Chesterfield Special Cylinders Holdings (LSE:CSC) — Preliminary Results

0:01 Good afternoon, and welcome to the Pressure Technologies Preliminary Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab that's situated on the right hand corner of your screen. Please simply at any time type your questions and press send. Company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I would like to submit to the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to James Locking, CFO and Chris Waters, CEO from Pressure Technologies. Good afternoon to you both. Good afternoon, Mark. Thank you for the introduction.

0:46 Good afternoon, Mark, and welcome, everybody. It's great to be on the I investment company platform this afternoon. Pressure Technologies, as well as really strong support from its institutional shareholders,

0:58 has a long history of strong support from private shareholders in individuals holding stock in in the company, and we're we're delighted to use IMC to get our our preliminary results for 2021, that message across this afternoon. I'm going to turn to our first slide and give a a an overview of the Pressure Technologies Group, our our our group. Now very much a a leading UK designer and manufacturer of safety critical components and systems serving global supply chains in defense, oil and gas, and industrial hydrogen hydrogen energy markets. We now have two divisions within within the group, the CHESTERFIELD SPECIAL CYLINDERS division, the cornerstone of pressure technologies, and the precision machine components, the PMC division.

1:48 CHESTERFIELD SPECIAL CYLINDERS was established back in 1897. It's fundamentally involved in the manufacturing of safety critical gas containment systems, also their inspection and recertification. We serve global defense, oil and gas, and and industrial customers, and we're seeing increasingly, growing, market in hydrogen energy, which, Chesterfield has an increasing presence in. Our precision machine components division, comprises today of the Almet, Ruta, and Martract brands. We manufacture highly specialized precision components for complex safety critical applications principally in oil and gas. Those components are serving drilling, well intervention, production flow control activities.

2:39 Again, we have a global oil and gas OEM customer base. As you can see, in the, the photographs in in the slides there, the manufacturing process at both our CHESTERFIELD SPECIAL CYLINDERS and our precision machine components, sites, and the, the range of components that we are delivering to, significant OEM OEM customers. Our sites are in The UK. Our operations are are based, in in in in England and Wales. And in in Wales, we, have our helmet facility, a pump to clean near near Cardiff. Our Chesterfield Special Cylinders site is based, here where where James and I are today in in in Sheffield. Our router facility is, a short distance from the Chesterfield Special Cylinder site in, in in Rotherham, and our Martrack facility, is in Barton On Humber.

3:36 All told, the group today has around a 190 staff, distributed across the the four operational sites. James and I joined the group in 2000, and, late late two thousand eighteen, early two thousand and and nineteen. And in 2019, in June 2019, we launched our our growth strategy for for the group. Previous growth strategy for the group was one very much based on diversification through through acquisition. The strategy today, as launched in 2019, is about, the delivery of organic growth from our two core manufacturing, divisions of CHESTERFIELD CYLINDERS and PRECISION MACHINE COMPANTS. The first phase of that strategy, was initiated, in in in in 2019, and it was very much about refocusing the group on on getting the the very best from those core manufacturing divisions. It was about the divestment of noncore activities, the divestment and sale, a divestment of the of the Hydroton Engineered Products business, and the, the the Greenlane biogas, business was also divested, and that transaction was completed in two thousand and nineteen. Nineteen.

4:57 The focus in our phase two of of the strategy was very much about extending the range of products we are offering to our existing customers and and extending also the the base of customers that the group the group served a traditional organic growth strategy. And that strategy was also about getting the very best efficiency, productivity, performance, and profitability from, the sites that that we're operating operating through operational improvement, to, to to support, growth in in in profitability and cash generation. Ultimately, the completion or extension of our of our, organic growth strategy would give the group the opportunity to accelerate growth further, through, through potentially acquisition,

5:51 partnership, and the building of scale. And we made, significant progress over the last, three years of implementing this strategy. Of course, two of those years, have, sadly been been hampered by, by oil and gas market conditions, which have constrained the growth and development in particular of our PMC PMC division that felt the the the brunt of that. But, nevertheless, we have pushed on during, phase phase one and and phase two with the, performance improvements across our operation, involving the implementation of capital expenditure plans to improve our equipment and facilities. And also, very importantly, the the strengthening of our management teams and our specialist skills and capabilities across the business in sales, and and and engineering.

6:46 And, we've seen the benefits also of a transformation of, of organizational culture during that that period. So progress being made not notwithstanding the challenges of the last two years, impact on our operations and our end markets. But, but but none but nonetheless, progress and and strong strong progress.

7:11 In addition to the organic growth from well established markets, we've also seen very strong, growth in an exciting market, in hydrogen energy energy storage, and we'll talk about more about the, the growth and development in that in that market later on in the slides today.

