Interim Results

Porvair PLC 28 June 2005 For immediate release 28 June 2005 Porvair plc Interim results for the six months ended 31 May 2005 Porvair plc ('Porvair'), the specialist filtration and advanced materials group, today announces its interim results for the six months ended 31 May 2005. Highlights • Results demonstrate Porvair delivering on its 2005 commitments to grow profits; generate cash; and continue investment into high growth opportunities in clean energy, environmental compliance and bioscience filtration. • Profits up 20%. Profits before tax, exceptional items and goodwill amortisation increased to £1.01m (2004: £0.84m). After accounting for exceptional items and goodwill amortisation, loss before tax reduced substantially to £34K (2004: £271K loss). • Earnings up 30%. Earnings per share before goodwill amortisation and exceptional items increased to 1.3p (2004: 1.0p). After accounting for exceptional items and goodwill amortisation loss per share improved to 1.3p (2004: 1.7p loss). • Cash generation good: Borrowings reduced to £7.8m (2004: £11.2m). • New product development: two key growth opportunities in pre-production scale-up trials. • Key supply contracts signed: • 5 year deal with Alcoa Inc (Metals Filtration). • Aircraft fuel tank inerting filter for Parker Hannifin (Microfiltration). • Gasification supply contract with SG Solutions. First order will be delivered in the second half (Microfiltration). • Interim dividend declared of 1.0p (2004: 1.0p). Commenting on the results, John Morgan, Chairman, said: 'It is a pleasure to be able to report another satisfactory set of results. 2005 is progressing well. Current trading and net cash generation are healthy. Enquiry and order levels in the core businesses are robust and our key growth prospects are making demonstrable and exciting progress.' 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 Communications 0207 466 5000 Charles Ryland / Ben Willey A copy of the presentation that accompanies these results is available at www.porvair.com Chairman's statement and operating review Summary It is a pleasure to be able to report another satisfactory set of results for the six months to 31 May 2005. Porvair is delivering on its 2005 commitments to grow profits, generate cash and continue investment into the key development opportunities that have been outlined in previous reports to shareholders. Several of these opportunities are now making demonstrable progress towards commercialisation. Porvair's strategy is to focus on growing specialist filtration markets in which our proprietary materials science expertise can bring competitive advantage. We have invested heavily in recent years to develop opportunities in areas where we see sustainable long-term growth: clean energy, environmental compliance and bioscience filtration. Profitability and cash generation in the first half of 2005 have been good. Profits before tax, exceptional items and goodwill amortisation were 20% higher than the previous period at £1.01m (2004: £0.84m). After accounting for exceptional items and goodwill amortisation loss before tax was reduced substantially to £34K (2004: £271K loss). Cash generation was healthy with net borrowings falling to £7.8m (2004: £11.2m). Interest cover before exceptional items and goodwill amortisation is 6 times (2004: 4 times). Earnings per share before exceptional items and goodwill amortisation were up 30% at 1.3p (2004: 1.0p). After accounting for exceptional items and goodwill amortisation basic loss per share improved by 24% to (1.3)p (2004: loss of (1.7)p). The Board has declared an interim dividend of 1.0p (2004: 1.0p). Operating review Divisional performance Our US Metals Filtration business, Selee, has performed well in the first six months of 2005. In US dollars, sales revenues grew by 3% and operating profit by 21%. After the impact of exchange retranslation, operating profit in Sterling grew by 15% to £0.4m. The plant in North Carolina is running very efficiently and this enhances our highly competitive cost position. As a result, market share gains have been made both in the US and internationally. Particularly important was the award of a five year supply agreement with Alcoa Inc, the global leader in aluminium casting, which will reinforce Selee's position as a market leader in this field. One of the Group's key growth prospects is Selee's proprietary metal conditioning filter, sales of which are 16% ahead of the same period in 2004. This patented technology enhances our customers' product quality in a cost-effective manner, and is expected to grow further as new applications become qualified. Sales revenues in the Microfiltration business were 2% higher at £11.9m. At constant currencies sales growth would have been 5%. Operating profits grew 7% to £1.6m (2004: £1.5m). Enquiry and order levels are robust and several large orders will be fulfilled in the second half. Notable amongst these is our first order for coal gasification filters under the supply