REG - Porvair PLC - Results for the year ended 30 November 2022
30/01/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230130:nRSd1725Oa&default-theme=true
RNS Number : 1725O Porvair PLC 30 January 2023
For immediate
release
30 January 2023
Porvair plc
Results for the year ended 30 November 2022
Porvair plc ("Porvair" or "the Group"), the specialist filtration, laboratory
and environmental technology group, announces its results for the year ended
30 November 2022.
Highlights:
· Revenue 18% higher at £172.6 million (2021: £146.3 million),
13% higher on a constant currency basis*.
· Operating profit 25% higher at £19.8 million (2021: £15.8
million).
· Adjusted operating profit* 29% higher at £20.5 million (2021:
£15.9 million).
· Profit before tax 26% higher at £18.7 million (2021: £14.8
million).
· Adjusted profit before tax* 31% higher at £19.4 million (2021:
£14.8 million).
· Basic earnings per share 23% higher at 32.1 pence (2021: 26.0
pence).
· Adjusted basic earnings per share* 32% higher at 33.2 pence
(2021: 25.2 pence).
· Net cash was £18.3 million (2021: £10.2 million) after
investing £5.9 million (2021: £7.2 million) in capital expenditure and
acquisitions.
· Recommended final dividend of 3.8 pence (2021: 3.5 pence)
bringing the full year dividend to 5.7 pence (2021: 5.3 pence).
Commenting on the results and outlook, Ben Stocks, Chief Executive, said:
"2022 was a record year with 13% constant currency revenue growth and adjusted
profit before tax 31% higher. All three divisions traded well to deliver top
line growth ahead of the Group's fifteen-year average of 9% revenue CAGR.
Porvair's strategy and devolved management structure together helped to
overcome challenging supply chain, inflationary and operating conditions.
"As we move into 2023 the Board sees some reasons for caution in the
near-term: supply chain dislocation, while diminishing, requires vigilance;
inflationary pressures continue; the wider economic picture is uncertain and
there is a likelihood of currency headwinds. However, the Group order book
finished the year at record levels despite clear signs of lead times returning
to normal; the aerospace outlook is healthier than it has been since 2019; the
petrochemical orderbook is encouraging; and recent new product introductions
will support growth. Consistent investment in productivity over the last five
years is improving operating margins and a strong balance sheet will support
continued investment in 2023. Porvair benefits from global growth trends
including tightening environmental regulation; 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. These trends have supported a consistent medium and
long-term growth record and the Board is confident that this can continue."
* 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
020 7466 5000
Buchanan Communications
Charles Ryland / Simon Compton / George Cleary
An analyst briefing will take place at 9:30 a.m. on Monday 30 January 2023,
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
2022 started with supply side dislocation and goods inflation exacerbated by
energy shocks and distorted by currency fluctuation. The year finished with
supply side issues diminishing, albeit slowly, and wage inflation gathering
pace. It was a year when close operational focus and attention to margins was
essential but could not be allowed to disrupt the delivery of longer-term
investments in productivity, product development and people.
The Group navigated challenging conditions satisfactorily, achieving reported
revenue growth of 18%, although this is flattered by foreign exchange.
Constant currency revenue growth was 13%. Revenue was driven by robust order
books throughout the year and price increases passed on whenever goods
inflation could not be avoided. Record profit and a focus on cash meant the
year finished with £18.3 million of cash on the balance sheet.
Porvair's devolved management structure is helpful in volatile conditions,
enabling key cost, price and inventory decisions to be made close to the
market. Operational objectives shared across all general managers were around
cash generation, margin enhancement and active employee engagement; with
almost all targets set delivered or exceeded. Details of our employee
engagement and environmental programmes are published in a separate ESG report
at the same time as these financial results.
Financial results
2022 2021 Growth
£m £m %
Revenue 172.6 146.3 18
Operating profit 19.8 15.8 25
Adjusted operating profit* 20.5 15.9 29
Profit before tax 18.7 14.8 26
Adjusted profit before tax* 19.4 14.8 31
Pence Pence
Earnings per share 32.1 26.0 23
Adjusted earnings per share* 33.2 25.2 32
£m £m
Cash generated from operations 22.8 18.6
Net cash (excluding lease liabilities) 18.3 10.2
* See notes 1, 2 and 3 for definitions and reconciliations.
Revenue was 18% higher. Profit before tax increased by 26%. Adjusted profit
before tax was up 31% and adjusted earnings per share up 32%.
It was a year of unusually strong currency tail-winds. At constant currency,
revenue growth was 13% (see note 1). The direct effects of foreign exchange on
profit are harder to measure. We estimate that adjusted operating profit at
constant currency would have been around £19.0 million and adjusted earnings
per share around 31 pence.
