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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Porvair Plc | LSE:PRV | London | Ordinary Share | GB0006963689 | ORD 2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 618.00 | 608.00 | 614.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Chemicals & Chem Preps, Nec | 176.01M | 15.97M | 0.3445 | 17.94 | 286.45M |
From Apr 2019 to Apr 2024
TIDMPRV
RNS Number : 3769V
Porvair PLC
30 January 2017
For immediate release 30 January 2017
Porvair plc
Results for the year ended 30 November 2016
Record profit before tax and strong cash generation
Porvair plc ("Porvair" or "the Group"), the specialist filtration and environmental technology group, today announces its results for the year ended 30 November 2016.
Highlights
Strong financial performance:
-- Record revenue of GBP109.4 million (2015: GBP95.8 million), up 14%. At constant currency* up 8%.
-- Profit before tax up 10% to a record GBP10.1 million (2015: GBP9.2 million). -- Basic earnings per share up 10% to 17.1 pence (2015: 15.5 pence).
-- Strong cash generation: net cash increased to GBP13.6 million at 30 November 2016 (2015: GBP10.7 million). GBP7.4 million (2015: GBP4.4 million) invested in capital expenditure and acquisitions.
-- Final dividend of 2.4 pence per share (2015: 2.2 pence per share) recommended, an increase of 9%.
Metals Filtration:
-- Revenue up 12% to GBP34.7 million (2015: GBP31.0 million). 1% up in constant currency, following a strong second half.
-- 89% sales growth in China and promising pipeline going into 2017.
-- 12% operating profit decline to GBP2.2 million (2015: GBP2.4 million) largely due to planned start-up costs in China.
-- Record aluminium filtration sales.
Microfiltration:
-- Record revenue and profit. Revenue up 15% to GBP74.6 million (2015: GBP64.8 million), up 11% in constant currency.
-- Operating profit up 22% to GBP11.8 million (2015: GBP9.7 million). -- Record revenue in aviation filtration. -- Record results at Seal Analytical. -- TEM, acquired in December 2015, delivered a strong first year.
Outlook:
-- Further investments in capacity, new product development and skills planned. -- Healthy order position going into 2017.
Commenting on the outlook, Ben Stocks, Chief Executive, said:
"Porvair finished 2016 strongly and the Group has started 2017 with a healthy order position. Investments in capacity and manufacturing capabilities allow room for further growth. The acquisition made in December 2015 continues to perform ahead of expectations. New products will be introduced in aviation, nuclear filtration and by Seal Analytical. The modest losses incurred in our Chinese start-up are expected to diminish. Overall, the Group remains in a strong financial position and a good start has been made to the current year."
*See note 14 for definition of revenue at constant currency
For further information please contact:
Hot Features
Premium
Porvair plc 020 7466 today
5000
Ben Stocks, Chief Executive 01553 765 thereafter
500
Chris Tyler, Group Finance
Director
020 7466
Buchanan Communications 5000
Charles Ryland / Steph
Watson
An analyst briefing will take place at 9:30 a.m. on Monday 30 January 2017 at Buchanan. An audio webcast and a copy of the presentation will be available at www.porvair.com on the day.
Operating review
Overview of 2016
2016 2015 Growth
GBPm GBPm %
Revenue 109.4 95.8 14
------ ------ -------
Profit before tax 10.1 9.2 10
------ ------ -------
Earnings per share 17.1p 15.5p 10
------ ------ -------
Cash generated from operations 13.3 13.3 -
------ ------ -------
Net cash 13.6 10.7 27
------ ------ -------
Profit before tax in the year ended 30 November 2016 was up 10% to a record GBP10.1 million. Earnings per share increased 10% to 17.1 pence. Robust cash generation enabled the Group to finish the year with net cash of GBP13.6 million after investing GBP7.4 million in capital expenditure and acquisitions.
Revenue was GBP109.4 million, an increase of 14%. Currency translation benefited reported revenues. At constant currency growth was 8%.
Record revenue was achieved in aviation, by the Microfiltration division's US operation, by Seal Analytical and in aluminium filtration. Demand in the nuclear, general industrial and bioscience markets was also strong. TEM, the microelectronics business acquired in December 2015 had an excellent first year.
Further investments in organic growth were made. The Microfiltration division's US operation moved to new premises, expanding manufacturing and office space. In China, commissioning of the aluminium filter production line finished. Of our eleven manufacturing sites, eight have been extended and upgraded in recent years. In 2017 investment will continue as we build further capacity to meet growing demand.
Over the last five years the Group has delivered revenue growth of 60% (10% CAGR) and cash from operations of GBP63 million. Over the same period, GBP28 million has been invested in capital expenditure and acquisitions, and net debt of GBP5.1 million has moved into a cash position of GBP13.6 million. In 2016, the Group's after tax operating profit return on operating capital was 48% (2015: 49%), up from 21% five years ago.
Strategic statement
Porvair's strategy has remained consistent for a number of years. It is to generate shareholder value through the development of specialist filtration and associated environmental technology businesses, both organically and by acquisition. Such 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 often designed into a specification and will typically have long life cycles.
This strategy continues to work for the Group, which moves into 2017 in a position of financial strength, able to invest in both organic and acquired growth as appropriate.
Business model outline
Our customers require filtration or emission control products that perform to a given specification. We win business by offering the best technical solutions for these requirements at an acceptable commercial cost. Filtration expertise is applicable across all markets with new products generally being adaptations of existing designs. Experience in particular markets or applications is valuable in building customer confidence. Domain knowledge is important, as is deciding where to direct resources.
This leads us to:
1. Focus on markets where we see long term growth potential.
2. Look for applications where product use is mandated and replacement demand is therefore regular.
3. Make new product development a core business activity. 4. Establish geographic presence where end-markets require. 5. Invest in both organic and acquired growth.
Therefore:
-- We focus on four markets: aviation; energy and industrial; laboratories; and molten metals. All have clear structural growth drivers.
