Final Results

RNS Number : 6373S

Pressure Technologies PLC

04 December 2012

 



4 December 2012

PRELIMINARY RESULTS 2012

Pressure Technologies plc ("Pressure Technologies","PT" or the "Group") is pleased to announce its preliminary results for the year ended 29 September 2012.

Financials:

•    Record revenue of £30.4 million (2011: £23.1 million)

•    Operating profit post acquisition costs and related amortisation at £1.8 million (2011: £0.7 million)

•    Pre-tax profit of £1.8 million (2011: £0.6 million)

•    Basic earnings per share of 11.2p (2011: 3.5p)

•    Adjusted earnings per share of 12.5p (2011:6.2p)

•    Operating cash flow of £1.9 million (2011: £0.9m)

•    Year end net funds of £2.7 million (2011: £2.9 million)

•    Proposed final dividend of 5.0p per share (2011: 4.8p), giving a total dividend of 7.5p per share (2011: 7.2p)

Operations:

Better balanced

•    Engineered Products - poised to become largest part of the Group

•    Cylinders - significant increase in rig and drillship activity and strong growth in service offerings

•    Alternative Energy - ready for rapid expansion with 2013 being the crucial year

Growing

•    Strong order books and pipeline for Cylinders and Engineered Products

•    Alternative Energy pipeline strong with number and size of projects increasing

•    Focus on growing higher margin services in Cylinders

•    New products planned for Engineered Products

•    Engineered Products focus on "On Time In Full" delivery to take market share

•    Seeking selective acquisition opportunities

Richard Shacklady, Chairman of Pressure Technologies, said:  "The Engineered Products Division is poised for further growth; the facility in North America has been re-structured and is positioned to take advantage of a buoyant US market for its well control products. Additionally, the seabed well control equipment market has rebounded after a period of stagnation and orders from this sector are particularly buoyant. 

"Having rebounded strongly in 2012 we expect growth in the Cylinder Division to moderate this year, not least due to increased competition from the Far East in the oil and gas market. However, the business does benefit from having a large forward order book, market leadership in the defence sector and growth positions into diversified markets.

"We will continue to seek acquisitions that suit our profile and will fit into and enhance the Engineered Products Division. It is now positioned both geographically and in product range to become a significant player in the oilfield control and equipment sector and we believe it is proving to be a platform for growth."

For further information, please contact:

Pressure Technologies plc John Hayward, Chief Executive James Lister, Group Finance Director	Today:  020 7920 3150 Thereafter:  0114 242 7500 www.pressuretechnologies.co.uk
Tavistock Communications Catriona Valentine Keeley Clarke	Tel:  [phone] www.rawlingsfinancial.co.uk
Charles Stanley Securities Nominated Adviser and Broker Philip Davies Carl Holmes	Tel:  [phone]

Company description:

Pressure Technologies is an AIM listed, leading designer and manufacturer of speciality engineering solutions for high pressure systems serving large global markets. The Group is organised into three divisions: Cylinders, Engineered Products and Alternative Energy.

Engineered Products: This division comprises Al-Met Limited ("Al-Met") and the Hydratron group of companies ("Hydratron").

Al-Met is a niche manufacturer of specialised, precision engineered valve wear parts used in the oil and gas industries, which was acquired by Pressure Technologies in February 2010. Its products are used in high-pressure choke and flow control valves, designed to regulate flow volumes in extremely demanding applications in the subsea and surface oil and gas industries. The business, which was established in 1985, has developed a leading edge capability in precision machining carbides, high grade stainless steels and super alloys.

Hydratron, acquired in October 2010, designs, manufactures and sells a range of air operated high pressure hydraulic pumps, gas boosters, power packs, hydraulic control panels and test rigs. Hydratron has sales and manufacturing companies in Altrincham, UK, and Houston, USA and a spread of third party distributors in key locations around the world. Formed in 1981, Hydratron has since established itself as a leading supplier of quality high pressure equipment to the oil and gas industries. The full range of Hydratron products may be viewed at www.hydratron.co.uk.

Cylinders: Chesterfield Special Cylinders Limited ("CSC") designs, manufactures and offers retesting and refurbishment services for a range of speciality high pressure, seamless steel gas cylinders for global energy and defence markets. The business is conducted under the "Chesterfield" brand which is a long established name in the cylinders and specialised pressure vessel market.

Alternative Energy: Chesterfield BioGas Limited was formed in November 2008 following the signing of a co-operation agreement with Greenlane® Biogas Limited, the world leader in biogas upgrading. This gives Pressure Technologies exclusive rights to market and manufacture Greenlane® equipment in the UK and Eire. Chesterfield BioGas provides turnkey solutions for the cleaning, storage and dispensing of biomethane for injection into the gas grid or use as a vehicle fuel.

