Interim Results
Porvair PLC
25 June 2003
FOR IMMEDIATE RELEASE 25 June 2003
Contacts:
Ben Stocks, Chief Executive
Mark Moran, Group Finance Director
Porvair plc today 0207 466 5000
at all other times 01553 761111
Charles Ryland / Catherine Miles
Buchanan Communications 0207 466 5000
PORVAIR plc ('Porvair')
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2003
Porvair, the materials science group, announces its interim results for the six
months ended 31 May 2003.
HIGHLIGHTS
• After R&D expenditure of £3.0m (2002: £2.9m) profit before tax and
goodwill amortisation in line with expectations at £0.2m (2002: £0.6m). After
goodwill amortisation loss before tax £0.9m (2002: loss £0.6m)
• Porvair Fuel Cell Technology experiencing strong customer demand and
generated sales approaching $3m - far ahead of expectations
• Selee well placed for upturn as result of cost savings and operational
efficiencies
• Porvair Filtration Group trading well and Life Sciences delivered record
results
• Net borrowings at £12.4m (2002: £14.2m) confirm business model of
self-funded R&D investment robust
• Dividend unchanged at 2.4p per share (2002: 2.4p) reflecting confidence
in future prospects
John Morgan, Chairman, said:
'Given the continuation of difficult market conditions, the performance of the
Group in the first half of 2003 has been encouraging and most parts of the Group
are trading well. Porvair Fuel Cell Technology will move into an exciting phase
of development in the second half, as issues of scale-up start to be addressed,
and the structure of the Group will evolve as our new materials develop. The
Board looks forward with optimism.'
Chairman's Statement
It is a pleasure to be able to report continued good progress at Porvair in the
first half of 2003.
The benefits of the strategy first outlined in 2001 are starting to become
evident. This involved :
• improving operational efficiencies and continuing investment in our core
businesses
• strengthening of core businesses through acquisitions
• investing significantly in new material technologies that we believe
have the potential to transform the financial performance of the Group
As stated two and a half years ago these new materials were expected to take 3
to 5 years to develop; whilst Group profits would be held back during this
period by the high levels of expenditure involved, the projected applications -
in fast growing markets such as fuel cells, emission control and compact heat
exchange - fully justified the levels of investment required.
The results for the first half of 2003 again show the effect of our research &
development ('R&D') investment. Profit before tax and goodwill amortisation is
£0.2m (2002: £0.6m), which was achieved after spending £3.0m on R&D (2002:
£2.9m). The loss before tax is £0.9m (2002: loss £0.6m). Net borrowings at
£12.4m were lower than those at the same point last year (2002: £14.2m) and
confirmation that our business model of self-funded R&D investment is robust.
The mid-year represents a high point for net borrowings and it is anticipated
that levels should again reduce during the second half.
During the first half the Group has in aggregate delivered profits in line with
expectations. Given that many of the markets in which we operate have remained
tough, this is an encouraging result. Cost savings and operational efficiencies
have made a significant difference at Porvair Selee, which is now well placed to
benefit from an upturn in demand as it occurs. The Porvair Filtration Group
continues to perform well, with the Life Sciences operation delivering another
record result. Membranes and Ceramic Moulds are experiencing difficult market
conditions and have incurred losses in the first half of 2003.
Progress with our new materials has been faster than we expected. Strong
customer demand at Porvair Fuel Cell Technology ('PFCT'), particularly for our
proprietary bi-polar plates, has generated sales of around $3m in the period -
well ahead of our forecast. This demand has led to the rapid acceleration of the
programme, in partnership with the US Government Department of Energy and United
Technologies Corporation. Staff levels in this business have increased by 50%
and pilot plant capacity has quadrupled.
As a result the Board has started to evaluate strategic options for the next
phase of the Group's development, which will involve production scale-up at
PFCT. This will now happen sooner than expected, and resources - capital and
management in particular - need to be deployed appropriately to maximise
profitability and growth potential. Porvair remains committed to its specialist
filtration businesses and will in the coming months evaluate options for other
parts of the Group.
