Pressure ready to step on buying trail again

ENGINEERING group Pressure Technologies is plotting more acquisitions after growing half-year revenues and returning to profit.

The Sheffield-based maker of valves, high-pressure gas cylinders and hydraulic control systems said it has successfully integrated two acquisitions made in 2010 and is looking for more.

“We don’t need acquisitions to grow but if we can get the right things for the right price it makes sense to do them,” said chief executive John Hayward.

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Pressure plans bolt-on deals to expand its presence in the oil and gas market, where it is benefiting from looser spending. “We’re looking for other businesses that could complement that,” said Mr Hayward, adding acquisitions will likely be in hydraulics, pneumatics or control systems.

“We’re looking at things that overlap and extend the product ranges.”

Pressure bought valve wear parts firm Al-Met and hydraulic pumps business Hydratron in 2010 to create its engineered products division.

The company reported pre-tax profits of £0.5m in the six months to the end of March, reversing the £0.3m losses a year earlier. Revenues increased to £12.6m from £10.3m and Pressure said order books for 2012/13 are filling up. Its results are typically second half weighted. Pressure lifted its interim dividend to 2.5p per share from 2.4p a year earlier.

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The group ended the period with net cash of £3.5m, up from £2.7m a year earlier. Mr Hayward added acquisitions could be funded through cash and debt, but share issues are unlikely.

After enduring a “protracted recession” since 2009, as the global downturn and BP’s 2010 Gulf of Mexico oil spill constrained spending on deep sea oil exploration, Pressure said its prospects are picking up.

“Rigs and drillships that were lying idle 12 months ago are now fully booked, triggering new build activity at rates not seen since 2008/9,” said chairman Richard Shacklady.

“Oil and gas production activity has accelerated, both onshore and offshore, benefiting our engineered products division.”

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This division earned revenues of £6.4m, up from £5.1m, and operating profits doubled to £0.4m.

Pressure’s cylinder division, which makes high-pressure cylinders used in deep-sea oil rigs, aircraft and submarines, grew revenues to £6m from £4.3m. Operating profits more than doubled to £0.7m.

The division has already won nine drill ship orders for its current financial year. Last year it won just three.

Despite recent weakness in the oil price, the company said global demand is in its favour. Mr Shacklady said: “It is difficult to imagine a return to a sustained period of low oil prices.”

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Pressure admitted it is “disappointed” by slow progress in its biogas arm, which sells systems to purify methane. The division’s losses deepened to £0.2m, with revenues falling from £0.7m to £0.2m. But Mr Hayward said the business has good potential, and it has identified 20 possible projects. “Things are starting to pick up. The momentum is there.”

House broker Fairfax upgraded its revenue forecast for the full year from £27.7m to £29.4m, but maintained its profit expectation at £1.8m.

“The business is operationally geared,” said analyst Phil Smith. “We would expect top line sales growth to feed disproportionately through to the bottom line.”