CHAIRMAN'S STATEMENT

I am pleased to report that the Group has delivered a much improved performance for the year ended 29 September 2012, with a continuation of the recovery previously reported in the first half interim statement. 

We begin the new financial year with solid order books in our two main divisions, Engineered Products and Cylinders, and a number of contracts stretching beyond the current financial year, underpinning our confidence in the medium term prospects for the Group.  Whilst the oil and gas market remains the largest sector for the Group, the businesses are now better balanced both by product sector and customer geographic location. 

The strength of the Group's balance sheet underpins the Board's strategy for the growth of the Group. Our prime objective is to penetrate select growth market sectors which offer synergies to our core businesses and provide niche, design and technology driven, high margin products for critical applications, through organic development programmes or by acquisition.

Results

Group revenues for the year ended 29 September 2012 increased almost 32% to a record £30.4 million from £23.1 million in 2011.  Profit before taxation saw a threefold increase to £1.8 million from £0.6 million in 2011, giving basic earnings per share of 11.2p compared to 3.5 p.

We continue to maintain a strong balance sheet through focussing on operating cash and working capital controls across the Group's Divisions and net cash at the year end was £2.7 million, after outflows of £0.8 million on deferred acquisition costs, compared to £2.9 million in 2011.

Given our strong balance sheet and confidence in the medium term prospects for the Group, the Board is proposing a final dividend of 5.0 pence per share, giving a total of 7.5 pence per share for the year. This represents an increase of 4% over 2011.  If approved, the final dividend will be paid on 8 March 2013 to shareholders on the register at the close of business on 15 February 2013.

The Board is committed to maintaining a progressive dividend policy.

Trading

Demand from the global offshore oil and gas drilling operators has continued to firm-up, reflecting a return to higher levels of exploration and production by the major oil and gas producers, in particular, and activity levels generally across the wider industry.

The Group has significant interests in two sectors of this market; deepwater oil and gas drilling equipment and oilfield well head equipment and controls, including the rapidly developing subsea well head equipment sector.

Our Engineered Products Division, which supplies the oilfield well head controls and equipment sectors has continued to benefit from sustained high levels of oil and gas production both onshore and offshore.  The subsea well head equipment sector experienced a period of flat demand for some six months and is now moving ahead strongly with new offshore fields moving into the production phase. 

The Cylinder Division has seen in a significant increase in rig and drillship activity and in the defence sector we maintain our market leading position at home whilst increasing sales into overseas defence programmes.  Further business has been secured from overseas navies and, in the UK, we have taken orders for BAE's Astute boat 6 submarine.  As the UK MoD source for in-service and after market cylinder maintenance and support for the Royal Navy, we have responsibility for the management of through-life capability for all high pressure cylinders including in-situ inspection.

Our facilities in the industrial gases storage and transportation market have been further developed, resulting in record levels of activity in this sector and growing  penetration of new accounts. This in turn provides the platform for further growth on the back of compressed natural gas (CNG) and hydrogen being recognised across Europe as alternatives to traditional fuels.

We continue to believe that the best long term prospects for the Group lie in the global energy markets and particularly in the equipment required for exploration and production of hydrocarbons.

In our Alternative Energy Division, Chesterfield BioGas has been very active throughout the year promoting and tendering for biogas upgrade plant and enjoys a high profile in this market.  Demand for UK biogas upgrade plant is still in early phase development with, so far, limited conversion from the project stage, which is very active, into firm orders. 

Our second biogas upgrading installation, however, will be completed in the 1st Quarter of the coming financial year and we are expecting to see a number of the outstanding major quotations converted into firm orders for delivery in mid 2013 and beyond.

The Board believes that there is major UK potential for this technology in the longer term. However regular reviews on the division's progress are being undertaken and we recognise that 2013 is a crucial year for Chesterfield BioGas.

Prospects

The Engineered Products Division is ready to deliver  further growth; the facility in North America has been re-structured and is very well positioned to take advantage of a buoyant US market for its well control products. Additionally, the seabed well control equipment market has rebounded after a period of stagnation and orders from this sector are particularly buoyant. 

Having recovered strongly in 2012, we expect growth in the Cylinder Division to moderate this year, not least due to increased competition from the Far East in the oil and gas market. However, the business does benefit from having a large forward order book, market leadership in the defence sector and growth positions into diversified markets.

We will continue to seek acquisitions that suit our profile and will fit into and enhance the Engineered Products Division. It is now positioned both geographically and in product range to become a significant player in the oilfield control and equipment sector and we believe it is proving to be a platform for growth.

Richard L. Shacklady

Chairman

4 December 2012

CHIEF EXECUTIVE'S STATEMENT

Pressure Technologies has made considerable progress in the last 12 months. We have delivered better results and have made improvements across the Group to create a more balanced business portfolio.   This is highlighted by the expansion of sales in the Engineered Products Division and the development of new service offerings in the Cylinder Division.

