Pressure Tech shares jump after torrid time

The Sheffield-based group '‹has been through a torrid time following the collapse in the oil and gas market, but its cylinders business (which supplies high-pressure cylinder systems) has switched its focus away from oil and gas to the defence market.Pressure Tech’s CEO John Hayward said the defence market is now the mainstay of the cylinders business with a firm order book of £11.2m through to 2020. Further orders are expected for the Dreadnought class submarine build programme, which is Trident’s replacement. “We are supplying the Dreadnought programme with a range of cylinders,” said Mr Hayward.“There are standard submarine cylinders and banana cylinders, which are very specialised and more efficient. We are not allowed to say exactly what they’re used for.”The first-half result was hit by the phasing of the delivery of large defence orders, pushing both revenue and profit into the second-half.Meanwhile demand for cylinders in the oil and gas market remains subdued, but the firm is getting small orders for floating crane and diving support projects. “There is no expectation of an increase in drill-ship or semi-submersible rigs in the near future,” said Mr Hayward.Pressure Tech is seen as a safe pair of hands at a time when rivals are going bust.“We are recognised as being financially stable when a number of our rivals have gone bust,” said Mr Hayward.“We press all the right buttons in de-risking the supply chain.”The group said it had not seen any impact from last week’s General Election and it should not be affected by the Brexit negotiations.“For us, Brexit is not an issue,” said Mr Hayward.“In terms of Europe, the only work that has the potential to be affected is defence, but we are a monopoly supplier. I’m not overly concerned about Brexit.”The group said redundancy costs had an impact on the business'‹ after the firm made 12 employees redundant. It said it is not planning any more job losses.The company made a pre-tax loss of £2.6m in the six months to April 1, down from a profit of £900,000 the previous half year. Much of this was due to the recognition of a payment in the 2016 accounts and a £400,000 hit from the redundancies.The group said that its restructured Alternative Energy Division has a solid platform on which to grow. “Whilst timing of orders continues to be a source of frustration there are clear signs, particularly in North America, that significant market growth can be expected over the remainder of the decade,” said Mr Hayward.The division designs and supplies equipment used to upgrade biogas produced by the anaerobic digestion of organic waste to high-quality methane, which is suitable for injection into the gas grid or can be used as vehicle fuel.The division entered the year with an order book for biogas upgraders of £14m, around half of which has been delivered in the period and a return to profit has been achieved. The group said that order placement has been “frustratingly slow” due to external factors. In the UK, a proposed change to Renewable Heat Incentive which favoured biogas upgrading, was initially delayed by a drafting error in the legislation and has now been delayed by the General Election. Looking ahead, Pressure Tech said it is confident about the future.“We are positive. We’ve got momentum behind us and we are more confident in oil and gas,” said Mr Hayward.The group’s shares closed up 14p to 150p and analysts welcomed the results.Analyst William Game at Cantor Fitzgerald said: “The interims point to improving momentum across the manufacturing businesses. Precision Machined Components is now benefiting from significant restructuring in recent years against what is a more optimistic backdrop. “Cylinders has also established a strong order book in the defence sector and medium term prospects are positive, notwithstanding a potential oil and gas recovery. Elsewhere, the pipeline in Alternative Energy continues to strengthen, with a number of potentially material projects expected to fall in the second half, albeit timing remains difficult to predict.”