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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 | |
---|---|---|---|---|---|---|---|---|---|---|
-2.00 | -0.33% | 612.00 | 612.00 | 614.00 | 620.00 | 612.00 | 620.00 | 93,184 | 16:15:26 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Chemicals & Chem Preps, Nec | 176.01M | 15.97M | 0.3445 | 17.76 | 283.67M |
TIDMPRV
RNS Number : 7916M
Porvair PLC
25 January 2016
For immediate release 25 January 2016
Porvair PLC
Results for the year ended 30 November 2015
Record profits 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 2015.
Highlights
Strong financial performance:
-- Profit before tax up 9% to a record GBP9.2 million (2014: GBP8.4 million). -- Basic earnings per share up 8% to 15.5 pence (2014: 14.4 pence).
-- Strong cash generation: net cash doubled to GBP10.7 million at 30 November 2015 (2014: GBP5.3 million).
-- Underlying revenue(1) growth of 7%.
o As previously announced, large project revenue was GBP14.0 million lower in 2015 so total reported revenue is 8% lower at GBP95.8 million (2014: GBP104.0 million).
-- Final dividend of 2.2 pence per share (2014: 2.0 pence per share) recommended, an increase of 10%.
Metals Filtration:
-- Revenue up 3% to a record GBP31.0 million (2014: GBP30.1 million). 4% lower in constant currency.
-- Acquisition of Fiber Ceramics to enhance offering in steel filtration. -- Production of a new aluminium filter started in Porvair's expanded facility in China.
Microfiltration:
-- 9% underlying revenue(1) growth and record operating profit. -- Revenue was GBP64.8 million (2014: GBP73.9 million). -- Building and commissioning work for the large projects is going well. -- Seal Analytical had a record year.
Outlook:
-- Healthy order position going into 2016. -- Further capital investment planned to allow for further organic growth. -- TEM acquired in December 2015 to expand into specialist filtration in microelectronics.
Commenting on the outlook, Ben Stocks, Chief Executive, said:
"2015 finished with a strong final quarter and healthy order books. Over the last two years significant investments have been made in capacity with new production lines being brought into operation. A promising new product development pipeline offers plenty of opportunity for organic growth. The two recent acquisitions should start to contribute in 2016. The Group is in a strong financial position and a good start has been made to the year."
Note (1) Underlying revenue: Revenue excluding the impact of four specific large projects, as previously announced and reported.
For further information please contact:
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 25 January 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 2015
2015 2014 2013 GBPm GBPm GBPm Revenue 95.8 104.0 84.3 ------ ------ ------ Profit before tax 9.2 8.4 7.6 ------ ------ ------ Earnings per share 15.5p 14.4p 12.3p ------ ------ ------ Cash generated from operations 13.3 14.2 12.3 ------ ------ ------ Net cash 10.7 5.3 0.6 ------ ------ ------
2015 was a strong year for the Group and positive progress was achieved. Profit before tax in the year ended 30 November 2015 was up 9% to a record GBP9.2 million (2014: GBP8.4 million). Earnings per share grew 8% to 15.5 pence (2014: 14.4 pence). Cash generation was again strong, enabling the Group to invest GBP3.8 million in capital expenditure and finish the year with GBP10.7 million of net cash.
As anticipated in previous statements, revenue at GBP95.8 million (2014: GBP104.0 million) was 8% lower due to revenue from large projects dropping by GBP14.0 million compared with the previous year. Underlying revenue growth was 7%.
Demand for gasification spares, bioscience materials, aluminium filters and water analysis consumables continued to grow, driven by the new product introductions, new installations and account wins of recent years. With 48% of our products manufactured in the USA, this was balanced by the negative commercial effects of a strong US dollar.
2015 was another year of capital investment for organic growth with facility expansion and production equipment upgrades in the UK, USA and China. In recent years, seven of our ten manufacturing plants have been extended and upgraded. 2016 will see a continuation of this programme.
Shortly after the year end we acquired the business and trading assets of TEM Filter Company ("TEM"), a filter business serving the microelectronics industry. It offers the Group entry into a niche market where technical specifications are challenging and quality requirements high. TEM offers a well-designed product range and an experienced distribution network. Porvair can bring a broader range of filtration media, wider sales reach, and funds for investment. Plans to expand the range, develop new products and widen the distribution network will roll out through 2016.
Over the last five years the Group has delivered revenue growth of 50% (9% CAGR) and cash from operations of GBP57.0 million. Over the same period, GBP21.8 million has been invested in capital expenditure and acquisitions and net debt of GBP9.7 million has moved into a net cash position of GBP10.7 million. In 2015, the Group's after tax operating profit return on operating capital was 49% (2014: 47%).
