REG - Porvair PLC - Interim Results
01/07/2024 07:00
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RNS Number : 4777U Porvair PLC 01 July 2024
For immediate
release
1 July 2024
Porvair plc
Interim results for the six months ended 31 May 2024
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 2024 ("H1 2024" or the "period").
Highlights:
· Revenue up 5% to £94.6 million (2023: £90.6 million), 8% higher
on a constant currency basis*
· Adjusted operating profit* 2% higher at £12.5 million (2023:
£12.2 million)
· Operating profit 1% lower at £11.6 million (2023: £11.7
million)
· Adjusted profit before tax* 3% lower at £11.5 million (2023:
£11.8 million)
· Profit before tax 6% lower at £10.6 million (2023: £11.2
million)
· Adjusted basic earnings per share* 4% lower at 19.5 pence (2023:
20.3 pence)
· Basic earnings per share 6% lower at 18.1 pence (2023: 19.3
pence)
· Net closing cash at £4.1 million (31 May 2023: £19.7 million;
30 November 2023: £14.1 million) after investing £12.7 million (2023: £2.9
million) in capital expenditure and acquisitions
· Interim dividend increased 0.1 pence per share to 2.1 pence
(2023: 2.0 pence)
Commenting on the performance and outlook, Ben Stocks, Chief Executive, said:
"2024 is unfolding as expected. Over the first six months, strength in
aerospace and petrochemical markets, helped by the benefit of 2024
acquisitions, has offset weakness in industrial and laboratory consumables and
foreign exchange headwinds. This has been in line with management
expectations. The trading outlook for the second half of the year is positive.
Order books across the Group are strengthening with lead times now returned to
more traditional levels. The benefits of the 2023 acquisitions continue to
come through, and several larger petrochemical orders will start to ship
towards the end of the year.
The Group's fundamental demand drivers have not changed. Porvair remains well
positioned to take advantage of tightening environmental regulation; the
growth of analytical science; the need for clean water; the development of
carbon-efficient transportation; the replacement of plastic and steel by
aluminium; and the drive for manufacturing process quality and efficiency. It
is these trends that have driven the Group's consistent longer-term trading
record. The Board expects a healthy second half which will allow the Group to
move into 2025 in good shape."
*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
Burson Buchanan 020 7466 5000
Charles Ryland / Stephanie Whitmore / Jack Devoy
An analyst briefing will take place at 9:30 a.m. on Monday 1 July 2024 at
Burson Buchanan, please contact Burson Buchanan for details. An audiocast of
the meeting and the presentation will subsequently be made available at
www.porvair.com (http://www.porvair.com) .
Operating review
The Group has begun 2024 with 5% revenue growth (8% constant currency).
Stripping out the benefit of acquisitions, underlying sales revenue was down
3% at constant currency as industrial and laboratory consumables markets
adjusted to lower inventory levels and more normal lead times through 2023 and
into 2024. The Board's view is that underlying market growth will be more
evident in the second half.
Margins in those operations affected by de-stocking have reduced modestly and
foreign exchange rates have had a £0.4 million adverse effect on adjusted
profit. Adjusted operating profit was nonetheless 2% ahead of the prior
period. Cash generation was as expected, leaving net cash reserves of £4.1
million at 31 May 2024, having completed the acquisition of the European
Filter Corporation ("EFC") in the first trading week of the new financial
year.
Trading has been mixed across segments. Stronger demand in aerospace and
petrochemical markets has continued. Both have reassuring order books into
2025. Laboratory consumables businesses started to see more consistent order
patterns in the second quarter. Demand for industrial consumables, notably in
the US, remained patchy for most of the period.
Inconsistency in trading patterns across the Group is not unusual. We serve a
range of markets in different parts of the world and trading can be affected
by both local and global events. Despite this natural variation Porvair
benefits from underlying growth trends that have not changed: tightening
environmental regulation; the growth of analytical science; the need for clean
water; the development of carbon-efficient transportation; the replacement of
plastic and steel by aluminium; and the drive for manufacturing process
quality and efficiency.
