Pressure Technologies plc Annual Report 2015

FY2015 Annual Report · Pressure Technologies plc

Loading PDF…

ANNUAL REPORT 2015

WHO WE ARE

A specialist engineering
Group supplying safety-
critical products and
services

Visit our website for the latest news and information
pressuretechnologies.com

Pressure Technologies
was founded on its leading
market position as a designer
and manufacturer of high
pressure systems serving
the global energy, defence
and industrial gases markets.
Today it continues to serve
those markets from a
broader engineering base
with specialist precision
engineering businesses
and has a worldwide
presence in Alternative
Energy as the global leader
in biogas upgrading.

On the cover: Keeron Manley,
year two apprentice at Al-Met

Pressure Technologies plc Annual Report 2015

HIGHLIGHTS

SUSTAINABLE AND
RESPONSIBLE BUSINESS

Read more on page 14

Strategic Report
Highlights

At a Glance – Divisions

The Changing Market Conditions

Chairman’s Statement

At a Glance – Strategy

Overview of our Markets

Business Review

Our Divisional Companies

Financial Review

Sustainable and Responsible Business 28

Key Performance Indicators

Risks and Uncertainties

Governance
Directors and Advisers

Report of the
Remuneration Committee

Directors’ Report

Independent Auditor’s
Report to the Members of
Pressure Technologies plc

Financial Statements
Consolidated Statement
of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement
of Changes in Equity

Consolidated Statement
of Cash Flows

Accounting Policies

Notes to the Consolidated
Financial Statements

Company Balance Sheet

Notes to the Company
Financial Statements

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

AT A GLANCE – DIVISIONS

Another year
of great change

The Group operates across four
divisions. Precision Machined
Components, Engineered Products,
Cylinders and Alternative Energy.

As part of the integration strategy following the
acquisition of Quadscot Precision Engineers in
October 2014, the Group split Engineered Products
(“EP”) to form a fourth division, Precision Machined
Components (“PMC”). Al-Met, the Group’s first
acquisition in February 2010, and Roota Engineering
acquired in March 2014 were moved from EP to
the newly formed division leaving EP with Hydratron
and Hydratron Inc., which were acquired in October
2010. Each division is headed by a Managing
Director who reports directly to the Chief Executive.
Each Division also has a Finance Director who
reports directly to the Group Finance Director.

OUR DIVISIONS

WHERE WE OPERATE

DIVISIONAL REVENUE

£55.6m

Group revenue 2015

£54.0m

Group revenue 2014

PRECISION MACHINED COMPONENTS
The division serves the global oil and gas market where
extremely demanding applications require specialised precision
engineered parts. Products from the division are used in oil
and gas exploration and production. The businesses within
the division provide Computer Numerical Control (“CNC”) and
conventional precision engineering services and work with high
performance materials and exotic alloys including Inconel and
Monel, Duplex, Toughmet and Beryllium Copper, along with a
wide range of high strength carbon steels.

ENGINEERED PRODUCTS
Hydratron is a global leader in the manufacture of high pressure
air driven liquid pumps, gas boosters and associated systems
for the testing of high pressure components and subsea control
systems. The majority of its sales are to service providers,
contractors and other high pressure equipment manufacturers.
While around 80% of the division’s applications go into the global
oil and gas market, it also serves a variety of other markets where
high pressure equipment is required, including, petrochemical,
aerospace, marine, automotive and power generation.

Pressure Technologies plc Annual Report 2015

Manufacturing

Agents and distributors

Sales and engineering

Associated company

Manufacturing

Agents and distributors

Sales and engineering

Associated company

CYLINDERS
The division serves the offshore oil and gas, defence, aerospace,
industrial gases and alternative energy markets. It is comprised
of wholly owned subsidiary, Chesterfield Special Cylinders Ltd
(“CSC”), which was the core of the Group at IPO on AIM in 2007
and associate company Kelley GTM based in Amarillo, Texas,
USA, in which we have a 40% stake acquired in December 2013.
The core product for the division is the design and manufacture
of ultra large cylinders for a variety of applications including,
Air Pressure Vessel systems for oil rig motion compensation
and high pressure cylinders for submarines, transportation
and bulk storage of gases. Increasingly, the division is building
on its extensive experience and knowledge to provide higher
margin services around the world including retesting and
refurbishment.

ALTERNATIVE ENERGY
The division serves the renewable natural gas (“RNG”) or
biomethane market around the world, through its subsidiary
Greenlane Biogas which was acquired in October 2014. Today,
it is one of the world’s largest suppliers of biogas upgrading
technology and is the acknowledged leader in the upgrading
of biogas to biomethane. While its water scrubbing technology
commands a substantial market share, the division is also
extending the variety of upgrading technologies it offers to
become more technology agnostic. The upgraders clean the
raw biogas produced primarily from Anaerobic Digesters (“AD”)
and landfill sites to produce biomethane that can either be
put directly into the gas grid or stored for use as a vehicle fuel.
There are almost 100 Greenlane biogas upgraders installed
around the world.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportTHE CHANGING MARKET CONDITIONS

Oil and gas is not
the whole story

While revenues have been protected
as defence and alternative energy
markets supported the decline in
oil and gas, Pressure Technologies
remains committed to the oil and
gas sector.

Due to the strategic decisions taken over the last
couple of years, this year has seen a major change
to the revenue split from the markets we serve,
with alternative energy continuing to grow. The
re-balancing of our revenues from sources other
than oil and gas have protected group turnover
during a turbulent year for oil and gas. However,
we remain committed to the oil and gas sector as
we still see much growth potential in this market
for our niche engineering skills and core products.

Growing revenues from all the markets we serve
will continue to be an integral part of our strategy.

Pressure Technologies plc Annual Report 2015

2011

OUR MARKET SPLIT
Over the last five years alternative
energy has grown from 3% of our
revenues to over 25%. Defence has
also played an important role during
the year and while there has been little
change to industrial gases, we believe
that the increased use of Hydrogen
will give depth to this area in the
medium term.

2015

2015 DATA

OIL AND GAS

DEFENCE

INDUSTRIAL GASES

ALTERNATIVE ENERGY

59%

£32.6m

13%

£7.5m

£1.5m

25%

£14.0m

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportCHAIRMAN’S STATEMENT

The diversification
of the Group has given
us a better balance

BOARD
This year saw changes to executive
and Non-executive Directors. Group
Finance Director, James Lister retired
and was replaced by Joanna Allen in July.
James had served the Group since 2008
making a valuable contribution to the
growth and diversification of the Group.
Joanna joined us from PwC and she
brings a wealth of experience in financial
reporting and mergers and acquisitions
to the Group.

In September 2015, Non-executive
Director Nigel Luckett retired and was
replaced by Brian Newman. I’d like to
take this opportunity to thank Nigel for
his support and wise advice which the
Group has benefitted from significantly
over the years and also to welcome
Brian to the Board. Given Brian’s wide
and varied industrial experience I am
sure he will add much value to the Board
going forward.

RESULTS
I am pleased to report that Group
revenues increased slightly to £55.6
million (2014: £54.0 million). Adjusted
Operating Profit1 came in at £3.3 million
(2014: £7.8 million), delivering a Return
on Revenue of 5.9% (2014: 14.5%), both
of which were slightly better than market
expectations set at the half-year.

Net asset value ended the year at
£36.3 million (2014: 36.5 million) and
cash generated from normal trading
operations was £7.9 million (2014:
£3.4 million). At year-end, closing net
debt was £7.1 million and the Group
comfortably complied with all bank
covenants. The Board is proposing to
maintain the dividend at 5.6p per share,
giving a total dividend for the year of
8.4p, which will be paid to shareholders
on 18 March 2016 to those shareholders
on the register on 19 February 2016.
The dividend is covered 1.7 times by
adjusted earnings per share.

1 Pre acquisition costs, amortisation on acquired
businesses and exceptional charges and credits

The past 18 months has seen a
sustained fall in the price of crude
oil, principally caused by a lack of
demand on the back of sluggish global
economic growth, but exacerbated by
an oversupply primarily from onshore
tight-oil fields located in North America.
This has caused significant uncertainty
in the oil and gas markets, forcing oil
companies to cut investment in new
field developments by around 30%
and spending on operating assets
has also come under intense cost-
down pressure.

Pressure Technologies’ products
are mostly destined for use in the
exploration, development and
operation of offshore oil and gas fields,
which are generally more expensive
compared to onshore. Our key
markets such as down-hole products,
subsea production equipment and the
construction of new semi-submersible
drilling rigs and diving support vessels
have been severely hit.

I am pleased, however, with the progress
we’ve made in integrating our Precision
Machining Components acquisitions,
Roota and Quadscot, into the Group and
both have made valuable sales, profits
and cash contributions. We announced
the acquisition of Greenlane Biogas
in October 2014 and, as planned, this
financial year has seen a substantial
amount of restructuring and integration
with Chesterfield Biogas to create
a more streamlined, focused and
competitive business. It is pleasing to
note that our Alternative Energy Division
can lay claim to having designed and
constructed the world’s largest biogas
plant, demonstrating that our technology
and project execution expertise is
unquestionably world-class.

I am proud of the resolute way our
people have risen to the trials of the
past year. We’ve taken substantial cost
out of our businesses so that we remain
competitive and ready to support
our customers, whilst protecting our
knowledge and skills for the future.

Pressure Technologies plc Annual Report 2015

SHARE PRICE VS. OIL PRICE

900

800

700

600

500

400

300

200

100

)

(

e
c
i
r
p
e
r
a
h
S

140

120

100

)
l

e
r
r
a
b
r
e
p
$
e
d
u
r
C
t
n
e
r
B

(

e
c
i
r
p

l
i

7
0
t
c
O

8
0
r
p
A

8
0
t
c
O

9
0
r
p
A

9
0
t
c
O

0
1
r
p
A

0
1
t
c
O

1
1
r
p
A

1
1
t
c
O

2
1
r
p
A

2
1
t
c
O

3
1
r
p
A

3
1
t
c
O

4
1
r
p
A

4
1
t
c
O

5
1
r
p
A

5
1
t
c
O

Share Price

Oil Price

Interestingly the underlying like-for-like
performance of the Group, if all the
acquired businesses were excluded,
would show a fall in revenue of 24.4%
and this highlights the positive impact
of the strategic decisions taken by the
Board to diversify revenues and to
acquire Roota, Greenlane and Quadscot.

OIL AND GAS MARKET
The annual growth of global demand
for oil in 2016 is forecast to be a
modest 1.3%, which is broadly the same
as last year. Chinese demand growth is
forecast to remain robust at 3%, despite
the current economic slowdown.
Although there have been reports
of falling car sales in China in recent
months, the overall vehicle pool is still
expanding, resulting in steady gasoline
demand growth. Similarly, there is high
gasoline demand growth in the USA
due to a combination of reducing pump
prices and stronger economic activity.
The United States is by far the world’s
largest oil consumer and the country’s
demand is forecast to reach 19.5mbpd
in 2016.

On the supply side, much has been
written about the stand-off between
OPEC and the USA and who will blink
first to curb production and effectively
become the swing producer, thereby
controlling global crude oil prices. There
is no question that this stand-off has
destroyed billions of dollars of value
for oil companies over the past year
or so, to the extent that American and
International oil companies wrote-off
$38 billion of assets in the third-quarter
of 2015 alone. In the USA, the number
of onshore rigs in operation has fallen
by 60% since November 2014 and
non-strategic petroleum reserve stocks

have increased by 30% since July 2014
to a record 484mbls at the end of
October 2015.

Against this uncertain and somewhat
tense market backdrop, the Board does
not expect oil and gas market conditions
in 2016 to differ markedly from what
we’ve seen during the second-half of
2015. On that basis, we have taken steps
to monitor market developments as
closely as we can, so that we are able
to respond quickly to unfolding events.

OUTLOOK
At the strategic level, the Board has
approved further investment in our
technology offerings in the Alternative
Energy Division, which will broaden
our market opportunities. Further,
given the restructuring efforts that
we’ve undertaken in 2015, the Board is
confident that this Division will deliver
substantially better financial returns this
coming year. Already we are seeing a
strong order pipeline in the Americas,
the European Union and China.

Within Cylinders we have taken steps to
increase our presence in the USA and
developments in this market are likely
in the coming year. We also anticipate
more success in delivering our Cylinder
Integrity Management Services as
customers focus more on maximising
the life of their assets. Product
development at Engineered Products
coupled with an increased emphasis
on sales and rental, underpinned by
significant cost reductions, will help
lift this Division in 2016. We expect
that Precision Machined Components
will produce further synergies as the
businesses continue to capitalise on
the benefits of working together.

After completing his A’ Levels,
James chose to take an
apprenticeship at CSC rather than
opting for university. With the
continued support of CSC he went
on to gain a work placed degree
in engineering. He is now a key
member of the engineering and
Integrity Management team.

James Taylor
Chesterfield Special Cylinders

Head to page 29 to read more
on our apprenticeships

Whilst the oil and gas market
has become more uncertain, the
diversification of the Group has given
us a better balance with 59% of our
revenues now coming from this market,
compared to 73% in 2014. Our focus to
reduce costs and align the businesses
with the current market conditions
puts us in a strong position to weather
the downturn. The Board remains
alert to changing conditions in our
core markets, so that we are ready to
capitalise on opportunities whenever
and wherever they arise.

ALAN WILSON
Chairman
15 December 2015

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

AT A GLANCE – STRATEGY

Our goals

OUR BUSINESS MODEL

Our goal is to build a highly
profitable group of companies,
specialising in technology for the
containment and control of liquids
and gases in pressure systems.

To achieve this, we serve four
core markets to build a better
balanced Group:

Oil and gas

Defence

Industrial gases

Alternative energy

See page 04 for our market insight

OUR STRATEGY

OUR PROGRESS

Our strategy is to identify and develop,
profitable niche opportunities in growth
sectors for pressure products and
services through a combination of
organic initiatives and by acquisitions.

Following the divisional restructuring
which has positioned the businesses
to best exploit internal synergies, each
Division has developed a strategic plan
encompassing internal rationalisation,
organic growth and acquisition
opportunities. These have generated
a number of new market and product
development opportunities.

See page 16 for our Business Review

1. Consolidate and

build on the current
business

Development of divisional structure in
order to streamline operations, realise
cost savings and align the businesses
with key markets.

2. Identify and develop

profitable niche
opportunities in
growth sectors

Launch of Cylinders Division’s Integrity
Management service and the establishment
of a dedicated US Sales Team for the
Cylinders Division.

Investment in the development of new
upgrading technologies to position the
Alternative Energy Division as
“technology agnostic”.

Development of the Chinese biogas
upgrading market.

Expansion of Engineered Products Division’s
core pump range to widen product offering
and access new market sectors.

3. Identify and develop
profitable acquisition
opportunities

Acquisition opportunities are kept
under review by the Board working
together with the Group businesses.
The Group has structured acquisition
criteria to maintain the focus on the
vision and minimise risk.

Pressure Technologies plc Annual Report 2015

OUR KPIS

OUR RISK AWARENESS

OUR FUTURE

The Board uses key performance
indicators when assessing the
performance of the Group.

Specific principal risks are identified
by management and actions are
implemented to minimise these risks.
These risks are reviewed by the Risk
Committee. Risks below are those
most likely to affect the development
of the strategy.

It is central to our strategy that we
continue to take actions that enable
the future development of the Group.
In addition the Group continues to
identify both organic growth and
acquisition opportunities that focus
on markets and technologies that are
adjacent to our current ones.

See page 30 for our KPIs

See page 31 for our Risks and Uncertainties

See page 19 for our Summary and Outlook

5.9%

Return on Revenue

2.41x

Cash Conversion Ratio

£55.6m

Revenue

Risks to this element of the strategy are
from management resource, employee
skill base and economic environment.

Continue to leverage the synergies
within the current businesses whilst
engaging more with the customer base.

Risks to this element of the strategy
are from competition, access to funding,
management resource, employee skill
base and economic environment.

Expansion into geographical markets
where opportunities exist for our
products and services along with the
development new products and value
added services.

5.9%

Return on Revenue

14.5p

Adjusted Earnings per Share

Risks to this element of the strategy are
from competition, access to funding,
management resource and economic
environment.

Continued monitoring and focus on
suitable acquisition opportunities with
a close strategic fit.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

The International Energy Agency (“IEA”)
is currently predicting that global
demand for oil will be lower in the first
half of 2016, falling from 95.42mb/d
in Q4 of 2015 to 94.89mb/d in Q1
2016, before rising to 96.67mb/d in
Q4 of 2016. However, oversupply
may continue as additional Iranian
barrels are added once sanctions are
lifted. Oversupply and a low oil price
have significantly reduced the capital
expenditure in this market.

The effect of this on our businesses
has been significant although the
overall effect on the Group has been
lessened as we further diversified our
product mix into this market. In the
current financial year we benefited
from full year contributions from Roota
Engineering, acquired in March 2014
and Quadscot Engineers, acquired in
October 2014.

OVERVIEW OF OUR MARKETS

In pursuit of our
strategy, we serve
four core markets

OIL AND GAS

Market fact sheet

MARKET SERVED BY
Cylinders
Engineered Products
Precision Machined Components

2015 REVENUE

£32.6m

(2014: £39.6m) – down 18%

2015 % OF GROUP REVENUE

59%

The oil and gas market, while reducing
in size in relation to other markets
served by the Group, still accounts for
59% of our business. Over the last 12
months this market has been through
an unprecedented downturn with the
price of Brent Crude remaining below
$70/bbl over the year with averages
falling to $50/bbl during the third
quarter of calendar 2015.

During the last quarter of calendar
2014 the global demand for oil and
gas began to reduce primarily as a
consequence of an economic slowdown
in China and other developing
countries. This slowdown was coupled
with a significant increase in production
as the United States went into full
production of its shale oil.

OPEC, which represents the world’s
largest oil producing nations, has
historically been the swing producer
during times of lowered global demand.
Its predominantly and well-established
onshore oil production is less complex
to cease than offshore, deepwater
and shale production. However, in an
attempt to defend its market share
from the increasing US production, it
chose not to assume its swing producer
role and continued to produce oil at
normal volumes of around 30/bbl a day.
The result of this action initially caused
the price of Brent Crude Oil to drop
from over a $100 per barrel to below
$50 and has subsequently contributed
to that low price remaining for an
unprecedented time.

Pressure Technologies plc Annual Report 2015

DEFENCE

Market fact sheet

MARKET SERVED BY
Cylinders
Engineered Products

2015 REVENUE

£7.5m

(2014: £3.5m) – up 114%

2015 % OF GROUP REVENUE

13%

INDUSTRIAL GASES

CSC is the major supplier in the naval
market to NATO and NATO friendly
nations with the exception of the USA,
with Germany now our largest market.
There are significant medium term
opportunities, the largest being the
Successor Programme, which replaces
the Vanguard class of submarines and we
are working with defence OEMs on initial,
small-scale prototypes.

Integrity Management services are widely
used in the UK naval sector and are now
being offered on overseas naval contracts.

This is the third largest market for the
Group where CSC has specialist capability
in the manufacture of high-pressure
cylinders for submarines, surface vessels
and military aircraft. It also supplies small
steel cylinders to the military aerospace
sector in both the UK and the US for
breathing apparatus, emergency system
operations and fuel tank explosion
prevention systems. Work done over the
last decade to expand the customer base
for naval applications has reduced the
“lumpiness” of defence revenue and there
is a good forward visibility on projects in
Germany, South Korea and the UK.

Although defence budgets around the
world are under pressure, submarine
build programmes have continued. The
market is less sensitive to competition
due to the complexity of products, quality
requirements and the bureaucratic
overhead. However, countries, such as
the USA, have regulations which protect
indigenous suppliers and during the
period we have introduced a US sales
team to strengthen our position in this
important market.

Market fact sheet

MARKET SERVED BY
Cylinders
Engineered Products

2015 REVENUE

£1.5m

(2014: £2.3m) – down 35%

2015 % OF GROUP REVENUE

The major driver for the industrial gases
market is GDP growth. Our principal
markets are Europe and the UK, so recent
years have seen low capital expenditure
from the gas majors and little infrastructure
development. CSC supplies a range of high-
pressure trailers and bulk storage packs
into the market. Hydratron supplies test
systems for pressure components (e.g.
valves, hoses, transducers).

In the medium term, significant growth is
expected in the market for Hydrogen as a
fuel source as the market is driven primarily
by regulations pertaining to desulfurisation
of fuel used in transportation and the
growth in transportation fuels. This market
is at pressures significantly above the
normal 200 to 300 bar range for standard
industrial gases. Demands of this market
suit the product range of both CSC and
Hydratron and, for Cylinders, are at
pressures that many competitors lack
proven capability.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportOVERVIEW OF OUR MARKETS CONTINUED

ALTERNATIVE ENERGY

Market fact sheet

MARKET SERVED BY
Greenlane Biogas

2015 REVENUE

£14.0m

(2014: £8.6m) – up 63%

2015 % OF GROUP REVENUE

25%

In addition local environmental
concerns are also driving this market. In
China there is increasing interest in the
benefits of managing agricultural waste
by converting it rather than burning
it, which contributes to air pollution.
Greenlane is currently working with
China’s Agricultural University to
demonstrate how agricultural waste can
have value as a clean source of energy.
In the United States for example,
Yakima County is one of the most active
dairy centres and concerns about the
dairies impacting water and air quality
have led farmers to look for ways to
improve their waste management
practices. Greenlane is also active in
this market where it has a contract with
Promus Energy, a project development
company focusing on renewable and
sustainable technologies.

THE POTENTIAL
Renewable gas has the potential to
make a significant contribution to the
reduction of greenhouse gas emissions
while enhancing the security of our
energy supply. With an endless supply
of potential source material from
increasing global waste and several
already advanced technologies available
for treating and converting the biogas,
there is little to stop this market seeing
rapid growth as global governments
seek solutions to increasingly stricter
regulations on CO2 emissions.

PROVIDING SOLUTIONS FOR
RENEWABLE ENERGY
The global drivers for the alternative
energy market are the world’s
commitment to reduce its greenhouse
gas emissions, air and water pollution
and to ensure security of supply, reducing
fossil fuel reliance, while continuing to
meet rising energy demand.

Biomethane, also referred to as
Renewable Natural Gas (“RNG”), can
play an important role in the reduction
of greenhouse gas emissions. It
represents an opportunity to deliver
a renewable fuel within a relatively
short time frame that uses existing
infrastructure and can be injected
directly back into the grid or used
for vehicle fuel. It is an efficient way
to utilise yesterday’s waste to fuel
tomorrow’s fuel requirements. The
solution uses waste from organic
sources such as food, animal manure,
agriculture and landfill together with
an already advanced technology for
upgrading biogas to biomethane.
Water scrubbing technology, in which
Greenlane is a world leader has been
around for over 20 years.

