PRESSURE
TECHNOLOGIES PLC
ANNUAL REPORT AND ACCOUNTS 2008 CONTENTS
OVERVIEW
PRODUCTS
PEOPLE
MARKETS
BIOGAS
HIGHLIGHTS 09
CHAIRMAN’S STATEMENT 10
REVIEW
CHIEF EXECUTIVE’S STATEMENT 12
MANAGEMENT & GOVERNANCE
DIRECTORS AND ADVISORS 16
DIRECTORS’ REPORT 18
FINANCIAL STATEMENTS & NOTES
REPORT OF THE INDEPENDENT AUDITOR TO THE
MEMBERS OF PRESSURE TECHNOLOGIES PLC 22
CONSOLIDATED INCOME STATEMENT 23
CONSOLIDATED STATEMENT OF TOTAL
RECOGNISED INCOME AND EXPENSE 23
CONSOLIDATED BALANCE SHEET 24
CONSOLIDATED CASH FLOW STATEMENT 25
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS 26
COMPANY BALANCE SHEET 47
NOTES TO THE COMPANY FINANCIAL STATEMENTS 48
PRESSURE
TECHNOLOGIES PLC
PRODUCTS
A LEADING DESIGNER AND
MANUFACTURER OF ENGINEERING
SOLUTIONS FOR HIGH PRESSURE
MARKETS.
PT
=
SPECIAL
WE ARE MORE THAN A MANUFACTURER.
WE WORK IN PARTNERSHIP WITH OUR
CUSTOMERS TO DESIGN AND DEVELOP
THE BEST TECHNICAL SOLUTIONS
FOR THEIR CYLINDER AND PRESSURE
SYSTEMS REQUIREMENTS. IST
>
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> PEOPLE
WE HAVE A HIGHLY EXPERIENCED
AND SKILLED TEAM. WE DRAW UPON
THESE SKILLS FROM DESIGN AND
MANUFACTURING TO PROJECT
AND SUPPLY CHAIN MANAGEMENT
WITH ONE COMMON PURPOSE:
TO MAKE OUR CUSTOMERS’
LIVES EASIER.
EXPERTS
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> >
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> MARKETS
0PPORTU
WE LOOK FORWARD TO THE FUTURE
WITH CONFIDENCE, UNDERPINNED BY
A RECORD ORDER BOOK IN GROWING
NICHE MARKETS IN THE GLOBAL
ENERGY AND DEFENCE SECTORS.
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> NITIES
> WE ARE BUILDING UPON A PROVEN
TRACK RECORD IN THE RENEWABLE
ENERGY MARKET WITH OUR PARTNERS
GREENLANE
®
BIOGAS IN SCANDINAVIA
BRINGING THE TECHNOLOGY TO
CONVERT RAW BIOGAS TO FUEL GRADE
BIOMETHANE INTO THE UK MARKET.
BIOGAS
SUSTAIN
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> ABLE
>
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> AN EXCEPTIONAL YEAR!
OUTSTANDING PROFITS,
STRONG BALANCE SHEET,
RECORD ORDER BOOK
AND CASH IN THE BANK
TO FUND FUTURE GROWTH.
HIGHLIGHTS
VALUE
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> PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 09
DELIVERING
SUCCESS
56
%
REVENUE 2008: £23.7M
91
%
%
GROSS PROFIT 2008: £7.5M
16 2
OPERATING PROFIT 2008: £4.9M
EPS-BASIC 2008: £31.6P
%
19 0
A GREAT HERITAGE
100 YEARS OF EXPERIENCE IN THE DESIGN,
MANUFACTURE AND MAINTENANCE OF
PRESSURE PRODUCTS.
MEETING CUSTOMERS NEEDS
AN UNRIVALLED REPUTATION FOR PRODUCT
EXCELLENCE AND CUSTOMER SERVICE.
INNOVATION
CONTINUING RESEARCH AND DEVELOPMENT
IN CYLINDER AND SYSTEM APPLICATIONS.
DESIGN AND TECHNICAL EXPERIENCE
CONTINUING TO STRETCH THE ENVELOPE
OF CYLINDER AND SYSTEM DESIGNS AND
INFLUENCING INTERNATIONAL STANDARDS
THROUGH ACTIVE COLLABORATION ON ISO
WORKING GROUPS.
ENGINEERING SALES
THE SALES TEAM ARE FIRST AND FOREMOST
ENGINEERS, LOOKING FOR THE OPTIMUM
SOLUTION TO OUR CUSTOMERS’ REQUIREMENTS.
BUILDING FOR THE FUTURE
RECRUITING, TRAINING AND DEVELOPING
THE BEST DESIGNERS, TECHNICIANS,
ENGINEERS AND APPRENTICES.
ADDING VALUE
A DEEP UNDERSTANDING OF CORE
MARKETS ENABLING THE DELIVERY OF
BESPOKE ENGINEERING SOLUTIONS.
BROADENING THE BASE
CONTINUING TO DEVELOP NEW MARKETS
FOR OUR PRODUCTS AROUND THE WORLD
WITH EXPANSION IN AUSTRALASIA AND
THE PACIFIC RIM.
PUSHING THE BOUNDARIES
IDENTIFYING NEW PRODUCTS AND CROSS
SELLING OPPORTUNITIES INCLUDING THE
INTRODUCTION OF BIOGAS INTO THE UK
AND GAS TRAILER REFURBISHMENT.
GREEN ENERGY
SUPPLYING THE TECHNOLOGY TO TURN
RAW BIOGAS INTO HIGH QUALITY BIOMETHANE,
A GREEN, ENERGY EFFICIENT FUEL.
TECHNOLOGY AVAILABLE TODAY
BRINGING TO THE UK A PROVEN TECHNOLOGY
WITH A DECADE LONG TRACK RECORD
AROUND THE WORLD.
UNTAPPED MARKET
A SIGNIFICANT PIPELINE OF PROJECT
OPPORTUNITIES ALREADY IDENTIFIED.
SALES GROWTH
WE HAVE SEEN SIGNIFICANT GROWTH
ACROSS ALL MARKET SECTORS WHICH
CONTINUES TO BE UNDERPINNED BY A
SOLID FORWARD ORDER LOAD.
PROFIT GROWTH
PROFITABILITY HAS GROWN THROUGH
THE CONTRIBUTION OF INCREASED VOLUMES,
PRODUCTION EFFICIENCIES, BETTER
OPERATIONAL GEARING AND THE WEAKENING
OF STERLING.
FINANCIAL STABILITY
STRONG BALANCE SHEET WITH
NET FUNDS OF £5.9 MILLION.
SHAREHOLDER VALUE
EARNINGS PER SHARE ALMOST TRIPLED
REFLECTING THE INCREASED LEVEL
OF PROFITABILITY IN THE BUSINESS.
MAIDEN DIVIDEND OF 6P PER SHARE
PAID AND PROPOSED.
> > > > 10 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
CHAIRMAN’S STATEMENT
WE HAVE ENTERED THE NEW
FINANCIAL YEAR WITH A RECORD
ORDER BOOK OF £23 MILLION GIVING
CLEAR VISIBILITY THROUGHOUT
2009 AND INTO 2010.
2008
A GREAT YEAR
OCTOBER 2007
FOR THE FIRST TIME IN 14 YEARS, AN AVRO VULCAN,
SYMBOL OF BRITAIN’S COLD WAR HISTORY, HAS TAKEN
TO THE SKIES, WITH A LITTLE HELP FROM
CHESTERFIELD SPECIAL CYLINDERS. CHESTERFIELD
SUPPLIED AROUND 20 HP AIRCRAFT CYLINDERS OF
BETWEEN 0.44 AND 10 LITRES CAPACITY. PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 11
NOVEMBER 2007
PRESSURE TECHNOLOGIES PLC WON THE YORKSHIRE
POST EXCELLENCE IN BUSINESS AWARD FOR 2007.
THE AWARD FOR BUSINESS ACHIEVEMENT WAS
SPONSORED BY PRICEWATERHOUSECOOPERS AND
PRESENTED BY THE RIGHT HON. WILLIAM HAGUE MP .
DECEMBER 2007
NEW FURNACES INSTALLED AT THE
ULTRA-LARGE FORGE, REDUCING GAS USAGE
BY 50% AND IMPROVING BOTH PRODUCT
QUALITY AND THROUGHPUT.
It gives me pleasure to announce an outstanding
set of results for the Group, which surpassed all
original expectations for the year .
We are also on course to exceed one of the major
aims in our flotation strategy “to be a £40 million
turnover business within five years”, as the
Group achieved record exports to its Oil and Gas
exploration and production customers, as well as
winning selected overseas defence contracts.
RESULTS
Turnover increased to £23.7 million, compared
with £15.1 million in 2007 - a creditable rise of
over 50%. This increase in sales, combined with
ongoing operating efficiency gains, served to more
than double operating profits to £4.9 million
before exceptional items (2007: £1.9 million).
Profit before taxation was £5.0 million
(2007: £1.4 million) and earnings per share rose
to 31.6p (2007: 10.9p).
Despite long lead times from major suppliers,
I am pleased to confirm that our actions to
control working capital resulted in year end net
funds of £5.9 million (2007: £4.6 million).
The Board has agreed a progressive dividend
policy and is recommending a maiden final
dividend of 4.0 pence per share, giving a total
dividend for the year of 6.0 pence. If approved at
the Annual General Meeting, this dividend will
be paid on 12 March 2009 to shareholders
on the share register at the close of business on
13 February 2009. The ex-dividend date will be
11 February 2009.
STRATEGY
Our Business Growth Strategy, to penetrate key
growth sectors, notably global energy and high
pressure gases markets, establishing a
presence in new niche markets and acquire
businesses which offer synergistic benefits in
related niche sectors, is progressing:
Long term export contracts and orders have
been secured from overseas defence and
aerospace programmes in Europe and Asia.
As well as supplying assemblies to drilling rig
constructors, we are also continuing to win
orders for offshore diving support vessels.
In the industrial gas trailer refurbishment sector,
contracts have been secured stretching into 2009
from a major industrial gas supplier .
In the Compressed Natural Gas (“CNG”) and
Biogas sectors, we have signed an Agreement
with Greenlane
®
Biogas Limited, a New Zealand
based company with a market leading position
on Biogas upgrading technology. The UK lags
behind the rest of northern Europe in exploiting
an energy source that is growing at over 25% per
annum in those countries. Recent changes in UK
legislation will facilitate the growth of this energy
source in the UK gas market.
We continue to invest in R&D programmes,
including composite material cylinders and
internal selected surface coatings, which are
attracting interest from both industrial and
defence customers. Initial prototype products
are being manufactured and evaluated for
potential applications.
Key equipment has been procured and skilled
staff recruited that will enable us to target the
in-service field testing of ultra-large cylinders.
This sector is expected to develop as cylinders
in service start to require re-certification.
PEOPLE
We welcomed Philip Cammerman to the Board
as a Non-executive Director in April 2008 and
also James Lister, who was appointed Group
Finance Director on 1 June 2008. The Group
is already benefiting from their combined
expertise.
I am particularly pleased to report that the
achievements of our Chief Executive, John
Hayward, were recognised nationally when he
scooped the Ernst & Young Business Products
Entrepreneur of the Year Award 2008.
