Pressure Tech Regulatory News (PRES)

1 October 2014

Pressure Technologies plc

("Pressure Technologies", the "Company" or the "Group")

Acquisition of Quadscot Holdings Limited

Pressure Technologies announces that it has acquired the entire issued share capital of Quadscot Holdings Limited ("Quadscot") (the "Acquisition"), a provider of high quality computer controlled and conventional precision engineering and machining services primarily to the oil, gas and petrochemical industries.

Highlights

· The Acquisition is complementary to the Group's existing subsidiaries Al-Met Limited ("Al-Met") and Roota Engineering Limited ("Roota") and Quadscot will become part of the Engineered Products division

· Quadscot is a profitable and cash generative business that also benefits from good near term order book visibility

· The Board expects that the Acquisition will be immediately earnings enhancing

· Quadscot has significant opportunities to expand and extend its customer base following a recent large scale expansion of its manufacturing facilities

· The Acquisition is further evidence of the Board delivering on the Group's stated strategy to expand both organically and by acquisition and adhering to its strict acquisition criteria 

The maximum total consideration for the Acquisition is £10.3 million (plus cash balances), comprising an initial cash consideration of £7.3 million (plus cash balances) ("Initial Consideration") with additional deferred payments, split over two years, of up to a maximum of £3.0 million, based on the future financial performance of Quadscot ("Additional Consideration"). The Initial Consideration will be met from the Group's new bank facilities and existing cash resources.

Alan Wilson, Chairman of Pressure Technologies, said: "The acquisition of Quadscot is further evidence of the Group's ability to identify well run, profitable businesses that will benefit from being part of Pressure Technologies, whilst also making a significant contribution to the future performance of the Group.

Quadscot has an excellent reputation in its market and we are delighted to welcome all of the employees to the Group."

For further information, please contact:

Information on Quadscot

Quadscot was founded in 1990 by the joint owners Jim Smith, the current Managing Director, and Bob Cant, and is based in Blantyre, near Glasgow, in a modern freehold facility that was recently significantly expanded to 32,000 square feet and which will form part of the Acquisition. Continuous investment has been made in modern, high quality engineering equipment which is manned by highly experienced engineers and machinists, providing milling, turning, boring, grinding and electric discharge machining.

This combination of experience and modern machinery is allied to a commitment to quality and high standards in producing bespoke solutions to complex designs, delivered on time, working in a wide variety of materials, including nickel alloys, stainless and carbon steels, titanium and plastics. The majority of products relate to exploration and monitoring equipment used in the sub-sea oil & gas industry.

Quadscot is well recognised for its quality components and services and is an ISO 9001:2008 Lloyds accredited company.

Quadscot has a long established "blue chip" customer base in the oil, petrochemicals and gas sectors. It employs 55 people and Jim Smith will remain with the enlarged business, retaining his long standing role as Managing Director.

For the year ended 30 September 2013, Quadscot reported revenues of £4.46 million and profit before tax of £0.98 million; net assets at 30 September 2013 were £2.35 million. The Directors anticipate that for the year ended 30 September 2014, Quadscot will report a significant uplift in both revenues and profit before tax.

Background to and reasons for the Acquisition

In line with Pressure Technologies stated strategy, the Board believes that the Acquisition represents an excellent opportunity to further enhance the Group's capabilities within the Engineered Products division. Quadscot will dovetail with the Group's Al-Met and Roota subsidiaries, as the business serves the same markets.

As with the acquisition of Roota, acquired earlier this year, there will be opportunities to leverage Quadscot's established reputation, modern manufacturing facility and technical expertise through its highly skilled and experienced workforce. It is anticipated that cross selling opportunities across the division's customer bases will arise in due course. The Board believes that Quadscot has a significant opportunity to capitalise on the additional manufacturing capacity following the recent increase in square footage, both in terms of attracting new business as well as increasing order intake from existing customers. Quadscot has also invested significantly in new machines and in upgrading its manufacturing facility.

Quadscot is a well run, profitable and cash generative business that also benefits from good near term order book visibility.

The Acquisition is another obvious strong strategic fit with Pressure Technologies' growth and acquisition strategy and the Directors believe that Quadscot will have excellent long term growth prospects as part of the Group.

Terms of the Acquisition

The Company has agreed terms to acquire Quadscot for a maximum total consideration of £10.3 million (plus cash balances). The Initial Consideration is £7.3 million (plus cash balances) and will be met from the Group's new bank facilities and existing cash resources.

Further consideration of up to £3.0 million is payable in respect of two separate periods over the 24 months post completion dependent on the future audited EBITDA performance of Quadscot for the 12 month periods to 30 September 2015 and 30 September 2016.

For each of those financial periods, additional consideration will become payable on a £2.40 per £1 basis for audited EBITDA in excess of £1.5 million, capped at a maximum of £1.2 million and £1.8 million for 2015 and 2016 respectively. Any such Additional Consideration will be satisfied in cash and will be paid within 45 business days following the preparation of audited accounts for Quadscot.

The terms of the Acquisition contain the normal commercial warranties and indemnities in favour of the Group.

.Ends.

Company description - www.pressuretechnologies.com

With its head office in Sheffield and its origins going back to 1897, Pressure Technologies is a growing, profitable, dividend paying, AIM listed, leading designer and manufacturer of speciality engineering solutions for high pressure systems serving large global markets. The company is building a highly profitable group of companies, specialising in technology for the containment and control of liquids and gases in pressure systems through a combination of organic initiatives and acquisitions.

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

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 with an option to acquire a further 40% in 2015 www.kellygtm.com

Engineered Products

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

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

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

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

Alternative Energy

· Chesterfield BioGas Limited, Sheffield, founded in 2008 www.chesterfieldbiogas.co.uk

· Greenlane Biogas Holdings Limited, acquired in October 2014 www.greenlanebiogas.com