Looking ahead, an exciting range of organic growth and capital projects are underway and the benefits of integrating Fiber Ceramics and TEM will start to flow through. Order books at the start of 2016 were healthy.
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 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.
Over the last five years this strategy has worked for the Group, which moves into 2016 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; for a minimum amount of time; often with prescribed physical attributes such as size or weight. 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 end-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 end-markets: aviation; energy and industrial; environmental 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 encourage 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. 47% of revenue is in the Americas, where aviation and metals filtration are strong. 22% 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 careful investment hurdle rate analysis based on strategic and financial priorities.
Operating structure
-- The Group has two divisions. The Microfiltration division serves the aviation, environmental laboratory and energy/industrial 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, 42% in the UK, 8% in Germany and 2% in China.
Investment and future development
2015 was a year of continued investment with capital expenditure of GBP3.8 million.
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-- In the UK, the Microfiltration facility at New Milton moved into a larger site to increase capacity for aviation and industrial filtration growth. Further investment in production capacity at our UK sites is planned for 2016.
-- In the US, the manufacturing footprint in Maine was expanded, with further investments in production equipment to follow in 2016. We are in the process of fitting out a new facility in Virginia which will open in early 2016.
-- A second factory in China, sited alongside the one opened in 2013, was built, fitted out and commissioned. Further investments on this site are planned for 2016.
-- The gasification projects are going well. The first of these to reach the commissioning stage is in South Korea, and early indications of its start-up are promising. In India investments are planned in service and maintenance equipment to support the filtration systems that are due for commissioning towards the end of 2016. We continue to work on other such projects.
-- Investments in the Metals Filtration plant in North Carolina have focussed on productivity, new product development and the integration of Fiber Ceramics, acquired earlier in the year.
-- Following the acquisition of TEM in early December 2015, investments are planned in sales and marketing, product development and production equipment upgrades.
New product development remains core to Porvair's strategy, with investments in range extensions and product differentiation being the driving force behind our plans for organic growth:
-- Adoption of our proprietary aluminium lithium filter increased during the year. -- We will launch a patented aluminium filter formulation in our Chinese operation. -- We are evaluating a new formulation for the filtration of steel.
-- In Bioscience we have almost finished the development of our DNA filtration product range and will be seeking commercial partners in 2016.
-- Seal Analytical will bring two new platforms to market in the course of the year.
-- A host of new products will be launched in the microelectronics filtration market as we combine the expertise we have in Maine with the newly acquired TEM in Idaho.
Divisional review
Metals Filtration
2015 2014 2013 GBPm GBPm GBPm Revenue 31.0 30.1 28.5 ----- ----- ----- Operating profit 2.4 2.6 2.4 ----- ----- -----
Revenue from the Metals Filtration division was at a record GBP31.0 million, although this benefited from currency movements. At constant currency, revenue fell by 4%. Foundry filtration in the US agricultural sector held back sales by around 2%, whilst the prior year was boosted by a one-off aluminium equipment order to Nanshan that accounted for a further 3% of sales.
Additional costs associated with the start-up in China and the lower constant currency revenue led to a small drop in operating profit.
41% of this division's sales were exported from the US, and given the strength of the US dollar the Board was pleased with this performance overall. Market conditions were not straightforward and these results show a certain resilience, driven by continued market share wins from our range of patented and differentiated products, mainly:
-- Selee CSX(TM) for aluminium cast house filtration. This product has a unique environmental footprint in being free of phosphates and ceramic fibres.
-- Selee IC(TM) for gray 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 highly proprietary additive manufacturing technique.
We are increasingly asked to run competitive trials by customers to demonstrate environmental or filtration performance in the field. Again this year we have performed well, notably in aluminium where our products clearly out-perform the competition. Over recent years, while metal quality requirements in the market have increased, customers have often cut back on their technical overheads. In response, we have launched Selee Metallurgical Services, a business unit that offers confidential technical support and advice to aluminium cast houses, investment casters and foundries. Backed by excellent laboratory resources and extensive metallurgical experience, Selee Metallurgical Services has been busy from its inception.
Two events dominated the year in this division: the acquisition of Fiber Ceramics and the commissioning of a new line in China. Fiber Ceramics has now been moved into the main plant in Hendersonville and has made a modest contribution to results in the year. The product line was acquired mainly for its technical capability, and we expect to take advantage of a shorter production cycle and stronger formulation for steel filtration in 2016.
Significant management and engineering resource was directed to commissioning the new aluminium filtration line in China, which started production in November. Good quality filters are now being made, using a new proprietary formulation that we expect to be attractive in this market. Customer trials are underway and thus far have gone well. Current market conditions in China are not easy; but the market opportunity is substantial; we have an excellent differentiated product; and our cost base is competitive. We expect the Chinese operation to grow in 2016.
