Interim Results
Porvair PLC
27 June 2001
FOR IMMEDIATE RELEASE 27 June 2001
Contacts:
Ben Stocks, Chief Executive
Mark Moran, Group Finance Director
Porvair plc today 020 7466 5000
at all other times 01553 761111
Charles Ryland / Catherine Miles
Buchanan Communications 020 7466 5000
PORVAIR plc ('Porvair')
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2001
Porvair, the materials science group, announces interim results for the six
months ended 31 May 2001.
KEY POINTS
* Operating profit (before research and development expenditure,
goodwill amortisation and exceptional items) of ongoing businesses up 8% to £
3.7 million (2000: £3.4 million)
* Considerable progress made against the objectives set out in the
Strategic Outlook for 2001
* Four acquisitions made, all integrating well
* Fully underwritten Rights Issue announced 30 May 2001: borrowings
substantially reduced in middle of July when £27.3 million of net proceeds
received
* Porvair Fuel Cell Technologies: substantially increased research and
development programme on track. New material science licence taken
John Morgan, Chairman, said:
'As planned 2001 is a year of change for Porvair and this process is being
managed effectively. We expect to see further progress in the achievement of
our strategic objectives in the second half. Overall the Group is trading in
line with market expectations and the Board remains confident of the prospects
for the current financial year.'
Chairman's statement
The first half of 2001 has been a busy period for Porvair with good progress
being made on the strategic plan outlined in the last annual report. The
Group has substantially increased research and development expenditure,
continued the simplification programme in its membrane operation, completed
four acquisitions to strengthen its core businesses and licenced some new and
exciting material science for its fuel cell development programme.
As a consequence in this transition year for Porvair it is difficult to see
clearly the underlying trading results. However, I am pleased to report that
the operating profits (before research and development expenditure, goodwill
amortisation and exceptional items) of the businesses owned both in this
period and the first half of 2000 increased by 8% to £3.7 million. Given
difficult trading conditions in the US, we are pleased with this result, as we
are with the acquired businesses, which have contributed £0.9m of operating
profit before goodwill amortisation and exceptional items.
In order to help clarify the position I include below a summary of the actual
result, which is entirely in line with the profit forecast made in the recent
rights issue circular :
2001 2000
Continuing
activities Acquisitions Total
£'m £'m £'m £'m
Turnover 31.0 4.4 35.4 31.7
Operating profit before R&D
expenditure, goodwill amortisation
and exceptional items 3.7 1.1 4.8 3.4
R&D expenditure (2.1) (0.2) (2.3) (1.0)
Operating profit before goodwill
amortisation and exceptional items 1.6 0.9 2.5 2.4
Net borrowings at the end of May stood at £34.1 million up from £10.0 million
at the previous year end. This reflects the cash expenditure on the
acquisitions detailed later. However, as a fully underwritten rights issue
was announced on 30 May bank borrowings will be substantially reduced in the
middle of July when £27.3 million of net proceeds are received. The interest
charge of £1.0 million (2000 : £0.4 million) also reflects the much higher
average level of net borrowings outstanding during the first half of the year
together with amortisation of financing charges relating to the raising of
acquisition debt.
Operating exceptional charges of £3.4 million relate both to the
simplification of the membranes operation (£3.0 million) and to the
reorganisation of the newly created Porvair Filtration Group (£0.4m) following
the acquisitions of Microfiltrex and 2fi.
The Directors have declared an interim dividend of 2.4p per ordinary share
(2000 : 2.4p). This will also be payable to holders of the new shares issued
under the rights issue and will have the effect of increasing the total
interim dividend payable by £265,000 above that shown in the interim accounts.
Losses per share were 9.9p (2000 : earnings of 0.6p); however, calculated
before goodwill amortisation and exceptional charges earnings per share were
4.1p per share (2000 : 4.7p).
As planned 2001 is a year of change for Porvair and this process is being
managed effectively. We expect to see further progress in the achievement of
our strategic objectives in the second half. Overall the Group is trading in
line with market expectations and the Board remains confident of the prospects
for the current financial year.
