Interim Results

RNS Number : 3509X

Porvair PLC

24 June 2008

 



For immediate release                                    24 June 2008

Porvair plc

Interim results for the six months ended 31 May 2008

Porvair plc ('Porvair'), the specialist filtration and environmental technology group, today announces its interim results for the six months ended 31 May 2008.

Financial highlights

• Revenues up 12% to £25.6m (2007: £22.9m).

• Profit before tax up 33% to £1.9m (2007: £1.5m).

• Earnings per share up 28% to 3.2p (2007: 2.5p).

Operating highlights

• Microfiltration revenues up 11% to £14.7m (2007: £13.3m) driven by aerospace and energy growth.

• Metals Filtration revenue up 15% to $21.8m (2007: $19.0m) driven by key growth projects and market share gains in aluminium and iron foundry.

• Period of capital investment in facilities, production efficiency and acquisitions funded from operating cash flow

• • Toolturn Engineering Limited acquired for £1m to support aviation growth. Integration going well.

  • New manufacturing facilities for Microfiltration, costing £1.4m over the last 12 months.

  • Production efficiency investments in Metals Filtration and first steps in opening a satellite manufacturing facility in China.

• Encouraging progress in key growth projects:

• • Sales of new Nickel-Cobalt filter increase following customer qualification.

  • Sales increases for new solar panel etching filter.

  • Bioscience initiatives begin to generate modest revenue.

  • Two new Gasification projects won.

  • Energy storage device development enters production scale up.

Commenting on the results, Ben Stocks, Chief Executive, said:

'Porvair has continued to trade strongly in the first half of 2008 and starts the second half with healthy order books in its core markets, both in the USA and UK. The Board is encouraged by prospects from key growth projects as they move into commercial production. During the first half of 2008 we have invested further in manufacturing facilities to accommodate growth, and additional investments are planned for the second half to improve production efficiencies and allow for the commercial scale-up of new products. The Board looks forward with confidence.'

For further information please contact:

Porvair plc		0207 466 5000	today
Ben Stocks, Chief Executive		01553 765 500	thereafter
Chris Tyler, Group Finance Director
Buchanan Communications		0207 466 5000
Charles Ryland / Ben Willey / Susanna Gale

A copy of the presentation that accompanies these results is available at www.porvair.com.

Chief Executive's review

Overview

Porvair has delivered a strong performance in the six months to 31 May 2008. Revenue was up 12% and profit before tax was up 33% compared to the same period in 2007.  Earnings per share improved 28% to 3.2p per share (2007: 2.5p).

Key growth projects again increased their contribution to revenue and profits. Significant investments were made in production facilities and manufacturing assets.  A robust order book in the core business and orders committed against some of the key growth projects give the Board confidence for the future. 

Business strategy 

Porvair is managed through two divisions. The Microfiltration division comprises the Porvair Filtration Group and Porvair Sciences and is based in the UK. It serves aviation, life science and other markets using metallic and polymeric filtration technologies. The Metals Filtration division trades as SELEE Corp and is based in the US. It uses ceramic filtration technology. Its primary focus is the molten aluminium and specialist alloy filtration markets where it has global market leadership positions. 

The Group's revenues are global, with only 29% (2007: 32%) of revenues earned from UK customers.

Porvair's strategy for the creation of growth and sustainable shareholder value is to:

• Develop in filtration and environmental technology markets where superior returns can be achieved because products:

• require specialist design, engineering or application skills

• are protected either by regulation, quality accreditation or technical know-how

• are often consumable and replaced as part of a maintenance routine

• have long life cycles.

• Broaden the range of products Porvair delivers to key market segments, particularly aviation and molten aluminium.

• Acquire specialist filtration and environmental technology businesses that meet Group financial and commercial criteria.

• Maintain an appropriately funded balance sheet and generate sufficient cash to sustain a progressive dividend policy.

The Board believes that this strategy will enable Porvair to continue to grow its revenues and operating profits. For several years the Group has funded key growth projects from its own cash flows. This has had a considerable impact on Group profits, which the Board has considered a prudent investment in the Company's longer term future. A feature of recent results is how these investments have now started to generate revenues and profits.