Microfiltration
2015 2014 2013 GBPm GBPm GBPm Revenue 64.8 73.9 55.8 ----- ----- ----- Operating profit 9.7 8.7 8.6 ----- ----- -----
Revenue in the Microfiltration division was 12% lower, with revenue from large projects GBP14.0 million less than in the prior year, as expected. Allowing for this, underlying revenue growth was 9%. Operating profits grew 11% to a record GBP9.7 million.
The underlying performance of the division was just above its five year average of 8% revenue growth with gasification spares, US general industrial and bioscience filtration all performing well. Aviation had a quieter year, but our exposure to the newer Boeing and Airbus airframes means we expect a return to growth in 2016. As our reputation in the industry grows we are approached from time to time to manufacture products for other filter companies. This is a growing part of our industrial portfolio.
The UK based filtration facilities in this division were the proud recipients of a Queens Award for export in 2015, which recognised their work in aerospace and industrial filtration growth since 2012.
The large projects are progressing well. The installation in South Korea is complete and commissioning is underway. The project in India is much larger and will be built through 2016. Manufacturing for the project in China started during 2015 and shipment will commence in the first quarter of 2016. Shipments to the UK nuclear project are underway. Orders for filter spares for the commissioning process were received early in the year and shipped on time. We are developing a service and maintenance capability for the Indian installation, which due to its size will require constant cleaning and filter replacement. We expect final contract negotiations for this to be complete in the first half of 2016.
As discussed in previous statements, the Group has adopted long term contract accounting for these large contracts. Revenue is recognised through the manufacturing and shipping phase of each project, leading to the unusually high revenue of GBP19.5 million reported in 2014. Revenue in 2015 was GBP5.5 million. There is expected to be further revenue in 2016 and 2017. Allowance is made for potential future costs arising during the commissioning and warranty stages of the projects. Profits are therefore recognised over the life of the projects, which are likely to run into 2017 and 2018.
Seal Analytical posted a record result with revenue growing by 4% in constant currency. Seal is a market leading supplier of equipment and consumables for the detection of inorganic contamination in water. This well defined niche market grows as water quality standards improve and we have again been successful in exporting to China. Seal has a good track record of product development, and places particular emphasis on technical training of its skilled workforce. These initiatives are showing through in results. Seal's five year CAGR revenue growth is 7%. Another new analysis platform was introduced during the year, and a further two are planned for 2016.
Dividends
The Board re-affirms its preference for a progressive dividend and recommends an improved final dividend of 2.2 pence per share (2014: 2.0 pence), making the full year dividend 3.5 pence per share (2014: 3.2 pence), an increase of 9%.
Staff
Porvair has doubled in size over the last six years, a testament to our staff and their commitment. In 2016 we welcome those who have joined us from Fiber Ceramics and TEM. The Board recognises that the Group's success is due to the skills and hard work of its staff, to whom we offer our thanks.
Current trading and outlook
2015 finished with a strong final quarter and healthy order books. Over the last two years significant investments have been made in capacity with new production lines being brought into operation. A promising new product development pipeline offers plenty of opportunity for organic growth. The two recent acquisitions should start to contribute in 2016. The Group is in a strong financial position and a good start has been made to the year.
Ben Stocks
Group Chief Executive
22 January 2016
Financial review
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Group operating performance
2015 2014 2013 GBPm GBPm GBPm Revenue 95.8 104.0 84.3 ----- ------ ----- Operating profit 9.8 9.2 8.4 ----- ------ ----- Profit before tax 9.2 8.4 7.6 ----- ------ ----- 2015 2014 2013 GBPm GBPm GBPm Underlying revenue 90.3 84.5 78.3 Large projects revenue (Microfiltration) 5.5 19.5 6.0 ----- ------ ----- Revenue 95.8 104.0 84.3 ----- ------ -----
Underlying revenue, which excludes the impact of large contracts, grew 7% (4% at constant currencies). Reported revenue fell by 8% as a result of large contract revenue in Microfiltration being GBP14.0 million lower than 2014. Operating profit was up 6% and profit before tax grew 9%. Operating profit margins were 10.2% (2014: 8.9%), the improvement resulting from the phasing of profits on the large contracts and an improvement in the underlying margin in the Microfiltration division.
The operating performance of the Microfiltration and Metals Filtration divisions are described in detail in the Operating Review and below. The operating loss associated with the Other Unallocated segment was GBP2.4 million (2014: GBP2.1 million), which mainly comprises Group corporate expenditure such as head office and Board costs, new business development and general financial costs.
