Interim Results

RNS Number : 0964G

Porvair PLC

26 June 2012

 



For immediate release                                                                                                            26 June 2012

Porvair plc

Half yearly results for the six months ended 31 May 2012

Porvair plc ("Porvair" or "the Group"), the specialist filtration and environmental technology group, today announces its half yearly results for the six months ended 31 May 2012.

Highlights

·      Revenues grew by 15% (14% in constant currency) to £35.9m (2011: £31.1m).

·      Profit before tax increased by 48% to £2.4m (2011: £1.6m).

·      Earnings per share up 48% to 4.0 pence (2011: 2.7 pence).

·      £3.5m invested in three small acquisitions.  All have been integrated and will contribute to performance in the second half.

·      Net debt reduced by £3.1m to £5.8m (2011: £8.9m) over last 12 months.

·      Metals Filtration:

o  Good performance driven by patented products and stronger demand in end markets;

o  Operating profit margins improving.

·      Microfiltration:

o  Aerospace revenues up 29% with healthy schedules for the second half;

o  Order position strong;

o  Seal Analytical revenues up 8%.

·      Interim dividend of 1.0 pence (2011: 1.0 pence) declared.

·      Management's expectations for profitability for the full year have been increased.

Commenting on the outlook, Ben Stocks, Chief Executive, said:

"Porvair's strategic direction and operating objectives remain consistent and continue to produce good results.  We focus on regulated markets with sound structural growth drivers.  In line with general economic commentary, the Group is seeing stronger demand in North America and a slight weakening of demand in China and certain markets in Europe.  

In the Metals Filtration division margins continue to improve, market demand has increased and steady market share gains are being made with newer products.  In the Microfiltration division, aerospace revenues and schedules are particularly strong as new programmes come on stream and aircraft production increases.  In other Microfiltration markets the order book and pipeline of potential opportunities remain robust.  Acquisitions made in the first half of the year will contribute to performance in the second half of the year.

As a result of all these factors, management's expectation for profitability for the year has been increased."

For further information please contact:

Porvair plc		0207 466 5000	today
Ben Stocks, Chief Executive		01553 765 500	thereafter
Chris Tyler, Group Finance Director
Buchanan		0207 466 5000
Charles Ryland / Catherine Breen

A copy of the presentation that accompanies these results is available at www.porvair.com 

Chief Executive's review

Overview

Porvair has continued to make progress against its objectives for 2012 as is shown in the performance for the six months ended 31 May 2012:

·      Revenues grew by 15% (14% in constant currency) to £35.9m (2011: £31.1m).

·      Profit before tax rose by 48% to £2.4m (2011: £1.6m).

·      Earnings per share increased by 48% to 4.0 pence (2011: 2.7 pence).

These improvements have been driven by consistent investment in new and patented products and steady geographic expansion in target markets.

In the period, £3.5m has been invested in three small acquisitions. The block digesters product line was acquired from Aim Laboratories to complement Seal Analytical in December 2011; the business of Pell Industries ('Pell') was integrated into the Metals Filtration division in February 2012; and the business of Pulse Instrumentation ('Pulse'), a Canadian producer and marketer of environmental laboratory supplies, was acquired in April 2012.  All have now been integrated into their respective operations and will contribute to results over the balance of the year.

Operating cash flow in the period was strong. Over the last twelve months net debt has reduced to £5.8m (2011: £8.9m) notwithstanding the £3.1m that has been invested to date in the acquisitions described above.

The Group's order book has strengthened over the first half of the year and the outlook for the second half is promising.  Management's expectation for profitability for the full year has been increased as a result.

Porvair's activities and strategy

Porvair specialises in filtration and related environmental technology.  We operate two divisions.  The Microfiltration division comprises the Porvair Filtration Group, Porvair Sciences and Seal Analytical ('Seal').  It principally serves aviation, environmental laboratory and energy markets.  The Metals Filtration division serves global aluminium, NAFTA iron foundry and super-alloy markets.  The Group manufactures in the UK, US, Germany and China.  Its sales are global.

Porvair's strategy for growth and the creation of sustainable shareholder value is to:

·      Develop filtration and environmental technology positions in markets where typically:

o  specialist design or engineering skills win business;

o  regulation or quality accreditation requirements mandate product use;

o  consumable products, which protect more costly downstream components, are often replaced as part of a maintenance routine;

o  products, once designed into a specification, have very long lifecycles.