John Morgan
Chairman
27 June 2001
Operational review
Porvair is a materials science business. Our strategy is to identify and
develop materials technologies that display clear technical edge, strong
market position and significant potential for profitable growth. A brief
synopsis of our activities appears at the end of this statement.
In our Annual Report and Accounts for the year ended 30 November 2000, the
Company set out its strategic outlook for 2001, describing the year ahead as
being one of transition.
We set out to increase research and development expenditure substantially in
support of promising materials technology applicable to fuel cell development;
to simplify our membranes business; to continue focus on those areas of the
business best positioned for organic and acquisitive growth; and to continue
our search for complementary technologies that we might licence, develop or
acquire.
Considerable progress has been made against these objectives in the first half
of 2001, full details of which can be found in the Chairman's Letter that
accompanied the Rights Issue document of May 30 2001, the highlights of which
are :
* Selee and Engineered Ceramics. Selee has had a
successful six months. Our emphasis on new product development is feeding
through, and both profits and margins have improved despite challenging US
trading conditions. In February Selee acquired Engineered Ceramics (EC), a
US-based manufacturer of high performance products for the molten metal and
thermal processing industries. We expect that combining Engineered Ceramics'
product base with Selee's sales force and new materials pipeline will generate
further growth for these operations.
* Membranes. As previously announced, we are underway
with a simplification programme in our membranes business. Marginal product
lines will cease production in 2001, thereby reducing cost and complexity and
freeing cash resources, and a one-time cost of £3.0 million, primarily
associated with the write down of assets used in the production of redundant
products, has been incurred as an exceptional item during the six months
ending 31 May 2001.
Once this programme is complete, our membrane business will benefit from an
enhanced focus on its windproof/waterproof/breathable technology.
Consistent with this programme was the acquisition of a 25% stake in Sympatex,
announced in March. Sympatex has a leading market share in German-speaking
Europe and we expect that the combination of Sympatex's brand strength and
Porvair's membrane technology will strengthen Sympatex's competitive position
and accelerate its development.
* Porvair Filtration Group. Following the acquisitions of two
specialist filtration businesses, Microfiltrex and 2Fi, we have combined them
with our existing filtration business to create a new specialist filtration
business to be named Porvair Filtration Group. We expect that the combination
of Microfiltrex's excellent reputation and market position, the
entrepreneurial skill and market knowledge of 2Fi's management and Porvair's
microporous materials expertise and financial discipline will position the new
business as a leading specialist filtration operation. The new operation has
made a strong start.
* Porvair Fuel Cell Technologies. As previously announced we are
increasing substantially our research and development expenditure in support
of promising fuel cell materials technology - which we are now calling
MetPoreTM. The technical programme associated with this expenditure consists
of fourteen specific projects all of which are progressing well. Commercial
progress is encouraging with 40 sampling/development programmes in place to
date.
In our search for complementary materials technology we have made exciting
progress, and in April 2001 agreed a licence with Oak Ridge National
Laboratory, a US government funded energy research body. The licence relates
to a patent-protected porous carbon composite mouldable bi-polar plate which
will undergo trials for use in Proton Exchange Membrane fuel cell stacks. It
is an excellent strategic fit and complements Porvair's existing MetPoreTM
technology and advanced ceramics manufacturing capabilities. Porvair's
exclusive access to this intellectual property will strengthen its position in
the developing fuel cell market.
PORVAIR AT A GLANCE
Porvair is a materials science group. We specialise in advanced ceramics,
sintered materials and polyurethane membranes.
Material Locations Activities
Advanced
ceramics:
- metals Hendersonville, Brings ceramics expertise to the field of
filtration USA molten metal handling, catalyst media and
Gilberts, USA thermal processing. World leader in aluminium
filtration.
- fuel cell Hendersonville, Develops media and components for fuel cell,
technologies USA fuel reformer and allied applications.
Sintered
materials:
- filtration Fareham, UK Develops innovative sintered metal and polymer
group New Milton, UK solutions to filtration problems.
Wrexham, UK
- sciences Shepperton, UK Specialises in assay equipment and other
microplate products for the Life Sciences
market.
Polyurethane King's Lynn, UK Specialises in polyurethane membranes that
membranes Acton, Canada enhance the performance of leather and
China (50:50 textiles to make them waterproof and
JV) breathable.