7:36 Moving on to the group highlights, in particular for the year ending 10/02/2021. I'm going to talk, about the about the headlines. James is going to then talk about the the financial the financial details. 2021, despite the the the challenges and the disruptive backdrop caused by by COVID nineteen and an oil and gas market conditions, we were pleased with the overall progress in in the group, and and the revenue delivered £25,300,000 and adjusted operating loss of 700,000. That performance, was, was was underpinned by by very strong revenue and profit in our CHESTERFIELD SPECIAL CYLINDERS CYLINDERS division, HOLDINGS PLC, but, which offset sought to offset, some of the, the results in our precision machine components division.

8:33 CHESTERFIELD CYLINDERS order book underpinned their very strong revenue of £18,900,000 and a very strong EBITDA of £3,500,000 for for for CHESTERFIELD in that period, significantly up on the previous year, 600,000 EBITDA. In our precision machine components division, oil and gas trading conditions drove that 55% reduction in revenue just down to £6,400,000, around £8,000,000 worth of of revenue, drop compared to to the previous year, but only £1,000,000 worth of impact on on EBITDA as a result of steps taken promptly at the early stages of 2020 to to mitigate the, the the losses or to mitigate the impact of the oil and gas market on on our on our operations.

9:31 So during the period, we have seen some strong progress, in particular momentum building in hydrogen in the hydrogen energy market, where our revenue grew from 200,000 in 2020 to 2,200,000. We've seen, the tremendous success, for our high highly competitive efficient designs for hydrogen storage, and that's something we'll talk about later on in in the slide deck. Fundamentally important to underpinning our growth in the hydrogen energy market has been collaboration with our two core steel tube suppliers, Tenaris and and and Valerec. We also have continued to progress the the investment necessary to meet the future growth in demand at our factory here, in in, in Chesterfield's special cylinders.

10:26 Funds, raised during our very successful funding round in, in December 2020. Notwithstanding the impact of oil and gas markets on our precision machine components business, we have continued to press on, with the with the improvements, our strategic improvements set out in in in phase two, the improved efficiency, through the implementation of new, new new new advanced equipment, production engineering methods, the implementation of manufacturing, manufacturing systems, and the use of data in the management of our of our manufacturing operations, and the extension a significant extension of our customer base and, extension of the range of products that that we offer in that division. So all of the strategic, focus areas, of for development of our PMC division have been progressed, notwithstanding the impact of of, of the difficult market conditions in, in in in oil and gas.

11:31 We also, during the period, implemented an extension, of our banking facilities with with Lloyds Bank, extending the, the the facility through until June, 2023. So some good progress made despite the the backdrop of difficult market conditions in in in oil and gas, but, the strength of CHESTERFIELD's CYLINDERS business in established and new exciting hydrogen market, was was seen during the period. I'm going to ask James to talk about the, the group financial results. Thanks, Chris. Okay. So as Chris said, the revenue was very similar to the previous year. But more importantly, our gross profit improved from 5,300,000 to 6,700,000 because of that improved performance in the CSC division.

12:24 Obviously, our operating loss for the year was at naught 700,000 compared to 2,400,000 in the prior year. And I think key, if you look on the graphs on the right hand side there, you can clearly see the right graph revenue by market sector that shows that balance of of revenue split between our four major sectors. So you can clearly see the dark blue color is the oil and gas, the red is the defense, yellow is the industrial market, and the green top of the right

12:56 hand f y 21 bar is the hydrogen market. So you can clearly see we're starting to see that defense growth in revenue from the previous two two years. Industrial Industrial revenues remaining similar to around £4,000,000 per annum, but the hydrogen market revenue of 2,000,000 coming in into '21, and that we hope will continue to grow going forwards. Okay. For CHESTERFIELD CYLINDERS, stand alone division, that as Chris said, their revenue is up by nearly 70% to 18,900,000 compared to 11,000,000 in the previous year. That allowed them to double their gross profit to 6,100,000 from 2.9 and make an adjusted operating profit of 2,800,000, which was compared to a a very small loss the previous year of just under under a £100,000 loss.

13:47 The more importantly, their gross margin went up as well 32% compared to the previous 26. And that as you can see on, again, on the graph on the right hand side there, you can clearly see the the impact of the defense revenues and the hydrogen revenues on CHESTERFIELD SPECIAL CYLINDERS and and how that's allowed them to grow in the top graph. Their gross margin came back up on that higher revenue and the basis of the defense contracts and hydrogen contracts that we've got.

14:17 And I'll let Chris talk to you about a bit more about the progress made in the in the division. Thanks, James. Yes. Just a few highlights from from FY 2021. As as as we've seen already, very strong contribution from our defense contract revenues at CHESTERFIELD SPECIAL CYLINDERS, that £11,100,000 worth of of revenue driven by UK and and overseas naval submarine programs, programs for the likes of BAE Systems and and and Naval Group. The revenue from from from hydrogen grew to 2,200,000 from from a from a low base in in in 2020 from contracts from key customers, Haskell, McPhee, Framatome, Arcola, and and and US fuel cell major Plug Power, where we've been able to establish, the, the very successful CHESTERFIELD SPECIAL CYLINDERS design, as as the specified product for hydrogen refueling stations for these customers.

