Pressure left frustrated by contract delays
Engineer warns of a full-year loss
ENGINEERING GROUP Pressure Technologies yesterday warned that it expects to make a full-year loss, as it faces frustrating contract delays and weakness in the oil and gas market.
However, the Sheffield-based group said it remained confident in its medium to long term prospects and revealed that it had secured a series of contract wins in its alternative energy division.
Analysts at Cantor Fitzgerald said Pressure Technologies was coping well in difficult conditions, with management focusing on productivity improvements and cost control, while maintaining the company’s core skills base.
In a trading update, Pressure Technologies said: “Trading in our three manufacturing divisions, cylinders, precision machined components and engineered products, overall continues to be in line with market expectations and, despite the ongoing challenges of the oil and gas market, there have been some positive developments.”
Since the company announced its interim results in June, its alternative energy division has secured a further £8.5m of firm contracts and a conditional award of a contract for £6.5m, to add to the £10m that were signed in the first half of the year.
The statement continued: “As we have highlighted previously, the outturn for the current year is dependent on the timing of contracts in this division.
“It is now clear that delays both in award and commencement on a number of these contracts, particularly in the US, will have a significant impact on the expected results for the year as a whole, albeit that the 2017 financial year will be positively impacted as a result.
“We have also encountered some unanticipated additional legacy costs and margin erosion on a first of type project in North America.
“These factors, coupled with R&D (research and development) spend that has been charged to the profit and loss account as part of our tax planning, will swing the division from a profit to a loss that will materially impact the group result. We now anticipate that the full year result at group level will be a loss, against a market expectation of a profit.”
Chief executive John Hayward said this was disappointing, but not entirely unexpected. He highlighted the importance of the new contract wins, and he said the vote in favour of Brexit hadn’t affected Pressure Technologies, which is a worldwide business.
The company’s precision machined components division has increased its market share by securing a number of new customers, and diversifying into new markets.
Pressure Technologies’ South Wales subsidiary, Al-Met, recently won its single largest order of $1.2m US dollars from the water industry which will be delivered in the first quarter of the 2017 financial year.
Pressure Technologies said: “We have continued to focus on productivity and cost reduction while maintaining our core skills.
“Further headcount reductions have been made, particularly in the engineered products division, although the full benefit of these has not yet been seen as volumes declined further in the second half.
“We are in the process of transferring the business and staff of the Engineered Products Houston sales and maintenance office to a third-party distributor. This move widens the scope of potential sales for the division from the Texas and Louisiana region to the whole of North America, without the attendant costs of maintaining a satellite facility.”
Since the peak of its employment numbers in October 2014, the company has seen a total headcount reduction of 35 per cent, with numbers dropping from 390 to 255.
The company said that trading conditions in the oil and gas market continue to be challenging, and while the market is balancing, the outlook for recovery is slow.
It anticipates that trading in the manufacturing divisions will remain around the current level throughout the next financial year. The statement added: “In the meantime, we will take whatever measures are necessary to ensure the resilience of our businesses while continuing to invest in the future of the group, and implement the strategic objectives to broaden our customer, technology and industrial base.”