25th Jan 2005 07:00
Porvair PLC25 January 2005 For immediate release 25 January 2005 Porvair plc Preliminary results for the year ended 30 November 2004 Porvair plc ("Porvair"), the specialist filtration and advanced materials Group,today announces its preliminary results for the year ended 30 November 2004. Highlights • Operational benefits, following 2003 disposals, are now evident. • Profit before taxation, exceptional items and goodwill increased by 60% to £2.6 m (2003: £1.6 m). Profit before taxation was £0.3m (2003: continuing operations £2.2m loss). • Gross revenue of £44.6m (2003: continuing operations £46.2m). Revenue growth was suppressed by the weak dollar. • Net debt reduced to £8.0 m (2003: £10.1 m). • Core specialist filtration businesses performing well. Dollar turnover at Selee Corporation was up 8% and operating profit growth was significant. Turnover at Porvair Filtration Group was up 4%. • Operating losses significantly reduced in Advanced Materials. Porous metal sales were up 64% as commercial applications are introduced. Fuel cell bipolar plate technology is meeting all key milestones. • Announced separately today: A $20m long term supply agreement with US coal gasification operators, SG Solutions LLC. Commenting on the results, John Morgan, Chairman, said: "In 2004 Porvair started to show the benefits of the changes undergone inprevious years. The Group is profitable, cash generative and deliveringearnings growth. After several years of very high R&D investment, a range ofhighly promising new products are in the process of being commercialised. 2005has started well, and the Board is optimistic about new product potential andthe prospects for growth". 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 5000Charles Ryland / Ben Willey Chairman's statement It is a pleasure to report good results for Porvair in 2004. This is the firstfull set of results for the Group after several years of transition, and it isexciting to see the expected benefits now coming through. Following thedisposals of two subsidiaries in 2003, Porvair has shown improved return onassets, cash generation and commercial focus. The significant spend on researchand development ("R&D") of recent years has opened up a range of promisingopportunities, and as some of these products move towards commercialisation,their sales income is already starting to offset R&D expenditure. The Board remains confident that Porvair's strategy and structure will deliverlong term value to shareholders. Our core specialist filtration businesses aregrowing, profitable, cash generative and address market segments wheretechnology and know-how are critical. This is a solid base from which todevelop a range of larger opportunities, some nearer term and incremental innature, some longer term and potentially transformational. Profits before tax, exceptional items and goodwill amortisation for 2004 were£2.6m (2003: continuing operations £1.6m), a 60% improvement. Profit beforetaxation was £0.3m (2003: continuing operations £2.2m loss). Porvair is cashgenerative, and net borrowings, at £8.0m, were significantly lower than theprior year (2003: £10.1m). Interest cover before goodwill amortisation was 6.5times (2003: 5.2 times). The weakness of the dollar has held back reported sales and profits. Reportedsales of £44.6m are lower than those reported for 2003 (2003: continuingoperations £46.2m) but had dollar rates remained constant growth would have been2%. Operating profits were also held back by about £0.2m as margins associatedwith dollar sales out of the UK came under pressure. The net effect wassomewhat mitigated however as we worked hard to grow US export sales. It isalso worth noting that turnover at the US Metals Filtration division was 8%higher than 2003 before translation into Sterling. As most of our borrowingsare in US dollars, the weaker dollar reduced reported borrowings. Our US Metals Filtration and Advanced Materials businesses have had a good year.Selee, our Metals Filtration business, continued its recovery, growing itsoperating profit significantly. Losses in our Advanced Materials division wherethe Group spends a large percentage of its R&D expenditure were cut by 31%before translation into Sterling. The Board was particularly pleased to