REG - Porvair PLC - Half Year Results 2022
04/07/2022 07:00
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RNS Number : 1041R Porvair PLC 04 July 2022
For immediate
release
4 July 2022
Porvair plc
Interim results for the six months ended 31 May 2022
Porvair plc ("Porvair" or "the Group"), the specialist filtration, laboratory
and environmental technology group, announces its interim results for the six
months ended 31 May 2022 ("H1 2022" or the "period").
Highlights:
· Revenue 18% higher at £82.3 million (2021: £69.7 million), 16%
higher on a constant currency basis*.
· Operating profit 9% higher at £10.1 million (2021: £9.3
million).
· Adjusted operating profit* 14% higher at £10.4 million (2021:
£9.1 million).
· Profit before tax 7% higher at £9.5 million (2021: £8.9
million).
· Adjusted profit before tax* 14% higher at £9.8 million (2021:
£8.6 million).
· Adjusted basic earnings per share* were 16.6 pence (2021: 14.8
pence).
· Basic earnings per share were 16.1 pence (2021: 16.4 pence,
flattered by adjusting items. See note 1).
· Net cash was £12.2 million (31 May 2021: £6.2 million; 30
November 2021: £10.2 million) after investing £2.3 million (2021: £2.0
million) in capital expenditure.
· Interim dividend increased 0.1 pence per share to 1.9 pence
(2021: 1.8 pence).
Commenting on the outlook, Ben Stocks, Chief Executive, said:
"This is a record set of Interim results with growth in all three divisions,
showing that the Group is performing well and has managed wide-spread supply
dislocation and inflationary pressures satisfactorily thus far. Porvair
remains well positioned to address long-term global growth trends: tightening
environmental regulations; growth in analytical science; the need for clean
water; carbon-efficient transportation; the replacement of plastic and steel
with aluminium; and the drive for manufacturing process quality and
efficiency.
The strong current order book is flattered in places by extended lead times,
but the underlying order position remains healthy, with aerospace and
laboratory demand notably stronger than one year ago. The focus for the coming
months is on margins. The Group will continue to pass on cost increases where
necessary and has accelerated investments in productivity. 2022 has started
strongly and provided economic conditions allow the outlook for the balance of
the year is promising."
*See notes 1, 2 and 3 for definitions and reconciliations.
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 Whitmore / George Cleary
An analyst briefing will take place at 9:30 a.m. on Monday 4 July 2022, please
contact Buchanan if you wish to join. An audiocast of the meeting and the
presentation will subsequently be made available at www.porvair.com
(http://www.porvair.com)
Operating review
The last twelve months have seen revenue and earnings growth despite headwinds
from supply-side challenges and inflationary pressures. At the start of 2022,
supply chain dislocation had started to ease somewhat, but inflationary
pressure continued to build and war in Europe, along with renewed covid
outbreaks in China, increased volatility. While the Group has navigated these
issues satisfactorily thus far, we remain vigilant and expect inflationary and
supply problems to persist well into 2023.
Despite these conditions the Group delivered revenue growth of 18% in the
first half of 2022, with all three divisions contributing. Excluding currency
and acquisitions, revenue growth was 15%. This was in part driven by strong
order books through the period, and in part due to price increases implemented
over the last year. Laboratory demand was expected to settle as the direct
effects of the pandemic eased, but this has not noticeably been the case yet.
The aerospace forward orderbook is better than it has been since 2019.
Aluminium production is also robust.
In inflationary times the management of margin is critical. We pass on direct
cost increases and have stepped up investments aimed at productivity and
automation. Porvair's devolved management structure is helpful in these
conditions with key cost, price and inventory decisions made close to the
market.
Financial summary
H1 2022 H1 2021 Growth
£m £m %
Revenue 82.3 69.7 18
Operating profit 10.1 9.3 9
Adjusted operating profit* 10.4 9.1 14
Profit before tax 9.5 8.9 7
Adjusted profit before tax* 9.8 8.6 14
Pence Pence
Earnings per share 16.1 16.4 (2)
Adjusted earnings per share* 16.6 14.8 12
£m £m
Cash generated from operations 7.2 6.1
Net cash (excluding lease liabilities) 12.2 6.2
*See notes 1, 2 and 3 for definitions and reconciliations.
