ANNUAL REPORT 2020
Advancing safety
and reliability
in demanding
environments.
Our Vision
To build a Group that is globally
recognised within our markets as
the leading provider of pressure
containment and control products
and services to customers who operate
in highly demanding, safety-critical
environments where the consequences
of product failure could be catastrophic.
Our Mission
To create value for our customers
by enhancing the performance of
their safety-critical supply chains
and to advance safety and reliability
in demanding environments through
technology, high-quality engineering
and the skills of our people.
Please visit our website
for more information:
www.pressuretechnologies.com
CONTENTS
INTRODUCTION
Strategic Report
Overview
Chairman’s Statement
Our Stakeholders
Section 172 Statement
Vision and Strategy
Our Marketplace
Business Review
Our Covid-19 Response
Financial Review
Key Performance Indicators
Risks and Uncertainties
Governance
Introduction to Governance
Directors and Advisors
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04
06
08
09
12
14
18
20
26
28
34
38
Report of the Remuneration Committee 40
Directors’ Report
Audit and Risk Committee Report
Independent Auditor’s Report to the
Members of Pressure Technologies
Financial Statements
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Financial Position
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Accounting Policies
Notes to the Consolidated
Financial Statements
Company Statement
of Financial Position
Company Statement
of Changes in Equity
Notes to the Company
Financial Statements
Company Information
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Leading UK designers
and manufacturers of
high-integrity, safety-
critical components
and systems serving
global supply chains
in oil and gas, defence,
industrial gases and
hydrogen energy
markets.
OUR BUSINESSES
Our businesses work in close
collaboration with our customers
who require unique engineering
solutions for their products used
in harsh operating environments.
INTRODUCTION
Maintaining safety
and business continuity
throughout the period
Managing
risk
Risks and Uncertainties
See page
28
Operating
responsibly
Business Review
See page
14
Supporting
stakeholders
Our Stakeholders
See page
06
Maintaining
our vision
Vision and Strategy
See page
09
CHESTERFIELD SPECIAL CYLINDERS
Operating for over a century,
Chesterfield Special Cylinders
designs and manufactures
high-pressure gas containment
systems and provides through-life
integrity management services
for safety-critical applications
in defence, oil and gas, industrial
and hydrogen energy markets.
GROUP HIGHLIGHTS
Whilst these results reflect an extraordinarily
challenging year, the operational changes and
strategic progress made since 2019 put the Group
in a stronger position to face the impact of the
Covid-19 pandemic and depressed oil and gas
market throughout FY20. I would like to thank
all our employees for their continued hard work
and commitment through this period.
Whilst we remain cautious regarding oil and gas
market conditions, the increasing momentum in
hydrogen and the strong orderbook for defence
and nuclear customers underpin the Board’s
confidence in the outlook for 2021 and beyond.
Chris Walters
Chief Executive
FINANCIAL HIGHLIGHTS
Group revenue*
£25.4M
(2019: £28.3m)
Gross profit margin
21.1%
(2019: 32.4%)
Adjusted operating loss**
£(2.4)M
(2019: £2.2m operating profit)
Reported loss before tax
£(20.0)M
(2019: £(0.5)m)
Adjusted earnings per share*
6.4P
(2019: 7.8p)
Reported basic loss per share
(101.5)P
(2019: (2.1)p)
Adjusted net operating cash inflow***
£1.7M
(2019: £2.0m)
Net debt
£7.4M
(2019: £11.4m)
Operating loss excluding amortisation, impairments and other exceptional costs.
*
** Before cash outflow for exceptional costs and excluding cash flows associated with discontinued operations.
*** Total net debt includes gross borrowings, asset finance leases, right of use asset leases, less cash and cash equivalents.
PRECISION MACHINED COMPONENTS
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The Precision Machined
Components division comprises
the Roota Engineering, Quadscot
Precision Engineering, Al-Met and
Martract brands, with world-class
lead times, highly specialised
precision engineering skills and
a blue chip customer base in the
global oil and gas market.
Pressure Technologies plc Annual Report 2020
01
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
OVERVIEW
Focused on keeping us at the
forefront of engineering excellence
BUSINESS MODEL
We are UK based with our divisions serving a global blue
chip customer base working in close collaboration with our
customers who require unique engineering solutions for their
products used in harsh operating environments in the oil and
gas, defence, industrial gases and hydrogen energy sectors.
WHO WE ARE
AIM listed group, headquartered
in Sheffield, England, operating
through two manufacturing divisions
over four sites with over 200 people
across the UK.
WHERE WE OPERATE
Our manufacturing
is UK based, with
businesses serving
a global blue chip
customer base from
four operational sites.
WHAT WE VALUE MOST
Everything we do as a Company
stems from our core values.
• We Put People First.
• We Work with Each Other.
• We Innovate and Create the Future.
• We Deliver to the Highest Standard.
To read more see page
Key
1 Al-Met
2 CSC/Head Office
05
3 Roota
4 Martract
3 4
2
1
WHAT WE DO
We build on our unrivalled 120 years of engineering
heritage, by hiring and developing highly skilled
craftsmen and design engineers who have the
creativity and ingenuity required to solve complex
design and manufacturing challenges.
This differentiates us from competitors and we are
committed to continuously investing in people and
technologies to position the Company at the forefront
of engineering excellence.
To read more see page
12
Oil and gas
Defence
Industrial
gases
Hydrogen
energy
INVESTING IN KEY AREAS OF OUR BUSINESS
1. Investment in our people
2. Investment in technology
3. Investing in our culture
The success of the Group comes
from our people. Our performance
and our reputation are achieved
through their skills, experience
and relationships.
Investment in new equipment
and technology skills enables us
to deliver an extended range of
products, while improving quality
and efficiency.
Organisational development
and culture is key to delivering
sustainable growth and
continuous improvement.
02
Pressure Technologies plc Annual Report 2020 OUR BUSINESSES
CHESTERFIELD SPECIAL CYLINDERS
Chesterfield Special Cylinders (CSC) has over a
century of industry knowledge and expertise and is
a world-leading provider of bespoke, high-pressure
gas containment solutions and services. It is one
of only five companies globally which can compete
for ultra large cylinder contracts.
CSC’s high-pressure cylinders are a critical component for
a number of end applications, from high-pressure systems
in naval submarines and surface vessels to oxygen cylinders
in fighter jets, from the bulk storage of industrial gases to air
pressure vessels in floating oil platform motion compensation
systems and more recently for hydrogen transport refuelling
and energy storage.
Integrity Management services is a growing part of the
business, where cylinders cannot be removed for routine
maintenance and are inspected and certified ‘in-situ’.
The service has been built on CSC’s unrivalled industry
knowledge and experience.
To read more see page
15
PRECISION MACHINED COMPONENTS
The Precision Machined Components (PMC)
division comprises the four brands of Roota
Engineering, Quadscot Precision Engineering,
Al-Met and Martract.
These brands are leaders in their markets, with world-class
lead times, highly specialised precision engineering skills
and a blue-chip customer base. Strong partnerships are
formed with customers to develop technical solutions for
their end-product applications.
Serving the oil and gas market, these businesses specialise in
supplying key components, made from super alloys, manufactured
to exacting standards and tolerances, that are destined for
extreme or hostile environments such as subsea oil exploration
and wear parts for offshore and onshore oil production.
To read more see page
16
Revenue
£11.2m
Gross margin
26%
Revenue
£14.2m
Gross margin
17%
03
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements CHAIRMAN'S STATEMENT
Focused on advancing
strategic plans
The Group’s strategy remains
focused on the diversification,
continued development, and
organic growth of both divisions.
Sir Roy Gardner
Chairman
As Chairman of the Board I have
a clear focus on good governance
and ensuring that the Company
stays on track to success as we
continue to navigate through
unprecedented times.
Our Covid-19 Response
To read more see page
Introduction to Governance
To read more see page
Audit and Risk Committee Report
To read more see page
18
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04
Overview
Whilst 2020 has without doubt
been a unique and challenging
year, I have been impressed by
and am proud of the response
of the entire team at Pressure
Technologies.
We entered this year with a
clear vision for growth and
strong momentum against our
strategic plans and priorities.
The Covid-19 pandemic has
brought significant headwinds
to our markets and operations,
which is reflected in our
financial performance, but I am
pleased to report that we have
made further progress against
these plans and priorities.
The investments made since
2019 have underpinned
growing diversification across
both divisions this year.
Strengthened engineering,
sales and production
capabilities have supported
new customer acquisitions
and further penetration in our
target markets, helping place
the Group in a stronger position
to cope with the ongoing
uncertainty, particularly
in oil and gas markets.
From the onset of the pandemic
in March, we were quick to take
decisive action, prioritising the
safety and wellbeing of our
teams whilst ensuring business
continuity and maintaining
active communications with
customers and colleagues
across all our sites throughout
the crisis. The investments
made across our teams and
operations, particularly in
management, HR and IT, have
been fundamental to our
ability to deliver this effective
response and I would personally
like to thank all of our
colleagues for the leadership
and commitment they have
shown throughout the year.
Results
Covid-19 and the resulting
macro-economic uncertainty
has been felt in varying
degrees across our markets
throughout the year and it has
also impacted performance.
This has been compounded
by slower operational progress
than anticipated in some areas
of the business.
Overall Group revenue
decreased to £25.4 million
(2019: £28.3 million) resulting
in an adjusted operating loss
for the year of £2.4 million
(2019: £2.2 million adjusted
operating profit).
Pressure Technologies plc Annual Report 2020 The Group made a loss before
taxation of £20.0 million (2019:
£0.5 million) which included
amortisation, impairment and
exceptional costs totalling
£17.6 million.
The phasing of major defence
contracts in our Chesterfield
Special Cylinders (CSC) division
and the deferral of revenue
and profit of a major contract
from late in the year into FY21,
overshadowed what was
otherwise a good performance
for CSC, particularly for our
Integrity Management services
business, which delivered
its fifth consecutive year of
growth. The diversification of
end markets in CSC continues
to reduce the historical
dependence on the oil and
gas sector and we have been
particularly pleased with the
good progress made in the
rapidly developing hydrogen
energy market, which
presents significant growth
opportunities for the Group.
The Precision Machined
Components (PMC) division
delivered revenue of £14.2
million (2019: £14.4 million),
but reported an operating
loss of £0.7 million (2019: £1.9
million operating profit) driven
by lower than expected gross
margins and higher indirect
overhead and depreciation
costs resulting from the growth
investment made since 2019.
Poor operational performance
in the first half of the year failed
to improve in the pandemic-
impacted second half. This was
compounded by a depressed
oil price, which resulted in
continued disruption and
uncertainty for customers and
the deferral of project spend,
significantly impacting order
intake. Prudent steps have
been taken to stabilise and
protect capability in this area of
the business, ensuring PMC is
positioned for market recovery.
Strengthened balance sheet
The Group has maintained tight
control of costs throughout the
year with proactive steps taken
to preserve cash, including
further site consolidation and
management restructuring
where appropriate. We are
also pleased to have received
strong support from our bank
which, since the year end, has
approved amendments to and
an extension of the Group’s
revolving credit facility (RCF) to
the end of November 2022 with
updated financial covenants.
On 18 December 2020, the
Group was also pleased to
successfully complete a
£7.5 million (before expenses)
fundraise from new and existing
shareholders to support exciting
growth opportunities for CSC in
the hydrogen energy market and
in the Integrity Management
services business. The fundraise
also provides additional balance
sheet strength for the Group.
Board
I was delighted to join the
Board of Pressure Technologies
in January 2020 and I look
forward to working with the
Executive team and my fellow
Non-Executive Directors as
the Group continues to make
further progress against its
strategy for growth. In March
2020, Neil MacDonald retired
from the Board and I would
like to thank Neil for his
service to the Group since his
appointment in June 2013.
In October 2020, we announced
that Group CFO, Joanna Allen
had stepped down from the
Board after five years with the
Group and that Group Financial
Controller, James Locking had
been appointed Interim Group
Finance Director in a non-Board
position. I would like to thank
Joanna for her contribution and
service during her five years
with the business.
LIVING OUR VALUES
We Put People First
Fundamental to who we are is how we behave with
others. Respect, dignity, diversity, mutual trust
and care for each other as people is at the heart
of our culture. Physical and emotional safety are
vital to the health and wellbeing of our colleagues
and their families and are the primary guide to our
behaviour and practices.
We Work with Each Other
Critical to our success is our ability and
willingness to listen, cooperate, collaborate
and support each other. We also encourage
and demonstrate the courage to constructively
challenge and be honest with each other in order
to achieve the best outcome for the Company,
our customers and each other.
We Innovate and Create the Future
In order to continuously improve, succeed and
grow, we anticipate and adapt to our changing
environment and respond positively and creatively
to the demands and expectations of our customers
and end markets.
We Deliver to the Highest Standard
Be it to our customers, on our promises or to
each other, we take personal and collective
responsibility, pride and ownership of our work and
its quality. Through adherence to process and by
learning, we deliver on our objectives, achieve our
goals and celebrate our successes.
As part of our plans to further
strengthen the Board and
reinforce governance and
culture, the Group was pleased
to announce the appointment
of Tim Cooper as Non-Executive
Director in January 2020 and
the appointment of Mike
Butterworth as Non-Executive
Director and Chair of the
Audit and Risk Committee
in June 2020. Both Tim and
Mike bring complementary
skills and experience which
will be invaluable as we grow
the business and realise its
significant potential.
Outlook
The Group’s strategy remains
focused on the diversification,
continued development, and
organic growth of both divisions.
In PMC, our priority remains
to stabilise and protect the
consolidated operations,
complete operational efficiency
improvements and maintain
service levels for our growing
base of OEM customers, as
we seek to conserve cash
and recover profitability.
CSC entered FY21 with a
strong order book and we will
continue to drive the operational
improvements that underpin
margin growth from established
defence, energy and industrial
contracts. The successful
fundraising will enable us to
strengthen our capabilities
across this division to realise the
significant growth opportunities,
particularly in the exciting
hydrogen energy market.
Sir Roy Gardner
Chairman
13 January 2021
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements OUR STAKEHOLDERS
Working together with
our stakeholders
The Board fully recognises that long-term growth and
profitability are enhanced when businesses behave
in a sustainable and responsible manner, with respect
for the environment and all stakeholders.
The Group’s stakeholders include Customers, Employees, Shareholders, Suppliers,
Government and Regulators and the Communities in which the Group’s businesses
operate. The Company actively encourages good communications with all stakeholders.
CUSTOMERS
EMPLOYEES
SHAREHOLDERS
We do this by
Our customers are pioneers in what they
do. We work in close collaboration with
them to develop technical solutions for
their engineering needs and produce
products that can be trusted to deliver
in environments where failure would be
catastrophic. Customer feedback helps us
measure customer satisfaction. Customer
satisfaction and loyalty are crucial factors
that determine our financial performance
and we look to improve this constantly.
Key areas of interest
• Building and maintaining robust
relationships and maintaining an
appropriate level of communication
with our customers will ensure that:
• they receive the information
they require;
• they are consulted;
• their needs and requirements
are heard and actioned; and
• there is a formal feedback
process in place.
We do this by
Through strong management,
we have demonstrated resilience
during challenging market conditions,
responding to changing environments,
including the Covid-19 pandemic,
and reviewing the focus of the Group
to ensure we remain well positioned
to deliver value to shareholders.
The executives meet periodically with
the Group’s larger financial investors.
Key areas of interest
• The Company actively encourages
good communication with all
shareholders from the largest
to the smallest.
• Feedback is obtained following all
investor meetings and this is reviewed
by the Board.
• The executives will often host or
attend events for new and existing
private investors.
• The Company has always aimed
to accommodate investors who
wish to visit its manufacturing sites.
We do this by
It is the policy of the Group to
communicate with employees via
employee representation on works
and staff committees and by regular
briefing meetings conducted by senior
management. A long-term view of the
business is encouraged through the
provision of defined contribution pension
schemes and SAYE share option schemes
for UK based employees and Long Term
Incentive Plans (LTIPs) for the senior
management team. We implemented the
Group’s first Employee Engagement Survey
in January 2018, using a benchmarked
UK index provided by Best Companies.
The second survey was carried out in
October 2019 with an improved response
rate and engagement scores across the
Group. The survey was repeated in October
2020 and a further mid-term survey is
planned for April 2021.
Key areas of interest
• Committed, well trained, highly skilled
and motivated employees are at the
heart of our business.
• We strive to create a working
environment where our employees
can fulfil their potential by offering
training, career opportunities and
a platform for innovation.
• By doing this, we get the best from
our people who enjoy working with us.
06
Pressure Technologies plc Annual Report 2020 More information
Our Covid-19 Response
18
CUSTOMERS
SUPPLIERS
GOVERNMENT & REGULATORS
COMMUNITY
We do this by
As a technical leader in our field,
we contribute to the development
of technical, safety and operational
standards that relate to the products
we design and manufacture.
Key areas of interest
• We engage periodically with local
and national government representatives
and have encouraged visits to our sites.
• We participate regularly in expert
working groups with industry and
regulatory bodies.
• We communicate regularly and openly
regarding policies that relate to the
sectors we are involved in.
We do this by
Strong and forward-looking relationships
with our suppliers allow us to deliver our
products and services on time and in
accordance with high standards.
Key areas of interest
• We have continued to focus on
strengthening our supplier relationships
and performance this year, collaborating
closely to ensure that our customer
needs are met.
• We measure and report on supplier
quality and on-time delivery performance.
• Our supplier relationship managers
ensure that any issues are dealt with
promptly and we hold regular meetings
with our suppliers to review performance
and the outlook for demand.
• We remain committed to the
establishment of long-term strategic
relationships with our suppliers to
improve the efficiency of our operations
and to support the long-term commitments
made to us by our customers.
We do this by
The Group will comply with both
the letter and the spirit of relevant
environmental regulations. As part
of our ongoing Health and Wellbeing
initiative, the Group has again made
MIND its featured charity. The Group
also continues to support local charities
and employees who individually raise
money or volunteer for charities.
Key areas of interest
• 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
evaluated as part of the management
review process.
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements SECTION 172 STATEMENT
Promoting the success
of the Group
Section 172 of the Companies Act 2006 requires
a Director of a company to act in the way he or she
considers, in good faith, would most likely promote
the success of the Company for the benefit of its
members as a whole. In doing this, Section 172
requires a Director to have regard, amongst other
matters, to the:
a) Likely consequences of any decisions
in the long term.
b) Interests of the Company’s employees.
c) Need to foster the Company’s business
relationships with suppliers, customers
and others.
d) Impact of the Company’s operations
on the community and environment.
e) Desirability of the Company maintaining
a reputation for high standards of
business conduct.
f) Need to act fairly as between members
of the Company.
In discharging our Section 172 duty
we have regard to the factors set out
in the section ‘Our Stakeholders’.
We also have regard to other factors
which we consider relevant to the
decision being made. We acknowledge
that every decision we make will
not necessarily result in a positive
outcome for all of our stakeholders.
By considering our vision and values,
together with our strategic priorities
and having a process in place for
decision-making, we do however,
aim to make sure that our decisions
are consistent and well considered.
During the year, the Directors have acted
to promote the success of the Group
for the benefit of shareholders, whilst
having regard to the following matters:
MATTER
WHERE TO FIND OUT MORE (PAGE)
Likely long-term consequences
06, 09 to 11, 28 to 33 and 34 to 37
Interests of the Group’s employees
06, 09 to 11, 28 to 33 and 34 to 37
Business relationships with
suppliers and customers
Impact on the community
and environment
Reputation for high standards
of business conduct
06 to 07, 09 to 11, 28 to 33 and 34 to 37
07, 09 to 11, 28 to 33 and 34 to 37
06, 09 to 11, 28 to 33 and 34 to 37
Acting fairly between shareholders
06, 09 to 11, 28 to 33 and 34 to 37
08
Pressure Technologies plc Annual Report 2020
VISION AND STRATEGY
Vision for Growth
Creating value for
investors, customers,
colleagues and the
communities we operate
in through:
• Quality of our products and services.
• Financial Performance – revenue,
operating profit, EPS, dividend.
• Customer Preference – market share,
repeat business, new customers.
• Operational Excellence – margins, lead
times, supply chain performance.
The Group is well placed to take advantage
of market conditions as and when they
improve and to realise the benefits of the
investment made in people, customer
relationships, new equipment and
supporting processes. To find out more,
please see the Business review on pages
14 to 17.
Our Strategy
In March 2019, we set out a vision for
growth in three phases and were pleased
with the steady progress being made in the
first two phases. However, the Covid-19
pandemic significantly impacted the
business environment, including working
conditions, operational performance,
end markets and the global economy. We
have adapted and remain ready to further
adjust our focus and resources to protect
the business, progress our strategy and
take advantage of future opportunities.
The Covid-19 pandemic and slower than
expected improvement in operational
performance have contributed to delayed
progress in Phase 1 – Refocus, which we
now expect to extend to the end of 2021,
in line with the anticipated slow recovery
of oil and gas market conditions and the
impact of this on our PMC division. We
expect Phase 2 – Deliver Organic Growth,
to accelerate through opportunities for
CSC in the fast-developing hydrogen
energy market, driving the need for
investment that was supported by the
successful fundraising in December 2020.
Key
Completed
In progress
New addition
OUR VISION
To build a Group that is globally recognised within our
markets as the leading provider of pressure containment and
control products and services to customers who operate in
highly demanding, safety-critical environments where the
consequences of product failure could be catastrophic.
CHANGES TO OUR STRATEGIC ROADMAP
Phase 1 – Refocus
Phase 2 – Deliver Organic Growth
Phase 3 – Accelerate
Growth and Build Scale
2019
2020
2021
2022
2023
Our strategic roadmap is now updated to reflect these changes.
Phase 1 – Refocus (originally to
mid-2020, now extending to the
end of 2021)
Divestment of non-core divisions
– completed in June 2019
Phase 2 – Deliver Organic Growth (from
mid-2019) – hone the business model
Grow revenue and margin from
existing and new customers by
investing in core capability
Recover profitability and cash
generation, especially in oil and
gas market-facing PMC – ongoing
through 2021
Capture and safeguard value
by developing strategic
partnerships with customers
and in the supply chain
Complete foundations for new
growth, people, structure, processes
– ongoing through 2021
Grow revenue and margin from
extended product/service offers
and new regions
Adjust strategic focus and plans
to support growth in hydrogen
energy and Integrity Management
for CSC – ongoing following
fundraising in December 2020.
Plans to be completed by July 2021
Secure funding for investment
and strengthened balance sheet
to provide resilience and financial
resources to support growth –
completed December 2020
Grow margins through continuous
process improvements
and efficiencies
Phase 3 – Accelerate Growth and Build
Scale (from late-2021) – replicate the
business model
• Growth from new sectors
• Growth from new regions
• Scale from acquisitions
To read more see page
10
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
VISION AND STRATEGY continued
STRATEGIC PROGRESS
Phase 1 – Refocus
Divestment of non-core divisions
• Sale of two divisions completed as
planned in 2018 and 2019. Disposal
of remaining Greenlane investment
in 2020 with final disposal proceeds
due in June 2021.
• Group now focused on its two core
divisions, with more resources allocated
to CSC and hydrogen-related growth.
Recover profitability
and cash generation
• Covid-19 pandemic and tougher trading
conditions combined with a CSC contract
related deferral of revenue and profit
resulted in reduction of Group revenue
to £25.4 million and an adjusted operating
loss of £2.4 million.
• CSC strengthens foundations for new growth
with process improvement initiatives.
• Closure of loss-making PMC’s Quadscot
operation completed after onset of
Covid-19 pandemic.
• PMC management restructured and
cost-/cash-saving measures implemented.
Confirm strategic focus
and growth plans
• Board strengthened with new Chairman
and NEDs.
• Strategy Roadmap updated and strategic
focus increased on hydrogen energy and
Integrity Management.
Phase 2 – Deliver Organic Growth
Grow revenue and margin from existing and
new customers by investing in core capability
• CSC continued good progress with major contracts for
existing home/export customers in defence sector, reducing
dependence on oil and gas.
• CSC Integrity Management, although impacted by travel
restrictions after a strong Q1, delivered strong sales growth
for fifth consecutive year at £2.3 million for the year.
• A substantial second contract won by CSC with EDF Energy
for UK nuclear application – a new sector.
• New customer acquisitions continued in PMC – long term
strategic supply agreements signed with major OEMs.
Grow revenue and margin from extended
product scopes and emerging sectors
• Three more hydrogen refuelling station projects started
for the hydrogen energy sector by CSC.
• Opportunities emerging for CSC Integrity Management
at all stages of hydrogen cylinder life-cycle.
Grow margins through operational
improvements and growth
• PMC implemented new production management systems,
used data to drive better production scheduling and
customer reporting leading to better delivery performance.
• PMC’s 2019 investments in machines and production
engineering translated into time/cost savings.
2019
2020
2021
10
Pressure Technologies plc Annual Report 2020 STRATEGIC PROGRESS
Phase 3 – Accelerate
Growth and Build Scale
Growth from new sectors
Growth from new regions
Scale from acquisitions
• Our priority is to demonstrate the organic growth
potential of the focused Group, but we will continue
to appraise growth and development through
acquisition where we see opportunity to advance
our scale, technical capability and reach into new
sectors and regions.
2022
2023
Key
Extension in phase
11
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
OUR MARKETPLACE
Identifying trends within
our core markets
It is now clear that the oil
and gas sector will need
more time to recover from
Covid-depressed oil prices,
even though we are seeing
some encouraging signs in
returning customer orders
and new customer interest.
Steady growth is predicted to continue for
defence, nuclear and industrial sectors,
with the emerging hydrogen energy market
predicted to grow at a much faster pace
over the next three to five years. Hydrogen
energy is a key area of focus for our
existing and future resources, as we build
capacity and capability to meet customer
needs, using the funds raised in December
2020. This is against the backdrop of
a number of governments stimulating
economic recovery by funding ‘green’
and hydrogen energy-related initiatives,
including bringing forward climate change
targets. Whilst progress to date has been
encouraging, hydrogen energy is still
a relatively unproven technology and, as
with all immature market sectors, there
inevitably remains uncertainty as to the
timing and scale of growth in this market.
How we reacted to market conditions
Covid-19 was the main driver for a large
drop in oil and gas activity and restrictions
on travel for our staff. We took decisive
action to safeguard our staff and customer
service as well as matching resources to
market needs. We are maintaining the
current capability, scale and reach of our
manufacturing activities for oil and gas
and defence markets. We decided the
timing was right to raise funds to realise
further growth opportunities, especially
in hydrogen energy, and to strengthen the
balance sheet so we can take advantage
of partnership opportunities as they arise.
We are now well placed to take advantage
of any improvement in market conditions
and realise the benefits of the investment
in people, new equipment and supporting
processes.
12
SECTOR
WHAT IS HAPPENING IN THE MARKET?
The low oil price environment of recent years and
pandemic-driven collapse saw major delays and cuts
in oil exploration investment, resulting in fewer oil
discoveries and reduced capex and opex spend. With an
oil price now around $50, confidence to sanction project
expenditure over the next two years is showing some
very early signs of returning. However, our base case
expectation is at least a further year of challenging
trading conditions in the depressed oil and gas market.
The sustained low oil price environment has advanced
technical innovation in the oil service industry and reduced
the cost of oil exploration and production. Oil service
majors, OEMs and component manufacturers now
collaborate to produce parts more efficiently, on a ‘cost-
out’ basis, while often improving performance and quality.
Current defence spending is driven by the need to replace
obsolete warship classes, both in terms of surface and
submarine fleets, alongside US pressure for NATO allies
to increase defence spending.