notethat sales of our proprietary porous metals increased by 64% with several moreopportunities still in development, and that all the key milestones in our fuelcell bipolar plate development were met. On the whole our UK Microfiltration businesses performed well, and althoughPorvair Sciences did not do as well as expected, the Porvair Filtration Group ("PFG") posted sales growth of 4%. Reported profits before tax at PFG were flatbut were held back by lower margins on dollar denominated sales. Progress inkey developmental markets has been promising, and we are delighted, early in2005, to have won a long term supply agreement with one of the leadingcommercial US coal gasification operators. Several issues relating to the disposal of our chemical businesses in late 2003were dealt with during 2004. Our Canadian membrane outlet was closed and wedisposed of our minority equity position in Sympatex. As noted last year, thefirst of three scheduled payments into the Porvair pension plan was made inorder to improve the plan's funding. Earnings per share and dividend Earnings per share before goodwill amortisation and exceptional items were 3.4p(2003: continuing operations 4.4p). Although profit before tax, exceptionalitems and goodwill amortisation increased by 60%, the effect of a tax chargethis year compared with a tax credit last year resulted in the adjusted earningsper share falling. The loss per share was 2.0p (2003: 67.4p loss per share). Afinal dividend of 1.0p (2003: 1.0p) is recommended for 2004. Board and employees Our staff have worked tirelessly in 2004, and on behalf of the Board, I wouldlike to thank them for their efforts. The year has also seen a number of Boardchanges. Our Chief Executive, Ben Stocks, is now based in our US operations.Our new Finance Director, Chris Tyler, is based in the UK and the Board isdelighted that he has settled into the role immediately and is already making asignificant contribution. Two new non-executive Directors have been appointed:Charles Matthews and Andrew Walker. Both have had distinguished and broadranging careers and will bring a wealth of experience to Porvair. Michael Ost,who was a Director of the Group for 6 years retires after the announcement ofthese results. Michael has made a considerable contribution to Porvair and hasbeen a very valuable member of the Board. We wish him a long and happyretirement. Outlook In 2004 Porvair started to show the benefits of the changes undergone inprevious years. The Group is profitable and cash generative. After severalyears of very high R&D investment, a range of highly promising new products arein the process of being commercialised. 2005 has started well, and the Board isoptimistic about new product potential and the prospects for growth. Operating review Porvair is a specialist filtration business whose proprietary micro-porousmaterials offer both competitive strength and exciting commercial potential. Our strategy is to specialise in a range of filtration markets where we findchallenging technical specifications; long product cycles; and growth. Porvairbrings expertise in porous and micro-porous materials - ceramics, metals,carbons and polymers - to these markets. We seek to supply a diverse range offiltration products and limit our exposure to any one market segment. Wesupply, amongst others, the aluminium, foundry, aerospace, life science, nuclearclean-up, print systems, high-purity liquid and fuel cell industries. No singlesegment makes up more than 17% of our sales. Furthermore, we seek to develop a range of significant growth opportunities bycapitalising on our market knowledge and technical expertise. We have investedheavily in R&D in recent years in developing new materials and products that webelieve have the potential to transform Porvair. The opportunities we arepursuing range in scale, risk and timeframe and are described in laterparagraphs. Operations 2004 Metals Filtration Porvair Selee ("Selee"), our US Metals Filtration business, continued itsrecovery with dollar sales growing by 8% before translation into Sterling. Thebenefits of plant investments made in prior years showed through with sales peremployee up 13% when compared with 2003. Plant efficiencies contributed both toimproved gross margins and lower working