Final Results

RNS Number : 0324J

Pressure Technologies PLC

15 December 2015

Pressure Technologies plc

("Pressure Technologies" or the "Group")

2015 Preliminary Results

Pressure Technologies (AIM: PRES), the specialist engineering group, announces its preliminary results for the 53 weeks to 3 October 2015, which are slightly ahead of expectations and show strong cash conversion as the full year benefits of acquisitions come through.

John Hayward, CEO of Pressure Technologies, said:

"The Alternative Energy Division has a strong pipeline of potential orders as the demand for renewable energy grows worldwide. Development of the division is important to the near-term growth of the Group and we have the resources to achieve this.

"Whilst current trading conditions for the majority of our businesses remain challenging, the Group is much more diverse and better balanced than in the previous low in the oil and gas market. The Board remains confident in the medium to long-term prospects for the Group."

Financial highlights:

· Revenue of £55.6 million (2014: £54.0 million)

· Adjusted operating profit* at £3.3 million (2014: £7.8 million)

· Adjusted EBITDA* of £4.7m (2014:£8.7m)

· Adjusted earnings per share* of 14.5p (2014: 44.9p)

· Improved operational cash conversion of 2.41x adjusted operating profit (2014: 0.43x)

· Net debt to EBITDA ratio of 1.51x

· Final dividend unchanged at 5.6p per share, total dividend maintained at 8.4p

* pre acquisition costs, amortisation on acquired businesses and exceptional charges and credits

Highlights:

· Creation of Precision Machined Components Division and successful integration of Quadscot

· Successful restructuring of Greenlane Biogas

· In-sourcing of machined components completed

· Major cost savings made in response to the trading environment

· Revenue from oil and gas market reduced from 73% to 59%

· New products and services being developed across the Group to benefit 2016

· Alternative Energy order pipeline strong for 2016

For further information, please contact:

Pressure Technologies plc John Hayward, Chief Executive Joanna Allen, Group Finance Director Keeley Clarke, Investor Relations	Today Tel: 020 7920 3150 thereafter, Tel: 0114 257 3616 www.pressuretechnologies.com
Cantor Fitzgerald Europe (Nominated Adviser and Broker)	Tel: 020 7894 7000
Philip Davies / Rick Thompson / Michael Reynolds / Will Goode
David Banks / Tessa Sillars
Tavistock Simon Hudson	Tel: 020 7920 3150

COMPANY DESCRIPTION

Company description - www.pressuretechnologies.com

With its head office in Sheffield, Pressure Technologies was founded on its leading market position as a designer and manufacturer of high pressure systems serving the global energy, defence and industrial gases markets. Today it continues to serve those markets from a broader engineering base with specialist precision engineering businesses and has a worldwide presence in Alternative Energy as the global leader in biogas upgrading. On this foundation, the company is building a highly profitable group of companies through a combination of organic initiatives and acquisitions.

Pressure Technologies has four divisions, Precision Machined Components, Cylinders, Engineered Products and Alternative Energy, serving four markets: oil and gas, defence, industrial gases and alternative energy.

Precision Machined Components

· Al-Met, Mid Glamorgan, acquired in 2010 www.almet.co.uk

· Roota Engineering, Rotherham, acquired in March 2014 www.roota.co.uk

· Quadscot, Glasgow, acquired in October 2014 www.quadscot.co.uk

Cylinders

· Chesterfield Special Cylinders, Sheffield, IPO cornerstone in 2007 www.chesterfieldcylinders.com

· Kelley GTM Manufacturing, Amarillo - 40% stake acquired by the Group in December 2013 www.kelleygtm.com

Engineered Products

· Hydratron, Manchester and Houston, acquired in 2010 www.hydratron.com

Alternative Energy

· Chesterfield BioGas, Sheffield, founded in 2008. Renamed Greenlane Biogas UK on 5 June 2015.

· Greenlane, Vancouver, Canada and Auckland, New Zealand, acquired in October 2014 www.greenlanebiogas.com

CHAIRMAN'S STATEMENT

The past 18 months has seen a sustained fall in the price of crude oil, principally caused by a lack of demand on the back of sluggish global economic growth, but exacerbated by an oversupply primarily from onshore tight-oil fields located in North America. This has caused significant uncertainty in the oil and gas markets, forcing oil companies to cut investment in new field developments by around 30% and spending on operating assets has also come under intense cost-down pressure.

Pressure Technologies' products are mostly destined for use in the exploration, development and operation of offshore oil and gas fields, which are generally more expensive compared to onshore. Our key markets such as down-hole products, subsea production equipment and the construction of new semi-submersible drilling rigs and diving support vessels have been severely hit.

I am pleased, however, with the progress we've made in integrating our Precision Machining Components acquisitions, Roota and Quadscot, into the Group and both have made valuable sales, profits and cash contributions. We announced the acquisition of Greenlane Biogas in October 2014 and, as planned, this financial year has seen a substantial amount of restructuring and integration with Chesterfield Biogas to create a more streamlined, focused and competitive business. It is pleasing to note that our Alternative Energy Division can lay claim to having designed and constructed the world's largest biogas plant, demonstrating that our technology and project execution expertise is unquestionably world-class.

I am proud of the resolute way our people have risen to the trials of the past year. We've taken substantial cost out of our businesses so that we remain competitive and ready to support our customers, whilst protecting our knowledge and skills for the future.

Board

This year saw changes to executive and non-executive directors. Group Finance Director, James Lister retired and was replaced by Joanna Allen in July. James had served the Group since 2008 making a valuable contribution to the growth and diversification of the Group. Joanna joined us from PwC and she brings a wealth of experience in financial reporting and mergers and acquisitions to the Group.

In September 2015, Non-Executive Director Nigel Luckett retired and was replaced by Brian Newman. I'd like to take this opportunity to thank Nigel for his support and wise advice which the Group has benefitted from significantly over the years and also to welcome Brian to the Board. Given Brian's wide and varied industrial experience I am sure he will add much value to the Board going forward.

Results

I am pleased to report that Group revenues increased slightly to £55.6 million (2014: £54.0 million). Adjusted operating Profit came in at £3.3 million (2014: £7.8 million), delivering a Return on Revenue of 5.9% (2014: 14.5%), both of which were slightly better than market expectations set at the half-year.

Net asset value ended the year at £36.3 million (2014: 36.5 million) and cash generated from normal trading operations was £7.9 million (2014: £3.4 million). At year-end, closing net debt was £7.1 million and the Group comfortably complied with all bank covenants. The Board is proposing to maintain the dividend at 5.6p per share, giving a total dividend for the year of 8.4p, which will be paid to shareholders on 18 March 2016 to those shareholders on the register on 19 February 2016. The dividend is covered 1.7 times by adjusted earnings per share.

Interestingly the underlying like-for-like performance of the Group, if all the acquired businesses were excluded, would show a fall in revenue of 24.4% and this highlights the positive impact of the strategic decisions taken by the Board to diversify revenues and to acquire Roota, Greenlane and Quadscot.

Oil and Gas Market

The annual growth of global demand for oil in 2016 is forecast to be a modest 1.3%, which is broadly the same as last year. Chinese demand growth is forecast to remain robust at 3%, despite the current economic slowdown. Although there have been reports of falling car sales in China in recent months, the overall vehicle pool is still expanding, resulting in steady gasoline demand growth. Similarly, there is high gasoline demand growth in the USA due to a combination of reducing pump prices and stronger economic activity. The United States is by far the world's largest oil consumer and the country's demand is forecast to reach 19.5mbpd in 2016.

