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Pressure Technologies set for future profits

Pressure Technologies' CEO John Hayward
Pressure Technologies' CEO John Hayward
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Engineering firm Pressure Technologies ​expects to break even this year after a half year loss and said it expects to be profitable going forwards.

​The ​​Sheffield-based​ ​​group ​has been hit by delays in customer decision making and the Renewable Heat Incentive (RHI) legislation progressing slowly through Parliament.​

The ​firm warned two weeks ago that its full year results would be substantially below market expectations​.

In its ​​Alternative Energy Division, the ​firm said the ​biogas market offers substantial potential, but has been frustratingly slow to deliver.

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 RHI legislation progressing slowly through Parliament. The legislation was approved on May 2​2​, four months later than the energy market​ expected.

​The group said p​rofit recognition for ​the​ upgrading projects is skewed towards completion, so delays in contract awards will negatively impact 2018 results and the ​division will be loss making for the year.

Following a detailed review of the ​Alternative Energy Division, ​the group said it is exploring a number of strategic options that have the potential to unlock value for shareholders.​

The group’s CEO John Hayward said there are a wide range of alternatives for the division’s future, but refused to be drawn on what these are.

“It’s not about re-organisation. We’ve done that,” he said.

“It’s about finding a model for the business that gives shareholder value.”

The group made a pre-tax loss of £5m in the six months to March 31, up from a loss of £2.6m the previous half year.

Mr Hayward said: “Alternative energy is the reason we’ve gone backwards. On the manufacturing side, there is very positive momentum.”

He said that the defence and oil and gas markets are showing considerable momentum, so the outlook for the Manufacturing Divisions is encouraging, but it depends on timing.

“There is significant potential in Alternative Energy, and the board is considering a number of strategic options for this division that will hopefully increase market opportunities and lead to enhanced shareholder value.”

He said the group’s defence business is doing “very well”.

“We’ve got a pretty strong order book,” he added.

“We have a contract for full supply on the Dreadnought submarine (Trident’s replacement). We have to wait for each stage to be released.

“We are picking up orders for submarine cylinders in foreign markets. It’s a very positive picture.”

He said the oil and gas market is starting to pick up.

“There is still some volatility in the market, but requests for quotations have increased.

“There is a lot more confidence around the market. It’s very positive. The big change now is that because the oil price has stabilised above 70 dollars, people are willing to invest,” he added.

Analyst Robin Byde at Cantor Fitzgerald said: “Pressure Technologies has reported half year results which are in line with our revised expectations following a recent profit warning.

“Recent trading has been tough particularly due to delayed customer decisions on biogas upgrader contracts in the Alternative Energy (AE) division. The Manufacturing units are generally performing well, but a delay in uptake of cylinders for the Dreadnought submarine programme will shift earnings into FY19.

“Despite recent headwinds, the Manufacturing divisions are probably now better placed to capture recovery in demand, and we believe Pressure Technologies will rigorously address the underperformance of the AE unit.”