The operating profit includes amortisation charges on intangible assets arising on acquisition of GBP0.2 million (2014: GBP0.2 million), a credit of GBP0.1 million (2014: credit of GBP0.3 million) arising on the reassessment of acquisition consideration, acquisition expenses of GBP0.1 million (2014: GBPnil) and share based payment charges of GBP0.5 million (2014: 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 have a significant impact on reported performance. The average rate used for translating the results of US operations into Sterling was US$1.53:GBP1 (2014: US$1.65:GBP1) and the Group's Euro denominated operations were translated at EUR1.37:GBP1 (2014: EUR1.24:GBP1). The stronger dollar offset by the weaker Euro improved revenue growth by 2% and operating profit growth by 2% on translating the Group's foreign subsidiaries compared with 2014.
The Group sold its UK business' 2015 US dollar receipts during the financial year and achieved an average rate of US$1.54:GBP1 (2014: US$1.57:GBP1).
At 30 November 2015 the Group has US$8.8 million of outstanding forward foreign exchange contracts taken out to translate the future revenue on the Group's underlying dollar revenue generated by the UK operations and on the Group's large contracts. The Group has applied hedge accounting to US$4.0 million of these transactions. The reduction in the value of the hedge in the year of GBP0.2 million (2014: gain of GBP0.9 million) is shown in the consolidated statement of comprehensive income.
Finance costs
Net interest payable reduced to GBP0.6 million (2014: GBP0.8 million). Included within interest payable are finance costs in relation to the defined benefit pension scheme, which were GBP0.4 million (2014: GBP0.5 million) in the year. Other net interest payable reduced as a result of lower gross borrowings in the year. The Group suffers non-utilisation fees on its unused borrowing facilities at a rate of half the margin on the facility. Consequently, the interest payments have not fallen in line with the elimination of gross borrowings.
Interest cover was 16 times (2014: 12 times); excluding the impact of the pension finance charge the interest cover is 61 times (2014: 30 times).
Tax
The Group tax charge was GBP2.2 million (2014: GBP2.1 million). This is an effective rate of 24% (2014: 25%), which is higher than the UK standard corporate tax rate of 20.3% (2014: 21.7%). 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 GBP2.3 million (2014: GBP2.1 million) and a deferred tax credit of GBP0.1 million (2014: GBPnil).
The Group carries a deferred tax asset of GBP2.5 million (2014: GBP3.2 million) and a deferred tax liability of GBP1.5 million (2014: 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
Total equity at 30 November 2015 was GBP59.1 million (2014: GBP52.1 million), an increase of 13% over the prior year. Increases in total equity arose from profit after tax of GBP7.3 million (2014: GBP6.4 million), after adding back the charge for employee share option schemes net of tax of GBP0.3 million (2014: GBPnil); exchange gains on translation of GBP0.9 million (2014: GBP1.1 million); actuarial gains of GBP0.4 million (2014: loss of GBP1.1 million); and GBPnil (2014: GBP0.2 million) arising on the issue of shares on share option exercises. Dividends paid of GBP1.5 million (2014: GBP1.3 million); and a reduction of GBP0.1 million (2014: gain of GBP0.9 million) in the value of hedge accounting instruments reduced total equity.
Return on capital employed
The increase in the profits of the Group compared with lower capital employed led to an increase in the return on capital employed to 16% (2014: 15%). Excluding the impact of goodwill and the net pension liability, the return on operating capital employed increased to 49% (2014: 47%).
Cash flow
The table below summarises the key elements of the cash flow for the year:
2015 2014 GBPm GBPm Operating cash flow before working capital 12.5 11.9 Working capital movement 0.8 2.2 ------ ------ Cash generated from operating activities 13.3 14.1 Interest (0.2) (0.3) Tax (1.8) (2.2) Capital expenditure net of disposals (3.3) (5.1) ------ ------ 8.0 6.5 Acquisitions (1.1) (0.7) Dividends (1.5) (1.3) Share issue proceeds - 0.2 ------ ------ Net cash increase in the year 5.4 4.7 Net cash at 1 December 5.3 0.6 ------ ------ Net cash at 30 November 10.7 5.3 ------ ------
Net working capital reduced by GBP0.8 million (2014: GBP2.2 million). Cash was received from large contracts in excess of the revenue recognised in the year ended 30 November 2015, mainly as a result of the collection in 2015 of a receivable outstanding at the end of 2014 of GBP2.6 million. Inventories in Microfiltration and the China plant of Metals Filtration increased to support growth and payables at the year end were lower than the prior year.
Net interest paid represents the bank interest and non-utilisation fees charged in the year. It reduced as bank borrowings fell in the year.
Tax payments in the year are lower than the current tax charge as a result of recoveries in relation to prior years.
GBP0.8 million was paid in deferred consideration for acquisitions completed in 2012 and 2013 and GBP0.3 million was paid in relation to an acquisition in 2015. A maximum of a further GBP0.1 million is payable in 2016.