Operating review

Microfiltration

Microfiltration performed well in the first half with revenue growing 11% to £14.7m (2007: £13.3m) and operating profit up 8% to £2,437,000 (2007: £2,254,000).  During the period we have reorganised production facilities to allow space for growth. Aviation filtration moved into larger premises in Fareham, a complex project which was finished on time and at the budgeted cost. The new factory offers improved clean room, manufacturing, design, laboratory and test-house facilities. It is conveniently located very close to Toolturn Engineering Limited, a specialist engineering firm acquired in March. Toolturn has an excellent record in supplying the Porvair Filtration Group with high-precision components that are essential to the 40% growth in aviation filtration experienced in recent years.  Its acquisition secures some key skills and machining capabilities for the Group, which will enhance our competitive advantage in this field. 

The energy segment - both nuclear and gasification - is also very active. We won two new projects in our gasification programme during the period - a US Department of Environment project to look at the gasification of lignite coals and an EU project (Greensyngas) to develop biomass gasification. Both will complement our current work in clean coal technology for which a further major order was shipped during the period. We have also made progress with our bioscience initiatives which are based on the chemical treatment of filtration media. These continue to show promise and are starting to generate modest sales revenues. 

Metals filtration

Metals Filtration ('Selee') has continued to make good progress in the first half of 2008. Revenue was up 15% at $21.8m (2007: $19.0m) with all parts of the business contributing to the growth.   Operating profit increased by $1m to $653,000 (2007: $382,000 loss). After translation, revenues in the period were £10.9m (2007: £9.6m) and operating profits were £327,000 (2007: £194,000 loss).

Sales of aluminium filters, in which the group has global market leadership, have been supported by underlying strength in aluminium production around the world. As a result, export revenue growth has been particularly strong. Notable gains have been made in China, where sales of Selee's patented stage filtration system are benefiting from the trend towards higher quality metal requirements. New systems have also been installed in Russia and Europe.  In its US domestic business an enlarged applications engineering team is winning market share in iron foundry and investment casting. 

In late 2007, Selee introduced a completely new molten aluminium filter - the first innovation in this market for 25 years. We were pleased to make our first commercial deliveries of this proprietary product in early 2008.  The new filter offers superior performance and materials handling characteristics compared with the industry standard and is being offered at a premium price. Customer trials have been going well. Thousands of units have shipped and are meeting customer requirements and we will continue to trial the product through the rest of 2008 and into 2009. 

Several of the Group's key growth projects are under development at Selee. Three in particular are now beginning to contribute to the improving performance of the division: 

• Customer qualifications of our new Nickel-Cobalt filter finished in the first half of the year and production increased commensurately. 

• A new filter to be used in the manufacture of solar panels also completed qualification and will contribute to growth in the second half.

• A third key project, a component for an energy storage device, finished the first phase of its development in the period and a supply contract was signed.  We have started to invest in production scale-up and expect this to take six to eight months. 

All these projects have customer order commitments against them and give the Board confidence that we can harvest our R&D investments in the year ahead.

Operating profit, before prior year restructuring costs, increased by $0.5m in the period with volume increases and the benefit of the higher revenue from key growth projects being offset in part by input cost price rises. Raw material costs related to natural gas, oil derivatives, silicon carbide and alumina have risen in 2008 and whilst there is always a lag, these are now being successfully passed on to customers.

Early in 2008 we decided to open a satellite manufacturing facility in China to meet the needs of our growing customer base in Asia. Planning is well advanced and we expect to begin production at the end of the year. 

Profit for the period and dividends

The profit for the period attributable to shareholders increased by 29% to £1.3m (2007: £1.0m).  Earnings per share for the period were 3.2p (2007: 2.5p). In common with recent years, the Board has declared an unchanged interim dividend of 1.0p, and notes that it intends to maintain its progressive dividend policy at the time of the full year accounts.

Cash flow

Operating cash flow in the period was £2.8m, offset by both cash outflows for inventory and dilapidations at the new Microfiltration factory and increases in stock and debtors associated with higher export revenues in Metals Filtration. Cash generated from continuing operations was therefore £1.1m (2007: £2.2m).

