 2021 |
|
3,217 |
(4,773) |
(3,355) |
(4,911) |
|
Cash flows |
|
(1,434) |
- |
- |
(1.434) |
|
Repayments |
|
- |
2,366 |
1,260 |
3,626 |
|
New facilities - asset finance leases |
|
- |
- |
(1,025) |
(1,025) |
|
Surrender - right of use leases |
|
- |
- |
244 |
244 |
|
|
|
|
|
|
|
|
At 1 October 2022 |
|
1,783 |
(2,407) |
(2,876) |
(3,500) |
|
|
|
|
|
|
|
|
Cash flows |
|
(838) |
- |
- |
(838) |
|
Repayments |
|
- |
1,500 |
989 |
2,489 |
|
New facilities - right of use leases |
|
- |
- |
(482) |
(482) |
|
New facilities - right of use leases |
|
- |
- |
(32) |
(32) |
|
|
|
|
|
|
|
|
At 30 September 2023 |
|
945 |
(907) |
(2,401) |
(2,363) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the consolidated financial statements (continued)
13. Subsequent events
On 24 October 2023, the Group announced its intention to divest the Precision Machined Components division in order to strengthen the Group's balance sheet and cash position and support strategic investment into Chesterfield Special Cylinders.
On 14 November 2023, the Group exited its existing Revolving Credit Facility, provided by Lloyds Banking Group, by arranging a new Term Loan facility of £1.5 million with Rockwood Strategic plc and Peter Gyllenhammar AB, two of its major shareholders. The new Term Loan is committed for a period of 5 years and is secured against the assets of the Group. The new loan was drawn in full and used to repay Lloyds in full, settle transaction costs and to provide general working capital headroom.
In conjunction with the provision of the new Term Loan, Rockwood and Gyllenhammar were issued with 1,933,358 warrants in aggregate (representing 5% of the issued share capital) to subscribe for ordinary shares in the Company at a price of 32 pence per share, representing a 20% premium to the closing share price on 23 October 2023 (being the day prior to the announcement of the new facility). The warrants may be exercised at any time in the 5 years following drawdown of the new facility and continue to be exercisable in the event the facility is repaid before its final expiry.
Rockwood Strategic plc is a quoted unit trust whose funds are managed by Harwood Capital LLP, thereby placing it under the control of Richard Staveley, a Non-Executive Director of the Company. Rockwood Strategic plc is therefore considered to be a related party under "IAS 24 - Related Party Disclosures".
14. Prior period adjustment
During the year ended 1 October 2022 ("FY22"), the Group reviewed its accounting policy and past accounting treatment in respect of a small number of long-term defence contracts within its Cylinders division.
Since FY19, the Group had consistently applied an accounting treatment whereby revenue for these specific defence contracts was recognised using an 'Output' methodology under IFRS 15, 'Revenue from Contracts with Customers' ("IFRS 15"), with costs being accrued to achieve a uniform profit margin throughout the multi-year life of the contracts, resulting in cost deferrals at financial period ends. During FY22, it was noted that this accounting treatment was not in compliance with IFRS 15, which requires that all costs incurred in the period relating to the contract should be immediately expensed. Specifically, the cost deferral historically adopted by the Group, to achieve a uniform contract profit margin, was not permitted. As a result, the financial statements for FY21 were restated with raw materials reduced by £625,000, work-in-progress reduced by £429,000 and net assets reduced by £1,054,000.
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