Pressure Technologies plc
Annual Report & Financial Statements
Period ended 1 October 2022
Contents of the Annual Report and Financial
Statements
Company information
Chair’s statement
Strategic report
- Overview
- Our stakeholders
-
Section 172 statement
- Our vision and strategy
- Markets
-
-
Business and financial review
Key performance indicators – measured performance
- Corporate governance
- Risks and uncertainties
-
Approval of the strategic report
Report of the Remuneration Committee
Directors’ report
Audit and Risk Committee report
Independent Auditor’s report to the members of Pressure Technologies plc
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
Page
2
3-4
5-29
5
6-7
8
9-11
12-13
14-19
20-21
22-24
25-29
29
30-32
33-38
39-42
43-52
53
54
55
56
57-66
67-92
93
94
95-105
1
Company information
Directors
Secretary
Investor relations
Registered office
N.R. Salmon – Non-Executive Chair
C.L. Walters – Chief Executive
T.J. Cooper – Senior 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
Website
www.pressuretechnologies.com
Nominated advisor
Singer Capital Markets Limited
1 Bartholomew Lane
London
EC2N 2AX
Auditor
Solicitors
Bankers
Registrars
Grant Thornton UK LLP
1 Holly Street
Sheffield
S1 2GT
Knights
14 Commercial Street
Sheffield
S1 2AT
Lloyds Bank
1 High Street
Sheffield
S1 2GA
Neville Registrars Limited
Neville House
Steelpark
Halesowen
B62 8HD
2
Chair’s statement
FY22 was a challenging period for the Group, as results were impacted by a combination of defence contract delays,
operational and supply chain disruption and slower than expected recovery in the oil and gas market. The Group
incurred increased operating losses for the full year, as performance in the second half fell significantly below the
level anticipated. I am pleased to say that market conditions have improved considerably in FY23, and we have
made significant operational improvements to ensure that the Group benefits from strong orderbooks in both
divisions.
I apologise for the delay in issuing these FY22 results. Late in the auditor's review of the financial statements, it was
determined that the accounting methodology adopted in Chesterfield Special Cylinders since FY19 for large, multi-
year naval contracts with a specific customer was incorrect in respect of the timing of cost and profit recognition. The
correction of this error impacted the previously reported results for FY21, which have been restated, and also
reduced operating profit for FY22 below our previous expectations, albeit with a corresponding increase in the
expected profit contributions from these contracts in FY23 and FY24. These corrections and restatements impact the
timing of profit recognition over the life of the contract, but do not change overall contract profitability, nor do they
affect the value or timing of future cash flows.
On 6 February 2023, we announced the award of a £18.2 million major defence contract, underpinning the defence
orderbook and outlook for Chesterfield Special Cylinders in FY23 and FY24. We are also encouraged by
diversification opportunities for pressure system inspection and testing services, including Integrity Management field
deployments and cylinder reconditioning and recertification services. These activities cover established defence and
offshore markets, while new opportunities are developing for industrial gas and hydrogen storage applications.
We are very well positioned in the emerging market for hydrogen storage and transportation. However, order
placement by established and new customers was slower than expected during FY22 and the first half of FY23,
influenced by constraints and delays in the supply chain for components required in the generation and compression
of hydrogen for refuelling and decarbonisation projects. Despite these delays, we are confident of securing several
contracts in the second half of 2023 and remain positive about the prospects for Chesterfield Special Cylinders in the
hydrogen energy market for new build storage and transport solutions, and for the through-life inspection, testing and
recertification of hydrogen systems over the medium and longer term.
Since 2020, our Precision Machined Components division has felt the significant impact of the Covid-19 pandemic
and the downturn in oil and gas markets and the division was loss making in FY22. We are pleased and encouraged
by the steady recovery in order intake and order book development for the division, which has traded in line with
expectations throughout the first half of FY23 and returned to profitability at the end of the second quarter, as we
realised the benefits of increased volumes and the operational improvements made over the past few years. OEM
customers continue to forecast strong recovery in demand for specialised components for oil and gas exploration and
production projects over the next three to five years. On 27 March 2023, we announced a record £3.0 million order
from an established international OEM customer for the supply of flow control components and subassemblies.
Order intake has continued to grow in line with customer sentiment and project activity, further strengthening the
divisional order book for FY23 and well into the first half of FY24.
Improved trading and a stronger market outlook have presented the Group with the potential opportunity to divest
Precision Machined Components activities in order to raise funds and support strategic priorities within Chesterfield
Special Cylinders. This opportunity is being actively pursued and all options under consideration will seek to deliver
optimum shareholder value.
On 6 December 2022 we completed a £2.1 million equity fundraise with support from institutional and retail
shareholders. The funds raised have provided important flexibility and liquidity during the first half of FY23 as a
bridge to stronger cash generation from major contracts in Chesterfield Special Cylinders and the return to
profitability in Precision Machined Components. Ernst & Young LLP continues to support the Group with the review
of funding options to replace the Lloyds Bank facility with new arrangements that provide increased liquidity, greater
flexibility and the required working capital to support the Group’s strategic plans. We expect to complete the
refinancing project in the second calendar quarter of 2023.
In April 2022 we were pleased to welcome Chris Webster to the Group as Chief Operating Officer. Chris has brought
considerable operational experience to the business through his thirty-year career in manufacturing and has already
made a positive impact across all sites, improving production efficiencies, supply chain controls and project
management that all support improved forecasting and underpin our growth plans.
On 17 January 2023, we announced the appointment of Steve Hammell as Chief Financial Officer. Steve joined the
business on 2 May 2023 and will join the Board from 23 May 2023, immediately after publication of the FY22
accounts. Steve takes over from James Locking who left the Board on 3 March 2023. We would like to thank James
for his contribution and service to the business over the past four years and wish him every success for the future.
3
Further to our announcement made on 21 March 2023, I am pleased to confirm that Richard Staveley will also join
the Board from 23 May 2023.
With a strong order book, a strengthened executive team and clear strategic focus for the Group, we are excited
about opportunities in the medium to long term and remain confident in meeting full-year market expectations for
FY23.
Nick Salmon
Chair
22 May 2023
4
Strategic report
Overview - Pressure Technologies
We work in close collaboration with our customers who require unique solutions when developing and manufacturing
highly engineered products for use in harsh operating environments. We continue to 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.
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 are a growing part of the business, where safety-critical cylinders cannot be removed
for routine maintenance and are inspected and certified ‘in-situ’, minimising operational disruption and increasing
system availability, while factory reconditioning and recertification services extend the life of bulk gas storage
systems and road trailers to meet demanding safety requirements. These services have been built on CSC’s
unrivalled industry knowledge and OEM experience.
Precision Machined Components
The Precision Machined Components (PMC) division comprises the three brands of Roota Engineering, Al-Met and
Martract. These brands are all 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 primarily 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.
Where we operate
Our manufacturing is UK based, with businesses serving a global blue chip customer base from four operational
sites.
5
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 & Regulators and the
Communities in which the Group’s businesses operate. The Group actively encourages good communications with
all stakeholders.
Customers
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.
Building and maintaining robust relationships and maintaining an appropriate level of communication with
our customers will ensure that:
o
o
o
o
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.
Employees
It is the policy of the Group to communicate with employees through site-based employee forums 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, SAYE share option schemes for UK based employees, and
performance bonuses. A long-term incentive plan is provided for the executive management through a Value
Creation Scheme.
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, including apprenticeships
and career development opportunities. By doing this, we get the best from our people who enjoy working with
us. We developed with our employee representatives a new set of four company values that capture what it means
to work for the Group and underpin our brand.
In January 2018, we carried out the first employee engagement survey using a benchmarked UK index provided by
Best Companies. Further surveys were carried out in October 2019, October 2020 and June 2021. Response rates
and engagement scores have improved steadily across the Group over that period and helped develop positive
changes across all sites. Following changes to the management of the Group HR function, the next survey is
scheduled for June 2023.
Shareholders
Through strong management, we have demonstrated resilience during challenging market conditions, responding to
changing environments, including the Covid-19 pandemic, depressed oil and gas markets and the war in the Ukraine,
and reviewing the focus of the Group to ensure we remain well positioned to deliver value to shareholders. The
executive directors meet periodically with the Group’s larger financial investors.
The Group 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 Group has always aimed to accommodate investors who wish to visit its manufacturing sites.
Suppliers
Strong and forward-looking relationships with our suppliers allow us to deliver our products and services on time and
in accordance with high standards:
We have continued to focus on strengthening our supplier relationships and performance this year,
collaborating closely to ensure that our customer needs are met. Recent recruitment in February 2023 has
strengthened supply chain management capability.
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.
6
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.
This has been demonstrated through the collaboration and long-term supply agreements established with
CSC’s European steel tube suppliers.
Government & Regulators
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:
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.
Community
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.
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.
7
Section 172 statement
Section 172 of the Companies Act 2006 requires every 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)
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Likely long-term consequences
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Interests of the Group’s employees
6, 9 to 11, 12 to 13, 22 to 24 and 25 to 29
● Business relationships with suppliers and
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customers
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Impact on the community and environment
6 to 7, 9 to 11, 12 to 13, 22 to 24 and 25 to 29
● Reputation for high standards of business
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conduct
● Acting fairly between shareholders
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8
Our vision and strategy
Our vision
To develop and grow our brand as the leading provider of pressure containment and flow control systems and
services to customers who operate in highly demanding, safety-critical environments where the consequences of
product failure could be catastrophic.
The Company is well placed to take advantage of market conditions, its specialist capabilities and reputation to
realise the benefits of the investment made in recent years in people, customer relationships, new equipment and
supporting processes.
Our strategy
Group strategy was reviewed and updated in June 2019 and was focused on the organic growth and development of
the two core manufacturing divisions, CSC and PMC. The Covid-19 pandemic significantly impacted the business
environment for both divisions, including working conditions, operational performance, end markets and the global
economy. To meet the challenges posed by the pandemic and business environment, we adapted and remained
ready to further adjust our focus and resources to protect the business, progress our strategy and take advantage of
future opportunities.
Delayed recovery of oil and gas markets and the global economic uncertainties caused by the war in Ukraine have
slowed the expected improvement in operational performance and contributed to further delay in Phase 1 - Refocus,
which we now expect to extend to the middle of 2023, in line with the improvement in oil and gas market conditions
and the impact of this on our PMC division. We expect Phase 2 - Deliver Organic Growth, to continue steadily in
PMC and accelerate through opportunities for CSC in the hydrogen energy market and for Integrity Management
services, driving the need for investment and a strengthened balance sheet that was supported by successful
fundraisings in December 2020 and December 2022.
On 15 November 2022, the Group announced that an improved trading environment and outlook for PMC created
the potential opportunity to divest the non-core PMC division in order to raise funds to progress its strategic priorities,
particularly within CSC and the hydrogen energy sector. The project is underway and is progressing as planned with
support from advisors, KPMG.
The Strategic Roadmap updated to reflect these changes, now focused on the growth and development of CSC.
Phase 1 - Refocus (originally to mid-2020, now extended to mid-2023)
Recover profitability and cash generation (improving oil and gas market conditions driving contributions from
PMC division, strong defence order book at CSC)
Consider potential divestment of non-core PMC division (generate funds to further strengthen balance sheet
and support investment in CSC)
Align Group functions with smaller scale after potential PMC divestment (consolidation of support functions,
cost savings)
Complete foundations for growth in CSC (strengthen operational leadership, build plans for efficiency
improvements and operational resilience and capacity to support growth)
Phase 2 - Deliver organic growth (ongoing)
Growth from core CSC operations (margin improvement on major defence contracts, factory reconditioning
services and small cylinder manufacturing through operational efficiencies and strengthened commercial,
project and supply chain management)
Growth in revenue and margin from expanding hydrogen energy market (supplier and customer
collaboration to ensure competitive product development for storage and transportation solutions and
strengthened business development function, grow hydrogen road trailer capacity)
Growth in in-situ Integrity Management and factory reconditioning and recertification services (both in
traditional defence markets and by entering new segments such as offshore services, bulk gas
transportation and hydrogen storage)
Phase 3 - Accelerate growth & build scale (from 2023 onwards)
Growth from new sectors and regions
Seek collaboration opportunities with business partners needing our high-pressure technology expertise
(such as for Hydrogen Refuelling Stations, alternative non-steel pressure vessel types etc.)
9
Strategic progress
Phase
Strategic objective
Progress and priorities
1 - Refocus
Recover profitability and
cash generation, strengthen
balance sheet and increase
flexibility and facility
headroom.
Divest non-core PMC
division
Improving oil and gas market conditions are driving
recovery in revenue. Roota Engineering and Martract
have been trading profitably since March 2021, slower
recovery in Al-Met resulted in divisional loss for FY22, but
a return to profitability at the end of Q2 FY23
CSC recovering from Q2 FY23 due to record £18.2 million
contract placement by a major UK naval customer,
underpinning the orderbook for FY23 and FY24
Fundraising in December 2022 raised cash proceeds, net
of expenses, of approximately £2.1 million
The Group is currently working with Ernst & Young LLP to
evaluate funding options to replace the Lloyds Bank
revolving credit facility with new arrangements that provide
increased facility headroom and flexibility. New facilities
are expected to be in place in Q3 FY23
A project to evaluate the potential opportunity for divesting
the PMC division is progressing as planned with support
from advisors, KPMG LLP. All options under
consideration will seek to deliver optimum shareholder
value.
Strategy Roadmap updated and strategic focus now on
CSC in the defence and hydrogen energy markets for new
build, in-situ Integrity Management and factory
reconditioning services
Align Group functions with
smaller scale following the
possible divestment of PMC
Cost savings through the consolidation of divisional and
Group finance and HR functions from October 2022 reflect
a smaller scale of operations in the event of PMC
divestment and CSC focus
Complete foundations for
growth in CSC
2 - Deliver
organic
growth
Growth from core CSC
operations
Chief Operating Officer, Chris Webster, joined the Group
in April 2022, strengthening operational leadership in CSC
and PMC, planning for improvements in efficiency and
operational resilience, capacity growth and a professional
approach to the management of customer projects and
the supply chain
Margin improvement on major defence contracts, factory
reconditioning services and small cylinder manufacturing
through operational efficiencies and strengthened
commercial, project and supply chain management
Strengthened sales and engineering teams to underpin
CSC market positioning, responsive and competitive
proposals and effective customer relationship
management
Growth in revenue and
margin from expanding
hydrogen energy market
Supplier and customer collaboration to ensure competitive
product development for storage and transportation
solutions
Strengthened business development function and industry
profile
Operational efficiency improvements to ensure profitability
from short lead time, higher volume orders anticipated
from target customers over the next five years
Develop capability and capacity to deliver growth from
new build, reconditioning and testing of hydrogen road
trailers
10
Growth in in-situ Integrity
Management and factory
reconditioning and
recertification services
3 - Accelerate
growth and
build scale
Growth from new sectors
and regions
Opportunities from business
partnerships
Maintain and grow a multiskilled team for in-situ inspection
and testing deployments
Grow margins from core naval deployments through
stronger commercial management and operational
efficiencies.
Establish supply agreements to mitigate significant
fluctuations in revenue and capacity requirements due to
naval vessel schedule changes
Grow revenue from deployments to offshore service
vessels through track record and sales focus.
Diversify further into industrial and power generation
Establish position as leading supplier of in-situ inspection
and testing services for hydrogen storage
We will continue to appraise growth and development
where we see opportunity to advance our scale, technical
capability and reach into new sectors and regions and via
partnerships with businesses which require high-pressure
technology expertise
11
Markets
What is happening in the markets
What this means for us
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.
Major OEM customers are reporting a positive outlook
for opex and capex demand in 2023 and 2024. This
has been evidenced through record order intake and
order book levels in PMC at the end of the first half of
FY23.
CSC has also seen the early signs of recovery in the oil
and gas market, with demand for motion compensation
systems, spares and inspection services increasing
during the second half of 2022. Demand for Integrity
Management services covering diving support and
offshore services vessels is also showing signs of
recovery with increased enquiry levels in late 2022 and
the first half of 2023.
Oil & gas
Overview
The oil and gas market is emerging from a prolonged
period of underinvestment and global inventories are at a
decade low, while crude oil prices remain elevated.
The market outlook has become increasingly positive,
with the market expected to enter a sustained cyclical
upturn. The resurgence is driving increased exploration
and production (E&P) spending and capital investment.
Resurgence in oil and gas industry
Organization of the Petroleum Exporting Countries
(OPEC) forecast world oil demand in 2023 to rise by 2.25
million barrels per day (bpd), or about 2.3%.
Skandinaviska Enskilda Banken AB (SEB) has also
predicted double digit growth in exploration and
production in 2023 and 2024. However, forecast
spending still remains at 40% less than the 2014 peak.
As a result of the resurgence of oil and gas, major OEMs
such as Schlumberger are forecasting significant growth
activity in short and long term cycle projects both onshore
and offshore.
Many major OEMs have recently reported strong Q4
2022 results with Schlumberger citing increased activity
in Well Construction and Production Systems in offshore
and international markets as key revenue drivers.
Increased capital investment
Capital investment in the oil and gas market is forecast to
accelerate across all geographies to drive new production
and capacity increases.
Major OEMs, such as Baker Hughes, are forecasting
increased upstream capex spend from 2023 onwards.
Defence
Current defence spending continues to be driven by the
need to replace obsolete fleets, both in terms of surface
and submarine fleets, alongside commitments within
NATO to increase budgets.
In November 2022, the UK government confirmed it will
maintain the national defence budget of at least 2% of
GDP to be consistent with NATO partners.
CSC is the leading supplier of high-pressure gas
storage systems to NATO member and NATO friendly
state navies and has long-term contracts to supply
bespoke products and services for conventional and
nuclear submarine and surface ship programmes in the
UK and overseas. CSC are also currently in
negotiations for future global naval contracts which
could see manufacturing of these products beyond
2040.
Notwithstanding the coronavirus pandemic and
contraction in economic output over the last couple of
years, global defence-spending has remained resilient
with a significant number of naval build programs starting
and many more in the design & planning stages.
Although the phasing of defence project milestones and
contract revenues can fluctuate significantly between
and within financial years, there is good medium and
long-term visibility of vessel construction programmes
12
and planned defence expenditure from navies and their
prime contractors.
CSC is the principal provider of inspection and testing
services to the UK MoD for through-life cylinder
performance and safety management on various
classes of nuclear submarine.
PMC secured its first orders for defence related
components in FY21. This collaboration with CSC
progressed throughout FY22 and is continuing in FY23.
Industrial
The market for bulk gas storage and transportation in
industrial processes has a diverse customer base,
including industrial gas majors, higher education and
scientific research bodies, nuclear and conventional
power plants and other specialised installations, including
space programmes.
Specialised new build opportunities for high-volume
industrial gas storage are ad hoc, while in-situ and
factory inspection, testing and reconditioning services
have been identified as a target growth area for CSC,
confirmed by initial trial projects undertaken
successfully for industrial customers in 2022.
Hydrogen energy
Momentum is increasing in this sector, driven by several
factors including the UK government’s target to achieve
10GW of hydrogen production by 2030, the European
commission doubling its state aid for IPCEI (Important
Projects of Common European Interest) projects as well
as the European Union co funding transport infrastructure
projects that will form part of the TEN-T core network thus
increasing the number of hydrogen refuelling stations in
Europe.
Additionally, there is an expanding market for hydrogen
transportation, which mostly relies on compressed bulk
gas trailer vehicles to move hydrogen from the point of
production to the end user.
The hydrogen sector is developing across the continent,
with the UK and Western Europe expected to account for
75% of the total low-emission hydrogen production in the
region.
