Pressure Tech Regulatory News (PRES)

18 January 2022

Pressure Technologies plc

("Pressure Technologies" or "the Group")

2021 Preliminary Results

Pressure Technologies (AIM: PRES), the specialist engineering group, announces its preliminary results for the 52 weeks to 2 October 2021.

Financial Results

* Operating loss excluding amortisation, impairments and other exceptional costs.

** Before cash outflow for exceptional costs

*** Net debt includes gross borrowings, asset finance leases, right of use asset leases, less cash and cash equivalents

Group Highlights

Results

Chris Walters, Chief Executive of Pressure Technologies commented:

"Over the past year, we have continued to make good progress and delivered results in line with market expectations, despite the prolonged challenge of oil and gas market conditions and the disruptive backdrop of Covid-19. Colleagues across the business have shown great resilience through this period and I would like to thank them for all that they have done and continue to do.

The management and operational changes we have implemented over the past two years have helped us to cope with these challenges and have further developed the organisational culture in line with our values, which remains key to the delivery of our strategy and sustainable growth.

Improved performance in Chesterfield Special Cylinders has been underpinned by high-value defence contracts and the orderbook remains strong going into 2022 for major UK and overseas naval submarine and surface ship programmes.

Revenue from hydrogen energy contracts grew significantly last year and momentum continues to build in this exciting and fast-developing market, with increased visibility of opportunities and customers planning increased production capacity throughout 2022. Investment continues in the Chesterfield Special Cylinders production facility to meet expected growth in hydrogen project demand from 2023.

Strong collaboration with our specialist steel tube suppliers, Tenaris and Vallourec continues to support competitive product development and underpins the delivery of the future order book. The purchase of strategic steel tube stock for popular hydrogen cylinder designs in early 2021 proved to be important in mitigating raw material cost escalation, supply chain disruption and increasing lead times experienced throughout the second half of last year.

Our OEM customers are reporting a stronger outlook for the oil and gas market in 2022 and whilst we remain cautious regarding the pace of recovery, the steadily improving order intake is encouraging news for our Precision Machined Components division.

As we begin 2022, the Group is well positioned to take advantage of a strong defence order book, exciting growth opportunities in hydrogen energy and the prospect of steadily improving oil and gas market conditions. Our strategy remains focused on delivering value from the growth and development of both divisions and the Board remains confident in the prospects and opportunities for the Group."

ENDS

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Chairman's statement

Overview

The team at Pressure Technologies demonstrated great resilience and resourcefulness as the Covid-19 pandemic continued to impact our business throughout the financial year. Whilst a number of anticipated contracts were delayed as a result of the significant economic and operational headwinds that have slowed global activity for an extended period of time, we focused on enhancing our capabilities and increasing efficiencies to ensure that the business is well placed to secure the opportunities we see in FY22.

During the year we continued to prioritise the safety and wellbeing of our people and I would like to express my gratitude to the entire Pressure Technologies team for their hard work and commitment throughout this immensely challenging period.

We started the financial year with a substantial funding round in December 2020 from supportive investors that will enable us to focus on the exciting growth opportunities for Chesterfield Special Cylinders (CSC) in the hydrogen energy market and Integrity Management services business. The importance of the hydrogen sector was highlighted during the COP26 meeting in Glasgow in November 2021, where discussions centred on the importance of limiting global warming through energy transition. In the years ahead, the hydrogen sector will play a key role in achieving that goal and I am delighted that Pressure Technologies and CSC will be supporting these efforts. We have also continued to see strong performance in defence markets with a healthy pipeline of opportunities heading into 2022, which will be CSC's 125th anniversary year. 

Having strengthened our engineering, sales and production capabilities in recent years, we saw new customer acquisitions and further penetration in our target markets, despite the challenging economic and operating environment. In addition, the business returned to a stable financial footing at the end of the year, having agreed an amendment to its banking credit facility.

Whilst oil and gas markets remained very subdued for much of 2021, towards the end of the financial year we started to experience early signs of recovery, with renewed investment in subsea systems and production levels which is encouraging for Precision Machined Components (PMC) as we move into FY22.

Despite the disruptions, we maintained focus on improving operational efficiencies and bringing talent into the business to ensure that the Group is well-placed to fully leverage its leading position in core markets over the medium and long term.

Board

In May 2021, James Locking was appointed Chief Financial Officer and joined the Board. Having been with Pressure Technologies for two years already as Group Financial Controller and then Interim Chief Financial Officer, James has a strong understanding of the business and the required skills that will be essential as Pressure Technologies continues to grow.

