TIDMPRV
RNS Number : 4576N
Porvair PLC
01 February 2021
For immediate release 1 February 2021
Results for the year ended 30 November 2020
Resilient performance in challenging circumstances, optimism for
the future.
Porvair plc ("Porvair" or "the Group"), the specialist
filtration, laboratory and environmental technology group,
announces its results for the year ended 30 November 2020.
Highlights
-- Revenue 7% lower at GBP135.0 million (2019: GBP144.9 million).
-- Operating profit 15% lower at GBP12.6 million (2019: GBP14.8 million).
-- Adjusted operating profit* 13% lower at GBP13.6 million (2019: GBP15.6 million).
-- Profit before tax 17% lower at GBP11.6 million (2019: GBP14.0
million). Adjusted profit before tax* 15% lower at GBP12.6 million
(2019: GBP14.8 million).
-- Basic earnings per share was 18.4 pence (2019: 23.6 pence).
Adjusted basic earnings per share* were 21.6 pence (2019: 25.3
pence).
-- Net cash was GBP4.9 million (2019: GBP4.0 million) after
investing GBP4.2 million (2019: GBP14.1 million) in capital
expenditure and acquisitions.
-- Recommended final dividend of 3.3 pence (2019: 3.2 pence)
bringing the full year dividend to 5.0 pence (2019: 4.9 pence).
Commenting on the outlook, Ben Stocks, Chief Executive,
said:
"Until the pandemic recedes, near-term trading remains
unpredictable and the Group continues to withhold earnings
guidance. But the results for the year turned out to be better than
initially feared in our contingency planning. This was partly
because the Group went into the pandemic financially sound and
stable; and partly because the underlying growth drivers for most
of the markets we serve remain in place, even though they are
currently more volatile than usual. We expect demand for emissions
control, clean water, process efficiency and laboratory consumables
to revert to normal levels as economies allow. Certain end markets,
aerospace in particular, may take longer to recover; while others,
mainly in the Laboratory Division, are already rebounding
strongly.
"We entered 2021 with a strong balance sheet and a lower cost
base than a year ago, which will be helpful while we wait for
vaccinations to bring the pandemic under control. The next few
months may continue to be difficult, but beyond that we are
increasingly optimistic. Investments made over the last few years
will help margins and our new product development pipeline is
strong for the near term. Prospects for the medium term are good
and Porvair should return to its historical levels of growth once
the pandemic retreats."
* See notes 1 and 3 for definitions and reconciliations.
For further information please contact:
Porvair plc 01553 765 500
Ben Stocks, Chief Executive
Chris Tyler, Group Finance Director
Buchanan Communications 020 7466 5000
Charles Ryland / Steph Watson
An analyst briefing will take place at 9:30 a.m. on Monday 1
February 2021 by video conference through invitation from
Buchanan.
A copy of an audio webcast and the presentation will be
available at www.porvair.com .
Operating review
Overview of 2020 and impact of Covid-19
Over the course of this extraordinary year, management has acted
to protect staff wellbeing; adjust operations to changing levels of
demand; and to continue investment for the post-Covid-19 economic
recovery. There are early indications that the year ahead will show
the benefits of these actions.
While 2020 started strongly, trading was overtaken by events:
first in Wuhan where our plant was shut for eight weeks to the end
of March; and later across the rest of the Group where supply was
constrained by lockdowns in the second quarter and again towards
the end of the year. Order levels dropped in the early summer, with
de-stocking sharpening declines in aerospace, molten metal and
industrial markets. Actions were taken to ensure working practices
were Covid-19 compliant and members of staff were fully supported
when away from work. In July orders stabilised at a lower level and
they have increased steadily since. Operating costs were reduced,
ensuring that the Group remained profitable and cash generative
throughout. Recessionary effects meant the Group finished the year
with 13% fewer staff.
The ill-wind of the pandemic was mainly a challenge, but it also
brought opportunities. Manufacturing equipment upgrades for
productivity improvements were more easily carried out. Periods of
lower demand are good times to change process control software,
clean facilities and improve workflow. There was more time for
skills training. It was also a good year for new product
development, with some projects accelerating as technical staff
were less drawn into daily production issues. New products have
always been a focus at Porvair and the current pipeline is
encouraging: new industrial process filters are in trials; wider
applications have been found in superalloy filtration; and high
volume life science filters for diagnostics are now in production
and will need capacity expansion in early 2021. All of this will
benefit the Group when demand recovers.
Porvair remains positioned to address global growth trends, some
of which have been affected by the pandemic. While the near-term
prospects for aerospace are more challenging than they have been in
recent years, the outlook for laboratory sample preparation and
diagnostics is much more positive. The fundamental drivers of Group
demand remain in place: tightening environmental regulations;
growth in analytical science; more carbon-efficient transportation;
the replacement of plastic and steel by aluminium; and the drive
for manufacturing process efficiency.
Porvair's strategic purpose remains the development of
specialist filtration, laboratory and environmental technologies
for the benefit of all stakeholders, and the Board has been mindful
of the need to balance these obligations this year. This statement,
and the full Environmental, Social and Governance ('ESG') report
that accompanies it, set out how the Group has sought to benefit
customers, staff, shareholders, pensioners, and communities in
2020.
Financial Results
2020 2019 Change
GBPm GBPm %
Revenue 135.0 144.9 (7)
------ ------ -------
Operating profit 12.6 14.8 (15)
------ ------ -------
Adjusted operating profit* 13.6 15.6 (13)
------ ------ -------
Adjusted profit before tax* 12.6 14.8 (15)
------ ------ -------
Profit before tax 11.6 14.0 (17)
------ ------ -------
Adjusted earnings per share* 21.6p 25.3p (15)
------ ------ -------
Earnings per share 18.4p 23.6p (22)
------ ------ -------
Cash generated from operations 13.2 16.8
------ ------
Net cash at 30 November 4.9 4.0
------ ------
* see note 1 and note 3
Reported and constant currency revenue reduced by 7%. Profit
before tax reduced by 17%. For the first time in many years the
Group recorded significant adjusted items. The principal
adjustments concern the release of provisions; impairment of
tangible assets, principally in China; and charges related to
redundancies. These are set out in full in note 1.
Adjusted profit before tax reduced by 15% and adjusted earnings
per share reduced by 15% to 21.6 pence. The Group invested GBP4.2
million (2019: GBP14.1 million) in acquisitions and capital
expenditure in 2020.
The Group's record for growth, cash generation and investment is
as follows:
5 years 10 years 15 years
CAGR* CAGR* CAGR*
Revenue growth 7% 8% 8%
Earnings per share growth 3% 13% 11%
Adjusted earnings per share growth 6% 15% 13%
-------- --------- ---------
GBPm GBPm GBPm
Cash from operations 70.9 127.9 154.4
Investment in acquisitions and capital
expenditure 50.5 72.2 86.3
-------- --------- ---------
* Compound annual growth rate
Porvair's strategy and purpose is little changed since 2004, a
period that now encompasses two recessions and many years of
growth. This longer term record gives the Board confidence that the
Group can show resilience in difficult times, and will return to
growth when economies allow.
Strategic statement and business model
Porvair's strategic purpose is the development of specialist
filtration, laboratory and environmental technology businesses for
the benefits of all stakeholders. Principal measures of success
include consistent earnings growth over the medium term, and
selected ESG measures as set out in the full ESG report.
Porvair businesses have certain key characteristics in
common:
-- Specialist design or engineering skills are required;
-- Product use and replacement is mandated by regulation,
quality accreditation or a maintenance cycle; and
-- Products are typically designed into a system that will have
a long life-cycle and must perform to a given specification.
Orders are won by offering the best technical solutions at an
acceptable commercial cost. Technical expertise is necessary in all
markets served. New products are often adaptations of existing
designs with attributes validated in our own test and measurement
laboratories. Experience in specific markets and applications is
valuable in building customer confidence. Domain knowledge is
important, as is deciding where to direct resources.
This leads the Group to:
1. Focus on markets with long term growth potential.
2. Look for applications where product use is mandated and replacement demand is regular.
3. Make new product development a core business activity.
4. Establish geographic presence where end-markets require.
5. Invest in both organic and acquired growth.
Therefore:
-- We focus on three operating segments: Aerospace &
Industrial; Laboratory; and Metal Melt Quality. All have clear long
term growth drivers.
-- Our products typically reduce emissions or protect downstream
systems and, as a result, are replaced regularly. A high proportion
of our annual revenue is from repeat orders.
-- Through a focus on new product development, we aim to
generate growth rates in excess of the underlying market. Where
possible, we build intellectual property around our product
developments.
