Interim Results
Porvair PLC
26 June 2002
FOR IMMEDIATE RELEASE 26 June 2002
PORVAIR plc ('Porvair')
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2002
Porvair, the materials science group, announces interim results for the six
months ended 31 May 2002.
KEY POINTS
• Operating Profit before R&D expenditure and increased insurance costs
£4.2m (2001: £4.9m) - shortfall resulting from downturn in US economy
• R&D expenditure up £0.6m to £2.9m. Considerable progress made in
Porvair Fuel Cell Technology - partnerships with key players in the fuel
cell arena and accelerated activity outside fuel cell markets - better than
anticipated reinforcing R&D investment decision
• Strategic plan previously outlined validated by excellent progress:
simplification of membranes operation on track; operations acquired in 2001
all performing ahead of expectation; and encouraging progress made by R&D
programmes
• Integration benefits expected at time of Porvair Filtration Group's
formation coming through with good performance during the period
• Appointment of Michael Gatenby as a non-executive director further
strengthening the Board
• Maintained dividend of 2.4p per ordinary share (2001: 2.4p)
John Morgan, Chairman, said:
'The first half of 2002 has been challenging and whilst the outlook for the
second half appears better, a prudent view of prospects suggests Group profits
for the full year will fall below those achieved last year. However, management
have acted swiftly in response to conditions, and have not been deflected from
making progress against our strategic goals. The Board is growing in confidence
that our high research and development investment will start to yield commercial
sales ahead of expectation, and the Group is well placed to benefit from an
upturn in trading as it occurs'.
Contacts:
Ben Stocks, Chief Executive
Mark Moran, Group Finance Director
Porvair plc today 020 7466 5000
at all other times 01553 761111
Charles Ryland / Catherine Miles
Buchanan Communications 020 7466 5000
Chairman's statement
Profits in the first half of 2002 have been affected by a number of factors -
most importantly the downturn in the US economy. Difficult trading conditions
have caused our US subsidiary, Porvair Selee, to report significantly lower
profits, and as a substantial proportion of sales from our Membranes business
are directly or indirectly exported to the US its profitability has also
suffered. The Group has also experienced large increases in insurance premiums
to £0.5m (2001: £0.1m). Whilst these matters have adversely impacted the
results our confidence in the longer term is undiminished, and we have continued
with the planned increase in research and development expenditure to £2.9m
(2001: £2.3m).
Sales and profits in businesses outside the US have been satisfactory. The
operations acquired in 2001 are all performing ahead of expectation, and the
simplification of our membranes operation is on track. Developments in Porvair
Fuel Cell Technology have been more successful than we anticipated. Many of our
European operations - notably the Filtration Group and Life Sciences business
are delivering profit growth. Porvair is performing well in difficult
circumstances, is making excellent progress against the strategic plan
previously outlined and is well placed for the future.
The Operational Review details some of the exciting progress that is being made
by Porvair Fuel Cells Technology - the R&D operation developing a range of new
porous and microporous materials for fuel cell and allied applications. The
Board's belief that this investment, which is substantial in relation to our
declared profits, is a very sound one for the Group to be making, has been
further reinforced by the considerable progress made in the last six months.
Strong associations with key players in the fuel cell arena are in place, and
significant opportunities are fast emerging outside of fuel cell markets.
Increasing customer demand and positive test results give us confidence in the
significant potential of this ongoing R&D investment.
Net borrowings at the end of May stood at £14.2m (2001: £34.1m), an increase of
£4.8m since the year end. The mid year represents a high point for net
borrowings and it is anticipated that the levels will be reduced during the
second half.
The directors have declared a maintained interim dividend of 2.4p per ordinary
share (2001: 2.4p) which is a clear sign of their confidence in future
prospects. Losses per share were 2.3p (2001: loss of 9.3p restated); however,
calculated before goodwill amortisation and exceptional charges earnings per
share were 0.8p per share (2001: 3.9p restated).
We welcome Michael Gatenby onto the Porvair Board as a non-executive director.