In November 2021, I announced that I would be stepping down as Chairman prior to the next Annual General Meeting in March 2022. It has been a privilege and honour to serve as Chairman of the Pressure Technologies Board over the past two years. I am pleased to have been able to support our Chief Executive, Chris Walters, and his team to steer the business through these challenging times. I leave the company with a significantly strengthened balance sheet and sufficient funding to meaningfully address the growing hydrogen energy opportunity and recovering oil and gas market. My successor will join a Board with the strong mix of knowledge and experience required to support and guide Pressure Technologies through this next exciting phase of its development.

Sir Roy Gardner

Chairman 

Business review

Over the past year, we have continued to make good progress against our strategic priorities and delivered results in line with market expectations, despite the prolonged challenge of oil and gas market conditions and the disruptive backdrop of Covid-19.

The management and operational changes we have implemented over the past two years have helped us to cope with these challenges and have further developed the organisational culture in line with our values, which remains key to the delivery of our strategy and sustainable growth. Colleagues across the business have worked hard and shown great resilience throughout the year and I would like to thank them for all that they have done and continue to do.

I would also like to thank our Chairman, Sir Roy Gardner, who will stand down from the Board before the next AGM in March 2022, for his support and guidance over the past two eventful years.

OUR PERFORMANCE

Overall Group revenue for the year of £25.3 million (2020: £25.4 million) and an adjusted operating loss1 of £0.7 million (2020: £2.4 million loss) reflect a strong performance in Chesterfield Special Cylinders (CSC) from major defence, nuclear and hydrogen energy contracts, which offset the impact of difficult trading conditions for Precision Machined Components (PMC) in the oil and gas market, supply chain disruptions and the continuing backdrop of Covid-19 related challenges.

1 Operating loss excluding amortisation, impairments and other exceptional costs.

CHESTERFIELD SPECIAL CYLINDERS

Chesterfield Special Cylinders delivered a 69% increase in revenue for the year to £18.9 million (2020: £11.2 million). 

The phasing of major defence contracts resulted in significantly higher revenue and gross margin in the first half of the year, which also included the positive impact of a major defence contract delayed from FY20 into Q1 FY21. Gross margin increased to 32% (2020: 26%), resulting in an adjusted operating profit of £2.8 million (2020: £0.1 million adjusted operating loss) and a return on revenue of 15% (2020: 0%).

Revenue for defence contracts more than doubled to £11.1 million (2020: £5.1 million), representing 59% of the divisional total for the year, driven by UK and overseas naval submarine and surface ship programmes for customers including BAE Systems, Naval Group, Babcock and ThyssenKrupp. A contract to supply highly specialised cylinders for early warning radar systems was delivered to Thales for the UK Ministry of Defence during the year.

The defence order book and contract pipeline remain strong, providing good visibility of naval new construction and refit programmes going into FY22. Several major contracts were secured in the first quarter of FY22 for the supply of pressure systems to UK and overseas submarine and surface ship programmes. 

Industrial market revenue increased to £5.3 million (2020: £4.9 million), representing 28% of the divisional total for the year, and included the second contract for EDF Energy to supply several UK nuclear power stations with nitrogen storage packages and the delivery of a contract for new customer, Parker Hannifin to supply cylinders for a wastewater treatment project in Abu Dhabi.

Momentum continued to build in the fast-developing hydrogen energy market, with revenue of £2.2 million (2020: £0.2 million), representing 12% of the divisional total for the year, from contracts with established and new customers, including Haskel Hydrogen Group, McPhy, Framatome, Arcola Energy and US fuel cell technology major, Plug Power. During the second half the year, Shell placed the first two orders for hydrogen storage under the five-year framework agreement with CSC announced in June 2020, both for European refuelling station projects.

All contracts placed to date for hydrogen storage utilise CSC's efficient and highly competitive hydrogen cylinder design that has been developed with our customers to allow modular expansion to meet future demand and configured to enable cost-effective in-situ inspection and recertification with maximum availability through life, using CSC's Integrity Management services.

Collaboration with our specialist steel tube suppliers, Tenaris and Vallourec has been strengthened further during the year to size the global hydrogen energy market, support competitive product development, improve manufacturing efficiencies and to underpin the delivery of our future order book. The purchase of strategic steel tube stock for popular hydrogen cylinder designs in early 2021 proved to be important in mitigating raw material cost escalation, supply chain disruption and increasing lead times experienced throughout the second half of the year.

Demand for oil and gas related projects deteriorated sharply during 2020 and remained low throughout 2021 due to depressed oil prices and reduced capital spend in the sector. Total oil and gas market revenue decreased by 70% to £0.3 million (2020: £1.0 million), representing just 2% of the divisional total for the year. Early signs of recovering demand for air pressure vessels came in the second half of the year with a £1.1 million order placed by established customer, MHWirth for delivery in FY22. Several smaller orders for similar applications were also placed by new and established customers in the second half of the year.