The Group's record for growth, cash generation and investment is:
5 years 10 years 15 years
CAGR* CAGR* CAGR*
Revenue growth 8% 8% 9%
Earnings per share growth 10% 12% 12%
Adjusted earnings per share growth 11% 13% 12%
£m £m £m
Cash from operations 86.7 152.1 187.8
Investment in acquisitions and capital expenditure 44.8 78.7 96.4
* Compound annual growth rate
Porvair's strategy and purpose has remained consistent for 18 years, a period
that now encompasses two recessions and a pandemic. 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 as set out in the full ESG report.
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; and
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: 50% of revenue was in the Americas; 18% in Asia; 21% in
Continental Europe; 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:
55% of revenue was manufactured in the US; 29% in the UK; 13% in Continental
Europe; and 3% in China;
· We aim to meet dividend and investment needs from free cash flow
and modest borrowing facilities. In recent years we have expanded
manufacturing capacity in the UK, Germany, US and China, and made several
acquisitions. All investments are subject to a hurdle rate analysis based on
strategic and financial priorities.
Environmental, Social and Governance ('ESG')
The Board understands that responsible business development is essential for
creating long-term value for stakeholders. Most of the products made by
Porvair are used for 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 is published with this statement, setting out:
· Porvair's ESG management framework, goals and TCFD reporting;
· How climate change and a net zero carbon future might affect
markets served by the Group;
· ESG metrics and results; and
· How the Group has acted for the benefit of its stakeholders in
2022.
In 2020 the Group set a target to achieve a 10% reduction in carbon intensity
ratio by 2025. As set out in the ESG report, this was exceeded in 2022. The
Board has reset the target to achieve a further 10% reduction from the 2022
baseline.
Divisional review
Aerospace & Industrial
2022 2021 Growth
£m £m %
Revenue 64.7 55.8 16
Operating profit 6.8 3.9 74
Adjusted operating profit* 7.2 4.4 64
* 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; and quality accreditations.
Revenue grew 16%, or 13% at constant currency (note 1), with aerospace,
nuclear and microelectronics all well ahead of the prior year. It was a slower
year for petrochemical work but orders picked up in the final quarter and the
outlook is brighter, particularly for emissions control work in India. For the
second year there were no gasification sales with current filters performing
better than expected in situ. Aerospace revenue was up 19% and the order book
for 2023 is healthy.
Operating profit benefitted from both volume and pricing effects and were
further improved by productivity investments made in covid-affected prior
years. Adjusted operating profit margin at 11.1% is returning to pre-pandemic
levels. Investments continued through the year to improve quality, capacity
and productivity.
It was a good year for recently introduced products. While relatively modest
in revenue terms, unusual engineering challenges were successfully undertaken
for both the SpaceX and Blue Origin space programmes; the US DoE nuclear waste
remediation programme at Hanford River; and the International Thermonuclear
Experimental Reactor in France.
Laboratory
2022 2021 Growth
£m £m %
Revenue 62.7 53.2 18
Operating profit 10.0 9.6 4
Adjusted operating profit* 10.3 9.6 7
* See notes 1 and 2 for definitions and reconciliations.
The Laboratory division has two operating businesses: Porvair Sciences
(including JG 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 18%, or 14% at constant currency (note 1), with both Seal
Analytical and the Life Sciences consumables segments achieving record sales.
Kbio performed well, returning to more normal sales patterns after a
covid-related boost in the prior year and helped by increased sales into the
US through JG Finneran sales channels.
Operating profit was up 7%, or 5% in constant currency, with margins softening
as flattering covid-related work settled back and a more normal product mix
returned. Adjusted operating profit margin at 16.4% is at satisfactory levels.
Investment continued through the year in tooling and capacity expansion for
sample preparation products.
The recently introduced AQ700 water analysis instrument exceeded expectations
in the year and will be a key component in Seal's future growth. Based on
proprietary component design this is a high-throughput, low detection-limit
instrument ideally suited to laboratories where automation of process is
becoming essential.
Metal Melt Quality
2022 2021 Growth
£m £m %
Revenue 45.2 37.4 21
Operating profit 5.7 5.7 -
Adjusted operating profit* 5.7 5.1 12
* 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 a promising new product pipeline.
Revenue was at a record level, growing at 21%, or 11% at constant currency
(note 1). Post-covid recovery in aerospace and foundry-related markets helped,
as did further progress in the demand for metal grades suitable for electric
and hybrid vehicles; and the switch from plastic to recyclable aluminium
beverage packaging. Over 90 billion cans were made from aluminium filtered by
Porvair in 2022.
Operating profit was up 12%, or 6% in constant currency. Adjusted margin was
ahead of target at 12.6%, marginally less than the prior year which was
flattered by lower than normal selling and other costs.