Net interest paid was £226,000 (2007: £309,000), as a result of lower interest rates on US dollar denominated borrowings. £152,000 (2007: £301,000) was paid in tax, lower than the prior year as a result of repayments in relation to research and development.  

£0.7m was paid to acquire Toolturn Engineering, an £0.1m overdraft was assumed and a further £0.3m is payable over the next three years. £1.5m (2007: £0.7m) was invested in capital expenditure on tangible and intangible fixed assets. £0.8m of the total was spent fitting out the new Microfiltration factory which opened in March.  

Finally, borrowings increased by £0.4m as a result of retranslating dollar denominated borrowings at $1.98:£1 compared with a rate of $2.06:£1 at 30 November 2007, giving closing net borrowings of £9.9m (2007: £8.8m).

Interest cover was equivalent to 9.6 times operating profits (2007: 7.6 times).

Principal risks 

Each division considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are reviewed by the Board and updated at least annually. The principal risks and uncertainties for the remaining six months of the financial year are discussed below. Further details of the Group's risk profile analysis can be found in the Annual Report for the year ended 30 November 2007.

The Group's strategy is to serve the needs of a range of specialist filtration markets, such that it is not dependent upon any one market. No single market represents more than 20% of revenues. However, three key markets: aluminium filtration; aviation filtration; and foundry products contribute more than 10% of the Group's revenue. The order book for aviation filtration is long enough to give some comfort that revenues to this market in the second half of the financial year will remain steady. Order books for aluminium filtration and foundry products are shorter and although they are currently at healthy levels, there can be no certainty that revenue from these key markets will continue at the current level.

Prices for raw materials can be volatile and are affected by the cyclical movement in commodity prices such as gas, oil, alumina, silicon carbide and stainless steel. The Group's strategy is to pass raw material cost increases through to customers. Its ability to do so is, to some extent, dependent on the timing of sales contracts and prevailing market conditions.  

Outlook

Porvair has continued to trade strongly in the first half of 2008 and starts the second half with healthy order books in its core markets, both in the USA and UK. The Board is encouraged by prospects from key growth projects as they move into commercial production. During the first half of 2008 we have invested further in manufacturing facilities to accommodate growth, and additional investments are planned for the second half to improve production efficiencies and allow for the commercial scale-up of new products. The Board looks forward with confidence.

Related parties

There were no related party transactions in the six months ended 31 May 2008.

Forward looking statements

Certain statements in this Interim Report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Consolidated income statement

For the six months ended 31 May 

		Six months ended 31 May
		2008		2007
	Note	Unaudited		Unaudited
Continuing operations		£'000		£'000
Revenue	1	25,603		22,899
Cost of sales		(17,497)		(15,605)
Gross profit		8,106		7,294
Other operating expenses		(5,956)		(5,624)
Operating profit	1	2,150		1,670
Interest payable and similar charges		(360)		(362)
Interest receivable		136		143
Profit before income tax		1,926		1,451
Income tax expense		(568)		(411)
Overseas tax		(43)		(19)
Profit for the period attributable to shareholders		1,315		1,021
Earnings per share (basic)	2	3.2p		2.5p
Earnings per share (diluted)	2	3.2p		2.5p

Consolidated statement of recognised income and expense

For the six months ended 31 May 

	Six months ended 31 May
	2008 Unaudited		2007 Unaudited
	£'000		£'000
Exchange differences on translation of foreign subsidiaries	481		(64)
Taxation (charge)/credit on items taken directly to equity	(49)		9
Net income/(expense) recognised directly in equity	432		(55)
Profit for the period	1,315		1,021
Total recognised income for the period	1,747		966
Attributable to shareholders of Porvair plc	1,747		966

