Chesterfield Special Cylinders Holdings PLC

Earnings Release • Jun 11, 2013

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RNS Number : 7181G

Pressure Technologies PLC

11 June 2013

Embargoed for release at 07.00 hours                                                                                                          11 June 2013

PRESSURE TECHNOLOGIES PLC

INTERIM RESULTS 2013

Pressure Technologies plc ("Pressure Technologies" or the "Group") announces its interim results for the 26 weeks to 30 March 2013.

Highlights:

·     Strong growth in revenues and profits

-  Revenue up 30% at £16.4 million (2012: £12.6 million)

-  Pre-tax profit of £1.33 million (2012: £0.46 million)

·     Basic earnings per share increased to 8.5p (2012: 3.1p)

·     Progressive dividend policy continues: interim dividend of 2.6p per share (2012: 2.5p)

·     Strong balance sheet maintained - net cash of £2.7m

·     Improving trend in order intake with good opportunities for further growth across all markets

·     Ongoing commitment to organic and acquisitive diversification strategy

Alan Wilson, Chairman of Pressure Technologies, said:  "The interim results show the benefits of the Board's diversification strategy and these, combined with on-going opportunities, give us considerable optimism for the future."

For further information, please contact:

Pressure Technologies plc John Hayward, Chief Executive James Lister, Group Finance Director	Today: 020 7920 3150 Therafter:  0114 242 7500 www.pressuretechnologies.co.uk
Tavistock Communications Catriona Valentine / Keeley Clarke	Tel:  020 7920 3150
Charles Stanley Securities (Nomad and broker) Philip Davies / Carl Holmes	Tel: 020 7149 6942

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.

Cylinders

Chesterfield Special Cylinders is a global market leader in the design and manufacture of speciality high pressure, seamless steel gas cylinders for the offshore oil and gas, defence, industrial gases and alternative energy markets and retesting and refurbishment services.

The company has unparalleled industry knowledge, gathered over the last 100 years' trading. As a trusted supplier with unrivalled expertise, Chesterfield Special Cylinders plays an integral role in the project design and engineering process, working closely with its customers on design solutions for high pressure systems.

The core activity of Chesterfield Special Cylinders is the design and manufacture of Air Pressure Vessel systems for oil rig motion compensation systems and deepwater offshore platforms. This is closely followed in importance by activity in the naval market. Chesterfield Special Cylinders provides cylinders for a wide range of applications in submarines and surface ships to a significant proportion of the world's navies.

The company's product and process knowledge has led, in recent years, to an expansion from manufacturing into value added services, making full use of expertise in the business. Chesterfield Special Cylinders has developed a number of service offerings for the inspection and revalidation of cylinders including a novel "in-situ" testing service, which is driven by a new BSI standard for the inspection of hard to reach/impossible to move gas tubes.  Chesterfield Special Cylinders is the only company capable of delivering this strict new testing regime worldwide.

More information is available on the company's website www.chesterfieldcylinders.co.uk.

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, acquired by Pressure Technologies plc in 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, established in 1985, has developed a market leading capability in precision machining carbides, high grade stainless steels and super alloys. More information is available on the company's website www.almet.co.uk.

Hydratron designs, manufactures and sells a range of air operated high pressure hydraulic pumps, gas boosters, power packs, hydraulic control panels and test rigs. The business, which was also acquired in 2010, operates out of two locations situated in the UK and USA. Hydratron also has an extensive network of distributors in key locations around the world. Formed in 1981, Hydratron has 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.

Alternative Energy: 

Chesterfield BioGas Limited was founded in November 2008, following the signing of a co-operation agreement with Greenlane® Biogas Limited, the world leader in biogas upgrading, which 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. In 2010, Chesterfield BioGas installed the UK's first biogas upgrader supplying biomethane to the national grid at a Thames Water site in Didcot.  A second upgrader was delivered in October 2012.

For more information visit the company's website www.chesterfieldbiogas.co.uk.

Chairman's Statement

I am delighted to have taken over the chairmanship of Pressure Technologies plc and I look forward to working with the Board on driving growth in the coming years.

On behalf of the Board of Directors, I would like to thank Richard Shacklady for his excellent contribution in chairing the Board of Pressure Technologies since its inception and helping to lead the business to where it is today.

Results

I am pleased to report that revenues for the 26 weeks to 30 March 2013 were £16.4 million (2012: £12.6 million), which returned a pre-tax profit of £1.33 million (2012: £0.46 million) and a return on sales of 8.1% (2012: 3.5%).

The Group's balance sheet remains strong with £2.7m of net cash.  The strength of the balance sheet combined with the positive trading outlook has allowed the Board to continue with its progressive dividend policy. An interim dividend of 2.6p per share (2012: 2.5p) will be paid on 8 August 2013 to shareholders on the share register at the close of business on 12 July 2013.