A SOLUTION TO MORE THAN
ONE PROBLEM
At a local level the drivers for this
market are government policies and
incentives, which operate under
different names in many countries
around the world including France
and Italy. In the UK it is the Renewable
Heat Incentive (“RHI”). In Denmark the
Government is pushing for large scale
upgrading and Italy is looking to run
large vehicle fleets off Compressed
Natural Gas (“CNG”), with renewable
gas contributing to this.

Pressure Technologies plc Annual Report 2015

GREENLANE SUPPLIES REFOOD WITH A BIOGAS-
TO-BIOMETHANE UPGRADING PLANT WITH DE-
SULPHURISATION PACKAGE AND VOC REMOVAL
PLANT AT THEIR WASTE FOOD COLLECTIONS
PROCESSING PLANT AT WIDNES, UK.

ReFood is Europe’s leading specialist food waste
recycling service provider and a division of Saria
Group. The project which was completed in
(June 2014), upgrades biogas from food waste
no longer fit for human consumption, for
gas-to-grid injection.

Visit the Greenlane Biogas website for the latest news
and information greenlanebiogas.co.uk

The agreement will allow Greenlane
to distribute Sysadvance products in
Canada, US and Mexico, and will see
the two companies work together
to integrate their systems to offer
leading biogas upgrading solutions.
These units can be easily installed in
any indoor facility and have a wide
range of applications in the food,
pharmaceutical, chemical, automotive,
medical and wastewater treatment
industries.

We are also soon launching our own
membrane based upgrading systems
which will enable us to offer upgrading
solutions where planning restrictions
or insufficient water supply rule out
our other technologies. When this
is introduced the division will be
“technology agnostic” and able to offer
the optimum upgrading solution for
each project.

GREENLANE’S POSITION
IN THE MARKET
Greenlane is one of the world’s
largest suppliers of biogas upgrading
technology. The division was originally
a start-up business following an
agreement with then New Zealand
based, Greenlane® Biogas in November
2008. Under the brand name
Chesterfield Biogas, it had exclusive
rights to market and manufacture
Greenlane’s water scrubbing technology
in the UK and Eire. In October 2014,
Pressure Technologies acquired the
Greenlane® business, giving the division
the global intellectual property rights
of its leading technology and securing
a worldwide presence in the rapidly
growing biogas upgrading market.
Chesterfield BioGas was subsequently
renamed Greenlane Biogas and the
headquarters for the worldwide
operation are now based in the UK.

EXPANDING OUR MARKET
There is an increasing demand for
joined up thinking as this market
becomes more mainstream, creating an
opportunity for the division to provide
a one stop shop solution. We are
developing our project management
offer to encompass installation,
commissioning and maintenance
services from anaerobic digester stage
through to injection into the grid.

As part of this strategy we are adding
other upgrading technologies to our
own water scrubbing technology.
We recently signed a distribution
agreement with Sysadvance, a
Portuguese company specialising in
advanced gas separation systems that
utilise pressure swing adsorption
(“PSA”) technology.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report
OVERVIEW OF OUR MARKETS CONTINUED

Managing Director for Greenlane
Biogas Europe, Stephen McCulloch,
speaks to us about the significant
market opportunities for
renewable energy.

Pressure Technologies plc Annual Report 2015

Q. How long have you been MD?

A. I originally joined the small cylinder
division of Pressure Technologies
in 2008 but shortly after joining
I was asked to set up a start-up
company, Chesterfield BioGas as
it was then named, to develop the
biogas market in the UK. I became
Managing Director in 2011 when the
business was purely UK focused, but
since the purchase of Greenlane last
year we are now a global leader and I
work with a team of MDs, Brent Jaklin
who looks after the Americas and
China, Steve Rowntree who covers
Australasia and Asia, I now look after
Europe as well the UK.

Q. Where exactly do you install

upgraders?

A. Any waste suitable for anaerobic
digestion (“AD”) such as food,
manure, sewage, agricultural waste
and landfill will produce raw biogas.
Upgraders are installed at AD plants
and Landfill sites to take the biogas
and clean it to produce biomethane,
which can then either be used for
injection into the gas grid, or stored
for vehicle fuel or Liquid Natural
Gas (”LNG”).

Q. How many upgraders has Greenlane

installed?

A. Globally we are approaching

100. Back in 2010 we installed an
upgrader at Didcot for Thames
Water, this was the project that
initiated the UK biogas upgrading
market. Since then we have installed
a further ten in the UK. Last year my
colleagues in North America installed
the world’s largest upgrader plant
in Canada, processing up to 16,000
Nm3/h of biogas.

Q. Which country has capitalised most
on biogas upgrading and who do
think will catch up next?

A. Sweden were the pioneers of this
technology but I would say that
Germany are currently the leaders
and their ultimate aim is to run
the whole country on renewables.
I think France will be the next to
catch up, especially as they have a
newly confirmed Biomethane tariff.
We are active in France and have
recently completed the installation
of France’s largest upgrader at Lyon
for Tiru, one of Europe’s largest
waste management companies.

Q. What do you find most exciting

about this market?

A. Even though the renewable energy

sector has been around for a
long time, it is still relatively small
considering the importance of its
role in the future of our energy
supply and security. The reduction
of greenhouse gas emissions is now
high on the global political agenda.
In the UK renewable gas has the
potential to make a significant
contribution to our renewable
energy and carbon reduction targets
for 2020. And in the longer term,
with the right government policies
in place, renewable gas could meet
up to 50% of UK residential gas
demand. I believe that the market
for renewable gas, utilising our
waste streams, is inevitable as global
energy demands increase.

The reduction of greenhouse gas
emissions is now high on the global
political agenda. In the UK renewable gas
has the potential to make a significant
contribution to our renewable energy and
carbon reduction targets for 2020.

Steve McCulloch
MD for Greenlane Europe

Q. Where next for Greenlane?

A. As this market starts to mature
we see a growing need for
businesses to provide a one stop
shop for customers. It’s a complex
process from AD to gas-to-grid,
with interlocking planning and
engineering requirements. We are
very experienced in dealing with all
of these and believe that we can
offer a project management service
that will enable greater uptake of the
opportunities provided by biogas.
We are also further developing our
technology solutions, we are working
on our own membrane product and
have signed an agreement with a
pressure swing adsorption (“PSA”)
technology company Sysadvance.
While water scrubbing is the leading
industry technology these other
systems allow us to offer solutions
for a wider variety of applications.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportBUSINESS REVIEW

Businesses working
together to ensure
synergies are achieved

The key points for the year are:

PRECISION MACHINED
COMPONENTS DIVISION
The division is comprised of Al-Met,
Roota Engineering and Quadscot
Precision Engineers. Al-Met produces
wear resistant components in a range
of high alloy steels and tungsten
carbides for use in high-pressure choke
and flow control valves, designed to
regulate flow volumes in extremely
demanding applications in the subsea
and surface oil and gas industries.
Roota and Quadscot make a wide range
of components for oil and gas pressure
systems and downhole tools with
Roota generally focusing on larger,
longer products and Quadscot on
smaller product in a range of high
alloy materials.

The division had an excellent first-half
performance but demand weakened
markedly in the second-half as the
downturn in investment in the oil
and gas market deepened. Long
established customer relationships
and the ability to give high quality,
short lead time deliveries gave some
measure of protection to the order
book but at much lower levels than
that experienced up to the half-year.

The three businesses are working
together well to ensure best practice
is being used across the division and
synergies are being achieved. Al-Met
is now providing an EDM wire cutting
service for Roota where this was
previously subcontracted. Quadscot
has been the main beneficiary of the
in-sourcing project not only supplying
products to the Engineered Products
and Cylinders Division previously
subcontracted to external suppliers
but also supplying product previously
machined in-house in those divisions.
The machining sections at Engineered
Products and Cylinders have been
closed and their machine tools
transferred to Quadscot.

We have had another year of great
change with the acquisitions of a
Glasgow based precision machining
business, Quadscot Precision Engineers
and the business and certain assets
of our Alternative Energy Division
technology partner, Greenlane, with
operations in Canada, New Zealand
and Europe. The acquisition of
Quadscot prompted the split of the
Engineered Products Division with
the precision machining businesses
becoming the Precision Machined
Components Division. The acquisition
of Greenlane gives us a worldwide
footprint for the Alternative Energy
Division in a market with drivers
different from the rest of the Group.

The oil and gas market is the major
market for the Group’s products
accounting for 59% of revenues in the
year (2014: 73%). The collapse in the oil
price from mid-2014 and its continued
weakness through 2015 had a material
impact on the Group’s results. Sales
revenues increased year on year as

a result of the full year effect of the
acquisition of Roota in March 2014
and the two acquisitions at the
beginning of the year. At the same
time adjusted operating profits fell
as a result of the downturn in the oil
and gas market combined with one-
off administrative integration costs
of bringing Greenlane into the Group.

As part of the integration of the
acquisitions, but expanded by our
response to the trading environment,
the Group’s divisions have made
significant cost reductions. There has
been a reduction of 77 employees
amounting to 20% of the total
employed at October 2014. These
changes have not been at the expense
of quality and service and key skills
have been retained. All businesses are
working on diversifying their customer
base and end markets and a major in-
sourcing of machined components has
been completed.

Pressure Technologies plc Annual Report 2015

PRECISION MACHINED COMPONENTS DIVISION

Revenue

2015
2014
2013
2012
2011

£6.4m

£4.8m
£4.6m

Adjusted Operating Profit

2015
2014
2013
2012
2011

£1.0m

£0.1m

£0.5m

£18.8m

£13.0m

£4.5m

£3.0m

ENGINEERED PRODUCTS DIVISION

Revenue

2015
2014
2013
2012
2011

£8.4m

£11.1m

£9.6m

£9.1m

£6.6m

Adjusted Operating Profit/(Loss)

£(0.4)m

2015
2014
2013
2012
2011

£1.6m

£0.6m

£0.9m

£0.5m

Capital expenditure in the division,
excluding equipment transfers from
other divisions was £0.8 million.
Major capital expenditure in the
division was focused on Al-Met to
improve productivity in the carbide
grinding section and in milling. Capital
expenditure for 2016 will be focused
on extensions to the current product
range, where there is known
customer demand.

ENGINEERED PRODUCTS DIVISION
The division manufactures a range of
air operated high pressure hydraulic
pumps, gas boosters, power packs,
hydraulic control panels and test rigs,
mainly for use in the oil and gas sector.
It is now comprised of Hydratron
Ltd, based in Altrincham, UK and
Hydratron Inc., based in Houston,
Texas, USA. The division had a difficult
financial year moving from an adjusted
operational profit in 2014 to a loss in
2015. The US subsidiary experienced
an immediate downturn in business
at the start of the financial year, which
continued throughout the year as
oil and gas customers first delayed,
then postponed capital equipment
purchases. The UK subsidiary entered
the financial year with a strong
order book and demand but project
execution issues on a number of
complex high-pressure systems

adversely impacted the first-half
results through increased operating
costs and restricting new order intake.
Recovery of this position coincided with
a downturn in orders similar to that
experienced by the Precision Machined
Components Division.

Management of the division has been
restructured under a new divisional
Managing Director with a dedicated
Commercial Director focused on
expansion of sales and distribution
channels. As noted above, the
machining section at Hydratron Ltd
was closed and all work transferred to
Quadscot at the summer shutdown.
Headcount in other sections has also
recently been reduced to a level in
line with current market conditions.
Hydratron Inc. has been restructured
as a sales and engineering facility and
all large systems builds are now being
undertaken in the UK.

In a market where Hydratron has a
small market share compared to its
two largest competitors, there exists
significant organic growth potential
and the division is developing its
core pump range to extend the
product offering. This will make the
business more attractive to potential
distributors worldwide. Additionally, the
US subsidiary has launched a rental

service for high pressure units which,
although currently small, is making
encouraging headway as customers
with capital expenditure restrictions
are more readily able to rent than
buy equipment. If successful, there
is potential to replicate this model in
other locations.

CYLINDERS DIVISION
Chesterfield Special Cylinders (“CSC”),
which supplies a range of high pressure
cylinder systems, performed slightly
ahead of expectations. Major successes
in securing orders for the defence
market reduced the effects of a fall
in orders into the oil and gas market,
which were £11.0 million lower.

Revenue from other markets
increased by £3.9 million largely as a
result of increased orders from the
naval defence market where, with
the exception of the USA, CSC is the
established leader in sales to NATO
and NATO friendly nations. In order
to enter US defence and commercial
markets a US based sales team has
been established based in Pittsburgh,
Pennsylvania.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportBUSINESS REVIEW CONTINUED

CYLINDERS DIVISION

Revenue

2015
2014
2013
2012
2011

Adjusted Operating Profit

2015
2014
2013
2012
2011

£14.3m

£21.4m

£17.3m

£16.3m

£11.3m

£2.1m

£3.8m

£3.6m

£2.3m

£1.4m

ALTERNATIVE ENERGY DIVISION

Revenue

2015
2014
2013
2012
2011

£1.1m

£0.2m

£0.9m

£14.0m

£8.4m

Adjusted Operating Profit/(Loss)

2015
2014
2013
2012
2011

£(1.1)m

£(0.5)m
£(0.5)m
£(0.5)m

£1.1m

Sales of services increased marginally
over the year with a cyclical reduction in
trailer reconditioning being more than
offset by an increase in the Integrity
Management service. Revenues from
Integrity Management increased by 53%
to just under £0.9 million. The British
Standard created by CSC has been
approved as a European Standard, EN
16753. This has now been submitted to
the International Standards Organisation
for approval as an ISO standard.

Capital expenditure in the year of
£0.9 million was again centred on
forging equipment for ultra-large
cylinders which entered production
in January 2015. The long-term future
of CSC was secured by the Group
purchase of the freehold land and
buildings at its Meadowhall site.

I am very sad to report that we had a
fatal accident at CSC in June. The police
have completed their investigation
and have advised that no charges for
manslaughter will be brought. The
accident was not due to a product
failure. The Health and Safety Executive
(“HSE”) is now in charge of the accident
investigation and we are cooperating
fully. A hearing date has been set for
February 2016 and we will report fully
on the outcome in due course. Our
sympathies are with the family.

Throughout the Group Health and Safety
is a priority; the safety of our workforce
is of paramount importance. CSC holds
OHSAS 18001 accreditation and the
Group employs a qualified health and
safety manager. We have a strong
working relationship with the HSE and
an otherwise excellent safety record,
especially given the often hazardous
nature of our working environment.

Pressure Technologies plc Annual Report 2015

The Group’s 40% associate Kelley GTM
(“KGTM”) based in Amarillo, Texas, USA
has had a difficult year. Its core market
is the US onshore oil and gas market
for which it provides gas transportation
modules, GTMs. This market has been
severely impacted by the fall in oil prices
with the number of land based rigs in
North America reducing by over 60%
in the year and consequently KGTM
has struggled to make headway. With
no immediate prospect of recovery in
the market the Group did not exercise
its option to purchase a further 40%
of the share capital of KGTM and the
investment has been written down.

ALTERNATIVE ENERGY DIVISION
The division is a designer and supplier
of equipment to upgrade biogas
produced by the anaerobic digestion of
organic waste to high quality methane
suitable for injection into the gas grid
or for use as a vehicle fuel. The division
was transformed by the purchase of
the business and certain assets of
its technology provider, Greenlane,
in October 2014. This has given the
division a worldwide platform for
selling biogas upgrading technology,
trading out of the UK, Canada and New
Zealand. The upgrader market is driven
by environmental subsidy rather than
oil and gas prices giving a welcome
diversification from the risks of the
oil and gas market. Buying Greenlane
further reduces risks as our existing
business, Chesterfield BioGas, was
wholly dependent on the UK market
with the inherent possibility of potential
changes to Government policy. The
divisional strategy is to focus resources
on markets where subsidies encourage
investment and to move to other
markets as these change.

Following the purchase of Greenlane
a restructuring was carried out with
staffing rationalised across the division
where there were areas of duplication.
Research and Development has been
more closely aligned with market
requirements and located and sized
accordingly. This included an exercise
to properly record core product designs
as a basis for future development.
Chesterfield BioGas has now been
rebranded under the Greenlane name.

As a result of the costs of the integration
and rationalisation, completion of a
number of low margin older projects
and some slippage of projects into
2016, the division made a loss in 2015.
At the operating level the operational

businesses in the UK, Canada and New
Zealand made an adjusted operating
profit but the European business
made a small loss. The majority of the
operating loss in the year is attributable
to the cost of restructuring.

The division has a programme of
development which will lead to it being
“technology agnostic”, that is, to have a
range of biogas technologies available
to give the best solution for customers’
requirements. To date the division is
able to offer both its core water wash
technology and vacuum pressure swing
absorption technology licensed from
SysAdvance, Portugal. By the half-year
it is intended to launch an upgrader
product using membrane technology.
Having these three technologies will
make the division unique in its capability
to select the right technology for
customers’ needs for all sources
of biogas.

Development of the core water
wash technology is continuing with
a re-engineering exercise to cut the
complexity and cost of our plants and
development of larger capacity plants
capable of processing around twice
the volume of the largest of the current
model range.

Looking at financial year 2016, we
have orders for upgraders in North
America, Brazil, China and the UK with
a considerable pipeline of potential
follow on orders for these regions and
Europe. The UK market has been stalled
pending a review by Government of
the Renewable Heat Incentive (“RHI”) an
announcement on which is expected
imminently. Given the UK government’s
recent statements on the importance
of natural gas in meeting environmental
targets it is expected that there will
be no major changes to the RHI at
this time and the Group anticipates
that this will be the trigger for an
increase in project launches. Growth
is also anticipated in the European
market, particularly in France and the
Netherlands where there are a number
of projects at the planning stage. Italy
is set to introduce its equivalent of the
RHI in the near future and the German
market is forecast to start a second
wave of biogas upgrading investment.
There is potential for significant market
growth in China, where environmental
protection is a key target of the current
five year plan, and we have established
a sales presence in that market.

INCREASING OUR SERVICES – INTEGRITY MANAGEMENT

High-pressure gas cylinders degrade from the inside as well as outside.
However, many cylinders cannot be removed or easily reached. The British
Standards Institution (“BSI”) – with input from Chesterfield Special Cylinders –
has developed BS 8562, the new standard for the inspection and testing of hard
to reach/impossible to remove, gas tubes.

Progress has been achieved in securing
ongoing revenue from upgrader
projects through the provision of
maintenance services. The operational
businesses in the division have a target
of covering their fixed costs through
maintenance contracts.

PEOPLE
Changes in market conditions and
the rationalisation of the Alternative
Energy Division has seen a major
reduction in numbers of employees
in the Group, the majority through
compulsory redundancies. However,
we have been careful to ensure that
we have maintained our core skills
so that we can continue product and
service development and rapidly
respond to an upturn in our markets.

We have continued with our apprentice
and graduate training schemes as well
as in-house and external training for
our employees. This is essential for the
long-term development of the Group.
With the majority of our manufacturing
businesses having Managing Directors,
senior operational and engineering
staff, who are former apprentices, there
is a demonstrable career path for
our employees.

SUMMARY AND OUTLOOK
This was a tough year for the Group
due to the downturn in the oil and
gas market. Substantial progress has
been made in restructuring to meet
the challenges of reduced revenues.
With continued pressure on the oil
price due to a combination of over-
supply and weak demand the Board is
of the opinion that any major recovery
in that market will not occur before

the end of the 2016 financial year.
That said, we are structured to expand
rapidly to meet increases in demand.
The Precision Machined Components
Division and Engineered Products
Division have short order to delivery
lead times of between two and four
months and are therefore expected to
benefit very quickly from an upturn. The
Cylinders Division is expected to see a
much slower return to revenues from
oil and gas as it is reliant on the building
of drillships and semi-submersible oil
rigs for its larger orders. In the short-
term these divisions continue to seek
out new markets, products and services
whilst at the same time focusing on cost
reduction and efficiency savings.

The Alternative Energy Division has a
strong pipeline of potential order as the
demand for renewable energy grows
worldwide. Development of the division
is important to the near-term growth of
the Group and we have the significant
resources to achieve this.

Whilst current trading conditions for
the majority of our businesses remain
challenging, the Group is much more
diverse and better balanced than in the
previous low in the oil and gas market.
The Board remains confident in the
medium to long-term prospects for
the Group.

JOHN HAYWARD
Chief Executive
15 December 2015

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportOUR DIVISIONAL COMPANIES

The Group has delivered
on its strategy to widen
its range of activities

Precision Machined
Components / Roota

Founded in 1973, Roota is a long established,
sub-contract precision engineering company
specialising in the manufacture of bespoke
engineered products for the oil and gas industry,
such as components for high added value
ball valves, mandrels, connectors and well-
head cleaning tools. Roota’s niche lies in the
production of highly complex products, with a
specialism in machining exotic alloys to exacting
tolerances. It has modern manufacturing
facilities, located close to Pressure Technologies’
existing cylinder business and an impressive
“blue chip” customer base.

Visit the Roota website at roota.co.uk to read
more information

Pressure Technologies plc Annual Report 2015

Precision Machined
Components / Quadscot

Quadscot was founded in 1990 and is based
in Blantyre, near Glasgow, in a modern 32,000
square feet freehold facility. High quality
engineering equipment manned by highly
experienced engineers and machinists, providing
milling, turning, boring, grinding and electric
discharge machining, enable it to produce,
and deliver on time, bespoke solutions to
complex designs. The majority of products relate
to exploration and monitoring equipment used
in the subsea oil and gas industry. Quadscot
has a long established “blue chip” customer
base in the oil, petrochemicals and gas sectors.

Visit the Quadscot website at
quadscot.co.uk to read more information

Precision Machined
Components / Al-Met

Al-Met Limited is a niche manufacturer of
specialised, precision engineered valve wear
parts used in the oil and gas industries.
Al-Met’s products are used in high-pressure
choke and flow control valves, designed to
regulate flow volumes in extremely demanding
applications in the subsea and surface oil
and gas industries. The business, which was
established in 1985, has developed a leading
edge capability in precision machining carbides
and super alloy matrix materials. The ability to
combine high alloy steels with tungsten carbide
inserts and specialised coatings gives Al-Met
its niche position with its customers, global
wellhead and subsea equipment OEMs.

