TIDMPRV
RNS Number : 2029O
Porvair PLC
28 January 2019
For immediate release 28 January 2019
Results for the year ended 30 November 2018
Record revenue, profit before tax and strong cash generation
Porvair plc ("Porvair" or "the Group"), the specialist
filtration and environmental technology group, today announces its
results for the year ended 30 November 2018.
Highlights
Strong financial performance:
-- Record revenue of GBP128.8 million (2017: GBP116.4 million), up 11%.
-- Profit before tax up to a record GBP12.0 million (2017: GBP11.7 million).
-- Adjusted profit before tax* increased to GBP13.5 million (2017: GBP12.4 million).
-- Basic earnings per share up 13% to 22.1 pence (2017: 19.5 pence).
-- Adjusted basic earnings per share* up 11% to 22.9 pence (2017: 20.7 pence).
-- Net cash was GBP6.6 million at 30 November 2018 (2017: GBP9.8
million) after GBP13.5 million (2017: GBP11.4 million) invested in
capital expenditure and acquisitions.
-- Recommended final dividend of 3.0 pence per share (2017: 2.7
pence per share), an increase of 11%.
-- Rohasys BV acquired and traded in line with expectations in its first year.
-- Keystone Filter acquired and integrated into the Aerospace & Industrial division.
-- Order books for 2019 are healthy, ahead of the prior year.
Commenting on the outlook, Ben Stocks, Chief Executive,
said:
"The Group has started 2019 with a healthy order book and is
trading well. The acquisitions made during the year have expanded
the Group's capabilities in industrial and laboratory markets and
are performing as expected. Porvair remains in a strong financial
position."
*See note 1 for definition of alternative performance
measures.
For further information please contact:
Porvair plc 020 7466 5000 today
Ben Stocks, Chief Executive 01553 765 500 thereafter
Chris Tyler, Group Finance Director
Buchanan Communications 020 7466 5000
Charles Ryland / Steph Watson
An analyst briefing will take place at 9:30 a.m. on Monday 28
January 2019 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 2018
2018 2017 Growth
GBPm GBPm %
Revenue 128.8 116.4 11
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Adjusted profit before tax 13.5 12.4 9
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Profit before tax 12.0 11.7 3
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Adjusted earnings per share 22.9p 20.7p 11
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Earnings per share 22.1p 19.5p 13
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Cash generated from operations 15.3 12.3
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Net cash 6.6 9.8
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Revenue was GBP128.8 million, an increase of 11%. Demand across
the Group's three divisions was generally robust, notably so in US
industrial, nuclear, laboratory consumables, aluminium and
specialist metal filtration.
Profit before tax was GBP12.0 million (2017: GBP11.7 million).
Adjusted profit before tax in the year ended 30 November 2018,
excluding the items disclosed in note 1, was up 9% to a record
GBP13.5 million. Adjusted earnings per share increased 11% to 22.9
pence. After investing GBP13.5 million in capital expenditure and
acquisitions, the Group finished the year with net cash of GBP6.6
million.
Over the last five years the Group has delivered revenue growth
of 53% (9% CAGR) and cash from operations of GBP68 million.
Adjusted profit before tax has increased 66% (11% CAGR). Over the
same period, GBP42 million has been invested in capital projects
and acquisitions. In 2018, the Group's after tax adjusted operating
profit return on operating capital was 43% (2017: 48%).
Strategic statement
Porvair's strategy is to generate shareholder value through the
development of specialist filtration and associated environmental
technology businesses, both organically and by acquisition. Such
businesses have certain key characteristics in common:
-- Specialist design or engineering skills are required;
-- Product use and replacement is mandated by regulation,
quality accreditation or a maintenance cycle; and
-- Products are typically designed into a system that will have a long life-cycle.
This strategy continues to work for the Group, which moves into
2019 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. Orders are won by offering
the best technical solutions for these requirements at an
acceptable commercial cost. Filtration expertise is applicable
across all markets served with new products generally being
adaptations of existing designs. Experience in specific 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 regulated 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 three operating segments: Aerospace &
Industrial; Laboratory; and Metal Melt Quality. All have clear
structural growth drivers.
-- Our products typically protect complex downstream systems and
as a result are replaced regularly. A high proportion of our annual
revenue is from repeat orders.
-- Through new product development the Group aims to generate
growth rates in excess of the underlying market. Where possible we
build robust intellectual property around our product
developments.
-- Our geographic presence follows the markets we serve. 52% of
revenue is in the Americas; 19% in Asia; 15% in the EU and 13% in
the UK. We aim to meet dividend and investment needs from free cash
flow and modest borrowing facilities. All investments are subject
to a hurdle rate analysis based on strategic and financial
priorities.
Operating structure
-- The Group operates with three divisions. Each division
addresses a core market: Aerospace & Industrial (approximately
40% of Group revenue); Laboratory (approximately 30% of Group
revenue); and Metal Melt Quality (approximately 30% of Group
revenue).
-- The Group has plants in the US, UK, Germany, Netherlands and
China. In 2018, 57% of revenue was manufactured in the US, 30% in
the UK, 9% in Continental Europe and 4% in China.
Investment and future development
The main investments during 2018 were:
-- The acquisition of Rohasys BV on 7 December 2017, bringing
complementary instruments and automation expertise to Seal
Analytical.
-- The acquisition of Keystone Filter on 28 February 2018,
adding the manufacture of filter cartridges for the food, beverage
and nuclear markets to our US Aerospace & Industrial
division.
-- The expansion of our facility in Vineland, NJ, to provide
increased manufacturing capacity, clean room capabilities and
better plant layout.
-- Expansion and refurbishment of our microelectronics facility in Boise, ID.
-- A new manufacturing line for nuclear containment filters in Ashland, VA.
-- The commissioning of a new manufacturing line for bioscience filters in Wrexham, UK.
New product development remains core to Porvair's strategy, with
incremental range extensions and increasing product differentiation
being priorities. Our biggest project in 2018 was the overhaul and
upgrade of Seal Analytical's core product, a segmented flow
analyser. Our new AA500 analyser is smaller, faster, quieter and
more accurate than any other on the market.
Divisional review
Aerospace & Industrial
2018 2017 Growth
GBPm GBPm %
Revenue 50.5 43.4 16
Inter segment revenue - (0.2)
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External revenue 50.5 43.2 17
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Operating profit 7.7 6.8 14
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Adjusted operating profit 8.0 6.8 18
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Reported revenue growth was 17%, but this includes sales
transferred in from the Laboratory division and acquired growth.
Underlying sales growth was 10% (note 1). Adjusted operating
profits in the division were up 18% to GBP8.0 million.
The division designs and manufactures a wide range of specialist
filtration products, demand for which grows as aerospace and
industrial customers seek cleaner, safer or more efficient
operations. Differentiation is achieved through design engineering,
with notable new products introduced this year for the US nuclear
market and aerospace inerting applications.
Demand in 2018 was good across industrial markets, notably in
the US, where the Keystone acquisition contributed to growth in the
second half. The US had another record year for revenues and
profits with nuclear and industrial orders robust. After a quiet
first half, aerospace orders increased in the second half and
finished the year strongly.
Commissioning of the large gasification projects continued.
These are complex power plants using new technology for which our
filter systems are a relatively small but critical component. All
three facilities - in Korea, India and China - experienced
commissioning challenges during the year due to variations in
feedstocks and operating conditions, but successful run time is
accumulating. At this stage our filters are performing as expected,
with spares orders delivered in the final quarter and scheduled for
further deliveries in the first half of 2019.