Dividends
The Board re-affirms its progressive dividend policy and recommends a final
dividend of 3.8 pence per share, at a value of £1.7 million (2021: 3.5 pence
per share, at a value of £1.6 million). The full year dividend increases by
7.5% to 5.7 pence per share, a value of £2.6 million (2021: 5.3 pence per
share, a value of £2.4 million). The Company had £36.5 million (2021:
£27.8 million) of distributable reserves at 30 November 2022.
Staff
In many respects, of our various stakeholders, it is our staff that are the
most crucial. 2022 was not an easy year in which to work in manufacturing
operations with the macro shocks of inflation and economic uncertainty
combining with micro complications of supply disruption and covid-related
absence. The staff across our 17 facilities have coped well and the Board
wishes to salute their resourcefulness and perseverance. Porvair believes in
devolving management autonomy as far as possible, and our management teams are
remunerated in part by how well they execute the employee engagement framework
set out by the Board. The Board is very grateful for the hard work, enthusiasm
and dedication of all our staff.
Current trading and outlook
2022 was a record year with 13% constant currency revenue growth and adjusted
profit before tax 31% higher. All three divisions traded well to deliver top
line growth ahead of the Group's fifteen-year average of 9% revenue CAGR.
Porvair's strategy and devolved management structure together helped to
overcome challenging supply chain, inflationary and operating conditions.
As we move into 2023 the Board sees some reasons for caution in the near-term:
supply chain dislocation, while diminishing, requires vigilance; inflationary
pressures continue; the wider economic picture is uncertain and there is a
likelihood of currency headwinds. However, the Group order book finished the
year at record levels despite clear signs of lead times returning to normal;
the aerospace outlook is healthier than it has been since 2019; the
petrochemical orderbook is encouraging; and recent new product introductions
will support growth. Consistent investment in productivity over the last five
years is improving operating margins and a strong balance sheet will support
continued investment in 2023. Porvair benefits from global growth trends
including tightening environmental regulation; 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. These trends have supported a consistent medium and
long-term growth record and the Board is confident that this can continue.
Ben Stocks
Group Chief Executive
27 January 2023
Financial review
Group results
2022 2021 Growth
£m £m %
Revenue 172.6 146.3 18
Operating profit 19.8 15.8 25
Profit before tax 18.7 14.8 26
Profit after tax 14.7 11.9 24
Revenue was 18% higher on a reported currency basis and 13% higher at constant
currency (see note 1). Operating profit was £19.8 million (2021: £15.8
million) and profit before tax was £18.7 million (2021: £14.8 million).
Profit after tax was £14.7 million (2021: £11.9 million).
Alternative performance measures - profit
2022 2021 Growth
£m £m %
Adjusted operating profit 20.5 15.9 29
Adjusted profit before tax 19.4 14.8 31
Adjusted profit after tax 15.3 11.6 32
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 adjusted item provides a more consistent
assessment of the Group's trading. Adjusting items comprise a £0.7 million
charge (2021: a net £0.1 million charge) for the amortisation of acquired
intangible assets. The details of these adjustments are set out in note 1.
Impact of exchange rate movements on performance
The international nature of the Group's business means that relative movements
in exchange rates can affect reported performance. The rates used for
translating the results of overseas operations were:
2022 2021
Average rate for translating the results:
US $ denominated operations $1.25:£ $1.37:£
Euro denominated operations €1.18:£ €1.16:£
Closing rate for translating the balance sheet:
US $ denominated operations $1.19:£ $1.32:£
Euro denominated operations €1.16:£ €1.18:£
The movement in average rates used for translating US dollar and Euro results
into Sterling has resulted in a net favourable revenue variance year-on-year
of £8.2 million, between reported and constant currency (note 1 explains how
constant currency performance is determined).
During the year, the Group sold US$25.0 million (2021: US$16.5 million) at a
net rate of US$1.29:£1(2021: US$1.36:£1) and €2.6 million (2021: €10.5
million) at a net rate of €1.19:£1 (2021: €1.14:£1). At 30 November
2022, the Group had US$13.0 million (2021: US$1.0 million) and €0.4 million
(2021: €0.3 million) of outstanding forward foreign exchange contracts;
hedge accounting has not been applied to these contracts.
Finance costs
Net interest payable comprises bank borrowing costs, interest on lease
liabilities, interest on the Group's pension deficit and the cost of unwinding
discounts on provisions and other payables. Interest in the year remained flat
at £1.1 million (2021: £1.1 million). Interest cover was 18 times (2021: 15
times). Interest cover on bank finance costs was 57 times (2021: 51 times).
Tax
The total Group tax charge for the year was £4.0 million (2021: £2.8
million), including the tax effect of adjusting items which are set out in
note 1. The adjusted tax charge was £4.2 million (2021: £3.2 million),
with the effective rate of income tax on adjusted profit before tax being 21%
(2021: 22%). The Group effective tax rate was impacted by overseas profits,
which attract higher tax rates than the current 19% in the UK, noting the
enacted increase in UK Corporation Tax to 25% from April 2023.
