pres today - a class act!10 Nov 2015 18:52
Pressure Tech flags profits beat:
It's been a terrible year for Pressure Technologies, but it's a class act and investors are betting that the shares have bottomed out. We've spotted a rare beast this results season, a company that actually expects to beat earnings forecasts this year. Pressure Technologies (PRES) has been pummelled over the past year because of heavy exposure to the oil industry, but its Precision Machined Components (PMC) and Cylinders divisions have both done better than expected, and the Alternative Energy business has had a strong second half.
Having last week registered a near four-year low, investors have piled in on proof that Pressure Tech is staying afloat, steering the shares up an incredible 24% Tuesday.
Pressure Tech makes money selling air pressure vessel systems used on deep water drilling rigs and drillships, and high pressure cylinders for submarine ballast. But with a majority of its income from the oil and gas sector, it's little wonder the shares had sunk 82% since July 2014 to just 140p Monday.
Cost-cutting should skim £1.5 million off its bills this year, which could improve as management look for other saving opportunities. This will cover the deferred consideration for its Quadscot acquisition. With strong cash generation in the second half, debt will be lower, too.
The firm's breadwinner, PMC, has trumped expectations with the company's highest return on sales and cash conversion. Although there have been fewer orders since April and pressure on pricing is ongoing, all divisions have made a profit in the period and in-sourcing of machined products from Quadscot will beef up margins.
Thanks to efficiencies put in place earlier this year, Pressure Tech's Cylinders business should easily beat forecasts, although the Engineered Products operation, which makes high pressure hydraulic pumps, has been unable to offset lower orders, price pressure and an order deferral. Things could improve once a new managing director is appointed, however.
With a strong second half from the Alternative Energy unit, the company is looking at using its technology to access waste management and renewable energy supply markets. This is a cracking biofuels business, and while timing will likely remain an issue, a strong order book and enquiry levels is a good sign.
Ahead of its full-year results on 15 December, the company said: "Along with many others in the sector, we do not foresee any signs of pick-up in our main oil and gas market during 2016, however we do not currently anticipate market conditions deteriorating further. As a result, we remain confident in our expectations for our Precision Machined Components, Cylinders and Engineered Products divisions. The Alternative Energy division is project based and consequently is subject to the timing of new contract awards, but we are pleased with the growing momentum in this business."
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