PT is growing and that growth is now better balanced across the Group's divisions and markets. 

The key points for the year are:

Cylinder Division

£m	2012	2011
Sales	16.3	11.0
Operating Profits	2.3	1.5
Net Assets	6.8	6.9

Chesterfield Special Cylinders ("CSC") grew strongly, as a direct result of the resurgence in the building of deepwater semi-submersible oil rigs and drill ships, following a prolonged downturn, caused, initially, by the global financial crisis and exacerbated by the crisis of confidence following the sinking of Deepwater Horizon in the Gulf of Mexico in 2010.

Air Pressure Vessels ("APVs") for motion compensation systems on 10 drillship projects were delivered in the year, compared to three in 2011. We currently have orders for seven projects in 2013, compared to six at the same stage last year. However, market dynamics have changed considerably and margins are under acute pressure from Asian competition, particularly South Korea, and we expect to see a declining market share for projects built in South Korean shipyards. This is compounded by a weaker Euro, as sales into this market are Euro denominated.

We are, however, actively pursuing opportunities with a number of new entrants into the motion compensation system market, who need the design expertise of CSC. Opportunities will also open up away from South Korea, as Brazil expands shipyard capacity to build oil rigs and drillships.

As expected, sales into the naval defence market were materially lower than in 2011, as a result of the phasing of projects rather than a downturn in the market. In August, CSC won the contract to supply the high pressure cylinders for the sixth Astute class submarine, HMS Agamemnon, which will be delivered over 2013 and 2014. The order for cylinders for the seventh and final Astute class submarine is expected in 2013 for delivery over 2014 and 2015 and we have begun preliminary design work on the cylinders for the Trident replacement.

We have continued focus on expanding our customer base in the naval defence market and have strengthened our design team with an experienced naval cylinder designer. Building on our expertise on cleanliness standards developed for the oil and gas industry, we won a contract from BAE to supply a service cleaning cylinders for oxygen containment. This demonstrated CSC's technical capabilities and its flexibility. The process was developed and capital equipment was procured and installed in a six week period to meet an urgent customer requirement. CSC is now planning to market this service to other potential customers, building oxygen systems. The contract to maintain the Royal Navy's stores of high pressure cylinders, won last year, has expanded rapidly with a number of planned submarine refit projects increasing the value of this contract, as well as giving more opportunity to sell in-situ inspection services.

The Small Cylinder market stabilised in the year with an increase in military aerospace spending, which improved margins in this market. The military market has been more resilient than we forecast and in August we were awarded the contract to supply steel high pressure cylinders on the initial build programme of the F22 Raptor. The development of the type IV composite has been successfully completed but, as yet, we have not identified a new commercial platform into which this can be built and consequently we have amortised the £224,000 development costs incurred to date. This was always viewed as a long term development and we are well placed to move into the composite market as new opportunities arise. 

The high pressure trailer market saw a reduction in reconditioning and refurbishment due to the phasing of statutory inspection within the BOC trailer fleet but we supplied two new trailers to Air Liquide and Linde France. Overall sales were slightly higher and margins slightly lower, as a result of the material content in the new trailers. CSC's new sales manager in Germany has made significant inroads with the large industrial gases companies in Europe. This, coupled with the financial instability of a major European competitor, puts CSC in a strong position in this market.  With the forecast growth of the market for the transportation and bulk storage of hydrogen and CNG, the medium and long term prospects for this market are very promising.

Our in-situ inspection service grew fourfold in the year and we have a team solely dedicated to the development of this offering. Immediate opportunities for growth exist in the defence and oil and gas markets. In the medium term, the increase of high pressure bulk storage of hydrogen and compressed natural gas for alternative fuels will be a source for further growth. In-situ inspection creates a new revenue stream from the knowledge base of CSC. It is a high margin service offering, which is not subject to the pricing pressures created by our low cost competitors in the ultra large cylinder manufacturing market.

Manufacturing continued to focus on "lean" initiatives. A major review of trailer build was carried out, creating  significant improvements in strip down and build times. A similar initiative is underway on the ultra-large finishing line. These initiatives are team based, owned and run by the shopfloor employees working on the product. Further investment was made in CSC's IT systems with the introduction of a more sophisticated finite capacity scheduling system and shop floor data capture. This allows efficient real time planning of resources to further improve efficiency. The major items of capital spend in the year were the oxygen cleaning facility and replacement overhead cranes. Together, these accounted for 50% of the total capital spend of £446,000. The balance was investment in a number of process improvements, particularly in the forging and washing processes.  Capital expenditure in 2013 is expected to be at a similar level to 2012 with the major focus being on process efficiency.

The key issue for CSC is to develop high added value service offerings quickly, to offset the effects of margin erosion from low cost competitors and the weak Euro. The business has the energy, the expertise and the people to achieve this effectively.