15:18 We also saw in the period, the first two orders placed by Shell under a five year frame agreement that we established in June 2020 to supply their European refueling stations, and, those projects are on ongoing in Chesterfield for for for delivery within 2022. We've also to underpin the the growth and and and production improvements at Chesterfield CYLINDERS implemented a a series of of of process and system improvements in our manufacturing, manufacturing operations. And those have progressed on under a new management team, throughout 2021 and will continue through 2022, as we we will also continue to implement the capital investment program that will also, underpin the delivery of our longer lead time defense contracts, alongside the shorter lead time and higher volumes of of, high pressure hydrogen storage.

16:24 In terms of the the outlook for CHESTERFIELD CYLINDERS looking into 2022 and and beyond, CHESTERFIELD has a very strong defense order book and and a and a very visible pipeline. In some cases, that that pipeline extending, well beyond five years, which supports, the, the capacity capacity planning with it within Chesterfield Cylinders. It's also high value, high high value. The defense contract's very high high value for for CHESTERFIELD. And we also support a number of our naval naval customers with integrity management. That's the insitu reinspection and recertification of high pressure systems onboard, naval submarines and and and surface vessels for which, again, we get, very good visibility of those of those contracts.

17:16 Also in the outlook, we're very pleased with, so far, the development of of our products for the hydrogen energy market, the pressure pressurized storage of of hydrogen energy for refueling stations, green hydrogen storage, and mobile mobile transportation. So very good progress made so far, and we're getting increasingly strong visibility of opportunities, in that market, as, as we work closer with with our with our key customers to understand, their projects, their project pipelines for two thousand twenty two, twenty three, and, and beyond. Going to just elaborate a bit more here on our on our our defense, order book and and pipeline.

18:07 CHESTERFIELD CYLINDERS supports, key customers, such as BA Systems, Naval Group, Rolls Royce, HDW Tisson Group, Babcock, for major defense new construction programs for naval submarines and and and surface vessels. We're pleased to continue to support, BA Systems, and the UK Ministry of Defense with the astute program and the supply of cylinders of the astute program, also for the the Dreadnought new construction program for which there are four four boat sets, of cylinders in in total. Currently working on the on the second boat set for for BA BA systems. We also support Naval Group, French, naval constructor for, in particular, their their Barracuda the Barracuda class, and we have good visibility of the outlook of Barracuda class projects.

19:05 In addition, in in the the end of twenty twenty two, we secured, further contracts with BA Systems for the type 26 frigate program, and we see also a strong pipeline for type 26 hunter class frigates for the Australian and Canadian Navy. In addition to the supply of products for new construction Right. Cylinders for new construction project projects, the CHESTERFIELD SPECIAL CYLINDERS delivers integrity management services, for the naval submarines and and surface vessels, where we, inspect and and recertify cylinders in in service. We have, again, good good visibility of of those programs and their high value, important revenue for the CHESTERFIELD SPECIAL CYLINDERS naval naval business.

20:05 Operating for many years in safety critical pressurized storage, does position CHESTERFIELD SPECIAL CYLINDERS very well for the growing hydrogen energy storage market, both in terms of hydrogen refueling stations and green hydrogen storage and and the mobile trans transportation of of, of hydrogen. Customers operating in that space look for, the experience and longevity of companies such as CHESTERFIELD SPECIAL CYLINDERS in in in respect of the design, and and proven manufacturing capability, for the high pressure storage of of hydrogen, at some some cases at pressures,

20:53 up to a thousand a thousand bar. We've seen, strong progress over the over the past year, in in in that market. And I can share with you here the progress that has that has that has been made. As you can see, our important customer base here, Haskell, Shell, McPhee, Plug Power, as well Arcola Energy, now part of of of Ballard, Framatome. And and we're seeing increasingly inquiries for green hydrogen storage projects from the likes of Total and and and Iberdrola. Over the course of the of the last two years, we we've been working with with our partners to properly understand and and size the market for hydrogen storage.

21:51 And, the areas of, of priority for CHESTERFIELD SPECIAL CYLINDERS are are, in European mobility for bus and and truck, train, and logistics app applications, where the second phase is looking at mobility solutions in The Americas, Australasia, and the rest of, of of Europe, in particular, for for green hydrogen storage. And here, you can see the the very rapid development in in in this this slide, the very rapid development of truck and bus demand for refueling. And this is we have evaluated, through our rigorous analysis and research over the last two years.

