Virus restrictions continue to hit engineering group
Sheffield-based specialist engineering group, Pressure Technologies, says it still expects to make a loss for the year.
The listed business, which has published a trading update for its two divisions for the year to 3 October 2020, has been contending with tough trading conditions, Covid-19 disruption and the deferral of revenue and profit for a defence contract into FY21.
This has led to a fall in Group revenue for the year to approximately £25m (2019: £28.3m). Overall the Group is expected to deliver an adjusted operating loss for the year versus a £2.2m profit in 2019.
The firm’s Chesterfield Special Cylinders (CSC) division delivered revenue of approximately £11m (2019: £13.9m) and is expected to break even at the adjusted operating profit level.
However, the phasing of major defence contracts resulted in significantly lower revenue in the year, driving lower overall gross margin performance, which was further compounded by the previously announced deferral of revenue on a defence contract from quarter four FY20 into quarter one FY21.
Despite very difficult trading conditions in the oil and gas market during the second half of the year, the company’s Precision Machined Components (PMC) division delivered full-year revenue of approximately £14m (2019: £14.4m).
But it is expected to make an operating loss, driven by lower than expected gross margins, as poor operational performance in the first half of the year failed to improve in the second half.
Pressure Technologies says it remains in “constructive and supportive dialogue” with Lloyds Bank about the amendment and extension of its Revolving Credit Facility (RCF).
On 3 October 2020, total net borrowings (excluding right of use assets) reduced to £6.4m (28 September 2019: £11.4m).
The Group’s £12m RCF was drawn at £6.8m (28 September 2019: £10.8m). Cash and cash equivalents increased to £3.4m (28 September 2019: £2.2m) taking net RCF debt down to £3.4m (28 September 2019: £8.6m).
Chris Walters, chief executive of Pressure Technologies, said: “Despite challenging trading conditions, we have continued to make strategic progress through FY20 with increased diversification of the customer base in both divisions.
“Recent major contract wins and the further growth in Integrity Management services have strengthened the outlook for CSC.
“I am also really encouraged by the progress made in the rapidly developing hydrogen energy sector, where our successful development of products and services for high-pressure hydrogen storage has been followed by new projects and a growing pipeline of opportunities.
“Depressed oil and gas markets and slower than expected turnaround of operational performance have impacted the PMC division and the outlook remains uncertain.
“Management actions are focused on maintaining customer service levels and completing operational improvements, while preserving cash and protecting the capabilities built over the past two years.
“With further UK-wide lockdown restrictions announced in the last week, Covid-19 continues to impact our target markets, our operations and our people.”
