TIDMPRV
RNS Number : 2712C
Porvair PLC
27 June 2016
For immediate release 27 June 2016
Porvair plc
Half yearly results for the six months ended 31 May 2016
Strong positive momentum
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 2016.
Highlights
-- Encouraging financial progress:
o Revenue up 13% to GBP52.1 million (2015: GBP46.3 million).
Constant currency revenue growth was 10%.
o Profit before tax up 7% to GBP4.5 million (2015: GBP4.2
million).
o Basic earnings per share up 9% to 7.5 pence (2015: 6.9
pence).
o Net cash was GBP7.2 million (31 May 2015: GBP6.2 million; 30
November 2015: GBP10.7 million).
o Acquisition of TEM for GBP3.4m, GBP2.9 million paid in the
period.
o Capital investment of GBP2.7 million in the period.
-- Microfiltration:
o Revenue up 15%.
o Aerospace revenue up 14%.
o Large contracts progressing smoothly - POSCO contract is
largely commissioned.
o TEM has performed well since acquisition.
o New facility in USA opened on schedule and to budget.
o Indian joint venture with Mascot Dynamics signed.
o Order book healthy.
-- Metals Filtration:
o Revenues up 7% (4% lower in constant currency).
o New facility in China performing well and has delivered its
first filters for molten aluminium.
o Exclusive multi-year contract with Alcoa renewed.
-- Interim dividend increased 8% to 1.4 pence per share (2015: 1.3 pence).
Commenting on the outlook, Ben Stocks, Chief Executive,
said:
"Provided recent economic and political uncertainty does not
affect general industrial activity, the outlook for Porvair is
positive. 2016 has started well. Demand in most of our markets is
good and order books for the second half are healthy. We are
benefiting from the introduction of new products and the
integration of acquisitions made in 2015. The Group has a strong
balance sheet, a promising project pipeline and many opportunities
ahead."
For further information please contact:
Porvair plc 0207 466 today
5000
Ben Stocks, Chief Executive 01553 765 thereafter
500
Chris Tyler, Group Finance
Director
0207 466
Buchanan Communications 5000
Charles Ryland / Stephanie
Watson
A copy of the presentation that accompanies these results is
available at www.porvair.com
Operating Review
Overview
2016 2015 Growth
GBPm GBPm %
Revenue 52.1 46.3 13
----- ----- -------
Profit before tax 4.5 4.2 7
----- ----- -------
Basic earnings per share 7.5 6.9 9
----- ----- -------
Net cash 7.2 6.2
----- -----
Demand in most of our markets was good and revenue for the six
months ended 31 May 2016 was up 13%. In constant currency revenue
growth was 10%.
The Group has invested GBP5.6 million in capital expenditure and
acquisitions in the period and has made good progress towards its
key operating objectives including:
-- Growth in aviation, nuclear and Seal Analytical driven by
strong demand and new product introductions;
-- Large projects progressing well, with developments in ancillary services;
-- New facilities opened in the USA and China on budget and schedule; and
-- A good start by TEM, acquired in December 2015.
The second half of 2016 has started well and order books are
healthy.
Strategic statement
Porvair's strategy has remained consistent for a number of
years. It is to generate shareholder value through the development
of specialist filtration and environmental technology businesses,
both organically and by acquisition. Such businesses have certain
key characteristics in common:
-- Specialist design or engineering skills are required;
-- Product use and replacement is mandated by regulation,
quality accreditation or a maintenance cycle; and
-- Products are often designed into a specification and will typically have long life cycles.
Over the last five years this strategy has worked well for the
Group. It has invested GBP27 million in capacity expansion and
acquisitions and generated sufficient cash to turn GBP9 million of
net debt into GBP7 million of net cash. The Group is now in a
position of financial strength, and will continue to invest in both
organic and acquired growth as appropriate. In the last twelve
months the Group's after tax return on operating capital was 48%
(2015: 47%).
Business model outline
Our customers require filtration or emission control products
that perform to a given specification; for a minimum amount of
time; often with prescribed physical attributes such as size or
weight. We win business by offering the best technical solutions
for these requirements at an acceptable commercial cost. Filtration
expertise is applicable across all markets with new products
generally being adaptations of existing designs. Experience in
particular markets or applications is valuable in building customer
confidence. Domain knowledge is important, as is deciding where to
direct resources.
This leads us to:
1. Focus on end-markets where we see long term growth potential.
2. Look for applications where product use is mandated and
replacement demand is therefore regular.
3. Make new product development a core business activity.
4. Establish geographic presence where end-markets require.
5. Invest in both organic and acquired growth.
Therefore:
-- We focus on four end-markets: aviation; energy and
industrial; environmental laboratories; and molten metals. All have
clear structural growth drivers.
-- Our products are specialist in nature and typically protect
costly or complex downstream systems. As a result they are replaced
regularly. A high proportion of our annual revenue is from repeat
orders.
-- We encourage new product development in order to generate
growth rates in excess of the underlying market. Where possible we
build robust intellectual property around our product developments.
About 30% of our revenue is derived from patent protected
products.
-- Our geographic presence follows the markets we serve. Some
44% of revenue is in the Americas, where aviation and metals
filtration are strong. Some 24% of revenue is in Asia, where sales
into water analysis markets are growing and the demand for
gasification plants is strongest.