22:38 We've determined the, the the volume of hydrogen that will be required for for visible mobility mobility projects, in particular, for buses and trucks. And that volume of of hydrogen will require hydrogen refueling stations across across Europe, and we've quantified those. It gives us an identifiable and addressable market for CHESTERFIELD SPECIAL CYLINDERS, to to focus, growth growth efforts on. And, we're seeing, the, the the benefits of having developed a very successful 550 bar hydrogen, storage solution, that meets very, very well the requirements of bus and, and

23:23 heavy duty truck refueling. To underpin, the, the delivery of of hydrogen growth, at CHESTERFIELD SPECIAL CYLINDERS, it's been necessary for us to make, make changes, to make improvements to our production capacity and our efficiencies, which we, will have in place by the end of of twenty twenty two. We anticipate, given the market outlook, that there'll be a a rapid, increase in in in production requirements, from the end of of twenty twenty three. So very important that we put in place the the necessary production capacity and efficiencies to to be able to deliver, that demand. And for us, very specifically, that's about expanding and and improving our finishing lines and upgrading our our testing,

24:22 painting, and shot blasting facilities, and also, to to to make sure that we can, manage contracts for hydrogen refueling, and and storage alongside our traditional defense and and industrial and and oil and gas projects. So we raised funds in, in in in December 2020, £7,500,000, we we we raised. And, I think £1,500,000 worth of of that was very specifically to increase the production capacity and efficiencies of our CHESTERFIELD SPECIAL CYLINDERS HOLDINGS PLC here in in in in Sheffield. In addition to the production efficiency improvements and capacity improvements, it's been absolutely vital that we develop, a a deeper

25:16 and and stronger relationship with our key, key suppliers. And over the past year, I'm pleased to say with that we have both with with Tenaris and and Valerec, our our key specialist steel tube manufacturers developed, very strong relationships both, with with both of them focused on the the necessary development of of of of the right of the right products and also the securing of the necessary stock lead times and consignment stocks in order to meet the customer the customer service levels, the lead times that, that are required in in that in that, in the hydrogen hydrogen energy market, which are significantly shorter than our traditional projects for, for for typical defense defense customers.

26:18 So I'm going to, now, move move on, to the precision machine components performance for for the year. But, but before before I I do that one sort of final comment on on the hydrogen on the hydrogen market for for for CHESTERFIELD CYLINDERS, in terms of its outlook, going into, in in into twenty twenty twenty two, that the the building of our production capacity and the strengthening of relationships, with, with with our key key suppliers, stands us in in in very good stead to to see continued growth and development, in this market. And we anticipate, the, a very similar level of of growth, through 2022, as to that that we have seen in all levels of of revenue in twenty twenty twenty twenty two to those that we have seen in through throughout 2020, 2021.

27:19 So very strong, very attractive market, and and CHESTERFIELD SPECIAL CYLINDERS has has developed over the course of the last two years a very attractive, very competitive, and very efficient product for for that market. And we we look forward to seeing more of its success during during 2022.

27:40 James, I'm going to ask you to talk about the financial results. Yes. So for PMC, precision machine components division, obviously, as Chris said earlier, quite a difficult year, both revenue and profit. Obviously, our revenue dropped by 55% down to 6,400,000 compared to 14,200,000 in the previous year. We've made an adjusted operating loss of 1,600,000 compared to naught 700,000 in the previous year. I think what key for us though is coming as the oil and gas market recovers, which I'm sure Chris will come on to you shortly. Key for us is that in the year, though, there was a move away from just pure oil and gas revenues. And for the first time, that's gone to a significant size. We had over 700,000 of that 6,400,000 was from actually revenue delivered to non oil and gas markets.

28:30 Some of that revenue was delivered to our CSC division. Some of it was delivered to other industrial projects. So starting to see that we can diversify away from oil and gas. But oil and gas, as we say, coming on too shortly, we expect that to recover during 2022. Clearly, as you can see from the bottom right hand graph there, the revenue decrease compared to the previous four years was very significant. Okay, Chris. Back to you. Yeah. Thanks. Thanks, James. Yes. No. Undoubtedly, a a tough year FY '21, as was twenty twenty twenty. I think importantly, and perhaps I will just just jump back in the slide deck there to make a point about, f y f y twenty. So financial year 2020, for us started, extremely well with around 15 over 15% growth year on year for for the for the for the half for the half years

29:28 compared to f y f y twenty, we were seeing, the early stages of of of improving the, the diversity of our customer base. We were seeing good sales growth in in in PMC, but, that FY twenty was clipped by the start of the, of of the pandemic. The second half was was hit, by that, but by that in terms of in terms of volume.

29:55 We so we had been anticipating, around 16 to £17,000,000 in in f in f y f y twenty in f y twenty one, as you can see, very, very, very significantly impacted, by by the drop off in in oil and gas demand. Not not not not with withstanding that, as I said, we have been able to continue to make progress, with with our strategic goals. Those were very much around the diversification of the, of the customer base, back in 2019 and and for the years, prior to that, for all the PMC companies, Almet, Rooter, Martrack, and and Quadscott at the time, they were very, very high customer concentrations in in in Rooter's case. In in particular, our Rotherham facility, Rooter's case, 75% of the revenue, came from just from just one one customer back in 2019.