·      Focus on selected markets which have good long term growth: aviation, energy & industrial, environmental laboratory supplies and aluminium filtration.

·      Invest consistently in specified new products. 

·      Expand geographically, where appropriate, in our chosen markets.

·      Acquire complementary businesses that meet Group financial and commercial criteria.

·      Maintain an appropriately funded balance sheet and generate sufficient cash to sustain a

progressive dividend policy.

Operating review

Metals Filtration

Revenues increased 20% (18% in constant currency) to £14.6m (2011: £12.2m).  Operating profits increased to £1.2m (2011: £0.5m) from the benefits of operational gearing and improved margins from new and patented products.

Many of the division's end markets were stronger in the period: aluminium production was supported by aerospace growth and iron foundry by automotive growth in the US.  Sales of super alloy filters for turbine blades were also robust.  There was some weakness in domestic Chinese foundry demand, but this is a minor part of this business at present and did not affect the general picture.

Margin and market share growth is being driven by the adoption of three patented products introduced in recent years: Selee CSX™ for aluminium filtration; Selee SA™ for NiCo alloy filtration; and Selee IC™ for the filtration of gray and ductile iron.  All three are now widely accepted by our current customer base to whom they offer either a better environmental impact, better filtration efficiency, or both.  We are steadily introducing them to new customers and are winning market share as a result.  These new products contribute better margins to the business and enable manufacturing to be streamlined in the US.

We are starting a new cycle of investment in facilities, plant and people in China in the second half of the year. This investment is part of a settled strategy for the division that will pursue opportunities in certain niche molten metals filtration markets in Asia.  Costs are therefore expected to increase at a time of weaker demand in the region.  This will have a very modest impact on divisional profits in the second half that management expects to be covered by the better performance elsewhere in the division.

Pell was acquired into the division in the period.  Pell makes refractory products for molten metal handling and we have been able to integrate its product line into existing facilities with no additional overhead.  The Pell process is unusual, manufacturing products with longer lifecycles than competitive materials.  We have started to incorporate this know-how into our wider product range and see several opportunities for development.

Our new product development programme continues to generate new ideas.  We are testing a new generation of filters for molten metals and will continue this work over the balance of the year.  We are very encouraged by the results but it is too soon to say what impact, if any, these products will have on the business.

Microfiltration

Revenue from Microfiltration grew by 12% to £21.3m (2011: £19.0m).  Operating profits grew by 11% to £2.4m (2011: £2.2m).

Aerospace revenue grew by 29%.  Inerting filter production is the principal driver of this growth, with other new programmes beginning to come on stream and increased production by Boeing and Airbus helping the underlying business.  As a result, forward order schedules strengthened throughout the period.  Nuclear and general industrial demand is satisfactory.  Revenues at the US subsidiary, PFG Inc., grew in part as a consequence of transferring some manufacturing from the UK.

Filters for the bioscience market have had a good start to the year with market share gains in laboratory consumables, porous plastics and further product introductions in the Chromatrap™ range of filters for epigenetics research. We have made a series of improvements in our bioscience filtration capabilities in recent years, and these are starting to show through in increased revenues.

No revenue has yet been recognised from the POSCO contract, a $10m-$15m contract to design and build char filtration equipment for a coal to substitute natural gas project under construction in Korea by POSCO.  POSCO is one of the world's largest steel manufacturers and will use the new plant to provide energy for its production.  Engineering and manufacturing work has begun and the project is running smoothly.  We do not currently know whether the first deliveries will be required towards the end of 2012 or in early 2013.

Revenues at Seal were 8% higher than the prior period.  Underlying growth was 4% (in constant currency) with the balance contributed by the first few months' trading of the two acquisitions completed in the period.  Weakness in several western European markets was more than offset by an improvement in US demand.  Following product launches in 2010 and 2011, Seal introduced a third new platform in 2012, the Quaatro 39.  Of all the Porvair operating units, Seal is most exposed to European economies and we are cautious in our outlook for the second half. However, we are steadily increasing the proportion of consumable and service revenue generated by this business, giving it a more consistent revenue base.