-- Our products are specialist in nature and typically protect costly or complex downstream systems. As a result they are replaced regularly. A high proportion of our annual revenue is from repeat orders.
-- We prioritise new product development in order to generate growth rates in excess of the underlying market. Where possible we build robust intellectual property around our product developments. About 30% of our revenue is derived from patent protected products.
-- Our geographic presence follows the markets we serve. 46% of revenue is in the Americas, where aviation and metals filtration are strong. 24% of revenue is in Asia, where sales into water analysis markets are growing and the demand for gasification plants is strongest.
-- 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 small acquisitions. All investments are subject to a hurdle rate analysis based on strategic and financial priorities.
Operating structure
-- The Group has two divisions. The Microfiltration division serves the aviation, energy and industrial, and laboratory markets. The Metals Filtration division focuses on filtration of molten metals, principally aluminium.
-- The Group has plants in the US, UK, Germany and China. 48% of revenue is manufactured in the US, 41% in the UK, 8% in Germany and 3% in China.
Investment and future development
The main investments during 2016 were:
-- The acquisition of TEM filters in December 2015, greatly expanding our offering in microelectronics filtration and opening new routes into that market.
-- A new manufacturing facility and headquarters for US industrial filtration, opened in March 2016, doubling our production capacity, upgrading equipment and creating space for engineering and sales expansion.
-- A new facility for Seal Analytical in the US opened in December 2016, creating additional capacity for manufacturing and product development for our water analysis and laboratory supplies business.
-- The final commissioning of the Metals Filtration aluminium filtration line in China, products from which are now shipping across Asia. Further investments will be made in 2017 to expand our foundry filter capability in China.
-- Additional manufacturing capacity in all three UK plants, mainly focused on increasing aviation output and shortening production lead times.
-- Further capacity expansion in Maine for US industrial production of sintered metal filters.
New product development remains core to Porvair's strategy, with incremental range extensions and increasing product differentiation being priorities. In 2016:
-- Testing of a new inerting filter for commercial aviation was completed. This will go into production in early 2017.
-- A patented aluminium filter for the Chinese market secured initial sales.
-- Seal Analytical launched two new platforms and three product upgrades. A further new platform, and two additional model upgrades are planned for 2017.
-- The range of filters acquired with TEM for microelectronics was updated, expanded and relaunched under a new brand. New products will be added to the range in 2017.
-- Six range extensions were introduced to Chromatrap for the filtration and separation of genetic materials.
-- An innovative, high strength HEPA filter was certified for use in nuclear air and gas treatment. Production will begin in 2017.
Divisional review
Metals Filtration
2016 2015 Growth
GBPm GBPm %
Revenue 34.7 31.0 12
----- ----- -------
Operating profit 2.2 2.4 (12)
----- ----- -------
Revenue from the Metals Filtration division was GBP34.7 million. This was a record, albeit flattered by currency movements, with constant currency revenue for the year up 1%. Having been 4% down after six months trading, performance in the second half of the year was encouraging, particularly against a dollar headwind for this business which exports 40% of its production.
Operating profit fell 12%, principally due to a second year of planned losses in the Chinese start-up. These are expected to diminish in 2017 as the plant builds revenue and investments in staff and training start to take effect.
This division serves three market segments and has a well differentiated and patented product range:
-- Selee CSX(TM) and Selee CSW(TM) for aluminium cast house filtration. These products have a unique environmental footprint in being free of phosphates and ceramic fibres.
-- Selee IC(TM) for grey and ductile iron filtration. This range is sold principally in the US and offers excellent filtration efficiency.
-- Selee SA(TM) for the filtration of nickel-cobalt alloys. This niche application requires exceptional filtration performance and uses a proprietary additive manufacturing technique.
Sales of aluminium filters were at record levels, driven partly by revenue in China which grew by 89%. We expect our proprietary formulation will be attractive in higher quality Chinese aluminium cast houses. We are prepared to be patient in building our position in this market, selling on value rather than price.
The environmental and filtration benefits of our filters were recognised with a further exclusive multi-year supply contract for Arconic's (formerly Alcoa) global cast house filter needs. Sales of Selee CSX(TM) achieved another record in 2016.
We will make further modest investments in China in 2017 to expand our foundry market capacity there. We have made some productivity gains in the US using automation, robotics and additive manufacturing and will invest further in these in 2017.
Microfiltration
2016 2015 Growth
GBPm GBPm %
Revenue 74.6 64.8 15
----- ----- -------
Operating profit 11.8 9.7 22
----- ----- -------
Record results were achieved in the Microfiltration division. Revenue was up 15% to GBP74.6 million (11% at constant currency) and operating profits were up 22% to GBP11.8 million.
General levels of demand were encouraging. Aviation revenues grew 21% and the new product pipeline is promising. Orders for new programmes, including the Airbus NEO, Airbus A350, Boeing 777X, Bombardier C Series and Mitsubishi MRJ, are starting to come through. Nuclear filtration had a good year with further orders anticipated for 2017. Revenues in the US from both general industrial and Seal Analytical were up 9%. The 2017 orderbook for bioscience filtration is good, with sales of our licenced technology to Thermo Fisher again growing. We will expand our bioscience production capabilities early in 2017.
Large gasification projects continue to be an area of focus. At the half year we expected commissioning in Korea to be largely complete by the year end, but delays in the wider project have slowed its final start-up. We have seen only minor issues with our equipment thus far and are pleased with progress. The project in India is expected to begin commissioning towards the end of 2017 and the one in China is on track. An Indian Joint Venture agreement with Mascot Dynamics and contracts to build the filter cleaning equipment we have designed have been signed.
As discussed in previous statements, the Group has adopted long term contract accounting for these large projects. Revenue is principally recognised through the manufacturing and shipping phase of each project: GBP19.5 million was reported in 2014; GBP5.5 million in 2015; and GBP9.7 million in 2016. Allowance is made for potential future costs arising during the commissioning and warranty stages of the projects. Profits are therefore recognised as the projects mature.