30:57 And today,

30:59 four customers represent 75% of the order book, in router. And, we we have extended, not only the customer base, but but also extended the range of products and services offered, to, to those to those customers. During the second half of, 2021, we saw, this the start of a recovery of order intake for our Rooter and Martrack sites. A Ruta and a Martrack Martrack are are operating, or or are manufacturing products that are very specifically focused on on the, on well on well in in intervention.

31:45 And, and and those the the early stages, early signs of of recovery, we started to see in March in March last year. That continued throughout the course of the second half of of twenty twenty one, to the extent that

32:01 our Ruta and Martrac sites, had a very profitable, second half of the year, achieving levels of of profitability, greater than than pre than pre pandemic levels. So we're very encouraged, by that, and that situation continues, in Rooter and and and Martrack today, again, across a more diversified, customer customer base. However, our site in in PonteClean, near near Cardiff works almost exclusively for Cameron. Cameron, a member of the of the Schlumberger group. And and Cameron have have felt the the impact of oil and gas markets on the demand for their flow control components.

32:48 The the subsea subsea tree demand fell sharply through 2020 and and 2021. And the components that ALMET make are very much part of the of the overall subsea tree assemblies. What we see going into 2022, is the very clear clearly anticipated recovery in demand for subsea tree construction for key OEM customers such as Baker Hughes, Cameron themselves, Technip, FMC, and which is an we anticipate that the recovery will will therefore be be be strong during 2022 for the components that ALMET manufacture.

33:35 That's the the valve stems gates and components that that are installed within the the subsea the subsea trees. We're already seeing the the signs of, increased inquiry levels, and increased order placement through our site, and we're very encouraged by, by what we see and the, the the anticipated demand coming through from the likes of Cameron and Baker Hughes, going into into twenty twenty twenty two. So, dear, it's been a very tough couple of years in in in oil and gas and very, very significantly impacted the performance in 2021 for for for for PMC.

34:21 But we're we're, you know, we're we're optimistic looking at the the signs of of recovery going into in 2022, especially for for Almed. And as James says, really important, diversification,

34:35 within the, within the revenue for for PMC. It's very much part of our our strategy launched in 2019 was to reduce the dependency on on oil and gas customers as much oil and gas market as much as as much as we could to utilize also the strong, skills, the expertise, of, of of the PMC operations, and we've been pleased to be able to do that across, the offshore wind, markets, defense markets, and in and industrial markets, otherwise, including water treatment. Defense markets in particular, there's a great opportunity during, 2022 to collaborate, with our CHESTERFIELD CYLINDERS colleagues on on defense contracts, for for for UK naval programs supporting BA systems.

35:27 We, established over the last two years, long term supply agreements, with with with Schlumberger, and with Baker Hughes and, and key customer at Xpro. We are also in in discussions, with, with Halliburton about similar, arrangements, to underpin the the manufacturer of valve components at the router at the router site. So it's been very important for us to establish those long term, agreements, which have also, allowed us to extend the range, of products, that we offer that we offer to, to to all of them. Those OEM customers, through especially through through discussions about those long term agreements are giving us, the very best indication that they can of their outlook, during 2022, which has helped us determine the, the level of resourcing and capacity, during, the level of capacity required, to meet their their requirements.

36:30 Over the course of 2020 and 2021, we had to make some very tough restructuring, decisions across the PMC business. We chose to, to to close our Codscot operation in East Kilbride persistently loss making operation. We consolidated the the activities of quad Scott into our router router facility. We we also had to implement cost saving restructuring in in in Almet and and router themselves to the extent that that we reduced the cost base, within the PMC division to around 40%. But I'm really pleased to say that going into 2022, our router facility is already back at pre pandemic levels of of resourcing, and we've been, very successful in our recruitment of of new skills and expertise, into that operation, in order to support the, the growth that that we've, that we've started to see and and are optimistic about for for 2022.

37:37 So coming to the end of the of the of the slides, here, I wanted to, to to summarize as we as we look into into 2022. The group is well positioned to take, advantage of a very strong defense order book in in CHESTERFIELD SPECIAL CYLINDERS. And CHESTERFIELD SPECIAL CYLINDERS also faces this very exciting opportunity in in hydrogen energy storage. The importance of oil and gas market recovery, though, is, is is extremely important to our precision machining business, and, we're we're we're we're more optimistic about that going in into 2022. Having launched our strategy in in 2019, which was very much about the organic growth and development of of both of our manufacturing divisions.

38:31 Our strategy remains focused very much on that, very much focused on the growth and development of both both divisions. Strong defense order book in CHESTERFIELD CYLINDERS underpins the outlook for 2022 for for for the group. We're very excited about the progress that's been made having positioned some very strong products in the in the hydrogen energy market. We're very excited about the prospects for those, for those products, in in in 2022. The visibility of the exciting hydrogen market is is improving all the time, with refueling station projects, also green hydrogen storage, and, and and mobile trans transportation of hydrogen expected to ramp up very sharply from 2023.