Cylinders

The primary driver for the overall growth in sales and profits was the Group's Cylinders division.  The continued recovery in our offshore oil and gas activity, coupled with strong activity in defence, resulted in significant sales and profit growth that was ahead of our expectations.  We have seen the benefit of our move to focus on more complex, higher value added opportunities and the provision of services, such as in-situ testing, into this market.

Within oil and gas, the number of new rig build projects is ahead of the comparable period last year. As anticipated, however, this has slowed and we continue to expect a lower level of activity from the second half onwards.  In other areas of oil and gas, including diving support and motion compensated winch systems, we are enjoying high levels of activity and we expect this to continue. Overall, cylinder sales for the financial year into this market are expected to be broadly in line with 2012 but spread across a wider range of products and customers.

Chesterfield Special Cylinders is the principal supplier of high pressure cylinders for use on naval vessels in the European defence market. Our order book at the half year end was already 33% higher than the prior year and investment in global naval infrastructure is leading to new opportunities in the European market. We are confident of securing new customers in this sector.

Engineered Products

Al-Met experienced strong demand for wear parts in the subsea tree market.  The four largest subsea tree manufacturers have reported record order books as a result of substantial capital spending on deepwater project developments. This has already had a very positive impact on Al-Met's revenues and profits and there is scope for Al-Met to gain a greater market share.

First quarter order placement at Hydratron was lower than anticipated and adversely impacted first half results. A dramatic increase in orders was experienced in the second quarter and I am pleased to report that this trend has continued.  We see strong potential for new and existing Hydratron products in the global oil and gas market and, accordingly, we have invested significantly in people and new product development during the period, both in the UK and USA.

The Board remains excited by the growth prospects for this division.

Alternative Energy

Chesterfield BioGas delivered a biogas upgrader in Stockport and received a number of high value project opportunities in the first half.  The placement of orders has been delayed primarily by a regulatory issue, allowable oxygen levels in biomethane for injection to the UK gas Grid, which was satisfactorily resolved on 24 May 2013. 

Outlook

Overall market conditions within our dominant sector, offshore oil and gas, remain buoyant; global exploration and production spending is expected to reach a record US$644 billion in 2013 - up 7% on the previous year.  Looking to the longer term, we have been monitoring the developments in the North American Light Tight Oil sector. We are also monitoring the hydraulic fracturing market in North America and the UK, to assess where opportunities for our products and technology development may arise.

The Board believes that opportunities across all the Group's markets are good.  Our ongoing investment in new products and services will broaden our customer spread and ensure that the Group is well positioned to deliver further growth. 

Alongside our focus on organic growth, we have explored a number of acquisition opportunities in the first half. As yet, none have fulfilled the Board's risk versus reward criteria and further opportunities are being evaluated.

The interim results show the benefits of the Board's diversification strategy and these, combined with on-going opportunities, give us considerable optimism for the future.

Alan Wilson

Chairman           

11 June 2013

Condensed Consolidated Statement of Comprehensive Income

for the 26 weeks ended 30 March 2013           

		Unaudited 26 weeks ended 30 March 2013	Unaudited 26 weeks ended 31 March 2012	Audited 52 weeks ended 29 September 2012
	Note	£'000	£'000	£'000
Revenue	2	16,412	12,639	30,442
Cost of sales		(11,691)	(9,391)	(22,704)
Gross profit		4,721	3,248	7,738
Administration expenses		(3,301)	(2,708)	(5,788)
Operating profit pre acquisition costs and		1,420	540	1,950
related amortisation
Acquisition costs and related amortisation		(93)	(95)	(190)
Operating profit post acquisition costs and related amortisation		1,327	445	1,760
Finance income		5	16	27
Finance costs		(5)	(5)	(9)
Profit before taxation		1,327	456	1,778
Taxation	3	(356)	(109)	(507)
Profit for the financial period		971	347	1,271
Other comprehensive income		69	5	9
Total comprehensive income for the period		1,040	352	1,280
Earnings per share - basic	4	8.5p	3.1p	11.2p
Earnings per share - diluted	4	8.5p	3.1p	11.2p