The microelectronics business acquired in December 2015 has started positively with both revenue and profit well ahead of expectations. New management has been appointed following the earn-out period, several new distributors are being appointed and new products will roll out in 2017.
Seal Analytical achieved another record result with revenue growing by 17%, 6% in constant currency. Seal is a leading supplier of equipment and consumables to laboratories and specialises in equipment for the detection of inorganic contamination in water. This niche market grows as water quality standards improve, with demand particularly strong in 2016 from China and the US. Seal distinguishes itself from its competitors with an active new product development programme. Four new platforms have been introduced over the last four years and one more will be introduced in 2017. Seal's five year CAGR revenue growth is 11%. We plan to expand our German manufacturing footprint in 2017.
Dividends
The Board re-affirms its preference for a progressive dividend and recommends an improved final dividend of 2.4 pence per share (2015: 2.2 pence). This makes the full year dividend 3.8 pence per share (2015: 3.5 pence), an increase of 9%.
Staff
Porvair continues to expand and the Board welcomes the new staff who have joined us during 2016. We recognise that our success is entirely due to the skill and commitment of our people, to whom we offer our thanks.
As we grow, retaining staff and developing key skills becomes increasingly important. We put more emphasis on training across the Group in 2016 and this will increase again in 2017.
On behalf of shareholders and the Group we sent our condolences to the family of Dr Krishnamurthy Rajagopal, who died in November. He was a wise and highly effective Non-Executive Director of the Group whose contribution is missed.
We were delighted to welcome Sally Martin to the Board as an Independent Non-Executive Director in October 2016. Sally is Vice President of Health, Safety, Security and Environmental at the Downstream division of Shell International Petroleum and is a member of the Chartered Institute of Electrical Engineers. She has joined the Audit, Remuneration and Nomination Committees. Sally will become Chairman of the Remuneration Committee from the AGM in April 2017.
Current trading and outlook
Porvair finished 2016 strongly and the Group has started 2017 with a healthy order position. Investments in capacity and manufacturing capabilities allow room for further growth. The acquisition made in December 2015 continues to perform ahead of expectations. New products will be introduced in aviation, nuclear filtration and by Seal Analytical. The modest losses incurred in our Chinese start-up are expected to diminish. Overall, the Group remains in a strong financial position and a good start has been made to the current year.
Ben Stocks
Group Chief Executive
27 January 2017
Financial review
Group operating performance
2016 2015 Growth
GBPm GBPm %
Revenue 109.4 95.8 14
------ ----- -------
Operating profit 10.7 9.8 9
------ ----- -------
Profit before tax 10.1 9.2 10
------ ----- -------
Reported revenue growth was 14%. At constant currency, translating overseas subsidiaries at the same rates in 2015 and 2016, revenue was up 8%. Operating profit was up 9% and profit before tax grew 10%.
Operating profit margins were 9.7% (2015: 10.2%), with margin improvements in the Microfiltration division offset by a reduction in Metals Filtration, as a result of start-up losses in the new China plant, and an increase in Other Unallocated expenses. Other Unallocated expenses cover central costs and increased to GBP3.3 million (2015: GBP2.4 million) largely due to currency contract mark-to-market provisions.
Operating profit includes amortisation charges on intangible assets arising on acquisition of GBP0.3 million (2015: GBP0.2 million); a charge of GBP0.1 million (2015: credit of GBP0.1 million) from the reassessment of acquisition consideration; acquisition expenses of GBPnil (2015: GBP0.1 million); and share based payment charges of GBP0.5 million (2015: GBP0.5 million).
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 average rate used for translating the results of US operations into Sterling was $1.38:GBP1 (2015: $1.53:GBP1) and the Group's Euro denominated operations were translated at EUR1.25:GBP1 (2015: EUR1.37:GBP1). The rates used to translate the balance sheet at 30 November 2016 were $1.25:GBP1 (2015: $1.51:GBP1) and EUR1.18:GBP1 (2015: EUR1.43:GBP1). Weaker Sterling lifted reported revenues by 6%. Translation gains increased operating profit by 7% compared with 2015 but were offset by mark to market provisions on forward currency sales such that there was little net currency impact on operating profit or earnings.
The Group sold $19.0 million and EUR6.75 million of its 2016 UK receipts during the financial year and achieved an average rate of $1.50:GBP1 (2015: $1.54:GBP1) and EUR1.23:GBP1 (2015: EUR1.39:GBP1), respectively.
At 30 November 2016, the Group had $12.0 million (2015: $8.8 million) of outstanding forward foreign exchange contracts taken out to translate the future receipts on the Group's dollar revenue generated by the UK operations; offset by $3.4 million of net current assets on the UK operations' balance sheet. The Group has applied hedge accounting to $1.0 million (2015: $4.0 million) of these contracts. The reduction in the value of the hedge in the year of GBP0.1 million (2015: charge of GBP0.2 million) is shown in the consolidated statement of comprehensive income. Included in Other Unallocated, the Group has taken a GBP1.0 million provision on marking to market the $7.6 million forward exchange contracts not covered by dollar denominated current assets.
Finance costs
Net interest payable remained at GBP0.6 million (2015: GBP0.6 million). Included within interest payable are finance costs in relation to the defined benefit pension scheme, which were GBP0.4 million (2015: GBP0.4 million) in the year. The Group incurs non-utilisation fees on its unused borrowing facilities, which were at a rate of 50% of the facility's margin until the end of April 2016, when the rate dropped to 35% of the margin. Non-utilisation fees comprise the majority of the remaining interest cost.
Interest cover was 18 times (2015: 16 times); excluding the impact of the pension finance charge, the interest cover is 66 times (2015: 61 times).
Tax
The Group tax charge was GBP2.3 million (2015: GBP2.2 million). This is an effective rate of 23% (2015: 24%), which is higher than the UK standard corporate tax rate of 20% (2015: 20.3%). Tax in the UK was reduced by the benefit of tax relief on the exercise of share options but the rates of tax are higher on profits made in Germany and the US. The tax charge comprises current tax of GBP2.4 million (2015: GBP2.3 million) and a deferred tax credit of GBP0.1 million (2015: GBP0.1 million).
