TIDMPRES
RNS Number : 2867J
Pressure Technologies PLC
09 April 2020
9 April 2020
PRESSURE TECHNOLOGIES plc
("Pressure Technologies" or "The Group")
UPDATE ON TRADING AND THE IMPACT OF COVID-19
Pressure Technologies (AIM: PRES), the specialist engineering
group, provides an update on trading for the 26 weeks to 28 March
2020 and on the impact of COVID-19 on its operations.
Trading Update
Chesterfield Special Cylinders (CSC) performed in line with
expectations for the half year. Progress with key energy and
defence orders has continued in line with project plans. Sales
growth for Integrity Management services continued in the period,
despite the postponement of March deployments due to COVID-19
travel and access restrictions. As expected, operating profit for
CSC will be lower than for the same period last year, due to the
phasing of large contracts.
Precision Machined Components (PMC) achieved strong order intake
over the past six months across a broadening customer base. Despite
this progress, a significant delay to the output of new large
complex components, the onboarding of new customers and the late
commissioning of new machining centres adversely impacted gross
margins in the first quarter. Recovery of output and margin
performance in the second quarter was much slower than expected
and, with higher indirect costs from the investment in sales and
engineering functions, has resulted in a significantly lower
operating profit on higher revenue than for the same period last
year. However, margins and on-time delivery performance are
improving as management changes and the ongoing programme of
operational improvements, including recently implemented planning
tools and systems, take effect.
As a result of contract phasing in CSC and delayed output in
PMC, the unwinding of working capital and cash generation in the
period has been slower than expected, resulting in a higher
leverage at the half year than previously anticipated.
Good progress has been made against strategic priorities in both
divisions, with continued broadening of the customer base in target
markets. The investment made in strengthening the divisional sales
teams and engineering capability has underpinned new customer
acquisitions and an extended product range and scope.
Outlook and the Impact of COVID-19
The Board is closely monitoring the changing global situation as
a result of the COVID-19 pandemic.
Both divisions experienced some operational disruption and
capacity issues during March as a result of COVID-19 restrictions
and absences, but all sites remain open and operational and we are
working on the basis of 'business as usual, with caution'. We will
continually review this stance and adapt our approach in line with
any changes to government guidelines and, more importantly, our
ability to operate safely and effectively.
Key customers of both CSC and PMC divisions have confirmed their
status as supporting either UK Critical National Infrastructure or
strategic defence contracts and requested our confirmation of
continued operation during COVID-19 restrictions, subject to
meeting UK government guidelines on workforce protection, which we
have done.
Despite strong order books in both divisions at the half year,
it remains difficult to predict the length and depth that the
impact of COVID-19 will have on operational performance. This
uncertainty is compounded by a depressed oil price and the Board
anticipates that sales pipelines may be adversely affected, as some
oil and gas customers defer project spend and apply pricing
pressure throughout the supply chain. Both divisions remain in
close contact with customers and suppliers and we will continue to
take all appropriate steps to maintain business continuity and
safely deliver customer orders. We are also communicating regularly
and openly with all colleagues working on site, remotely and at
home.
Given the level of uncertainty in the outlook, the Board has
decided to withdraw guidance and forecasts. We continue to review
possible scenarios and determine the actions we may take as the
outlook becomes clearer. Management actions will seek to preserve
cash and core capability in the business without undermining the
progress already made in both divisions to establish resilience and
a foundation for future growth in strategic focus areas.
We are in regular and constructive dialogue with Lloyds Bank
regarding ongoing facility requirements and the impact of
foreseeable COVID-19 disruption on operations and the leverage
covenant. The Group's GBP12.0 million Revolving Credit Facility
(RCF) is currently drawn at GBP9.3 million. We continue to evaluate
government support measures available to the Group and will
progress with actions and applications where appropriate.
Chris Walters, Chief Executive of Pressure Technologies
commented:
"While COVID-19 and a very low oil price present an uncertain
outlook, I am confident that the management and operational changes
already made over the past year will help the business to navigate
through this challenging period and return to cash generative
growth.
We have strong order books in both Chesterfield Special
Cylinders and Precision Machined Components divisions and will
endeavour to fulfil customer orders on time, while prioritising the
safety and well-being of our employees as we all adapt to very
different ways of working and living.
I am proud to see the tremendous commitment and continued hard
work of our teams across the Group, those working on site, remotely
and from home."
ENDS
For further information, please contact:
Pressure Technologies plc Tel: 0114 257 3616
Chris Walters, Chief Executive PressureTechnologies@houston.co.uk
Joanna Allen, Chief Financial
Officer
N+1 Singer (Nomad and Broker) Tel: 0207 496 3000
Mark Taylor / Lauren Kettle
Houston (Financial PR and Investor Tel: 0203 701 7660
Relations)
Kate Hoare / Anushka Mathew
COMPANY DESCRIPTION
Company description - www.pressuretechnologies.com
With its head office in Sheffield, the Pressure Technologies
Group was founded on its leading market position as a designer and
manufacturer of high-integrity, safety-critical components and
systems serving global supply chains in oil and gas, defence,
industrial gases and hydrogen energy markets.
The Group has two divisions, Chesterfield Special Cylinders and
Precision Machined Components.
Chesterfield Special Cylinders (CSC) -
www.chesterfieldcylinders.com
-- Chesterfield Special Cylinders, Sheffield, includes CSC
Deutschland GmbH and Chesterfield Special Cylinders Inc.
Precision Machined Components (PMC) - www.pt-pmc.com
-- Precision Machined Components includes the Al-Met, Roota
Engineering, Quadscot Precision Engineers and Martract brands.
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END
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