Revenue was 18% higher (16% at constant currency). Operating profit was 9%
higher at £10.1 million. Profit before tax increased by 7%. Adjusted
earnings per share increased 12% to 16.6 pence. Net cash at 31 May 2022 was
£12.2 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 7% 8% 9%
Earnings per share growth 8% 12% 10%
Adjusted earnings per share growth 9% 12% 10%
£m £m £m
Cash from operations 81.9 141.8 175.7
Investment in acquisitions and capital expenditure 43.1 76.6 93.9
* Compound annual growth rate
Porvair's strategy and purpose has remained consistent for over 17 years, a
period that now encompasses two recessions, a pandemic, and many years of
growth. This longer-term growth record gives the Board confidence in the
Group's capabilities and is the basis for longer-term capital allocation and
planning decisions.
Strategic statement and business model
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 Final Results.
The Group is positioned to benefit from global trends: tightening
environmental regulations; growth in analytical science; the need for clean
water; carbon-efficient transportation; the replacement of plastic and steel
by aluminium; and the drive for manufacturing process quality and 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 at an acceptable
commercial cost. Technical expertise is necessary in all markets served. New
products are often adaptations of existing designs with attributes validated
in our own test and measurement laboratories. Experience in specific markets
and 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 with 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 reduce emissions or protect complex
downstream systems and, as a result, 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, 49% of revenue was in the Americas; 18% in Asia; 22% in
Continental Europe; and 10% in the UK; and 1% in Africa. The Group has
plants in the US, UK, Germany, the Netherlands and China. In the last twelve
months, 51% of revenue was manufactured in the US; 30% in the UK; 15% in
Continental Europe; and 4% 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 have 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 2022 setting out the Group's ESG
management framework and goals. This will be updated in February 2023.
Divisional review
Aerospace & Industrial
H1 2022 H1 2021 Growth
£m £m %
Revenue 30.7 26.0 18
Operating profit 2.9 2.1 38
Adjusted operating profit* 3.1 2.5 24
*See notes 1, 2 and 3 for definitions and reconciliations.
The Aerospace & Industrial division designs and manufactures a wide range
of specialist filtration products, demand for which is driven by customers
seeking better engineered, cleaner, safer or more efficient operations.
Differentiation is achieved through design engineering; the development of
intellectual property; and quality accreditations.
Revenue in the period increased by 18%. Aerospace revenues increased for the
first time since 2019 and the forward order book is returning to more normal
levels. We have used the pandemic-induced quieter period since 2020 to invest
in automation and productivity and the benefits of this are starting to
materialise as aerospace volume returns. Industrial filtration has started
2022 well. Timing of certain petrochemical contracts has drifted but this has
been balanced by strong demand in general industrial filtration in both the US
and Europe. Microelectronics continues to grow. With better aerospace volumes,
adjusted margins are higher in 2022 at 10.1%.
Laboratory
H1 2022 H1 2021 Growth
£m £m %
Revenue 30.8 25.2 22
Operating profit 5.9 4.9 20
Adjusted operating profit* 6.1 4.8 27
*See notes 1, 2 and 3 for definitions and reconciliations.
The Laboratory division has two operating businesses: Porvair Sciences
(including JGF Finneran and Kbio) and Seal Analytical.
· Porvair Sciences manufactures laboratory filters, small
instruments 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, for which demand is driven by
water quality regulations. Differentiation is achieved through consistent new
product development.
Revenue grew by 22% in the period, or 19% excluding acquisitions. Demand for
laboratory consumables remained robust, while demand for covid-related
components fell, but by less than expected. Seal Analytical sales were up 18%.
The division continues to perform strongly, driven by the global expansion in
diagnostic, analytic and environmental laboratory capacity. The Group's
expertise is in sample preparation products, chromatography consumables and
clean water analysis. Investment has been made in expanding capacity,
improving sales channels and accelerating new product development. Seal
Analytical has a good record of product introductions. Its latest analyser,
which incorporates robotic handling capability, has secured its first sales in
2022. Adjusted operating margins in the division were steady at 19.8%.
Metal Melt Quality
H1 2022 H1 2021 Growth
£m £m %
Revenue 20.8 18.4 13
Operating profit 2.8 3.6 (22)
Adjusted operating profit* 2.8 3.0 (7)
*See notes 1, 2 and 3 for definitions and reconciliations.