Two acquisitions in the period further enhance Seal's consumables and service capabilities.  A line of block digesters, which are used alongside Seal's current products on an environmental laboratory bench, are now being manufactured in Seal's US operation, having been moved from Australia following acquisition.  Sales to date are encouraging.  Pulse has also been moved to Seal's US operation from Canada.  Pulse supplies a broad range of consumables for environmental laboratories and brings with it some interesting production know-how and access to a wider installed base. We see the development of this installed base as a crucial part of our plan for Seal in the future.

Earnings per share and dividends

The basic and diluted earnings per share for the period increased 48% to 4.0 pence (2011: 2.7 pence).  The Board is again declaring an interim dividend of 1.0 pence (2011: 1.0 pence) per share.  In recent years the interim dividend has remained unchanged, with dividend increments declared at the time of the full year results in January in line with the Group's progressive dividend policy.

Cash flow and net debt

Cash generated from operations in the six months to 31 May 2012 was £3.9m (2011: £1.8m).  Working capital was held steady in the period.  Inventories have increased as a result of the higher scheduled requirements for aerospace and the build-up of work in progress as activity increases on the POSCO contract.  Payments in advance have been received from POSCO to offset the work in progress, £1.5m of which is held as a guarantee by a UK bank against an advance payment bond in relation to the contract.

£3.1m has been paid out for acquisitions in the period with a further £0.4m expected to be paid in contingent or deferred consideration in the period up to December 2013.

Net interest paid was £0.3m (2011: £0.3m), tax paid was £0.3m (2011: £0.7m) and capital expenditure was £0.9m (2011: £0.8m).  Closing net debt at 31 May 2012 was £5.8m (31 May 2011: £8.9m).

Current trading and outlook

Porvair's strategic direction and operating objectives remain consistent and continue to produce good results.  We focus on regulated markets with sound structural growth drivers.  In line with general economic commentary, the Group is seeing stronger demand in North America and a slight weakening of demand in China and certain markets in Europe. 

In the Metals Filtration division margins continue to improve, market demand has increased and steady market share gains are being made with newer products.  In the Microfiltration division, aerospace revenues and schedules are particularly strong as new programmes come on stream and aircraft production increases.  In other Microfiltration markets the order book and pipeline of potential opportunities remain robust.  Acquisitions made in the first half of the year will contribute to performance in the second half of the year.

As a result of all these factors, management's expectation for profitability for the year has been increased.

Ben Stocks

Group Chief Executive

Related parties

There were no related party transactions in the six months ended 31 May 2012.

Principal risks

Each division considers strategic, operational and financial risks and identifies actions to mitigate those risks.  These risk profiles are reviewed by the Board and updated at least annually.  The principal risks and uncertainties for the remaining six months of the financial year are discussed below.  Further details of the Group's risk profile analysis can be found in the Annual Report for the year ended 30 November 2011.

Certain elements of the Group's order position, although healthy at 31 May 2012, can change quickly in the face of changing economic circumstances.  The Metals Filtration division and environmental laboratory supplies and general industrial filtration within the Microfiltration division all have relatively short lead times and order cycles and therefore revenues are subject to fluctuations, which could have a material effect on the Group's results for the balance of 2012.

The Microfiltration division serves several customers whose orders are quite large relative to Porvair's overall order book.  Should any of these be cancelled or delayed it may affect the Group's results for the balance of 2012.

Forward looking statements

Certain statements in this half yearly financial information are forward-looking.  Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct.  Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Consolidated income statement

For the six months ended 31 May

			Six months ended 31 May
			2012		2011
	Note		Unaudited		Unaudited
			£'000		£'000
Revenue	1		35,866		31,131
Cost of sales			(23,330)		(20,590)
Gross profit			12,536		10,541
Other operating expenses			(9,719)		(8,516)
Operating profit	1		2,817		2,025
Interest payable and similar charges			(410)		(409)
Interest receivable			-		12
Profit before income tax			2,407		1,628
Income tax expense			(718)		(494)
Profit for the period attributable to shareholders			1,689		1,134
Earnings per share (basic)	2		4.0p		2.7p
Earnings per share (diluted)	2		4.0p		2.7p

Consolidated statement of comprehensive income

For the six months ended 31 May

	Six months ended 31 May
	2012 Unaudited		2011 Unaudited
	£'000		£'000
Profit for the period	1,689		1,134
Other comprehensive income/(expense):
Exchange differences on translation of foreign subsidiaries	146		(712)
Changes in fair value of interest rate swaps held as a cash flow hedge	46		52
Net other comprehensive income/(expense)	192		(660)
Total comprehensive income for the period attributable to shareholders of Porvair plc	1,881		474

The accompanying notes are an integral part of this interim financial information.