We strengthened our second tier management
and professional staff during the year under
review. Recognising that there is a skills
shortage in the UK, we have ramped up our
engineering training and apprentice programmes.
The Group is also well positioned geographically
to benefit from local universities and Research
Institutes which have maintained sound technical
faculties - including Sheffield University, Hallam
University and NAMTEC. Our future as a
value-driven engineered products business
depends on our investment in engineering and
metallurgical skills and resources.
It is appropriate to acknowledge the skill, hard
work and support of our Operational Directors
and all our employees in contributing to another
successful year for our business.
Finally, I would like to thank our shareholders for
their support of the Company throughout the year .
PROSPECTS
Pressure Technologies has entered the new
financial year with a record order book of
£23 million (2007: £18.0 million) giving clear
visibility throughout 2009 and into 2010. There
remains a shortage of semi submersible and
deepwater drilling rigs to support the world’s
demand for hydrocarbons and we are enthused
by the medium term prospects of the CNG and
Biogas sector, in which Chesterfield BioGas is
already developing a significant tender pipeline.
The Company continues to evaluate synergisitic
acquisitions, particularly in the light of our cash
resources and the opportunities now being
presented in the market.
The Board is confident that Pressure Technologies
will deliver further growth in the short term and,
as we roll out our diversification strategy on a
controlled and profit driven basis, the medium to
long term future of the Group remains strong.
RICHARD SHACKLADY
Chairman
8 December 2008 12 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
CHIEF EXECUTIVE’S STATEMENT
2008
A GREAT YEAR
JANUARY 2008
IT WAS VERY PLEASING TO SEE CSC GAIN
ACCREDITATION TO ISO14001:2004 IN JANUARY 2008.
OUR PRODUCT IS VIRTUALLY 100% RECYCLABLE,
BUT IT IS ALSO GOOD TO KNOW THAT WE ALSO HAVE
A ROBUST ENVIRONMENTAL MANAGEMENT SYSTEM
IN OUR MANUFACTURING FACILITY. PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 13
OUR STRONG ORDER BOOK AND
PIPELINE OF PROSPECTS SHOULD
ENSURE THAT WE DELIVER ANOTHER
GOOD RESULT IN 2009.
MARCH 2008
FIRST CYLINDERS SUPPLIED TO THE CANADIAN NAVY
FOR VICTORIA CLASS SUBMARINES.
JUNE 2008
FURTHER ORDERS RECEIVED FROM THE INDIAN
NATIONAL AERONAUTICS LABORATORY AS PART
OF OUR INVOLVEMENT IN THE INDIAN SPACE
PROGRAMME.
It was a year of exceptional organic growth,
which was recognised in our share price
performance relative to the AIM market.
We exited the year with a record order book
and a strong pipeline of quoted projects in all
markets. This seems somewhat at odds with the
world financial climate but may be explained, in
part, by the markets in which we operate.
In our main market, the Oil and Gas sector, there
remains a shortage of semi-submersible drilling
rigs and drill ships to develop deep water
hydrocarbon reserves. This has created strong
demand for our products which started in 2005
when oil prices were averaging around $50 per
barrel. If oil price is a driver of investment, then
we do not yet appear to be outside the price
range for investment to be profitable. Nor has
there been a reduction in the number of projects
for support services projects. A further indicator
of the sector’s strength is the availability of
materials, in particular, seamless pipe, which is
used for drill pipe as well as cylinders. This is
still rationed and a number of steel mills have
no available capacity in 2009.
There was an increase in activity in the export
defence market. We won naval build orders in
two new geographical areas, France and Canada.
The UK defence market remains subdued,
however we continued to supply significant
quantities of cylinders into military aircraft
programmes and are bidding for further
contracts on aircraft carriers and the Astute
submarine programme. Sales to the naval
market will be significantly higher in 2009 than
at any time since 2002.
All our other markets, in terms of orders and
levels of quotations, remain at or above historical
levels. I was particularly pleased with the growth
achieved in our trailer refurbishment business,
which should continue into 2009. We have our
largest forward order load for new trailers since
the management buyout in 2004.
Threats from market downturn do not appear
significant in the short term and I concur with
our Chairman on the medium and long term
prospects for the Group.
Looking at 2008, we had a terrific year with a
significant number of “highs” and a few missed
opportunities. The key points being:
WHAT WE DID WELL
Winning orders, growing sales and ending the
year with a record £23 million order book. Sales
at our operating company, Chesterfield Special
Cylinders, increased by 56% to £23.7 million
(2007: £15.1 million) with growth being achieved
in all our major markets.
The increase in sales was predominantly in
ultra-large cylinders and operations management
was highly effective, improving line efficiency.
As a consequence, gross profit increased by
91% after allowing for year on year net exchange
gains of £0.5 million.
Manufacturing support was improved through
the addition of a production planner and
implementation of finite capacity scheduling
software.
Building relationships with a range of business
partners and organisations, which will benefit
the growth of the business in the future.
Getting to a position where we could launch
Chesterfield BioGas (see below).
WHERE WE COULD HAVE DONE BETTER
We did not have sufficient resources to grow
the small cylinder business, due to the focus
on improving throughput on the ultra-large
production line and sales resources were
diverted onto the Biogas project (see below).
This will be addressed in 2009 by the introduction
of a separately managed business unit for small
cylinders, which will have its own dedicated
operations management and sales staff. 14 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
CHIEF EXECUTIVE’S STATEMENT
CONTINUED
2008
A GREAT YEAR
JULY 2008
CHESTERFIELD BIOGAS FORMED IN PREPARATION
FOR THE LAUNCH OF THE NEW DIVISION IN
NOVEMBER 2008.
Stock levels were too high, as a result of holding
stock to cover poor delivery by suppliers and the
insistence, by some customers, that we source
certain fittings from their nominated suppliers.
We are working very closely with suppliers to
improve the reliability of deliveries and our
customers have now given us permission to
resource fittings from cost effective UK based
suppliers.
OPERATIONAL REVIEW
Sales and marketing
This was a very busy year for Philip Redfern and
his team at CSC. The plan to pursue growth in
the UK aggressively with the appointment of an
additional salesman focused solely on this
market was put on hold, as the new salesman
was moved to our new Biogas project. Significant
opportunities to grow the customer base in our
home market across the full range of
commercial products and services remain and a
modified version of this plan, incorporating the
new business unit structure, will be relaunched
as soon as we have recruited another salesman.
Our International Sales Development Manager
was very active in India, the Far East and China
during the year and we are actively quoting for
projects in niche sectors, where higher pressures,
product integrity and design capability are
essential.
As reported above, the export defence market
was very rewarding. It was particularly satisfying
to win the contract for high pressure cylinders on
the Barracuda submarine, after thirty years
endeavouring to gain entry to the French defence
sector . We will continue to target all naval build
programmes worldwide, as our design and
development capability in this sector is
unrivalled. Medium term prospects for the UK
look promising and we intend to lodge innovative
bids that highlight our supply chain expertise.
Operations
The challenges of the £8.6 million increase in
revenues should not be underestimated.
Operations management at CSC, led by John
Brown and Philip Catton, met the challenges
very successfully. Manufacturing employees
increased from 33 at the beginning of the year to
52 by year end. Training was not neglected and
we successfully ran induction courses and an
NVQ level 2 course. Given the success of our
apprenticeship scheme, we decided to employ
three new apprentices in September 2008.
An experienced production planner was
employed and investment in finite capacity
scheduling software was made to ensure on-
time delivery and manage production flow more
effectively. By the year end, overdue orders were
reduced to very low levels.
Capital investment was once again focused on
improving manufacturing efficiency and
increasing output. This included changing the
layout of a number of areas within ultra-large
manufacturing to improve product flow and the
installation of new end-heating furnaces for the
ultra-large forge, which halved gas usage and
improved product quality. Capital investment in
2009 will again be in excess of twice the
depreciation level.
Business units will be introduced in 2009 to
deliver improvements in both the ultra-large and
the small cylinder areas. In ultra-large, there will
be a concerted effort to eliminate waste and
further improve process flow and we are
currently working with the Manufacturing
Advisory Service on a project to achieve this.
In small cylinders, the focus will be on growing
the business.
Technical and development
Maintaining our technical and design capability
continued to pay dividends, as many of our
customers no longer have high pressure cylinder
design expertise in their organisations. The
additional designer we employed gives us greater
scope for both product and tooling development.
We are now in the process of recruiting a
graduate trainee into the design function.
The CSC Technical Director, Alan Harding, is
actively engaged in the development of new
ISO standards for ultra-large seamless steel
cylinders and ultra-large composite cylinders.
To assist with this and other areas of development,
we have engaged Dr Rohitan (Roy) Irani, former
Global Technical Authority, Cylinders, for
The BOC Group, as a consultant. Roy has a
lifetime’s experience in the design and applications
of both high and low pressure cylinders, including
cryogenic applications.
Research and development continued on a range
of products and services and we now have closer
links with the Sheffield Advanced Manufacturing
Research Centre and the two Sheffield universities.
CSC is also involved in the Special Metals
Forum's nuclear supply chain initiative. The key
areas for development in 2008 are:
The development of in-service field testing of
cylinders where we have recently procured key
equipment and recruited staff with the relevant
non-destructive testing expertise.
The development of ultra-large composite
cylinders.
The development of materials and coatings for
naval applications. PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 15
Corporate Social Responsibility
The management of health and safety issues
remains a management priority across the
business. Health and safety is an agenda item at
both the Pressure Technologies and CSC Boards.
It was disappointing to see reportable accidents
increase to three this year (2007: 2, target: 0);
none of these injuries were life-threatening.
Additional capital expenditure to improve
materials handling is planned for 2009 - the
major project will improve loading and unloading
of the ultra-large forge.
It was very pleasing to see CSC gain accreditation
to ISO14001:2004 in January 2008. Our product is
virtually 100% recyclable, but it is also good to
know that we also have a robust environmental
management system in our manufacturing
facility. Once again, we had no environmental
incidents in the year .
CSC gives donations of £250 per month to
charity. These donations are administered by an
employee committee. The aim of these donations
is two-fold; to help small, mainly local charities
and to raise employee awareness of, and
participation in, charitable giving.
Chesterfield BioGas
During the year, we were actively engaged in
preparing the Group’s entry to a new market.
On 10 November 2008, we announced the
establishment of a new operating division,
Chesterfield BioGas, following the signing of a
co-operation agreement with Greenlane
®
Biogas
Limited, the world leader in biogas upgrading
from raw biogas to vehicle quality fuel.
Under the agreement, which gives Pressure
Technologies exclusive rights to market Greenlane
®
equipment in the UK and Eire, Chesterfield
BioGas will provide turnkey solutions for the
cleaning, storage and dispensing of biomethane,
produced from waste water treatment and
anaerobic digestion of organic waste. We have a
long relationship with Flotech, the owners of
Greenlane
®
Biogas, as we have worked together
on a number of biogas projects in Sweden over
the last decade. This is a low-risk, tried and
tested biomethane fuel solution for the UK
market. Our joint skills and experience in this
field mean that we are able to deliver an effective
and successful system, when others can only
offer prototypes.
