REG - Porvair PLC - Half Year Results 2021

PorvairAnnouncement

05/07/2021 07:05

RNS Number : 0865E
  
Porvair PLC
  
05 July 2021
  
 

For immediate release                                                                                                                   5 July 2021
 
Porvair plc
 
Half year results for the six months ended 31 May 2021
 
Porvair plc ("Porvair" or "the Group"), the specialist filtration, laboratory and environmental technology group, announces its half year results for the six months ended 31 May 2021.
 
Key points:
·      Revenue 5% lower at £69.7 million (2020: £73.2 million), 2% lower on a constant currency basis*; 
o  33% growth in Laboratory offset by continued weakness in Aerospace & Industrial.
·      Operating profit £9.3 million (2020: £9.3 million).  
·      Adjusted operating profit* £9.1 million (2020: £9.0 million), 4% higher on a constant currency basis. 
·      Profit before tax up 1% to £8.9 million (2020: £8.8 million).
·      Basic earnings per share were 16.4 pence (2020: 13.1 pence).  Adjusted basic earnings per share* were 14.8 pence (2020: 14.3 pence).
·      Net cash was £6.2 million (31 May 2020: £1.0 million) after investing £2.0 million (2020: £2.0 million) in capital expenditure and £1.7 million (net of cash acquired) on the acquisition of Kbiosystems.
·      Interim dividend increased 0.1 pence per share to 1.8 pence (2020: 1.7 pence).
Commenting on the outlook, Ben Stocks, Chief Executive, said:
"While demand in aerospace has remained markedly lower than pre-pandemic levels, other segments are now showing signs of recovery.  The Group started 2021 with a sound balance sheet and is now seeing the benefits of cost reductions made last year.  Investments in productivity, capacity and acquisitions have continued and margins in 2021 are better as a result. 
Looking ahead, the underlying drivers of growth for Porvair all remain in place: tightening environmental regulations; the need for clean water; expansion of analytical science; the drive for manufacturing efficiency; the replacement of steel and plastic with aluminium; and the development of carbon-efficient transport.  
The order book for the second half looks healthy and whilst the currently high levels of demand in Laboratory are likely to dampen as the pandemic eases, there are signs that activity levels in aerospace are starting to rebound."
 
 
*See notes 1, 2 and 3 for definition and calculations of alternative performance measures
 
For further information please contact: 




Porvair plc


 


01553 765 500


 




Ben Stocks, Chief Executive


 


 


 




James Mills, Group Finance Director


 


 


 




Buchanan Communications


 


020 7466 5000


 




Charles Ryland / Steph Watson


 


 


 




 
 
A sell side analyst briefing will take place at 9:30 a.m. on Monday 5 July 2021, please contact Buchanan if you wish to join. An audiocast of the meeting and the presentation will be made available later today at www.porvair.com.

 
Operating summary 
As reported last year, Group order books fell sharply in the early months of the pandemic, reaching a low in June 2020, since when there has been a steady recovery in most segments. While aerospace demand remains low by historic standards, elsewhere the Group has been getting busier. General industrial activity has picked up in recent months.  Metal Melt Quality has seen better demand from aluminium and automotive customers. In Laboratory, Covid-related diagnostic demand has been high, and while this might be expected to subside as the pandemic eases, general laboratory consumables and water quality demand is returning to more normal levels. 
Group operations in different parts of the world have seen different levels of Covid restrictions, and management teams have prioritised staff well-being through the period. In 2020 the most volatile effects of the pandemic were on the demand side, but in 2021 it has been the supply side that has seen the greatest disruption, particularly in the US.  Some suppliers have found their capacity constrained by Covid outbreaks in their plants. In some markets there were clear signs of re-stocking, driving short-term demand and lead-time elongation.  Transport and shipping dislocation has affected some supply chains and in some US states the labour market has been more restricted than usual.  As a result, cost inflation and logistical challenges have been more common in 2021 than is usually the case and the Group is having to be disciplined in passing price increases and lead-time effects through to customers.  It is not yet clear whether these are short-term, post-pandemic inflationary effects that will subside, or whether we should expect a period of more sustained inflation.  The Group has been through similar challenges before and is prepared for either eventuality.
Margins however have improved where demand has started to recover and cost levels remain lower than the pre-pandemic average.  In some categories this will not continue - travel and selling costs for example have been very low for twelve months and will climb as normal economic activity returns - but our operations were busy in 2020 using quieter periods to invest in productivity and other improvements, and in 2021 the benefits of that activity are evident.  Adjusted operating profit margins have reflected levels of activity: 9.4% in Aerospace & Industrial, 16.3% in Metal Melt Quality (a record), and 18.8% in Laboratory (also a record).
 
Financial Summary




 


H1 2021


 


H1 2020


 


Growth




 


£m


 


£m


 


%




Revenue


69.7


 


73.2


 


(5)




Operating profit


9.3


 


9.3


 


-




Adjusted operating profit*


9.1


 


9.0


 


1




Profit before tax


8.9


 


8.8


 


1




Adjusted profit before tax*


8.6


 


8.5


 


1




 


Pence


 


Pence


 


 




Earnings per share


16.4


 


13.1


 


25




Adjusted earnings per share*


14.8


 


14.3


 


3




 


 


 


 


 


 




 


£m


 


£m


 


 




Net cash


6.2


 


1.0


 


 




 
*See notes 1, 2 and 3 for definition and calculations of alternative performance measures
 
Revenue was 5% lower (2% at constant currency).  Operating profit was level at £9.3 million.  Profit before tax increased by 1%.  Adjusted earnings per share increased 3% to 14.8 pence.  Net cash at 31 May 2021 was £6.2 million.
The Group's record for growth, cash generation and investment is as follows:




 


5 years


 


10 years


15 years




 


CAGR*


 


CAGR*


CAGR*




Revenue growth


5%


 


7%


7%




Earnings per share growth


6%


 


14%


11%




Adjusted earnings per share growth


7%


 


14%


11%




 


 


 


 


 




 


£m


 


£m


£m




Cash from operations


74.5


 


132.3


160.0




Investment in acquisitions and capital expenditure


48.6


 