agreement announced in January 2005. This agreement is expected to generate approximately $1.5m in sales revenues each year. Gasification is another of the Group's key growth prospects and it is pleasing to report demonstrable progress in this rapidly expanding field. Sales into the aerospace market grew by 9% compared with 2004. We are delighted to have secured a supply contract for filter systems used to deliver nitrogen enriched air into aircraft fuel tanks. This new product, another key growth prospect for the Group, is expected to start shipping in mid 2006, and should generate at least $3m of revenue over the ensuing five years. High purity liquid filtration sales increased 77% compared with 2004. We now have a premium quality and highly competitive product range and benefited in the first half from a contract to supply the Royal Navy with water filtration systems for its major ships. Porvair Sciences has recovered from a difficult 2004 with revenue 20% up on the prior year and operating profits more than doubled. New Product Development Investment in the development of our new materials at Porvair Advanced Materials ('PAM') continued, generating an operating loss for the period of £0.8m (2004: £0.7m). PAM is developing two new materials for high growth markets: porous metals, which have a wide range of applications; and microporous carbons, which are specifically developed for fuel cells and other electrically conductive applications. Sales of PAM's proprietary porous metals grew by 35% compared with 2004. Combustion plate revenues grew by almost 400% compared with the same period in the prior year. PAM's material shows superior combustion efficiency and physical strength in a market where higher fuel costs and stricter emission legislation is driving change. Other key projects with significant potential have now reached pre-production scale-up trials. A compact heat management customer is undergoing advanced design verification trials with a view to launching its product later in the year. In the last few weeks a supply agreement has been signed with a diesel exhaust customer, opening the way for this customer to complete its own commercial negotiations. This large market is being driven by emissions control legislation due to start in 2006. Both projects offer smart technical solutions to problems in growth markets and we are very encouraged that our materials provide a unique solution in each case. Development work on bipolar plates for fuel cells has continued successfully. Our objective for 2005 was to establish the capabilities of our new low cost moulded plates across a range of fuel cell designs. Customers are undertaking accelerated testing of product durability and PAM must demonstrate tight manufacturing process capability. This qualification work is going well and will continue for the rest of this year. Orders have now been received for our latest generation of plates for delivery in the second half of 2005. We are encouraged that the number of customers testing our materials continues to grow, particularly in the Far East where fuel cell development is currently very active. Other financial matters The Group benefited from a net £0.1m exceptional credit in the period. This comprised an exceptional credit of £0.7m arising on the collection of a debt that had been written off prior to the acquisitions of 2001; and a charge of £0.6m principally relating to property costs associated with the business disposals of 2003. An important beneficial characteristic of Porvair is its ability to generate cash. The Group's cash generation in the period was an encouraging £0.6m (2004: £2.0m outflow). Borrowings reduced by £0.2m in the period as retranslation of dollar borrowings at a higher rate at the end of the period increased borrowings by £0.4m. Outlook 2005 is progressing well. Current trading and net cash generation are healthy. Enquiry and order levels in the core businesses are robust and our key growth prospects are making demonstrable and exciting progress. Group profit and loss account For the six months ended 31 May (unaudited) Year ended 30 Six months ended 31 May November 2005 2005 2005 2005 2004 2004 2004 2004 Before Goodwill Exceptional Before Goodwill exceptional amortisation items exceptional amortisation items and items and goodwill goodwill amortisation amortisation £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Turnover 21,566 - - 21,566 21,794 - 21,794 44,632 Group operating profit/(loss) 1,193 (1,109) 67 151 1,032 (1,112) (80) 339 Share of operating profit in associated undertaking - - - - 60 - 60 454 Total operating profit/(loss) 1,193 (1,109) 67 151 1,092 (1,112) (20) 793 Interest payable (185) - - (185) (251) - (251) (460) (net) Profit/(loss) on ordinary activities before taxation 1,008 (1,109) 67 (34) 841 (1,112) (271) 333 Tax on profit/(loss) on ordinary activities (325) - (20) (345) (239) - (239) (833) Profit/(loss) on ordinary activities after taxation 683 (1,109) 47 (379) 602 (1,112) (510) (500) Equity