Financial summary
H1 2024 H1 2023 Growth
£m £m %
Revenue 94.6 90.6 5
Operating profit 11.6 11.7 (1)
Adjusted operating profit* 12.5 12.2 2
Profit before tax 10.6 11.2 (6)
Adjusted profit before tax* 11.5 11.8 (3)
Pence Pence
Earnings per share 18.1 19.3 (6)
Adjusted earnings per share* 19.5 20.3 (4)
£m £m
Cash generated from operations 7.1 8.2
Net closing cash (excluding lease liabilities) 4.1 19.7
*See notes 1, 2 and 3 for definitions and reconciliations.
Strategy and purpose
Porvair's strategy and purpose have remained consistent for over 20 years, a
period that encompasses two recessions and a pandemic. The Group's record
for growth, cash generation and investment is:
5 years 10 years 15 years
Revenue CAGR* 5% 6% 8%
Earnings per share CAGR* 7% 9% 18%
Adjusted earnings per share CAGR* 7% 10% 16%
* Compound annual growth rate
5 years 10 years 15 years
£m £m £m
Cash from operations 101.2 168.3 212.7
Investment in acquisitions and capital expenditure 60.0 102.3 118.3
This longer-term growth record gives the Board confidence in the Group's
capabilities and is the basis for 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 financial results.
The Group is positioned to benefit from global trends as outlined above.
Porvair businesses have certain key characteristics in common:
· specialist design, engineering or commercial 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 or commercial service
at an acceptable 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:
· focus on markets with long-term growth potential;
· look for applications where product use is mandated and
replacement demand is regular;
· make new product development a core business activity;
· establish geographic presence where end-markets require; and
· 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: 46% of revenue was in the Americas; 17% in Asia; 25% in
Continental Europe; 11% in the UK; and 1% in Africa. The Group has plants in
the US, UK, Belgium, Germany, Hungary, the Netherlands, India and China. In
the last twelve months: 48% of revenue was manufactured in the US; 26% in the
UK; 23% in Continental Europe; 3% in Asia; and
· 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 2024 setting out:
· Porvair's ESG management framework and goals;
· how climate change and a net zero carbon future might affect
markets served by the Group;
· ESG metrics and results; and
· how the Group acted for the benefits of its stakeholders in 2023.
This ESG report will be updated in February 2025.
Divisional review
Aerospace & Industrial
H1 2024 H1 2023 Growth
£m £m %
Revenue 40.4 36.5 11
Operating profit 5.3 5.1 3
Adjusted operating profit* 5.9 5.4 9
*See notes 1 and 2 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; quality accreditations; and customer service.
Revenue in the period increased by 11%. Aerospace revenue was ahead 15%.
Petrochemical sales, which can be lumpy, were up 43%. US industrial
consumable demand was lower, offset in the period by a strong start by EFC,
which was acquired in December. HRW, acquired earlier in 2023, improved
margins in the microelectronics segment, wherein demand seems to be improving.
The general industrial factories were busier in the second quarter, with work
due to ship in the second half.
Laboratory
H1 2024 H1 2023 Growth
£m £m %
Revenue 32.1 29.1 10
Operating profit 4.2 4.7 (11)
Adjusted operating profit* 4.5 4.9 (8)
*See notes 1 and 2 for definitions and reconciliations.
The Laboratory division has two operating businesses: Porvair Sciences
(including Finneran, Kbiosystems and, from July 2023, Ratiolab) and Seal
Analytical.
· Porvair Sciences manufactures laboratory filters, small
instruments and associated consumables, for which demand is driven by sample
preparation in analytical laboratories. Differentiation is achieved through
proprietary manufacturing capabilities; control of filtration media; and
customer service.
· Seal Analytical supplies instruments and consumables to
environmental laboratories, for which demand is driven by water quality
regulations. Differentiation is achieved through consistent new product
development focused on improving detection limits, and improving laboratory
automation.
A return to sales growth in the first half of 2024 was as expected, helped by
a maiden contribution from Ratiolab, which was acquired in July 2023. The
sales and margin delivered in the first half of 2024 are almost identical to
those of the second half of 2023 with margins in both periods around 14%. As
integration costs associated with Ratiolab fall away, we expect margins in the
division to improve to more normal levels.