75.1


89.7




* Compound annual growth rate
 
 
Porvair's strategy and purpose has changed little since 2004, a period that now encompasses two significant recessions. This longer-term growth record gives the Board confidence that the Group can weather difficult times and will return to historic growth rates when economic conditions allow.
Strategic statement
Porvair's strategic purpose is the development of specialist filtration, laboratory and environmental technology businesses for the benefit of all stakeholders.  Principal measures of success include consistent earnings growth and selected ESG measures. The Group publishes a full ESG report at the time of the annual preliminary results. 
The Group is positioned to benefit from global trends: tightening environmental regulations; the need for clean water; growth in analytical science; more carbon-efficient transport; the replacement of plastic and steel by aluminium; and the drive for manufacturing process efficiency.  
Porvair 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 typically designed into a system that will have a long life-cycle and must perform to a given specification. 
Orders are won by offering the best technical solutions for these requirements at an acceptable commercial cost. Technical expertise is necessary in all markets served.  New products are often adaptations of existing designs. Experience in specific markets or applications is valuable in building customer confidence.  Domain knowledge is important, as is deciding where to direct resources.
This leads the Group to:
1.     Focus on markets where we see long-term growth potential.
2.     Look for applications where product use is mandated and replacement demand is 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 three operating segments: Aerospace & Industrial; Laboratory; and Metal Melt Quality. All have clear long-term growth drivers. 
·      Our products typically control emissions or protect complex downstream systems and are replaced regularly. A high proportion of our annual revenue is from repeat orders.
·      Through a focus on new product development we aim to generate growth rates in excess of the underlying market. Where possible we build intellectual property around our product developments.
·      Our geographic presence follows the markets we serve.  In the last twelve months: 46% of revenue was in the Americas; 23% in Asia; 21% in continental Europe; and 10% in the UK.  The Group has plants in the US, UK, Germany, the Netherlands and China.  In the last twelve months, 49% of revenue was manufactured in the US; 28% in the UK; 18% in Europe; and 5% in China.
·      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 acquisitions.  All investments are subject to a hurdle rate analysis based on strategic and financial priorities.
Environmental, Social and Governance ('ESG')
The Board understands that responsible business development is essential for creating long-term value for stakeholders.  Most of the products made by Porvair are used to the benefit of the environment.  Our water analysis equipment measures contamination levels in water.  Industrial filters are typically needed to reduce emissions or improve efficiency.  Aerospace filters improve safety and reliability. Nuclear filters confine fissile materials.  Metal Melt Quality filters reduce waste and help improve the strength to weight ratio of metal components.  
A full ESG report was published in February 2021 setting out the Group's ESG management framework and goals. This will be updated in February 2022.
 
Divisional review
Aerospace & Industrial




 


H1 2021


 


H1 2020


 


Growth




 


£m


 


£m


 


%




Revenue


26.0


 


35.7


 


(27)




Operating profit


2.1


 


7.5


 


(72)




Adjusted operating profit*


2.5


 


4.8


 


(48)




 
*See notes 1, 2 and 3 for definition and calculations of alternative performance measures
 
The Aerospace & Industrial division designs and manufactures a wide range of specialist filtration products, demand for which grows as aerospace and industrial customers seek cleaner, safer or more efficient operations.  Differentiation is achieved through design engineering; intellectual property; or quality accreditations.
Revenue in the period reduced by 27%.  No gasification spares were shipped in the period, compared with £7.0 million in 2020.  Like-for-like revenue fell 23% in aerospace and 3% in industrial. Porvair has had twelve months of aerospace revenue at these levels and has used the time to upgrade our capacity and planning systems in preparation for better times ahead.  Aerospace orders are stronger for the second half, but shipments will depend on how pandemic restrictions on travel evolve.  Industrial demand strengthened towards the end of the period and the outlook for the remainder of the year is better, with both petrochemical and microelectronic filtration performing well in the year to date.
Laboratory




 


H1 2021


 


H1 2020


 


Growth




 


£m


 


£m


 


%




Revenue


25.2


 


19.0


 


33




Operating profit


4.9


 


2.8


 


75




Adjusted operating profit*


4.8


 


2.8


 


71




 
*See notes 1, 2 and 3 for definition and calculations of alternative performance measures
 
The Laboratory division has two operating businesses: Porvair Sciences and Seal Analytical. 
·      Porvair Sciences manufactures laboratory filters and associated consumables.  Differentiation is achieved through proprietary manufacturing capabilities and filtration media. 
·      Seal Analytical is a leading supplier of instruments and consumables for environmental laboratories.  Demand is driven by water quality regulations. Differentiation is achieved through active new product development. 
Revenue grew by 33% in the period, with a helpful contribution from Kbiosystems. Like-for-like revenue growth was 26%. The division makes a range of products used in Covid testing and analysis for which demand has been high. Order pressure in these products has shortened new product qualification timescales and it has been a good period for new product introductions. Additional capacity investments have been made to meet demand which is expected to remain strong until the pandemic recedes. Seal Analytical sales were up 11%, with robust demand in both the US and China. 
In the US plants, supply chain dislocation and the hiring of staff have been recurring challenges and where costs have risen, price rises are being implemented.
Kbiosystems, acquired in February 2021, specialises in the design and manufacture of laboratory instruments that complement our growing range of microplate and sample preparation filters.  We will introduce their range to our US sales channels and use their automation expertise for product development across the division.
 
 
 
Metal Melt Quality




 


H1 2021


 


H1 2020


 


Growth




 


£m


 


£m


 


%




Revenue


18.4


 


18.6


 


(1)




Operating profit/(loss)


3.6


 


(0.1)


 


-




Adjusted operating profit*


3.0


 


2.3


 


30




 
*See notes 1, 2 and 3 for definition and calculations of alternative performance measures
 
The Metal Melt Quality division manufactures filters for molten metal, specialising in aluminium, ductile iron and nickel-cobalt alloys.  It has a well-differentiated product range based on patented products.
Metal Melt Quality experienced better demand in 2021 for both aluminium and automotive customers, but its aerospace-related activities (around 12% of sales in a normal year) remained low.  Revenue at reported currencies were £18.4 million (2020: £18.6 million) and improved 6% at constant currency rates.  Investments carried out during the quieter months of 2020 resulted in better margins yielding a 30% improvement in adjusted operating profit.  It should be noted that some of this improvement - seen across the Group - is due to unprecedentedly low travel and sales related costs, which will increase again as normal business conditions return.  Nonetheless, we are running at high levels of efficiency, which is encouraging.  Metal Melt Quality, the most global of the three divisions, has seen the greatest supply side disruption in the period, with supply chains and transportation dislocation causing operational challenges and input price increases.  These are being passed on as they occur.
Order books going into the second half look reasonable, and there has been a modest recent uptick in higher margin aerospace related demand.
 