-- We aim to meet dividend and investment needs from free cash
flow and modest borrowing facilities. In recent years we have
expanded manufacturing capacity in the UK, Germany, US and China
and made several small acquisitions. All investments are subject to
a careful investment hurdle rate analysis based on strategic and
financial priorities.
Operating structure
-- The Group has two divisions. The Microfiltration division
serves the aviation, environmental laboratory and energy/industrial
markets. The Metals Filtration division focuses on filtration of
molten metals, principally aluminium.
-- The Group has plants in the US, UK, Germany and China.
Investment and future development
Since the start of 2014 over GBP11.5 million has been invested
in capacity expansion. New plants have been opened in the UK, US
and China. Highlights in 2016 and future developments include:
-- A new US industrial filtration plant was opened in March
2016, expanding manufacturing and design capabilities. Further
investment in production equipment is planned for the second half
of 2016.
-- New equipment to increase capacity has been installed in Caribou, Maine.
-- The new plant in China has started production successfully
and is making good quality products for aluminium filtration
customers in the region.
-- Manufacturing capacity has been expanded in two of the UK plants.
-- Gasification projects remain on track. Commissioning work in
Korea has gone well with no major issues reported. Shipping on the
project for Reliance is now substantially complete. Commissioning
is likely to start in 2017.
-- Several new aviation product programmes were won including
work for Airbus NEO and Boeing 777x.
-- Integration of TEM, acquired in December 2015, is underway.
Trading since acquisition has been good.
-- A joint venture agreement with Mascot Dynamics was signed to
provide filter cleaning and services in India.
Metals Filtration
2016 2015 Growth
GBPm GBPm %
Revenue 16.8 15.7 7
----- ----- -------
Operating profit 1.2 1.2 (2)
----- ----- -------
Revenue was up 7% to GBP16.8 million (2015: GBP15.7million).
However, in constant currency, revenues are 4% lower, with fewer
capital projects at aluminium smelters, following a period of low
metal prices, holding back the sales of capital equipment.
Nevertheless, this division has made positive progress in 2016.
Sales of filters in the US and Europe have been steady, with
consistent market share gains from patented products. We have been
awarded a further multi-year contract for the exclusive supply of
aluminium filters to Alcoa.
The new plant in China has started production with modest
start-up losses as expected. The aluminium filtration line is fully
commissioned and is making good quality products. These products
will be sold into the Asian market, using a new patented formula
specifically developed for these applications. We plan to grow our
volumes steadily, competing on value not price. We are confident
that we have a differentiated offering in Asia and that over time,
as in the rest of the world, this approach will be successful.
Microfiltration
2016 2015 Growth
GBPm GBPm %
Revenue 35.3 30.6 15
----- ----- -------
Operating profit 4.9 4.3 15
----- ----- -------
Revenue was up 15% at GBP35.3 million (2015: GBP30.6 million) as
a result of good growth in most markets and further revenue from
the large projects.
Aviation revenues are up 14% and the order book is healthy. It
has been a good period for project wins, including packages for the
Airbus NEO programme, which will be made in the new US facility;
and the next generation inerting systems for the Boeing 777x.
Bioscience filtration projects are going well with sales of the
product licenced to Thermo Fisher Scientific growing well. Nuclear
projects are having an encouraging year with stronger order books
for the second half including some interesting new HEPA filter
designs in the USA.
Large projects continue to be a focus. The installation in Korea
is now largely commissioned. Shipments to the installations in
India and China have finished and both are expected to begin
operations in early 2017. Shipments for the UK Government nuclear
remediation contract will continue through 2016.
We have signed a joint venture agreement with our long term
Indian partner, Mascot Dynamics. The joint venture has reached an
agreement with Reliance to design, build and operate filter
cleaning equipment for its Indian installations. We do not expect
this to generate significant revenues but it will give better
access to the Indian industrial filtration market, and we expect
sales to grow in time.
We completed the acquisition of TEM, a filter business serving
the microelectronics industry, in December 2015 and it has traded
well since then. Integration is underway and we have started the
process of expanding the product range using filtration
capabilities from other parts of the Group. Prospects for the
second half are encouraging.
Seal Analytical sales grew 13%, again posting a record for the
period. Strong demand from Chinese and US markets has driven this
growth. Seal is a market leading supplier of equipment and
consumables for the detection of inorganic contamination of water.
It distinguishes itself from its competitors with an active new
product development programme that has seen the introduction of
four new platforms in the last four years, with more to come.
Interest
The Group incurred an interest charge of GBP0.3 million (2015:
GBP0.3 million). GBP0.2 million (2015: GBP0.2 million) relates to
the finance cost of the defined benefit pension scheme. The
remainder principally comprises non-utilisation fees on the Group's
banking facilities.
Tax
The Group tax charge was GBP1.1 million (2015: GBP1.1 million).
This is an effective rate of 24% (2015: 26%), in line with the rate
recorded for the full year ended 30 November 2015 and higher than
the UK standard corporate tax rate because tax rates are higher on
profits made in Germany and the US.
Earnings per share and dividends
The basic earnings per share for the period increased 9% to 7.5
pence (2015: 6.9 pence).
The Board is declaring an increased interim dividend of 1.4
pence (2015: 1.3 pence) per share, an increase of 8%.