Construction contracts and performance bonds
The income statement impact of the large contracts is described in the Divisional Review above. At 30 November 2015, the Group had no amounts due from contract customers and amounts due to contract customers of GBP7.7 million, representing the amount by which cash received at 30 November 2015 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 2015 the Group held US$3.7 million (GBP2.5 million) of advanced payments against future shipments and there were US$5.3 million (GBP3.5 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 2015 the Group had US$9.7 million (GBP6.5 million) of performance bonds outstanding.
Capital expenditure
Capital expenditure was GBP3.3 million (2014: GBP5.1 million) net of GBP0.5 million disposal proceeds. The principal investments in 2015 related to the completion of a new plant in New Milton, UK, which was fully operational in February; completion of the extension to the plant in Caribou, Maine, which was opened in May; and a new cast shop filtration line in China, which began production in November.
Looking forward to 2016 the Board is planning further investments: facilities in the US; gasification service and maintenance in India; and upgraded production capability in the UK, US and China. Capital expenditure in 2016 is expected to be up to GBP5.0 million.
Pension schemes
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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 GBP2.2 million (2014: GBP2.2 million). GBP1.8 million (2014: GBP1.7 million) was recorded as an operating cost: GBP1.2 million (2014: GBP1.2 million) related to funding defined contributions schemes; and GBP0.6 million (2014: GBP0.5 million) related to the charge for the Group's defined benefit scheme. GBP0.4 million (2014: GBP0.5 million) was charged as a finance cost in relation to the defined benefit scheme.
The Group's net retirement benefit obligation was GBP12.0 million (2014: GBP12.8 million). The contributions paid to the defined benefit scheme in the UK were GBP1.0 million (2014: GBP0.9 million). The service cost, administrative expenses and finance cost were GBP1.0 million (2014: GBP1.0 million) and the actuarial gain in the year was GBP0.8 million (2014: loss of GBP0.9 million). All of the assumptions adopted were broadly in line with the previous year.
The defined benefit scheme had 48 (2014: 53) active members, 271 (2014: 281) deferred members and 249 (2014: 271) pensioners at 30 November 2015. The life expectancy of members of the scheme reaching age 65 at 30 November 2015 is assumed to be 21.6 years (2014: 21.6 years) for men and 23.6 years (2014: 23.8 years) for women. The weighted average duration of the plan scheme liabilities at the end of the period is 20 years (2014: 18 years).
A full triennial actuarial valuation of the assets and liabilities of the defined benefit scheme was completed in 2013, based on data at 31 March 2012. As a result of this review, the Group and the Trustees agreed to alter the employer's contributions from 8.2% of salary to 13.3% of salary. Additionally, the Group committed to making a GBP194,000 annual contribution towards the running costs of the scheme from March 2014, which will increase by 3.25% per annum thereafter. The Group also committed to make additional annual contributions, to cover the past service deficit, of GBP456,000 per annum commencing in December 2013, increasing by 5% per annum thereafter. The next full actuarial valuation of the scheme will be based on the pension scheme's position at 31 March 2015 and is expected to be completed before June 2016.
Borrowings and bank finance
At the year end, the Group had cash balances of GBP10.7 million (2014: net cash of GBP5.3 million) comprising cash balances of GBP10.7 million (2014: GBP7.9 million) offset by gross borrowings of GBPnil (2014: GBP2.6 million).
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 at 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 2015, the Group had GBP13.3 million (2014: GBP10.8 million) of unused loan facilities, an unused overdraft facility of GBP2.5 million (2014: GBP2.5 million) and net cash balances of GBP10.7 million (2014: GBP7.9 million).