The directors have declared a maintained interim dividend of 2.4p per share
(2002: 2.4p), a clear sign of their confidence in the Group's future prospects.
Losses per share were 3.0p (2002: loss of 2.3p); but when calculated before
goodwill amortisation losses per share were 0.1 p (2002: earnings of 0.5p).
As outlined in the Operating Review, given the continuation of difficult market
conditions, the performance of the Group in the first half of 2003 has been
encouraging and most parts of the Group are trading well. PFCT will move into
an exciting phase of development in the second half, as issues of scale-up start
to be addressed, and the structure of the Group will evolve as our new materials
develop. The Board looks forward with optimism.
John Morgan, Chairman
25 June 2003
Operating Review
Metals Filtration
It is encouraging to report improved trading at Porvair Selee. This is largely
as a result of cost reductions undertaken in response to difficult trading in
2002. Sales levels are stable, but are still well below levels seen in 2000 and
early 2001. We continue to pursue a strategy of consolidating our market
leadership position in aluminium filtration; and growing in other niche metals
filtration markets by geographic expansion and new product development. We are
increasing marketing efforts outside our home USA market, and this, coupled with
improving plant efficiencies, supports our expectation of further progress in
the second half.
Microfiltration
The Porvair Filtration Group ('PFG') has started 2003 well. Porvair Sciences
has again produced record sales and profits. Our small Ceramic Moulds operation
continues to suffer with both tableware and sanitaryware markets depressed.
PFG serves a range of specialist filtration niche markets, adding value through
filter media and filtration design expertise. Its largest market segment is
aerospace filters, where sales have started to recover from the difficulties of
2002. Several other market segments - notably energy, industrial, ink systems
and high purity liquids - have also performed well. The expansion of our
facility in Fareham will complete on time and to budget this year, and will add
clean room facilities to our customer offering.
Sales at Porvair Sciences were up 20% on the prior year as the benefits of
steady new product introductions in the last few years start to show through.
Membranes
Our Membranes business, as expected, continues to find trading difficult.
Profits have been affected both by lower sales and by planned investments in the
future of the business. The management team is strong and has made encouraging
progress with key projects: in setting up its office in Shanghai; in securing
early sales of automotive Permair; and in launching a new and highly breathable
Porelle membrane. Sales of Sealskinz products are at record levels.
PFCT
Progress in this operation has been much more rapid than anticipated in the
last six months. Staff numbers have grown by 50%, and manufacturing capacity
has quadrupled. Sales, at around $3.0m in the first half, have far exceeded
expectations.
Two materials technologies are being developed:
Porous and Microporous metals. Customer demand remains very strong for this
technology, and orders in the first half of the year have been at record levels.
We have started to sell radiant burner plates and water treatment discs on a
commercial basis, and our first pressure vessel lining is installed and is now
being used in the field. We have a large number of projects underway - 75 or
more - with sales potential ranging from modest to very high. At the higher end,
where applications under evaluation include aluminium production, diesel
emission control and compact heat exchange, customer testing continues to be
encouraging.
Microporous carbons. We are developing proprietary bi-polar plate technology
for PEM fuel cells in conjunction with the US Government Department of Energy
and United Technologies Corporation Fuel Cells - one of the very few global
players in this market. We have also started in 2003 to develop variations of
this material for other customers and market applications. This work is going
extremely well. We have had to install additional pilot scale production
capacity which has already been filled. As plate production increases so our
understanding of the necessary quality and process parameters improves. The
next stage in the programme is manufacturing process design for high volume
production. Planning and experimentation for this has been underway for some
months and we expect to start the installation of volume production equipment
towards the end of 2003. This will put Porvair at the forefront of bi-polar
plate manufacturing and establish us as a leading player in this emerging
market.
Introduction to Porvair
Porvair is a materials science company which specialises in:
• Metals Filtration: Porvair Selee invented the ceramic foam
filter, and leads the world in its application to molten aluminium. A wide
range of porous and microporous technologies serve other metals industries.