Wuppertal,
Germany
(25%
shareholding in
Sympatex)
Acrylic King's Lynn Supplies sanitaryware and tableware customers
materials worldwide with long-life alternatives to
traditional ceramic moulding media.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31 May 2001 (unaudited)
Before
Existing Exceptional Exceptional
Operations Acquisitions items items May Nov
May May May May May 2000 2000
2001 2001 2001 2001 2001 restated restated
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover
Continuing 2(a) 31,036 4,371 35,407 - 35,407 31,655 65,613
operations
(including
share
of joint
venture)
Less : (638) - (638) - (638) (432) (1,061)
share of
joint
venture
30,398 4,371 34,769 - 34,769 31,223 64,552
Group 1,641 902 2,543 (3,388) (845) 2,417 6,863
operating
profit/
(loss)
before
goodwill
amortisation
Goodwill (939) (306) (1,245) - (1,245) (1,056) (2,113)
amortisation
Group 702 596 1,298 (3,388)(2,090) 1,361 4,750
operating
profit/
(loss)
before
joint
venture
Share of 6 - 6 5 35
operating
profit
in joint
venture
Group
operating
profit/ 2(b) 1,304 (3,388) (2,084) 1,366 4,785
(loss)
including
joint
venture
Exceptional - 90 90 - -
profit
on part
disposal
in
subsidiary
undertaking
Interest (960) - (960) (399) (877)
payable
(net)
Profit/ 344 (3,298) (2,954) 967 3,908
(loss) on
ordinary
activities
before
taxation
Tax on
profit 1 (476) 933 457 (819) (2,438)
on
ordinary
activities
Profit/ (132) (2,365) (2,497) 148 1,470
(loss) on
ordinary
activities
after
taxation
Equity (51) - (51) 2 9
minority
interests
Profit/ (183) (2,365) (2,548) 150 1,479
(loss)
attributable
to
shareholders
Dividends 4 (618) - (618) (616) (1,723)
Retained (801) (2,365) (3,166) (466) (244)
loss for
the
financial
period
Earnings
per share
- basic 3(a) (9.9)p 0.6p 5.8p
and
diluted
- basic 4.1p 4.7p 14.0p
and
diluted
before 3(b)
goodwill
amortisation
and
exceptional
charges
Dividend 4 2.4p 2.4p 6.7p
per share
Reconciliation of movements in equity shareholders' funds
For the six months ended 31 May 2001 (unaudited)
May May Nov
2001 2000 2000
restated restated
Note £'000 £'000 £'000
(Loss)/profit attributable to shareholders (2,548) 150 1,479
Dividends (618) (616) (1,723)
Retained loss for the financial period (3,166) (466) (244)
Capital redemption - (20) -
New share capital subscribed 66 - 121
Exchange differences 31 132 270
Net (reduction)/increase in equity shareholders'
funds (3,069) (354) 147
Opening equity shareholders' funds (restated) 1 41,335 41,188 41,188
Closing equity shareholders' funds 38,266 40,834 41,335
Statement of total recognised gains and losses
For the six months ended 31 May 2001 (unaudited)
May May Nov
2001 2000 2000
restated restated
£'000 £'000 £'000
(Loss)/profit attributable to shareholders (2,548) 150 1,479
Exchange differences on retranslation of net assets of
subsidiary undertaking and foreign borrowings 31 132 270
Total (losses)/gains relating to the period (2,517) 282 1,749
CONSOLIDATED BALANCE SHEET
As at 31 May 2001 (unaudited)
May May Nov
2001 2000 2000
restated restated
Note £'000 £'000 £'000
Fixed Assets
Goodwill 5 36,108 19,656 18,599
Tangible assets 21,922 19,451 20,543
Investments
Investments in associate undertakings 2,228 - -
Investments in joint venture :
Share of gross assets 355 182 305
Share of gross liabilities (294) (157) (250)
61 25 55
60,319 39,132 39,197
Current Assets
Stocks 13,890 11,668 11,993
Debtors 21,181 14,965 15,914
Cash at bank and in hand 892 898 856
35,963 27,531 28,763
Creditors
Amounts falling due within one year (33,969) (13,239) (13,179)
Net current assets 1,994 14,292 15,584
Total assets less current liabilities 62,313 53,424 54,781
Creditors
Amounts falling due after more than one (16,806) (10,291) (10,668)
year
Provisions for liabilities and charges 1 (2,405) (2,269) (2,742)
43,102 40,864 41,371
Capital and reserves
Called up share capital 515 514 515
Share premium account 1,397 1,191 1,331
Other reserves 5,393 5,224 5,362
Profit and loss account 1 30,961 33,905 34,127
Total equity shareholders' funds 38,266 40,834 41,335