Consolidated balance sheet

As at 31 May

		As at 31 May				As at 30 November
	Note	2012 Unaudited		2011 Unaudited		2011 Audited
		£'000		£'000		£'000
Non-current assets
Property, plant and equipment	4	8,645		8,486		8,213
Goodwill and other intangible assets	4	40,372		36,496		37,070
Deferred tax asset		1,802		1,794		1,400
		50,819		46,776		46,683
Current assets
Inventories		10,677		9,164		9,056
Trade and other receivables		12,235		10,653		11,604
Derivative financial instruments		54		136		13
Cash and cash equivalents	5	6,231		4,248		5,111
		29,197		24,201		25,784
Current liabilities
Trade and other payables		(16,027)		(10,563)		(12,355)
Current tax liabilities		(865)		(542)		(361)
Bank overdraft and loans		(933)		(921)		(865)
Finance lease liabilities		-		(18)		(6)
Derivative financial instruments		(134)		(218)		(180)
		(17,959)		(12,262)		(13,767)
Net current assets		11,238		11,939		12,017
Non-current liabilities
Bank loans		(11,056)		(12,201)		(9,331)
Retirement benefit obligations		(7,025)		(5,414)		(7,171)
Provisions for other liabilities and charges		(112)		(74)		(107)
		(18,193)		(17,689)		(16,609)
Net assets		43,864		41,026		42,091
Capital and reserves
Share capital	6	852		848		851
Share premium account	6	34,511		34,366		34,471
Cumulative translation reserve	7	1,029		90		883
Retained earnings	7	7,472		5,722		5,886
Total equity		43,864		41,026		42,091

The interim financial statements on pages 6 to 17 were approved by the Board of Directors on 25 June 2012 and were signed on its behalf by:

Ben Stocks                                                                                                                                          Christopher Tyler

Group Chief Executive                                                                                                                        Group Finance Director

The accompanying notes are an integral part of this interim financial information.

Consolidated cash flow statement

For the six months ended 31 May

		Six months ended 31 May
	Note	2012 Unaudited		2011 Unaudited
		£'000		£'000
Cash flows from operating activities
Cash generated from operations	8	3,924		1,776
Interest received		-		85
Interest paid		(269)		(416)
Tax paid		(345)		(694)
Net cash generated from operating activities		3,310		751
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired)	10	(3,076)		-
Purchase of property, plant and equipment	4	(860)		(799)
Purchase of intangible assets	4	(11)		(15)
Proceeds from sale of property, plant and equipment		101		19
Net cash used in investing activities		(3,846)		(795)
Cash flows from financing activities
Net proceeds from the issue of ordinary shares	6	41		349
Increase in/(repayment of) borrowings	9	1,621		(1,892)
Capital element of finance leases	9	(6)		(22)
Net cash generated from/(used in) financing activities		1,656		(1,565)
Net increase/(decrease) in cash and cash equivalents	9	1,120		(1,609)
Effects of exchange rate changes		-		(40)
		1,120		(1,649)
Cash and cash equivalents at the beginning of the period		5,111		5,897
Cash and cash equivalents at the end of the period	5	6,231		4,248

The accompanying notes are an integral part of this interim financial information.

Consolidated statement of changes in equity

For the six months ended 31 May (Unaudited)

	Share capital £'000	Share premium account £'000	Cumulative translation reserve £'000	Retained earnings £'000	Total £'000
Balance at 1 December 2010	841	34,024	802	4,814	40,481
Profit for the period	-	-	-	1,134	1,134
Other comprehensive (expense) / income for the period:
Exchange differences on translation of foreign subsidiaries	-	-	(712)	-	(712)
Changes in fair value of interest rate swaps held as a cash flow hedge	-	-	-	52	52
Total comprehensive (expense) / income for the period	-	-	(712)	1,186	474
Transactions with owners:
Proceeds from shares issued, net of costs	7	342	-	-	349
Employee share option schemes:
Value of employee services net of tax	-	-	-	274	274
Dividends approved as final or paid	-	-	-	(552)	(552)
Balance at 31 May 2011	848	34,366	90	5,722	41,026
Balance at 1 December 2011	851	34,471	883	5,886	42,091
Profit for the period	-	-	-	1,689	1,689
Other comprehensive income for the period:
Exchange differences on translation of foreign subsidiaries	-	-	146	-	146
Changes in fair value of interest rate swaps held as a cash flow hedge	-	-	-	46	46
Total comprehensive income for the period	-	-	146	1,735	1,881
Transactions with owners:
Proceeds from shares issued, net of costs	1	40	-	-	41
Employee share option schemes:
Value of employee services net of tax	-	-	-	448	448
Dividends approved as final or paid	-	-	-	(597)	(597)
Balance at 31 May 2012	852	34,511	1,029	7,472	43,864