Consolidated balance sheet

As at 31 May

			As at 31 May				As at 30 November
		Note	2008 Unaudited		2007 Unaudited		2007 Audited
			£’000		£’000		£’000
Non-current assets
Property, plant and equipment		4	8,023		6,644		6,722
Goodwill		4	27,549		26,926		26,512
Other intangible assets		4	663		415		626
Deferred tax asset			630		1,904		753
Other receivable			1,185		990		1,056
			38,050		36,879		35,669
Current assets
Inventories			7,798		6,917		6,888
Trade and other receivables			8,807		8,043		7,888
Derivative financial instruments			-		46		44
Cash and cash equivalents			599		2,154		2,893
			17,204		17,160		17,713
Current liabilities
Trade and other payables			(6,794)		(6,133)		(6,937)
Current tax liabilities			(670)		(342)		(224)
Bank overdraft and loans			(600)		(500)		(500)
Derivative financial instruments			(9)		-		-
Provisions for other liabilities and charges		5	-		-		(78)
			(8,073)		(6,975)		(7,739)
Net current assets			9,131		10,185		9,974
Non current liabilities
Bank loans			(9,723)		(10,427)		(9,364)
Retirement benefit obligations			(1,568)		(4,187)		(1,804)
Provisions for other liabilities and charges		5	(57)		(367)		(55)
	Other non-current liabilities		(79)		-		-
			(11,427)		(14,981)		(11,223)
			35,754		32,083		34,420
	Capital and reserves
	Share capital	6	814		811		814
	Share premium account	6	32,765		32,615		32,765
	Cumulative translation reserve	7	(3,343)		(3,360)		(3,824)
	Retained earnings	7	5,518		2,017		4,665
	Total shareholders’ equity		35,754		32,083		34,420

 Consolidated cash flow statement 

For the six months ended 31 May 

		Six months ended 31 May
	Note	2008 Unaudited		2007 Unaudited
		£'000		£'000
Cash flows from operating activities
Cash generated from operations	8	1,107		2,207
Interest received		105		120
Interest paid		(331)		(429)
Tax paid		(152)		(301)
Net cash generated from operating activities		729		1,597
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired)	10	(796)		(1,059)
Purchase of property, plant and equipment	4	(1,357)		(640)
Purchase of intangible assets	4	(157)		(18)
Proceeds from sale of property, plant and equipment		5		-
Available for sale investments		-		200
Net cash (used in) investing activities		(2,305)		(1,517)
Cash flows from financing activities
(Repayment)/increase of borrowings	9	(250)		767
Dividends paid to shareholders	3	(488)		(446)
Capital element of finance leases		(9)		-
Net cash (used in)/generated from financing activities		(747)		321
Net (decrease)/increase in cash and cash equivalents	9	(2,323)		401
Effects of exchange rate changes		29		(3)
		(2,294)		398
Cash and cash equivalents at the beginning of the period		2,893		1,756
Cash and cash equivalents at the end of the period		599		2,154

  Notes to the accounts

1.    Segmental analyses

Primary reporting format - business segments

As at 31 May 2008, the Group is organised on a worldwide basis into two main business segments:

• Metals Filtration

• Microfiltration

In the six months ended 31 May 2007, the Group reported three main segments. The Advanced Materials segment is now reported within Metals Filtration as operations are controlled by the same management team. The Accounts for the year ended 30 November 2007 reported two business segments. Comparatives for the six month period ended 31 May 2007 have been restated to reflect this change. 

Six months ended 31 May 2008 - Unaudited		Metals Filtration		Microfiltration		Other unallocated		Group
		£'000		£'000		£'000		£'000
Revenue		10,903		14,700		-		25,603
Operating profit/(loss) before share based payments		327		2,474		(576)		2,225
Share based payments		-		(37)		(38)		(75)
Operating profit/(loss)		327		2,437		(614)		2,150
Finance costs		-		-		(224)		(224)
Profit/(loss) before income tax		327		2,437		(838)		1,926
Income tax expense		-		-		(611)		(611)
Profit/(loss) for the period		327		2,437		(1,449)		1,315

Six months ended 31 May 2007 - Unaudited		Metals Filtration		Microfiltration		Other unallocated		Group
		£'000		£'000		£'000		£'000
Revenue		9,648		13,251		-		22,899
Operating (loss)/profit before share based payments		(193)		2,260		(358)		1,709
Share based payments		(1)		(6)		(32)		(39)
Operating (loss)/profit		(194)		2,254		(390)		1,670
Finance costs		-		-		(219)		(219)
(Loss)/profit before income tax		(194)		2,254		(609)		1,451
Income tax expense		-		-		(430)		(430)
(Loss)/profit for the period		(194)		2,254		(1,039)		1,021

The Metals Filtration segment operating profit for the six months ended 31 May 2007 included a restructuring charge of £0.25m.