Michael brings extensive City and public company directorate experience to the
Board, and will replace William Wallis who retired in June 2002. William's
contribution to the development of Porvair since its MBO in 1982 has been
considerable. As the senior non-executive director and Deputy Chairman his help
and advice has been invaluable. On behalf of the Company I thank him and wish
him well in his retirement.
The first half of 2002 has been challenging and whilst the outlook for the
second half appears better, a prudent view of prospects suggests Group profits
for the full year will fall below those achieved last year. However, management
have acted swiftly in response to conditions, and have not been deflected from
making progress against our strategic goals. The Board is growing in confidence
that our high research and development investment will start to yield commercial
sales ahead of expectation, and the Group is well placed to benefit from an
upturn in trading as it occurs.
John Morgan, Chairman
26 June 2002
Operational review
Porvair is a materials science company, specialising in:
• Metals filtration: Porvair Selee invented the ceramic foamfilter, and leads
the world in its application to the aluminium industry. A wide range of
porous and microporous ceramic technologies serve other metals industries.
• Microfiltration materials and systems: Porvair Filtration Group is a
specialist microfiltration business, expert in both filtration and
filtration media.
• Microporous membranes: Porvair Membranes make textiles and leather
waterproof and breathable. Our polyurethane technology, which is both
durable and soft, is unique in this field.
• Microporous metals and carbons: Porvair Fuel Cell Technology is an R&D
operation that is developing several Porvair materials for fuel cell
components, heat exchange, industrial process and emission control.
2002
In the first half of 2002:
• Our US operations - principally Porvair Selee - have found trading
conditions very challenging
• European based businesses, principally our filtration operations, have
performed well
• Simplification of our Membranes operation is on track to complete at the
end of 2002
• R&D programmes have made encouraging progress
US operations have seen difficult economic conditions, particularly at Porvair
Selee which saw the tough trading of late 2001 continue well into 2002. Two of
Selee's principal markets are suffering: aluminium demand has now fallen for 8
consecutive quarters, and high value alloys used in aerospace markets are well
down on prior years. As a result, profits in Selee fell well below those
achieved in 2001. However, management reacted swiftly. Costs were cut - Selee's
headcount is 15% down on the same period last year. Sales efforts were
successfully stepped up in export markets. New product introductions have been
accelerated, and customer trials for an entirely new and patentable filter
system are going well. Tentative signs of a recovery in the US became apparent
towards the end of the period, and we expect Selee to perform better in the
second half of 2002.
Conditions in the US also affected our Membranes business, although the
simplification programme undertaken last year has enabled us to contain much of
the profit impact. We have also been helped by an encouraging contribution from
our minority interest in Sympatex. As explained in the 2001 report, we are now
focusing on a smaller range of Membrane products, and expect to see sales growth
start to come through in 2002/3. Whilst it is too early to show definitive
progress, we are encouraged by the programme achievements to date.
The Porvair Filtration Group, which specialises in highly engineered speciality
microfiltration products, is achieving the integration benefits anticipated at
the time of its formation in 2001 and has performed well in the first half of
the year. Despite its exposure to aerospace filtration - around 30% of sales -
the business is finding cost savings, sales opportunities and new product
initiatives to compensate. During the period we have extended our export sales
efforts, adding both technical sales staff and international distributors. This
additional sales resource is combined with higher overall product development
expenditure and is already proving successful with notable hot gas filtration
contracts won this year.
Our two smaller filtration businesses, Life Sciences and Ceramic Moulds have
delivered quality profits in the period. Life Sciences in particular is growing
strongly, benefiting from new product introductions and reinvigorated sales and
marketing efforts. Demand for our patented new sanitaryware pressure casting
system is also growing, and we have installed and commissioned our first
machines during 2002.