Covid-19 travel restrictions continued to significantly disrupt Integrity Management services and deployments during the year. Several UK and overseas projects were completed for offshore services and defence customers in the first half of the year, but the extended UK lockdown, travel restrictions and postponed customer projects had a negative impact on Integrity Management revenue for the year, which fell to £1.5 million (2020: £2.3 million). A recovery of deployment activity had been expected during the second half, but these projects have been rescheduled into FY22 and FY23.

Investment in people and production facilities progressed at the CSC Sheffield site during the year, in line with plans set out during the December 2020 fundraise. The investment will continue throughout 2022 and will increase overall operational capacity to meet the expected growth in demand for static and mobile hydrogen storage projects from 2023. We have also strengthened our operational teams, making key appointments across research and development, engineering, sales, production and supply chain functions.

PRECISION MACHINED COMPONENTS

Precision Machined Components (PMC) delivered revenue of £6.4 million (2020: £14.2 million) and an adjusted operating loss of £1.6 million (2020: £0.7 million loss), reflecting the very challenging trading conditions in the oil and gas market throughout FY21, while Covid-19 disruption and supply chain constraints resulted in several delays to output.

Our customers downgraded their trading outlook in early 2021 and, as a result, a further phase of restructuring was completed in February, which delivered a 40% reduction in the cost base compared with 2020 and helped to minimise losses and conserve cash through the year.

As expected, the demand for subsea well intervention tools, valve assemblies and control module components began to recover steadily from March 2021, exceeding pre-pandemic order intake levels and resulting in a profitable second half of the year for our Roota and Martract sites. This recovery has been supported by successful recruitment and new skills development, increasing Roota's capacity to meet the growing demand. 

However, this improvement was largely offset by the slower than expected recovery in demand for subsea trees and the associated production drilling and flow control components, which severely impacted order intake at our Al-Met site, which remained loss-making in the second half of the year. Whilst our Al-Met OEM customers have indicated that they expect a strong recovery in demand for subsea trees from the beginning of 2022, we have yet to see this increased optimism result in higher order intake.

Further strategic progress has been made on reducing customer concentrations and extending the range of products covered by the long-term supply agreements established over the past two years, demonstrating customer confidence in our products and service levels as they seek to consolidate their approved supplier lists. In June 2021, we reported that we had signed a global supply agreement with Schlumberger Technology Corporation, covering a wide range of precision machined parts for their oilfield service applications. 

A stronger sales team and mature sales processes have underpinned increased sales effectiveness and better customer relationship management. We have also made initial progress in diversifying our end markets, with the first orders secured for offshore wind turbine components, water treatment applications and specialised components on UK defence projects in collaboration with CSC, which are expected to continue into FY22. Non-oil and gas revenues totalled £0.7 million (2020: £0.3 million), being 12% of divisional revenue for the year, with initial progress made in defence and industrial markets.

OUTLOOK

Our strategy remains the delivery of value from the continued growth and development of both divisions and whilst we have had to endure another year of difficult trading in the PMC division as a result of the Covid-19 pandemic and depressed oil and gas market conditions, the Board is pleased with the overall progress being made by the Group.

CSC has a strong defence order book going into FY22, with high-value projects weighted to the second half of the year. As travel restrictions are gradually lifted, periodic inspection regimes will require product revalidations and we expect to see a steady recovery in Integrity Management services across defence, offshore, nuclear power and hydrogen energy sectors, where risk management and asset availability are paramount.

As governments increasingly acknowledge the role of hydrogen in net zero carbon targets for transportation and industrial decarbonisation, hydrogen energy storage remains a strategically important market for the Group. Hydrogen related revenue was strong in FY21 and the pipeline of opportunities for static and mobile hydrogen storage systems with established and new customers continues to grow. The visibility of future demand is improving, with refuelling station projects expected to ramp up sharply driven by city bus networks from 2023 and accelerating heavy duty truck demand from 2024.

Ongoing investment following the December 2020 fundraising is helping to deliver operational improvements that will underpin the capacity growth, efficiencies and reduced lead times at our Sheffield facility over the next two years in readiness for the increasing hydrogen demand. Stronger collaboration with our specialist steel tube suppliers, Tenaris and Vallourec will continue to support competitive product development and underpin the delivery of our future order book.

For PMC, our focus remains on the recovery of profitability and cash generation. We are encouraged by recent increases in order intake for the Roota and Martract businesses and by efficiency and margin gains achieved from operational improvements at all sites. Our major OEM customers, including Schlumberger, Halliburton, Expro and Baker Hughes are reporting a stronger outlook for the oil and gas market during 2022, which we expect to drive improved performance, including restoring profitability in our Al-Met business. Whilst we remain cautious regarding the pace of recovery, particularly in light of the Covid-19 Omicron variant, the division is well placed to deliver an improved performance in FY22.