However, market growth in refuelling stations and green
hydrogen storage stalled temporarily in 2022 and the first
quarter of 2023 due to supply chain constraints and the
uncertainty caused by cost inflation challenges and lack
of government support within the UK. Further disruption
and delays to market development are expected during
the remainder of 2023 resulting from supply chain
challenges and performance issues with electrolysers
and extended lead times for gas compression systems.
The recent news of ITM Power reducing its workforce
and restructuring of its business has led the company to
review strategic options with its joint venture with Vitol in
Motive Fuels. Following this announcement Motive
Fuels is in a consultation phase until further notice.
Shell also announced the closure of three car hydrogen
refuelling stations in the UK and the cancellation of two
additional stations in order to focus on enabling net zero
targets for HGVs.
This has resulted in a less clear picture of our current
and pipeline enquiries from key accounts and new
customers.
Moreover, we are making significant progress with
framework purchase agreements with some of our key
customers to support collaboration on the development
of efficient and cost-effective storage solutions for their
projects, enabling more effective forecasting and
production planning.
Demand for steel tube trailer new construction,
refurbishment and recertification increased steadily
during 2022 and the first quarter of 2023 and
notwithstanding the expected slowdown in refuelling
station demand, this area is expected to grow further
during the remainder of 2023 and into 2024 due to
increasing demand for bulk hydrogen transportation.
13
Business and financial review
Overview
Difficult trading conditions throughout the year reflected the challenging global economic climate, supply chain
disruptions and cost inflationary pressures on the Group’s operations, customers and suppliers, and resulted in an
unsatisfactory financial performance. However, good progress has continued against strategic priorities in defence,
oil and gas and hydrogen energy markets while operational improvements and strengthened management team
underpin confidence in the outlook for the Group.
Overall Group revenue for the year was £24.9 million (2021: £25.3 million) and the adjusted operating loss for the
year was £2.6 million (2021: adjusted loss of £1.5 million). The Group made a loss before taxation of £4.0 million
(2021: loss of £5.0 million).
£ million
Group revenue
Oil & gas
Defence
Industrial
2022
Restated
2021
2020
2019
2018
24.9
25.3
25.4
28.3
21.1
7.9
6.1
14.9
16.3
12.4
13.5
1.1
11.1
5.9
5.1
5.2
9.1
2.2
6.4
2.3
Hydrogen energy
2.4
2.2
0.2
0.7
-
Group operating (loss)/profit before amortisation,
impairments and exceptional administration charges
(2.6)
(1.5)
(2.4)
2.2
1.0
Group loss before taxation
(4.0)
(5.0)
(20.0)
(0.5)
(1.7)
14
Chesterfield Special Cylinders
£ million
Revenue
Oil and gas
Defence
Industrial
Hydrogen energy
Gross margin
Operating profit/(loss) before amortisation, impairments
and exceptional administration charges
Profit/(loss) before taxation
2022
Restated
2021
2020
2019
2018
17.6
18.9
11.2
13.9
9.9
1.0
13.5
0.7
2.4
0.3
11.1
5.3
2.2
1.0
5.1
4.9
0.2
2.2
9.1
1.9
0.7
1.4
6.4
2.1
-
29%
30%
26%
36%
35%
0.4
(0.1)
2.0
0.8
(0.1)
(1.0)
2.1
2.1
1.1
1.0
Chesterfield Special Cylinders (CSC) delivered revenue of £17.6 million (FY21: £18.9 million) and an adjusted
operating profit of £0.4 million (FY21: £2.0 million). A restatement of the Consolidated statement of comprehensive
income for the year ended 2 October 2021 has been undertaken to correct an error which related to the incorrect
treatment of certain contract accounting transactions (see Note 2).
Revenue in the first three quarters of the year reflected the expected timing of major defence contract placement and
phasing of contract milestones. However, the fourth quarter was significantly below expectations due to a
combination of unexpected customer delays, supply chain disruption and the unplanned outage of key equipment,
delaying significant revenue into the first half of FY23. Similarly, several Integrity Management deployments planned
for the second half were delayed by customers into FY23 and FY24. Input costs from raw materials and energy-
intensive processes increased significantly throughout the year, further impacting margins where the costs could not
be recovered through price escalations and permitted contract variations within the period.
The operating profitability for CSC in FY22 was £1.2 million below the value that was notified in the trading update on
15 November 2022 as a result of the correction of an historic incorrect application of IFRS 15, the accounting
standard that deals with the accounting treatment of long-term customer contracts. This is detailed in Note 2 to the
financial statements.
On 6 February 2023, the Group announced the major contract placement by a major UK naval customer for pressure
vessel manufacturing for a new construction project. Worth £18.2 million, this contract is the largest ever awarded to
CSC. Progress has commenced against early contract milestones and pressure vessels will be delivered to the
customer over the next three years.
Major contracts with naval customers, both in the UK and in France, underpinned a strong order book of £22.2 million
at the end of January 2023 and will contribute to significant revenue and margin recovery in FY23. The opportunities
pipeline provides good visibility of future UK and overseas navy new construction and refit programmes.
Demand for Integrity Management field services increased steadily through the first half of the year and was
anticipated to grow further throughout the second half. However, the postponement of several naval vessel
deployments from the second half into FY23 and FY24 resulted in full-year revenue of £1.8 million (2021: £1.5
million).
15
Growth opportunities for Integrity Management services remain strong in key markets of defence, offshore services,
nuclear and industrial ground storage. Enquiry levels from offshore services customers increased sharply at the end
of the first quarter of FY23, driven by growing activity in the market to support offshore oil and gas projects.
Revenue from hydrogen projects in the year was £2.4 million (2021: £2.2 million), reflecting a pause in order
placement by customers during the year due to supply chain issues that affected lead times for manufactured
components and the uncertainty due to cost inflation.
Whilst increasing lead times for electrolysers and hydrogen compression systems are affecting refuelling and
decarbonisation project schedules, the opportunities pipeline continues to develop for hydrogen ground storage and
road trailers in the UK and Europe. The growing road trailer opportunity reflects the increasing demand for the
flexible and cost-effective transportation of hydrogen, in which CSC is well placed to deliver solutions for established
operators and new entrants.
Throughout the year, CSC continued to raise the profile of its hydrogen capabilities, products and services during
events and exhibitions held in France, Spain, Germany and the UK. Based on market evaluation and evolving
customer requirements, we are developing solutions for higher storage pressures and efficient road trailer designs,
while in-situ testing and factory reconditioning of hydrogen storage and transportation systems present additional
exciting growth opportunities for CSC. Operational improvements in the Sheffield facility have delivered increased
capacity and efficiency for hydrogen road trailer assembly, reconditioning, inspection and testing services and we
remain focused on delivering improved revenue and contract margins from these growth areas.
Precision Machined Components
£ million
Revenue
Oil and gas
Industrial
Gross margin
Operating (loss)/profit before amortisation, impairments
and other exceptional charges
Loss before taxation
2022
2021
2020
2019
2018
7.3
6.9
0.4
18%
(1.1)
(1.3)
6.4
5.7
0.7
11%
(1.6)
(2.3)
14.2
14.4
11.2
13.9
14.0
11.0
0.3
17%
(0.7)
(4.3)
0.4
29%
0.2
33%
1.9
1.5
(0.3)
(0.3)
Precision Machined Components (PMC) delivered revenue of £7.3 million (2021: £6.4 million) and an adjusted
operating loss of £1.1 million (2021: £1.6 million loss).
As expected, and reflecting an increased oil price, the PMC order book built during the year and by the end
of September 2022 had reached its highest level since May 2020. However, an unexpected temporary slowdown in
order placement over the summer period, together with supply chain delays and cost increases, resulted in lower
revenue and a significantly greater adjusted operating loss than anticipated for the full year.
Order intake recovered later in the fourth quarter of FY22 and further strengthened during the first half of FY23.
Divisional order intake of £4.3 million in March 2023, the division’s highest ever monthly order intake, and £1.1 million
in April 2023, underpinned a closing order book of £7.6 million at the end of April 2023, the highest ever order book
level for the division (April 2022: £2.2 million). As expected, the division returned to profitable trading in the second
quarter of FY23.
At Roota Engineering, the demand for subsea well intervention tools, valve assemblies and control module
components is expected to grow further as major OEM customers including Aker, Expro, Halliburton and
Schlumberger, plus several new specialist customers, continue to report a stronger oil and gas market outlook for
2023 and are investing heavily in their global manufacturing capacity to support growth in oil and gas production,
principally from South America, West Africa, US Gulf of Mexico, Middle East and North Sea regions. The recovery of
revenue and profitability has been supported by successful recruitment, skills development and specialist
engineering software, increasing the capacity to meet the growing demand and extended product range for a broader
customer base.
16
At Al-Met, a slower than expected recovery in demand for production drilling and flow control components and a
higher cost base driven by the necessary protection of core capabilities and retention of the skilled workforce resulted
in a loss for the year. However, OEM customers, Schlumberger and Baker Hughes are forecasting a strong and
sustained recovery in demand for subsea trees and flow control components throughout 2023 and beyond. Order
intake levels for these components increased steadily through the first half of FY23, with Baker Hughes placing their
first significant orders for precision choke components since June 2020, as major subsea and surface production
engineering contracts restart.
Al-Met has remained focused on the improvement of operational performance, efficiency, and competitiveness in
readiness for the recovering order book and is well positioned amongst very few European competitors. On 27 March
2023, the Group announced that Al-Met had been awarded a record £3.0 million order from an established
international OEM customer for the supply of flow control components and subassemblies used in high-pressure
extreme service oil and gas applications.
This unprecedented order for Al-Met and the continuing momentum in PMC order intake underpin the FY23 full-year
outlook for the division and also provide substantial order book coverage and visibility for the first half of FY24.
On 15 November 2022, the Group announced that an improved trading environment and outlook created the
potential opportunity to divest PMC activities in order to raise funds to progress strategic priorities, particularly within
Chesterfield Special Cylinders. The project is underway and is progressing as planned with support from advisors,
KPMG LLP. All options under consideration will seek to deliver optimum shareholder value.
Financial review
Prior year restatement
The comparative period financial statements for 2021 have been restated to correct an incorrect application of IFRS
15, ‘Revenue from Contracts with Customers’. The restatement impacts the timing, but not the overall quantum, of
profits from multi-year contracts and has no cashflow impacts (either quantum or timing). An explanation of the
restatement and tables showing the impact on the comparative period financial statements is included in Note 2 to
the financial statements.
Financing and cash flow
Operating cash outflow before movements in working capital was £2.2 million (2021: £1.0 million outflow, restated).
After a net working capital inflow of £3.0 million (2021: £5.1 million outflow, restated), cash generated from
operations was £0.8 million (2021: £6.1 million used by operations). Key movements within working capital include
an inflow of £0.9 million of deferred PAYE and VAT due to HMRC, in order to preserve cash flow in the final quarter
of the year.
Cash outflows in the year in respect of exceptional administration costs (see Note 6) were £0.8 million (2021: £0.6
million).
Cash inflow from investing activities includes proceeds of £1.6 million from the sale and leaseback of the Roota site
in July 2022.
Central costs
Unallocated central costs (before exceptional administration costs) were £2.0 million (2021: £1.9 million). In respect
of the Group’s various share option plans there was a net cost in the year of £0.1 million (2021: £0.1 million).
Asset impairments and amortisation
The Group tests annually for impairment, or more frequently if there are indicators that intangible and tangible fixed
assets might be impaired. The difficult general economic environment and the recent uncertainties in the oil and gas
market, PMC’s key end market, are considered to be an indicator that the carrying value of our intangible and
tangible assets in PMC and CSC, the Group’s cash generating units (CGU), may be impaired.
The Group has considered a range of economic conditions for the divisions over the next three years. These
economic conditions, together with reasonable and supportable trading assumptions, have been used to estimate the
future cash inflows and outflows for both divisional CGUs over the next three years. The assumptions underlying
these forecasts are detailed in Note 14 to these financial statements.
17
The review concluded that no impairment was required in these financial statements. Amortisation costs were £0.1
million (2021: £0.2 million).
The Group holds freehold land and buildings, including CSC’s main facility at Meadowhall Road, Sheffield. As part of
discussions with the Group’s bankers during the year, the Directors obtained two valuations from two independent
chartered surveyors of this this freehold land and buildings, which indicated that no impairment of this asset was
required.
Exceptional administration costs
Exceptional administration costs of £1.0 million principally included costs associated with the refinancing of the
Group’s banking facilities of £0.3 million, the final costs of £0.2 million related to ongoing software licencing for the
cancelled ERP system impaired in the prior financial year, and other legal and associated costs relating to the
surrender of property leases with non-utilised sites under tenancy arrangements of £0.3 million. There were other
costs of £0.2 million for several other matters that included a historical settlement dispute and an obsolete stock write
off, both in the CSC division.
Taxation
The tax charge for the year was £0.1 million (2021: tax credit £0.8 million). The current year tax charge was impacted
by a £0.6 million under provision in respect of the prior year (2021: over provision £0.1 million).
Corporation tax refunded in the year totalled £0.1 million (2021: £nil). Taxes relating to overseas territories are
minimal.
Foreign exchange
The Group now has no material exposure to movements in foreign exchange rates related to both transactional
trading and translation of overseas assets and liabilities.
In the year under review, the principal exposure which arose from trading activities was to movements in the value of
the Euro and the US Dollar relative to Sterling. As the Group companies both buy and sell in overseas currencies,
particularly the Euro and the US Dollar, there is a degree of natural hedging already in place. Where appropriate, and
where the timing of future cash flows are able to be reliably estimated, forward contracts can be taken out to cover
exposure.
Loss per share and dividends
Basic loss per share was 13.0 pence (2021: 14.8 pence). Adjusted loss per share was 10.2 pence (2021: 4.9 pence).
No dividends were paid in the year (2021: nil) and no dividends have been declared in respect of the year ended 1
October 2022 (2021: nil). Distributable reserves in the parent company totalled £6.3 million at year end (2021: £8.6
million).
Statement of financial position
Intangible assets (at net book value) decreased by £0.1 million to £nil (2021: £0.1 million). Amortisation in the year
was £0.1 million (2021: £0.2 million).
Net current assets (being current assets less current liabilities) decreased to £3.0 million (2021: £5.2 million,
restated). Non-current liabilities of £2.8 million (2021: £3.6 million) have decreased by £0.8 million, as a result of the
reduction in lease liabilities, deferred taxation liabilities and other payables.
Net assets decreased by 24% to £12.1 million (2021: £16.0 million, restated) and net asset value per share
decreased to 39 pence (2021: 56 pence).
Bank facility, borrowings and liquidity
Net debt at 1 October 2022 was £3.5 million (2021: £5.0 million). The decrease was driven primarily by cash
proceeds of £1.6 million from the sale and leaseback of the Roota Engineering site in July 2022. This enabled the
repayment of £2.4 million of the Group’s drawings under the revolving credit facility (RCF) reducing drawn debt to
£2.4 million at the year end (2021: £4.8 million).
In October 2022, the Group's RCF was amended and its facility term was extended from September 2023 to March
2024, with the facility reducing from £2.4 million to £1.9 million in March 2023 and then £0.9 million in September
2023. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested quarterly, recommenced on the
first testing date of 30 September 2022 through to the end of the facility. The September 2022 test period was
18
waived. The December 2022 test period was deferred until January 2023 and subsequently waived. The financial
covenant tests for March and June 2023 were amended to reflect the impact of the IFRS 15 contract accounting
restatement noted above.
Ernst & Young LLP continues to support the Group with the review of funding options to replace the Lloyds Bank
facility with new arrangements that provide increased liquidity, greater flexibility and the required working capital to
support the Group’s strategic plans. We expect to complete the refinancing project in the second calendar quarter of
2023.
On 15 November 2022, the Group announced the results of a Placing and Retail Offer. The £2.1 million net proceeds
are supporting short term working capital requirements, whilst longer term financing options are progressed.
Going concern
The Group currently has a very strong order book reflecting both the recent award of a major £18.2 million, multi-year
contract for a major UK naval new construction programme, and the recent significantly improved trading in the
Precision Machined Components division resulting in an order book of £7.6 million at the end of April 2023, the highest
ever order book level for the division. Forecasts have been prepared covering the sixteen month going concern period
and these demonstrate that the Group can operate within its existing financial facilities and has sufficient headroom in
its financial covenants. While the level of cash reserves is relatively low for the period to the end of July 2023, the level
is forecast to improve substantially for the remainder of the forecast period. However, the possibility of delays to the
performance on the large naval contract in CSC, particularly if combined with other trading downsides, and the relative
lack of headroom and flexibility in the Group’s fully drawn facility with Lloyds Bank for which a replacement financing
is not yet in place, gives rise to material uncertainties, as defined in the accounting standard, relating to events and
circumstances which may cast significant doubt over the Group’s ability to continue as a going concern.
However, taking into account the very low likelihood of material delays in the large naval contract, the ability of the
Group to mitigate, partially or fully, the impact of any such delays, the Board’s expectation that it will obtain
alternative financing to replace the Lloyds Bank facility in the second calendar quarter of 2023, and the ongoing work
to explore longer term opportunities to strengthen the Group’s balance sheet and cash position, the Directors
consider that the Group has sufficient financial headroom to be able to continue its operations for the foreseeable
future. Therefore, these financial statements have been prepared on a going concern basis.
Outlook
Despite the disappointing results in FY22, the Board is confident in underlying market opportunities and trading
conditions and expects a return to profitability and cash generation in FY23.
The strong defence order book for UK and overseas naval contracts underpins confidence in FY23 and FY24
performance for CSC. Despite delays in the hydrogen energy supply chain, opportunities for the supply of new
hydrogen storage and road trailers continue to develop in the UK and Europe, while in-situ testing and factory
reconditioning of hydrogen storage and transportation systems present exciting growth opportunities for Integrity
Management services beyond existing defence, offshore and industrial markets.
Following a return to profitability for PMC at the end of the second half of FY23, increasing demand from OEM
customers and the continuing momentum in order intake underpin the FY23 full-year outlook and provide substantial
order book coverage and visibility for the first half of FY24. As previously announced, this improved trading
environment and outlook has created a potential opportunity to divest PMC activities in order to fund strategic
priorities, particularly within Chesterfield Special Cylinders. All options under consideration for PMC will seek to
deliver optimum shareholder value.
The Board is confident in meeting FY23 market expectations and excited about the opportunities and prospects for
the business in the medium and longer term.
Chris Walters
Chief Executive
22 May 2023
19
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
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 adjusted
operating profit divided by revenue. The
Group has a target of at least 15% return
on revenue, although this has been very
negatively impacted by the Covid-19
pandemic, the war in Ukraine and global
economic uncertainties in the last three
years.
The measured net debt ratio is specific to
the covenants contained in 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 –
although this has been very negatively
impacted by the reduced profitability in
the last three years.
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. This measure
has been very negatively impacted by
the depressed oil and gas market, the
key end market for PMC, in the last three
years
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.
Net debt ratio
(for covenant
purposes)
Order intake-
PMC
Order intake-
CSC
20
Measured performance (continued)
Shareholders
Adjusted
EPS
Adjusted earnings/(loss) per share is
used as a measure of shareholder
return. Details of the calculation of
adjusted EPS can be found in Note 11 of
the Notes to the consolidated financial
statements.
Corporate Social responsibility
Health and
safety
Safety performance and trends are measured through reported data on accidents, near misses
and safety observations.
Performance is reviewed periodically by management and the Board.
Environment
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.
21
Corporate governance
The Board endorses the highest standards of corporate governance and has adopted the Quoted Companies
Alliance Corporate Governance Code (the “QCA Code”). The Board will comply with, or explain any departure from,
the ten principles of the QCA Code and their application.