Visit the Al-Met website at almet.co.uk to read
more information

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

OUR DIVISIONAL COMPANIES CONTINUED

Cylinders / Chesterfield Special
Cylinders and Kelley GTM

Chesterfield Special Cylinders is a global
market leader in the design and manufacture
of speciality high pressure, seamless steel gas
cylinders for the offshore oil and gas, defence,
industrial gases and alternative energy markets
and retesting and refurbishment services.

It also leverages its extensive knowledge and skill
base to provide “in situ” testing to the oil and
gas and defence markets through its dedicated
and highly trained Integrity Management
team who are deployed to test and service
cylinders in situations where their removal and
transportation to a testing facility is difficult,
if not impossible.

Kelley GTM is a manufacturer of high pressure
gas transport solutions based in Amarillo, Texas.

Visit the Chesterfield website at
chesterfieldcylinders.com to read more information

Pressure Technologies plc Annual Report 2015

Engineered Products /
Hydratron and Hydraton Inc.

In the UK Hydratron designs, manufactures and
sells a range of air operated high pressure liquid
pumps, gas boosters, power packs, hydraulic
control panels and engineered test systems.
Hydratron Inc., based in Houston has recently
been restructured to focus on sales and rental,
support and small local engineered system
applications into southern USA, complementing
Hydratron’s wider sales channels around the world.

Visit the Hydratron website at hydratron.com
to read more information

Alternative Energy /
Greenlane Biogas

Greenlane is one of the world’s largest suppliers
of biogas upgrading technology; commanding a
substantial market share, it is the acknowledged
leader in upgrading biogas to biomethane. The
two largest biogas upgrading plants in the world
at Güstrow, Germany, and Montreal, Canada, use
Greenlane’s pressurised water scrubbing systems.

The business is split into three geographical
regions; North and South America and China,
serviced out of Vancouver, Canada; Europe,
serviced out of Sheffield, UK; and South East Asia
and Australasia serviced out of Auckland,
New Zealand.

A continuous programme of Research and
Development ensures that Greenlane remains at
the leading edge of biogas upgrading technology.

Visit the Greenlane Biogas at
greenlanebiogas.co.uk to read more information

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

FINANCIAL REVIEW

Group operating cash
conversion was a significant
increase over the prior year

Precision Machined Components
(“PMC”) is contributing very positively.
The nature of the products and highly
skilled manufacturing processes in the
division commands higher margins than
elsewhere in the Group and overall the
division achieved £4.5 million adjusted
operating profit, a return on sales of
23.9%, for the full year (2014: 23.1%).
There are further benefits to be achieved
through the continued monitoring of
the cost base in light of the persisting
lower volumes, opportunities for further
divisional synergies and Group machining
in-sourcing which should at least maintain
the current level of profitability in this
division going forward.

Engineered Products has had a very
difficult second half and ended with a
loss, worsening from the near break-
even position at the half year. This arose
predominantly as the division’s cost base
had been geared up for the much higher
volumes which did not materialise. This
has resulted in a disappointing loss for
the year. A recovery plan commenced
in August which led to higher than
anticipated exceptional costs but leaves
the division well placed to return to
profitability in 2016.

The actions taken in the second half to
respond to the conditions in the oil and
gas market and align our cost base with
the anticipated lower volumes in this
market are expected to maintain the
current levels of profitability despite the
volume and pricing pressures anticipated
in 2016. The expected operating loss in
Alternative Energy arose from certain
legacy Greenlane loss-making contracts,
a high fixed cost base in the early
months of the year which has now
been addressed through redundancy
(employee numbers fell 30% over the
year) and £0.7 million in relation to other
one-off administrative costs in respect
of the core product designs. Overall, the
division performed as expected in the
year and the benefits of reorganisation
will flow through fully in 2016.

OVERVIEW
I am delighted to be presenting my first
financial review. It is an exciting time for
the Group as the divisional structure
becomes embedded and the strategic
plans progress. Whilst market conditions
in the second half of the year were tough,
the recent acquisitions are integrating
well and the Group is benefiting from the
divisional synergies and greater diversity.

REVENUE
Revenue has increased by 2.9% year-on-
year. 2015 benefited from a full year of
Roota (acquired 5 March 2014), and the
acquisitions of Quadscot and Greenlane
at the start of the period, which offset
the anticipated decline in revenue in
Cylinders and Engineering Products. The
underlying like-for-like performance of the
Group, excluding all the recently acquired
businesses, was a fall in revenue of 24.4%
which highlights the positive impact of the
strategic decisions taken by the Board to
acquire Roota, Greenlane and Quadscot.
The second half of the year was tougher
across the Group and the second half

revenues fell by almost 27% compared
to those reported at the interim results.
This decline was particularly marked in the
Precision Machined Components Division
which is concentrated in the oil and gas
sector and was also adversely impacted
by the timing of orders in the Alternative
Energy Division.

PROFITABILITY
The first year integration of acquisitions
and the changing portfolio of companies in
the Group have led to a mix of profitability
quite different to that experienced in
prior years. At the Group level, Return on
Revenue (based on adjusted operating
profit) for the year is 5.9%, compared
to 14.5% in the prior year.

Cylinders (“CSC”) has performed well,
finishing ahead of market expectation,
despite the volume decline and selling
price pressures in the second half. The
sales mix in the year has resulted in
a 3.0ppt fall in return on sales year on
year. However the business remains
stable and profitable.

Pressure Technologies plc Annual Report 2015

FINANCIAL HIGHLIGHTS

Revenue

£55.6m

(2014: £54.0m)

Adjusted EBITDA

£4.7m

(2014: £8.7m)

Profit Before Taxation

Operating Cash Flow

£0.6m

(2014: £5.3m)

£7.9m

(2014: £3.4m)

FIVE YEAR SALES ANALYSIS

n
o

i
l
l
i

m
£

2011

2012

2013

2014

2015

Cylinders

Engineered Products

Precision Machined Components

Alternative Energy

EXCEPTIONAL RESTRUCTURING COSTS
Exceptional restructuring costs of
£0.7 million were incurred (2014: nil), the
most significant of these related to the
planned post acquisition restructuring of
the Alternative Energy Division, the balance
arising in Engineered Products and at Group.

ACQUISITIONS
On 1 October 2014 the Group completed
the acquisition of the business and assets
of Greenlane Biogas Holdings Ltd and its
various subsidiaries. The maximum total
consideration is NZ$25.0 million (£12.4
million) comprising an initial consideration of
NZ$12.0 million (£6.0 million) with additional
deferred payments split over four years of
up to a maximum of NZ$13.0 million (£6.2
million). The initial consideration was met
from the Group’s existing cash resources.

On the same date the Group acquired 100%
of the share capital of Quadscot Holdings
Ltd for an initial consideration of £7.9
million (plus cash balances acquired) and
deferred consideration up to a maximum
of £3.0 million based on the financial
performance of the business over the two
years immediately following acquisition.
The acquisition was funded by drawing on
£7.0 million from the Group’s banking facility
with the balance funded from the Group’s
existing cash resources.

As detailed in Note 22 a total of £6.0 million
deferred consideration is provided for at
the balance sheet date. This comprises
the final year of the Roota deferred
consideration and that expected to
become payable in respect of Greenlane.
All deferred consideration obligations have
been assessed against the latest financial
forecasts of the individual businesses
compared to the minimum and maximum
EBITDA targets set out in the respective
acquisition agreements. The provision of
£1.8 million previously held in respect of
Quadscot has been released at the year-end
as, despite the profitability of the business,
the EBITDA target required in 2016 to
trigger payment is no longer expected
to be achieved.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report
FINANCIAL REVIEW CONTINUED

GROUP CASH FLOW

n
o

i
l
l
i

m
£

-5

-10

5.9

f
/
b
s
d
n
u
f

t
e
N

8.2

(6.4)

(2.0)

(1.2)

(11.6)

s
n
o
i
t
i
s
u
q
c
A

(7.1)

f
/
c

t
b
e
d
t
e
N

d
n
e
d
v
D

t
s
e
r
e
t
n

&
x
a
T

e
r
u
t
i
d
n
e
p
x
e

a
t
i
p
a
C

w
o
ﬂ
n

h
s
a
c
g
n
i
t
a
r
e
p
O

CASH FLOW
Operating cash inflow from trading
operations was £7.9 million (2014: £3.4
million), despite the fall in sales in the
second half cash inflow remained positive.
This is largely driven by the Precision
Machined Components Division which,
following the Roota and Quadscot
acquisitions, has the highest cash
conversion of the Group contributing
over £5.0 million of the total cash inflow
over the year.

The non-trading cash outflows in the
first half of the year were significant and
included the acquisitions of Quadscot
and Greenlane, Roota’s deferred
consideration, the purchase of the
Meadowhall site and restructuring. These
non-recurring outflows totalled £15.1
million in the year (2014: £12.9 million).

Following the reorganisation and
integration, divisional management are
increasingly focused on the operating
cash conversion ratio. The Group
operating cash conversion ratio was 2.41x,
a significant increase over the prior year
(2014: 0.43x), despite the anticipated cash
requirements of the Alternative Energy
Division and the disappointing result
of the Engineered Products Division.

BORROWINGS
In October 2014 the Group concluded
a new four year banking facility with
Lloyds Banking Group. The facility which
is available until 30 September 2018
comprises a £15 million multi-currency
revolving credit facility and an accordion
feature that allows the total revolving
credit facility to be expanded by a further
£10 million subject to certain conditions
set out in the agreement.

Pressure Technologies plc Annual Report 2015

Cash Inﬂow

Cash Outﬂow

At the year-end £10 million of the
revolving facility was drawn down and
the accordion was not utilised. This was
a reduction from the half year of £1.5
million and leaves £15 million giving £7.9
million headroom at the year-end date.
Net Debt ended lower than the half-year
at £7.1 million. The second half reduction
in net debt resulted from the cash
generation of the trading operations
and a normalised level of non-trading
related outflows.

The Group complied comfortably with
all financial covenants on the banking
facilities during the year.

SUMMARY OF SALES – ORIGINAL GROUP AND ADDITIONAL ACTIVITIES

n
o

i
l
l
i

m
£

2007

2008

2009

2010

2011

2012

2013

2014

2015

Original Group

Additional Activities

TAXATION
The effective tax rate for the Group
in 2015 was a credit of 21.0% (2014:
effective tax charge of 30.6%). Adjusting
to exclude the release of the deferred
consideration liability of £1.7 million which
does not give rise to a taxable credit the
effective tax rate would have been a credit
of 10.3% (2014: adjusted effective tax
charge of 23.6%).

During the year the current tax rate
reduced to 20% for the fiscal year
2015/6, the applicable tax rate for the
year is therefore 20.5% (2014: 22%).
This reduction in rate and the effects of
unrealised losses overseas have resulted
in a lower effective tax rate than the
current tax rate.

Corporation tax paid in the year totalled
£1.8 million, all of which relates to the UK.

JOANNA ALLEN
Finance Director
15 December 2015

FOREIGN EXCHANGE
The Group has a number of major
exposures to movements in foreign
exchange rates related to both
transactional trading and revaluation
of overseas investments and deferred
consideration liabilities.

In the year under review, the principal
exposures, which arose from trading
activities, were to movements in the
value of the Euro and US Dollar relative
to Sterling. As Group companies both
buy and sell in overseas currencies,
particularly the Euro and US Dollar, there
is a degree of natural hedge already in
place. At the transactional level, where
exchange movements are quickly realised,
foreign exchange contracts are taken out
to cover the majority of this exposure.
As at the 3 October 2015 contracts were
in place to cover the forward sale
of €1.0 million and US$0.4 million.

In 2015 a net gain of £0.2 million (2014:
£0.03 million) has been recognised in
adjusted operating profit in respect of
realised and unrealised transactions in
NZ Dollar, CA Dollar and US Dollar. A
further £0.4 million gain arising from the
revaluation of the Greenlane deferred
consideration liability denominated in
NZ Dollar has been taken below adjusted
operating profit.

At the present time no cover is held
against the value of overseas investments
or intercompany loans with overseas
entities as these are expected to be held
for the long term and over the next year
dividend flows are not expected
to be significant.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report
SUSTAINABLE AND RESPONSIBLE BUSINESS

Building the future
of our business

Gary has been with Quadscot
for 9½ years. He completed his
apprenticeship in 2010 and
achieved an HNC in Mechanical
Engineering.

Gary Matthews, Quadscot
5 Axis CNC Machinist

Pressure Technologies plc Annual Report 2015

At the core of every
business in the Pressure
Technologies Group is a
highly skilled and specialist
workforce.

Three of our divisional MDs are
former apprentices. The benefits
of apprenticeship training are
manifold. Being trained from the
shop floor up gives our employees,
and especially those who go on
to become senior managers, a
comprehensive understanding
of product development and
production. It is this, which we believe
is the essence of meeting customer
product requirements and enables
us to command a high regard and
reputation in niche markets.

We have 20 apprentices around the
Group concentrated in our Cylinders
and Precision Machined businesses
where the precision skills required
are best learned on the shop floor.
We have a good retention rate for
apprentices with many who go in to
become senior managers. Some of
our apprentices have been with the
Group their whole career.

Career development is encouraged
through suitable training and the
Group operates a number of formal
education programmes extending
from apprenticeships through to
post-graduate development. We have
funded and supported a number of
senior managers to complete MBAs.
We believe that through this level
of support our employees become
highly skilled and as committed to the
Group as we are to them. We believe
this gives us a loyal, highly skilled and
sustainable workforce.

NEW APPRENTICES EMPLOYED IN 2015

APPRENTICES PROMOTED

Pressure Technologies
prides itself on the
Group’s reputation
for being honest and
fair in the way we
work with customers,
suppliers, governments,
fellow employees,
shareholders,
competitors and our
local communities.

The way we do business
encourages involvement
at every level of the
business and creates
strong support between
the Group and its
employees.

Al-Met Toolmakers, Karl Downes
and Andrew Davies embarked on an
epic charity bike ride from Cardiff to
Paris on the 27 May 2015. Karl and
Andrew were part of a team of over
40 other cyclists who set off from the
Millennium Stadium, Cardiff for Paris.
Stopping first in Frome, then onto
Southampton, before getting the
ferry on Friday 29 to finish the cycle in
Paris on Saturday 30 May.

The team raised over £56,000 and
Karl and Andrew raised almost
£4,000 between them, with Al-Met
sponsoring them £500 each. All
proceeds went to Tenovus, the cancer
charity that works to help prevent,
treat and find a cure for cancer.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportKEY PERFORMANCE INDICATORS

Measured performance

The Board uses key performance indicators (“KPIs”) when
assessing the performance of the Group. These KPIs are
divided into three sections:

SHAREHOLDERS
EARNINGS PER SHARE
Adjusted earnings per share is used as a measure of
shareholder return. (Fig. 4) details of the calculation of
adjusted EPS can be found in the Finance Director’s report.

e
c
n
e
p
S
P
E

Earnings per Share

2011

2012

2013

2014

2015

Fig. 4

CORPORATE SOCIAL RESPONSIBILITY
HEALTH & SAFETY
The measure used is reportable accidents where the target is
zero across the Group.

Number of Accidents

2011

2012

2013

2014

2015

Fig. 5

ENVIRONMENT
The measure used is number of reportable environmental
incidents. The target is zero across the Group. Environmental
incidents are not graphed as there has been no reportable
incident for the five year period.

A full-time health, safety & environmental manager is
employed by GBUK but has responsibility for these matters
across the Group and reports directly to the Group CEO.

FINANCIAL PERFORMANCE
GROWTH AND RETURN
Growth is measured in terms of sales revenue.

The efficiency of converting sales into profits is measured in
terms of return on revenue, calculated as Operating Profit
divided by revenue. (Fig. 1). The Group targets an overall
return on revenue of at least 15%.

n
o

i
l
l
i

m
£

Growth and Return

2011

2012

2013

Revenue

2014
Return on Revenue

2015

16%

14%

12%

10%

Fig. 1

CASH CONVERSION
The cash conversion ratio measures the proportion of
Operating Profit converted into cash in the period (Fig. 2).
This is calculated as “cash flows from operating activities”
divided by Operating Profit. The minimum target cash
conversion ratio is 1, although each division has a separate
target relevant to its business activity and cycle.

Cash Conversion

3.5

3.0

2.5

2.0

1.5

1.0

0.5

2011

2012

2013

2014

2015

Fig. 2

NET DEBT RATIO
In 2015 the Group has taken on bank borrowings and the
ratio of Net Debt to EBITDA is therefore relevant to be
measured from 2015 onwards (Fig. 3). This is calculated as Net
Debt (cash and cash equivalents less borrowings) divided by
EBITDA.

Net Debt Ratio

1.5x

(2014: not applicable)

Fig. 3

Pressure Technologies plc Annual Report 2015

RISKS AND UNCERTAINTIES

Minimised risk

Specific principal risks identified by management are
described below together with management actions
to minimise these risks:

Risk and Impact

Strategic

Economic/Market downturn
The Group has a significant exposure to the
deep-water oil and gas sector.

A continued downturn in the deep water
oil and gas sector would have a significant
impact on results of the Cylinders,
Engineered Products and Precision
Machined Components Divisions.

Competition
The Group has a number of suppliers who
are also competitors.

The Group has a number of major
competitors in some of its key markets
who offer a wider range of products. Some
of these competitors are also suppliers to
various Group businesses. This exposes
the Group to a risk that they might seek
to displace Pressure Technologies position
in the market.

Impact on
Strategy

Management Strategy

Probability

Impact

High

Medium

The Group continues to develop
programmes for new products and services
to dilute the proportion of total revenues
into these markets and, by growing other
activities of the Group, both organically
and by acquisition.

The recent acquisition of Greenlane Biogas
has helped balance the Group’s portfolio
away from the deep water oil and gas
sector and has contributed to 25% of
revenues in the period.

The Group ensures that it has a suitable
structure and product offerings for the new
market conditions.

To reduce the inherent risk of supply from
competitors, requirements are split across
the available supplier base. A constant
review is maintained to identify alternative
suppliers subject to constraints on pricing
and quality.

As part of the longer term strategy, the
Group continues to expand into high value,
niche markets, where there are fewer
competitors and the barriers to entry
are higher.

Product development is pursued in order to
maintain and grow the product range and
reduce reliance on competitive suppliers.

Key Account Management, to build long
term relationships and retain high value
customers, forms part of the Group’s
Strategic Plan.

A reminder of our Strategy:

Consolidate and build on the
current business

Identify and develop profitable niche
opportunities in growth sectors

Identify and develop profitable
acquisition opportunities

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

RISKS AND UNCERTAINTIES CONTINUED

Impact on
Strategy

Management Strategy

Probability

Impact

Risk and Impact

Strategic continued

Pricing
The Group is exposed to considerable price
pressure in the oil and gas sector as well
as facing increasing competition from
low cost manufacturers.

The Group faces continued price pressure
due to the current market dynamics
following the fall in oil and gas prices.
Certain divisions also increasingly operate
in markets where its major competitors
are based in low cost countries which have
considerable cost advantages and are able
to undercut on pricing.

Operational

Management resource
The Group has a small management team.

The Group is small and relies on a small
number of key Directors, senior managers
and specialists. A loss of a small number
of such staff could have a major impact
on Group revenues and development.

Key employee knowledge/skill base
The Group relies on skilled artisans who are
often difficult to find in the market.

For certain business units strategic skills
required on the shop floor are difficult
to acquire and the age profile of the
workforce means that there is a risk that
knowledge will be lost or there will not be
enough staff available to support ongoing
business and the planned expansion of
the businesses.

High

Medium

Low

Medium

Low

Medium

The Group has set minimum return on
investment and gross margin levels and
does not reduce prices to unacceptable
levels as experience indicates that these
pressures reduce in the medium term.

Product development is pursued in order
to maintain a technical lead and a range of
high value added service offerings is under
development to reduce dependence on
markets where this pricing pressure exists.

Cost reduction through lean manufacturing
and supply chain management to mitigate
the impact of pricing pressures.

Divisional purchasing initiatives being put
in place across PMC as well as “insourcing”
of manufacturing within the Group.

As the business grows, increases in staff
numbers make succession planning easier
and recruitment is already carried out to
ensure that skills and expertise can be
duplicated.

The Group has adopted a policy restricting
the number of Directors travelling together.

Individual business units are tasked with
ensuring adequate cover to maintain
operations.

There is a programme of training around the
Divisions to ensure the company develops
the skills required via apprenticeship
programmes and internal development.

As business grows additional management
capacity is added, ensuring capacity and
duplication is available for critical mass,
particularly on the machining side.

The Group provides attractive employment
terms and conditions to ensure the
businesses attract and retain
suitable craftsmen.

A reminder of our Strategy:

Consolidate and build on the
current business

Identify and develop profitable niche
opportunities in growth sectors

Identify and develop profitable
acquisition opportunities

Pressure Technologies plc Annual Report 2015

Risk and Impact

Operational continued

Customer concentration/disruption
The Group has a number of businesses with
a high dependence on very small number
of customers.

The long term relationships and niche nature
of the Group’s businesses particularly within
the Precision Machined Components and
Precision Engineering Divisions, mean that
the businesses have a strong concentration
of key customers accounting for over 70%
of their respective sales revenue. The loss
of one of these customers would materially
affect Group results.

Alternative Energy Division Growth
The Group has a high reliance on the
growth of the Alternative Energy Division
in order to support the overall Group.

The growth in the coming 12–18 months
is reliant on the Alternative Energy Division
and its failure to achieve its growth targets
would have a material impact on the Group.

Impact on
Strategy

Management Strategy

Probability

Impact

Medium

The Group seeks to intelligently manage the
customer selection and retention program.
The Group’s strategic plans focus on
increasing the customer base to mitigate
this risk through acquisition, diversification
and customer retention.

Key Account Management across the
Group is incorporated into the Group’s
strategic plan.

The Division is focusing on developing
key relationships with funders and
major Engineering, Procurement and
Construction providers, positioning itself as
a preferred partner in order to secure long-
term businesses through repeat orders.

New product development forms a core
strategic objective with the development
of Pressure Swing Absorption (“PSA”)
and membrane technology to become
“technology independent” and gain
additional market share.

Financial

Liquidity and funding management
The Group’s growth requires higher funding
requirements.

The Group faces the risk that the facility
becomes unavailable due to a failure to
meet covenants.

Foreign currency
Movements in exchange rates could
potentially impact Group revenue.

The Group has operations and contracts
in a number of overseas countries and
purchases some of its raw materials and
receives payment for some of its products
in a number of currencies.

The acquisition of Greenlane has further
exposed the Group to foreign exchange risk.