Equity minority interests 4,836 30 36
43,102 40,864 41,371
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 May 2001 (unaudited)
May May Nov
Note 2001 2000 2000
£'000 £'000 £'000
Net cash inflow from operating 6 1,661 2,361 6,758
activities
Returns on investments and servicing
of finance
Interest received 15 - 26
Interest paid (1,041) (227) (815)
(1,026) (227) (789)
Taxation
UK corporation tax (paid)/refunded (35) - 151
Overseas tax paid (269) (231) (602)
(304) (231) (451)
Capital Expenditure
Purchase of tangible fixed assets (1,523) (1,427) (3,583)
Sale of tangible fixed assets - - 80
(1,523) (1,427) (3,503)
Acquisitions and disposals
Purchase of subsidiary undertakings (18,689) - -
Net borrowings acquired with (189) - -
subsidiary undertakings
Purchase of associate company (2,228) - -
(21,106) - -
Equity dividends paid (1,107) (1,053) (1,670)
Financing
Issue of ordinary share capital 66 - 121
Debt due within one year
increase in net borrowings 16,000 105 -
Debt due after one year
increase in net borrowings 6,855 - (125)
22,921 105 (4)
(Decrease)/increase in cash in the (484) (472) 341
period
NOTES
1. Prior year adjustment
The Group's accounting policy for deferred tax has changed in line with
Financial Reporting Standard 19 'Deferred Taxation ('FRS 19'), a new
accounting standard that the Group has adopted early. FRS 19 introduces a
form of full provision for accounting for deferred tax which replaces the
partial provision approach previously followed under SSAP 15.
As a consequence a prior year adjustment to the deferred tax provision at 30
November 2000 has increased the provision by £2,308,000 with a corresponding
reduction in shareholders' funds. The prior year tax charge increased by £
630,000 and the interim tax charge by £214,000 as a result of adopting the new
policy. The consequent impact on earnings per share has been to reduce the
interim figure by 0.8p and the full year by 2.4p There is no effect on the
current year tax charge.
2. Turnover and segmental analysis
The analysis by geographical segment of the Group's turnover, operating profit
and net assets is set out below :
Six months ended Six months ended Year ended
31 May 31 May 30 Nov
2001 2000 2000
£'000 £'000 £'000
(a) Turnover by geographical destination
United Kingdom 6,761 4,259 8,932
Continental Europe 5,448 5,840 12,000
Americas 17,105 15,009 31,530
Asia 4,541 4,313 8,969
Australasia 217 359 679
Africa 1,335 1,875 3,503
35,407 31,655 65,613
Less share of joint venture (638) (432) (1,061)
34,769 31,223 64,552
(b) Operating (loss)/profit
Operating (loss)/profit after
exceptionals, before goodwill amortisation
United Kingdom (1,095) 1,472 4,069
Americas 250 945 2,794
Joint venture 6 5 35
(839) 2,422 6,898
Goodwill amortisation (1,245) (1,056) (2,113)
Operating (loss)/profit after goodwill
amortisation and exceptionals
(2,084) 1,366 4,785
As at As at As at
31 May 31 May 30 Nov
2001 2000 2000
restated restated
£'000 £'000 £'000
(c) Net Assets
Net assets before goodwill and net
borrowings :
United Kingdom 27,700 22,794 22,146
Americas 13,433 8,843 10,586
41,133 31,637 32,732
Goodwill 36,108 19,656 18,599
Net borrowings (34,139) (10,429) (9,960)
43,102 40,864 41,371
3. Earnings per share
Year
Six months ended Six months ended ended
31 May 31 May 30 Nov
2001 2000 2000
£'000 £'000 £'000
(a) (Losses)/earnings per
share
(Losses)/earnings (2,548) 150 1,479
Number of shares (weighted) 25,744,787 25,676,406 25,694,323
(Losses)/earnings per share (9.9)p 0.6p 5.8p
(b) Earnings per share before goodwill amortisation and exceptional
charges
Earnings 1,062 1,206 3,592
Number of shares (weighted) 25,744,787 25,676,406 25,694,323
Earnings per share 4.1p 4.7p 14.0p
4. Dividends
Six months ended Six months ended ended
31 May 31 May 30 Nov
2001 2000 2000
£'000 £'000 £'000
Interim Dividend of 2.4p (2000 : 618 616 616
2.4p)
Final Dividend of 4.3p - - 1,107
618 616 1,723
The interim dividend of 2.4p per share for the six months to
31 May 2001 will be paid on 14 September 2001 to members on the register on 17
August 2001.