The accompanying notes are an integral part of this interim financial information.

Notes to the accounts

1.             Segmental analyses

The chief operating decision maker has been identified as the Board of Directors.  The Board of Directors review the Group's internal reporting in order to assess performance and allocate resources.  Management have determined the operating segments based on this reporting.

As at 31 May 2012, the Group is organised on a worldwide basis into two operating segments:

1)    Metals Filtration

2)    Microfiltration

The segment results for the period ended 31 May 2012 are as follows:

Six months ended 31 May 2012 - Unaudited		Metals Filtration		Microfiltration		Other unallocated		Group
		£'000		£'000		£'000		£'000
Revenue		14,596		21,270		-		35,866
Operating profit/(loss)		1,213		2,422		(818)		2,817
Finance costs		-		-		(410)		(410)
Profit/(loss) before income tax		1,213		2,422		(1,228)		2,407
Income tax expense		-		-		(718)		(718)
Profit/(loss) for the period		1,213		2,422		(1,946)		1,689

The segment results for the period ended 31 May 2011 are as follows:

Six months ended 31 May 2011 - Unaudited		Metals Filtration		Microfiltration		Other unallocated		Group
		£'000		£'000		£'000		£'000
Revenue		12,172		18,959		-		31,131
Operating profit/(loss)		540		2,189		(704)		2,025
Finance costs		-		-		(397)		(397)
Profit/(loss) before income tax		540		2,189		(1,101)		1,628
Income tax expense		-		-		(494)		(494)
Profit/(loss) for the period		540		2,189		(1,595)		1,134

The Other unallocated segment mainly comprises Group corporate costs not directly allocated, some research and development costs not directly allocated, new business development costs, tax and general finance costs.

Segment assets and liabilities

At 31 May 2012 - Unaudited		Metals Filtration		Microfiltration		Other unallocated		Group
		£'000		£'000		£'000		£'000
Segmental assets		26,149		44,891		2,745		73,785
Cash and cash equivalents		-		-		6,231		6,231
Total assets		26,149		44,891		8,976		80,016
Segmental liabilities		(3,600)		(11,292)		(2,246)		(17,138)
Retirement benefit obligations		-		-		(7,025)		(7,025)
Borrowings		-		-		(11,989)		(11,989)
Total liabilities		(3,600)		(11,292)		(21,260)		(36,152)

At 31 May 2011 - Unaudited		Metals Filtration		Microfiltration		Other unallocated		Group
		£'000		£'000		£'000		£'000
Segmental assets		25,420		39,126		2,183		66,729
Cash and cash equivalents		-		-		4,248		4,248
Total assets		25,420		39,126		6,431		70,977
Segmental liabilities		(2,797)		(6,718)		(1,882)		(11,397)
Retirement benefit obligations		-		-		(5,414)		(5,414)
Borrowings		-		(18)		(13,122)		(13,140)
Total liabilities		(2,797)		(6,736)		(20,418)		(29,951)
At 30 November 2011 - Audited		Metals Filtration		Microfiltration		Other unallocated		Group
		£'000		£'000		£'000		£'000
Segmental assets		26,005		39,068		2,283		67,356
Cash and cash equivalents		-		-		5,111		5,111
Total assets		26,005		39,068		7,394		72,467
Segmental liabilities		(3,042)		(8,466)		(1,495)		(13,003)
Retirement benefit obligations		-		-		(7,171)		(7,171)
Borrowings		-		(6)		(10,196)		(10,202)
Total liabilities		(3,042)		(8,472)		(18,862)		(30,376)

