Final Results - Year Ended 30 November 1999
Porvair PLC
27 January 2000
Contacts:
Ben Stocks, Chief Executive
Mark Moran, Group Finance Director
Porvair plc today 0171 466 5000
at all other times 01553 761111
Charles Ryland/Jennie Duschenes
Buchanan Communications 0171 466 5000
PORVAIR plc ('Porvair')
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 1999
Porvair, the innovative advanced materials company, announces
preliminary results for the year ended 30 November 1999.
KEY POINTS
* Profit before tax, goodwill and exceptional items up 100%
to £4.2m (1998 : £2.1m).
* Restructuring programme initiated in 1998 now complete.
Benefits already apparent and considerable progress made.
* Strong cash generation reduced net borrowings to £9.5m
(1998 : £10.2m) despite increased capital expenditure of £4.3m
(1998 : £3.2m).
* Final dividend unchanged at 4.1p, making a total for 1999
of 6.4p (1998 : 6.4p). Dividend cover increased to just under
two times.
* Consumer division : now focussed on core products -
profits up to £2.2m (1998 : £0.9m).
* Filtration division : strong performance with
profitability up 23%.
John Morgan, Chairman, said:
'It is a pleasure to report that the restructuring is complete
and that operationally the Group is well positioned to face
the future. Like for like sales have increased in the last
six months, against both the first half and the comparative
period last year, and this trend is expected to continue.
This, taken together with progress in new product development
and the opportunities for licensing technology, underpins the
prospects for further solid progress in the coming year.'
Chairman's Statement
I am pleased to report that profit before tax, goodwill and
exceptional charges has doubled to £4.2m (1998 : £2.1m). This
result was achieved against trading conditions that remained
challenging for much of the year. The benefits of the
restructuring programme outlined in the last annual report
have been delivered in full. Our cost base is now lower than
in the previous year and the operations are running more
efficiently. In addition we have improved the performance of
the Group further by dispensing with certain loss making
activities and marginal product lines. Although revenue is
marginally lower as a result of these actions, sales of our
continuing product portfolio are growing.
The Group has decided, in adopting Financial Reporting
Standard 10 'Goodwill and Intangible Assets', to reinstate all
goodwill previously written off against reserves. We believe
this to be the best accounting practice, and ensures that all
purchased goodwill, now and in the future, will be accounted
for consistently. One effect of this will be an annual charge
for the amortisation of goodwill which in 1999 amounts to
£2.1m (1998 : £2.0m). It will also aid clarity in reporting
and allows the balance sheet to reflect a more realistic
capital employed figure. The following summarises the
operating results restated to take account of the goodwill
amortisation :
1999 1998
£m £m
* Operating profit
before goodwill 5.0 3.1 +62%
amortisation/exceptionals
* Goodwill amortisation (2.1) (2.0)
* Operating profit
before exceptionals 2.9 1.1
* Exceptionals - (3.1)
----- ------
* Operating profit 2.9 (2.0)
===== ======
Operating profit before goodwill amortisation and exceptionals
increased 62% in 1999 and earnings per share, on the same
basis, increased to 12.6p (1998 : 8.1p). We benefited from an
effective tax rate of 23% this year, whilst a more normal rate
of 30% would have given earnings per share of 11.5p.
Cash generation has reduced net borrowings to £9.5m (1998 :
£10.2m), despite capital expenditure of £4.3m (1998 : £3.2m).
This is the result of tight operational controls leading to
lower working capital. The interest charge has reduced by 26%
to £749,000, and interest cover before goodwill amortisation
and exceptionals increased to 6.6 times (1998 : 3 times).
Dividend
The Board is recommending an unchanged final dividend of 4.1p
per share (1998 : 4.1p) to be paid on 6 April 2000 to
shareholders on the register at the close of business on 10
March 2000. This brings the total dividend for the year to
6.4p per share (1998 : 6.4p).