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.
Compliance with each of the ten principles set out in the QCA Code is summarised below:
Principle and Board response
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
Group’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 Group’s
strategy and business model are clearly set out on page 9 of these financial statements and key challenges to the
business are detailed in the Annual Report.
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 and Chief Financial Officer)
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.
On his appointment on 1 April 2022, the new Chair consulted with major shareholders, seeking their feedback on key
strategic matters.
The Annual General Meeting presents an opportunity for the Board to meet with private investors.
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, having regard to environmental, social and governance matters and all its
stakeholders. The Group’s stakeholders include employees, customers, regulators, 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 Group’s Audit and Risk Committee meets regularly throughout the year to review business risk and oversees
the Group’s approach to risk management. Emerging risks and the management of key risks are reported to the
Board.
Acknowledging the increasing threat to cyber security, the Group recruited skills and resources to ensure effective
risk management and protection in this critically important area. In December 2022, the Board reviewed the Group’s
cyber security measures and discussed an independent Cyber Maturity Assessment and associated action plan.
The risk reporting model, set out on pages 25 to 29 of these financial statements, includes the key risks to the
Group’s strategy.
5. Maintain the Board as a well-functioning, balanced team led by the Chair
The Board currently comprises an Independent Non-Executive Chair, Nick Salmon, who joined the business in April
2022, a Senior Independent Non-Executive Director, Tim Cooper, who joined the business in January 2020, an
Independent Non-Executive Director, Mike Butterworth who joined the business in June 2020 and a Chief Executive,
Chris Walters, who joined the Group in September 2018.
22
Brian Newman, who was appointed to the Board as an Independent Non-Executive Director in September 2015 and
became a Senior Independent Non-Executive Director in June 2019, stepped down from the Board in March 2022.
Sir Roy Gardner, who was appointed to the Board as an Independent Non-Executive Chairman in January 2020,
also stepped down from the Board in March 2022 and was succeeded by Nick Salmon, Independent Non-Executive
Chair. James Locking joined the business in January 2019 and was appointed to the Board in May 2021 as Chief
Financial Officer. As announced in November 2022, James stepped down from the Board and left the Company in
early March 2023.
Steve Hammell has been appointed as the new Chief Financial Officer and will join the Group and the Board in May
2023. Richard Staveley, a representative of Harwood Capital LLP, will also join the board in May 2023.
Biographies of all Board members are published on the Group’s website.
The Board structure ensures that no individual or group dominates the decision-making process. The Non-Executive
Directors are considered to be independent of management and from any business relationship which could
materially interfere with their independent judgement. The Chair and Senior Independent Non-executive Director are
available to shareholders if they have concerns regarding the functioning of the Board.
The Nominations Committee is responsible for monitoring and reviewing the membership and composition of the
Board, including the decision to recommend the appointment, or to re-appoint a director.
The Company’s Articles of Association require that at each Annual General Meeting, any director then in office who
has held office for three years or more will retire, but may, if eligible, offer themselves for re-election. However, in
line with best practice, all directors will retire and stand for re-election at each Annual General Meeting.
The Board meets regularly with no fewer than seven meetings held in each financial year. The Chair ensures that all
directors are properly briefed on issues arising at Board meetings. The Group uses collaboration software for its
Board reports which facilitates the secure and timely distribution of information to the Board.
The Board held twelve meetings during the financial year ended 1 October 2022 and attendance was 100% for all
meetings.
6. Ensure that between them the Directors have the necessary up-to-date experience, skills and
capabilities
The Board is satisfied that it 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 Nominations
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 various regulatory and corporate governance matters.
7. Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement
The Board did not carry out a Board evaluation during 2022, as a new Chair was appointed in April and it was felt
that it would be beneficial to allow the new Chair time to familiarise himself with the operation of the Board and its
Committees before leading an evaluation process towards the end of 2023, once the new CFO has settled in.
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
23
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 is continually
reviewed and relevant to the business and its stakeholders falls to the Audit and Risk Committee.
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 and Chief Financial Officer meet 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 Group’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 we endeavour to adopt best practice, where relevant and
practical. From time to time the executives attend private investor events and welcome investors to the
manufacturing facilities.
24
Risks & uncertainties
The principal risks identified by management are described below.
Risk and impact
Status and management strategy to mitigate
Change
1. Global economic conditions and market volatility
Macroeconomic factors
● The Group maintains close contacts with its
Whilst the beginning of the financial year saw an
improvement in economic sentiment following the
lifting of the UK’s Covid 19 restrictions in
February 2022, the economic situation
deteriorated as the year progressed. The war in
Ukraine, post-Covid 19 supply chain constraints,
rising global interest rates and high levels of
global inflation (notably, for energy) have slowed
global growth in the second half of the year and
reduced forecast growth for the next few years.
For the PMC division order levels for most of the
year were depressed compared to pre-pandemic
levels. There has been some recent increase in
order intake for our PMC businesses during Q4
FY22 and the first half of FY23 and customers
are reporting a stronger outlook for the oil and
gas market as we head into the remainder of
FY23 and beyond.
Market sectors
The Group operates in and is therefore impacted
by the macro conditions in the oil and gas,
defence, industrial 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.
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.
customers to ensure we have a full understanding
of their likely future orders. This is particularly
important for the PMC division given its economic
sensitivity and the short-term nature of its order
book.
● The Group’s cost base is under regular review to
ensure that it appropriately matches customer
demand whilst ensuring that the high level of
technical skills and know-how is maintained in the
business.
● Through the potential divestment of PMC and the
implementation of new financing arrangements,
the Group is seeking to strengthen its financial
resilience.
● 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 in recent years
● The PMC businesses serve both production and
exploration in the oil and gas market, with
production being less volatile during a market
downturn
● Continued sales focus across the Group is aiming
to expand us into new market sectors, new
customers and new product lines
● 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
2. Governmental 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.
● 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
25
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.
● Changes to R&D tax credits for development
projects may reduce claims levels, increase
overall tax and increase project funding
requirements
Recent government policy has been to support
higher levels of spending on defence. However,
the Covid-19 pandemic and the recent energy
crisis 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.
● Given the considerable additional debt incurred
during the pandemic and the subsequent energy
crisis by HMG to fund business and employee
support and energy consumers, there have been
recent increases in business taxes introduced by
HMG, including significant increases in
Corporation Tax Rates. These higher taxes may
depress investment and, hence, demand for the
Group’s products
● The Group is accredited to international ISO
standards for HSE and has an established HSE
management system and site-based teams with
Group oversight
● Managers and appointed safety officers have
completed recognised HSE training
● Senior management monitors and reviews
divisional HSE performance during weekly and
monthly management meetings, taking actions to
address trends or key findings
● HSE performance is reviewed regularly by the
Board and HSE management maturity is reviewed
quarterly against target levels for each site
3. Markets 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 and supplier 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.
● Commercial management skills have been
recruited into the CSC business
● Authority for the approval of major contract terms
and conditions rests with the executive
management team or is delegated according to
Group policies
● Major contract performance is reviewed in senior
management meetings against time, cost and
quality goal
● Key account management is a focus across the
Group and we have a history of strong customer
relationships and customer retention
● The Group has a high dependence on a relatively
small number of customers and work continues to
expand the customer base in both divisions
● The growth of the hydrogen energy business in
the CSC division should result in lower customer
concentration away from the traditional defence
and industrial customer base
● Work undertaken to extend the PMC customer
base has resulted in a lower concentration at
Roota. Progress has been slower in Al-Met,
where one major OEM customer continues to
dominate the order book, while a second major
OEM is steadily increasing volume.
Supplier concentration in CSC division
●
The majority of seamless steel tube used in the
manufacturing of ultra-large high-pressure
cylinders has historically been sourced from two
key suppliers in mainland Europe.
Long-term supply and cooperation agreements
established with both suppliers during 2021
● Strengthened supplier management and
procurement activities through recruitment of
specialist supply chain management capability will
support the evaluation of alternative seamless
26
There are few alternative suppliers globally that
can match the cost, quality and lead times of
these two European steel tube mills. There could
be a significant disruption to the CSC business in
the event that one or both companies became
unable to supply tube.
tube supply to reduce the risks of single source
dependency
● Strategic collaboration with a key European steel
tube supplier to develop joint product and service
opportunities in target markets, including defence,
industrial bulk gas storage and hydrogen energy
In November 2021, one supplier announced
plans to close its German mill at the end of 2023,
while committing to meet demand from its
facilities and partners outside Europe.
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 still remains
a level of uncertainty in the UK and global
economic outlook and this has increased the
desirability of a more conservative and resilient
capital structure. The PMC division was loss-
making in both the current and prior year, albeit
recovering to profitability in Q2 FY23, and this
has resulted in significant pressure on financial
covenants included in the Group’s banking
facilities.
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.
5. Availability and use of key resources
Leadership
As a publicly listed SME, the Group has certain
roles that are key to governance and to the
strategic and operational leadership that is
required to deliver business performance and
growth. There is a high level of dependency on
key individuals and a requirement for depth and
resilience in leadership.
● The Group's Revolving Credit Facility (RCF) at
£2.4 million at the year end is fully drawn and the
facility term runs to March 2024. The facility
stepped down to £1.9 million in March 2023 and
then to £0.9 million in September 2023. Leverage
(net debt to adjusted EBITDA) and interest cover
covenants, tested quarterly, run through to the
end of the facility from December 2022
● Financial covenants contained within the RCF
have recently been amended in respect of the
tests at March and June 2023 to reflect the impact
of the IFRS contract accounting restatement
● During the year discussions have been held to
find an alternative refinancing partner, including
asset-backed lenders as well as high street
banking institutions. This project is progressing
with support from Ernst & Young LLP and is
expected to complete during the second calendar
quarter of 2023
● Other longer term sources of funding are also
being considered, including the potential disposal
of non-core operations and the refinancing of
freehold properties
Long-term finance products, including leasing, are
used for core debt e.g. capital investments
●
● Working capital levels, cash conversion and bank
covenant compliance are regularly monitored by
executive management and reported to the Board
● On 1 April 2022, Nick Salmon replaced Sir Roy
●
Gardner as Chair
In April 2022, the Group appointed a new Chief
Operating Officer, Chris Webster, who has
responsibility for the manufacturing operations at
the Chesterfield Special Cylinders, Roota
Engineering, Al-Met and Martract sites.
● On 15 November 2022, it was announced that
Chief Financial Officer, James Locking, would be
stepping down from the Board in early March
2023. On 17 January 2023, it was announced
that Steve Hammell was to be appointed as the
new Chief Financial Officer, joining the company
in May 2023.
In May 2023, Richard Staveley, a representative
of Harwood Capital LLP, will also join the Board.
●
27
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.
The Group needs 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.
Post Covid 19, the labour market has become
very tight in the UK with very low levels of
unemployment, substantial unfilled vacancies and
rising salary and wage costs
● 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 and
recognised industry qualifications
● Company policies and procedures are reviewed
annually and are incorporated in an Employee
Handbook given to all new starters
● Employee engagement surveys are periodically
undertaken to benchmark and assess progress in
employee engagement and development. The
most recent survey was undertaken in June 2021
and the next survey is due to take place in June
2023
● The Group regularly reviews its remuneration
arrangements to ensure that they remain
sufficiently competitive to attract the necessary
talent to the business
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.
● 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
6. Technology & innovation
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 remains
relatively immature and unproven.
Disruptive technologies
Technological advances in production processes
or materials may cause a reduction in demand for
the Group’s products.
Increased interest and use of composite (fibre-
polymer) cylinders presents a threat to the
demand for steel cylinders for high-pressure
hydrogen storage, which is a growth market for
CSC.
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,
●
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
● Research & Development Manager in CSC works
with customers and suppliers in the development
of progressive solutions for static and mobile gas
storage
● Collaborations with major steel tube suppliers are
supporting product and service development in
CSC
● Collaborations with academic and research
bodies are supporting the development of new
manufacturing and inspection processes
● 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
● CSC is promoting the efficiency, sustainability and
lower Total Cost of Ownership advantages of
steel over composite but accepts that both
technologies have a role to play in the hydrogen
energy market. CSC can integrate composite
cylinders into packages required by its customers
● Cyber security policies are overseen by the
Group’s Head of IT
● CSC has achieved Cyber Essentials Plus
accreditation, following an independent audit.
PMC sites are working towards accreditation
28
transact over the internet. Cyber-crime is a
growing risk for all businesses, recently
exacerbated by heightened political tensions
resulting from the war in Ukraine.
● The Group uses cloud storage with secure data
access
● All employees undertook mandatory cyber
security training during the year
Approval of the strategic report
The strategic report, as set out on pages 5 to 29, has been approved by the Board.
By order of the Board
Chris Walters
Chief Executive
22 May 2023
29
Report of the Remuneration Committee
The Remuneration Committee comprises at least two Non-Executive Directors and is chaired by Tim Cooper. The
Committee meets when necessary and is responsible for determining the remuneration packages of the Executive
Directors and the Chair. The remuneration of the Non-Executive Directors is set by the Board annually. Directors are
not involved in decisions relating to their own remuneration. All members attended the two meetings during the year.
The Committee meets not less than two times a year in a formal capacity and forms sub-groups to address specific
matters as necessary outside of these meetings. The Committee receives advice from PwC on current market
remuneration levels and practises.
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 9% of basic salary into individual money purchase pension schemes so long
as this is matched by a minimum of 7%, 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
2021 Value Creation Scheme
As reported last year, the Committee determined that it would be appropriate to introduce a new LTIP, the
Pressure Technologies plc Value Creation Scheme (the “VCS”). The VCS was designed, following consultation
with major shareholders, to provide a strong motivation to executive management to maximise the performance
of the Group in a manner that is closely aligned with the interests of the Company’s shareholders. Participants of
the plan include the Executive Directors and other senior managers, but not the Non-Executive Directors. The
first awards under this new plan were made on 18 January 2022 shortly after the announcement of the Group’s
results for the 52 weeks to 2 October 2021.
Awards under the VCS entitle participants to receive in aggregate up to a maximum of 5.5% of the market
capitalisation of the Group above a share price hurdle of £1.40. The share price hurdle was set at a level that
represented an increase of 89% on the share price as at the close of business on 17 January 2022. The
performance period for the awards is three financial years, commencing from the start of FY22 on 4 October
2021.
At the end of the performance period the awards will be settled in ordinary shares in the Company delivered in
the form of nil cost share options. 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 further aligned with
those of all other shareholders. A holding period of two years from the end of the performance period will apply
to the options and any shares pursuant to them, subject to the participant being permitted to sell shares to cover
any tax liabilities arising on exercise of an option. The maximum number of shares over which options can be
granted under the VCS is 1,708,694 shares representing 5.5% of the Company’s issued share capital as at 18
January 2022.
Each participant will be awarded a number of performance units for the purposes of the VCS. The number of
options granted to participants will be determined by dividing the number of performance units subject to their
award by the aggregate number of performance units subject to all awards (not including those which were
subject to Awards which have lapsed, unless those performance units are reallocated under new awards). The
aggregate number of performance units subject to the initial awards granted under the VCS on 18 January 2022
is 60, with a further 40 performance units available for future awards.
30
Report of the Remuneration Committee (continued)
Policy on remuneration of Executive Directors (continued)
d) Service contracts
All Executive Directors have rolling service contracts terminable on no more than one year’s notice.
Directors’ Remuneration
Particulars of Directors’ remuneration are as follows:
Salary
and
fees
£’000
30
33
30
40
40
215
140
528
Non-Executive:
Nick Salmon*
Sir Roy Gardner**
Brian Newman**
Tim Cooper
Mike Butterworth
Executive:
Chris Walters***
James Locking****
Total remuneration
Benefits
£’000
Bonus Pension
£’000
£’000
Total
2022
£’000
Total
2021
£’000
Employers’
national
insurance
2022
£’000
Employers’
national
insurance
2021
£’000
-
-
-
-
-
2
1
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13
13
30
33
30
40
40
217
154
544
-
65
40
40
40
219
64
468
4
4
4
4
4
39
18
78
-
6
4
4
4
33
7
58
* Nick Salmon was appointed as Non-Executive Chair on 1 April 2022. His annual fee is £60,000.
** Sir Roy Gardner and Brian Newman stepped down from the Board on 31 March 2022.
*** Chris Walters’ total remuneration in 2022 excludes £53,641 (2021: £28,221) of taxable accommodation and travel expenses and £13,298 (2021:
£10,013) of taxable allowance in lieu of employer pension contributions.
**** James Locking resigned as Chief Financial Officer with effect from 3 March 2023.
The number of Directors who accrued benefits under money purchase pension arrangements in the period was one
(2021: two).
Chris Walters’ salary for the year ending 30 September 2023 will remain at its current level of £215,000 per annum.
James Locking’s salary for the period from 2 October 2022 to 3 March 2023, the date of his resignation as Chief
Financial Officer, remained at its current level of £140,000 per annum.
No bonuses were paid in respect of the periods ended 1 October 2022 and 2 October 2021. Bonus arrangements for
the year ending 30 September 2023 have been agreed by the Remuneration Committee and will be based 100% on
the achievement of profit targets in the Group’s Budget for the year ending 30 September 2023. However, the
maximum amount payable under the bonus arrangements will not exceed the current policy limit of 50% of salary.
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 (2021: nil).
Directors’ Share Awards and Options
The Directors’ interests in the LTIP schemes are as follows:
Value Creation Scheme:
On 18 January 2022, the first awards under the VCS were made to the two executive directors, Chris Walters and
James Locking. Chris Walters received an award of 40 performance units, whilst James Locking received an award
of 20 performance units. Each award represents a grant of a conditional right under the VCS to receive a proportion of
5.5% of the market capitalisation of the Group above a share price hurdle of £1.40, such proportion being determined
by dividing the number of each participant’s performance units by the aggregate number of performance units issued.
31
Report of the Remuneration Committee (continued)
Directors’ Share Awards and Options (continued)
Outstanding at the beginning and end of the period
Chris
Walters
No.
James
Locking
No.
26,554
16,363
The Directors options granted in the period shown above relate to the Group’s SAYE scheme (see Note 26).
On behalf of the Board
Tim Cooper
Chair of the Remuneration Committee
22 May 2023
32
Directors’ report
The Directors present their report and the audited financial statements for the period from 3 October 2021 to 1
October 2022.
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. In addition to its UK based operation, CSC has one
German subsidiary, CSC Deutschland GmbH and one non-trading subsidiary in Pittsburgh, USA.
Precision Machined Components
The Precision Machined Components divisions consists of three trading businesses as follows:
Al-Met Limited (‘Al-Met’) whose principal activity is the manufacture of precision engineered valve and flow control
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.
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 53. The adjusted operating loss on ordinary
activities of the Group for the period ended 1 October 2022 amounted to £2.6 million (2021: £1.5 million adjusted loss
after restatement, see Note 2). The Group made a loss before taxation of £4.0 million (2021: £5.0 million loss before
taxation).
No interim dividend was paid in the period (2021: £nil). The Directors do not recommend the payment of a final
dividend (2021: £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 is the responsibility of the main Board and the
senior management at each Group company. The Group will comply with both the letter and the spirit of
relevant environmental regulations. Additionally, the Group will actively participate in industry and
Governmental environmental consultative processes
● The Group is committed to the continuous improvement of its environmental management system. 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 2022 (2021: nil).