39:24 And our our progress over the last year and, the, the plans we have for 2022 will position will position Chesterfield Special Cylinders very strongly, for for that market. So, there's there's an element of caution going into 2022 about the recovery of oil and gas markets and macro macro factors very much outside of of our control, but the, increasing level of order intake and customer sentiment, is is is very encouraging. And, there that is the the end of the, of of the slides, and we we've also included in the pack some additional financial summary detail. But, Mark, thank you. I that's the end of our That's great. Presentation.

40:13 Chris James, thank you very much indeed for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. But just while James and Chris take a few moments to review those questions submitted already, I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard, and we'll send you an email when that's ready for your review. James, Chris, we did receive a number of pre submitted questions from investors, and I can see you've had quite a few coming through the live meeting. So I'll read out a few of these first, if I may. The first one reads as follows. We hear in the prelims great news of new contracts. I see no mention of these new or existing contracts via an RNS'. So why not why do you not release information on these contracts via the RNS service? Why do you only mention them in the results?

41:04 Yeah. Thanks, Mark. I mean, happy to take that one. So we we we we endeavor to to communicate our successful securing of of contracts even when those those contracts are not material. Of course, if they're material, we're we're obliged to to to to report them. However, we are also restricted by by our customers and what our customers will allow us to communicate. And some of those those those contracts, I'm afraid, were were, we weren't able to to to announce them due to the the restrictions put put on us by, by by the customer. That's great. Thank you. If I may turn to the next one regarding the current loss making division, PLC. Even pre pandemic in trading, the the division was real really loss making.

41:52 Why do you still retain it? Yeah. So I think as we've we've said, Mark, you know, the the the board is very much focused on the the development and and growth of of both divisions. And we have seen, back in 2019 on around 14, million pounds worth of revenue. The PMC operation, PMC business was a profitable was a profitable business. And if you take, in fact, take the the ALMET, business as a as as an example, around £7,500,000 worth of of revenue in 2019, Business made around £1,500,000,000 worth of of of operating profit. So the businesses are and can be, can can be very, very, very profitable with the right level of of volume.

42:39 And that's what we're waiting, to to to see, coming back in into both into both the into the Almet, router, and and Martrack facilities. Worth also adding that the improvements that we've made operationally to these businesses don't just necessary give give them the potential to be profitable and and cash generative. They're they're also actually operationally, performing far better than than they were, back, pre pre 2019. The businesses themselves are now much more much more sustainable. They are delivering on time delivery performance around 90%. Whereas back before 2019, those operational that operational performance was was was delivering on time delivery around 3030% of the time. Quality performance is is much greater. Our ability to improve shortened lead times, enhance profitability of of individual components for for customers is greater because we're using data and and and MRP systems and manufacturing resource planning systems that that give us the opportunity to to to to modernize, and and deliver better operational operational performance.

44:00 And as we as we're doing that over a much more diverse customer base. So there's there's there's significantly less dependence on on just one one one or two one or two customers. So we are optimistic about the, the future of of of recovering profitability and cash generation, in in in PMC. That's great. Thank you. And then I guess the final pre submitted question, if I may, is would you be able to provide some further details on your general contract terms for CSC, particularly regarding raw material costs? Are you able to pass on price rises to customers? Yes. Thanks, Mark. So I I I mean, I can't give very specific details of individual customer customer terms. But but what I what I can say is that, you know, when when we price our our our products, we do so very much with updated costs, from from our key from our key suppliers.

44:55 Our our customers know the kind of, escalation kind of inflationary pressures, that, that that we face in terms of raw material costs, in terms of labor costs, also in terms of energy costs. And, we, as far as material costs are concerned, we do indeed pass on, those costs, to to our customers at the point at which we we are establishing the pricing for for our products. This is why it's been absolutely essential for us over the past year to establish closer, more strategic partnerships with our key suppliers, Chesterfield CYLINDERS, in particular, that's Tenaris and Valerec. That's great. Thank you very much indeed. Well, that concludes the the presubmitted questions. I'm just mindful of time that we can get through as many of the live questions that have come through. As you can see, investors have submitted quite a few questions throughout today's meeting.

45:50 Very happy to hand over to you to read out these questions and give a response where it is, of course, appropriate to do so. And perhaps there there'd be questions more on the financial tone that I guess for you, James. But, again, if I hand back to you perhaps and and let you go through those, and I'll pick up from you at the end. Okay. Thanks, Mark. I can see a couple of questions at the top around hydrogen. I think, Chris, do you wanna do the first one? We've gone about the Yeah. So I've got I've got one here about the the materials the materials and technology used for hydrogen refueling station storage, and and I can talk about the the product that has been very successful for CHESTERFIELD CYLINDERS just over the last year. In fact, it's it is the of the 2,200,000, it is in the the the entire £2,200,000 over 2021 came from our five hundred and and fifty bar type one steel cylinder design of of various of various lengths, various capacities, 500 liters, 1,000 liters, and 1,600 liters. It's been a very, very successful product.