Engineered Products Division

£m	2012	2011
Sales	13.9	11.2
Operating Profits	1.0	1.0
Net Assets	7.7	6.5

The division is comprised of Hydratron Ltd in Altrincham, Hydratron Inc in Houston, Texas and Al-Met Ltd in Pontyclun, South Wales. The Hydratron businesses manufacture a range of air operated high pressure hydraulic pumps, gas boosters, power packs, hydraulic control panels and test rigs mainly for use in the oil and gas sector. Al-Met produces wear resistant components in a range of high alloy steels and tungsten carbides for use in high-pressure choke and flow control valves, designed to regulate flow volumes in extremely demanding applications in the subsea and surface oil and gas industries.

Hydratron Ltd had an excellent year with sales growing by one third and operating profits doubling. The sales, design and development teams were strengthened during the year. New products launched in the year included a 30,000 psi pump for very high pressure testing applications, a helium leak test gas booster system capable of injecting precise concentrations of helium and a pulse test system for testing aerospace pressure transducers. The latter project involved the recruitment of an electronics engineer, giving the business self-sufficiency in the design and development of automated plc controlled systems. Several new product opportunities have been identified and an additional full time development engineer is being sought to speed up the development cycle.

The assembly section of the business was reorganised to split standard product assembly from the bespoke systems. This has improved the efficiency of both areas. Due to the pace of growth in the business, the Operations Manager role is to be split in January with the incumbent becoming Technical Manager responsible for design, engineering and logistics and a new, experienced lean manufacturing engineer joining as Manufacturing Manager responsible for the machining and assembly areas.

Due to the nature of the business, little capital expenditure is required. IT systems will be upgraded in 2013 but beyond that no other major spend is planned.

Hydratron has an excellent reputation for its design and build ability. This, allied to a strong sales team, augmented by a distributor network in key market locations and the general level of market activity, gives grounds for optimism of further progress in 2013.

Hydratron Inc, after a good first half, failed to deliver its second half order book profitably, despite a 50% increase in sales. We did not have sufficient management resources of the right calibre in the business which has now been remedied. An experienced general manager was appointed in October 2012 with the remit to grow the business profitably. Being located in Houston, the business is situated close to all the major oilfield wellhead equipment and control system manufacturers and is, therefore, in a prime location from which to grow. It has already established a reputation for the same design and build capability as its UK sister company and is expected to make significant progress in 2013.

Al-Met had a challenging year. Sales were at the same level as 2011 but the phasing of these was very heavily skewed with low sales in the first half and a strong third quarter which tailed off into the fourth quarter. Concurrently, market forecasts and customer orders for 2013 were showing a significant increase. The decision was taken to hold the level of the shopfloor workforce and strengthen the management and engineering team with lean manufacturing specialists ahead of this increase. As a result of these factors, operating profits were down two thirds on 2011. The expected growth has materialised, following these changes, and the year end order book was 73% higher than at September 2011 and production schedules are full through to the end of February 2013. An additional afternoon shift has subsequently been recruited to meet the increased loading and reduce overtime.

There are two major reasons for this growth. A significant proportion of Al-Met's turnover is wear parts for subsea tree valves. This market is growing rapidly as more deepwater oil wells come on stream. Market forecasts and customer feedback suggest a 40% increase in this market in 2013 and continued growth into 2014. Also, a UK competitor ceased production in October which has compounded the increase.

As a division, it was disappointing that operating profits did not grow year on year. Increased profits at Hydratron Ltd were offset by the reduction in profitability at Al-Met and losses at Hydratron Inc. The outlook for 2013 is good and I expect the benefits of the changes made in 2012 to feed through into improved profits in 2013. The organic growth opportunities for this division are immediate and we expect Engineered Products to become the largest division of the Group, in terms of sales revenues, within the next eighteen months.

Additionally, we are pursuing a number of acquisition opportunities to add further breadth to the product range of the division.

In the medium to long term, on time in full delivery ("OTIF") remains the key to success for the division. Specific targeting of customers has proved that where delivery OTIF is met, order intake improves. In the current buoyant environment, this advantage is masked by general growth but, as our companies are significantly smaller than their competitors, we expect to take market share, even when markets are declining, if we can consistently deliver OTIF.

Alternative Energy

£m	2012	2011
Sales	0.2	0.9
Operating Profits	(0.5)	(0.5)
Net Assets	1.6	1.7

This was an important year for Chesterfield BioGas ("CBG"), our start-up alternative energy equipment business. An order was secured for an upgrader, our second into the biogas to grid ("BtG") market. This was due for installation in September 2012 but a road accident, which occurred during delivery, damaged the equipment and delayed installation to October. But for this, operating losses would have been halved in the year. More importantly, confirmation by Government of the structure of the Renewable Heat Incentive ("RHI") for BtG has increased the number and size of potential projects.