33
Directors’ report (continued)
Substantial shareholdings
As at 28 February 2023, the following held or were beneficially interested in 3% or more of the Company’s issued
ordinary share capital:
Number of
shares
10,470,367
7,750,000
4,417,547
2,028,281
1,761,595
1,268,217
1,083,294
1,020,719
Percentage of
issued share
capital owned
27.08%
20.04%
11.42%
5.25%
4.56%
3.28%
2.80%
2.64%
Schroder Investment Management
Harwood Capital Management
Peter Gyllenhammer AB
Hargreaves Lansdown
James Sharp & Co
abrdn plc
A J Bell Group
Charles Stanley Group
Directors and their interests
The present Directors of the Company are set out on page 2.
During the year the following Directors held office:
NR Salmon (appointed 1 April 2022)
Sir RA Gardner (resigned 31 March 2022)
CL Walters
J Locking (resigned 3 March 2023)
BM Newman (resigned 31 March 2022)
TJ Cooper
MG Butterworth
Subsequent to year end, on 3 March 2023, James Locking stepped down from the Board.
All Directors were Directors throughout the period and since unless otherwise stated.
Ordinary shares
Nick Salmon
Chris Walters
Mike Butterworth
Tim Cooper
Share options
31 December
2022
No.
1 October
2022
No.
2 October
2021
No.
100,000
118,000
114,133
45,000
-
84,667
80,800
11,667
-
84,667
80,800
11,667
Details of the share options granted in the period are disclosed in Note 26 to the consolidated financial statements.
The Directors’ interests in share options are disclosed in the Report of the Remuneration Committee.
Financial instruments
The Group’s operations expose it to a variety of financial risks including the effects of changes in interest rates,
foreign currency exchange rates, credit risk and liquidity risk.
The Group’s principal financial instruments comprise cash and bank 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 23 to the
consolidated financial statements.
34
Directors’ report (continued)
Directors' indemnities
The Company maintains director and officer insurance cover for the benefit of its Directors which remained in force at
the date of this report.
Employee involvement
It is the policy of the Group to communicate with employees by regular briefing meetings conducted by senior
management. Career development is encouraged through suitable training and annual appraisals. The Group takes
the approach of maximising performance through the heightening of awareness of corporate objectives and policies.
Disabled persons
The Group gives full and fair consideration to applications for employment from disabled persons, where they have
the necessary abilities and skills for that position, and, wherever possible, will retrain employees who become
disabled so that they can continue their employment in another position. The Group engages, promotes, and trains
staff on the basis of their capabilities, qualifications and experience, without discrimination, giving all employees an
equal opportunity to progress.
Going concern
The financial statements have been prepared on a going concern basis. The Group and 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 25 to 29. The Financial Reporting
Council issued its “Annual Review of Corporate Reporting 2020/21” in October 2021. The Directors have considered
this when preparing these financial statements.
On 21 October 2022, the Group's Revolving Credit Facility (RCF) with Lloyds Bank was amended and its facility term
was extended from 30 June 2023 to 31 March 2024, with the facility reducing from £2.4 million to £1.9 million on 31
March 2023 and then to £0.9 million on 30 September 2023. Leverage (net debt to adjusted EBITDA) and interest
cover covenants, tested quarterly, recommenced on the first testing date of 30 September 2022 through to the end of
the facility. The next testing date is 30 June 2023. Final repayment of this facility is required on 31 March 2024.
Management have produced forecasts for the period up to September 2024 for all business units, taking account of
reasonably plausible changes in trading performance and market conditions, which have been reviewed by the
Directors. In particular, the forecasts reflect both (i) the award of a major, multi-year contract for the Chesterfield
Special Cylinders division to supply air pressure vessels for a major UK naval new construction program, which was
announced on 6 February 2023, and also (ii) the recent significantly improved trading in the Precision Machined
Components division as oil and gas markets recover, following unprecedented order intake levels which have
resulted in an order book of £7.6 million at the end of April 2023, the highest ever order book level for the division.
The base case forecast demonstrates that the Group is projected to:
generate profits and cash in the current financial year and beyond:
has headroom in financial covenants over the period up to the expiry of the RCF on 31 March 2024, and;
generates sufficient cash to repay the tranches of the RCF on 30 September 2023 and 31 March 2024 and
has sufficient cash reserves beyond 1 April 2024 to manage without the RCF or an alternative financing
facility. While the level of cash reserves is relatively low for the period to the end of July 2023, the level is
forecast to improve substantially for the remainder of the forecast period.
The Group has also developed downside scenarios, which include consideration of the recent track record of not
always achieving budgets. The downside scenario demonstrates the Group’s dependence on the performance of
large contracts (for example the large naval contract) noted above due to their materiality to the Group’s overall
results. Management have modelled the downside scenario based on reasonably possible delays in the large naval
contract. By their nature, the achievement of performance milestones under these types of contract can be subject to
uncertainties, and delays have occurred to similar contracts in the past. These uncertainties include in-house
operational delays and inefficiencies, delays in the supply of material and components by suppliers, and delays in the
performance of work by subcontractors. The Group often has very limited control of the latter two factors. The
achievement of performance milestones enables the Group to recognise revenue and profits under the contract and
typically initiates invoicing to, and subsequent cash collection from, the customer.
35
Directors’ report (continued)
As a result, these delays, whilst typically not impacting the financial performance of the contract over its entire duration,
can lead to material delays in the timing of profit recognition and cash receipts between periods. Given the size of the
particular naval contract, any delays and unforeseen events could have a material impact on the Group’s cash reserves
and covenant compliance, particularly in the first three months of the forecast period when the level of cash reserves
is relatively low.
In the event of delays in the contract, the Group would look to mitigate the impact, partially or fully, by pulling forward
contracted work from other customers, and through normal working capital management and other cash preservation
initiatives. It should also be noted that work on this contract has already commenced and, to date, no material problems
or delays have arisen and the contract is progressing in line with our contractual obligations. The contract has also
largely passed through the phase in which the supply of materials and components and the use of third-party
contractors, over whom the Group has significantly less control, is at its highest. Nonetheless, this remains a key risk
for the business and management are exploring financing options to provide the required flexibility in the event of such
downside scenarios.
Given the expiry of the RCF on 31 March 2024 and the step down in its quantum in September 2023, the Group is
currently exploring several actions to strengthen the Group and the Company’s financial position. In particular, the
Group is currently working with an advisor to support the Group’s review of funding options, including asset-backed
lenders as well as high street banking institutions, in order to replace the Lloyds Bank RCF with new arrangements
that will provide the Group with increased facility headroom and flexibility. These discussions are ongoing and
management expect this to complete in the second calendar quarter of 2023. In addition to pursuing refinancing
opportunities, the Group is also currently exploring other longer-term opportunities to strengthen the Group’s balance
sheet and cash position, including divesting of non-core activities and the refinancing of the Group’s freehold property
at Meadowhall Road, Sheffield.
Other factors which could negatively impact the forecasts include:
Failure to win additional contracts in the Chesterfield Special Cylinders division for hydrogen energy projects
due to market factors outside the control of the Group
Weaker revenue from Integrity Management deployments due to customer delays; and
The recent improvement in the Precision Machined Components divisional revenue and order book not
continuing going forward due to weaker than expected oil and gas market conditions.
The Group believes that these factors are individually less likely to be material to the achievement of the forecasts than
potential delays in the large naval contract, but in the event that they occur together with large naval contract delays
they may have a negative impact on covenant compliance and cash flow at certain test dates in the forecast period.
The possibility of material delays to the performance of contracts (naval contract in particular) and a replacement
financing facility not yet being in place gives rise to material uncertainties, as defined in accounting standards, relating
to events and circumstances which may cast significant doubt about the Group’s and Parent Company’s ability to
continue as a going concern and to realise its assets and discharge its liabilities in the normal course of business.
Reflecting management’s confidence in delivering large contracts and successfully replacing their finance facility, the
Group and Parent Company continue to adopt the going concern basis in preparing these financial statements.
Management have concluded that the Group and Parent Company will be able to continue in operation and meet their
liabilities as they fall due over the period to September 2024. Consequently, these financial statements do not include
any adjustments that would be required if the going concern basis of preparation were to be inappropriate.
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 UK-adopted International Accounting
Standards, in conformity with the requirements of the Companies Act 2006. 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.
36
Directors’ report (continued)
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 UK-adopted International Accounting Standards
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.
Auditor
A resolution to reappoint Grant Thornton UK LLP was approved at the Annual General Meeting on 31 March 2023.
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
On 21 October 2022, the Group's Revolving Credit Facility (RCF) was amended and its facility term was extended
from September 2023 to March 2024, with the facility reducing from £2.4 million to £1.9 million in March 2023 and
then £0.9 million in September 2023. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested
quarterly, recommenced on the first testing date of 30 September 2022 through to the end of the facility. The
September 2022 test period was waived. The December 2022 test was deferred until January 2023 and
subsequently waived. The covenants as at March and June 2023 have been amended to reflect the impact of the
IFRS 15 contract accounting restatement.
37
Directors’ report (continued)
On 15 November 2022, the Group announced that it was exploring longer term opportunities which included
potentially divesting the Precision Machined Components division, to strengthen the Group’s balance sheet and cash
position and support the strategic investment in the Cylinders division.
On 6 December 2022, 7,600,000 new ordinary shares with a nominal value of 5p each, were issued as part of a
fundraising which raised cash proceeds, net of expenses, of approximately £2.1 million. Of that total, £1.7 million was
allocated to the share premium account.
On 6 February 2023, the Company announced the major contract placement to one of the Company’s subsidiaries
by a major UK naval customer for pressure vessel manufacturing for a new construction project. Worth £18.2 million,
this contract is the largest ever awarded to a Group company. Progress has commenced against early contract
milestones and pressure vessels will be delivered to the customer over the next three years.
By order of the Board.
Chris Walters
Chief Executive
22 May 2023
38
Audit and Risk Committee report
Members and meetings
The Group’s Audit and Risk Committee (“the Committee”) is chaired by Mike Butterworth. The Committee’s members
are set out on the Group’s website. All members attended all three meetings during the year. The Committee meets
not less than three 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 auditor is Grant Thornton UK LLP (“Grant Thornton”). A resolution to reappoint Grant Thornton
was approved at the Annual General Meeting on 31 March 2023.
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 auditor and will ensure that auditor independence has not
been compromised.
The Committee formally met with Grant Thornton three times during the year (i) after the conclusion of the full-year
FY21 audit when the audit findings were presented, (ii) after the conclusion to their limited review of the FY22 interim
results and (iii) to approve the annual audit plan for the FY22 year end.
In order to ensure the independence of the external auditor, 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 (EU MAR) which came into effect from 3 July 2016.
Following the European Union (Withdrawal) Act 2018, on 31 December 2020, this was onshored into UK law.
Changes were made to ensure the onshored legislation (UK MAR) operates effectively in the UK.
39
Audit and Risk Committee Report (continued)
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:
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 25 to 29. 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 continued to see significant disruption to the business due to customer delays, supply
chain disruption and operational issues, particularly for the Chesterfield Special Cylinders (CSC) division which
experienced a significant reduction in activity in the last quarter whilst also experiencing the delay of a number of
Integrity Management deployments. The Precision Machined Components (PMC) division also experienced
continued depressed levels of trading, although it did see an improvement in order intake through the last quarter
and subsequently.
During the course of the year, an error was identified in the historic application of an accounting standard (IFRS 15)
which impacted the comparative period financial statements for FY21 and prior which resulted in a restatement being
required. The error was in respect of a small number of long-term defence contracts with one customer where the
contractual arrangements were non-standard. The identification of this error led to a significant delay in producing
the financial statements for FY22, which was exacerbated by resource issues both internally and with Grant
Thornton. Procedures have been put in place and resources strengthened to ensure that future contracts awarded
with similar contractual arrangements are correctly accounted for and that delays in producing the financial
statements do not repeat.
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 assistance in our discussions with the Group’s bankers.
40
Audit and Risk Committee Report (continued)
Contract accounting judgments and restatement
As explained more fully in our accounting policies on page 59, 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.
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 were in agreement with
the position adopted.
As noted above, during the year an error was identified in respect of the comparative period financial statements
arising from a historic incorrect application of IFRS 15, ‘Revenue from Contracts with Customers’ in respect of a
small number of long-term defence contracts. The Committee reviewed a paper from management explaining the
basis for the restatement and the impact on the comparative period financial statements and agreed with the
proposed treatment.
Going concern
The possibility of material delays to the performance of the large naval contract in CSC and a replacement financing
facility not yet being in place gives rise to material uncertainties relating to events and circumstances which may cast
significant doubt over the Group’s ability to continue as a going concern. However, including consideration as to (i)
the very low likelihood of material delays in the large naval contract, (ii) the ability of the Group to mitigate, partially or
fully, the impact of any such delays by pulling other contracted work forward or through normal working capital
management and other cash preservation initiatives, (iii) the Board’s expectation that it will be able to obtain
alternative financing to replace the Lloyds Bank RCF in the second calendar quarter of 2023, and (iv) the ongoing
work to explore longer term opportunities to strengthen the Group’s balance sheet and cash position, the Directors
believe the Group has sufficient financial headroom to be able to continue its operations for the foreseeable future.
The Directors believe that the Group is in a position to manage its financing and other business risks satisfactorily
and have a reasonable expectation that the Group will have adequate resources to continue in operation for at least
16 months from the signing date of these financial statements. 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, albeit with reference being made to the material uncertainty of the performance of the large
naval contract in CSC.
Asset impairment review – PMC and CSC divisions
PMC:
Ongoing uncertainties in the oil and gas market have had a significant negative impact on the PMC division in recent
years. Whilst activity levels have improved towards the end of FY22 and in the first half of FY23, these uncertainties
are considered to be an indicator that the carrying value of all intangible and tangible assets in the PMC division may
need to be impaired.
As part of this impairment review, management has considered a range of economic conditions for the sectors in
which the PMC division operates that may exist over the next three years. These economic conditions, together with
reasonable and supportable assumptions for as far as we have visibility, have been used to estimate the future cash
inflows and outflows for the PMC cash generating unit over the next three years. These forecasts have been
prepared by management and are based on a bottom-up assessment of costs and use the current and estimated
future sales pipeline. The forecasts used for years two to three assume revenue growth, along with a 1.9% long-term
rate of growth or inflation incorporated into the perpetuity calculation at the end of year three. A value in use
calculation has been calculated by applying a pre-tax discount rate of 18.0% to the cash flows in these forecasts. The
resulting value in use calculation indicated that no impairment was required in the current year. The Committee
considered this value in use calculation prepared by management, including the reasonableness of the underlying
assumptions, and confirmed the conclusion that no impairment was required.
CSC:
Trading performance in the fourth quarter was significantly below expectations due to a combination of unexpected
customer delays, supply chain disruption and the unplanned outage of key equipment, delaying significant revenue
into the first half of FY23. Similarly, several Integrity Management deployments planned for the second half were
delayed by customers into FY23 and FY24. Input costs from raw materials and energy-intensive processes increased
significantly throughout the year, further impacting margins where the costs could not be recovered through price
escalations and permitted contract variations within the period.
41
Audit and Risk Committee Report (continued)
Combined, the disruption to trading from external and internal factors is considered to be an indicator that the
carrying value of all intangible and tangible assets in the CSC division may need to be impaired.
As part of this impairment review, management has considered a range of economic conditions for the sectors in
which the CSC division operates that may exist over the next three years. These economic conditions, together with
reasonable and supportable assumptions for as far as we have visibility, have been used to estimate the future cash
inflows and outflows for the CSC cash generating unit over the next three years. These forecasts have been
prepared by management and are based on a bottom-up assessment of costs and use the current and estimated
future sales pipeline. These future sales include the impact of the award of a £18.2 million major defence contract
which was announced on 6 February 2023. The forecasts used for years two to three assume revenue growth, along
with a 1.9% long-term rate of growth incorporated into the perpetuity calculation at the end of year three.
A value in use calculation has been calculated by applying a pre-tax discount rate of 18.0% to the cash flows in these
forecasts. The resulting value in use calculation indicated that no impairment was required in the current year. The
Committee considered this value in use calculation prepared by management, including the reasonableness of the
underlying assumptions, and confirmed the conclusion that no impairment 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 95. The results of this year’s testing indicated that no impairment was
required either in respect 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, or Chesterfield Special Cylinders Limited that includes the operations of the Cylinders division.
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 no impairments were required.
Asset impairment review – freehold property
During the course of the year, in connection with discussions to amend and extend the Group’s banking facilities, the
Group obtained property valuations from two independent chartered surveyors, Lambert Smith Hampton and Knight
Frank, for the freehold property used by CSC at Meadowhall Road, Sheffield. As a result of this valuation, no further
impairment is required to the carrying value of freehold property. The Committee considered the valuation and the
calculation of the impairment and confirmed that no impairment was required.
Exceptional administration costs
The classification of Exceptional administration costs was considered by the Committee due to their nature and
value. For the current year, Exceptional administration costs included bank refinancing and related legal costs and
property costs associated with a former managed site. The Committee reviewed reports from management outlining
the accounting policy on the classification of Exceptional administration costs (set out on page 72) 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.
Other matters
The Group has operated a ‘whistleblowing’ policy and reporting 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.
Approved by the Board and signed on its behalf by:
Mike Butterworth
Chair of the Audit & Risk Committee
22 May 2023
42
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 52-week period ended 1 October 2022, which comprise the Consolidated statement of
comprehensive income, the Consolidated statement of financial position, the Consolidated statement of changes in
equity, the Consolidated statement of cash flows, the Company statement of financial position, the 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 UK-adopted international accounting standards. 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 1 October 2022 and of the group’s loss for the 52-week period then ended;
The group financial statements have been properly prepared in accordance with UK-adopted international
accounting standards;
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.
Material uncertainty related to going concern
We draw attention to the going concern section in the Accounting policies in the financial statements, which indicates
that at the reporting date, the group and parent company meets its day-to-day working capital requirements through
reliance on its available financing facilities. This facility was fully drawn as at 1 October 2022, and has been extended
through to 31 March 2024 with repayments scheduled throughout the forecast period and full repayment at the end
date. The facility is also subject to quarterly financial covenant tests. Management are currently engaged in a number
of activities to obtain replacement financing. Downside scenarios also include delays to large contracts, in particular
the naval contract, which could adversely impact going concern cash flow forecasts. The possibility of material delays
to the performance of contracts (the naval contract in particular) and a replacement financing facility not yet being in
place constitute material uncertainties which may cast significant doubt on the Group and the parent company’s
ability to continue as a going concern and, therefore, that the Group and Parent Company may be unable to realise
their assets and discharge their liabilities in the normal course of business. Our opinion is not modified in respect of
these matters.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Our evaluation of management’s assessment of the entity’s ability to continue as a going concern
Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the
going concern basis of accounting included:
43
Obtaining an understanding of how management prepared their base case and sensitised forecasts for the
period to September 2024;
Assessing the accuracy of management’s forecasting by comparing the reliability of past forecasts to
management’s actual results, and considering whether management’s historic forecasting accuracy impacts
the reliance we can place upon the forecasts provided;
Assessing the terms of the external debt held and challenging management’s assessment of covenant
compliance and repayments as they fall due throughout the forecast period;
Assessing the plausibility of the mitigating actions available to management to continue as a going concern
if downside sensitivities were to crystalise;
Performing arithmetical and consistency checks on management’s going concern base case model;
Assessing the timing of the naval contract and work performed post year end, including obtaining an
understanding of the cash profile of the contract; and
Assessing the adequacy of related disclosures within the Annual Report for consistency with management's
assessment of going concern and whether they are in line with the accounting standards.
Our responsibilities
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the group’s and the parent company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the
related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion.
Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or
conditions may cause the group or the parent company to cease to continue as a going concern.
The responsibilities of the directors with respect to going concern are described in the ‘Responsibilities of directors
for the financial statements’ section of this report.
Our approach to the audit
Overview of our audit approach
Overall materiality:
Group: £253,000, which represents 1% of the group’s revenue.