The total tax charge comprises current tax of £3.4 million (2021: £2.7
million) and deferred tax of £0.6 million (2021: £0.1 million).
The Group has current tax provisions of £0.3 million (2021: £0.9 million),
which includes £1.1 million (2021: £1.1 million) for uncertainties relating
to the interpretation of tax legislation in the Group's operating territories,
offset by payments on account and amounts recoverable for overpayments of tax.
The Group carries a deferred tax asset of £1.0 million (2021: £1.8 million)
and a deferred tax liability of £2.8 million (2021: £2.4 million). The
deferred tax asset relates principally to the retirement benefit obligations
and share-based payments. The deferred tax liability relates to accelerated
capital allowances, acquired intangible assets arising on consolidation and
other timing differences.
Total equity and distributable reserves
Total equity at 30 November 2022 was £131.1 million (2021: £108.9 million),
an increase of 20% over the prior year.
The net increase in total equity includes profit after tax of £14.7 million
(2021: £11.9 million), a net of tax actuarial gain of £1.3 million (2021:
£1.6 million), together with a £7.8 million exchange gain (2021: £nil) on
the retranslation of foreign subsidiaries.
The Company had £36.5 million (2021: £27.8 million) of distributable
reserves at 30 November 2022. The Company's distributable reserves increased
in the year from dividends received from Group companies, together with an
actuarial gain, offset by head office costs and dividends paid to
shareholders.
Cash flow
The table below summarises the key elements of the cash flow for the year:
2022 2021
£m £m
Operating cash flow before working capital 26.9 21.0
Working capital movement (2.7) (0.8)
Post-employment benefits (net cash movement) (1.4) (1.6)
Cash generated from operating activities 22.8 18.6
Interest (0.4) (0.3)
Tax (4.1) (2.2)
Capital expenditure (4.9) (3.2)
13.4 12.9
Acquisitions (1.0) (4.0)
Share issue proceeds 0.5 0.1
Purchase of Employee Benefit Trust shares (0.7) (0.7)
Decrease in borrowings (5.0) (3.7)
Dividends (2.5) (2.3)
Repayment of lease liabilities (2.5) (2.3)
Increase in cash 2.2 -
Net debt reconciliation 2022 2021
£m £m
Net debt at 1 December (2.0) (8.7)
Increase in cash 2.2 -
Decrease in borrowings 5.0 3.7
Decrease in lease liabilities 1.2 1.1
Paycheck Protection Program loan waiver - 1.4
Exchange gains 0.4 0.5
Net cash/(debt) at 30 November 6.8 (2.0)
Net cash 18.3 10.2
Lease liabilities (11.5) (12.2)
Net cash/(debt) at 30 November 6.8 (2.0)
Generating free cash flow is key to the Group's business model. Operating
cash flow of £22.8 million was generated in the year (2021: £18.6 million),
with net working capital increasing by £2.7 million (2021: £0.8 million).
Receivables increased by £2.0 million (2021: decrease £0.2 million) as a
result of the revenue growth, with strong collections throughout the year.
Working capital management supported the investment in certain inventory
items, given the wide-spread supply chain dislocation and need to sure up
security of supply. Inventories increased by £4.9 million (2021: £0.5
million) and payables and provisions increased by £4.2 million (2021:
decrease of £0.5 million).
Provisions and contingent liabilities
The Group has £4.0 million (2021: £4.7 million) of provisions for
dilapidations and performance warranties. £0.4 million of warranty provisions
have been created in relation to sales made in the year. £1.1 million of
warranty provisions have been released in the year, following the latest
estimate of the expected costs to be incurred.
At 30 November 2022, the Group had the following advanced payment bonds
(relating to monies received in advance on contracts) and performance bonds
issued to customers in US dollars and Euros:
$m €m
Advanced payment bonds - 0.7
Performance bonds 1.0 0.3
At 30 November 2022 1.0 1.0
$m €m
Advanced payment bonds - 0.3
Performance bonds 2.5 0.8
At 30 November 2021 2.5 1.1
The uncalled performance bonds are expected to be called or released no later
than December 2024.
Capital expenditure
Capital expenditure on property, plant and equipment was £4.9 million in the
year (2021: £3.2 million), as the Group stepped up investment in capital
projects with a particular emphasis on automation and productivity.
Acquisitions
On 25 February 2021, the Group purchased 100% of the share capital of Kbio.
Contingent consideration paid in the 2022 year was £1.0 million. A further
and final £1.0 million of consideration is contingent on Kbio meeting a
profit target for the year ending 31 March 2023. This amount discounted is
accrued within 'Trade and other payables' at 30 November 2022.