Condensed Consolidated Balance Sheet

for the 26 weeks ended 30 March 2013           

	Unaudited 30 March 2013	Unaudited 31 March 2012	Audited 52 weeks ended 29 September 2012
	£'000	£'000	£'000
Non-current assets
Goodwill	1,964	1,964	1,964
Intangible assets	1,350	1,805	1,478
Property, plant and equipment	4,623	4,458	4,654
Deferred tax asset	111	224	110
Trade and other receivables	157	327	152
	8,205	8,778	8,358
Current assets
Inventories	6,795	6,053	6,922
Trade and other receivables	9,550	6,036	7,257
Cash and cash equivalents	2,689	3,505	2,693
	19,034	15,594	18,872
Total assets	27,239	24,372	25,230
Current liabilities
Trade and other payables	(8,824)	(7,489)	(7,651)
Derivative financial instruments	(127)	-	(23)
Borrowings	-	(19)	(6)
Current tax liabilities	(501)	(71)	(252)
	(9,452)	(7,579)	(7,932)
Non-current liabilities
Other payables	(633)	(703)	(655)
Deferred tax liabilities	(593)	(722)	(588)
	(1,226)	(1,425)	(1,243)
Total liabilities	(10,678)	(9,004)	(9,175)
Net assets	16,561	15,368	16,055
Equity
Share capital	568	567	568
Share premium account	5,387	5,369	5,378
Translation reserve	75	2	6
Profit and loss account	10,531	9,430	10,103
Total equity	16,561	15,368	16,055

Condensed Consolidated Statement of Changes in Equity

for the 26 weeks ended 30 March 2013           

	Share capital	Share premium account	Profit and loss account	Translation reserve	Total equity
	£'000	£'000	£'000	£'000	£'000
Balance at 29 September 2012 (audited)	568	5,378	10,103	6	16,055
Dividends	-	-	(568)	-	(568)
Share based payments	-	-	25	-	25
Shares issued	-	9	-	-	9
Transactions with owners	-	9	(543)	-	(534)
Profit for the period	-	-	971	-	971
Exchange gains arising on retranslation of foreign operations	-	-	-	69	69
Balance at 30 March 2013 (unaudited)	568	5,387	10,531	75	16,561

for the 26 weeks ended 31 March 2012

	Share capital	Share premium account	Profit and loss account	Translation reserve	Total equity
	£'000	£'000	£'000	£'000	£'000
Balance at 1 October 2011 (audited)	567	5,369	9,605	(3)	15,538
Dividends	-	-	(545)	-	(545)
Share based payments	-	-	23	-	23
Transactions with owners	-	-	(522)	-	(522)
Profit for the period	-	-	347	-	347
Exchange differences arising on retranslation of foreign operations	-	-	-	5	5
Balance at 31 March 2012 (unaudited)	567	5,369	9,430	2	15,368

Condensed Consolidated Statement of Changes in Equity (continued)

for the 52 weeks ended 29 September 2012

	Share capital	Share premium account	Profit and loss account	Translation reserve	Total Equity
	£'000	£'000	£'000	£'000	£'000
Balance at 1 October 2011 (audited)	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 arising on retranslation of foreign operations	-	-	-	9	9
Balance at 29 September 2012 (audited)	568	5,378	10,103	6	16,055

Condensed Consolidated Cash Flow Statement

	Unaudited 26 weeks ended 30 March 2013	Unaudited 26 weeks ended 31 March 2012	Audited 52 weeks ended 29 September 2012
	£'000	£'000	£'000
Cash flows from operating activities
Profit after taxation	971	347	1,271
Adjustments for:
Depreciation	326	277	639
Finance (income)/costs - net	-	(11)	(18)
Amortisation of intangible assets	128	157	484
Loss/(profit) on disposal of fixed assets	6	15	(1)
Share option costs	25	23	56
Taxation expense recognised in income statement	356	109	507
Loss on derivative financial instruments	104	-	23
Foreign exchange movement	69	-	9
Decrease/(increase) in inventories	127	(1,041)	(1,910)
(Increase)/decrease in trade and other receivables	(2,298)	448	(589)
Increase in trade and other payables	1,153	1,593	2,102
Cash generated from operations	967	1,917	2,573
Finance costs paid	(5)	(5)	(9)
Income tax paid	(103)	(277)	(514)
Net cash from operating activities	859	1,635	2,050
Cash flows from investing activities
Finance income received	-	-	2
Purchase of property, plant and equipment	(301)	(161)	(727)
Proceeds from sale of fixed assets	3	60	84
Deferred purchase consideration	-	(400)	(800)
Net cash flow used in investing activities	(298)	(501)	(1,441)
Cash flows from financing activities
Repayment of borrowings	(6)	(23)	(36)
Shares issued	9	-	10
Dividends paid	(568)	(545)	(829)
Net cash used for financing activities	(565)	(568)	(855)
Net (decrease)/increase in cash and cash equivalents	(4)	566	(246)
Cash and cash equivalents at beginning of period	2,693	2,939	2,939
Cash and cash equivalents at end of period	2,689	3,505	2,693

Notes to the Condensed Consolidated Interim Financial Statements

1.  Basis of preparation

The Group's interim results for the 26 weeks ended 30 March 2013 are prepared in accordance with the Group's accounting policies which are based on the recognition and measurement principles of International Financial Reporting Standards ("IFRS") as adopted by the EU and effective, or expected to be adopted and effective, at 28 September 2013.  The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2012 annual report and financial statements. The Group's 2012 financial statements received an unqualified audit report, did not contain statements under Sections 498(2) or (3) of the Companies Act 2006 and have been filed with the Registrar of Companies. As permitted, this interim report has been prepared in accordance with the AIM rules and not in accordance with IAS34 "Interim financial reporting".