Porvair Fuel Cell Technology. At the end of 2001 we were able to announce the
first sale of our new MetPore(TM) material. Since then sales income has
increased substantially. At this stage most products sold are on a small scale
for customer test programmes. Demand is strong and sales income in the first
half of the year grew 74% compared with the same period in 2001. Our live
customer list now exceeds 65. In the fuel cell market we are delighted with
progress on our bi-polar plate. Our partner in this development is United
Technologies Corporation Fuel Cells. UTCFC is one of the major players in the
fuel cell market and an excellent partner for Porvair. Our dedicated team is
producing encouraging early test data showing performance characteristics better
than those specified in the US Department of Energy grant of 2001. There is a
long way to go with this programme, but achievements to date have been
excellent. A feature of 2002 has been accelerated activity outside fuel cell
development markets with test programmes underway at Alcoa, Rolls Royce,
Lockheed Martin and Praxair amongst many others. We have also secured NASA
accreditation as an approved materials supplier. Primary markets are beginning
to emerge, and include compact heat exchange, water treatment, catalyst
substrate, emission control and industrial process. Manufacturing scale up is
on track and under budget. We will have our first pilot plant in place by the
end of 2002, and expect to achieve accreditation for ISO 14001 for both Selee
and PFCT during the year.
PORVAIR AT A GLANCE
Porvair is a materials science group. We specialise in advanced ceramics,
sintered materials and polyurethane membranes.
Material Locations Activities
Advanced ceramics:
- metals filtration Hendersonville, USA Brings ceramics expertise to the field of
Gilberts, USA molten metal handling, catalyst media and
thermal processing. World leader in
aluminium filtration.
- fuel cell technologies Hendersonville, USA Develops media and components for fuel
cell, heat exchange, chemical process,
emission control and water treatment
applications
Sintered materials:
- filtration group Fareham, UK Develops innovative sintered metal and
New Milton, UK polymer solutions to filtration problems.
Wrexham, UK
- sciences Shepperton, UK Specialises in assay equipment and other
microplate products for the Life Sciences
market.
Polyurethane membranes King's Lynn, UK Specialises in polyurethane membranes
Acton, Canada that enhance the performance of leather
China (50:50 JV) and textiles to make them waterproof and
Wuppertal, Germany breathable.
(25% shareholding in
Sympatex)
Acrylic materials King's Lynn Supplies sanitaryware and tableware
customers worldwide with long-life
alternatives to traditional ceramic
moulding media.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31 May 2002 (unaudited)
May May Nov
2002 2001 2001
Note £'000 £'000 £'000
Turnover
Continuing operations (including share of joint
venture) 1(a) 35,318 35,407 72,267
Less : share of joint venture (128) (638) (808)
35,190 34,769 71,459
Group operating
loss before joint venture and associated undertaking (471) (2,090) (1,555)
Share of operating (loss)/profit in joint venture (48) 6 40
Share of operating profit in associated undertaking 171 - -
Group operating loss including joint venture and
associated undertaking 1 (b) (348) (2,084) (1,515)
Exceptional profit on part disposal in subsidiary
undertaking
- 90 90
Interest payable (net) (227) (960) (1,684)
Loss on ordinary activities before taxation (575) (2,954) (3,109)
Loss on ordinary activities before taxation (575) (2,954) (3,109)
Add back goodwill amortisation 1,154 1,245 2,515
Add back exceptional items - 3,298 4,363
Profit on ordinary activities before taxation, 579 1,589 3,769
exceptional items and goodwill amortisation
Tax on profit on ordinary activities (173) 457 575
Loss on ordinary activities after taxation
(748) (2,497) (2,534)
Equity minority interests (103) (51) (150)
Loss attributable to shareholders (851) (2,548) (2,684)
