TIDMPRV
RNS Number : 0609A
Porvair PLC
31 January 2022
For immediate release
31 January 2022
Results for the year ended 30 November 2021
Porvair plc ("Porvair" or "the Group"), the specialist
filtration, laboratory and environmental technology group,
announces its results for the year ended 30 November 2021.
Highlights
-- Revenue 8% higher at GBP146.3 million (2020: GBP135.0
million), 12% higher on a constant currency basis*.
-- Operating profit 25% higher at GBP15.8 million (2020: GBP12.6 million).
-- Adjusted operating profit* 17% higher at GBP15.9 million (2020: GBP13.6 million).
-- Profit before tax 28% higher at GBP14.8 million (2020: GBP11.6 million).
-- Adjusted profit before tax* 17% higher at GBP14.8 million (2020: GBP12.6 million).
-- Basic earnings per share were 26.0 pence (2020: 18.4 pence).
-- Adjusted basic earnings per share* were 25.2 pence (2020: 21.6 pence).
-- Net cash was GBP10.2 million (2020: GBP4.9 million) after
investing GBP7.2 million (2020: GBP4.2 million) in capital
expenditure and acquisitions.
-- Recommended final dividend of 3.5 pence (2020: 3.3 pence)
bringing the full year dividend to 5.3 pence (2020: 5.0 pence).
Commenting on the outlook, Ben Stocks, Chief Executive,
said:
"Laboratory demand increased strongly in 2021 and most other
segments saw some measure of recovery except aerospace, where
activity levels remain well below those of 2019. However the spread
of markets served by the Group generated a positive overall
performance, supported by the strong balance sheet and long-term
investment focus that are central to Porvair's strategy. The Group
remains well positioned to address global growth trends: tightening
environmental regulations; growth in analytical science; the need
for clean water; carbon-efficient transportation; the replacement
of plastic and steel by aluminium; and the drive for manufacturing
process quality and efficiency.
"At the start of 2022, while order books are flattered by
extended lead times through almost all supply chains, underlying
orders are still better than they were a year ago, notably in
aerospace and laboratory. Consistent investment is improving
productivity and margins. In laboratory, covid-related demand may
settle to more regular levels as the pandemic recedes, but as it
does so aerospace activity should pick up. Porvair management teams
are monitoring near-term supply dislocations and inflationary
pressures closely and provided these challenges are navigated
successfully the outlook for 2022 is promising".
* See notes 1 and 3 for definitions and reconciliations.
For further information please contact:
Porvair plc 01553 765 500
Ben Stocks, Chief Executive
James Mills, Group Finance Director
Buchanan Communications 020 7466 5000
Charles Ryland / Steph Whitmore
An analyst briefing will take place at 9:30 a.m. on Monday 31
January 2022, please contact Buchanan if you wish to join. An
audiocast of the meeting and the presentation will subsequently be
made available at www.porvair.com .
Operating Review
Overview of 2021 and impact of covid-19
If 2020 was the year of the pandemic, 2021 was a year of
after-shocks and consequences. In January most of the Group's
markets were still in some level of lockdown, but a wave of
industrial re-stocking gathered pace in the Spring. Sharp order
increases improved trading but brought supply dislocation and
inflationary pressures. Management's priority for the year was
again staff wellbeing and working with covid; continuing to invest
for the longer term; and adjusting operations to cope with
vicissitudes of supply.
Aerospace activity remained well below 2019 levels through the
year, but laboratory demand increased strongly in 2021 and most
other segments saw some measure of recovery. Porvair remains well
positioned to address global growth trends: tightening
environmental regulations; growth in analytical science; the need
for clean water; carbon-efficient transportation; the replacement
of plastic and steel by aluminium; and the drive for manufacturing
process quality and efficiency.
Porvair's unchanged strategic purpose is to develop specialist
filtration, laboratory and environmental technologies for the
benefit of all stakeholders. This statement, and the full
Environmental, Social and Governance ('ESG') report that
accompanies it, set out how the Group has worked for its customers,
staff, shareholders, pensioners, and communities in 2021.
Financial Results
2021 2020 Change
GBPm GBPm %
Revenue 146.3 135.0 8
------ ------ -------
Operating profit 15.8 12.6 25
------ ------ -------
Adjusted operating profit* 15.9 13.6 17
------ ------ -------
Adjusted profit before tax* 14.8 12.6 17
------ ------ -------
Profit before tax 14.8 11.6 28
------ ------ -------
Adjusted earnings per share* 25.2p 21.6p 17
------ ------ -------
Earnings per share 26.0p 18.4p 41
------ ------ -------
Cash generated from operations 18.6 13.2
------ ------
Net cash at 30 November 10.2 4.9
------ ------
* see note 1 and note 3
Reported revenue increased by 8%. At constant currencies,
revenue increased by 12%. Profit before tax increased 28%. Adjusted
profit before tax increased by 17% as did adjusted earnings per
share.