Geographical analysis

Revenue

	Six months ended 31 May
	2012 Unaudited			2011 Unaudited
	By destination £'000	By origin £'000		By destination £'000	By origin £'000
United Kingdom	7,099	15,011		7,062	13,752
Continental Europe	5,578	2,809		5,158	2,960
United States of America	14,576	17,295		11,583	13,653
Other NAFTA	2,149	-		2,038	-
South America	1,011	-		567	-
Asia	4,201	751		4,122	766
Australasia	606	-		114	-
Africa	646	-		487	-
	35,866	35,866		31,131	31,131

2.             Earnings per share

	Six months ended 31 May
	2012 Unaudited				2011 Unaudited
	Earnings £'000	Weighted average number of shares	Per share amount Pence		Earnings £'000	Weighted average number of shares	Per share amount Pence
Basic EPS - Earnings attributable to ordinary shareholders	1,689	42,575,320	4.0		1,134	42,187,437	2.7
Effect of dilutive securities - share options	-	137,655	-		-	81,897	-
Diluted EPS	1,689	42,712,975	4.0		1,134	42,269,334	2.7

3.             Dividends per share

	Six months ended 31 May
	2012			2011
	Unaudited			Unaudited
	Per share	£'000		Per share	£'000
Final dividend approved	1.40p	597		1.30p	552

The final dividend approved was paid to shareholders on 8 June 2012.

The Directors have declared an interim dividend of 1.0 pence (2011: 1.0 pence) per share to be paid on 7 September 2012 to shareholders on the register at the close of business on 3 August 2012.  The ex-dividend date for the shares is 1 August 2012.

4.             Property, plant and equipment and goodwill and other intangible assets

Six months ended 31 May 2012 - Unaudited		Property, plant and equipment		Goodwill and other intangible assets		Total
		£'000		£'000		£'000
Opening net book amount at 1 December 2011		8,213		37,070		45,283
Additions		860		11		871
Acquisitions		91		3,188		3,279
Disposals		(13)		-		(13)
Depreciation, amortisation, impairment and other movements		(506)		103		(403)
Closing net book amount at 31 May 2012		8,645		40,372		49,017

Six months ended 31 May 2011 - Unaudited		Property, plant and equipment		Goodwill and other intangible assets		Total
		£'000		£'000		£'000
Opening net book amount at 1 December 2010		8,659		37,916		46,575
Additions		799		15		814
Disposals		(3)		-		(3)
Depreciation, amortisation, impairment and other movements		(969)		(1,435)		(2,404)
Closing net book amount at 31 May 2011		8,486		36,496		44,982

5.             Cash and cash equivalents

	As at 31 May				As at 30 November
	2012 Unaudited £'000		2011 Unaudited £'000		2011 Audited £'000
Cash at bank and in hand	4,510		4,248		5,111
Restricted cash	1,721		-		-
Cash and cash equivalents	6,231		4,248		5,111

Cash and cash equivalents include restricted balances of £1,721,000 (2011: £nil).  $2,263,000 (£1,470,000) is held as a guarantee by a UK bank against the advance payment bond in relation to the POSCO contract and will be released no later than August 2015.  Can$400,000 (£251,000) is held in escrow as contingent consideration relating to the acquisition of Pulse Instrumentation, further details are disclosed in note 10. 

6.             Share capital and premium

		Number of shares (thousands)		Ordinary shares Unaudited		Share premium account Unaudited		Total Unaudited
				£'000		£'000		£'000
At 1 December 2010		42,074		841		34,024		34,865
Employee share options schemes:
Proceeds from the exercise of options under share option schemes		352		7		342		349
At 31 May 2011		42,426		848		34,366		35,214
At 1 December 2011		42,561		851		34,471		35,322
Employee share options schemes:
Proceeds from the exercise of options under share option schemes		52		1		40		41
At 31 May 2012		42,613		852		34,511		35,363

The authorised number of ordinary shares is 75 million (2011: 75 million) shares with a par value of 2.0 pence (2011: 2.0 pence) per share.  All issued shares are fully paid.  51,700 ordinary shares of 2p each were issued in the period on the exercise of employee share options for a cash consideration of £41,000.