On the supply side, much has been written about the stand-off between OPEC and the USA and who will blink first to curb production and effectively become the swing producer, thereby controlling global crude oil prices. There is no question that this stand-off has destroyed billions of dollars of value for oil companies over the past year or so, to the extent that American and International oil companies wrote-off $38 billion of assets in the third-quarter of 2015 alone. In the USA, the number of onshore rigs in operation has fallen by 60% since November 2014 and non-strategic petroleum reserve stocks have increased by 30% since July 2014 to a record 484 mbls at the end of October 2015.

Against this uncertain and somewhat tense market backdrop, the Board does not expect oil and gas market conditions in 2016 to differ markedly from what we've seen during the second-half of 2015. On that basis, we have taken steps to monitor market developments as closely as we can, so that we are able to respond quickly to unfolding events.

Outlook

At the strategic level, the Board has approved further investment in our technology offerings in the Alternative Energy Division, which will broaden our market opportunities. Further, given the restructuring efforts that we've undertaken in 2015, the Board is confident that this division will deliver substantially better financial returns this coming year. Already we are seeing a strong order pipeline in the Americas, the European Union and China.

Within Cylinders we have taken steps to increase our presence in the USA and developments in this market are likely in the coming year. We also anticipate more success in delivering our Cylinder Integrity Management Services as customers focus more on maximising the life of their assets. Product development at Engineered Products coupled with an increased emphasis on sales and rental, underpinned by significant cost reductions, will help lift this division in 2016. We expect that Precision Machined Components will produce further synergies as the businesses continue to capitalise on the benefits of working together.

Whilst the oil and gas market has become more uncertain, the diversification of the Group has given us a better balance with 59% of our revenues now coming from this market, compared to 73% in 2014. Our focus to reduce costs and align the businesses with the current market conditions puts us in a strong position to weather the downturn. The Board remains alert to changing conditions in our core markets, so that we are ready to capitalise on opportunities whenever and wherever they arise.

Alan Wilson

Chairman

15 December 2015

BUSINESS REVIEW

We have had another year of great change with the acquisitions of a Glasgow based precision machining business, Quadscot Precision Engineers and the business and certain assets of our Alternative Energy Division technology partner, Greenlane, with operations in Canada, New Zealand and Europe. The acquisition of Quadscot prompted the split of the Engineered Products Division with the precision machining businesses becoming the Precision Machined Components Division. The acquisition of Greenlane gives us a worldwide footprint for the Alternative Energy Division in a market with drivers different from the rest of the Group.

The oil and gas market is the major market for the Group's products accounting for 59% of revenues in the year (2014: 73%). The collapse in the oil price from mid-2014 and its continued weakness through 2015 had a material impact on the Group's results. Sales revenues increased year on year as a result of the full year effect of the acquisition of Roota in March 2014 and the two acquisitions at the beginning of the year. At the same time adjusted operating profits fell as a result of the downturn in the oil and gas market combined with one-off administrative integration costs of bringing Greenlane into the Group.

As part of the integration of the acquisitions, but expanded by our response to the trading environment, the Group's divisions have made significant cost reductions. There has been a reduction of 77 employees amounting to 20% of the total employed at October 2014. These changes have not been at the expense of quality and service and key skills have been retained. All businesses are working on diversifying their customer base and end markets and a major in-sourcing of machined components has been completed.

The key points for the year are:

Precision Machined Components Division

	2015	2014	2013	2012	2011

Revenue £m	18.8	13.0	6.4	4.8	4.6
Adjusted operating profit £m	4.5	3.0	1.0	0.1	0.5

The division is comprised of Al-Met, Roota Engineering and Quadscot Precision Engineers. 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. Roota and Quadscot make a wide range of components for oil and gas pressure systems and downhole tools with Roota generally focusing on larger, longer products and Quadscot on smaller product in a range of high alloy materials.

The division had an excellent first-half performance but demand weakened markedly in the second-half as the downturn in investment in the oil and gas market deepened. Long established customer relationships and the ability to give high quality, short lead time deliveries gave some measure of protection to the order book but at much lower levels than that experienced up to the half-year.

The three businesses are working together well to ensure best practice is being used across the division and synergies are being achieved. Al-Met is now providing an EDM wire cutting service for Roota where this was previously subcontracted. Quadscot has been the main beneficiary of the in-sourcing project not only supplying products to the Engineered Products and Cylinders Division previously subcontracted to external suppliers but also supplying product previously machined in-house in those divisions. The machining sections at Engineered Products and Cylinders have been closed and their machine tools transferred to Quadscot.

Capital expenditure in the division, excluding equipment transfers from other divisions was £0.8 million. Major capital expenditure in the division was focused on Al-Met to improve productivity in the carbide grinding section and in milling. Capital expenditure for 2016 will be focused on extensions to the current product range, where there is known customer demand.

Engineered Products Division

	2015	2014	2013	2012	2011

Revenue £m	8.4	11.1	9.6	9.1	6.6
Adjusted operating profit £m	(0.4)	1.6	0.6	0.9	0.5

The division manufactures 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. It is now comprised of Hydratron Ltd, based in Altrincham, UK and Hydratron Inc, based in Houston, Texas, USA. The division had a difficult financial year moving from an adjusted operational profit in 2014 to a loss in 2015. The US subsidiary experienced an immediate downturn in business at the start of the financial year, which continued throughout the year as oil and gas customers first delayed, then postponed capital equipment purchases. The UK subsidiary entered the financial year with a strong order book and demand but project execution issues on a number of complex high-pressure systems adversely impacted the first-half results through increased operating costs and restricting new order intake. Recovery of this position coincided with a downturn in orders similar to that experienced by the Precision Machined Components Division.

Management of the division has been restructured under a new divisional Managing Director with a dedicated Commercial Director focused on expansion of sales and distribution channels. As noted above, the machining section at Hydratron Ltd was closed and all work transferred to Quadscot at the summer shutdown. Headcount in other sections has also recently been reduced to a level in line with current market conditions. Hydratron Inc has been restructured as a sales and engineering facility and all large systems builds are now being undertaken in the UK.

In a market where Hydratron has a small market share compared to its two largest competitors, there exists significant organic growth potential and the division is developing its core pump range to extend the product offering. This will make the business more attractive to potential distributors worldwide. Additionally, the US subsidiary has launched a rental service for high pressure units which, although currently small, is making encouraging headway as customers with capital expenditure restrictions are more readily able to rent than buy equipment. If successful, there is potential to replicate this model in other locations.

Cylinders Division

	2015	2014	2013	2012	2011

Revenue £m	14.3	21.4	17.3	16.3	11.3
Adjusted operating profit £m	2.1	3.8	3.6	2.3	1.4

Chesterfield Special Cylinders ("CSC"), which supplies a range of high pressure cylinder systems, performed slightly ahead of expectations. Major successes in securing orders for the defence market reduced the effects of a fall in orders into the oil and gas market, which were £11.0 million lower. Revenue from other markets increased by £3.9 million largely as a result of increased orders from the naval defence market where, with the exception of the USA, CSC is the established leader in sales to NATO and NATO friendly nations. In order to enter US defence and commercial markets a US based sales team has been established based in Pittsburgh, Pennsylvania.

Sales of services increased marginally over the year with a cyclical reduction in trailer reconditioning being more than offset by an increase in the Integrity Management service. Revenues from Integrity Management increased by 53% to just under £0.9 million. The British Standard created by CSC has been approved as a European Standard, EN 16753. This has now been submitted to the International Standards Organisation for approval as an ISO standard.