The recommended dividend is covered at just under two times
earnings per share before goodwill amortisation. The Boards
intention is to follow a progressive dividend payment policy
whilst also working to achieve earnings per share cover,
before goodwill amortisation, for the dividend in the range of
2.0 to 2.5 times.
Board
As I reported in the Interim results Michael Ost has joined us
as a non-executive director, and Peter Greenwood has retired
from the Board after serving as a non-executive director for
twelve years. Since the half year I have become non-executive
Chairman having retired from full-time employment at the end
of May 1999.
Employees
At the year end the Group employed 637 personnel (1998 : 646).
After a difficult period for the Group we are making
considerable progress and this is due in no small measure to
our employees. Our goals can only be achieved through the
efforts of those who work in the Group and, on behalf of the
Board, I wish to thank all our employees for their commitment
to our success.
Outlook
It is a pleasure to report that the restructuring is complete
and that operationally the Group is well positioned to face
the future. Like for like sales have increased in the last
six months, against both the first half and the comparative
period last year, and this trend is expected to continue.
This, taken together with progress in new product development
and the opportunities for licensing technology, underpins the
prospects for further solid progress in the coming year.
John Morgan, Chairman
27 January 2000
Operating Review
Group
Porvair is an advanced materials Group specialising in four
technologies :
* Polyurethane membranes * Advanced ceramics
* Acrylic materials * Sintered materials
These four materials technologies approach specific markets
through two divisions and five operating companies. Details
of each company can be found at the end of this statement. In
our activities we look for clear technical edge, strong market
presence and significant opportunities for profitable growth.
1999
1999 has been a year of recovery for Porvair. Considerable
progress has been made, and we finished the year strongly.
Restructuring, announced in late 1998, was completed ahead of
schedule - and left us with a smaller product portfolio, fewer
operating companies and a lower cost base. The benefits of
this programme are reflected in the results.
Sales for the year were £61.6m and profit before tax and
goodwill amortisation was £4.2m (1998 : £2.1m). Cash
generation was good. Through tight operational control we
reduced average trading working capital as a percentage of
sales by 14%. Key operating measures, particularly
productivity and on-time deliveries, have improved through
1999 - and encouragingly, in the second half of the year, we
began to see solid progress in sales volumes as the benefits
of new product introductions began to show through :
H2 H1 H2
1998 1999 1999
£'m £'m £'m
Sales 29.6 30.2 31.4
Operating profit before
goodwill amortisation/exceptionals 0.5 1.8 3.2
Consumer division
This division develops, manufactures and markets polyurethane
membranes.
As outlined at the half-year, the principal feature of this
division in 1999 has been the consolidation of its activities.
We cut marginal product lines and focussed on core products.
This smaller business started to deliver sales growth in the
second half and finished the year at £28.7m.
The mainstays of this business are Permair enhanced leather
and Porelle waterproof/breathable membranes.
Permair enhanced leather has grown through 1999. Early in the
year we introduced two new products to improve the technical
performance of the range. These have been well received by
customers and progress has been helped by a marketing
programme that concentrates on the technical edge of the
product for specific markets - such as industrial/safety
footwear and childrens shoes. As a result, second half sales
volumes were 31% ahead of the prior year. Our joint venture
in China grew by 20% and exceeded profit expectation.
Porelle again grew by 20% in 1999. This volume was largely
delivered by a 30% productivity improvement in the existing
plant. At the end of the year we brought new capacity on-line
to cope with further anticipated growth. Porelle-based
products, particularly our waterproof socks and the Sealskinz
gloves launched in 1999, did well. Encouragingly, late in
1999, we made substantial progress with some new
waterproof/breathable fabrics for institutional applications,
and these will benefit us in coming years.
As a consequence of the above, operating profit before
goodwill amortisation for this division rebounded strongly and
at £2.2m was well ahead of the prior year (£0.9m).