-- Our geographic presence follows the markets we serve. In the
last twelve months: 45% of revenue was in the Americas; 26% in
Asia; 18% in Continental Europe; 10% in the UK; and 1% in Africa.
The Group has plants in the US, UK, Germany, the Netherlands and
China. In the last twelve months, 47% of revenue was manufactured
in the US, 31% in the UK, 17% in Continental Europe and 5% in
China.
-- We aim to meet dividend and investment needs from free cash
flow and modest borrowing facilities. In recent years we have
expanded manufacturing capacity in the UK, Germany, US and China
and made several acquisitions. All investments are subject to a
hurdle rate analysis based on strategic and financial
priorities.
Environmental, social and governance ('ESG')
The Board understands that responsible business development is
essential for creating long term value for stakeholders. Most of
the products made by Porvair are used to the benefit of the
environment. Our water analysis equipment measures contamination
levels in water. Industrial filters are typically needed to reduce
emissions or improve efficiency. Aerospace filters improve process
reliability. Nuclear filters confine fissile materials. Metal Melt
Quality filters reduce waste and help improve the strength to
weight ratio of metal components.
A full ESG report is published for the first time with this
statement, setting out:
-- Porvair's ESG management framework and goals;
-- How the Group might address a net zero carbon future;
-- ESG metrics and results; and
-- How the Group has acted for the benefit of its stakeholders in 2020.
Aerospace & Industrial
2020 2019 Change
GBPm GBPm %
Revenue 62.0 64.6 (4)
----- ----- -------
Operating profit 8.0 8.2 (3)
----- ----- -------
Adjusted operating profit* 6.3 8.5 (26)
----- ----- -------
* see note 2
The Aerospace & Industrial division designs and manufactures
a wide range of specialist filtration products, demand for which
grows as aerospace and industrial customers seek cleaner, safer or
more efficient operations. Differentiation is achieved through
design engineering; the development of intellectual property; and
quality accreditations.
Revenue was lower by 4%, with a 19% reduction in aerospace
revenue offset by a strong first full year from Royal Dahlman,
which traded ahead of expectations in both its petrochemical and
distribution businesses. UK industrial filtration capacity was
upgraded during the year to support Royal Dahlman, where orders for
flue gas emission filters in the first half of 2021 are strong.
Long order lead times in the aerospace supply chain meant that
aerospace revenue fell later in the year. Second half aerospace
revenues were 29% lower than the same period in 2019, in line with
wider industry metrics. Gasification revenues were GBP7.0 million
(2019: GBP11.0 million), recognised in the first half of 2020.
These will repeat, but irregularly and not necessarily in 2021. US
general industrial had a mixed year but finished strongly,
particularly in microelectronics and sintered products, for which
the plant in Caribou, Maine, was extended and upgraded.
In such challenging circumstances, management acted to adjust
costs and staff numbers reduced by 21% over the course of the year,
mainly in the UK based aerospace business. The UK government Jobs
Retention Scheme enabled the division to assess its response to
falls in order patterns before making organisational changes or
redundancies. During that time, all staff furloughed received their
full salary and benefits. The Group has concluded that it should
fund the impact of necessary restructuring in full and Job
Retention Scheme payments received for employees made redundant
have been returned. The Board sees this action as being consistent
with its purpose of developing Porvair for the benefit of all
stakeholders.
Laboratory
2020 2019 Change
GBPm GBPm %
Revenue 42.0 43.7 (4)
Inter segment revenue (1.9) (2.4)
------ ------ -------
External revenue 40.1 41.3 (3)
------ ------ -------
Operating profit 7.0 6.4 9
------ ------ -------
Adjusted operating profit* 6.7 6.6 2
------ ------ -------
* see note 2
The Laboratory division has two operating businesses: Porvair
Sciences (including J G Finneran) and Seal Analytical.
-- Porvair Sciences manufactures laboratory filters and
associated consumables. Differentiation is achieved through
proprietary manufacturing capabilities and filtration media.
-- Seal Analytical is a leading supplier of instruments and
consumables for environmental laboratories for which demand is
driven by water quality regulations. Differentiation is achieved
through consistent new product development.
Revenue in 2020 fell 4% with demand affected in the middle of
the year by Covid-19 related shutdowns of environmental, academic
and industrial laboratories.
Towards the end of the year demand rebounded strongly with sales
from new products contributing well. Adjusted operating profit grew
2% as a result.
Clean room manufacturing capacity was increased in the US and
laboratory space and equipment upgraded in the UK. Sales resources
were added in Europe. Further expansion for the manufacturing of
diagnostic components is underway with record orders received for
the early part of 2021.
Metal Melt Quality
2020 2019 Change
GBPm GBPm %
Revenue 32.9 39.0 (16)
------ ----- -------
Operating (loss)/ profit (0.2) 2.8 (106)
------ ----- -------
Adjusted operating profit* 2.8 2.8 (1)
------ ----- -------
* see note 2
The Metal Melt Quality division manufactures filters for molten
aluminium, ductile iron and nickel-cobalt alloys. It has a well
differentiated product range based on patented products and a
promising new product pipeline.
Revenue was 16% lower than 2019, but adjusted operating profit
was flat. This was well ahead of management's expectation and was
achieved through tight cost control and a significantly better
performance in China which saw 37% revenue growth. US operations
used periods of lower demand to clean manufacturing facilities,
improve workflow and upgrade process control software to a Group
standard package. After a difficult year, which included
restructuring costs and an impairment of the Chinese assets (see
note 1), the division reported sequential growth between the third
and fourth quarter and better order books into 2021.
Dividends and Pension
Consistent with its strategic purpose of developing Porvair for
the benefit of all stakeholders, the Board has been mindful of the
interests of shareholders and pensioners. The Company increased its
deficit recovery payments to the Porvair Pension Plan to GBP1.6
million (2019: GBP1.0 million) per annum.
The Board re-affirms its progressive dividend policy and
recommends a final dividend of 3.3 pence per share, a cost of
GBP1.5 million (2019: 3.2 pence per share, a cost of GBP1.5
million). The full year dividend increases by 2% to 5.0 pence per
share, a cost of GBP2.3 million (2019: 4.9 pence per share, a cost
of GBP2.2 million). The Company had GBP17.9 million (2019: GBP19.2
million) of distributable reserves at 30 November 2020.
Staff
This has been a challenging year and the response of our staff
to the many difficulties they have faced has been outstanding.
Porvair believes in devolving management autonomy as far as
possible and the actions taken by our management teams in looking
after staff wellbeing have been exemplary. The Board takes employee
engagement seriously and, as set out in the ESG report, has a
system in place to make sure it hears and responds to all staff
comments. We are fortunate to have colleagues around the Group who
show such pragmatism and optimism at times like these and the Board
is very grateful for the hard work, enthusiasm and dedication of
all our staff.
Current trading and outlook
Until the pandemic recedes near-term trading remains
unpredictable and the Group continues to withhold earnings
guidance. But the results for the year turned out to be better than
initially feared in our contingency planning. This was partly
because the Group went into the pandemic financially sound and
stable; and partly because the underlying growth drivers for most
of the markets we serve remain in place, even though they are
currently more volatile than usual. We expect demand for emissions
control, clean water, process efficiency and laboratory consumables
to revert to normal levels as economies allow. Certain end markets,
aerospace in particular, may take longer to recover; while others,
mainly in the Laboratory Division, are already rebounding
strongly.
We entered 2021 with a strong balance sheet and a lower cost
base than a year ago, which will be helpful while we wait for
vaccinations to bring the pandemic under control. The next few
months may continue to be difficult, but beyond that we are
increasingly optimistic. Investments made over the last few years
will help margins and the new product development pipeline is
strong for the near term. Prospects for the medium term are good
and Porvair should return to its historical levels of growth once
the pandemic retreats.
Ben Stocks
Group Chief Executive
29 January 2021
Financial review
Group results
2020 2019 Change
GBPm GBPm %
Revenue 135.0 144.9 (7)
------ ------ -------
Operating profit 12.6 14.8 (15)
------ ------ -------
Profit before tax 11.6 14.0 (17)
------ ------ -------
Profit after tax 8.4 10.8 (22)
------ ------ -------
Reported and constant currency (see note 1) revenue fell 7%.
Royal Dahlman contributed a full year for the first time. Excluding
Royal Dahlman, revenue fell by 19%. Operating profit was GBP12.6
million (2019: GBP14.8 million) and profit before tax was GBP11.6
million (2019: GBP14.0 million). Profit after tax was GBP8.4
million (2019: GBP10.8 million).