The UK market for biomethane has, to date,
remained untapped, largely due to a limited
availability of methane-fuelled vehicles and
subsidies for combined heat and power plants,
which have made the injection of methane into
the gas grid uneconomic. These two factors are
now being addressed. Mercedes and Volkswagen
are now producing right-hand drive methane
fuelled vehicles for the UK market and the
Energy Bill has been changed to pave the way
for financial incentives, designed to encourage
direct injection of biomethane into the gas grid.
Chesterfield BioGas will develop the UK market
for biogas cleaning equipment, which provides
clean biomethane suitable for use as an alternative
vehicle fuel or for direct injection into the natural
gas grid, across a wide range of commercial
sectors. These will include waste management
and water treatment companies, as well as large
commercial farmers and waste food processors.
A strong pipeline of projects is developing but,
due to the complexity of UK planning law and
lead times on equipment, it is anticipated that
orders secured by Chesterfield BioGas in 2009
will not contribute to Group revenues until the
year ending 30 September 2010.
Acquisitions
We have a target list of companies that match
our criteria of niche, high added value companies
in pressure containment and control markets
and we are actively in discussions with a number
of companies. We now have more time to spend
working on delivering acquisitions and intend to
employ additional resources to assist with this
process. Buying private companies is time
consuming and about relationships. Time spent
getting this right is essential to the success of
the programme and we will not buy in haste.
In summary, 2008 was another successful year
for the Group, delivering solid growth and
shareholder value. Our strong order book and
pipeline of prospects should ensure that we
deliver another good result in 2009.
JOHN HAYWARD
Chief Executive
8 December 2008
AUGUST 2008
RECORD ORDER INTAKE OF OVER £6 MILLION
IN ONE MONTH.
SEPTEMBER 2008
ORDER PLACED BY DCN FOR THE SUPPLY OF
CYLINDERS FOR THE FRENCH NAVY’S BARRACUDA
CLASS SUBMARINES. 16 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
DIRECTORS AND ADVISORS
Pressure Technologies plc
Board of Directors
(Left to Right)
Nigel Luckett, Richard Shacklady,
Philip Cammerman,
John Hayward, James Lister
Chesterfield Special Cylinders Ltd
Operational Board Directors
(Left to Right)
John Hayward (Managing Director), James Lister,
John Brown, Alan Harding, Philip Catton,
Philip Redfern. PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 17
P S Cammerman
Non-executive Director (66)
Philip has over 20 years industrial experience in
engineering and hi-tech industries and has
worked in both the UK and USA. He has spent
the last 23 years in the venture capital industry,
playing a major part in the development of the
YFM Group into the most active investor in UK
SME’s. He retired from all YFM Group
businesses in April 2008 following their disposal
to GLE Capital. Philip is Chairman of the
remuneration committee.
N F Luckett
Non-executive Director (66)
A qualified chartered accountant, Nigel is a
former partner of Thomson McLintock & Co and
latterly KPMG and has over 40 years of extensive
corporate finance, insolvency and auditing
experience. Since his retirement from KPMG in
1995 he has had a number of Non-executive
Director and Chairman positions in the broad
engineering sector . Nigel is Chairman of the
audit committee.
R L Shacklady
Non-executive Chairman (60)
Richard is a partner with RLS Associates
where he works as a management consultant.
He joined the Pressure Technologies business
at the time of the MBO in 2004. He has extensive
experience of working in several roles in the
engineering sector, latterly as Managing Director
of Doncasters UK Holdings plc. Richard is
also the Non-executive Chairman of Langley
Alloys Limited.
J T S Hayward
Chief Executive (47)
John has worked for the Company for 11 years,
initially as Finance Director of Chesterfield
Cylinders Limited before assuming additional
directorial responsibility for the then Special
Products division in 2000. He led the MBO
in 2004 and then assumed the role of
Chief Executive. John is a qualified accountant
and has previously worked for Boots, Courtaulds,
United Engineering Steels and T&N. Latterly at
T&N, he worked as an internal consultant and
was brought to Chesterfield Cylinders as a
result of his experience of automotive sector
management techniques. He holds a degree
in Physics from Oxford University.
T J Lister
Finance Director (53)
James joined the Company in 2008. His previous
engineering industry experience includes seven
years with The 600 Group Plc in roles both as
Group Financial Controller and as Finance
Director of 600 Lathes. Prior experience included
15 years with Bridon in a variety of roles including
Group Development Manager where he acted as
the in house mergers and acquisitions manager .
James is a qualified chartered accountant.
OUR MANAGEMENT TEAM
A WIDE RANGE OF TALENTS AND
EXPERIENCE FOCUSED ON
DELIVERING SHAREHOLDER VALUE.
DIRECTORS
R.L.Shacklady – Non-executive Chairman
J.T.S.Hayward – Chief Executive
P .S.Cammerman - Non-executive Director
(appointed on 14/04/08)
T .J.Lister - Finance Director (appointed on 01/06/08)
N.F.Luckett – Non-executive Director
SECRETARY
T.J.Lister
REGISTERED OFFICE
Meadowhall Road
Sheffield
S9 1BT
COMPANY INFORMATION
REGISTERED NUMBER
06135104
WEBSITE
www.pressuretechnologies.com
NOMINATED ADVISOR
Brewin Dolphin Limited
34 Lisbon Street
Leeds, LS1 4LX
AUDITORS
Grant Thornton UK LLP
Enterprise House
115 Edmund Street
Birmingham
West Midlands, B3 2HJ
SOLICITORS
hlw Commercial Lawyers LLP
Commercial House
Commercial Street
Sheffield, S1 2AT
BANKERS
Bank of Scotland
7 Leopold Street
Sheffield, S1 2FF
REGISTRARS
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield, HD8 0LA 18 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
DIRECTORS’ REPORT
The Directors present their report and the audited financial statements for the period from 1 October 2007 to 27 September 2008.
PRINCIPAL ACTIVITIES
Pressure Technologies plc (“PT”) is the holding Company for Chesterfield Special Cylinders Limited (“CSC”) whose principal activities are the
design, manufacture and reconditioning of seamless steel high pressure gas cylinders.
RESULTS AND DIVIDENDS
The Consolidated Income Statement is set out on page 23. The profit on ordinary activities before taxation of the Group for the period ended
27 September 2008 amounted to £5.046 million (2007: £1.384 million).
An interim dividend of 2.0p per share was paid during the period (2007: £nil). The Directors recommend a final dividend of 4p per share (2007: £nil).
BUSINESS REVIEW
Financial overview
Revenues increased to £23.660 million (2007: £15.124 million) principally as a result of demand from the Oil and Gas sector, an increase of 56%.
Gross profit increased by 91% to £7.510 million (2007: £3.935 million) giving a gross margin of 32% (2007: 26%). The increase in gross margin was
due to improved operating efficiencies, increased activity levels through the factory and favourable exchange rate movements.
Administration expenses, excluding exceptional costs, increased by 26% to £2.578 million to support business growth.
Profit before tax increased by 265% to £5.046 million (2007: £1.384 million). Basic earnings per share were up 187% at 31.6p (2007: 10.9p).
The cash inflow from operations was £2.881 million (2007: outflow £0.609 million) reflecting the significant increase in operating profits which
were converted to cash, less the extra inventory requirements of the business.
The nature of the capital expenditure projects undertaken during the year are described in the Chief Executive’s statement.
Operational overview
The operational overview is contained in the Chief Executive’s statement on pages 12 to 15.
ENVIRONMENT
Pressure Technologies recognises that its activities have an impact on the environment. Managing this impact is an integral part of responsible
corporate governance and good management practice. The Group has developed environmental policies and the main points are listed below:
• Overall responsibility for the implementation of these policies is the responsibility of the main Board and the senior management at each
Group Company.
• The Group will comply with both the letter and the spirit of relevant environmental regulations. Additionally the Group will actively participate in
industry and governmental environmental consultative processes.
• Chesterfield Special Cylinders gained ISO14001:2004 approval in January 2008.
• The Group is committed to the continuous improvement of its environmental management system. Specifically the Group seeks to reduce
waste and energy use and prevent pollution.
• As part of continuous improvement, it is the policy of the Group to establish measurable environmental objectives and communicate these to
all employees. These documented objectives will be periodically reviewed as part of the management review process. The necessary personnel
and financial resources will be provided to meet these objectives.
• Employees are given such information, training and equipment as is necessary to enable them to undertake their work with the minimum
impact on the environment.
The Group had no notifiable environmental incidents in 2008. PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 19
PRINCIPAL RISKS AND UNCERTAINTIES
Specific principal risks identified by management are described below together with management actions to minimise these risks:
Other risks may also adversely affect the Group and actual results may differ materially from anticipated results because of a variety of risk factors,
including but not limited to: changes in interest and exchange rates; changes in global, political, economic, business, competitive and market forces;
changes to legislation and tax rates; future business acquisitions or disposals; relations with customers and customer credit risk; relations with
suppliers and supplier credit risks; events affecting international security, including global health issues and terrorism, and changes in legislation.
SUMMARY AND CALCULATION OF KEY PERFORMANCE INDICATORS
Shareholders
KPI – Earnings per share
2008 31.6p
2007 10.9p
The improvement in earnings per share is a result of growth in the business and continued drive to improve efficiency and elimination of waste.
Earnings per share is calculated as profit for the period divided by the weighted average number of shares in issue.
Financial performance
KPI – Revenue KPI – Return on revenue
2008 £23.7 million 2008 20.8%
2007 £15.1 million 2007 12.4%
Target £40 million by 2011 Target 20.0%
Revenue growth was predominantly in the offshore Oil and Gas sector which accounted for 85% of sales in 2008 (86% in 2007).
The return on revenue benefited from improved operational gearing through the factory and the weakening of Sterling against the Euro.
Return on revenue is calculated as operating profit before exceptional operating costs divided by revenue, expressed as a percentage.
Health & safety Environment
KPI – Reportable Accidents KPI – Reportable Incidents
2008 3 2008 Zero
2007 2 2007 Zero
Target Zero Target Zero
Risk
The Group derives over 75% of its sales from two key customers in one
market sector.
The Group derives a high proportion of its raw material from a small
number of key suppliers, some of whom are competitors.
The Group operates from a single manufacturing site. In the event of a
prolonged interruption to operations at this site, the Group may not have
the ability to transfer its manufacturing activities to other facilities.
The Group is small and relies on a small number of key Directors
and senior managers.
The Group purchases some of its raw materials in both US Dollars
and Euros and receives payment for some of its products in Euros.
Management action
Significant management resource is allocated to service the requirements
of these customers. Ongoing development of new products,
customers and markets.
To reduce the inherent risk of supply from competitors, requirements
are split across the available supplier base.
Health, safety and environmental risks which could result in site
closure are managed on a day to day basis by a specialist manager
reporting directly to the CSC Operations Director.
As the business grows increases in staff numbers make succession
planning easier and recruitment is already carried out to ensure that
skills and expertise can be duplicated.
Key man insurance is in place for the PT Chief Executive, the CSC
Operations Director and the CSC Sales and Marketing Director . The Board
regularly reviews the adequacy of the policies currently in place.
