Morning, folks. Today I'm planning to cover:




Porvair (LON:PRV)

  • Share price: 493.5p (+3%)
  • No. of shares: 45.6 million
  • Market cap: £225 million

Half Yearly Results

I like how promptly this has been reported. Other companies have only released their annual results for the period ending December in the last few days, while Porvair is already releasing interims to May.

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 2018.

I'd give the company a premium rating simply for keeping on top of its accounts so well, and keeping shareholders properly informed!

Financial highlights are good;

  • Revenue up 7% to £59.7 million (2017: £55.5 million), 12% on a constant currency basis*.
  • Profit before tax up 8% to £5.2 million (2017: £4.9 million).

See how the currency movements were a headwind to revenue. 12% is the measure I would use when thinking about underlying growth rates. Most of the company's revenue originates from the Americas.

ROCE

Encouraging to see the company specifically mention its ROCE performance:

The Group's return on capital employed was 14% (2017: 14%).  Excluding the impact of goodwill, acquired intangible assets and the pension liability the return on operating capital employed was 42% (2017: 43%).

It has grown by acquisition and therefore the goodwill and other intangibles are a very significant portion of the balance sheet: £65 million (for context, balance sheet book value is £80 million).

This is why you have such a large discrepancy in the ROCE calculation, depending on whether or not goodwill etc. is included.

14% is the actual number enjoyed by Porvair shareholders (Stocko roughly agrees, estimating Return on Capital at 12.6%).

42% is the company's view of its return on tangible capital employed, also ignoring the effect of its pension deficit. What that says to me is that the underlying businesses must be very interesting in terms of their ability to generate a return for shareholders. Porvair management have had to pay up to acquire them and therefore the return…

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