Alternative performance measures - profit
2020 2019 Change
GBPm GBPm %
Adjusted operating profit 13.6 15.6 (13)
----- ----- -------
Adjusted profit before tax 12.6 14.8 (15)
----- ----- -------
Adjusted profit after tax 9.9 11.6 (14)
----- ----- -------
The Group presents alternative performance measures to enable a
better understanding of its trading performance (see note 1).
Adjusted operating profit and adjusted profit before tax exclude
items that are considered significant and where treatment as an
adjusted item provides a more consistent assessment of the Group's
trading. Adjusted operating profit excludes GBP1.0 million (2019:
GBP0.8 million) of net charges from operating profit. These
are:
-- the impact of acquiring businesses:
o The amortisation of intangible assets arising on acquisition
of businesses was GBP0.6 million (2019: GBP0.6 million);
o Other acquisition related adjustments to profit and loss
related to acquiring businesses of GBP0.4 million credit (2019:
GBP0.2 million charge). In 2020, the GBP0.4 million credit relates
to the release of earnout contingent consideration (see note
12).
-- other items that are considered significant and where
treatment as an adjusted item provides a more consistent assessment
of the Group's trading:
o Restructuring costs of GBP2.2 million (2019: GBPnil) comprised
redundancy costs and plant reconfigurations related to the impact
of the Covid-19 pandemic, principally arising in the Aerospace
& Industrial and Metal Melt Quality divisions;
o A net credit of GBP4.0 million (2019: GBPnil) related to the
large gasification projects. Settlement of outstanding warranty
issues and the cancellation of performance bonds has allowed the
Group to release GBP5.1 million (2019: GBPnil) from its provisions.
Related to the release, the Group has written off a GBP1.1 million
(2019: GBPnil) receivable due over the next five years; and
o An impairment write down of tangible assets of GBP2.6 million
(2019: GBPnil). GBP2.3 million results from the Board's review of
Chinese operations taking a more prudent view of asset values based
on changing geopolitical and international trade assumptions.
GBP0.3 million of redundant fixed assets in Aerospace &
Industrial have been written off.
Group operating performance
Revenue fell 7% and adjusted operating profit fell 13%. Adjusted
operating margin was 10.1% (2019: 10.8%). Adjusted operating
margins in the Aerospace & Industrial division were 10.1%
(2019: 13.2%). Lower revenue from the second quarter, particularly
in aerospace, drove down margins. Adjusted operating margins in the
Laboratory division were 16.0% (2019: 15.1%). A switch to higher
margin diagnostic equipment products and away from industrial
products improved the margin in the second half. Metal Melt Quality
operating margins increased to 8.5% (2019: 7.3%). Lower sales in
the US led to lower US margins despite a strong operational
performance but this was offset by a better performance in China.
Adjusted Central costs reduced to GBP2.2 million (2019: GBP2.4
million).
Impact of exchange rate movements on performance
The international nature of the Group's business means that
relative movements in exchange rates can affect reported
performance. The rate used for translating the results of overseas
operations were:
2020 2019
Average rate for translating the results:
US $ denominated operations $1.28:GBP $1.27:GBP
Euro denominated operations EUR1.13:GBP EUR1.14:GBP
Closing rate for translating the balance
sheet:
US $ denominated operations $1.34:GBP $1.29:GBP
Euro denominated operations EUR1.12:GBP EUR1.17:GBP
The very similar average rates for the year used for translating
the US dollar and Euro into Sterling meant that there was no
significance difference between reported revenue and revenue at
constant currency.
In the year, the Group sold $28.1 million (2019: $27.0 million)
at an average rate of $1.30:GBP1 (2019: $1.28:GBP1) and EUR3.5
million (2019: EUR3.5 million) at an average rate of EUR1.15:GBP1
(2019: EUR1.14:GBP1).
At 30 November 2020, the Group had $1.3 million (2019: $9.9
million) of outstanding forward foreign exchange contracts; hedge
accounting has been applied to $nil (2019: $8.6 million) of these
contracts. The Group had $4.1 million (2019: $7.8 million) of net
current assets on the UK operations' balance sheet.
Finance costs
Net interest payable comprises bank borrowing costs, interest on
lease liabilities, interest on the Group's pension deficit and the
cost of unwinding discounts on provisions. Interest increased in
the year to GBP1.0 million (2019: GBP0.8 million). The
implementation of IFRS 16 for the first time this year resulted in
an interest charge of GBP0.4 million (2019: GBPnil). The defined
benefit pension scheme interest cost reduced to GBP0.3 million
(2019: GBP0.4 million), bank interest and borrowing facilities
non-utilisation fees were GBP0.3 million (2019: GBP0.3 million).
The charge related to unwinding discounted provisions reduced to
GBPnil (2019: GBP0.1 million).
Interest cover was 14 times (2019: 19 times). Interest cover on
bank finance costs was 49 times (2019: 45 times).
Tax
The Group tax charge was GBP3.1 million (2019: GBP3.2 million).
The tax charge on the adjusting items was GBP0.5 million and the
tax on the adjusted profit before tax was GBP2.6 million. This is
an effective rate of 19% (2019: 23%), in line with the UK standard
corporate tax rate of 19.0% (2019: 19.0%). The tax rate in the UK
was lower than the standard rate because of tax relief on the
exercise of share options. US tax was at an effective rate of 22%
(2019: 23%) and in the Netherlands it was 20% (2019: 22%). The
Group tax rate was pushed up by profits made in Germany, which
attract a 31% tax rate (2019: 30%). The tax rate is lower than the
prior year because no further losses in China were incurred. In the
prior year, the tax rate was increased by 2% because the Group did
not take a tax credit relating to the losses arising in China.
The tax charge comprises current tax of GBP2.3 million (2019:
GBP2.6 million) and a deferred tax charge of GBP0.8 million (2019:
GBP0.6 million).
The Group has current tax provisions of GBP0.2 million (2019:
GBP0.6 million). The current tax provision includes GBP1.0 million
(2019: GBP1.2 million) for uncertainties relating to the
interpretation of tax legislation in the Group's operating
territories offset by payments on account and amounts recoverable
for overpayments of tax.
The Group carries a deferred tax asset of GBP2.6 million (2019:
GBP2.4 million) and a deferred tax liability of GBP2.8 million
(2019: GBP2.6 million). The deferred tax asset relates principally
to the deficit on the pension fund and share-based payments. The
deferred tax liability relates to accelerated capital allowances,
capitalised development costs and other timing differences,
predominantly arising in the US and on acquired intangibles in the
Netherlands.
Total equity and distributable reserves
Total equity at 30 November 2020 was GBP98.2 million (2019:
GBP95.3 million), an increase of 3% over the prior year.
Increases in total equity arose from: profit after tax of GBP8.4
million (2019: GBP10.8 million); employee share option schemes net
of tax of GBP0.1 million (2019: GBP0.7 million); and GBP0.4 million
(2019: GBP0.6 million) arising on the proceeds of the issue of
shares on share option exercises.
Reductions in total equity arose from: dividends paid of GBP2.3
million (2019: GBP2.1 million); purchases by the Employee Benefit
Trust of the Company's own shares charged directly to equity of
GBP0.7 million (2019: GBP0.6 million); a pension scheme actuarial
loss (net of tax) of GBP1.3 million (2019: GBP2.3 million); and
exchange losses (net of tax) on translation of GBP1.7 million
(2019: GBP1.1 million).
The Company had GBP17.9 million (2019: GBP19.2 million) of
distributable reserves at 30 November 2020. The Company's
distributable reserves increased in the year from dividends
received from other Group companies, offset by an actuarial loss,
head office costs, investment write downs and dividends paid to
shareholders.
Return on capital employed
The Group's after tax return on capital employed of 12% (2019:
14%) gives a measure of the operating return the Group makes on all
its invested capital. It fell in the year because of lower
profitability and an increase in average capital employed of GBP5.2
million. The after tax return on operating capital employed of 28%
(2019: 36%) gives a measure of the returns that the Group makes on
its fixed assets and working capital. It fell in 2020 because of
lower profitability and an increase in the average capital employed
of GBP5.2 million mainly comprising the effect of a full year of
ownership of Royal Dahlman. The Group's divisions have post-tax
weighted average costs of capital of between 6% and 8%.