The Group has extended Group banking
facilities until end September 2018.

Low

High

The Group’s liquidity and funding position is
monitored monthly and reviewed at Group
Board level.

The Group maintains and continually
develops reliable and accurate reporting
methodology.

The Group has natural hedges for its Euros
and US Dollar foreign currency exposure.
It remains less covered for SKD and NZ
Dollars transactions, although volume of
these is limited.

The Group Treasury discipline does not
allow the Divisions to do any foreign
exchange trading.

Regular reviews of the net exposure
are carried out and where it is deemed
necessary the exposure is reduced by the
use of forward exchange contracts.

Medium

Low

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportRISKS AND UNCERTAINTIES CONTINUED

Risk and Impact

Compliance

Tax
Risk of failure to comply with tax regulations.

With the wider geographic spread of the
Group and the different operating activities
within Group businesses, the Group is
exposed to a variety of tax regimes and
risks failing to understand the requirements
of individual country tax regulations.

There is also the risk that the Group fails to
maximise opportunities from efficient tax
planning.

Compliance and Corruption risks
The Group is subject to risk from a failure to
comply with laws and regulations.

The Group has contracts and operations in
many parts of the world and operates in a
highly regulated environment. The Group
must ensure that all of its businesses,
its employees and third party parties
providing services on its behalf, comply
with all relevant legal obligations as non-
compliance would expose the Group to
fines, penalties, suspension, debarment
and reputational damage.

Impact on
Strategy

Management Strategy

Probability

Impact

Low

High

The Group will outsource certain compliance
functions, principally in more remote
locations like New Zealand and make use of
third party advice on region by region basis.

The group will put in place a tax strategy
and planning policy which addresses the
complexities of operating a global business.

Low

Medium

The Group operates under the principles
defined in the UK Bribery and Corruption
Act which stipulates the standards of
acceptable business conduct required from
all employees and third parties acting on
the Group’s behalf.

A program of training in relation to ethics
and corruption, based on the UK Bribery
and Corruption Act has been implemented.

APPROVAL OF THE STRATEGIC REPORT
The Strategic Report, as set out on pages 01 to 35, has been approved by the Board.

By order of the Board

JOHN HAYWARD
Chief Executive
15 December 2015

A reminder of our Strategy:

Consolidate and build on the
current business

Identify and develop profitable niche
opportunities in growth sectors

Identify and develop profitable
acquisition opportunities

Pressure Technologies plc Annual Report 2015

Around the Group we have
a total of 20 apprentices.

Apprentice and graduate
training schemes as well as
in-house and external training
for our employees is essential
for the long-term development
of the Group. With the majority
of our manufacturing business
Managing Directors, senior
operational and engineering
staff, former apprentices there
is a demonstrable career path
for our employees.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportDIRECTORS AND ADVISERS

Diverse and strong leadership

COMPANY INFORMATION

Registered office
Newton Business Centre
Newton Chambers Road
Chapeltown
Sheffield
South Yorkshire, S35 2PH

Registered number
06135104

Website
pressuretechnologies.com

Nominated advisor
Charles Stanley Securities
131 Finsbury Pavement
London, EC2A 1NT

Auditor
Grant Thornton UK LLP
No 1 Whitehall Riverside
Leeds, LS1 4BN

Solicitors
hlw Keeble Hawson LLP
Commercial House
Commercial Street
Sheffield, S1 2AT

Bankers
Lloyds Bank
14 Church Street
Sheffield, S1 1HP

Registrars
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield, HD8 0LA

Company Secretary
Alex Tristram

Pressure Technologies plc Annual Report 2015

KEY

1. ALAN WILSON
Non-executive Chairman

A N R

2. JOHN HAYWARD
Chief Executive

3. JOANNA ALLEN
Group Finance Director

Appointed: February 2013
Experience: Alan is a degree qualified
Chartered Engineer with 33 years of
experience from working in the oil and
gas industry, the majority of which has
been served at senior management
and board level. His experience spans
most aspects of the industry life cycle
including; oil company operations,
major capital projects, support services
and product manufacturing.
Other roles: Alan also serves as
Chairman and Non-executive Director
of other private equity-backed and
privately owned companies within the
oil and gas sector.

Appointed: June 2007
Experience: John joined the Company
in 1997 when it was part of United
Engineering Forgings. He led the MBO
in 2004 that created Chesterfield
Special Cylinders and then assumed
the role of Chief Executive of Pressure
Technologies on admission to AIM.
John is a qualified accountant and
has finance and general management
experience in the steel, chemicals and
engineering sectors. In 2008 he was
the UK Ernst and Young Entrepreneur
of the Year® for manufacturing.
He holds a degree in Physics from
Oxford University.

Appointed: July 2015
Experience: Joanna joined Pressure
Technologies in July 2015 from PwC
where she was a Director in their
North Assurance practice, based
in Sheffield. She has a BA Honours
degree in Business Studies from the
University of Sheffield and joined PwC
as a graduate in 1998, qualifying as a
Chartered Accountant in 2001. She
became a Director in 2008 and her
experience covers both audit and
transaction services with a particular
focus on working with clients in the
manufacturing and engineering sectors.

4. PHILIP CAMMERMAN
Non-executive Director

A N R

5. BRIAN NEWMAN
Non-executive Director

A N R

6. NEIL MACDONALD
Non-executive Director

A N R

Appointed: April 2008
Experience: Philip has over 20 years’
industrial experience in engineering
and hi-tech industries and has worked
in both the UK and USA. He spent 23
years in the venture capital industry,
playing a major part in the development
of the YFM Group into the most active
investor in UK SMEs.
Other roles: Following his retirement
from the YFM Group in 2008, he
has developed a small but proactive
portfolio of non-executive directorships
in the engineering and finance sectors.

Appointed: September 2015
Experience: Brian is a Chartered
Engineer with a degree in Engineering
from Cambridge University and an
MBA from Penn State University, USA.
He has been a Divisional Director at
two FTSE 100 companies, latterly at
Melrose plc as EMEA Managing Director
at its subsidiary, Bridon International
Group. Prior to that he spent nine years
as a Divisional Managing Director at
international engineering group GKN
plc, with responsibility for its global
Wheels and Axles Divisions. He has over
40 years’ experience in engineering
having also previously served on the
boards of two listed companies.
Other roles: He is currently a Non-
executive Director with Teknomek
Ltd, Shrewsbury and Telford Hospital
NHS Trust and a number of other
organisations.

Appointed: June 2013
Experience: Neil is a Chartered
Accountant with 25 years of experience
in the oil and gas and engineering
industries. He was Group Finance
Director of AES Engineering Limited,
a successful, fast growing, privately
owned mechanical seals manufacturer,
for 5 years until September 2012. Prior
to this, he was Group Finance Director
of the international aerospace company,
Firth Rixson, both as a listed company
and under private equity ownership. Neil
has valuable experience in the oil and
gas sector and general M&A.
Other roles: Neil is a Non-executive
Director of Sheffield Children’s Hospital
NHS Foundation Trust, an Independent
Governor on the Board of Sheffield
Hallam University and is a Trustee of
various charitable organisations.

COMMITTEES

Audit and Risk Committee

N Nomination Committee

Remuneration Committee

Chairman

Member

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportREPORT OF THE REMUNERATION COMMITTEE

The Remuneration Committee comprises four non-executive Directors and is chaired by Philip Cammerman. The committee
meets when necessary, usually at least four times annually, and is responsible for determining the remuneration packages
of the executive directors and the Chairman. The remuneration of the non-executive Directors is set by the board annually.

POLICY ON REMUNERATION OF EXECUTIVE DIRECTORS
The committee aims to ensure that the remuneration packages offered are designed to attract, maintain and motivate high
calibre Directors without paying more than necessary for this purpose. The remuneration policy and packages attempt
to match the interest of the executive with those of shareholders by providing:

A) BASIC SALARY AND BENEFITS

Executive Directors’ basic salaries are reviewed each year, taking into account the performance of the individual and rates
of salary and benefits for similar jobs in companies of comparable size.

Benefits include all assessable tax benefits arising from employment by the Company and relate mainly to the provision
of private medical and life assurance cover.

The Company pays 5% of basic salary into individual money purchase pension schemes so long as this is matched, by salary
sacrifice, by the individual.

B) ANNUAL PERFORMANCE RELATED CASH BONUS SCHEME

In order to link executive remuneration to Group performance, executive Directors participate in a cash bonus scheme which,
in the event of exceptional performance, can pay out up to a maximum of 50% of basic salary.

C) LONG TERM INCENTIVE PLAN

The Company has introduced a long term incentive plan whereby, at the discretion of the Remuneration Committee, share
options are granted to executive directors and senior managers on a rolling annual basis.

The extent to which options granted vest is dependent on the cumulative growth in earnings per share (“EPS”) over the three
year period following the grant relative to the EPS in the period immediately prior to grant as follow:

Increase in EPS over three year period

33%
50%
100%

% of annual salary over
which options granted vest

25%
50%
100%

The maximum grant of options in any one year is fixed at 100% of basic salary for executive directors of Pressure Technologies plc
and 50% of salaries for other senior managers in the Group.

The option price is set at the outset and is in line with the share price at that time. Executives who leave the Group before
the expiry of the three year vesting period will lose their right to exercise their options.

D) SERVICE CONTRACTS

All executive Directors have rolling service contracts terminable on no more than one year’s notice.

Pressure Technologies plc Annual Report 2015

DIRECTORS’ REMUNERATION
Particulars of Directors’ emoluments are as follows:

Salary
and
fees
£’000

45
30
28
3
30

192
29
103

460

Benefits
£’000

Bonus Pension
£’000

£’000

—
—
—
—
—

1
—
1

—
—
—
—
—

—
—
—

—

—
—
—
—
—

20
3
11

Total
2015
£’000

45
30
28
3
30

213
32
115

496

Non-Executive:
Alan Wilson
Philip Cammerman
Nigel Luckett*
Brian Newman**
Neil MacDonald
Executive:
John Hayward
Joanna Allen***
Thomas James Lister****

Total emoluments

*(Resigned 1 September 2015)
**(Appointed 1 September 2015)
***(Appointed 13 July 2015)
****(Resigned 30 June 2015)

Employers’ Employers’
national
insurance
2014
£’000

national
insurance
2015
£’000

Total
2014
£’000

48
30
30
—
45

275
—
223

651

—
3
3
—
3

25
4
13

—
3
1
—
5

34
—
27

The remuneration of Alan Wilson and, from April 2013 to March 2014, for Nigel Luckett, was paid to management companies
which they control.

The number of Directors who accrued benefits under money purchase pension arrangements in the period was three (2014: two).

The Group believes that the Directors of Pressure Technologies plc are the only key management personnel under the definition
of IAS 24 “Related party disclosures”.

In addition to the above, Directors have received dividends during the year as follows:

Non-Executive:
Philip Cammerman
Nigel Luckett (Resigned 1 September 2015)
Executive:
John Hayward
Thomas James Lister (Resigned 30 June 2015)

Total dividends paid to Directors

Total
2015
£’000

Total
2014
£’000

3
6 6

84
6

80
2

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

REPORT OF THE REMUNERATION COMMITTEE CONTINUED

DIRECTORS’ OPTIONS
The Directors’ interests in share options are as follows:

John Hayward
John Hayward
Joanna Allen

Scheme

Long Term Incentive Plan
Long Term Incentive Plan
Save-as-you-earn Scheme

The movements in share options held by Directors in the period is as follows:

Date granted

Number Option price

3 April 2014
12 December 2014
30 July 2015

24,972
38,028
4,466

720.80p
473.33p
161.20p

John Hayward
No.

Joanna Allen
No.

24,972
38,028

63,000

—
4,466

4,466

Thomas
James Lister
No.

153,722
30,634

184,356

Outstanding at the beginning of the period
Granted during the period

Outstanding at the end of the period

Outstanding at the beginning of the period
Granted during the period

Outstanding at the cessation of directorship

On behalf of the Board

PHILIP CAMMERMAN
Chairman, Remuneration Committee
15 December 2015

Pressure Technologies plc Annual Report 2015

DIRECTORS’ REPORT

The Directors present their report and the audited financial statements for the period from 28 September 2014 to 3 October 2015.

PRINCIPAL ACTIVITIES
During the period, Pressure Technologies plc (“PT”) was the holding Company for the following Group operations:

CYLINDERS
Chesterfield Special Cylinders Limited (“CSC”) whose principal activities are the design, manufacture, testing and reconditioning
of seamless steel high pressure gas cylinders. CSC has one subsidiary, CSC Deutschland GmbH, based in Germany.

The Company holds a 40% strategic investment in Kelley GTM, LLC, whose principal activity is the manufacture of high pressure
vessels for gas transport solutions. The company is based in Amarillo, Texas.

PRECISION MACHINED COMPONENTS
Al-Met Limited (“Al-Met”) whose principal activity is the manufacture of precision engineered valve components for use in the oil
and gas industry.

Roota Engineering Limited (“Roota”) whose principal activity is the manufacture of precision engineered products for use in the oil
and gas industry.

On 1 October 2014, the Group acquired 100% of the issued share capital of the Quadscot Group of companies (“Quadscot”)
whose principal activity is the manufacture of precision engineered products for use in the oil and gas industry. Further details
of the investment are given in note 30 to the financial statements.

ENGINEERED PRODUCTS
The Hydratron Group of Companies, (“Hydratron Limited” and “Hydratron Inc.”) whose principal activity is the design, manufacture
and sale of a range of air operated high pressure hydraulic pumps, gas boosters, power packs, hydraulic control panels and test rigs.

ALTERNATIVE ENERGY
Greenlane Biogas UK Limited (“GBUK”), formerly Chesterfield BioGas Limited (“CBG”), whose principal activity is the provision
of turnkey solutions for the cleaning, storage and dispensing of gas for injection into the grid or use as a vehicle fuel.

On 1 October 2014, the Group acquired the trade and certain assets of the Greenlane Group of companies, whose principal
activity is the provision of Biogas upgraders using waterwash technology. Further details of the investment are given in note 30
to the financial statements.

RESULTS AND DIVIDENDS
The consolidated statement of comprehensive income is set out on page 46. The profit on ordinary activities before taxation
of the Group for the period ended 3 October 2015 amounted to £0.6 million (2014: £5.3 million).

An interim dividend of 2.8p per share was paid during the period (2014: 2.8p). The Directors recommend the payment of a final
dividend of 5.6p per share (2014: 5.6p).

ENVIRONMENT
Pressure Technologies recognises that its activities have an impact on the environment. Managing this impact is an integral part
of responsible corporate governance and good management practice. The Group has developed environmental policies and the
main points are listed below:

• Overall responsibility for the implementation of these policies is the responsibility of the main Board and the senior management

at each Group Company. The Group will comply with both the letter and the spirit of relevant environmental regulations
Additionally, the Group will actively participate in industry and Governmental environmental consultative processes

• The Group is committed to the continuous improvement of its environmental management system. Specifically the Group

seeks to reduce waste and energy use and prevent pollution

• As part of continuous improvement, it is the policy of the Group to establish measurable environmental objectives and

communicate these to all employees. These documented objectives will be periodically reviewed as part of the management
review process. The necessary personnel and financial resources will be provided to meet these objectives

• Employees are given such information, training and equipment as is necessary to enable them to undertake their work with

the minimum impact on the environment

The Group had no notifiable environment incidents in 2015 (2014: nil).

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportDIRECTORS’ REPORT CONTINUED

SUBSTANTIAL SHAREHOLDINGS
As at 18 November 2015, the following held or were beneficially interested in 3% or more of the Company’s issued ordinary
share capital:

Liontrust Asset Management
Schroder Investment Management
City Financial
John Hayward
Hargreave Hale
Hargreaves Lansdown
James Sharp
Artemis Investment Management
Unicorn Asset Management
Aviva Investors

DIRECTORS AND THEIR INTERESTS
The present Directors of the Company are set out on pages 36 and 37.

All directors were directors throughout the period unless otherwise stated.

ORDINARY SHARES

John Hayward
Philip Cammerman
Thomas James Lister (resigned 30 June 2015)
Nigel Luckett (including 7,667 shares held by his wife) (resigned 1 September 2015)
Neil MacDonald
Alan Wilson
Joanna Allen (appointed 13 July 2015)
Brian Newman (appointed 1 September 2015)

Number of

Percentage of
issued share
shares capital owned

1,346,783
1,165,701
1,130,000
1,002,221
812,000
655,888
644,720
517,500
467,167
430,662

9.3%
8.1%
7.8%
7.0%
5.6%
4.6%
4.5%
3.6%
3.2%
3.0%

3 October 27 September
2014
No.

2015
No.

1,002,221
33,395
—
—
5,200
—
—
—

1,002,221
33,395
66,000
70,000
5,200
—
—
—

SHARE OPTIONS
On 12 December 2014, options were granted over 90,547 ordinary shares under the rules of the Company’s long term incentive
plan. The options have an exercise price of 473.3p. On 25 June 2015, options were granted over 111,665 ordinary shares under
the rules of the Company’s long term incentive plan. The options have an exercise price of 225p. The options are exercisable
between three and six years following the date of grant.

On 30 July 2015 options were granted over 281,565 ordinary shares under the rules of the Pressure Technologies plc Save-As-
You-Earn Scheme at an exercise price of 161.2p. The options are exercisable after three years and lapse six months after this
date if they are not exercised.

The Directors’ interests in share options are disclosed in the report of the Remuneration Committee.

FINANCIAL INSTRUMENTS
The Group’s operations expose it to a variety of financial risks including the effects of changes in interest rates, foreign currency
exchange rates, credit risk and liquidity risk.

The Group’s principal financial instruments comprise cash and bank deposits together with trade receivables and trade payables
that arise directly from its operations. The Group has entered into derivative transactions in the normal course of trade. It does
not trade in financial instruments as a matter of policy.

Information about the use of financial instruments by the Company and its subsidiaries is given in note 25 to the consolidated
financial statements.

Pressure Technologies plc Annual Report 2015

DIRECTORS’ INDEMNITIES
The Company maintains director and officer insurance cover for the benefit of its Directors which remained in force at the date
of this report.

EMPLOYEE INVOLVEMENT
It is the policy of the Group to communicate with employees by regular briefing meetings conducted by senior management.
Career development is encouraged through suitable training and annual appraisals. The Group takes the approach of maximising
performance through the heightening of awareness of corporate objectives and policies.

DISABLED PERSONS
The Group gives full and fair consideration to applications for employment from disabled persons, where they have the necessary
abilities and skills for that position, and, wherever possible, will retrain employees who become disabled so that they can
continue their employment in another position. The Group engages, promotes, and trains staff on the basis of their capabilities,
qualifications and experience, without discrimination, giving all employees an equal opportunity to progress.

GOING CONCERN
Management has produced forecasts for all business units which have been reviewed by the Directors. These demonstrate that
the Group is forecast to generate profits and cash in 2015/2016 and beyond and that the Group has sufficient cash reserves
and bank facilities to enable the Group to meet its obligations as they fall due for a period of at least 12 months from when these
financial statements have been signed.

As such, the Directors are satisfied that the Company and Group have adequate resources to continue to operate for the
foreseeable future. For this reason they continue to adopt the going concern basis for preparing the financial statements.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Strategic report, the Directors’ report and the financial statements in accordance
with applicable law and regulations.

Company law requires the Directors to prepare Group financial statements for each financial year. Under that law the Directors
have to prepare the Group’s financial statements in accordance with International Financial Reporting Standards as adopted by
the European Union (“IFRSs”). The Directors have elected to prepare the parent Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (“UK GAAP”). Under company law, the Directors must not approve
the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the
Group and parent Company for that period. In preparing these financial statements, the Directors are required to:

• Select suitable accounting policies and then apply them consistently
• Make judgements and accounting estimates that are reasonable and prudent
• For the Group financial statements, state whether applicable IFRSs have been followed, subject to any material departures

disclosed and explained in the financial statements

• For the parent Company financial statements, state whether applicable UK Accounting Standards have been followed,

subject to any material departures disclosed and explained in the financial statements

• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company

will continue in business

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportDIRECTORS’ REPORT CONTINUED

STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS CONTINUED
The Directors confirm that:

• So far as each Director is aware, there is no relevant audit information of which the Company’s auditor is unaware
• The Directors have taken all steps that they ought to have taken as Directors to make themselves aware of any relevant

audit information and to establish that the auditor is aware of that information

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.

AUDITOR
Grant Thornton UK LLP are willing to continue in office and a resolution to reappoint them will be proposed at the Annual
General Meeting.

CORPORATE GOVERNANCE
The Group’s corporate governance is set out on its website under the AIM rule 26 section.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS AND RELATED INFORMATION
The annual report contains a number of forward-looking statements relating to the Group. The Group considers any statements
that are not historical facts as “forward-looking statements”. They relate to events and trends that are subject to risks and
uncertainties that could cause the actual results and financial position of the Group to differ materially from the information
presented. Readers are cautioned not to place undue reliance on these forward-looking statements which are relevant only
as at the date of this document.

By order of the Board

JOHN HAYWARD
Chief Executive
15 December 2015

Pressure Technologies plc Annual Report 2015

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF PRESSURE TECHNOLOGIES PLC

We have audited the financial statements of Pressure Technologies plc for the period ended 3 October 2015 which comprise
the group statement of comprehensive income, the group and parent company balance sheets, the group statement of changes
in equity, the group statement of cash flows, the group statement of changes in equity, the group and parent reconciliation
of movements in shareholders’ funds and the related notes. The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As explained more fully in the Directors’ Responsibilities Statement set out on page 43, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website
at www.frc.org.uk/auditscopeukprivate.

OPINION ON FINANCIAL STATEMENTS
In our opinion:

• The financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at

3 October 2015 and of the Group’s profit for the period then ended

• The Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
• The parent Company financial statements have been properly prepared in accordance with United Kingdom Generally

Accepted Accounting Practice

• The financial statements have been prepared in accordance with the requirements of the Companies Act 2006

OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you
if, in our opinion:

• Adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been

received from branches not visited by us

• The parent Company financial statements are not in agreement with the accounting records and returns
• Certain disclosures of Directors’ remuneration specified by law are not made
• We have not received all the information and explanations we require for our audit

MARK OVERFIELD BSc FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
15 December 2015

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report53 weeks
ended

52 weeks
ended
3 October 27 September
2014
£’000

2015
£’000

55,570
(39,892)

15,678
(12,383)

54,015
(38,277)

15,738
(7,904)

3,295

7,834

(291)
(425)

2,579
15
(457)
(1,408)
(151)

578
121

699

(10)

689

4.9p
4.8p

(1,556)
—

6,278
32
(60)
(718)
(183)

5,349
(1,638)

3,711

3,721

28.5p
27.9p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 53 WEEK PERIOD ENDED 3 OCTOBER 2015

Revenue
Cost of sales

Gross profit
Administration expenses

Operating profit pre acquisition costs, amortisation on acquired businesses
and exceptional charges and credits
Separately disclosed items of administrative expenses:
Acquisition related exceptional items and amortisation
Other exceptional charges and credits

Operating profit
Finance income
Finance costs
Exceptional costs in relation to the option on and loan to KGTM
Share of losses of associate

Profit before taxation
Taxation

Profit for the period attributable to owners of the parent

Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation differences on translation of foreign operations

Total comprehensive income for the period attributable to the owners of the parent

Earnings per share – basic

– diluted

All of the above results are from continuing operations.