Alternative performance measures




 


 


 


H1 2021


 


 


 


H1 2020


 




 


 


Adjusted


Adjustments


Reported


 


Adjusted


Adjustments


Reported




 


 


£m


£m


£m


 


£m


£m


£m




Operating profit


9.0


0.3


9.3


 


9.0


0.3


9.3




Profit before income tax


8.6


0.3


8.9


 


8.5


0.3


8.8




Profit for the year


6.8


0.7


7.5


 


6.6


(0.6)


6.0



 
 
 
 
 
 
 
 
 



 
The Group presents alternative performance measures to enable a better understanding of its trading performance.   Adjusted operating profit and adjusted profit before tax exclude items that are considered significant and where treatment as an adjusting item provides a more consistent assessment of the Group's trading.   Adjusted operating profit excludes £0.3 million (2020 £0.3 million) of net income from operating profit.  The details of these adjustments are set out in note 1.  
Interest
The Group incurred an interest charge of £0.5 million (2020: £0.5 million).  £0.2 million (2020: £0.2 million) relates to the finance cost of the defined benefit pension scheme.  £0.2 million (2020: £0.2 million) relates to the interest charge on right-of-use assets.  The remainder comprises undrawn commitment fees and interest on the Group's banking facilities.
Tax
The Group tax charge was £1.3 million (2020: £2.7 million).  The adjusted income tax expense was £1.8 million (2020: £2.0 million).  The underlying rate of income tax for the period on adjusted measures was 21% (2020: 23%).
Earnings per share and dividends
The basic earnings per share for the period was 16.4 pence (2020: 13.1 pence).  Adjusted earnings per share was 14.8 pence (2020: 14.3 pence).  
The Board has declared an interim dividend of 1.8 pence (2020: 1.7 pence) per share. 
Investment
In the last five years, £49.0 million has been invested in acquisitions and capacity expansion.  The Group invested £2.0 million (2020: £2.0 million) in capital expenditure in the first half of 2021, together with £1.7 million (net of cash acquired) on the acquisition of Kbiosystems.
 
Cash flow and net debt
Cash generated from operations in the six months to 31 May 2021 was £6.1 million (2020: £1.9 million).  The Group normally sees an outflow of working capital in the first half of the year.  Working capital increased by £3.8 million (2020: £11.5 million) in the period.  
Net cash at 31 May 2021 was £6.2 million (31 May 2020: £1.0 million; 30 November 2020: £4.9 million).  Lease liabilities were £12.8 million (31 May 2020: £15.0 million; 30 November 2020: £13.6 million).  
On 18 May 2021, the Group agreed a €28 million (£24 million) four year secured revolving credit facility, with an option to extend by one year, plus a €17 million (£15 million) accordion facility, with Barclays Bank plc and Citibank N.A., London Branch.  The financial covenants continue to require the Group to maintain interest cover of 3.5 times and net debt to be less than 2.5 times EBITDA.  The Group also has a £2.5 million overdraft facility provided by Barclays Bank plc. 
Provisions, contingent liabilities and performance bonds
The Group has £4.2 million (30 November 2020: £4.6 million) of provisions for dilapidations and warranty risks.
The Group has outstanding performance bonds with customers on 31 May 2021 of $2.5 million (30 November 2020: $2.5 million) and €0.8 million (30 November 2020: €1.0 million). 
Return on capital employed
The Group's return on capital employed was 11% (2020: 13%).  Excluding the impact of goodwill, acquired intangible assets and the pension liability, the return on operating capital employed was 29% (2020: 30%). 
Outlook
While demand in aerospace has remained markedly lower than pre-pandemic levels, other segments are now showing signs of recovery.  The Group started 2021 with a sound balance sheet and is now seeing the benefits of cost reductions made last year.  Investments in productivity, capacity and acquisitions have continued and margins in 2021 are better as a result. 
Looking ahead, the underlying drivers of growth for Porvair all remain in place: tightening environmental regulations; the need for clean water; expansion of analytical science; the drive for manufacturing efficiency; the replacement of steel and plastic with aluminium; and the development of carbon-efficient transport.  
The order book for the second half looks healthy and whilst the currently high levels of demand in Laboratory are likely to dampen as the pandemic eases, there are signs that activity levels in aerospace are starting to rebound.
 
 
Ben Stocks
Group Chief Executive
2 July 2021

 
 
 
Related parties
There were no related party transactions in the six months ended 31 May 2021 (2020: 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.  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 2020.
 
The trading challenges associated with the current Covid-19 pandemic are considered in the operating review section above.  Certain elements of the Group's order position can change quickly in the face of changing economic circumstances.  The Metal Melt Quality division, Laboratory division and general industrial filtration within the Aerospace & Industrial division all have relatively short lead times and order cycles and, therefore, revenue is subject to fluctuations which could have a material effect on the Group's results for the balance of 2021.  These effects are exacerbated by the current pandemic.
 
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




 


 


 


2021


 


2020




 


Note


 


Unaudited


 


Unaudited




 


 


 


£'000


 


£'000




Revenue


1,2


 


69,654


 


73,236




Cost of sales


 


 


(46,759)


 


(48,862)




Gross profit


 


 


22,895


 


24,374




Other operating expenses


 


 


(13,566)


 


(15,085)




Adjusted operating profit


1,2


 


9,066


 


9,039




Adjustments:


 


 


 


 


 




Amortisation of acquired intangibles


 


 


(402)


 


(332)




Other acquisition-related adjustments


 


 


(80)


 


-




Settlement of project-related warranties


 


 


-


 


3,791




Impairment of assets and restructuring costs 


 


 


(592)


 


(3,209)




Paycheck Protection Program 


 


 


1,337


 


-




Operating profit


1,2


 


9,329


 


9,289




Interest payable and similar charges


 


 


(479)


 


(519)




Profit before income tax


 


 


8,850


 


8,770




Adjusted income tax expense


1,2


 


(1,768)


 


(1,958)




Adjustments:


 


 


 


 


 




Tax effect of adjustments


 


 


472


 


(771)




Income tax expense


1,2


 


(1,296)


 


(2,729)




Profit for the period


 


 


7,554


 


6,041




 


 


 


 


 


 




Profit attributable to:


 


 


 


 


 




Owners of the parent


 


 


7,554


 


6,041




Non-controlling interests


 


 


-


 


-




Profit for the period 


 


 


7,554


 


6,041




 


 


 


 


 


 




Earnings per share (basic)


3


 


16.4p


 


13.1p




Earnings per share (diluted)


3


 


16.4p


 


13.1p




Adjusted earnings per share (basic)


3


 


14.8p


 


14.3p




Adjusted earnings per share (diluted)


3


 


14.8p 


 


14.3p 




 
 
 
 
Condensed consolidated statement of comprehensive income
For the six months ended 31 May 




 


Six months ended 31 May




 


2021
Unaudited


 


2020
Unaudited




 


£'000


 


£'000




Profit for the period


7,554


 


6,041




Other comprehensive income:


 


 


 




Items that will not be reclassified to profit and loss


 


 


 




Actuarial gain / (loss) in defined benefit pension plans net of tax


2,515


 


(1,473)




Items that may be subsequently reclassified to profit or loss


 


 


 




Exchange differences on translation of foreign subsidiaries


(4,301)


 


3,589




Changes in fair value of foreign exchange contracts held as a cash flow hedge


-


 


(186)




 


(4,301)


 


3,403




Net other comprehensive income


(1,786)


 


1,930




Total comprehensive income for the period 


5,768


 


7,971




 


 


 


 




Comprehensive income attributable to:


 


 


 




Owners of the parent


5,768


 


7,971




Total comprehensive income for the period


5,768


 


7,971




 
The accompanying notes are an integral part of this interim financial information.  
 