Capital expenditure in the year of £1.3 million was again centred on forging equipment for ultra-large cylinders, which entered production in January 2015. The long-term future of CSC was secured by the Group purchase of the freehold land and buildings at its Meadowhall site.

I am very sad to report that we had a fatal accident at CSC in June. The police have completed their investigation and have advised that no charges for manslaughter will be brought. The accident was not due to a product failure. The Health and Safety Executive (HSE) is now in charge of the accident investigation and we are cooperating fully. A hearing date has been set for February 2016 and we will report fully on the outcome in due course. Our sympathies are with the family.

Throughout the Group Health and Safety is a priority; the safety of our workforce is of paramount importance. CSC holds OHSAS 18001 accreditation and the Group employs a qualified health and safety manager. We have a strong working relationship with the HSE and an otherwise excellent safety record, especially given the often hazardous nature of our working environment.

The Group's 40% associate Kelley GTM ("KGTM") based in Amarillo, Texas, USA has had a difficult year. Its core market is the US onshore oil and gas market for which it provides gas transportation modules, GTMs. This market has been severely impacted by the fall in oil prices with the number of land based rigs in North America reducing by over 60% in the year and consequently KGTM has struggled to make headway. With no immediate prospect of recovery in the market the Group did not exercise its option to purchase a further 40% of the share capital of KGTM and the investment has been written down.

Alternative Energy Division

	2015	2014	2013	2012	2011

Revenue £m	14.0	8.4	1.1	0.2	0.9
Adjusted operating result £m	(1.1)	1.1	(0.5)	(0.5)	(0.5)

The division is a designer and supplier of equipment to upgrade biogas produced by the anaerobic digestion of organic waste to high quality methane suitable for injection into the gas grid or for use as a vehicle fuel. The division was transformed by the purchase of the business and certain assets of its technology provider, Greenlane, in October 2014. This has given the division a worldwide platform for selling biogas upgrading technology, trading out of the UK, Canada and New Zealand. The upgrader market is driven by environmental subsidy rather than oil and gas prices giving a welcome diversification from the risks of the oil and gas market. Buying Greenlane further reduces risks as our existing business, Chesterfield BioGas, was wholly dependent on the UK market with the inherent possibility of potential changes to Government policy. The divisional strategy is to focus resources on markets where subsidies encourage investment and to move to other markets as these change.

Following the purchase of Greenlane a restructuring was carried out with staffing rationalised across the division where there were areas of duplication. Research and Development has been more closely aligned with market requirements and located and sized accordingly. This included an exercise to properly record core product designs as a basis for future development. Chesterfield BioGas has now been rebranded under the Greenlane name.

As a result of the costs of the integration and rationalisation, completion of a number of low margin older projects and some slippage of projects into 2016, the division made a loss in 2015. At the operating level the operational businesses in the UK, Canada and New Zealand made an adjusted operating profit but the European business made a small loss. The majority of the operating loss in the year is attributable to the cost of restructuring.

The division has a programme of development which will lead to it being "technology agnostic", that is, to have a range of biogas technologies available to give the best solution for customers' requirements. To date the division is able to offer both its core water wash technology and vacuum pressure swing absorption technology licensed from SysAdvance, Portugal. By the half-year it is intended to launch an upgrader product using membrane technology. Having these three technologies will make the division unique in its capability to select the right technology for customers' needs for all sources of biogas.

Development of the core water wash technology is continuing with a re-engineering exercise to cut the complexity and cost of our plants and development of larger capacity plants capable of processing around twice the volume of the largest of the current model range.

Looking at financial year 2016, we have orders for upgraders in North America, Brazil, China and the UK with a considerable pipeline of potential follow on orders for these regions and Europe. The UK market has been stalled pending a review by Government of the Renewable Heat Incentive ("RHI") an announcement on which is expected imminently. Given the UK government's recent statements on the importance of natural gas in meeting environmental targets it is expected that there will be no major changes to the RHI at this time and the Group anticipates that this will be the trigger for an increase in project launches. Growth is also anticipated in the European market, particularly in France and the Netherlands where there are a number of projects at the planning stage. Italy is set to introduce its equivalent of the RHI in the near future and the German market is forecast to start a second wave of biogas upgrading investment. There is potential for significant market growth in China, where environmental protection is a key target of the current five year plan, and we have established a sales presence in that market.

Progress has been achieved in securing ongoing revenue from upgrader projects through the provision of maintenance services. The operational businesses in the division have a target of covering their fixed costs through maintenance contracts.

People

Changes in market conditions and the rationalisation of the Alternative Energy Division has seen a major reduction in numbers of employees in the Group, the majority through compulsory redundancies. However, we have been careful to ensure that we have maintained our core skills so that we can continue product and service development and rapidly respond to an upturn in our markets.

We have continued with our apprentice and graduate training schemes as well as in-house and external training for our employees. This is essential for the long-term development of the Group. With the majority of our manufacturing businesses having Managing Directors, senior operational and engineering staff who are former apprentices, there is a demonstrable career path for our employees.

Summary and outlook

This was a tough year for the Group due to the downturn in the oil and gas market. Substantial progress has been made in restructuring to meet the challenges of reduced revenues. With continued pressure on the oil price due to a combination of over-supply and weak demand the Board is of the opinion that any major recovery in that market will not occur before the end of the 2016 financial year. That said, we are structured to expand rapidly to meet increases in demand. The Precision Machined Components Division and Engineered Products Division have short order to delivery lead times of between two and four months and are therefore expected to benefit very quickly from an upturn. The Cylinder Division is expected to see a much slower return to revenues from oil and gas as it is reliant on the building of drillships and semi-submersible oil rigs for its larger orders. In the short-term these divisions continue to seek out new markets, products and services whilst at the same time focusing on cost reduction and efficiency savings.

The Alternative Energy Division has a strong pipeline of potential orders as the demand for renewable energy grows worldwide. Development of the division is important to the near-term growth of the Group and we have the resources to achieve this.

Whilst current trading conditions for the majority of our businesses remain challenging, the Group is much more diverse and better balanced than in the previous low in the oil and gas market. The Board remains confident in the medium to long-term prospects for the Group.

John Hayward

Chief Executive

15 December 2015

FINANCIAL REVIEW

Overview

I am delighted to be presenting my first financial review. It is an exciting time for the Group as the divisional structure becomes embedded and the strategic plans progress. Whilst market conditions in the second half of the year were tough, the recent acquisitions are integrating well and the Group is benefiting from the divisional synergies and greater diversity.

Revenue

Revenue has increased by 2.9% year-on-year. 2015 benefited from a full year of Roota (acquired 5 March 2014), and the acquisitions of Quadscot and Greenlane at the start of the period, which offset the anticipated decline in revenue in Cylinders and Engineering Products. The underlying like-for-like performance of the Group, excluding all the recently acquired businesses, was a fall in revenue of 24.4% which highlights the positive impact of the strategic decisions taken by the Board to acquire Roota, Greenlane and Quadscot. The second half of the year was tougher across the Group and the second half revenues fell by almost 27% compared to those reported at the interim results. This decline was particularly marked in the Precision Machined Components Division which is concentrated in the oil and gas sector and was also adversely impacted by the timing of orders in the Alternative Energy Division.

Profitability

The first year integration of acquisitions and the changing portfolio of companies in the Group have led to a mix of profitability different from that experienced in prior years. At the Group level, Return on Revenue (based on adjusted operating profit) for the year is 5.9%, compared to 14.5% in the prior year.