Filtration division
There are four principal operating businesses in this
division. The largest is the advanced ceramics organisation
in the USA - Selee - which specialises in materials used for
molten metal handling. Sales in this business improved 7%
during 1999. Tight operational management converted this into
a 25% uplift in operating profits. Demand in all markets
strengthened across the year and trading was buoyed up by
further advances in our proprietary dual-stage aluminium
process and by a 40% uplift in high value metals filtration.
Progress was also made with the microporous ceramic ('GPM'),
which is gaining adoptions for kiln furniture and catalyst
media applications.
Two intellectual property licences were taken on in 1999 to
enhance our ceramic materials technology. Both licences
relate to specific ceramic formulations that will improve
further our technical performance in molten metal filtration
and catalyst media. We have dedicated teams working to bring
both to commercial application and expect initial sales in
2000.
Operating profit in the sintered materials filtration business
was up 49% in the year. This business sinters various
materials into porous media. As part of the restructuring we
exited marginal product lines early in the year. Consequently
sales were flat, but both margins and operational efficiencies
improved. We have realigned our marketing effort and now
concentrate on proprietary applications for our materials.
This will allow steady growth and better margin management.
Porvair Sciences, which supplies assay equipment to life
science laboratories also uses our sintered materials. This
operation had an excellent year. Both sales and profits are
up by 50%, driven by key customer adoptions and new microplate
products.
We indicated at the half year that the acrylic materials
business, which makes moulds for the ceramic industry, was
finding trading difficult. Conditions did not improve during
the second half and the result for the year was below
expectation. However, in 1999 we have redoubled our efforts
to accelerate product development in this business, and by the
end of the year stronger commercial activity suggested that
the benefits of this programme were starting to come through.
Two new pressure casting machine configurations were
introduced in the year and one of these, a modular fully
automatic design, has been installed in several customers and
is working successfully. We also introduced two new mould
chemistries for both sanitary and tableware applications.
These are currently undergoing customer tests and commercial
sales are expected to commence in 2000.
Overall the Filtration division improved profitability by 23%,
reporting an operating profit of £2.7m (1998 : £2.2m).
New product development
As made clear in last years report, new product development
is seen as the primary focus for Porvair management.
Good progress has been made in 1999. In addition to the
licences outlined above we have introduced two new Permair
leather configurations and with Porelle have developed line
extensions to improve our offering to institutional markets.
Sealskinz gloves were launched in September and have been well
received. In the Filtration division we have a new
formulation of foam filter for steel foundries; a superdome
aeration diffuser for waste water treatment; two new
optiplates for our life sciences business; our P100 pressure
casting system; our PC570 upgraded machine; and the two
acrylic mould configurations mentioned above. All of these
will benefit sales revenues and margins from 2000 onwards.
Management objectives
These will change little from those set in 1999. The primary
objectives remain : sales growth driven by new product
development; improving return on capital employed; and
progress with six key operating performance indicators.
Management incentives remain tied to performance against these
objectives.
PORVAIR AT A GLANCE
Porvair is an innovative advanced materials group. We
specialise in polyurethane membranes, acrylic, advanced
ceramic and sintered materials. The Group is organised under
two divisions - Consumer and Filtration.
Material Locations Employees Activities
* Consumer division
Polyurethane Kings Lynn, UK 263 Specialises in
membranes Boston, USA polyurethane
China (50:50 JV) membranes that
the performance
of leather and
textiles to make
them waterproof
and breathable.
* Filtration division
Advanced Hendersonville, 215 Brings ceramics
ceramics USA expertise to the
field of molten
metal handling,
catalyst media
and thermal
processing. World
leader in aluminium
filtration.
Acrylic Kings Lynn 48 Supplies sanitary-
materials ware and table-
ware customers
worldwide with
long-life
alternative
to traditional
ceramic moulding
media.
Sintered materials :
- filtration Wrexham, UK 86 Develops innovative
sintered metal and
polymer solutions to
filtration problems.
