21 October 2011 – trading update
A downbeat trading update has seen shares in Pressure Technologies plunge to an all-time low. Results for the financial year ended 1 October 2011, due to be released on 6 December, will be lower than market expectations. Gross profits have fallen due to changes to the sales mix at both Chesterfield Special Cylinders and the Engineered Products Division. There have also been marginally lower sales in Chesterfield BioGas. Fixed costs were higher than the market forecast, due mainly to the write off of acquisition costs and a further investment in commercial and technical staff which was budgeted for 2012 being brought forward.
The lowly share price is perhaps justified in the near term given the uncertain outlook. However, it is easy to argue that it now undervalues the business significantly. The dividend will be maintained and is supported by a net cash position. Excluding cash the business is now valued at just above £10m. Bearing in mind the history and reputation of the company this is far from excessive. Current stock market conditions may mean that the shares have not bottomed yet but we feel that patient investors will ultimately be rewarded. For the time being we rate the shares as a HOLD.