Cylinders has performed well, finishing ahead of market expectation, despite the volume decline and selling price pressures in the second half. The sales mix in the year has resulted in a 3.0ppt fall in return on sales year on year. However the business remains stable and profitable.

Precision Machined Components is contributing very positively. The nature of the products and highly skilled manufacturing processes in the division commands higher margins than elsewhere in the Group and overall the division achieved £4.5 million adjusted operating profit, a return on sales of 23.9%, for the full year (2014: 23.1%). There are further benefits to be achieved through the continued monitoring of the cost base in light of the persisting lower volumes, opportunities for further divisional synergies and Group machining in-sourcing, which should at least maintain the current level of profitability in this division going forward.

Engineered Products has had a very difficult second half and ended with a loss, worsening from the near break-even position at the half year. This arose predominantly as the division's cost base had been geared up for the much higher volumes which did not materialise. This has resulted in a disappointing loss for the year. A recovery plan commenced in August which led to higher than anticipated exceptional costs but leaves the division well placed to return to profitability in 2016.

The actions taken in the second half to respond to the conditions in the oil and gas market and align our cost base with the anticipated lower volumes in this market are expected to maintain the current levels of profitability despite the volume and pricing pressures anticipated in 2016.The expected operating loss in Alternative Energy arose from certain legacy Greenlane loss-making contracts, a high fixed cost base in the early months of the year which has now been addressed through redundancy (employee numbers fell 30% over the year) and £0.7 million in relation to other one-off administrative costs in respect of the core product designs. Overall, the division performed as expected in the year and the benefits of reorganisation will flow through fully in 2016.

Exceptional restructuring costs

Exceptional restructuring costs of £0.7 million were incurred (2014: nil), the most significant of these related to the planned post acquisition restructuring of the Alternative Energy Division, the balance arising in Engineered Products and at Group.

Acquisitions

On 1 October 2014 the Group completed the acquisition of the business and assets of Greenlane Biogas Holdings Ltd and its various subsidiaries. The maximum total consideration is NZ$25.0 million (£12.4 million) comprising an initial consideration of NZ$12.0 million (£6.0 million) with additional deferred payments split over four years of up to a maximum of NZ$13.0 million (£6.2 million). The initial consideration was met from the Group's existing cash resources.

On the same date the Group acquired 100% of the share capital of Quadscot Holdings Ltd for an initial cash consideration of £7.9 million (plus cash balances acquired) and deferred consideration of up to a maximum of £3.0 million based on the financial performance of the business over the two years immediately following acquisition. The acquisition was funded by drawing on £7.0 million from the Group's banking facility with the balance funded from the Group's existing cash resources.

As detailed in Note 13 a total of £6.0 million deferred consideration is provided for at the balance sheet date. This comprises the final year of the Roota deferred consideration and that expected to become payable in respect of Greenlane. All deferred consideration obligations have been assessed against the latest financial forecasts of the individual businesses compared to the minimum and maximum EBITDA targets set out in the respective acquisition agreements. The provision of £1.8 million previously held in respect of Quadscot has been released at the year-end as, despite the profitability of the business, the EBITDA target required in 2016 to trigger payment is no longer expected to be achieved.

Cash flow

Operating cash inflow from trading operations was £7.9 million (2014: £3.4 million), despite the fall in sales in the second half cash inflow remained positive. This is largely driven by the Precision Machined Components Division which, following the Roota and Quadscot acquisitions, has the highest cash conversion of the Group contributing over £5.0 million of the total cash inflow over the year.

The non-trading cash outflows in the first half of the year were significant and included the acquisitions of Quadscot and Greenlane, Roota's deferred consideration, the purchase of the Meadowhall site and restructuring. These non-recurring outflows totalled £15.1 million in the year (2014: £12.9m).

Following the reorganisation and integration, divisional management are increasingly focused on the operating cash conversion ratio. The Group operating cash conversion ratio was 2.41x, a significant increase over the prior year (2014: 0.43x), despite the anticipated cash requirements of the Alternative Energy Division and the disappointing result of the Engineered Products Division.

Borrowings

In October 2014 the Group concluded a new four year banking facility with Lloyds Banking Group. The facility which is available until 30 September 2018 comprises a £15 million multi-currency revolving credit facility and an accordion feature that allows the total revolving credit facility to be expanded by a further £10 million for specific purposes.

At the year-end £10 million of the revolving facility was drawn down and the accordion was not utilised. This was a reduction from the half year of £1.5 million giving £7.9 million headroom at the year-end date. Net Debt ended lower than the half-year at £7.1 million. The second half reduction in net debt resulted from the cash generation of the trading operations and a normalised level of non-trading related outflows.

The Group complied comfortably with all financial covenants on the banking facilities during the year.

Foreign Exchange

The Group has a number of major exposures to movements in foreign exchange rates related to both transactional trading and revaluation of overseas investments and deferred consideration liabilities.

In the year under review, the principal exposures, which arose from trading activities, were to movements in the value of the Euro and US$ relative to Sterling. As Group companies both buy and sell in overseas currencies, particularly the Euro and US$, there is a degree of natural hedge already in place. At the transactional level, where exchange movements are quickly realised, foreign exchange contracts are taken out to cover the majority of this exposure. As at the 3 October 2015 contracts were in place to cover the forward sale of Euro 1.0 million and US$0.4 million.

In 2015 a net gain of £0.2 million (2014: £0.03 million) has been recognised in adjusted operating profit in respect of realised and unrealised transactions in NZ$, CA$ and US$. A further £0.4 million gain arising from the revaluation of the Greenlane deferred consideration liability denominated in NZ$ has been taken below adjusted operating profit.

At the present time no cover is held against the value of overseas investments or intercompany loans with overseas entities as these are expected to be held for the long term and over the next year dividend flows are not expected to be significant.

Taxation

The effective tax rate for the Group in 2015 was a credit of 21.0% (2014: effective tax charge of 30.6%). Adjusting to exclude the release of the deferred consideration liability of £1.7 million, which does not give rise to a taxable credit, the effective tax rate would have been a credit of 10.3% (2014: adjusted effective tax charge of 23.6%).

During the year the current tax rate reduced to 20% for the fiscal year 2015/6, the applicable tax rate for the year is therefore 20.5% (2014: 22%). This reduction in rate and the effects of unrealised losses overseas have resulted in a lower effective tax rate than the current tax rate.

Corporation tax paid in the year totalled £1.8 million, all of which relates to the UK.

Joanna Allen

Finance Director

15 December 2015

Consolidated statement of comprehensive income

For the 53 week period ended 3 October 2015

	Notes	53 weeks ended 3 October 2015	52 weeks ended 27 September 2014
		£'000	£'000


Revenue	1	55,570	54,015

Cost of sales		(39,892)	(38,277)

Gross profit		15,678	15,738

Administration expenses		(12,383)	(7,904)

Operating profit pre acquisition costs, amortisation on acquired businesses and exceptional charges and credits	2	3,295	7,834
Separately disclosed items of administrative expenses:
Acquisition related exceptional items and amortisation	3	(291)	(1,556)

Other exceptional charges and credits	4	(425)	-

Operating profit		2,579	6,278
Finance income		15	32
Finance costs		(457)	(60)
Exceptional costs in relation to the option on and loan to KGTM	5	(1,408)	(718)
Share of losses of associate	11	(151)	(183)

Profit before taxation		578	5,349
Taxation	6	121	(1,638)

Profit for the period attributable to owners of the parent		699	3,711
Other comprehensive income Items that may be reclassified subsequently to profit or loss: Currency translation differences on translation of foreign operations		(10)	10

Total comprehensive income for the period attributable to the owners of the parent		689	3,721


Earnings per share - basic	7	4.9p	28.5p
-diluted	7	4.8p	27.9p

All of the above results are from continuing operations.