Investments in the new plant in Hungary and new product development in Seal
continued unabated and both will start to deliver returns in the balance of
the year.
Metal Melt Quality
H1 2024 H1 2023 Growth
£m £m %
Revenue 22.1 24.9 (11)
Operating profit 3.5 3.7 (4)
Adjusted operating profit* 3.5 3.7 (4)
*See notes 1 and 2 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 extensive experience in melt quality
assessment.
Revenue fell 11% with de-stocking in US markets reducing demand compared with
a strong start to the prior year. This was partially offset by robust demand
for turbine blade filters and revenue growth at the Chinese plant.
Margin management, operational discipline and a better product mix improved
margins, with operating profits 4% lower.
Alternative performance measures - profit
H1 2024 H1 2023 Growth
£m £m %
Adjusted operating profit 12.5 12.2 2
Adjusted profit before tax 11.5 11.8 (3)
Adjusted profit after tax 9.0 9.3 (4)
The Group presents alternative performance measures to enable a better
understanding of its trading performance (see note 1). 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 performance. Adjusting items
comprise £0.9 million (2023: £0.4 million) for the amortisation of acquired
intangible assets and £nil (2023: £0.2 million) for other
acquisition-related costs (see note 1).
Finance costs
Net finance costs of £1.0 million (2023: £0.4 million) comprise interest on
borrowings; lease liabilities; and the Group's retirement benefit obligations;
together with the cost of unwinding discounts on provisions and other
payables. The Group also incurs undrawn commitment fees on available banking
facilities. Net finance costs increased in the period, primarily due to
interest on borrowings and the lease liability interest associated with a
property lease renewal in the UK and the leased properties acquired within
both Ratiolab and EFC.
Tax
The total Group tax charge was £2.3 million (2023: £2.4 million), including
the tax effect of the adjusting items set out in note 1. The adjusted tax
charge was £2.5 million (2023: £2.4 million), with the effective rate of
income tax on adjusted profit before tax at 22% (2023: 21%).
Earnings per share and dividends
The basic earnings per share for the period was 18.1 pence (2023: 19.3
pence). Adjusted earnings per share was 19.5 pence (2023: 20.3 pence).
The Board has declared an interim dividend of 2.1 pence (2023: 2.0 pence) per
share.
Investment
In the last five years, £60.0 million has been invested in acquisitions and
capital expenditure. During the period, the Group invested £10.2 million
(net of cash acquired) on the acquisition of EFC and £2.5 million on capital
expenditure (2023: £2.9 million).
Cash flow, cash and net debt
Cash generated from operations in the six months to 31 May 2024 was £7.1
million (2023: £8.2 million). The Group normally sees an outflow of working
capital in the first half of the year. Working capital increased by £7.0
million (2023: £5.0 million) in the period.
Net cash (excluding lease liabilities) at 31 May 2024 was £4.1 million (31
May 2023: £19.7 million; 30 November 2023: £14.1 million), comprising cash
of £14.2 million; bank overdrafts of £2.3 million and borrowings of £7.8
million. The borrowings were drawn to fund the acquisition of EFC and are
expected to be repaid in the second half. Lease liabilities were £18.7
million (31 May 2023: £11.0 million; 30 November 2023: £13.4 million).
Return on capital employed
The Group's return on capital employed was 14% (2023: 16%). Excluding the
impact of goodwill and retirement benefit obligations, the return on operating
capital employed was 31% (2023: 37%).
CEO succession
As announced on 16 April 2024 Ben Stocks has notified the Board of his
decision to retire in early 2025. The search for a successor is progressing
well and further updates will be provided as appropriate.
Outlook
2024 is unfolding as expected. Over the first six months, strength in
aerospace and petrochemical markets, helped by the benefit of 2024
acquisitions, has offset weakness in industrial and laboratory consumables and
foreign exchange headwinds. This has been in line with management
expectations. The trading outlook for the second half of the year is positive.
Order books across the Group are strengthening with lead times now returned to
more traditional levels. The benefits of the 2023 acquisitions continue to
come through, and several larger petrochemical orders will start to ship
towards the end of the year.