Finance and treasury policy
The treasury function at Porvair is managed centrally, under Board supervision. It is not a profit centre and does not undertake speculative transactions. 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
22 January 2016
Consolidated income statement
For the year ended 30 November
2015 2014 Continuing operations GBP'000 GBP'000 Revenue 1 95,828 104,004 Cost of sales (63,474) (74,157) --------- --------- Gross profit 32,354 29,847 Distribution costs (1,207) (1,227) Administrative expenses (21,346) (19,415) --------- --------- Operating profit 1 9,801 9,205 Finance income 12 - Finance costs (616) (785) Profit before income tax 9,197 8,420 Income tax expense (2,241) (2,087) Profit for the year attributable to shareholders 1 6,956 6,333 --------- --------- Earnings per share (basic) 2 15.5p 14.4p Earnings per share (diluted) 2 15.4p 14.2p
Consolidated statement of comprehensive income
For the year ended 30 November
2015 2014 GBP'000 GBP'000 Profit for the year 6,956 6,333 --------- --------- Other comprehensive income/(expense): Items that will not be reclassified to profit and loss Actuarial gains/(losses) in defined benefit pension plans net of tax 368 (1,066) --------- --------- Items that may subsequently be classified to profit and loss Exchange differences on translation of foreign subsidiaries 890 1,125 Changes in fair value of interest rate swaps held as a cash flow hedge - 20 Changes in fair value of forex contracts held as a cash flow hedge (156) (866) --------- --------- 734 279 --------- --------- Net other comprehensive income/(expense) 1,102 (787) --------- --------- Total comprehensive income for the year attributable to shareholders of Porvair plc 8,058 5,546 --------- ---------
Consolidated balance sheet
As at 30 November
Note 2015 2014 GBP'000 GBP'000 Non-current assets Property, plant and equipment 4 14,216 12,336 Goodwill and other intangible assets 5 43,547 43,209 Deferred tax asset 2,529 3,240 60,292 58,785 Current assets Inventories 12,350 11,363 Trade and other receivables 14,621 17,067 Derivative financial instruments - 66 Cash and cash equivalents 10,738 7,891 --------- ----------- 37,709 36,387 Current liabilities Trade and other payables 6 (23,192) (24,910) Current tax liabilities (1,405) (919) Borrowings 8 - (727) Derivative financial instruments (154) (118) --------- ----------- (24,751) (26,674) Net current assets 12,958 9,713 --------- ----------- Non-current liabilities Borrowings 8 - (1,900) Deferred tax liability (1,465) (1,494) Retirement benefit obligations (11,993) (12,833) Provisions for other liabilities and charges (728) (138) --------- ----------- (14,186) (16,365) --------- ----------- Net assets 59,064 52,133 --------- ----------- Capital and reserves Share capital 9 896 887 Share premium account 9 35,359 35,334 Cumulative translation reserve 10 1,706 816 Retained earnings 10 21,103 15,096 --------- ----------- Total equity 59,064 52,133 --------- -----------
Consolidated cash flow statement
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For the year ended 30 November
Note 2015 2014 GBP'000 GBP'000 Cash flows from operating activities Cash generated from operations 13 13,294 14,156 Interest paid (155) (328) Tax paid (1,836) (2,205) --------- --------- Net cash generated from operating activities 11,303 11,623 --------- --------- Cash flows from investing activities Interest received 12 - Acquisition of subsidiaries (net of cash acquired) 12 (1,087) (707) Purchase of property, plant and equipment 4 (3,823) (4,930) Purchase of intangible assets 5 (16) (167) Proceeds from sale of property, plant and equipment 502 1 Net cash used in investing activities (4,412) (5,803) --------- --------- Cash flows from financing activities Proceeds from issue of ordinary share capital 9 34 199 Repayment of borrowings (2,630) (3,654) Dividends paid to shareholders 3 (1,479) (1,325) Net cash used in financing activities (4,075) (4,780) --------- --------- Net increase in cash and cash equivalents 2,816 1,040 Gains on cash and cash equivalents 31 78 --------- --------- 2,847 1,118 Cash and cash equivalents at 1 December 7,891 6,773 --------- --------- Cash and cash equivalents at 30 November 10,738 7,891 --------- ---------
Reconciliation of net cash flow to movement in net cash
2015 2014 GBP'000 GBP'000 Net increase in cash and cash equivalents 2,816 1,040 Effects of exchange rate changes 28 (9) Repayment of borrowings 2,630 3,654 Net cash at 1 December 5,264 579 --------- --------- Net cash at 30 November 10,738 5,264 --------- ---------
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 2013 875 35,147 (309) 11,967 47,680 ---------- --------- ------------- ----------- ---------- Profit for the year - - - 6,333 6,333 Other comprehensive income/(expense): Exchange differences on translation of foreign subsidiaries - - 1,125 - 1,125 Changes in fair value of interest rate swaps held as a cash flow hedge - - - 20 20 Changes in fair value of foreign exchange contracts held as a cash flow hedge - - - (866) (866) Actuarial losses in defined benefit pension plans net of tax - - - (1,066) (1,066) ---------- --------- ------------- ----------- ---------- Total comprehensive income for the year - - 1,125 4,421 5,546 ---------- --------- ------------- ----------- ---------- Transactions with owners: Employee share option schemes: * value of employee services net of tax - - - 33 33 Proceeds from shares issued 12 187 - - 199 Dividends approved or paid - - - (1,325) (1,325) ---------- --------- ------------- ----------- ---------- Total transactions with owners recognised directly in equity 12 187 - (1,292) (1,093) ---------- --------- ------------- ----------- ---------- Balance at 30 November 2014 887 35,334 816 15,096 52,133 ---------- --------- ------------- ----------- ---------- 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 ---------- --------- ------------- ----------- ----------