Consolidated balance sheet

As at 3 October 2015

	Notes	3 October	27 September
		2015	2014
		£'000	£'000

Non-current assets
Goodwill	9	15,020	7,081
Intangible assets	10	13,451	6,960
Property, plant and equipment		14,348	7,802
Deferred tax asset	16	270	155
Trade and other receivables	12	-	1,575
Investment in associates	11	-	123

		43,089	23,696

Current assets
Inventories		7,414	8,819
Trade and other receivables	12	13,539	20,561
Cash and cash equivalents Derivative financial instruments		3,459 26	6,356 43
Current tax asset		82
		24,520	35,779

Total assets		67,609	59,475


Current liabilities
Trade and other payables	13	(13,025)	(16,453)
Borrowings	14	(337)	(180)
Current tax liabilities		-	(1,183)

		(13,362)	(17,816)


Non-current liabilities
Other payables	13	(5,078)	(2,909)
Borrowings	14	(10,236)	(324)
Deferred tax liabilities	16	(2,592)	(1,897)

		(17,906)	(5,130)

Total liabilities		(31,268)	(22,946)

Net assets		36,341	36,529


Equity
Share capital		721	718
Share premium account		21,539	21,463
Translation reserve		25	35
Retained earnings		14,056	14,313

Total equity		36,341	36,529

Consolidated statement of changes in equity

For the 53 week period ended 3 October 2015

	Notes	Share capital	Share premium account	Translation reserve	Profit and loss account	Total equity
		£'000	£'000	£'000	£'000	£'000

Balance at 28 September 2013		568	5,387	25	11,484	17,464

Dividends	8	-	-	-	(991)	(991)
Share based payments		-	-	-	109	109
Shares issued		150	16,076	-	-	16,226

Transactions with owners		150	16,076	-	(882)	15,344

Profit for the period		-	-	-	3,711	3,711
Other comprehensive income: Exchange differences on translating foreign operations		-	-	10	-	10

Total comprehensive income		-	-	10	3,711	3,721

Balance at 27 September 2014		718	21,463	35	14,313	36,529

Dividends	8	-	-	-	(1,209)	(1,209)
Share based payments		-	-	-	253	253
Shares issued		3	76	-	-	79

Transactions with owners		3	76	-	(956)	(877)

Profit for the period		-	-	-	699	699
Other comprehensive income: Exchange differences on translating foreign operations		-	-	(10)	-	(10)

Total comprehensive income		-	-	(10)	699	689

Balance at 3 October 2015		721	21,539	25	14,056	36,341

Consolidated statement of cash flows

For the 53 week period ended 3 October 2015

	Notes	53 weeks ended 3 October 2015	52 weeks ended 27 September 2014
		£'000	£'000
Operating activities
Cash flows from operating activities	17	7,925	3,411
Finance costs paid		(220)	(7)
Income tax paid		(1,770)	(1,766)

Net cash inflow from operating activities		5,935	1,638


Investing activities
Interest received		-	19
Proceeds from sale of fixed assets		181	155
Purchase of property, plant and equipment		(6,250)	(1,792)
Cash outflow on purchase of subsidiaries net of cash acquired	18	(9,648)	(7,630)
Cash outflow on payment of deferred consideration		(2,000)	(306)
Cash outflow on loans made to associate		-	(2,147)
Cash outflow on third party loans		-	(2,782)

Net cash used in investing activities		(17,717)	(14,483)


Financing activities
Repayment of borrowings		(185)	(78)
Dividends paid		(1,209)	(991)
Shares issued		79	16,226
Borrowings		10,000	-
Receipt of government grants		200	-

Net cash from financing activities		8,885	15,157


Net (decrease) / increase in cash and cash equivalents		(2,897)	2,312
Cash and cash equivalents at beginning of period		6,356	4,044

Cash and cash equivalents at end of period		3,459	6,356

NOTES

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 3 October 2015. The consolidated financial statements have been prepared on a going concern basis.

Management has produced forecasts for all business units which have been reviewed by the Directors. These demonstrate the Group is forecast to generate profits and cash in 2015/2016 and beyond and that the Group has sufficient cash reserves and headroom in borrowing costs to enable the Group to meet its obligations as they fall due for a period of at least 12 months from when these financial statements have been signed.

As such, the Directors are satisfied that the Company and Group have adequate resources to continue to operate for the foreseeable future. For this reason they continue to adopt the going concern basis for preparing the financial statements.

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

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). The segmental analysis has changed since the prior year, with the splitting of the old Engineered Products segment into two segments, Precision Machined Components and Engineered Products. Where appropriate the comparative information is restated in the analysis below.

For the 53 week period ended 3 October 2015

	Cylinders	Precision Machined Components	Engineered Products	Alternative Energy	Central costs	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue
- from external customers	14,343	18,815	8,441	13,971	-	55,570



Operating profit / (loss) before acquisition costs, amortisation on acquired businesses and exceptional charges and credits	2,111	4,512	(354)	(1,142)	(1,832)	3,295
Acquisition related exceptional items and amortisation (charges) / credits*	-	(1,425)	(135)	(720)	1,989	(291)

Other exceptional credits and (charges)	297	-	(263)	(309)	(150)	(425)


Operating profit / (loss)	2,408	3,087	(752)	(2,171)	7	2,579

Exceptional costs in relation to the option on and loan to KGTM	-	-	-	-	(1,408)	(1,408)

Share of losses of associate	(151)	-	-	-	-	(151)

Net finance (costs) / income	-	(30)	2	3	(417)	(442)



Profit / (loss) before tax	2,257	3,057	(750)	(2,168)	(1,818)	578


Segmental net assets **	7,452	23,671	4,594	11,321	(10,697)	36,341




Other segment information:
Capital expenditure	1,254	1,058	110	123	3,757	6,302
Depreciation	318	770	104	93	85	1,370
Amortisation	-	1,425	135	720	-	2,280

There has been no significant trading between the segments in the period.

*Includes fees associated with making acquisitions.

** 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.

For the 52 week period ended 27 September 2014

	Cylinders	Precision Machined Components	Engineered Products	Alternative Energy	Central costs	Total
	£'000	£'000	£'000	£'000	£'000	£'000
		(Restated)	(Restated)
Revenue
- from external customers	21,443	13,040	11,093	8,439	-	54,015


Operating profit / (loss) before acquisition costs, amortisation on acquired businesses and exceptional charges and credits	3,791	3,024	1,625	1,094	(1,700)	7,834
Acquisition related exceptional costs and amortisation*	-	(559)	(135)	-	(862)	(1,556)
Exceptional costs in relation to the option on and loan to KGTM	-	-	-	-	(718)	(718)

Operating profit / (loss)	3,791	2,465	1,490	1,094	(3,280)	5,560

Share of losses of associate	(183)	-	-	-	-	(183)

Net finance income/(costs)	11	(2)	-	2	(39)	(28)

Profit / (loss) before tax	3,619	2,463	1,490	1,096	(3,319)	5,349


Segmental net assets **	7,336	17,085	5,631	2,767	3,710	36,529




Other segment information:
Capital expenditure	1,040	1,072	194	40	28	2,374
Depreciation	312	354	97	37	4	804
Amortisation	-	559	135	70	-	764

*Includes fees associated with making acquisitions.