In the UK, the government has recently pledged an
additional £16.5 billion in military spending over the next
four years, representing the largest increase in real terms
since the end of the Cold War.
CSC provides both storage solutions and inspection,
reconditioning and retest services. The opportunities
for CSC will continue to come from the higher education
and scientific research sectors, along with a continued
penetration of the nuclear power generation market.
Increased drive for lower emissions from many
governments, including stimulus for a green economic
recovery from Covid-19, means hydrogen storage needs
are growing. This is especially true for refuelling station
needs for vehicles, trains and ships where CSC already
has product and services.
This sector is at a very early stage in development, but
has the potential to develop into a significant long-term
growth opportunity.
OIL AND
GAS
DEFENCE
INDUSTRIAL
GASES
HYDROGEN
ENERGY
Pressure Technologies plc Annual Report 2020 WHAT THIS MEANS FOR US
CSC
PMC
This market is primarily served by
businesses in our Precision Machined
Components division (PMC) but also
by our Cylinders division (CSC).
The PMC businesses in the Group are
leaders in their markets, supplying high
integrity components for subsea and
topside applications to global oil services
companies. Pressure Technologies has
embraced the shift to collaborative
working with customers through long-
term supply agreements and invested
in sales and technical capabilities with
measurable benefits for PMC.
CSC has long-term contracts to supply
bespoke products and services for key
submarine build programmes and for
surface ships such as the Type 26 Frigate.
Its status as the leading global supplier
of high-pressure gas storage solutions to
NATO member states and NATO-friendly
nations is stronger than ever, underpinned
by the growing importance of Chesterfield
Integrity Management (CSC IM).
CSC IM is the principal provider of
inspection and testing services to the
MoD for ongoing cylinder performance
This market is predominantly served
by CSC but also by Martract, a business
within our PMC division.
This market crosses multiple segments
for CSC, including cryogenics and bulk
gas transport and storage, scientific
research facilities and universities.
CSC will also benefit from an upturn in
the oil and gas market, with demand
for motion compensation systems on
offshore oil platforms anticipated to
recover in 2021. Growth of the Integrity
Management services business in this
market is expected to continue.
Oil and gas revenue (£’000)
20,000
16,000
12,000
8,000
4,000
0
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
and safety management on the Astute,
Vanguard and Trafalgar classes of
nuclear submarines.
CSC IM’s strategic focus is to support
hydrogen growth by adding value to the
product offering through risk assurance.
Additionally, the intention is to apply the
operating model that has been successful
with the Royal Navy to foreign navies who
are already supplied products by CSC
through existing strategic partners.
As disciplines such as cryogenics
continue to expand, the demand for
bespoke, high quality gas containment
systems also grows, driven by safety and
control requirements. The growth of gas
management systems within the higher
education sector is being driven by the
expansion of vocational and practical
courses nationally and internationally.
Defence revenue (£’000)
12,000
10,000
8,000
6,000
4,000
2,000
0
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Industrial gases revenue (£’000)
8,000
6,000
4,000
2,000
0
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
-8.4%
-43.6%
+140.6%
The emerging hydrogen energy supply
chain generates demand for the types
of products developed by CSC over
many years. In the past year, two orders
for large high-pressure ground storage
cylinders were secured for projects
in the UK and overseas.
Funds raised in December 2020 will be
used to increase capability and capacity
for both products and services for the
hydrogen energy sector. CSC is now better
positioned to secure sales growth and
long-term supply and support agreements
as this market expands further.
Hydrogen energy revenue (£’000)
4,000
3,000
2,000
1,000
0
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
-9.2%
13
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements BUSINESS REVIEW
Establishing resilience and
a foundation for future growth
Trading in the first few months
of FY21 has continued in line
with our expectations.
Chris Walters
Chief Executive
The important management and
operational changes made since 2019
positioned us well to cope with the
significant challenges faced over the
past year. I am extremely proud of
our teams and their response during
unprecedented circumstances and
encouraged by the further progress
made with organisational culture, this
being key to continuous improvement
and the delivery of sustainable growth.
14
£ million revenue
Group revenue
Oil and gas
Defence
Industrial gases
Hydrogen energy
2020
2019
2018
2017
25.4 28.3 21.2
18.8
14.9 16.3 12.4
10.6
5.1
5.2
0.2
9.1
2.2
6.4
2.4
6.4
1.8
0.7 — —
Group operating (loss) / profit1
(2.4)
2.2
1.0
1.6
Group loss before taxation
(20.0)
(0.5)
(1.7)
(1.4
)
1 Before amortisation, impairments and other exceptional charges.
Whilst slower than expected
turnaround of operational
performance and depressed oil
and gas markets have impacted
profitability, the strategic
progress made to date across
the Group is driving increased
diversification in the customer
base, positioning the business
for sustainable long-term
growth and ensuring that we
are well placed to capitalise
on exciting opportunities in
some of our key markets.
£25.4m
Group revenue
Performance
Overall Group revenue for the
year was £25.4 million (2019:
£28.3 million), down 10% and
reflecting challenging trading
conditions, Covid-19 disruption
and the deferral of revenue
and profit for a major defence
contract into FY21.
An adjusted operating loss of
£2.4 million (2019: £2.2 million
operating profit) was driven
by lower than expected gross
margins in both divisions, the
deferral of revenue relating
to a major defence contract
into FY21 in CSC and poor
operational performance
in PMC. The Group made a
loss before taxation of £20.0
million (2019: £0.5 million)
which included amortisation,
impairment and exceptional
costs totalling £17.6 million.
Pressure Technologies plc Annual Report 2020 CHESTERFIELD SPECIAL CYLINDERS (CSC)
£ million revenue
Divisional revenue
Oil and gas
Defence
Industrial gases
Hydrogen energy
2020
11.2
1.0
5.1
4.9
0.2
2019
13.9
2.2
9.1
1.9
0.7
2018
2017
9.9
1.4
6.4
2.1
—
8.4
0.8
6.4
1.2
—
Gross margin
26%
36%
35%
41%
Operating (loss) / profit1
(Loss)/profit before taxation
(0.1)
(1.0)
2.1
2.1
1.1
1.0
1.1
1.0
Return on revenue
15%
11%
13%
11%
1 Before amortisation, impairments and other exceptional charges.
Divisional revenue for the
year was down 19% to £11.2
million (2019: £13.9 million),
predominantly due to the
phasing of a major defence
contract into FY21 which drove
lower overall gross margin
performance. Overall divisional
gross margin decreased to 26%
(2019: 36%), resulting in an
operating loss of £0.1 million
(2019: £2.1 million operating
profit) and a return on revenue
of 0% (2019: 15%).
Total defence market revenue
decreased by 44% to £5.1 million
representing 46% of divisional
sales. Revenue for the supply
of ultra-large cylinders to UK
defence contracts reduced
to £3.5 million, down by 15%
(2019: £4.1 million), with the first
deliveries to the UK Ministry
of Defence’s Dreadnought class
submarine programme made
during this period for long-
standing customer BAE Systems.
A major order covering the long
lead time raw material milestone
for the second Dreadnought boat
in the series was secured in June
2020, but the revenue and profit
for this order were deferred from
the fourth quarter of FY20 into
the first quarter of FY21.
Revenue for export naval
contracts decreased by 50% to
£1.6 million (2019: £3.2 million).
Revenue includes bespoke,
safety critical systems supplied
to Naval Group for French and
Brazilian naval submarine
programmes.
New contracts to supply highly
specialised cylinders for early
warning radar systems were
secured with Thales and the UK
Ministry of Defence for delivery
in FY21.
Despite several contracts
secured in late 2019, demand
for oil and gas related projects
has deteriorated sharply
due to depressed oil prices
and reduced capital spend
in the sector, with several
ultra-large cylinder prospects
being deferred to late 2021
and beyond. Total oil and gas
market revenue decreased
by 55% to £1.0 million (2019:
£2.2 million), representing 9%
of divisional sales and reflecting
the progress CSC continues to
make in reducing its historical
dependence on the oil and gas
sector, with the diversification
of end markets. Delivery was
successfully completed for the
semi-submersible drilling unit
projects in Singapore for new
customer MH Wirth.
Industrial gases market
revenue increased significantly
to £4.9 million (2019: £1.9
million), representing 44% of
the divisional revenue, with the
successful completion of the
first contract with EDF Energy
for the supply of high-pressure
nitrogen storage solutions to
nuclear power stations in the
UK, including Heysham, Torness
and Hartlepool sites.
As previously announced,
a second contract in excess of
£3 million was awarded by EDF
Energy in September 2020 to
supply several other nuclear
power stations in the UK with
a series of nitrogen storage
packages for delivery through
to mid-2021. This second order
demonstrates the strength
of our relationship with EDF
Energy and the expertise of
CSC in producing bespoke
seismically qualified modular
designs for these safety-critical
projects. In May 2020, CSC was
also pleased to be awarded a
£0.6 million revenue contract by
new customer, Parker, to provide
ultra-large cylinders for a major
wastewater treatment project
in Abu Dhabi. This significant
contract represents a new
market for CSC’s ultra-large
cylinders and through-life
support services.
Opportunities remain strong in
the fast-developing hydrogen
energy market, with CSC
completing three contracts
for transport refuelling high-
pressure storage for new
customers including ITM Power,
Haskel Hydrogen Systems
and McPhy Energy, delivering
revenues of £0.2 million.
Whilst this represented just 1%
of divisional sales in the year,
it demonstrated the design,
engineering and through-life
support capabilities that
uniquely position CSC with
major players in this market.
As further testament to
this, CSC signed a five-year
framework agreement with
Shell Hydrogen in the first
half of the year, becoming the
approved supplier of Type 1
steel cylinders to Shell-branded
hydrogen refuelling stations
across Europe.
£11.2m
Divisional revenue
Despite Covid-19 travel
restrictions from March
onwards, Integrity
Management services
delivered a fifth consecutive
year of strong growth, with
total revenue up a record 93%
to £2.3 million (2019: £1.2
million). Notwithstanding
the deferral of several UK
deployments, revenue
from in-situ inspection and
recertification projects for
UK submarine and surface
vessel fleets primarily drove
this growth, more than
doubling to £1.4 million.
This reflected support for
critical infrastructure projects
during the Covid-19 outbreak,
with successful revalidation
of high-pressure systems
onboard aircraft carriers HMS
Queen Elizabeth and HMS
Prince of Wales. Overseas
non-naval revenues declined
by 50% to £0.1 million and
despite new contract wins for
in-situ revalidation projects
on offshore production units
and diving support vessels
in Azerbaijan and Dubai,
Covid-19 enforced travel
restrictions caused disruption
and delays, with the deferral
of several deployments
into 2021.
Investment plans for the
division were delivered
during the year, with a second
advanced machining centre
becoming operational in
July, delivering substantial
improvements to efficiency
and quality performance. The
delivery and commissioning
of an advanced robotic
ultrasonic test facility was
delayed due to Covid-19
restrictions, but installation
commenced in November and
the system will become fully
operational early in FY21.
15
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements BUSINESS REVIEW continued
Reliance on the division’s top
three customers by revenue has
also reduced from 78%
to 69%, demonstrating further
progress in reducing customer
concentrations. Diversification
of product scope also continues,
with a far broader range of
components now being
delivered to established and
newly acquired customers.
With the current low oil price
impacting demand for drilling
and exploration projects, we
have increased our focus on
decommissioning opportunities
and accelerated our evaluation
of new geographies and adjacent
markets, such as renewable
energy, nuclear power and
defence, where we have an
established customer base
with CSC.
The operating result in the
period was disappointing,
however we continue to make
strategic progress across this
division as changes made over
the past year deliver operational
improvements. The divisional
leadership structure and new
management appointments
are driving important cultural
change that is more focused
on performance and customer
service.
PRECISION MACHINED COMPONENTS (PMC)
£ million revenue
Divisional revenue
Oil and gas
Industrial gases
Gross margin
Operating (loss) / profit1
(Loss)/profit before taxation
2020
14.2
13.9
0.3
17%
(0.7)
(4.3)
2019
14.4
14.0
0.4
2018
11.2
11.0
0.2
2017
10.4
9.8
0.6
29%
33%
35%
1.9
1.5
(0.3)
(0.3)
1.8
0.1
Return on revenue
(5)%
13%
13%
18%
1 Before amortisation, impairments and other exceptional charges.
Performance and market
outlook also resulted in an
impairment review of the
goodwill and other intangible
assets of the PMC division
as they relate to Al-Met,
Quadscot, Roota and Martract
subsidiaries, acquired by the
Group between 2010 and
2016. Lower than previously
considered growth rates and
higher risk-factored discount
rates applied to future cash
flows have resulted in a non-
cash exceptional impairment
to goodwill and other intangible
assets of £13.9 million.
Significantly higher indirect
costs and depreciation
following two years of growth
investment were not fully
offset by the proactive steps
taken early in the second half
of the year to limit the impact
of trading conditions on the
division. These actions included
closure of the persistently loss-
making Quadscot operation,
management restructuring
and the implementation of
other cost saving and cash
preservation measures,
whilst seeking to protect
core capability.
£14.2m
Divisional revenue
Although divisional revenue for
the year was broadly unchanged
on the prior year at £14.2 million
(2019: £14.4 million), PMC
reported an operating loss of
£0.7 million (2019: £1.9 million
operating profit), driven by lower
than expected gross margins, as
poor operational performance
in the first half of the year failed
to improve in the second half.
Operating profit was further
impacted by higher indirect
overhead and depreciation
costs resulting from the growth
investment made since 2019,
whilst restructuring and site
consolidation steps taken in the
second half had only a minimal
impact on the full year costs.
Overall divisional gross margin
reduced to 17% (2019: 29%),
impacted by delayed output of
new large complex components
and the late commissioning of
new machining centres in the
first half of the year and by the
onboarding of new customers,
Covid-19 disruption across
the supply chain and lower
utilisation levels in the second
half. Return on revenue was
(5)% compared to 13% last year.
The depressed oil price
has resulted in continued
disruption and uncertainty
for our oil and gas OEM
customers and the deferral
of project spend. Consequently,
order intake in the second half
fell sharply and the divisional
order book at the start of
FY21 was less than half the
pre-pandemic value six
months earlier.
16
Whilst the consolidation of the
Quadscot operation and order
book into Roota through the
peak of Covid-19 disruption
took longer than expected and
adversely impacted divisional
margins and customer delivery
schedules, this transition
has now resulted in a lower
cost base and increased
utilisation of capacity across
the remaining sites.
Further progress was
made during the year with
diversifying the customer
base and extending our
range of precision machined
components for specialised
oil and gas applications. This
includes long-term strategic
supply agreements being
signed or under negotiation
with key OEM customers,
demonstrating their confidence
in PMC’s products and service
levels as they seek to consolidate
their approved supplier lists.
A stronger sales team and
maturing sales processes
have underpinned increased
sales effectiveness and
better customer relationship
management. The investment
in new production management
systems and the use of data to
drive production scheduling and
customer reporting are starting
to deliver improvements, most
notably to on-time delivery
performance. The investment
in production engineering
capability and new advanced
machining centres have also
helped deliver significant
time and cost savings in the
production of familiar and new
component designs, which will
contribute to improved margins
and competitiveness through
shorter lead times.
Pressure Technologies plc Annual Report 2020 Outlook
Chesterfield Special Cylinders
Significant expansion and
diversification of CSC’s
customer base was achieved
this year especially into the
hydrogen energy transport
refuelling market and nuclear
power generation market.
Strategic partnerships
across the supply chain have
enabled significant reduction
in lead times and the ongoing
deepening of existing customer
relationships is a clear
testament to the strategic
progress made by the division
in a difficult operating and
trading environment.
Trading in the first few months
of FY21 has continued in line
with our expectations. The order
book for the year ahead remains
strong, with higher-margin
projects, including the deferred
BAE Systems contract, weighted
to the first half of the year.
CSC will continue to drive the
operational improvements
that underpin margin growth
from established defence and
industrial contracts, while
strengthening capability and
readiness for further growth
in Integrity Management
services. Periodic inspection
regimes will require product
revalidations as current travel
restrictions are lifted and the
Group expects to see continued
growth in Integrity Management
services in the defence, nuclear
power generation and hydrogen
energy sectors, where risk
management and asset
availability are paramount.
Hydrogen energy storage
remains an area of strategic
focus and significant future
growth potential for the Group.
The progress already made in
this rapidly developing market
is expected to continue as
governments increasingly
acknowledge the role of
hydrogen in the overall energy
mix, with its contribution
to meeting net zero carbon
targets in transportation and
in the decarbonising industry.
In addition to the transport
refuelling station projects
successfully completed
or currently in production,
CSC has a strong pipeline of
opportunities with new and
existing partners, including the
five-year framework agreement
with Shell Hydrogen. These
opportunities are supported
by the ongoing development
of products and services to
reduce through-life cost and
risk for the operators of static
and mobile hydrogen storage.
Whilst progress to date has
been encouraging, hydrogen
energy is still a developing
technology and, as with all
immature market sectors, there
inevitably remains uncertainty
as to the timing and scale
of growth.
In December 2020, we were
pleased to secure contracts
for five further hydrogen
refuelling stations with existing
customer Haskel, new customer
Framatome and a major new
US customer for their European
projects.
Precision Machined
Components
Our priority remains to
stabilise and protect the
consolidated operations,
complete operational
improvements and maintain
service levels for our growing
base of OEM customers, as
we seek to conserve cash
and recover profitability.
We anticipate at least a further
year of challenging trading
conditions in a depressed
oil and gas market and
will continue to appraise
opportunities to diversify
our specialist engineering
capability in other sectors.
Fundraising
On 18 December 2020 the Group
was pleased to successfully
complete a £7.5 million (before
expenses) fundraise from new
and existing shareholders
to support exciting growth
opportunities for CSC in the
hydrogen energy market and
in the Integrity Management
services business.
The investment provides us with
the resources to capitalise on
the significant growth prospects
in the hydrogen energy market
and to accelerate growth in our
Integrity Management services
business. The stronger balance
sheet will also provide resilience
through the difficult oil and
gas market trading conditions,
demonstrate strength when
developing partnerships and
negotiating major contracts,
and provide flexibility to
take advantage of emerging
opportunities.
Chris Walters
Chief Executive
13 January 2021
17
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements OUR COVID-19 RESPONSE
Safeguarding the health
and wellbeing of our teams
Our action plan has
been to maintain safety
and business security
throughout the period by:
• Managing risk.
• Supporting
stakeholders.
• Operating responsibly.
• Maintaining our vision.
As a supplier to customers who
support UK Critical National
Infrastructure and Strategic Defence
Contracts, we have worked hard to
ensure business continuity whilst
maintaining our primary focus on
safeguarding the health and wellbeing
of our teams.
Investments made in our central
group functions including Human
Resources and IT infrastructure over
the course of the previous year have
underpinned the support we have
been able to offer our teams through
this difficult period, reinforced by
regular and open communications
with colleagues working both on site
and at home.
OUR PRIORITIES
1. Business as usual with caution
and all sites operational
Notwithstanding the many challenges
faced on account of the pandemic, the
businesses worked effectively to ensure
business continuity given our status as
a supplier to customers who support
UK Critical National Infrastructure and
Strategic Defence Contracts.
Despite a certain level of operational
disruption during the lockdown period
in the UK, staff absence levels stayed
relatively low, enabling us to keep all
sites open and operational, with staff
working on the basis of ‘business as
usual, with caution’.
We continue to support our customers,
maintaining close communication and
remaining focused on delivering orders
safely and to the best of our abilities.
The oil and gas markets remain
depressed, causing ongoing uncertainty
for our oil and gas customers in
particular, some of whom have deferred
project spend, causing pricing pressure
throughout the supply chain. We remain
focused on the diversification of our
customer portfolio to mitigate this,
in line with our growth strategy. Integrity
Management services continues to
be impacted by the travel restrictions,
especially with overseas non-naval
contracts, although some UK based
naval contracts remained on track due
to critical defence and infrastructure
requirements.
2. Keeping employees safe whilst
supporting UK Critical National
Infrastructure
At the onset of the Covid-19 pandemic
in March, we undertook swift, decisive
actions to protect the health, safety and
wellbeing of our teams.
We wrote and implemented specific
precautions, policies and guidelines which
allowed us to adapt working practices
to meet UK government guidelines on
workforce protection, enabling social
distancing across all our facilities,
encouraging working from home wherever
roles permit, and safeguarding employees
who met vulnerable and extremely
vulnerable category criteria.
During this difficult period, we successfully
maintained regular, open communications
with colleagues working both on site and
at home, significantly enhanced due to the
investments made in the last year in our
central group functions including Human
Resources and IT infrastructure.
Risks and Uncertainties
To read more see page
28
18
Pressure Technologies plc Annual Report 2020 OUR PRIORITIES
3. Protecting our financial strength
To protect our financial strength, we took
a number of prudent measures to stabilise
operations, manage cost and conserve
cash and core capability.
We enjoy a strong and supportive
relationship with our bank and post
the financial year end were pleased to
secure amendments and an extension
to our facility to 30 November 2022 with
updated financial covenant targets.
In December 2020, we also successfully
completed a fundraising from new and
existing shareholders to raise £7.5 million
(before expenses).
We continue to monitor the Covid-19
situation closely and will adapt as
necessary in order to continue servicing
our customers whilst protecting
our people.
Chris Walters
Chief Executive
13 January 2021
19
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements FINANCIAL REVIEW
Establishing resilience and
a foundation for future growth
The investments made in the previous
year in equipment, infrastructure
and technology to add capacity and
capability have been instrumental
in supporting business continuity
across our operations during the
Covid-19 crisis.
Chris Walters
Chief Executive
Our financial priority this year has been
to minimise the impact of Covid-19
on the Group with proactive measures
to reduce costs and to conserve cash
while continuing to invest in making
further strategic progress against
our focus areas for growth.
Revenue split
2
Total: £25.4m
Precision Machined
Components: £14.2m
1
Chesterfield Special
Cylinders: £11.2m
Business Review
To read more see page
Risks and Uncertainties
To read more see page
14
28
Tougher trading conditions
and Covid-19 disruption,
which particularly impacted
the Precision Machined
Components division (PMC)
as well as the deferral of
a defence contract with
Chesterfield Special Cylinders
(CSC) into the year ended
2 October 2021 resulted in
a reduction in Group revenue
for the year to £25.4 million
(2019: £28.3 million) and an
adjusted operating loss for
the year of £2.4 million (2019:
£2.2 million operating profit).
The Group made a loss before
taxation of £20.0 million (2019:
£0.5 million), which included
amortisation, impairment and
other exceptional costs of
£17.6 million.
However, the investments
made in the previous year
in equipment, infrastructure
and technology to add capacity
and capability have been
instrumental in supporting
business continuity across
our operations during the
Covid-19 crisis.
CSC revenue decreased by
19% to £11.2 million (2019:
£13.9 million) and the division
made an adjusted operating
loss of £0.1 million (2019:
£2.1 million operating profit).
PMC revenue decreased by 1%
to £14.2 million (2019: £14.4
million) and the division made
an adjusted operating loss of
£0.7 million (2019: £1.9 million
operating profit).
The current trading
performance and medium-
term outlook of our OEM
customers regarding the
depressed oil and gas market
resulted in an impairment
review of the goodwill and
other intangible assets of the
PMC division as they relate to
Al-Met, Quadscot, Roota and
Martract subsidiaries, acquired
by the Group between 2010 and
2016. Lower than previously
considered growth rates and
higher risk-factored discount
rates, than assumed at the half
year, applied to future cash
flows have resulted in a non-
cash exceptional impairment
to goodwill and other intangible
assets of £13.9 million.
20
Pressure Technologies plc Annual Report 2020
FINANCIAL HIGHLIGHTS
Group revenue
Group adjusted operating loss*
£25.4m
(2019: £28.3m)
£2.4m
(2019: £2.2m operating profit)
Return on revenue**
Net operating cash inflow***
(9.4)%
down 17.3ppt (2019: 7.9%)
£1.7m
(2019: £0.6m)
Group loss before taxation
Closing total net debt****
£20.0m
(2019: £0.5m operating loss)
£7.4m
(2019: £11.4m)
*
Operating loss excluding amortisation, impairments
and other exceptional costs.
** Adjusted operating loss divided by revenue.
*** Before cash outflow for exceptional costs and excluding
cash flows associated with discontinued operations.
**** Total net debt includes gross borrowings, asset
finance leases, right-of-use asset leases, less cash
and cash equivalents.
Contracts that were
categorised as ‘recognised
over time’ and still in progress
at the end of the year had a
value of £6.5 million of future
revenue on these contracts
relating to as yet unfulfilled
performance obligations which
are due for delivery in 2021.
The Group’s existing RCF of
£12 million at the year end
was put in place in December
2019 for two years through to
December 2021. In December
2020, the Group extended its
facility through to 30 November
2022 with a £9 million facility
through to 1 July 2021 and then
£7 million for the remainder of
the term.
In addition, the Group
undertook a fundraising on
18 December 2020 through
the issue of 12,471,998 new
ordinary shares which raised
cash proceeds, net of expenses,
of approximately £7.0 million.
Trading results
CSC
Revenue decreased by 19% on
the prior year primarily due to
the phasing of major defence
contracts, which was further
compounded by the deferral
of revenue on a significant
defence contract from Q4 FY20
into Q1 FY21.
As a result, gross profit has
decreased to £2.9 million (2019:
£5.0 million), with a 10.0ppt
reduction in gross margin.
An adjusted operating
loss before amortisation,
impairments and other
exceptional costs of
£0.1 million resulted in FY20
(2019: £2.1 million adjusted
operating profit) and there has
been a 15.1ppt decrease in the
return on revenue in the year
to 0.0% (2019: 15.1%).
In addition, in the Company
only accounts of Pressure
Technologies plc a write down
of £26.5 million was made with
respect to the valuation of its
investment in PT Precision
Machined Components
Limited, the holding company
which owns the subsidiary
companies that comprise the
operations of the PMC division.
On 3 October 2020, total net
debt (which now includes
right- of-use asset leases
following the adoption of
IFRS 16) reduced to £7.4
million (28 September 2019:
£11.4 million). The Group’s
£12.0 million RCF was drawn
at £6.8 million (28 September
2019: £10.8 million). Cash and
cash equivalents increased
to £3.4 million (28 September
2019: £2.2 million) taking net
RCF debt down to £3.4 million
(28 September 2019: £8.6
million). Lease liabilities on
3 October 2020 increased to
£4.1 million (28 September
2019: £2.8 million), mainly as
a result of right-of-use asset
liabilities brought in under
the adoption of IFRS 16.
The significant reduction
in total net debt was driven
principally by the receipt in
February 2020 of a £2.1 million
repayment of the Greenlane
Renewables Inc. Promissory
Note with associated interest
and the receipt in June and
July 2020 of £3.1 million from
the sale of the shareholding
in Greenlane Renewables Inc.
Receipt of the outstanding
Promissory Note balance of
£3.1 million is expected in
June 2021.
21
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements FINANCIAL REVIEW continued
In respect of the Group’s
various share option plans
there was a net cost in the year
of £0.1 million (2019: net cost
of £0.1 million).
Asset impairments
and amortisation
The Group tests annually for
impairment, or more frequently
if there are indicators that
goodwill, other intangibles and
tangible fixed assets might
be impaired. The occurrence
of the Covid-19 pandemic is
a global issue affecting every
single business sector and
every country to some degree.