Laboratory
2018 2017 Growth
GBPm GBPm %
Revenue 41.2 36.8 12
Inter segment revenue (2.5) (1.5)
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External revenue 38.7 35.3 9
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Operating profit 6.2 6.1 3
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Adjusted operating profit 6.5 6.3 4
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Revenue growth in the Laboratory division was 9%, including a
full year of revenue from JG Finneran and the first year from
Rohasys. Adjusted operating profit grew 4%, Rohasys having
contributed revenue but minimal profits in its first year of
ownership.
The division serves the analytical laboratory market, where
increasing availability of smaller automated instruments and the
growing requirement for ever improving detection limits is driving
demand for sample preparation and testing. The Group addresses this
market with analytical instruments and robotic systems supplied by
Seal Analytical and a range of sample preparation and
chromatography consumables supplied by Porvair Sciences and JG
Finneran.
Seal Analytical had a good year, compensating for slower
instrument sales into China with increased demand in the US. Seal
is a leading supplier of instruments and consumables to
environmental laboratories and specialises in equipment for the
detection of inorganic contamination in water. This market grows as
water quality standards improve. Seal differentiates itself with an
active new product development programme which will be boosted in
2019 by the roll out of the new AA500, a product that offers
significant benefits to Seal's extensive installed base. Rohasys
finished its first year with sales and profits in line with the
targets set at the time of the acquisition. Its automation
expertise is accelerating our new product development programme.
Seal's five-year CAGR revenue growth is 10%.
Porvair Sciences manufactures laboratory filters and associated
consumables, with a focus on chromatography and laboratory sample
preparation products. Differentiation is through proprietary
filtration media and manufacturing capabilities, with both
benefitting from continued investment in 2018. During the year we
acquired some filter coating intellectual property which we expect
will add to our sample preparation capabilities. Sales of
bioscience filtration media increased 26%. JG Finneran performed
strongly in its first full year and will further benefit in 2019
from its improved and enlarged facilities.
Metal Melt Quality
2018 2017 Growth
GBPm GBPm %
Revenue 39.6 37.8 5%
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Operating profit 2.4 1.7 37%
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Revenue was up 5% (9% in constant currency (note 1)) to a record
GBP39.6 million. Operating profit increased 37%. Much improved US
operational efficiencies were balanced by continuing losses in
China.
This division serves three market segments and has a well
differentiated and patented product range:
-- Selee CSX(TM) and Selee CSW(TM) for aluminium cast house
filtration. These products are free of phosphates and ceramic
fibres, giving them a unique environmental footprint.
-- Selee IC(TM) for grey and ductile iron filtration. This range
is sold principally in the US and offers excellent filtration
efficiency.
-- Selee SA(TM) for the filtration of nickel-cobalt alloys. This
niche application requires exceptional filtration performance and
uses proprietary manufacturing techniques.
In the US, market share gains resulted in a fifth record year
for sales of Selee CSX(TM) aluminium cast house filters. Demand for
super alloy filters grew and the range and volume of ceramic 3D
manufactured products again increased. Plant efficiencies in the US
were excellent. This allowed the US business to report record
margins.
Revenue in China grew by over 30%, but our Chinese plant is not
yet at break even volumes and costs. As the Chinese aluminium
market develops, we expect demand for our proprietary filters to
grow, based on their demonstrably better quality and environmental
performance. Higher grades of metal require better filtration and,
in line with the Chinese Government's 'China 2025' initiative,
Chinese producers are moving to higher grade alloys. We continue to
sell on value rather than price. This can initially hold back
growth, but our experience in other parts of the world gives us
confidence that this remains the right strategy.
Dividends
The Board re-affirms its preference for a progressive dividend
policy and recommends an increased final dividend of 3.0 pence per
share, a cost of GBP1.4 million (2017: 2.7 pence per share, a cost
of GBP1.2 million). This makes the full year dividend increase by
10% to 4.6 pence per share, a cost of GBP2.1 million (2017: 4.2
pence, a cost of GBP1.9 million).
Staff
The Board recognises that Porvair's success is largely due to
the skill and commitment of its staff, to whom we offer our sincere
thanks. During the year we welcomed new members of staff to the
Group from both Keystone and Rohasys.
Charles Matthews stepped down from the Board at the 2018 AGM, at
which time we expressed our gratitude and best wishes.
Current trading and outlook
The Group has started 2019 with a healthy order book and is
trading well. The acquisitions made during the year have expanded
the Group's capabilities in industrial and laboratory markets and
are performing as expected. Porvair remains in a strong financial
position.
Ben Stocks
Group Chief Executive
25 January 2019
Financial review
Group results
2018 2017 Growth
GBPm GBPm %
Revenue 128.8 116.4 11
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Operating profit 12.9 12.3 4
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Profit before tax 12.0 11.7 3
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Profit for the year 10.0 8.8 13
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Reported revenue growth was 11%, 13% at constant currency. 7%
was from organic growth and 6% from acquisitions. Operating profit
was GBP12.9 million (2017: GBP12.3 million) and profit before tax
was GBP12.0 million (2017: GBP11.7 million). Profit for the year
increased by 13% to GBP10.0 million.
Alternative performance measures
2018 2017 Growth
GBPm GBPm %
Adjusted operating profit 14.3 13.0 10
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Adjusted profit before tax 13.5 12.4 9
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Adjusted profit for the year 10.4 9.4 11
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In addition to the constant currency revenue measures disclosed
in previous years, the Group has presented other alternative
performance measures for the first time this year to enable a
better understanding of the Group's trading performance. Adjusted
operating profit and adjusted profit before tax exclude:
-- the impact of acquiring businesses:
o the amortisation of acquired intangible assets of GBP0.6
million (2017: GBP0.2 million);
o other adjustments to profit and loss related to acquiring
businesses of GBP0.1 million (2017: GBP0.4 million).
-- other items that are considered significant and where
treatment as an adjusted item provides a more consistent assessment
of the Group's trading:
o an exceptional charge of GBP773,000 (2017: GBPnil), following
recent legal guidance, to enhance the benefits provided by the
Group's defined benefit pension plan to equalise its guaranteed
minimum pensions for men and women on benefits earned between 17
May 1990 and 6 April 1997.
Adjusted profit for the year excludes the adjustments to profit
before tax above together with their tax effect and an exceptional
one off tax credit of GBP778,000 (2017: GBPnil), reflecting a
reduction in the Group's deferred tax liability from the change in
US tax rates from December 2017 enacted in the US Tax Cuts and Jobs
Act.
Group operating performance
The two recent acquisitions, Rohasys BV ("Rohasys") and Keystone
Filter ("Keystone") contributed to revenue growth in the year but,
as expected, neither contributed significantly to operating profit,
consequently adjusted operating profit margins reduced slightly to
11.1% (2017: 11.2%). Adjusted operating margins increased in the
Aerospace & Industrial division to 15.9% (2017: 15.7%). In the
Laboratory division adjusted operating margins reduced to 15.8%
(2017: 17.0%), as a result of the acquisition of Rohasys and margin
sharing with Aerospace & Industrial on the transfer of
customers between divisions. Metal Melt Quality operating margins
increased to 6.0% (2017: 4.6%), a better performance in the US more
than offsetting the increased losses in China. Adjusted Central
costs increased to GBP2.6 million (2017: GBP1.8 million). The
result in 2017 included the release of GBP1.0 million currency
contract mark-to-market provisions.
Impact of exchange rate movements on performance
The international nature of the Group's business means that
relative movements in exchange rates can affect reported
performance. The rate used for translating the results of overseas
operations were:
2018 2017
Average rate for translating the results:
US $ denominated operations $1.34:GBP $1.29:GBP
Euro denominated operations EUR1.13:GBP EUR1.15:GBP
Closing rate for translating the balance
sheet:
US $ denominated operations $1.28:GBP $1.35:GBP
Euro denominated operations EUR1.13:GBP EUR1.14:GBP
A stronger Sterling average rate against the US dollar offset by
a weaker Sterling average rate against the Euro over the year
reduced reported revenues on translation by 2%.