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

Revenue	2015	2014
	£'000	£'000

United Kingdom	29,250	25,730
Europe	8,929	7,658
Rest of the World	17,391	20,627

	55,570	54,015

The Group's largest customer contributed 12% to the Group's revenue (2014: 23%) which is reported within the Precision Machine Components and Engineered Products segments. No other customer contributed more than 10% in the period to 3 October 2015 (2014: nil).

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

Revenue	2015	2014
	£'000	£'000

Oil and gas	32,576	39,607
Defence Industrial gases	7,471 1,502	3,478 2,309
Alternative energy	14,021	8,621

	55,570	54,015

The above table is provided for the benefit of shareholders. It is not provided to the PT board on a regular monthly basis and consequently does not form part of the divisional segmental analysis.

The following table provides an analysis of the carrying amount of non-current assets and additions to property, plant and equipment.

	2015			2014
	United Kingdom	Rest of the World	Total	United Kingdom	Rest of the World	Total
	£'000	£'000	£'000	£'000	£'000	£'000

Non-current assets	42,954	135	43,089	23,645	51	23,696

Additions to property, plant and equipment	6,191	111	6,302	2,369	5	2,374

2. Profit before taxation

Profit before taxation is stated after charging / (crediting):

	2015	2014
	£'000	£'000

Depreciation of property, plant and equipment - owned assets	1,271	783
Depreciation of property, plant and equipment - assets under finance lease and hire purchase agreements	99	21
Profit on disposal of fixed assets	(10)	(7)
Amortisation of intangible assets - licence and distribution agreement	-	70
Amortisation of intangible assets acquired on business combinations	2,280	694
Amortisation of grants receivable	(104)	(107)
Staff costs	16,366	9,670
Cost of inventories recognised as an expense	27,615	28,581
Operating lease rentals:
- Land and buildings	638	644
- Machinery and equipment	94	67
Foreign currency gain	(215)	(26)
Share based payments	253	109

3. Acquisition related exceptional items and amortisation


	2015	2014
	£'000	£'000

Amortisation of intangible assets arising on a business combination	(2,280)	(694)
Acquisition costs	(177)	(862)
Deferred consideration write back	1,749	-
Foreign currency gain on revaluation of deferred consideration liability	417	-

	(291)	(1,556)

The Deferred consideration write back relates to the deferred consideration arising from the acquisition of Quadscot . The payment of this consideration is contingent on the future results of the acquired entities. The Directors have reviewed forecasts in relation to Quadscot and consider that it is unlikely that the consideration will be paid, and as such it has been released. Given the magnitude of the release and the fact that it is non-trading, the Directors consider it appropriate to disclose this as an exceptional item.

The revaluation of deferred consideration liability relates to the exchange differences calculated on the deferred consideration arising from the acquisition of The Greenlane Group, which is denominated in NZ$. Given the large balance and therefore the effect on the results of the Group, the Directors consider it appropriate to disclose this foreign exchange movement as an exceptional item.

4. Other exceptional (charges) / credits

	2015	2014
	£'000	£'000

Reorganisation and redundancy	(747)	-
Release of IFRS rent provision	322	-

	(425)	-

The release of the IFRS rent provision relates to a provision made in relation to IAS 17 with regards to the lease held by Chesterfield Special Cylinders at the Meadowhall site. Following the purchase of the site by the Group in January 2015, this provision is no longer required and is consequently released. Given its non-operating nature it is disclosed as an exceptional item.

The reorganisation costs relate to costs of restructuring across the Group. They are recognised in accordance with IAS 19.

5. Exceptional costs - KGTM write off


	2015	2014
	£'000	£'000

Exceptional provisions in relation to the option on and loans to KGTM	1,408	718

The exceptional costs in relation to the options on and loans to KGTM relate to provisions made by the Board against the balance of the loans receivable from KGTM, an associated company. Due to the uncertainty of repayment, the entire balance of the loan outstanding has been provided for in the current period. In the prior period, the costs related to a provision of £330,000 against the recoverability of the loan balances and a charge of £388,000 in relation to the writing down to nil of an option held to purchase a further 40% of Kelley GTM.

6. Taxation

	2015	2014
	£'000	£'000
Current tax
Current tax expense	269	1,737
Over provision in respect of prior years	(79)	(34)

	190	1,703
Deferred tax
Origination and reversal of temporary differences	(307)	(65)
Over provision in respect of prior years	(4)	-

	(311)	(65)

Total taxation (credit) / charge	(121)	1,638

Corporation tax is calculated at 20.5% (2014: 22%) of the estimated assessable profit for the period. Deferred tax is calculated at 18% (2014: 20%).

On 23 October 2015 the legislation that reduced the UK corporation tax rate to 18% was substantively enacted. As such, in future years, deferred tax will be calculated at 18%. If this has been substantively enacted before the balance sheet date, the Group's overall tax credit would have been £361,000, with a net deferred tax liability of £2,082,000.

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

	2015 £'000	2014 £'000

Profit before taxation	578	5,349


Theoretical tax at UK corporation tax rate 20.5% (2014: 22%)	118	1,177
Effect of (credits) / charges:
- non-deductible expenses and other timing differences	(46)	301
- disallowable acquisition costs	(243)	190
- Research and development allowance	(23)	-
- adjustments in respect of prior years	(83)	(34)
- effect of unrealised overseas	154	(12)
- change in taxation rates	2	16

Total taxation (credit) / charge	(121)	1,638

7. 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. The adjusted earnings per share is also calculated based on the basic weighted average number of shares.

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

	2015 £'000	2014 £'000

Profit after tax	699	3,711


	No.	No.

Weighted average number of shares - basic	14,378,392	13,025,349
Dilutive effect of share options	144,690	263,283

Weighted average number of shares - diluted	14,523,082	13,288,632


Basic earnings per share	4.9p	28.5p
Diluted earnings per share	4.8p	27.9p

The Group adjusted earnings per share is calculated as follows:

Profit after tax	699	3,711
Acquisition related exceptional items and amortisation	291	1,556
Other exceptional charges and credits	425	-
Exceptional costs in relation to the option on and loan to KGTM	1,408	718
Theoretical tax effect of above adjustments	(739)	(138)

Adjusted earnings	2,084	5,847


Adjusted earnings per share	14.5	44.9

8. Dividends

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

	Rate	Date	Shares in issue	2015	2014
				£'000	£'000

Final 2012/13	5.2p	7 March 2014	11,362,249	-	591
Interim 2013/14 Final 2013/14 Interim 2014/15	2.8p 5.6p 2.8p	8 August 2014 17 March 2015 7 August 2015	14,268,733 14,377,130 14,414,930	- 805 404	400 - -

				1,209	991

At 3 October 2015, the 2014/15 final dividend had not been approved by Shareholders and consequently this has not been included as a liability. The proposed dividend of 5.6p per share will, if approved at the AGM, be paid on 18 March 2016 at a total cost of £807,236.

9. Goodwill

	Total £'000
Cost and gross carrying amount


At 28 September 2013	1,964
Acquired through business combinations	5,117
At 27 September 2014	7,081
Acquired through business combinations (note 18)	7,939

At 3 October 2015	15,020

	Date of acquisition	Original cost £'000
Precision Machined components
Al-Met Limited	February 2010	272
Roota Engineering Limited	March 2014	5,117
The Quadscot Group	October 2014	3,079

Engineered products
The Hydratron Group	October 2010	1,692

Alternative Energy
The Greenlane Group	October 2014	4,860

		15,020

Goodwill arising on consolidation represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. The Group has Goodwill in relation to 5 acquisitions: Al Met Limited, The Hydratron Group, Roota Engineering Limited, The Quadscot Group and The Greenlane Group.