In previous years, CBG has been quoting a handful of small, "pilot" projects with larger projects only at the feasibility stage. Now, quotations are more numerous and the project size has increased to fully commercial sized plants as large utility companies look to enter the market. This matches the pattern experienced in other countries, where adoption of this technology is more advanced.

Summary and outlook

2012 was a turning point for PT, as we returned to growth and delivered market expectations. The result was underpinned by recovery in the Cylinder Division's main market and the Group's other two divisions making significant progress.  This progress, which has created a better balanced Group, is yet to be reflected in bottom line performance.

Looking to 2013, the Cylinder Division will face stiffer competition in its core oil and gas market and the challenge is to speed up the development of high added value services and new customers. There is significant potential for revenue growth in the Engineered Products Division, which this year must lead to bottom line growth. The Alternative Energy Division, Chesterfield BioGas, appears set for major growth and 2013 will be the crucial year for this business.

The clear message is that Pressure Technologies delivered in 2012; it is a better balanced Group, growing strongly in market sectors where its expertise is recognised and valued, seeking opportunities for further expansion through selective acquisitions. 

John Hayward

Chief Executive

4 December 2012

FINANCE DIRECTOR'S REPORT

Overview

The Group's revenue grew to £30.4m (2011: £23.1m). The growth was driven principally by a recovery in CSC's oil and gas business, where sales increased from £4.3m to £10.9m, and growth in the Engineered Products division.

Operating profit increased from £0.7m to £1.8m mainly as a result of the benefits to CSC from operational gearing following the recovery in the level of their business with the oil & gas sector. Historically, the Group has benefited from a high market share for cylinders used in deep water motion compensation systems but, with increasing competition, pricing and volume pressures are expected to be a feature going forward.

The Group seeks to target niche markets with good growth prospects and uses return on revenue as a key performance indicator. Our aim is a target return of 15% before taking account of the cost of acquiring subsidiaries and the subsequent amortisation of the intangible assets so acquired. The Alternative Energy Division is also excluded from this target as it is still considered to be in start-up mode. Using this measure we achieved an 8.1% return in 2012 (2011: 6.7%) with the expectation that this can be raised further with the benefits of lean manufacturing and operational gearing.

Foreign exchange

PT operates in international markets and accordingly accepts contracts denominated in currencies other than Sterling.

Whilst the level of exposure at any point in time is dependent on the nature of individual contracts, the Group usually has a partial hedge in place as both purchases and sales are made in Euro and also to a lesser extent in US dollars. With the Group's manufacturing activities being based mainly in the UK, management estimates that a 5% weakening of the Euro against Sterling would cost the Group circa £0.2m in profit before tax in any one year. The effect on the Group of movements in the US dollar to Sterling exchange rate, as long as it is within normal parameters, is not significant.

At the end of September 2012, the Group had contracts in place to sell Euros 3.5m at an average exchange rate of 1.26 to £ (2011: nil)

Treatment of acquisition related costs in the engineered products division

The Board intends to grow the Group both organically and by acquisition and consequently both goodwill and intangible assets are expected to be a recurring theme within the annual financial statements.

In the interest of clarity, acquisition costs and the amortisation of intangible assets resulting from acquisitions is shown separately in the Income statement. The relevant costs for the last two years, all of which relate to the engineering products division, are as follows:

	2012 £m		2011 £m
Cost of acquiring Hydratron	-		0.1
Amortisation of intangible assets acquired with Al-Met and Hydratron	0.2		0.3
Total	0.2		0.4

The remaining carrying value of these intangible assets totalling £0.5m will be amortised over the next three years.

The effect on earnings per share of these adjustments is:

	2012		2011
Earnings per share as reported	11.2p		3.5p
Adjustment for acquisition costs and related amortisation	1.3p		2.7p
Adjusted earnings per share	12.5p		6.2p

Amortisation of other intangible assets

The cost of the Chesterfield BioGas licence and distribution agreement with Greenlane Biogas is being amortised over a period of 15 years; this being the period over which significant revenues are expected to be generated.

Development costs incurred in the Cylinder Division in 2011, totalling £0.2m, have been expensed in 2012, as these costs no longer meet the recognition requirements of IAS 38.

Taxation

The effective tax rate for the group in 2012 was 28.5% (2011 30.6%), which is higher than the UK standard rate of 25% due to the effect of unrelieved losses in the US.

Cash flow

The Group has a strong balance sheet with net funds of £2.7m (2011: £2.9m) and an unused overdraft facility of £2m.

The movement in cash flow can be summarised as follows:

	2012 £m		2011 £m
Earnings before interest, tax, depreciation and amortisation (EBITDA)	2.9		1.5
Movement in working capital	(0.4)		1.6
Capital expenditure (net of disposals)	(0.6)		(1.2)
Development costs capitalised	-		(0.2)
Extension of biogas licence	-		(0.8)
Operating cash flow	1.9		0.9
Acquisition of Hydratron
(2012: deferred consideration paid)	(0.8)		(2.8)
UK Corporation tax paid	(0.5)		(0.9)
Dividends paid	(0.8)		(0.8)
Net movement	(0.2)		(3.6)

Cash flow in 2012 was strongly positive at the operational level.