capital, which finished the year atrecord low levels. Export sales grew 25%, helped by several key account gainsand a weaker dollar. As a result of these initiatives, operating profit beforegoodwill amortisation grew to £0.9m (2003: £0.2m). In the second half of theyear Selee started to make demonstrable progress in its commercial strategy ofextending its market leadership in aluminium filtration and expanding itsspecialist metals filtration scope. Sales of Selee's new proprietary metalconditioning filter increased by 55% and new customer trial programmes continue. Microfiltration As reported at the half year, 2004 started slowly at Porvair Sciences ("PSL"),and although trading improved as expected in the second half, it was not enoughto make up the early shortfall. After three record years for sales and profits,sales declined in 2004 with a fall in cell culture media sales being the singlebiggest contributor. Whilst this fully accounts for the £0.4m reduction in theoperating profits of the Microfiltration division in the year, the Board werenonetheless encouraged that the core microplate business at PSL continued togrow, new overseas distributors were appointed during the year and new productsare ready to be introduced early in 2005. The Porvair Filtration Group ("PFG") posted a respectable result for the yearwith sales growing by 4%. Given that over 20% of its sales are dollardenominated this was a very creditable performance. Operating profit was flatbut would have grown by 8% had the dollar exchange rate remained the same as inthe prior year. Sales into the aerospace, bioscience, high purity liquid andengineering segments were robust. Promisingly, enquiry levels are high andproject pipelines full. Management is focusing its development resources intokey segments including gasification, specialist aerospace, nuclear clean-up andbioscience filtration devices. Progress in each of these areas has beensatisfactory in 2004. As noted at the half year, the Board sees gasification asa particularly promising longer term prospect for the Group. This is a marketthat is growing and in which Porvair has a good track record. We started tomarket our expertise in this area more actively in 2004 and were particularlypleased to secure a long term, multi-million dollar supply agreement with one ofthe leading US coal gasification operators early in 2005. Advanced Materials Much of our R&D investment is undertaken at Porvair Advanced Materials ("PAM"),formerly Porvair Fuel Cell Technology, which we have re-named this year toreflect better the activities of this business. As some of the products underdevelopment at PAM have moved towards commercialisation in 2004, operatinglosses were cut by 31% before translation into Sterling. PAM is involved in developing two new materials, one - microporous carbons - isspecific to fuel cells; the other - porous metals - has a wider range ofpotential applications. Sales of porous metals increased 64% during 2004 ascommercial orders increased steadily and key projects moved ahead. Ourmaterials are now used commercially in both pressure vessel lining and gascombustion applications. Gas combustion technology is having to adapt totighter emission control standards, and we believe our material is particularlywell suited to meet this significant emerging market need. We have madesubstantial progress in electronic cooling applications and customer prototypetests are well advanced. Diesel exhaust testing also continues positively. Thegeneral level of enquiries for porous metal applications remains very high. PAM's carbon materials are used to manufacture bipolar plates - a criticalcomponent in proton exchange membrane fuel cell design. As we noted at thehalf-year, the many thousands of plates made in 2003, which boosted our saleslast year, have provided extensive test data and our materials have been provento work well. In 2004 our goal was to develop a second generation of plates,refine material composition and demonstrate low cost manufacture. All of thiswas achieved during the year, and was confirmed in a series of successfullaboratory fuel cell tests. This opens the way to much lower unit costs andsignificantly higher manufacturing efficiencies, the effects of both of thesecan be seen in PAM's results