The Group carries a deferred tax asset of GBP3.3 million (2015: GBP2.5 million) and a deferred tax liability of GBP1.7 million (2015: GBP1.5 million). The deferred tax asset relates principally to the deficit on the pension fund and share-based payments. The deferred tax liability relates to accelerated capital allowances, capitalised development costs and other timing differences, arising in the US.
Total equity and distributable reserves
Total equity at 30 November 2016 was GBP71.4 million (2015: GBP59.1 million), an increase of 21% over the prior year. Increases in total equity arose from: profit after tax of GBP8.2 million (2015: GBP7.3 million) with the charge for employee share option schemes net of tax (2016 GBP0.5 million; 2015: GBP0.3 million) added back; exchange gains on translation of GBP9.2 million (2015: GBP0.9 million); and GBP0.2 million (2015: GBPnil) arising on the proceeds of the issue of shares on share option exercises. Reductions in total equity arose from a pension scheme actuarial loss net of tax of GBP3.5 million (2015: gains of GBP0.4 million); dividends paid of GBP1.6 million (2015: GBP1.5 million); purchases by the Employee Benefit Trust of the Company's own shares charged directly to equity of GBP0.1m (2015: GBPnil) and a reduction of GBP0.1 million (2015: GBP0.1 million) in the value of hedge accounting instruments.
The Company had GBP9.9 million (2015 GBP8.3 million) of distributable reserves at 30 November 2016. Following the adoption of FRS101 in the Company accounts, distributable reserves as at 30 November 2015 have been restated from GBP18.2 million previously reported to GBP8.3 million. This arises principally as a result of including the Group's pension deficit on the Company balance sheet for the first time.
Return on capital employed
The Group's return on capital employed was 15% (2015: 16%). Excluding the impact of goodwill and the net pension liability, the return on operating capital employed was 48% (2015: 49%).
Cash flow
The table below summarises the key elements of the cash flow for the year:
2016 2015
GBPm GBPm
Operating cash flow before working
capital 13.7 12.5
Working capital movement (0.4) 0.8
------ ------
Cash generated from operating activities 13.3 13.3
Interest (0.2) (0.2)
Tax (2.1) (1.8)
Capital expenditure net of disposals (4.5) (3.3)
------ ------
6.5 8.0
Acquisitions (2.9) (1.1)
Dividends (1.6) (1.5)
Share issue proceeds 0.1 -
------ ------
Net cash increase in the year 2.1 5.4
Exchange gains 0.8 -
Net cash at 1 December 10.7 5.3
------ ------
Net cash at 30 November 13.6 10.7
------ ------
Net working capital increased by GBP0.4 million (2015: reduced by GBP0.8 million). Cash receipts less payments from large contracts was GBP1.0 million higher than the profit recognised in the year ended 30 November 2016. This reduction in working capital was offset by increased working capital from strong trading in the final quarter and in China associated with the start up of production in the new plant.
Construction contracts and performance bonds
The income statement impact of the large contracts is described in the Divisional Review above. At 30 November 2016, the Group had GBP0.8 million (2015: GBPnil) due from contract customers and amounts due to contract customers of GBP7.9 million (2015: GBP7.7 million), representing the amount by which progress billings at 30 November 2016 exceeds revenue recognised to date on these large contracts.
The contract customers generally provide advance payments to fund the initial stages of the contracts and the Group provides advance payment bonds to the customer as security. The bonds are cancellable after up to six months following the shipment of goods. At 30 November 2016 there were US$5.0 million (2015: US$5.3 million) of advance payment bonds outstanding.
The contract customers also generally require performance bonds to cover risks arising during the contract warranty periods. At 30 November 2016 the Group had US$7.2 million (2015: US$9.7 million) of performance bonds outstanding.
Capital expenditure
Capital expenditure was GBP4.5 million (2015: GBP3.8 million before disposal proceeds of GBP0.5 million). The principal investments in 2016 are described in the Operating Review. Capital expenditure in 2017 is expected to be at a similar level.
Acquisitions
On 4 December 2015, the Group acquired TEM Filter Company. The total consideration was $5.2 million (GBP3.6 million), of which $4.4 million (GBP2.9 million) was paid immediately. An estimated $0.9 million (GBP0.7 million) is expected to be paid in contingent consideration in 2017 based upon the performance of the business in its first year of ownership by the Group. $0.8 million of the contingent consideration is included in the original purchase cost and goodwill calculation, $0.1 million has been written off to the profit and loss account.
Pension schemes
The Group continues to support its defined benefit pension scheme in the UK, which is closed to new members, and to provide access to defined contribution schemes for its US employees and other UK employees.
The Group total pension cost was GBP2.4 million (2015: GBP2.3 million). GBP2.0 million (2015: GBP1.9 million) was recorded as an operating cost: GBP1.3 million (2015: GBP1.2 million) related to funding defined contributions schemes; GBP0.6 million (2015: GBP0.6 million) related to the charge for the Group's defined benefit scheme and GBP0.1 million (2015: GBPnil) related to the pension protection levy. GBP0.4 million (2015: GBP0.4 million) was charged as a finance cost in relation to the defined benefit scheme.
The Group's net retirement benefit obligation was GBP16.1 million (2015: GBP12.0 million). The Company contributions paid to the defined benefit scheme in the UK were GBP1.1 million (2015: GBP1.0 million). The service cost, administrative expenses and finance cost were GBP1.0 million (2015: GBP1.0 million) and the actuarial loss in the year was GBP4.2 million (2015: gain of GBP0.8 million). All of the assumptions adopted were broadly in line with the previous year with the exception of the discount rate used to value the liabilities which was reduced from 3.7% to 2.9%. This broadly accounts for the 18% in the increase in the plan liabilities to GBP42.1 million (2015: GBP35.7 million). The plan's assets increased to GBP26.1 million (2015: 23.8 million).
