Pressure Technologies 2016 Annual Report
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ANNUAL REPORT 2016 High quality engineering for demanding markets WHO WE ARE Pressure Technologies plc Annual Report 2016 A specialist engineering Group supplying safety- critical products and services world-wide Pressure Technologies was founded on its leading market position as a designer and manufacturer of high pressure systems serving the global energy, defence and industrial gases markets. Today it continues to serve those markets from a broader engineering base with specialist precision engineering businesses and has a worldwide presence in Alternative Energy as a global leader in biogas upgrading. AT A GLANCE WHERE WE OPERATE Manufacturing Strategic Report Agents and distributors Sales and engineering Associated company HOW WE OPERATE The Group operates across four Contracting Alternative Energy divisions. Three of the divisions are Activity: Greenlane is one of the world’s Alternative Energy is largest suppliers of biogas upgrading manufacturing businesses and the our only contracting equipment with an installed base of over fourth is our Alternative Energy business and we discuss 100 upgraders world-wide. It is also the Division, which is a contracting it separately from only company in its market to supply three our manufacturing of the main biogas upgrading technologies. business. businesses. As a project Upgrading biogas takes a problem for based business the risk, businesses, local authorities and the All our manufacturing is UK based, exporting products revenue and cash flow environment and creates a profitable to a global blue chip customer base. Our businesses profiles are typical of and green solution using existing waste have a recognised reputation for quality, reliability large capital projects. to create renewable energy. and are trusted suppliers of safety-critical products and services. Biogas is a mixture of methane and carbon dioxide and is produced naturally when organic matter such as food waste We specialise in designing, engineering, manufacturing from households, manure, or crops from and servicing what is deemed ‘difficult’ giving us our agriculture is broken down by micro- niche position in the markets we serve and reinforcing organisms in anaerobic digesters our strong partnerships with customers. (“AD”), landfill sites and wastewater treatment plants. Upgrading equipment takes the raw biogas Group revenue 2016 and removes the methane to produce a high purity of biomethane or Renewable £35.8m Natural Gas (“RNG”) as it is also known, Group revenue 2015 that can then be used as a vehicle fuel or injected directly into the gas grid network. £53.8m Market: The global biogas upgrading market was estimated to be worth $0.33 billion in 2015 and is expected to reach $1.97 billion by 2022 growing at a combined annual growth rate (“CAGR”) of 28.7%. Read more on page 16 Pressure Technologies plc Annual Report 2016 The Group will continue its growth strategy, combining acquisitions and organic growth.” Alan Wilson Chairman Sustainable and Responsible Business Read more on pages 18 to 21 Manufacturing Precision Machined Components Cylinders Engineered Products Activity: The businesses within this Activity: Chesterfield Special Cylinders Activity: Hydratron is a manufacturer Three of our four division are leaders in their markets. (“CSC”), has over a century of industry and global supplier of high pressure divisions are With world-class lead times, highly knowledge and expertise and is a testing equipment. Its customers are manufacturers serving specialised precision engineering skills world-leading provider of bespoke, high- high pressure original equipment primarily the oil and gas, and a blue chip customer base. pressure gas containment solutions and manufacturers (“OEMs”), suppliers defence and industrial services. It is one of only five companies and service providers. gases markets. The exploration and production of who can compete globally for ultra large oil and gas demands equipment that cylinder contracts. High pressure testing equipment can withstand extreme and hostile is required wherever there is a environments, produced to exacting The need for high pressure gas need to test pressure in safety standards in order to reliably perform containment spans several markets critical applications. The business in safety critical situations. We provide and applications, from ultra large air manufactures across two areas, key components for a variety of deep- pressure vessel systems used for motion standard pumps and engineered water and subsea oil exploration and compensation on floating oil rigs, high products, which are bespoke production equipment as well as wear pressure cylinders on submarines to systems designed to exact customer parts