The Board remains confident in the prospects and opportunities for the business in the medium term.

Chris Walters

Chief Executive

Financial review

Highlights

* Operating loss excluding amortisation, impairments and other exceptional costs.

** Adjusted operating loss divided by revenue

*** Before cash outflow for exceptional costs

**** Net debt includes gross borrowings, asset finance leases, right of use asset leases, less cash and cash equivalents

Our financial priority this year, following the fundraise in December 2020, was to invest in our Chesterfield Special Cylinders (CSC) facility, strategic stock to reduce lead times in the hydrogen energy market and the Integrity Management business, whilst maintaining sufficient liquidity for the increased working capital requirements during the year.

CSC had a significantly improved year due to the BAE Dreadnought Boatset 2 revenue for material and build as well as increased hydrogen energy revenue. However, continued tough trading conditions within the oil and gas market as well as Covid-19 disruption severely impacted the Precision Machined Components (PMC) division. Overall, this resulted in a very minor reduction in Group revenue for the year to £25.3 million (2020: £25.4 million) and an adjusted operating loss for the year of £0.7 million (2020: adjusted loss of £2.4 million). The Group made a loss before taxation of £4.2 million (2020: loss of £20.0 million).

CSC revenue increased by 69% to £18.9 million (2020: £11.2 million) with an adjusted operating profit of £2.8 million (2020: £0.1 million adjusted loss) and profit before taxation of £1.7 million (2020: loss of £1.0 million). PMC revenue decreased by 55% to £6.4 million (2020: £14.2 million) with an adjusted operating loss of £1.6 million (2020: adjusted loss of £0.7 million) and a loss before taxation of £2.3 million (2020: loss of £4.3 million).

As at 2 October 2021, net debt reduced to £4.9 million (2020: £7.4 million). The Group's £6.0 million revolving credit facility (RCF) was drawn at £4.8 million (2020: £6.8 million). Cash and cash equivalents decreased slightly to £3.2 million (2020: £3.4 million) resulting in reduced net borrowings (before lease liabilities) of £1.6 million (2020: £3.4 million). Lease liabilities as at 2 October 2021 decreased to £3.4 million (2020: £4.1 million). 

The reduction in net debt was driven principally by the receipt in February 2021 of a £3.4 million final repayment of the Greenlane Renewables Inc. Promissory Note and the fundraising in December 2020, through the issue of 12,471,998 new ordinary shares, which raised cash proceeds, net of expenses, of approximately £7.0 million. These cash inflows were partially offset by a net working capital outflow of £6.2 million.

The Group's Revolving Credit Facility (RCF) was amended subsequent to year end in October 2021. The RCF was reduced from £6.0 million to £4.0 million and the facility term was extended from November 2022 to June 2023. New covenants covering minimum liquidity and maximum capital expenditure were agreed for the period to the end of June 2022. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested quarterly, will commence on the first testing date of 30 September 2022 through to the end of the facility.

Trading results

CSC

Revenue increased by 69% on the prior year primarily due to the phasing of major defence contracts and a step change in our hydrogen energy revenue to £2.2 million (2020: £0.2 million). 

As a result, gross profit increased to £6.1 million (2020: £2.9 million), with a 6.3ppt improvement in gross margin. 

Adjusted operating profit before amortisation, impairment and other exceptional costs was £2.8 million (2020: £0.1 million adjusted operating loss) with a 15.0ppt increase in return on revenue to 15.0% (2020: nil).

Contracts that were categorised as 'recognised over time' and still in progress at the end of the year had a future revenue value of £5.0 million relating to as yet unfulfilled performance obligations which are due for delivery in 2022.

PMC

PMC revenue decreased by 55% primarily due to the lack of recovery in oil and gas markets, the key end-market for this division, and the continued impact of the Covid-19 pandemic. The division also saw lower than expected gross margins as volume decreases could not be fully mitigated, despite the further restructuring in February giving a 40% reduction in the divisional cost base.

Gross profit decreased by 71.7% with a 6.4ppt reduction in gross margin to 10.9% compared to 2020, primarily due to the sharply reduced order intake in the first half of the year as our oil and gas OEM customers deferred project spend causing further uncertainty and disruption in the market. There were some signs of recovery in our Roota operation in the second half of the year with a return to profitability in the last four months of the financial year. However, Al-Met experienced very difficult trading throughout the year and is expected to return to profitability in the second quarter of FY22.

The division reported an adjusted operating loss before amortisation, impairments and other exceptional costs of £1.6 million which represents a return on revenue of -25.7%, a 21.1ppt reduction from 2020.

Central costs

Unallocated central costs (before other exceptional costs) were £1.9 million (2020: £1.7 million). 

In respect of the Group's various share option plans there was a net cost in the year of £0.1 million (2020: £0.1 million). 

