The Courier & Advertiser (Perth and Perthshire Edition)
Engineering group losses widen as oil slump hits
INDUSTRY: GA Engineering parent Pryme Group reports £2.5 million pre-tax loss
The slump in the global oil price pushed Dundee manufacturer Pryme Group to a seven-figure loss last year.
Newly published accounts at Companies House show the West Pitkerrobased parent of GA Scotland Precision Engineering suffered a £2.54 million reverse in the year to March 31 2016.
The return represented a significant downturn from the previous year when the group booked a £230,484 loss.
The outcome came despite a major uplift in revenues during the 12-month period from £5.2m in 2015 to £12.58m.
The increase came as Pryme moved to acquire three operating companies – MKW Engineering ,Total Maintenance and Engineering and Stargate Precision Engineering – in the north of England.
The firm said the acquisitions, which all completed on the same day, increased the group’s capabilities in larger fabrication, assembly, testing, project management, hydraulics design and installation works.
Despite the improved capability, chief financial officer Frank Watson said the company had suffered as a result of the oil price downturn.
In the period in review, the price fell from north of $100 per barrel to less than half that figure.
“The group generates a significant proportion of its revenue from clients in the oil and gas industry,” Mr Watson said.
“The fall in the oil price beginning in 2015 impacted on operator and service company spending levels in this sector such that the group experienced difficult trading conditions in the year.”
The accounts show the group attempted to identify new market opportunities to offset the loss of oil and gas derived revenues, and also took steps to cut its overheads.
A total of 14 employees within GA Engineering (Group) were made redundant during the year, resulting in redundancy costs of £100,000.
However, the group’s overall workforce increased from 157 to 206 during the year as a result of additional employees joining the group from the acquired businesses.
In his strategic report to the accounts, which were signed off last month, Mr Watson said it was taking time for a partial rebound in the oil price to be reflected in demand for the group’s services.
“Whilst there are signs of the oil and gas market improving given the oil price is over 50% higher compared to the low price set in January 2016, the general level of activity has decreased further in the current financial year as it takes time for this to filter through to demand for the group’s services,” Mr Watson said.
“This has, in the short term, outweighed the effects of the actions being undertaken by the group to expand into other industrial sectors, capitalise on opportunities that arise in conjunction with the increased range of services offered by the group and further cost reductions, although the group has seen a significant increase in orders received in the last few months and, with the relative stability of oil prices, expects prospects to improve.”
The accounts also note a number of significant events in the current financial year, including completion of a £2m group refinancing in November.
The same month, the group acquired a 90% interest in SENGS Subsea Engineering Solutions and it also raised a further £1.5m in a new share issue.
The firm is ultimately controlled by Simmons Private Equity II, a fund registered in Guernsey.