The build up of working capital reflects the recovery in activity in CSC and growth in the engineering products division.

Net capital expenditure at £0.6m was in-line with the depreciation charge.

The deferred consideration of £0.8m re the acquisition of Hydratron was paid during 2012. There are no further deferred consideration payments to be made for either Al-Met or Hydratron.

The acquisition of Hydratron cost a total of £3.6m, comprising purchase consideration of £3.3m and £0.3m of borrowings assumed on takeover. In addition £0.1m of acquisition costs were expensed through the Income Statement in 2011.

It is pleasing to note that in both of the last two years our acquisitions have generated profits of over £1 million on an initial outlay of £5.8 million (including net borrowings assumed).

James Lister

Group Finance Director

4 December 2012

Consolidated statement of comprehensive income

For the period ended 29 September 2012

	Notes	52 weeks ended 29 September 2012	52 weeks ended 1 October 2011
		£'000	£'000
Revenue	2	30,442	23,129
Cost of sales		(22,704)	(16,835)
Gross profit		7,738	6,294
Administration expenses		(5,978)	(5,645)
Operating profit pre acquisition costs and related amortisation	2	1,950	1,031
Acquisition costs and related amortisation	2	(190)	(382)
Operating profit post acquisition costs and related amortisation		1,760	649
Finance income		27	8
Finance costs		(9)	(79)
Profit before taxation		1,778	578
Taxation	3	(507)	(177)
Profit for the period		1,271	401
Exchange differences on translating foreign operations		9	(3)
Total comprehensive income for the period attributable to the owners of the parent		1,280	398
Earnings per share - basic	4	11.2p	3.5p
- diluted	4	11.2p	3.5p

All the above results are from continuing operations.

Consolidated balance sheet

As at 29 September 2012

	Notes	29 September	1 October
		2012	2011
		£'000	£'000
Non-current assets
Goodwill		1,964	1,964
Intangible assets	6	1,478	1,962
Property, plant and equipment		4,654	4,649
Deferred tax asset		110	245
Trade and other receivables		152	324
		8,358	9,144
Current assets
Inventories		6,922	5,012
Trade and other receivables		7,257	6,471
Cash and cash equivalents		2,693	2,939
		16,872	14,422
Total assets	2	25,230	23,566
Current liabilities
Trade and other payables		(7,651)	(6,260)
Derivative financial instruments		(23)	-
Borrowings		(6)	(33)
Current tax liabilities		(252)	(190)
		(7,932)	(6,483)
Non-current liabilities
Other payables		(655)	(744)
Borrowings		-	(9)
Deferred tax liabilities		(588)	(792)
		(1,243)	(1,545)
Total liabilities		(9,175)	(8,028)
Net assets		16,055	15,538
Equity
Share capital		568	567
Share premium account		5,378	5,369
Translation reserve		6	(3)
Retained earnings		10,103	9,605
Total equity	2	16,055	15,538

Consolidated statement of changes in equity

For the period ended 29 September 2012

	Share capital	Share premium account		Profit and loss account	Translation reserve	Total equity
	£'000	£'000		£'000	£'000	£'000
Balance at 2 October 2010	567	5,341		9,999	-	15,907
Dividends	-	-		(816)	-	(816)
Share based payments	-	-		21	-	21
Shares issued	-	28		-	-	28
Transactions with owners	-	28		(795)	-	(767)
Profit for the period	-	-		401	-	401
Exchange differences on translating foreign operations	-	-		-	(3)	(3)
Total comprehensive income	-	-		401	(3)	398
Balance at 1 October 2011	567	5,369		9,605	(3)	15,538
Dividends	-	-		(829)	-	(829)
Share based payments	-	-		56	-	56
Shares issued	1	9		-	-	10
Transactions with owners	1	9		(773)	-	(763)
Profit for the period	-	-		1,271	-	1,271
Exchange differences on translating foreign operations	-	-		-	9	9
Total comprehensive income	-	-		1,271	9	1,280
Balance at 29 September 2012	568	5,378		10,103	6	16,055

Consolidated statement of cash flows

For the period ended 29 September 2012

	Notes	52 weeks ended 29 September 2012	52 weeks ended 1 October 2011
		£'000	£'000
Operating activities
Cash flows from operating activities	7	2,573	3,095
Finance costs paid		(9)	(23)
Income tax paid		(514)	(896)
Net cash inflow from operating activities		2,050	2,176
Investing activities
Interest received		2	8
Proceeds from sale of fixed assets		84	-
Purchase of property, plant and equipment		(727)	(1,147)
Purchase of licence and distribution agreement		-	(800)
Development costs incurred		-	(234)
Purchase of subsidiary net of cash and cash equivalents		-	(2,164)
Deferred purchase consideration		(800)	-
Net cash used in investing activities		(1,441)	(4,337)
Financing activities
Repayment of borrowings		(36)	(725)
Dividends paid		(829)	(816)
Shares issued		10	28
Net cash outflow from financing activities		(855)	(1,513)
Net decrease in cash and cash equivalents		(246)	(3,674)
Cash and cash equivalents at beginning of period		2,939	6,613
Cash and cash equivalents at end of period		2,693	2,939

Notes

1.   Accounting policies

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union and IFRIC interpretations issued by the International Accounting Standards Board and the Companies Act 2006.