Retirement benefit obligations
Retirement benefit obligations measured in accordance with IAS 19 Employee
Benefits were £9.8 million (2021: £12.6 million). The Group supports its
defined benefit pension scheme in the UK ("The Plan"), which is closed to new
members, and provides access to defined contribution schemes for its other
employees. The Plan's liabilities decreased in the year to £34.1 million
(2021: £49.6 million). The Plan's assets also decreased in the year to £24.5
million (2021: £37.0 million). Following a change in financial assumptions,
including an increase in the discount rate, together with a loss on assets, a
net of tax actuarial gain of £1.3 million (2021: gain of £1.6 million) was
recognised within the statement of comprehensive income.
Cash contributions paid to The Plan were £2.1 million (2021: £2.3 million),
which included a deficit recovery payment of £1.6 million (2021: £1.6
million). The triennial actuarial valuation was completed in the year based on
the Plan's position at 31 March 2021. Based on the valuation, the Group has
agreed to increase the annual deficit recovery payment from £1.6 million to
£2.1 million, effective December 2022.
Borrowings and bank finance
At 30 November 2022, the Group had cash balances of £18.3 million (2021:
£15.4 million) and borrowings of £nil (2021: £5.2 million); with net cash
(excluding lease liabilities) of £18.3 million (2021: £10.2 million).
At 30 November 2022, the Group had €27.7 million/£23.9 million (2021:
€21.5 million/£18.3 million) of unused credit facilities and an unutilised
£2.5 million (2021: £2.5 million) overdraft facility.
Finance and treasury policy
The treasury function at Porvair is managed centrally, under Board
supervision. It seeks to limit the Group's trading exposure to currency
movements. The Group does not hedge against the impact of exchange rate
movements on the translation of profits and losses of overseas operations.
The Group finances its operations through share capital, retained profits and,
when required, bank debt. It has adequate facilities to finance its current
operations and capital plans for the foreseeable future.
James Mills
Group Finance Director
27 January 2023
Consolidated income statement
For the year ended 30 November
2022 2021
Continuing operations Note £'000 £'000
Revenue 1,2 172,575 146,310
Cost of sales (113,597) (99,353)
Gross profit 58,978 46,957
Distribution costs (2,759) (2,391)
Administrative expenses (36,409) (28,724)
Adjusted operating profit 1,2 20,498 15,885
Adjustments:
Amortisation of acquired intangible assets (688) (740)
Other acquisition-related adjustments - (98)
Impairment of assets and restructuring costs - (542)
Paycheck Protection Program - 1,337
Operating profit 1,2 19,810 15,842
Finance costs (1,072) (1,084)
Profit before tax 1,2 18,738 14,758
Adjusted income tax expense (4,169) (3,210)
Adjustments:
Tax effect of adjustments to operating profit 1 145 396
Income tax expense (4,024) (2,814)
Profit for the year 1,2 14,714 11,944
Earnings per share (basic) 3 32.1p 26.0p
Earnings per share (diluted) 3 32.0p 26.0p
Adjusted earnings per share (basic) 3 33.2p 25.2p
Adjusted earnings per share (diluted) 3 33.2p 25.2p
Consolidated statement of comprehensive income
For the year ended 30 November
2022 2021
£'000 £'000
Profit for the year 14,714 11,944
Other comprehensive income
Items that will not be reclassified to profit and loss:
Actuarial gain in defined benefit pension plans net of tax 1,257 1,600
Items that may be subsequently reclassified to profit and loss:
Exchange gains on translation of foreign subsidiaries 7,796 12
Total other comprehensive income for the year 9,053 1,612
Total comprehensive income for the year 23,767 13,556
Consolidated balance sheet
As at 30 November
2022 2021
Note £'000 £'000
Non-current assets
Property, plant and equipment 24,311 21,235
Right-of-use assets 10,144 11,014
Goodwill and other intangible assets 77,900 74,103
Deferred tax asset 1,046 1,821
113,401 108,173
Current assets
Inventories 30,973 24,650
Trade and other receivables 24,471 21,344
Derivative financial instruments 554 -
Cash and cash equivalents 18,297 15,442
74,295 61,436
Current liabilities
Trade and other payables (27,881) (21,702)
Current tax liabilities (309) (853)
Lease liabilities (2,156) (2,207)
Derivative financial instruments (319) (20)
Provisions 5 (3,692) (4,372)
(34,357) (29,154)
Net current assets 39,938 32,282
Non-current liabilities
Borrowings - (5,217)
Deferred tax liability (2,811) (2,425)
Retirement benefit obligations (9,816) (12,602)
Other payables - (945)
Lease liabilities (9,316) (10,024)
Provisions 5 (328) (296)
(22,271) (31,509)
Net assets 131,068 108,946
Capital and reserves
Share capital 927 924
Share premium account 37,626 37,078
Cumulative translation reserve 15,453 7,657
Retained earnings 77,062 63,287
Equity attributable to owners of the parent 131,068 108,946