7.             Other reserves

			Cumulative translation reserve Unaudited		Retained earnings Unaudited
			£'000		£'000
At 1 December 2010			802		4,814
Profit for the period attributable to shareholders			-		1,134
Direct to equity:
Final dividends approved			-		(552)
Share based payments			-		103
Tax on share based payments			-		171
Interest rate swap cash flow hedge			-		52
Exchange differences			(712)		-
At 31 May 2011			90		5,722
At 1 December 2011			883		5,886
Profit for the period attributable to shareholders			-		1,689
Direct to equity:
Final dividends approved			-		(597)
Share based payments			-		146
Tax on share based payments			-		302
Interest rate swap cash flow hedge			-		46
Exchange differences			146		-
At 31 May 2012			1,029		7,472

8.             Cash generated from operations

		Six months ended 31 May
		2012 Unaudited £'000		2011 Unaudited £'000
Operating profit		2,817		2,025
Non-cash pension charge		100		200
Share based payments		146		103
Depreciation, amortisation and impairment		749		1,370
Profit on disposal of property, plant and equipment		(88)		(16)
Operating cash flows before movement in working capital		3,724		3,682
(Increase) in inventories		(1,369)		(1,545)
(Increase)/decrease in trade and other receivables		(604)		301
Increase/(decrease) in payables		2,173		(662)
Decrease/(increase) in working capital		200		(1,906)
Cash generated from operations		3,924		1,776

9.             Reconciliation of net cash flow to movement in net debt

	Six months ended 31 May
	2012 Unaudited £'000		2011 Unaudited £'000
Net increase/(decrease) in cash and cash equivalents	1,120		(1,609)
Effects of exchange rate changes	(172)		478
(Increase in)/repayment of borrowings	(1,621)		1,892
Repayment of finance leases	6		22
Net debt at the beginning of the period	(5,091)		(9,675)
Net debt at the end of the period	(5,758)		(8,892)

10.          Acquisitions

On 5 December 2011 a Group subsidiary, Seal Analytical Limited, purchased the Block Digestion product range ("Block Digesters") from Aim Lab Automation Technologies Pty Limited based in Australia.  The product range contributed external revenue of £0.2m and a net profit of £0.1m in the period from acquisition to 31 May 2012.  The total consideration paid was £485,000.  Acquisition related costs of £38,000 have been charged to administrative expenses in the consolidated income statement for the period ended 31 May 2012.  The purchase is accounted for as an acquisition.

On 10 February 2012 a Group subsidiary, Selee Corporation, purchased the trade and assets of Pell Industries, a manufacturer of powdered metal handling products.  The product line contributed £0.1m of external revenue and a small net profit in the period from acquisition to 31 May 2012.  If the acquisition had occurred on 1 December 2011, it is estimated that the business would have contributed external revenues of £0.1m and a small net profit in the period to 31 May 2012.  Total consideration is a maximum of $500,000 (£318,000) with a $300,000 (£191,000) initial payment and a maximum further consideration of $200,000 (£127,000) contingent upon achievement of agreed average monthly revenues from acquisition until December 2013.  The contingent consideration may be paid in cash or shares at the Group's option.  The Group expects the contingent consideration to be paid in full in cash.  The purchase is accounted for as an acquisition.

On 17 April 2012 a Group subsidiary, Seal Analytical Inc., purchased the trade and assets of Pulse Instrumentation (1992) Limited, a laboratory consumables business based in Canada.  The business contributed external revenues of £0.1m  and a small net profit in the period from acquisition to 31 May 2012.  If the acquisition had occurred on 1 December 2011 it is estimated that the business would have contributed external revenues of £0.8m and a small net profit in the period to 31 May 2012. Total consideration is a maximum of Can$4,289,000 (£2,714,000).  Can$3,789,000 (£2,400,000) was paid as an initial payment, Can$400,000 (£251,000) is contingent upon the cumulative revenue earned in the six months to 17 October 2012 and Can$100,000 (£63,000) is deferred until 2 January 2013.  The Can$400,000 contingent consideration, held in escrow by the vendor's lawyers, is expected to be paid in full.    Acquisition costs of £44,000 have been charged to administrative expenses in the consolidated income statement for the period ended 31 May 2012.  The purchase is accounted for as an acquisition.