Asset impairment and amortisation

The Group tests annually for impairment, or more frequently if there are indicators that intangible and tangible fixed assets might be impaired. The continued impact of the Covid-19 pandemic and the difficult trading conditions and outlook for the oil and gas market, PMC's key end-market, is considered to be an indicator that the carrying value of our intangible and tangible assets in one of the Group's cash generating units (CGU) - the PMC division - may be impaired. The Group has considered a range of economic conditions for the sectors over the next three years. 

These economic conditions, together with reasonable and supportable assumptions, have been used to estimate the future cash inflows and outflows for the PMC CGU over the next three years. 

The assumptions underlying these forecasts are detailed in these financial statements. The review concluded that no impairment was required in these financial statements. Amortisation costs were £0.2 million (2020: £2.0 million) and have been treated as a non-cash exceptional item. 

The Group holds a number of freehold land and buildings, including CSC's main facility at Meadowhall Road, Sheffield. As part of discussions with the Group's bankers during the year, the Directors obtained a valuation from an independent chartered surveyor, Lambert Smith Hampton, of this building which indicated that an impairment of this asset of £655,000 was required which has been treated as a non-cash exceptional item.

Also included in Assets under Construction is £829,000 along with associated costs of £289,000 held in prepayments, relating to the internal and third-party costs incurred in the current and prior years associated with the development of a new ERP system in the CSC division. Improvements to the incumbent ERP system in CSC have recently become available which the Group is currently assessing for suitability and cost. Whilst this review is not yet complete, an initial assessment indicates that upgrading the incumbent system to the recently announced software version, rather than completing the development of the new system, may be a more appropriate and cost-effective route to improving the ERP system in CSC. As a result, the Directors have determined that there is an indicator of impairment of the Asset under Construction and the associated prepayment relating to the development of CSC's ERP system. Following an impairment review, the Directors have recorded an impairment charge of £1,118,000 to fully write off this asset. This impairment has been reflected as a non-cash exceptional item.

Other exceptional items 

Reorganisation and redundancy costs in the year were £0.4 million (2020: £0.4 million), which predominantly related to the PMC site reorganisation costs that took place in February 2021.

Other exceptional items included an inventory write off in CSC relating to obsolete stock items totalling £0.2 million (2020: £0.5 million), costs related to the closure in the prior year of PMC's Quadscot facility of £0.2 million (2020: £0.7 million), and other head office costs including bank refinancing costs totalling £0.2 million (2020: £0.4 million).

Taxation

The tax credit for the year was £0.8 million (2020: £1.1 million).

The current year tax credit has benefitted from a £0.4 million overprovision in respect of the prior year (2020: overprovision £0.1 million).

R&D tax benefits in respect of 2021 are expected to be £1.4 million (2020: £1.1 million). 

Corporation tax refunded in the year totalled £nil (2020: £0.2 million). Taxes relating to overseas territories are minimal.

Foreign Exchange

The Group now has no material exposure to movements in foreign exchange rates related to both transactional trading and translation of overseas assets and liabilities, following the receipt in February 2021 of the remaining Promissory Note from Greenlane Renewables Inc. which were part denominated in Canadian dollars. 

In the year under review, the principal exposure which arose from trading activities was to movements in the value of the Euro, the Canadian Dollar and the US Dollar relative to Sterling. As the Group companies both buy and sell in overseas currencies, particularly the Euro and the US Dollar, there is a degree of natural hedging already in place. Where appropriate, and where the timing of future cash flows are able to be reliably estimated, forward contracts can be taken out to cover exposure.

As at 2 October 2021 there were no forward contracts in place (2020: none). 

Financing, cash flow and leverage

Operating cash outflow before movements in working capital was £0.4 million (2020: £3.3 million outflow). After a net working capital outflow of £6.2 million (2020: £5.0 million inflow), cash used by operations was £6.6 million (2020: £1.7 million generated from operations). Key movements within working capital include £0.8 million related to the purchase of strategic stock, £2.6 million related to the increase in CSC's net contract balances and an outflow of £1.0 million PAYE and VAT to HMRC, which had been deferred from the prior year utilising Covid-19 relief. 

Cash outflows in the year in respect of other exceptional costs (see Note 5) were £0.6 million (2020: £1.5 million). This excludes the inventory write down and asset impairments which were non cash-flow related. 

During the year the Group received the final repayment of £3.1 million of the Promissory Note and its associated interest from Greenlane Renewables Inc. which formed part of the consideration on the sale of the Alternative Energy division in 2019. 

Net debt was £4.9 million (2020: £7.4 million), the decrease driven primarily by the receipts of £3.4 million from the Greenlane Renewables Inc. Promissory Note and the fundraising on 18 December 2020 which raised cash proceeds, net of expenses, of approximately £7.0 million. This enabled the repayment of £2.0 million of the Group's drawings under the revolving credit facility ("RCF") reducing drawn debt to £4.8 million at the year end (2020: £6.8 million).