The Group's fundamental demand drivers have not changed. Porvair remains well
positioned to take advantage of tightening environmental regulation; the
growth of analytical science; the need for clean water; the development of
carbon-efficient transportation; the replacement of plastic and steel by
aluminium; and the drive for manufacturing process quality and efficiency. It
is these trends that have driven the Group's consistent longer-term trading
record. The Board expects a healthy second half which will allow the Group to
move into 2025 in good shape.
Ben Stocks
Group Chief Executive
28 June 2024
Related parties
Other than remuneration of key management personnel, there were no related
party transactions in the six months ended 31 May 2024 (2023: 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 2023.
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 2024.
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 be 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
2024 2023
Note Unaudited Unaudited
Continuing operations £'000 £'000
Revenue 1,2 94,639 90,552
Cost of sales (61,346) (59,924)
Gross profit 33,293 30,628
Other operating expenses (21,708) (18,975)
Adjusted operating profit 1,2 12,468 12,226
Adjustments:
Amortisation of acquired intangible assets (883) (370)
Other acquisition-related costs - (203)
Operating profit 1,2 11,585 11,653
Finance costs (1,013) (437)
Profit before tax 10,572 11,216
Adjusted income tax expense (2,472) (2,449)
Adjustments:
Tax effect of adjustments to operating profit 1 209 82
Income tax expense (2,263) (2,367)
Profit for the period 8,309 8,849
Earnings per share (basic) 3 18.1p 19.3p
Earnings per share (diluted) 3 18.1p 19.3p
Adjusted earnings per share (basic) 3 19.5p 20.3p
Adjusted earnings per share (diluted) 3 19.5p 20.3p
Condensed consolidated statement of comprehensive income
For the six months ended 31 May
Six months ended 31 May
2024 2023
Unaudited Unaudited
£'000 £'000
Profit for the period 8,309 8,849
Other comprehensive income/(expense)
Items that will not be reclassified to profit and loss:
Actuarial gain in defined benefit pension plans net of 132 750
tax
Items that may be subsequently reclassified to profit and loss:
Exchange loss on translation of foreign subsidiaries (682) (2,751)
Total other comprehensive expense for the period (550) (2,001)
Total comprehensive income for the period 7,759 6,848
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
2024 2023 2023
Note Unaudited Unaudited Audited
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 28,795 24,710 28,329
Right-of-use assets 17,208 9,614 12,136
Goodwill and other intangible assets 91,242 76,470 82,949
Deferred tax asset 163 740 401
137,408 111,534 123,815
Current assets
Inventories 32,480 32,803 31,898
Trade and other receivables 32,405 26,278 23,268
Derivative financial instruments 185 335 250
Cash and cash equivalents 8 14,240 19,678 16,839
79,310 79,094 72,255
Current liabilities
Trade and other payables (27,420) (28,664) (23,827)
Bank overdrafts 8 (2,266) - (2,787)
Borrowings 8 (7,849) - -
Current tax liabilities (1,235) (572) (594)
Lease liabilities (1,763) (2,046) (2,057)
Provisions 5 (2,862) (4,028) (3,243)
(43,395) (35,310) (32,508)
Net current assets 35,915 43,784 39,747
Non-current liabilities
Deferred tax liability (3,903) (2,698) (3,583)
Retirement benefit obligations (5,536) (6,759) (7,713)
Other payables - - (123)
Lease liabilities (16,956) (8,968) (11,342)
Provisions 5 (324) (345) (363)
(26,719) (18,770) (23,124)
Net assets 146,604 136,548 140,438
Capital and reserves
Share capital 927 927 927
Share premium account 37,784 37,778 37,778
Cumulative translation reserve 10,143 12,702 10,825
Retained earnings 97,750 85,141 90,908