The Other unallocated segment mainly comprises Group corporate costs, some research and development costs, new business development costs and general financial services. The Other unallocated loss before tax in the six months ended 31 May 2007 includes provisions written back of £0.15m, principally related to costs associated with the business disposals in 2003.  

Segment assets and liabilities

At 31 May 2008 - Unaudited		Metals Filtration		Microfiltration		Other unallocated		Group
		£'000		£'000		£'000		£'000
Segmental assets		22,561		30,564		345		53,470
Long term receivable		-		-		1,185		1,185
Cash and cash equivalents		-		-		599		599
Total assets		22,561		30,564		2,129		55,254
Segmental liabilities		(2,572)		(4,015)		(1,022)		(7,609)
Retirement obligations		-		-		(1,568)		(1,568)
Borrowings		-		-		(10,323)		(10,323)
Total liabilities		(2,572)		(4,015)		(12,913)		(19,500)

At 31 May 2007 - Unaudited		Metals Filtration		Microfiltration		Other unallocated		Group
		£'000		£'000		£'000		£'000
Segmental assets		20,379		28,505		2,011		50,895
Long term receivable		-		-		990		990
Cash and cash equivalents		-		-		2,154		2,154
Total assets		20,379		28,505		5,155		54,039
Segmental liabilities		(2,272)		(3,454)		(1,116)		(6,842)
Retirement obligations		-		-		(4,187)		(4,187)
Borrowings		-		-		(10,927)		(10,927)
Total liabilities		(2,272)		(3,454)		(16,230)		(21,956)

At 30 November 2007 - Audited		Metals Filtration		Microfiltration		Other unallocated		Group
		£'000		£'000		£'000		£'000
Segmental assets		20,859		28,151		423		49,433
Long term receivable		-		-		1,056		1,056
Cash and cash equivalents		-		-		2,893		2,893
Total assets		20,859		28,151		4,372		53,382
Segmental liabilities		(1,847)		(4,587)		(860)		(7,294)
Retirement obligations		-		-		(1,804)		(1,804)
Borrowings		-		-		(9,864)		(9,864)
Total liabilities		(1,847)		(4,587)		(12,528)		(18,962)

Secondary reporting format - geographical segments

Revenue 

	Six months ended 31 May
	2008			2007
	By destination Unaudited £'000	By origin Unaudited £'000		By destination Unaudited £'000	By origin Unaudited £'000
United Kingdom	7,349	14,204		7,425	12,840
Continental Europe	3,699	-		3,308	-
Americas	12,766	11,399		10,356	10,059
Asia	1,220	-		1,327	-
Australasia	301	-		244	-
Africa	268	-		239	-
Continuing operations	25,603	25,603		22,899	22,899

2.    Earnings per share

	Six months ended 31 May
	2008 Unaudited				2007 Unaudited
	Earnings £'000	Weighted average number of shares	Per share amount (pence)		Earnings £'000	Weighted average number of shares	Per share amount (pence)
Basic EPS - earnings attributable to ordinary shareholders	1,315	40,698,476	3.2p		1,021	40,574,586	2.5p
Effect of dilutive securities - share options		25,984	-			208,147	-
Diluted EPS - adjusted earnings	1,315	40,724,460	3.2p		1,021	40,782,733	2.5p

3.     Dividends per share

	Six months ended 31 May
	2008			2007
	Per share	Unaudited £'000		Per share	Unaudited £'000
Final dividend paid	1.20p	488		1.10p	446
	1.20p	488		1.10p	446

The Directors have declared an interim dividend of 1.0p per share (2007: 1.0p) to be paid on 12 September 2008 to shareholders on the register at the close of business on 8 August 2008. The ex-dividend date for the shares is 6 August 2008.