The financial information for the 26 weeks ended 30 March 2013 and 31 March 2012 has not been audited and does not constitute full financial statements within the meaning of Section 434 of the Companies Act 2006. The unaudited interim financial statements were approved by the Board of Directors on 11 June 2013.

The consolidated financial statements are prepared under the historical cost convention as modified to include the revaluation of financial instruments. The statutory accounts for the 52 weeks ended 29 September 2012, which were prepared under IFRS, have been filed with the Registrar of Companies.

2.  Segmental analysis

Revenue by destination

	Unaudited 26 weeks ended 30 March 2013	Unaudited 26 weeks ended 31 March 2012	Audited 52 weeks ended 29 September 2012
	£'000	£'000	£'000
United Kingdom	5,942	4,185	10,307
Other EU	2,995	2,979	4,275
Rest of World	7,475	5,475	15,860
	16,412	12,639	30,442

Revenue by origin

All turnover originates in the United Kingdom except for £994,000 (2012 interim - £897,000, 2012 year end - £2,221,000) which originates in America. Turnover of £68,000 originated in Australia during the 2012 interim period and 2012 year end.

2.  Segmental analysis (continued)

Revenue by sector

	Unaudited 26 weeks ended 30 March 2013	Unaudited 26 weeks ended 31 March 2012	Audited 52 weeks ended 29 September 2012
	£'000	£'000	£'000
Defence	1,805	933	2,190
Oil and gas	12,741	10,260	24,051
Industrial gases	969	1,297	3,888
Alternative energy	897	149	313
	16,412	12,639	30,442

Revenue by activity

	Unaudited 26 weeks ended 30 March 2013	Unaudited 26 weeks ended 31 March 2012	Audited 52 weeks ended 29 September 2012
	£'000	£'000	£'000
Cylinders	8,468	6,020	16,306
Alternative Energy	897	149	224
Engineered Products	7,047	6,470	13,912
	16,412	12,639	30,442

Profit/(loss) before taxation by activity

	Unaudited 26 weeks ended 30 March 2013	Unaudited 26 weeks ended 31 March 2012	Audited 52 weeks ended 29 September 2012
	£'000	£'000	£'000
Cylinders	1,801	720	2,329
Alternative Energy	(85)	(197)	(494)
Engineered Products	214	374	819
Unallocated central costs	(603)	(441)	(876)
	1,327	456	1,778

The profit before taxation by activity is stated before the allocation of Group management charges.

3.  Taxation

	Unaudited 26 weeks ended 30 March 2013	Unaudited 26 weeks ended 31 March 2012	Audited 52 weeks ended 29 September 2012
	£'000	£'000	£'000
Current tax	352	158	576
Deferred taxation	4	(49)	(69)
Taxation charged to the income statement	356	109	507

4.  Earnings per ordinary share

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 year.

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

	Unaudited 26 weeks ended 30 March 2013	Unaudited 26 weeks ended 31 March 2012	Audited 52 weeks ended 29 September 2012
	£'000	£'000	£'000
Profit after tax	971	347	1,271
	Number of Shares	Number of shares	Number of shares
Weighted average number of shares in issue	11,360,232	11,349,540	11,350,099
Dilutive effect of options	35,543	14,570	-
Diluted weighted average number of shares	11,395,775	11,364,110	11,350,099
Earnings per share - basic	8.5p	3.1p	11.2p
Earnings per share - diluted	8.5p	3.1p	11.2p

5.  Dividends

The final dividend for the 52 weeks ended 1 October 2011 of 4.8p per share was paid on 9 March 2012.

The interim dividend for the 52 weeks ended 29 September 2012 of 2.5p per share was paid on 6 August 2012.

The final dividend for the 52 weeks ended 29 September 2012 of 5.0p per share was paid on 8 March 2013.

An interim dividend for the 52 weeks period ending on 28 September 2013 of 2.6p per share will be paid on 8 August 2013 to shareholders on the share register at the close of business on 12 July 2013.

A copy of the Interim Report will be sent to shareholders shortly and will be available on the Company's website: www.pressuretechnologies.co.uk.

This information is provided by RNS

The company news service from the London Stock Exchange

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