Consolidated cash flow statement
For the year ended 30 November
2022 2021
Note £'000 £'000
Cash flows from operating activities
Cash generated from operations 7 22,798 18,624
Interest paid (403) (305)
Tax paid (4,118) (2,215)
Net cash generated from operating activities 18,277 16,104
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired) (1,000) (3,968)
Purchase of property, plant and equipment (4,826) (3,182)
Purchase of intangible assets (61) (47)
Proceeds from sale of property, plant and equipment 17 9
Net cash used in investing activities (5,870) (7,188)
Cash flows from financing activities
Proceeds from issue of ordinary shares 551 152
Purchase of Employee Benefit Trust shares (749) (716)
Decrease in borrowings (4,986) (3,687)
Dividends paid to shareholders 4 (2,478) (2,345)
Repayments of lease liabilities (2,503) (2,292)
Net cash used in financing activities (10,165) (8,888)
Net increase in cash and cash equivalents 2,242 28
Exchange gains/(losses) on cash and cash equivalents 613 (149)
2,855 (121)
Cash and cash equivalents at 1 December 15,442 15,563
Cash and cash equivalents at 30 November 18,297 15,442
Reconciliation of net cash flow to movement in net debt
2022 2021
£'000 £'000
Net debt at 1 December (2,006) (8,735)
Increase in cash and cash equivalents 2,242 28
Decrease in borrowings 4,986 3,687
Decrease in lease liabilities 1,194 1,147
Paycheck Protection Program loan waiver - 1,337
Effects of exchange rate changes 409 530
Net cash/(debt) at 30 November 6,825 (2,006)
Net cash and bank debt 18,297 10,225
Lease liabilities (11,472) (12,231)
Net cash/(debt) at 30 November 6,825 (2,006)
Consolidated statement of changes in equity
For the year ended 30 November
Share Cumulative
Share capital premium account translation reserve Retained earnings Total
£'000 £'000 £'000 £'000 equity
£'000
At 1 December 2020 923 36,927 7,645 52,697 98,192
Profit for the year - - - 11,944 11,944
Other comprehensive income - - 12 1,600 1,612
Total comprehensive income for the year - - 12 13,544 13,556
Purchase of own shares (held in trust) - - - (716) (716)
Issue of ordinary share capital 1 151 - - 152
Share-based payments charge - - - 107 107
Dividends paid - - - (2,345) (2,345)
At 30 November 2021 924 37,078 7,657 63,287 108,946
Profit for the year - - - 14,714 14,714
Other comprehensive income - - 7,796 1,257 9,053
Total comprehensive income for the year - - 7,796 15,971 23,767
Purchase of own shares (held in trust) - - - (749) (749)
Issue of ordinary share capital 3 548 - - 551
Share-based payments charge - - - 1,031 1,031
Dividends paid - - - (2,478) (2,478)
At 30 November 2022 927 37,626 15,453 77,062 131,068
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
2022 2021 Growth
Aerospace & Industrial £'000 £'000 %
Revenue at constant currency 61,864 54,888 13
Exchange 2,861 888
Revenue as reported 64,725 55,776 16
Laboratory
Underlying revenue 52,737 46,863 13
Acquisition 6,639 5,428
Revenue at constant currency 59,376 52,291 14
Exchange 3,308 885
Revenue as reported 62,684 53,176 18
Metal Melt Quality
Revenue at constant currency 40,236 36,225 11
Exchange 4,930 1,133
Revenue as reported 45,166 37,358 21
Group
Underlying revenue 154,837 137,976 12
Acquisition 6,639 5,428
Revenue at constant currency 161,476 143,404 13
Exchange 11,099 2,906
Revenue as reported 172,575 146,310 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 $1.25:£1
(2021: $1.37:£1) and €1.18:£1 (2021: €1.16:£1).
Underlying revenue is revenue at constant currency adjusted for the impact of
acquisitions made in the current and prior year.
The acquisition line relates to the revenue in relation to the acquisition of
Kbio, which was acquired in February 2021.
Alternative profit measures
A reconciliation of the Group's adjusted performance measures to the reported
IFRS measures is presented below:
2022 2021
Adjusted Adjustments Reported Adjusted Adjustments Reported
£'000 £'000 £'000 £'000 £'000 £'000
Operating profit 20,498 (688) 19,810 15,885 (43) 15,842
Finance costs (1,072) - (1,072) (1,084) - (1,084)
Profit before tax 19,426 (688) 18,738 14,801 (43) 14,758
Income tax expense (4,169) 145 (4,024) (3,210) 396 (2,814)
Profit for the year 15,257 (543) 14,714 11,591 353 11,944
An analysis of adjusting items is given below:
2022 2021
Affecting operating profit: £'000 £'000
Amortisation of acquired intangible assets (688) (740)
Other acquisition-related adjustments - (98)
Impairment of assets and restructuring costs - (542)
Paycheck Protection Program - 1,337
(688) (43)
Affecting tax:
Tax effect of adjustments to operating profit 145 396
Total adjusting items (543) 353
Adjusted operating profit excludes:
· The amortisation of intangible assets arising on acquisition of
businesses of £0.7 million (2021: £0.7 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: £0.5 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).