The net exposure is reduced by the use of forward exchange contracts
subject to limits in the Group’s banking facility. 20 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
DIRECTORS’ REPORT CONTINUED
SUBSTANTIAL SHAREHOLDINGS
As at 1 December 2008, the following held or were beneficially interested in 3% or more of the Company’s issued ordinary share capital:
Percentage of
Number issued share
of shares capital owned
Funds Managed by Octopus Investments Limited 1,039,933 9.2%
J.T.S. Hayward 1,000,040 8.8%
Goldman Sachs International 899,910 7.9%
P.L. Redfern 745,000 6.6%
J.W. Brown 700,000 6.2%
P.D. Catton 673,333 5.9%
A. Harding 673,333 5.9%
Funds Managed by AXA Framlington 597,284 5.0%
Unicorn AIM VCT2 366,767 3.2%
South Yorkshire Investment Capital Fund LP 342,224 3.0%
The Liontrust Intellectual Capital Trust 341,553 3.0%
DIRECTORS AND THEIR INTERESTS
The present Directors of the Company are set out on page 16 and 17.
J.D. Clark resigned on 31 December 2007. P.S. Cammerman was appointed as a Non-executive Director on 14 April 2008. T.J. Lister was
appointed as a Director on 1 June 2008. The interests of the Directors in the share capital of the Company are set out below.
27 September 30 September
2008 2007
Ordinary shares No. No.
R.L. Shacklady (including 22,500 shares held by his wife) 57,500 43,333
J.T.S. Hayward 1,000,040 1,100,040
N.F. Luckett 50,000 33,333
T.J. Lister 3,750 —
P.S. Cammerman 2,000 —
Share options
On 2 November 2007 approval was received from HM Revenue and Customs for the Pressure Technologies SAYE Sharesave Scheme. On 30 November 2007
the Directors granted options on 59,197 ordinary shares in accordance with the Rules of the scheme to 27 of the Group’s 46 employees who were
eligible to apply for option shares under the scheme. The Directors’ interests in share options granted on 30 November 2007 are as follows:
Options on
Ordinary shares
of 5p
No.
2008
J.T.S.Hayward 2,181
On 20 August 2008, following a review of best practice in corporate governance, R.L. Shacklady and N.F. Luckett cancelled their SAYE Sharesave
Scheme membership. There were no other changes in the number of options in issue during the year or since the year end.
FINANCIAL INSTRUMENTS
The Group’s operations expose it to a variety of financial risks including the effects of changes in interest rates on debt, foreign currency exchange
rates, credit risk and liquidity risk.
The Group’s principal financial instruments comprise cash and bank deposits, bank loans and overdrafts together with trade debtors and trade
creditors that arise directly from its operations. The Group has entered into derivative transactions, being foreign exchange contracts and sale and
purchase contracts denominated in a foreign currency, in the normal course of trade. It does not trade in financial instruments as a matter of policy.
Information about the use of the financial instruments by the Company and its subsidiaries is given in note 19 to the financial statements.
DONATIONS
Donations made by the Group during the period for charitable purposes in the United Kingdom amounted to £3,275 (2007: £3,495). PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 21
SUPPLIER PAYMENT POLICY
The Group’s policy is to comply wherever practical with the terms of payment agreed with its suppliers. The average creditor days were 40 (2007: 43)
for the Group.
DIRECTORS’ INDEMNITIES
The Company maintains director and officer insurance cover for the benefit of its Directors which remained in force at the date of this report.
EMPLOYEE INVOLVEMENT
It is the policy of the Group to communicate with employees by employee representation on works and staff committees and by regular briefing
meetings conducted by senior management. Career development is encouraged through suitable training and annual appraisals. The Group takes
the approach of maximising performance through the heightening of awareness of corporate objectives and policies.
DISABLED PERSONS
The Group gives full and fair consideration to applications for employment from disabled persons, where they have the necessary abilities and
skills for that position, and wherever possible will retrain employees who become disabled, so that they can continue their employment in another
position. The Group engage, promote, and train staff on the basis of their capabilities, qualifications and experience, without discrimination, giving
all employees an equal opportunity to progress.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of
the parent Company and the Group as at the end of the financial year and of the profit or loss of the Group for the financial year. The AIM Rules for
Companies require that the Directors prepare the Group financial statements in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs). The Directors have elected to prepare the parent Company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (UK GAAP). In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• for the Group financial statements, state whether applicable IFRSs have been followed, subject to any material departures disclosed and
explained in the financial statements;
• for the parent Company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation
in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
DISCLOSURE OF INFORMATION TO AUDITORS
In so far as each of the Directors is aware:
• There is no relevant audit information of which the Company’s Auditors are unaware, and
• The Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish
that the Auditors are aware of that information.
AUDITORS
Grant Thornton UK LLP are willing to continue in office and a resolution to reappoint them will be proposed at the Annual General Meeting.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS AND RELATED INFORMATION
This document contains a number of forward-looking statements relating to the Group. The Group considers any statements that are not
historical facts as “forward-looking statements”. They relate to events and trends that are subject to risks and uncertainties that could cause the
actual results and financial position of the Group to differ materially from the information presented. Readers are cautioned not to place undue
reliance on these forward-looking statements which speak only as at the date of this document.
By order of the Board
T.J. Lister
Secretary
8 December 2008 22 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
REPORT OF THE INDEPENDENT AUDITOR
TO THE MEMBERS OF PRESSURE TECHNOLOGIES PLC
We have audited the Group and parent Company financial statements (the ''financial statements'') of Pressure Technologies plc for the period
ended 27 September 2008 which comprise the consolidated income statement, the consolidated and parent Company balance sheets, the
consolidated cash flow statement, the consolidated statement of recognised income and expense and notes 1 to 26 to the Group consolidated
financial statements and notes 1 to 9 to the parent Company financial statements. These financial statements have been prepared under the
accounting policies set out therein.
This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has
been undertaken so that we might state to the Company’s members those matters we are required to state to them in an Auditor's report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and Auditors
The Directors' responsibilities for preparing the Annual Report and the Group financial statements in accordance with United Kingdom law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and for preparing the parent Company financial
statements in accordance with United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are
set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards
on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements have been
properly prepared in accordance with the Companies Act. We also report to you whether in our opinion the information given in the Directors'
Report is consistent with the financial statements. The information given in the Directors' Report includes that specific information presented in
the Chairman's and Chief Executive's statements that are cross referred from the Principal Activities and Business Review section of the
Directors' Report.
In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law regarding Directors' remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report, and consider whether it is consistent with the audited financial statements. This other
information comprises only the Directors' Report, the Chairman's statement and the Chief Executive's statement. We consider the implications
for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities
do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the Group's and Company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or
other irregularity or error . In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion:
• the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the
Group's affairs as at 27 September 2008 and of its profit for the period then ended;
• the Group financial statements have been properly prepared in accordance with the Companies Act 1985;
• the parent Company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting
Practice, of the state of the parent Company's affairs as at 27 September 2008;
• the parent Company financial statements have been properly prepared in accordance with the Companies Act 1985; and
• the information given in the Directors’ Report is consistent with the financial statements.
Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
Birmingham
8 December 2008 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 23
CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 27 SEPTEMBER 2008
2008 2007
Notes £’000 £’000
Revenue 3 23,660 15,124
Cost of sales (16,150) (11,189)
Gross profit 7,510 3,935
Administration expenses (2,578) (2,053)
Exceptional administration costs — (530)
Total administration expenses (2,578) (2,583)
Operating profit before exceptional costs 4,932 1,882
Exceptional administration costs 6 — (530)
Operating profit 4,932 1,352
Finance income 4 155 116
Finance costs 5 (41) (84)
Profit before taxation 6 5,046 1,384
Taxation 10 (1,465) (446)
Profit for the financial period 23 3,581 938
Earnings per share – basic 11 31.6p 10.9p
– diluted 11 31.5p 10.9p
All the above results are from continuing operations.
The notes on pages 26 to 46 form part of these financial statements.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED INCOME AND EXPENSE
FOR THE PERIOD ENDED 27 SEPTEMBER 2008
2008 2007
Note £’000 £’000
Profit for the financial period 3,581 938
Tax taken directly to equity 23 1 —
Total recognised gains and losses relating to the period 3,582 938 24 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
CONSOLIDATED BALANCE SHEET
AS AT 27 SEPTEMBER 2008
2008 2007
Notes £’000 £’000
Non-current assets
Property, plant and equipment 12 2,043 1,774
Deferred tax asset 20 76 49
2,119 1,823
Current assets
Inventories 14 6,527 4,550
Trade and other receivables 15 3,125 3,155
Derivative financial instruments 16 110 78
Cash and cash equivalents 6,091 4,930
15,853 12,713
Total assets 17,972 14,536
Current liabilities
Trade and other payables 17 (4,731) (5,348)
Borrowings 18 (80) (80)
Current tax liabilities (846) (362)
(5,657) (5,790)
Non-current liabilities
Other payables 17 (695) (448)
Borrowings 18 (160) (240)
Deferred tax liabilities 20 (293) (263)
(1,148) (951)
Total liabilities (6,805) (6,741)
Net assets 11,167 7,795
Equity
Share capital 21 567 567
Share premium account 23 5,341 5,341
Retained earnings 23 5,259 1,887
Total equity 23 11,167 7,795
The notes and accounting policies on pages 26 to 46 form part of these financial statements.
The financial statements were approved by the Board on 8 December 2008 and signed on its behalf by:
J.T.S. Hayward
Director PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 25
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 27 SEPTEMBER 2008
2008 2007
Note £’000 £’000
Operating activities
Cash flows from operating activities 24 2,881 (609)
Finance costs paid (41) (84)
Income tax paid (977) (176)
Net cash inflow/(outflow) from operating activities 1,863 (869)
Investing activities
Interest received 155 116
Purchase of property, plant and equipment (551) (428)
Proceeds from sale of property, plant and equipment 101 9
Net cash used in investing activities (295) (303)
Financing activities
Proceeds from issue of ordinary shares — 5,541
Repayment of borrowings (80) (437)
Dividends paid (227) —
Payment of deferred consideration (100) —
Net cash (outflow)/inflow from financing activities (407) 5,104
Net increase in cash and cash equivalents 1,161 3,932
Cash and cash equivalents at beginning of period 4,930 998
Cash and cash equivalents at end of period 6,091 4,930
The notes on pages 26 to 46 form part of these financial statements. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the
European Union and IFRIC interpretations issued by the International Accounting Standards Board, and with those parts of the Companies Act 1985
applicable to companies reporting under IFRS for the first time. The Company has elected to prepare its parent Company financial statements in
accordance with UK Generally Accepted Accounting Principles (UK GAAP). These are presented on pages 47 to 49.
The policies have changed from the previous year when the financial statements were prepared under applicable United Kingdom Generally
Accepted Accounting Principles (UK GAAP). The comparative data for the year to 30 September 2007 has been restated and reconciliations are
included in note 26 to explain the changes.
The financial statements have been prepared under the historical cost convention, except for derivative financial instruments carried at fair value.
The following Standards and Interpretations, which have not been applied during the period but are likely to impact on the financial statements
of the Group, were in issue but not yet effective:
IAS 1 Presentation of Financial Statements (revised 2007) (effective 1 January 2009)
IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009)
IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009)
Amendment to IFRS 2 Share-based Payment – Vesting Conditions and Cancellations (effective 1 January 2009)
IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009)
IFRS 8 Operating Segments (effective 1 January 2009)
Improvements to IFRSs (effective 1 January 2009 other than certain elements effective 1 July 2009)
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial
statements of the Group except for IAS 1 (revised), IFRS 3 (revised) and IFRS 8. The amendment to IAS 1 affects the presentation of owner
changes in equity and introduces a statement of comprehensive income. Preparers will have the option of presenting items of income and
expense and components of other comprehensive income either in a single statement of comprehensive income with subtotals, or in two separate
statements (a separate income statement followed by a statement of other comprehensive income). This amendment does not affect the financial
position or results of the Group but will give rise to additional disclosures. Management is currently assessing the detailed impact of this
amendment on the Group’s financial statements.