Equity attributable to owners of the parent 146,604 136,548 140,438
The interim financial information was approved by the Board of Directors on 28
June 2024 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
2024 Unaudited 2023 Unaudited
Note
£'000 £'000
Cash flows from operating activities
Cash generated from operations 7 7,120 8,211
Interest paid (394) (154)
Tax paid (1,783) (2,057)
Net cash generated from operating activities 4,943 6,000
Cash flows from investing activities
Interest received 1 39
Acquisition of subsidiaries (net of cash acquired) 9 (10,166) (678)
Purchase of property, plant and equipment (2,368) (2,221)
Purchase of intangible assets (143) (30)
Net cash used in investing activities (12,676) (2,890)
Cash flows from financing activities
Proceeds from issue of ordinary shares 6 152
Purchase of Employee Benefit Trust shares (319) (372)
Increase in borrowings 8 10,720 -
Decrease in borrowings 8 (2,871) -
Repayment of lease liabilities (1,803) (1,259)
Net cash generated from/(used in) financing activities 5,733 (1,479)
Net (decrease)/increase in cash and cash equivalents 8 (2,000) 1,631
Effects of exchange rate changes (78) (250)
(2,078) 1,381
Cash and cash equivalents at the beginning of the period 14,052 18,297
Cash and cash equivalents at the end of the period 8 11,974 19,678
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 Total
£'000 £'000 equity
£'000
At 1 December 2022 927 37,626 15,453 77,062 131,068
Profit for the period - - - 8,849 8,849
Other comprehensive (expense)/income - - (2,751) 750 (2,001)
Total comprehensive (expense)/income for the period
- - (2,751) 9,599 6,848
Purchase of own shares (held in trust) - - - (372) (372)
Issue of ordinary share capital - 152 - - 152
Share-based payments (net of tax) - - - 597 597
Dividends - - - (1,745) (1,745)
At 31 May 2023 927 37,778 12,702 85,141 136,548
At 1 December 2023 927 37,778 10,825 90,908 140,438
Profit for the period - - - 8,309 8,309
Other comprehensive (expense)/income - - (682) 132 (550)
Total comprehensive (expense)/income for the period
- - (682) 8,441 7,759
Purchase of own shares (held in trust) - - - (319) (319)
Issue of ordinary share capital - 6 - - 6
Share-based payments (net of tax) - - - 562 562
Dividends - - - (1,842) (1,842)
At 31 May 2024 927 37,784 10,143 97,750 146,604
The accompanying notes are an integral part of this interim financial
information.
Notes
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 (unaudited)
Six months ended 31 May
2024 2023 Growth
Aerospace & Industrial £'000 £'000 %
Underlying revenue 34,297 34,503 (1)
Acquisition 4,916 -
Revenue at constant currency 39,213 34,503 14
Exchange 1,221 2,037
Revenue as reported 40,434 36,540 11
Laboratory
Underlying revenue 26,090 26,964 (3)
Acquisition 4,247 -
Revenue at constant currency 30,337 26,964 13
Exchange 1,732 2,163
Revenue as reported 32,069 29,127 10
Metal Melt Quality
Revenue at constant currency 20,028 21,655 (8)
Exchange 2,108 3,230
Revenue as reported 22,136 24,885 (11)
Group
Underlying revenue 80,415 83,122 (3)
Acquisitions 9,163 -
Revenue at constant currency 89,578 83,122 8
Exchange 5,061 7,430
Revenue as reported 94,639 90,552 5
Revenue at constant currency is derived from translating overseas subsidiaries
results at budgeted fixed exchange rates. In 2024 and 2023, the rates used
were US$1.40:£1 and €1.20:£1, compared with actual rates of US$1.27:£1
(2023: US$1.22:£1) and €1.17:£1 (2023: €1.14:£1).
Underlying revenue is revenue at constant currency adjusted for the impact of
acquisitions made in the current period and prior year.
The acquisition lines relate to the revenue from Ratiolab and EFC, acquired in
July 2023 and December 2023 respectively.