- sciences Shepperton, UK 17 Specialises in assay
equipment and other
microplate products
for the Life
Sciences market.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 November 1999
Group Group
1999 1998
restated
Note £'000 £'000
Turnover
Continuing operations (including share of 62,535 62,768
joint venture)
Less : share of joint venture (964) (803)
---------------
4 61,571 61,965
Cost of sales (43,780) (45,998)
----------------
Gross profit 17,791 15,967
----------------
Distribution costs (2,043) (1,976)
Administrative expenses (12,949) (15,968)
-----------------
Group operating profit before goodwill 4,912 52
amortisation - continuing operations
Goodwill amortisation 2 (2,113) (2,029)
-----------------
Group operating profit/(loss) before 2,799 (1,977)
joint venture
Share of operating profit/(loss) in joint 62 (83)
venture -----------------
Group operating profit/(loss) including 2,861 (2,060)
joint venture
Interest payable (net) (749) (1,007)
-----------------
Profit/(loss) on ordinary activities 2,112 (3,067)
before taxation
Tax on profit on ordinary activities (987) (5)
-----------------
Profit/(loss) on ordinary activities 1,125 (3,072)
after taxation
Equity minority interests 6 10
-----------------
Profit/(loss) attributable to 1,131 (3,062)
shareholders
Dividends (1,644) (1,623)
-----------------
Retained loss for the financial year (513) (4,685)
=================
Earnings/(losses) per share
- basic and diluted 3 4.4p (11.9)p
- basic and diluted before goodwill 12.6p (4.0)p
amortisation
Reconciliation of movements in equity shareholders funds
For the year ended 30 November 1999
Group Group
1999 1998
restated
Note £'000 £'000
Profit/(loss) for the financial year 1,131 (3,062)
Dividends (1,644) (1,623)
----------------
Retained loss for the financial year (513) (4,685)
New share capital subscribed - 141
Exchange differences 184 171
---------------
Net reduction in equity shareholders funds (329) (4,373)
Opening equity shareholders funds
(as originally stated) 43,195 23,132
Prior year adjustment 1,2 - 24,436
---------------
Closing equity shareholders funds 42,866 43,195
===============
Statement of total recognised gains and losses
For the year ended 30 November 1999
Group Group
1999 1998
restated
Note £'000 £'000
Profit/(loss) attributable to shareholders 1,131 (3,062)
Exchange differences on retranslation of net
assets of subsidiary undertaking and 184 171
foreign borrowings --------------
Total gains/(losses) relating to the year 1,315 (2,891)
Prior year adjustment 1,2 22,407 -
----------------
Total gains/(losses) recognised since
last annual report 23,722 (2,891)
================
BALANCE SHEET
As at 30 November 1999
Group Group
Note 1999 1998
restated
£'000 £'000
Fixed Assets
Goodwill 2 20,712 22,407
Tangible assets 19,368 18,004
Investments
Investments in joint venture :
Share of gross assets 292 317
Share of gross liabilities (272) (359)
20 (42)
Other investments - 4
20 (38)
----------------
40,100 40,373
Current Assets ----------------
Stocks 11,052 13,199
Debtors 13,217 12,671
Cash at bank and in hand 665 1,325
---------------
24,934 27,195
---------------
Creditors
Amounts falling due within one year (12,029) (14,976)
-----------------
Net current assets 12,905 12,219
-----------------
Total assets less current liabilities 53,005 52,592
----------------
Creditors
Amounts falling due after more than one year (9,787) (9,098)
Provisions for liabilities and charges (320) (261)
----------------
42,898 43,233
===============
Capital and reserves
Called up share capital 514 514
Share premium account 1,211 1,211
Other reserves 5,092 4,908
Profit and loss account 36,049 36,562
---------------
Total equity shareholders funds 42,866 43,195