• Microfiltration materials and systems: Porvair Filtration
Group, Porvair Life Sciences and Porvair Ceramic Moulds are specialist
microfiltration businesses, expert in both filtration and filtration media for
specific applications.
• Microporous membranes: Porvair Membranes make textiles and
leather waterproof and breathable. Our polyurethane technology, which is both
durable and soft, is unique in this field.
• Microporous metals and carbons: Porvair Fuel Cell Technology
is a research and development operation that is developing new and unique
porvair materials for a range of fast growing markets, one of which is fuel cell
components.
Porvair at a glance
Operating businesses Materials Locations and activities
Hendersonville and Gilberts, USA:
PORVAIR Metals filtration Brings ceramics expertise to the
field of molten metal handling,
catalyst media and thermal
processing. World leader in
aluminium filtration
Shepperton, UK:
PORVAIR Microfiltration materials and Specialises in assay equipment,
systems microplate products and cell culture
media for the Life Sciences market
Fareham, New Milton and Wrexham, UK;
Rock Hill, USA:
PORVAIR Microfiltration materials and
systems Develops innovative sintered metal
and polymer solutions to filtration
problems.
Uses sintered metals and polymers in
the design and manufacture of
specialist filters and filtration
devices
King's Lynn, UK:
PORVAIR Acrylic materials Supplies sanitaryware, tableware and
technical ceramics customers
worldwide with long-life
alternatives to traditional ceramic
moulding media
King's Lynn, UK; Acton, Canada;
Wuppertal, Germany (25% shareholding
PORVAIR Microporous membranes in Sympatex):
Specialises in polyurethane
membranes that enhance the
performance of leather and textiles
to make them waterproof and
breathable
Hendersonville, USA:
PORVAIR Porous and microporous metals and Develops media and components for
carbons fuel cell, heat exchange, chemical
process, emission control and water
treatment applications
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31 May 2003 (unaudited)
May May Nov
2003 2002 2002
Note £'000 £'000 £'000
Turnover
Continuing operations (including share of
joint venture) 33,209 35,318 68,485
Less : share of joint venture - (128) (153)
1(a) 33,209 35,190 68,332
Group operating
loss before joint venture and associated
undertaking (749) (471) (1,766)
Share of operating loss in joint venture - (48) (94)
Share of operating profit in associated
undertaking 25 171 181
Total group operating loss 1 (b) (724) (348) (1,679)
Interest payable (net) (216) (227) (451)
Loss on ordinary activities before taxation (940) (575) (2,130)
Loss on ordinary activities before taxation (940) (575) (2,130)
Add back goodwill amortisation 1,148 1,154 2,299
Profit on ordinary activities before 208 579 169
taxation and goodwill amortisation
Tax on profit on ordinary activities (45) (173) 352
Loss on ordinary activities after taxation (985) (748) (1,778)
Equity minority interests (113) (103) (101)
Loss attributable to shareholders (1,098) (851) (1,879)
Dividends 3 (883) (883) (2,467)
Retained loss for the financial period (1,981) (1,734) (4,346)
Earnings/(losses) per share
- basic and diluted 2 (a) (3.0)p (2.3)p (5.1)p
- basic and diluted before goodwill
amortisation 2(b) (0.1)p 0.5p 0.6p
Dividend per share 3 2.4p 2.4p 6.7p
Reconciliation of movements in equity shareholders' funds
For the six months ended 31 May 2003 (unaudited)
May May Nov
2003 2002 2002
£'000 £'000 £'000
Loss attributable to shareholders (1,098) (851) (1,879)
Dividends (883) (883) (2,467)
Retained loss for the financial period (1,981) (1,734) (4,346)