 
 
Condensed consolidated balance sheet
As at 31 May




 


 


 
As at 31 May


 


As at 30 November




 


Note


2021
Unaudited


 


2020
Unaudited


 


2020
Audited




 


 


£'000


 


£'000


 


£'000




Non-current assets


 


 


 


 


 


 




Property, plant and equipment


 


20,427


 


21,503


 


20,716




Right-of-use assets


 


11,878


 


14,171


 


12,762




Goodwill and other intangible assets


 


71,962


 


73,678


 


70,039




Deferred tax asset


 


1,257


 


2,639


 


2,614




 


 


105,524


 


111,991


 


106,131




Current assets


 


 


 


 


 


 




Inventories


 


24,418


 


24,832


 


23,355




Trade and other receivables


 


22,428


 


27,147


 


20,674




Derivative financial instruments


 


214


 


-


 


23




Cash and cash equivalents


 


15,501


 


11,830


 


15,563




 


 


62,561


 


63,809


 


59,615




 


 


 


 


 


 


 




Current liabilities


 


 


 


 


 


 




Trade and other payables


 


(23,429)


 


(23,854)


 


(20,197)




Current tax liabilities


 


(469)


 


(1,675)


 


(192)




Borrowings


 


(1,796)


 


(1,489)


 


(1,379)




Lease liabilities


 


(2,071)


 


(2,057)


 


(2,007)




Derivative financial instruments


 


-


 


(608)


 


-




Provisions 


10


(3,884)


 


(4,259)


 


(4,365)




 


 


(31,649)


 


(33,942)


 


(28,140)




 


 


 


 


 


 


 




Net current assets


 


30,912


 


29,867


 


31,475




 


 


 


 


 


 


 




Non-current liabilities


 


 


 


 


 


 




Borrowings 


 


(7,553)


 


(9,371)


 


(9,303)




Deferred tax liability


 


(2,835)


 


(2,664)


 


(2,839)




Retirement benefit obligations


 


(10,871)


 


(15,202)


 


(15,395)




Other payables


9


(1,900)


 


-


 


-




Lease liabilities


 


(10,682)


 


(12,906)


 


(11,609)




Provisions 


10


(282)


 


(255)


 


(268)




 


 


(34,123)


 


(40,398)


 


(39,414)




Net assets


 


102,313


 


101,460


 


98,192




 


 


 


 


 


 


 




Capital and reserves


 


 


 


 


 


 




Share capital


 


923


 


921


 


923




Share premium account


 


36,981


 


36,549


 


36,927




Cumulative translation reserve


 


3,344


 


12,947


 


7,645




Retained earnings


 


61,065


 


51,043


 


52,697




Equity attributable to owners of the parent


 


102,313


 


101,460


 


98,192




Total equity


 


102,313


 


101,460


 


98,192




 
The interim financial information was approved by the Board of Directors on 2 July 2021 and was signed on its behalf by:
 
 
 
Ben Stocks                                                                                                                                          James Mills
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


2021 Unaudited


 


2020 Unaudited




 


 


£'000


 


£'000




Cash flows from operating activities


 


 


 


 




Cash generated from operations


5


6,078


 


1,918




Interest paid


 


(138)


 


(202)




Tax paid


 


(916)


 


(1,146)




Net cash generated from operating activities


 


5,024


 


570




 


 


 


 


 




Cash flows from investing activities


 


 


 


 




Acquisition of subsidiaries (net of cash acquired)


7


(1,694)


 


-




Purchase of property, plant and equipment


 


(1,987)


 


(1,896)




Purchase of intangible assets


 


(14)


 


(59)




Net cash used in investing activities


 


(3,695)


 


(1,955)




 


 


 


 


 




Cash flows from financing activities


 


 


 


 




Net proceeds from the issue of ordinary shares


 


54


 


45




Purchase of Employee Benefit Trust shares


 


(332)


 


(399)




Increase in borrowings


6


434


 


1,448




Repayment of lease liabilities


 


(1,137)


 


(1,115)




Net cash used in financing activities


 


(981)


 


(21)




 


 


 


 


 




Net increase / (decrease) in cash and cash equivalents


6


348


 


(1,406)




Effects of exchange rate changes


 


(410)


 


347




 


 


(62)


 


(1,059)




Cash and cash equivalents at the beginning of the period


 


15,563


 


12,889




Cash and cash equivalents at the end of the period


 


15,501


 


11,830




 
 
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 capital
£'000


Share premium account
£'000


Cumulative translation reserve
£'000


 
Retained earnings
£'000


 
 
Total
£'000




Balance at 1 December 2019


921


36,504


9,358


48,552


95,335




Profit for the period


-


-


-


6,041


6,041




Other comprehensive income/(expense):


 


 


 


 


 




Exchange differences on translation of foreign subsidiaries


-


-


3,589


-


3,589




Changes in fair value of foreign exchange contracts held as a cash flow hedge


 
-


 
-


 
-


 
(186)


 
(186)




Actuarial losses in defined benefit pension plans net of tax


 
-


 
-


 
-


 
(1,473)


 
(1,473)




Total comprehensive income for the period


 
-


 
-


 
3,589


 
4,382


 
7,971




Transactions with owners:


 


 


 


 


 




Consideration paid for purchase of own shares (held in trust)


 
-


 
-


 
-


 
(399)


 
(399)




Proceeds from shared issued, net of costs


 
-


 
45


 
-


 
-


 
45




Employee share option schemes:


 


 


 


 


 




- value of employee services net of tax


-


-


-


(20)


(20)




Dividends approved or paid 


-


-


-


(1,472)


(1,472)




Total transactions with owners recognised directly in equity


 
-


 
45


 
-


 
(1,891)


 
(1,846)




Balance at 31 May 2020


921


36,549


12,947


51,043


101,460




 
 
 
 




 
 
 


 
Share 
capital
£'000


Share premium account
£'000


Cumulative translation reserve
£'000


 
Retained earnings
£'000


 
 
Total
£'000




Balance at 1 December 2020


923


36,927


7,645


52,697


98,192




Profit for the period


-


-


-


7,554


7,554




Other comprehensive income/(expense):


 


 


 


 


 




Exchange differences on translation of foreign subsidiaries


-


-


(4,301)


-


(4,301)




Actuarial gains in defined benefit pension plans net of tax


 
-


 
-


 
-


 
2,515


 
2,515




Total comprehensive income for the period


 
-


 
-


 
(4,301)


 
10,069


 
5,768




Transactions with owners:


 


 


 


 


 




Consideration paid for purchase of own shares (held in trust)


 
-


 
-


 
-


 
(332)


 
(332)




Proceeds from shared issued, net of costs


 
-


 
54


 
-


 
-


 
54




Employee share option schemes:


 


 


 


 


 




- value of employee services net of tax


 
-


 
-


 
-


 
148


 
148




Dividends approved or paid 


-


-


-


(1,517)


(1,517)




Total transactions with owners recognised directly in equity


 
-


 
54


 
-


 
(1,701)


 
(1,647)




Balance at 31 May 2021


923


36,981


3,344


61,065


102,313




 
 
The accompanying notes are an integral part of this interim financial information.
 