The Group's RCF was amended subsequent to year end in October 2021. The RCF was reduced from £6.0 million to £4.0 million and the facility term was extended from November 2022 to June 2023. New covenants covering minimum liquidity and maximum capital expenditure were agreed for the period to the end of June 2022. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested quarterly, will commence on the first testing date of 30 September 2022 through to the end of the facility. 

Loss per share and dividends

Basic loss per share was 12.0 pence (2020: 101.5 pence). Adjusted loss per share was 2.2 pence (2020: 6.4 pence).

No dividends were paid in the year (2020: nil) and no dividends have been declared in respect of the year ended 2 October 2021 (2020: nil). Distributable reserves in the parent company, which at the year end are £8.6 million (2020: £20.4 million negative reserve), increased as a result of the fundraising which increased the share premium reserve and the subsequent capital reduction and transfer of the share premium reserve into distributable reserves following Court approval granted in June 2021. 

Statement of financial positionIntangible assets (at net book value) decreased by £0.2 million to £0.1 million (2020: £0.3 million). Amortisation in the year was £0.2 million (2020: £2.0 million). 

The property at Quadscot is owned by the Group and was marketed for sale after the site was closed in June 2020. As at 2 October 2021 the Group had sold 2 of its 3 conjoined units, generating proceeds of £0.4 million. The statement of financial position is showing the market value of the remaining property of £0.2 million (2020: £0.6 million) as an "Asset held for sale" under current assets. The remaining property was sold on 10 December 2021 for £0.2 million.

Net current assets (being current assets less current liabilities) decreased to £6.3 million (2020: £8.5 million) following RCF borrowings being reclassified to current from non-current liabilities. Non-current liabilities of £3.6 million (2020: £10.9 million) have decreased by £7.3 million, primarily as a result of the reclassification of RCF borrowings to current liabilities, as well as a reduction in RCF borrowings by £2.0 million. 

Net assets increased by 29% to £17.1 million (2020: £13.3 million) but net asset value per share decreased to 55 pence (2020: 72 pence) following the fundraising through the issue on 18 December 2020 of 12,471,998 new ordinary shares, taking our total ordinary shares in issue to 31,067,163.

James Locking

Chief Financial Officer

Consolidated statement of comprehensive income

For the 52 week period ended 2 October 2021

Consolidated statement of financial position

As at 2 October 2021

A restatement of the Consolidated statement of financial position as at 3 October 2020 and 28 September 2019 has been undertaken to correct an error, which had resulted in the incorrect presentation of contract assets and contract liabilities relating to ongoing contracts (see Note 12).

Consolidated statement of changes in equity

For the 52 week period ended 2 October 2021

Consolidated statement of cash flows

For the 52 week period ended 2 October 2021

Notes

Basis of preparation

The summary accounts are based on the consolidated financial statements that have been prepared in accordance with international accounting standards, in conformity with the requirements of the Companies Act 2006. The summary accounts and consolidated financial statements are made up to the Saturday nearest to the period end for each financial period.

Pressure Technologies plc, company number 06135104, is incorporated and domiciled in the United Kingdom. The registered office address is Pressure Technologies Building, Meadowhall Road, Sheffield, South Yorkshire, S9 1BT.

The Group has applied all accounting standards and interpretations issued relevant to its operations for the period ended 2 October 2021. The consolidated financial statements have been prepared on a going concern basis.

The summary accounts set out above do not constitute statutory accounts as defined by Section 434 of the UK Companies Act 2006. The summarised consolidated statement of comprehensive income, the summarised consolidated balance sheet at 2 October 2021, the summarised consolidated statement of comprehensive income, the summarised consolidated statement of changes in equity and the summarised consolidated statement of cash flows for the period then ended have been extracted from the Group's 2021 statutory financial statements upon which the auditor's opinion is unqualified and did not contain a statement under either sections 498(2) or 498(3) of the Companies Act 2006. The audit report for the period ended 3 October 2020 did not contain statements under sections 498(2) or 498(3) of the Companies Act 2006. The statutory financial statements for the period ended 3 October 2020 have been delivered to the Registrar of Companies. The 2 October 2021 accounts were approved by the directors on 17 January 2022 but have not yet been delivered to the Registrar of Companies.

Going concern

The financial statements have been prepared on a going concern basis. The Company's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Group Strategic Report. The Financial Reporting Council issued its "Annual Review of Corporate Reporting 2020/21" in October 2021. The Directors have considered this when preparing these financial statements.