The Metal Melt Quality division manufactures filters for molten aluminium,
ductile iron and nickel-cobalt alloys. It has a well-differentiated product
range based on patented products and a promising new product pipeline.
Revenue grew by 13%, helped by a partial recovery of aerospace-related
filters. Aluminium demand in 2022 has been robust, driven by the switch from
plastic to recyclable aluminium in beverage packaging and the higher
proportion of aluminium used in electric and hybrid vehicles.
As outlined this time last year, adjusted margins in H1 2021 (16.3%) were
flattered by lower sales and marketing costs. The Board notes that the 13.5%
adjusted operating margin recorded in H1 2022 is good relative to historic
averages and is driven by operational efficiency, productivity investments,
and active management of cost and price issues.
Alternative performance measures
H1 2022 H1 2021 Growth
£m £m %
Adjusted operating profit 10.4 9.1 14
Adjusted profit before tax 9.8 8.6 14
Adjusted profit after tax 7.6 6.8 12
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 a £0.3 million
charge for the amortisation of acquired intangible assets (2021: £0.3 million
of net income) from operating profit. The details of these adjustments are
set out in note 1.
Finance costs
The Group incurred an interest charge of £0.6 million (2021: £0.5 million):
£0.1 million (2021: £0.2 million) relates to the finance cost of the defined
benefit pension scheme; £0.2 million (2021: £0.2 million) relates to the
interest charge on lease liabilities; and £0.1 million (2021: £0.1 million)
relates to the cost of unwinding discounts on provisions and other payables.
The remainder comprises undrawn commitment fees and interest on the Group's
banking facilities.
Tax
The Group tax charge was £2.1 million (2021: £1.3 million), including the
tax effect of adjusting items (see note 1). The adjusted income tax expense
was £2.2 million (2021: £1.8 million), with the underlying rate of income
tax for the period on adjusted measures being 22% (2021: 21%).
Earnings per share and dividends
The basic earnings per share for the period was 16.1 pence (2021: 16.4
pence). Adjusted earnings per share was 16.6 pence (2021: 14.8 pence).
The Board has declared an interim dividend of 1.9 pence (2021: 1.8 pence) per
share.
Investment
In the last five years, £43.1 million has been invested in acquisitions and
capacity expansion. The Group invested £2.3 million in capital expenditure
in the first half of 2022 (2021: £2.0 million).
Cash flow, cash and net debt
Cash generated from operations in the six months to 31 May 2022 was £7.2
million (2021: £6.1 million). The Group normally sees an outflow of working
capital in the first half of the year. Working capital increased by £4.9
million (2021: £3.8 million) in the period.
Net cash at 31 May 2022 was £12.2 million (31 May 2021: £6.2 million; 30
November 2021: £10.2 million). Lease liabilities were £11.5 million (31
May 2021: £12.8 million; 30 November 2021: £12.2 million).
Provisions and contingent liabilities
The Group has £4.5 million (30 November 2021: £4.7 million) of provisions
for dilapidations and warranty risks.
The Group has outstanding performance bonds with customers at 31 May 2022 of
$2.5 million (30 November 2021: $2.5 million) and €0.4 million (30 November
2021: €0.8 million).
Return on capital employed
The Group's return on capital employed was 13% (2021: 11%). Excluding the
impact of goodwill and the pension deficit, the return on operating capital
employed was 33% (2021: 29%).
Outlook
While the Group has managed supply dislocation and inflationary pressure
satisfactorily thus far, both are expected to persist for the rest of 2022.
Longer-term, Porvair remains well positioned to address global growth trends:
tightening environmental regulations; growth in analytical science; the need
for clean water; carbon-efficient transportation; the replacement of plastic
and steel by aluminium; and the drive for manufacturing process quality and
efficiency.