It has already had a significant
impact on the global economy,
and its impacts are expected
to continue for the foreseeable
future. Consequently, the
impact of the pandemic is
considered to be an indicator
that the carrying value of
our intangible and tangible
assets in one of the Group’s
cash-generating units (CGU)
– the Precision Machined
Components (PMC) division
– is impaired. In light of the
pandemic and the very difficult
trading conditions and outlook
for the oil and gas market,
PMC’s key end-market, the
Group has considered a range
of economic conditions for the
sectors that may exist over
the next three years.
These economic conditions,
together with reasonable and
supportable assumptions,
have been used to estimate
the future cash inflows and
outflows for the PMC CGU
over the next three years.
PMC
PMC revenue has decreased
just over 1% primarily due to
the deterioration in oil and
gas markets as a result of
the Covid-19 pandemic. The
division also saw lower than
expected gross margins as
poor operational performance
in the first half of the year
failed to improve in the
second half of the year.
Gross profit decreased by
41.4% and there was a 11.8ppt
reduction in gross margin,
compared to 2019 at 29.1%,
primarily due to the sharply
reduced order intake in the
second half of the year as our
oil and gas OEM customers
deferred project spend against
the backdrop of a depressed
oil price causing continued
uncertainty and disruption
in the market. Margins were
also impacted by the longer
than expected consolidation
process of the Quadscot
operation and order book into
our Roota facility, although we
have now made good progress
in lowering the cost base and
increasing capacity utilisation
across other sites.
The division reported an
adjusted operating loss before
amortisation, impairments
and other exceptional costs of
£0.7 million which represents
a return on revenue of -4.6%,
a 17.6ppt reduction from 2019.
Central costs
Unallocated central costs
(before other exceptional
charges) were £1.7 million
(2019: £1.7 million). The profit
on the sale of the investment in
PT US Inc. and its 40% holding
in Kelley GTM and its assets
totalling £0.3 million has been
treated as an exceptional
finance cost and is shown
in Note 2 to these financial
statements.
22
Pressure Technologies plc Annual Report 2020 Other exceptional items
Reorganisation and
redundancy costs in the year
were £0.4 million (2019: £0.5
million), which predominantly
relate to termination payments
made on the resignation
of the previous CFO and
divisional PMC management
reorganisation costs.
An inventory write off in PMC
relating to obsolete stock
items totalled £0.5 million and
other head office costs totalled
£0.4 million in the year.
The Group closed its Quadscot
operation in June 2020 after
five consecutive years of loss
making and closure costs,
both incurred and provided for,
totalled £0.7 million in the year.
On 26 November 2019, the
Group announced that its
subsidiary Chesterfield
Special Cylinders (CSC)
had been found guilty of a
charge brought by the Health
and Safety Executive (HSE)
pursuant to Section 2 of the
Health and Safety at Work Act
1974 following a fatal accident in
June 2015. On 13 January 2020,
the Group was sentenced to a
fine of £0.7 million along with
prosecution costs of £0.2 million.
The fine is due to be paid over
five six-monthly instalments
of £140,000 commencing on
31 January 2021.
Taxation
The tax credit for the year
was £1.1 million (2019:
£0.1 million).
The current year tax charge
has benefitted from a £0.1
million overprovision in respect
of the prior year. Deferred tax
reflects a £1.0 million credit
relating to the charge in
respect of the impairment
of intangible assets.
R&D tax benefits in respect
of 2020 are expected to be
around £1.1 million (2019:
£1.2 million).
Corporation tax refunded
in the year totalled £0.2
million (2019: £0.2 million),
which relates to the UK.
Taxes relating to overseas
territories are minimal.
Foreign exchange
The Group has exposure
to movements in foreign
exchange rates related to
both transactional trading
and translation of overseas
investments.
In the year under review,
the principal exposure
which arose from trading
activities, was to movements
in the value of the Euro, the
Canadian Dollar and the US
Dollar relative to Sterling.
As the Group companies
both buy and sell in overseas
currencies, particularly the
Euro and the US Dollar, there
is a degree of natural hedge
already in place.
The assumptions underlying
these forecasts are detailed
in Note 12 to these financial
statements. The review
concluded that an impairment
was required of £13.9 million,
comprising £9.5 million
of goodwill, £2.1 million of
intellectual property, £2.2
million of non-contractual
customer relationships and
£0.1 million of software
items, which has therefore
been included, as a non-
cash exceptional item, in
these financial statements.
Amortisation costs were
£2.0 million (2019: £1.8 million)
and have also been treated as
a non-cash exceptional item.
Disposal of investments
and carrying value of other
financial assets
Greenlane Renewables Inc:
£3.1m
Cash proceeds from sale
of common shares
On 3 July 2020, the Group
entered into a Framework
Agreement with Greenlane
Renewables Inc. (Greenlane),
Creation Partners LLP
(Creation) and Brad Douville
(the “Framework Agreement”)
and immediately sold a total of
7,663,920 common shares and
the underlying common shares
of 5,094,765 share purchase
warrants in Greenlane
Renewables Inc. (the “PT
Securities”). The PT Securities
had been issued to PT in
connection with the disposal
in the prior year of its wholly
owned subsidiary PT Biogas
Holdings Limited. Together
with the sale of 2,525,610
common shares in Greenlane
on 10 June 2020, the Group
realised cash proceeds of
£3.1 million from these sales.
As a result of the Framework
Agreement, Greenlane’s
outstanding principal on the
Promissory Note owed to the
Group (the “Promissory Note”)
was reduced to approximately
£3.1 million and the maturity
date was advanced from
3 June 2023 to 30 June 2021.
The profit on sale of the
shareholding of £1.9 million and
the consequent modification
in the value of the Promissory
Note of £1.0 million have been
treated as exceptional finance
costs and are shown in Note 2
to these financial statements.
The Group’s only remaining
interest in Greenlane
Renewables Inc is the
Promissory Note, details of
which can be found in Note 18
to these financial statements.
PT US Inc:
At the beginning of the year,
the Group indirectly held a 40%
investment in Kelley GTM, LLC,
through its 100% subsidiary
PT US Inc. The principal activity
of Kelley GTM, LLC is the
manufacture of high-pressure
vessels for gas transport
solutions. Kelley GTM, LLC is
based in Amarillo, Texas. The
investment in Kelley GTM, LLC
was fully written down in the
period ended 3 October 2015.
In May 2020, the Group sold
the entire share capital of PT
US Inc for a consideration of
US$50,000 along with five
GTM transport modules for
US$250,000. We therefore
no longer have any interests
in Kelley GTM, LLC. The total
profit on sale of this associate
has been treated as exceptional
finance costs and is shown
in Note 2 to these financial
statements.
23
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements FINANCIAL REVIEW continued
Pressure Technologies plc,
the Company, has £26.2 million
of share premium as at year
end. On 17 December 2020, the
Company received shareholder
approval to convert the share
premium, under a capital
reduction, into a distributable
reserve. This process requires
Court Approval. An application
to the Courts has been made
but the timing of the process
is currently uncertain.
Statement of
financial position
Goodwill and intangible assets
(at net book value) decreased
by £15.8 million to £0.3 million
(2019: £16.1 million) principally
as a result of the £13.9 million
impairment of the PMC CGU.
Amortisation in the year was
£2.0 million (2019: £1.8 million).
The consolidation of the
Quadscot operation and order
book into the Roota Engineering
facility took place in June 2020.
The property at Quadscot is
owned and was marketed for
sale with immediate effect.
As at 3 October 2020 the
Group was expecting to sell all
three conjoined units, either
separately or as a whole, within
the next financial year and
therefore in the statement of
financial position is showing the
market value of the properties
of £0.6 million as an “Asset held
for sale” under current assets.
In light of the pandemic
and the very difficult
trading conditions for
the oil and gas market,
PMC’s key end-market,
the Group has considered
a range of economic
conditions for the sectors
that may exist over the
next three years.
Cash outflow in the year in
respect of other exceptional
costs (see Note 5) was £1.5
million (2019: £1.6 million).
This excludes the inventory
write down and asset
impairments (which were non
cash flow exceptional items)
and the HSE fine, none of
which was paid in the year
but deferred to future periods
for payment.
During the year the Group
received £5.2 million
exceptional cash inflow relating
to its interests in Greenlane
Renewables Inc. following
the sale for £3.1 million of
its entire holding of common
shares and underlying share
purchase warrants and a
repayment of £2.1 million
of the Promissory Note.
Total net debt, including right-
of-use asset leases following
the adoption of IFRS 16, was
£7.4 million (2019: £11.4 million),
the decrease driven primarily
by exceptional receipts of
£5.2 million from the Group’s
interests in Greenlane
Renewables Inc. and other
working capital inflows.
This enabled the repayment
of £4.0 million of the Group’s
£12 million revolving credit
facility (RCF) reducing drawn
debt to £6.8 million at the year
end (2019: £10.8 million).
The decrease in adjusted
EBITDA more than offset the
decrease in net debt which
means the net debt to adjusted
EBITDA leverage ratio included
as a covenant in the RCF
facility increased to 3.8:1 at
3 October 2020 (2019: 1.8:1).
The Group’s existing RCF at the
year end was put in place in
December 2019 for two years
through to December 2021.
In December 2020 the Group
extended its facility through
to 30 November 2022 with a
£9 million facility through to
1 July 2021 and then £7 million
for the remainder of the term.
The key financial covenant in
the amended RCF remains
the leverage covenant, which
is tested quarterly, and has a
maximum permitted net debt
to adjusted EBITDA ratio of 5.5:1
for the two quarterly test dates
of December 2020 and March
2021, a ratio of 3.5:1 in June
2021 reducing to a maximum
of 3:1 by September 2021 and
for the remainder of the term.
Following the fundraising in
December 2020 (see Note 34),
it is expected that these
covenants may be subject
to amendment following
discussions with the bank.
(Loss)/earnings per share
and dividends
Adjusted loss per share was
6.4 pence (2019: 7.8 pence
adjusted earnings per share).
Basic loss per share was
101.5 pence (2019: 2.1 pence).
No dividends were paid in
the year (2019: nil) and no
dividends have been declared
in respect of the year ended
3 October 2020 (2019: nil).
Distributable reserves in the
parent company decreased as
a result of the write down of the
investment in PT PMC Limited
and as at the year end are
negative £20.6 million (2019:
£6.8 million positive reserve).
Following the disposal of the
Alternative Energy division
in the prior year, the overall
exposure of the Group to
currency fluctuations in
respect of trading has reduced
considerably. The Group is
however more exposed to the
transactional impact of the
Canadian Dollar in respect
of the Greenlane Renewables
Promissory Note, 50% of
which is denominated in that
currency. Where appropriate,
and where the timing of future
cash flows are able to be
reliably estimated, forward
contracts are taken out to
cover exposure.
As at 3 October 2020 there
were no forward contracts
in place (2019: none).
Financing, cash flow
and leverage
£6.8m
RCF debt
Operating cash outflow
before movements in working
capital was £3.3 million (2019:
£2.6 million inflow). After a net
working capital inflow of
£5.0 million (2019: £2.0 million
outflow), cash generated from
operations was £1.7 million
(2019: £0.6 million). Key
movements within working
capital include the timing
flows of major CSC contracts
including received milestone
payments with respect to
the Dreadnought Boatset 2
Programme materials, whereby
supplier payments moved to
after the year end. In addition,
the inflow from net working
capital includes around £1.0
million from deferred payments
of PAYE and VAT to HMRC, due
to Covid-19 relief, across the
Group that have been moved
into 2021 to be paid on an
agreed instalment timescale.
24
Pressure Technologies plc Annual Report 2020 Net current assets (being
current assets less current
liabilities), excluding RCF
borrowings, decreased to
£8.5 million (2019: £9.1 million).
Non-current liabilities of
£10.9 million have increased
by £7.1 million, primarily as a
result of £6.8 million of RCF
borrowings. In the prior year
the RCF borrowings were
classified as current liabilities.
However, following the recent
renegotiation of the RCF which
now extends to 30 November
2022, they are classified as
non-current liabilities as at
3 October 2020.
Net assets decreased by 59%
to £13.3 million (2019: £32.1
million) and net asset value per
share decreased to 72 pence
(2019: 176 pence).
Chris Walters
Chief Executive
13 January 2021
25
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements KEY PERFORMANCE INDICATORS
How we measure
our success
Measured performance
The Board uses Key Performance Indicators (KPIs)
when assessing the performance of the Group.
These KPIs are divided into three sections:
FINANCIAL PERFORMANCE
Growth and return £m
Cash conversion
Net debt ratio
Order intake – PMC £m
1.9x
3.8x
11.8
1.9
3.7
3.8
1.6
3.1
2.3
1.8
10.7
10.4
16.3
12.8
11.8
Revenue and return on revenue
Revenue
Return on revenue
£m
30
25
20
15
10
5
0
%
15
10
5
0
-5
-10
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
0.9
N/A
6
1
0
2
7
1
0
2
8
1
0
2
0.5
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Growth is measured in terms
of sales revenue.
The efficiency of converting
sales into profits is
measured in terms of return
on revenue. This is calculated
as operating profit divided
by revenue. The Group has a
target of at least 15% return
on revenue, although this
was very negatively impacted
by the Covid-19 pandemic
during the year.
The cash conversion ratio
measures the proportion of
adjusted operating profit/
(loss) converted into cash in
the period. This is calculated
as cash flows from operating
activities (before exceptional
costs) divided by adjusted
operating profit/(loss).
The minimum target cash
conversion ratio is 1.
The measured net debt ratio
is specific to the Group’s RCF
facility. It is calculated as
net debt attributable to the
lender, being total net debt
less right-of-use asset leases,
divided by adjusted EBITDA.
The targeted ratio is less
than 3:1.
Twelve-month order intake
is measured as an indication
of future workload, trends
in capacity requirements
and progress with strategic
plans for customer, product,
market and regional targets
in each division.
26
Pressure Technologies plc Annual Report 2020 FINANCIAL PERFORMANCE
SHAREHOLDERS
CORPORATE SOCIAL RESPONSIBILITY
Order intake – CSC £m
Adjusted earnings per share
Health and safety
Environment
11.0
13.1
10.6
11.0
(6.4)p
10.0
7.4
7.8
8.1
7.8
2.9
0
incidents
0
incidents
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
-6.4
0
2
0
2
0
6
1
0
2
0
7
1
0
2
0
8
1
0
2
0
9
1
0
2
0
0
2
0
2
0
6
1
0
2
0
7
1
0
2
0
8
1
0
2
0
9
1
0
2
0
0
2
0
2
Twelve-month order intake
is measured as an indication
of future workload, trends
in capacity requirements
and progress with strategic
plans for customer, product,
market and regional targets
in each division.
Adjusted earnings per
share is used as a measure
of shareholder return.
Details of the calculation
of adjusted EPS can be
found in Note 10 of the
Notes to the consolidated
financial statements.
Safety performance is
measured against reportable
accidents in accordance
with the Specified Injuries to
Workers as set out in RIDDOR
2013 guidelines. The Group
target is zero.
The Group has not had any
reportable accidents over the
last five years.
The environment measure
currently used is the number
of reportable environmental
incidents and as with health
and safety, the target across
the Group is zero.
The Group has not had
any incidents over the last
five years.
The Group employs a Director
of Group Health, Safety,
Quality and Environment,
who reports directly to
the Chief Executive. He is
responsible for ensuring
that the Group employs best
practice that is consistent
around the Group and leads
the team of health and safety
managers employed at each
business in the Group.
27
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements RISKS AND UNCERTAINTIES
Managing risk
effectively
The principal risks identified by
management and any changes
to those risks are detailed below.
Direction of change
Risk heat map – impact and likelihood
Increased
Risk
No
change
Decreased
Risk
NEW New
Risk
Risk management process
Risk
monitoring
and review
Risk
context
Risk
treatment
Risk
assessment
(identification
and analysis and
evaluation)
5
6
4
1
3
2
t
c
a
p
m
I
5
4
3
2
1
1
2
3
4
5
Likelihood
1 Global economic conditions and
market volatility: 20 (2019: 20)
2 Government policy, regulation,
legislation and compliance: 6 (2019: 6)
3 Market conditions and commercial
relationships: 12 (2019: 12)
4 Funding and liquidity: 8 (2019: 25)
5 Availability and use of key resources: 20 (2019: 25)
6 Technology and innovation: 20 (2019: 16)
28
Pressure Technologies plc Annual Report 2020
RISK AND IMPACT
STATUS AND MANAGEMENT STRATEGY TO MITIGATE
CHANGE
1. Global economic conditions and market volatility
Covid-19
There remains significant uncertainty and concern
as to the duration and impact of the Covid-19 crisis
going forward. As a supplier to customers who support
UK Critical National Infrastructure and Strategic
Defence Contracts, to date, we have been able to
keep all our sites open with only minimal operational
disruption and capacity issues at the beginning of
the pandemic. The defence, industrial gases and
hydrogen energy markets – the key markets for our
CSC division – have been relatively unaffected by the
pandemic, other than for our Integrity Management
business which has been impacted by the domestic
and international travel restrictions. However, the
pandemic has had a very significant negative impact
on the oil and gas sector, which is the primary market
for the PMC division. As a result order intake in this
division has been, and continues to be, significantly
depressed. At this point in time, it is unclear as to how
quickly or otherwise the oil and gas sector will recover
when the outbreak is contained, whether through the
deployment of an effective vaccine or otherwise, and
restrictions are lifted.
Market sectors
The Group operates in and is therefore impacted
by the macro conditions in the oil and gas, defence,
industrial gases and hydrogen energy markets.
We need to remain sufficiently flexible to allow us
to anticipate downturns, to allow us to adjust our
operations accordingly, and equally to meet growth
in demand when our customers’ markets are buoyant.
Brexit
Whilst the negotiations to determine the basis by
which the UK will trade with the EU going forward
have recently been concluded, there still remains
a level of uncertainty and concern as to how these
new arrangements will operate in practice. The
potential implications for the Group tend to focus
around currency fluctuation and cross-border
business. Any changes to cross-border trading,
including tariffs and non-tariff barriers, which could
be imposed through failure by the UK to comply with
the agreement, could affect both working capital
requirements, by extending supply chains, and the
costs of both manufacturing and sales.
NEW
• The Group has written and implemented specific policies
which have successfully allowed us to adopt working
practices to meet UK government guidelines on workforce
protection, enabling social distancing across all our
facilities, encouraging working from home wherever roles
permit and promoting employee health and wellbeing
across the business.
• The Group has continued to support our customers,
maintaining close dialogue with them and remaining
focused on safely delivering their orders.
• The Group has taken a number of prudent measures to
manage cost and conserve cash and core capability in the
business, including closure of the Quadscot facility in the
PMC division.
• The Group has increased its exposure to markets outside
of oil and gas such as defence and hydrogen energy storage
and revenues from these areas have risen.
• The Group has responded to adverse conditions in oil and
gas by restructuring through the Covid-19 driven downturn,
including the closure of the Quadscot facility, but has
retained and invested in its core capabilities as confidence
in market recovery has grown.
• The PMC businesses serve both production and exploration
in the oil and gas market, with production being less volatile
during a market downturn.
• Increased sales focus across the Group to expand into new
market sectors, new customers and new product lines.
• The Group typically quotes for business on a short quote
expiry and there is considered to be a relatively limited risk
in the following areas:
• VAT and duty particularly related to the import
of raw materials.
• Exchange rates.
• The Group is actively working with the Sheffield Chamber
of Commerce and Industry to assess risk and to better
understand the practical implications of the recent
agreement with the EU.
• The Group has obtained Authorised Economic Operator
Status (AEO) as part of its risk mitigation procedures.
29
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements RISKS AND UNCERTAINTIES continued
RISK AND IMPACT
STATUS AND MANAGEMENT STRATEGY TO MITIGATE
CHANGE
1. Global economic conditions and market volatility continued
Foreign exchange
A proportion of the Group’s business is carried out in
currencies other than Sterling. To the extent that there
are fluctuations in exchange rates, this may have an
impact on the Group’s financial position or results.
The Group may engage in foreign currency hedging
transactions to mitigate potential foreign currency
exposure which is dependent on the certainty of
value and timing of cash flows.
• Natural hedges are in place for the predominant currencies
the Group is exposed to and all foreign currency trading is
completed by Group treasury, including forward exchange
contracts when appropriate.
• The Group typically quotes for business on a short
quote expiry and where appropriate will include price
escalation clauses to limit exposure to fluctuations
in foreign currencies.
• Following the sale of the Alternative Energy division in the
prior year there is a potential volatility on a transactional
basis to movement between the CAD:GBP arising on the
repayments in June 2021 of the remaining Promissory
Note of £3.1 million due from Greenlane Renewables Inc.
which is denominated 50:50 GBP:CAD.
2. Government policy, regulation, legislation and compliance
Government policies
Revenue generated from defence contracts is
impacted by government policies which the Group
may not be able to influence.
Whilst unlikely in the short term, a change of
government may result in amendments to tax and
employment policies that could affect the business
e.g. R&D tax credit regime, worker representation
and rights.
In November 2020, the government announced a
significant increase in defence spending over the
next four years. However, the Covid-19 pandemic has
resulted in a very significant increase in government
borrowings which may have a negative impact on the
government’s ability to meet this commitment.
Health and Safety
The Group operates manufacturing facilities therefore
has a fundamental duty to protect its people and
other stakeholders from harm whilst conducting
its business.
• Changes that impact our defence contracts have enough
visibility for management to implement plans that could
mitigate them. A change of government is the greatest risk
to the UK defence programme spending.
• Changes to R&D tax credits for development projects may
reduce claims levels, increase overall tax and increase
project funding requirements.
• Given the considerable additional debt incurred during the
pandemic by HMG to fund business and employee support,
increases in business taxes are a distinct possibility.
• The Group has an established HSE Committee which
monitors and assesses risk and leads a continuous
improvement programme across all Group facilities.
• On 26 November 2019, the Group confirmed that its CSC
business had been found guilty of a charge brought by the
HSE under Section 2 of the H&S at Work Act following a
fatal accident at the site in June 2015. On 13 January 2020,
the Group was sentenced to a fine of £0.7 million along with
prosecution costs of £0.2 million.
30
Pressure Technologies plc Annual Report 2020 RISK AND IMPACT
STATUS AND MANAGEMENT STRATEGY TO MITIGATE
CHANGE
3. Market conditions and commercial relationships
Contract risk
Failure to adequately manage contract risk and,
as a result, commit to obligations which the Group
is unable to meet without incurring significant
unplanned costs.
Customer concentration
Customer concentration is high in both divisions
of the Group and our relationships with these key
customers could be materially adversely affected
by several factors, including: a decision to diversify or
change how, or from whom, they source components
that we currently provide, an inability to agree on
mutually acceptable pricing or a significant dispute
with the Group. If the Group was unable to enter
similar relationships with other customers on a timely
basis, or at all, our business could be materially
adversely affected.
4. Funding and liquidity
Funding
The Group requires a working capital facility for
trading and the growth strategy may require access
to specific project funding, particularly with regard
to the growth in our hydrogen energy business in the
CSC division. There remains significant uncertainty
in the UK economy as a result of Covid-19 and Brexit
and this has increased the desirability of a more
conservative and resilient capital structure.
Should revenue or margins be materially reduced,
or working capital requirements significantly increase,
there would be an immediate reduction in the facility’s
covenant headroom.
• The prevalence of significant and complex contracts
in the CSC division has continued to increase.
• The Group’s governance policies and procedures in relation
to contract risk were reviewed in the prior year and
enhanced and a new governance framework established.
• Key account management is a focus across the Group
and we have a history of strong customer relationships.
• The Group has a high dependence on a small number
of customers and much work continues to develop the
distribution channels and expand the customer base
in both divisions.
• The Group’s existing revolving credit facility (RCF) of £12
million at the year end, was put in place in December 2019
for two years through to December 2021. In December 2020,
the Group extended its facility through to 30 November 2022
with a £9 million facility through to 1 July 2021 and then
£7 million for the remainder of the term.
• The Group undertook a fundraising through the issue
on 18 December 2020 of 12,471,998 new ordinary shares
which raised cash proceeds, net of expenses, of approximately
£7.0 million.
• Long-term finance products, such as leasing, are used
for core debt items such as capital investments.
• Working capital levels, cash conversion and bank
covenant compliance are regularly monitored by executive
management and reported to the Board.
31
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
RISKS AND UNCERTAINTIES continued
RISK AND IMPACT
STATUS AND MANAGEMENT STRATEGY TO MITIGATE
CHANGE
5. Availability and use of key resources
Leadership
As an SME, the Group has certain roles that are critical
to business performance and growth and a higher
level of reliance on certain individuals.
Retention of key staff in business critical roles
Failure to continue to evolve organisation structure
and culture could prevent us from employing and
retaining the right talent, knowledge and skills to
deliver the strategy.
As markets improve post the Covid-19 crisis and the
Group develops into new markets such as hydrogen
energy we need to continue to recruit high quality
staff, building on existing capability while recruiting
skilled expertise in the right areas of the business,
at the right time.
Major capital assets
Certain of the Group’s businesses rely on large or
critical pieces of equipment and major breakdown
could affect our ability to maintain delivery
performance and customer growth.
• Restructuring and new leadership of the Precision
Machined Components division was undertaken in the
second half of 2019 and these have driven an important
cultural change that is more focused on performance
and customer service.
• A similar programme of significant management changes
within the Cylinders division was completed in December
2019, which has already helped drive operational
improvements, better customer service and stronger
colleague engagement across the division.
• The Board was strengthened during the year with the
appointment of a new Chairman and two new Non-Executive
Directors. The Chief Financial Officer stepped down from the
Board in October 2020 and has been replaced on an interim
basis by the previous Group Financial Controller pending
the appointment of a permanent successor.
• The high added value products and services provided by all
the businesses are reliant on the skills and knowledge of
our employees and there is a programme of training around
the Group to ensure the development and retention of these
key skills and employees. The training programme includes
apprenticeships, industry qualifications and through to
post-graduate degrees.
• 2019 and 2020 have been a period of transition for the
Group including both Board and operational management
changes and progress made with organisational
development and culture.
• Policies and procedures are reviewed at least annually.
• Investment in the use of third-party recruitment resource
extends and enhances existing skills within the Group and
strengthens succession planning.
• Employee engagement surveys are periodically undertaken
to benchmark and assess progress in employee engagement
and development and a recent survey was undertaken in
November 2020.
• Key assets are subject to ongoing maintenance
programmes and strategic spares are held.
• The risk is further mitigated in the Precision Machined
Components division by the number of manufacturing sites.
• Investment in capital assets is constantly reviewed and in
2019 £2.8 million was invested in new advanced machining
centres across the Group. In 2020, the investment in capital
assets was reduced to £2.1 million in response to the need
to conserve cash due to the Covid-19 crisis.
• In December 2020, the Group undertook a fundraising by
the issue of new shares which raised cash proceeds, net of
expenses, of £7.0 million. Of these proceeds, £3.0 million is
expected to be spent in the CSC division which will include
increasing manufacturing capacity and resilience.
32
Pressure Technologies plc Annual Report 2020 RISK AND IMPACT
6. Technology and innovation
STATUS AND MANAGEMENT STRATEGY TO MITIGATE
CHANGE
Product development
The strength of our business is built upon a history of
delivering products that advance safety and reliability
in demanding environments. If we fail to keep abreast
of market needs or to innovate solutions, we are at risk
of losing market share to our competitors and lowering
margins as demand will reduce. The hydrogen energy
market is a significant growth opportunity for the CSC
division but the underlying technology is relatively
immature and unproven.