Parent company: £139,000, which is 1.1% of the parent company’s total assets,
capped at its component materiality.
A key audit matter for the Group and parent entity was identified as:
Going concern – same as previous period.
Key audit matters for the Group were identified as:
Inappropriate recognition of revenue - same as previous period; and
Impairment of non-current assets – same as previous period.
A key audit matter for the parent company was identified as:
Impairment of investments in subsidiaries and recoverability of intercompany
balances – same as previous period.
Our auditor’s report for the 52-week period ended 2 October 2021 included the
same key audit matters as reported above.
Scoping has been determined to ensure appropriate coverage of the group
significant risks, and key financial statement line items.
The coverage of key financial statement line items was:
Revenue 95% (2021: 75%)
We performed an audit of the financial information of five components using
component materiality (full-scope audit procedures). We performed specific-scope
audit procedures on a further two components using component materiality. We
performed analytical procedures on the financial information of the remaining three
group components using group materiality.
All audit work was performed by the group engagement team. There have been no
changes in scope from the prior year.
44
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. In addition to the matter described in the Material
uncertainty related to going concern section, we have
determined the matter(s) described below to be the key audit
matter(s) to be communicated in our report.
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
High
Potential
financial
statement
impact
Low
Low
Impairment of non-
current assets
Provisions
Contract assets
Contract
liabilities
Going
concern
Inappropriate
recognition of
revenue
Impairment of investment in
subsidiaries and intercompany
balances
Contract costs
Management
override of controls
Non-
contract
revenue
Trade
receivables
Cash and cash
equivalents
Extent of management judgement
High
45
Key Audit Matter – Group
How our scope addressed the matter – Group
Inappropriate recognition of revenue
We identified the inclusion of fraudulent transactions
within revenue, as one of the most significant assessed
risks of material misstatement due to fraud and error.
Revenue recorded in the financial statements is
£24,939,000 (2021: £25,284,000).
The group has entered into contracts with customers
which span the 1 October 2022 period end with varying
terms and degrees of complexity, generating revenue
‘over time’. The group also recognises revenue from
other income streams at a ‘point in time’.
There is a significant risk of fraudulent reporting due to
the judgemental nature of assessing revenue
recognised, using the ‘over time’ principles in
International Financial Reporting Standard (‘IFRS’) 15
‘Revenue from Contracts with Customers’ and the
motivation to meet market expectations. Management’s
assessment includes several estimates including:
Estimated total contract costs; and
Estimated stage of completion derived from the
milestones reached within a contract.
Relevant disclosures in the Annual Report and
Accounts 2022
Financial statements (Group): Accounting policies,
critical accounting judgements, stage of
completion on contracts.
Financial statements (Group): Note 1, Segment
analysis.
Impairment of non-current assets
We identified impairment of non-current assets as one
of the most significant assessed risks of material
misstatement due to error.
Non-current assets recorded in the financial statements
are £11,197,000 (2021: £13,201,000). There is a risk
that the carrying amount exceeds the recoverable
amount of these assets. The group’s two cash-
generating units (‘CGUs’), have suffered losses in the
period and there was a deterioration of the share prices
following the trading update on 27 September 2022,
both of which may be indicators of impairment.
As required by International Accounting Standard (‘IAS’)
36 ‘Impairment of Assets’, management performs an
impairment review where there is any indication that an
impairment has occurred. Recoverable amount is
assessed as the higher of value-in-use or fair value less
costs to sell. Management have determined that value-
In responding to the key audit matter, we performed
the following audit procedures:
Assessed whether the group’s accounting
policies for revenue from contracts are in
accordance with the financial reporting
framework, IFRS 15;
Tested a sample of contracts to original signed
agreements;
Performed procedures over management’s
contract forecast models, testing mathematical
accuracy and agreeing amounts and terms to
underlying contracts;
For a sample of contracts, recalculated revenue
recognised over time using the input method;
Made enquires to obtain an understanding of
their process for estimating cost to complete.
This was then compared to the current progress
of the contract;
Compared costs expected with post year end
results and tested a sample of costs to
supporting evidence;
Tested the historical accuracy of forecasting by
comparing final outturn of completed contracts
to forecasts at previous year end;
For contract liabilities, using the sample selected
through our revenue testing, we confirmed that
there was a contract liability balance based on
contractual terms, recalculated the contract
liability balance and agreed inputs to supporting
documentation, such as invoices raised, and
cash received; and
For performance obligations recognised at a
point in time, tested a sample to evidence of
completion of those performance obligations.
Our results
Based on our audit work, we did not identify any
material misstatement or fraudulent transactions in the
revenue recognised in the period ended 1 October
2022.
In responding to the key audit matter, we performed
the following audit procedures:
Assessed whether the accounting policy for
impairment of non-current assets is in accordance
with IAS 36, and whether the accounting policy
had been applied consistently through our
assessment of the impairment models;
Assessed the appropriateness of the CGUs
identified and the allocation of assets and
cashflows to these CGUs;
Assessed the integrity of the impairment models
by testing the mechanical and mathematical
accuracy;
Obtained an understanding of the process used
by management to determine the discount rates,
and using our internal experts to evaluate those
rates against their expectations and industry
norms;
46
Key Audit Matter – Group
How our scope addressed the matter – Group
in-use represents the recoverable amount. This involves
management making several key judgements.
Assessed the appropriateness of any changes to
assumptions since the prior year;
The key judgements in assessing non-current assets for
impairment include:
The growth rates applied throughout the cash flow
and in the terminal year, due to the sensitivity of
these assumptions to changes; and
The discount rate applied in the discounted cash
flow calculations, due to the sensitivity of these
assumptions to changes
The allocation of corporate assets to the
appropriate cash generating unit due to the impact
this could have on the carrying value of the asset
base.
Relevant disclosures in the Annual Report and
Accounts 2022
Audit and risk committee report
Financial statements (Group): Accounting policies,
critical accounting judgements
Financial statements (Group): Note 14, Property,
plant and equipment.
Performed sensitivity analysis on management’s
impairment model and own sensitivities;
Challenged the cash flow forecasts and growth
rates with reference to historical forecasts and
actual performance to assess management’s
ability to forecast accurately;
Engaged our internal valuations specialists to
independently calculate a reasonable range for
both the discount rate and long-term growth rate
assumptions used within the value in use
calculations; and
Assessed the adequacy of the disclosures
included within the financial statements for
compliance with IAS 36.
Our results
Based on our audit work, we did not identify any
material misstatement due to error in the impairment
of non-current assets as at 1 October 2022.
Key Audit Matter – Parent company
Impairment of investments in subsidiaries and
recoverability of intercompany balances
We identified impairment of investments in subsidiaries
and recoverability of intercompany receivables as one of
the most significant assessed risks of material
misstatement due to error.
Investments in subsidiaries are recorded in the financial
statements, at £5,770,000 (2021: £5,770,000) and
intercompany receivables are recorded in the financial
statements at £3,6930,000 (2021: £4,991,000). There is
a risk that the carrying amounts exceed the recoverable
amounts of these investments and intercompany
balances.
The PMC and CSC subsidiaries both suffered losses in
the period which may be an indication of impairment.
As required by IAS 36, management perform an
impairment review where there is any indication that an
impairment has occurred. Recoverable amount is
assessed either using discounted cash flows on a value-
in-use basis or a fair value less costs to sell 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.
How our scope addressed the matter– Parent
company
In responding to the key audit matter, we performed
the following audit procedures:
Assessed whether the accounting policy for
investments in subsidiaries is in accordance with
IAS 27 ‘Separate Financial Statements’ (‘IAS 27’)
and IAS 36, and whether the accounting policy
had been applied consistently;
Assessed whether the accounting policy for the
recoverability of intercompany receivables is in
accordance with IFRS 9 ‘Financial instruments’
and whether the accounting policy had been
applied consistently;
Assessed the integrity of the impairment models
by testing the mechanical and mathematical
accuracy;
Obtained an understanding the process used by
management to determine the discount rates, and
using our internal experts to evaluate those rates
against their expectations and the industry norms;
Assessed the appropriateness of any changes to
assumptions since the prior year;
Challenged the cash flow forecasts and growth
rates with reference to historical forecasts and
actual performance to assess management’s
ability to forecast accurately;
Challenged management over the recoverability
of intercompany receivables and the related
expected credit loss; and
47
Key Audit Matter – Parent company
How our scope addressed the matter– Parent
company
Assessed the adequacy of the disclosures
included within the financial statements for
compliance with IAS 27 and IAS 36.
Relevant disclosures in the Annual Report and
Accounts 2022
Audit and risk committee report
Company financial statements: Note 4, Investments
in subsidiary companies.
Our results
Based on our audit work, we did not identify any
material misstatement due to error in the impairment
of investments and recoverability of intercompany
receivables as at 1 October 2022.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of
identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in
forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Materiality for financial
statements as a whole
We define materiality as the magnitude of misstatement in the financial statements
that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of these financial statements. We use
materiality in determining the nature, timing and extent of our audit work.
Materiality threshold
Significant judgements
made by auditor in
determining materiality
£253,000, which is 1% of group revenue. £139,000, which is 1.1% of the parent
company’s total assets. This has been
capped at its component materiality.
In determining materiality, we made
the following significant judgements:
In determining materiality, we made the
following significant judgements:
The group’s revenue is considered the
most appropriate benchmark because it
is the most relevant performance
measure to the stakeholders of the group
and is presented as the first financial
highlight on page 14. There is also
volatility in the loss before tax, with
revenue a more stable benchmark.
Materiality for the current 52-week period
is lower than the level that we
determined for the 52 week period ended
1 October 2021 to reflect the lower
revenue of the Group in the current
period.
The parent company’s total assets is
considered to be the most appropriate
benchmark because it is the most
relevant measure of financial position
for the stakeholders of the parent
company, which does not trade.
Materiality for the current 52 week
period is higher than the level that we
determined for the 52 week period
ended 2 October 2021 to reflect the
increase in percentage benchmark
applied.
Performance materiality
used to drive the extent
of our testing
We set performance materiality at an amount less than materiality for the financial
statements as a whole to reduce to an appropriately low level the probability that
the aggregate of uncorrected and undetected misstatements exceeds materiality
for the financial statements as a whole.
Performance materiality
threshold
£177,000, which is 70% of financial
statement materiality.
£97,000, which is 70% of financial
statement materiality.
48
Materiality measure
Group
Parent company
Significant judgements
made by auditor in
determining performance
materiality
In determining performance materiality,
we made the following significant
judgements:
In determining performance
materiality, we made the following
significant judgements:
The quantum and number of errors
identified in the prior year audit were
significant enough to result in
decreasing the performance
materiality threshold.
The changes in management and
ongoing sales process in respect of
one of the CGUs influenced our
decision to decrease the
performance materiality threshold.
The quantum and number of
errors identified in the prior year
audit were significant enough to
result in decreasing the
performance materiality threshold.
The changes in management and
ongoing sales process in respect
of one of the CGUs influenced our
decision to decrease the
performance materiality threshold.
Specific materiality
We determine specific materiality for one or more particular classes of
transactions, account balances or disclosures for which misstatements of lesser
amounts than materiality for the financial statements as a whole could reasonably
be expected to influence the economic decisions of users taken on the basis of
the financial statements.
Specific materiality
We determined a lower level of specific
materiality for the following areas:
Directors’ remuneration; and
Related party transactions.
We determined a lower level of
specific materiality for the following
areas:
Directors’ remuneration; and
Related party transactions.
Communication of
misstatements to the
audit committee
Threshold for
communication
We determine a threshold for reporting unadjusted differences to the audit
committee.
£13,000 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£5,000 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for
potential uncorrected misstatements.
Overall materiality – Group
Overall materiality – Parent company
Revenue
£24,939,000
PM
£177,000,
70%
FSM
£253,00,
1%
Total assets
£12,709,000
PM
£97,000,
70%
FSM
£139,000,
1.1%
TFPUM
£76,000, 30%
TFPUM
£42,000, 30%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected
misstatements
49
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business
and in particular matters related to:
Understanding the group, its components, and their environments, including group-wide controls
The engagement team obtained an understanding of the group and its environment, including group-wide
controls, and assessed the risks of material misstatement at the group level; and
The engagement team obtained an understanding of the effect of the group organisational structure on the
scope of the audit, for example. the level of centralisation of the group control function and the use of service
organisations.
Identifying significant components
The engagement team evaluated the identified components to assess their significance and determined the
planned audit response based on a measure of materiality. Significance was determined as a percentage of the
group’s revenue and qualitative factors, such as the component’s specific nature or circumstances.
Type of work to be performed on financial information of parent and other components (including
how it addressed the key audit matters)
Full-scope audit procedures were performed on the financial information of two components using component
materiality. These procedures included a combination of tests of details and analytical procedures.
Specific-scope audit procedures were carried out on a further four components using component materiality.
These procedures included a combination of tests of details and analytical procedures and were designed to
increase coverage of the group’s financial statement line items.
For the four components that were not individually significant to the group, we carried out analytical procedures.
Where there were material balances in these components that affect the group, we performed procedures on
those balances to determine whether there was evidence of material misstatement.
The key audit matters identified in the key audit matter section of our audit report were addressed with the audit
of the significant scoped locations.
Audit approach
No. of components
% Coverage revenue
Audit of component financial information
Audit of specific financial statement line items
Analytical procedures
Total
Performance of our audit
2
4
4
10
71%
29%
0%
100%
For the audit of financial statement line items, specific procedures were primarily designed to audit the key audit
matters, but additional procedures were performed on cash balances;
We visited all locations which the group operates from for a variety of reasons including inventory count
procedures, evidence gathering and discussions with management;
The primary team performed audit procedures across all components in line with the approach described. There
were no component teams engaged to support the primary team.
Other information
The other information comprises the information included in the Annual Report, other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information contained within the Annual
Report. 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.
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.
50
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 year 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.
Matter 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 their 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
As explained more fully in the directors’ responsibilities statement set out on pages 36 and 37, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below:
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and
determined that the most significant are those related to the reporting frameworks (UK-adopted international
accounting standards, United Kingdom Generally Accepted Accounting Practice and the Companies Act
2006), as well as the relevant tax regulations.
We assessed the susceptibility of the group’s financial statements to material misstatement, including how
fraud might occur, by evaluating management’s incentives and opportunities for manipulation of the financial
statements. This included the evaluation of the risk of management override of controls. We determined that
the principal risks were in relation to:
o
Journal entries that increased revenues or that reclassified costs from the consolidated statement
of comprehensive income to the consolidated statement of financial position;
51
o Potential management bias in determining accounting estimates, especially in relation to their
assessment of the valuation of non-current assets (group) and investments in subsidiaries and
intercompany balances (parent company);
o Transactions with related parties.
In assessing the potential risks of material misstatement, we obtained an understanding of :
o The entity's operations, including the nature of its revenue sources, products and services and of
its objectives and strategies to understand the classes of transactions, account balances, expected
financial statement disclosures and business risks that may result in risks of material misstatement.
o The applicable statutory provisions
o The entity's control environment, including the relevant legislation, the procedures for authorisation
of transactions, internal review procedures over the entity's compliance with regulatory
requirements.
These audit procedures were designed to provide reasonable assurance that the financial statements were
free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk
of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more
difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment,
forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and
regulations is from events and transactions reflected in the financial statements, the less likely we would
become aware of it;
The engagement partner’s assessment of the appropriateness of the collective competence and capabilities
of the engagement team including consideration of the engagement team's:
o Understanding of, and practical experience with audit engagements of a similar nature and
complexity through appropriate training and participation
o Knowledge of the industry in which the client operates
o Understanding of the legal and regulatory requirements specific to the entity including:
o The provisions of the applicable legislation
o The applicable statutory provisions
Team communications in respect of potential non-compliance with laws and regulations and fraud included
the potential for fraud in revenue recognition through manipulation of deferred income. This is also reported
as a key audit matter in the key audit matter section of our report where the matter is explained in more
detail and the specific procedures we performed in response to the key audit matter are described.
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.
Donna Steel
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Sheffield
22 May 2023
52
Consolidated statement of comprehensive income
For the 52 week period ended 1 October 2022
Notes
52 weeks
ended
1 October
2022
£’000
Restated
52 weeks
ended
2 October
2021
£’000
1
24,939
25,284
Revenue
Cost of sales
Gross profit
Administration expenses
Operating loss before amortisation, impairment and
exceptional administration costs
Separately disclosed items of administration expenses:
Amortisation
Impairment
Exceptional administration costs
Total administration expenses
Operating loss
Finance costs
Loss before taxation
Taxation
Loss for the period attributable to the owners of the
parent
Other comprehensive (expense)/income to be reclassified
to profit or loss in subsequent periods:
Currency exchange differences on translation of foreign
operations
Total other comprehensive (expense)/income
Total comprehensive expense for
the period attributable to the owners of the parent
Basic loss per share
From loss for the period
Diluted loss per share
From loss for the period
5
5
6
3
4
10
11
11
(19,680)
(19,347)
5,259
5,937
(7,883)
(7,460)
(2,624)
(1,523)
(101)
-
(968)
(224)
(1,773)
(1,044)
(9,848)
(10,501)
(3,693)
(292)
(3,985)
(52)
(4,564)
(412)
(4,976)
772
(4,037)
(4,204)
(5)
(5)
33
33
(4,042)
(4,171)
(13.0)p
(14.8)p
(13.0)p
(14.7)p
A restatement of the Consolidated statement of comprehensive income for the year ended 2 October 2021 has been
undertaken to correct an error which related to the incorrect treatment of certain contract accounting transactions
(see Note 2).
The accounting policies and notes on pages 57-92 form part of these financial statements.
53
Consolidated statement of financial position
As at 1 October 2022
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax asset
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
Notes
13
14
24
17
18
29
15
19
20
21
19
21
24
25
1 October
2022
£’000
-
11,197
663
Restated
2 October
2021
£’000
101
13,100
1,138
Restated
3 October
2020
£’000
325
14,910
464
11,860
14,339
15,699
4,566
9,331
1,783
-
-
58
3,708
9,061
3,217
195
-
414
4,976
7,067
3,416
580
3,074
-
15,738
16,595
19,113
27,598
30,934
34,812
(9,477)
(2,407)
(839)
(5,474)
(4,773)
(1,110)
(9,659)
-
(1,209)
(12,723)
(11,357)
(10,868)
(32)
-
(2,037)
(703)
(241)
-
(2,245)
(1,068)
(538)
(6,773)
(2,843)
(752)
(2,772)
(3,554)
(10,906)
(15,495)
(14,911)
(21,774)
12,103
16,023
13,038
1,553
-
(265)
10,815
1,553
-
(260)
14,730
930
26,172
(293)
(13,771)
12,103
16,023
13,038
A restatement of the Consolidated statement of financial position as at 2 October 2021 and 3 October 2020 has been
undertaken to correct an error which related to the incorrect treatment of certain contract accounting transactions
(see Note 2). The accounting policies and notes on pages 57-92 form part of these financial statements.