IFRS 3 Business Combinations (Revised 2008) will apply to any future business combinations that the Group may undertake once it is in force.
The Group has no plans to adopt the revised standard in advance of its mandatory implementation date and it is not possible to quantify the effect
of the standard on future business combinations until those combinations take place.
IFRS 8 introduces new rules on the disclosure of operating results by business segment. The new standard requires a management approach,
under which segment information is presented on the same basis as that used for internal reporting procedures. The Group will apply IFRS 8
from 1 October 2009. The impact of the standard is not expected to be significant as the Group only has one segment that currently contributes
more then ten percent of total revenue, profit or loss, or assets.
First time adoption of IFRS
Application of IFRS 1
The consolidated financial statements for the period ended 27 September 2008 are the first annual financial statements that comply fully with
IFRS 1 and all other applicable International Financial Reporting Standards. These financial statements have been prepared as described above.
The Group's transition date is 1 October 2006 and the Group prepared its opening IFRS balance sheet at that date. In preparing these consolidated
financial statements in accordance with IFRS 1, the Group has applied the mandatory exemptions and certain of the optional exemptions from full
retrospective application of IFRS. The Group did not take advantage of any optional exemptions available.
26 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 1. ACCOUNTING POLICIES CONTINUED
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 27 September 2008.
Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its
activities. The Group obtains and exercises control through voting rights.
All intra-group transactions have been eliminated on consolidation. Unrealised gains on transactions between the Group and its subsidiaries are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable
assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in
the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the
consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group
accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over
the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition.
Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and rewards that are
different from those of other business segments. A geographical segment is engaged in providing products or services within a particular
economic environment that are subject to risks and returns that are different from those operating in other economic environments.
Based on risks and returns, the Directors consider that the primary reporting format is by business segment. The secondary reporting format is
by geographical analysis, by origin and destination.
Revenue
Revenue is measured by reference to the fair value of consideration received or receivable and arises from the sales of goods and services
provided in the normal course of business, net of trade discounts, VAT and other sales-related taxes. Revenue from the sale of goods is
recognised when the significant risks and benefits of ownership have been transferred to the buyer, which may be on despatch, completion of the
product or the product being ready for delivery, based on specific contract terms; when the amount of revenue can be measured reliably; and
when it is probable that the economic benefits associated with the transaction will flow to the Group.
Revenue from services provided by the Group, which does not represent a significant portion of the total revenue, is recognised when the outcome
of the transaction can be estimated reliably and the Group has performed its obligations and, in exchange, obtained the right to consideration.
Exceptional administration costs
Exceptional administration costs are material items which individually or, if a similar type, in aggregate, need to be disclosed by virtue of their size
or incidence because of their relevance to understanding the entity’s financial performance.
Costs of this nature were incurred in the prior period and are detailed in note 6 to the consolidated financial statements.
Research and development
Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred.
Development costs are capitalised when all the following conditions are satisfied:
• completion of the intangible asset is technically feasible so that it will be available for use or sale;
• the Group intends to complete the intangible asset and use or sell it;
• the Group has the ability to use or sell the intangible asset;
• the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output
from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;
• there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
• the expenditure attributable to the intangible asset during its development can be measured reliably.
Development costs not meeting the criteria for capitalisation are expensed as incurred.
Pressure Technologies plc has not incurred any costs in the year that have met the above criteria for development costs, with all relevant costs
being expensed as research costs as they are incurred.
PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. ACCOUNTING POLICIES CONTINUED
Share-based employee remuneration
All share-based payment arrangements granted after 7 November 2002, which had not vested by the date of transition to IFRS, are recognised in
the consolidated financial statements. The Group operates equity-settled share-based remuneration plans for remuneration of its employees.
The Group's plan does not feature any options for a cash settlement.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are
rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the
instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for
example, profitability and sales growth targets).
All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to the profit and loss reserve.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the
number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options expected to vest
differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any
expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. Upon exercise of share
options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share
capital with any excess being recorded as additional paid-in capital.
The cancellation of equity-settled share based payments is accounted for as an acceleration of vesting.
Dividends
Dividends are recognised when the shareholders right to receive payment is established.
Property, plant and equipment
Plant and equipment is stated at cost, net of depreciation and any provision for impairment. No depreciation is charged whilst assets are still in
the course of construction. Depreciation is applied on a straight-line basis so as to reduce the assets to their residual values over their estimated
useful lives. Residual values are reviewed annually. The rates of depreciation used are:
Plant and machinery 4 – 15 years
The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the
asset and is recognised in the income statement.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal
discounted cash flow evaluation.
The Group operates from a single manufacturing site in Sheffield under a 15 year lease expiring in June 2020. The Directors consider that the
remaining life of the building to be considerably longer than the remaining life of the lease and consequently the lease has been treated as an
operating lease.
Operating leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessee. All other leases are classified as operating leases.
Payments under operating leases are charged to the income statement on a straight-line basis over the term of the lease. Lease incentives are
spread over the term of the lease.
Inventories
Inventories are stated at the lower of cost and net realisable value, on a first in first out basis. Cost includes materials, direct labour and an
attributable proportion of manufacturing overheads based on normal levels of activity. Net realisable value is based on the estimated sales price
after allowing for all further costs of completion and disposal. Provision is made for obsolete, slow-moving or defective items where appropriate.
28 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 1. ACCOUNTING POLICIES CONTINUED
Income taxes
The tax expense represents the sum of the tax currently payable and deferred tax. Current tax is the tax currently payable based on taxable profit for the year .
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference
between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of
goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting
profit. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can
be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried
forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities
are calculated at tax rates that are expected to apply to their respective periods of realisation, provided they are enacted or substantively enacted
at the balance sheet date.
Changes in deferred tax assets and liabilities are recognised as a component of tax expense in the income statement, except where they relate to
items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.
Accounting for financial assets
The Group has financial assets in the following categories:
• loans and receivables
• financial assets at fair value through profit or loss
Financial assets are assigned to the different categories on initial recognition, depending on the characteristics of the instrument and its purpose.
A financial instrument's category is relevant for the way it is measured and whether any resulting income and expenses are recognised in profit or
loss or directly in equity.
All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets other than
those categorised as at fair value through profit or loss are recognised at fair value plus transaction costs. Financial assets categorised as at fair
value through profit or loss are recognised initially at fair value with transaction costs expensed through the income statement.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial
recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Any change in their value is
recognised in profit or loss. Pressure Technologies plc's trade and most other receivables fall into this category of financial instrument.
Discounting, however, is omitted where the effect of discounting is immaterial.
Significant receivables are considered for impairment on a case-by-case basis when they are past due at the balance sheet date or when objective
evidence is received that a specific counterparty will default. All other receivables are reviewed for impairment in Groups, which are determined by
reference to the industry and region of a counterparty and other available features of shared credit risk characteristics, if any. The percentage of
the write down is then based on recent historical counterparty default rates for each identified Group.
Accounting for financial liabilities
Financial liabilities represent a contractual obligation for the Group to deliver cash or other financial assets. Financial liabilities are initially
recognised at fair value, net of issue costs, when the Group becomes a party to the contractual agreements of the instrument. All interest-related
charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included in the income statement line items
“finance costs” or “finance income”.
The Group's financial liabilities include borrowings, trade and other payables (including finance lease liabilities), which are measured at
amortised cost using the effective interest rate method.
PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 29 1. ACCOUNTING POLICIES CONTINUED
Derivative financial instruments
The Group has derivative financial instruments and embedded derivative financial instruments that are carried at fair value through profit or loss.
The Group does not hedge account for these items.
Any gain or loss arising from derivative financial instruments is based on changes in fair value, which is determined by direct reference to active market
transactions or using a valuation technique where no active market exists. The Group has foreign currency forward contracts that fall into this category.
Derivatives embedded within contracts for the sale or purchase of a non-financial item that are denominated in a foreign currency are separated
when their economic characteristics and risks are not closely related to those of the host contract. Embedded derivatives are valued at their fair
value with changes in fair value being recognised in the income statement.
The Group have sales and purchase orders that contain embedded derivatives.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are
readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts, where they
form an integral part of the Group's cash management.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity
instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. The only equity instrument applicable to the
Group is its issued share capital.
Compound instruments
The component parts of compound instruments issued by the Group are classified separately as financial liabilities and equity in accordance with
the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing
market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective
interest rate method until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting
the amount of the liability component from the fair value of the component instrument as a whole. This is recognised and included in equity, net of
income tax effects, and is not subsequently re-measured.
The Group previously had preferential ordinary shares in issue which fell into this category. These shares were converted to ordinary shares
during the previous financial year.
Interest
Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset or liability and allocates the
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to the net carrying amount of the financial asset.
Foreign currency translation
Foreign currency transactions are translated into the functional currency (being the currency of the primary economic environment in which the
Group operates) of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign
exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary balance sheet items at
year-end exchange rates are recognised in the income statement. Non-monetary items carried at fair value that are denominated in foreign
currencies are translated at rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
For the purpose of the consolidated financial statements, the results and financial position of each Group Company are expressed in Pounds
Sterling, which is the functional currency of the Company, and the presentation currency of the consolidated financial statements.
Grants
Grants relating to property, plant and equipment are treated as deferred income and released to the income statement over the expected useful
lives of the assets concerned. Other grants are credited to the income statement in the same period as the related expenditure is incurred.
Pensions
The Group operates a defined contribution scheme with costs being charged to the income statement in the period to which they relate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
30 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, which are described in note 1, the Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and assumptions that have a material risk to the carrying value of assets and liabilities within the next financial year are discussed below:
Fair value of derivatives and other financial instruments
As described in note 19, the Directors use their judgement in selecting an appropriate valuation technique for financial instruments not quoted in
an active market. Valuation techniques commonly used by market practitioners are applied. For derivative and embedded derivative financial
instruments, assumptions are made based on quoted market rates adjusted for specific features of the instrument. Details of the assumptions
used and the results of sensitivity analyses regarding these assumptions are provided in note 19.
Revenue recognition
The Group recognises revenue when the goods in question have finished production and passed any applicable factory and customer acceptance
tests. Where goods remain on the Group’s premises at the year end at the request of the customer, management consider the detailed criteria for
the recognition of revenue from the sale of goods as set out in IAS 18. In particular, consideration is given as to whether the significant risks and
rewards of ownership are considered to have transferred to the buyer.
Capitalisation of research and development
Where the conditions of IAS 38 (Intangible Assets) are met, the Group capitalises the relevant development expenditure as an asset. In order to
capitalise research and development expenditure, the Group must create an asset that is expected to generate future economic benefits in which
the revenue can be reliably measured. The Group incurred research and development expenditure during the year which the Director’s do not
consider to have met this criteria and consequently the expenditure has been expensed during the period.
