PressureTechnologies - Final Results
Chris Walters, Chief Executive of Pressure Technologies, said:
"The Group is well placed to take advantage of improving market conditions and realise the benefits of investment in people, new equipment and supporting processes. Beyond the organic growth seen in our rising order book, increasing our capability, scale and reach through acquisitions remains a strategic focus."
? Revenue* of £32.2 million (2017: £34.6 million)
? Adjusted operating profit** at £0.5 million (2017: £1.6 million)
? Reported loss before tax of £(3.1) million (2017: £(1.4) million )
? Adjusted earnings per share* of 0.7p (2017: 10.0p)
? Reported basic loss per share* of (13.9)p (2017: (4.0)p)
? Adjusted net operating cash inflow*** £0.5 million (2017: £0.9 million)
? Closing net debt at £6.7 million (2017: £11.1 million )
* continuing operations
** Operating profit excluding acquisition costs, amortisation on acquired businesses and exceptional charges and credits.
***before cash outflow for exceptional costs
? Manufacturing revenue up 13% year on year with second-half 32% up on the first-half as the businesses experience an uplift in activity from core markets
? Precision Machined Components Division's closing order book up 54% on 2017, with highest intake levels in October 2018, since April 2014
? Completed sale of Hydratron, the Group's Engineered Products Division for £1.1 million initial consideration
? Post year-end conditional sale of the Alternative Energy Division for £11.1 million to a Canadian TSX Venture Exchange listed company
It's fair to say that the much anticipated up-turn in the oil and gas industry took slightly longer to gain momentum than we had anticipated towards the end of last year. However, it's pleasing to report that the past few months have seen improved order intake trends and order book levels, supported by markedly higher bid activity throughout the Group.
As previously announced, John Hayward, CEO, stepped down from his role and Phil Cammerman, Non-Executive Director, retired during the year. Chris Walters was appointed as Chief Executive in September, bringing a wealth of experience in building successful global businesses and we look forward to him making a significant contribution in leading the Group.
Further substantiation of Chesterfield Special Cylinders' (CSC) market leadership was reinforced during the year when they became the only company from their peer group that managed to deliver unique, highly specialised cylinders for the Dreadnought Class of nuclear-powered submarines. The level of technical and manufacturing skills involved in such an undertaking is remarkable and it can only be offered from CSC - a company of master craftsmen!
During the past year, we have reviewed our portfolio of companies, with the view to refocusing our efforts on where we can achieve market leadership and deliver more predictable growth in sales and profits. In June, we announced the sale of Hydratron, which formed the Group's Engineered Products Division, for an initial cash consideration of £1.1 million, with an additional consideration of up to £2.25 million, which may become payable in cash, contingent on the company's future trading performance.
In the second-half of the year, focus turned to reviewing the strategic options for the Alternative Energy Division (AE) to realise the full potential of the Greenlane Biogas business in the expanding market for renewable natural gas (RNG), acknowledging that the nature of RNG development projects and plant installation contracts are no longer strategically compatible with the Group's focus on highly specialised manufacturing in oil and gas and defence markets.
We conducted a comprehensive review of divestment options, including an outright sale, a merger or a stock market listing. After generating positive interest in the business, the Board opted to proceed with a listing on the Canadian TSX Venture Exchange (TSX-V) as the most attractive approach, primarily due to deal deliverability, timing and value realisation. This option also allows the Group to retain a minority stake in the listed entity and benefit from the anticipated upside potential. I am pleased to report that on 10 December 2018, the Group announced it had commenced a process to spin out Greenlane and list it on the TSX-V, which will be accomplished by selling it to Creation Capital. We will remain a supportive minority shareholder and anticipate retaining our holding for the medium term. We anticipate this will conclude during the first quarter of 2019.
Group revenue was £32.2m in the year, a 7% decline from last year, mostly as a result of lower turnover in AE. The turnover from our manufacturing divisions was up by 13%. Operating profits were modest at £0.5 million, however, returning a positive result on such low sales is clear evidence of the efforts taken in the past few years to align costs and improve operating efficiency.
The manufacturing divisions achieved returns on sales of between 11% and 13%, which is commendable in what were tough trading conditions in oil and gas. The AE Division recorded a small overall operating loss in the year, primarily due to low order intake in the first-half, but it was profitable throughout the second-half following its restructure.
The modest operating cash flow of £0.3 million reflects the phasing of large contract revenues around the year-end.
The Board has again resolved that no dividend shall be paid to shareholders this year as investment in the core manufacturing businesses remains the priority for capitalising on the improving markets conditions.
Clearly, the opportunities for growth that we anticipated at the beginning of last year didn't materialise until later in the year. However, recent trading performance, order intake and general bidding activity indicates that we're seeing a period of increased market activity, particularly for oil and gas, so the Board expects a much better trading performance from the Group this year.
This increase in activity has been fuelled by greater confidence in the global oil and gas market, where most international oil companies have recently reported strong quarterly profits, which has in turn spurred a flurry of investment in capital projects. Time will tell whether these promising signs gather further momentum, in an environment where the USA Government is actively lobbying some of the world's largest crude oil producers to increase production in order to push prices down, thereby stimulating economic growth. This is an economic model that is more suited to heavily industrialised nations, but not for those who are reliant on oil revenues to fund domestic spending. The tensions are obvious.
When reflecting upon factors within the Board's control, the past year could be considered transformational, with the strategic divestment of two Divisions. Once the Greenlane Biogas deal has concluded, the Group will be in a stronger position to realise the efficiency benefits gained from recent restructuring and performance improvement measures, thereby capitalising on improving market conditions.
It is worth highlighting that the trading outlook for next year is much more encouraging, with year-end order books in our core manufacturing Divisions between 36-54% higher than at the same time last year.
The Board anticipates that funds generated from the portfolio rationalisation will provide the Group with a strengthened balance sheet, so we are actively looking at how we may be able to leverage that to accelerate growth in target markets.
10 December 2018