where, even though sales are lower, operatinglosses were significantly reduced compared with last year. As a result of thesetechnical steps forward the number of interested customers has recentlyincreased markedly. Our goal for 2005 is to get our low-cost moulded platesinto several customer prototypes. Health, safety and the environment Overall responsibility for health, safety and the environment rests with theGroup Board, and we publish our HS&E report on our website: www.porvair.com. Weare proud of the fact that many of the products sold and under development atPorvair are used to the benefit of the environment. Cash Flow The Group generated good cash flow in 2004. Net cash inflow from operatingactivities before exceptional cash items was £4.9m (2003: continuing operations£3.3m). Net cash inflow from operating activities was £2.8m (2003: £2.1m).Capital expenditure was £1.2m (2003: £1.8m). Net interest paid was £0.5m(2003: £0.6m) and interest cover was 6.5 times (2003: 5.2 times). Net cashinflow before financing, disposal proceeds of £0.5m (2003: £2.3m) andexceptional cash payments of £2.1m (2003: £0.3m), was £2.6m (2003: cash outflow£1.4m). Exceptional cash items relate to the settlement of a number of itemsassociated with business disposals undertaken in 2003. The Group's reduction innet debt before exchange differences was £1.1m (2003: £0.6m). Currencytranslation effects of our dollar denominated borrowings further reduced netdebt by £1.0m (2003:£1.1m), resulting in an overall reduction in net debt of£2.1m (2003: £1.7m). Shareholders' funds Shareholders' funds of £30.5m were £1.7m lower than at 1 December 2003. Profitafter tax before goodwill amortisation was £1.7m. Goodwill amortisation reducedshareholders' funds by £2.2m, the minority's interest was £0.2m, currencyexchange translation losses were £0.2m and dividends paid and proposed were£0.7m. Tax The Group tax charge of £0.8m represents an effective tax rate of 33% on profitsbefore goodwill amortisation. The tax charge comprises current tax of £0.4m anddeferred tax of £0.4m. The Group carries a deferred tax asset in relation tothe losses in its US operations. A portion of the tax credits associated withthis year's losses have not been recognised. Finance & Treasury policy The treasury function at Porvair is managed centrally, under Board supervision.It is not a profit centre and does not undertake speculative transactions. Itseeks to limit the Group's exposure to trading in currencies other than itsoperations' local currency and to hedge its investments in currencies other thanSterling. The Group does not hedge against the impact of exchange ratemovements on the translation profits and losses of overseas operations. At the year end the Group had $19.0m of dollar borrowings which hedgedunderlying US assets on the balance sheet of $19.4m. In addition, the Group hasa Euro 1.6m interest bearing debtor that was fully hedged by borrowings inEuros. The Group finances its operations by a combination of retained profits and shortand long term loans. Borrowings are principally at floating rate andappropriate hedges are used to manage fluctuations in interest rates. At the year end the Group had net borrowings of £8.0m (2003: £10.1m) comprisinggross borrowings of £11.1m offset by cash balances of £3.1m. Pension schemes The Group continues to support its closed defined benefit pension scheme in theUK and provide access to a defined contribution scheme for its US employees andmore recent and new UK employees. In the exceptional charges arising in 2003 the Group provided for additionalcash payments to the defined benefit pension scheme. During the year the Groupmade a £400,000 payment and expects to make two further payments of £550,000each in March 2005 and March 2006. Accounting changes The Company will be required to adopt International Financial ReportingStandards ("IFRS") with effect from 1 December 2005. An initial assessment ofthe impact on the Group's financial statements and underlying processes has beenmade. An implementation plan is being prepared to enable the Group to reportunder IFRS from 1 December 2005. Group profit and loss accountFor the year ended 30 November 2004 2003 2003 2003 Continuing Discontinued operations operations £'000 £'000 £'000 £'000 