In the year, the Group sold $17.8 million (2017: $16.0 million)
at an average rate of $1.33:GBP1 (2017: $1.29:GBP1) and EUR3.9
million (2017: EUR5.5 million) at an average rate of EUR1.13:GBP1
(2017: EUR1.12:GBP1).
At 30 November 2018, the Group had no outstanding forward
foreign exchange contracts (2017: $2.0 million). It had $6.2
million (2017: $3.9 million) of net current assets on the UK
operations' balance sheet.
Finance costs
Net interest payable comprises bank borrowing costs, interest on
the Group's pension deficit and the cost of unwinding discounts on
provisions. Overall, it remained stable at GBP0.8 million (2017:
GBP0.7 million). The defined benefit pension scheme interest cost
was GBP0.4 million (2017: GBP0.4 million), bank interest and
borrowing facilities non-utilisation fees were GBP0.3 million
(2017: GBP0.3 million) and there was a charge of GBP0.1 million
(2017: GBPnil) for unwinding discounted provisions.
Interest cover was 17 times (2017: 20 times). Interest cover on
bank finance costs was 44 times (2017: 62 times).
Tax
The Group tax charge was GBP2.0 million (2017: GBP2.8 million).
After removing the adjusting items described in note 1 to the
accounts, the Group's underlying tax charge was GBP3.1 million
(2017: GBP3.0 million). This is an effective rate of 23.0% (2017:
24.4%), which is higher than the UK standard corporate tax rate of
19.0% (2017: 19.3%). The tax rate in the UK compared with the
standard rate was reduced by the benefit of tax relief on the
exercise of share options. The tax rate was pushed up by profits
made in Germany, which attract a higher tax rate. The Group has not
taken a tax credit relating to the losses arising in China because
it could not be certain that the asset would be recovered, this has
increased the tax rate by 3.2% (2017: 2.5%).
The US tax rate reduced to an effective rate of 23% (2017: 31%)
as a result of changes enacted in the US Tax Cuts and Jobs Act.
This has reduced the effective tax rate on Group trading profits by
3% compared with the prior year.
The tax charge comprises current tax of GBP2.7 million (2017:
GBP2.1 million) and a deferred tax credit of GBP0.7 million (2017:
charge of GBP0.8 million).
The Group carries a deferred tax asset of GBP2.3 million (2017:
GBP2.9 million) and a deferred tax liability of GBP2.0 million
(2017: GBP2.2 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,
predominantly arising in the US.
Total equity and distributable reserves
Total equity at 30 November 2018 was GBP89.5 million (2017:
GBP74.9 million), an increase of 19% over the prior year.
Increases in total equity arose from: profit after tax of
GBP10.5 million (2017: GBP9.2 million) with the charge for employee
share option schemes net of tax (2018: GBP0.4 million; 2017: GBP0.4
million) added back; GBP0.1 million (2017: GBP0.3 million) arising
on the proceeds of the issue of shares on share option exercises; a
pension scheme actuarial gain (net of tax) of GBP2.9 million (2017:
nil); and exchange gains (net of tax) on translation of GBP3.5
million (2017: loss of GBP4.0 million). In 2018 there was no impact
of hedge accounting instruments (2017: gain of GBP0.2 million).
Reductions in total equity arose from dividends paid of GBP2.0
million (2017: GBP1.8 million) and purchases by the Employee
Benefit Trust of the Company's own shares charged directly to
equity of GBP0.4 million (2017: GBP0.5 million).
The Company had GBP19.5 million (2017: GBP12.6 million) of
distributable reserves at 30 November 2018. The Company's
distributable reserves increased in the year as a result of
dividends received from other Group companies and an actuarial gain
offset by head office costs and dividends paid to shareholders.
Return on capital employed
The Group's return on capital employed was 15% (2017: 16%).
Excluding the impact of goodwill and the net pension liability, the
return on operating capital employed was 43% (2017: 48%). The
Group's divisions have pre-tax weighted average costs of capital of
between 9% and 11%.
Cash flow
The table below summarises the key elements of the cash flow for
the year:
2018 2017
GBPm GBPm
Operating cash flow before working capital 17.0 13.7
Working capital movement (1.7) (1.4)
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Cash generated from operating activities 15.3 12.3
Interest (0.3) (0.2)
Tax (2.4) (2.7)
Capital expenditure net of disposals (4.5) (5.4)
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8.1 4.0
Acquisitions (9.0) (5.9)
Dividends (2.0) (1.8)
Share issue proceeds 0.1 0.3
Purchase of EBT shares (0.4) (0.5)
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Net cash decrease in the year (3.2) (3.9)
Exchange gains - 0.1
Net cash at 1 December 9.8 13.6
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Net cash at 30 November 6.6 9.8
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Generating free cash flow is key to the Group's business model
and operating cashflow of GBP15.3 million, represented an 88%
(2017: 80%) conversion rate of operating profit before depreciation
and amortisation. Net working capital increased by GBP1.7 million
(2017: GBP1.4 million), mainly arising in the Aerospace &
Industrial division. A particularly strong final month and
purchases made for manufacture and delivery of the strong order
book meant that receivables increased by GBP1.6 million (2017:
GBP0.3 million) and inventories increased by GBP2.5 million (2017:
GBP0.5 million). Payables increased by GBP3.2 million (2017: GBP0.5
million).
Construction contracts and performance bonds
During the year a nuclear and a gasification contract were
completed. Progress on a further nuclear contract and two
gasification contracts is described in the Aerospace &
Industrial section of Operating Review. At 30 November 2018, the
Group had GBP0.3 million (2017: GBP0.8 million) due from contract
customers and net amounts due to contract customers of GBP7.3
million (2017: GBP8.0 million), representing the net amount by
which progress billings at 30 November 2018 exceeded revenue
recognised to date on these contracts. The deferred revenue will be
recognised as costs are incurred and/or profits recognised.
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 2018 there were $2.4 million advance payment bonds
outstanding (2017: GBPnil).
Contract customers also generally require performance bonds to
cover risks arising during the contract warranty periods. At 30
November 2018, the Group had $7.5 million (2017: $6.2 million) of
performance bonds outstanding.
Capital expenditure
Capital expenditure was GBP4.5 million (2017: GBP5.4 million) in
the year. The principal investments in 2018 are described in the
Investment section of the Operating review.
Acquisitions
On 7 December 2017 the Group purchased 100% of the share capital
of Rohasys B.V. ("Rohasys") to increase the Group's offering in the
laboratory market. Rohasys manufactures robotic sample handling
systems in the Netherlands. The total maximum consideration is
EUR3,548,000 (GBP3,118,000); EUR896,000 (GBP787,000) was paid in
cash on the acquisition date, together with EUR502,000 (GBP441,000)
to settle the outstanding loan. The balance is contingent on
financial performance and due for payment in cash over four years.
The contingent consideration is dependent on Rohasys meeting sales
and profit targets and will be settled in cash. EUR250,000
(GBP226,000) was paid in the year and, at 30 November 2018, EUR1.7
million (GBP1.5 million) was held in other payables.
On 28 February 2018 the Group purchased the net assets of
Keystone Filter ("Keystone"), a division of CECO Environmental
Corp. Keystone designs and manufactures a range of filter
cartridges and housings for the food and beverage, drinking water,
and chemical process markets and is based in the USA. The total
consideration of $7,190,000 (GBP5,219,000) was paid in full in the
year.