10. Intangible assets

	Licence and distribution agreement	Development expenditure	Customer order book	Technology	Non contractual customer relationships	Total
Cost	£'000	£'000	£'000	£'000	£'000	£'000
At 28 September 2013	1,200	234	197	-	937	2,568
Acquired through business combination	-	-	-	-	6,503	6,503

Disposed of in the period	-	(234)	(197)	-	-	(431)

At 27 September 2014	1,200	-	-	-	7,440	8,640
Acquired through business combination	-	-	-	5,316	4,262	9,578

Disposed of in the period	(1,200)	-	-	-	-	(1,200)

At 3 October 2015	-	-	-	5,316	11,702	17,018


Amortisation
At 28 September 2013	323	234	197	-	593	1,347
Charge for the period	70	-	-	-	694	764

Disposed of in the period	-	(234)	(197)	-	-	(431)

At 27 September 2014	393	-	-	-	1,287	1,680
Charge for the period	-	-	-	720	1,560	2,280

Disposed of in the period	(393)	-	-	-	-	(393)

At 3 October 2015	-	-	-	720	2,847	3,567


Net book value
At 3 October 2015	-	-	-	4,596	8,855	13,451


At 27 September 2014	807	-	-	-	6,153	6,960

Remaining useful economic life at 3 October 2015

7 years

6 years

11. Investments in associates

	£'000

At 28 September 2013	-
Investments made in the year	306
Share of profits / (losses)	(183)

At 27 September 2014	123
Investments made in the year	-
Share of profits / ( losses)	(123)

As at 3 October 2015	-

Note that the share of losses of associates as set out in the Consolidated Statement of Comprehensive Income were set first against the investment and then against the value of other receivables from KGTM, as shown below. The remaining value of these receivables has been provided against as set out in note 5.

	2015	2014
	£'000	£'000

Amount of losses set against investment	123	183
Amount of losses set against other receivables from KGTM	28	-

	151	183

The group's share of the results of its principal associates and its aggregated assets (including goodwill) and liabilities, are as follows:

	Country of incorporation	Assets	Liabilities	Revenues	Loss	Interest held
		£'000	£'000	£'000	£'000	%

At 27 September 2014
Kelley GTM, LLC.	USA	612	(4,424)	1,374	(183)	40

At 3 October 2015
Kelley GTM, LLC.	USA	578	(5,273)	793	(741)	40

KGTM has a year-end date of 31 December. The period for which the results of KGTM have been included in the Group's financial statements is from 28 September 2014 to 3 October 2015.

The total losses recognised against the investment and other receivables from KGTM for the period were £151,000 (2014: £183,000) leaving unrecognised losses of £590,000 (2014:Nil).

12. Trade and other receivables

	2015	2014
	£'000	£'000
Current
Trade receivables	11,015	13,924
Amounts due from customers for construction contract work	756	383
Other receivables	545	5,012
Prepayments and accrued income	1,223	1,242

	13,539	20,561

	2015	2014
	£'000	£'000
Non-current
Loans to associated companies	-	1,436
Accrued income	-	139

	-	1,575

Included in non-current assets in the prior period were debts not due for settlement for a number of years. These assets are no longer disclosed as non-current as they near maturity. The release during the year was £9,000 (2014: £11,000).

The average credit period taken on the sale of goods and services was 79 days (2014: 63 days) in respect of the Group. Two debtors individually accounted for over 10% of trade receivables and both individually represented 10% of the total balance. In 2014, three debtors accounted for over 10% of trade receivables and represented 14%, 13% and 11% of the total balance.

Ageing of past due but not impaired receivables:

	2015	2014
	£'000	£'000
Days past due:
0 - 30 days	1,221	2,330
31 - 60 days	539	855
61 - 90 days	129	257
91 - 120 days	77	86
121+ days	885	47

Total	2,851	3,575

The Group's doubtful debt provision is not a significant balance.

13. Trade and other payables

	2015	2014
	£'000	£'000
Amounts due within 12 months

Trade payables	3,447	4,930
Progress billings on construction contracts in excess of work completed	2,131	2,331
Other tax and social security	903	1,096
Accruals, deferred income and other payables	4,044	6,111
Deferred consideration	2,500	1,985

Total due within 12 months	13,025	16,453

Amounts due after 12 months

Deferred consideration	3,531	2,432
Other payables	-	313
Accruals, deferred income and other payables	1,547	164

Total due after 12 months	5,078	2,909

In the prior period, other payables due after 12 months related to rental lease incentives, the benefits of which were spread over the life of the lease. Following the purchase of the Meadowhall site in the current period, this was no longer required and has been released to the consolidated statement of comprehensive income as an exceptional credit, see note 4.

Deferred income due after 12 months includes grant income received and customer prepayments for contracts in delivery in a number of years. There are no unfulfilled conditions or other contingencies attached to these grants.

14. Borrowings

	2015 £'000	2014 £'000
Non-current
Bank borrowings	10,000	-
Finance liabilities	236	324

	10,236	324


Current
Finance liabilities	337	180

	337	180


Total borrowings	10,573	504

Bank borrowings mature in 2018 and bear average coupons of 2% above LIBOR annually.

Total borrowings include secured liabilities of £10 million. Bank borrowings are secured on the property, plant and equipment of the group. Obligations under finance leases are secured on the plant & machinery assets to which they relate.

The carrying amounts of the group's borrowings are all denominated in GBP.

The maturity profile of long-term loans is as follows:

	2015	2014
	£'000	£'000

Due within one year
Finance liabilities	337	180

Due within two to five years
Bank borrowings	10,000	-
Finance liabilities	236	324

The Group has the following undrawn borrowing facilities:

	2015	2014
	£'000	£'000

Expiring beyond one year	5,000	-

The Group has an additional agreed accordion facility of £10m that is available for specific purposes.

15. Construction contracts

Construction contracts are accounted for in accordance with IAS 11, 'Construction Contracts' and IAS18, 'Revenue and construction contracts'. The position on individual contracts is held as 'Amounts due from customers for contract work' within trade and other receivables or as 'Progress billings on construction contracts in excess of work completed' within trade and other payables as applicable.

	2015 £'000	2014 £'000

Costs incurred and profit recognised to date	14,488	8,348
Less: Progress billings	(15,863)	(10,296)

Net balance sheet position for ongoing contracts	(1,375)	(1,948)

16. Deferred tax

The following are the major deferred tax assets / (liabilities) recognised by the Group and movements thereon during the current and prior reporting period.