The 2021 tax effect of adjustments to operating profit includes a credit in
relation to eligible costs incurred in 2020, 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.
Return on capital employed
The Group uses two return measures to assess the return it makes on its
investments:
· Return on capital employed of 15% (2021: 13%) is the tax adjusted
operating profit as a percentage of the average capital employed. Capital
employed is the average of the opening and closing Group net assets less the
average of the opening and closing net cash (excluding lease liabilities); and
· Return on operating capital employed of 36% (2021: 31%) is
calculated on the same basis except that the capital employed is adjusted to
remove the average of the opening and closing goodwill and the opening and
closing retirement benefit obligations to give a measure of the operating
capital.
2. Segment 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 30 November 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 year ended 30 November 2022 are as follows:
2022 Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Total segment revenue 64,864 64,453 45,166 - 174,483
Inter-segment revenue (139) (1,769) - - (1,908)
Revenue 64,725 62,684 45,166 - 172,575
Adjusted operating profit/(loss)
7,200 10,321 5,701 (2,724) 20,498
Amortisation of acquired intangible assets
(382) (306) - - (688)
Operating profit/(loss) 6,818 10,015 5,701 (2,724) 19,810
Finance costs - - - (1,072) (1,072)
Profit/(loss) before tax 6,818 10,015 5,701 (3,796) 18,738
The segment results for the year ended 30 November 2021 are as follows:
2021 Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Total segment revenue 55,918 54,965 37,358 - 148,241
Inter-segment revenue (142) (1,789) - - (1,931)
Revenue 55,776 53,176 37,358 - 146,310
Adjusted operating profit/(loss)
4,399 9,649 5,074 (3,237) 15,885
Amortisation of acquired intangible assets
(396) (344) - - (740)
Other acquisition-related adjustments
- - - (98) (98)
Impairment of assets and restructuring costs
(542) - - - (542)
Paycheck Protection Program
407 295 635 - 1,337
Operating profit/(loss) 3,868 9,600 5,709 (3,335) 15,842
Finance costs - - - (1,084) (1,084)
Profit/(loss) before tax 3,868 9,600 5,709 (4,419) 14,758
The segment assets and liabilities at 30 November 2022 are as follows:
2022 Aerospace & Industrial Metal Melt Quality
Laboratory Central Group
£'000 £'000 £'000 £'000 £'000
Segmental assets 68,033 63,324 36,063 1,979 169,399
Cash and cash equivalents - - - 18,297 18,297
Total assets 68,033 63,324 36,063 20,276 187,696
Segmental liabilities (21,640) (13,168) (6,893) (5,111) (46,812)
Retirement benefit obligations - - - (9,816) (9,816)
Total liabilities (21,640) (13,168) (6,893) (14,927) (56,628)
The segment assets and liabilities at 30 November 2021 are as follows:
2021 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
2022 2021
Revenue By destination By origin By destination By origin
£'000 £'000 £'000 £'000
United Kingdom 17,715 50,018 14,886 42,652
Continental Europe 35,898 21,695 31,534 25,873
United States of America 80,537 96,370 64,673 71,695
Other NAFTA 3,592 - 2,647 -
South America 2,409 - 2,642 -
Asia 30,785 4,492 28,688 6,090
Africa 1,639 - 1,240 -
172,575 172,575 146,310 146,310
3. Earnings per share (EPS)
2022 2021
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 year - attributable to owners of the parent
14,714 11,944
Shares in issue 46,211,979 46,170,094
Shares owned by the Employee Benefit Trust
(319,288) (198,822)
Basic EPS 14,714 45,892,691 32.1 11,944 45,971,272 26.0
Dilutive share options outstanding
- 18,598 (0.1) - 38,370 -
Diluted EPS 14,714 45,911,289 32.0 11,944 46,009,642 26.0
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.
2022 2021
Earnings Weighted average number of shares Per share Earnings Weighted average number of shares Per share
Adjusted
£'000 Pence £'000 Pence
Profit for the year - attributable to owners of the parent
14,714 11,944
Adjusting items (note 1) 543 (353)
Adjusted profit -attributable to owners of the parent
15,257 11,591
Adjusted basic EPS 15,257 45,892,691 33.2 11,591 45,971,272 25.2
Adjusted diluted EPS 15,257 45,911,289 33.2 11,591 46,009,642 25.2
4. Dividends per share
2022 2021
Per share Per share
Pence £'000 Pence £'000
Final dividend paid - in respect of prior year 3.5 1,606 3.3 1,517
Interim dividend paid - in respect of current year 1.9 872 1.8 828
5.4 2,478 5.1 2,345
The Directors recommend the payment of a final dividend of 3.8 pence per share
(2021: 3.5 pence per share) to be paid on 7 June 2023 to shareholders on the
register on 5 May 2023; the ex-dividend date is 4 May 2023. This makes a
total dividend for the year of 5.7 pence per share (2021: 5.3 pence per
share).