Turnover 44,632 46,167 18,042 64,209Cost of sales (30,466) (30,000) (16,493) (46,493)Gross profit 14,166 16,167 1,549 17,716Distribution costs (485) (795) (695) (1,490)Research & development expense (3,181) (4,661) (1,174) (5,835)Exceptional item - (1,525) - (1,525)Administrative - other (10,161) (11,125) (2,979) (14,104)Total administrative expenses (13,342) (17,311) (4,153) (21,464) Group operating profit/(loss) beforeshare of profit in associatedundertaking 339 (1,939) (3,299) (5,238) Share of operating profit inassociated undertaking 454 159 - 159 Total Group operating profit/(loss) 793 (1,780) (3,299) (5,079)Exceptional items - - (23,033) (23,033)Interest payable (net) (460) (379) - (379)Profit/(loss) on ordinary activitiesbefore taxation 333 (2,159) (26,332) (28,491)Profit/(loss) on ordinary activitiesbefore taxation 333 (2,159) (26,332) (28,491)Add back goodwill amortisation 2,224 2,237 53 2,290Add back exceptional items - 1,525 23,033 24,558Adjusted profit/(loss) on ordinaryactivities before exceptional items,goodwill amortisation and taxation 2,557 1,603 (3,246) (1,643)Tax on profit/(loss) on ordinaryactivities (833) 4,095Loss on ordinary activities aftertaxation (500) (24,396)Equity minority interests (249) (394)Loss attributable to shareholders (749) (24,790)Dividends (736) (1,251)Deficit for the financial period (1,485) (26,041)Loss per share (basic and diluted) (2.0)p (67.4)pDividend per share 2.0p 3.4p Reconciliation of movements in equity shareholders' fundsFor the year ended 30 November 2004 2003 £'000 £'000 Loss attributable to shareholders (749) (24,790)Dividends (736) (1,251)Deficit for the financial period (1,485) (26,041)Exchange differences (239) (137)Net reduction in equity shareholders' funds (1,724) (26,178)Opening equity shareholders' funds 32,196 58,374Closing equity shareholders' funds 30,472 32,196 Statement of total recognised gains and lossesFor the year ended 30 November 2004 2003 £'000 £'000 Loss attributable to shareholders (749) (24,790)Exchange differences (239) (137)Total losses recognised in the period (988) (24,927) Group balance sheet At 30 At 1 November December 2004 2003 £'000 £'000 Fixed assetsIntangible assets 27,785 30,204Tangible assets 8,241 9,277Investment in associated undertaking - 2,453 36,026 41,934Current assetsStocks 5,897 7,088Debtors falling due after one year 3,071 2,624Debtors falling due within one year 8,263 9,039 11,334 11,663Cash at bank and in hand 3,047 3,980 20,278 22,731 Creditors: amounts falling due in within one year (6,753) (9,001)Net current assets 13,525 13,730 Total assets less current liabilities 49,551 55,664 Creditors: amounts falling due after more than one year (11,052) (14,081)Provisions for liabilities and charges (2,508) (4,117) 35,991 37,466 Capital and reservesCalled up share capital 736 736Share premium account 28,679 28,679Other reserves (1,100) (861)Profit and loss account 2,157 3,642Total equity shareholders' funds 30,472 32,196Equity minority interests 5,519 5,270 35,991 37,466 Group cash flow statementFor the year ended 30 November 2004 2003 £'000 £'000 Net cash inflow from operating activities 2,811 2,054 Dividend from associated undertaking 161 129Returns on investments and servicing of financeInterest received 112 65Interest paid (635) (642) (523) (577)TaxationUK corporation tax refunded/(paid) 18 (194)Overseas tax refunded/(paid) (18) 1,107 - 913Capital expenditurePurchase of tangible fixed assets (1,228) (1,806)Sale of tangible fixed assets 57 8 (1,171) (1,798)Acquisitions and disposalsDisposal of subsidiaries assets and liabilities - 2,304Sale of associated undertaking 526 - 526 2,304 Equity dividends paid (736) (2,467) Net cash inflow before financing 1,068 558FinancingLoans repaid (7) (41)Increases/(decreases) in borrowings (1,820) 339 (1,827) 298(Decrease)/increase in cash in the period (759) 856 Reconciliation of net cash flow to movement in net debt(Decrease)/increase in cash in year (759) 856(Increase)/decrease in borrowings 1,827 (298)Change in net debt from cash flows 1,068 558Exchange differences 1,035 1,122Movement in net debt in year 2,103 1,680Opening net debt (10,108) (11,788)Closing net debt (8,005) (10,108) Turnover and segmental analysesThe geographical analyses of the group's turnover and segmental analyses