Alternative profit measures (unaudited)
A reconciliation of the Group's adjusted performance measures to the reported
IFRS measures is presented below:
H1 2024 H1 2023
Adjusted Adjustments Reported Adjusted Adjustments Reported
£'000 £'000 £'000 £'000 £'000 £'000
Operating profit 12,468 (883) 11,585 12,226 (573) 11,653
Finance costs (1,013) - (1,013) (437) - (437)
Profit before tax 11,455 (883) 10,572 11,789 (573) 11,216
Income tax expense (2,472) 209 (2,263) (2,449) 82 (2,367)
Profit for the period 8,983 (674) 8,309 9,340 (491) 8,849
An analysis of adjusting items is given below:
2024 2023
Affecting operating profit: £'000 £'000
Amortisation of acquired intangible assets (883) (370)
Other acquisition-related costs - (203)
(883) (573)
Affecting tax:
Tax effect of adjustments to operating profit 209 82
Total adjusting items (674) (491)
Adjusted operating profit excludes:
· the amortisation of intangible assets arising on acquisition of
businesses of £0.9 million (2023: £0.4 million); and
· other acquisition-related costs of £nil (2023: £0.2 million)
incurred in relation to the acquisition of certain business and assets from
HRW acquired in March 2023; the 100% share capital of Ratiolab acquired in
July 2023; and the 100% share capital of EFC acquired in December 2023 (note
9).
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. The key profit measure used to
assess the performance of each reportable segment is adjusted operating
profit/(loss). Management has determined the operating segments based on
this reporting.
As at 31 May 2024, 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 superalloys 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 2024 are as follows:
2024 - Unaudited
Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Total segment revenue 40,434 32,689 22,136 - 95,259
Inter-segment revenue - (620) - - (620)
Revenue 40,434 32,069 22,136 - 94,639
Adjusted operating profit/(loss)
5,846 4,521 3,565 (1,464) 12,468
Amortisation of acquired intangible assets
(573) (310) - - (883)
Operating profit/(loss) 5,273 4,211 3,565 (1,464) 11,585
Finance costs - - - (1,013) (1,013)
Profit/(loss) before tax 5,273 4,211 3,565 (2,477) 10,572
The segment results for the period ended 31 May 2023 are as follows:
2023 - Unaudited
Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Total segment revenue 36,553 30,076 24,885 - 91,514
Inter-segment revenue (13) (949) - - (962)
Revenue 36,540 29,127 24,885 - 90,552
Adjusted operating profit/(loss)
5,359 4,898 3,715 (1,746) 12,226
Amortisation of acquired intangible assets
(217) (153) - - (370)
Other acquisition-related costs
- - - (203) (203)
Operating profit/(loss) 5,142 4,745 3,715 (1,949) 11,653
Finance costs - - - (437) (437)
Profit/(loss) before tax 5,142 4,745 3,715 (2,386) 11,216
The segment assets and liabilities at 31 May 2024 are as follows:
At 31 May 2024 - Unaudited
Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Segmental assets 87,009 77,913 34,930 2,626 202,478
Cash and cash equivalents - - - 14,240 14,240
Total assets 87,009 77,913 34,930 16,866 216,718
Segmental liabilities (27,607) (13,602) (4,862) (8,392) (54,463)
Retirement benefit obligations - - - (5,536) (5,536)
Bank overdrafts - - - (2,266) (2,266)
Borrowings - - - (7,849) (7,849)
Total liabilities (27,607) (13,602) (4,862) (24,043) (70,114)
The segment assets and liabilities at 31 May 2023 are as follows:
At 31 May 2023 - Unaudited
Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Segmental assets 70,099 64,762 34,099 1,990 170,950
Cash and cash equivalents - - - 19,678 19,678
Total assets 70,099 64,762 34,099 21,668 190,628
Segmental liabilities (20,488) (13,498) (6,587) (6,748) (47,321)
Retirement benefit obligations - - - (6,759) (6,759)
Total liabilities (20,488) (13,498) (6,587) (13,507) (54,080)
The segment assets and liabilities at 30 November 2023 are as follows:
At 30 November 2023 - Audited
Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Segmental assets 67,456 74,835 34,470 2,470 179,231
Cash and cash equivalents - - - 16,839 16,839
Total assets 67,456 74,835 34,470 19,309 196,070
Segmental liabilities (18,709) (13,533) (6,301) (6,589) (45,132)
Retirement benefit obligations - - - (7,713) (7,713)
Bank overdrafts - - - (2,787) (2,787)
Total liabilities (18,709) (13,533) (6,301) (17,089) (55,632)
Geographical analysis
Six months ended 31 May
2024 2023
Unaudited Unaudited
Revenue By destination By origin By destination By origin
£'000 £'000 £'000 £'000
United Kingdom 9,308 23,363 8,975 24,018