Equity minority interests 32 38
---------------
42,898 43,233
=============
Approved by the Board on 27 January 2000
B D W Stocks, Director
M Moran, Director
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 November 1999
Group Group
1999 1998
£'000 £'000
Net cash inflow from operating 6 9,126 9,251
activities before exceptional items
Exceptional items (477) (430)
6 ----------------
Net cash inflow from operating 6 8,649 8,821
activities -----------------
Returns on investments and servicing
of finance
Interest received 25 17
Interest paid (785) (1,006)
--------------------------
(760) (989)
--------------------------
Taxation
UK corporation tax refunded/(paid) 108 (1,365)
Overseas tax paid (643) (512)
---------------------------
(535) (1,877)
----------------------------
Capital Expenditure
Purchase of tangible fixed assets (4,327) (3,244)
Sale of tangible fixed assets 7 23
----------------------------
(4,320) (3,221)
----------------------------
Acquisitions and disposals
Purchase of Marand goodwill (418) -
----------------------------
Equity dividends paid (1,644) (1,641)
---------------------------
Financing
Issue of ordinary share capital - 141
Borrowings due after one year :
Increase in net borrowings 8 430 3,865
---------------------------
430 4,006
---------------------------
Increase in cash in the year 8 1,402 5,099
===========================
NOTES
1. Prior year adjustment
The Groups accounting policy for goodwill has changed in
line with Financial Reporting Standard 10 'Goodwill and
Intangible Assets', which requires purchased goodwill to
be capitalised and amortised through the profit and loss
account over its useful economic life. In order to
ensure consistency with the revised accounting policy all
goodwill previously eliminated against reserves has been
reinstated as an asset on the balance sheet, by means of
a prior year adjustment, and comparatives restated
accordingly. This change in accounting policy has had no
impact on net borrowings.
The effects of this change of policy on the Groups
balance sheet has been to increase net assets,
represented by the net book value of goodwill, and
shareholders funds by £22.4m at 30 November 1998. The
impact of this change in policy resulting from the non-
cash amortisation of goodwill was to reduce operating
profit in 1999 by £2.1m (1998 : £2.0m).
2. Goodwill
Group Group
1999 1998
£'000 £'000
At beginning of the year as - -
previously stated
Prior year adjustment
- reinstated goodwill 29,904 29,904
- accumulated amortisation (7,497) (5,468)
brought forward ----------------
At beginning of the year as restated 22,407 24,436
Additions 418 -
Amortisation (2,113) (2,029)
----------------
At end of the year as restated 20,712 22,407
===============
On 1 December 1999 the Group acquired the stock of Marand
Marketing at book and fair value for £669,000. In
addition the Group purchased goodwill totalling £418,000.
This acquisition did not make a significant contribution
to turnover and operating profit.
3. Earnings per share
The basic earnings per share as shown in the profit and
loss account are calculated by reference to the
profit/(loss) attributable to shareholders and the
average number of shares in issue during the year on a
time weighted basis of 25,683,073 (1998 : 25,659,245).
For the diluted earnings per share, the weighted average
number of ordinary shares is adjusted to assume
conversion of all share options outstanding at the year
end. The earnings per share before goodwill amortisation
and exceptional items have been calculated by adding back
£2,113,000 (1998 : £5,128,000) to profit after tax
attributable to shareholders of £1,131,000 (1998 : loss
of £3,062,000).