Inventory provisions
The Directors have reviewed the level of specific and general provisions carried against inventory in the light of outstanding current and
anticipated customer orders. Where no customer orders are received against finished goods, full provision is made.
3. SEGMENTAL ANALYSIS
Based on risks and returns, the Directors consider that the primary reporting format is by business segment. The Directors consider that only one
business segment exists, being the Group's supply of high-pressure gas cylinders into the energy market. No other segment represents more
than 10% of revenue. Consequently, separate disclosure of each business segment is not required as disclosures for the primary segment are
already given in the financial statements.
Geographical segment
The following table provides an analysis of the Group's revenue by geographical market. The carrying amount of segment assets and additions to
property, plant and equipment and intangible assets have not been analysed separately by location, as they are all located in the United Kingdom.
2008 2007
Revenue £’000 £’000
United Kingdom 2,770 1,794
Europe 2,134 350
Rest of the World 18,756 12,980
23,660 15,124
4. FINANCE INCOME
2008 2007
£’000 £’000
Interest receivable on bank deposits 155 116
5. FINANCE COSTS
2008 2007
£’000 £’000
Interest payable on bank loans and overdrafts (41) (84)
PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 31 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
6. PROFIT BEFORE TAXATION
Profit on ordinary activities before taxation is stated after charging/(crediting):
2008 2007
£’000 £’000
Depreciation of property, plant and equipment 200 203
Profit on disposal of property, plant and equipment (19) (1)
Amortisation of grant receivable (27) (12)
Staff costs (see note 9) 2,589 1,670
Cost of inventories recognised as an expense 14,053 9,737
Operating lease rentals:
Land and buildings 434 417
Machinery and equipment 17 8
Exceptional operating items — 530
The charge for exceptional operating items in the prior period comprised costs relating to the Group’s flotation on AIM of £125,000 and costs
relating to a prospective overseas acquisition of £405,000. There were no such costs incurred in the current period.
7. AUDITORS’ REMUNERATION
2008 2007
£’000 £’000
Fees payable to the Company's Auditor for the audit of the financial statements 10 5
Fees payable to the Company's Auditor and its associates for other services:
– Audit of the Company's subsidiaries pursuant to legislation 15 12
Fees payable to the Group's Auditors for non-audit services:
– Tax services 17 25
– Services as Reporting Accountants in relation to flotation — 75
– Review of Interim Financial Statements 8 —
– Other services 8 —
8. DIRECTORS’ EMOLUMENTS
Particulars of Directors’ emoluments are as follows:
Salary Pension Pension
and Total Total Total Total
fees Benefits Bonus 2008 2007 2008 2007
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Non-Executive:
R.L. Shacklady 24 —— 24 55 — —
N.F. Luckett 15 —— 15 7 — —
P.S. Cammerman 8— — 8 — — —
Executive:
J.T.S. Hayward 92 1 50 143 106 8 5
J.D. Clark 17 1— 18 65 1 3
T.J. Lister 26 — 13 39 — 2 —
Total emoluments 182 2 63 247 233 11 8
All the payments shown for R.L. Shacklady were paid to RLS Associates, a partnership which he controls, on his behalf.
T.J.Lister joined the Company in January 2008 as Finance Director designate, being appointed a Director on 1 June 2008. The emoluments included
above cover the period from his appointment as a Director to the 27 September 2008.
In addition to the amounts shown above, J.D. Clark received a payment as compensation for loss of office of £50,000.
The number of Directors who are accruing benefits under money purchase schemes is 2 (2007: 2).
The Group believes that the Directors of Pressure Technologies plc are the only key management personnel under the definition of IAS 24
“Related party disclosures”.
32 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 9. EMPLOYEE COSTS
Particulars of employees, including Executive Directors:
2008 2007
£’000 £’000
Wages and salaries 2,281 1,471
Social security costs 228 156
Other pension costs 80 43
2,589 1,670
The average monthly number of employees (including Executive Directors) during the period was as follows:
2008 2007
No. No.
Production 58 39
Selling and distribution 4 4
Administration 5 4
67 47
10. TAXATION
2008 2007
£’000 £’000
Current tax
Current tax expense 1,461 445
Relating to prior periods — (18)
1,461 427
Deferred tax
Origination and reversal of temporary differences (4) 19
Adjustment in respect of prior years 8 —
Total taxation charge 1,465 446
Corporation tax is calculated at 28% (2007: 30%) of the estimated assessable profit for the period.
The charge for the period can be reconciled to the profit per the income statement as follows:
2008 2007
£’000 £’000
Profit before taxation 5,046 1,384
Theoretical tax at UK corporation tax rate 28% (2007: 30%) 1,413 415
Effects of:
– non-deductible expenses 4 72
– adjustments in respect of prior years – current tax — (18)
– adjustments in respect of prior years – deferred tax 8 —
– effect of rate change – see below 50 (17)
– small companies and marginal relief (10) (6)
Total taxation charge 1,465 446
The corporation tax rate has fallen as a result of the reduction in the UK corporation tax rate from 30% to 28% from 6 April 2008.
PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
11. EARNINGS PER ORDINARY SHARE
Basic and diluted earnings per share have been calculated in accordance with IAS 33, which requires that earnings should be based on the net profit
or loss attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the period.
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average
number of shares in issue during the period.
The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares on the assumed
conversion of all dilutive options.
2008 2007
£’000 £’000
Profit after tax 3,581 938
No. No.
Weighted average number of shares – basic 11,333,620 8,615,812
Dilutive effect of options issued 30 November 2007 47,958 —
Weighted average number of shares – diluted 11,381,578 8,615,812
Basic earnings per share 31.6p 10.9p
Diluted earnings per share 31.5p 10.9p
12. PROPERTY, PLANT AND EQUIPMENT
Plant and
machinery
£’000
Cost
At 1 October 2006 3,390
Additions 428
Disposals (12)
At 30 September 2007 3,806
Additions 551
Disposals (388)
At 27 September 2008 3,969
Depreciation
At 1 October 2006 1,833
Charge for the year 203
Disposals (4)
At 30 September 2007 2,032
Charge for the period 200
Disposals (306)
At 27 September 2008 1,926
Net book value
At 27 September 2008 2,043
At 30 September 2007 1,774
34 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 13. SUBSIDIARIES
A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given in
note 4 to the Company's separate financial statements.
14. INVENTORIES
2008 2007
£’000 £’000
Raw materials and consumables 3,749 2,599
Work in progress 2,778 1,951
6,527 4,550
The replacement cost of stock is not materially different from the book value.
15. TRADE AND OTHER RECEIVABLES
2008 2007
£’000 £’000
Amounts: falling due within one year
Trade receivables 1,830 2,023
Other debtors 245 113
Prepayments and accrued income 1,050 1,019
3,125 3,155
The average credit period taken on the sale of goods and services was 70 days (2007: 56 days) in respect of the Group. The Group has two major
customers, the largest of which represent 43% (2007: 35%) and the other 24% (2007: 32%) of trade receivables at the year end. Apart from these
balances the Group has no other significant concentration of receivables.
Ageing of past due but not impaired receivables:
2008 2007
£’000 £’000
Days past due:
0 – 30 days 19 143
31 – 60 days 23 14
61 – 90 days 28 8
91-120 days 39 —
121 + days 84 2
Total 193 167
Of the above overdue debts, £161,000 has since been received. The Group has reviewed the need for provisions against bad and doubtful debts and
concluded that no provision is required. No impairment losses were recognised during the year in respect of trade receivables.
16. DERIVATIVE FINANCIAL INSTRUMENTS
2008 2007
£’000 £’000
Derivatives carried at fair value not recognised for hedge accounting
– Forward foreign currency contracts 21 —
– Contracts for sales and purchases of non-financial items denominated in foreign currencies 89 78
110 78
PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 35 36 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
17. TRADE AND OTHER PAYABLES
2008 2007
£’000 £’000
Amounts due within 12 months
Trade payables 1,354 1,339
Other tax and social security 58 45
Accruals and deferred income 3,269 3,839
4,681 5,223
Deferred consideration 50 125
Total due within 12 months 4,731 5,348
Amounts due after 12 months
Other payables 247 175
Deferred income 348 148
595 323
Deferred consideration 100 125
Total due after 12 months 695 448
The payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the
carrying amount of trade payables approximates to their fair value.
Deferred consideration relating to a prior acquisition is payable over ten years ending in June 2014. The amount payable is not contingent.
18. BORROWINGS
2008 2007
£’000 £’000
Secured borrowings
Bank loans 240 320
Total borrowings 240 320
Amounts due for settlement within 12 months 80 80
Amounts due for settlement after 12 months 160 240
The maturity profile of long-term loans is as follows:
2008 2007
£’000 £’000
Due within one year 80 80
Due within one to two years 80 80
Due within two to five years 80 160
240 320
Security is provided on the bank loan by a charge over the Group’s assets. PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 37
19. FINANCIAL INSTRUMENTS
Capital risk management
Pressure Technologies plc's capital management objectives are to ensure the Group's ability to continue as a going concern and to provide an
adequate return to shareholders.
The Group manages its capital through the optimisation of the debt and equity balance and by pricing products and services commensurately with
the level of risk. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 18, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in note 23.
2008 2007
£’000 £’000
Debt (240) (320)
Cash and cash equivalents 6,091 4,930
Net debt 5,851 4,610
Equity 11,167 7,795
Debt is defined as long and short-term borrowings, as detailed in note 18. Equity includes all capital and reserves of the Group attributable to
equity holders of the parent.
The Group is not subject to externally imposed capital requirements, other than the minimum capital requirements and duties regarding a serious
reduction of capital, as imposed by the Companies Act 1985 on all public limited companies.
The Group held the following categories of financial instruments:
2008 2007
£’000 £’000
Financial assets
Fair value through profit and loss (FVTPL)
– Derivative instrument – forward currency contract not recognised for hedge accounting 21 —
– Embedded derivative instrument – contracts for sales and purchase of non-financial items
denominated in foreign currencies 89 78
Loans and receivables:
– Trade receivables 1,830 2,023
– Cash and cash equivalents 6,091 4,930
8,031 7,031
Financial liabilities
Trade and other payables – held at amortised cost
– Trade payables 1,354 1,339
– Accruals and deferred income 3,269 3,839
Borrowings – at amortised cost 240 320
Deferred consideration – held at amortised cost 150 250
5,013 5,748
The fair value of the financial instruments set out above is not materially different from their book value.
Financial risk management objectives
Management monitor and manage the financial risks relating to the operations of the Group through regular reports to the Board. These risks
include currency risk, interest rate risk, credit risk and liquidity risk.
The Group seeks to minimise the effects of these risks by using derivative financial instruments to reduce these risk exposures. The use of financial
derivatives is governed by the Group's policies on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative
financial instruments, and the investment of excess liquidity. The Group does not enter into or trade financial instruments, including derivative
financial instruments, for speculative purposes. Whilst the Group enters into forward currency contracts during the year to mitigate foreign
currency risk, it does not apply hedge accounting. 38 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
19. FINANCIAL INSTRUMENTS CONTINUED
Market risk
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates, particularly in US Dollars and Euros, and
interest rates. The Group enters into derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk including
the use of fixed interest rates on its long term borrowings. The level of long term borrowings in place at the year end is not significant to the Group.