Cash flow and net debt
Cash generated from operations in the six months to 31 May 2016
was GBP2.5 million (2015: GBP3.1 million). Working capital
increased in the period by GBP3.9 million (2015: GBP2.8 million).
Following several years of receiving cash in excess of revenue
recognised on the large projects, in this period, as expected, more
revenue has been recognised than cash received. In addition, there
was a planned increase in inventory as part of the startup of the
new plant in Xiaogan.
Interest paid was GBP0.1 million (2015: GBP0.1 million). Tax
payments were GBP0.6 million (2015: GBP0.6 million) in line with
the prior year.
Capital expenditure was GBP2.7 million (2015: GBP1.4 million),
mainly spent on the planned fit out of facilities in US and China
and additional machining capacity in the UK.
GBP2.9 million (2015: GBP0.5 million of deferred consideration
on previous acquisitions) was spent on TEM acquired on 4 December
2015. As described in note 9, further consideration is due in 2017
contingent upon the performance of the business in its first year
of trading under our ownership.
Net cash at 31 May 2016 was GBP7.2 million (31 May 2015: GBP6.2
million; 30 November 2015: GBP10.7 million).
Return on capital employed
The Group's return on capital employed was 15% (2015: 15%).
Excluding the impact of goodwill and the pension liability the
return on operating capital employed was 48% (2015: 47%).
Current trading and outlook
Provided recent economic and political uncertainty does not
affect general industrial activity, the outlook for Porvair is
positive. 2016 has started well. Demand in most of our markets is
good and order books for the second half are healthy. We are
benefiting from the introduction of new products and the
integration of acquisitions made in 2015. The Group has a strong
balance sheet, a promising project pipeline and many opportunities
ahead.
Ben Stocks
Group Chief Executive
Related parties
There were no related party transactions in the six months ended
31 May 2016 (2015: none).
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 Strategic Report
section of the Annual Report for the year ended 30 November
2015.
Although healthy at 31 May 2016, certain elements of the Group's
order position 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 2016.
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.
Condensed consolidated income statement
For the six months ended 31 May
Six months ended
31 May
----------------------
2016 2015
Note Unaudited Unaudited
GBP'000 GBP'000
Revenue 1 52,060 46,261
Cost of sales (35,817) (30,560)
---------- ----------
Gross profit 16,243 15,701
Other operating expenses (11,489) (11,218)
---------- ----------
Operating profit 1 4,754 4,483
Interest payable and similar
charges (303) (319)
Profit before income tax 4,451 4,164
Income tax expense (1,084) (1,062)
Profit for the period attributable
to shareholders 3,367 3,102
---------- ----------
Earnings per share (basic) 2 7.5p 6.9p
Earnings per share (diluted) 2 7.4p 6.9p
Condensed consolidated statement of comprehensive income
For the six months ended 31 May
Six months ended
31 May
------------------------
2016 2015
Unaudited Unaudited
GBP'000 GBP'000
Profit for the period 3,367 3,102
----------- -----------
Other comprehensive income:
Items that will not be reclassified
to profit and loss
Actuarial losses in defined benefit (442) -
pension plans net of tax
----------- -----------
Items that may be subsequently reclassified
to profit or loss
Exchange differences on translation
of foreign subsidiaries 1,727 409
Changes in the fair value of foreign
exchange contracts held as a cash
flow hedge, net of tax 17 (160)
----------- -----------
1,744 249
Net other comprehensive income 1,302 249
----------- -----------
Total comprehensive income for the
period attributable to shareholders
of Porvair plc 4,669 3,351
----------- -----------
The accompanying notes are an integral part of this interim
financial information.
Condensed consolidated balance sheet
As at 31 May
As at
As at 31 May 30 November
------------------------ -------------
Note 2016 2015 2015
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 4 16,061 12,539 14,216
Goodwill and other
intangible assets 4 47,729 43,331 43,547
Deferred tax asset 2,484 2,900 2,529
66,274 58,770 60,292
Current assets
Inventories 14,008 13,060 12,350
Trade and other receivables 20,123 18,373 14,621
Cash and cash equivalents 8,318 8,218 10,738
----------- ----------- -------------
42,449 39,651 37,709
Current liabilities
Trade and other payables (25,870) (25,919) (23,192)
Current tax liabilities (1,893) (1,432) (1,405)
Bank overdraft and - (244) -
loans
Derivative financial
instruments (427) (151) (154)
-------------
(28,190) (27,746) (24,751)
Net current assets 14,259 11,905 12,958
Non-current liabilities
Bank loans (1,153) (1,794) -
Deferred tax liability (1,515) (1,173) (1,465)
Retirement benefit
obligations (12,420) (12,732) (11,993)
Provisions for other
liabilities and charges 12 (2,556) (144) (728)
-------------
(17,644) (15,843) (14,186)
----------- ----------- -------------
Net assets 62,889 54,832 59,064
----------- ----------- -------------
Capital and reserves
Share capital 5 902 896 896
Share premium account 5 35,359 35,344 35,359
Cumulative translation
reserve 6 3,433 1,225 1,706
Retained earnings 6 23,195 17,367 21,103
----------- ----------- -------------
Total equity 62,889 54,832 59,064
----------- ----------- -------------
The interim financial information on pages 7 to 21 was approved
by the Board of Directors on 24 June 2016 and was signed on its
behalf by:
Ben Stocks Chris Tyler
Group Chief Executive Group Finance Director
The accompanying notes are an integral part of this interim
financial information.