4. Turnover and segmental analysis
The analysis by class of business and geographical
segment of the Groups turnover, operating profit and net
assets is set out below :
1999 1998
Filtr- Filtr-
Consumer ation Consumer ation
division division Total division division Total
£'000 £'000 £'000 £'000 £'000 £'000
Turnover by
geographical
destination
United Kingdom 4,843 6,325 11,168 4,094 6,535 10,629
Continental Europe 6,893 3,893 10,786 7,197 4,872 12,069
Americas 9,336 19,806 29,142 11,403 19,382 30,785
Asia 6,134 1,351 7,485 5,617 1,114 6,731
Australasia 220 531 751 207 534 741
Africa 2,275 928 3,203 1,497 316 1,813
----------------------------------------------
29,701 32,834 62,535 30,015 32,753 62,768
Less share of
joint venture (964) - (964) (803) - (803)
----------------------------------------------
28,737 32,834 61,571 29,212 32,753 61,965
----------------------------------------------
Turnover by
geographical origin
United Kingdom 23,261 12,578 35,839 22,812 13,800 36,612
Americas and Asia 6,440 20,256 26,696 7,203 18,953 26,156
Less share of
joint venture (964) - (964) (803) - (803)
----------------------------------------------
28,737 32,834 61,571 29,212 32,753 61,965
----------------------------------------------
Operating profit
Operating profit
before goodwill
amortisation,
share of joint
venture profits
and exceptional
charges 2,183 2,729 4,912 937 2,214 3,151
Goodwill
amortisation (794) (1,319) (2,113) (710) (1,319) (2,029)
Share of joint
venture 62 - 62 (83) - (83)
Exceptional charges - - - (2,342) (757) (3,099)
-----------------------------------------------
Operating profit/
(loss) after
goodwill
amortisation,
share of joint
venture profits
and exceptional
charges 1,451 1,410 2,861 (2,198) 138 (2,060)
-------------------------------------------------
Net Assets
Net assets before
goodwill and
net borrowings:
United Kingdom 16,730 5,782 22,512 14,882 5,693 20,575
Americas 1,942 7,229 9,171 1,572 8,915 10,487
--------------------------------------------------
18,672 13,011 31,683 16,454 14,608 31,062
Goodwill 1,354 19,358 20,712 1,730 20,677 22,407
Net borrowings (9,497) (10,236)
---------------------------------------------------
42,898 43,233
---------------------------------------------------
5. Employees
1999 1998
Average Year Average Year
end end
Consumer division 266 263 331 284
Filtration division 357 366 387 352
Head office 9 8 10 10
--------------------------------------
632 637 728 646
--------------------------------------
USA employees
included above 230 233 248 229
6. Reconciliation of operating profit to net cash inflow
from operating activities
1999 1998
£'000 £'000
Group operating profit/(loss) including joint 2,861 (2,060)
venture
Goodwill amortisation 2,113 2,029
Depreciation 2,909 2,695
Loss on sale of fixed assets 39 30
Decrease in stocks 2,287 187
(Increase)/decrease in debtors (696) 5,932
(Decrease)/increase in creditors (325) 355
Share of joint venture (profit)/loss (62) 83
-------------
Net cash inflow from operating activities before 9,126 9,251
exceptional items
Exceptional items (477) (430)
-------------
Net cash inflow from operating activities 8,649 8,821
--------------
7. Reconciliation of net cash flow to movement in net
borrowings
1999 1998
£'000 £'000
Increase in cash in the period 1,402 5,099
Increase in borrowings and lease financing (430) (3,865)
----------------
Change in net borrowings from cash flows 972 1,234
Translation difference (233) (78)
----------------
Movements in net borrowings in period 739 1,156
Net borrowings at 1 December 1998 (10,236) (11,392)
----------------
Net borrowings at 30 November 1999 (9,497) (10,236)
----------------
8. Analysis of net borrowings
Other
Cash non- Exchange
30/11/98 flow cash movement 30/11/99
£'000 £'000 £'000 £'000 £'000
Cash in hand
and at bank 1,325 (686) - 26 665
Overdrafts (2,338) 2,088 - - (250)
--------------------------------------------
1,402
--------------------------------------------
Borrowings due
after 1 year (9,098) - (430) (259) (9,787)
Borrowings due
within 1 year (125) (430) 430 - (125)
---------------------------------------------
(430)
---------------------------------------------
Total (10,236) 972 - (233) (9,497)
----------------------------------------------
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