Foreign currency risk management
The Group purchases its principal raw materials in both US Dollars and Euros and receives payment for some of its products in Euros as well as
in Pounds Sterling. After netting off foreign currency receipts and payments there is a net exposure to the risk of currency movements both in US
Dollars and Euros. Where necessary the net exposure is hedged using forward contracts subject to limits in the Group’s banking facility.
The carrying amounts of the Group's foreign currency denominated monetary financial assets and monetary financial liabilities at the reporting
date are as follows:
Financial Financial Financial Financial
liabilities assets liabilities liabilities
2008 2007 2008 2007
£'000 £'000 £'000 £'000
Euro 1,706 2,356 1,574 825
Norwegian Krone — 42 — —
US Dollar 331 339 — —
2,037 2,737 1,574 825
Foreign currency sensitivity analysis
The Group is mainly exposed to the US Dollar and Euro currency movements.
The following table details the Group's sensitivity to a 10% increase and decrease in Pound Sterling against the relevant foreign currencies:
Euro currency Euro currency Norwegian Krone Norwegian Krone US Dollar US Dollar
impact impact currency impact currency impact currency impact currency impact
2008 2007 2008 2007 2008 2007
£'000 £'000 £'000 £'000 £'000 £'000
Profit or loss 26 143 — 7 28 31
The use of a 10% movement in exchange rates is considered appropriate given recent movements in exchange rates.
The above analysis represents the Group’s exposure to foreign currency risk based financial assets and liabilities outstanding at the year end.
A substantial amount of the Group’s sales and purchases are made in foreign currencies. The exposure to foreign exchange rates varies
throughout the year depending on the volume and timing of transactions in foreign currencies.
Forward foreign exchange contracts
It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts. The Group
also periodically enters into forward foreign exchange contracts to manage the risk associated with anticipated sales and purchase transactions
out to between 6-12 months. The Group does not hedge account for the forward currency exchange contracts.
As of 27 September 2008 the aggregate amount of profit/loss under forward foreign exchange contracts was £21,000.
At 27 September 2008 the Group had an outstanding forward exchange contract to purchase $560,000 which substantially covered the outstanding
value of US Dollar denominated purchase orders.
Interest rate risk management
The Group finances its operations where necessary through bank loans and overdrafts. Surplus cash is placed on short-term deposit at fixed
rates of interest.
If interest rates had been 0.5% higher/lower and all other variables were held constant, the impact on the results in the Income Statement and
equity would be an increase/decrease of £17,000.
The Group had un-drawn borrowing facilities available at 27 September 2008 of £1,500,000 (2007: £1,250,000).
Price risk management
Where possible the Group enters into contracts incorporating price escalation clauses to mitigate any significant exposure to materials and
utilities price risk. PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 39
19. FINANCIAL INSTRUMENTS CONTINUED
Credit risk management
The Group’s credit risk is primarily attributable to its trade debtors. Credit risk is managed by monitoring the aggregate amount and duration of
exposure to any one customer. The Group’s management estimate the level of allowances required for doubtful debts based on prior experience
and their assessment of the current economic environment. The credit risk on liquid funds is minimized by using counterparty banks with high
credit-ratings assigned by international credit-rating agencies.
Liquidity risk management
The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously monitoring forecast and actual cash
flows and by matching the maturity profiles of financial assets and liabilities.
At 27 September 2008, the Group's liabilities have contractual maturities summarised below:
Current
Within Current Non current Less future Total net
6 months 6-12 months 1 to 5 years interest payable
2008 £’000 £’000 £’000 £’000 £’000
Bank overdraft and loans 48 47 173 (28) 240
Trade and other payables 4,094 529 —— 4,623
Gross settled derivatives 283 —— — 283
4,425 576 173 (28) 5,146
Current
Within Current Non current Less future Total net
6 months 6-12 months 1 to 5 years interest payable
2007 £’000 £’000 £,000 £’000 £’000
Bank overdraft and loans 53 51 268 (52) 320
Trade and other payables 4,801 342 35 — 5,178
4,854 393 303 (52) 5,498
The interest rate on the bank loans of £240,000 (2007: £320,000) is set at 2.75% above Bank of Scotland base rate. The loan is repayable at the rate
of £20,000 per quarter.
Included in cash and cash equivalents is a Sterling balance of £2,000,000 (2007: £3,500,000) which represents a single fixed term deposit for one
month ending on 24 October 2008 at a rate of interest of 5.24% (2007: 6.45%).
The Group maintains foreign currency denominated bank accounts that earn interest based on the Bank of Scotland base rate applicable to that currency.
At 27 September 2008 there was an outstanding foreign exchange liability of £283,000 which expires within 6 months of the year end (2007: £nil).
The following amounts have been recognised in the income statement in respect of derivative financial instruments:
2008 2007
£’000 £’000
Fair value through profit and loss (FVTPL)
– Derivative instrument – forward currency contract not recognised for hedge accounting 21 —
– Embedded derivative instrument – contracts for sales and purchase of non-financial items
denominated in foreign currencies 11 48
Amounts credited to cost of sales within the income statement 32 48
Fair values
The fair values of financial assets and liabilities are determined as follows:
– Outstanding foreign currency exchange contracts are measured using quoted forward exchange rates at the balance sheet date. The Group does
not hedge account.
– The value of outstanding sales and purchase orders denominated in foreign currencies are revalued at the balance sheet date using exchange
rates then applicable to the expected settlement of the outstanding orders.
The carrying value and fair value of the financial assets and financial liabilities are considered to be the same. 40 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
20. DEFERRED TAX
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period.
Accelerated Revaluation Short term Operating
tax of financial timing Share lease
depreciation instruments differences option costs incentives Total
£’000 £’000 £’000 £’000 £’000 £’000
At 1 October 2006 (216) (12) —— 33 (195)
(Credit)/charge to income (25) (10) —— 16 (19)
At 30 September 2007 (241) (22) —— 49 (214)
(Credit)/charge to income (21) (9) 33 20 (4)
Taken directly to equity —— — 1— 1
At 27 September 2008 (262) (31) 34 69 (217)
The net deferred tax balance has been analysed as follows in the consolidated balance sheet:
2008 2007
£’000 £’000
Non current asset
Deferred tax asset 76 49
Non current liabilities
Deferred tax liabilities (293) (263)
(217) (214)
At the balance sheet date, the Group has unused tax losses as disclosed below:
Unprovided Unprovided
2008 2007
£’000 £’000
Trading losses 43 43
21. CALLED UP SHARE CAPITAL
2008 2007 2008 2007
No. No. £’000 £’000
Authorised
Authorised ordinary shares of 5p each 15,000,000 15,000,000 750 750
Allotted, issued and fully paid
Ordinary shares of 5p each 11,333,620 11,333,620 567 567 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 41
22. SHARE BASED PAYMENTS
Pressure Technologies plc introduced a share option scheme for all employees of the Group during the period. No options were in issue in the
prior year. Options are exercisable at 176p. The vesting period is 3 years. If the options remain unexercised after a period of 3 years and 6 months
from the date of the grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest.
Details of the share options outstanding during the period are as follows:
Options
No.
Granted during the period 59,197
Cancelled during the period (10,908)
Outstanding and Exercisable at the end of the period 48,289
The options outstanding at 27 September 2008 had a weighted average exercise price of 176p and a weighted average remaining contractual life
of 2.2 years. The terms of these options are as follows:
Options
outstanding Market value
at 27 September Vesting at date of Exercise Exercise
Date of grant 2008 period grant (p) price (p) period
30/11/07 48,289 3 years 220 176 6 months
There are no performance conditions that apply to the options, other than continued employment.
On 30 November 2007, the Company's Non-executive Chairman, R.L. Shacklady, and its Non-executive Director, N.F. Luckett, were each granted
options over 5,454 Ordinary Shares under the Scheme. These options comprised the Directors entire holdings of share options. These options
were cancelled on 20 August 2008 following a review of best practice in corporate governance in which the Directors concluded that it would be
inappropriate for the Non-executive Directors to participate in the Scheme.
The options granted have been valued using the Black-Scholes model. The inputs into the Black-Scholes model are as follows:
Scheme: date of grant 30/11/07
Weighted average share price 220p
Weighted average exercise price 176p
Expected volatility 37.6%
Expected life 3 years
Risk free rate 5.2%
Expected dividend yield 0%
Expected volatility was determined by calculating the historical volatility of the Group's share price over the period since the Group was
admitted to AIM. The expected option value used in the model has been adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural considerations. The expected dividend yield was based on the Group’s dividend payout
pattern at the date of issue of the options.
The total charge to the income statement in the period in respect of share-based payments was £18,000.
A deferred tax charge of £3,000 was recognised in the income statement during the period in respect of share based payments. A further £1,000
was taken directly to reserves. 42 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
23. STATEMENT OF CHANGES IN EQUITY
Share Share
capital premium Other Retained
account account reserves earnings Total
£’000 £’000 £’000 £’000 £’000
Balance at 1 October 2006 220 — (54) 680 846
Profit for the year —— — 938 938
Release of financial liability —— 54 269 323
New share issue 347 5,341 —— 5,688
At 30 September 2007 567 5,341 — 1,887 7,795
Profit for the period —— — 3,581 3,581
Dividends paid —— — (227) (227)
Share based payments —— — 17 17
Tax taken directly to equity — — —11
At 27 September 2008 567 5,341 — 5,259 11,167
The Share premium account represents the excess of proceeds from the share issue over the nominal value of the shares, net of issue costs.
The Other reserve represents the excess of the fair value of the financial liability over its transaction value and was released to the profit and loss
account upon settlement of the financial liability.
24. CASH FLOWS FROM OPERATING ACTIVITIES
2008 2007
£’000 £’000
Continuing operations
Profit after tax 3,581 938
Adjustments for:
Finance income – net (114) (32)
Depreciation of property, plant and equipment 200 203
Profit on sale of property, plant and equipment (19) (1)
Share option costs 17 —
Income tax expense 1,465 446
Gain on derivative financial instruments (32) (48)
Changes in working capital:
Increase in inventories (1,977) (3,269)
Decrease in trade and other receivables 30 211
(Decrease)/increase in trade and other payables (270) 943
Cash flows from operating activities 2,881 (609) PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 43
25. FINANCIAL COMMITMENTS
(a) Capital commitments
Commitments for capital expenditure entered into were as follows:
2008 2007
£’000 £’000
Contracted for, but not provided in the accounts 64 66
(b) Operating lease commitments
The Group has entered into commercial leases on certain properties, motor vehicles and items of plant and equipment. At the balance sheet date,
the Group had outstanding commitments for minimum lease payments under non-cancellable operating leases, which fall due as follows:
2008 2007
£’000 £’000
Land and buildings, leases expiring:
Within one year 403 403
In the second to fifth years inclusive 1,751 1,708
After more than five years 3,246 3,692
5,400 5,803
Other assets, leases expiring:
Within one year 7 8
In the second to fifth years inclusive 7 —
14 8
The operating lease commitment on land and buildings represents the lease on the Group’s factory and offices at Meadowhall, Sheffield. The Group
entered into a lease for a period of 15 years commencing on 1 July 2005. The current rent payable under the lease is £370,975 per annum. The
lease includes rent reviews in every fifth year of the term. In respect of years 6-10 inclusive, the rent increases to £409,586 and then £452,216 in
the following review period.