Condensed consolidated cash flow statement
For the six months ended 31 May
Six months ended
31 May
------------------------
Note 2016 2015
Unaudited Unaudited
GBP'000 GBP'000
Cash flows from operating
activities
Cash generated from operations 7 2,503 3,055
Interest paid (80) (91)
Tax paid (571) (591)
----------- -----------
Net cash generated from operating
activities 1,852 2,373
----------- -----------
Cash flows from investing
activities
Acquisition of subsidiaries
(net of cash acquired) 9 (2,930) (490)
Purchase of property, plant
and equipment 4 (2,623) (1,385)
Purchase of intangible assets 4 (60) (6)
Proceeds from sale of property,
plant and equipment - 475
Net cash used in investing
activities (5,613) (1,406)
----------- -----------
Cash flows from financing
activities
Net proceeds from the issue
of ordinary shares 5 6 19
Increase in/(repayment of)
borrowings 8 1,113 (637)
Net cash generated from/(used
in) financing activities 1,119 (618)
----------- -----------
Net (decrease)/increase in
cash and cash equivalents 8 (2,642) 349
Effects of exchange rate changes 222 (22)
----------- -----------
(2,420) 327
Cash and cash equivalents
at the beginning of the period 10,738 7,891
----------- -----------
Cash and cash equivalents
at the end of the period 8,318 8,218
----------- -----------
The accompanying notes are an integral part of this interim
financial information.
Condensed consolidated statement of changes in equity
For the six months ended 31 May (Unaudited)
Share Cumulative
Share premium translation Retained
capital account reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 December
2014 887 35,334 816 15,096 52,133
---------- --------- ------------- ----------- ----------
Profit for the period - - - 3,102 3,102
Other comprehensive
income for the period:
Exchange differences
on translation of
foreign subsidiaries - - 409 - 409
Changes in the fair
value of foreign exchange
contracts held as
a cash flow hedge - - - (160) (160)
---------- --------- ------------- ----------- ----------
Total comprehensive
income for the period - - 409 2,942 3,351
---------- --------- ------------- ----------- ----------
Transactions with
owners:
Proceeds from shares
issued, net of costs 9 10 - - 19
Employee share option
schemes:
Value of employee
services net of tax - - - 225 225
Dividends approved
as final or paid - - - (896) (896)
---------- --------- ------------- ----------- ----------
Balance at 31 May
2015 896 35,344 1,225 17,367 54,832
---------- --------- ------------- ----------- ----------
Balance at 1 December
2015 896 35,359 1,706 21,103 59,064
---------- --------- ------------- ----------- ----------
Profit for the period - - - 3,367 3,367
Other comprehensive
income for the period:
Exchange differences
on translation of
foreign subsidiaries - - 1,727 - 1,727
Changes in the fair
value of foreign exchange
contracts held as
a cash flow hedge - - - 17 17
Actuarial losses in
defined benefit pension
plans net of tax - - - (442) (442)
---------- --------- ------------- ----------- ----------
Total comprehensive
income for the period - - 1,727 2,942 4,669
---------- --------- ------------- ----------- ----------
Transactions with
owners:
Proceeds from shares
issued, net of costs 6 - - - 6
Employee share option
schemes:
Value of employee
services net of tax - - - 143 143
Dividends approved
as final or paid - - - (993) (993)
---------- --------- ------------- ----------- ----------
Balance at 31 May
2016 902 35,359 3,433 23,195 62,889
---------- --------- ------------- ----------- ----------
The accompanying notes are an integral part of this interim
financial information.
Notes to the condensed half-yearly consolidated financial
information
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 has determined the operating segments based
on this reporting.
As at 31 May 2016, 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 2016 are as
follows:
Six months ended Metals Microfiltration Other Group
31 May 2016 - Unaudited Filtration unallocated
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 16,752 35,308 - 52,060
------------ ---------------- ------------- --------
Operating profit/(loss) 1,181 4,923 (1,350) 4,754
Interest payable
and similar charges - - (303) (303)
------------ ---------------- ------------- --------
Profit/(loss) before
income tax 1,181 4,923 (1,653) 4,451
Income tax expense - - (1,084) (1,084)
------------ ---------------- ------------- --------
Profit/(loss) for
the period 1,181 4,923 (2,737) 3,367
------------ ---------------- ------------- --------
The segment results for the period ended 31 May 2015 are as
follows:
Six months ended Metals Microfiltration Other Group
31 May 2015 -Unaudited Filtration unallocated
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 15,690 30,571 - 46,261
------------ ---------------- ------------- --------
Operating profit/(loss) 1,206 4,294 (1,017) 4,483
Interest payable
and similar charges - - (319) (319)
------------ ---------------- ------------- --------
Profit/(loss) before
income tax 1,206 4,294 (1,336) 4,164
Income tax expense - - (1,062) (1,062)
------------ ---------------- ------------- --------
Profit/(loss) for
the period 1,206 4,294 (2,398) 3,102
------------ ---------------- ------------- --------
Other Group operations are included in "Other unallocated".
These mainly comprise Group corporate costs, including new business
development costs, some research and development costs, general
financial costs, and income tax expense.