Cash flow
The table below summarises the key elements of the cash flow for
the year:
Cash flow 2020 2019
GBPm GBPm
Operating cash flow before working capital 19.5 18.1
Working capital movement (6.3) (1.3)
Cash generated from operating activities 13.2 16.8
Interest (0.3) (0.3)
Tax (2.5) (3.3)
Capital expenditure net of disposals (3.6) (4.3)
------- ------
6.8 8.9
Acquisitions (0.6) (9.8)
Dividends (2.3) (2.1)
Share issue proceeds 0.4 0.5
Purchase of EBT shares (0.7) (0.6)
Increase in bank borrowings 1.5 4.6
Repayment of right of use lease liabilities (2.3) -
------- ------
Net cash increase in the year 2.8 1.5
------- ------
Net debt reconciliation 2020 2019
GBPm GBPm
Net cash reported at 30 November 4.0 6.6
IFRS 16 transition adjustment (15.2) -
------- ------
Net cash at 1 December (11.2) 6.6
Increase in cash and cash equivalents 2.8 1.5
Increase of borrowings (1.5) (4.6)
Decrease in lease liabilities 1.8 -
Exchange (losses)/gains (0.6) 0.5
Net (debt)/cash at 30 November (8.7) 4.0
------- ------
Net cash and bank debt 4.9 4.0
Lease liabilities (13.6) -
------- ------
Net (debt)/cash at 30 November (8.7) 4.0
------- ------
Generating free cash flow is key to the Group's business model
and operating cash flow of GBP13.2 million (2019: GBP16.8 million)
represented an 80% (2019: 89%) conversion rate of operating profit
before depreciation and amortisation. Net working capital increased
by GBP6.3 million (2019: GBP1.3 million). Receivables reduced by
GBP4.1 million (2019: increase of GBP0.7 million) following good
receivables collections and a weaker fourth quarter than the prior
year. Inventories increased by GBP0.3 million (2019: GBP2.4
million). Inventories in the laboratory division increased by
GBP0.8 million reflecting the strong order book and aerospace
finished goods increased by GBP0.9 million, which will reduce as
aerospace orders recover. Throughout the rest of the Group
inventories reduced by GBP1.6 million. Payables and provisions
reduced by GBP10.1 million (2019: increase of GBP1.7 million),
GBP5.1 million from releasing provisions in the Aerospace &
Industrial division, the reduction in other payables reflects
reduced purchases in the final quarter, lower accruals and faster
payments to suppliers.
Provisions, contingent liabilities and performance bonds
The Group has GBP4.6 million (2019: GBP9.8 million) of
provisions for dilapidations and warranty risks. In December 2019,
a $0.9 million (GBP0.7 million) performance bond was called by the
customer, the amount was paid and charged to provisions.
Subsequently progress has been made on resolving warranty risks and
$5.0 million of performance bonds have lapsed. Consequently GBP5.1
million of provisions have been released. GBP0.7 million of
warranty provisions have been created in relation to sales made in
the year.
At 30 November 2020, the Group had the following advanced
payment bonds (relating to monies received in advance on contracts)
and performance bonds issued to customers in US dollars and
Euros:
$'000 EUR'000
Advanced payment bonds - 162
Performance bonds 2,549 842
At 30 November 2020 2,549 1,004
------ --------
$'000 EUR'000
Performance bonds 8,534 638
At 30 November 2019 8,534 638
------ --------
The uncalled performance bonds are expected to be called or
released no later than March 2023.
Capital expenditure
Capital expenditure was GBP3.6 million (2019: GBP4.3 million) in
the year. Expenditure was spread across each division: GBP0.9
million (2019: 0.5 million plus GBP0.4 million brought into use in
the year) was spent on buildings and infrastructure mainly to
complete the 20,000 square feet of space in the Laboratory division
in the US. GBP2.1 million (2019: GBP3.4 million) was spent on plant
and machinery plus a further GBP1.0 million (2019: GBP0.5 million)
in the course of construction last year brought into use this year.
GBP0.5 million (2019: GBP0.1 million) was spent on equipment that
is in the course of construction. GBP0.2 million (2019: GBP0.4
million) was spent on intangible assets including software upgrades
and intellectual property costs.
Acquisitions
GBP0.6 million (2019: GBP9.8 million) was spent on acquisitions
in the year, all in relation to earnout payments for Rohasys B.V.
There are no earnout payments remaining.
Pension schemes
The Group supports its defined benefit pension scheme in the UK
("The Plan"), which is closed to new members, and provides access
to defined contribution schemes for its other employees. A summary
of the costs of pension provision is given below:
2020 2019
GBPm GBPm
Charged to operating costs:
Defined contribution schemes 2.4 2.1
Defined benefit scheme 0.7 0.6
Additional pension provision 0.2 -
Pension protection levy 0.1 0.1
----- -----
Total pensions charged to operating costs 3.4 2.8
Charged to interest payable:
Defined benefit scheme 0.3 0.4
----- -----
Total pensions charged to interest payable 0.3 0.4
----- -----
Total pension costs 3.7 3.2
----- -----
The Group's cash contributions paid to The Plan were GBP2.2
million (2019: GBP1.6 million).
The Group's net retirement benefit obligation was GBP15.4
million (2019: GBP14.5 million). The Plan's liabilities increased
to GBP48.6 million (2019: GBP45.2 million). The Plan's assets
increased to GBP33.4 million (2019: GBP30.8 million). There were a
further GBP0.3 million (2019: GBP0.1 million) of non-Plan
liabilities.
The actuarial loss in the year of GBP2.0 million (2019: GBP2.7
million) net of GBP0.7 million (2019: GBP0.5 million) of tax was
recognised in the statement of comprehensive income. The Plan's
assets achieved an actuarial gain of GBP1.6 million (2019: GBP3.2
million). The experience loss of GBPnil (2019: GBP0.9 million)
related to adjustments arising from the triennial valuation
completed in 2019. The actuarial loss on the liabilities of GBP3.6
million (2019: GBP5.0 million) arose principally from changes to
the discount rate used to value The Plan's liabilities and a change
in the mortality assumption:
-- The discount rate reduced from 2.0% to 1.5%, as a result of
lower AA bond yields, which accounted for GBP3.4 million in
increased liabilities.
-- The mortality assumptions have been updated to incorporate
the CMI 2019 Core Projection Model. This increased the life
expectancy of 65 year old women by 0.2 years and men by 0.1 years.
The liabilities increased by GBP0.2 million as a result.
The triennial actuarial valuation of The Plan determines the
cash contributions that the Group makes to The Plan. A full
actuarial valuation was completed in the year based on The Plan's
position at 31 March 2018. Based on the valuation, the Group agreed
to set the employer's contributions at 20.9% (previously 18.9%) of
salary. The Group committed to making a GBP0.2 million annual
contribution towards the running costs of The Plan from April 2019,
which will increase by 3.5% per annum thereafter. The Group also
committed to make additional annual contributions, to cover the
past service deficit, of GBP1.6 million (previously GBP1.0 million)
per annum from 1 December 2019 until 1 December 2028.
Borrowings and bank finance
At 30 November 2020, the Group had cash balances of GBP15.6
million (2019: GBP12.9 million) and borrowings of GBP10.7 million
(2019: GBP8.9 million).
In 2017, the Group secured a five year revolving credit facility
of EUR23 million (GBP20.4 million) with Barclays Bank plc and
Handelsbanken plc. The facility has a margin over LIBOR of 1.5% and
a non-utilisation fee of 0.4375%. The Group also has a GBP2.5
million overdraft facility provided by Barclays Bank plc. The
financial covenants require the Group to maintain interest cover of
3.5 times and net debt to be less than 2.5 times EBITDA.
In May 2020, the Group received loan proceeds of $1.8 million
(GBP1.4 million) from the Truist Bank under the Paycheck Protection
Program ("PPP"). The PPP provides for loans to qualifying
businesses which are forgivable after eight weeks provided the loan
proceeds are used for eligible purposes and payroll levels are
maintained. The Group had not taken forgiveness at the year end and
the loan is treated as current borrowings in these accounts.
At 30 November 2020, the Group had net cash of GBP4.9 million
(2019: GBP4.0 million), EUR11.1 million (GBP9.9 million) of unused
facilities (2019: EUR13.3 million of unused facilities (GBP11.4
million)), and an unutilised overdraft facility of GBP2.5 million
(2019: GBP2.5 million).
Adoption of IFRS 16
At 30 November 2020, the Group had right of use assets of
GBP12.8 million (2019: GBPnil) and lease liabilities of GBP13.6
million (2019: GBPnil) arising as a result of adopting IFRS 16 for
the first time in the year ended 30 November 2020.
Under IFRS 16, the Group's leases for property, plant and
equipment previously treated as operating leases were brought on to
the balance sheet from 1 December 2019. GBP14.6 million of right of
use assets and GBP15.2 million of discounted lease liabilities were
recognised. A net GBP0.6 million of previously accrued and prepaid
rent was eliminated. There was no change to opening reserves.