The strong current order book is flattered in places by extended lead times,
but the underlying order position remains healthy, with aerospace and
laboratory demand notably stronger than one year ago. The focus for the coming
months is on margins. The Group will continue to pass on cost increases where
necessary and has accelerated investments in productivity. 2022 has started
strongly and provided economic conditions allow the outlook for the balance of
the year is promising.
Ben Stocks
Group Chief Executive
1 July 2022
Related parties
Other than remuneration of key management personnel, there were no related
party transactions in the six months ended 31 May 2022 (2021: 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 & Accounts for the year ended 30 November 2021.
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 2022.
Forward-looking statements
Certain statements in this interim 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
2022 2021
Note Unaudited Unaudited
£'000 £'000
Revenue 1,2 82,280 69,654
Cost of sales (55,018) (46,759)
Gross profit 27,262 22,895
Other operating expenses (17,185) (13,566)
Adjusted operating profit 1,2 10,412 9,066
Adjustments:
Amortisation of acquired intangible assets (335) (402)
Other acquisition-related adjustments - (80)
Impairment of assets and restructuring costs - (592)
Paycheck Protection Program - 1,337
Operating profit 1,2 10,077 9,329
Finance costs (566) (479)
Profit before tax 9,511 8,850
Adjusted income tax expense (2,202) (1,768)
Adjustments:
Tax effect of adjustments to operating profit 1 67 472
Income tax expense (2,135) (1,296)
Profit for the period 7,376 7,554
Earnings per share (basic) 3 16.1p 16.4p
Earnings per share (diluted) 3 16.1p 16.4p
Adjusted earnings per share (basic) 3 16.6p 14.8p
Adjusted earnings per share (diluted) 3 16.6p 14.8p
Condensed consolidated statement of comprehensive income
For the six months ended 31 May
Six months ended 31 May
2022 2021
Unaudited Unaudited
£'000 £'000
Note
Profit for the period 7,376 7,554
Other comprehensive income/(expense)
Items that will not be reclassified to profit and loss:
Actuarial gain in defined benefit pension plans net of tax 9 3,037 2,515
Items that may be subsequently reclassified to profit or loss:
Exchange gain/(loss) on translation of foreign subsidiaries 3,329 (4,301)
Total other comprehensive income/(expense) for the period 6,366 (1,786)
Total comprehensive income for the period 13,742 5,768
The accompanying notes are an integral part of this interim financial
information.
Condensed consolidated balance sheet
As at 31 May
As at 30 November
As at 31 May
Note 2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 22,705 20,427 21,235
Right-of-use assets 10,207 11,878 11,014
Goodwill and other intangible assets 75,630 71,962 74,103
Deferred tax asset 342 1,257 1,821
108,884 105,524 108,173
Current assets
Inventories 28,266 24,418 24,650
Trade and other receivables 28,109 22,428 21,344
Derivative financial instruments - 214 -
Cash and cash equivalents 15,988 15,501 15,442
72,363 62,561 61,436
Current liabilities
Trade and other payables (28,478) (23,429) (21,702)
Current tax liabilities (1,246) (469) (853)
Borrowings - (1,796) -
Lease liabilities (2,097) (2,071) (2,207)
Derivative financial instruments (269) - (20)
Provisions 8 (4,177) (3,884) (4,372)
(36,267) (31,649) (29,154)
Net current assets 36,096 30,912 32,282
Non-current liabilities
Borrowings (3,754) (7,553) (5,217)
Deferred tax liability (2,472) (2,835) (2,425)
Retirement benefit obligations 9 (7,102) (10,871) (12,602)
Other payables (900) (1,900) (945)
Lease liabilities (9,395) (10,682) (10,024)
Provisions 8 (312) (282) (296)
(23,935) (34,123) (31,509)
Net assets 121,045 102,313 108,946
Capital and reserves
Share capital 924 923 924
Share premium account 37,078 36,981 37,078
Cumulative translation reserve 10,986 3,344 7,657
Retained earnings 72,057 61,065 63,287
Equity attributable to owners of the parent 121,045 102,313 108,946