There is an additional lease entered into on the same date for the same period for an end bay at the premises. The rent for the first five years of
the lease will be £32,000 per annum rising to £36,206 following the first review and £40,964 following the final review.
(c) Other financial commitments
At 27 September 2008, the Group had entered into a binding commitment with its primary supplier to make advance payments after the period
end against outstanding purchase orders totalling £nil (2007: £483,000). 44 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
26. RECONCILIATION OF EQUITY AND PROFIT UNDER UK GAAP TO IFRS
Pressure Technologies plc reported under UK GAAP in its previously published financial statements for the year ended 30 September 2007. The
analysis below shows a reconciliation of equity and profit as reported under UK GAAP as at 30 September 2007 to the revised equity and profit
under IFRS as reported in these financial statements. In addition, there is a reconciliation of equity under UK GAAP to IFRS at the transition date
for the Group, being 1 October 2006.
Reconciliation of consolidated equity at 1 October 2006 (date of transition to IFRS)
UK GAAP IAS 17 IAS 39 IAS 12 IFRS
£’000 £’000 £’000 £’000 £’000
Property, plant and equipment 1,557 —— — 1,557
Deferred tax asset —— — 33 33
Non-current assets 1,557 —— 33 1,590
Inventories 1,281 —— — 1,281
Trade and other receivables 3,366 —— — 3,366
Derivative asset —— 30 30
Cash and cash equivalents 998 —— — 998
Current assets 5,645 — 30 — 5,675
Total assets 7,202 — 30 33 7,265
Trade and other payables (4,571) —— — (4,571)
Current portion of long-term borrowings (216) —— — (216)
Current tax payable (111) —— — (111)
Current liabilities (4,898) —— — (4,898)
Other payables (180) (102) —— (282)
Long-term borrowings (1,011) —— — (1,011)
Deferred tax liabilities (216) —— (12) (228)
Non-current liabilities (1,407) (102) — (12) (1,521)
Total liabilities (6,305) (102) — (12) (6,419)
Net assets 897 (102) 30 21 846
Share capital 220 —— — 220
Other reserve (54) —— — (54)
Profit and loss account 731 (102) 30 21 680
Total equity 897 (102) 30 21 846 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 45
26. RECONCILIATION OF EQUITY AND PROFIT UNDER UK GAAP TO IFRS CONTINUED
Reconciliation of equity at 30 September 2007
UK GAAP IAS 17 IAS 39 IAS 12 IFRS
£’000 £’000 £’000 £’000 £’000
Property, plant and equipment 1,774 —— — 1,774
Deferred tax asset —— — 49 49
Non-current assets 1,774 —— 49 1,823
Inventories 4,550 —— — 4,550
Trade and other receivables 3,155 —— — 3,155
Derivative asset —— 78 — 78
Cash and cash equivalents 4,930 —— — 4,930
Current assets 12,635 — 78 — 12,713
Total assets 14,409 — 78 49 14,536
Trade and other payables (5,348) —— — (5,348)
Current portion of long-term borrowings (80) —— — (80)
Current tax payable (362) —— — (362)
Current liabilities (5,790) —— — (5,790)
Other payables (273) (175) —— (448)
Long-term borrowings (240) —— — (240)
Deferred tax liabilities (241) —— (22) (263)
Non-current liabilities (754) (175) — (22) (951)
Total liabilities (6,544) (175) — (22) (6,741)
Net assets 7,865 (175) 78 27 7,795
Share capital 567 —— — 567
Share premium account 5,341 —— — 5,341
Profit and loss account 1,957 (175) 78 27 1,887
Total equity 7,865 (175) 78 27 7,795 46 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
26. RECONCILIATION OF EQUITY AND PROFIT UNDER UK GAAP TO IFRS CONTINUED
Reconciliation of profit for the year ended 30 September 2007
UK GAAP IAS 17 IAS 39 IAS 12 IFRS
£’000 £’000 £’000 £’000 £’000
Revenue 15,124 —— — 15,124
Cost of sales (11,237) — 48 — (11,189)
Gross profit 3,887 — 48 — 3,935
Selling and administration expenses (1,980) (73) —— (2,053)
Exceptional administration costs (530) —— — (530)
Operating profit 1,377 (73) 48 — 1,352
Finance income 116 —— — 116
Finance cost (84) —— — (84)
Profit before taxation 1,409 (73) 48 — 1,384
Taxation (452) —— 6 (446)
Profit for the period 957 (73) 48 6 938
Explanation of transition to IFRS
An explanation of how the transition from UK GAAP to IFRS has affected the Group’s financial position, financial performance and cash flows is
set out below:
IAS 17 – Accounting for operating leases
The Group benefited from an operating lease incentive at the outset of its 15 year lease on the Meadowhall factory in 2005.
Under UK GAAP, the benefit of the operating lease incentive is spread to the date that the rent is first revised to market rent.
Under IAS 17 “Leases”, payments made under operating leases should be recognised as an expense on a straight line basis over the lease term,
even if lease payments are not made on such a basis. As a result, the total amount payable under the operating lease has been spread over the
entire lease term on a straight line basis, with the difference between the amount recognised in the income statement and the amount paid being
included within other payables on the balance sheet.
IAS 39 – Contracts in foreign currencies
IAS 39 “Financial Instruments: recognition and measurement”, requires that embedded derivatives are separated from the host contract and
accounted for as a derivative when they are not closely related to the economic characteristics of the host contract. A value is placed on all sales
and purchase orders at the time of order placement based on the forward rate applicable for the expected date of delivery. Where orders remain
outstanding at subsequent reporting dates, the difference between that rate and the forward rate for the expected delivery date calculated at the
reporting date is accounted for separately as a derivative asset or liability.
Movements in the carrying value of the derivative asset or liability are recognised through the income statement.
IAS 39 also requires forward foreign exchange contracts to be recognised on the balance sheet at their fair value with movements in the fair value
being recognised through the income statement.
IAS 12 – Income taxes
IAS 12 “Income taxes”, requires that deferred tax is calculated based on the difference between the carrying amounts of assets and liabilities and
their tax bases. As a result, deferred tax has been calculated on each of the adjustments explained above. Deferred tax assets and liabilities are
recognised separately. PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 47
COMPANY BALANCE SHEET
AS AT 27 SEPTEMBER 2008
2008 2007
Notes £’000 £’000
Fixed assets
Investments 4 1,010 1,001
Current assets
Debtors 5 1,918 1,804
Cash at bank and in hand 5,042 3,931
6,960 5,735
Creditors: amounts falling due within one year 6 (661) (330)
Net current assets 6,299 5,405
Net assets 7,309 6,406
Capital and reserves
Called up share capital 7 567 567
Share premium account 8 5,341 5,341
Equity – non distributable 8 9 —
Profit and loss account 8 1,392 498
Equity shareholders' funds 9 7,309 6,406
The notes on pages 48 to 49 form part of these financial statements.
Approved by the Board on 8 December 2008 and signed on its behalf by:
J.T.S. Hayward
Director 48 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
These financial statements have been prepared under the historical cost convention and in accordance with applicable UK accounting standards and
the Companies Act 1985. Under section 230(4) of the Companies Act 1985 the Company is exempt from the requirement to present its own profit and
loss account. The profit for the financial year dealt within the financial statements of the holding Company was £1,113,000 (2007: £498,000).
Investments
Investments in subsidiary undertakings are stated at cost subject to provision for impairment where the underlying business does not support the
carrying value of the investment. Where the ownership of investments have been transferred between Group undertakings, this has been
accounted for at nominal value under the provisions of merger relief.
Pensions
The Company makes contributions to a defined contribution scheme with costs being charged to the profit and loss account in the period to which
they relate.
Share based payments
The share option programme allows Pressure Technologies plc to grant options to Group employees to acquire shares in Pressure Technologies
plc. The fair value is measured at the date of granting the options and spread over the period during which the employees become unconditionally
entitled to the options. The fair value of the options granted is measured using an option valuation model, taking into account the terms and
conditions upon which the options were granted. The amount recognised as fair value is adjusted to reflect the actual number of share options
that vest except where forfeiture is due only to share prices not achieving the threshold for vesting. Deferred taxation is recognised over the
vesting period.
Where the individuals are employed by the parent Company, the fair value of options granted is recognised as an employee expense with a
corresponding increase in equity. Where the individuals are employed by a subsidiary undertaking, the fair value of options to purchase shares in
the Company that have been issued to employees of subsidiary companies is recognised as an additional cost of investment by the parent
Company. An equal amount is credited to other equity reserves. This treatment is in accordance with UITF 44 and FRS 20: Share based payments.
2. EMPLOYEE COSTS
The only employee costs of the Company are those of the Directors, these are detailed in note 9 to the Consolidated Financial Statements.
3. OPERATING PROFIT
The Auditors’ remuneration for the audit and other services is disclosed in note 7 to the Consolidated Financial Statements.
4. INVESTMENTS
Investment
in subsidiary
companies
£’000
Cost
At 1 October 2007 1,001
Share options granted to subsidiary employees 9
At 27 September 2008 1,010
The principal subsidiaries which are both 100% owned, are:
Name Country of incorporation Principal activity
Chesterfield Pressure Systems Group Limited (“CPSG”) England Management company
Chesterfield Special Cylinders Limited (“CSC”) England Manufacturing
5. DEBTORS
2008 2007
£’000 £’000
Amounts: falling due within one year
Other debtors 6 26
Prepayments and accrued income 24 31
Amounts owed by Group undertakings 1,888 1,747
1,918 1,804 PRESSURE TECHNOLOGIES PLC ANNUAL REPORT AND ACCOUNTS 2008 49
6. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2008 2007
£’000 £’000
Trade creditors 15 20
Other tax and social security 8 7
Other creditors 2 —
Accruals and deferred income 162 303
Corporation tax 39 —
Amounts owed by Group undertakings 435 —
661 330
7. SHARE CAPITAL
Details of the Company's authorised and issued share capital and of movements in the year are given in note 21 to the consolidated financial
statements.
8. RESERVES
Share Profit Share Profit
Equity – non premium and loss premium and loss
distributable account account account account
2008 2008 2008 2007 2007
£’000 £’000 £’000 £’000 £’000
At beginning of period — 5,341 498 ——
Profit for the financial period —— 1,113 — 498
Arising on share issue —— — 5,800 —
Share option costs —— 8 — —
Share options granted to subsidiary employees 9— — — —
Costs relating to share issue —— — (459) —
Dividends —— (227) ——
At end of period 9 5,341 1,392 5,341 498
9. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS’ FUNDS
2008 2007
£’000 £’000
Equity shareholders’ funds at beginning of period 6,406 —
Profit for the financial period 1,113 498
Shares issued in share-for-share exchange — 367
Dividends paid (227) —
Share option costs 8 —
Proceeds of share issue (net of costs) — 5,541
Share options granted to subsidiary employees 9 —
Equity shareholders’ funds at end of period 7,309 6,406
DESIGN & PRODUCTION
www.ckdcorp.co.uk
TEL: 020 7566 0190
PHOTOGRAPHY
Charlie Fawell
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MEADOWHALL ROAD
SHEFFIELD
S9 1BT
UK
TELEPHONE +44 (0) 114 242 7500
FAX +44 (0) 114 242 7501
www.pressuretechnologies.com