The profile of expenses related to leasing arrangements has
changed. Straight line operating lease expenses have been replaced
by a straight line depreciation of the right of use assets and
interest charges on lease liabilities, which follow a reducing
balance profile. Consequently, there will be earlier recognition of
cost under IFRS 16 compared to the previous treatment under IAS 17.
Over the lifetime of each lease there will be no change in the
overall income statement impact or the cash paid out.
The adoption of IFRS 16 reduced adjusted profit before tax by
GBP0.2 million and basic earnings per share by 0.4 pence per share.
The adjustments are shown below:
2020 2020
Adjusted Adjusted
operating profit before
profit tax
GBPm GBPm
As reported 13.6 12.6
Operating lease rentals, removed from operating
costs (2.3) (2.3)
Depreciation on leases - right of use assets,
added to operating costs 2.1 2.1
Interest on lease liabilities - 0.4
------------ ----------------
Pre-IFRS 16 13.4 12.8
------------ ----------------
Finance and treasury policy
The treasury function at Porvair is managed centrally, under
Board supervision. It seeks to limit the Group's trading exposure
to currency movements. The Group does not hedge against the impact
of exchange rate movements on the translation of profits and losses
of overseas operations.
The Group finances its operations through share capital,
retained profits and, when required, bank debt. It has adequate
facilities to finance its current operations and capital plans for
the foreseeable future.
International trade
The UK left the EU on 31 January 2020 and signed a trade
agreement with the EU, which became effective on 31 December 2020.
The Board does not expect the impact of this change in trading
arrangements to be significant for the Group. The Board notes that
revenues between the UK and Continental Europe were less than 10%
of total revenues in 2020. 45% of Group revenue is manufactured in
the US and higher US tariffs on China trade have had an effect on
trading. A few customers in the US and China have switched back to
domestic suppliers, and the Group has both won and lost accounts as
a result. The net effect has been small.
Chris Tyler
Group Finance Director
29 January 2021
Consolidated income statement
For the year ended 30 November
Note 2020 2019
Continuing operations GBP'000 GBP'000
Revenue 1,2 135,011 144,932
Cost of sales (91,469) (97,505)
--------- ---------
Gross profit 43,542 47,427
Distribution costs (2,373) (2,259)
Administrative expenses (28,612) (30,381)
------------------------------------------ ----- --------- ---------
Adjusted operating profit 1,2 13,571 15,592
Adjustments
Amortisation of acquired intangibles 1 (611) (588)
Other acquisition related adjustments 1 442 (217)
Restructuring 1 (2,246) -
Settlement of project related
warranties 1 4,005 -
Impairment of tangible assets 1 (2,604) -
Operating profit 1,2 12,557 14,787
Finance income 1 7
Finance costs (1,001) (809)
Profit before income tax 1,2 11,557 13,985
------------------------------------------ ----- --------- ---------
Adjusted income tax expense (2,642) (3,220)
Tax effect of adjustments to
operating profit 1 (472) -
---------
Income tax expense (3,114) (3,220)
Profit for the year 8,443 10,765
--------- ---------
Profit attributable to:
Owners of the parent 8,443 10,768
Non-controlling interests - (3)
--------- ---------
Profit for the year 8,443 10,765
--------- ---------
Earnings per share (basic) 3 18.4p 23.6p
Adjusted earnings per share
(basic) 3 21.6p 25.3p
Earnings per share (diluted) 3 18.4p 23.5p
Adjusted earnings per share
(diluted) 3 21.6p 25.3p
Consolidated statement of comprehensive income
For the year ended 30 November
2020 2019
GBP'000 GBP'000
Profit for the year 8,443 10,765
--------- ---------
Other comprehensive (expense)/income:
Items that will not be reclassified to
profit and loss
Losses in defined benefit pension plans
net of tax (1,334) (2,278)
--------- ---------
Items that may subsequently be reclassified
to profit and loss
Exchange differences on translation of
foreign subsidiaries (1,713) (1,212)
Tax relating to components of other comprehensive
income - 149
Changes in fair value of forex contracts
held as a cash flow hedge (35) 35
--------- ---------
(1,748) (1,028)
--------- ---------
Net other comprehensive expense (3,082) (3,306)
--------- ---------
Total comprehensive income for the year 5,361 7,459
--------- ---------
Comprehensive income attributable to:
Owners of the parent 5,361 7,462
Non-controlling interests - (3)
--------- ---------
Total comprehensive income for the year 5,361 7,459
--------- ---------
Consolidated balance sheet
As at 30 November
Note 2020 2019
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 5 20,716 22,779
Right of use assets 6 12,762 -
Goodwill and other intangible
assets 7 70,039 71,512
Deferred tax asset 2,614 2,360
Other receivables - 1,048
106,131 97,699
Current assets
Inventories 23,355 23,197
Trade and other receivables 20,674 24,153
Derivative financial instruments 23 48
Cash and cash equivalents 15,563 12,889
--------- -----------
59,615 60,287
Current liabilities
Trade and other payables 8 (20,197) (25,989)
Current tax liabilities (192) (564)
Borrowings 9 (1,379) -
Lease liabilities 6 (2,007) -
Provisions 10 (4,365) (9,526)
(28,140) (36,079)
Net current assets 31,475 24,208
--------- -----------
Non-current liabilities
Borrowings 9 (9,303) (8,875)
Deferred tax liability (2,839) (2,588)
Retirement benefit obligations (15,395) (14,450)
Other payables - (417)
Lease liabilities 6 (11,609) -
Provisions 10 (268) (242)
--------- -----------
(39,414) (26,572)
--------- -----------
Net assets 98,192 95,335
--------- -----------
Capital and reserves
Share capital 11 923 921
Share premium account 11 36,927 36,504
Cumulative translation reserve 7,645 9,358
Retained earnings 52,697 48,552
--------- -----------
Equity attributable to owners
of the parent 98,192 95,335
Total equity 98,192 95,335
--------- -----------
Consolidated cash flow statement
For the year ended 30 November
Note 2020 2019
GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 14 13,220 16,758
Interest paid (347) (343)
Tax paid (2,551) (3,256)
--------- ---------
Net cash generated from operating
activities 10,322 13,159
--------- ---------
Cash flows from investing activities
Interest received 1 7
Acquisition of subsidiaries (net of
cash acquired) 12 (588) (9,761)
Purchase of property, plant and equipment 5 (3,458) (3,943)
Purchase of intangible assets 7 (166) (363)
Net cash used in investing activities (4,211) (14,060)
--------- ---------
Cash flows from financing activities
Proceeds from issue of ordinary share
capital 11 425 550
Purchase of Employee Benefit Trust
shares (726) (623)
Receipt of Payment Protection Plan 1,507 -
loan
Increase in borrowings - 4,648
Dividends paid to shareholders 4 (2,253) (2,146)
Repayment of right of use lease liabilities 6 (2,297) -
Net cash (used in)/from financing
activities (3,344) 2,429
--------- ---------
Net increase in cash and cash equivalents 2,767 1,528
Exchange losses on cash and cash equivalents (93) (131)
--------- ---------
2,674 1,397
Cash and cash equivalents at 1 December 12,889 11,492
--------- ---------
Cash and cash equivalents at 30 November 15,563 12,889
--------- ---------
Reconciliation of net cash flow to movement in net cash
2020 2019
GBP'000 GBP'000
Net funds at 30 November 2019 4,014 6,625
IFRS 16 adjustment for lease liabilities (15,218) -
--------- ---------
Net (debt)/funds at 1 December 2019 (11,204) 6,625
Net increase in cash and cash equivalents 2,767 1,528
Decrease in lease liabilities 1,778 -
Increase in borrowings (1,507) (4,648)
Effects of exchange rate changes (569) 509
Net (debt)/funds at 30 November (8,735) 4,014
--------- ---------
Net cash and bank debt 4,881 4,014
Lease liabilities (13,616) -
Net (debt)/funds at 30 November (8,735) 4,014
--------- ------
Consolidated statement of changes in equity
Share Cumulative Non-controlling
Share premium translation Retained interest
capital account reserve earnings Total GBP'000 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- -------- ------------ ---------- ---------- ---------------- ----------
Balance at 30 November
2018 917 35,958 10,570 42,024 89,469 3 89,472
IFRS 15 adjustment - - - (57) (57) - (57)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Balance at 1 December
2018 917 35,958 10,570 41,967 89,412 3 89,415
--------- -------- ------------ ---------- ---------- ---------------- ----------
Profit for the year - - - 10,768 10,768 - 10,768
Other comprehensive
income - - (1,212) (2,094) (3,306) - (3,306)
Total comprehensive
income for the year - - (1,212) 8,674 7,462 - 7,462
--------- -------- ------------ ---------- ---------- ---------------- ----------
Transactions with owners:
Consideration paid
for purchase of own
shares (held in trust) - - - (623) (623) - (623)
Employee share option
schemes:
* value of employee services net of tax - - - 680 680 - 680
Proceeds from shares
issued 4 546 - - 550 - 550
Dividends paid (note
4) - - - (2,146) (2,146) - (2,146)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Total transactions
with owners recognised
directly in equity 4 546 - (2,089) (1,539) - (1,539)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Adjustment arising
from change in non-controlling
interest - - - - - (3) (3)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Balance at 30 November
2019 921 36,504 9,358 48,552 95,335 - 95,335
--------- -------- ------------ ---------- ---------- ---------------- ----------
Profit for the year - - - 8,443 8,443 - 8,443
Other comprehensive
expense - - (1,713) (1,369) (3,082) - (3,082)
Total comprehensive
(expense)/income for
the year - - (1,713) 7,074 5,361 - 5,361
--------- -------- ------------ ---------- ---------- ---------------- ----------
Transactions with owners:
Consideration paid
for purchase of own
shares (held in trust) - - - (726) (726) - (726)
Employee share option
schemes:
* value of employee services net of tax - - - 50 50 - 50
Proceeds from shares
issued 2 423 - - 425 - 425
Dividends paid (note
4) - - - (2,253) (2,253) - (2,253)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Total transactions
with owners recognised
directly in equity 2 423 - (2,929) (2,504) - (2,504)
--------- -------- ------------ ---------- ---------- ---------------- ----------
Balance at 30 November
2020 923 36,927 7,645 52,697 98,192 - 98,192
--------- -------- ------------ ---------- ---------- ---------------- ----------
Notes
1. Alternative performance measures
The Group uses adjusted figures as alternative performance
measures in addition to those reported under IFRS, as management
believe that these measures provide a useful analysis of trends in
underlying performance between divisions and compared with prior
periods.