Pension schemes
The Group supports its defined benefit pension scheme in the UK
("The Plan"), which is closed to new members, and provides access
to defined contribution schemes for its US employees and other UK
employees.
The Group's total pension cost was GBP3.7 million (2017: GBP2.7
million). GBP3.3 million (2017: GBP2.3 million) was recorded as an
operating cost: GBP1.7 million (2017: GBP1.6 million) related to
funding defined contributions schemes; GBP1.5 million (2017: GBP0.6
million) related to the charge for The Plan and GBP0.1 million
(2017: GBP0.1 million) related to the pension protection levy.
GBP0.4 million (2017: GBP0.4 million) was charged as a finance cost
in relation to The Plan.
The Group's cash contributions paid to The Plan were GBP1.6
million (2017: GBP1.6 million).
The Group's net retirement benefit obligation was GBP12.4
million (2017: GBP15.7 million). The Plan's liabilities reduced to
GBP39.2 million (2017: GBP43.8 million). The Plan's assets reduced
to GBP27.0 million (2017: GBP28.3 million). There were a further
GBP0.2 million (2017 GBP0.2 million) of non-Plan liabilities.
The actuarial gain in the year was GBP3.6 million (2017: loss of
GBP0.1 million). The Plan's assets suffered an actuarial loss of
GBP1.4 million. The actuarial gain on the liabilities of GBP5
million arose principally from changes to the discount rate used to
value The Plan's liabilities and a change in the mortality
assumption:
-- The discount rate increased from 2.5% to 3.0%, as a result of
higher AA bond yields, which accounted for most of the reduction of
GBP3.2 million in liabilities arising on changes in financial
assumptions.
-- During 2018, as a precursor to the triennial valuation, the
Group reviewed the demographic assumptions used by The Plan. To
assess the most appropriate mortality assumption for The Plan, the
Group commissioned a Medically Underwritten Mortality Study and a
postcode mortality analysis from its actuarial advisers, KPMG. The
Company wrote to members of The Plan aged between 55 and 80
representing approximately 95% of the value of liabilities in that
age range and 61% of the liabilities in total. 134 members
completed the survey representing 63% of the liabilities in the 55
to 80 age range and 40% of the liabilities in total. The medical
underwriter's results were analysed by KPMG and combined with the
findings of a postcode mortality analysis to arrive at an overall
blended mortality assumption for The Plan.
This resulted in a multiplier applied to the SAPS series 2 base
tables of 122% (2017: 106%) for the IAS 19 accounting valuation.
The allowance for future improvements used the 2017 CMI Core
Projection (2017: 2016 CMI Core Projections) with a long term trend
of 1.25% per annum. The change in demographic assumptions modestly
reduced the life expectancy assumed for the members and reduced the
Group's defined pension scheme liabilities by GBP1.8 million.
The Plan's liabilities increased by GBP773,000 to amend the
benefits provided by The Plan to equalise its guaranteed minimum
pensions for men and women on benefits earned between 17 May 1990
and 6 April 1997. This additional liability was charged to the
income statement.
The triennial actuarial valuation of The Plan determines the
cash contributions that the Group makes to The Plan. The next full
actuarial valuation will be based on The Plan's position at 31
March 2018 and is expected to be completed before 30 June 2019. For
the previous valuation, based on data at 31 March 2015, the Group
agreed to set the employer's contributions at 18.9% of salary.
Additionally, the Group committed to making a GBP0.2 million annual
contribution towards the running costs of The Plan from April 2016,
which will increase by 3.5% per annum thereafter. The Group also
committed to make additional annual contributions, to cover the
past service deficit of GBP1.0 million per annum.
Borrowings and bank finance
At the year end, the Group had cash balances of GBP11.5 million
(2017: GBP12.5 million) and borrowings of GBP4.9 million (2017:
GBP2.7 million).
In 2017, the Group secured a five year revolving credit facility
of EUR23 million (GBP20.4 million) with Barclays Bank plc and
Handelsbanken plc. The facility has a margin over LIBOR of 1.5% and
a non-utilisation fee of 0.4375%. The Group also has a GBP2.5
million overdraft facility provided by Barclays Bank plc. The
financial covenants require the Group to maintain interest cover of
3.5 times and net debt to be less than 2.5 times EBITDA.
At 30 November 2018, the Group had net cash of GBP6.6 million
(2017: GBP9.8 million), EUR17.3 million (GBP15.3 million) of unused
facilities (2017: EUR19.6 million of unused facilities (GBP17.2
million)) and an unutilised overdraft facility of GBP2.5 million
(2017: GBP2.5 million).
Finance and treasury policy
The treasury function at Porvair is managed centrally, under
Board supervision. It seeks to limit the Group's trading exposure
to currency movements. The Group does not hedge against the impact
of exchange rate movements on the translation of profits and losses
of overseas operations.
The Group finances its operations through share capital,
retained profits and, when required, bank debt. It has adequate
facilities to finance its current operations and capital plans for
the foreseeable future.
Adoption of new accounting standards
The Group will adopt IFRS 9 and 15 in its accounts for the year
ending 30 November 2019 and will adopt IFRS 16 in its accounts for
the year ending 30 November 2020. The impact of the changes arising
from the adoption of these new standards is expected to be
immaterial to the opening reserves and performance of the Group.
Adopting IFRS 16 will result in the gross up of fixed assets and
liabilities in the opening balance sheet of the 2020 accounts and
adopting IFRS 15 will result in substantially all of the amounts
due to contract customers included in accruals and deferred income
in the 2018 accounts being converted to accruals for future costs
in the opening balance sheet of the 2019 accounts.
International Trade
Over 50% of Group revenues are manufactured in the US and
changes to US tariff arrangements have had a modest effect on
trading. A few customers in both the US and China have switched
back to domestic suppliers, and the Group has both won and lost
accounts as a result. The net effect has been small. Trading
activity between the UK and the EU is less than 10% of Group
revenues, so a significant perturbation due to Brexit is unlikely,
nevertheless the implications of either a short term disturbance in
the movement of goods or longer term tariff changes have been taken
into account in the Group's planning for 2019.