	Accelerated tax depreciation	Intangible assets	Short term temporary differences	Share option costs	Operating lease incentives	Total
	£'000	£'000	£'000	£'000	£'000	£'000

At 28 September 2013	(470)	(68)	51	19	68	(400)
(Charge) / credit to income	(81)	138	(19)	30	(3)	65

Acquired through business combinations	(106)	(1,301)	-	-	-	(1,407)


At 27 September 2014	(657)	(1,231)	32	49	65	(1,742)

(Charge) / credit to income	(61)	313	79	46	(65)	311

Acquired through business combinations	(39)	(852)	-	-	-	(891)

At 3 October 2015	(757)	(1,770)	111	95	-	(2,322)

The net deferred tax balance has been analysed as follows in the consolidated balance sheet:

	2015	2014
	£'000	£'000

Non-current asset Deferred tax asset	270	155
Non-current liabilities Deferred tax liabilities	(2,592)	(1,897)
	(2,322)	(1,742)

17. Consolidated cash flow statement

	2015	2014
	£'000	£'000

Profit after tax	699	3,711
Adjustments for:
Finance costs / (income) - net	442	28
Depreciation of property, plant and equipment	1,370	804
Amortisation of intangible assets	2,280	764
Share option costs	253	109
Income tax expense	(121)	1,638
Loss / (profit) on derivative financial instruments	17	28
(Profit) / loss on disposal of property, plant and equipment	(10)	(7)
Exceptional charges associated with Kelley GTM	1,408	718
Exceptional IFRS rent adjustment release	(322)	-
Exceptional deferred consideration released and revaluation	(2,166)	-
Loss on investment in associate	151	183

Changes in working capital:
(Increase) in inventories	1,693	(440)
(Increase) in trade and other receivables	5,964	(7,449)
Increase in trade and other payables	(3,733)	3,324

Cash flows from operating activities	7,925	3,411

18. Business combinations

The Quadscot Group of Companies

On 1 October 2014, Pressure Technologies Plc acquired 100% of the issued share capital of the Quadscot Group of companies ("Quadscot") for an initial consideration of £7,884,000, plus maximum deferred consideration of £3,000,000.

In calculating goodwill below, the contingent consideration is held at fair value at time of acquisition of £1,697,000. This has been estimated based on future earnings. The fair value estimate is based on a discount rate of 3% and assumes that £1,800,000 of deferred consideration is payable. The effects on the fair value of risk and uncertainty in the future cash flows are dealt with by adjusting the estimated cash flows rather than adjusting the discount rate. At the balance sheet date the £1.8m previously provided has been released as, despite the profitability of the business, the minimum target EBITDA in 2016 is no longer expected to be achieved.

Quadscot specialises in a wide range of components for oil and gas pressure systems and downhole tools and is based in Blantyre, Scotland. The transaction has been accounted for by the acquisition method of accounting.

The directors believe that Quadscot is complementary to the Group's other subsidiary businesses and provides cross selling opportunities between the respective customer bases.

The table below summarises the consideration paid for Quadscot and the fair value of the assets and liabilities acquired:

	Book value £'000	Fair value adjustment on acquisition £'000	Intangible assets recognised on acquisition £'000	Fair value £'000
Recognised amounts of identifiable assets acquired and liabilities assumed:
Property plant and equipment	1,988	(275)	-	1,713
Intangible assets	-	-	4,262	4,262
Inventories	242	-	-	242
Trade and other receivables	1,460	-	-	1,460
Cash and cash equivalents	1,149	-	-	1,149
Trade and other payables	(917)	-	-	(917)
Borrowings	(202)	-	-	(202)
Current tax liabilities	(314)	-	-	(314)
Deferred tax (liabilities) / assets	(94)	55	(852)	(891)

	3,312	(220)	3,410	6,502

Goodwill				3,079

Total consideration				9,581

Satisfied by:
Cash				7,884
Deferred cash consideration				1,697

				9,581

Net cash outflow arising on acquisition
Initial cash consideration				7,884
Cash and cash equivalents acquired				(1,149)

				6,735

Borrowings acquired				202

Net cash acquired				6,937

The intangible assets acquired with the business comprise £4,262,000 in relation to non-contractual customer relationships.

The goodwill arising on the acquisition of Quadscot is mainly attributable to the skills and talent of the workforce and the anticipated value of synergies that Quadscot can bring to the wider Pressure Technologies Group.

The revenue included in the consolidated statement of comprehensive income since acquisition contributed by Quadscot was £4.2 million. Quadscot also contributed a profit of £1.0 million over the same period. The effect of the inclusion of the acquisition had it been completed on the first day of the financial year is considered to be immaterial upon the Group's revenue and profit before tax.

The Greenlane Group of Companies

On 1 October 2014, Pressure Technologies Plc acquired the trade and certain assets of the Greenlane Group of companies, for an initial £5,971,000 (NZ$ 12,000,000 translated at £1 : NZ$2.085) plus a maximum deferred consideration of £6,235,000 (NZ$ 13,000,000 translated at £1 : NZ$2.085).

In calculating goodwill below, the contingent consideration is held at fair value at time of acquisition of £3,533,000. This has been estimated using the income approach. The fair value estimate is based on a discount rate of 3% and reflects the profits the directors consider are likely to arise.

Greenlane is a leading global provider of Biogas upgraders using waterwash technology. Greenlane have designed and built over 80 biogas plants around the world. The business has operations in Vancouver, Auckland and Sheffield.

The Directors consider that a worldwide presence in the Alternative Energy segment provides opportunities to grow the Group and diversify the markets in which the Group operates.

The table below summarises the consideration paid for Greenlane and the fair value of the assets and liabilities acquired.

	Book value £'000	Intangible assets recognised on acquisition £'000	Fair value £'000
Recognised amounts of identifiable assets acquired and liabilities assumed:
Property, plant and equipment	68	-	68
Intangible assets	-	5,316	5,316
Inventories	46	-	46
Trade and other receivables	153	-	153
Trade and other payables	(132)	-	(132)

	135	5,316	5,451

Goodwill			4,860

Total consideration			10,311

Satisfied by:
Cash advanced in previous period			2,782
Cash paid in current period			2,913
Remaining initial consideration			276
Existing licence held with Greenlane			807
Deferred cash consideration			3,533

			10,311

The intangible assets acquired with the business comprise £5,316,000 in relation to the technology acquired.

The goodwill arising on the acquisition of Greenlane is mainly attributable to the skills and talent of the workforce and the anticipated value of synergies that Greenlane can bring to the wider Pressure Technologies Group.

The revenue included in the consolidated statement of comprehensive income since acquisition contributed by Greenlane was £7,243,000. Greenlane contributed a loss of £2,519,000 over the same period. The effect of the inclusion of the acquisition had it been completed on the first day of the financial year is considered to be immaterial upon the Group's revenue and profit before tax.

Details of acquisition costs paid in the year are given in note 3 to the financial statements.

19. Contingent liabilities

Following the fatal accident at Chesterfield Special Cylinders Ltd in June, whilst the Police have confirmed that no charges for manslaughter will be brought, the HSE investigation remains ongoing and is expected to continue at least through 2016. At this time it is not possible to determine with any degree of certainty what, if any, financial penalties may be levied on Chesterfield Special Cylinders Ltd or any other group company as a result of this investigation. We continue to cooperate fully with the HSE and at such time as the quantum and likelihood of any penalty is able to be reliably determined further disclosure or provision will be made in accordance with IAS37 'Provisions, Contingent Liabilities and Contingent Assets'.

20. Related party transactions

The interests of Directors in dividends paid during the year are disclosed in the Report of the Remuneration Committee which has been audited.

During the year, Pressure Technologies purchased 5 GTMs from Kelley GTM, LLC, in which the Group owns a 40% stake. These GTMs were purchased at a cost of £391,000 with the intention of entering them into a lease fleet of GTMs in operation, in which they remain at the period end. The GTMs owned by the Pressure Technologies Group are disclosed within property, plant and equipment at their carrying value. The transaction was completed on an arm's length basis.

The Group also has loans outstanding from Kelley GTM, LLC of $3,500,000. The Directors consider that the recoverability of these loans is not certain and therefore have made full provision against the full value of the loans.

21. Notice of Annual General Meeting