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LONDON (Alliance News) - Shares dropped in Pressure Technologies PLC on Wednesday as the company said its loss-making Alternative Energy division, will bring the group's results for its current financial year below market expectations.
Shares in the engineering firm fell 22% to 144.30 pence on Wednesday.
Pressure Technologies said the biogas market has been "frustratingly slow to deliver" for the Alternative Energy division, leading to only three upgrader contracts being awarded since October 2017. This is due to delays in customer decision-making, particularly in North and South America with slowness in environmental permits.
There were also complexities in contract negotiations and customer funding arrangements. Since profit recognition for upgrading projects is skewed towards completion, the delays in contract awards will hurt Pressure's performance for the year ending September 30.
Within Manufacturing, Precision Machined Components and Engineered Products saw an improved oil and gas market, however muted order intake in the third quarter has led to a more cautious full-year outlook for the division.
In Cylinders, the division's focus for the current year and the next is to supply the first boat set of cylinders for the Dreadnought submarine programme. The manufacturing of standard design naval cylinders has started, but Pressure is waiting for the order to start manufacturing of the programme-specific cylinders.
This will move revenue and profit between years, with any shortfall in 2018 recovered in 2019.
"Whilst these timing issues do not affect the medium-term prospects for the group they do have a material short-term impact. The outturn for the AE Division is now dictated by projects already in execution, which are insufficient to avoid incurring financial losses for the full-year," Pressure Technologies said in a statement.
"Delays to the start of the next stage of the Dreadnought programme will also impact Cylinder's current year but the full extent of this will not be clear until quarter four. The cumulative short-term effect of these means that the group's results for the full year are expected to be substantially below market expectations," the company added.
Pressure Technologies will publish its interim results on June 12.