• Investment in product development and services is key to
the continued growth of the Group and we strive to embed
a culture of research and development initiatives within
the business, which are enhanced through engagement
with advanced university research institutes. We are
working closely with the major players in the emerging
hydrogen energy market to help ensure our products in
the CSC division meet the evolving requirements of our
potential customers.
Disruptive technologies
Technological advances in production processes or
materials may cause a reduction in demand for the
Group’s products.
• The monitoring of evolving technologies that may
disrupt the market is ongoing, looking to both capitalise
on the opportunities they may provide as well offset any
potential threats.
Cyber crime
At present, the Group’s principal exposures to cyber
crime relate to the misappropriation of cash and data.
Our revenue streams are largely protected as our
products are not currently electronic in nature and
we do not, as a rule, transact over the internet.
• Cyber security is a growing risk for all businesses and
in late 2018 the Group appointed a Group Head of IT who
now chairs the Cyber Security Committee.
• The Cyber Security Committee comprises a member of the
Board, the senior management team and third-party IT
service providers.
• Assessment of cyber security arrangements is a continuous
process and external resources are engaged as necessary
to support the Group to both assess risk and implement
solutions.
• The Group uses collaborative working systems with cloud
storage where there are increased security advantages
for data protection and a programme of investment in MRP
and ERP systems is underway.
Approval of the Strategic report
The Strategic report, as set out on pages 02 to 33, has been approved by the Board.
By order of the Board
Chris Walters
Chief Executive
13 January 2021
33
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements INTRODUCTION TO GOVERNANCE
Ensuring effective
corporate governance
Pressure Technologies plc is
proud of its reputation for being
honest and fair in the way it
does business.
Compliance with each of
the ten principles set out
in the revised QCA Code is
summarised below:
1. Establish a strategy and
business model which
promote long-term value
for shareholders
Pressure Technologies has
an established strategy for
growth, which it reports on
annually to its shareholders in
the Company’s Annual Report,
indicating how it has delivered
on the strategy and how it has
managed strategic risks. The
Board reviews the strategy at
least once a year to ensure
that it remains relevant and
sustainable. The Company’s
business model is clearly
set out on page 02 of these
financial statements.
2. Seek to understand and
meet shareholder needs
and expectations
The Company actively
encourages good
communication with all
shareholders from the largest
to the smallest. Presentations
to institutional and mid-sized
investors (typically by the Chief
Executive) are offered at the
full-year and half-year and
all investor presentations are
posted to the Group’s website.
Feedback is obtained following
all investor meetings and
this feedback is reviewed by
the Board. The Company has
always aimed to accommodate
investors who wish to visit its
manufacturing sites.
Sir Roy Gardner
Chairman
The Board fully supports the
underlying principles of corporate
governance contained in the Corporate
Governance Code (“the Code”) and
the Board has adopted the revised
QCA Code, released in April 2018. The
responsibility for ensuring compliance
and accurate reporting of corporate
governance resides with the Audit and
Risk Committee (“the Committee”).
Corporate governance will be
continually monitored and reviewed
formally by the Committee annually,
following publication of the report
and accounts each year.
Report of the Remuneration Committee
To read more see page
Directors’ Report
To read more see page
Audit and Risk Committee Report
To read more see page
40
43
47
34
Pressure Technologies plc Annual Report 2020 Board of Directors’ Purpose Statement
Subcommittees
In addition to the main Board Committees, the Group also
has the following subcommittee as set out below.
Health, Safety and Environment
A quarterly strategy meeting is held with the Director
of Group Health, Safety, Quality and Environment, his
team of Health and Safety Managers, the Chief Executive,
one of our Non-Executive Directors and the HR Director.
Additional operational meetings are held monthly, which
the senior executive team do not attend. The purpose
of the Committee is to embed a culture of safety and
wellbeing from the top down and ensure that best
practice is always employed at each Group company.
Establish and maintain vision, mission and values
• Determine and maintain the Company's vision and
mission to guide and set the pace for its current
operations.
• Determine and maintain the values to be promoted
throughout the Company.
• Determine, maintain and review Company goals.
• Determine and maintain Company policies.
Decide strategy and structure
• Review and evaluate present and future opportunities,
threats, risks in the external environment; current and
future strengths, weaknesses and risks relating to
the Company.
• Determine strategic options, select those to be
pursued and decide the means to implement and
support them.
• Determine the business strategies and plans that
underpin the corporate strategy.
• Ensure that the Company's organisational structure
and capability are appropriate for implementing the
chosen strategies.
Delegate to management
• Delegate authority to management and evaluate
the implementation of policies, strategies and
business plans.
• Determine the monitoring criteria to be used
by the Board.
• Ensure the internal controls are effective.
• Communicate with senior management.
• Account to shareholders and be responsible
to stakeholders.
Ensure that communications both to and from
shareholders and relevant stakeholders are effective
• Understand and take into account the interests of
shareholders and relevant stakeholders.
• Monitor relations with shareholders and relevant
stakeholders by gathering and evaluating appropriate
information.
• Promote the goodwill and support of shareholders
and relevant stakeholders.
35
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements INTRODUCTION TO GOVERNANCE continued
8. Promote a corporate culture
that is based on ethical values
and behaviours
Pressure Technologies plc is
proud of its reputation for being
honest and fair in the way it
does business. This reputation
has been established over many
years through leadership and
continuous reinforcement of
ethical principles by managers
and all employees. The principles
that apply to how the Group
works with its customers,
employees, shareholders and
the local communities in which
it operates are set out on the
Group’s website.
9. Maintain governance
structures and processes
that are fit for purpose and
support good decision making
by the Board
The roles of each of the Board
Committees are set out in their
Terms of Reference, which
can be found on the website
along with Matters Reserved
for the Board. The roles of
individual Directors are not
formally described, but this will
be reviewed and disclosed if
relevant. The responsibility for
ensuring governance structures
are continually reviewed and
relevant to the business and its
stakeholders falls to the Audit
and Risk Committee.
3. Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success
The Board fully recognises
that long-term growth and
profitability are enhanced
when businesses behave in
a sustainable and responsible
manner, with respect for
the environment and all
stakeholders. The Group’s
stakeholders include employees,
customers, investors, suppliers,
advisors and the communities
in which the Group’s businesses
operate. The Group’s approach
to sustainable and responsible
business is set out on the
website.
4. Embed effective risk
management, considering
both opportunities and
threats, throughout the
organisation
The Committee conducts
regular reviews of business
risk and oversees the
approach to risk management.
Acknowledging the increasing
threat to cyber security, the
Group has recruited new
skills and resources to ensure
effective risk management
and protection in this critically
important area. The Group
also has an established HSE
Committee which monitors
and assesses risk and leads
a continuous improvement
programme across all Group
facilities. The risk reporting
model, set out on pages
28 to 33 of these financial
statements, includes the key
risks to the Group’s strategy.
36
5. Maintain the Board as a
well-functioning, balanced
team led by the Chair
The Board comprises a
Chairman, Sir Roy Gardner, who
joined the business in January
2020, a Senior Independent
Non-Executive Director, Brian
Newman, who has served the
business for five years and two
Independent Non-Executive
Directors, Tim Cooper, who
joined the business in January
2020 and Mike Butterworth,
who joined the business in
June 2020. There is currently
one Executive Director, Chris
Walters, Chief Executive, who
joined the Group in September
2018. The Chief Financial
Officer stepped down from the
Board in October 2020 and has
been replaced on an interim
basis by the previous Group
Financial Controller in a non-
Board capacity, pending the
appointment of a permanent
successor. Board meeting
and Committee meeting
frequency and attendance are
set out within these financial
statements and the Terms of
Reference for each Committee
can be found on the website.
The Group uses specialist
software for its Board reports
which facilitates the quality
and timeliness of getting
information to the Board.
6. Ensure that between
them the Directors have
the necessary up-to-date
experience, skills and
capabilities
The Board comprises
an effective balance of
knowledge, skills, experience
and independence. The Board
represents relevant industry
experience from engineering,
operational management,
finance and investment. Every
member of the Board is there
for the benefit of Pressure
Technologies plc and each
recognises their responsibility
to the Company’s stakeholders.
The Board regularly reviews
its composition to ensure that
it has the necessary breadth
and depth of skills to support
the ongoing development of
the Group. The approach to
maintaining relevance and
diversity on the Board as well
as assigning internal advisory
responsibilities, such as those
of the Company Secretary and
Senior Independent Director,
are continuously reviewed by
the Committee. The skills that
each member brings to the
Board are clearly set out on
the Group’s website. The Chief
Executive, in conjunction with
the executive team, ensures
that the Directors’ knowledge
is kept up to date on key issues
and developments pertaining
to the Group, its operational
environment and to the
Directors’ responsibilities
as members of the Board.
During the course of the year,
Directors received updates
from the Company Secretary
and various external advisors
on a number of corporate
governance matters.
7. Evaluate Board performance
based on clear and relevant
objectives, seeking
continuous improvement
The corporate governance
statement on page 30 of the
2019 Annual Report notes that
details of the performance
evaluation procedures for
each Director, the whole Board,
or each Committee, are not
currently disclosed. As several
appointments to the Board
were made during 2020 and
the business was impacted
by the Covid-19 pandemic, no
Board evaluation was carried
out in 2020. However, it is the
current intention that the
Board evaluation process will
be reviewed, updated and
re-implemented during 2021.
The updated evaluation
process and schedule will be
published through the Group’s
website in due course.
Pressure Technologies plc Annual Report 2020 10. Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders
and other relevant
stakeholders
In addition to a Directors’
Report, reports from the
Remuneration Committee and
the Audit and Risk Committee
are included in these financial
statements. The Chief Executive
meets periodically with the
Group’s larger institutional
investors and feedback is
always obtained. Pressure
Technologies has a reputation
amongst its investors for its
fair and frank disclosure on
the Company’s performance.
All investor presentations
are available on the Group’s
website. The voting statistics
from AGMs are disclosed in a
Regulatory News release on
the day of the AGM. If relevant,
details of any actions to be
taken as a result of resolutions
for which votes against
had been received from at
least 20% of independent
shareholders would also be
disclosed. The Group’s website
is regularly updated and historic
documents dating back to the
Company’s listing in 2007 are
available. The Annual Report
is reviewed against FTSE 350
guidelines and best practice
is adopted, where relevant
and practical. From time to
time the executives attend
private investor events and
welcome investors to the
manufacturing facilities.
Sir Roy Gardner
Chairman
13 January 2021
37
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements DIRECTORS AND ADVISORS
Experienced leadership
Sir Roy Gardner
Chairman
Appointed
January 2020
Relevant strengths
• 40 years’ experience in leading
FTSE 250 companies.
• Recognised by Harvard as one of
the world’s leading wealth creators.
• Multi-industry expertise.
Relevant experience
• Fellow of the Chartered Association
of Certified Accountants, City & Guilds
Institute and Energy Institute.
• Leads and chairs large international
businesses, many of them providing
services to, or regulated by, governments.
• Chair of Serco plc and the Senior
Non-Executive Director of Mainstream
Renewable Power Limited.
• Previously Chief Executive of Centrica
plc, Chairman of Manchester United plc,
Chairman of Compass Group plc and
Senior Independent Director of
William Hill plc.
N R
Brian Newman
Senior Independent
Non-Executive Director
A N R
Chris Walters
Chief Executive
Appointed
September 2015
Appointed
September 2018
Relevant strengths
• Engineering expertise.
• Knowledge of global industrial
businesses, including cross-border M&A.
Relevant strengths
• Business regeneration and growth.
• Engineering expertise and credentials.
• Energy and marine sector knowledge
• Divisional management experience.
and network.
Relevant experience
• A Chartered Engineer with a degree
in Engineering from Cambridge
University and an MBA from Penn
State University, USA.
• Former Divisional Director at two FTSE
100 companies, latterly at Melrose
plc as EMEA Managing Director at its
subsidiary, Bridon International Group.
• Former Divisional Managing Director at
international engineering group GKN plc,
with responsibility for its global Wheels
and Axles Divisions.
• Over 40 years’ experience in engineering
having also previously served on the
boards of two listed companies.
• Multi-division, multi-region operations
management.
Relevant experience
• Master’s degree-qualified Chartered
Engineer with over 25 years of experience.
MBA from Imperial College, London.
• Fellow of the Royal Institution of Naval
Architects and Fellow of the Institution of
Marine Engineers, Science & Technology.
• Background in engineering design,
construction and through-life integrity
management for marine and oil and gas
operational assets.
• Senior executive career with Lloyd’s
Register Group, including roles in the
UK and overseas and the management
of the Group’s global marine and oil
and gas certification businesses.
• Chief Executive and co-owner of VCT-
backed oil and gas technology SME, TSC
Inspection Systems.
External commitments
• Trustee of the Royal National Lifeboat
Institution (RNLI) and member of the
Technical Committee.
External commitments
• Chairman of the Board of Governors
External commitments
• Non-Executive director of The
at St. Albans School.
• Tireless fundraiser for many charities
and most notably was President of
Carers UK, Chairman of the Employers
Forum on Disability and Chairman of
The Princess Royal’s Development Trust.
Shrewsbury and Telford Hospital NHS
Trust, The Woodard Corporation Ltd
and a number of other organisations.
38
Pressure Technologies plc Annual Report 2020 BOARD COMPOSITION
2
5
Tim Cooper
Independent
Non-Executive Director
A N R
Mike Butterworth
Independent
Non-Executive Director
A N R
1. Executive Directors: 2
2. Non-Executive Directors: 5
Appointed
January 2020
Appointed
June 2020
Relevant strengths
• Strong commercial expertise
in industrial markets.
• Operational management in
manufacturing organisations.
• Growing international, technically
based businesses.
Relevant experience
• Over 40 years’ of international business
experience in FTSE plc. Venture Capital
and privately-owned companies.
• Former Executive Director of Victrex plc
for seven years and has previously held
Managing Directorships of Umeco plc,
Tellermate plc and Avery Berkel Limited.
• BA (Hons) in Business Studies.
• Institute of Directors Certificate
in Company Direction.
External commitments
• Non-Executive Director of Renold
plc and Chair of their Remuneration
Committee.
Relevant strengths
• 18 years’ experience in Chair of
Audit Committee and Non-Executive
Director roles.
• Cross-sector expertise.
• Chief Financial Officer of FTSE
250 company.
Relevant experience
• Qualified chartered accountant with
an Honours degree in Philosophy,
Politics and Economics from the
University of Oxford.
• Former Chief Financial Officer at Incepta
Group plc and Cookson Group plc,
a FTSE 250 business.
• Former Non-Executive Director and
Chair of the Audit Committee of Kin
and Carta plc, Johnston Press plc and
Cambian Group plc.
• Former Senior Independent Director at
Kin and Carta plc and Johnston Press plc.
External commitments
• Non-Executive Director and Chair
of the Audit Committee of Stock
Spirits Group plc.
• Non-Executive Director of Hammerson plc.
BOARD ATTENDANCE
11/11
BOARD MEETING ATTENDANCE
11/11
11/11
11/11
8/8
8/8
4/4
2/2
AUDIT AND RISK ATTENDANCE
7/7
5/5
3/3
2/2
NOMINATION ATTENDANCE
2/2
2/2
REMUNERATION ATTENDANCE
3/3
3/3
COMMITTEE KEY
A Audit and Risk Committee
N Nomination Committee
R Remuneration Committee
Chairman
Member
39
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
REPORT OF THE REMUNERATION COMMITTEE
The Remuneration Committee comprises at least two Non-Executive Directors and is chaired by Brian Newman. 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.
All members attended all four meetings during the year, except for Sir Roy Gardner who has attended one meeting since his
appointment to the Board on 23 January 2020, Tim Cooper who has attended one meeting since his appointment to the Board
on 28 January 2020 and Mike Butterworth who has attended one meeting since his appointment to the Board on 23 June 2020.
The Committee meets not less than four times a year in a formal capacity and forms sub-groups to address specific matters
as necessary outside of these meetings.
Policy on remuneration of Executive Directors
The Committee aims to ensure that the remuneration packages offered are designed to attract, retain 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 a maximum of 8% of basic salary into individual money purchase pension schemes so long as this is matched
by a minimum of 6%, 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
Under the terms of this plan, introduced in September 2018, each participant has the right to receive new ordinary shares
of 5 pence each in the Company equal to a fixed percentage of the value created for shareholders above a hurdle over
the period from the date of grant. Awards are subject to certain performance conditions, principally delivering growth in the
value of the Company above a share price hurdle which is adjusted for value returned to shareholders over the Performance
Period. In this way, the Board can incentivise senior employees in a manner that is closely aligned with the interests of the
Company’s shareholders.
The awards, which can be acquired for nil consideration, are subject to an individual maximum value. 50% of awards will vest
after the expiry of the Performance Period, 30% on the first anniversary of the expiry of the Performance Period and 20% on the
second anniversary of the expiry of the Performance Period in accordance with the rules of the LTIP. The participants will have no
right to any payment of cash, rather they will become shareholders in the Company. In this way, the interests of the participants
will be aligned with those of all other shareholders.
On 3 September 2018 awards were granted to two Executive Directors and three senior managers. The fair value of these awards
at time of grant, as estimated by the Group’s external valuation specialists, was £239,000 and as of 3 October 2020 only one
Executive Director and one senior manager remain part of the scheme.
d) Service contracts
All Executive Directors have rolling service contracts terminable on no more than one year’s notice.
40
Pressure Technologies plc Annual Report 2020 Directors’ remuneration
Particulars of Directors’ remuneration are as follows:
Salary
and fees
£’000
Benefits
£’000
Exceptional
Bonus** Pension emoluments
£’000
£’000
£’000
Total
2020
£’000
Employers’ Employers’
national
insurance
2019
£’000
national
insurance
2020
£’000
Total
2019
£’000
Non-Executive:
Sir Roy Gardner
Brian Newman
Neil MacDonald
Tim Cooper
Mike Butterworth
Alan Wilson
Executive:
Joanna Allen
Chris Walters*
Total remuneration
46
40
28
27
11
—
145
208
505
—
—
—
—
—
—
1
2
3
—
—
—
—
—
—
40
—
40
—
—
—
—
—
—
22
29
51
—
—
—
—
—
—
110
—
110
46
40
28
27
11
—
318
239
709
—
45
43
—
—
43
215
241
587
2
4
4
2
1
—
24
34
71
—
5
5
—
—
3
25
32
70
* Chris Walters’ salary of £215,000 was subject to a voluntary reduction of 20% in August and September 2020 to support Group cost saving measures.
His total remuneration in 2020 excludes £57,842 (2019: £48,808) of taxable accommodation and travel expenses and allowances.
** Bonus payable for completion of sale of GRN Inc. shareholding in July 2020.
Part of the remuneration of Sir Roy Gardner was paid to a management company which he controls.
The number of Directors who accrued benefits under money purchase pension arrangements in the period was two (2019: two).
On 20 August 2020 it was agreed that Joanna Allen would step down from her role as Chief Financial Officer. She subsequently
resigned from the Board, with effect from 28 September 2020 and left the business at the end of October 2020. Exceptional
emoluments for Joanna Allen include a payment in lieu of contractual notice of £80,000 with the balance as an ex-gratia
severance payment.
Chris Walters’ salary for the year ending 2 October 2021 will remain at its current level of £215,000 per annum. Bonus arrangements
for the year ending 2 October 2021 have not yet been determined by the Remuneration Committee due to the uncertainties arising
from the Covid-19 pandemic. However, the maximum amount payable under any bonus arrangements will not exceed the current
policy limit of 50% of salary.
Following the resignation of Joanna Allen as Chief Financial Officer on 20 August 2020, an interim replacement was appointed
but this was a non-Board position. It is expected that a permanent replacement will be appointed to the Board as Chief Financial
Officer during the current year. Their remuneration arrangements will be determined by the Remuneration Committee at the time
of their appointment but these arrangements will be in line with current policy.
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’.
No Directors received dividends during the year (2019: nil).
41
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
REPORT OF THE REMUNERATION COMMITTEE continued
Directors’ share awards and options
The Directors’ interests in the LTIP scheme are as follows:
Scheme
Date granted
Number
Consideration
price
Chris Walters
Long Term Incentive Plan
3 September 2018
*
Nil*
* Chris Walters will receive such number of shares as equals 3% of the growth in value above a share price hurdle of £2.50 (adjusted for value returned to shareholders
over the performance period, i.e. dividends).
No awards were made under the LTIP during the year. LTIP arrangements for the year ending 2 October 2021 have not yet been
determined by the Remuneration Committee due to the uncertainties arising from the Covid-19 pandemic. The current LTIP
arrangements will be reviewed during the course of the current year to determine whether these arrangements remain aligned
with business circumstances.
The movements in share options held by Directors relating to the Group’s Save-As-You- Earn (SAYE) scheme in 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
Chris Walters
No.
Joanna Allen
No.
—
21,818
—
21,818
94,274
27,272
(121,546)
—
The Directors’ options granted in the period shown above relate to the Group’s SAYE scheme (see Note 28).
On behalf of the Board
Brian Newman
Chairman, Remuneration Committee
13 January 2021
42
Pressure Technologies plc Annual Report 2020
DIRECTORS’ REPORT
The Directors present their report and the audited financial statements for the period from 29 September 2019 to 3 October 2020.
Principal activities
During the period, Pressure Technologies plc (PT) was the holding Company for the following Group operations:
Chesterfield Special 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 two subsidiaries, CSC Deutschland GmbH, based in Germany, and
Chesterfield Special Cylinders Inc., based in Pittsburgh.
Precision Machined Components
The Precision Machined Components division consists of four businesses as follows:
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.
The Quadscot Group of Companies (Quadscot Holdings Limited and Quadscot Precision Engineers Limited) whose principal activity
is the manufacture of precision engineered products for use in the oil and gas industry. These entities’ operations were transferred
to Roota Engineering Limited during the year and operations ceased on 12 June 2020.
Martract Limited (Martract) whose principal activity is the provision of grinding and lapping services for ball and seat assemblies
and gate valves.
Results and dividends
The consolidated statement of comprehensive income is set out on page 56. The adjusted operating loss on ordinary activities
of the Group for the period ended 3 October 2020 amounted to £2.4 million (2019: £2.2 million adjusted profit). The Group made
a loss before taxation of £20.0 million (2019: £0.5 million) which included amortisation, impairment and exceptional costs totalling
£17.6 million.
No interim dividend was paid in the period (2019: £nil). The Directors do not recommend the payment of a final dividend (2019: £nil).
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 rests with 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. In particular, 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 environmental incidents in 2020 (2019: nil).
43
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements DIRECTORS’ REPORT continued
Substantial shareholdings
As at 31 December 2020, the following held or were beneficially interested in 3% or more of the Company’s issued ordinary
share capital:
Schroder Investment Management
Gresham House
Premier Miton Group
Hargreaves Lansdown
James Sharp & Co
Interactive Investor Trading
Mr John TS Hayward
Barclays Bank
Number of
shares
7,832,304
5,666,234
3,500,000
1,730,961
1,665,632
1,053,718
1,007,500
970,933
Percentage of
issued share
capital owned
25.21%
18.24%
11.27%
5.57%
5.36%
3.39%
3.24%
3.13%
Directors and their interests
The present Directors of the Company are set out on pages 38 to 39. During the year the following Directors held office:
Sir RA Gardner (appointed 23 January 2020)
CL Walters
BM Newman
TJ Cooper (appointed 28 January 2020)
MG Butterworth (appointed 23 June 2020)
NA MacDonald (retired 4 March 2020)
JC Allen (resigned 28 September 2020)
All Directors were Directors throughout the period and up to the date of this report unless otherwise stated. All Directors attended
all Board meetings throughout the year, subject to their appointment date.
Ordinary shares
Sir Roy Gardner
Chris Walters
Brian Newman
Tim Cooper
Mike Butterworth
Neil MacDonald
Joanna Allen
31 December
2020
No.
3 October
2020
No.
28 September
2019
No.
326,667
84,667
30,000
11,667
50,000
—
—
160,000
18,000
10,000
—
—
—
—
—
—
10,000
—
—
45,200
5,000
As part of the fundraise in December 2020, all of the Directors subscribed for a number of new shares, which is reflected in the
shareholding shown as at 31 December 2020.
Share options and awards
Details of the share options and awards granted in the period are disclosed in Note 28 to the consolidated financial statements.
The Directors’ interests in share options and awards 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 loans together with trade receivables and trade payables that
arise directly from its operations. Where it is considered appropriate, the Group enters 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.
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.
44
Pressure Technologies plc Annual Report 2020
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
The financial statements have been prepared on a going concern basis. The Group’s business activities, together with the factors
likely to affect its future development, performance and position, are set out in the Group Strategic report. The principal risks
and uncertainties are set out on pages 28 to 33. The Financial Reporting Council issued “Guidance on the Going Concern Basis
of Accounting and Reporting on Solvency and Liquidity Risks” in 2016. The Directors have considered this when preparing these
financial statements.
The Group’s existing revolving credit facility (RCF) of £12 million at the year end was put in place in December 2019 for two years
through to December 2021 (see Note 22). In December 2020 the Group extended its facility through to 30 November 2022 with
a £9 million facility through to 1 July 2021 and then £7 million for the remainder of the term. In addition, in December 2020 the
Group undertook a fundraising through the issue of new shares which raised cash proceeds, net of expenses, of approximately
£7 million.
Management have produced forecasts for the period up to January 2022 for all business units, taking account of reasonably
plausible changes in trading performance and market conditions, which have been reviewed by the Directors. These reasonably
plausible changes include the continued impact of the Covid-19 pandemic and the impact of the currently depressed oil and gas
market. The forecasts demonstrate that the Group is forecast to generate profits and cash in 2020/2021 and beyond and that the
Group has sufficient cash reserves and headroom in financial covenants to enable the Group to meet its obligations as they fall
due for a period of at least 12 months from the date when these financial statements have been signed.
After undertaking these assessments and considering the uncertainties set out above, the Directors have a reasonable expectation
that the Group has adequate resources to continue to operate for the foreseeable future and for these reasons they continue to
adopt the going concern basis in preparing the financial statements.
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
Financial Reporting Standard 101 – ‘The Reduced Disclosure Framework’ (FRS 101) (UK Accounting standards). 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.
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; and
• 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.
45
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements DIRECTORS’ REPORT continued
Auditor
Grant Thornton UK LLP have expressed their willingness to continue in office and a resolution to reappoint them will be proposed
at the next Annual General Meeting.
Corporate governance
The Group’s corporate governance statement 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.
Subsequent events
The Company’s existing RCF of £12 million at the year end was put in place in December 2019 for two years through to December 2021
(see Note 22). In December 2020 the Company extended its facility through to 30 November 2022 with a £9 million facility through
to 1 July 2021 and then £7 million for the remainder of the term. In addition, the Company undertook a fundraising through the
issue on 18 December 2020 of 12,471,998 new ordinary shares which raised cash proceeds, net of expenses, of approximately
£7 million.
By order of the Board
Chris Walters
Chief Executive
13 January 2021
46
Pressure Technologies plc Annual Report 2020 AUDIT AND RISK COMMITTEE REPORT
Members and meetings
The Group’s Audit and Risk Committee (“the Committee”) is chaired by Mike Butterworth, who replaced Brian Newman as Chairman
on 23 June 2020. Mike Butterworth is a Chartered Accountant and the Board is satisfied that he brings recent and relevant financial
experience to the Committee having served as CFO of a FTSE 250 company for eight years until December 2012. The Committee’s
members are set out on the Group’s website. All members attended all seven meetings during the year, except for Mike Butterworth
who has attended two meetings since his appointment to the Board on 23 June 2020 and Tim Cooper who has attended five
meetings since his appointment to the Board on 28 January 2020. The Committee meets not less than four times a year in a formal
capacity and forms sub-groups to address specific matters as necessary outside of these meetings.