minority interests (202) 89 - (113) (235) 104 (131) (249) Profit/(loss) attributable to shareholders 481 (1,020) 47 (492) 367 (1,008) (641) (749) Dividends (368) (368) (736) Deficit for the financial period (860) (1,009) (1,485) Profit/(loss) per share (basic and diluted) 1.3p (2.7)p 0.1p (1.3)p 1.0p (2.7)p (1.7)p (2.0)p Dividend per share 1.0p 1.0p 2.0p Reconciliation of movements in equity shareholders' funds For the six months ended 31 May (unaudited) Year ended 30 November Six months ended 31 May 2005 2004 2004 £'000 £'000 £'000 Loss attributable to shareholders (492) (641) (749) Dividends (368) (368) (736) Deficit for the financial period (860) (1,009) (1,485) Exchange differences 60 (59) (239) Net reduction in equity shareholders' funds (800) (1,068) (1,724) Opening equity shareholders' funds 30,472 32,196 32,196 Closing equity shareholders' funds 29,672 31,128 30,472 Statement of total recognised gains and losses For the six months ended 31 May (unaudited) Year ended 30 November Six months ended 31 May 2005 2004 2004 £'000 £'000 £'000 Loss attributable to shareholders (492) (641) (749) Exchange differences 60 (59) (239) Total losses recognised in the period (432) (700) (988) Group balance sheet As at 31 May (unaudited) At 30 November At 31 May 2005 2004 2004 £'000 £'000 £'000 Fixed assets Intangible assets 26,776 28,969 27,785 Tangible assets 8,122 8,829 8,241 Investment in associated undertaking - 2,440 - 34,898 40,238 36,026 Current assets Stocks 5,759 6,152 5,897 Debtors: amounts falling due after more than one year 1,887 1,546 3,071 Debtors: amounts falling due within one year 9,852 10,555 8,263 Cash at bank and in hand 3,679 1,860 3,047 21,177 20,113 20,278 Creditors: amounts falling due within one year (8,285) (7,977) (6,753) Net current assets 12,892 12,136 13,525 Total assets less current liabilities 47,790 52,374 49,551 Creditors: amounts falling due after more than one year (10,509) (13,065) (11,052) Provisions for liabilities and charges (1,977) (2,780) (2,508) 35,304 36,529 35,991 Capital and reserves Called up share capital 736 736 736 Share premium account 28,679 28,679 28,679 Other reserves (1,040) (920) (1,100) Profit and loss account 1,297 2,633 2,157 Total equity shareholders' funds 29,672 31,128 30,472 Equity minority interests 5,632 5,401 5,519 35,304 36,529 35,991 Group cash flow statement For the six months ended 31 May (unaudited) Year ended 30 November Six months ended 31 May 2005 2004 2004 £'000 £'000 £'000 Net cash inflow/(outflow) from operating activities 1,198 (1,072) 2,811 Dividend from associated undertaking - - 161 Returns on investments and servicing of finance Interest received 132 64 112 Interest paid (309) (41) (635) (177) 23 (523) Taxation UK corporation tax (paid)/ refunded (482) 372 18 Overseas tax paid - - (18) (482) 372 - Capital expenditure Purchase of tangible fixed assets (407) (785) (1,228) Sale of tangible fixed assets - - 57 (407) (785) (1,171) Acquisitions and disposals Disposal of subsidiaries' assets and liabilities 300 - - Sale of associated undertaking 527 - 526 827 - 526 Equity dividends paid (368) (368) (736) Net cash inflow/(outflow) before financing 591 (1,830) 1,068 Financing Loans repaid - (7) (7) Decrease in borrowings - (167) (1,820) (174) (1,827) Increase/(decrease) in cash in the period 591 (2,004) (759) Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash in the period 591 (2,004) (759) Decrease in borrowings - 174 1,827 Change in net debt from cash flows 591 (1,830) 1,068 Exchange differences (416) 733 1,035 Movement in net debt in the period 175 (1,097) 2,103 Opening net debt (8,005) (10,108) (10,108) Closing net debt (7,830) (11,205) (8,005) Notes to the accounts Turnover and segmental analyses The geographical analyses of the group's turnover and segmental analyses of turnover, operating profit/(loss) and net assets are set out below: Turnover Six months ended 31 May Year ended 30 November 2005 2004 2004 By By By destination destination destination By origin By origin By origin £'000 £'000 £'000 £'000 £'000 £'000 United Kingdom 6,414 11,913 6,145 11,726 12,707 24,121 Continental Europe 2,454 - 2,722 - 5,735 - Americas 10,290 9,653 10,363 10,068 21,036 20,511 Asia 1,878 - 1,652 - 3,526 - Australasia 171 - 306 - 665 - Africa 359 - 606 - 963 - Continuing operations 21,566 21,566 21,794 21,794 44,632 44,632 Year ended 30 November Six months ended 31 May 2005 2004 2004 £'000 £'000 £'000 Metals Filtration 9,348 9,533 19,387 Microfiltration 11,913 11,726 24,121 Advanced Materials 305 535 1,124 Continuing operations 21,566 21,794 44,632 Operating profit/(loss) Six months ended 31 May Year ended 30 November 2005 2004 2004 Operating Operating Operating Operating profit/ profit/ profit/(loss) profit/(loss) (loss) (loss) after before Operating before Operating before goodwill goodwill profit/(loss) goodwill profit/(loss) goodwill amortisation amortisation after goodwill amortisation after goodwill amortisation amortisation amortisation £'000 £'000 £'000 £'000 £'000 £'000 Metals