The financial statements were approved by the Board on 22 May 2023 and signed on its behalf by:
Chris Walters
Chief Executive
Company Number: 06135104
54
Consolidated statement of changes in equity
For the 52 week period ended 1 October 2022
Notes
Share
capital
£’000
2
26
2
Balance at 3 October 2020
Prior period adjustment
Restated balance at 3 October 2020
Share issued
Share based payments
Capital reduction transfer
Transactions with owners
Loss for the period
Prior period adjustment
Other comprehensive income:
Exchange differences on translating
foreign operations
Total comprehensive income/
(expense)
930
-
930
623
-
-
623
-
-
-
-
Restated balance at 2 October 2021
1,553
Share based payments
26
Transactions with owners
Loss for the period
Other comprehensive expense:
Exchange differences on translating
foreign operations
Total comprehensive expense
-
-
-
-
-
Balance at 1 October 2022
1,553
Share
premium
account
£’000
26,172
-
26,172
6,401
-
(32,573)
(26,172)
-
-
-
-
-
-
-
-
-
-
-
Translation
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
13,314
(276)
13,038
7,024
132
-
(13,495)
(276)
(13,771)
-
132
32,573
32,705
7,156
(3,426)
(778)
(3,426)
(778)
(293)
-
(293)
-
-
-
-
-
-
33
-
33
33
(4,204)
(4,171)
(260)
14,730
16,023
-
-
-
(5)
(5)
122
122
122
122
(4,037)
(4,037)
-
(5)
(4,037)
(4,042)
(265)
10,815
12,103
A restatement of the Consolidated statement of changes in equity for the years ended 2 October 2021 and 3 October
2020 has been undertaken to correct an error which related to the incorrect treatment of certain contract accounting
transactions (see Note 2).
The accounting policies and notes on pages 57-92 form part of these financial statements.
55
52 weeks
ended
1 October
2022
£’000
52 weeks
ended
2 October
2021
£’000
Consolidated statement of cash flows
For the 52 week period ended 1 October 2022
Notes
27
Operating activities
Cash flows from operating activities
Finance costs paid
Income tax refunded
Net cash inflow/(outflow) from operating activities
Investing activities
Proceeds from sale of fixed assets
Proceeds from repayment of promissory note
Purchase of property, plant and equipment
Net cash inflow from investing activities
Financing activities
Repayment of borrowings
Repayment of lease liabilities
Shares issued net of transaction costs
Proceeds from asset financing
Net cash (outflow)/inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
819
(292)
138
665
2,063
-
(536)
1,527
(2,366)
(1,260)
-
-
(3,626)
(1,434)
3,217
1,783
The accounting policies and notes on pages 57-92 form part of these financial statements.
(6,166)
(412)
-
(6,578)
477
3,074
(1,325)
2,226
(2,000)
(1,805)
7,024
934
4,153
(199)
3,416
3,217
56
Accounting policies
Basis of preparation
The consolidated financial statements have been prepared in accordance with UK-adopted International Accounting
Standards, in conformity with the requirements of 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 93 to 105. 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 1 October 2022. 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 Group and 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 25 to 29. The Financial Reporting
Council issued its “Annual Review of Corporate Reporting 2020/21” in October 2021. The Directors have considered
this when preparing these financial statements.
On 21 October 2022, the Group's Revolving Credit Facility (RCF) with Lloyds Bank was amended and its facility term
was extended from 30 June 2023 to 31 March 2024, with the facility reducing from £2.4 million to £1.9 million on 31
March 2023 and then to £0.9 million on 30 September 2023. Leverage (net debt to adjusted EBITDA) and interest
cover covenants, tested quarterly, recommenced on the first testing date of 30 September 2022 through to the end of
the facility. The next testing date is 30 June 2023. Final repayment of this facility is required on 31 March 2024.
Management have produced forecasts for the period up to September 2024 for all business units, taking account of
reasonably plausible changes in trading performance and market conditions, which have been reviewed by the
Directors. In particular, the forecasts reflect both (i) the award of a major, multi-year contract for the Chesterfield
Special Cylinders division to supply air pressure vessels for a major UK naval new construction program, which was
announced on 6 February 2023, and also (ii) the recent significantly improved trading in the Precision Machined
Components division as oil and gas markets recover, following unprecedented order intake levels which have
resulted in an order book of £7.6 million at the end of April 2023, the highest ever order book level for the division.
The base case forecast demonstrates that the Group is projected to:
generate profits and cash in the current financial year and beyond:
has headroom in financial covenants over the period up to the expiry of the RCF on 31 March 2024, and;
generates sufficient cash to repay the tranches of the RCF on 30 September 2023 and 31 March 2024 and
has sufficient cash reserves beyond 1 April 2024 to manage without the RCF or an alternative financing
facility. While the level of cash reserves is relatively low for the period to the end of July 2023, the level is
forecast to improve substantially for the remainder of the forecast period.
The Group has also developed downside scenarios, which include consideration of the recent track record of not
always achieving budgets. The downside scenario demonstrates the Group’s dependence on the performance of
large contracts (for example the large naval contract) noted above due to their materiality to the Group’s overall
results. Management have modelled the downside scenario based on reasonably possible delays in the large naval
contract. By their nature, the achievement of performance milestones under these types of contract can be subject to
uncertainties, and delays have occurred to similar contracts in the past. These uncertainties include in-house
operational delays and inefficiencies, delays in the supply of material and components by suppliers, and delays in the
performance of work by subcontractors. The Group often has very limited control of the latter two factors. The
achievement of performance milestones enables the Group to recognise revenue and profits under the contract and
typically initiates invoicing to, and subsequent cash collection from, the customer.
As a result, these delays, whilst typically not impacting the financial performance of the contract over its entire
duration, can lead to material delays in the timing of profit recognition and cash receipts between periods. Given the
size of the particular naval contract, any delays and unforeseen events could have a material impact on the Group’s
cash reserves and covenant compliance, particularly in the first three months of the forecast period when the level of
cash reserves is relatively low.
57
Accounting policies (continued)
In the event of delays in the contract, the Group would look to mitigate the impact, partially or fully, by pulling forward
contracted work from other customers, and through normal working capital management and other cash preservation
initiatives. It should also be noted that work on this contract has already commenced and, to date, no material
problems or delays have arisen and the contract is progressing in line with our contractual obligations. The contract
has also largely passed through the phase in which the supply of materials and components and the use of third-
party contractors, over whom the Group has significantly less control, is at its highest. Nonetheless, this remains a
key risk for the business and management are exploring financing options to provide the required flexibility in the
event of such downside scenarios.
Given the expiry of the RCF on 31 March 2024 and the step down in its quantum in September 2023, the Group is
currently exploring several actions to strengthen the Group and the Company’s financial position. In particular, the
Group is currently working with an advisor to support the Group’s review of funding options, including asset-backed
lenders as well as high street banking institutions, in order to replace the Lloyds Bank RCF with new arrangements
that will provide the Group with increased facility headroom and flexibility. These discussions are ongoing and
management expect this to complete in the second calendar quarter of 2023. In addition to pursuing refinancing
opportunities, the Group is also currently exploring other longer-term opportunities to strengthen the Group’s balance
sheet and cash position, including divesting of non-core activities and the refinancing of the Group’s freehold
property at Meadowhall Road, Sheffield.
Other factors which could negatively impact the forecasts include:
Failure to win additional contracts in the Chesterfield Special Cylinders division for hydrogen energy projects
due to market factors outside the control of the Group
Weaker revenue from Integrity Management deployments due to customer delays; and
The recent improvement in the Precision Machined Components divisional revenue and order book not
continuing going forward due to weaker than expected oil and gas market conditions.
The Group believes that these factors are individually less likely to be material to the achievement of the forecasts
than potential delays in the large naval contract, but in the event that they occur together with large naval contract
delays they may have a negative impact on covenant compliance and cash flow at certain test dates in the forecast
period.
The possibility of material delays to the performance of contracts (naval contract in particular) and a replacement
financing facility not yet being in place gives rise to material uncertainties, as defined in accounting standards,
relating to events and circumstances which may cast significant doubt about the Group’s and Parent Company’s
ability to continue as a going concern and to realise its assets and discharge its liabilities in the normal course of
business.
Reflecting management’s confidence in delivering large contracts and successfully replacing their finance facility, the
Group and Parent Company continue to adopt the going concern basis in preparing these financial statements.
Management have concluded that the Group and Parent Company will be able to continue in operation and meet
their liabilities as they fall due over the period to September 2024. Consequently, these financial statements do not
include any adjustments that would be required if the going concern basis of preparation were to be inappropriate.
New standards adopted in 2022
No new standards were applied during the year.
Amendments to IFRSs that are mandatorily effective for the current year
At the date of the authorisation of these financial statements, several new, but not yet effective, standards and
amendments to existing standards, and interpretations have been published by the IASB. None of these standards or
amendments to existing standards have been adopted early by the Group. Management anticipates that all relevant
pronouncements will be adopted for the first period beginning on or after the effective date of pronouncement. The
impact of new standards, amendments and interpretations not adopted in the current year have not been disclosed
as they are not expected to have a material impact on the Group’s financial statements.
58
Accounting policies (continued)
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 or partially satisfies a performance obligation before it hits a contractual
billing milestone/raises an invoice, then it will recognise either a contract asset or a receivable in its statement of
financial position. See Note 22.
Impairment reviews – freehold land and buildings
The Group holds a number of freehold land and buildings, including Cylinders’ main facility at Meadowhall Road,
Sheffield. As part of discussions with the Group’s bankers during the year, the Directors obtained a valuation of this
building which indicated that no impairment of this asset was required. See Note 14.
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 17 to the financial
statements.
Stage of completion on contracts
Revenue recognised from manufacturing 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. See Note 22.
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to
1 October 2022 (2021: to 2 October 2021). 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.
59
Accounting policies (continued)
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 and Hydrogen Energy.
Under IFRS 15, in order to determine whether to recognise revenue, the Group follows a 5-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 longer than 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 by reference to the costs that have been incurred as a
proportion of the total costs of the forecasted contract. 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.
60
Accounting policies (continued)
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.
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.
61
Accounting policies (continued)
Intangible assets
Amortisation on intangible assets is charged in cost of sales, with the exception of that on intangible assets acquired
on business combinations, which is disclosed separately in the consolidated statement of comprehensive income.
Such intangible assets are amortised on a straight-line basis over their estimated useful lives as follows:
Technology
IT systems & software licenses
Development expenditure
7.5 - 15 years
3-5 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. 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
The Group as a lessee
For any new contracts entered into, 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
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’.
62
Accounting policies (continued)
Sale and leaseback
The treatment of sale and leaseback transactions depends on whether the transfer of the asset in question meets the
criteria of IFRS 15 Revenue from Contracts with Customers for recognition as a sale.
A sale and leaseback qualifies as a sale if the buyer/lessor obtains control of the underlying asset. The seller/lessee
measures a right-of-use asset arising from the leaseback as the proportion of the previous carrying amount of the
asset that relates to the right-of-use retained. The gain (or loss) that the seller/lessee recognises is limited to the
proportion of the total gain (or loss) that relates to the rights transferred to the buyer/lessor.
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.
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.
63
Accounting policies (continued)
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
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.
● 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).
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.
● 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 it is “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’.
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, 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.
64
Accounting policies (continued)
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.
Foreign currency translation
Foreign currency transactions are translated into the functional currency (being the currency of the primary economic
environment in which the entity operates) of the respective Group entity, using the exchange rates prevailing at the
dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of
such transactions and from the re-measurement of monetary balance sheet items at year-end exchange rates are
recognised in the consolidated statement of comprehensive income. Non-monetary items carried at fair value that
are denominated in foreign currencies are translated at 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.
65
Accounting policies (continued)
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.
Exceptional administration costs
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 and taxation. Adjusted operating loss is stated after
adding back amortisation, impairments and other exceptional costs. This alternative performance measure is used in
discussions with the Board, management and investors to aid the understanding of the performance of the Group.
The Group considers that the presentation of this alternative performance measure allows for improved insight to the
trading performance of the Group. The Group consider that the term ‘Adjusted’ together with an adjusting items
category, best reflects the trading performance of the Group.
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.
66
Notes to the consolidated financial statements
1.
Segment analysis
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.
The financial information by segment detailed below is frequently reviewed by the Chief Executive who has been
identified as the Chief Operating Decision Maker (CODM).
For the 52 week period ended 1 October 2022
Precision
Machined
Components
£'000
Cylinders
£'000
All other
segments
£'000
Total
£'000
Revenue from external customers
17,583
7,356
-
24,939
Gross profit/(loss)
4,521
838
(100)
5,259
Operating profit/(loss) before
amortisation and exceptional
administration costs
409
(1,100)
(1,933)
(2,624)
Amortisation
-
(161)
60
Exceptional administration (costs)/income
(403)
50
(615)
(101)
(968)
Operating profit/(loss)
6
(1,211)
(2,488)
(3,693)
Net finance costs
(37)
(73)
(182)
(292)
Profit/(loss) before tax
(31)
(1,284)
(2,670)
(3,985)
Segmental net assets/(liabilities) *
7,330
7,708
(2,935)
12,103
Other segment information:
Capital expenditure - property, plant and
equipment
Depreciation
Amortisation
559
679
-
526
790
101
47
209
-
1,132
1,678
101
* 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.
67
Notes to the consolidated financial statements (continued)
1. Segment analysis (continued)
Restated for the 52 week period ended 2 October 2021
Revenue
Gross profit/(loss)
Operating profit/(loss) before amortisation,
impairment and exceptional administration
costs
Amortisation and impairment
Exceptional administration costs
Operating profit/(loss)
Net finance costs
Precision
Machined
Components
£'000
6,407
696
All other
segments
£'000
-
(83)
Total
£'000
25,284
5,937
(1,647)
(1,932)
(1,523)
(56)
(501)
(1,025)
(1,997)
(293)
(1,044)
(2,204)
(3,250)
(4,564)
(85)
(245)
(412)
Cylinders
£'000
18,877
5,324
2,056
(916)
(250)
890
(82)
Profit/(loss) before tax
808
(2,289)
(3,495)
(4,976)
Segmental net assets/(liabilities) *
7,515
9,352
(844)
16,023
Other segment information:
Capital expenditure - property, plant and
equipment
Depreciation
Amortisation
795
632
87
487
818
56
217
205
81
1,499
1,655
224
* 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.
A restatement of the Segmental analysis for the year ended 2 October 2021 has been undertaken to correct an error
which related to the incorrect treatment of certain contract accounting transactions (see Note 2).
68
Notes to the consolidated financial statements (continued)
1. Segment analysis (continued)
The Group’s revenue disaggregated by primary geographical markets is as follows:
Revenue
United Kingdom
France
Norway
USA
Romania
Italy
Taiwan
Netherlands
Germany
Switzerland
South Korea
Rest of Europe
Rest of World
2022
Precision
Machined
Components
£’000
Cylinders
£’000
Total
£’000
Cylinders
£’000
2021
Precision
Machined
Components
£’000
12,406
2,958
885
3
-
-
393
359
272
-
-
157
150
3,720
68
272
1,071
972
764
-
-
-
-
-
8
481
16,126
3,026
1,157
1,074
972
764
393
359
272
-
-
165
631
15,270
1,164
23
-
-
-
-
164
616
748
294
8
590
2,950
-
306
798
916
776
-
-
-
-
-
171
490
Total
£’000
18,220
1,164
329
798
916
776
-
164
616
748
294
179
1,080
17,583
7,356
24,939
18,877
6,407
25,284
During the year, there were two customers who each contributed to over 10% of total Group revenue. These
revenues were £5.2 million (20.9%) and £3.0 million (12.0%), both within the Cylinders segment (2021: two
customers, £6.7 million (26.3%) and £3.8 million (15.0%), both reported in the Cylinders segment).
The following table provides an analysis of the Group's revenue by market.
Revenue
Oil and gas
Defence
Industrial
Hydrogen energy
2022
£’000
7,953
13,483
1,099
2,404
2021
£’000
6,076
11,070
5,949
2,189
24,939
25,284
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
2022
2021
Sale of goods transferred at a point in time
Sale of goods transferred over time
Rendering of services
Precision
Machined
Components
£’000
7,021
-
335
Precision
Machined
Components
£’000
6,006
-
401
Cylinders
£’000
1,080
15,594
2,203
Cylinders
£’000
3,336
12,584
1,663
17,583
7,356
18,877
6,407
69
Notes to the consolidated financial statements (continued)
1. Segment analysis (continued)
The following aggregated amounts of transaction values relate to the performance obligations from existing contracts
that are unsatisfied or partially unsatisfied as at 1 October 2022:
Revenue expected in future periods
Sale of goods - Cylinders
2023
£’000
4,601
The following table provides an analysis of the carrying amount of non-current assets and additions to property, plant
and equipment, all of which is held within the United Kingdom.
Non-current assets
Additions to property, plant and equipment
2022
£’000
2021
£’000
11,197
14,247
1,132
1,499
2. Restatement in respect of IFRS 15 “Revenue from Contracts with Customers”
During the year, the Group reviewed its accounting policy and past accounting treatment in respect of a small
number of long-term defence contracts within its Cylinders division.
Since FY19, the Group has consistently applied an accounting treatment whereby revenue for these specific defence
contracts was recognised using an ‘Output’ methodology under IFRS 15, ‘Revenue from Contracts with Customers’
(“IFRS 15”), with costs being accrued to achieve a uniform profit margin throughout the multi-year life of the
contracts, resulting in cost deferrals at financial period ends. Whilst this cost treatment impacted the timing of profit
recognition between financial periods, it had no impact on either the total profitability of the contracts over their entire
lives, nor the quantum or timing of cash flows. During the year, it was noted that this accounting treatment is not in
compliance with IFRS 15, which requires that all costs incurred in the period relating to the contract should be
immediately expensed. This means that cost deferral to achieve a uniform contract profit margin, as historically
adopted by the Group, is not permitted. As a result, the comparative period financial statements have been restated
as detailed in the tables below. These accounting adjustments only impact the timing of profit recognition under these
specific contracts. They do not impact the net debt position of the Group at any date, the future cash generation
profile of the Group, nor the underlying trading or operations of the business.
As at, and for the year ended, 2 October 2021, the impact of the restatement was as follows:
2021
Presented
2021
Adjustment
2021
Restated
Income statement items:
Cost of sales
Gross profit
Operating loss
Loss for the period attributable to the owners of the parent
(18,569)
6,715
(3,786)
(3,426)
(778)
(778)
(778)
(778)
(19,347)
5,937
4,564
4,204
Balance sheet items:
Inventories – Raw materials
Inventories – Work in progress
Total equity
3,000
1,732
(17,077)
(625)
(429)
1,054
2,375
1,303
(16,023)
70
Notes to the consolidated financial statements (continued)
2. Restatement in respect of IFRS 15 “Revenue from Contracts with Customers” (continued)
As at, and for the year ended, 3 October 2020, the impact of the restatement was as follows:
Balance sheet items:
Inventories – Raw materials
Total equity
Effect on FY22:
2020
Presented
2020
Adjustment
2020
Restated
2,749
(13,314)
(276)
276
2,473
(13,038)
Had the restatement not been applied, the income statement measures for the year ended 1 October 2022 set out
below would have differed by the following amounts:
Amount by which income items would have been changed:
Cost of sales – higher by
Gross profit – reduced by
Operating loss – increased by
Loss for the period attributable to the owners of the parent – increased by
3. Finance costs
Interest receivable
Interest payable on bank loans and overdrafts
Interest payable on lease liabilities
4. 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)/loss on disposal of fixed assets
Amortisation of intangible assets
Amortisation of grants receivable
Staff costs - excluding share based payments (see Note 8)
Cost of inventories recognised as an expense
Share based payments (see Note 8)
£’000
1,054
1,054
1,054
1,054
2022
£’000
2021
£’000
-
168
124
292
(40)
332
120
412
2022
£’000
1,114
564
(327)
101
(66)
9,234
12,463
122
2021
£’000
956
699
78
224
(40)
8,899
12,821
132
Included in the (profit)/loss on disposal of fixed assets in 2022 is a £401,000 profit relating to the sale and leaseback
of the property at Roota Engineering Limited, part of the Precision Machined Components division.