The interim financial information was approved by the Board of Directors on 1
July 2022 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 2022 Unaudited 2021 Unaudited
£'000 £'000
Cash flows from operating activities
Cash generated from operations 5 7,239 6,078
Interest paid (194) (138)
Tax paid (1,400) (916)
Net cash generated from operating activities 5,645 5,024
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired) - (1,694)
Purchase of property, plant and equipment (2,310) (1,987)
Purchase of intangible assets (43) (14)
Proceeds from sale of property, plant and equipment 16 -
Net cash used in investing activities (2,337) (3,695)
Cash flows from financing activities
Net proceeds from the issue of ordinary shares - 54
Purchase of Employee Benefit Trust shares (406) (332)
(Decrease)/increase in borrowings 6 (1,350) 434
Repayment of lease liabilities (1,208) (1,137)
Net cash used in financing activities (2,964) (981)
Net increase in cash and cash equivalents 6 344 348
Exchange gains/(losses) on cash and cash equivalents 202 (410)
546 (62)
Cash and cash equivalents at the beginning of the period 15,442 15,563
Cash and cash equivalents at the end of the period 15,988 15,501
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 premium account Cumulative translation reserve
Share capital £'000 £'000 Retained earnings
£'000 £'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) - - (4,301) 2,515 (1,786)
Total comprehensive income for the period - - (4,301) 10,069 5,768
Purchase of own shares (held in trust) - - - (332) (332)
Issue of ordinary share capital - 54 - - 54
Employee share option schemes - - - 148 148
Ordinary share dividends - - - (1,517) (1,517)
Balance at 31 May 2021 923 36,981 3,344 61,065 102,313
Share premium account Cumulative translation reserve
Share capital £'000 £'000 Retained earnings
£'000 £'000 Total
£'000
Balance at 1 December 2021 924 37,078 7,657 63,287 108,946
Profit for the period - - - 7,376 7,376
Other comprehensive income - - 3,329 3,037 6,366
Total comprehensive income for the period - - 3,329 10,413 13,742
Purchase of own shares (held in trust) - - - (406) (406)
Employee share option schemes - - - 369 369
Ordinary share dividends - - - (1,606) (1,606)
Balance at 31 May 2022 924 37,078 10,986 72,057 121,045
The accompanying notes are an integral part of this interim financial
information.
Notes to the condensed interim consolidated financial information
1. Alternative performance measures
Alternative performance measures are used by the Directors and management to
monitor business performance internally and exclude certain cash and non-cash
items which they believe are not reflective of the normal course of business
of the Group. The Directors believe that disclosing such non-IFRS measures
enables a reader to isolate and evaluate the impact of such items on results
and allows for a fuller understanding of performance from year to year.
Alternative performance measures may not be directly comparable with other
similarly titled measures used by other companies.
Alternative revenue measures
Six months ended 31 May
2022 2021 Growth
Aerospace & Industrial £'000 £'000 %
Revenue at constant currency 29,971 25,564 17
Exchange 714 481
Revenue as reported 30,685 26,045 18
Laboratory
Underlying revenue 26,371 22,504 17
Acquisitions 3,469 2,296
Revenue at constant currency 29,840 24,800 20
Exchange 935 445
Revenue as reported 30,775 25,245 22
Metal Melt Quality
Revenue at constant currency 19,355 17,841 8
Exchange 1,465 523
Revenue as reported 20,820 18,364 13
Group
Underlying revenue 75,697 65,909 15
Acquisitions 3,469 2,296
Revenue at constant currency 79,166 68,205 16
Exchange 3,114 1,449
Revenue as reported 82,280 69,654 18
Revenue at constant currency is derived from translating overseas subsidiaries
results at budgeted fixed exchange rates. In 2022 and 2021, the rates used
were $1.40:£1 and €1.20:£1, compared with reported rates of $1.31:£1
(2021: $1.38:£1) and €1.19:£1 (2021: €1.14:£1).