The Group's Revolving Credit Facility (RCF) was amended subsequent to the year end in October 2021. The RCF was reduced from £6.0 million to £4.0 million and the facility term was extended from November 2022 to June 2023. New covenants covering minimum liquidity and maximum capital expenditure were agreed for the period to the end of June 2022. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested quarterly, will commence on the first testing date of 30 September 2022 through to the end of the facility.

Management have produced forecasts for the period up to March 2023 for all business units, taking account of reasonably plausible changes in trading performance and market conditions, which have been reviewed by the Directors. These reasonably plausible changes include the continued impact of the Covid-19 pandemic and the impact of the currently depressed oil and gas market. The forecasts demonstrate that the Group is forecast to generate profits and cash in the current financial year and beyond and that the Group has sufficient cash reserves and headroom in the financial covenants to enable the Group to meet its obligations as they fall due for a period of at least 14 months from the date when these financial statements have been signed. The Directors believe that, in the event that the assumptions in the forecast are not being realised such that a future potential covenant breach is anticipated, there are a number of mitigating actions that could be taken, including further cost reductions and cash management actions, that could help prevent a potential covenant breach from occurring. After undertaking these assessments and considering the uncertainties set out above, the Directors have a reasonable expectation that the Group has adequate resources to continue to operate for the foreseeable future and for these reasons they continue to adopt the going concern basis in preparing the financial statements.

New Standards adopted in 2021

No new standards were applied during the year.

Adoption of new and revised standards

Amendments to IFRSs that are mandatorily effective for the current year

At the date of the authorisation of these financial statements, several new, but not yet effective, standards and amendments to existing standards, and interpretations have been published by the IASB. None of these standards or amendments to existing standards have been adopted early by the Group. Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of pronouncement. The impact of new standards, amendments and interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Group's financial statements.

Notes to the consolidated financial statements

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).

For the 52 week period ended 2 October 2021

* Segmental net assets/(liabilities) 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.

Notes to the consolidated financial statements (continued)

1. Segment analysis (continued)

For the 53 week period ended 3 October 2020

* Segmental net assets/(liabilities) 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.

Notes to the consolidated financial statements (continued)

1. Segment analysis (continued)

The Group's revenue disaggregated by primary geographical markets is as follows:

The Group's largest customer, which is reported within the Cylinders segment, contributed 26% to the Group's revenue (2020: 13%, reported in the Cylinders segment).

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

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

The Group's revenue disaggregated by pattern of revenue recognition and category is as follows:

Notes to the consolidated financial statements (continued)

1. Segment analysis (continued)

The following aggregated amounts of transaction values relate to the performance obligations from existing contracts that are unsatisfied or partially unsatisfied as at 2 October 2021:

The following table provides an analysis of the carrying amount of non-current assets and additions to property, plant and equipment, all of which is held within the United Kingdom. 

2. Finance (costs)/income

In June and July 2020, the Group sold its 21% shareholding in Greenlane Renewables, Inc. for cash proceeds, net of related expenses, of £3,145,000 generating a profit on sale of £1,895,000. At the same time, the Group recorded a related modification of £1,026,000 in the carrying value of the Promissory Note which formed part of the consideration on sale of the Alternative Energy division in 2019. In February 2021, the Group received the final proceeds of £3,074,000 in relation to the Promissory Note.

3. Loss before taxation

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

Notes to the consolidated financial statements (continued)

4. Amortisation and Impairment

Within tangible fixed assets, land and buildings include the Meadowhall Road site which, as part of the Group's discussions with its bankers, was valued by an independent chartered surveyor, Lambert Smith Hampton, during the period resulting in an impairment of £655,000. The Directors are satisfied that the carrying value is comparable with market value.

Included in tangible fixed assets within Assets under Construction is £829,000 along with associated costs of £289,000 held in prepayments, relating to the internal and third-party costs incurred in the current and prior years associated with the development of a new ERP system in the CSC division. As also noted in the prior year, the Covid-19 pandemic has resulted in delays in finalising this project such that it has effectively been at standstill for nearly two years. Improvements to the incumbent ERP system in CSC have recently become available which the Group is currently assessing for suitability and cost. Whilst this review is not yet complete, an initial assessment indicates that upgrading the incumbent system to the recently announced software version, rather than completing the development of the new system, may be a more appropriate and cost-effective route to improving the ERP system in CSC. As a result, the Directors have determined that there is an indicator of impairment of the Asset under Construction and the associated prepayment relating to the development of CSC's ERP system. Following an impairment review, the Directors have recorded an impairment charge of £1,118,000 to fully write off this asset. This impairment has been reflected as a non-cash exceptional item.

5. Other exceptional costs

The reorganisation and redundancy costs relate to costs of restructuring across the Group. No further reorganisation costs are expected in FY22 unless market conditions deteriorate further as a result of the Covid-19 pandemic. In addition, no further costs are expected in FY22 relating to the closure of the Quadscot facility or impairment of inventory.