The Group invested GBP7.2 million (2020: GBP4.2 million) in
acquisitions and capital expenditure in 2021.
The Group's record for growth, cash generation and investment is
as follows:
5 years 10 years 15 years
CAGR* CAGR* CAGR*
Revenue growth 6% 8% 8%
Earnings per share growth 9% 14% 11%
Adjusted earnings per share growth 8% 13% 11%
-------- --------- ---------
GBPm GBPm GBPm
Cash from operations 76.2 138.4 170.7
Investment in acquisitions and capital
expenditure 50.3 78.1 93.1
-------- --------- ---------
* Compound annual growth rate
Porvair's strategy and purpose has remained consistent for 17
years, a period that now encompasses two recessions, a pandemic,
and many years of growth. This longer-term record gives the Board
confidence in the Group's capabilities and is the basis for longer
term capital allocation and planning decisions.
Strategic statement and business model
Porvair's strategic purpose is to develop 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: 47% of revenue was in the Americas; 20% in
Asia; 22% 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, 49% of revenue was manufactured
in the US, 29% in the UK, 18% in Continental Europe and 4% 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 for 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 with this statement, setting
out:
-- Porvair's ESG management framework and goals;
-- How a net zero carbon future might affect markets served by the Group;
-- ESG metrics and results; and
-- How the Group has acted for the benefit of its stakeholders in 2021.
Aerospace & Industrial
2021 2020 Change
GBPm GBPm %
Revenue 55.8 62.0 (10)
----- ----- -------
Operating profit 3.9 8.0 (51)
----- ----- -------
Adjusted operating profit* 4.4 6.3 (30)
----- ----- -------
* see note 2
The Aerospace & Industrial division designs and manufactures
a wide range of specialist filtration products, demand for which is
driven by customers seeking better engineered, cleaner, safer or
more efficient operations. Differentiation is achieved through
design engineering; the development of intellectual property; and
quality accreditations.
Revenue was 10% lower in 2021 due to falls in aerospace and
gasification activity, partially offset by growth in
microelectronics and petrochemical filtration. Aerospace revenue
fell for a second year, down 4% in 2021 (2020: down 25%), broadly
in line with wider industry metrics. As expected, there was no
gasification revenue in 2021 (2020: GBP7 million). In other
industrial segments activity recovered through the year, with
re-stocking lifting orders. Microelectronics was particularly
strong, with revenues benefitting from newly developed and patented
products introduced at the start of the year. Demand in European
industrial and petrochemical markets was steady. Royal Dahlman
traded well in the year, it has been fully integrated into the
Group and achieved synergies with other parts of the division.
The aerospace outlook for 2022 is better. Aerospace orders
started to improve in the second half of 2021 and shipping
schedules in early 2022 are stronger.
Lower gasification and aerospace revenue suppressed operating
margins in the plants directly affected, causing adjusted operating
profits in the division to fall to GBP4.4 million (2020: GBP6.3
million). Margins were to some extent protected by restructuring
actions carried out in 2020. Cash generation in the division was
good as inventories fell in line with levels of activity. Capital
investment was directed at productivity and capacity enhancements
which should start benefiting performance in 2022.
Laboratory
2021 2020 Change
GBPm GBPm %
Revenue 53.2 40.1 33
----- ----- -------
Operating profit 9.6 7.0 37
----- ----- -------
Adjusted operating profit* 9.6 6.7 43
----- ----- -------
* see note 2
The Laboratory division has two operating businesses: Porvair
Sciences (including JG Finneran and Kbiosystems ("Kbio")) and Seal
Analytical.
-- Porvair Sciences manufactures laboratory filters, small
instruments 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 grew 33% in 2021. Like for like revenue growth (at
constant currency and excluding acquisitions) was 24%, driven in
part by demand for a range of products used in covid testing and
analysis. Capital investment in the year focused on increasing the
capacity and improving the quality of these components. Although we
expect some softening of covid-related demand as the pandemic
recedes, we have gained market share in this category over the last
two years.
Beyond covid, Laboratory demand has been robust for much of
2021, with global expansion of diagnostic, analytic and
environmental labs. The division has been further helped in the US
by expanding routes to market through JG Finneran and by prior year
investments in new manufacturing lines across the division.
Increased demand also brought challenges around supply dislocation,
inflation and staff shortages, all of which require close attention
as we move into 2022.