 
 
 
Notes to the condensed half-yearly consolidated financial information
 
 
1.             Alternative performance measures
The Group uses adjusted figures as alternative performance measures in addition to those reported under IFRS, as management believe that these measures provide a useful analysis of trends in underlying performance compared with prior periods.  
 
Alternative revenue measures




 


 


2021


 


2020


 


Growth




Aerospace & Industrial


 


£'000


 


£'000


 


%




Revenue at constant currency


 


25,564


 


34,599


 


(26)




Exchange


 


481


 


1,113


 


 




Revenue as reported


 


26,045


 


35,712


 


(27)




 


 


 


 


 


 


 




Laboratory


 


 


 


 


 


 




Underlying revenue


 


22,504


 


17,871


 


26




Acquisition


 


2,296


 


-


 


 




Revenue at constant currency


 


24,800


 


17,871


 


39




Exchange


 


445


 


1,092


 


 




Revenue as reported


 


25,245


 


18,963


 


33




 


 


 


 


 


 


 




Metal Melt Quality


 


 


 


 


 


 




Revenue at constant currency


 


17,841


 


16,832


 


6




Exchange


 


523


 


1,729


 


 




Revenue as reported


 


18,364


 


18,561


 


(1)




 


 


 


 


 


 


 




Group


 


 


 


 


 


 




Underlying revenue


 


65,909


 


69,302


 


(5)




Acquisitions


 


2,296


 


-


 


 




Revenue at constant currency


 


68,205


 


69,302


 


(2)




Exchange


 


1,449


 


3,934


 


 




Revenue as reported


 


69,654


 


73,236


 


(5)




 
 
Revenue at constant currency is derived from translating overseas subsidiaries at budgeted fixed exchange rates.  In 2021 and 2020, the rates used were $1.4:£ and €1.2:£.
 
Underlying revenue is revenue at constant currency adjusted for the impact of acquisitions made in the current and prior year.  
 
 
Alternative profit measures
A reconciliation of the Group's adjusted performance measures to the reported IFRS measures is presented below:
 




 


 


 


H1 2021


 


 


 


H1 2020


 




 


 


Adjusted


Adjustments


Reported


 


Adjusted


Adjustments


Reported




 


 


£'000


£'000


£'000


 


£'000


£'000


£'000




Operating profit


9,066


263


9,329


 


9,039


250


9,289




Finance costs 


(479)


-


(479)


 


(519)


-


(519)




Profit before income tax


8,587


263


8,850


 


8,520


250


8,770




Income tax expense


(1,768)


472


(1,296)


 


(1,958)


(771)


(2,729)




Profit for the year


6,819


735


7,554


 


6,562


(521)


6,041



 
 
 
 
 
 
 
 
 



 
 
 
An analysis of adjusting items is given below:




 


2021


 


2020




Affecting operating profit


£'000


 


£'000




Amortisation of acquired intangible assets


(402)


 


(332)




Other acquisition-related adjustments


(80)


 


-




Settlement of project-related warranties


-


 


3,791




Impairment of assets and restructuring costs


(592)


 


(3,209)




Paycheck Protection Program


1,337


 


-




 


263


 


250




 


 


 


 




Affecting tax


 


 


 




Tax effect of adjustments


472


 


(771)




Total adjusting items


735


 


(521)




 
 
Adjusted operating profit and adjusted profit before tax exclude:
·      The amortisation of intangible assets arising on acquisition of businesses of £0.4 million (2020: £0.3 million);
 
·      Other acquisition-related costs of £0.1 million (2020: £nil) in relation to the acquisition of Kbiosystems;
 
·      Provision releases of £nil (2020: £5.1 million) arising from the settlement of outstanding warranty issues and the cancellation of performance bonds related to the large gasification projects.  Related to the release in the prior period, the Group wrote-off a £1.3 million receivable due;
 
·      Covid-19 related impairment of assets and restructuring costs of £0.6 million, principally within the Aerospace & Industrial division.  The prior period consisted of a £2.3 million charge in relation to the Metal Melt Quality operations in China, together with other Covid-related restructuring across the Group; and
 
·      A net credit of £1.3 million (2020: £nil) relating to the monies received in the prior year from the Truist Bank under the Paycheck Protection Program ("PPP").  The PPP provided loans to qualifying businesses for the purpose of maintaining payroll levels during the pandemic in 2020.  The criteria for forgiveness for these loans was achieved by the Group in 2020 and the costs associated with maintaining payroll levels were recognised in the prior year.  Formal forgiveness of the loan was granted in 2021, leading to a mismatch in the accounts between the costs incurred and income received. 
 
 
2.             Segmental analyses
The chief operating decision maker has been identified as the Board of Directors.  The Board of Directors has instructed the Group's internal reporting to be based around differences in products and services, in order to assess performance and allocate resources.  Management has determined the operating segments based on this reporting.
 
As at 31 May 2021, the Group is organised on a worldwide basis into three operating segments:
 
1)    Aerospace & Industrial - principally serving the aviation, and energy and industrial markets;
 
2)    Laboratory - principally serving the bioscience and environmental laboratory instrument and consumables market; and
 
3)    Metal Melt Quality - principally serving the global aluminium, North American Free Trade Agreement (NAFTA) iron foundry and super-alloys markets.
Other Group operations' costs, assets and liabilities are included in the "Central" division.  Central costs mainly comprise Group corporate costs, including new business development costs, some research and development costs and general financial costs.  Central assets and liabilities mainly comprise Group retirement benefit obligations, tax assets and liabilities, cash and borrowings.   
The segment results for the period ended 31 May 2021 are as follows:
 




2021


Aerospace & Industrial


 


Laboratory


 


Metal Melt Quality


 


Central


 


Group




 


£'000


 


£'000


 


£'000


 


£'000


 


£'000




Total segment revenue


26,126


 


26,156


 


18,364


 


-


 


70,646




Inter-segment revenue


(81)


 


(911)


 


-


 


-


 


(992)




Revenue


26,045


 


25,245


 


18,364


 


-


 


69,654




 


 


 


 


 


 


 


 


 


 




Adjusted operating profit/(loss)


 
2,455


 


 
4,753


 


 
2,994


 


 
(1,136)


 


 
9,066




Amortisation of acquired intangibles


 
(211)


 


 
(191)


 


 
-


 


 
-


 


 
(402)




Other acquisition-related adjustments


 
-


 


