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.
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