ofturnover, operating profit/(loss) and net assets are set out below: 2004 2003 By destination By origin By destination By origin £'000 £'000 £'000 £'000 TurnoverUnited Kingdom 12,707 24,121 15,277 24,157Continental Europe 5,735 - 5,286 -Americas 21,036 20,511 22,513 22,010Asia 3,526 - 1,801 -Australasia 665 - 553 -Africa 963 - 737 -Continuing operations 44,632 44,632 46,167 46,167Discontinued operations - - 18,042 18,042 44,632 44,632 64,209 64,209 2004 2003 £'000 £'000TurnoverMetals Filtration 19,387 20,020Microfiltration 24,121 24,157Advanced Materials 1,124 1,990Continuing operations 44,632 46,167Discontinued operations - 18,042 44,632 64,209 Operating profit/(loss) 2004 2003 Operating Operating profit/ Operating profit/(loss) Operating (loss) profit/(loss) before profit/(loss) before after goodwill Goodwill after goodwill goodwill Goodwill goodwill amortisation amortisation amortisation amortisation amortisation amortisation £'000 £'000 £'000 £'000 £'000 £'000 MetalsFiltration 855 (1,213) (358) 242 (1,226) (984)Microfiltration 3,487 (1,011) 2,476 3,900 (1,011) 2,889AdvancedMaterials (1,325) - (1,325) (2,160) - (2,160)Exceptional item - - - (1,525) - (1,525)Operating profit/(loss) ofcontinuingoperations 3,017 (2,224) 793 457 (2,237) (1,780)Discontinuedoperations - - - (3,246) (53) (3,299) 3,017 (2,224) 793 (2,789) (2,290) (5,079) Net assets As at 30 November 2004 As at 1 December 2003 Net assets Net assets Before including Before including goodwill Goodwill goodwill goodwill Goodwill goodwill £'000 £'000 £'000 £'000 £'000 £'000 Metals Filtration 6,252 12,733 18,985 7,488 14,141 21,629Microfiltration 8,686 15,052 23,738 9,268 16,063 25,331Advanced Materials 809 - 809 1,154 - 1,154 15,747 27,785 43,532 17,910 30,204 48,114Long term relatedparty loan 1,112 1,110Equity investmentin associatedundertaking - 1,343Deferredconsideration 1,988 1,000Discontinuedoperations (2,349) (4,586)Taxation 81 961Dividend payable (368) (368)Net borrowings (8,005) (10,108) 35,991 37,466 Reconciliation of operating profit/(loss) to net cash flow from operatingactivities Continuing Discontinued 2004 operations operations 2003 £'000 £'000 £'000 £'000Total group operating profit/(loss) beforeshare of associated undertaking and exceptionalitems 339 (414) (3,299) (3,713)Goodwill amortisation 2,224 2,237 53 2,290Depreciation 1,654 1,700 1,609 3,309Loss on sale of fixed assets 4 53 - 53(Increase)/decrease in stocks 359 (533) 483 (50)(Increase)/decrease in debtors 963 144 2,036 2,180(Increase)/decrease in creditors (629) 91 (1,771) (1,680)Net cash inflow/(outflow) from operatingactivities before exceptional items 4,914 3,278 (889) 2,389Cash outflow relating to exceptional items (2,103) - (335) (335)Net cash inflow/(outflow) from operatingactivities 2,811 3,278 (1,224) 2,054 Additional notes 1. Exchange rates Exchange rates for the major currencies during the period were: Average rate to Average rate Closing rate at 30 Closing rate at Closing rate at 30/11/04 to 30/11/03 /11/04 1/12/03 30/11/02US dollar 1.8134 1.6225 1.9115 1.7199 1.5560Canadian dollar 2.3725 2.3089 2.2729 2.2357 2.4376Euro 1.4697 1.4607 1.4382 1.4348 1.5642 2. Dividends The Board has recommended a final dividend of 1.0p per share (2003: 1.0p) to bepaid on 19 April 2005 to shareholders on the register at the close of businesson 29 March 2005. This makes a total dividend for the year of 2.0p (2003: 3.4p) 3. Nature of financial statements These financial statements are not the full financial statements for the Group.The abridged profit and loss account and balance sheet for the year to 1December 2003 is an extract from the full accounts for that year which have beendelivered to the Registrar of Companies; the report of the auditors on thoseaccounts was unqualified. The full financial statements for this year, on whichthe auditors have reported without qualification, have not yet been delivered tothe Registrar of Companies. A full copy of the financial statements will bedelivered to the Registrar following the Company's annual general meeting. 4. Annual general meeting The Company's annual general meeting will be held on Tuesday 5 April at BramptonHouse, Bergen Way, King's Lynn. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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