The accounting policies and notes on pages 50 to 84 form part of these financial statements.

Notes

5
6

2
3
7
18

4
11

12
12

Pressure Technologies plc Annual Report 2015

CONSOLIDATED BALANCE SHEET
AS AT 3 OCTOBER 2015

Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax asset
Trade and other receivables
Investment in associates

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments
Current tax asset

Total assets

Current liabilities
Trade and other payables
Borrowings
Current tax liabilities

Non-current liabilities
Other payables
Borrowings
Deferred tax liabilities

Total liabilities

Net assets

Equity
Share capital
Share premium account
Translation reserve
Retained earnings

Total equity

3 October 27 September
2014
£’000

2015
£’000

Notes

14
15
16
26
20
18

19
20

22
23

22
23
26

15,020
13,451
14,348
270
—
—

43,089

7,414
13,539
3,459
26
82

24,520

67,609

(13,025)
(337)
—

(13,362)

(5,078)
(10,236)
(2,592)

(17,906)

(31,268)

36,341

721
21,539
25
14,056

36,341

7,081
6,960
7,802
155
1,575
123

23,696

8,819
20,561
6,356
43
—

35,779

59,475

(16,453)
(180)
(1,183)

(17,816)

(2,909)
(324)
(1,897)

(5,130)

(22,946)

36,529

718
21,463
35
14,313

36,529

The accounting policies and notes on pages 50 to 84 form part of these financial statements.

The financial statements were approved by the Board on 15 December 2015 and signed on its behalf by:

JOANNA ALLEN
Director
Company number: 06135104

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 53 WEEK PERIOD ENDED 3 OCTOBER 2015

Balance at 28 September 2013
Dividends
Share based payments
Shares issued

Transactions with owners

Profit for the period
Other comprehensive income:
Exchange differences on translating
foreign operations

Total comprehensive income

Balance at 27 September 2014
Dividends
Share based payments
Shares issued

Transactions with owners

Profit for the period
Other comprehensive income:
Exchange differences on translating
foreign operations

Total comprehensive income

Balance at 3 October 2015

Notes

13
28
27

Share
capital
£’000

568
—
—
150

150

—

718
—
—
3

—

721

Share
premium
account
£’000

5,387
—
—
16,076

16,076

—

21,463
—
—
76

—

21,539

Translation
reserve
£’000

25
—
—
—

—

35
—
—
—

—

Profit
and loss
account
£’000

11,484
(991)
109
—

(882)

3,711

—

3,711

14,313
(1,209)
253
—

(956)

699

Total
equity
£’000

17,464
(991)
109
16,226

15,344

3,711

3,721

36,529
(1,209)
253
79

(877)

699

(10)

—

699

(10)

689

14,056

36,341

The accounting policies and notes on pages 50 to 84 form part of these financial statements.

Pressure Technologies plc Annual Report 2015

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 53 WEEK PERIOD ENDED 3 OCTOBER 2015

Notes

Operating activities
Cash flows from operating activities
Finance costs paid
Income tax paid

Net cash inflow from operating activities

Investing activities
Interest received
Proceeds from sale of fixed assets
Purchase of property, plant and equipment
Cash outflow on purchase of subsidiaries net of cash acquired
Cash outflow on payment of deferred consideration
Cash outflow on loans made to associate
Cash outflow on third party loans

Net cash used in investing activities

Financing activities
Repayment of borrowings
Dividends paid
Shares issued
Borrowings
Receipt of government grants

Net cash from financing activities

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

The accounting policies and notes on pages 50 to 84 form part of these financial statements.

53 weeks
ended

52 weeks
ended
3 October 27 September
2014
£’000

2015
£’000

7,925
(220)
(1,770)

5,935

—
181
(6,250)
(9,648)
(2,000)
—
—

3,411
(7)
(1,766)

1,638

19
155
(1,792)
(7,630)
(306)
(2,147)
(2,782)

(17,717)

(14,483)

(185)
(1,209)
79
10,000
200

8,885

(2,897)
6,356

3,459

(78)
(991)
16,226
—
—

15,157

2,312
4,044

6,356

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

ACCOUNTING POLICIES

BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
adopted for use in the European Union and IFRIC interpretations issued by the International Accounting Standards Board and
the Companies Act 2006. The Company has elected to prepare its parent Company financial statements in accordance with UK
Generally Accepted Accounting Practice (“UK GAAP”). These are presented on pages 85 to 91.

Pressure Technologies plc, company number 06135104, is incorporated and domiciled in the United Kingdom. The registered
office address is Unit 6b Newton Business Centre, Newton Chambers Road, Chapeltown, Sheffield, South Yorkshire, S35 2PH.

The Group has applied all accounting standards and interpretations issued relevant to its operations for the period ended
3 October 2015. The consolidated financial statements have been prepared on a going concern basis.

Management has produced forecasts for all business units which have been reviewed by the Directors. These demonstrate the
Group is forecast to generate profits and cash in 2015/2016 and beyond and that the Group has sufficient cash reserves and
headroom in borrowing costs to enable the Group to meet its obligations as they fall due for a period of at least 12 months from
when these financial statements have been signed.

The financial statements have been prepared under the historical cost convention, except for derivative financial instruments
which are carried at fair value.

STANDARDS AND INTERPRETATIONS NOT YET APPLIED BY THE GROUP
There are a number of standards and interpretations issued by the International Accounting Standards Board that are effective
for financial statements beginning on or after the dates given below and are expected to be relevant to the financial statements.
These standards will be effective in future periods.

IFRS 9 Financial Instruments (IASB effective date 1 January 2018)
IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016)
IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017)

•
•
•
• Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (IASB effective date 1 July 2014)
• Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (IASB effective date 1 January 2016)
• Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38 (IASB effective

date 1 January 2016)

• Annual Improvements to IFRSs 2010-2012 Cycle (IASB effective date generally 1 July 2014)
• Annual Improvements to IFRSs 2011-2013 Cycle (IASB effective date 1 July 2014)
• Annual Improvements to IFRSs 2012-2014 Cycle (effective 1 January 2016)
• Amendments to IAS 16 and IAS 41: Bearer Plants (effective 1 January 2016)
• Amendments to IAS 27: Equity Method in Separate Financial Statements (effective 1 January 2016)
• Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception (effective 1 January 2016)
• Disclosure Initiative: Amendments to IAS 1 Presentation of Financial Statements (effective 1 January 2016)
• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28

(effective 1 January 2016)

Management are still assessing the impact that the implementation of IFRS 15 will have on revenue recognition, particularly with
reference to construction contracts.

The application of these standards and interpretations is not expected to have a material impact on the Group’s reported financial
performance or position. However, they may give rise to additional disclosures being made in the financial statements.

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described below, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.

Pressure Technologies plc Annual Report 2015

The estimates and assumptions that have a material risk to the carrying value of assets and liabilities within the next financial year
are discussed below:

CRITICAL ACCOUNTING JUDGEMENTS
REVENUE RECOGNITION
The Group recognises revenue when the goods in question have finished production and passed any applicable factory and
customer acceptance tests. Where goods remain on the Group’s premises at the year-end at the request of the customer,
management consider the detailed criteria for the recognition of revenue from the sale of the goods as set out in IAS 18 “Revenue”.
In particular, consideration is given as to whether the significant risks and rewards of ownership are considered to have transferred
to the buyer.

IMPAIRMENT REVIEWS – INTANGIBLE ASSETS
The Group has acquired, through business combinations and through other acquisitions, intangible assets and capitalised certain
assets, such as licence agreements and development costs, which are expected to generate revenue in the future but at a reporting
period end may not have generated significant income at that time. At each reporting period date, the Directors review the
likelihood of indefinite life assets generating income, the period over which this is likely to be achieved and the potential income
that can be generated. Where it is probable the future recoverable amount will be in excess of capitalised costs the assets are held
within the balance sheet at cost. Where this is not the case, an impairment charge will be recorded to adjust the assets to their
recoverable amount.

STAGE OF COMPLETION ON CONSTRUCTION CONTRACTS
The Group assess the stage of completion of a contract based on internal estimates, with reference to the proportion
of costs incurred.

DEFERRED CONSIDERATION
The Group has acquired, as a result of acquisition activity, significant liabilities in respect of deferred consideration. The payment
of this consideration is contingent on the results of the acquired entities. Upon acquisition, deferred consideration is recognised
at fair value. The Directors review the amount of deferred consideration alongside forecast results for the relevant businesses and
assess the amount considered to be payable. Where an adjustment to deferred consideration is deemed necessary, the difference
is recognised in profit and loss as an exceptional item.

KEY SOURCES OF ESTIMATION UNCERTAINTY
INVENTORY PROVISIONS
The Directors have reviewed the level of inventory provisions carried against inventory in the light of outstanding current and
anticipated customer orders. The future realisation of carrying amounts is affected by whether the anticipated level of orders
is achieved. The level of inventory provisions is disclosed in note 19 to the financial statements.

VALUATION OF INTANGIBLE ASSETS ACQUIRED THROUGH BUSINESS COMBINATIONS
As far as possible, professional advice is sought on the valuation of intangible assets. The Directors estimate the value of intangible
assets with reference to any advice received, based on their experience of the value of such assets in similar businesses and under
similar market conditions. The carrying value of intangible assets is disclosed in note 15 to the financial statements.

WARRANTY PROVISIONS
Under certain contractual arrangements, the Group provides a warranty in relation to some products sold, which could result
in the future transfer of economic benefits from the entity. The Directors review the products for which a warranty is provided,
and assess the amount of provision required to meet future potential liabilities. Warranty periods vary between products but
are typically one year in duration.

BASIS OF CONSOLIDATION
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 3 October
2015 (2014: to 27 September 2014). Subsidiaries are all entities over which the Group has the power to control the financial
and operating policies. The Group obtains and exercises control through voting rights. The consolidated financial statements
of the Group incorporate the financial statements of the parent Company as well as those entities controlled by the Group
by full consolidation. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.

Intra-group balances and transactions, and any unrealised gains or losses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportACCOUNTING POLICIES CONTINUED

BUSINESS COMBINATIONS AND GOODWILL
The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair
values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any
asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Group recognises identifiable assets acquired and liabilities assumed, including contingent liabilities, in a business combination
regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets
acquired and liabilities assumed are measured at their acquisition-date fair values, which are also used as the bases for subsequent
measurement in accordance with the Group accounting policies.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of:

• Fair value of consideration transferred
• The recognised amount of any non-controlling interest in the acquiree
• Acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of

identifiable net assets

If the fair values of identifiable net assets exceed the consideration transferred, the excess amount (i.e. gain on a bargain purchase)
is recognised in profit or loss immediately.

Deferred contingent consideration is recognised at its acquisition date fair value. Subsequent changes to this fair value resulting
from events after the acquisition date are recognised through profit or loss. Where this deferred consideration arises in a currency
other than Sterling, the liability is revalued at each period end date.

REVENUE
Revenue is measured by reference to the fair value of consideration received or receivable and arises from the sales of goods and
services provided in the normal course of business, net of trade discounts, VAT and other sales-related taxes. Revenue from the
sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyer, which may be
the date the goods are despatched to the customer, completion of the product or the product being ready for delivery based on
specific contract terms; when the amount of revenue can be measured reliably; and when it is probable that the economic benefits
associated with the transaction will flow to the Group.

CYLINDERS
In respect of revenue recognition within the Cylinders segment, revenue is recognised when the goods in question have finished
production and passed any applicable factory and customer acceptance tests. Goods may not always have been despatched for
revenue to be recognised provided the above criteria have been met.

Revenue from services is recognised when the outcome of the transaction can be estimated reliably and the Group has performed
its obligations and, in exchange, obtained the right to consideration.

ENGINEERED PRODUCTS AND PRECISION MACHINED COMPONENTS
In applying the above policy, revenue is recognised in the Engineered Products segment when production is complete, the goods
are ready to be despatched, the goods have passed any applicable factory and customer acceptance tests and substantially all the
risks and rewards associated with the product have passed to the customer. In the vast majority of cases, despatch takes place as
soon as production has been completed.

ALTERNATIVE ENERGY
Revenue is recognised in the Alternative Energy segment in accordance with IAS 11 “Construction contracts” for biogas
upgrader projects.

The division designs and constructs biogas upgrading units for the production of biomethane for supply to the gas grid or for
use as vehicle fuel. Once a contract is sufficiently advanced and the outcome of the contract can be measured reliably, contract
revenue, costs and profits are recognised over the period of the contract by reference to the stage of completion of each contract.
The stage of completion of a contract is determined by internal estimates, with reference to the proportion of costs incurred.
Revenue is recognised in proportion to the total revenue expected on the contract.

Prior to this recognition, stage payments received from customers and made to suppliers are recorded in the consolidated
balance sheet as trade and other receivables and trade and other payables as appropriate.

Pressure Technologies plc Annual Report 2015

If contract costs are expected to exceed contract revenue, then the expected loss is recognised immediately in the consolidated
statement of comprehensive income.

Contract revenue includes an assessment of the amounts agreed in the contract, plus or less any variations in contract work
and claims to the extent that they are approved and can be measured reliably.

Once revenue has started to be recognised on an individual contract, the Group reports the position for each contract as either
an asset or a liability. In instances where costs incurred plus recognised profits exceed billings to date an asset is recognised.
Similarly, a liability is recognised where billings to date exceed costs incurred and profits recognised.

The Alternative Energy Division also enters into maintenance and service agreements with customers. Revenue on these
agreements is recognised in accordance with IAS 18 “Revenue”. Revenue is recognised in accordance with the stage of completion
of the maintenance or service agreement.

SHARE-BASED EMPLOYEE REMUNERATION
The Group operates equity-settled share-based remuneration plans for some of its employees. The Group’s plan does not feature
any options for a cash settlement.

All services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees
are rewarded using share-based payments, the fair values of employees’ services are determined indirectly by reference to the
fair value of the share options granted to the employee. This fair value is appraised at the grant date and excludes the impact
of non-market vesting conditions (for example, profitability and sales growth targets).

All share-based remuneration is ultimately recognised as an expense in the consolidated statement of comprehensive income
with a corresponding credit to the profit and loss reserve.

If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available
estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the
number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised
in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised
are different to that estimated on vesting. Upon exercise of share options, the proceeds received net of any directly attributable
transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as
additional paid-in capital.

The cancellation of equity-settled share based payments is accounted for as an acceleration of vesting.

DIVIDENDS
Interim dividends are charged in the period in which they are paid. Final dividends are only provided when approved by
the shareholders.

PROPERTY, PLANT AND EQUIPMENT
Plant and equipment is stated at cost, net of depreciation and any provision for impairment. Property, plant and equipment
is held at historical cost with the exception of assets acquired on business combinations. These are added at their fair value
and depreciated accordingly. Land is not depreciated. Assets under construction are recognised when costs are incurred
in the construction of an asset and are not depreciated until the asset is ready for use. Depreciation on other assets is applied
on a straight-line basis so as to reduce the assets to their residual values over their estimated useful lives. The rates of
depreciation used are:

Buildings
Plant and machinery

50 years
4 – 15 years

The estimates used for residual values and useful lives are reviewed as required, but at least annually. The gain or loss arising
on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset
and is recognised in the consolidated statement of comprehensive income.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report
ACCOUNTING POLICIES CONTINUED

INTANGIBLE ASSETS
DEVELOPMENT COSTS
Development costs are recognised at cost, net of amortisation or provision for impairment, where the recognition requirements
under IAS 38 “Intangible assets” are met. These are:

It is probable that the future economic benefits that are attributable to the asset will flow to the enterprise

•
• The project is technically and commercially feasible
• The Group intends to and has sufficient resources to complete the projects
• The Group has the ability to use or sell the asset
• The cost of the asset can be measured reliably

These costs are capitalised up to the point development is complete and the asset is then amortised over the period which the
asset is expected to generate income. If at any point the development costs fail to meet the recognition requirements of IAS 38,
the costs are expensed through the consolidated statement of comprehensive income.

INTANGIBLE ASSETS ACQUIRED AS PART OF A BUSINESS COMBINATION
In accordance with IFRS 3 “Business Combinations”, an intangible asset acquired in a business combination is deemed to have
a cost to the Group of its fair value at the acquisition date. The fair value of an intangible asset reflects market expectations about
the probability that the future economic benefits embodied in the asset will flow to the Group.

Amortisation on intangible assets is charged in cost of sales, with the exception of that on intangible assets acquired on business
combinations, which is disclosed separately in the consolidated statement of comprehensive income.

Such intangible assets are amortised on a straight-line basis over their estimated useful lives as follows:

Customer order book
License and distribution agreement
Non-contractual customer relationships
Technology

Over life of the order book – typically one year
15 years
5 to 10 years
7.5 years

IMPAIRMENT TESTING OF NON-CURRENT ASSETS
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-
generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related
business combination and represent the lowest level within the Group at which management monitors goodwill. Cash-generating
units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating
units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the assets or cash-generating unit’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs
to sell, and value in use based on an internal discounted cash flow evaluation.

LEASED ASSETS
In accordance with IAS 17 “Leases”, the economic ownership of a leased asset is transferred to the lessee if the lessee bears
substantially all the risks and rewards related to the ownership of the asset. The related asset is recognised at the inception of the
lease at its fair value or, if lower, the present value of the lease payments. A corresponding liability is recognised where the interest
element of the lease payments represents a constant proportion of the capital balance outstanding and is charged to profit or loss
over the period of the lease.

All other leases are treated as operating leases. Payments under operating leases are charged to profit or loss on a straight-line
basis over the term of the lease. Lease incentives are spread over the term of the lease. Benefits received as an incentive to enter
into an operating lease are spread over the lease term on a straight line basis.

INVENTORIES
Inventories are stated at the lower of cost and net realisable value, on a first in first out basis. Cost includes materials, direct labour
and an attributable proportion of manufacturing overheads based on normal levels of activity. Net realisable value is based on the
estimated sales price after allowing for all further costs of completion and disposal. Provision is made for obsolete, slow-moving
or defective items where appropriate.

Pressure Technologies plc Annual Report 2015

INCOME TAXES
The tax expense represents the sum of the tax currently payable and deferred tax. Current tax is the tax currently payable based
on taxable profit for the year.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on
the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided
on the initial recognition of goodwill nor on the initial recognition of an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not
provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in
the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are
assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable
that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred
tax assets and liabilities are calculated at tax rates that are expected to apply to their respective periods of realisation, provided
they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets and liabilities are recognised as a component of tax expense in the consolidated statement
of comprehensive income, except where they relate to items that are recognised in other comprehensive income or directly
in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively.

ACCOUNTING FOR FINANCIAL ASSETS
The Group has financial assets in the following categories:

• Loans and receivables (trade and other receivables)
• Financial assets at fair value through profit or loss (derivative financial instruments)

Financial assets are assigned to the different categories on initial recognition, depending on the characteristics of the instrument
and its purpose. A financial instrument’s category is relevant for the way it is measured and whether any resulting income and
expenses are recognised in profit or loss or other comprehensive income.

All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument.

Financial assets categorised as at fair value through profit or loss are recognised initially at fair value with transaction costs
expensed through profit or loss. Changes in fair value due to subsequent measurement are recognised in profit or loss.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Loans and receivables are initially recognised at fair value plus transaction costs, and subsequently measured at amortised
cost using the effective interest method, less provision for impairment. Receivables are considered for impairment on a case-by-
case basis, and impairment is recognised where the balances are past due or where there is other evidence that a counterparty
may default. Any gains or losses arising as a result of the impairment review are recognised in profit or loss. Pressure Technologies
plc’s trade and most other receivables fall into this category of financial instrument. Discounting on loans and receivables is omitted
where the effect is immaterial. However, where it is required, the asset is initially held at fair value (including transaction costs) after
discounting and the difference is recognised in the consolidated statement of comprehensive income under financing costs, or
asset. Long term retentions due on contracts are the main balances where such treatment is required.

Receivables are considered for impairment on a case-by-case basis.

ACCOUNTING FOR FINANCIAL LIABILITIES
Financial liabilities represent a contractual obligation for the Group to deliver cash or other financial assets. Financial liabilities
are initially recognised at fair value, net of issue costs, when the Group becomes a party to the contractual agreements of the
instrument. All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss
are included in the consolidated statement of comprehensive income line items “finance costs” or “finance income”. The Group’s
financial liabilities include borrowings, trade and other payables, and derivative financial instruments. After initial recognition, all
but the latter are measured at amortised cost using the effective interest rate method. Discounting on financial liabilities is omitted
where the effect is immaterial. However, where it is required, the liability is initially recognised at fair value after discounting and
the difference is recognised in the consolidated statement of comprehensive income under financing costs. Deferred consideration
on acquisitions are the main balances where such treatment is required.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportACCOUNTING POLICIES CONTINUED

MEASUREMENT OF FAIR VALUE FINANCIAL INSTRUMENTS
The Group’s finance team performs valuations of financial items for financial reporting purposes, including Level 3 fair values,
in consultation with third party valuation specialists for complex valuations. Valuation techniques are selected based on the
characteristics of each instrument, with the overall objective of maximising the use of market-based information. The finance
team reports directly to the Group Finance Director and to the audit committee. Valuation processes and fair value changes
are discussed at least every year, in line with the Group’s reporting dates.

DERIVATIVE FINANCIAL INSTRUMENTS
The Group has derivative financial instruments that are carried at fair value through profit or loss. The Group does not hedge
account for these items. Any gain or loss arising from derivative financial instruments is based on changes in fair value, which
is determined by direct reference to active market transactions or using a valuation technique where no active market exists.
The Group has foreign currency forward contracts that fall into this category.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash in hand and demand deposits, together with other short-term, highly liquid investments
that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and bank
overdrafts, where they form an integral part of the Group’s cash management.