Filtration 371 (233) 322 (286) 855 (358) Microfiltration 1,579 1,074 1,472 968 3,487 2,476 Advanced Materials (757) (757) (702) (702) (1,325) (1,325) Exceptional items 67 67 - - - - Operating profit/ (loss) 1,260 151 1,092 (20) 3,017 793 Net assets As at 31 May As at 30 November 2005 2004 2004 Net assets Net assets Net assets including including including Before goodwill Before goodwill Before goodwill goodwill goodwill goodwill £'000 £'000 £'000 £'000 £'000 £'000 Metals Filtration 6,798 19,028 7,825 21,236 6,252 18,985 Microfiltration 8,131 22,677 9,595 25,153 8,686 23,738 Advanced Materials 1,018 1,018 1,063 1,063 809 809 15,947 42,723 18,483 47,452 15,747 43,532 Long term related party loan 1,082 1,066 1,112 Equity investment in associated undertaking - 1,374 - Deferred consideration 1,161 1,000 1,988 Discontinued operations (1,709) (3,027) (2,349) Taxation 245 237 81 Dividend payable (368) (368) (368) Net borrowings (7,830) (11,205) (8,005) 35,304 36,529 35,991 Exceptional items Two exceptional items were recorded in the period giving rise to a net credit of £67K. An exceptional credit of £711K resulted from the collection of a debt previously transferred to head office that had been written off prior to the acquisition of Microfiltrex in 2001; and a charge of £644K resulted from additional costs associated with the business disposals from the discontinued operations in 2003, principally related to vacant property. Profit/(loss) before tax and earnings/(losses) per share Six months ended 31 May Year ended 30 November 2005 2004 2004 Profits/ Profits/ Profits/ (losses) (losses) (losses) £'000 £'000 £'000 Profit/(loss) on ordinary activities before taxation (34) (271) 333 Add back: Goodwill amortisation 1,109 1,112 2,224 Deduct: Exceptional items (67) - - Adjusted profit/(loss) on ordinary activities before exceptional items, goodwill amortisation and taxation 1,008 841 2,557 Profits/ Profits/ Profits/ (losses) (losses) (losses) £'000 Per share £'000 Per share £'000 Per share Loss per share - basic and diluted on shares in issue of 36,803,011 (492) (1.3)p (641) (1.7)p (749) (2.0)p Add back: Goodwill amortisation (excluding minority interests' share) 1,020 2.7p 1,008 2.7p 2,016 5.4p Deduct: Exceptional items (including tax charge) (47) (0.1)p - - - - Adjusted earnings per share before goodwill amortisation and exceptional items 481 1.3p 367 1.0p 1,267 3.4p Reconciliation of operating profit/(loss) to net cash flow from operating activities Year ended 30 November Six months ended 31 May 2005 2004 2004 £'000 £'000 £'000 Total group operating profit/(loss) before share of associated undertaking and exceptional items 84 (80) 339 Goodwill amortisation 1,109 1,112 2,224 Depreciation 755 859 1,654 Loss on sale of fixed assets - 24 4 Decrease in stocks 226 320 359 (Increase)/decrease in debtors (1,144) (1,304) 963 Increase/(decrease) in creditors 105 (590) (629) Net cash inflow from operating activities before exceptional items 1,135 341 4,914 Cash inflow/(outflow) relating to exceptional 63 (1,413) (2,103) items Net cash inflow/(outflow) from operating 1,198 (1,072) 2,811 activities Exchange rates Exchange rates for the major currencies during the period were: Average rate to Average rate to Average rate to Closing rate at Closing rate Closing rate 31/05/05 31/05/04 30/11/04 31/05/05 at 31/05/04 at 30/11/04 US dollar 1.8915 1.7980 1.8134 1.8225 1.8334 1.9115 Canadian dollar N/A 2.3946 2.3725 2.2858 2.5019 2.2729 Euro N/A 1.4697 1.4697 1.4761 1.5014 1.4382 Dividends The Directors have declared an interim dividend of 1.0p per share (2004: 1.0p) to be paid on 16 September 2005 to shareholders on the register at the close of business on 19 August 2005. The ex-dividend date for the shares is 17 August 2005. 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 2004. The interim financial statements do not constitute statutory accounts and are unaudited, although they have been reviewed by the auditors. The abridged accounts for the year ended 30 November 2004 set out above are an extract from the latest statutory accounts for 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. Independent review report to Porvair plc Introduction We have been instructed by the Company to review the financial information set out in the Group profit and loss account, Group balance sheet, Group cash flow statement and related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulleting 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing 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. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 May 2005. PricewaterhouseCoopers LLP Chartered Accountants Cambridge 27 June 2005 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 interim report since it was initially presented on the website. b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. -------------------------- This information is provided by RNS The company news service from the London Stock Exchange

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