Kbio, acquired in February 2021, makes equipment used in
microplate assays for analytical laboratories, products that fit
well with Porvair Sciences' microplate business and through JG
Finneran's US routes to market. It has started strongly with the
Group, and prospects for 2022, particularly through US channels,
are promising.
Seal Analytical had a record year. Like for like revenue grew
15% with demand better in all main markets. Seal has a strong
recent track record of introducing new and differentiated products.
Those launched in 2021 offer faster throughput, lower detection
limits and better energy efficiency and will start to generate
revenues in 2022.
Metal Melt Quality
2021 2020 Change
GBPm GBPm %
Revenue 37.4 32.9 14
----- ------ -------
Operating profit/(loss) 5.7 (0.2) -
----- ------ -------
Adjusted operating profit* 5.1 2.8 82
----- ------ -------
* 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 rose 14% in 2021, back to 2019 levels despite
aerospace-related activity in this division remaining 23% below
2019. Aluminium filtration was up 33%, driven by industrial
re-stocking and growing demand for aluminium from carbon-efficient
transport and the move away from plastic packaging. Iron foundry
sales also recovered (to 6% below 2019 levels, up 28% in 2021) with
US auto production curtailments balanced by US supply chain
re-shoring.
Adjusted operating profit margins were 13.6% (2020: 8.5%), with
more profitable trading in China; consistent operating
efficiencies; and the benefits of 2020 cost reductions all
contributing. Inflationary and supply dislocation challenges were
successfully navigated. Adjusted operating profit of GBP5.1 million
is a record. As outlined at the half year, the Board does not
expect margins in this division to remain at such levels once sales
and marketing costs return to more normal levels post-pandemic, but
nonetheless expects that underlying margins are sustainable at
higher than the ten year average for this division.
Dividends
The Board re-affirms its progressive dividend policy and
recommends a final dividend of 3.5 pence per share, a cost of
GBP1.6 million (2020: 3.3 pence per share, a cost of GBP1.5
million). The full year dividend increases by 6% to 5.3 pence per
share, a cost of GBP2.4 million (2020: 5.0 pence per share, a cost
of GBP2.3 million). The Company had GBP27.8 million (2020: GBP17.9
million) of distributable reserves at 30 November 2021.
Staff
While perhaps less disrupted than 2020, 2021 was another
challenging year and the Board is pleased to recognise and applaud
the response of our staff to the many difficulties they have faced.
Porvair believes in devolving management autonomy as far as
possible, and our management teams do their best to monitor and
promote staff wellbeing. In many respects, of our various
stakeholders, it is our staff that are the most crucial. 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. The Board is very grateful for the hard work,
enthusiasm and dedication of all our staff.
Current trading and outlook
Laboratory demand increased strongly in 2021 and most other
segments saw some measure of recovery except aerospace, where
activity levels remain well below those of 2019. However the spread
of markets served by the Group generated a positive overall
performance, supported by the strong balance sheet and long-term
investment focus that are central to Porvair's strategy. The Group
remains well positioned to address global growth trends: tightening
environmental regulations; growth in analytical science; the need
for clean water; carbon-efficient transportation; the replacement
of plastic and steel by aluminium; and the drive for manufacturing
process quality and efficiency.
At the start of 2022, while order books are flattered by
extended lead times through almost all supply chains, underlying
orders are still better than they were a year ago, notably in
aerospace and laboratory. Consistent investment is improving
productivity and margins. In Laboratory, covid-related demand may
settle to more regular levels as the pandemic recedes, but as it
does so aerospace activity should pick up. Porvair management teams
are monitoring near-term supply dislocations and inflationary
pressures closely and provided these challenges are navigated
successfully the outlook for 2022 is promising.
Ben Stocks
Group Chief Executive
28 January 2022
Financial review
Group results
2021 2020 Change
GBPm GBPm %
Revenue 146.3 135.0 8
------ ------ -------
Operating profit 15.8 12.6 25
------ ------ -------
Profit before tax 14.8 11.6 28
------ ------ -------
Profit after tax 11.9 8.4 42
------ ------ -------
Revenue was 8% higher on a reported currency basis and 12%
higher at constant currency (see note 1). Kbio contributed GBP5.4
million of revenue (see note 6). Operating profit was GBP15.8
million (2020: GBP12.6 million) and profit before tax was GBP14.8
million (2020: GBP11.6 million). Profit after tax was GBP11.9
million (2020: GBP8.4 million).