71
Notes to the consolidated financial statements (continued)
5. Amortisation and Impairment
Amortisation of intangible assets
Property impairment
ERP system impairment
6. Exceptional administration costs
Refinancing Group banking facilities
Property costs
Final settlement for ERP system costs
Reorganisation and redundancy
Historical contract settlement
Impairment of inventory and work in progress
Reversal of inventory provision from prior year
Release of bad debt provision
Closure of Precision Machined Components facility (Quadscot)
New Long-Term Incentive Plan set up costs
2022
£’000
101
-
-
101
2022
£’000
344
280
193
-
88
121
(91)
-
-
33
968
2021
£’000
224
655
1,118
1,997
2021
£’000
175
206
-
425
-
240
-
(168)
166
-
1,044
Property costs relate to two closed sites of a formerly owned entity. The leases relating to this former entity have
been surrendered and no further costs are expected in FY23.
7. 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
2022
£’000
2021
£’000
195
80
90
-
3
22
12
72
27
7
20
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.
72
Notes to the consolidated financial statements (continued)
8. Employee costs
Particulars of employees, including Executive Directors:
Wages and salaries
Social security costs
Pension costs
Share based payments (see Note 26)
2022
£’000
7,972
813
449
122
2021
£’000
7,563
784
552
132
9,356
9,031
Included in Wages and salaries is furlough grant income of £nil (2021: £409,000).
The average monthly number of employees (including Executive Directors) during the period was as follows;
Production
Selling and distribution
Administration
9. Directors’ remuneration
Particulars of Directors’ remuneration are as follows:
Emoluments
Pension costs
Share based payments
2022
No.
144
14
39
197
2021
No.
144
16
41
201
2022
£’000
597
13
15
2021
£’000
487
19
28
625 534
Please see the Report of the Remuneration Committee on pages 30 to 32 for full details of Directors’ emoluments.
Emoluments include £53,641 (2021: £28,221) of taxable accommodation and travel expenses and £13,298 (2021:
£10,013) of taxable allowance in lieu of employer pension contributions.
No Directors exercised any share options in the period. During the year retirement benefits were accruing to one
(2021: two) Directors in respect of defined contributions schemes.
Included in the aggregate emoluments for the period ended 1 October 2022 are payments of £nil (2021: £12,500)
made to companies controlled by Directors.
The highest paid Director received total emoluments of £283,000 and pension contributions of £nil (2021: total
emoluments of £247,000 and pension contributions of £10,000).
73
Notes to the consolidated financial statements (continued)
10. Taxation
Current tax charge/(credit)
Current tax expenses
Over provision in respect of prior years
Deferred tax charge/(credit)
Origination and reversal of temporary differences
Under provision in respect of prior years
Total taxation charge/(credit)
2022
£’000
2021
£’000
7
(65)
-
(414)
(58)
(414)
(494)
604
(387)
29
110
(358)
52
(772)
Corporation tax is calculated at 19% (2021: 19%) of the estimated assessable profit for the period. Deferred tax is
calculated at the rate applicable when the temporary differences are expected to unwind.
The charge for the period can be reconciled to the loss per the consolidated statement of comprehensive income as
follows:
Loss before taxation
2022
£’000
Restated
2021
£’000
(3,985)
(4,976)
Theoretical tax credit at UK corporation tax rate 19%
(757)
(945)
(2021: 19%)
Effect of charges/(credits):
- non-deductible expenses
- non-deductible exceptional items
- adjustments in respect of prior years
- difference due to correct of error in prior year
- change in taxation rates
- differences in deferred tax rates
- losses not previously recognised now utilised
Total taxation charge/(credit)
20
159
539
-
(34)
-
125
(3)
393
(385)
147
16
(17)
22
52
(772)
An increase in the UK corporation tax rate to 25% was substantively enacted in May 2021 and is due to take effect
from 1 April 2023. As the most significant timing differences are not expected to unwind until 2023 or later, the
deferred tax rate was maintained at 25% in the period.
74
Notes to the consolidated financial statements (continued)
11. Loss per ordinary share
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided
by the weighted average number of shares in issue during the period. The adjusted earnings per share is also
calculated based on the basic weighted average number of shares.
The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue
of shares on the assumed conversion of all dilutive share options. As the Group made a loss after taxation for the
financial year there is no dilution to take place.
On 6 December 2022 the Group undertook a fundraising through the issue of 7,600,000 new ordinary shares (see
Note 25).
For the 52 week period ended 1 October 2022
Loss after tax
Weighted average number of shares – basic
Basic loss per share
Diluted loss per share
The Group adjusted loss per share is calculated as follows:
Loss after tax
Amortisation (see Note 5)
Exceptional administration costs (see Note 6)
Theoretical tax effect of the above adjustments
Adjusted loss
Adjusted loss per share
Total
£'000
(4,037)
No.
31,067,163
(13.0)p
(13.0)p
Total
£'000
(4,037)
101
968
(203)
(3,171)
(10.2)p
In the Directors’ view, adjusted loss per share reflects the ongoing performance of the business, how the business is
managed on a day to day basis, and allows for a consistent and meaningful comparison between periods.
The theoretical tax effect is based on applying a 19% tax rate to the adjustments for amortisation and other
exceptional costs incurred.
75
Notes to the consolidated financial statements (continued)
11. Loss per ordinary share (continued)
Restated for the 52 week period ended 2 October 2021
Loss after tax
Weighted average number of shares – basic
Basic loss per share
Diluted loss per share
The Group adjusted loss per share is calculated as follows:
Loss after tax
Amortisation and Impairment (see Note 5)
Exceptional administration costs (see Note 6)
Theoretical tax effect of the above adjustments
Adjusted loss
Adjusted loss per share
Total
£'000
(4,204)
No.
28,463,119
(14.8)p
(14.8)p
(4,204)
1,997
1,044
(241)
(1,404)
(4.9)p
A restatement of the loss per ordinary share Consolidated statement of comprehensive income for the year ended 2
October 2021 has been undertaken to correct an error which related to incorrect treatment of certain contract
accounting transactions (see Note 2).
12. Dividends
No dividends have been declared or proposed in either the 52 week period ended 1 October 2022 or the 52 week
period ended 2 October 2021.
76
Notes to the consolidated financial statements (continued)
13. Intangible assets
Intellectual
Property
£’000
IT systems
& Software
Licenses
Development
expenditure
£'000
£'000
Non-
contractual
customer
relationships
£’000
Total
£’000
2,796
684
175
11,880
15,535
2,796
-
2,796
-
2,796
-
-
446
137
583
101
684
-
101
88
87
175
-
175
-
-
11,880
-
15,210
224
11,880
-
15,434
101
11,880
15,535
-
-
-
101
Cost
At 3 October 2020,
2 October 2021 and
1 October 2022
Amortisation
At 3 October 2020
Charge for the period
At 2 October 2021
Charge for the period
At 1 October 2022
Net book value
At 1 October 2022
At 2 October 2021
77
Notes to the consolidated financial statements (continued)
14. Property, plant and equipment
Cost
At 3 October 2020
Additions - right of use assets
Additions
Disposals
Transfers
At 2 October 2021
Additions - right of use assets
Additions
Disposals
Transfers
At 1 October 2022
Depreciation
At 3 October 2020
Charge for the period
Disposals
Impairment
At 2 October 2021
Charge for the period
Disposals
At 1 October 2022
Net book value
At 1 October 2022
Assets under
construction
£’000
Land and
buildings
£’000
Plant and
machinery
£’000
1,164
-
740
-
(964)
940
-
378
-
(290)
5,255
-
-
-
-
5,255
399
-
(1,429)
-
17,394
174
585
(490)
964
18,627
197
158
(2,541)
290
Total
£’000
23,813
174
1,325
(490)
-
24,822
596
536
(3,970)
-
1,028
4,225
16,731
21,984
-
-
-
829
829
-
-
829
446
26
-
655
1,127
306
(476)
8,457
1,629
(320)
-
9,766
1,372
(2,137)
8,903
1,655
(320)
1,484
11,722
1,678
(2,613)
957
9,001
10,787
199
3,268
7,730
11,197
At 2 October 2021
111
4,128
8,861
13,100
Leased assets
Carrying value at 1 October 2022
Carrying value at 2 October 2021
-
-
619
2,772
3,391
644
4,232
4,876
78
Notes to the consolidated financial statements (continued)
14.
Property, plant and equipment (continued)
Included within ‘Land and buildings’ is the disposal of the freehold property occupied by Roota Engineering Limited,
part of the Precision Machined Components division, following completion of a sale and leaseback transaction that
took place during the period. The gross sale proceeds were £1.65 million and the gain on disposal of the asset of
£401,000 is disclosed in note 4.
Also included within ‘Land and buildings’ is Cylinders’ main facility at Meadowhall Road, Sheffield, which is carried at
cost. As part of discussions with the Group’s bankers during the year, the Directors obtained two valuations of the
Meadowhall Road site from independent chartered surveyors, Lambert Smith Hampton and Knight Frank, which
indicated that no impairment of this asset was required.
The Group tests annually for impairment, under IAS 36, or more frequently if there are indicators that intangible or
tangible fixed assets might be impaired. The recoverable amounts of the cash generating units (CGUs) are
determined from value in use calculations, using a three-year forecast, approved by management and the Board of
Directors, and applying a pre-tax discount rate of 18.0% to both the Cylinders and Precision Machined Components
divisions (2021: post-tax discount rate of 11.0% / pre-tax discount rate of 13.9%).
The FY22 impairment assessment has been undertaken based on the forecast future cash flows, taking into account
the firm order book, sales pipeline, market opportunities, together with expected gross margin performance, and
consideration of administration costs, planned capital expenditure and estimated working capital movements. A long-
term growth rate of 1.9% has been incorporated into the perpetuity calculation at the end of year three.
Management’s key assumptions are based on their past experience, future expectations, risks and opportunities in
its markets 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 future cash flows, in particular for an increase in discount rate from 18.0% to 22.0%,
management believes that there is no reasonably possible change in discount rate that would drive an impairment in
the PMC division.
For the PMC division, after applying a sensitivity analysis where medium-term revenue growth reduced to 10%
growth indicated by wider market data, an impairment of £555k would occur. Management are confident in a strong
order book, but nonetheless recognise that the VIU calculation is predicated on continuing the recent trend of strong
revenue growth.
For the CSC division, there are no reasonably possible changes in assumptions or combinations of assumptions that
would result in an impairment. As such, management have not included any sensitivity disclosures for this division.
Management are not aware of any other matters that would necessitate changes to its key estimates.
15. Asset held for sale
Property for sale
2022
£’000
2021
£’000
-
195
The Group closed its operations at Quadscot Precision Engineers Limited, part of the Precision Machined
Components division, in June 2020 and put the properties from which it operated up for sale. During the period the
remaining property, which was held as an asset held for sale as at 2 October 2021, was sold in December 2021 and
proceeds of £200,000 were received.
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 100.
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.
79
Notes to the consolidated financial statements (continued)
17. Inventories
Raw materials and consumables
Work in progress
Finished goods
2022
£’000
2,611
1,938
17
Restated
2021
£’000
2,375
1,303
30
4,566
3,708
Inventories are stated net of provisions of £339,000 (2021: £846,000).
The write off of inventory recognised in the comprehensive income statement in the year was £121,000 (2021:
£240,000), which was treated as an exceptional administration cost (see Note 6). In addition, during the year the
Group reversed a £91,000 prior period obsolete inventory provision due to the sale of related stock during this period.
The amount reversed has been included as a credit within other exceptional administration costs (see Note 6).
A restatement of the value of Raw materials and Work in progress as at 2 October 2021 has been undertaken to
correct an error which related to the incorrect treatment of certain contract accounting transactions (see Note 2).
18. Trade and other receivables
Trade receivables
Allowance for expected credit losses
Contract assets
Other receivables
Prepayments and accrued income
2022
£’000
4,593
-
3,451
233
1,054
2021
£’000
4,224
(17)
3,609
313
932
9,331
9,061
All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of
fair value.
Note 23 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 3 October 2020
Increase in loan loss allowance recognised in profit or loss
during the period
Unused amount reversed
At 2 October 2021
Receivables written off during the period as uncollectable
At 1 October 2022
£’000
(197)
(9)
189
(17)
17
-
80
Notes to the consolidated financial statements (continued)
19. 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
2022
£’000
5,423
513
1,401
1,685
455
2021
£’000
1,990
237
685
1,918
644
9,477
5,474
2022
£’000
2021
£’000
-
32
32
140
101
241
With the exception of a portion of deferred income, all amounts are short-term. The carrying values of trade payables
and other payables are considered to be a reasonable approximation of fair value.
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 using 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.
20. Borrowings
Current
Revolving credit facility
2022
£'000
2021
£'000
2,407
4,773
During the period, the bank loans drawn under the Revolving Credit Facility (RCF) had an average annual interest
rate of 2% above SONIA.
On 21 October 2022, the Group's Revolving Credit Facility (RCF) was amended and its facility term was extended
from September 2023 to March 2024, with the facility reducing from £2.4 million to £1.9 million in March 2023 and
then £0.9 million in September 2023. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested
quarterly, recommenced on the first testing date of 30 September 2022 through to the end of the facility. The
September 2022 test period was waived. The December 2022 test period was deferred until January 2023 and
subsequently waived. The covenants as at March and June 2023 have been amended to reflect the impact of the
IFRS 15 contract accounting restatement – see Note 2.
81
Notes to the consolidated financial statements (continued)
20. Borrowings (continued)
The Group’s RCF was drawn at £2.4 million at 1 October 2022 (2 October 2021: £4.8 million). 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 carrying amount of other bank borrowings is considered to be a reasonable approximation of fair value. The
carrying amounts of the Group’s borrowings are all denominated in GBP.
The maturity profile of borrowing facilities are as follows:
Due for settlement within one year:
Revolving credit facility
The Group has the following undrawn borrowing facilities at the year end:
Expiring within one year
2022
£’000
2021
£’000
2,407
4,773
2022
£’000
2021
£’000
-
1,227
Subsequent to year end, as noted above, the RCF was reduced to £2.4 million and the facility term was extended
from September 2023 to March 2024.
21. 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
2022
£’000
2021
£’000
629
210
839
810
300
1,110
735
1,302
1,521
724
2,037
2,245
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. During the period, the
Group completed a sale and leaseback of its freehold property occupied by Roota Engineering Limited, part of the
Precision Machined Components division. The property lease liability at the end of the period was £837,000.
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.
82
Notes to the consolidated financial statements (continued)
21. Lease Liabilities (continued)
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 1 October 2022
were as follows:
1 October 2022
Lease payments
Finance costs
Net present value
2 October 2021
Lease payments
Finance costs
Net present value
Within one
year
£’000
Over one to
five years
£’000
963
(124)
2,512
(475)
Total
£’000
3,475
(599)
839
2,037
2,876
Within one
year
£’000
Over one to
five years
£’000
Total
£’000
3,644
(289)
2,419
(174)
2,245
3,355
1,225
(115)
1,110
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.
22. Contract balances
Contract assets (Note 18)
Contract liabilities (Note 19)
2022
£'000
3,451
(513)
2021
£'000
3,609
(237)
Net balance sheet position for ongoing contracts
2,938
3,372
83
Notes to the consolidated financial statements (continued)
22. Contract balances (continued)
Release of contract liabilities and deferred income
2022
£’000
2021
£’000
Contract revenue recognised through release of contract liabilities and
deferred income
835
1,336
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 decreased compared to the prior year as historical contracts accounted for under IFRS 15 have met
performance obligations that were invoiced during the current period.
23. 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 1 October 2022.
The Group held the following categories of financial instruments:
Financial assets - amortised cost
- Trade receivables
- Other receivables
- Cash and cash equivalents
2022
Total
£’000
4,593
1,287
1,783
2021
Total
£’000
4,207
1,245
3,217
7,663
8,669
84
Notes to the consolidated financial statements (continued)
23. Financial instruments (continued)
Financial liabilities - amortised cost
- Trade payables
- Accruals and other payables
- Borrowings
- Lease Liabilities
2022
Total
£'000
5,423
1,685
2,407
2,876
2021
Total
£'000
1,990
1,705
4,773
3,355
12,391
11,823
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.
2022
Trade and other payables
Bank borrowings
Amounts due under lease liabilities
2021
Trade and other payables
Bank borrowings
Amounts due under lease liabilities
Current
within 6
months
£’000
7,106
581
482
Current
6 to 12
months
£’000
-
1,064
481
Non-current
1 to 5 years
£’000
-
937
2,512
Total
net
payable
£’000
7,106
2,582
3,475
8,169
1,545
3,449
13,163
Current
within 6
months
£’000
3,556
860
610
Current
6 to 12
months
£’000
-
4,540
614
Non-current
1 to 5 years
£’000
140
-
2,460
Total
net
payable
£’000
3,696
5,400
3,684
5,026
5,154
2,600
12,780
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.
85
Notes to the consolidated financial statements (continued)
23. Financial instruments (continued)
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:
Euro
US Dollar
Canadian Dollar
New Zealand Dollar
Financial assets
Financial liabilities
2022
£'000
1,257
236
2
-
1,495
2021
£'000
242
122
2
1
367
2022
£'000
2,468
387
-
-
2,855
2021
£'000
3
44
-
-
47
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
US Dollar
currency impact
2022
£'000
2021
£'000
2022
£'000
2021
£'000
Profit or loss impact
(110)
22
(14)
7
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 a decrease/increase of £8,000 (2021:
£2,000).
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 1 October 2022 the largest customer within
trade receivables accounted for 12% (2021: 26%) of debtors. Management continually monitors 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.
86
Notes to the consolidated financial statements (continued)
23. Financial instruments (continued)
Liquidity risk management
The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously
monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
On 21 October 2022, the Group's Revolving Credit Facility (RCF) was amended and its facility term was extended
from September 2023 to March 2024, with the facility reducing from £2.4 million to £1.9 million in March 2023 and
then £0.9 million in September 2023. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested
quarterly, recommenced on the first testing date of 30 September 2022 through to the end of the facility. The
September 2022 test period was waived. The December 2022 test period was deferred until January 2023 and
subsequently waived. The covenants as at March and June 2023 have been amended to reflect the impact of the
IFRS 15 contract accounting restatement - see Note 2.
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 20, leases
disclosed in Note 21 and cash and cash equivalents disclosed in Note 29 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
2022
£'000
(2,407)
(1,364)
(1,512)
1,783
Restated
2021
£'000
(4,773)
(2,331)
(1,024)
3,217
(3,500)
(4,911)
12,103
16,023
Debt is defined as long and short-term borrowings, as detailed in Notes 21 and 22. Net debt is debt less cash and
cash equivalents, as detailed in Note 29. Equity includes all capital and reserves of the Group attributable to equity
holders of the parent. Subsequent to the year end, on 6 December 2022, 7,600,000 new ordinary shares were issued
as part of a fundraising which raised cash proceeds, net of expenses, of approximately £2.1 million.
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.
87
Notes to the consolidated financial statements (continued)
24. Deferred tax
The following are the major deferred tax assets/(liabilities) recognised by the Group and movements thereon during
the current and prior reporting period.
Accelerated
tax
depreciation
£’000
Short-term
temporary
differences
£’000
Share
option
costs
£’000
Unused
losses
£’000
At 3 October 2020
Prior year adjustment
Credit/(charge) to income
At 2 October 2021
Prior year adjustment
Credit/(charge) to income
At 1 October 2022
(689)
(132)
(162)
(983)
186
94
(703)
64
-
(3)
61
159
-
84
243
178
69
502
749
Total
£’000
(288)
(63)
421
70
-
(243)
(547)
(604)
(16)
45
-
-
416
618
494
(40)
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
2022
£’000
2021
£’000
663
1,138
(703)
(1,068)
(40)
70
The deferred tax asset is expected to be recoverable against future profits generated by the Group. The Group has
unused tax losses of £8,111,000.