Role of the Committee
The Committee’s primary responsibilities are to:
• Oversee the relationship with the external auditors and make recommendations to the Board on the appointment and
remuneration of the auditors.
• Review the conduct and control of the annual audit and the operation of the internal controls and advise the Board on
principal risks and uncertainties.
• Review the adoption of and compliance with the relevant Corporate Governance Code.
• Report on the financial performance of the Company and review financial statements prior to publication.
• Review annually the Company’s anti-bribery and corruption policy.
• Review the Company’s procedures for handling reports by ‘whistleblowers’.
Terms of Reference
The Board fully supports the underlying principles of corporate governance contained in the Corporate Governance Code
(“the Code”) and in 2018 adopted the revised Quoted Companies Alliance Code for Small and Mid-sized Quoted Companies
(‘the QCA Code’).
The responsibility for ensuring compliance and accurate reporting of corporate governance resides with the Committee.
Corporate governance will be continually monitored and reviewed formally by the Committee annually, following the publication
of the report and accounts each year.
Terms of Reference for the Committee, which are reviewed annually, can be found on the Company’s website.
External audit
The Group’s external auditors are Grant Thornton UK LLP (Grant Thornton).
The Committee will ensure that at least once every ten years the audit services contract is put out to tender to enable comparison
of the quality and effectiveness of the services provided by the incumbent auditor with those of other audit firms. The most recent
tender was completed in 2018.
The Committee has unrestricted access to the Group’s auditors and will ensure that auditor independence has not been compromised.
The Committee formally met with Grant Thornton twice during the year to approve the annual audit plan and after the conclusion
of the audit when the audit findings were presented.
In order to ensure the independence of the external auditors, the Committee monitors the non-audit services provided by them
to the Group.
Market Abuse Regulation
The Committee periodically reviews the impact of the Market Abuse Regulation including its treatment of inside information;
the relationship with our stockbrokers and analysts; the obligations of Persons Discharging Managerial Responsibilities; and the
Company’s share dealing code. Appropriate measures are taken to ensure compliance with the implementation of the EU Market
Abuse Regulation which came into effect from 3 July 2016.
Significant matters addressed during the year
During the year in carrying out its main responsibilities the Committee has spent its time in the following proportions:
How the Committee has spent its time
Governance: 30%
Risk management: 30%
Financial reporting: 20%
Audit: 20%
47
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements AUDIT AND RISK COMMITTEE REPORT continued
Internal controls
Details of the key risks which the Group faces, the key controls in place to control those risks and the system of risk management
adopted by the Group are set out on pages 28 to 33. The Committee has evaluated the effectiveness of the internal controls and
the risk management system operated. The evaluation covered all controls including financial, operational, risk management
and compliance.
The year under review has seen significant disruption to the business due to the Covid-19 pandemic, particularly for the Precision
Machined Components (PMC) division which experienced a significant reduction in activity resulting in the need for additional
restructuring measures. Covid-19 has also resulted in delays to the programme of investment in MRP and ERP systems in both
the PMC and CSC divisions. These programmes will be restarted as soon as possible in the coming year in order to underpin the
continuous improvement in the internal control environment. There will also be increased focus on the assessment of new areas
of risk as the Group delivers its organic growth strategy.
The Committee will continue to review and advise on the design and operation of internal controls as the organisational
structure evolves.
The Group does not have a specific internal audit department. The need for an internal audit department is considered from time
to time but currently it is regarded that the costs would outweigh the benefits. If required, external specialists are brought in to
perform specific reviews of areas considered a risk. During the year consultants have been engaged for system upgrades and
specific tax matters.
Contract accounting judgements
As explained more fully in our accounting policies on page 60, the CSC division derives a significant proportion of turnover from
contracts that span one or more years and are accounted for under the relevant accounting standard, IFRS 15, which the Group
adopted fully in the prior year.
Contract costs and revenues may be affected by a number of uncertainties that are dependent on the outcome of future events
and therefore estimates may need to be revised as events unfold and uncertainties are resolved.
During the year, the Committee examined the methodologies applied to key judgements and was in agreement with the
position adopted.
Carrying value of intangible assets
The Group’s policies on accounting for separately acquired intangible assets and goodwill on acquired businesses are set out
in our accounting policies on pages 62 and 64. The results of this year’s testing indicated that an impairment was required for
the PMC division, one of the Group’s cash-generating units, of £13.9 million, comprising £9.5 million of goodwill, £2.1 million of
intellectual property, £2.2 million of non-contractual customer relationships and £0.1 million of software items. The impairment
reflects the very difficult trading conditions and outlook for the oil and gas market, PMC’s key end-market.
As part of the testing, the Committee has reviewed the key assumptions behind these valuations; notably the expected
development of future cash flows and the discount rates used, as well as considering reasonable sensitivities to these estimates,
and concluded that the impairment noted above was required.
Carrying value of investments in subsidiary undertakings – company only accounts
In the company-only accounts of Pressure Technologies plc, the Company’s policy on accounting for investments in subsidiary
undertakings is set out on page 93. The results of this year’s testing indicated that an impairment of £26.5 million was required
in respect of the majority of the Company’s investment in the holding company, PT Precision Machined Components Limited,
which owns the subsidiary companies that comprise the operations of the Precision Machined Components division.
As part of the testing, the Committee has reviewed the key assumptions behind this valuation; notably the expected development
of future cash flows and the discount rates used, as well as considering reasonable sensitivities to these estimates, and concluded
that the impairment noted above was required.
Going concern
In assessing whether the Group is a going concern, and accordingly making our recommendation to the Board, the Committee
considered a paper prepared by management based on guidance published by the Financial Reporting Council. The assessment
was made for the period of 12 months from the date of this report, in accordance with accepted practice. Based on internal
forecasts, we reviewed the Group’s debt maturity profile, including headroom and compliance with financial covenants, and its
capital structure. We stress tested this by adjusting the Group’s internal forecast cash flow by a combination of the principal risks
we have identified – notably delays in key contracts in CSC and reductions in PMC activity due to a further deterioration in oil and
gas markets. The review took into account the extension and amendment of the Group’s bank facilities, which was completed in
December 2020, and the raising of £7.0 million (net of expenses) of additional capital from shareholders, which was completed
on 18 December 2020. Based on the above, the Committee concluded that the application of the going concern basis for the
preparation of the Annual Report and financial statements remained appropriate.
48
Pressure Technologies plc Annual Report 2020 Exceptional items
The classification of exceptional items was considered by the Committee due to their nature and value. For the current year,
exceptional items included costs associated with divisional and Group restructuring, the closure of an operational facility, costs
in relation to the HSE fine, profit on sales of assets and investments, and impairment and amortisation charges related to goodwill,
intangible assets, inventory and a modification to Promissory Note receivables. The Committee reviewed reports from management
outlining the accounting policy on the classification of exceptional items (set out on page 69) and satisfied itself that it was
appropriate to separately identify these items on the face of the income statement to assist in the understanding of the underlying
financial performance achieved by the Group.
IFRS 16 Leases
IFRS 16 Leases, which details how leases should be accounted for in the financial statements, became effective for the Group
in the current year. The Committee reviewed a paper prepared by management on how this new accounting standard would be
adopted in the financial statements and agreed with its recommendations.
Other matters
The Group has operated a ‘whistleblowing’ policy and arrangement for many years so that all employees of the Group are able, via
an independent external third party, to confidentially report any malpractice or matters of concern they have regarding the actions
of employees, management and Directors and any breaches of the Company’s Anti-Bribery and Corruption policy. No matters have
been reported to the Chair of the Committee, who is the nominated contact for the third-party provider, in the year.
Following the receipt by a key customer of a suspected malicious email purporting to be from an employee of one of the Group’s
subsidiary companies and containing false claims regarding the customer’s project, the customer conducted an investigation in
accordance with their corporate whistleblowing policy and subsequently concluded that there was no foundation to the claims
and no further action was required.
Approved by the Board and signed on its behalf by:
Mike Butterworth
Chair of the Audit and Risk Committee
13 January 2021
49
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PRESSURE TECHNOLOGIES PLC
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Pressure Technologies plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the 53 week period ended 3 October 2020, which comprise the Consolidated statement of comprehensive
income, Consolidated statement of financial position, Consolidated statement of changes in equity, Consolidated statement
of cash flows, Company statement of financial position, Company statement of changes in equity and notes to the financial
statements, including a summary of significant accounting policies. 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, including Financial Reporting
Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
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 2020 and of the group’s loss 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; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
The impact of macro-economic uncertainties on our audit
Our audit of the financial statements requires us to obtain an understanding of all relevant uncertainties, including those arising
as a consequence of the effects of macro-economic uncertainties such as Covid-19 and Brexit. All audits assess and challenge
the reasonableness of estimates made by the directors and the related disclosures and the appropriateness of the going concern
basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and the
group’s and the parent company’s future prospects and performance.
Covid-19 and Brexit are amongst the most significant economic events currently faced by the UK, and at the date of this report
their effects are subject to unprecedented levels of uncertainty, with the full range of possible outcomes and their impacts
unknown. We applied a standardised firm-wide approach in response to these uncertainties when assessing the group’s and
the parent company’s future prospects and performance. However, no audit should be expected to predict the unknowable
factors or all possible future implications for a group or a parent company associated with these particular events.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are authorised for issue.
In our evaluation of the directors’ conclusions, we considered the risks associated with the group’s and the parent company’s
business model, including effects arising from macro-economic uncertainties such as Covid-19 and Brexit, and analysed how
those risks might affect the group’s and the parent company’s financial resources or ability to continue operations over the period
of at least twelve months from the date when the financial statements are authorised for issue. In accordance with the above,
we have nothing to report in these respects.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty
in this auditor’s report is not a guarantee that the group and the parent company will continue in operation.
Overview of our audit approach
• Overall materiality: £127,000, which represents 0.5% of the group’s revenue;
• Key audit matters for the group were identified as going concern, revenue recognition, and the impairment of goodwill and
other non-current assets;
• The key audit matter for the parent company was identified as the impairment of investments; and
• We have assessed the components within the group and performed a full scope audit on the financial statements
of Pressure Technologies plc and on the financial information of all UK-based non-dormant components.
50
Pressure Technologies plc Annual Report 2020 Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
KEY AUDIT MATTER – GROUP
HOW THE MATTER WAS ADDRESSED IN THE AUDIT – GROUP
Going concern
As stated in ‘The impact of macro-economic
uncertainties on our audit’ section of our report,
Covid-19 is one of the most significant economic
events currently faced by the UK, and at the date of this
report its effects are subject to unprecedented levels
of uncertainty. This event could adversely impact the
future trading performance of the group and as such
increases the extent of judgement and estimation
uncertainty associated with management’s decision
to adopt the going concern basis of accounting in the
preparation of the financial statements.
We therefore identified going concern as a significant
risk, which was one of the most significant assessed
risks of material misstatement.
This included, but was not restricted to:
• Obtaining management’s original forecasts covering the period
from October 2020 to January 2022, assessing how these cash flow
forecasts were compiled and assessing their appropriateness by
applying relevant sensitivities to the underlying assumptions,
and challenging those assumptions;
• Assessing the accuracy of management’s past forecasting by
comparing management’s forecasts for last year to the actual
results for last year and considering the impact on the base case
cash flow forecast;
• Assessing management’s cash position along with the level of
subsequent trade to determine the impact of the pandemic on the
quarterly covenant tests;
• Performing sensitivity analysis on management’s revised forecasts to
determine the reduction in earnings before interest, tax, depreciation
and amortisation (EBITDA) that would lead to elimination of the
headroom in their original cash flow forecasts; and
• Assessing the adequacy of the going concern disclosures included
within the annual report and financial statements.
The group’s accounting policy on going concern is shown in the
accounting policies section on page 60 to the financial statements.
The Audit and Risk Committee identified going concern as a significant
matter in its report on page 48, where the Audit and Risk Committee
also described the action that it has taken to address this issue.
Key observations
We have nothing to report in addition to that stated in the ‘Conclusions
relating to going concern’ section of our report.
51
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PRESSURE TECHNOLOGIES PLC continued
KEY AUDIT MATTER – GROUP
HOW THE MATTER WAS ADDRESSED IN THE AUDIT – GROUP
Revenue recognition
Revenue is a major driver of the business and under
ISA (UK) 240 ‘The Auditor’s Responsibilities Relating
to Fraud in an Audit of Financial Statements’, there
is a presumption that there are risks of fraud in
revenue recognition.
The group enters into a high volume of transactions
and some contracts are entered into which span the
3 October 2020 period end. These contracts have
varying terms and degrees of complexity. There is a risk
that the deferral and recognition of revenues does not
match the underlying terms of customer contracts,
in particular the period over which the performance
obligations are met, or is not in accordance with the
requirements of IFRS 15 ‘Revenue from Contracts
with Customers’.
Revenue recognition is dependent on management
judgement, heightening this risk.
We therefore identified revenue recognition as a
significant risk, which was one of the most significant
assessed risks of material misstatement.
Our audit work included, but was not restricted to:
• Assessing whether the group’s revenue recognition policy is in
accordance with IFRS 15;
• Comparing a sample of contract revenue to the group’s accounting
policy to determine whether it has been recognised in accordance
with the policy by:
• Testing that a valid contract existed with the customer by reference
to evidence such as written agreements;
• Challenging whether the identification of the performance
obligations within the contract by management is appropriate;
• Challenging the appropriateness of the transaction price
determined by management by reference to relevant contract(s);
• Determining whether the allocation of transaction price to
performance obligations is appropriate;
• Challenging whether management’s assessment as to whether
performance obligations have been met, including the percentage
of completion assessment made by management where performed
over time, is appropriate in light of relevant evidence, including
manufacturing records and customer acceptance records;
• Agreeing a sample of revenue transactions to customer payments,
remittances and evidence of performance of the service;
• Analytically reviewing sales, including trend and ratio analysis
comparing results to prior period; and
• Testing that management’s cut-off procedures have been
appropriately applied by agreeing a sample of revenue transactions
to supporting manufacturing, despatch, and customer acceptance
records, as appropriate.
The group’s accounting policy on revenue recognition is shown in the
accounting policies section on page 63 to the financial statements and
related disclosures are included in Note 1. The Audit and Risk Committee
identified contract accounting judgements as a significant matter in its
report on page 48, where the Audit and Risk Committee also described
the action that it has taken to address this issue.
Key observations
Based on our audit work addressing the risk of improper revenue
recognition from contracts, we found that revenue from contracts is
being accounted for, and recognition is in accordance with the financial
reporting framework, including IFRS 15.
52
Pressure Technologies plc Annual Report 2020 KEY AUDIT MATTER – GROUP
HOW THE MATTER WAS ADDRESSED IN THE AUDIT – GROUP
Impairment of goodwill and other non-current assets
The carrying value of goodwill and other non-current
assets at 3 October 2020 was £15.7 million, following
an impairment of £13.9 million being recorded during
the period ended 3 October 2020. There is a risk that
the carrying value of these assets exceeds their
recoverable amount.
As required by IAS 36 ‘Impairment of Assets’,
management performs an impairment review on
an annual basis using discounted cash flows on
a value in use basis. This involves management
making a number of key judgements.
The key judgements in assessing goodwill and other
non-current assets for impairment include:
• The growth and discount rates applied in the
discounted cash flow calculations, due to the
sensitivity of these assumptions to changes; and
• The identification of cash generating units following
the divisional restructuring of the group.
We therefore identified impairment of goodwill and
other non-current assets as a significant risk, which
was one of the most significant assessed risks of
material misstatement.
Our audit work included, but was not restricted to:
• Determining the integrity of the impairment models by testing the
mathematical accuracy;
• Obtaining and understanding the process used by management
to determine the discount rates, and using auditor’s experts to assess
them for reasonableness;
• Assessing the appropriateness of any changes to assumptions since
the prior period; and
• Challenging management’s cash flow forecasts with reference
to historical forecasts, actual performance data and independent
evidence supporting any significant expected future changes
to the business.
The group’s accounting policy on impairment of goodwill and other
non-current assets is shown in the accounting policies section on page 64
to the financial statements and related disclosures are included in Note 4.
The Audit and Risk Committee identified carrying value of intangible
assets as a significant matter in its report on page 48, where the Audit
and Risk Committee also described the action that it has taken to address
this issue.
Key observations
Based on our audit work, we have not identified a material misstatement
in the impairment of goodwill and other non-current assets and consider
that the disclosures in Note 4 to the financial statements appropriately
describe this matter.
KEY AUDIT MATTER – PARENT
HOW THE MATTER WAS ADDRESSED IN THE AUDIT – PARENT
Impairment of investments in subsidiaries
The carrying value of investments in subsidiaries
was £6.5 million as at 3 October 2020. There is a risk
that the carrying value of these assets exceeds their
recoverable amount.
As required by IAS 36 ‘Impairment of Assets’,
management performs an impairment review on
an annual basis using discounted cash flows on
a value in use basis.
The key judgements made by management in
assessing the valuation of investments include the
growth and discount rates applied in the discounted
cash flow calculations, due to the sensitivity of these
assumptions to changes.
We therefore identified impairment of investments
in subsidiaries as a significant risk, which was one
of the most significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
• Determining the integrity of the impairment models by testing the
mathematical accuracy;
• Understanding the process used by management to determine
the discount rates, and using auditor’s experts to assess them
for reasonableness;
• Assessing the appropriateness of any changes to assumptions since
the prior period; and
• Challenging management’s cash flow forecasts with reference
to historical forecasts, actual performance data and independent
evidence supporting any significant expected future changes
to the business.
The company’s accounting policy on valuation of investments is shown
in the accounting policies section on page 92 to the financial statements
and related disclosures are included in Note 4. The Audit and Risk
Committee identified the carrying value of investments as a significant
issue in its report on page 48, where the Audit and Risk Committee also
described the action that it has taken to address this issue.
Key observations
Following our challenge of management’s cash flow forecasts, an
impairment charge of £26.5 million was recognised against the carrying
value of investments in subsidiaries.
53
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PRESSURE TECHNOLOGIES PLC continued
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature,
timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
MATERIALITY MEASURE
GROUP
PARENT
Financial statements as a whole
£127,000, which is 0.5% of the group’s
revenue. This benchmark is considered
the most appropriate because revenue is
a key performance indicator (KPI) of the
group (as part of the growth and return
KPI) and is a stable base.
Materiality for the current period is lower
than the level that we determined for
the period ended 28 September 2019
to reflect the reduction in revenue in
the current period.
£117,000, which is 1% of the parent
company’s total assets, capped at its
component materiality, being 92%
of group materiality Total assets is
considered the most appropriate
benchmark as the parent company
is primarily a holding company and
its major activities relate to holding
the investments in its subsidiary
undertakings.
Materiality for the current period is higher
than the level that we determined for
the period ended 28 September 2019
to reflect the higher percentage at which
the parent company materiality is capped
this period.
Performance materiality used
to drive the extent of our testing
Specific materiality
75% of financial statement materiality.
75% of financial statement materiality.
We determined a lower level of specific
materiality for certain areas such as
directors’ remuneration and related
party transactions.
We determined a lower level of specific
materiality for certain areas such as
directors’ remuneration and related
party transactions.
Communication of misstatements to the
audit committee
£6,350 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£5,850 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the group’s business, its environment and
risk profile and in particular included:
• evaluation by the group audit team of identified components to assess the significance of that component and to determine the
planned audit response based on a measure of materiality. Significance was determined as a percentage of the group’s total
assets, revenues and loss before taxation;
• performing full scope audit procedures on the financial statements of the parent company and on the financial information
of all other non-dormant UK-based group components;
• conducting planning and interim visits, and evaluating the group’s internal controls environment including its IT systems
and controls;
• undertaking targeted procedures on the financial information of non-significant components with no external revenue; and
• the components subject to full scope audit procedures represent 100% of the group’s revenue and net assets.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report and financial statements, other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether there is a material misstatement in the financial statements or a material misstatement
of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
54
Pressure Technologies plc Annual Report 2020 We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial period for which the financial
statements are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which 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; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the statement of directors’ responsibilities set out on pages 45 to 46, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
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.
Andrew Wood
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
13 January 2021
55
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 53 week period ended 3 October 2020
Revenue
Cost of sales
Gross profit
Administration expenses
Operating (loss)/profit before amortisation, impairments
and other exceptional costs
Separately disclosed items of administrative expenses:
Amortisation
Impairments
Other exceptional charges
Operating loss
Finance income/(costs)
Loss before taxation
Taxation
Loss for the period from continuing operations
Discontinued operations
Loss for the period from discontinued operations
Loss for the period attributable to the owners of the parent
Notes
1
4
4
5
2
3
9
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Currency exchange differences on translation of foreign operations
Exchange differences on translation of discontinued foreign operations
Total other comprehensive income
53 weeks
ended
3 October
2020
£’000
25,403
(20,054)
5,349
(7,728)
52 weeks
ended
28 September
2019
£’000
28,291
(19,119)
9,172
(6,938)
(2,379)
2,234
(1,958)
(13,878)
(2,751)
(20,966)
977
(19,989)
1,113
(18,876)
—
(18,876)
(13)
—
(13)
(1,832)
—
(450)
(48)
(467)
(515)
126
(389)
(1,203)
(1,592)
(140)
325
185
Total comprehensive expense for the period attributable to the owners of the parent
(18,889)
(1,407)
Basic loss per share
From continuing operations
From discontinued operations
From loss for the period
Diluted loss per share
From continuing operations
From discontinued operations
From loss for the period
10
10
10
10
(101.5)p
—
(101.5)p
(101.5)p
—
(101.5)p
(2.1)p
(6.5)p
(8.6)p
(2.1)p
(6.5)p
(8.6)p
The accounting policies and notes on pages 60 to 89 form part of these financial statements.
56
Pressure Technologies plc Annual Report 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 3 October 2020
3 October
2020
£’000
28 September
2019
£’000
Notes
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax asset
Other financial assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Asset held for sale
Other financial assets
Current tax
Total assets
Current liabilities
Trade and other payables
Borrowings – revolving credit facility
Lease liabilities
Non-current liabilities
Other payables
Borrowings – revolving credit facility
Lease liabilities
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Translation reserve
Retained earnings
Total equity
12
13
14
26
18
19
20
31
15
18
21
22
23
21
22
23
26
27
—
325
14,910
464
—
15,699
5,487
11,543
3,416
580
3,074
—
24,100
39,799
(14,370)
—
(1,209)
(15,579)
(538)
(6,773)
(2,843)
(752)
(10,906)
(26,485)
13,314
930
26,172
(293)
(13,495)
13,314
The accounting policies and notes on pages 60 to 89 form part of these financial statements.
The financial statements were approved by the Board on 13 January 2021 and signed on its behalf by:
Chris Walters
Director
Company Number: 06135104
9,510
6,598
14,042
278
7,350
37,778
5,115
9,541
2,208
—
—
95
16,959
54,737
(7,360)
(10,800)
(656)
(18,816)
(158)
—
(2,116)
(1,561)
(3,835)
(22,651)
32,086
930
26,172
(280)
5,264
32,086
57
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 53 week period ended 3 October 2020
Balance at 29 September 2018
Share based payments
Transactions with owners
Notes
28
Loss for the period – continuing operations
Loss for the period – discontinued operations
Other comprehensive expense:
Exchange differences on translating foreign operations
Other comprehensive income:
Exchange differences on translation of discontinued
foreign operations
Total comprehensive income/(expense)
Balance at 28 September 2019
Share based payments
Transactions with owners
28
Loss for the period – continuing operations
Other comprehensive expense:
Exchange differences on translating foreign operations
Total comprehensive expense
Balance at 3 October 2020
Share
capital
£’000
930
—
—
—
—
—
—
—
930
—
—
—
—
—
Share
premium
account
£’000
26,172
—
—
—
—
—
—
—
26,172
—
—
—
—
—
Translation
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
33,393
100
100
(389)
(1,203)
(140)
325
(1,407)
32,086
117
117
6,756
100
100
(389)
(1,203)
—
—
(1,592)
5,264
117
117
(18,876)
(18,876)
—
(13)
(18,876)
(18,889)
(465)
—
—
—
—
(140)
325
185
(280)
—
—
—
(13)
(13)
930
26,172
(293)
(13,495)
13,314
The accounting policies and notes on pages 60 to 89 form part of these financial statements.
58
Pressure Technologies plc Annual Report 2020
Notes
29
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 53 week period ended 3 October 2020
Operating activities
Cash flows from operating activities
Finance costs paid
Income tax refunded
Cash flows from discontinued operations
Net cash inflow/(outflow) from operating activities
Investing activities
Proceeds from sale of financial assets held at FVTPL
Proceeds from sale of associate
Proceeds from sale of fixed assets
Proceeds from repayment of Promissory Note
Purchase of property, plant and equipment
Cash inflow on disposal of subsidiaries net of cash disposed of
Net cash from/(used in) investing activities
Financing activities
Repayment of borrowings
Proceeds from new borrowings
Repayment of lease liabilities
Proceeds from asset financing
Net cash (used in)/from financing activities
Net increase/(decrease) 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 60 to 89 form part of these financial statements.
53 weeks
ended
3 October
2020
£’000
52 weeks
ended
28 September
2019
£’000
1,707
(188)
213
—
1,732
3,145
297
268
2,000
(2,103)
—
3,607
(4,250)
223
(1,301)
1,197
(4,131)
1,208
2,208
3,416
628
(464)
159
(2,534)
(2,211)
—
—
—
—
(3,693)
1,277
(2,416)
(1,000)
—
(307)
2,002
695
(3,932)
6,140
2,208
59
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
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 Financial
Reporting Standard 101 (FRS 101). These are presented on pages 90 to 101. The financial statements are made up to the Saturday
nearest to the period end for each financial period.
Pressure Technologies plc, company number 06135104, is incorporated and domiciled in the United Kingdom. The registered office
address is Pressure Technologies Building, Meadowhall Road, Sheffield, South Yorkshire, S9 1BT.
The Group has applied all accounting standards and interpretations issued relevant to its operations for the period ended
3 October 2020. The consolidated financial statements have been prepared on a going concern basis.
Going concern
The financial statements have been prepared on a going concern basis. The Company’s business activities, together with the
factors likely to affect its future development, performance and position, are set out in the Group Strategic Report. The principal
risks and uncertainties are set out on pages 28 to 33. The Financial Reporting Council issued “Guidance on the Going Concern Basis
of Accounting and Reporting on Solvency and Liquidity Risks” in 2016. The Directors have considered this when preparing these
financial statements.
The Group’s existing revolving credit facility (RCF) of £12 million at the year end was put in place in December 2019 for two
years through to December 2021 (see Note 22). In December 2020 the Group extended its facility through to 30 November 2022
with a £9 million facility through to 1 July 2021 and then £7 million for the remainder of the term. In addition, in December 2020
the Group undertook a fundraising through the issue of new shares which raised cash proceeds, net of expenses, of approximately
£7 million.
Management have produced forecasts for the period up to January 2022 for all business units, taking account of reasonably
plausible changes in trading performance and market conditions, which have been reviewed by the Directors. These reasonably
plausible changes include the continued impact of the Covid-19 pandemic and the impact of the currently depressed oil and gas
market. The forecasts demonstrate that the Group is forecast to generate profits and cash in 2020/2021 and beyond and that the
Group has sufficient cash reserves and headroom in financial covenants to enable the Group to meet its obligations as they fall
due for a period of at least 12 months from the date when these financial statements have been signed.