47:02 And and in terms of the question here about what materials and and technology are we are we using, we're monochrome steel, steel tube, seamless steel tube, in this case, manufactured by by our our supplier Valerec. We receive the the tubes here on our Chesterfield special cylinder site. We heat and forge the ends of of those cylinders. And so after, after heat treatment after heat treatment and and machining and and assembly and certification. Those cylinders are are tested and then taken to the to the customer's site and and and installed alongside their their refueling station equipment. So that's our that that's the the the those are the technologies that we're using for our type one steel steel cylinders.

47:59 The question from Andrew says, what forecast do we have for hydrogen storage over the next three to five years? I think over the next couple of years, Andrew, it's fair to say that whilst we made £2,000,000 next sorry, last year, we'd expect to see that kinda go up to about 3,500,000 we anticipate for this financial year. So f y '22, again, about a similar level of growth from the previous year of just under £2,000,000 growth in revenue. Beyond that, it starts to get a bit more difficult to judge as I'm sure you'll anticipate. But, basically, what we see for 2023 is probably, again, another circa 2 to 3,000,000 on top of that. So you're probably looking at about 6,000,000 in 2023. Forward of that, that growth, the the the chart that Chris showed on the slide, which talks about the growth in refueling station potential volumes of stations required. Obviously, that has an implication for the number of cylinders that we produce.

48:55 It is quite difficult for us to assess that directly financially just because of the nature of the market. And And I think, Chris, if you want to talk about the market space so that everyone's really clear about that, I think that would and the and then question from Michael about the competitive landscape of and why would people choose pressure technologies. I think you can kinda see that it's it's kind of the development as the market grows. We'll see that competitive nature, and then there'll be pricing implications kicking in. So we don't we've not really seen our revenue beyond the next couple of years just for the time being. So the, I think the the the pacing, item, at the moment, with within the industry within the supply chain is is is not just the, the the the pressurized pressurized storage, but it's also the chillers and and and the compressors and supply chain in in that in in that areas is is also, something that our, you know, our customers are very con conscious of making sure can meet can meet their growth growth, expectations.

49:59 What's driving the immediate demand for for CHESTERFIELD SPECIAL CYLINDERS is the is the growth and development of refueling stations. Those principally are related to to bus bus and trucks, but also, logistics applications, as well for our plug power customer there. It's it's for them, it's the it's the the warehouse applications, forklift forklift truck refueling stations as well. We've evaluated those various various areas of of the market principally, again, in terms of high overall hydrogen volume demand. It's it's it's buses it's it's buses and and trucks. And as as James says, we we would anticipate a similar level of of of stepping up in in in in 2022.

50:47 So sort of revenues, $3.3.5 to £4,000,000 for 2022 and then similar levels beyond. After 2025 is when we're expecting very, very steep, demand where where other parts of of the supply chain, really, are are able to to meet the the refueling station manufacturing capacity capacity requirements. I've there's a a question also here from from John John h. What exposure do you have to rising rising steel prices is is the question. And I think so answering that in in in a in a couple of ways, John, of course, the, you know, the the we're we we've seen over the the course of the last year or so very significant steel price rises.

51:41 Those those steel price rises are our customers are are very aware of the of the of the market conditions and and the the increasing steel steel prices. And we have attempted over the last year or so to to mitigate those steel price rises through the, the purchase of of strategic, material stock, which we started acquiring in early twenty twenty one before the prices really start started to to to rise. We've secured that that that stock. We've also secured arrangements with our key suppliers for consignment consignment stock both in ingot terms, but also in in in raw material steel steel tube.

52:35 And, so when whereas we we have supply agreements with with with our customers, and we keep them informed, about the, the the nature of of rising rising prices, and and encourage then the securing or allocation of strategic stock that that we have in order to to mitigate price rises for for their projects. I can see Simon's asked two questions, one around supply chain issues and longer term implications and one about I think as Chris was saying there, Simon, that basically the the price rises that we're seeing across energy cost, material cost, we do keep our customers aware of the rising cost implications upon ourselves. Clearly, Clearly, the majority of our cost is material cost to be fair and also people costs.

53:25 But as we, you know, go into commercial contracting, then we're aware of our latest cost position, and we we are able to quote and pass on costs where we're contracted allowed to do so. So think Simon's also Simon's also asked a question about general supply chain Yes. Issues and any long longer term implications. I mean, we have established the the the long term supply agreement, last year with with with Valerec, which has very been very important for our steel tube, the steel tube we purchased for the, for the hydrogen projects. But other supply chain issues, the supply chain disruptions we saw early in in twenty twenty twenty, we you know, we're not a we're not a just in time organization, so we can we can accommodate variations in in terms of raw material, lead times, providing we have sufficient sufficient notice.