 
-


 


 
-


 


 
(80)


 


 
(80)




Impairment of assets and restructuring


 
(592)


 


 
-


 


 
-


 


 
-


 


 
(592)




Paycheck Protection Program


 
407


 


 
295


 


 
635


 


 
-


 


 
1,337




Operating profit/(loss)


2,059


 


4,857


 


3,629


 


(1,216)


 


9,329




Interest payable and similar charges


 
-


 


 
-


 


 
-


 


 
(479)


 


 
(479)




Profit/(loss) before income tax


 
2,059


 


 
4,857


 


 
3,629


 


 
(1,695)


 


 
8,850




Adjusted income tax expense


 
-


 


 
-


 


 
-


 


 
(1,768)


 


 
(1,768)




Tax effect of adjusting items


 
-


 


 
-


 


 
-


 


 
472


 


 
472




Income tax expense


-


 


-


 


-


 


(1,296)


 


(1,296)




Profit/(loss) for the period


 
2,059


 


 
4,857


 


 
3,629


 


 
(2,991)


 


 
7,554




 
 
 
 
The segment results for the period ended 31 May 2020 are as follows:
 




2020


Aerospace & Industrial


 


Laboratory


 


Metal Melt Quality


 


Central


 


Group




 


£'000


 


£'000


 


£'000


 


£'000


 


£'000




Total segment revenue


35,712


 


19,947


 


18,561


 


-


 


74,220




Inter-segment revenue


-


 


(984)


 


-


 


-


 


(984)




Revenue


35,712


 


18,963


 


18,561


 


-


 


73,236




 


 


 


 


 


 


 


 


 


 




Adjusted operating profit/(loss)


 
4,755


 


 
2,849


 


 
2,279


 


 
(844)


 


 
9,039




Amortisation of acquired intangibles


 
(233)


 


 
(99)


 


 
-


 


 
-


 


 
(332)




Settlement of project-related warranties


 
3,791


 


 
-


 


 
-


 


 
-


 


 
3,791




Impairment of assets and restructuring


 
(824)


 


 
-


 


 
(2,385)


 


 
-


 


 
(3,209)




Operating profit/(loss)


7,489


 


2,750


 


(106)


 


(844)


 


9,289




Interest payable and similar charges


 
-


 


 
-


 


 
-


 


 
(519)


 


 
(519)




Profit/(loss) before income tax


 
7,489


 


 
2,750


 


 
(106)


 


 
(1,363)


 


 
8,770




Adjusted income tax expense
Tax effect of adjusting items


 
-
 
-


 


 
-
 
-


 


 
-
 
-


 


 
(1,958)
 
(771)


 


 
(1,958)
 
(771)




Income tax expense


-


 


-


 


-


 


(2,729)


 


(2,729)




Profit/(loss) for the period


7,489


 


2,750


 


(106)


 


(4,092)


 


6,041




 
 
 
 
Segment assets and liabilities




At 31 May 2021 - Unaudited


Aerospace & Industrial


 


Laboratory


 


Metal Melt Quality


 


Central


 


Group




 


£'000


 


£'000


 


£'000


 


£'000


 


£'000




Segmental assets


72,098


 


51,639


 


26,542


 


2,305


 


152,584




Cash and cash equivalents


 
-


 


 
-


 


 
-


 


 
15,501


 


 
15,501




Total assets


72,098


 


51,639


 


26,542


 


17,806


 


168,085




 


 


 


 


 


 


 


 


 


 




Segmental liabilities


(18,434)


 


(15,983)


 


(5,226)


 


(5,909)


 


(45,552)




Retirement benefit obligations


 
-


 


 
-


 


 
-


 


 
(10,871)


 


 
(10,871)




Bank overdraft and loans


 
-


 


 
-


 


 
-


 


 
(9,349)


 


 
(9,349)




Total liabilities


(18,434)


 


(15,983)


 


(5,226)


 


(26,129)


 


(65,772)




 




At 31 May 2020 - Unaudited


Aerospace & Industrial


 


Laboratory


 


Metal Melt Quality


 


Central


 


Group




 


£'000


 


£'000


 


£'000


 


£'000


 


£'000




Segmental assets


82,270


 


44,022


 


34,763


 


2,915


 


163,970




Cash and cash equivalents


 
-


 


 
-


 


 
-


 


 
11,830


 


 
11,830




Total assets


82,270


 


44,022


 


34,763


 


14,745


 


175,800




 


 


 


 


 


 


 


 


 


 




Segmental liabilities


(24,521)


 


(12,871)


 


(5,862)


 


(5,024)


 


(48,278)




Retirement benefit obligations


 
-


 


 
-


 


 
-


 


 
(15,202)


 


 
(15,202)




Bank overdraft and loans


 
-


 


 
-


 


 
-


 


 
(10,860)


 


 
(10,860)




Total liabilities


(24,521)


 


(12,871)


 


(5,862)


 


(31,086)


 


(74,340)




 
 




At 30 Nov 2020 - Audited


Aerospace & Industrial


 


Laboratory


 


Metal Melt Quality


 


Central


 


Group




 


£'000


 


£'000


 


£'000


 


£'000


 


£'000




Segmental assets


73,459


 


42,926


 


30,860


 


2,938


 


150,183




Cash and cash equivalents


 
-


 


 
-


 


 
-


 


 
15,563


 


 
15,563




Total assets


73,459


 


42,926


 


30,860


 


18,501


 


165,746




 


 


 


 


 


 


 


 


 


 




Segmental liabilities


(22,013)


 


(11,875)


 


(5,548)


 


(2,041)


 


(41,477)




Retirement benefit obligations


 
-


 


 
-


 


 
-


 


 
(15,395)


 


 
(15,395)




Bank overdraft and loans


 
-


 


 
-


 


 
-


 


 
(10,682)


 


 
(10,682)




Total liabilities


(22,013)


 


(11,875)


 


(5,548)


 


(28,118)


 


(67,554)




 
 
 
 
Geographical analysis
Revenue 




 


Six months ended 31 May




 


2021
Unaudited


 


2020
Unaudited




 


By destination
£'000


By origin
£'000


 


By destination
£'000


By origin
£'000




United Kingdom


6,717


19,840


 


7,452


24,216




Continental Europe


15,693


12,447


 


12,452


11,517




United States of America


29,949


34,550


 


28,351


34,298




Other NAFTA


1,529


-


 


3,218


-




South America


882


-


 


1,111


-




Asia


14,312


2,817


 


20,131


3,205




Africa


572


-


 


521


-




 


69,654


69,654


 


73,236


73,236




 
3.             Earnings per share




 


Six months ended 31 May




As reported


2021
Unaudited


 


2020
Unaudited




 


Earnings
 
 
£'000


Weighted average number of shares


Per share amount
 
Pence


 