The Group has applied all accounting standards and interpretations issued relevant to its operations for the period ended 29 September 2012. The consolidated financial statements have been prepared on a going concern basis.

The financial statements have been prepared under the historical cost convention, except for derivative financial instruments which are carried at fair value.

2.   Segment analysis

 

The financial information by segment detailed below is frequently reviewed by the Chief Executive.

For the period ended 29 September 2012

	Cylinders	Engineered Products	Alternative Energy	Unallocated Amounts**	Total
	£'000	£'000	£'000	£'000	£'000
Revenue
- from external customers	16,306	13,912	224	-	30,442
Operating profit / (loss) before acquisition costs	2,303	1,017	(494)	(876)	1,950
Acquisition costs*	-	(190)	-	-	(190)
Operating profit / (loss)	2,303	827	(494)	(876)	1,760
Net finance income/(costs)	26	(8)	-	-	18
Profit / (loss) before tax	2,329	819	(494)	(876)	1,778
Segmental net assets ***	6,815	7,703	1,632	(95)	16,055
Other segment information:
Capital expenditure	446	275	6	-	727
Depreciation	275	331	33	-	639
Amortisation	224	190	70	-	484

 

*Acquisition costs include the amortisation of intangible assets acquired through an acquisition.

 

**Unallocated amounts include central costs, central assets and unallocated consolidation adjustments.

 

*** 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.

2.   Segment analysis (continued)

Period ended 1 October 2011

	Cylinders	Engineered Products	Alternative Energy	Unallocated Amounts**	Total
	£'000	£'000	£'000	£'000	£'000
Revenue
- from external customers	11,052	11,161	916	-	23,129
- from other segments	209	-	-	(209)	-
Segment revenues	11,261	11,161	916	(209)	23,129
Operating profit / (loss) before acquisition costs	1,440	1,048	(456)	(1,001)	1,031
Acquisition costs*	-	(382)	-	-	(382)
Operating profit / (loss)	1,440	666	(456)	(1,001)	649
Net finance income/(costs)	(55)	(21)	1	4	(71)
Profit / (loss) before tax	1,385	645	(455)	(997)	578
Segmental net assets ***	6,932	6,486	1,719	401	15,538
Other segment information:
Capital expenditure	504	411	232	-	1,147
Depreciation	248	248	22	-	518
Amortisation	10	288	83	-	381

 

 

*Acquisition costs include the amortisation of intangible assets acquired through an acquisition and fees associated with acquiring the entity.

 

**Unallocated amounts include central costs, central assets and unallocated consolidation adjustments.

*** 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.

2.   Segment analysis (continued)

 

The following table provides an analysis of the Group's revenue by geographical destination.

Revenue	2012	2011
	£'000	£'000
United Kingdom	10,307	11,828
Europe	4,275	4,850
Rest of the World	15,860	6,451
	30,442	23,129

 

The Group's largest customer contributed 38% to the Group's revenue (2011: 13%) which is reported within the Cylinders segment. No other customer contributed more than 10% in the year to 29 September 2012.

The second largest customer in the year to 1 October 2011 contributed 12% to the Group's revenue which is reported within the Engineered Products segment. No other customer contributed more than 10% in the year to 1 October 2011.

The following table provides an analysis of the Group's revenue by market.

Revenue	2012	2011
	£'000	£'000
Oil and gas	24,051	15,402
Defence Industrial gases	2,190 3,888	4,472 2,339
Alternative energy	313	916
	30,442	23,129

The following table provides an analysis of the carrying amount of segment assets, additions to property, plant and equipment for 2012. 

		United Kingdom	Rest of the World	Total
		£'000	£'000	£'000
Total assets		24,217	1,013	25,230
Additions to property, plant and equipment		706	21	727

There were no additions of intangible assets for 2012.

The following table provides an analysis of the carrying amount of segment assets, additions to property, plant and equipment and intangible assets for 2011. 