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:
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 ------------ ---------------- ------------- -------- 2014 Metals Microfiltration Other Group Filtration Unallocated GBP'000 GBP'000 GBP'000 GBP'000 Revenue 30,061 73,943 - 104,004 ------------ ---------------- ------------- -------- Operating profit/(loss) 2,558 8,710 (2,063) 9,205 Net finance costs - - (785) (785)
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------------ ---------------- ------------- -------- Profit/(loss) before income tax 2,558 8,710 (2,848) 8,420 Income tax expense - - (2,087) (2,087) ------------ ---------------- ------------- -------- Profit/(loss) for the year 2,558 8,710 (4,935) 6,333 ------------ ---------------- ------------- --------
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 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) ------------ ---------------- ------------- --------- At 30 November Metals Microfiltration Other Group 2014 Filtration Unallocated GBP'000 GBP'000 GBP'000 GBP'000 Segmental assets 27,119 55,481 4,681 87,281 Cash and cash equivalents - - 7,891 7,891 ------------ ---------------- ------------- --------- Total assets 27,119 55,481 12,572 95,172 ------------ ---------------- ------------- --------- Segmental liabilities (3,249) (20,379) (3,951) (27,579) Retirement benefit obligations - - (12,833) (12,833) Borrowings - - (2,627) (2,627) ------------ ---------------- ------------- --------- Total liabilities (3,249) (20,379) (19,411) (43,039) ------------ ---------------- ------------- ---------
Geographical analysis
2015 2014 By destination By origin By destination By origin GBP'000 GBP'000 GBP'000 GBP'000 Revenue United Kingdom 15,516 40,051 17,730 52,380 Continental Europe 13,050 7,572 11,630 7,623 United States of America 36,758 46,601 33,372 42,671 Other NAFTA 6,925 - 6,195 - South America 1,415 - 1,661 - Asia 21,027 1,604 31,643 1,330 Africa 1,137 - 1,773 - --------------- ---------- --------------- ---------- 95,828 95,828 104,004 104,004 --------------- ---------- --------------- ---------- 2. Earnings per share 2015 2014 Earnings Weighted Per Earnings Weighted Per average share average share number amount number amount of shares of shares Basic EPS GBP'000 GBP'000 (pence) (pence) Earnings attributable to ordinary shareholders 6,956 44,736,977 15.5 6,333 44,121,412 14.4 Effect of dilutive securities - share options - 455,668 (0.1) - 587,422 (0.2) --------- ------------- --------- --------- ------------- --------- Diluted EPS 6,956 45,192,645 15.4 6,333 44,708,834 14.2 --------- ------------- --------- --------- ------------- --------- 3. Dividends per share 2015 2014 Per share GBP'000 Per share GBP'000 Final dividend paid 2.0p 896 1.8p 795 Interim dividend paid 1.3p 583 1.2p 530 ---------- -------- ---------- -------- 3.3p 1,479 3.0p 1,325 ---------- -------- ---------- --------
The Directors recommend the payment of a final dividend of 2.2 pence per share (2014: 2.0 pence per share) on 3 June 2016 to shareholders on the register on 29 April 2016; the ex-dividend date is 28 April 2016. This makes a total dividend for the year of 3.5 pence per share (2014: 3.2 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 2014 6,008 1,887 27,503 35,398 Reclassification 1,414 (1,887) 473 - Additions 542 1,147 2,134 3,823 Acquisitions - - 159 159 Disposals (566) - (4,202) (4,768) Exchange differences 118 25 477 620 At 30 November 2015 7,516 1,172 26,544 35,232 --------------- ----------------- --------------- -------- Depreciation At 1 December 2014 (2,158) - (20,904) (23,062) Charge for the year (166) - (1,650) (1,816) Disposals 118 - 4,165 4,283 Exchange differences (10) - (411) (421) At 30 November 2015 (2,216) - (18,800) (21,016) -------- --------- --------- Net book value At 30 November 2015 5,300 1,172 7,744 14,216 ------ ------ ------ ------- At 30 November 2014 3,850 1,887 6,599 12,336 ------ ------ ------ ------- 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 2014 42,207 223 13 766 43,209 Additions - - 16 - 16 Acquisitions 79 - - 33 112 Disposals cost - (1,380) - - (1,380) Disposals amortisation - 1,380 - - 1,380 Amortisation charges - (113) (15) (212) (340) Exchange differences 539 14 (3) - 550 ----------- Net book amount at 30 November 2015 42,825 124 11 587 43,547 ----------- -------------- -------------- ------------- --------- At 30 November Trademarks, 2015 Development knowhow expenditure Software and other Goodwill capitalised capitalised intangibles Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Cost 61,385 513 1,053 1,264 64,215 Accumulated amortisation and impairment (18,560) (389) (1,042) (677) (20,668)