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 2022 H1 2021
Adjusted Adjustments Reported Adjusted Adjustments Reported
£'000 £'000 £'000 £'000 £'000 £'000
Operating profit 10,412 (335) 10,077 9,066 263 9,329
Finance costs (566) - (566) (479) - (479)
Profit before tax 9,846 (335) 9,511 8,587 263 8,850
Income tax expense (2,202) 67 (2,135) (1,768) 472 (1,296)
Profit for the period 7,644 (268) 7,376 6,819 735 7,554
An analysis of adjusting items is given below:
2022 2021
Affecting operating profit £'000 £'000
Amortisation of acquired intangible assets (335) (402)
Other acquisition-related adjustments - (80)
Impairment of assets and restructuring costs - (592)
Paycheck Protection Program - 1,337
(335) 263
Affecting tax
Tax effect of adjustments to operating profit 67 472
Total adjusting items (268) 735
Adjusted operating profit excludes:
· The amortisation of intangible assets arising on acquisition of
businesses of £0.3 million (2021: £0.4 million);
· Other acquisition-related costs of £nil (2021: £0.1 million in
relation to the acquisition of Kbio);
· Covid-19 related impairment of assets and restructuring costs of
£nil (2021: £0.6 million, principally within the Aerospace & Industrial
division); and
· Monies received under the US Paycheck Protection Program of £nil
(2021: £1.3 million, for proceeds received in relation to eligible costs
incurred within the US operations during the covid pandemic, as disclosed in
the Annual Report & Accounts for the year ended 30 November 2021).
The 2021 tax effect of adjustments to operating profit includes a credit in
relation to eligible costs incurred in the prior year, associated with the US
Paycheck Protection Program and previously treated as disallowed for tax.
The £1.3 million Paycheck Protection Program income in 2021 does not attract
US tax. These items combined contribute to the tax credit on net adjusting
items.
2. Segmental information
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 2022, 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 2022 are as follows:
2022 - Unaudited Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Total segment revenue 30,769 31,797 20,820 - 83,386
Inter-segment revenue (84) (1,022) - - (1,106)
Revenue 30,685 30,775 20,820 - 82,280
Adjusted operating profit/(loss) 3,091 6,064 2,782 (1,525) 10,412
Amortisation of acquired intangible assets
(182) (153) - - (335)
Operating profit/(loss) 2,909 5,911 2,782 (1,525) 10,077
Finance costs - - - (566) (566)
Profit/(loss) before tax 2,909 5,911 2,782 (2,091) 9,511
The segment results for the period ended 31 May 2021 are as follows:
2021 - Unaudited Aerospace & Industrial Metal Melt Quality
Laboratory 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 intangible assets
(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
Finance costs - - - (479) (479)
Profit/(loss) before tax 2,059 4,857 3,629 (1,695) 8,850
The segment assets and liabilities at 31 May 2022 are as follows:
At 31 May 2022 - Unaudited Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Segmental assets 77,124 57,114 30,777 244 165,259
Cash and cash equivalents - - - 15,988 15,988
Total assets 77,124 57,114 30,777 16,232 181,247
Segmental liabilities (20,481) (15,358) (7,015) (6,492) (49,346)
Retirement benefit obligations - - - (7,102) (7,102)
Borrowings - - - (3,754) (3,754)
Total liabilities (20,481) (15,358) (7,015) (17,348) (60,202)
The segment assets and liabilities at 31 May 2021 are as follows:
At 31 May 2021 - Unaudited Aerospace & Industrial Metal Melt Quality
Laboratory 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)
Borrowings - - - (9,349) (9,349)
Total liabilities (18,434) (15,983) (5,226) (26,129) (65,772)
The segment assets and liabilities at 30 November 2021 are as follows:
At 30 November 2021 - Audited Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Segmental assets 70,038 51,720 30,087 2,322 154,167
Cash and cash equivalents - - - 15,442 15,442
Total assets 70,038 51,720 30,087 17,764 169,609
Segmental liabilities (19,242) (12,675) (5,747) (5,180) (42,844)
Retirement benefit obligations - - - (12,602) (12,602)
Borrowings - - - (5,217) (5,217)
Total liabilities (19,242) (12,675) (5,747) (22,999) (60,663)
Geographical analysis
Six months ended 31 May
2022 2021
Unaudited Unaudited
Revenue By destination By origin By destination By origin
£'000 £'000 £'000 £'000
United Kingdom 8,735 25,794 6,717 19,840
Continental Europe 18,961 10,146 15,693 12,447
United States of America 37,171 43,961 29,949 34,550
Other NAFTA 1,734 - 1,529 -
South America 987 - 882 -
Asia 13,558 2,379 14,312 2,817
Africa 1,134 - 572 -
82,280 82,280 69,654 69,654
3. Earnings per share (EPS)
Six months ended 31 May
2022 2021
Unaudited Unaudited
As reported Earnings Weighted average number of shares Per share amount Earnings Weighted average number of shares Per share amount
Pence Pence
£'000 £'000
Profit for the period - attributable to owners of the parent
7,376 7,554
Shares in issue 46,201,685 46,162,623
Shares owned by the Employee Benefit Trust
(289,162) (167,788)
Basic EPS 7,376 45,912,523 16.1 7,554 45,994,835 16.4
Dilutive share options outstanding
- 42,640 - - 20,457 -
Diluted EPS 7,376 45,955,163 16.1 7,554 46,015,292 16.4
In addition to the above, the Group also calculates an earnings per share
based on adjusted profit as the Board believes this to be a better measure to
judge the progress of the Group, as discussed in note 1.