		United Kingdom	Rest of the World	Total
		£'000	£'000	£'000
Total assets		22,786	780	23,566
Additions to property, plant and equipment		1,147	-	1,147
Additions to intangible assets		1,800	-	1,800

 

 

3.   Taxation

	2012	2011
	£'000	£'000
Current tax
Current tax expense	578	227
(Over) / Under provision in prior years	(2)	19
	576	246
Deferred tax
Origination and reversal of temporary differences	(76)	(69)
Under provision in prior years	6	-
Total taxation charge	507	177

Corporation tax is calculated at 25% (2011: 27%) of the estimated assessable profit for the period. Deferred tax is calculated at 23% (2011: 26%).

The charge for the period can be reconciled to the profit per the consolidated statement of comprehensive income as follows:

	2012 £'000	2011 £'000
Profit before taxation	1,778	578
Theoretical tax at UK corporation tax rate 25% (2011: 27%)	444	156
Effects of:
- non-deductible expenses	(2)	5
- adjustments in respect of prior years	4	19
- effect of unrealised overseas losses	64	-
- change in taxation rates	(3)	(3)
Total taxation charge	507	177

4.   Earnings per ordinary share

Basic and diluted earnings per share have been calculated based on the net profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the period.

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

4.   Earnings per ordinary share  (continued)

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive options.

	2012 £'000	2011 £'000
Profit after tax	1,271	401
	No.	No.
Weighted average number of shares - basic	11,350,099	11,342,907
Dilutive effect of share options	-	21,215
Weighted average number of shares - diluted	11,350,099	11,364,122
Basic earnings per share	11.2p	3.5p
Diluted earnings per share	11.2p	3.5p

5.   Dividends

 

The following dividend payments have been made on the ordinary 5p Shares in issue:

 

	Rate	Date	Shares in issue	2012	2011
				£'000	£'000
Final 2009/10	4.8p	11 March 2011	11,349,544	-	544
Interim 2010/11	2.4p	10 August 2011	11,349,544	-	272
Final 2010/11	4.8p	9 March 2012	11,356,199	545	-
Interim 2011/12	2.5p	6 August 2012	11,356,199	284	-
				829	816

 

At 29 September 2012, the 2011/12 final dividend had not been approved by Shareholders and consequently this has not been included as a liability. The proposed dividend of 5.0p per share is expected to be paid on 8 March 2013 at a total cost of £568,000.

6.   Intangible assets

	Licence and distribution agreement	Development expenditure	Customer order book	Non Contractual customer relationships		Total
	£'000	£'000	£'000	£'000		£'000
Cost
At 2 October 2010	400	-	107	261		768
Additions	800	234	90	676		1,800
At 1 October 2011 and 29 September 2012	1,200	234	197	937		2,568
Amortisation
At 2 October 2010	100	-	90	35		225
Charge for the period	83	10	107	181		381
At 1 October 2011	183	10	197	216		606
Charge for the period	70	50	-	190		310
Impairment losses	-	174	-	-		174
At 29 September 2012	253	234	197	406		1,090
Net book value
At 29 September 2012	947	-	-	531		1,478
At 1 October 2011	1,017	224	-	721		1,962

 

An impairment loss of £174,000 (2011: £nil) was recognised for development expenditure reducing the value to £nil at the year end. All amortisation and impairment charges are included in the Consolidated statement of comprehensive income.

 

7.   Consolidated cash flow statement

	2012	2011
	£'000	£'000
Profit after tax	1,271	401
Adjustments for:
Finance costs / (income) - net	(18)	71
Depreciation of property, plant and equipment	639	518
Amortisation of intangible assets	484	381
Share option costs	56	21
Income tax expense	507	177
Loss/(profit) on derivative financial instruments	23	(21)
Foreign exchange movement	9	(3)
Profit on disposal of fixed assets	(1)	-
Changes in working capital:
(Increase) in inventories	(1,910)	(235)
(Increase) / decrease in trade and other receivables	(589)	1,235
Increase  in trade and other payables	2,102	550
Cash flows from operating activities	2,573	3,095

 

8. Notice of Annual General Meeting

 

The Annual General Meeting of the Company will be held at the offices of Hydratron Ltd, Stuart Road, Broadheath, Cheshire WA15 5GJ on Tuesday 12 February 2013 at 10:00 am. For those shareholders attending the Annual General Meeting, there will be an opportunity to see the operations at Hydratron Ltd once the formal business of the meeting has been concluded.

 

9. Preliminary statement

 

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 and 435 of the Companies Act 2006. The financial information for the period ended 29 September 2012 has been extracted from the Group's financial statements upon which the auditor's opinion is unqualified and does not include any statement under section 498(2) or 493(2) of the Companies Act 2006.

 

The statutory accounts for the period ended 29 September 2012 will be posted to shareholders at least 21 days before the Annual General Meeting and made available on our website www.pressuretechnologies.co.uk. In due course they will be delivered to the Registrar of Companies. The statutory accounts for the period ended 1 October 2011 have been delivered to the Registrar of Companies.

 

 

END

 

 

FR FSIFUDFESEDE