The defined benefit scheme had 46 (2015: 48) active members, 261 (2015: 271) deferred members and 249 (2015: 249) pensioners at 30 November 2016. The life expectancy of members of the scheme reaching age 65 at 30 November 2016 is assumed to be 21.7 years (2015: 21.6 years) for men and 23.7 years (2015: 23.6 years) for women. The weighted average duration of the plan scheme liabilities at the end of the period is 20 years (2015: 20 years).
A full triennial actuarial valuation of the assets and liabilities of the defined benefit scheme was completed in 2016, based on data at 31 March 2015. As a result of this review, the Group and the Trustees agreed to alter the employer's contributions from 13.3% of salary to 18.9% of salary. Additionally, the Group committed to making a GBP0.2 million annual contribution towards the running costs of the scheme from April 2016, which will increase by 3.5% per annum thereafter. The Group also committed to make additional annual contributions, to cover the past service deficit, of GBP1.0 million per annum commencing in December 2016. The next full actuarial valuation of the scheme will be based on the pension scheme's position at 31 March 2018 and is expected to be completed before June 2019.
Borrowings and bank finance
At the year end, the Group had cash balances of GBP13.6 million (2015: GBP10.7 million) and no borrowings (2015: GBPnil).
The Group signed a five year borrowing facility agreement on 25 January 2013 comprising a five year US$20 million revolving credit facility, a GBP2.5 million term loan (reduced to GBPnil million by 30 November 2015) and a GBP2.5 million overdraft facility. These facilities have margins over LIBOR ranging between 1.95% and 2.25%.
At 30 November 2016, the Group had $20 million (2015: $20 million) of unused loan facilities and an unused overdraft facility of GBP2.5 million (2015: GBP2.5 million).
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.
Chris Tyler
Group Finance Director
27 January 2017
Consolidated income statement
For the year ended 30 November
Note 2016 2015
Continuing operations GBP'000 GBP'000
Revenue 1 109,363 95,828
Cost of sales (73,350) (63,474)
--------- ---------
Gross profit 36,013 32,354
Distribution costs (1,418) (1,207)
Administrative expenses (23,926) (21,346)
--------- ---------
Operating profit 1 10,669 9,801
Finance income 9 12
Finance costs (595) (616)
Profit before income
tax 1 10,083 9,197
Income tax expense (2,347) (2,241)
Profit for the year attributable
to shareholders 7,736 6,956
--------- ---------
Earnings per share (basic) 2 17.1p 15.5p
Earnings per share (diluted) 2 17.1p 15.4p
Consolidated statement of comprehensive income
For the year ended 30 November
2016 2015
GBP'000 GBP'000
Profit for the year 7,736 6,956
--------- ---------
Other comprehensive income/(expense):
Items that will not be reclassified
to profit and loss
Actuarial (losses)/gains in defined
benefit pension plans net of
tax (3,486) 368
--------- ---------
Items that may subsequently be
classified to profit and loss
Exchange differences on translation
of foreign subsidiaries 9,243 890
Changes in fair value of forex
contracts held as a cash flow
hedge (67) (156)
--------- ---------
9,176 734
--------- ---------
Net other comprehensive income 5,690 1,102
--------- ---------
Total comprehensive income for
the year attributable to shareholders
of Porvair plc 13,426 8,058
--------- ---------
Consolidated balance sheet
As at 30 November
Note 2016 2015
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 4 18,102 14,216
Goodwill and other intangible
assets 5 52,578 43,547
Deferred tax asset 3,291 2,529
73,971 60,292
Current assets
Inventories 15,001 12,350
Trade and other receivables 18,593 14,621
Cash and cash equivalents 13,633 10,738
--------- -----------
47,227 37,709
Current liabilities
Trade and other payables 6 (25,873) (23,192)
Current tax liabilities (1,921) (1,405)
Derivative financial instruments (1,578) (154)
--------- -----------
(29,372) (24,751)
Net current assets 17,855 12,958
--------- -----------
Non-current liabilities
Deferred tax liability (1,739) (1,465)
Retirement benefit obligations (16,117) (11,993)
Provisions for other liabilities
and charges 9 (2,524) (728)
--------- -----------
(20,380) (14,186)
--------- -----------
Net assets 71,446 59,064
--------- -----------
Capital and reserves
Share capital 10 906 896
Share premium account 10 35,513 35,359
Cumulative translation reserve 10,949 1,706
Retained earnings 24,078 21,103
--------- -----------
Total equity 71,446 59,064
--------- -----------
Consolidated cash flow statement
For the year ended 30 November
Note 2016 2015
GBP'000 GBP'000
Cash flows from operating
activities
Cash generated from operations 13 13,364 13,294
Interest paid (170) (155)
Tax paid (2,090) (1,836)
--------- ---------
Net cash generated from operating
activities 11,104 11,303
--------- ---------
Cash flows from investing
activities
Interest received 9 12
Acquisition of subsidiaries
(net of cash acquired) 12 (2,930) (1,087)
Purchase of property, plant
and equipment 4 (4,362) (3,823)
Purchase of intangible assets 5 (162) (16)
Proceeds from sale of property,
plant and equipment 14 502
Net cash used in investing
activities (7,431) (4,412)
--------- ---------
Cash flows from financing
activities
Proceeds from issue of ordinary
share capital 10 164 34
Purchase of Employee Benefit (77) -
Trust shares
Repayment of borrowings - (2,630)
Dividends paid to shareholders 3 (1,625) (1,479)
Net cash used in financing
activities (1,538) (4,075)
--------- ---------
Net increase in cash and
cash equivalents 2,135 2,816
Gains on cash and cash equivalents 760 31
--------- ---------
2,895 2,847
Cash and cash equivalents
at 1 December 10,738 7,891
--------- ---------
Cash and cash equivalents
at 30 November 13,633 10,738
--------- ---------
Reconciliation of net cash flow to movement in net cash
2016 2015
GBP'000 GBP'000
Net increase in cash and cash
equivalents 2,135 2,816
Effects of exchange rate changes 760 28
Repayment of borrowings - 2,630
Net cash at 1 December 10,738 5,264
--------- ---------
Net cash at 30 November 13,633 10,738
--------- ---------
Consolidated statement of changes in equity
Share Cumulative
Share premium translation Retained
capital account reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- ------------- ----------- ----------
Balance at 1 December
2014 887 35,334 816 15,096 52,133
---------- --------- ------------- ----------- ----------
Profit for the year - - - 6,956 6,956
Other comprehensive
income/(expense):
Exchange differences
on translation of
foreign subsidiaries - - 890 - 890
