REG - Porvair PLC - Half Yearly Results <Origin Href="QuoteRef">PORV.L</Origin> - Part 2
27/06/2017 07:05
- Part 2: For the preceding part double click ID:nRSa1993Ja
9,602
Fair value of net assets acquired (2,391)
Goodwill 7,211
Recognised amounts of identifiable assets acquired and liabilities assumed Fair value
£'000
Property plant and equipment 324
Patents 190
Customer list 201
Non-compete agreement 241
Inventory 1,129
Trade receivables 1,069
Other working capital (net) (296)
Loan (467)
Net assets acquired 2,391
Purchase consideration settled in cash 4,781
Cash outflow on acquisition 4,781
The goodwill attributable to the acquisition relates non-contractual
relationships, the synergies between the business acquired and the existing
operations of the Group and the potential to develop the acquired
technologies, which do not meet the criteria for capitalisation as intangible
assets. The goodwill recognised is attributable to the Microfiltration
division. The purchase is accounted for as an acquisition.
JGF was acquired close to the period end, as a consequence the accounting
entries are deemed provisional. The accounting entries for the business
combination will be finalised as permitted by IFRS3 para 45 prior to the
approval of the Annual Report for the financial year ending 30 November 2017.
The direct costs of acquisition, which have been charged to the income
statement, were $459,000 (£364,000). A further £64,000 was incurred on other
potential acquisitions that did not proceed past due diligence.
10. Contingent liabilities
At 31 May 2017, the Group has advanced payment bonds totalling US$ nil (30
November 2016: US$5,024,000) relating to monies received in advance on
contracts. The Group has performance bonds totalling US$7,179,000 (30
November 2016: $7,179,000). The bonds are released after a warranty period and
in any event no later than November 2019.
11. Fair value estimation
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, cash flow interest rate risk and price risk), credit
risk and liquidity risk. The condensed half-yearly consolidated financial
information does not include all financial risk management information and
disclosures required in the annual financial statements; it should be read in
conjunction with the Group's annual financial statements as at 30 November
2016. There have been no changes in the risk management processes or in any
risk management policies since the year end.
Compared to the year end, there was no material change in the contractual
undiscounted cash out flows for financial liabilities with the exception of
bank overdraft and loans of £7.5 million, which are due in 2022.
The Group's finance department performs the valuations of financial assets and
liabilities required for financial reporting purposes, including Level 3 fair
values. The department reports directly to the Group Finance Director and the
Audit Committee. Discussions of valuation processes and results are held
between the Group Finance Director, the Audit Committee and the valuation team
at least twice a year, in line with the Group's external reporting dates.
The table below analyses financial instruments carried at fair value, by
valuation method. The different levels have been defined below:
· Quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1).
· Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (Level 2).
· Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs) (Level 3).
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial liabilities at fair value through profit or loss:- Trading derivatives - (523) - (523)
Contingent consideration - - (4,648) (4,648)
At 31 May 2017 - (523) (4,648) (5,171)
Financial liabilities at fair value through profit or loss:- Trading derivatives - (1,421) - (1,421)
Deferred consideration - - (696) (696)
Foreign exchange contracts used for hedging - (157) - (157)
At 30 November 2016 - (1,578) (696) (2,274)
There were no transfers between levels during the period, and there were no
changes in valuation techniques in the period.
Level 2 trading and hedging derivatives comprise forward foreign exchange
contracts. These forward foreign exchange contracts have been fair valued
using forward exchange rates that are quoted in an active market. The effects
of discounting are generally insignificant for Level 2 derivatives.
A summary of the movements in deferred and contingent consideration on
acquisitions contained in Level 3 is given below:
J. G. Finneran Associates, Inc. TEM Filter Company Total
£'000 £'000 £'000
At 1 December 2016 - (696) (696)
Purchase consideration additions in the period (9,602) - (9,602)
Cash paid in the period 4,781 684 5,465
Recognised in the income statement - (20) (20)
Foreign exchange movement 173 32 205
At 31 May 2017 (4,648) - (4,648)
Fiber Ceramics TEM Filter Company Total
£'000 £'000 £'000
At 1 December 2015 (56) - (56)
Purchase consideration additions in the period - (3,377) (3,377)
Cash paid in the period 50 2,880 2,930
Recognised in the income statement 7 - 7
Foreign exchange movement (1) (18) (19)
At 31 May 2016 - (515) (515)
Details regarding the valuation and sensitivity of the contingent
consideration are disclosed in Note 9.
The fair value of the following financial assets and liabilities approximate
their carrying amount: borrowings, trade and other receivables, other current
financial assets, cash and cash equivalents, and trade and other payables.