Chris Tyler
Group Finance Director
25 January 2019
Consolidated income statement
For the year ended 30 November
Note 2018 2017
Continuing operations GBP'000 GBP'000
Revenue 1,2 128,823 116,423
Cost of sales (84,444) (78,091)
--------- ---------
Gross profit 44,379 38,332
Distribution costs (2,172) (1,645)
Administrative expenses (29,339) (24,348)
------------------------------------------ ----- --------- ---------
Adjusted operating profit 1,2 14,343 13,021
Adjustments
Equalisation of guaranteed minimum
pension 1 (773) -
Amortisation of acquired intangibles 1 (564) (244)
Other acquisition related adjustments 1 (138) (438)
------------------------------------------ ----- --------- ---------
Operating profit 1,2 12,868 12,339
Finance income 6 4
Finance costs (836) (661)
Profit before income tax 1,2 12,038 11,682
------------------------------------------ ----- --------- ---------
Adjusted income tax expense (3,113) (3,011)
Adjustments
Tax effect of adjustments to
operating profit 1 325 171
Exceptional reduction of US
deferred tax liability 1 778 -
------------------------------------------ ----- --------- ---------
Income tax expense (2,010) (2,840)
Profit for the year 10,028 8,842
--------- ---------
Profit attributable to:
Owners of the parent 10,045 8,861
Non-controlling interests (17) (19)
--------- ---------
Profit for the year 10,028 8,842
--------- ---------
Earnings per share (basic) 3 22.1p 19.5p
Adjusted earnings per share
(basic) 3 22.9p 20.7p
Earnings per share (diluted) 3 22.0p 19.4p
Adjusted earnings per share
(diluted) 3 22.8p 20.5p
Consolidated statement of comprehensive income
For the year ended 30 November
2018 2017
GBP'000 GBP'000
Profit for the year 10,028 8,842
--------- ---------
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 2,948 (66)
--------- ---------
Items that may subsequently be classified
to profit and loss
Exchange differences on translation of
foreign subsidiaries 3,606 (3,985)
Tax relating to components of other comprehensive (149) -
income
Changes in fair value of forex contracts
held as a cash flow hedge - 157
--------- ---------
3,457 (3,828)
--------- ---------
Net other comprehensive income/(expense) 6,405 (3,894)
--------- ---------
Total comprehensive income for the year 16,433 4,948
--------- ---------
Comprehensive income attributable to:
Owners of the parent 16,450 4,967
Non-controlling interests (17) (19)
--------- ---------
Total comprehensive income for the year 16,433 4,948
--------- ---------
Consolidated balance sheet
As at 30 November
Note 2018 2017
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 5 21,827 19,997
Goodwill and other intangible assets 6 67,001 57,227
Deferred tax asset 2,304 2,933
91,132 80,157
Current assets
Inventories 19,856 16,067
Trade and other receivables 22,336 19,186
Derivative financial instruments - 40
Cash and cash equivalents 11,492 12,497
--------- -----------
53,684 47,790
Current liabilities
Trade and other payables 7 (32,826) (27,736)
Current tax liabilities (1,530) (1,164)
Provisions for other liabilities and
charges 10 (506) (1,217)
(34,862) (30,117)
Net current assets 18,822 17,673
--------- -----------
Non-current liabilities
Borrowings 9 (4,867) (2,711)
Deferred tax liability (2,032) (2,166)
Retirement benefit obligations (12,356) (15,670)
Other payables (1,008) (2,216)
Provisions for other liabilities and
charges 10 (219) (178)
--------- -----------
(20,482) (22,941)
--------- -----------
Net assets 89,472 74,889
--------- -----------
Capital and reserves
Share capital 11 917 913
Share premium account 11 35,958 35,831
Cumulative translation reserve 10,570 6,964
Retained earnings 42,024 31,161
--------- -----------
Equity attributable to owners of the
parent 89,469 74,869
Non-controlling interests 3 20
--------- -----------
Total equity 89,472 74,889
--------- -----------
Consolidated cash flow statement
For the year ended 30 November
Note 2018 2017
GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 14 15,335 12,257
Interest paid (345) (220)
Tax paid (2,419) (2,741)
--------- ---------
Net cash generated from operating
activities 12,571 9,296
--------- ---------
Cash flows from investing activities
Interest received 6 4
Acquisition of subsidiaries (net of
cash acquired) 13 (9,007) (5,932)
Purchase of property, plant and equipment 5 (3,796) (5,248)
Purchase of intangible assets 6 (656) (177)
Share capital from non-controlling
interests - 39
Net cash used in investing activities (13,453) (11,314)
--------- ---------
Cash flows from financing activities
Proceeds from issue of ordinary share
capital 11 131 325
Purchase of Employee Benefit Trust
shares (416) (475)
Increase in borrowings 1,913 3,021
Dividends paid to shareholders 4 (1,957) (1,769)
Net cash (used in)/from financing
activities (329) 1,102
--------- ---------
Net decrease in cash and cash equivalents (1,211) (916)
Exchange gains/(losses) on cash and
cash equivalents 206 (220)
--------- ---------
(1,005) (1,136)
Cash and cash equivalents at 1 December 12,497 13,633
--------- ---------
Cash and cash equivalents at 30 November 11,492 12,497
--------- ---------
Reconciliation of net cash flow to movement in net cash
2018 2017
GBP'000 GBP'000
Net decrease in cash and cash equivalents (1,211) (916)
Effects of exchange rate changes (37) 90
Increase in borrowings (1,913) (3,021)
Net cash at 1 December 9,786 13,633
--------- ---------
Net cash at 30 November 6,625 9,786
--------- ---------
Consolidated statement of changes in equity
Share Cumulative Non-controlling
Share premium translation Retained interest
capital account reserve earnings Total GBP'000 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- -------- ------------ ---------- ---------- ---------------- ----------
Balance at 1 December
2016 906 35,513 10,949 24,078 71,446 - 71,446
--------- -------- ------------ ---------- ---------- ---------------- ----------
Profit for the year - - - 8,861 8,861 - 8,861
Other comprehensive
income/(expense): - - (3,985) 91 (3,894) - (3,894)
Total comprehensive
income for the year - - (3,985) 8,952 4,967 - 4,967
--------- -------- ------------ ---------- ---------- ---------------- ----------
Transactions with owners:
Consideration paid
for purchase of own
shares (held in trust) - - - (475) (475) - (475)
Employee share option
schemes:
* value of employee services net of tax - - - 375 375 - 375
Proceeds from shares
issued 7 318 - - 325 - 325
Dividends paid - - - (1,769) (1,769) - (1,769)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Total transactions
with owners recognised
directly in equity 7 318 - (1,869) (1,544) - (1,544)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Adjustment arising
from change in non-controlling
interest - - - - - 20 20
--------- -------- ------------ ---------- ---------- ---------------- ----------
Balance at 30 November
2017 913 35,831 6,964 31,161 74,869 20 74,889
--------- -------- ------------ ---------- ---------- ---------------- ----------
Balance at 1 December
2017 913 35,831 6,964 31,161 74,869 20 74,889
--------- -------- ------------ ---------- ---------- ---------------- ----------
Profit for the year - - - 10,045 10,045 - 10,045
Other comprehensive
income: - - 3,606 2,799 6,405 - 6,405
Total comprehensive
income for the year - - 3,606 12,844 16,450 - 16,450
--------- -------- ------------ ---------- ---------- ---------------- ----------
Transactions with owners:
Consideration paid
for purchase of own
shares (held in trust) - - - (416) (416) - (416)
Employee share option
schemes:
* value of employee services net of tax - - - 392 392 - 392
Proceeds from shares
issued 4 127 - - 131 - 131
Dividends paid - - - (1,957) (1,957) - (1,957)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Total transactions
with owners recognised
directly in equity 4 127 - (1,981) (1,850) - (1,850)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Adjustment arising
from change in non-controlling
interest - - - - - (17) (17)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Balance at 30 November
2018 917 35,958 10,570 42,024 89,469 3 89,472
--------- -------- ------------ ---------- ---------- ---------------- ----------
Notes
1. Alternative performance measures
The Group uses adjusted figures as alternative performance
measures in addition to those reported under IFRS, as management
believe that these measures provide a useful analysis of trends in
underlying performance compared with prior periods.
Alternative revenue measures
2018 2017 Growth
Aerospace & Industrial GBP'000 GBP'000 %
Underlying revenue 47,916 43,651 10
Divisional adjustment - (1,955)
Acquisitions 1,671 -
-------- -------- -------
Revenue at constant currency 49,587 41,696 19
Exchange 949 1,553
Revenue as reported 50,536 43,249 17
-------- -------- -------
Laboratory
Underlying revenue 25,970 26,075 0
Divisional adjustment - 1,955
Acquisitions 11,291 5,866
-------- -------- -------
Revenue at constant currency 37,261 33,896 10
Exchange 1,398 1,430
-------- -------- -------
Revenue as reported 38,659 35,326 9
-------- -------- -------
Metal Melt Quality
Revenue at constant currency 37,678 34,707 9
Exchange 1,950 3,141
-------- -------- -------
Revenue as reported 39,628 37,848 5
-------- -------- -------
Group
Underlying revenue 111,564 104,433 7
Acquisitions 12,962 5,866
-------- -------- -------
Revenue at constant currency 124,526 110,299 13
Exchange 4,297 6,124
-------- -------- -------
Revenue as reported 128,823 116,423 11
-------- -------- -------
Revenue at constant currency is derived from translating
overseas subsidiaries at budgeted fixed exchange rates. In 2018 and
2017 the rates used were $1.4:GBP and EUR1.2:GBP.