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Net book amount 42,825 124 11 587 43,547 ----------- -------------- -------------- ------------- ----------- 6. Trade and other payables 2015 2014 Amounts falling due within one year: GBP'000 GBP'000 Trade payables 6,741 6,977 Taxation and social security 724 1,020 Other payables 64 924 Accruals and deferred income 15,663 15,989 At 30 November 23,192 24,910 --------- --------- 7. Construction contracts 2015 2014 GBP'000 GBP'000 Amounts due from contract customers included in trade receivables - 2,564 --------- --------- Contracts in progress at 30 November Amounts due to contract customers included in accruals and deferred income (7,730) (8,586) --------- --------- Net amounts due to contract customers (7,730) (8,586) --------- --------- Contract costs incurred plus recognised profits less recognised losses to date 35,160 29,611 Less: progress billings (42,890) (38,197) Contracts in progress at 30 November (7,730) (8,586) --------- --------- 8. Borrowings 2015 2014 GBP'000 GBP'000 Secured multi-currency revolving credit facility of US$20 million (2014: US$20 million) maturing in January 2018 with interest at 2.25% (2014: 2.25%) above US dollar LIBOR - 1,900 Secured five year amortising debt facility of GBPnil (2014: GBP0.75 million) expiring in June 2015 with interest at 2.0% (2014: 2.0%) above LIBOR - 727 At 30 November - 2,627 ----------- ---------
On 25 January 2013, the Group entered into new 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 GBP750,000 at 30 November 2014) and a GBP2.5 million overdraft. At 30 November 2015, the Group had GBP13.2 million of unused facilities (2014: GBP10.8 million of unused facilities) and an unutilised overdraft facility of GBP2.5 million (2014: GBP2.5 million).
9. Share capital and premium Number Ordinary Share Total of shares shares premium account Thousands GBP'000 GBP'000 GBP'000 At 1 December 2014 44,363 887 35,334 36,221 Issue of shares on exercise of share options 460 9 25 34 At 30 November 2015 44,823 896 35,359 36,255 ----------- --------- --------- --------
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.
10. Other reserves Cumulative Retained translation earnings reserve GBP'000 GBP'000 At 1 December 2013 (309) 11,967 Profit for the year attributable to shareholders - 6,333 Dividends paid - (1,325) Actuarial losses - (900) Tax on actuarial losses - (166) Share based payments - 503 Tax on share based payments - (470) Interest rate swap cash flow hedge - 20 Foreign exchange contract cash flow hedge - (866) Exchange differences 1,125 - ------------- ---------- At 30 November 2014 816 15,096 Profit for the year attributable to shareholders - 6,956 Dividends paid - (1,479) Actuarial gains - 872 Tax on actuarial gains - (504) Share based payments - 502 Tax on share based payments - (184) Foreign exchange contract cash flow hedge - (156) Exchange differences 890 - ------------- ---------- At 30 November 2015 1,706 21,103 ------------- ---------- 11. Acquisition
On 29 June 2015 the Group, through its subsidiary Selee Corporation, purchased the trade and assets of Fiber Ceramics from Joy-Mark, Inc. The trade is the manufacture of specialist filters and is based in the USA. The trade contributed external revenue of $217,000 (GBP141,000) and a net profit of $32,000 (GBP21,000) in the period 29 June 2015 to 30 November 2015. It is estimated that if the acquisition had occurred on 1 December 2014, the acquisition would have contributed external revenue of $700,000 (GBP456,000) and a net profit of $80,000 (GBP52,000) for the year ended 30 November 2015. The total consideration is $509,000 (GBP324,000); $425,000 (GBP271,000) was paid by 30 November 2015, with the balance due by 31 December 2015. The purchase is accounted for as an acquisition. Acquisition related costs of $27,000 (GBP18,000) have been charged to administrative expenses in the consolidated income statement in the year ended 30 November 2015.
12. Deferred and contingent consideration on acquisitions GBP'000 At 1 December 2014 924 Purchase consideration in the period 324 Cash paid in the period (1,087) Recognised in the income statement (129) Exchange movements 24 -------- At 30 November 2015 56 -------- 13. Cash generated from operations 2015 2014 GBP'000 GBP'000 Operating profit 9,801 9,205 Post-employment benefits 75 26 Share based payments 502 503 Depreciation, amortisation and impairment 2,156 2,235 Profit on disposal of property, plant and equipment (17) (1) --------- --------- Operating cash flows before movement in working capital 12,517 11,968 --------- --------- (Increase)/decrease in inventories (904) 415 Decrease/(increase) in trade and other receivables 2,492 (2,440) (Decrease)/increase in payables (1,389) 4,213 Increase in provisions 578 - Decrease in working capital 777 2,188 --------- --------- Cash generated from operations 13,294 14,156 --------- --------- 14. Post balance sheet event
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 $4,888,000 (GBP3,236,000); $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 direct costs of acquisition, which will be charged to the income statement, were $58,000 (GBP38,000).
15. Basis of preparation
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