5. Provisions
Dilapidations Warranty Total
£'000 £'000 £'000
At 30 November 2021 296 4,372 4,668
Additional charge in the year - 439 439
Utilisation of provision - (40) (40)
Release of provision - (1,120) (1,120)
Unwinding of discount 32 - 32
Exchange - 41 41
At 30 November 2022 328 3,692 4,020
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. The outflow of economic benefits in relation to warranty provisions
is expected to be within one year, whilst the outflow on dilapidations is
expected to be greater than one year.
2022 2021
Analysis of total provisions £'000 £'000
Current 3,692 4,372
Non-current 328 296
Net book value at 30 November 4,020 4,668
6. Contingent liabilities
At 30 November 2022, the Group had the following advanced payment bonds
(relating to monies received in advance on contracts) and performance bonds:
$'000 €'000
Advanced payment bonds - 657
Performance bonds 956 353
At 30 November 2022 956 1,010
$'000 €'000
Advanced payment bonds - 320
Performance bonds 2,549 811
At 30 November 2021 2,549 1,131
$1.0 million (2021: $2.5 million) of the performance bonds relate to the
contracts for filtration systems provided for gasification projects. These
projects are being commissioned, a process which is taking several years.
The Group has provided its best estimate of the amount of any potential loss
arising from rectification and claims arising on these contracts within the
£3.7 million warranty provisions disclosed in note 5. The uncalled
performance bonds are expected to be called or released no later than December
2024.
7. Cash generated from operations
2022 2021
£'000 £'000
Operating profit 19,810 15,842
Adjustments for:
Payment Protection Program loan waiver - (1,337)
Fair value movement of derivatives through profit and loss (255) 43
Share-based payments 1,057 247
Depreciation of property, plant and equipment and amortisation of intangibles 3,845 3,662
Depreciation of right-of-use assets 2,212 2,138
Impairment of property, plant and equipment 186 195
Impairment of right-of-use assets 14 150
Loss on disposal of property, plant and equipment - 68
Operating cash flows before movement in working capital 26,869 21,008
Increase in inventories (4,919) (476)
(Increase)/decrease in trade and other receivables (2,044) 215
Increase/(decrease) in trade and other payables 5,032 (256)
Decrease in provisions (783) (282)
Increase in working capital (2,714) (799)
Post-employment benefits (net cash movement) (1,357) (1,585)
Cash generated from operations 22,798 18,624
8. Related parties
There were no related party transactions in the year ended 30 November 2022
other than Directors' compensation.
9. Basis of preparation
The results for the year ended 30 November 2022 have been prepared in
accordance with The Companies Act 2006 and UK-adopted International Accounting
Standards. The financial information contained in this announcement does not
constitute statutory accounts as defined in Section 434 of The Companies Act
2006. The financial information has been extracted from the financial
statements for the year ended 30 November 2022, which have been approved by
the Board of Directors and on which the auditors have reported without
qualification. The financial statements will be delivered to the Registrar
of Companies after the Annual General Meeting. The financial statements for
the year ended 30 November 2021, upon which the auditors reported without
qualification, have been delivered to the Registrar of Companies.
10. Annual general meeting
The Company's Annual General Meeting will be held at 11.00 a.m. on Tuesday 18
April 2023 at the offices of Buchanan Communications, 107 Cheapside, London,
EC2V 6DN.
11. Responsibility Statement
Each of the Directors confirms, to the best of their knowledge, that:
· the financial statements, on which this announcement is based,
have been prepared in accordance with The Companies Act 2006 and UK-adopted
International Accounting Standards, and give a true and fair view of the
assets, liabilities, financial position, and profit or loss of the Company and
the undertakings included in the consolidation taken as a whole; and
· the review of the business includes a fair review of the
development and performance of the business and the position of the Company
and the undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face.
The Directors of Porvair are listed in the Porvair Annual Report for the year
ended 30 November 2021. Ami Sharma joined the Board on 1 January 2023. A
list of current Directors is maintained on the Porvair plc website,
www.porvair.com (http://www.porvair.com) . Copies of full accounts will be
sent to shareholders in March 2023. Additional copies will be available from
www.porvair.com.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FLFSLLDITFIVRecent news on Porvair
See all newsREG - Porvair PLC - Director/PDMR Shareholding
AnnouncementREG - Porvair PLC - AGM Results Announcement
AnnouncementREG - Porvair PLC - AGM Trading Update & Board Update
AnnouncementREG - Porvair PLC - Director resignation
AnnouncementREG - Porvair PLC - Director declaration
Announcement