Pressure Technologies#: A Company in Turnaround
A Company in Turnaround
The Group today, compared with 2018, has been undergoing a significant turnaround. Pressure Technologies (PRES LN), a precision engineering business, producing high pressure cylinders, and providing specialised machining services, has a refreshed board and strong balance sheet. It has restructured and invested in operations, software, and machining technology. PRES is winning business in new, potentially high growth markets, including advanced cylinder technology for hydrogen vehicle refuelling infrastructure.
The Hydrogen Opportunity
Hydrogen is seen as having a potential contribution to net-zero targets by de-carbonising heating, industrial processes including steel production, and heavy-duty transport. In February 2021, the Hydrogen Council reported that over 30 countries had national hydrogen strategies in place, pledging some US$70 billion in support. The Group’s high-pressure cylinders are seen as a storage solution for hydrogen and in-vehicle refuelling contracts have been won with Shell, McPhy Energy and Haskel Hydrogen Systems (part of Ingersoll Rand Inc. NYSE IR) representing early penetration of high growth markets.
Cyclical Recovery in Core Markets
The Group has exposure to oil and gas industry capital spend through sales of cylinders for use in motion compensation systems on floating platforms as well as the PMC division specialised machining for valves. In 2020, as industry capital spend weakened, Group sales into the sector fell by 8.6% to £14.9m. Whilst demand from the oil and gas market remains uncertain, recovery in oil prices could see spend start to rise again.
Recommendation
The Group is in turnaround and creating a clear path to profit. We see the Group moving from losses in 2020 to adjusted EBITDA positive of £0.5m for FY2021 and £3.0m for FY 2022. The hydrogen opportunity presents significant future upside.
Our peer group valuation combined with DCF, sets a share price target of 175p. Buy.
Phil Smith, Head of Technology | T: +44 (0)20 3617 5187 | E: psmith@vsacapital.com
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