54:24 But there were disruptions, logistics disruptions, during the early part of of twenty twenty one. We've seen those those those those stabilize for for us, during during the latter part of of of 2021. And so the arrangements that we have put in place with our key key suppliers are there very much to to mitigate the the the the the supply chain issues. If we can give our key suppliers a good indication of the likely project demand ahead, it it allows them, of course, to manage their their production plans and and meet meet our our demand. Chris? Just to go you're gone, Mark. Sorry. Go on. No. No. I was just gonna say we're just coming up to the hour, and I'm I'm mindful for every very quest good question that you seem to answer. There's another one or two that comes comes throughout you. So I was just gonna suggest maybe if there's a final question, then, of course, we can make available to you any question that's been submitted today, and and, obviously, you can review those at at your leisure.

55:24 I think your time. Thanks. You to you have to do this, Chris, or do want me to do it? I mean, there were there's a question just about oil and gas just to give you a just a different question away from hydrogen. So, Simon, I think it is you again, same person. What sort of level of do you think the oil and gas business could get back to and how affected by the scrapping of new projects? I take the first part of that question. I think, Simon, it's gonna take a bit of time to get back to the $1,415,000,000 level, but we certainly think that this year revenue should be around 10,000,000 in 2022. And we hope beyond that, so it's 2023, 2024. It could be well be back up. But, obviously, as we start as Chris said, whilst we're cautious around this pace of recovery, we feel that there is a good sign that that could be the case that we could get back up towards $1,212,000,000 by 2023 and maybe beyond that back up to the fourteen, fifteen million numbers that we've seen previously. But for this year, around 12,000,000.

56:18 Do you wanna talk a bit about scrapping of new projects, Chris? I mean, I don't think there's anything that it's starting to allow be a backlog, and then we're starting to see these projects coming back online now, aren't we? Yes. I think new construction projects are are typically sanctioned at oil oil prices above above $60. We we see oil oil prices now at at at just over $80.80 dollars, and and our our key OEM customers, favor oil prices in that 70, 75 around 75 to $80.80 dollars as being a a good stable position to be in. It it allows continued sanctioning of of CapEx projects in in most in most region in most regions.

57:04 So that's what is we we believe driving the the anticipated increase in demand for subsea subsea tree infrastructure during 2022, '23, and and '20 and 2024. Our and router businesses supported by by by Martract are not just supporting new construction projects, though they are also supporting OpEx or operational expenditure for the replacement of of wear parts, whether it's valve assemblies, chokes, or stems. The the components that that that Almet router and and Martrac manufacture are also supporting ongoing production levels. And as those production levels rise, then then the quantity of of of wear parts for for replacement also increases as well.

57:57 That's great, Chris, James. Thank you very much indeed. And I think you've taken all we have time for today. But, of course, the company review all questions submitted today, and we'll publish those responses on the investor me company platform as soon as is practical. Chris, James, I know investor feedback is important to you guys, and I'll I'll shortly redirect investors to provide you with their thoughts and expectations. But I guess before doing so, if I could ask you just for a few closing comments to wrap up with, and then I'll redirect investors. Thank you. Yes, Mark. Thank thank you very much, and thanks very much for the opportunity to take in here with with with IMC. It's our first first opportunity. And I think we we've been pleased to talk about the progress that has that has been made over the last over the last couple of years despite the the the challenges of of of of COVID nineteen in oil and gas market conditions.

58:48 But, you know, the the exciting prospects for for the group are very much the, the the opportunity in in hydrogen and hydrogen refueling, green storage, and and transportables where CHESTERFIELD SPECIAL CYLINDERS has some fantastic products, you know, a hundred years of of of of expertise, and we're really optimistic about the years ahead, and the the impact that's going to have positive impact that's going to have on CHESTERFIELD CYLINDERS and and the group. We're also really encouraged by what we're seeing at the moment from our OEM customers in in in oil and gas after a couple of very difficult years. We've pushed on with the improvements to our PMC business and now with a much more diversified customer base and and a broader range of of products and more efficient sites, we're we're optimistic going into 2022 for for for that that division as well. And we appreciate very much the the strong support we we have from from all of of our of our shareholders, those institutional shareholders, but, of course, also the, the many private individuals that have backed the business, and to Pressure Technologies since its IPO in in 2000 and '7 and continue to do so today.

1:00:00 So we look forward to the next opportunity to brief on on progress. And with the, with the restrictions now coming, coming down on on COVID, you know, we're determined as we was in as as sorry, as we were in in 2019, at opening our sites for, for for open for open days and come and see, some of our our, our engineering, in action. We look forward to to talking about announcing those those open days in the year ahead. That's great. And I'll just say thanks very much to everybody for joining, and all the best for 2022. That's great. Chris, James, thank you very much indeed for updating investors this afternoon. Can expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Pressure Technologies PLC, we'd like to thank you for attending today's presentation.

1:00:58 Good afternoon to you all.