Continental Europe 26,824 25,682 18,475 14,054
United States of America 39,665 43,074 43,250 49,701
Other NAFTA 2,212 - 2,204 -
South America 792 - 1,448 -
Asia 14,498 2,520 15,395 2,779
Africa 1,340 - 805 -
94,639 94,639 90,552 90,552
3. Earnings per share (EPS)
Six months ended 31 May
2024 2023
Unaudited Unaudited
As reported Earnings Weighted average number of shares Per share Earnings Weighted average number of shares Per share
£'000 Pence £'000 Pence
Profit for the period - attributable to owners of the parent
8,309 8,849
Shares in issue 46,355,562 46,343,604
Shares owned by the Employee Benefit Trust
(367,852) (410,009)
Basic EPS 8,309 45,987,710 18.1 8,849 45,933,595 19.3
Dilutive share options outstanding
- 42,588 - - 18,087 -
Diluted EPS 8,309 46,030,298 18.1 8,849 45,951,682 19.3
In addition to the above, the Group also calculates an EPS 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
2024 2023
Unaudited Unaudited
Adjusted Earnings Weighted average number of shares Per share Earnings Weighted average number of shares Per share
£'000 Pence £'000 Pence
Profit for the period - attributable to owners of the parent
8,309 8,849
Adjusting items (note 1) 674 491
Adjusted profit -attributable to owners of the parent
8,983 9,340
Adjusted Basic EPS 8,983 45,987,710 19.5 9,340 45,933,595 20.3
Adjusted Diluted EPS 46,030,298 19.5 9,340 45,951,682 20.3
4. Dividends per share
Six months ended 31 May
2024 2023
Unaudited Unaudited
Per share Per share
Pence £'000 Pence £'000
Final dividend approved 4.0 1,842 3.8 1,745
The final dividend approved for the year ended 30 November 2023 was paid to
shareholders on 5 June 2024.
The Directors have declared an interim dividend of 2.1 pence (2023: 2.0 pence)
per share to be paid on 21 August 2024 to shareholders on the register at the
close of business on 19 July 2024; the ex-dividend date is 18 July 2024.
5. Provisions
Dilapidations Warranty Total
£'000 £'000 £'000
At 1 December 2023 363 3,243 3,606
Additional charge in the period - 185 185
Utilisation of provision - (212) (212)
Release of provision (62) (347) (409)
Unwinding of discount 23 - 23
Exchange - (7) (7)
At 31 May 2024 324 2,862 3,186
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.
6. Contingent liabilities
The Group has €2.8 million (31 May 2023: €0.8 million; 30 November 2023:
€3.0 million) of unexpired advanced payment and performance bonds issued in
the ordinary course of business. The advanced payment bonds are expected to
expire no later than July 2026 and the performance bonds no later than October
2027.
7. Cash generated from operations
Six months ended 31 May
2024 2023
Unaudited Unaudited
£'000 £'000
Operating profit 11,585 11,653
Adjustments for:
Fair value movement of derivatives through profit and loss 65 (100)
Share-based payments 532 552
Depreciation of property, plant and equipment and amortisation of intangibles
2,904 2,127
Depreciation of right-of-use assets 1,323 1,124
Operating cash flows before movement in working capital 16,409 15,356
Decrease/(increase) in inventories 192 (2,301)
Increase in trade and other receivables (7,718) (2,313)
Increase/(decrease) in trade and other payables 840 (734)
(Decrease)/increase in provisions (437) 351
Increase in working capital (7,123) (4,997)
Post employment benefits (net cash movement) (2,166) (2,148)
Cash generated from operations 7,120 8,211
8. Reconciliation of net cash flow to movement in net
cash/(debt)
Six months ended 31 May
2024 2023
Unaudited Unaudited
£'000 £'000
Net cash at the beginning of the period 653 6,825
(Decrease)/increase in cash and cash equivalents (2,000) 1,631
Net movement in borrowings (7,849) -
(Increase)/decrease in lease liabilities (5,426) 348
Effects of exchange rate changes 28 (140)
Net (debt)/cash at the end of the period (14,594) 8,664
Cash and cash equivalents 14,240 19,678
Bank overdraft (2,266) -
Borrowings (7,849) -
4,125 19,678
Lease liabilities (18,719) (11,014)
Net (debt)/cash at the end of the period (14,594) 8,664
9. Acquisition
On 4 December 2023, the Group acquired 100% of the share capital of European
Filter Corporation NV ("EFC"), a filtration business based in Lummen,
Belgium. EFC has expertise in the manufacture of mist elimination filters
used in the production of industrial feedstocks and well-established
industrial filtration sales channels in north east Europe. EFC joins the
Group's Aerospace & Industrial division, bringing complementary products
and engineering as well as strengthening European routes to market.