Dividends 3 (883) (618) (2,467)
Retained loss for the financial period (1,734) (3,166) (5,151)
Earnings per share
- basic and diluted 2 (a) (2.3)p (9.3)p (8.7)p
- basic and diluted before goodwill
amortisation and exceptional charges
2(b) 0.8p 3.9p 7.8p
Dividend per share 3 2.4p 2.4p 6.7p
Reconciliation of movements in equity shareholders' funds
For the six months ended 31 May 2002 (unaudited)
May May Nov
2002 2001 2001
£'000 £'000 £'000
Loss attributable to shareholders (851) (2,548) (2,684)
Dividends (883) (618) (2,467)
Retained loss for the financial period (1,734) (3,166) (5,151)
New share capital subscribed - 66 27,569
Exchange differences (149) 31 (420)
Net (reduction)/increase in equity shareholders' funds (1,883) (3,069) 21,998
Opening equity shareholders' funds 63,333 41,335 41,335
Closing equity shareholders' funds 61,450 38,266 63,333
Statement of total recognised gains and losses
For the six months ended 31 May 2002 (unaudited)
May May Nov
2002 2001 2001
£'000 £'000 £'000
Loss attributable to shareholders (851) (2,548) (2,684)
Exchange differences (149) 31 (420)
Total losses relating to the period (1,000) (2,517) (3,104)
CONSOLIDATED BALANCE SHEET
As at 31 May 2002 (unaudited)
May May Nov
2002 2001 2001
£'000 £'000 £'000
Fixed Assets
Goodwill 34,201 36,108 35,940
Tangible assets 21,317 21,922 22,020
Investments
Investment in joint venture :
Share of gross assets 248 355 369
Share of gross liabilities (202) (294) (275)
46 61 94
Investment in associated undertaking 2,354 2,228 2,192
57,918 60,319 60,246
Current Assets
Stocks 14,516 13,890 14,892
Debtors falling due after one year 3,104 2,831 3,247
Debtors falling due within one year 19,049 18,350 15,559
Cash at bank and in hand 1,174 892 2,548
37,843 35,963 36,246
Creditors
Amounts falling due within one year (12,746) (33,969) (15,713)
Net current assets 25,097 1,994 20,533
Total assets less current liabilities 83,015 62,313 80,779
Creditors
Amounts falling due after more than one year (14,184) (16,806) (10,346)
Provisions for liabilities and charges (2,379) (2,405) (2,201)
66,452 43,102 68,232
Capital and reserves
Called up share capital 736 515 736
Share premium account 28,679 1,397 28,679
Other reserves 4,793 5,393 4,942
Profit and loss account 27,242 30,961 28,976
Total equity shareholders' funds 61,450 38,266 63,333
Equity minority interests 5,002 4,836 4,899
66,452 43,102 68,232
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 May 2002 (unaudited)
May May Nov
Note 2002 2001 2001
£'000 £'000 £'000
Net cash inflow from operating 4 (2,037) 1,661 4,882
activities
Returns on investments and
servicing of finance
Interest received 71 15 25
Interest paid (148) (1,041) (1,100)
Exceptional finance costs - - (425)
(77) (1,026) (1,500)
Taxation
UK corporation tax paid - (35) (830)
Overseas tax paid (124) (269) (649)
(124) (304) (1,479)
Capital expenditure
Purchase of tangible fixed assets (1,395) (1,523) (3,233)
Sale of tangible fixed assets 78 - 16
(1,317) (1,523) (3,217)
Acquisitions
Acquisition of subsidiary - (18,878) (19,050)
undertakings
Acquisition of associate - (2,228) (2,192)
investment
- (21,106) (21,242)
Equity dividends paid (1,583) (1,107) (1,990)
Financing
Issues of ordinary share capital - 66 28,771
Expenses of rights issue - - (1,202)
Increase/(decrease) in net 2,633 22,855 (1,198)
borrowings
2,633 22,921 26,371
(Decrease)/increase in cash in (2,505) (484) 1,825
the period
NOTES
1. Turnover and segmental analysis
The geographical analysis of the Group's turnover, operating profit and net
assets is set out below :
Six months ended Six months ended Year ended
31 May 31 May 30 Nov
2002 2001 2001
£'000 £'000 £'000
(a) Turnover by geographical destination
United Kingdom 9,095 6,761 16,241
Continental Europe 6,079 5,448 11,559
Americas 14,815 17,105 32,812
Asia 3,802 4,541 8,501
Australasia 401 217 596
Africa 1,126 1,335 2,558
35,318 35,407 72,267
Less share of joint venture (128) (638) (808)
35,190 34,769 71,459
(b) Operating (loss)/profit
Operating (loss)/profit after exceptionals, before
goodwill amortisation