EQUITY AND RESERVES
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Share premium represents
premiums received on issuing of share capital. Retained earnings include all current and prior year results as disclosed in the
consolidated statement of comprehensive income and reserves note.

The translation reserve is used to record foreign exchange translation differences that occur as a result of the translation of
overseas subsidiary undertakings’ financial statements into the presentation currency of the consolidated financial statements.

FOREIGN CURRENCY TRANSLATION
Foreign currency transactions are translated into the functional currency (being the currency of the primary economic environment
in which the entity operates) of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot
exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement
of monetary balance sheet items at year-end exchange rates are recognised in the consolidated statement of comprehensive
income. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at rates prevailing at the
date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are
not retranslated. The consolidated financial statements are presented in Pounds Sterling, which is also the functional currency of the
parent company.

As a result of corporate acquisition activity, the Group has significant deferred consideration balances denominated in foreign
currencies. Any exchange differences arising on these balances are recognised in profit and loss. Given the large balances and
therefore the potential effect on the results of the Group, the Directors consider it appropriate to disclose these foreign exchange
movements as an exceptional item.

The results of overseas subsidiary undertakings are translated at the average exchange rate (being an approximation to the rate at
the date of transactions throughout the year) and the balance sheets of such undertakings are translated at the year-end exchange
rates. Exchange differences arising on the retranslation of opening net assets of overseas subsidiary undertakings are charged/
credited to other comprehensive income and recognised in the translation reserve in equity. On disposal of a foreign operation
the cumulative translation differences are transferred to profit or loss as part of the gain or loss on disposal.

GRANTS
Grants are recognised where there is reasonable assurance that the entity complies with the conditions attached to them. Grants
relating to property, plant and equipment are treated as deferred income and released to profit or loss over the expected useful
lives of the assets concerned. Other grants are credited to profit or loss in the same period as the related expenditure is incurred.

Pressure Technologies plc Annual Report 2015

PENSIONS
The Group operates defined contribution schemes with costs being charged to profit or loss in the period to which they relate.

SEGMENT REPORTING
IFRS 8 requires operating segments to be identified on the basis of the internal reports about operating units of the Group that
are regularly reviewed by the Chief Executive to allocate resources and to assess their performance. The Group operates four
operating segments which represent the main products and services provided by the Group:

• Cylinders: the design, manufacture and reconditioning of seamless high pressure gas cylinders. The Group’s share of the results

of KGTM are included within the Cylinders segment

• Engineered Products: the manufacture of precision engineered products, air operated high pressure hydraulic pumps,

gas boosters, power packs, hydraulic control panels and test rigs

• Alternative Energy: marketing, selling and manufacture of biogas upgrading equipment to produce high purity biomethane
• Precision Machined Components: the manufacture of specialised, precision engineered valve wear parts used in the oil

and gas industries

Each of these operating segments is managed separately as each requires different technologies, resources and marketing
approaches.

Historically, the Group has disclosed three operating segments – Cylinders, Engineered Products and Alternative Energy. Given
the recent expansion of the Group, the Directors now disclose results of the Group in four operating segments. The old Engineered
Products segment has been split between the new Engineered Products segment, comprising the Hydratron Group of companies,
and the Precision Machined Components segment, which comprises Al-Met, Quadscot and Roota. Where appropriate, prior
year comparatives have been restated to allow comparison. The acquisition of Greenlane has been added to the Alternative
Energy segment.

The measurement policies used by the Group for segment reporting are the same as those used in its financial statements.
Amortisation of intangible assets arising from business combinations and fair value adjustments arising from business
combinations are allocated to the operating segment to which they relate.

In addition, corporate overheads and assets not directly related to the business activities of any operating segment are not
allocated to a segment.

INVESTMENTS IN ASSOCIATES
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding
of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting.
Under the equity method, the investments are initially recognised at cost, and the carrying amount is increased or decreased
to recognise the investor’s share of the profit or loss of the investee after the date of acquisition.

The Group’s share of post-acquisition profit or loss is recognised in the income statement. When the Group’s share of losses
in an associate equals or exceeds this interest in the associate, the Group does not recognise further losses unless it has incurred
legal or constructive obligation or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the associate is impaired. If this is the
case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and
its carrying value and recognises the amount adjacent to “share of profit/(loss) of associates” in the consolidated statement of
comprehensive income.

The Group considers that it has significant influence over another entity when it has less than 50% but more than 20% of the voting
rights of that entity. Given Pressure Technologies has 40% of the voting rights of Kelley GTM, the Directors consider that it has
significant influence and therefore it is treated as an associate.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportACCOUNTING POLICIES CONTINUED

EXCEPTIONAL ITEMS
One off, non-trading items with a material effect on results are disclosed separately on the face of the Consolidated Statement
of Comprehensive Income. The Directors apply judgement in assessing the particular items, which by virtue of their scale and
nature, should be classified as exceptional items. The directors consider that separate disclosure of these items is relevant
to an understanding of the Group’s financial performance.

BORROWINGS
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised
cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no
evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity
services and amortised over the period of the facility to which it relates.

OPERATING PROFIT
Operating profit is stated before finance costs, finance income, share of profits and losses from associates and finance related
exceptional costs. Adjusted operating profit is stated after adding back any other exceptional items.

Pressure Technologies plc Annual Report 2015

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”). As disclosed in the Accounting Policies, the segmental analysis has changed since the
prior year, with the splitting of the old Engineered Products segment into two segments, Precision Machined Components and
Engineered Products. Where appropriate the comparative information is restated in the analysis below.

Precision

For the 53 week period
ended 3 October 2015

Revenue
– from external customers

Cylinders Components
£’000

Machined Engineered Alternative
Energy
£’000

Products
£’000

£’000

Central
costs
£’000

Total
£’000

14,343

18,815

8,441

13,971

—

55,570

Operating profit/(loss) before acquisition
costs, amortisation on acquired businesses
and exceptional charges and credits
Acquisition related exceptional items
and amortisation (charges)/credits*
Other exceptional credits and (charges)

Operating profit/(loss)
Exceptional costs in relation to
the option on and loan to KGTM
Share of losses of associate
Net finance (costs)/income

Profit/(loss) before tax

2,111

4,512

(354)

(1,142)

(1,832)

3,295

—
297

2,408

—
(151)
—

(1,425)
—

3,087

—
—
(30)

(135)
(263)

(752)

—
—
2

(720)
(309)

(2,171)

—
—
3

2,257

3,057

(750)

(2,168)

1,989
(150)

(1,408)
—
(417)

(1,818)

(291)
(425)

2,579

(1,408)
(151)
(442)

578

Segmental net assets**

7,452

23,671

4,594

11,321

(10,697)

36,341

Other segment information:
Capital expenditure
Depreciation
Amortisation

1,254
318
—

1,058
770
1,425

110
104
135

123
93
720

3,757
85
—

6,302
1,370
2,280

There has been no significant trading between the segments in the period.

* Includes fees associated with making acquisitions.
** Segmental net assets 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.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

1. SEGMENT ANALYSIS CONTINUED

For the 52 week period
ended 27 September 2014

Revenue
– from external customers

Precision
Machined
Components
(Restated)
£’000

Cylinders
£’000

Engineered
Products
(Restated)
£’000

Alternative
Energy
£’000

Central
costs
£’000

Total
£’000

21,443

13,040

11,093

8,439

—

54,015

Operating profit/(loss) before acquisition
costs, amortisation on acquired businesses
and exceptional charges and credits
Acquisition related exceptional costs
and amortisation*

Operating profit/(loss)
Exceptional costs in relation to the option
on and loan to KGTM
Share of losses of associate
Net finance income/(costs)

3,791

3,024

1,625

1,094

(1,700)

7,834

—

3,791

—
(183)
11

(559)

2,465

(135)

1,490

—

1,094

—
—
(2)

—
—
—

—
—
2

(862)

(2,562)

(718)
—
(39)

(1,556)

6,278

(718)
(183)
(28)

Profit/(loss) before tax

3,619

2,463

1,490

1,096

(3,319)

5,349

Segmental net assets**

7,336

17,085

5,631

2,767

3,710

36,529

Other segment information:
Capital expenditure
Depreciation
Amortisation

1,040
312
—

1,072
354
559

194
97
135

40
37
70

28
4
—

2,374
804
764

* Includes fees associated with making acquisitions.
** Segmental net assets 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.

Pressure Technologies plc Annual Report 2015

1. SEGMENT ANALYSIS CONTINUED

The following table provides an analysis of the Group’s revenue by geographical destination.

Revenue

United Kingdom
Europe
Rest of the World

2015
£’000

29,250
8,929
17,391

55,570

2014
£’000

25,730
7,658
20,627

54,015

The Group’s largest customer contributed 12% to the Group’s revenue (2014: 23%) which is reported within the Precision Machined
Components and Engineered Products segments. No other customer contributed more than 10% in the period to 3 October 2015
(2014: nil).

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

Revenue

Oil and gas
Defence
Industrial gases
Alternative energy

2015
£’000

32,576
7,471
1,502
14,021

55,570

2014
£’000

39,607
3,478
2,309
8,621

54,015

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

The following table provides an analysis of the carrying amount of non-current assets and additions to property, plant
and equipment.

United
Kingdom
£’000

Rest of
the World
£’000

Non-current assets
Additions to property, plant and equipment

42,954
6,191

135
111

2. FINANCE INCOME

Interest receivable on bank deposits
Discounting adjustment on loans and receivables (note 20)
Interest receivable on assets under finance leases

2015

Total
£’000

43,089
6,302

United
Kingdom
£’000

23,645
2,369

Rest of
the World
£’000

51
5

2015
£’000

6
9
—

2014

Total
£’000

23,696
2,374

2014
£’000

19
11
2

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3. FINANCE COSTS

Interest payable on bank loans and overdrafts
Interest payable on finance leases
Discounting adjustment on trade and other payables

4. PROFIT BEFORE TAXATION
Profit before taxation is stated after charging/(crediting):

Depreciation of property, plant and equipment – owned assets
Depreciation of property, plant and equipment – assets under finance lease and hire purchase agreements
Profit on disposal of fixed assets
Amortisation of intangible assets – licence and distribution agreement
Amortisation of intangible assets acquired on business combinations
Amortisation of grants receivable
Staff costs (see note 9)
Cost of inventories recognised as an expense
Operating lease rentals:
– Land and buildings
– Machinery and equipment
Foreign currency gain
Share based payments

5. ACQUISITION RELATED EXCEPTIONAL ITEMS AND AMORTISATION

Amortisation of intangible assets arising on a business combination
Acquisition costs
Deferred consideration write back
Foreign currency gain on revaluation of deferred consideration liability

2015
£’000

195
31
231

457

2015
£’000

1,271
99
(10)
—
2,280
(104)
16,366
27,615

638
94
(215)
253

2015
£’000

(2,280)
(177)
1,749
417

(291)

2014
£’000

—
7
53

2014
£’000

783
21
(7)
70
694
(107)
9,670
28,581

644
67
(26)
109

2014
£’000

(694)
(862)
—
—

(1,556)

The deferred consideration write back relates to the deferred consideration arising from the acquisition of Quadscot. The payment
of this consideration is contingent on the future results of the acquired entities. The Directors have reviewed forecasts in relation to
Quadscot and consider that it is unlikely that the consideration will be paid, and as such it has been released. Given the magnitude
of the release and the fact that it is non-trading, the Directors consider it appropriate to disclose this as an exceptional item.

The revaluation of deferred consideration liability relates to the exchange differences calculated on the deferred consideration arising
from the acquisition of The Greenlane Group, which is denominated in NZ Dollars. Given the large balance and therefore the effect
on the results of the Group, the Directors consider it appropriate to disclose this foreign exchange movement as an exceptional item.

Pressure Technologies plc Annual Report 2015

6. OTHER EXCEPTIONAL (CHARGES)/CREDITS

Reorganisation and redundancy
Release of IFRS rent provision

2015
£’000

(747)
322

(425)

2014
£’000

—
—

—

The release of the IFRS rent provision relates to a provision made in relation to IAS 17 with regards to the lease held by Chesterfield
Special Cylinders at the Meadowhall site. Following the purchase of the site by the Group in January 2015, this provision is no longer
required and is consequently released. Given its non-operating nature it is disclosed as an exceptional item.

The reorganisation costs relate to costs of restructuring across the Group. They are recognised in accordance with IAS 19.

7. EXCEPTIONAL COSTS IN RELATION TO THE OPTION ON AND LOAN TO KGTM

Exceptional provisions in relation to the option on and loans to KGTM

2015
£’000

1,408

2014
£’000

718

The exceptional costs in relation to the options on and loans to KGTM relate to provisions made by the Board against the balance
of the loans receivable from KGTM, an associated company. Due to the uncertainty of repayment, the entire balance of the loan
outstanding has been provided for in the current period. In the prior period, the costs related to a provision of £330,000 against the
recoverability of the loan balances and a charge of £388,000 in relation to the writing down to nil of an option held to purchase
a further 40% of Kelley GTM.

8. AUDITOR’S REMUNERATION

Fees payable to the Company’s Auditor for the audit of the Company and consolidated financial statements

Fees payable to the Company’s Auditor and its associates for other services:
– Audit of the Company’s subsidiaries pursuant to legislation

Fees payable to the Group’s Auditor for non-audit services:
– Tax services
– Other services

9. EMPLOYEE COSTS
Particulars of employees, including Executive Directors:

Wages and salaries
Social security costs
Pension costs
Share based payments

The average monthly number of employees (including Executive Directors) during the period was as follows:

Production
Selling and distribution
Administration

2015
£’000

104

26
12

2015
£’000

14,176
1,378
463
253

16,270

2015
No.

249
39
95

383

2014
£’000

17
11

2014
£’000

8,520
819
222
109

9,670

2014
No.

185
24
36

245

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

10. DIRECTORS’ EMOLUMENTS
Particulars of Directors’ emoluments are as follows:

Emoluments – short term employee benefits
Pension costs – post employment benefits
Employers’ national insurance
Share based payments

2015
£’000

460
34
51
4

549

2014
£’000

619
32
70
37

758

Please see the Report of the Remuneration Committee on pages 38 to 40 for full details of Directors’ emoluments which have
been audited.

Included in the aggregate emoluments for the period ended 3 October 2015 are payments of £48,000 (2014: £63,000) made
by the Company to third parties. The highest paid Director received total emoluments of £238,000 including pension contributions
of £20,000 (2014: total emoluments of £275,000 including pension contributions of £18,000).

The Group believe that the Directors of Pressure Technologies plc are the only key management personnel under the definition
of IAS 24 “Related party disclosures”.

11. TAXATION

Current tax
Current tax expense
Over provision in respect of prior years

Deferred tax
Origination and reversal of temporary differences
Over provision in respect of prior years

2015
£’000

269
(79)

190

(307)
(4)

(311)

2014
£’000

1,737
(34)

1,703

(65)
—

(65)

Total taxation (credit)/charge

(121)

1,638

Corporation tax is calculated at 20.5% (2014: 22%) of the estimated assessable profit for the period. Deferred tax is calculated at
20% (2014: 20%).

On 23 October 2015 the legislation that reduced the UK corporation tax rate to 18% was substantively enacted. As such, in future
years, deferred tax will be calculated at 18%. If this has been substantively enacted before the balance sheet date, the Group’s
overall tax credit would have been £361,000, with a net deferred tax liability of £2,082,000.

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

Profit before taxation

Theoretical tax at UK corporation tax rate 20.5% (2014: 22%)
Effect of (credits)/charges:
– non-deductible expenses and other timing differences
– disallowable acquisition costs
– Research and development allowance
– adjustments in respect of prior years
– effect of unrealised overseas
– change in taxation rates

Total taxation (credit)/charge

Pressure Technologies plc Annual Report 2015

2015
£’000

578

2014
£’000

5,349

118

1,177

(46)
(243)
(23)
(83)
154
2

(121)

301
190
—
(34)
(12)
16

1,638

12. EARNINGS PER ORDINARY SHARE
Basic and diluted earnings per share have been calculated based on the net profit or loss attributable to ordinary shareholders and
the weighted average number of ordinary shares in issue during the period.

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 options.

Profit after tax

Weighted average number of shares – basic
Dilutive effect of share options

Weighted average number of shares – diluted

Basic earnings per share
Diluted earnings per share

The Group adjusted earnings per share is calculated as follows:
Profit after tax
Acquisition related exceptional items and amortisation
Other exceptional charges and credits
Exceptional costs in relation to the option on and loan to KGTM
Theoretical tax effect of above adjustments

Adjusted earnings

Adjusted earnings per share

13. DIVIDENDS
The following dividend payments have been made on the ordinary 5p shares in issue:

Final 2012/13
Interim 2013/14
Final 2013/14
Interim 2014/15

Rate

5.2p
2.8p
5.6p
2.8p

Date

Shares
in issue

7 March 2014
8 August 2014
17 March 2015
7 August 2015

11,362,249
14,268,733
14,377,130
14,414,930

2015
£’000

699

2014
£’000

3,711

No.

14,378,392
144,690

13,025,349
263,283

14,523,082

13,288,632

4.9p
4.8p

28.5p
27.9p

699
291
425
1,408
(739)

2,084

14.5p

2015
£’000

—
—
805
404

1,209

3,711
1,556
—
718
(138)

5,847

44.9p

2014
£’000

591
400
—
—

991

At 3 October 2015, the 2014/15 final dividend had not been approved by Shareholders and consequently this has not been
included as a liability. The proposed dividend of 5.6p per share will, if approved at the AGM, be paid on 18 March 2016 at a total
cost of £807,236.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

14. GOODWILL

Cost and gross carrying amount
At 28 September 2013
Acquired through business combinations

At 27 September 2014
Acquired through business combinations (note 30)

At 3 October 2015

Precision Machined Components
Al-Met Limited
Roota Engineering Limited
The Quadscot Group

Engineered Products
The Hydratron Group

Alternative Energy
The Greenlane Group

Total
£’000

1,964
5,117

7,081
7,939

15,020

Original
cost
£’000

272
5,117
3,079

Date of
acquisition

February 2010
March 2014
October 2014

October 2010

1,692

October 2014

4,860

15,020

Goodwill arising on consolidation represents the excess of the fair value of the consideration given over the fair value of the
identifiable net assets acquired. The Group has Goodwill in relation to 5 acquisitions: Al-Met Limited, The Hydratron Group,
Roota Engineering Limited, The Quadscot Group and The Greenlane Group.

The Group tests annually for impairment, or more frequently if there are indicators that goodwill might be impaired.

The recoverable amounts of the cash generating units (“CGUs”) are determined from value in use calculations, covering a four year
forecast and applying a discount rate of 11.6% which equates to the Group’s weighted average cost of capital. The same discount
rate is used for all CGUs due to the businesses having common sources of finance and operating in very similar markets.
The discount rate used has increased from the prior year due to changes in the Group structure and sources of finance.

The forecast for year one is the forecast approved by management and used within the Group, and is based on a bottom up
assessment of costs and uses the known and estimated pipeline. The forecast used for year two assumes some revenue growth,
with forecasts for years three to four assuming no further growth. A perpetuity is used as a terminal value in this calculation.

Management’s key assumptions are based on their past experience and future expectations of the market over the longer term.
The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected changes
to selling prices and direct costs.

Apart from the considerations described in determining the value-in-use of the cash generating unit above, the Group management
does not believe that possible changes on the assumptions underlying the value in use calculation would have an impact on the
carrying value of goodwill.

After applying sensitivity analysis in respect of the results and future cash flows, in particular for presumed growth rates and
discount rates, management believe that no impairment is required. Management is not aware of any other changes that would
necessitate changes to its key estimates. At 3 October 2015, no reasonable expected change in the key assumptions would give
rise to an impairment charge for any CGU and the assumptions accordingly are not sensitive.

Pressure Technologies plc Annual Report 2015

Non
contractual
Licence and
customer
Customer
distribution Development
agreement expenditure order book Technology relationships
£’000

£’000

15. INTANGIBLE ASSETS

Cost
At 28 September 2013
Acquired through business combination
Disposed of in the period

At 27 September 2014
Acquired through business combination
Disposed of in the period

At 3 October 2015

Amortisation
At 28 September 2013
Charge for the period
Disposed of in the period

At 27 September 2014
Charge for the period
Disposed of in the period

At 3 October 2015

Net book value
At 3 October 2015

At 27 September 2014

Remaining useful economic life
at 3 October 2015

1,200
—
—

1,200
—
(1,200)

—

323
70
—

393
—
(393)

—

807

—

234
—
(234)

—
—
—

—

234
—
(234)

—
—
—

—

197
—
(197)

—
—
—

—

197
—
(197)

—
—
—

—

Total
£’000

2,568
6,503
(431)

8,640
9,578
(1,200)

937
6,503
—

7,440
4,262
—

11,702

17,018

593
694
—

1,287
1,560
—

2,847

1,347
764
(431)

1,680
2,280
(393)

3,567

—
—
—

—
5,316
—

5,316

—
—
—

—
720
—

720

4,596

8,855

13,451

—

6,153

6,960

—

7 years

6 years

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

16. PROPERTY, PLANT AND EQUIPMENT

Cost
At 28 September 2013
Additions
Acquired through business combinations
Disposals
Net exchange differences

At 27 September 2014
Additions
Acquired through business combinations
Disposals
Net exchange differences

At 3 October 2015

Depreciation
At 28 September 2013
Charge for the period
Disposed of in the period

At 27 September 2014
Charge for the period
Disposed of in the period

At 3 October 2015

Net book value
At 3 October 2015

At 27 September 2014

Assets under
construction
£’000

Land and
Plant and
buildings machinery
£’000

£’000

—
—
1,229
—
—

1,229
608
—
—
—

1,837

—
—
—

—

—
—
800
—
—

800
3,434
660
—
—

4,894

—
9
—

9
57
—

8,157
1,145
815
(444)
(2)

9,671
2,260
1,121
(511)
4

12,545

3,390
795
(296)

3,889
1,313
(340)

4,862

Total
£’000

8,157
2,374
1,615
(444)
(2)

11,700
6,302
1,781
(511)
4

19,276

3,390
804
(296)

3,898
1,370
(340)

4,928

1,837

4,828

7,683

14,348

1,229

791

5,782

7,802

Included within the net book value of £14,348,000 is £900,000 (2014: £607,000) relating to assets held under finance lease
agreements. The depreciation charged to the financial statements in the period in respect of such assets amounted to £99,000
(2014: £21,000).