The acquisition completed on a cash free, debt free basis and subject to an
agreed level of working capital. Total cash consideration of £10.3 million
was paid in the period. In the period since acquisition, EFC has contributed
£4.9 million of revenue at constant currency and £1.0 million of adjusted
operating profit to the Group results.
The following table sets out the consideration paid, together with the
provisional fair value of assets acquired and liabilities assumed:
Total
£'000
Cash consideration 10,294
Provisional fair value of net assets acquired (below) (4,745)
Goodwill 5,549
Fair value
£'000
Property, plant and equipment (including right-of-use assets) 2,344
Trademark, customer order book and relationships (included within intangible 4,092
assets)
Inventories 944
Trade and other receivables 1,592
Cash and cash equivalents 128
Trade and other payables (including lease liabilities) (3,554)
Deferred tax liability (801)
Provisional fair value of net assets acquired 4,745
An independent valuation of the identifiable intangible assets has been
carried out in the period. The provisional value of acquired intangible
assets comprise trademarks of £0.6 million, a customer order book of £0.2
million and customer relationships of £3.3 million.
The goodwill is attributable to 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 Aerospace & Industrial division
and is not expected to be deductible for income tax purposes.
These provisional fair values may be adjusted in future in accordance with
IFRS 3 Business Combinations.
10. Exchange rates
Exchange rates for the US dollar and Euro during the period were:
Average rate to 31 May 24 Average rate to 31 May 23 Closing rate at 31 May 24 Closing rate at 30 Nov 23
Unaudited Unaudited Unaudited Unaudited
US dollar 1.27 1.22 1.27 1.27
Euro 1.17 1.14 1.17 1.16
11. 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 2024 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 2023, which were prepared in
accordance with applicable law and UK-adopted International Accounting
Standards.
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 2023. A number of new amendments are
effective from 1 December 2023 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 2023.
After having made appropriate enquiries, including a review of progress
against the Group's budget for 2024, its current trading and medium-term
plans; taking into account the banking facilities available until May 2025,
together with the positive progress being made to renew the four year secured
revolving credit facility, with an option to extend by one year, 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
2023, which were approved by the Board of Directors on 2 February 2024, 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 2023. 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 2023. Since the publication of the Annual Report
for the year ended 30 November 2023, Sarah Vawda resigned from the Board. 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
28 June 2024
INDEPENDENT REVIEW REPORT TO PORVAIR PLC
Conclusion
We have been engaged by Porvair plc ('the Company') to review the condensed
set of financial statements of the Company and its subsidiaries (the 'Group')
in the interim financial report for the six months ended 31 May 2024 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 11. We
have read the other information contained in the interim financial report and
considered whether it contains any apparent misstatements of fact or material
inconsistencies with the information in the condensed set of financial
statements.
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 2024 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.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ('ISRE (UK) 2410') issued 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.
As disclosed in note 11, the annual financial statements of the Group are
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.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group and
the Company to cease to continue as a going concern.
Responsibilities of Directors
The interim financial report, is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
financial report 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.
In preparing the interim financial report, the directors are responsible for
assessing the Group's and the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's Responsibilities for the Review of the Financial Information
In reviewing the interim financial report, we are responsible for expressing
to the Company a conclusion on the condensed set of financial statements in
the interim financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information performed by the Independent Auditor of the Entity". 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
28 June 2024
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