5. Goodwill
As at 31 May As at 31 May As at 30 Nov
2001 2000 2000
£'000 £'000 £'000
Cost
At beginning of the period 30,322 30,322 30,322
Additions 18,754 - -
At end of period 49,076 30,322 30,322
Amortisation
At beginning of period (11,723) (9,610) (9,610)
Charge for period (1,245) (1,056) (2,113)
At end of period (12,968) (10,666) (11,723)
NBV at end of period 36,108 19,656 18,599
6. Reconciliation of operating (loss)/profit to net cash inflow
from operating activities
Six months Six months Year
ended ended ended
31 May 31 May 30 Nov
2001 2000 2000
£'000 £'000 £'000
Group operating (loss)/profit including joint (2,084) 1,366 4,785
venture
Goodwill amortisation 1,245 1,056 2,113
Share of joint venture profit (6) (5) (35)
Depreciation 1,526 1,636 2,938
Loss on sale of fixed assets 15 29 58
Decrease/(increase) in stocks 690 (455) (586)
Increase in debtors (1,712) (1,467) (2,115)
Increase/(decrease) in creditors 2,253 201 (400)
Net cash inflow from operating activities 1,927 2,361 6,758
before exceptional items
Exceptional items (266) - -
Net cash inflow from operating activities 1,661 2,361 6,758
7. Reconciliation of net cash flow to movement in net borrowings
Six months Six months Year
ended ended ended
31 May 31 May 30 Nov
2001 2000 2000
£'000 £'000 £'000
(Decrease)/increase in cash in the period (484) (472) 341
(Increase)/decrease in borrowing (22,855) - 125
Change in net borrowings from cash flows (23,339) (472) 466
Loans and finance leases acquired with (840) - -
subsidiary
Translation difference - (460) (929)
Movement in net borrowings in the period (24,179) (932) (463)
Opening net borrowings (9,960) (9,497) (9,497)
Closing net borrowings (34,139) (10,429) (9,960)
8. Analysis of net borrowings
01/12/00 Cash flow Acquisitions 31/05/01
£'000 £'000 £'000 £'000
Cash in hand and at bank 856 36 892
Overdrafts (23) (520) (543)
(484)
Borrowings due after 1 year (10,668) (5,298) (840) (16,806)
Borrowings due within 1 year (125) (17,557) - (17,682)
(22,855)
Total (9,960) (23,339) (840) (34,139)
9. Statutory group accounts
The interim financial statements have been prepared in accordance with
applicable accounting standards. The accounting policies applied are those
set out in the Annual Report and Accounts for the year ended 30 November 2000
with the exception of the revised policy on deferred taxation referred to in
note 1. The interim results for 31 May 2000 and for the year ended 30
November 2000 have been restated to reflect the full provision for deferred
taxation which has been adopted for the first time in this interim statement.
The interim financial statements do not constitute statutory accounts as they
are unaudited, although they have been reviewed by the auditors. The abridged
accounts for the year ended 30 November 2000 set out above are an extract from
the latest statutory accounts of the Group which have been delivered to the
Registrar of Companies. The report of the auditors on those accounts was
unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985.
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