Notes to the consolidated financial statements (continued)

6. Taxation

Corporation tax is calculated at 19% (2020: 19%) of the estimated assessable profit for the period. Deferred tax is calculated at the rate applicable when the temporary differences are expected to unwind.

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

An increase in the UK corporation tax rate to 25% was substantively enacted in May 2021 and is due to take effect from 1 April 2023. As the most significant timing differences are not expected to unwind until 2023 or later, the deferred tax rate was changed from 19% to 25% in the period.

Notes to the consolidated financial statements (continued)

7. Loss 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 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 share options. As the Group made a loss after taxation for the financial year there is no dilution to take place.

On 18 December 2020 the Group undertook a fundraising through the issue of 12,471,998 new ordinary shares.

For the 52 week period ended 2 October 2021

The Group adjusted loss per share is calculated as follows:

In the Directors' view, adjusted loss per share reflects the ongoing performance of the business, how the business is managed on a day to day basis, and allows for a consistent and meaningful comparison between periods.

The theoretical tax effect is based on applying a 19% tax rate to the adjustments for amortisation and other exceptional costs incurred.

Notes to the consolidated financial statements (continued)

7. Loss per ordinary share (continued)

For the 53 week period ended 3 October 2020

The Group adjusted loss per share is calculated as follows:

8. Borrowings

During the period, the bank loans drawn under the Revolving Credit Facility (RCF) had an average annual interest rate of 2% above SONIA.

In December 2020 the Group extended its facility through to 30 November 2022 with a £9 million facility through to 1 July 2021 and then £7 million for the remainder of the term. In March 2021, the RCF was reduced to £6 million from September 2021, following the sales of the Quadscot properties during the year.

The Group's RCF was drawn at £4.8 million at the year end date. These bank borrowings are secured on the property, plant and equipment of the Group by way of a debenture. Obligations under finance leases are secured on the plant and machinery assets to which they relate.

Notes to the consolidated financial statements (continued)

8. Borrowings (continued)

The Group's RCF was amended subsequent to the period end on 22 October 2021. The RCF was reduced from £6.0 million to £4.0 million and the facility term was extended from November 2022 to June 2023. New covenants covering minimum liquidity and maximum capital expenditure were agreed for the period to the end of June 2022. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested quarterly, will commence on the first testing date of 30 September 2022 through to the end of the facility.

The carrying amount of other bank borrowings is considered to be a reasonable approximation of fair value. The carrying amounts of the Group's borrowings are all denominated in GBP.

The maturity profile of borrowing facilities are as follows:

The Group has the following undrawn borrowing facilities at the year end:

Subsequent to year end, as noted above, the RCF was reduced from £6.0 million to £4.0 million and the facility term was extended from November 2022 to June 2023.

9. Lease Liabilities

Lease liabilities are presented in the statement of financial position as follows:

Notes to the consolidated financial statements (continued)

9. Lease Liabilities (continued)

The Group has leases for certain operational factory premises and related facilities, several large items of plant and machinery equipment, an office building, a number of motor vehicles and some IT equipment.

For right of use assets, with the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability.

The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment. Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. Some leases contain an option to extend the lease for a further term. The Group is prohibited from selling or pledging the underlying leased assets as security.

For leases over office buildings and factory premises the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the Group must insure items of property, plant and equipment and incur maintenance fees on such items in accordance with the lease contracts.

The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 2 October 2021 were as follows:

Lease payments not recognised as a liability

The Group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred and are disclosed in operating lease commitments in these financial statements.

10. Consolidated cash flow statement

A restatement of the various components of Changes in working capital in the prior period has been undertaken to correct an error in the Consolidated statement of financial position as at 3 October 2020 and 28 October 2019, which resulted in the incorrect presentation of contract assets and contract liabilities relating to ongoing contracts (see Note 12). The cash inflow from operating activities in the prior period of £1,707,000 has not been impacted by this restatement.

11. Net Debt Reconciliation

Notes to the consolidated financial statements (continued)

12. Prior Period Adjustment

A restatement of Consolidated statement of financial position as at 3 October 2020 and 28 September 2019 has been undertaken to correct an error, which resulted in the incorrect presentation of contract assets and contract liabilities relating to ongoing contracts.

As at 3 October 2020, the impact of the restatement was as follows:-

As at 28 September 2019, the impact of the restatement was as follows:-

13. Subsequent events

The Group's Revolving Credit Facility (RCF) was amended subsequent to the year end in October 2021. The RCF was reduced from £6.0 million to £4.0 million and the facility term was extended from November 2022 to June 2023. New covenants covering minimum liquidity and maximum capital expenditure were agreed for the period to the end of June 2022. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested quarterly, will commence on the first testing date of 30 September 2022 through to the end of the facility.