After undertaking the assessments and considering the uncertainties set out above, the Directors have a reasonable expectation
that the Group has adequate resources to continue to operate for the foreseeable future and for these reasons they continue
to adopt the going concern basis in preparing the financial statements.
New standards adopted in 2020
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three interpretations (IFRIC 4 ‘Determining Whether an Arrangement Contains
a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27 ‘Evaluating the Substance of Transactions Involving the Legal Form
of a Lease’).
The adoption of this new standard has resulted in the Group recognising a right-of-use asset and related lease liability in
connection with all former operating leases except for those identified as low-value or having a remaining lease term of less
than 12 months from the date of initial application.
The new standard has been applied using the modified retrospective approach. Prior periods have not been restated.
For contracts in place at the date of initial application, the Group has elected to apply the definition of a lease from IAS 17 and
IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as a lease under IAS 17 and IFRIC 4.
The Group elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued
lease payments that existed at the date of transition.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group has relied
on its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.
On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and
for leases of low-value assets, the Group has applied the optional exemptions to not recognise right-of-use assets but to account
for the lease expense on a straight-line basis over the remaining lease term.
For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date
of initial application at the same amounts as under IAS 17 immediately before the date of initial application.
On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16
was 4.25%.
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Pressure Technologies plc Annual Report 2020 New standards adopted in 2020 continued
IFRS 16 ‘Leases’ continued
The following is a reconciliation of total operating lease commitments at 28 September 2019 (as disclosed in the financial
statements to 28 September 2019) to the lease liabilities recognised at 29 September 2019:
Total operating lease commitments disclosed at 28 September 2019
Recognition exemptions – leases with remaining lease terms of less than 12 months
Total lease liabilities before discounting
Discounted using incremental borrowing rate
Total lease liabilities recognised under IFRS 16 at 29 September 2019
Standards and interpretations not yet applied by the Group
The following standards will be effective in future periods:
£’000
1,348
(17)
1,331
(125)
1,206
• IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ (effective date 1 January 2020).
• IFRS 3 ‘Amendments to the definition of a business’ (effective date 1 January 2020).
• IAS 1 ‘Amendments to the definition of material to align with the Revised Conceptual Framework’ (effective date 1 January 2020).
• IFRS 9, IAS 39 and IFRS 7 ‘Amendments in Interest Rate Benchmark Reform when accounting for hedging’ (effective date
1 January 2020).
IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ is applied in selecting and applying accounting policies,
accounting for changes in estimates and reflecting corrections of prior period errors.
The standard requires compliance with any specific IFRS applying to a transaction, event or condition, and provides guidance on
developing accounting policies for other items that result in relevant and reliable information. Changes in accounting policies and
corrections of errors are generally retrospectively accounted for, whereas changes in accounting estimates are generally accounted
for on a prospective basis. The Group has reviewed this standard and the other three incoming standards and does not consider
that these will have any material effect on our 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.
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
Stage of completion on contracts
The majority of contracts have payment terms based on contractual milestones, which are not always aligned to when revenue
is recognised. The Group recognises contract liabilities for consideration received in respect of unsatisfied performance
obligations and reports these amounts as a contract liability in the statement of financial position. Similarly, if the Group satisfies
a performance obligation before it receives the consideration, then it will recognise either a contract asset or a receivable in its
statement of financial position.
Impairment reviews – intangible and tangible 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.
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ACCOUNTING POLICIES continued
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
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 13 to the financial statements.
Stage of completion on contracts
Revenue recognised from construction contracts reflects management’s best estimate about each contract’s outcome and stage
of progress but is subject to estimation uncertainty. For more complex contracts in particular, costs to complete and contract
profitability are subject to more significant estimation uncertainty.
Contract costs
The Cylinders division has a number of sources of revenue, not all of which meet the criteria for recognition over time. The resources
deployed are common to all activities and therefore internal labour and overhead costs attributed to a contract in determining the
total contract cost reflects management’s best estimate of the hours dedicated to the individual contracts.
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 3 October 2020
(2019: to 28 September 2019). Subsidiaries are all entities which the Group has the power to control. The consolidated financial
statements of the Group incorporate the financial statements of the parent company as well as those entities controlled by the Group.
Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect returns.
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.
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; and
• 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.
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Pressure Technologies plc Annual Report 2020 Revenue
Revenue recognition
Continuing revenue arises mainly from the manufacture of pressure containment products and components and related services
in the Group’s core sectors which are Oil and Gas, Defence, Industrial Gases and Hydrogen Energy.
Under IFRS 15, in order to determine whether to recognise revenue, the Group follows a five-step process:
• Identifying the contract with a customer.
• Identifying the performance obligations.
• Determining a transaction price.
• Allocating the transaction price to the performance obligations.
• Recognising revenue when/as performance obligation(s) are satisfied.
Revenue in the Cylinders division is recognised over time as the product is being manufactured or a service being provided if any
of the following criteria are met:
• The Group is creating a bespoke item which doesn’t have an alternative use to the Group, the time between order and completion
of the contract is over six months and the entity has a right to payment for work completed to date including a reasonable profit.
• The customer controls the asset that is being created or enhanced during the manufacturing process.
• Services provided where the customer simultaneously receives and consumes the benefits provided by the Group’s performance
as the Group performs.
Judgement is required when determining if a contract meets the criteria for recognition over time and the proportion of revenue
to recognise as products are being manufactured. Judgement is also applied in determining how many performance obligations
there are within each contract and whether the development phase represents a separate obligation. The stage of completion of
a contract is determined either by reference to the proportion that contract costs incurred for work performed to date bear to the
estimated total contract costs, or by reference to the completion of a physical proportion of the contract work. The basis used is
dependent upon the nature of the underlying contract and takes into account the degree to which the physical proportion of the
work is subject to certification procedures. Losses on contracts are recognised at the point when such losses become probable.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases
or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise
to the revision become known by management.
The revenue is measured at the fixed transaction price agreed under the contract. If the contract includes an hourly fee for services,
revenue is recognised in the amount to which the Company has a right to invoice. Customers are invoiced on a bi-monthly basis and
consideration is payable when invoiced. The Group does not expect to have any contracts where the period between the transfer of
the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does
not adjust any of the transaction prices for the time value of money.
Revenue of the Cylinders division that does not meet the criteria for recognition over time is recognised at a point in time on
notification that the product is ready for collection, despatch or delivery dependent on terms of sale.
Revenue of the Precision Machined Components division is not considered to meet the criteria for recognition over time and
is recognised at a point in time on notification that the product is ready for collection, despatch or delivery dependent on terms
of sale.
Share based employee remuneration
The Group operates equity settled share based remuneration plans for some of its employees. The Group’s plans do 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 or awards 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, EPS 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 or awards expected to vest. Non-market vesting conditions are included in assumptions
about the number of options or awards that are expected to become exercisable. Estimates are subsequently revised if there is any
indication that the number of share options or awards 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 or awards ultimately exercised are different to those estimated on vesting. Upon exercise of share options or awards, 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.
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements ACCOUNTING POLICIES continued
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
3 – 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.
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; and
• 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 in 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 of 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:
Non-contractual customer relationships
Technology
Intellectual Property
IT systems and software licences
Development expenditure
5 – 10 years
7.5 – 15 years
15 years
5 years
5 – 15 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 combinations 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 asset’s 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
As described in Note 3, the Group has applied IFRS 16 using the modified retrospective approach and therefore comparative
information has not been restated. This means comparative information is still reported under IAS 17 and IFRIC 4.
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Pressure Technologies plc Annual Report 2020 Accounting policy applicable from 29 September 2019
The Group as a lessee
For any new contracts entered into on or after 29 September 2019, the Group considers whether a contract is or contains a lease.
A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of
time in exchange for consideration’. To apply this definition the Group assesses whether the contract meets three key evaluations,
which are whether:
• the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Group;
• the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period
of use, considering its rights within the defined scope of the contract; and
• the Group has the right to direct the use of the identified asset throughout the period of use. The Group assesses whether it has
the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use
asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by
the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in
advance of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the
end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for
impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that rate is readily available, or the Group’s incremental borrowing rate.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured
to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the
right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of
recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss
on a straight-line basis over the lease term.
On the consolidated statement of financial position, right-of-use assets have been included in property, plant and equipment and
lease liabilities have been included as a separate line item, ‘Lease liabilities’.
Accounting policy applicable before 29 September 2019
The Group as a lessee
Finance leases
Management applies judgement in considering the substance of a lease agreement and whether it transfers substantially all
the risks and rewards incidental to ownership of the leased asset. Key factors considered include the length of the lease term in
relation to the economic life of the asset, the present value of the minimum lease payments in relation to the asset’s fair value,
and whether the Group obtains ownership of the asset at the end of the lease term.
For leases of land and buildings, the minimum lease payments are first allocated to each component based on the relative fair
values of the respective lease interests. Each component is then evaluated separately for possible treatment as a finance lease,
taking into consideration the fact that land normally has an indefinite economic life.
See the accounting policy note for the depreciation methods and useful lives for assets held under finance leases. The interest
element of lease payments is charged to profit or loss, as finance costs over the period of the lease.
Operating leases
All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease agreements are
recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance,
are expensed as incurred.
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.
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Accounting policy applicable before 29 September 2019 continued
The Group as a lessee continued
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 the 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.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the
financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised
when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price
in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
• Amortised cost.
• Fair value through profit or loss (FVTPL).
• Fair value through other comprehensive income (FVOCI).
In the periods presented the Group does not have any financial assets categorised as FVOCI.
The classification is determined by both:
• The entity’s business model for managing the financial asset.
• The contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs,
finance income or other financial items, except for impairment of trade receivables and contract assets which are presented
within other expenses.
Subsequent measurement of financial assets
• Financial assets at amortised cost: Financial assets are measured at amortised cost if the assets meet the following conditions
(and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where
the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this
category of financial instruments as well as listed bonds that were previously classified as held-to-maturity under IAS 39.
• Financial assets at fair value through profit or loss (FVTPL): Financial assets that are held within a different business model
other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of
business model, financial assets whose contractual cash flows are not solely payments of principal and interest are accounted
for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging
instruments, for which the hedge accounting requirements apply (see below).
The category also contains an equity investment. The Group accounts for the investment at FVTPL and did not make the irrevocable
election to account for the investment in Greenlane Renewables Inc. to be held at fair value through other comprehensive income
(FVOCI). During the current financial year, the equity investment was sold.
Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial
assets in this category are determined by reference to active market transactions or using a valuation technique where no active
market exists.
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Pressure Technologies plc Annual Report 2020 Financial instruments continued
Subsequent measurement of financial assets continued
• Financial assets at fair value through other comprehensive income (FVOCI): The Group accounts for financial assets at FVOCI
if the assets meet the following conditions:
• they are held under a business model whose objective is to ‘hold to collect’ the associated cash flows and sell; and
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset.
Impairment of financial assets
IFRS 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit
loss (ECL) model’. This replaces IAS 39’s ‘incurred loss model’.
Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised
cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15 and loan commitments and some
financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss.
Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group
considers a broader range of information when assessing credit risk and measuring expected credit losses, including past
events, current conditions, and reasonable and supportable forecasts that affect the expected collectability of the future cash
flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
• Financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk
(‘Stage 1’) and
• Financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low
(‘Stage 2’).
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.
‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the
second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life
of the financial instrument.
Trade and other receivables and contract assets
The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records
the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the
potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience,
external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.
The Group assesses impairment of trade receivables on a collective basis; as they possess shared credit risk characteristics they
have been grouped based on the days past due.
Classification and measurement of financial liabilities
As the accounting for financial liabilities remains largely the same under IFRS 9 compared to IAS 39, the Group’s financial liabilities
were not impacted by the adoption of IFRS 9. However, for completeness, the accounting policy is disclosed below.
The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group
designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and
financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or
loss (other than derivative financial instruments that are designated and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included
within finance costs or finance income.
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.
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.
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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 remeasurement
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 the 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.
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.
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 two 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.
• Precision Machined Components: the manufacture of specialised, precision engineered valve wear parts used primarily in the oil
and gas industries.
Each of these operating segments is managed separately as each requires different technologies, resources and marketing
approaches.
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 a legal
or constructive obligation to do so or has 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 is likely to have significant influence over another entity when it has less than 50% but more than 20%
of the voting rights of that entity.
In the current period Pressure Technologies sold its entire shareholding of PT US Inc. and therefore no longer holds any voting rights
over Kelley GTM which up to the date of the disposal had been accounted for as an associate.
68
Pressure Technologies plc Annual Report 2020 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.
Operating loss
Operating loss is stated before finance costs, finance income, taxation and the results of discontinued operations.
Adjusted operating loss is stated after adding back amortisation, impairments and other exceptional items.
Discontinued operations
A discontinued operation is a component of the Group that has either been disposed of or meets the criteria to be classified as
held for sale and represents a separate major line of business or geographical area of operations or is part of a single coordinated
plan to dispose of a separate major line of business or geographical area of operations.
The results of discontinued operations are analysed separately from continuing operations on the face of the statement of
comprehensive income and the related notes. Where there is a newly identified discontinued operation in the year, the prior
year statement of comprehensive income and the related notes are restated as if the operation was classified as discontinued
at that time.
The results of discontinued operations include the post-tax profit or loss on the discontinued operation along with the post-tax
gain or loss recognised on the remeasurement of the non-current assets of the discontinued operation to fair value less costs
to sell, and the subsequent gain or loss on disposal of the discontinued operation.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Group will be required to settle that obligation with an outflow of economic benefits and a reliable estimate can be made
of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using
the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
Where a liability is contingent on the occurrence or non-occurrence of uncertain future events or circumstances it is only
recognised if a reliable estimate can be made of the amount of obligation.
Asset held for sale
Non-current assets classified as held for sale are presented separately and measured at the lower of their carrying amounts
immediately prior to their classification as held for sale and their fair value less costs to sell. However, some held for sale assets,
such as deferred tax assets or financial assets, continue to be measured in accordance with the Group’s relevant accounting policy
for those assets. Once classified as held for sale, the assets are not subject to depreciation or amortisation.
69
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Segment analysis
The financial information by segment detailed below is frequently reviewed by the Chief Executive who has been identified as the
Chief Operating Decision Maker (CODM).
For the 53 week period ended 3 October 2020
Revenue from external customers
Precision
Machined
Components
£’000
14,185
Cylinders
£’000
11,218
Gross profit/(loss)
2,912
2,461
Operating loss before amortisation,
impairments and other exceptional costs
Amortisation and impairment
Other exceptional charges
Operating loss
Net finance (costs)/income
Loss before tax
(58)
(88)
(827)
(973)
(31)
(1,004)
(656)
(1,788)
(1,752)
(4,196)
(89)
(4,285)
Central
costs
£’000
—
(24)
(1,665)
(13,960)
(172)
(15,797)
1,097
(14,700)
Total
£’000
25,403
5,349
(2,379)
(15,836)
(2,751)
(20,966)
977
(19,989)
Segmental net assets/(liabilities)*
7,160
12,079
(5,925)
13,314
Other segment information:
Capital expenditure – property, plant and equipment
Depreciation
Amortisation
1,287
641
88
793
880
1,788
23
205
82
2,103
1,726
1,958
* Segmental net assets/(liabilities) comprise the net assets of each division adjusted to reflect the elimination of the cost of investment in subsidiaries and the provision
of financing loans provided by Pressure Technologies plc.
For the 52 week period ended 28 September 2019
Revenue
– total
– revenue from other segments
Revenue from external customers
Precision
Machined
Components
£’000
14,449
(18)
14,431
Cylinders
£’000
13,860
—
13,860
Central
costs
£’000
—
—
—
Total
£’000
28,309
(18)
28,291
Gross profit/(loss)
4,996
4,198
(22)
9,172
Operating profit/(loss) before amortisation,
impairments and other exceptional costs
Amortisation
Other exceptional charges
Operating profit/(loss)
Net finance costs
Profit/(loss) before tax
2,089
—
—
2,089
(15)
2,074
1,879
(1,750)
(398)
(269)
(30)
(299)
(1,734)
(82)
(52)
(1,868)
(422)
(2,290)
2,234
(1,832)
(450)
(48)
(467)
(515)
Segmental net assets/(liabilities)*
7,946
54,403
(30,263)
32,086
Other segment information:
Capital expenditure – property, plant and equipment
Depreciation
Amortisation
1,359
505
—
2,080
733
1,750
13
119
82
3,452
1,357
1,832
* Segmental net assets/(liabilities) comprise the net assets of each division adjusted to reflect the elimination of the cost of investment in subsidiaries and the provision
of financing loans provided by Pressure Technologies plc.
70
Pressure Technologies plc Annual Report 2020
1. Segment analysis continued
The Group’s revenue disaggregated by primary geographical markets is as follows:
Revenue
United Kingdom
Europe
Rest of the World
Precision
Machined
Components
£’000
7,544
3,678
2,963
14,185
Cylinders
£’000
8,509
1,895
814
11,218
2020
Total
£’000
16,053
5,573
3,777
25,403
Precision
Machined
Components
£’000
7,411
4,467
2,553
14,431
Cylinders
£’000
8,388
2,701
2,771
13,860
2019
Total
£’000
15,799
7,168
5,324
28,291
The Group’s largest customer, which is reported within the Cylinders segment, contributed 13% to the Group’s revenue (2019: 13%
reported in the Precision Machined Components segment).
The following table provides an analysis of the Group’s revenue by market.
Revenue
Oil and gas
Defence
Industrial gases
Hydrogen energy
2020
£’000
14,901
5,142
5,219
141
25,403
2019
£’000
16,272
9,118
2,175
726
28,291
The above table is provided for the benefit of shareholders. It is not provided to the PT Board or the CODM on a regular monthly
basis and consequently does not form part of the divisional segmental analysis.
The Group’s revenue disaggregated by pattern of revenue recognition and category is as follows:
Revenue
Sale of goods transferred at a point in time
Sale of goods transferred over time
Rendering of services
2020
Precision
Machined
Components
£’000
13,736
—
449
14,185
Cylinders
£’000
2,465
4,958
3,795
11,218
2019
Precision
Machined
Components
£’000
14,431
—
—
14,431
Cylinders
£’000
8,996
1,739
3,125
13,860
The following aggregated amounts of transaction values relate to the performance obligations from existing contracts that are
unsatisfied or partially unsatisfied as at 3 October 2020:
Revenue expected in future periods
Sale of goods – Cylinders
The following table provides an analysis of the carrying amount of non-current assets and additions to property, plant and
equipment, all of which are held within the United Kingdom.
Non-current assets
Additions to property, plant and equipment
2020
£’000
15,699
3,434
2021
£’000
6,457
2019
£’000
37,778
3,452
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
2. Finance income/(costs)
Interest receivable
Interest payable on bank loans and overdrafts
Interest payable on lease liabilities
Profit on sale of associate
Profit on sale of shareholding in GRN Inc.
Modification of Promissory Note receivable
2020
£’000
419
(455)
(153)
297
1,895
(1,026)
977
2019
£’000
—
(421)
(46)
—
—
—
(467)
In May 2020, the Group sold its holding in PT US Inc. and Kelley GTM, LLC of which it owned 40%. The proceeds for the sale of the entity
was $50,000 and the sale of the assets of the business was $250,000, which translated to £297,000 of profit on sale of associate.
In June and July 2020, the Group sold its 21% shareholding in Greenlane Renewables, Inc. for cash proceeds, net of related
expenses, of £3,145,000 generating a profit on sale of £1,895,000. At the same time, the Group recorded a related modification of
£1,026,000 in the carrying value of the Promissory Note which formed part of the consideration on sale of the Alternative Energy
division in the prior period.
3. Loss before taxation
Loss before taxation is stated after charging/(crediting):
Depreciation of property, plant and equipment – owned assets
Depreciation of property, plant and equipment – leased assets
Profit on disposal of fixed assets
Amortisation of intangible assets acquired on business combinations
Amortisation of grants receivable
Staff costs – excluding share based payments (see Note 7)
Cost of inventories recognised as an expense
Operating lease rentals:
– Land and buildings
– Machinery and equipment
Foreign currency loss
Share based payments
4. Amortisation and impairments
Amortisation of intangible assets
Goodwill and intangible assets impairment
2020
£’000
1,376
350
(61)
1,958
(40)
10,995
12,448
—
19
69
117
2020
£’000
(1,958)
(13,878)
(15,836)
2019
£’000
1,291
66
—
1,832
(40)
9,765
13,921
360
62
10
100
2019
£’000
(1,832)
—
(1,832)
The Covid-19 pandemic, current trading performance and medium-term outlook of our OEM customers regarding the depressed
oil and gas market have driven an impairment review of the goodwill and other intangible assets of the PMC division as they relate
to Al-Met, Quadscot, Roota and Martract subsidiaries, acquired by the Group between 2010 and 2016. Lower than previously
considered growth rates and higher risk-factored discount rates, than assumed at the half year, applied to future cash flows have
resulted in a non-cash exceptional impairment to goodwill of £9.5 million (see Note 12) and other intangible assets of £4.4 million
(see Note 13).
72
Pressure Technologies plc Annual Report 2020
5. Other exceptional charges
Reorganisation and redundancy
Impairment of inventory and work in progress
Costs in relation to HSE fine
Closure of Precision Machined Components facility (Quadscot)
Other costs (inc. bank refinancing and legal costs)
2020
£’000
(424)
(504)
(700)
(690)
(433)
(2,751)
2019
£’000
(450)
—
—
—
—
(450)
The reorganisation and redundancy costs (which are recognised in accordance with IAS 19) relate to costs of restructuring across
the Group; the divisional split is given in Note 1.
6. 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 Company’s auditor for non-audit services:
– Tax compliance services
– Tax advisory services
– Audit related services
– Other non-audit services
2020
£’000
2019
£’000
43
67
20
34
9
5
Amounts paid to the Group’s auditor in respect of services to the Company, other than the audit of the Company’s financial
statements, have not been disclosed separately as the information is only required to be disclosed on a consolidated basis.
7. Employee costs
Particulars of employees, including Executive Directors:
Wages and salaries
Social security costs
Pension costs
Share based payments (see Note 28)
Exceptional costs
2020
£’000
8,929
877
524
117
665
11,112
Exceptional employee costs primarily relate to restructuring activities across the Group including the closure of the Precision
Machined Components facility (Quadscot).
The average monthly number of employees (including Executive Directors) during the period was as follows:
Production
Selling and distribution
Administration
2020
No.
158
16
51
225
The total number of employees employed by the Group in its continuing operations on 3 October 2020 was 205 (2019: 223).
37
63
37
58
14
—
2019
£’000
8,234
848
437
100
354
9,973
2019
No.
147
23
41
211
73
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
8. Directors’ remuneration
Particulars of Directors’ remuneration are as follows:
Emoluments
Pension costs
Employers’ national insurance
Share based payments
Exceptional emoluments
2020
£’000
548
51
71
13
110
793
2019
£’000
541
46
70
43
—
700
Please see the Report of the Remuneration Committee on pages 40 to 42 for full details of Directors’ emoluments.
No Directors exercised any share options in the year. During the year retirement benefits were accruing to two (2019: two) Directors
in respect of defined contributions schemes.
Included in the aggregate emoluments for the period ended 3 October 2020 are payments of £18,750 (2019: £16,367) made
to companies controlled by Directors.
The highest paid Director received total emoluments of £296,000 and pension contributions of £22,000 (2019: total emoluments
of £218,000 and pension contributions of £23,000) which includes the exceptional payment in lieu of contractual notice of £80,000
with the balance as an ex-gratia severance payment.
9. Taxation
Current tax credit
Over provision in respect of prior years
Deferred tax (credit)/expense
Origination and reversal of temporary differences
Impairment of intangible assets
Under provision in respect of prior years
Total taxation credit
2020
Total
£’000
(118)
(118)
(43)
(1,013)
61
(995)
(1,113)
2019
Continuing
£’000
2019
Discontinued
£’000
(220)
(220)
(133)
—
227
94
(126)
(79)
(79)
—
—
(79)
2019
Total
£’000
(299)
(299)
(133)
—
227
94
(205)
Corporation tax is calculated at 19% (2019: 19%) of the estimated assessable profit for the period. Deferred tax is calculated at the
rate applicable when the temporary differences are expected to unwind.
The charge for the period can be reconciled to the profit per the consolidated statement of comprehensive income as follows:
Loss before taxation
Theoretical tax at UK corporation tax rate 19% (2019: 19%)
Effect of charges/(credits):
– non-deductible expenses
– non-deductible exceptional items
– research and development allowance
– adjustments in respect of prior years
– non-taxable profit on disposal
– effect of unrealised losses on discontinued operations
– effect of discontinued operations translation rates
– differences in deferred tax rates
– losses not previously recognised now utilised
Total taxation credit
2020
Total
£’000
(19,989)
(3,798)
74
2,970
(204)
(57)
—
—
—
31
(129)
(1,113)
2019
Continuing
£’000
2019
Discontinued
£’000
(515)
(98)
51
—
(118)
7
—
—
62
—
(30)
(126)
(1,282)
(243)
1
—
—
(79)
(293)
535
—
—
—
(79)
2019
Total
£’000
(1,797)
(341)
52
—
(118)
(72)
(293)
535
62
—
(30)
(205)
74
Pressure Technologies plc Annual Report 2020
10. Loss per ordinary share
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the period. The adjusted earnings per share is also calculated based on the
basic weighted average number of shares.
The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares
on the assumed conversion of all dilutive options.
On 18 December 2020 the Group undertook a fundraising through the issue of 12,471,998 new ordinary shares (see Note 34) which
would have materially impacted the number of shares outstanding at the end of the period, if the transaction had happened in the
reporting period.
For the 53 week period ended 3 October 2020
Loss after tax
Weighted average number of shares – basic
Dilutive effect of share options
Weighted average number of shares – diluted
Basic loss per share
Diluted loss per share
The Group adjusted loss per share is calculated as follows:
Loss after tax
Amortisation and impairments (see Note 4)
Other exceptional charges (see Note 5)
Theoretical tax effect of the above adjustments
Adjusted loss
Adjusted loss per share
Total
£’000
(18,876)
No.
18,595,165
—
18,595,165
(101.5)p
(101.5)p
(18,876)
15,836
2,751
(895)
(1,184)
(6.4)p
In the Directors’ view, adjusted loss per share reflects the ongoing performance of the business and how the business is managed
on a day to day basis, and allows for a consistent and meaningful comparison.
The theoretical tax effect is based on 19% of adjustments for amortisation and other exceptional charges incurred.
For the 52 week period ended 28 September 2019
Loss after tax
Weighted average number of shares – basic
Dilutive effect of share options
Weighted average number of shares – diluted
Basic loss per share
Diluted loss per share
The Group adjusted loss per share is calculated as follows:
Loss after tax
Amortisation (Note 4)
Other exceptional charges (Note 5)
Theoretical tax effect of the above adjustments
Adjusted earnings/(loss)
Adjusted earnings/(loss) per share
Continuing
£’000
Discontinued
£’000
(389)
(1,203)
Total
£’000
(1,592)
No.
18,595,165
9,234
18,604,399
(2.1)p
(2.1)p
(6.5)p
(6.5)p
(8.6)p
(8.6)p
(389)
1,832
450
(434)
1,459
7.8p
(1,203)
558
(1,401)
(428)
(2,474)
(1,592)
2,390
(951)
(862)
(1,015)
(13.3)p
(5.5)p
75
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
11. Dividends
No dividends have been declared or proposed in respect of the year ended 3 October 2020 or were declared or proposed in respect
of the year ended 28 September 2019.