12. Provisions for other liabilities and charges
Dilapidations Warranty Total
£'000 £'000 £'000
At 1 December 2016 164 2,360 2,524
Charged to/(released from) the consolidated income statement:
- Unwinding of discount 7 - 7
- Warranty - (600) (600)
Utilised:
- Warranty - (31) (31)
At 31 May 2017 171 1,729 1,900
The provisions, all of which are non-current, arise from a discounted
dilapidations provision for leased property, which is expected to be utilised
in 2023, and sale warranties, which are utilisable before 2020.
13. Exchange rates
Exchange rates for the US dollar and Euro during the period were:
Average rate to 31 May 17 Average rate to 31 May 16 Closing rate at 31 May 17 Closing rate at 30 Nov 16
Unaudited Unaudited Unaudited Unaudited
US dollar 1.26 1.45 1.29 1.25
Euro 1.17 1.32 1.15 1.18
14. Alternative performance measures - Underlying revenue at constant
currency estimation
2017 2016 Growth
Metals Filtration £m £m %
Revenue at constant currency* 17.2 16.3 6
Exchange 1.9 0.5
Revenue as reported 19.1 16.8 14
Microfiltration
Underlying revenue at constant currency* 34.8 30.5 14
Large projects 0.2 6.4
Exchange 1.4 (1.6)
Revenue as reported 36.4 35.3 3
Group
Underlying revenue at constant currency* 52.0 46.8 11
Large projects 0.2 6.4
Exchange 3.3 (1.1)
Revenue as reported 55.5 52.1 7
*Revenue at constant currency is based upon retranslating the overseas
subsidiaries at fixed exchange rates in both years of $1.4:£ and E1.2:£.
Large projects are the four large gasification and nuclear remediation
projects that the Group is currently completing.
15. Seasonality
The results for the six months ended 31 May 2017 are impacted by a lower
number of working days in the first six months of the year than in the second
half of the year.
16. Basis of preparation
Porvair plc is a public limited company registered in the UK and listed on the
London Stock Exchange.
This unaudited condensed half-yearly consolidated financial information for
the six months ended 31 May 2017 has been prepared in accordance with the
Disclosure and Transparency Rules ('DTR') of the Financial Conduct Authority
and with IAS 34, 'Interim financial reporting' as adopted by the European
Union. The condensed half-yearly consolidated financial information should be
read in conjunction with the annual financial statements for the year ended 30
November 2016, which have been prepared in accordance with IFRSs as adopted by
the European Union.
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 30 November 2016, as described in
those financial statements. A number of amendments to IFRSs became effective
for the financial year beginning 1 December 2016. However, the Group did not
have to change its accounting policies or make material retrospective
adjustments as a result of adopting these new standards.
Taxes on income in the interim period are accrued using the tax rate that
would be applicable to expected total annual earnings.
This condensed half-yearly consolidated financial information has been
prepared on a going concern basis under the historical cost convention, as
modified by the revaluation of certain current assets, financial assets and
financial liabilities held for trading and derivative contracts, which are
held at fair value.
The preparation of condensed half-yearly consolidated financial information in
conformity with generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the condensed half-yearly consolidated financial
information and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may ultimately
differ from those estimates. In preparing the condensed interim financial
statements, the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those applied to the consolidated financial statements for the
year ended 30 November 2016, 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 2017, its medium term plans and taking into
account the banking facilities available until January 2019, the Directors
have a reasonable expectation that the Group has adequate resources to
continue in operational existence for at least twelve months from the date of
approval of the condensed half yearly consolidated financial information.
Accordingly, they continue to adopt the going concern basis in preparing this
condensed half-yearly consolidated financial information.
This condensed half-yearly consolidated financial information and the
comparative figures does not constitute full accounts within the meaning of
Section 434 of the Companies Act 2006. Statutory accounts for the year ended
30 November 2016, which were approved by the Board of Directors on 26 January
2017, 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 2016. 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 as adopted by the
European Union and that the interim management report herein includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the
first six months of the year, their impact on the condensed half-yearly
consolidated financial information and a description of the principal risks
and uncertainties for the remaining six months of the financial year; and
· material related party transactions in the first six months of the
year and any material changes in the related party transactions described in
the last annual report.
The Directors of Porvair plc are listed in the Porvair plc Annual Report for
the year ended 30 November 2016. A list of current Directors is maintained on
the Porvair plc website www.porvair.com.
By order of the board
Ben Stocks
Group Chief Executive
Chris Tyler
Group Finance Director
26 June 2017
INDEPENDENT REVIEW REPORT TO PORVAIR PLC
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31 May
2017 which comprises the condensed consolidated income statement, condensed
consolidated statement of comprehensive income, condensed consolidated balance
sheet, condensed consolidated cash flow statement, condensed consolidated
statement of changes in equity, and related notes 1 to 16. 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 information in the condensed set of financial statements.
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 work has been undertaken so that
we might state to the company those matters we are required to state to it 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.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 16, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by 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 by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements 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 inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
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 half-yearly
financial report for the six months ended 31 May 2017 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Cambridge, United Kingdom
26 June 2017
This information is provided by RNS
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