Underlying revenue is revenue at constant currency adjusted for
the impact of acquisitions made in the current and prior year and,
in the case of 2017, the impact of accounts that were managed by
the Laboratory division in 2017 but transferred to Aerospace &
Industrial in 2018.
1. Alternative performance measures continued
Alternative profit measures
A reconciliation of the Group's adjusted performance measures to
the reported IFRS measures is presented below:
2018 2017
Adjusted Adjustments Total Adjusted Adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Operating profit 14,343 (1,475) 12,868 13,021 (682) 12,339
Finance income 6 - 6 4 - 4
Finance costs: (836) - (836) (661) - (661)
Profit before
income tax 13,513 (1,475) 12,038 12,364 (682) 11,682
Income tax expense (3,113) 1,103 (2,010) (3,011) 171 (2,840)
--------- ------------ -------- ---------- ---------- -------------
Profit for the
year 10,400 (372) 10,028 9,353 (511) 8,842
--------- ------------ -------- ---------- ---------- -------------
2018 2017
GBP'000 GBP'000
Equalisation of guaranteed minimum pension (773) -
Amortisation of intangible assets acquired through
acquisitions (564) (244)
Release of contingent consideration - 20
Acquisition expenses (138) (458)
Adjustments affecting operating profit (1,475) (682)
----------- --------
Tax effect of adjustments 325 171
Tax - exceptional item 778 -
Adjustments affecting tax 1,103 171
----------- --------
Total adjusting items (372) (511)
----------- --------
Adjusted operating profit and adjusted profit before tax
exclude:
-- the impact of acquiring businesses:
o the amortisation of acquired intangible assets of GBP0.6
million (2017: GBP0.2 million); and
o acquisition expenses and other adjustments to the income
statement related to acquiring businesses of GBP0.1 million (2017:
GBP0.4 million).
-- other items that are considered significant and where
treatment as an adjusted item provides a more consistent assessment
of the Group's trading:
o an exceptional charge of GBP773,000 (2017: GBPnil), following
recent legal precedent, to enhance the benefits provided by the
Group's defined benefit pension plan to equalise its guaranteed
minimum pensions for men and women on benefits earned between 17
May 1990 and 6 April 1997.
Adjusted profit for the year excludes the adjustments to profit
before tax together with their tax effect and an exceptional one
off tax credit of GBP778,000 (2017: GBPnil) reflecting a reduction
in the Group's deferred tax liability from the change in US tax
rates from December 2017 enacted in the US Tax Cuts and Jobs
Act.
2. Segment information
The segmental analyses of revenue, operating profit/(loss),
segment assets and liabilities and geographical analyses of revenue
are set out below:
2018 Aerospace Laboratory Metal Melt Central Group
& Industrial Quality
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment
revenue 50,546 41,181 39,628 - 131,355
Inter-segment
revenue (10) (2,522) - - (2,532)
-------------- ----------- ----------- ---------- ---------
Revenue 50,536 38,659 39,628 - 128,823
-------------- ----------- ----------- ---------- ---------
Adjusted operating
profit/(loss) 8,043 6,494 2,373 (2,567) 14,343
Equalisation of
guaranteed minimum
pension - - - (773) (773)
Amortisation of
acquired intangibles (302) (255) (7) - (564)
Other acquisition
related adjustments - - - (138) (138)
------------------------- -------------- ----------- ----------- ---------- ---------
Operating profit/(loss) 7,741 6,239 2,366 (3,478) 12,868
Interest payable
and similar charges - - - (830) (830)
-------------- ----------- ----------- ---------- ---------
Profit/(loss)
before income
tax 7,741 6,239 2,366 (4,308) 12,038
Income tax expense - - - (2,010) (2,010)
Profit/(loss)
for the year 7,741 6,239 2,366 (6,318) 10,028
-------------- ----------- ----------- ---------- ---------
2017 Aerospace Laboratory Metal Melt Central Group
& Industrial Quality
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment
revenue 43,407 36,774 37,848 - 118,029
Inter-segment
revenue (158) (1,448) - - (1,606)
-------------- ----------- ----------- ---------- ---------
Revenue 43,249 35,326 37,848 - 116,423
-------------- ----------- ----------- ---------- ---------
Adjusted operating
profit/(loss) 6,825 6,255 1,745 (1,804) 13,021
Amortisation of
acquired intangibles (42) (189) (13) - (244)
Other acquisition
related adjustments - - - (438) (438)
------------------------- -------------- ----------- ----------- ---------- ---------
Operating profit/(loss) 6,783 6,066 1,732 (2,242) 12,339
Interest payable
and similar charges - - - (657) (657)
-------------- ----------- ----------- ---------- ---------
Profit/(loss)
before income
tax 6,783 6,066 1,732 (2,899) 11,682
Income tax expense - - - (2,840) (2,840)
-------------- ----------- ----------- ---------- ---------
Profit/(loss)
for the year 6,783 6,066 1,732 (5,739) 8,842
-------------- ----------- ----------- ---------- ---------
Other Group operations are included in "Central". These mainly
comprise Group corporate expenditure such as head office and Board
costs, new business development and general financial costs.
2. Segment information continued
Segment assets and liabilities
At 30 Nov 2018 Aerospace Laboratory Metal Melt Central Group
& Industrial Quality
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental assets 59,655 37,608 33,869 2,192 133,324
Cash and cash
equivalents - - - 11,492 11,492
-------------- ----------- ----------- ----------- -----------
Total assets 59,655 37,608 33,869 13,684 144,816
-------------- ----------- ----------- ----------- -----------
Segmental liabilities (18,610) (11,365) (3,999) (4,147) (38,121)
Retirement
benefit obligations - - - (12,356) (12,356)
Bank overdraft
and loans - - - (4,867) (4,867)
-------------- ----------- ----------- ----------- -----------
Total liabilities (18,610) (11,365) (3,999) (21,370) (55,344)
-------------- ----------- ----------- ----------- -----------
At 30 Nov 2017 Aerospace Laboratory Metal Melt Central Group
& Industrial Quality
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental assets 46,985 30,250 35,222 2,993 115,450
Cash and cash
equivalents - - - 12,497 12,497
-------------- ----------- ----------- ----------- -----------
Total assets 46,985 30,250 35,222 15,490 127,947
-------------- ----------- ----------- ----------- -----------
Segmental liabilities (15,979) (7,690) (3,917) (7,091) (34,677)
Retirement
benefit obligations - - - (15,670) (15,670)
Bank overdraft
and loans - - - (2,711) (2,711)
-------------- ----------- ----------- ----------- -----------
Total liabilities (15,979) (7,690) (3,917) (25,472) (53,058)
-------------- ----------- ----------- ----------- -----------
Geographical analysis
2018 2017
By destination By origin By destination By origin
GBP'000 GBP'000 GBP'000 GBP'000
Revenue
United Kingdom 16,494 38,984 15,529 37,122
Continental Europe 19,322 10,949 15,156 10,120
United States of America 56,159 73,979 51,989 66,187
Other NAFTA 8,304 - 8,793 -
South America 2,206 - 1,658 -
Asia 24,914 4,911 22,004 2,994
Africa 1,424 - 1,294 -
--------------- ---------- --------------- ----------
128,823 128,823 116,423 116,423
--------------- ---------- --------------- ----------
3. Earnings per share
2018 2017
Total Earnings Weighted Per share Earnings Weighted Per share
average amount average amount
number number of
GBP'000 of shares (pence) GBP'000 shares (pence)
Earnings attributable
to ordinary shareholders 10,045 8,861
Shares in issue 45,705,419 45,429,715
Shares owned by
the Employee Benefit
Trust (156,552) (63,618)
--------- ------------ ---------- --------- ----------- ----------
Basic earnings 10,045 45,548,867 22.1 8,861 45,366,097 19.5
Effect of dilutive
securities - share
options 102,380 (0.1) 262,585 (0.1)
--------- ------------ ---------- --------- ----------- ----------
Diluted earnings 10,045 45,651,247 22.0 8,861 45,628,682 19.4
--------- ------------ ---------- --------- ----------- ----------
2018 2017
Adjusted Earnings Weighted Per share Earnings Weighted Per share
average amount average amount
number number of
GBP'000 of shares (pence) GBP'000 shares (pence)
Earnings attributable
to ordinary shareholders 10,045 8,861
Adjusting items
(note 1) 372 511
--------- ----------- ---------- --------- ----------- ----------
Adjusted earnings
attributable to
ordinary shareholders 10,417 9,372
--------- ----------- ---------- --------- ----------- ----------
Adjusted basic
earnings 10,417 45,548,867 22.9 9,372 45,366,097 20.7
Adjusted diluted
earnings 10,417 45,651,247 22.8 9,372 45,628,682 20.5
--------- ----------- ---------- --------- ----------- ----------
4. Dividends per share
2018 2017
Per share GBP'000 Per share GBP'000
Final dividend paid 2.7p 1,229 2.4p 1,088
Interim dividend paid 1.6p 728 1.5p 681
---------- -------- ---------- --------
4.3p 1,957 3.9p 1,769
---------- -------- ---------- --------
The Directors recommend the payment of a final dividend of 3.0
pence per share (2017: 2.7 pence per share) on 7 June 2019 to
shareholders on the register on 3 May 2019; the ex-dividend date is
2 May 2019. This makes a total dividend for the year of 4.6 pence
per share (2017: 4.2 pence per share).