12. Goodwill
Cost and gross carrying amount
At 29 September 2018
Removed upon business disposal
At 28 September 2019
Impairment
At 3 October 2020
Total
£’000
14,370
(4,860)
9,510
(9,510)
—
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. All of the goodwill arose in respect of acquisitions in the Precision Machined Components division
made in prior years.
The Group tests annually for impairment, under IAS 36, 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, using a four-year
forecast and applying a discount rate of 13.0% to the Precision Machined Components division (2019: 14.7%). The 2020 assessment,
following the reorganisation of the individual PMC businesses into an integrated division, has been carried out at the divisional level.
The forecast has been approved by management and the Board of Directors, and is based on a bottom up assessment of costs
and uses the known and estimated pipeline of orders to determine revenue. The forecasts used for years two to four assume 2%
revenue growth, however no long-term rate of growth or inflation is incorporated into perpetuity at the end of year four.
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 the discount rates, growth rates and expected changes
to selling prices and direct costs.
After applying sensitivity analysis in respect of the results and future cash flows, in particular for presumed growth rates and
discount rates, management believes that a full impairment is required for the goodwill relating to the Precision Machined
Components division.
Management is not aware of any other matters that would necessitate changes to its key estimates.
76
Pressure Technologies plc Annual Report 2020
13. Intangible assets
Cost
At 29 September 2018
Additions
Removed upon business disposal
At 28 September 2019
Additions
At 3 October 2020
Amortisation
At 29 September 2018
Charge for the period
Charge for the period – business disposal
Removed upon business disposal
At 28 September 2019
Charge for the period
Impairment
At 3 October 2020
Net book value
At 3 October 2020
At 28 September 2019
IT systems
Intellectual and software Development
licences expenditure
£’000
property
£’000
£’000
Non-
contractual
customer
Technology relationships
£’000
£’000
2,796
—
—
2,796
—
2,796
342
186
—
—
528
188
2,080
2,796
—
2,268
802
226
(397)
631
53
684
108
91
—
(22)
177
130
139
446
238
454
608
—
(433)
175
—
175
40
—
47
(87)
—
88
—
88
87
175
Total
£’000
21,402
226
(6,146)
15,482
53
15,535
9,958
1,832
558
(3,464)
8,884
1,958
4,368
11,880
—
—
11,880
—
11,880
6,634
1,555
—
(10)
8,179
1,552
2,149
11,880
15,210
—
325
3,701
6,598
—
5,316
—
(5,316)
—
—
—
2,834
—
511
(3,345)
—
—
—
—
—
—
—
Remaining useful economic life
at 3 October 2020
—
2 years
1 year
All of the intangible assets relating to intellectual property and non-contractual customer relationships arose in respect
of acquisitions in the Precision Machined Components division made in prior years. As part of the impairment review noted
in Note 12 above, it was determined that impairment of all of the intangible assets relating to intellectual property and
non-contractual customer relationships in the Precision Machined Components division was required.
77
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Assets under
construction
£’000
Land and
buildings
£’000
Plant and
machinery
£’000
14. Property, plant and equipment
Cost
At 29 September 2018
Additions
Additions – business disposal
Removed upon business disposal
Disposals
Transfers
At 28 September 2019
Additions – transition under IFRS 16
Additions – right-of-use assets
Additions
Disposals
Transfers
Transferred to asset held for sale
At 3 October 2020
Depreciation
At 29 September 2018
Charge for the period
Charge for the period – business disposal
Removed upon business disposal
Disposals
At 28 September 2019
Charge for the period
Disposals
At 3 October 2020
Net book value
At 3 October 2020
At 28 September 2019
Leased assets
Carrying value at 3 October 2020
Carrying value 28 September 2019
15. Asset held for sale
Property for sale
252
1,359
—
—
—
(1,108)
503
—
—
1,016
—
(355)
—
1,164
—
—
—
—
—
—
—
—
—
1,164
503
—
—
4,725
1
—
—
—
—
4,726
1,092
—
17
—
—
(580)
5,255
125
43
—
—
—
168
278
—
446
4,809
4,558
913
—
Total
£’000
19,878
3,452
15
(272)
(259)
—
22,814
1,206
178
1,997
(1,802)
—
(580)
23,813
7,846
1,357
20
(192)
(259)
8,772
1,726
(1,595)
8,903
14,901
2,092
15
(272)
(259)
1,108
17,585
114
178
964
(1,802)
355
—
17,394
7,721
1,314
20
(192)
(259)
8,604
1,448
(1,595)
8,457
8,937
14,910
8,981
14,042
3,238
1,120
2020
£’000
580
4,151
1,120
2019
£’000
—
The Group closed its operations at Quadscot Precision Engineers Limited, part of the Precision Machined Components division,
in June 2020 and has put the property from which it operated up for sale.
The property has three separate conjoined units being marketed for sale and the Group expects to sell all three units, either
individually or as a whole block, within the next 12 months with the proceeds receivable expected to achieve not less than the
£580,000 carrying value which equates to the market value as of 3 October 2020.
16. 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 on page 96.
Al-Met Limited, Martract Limited, Quadscot Holdings Limited, Quadscot Precision Engineers Limited and Roota Engineering Limited
are exempt from the requirement of the Companies Act relating to the audit of individual financial statements by virtue of s479A
of the Companies Act 2006.
78
Pressure Technologies plc Annual Report 2020
17. Investments in associates
In the current period, Pressure Technologies sold its entire shareholding of PT US Inc. which owned 40% of the shares of Kelley
GTM, LLC (KGTM) for US$50,000. As a result of the disposal, the Group no longer holds any voting rights over KGTM which up to
the date of the disposal had been accounted for as an associate. The Group’s share of the results of KGTM up to the date of its
disposal are not included in the Group’s financial statements as the investment and loans made to KGTM were fully written down
in the period ended 3 October 2015 and there is no legal or constructive obligation to recognise any further losses and no further
payments have been made on behalf of the associate.
Had this not been the case the Group’s share of the results of its principal associates and its aggregated assets (including goodwill)
and liabilities would be as follows:
At 28 September 2019
Kelley GTM, LLC.
At 3 October 2020
Kelley GTM, LLC.
Country of
incorporation
Assets
£’000
Liabilities
£’000
Revenues
£’000
Loss
£’000
USA
1,128
(8,624)
1,123
(151)
USA
—
—
—
—
Interest
held
%
40
—
KGTM has a year-end date of 31 December. The period for which the results of KGTM have been shown in the table above is from
28 September 2019 to 3 October 2020.
The total losses recognised against the investment and other receivables from KGTM for the period were £nil (2019: £nil) leaving
unrecognised losses of £nil (2019: £151,000).
18. Other financial assets
Amounts due within 12 months
Promissory Note
Total due within 12 months
Amounts due after 12 months
Listed security
Promissory Note
Total due after 12 months
2020
£’000
3,074
3,074
—
—
—
2019
£’000
—
—
1,250
6,100
7,350
As at the beginning of the year, the Group held a listed security asset which related entirely to its 21% shareholding in Greenlane
Renewables Inc. and a Promissory Note which formed part of the consideration on the sale of the Alternative Energy division in the
prior year. The voting rights of the shares held by the Group were restricted so the Group considered that it did not have significant
influence over GRN and did not account for the investment as an associate entity in the prior year.
The fair value of the shareholding in Greenlane Renewables Inc. as at 28 September 2019 was determined by reference to published
price quotations in an active market (classified as level 1 in the fair value hierarchy – see Note 25). In June and July 2020, the Group
sold its 21% shareholding in Greenlane Renewables, Inc. for cash proceeds, net of related expenses, of £3,145,000 generating a
profit on sale of £1,895,000 which has been reflected as an exceptional credit within Finance income/(costs) in the current year
(see Note 2).
The Promissory Note held at the start of the year was valued at amortised cost. The original term of the Note was four years
with a repayment date of no later than 3 June 2023 at Greenlane Renewables Inc. discretion. In February 2020, a prepayment of
£2.1 million was received. Interest is charged at 7% on the outstanding Promissory Note rolled up into the principal unless a trigger
event occurs under the terms of the Note which causes interest payments to be satisfied in cash. On initial recognition the value
was assessed to be the face value. The Note is denominated 50% in GBP and 50% in Canadian Dollars. The asset was held solely
to collect associated cash flows which related to principal and interest only.
In June and July 2020, the Group sold its 21% shareholding in Greenlane Renewables Inc. Linked to disposal of this shareholding
during the year the terms of the related attached Promissory Note were amended to reduce the value of the Note and to accelerate
the repayment date for the outstanding amount to 30 June 2021. As a result, a modification of £1,026,298 has been reflected
as an exceptional charge within Finance income/(costs) in the current year (see Note 2).
The new Promissory Note is classified as being held at fair value through profit and loss as its value at the point of the modification
was linked to the value at which the Greenlane Renewables Inc. shareholding was sold, thereby failing the solely payments of
principal and interest test. The fair value has been assessed at the year end and is reflected in the value shown in the table above.
79
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
19. Inventories
Raw materials and consumables
Work in progress
Finished goods
2020
£’000
2,749
2,716
22
5,487
2019
£’000
2,023
3,010
82
5,115
Inventories are stated net of provisions of £311,000 (2019: £330,000).
The write off of inventory recognised in the comprehensive income statement in the year was £504,000 (2019: £nil), which was
treated as an exceptional item (see Note 5).
20. Trade and other receivables
Trade receivables
Allowance for expected credit losses
Contract assets
Other receivables
Prepayments and accrued income
2020
£’000
4,368
(197)
5,296
463
1,613
11,543
2019
£’000
7,366
(308)
1,056
425
1,002
9,541
All amounts are short term. The net carrying value of trade receivables is considered a reasonable approximation of fair value.
Note 25 includes disclosures relating to the credit risk exposures and analysis relating to the allowance for expected credit losses.
The above comparative for impairment provisions applies IFRS 9, which is an expected loss model.
Credit losses
At 29 September 2018
Provision through the year
At 28 September 2019
Provision through the year
Bad debts recovered
At 3 October 2020
21. Trade and other payables
Amounts due within 12 months
Trade payables
Contract liabilities
Other tax and social security
Accruals and other payables
Deferred income
Total due within 12 months
Amounts due after 12 months
Accruals and other payables
Deferred income
Total due after 12 months
£’000
(34)
(274)
(308)
(17)
128
(197)
2019
£’000
3,341
—
369
1,297
2,353
7,360
2019
£’000
—
158
158
2020
£’000
2,911
505
1,758
2,699
6,497
14,370
2020
£’000
420
118
538
With the exception of a portion of the accruals, deferred income and other payables, all amounts are short term. The carrying values
of trade payables and other payables are considered to be a reasonable approximation of fair value.
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Pressure Technologies plc Annual Report 2020
21. Trade and other payables continued
Deferred income due after 12 months relates to grant income received. Grant income is measured under IAS 20 and the accounting
treatment is based on the accruals method. The grant relates to monies received from the Welsh Development Agency towards
a machine purchase and will be released through to April 2030. There are no unfulfilled conditions or other contingencies attached
to the grants.
In the prior year the Group disclosed a contingent liability relating to the fatal accident at its subsidiary Chesterfield Special
Cylinders Limited in June 2015. The company was found guilty at Sheffield Crown Court and on 9 January 2020 was fined £700,000
plus £169,000 in court costs. The Group has agreed with the Court for the fine to be paid on an instalment basis in five six-monthly
payments of £140,000 commencing in January 2021 through to January 2023. As a result, at the period end £420,000 of the fine
payable is due after 12 months.
22. Borrowings
Current
Revolving credit facility
Non-current
Revolving credit facility
Total borrowings
2020
£’000
2019
£’000
—
10,800
6,773
6,773
—
10,800
During the period, the bank loans drawn under the revolving credit facility (RCF) had an average annual interest rate of 2%
above LIBOR.
During the period the Group had in place a £12 million RCF which was drawn £6.8 million at the year end date. These bank
borrowings are secured on the property, plant and equipment of the Group (see Note 14) by way of a debenture. Obligations under
finance leases are secured on the plant and machinery assets to which they relate.
The Group’s existing RCF at the year end was put in place in December 2019 for two years through to December 2021. In December
2020 the Group extended its facility through to 30 November 2022 with a £9 million facility through to 1 July 2021 and then
£7 million for the remainder of the term.
The key financial covenant in the amended RCF remains the leverage covenant, which is tested quarterly, and has a maximum
permitted net debt to adjusted EBITDA ratio of 5.5:1 for the two quarterly test dates of December 2020 and March 2021, a ratio
of 3.5:1 in June 2021 reducing to a maximum of 3:1 by September 2021 and for the remainder of the term. Following the fundraising
in December 2020 (see Note 34), it is expected that these covenants may be subject to amendment following discussions with
the bank.
The carrying amount of other bank borrowings is considered to be a reasonable approximation of fair value. The carrying amounts
of the Group’s borrowings are all denominated in GBP.
The maturity profiles of long-term borrowing facilities are as follows:
Due within one year:
Revolving credit facility
Due for settlement after one year:
Revolving credit facility
The Group has the following undrawn borrowing facilities:
Expiring within one year
Expiring beyond one year
2020
£’000
2019
£’000
—
10,800
6,773
—
2020
£’000
—
5,227
2019
£’000
4,200
—
Subsequent to year end, as described above the RCF was reduced from £12 million to £9 million through to 1 July 2021 and then
£7 million for the remainder of the term to 30 November 2022.
81
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
23. Lease liabilities
Lease liabilities are presented in the statement of financial position as follows:
Current
Asset finance lease liabilities
Right-of-use asset lease liabilities
Non-current
Asset finance lease liabilities
Right-of-use asset lease liabilities
2020
£’000
955
254
1,209
2,003
840
2,843
2019
£’000
656
—
656
2,116
—
2,116
The Group has leases for certain operational factory premises and related facilities, several large items of plant and machinery
equipment, an office building, a number of motor vehicles and some IT equipment.
For right-of-use assets, with the exception of short-term leases and leases of low-value underlying assets, each lease is reflected
on the balance sheet as a right-of-use asset and a lease liability.
The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see Note 14). Each lease
generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party,
the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring
a substantive termination fee. Some leases contain an option to extend the lease for a further term. The Group is prohibited
from selling or pledging the underlying leased assets as security.
For leases over office buildings and factory premises the Group must keep those properties in a good state of repair and return the
properties in their original condition at the end of the lease. Further, the Group must insure items of property, plant and equipment
and incur maintenance fees on such items in accordance with the lease contracts.
The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 3 October 2020 were
as follows:
3 October 2020
Lease payments
Finance costs
Net present value
28 September 2019
Lease payments
Finance costs
Net present value
Within
one year
£’000
Over one to
five years
£’000
1,335
(126)
1,209
3,012
(169)
2,843
Within
one year
£’000
Over one to
five years
£’000
799
(143)
656
2,411
(295)
2,116
Total
£’000
4.347
(295)
4,052
Total
£’000
3,210
(438)
2,772
Lease payments not recognised as a liability
The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of 12 months or less)
or for leases of low-value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain
variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred and are disclosed
in operating lease commitments in Note 32 to these financial statements.
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Pressure Technologies plc Annual Report 2020
24. Contract balances
Costs incurred and profit recognised to date
Less: Progress billings
Net balance sheet position for ongoing contracts
Representing:
Contract assets (Note 20)
Contract liabilities (Note 21)
Net balance sheet position for ongoing contracts
Release of deferred income
Contract revenue recognised through release of deferred income
2020
£’000
18,659
(13,868)
4,791
2020
£’000
5,296
(505)
4,791
2020
£’000
1,645
2019
£’000
10,354
(9,298)
1,056
2019
£’000
1,056
—
1,056
2019
£’000
—
In the prior year the Group elected to transition to the new standard IFRS 15 Revenue from Customers using the modified
retrospective method. In the current financial year, we have completed several of these projects and released deferred income
to contract revenue.
The contract position will change according to the number or size of contracts in progress at the year-end as well as the status
of payment milestones towards those contracts. The Group will continue to structure payment milestones in order to cover the
up-front costs of materials for cash flow purposes. The variance between these and the performance obligations for revenue
recognition under IFRS 15 (typically acceptance of the product by the customer for all standard products), will cause increasing
values to remain in deferred income for longer. The contract asset has increased compared to the prior year as the new contracts
accounted under IFRS 15 have met performance obligations that have yet to be invoiced.
25. Financial instruments
Financial assets and liabilities recorded or disclosed at fair value in the consolidated statements of financial position are
categorised based on the level of judgement associated with inputs used to measure the fair value.
The following fair value hierarchy reflects the significance of inputs of valuation techniques used in making fair value
measurements and/or disclosures:
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 classified is determined based on the lowest level of significant input
to one fair value measurement. No transfers in either direction have been made between the levels of fair value hierarchy during
the period to 3 October 2020.
The Group held the following categories of financial instruments:
Financial assets – amortised cost (unless fair value hierarchy stated)
– Trade receivables
– Other receivables
– Cash and cash equivalents
– Other financial asset – listed security
– Other financial asset – Promissory Note
Level 1
Level 3
2020
Total
£’000
4,171
2,076
3,416
—
3,074
2019
Total
£’000
7,058
1,427
2,208
1,250
6,100
12,737
18,043
83
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
25. Financial instruments continued
Financial liabilities – amortised cost
– Trade payables
– Accruals and other payables
– Borrowings
– Lease liabilities
2020
Total
£’000
2,911
3,119
6,773
4,052
16,855
2019
Total
£’000
3,341
1,297
10,800
2,772
18,210
All of the financial assets and liabilities as at 3 October 2020 and 28 September 2019 were held at amortised cost, with the
exception of the listed security which was held at FVTPL as at 28 September 2019. This listed security, representing the Group’s
shareholding in Greenlane Renewables Inc., was sold in June and July 2020.
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed
repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay. The contractual maturity is also based on the earliest date on which the
Group may be required to pay.
2020
Trade and other payables
Bank borrowings
Amounts due under lease liabilities
2019
Trade and other payables
Bank borrowings
Amounts due under lease liabilities
Current
within 6
months
£’000
5,610
122
667
6,399
Current
within 6
months
£’000
4,638
—
399
5,037
Current
6-12 months
£’000
Non-current
1 to 5 years
£’000
—
122
668
790
420
7,057
3,012
10,489
Current
6-12 months
£’000
Non-current
1 to 5 years
£’000
—
10,800
400
11,200
—
—
2,411
2,411
Total net
payable
£’000
6,030
7,301
4,347
17,678
Total net
payable
£’000
4,638
10,800
3,210
18,648
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, price risk, credit risk and liquidity risk.
Foreign currency risk management
The Group purchases its principal raw materials in US Dollars, Euros and Pounds Sterling and receives payment for its products
in US 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 and Euros.
The carrying amounts of the Group’s foreign currency denominated monetary financial assets and monetary financial liabilities
at the reporting date are as follows:
Financial assets
Financial liabilities
2020
£’000
1,563
661
3
3
2,230
2019
£’000
556
784
3,051
2
4,393
2020
£’000
128
237
4
—
369
2019
£’000
196
477
4
—
677
Euro
US Dollar
Canadian (CAN) Dollar
New Zealand (NZ) Dollar
84
Pressure Technologies plc Annual Report 2020
25. Financial instruments continued
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
CAN Dollar
currency impact
US Dollar
currency impact
2020
£’000
130
2019
£’000
33
2020
£’000
—
2019
£’000
277
2020
£’000
39
2019
£’000
28
Profit or loss
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.
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 £33,000 (2019: £41,000).
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. At 3 October 2020 the largest customer within trade
receivables accounted for 13% (2019: 12%) of debtors. Management continually monitor this dependence on the largest customers
and are continuing to seek new customers and enter new 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 credit risk
on liquid funds is minimised by using counterparty banks with high credit-ratings assigned by international credit-rating agencies.
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. During the year, as a result of difficult
trading conditions and following discussions with the bank, the financial covenant tests for both June and September 2020 were
waived. In December 2020 the Group extended its facility through to 30 November 2022 with a £9 million facility through to
1 July 2021 and then £7 million for the remainder of the term.
The key financial covenant in the amended RCF remains the leverage covenant, which is tested quarterly, and has a maximum
permitted net debt to adjusted EBITDA ratio of 5.5:1 for the two quarterly test dates of December 2020 and March 2021, a ratio
of 3.5:1 in June 2021 reducing to a maximum of 3:1 by September 2021 and for the remainder of the term. Following the fundraising
in December 2020 (see Note 34), is it expected that these covenants may be subject to amendment following discussions with
the bank.
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 22, leases disclosed in
Note 23 and cash and cash equivalents disclosed in Note 31 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 – Revolving credit facility
Debt – Asset finance leases
Debt – Right-of-use asset leases
Cash and cash equivalents
Net debt
Equity
2020
£’000
(6,773)
(2,958)
(1,094)
3,416
(7,409)
2019
£’000
(10,800)
(2,772)
—
2,208
(11,364)
13,314
32,086
Debt is defined as long and short-term borrowings, as detailed in Notes 22 and 23. Net debt is debt less cash and cash equivalents,
as detailed in Note 31. 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.
85
Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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.
At 29 September 2018
Prior year adjustment
Credit/(charge) to income
At 28 September 2019
Prior year adjustment
Impairment of intangible assets
Credit/(charge) to income
At 3 October 2020
Accelerated tax
depreciation
£’000
Intangible
assets
£’000
Short-term
temporary
Share
differences option costs
£’000
£’000
Unused
losses
£’000
(186)
(211)
(80)
(477)
(65)
—
(147)
(689)
(1,308)
—
295
(1,013)
—
1,013
—
—
53
—
(2)
51
—
—
13
64
105
—
18
123
—
—
36
159
147
(16)
(98)
33
4
—
141
178
The net deferred tax balance has been analysed as follows in the consolidated balance sheet:
Non-current asset
Deferred tax asset
Non-current liabilities
Deferred tax liabilities
2020
£’000
464
(752)
(288)
The deferred tax asset is expected to be recoverable against future profits generated by the Group. The Group has unused tax
losses of £5,908,000.
27. Called up share capital
Allotted, issued and fully paid
Ordinary shares of 5p each
2020
No.
2019
No.
18,595,165
18,595,165
2020
£’000
930
Total
£’000
(1,189)
(227)
133
(1,283)
(61)
1,013
43
(288)
2019
£’000
278
(1,561)
(1,283)
2019
£’000
930
Subsequent to year end, on 18 December 2020 12,471,998 new ordinary shares were issued as part of a fundraising which raised
cash proceeds, net of expenses, of approximately £7 million (see Note 34).
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. An 11th grant of
options was made in July 2020. The scheme rules were reviewed and updated in 2017 as required by HMRC. If the options remain
unexercised after a period of three years and six months from the date of the grant, the options expire. Options are forfeited if the
employee leaves the Group before the options vest and are treated as cancelled if the employee chooses to stop contributing.
Members of the scheme are required to remain employees of the Group and make regular contributions.
Details of the movement of share options outstanding during the period are as follows:
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Cancelled during the period
Expired during the period
Outstanding at the end of the period
2020
No.
460,650
644,909
(55,433)
(224,173)
(17,040)
808,913
Weighted
average
exercise price
99.9p
66.0p
74.4p
94.1p
150.0p
75.2p
2019
No.
452,473
109,110
(40,559)
(10,474)
(49,900)
460,650
Weighted
average
exercise price
106.6p
99.2p
97.6p
97.6p
161.2p
99.9p
None of the outstanding options were exercisable at the end of the period. The options outstanding at 3 October 2020 had
a weighted average remaining contractual life of 2.3 years (2019: 2.0 years). The terms of these options are as follows:
86
Pressure Technologies plc Annual Report 2020
28. Share based payments continued
Save-As-You-Earn scheme continued
Date of grant
26 July 2018
15 July 2019
24 July 2020
Options
outstanding at
3 October
2020
168,142
64,042
576,729
Vesting
period
3 years
3 years
3 years
Market value
at date of
grant (p)
122.0
119.0
96.0
Exercise
price (p)
97.6
99.2
66.0
Exercise
period
6 months
6 months
6 months
Total options outstanding at 3 October 2020
808,913
There are no performance conditions that apply to these options other than continued employment.
Pressure Technologies plc – Long Term Incentive Plan – Type 1
Pressure Technologies plc introduced this share option scheme in April 2014. These options are exercisable between three and
six years following the date of the grant. Options are forfeited if the employee leaves the Group before the options vest, unless
certain conditions are met, and are treated as cancelled if the employee chooses to stop contributing.
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
2020
No.
114,752
(114,752)
—
Weighted
average
exercise price
250.6p
250.6p
—
2019
No.
206,469
(91,717)
114,752
Weighted
average
exercise price
259.0p
269.5p
250.6p
No options were granted during the period and no options are exercisable at the end of the period. The options outstanding
at 28 September 2019 had a weighted average remaining contractual life of 2.1 years.
Pressure Technologies plc – Long Term Incentive Plan – Type 2
The Group adopted a new Long Term Incentive Plan (LTIP) on 3 September 2018, when awards were granted to two Executive
Directors and three senior managers under the scheme.
LTIP awards give a conditional right to shares at three separate points in time: 13 August 2021, 13 August 2022 and 13 August 2023,
and the percentage of the total award of shares to be granted at these dates is 50%, 30% and 20% respectively. The amount of the
award is determined by the participant’s percentage entitlement to the award pool at 13 August 2021, and the size of the award
pool itself is based upon performance criteria relating to growth in the parent company’s share price and dividends over the period
to 13 August 2021. The overall entitlement of the only remaining Director in the plan, Chris Walters, in the overall award pool is 38%.
The value of payouts from the plan are capped on an individual basis but there is no specific limit on the number of share options
that can be granted.
The fair value of the award pool as at 3 October 2020 is £239,000. This valuation was based on the Monte-Carlo assessment model.
Valuation models
The SAYE options granted during the period have been valued using the Black-Scholes model. The inputs into the Black-Scholes
model are as follows:
Date granted
Share price at date of offer
Exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
Fair value
24 July 2020
96.0p
66.0p
45%
3 years
(0.1)%
0.0%
£271,507
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the three-year period to the
grant date. 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
£117,000 (2019: £100,000). The charge is calculated in accordance with IFRS 2, ‘Share Based Payments’. A deferred tax credit of
£20,000 (2019: credit of £18,000) was recognised in the consolidated statement of comprehensive income during the period in
respect of share based payments.
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
29. Consolidated cash flow statement
Loss after tax – continuing operations
Loss after tax – discontinued operations
Adjustments for:
Finance costs – net
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share option costs
Income tax credit
Profit on disposal of property, plant and equipment
Profit on sale of PT US Inc. associate
Profit on disposal of shareholding in Greenlane Renewables Inc.
