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Pressure's profits warning overshadows £2.25m buy
SHARES in gas cylinder group Pressure Technologies took a tumble last night after the group warned that profits are likely to fall below expectations.
The announcement overshadowed the news that the Sheffield-based company has bought niche manufacturer Al-Met for up to 2.25m.
The group's shares fell eight per cent, a fall of 19.5p to 222.5p, after the group warned that it has seen a slowdown in orders for oil and gas support projects.
Chief executive John Hayward said spending delays on these projects are mainly due to customer indecision and continuing economic uncertainty.
"There is a general reluctance to place orders that has been seen across the industry," he said. "Everything is getting pushed back. Until the big customers place big orders, people will remain cautious."
He added that he saw the delays as a temporary timing issue rather than something permanent.
"It's difficult to say when we will get the orders back, but we hope to get them early in 2011," he said.
But investors took flight at the news and analysts reduced their share price recommendations.
The group said pre-tax profits for the current year are likely to be up to 900,000 below market expectations as a result of order delays.
Analyst Mike Stoddart at Daniel Stewart said his new forecast of 3.6m in pre-tax profits was a cut of 26.5 per cent.
"We will see current year profits falling by about one third from the level achieved in 2009," he said.
Mr Hayward said the group would have a clearer picture of the likely full year result by mid April.
Analysts said the earnings recovery should be helped by the acquisition of Al-Met, which makes specialised, precision engineered valve wear parts for the oil and gas industry.
"Al-Met is a very good business and we understand the oil and gas sector," said Mr Hayward. "It will spread the risk profile of the group."
Al-Met is based in Cardiff and both the management team and 29 staff will be retained on the existing site in Wales.
"Al-Met is an established, well invested, niche business, operating in a sector we know and understand," said Mr Hayward. "The highly-skilled workforce and the focus on design and quality fit well culturally with our other businesses. There is a clear opportunity to grow the business organically by expanding both the customer base and the product portfolio."
Al-Met made a turnover of 4.2m and operating profits of 300,000 in the year to December 31. The group's house broker Fairfax said orders in the group's key cylinders division remain in line with expectations.
It added that the group is being cautious on the outlook for oil and gas support service projects.
"The company is looking almost eight months out on demand and in our view, is certainly being very careful on outlook," said Fairfax analyst Phil Smith. "We understand that the delayed orders are for a diverse range of projects on the oil services side rather than from one large customer. Client sentiment may change over the next couple of months and customers may start placing these orders."
Pressure's high-pressure cylinders are used in sectors including defence, shipping, aviation and deep-sea oil and gas.
It operates mainly through its core Chesterfield Special Cylinders division.
Production line for clean energy
Pressure Technologies is helping to power the green energy sector through its Chesterfield BioGas division, which turns methane into clean gas.
The group provides and installs systems to produce high-purity biogas, which can be used in the gas grid or to power vehicles, for customers ranging from councils to utility providers and farms.
Chesterfield BioGas builds systems to turn low-grade biomethane – a gas produced at sites such as sewage-treatment works – into clean, high concentration biomethane.
Car manufacturers Mercedes and Volkswagen are building methane-powered cars for the UK market, and government legislation is encouraging the injection of biomethane into the gas grid.
The group's traditional business is the manufacture of high-pressure cylinders for use in the shipping, oil and gas industries through its subsidiary, Chesterfield Special Cylinders.
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