5. Property, plant and equipment
Land and Assets in Plant, Total
buildings the course machinery
of construction and equipment
Cost GBP'000 GBP'000 GBP'000 GBP'000
At 1 December 2017 9,939 1,280 35,539 46,758
Reclassification 173 (975) 802 -
Additions 704 1,827 1,265 3,796
Acquisitions - - 192 192
Disposals (4) - (156) (160)
Exchange differences 394 46 1,165 1,605
At 30 November 2018 11,206 2,178 38,807 52,191
----------- ----------------- --------------- --------
Depreciation
At 1 December 2017 (2,964) - (23,797) (26,761)
Charge for the year (318) - (2,522) (2,840)
Disposals 4 - 156 160
Exchange differences (127) - (796) (923)
At 30 November 2018 (3,405) - (26,959) (30,364)
-------- --------- ---------
Net book value
At 30 November 2018 7,801 2,178 11,848 21,827
------ ------ ------- -------
At 30 November 2017 6,975 1,280 11,742 19,997
------ ------ ------- -------
6. 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
2017 56,309 158 232 528 57,227
Additions - 115 541 - 656
Acquisitions 4,036 - 2 3,218 7,256
Amortisation
charges - (76) (54) (637) (767)
Exchange differences 2,416 11 18 184 2,629
-----------
Net book amount
at 30 November
2018 62,761 208 739 3,293 67,001
----------- -------------- -------------- ------------- ---------
At 30 November Trademarks,
2018 Development knowhow
expenditure Software and other
Goodwill capitalised capitalised intangibles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost 81,429 890 1,882 5,324 89,525
Accumulated
amortisation
and impairment (18,668) (682) (1,143) (2,031) (22,524)
Net book amount 62,761 208 739 3,293 67,001
----------- -------------- -------------- ------------- -----------
7. Trade and other payables
2018 2017
Amounts falling due within one year: GBP'000 GBP'000
Trade payables 12,046 9,503
Taxation and social security 628 814
Other payables 2,884 2,318
Accruals and deferred income 17,268 15,101
At 30 November 32,826 27,736
--------- ---------
8. Construction contracts
2018 2017
GBP'000 GBP'000
Amounts due from contract customers included
in trade receivables 329 834
--------- ---------
Contracts in progress at 30 November:
Amounts due from contract customers included
in other receivables 460 211
Amounts due to contract customers included in
accruals and deferred income (7,728) (8,210)
--------- ---------
Net amounts due to contract customers (7,268) (7,999)
--------- ---------
Contract costs incurred plus recognised profits
less recognised losses to date 32,805 45,165
Less: progress billings (40,073) (53,164)
Contracts in progress at 30 November (7,268) (7,999)
--------- ---------
The amount of construction contract revenue recognised in the
year is GBP2,640,000 (2017: GBP910,000).
9. Borrowings
On 24 May 2017, the Group agreed a five year revolving credit
facility of EUR23 million (GBP20 million) with Barclays Bank plc
and Handelsbanken plc. The Group also has a GBP2.5 million
overdraft facility provided by Barclays Bank plc.
At 30 November 2018, the Group had EUR17.3 million of unused
facilities (2017: EUR19.6 million of unused facilities) and an
unutilised overdraft facility of GBP2.5 million (2017: GBP2.5
million).
10. Provisions
Dilapidations Warranty Total
GBP'000 GBP'000 GBP'000
At 1 December 2017 178 1,217 1,395
Released in the year - (711) (711)
Charged to the consolidated income
statement:
Unwinding of discount 41 - 41
At 30 November 2018 219 506 725
-------------- --------- --------
2018 2017
Analysis of total provisions: GBP'000 GBP'000
Current 506 1,217
Non-current 219 178
At 30 November 725 1,395
--------- ---------
Provisions arise from a discounted dilapidations provision for
leased property, which is expected to be required in 2023 and sale
warranties which expire by 2020. The amount released in the year of
GBP711,000 arose on the completion of contracts.
11. Share capital and premium
Number Ordinary Share premium Total
of shares shares account
Thousands GBP'000 GBP'000 GBP'000
At 1 December 2017 45,641 913 35,831 36,744
Issue of shares on
exercise of share
options 202 4 127 131
At 30 November 2018 45,843 917 35,958 36,875
----------- --------- -------------- --------
In February, March, April, June, July and September 2018, 51,049
ordinary shares of 2 pence each were issued on the exercise of Save
As You Earn share options for cash consideration of GBP128,000. In
September 2018, 151,375 ordinary shares of 2 pence each were issued
on the exercise of Long Term Share Plan share options for cash
consideration of GBP3,000.
The Group uses an Employee Benefit Trust (EBT) to purchase
shares in the Company to satisfy entitlements, granted since the
Company's AGM in 2015, under the Group's Long Term Incentive Plan.
During the year the Group purchased 84,000 ordinary shares of 2
pence each (2017: 92,000) for a total consideration of GBP416,000
(2017: GBP475,000). The cost of the shares held by the EBT is
deducted from retained earnings. The EBT is financed by a
repayable-on-demand loan from the Group of GBP968,000 (2017:
GBP552,000). As at 30 November 2018 the EBT held a total of 196,000
ordinary shares of 2 pence each (2017: 112,000) at a cost of
GBP968,000 (2017: GBP552,000) and a market value of GBP833,000
(2017: GBP521,000).