Segment assets and liabilities
At 31 May 2016 Metals Microfiltration Other Group
- Unaudited Filtration unallocated
GBP'000 GBP'000 GBP'000 GBP'000
Segmental assets 30,595 65,656 4,154 100,405
Cash and cash
equivalents - - 8,318 8,318
------------ ---------------- ------------- ---------
Total assets 30,595 65,656 12,472 108,723
------------ ---------------- ------------- ---------
Segmental liabilities (4,099) (22,521) (5,641) (32,261)
Retirement benefit
obligations - - (12,420) (12,420)
Bank overdraft
and loans - - (1,153) (1,153)
------------ ---------------- ------------- ---------
Total liabilities (4,099) (22,521) (19,214) (45,834)
------------ ---------------- ------------- ---------
At 31 May 2015 Metals Microfiltration Other Group
- Unaudited Filtration unallocated
GBP'000 GBP'000 GBP'000 GBP'000
Segmental assets 28,269 57,791 4,143 90,203
Cash and cash
equivalents - - 8,218 8,218
------------ ---------------- ------------- ---------
Total assets 28,269 57,791 12,361 98,421
------------ ---------------- ------------- ---------
Segmental liabilities (3,929) (20,748) (4,142) (28,819)
Retirement benefit
obligations - - (12,732) (12,732)
Bank overdraft
and loans - - (2,038) (2,038)
------------ ---------------- ------------- ---------
Total liabilities (3,929) (20,748) (18,912) (43,589)
------------ ---------------- ------------- ---------
At 30 November Metals Microfiltration Other Group
2015 - Audited Filtration unallocated
GBP'000 GBP'000 GBP'000 GBP'000
Segmental assets 28,520 55,445 3,298 87,263
Cash and cash
equivalents - - 10,738 10,738
------------ ---------------- ------------- ---------
Total assets 28,520 55,445 14,036 98,001
------------ ---------------- ------------- ---------
Segmental liabilities (3,851) (19,087) (4,006) (26,944)
Retirement benefit
obligations - - (11,993) (11,993)
Total liabilities (3,851) (19,087) (15,999) (38,937)
------------ ---------------- ------------- ---------
Geographical analysis
Revenue
Six months ended 31 May
--------------------------------------------------------
2016 2015
Unaudited Unaudited
By destination By origin By destination By origin
GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 8,114 23,049 6,407 17,985
Continental Europe 7,153 4,309 6,367 3,819
United States of
America 18,405 23,624 18,602 23,782
Other NAFTA 3,913 - 3,514 -
South America 644 - 817 -
Asia 13,145 1,078 10,006 675
Africa 686 - 548 -
--------------- ---------- --------------- ----------
52,060 52,060 46,261 46,261
--------------- ---------- --------------- ----------
2. Earnings per share
Six months ended 31 May
--------------------------------------------------------------
2016 2015
Unaudited Unaudited
Earnings Weighted Per share Earnings Weighted Per
average amount average share
number number amount
GBP'000 of shares Pence GBP'000 of shares
Pence
--------- ------------- ---------- --------- ------------- --------
Basic EPS -
Earnings attributable
to ordinary
shareholders 3,367 45,032,387 7.5 3,102 44,659,379 6.9
Effect of dilutive
securities
- share options - 165,612 (0.1) - 146,675 -
--------- ------------- ---------- --------- ------------- --------
Diluted EPS 3,367 45,197,999 7.4 3,102 44,806,054 6.9
--------- ------------- ---------- --------- ------------- --------
3. Dividends per share
Six months ended 31 May
------------------------------------------
2016 2015
Unaudited Unaudited
Per share GBP'000 Per share GBP'000
Final dividend approved 2.20p 993 2.00p 896
---------- -------- ---------- --------
The final dividend approved for the year ended 30 November 2015
was paid to shareholders on 3 June 2016.
The Directors have declared an interim dividend of 1.4 pence
(2015: 1.3 pence) per share to be paid on 2 September 2016 to
shareholders on the register at the close of business on 29 July
2016. The ex-dividend date for the shares is 28 July 2016.
4. Property, plant and equipment and goodwill and other intangible assets
Six months ended 31 May Property, Goodwill Total
2016 - Unaudited plant and other
and intangible
equipment assets
----------- ------------ --------
GBP'000 GBP'000 GBP'000
Opening net book amount
at 1 December 2015 14,216 43,547 57,763
Additions 2,623 60 2,683
Acquisitions 44 3,114 3,158
Depreciation and amortisation (1,044) (189) (1,233)
Exchange movements 222 1,197 1,419
Closing net book amount
at 31 May 2016 16,061 47,729 63,790
----------- ------------ --------
Six months ended 31 May Property, Goodwill Total
2015 - Unaudited plant and other
and intangible
equipment assets
----------- ------------ --------
GBP'000 GBP'000 GBP'000
Opening net book amount
at 1 December 2014 12,336 43,209 55,545
Additions 1,385 6 1,391
Disposals (397) - (397)
Depreciation and amortisation (912) (182) (1,094)
Exchange movements 127 298 425
Closing net book amount
at 31 May 2015 12,539 43,331 55,870
----------- ------------ --------
5. Share capital and premium
Number Ordinary Share
of shares shares premium Total
(thousands) Unaudited account Unaudited
Unaudited
------------- ----------- ----------- ------------
GBP'000 GBP'000 GBP'000
At 1 December 2014 44,363 887 35,334 36,221
Employee share
options schemes:
Exercise of options
under share option
schemes 450 9 10 19
------------- ----------- ----------- ------------
At 31 May 2015 44,813 896 35,344 36,240
------------- ----------- ----------- ------------
At 1 December 2015 44,824 896 35,359 36,255
Employee share
options schemes:
Exercise of options
under share option
schemes 308 6 - 6
------------- ----------- ----------- ------------
At 31 May 2016 45,132 902 35,359 36,261
------------- ----------- ----------- ------------
The authorised number of ordinary shares is 75 million (2015: 75
million) shares with a par value of 2.0 pence (2015: 2.0 pence) per
share. All issued shares are fully paid. 308,200 (2015: 450,221)
ordinary shares of 2p each were issued in the period on the
exercise of employee share options for a cash consideration of
GBP6,000 (2015: GBP19,000). The weighted average share price at the
date of exercise of the options was 288 pence (2015: 298
pence).