Alternative revenue measures
2020 2019 Growth
Aerospace & Industrial GBP'000 GBP'000 %
Underlying revenue 48,474 60,036 (19)
Acquisitions 11,313 2,452
-------- -------- -------
Revenue at constant currency 59,787 62,488 (4)
Exchange 2,193 2,155
Revenue as reported 61,980 64,643 (4)
-------- -------- -------
Laboratory
Revenue at constant currency 37,829 38,853 (3)
Exchange 2,298 2,427
-------- -------- -------
Revenue as reported 40,127 41,280 (3)
-------- -------- -------
Metal Melt Quality
Revenue at constant currency 30,020 35,377 (15)
Exchange 2,884 3,632
-------- -------- -------
Revenue as reported 32,904 39,009 (16)
-------- -------- -------
Group
Underlying revenue 116,323 134,266 (13)
Acquisitions 11,313 2,452
-------- -------- -------
Revenue at constant currency 127,636 136,718 (7)
Exchange 7,375 8,214
-------- -------- -------
Revenue as reported 135,011 144,932 (7)
-------- -------- -------
Revenue at constant currency is derived from translating
overseas subsidiaries results at budgeted fixed exchange rates. In
2020 and 2019 the rates used were $1.4:GBP and EUR1.2:GBP, compared
with reported rates of $1.28:GBP1 (2019: $1.27:GBP1) and
EUR1.13:GBP1 (2019: EUR1.14:GBP1).
Underlying revenue is revenue at constant currency adjusted for
the impact of acquisitions made in the current and prior years.
1. Alternative performance measures continued
Alternative profit measures
A reconciliation of the Group's adjusted performance measures to
the reported IFRS measures is presented below:
2020 2019
Adjusted Adjustments Reported Adjusted Adjustments Reported
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Operating profit 13,571 (1,014) 12,557 15,592 (805) 14,787
Finance income 1 - 1 7 - 7
Finance costs (1,001) - (1,001) (809) - (809)
Profit before
income tax 12,571 (1,014) 11,557 14,790 (805) 13,985
Income tax expense (2,642) (472) (3,114) (3,220) - (3,220)
-------- -------- --------- --------- ------------ ---------
Profit after tax 9,929 (1,486) 8,443 11,570 (805) 10,765
-------- -------- --------- --------- ------------ ---------
2020 2019
GBP'000 GBP'000
Amortisation of acquired intangibles (611) (588)
Other acquisition related adjustments 442 (217)
Restructuring (2,246) -
Settlement of project related warranties 4,005 -
Impairment of tangible assets (2,604) -
Adjustments affecting operating profit (1,014) (805)
----------- --------
Tax effect of adjustments (472) -
Total adjusting items (1,486) (805)
----------- --------
Adjusted operating profit and adjusted profit before tax exclude
items that are considered significant and where treatment as an
adjusted item provides a more consistent assessment of the Group's
trading:
-- the impact of acquiring businesses:
o The amortisation of intangible assets arising on acquisition
of businesses was GBP0.6 million (2019: GBP0.6 million).
o Other acquisitions related to adjustments to profit and loss
related to acquiring businesses of GBP0.4 million credit (2019:
GBP0.2 million charge). In 2020, the GBP0.4 million credit relates
to the release of earnout contingent consideration (see note
12).
-- other items that are considered significant and where
treatment as an adjusted item provides a more consistent assessment
of the Group's trading:
o Restructuring costs of GBP2.2 million (2019: GBPnil) included
redundancy costs and plant reconfigurations related to the impact
of the Covid-19 pandemic;
o A net release of GBP4.0 million (2019: GBPnil) related to the
large gasification projects. Settlement of outstanding warranty
issues and the cancellation of performance bonds has allowed the
Group to release GBP5.1 million (2019: GBPnil) from its provisions.
Related to the release, the Group has written off a GBP1.1 million
(2019: GBPnil) receivable due over the next five years; and
o An impairment write down of assets of GBP2.6 million (2019:
GBPnil). GBP2.3 million results from the Board's review of Chinese
operations taking a more prudent view of asset values based on
changing geopolitical and international trade assumptions. GBP0.3
million of redundant fixed assets in Aerospace & Industrial
have been written off.
Return on capital employed
The Group uses two return measures to assess the return it makes
on its investments:
-- return on capital employed of 12% (2019: 14%) is the tax
adjusted operating profit as a percentage of the average capital
employed. Capital employed is the average of the opening and
closing Group net assets less the average of the opening and
closing net cash position; and
-- return on operating capital employed of 28% (2019: 36%) is
calculated on the same basis except that the capital employed is
adjusted to remove the average of the opening and closing goodwill
and the opening and closing pension deficit to give a measure of
the operating capital.
2. Segment information
The segmental analyses of revenue, operating profit/(loss),
segment assets and liabilities, and geographical analyses of
revenue are set out below:
2020 Aerospace Laboratory Metal Melt Central Group
& Industrial Quality
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment
revenue 61,990 42,012 32,904 - 136,906
Inter-segment
revenue (10) (1,885) - - (1,895)
-------------- ----------- ----------- ---------- ----------
Revenue 61,980 40,127 32,904 - 135,011
-------------- ----------- ----------- ---------- ----------
Adjusted operating
profit/(loss) 6,279 6,718 2,803 (2,229) 13,571
Amortisation of
acquired intangibles (467) (144) - - (611)
Other acquisition
related adjustments - 442 - - 442
Restructuring (1,566) (55) (625) - (2,246)
Settlement of
project related
warranties 4,005 - - - 4,005
Impairment of
tangible assets (267) - (2,337) - (2,604)
Operating profit/(loss) 7,984 6,961 (159) (2,229) 12,557
Interest payable
and similar charges - - - (1,000) (1,000)
-------------- ----------- ----------- ---------- ----------
Profit/(loss)
before income
tax 7,984 6,961 (159) (3,229) 11,557
------------------------- -------------- ----------- ----------- ---------- ----------
Adjusted income
tax expense - - - (2,642) (2,642)
Tax effect of
adjustments to
operating profit - - - (472) (472)
------------------------- -------------- ----------- ----------- ---------- ----------
Income tax expense - - - (3,114) (3,114)
Profit/(loss)
for the year 7,984 6,961 (159) (6,343) 8,443
-------------- ----------- ----------- ---------- ----------
2019 Aerospace Laboratory Metal Melt Central Group
& Industrial Quality
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment
revenue 64,696 43,654 39,011 - 147,361
Inter-segment
revenue (53) (2,374) (2) - (2,429)
-------------- ----------- ----------- ---------- ---------
Revenue 64,643 41,280 39,009 - 144,932
-------------- ----------- ----------- ---------- ---------
Adjusted operating
profit/(loss) 8,527 6,597 2,845 (2,377) 15,592
Amortisation of
acquired intangibles (337) (251) - - (588)
Other acquisition
related adjustments - 36 - (253) (217)
------------------------- -------------- ----------- ----------- ---------- ---------
Operating profit/(loss) 8,190 6,382 2,845 (2,630) 14,787
Interest payable
and similar charges - - - (802) (802)
-------------- ----------- ----------- ---------- ---------
Profit/(loss)
before income
tax 8,190 6,382 2,845 (3,432) 13,985
Income tax expense - - - (3,220) (3,220)
Profit/(loss)
for the year 8,190 6,382 2,845 (6,652) 10,765
-------------- ----------- ----------- ---------- ---------
2. Segment information continued
Other Group operations are included in "Central". These mainly
comprise Group corporate expenditure such as head office and Board
costs, new business development and general financial costs.