Earnings
 
 
£'000


Weighted average number of shares


Per share amount
 
Pence




Basic EPS - earnings attributable to ordinary shareholders 


 
 
7,554


 


 


 


 
 
6,041


 


 




Shares in issue


 


46,162,623


 


 


 


46,052,105


 




Shares owned by the Employee Benefit Trust


 


 
(167,788)


 


 


 


 
(103,543)


 




Basic earnings per share


7,554


45,994,835


16.4


 


6,041


45,948,562


13.1




Effect of dilutive securities - share options


 
-


 
20,457


 
-


 


 
-


 
74,886


 
-




Diluted earnings per share


 
7,554


 
46,015,292


 
16.4


 


 
6,041


 
46,023,448


 
13.1




 
 
 




 


2021


 


2020




Adjusted
 
 


Earnings
 
 
£'000


Weighted average number of shares


Per share amount 
 
Pence


 


Earnings
 
 
£'000


Weighted average number of shares


Per share amount 
 
Pence




Earnings attributable to ordinary shareholders


 
7,554


 


 


 


 
6,041


 


 




Adjusting items (note 1)


(735)


 


 


 


521


 


 




Adjusted earnings attributable to ordinary shareholders


 
 
6,819


 


 


 


 
 
6,562


 


 




Adjusted basic earnings per share


 
6,819


 
45,994,835


 
14.8


 


 
6,562


 
45,948,562


 
14.3




Adjusted diluted earnings per share


 
6,819


 
46,015,292


 
14.8


 


 
6,562


 
46,023,448


 
14.3




 
 
4.             Dividends per share




 


Six months ended 31 May 




 


2021


 


2020




 


Unaudited


 


Unaudited




 


Per share


£'000


 


Per share


£'000




Final dividend approved


3.3p


1,517


 


3.2p


1,472




 
The final dividend approved for the year ended 30 November 2020 was paid to shareholders on 4 June 2021.
 
The Directors have declared an interim dividend of 1.8 pence (2020: 1.7 pence) per share to be paid on 27 August 2021 to shareholders on the register at the close of business on 23 July 2021.  The ex-dividend date is 22 July 2021.
 
 
5.             Cash generated from operations




 


 


Six months ended 31 May




 


 


2021
Unaudited
£'000


 


2020
Unaudited
£'000




Operating profit 


 


9,329


 


9,289




Adjustments for:


 


 


 


 




Post-employment benefits


 


(1,459)


 


(1,568)




Paycheck Protection Program


 


(1,337)


 


-




Fair value movement of derivatives through profit and loss


 


(191)


 


462




Share-based payments


 


306


 


(102)




Depreciation of property, plant and equipment and amortisation of intangibles


1,938


 


1,959




Impairment of property plant and equipment


 


270


 


2,273




Depreciation of right-of-use assets


 


979


 


1,004




Loss on disposal of property, plant and equipment


 


-


 


67




Operating cash flows before movement in working capital


 


9,835


 


13,384




Increase in inventories


 


(1,019)


 


(960)




Increase in trade and other receivables


 


(1,400)


 


(1,376)




Decrease in trade and other payables


 


(857)


 


(3,920)




Decrease in provisions


 


(481)


 


(5,210)




Increase in working capital


 


(3,757)


 


(11,466)




Cash generated from operations


 


6,078


 


1,918




 
 
6.             Reconciliation of net cash flow to movement in net cash




 


Six months ended 31 May




 


2021
Unaudited
£'000


 


2020
Unaudited
£'000




Net debt at 1 December


(8,735)


 


(11,204)




Increase / (decrease) in cash and cash equivalents


348


 


(1,406)




Paycheck Protection Program forgiven


1,337


 


-




Increase in borrowings


(434)


 


(1,448)




Decrease in lease liabilities


416


 


775




Effects of exchange rate changes


467


 


(710)




Net debt at the end of the period


(6,601)


 


(13,993)




 




Net cash 


6,152


 


970




Lease liabilities


(12,753)


 


(14,963)




Net debt at the end of the period


(6,601)


 


(13,993)




 
7.             Acquisitions
On 25 February 2021 the Group purchased 100% of the share capital of Kbiosystems Limited ("Kbiosystems").  Kbiosystems is based in Basildon, UK and specialises in the design and manufacture of laboratory instruments, with particular expertise in automated microplate handling systems.  
 
The total maximum consideration is £6.9 million; consisting of initial, deferred and contingent consideration.  
£3.0 million was paid in cash on acquisition.  Deferred consideration of £1.3 million, representing cash acquired and a working capital adjustment, was paid in June 2021.  Management has forecast that payment of 100% of the contingent consideration is the most probable outcome, of which £1.0 million was earned in the period and also paid in June 2021.  The balance is contingent on Kbiosystems meeting profit targets for the years ending 31 March 2022 and 2023.  The remaining consideration has been discounted to £1.7 million using a discount rate of 10%.  
  
In the period since acquisition, the business has contributed £2.3 million of revenue and £0.6 million of adjusted operating profit to the Group results.  The direct costs of acquisition charged to the income statement were £0.1 million and are disclosed as adjusting items in note 1.  Had the acquisition been consolidated from 1 December 2020, the income statement would show revenue of £72.0 million and adjusted operating profit of £9.6 million. 
 
The following table sets out the initial consideration, together with the provisional fair value of assets acquired and liabilities assumed:




   


 


 


Total




Purchase consideration:


 


 


£'000




Initial cash consideration


 


 


3,000




Deferred cash consideration
Contingent consideration


 


 


1,274
2,647




Total purchase consideration


 


 


6,921




Provisional fair value of net assets acquired (below)


 


 


(3,831)




Goodwill


 


 


3,090




 
      




 


 


 


Fair value




Provisional fair value of identifiable assets acquired and liabilities assumed:


 


 


£'000




Property, plant and equipment


 


 


519




Customer order book and relationships (included within intangible assets)


 


 


2,231




Inventory


 


 


823




Trade and other receivables 


 


 


1,110




Cash 


 


 


1,306




Trade and other payables and tax liabilities 


 


 


(2,158)




Provisional fair value of net assets acquired


 


 


3,831




 


 


 


 




Purchase consideration settled in cash


 


 


3,000




Cash acquired


 


 


(1,306)




Net cash outflow on acquisition


 


 


1,694




 
 
An independent valuation of the identifiable intangible assets has been carried out in the period.  Acquisition-related intangible assets comprise the customer order book of £0.1 million and customer relationships of £2.1 million.
 
The goodwill is attributable to the non-contractual relationships, the synergies between the business acquired and the operations of the Group and the potential to develop the technologies acquired.  None of these meet the criteria for recognition of intangible assets separable from goodwill.  The goodwill recognised is attributable to the Laboratory division and is not expected to be deductible for income tax purposes.  
 
The fair value of trade and other receivables of £1.1 million includes net trade receivables of £0.9 million, all of which is expected to be collectible.
 
