Pressure Technologies : Trading Update

RNS Number : 6007P

Pressure Technologies PLC

30 May 2018

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THE ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

30 May 2018

Pressure Technologies plc

('Pressure Technologies' or the 'Group')

Trading Update

Pressure Technologies plc, the specialist engineering Group today issues an update ahead of its interim results for the 26 weeks to 31 March 2018, which will be announced on Tuesday 12 June 2018.

Alternative Energy Division

The Alternative Energy Division (AE Division) has scored several notable successes since the start of the current financial year, which demonstrates our continued leadership in the biogas upgrading market. Notably, we have installed the world's first biogas upgrader which complies with very strict Californian standards and we have commissioned the world's largest biogas upgrader, in Arizona. Strategic relationships have been formed one of which will give us access to Pressure Swing Adsorption (PSA) technology, thereby expanding our product portfolio and broadening our market access.

As mentioned in the 2017 annual report, the biogas market offers substantial potential, but has been frustratingly slow to deliver and it is disappointing to report that only three new upgrader contracts have been awarded since October 2017. The most common reason for this is delays in customer decision making. In North and South America, delays have arisen due to slowness in obtaining environmental permits, complexity of contract negotiations and customer funding arrangements. Delays in the UK have been primarily caused by the Renewable Heat Incentive (RHI) legislation progressing slowly through Parliament, which was approved on 22 May 2018, some four months later than the energy market expected.
Profit recognition for our upgrading projects is necessarily skewed towards completion, so delays in contract awards experienced to-date will negatively impact our 2018 results and the Division will be loss making for the year.

Following a detailed review of the AE Division and its target markets, we are exploring a number of strategic options that have the potential to unlock value for shareholders.

Set against the background of increasing opportunities in North America and Europe, the Board's view remains positive for the prospects of the Division.

Manufacturing Divisions

Of the three Manufacturing Divisions, Precision Machined Components ('PMC') and Engineered Products ('EP') remain predominantly focused on the global oil and gas market with Cylinders transitioned from a reliance on oil and gas to the defence market.

Precision Machined Components and Engineered Products

It is clear that the oil and gas market is improving, although we see some variability in the order intake. For the last three half-years, PMC has consistently seen order intake rising: from £4.9 million in the first-half of 2017, to £6.5 million during the first-half of this year. Order intake at the start of the third-quarter has been a little muted, but requests for quotations have accelerated, particularly at Quadscot, and are at the highest level since the start of the market downturn in 2014. The recent slowing of order intake makes us slightly more cautious about PMC Division's full-year outlook but with short order to delivery lead-times now the market norm, this can change within a quarter.

EP started from a lower base than PMC and is trading in line with management expectations with a significantly stronger second-half pipeline of quotations.

Cylinders