Modification of Promissory Note receivable
Impairment of goodwill and intangible assets
Changes in working capital:
Increase in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash flows from operating activities
2020
£’000
(18,876)
—
189
1,726
1,958
117
(1,113)
(61)
(297)
(1,895)
1,026
13,878
(372)
(2,002)
7,429
1,707
30. Net debt reconciliation
Cost
At 29 September 2018
Cash flows
Repayments
New facilities
At 28 September 2019
Cash flows
Repayments
New facilities
New facilities – right-of-use leases
At 3 October 2020
31. Cash and cash equivalents
Cash at bank and in hand
Borrowings
£’000
Leases
£’000
Cash and bank
£’000
(11,800)
—
1,000
—
(10,800)
—
4,250
(223)
—
(6,773)
(1,077)
—
307
(2,002)
(2,772)
—
1,301
(1,197)
(1,384)
(4,052)
6,140
(3,932)
—
—
2,208
1,208
—
—
—
3,416
2020
£’000
3,416
2019
£’000
(389)
(1,203)
467
1,377
2,390
100
(126)
—
—
—
—
—
(1,234)
402
(1,156)
628
Total
£’000
(6,737)
(3,932)
1,307
(2,002)
(11,364)
1,208
5,551
(1,420)
(1,384)
(7,409)
2019
£’000
2,208
32. Financial commitments
(a) Capital commitments
Commitments for capital expenditure entered into at the period end were as follows:
Contracted for, but not provided in the accounts
2020
£’000
245
2019
£’000
632
This capital commitment as at 3 October 2020 relates to the purchase of a long-lead-time robotic scanner for the Cylinders division
due for delivery in the first half of the next financial year.
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Pressure Technologies plc Annual Report 2020
32. Financial commitments continued
(b) Operating lease commitments
The Group has entered into commercial leases on certain 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
2020
£’000
4
—
—
4
16
6
22
2019
£’000
230
879
155
1,264
49
35
84
Under IFRS 16 the majority of assets previously shown as operating leases were moved under transition into ‘Right-of-use assets’
(see Note 14). The residual operating lease commitments on other assets, which are too immaterial in value to be treated under
IFRS 16, are shown above.
(c) Pension commitments
As at 3 October 2020 pension contributions of £100,000 (2019: £60,000) due in respect of the current year had not been paid over
to the scheme. These were paid over in the following month and within statutory deadlines.
33. Related party transactions
Key management personnel are considered to be the Executive and Non-Executive Directors of the Group. Details of their
remuneration are set out below:
Short-term employee benefits (including employer’s NI)
Post-employment benefits
Share based payments
Exceptional termination benefits
Total remuneration
2020
£’000
619
51
13
110
793
2019
£’000
611
46
43
—
700
During the period ended 3 October 2020, Pressure Technologies incurred costs of £18,750 (2019: £nil) with RAG Associates Limited
with whom one of the Non-Executive Directors, Sir Roy Gardner, is a connected person. £7,500 was outstanding to be paid as at
3 October 2020 (2019: £nil). The transactions were made on an arm’s length basis. In the previous year, Pressure Technologies
incurred costs of £14,494 with a company related to a former Non-Executive Director.
During the period ended 3 October 2015, Pressure Technologies purchased five Gas Transportation Modules (GTMs) from Kelley
GTM, LLC, in which the Group owned a 40% stake prior to its disposal in the current year. 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 June 2020 the Group sold the five GTMs
for £0.3 million. As the carrying value of the GTMs disclosed within property, plant and equipment was fully written down, a profit
on sale of £0.3 million was recorded in the year (see Note 2). The transaction was completed on an arm’s length basis.
The Group also had loans due from Kelley GTM, LLC of $3,500,000. The Directors consider that the recoverability of these loans is
not certain and therefore made full provision against the value of the loans in the period ended 3 October 2015 and as part of the
sale agreement associated with the GTMs, the Directors agreed to waive any future legal claims against Kelley GTM, LLC.
34. Subsequent events
The Company’s existing RCF of £12 million at the year end was put in place in December 2019 for two years through to December
2021 (see Note 22). In December 2020 the Company extended its facility through to 30 November 2022 with a £9 million facility
through to 1 July 2021 and then £7 million for the remainder of the term. In addition, the Company undertook a fundraising through
the issue on 18 December 2020 of 12,471,998 new ordinary shares which raised cash proceeds, net of expenses, of approximately
£7 million.
Pressure Technologies plc, the Company, has £26.2 million of share premium as at year end. On 17 December 2020, the Company
received shareholder approval to convert the share premium, under a capital reduction, into a distributable reserve. This process
requires Court Approval. An application to the Courts has been made but the timing of the process is currently uncertain.
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
COMPANY STATEMENT OF FINANCIAL POSITION
As at 3 October 2020
Fixed assets
Investments
Other financial assets
Intangible fixed assets
Tangible fixed assets
Current assets
Debtors
Other financial assets
Cash at bank and in hand
Creditors: amounts falling due within one year
Trade and other payables
Borrowings – revolving credit facility
Lease liabilities
Net current assets/(liabilities)
Creditors: amounts falling due after more than one year
Borrowings – revolving credit facility
Lease liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Equity shareholders’ funds
3 October
2020
£’000
28 September
2019
£’000
Notes
4
5
6
7
8
5
9
9
10
9
10
12
14
14
6,451
—
162
3,970
10,583
1,053
3,074
375
4,502
(955)
—
(171)
3,376
(6,773)
(489)
6,697
930
26,172
(20,405)
6,697
32,918
7,350
244
3,374
43,886
997
—
203
1,200
(467)
(10,800)
(29)
(10,096)
—
(31)
33,759
930
26,172
6,657
33,759
The Company reported a loss for the 53 week period ended 3 October 2020 of £27,097,000 (2019: loss of £10,333,000).
The accounting policies and notes on pages 92 to 101 form part of these financial statements.
Approved by the Board on 13 January 2021 and signed on its behalf by:
Chris Walters
Director
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Pressure Technologies plc Annual Report 2020
COMPANY STATEMENT OF CHANGES IN EQUITY
For the 53 week period ended 3 October 2020
Balance at 29 September 2018
Share based payments
Transactions with owners
Loss for the period
Balance at 28 September 2019
Share based payments
Transactions with owners
Loss for the period
Balance at 3 October 2020
Share
capital
£’000
930
—
—
—
930
—
—
—
930
Share
premium
account
£’000
26,172
—
—
—
26,172
—
—
—
26,172
Profit
and loss
account
£’000
16,933
57
57
(10,333)
6,657
35
35
(27,097)
(20,405)
Total
equity
£’000
44,035
57
57
(10,333)
33,759
35
35
(27,097)
6,697
The accounting policies and notes on pages 92 to 101 form part of these financial statements.
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. Accounting policies
Statement of compliance
These financial statements have been prepared in accordance with applicable accounting standards and in accordance with
Financial Reporting Standard 101 – ‘The Reduced Disclosure Framework’ (FRS 101). The principal accounting policies adopted in
the preparation of these financial statements are set out below. These policies have all been applied consistently throughout the
year unless otherwise stated.
Under section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss
account. The loss for the financial year dealt with in the financial statements of the Company was £27,097,000 (2019: £10,333,000)
after applying a tax credit (Note 11) of £32,000 (2019: £90,000 credit) to the loss before tax of £27,129,000 (2019: £10,423,000).
Going concern
The financial statements have been prepared on a going concern basis. The Company’s business activities, together with the factors
likely to affect its future development, performance and position, are set out in the Group Strategic Report. The principal risks
and uncertainties are set out on pages 28 to 33 of the consolidated financial statements. The Financial Reporting Council issued
“Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks” in 2016. The Directors have
considered this when preparing these financial statements.
The Company’s existing revolving credit facility (RCF) in place at the year end was put in place in December 2019 through to
December 2021 (see Note 22 to the consolidated financial statements). In December 2020 the Company extended its facility
through to 30 November 2022 with a £9 million facility through to 1 July 2021 and then £7 million for the remainder of the term.
In addition, in December 2020 the Company undertook a fundraising through the issue of new shares which raised cash proceeds,
net of expenses, of approximately £7.0 million.
Management have produced forecasts for the period up to January 2022 for all business units, taking account of reasonably
plausible changes in trading performance and market conditions, which have been reviewed by the Directors. These reasonably
plausible changes include the continued impact of the Covid-19 pandemic and the impact of the currently depressed oil and gas
market. The forecasts demonstrate that the Group is forecast to generate profits and cash in 2020/2021 and beyond and that the
Group has sufficient cash reserves and headroom in financial covenants to enable the Group to meet its obligations as they fall
due for a period of at least 12 months from the date when these financial statements have been signed.
After undertaking the assessments and considering the uncertainties set out above, the Directors have a reasonable expectation
that the Company has adequate resources to continue to operate for the foreseeable future and for these reasons they continue
to adopt the going concern basis in preparing the financial statements.
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101.
Therefore these financial statements do not include:
1. A statement of cash flows and related notes
2. The requirements of IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered into between two or more
members of the Group as they are wholly owned within the Group
3. Capital management disclosures
4. The effect of future accounting standards not adopted
5. Certain share based payment disclosures
6. Certain financial instruments disclosures
New standards adopted in 2020
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three interpretations (IFRIC 4 ‘Determining Whether an Arrangement Contains
a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27 ‘Evaluating the Substance of Transactions Involving the Legal Form
of a Lease’).
The adoption of this new standard has resulted in the Company recognising a right-of-use asset and related lease liability in
connection with all former operating leases except for those identified as low-value or having a remaining lease term of less than
12 months from the date of initial application.
The new standard has been applied using the modified retrospective approach. Prior periods have not been restated.
For contracts in place at the date of initial application, the Company has elected to apply the definition of a lease from IAS 17 and
IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as a lease under IAS 17 and IFRIC 4.
The Company elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or
accrued lease payments that existed at the date of transition.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Company has relied
on its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.
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Pressure Technologies plc Annual Report 2020 1. Accounting policies continued
New standards adopted in 2020 continued
IFRS 16 ‘Leases’ continued
On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and for
leases of low-value assets, the Company has applied the optional exemptions to not recognise right-of-use assets but to account
for the lease expense on a straight-line basis over the remaining lease term.
For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date of initial
application at the same amounts as under IAS 17 immediately before the date of initial application.
On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16
was 4.25%.
The following is a reconciliation of total operating lease commitments at 28 September 2019 (as disclosed in the financial
statements to 28 September 2019) to the lease liabilities recognised at 29 September 2019:
Total operating lease commitments disclosed at 28 September 2019
Recognition exemptions – leases with remaining lease terms of less than 12 months
Total lease liabilities before discounting
Discounted using incremental borrowing rate
Total lease liabilities recognised under IFRS 16 at 29 September 2019
£’000
812
—
812
(76)
736
Investments
Investments in subsidiary undertakings are stated at cost less any applicable provision for impairment. Contingent consideration
classified as an asset or liability is subsequently remeasured through profit or loss.
Intangible assets
Intangible assets are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over
their estimated useful lives. Cost reflects purchase price of the asset together with any incidental costs of bringing the asset into
use. Residual values and useful lives are reviewed at each reporting date.
The following useful lives are applied:
IT systems and software
3-5 years
Tangible assets
Property, plant and equipment (PPE) is initially recognised at acquisition cost or manufacturing cost, including any costs directly
attributable to bringing the assets to the location and condition necessary for them to be capable of operating in the manner
intended by the Company’s management.
PPE is subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is recognised on
a straight-line basis (unless otherwise stated) to write down the cost less estimated residual value of PPE. The following useful
lives are applied:
Plant and machinery
Buildings
Computer equipment
3-15 years
50 years
3-15 years
Material residual value estimates and estimates of useful life are updated as required, but at least annually.
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal
proceeds and the carrying amount of the assets and are recognised in profit or loss within other income or other expenses.
Leased assets
As described in Note 3, the Company has applied IFRS 16 using the modified retrospective approach and therefore comparative
information has not been restated. This means comparative information is still reported under IAS 17 and IFRIC 4.
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
1. Accounting policies continued
Accounting policy applicable from 29 September 2019
The Company as a lessee
For any new contracts entered into on or after 29 September 2019, the Company considers whether a contract is, or contains,
a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for
a period of time in exchange for consideration’. To apply this definition the Company assesses whether the contract meets three
key evaluations which are whether:
• the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Company;
• the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the
period of use, considering its rights within the defined scope of the contract;
• the Company has the right to direct the use of the identified asset throughout the period of use. The Company assesses whether
it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Company recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-
use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by
the Company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in
advance of the lease commencement date (net of any incentives received).
The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the
end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use asset for
impairment when such indicators exist.
At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at
that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Company’s incremental
borrowing rate.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured
to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the
right-of-use asset is already reduced to zero.
The Company has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead
of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or
loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been included in property, plant and equipment and lease liabilities
have been included as a separate line item, ‘Lease liabilities’.
Accounting policy applicable before 29 September 2019
The Company as a lessee
Finance leases
Management applies judgement in considering the substance of a lease agreement and whether it transfers substantially all
the risks and rewards incidental to ownership of the leased asset. Key factors considered include the length of the lease term
in relation to the economic life of the asset, the present value of the minimum lease payments in relation to the asset’s fair value,
and whether the Company obtains ownership of the asset at the end of the lease term.
For leases of land and buildings, the minimum lease payments are first allocated to each component based on the relative fair
values of the respective lease interests. Each component is then evaluated separately for possible treatment as a finance lease,
taking into consideration the fact that land normally has an indefinite economic life.
See the accounting policy note in the year-end financial statements for the depreciation methods and useful lives for assets
held under finance leases. The interest element of lease payments is charged to profit or loss, as finance costs over the period
of the lease.
Operating leases
All other leases are treated as operating leases. Where the Company is a lessee, payments on operating lease agreements are
recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance,
are expensed as incurred.
Post-employment benefit plans
Contributions to defined contribution pension schemes are charged to profit or loss in the year to which they relate.
Prepaid contributions are recognised as an asset. Unpaid contributions are reflected as a liability.
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Pressure Technologies plc Annual Report 2020 1. Accounting policies continued
Share based payments
Where equity settled share options are awarded to employees of the Company the fair value of the options at the date of grant is
charged to profit or loss over the vesting period with a corresponding entry in the profit and loss account. The fair value of awards
made with market performance conditions has been measured by a Black-Scholes model.
Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options
that eventually vest.
Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all
other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.
The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition
is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining
vesting period.
Equity, reserves and dividend payments
Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition
of a financial liability or financial asset.
The Company’s ordinary shares are classified as equity. Transaction costs on the issue of shares are deducted from the share
premium account arising on that issue. Dividends on the Company’s ordinary shares are recognised directly in equity.
Interim dividends are recognised when they are paid. A liability for unpaid dividends is recognised when the dividends have been
approved in a general meeting prior to the reporting date.
Income taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive
income or directly in equity.
Calculation of current tax is based on tax rates and laws that have been enacted or substantively enacted by the end of the
reporting period. Deferred income taxes are calculated using the liability method.
Calculation of deferred tax is based on tax rates and laws that have been enacted or substantively enacted by the end of the
reporting period that are expected to apply when the asset is realised or the liability is settled.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the entity expects
to recover the related asset or settle the related obligation.
Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary difference
will be utilised against future taxable income. This is assessed based on the Company’s forecast of future operating results,
adjusted for significant non-taxable income and expenses and specific limits on the use of any unused tax loss or credit.
Deferred tax assets are not discounted.
Deferred tax liabilities are generally recognised in full with the exception of:
• on the initial recognition of a transaction that is not a business combination and at the time of the transaction affects neither
the accounting nor taxable profit.
Deferred tax liabilities are not discounted.
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
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
Exceptional costs
2020
Number
12
2019
Number
10
2020
£’000
981
122
105
35
110
2019
£’000
969
123
97
57
100
1,353
1,346
Further details of Directors’ remuneration are provided in the Report of the Remuneration Committee and Note 8 to the
consolidated financial statements.
3. Auditor’s remuneration
The auditor’s remuneration for audit and other services is disclosed in Note 6 to the consolidated financial statements.
4. Investments in subsidiary companies
Cost
At 29 September 2018
Additions
At 28 September 2019
Additions
At 3 October 2020
Amortisation and impairment
At 29 September 2018
Charge for the period
At 28 September 2019
Charge for the period – impairment
At 3 October 2020
Net book value
At 3 October 2020
At 28 September 2019
£’000
32,918
—
32,918
—
32,918
—
—
—
(26,467)
(26,467)
6,451
32,918
Investments in subsidiary companies are stated at cost less any applicable provision for impairment.
The Company tests annually for impairment, or more frequently if there are indicators that the carrying value of investment in
subsidiary companies might be impaired. The impairment review is described in Note 12 to the consolidated financial statements.
This review indicated that an impairment was required in respect of the majority of the Company’s investment in the holding
company, PT Precision Machined Components Limited, which owns the subsidiary companies that comprise the operations of the
Precision Machined Components division. The recoverable amount of the Precision Machined Components division is stated at the
value in use.
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Pressure Technologies plc Annual Report 2020
4. Investments in subsidiary companies continued
The subsidiaries as at the balance sheet date, which are all 100% owned, are:
Name
Country of incorporation
Al-Met Limited*
Chesterfield Special Cylinders Limited (“CSC”)
CSC Deutschland GmbH*
Chesterfield Special Cylinders Inc (formerly Hydratron Inc)*
Roota Engineering Limited*
Quadscot Precision Engineers Limited*
Quadscot Holdings Limited*
Chesterfield Tube Company Limited
Chesterfield Pressure Systems Group Limited
Chesterfield Cylinders Limited
Martract Limited*
PT Precision Machined Components Limited
Precision Machined Components Limited
*
Indirectly held subsidiaries.
England and Wales
England and Wales
Germany
USA
England and Wales
Scotland
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Principal activity
Manufacturing
Manufacturing
Sales and marketing
Manufacturing
Manufacturing
Manufacturing
Holding company
Dormant
Dormant
Dormant
Manufacturing
Holding company
Dormant
All the UK based subsidiaries have as their registered office the following address:
Pressure Technologies Building, Meadowhall Road, Sheffield, S9 1BT.
Al-Met Limited, Martract Limited, Quadscot Holdings Limited, Quadscot Precision Engineers Limited and Roota Engineering Limited
are exempt from the requirement of the Companies Act relating to the audit of individual financial statements by virtue of s479A of
the Companies Act 2006.
5. Other financial assets
Amounts due within 12 months
Promissory Note
Total due within 12 months
Amounts due after 12 months
Listed security
Promissory Note
Total due after 12 months
2020
£’000
3,074
3,074
2020
£’000
—
—
—
2019
£’000
—
—
2019
£’000
1,250
6,100
7,350
As at the beginning of the year, the Company held a listed security asset which related entirely to its 21% shareholding in Greenlane
Renewables Inc. and a Promissory Note which formed part of the consideration on the sale of the Alternative Energy division in the
prior year.
The fair value of the shareholding in Greenlane Renewables Inc. as at 28 September 2019 was determined by reference to
published price quotations in an active market (classified as level 1 in the fair value hierarchy – see Note 25 of the consolidated
financial statements). In June and July 2020, the Company sold its 21% shareholding in Greenlane Renewables, Inc. for cash
proceeds, net of related expenses, of £3,145,000 generating a profit on sale of £1,895,000.
The Promissory Note held at the start of the year was valued at amortised cost. The original term of the Note was four years with
a repayment date of no later than 3 June 2023 at Greenlane Renewables Inc. discretion. In February 2020, a prepayment of
£2.1 million was received. Interest is charged at 7% on the outstanding Promissory Note rolled up into the principal unless a trigger
event occurs under the terms of the Note which causes interest payments to be satisfied in cash. On initial recognition the value
was assessed to be the face value. The Note is denominated 50% in GBP and 50% in Canadian Dollars. The asset was held solely
to collect associated cash flows which related to principal and interest only.
In June and July 2020, the Group sold its 21% shareholding in Greenlane Renewables Inc. Linked to disposal of this shareholding
during the year the terms of the related attached Promissory Note were amended to reduce the value of the Note and to accelerate
the repayment date for the outstanding amount to 30 June 2021.
The new Promissory Note is classified as being held at fair value through profit and loss as its value at the point of the modification
was linked to the value at which the Greenlane Renewables Inc. shareholding was sold, thereby failing the solely payments of
principal and interest test. The fair value has been assessed at the year end and is reflected in the value shown in the table above.
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NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
6. Intangible fixed assets
Cost
At 28 September 2019
Additions
At 3 October 2020
Amortisation
At 28 September 2019
Charge for the period
At 3 October 2020
Net book value
At 3 October 2020
At 28 September 2019
7. Tangible fixed assets
Cost
At 28 September 2019
Additions – transition under IFRS 16
Additions – right-of-use assets
Additions
At 3 October 2020
Depreciation
At 28 September 2019
Charge for the period
At 3 October 2020
Net book value
At 3 October 2020
At 28 September 2019
Leased assets
Carrying value at 3 October 2020
Carrying value 28 September 2019
IT systems
and software
£’000
411
—
411
167
82
249
162
244
Total
£’000
3,936
736
37
30
4,739
562
207
769
3,970
3,374
617
65
Land and
buildings
£’000
Plant and
machinery
£’000
Computer
equipment
£’000
3,355
711
—
15
4,081
50
140
190
3,891
3,305
—
—
445
19
—
3
467
436
21
457
10
9
581
—
136
6
37
12
191
76
46
122
69
60
36
65
Land and buildings include an investment property relating to the Meadowhall Road site, which is leased to other Group companies.
The Meadowhall Road site is recorded at cost less depreciation, which the Directors are satisfied is comparable with market value.
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Pressure Technologies plc Annual Report 2020
8. Debtors
Amounts: falling due within one year
Trade debtors (net of doubtful debt provision)
Prepayments and accrued income
Other debtors
Amounts owed by Group companies
Corporation tax
Deferred tax (see Note 13)
9. Creditors
Amounts: falling due within one year
Trade creditors
Other tax and social security
Accruals and deferred income
Amounts owed to Group companies
Other payables
Revolving credit facility
Amounts: falling due after one year
Revolving credit facility
2020
£’000
—
504
455
—
—
94
1,053
2020
£’000
118
149
218
358
112
955
—
2020
£’000
6,773
2019
£’000
9
214
250
367
95
62
997
2019
£’000
174
40
225
—
28
467
10,800
2019
£’000
—
Details of bank borrowings are set out in Note 22 to the consolidated financial statements. All of the Company’s assets are subject
to fixed and floating charges as part of the Group’s cross-guarantee agreement with Lloyds Bank plc. At 3 October 2020 the amount
thus guaranteed by the Company was £nil (2019: £nil).
10. Lease liabilities
Lease liabilities are presented in the statement of financial position as follows:
Current
Asset finance lease liabilities
Right-of-use asset lease liabilities
Non-current
Asset finance lease liabilities
Right-of-use asset lease liabilities
2020
£’000
2019
£’000
29
142
171
2
487
489
29
—
29
31
—
31
The Company has leases for a non-operational factory premise, a number of motor vehicles and some IT equipment.
For right-of-use assets, with the exception of short-term leases and leases of low-value underlying assets, each lease is reflected
on the balance sheet as a right-of-use asset and a lease liability.
The Company classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see Note 7).
Each lease generally imposes a restriction that, unless there is a contractual right for the Company to sublet the asset to another
party, the right-of-use asset can only be used by the Company. Leases are either non-cancellable or may only be cancelled by
incurring a substantive termination fee. Some leases contain an option to extend the lease for a further term. The Company is
prohibited from selling or pledging the underlying leased assets as security.
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
10. Lease liabilities continued
For leases over office buildings and factory premises the Company must keep those properties in a good state of repair and return
the properties in their original condition at the end of the lease. Further, the Company must insure items of property, plant and
equipment and incur maintenance fees on such items in accordance with the lease contracts.
The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 3 October 2020 were as follows:
3 October 2020
Lease payments
Finance costs
Net present value
28 September 2019
Lease payments
Finance costs
Net present value
11. Taxation
Current tax
Over provision in respect of prior years
Deferred tax
Origination and reversal of temporary differences
Over provision in respect of prior year
Change in deferred tax rate
Total taxation credit
Within
one year
£’000
Over one to
five years
£’000
199
(28)
171
536
(47)
489
Within
one year
£’000
Over one to
five years
£’000
39
(8)
31
31
—
31
2020
£’000
—
—
(23)
1
(10)
(32)
Total
£’000
735
(75)
660
Total
£’000
70
(8)
62
2019
£’000
(95)
(95)
(15)
20
—
(90)
Corporation tax is calculated at 19% (2019: 19%) of the estimated assessable profit for the period. Deferred tax is calculated at
19% (2019: 17%).
12. Share capital
Details of the Company’s authorised and issued share capital and of movements in the year are given in Note 27 to the consolidated
financial statements.
13. Deferred tax
Opening balance for the period
Credit/(charge) for the period
Closing balance for the period
The deferred tax asset is made up as follows:
Cost of share options
Accelerated capital allowance
Unused losses
Other temporary differences
100
2020
£’000
62
32
94
2020
£’000
58
11
22
3
94
2019
£’000
67
(5)
62
2019
£’000
46
15
—
1
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Pressure Technologies plc Annual Report 2020
14. Reserves
At beginning of period
Loss for the financial period
Share option cost
At end of period
Share
premium
account
2020
£’000
26,172
—
—
26,172
Profit
and loss
account
2020
£’000
6,657
(27,097)
35
(20,405)
Share
premium
account
2019
£’000
26,172
—
—
26,172
Profit
and loss
account
2019
£’000
16,933
(10,333)
35
6,657
15. Related party transactions
As permitted by FRS 101 related party transactions with wholly owned members of the Pressure Technologies plc Group have
not been disclosed.
For details on other related party transactions, see Note 33 in the consolidated financial statements.
16. Ultimate controlling party
The Directors consider that there is no ultimate controlling party.
17. Subsequent events
The Company’s existing RCF of £12 million at the year end was put in place in December 2019 for two years through to
December 2021 (see Note 22 of the consolidated financial statements). In December 2020 the Company extended its facility
through to 30 November 2022 with a £9 million facility through to 1 July 2021 and then £7 million for the remainder of the term.
In addition, the Company undertook a fundraising through the issue on 18 December 2020 of 12,471,998 new ordinary shares
which raised cash proceeds, net of expenses, of approximately £7 million.
Pressure Technologies plc, the Company, has £26.2 million of share premium as at year end. On 17 December 2020, the Company
received shareholder approval to convert the share premium, under a capital reduction, into a distributable reserve. This process
requires Court Approval. An application to the Courts has been made but the timing of the process is currently uncertain.
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Pressure Technologies plc Annual Report 2020Strategic ReportGovernanceFinancial Statements
COMPANY INFORMATION
Directors
Secretary
Investor relations
Registered office
Sir R.A. Gardner – Chairman
C.L. Walters – Chief Executive
B.M. Newman – Senior Independent Non-Executive Director
T.J. Cooper – Independent Non-Executive Director
M.G. Butterworth – Independent Non-Executive Director
Haddleton & Co t/a Haddletons
Windsor House
Cornwall Road
Harrogate
HG1 2PW
Houston
The Leather Market
Studio 2
London
SE1 3ER
Pressure Technologies Building
Meadowhall Road
Sheffield
South Yorkshire
S9 1BT
Registered number
06135104
www.pressuretechnologies.com
N+1 Singer
1 Bartholomew Lane
London
EC2N 2AX
Grant Thornton UK LLP
No 1 Whitehall Riverside
Leeds
LS1 4BN
Keebles LLP
Commercial House
Commercial Street
Sheffield
S1 2AT
Lloyds Bank
14 Church Street
Sheffield
S1 1HP
Neville Registrars
Neville House
Steelpark
Halesowen
B62 8HD
Website
Nominated advisor
Auditor
Solicitors
Bankers
Registrars
102
Pressure Technologies plc Annual Report 2020
Design and Production
www.carrkamasa.co.uk
Pressure Technologies plc Annual Report 2020
Pressure Technologies plc
Pressure Technologies Building
Meadowhall Road
Sheffield
South Yorkshire
S9 1BT
UK
+44 (0) 333 015 0710
www.pressuretechnologies.com