17. SUBSIDIARIES
A list of investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given
in note 4 to the Parent Company’s separate financial statements as listed on page 88.

Pressure Technologies plc Annual Report 2015

18. INVESTMENTS IN ASSOCIATES

At 28 September 2013
Investments made in the year
Share of profits/(losses)

At 27 September 2014
Investments made in the year
Share of profits/( losses)

As at 3 October 2015

£’000

—
306
(183)

123
—
(123)

—

Note that the share of losses of associates as set out in the Consolidated Statement of Comprehensive Income were set first
against the investment and then against the value of other receivables from KGTM, as shown below. The remaining value of these
receivables has been provided against as set out in note 7.

Amount of losses set against investment
Amount of losses set against other receivables from KGTM

2015
£’000

123
28

151

2014
£’000

183
—

183

The Group’s share of the results of its principal associates and its aggregated assets (including goodwill) and liabilities, are as follows:

At 27 September 2014
Kelley GTM, LLC.

At 3 October 2015
Kelley GTM, LLC.

Country of
incorporation

Assets
£’000

Liabilities
£’000

Revenues
£’000

Loss
£’000

USA

612

(4,424)

1,374

(183)

USA

578

(5,273)

793

(741)

Interest
held
%

KGTM has a year-end date of 31 December. The period for which the results of KGTM have been included in the Group’s financial
statements is from 28 September 2014 to 3 October 2015.

The total losses recognised against the investment and other receivables from KGTM for the period were £151,000 (2014:
£183,000) leaving unrecognised losses of £590,000 (2014: £nil).

19. INVENTORIES

Raw materials and consumables
Work in progress
Finished goods

2015
£’000

3,825
3,292
297

7,414

2014
£’000

4,081
4,738
—

8,819

Included in the total net value above are gross inventories of £1,414,000 (2014: £624,000) over which provisions have been made of
£832,000 (2014: £623,000).

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

20. TRADE AND OTHER RECEIVABLES

Current
Trade receivables
Amounts due from customers for construction contract work
Other receivables
Prepayments and accrued income

Non-current
Loans to associated companies
Accrued income

2015
£’000

11,015
756
545
1,223

13,539

2015
£’000

—
—

—

2014
£’000

13,924
383
5,012
1,242

20,561

2014
£’000

1,436
139

1,575

Included in non-current assets in the prior period were debts not due for settlement for a number of years. These assets are no
longer disclosed as non-current as they near maturity. The release during the year was £9,000 (2014: £11,000).

The average credit period taken on the sale of goods and services was 79 days (2014: 63 days) in respect of the Group. Two debtors
individually accounted for over 10% of trade receivables and both individually represented 10% of the total balance. In 2014, three
debtors accounted for over 10% of trade receivables and represented 14%, 13% and 11% of the total balance.

Ageing of past due but not impaired receivables:

Days past due:
0 – 30 days
31 – 60 days
61 – 90 days
91 – 120 days
121+ days

Total

The Group’s doubtful debt provision is not a significant balance.

21. DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives carried at fair value not recognised for hedge accounting
– Forward foreign currency contracts

Asset

2015
£’000

1,221
539
129
77
885

2,851

2015
£’000

2014
£’000

2,330
855
257
86
47

3,575

2014
£’000

Pressure Technologies plc Annual Report 2015

22. TRADE AND OTHER PAYABLES

Amounts due within 12 months
Trade payables
Progress billings on construction contracts in excess of work completed
Other tax and social security
Accruals, deferred income and other payables
Deferred consideration

Total due within 12 months

Amounts due after 12 months
Deferred consideration
Other payables
Accruals, deferred income and other payables

Total due after 12 months

2015
£’000

3,447
2,131
903
4,044
2,500

2014
£’000

4,930
2,331
1,096
6,111
1,985

13,025

16,453

3,531
—
1,547

5,078

2,432
313
164

2,909

In the prior period, other payables due after 12 months related to rental lease incentives, the benefits of which were spread over
the life of the lease. Following the purchase of the Meadowhall site in the current period, this was no longer required and has been
released to the consolidated statement of comprehensive income as an exceptional credit, see note 6.

Deferred income due after 12 months includes grant income received and customer prepayments for contracts in delivery
in a number of years. There are no unfulfilled conditions or other contingencies attached to these grants.

23. BORROWINGS

Non-current
Bank borrowings
Finance liabilities

Current
Finance liabilities

Total borrowings

2015
£’000

10,000
236

10,236

337

10,573

2014
£’000

—
324

324

180

504

Bank borrowings mature in 2018 and bear average coupons of 2% above LIBOR annually.

Total borrowings include secured liabilities of £10 million. Bank borrowings are secured on the property, plant and equipment
of the Group (note 16). Obligations under finance leases are secured on the plant & machinery assets to which they relate.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

23. BORROWINGS CONTINUED
The carrying amounts of the Group’s borrowings are all denominated in GBP.

The maturity profile of long-term loans is as follows:

Due within one year
Finance liabilities

Due within two to five years
Bank borrowings
Finance liabilities

The Group has the following undrawn borrowing facilities:

Expiring beyond one year

2015
£’000

2014
£’000

337

180

10,000
236

2015
£’000

5,000

—
324

2014
£’000

—

The facility also includes an accordion feature option allowing for an additional facility for £10 million subject to certain conditions set
out in the agreement.

24. CONSTRUCTION CONTRACTS
Construction contracts are accounted for in accordance with IAS 11, “Construction Contracts” and IAS 18, “Revenue and
construction contracts”. The position on individual contracts is held as “Amounts due from customers for contract work” within
trade and other receivables or as “Progress billings on construction contracts in excess of work completed” within trade and other
payables as applicable.

Costs incurred and profit recognised to date
Less: Progress billings

Net balance sheet position for ongoing contracts

2015
£’000

14,488
(15,863)

(1,375)

2014
£’000

8,348
(10,296)

(1,948)

25. FINANCIAL INSTRUMENTS
CAPITAL RISK MANAGEMENT
Pressure Technologies plc’s capital management objectives are to ensure the Group’s ability to continue as a going concern and
to provide an adequate return to shareholders through the payment of dividends.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 23, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed
in the consolidated statement of changes in equity.

Debt
Cash and cash equivalents

Net (debt)/cash

Equity

2015
£’000

(10,573)
3,459

(7,114)

2014
£’000

(504)
6,356

5,852

36,341

36,529

Debt is defined as long and short-term borrowings, as detailed in note 23. Equity includes all capital and reserves of the Group
attributable to equity holders of the parent.

The Group is not subject to externally imposed capital requirements, other than the minimum capital requirements and duties
regarding a serious reduction of capital, as imposed by the Companies Act 2006 on all public limited companies.

Pressure Technologies plc Annual Report 2015

25. FINANCIAL INSTRUMENTS CONTINUED
CAPITAL RISK MANAGEMENT CONTINUED
The Group held the following categories of financial instruments:

Financial assets
Loans and receivables:
– Trade receivables
– Other receivables
– Other receivables – greater than one year
– Cash and cash equivalents
Fair value through the profit and loss (FVTPL):
– Derivative instrument – forward currency contract not recognised for hedge accounting

Financial liabilities
Financial liabilities – held at amortised cost
– Trade payables
– Accruals
– Deferred consideration payable
– Borrowings

2015
£’000

2014
£’000

11,015
545
—
3,459

13,924
5,012
1,436
6,356

15,045

26,771

2015
£’000

2014
£’000

3,447
2,042
6,031
10,573

22,093

4,930
3,328
4,416
504

13,178

The fair value of the financial instruments set out above is not materially different from their book value.

FINANCIAL RISK MANAGEMENT OBJECTIVES
Management monitor and manage the financial risks relating to the operations of the Group through regular reports to the Board.
These risks include currency risk, interest rate risk, credit risk and liquidity risk.

The Group seeks to minimise the effects of currency risk by using derivative financial instruments. The use of financial derivatives
is governed by the Group’s policies on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and
non-derivative financial instruments and the investment of excess liquidity. The Group does not enter into or trade financial
instruments, including derivative financial instruments, for speculative purposes. Whilst the Group enters into forward currency
contracts during the period to mitigate foreign currency risk, it does not apply hedge accounting.

MARKET RISK
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, particularly in US Dollars,
CA Dollars, NZ Dollars and Euros, and interest rates. The Group enters into derivative financial instruments to manage its exposure to
foreign currency risk.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

25. FINANCIAL INSTRUMENTS CONTINUED
FINANCIAL RISK MANAGEMENT OBJECTIVES CONTINUED
FOREIGN CURRENCY RISK MANAGEMENT
The Group purchases its principal raw materials in US Dollars, CA Dollars, NZ Dollars, Euros and Pounds Sterling and receives
payment for its products in US Dollars, CA Dollars, NZ Dollars, Euros and Pounds Sterling. After netting off foreign currency receipts
and payments, there is a net exposure to the risk of currency movements in US Dollars, CA Dollars, NZ Dollars and Euros. Where
necessary, the net exposure is hedged using forward contracts.

The carrying amounts of the Group’s foreign currency denominated monetary financial assets and monetary financial liabilities
at the reporting date are as follows:

Euro
Norwegian Krone
US Dollar
CA Dollar
NZ Dollar

Financial
assets
2015
£’000

Financial
assets
2014
£’000

Financial
liabilities
2015
£’000

Financial
liabilities
2014
£’000

1,777
4
3,056
179
92

5,108

2,859
5
458
—
—

3,322

1,834
—
2,286
243
3,576

7,939

320
—
210
—
—

530

FOREIGN CURRENCY SENSITIVITY ANALYSIS
The Group’s exposure to a 10% exchange rate movement on its foreign currency denominated financial assets and financial
liabilities is as follows:

Euro
currency
impact
2015
£’000

Euro
currency
impact
2014
£’000

Norwegian
Krone
currency
impact
2015
£’000

Norwegian
Krone
currency
impact
2014
£’000

US Dollar
currency
impact
2015
£’000

US Dollar
currency
impact
2014
£’000

Profit or loss

231

—

NZ Dollar
currency
impact
2015
£’000

NZ Dollar
currency
impact
2014
£’000

CA Dollar
currency
impact
2015
£’000

CA Dollar
currency
impact
2014
£’000

Profit or loss

317

—

The use of a 10% movement in exchange rates is considered appropriate given recent movements in exchange rates.

A substantial amount of the Group’s sales and purchases are made in foreign currencies. The exposure to foreign exchange rates
varies throughout the year depending on the volume and timing of transactions in foreign currencies.

The Group has deferred consideration balances denominated in NZ dollars. Given the magnitude of the balances, retranslation
gains and losses in respect of the deferred consideration are disclosed as an exceptional item. If the deferred consideration is
excluded, a 10% movement on the NZ dollars exchange rate gives rise to a theoretical charge or credit of £4,000.

Pressure Technologies plc Annual Report 2015

25. FINANCIAL INSTRUMENTS CONTINUED
FAIR VALUE HIERARCHY
Financial instruments carried at fair value are required to be measured by reference to the following levels:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the financial asset or liability is clarified is determined based on the lowest level of significant input to one
fair value measurement. The Group holds level 2 financial instruments as detailed below. No transfers in either direction have
been made between the levels of fair value hierarchy.

FORWARD FOREIGN EXCHANGE CONTRACTS – LEVEL 2
The Group enters into forward foreign exchange contracts to cover specific foreign currency payments and receipts. The Group
also periodically enters into forward foreign exchange contracts to manage the risk associated with anticipated sales and purchase
transactions out to between 6-12 months. The Group does not hedge account for the forward currency exchange contracts.

At 3 October 2015, the Group had contracts outstanding to sell €1.000 million for £0.714 million and to sell US$0.400 million for
£0.273 million. (2014: sell €2.850 million for £2.287 million, sell US$0.700 million for £0.421 million).

The fair value of forward foreign exchange contracts at 3 October 2015 gave rise to a loss of £17,000 (2014: loss of £28,000).

OPTION TO ACQUIRE 40% OF KGTM – LEVEL 3
An option to acquire a further 40% of KGTM, an associated company, held in the prior period has now expired, with no accounting
entry. This option was valued at a maximum of £388,000 at outset and had been fully provided against in the prior period.

INTEREST RATE RISK MANAGEMENT
If interest rates had been 0.5% higher/lower and all other variables were held constant, the impact on the results in the consolidated
statement of comprehensive income and equity would be an decrease/increase of £22,000 (2014: £35,000).

PRICE RISK MANAGEMENT
Where possible the Group enters into contracts incorporating price escalation clauses to mitigate any significant exposure
to material price risk.

CREDIT RISK MANAGEMENT
The Group’s credit risk is primarily attributable to its trade receivables. The two largest customers within trade receivables account
for 20% (2014: 27%) of debtors. Management continually monitor this dependence on the largest customers and are continuing to
seek acquisitions and are also developing new products, customers and markets to reduce this dependence. Credit risk is managed
by monitoring the aggregate amount and duration of exposure to any one customer. The Group’s management estimate the level
of allowances required for doubtful debts based on prior experience and their assessment of the current economic environment.
The Group’s maximum exposure to credit risk is limited to the carrying value of financial assets recognised at the period end. The
Group’s management considers that all financial assets that are not impaired or past due are of good credit quality. The credit risk
on liquid funds is minimized by using counterparty banks with high credit-ratings assigned by international credit-rating agencies.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

25. FINANCIAL INSTRUMENTS CONTINUED
LIQUIDITY RISK MANAGEMENT
The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously monitoring forecast
and actual cash flows and by matching the maturity profiles of financial assets and liabilities.

At 3 October 2015, the Group’s liabilities have contractual maturities summarised below:

2015

Trade and other payables
Amounts due under hire purchase agreements

2014

Trade and other payables
Amounts due under hire purchase agreements

Current
within
6 months
£’000

Current

6 to12 Non-current
months 1 to 5 years
£’000

£’000

Total net
payable
£’000

7,756
168

7,924

2,235
169

2,404

5,078
236

5,314

15,069
573

15,642

Current
within
6 months
£’000

10,247
90

10,337

Current

6 to12 Non-current
1 to 5 years
£’000

months
£’000

1,984
90

2,074

3,228
324

3,552

Total net
payable
£’000

15,459
504

15,963

The following amounts have been recognised in the consolidated statement of comprehensive income in respect of derivative
financial instruments:

Fair value through profit and loss (FVTPL)
– Derivative instrument – forward currency contract not recognised for hedge accounting
– Option held to acquire a further 40% of the issued share capital of KGTM

Amounts charged to cost of sales within the consolidated statement of comprehensive income

FAIR VALUES
The fair values of financial assets and liabilities are determined as follows:

2015
£’000

17
—

2014
£’000

28
388

416

• Outstanding foreign currency exchange contracts are measured using quoted forward exchange rates at the reporting date

The Group does not hedge account.

The carrying value and fair value of the financial assets and financial liabilities are considered to be the same.

Pressure Technologies plc Annual Report 2015

26. DEFERRED TAX
The following are the major deferred tax assets/(liabilities) recognised by the Group and movements thereon during the current
and prior reporting period.

Accelerated tax
depreciation
£’000

Intangible
assets
£’000

Short term
temporary
Share
differences option costs
£’000

£’000

Operating
lease
incentives
£’000

At 28 September 2013
(Charge)/credit to income
Acquired through business combinations

At 27 September 2014
(Charge)/credit to income
Acquired through business combinations

At 3 October 2015

(470)
(81)
(106)

(657)
(62)
(39)

(758)

(68)
138
(1,301)

(1,231)
313
(852)

(1,770)

51
(19)
—

32
79
—

111

19
30
—

49
46
—

68
(3)
—

65
(65)
—

—

The net deferred tax balance has been analysed as follows in the consolidated balance sheet:

Total
£’000

(400)
65
(1,407)

(1,742)
311
(891)

(2,322)

Non-current asset
Deferred tax asset

Non-current liabilities
Deferred tax liabilities

27. CALLED UP SHARE CAPITAL

Allotted, issued and fully paid
Ordinary shares of 5p each

2015
£’000

2014
£’000

270

155

(2,592)

(2,322)

(1,897)

(1,742)

2015
No.

2014
No.

2015
£’000

2014
£’000

14,414,930

14,362,813

721

718

The Company issued 52,117 ordinary shares at a price of 150p to employees exercising their rights to acquire shares under the
Company’s SAYE scheme throughout the year. The effect of these issues has been to increase share capital by £3,000 and share
premium by £76,000.

28. SHARE BASED PAYMENTS
SAVE-AS-YOU-EARN SCHEME
Pressure Technologies plc introduced a share option scheme for all employees of the Group in November 2007. A seventh grant of
options was made in July 2015. If the options remain unexercised after a period of 3 years and 6 months from the date of the grant,
the options expire. Options are forfeited if the employee leaves the Group before the options vest. Members of the scheme are
required to remain employees of the Group and make regular contributions.

Details of the share options outstanding during the period are as follows:

Outstanding at the beginning of the period
Granted during the period
Lapsed during the period
Forfeited during the period
Cancelled during the period
Exercised during the period
Expired during the period

Outstanding at the end of the period

Weighted
average
exercise
price

2015
No.

202,463
282,681
—
(16,295)
(61,439)
(52,117)
—

355,293

361p
161.2p
—
520.1p
584.8p
150p
—

186.9p

Weighted
average
exercise
price

152p
593p
215p
—
—
150p
—

361p

2014
No.

166,071
98,143
(17,147)
—
—
(44,604)
—

202,463

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

28. SHARE BASED PAYMENTS CONTINUED
SAVE-AS-YOU-EARN SCHEME CONTINUED
4,800 of the outstanding options were exercisable at the end of the period. The options outstanding at 3 October 2015 had
a weighted average remaining contractual life of 2.5 years (2014: 2.0 years). The terms of these options are as follows:

Date of grant

6 August 2012
29 July 2013
31 July 2014
30 July 2015

Total options outstanding at 3 October 2015

Options

outstanding at
3 October
2015

4,800
47,063
21,865
281,565

355,293

Market value
at date of
grant

Vesting
period

3 years
3 years
3 years
3 years

175p
247.5p
719p
238p

Exercise
price

150p
156p
593p
161.2p

Exercise
period

6 months
6 months
6 months
6 months

There are no performance conditions that apply to these options other than continued employment.

PRESSURE TECHNOLOGIES PLC PERFORMANCE SHARE PLAN – ENTERPRISE MANAGEMENT PLAN
Pressure Technologies plc introduced this share option scheme in October 2009. These options are exercisable between three and
five years following the date of grant. Options are forfeited if the employee leaves the Group before the options vest.

Details of the share options outstanding during the period are as follows:

Outstanding at the beginning of the period
Granted during the period
Lapsed during the period
Exercised during the period

Outstanding at the end of the period

Weighted
average
exercise
price

2015
No.

206,156
—
(53,000)
—

153,156

219p
—
242.5p
—

210.6p

Weighted
average
exercise
price

222p
—
—
233p

219p

2014
No.

257,768
—
—

(51,612)

206,156

53,156 of the outstanding options were exercisable at the end of the period. The options outstanding at 3 October 2015 had
a weighted average remaining contractual life of 2.3 years (2014: 4.2 years). The terms of these options are as follows:

Date of grant

23 February 2012
9 August 2013

Total options outstanding at 3 October 2015

Options
outstanding at
3 October
2015

53,156
100,000

153,156

Market value
at date of
grant

Vesting
period

3 years
3 years

150.5p
242.5p

Exercise
price

150.5p
242.5p

There are no performance conditions that apply to these options other than continued employment. The options will lapse if not
exercised by 5 years from the date of grant. No options were exercisable under this scheme as at the period end.

Pressure Technologies plc Annual Report 2015

28. SHARE BASED PAYMENTS CONTINUED
PRESSURE TECHNOLOGIES PLC PERFORMANCE SHARE PLAN – SHARE OPTIONS PLAN
Pressure Technologies plc introduced this share option scheme in February 2012. These options are exercisable between three and
five years following the date of grant. Options are forfeited if the employee leaves the Group before the options vest.

Details of the share options outstanding during the period are as follows:

Outstanding at the beginning of the period
Lapsed during the period

Outstanding at the end of the period

No options were exercisable under this scheme as at the period end.

Weighted
average
exercise
price

2015
No.

73,089
(73,089)

—

150.5p
150.5p

—

Weighted
average
exercise
price

150.5p
—

150.5p

2014
No.

73,089
—

73,089

PRESSURE TECHNOLOGIES PLC – LONG TERM INCENTIVE PLAN
Pressure Technologies plc introduced this share option scheme in April 2014. These options are exercisable between three and
six years following the date of grant. Options are forfeited if the employee leaves the Group before the options vest, unless certain
conditions are met.

Details of the share options outstanding during the period are as follows:

Outstanding at the beginning of the period
Granted during the period
Lapsed during the period

Outstanding at the end of the period

Weighted
average
exercise
price

2015
No.

77,493
232,846
(50,750)

259,589

720.8p
354.2p
571.4p

421.2p

Weighted
average
exercise
price

—
720.8p
—

720.8p

2014
No.

—
77,493
—

77,493

None of the outstanding options were exercisable at the end of the period. The outstanding options outstanding at 3 October 2015
had a weighted average remaining contractual life of 5.3 years (2014: 5.5 years). The terms of these options are as follows:

Date of grant

3 April 2014
12 December 2014
25 June 2015

Total options outstanding at 3 October 2015

Options
outstanding at
3 October
2015

57,377
90,547
111,665

259,589

Market value
at date of
grant

Vesting
period

3 years
3 years
3 years

720.8p
473.3p
212p

Exercise
price

720.8p
473.3p
225p

There are performance related conditions that apply to these options. The figures disclosed above show the options exercisable
if all performance conditions are met. Full details of the performance conditions can be found in the report to the remuneration
committee. The options lapse if not exercised 6 years after the grant date. No options were exercisable as at the reporting date.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

28. SHARE BASED PAYMENTS CONTINUED
PRESSURE TECHNOLOGIES PLC – LONG TERM INCENTIVE PLAN CONTINUED
The options granted during the period have been valued using the Black-Scholes model. The inputs into the Black-Scholes model
are as follows:

Scheme:
Date granted:

Share price at date of offer
Exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield

Long Term

Long Term
Incentive Plan Incentive Plan
25/06/2015

12/12/2014

473p
473p
44%
5 years
1.2%
1.3%

212p
225p
49%
5 years
1.6%
1.3%

Save-As-
You-Earn
30/07/2015

238p
161p
53%
3 years
1.0%
1.3%

Expected volatility was determined by calculating the historical volatility of the Group’s share price over the period since the Group
was admitted to AIM. The expected option value used in the model has been adjusted, based on management’s best estimate, for
the effects of non-transferability, exercise restrictions and behavioural considerations. The expected dividend yield was based on
the Group’s dividend pay out pattern at the date of issue of the options.