for oil production. oxygen cylinders in fighter jets and the specifications. The business has a bulk storage of gases. strong global reputation for high quality In order to meet customer needs, products and service excellence. strong partnerships have been In order to meet the exact needs of its formed to develop technical solutions customers it has become an integral Products are sold direct to customers tailored specifically for their end part of the design and engineering and through a comprehensive global product applications. Increasingly process for any high-pressure systems partner network including the US, our customers require technological project. Norway, Italy, South and West Africa, solutions that enable them to compete the Middle East, South East Asia and in a lower oil price environment and In recent years CSC has expanded Australia. we have been able to expand our its activity into Integrity Management market share by working closely with services, where cylinders that cannot Market: The majority of Hydratron’s customers on efficiency improvements be removed for routine maintenance products go into the oil and gas and technical development. are inspected and serviced in-situ. industry but the business also supplies The service is built on an unrivalled its products into the Petrochemical, Market: This division primarily serves knowledge and experience and Aerospace, Marine, Automotive, the global oil and gas industry. performed to industry-leading standards. Power Generation markets. Market: The business serves the global oil and gas market, the global defence market, industrial gases market and the alternative energy market. Read more on page 14 Pressure Technologies plc Annual Report 2016 HIGHLIGHTS Revenue Adjusted Operating Loss** • Annualised savings of £5.4 million achieved from restructuring over the last two years £35.8m £(0.4)m • Revenues from oil and gas reduced to 43% * * (2015 : £53.8m) (2015 ePSURȴW of total revenue (2015: 57%) $GMXVWHG2SHUDWLQJ3URȴW** Adjusted Operating Loss** • Manufacturing Divisions gross margins held up Manufacturing Divisions Alternative Energy at 31% (2015: 32.2%) • Manufacturing Divisions aligned to be profitable £2.2m £(1.1)m at volumes seen in the second half (2015: £6.7m) (2015: £(1.1)m) • Al-Met won its largest ever order of $1.2 million Strategic Report Net Debt Adjusted Loss per Share • Post year end strategic acquisition of Martract Limited £6.6m (2.6)p per Share • Alternative Energy has £14.2 million of upgrader (2015: £7.1m) (2015*: 18.1p) orders carried over for delivery in 2017 3URȴW$IWHU7D[ Total Dividend £0.6m nil * Represented to show results of the Engineered Products US operation as discontinued (2015: £1.2m) (2015: 8.4p) ** Before acquisition costs, amortisation and exceptional charges and credits Governance Financial Statements CONTENTS Strategic Report Who we are At a Glance +LΑKOLJKWV 01 Chairman’s Statement 02 Our Business Model 04 Our Strategy 06 Visit our website for the Overview of our Markets 08 latest news and information pressuretechnologies.com Q&A with Mick Pinder – MD, CSC 12 Business Review 14 Sustainable and Responsible Business 18 Financial Statements Financial Review 22 Consolidated Statement of Comprehensive Income 44 Key Performance Indicators 26 Consolidated Balance Sheet 45 Risks and Uncertainties 28 Consolidated Statement of Changes in Equity 46 Consolidated Statement of Cash Flows 47 Q&A with Accounting Policies 48 Mick Pinder Notes to the Consolidated Read more on Financial Statements 57 page 12 Company Balance Sheet 81 Company Statement of Changes in Equity 82 Governance Notes to the Company Introduction to Governance 32 Financial Statements 83 Directors and Advisers 34 Report of the Remuneration Committee 36 Directors’ Report 39 Independent Auditor’s Report to the Members of Pressure Technologies plc 43 01 CHAIRMAN’S STATEMENT Pressure Technologies plc Annual Report 2016 7KHGLYHUVLȴFDWLRQ of the Group continues Strategic Report Our Manufacturing Divisions are firmly focused on expanding revenues outside the oil and gas sector and the medium- term aim is to have a better balance of business within these divisions.” The last 12 months have been incredibly and some legacy costs which adversely and delayed contract awards. The impact busy for the Group, as we realigned our impacted revenues and profits. However, on adjusted operating profit was a loss manufacturing businesses to remain as a result of much hard work, it is of £0.4 million (2015: £3.8 million profit). profitable at the current volumes from the encouraging to report that we ended the Adjusted operating profit is defined as oil and gas sector, whilst working to build year with an upgrader order book value of operating profit before acquisition costs, the order book for Alternative Energy. £14.2 million,