Exchange differences 30 (149) (613)
Net reduction in equity shareholders' funds (1,951) (1,883) (4,959)
Opening equity shareholders' funds 58,374 63,333 63,333
Closing equity shareholders' funds 56,423 61,450 58,374
Statement of total recognised gains and losses
For the six months ended 31 May 2003 (unaudited)
May May Nov
2003 2002 2002
£'000 £'000 £'000
Loss attributable to shareholders (1,098) (851) (1,879)
Exchange differences 30 (149) (613)
Total losses recognised in the period (1,068) (1,000) (2,492)
CONSOLIDATED BALANCE SHEET
As at 31 May 2003 (unaudited)
May May Nov
2003 2002 2002
£'000 £'000 £'000
Fixed Assets
Goodwill 32,086 34,201 33,349
Tangible assets 19,966 21,317 20,734
Investments
Investment in joint venture :
Share of gross assets - 248 -
Share of gross liabilities - (202) -
- 46 -
Investment in associated undertaking 2,495 2,354 2,348
54,547 57,918 56,431
Current Assets
Stocks 15,161 14,516 14,661
Debtors falling due after one year 3,443 3,104 3,178
Debtors falling due within one year 16,826 19,356 16,616
20,269 22,460 19,794
Cash at bank and in hand 2,139 1,174 3,261
37,569 38,150 37,716
Creditors
Amounts falling due within one year (13,802) (13,053) (28,442)
Net current assets 23,767 25,097 9,274
Total assets less current liabilities 78,314 83,015 65,705
Creditors
Amounts falling due after more than one year (14,515) (14,184) -
Provisions for liabilities and charges (2,387) (2,379) (2,455)
61,412 66,452 63,250
Capital and reserves
Called up share capital 736 736 736
Share premium account 28,679 28,679 28,679
Other reserves 4,359 4,793 4,329
Profit and loss account 22,649 27,242 24,630
Total equity shareholders' funds 56,423 61,450 58,374
Equity minority interests 4,989 5,002 4,876
61,412 66,452 63,250
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 May 2003 (unaudited)
May May Nov
Note 2003 2002 2002
£'000 £'000 £'000
Net cash inflow/(outflow)
from operating activities 4 903 (2,037) 2,798
Returns on investments and
servicing of finance
Interest received 42 71 104
Interest paid (258) (148) (368)
(216) (77) (264)
Taxation
UK corporation tax paid - - (660)
Overseas tax refunded/(paid) 1,013 (124) 327
1,013 (124) (333)
Capital expenditure
Purchase of tangible fixed (1,262) (1,395) (3,070)
assets
Sale of tangible fixed 78 77
assets --
(1,262) (1,317) (2,993)
Equity dividends paid (1,583) (1,583) (2,467)
Financing
Increase in net borrowings 72 2,633 4,105
72 2,633 4,105
(Decrease)/increase in cash 5
in the period (1,073) (2,505) 846
NOTE
1. Turnover and segmental analyses
The geographical analyses of the Group's turnover, operating profit and net
assets is set out below :
(a) Turnover by Six months ended Six months ended Year ended
geographical segment 31 May 2003 31 May 2002 30 November 2002
By By By By By By
destination origin destination origin destination origin
£'000 £'000 £'000 £'000 £'000 £'000
United Kingdom 9,182 19,814 9,095 22,319 18,731 43,145
Continental Europe 5,631 - 6,079 - 11,786 -
Americas 14,020 13,395 14,815 12,871 28,013 25,187
Asia 2,852 - 3,802 128 6,638 153
Australasia 563 - 401 - 946 -
Africa 961 - 1,126 - 2,371 -
33,209 33,209 35,318 35,318 68,485 68,485
Less share of joint - - (128) (128) (153) (153)
venture
33,209 33,209 35,190 35,190 68,332 68,332
(b) Segmental analyses Six months ended Six months ended Year ended
31 May 2003 31 May 2002 30 November 2002
£'000 £'000 £'000
i) Turnover
Metals Filtration 10,375 11,154 21,489
Microfiltration 12,512 13,927 27,130
Membranes 8,734 10,005 19,080
Fuel Cells 1,588 232 786
33,209 35,318 68,485
ii) Operating profit/ Before After Before After Before After