Segment assets and liabilities
At 30 Nov 2020 Aerospace Laboratory Metal Melt Central Group
& Industrial Quality
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental assets 73,459 42,926 30,860 2,938 150,183
Cash and cash
equivalents - - - 15,563 15,563
-------------- ----------- ----------- ----------- -----------
Total assets 73,459 42,926 30,860 18,501 165,746
-------------- ----------- ----------- ----------- -----------
Segmental liabilities (22,013) (11,875) (5,548) (2,041) (41,477)
Retirement
benefit obligations - - - (15,395) (15,395)
Bank overdraft
and loans - - - (10,682) (10,682)
-------------- ----------- ----------- ----------- -----------
Total liabilities (22,013) (11,875) (5,548) (28,118) (67,554)
-------------- ----------- ----------- ----------- -----------
At 30 Nov 2019 Aerospace Laboratory Metal Melt Central Group
& Industrial Quality
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental assets 73,000 38,289 31,310 2,498 145,097
Cash and cash
equivalents - - - 12,889 12,889
-------------- ----------- ----------- ----------- -----------
Total assets 73,000 38,289 31,310 15,387 157,986
-------------- ----------- ----------- ----------- -----------
Segmental liabilities (23,721) (9,653) (4,243) (1,709) (39,326)
Retirement
benefit obligations - - - (14,450) (14,450)
Bank overdraft
and loans - - - (8,875) (8,875)
-------------- ----------- ----------- ----------- -----------
Total liabilities (23,721) (9,653) (4,243) (25,034) (62,651)
-------------- ----------- ----------- ----------- -----------
Geographical analysis
2020 2019
By destination By origin By destination By origin
GBP'000 GBP'000 GBP'000 GBP'000
Revenue
United Kingdom 13,990 41,343 16,394 50,058
Continental Europe 24,136 23,118 21,844 13,543
United States of America 54,121 63,811 67,214 75,336
Other NAFTA 5,296 - 2,310 -
South America 1,883 - 2,038 -
Asia 34,562 6,739 33,847 5,995
Africa 1,023 - 1,285 -
--------------- ---------- --------------- ----------
135,011 135,011 144,932 144,932
--------------- ---------- --------------- ----------
3. Earnings per share
2020 2019
Total Earnings Weighted Per share Earnings Weighted Per share
average amount average amount
number number of
GBP'000 of shares (pence) GBP'000 shares (pence)
Earnings attributable
to ordinary shareholders 8,443 10,768
Shares in issue 46,171,382 45,871,417
Shares owned by
the Employee Benefit
Trust (208,375) (183,308)
--------- ------------ ---------- --------- ------------ ----------
Basic earnings 8,443 45,963,007 18.4 10,768 45,688,109 23.6
Effect of dilutive
securities - share
options - 21,666 - - 47,240 (0.1)
--------- ------------ ---------- --------- ------------ ----------
Diluted earnings 8,443 45,984,673 18.4 10,768 45,735,349 23.5
--------- ------------ ---------- --------- ------------ ----------
2020 2019
Adjusted Earnings Weighted Per share Earnings Weighted Per share
average amount average amount
number number of
GBP'000 of shares (pence) GBP'000 shares (pence)
Earnings attributable
to ordinary shareholders 8,443 10,768
Adjusting items
(note 1) 1,486 805
--------- ----------- ---------- --------- ----------- ----------
Adjusted earnings
attributable to
ordinary shareholders 9,929 11,573
--------- ----------- ---------- --------- ----------- ----------
Adjusted basic
earnings 9,929 45,963,007 21.6 11,573 45,688,109 25.3
Adjusted diluted
earnings 9,929 45,984,673 21.6 11,573 45,735,349 25.3
--------- ----------- ---------- --------- ----------- ----------
4. Dividends per share
2020 2019
Per share GBP'000 Per share GBP'000
Final dividend paid 3.2p 1,472 3.0p 1,368
Interim dividend paid 1.7p 781 1.7p 778
---------- -------- ---------- --------
4.9p 2,253 4.7p 2,146
---------- -------- ---------- --------
The Directors recommend the payment of a final dividend of 3.3
pence per share (2019: 3.2 pence per share) on 4 June 2021 to
shareholders on the register on 30 April 2021; the ex-dividend date
is 29 April 2021. This makes a total dividend for the year of 5.0
pence per share (2019: 4.9 pence per share).
5. Property, plant and equipment
Land and Assets in Plant, Total
buildings the course machinery
of construction and equipment
Cost GBP'000 GBP'000 GBP'000 GBP'000
At 1 December 2019 11,937 1,388 41,809 55,134
Reclassification - (981) 981 -
Additions 854 466 2,138 3,458
Disposals - - (1,355) (1,355)
Exchange differences (242) (15) (546) (803)
At 30 November 2020 12,549 858 43,027 56,434
----------- ----------------- --------------- --------
Depreciation
At 1 December 2019 (3,694) - (28,661) (32,355)
Charge for the year (401) - (2,398) (2,799)
Impairment charge - - (2,261) (2,261)
Disposals - - 1,217 1,217
Exchange differences 73 - 407 480
At 30 November 2020 (4,022) - (31,696) (35,718)
-------- --------- ---------
Net book value
At 30 November 2020 8,527 858 11,331 20,716
------ ------ ------- -------
At 30 November 2019 8,243 1,388 13,148 22,779
------ ------ ------- -------
6. Right of use assets and lease liabilities
Land and Plant, Total
buildings machinery
and equipment
Cost GBP'000 GBP'000 GBP'000
At 30 November 2019 - - -
IFRS 16 transition
adjustment 14,055 534 14,589
----------- --------------- --------
At 1 December 2019 14,055 534 14,589
New leases 5 170 175
Exit from leases (44) (69) (113)
Exchange differences 145 14 159
At 30 November 2020 14,161 649 14,810
----------- --------------- --------
Depreciation
At 1 December 2019 - - -
Charge for the year (1,876) (179) (2,055)
Exit from leases - 34 34
Exchange differences (24) (3) (27)
At 30 November 2020 (1,900) (148) (2,048)
-------- ------ --------
Net book value
At 30 November 2020 12,261 501 12,762
------- ---- -------
At 30 November 2019 - - -
------- ---- -------
6. Right of use assets and lease liabilities - continued
Lease liabilities Total
GBP'000
At 30 November 2019 -
IFRS 16 transition adjustment (15,218)
----------
At 1 December 2019 (15,218)
New leases (175)
Exit from leases 93
Lease repayments 2,297
Interest on lease liabilities (437)
Exchange differences (176)
Net book value at 30 November 2020 (13,616)
----------
Repayable within one year (2,007)
Repayable after one year (11,609)
Net book value at 30 November 2020 (13,616)
----------
7. Goodwill and other intangible assets
Trademarks,
Development knowhow
expenditure Software and other
Goodwill capitalised capitalised intangibles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net book amount
at 1 December
2019 65,668 154 805 4,885 71,512
Additions - - 166 - 166
Amortisation
charges - (70) (166) (671) (907)
Exchange differences (797) (2) 13 54 (732)
-----------
Net book amount
at 30 November
2020 64,871 82 818 4,268 70,039
----------- -------------- -------------- ------------- ---------
At 30 November Trademarks,
2020 Development knowhow
expenditure Software and other
Goodwill capitalised capitalised intangibles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost 83,509 894 1,803 7,484 93,690
Accumulated
amortisation
and impairment (18,638) (812) (985) (3,216) (23,651)
Net book amount 64,871 82 818 4,268 70,039
----------- -------------- -------------- ------------- -----------
8. Trade and other payables
2020 2019
Amounts falling due within one year: GBP'000 GBP'000
Trade payables 10,353 14,728
Taxation and social security 1,060 1,016
Other payables 950 897
Accruals and contract liabilities 7,834 9,348
At 30 November 20,197 25,989
--------- ---------
9. Borrowings
On 24 May 2017, the Group agreed a five year revolving credit
facility of EUR23 million (GBP20 million) with Barclays Bank plc
and Handelsbanken plc. The Group also has a GBP2.5 million
overdraft facility provided by Barclays Bank plc.
