30th Jan 2023 19:05
(Alliance News) - Porvair PLC reported a higher annual profit on Monday, but remained cautious on its outlook due to inflationary and supply chain pressures, as well as possible currency headwinds.
Porvair is a Hampshire, England-based manufacturer focused on filtration and separation technology.
In the financial year to November 30, Porvair said pretax profit grew by 26% to GBP18.7 million from GBP14.8 million a year earlier, while revenue rose 18% to GBP172.6 million from GBP146.3 million.
Cost of sales increased slower than revenue, by 14% to GBP113.6 million from GBP99.4 million. Administrative expenses rose by 27% to GBP36.4 million from GBP28.7 million.
"As we move into 2023 the board sees some reasons for caution in the near-term: supply chain dislocation, while diminishing, requires vigilance; inflationary pressures continue; the wider economic picture is uncertain and there is a likelihood of currency headwinds," said Chief Executive Officer Ben Stocks.
More positively, Stocks added that the company benefits from growth in analytical science, the need for clean water, and tightening environmental regulation, among others.
"These trends have supported a consistent medium and long-term growth record and the board is confident that this can continue," he said.
Analysts at Shore Capital noted that Porvair has historically been "conservative" with its financial guidance, which has led to "numerous" upgrades and "very few" downgrades, "despite a turbulent macroeconomic environment."
"The company is guiding to flat earnings in financial 2023, which we consider to be conservative. Under a bullish scenario, we believe the earnings growth could be close to the company's historical 12% average," Shore Capital said.
In addition, the capital markets firm said it saw scope for its financial 2023 earnings before interest, tax, depreciation and amortisation forecast to be upgraded by more than 10%.
As a result, Shore Capital said it maintained its 'buy' recommendation for Porvair.
"We believe the company's consistently strong historic growth rates have the potential to accelerate in the long-term given the environmental solutions that group provides and the increasing regulatory requirements for controlling emissions," Shore explained.
"The growth in analytical science, clean water regulation, and the increased use of aluminium in electric vehicles and recyclable packaging are additional trends supporting the company's long-term prospects," it added.
Shares in the firm closed down 2.8% at 595.83 pence on Monday in London. Over the past 12 months, the stock is down 11%.
Shore Capital said that Porvair trades at a "significant discount" to filtration peers and industrial companies that have "inferior organic growth records and higher risk profiles."
"We see an around 20% upside to the current share price with limited downside risk," the capital market firm said.
By Heather Rydings, Alliance News senior economics reporter
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