4.    Capital Expenditure

Six months ended 31 May 2008 - Unaudited		Property, plant and equipment		Goodwill		Other intangible assets		Total
		£'000		£'000		£'000		£'000
Opening net book amount  1 December 2007		6,722		26,512		626		33,860
Additions		1,357		-		157		1,514
Acquisitions (note 10)		444		594		-		1,038
Disposals		(7)		-		-		(7)
Depreciation, amortisation, impairment and other movements		(493)		443		(120)		(170)
Closing net book amount 31 May 2008		8,023		27,549		663		36,235

Six months ended 31 May 2007 - Unaudited		Property, plant and equipment		Goodwill		Other intangible assets		Total
		£'000		£'000		£'000		£'000
Opening net book amount  1 December 2006		6,596		26,243		475		33,314
Additions		640		-		18		658
Acquisitions		79		744		-		823
Disposals		(1)		-		-		(1)
Depreciation, amortisation, impairment and other movements		(670)		(61)		(78)		(809)
Closing net book amount 31 May 2007		6,644		26,926		415		33,985

5.    Provisions for other liabilities and charges

	Six months ended 31 May
	2008 Unaudited £'000		2007 Unaudited £'000
At 1 December	133		517
Charged to consolidated income statement:
- Unused amounts reversed	-		(150)
- Unwinding of discount	2		-
- Used during period	(78)		-
At 31 May	57		367

The £78,000 utilised in the six month period ended 31 May 2008, relates to a building sublet in 2006 and surrendered in January 2008. The provision at 31 May 2008 relates to a discounted dilapidations provision for leased property which is expected to be utilised in 2027. Details in relation to the reversal of provisions in the six months ended 31 May 2007 are shown in Note 1.

6.     Share capital and premium

		Number of shares (thousands)		Ordinary shares Unaudited		Share premium account Unaudited		Total Unaudited
				£'000		£'000		£'000
At 1 December 2006		40,575		811		32,615		33,426
At 31 May 2007		40,575		811		32,615		33,426
At 1 December 2007		40,699		814		32,765		33,579
At 31 May 2008		40,699		814		32,765		33,579

7.     Other reserves

			Cumulative translation reserve Unaudited		Retained earnings Unaudited
			£'000		£'000
At 1 December 2006			(3,296)		1,394
Profit for the period attributable to shareholders			-		1,021
Direct to equity:
Dividends paid			-		(446)
Share based payments net of tax			-		48
Exchange differences			(64)		-
At 31 May 2007			(3,360)		2,017
At 1 December 2007			(3,824)		4,665
Profit for the period attributable to shareholders			-		1,315
Direct to equity:
Dividends paid			-		(488)
Share based payments net of tax			-		26
Exchange differences			481		-
At 31 May 2008			(3,343)		5,518

8.    Cash generated from operations

		Six months ended 31 May
		2008 Unaudited £'000		2007 Unaudited £'000
Operating profit		2,150		1,670
Pension cash movement		(182)		29
Share based payments		75		39
Depreciation and amortisation		772		726
Loss on disposal of property, plant and equipment		2		1
Operating cash flows before movement in working capital		2,817		2,465
(Increase) in inventories		(751)		(276)
(Increase)/decrease in trade and other receivables		(390)		21
(Decrease)/increase in payables		(491)		147
(Decrease) in provisions		(78)		(150)
Increase in working capital		(1,710)		(258)
Cash generated from operating activities		1,107		2,207

  9.    Reconciliation of net cash flow to movement in net debt

	Six months ended 31 May
	2008 Unaudited £'000		2007 Unaudited £'000
Net (decrease)/increase in cash and cash equivalents	(2,323)		401
Effects of exchange rate changes	(380)		32
Increase in borrowings	(50)		(767)
Increase in finance leases	(138)		-
Net debt at the beginning of the period	(6,971)		(8,439)
Net debt at the end of the period	(9,862)		(8,773)

The increase in borrowings includes £300,000 loan notes repayable over a 3 year period relating to the acquisition of Toolturn Engineering Limited (Note 10).

10.    Acquisition of Toolturn Engineering Limited

On 28 March 2008, The Group purchased 100% of the issued share capital of CM7 Limited and its wholly owned subsidiary Toolturn Engineering Limited for a total consideration of £990,000. The acquired business primarily sells to businesses within the Microfiltration segment and these transactions are eliminated on consolidation. The company contributed external revenues of £64,000 and net loss of £2,000 to the Group for the period 29 March 2008 to 31 May 2008. If the acquisition had occurred on 1 December 2007, the company would have contributed external revenues of £169,000 and minimal profits to the Group for the six month period ended 31 May 2008.