6. Other reserves
Cumulative
translation Retained
reserve earnings
Unaudited Unaudited
------------- ------------
GBP'000 GBP'000
At 1 December 2014 816 15,096
Profit for the period attributable
to shareholders - 3,102
Direct to equity:
Final dividends approved - (896)
Share based payments - 238
Tax on share based payments - (13)
Foreign exchange contract
cash flow hedge - (160)
Exchange differences 409 -
At 31 May 2015 1,225 17,367
------------- ------------
At 1 December 2015 1,706 21,103
Profit for the period attributable
to shareholders - 3,367
Direct to equity:
Final dividends approved - (993)
Actuarial loss - (539)
Tax on actuarial loss - 97
Share based payments - 227
Tax on share based payments - (84)
Foreign exchange contract
cash flow hedge - 17
Exchange differences 1,727 -
At 31 May 2016 3,433 23,195
------------- ------------
7. Cash generated from operations
Six months ended
31 May
------------------------
2016 2015
Unaudited Unaudited
GBP000 GBP000
Operating profit 4,754 4,483
Non-cash pension charge 178 166
Share based payments 227 238
Depreciation and amortisation 1,233 1,094
Profit on disposal of property,
plant and equipment - (78)
----------- -----------
Operating cash flows before
movement in working capital 6,392 5,903
----------- -----------
Increase in inventories (1,283) (1,694)
Increase in trade and other
receivables (4,754) (1,338)
Increase in payables 779 184
Increase in provisions 1,369 -
Increase in working capital (3,889) (2,848)
----------- -----------
Cash generated from operations 2,503 3,055
----------- -----------
8. Reconciliation of net cash flow to movement in net cash
Six months ended
31 May
------------------------
2016 2015
Unaudited Unaudited
GBP'000 GBP'000
Net (decrease)/increase in cash
and cash equivalents (2,642) 349
Effects of exchange rate changes 182 (70)
(Increase in)/repayment of borrowings (1,113) 637
Net cash at the beginning of the
period 10,738 5,264
----------- -----------
Net cash at the end of the period 7,165 6,180
----------- -----------
9. Acquisition
On 4 December 2015 the Group, through its subsidiary Porvair
Filtration Group Inc., purchased the trade and assets of TEM Filter
Company. The total estimated consideration payable is $5,100,000
(GBP3,377,000); $4,350,000 (GBP2,880,000) was paid on 4 December
2015, with the balance being contingent and due for payment before
31 May 2017. The contingent consideration is estimated based on the
forecast for the operating profit performance of the acquired
business in its first year of ownership by the Group. A change in
its operating profit forecast by $100,000 (GBP69,000), which is
considered a reasonable possibility, would change the liability by
the same amount. The maximum contingent consideration is $1,200,000
(GBP825,000). Direct acquisition-related costs of $58,000
(GBP38,000) have been charged to administrative expenses in the
consolidated income statement. In the period since acquisition, the
business has contributed $1,279,000 (GBP883,000) in revenue and
$296,000 (GBP205,000) in operating profit to the Group results.
Total
GBP'000
Purchase consideration:
Cash paid 2,880
Contingent consideration 497
Total purchase
consideration 3,377
Fair value of
net assets acquired (321)
Goodwill 3,056
--------
Recognised amounts Fair value
of identifiable assets
acquired and liabilities
assumed
GBP'000
Property plant and
equipment 44
Non-compete agreement 66
Inventory 93
Trade receivables 154
Other working capital
(net) (36)
-----------
Net assets acquired 321
-----------
Purchase consideration
settled in cash 2,880
-----------
Cash outflow on
acquisition 2,880
-----------
The goodwill attributable to the acquisition relates to the
acquired customer base and non-contractual relationships, the
synergies between the business acquired and the existing operations
of the Group and the potential to develop the acquired
technologies, which do not meet the criteria for capitalisation as
intangible assets. The goodwill recognised is attributable to the
Microfiltration division and is expected to be deductible for
income tax purposes. The purchase is accounted for as an
acquisition.
10. Contingent liabilities
At 31 May 2016, the Group has advanced payment bonds totalling
US$5,024,000 (30 November 2015: US$5,273,000) relating to monies
received in advance on contracts. The bonds require the amount to
be repaid in the event delivery is not made within certain
parameters. The Group has performance bonds totalling US$7,179,000
(30 November 2015: $9,728,000). The bonds are released after a
warranty period and in any event no later than January 2019. The
Group has no bid guarantees in place at the period end.