(loss) goodwill goodwill goodwill goodwill goodwill goodwill
£'000 £'000 £'000 £'000 £'000 £'000
Metals Filtration 205 (410) 89 (531) (794) (2,031)
Microfiltration 1,269 736 1,714 1,180 3,224 2,162
Membranes (505) (505) 297 297 510 510
Fuel Cells (545) (545) (1,294) (1,294) (2,320) (2,320)
424 (724) 806 (348) 620 (1,679)
iii) Net assets 31 May 2003 31 May 2002 30 November 2002
Excluding Including Excluding Including Excluding Including
goodwill Goodwill goodwill goodwill Goodwill Goodwill
£'000 £'000 £'000 £'000 £'000 £'000
Metals Filtration 8,813 23,666 12,981 29,356 10,161 25,745
Microfiltration 14,548 31,781 15,060 32,887 14,472 32,237
Membranes 20,065 20,065 20,653 20,653 19,585 19,585
Fuel Cells 2,388 2,388 1,295 1,295 1,214 1,214
45,814 77,900 49,989 84,191 45,432 78,781
Taxation (3,203) (2,632) (2,160)
Dividend payable (883) (883) (1,583)
Net borrowings (12,402) (14,224) (11,788)
61,412 66,452 63,250
2. Earnings/(losses) per share
Six months ended Six months ended Year ended
31 May 31 May 30 Nov
2003 2002 2002
(a) Losses per share - basic and diluted
Losses (£'000) (1,098) (851) (1,879)
Number of shares (weighted) 36,803,011 36,803,011 36,803,011
Losses per share (3.0)p (2.3)p (5.1)p
(b) Earnings/(losses) per share before goodwill amortisation
Earnings/(losses) (£'000) (54) 201 212
Number of shares (weighted) 36,803,011 36,803,011 36,803,011
Earnings/(losses) per share (0.1)p 0.5p 0.6p
3. Dividends
Six months ended Six months ended Year ended
31 May 31 May 30 Nov
2003 2002 2002
£'000 £'000 £'000
Interim dividend of 2.4p (2002 : 2.4p) 883 883 884
Final dividend of 4.3p - - 1,583
883 883 2,467
The interim dividend of 2.4p per share for the six months to 31 May 2003 will be
paid on 19 September 2003 to members on the register on 22 August 2003.
4. Reconciliation of operating loss to net cash flow from operating
activities
Six months ended
Six months ended 31 May Year ended
31 May 2002 30 Nov
2003 £'000 2002
£'000 £'000
Total group operating loss (724) (348) (1,679)
Goodwill amortisation 1,148 1,154 2,299
Share of joint venture/associated
undertaking profits and losses (25) (123) (87)
Depreciation 1,664 1,791 3,512
Loss on sale of fixed assets - 25 44
(Increase)/decrease in stocks (612) 282 82
Increase in debtors (923) (3,354) (1,081)
Increase/(decrease) in creditors 463 (1,464) (110)
Net cash inflow /(outflow) from operating 991 (2,037) 2,980
activities before exceptional items
Exceptional items (88) - (182)
Net cash inflow/(outflow) from operating
activities 903 (2,037) 2,798
5. Reconciliation of net cash flow to movement in net borrowings
Six months ended
Six months ended 31 May Year ended
31 May 2002 30 Nov
2003 £'000 2002
£'000 £'000
(Decrease)/increase in cash in the period (1,073) (2,505) 846
Increase in borrowings (72) (2,633) (4,105)
Change in net borrowings from cash flows (1,145) (5,138) (3,259)
Exchange difference 531 271 828
Movement in net borrowings in the period (614) (4,867) (2,431)
Opening net borrowings (11,788) (9,357) (9,357)
Closing net borrowings (12,402) (14,224) (11,788)
6. Analysis of net borrowings
01/12/02 Cash flow Transfers Exchange £'000 31/05/03
£'000 £'000 £'000 £'000
Cash in hand and at bank 3,261 (1,073) - (49) 2,139
Overdrafts - - - - -
(1,073)
Borrowings due after 1 year - (94) (15,001) 580 (14,515)
Borrowings due within 1 year (15,049) 22 15,001 - (26)
(72)
Total (11,788) (1,145) - 531 (12,402)
7. 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 2002.
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 2002 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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