	Note		£'000
Purchase consideration:
Cash paid			653
Deferred consideration			300
Direct costs relating to the acquisition			37
Total purchase consideration			990
Fair value of net assets acquired			(396)
Goodwill	4		594

The Goodwill is attributable to the workforce of the acquired business and synergies expected to arise after acquisition within the Microfiltration segment.

The total adjustments required to the book values of the assets and liabilities acquired in order to present the net assets at fair value in accordance with Group accounting policy were £4,000. The purchase has been accounted for as an acquisition.

The assets and liabilities as at 28 March 2008 arising from the acquisition are as follows:

	Fair value £'000		Acquiree's carrying amount £'000
Property, plant and equipment	444		444
Inventories	72		81
Trade and other receivables	373		365
Cash and cash equivalents	(106)		(106)
Trade and other payables	(249)		(245)
Finance leases	(138)		(139)
Net assets acquired	396		400
Purchase consideration settled in cash	690
Cash and cash equivalents in assets acquired	106
Cash outflow on acquisition	796

The deferred consideration is represented by interest bearing loan notes issued totalling £300,000. The loan notes are repayable annually in equal instalments over a 3 year period.

In the six months ended 31 May 2007, the Group acquired the trade and assets of Omnifilter. The acquisition is disclosed in the annual financial statements for the year ended 30 November 2007.

11.    Exchange rates

Exchange rates for the US dollar during the period were:

	Average rate to 31 May 08	Average rate to 31 May 07	Closing rate at 31 May 08	Closing rate at 30 Nov 07
	Unaudited	Unaudited	Unaudited	Audited
US dollar	2.00	1.97	1.98	2.06

12.    Seasonality

The results for the six months ended 31 May 2008 are impacted by a lower number of working days in the first six months of the year than in the second half of the year. The number of working days is 7% lower in the first six months of the year compared to the second half of the year.

13.    Basis of preparation

This unaudited condensed half-yearly financial information for the six months ended 31 May 2008 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The half-yearly condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 30 November 2007, which have been prepared in accordance with IFRSs as adopted by the European Union. 

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 November 2007, as described in those financial statements. Taxes on income in the interim period are accrued using the tax rate that would be applicable to expected total annual earnings. 

The following new standards, amendments to standards or interpretations are mandatory for the first time for the year ending 30 November 2008:

IFRIC 11, 'IFRS 2 - Group and treasury share transactions', is effective for annual periods beginning on or after 1 March 2007. Management do not expect this interpretation to have any effect on the Group as it already accounts for group share transactions using principles consistent with IFRIC 11.

IFRS 7, 'Financial instruments: Disclosures', is effective for annual periods beginning on or after 1 January 2007. As this interim report contains only condensed financial statements, the full IFRS 7 disclosures are not required at this stage. The full IFRS 7 disclosures will be given in the annual financial statements.

These interim financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of certain current assets, financial assets and financial liabilities held for trading and derivative contracts, which are held at fair value.

The preparation of interim financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the interim financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates.

These interim financial statements and the comparative figures for the year ended 30 November 2007 do not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 30 November 2007, which include an unqualified audit report, no emphasis of matter paragraph and no statements under sections 237(2) or (3) of the Companies Act 1985, have been delivered to the Registrar of Companies.

This report will be available at Porvair plc's registered office at Brampton House, 50 Bergen Way, King's Lynn, PE30 2JG and on the Company's website www.porvair.com.

Statement of directors' responsibilities

The directors confirm that this condensed set of consolidated interim financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

The directors of Porvair plc are listed in the Porvair plc Annual Report for 30 November 2007. There have been no changes in directors in the period. A list of current directors is maintained on the Porvair plc website www.porvair.com.

By order of the board

Ben Stocks  

Group Chief Executive

Christopher Tyler 

Group Finance Director

23 June 2008

  Independent review report to Porvair plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 May 2008, which comprises the consolidated income statement, consolidated balance sheet, consolidated statement of recognised income and expense, consolidated cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 13, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 May 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

Cambridge

23 June 2008

Notes:

The maintenance and integrity of the Porvair plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial information since it was initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

 

END

 

 

IR BRGDLBXDGGIX