11. Fair value estimation
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk. The
condensed half-yearly consolidated financial information does not
include all financial risk management information and disclosures
required in the annual financial statements; it should be read in
conjunction with the Group's annual financial statements as at 30
November 2015. There have been no changes in the risk management
department or in any risk management policies since the year
end.
Compared to year end, there was no material change in the
contractual undiscounted cash out flows for financial liabilities
with the exception of bank overdraft and loans of GBP1.2 million,
which are due in 2018.
The Group's finance department includes a team that performs the
valuations of financial assets and liabilities required for
financial reporting purposes, including Level 3 fair values. This
team reports directly to the Group Finance Director and the Audit
Committee. Discussions of valuation processes and results are held
between the Group Finance Director, the Audit Committee and the
valuation team at least twice a year, in line with the Group's
external reporting dates.
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
below:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
-- Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
Level Level Level Total
1 2 3
--------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
Financial liabilities
at fair value through
profit or loss:
* Trading derivatives - (354) - (354)
Contingent consideration - - (515) (515)
Foreign exchange contracts
used for hedging - (73) - (73)
---------- -------- -------- --------
At 31 May 2016 - (427) (515) (942)
---------- -------- -------- --------
Financial liabilities
at fair value through
profit or loss:
* Trading derivatives - (64) - (64)
Deferred consideration - - (56) (56)
Foreign exchange contracts
used for hedging - (90) - (90)
---------- -------- -------- --------
At 30 November 2015 - (154) (56) (210)
---------- -------- -------- --------
There were no transfers between levels during the period, and
there were no changes in valuation techniques in the period.
Level 2 trading and hedging derivatives comprise forward foreign
exchange contracts. These forward foreign exchange contracts have
been fair valued using forward exchange rates that are quoted in an
active market. The effects of discounting are generally
insignificant for Level 2 derivatives.
A summary of the movements in deferred and contingent
consideration on acquisitions contained in Level 3 is given
below:
Eisenmann Thomas
Metallurgical Cain Total
--------------- -------- --------
GBP'000 GBP'000 GBP'000
At 1 December 2014 (639) (285) (924)
Cash paid in the period 327 163 490
Recognised in the income
statement - 129 129
Foreign exchange movement (16) (7) (23)
--------------- -------- --------
At 31 May 2015 (328) - (328)
--------------- -------- --------
TEM
Fiber Filter
Ceramics Company Total
----------- --------- --------
GBP'000 GBP'000 GBP'000
At 1 December 2015 (56) - (56)
Purchase consideration
additions in the period - (3,377) (3,377)
Cash paid in the period 50 2,880 2,930
Recognised in the income
statement 7 - 7
Foreign exchange movement (1) (18) (19)
----------- --------- --------
At 31 May 2016 - (515) (515)
----------- --------- --------
Details regarding the valuation and sensitivity of the
contingent consideration are disclosed in Note 9.
The fair value of the following financial assets and liabilities
approximate their carrying amount: borrowings, trade and other
receivables, other current financial assets, cash and cash
equivalents, and trade and other payables.
12. Provisions for other liabilities and charges
Dilapidations Warranty Total
-------------- --------- --------
GBP'000 GBP'000 GBP'000
At 1 December 2015 150 578 728
Charged to the consolidated
income statement:
* Unwinding of discount 7 - 7
* Warranty - 1,821 1,821
At 31 May 2016 157 2,399 2,556
-------------- --------- --------
The provisions, all of which are non-current, arise from a
discounted dilapidations provision for leased property, which is
expected to be utilised in 2023, and sale warranties, which are
utilisable before 2020.
13. Exchange rates
Exchange rates for the US dollar and Euro during the period
were:
Average Average Closing Closing
rate to rate to rate at rate at
31 May 31 May 31 May 30 Nov
16 15 16 15
Unaudited Unaudited Unaudited Unaudited
US dollar 1.45 1.53 1.46 1.51
Euro 1.32 1.34 1.31 1.43
14. Revenue at constant currency estimation
2016 2015 Growth
Metals Filtration GBPm GBPm %
Revenue at constant
currency* 14.4 15.0 (4)
Exchange 2.4 0.7
----- ----- -------
Revenue as reported 16.8 15.7 7
----- ----- -------
Microfiltration
Revenue at constant
currency* 35.1 30.0 17
Exchange 0.2 0.6
----- ----- -------
Revenue as reported 35.3 30.6 15
----- ----- -------
Group
Revenue at constant
currency* 49.5 45.0 10
Exchange 2.6 1.3
----- ----- -------
Revenue as reported 52.1 46.3 13
----- ----- -------
Revenue at constant currency is based upon fixed exchange rates
in both years of $1.6:GBP and EUR1.4:GBP.
15. Seasonality
The results for the six months ended 31 May 2016 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.
16. 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 2016 has been prepared
in accordance with the Disclosure and Transparency Rules ('DTR') of
the Financial Conduct 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 2015, 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 2015, as
described in those financial statements. A number of amendments to
IFRSs became effective for the financial year beginning 1 December
2015. However, the Group did not have to change its accounting
policies or make material retrospective adjustments as a result of
adopting these new standards.