Changes in fair value
of foreign exchange
contracts held as
a cash flow hedge - - - (156) (156)
Actuarial gains in
defined benefit pension
plans net of tax - - - 368 368
---------- --------- ------------- ----------- ----------
Total comprehensive
income for the year - - 890 7,168 8,058
---------- --------- ------------- ----------- ----------
Transactions with
owners:
Employee share option
schemes:
* value of employee services net of tax - - - 318 318
Proceeds from shares
issued 9 25 - - 34
Dividends approved
or paid - - - (1,479) (1,479)
---------- --------- ------------- ----------- ----------
Total transactions
with owners recognised
directly in equity 9 25 - (1,161) (1,127)
---------- --------- ------------- ----------- ----------
Balance at 30 November
2015 896 35,359 1,706 21,103 59,064
---------- --------- ------------- ----------- ----------
Balance at 1 December
2015 896 35,359 1,706 21,103 59,064
---------- --------- ------------- ----------- ----------
Profit for the year - - - 7,736 7,736
Other comprehensive
income/(expense):
Exchange differences
on translation of
foreign subsidiaries - - 9,243 - 9,243
Changes in fair value
of interest rate swaps
held as a cash flow
hedge - - - (67) (67)
Actuarial losses in
defined benefit pension
plans net of tax - - - (3,486) (3,486)
---------- --------- ------------- ----------- ----------
Total comprehensive
income for the year - - 9,243 4,183 13,426
---------- --------- ------------- ----------- ----------
Transactions with
owners:
Consideration paid
for purchase of own
shares (held in trust) - - - (77) (77)
Employee share option
schemes:
* value of employee services net of tax - - - 494 494
Proceeds from shares
issued 10 154 - - 164
Dividends approved
or paid - - - (1,625) (1,625)
---------- --------- ------------- ----------- ----------
Total transactions
with owners recognised
directly in equity 10 154 - (1,208) (1,044)
---------- --------- ------------- ----------- ----------
Balance at 30 November
2016 906 35,513 10,949 24,078 71,446
---------- --------- ------------- ----------- ----------
Notes
1. Segment information
The segmental analyses of revenue, operating profit/(loss), segment assets and liabilities and geographical analyses of revenue are set out below:
2016 Metals Microfiltration Other Group
Filtration Unallocated
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 34,745 74,618 - 109,363
------------ ---------------- ------------- --------
Operating profit/(loss) 2,156 11,848 (3,335) 10,669
Net finance costs - - (586) (586)
------------ ---------------- ------------- --------
Profit/(loss) before
income tax 2,156 11,848 (3,921) 10,083
Income tax expense - - (2,347) (2,347)
------------ ---------------- ------------- --------
Profit/(loss) for
the year 2,156 11,848 (6,268) 7,736
------------ ---------------- ------------- --------
2015 Metals Microfiltration Other Group
Filtration Unallocated
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 30,984 64,844 - 95,828
------------ ---------------- ------------- --------
Operating profit/(loss) 2,448 9,704 (2,351) 9,801
Net finance costs - - (604) (604)
------------ ---------------- ------------- --------
Profit/(loss) before
income tax 2,448 9,704 (2,955) 9,197
Income tax expense - - (2,241) (2,241)
------------ ---------------- ------------- --------
Profit/(loss) for
the year 2,448 9,704 (5,196) 6,956
------------ ---------------- ------------- --------
Other Group operations are included in "Other Unallocated". These mainly comprise Group corporate expenditure such as head office and Board costs, new business development and general financial costs.
1. Segment information continued
Segment assets and liabilities
At 30 November Metals Microfiltration Other Group
2016 Filtration Unallocated
GBP'000 GBP'000 GBP'000 GBP'000
Segmental assets 36,683 65,762 5,120 107,565
Cash and cash
equivalents - - 13,633 13,633
------------ ---------------- ------------- ---------
Total assets 36,683 65,762 18,753 121,198
------------ ---------------- ------------- ---------
Segmental liabilities (4,650) (22,565) (6,420) (33,635)
Retirement benefit
obligations - - (16,117) (16,117)
Total liabilities (4,650) (22,565) (22,537) (49,752)
------------ ---------------- ------------- ---------
At 30 November Metals Microfiltration Other Group
2015 Filtration Unallocated
GBP'000 GBP'000 GBP'000 GBP'000
Segmental assets 28,520 55,445 3,298 87,263
Cash and cash
equivalents - - 10,738 10,738
------------ ---------------- ------------- ---------
Total assets 28,520 55,445 14,036 98,001
------------ ---------------- ------------- ---------
Segmental liabilities (3,851) (19,087) (4,006) (26,944)
Retirement benefit
obligations - - (11,993) (11,993)
Total liabilities (3,851) (19,087) (15,999) (38,937)
------------ ---------------- ------------- ---------
Geographical analysis
2016 2015
By destination By origin By destination By origin
GBP'000 GBP'000 GBP'000 GBP'000
Revenue
United Kingdom 16,460 44,826 15,516 40,051
Continental Europe 14,964 8,969 13,050 7,572
United States of
America 41,178 52,541 36,758 46,601
Other NAFTA 7,827 - 6,925 -
South America 1,802 - 1,415 -
Asia 26,058 3,027 21,027 1,604
Africa 1,074 - 1,137 -
--------------- ---------- --------------- ----------
109,363 109,363 95,828 95,828
--------------- ---------- --------------- ----------
2. Earnings per share
2016 2015
Earnings Weighted Per Earnings Weighted Per
average share average share
number amount number amount
GBP'000 of shares GBP'000 of shares
(pence) (pence)
Earnings attributable
to ordinary
shareholders 7,736 6,956
Shares in issue 45,113,873 44,736,977
Shares owned
by the Employee (3,799) -
Benefit Trust
--------- ----------- --------- --------- ----------- ---------
Basic earnings 7,736 45,110,074 17.1 6,956 44,736,977 15.5
Effect of dilutive
securities
- share options - 260,875 - - 455,668 (0.1)
--------- ----------- --------- --------- ----------- ---------
Diluted earnings 7,736 45,370,949 17.1 6,956 45,192,645 15.4
--------- ----------- --------- --------- ----------- ---------
3. Dividends per share
2016 2015
Per share GBP'000 Per share GBP'000
Final dividend paid 2.2p 993 2.0p 896
Interim dividend
paid 1.4p 632 1.3p 583
---------- -------- ---------- --------
3.6p 1,625 3.3p 1,479
---------- -------- ---------- --------
The Directors recommend the payment of a final dividend of 2.4 pence per share (2015: 2.2 pence per share) on 2 June 2017 to shareholders on the register on 28 April 2017; the ex-dividend date is 27 April 2017. This makes a total dividend for the year of 3.8 pence per share (2015: 3.5 pence per share).