	Block Digesters		Pell Industries		Pulse Instrumentation		Total
	£'000		£'000		£'000		£'000
Purchase consideration
Cash paid	485		191		2,400		3,076
Contingent consideration	-		127		253		380
Deferred consideration	-		-		63		63
Total purchase consideration	485		318		2,716		3,519
Fair value of net assets acquired	(79)		(45)		(935)		(1,059)
Provisional goodwill	406		273		1,781		2,460

The provisional goodwill attributable to each acquisition relates to the acquired customer base, the synergies between the business acquired and the existing operations of the Group and the potential to develop the acquired technologies. In addition, in the case of the acquisition of the trade and assets of Pulse Instrumentation, the goodwill is also attributable to the strategic benefits that arise from broadening the range of consumable products offered to the Group's existing customer base and the potential for economies of scale that will accrue to the Group.

Provisional fair value of assets acquired

	Fair value £'000		Acquiree's carrying value £'000
Block Digesters
Software	19		-
Process technology and know-how	33		-
Inventory	27		27
Net assets acquired	79		27
Pell Industries
Property, plant and equipment	13		-
Process technology and know-how	32		-
Net assets acquired	45		-
Pulse Instrumentation
Property, plant and equipment	78		80
Non-compete agreements (included in intangible assets)	628		-
Internet domain names	16		-
Inventory	213		637
Net assets acquired	935		717

11.          Exchange rates

Exchange rates for the US dollar during the period were:

	Average rate to 31 May 12	Average rate to 31 May 11	Closing rate at 31 May 12	Closing rate at 30 Nov 11
	Unaudited	Unaudited	Unaudited	Audited
US dollar	1.58	1.61	1.54	1.57

12.          Seasonality

The results for the six months ended 31 May 2012 are impacted by a lower number of working days in the first six months of the year than in the second half of the year.

13.          Basis of preparation

Porvair plc is a public limited company registered in the UK and listed on the London Stock Exchange.

This unaudited condensed half-yearly consolidated financial information for the six months ended 31 May 2012 has been prepared in accordance with the Disclosure and Transparency Rules ('DTR') of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union.  The condensed half-yearly consolidated financial information should be read in conjunction with the annual financial statements for the year ended 30 November 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 November 2011, as described in those financial statements. As at the date of signing the interim financial statements, there are no new standards likely to affect the financial statements for the year ending 30 November 2012.

Taxes on income in the interim period are accrued using the tax rate that would be applicable to expected total annual earnings.

This condensed half-yearly consolidated financial information has been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of certain current assets, financial assets and financial liabilities held for trading and derivative contracts, which are held at fair value.

The preparation of condensed half-yearly consolidated financial information in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed half-yearly consolidated financial information and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates.

After having made appropriate enquiries, including a review of progress against the Group's budget for 2012, its medium term plans and taking into account the banking facilities available until December 2013, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis in preparing this condensed half-yearly consolidated financial information.

This condensed half-yearly consolidated financial information and the comparative figures does not constitute full accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 November 2011, which include an unqualified audit report, no emphasis of matter paragraph and no statements under sections 498(2) or (3) of the Companies Act 2006, have been delivered to the Registrar of Companies.

This report will be available at Porvair plc's registered office at 7 Regis Place, Bergen Way, King's Lynn, PE30 2JN and on the Company's website www.porvair.com.

Statement of directors' responsibilities

The Directors confirm that this condensed half-yearly consolidated financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

§  an indication of important events that have occurred during the first six months of the year, their impact on the condensed half-yearly consolidated financial information and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

§  material related party transactions in the first six months of the year and any material changes in the related party transactions described in the last annual report.

The directors of Porvair plc are listed in the Porvair plc Annual Report for the year ended 30 November 2011. There have been no changes in directors in the period.  A list of current directors is maintained on the Porvair plc website www.porvair.com.

By order of the board

Ben Stocks 

Group Chief Executive

Chris Tyler

Group Finance Director

25 June 2012

Independent review report to Porvair plc

Introduction

We have been engaged by the company to review the condensed half-yearly consolidated financial information in the half-yearly financial report for the six months ended 31 May 2012, which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed half-yearly consolidated financial information.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 13, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed half-yearly consolidated financial information included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed half-yearly consolidated financial information in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed half-yearly consolidated financial information in the half-yearly financial report for the six months ended 31 May 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
25 June 2012
Cambridge

Notes:

(a)   The maintenance and integrity of the Porvair plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the condensed half-yearly consolidated financial information since it was initially presented on the website.

(b)   Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

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