These estimates of fair value may be adjusted in future in accordance with the requirements of IFRS 3 Business Combinations.
 
8.             Contingent liabilities
At 31 May 2021, the Group has performance bonds totalling US$2.5 million and €0.8 million (30 November 2020: US$2.5 million and €1.0 million). The bonds are released after a warranty period and in any event no later than March 2023.
 
9.             Deferred and contingent consideration
A summary of the movements in deferred and contingent consideration on acquisitions is given below:
 




 


 


 


 


 
Kbiosystems 


 


 
Total




 


 


 


 


£'000


 


£'000




At 1 December 2020


 


 


 


-


 


-




Deferred consideration 


 


 


 


1,274


 


1,274




Contingent consideration


 


 


 


2,647


 


2,647




Recognised in the income statement:


 


 


 


 


 


 




-       Unwinding discounted contingent consideration


 


 


 


 
68


 


 
68




At 31 May 2021


 


 


 


3,989


 


3,989




 




 


 


 


 


 


Rohasys BV


 


Total




 


 


 


 


 


£'000


 


£'000




 


 


 


 


 


 


 


 




At 1 December 2019


 


 


 


 


948


 


948




Recognised in the income statement:


 


 


 


 


 


 


 




-             Unwinding discounted contingent consideration


 


 


 
17


 


 
17




Foreign exchange movement


 


 


 


 


53


 


53




At 31 May 2020


 


 


 


 


1,018


 


1,018




 
 
£2.1 million of the deferred and contingent consideration is current (2020: £1.0 million), whilst £1.9 million is non-current (2020: £nil).
 
 
 
 




10.          Provisions 


 


 


 


Dilapidations
£'000


 


Warranty
£'000


 


Total
£'000




At 1 December 2020


 


 


 


268


 


4,365


 


4,633




Charged to/(released from) the consolidated income statement:


 


 


 


 


 


 


 


 




-       Unwinding of discount 


 


 


 


14


 


-


 


14




-       Warranty released


 


 


 


-


 


(82)


 


(82)




Utilised:


 


 


 


 


 


 


 


 




-       Warranty


 


 


 


-


 


(399)


 


(399)




At 31 May 2021


 


 


 


282


 


3,884


 


4,166




 




 


 


 


 


Dilapidations


 


Warranty


 


Total




 


 


 


 


£'000


 


£'000


 


£'000




At 1 December 2019


 


 


 


242


 


9,526


 


9,768




Charged to/(released from) the consolidated income statement:


 


 


 


 


 


 


 


 




-       Unwinding of discount 


 


 


 


13


 


-


 


13




-       Warranty released


 


 


 


-


 


(5,091)


 


(5,091)




-       Warranty charged


 


 


 


-


 


601


 


601




Utilised:


 


 


 


 


 


 


 


 




-       Warranty


 


 


 


-


 


(777)


 


(777)




At 31 May 2020


 


 


 


255


 


4,259


 


4,514




 
The provisions arise from a discounted dilapidations provision for property, which is expected to be utilised in 2023, and sale warranties.
 
The warranty provision includes amounts that will be utilised or released as these contracts approach completion.  Matters that could affect the timing and quantum of the utilisation of the provisions include the impact of any remedial work, claims against the outstanding performance bonds, and the demonstrated life of the filtration equipment installed.  Any future residual release to the income statement would be a non-cash item.
 
In December 2019, a $0.9 million (£0.8 million) performance bond was called by the customer, the amount was paid and charged to provisions.  Subsequently progress was made on resolving warranty risks and $5.0 million of performance bonds lapsed.  Consequently £5.1 million of provisions were no longer considered necessary and were therefore released.
 
 
11.          Exchange rates
Exchange rates for the US dollar and Euro during the period were:
 




 


Average rate to 31 May 21


Average rate to 31 May 20


Closing rate at 31 May 21


Closing rate at 30 Nov 20




 


Unaudited


Unaudited


Unaudited


Unaudited




US dollar


1.38


1.27


1.42


1.34




Euro


1.14


1.15


1.16


1.12




 
12.          Seasonality
The results for the six months ended 31 May 2021 are impacted by a lower number of working days in the first six months of the year than in the second half of the year. 
 
 
 
13.          Basis of preparation
Porvair plc is a public limited company registered in the UK and listed on the London Stock Exchange.
 
This unaudited condensed half-yearly consolidated financial information for the six months ended 31 May 2021 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 pursuant to Regulation (EC) No 1606/2002 as it applies in 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 2020, which have been prepared in accordance with IFRSs as adopted by the European Union. 
 
The accounting policies applied in these interim financial statements are consistent with those applied in the Group's consolidated financial statements for the year ended 30 November 2020.  A number of other new standards and amendments are effective from 1 December 2020 but they do not have a material effect on the Group's financial statements.
 
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 2020, with the exception of changes in estimates that are required in determining the provision for income taxes, together with the estimates and judgements within the Kbiosystems acquisition accounting.
 
After having made appropriate enquiries, including a review of progress against the Group's budget for 2021, its current trading and medium term plans; and taking into account the banking facilities available until May 2026, 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 do not constitute full accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 November 2020, which were approved by the Board of Directors on 29 January 2021, 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 2020.  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.
 
 
Statement of directors' responsibilities
The Directors confirm that this condensed half-yearly consolidated financial information has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in 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 2020.  A list of current Directors is maintained on the Porvair plc website, www.porvair.com.  Since the publication of the Annual Report for the year ended 30 November 2020, James Mills has joined the Group as Group Finance Director.  This followed the decision by Chris Tyler to step back from his position as Group Finance Director and continue, in a part-time role, as Company Secretary.  Both changes became effective following the Company's AGM in April 2021. 
 
By order of the board
 
 




Ben Stocks  


James Mills




Group Chief Executive
2 July 2021


Group Finance Director




 
 
 
INDEPENDENT REVIEW REPORT TO PORVAIR PLC
Introduction
We have been engaged by the Company to review the interim financial information in the half-yearly financial report for the six months ended 31 May 2021 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity and related notes 1 to 13. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for the preparation and presentation of interim financial information that gives a true and fair view of the financial position of the Company as at 31 May 2021 and of the financial performance of the Group and the cash flows of the Group for six month period then ended in accordance with the applicable law and International Accounting Standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. 
 
As disclosed in note 13, the annual financial statements of the Group are prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
 
Our Responsibility
Our responsibility is to express to the Company a conclusion on the interim financial information in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information does not give a true and fair view of the financial position of the Group as at 31 May 2021 and of the financial performance of the Group and the cash flows of the Group for the six month period then ended in accordance with the applicable law and International Accounting Standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Use of our report
This report is made solely to the Company 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. Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
 
RSM UK Audit LLP 
Chartered Accountants                   
25 Farringdon Street 
London
EC4A 4AB
 

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