4. Property, plant and equipment
Cost Land Assets Plant, Total
and buildings in the machinery
course and equipment
of construction
GBP'000 GBP'000 GBP'000 GBP'000
At 1 December
2015 7,516 1,172 26,544 35,232
Reclassification 41 (1,154) 1,113 -
Additions 140 667 3,555 4,362
Acquisitions - - 44 44
Disposals (36) - (386) (422)
Exchange differences 774 134 3,093 4,001
At 30 November
2016 8,435 819 33,963 43,217
--------------- ----------------- --------------- --------
Depreciation
At 1 December
2015 (2,216) - (18,800) (21,016)
Charge for the
year (288) - (1,885) (2,173)
Disposals 36 - 384 420
Exchange differences (335) - (2,011) (2,346)
At 30 November
2016 (2,803) - (22,312) (25,115)
-------- --------- ---------
Net book value
At 30 November
2016 5,632 819 11,651 18,102
------ ------ ------- -------
At 30 November
2015 5,300 1,172 7,744 14,216
------ ------ ------- -------
5. Goodwill and other intangible assets
Trademarks,
Development knowhow
expenditure Software and other
Goodwill capitalised capitalised intangibles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net book
amount at
1 December
2015 42,825 124 11 587 43,547
Reclassification - 96 - (96) -
Additions - 74 88 - 162
Acquisitions 3,048 - - 66 3,114
Amortisation
charges - (70) (39) (271) (380)
Exchange
differences 5,970 45 6 114 6,135
-----------
Net book
amount at
30 November
2016 51,843 269 66 400 52,578
----------- -------------- -------------- ------------- ---------
At 30 November Trademarks,
2016 Development knowhow
expenditure Software and other
Goodwill capitalised capitalised intangibles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost 70,526 841 1,166 1,483 74,016
Accumulated
amortisation
and impairment (18,683) (572) (1,100) (1,083) (21,438)
Net book
amount 51,843 269 66 400 52,578
----------- -------------- -------------- ------------- -----------
6. Trade and other payables
2016 2015
Amounts falling due within one year: GBP'000 GBP'000
Trade payables 9,144 6,741
Taxation and social security 626 724
Other payables 61 64
Accruals and deferred income 16,042 15,663
At 30 November 25,873 23,192
--------- ---------
7. Construction contracts
2016 2015
GBP'000 GBP'000
Amounts due from contract customers 827 -
included in trade receivables
--------- ---------
Contracts in progress at 30 November:
Amounts due from contract customers 300 -
included in other receivables
Amounts due to contract customers
included in accruals and deferred
income (8,208) (7,730)
--------- ---------
Net amounts due to contract customers (7,908) (7,730)
--------- ---------
Contract costs incurred plus recognised
profits less recognised losses to
date 44,854 35,160
Less: progress billings (52,762) (42,890)
Contracts in progress at 30 November (7,908) (7,730)
--------- ---------
8. Borrowings
On 25 January 2013, the Group entered into five year banking facilities sufficient for its foreseeable needs comprising a US $20 million revolving credit facility, a GBP2.5 million amortising term loan (reduced to GBPnil at 30 November 2015) and a GBP2.5 million overdraft. At 30 November 2016, the Group had $20 million of unused facilities (2015: $20 million of unused facilities) and an unutilised overdraft facility of GBP2.5 million (2015: GBP2.5 million).
9. Provisions
Dilapidations Warranty Total
GBP'000 GBP'000 GBP'000
At 1 December 2015 150 578 728
Charged to the consolidated
income statement:
Unwinding of discount 14 - 14
Warranty - 1,782 1,782
At 30 November 2016 164 2,360 2,524
-------------- --------- --------
10. Share capital and premium
Number Ordinary Share Total
of shares shares premium
account
Thousands GBP'000 GBP'000 GBP'000
At 1 December
2015 44,824 896 35,359 36,255
Issue of shares
on exercise of
share options 484 10 154 164
At 30 November
2016 45,308 906 35,513 36,419
----------- --------- --------- --------
In January 2016, 308,200 ordinary shares of 2 pence each were issued on the exercise of Long Term Share Plan share options for a cash consideration of GBP6,000. In July 2016, 25,000 ordinary shares of 2 pence each were issued on exercise of EMI share options for a cash consideration of GBP18,000. In October and November 2016, 150,928 ordinary shares of 2 pence each were issued on the exercise of Save As You Earn share options for a cash consideration of GBP140,000.
In February 2015, 441,000 ordinary shares of 2 pence each were issued on the exercise of Long Term Share Plan share options for a cash consideration of GBP9,000. In December 2014 and May 2015, 9,221 ordinary shares of 2 pence each were issued on exercise of Save As You Earn share options for a cash consideration of GBP10,000. In November 2015, 10,000 ordinary shares of 2 pence each were issued on the exercise of EMI share options for a cash consideration of GBP15,000.