12. Acquisitions
On 7 December 2017 the Group, through its subsidiary Seal
Analytical Limited, purchased 100% of the share capital of Rohasys
B.V. ("Rohasys") in order to increase the Group's offering in the
laboratory market. The trade is the manufacture of robotic sample
handling systems and is based in the Netherlands. The total maximum
consideration is EUR3,548,000 (GBP3,118,000); EUR896,000
(GBP787,000) of this was paid in cash on the acquisition date,
together with EUR502,000 (GBP441,000) to settle the outstanding
loan. The balance is contingent on financial performance and
payable in instalments until 2021; the first EUR250,000
(GBP226,000) instalment of contingent consideration was paid in
March 2018.
The contingent consideration is dependent on Rohasys meeting
sales and profit targets, and will be settled in cash. Management
has forecast that payment of 99% of the maximum contingent
consideration, EUR2,136,000 (GBP1,877,000), is the most probable
outcome. This was discounted to EUR1,878,000 (GBP1,650,000) using
the discount rate of 14.5%, calculated for Rohasys. A reduction in
the annual sales by EUR200,000 (GBP177,000), which is considered a
reasonable possible alternative, would reduce the future contingent
liability by EUR30,000 (GBP27,000). In the period since
acquisition, the business has contributed EUR2,378,000
(GBP2,101,000) sales and EUR83,000 (GBP73,000) operating profit to
the Group results. The direct costs of acquisition charged to the
income statement were GBP35,000. If Rohasys had been consolidated
from 1 December 2017, the consolidated statement of income would
show pro-forma revenue of GBP128,823,000 and underlying operating
profit of GBP12,886,000.
Total
GBP'000
Purchase consideration:
Cash paid 787
Loan repaid 441
Contingent consideration 1,650
Total purchase consideration 2,878
Fair value of net
assets acquired (1,070)
Goodwill 1,808
--------
12. Acquisitions continued
Provisional recognised amounts of identifiable
assets acquired and liabilities assumed Fair value
GBP'000
Property, plant and equipment 22
Software 2
Trade name 72
Knowhow 318
Customer list 528
Inventory 393
Trade receivables 369
Trade payables (425)
Deferred tax liabilities (229)
Other working capital
(net) 20
Net assets acquired 1,070
-------------
Purchase consideration
settled in cash 787
-------------
Cash outflow on acquisition 787
-------------
An independent valuation of the identifiable intangible assets
has been carried out in the period. The goodwill is attributable to
the non-contractual relationships, the synergies between the
business acquired and the existing operations of the Group and the
potential to develop the technologies acquired. The goodwill
recognised is attributable to the Laboratory division and is not
expected to be deductible for income tax purposes. The purchase has
been accounted for as an acquisition. The intangible assets arising
on the acquisition are to be written off between three and ten
years.
On 28 February 2018 the Group, through its subsidiary Porvair
Filtration Group Inc., purchased the net assets of Keystone Filter
("Keystone"), a division of CECO Environmental Corp. The trade is
the design and manufacture of a range of filter cartridges and
housings for the food and beverage, drinking water, and chemical
process markets and is based in the USA. The total consideration is
$7,190,000 (GBP5,219,000); $5,290,000 (GBP3,840,000) of this was
paid on 28 February 2018, with the balance deferred and paid in
August 2018. In the period since acquisition, the business has
contributed $2,342,000 (GBP1,747,000) sales and $133,000
(GBP99,000) of underlying operating profit to the Group results.
The direct costs of acquisition charged to the income statement
were $77,000 (GBP56,000). If Keystone had been consolidated from 1
December 2017, the consolidated statement of income would show
pro-forma revenue of GBP129,463,000 and underlying operating profit
of GBP12,999,000
Total
GBP'000
Purchase consideration:
Cash paid 3,840
Deferred consideration 1,379
Total purchase consideration 5,219
Fair value of net
assets acquired (2,991)
Goodwill 2,228
--------
12. Acquisitions continued
Provisional recognised amounts of identifiable
assets acquired and liabilities assumed Fair value
GBP'000
Property, plant and equipment 170
Trade name 208
Order backlog 73
Customer list 2,019
Inventory 372
Trade receivables 325
Trade payables (171)
Other working capital
(net) (5)
Net assets acquired 2,991
-------------
Purchase consideration
settled in cash 3,840
-------------
Cash outflow on acquisition 3,840
-------------
An independent valuation of the identifiable intangible assets
has been carried out in the period. The goodwill is attributable to
the non-contractual relationships, the synergies between the
business acquired and the existing operations of the Group and the
potential to develop the technologies acquired. The goodwill
recognised is attributable to the Aerospace & Industrial
division and is expected to be deductible for income tax purposes.
The purchase has been accounted for as an acquisition. The
intangible assets arising on the acquisition are to be written off
between three and ten years.
13. Deferred and contingent consideration on acquisitions
Rohasys Keystone JG Finneran Total
Associates
Inc.
GBP'000 GBP'000 GBP'000 GBP'000
At 1 December 2017 - - 4,432 4,432
Purchase consideration
in the year 2,878 5,219 - 8,097
Cash paid in the year (1,454) (5,302) (2,251) (9,007)
Recognised in the income
statement 95 - - 95
Exchange movements 22 83 170 275
-------- --------- ------------ --------
At 30 November 2018 1,541 - 2,351 3,892
-------- --------- ------------ --------
Included within other payables 2018 2017
GBP'000 GBP'000
Deferred and contingent consideration - current 2,884 2,216
Deferred and contingent consideration - non-current 1,008 2,216
At 30 November 3,892 4,432
--------- ---------
14. Cash generated from operations
2018 2017
GBP'000 GBP'000
Operating profit 12,868 12,339
Post-employment benefits (136) (963)
Fair value movement of derivatives through
profit and loss 40 (1,461)
Share based payments 610 508
Depreciation, amortisation and impairment 3,607 3,228
Operating cash flows before movement in
working capital 16,989 13,651
--------- ---------
Increase in inventories (2,494) (523)
Increase in trade and other receivables (1,570) (287)
Increase in payables 3,216 545
Decrease in provisions (806) (1,129)
Increase in working capital (1,654) (1,394)
--------- ---------
Cash generated from operations 15,335 12,257
--------- ---------
15. Basis of preparation
The results for the year ended 30 November 2018 have been
prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union as at 30
November 2018. The financial information contained in this
announcement does not constitute statutory accounts as defined in
Section 434 of the Companies Act 2006. The financial information
has been extracted from the financial statements for the year ended
30 November 2018, which have been approved by the Board of
Directors and on which the auditors have reported without
qualification. The financial statements will be delivered to the
Registrar of Companies after the Annual General Meeting. The
financial statements for the year ended 30 November 2017, upon
which the auditors reported without qualification, have been
delivered to the Registrar of Companies.
16. Annual general meeting
The Company's Annual General Meeting will be held at 11.00 a.m.
on Thursday 11 April 2019 at the offices of Porvair Sciences
Limited(,) Clywedog Road South, Wrexham Industrial Estate, Wrexham,
LL13 9XS.
17. Related parties
There were no related party transactions in the year ended 30
November 2018.
18. Responsibility Statement
Each of the Directors confirms, to the best of their knowledge,
that:
-- the financial statements, on which this announcement is
based, have been prepared in accordance with the applicable law and
International Financial Reporting Standards as adopted by the EU
and give a true and fair view of the assets, liabilities, financial
position, and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
-- the review of the business includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
The Directors of Porvair are listed in the Porvair Annual Report
for the year ended 30 November 2017. Charles Matthews resigned from
the Board on 17 April 2018. A list of current Directors is
maintained on the Porvair website www.porvair.com.
Copies of full accounts will be sent to shareholders in March
2019. Additional copies will be available from www.porvair.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LLFLALRIDFIA
(END) Dow Jones Newswires
January 28, 2019 02:00 ET (07:00 GMT)
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