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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