In May 2020, the Group received loan proceeds of $1,841,000 from
the Truist Bank, North Carolina under the Paycheck Protection
Program ("PPP"). The loan bears interest at 1% per annum, with a
deferral of payments until the US Small Business Administration,
implementing the PPP, has made a final decision on the forgiveness
of the loan, as set out in the "Flexibility Act", an amendment to
the CARES Act.
At 30 November 2020, the Group had EUR11.1 million of unused
facilities (2019: EUR13.3 million of unused facilities) and an
unutilised overdraft facility of GBP2.5 million (2019: GBP2.5
million).
10. Provisions
Dilapidations Warranty Total
-------------- --------- --------
GBP'000 GBP'000 GBP'000
At 1 December 2019 242 9,526 9,768
Charged to the consolidated
income statement:
* Unwinding of discount 26 - 26
* Warranty release - (5,091) (5,091)
* Warranty charge - 652 652
Utilised:
* Warranty - (720) (720)
Exchange reserve - (2) (2)
-------------- --------- --------
At 30 November 2020 268 4,365 4,633
-------------- --------- --------
Dilapidations Warranty Total
-------------- --------- --------
GBP'000 GBP'000 GBP'000
At 30 November 2018 219 506 725
Recognised on adoption of
IFRS 15 - 8,187 8,187
-------------- --------- --------
At 1 December 2018 219 8,693 8,912
Acquired - 136 136
Charged to the consolidated
income statement:
* Unwinding of discount 23 - 23
* Warranty charge - 801 801
Utilised:
* Warranty - (96) (96)
Exchange reserve - (8) (8)
-------------- --------- --------
At 30 November 2019 242 9,526 9,768
-------------- --------- --------
2020 2019
GBP'000 GBP'000
Current 4,365 9,526
Non-current 268 242
--------
Net book value at 30 November 2020 4,633 9,768
-------- --------
Provisions arise from potential claims on major contracts,
discounted dilapidations provision for leased property, which is
expected to be required in 2023, and sale warranties which expire
by 2021. The amount charged in the year of GBP652,000 (2019:
GBP801,000) arose on additional sales made in the year.
10. Provisions - continued
In December 2019, a US$0.9 million (GBP0.7 million) performance
bond was called by the customer, the amount was paid and charged to
provisions. Subsequently, progress has been made on resolving
warranty risks and US$5.0 million of performance bonds have lapsed.
Consequently GBP5.1 million of provisions are no longer considered
necessary and have been released.
11. Share capital and premium
Number Ordinary Share premium Total
of shares shares account
Thousands GBP'000 GBP'000 GBP'000
At 1 December 2019 46,041 921 36,504 37,425
Issue of shares on
exercise of share
options 115 2 423 425
At 30 November 2020 46,156 923 36,927 37,850
----------- --------- -------------- --------
In February, October and November 2020, 114,501 ordinary shares
of 2 pence each were issued on the exercise of Save As You Earn
share options for cash consideration of GBP425,000.
The Group uses an Employee Benefit Trust (EBT) to purchase
shares in the Company to satisfy entitlements, granted since the
Company's AGM in 2015, under the Group's Long Term Incentive Plan.
The EBT has waived its rights to dividends. During the year, the
Group purchased 120,000 ordinary shares of 2 pence each (2019:
114,000) for a total consideration of GBP728,000 (2019:
GBP623,000). During the year the EBT issued 129,700 ordinary shares
of 2 pence each (2019: 164,600) to satisfy the exercise of Long
Term Share Plan share options. The cost of the shares held by the
EBT is deducted from retained earnings. The EBT is financed by a
repayable-on-demand loan from the Group of GBP2,317,000 (2019:
GBP1,592,000). As at 30 November 2020, the EBT held a total of
135,700 ordinary shares of 2 pence each (2019: 145,400) at a cost
of GBP772,000 (2019: GBP773,000) and a market value of GBP733,000
(2019: GBP878,000).
12. Deferred and contingent consideration on acquisitions
Rohasys Total
GBP'000 GBP'000
At 1 December 2019 948 948
Cash paid in the year (588) (588)
Release of contingent
consideration (442) (442)
Release of discount 43 43
Exchange movements 39 39
-------- --------
At 30 November 2020 - -
-------- --------
Included within other payables 2020 2019
GBP'000 GBP'000
Deferred and contingent consideration - current - 531
Deferred and contingent consideration - non-current - 417
At 30 November - 948
----------- ---------
13. Contingent liabilities
At 30 November 2020, the Group had the following advanced
payment bonds (relating to monies received in advance on contracts)
and performance bonds:
$'000 EUR'000
Advanced payment bonds - 162
Performance bonds 2,549 842
At 30 November 2020 2,549 1,004
------ --------
$'000 EUR'000
Performance bonds 8,534 638
At 30 November 2019 8,534 638
------ --------
$2,520,000 (2019: $8,478,000) of the performance bonds relate to
the contracts for filtration systems provided for gasification
projects. These projects are being commissioned, a process which is
taking several years. The Group has provided its best estimate of
the amount of any potential loss arising from rectification and
claims arising on these contracts within the GBP4.4 million
warranty provisions disclosed in note 10. The maximum potential
unprovided exposure under these contracts is limited to GBP9.7
million. In December 2019, a $930,000 performance bond was called
by a customer, paid and cancelled. The uncalled performance bonds
are expected to be called or released no later than March 2023.
14. Cash generated from operations
2020 2019
GBP'000 GBP'000
Operating profit 12,557 14,787
Post-employment benefits (1,288) (1,003)
Fair value movement of derivatives through
profit and loss (10) (52)
IFRS 15 adjustment - (88)
Share based payments 89 585
Depreciation and amortisation of property,
plant and equipment, and intangibles 3,706 3,743
Depreciation of right of use assets 2,055 -
Impairment of property, plant and equipment 2,261 -
Loss on disposal of property, plant and
equipment and intangibles 162 122
Operating cash flows before movement in
working capital 19,532 18,094
--------- ---------
Increase in inventories (276) (2,351)
Decrease/(increase) in trade and other
receivables 4,139 (707)
Decrease in payables (5,084) (7,209)
(Decrease)/increase in provisions (5,091) 8,931
Increase in working capital (6,312) (1,336)
--------- ---------
Cash generated from operations 13,220 16,758
--------- ---------
15. Basis of preparation
The results for the year ended 30 November 2020 have been
prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union as at 30
November 2020. The financial information contained in this
announcement does not constitute statutory accounts as defined in
Section 434 of the Companies Act 2006. The financial information
has been extracted from the financial statements for the year ended
30 November 2020, which have been approved by the Board of
Directors and on which the auditors have reported without
qualification. The financial statements will be delivered to the
Registrar of Companies after the Annual General Meeting. The
financial statements for the year ended 30 November 2019, upon
which the auditors reported without qualification, have been
delivered to the Registrar of Companies.
16. Annual general meeting
The Company's Annual General Meeting will be held at 11.00 a.m.
on Tuesday 20 April 2021 at the offices of Porvair plc, 7 Regis
Place, King's Lynn, PE30 2JN.
17. Related parties
There were no related party transactions in the year ended 30
November 2020 other than Directors' compensation.
18. Responsibility Statement
Each of the Directors confirms, to the best of their knowledge,
that:
-- the financial statements, on which this announcement is
based, have been prepared in accordance with the applicable law and
International Financial Reporting Standards as adopted by the EU
and give a true and fair view of the assets, liabilities, financial
position, and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
-- the review of the business includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
The Directors of Porvair are listed in the Porvair Annual Report
for the year ended 30 November 2019, apart from Paul Dean, who
retired from the Board on 3 February 2020. A list of current
Directors is maintained on the Porvair website,
www.porvair.com.
Copies of full accounts will be sent to shareholders in March
2021. Additional copies will be available from www.porvair.com.
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END
FR FLFLALFILVIL
(END) Dow Jones Newswires
February 01, 2021 02:00 ET (07:00 GMT)
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