United Kingdom 1,906 (1,095) 451
Americas (1,223) 250 509
Associated undertaking 171 - -
Joint venture (48) 6 40
806 (839) 1,000
Goodwill amortisation (1,154) (1,245) (2,515)
- - -
Operating (loss)/profit after goodwill amortisation
and share of joint venture (348) (2,084) (1,515)
and associated undertaking
As at As at As at
31 May 31 May 30 Nov
2002 2001 2001
£'000 £'000 £'000
(c) Net Assets
Net assets before goodwill and net borrowings :
United Kingdom 39,047 25,472 32,620
Continental Europe 2,354 2,228 2,192
Americas 5,074 13,433 6,837
46,475 41,133 41,649
Goodwill 34,201 36,108 35,940
Net borrowings (14,224) (34,139) (9,357)
66,452 43,102 68,232
2. Earnings per share
Six months ended Six months ended Year ended
31 May 31 May 30 Nov
2001 2000 2000
(a) Losses per share
(Losses)/earnings (£'000) (851) (2,548) (2,684)
Number of shares (weighted) 36,803,011 27,366,708 31,042,605
(Losses)/earnings per share (2.3)p (9.3)p (8.7)p
(b) Earnings per share before goodwill amortisation and exceptional
charges
Earnings (£'000) 303 1,062 2,433
Number of shares (weighted) 36,803,011 27,366,708 31,042,605
Earnings per share 0.8p 3.9p 7.8p
3. Dividends
Six months ended Six months ended Year ended
31 May 31 May 30 Nov
2002 2001 2001
£'000 £'000 £'000
Interim dividend of 2.4p (2001 : 2.4p) 883 618 884
Final dividend of 4.3p - - 1,583
883 618 2,467
The interim dividend of 2.4p per share for the six months to 31 May 2002 will be
paid on 13 September 2002 to members on the register on 16 August 2002.
4. Reconciliation of operating (loss)/profit to net cash inflow from
operating activities
Six months ended Six months ended Year ended
31 May 31 May 30 Nov
2002 2001 2001
£'000 £'000 £'000
Group operating (loss)/profit including joint (348) (2,084) 2,513
venture
Goodwill amortisation 1,154 1,245 2,515
Share of joint venture/associated undertaking (123) (6) (40)
profit
Depreciation 1,791 1,526 3,222
Loss on sale of fixed assets 25 15 116
Decrease/(increase) in stocks 282 690 (1,068)
(Increase)/decrease in debtors (3,047) (1,712) 514
Increase/(decrease) in creditors (1,771) 2,253 (1,485)
Net cash (outflow)/inflow from operating (2,037) 1,927 6,287
activities before exceptional items
Exceptional items - (266) (1,405)
Net cash (outflow)/inflow from operating (2,037) 1,661 4,882
activities
5. Reconciliation of net cash flow to movement in net borrowings
Six months ended Six months ended Year ended
31 May 31 May 30 Nov
2002 2001 2001
£'000 £'000 £'000
(Decrease)/increase in cash in the period (2,505) (484) 1,825
(Increase)/decrease in borrowing (2,633) (22,855) 1,198
Change in net borrowings from cash flows (5,138) (23,339) 3,023
Loans and finance leases acquired with subsidiary - (840) (2,403)
Exchange differences 271 - (17)
Movement in net borrowings in the period (4,867) (24,179) 603
Opening net borrowings (9,357) (9,960) (9,960)
Closing net borrowings (14,224) (34,139) (9,357)
6. Analysis of net borrowings
01/12/01 Cash flow Transfers Exchange 31/05/02
£'000 £'000 £'000 £'000 £'000
Cash in hand and at bank 2,548 (1,366) - (8) 1,174
Overdrafts - (1,139) - - (1,139)
(2,505)
Borrowings due after 1 year (10,346) (4,165) 48 279 (14,184)
Borrowings due within 1 year (1,559) 1,532 (48) - (75)
(2,633)
Total (9,357) (5,138) 271 (14,224)
7. Statutory group accounts
The interim financial statements have been prepared in accordance with
applicable accounting standards. The accounting policies applied are those
set out in the Annual Report and Accounts for the year ended 30 November
2001.
The interim financial statements do not constitute statutory accounts as
they are unaudited, although they have been reviewed by the auditors. The
abridged accounts for the year ended 30 November 2001 set out above are an
extract from the latest statutory accounts of the Group which have been
delivered to the Registrar of Companies. The report of the auditors on
those accounts was unqualified and did not contain a statement under
section 237(2) or (3) of the Companies Act 1985.
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