Six months ended 31 May
2022 2021
Unaudited Unaudited
Adjusted Earnings Weighted average number of shares Per share amount Earnings Weighted average number of shares Per share amount
Pence Pence
£'000 £'000
Profit for the period - attributable to owners of the parent
7,376 7,554
Adjusting items (note 1) 268 (735)
Adjusted profit attributable to owners of the parent
7,644 6,819
Adjusted basic EPS 7,644 45,912,523 16.6 6,819 45,994,835 14.8
Adjusted diluted EPS 7,644 45,955,163 16.6 6,819 46,015,292 14.8
4. Dividends per share
Six months ended 31 May
2022 2021
Unaudited Unaudited
Per share £'000 Per share £'000
Final dividend approved 3.5p 1,606 3.3p 1,517
The final dividend approved for the year ended 30 November 2021 was paid to
shareholders on 1 June 2022.
The Directors have declared an interim dividend of 1.9 pence (2021: 1.8 pence)
per share to be paid on 26 August 2022 to shareholders on the register at the
close of business on 22 July 2022; the ex-dividend date is 21 July 2022.
5. Cash generated from operations
Six months ended 31 May
2022 2021
Unaudited Unaudited
£'000 £'000
Operating profit 10,077 9,329
Adjustments for:
Post-employment benefits (1,541) (1,459)
Paycheck Protection Program loan waiver - (1,337)
Fair value movement of derivatives through profit and loss 249 (191)
Share-based payments 387 306
Depreciation of property, plant and equipment and amortisation of intangibles 1,862 1,938
Impairment of property plant and equipment - 270
Depreciation of right-of-use assets 1,098 979
Loss on disposal of property, plant and equipment 23 -
Operating cash flows before movement in working capital 12,155 9,835
Increase in inventories (3,044) (1,019)
Increase in trade and other receivables (6,162) (1,400)
Increase/(decrease) in trade and other payables 4,582 (857)
Decrease in provisions (292) (481)
Increase in working capital (4,916) (3,757)
Cash generated from operations 7,239 6,078
6. Reconciliation of net cash flow to movement in net
debt
Six months ended 31 May
2022 2021
Unaudited Unaudited
£'000 £'000
Net debt at the beginning of the period (2,006) (8,735)
Increase in cash and cash equivalents 344 348
Decrease/(increase) in borrowings 1,350 (434)
Decrease in lease liabilities 878 416
Paycheck Protection Program loan waiver - 1,337
Effects of exchange rate changes 176 467
Net cash/(debt) at the end of the period 742 (6,601)
Net cash and bank debt 12,234 6,152
Lease liabilities (11,492) (12,753)
Net cash/(debt) at the end of the period 742 (6,601)
7. Contingent liabilities
At 31 May 2022, the Group has performance bonds totalling US$2.5 million and
€0.4 million (30 November 2021: US$2.5 million and €0.8 million). The
uncalled performance bonds are expected to be called or released no later than
December 2024.