The Group uses an Employee Benefit Trust (EBT) to purchase shares in the Company to satisfy entitlements, granted since the Company's AGM in 2015, under the Group's Long Term Incentive Plan and Save As You Earn schemes. During the year the Group purchased 20,000 ordinary shares (2015: nil) of 2 pence for a total consideration of GBP77,000 (2015: GBPnil). The cost of the shares held by the EBT is deducted from retained earnings. The EBT is financed by a repayable on demand loan from the Group of GBP77,000 (2015: GBPnil). As at 30 November 2016 the EBT held a total of 20,000 ordinary shares of 2 pence (2015: nil) at a cost of GBP77,000 (2015: GBPnil) and a market value of GBP84,000 (2015: GBPnil).
11. Acquisition
On 4 December 2015 the Group, through its subsidiary Porvair Filtration Group, Inc., purchased the trade and assets of TEM Filter Company. The trade is the manufacture of specialist filters and is based in the USA. The total consideration is $5,220,000 (GBP3,576,000); $4,350,000 (GBP2,880,000) was paid on 4 December 2015, with the balance being contingent and due for payment before 31 May 2017. The contingent consideration is estimated based on the forecast performance of the acquired business in its first year of ownership by the Group. At the time of acquisition this was expected to be $750,000 (GBP497,000). Based on the actual performance of the division, this amount is estimated to be $870,000 (GBP696,000). The difference between the initial assessment of contingent consideration and the revised estimate of $120,000 (GBP87,000) has been charged to the income statement in the year. The maximum contingent consideration is $1,200,000 (GBP960,000). The direct costs of acquisition, which were charged to the income statement, were $58,000 (GBP38,000). In the period since acquisition, the business has contributed $3,691,000 (GBP2,678,000) of revenue and $916,000 (GBP665,000) of operating profit to the Group results.
Total
GBP'000
Purchase consideration:
Cash paid 2,880
Contingent consideration
provided 497
Original estimate of
total purchase consideration 3,377
Fair value of net assets
acquired (329)
Goodwill 3,048
--------
Recognised amounts of
identifiable assets Fair value
acquired and liabilities
assumed
GBP'000
Property plant and
equipment 44
Non-compete agreement 66
Inventory 93
Trade receivables 162
Other working capital
(net) (36)
-----------------
Net assets acquired 329
-----------------
Purchase consideration
settled in cash 2,880
-----------------
Cash outflow on acquisition 2,880
-----------------
The goodwill attributable to the acquisition relates to the acquired customer base and non-contractual relationships, the synergies between the business acquired and the existing operations of the Group and the potential to develop the acquired technologies, which do not meet the criteria for capitalisation as intangible assets. The goodwill recognised is attributable to the Microfiltration division and is expected to be deductible for income tax purposes. The purchase is accounted for as an acquisition.
12. Deferred and contingent consideration on acquisitions
Fiber TEM Filter
Ceramics Company
GBP'000 GBP'000 GBP'000
At 1 December 2015 56 - 56
Purchase consideration in
the year - 3,377 3,377
Cash paid in the year (50) (2,880) (2,930)
Recognised in the income statement (7) 87 80
Exchange movements 1 112 113
---------- ----------- --------
At 30 November 2016 - 696 696
---------- ----------- --------
13. Cash generated from operations
2016 2015
GBP'000 GBP'000
Operating profit 10,669 9,801
Post-employment benefits 23 75
Share based payments 476 502
Depreciation, amortisation and
impairment 2,553 2,156
Profit on disposal of property,
plant and equipment (12) (17)
--------- ---------
Operating cash flows before
movement in working capital 13,709 12,517
--------- ---------
Increase in inventories (1,114) (904)
(Increase)/decrease in trade
and other receivables (798) 2,492
Increase/(decrease) in payables 230 (1,389)
Increase in provisions 1,337 578
(Increase)/decrease in working
capital (345) 777
--------- ---------
Cash generated from operations 13,364 13,294
--------- ---------
14. Revenue at constant currency estimation
2016 2015 Growth
Metals Filtration GBPm GBPm %
Revenue at constant
currency 30,080 29,701 1
Exchange 4,665 1,283
-------- ------- -------
Revenue as reported 34,745 30,984 12
-------- ------- -------
Microfiltration
Revenue at constant
currency 70,765 63,950 11
Exchange 3,853 894
-------- ------- -------
Revenue as reported 74,618 64,844 15
-------- ------- -------
Group
Revenue at constant
currency 100,845 93,651 8
Exchange 8,518 2,177
-------- ------- -------
Revenue as reported 109,363 95,828 14
-------- ------- -------
Revenue at constant currency is derived from translating overseas subsidiaries at budgeted fixed exchange rates. In 2016 and 2015 the rates used were $1.6:GBP and EUR1.4:GBP.
15. Basis of preparation
The results for the year ended 30 November 2016 have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as at 30 November 2016. 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 2016, 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 2015, upon which the auditors reported without qualification, have been delivered to the Registrar of Companies.
16. Annual general meeting
The Company's Annual General Meeting will be held at 10.30 a.m. on Tuesday 11 April 2017 at Porvair Filtration Group Limited, 1 Concorde Close, Segensworth, Fareham, Hampshire PO15 5RT.
17. Related parties
There were no related party transactions in the year ended 30 November 2016.
18. Responsibility Statement
Each of the Directors confirms that, to the best of their knowledge that:
-- the financial statements, on which this announcement is based, have been prepared in accordance with the applicable law and International Financial Reporting Standards as adopted by the EU 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 2015. A list of current Directors is also maintained on the Porvair website www.porvair.com.
Copies of full accounts will be sent to shareholders in March 2017. Additional copies will be available from www.porvair.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFFRLAIDFID
(END) Dow Jones Newswires
January 30, 2017 02:00 ET (07:00 GMT)
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