In line with HMRC approved schemes, share options under the Save-As-You-Earn scheme may be exercisable at a discount
of up to 20% of the market value of the shares at the time of issue.

The total charge to the consolidated statement of comprehensive income in the period in respect of share-based payments
was £253,000 (2014: £109,000). The charge is calculated in accordance with IFRS 2, “Share Based Payments”. There were a large
number of cancellations of share options in the year, at the request of employees who remained in the employment of the Group.
As required by IFRS, the charge associated with these options has been accelerated and recognised in the current period, giving
a share option cost larger than in previous years.

A deferred tax credit of £46,000 (2014: £30,000) was recognised in the consolidated statement of comprehensive income during
the period in respect of share based payments.

Pressure Technologies plc Annual Report 2015

29. CONSOLIDATED CASH FLOW STATEMENT

Profit after tax
Adjustments for:
Finance costs/(income) – net
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share option costs
Income tax expense
Loss/(profit) on derivative financial instruments
(Profit)/loss on disposal of property, plant and equipment
Exceptional charges associated with Kelley GTM
Exceptional IFRS rent adjustment release
Exceptional deferred consideration released and revaluation
Loss on investment in associate

Changes in working capital:
(Increase) in inventories
(Increase) in trade and other receivables
Increase in trade and other payables

Cash flows from operating activities

2015
£’000

699

442
1,370
2,280
253
(121)
17
(10)
1,408
(322)
(2,166)
151

1,693
5,964
(3,733)

7,925

2014
£’000

3,711

28
804
764
109
1,638
28
(7)
718
—
—
183

(440)
(7,449)
3,324

3,411

30. BUSINESS COMBINATIONS
THE QUADSCOT GROUP OF COMPANIES
On 1 October 2014, Pressure Technologies plc acquired 100% of the issued share capital of the Quadscot Group of companies
(“Quadscot”) for an initial consideration of £7,884,000, plus maximum deferred consideration of £3,000,000.

In calculating goodwill below, the contingent consideration is held at fair value at time of acquisition of £1,697,000. This has been
estimated based on future earnings. The fair value estimate is based on a discount rate of 3% and assumes that £1,800,000 of deferred
consideration is payable. The effects on the fair value of risk and uncertainty in the future cash flows are dealt with by adjusting the
estimated cash flows rather than adjusting the discount rate. At the balance sheet date the £1.8 million previously provided has been
released as, despite the profitability of the business, the minimum target EBITDA in 2016 is no longer expected to be achieved.

Quadscot specialises in a wide range of components for oil and gas pressure systems and downhole tools and is based in Blantyre,
Scotland. The transaction has been accounted for by the acquisition method of accounting.

The directors believe that Quadscot is complementary to the Group’s other subsidiary businesses and provides cross selling
opportunities between the respective customer bases.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

30. BUSINESS COMBINATIONS CONTINUED
THE QUADSCOT GROUP OF COMPANIES CONTINUED
The table below summarises the consideration paid for Quadscot and the fair value of the assets and liabilities acquired:

Intangible
assets
recognised
on
Book value acquisition acquisition
£’000

Fair value
adjustment
on

£’000

Recognised amounts of identifiable assets acquired and liabilities assumed:
Property plant and equipment
Intangible assets
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Current tax liabilities
Deferred tax (liabilities)/assets

1,988
—
242
1,460
1,149
(917)
(202)
(314)
(94)

3,312

(275)
—
—
—
—
—
—
—
55

(220)

—
4,262
—
—
—
—
—
—
(852)

3,410

Goodwill

Total consideration

Satisfied by:
Cash
Deferred cash consideration

Net cash outflow arising on acquisition
Initial cash consideration
Cash and cash equivalents acquired

Borrowings acquired

Net cash acquired

Fair value
£’000

1,713
4,262
242
1,460
1,149
(917)
(202)
(314)
(891)

6,502

3,079

9,581

7,884
1,697

9,581

7,884
(1,149)

6,735
202

6,937

The intangible assets acquired with the business comprise £4,262,000 in relation to non-contractual customer relationships.

The goodwill arising on the acquisition of Quadscot is mainly attributable to the skills and talent of the workforce and the
anticipated value of synergies that Quadscot can bring to the wider Pressure Technologies Group.

The revenue included in the consolidated statement of comprehensive income since acquisition contributed by Quadscot was
£4.2 million. Quadscot also contributed a profit of £1.0 million over the same period. The effect of the inclusion of the acquisition had
it been completed on the first day of the financial year is considered to be immaterial upon the Group’s revenue and profit before tax.

Pressure Technologies plc Annual Report 2015

30. BUSINESS COMBINATIONS CONTINUED
THE GREENLANE GROUP OF COMPANIES
On 1 October 2014, Pressure Technologies plc acquired the trade and certain assets of the Greenlane Group of companies,
for an initial £5,971,000 (NZ$12,000,000 translated at £1 : NZ$2.085) plus a maximum deferred consideration of £6,235,000
(NZ$13,000,000 translated at £1 : NZ$2.085).

In calculating goodwill below, the contingent consideration is held at fair value at time of acquisition of £3,533,000. This has
been estimated using the income approach. The fair value estimate is based on a discount rate of 3% and reflects the profits
the directors consider are likely to arise.

Greenlane is a leading global provider of Biogas upgraders using waterwash technology. Greenlane have designed and built
over 80 biogas plants around the world. The business has operations in Vancouver, Auckland and Sheffield.

The Directors consider that a worldwide presence in the Alternative Energy segment provides opportunities to grow the Group
and diversify the markets in which the Group operates.

The table below summarises the consideration paid for Greenlane and the fair value of the assets and liabilities acquired.

Intangible
assets
recognised
on
Book value acquisition
£’000

£’000

Fair value
£’000

Recognised amounts of identifiable assets acquired and liabilities assumed:
Property, plant and equipment
Intangible assets
Inventories
Trade and other receivables
Trade and other payables

68
—
46
153
(132)

135

—
5,316
—
—
—

5,316

Goodwill

Total consideration

Satisfied by:
Cash advanced in previous period
Cash paid in current period
Remaining initial consideration
Existing licence held with Greenlane
Deferred cash consideration

68
5,316
46
153
(132)

5,451

4,860

10,311

2,782
2,913
276
807
3,533

10,311

The intangible assets acquired with the business comprise £5,316,000 in relation to the technology acquired.

The goodwill arising on the acquisition of Greenlane is mainly attributable to the skills and talent of the workforce and the
anticipated value of synergies that Greenlane can bring to the wider Pressure Technologies Group.

The revenue included in the consolidated statement of comprehensive income since acquisition contributed by Greenlane
was £7,243,000. Greenlane also contributed a loss of £2,519,000 over the same period. The effect of the inclusion of the
acquisition had it been completed on the first day of the financial year is considered to be immaterial upon the Group’s
revenue and profit before tax.

Details of acquisition costs paid in the year are given in note 5 to the financial statements.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

31. FINANCIAL COMMITMENTS
(A) CAPITAL COMMITMENTS

Commitments for capital expenditure entered into were as follows:

Contracted for, but not provided in the accounts

(B) OPERATING LEASE COMMITMENTS

2015
£’000

—

2014
£’000

—

The Group has entered into commercial leases on certain properties, motor vehicles and items of plant and equipment. At the
balance sheet date, the Group had outstanding commitments for minimum lease payments under non-cancellable operating
leases, which fall due as follows:

Land and buildings:
Within one year
In the second to fifth years inclusive
After more than five years

Other assets:
Within one year
In the second to fifth years inclusive

2015
£’000

302
1,009
928

2,239

69
55

124

2014
£’000

673
2,831
830

4,334

57
59

116

The operating lease commitment on land and buildings includes the following significant commitments:

• A 15 year lease for Al-Met Limited’s property commenced on 10 November 2010 with rent reviews at the end of year five and

year ten of the term

• Hydratron Limited’s ten year property lease commenced on 28 October 2010 and has a rent review at the end of year five
• A five year lease for the Group’s head office commenced on 31 July 2014, at Chapeltown, Sheffield

32. CONTINGENT LIABILITIES
Following the fatal accident at Chesterfield Special Cylinders Ltd in June, whilst the Police have confirmed that no charges for
manslaughter will be brought, the HSE investigation remains ongoing and is expected to continue at least through 2016. At this
time it is not possible to determine with any degree of certainty what, if any, financial penalties may be levied on Chesterfield Special
Cylinders Ltd or any other group company as a result of this investigation. We continue to cooperate fully with the HSE and at such
time as the quantum and likelihood of any penalty is able to be reliably determined further disclosure or provision will be made in
accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”.

33. RELATED PARTY TRANSACTIONS
The interests of Directors in dividends paid during the year are disclosed in the Report of the Remuneration Committee which
has been audited.

During the year, Pressure Technologies purchased five GTMs from Kelley GTM, LLC, in which the Group owns a 40% stake.
These GTMs were purchased at a cost of £391,000 with the intention of entering them into a lease fleet of GTMs in operation,
in which they remain at the period end. The GTMs owned by the Pressure Technologies Group are disclosed within property,
plant and equipment at their carrying value. The transaction was completed on an arm’s length basis.

The Group also has loans outstanding from Kelley GTM, LLC of US$3,500,000. The Directors consider that the recoverability of these
loans is not certain and therefore have made a full provision against the full value of the loans.

Pressure Technologies plc Annual Report 2015

COMPANY BALANCE SHEET
AS AT 3 OCTOBER 2015

Fixed assets
Goodwill
Investments
Tangible fixed assets
Investment in associate
Debtors

Current assets
Debtors
Cash at bank and in hand

Creditors: amounts falling due within one year

Net current (liabilities)/assets

Creditors: amounts falling due after more than one year

Net assets

Capital and reserves
Called up share capital
Share premium account
Equity – non distributable
Profit and loss account

Equity shareholders’ funds

The accounting policies and notes on pages 86 to 91 form part of these financial statements.

Approved by the Board on 15 December 2015 and signed on its behalf by:

JOANNA ALLEN
Director

Notes

5
4
6
7
8

2015
£’000

4,212
29,604
3,700
—
11,307

48,823

1,346
359

1,705
(3,075)

2014
£’000

—
21,447
28
221
7,151

28,847

3,483
3,476

6,959
(2,639)

(1,370)

4,320

(14,596)

32,857

(2,432)

30,735

11
13
13
13

721
21,539
412
10,185

32,857

718
21,463
182
8,372

30,735

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE COMPANY FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES
These financial statements have been prepared under the historical cost convention and in accordance with applicable UK
accounting standards and the Companies Act 2006. Under section 408 of the Companies Act 2006 the Company is exempt from
the requirement to present its own profit and loss account. The profit for the financial year dealt within the financial statements
of the holding Company was £2,999,000 (2014: £2,827,000) after applying a tax charge (note 10) of £97,000 (2014: credit £13,000)
to the profit before tax of £3,096,000 (2014: £2,814,000).

GOING CONCERN
The Directors are satisfied that the Company has adequate resources to continue to operate for the foreseeable future. For this
reason they continue to adopt the going concern basis for preparing the financial statements. For further information see the
Group’s accounting policies.

INVESTMENTS
Investments in subsidiary undertakings are stated at cost subject to provision for impairment where the underlying business does
not support the carrying value of the investment.

FIXED ASSETS AND DEPRECIATION
Fixed assets are stated at cost less accumulated depreciation and any reduction for recognised impairment in value with
a corresponding charge to the profit and loss account. Cost reflects purchase price or construction cost of the asset together with
any incidental costs of bringing the asset into use. Land is not depreciated. Depreciation on other assets is applied on a straight-line
basis so as to reduce the assets to their residual values over their estimated useful lives. The rates of depreciation used are:

Plant and machinery
Buildings

Four years
50 years

PENSIONS
The Company makes contributions to a defined contribution scheme with costs being charged to the profit and loss account
in the period to which they relate.

SHARE BASED PAYMENTS
The share option programme allows Pressure Technologies plc to grant options to Group employees to acquire shares in Pressure
Technologies plc. The fair value is measured at the date of granting the options and spread over the period during which the
employees become unconditionally entitled to the options. The fair value of the options granted is measured using an option
valuation model, taking into account the terms and conditions upon which the options were granted. The amount recognised
as fair value is adjusted to reflect the actual number of share options that vest except where forfeiture is due only to share prices
not achieving the threshold for vesting. Deferred taxation is recognised over the vesting period.

Where the individuals are employed by the parent Company, the fair value of options granted is recognised as an employee
expense with a corresponding increase in equity. Where the individuals are employed by a subsidiary undertaking, the fair value
of options to purchase shares in the Company that have been issued to employees of subsidiary companies is recognised as an
additional cost of investment by the parent Company. An equal amount is credited to other equity reserves.

INVESTMENTS IN ASSOCIATES
Associates are all entities over which the Company has significant influence but not control, generally accompanying a shareholding
of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting.
Under the equity method, the investments are initially recognised at cost, and the carrying amount is increased or decreased
to recognise the investor’s share of the profit or loss of the investee after the date of acquisition.

The Company’s share of post-acquisition profit or loss is recognised in profit and loss. When the Group’s share of losses in an
associate equals or exceeds this interest in the associate, the Group does not recognise further losses unless is has incurred
legal or constructive obligation or made payments on behalf of the associate.

Pressure Technologies plc Annual Report 2015

DEFERRED TAX
Deferred income taxes are calculated using the liability method on timing differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities and their tax bases. Deferred tax on timing differences associated
with shares in subsidiaries is not provided if reversal of these timing differences can be controlled by the Company and it is
probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well
as other income tax credits to the Company are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable
that the underlying deductible timing differences will be able to be offset against future taxable income. Current and deferred tax
assets and liabilities are calculated at tax rates that are expected to apply to their respective periods of realisation, provided they
are enacted or substantively enacted at the balance sheet date.

GOODWILL
In accordance with FRS 10 “Goodwill and intangible assets”, goodwill acquired in a business combination is amortised on a straight
line basis over a period of 7.5 years.

The consideration transferred by the Company to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair
values of assets transferred, liabilities incurred and the equity interests issued by the Company, which includes the fair value of any
asset or liability arising from a contingent consideration arrangement.

The Company recognises identifiable assets acquired and liabilities assumed, including contingent liabilities, in a business
combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the
acquisition. Assets acquired and liabilities assumed are measured at their acquisition-date fair values, which are also used
as the bases for subsequent measurement in accordance with the accounting policies.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of:

assets

If the fair values of identifiable net assets exceed the consideration transferred, the excess amount (i.e. gain on a bargain purchase)
is recognised in profit or loss immediately.

Deferred contingent consideration is recognised at its acquisition date fair value. Subsequent changes to this fair value resulting
from events after the acquisition date are recognised against investments. Where this deferred consideration arises in a currency
other than Sterling, the liability is revalued at each period end date.

2. EMPLOYEES
Average weekly number of employees, including Executive Directors:

Administration

Staff costs, including Directors:

Wages and salaries
Social security costs
Other pension costs
Share based payments

2015
Number

2014
Number

9 6

2015
£’000

821
127
105
23

1,076

2014
£’000

563
68
45
41

717

Further details of Directors’ remuneration are provided in the Report of the Remuneration Committee.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

3. OPERATING PROFIT
The Auditor’s remuneration for the audit and other services is disclosed in note 8 to the consolidated financial statements.

4. INVESTMENTS IN SUBSIDIARY COMPANIES

Cost and net book value
At 27 September 2014

Investments made in the year
Share options granted to subsidiary company employees

At 3 October 2015

Investment
in subsidiary
companies
£’000

21,447

7,927
230

29,604

Further details of the investments made in the year are given in note 30 to the Group financial statements. In the holding company
financial statements certain acquisition costs are capitalised alongside the consideration paid. These costs are written off in full in
the Group Consolidated Statement of Comprehensive Income, which is prepared under IFRS.

The subsidiaries as at the balance sheet date, which are all 100% owned, are:

Name

Country of incorporation

Principal activity

Al-Met Limited
Greenlane Biogas UK Limited (“GBUK”)
Chesterfield Special Cylinders Limited (“CSC”)
CSC Deutschland GmbH
Hydratron Limited
Hydratron Inc.
Roota Engineering Limited
Pressure Technologies US, Inc
Quadscot Precision Engineers Limited
Quadscot Holdings Limited
Greenlane Biogas Europe Limited
PT Biogas Holdings Limited
PT Biogas Technology Limited
Greenlane Technologies New Zealand
Greenlane Biogas North America
Chesterfield Tube Company Limited
Chesterfield Pressure Systems Group Limited
Chesterfield Cylinders Limited

England & Wales
England & Wales
England & Wales
Germany
England & Wales
USA
England & Wales
USA
Scotland
Scotland
England & Wales
England & Wales
England & Wales
New Zealand
Canada
England & Wales
England & Wales
England & Wales

Manufacturing
Manufacturing
Manufacturing
Sales and marketing
Manufacturing
Manufacturing
Manufacturing
Holding company
Manufacturing
Holding company
Manufacturing
Holding company
Research and development
Manufacturing
Manufacturing
Dormant
Dormant
Dormant

The Company also has an indirect holding of 40% in Kelley GTM, LLC, a manufacturing company based in the USA.

Pressure Technologies plc Annual Report 2015

5. GOODWILL

Cost
At 27 September 2014
Acquired through business combinations

At 3 October 2015

Amortisation
At 27 September 2014
Charge for the period

At 3 October 2015

Net book value
At 3 October 2015

At 27 September 2014

The goodwill has arisen on the acquisition of Greenlane is mainly attributable to the skills and talent of the workforce and the
anticipated value of synergies that Greenlane can bring to the wider Pressure Technologies Group.

Total
£’000

—
4,860

4,860

(648)

4,212

—

Total
£’000

40
3,757

3,797

12
85

Land and
Plant and
buildings machinery
£’000

£’000

—
3,355

3,355

—
10

40
402

442

12
75

3,345

355

3,700

—

£’000

221
(221)

—

6. TANGIBLE FIXED ASSETS

Cost
At 27 September 2014
Additions

At 3 October 2015

Depreciation
At 27 September 2014
Charge for the period

At 3 October 2015

Net book value
At 3 October 2015

At 27 September 2014

7. INVESTMENTS IN ASSOCIATED COMPANIES

As at 27 September 2014
Share of losses

As at 3 October 2015

Further details of the investments in associated companies, including the Group’s share of assets and liabilities, are set out
in note 18 to the consolidated financial statements.

In the holding company financial statements certain acquisition costs are capitalised alongside the consideration paid. These costs
are written off in full in the Group Consolidated Statement of Comprehensive Income, which is prepared under IFRS.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

8. DEBTORS

Amounts: falling due within one year
Prepayments and accrued income
Other debtors
Amounts owed by Group companies
Deferred tax (note 12)

Amounts: falling due after one year
Loans to associated companies
Amounts owed by Group companies

9. CREDITORS

Amounts: falling due within one year
Trade creditors
Other tax and social security
Amounts owed by Group companies
Accruals and deferred income
Corporation tax
Deferred consideration

Amounts: falling due after one year
Deferred consideration
Amounts owed by Group companies
Bank loan

10. TAXATION

Current tax
Current tax expense
Under provision in respect of prior years

Deferred tax
Origination and reversal of temporary differences

Total taxation charge/(credit)

2015
£’000

198
108
1,019
21

1,346

2015
£’000

—
11,307

11,307

2015
£’000

62
89
35
424
97
2,368

3,075

2015
£’000

3,346
1,250
10,000

14,596

2015
£’000

—
97

—

2014
£’000

45
2,874
543
21

3,483

2014
£’000

1,436
5,715

7,151

2014
£’000

41
32
—
581
—
1,985

2,639

2014
£’000

2,432
—
—

2,432

2014
£’000

—
—

—

(13)

Corporation tax is calculated at 20.5% (2014: 22%) of the estimated assessable profit for the period. Deferred tax is calculated
at 20% (2014: 20%).

11. SHARE CAPITAL
Details of the Company’s authorised and issued share capital and of movements in the year are given in note 28 to the consolidated
financial statements.

Pressure Technologies plc Annual Report 2015

12. DEFERRED TAX

Opening balance for the period
Credit for the period

Closing balance for the period

The provision for the deferred taxation asset is made up as follows:

Cost of share options
Accelerated capital allowance

13. RESERVES

2015
£’000

21
—

2015
£’000

25
(4)

premium Equity – non
account distributable
2015
£’000

2015
£’000

At beginning of period
Profit for the financial period
Share option cost
Share options granted to subsidiary employees
Shares issued
Dividends

At end of period

21,463
—
—
—
76
—

21,539

182
—
—
230
—
—

412

Profit
and loss
account
2015
£’000

8,372
2,999
23
—
—
(1,209)

10,185

premium Equity – non
account distributable
2014
£’000

2014
£’000

5,387
—
—
—
16,076
—

21,463

114
—
—
68
—
—

182

2014
£’000

8
13

2014
£’000

20
1

Profit
and loss
account
2014
£’000

6,495
2,827
41
—
—
(991)

8,372

See note 28 in the Group financial statements for details of the movements on share capital and share premium in the year.

14. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS’ FUNDS

Equity shareholders’ funds at beginning of period
Profit for the financial period
Dividends paid
Share option cost
Share options granted to subsidiary employees
Shares issued

Equity shareholders’ funds at end of period

2015
£’000

30,735
2,999
(1,209)
23
230
79

32,857

2014
£’000

12,564
2,827
(991)
41
68
16,226

30,735

15. RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption available under FRS 8 not to disclose transactions with fellow members
of the Pressure Technologies plc Group.

The interests of Directors in dividends paid during the year are disclosed in the Report of the Remuneration Committee.

For details on other related party transactions, see note 33 in the Group financial statements.

16. ULTIMATE CONTROLLING PARTY
The Directors consider that there is no ultimate controlling party.

Pressure Technologies plc Annual Report 2015

GovernanceFinancial StatementsStrategic Report

NOTES

Pressure Technologies plc Annual Report 2015

Photography:
www.charliefawell.com

This report is printed on Chorus Lux silk which is FSC® certified as well as
having ISO14001 EMS, EMAS and the European EcoLabel.

Pressure Technologies plc Annual Report 2015

Newton Business Centre
Newton Chambers Road
Chapeltown
Sheffield
South Yorkshire
S35 2PH
UK

Telephone +44 (0) 114 257 3616
pressuretechnologies.com