8. Provisions
Dilapidations Warranty Total
£'000 £'000 £'000
At 1 December 2021 296 4,372 4,668
Utilisation of provision - (38) (38)
Release of provision - (164) (164)
Unwinding of discount 16 - 16
Exchange difference - 7 7
At 31 May 2022 312 4,177 4,489
Dilapidations Warranty Total
£'000 £'000 £'000
At 1 December 2020 268 4,365 4,633
Utilisation of provision - (399) (399)
Release of provision - (82) (82)
Unwinding of discount 14 - 14
At 31 May 2021 282 3,884 4,166
Provisions arise from potential claims on major contracts, sale warranties,
and discounted dilapidations for leased property. Matters that could affect
the timing, quantum and extent to which provisions are utilised or released,
include the impact of any remedial work, claims against outstanding
performance bonds, and the demonstrated life of the filtration equipment
installed.
9. Pension schemes
The Group supports its defined benefit pension scheme in the UK, which is
closed to new members, and provides access to defined contribution schemes for
its other employees. The Group's net retirement benefit obligation at 31 May
2022, measured in accordance with IAS 19 Employee Benefits, was £7.1 million
(30 November 2021: £12.6 million). An actuarial gain in the period of £3.0
million, net of tax, was recognised in the condensed statement of
comprehensive income, resulting primarily from an increase in the discount
rate.
10. Exchange rates
Exchange rates for the US dollar and Euro during the period were:
Average rate to 31 May 22 Average rate to 31 May 21 Closing rate at 31 May 22 Closing rate at 30 Nov 21
Unaudited Unaudited Unaudited Unaudited
US dollar 1.31 1.38 1.26 1.32
Euro 1.19 1.14 1.18 1.18
11. Seasonality
The results for the six months ended 31 May 2022 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.
12. Basis of preparation
Porvair plc is a public limited company registered in the UK and listed on the
London Stock Exchange.
This unaudited condensed interim consolidated financial information for the
six months ended 31 May 2022 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 contained in UK-adopted
International Accounting Standards. The condensed interim consolidated
financial information should be read in conjunction with the annual financial
statements for the year ended 30 November 2021, which were prepared in
accordance with 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.
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 2021. A number of other new standards and
amendments are effective from 1 December 2021 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 interim consolidated financial information has been prepared on
a going concern basis under the historical cost convention, as modified by the
recognition of certain financial assets and financial liabilities (including
derivative financial instruments) at fair value through profit or loss.
The preparation of condensed interim 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 interim 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 2021, 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 2022, 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 interim consolidated financial
information. Accordingly, they continue to adopt the going concern basis in
preparing this condensed interim consolidated financial information.
This condensed interim 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
2021, which were approved by the Board of Directors on 28 January 2022, 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 interim
consolidated financial information has been reviewed, not audited.
The condensed interim 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 2021. 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 (http://www.porvair.com) .
Statement of directors' responsibilities
The Directors confirm that this condensed interim consolidated financial
information has been prepared in accordance with IAS 34 Interim Financial
Reporting as contained in UK-adopted International Accounting Standards, 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 interim
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 2021. A list of current Directors is maintained
on the Porvair plc website, www.porvair.com (http://www.porvair.com) .
By order of the board
Ben Stocks James Mills
Group Chief Executive Group Finance Director
1 July 2022
INDEPENDENT REVIEW REPORT TO PORVAIR PLC
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the interim financial report for the six months ended 31 May
2022 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 12. We have read the other information contained in the interim financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
Directors' Responsibilities
The interim financial report, is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing and
presenting the interim financial report in accordance with the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
The annual financial statements of the Group will be prepared in accordance
with UK-adopted International Accounting Standards. The condensed set of
financial statements included in this interim financial report has been
prepared in accordance with International Accounting Standard 34, "Interim
Financial Reporting" as contained in UK-adopted International Accounting
Standards.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the interim 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 condensed set of financial statements in the interim
financial report for the six months ended 31 May 2022 is not prepared, in all
material respects, in accordance with International Accounting Standard 34,
"Interim Financial Reporting" as contained in UK-adopted International
Accounting Standards, and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
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 and for the purpose of the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority. 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
1 July 2022
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