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. In preparing the condensed
interim financial statements, the significant judgements made by
management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those applied to
the consolidated financial statements for the year ended 30
November 2015, with the exception of changes in estimates that are
required in determining the provision for income taxes.
After having made appropriate enquiries, including a review of
progress against the Group's budget for 2016, its medium term plans
and taking into account the banking facilities available until
January 2018, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for at least twelve months from the date of approval of the
condensed half yearly consolidated financial information.
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 2015, which were
approved by the Board of Directors on 22 January 2016, and 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 condensed half-yearly consolidated financial
information has been reviewed, not audited.
The condensed half-yearly consolidated financial information
does not include all financial risk management information and
disclosures required in the annual financial statements; it should
be read in conjunction with the Group's annual financial statements
for the year ended 30 November 2015. There have been no changes in
any risk management policies since the year end.
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.
17. Adoption of FRS 101 'Reduced disclosure framework -
Disclosure exemptions from EU-adopted IFRS for qualifying
entities'
Following the publication of FRS 100, 'Application of financial
reporting requirements', by the Financial Reporting Council,
Porvair plc is required to change its accounting framework for its
entity financial statements, which is currently UK GAAP, for its
financial year commencing 1 December 2015. The Board considers that
it is in the best interests of the Group for Porvair plc to adopt
FRS 101 'Reduced disclosure framework - Disclosure exemptions from
EU-adopted IFRS for qualifying entities'.
A list of IFRS requirements where there are exemptions available
under FRS 101 which are to be taken in preparation of the financial
statements of the entity, has been set out below:
-- paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based payment
(details of the number and weighted-average exercise prices of
share options and how the fair value of goods or services received
was determined);
-- paragraphs 62, B64(d), B64(e), B64(g), B64(h), B64(j) to
B64(m), B64(n) (ii), B64(o)(ii), B64(p), B64(q)(ii), B66 and B67 of
IFRS 3 Business Combinations;
-- paragraph 33(c) of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations;
-- IFRS 7 Financial Instruments: Disclosures;
-- paragraphs 91 to 99 of IFRS 13 Fair Value Measurement
(disclosure of valuation techniques and inputs used for fair value
measurement of assets and liabilities);
-- paragraph 38 of IAS 1 Presentation of Financial Statements to
present comparative information in respect of:
paragraph 79(a)(iv) of IAS 1;
paragraph 73(e) of IAS 16 Property, Plant and Equipment;
paragraph 118(e) of IAS 38 Intangible Assets (reconciliations
between the carrying amount at the beginning and end of the
period);
-- paragraphs 10(d) (statement of cash flows), 10(f) (statement
of financial position as at the beginning of the preceding period
when an entity applies an accounting policy retrospectively or
makes a retrospective restatement of items in its financial
statements, or when it reclassifies items in its financial
statements), 16 (statement of compliance with all IFRSs), 38A
(requirement for minimum of two primary statements, including cash
flow statements), 38B-D (additional comparative information), 40A-D
(requirements for a third statement of financial position), 111
(cash flow statement information) and 134 to 136 (capital
management disclosures) of IAS 1 Presentation of Financial
Statements;
-- IAS 7 Statement of Cash Flows;
-- paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors (requirement for the disclosure of
information when an entity has not applied a new IFRS that has been
issued but is not yet effective);
-- paragraph 17 of IAS 24 Related Party Disclosures (key management compensation);
-- IAS 24 Related Party Disclosures to disclose related party
transactions entered into between two or more members of a group,
provided that any subsidiary which is a party to the transaction is
wholly owned by such a member; and
-- paragraphs 130(f)(ii), 130(f)(iii), 134(d) to 134(f) and
135(c) to 135 (e) of IAS 36 Impairment of Assets (disclosures when
the recoverable amount is fair value less costs of disposal,
assumptions involved in estimating recoverable amounts of cash
generating units containing goodwill or intangible assets with
indefinite useful lives and management's approach to determining
these amounts).
A shareholder or shareholders holding in aggregate 5% or more of
the total allotted shares in Porvair plc can serve objections to
the use of the disclosure exemptions on Porvair plc, in writing, to
its registered office (7 Regis Place, Bergen Way, King's Lynn,
Norfolk PE30 2JN) no later than 26 August 2016.
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 2015. 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
24 June 2016
Independent review report to Porvair plc
Report on the condensed half-yearly consolidated financial
information
Our conclusion
We have reviewed Porvair plc's condensed half-yearly
consolidated financial information (the "interim financial
statements") in the half-yearly results of Porvair plc for the 6
month period ended 31 May 2016. Based on our review, nothing has
come to our attention that causes us to believe that the interim
financial statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated balance sheet as at 31 May 2016;
-- the condensed consolidated income statement and condensed
consolidated statement of comprehensive income for the period then
ended;
-- the condensed consolidated cash flow statement for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
results have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Rules and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 16 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half-yearly results, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the
half-yearly results in accordance with the Disclosure Rules and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly results based on our
review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the
Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, 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.
What a review of interim financial statements involves
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.
We have read the other information contained in the half-yearly
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Cambridge
24 June 2016
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 financial statements since
they were 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCFIMFTMBTTBFF
(END) Dow Jones Newswires
June 27, 2016 02:00 ET (06:00 GMT)