25. Called up share capital
Allotted, issued and fully paid
Ordinary shares of 5p each
2022
No.
2021
No.
2022
£’000
2021
£’000
31,067,163
31,067,163
1,553
1,553
Subsequent to the year end, on 6 December 2022, 7,600,000 new ordinary shares with a nominal value of 5p each,
were issued as part of a fundraising which raised cash proceeds, net of expenses, of approximately £2.1 million. Of
that total, £1.7 million was allocated to the share premium account.
There is a single class of ordinary shares. There are no restrictions on the distribution of dividends and the
repayment of capital.
88
Notes to the consolidated financial statements (continued)
26.
Share based payments
Save-As-You-Earn (SAYE) Scheme
Pressure Technologies plc introduced a share option scheme for all employees of the Group in November 2007. A
thirteenth grant of options was made in August 2022. The scheme rules were reviewed and updated in 2017 as
required by HMRC. If the options remain unexercised after a period of 3 years and 6 months from the date of the
grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest and are
treated as cancelled if the employee chooses to stop contributing. The cancellation of equity settled share based
payments is accounted for as an acceleration of vesting and is therefore recognised immediately in the statement of
comprehensive income. 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
2022 Weighted
average
exercise
price
No.
2021 Weighted
average
exercise
price
No.
811,882
281,733
(33,653)
(189,584)
(127,390)
75.1p
60.4p
72.7p
70.7p
97.6p
808,913
190,124
(106,912)
(80,243)
-
75.2p
76.0p
72.6p
81.4p
-
Outstanding at the end of the period
742,988
66.9p
811,882
75.1p
30,661 (2021: 127,390) of the outstanding options as at 1 October 2022 were exercisable at the end of the period.
The options outstanding at 1 October 2022 had a weighted average remaining contractual life of 1.8 years (2021: 1.7
years). The terms of these options are as follows:
Date of grant
15 July 2019
24 July 2020
30 July 2021
29 August 2022
Total options outstanding at
1 October 2022
Options
outstanding
at
1 October
2022
Vesting
period
Market
value
at
date of
grant
(p)
Exercise
price (p)
Exercise
period
3 years
119.0
3 years
3 years
3 years
96.0
93.8
73.0
99.2
66.0
76.0
60.4
6 months
6 months
6 months
6 months
30,661
307,018
123,576
281,733
742,988
There are no performance conditions that apply to these options other than continued employment.
89
Notes to the consolidated financial statements (continued)
26. Share based payments (continued)
Long-Term Incentive Plan (LTIP) - 2021 Value Creation Scheme
During the course of the year, a new LTIP, the 2021 Value Creation Scheme, was introduced. The first awards under
this scheme were made in January 2022. This scheme is described in the Report of the Remuneration Committee.
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
29 August 2022
Share price at date of offer
Exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
Fair value
73.0p
60.4p
44%
3 years
2.7%
0.0%
£81,703
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 £122,000 (2021: £132,000). The charge is calculated in accordance with IFRS2, ‘Share Based
Payments’. A deferred tax charge of £243,000 (2021: credit of £25,000) was recognised in the consolidated
statement of comprehensive income during the period in respect of share based payments.
90
Notes to the consolidated financial statements (continued)
27.
Consolidated cash flow statement
Loss after tax
Adjustments for:
Finance costs
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share option costs
Release of grants
Income tax charge/(credit)
(Profit)/loss on disposal of property, plant and equipment
Impairment
Changes in working capital:
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
2022
£’000
(4,037)
Restated
2021
£’000
(4,204)
292
1,678
101
122
(66)
52
(327)
-
(859)
(269)
4,132
412
1,655
224
132
(40)
(772)
78
1,484
1,268
(1,995)
(4,408)
Cash inflows/(outflows) from operating activities
819
(6,166)
A restatement of the loss after tax for the year ended 2 October 2021 and of Raw materials and Work in progress as
at 2 October 2021 has been undertaken to correct an error which related to the incorrect treatment of certain contract
accounting transactions (see Note 2). This restatement had no net impact on the cash outflow for the year ended 2
October 2021.
28. Net Debt Reconciliation
Cost
At 3 October 2020
Cash flows
Repayments
New facilities - asset finance leases
New facilities - right of use leases
Borrowings
£’000
Leases
£’000
(6,773)
-
2,000
-
-
(4,052)
-
1,805
(934)
(174)
Cash &
Bank
£’000
3,416
(199)
-
-
-
Total
£’000
(7,409)
(199)
3,805
(934)
(174)
At 2 October 2021
(4,773)
(3,355)
3,217
(4,911)
Cash flows
Repayments
New facilities - right of use leases
Surrender – right of use leases
-
2,366
-
-
-
1,260
(1,025)
244
(1,434)
-
-
-
(1,434)
3,626
(1,025)
244
At 1 October 2022
(2,407)
(2,876)
1,783
(3,500)
91
Notes to the consolidated financial statements (continued)
29. Cash and cash equivalents
Cash at bank and in hand
30. Financial commitments
2022
£'000
2021
£'000
1,783
3,217
Pension commitments
As at 1 October 2022 pension contributions of £2,000 (2021: £23,000) 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.
31. Related party transactions
Key management personnel are considered to be the Executive and Non-Executive Directors of the Group. Details of
their remuneration is set out in note 8.
During the period ended 1 October 2022, Pressure Technologies incurred costs of £nil (2021: £12,500) with R.A.G.
Associates Limited with whom one of the former Non-Executive Directors, Sir Roy Gardner, is a connected person.
£nil was outstanding to be paid as at 1 October 2022 (2021: £nil). The transactions were made on an arm’s length
basis.
32. Subsequent events
On 21 October 2022, the Group's Revolving Credit Facility (RCF) was amended and its facility term was extended
from September 2023 to March 2024, with the facility reducing from £2.4 million to £1.9 million in March 2023 and
then £0.9 million in September 2023. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested
quarterly, recommenced on the first testing date of 30 September 2022 through to the end of the facility. The
September 2022 test period was waived. The December 2022 test period was deferred until January 2023 and
subsequently waived. The covenants as at March and June 2023 have been amended to reflect the impact of the
IFRS 15 contract accounting restatement. See Note 2.
On 15 November 2022, the Group announced that it was exploring longer term opportunities which included
potentially divesting the Precision Machined Components division, to strengthen the Group’s balance sheet and cash
position and support the strategic investment in the Cylinders division.
On 6 December 2022, 7,600,000 new ordinary shares with a nominal value of 5p each, were issued as part of a
fundraising which raised cash proceeds, net of expenses, of approximately £2.1 million. Of that total, £1.7 million was
allocated to the share premium account.
On 6 February 2023, the Group announced the major contract placement by a major UK naval customer for pressure
vessel manufacturing for a new construction project. Worth £18.2 million, this contract is the largest ever awarded to
CSC. Progress has commenced against early contract milestones and pressure vessels will be delivered to the
customer over the next three years.
92
Company statement of financial position
As at 1 October 2022
Non-current assets
Investments
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Receivables
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 (liabilities)/assets
1 October
2022
£’000
2 October
2021
£’000
Notes
4
5
6
13
7
8
9
10
5,770
-
2,769
212
8,751
3,944
14
3,958
5,770
81
3,148
142
9,141
5,352
1,436
6,788
(2,333)
(2,407)
(28)
(585)
(4,773)
(152)
(810)
1,278
Creditors: amounts falling due after more than one year
Lease liabilities
10
(15)
(259)
Net assets
7,926
10,160
Capital and reserves
Called up share capital
Profit and loss account
Equity shareholders' funds
12
17
1,553
6,373
7,926
1,553
8,607
10,160
The Company reported a loss for the 52 week period ended 1 October 2022 of £2,257,000 (2021: loss of
£3,599,000).
The accounting policies and notes on pages 95-105 form part of these financial statements.
Approved by the Board on 22 May 2023 and signed on its behalf by:
Chris Walters
Director
93
Company statement of changes in equity
For the 52 week period ended 1 October 2022
Share
capital
£’000
Share
premium
account
£’000
Profit and
loss
account
£’000
Total
equity
£’000
Balance at 3 October 2020
Share based payments
Shares issued
Capital reduction transfer
Transactions with owners
Loss for the period
930
-
623
-
623
-
Balance at 2 October 2021
1,553
Share based payments
Transactions with owners
Loss for the period
-
-
-
Balance at 1 October 2022
1,553
26,172
(20,405)
6,697
-
6,401
(32,573)
38
-
32,573
38
7,024
-
(26,172)
32,611
7,062
-
-
-
-
-
-
(3,599)
(3,599)
8,607
10,160
23
23
23
23
(2,257)
(2,257)
6,373
7,926
The accounting policies and notes on pages 95-105 form part of these financial statements.
94
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 within the financial statements of the Company was
£2,257,000 (2021: £3,599,000 loss) after applying a tax credit (Note 11) of £70,000 (2021: £49,000 credit) to the loss
before tax of £2,327,000 (2021: £3,648,000 loss).
Going concern
The Company from a going concern perspective is inextricably linked to the Group. As explained in the Accounting
Policies section to the consolidated financial statements, the directors have concluded that it is appropriate to
prepare the Consolidated financial statements on a going concern basis, albeit noting a material uncertainty in
respect of possible delays in a large UK naval contract. This conclusion also applies to the preparation of the
Company’s financial statements for the reasons set out in that section.
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.
2.
3.
4.
5.
6.
A statement of cash flows and related notes
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
Capital management disclosures
The effect of future accounting standards not adopted
Certain share based payment disclosures
Certain financial instruments disclosures
New Standards adopted in 2022
No new standards were applied during the year.
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 re-measured 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 & Software – 3-5 years
Property, plant and equipment
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.
95
Notes to the Company financial statements (continued)
1. Accounting policies (continued)
The following useful lives are applied:
Plant and machinery
Buildings
3-15 years
50 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.
Financial Assets
The Company classifies its financial assets at amortised cost.
Financial Liabilities
Creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business
from suppliers. Creditors are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method. Creditors are presented as amounts falling due within one year unless payment is not due
within 12 months after the reporting period.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs involved. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid
on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the
extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised
as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged,
cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or
transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities
assumed, is recognised in profit or loss as other income or finance costs.
Borrowings are classified as creditors: amounts falling due within one year unless the Company has an unconditional
right to defer settlement of the liability for at least 12 months after the reporting period in which case they are
classified as creditors: amounts falling due after more than one year.
Leased assets
The Company as a lessee
For any new contracts entered into, 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.
96
Notes to the Company financial statements (continued)
1. Accounting policies (continued)
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 in as a separate line item, ‘Lease liabilities’.
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.
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.
97
Notes to the Company financial statements (continued)
1. Accounting policies (continued)
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.
Critical accounting judgements
Impairment reviews – freehold land and buildings
Land and buildings include an Investment property relating to the Meadowhall Road, Sheffield site, which is leased to
other Group companies. As part of discussions with the Company’s bankers during the year, the Directors obtained a
valuation of the Meadowhall Road site from an independent chartered surveyor, Lambert Smith Hampton, which
indicated that no impairment was required. The Directors are satisfied it is comparable with market value. See Note
6.
Impairment reviews – investment in subsidiaries
The Company has acquired, through business combinations and through other acquisitions, and therefore holds
investments in all its subsidiaries. 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
investment held value to its recoverable amount. See Note 4.
98
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
2022
Number
2021
Number
15
12
2022
£’000
1,273
142
149
23
2021
£’000
1,038
143
97
38
1,587
1,316
Further details of Directors’ remuneration are provided in the Report of the Remuneration Committee and Note 9 to
the consolidated financial statements.
3. Operating loss
The auditor’s remuneration for audit and other services is disclosed in Note 7 to the consolidated financial
statements. Of the total group audit fee for the period, £202,000 was allocated to the Company.
4. Investments
Cost
At 2 October 2021 and 1 October 2022
Amortisation and Impairment
At 2 October 2021 and 1 October 2022
Net book value
At 1 October 2022
At 2 October 2021
Investment in
subsidiaries
£’000
32,918
(27,148)
5,770
5,770
99
Notes to the Company financial statements (continued)
4. Investments in subsidiary companies (continued)
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 on page 79 in the
consolidated financial statements. This review indicated that no impairment was required in respect of the
Company's investment in Chesterfield Special Cylinders Limited that includes the operations of the Cylinders
division. For the holding company, PT Precision Machined Components Limited, which owns the subsidiary
companies that comprise the operations of the Precision Machined Components division, after applying a sensitivity
analysis where medium-term revenue growth reduced to 10% growth indicated by wider market data, an impairment
£1.1m would occur. Management are not aware of any other matters that would necessitate changes to its key
estimates. The recoverable amount of the Cylinders and Precision Machined Components divisions are stated at the
value in use.
The subsidiaries as at the balance sheet date, which are all 100% owned, are:
Name
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
Country of
incorporation
England & Wales
England & Wales
Germany
USA
England & Wales
Scotland
Scotland
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
*Indirectly held subsidiaries
Principal activity
Manufacturing
Manufacturing
Sales and marketing
Manufacturing
Manufacturing
Manufacturing
Holding company
Dormant
Dormant
Dormant
Manufacturing
Holding company
Dormant
Quadscot Precision Engineers Limited and Quadscot Holdings Limited have their registered office at the following
address:
C/O Blackadders LLP, 53 Bothwell Street, Glasgow, G2 6TS
All other 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.
100
Notes to the Company financial statements (continued)
5. Intangible assets
Cost
At 2 October 2021
Disposal
At 1 October 2022
Amortisation
At 2 October 2021
Charge for the period
At 2 October 2022
Net book value
At 1 October 2022
At 2 October 2021
6. Property, plant and equipment
Cost
At 2 October 2021
Additions - right of use assets
Additions
Disposals
At 1 October 2022
Depreciation
At 2 October 2021
Charge for the period
Disposals
At 1 October 2022
Net book value
At 1 October 2022
At 2 October 2021
Leased assets
Carrying value at 1 October 2022
Carrying value at 2 October 2021
IT systems &
Software
£’000
411
(7)
404
330
74
404
-
81
Total
£’000
4,726
11
36
(917)
3,856
1,578
200
(691)
1,087
2,769
3,148
43
383
101
Land and
Buildings
£’000
Plant
and
machinery
£’000
3,851
-
-
(481)
3,370
913
106
(275)
744
2,626
3,046
-
298
875
11
36
(436)
486
665
94
(416)
343
143
102
43
85
Notes to the Company financial statements (continued)
6. Property, plant and equipment (continued)
On 11 August 2022, the Company surrendered the final lease on the non-operational factory premise previously
used by Hydratron Limited and the right of use asset and associated lease liability have been disposed of.
Land and buildings include an Investment property relating to the Meadowhall Road, Sheffield site, which is leased to
other Group companies. As part of discussions with the Company’s bankers during the year, the Directors obtained
two valuations from independent chartered surveyors, Lambert Smith Hampton and Knight Frank, of the Meadowhall
Road site which indicated that no impairment was required. The Directors are satisfied it is comparable with market
value. The original cost of the land and buildings was £3.4 million, which is currently held at a carrying value of £2.7
million following an impairment charge of £0.7 million made in the period to 2 October 2021.
7. Receivables
Prepayments
Other debtors
Amounts owed by Group companies
8. Trade and other payables
Trade creditors
Other tax and social security
Accruals
Amounts owed to Group companies
Amounts owed by group undertakings are charged nil interest and are repayable on
demand.
9. Borrowings
Amounts: falling due within one year
Revolving credit facility
2022
£’000
116
135
3,693
2021
£’000
224
137
4,991
3,944
5,352
2022
£’000
323
136
146
1,728
2,333
2021
£’000
215
50
221
99
585
2022
£’000
2,407
2021
£’000
4,773
Details of bank borrowings are set out in Note 20 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 1 October 2022 the amount thus guaranteed by the company was £nil (2021: £nil).
102
Notes to the Company financial statements (continued)
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
Right of use asset lease liabilities
2022
£’000
2021
£’000
-
28
28
15
15
1
151
152
259
259
During the year, The Company surrendered the lease on the non-operational factory premise previously used by
Hydratron Limited and the lease liability and associated right of use asset have been disposed of. As at the end of
the year, leases were held for 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
6). 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.
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 1 October 2022
were as follows:
1 October 2022
Lease payments
Finance costs
Net present value
2 October 2021
Lease payments
Finance costs
Net present value
Within one
year
£’000
Over one to
five years
£’000
30
(2)
28
16
(1)
15
Within one
year
£’000
Over one to
five years
£’000
170
(18)
152
316
(57)
259
Total
£’000
46
(3)
43
Total
£’000
486
(75)
411
103
Notes to the Company financial statements (continued)
11. Taxation
Deferred tax
Origination and reversal of temporary differences
Under provision in respect of prior year
Change in deferred tax rate
Total taxation credit
2022
£’000
(424)
354
-
(70)
2021
£’000
(42)
27
(34)
(49)
An increase in the UK corporation tax rate to 25% was substantively enacted in May 2021 and is due to take effect
from 1 April 2023. As the most significant timing differences are not expected to unwind until 2023 or later, the
deferred tax rate was maintained at 25% in the period.
12. Share capital
Details of the Company's authorised and issued share capital and of movements in the year are given in Note 26 to
the consolidated financial statements.
Subsequent to the year end, on 6 December 2022, 7,600,000 new ordinary shares with a nominal value of 5p each,
were issued as part of a fundraising which raised cash proceeds, net of expenses, of approximately £2.1 million. Of
that total, £1.7 million was allocated to the share premium account.
There is a single class of ordinary shares. There are no restrictions on the distribution of dividends and the
repayment of capital.
13. Deferred tax
Opening deferred tax asset
Credit for the period
Closing deferred tax asset
The deferred tax asset is made up as follows:
Cost of share options
Accelerated capital allowances
Unutilised losses
Other temporary differences
14. Related party transactions
2022
£’000
142
70
2021
£’000
93
49
_______ _______
212
142
2022
£’000
-
(30)
243
(1)
_______
212
2021
£’000
85
(24)
79
2
_______
142
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 31 in the consolidated financial statements.
104
Notes to the Company financial statements (continued)
15. Ultimate controlling party
The Directors consider that there is no ultimate controlling party.
16. Subsequent events
On 21 October 2022, the Company's Revolving Credit Facility (RCF) was amended and its facility term was extended
from September 2023 to March 2024, with the facility reducing from £2.4 million to £1.9 million in March 2023 and
then £0.9 million in September 2023. Leverage (net debt to adjusted EBITDA) and interest cover covenants, tested
quarterly, recommenced on the first testing date of 30 September 2022 through to the end of the facility. The
September 2022 test period was waived. The December 2022 test period was deferred until January 2023 and
subsequently waived.
On 15 November 2022, the Company announced that it was exploring longer term opportunities which included
potentially divesting the Precision Machined Components division, to strengthen the Group’s balance sheet and cash
position and support the strategic investment in the Cylinders division.
On 6 December 2022, 7,600,000 new ordinary shares with a nominal value of 5p each, were issued as part of a
fundraising which raised cash proceeds, net of expenses, of approximately £2.1 million. Of that total, £1.7 million was
allocated to the share premium account.
On 6 February 2023, the Company announced the major contract placement to one of the Company’s subsidiaries
by a major UK naval customer for pressure vessel manufacturing for a new construction project. Worth £18.2 million,
this contract is the largest ever awarded to a Group company. Progress has commenced against early contract
milestones and pressure vessels will be delivered to the customer over the next three years.
17. Reserves
The profit and loss account includes retained profits and losses for all current and prior periods.
105
106