Alternative performance measures - profit
2021 2020 Change
GBPm GBPm %
Adjusted operating profit 15.9 13.6 17
----- ----- -------
Adjusted profit before tax 14.8 12.6 17
----- ----- -------
Adjusted profit after tax 11.6 9.9 17
----- ----- -------
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 GBP0.1 million (2020:
GBP1.0 million) of net charges from operating profit. Adjusted
items include GBP0.7 million (2020: GBP0.6 million) for the
amortisation of acquired intangible assets, GBP0.5 million (2020:
GBP4.9 million) for impairment of assets and restructuring costs;
and a GBP1.3 million credit (2020: GBPnil) relating to the
forgiveness of a loan received in the prior year under the Paycheck
Protection Program (PPP). Further details of these adjustments are
set out in note 1.
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 rates used for translating the results of overseas
operations were:
2021 2020
Average rate for translating the results:
US $ denominated operations $1.37:GBP $1.28:GBP
Euro denominated operations EUR1.16:GBP EUR1.13:GBP
Closing rate for translating the balance
sheet:
US $ denominated operations $1.32:GBP $1.34:GBP
Euro denominated operations EUR1.18:GBP EUR1.12:GBP
The movement in average rates used for translating US dollar and
Euro results into Sterling has resulted in a GBP4.5 million adverse
revenue variance between reported and constant currency.
In the year, the Group sold $16.5 million (2020: $28.1 million)
at a net rate of $1.36:GBP1 (2020: $1.30:GBP1) and EUR10.5 million
(2020: EUR3.5 million) at a net rate of EUR1.14:GBP1 (2020:
EUR1.15:GBP1).
At 30 November 2021, the Group had $1.0 million and EUR0.3
million (2020: $1.3 million) of outstanding forward foreign
exchange contracts; hedge accounting has not been applied to these
contracts.
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 and other payables.
Interest increased in the year to GBP1.1 million (2020: GBP1.0
million). Interest cover was 15 times (2020: 14 times). Interest
cover on bank finance costs was 51 times (2020: 49 times).
Tax
The Group tax charge was GBP2.8 million (2020: GBP3.1 million).
Tax on adjusting items was a credit of GBP0.4 million (2020: charge
GBP0.5 million) and tax on adjusted profit before tax was GBP3.2
million (2020 GBP2.6 million).
Eligible costs in the prior year associated with the US PPP loan
were previously treated as disallowed for tax; however it has since
been established that these costs are allowable in 2021.
Furthermore, the PPP income, arising on the forgiveness of the
loan, in the current year does not attract US tax. These items
combined contribute to the tax credit on net adjusting items.
The effective rate of tax on adjusted profit is 22% (2020: 21%).
The increase in the year reflects the impact on deferred tax of the
increase in the UK rate from 19% to 25% from 1 April 2023 (impact
GBP0.1 million). The Group effective tax rate is also impacted by
overseas profits, which currently attract tax rates higher than the
19% in the UK.
The total tax charge comprises current tax of GBP2.7 million
(2020: GBP2.3 million) and a deferred tax charge of GBP0.1 million
(2020: GBP0.8 million).
The Group has current tax provisions of GBP0.9 million (2020:
GBP0.2 million). The current tax provision includes GBP1.1 million
(2020: GBP1.0 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 GBP1.8 million (2020:
GBP2.6 million) and a deferred tax liability of GBP2.4 million
(2020: GBP2.8 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 in the US, and on acquired intangible assets arising
on consolidation.
Total equity and distributable reserves
Total equity at 30 November 2021 was GBP108.9 million (2020:
GBP98.2 million), an increase of 11% over the prior year.
The net increase in total equity includes profit after tax of
GBP11.9 million (2020: GBP8.4 million), together with a GBP1.4
million actuarial gain (2020: loss GBP2.0 million).
The Company had GBP 27.8 million (2020: GBP17.9 million) of
distributable reserves at 30 November 2021. The Company's
distributable reserves increased in the year from dividends
received from other Group companies, together with an actuarial
gain, offset by head office costs and dividends paid to
shareholders.
Cash flow
The table below summarises the key elements of the cash flow for
the year:
Cash flow 2021 2020
GBPm GBPm
Operating cash flow before working capital 19.4 19.5
Working capital movement (0.8) (6.3)
Cash generated from operating activities 18.6 13.2
Interest (0.3) (0.3)
Tax (2.2) (2.5)
Capital expenditure net of disposals (3.2) (3.6)
------- -------
12.9 6.8
Acquisitions (4.0) (0.6)
Dividends (2.3) (2.3)
Share issue proceeds 0.1 0.4
Purchase of EBT shares (0.7) (0.7)
(Decrease)/increase in bank borrowings (3.7) 1.5
Repayment of right-of-use lease liabilities (2.3) (2.3)
------- -------
Net cash increase in the year - 2.8
------- -------
Net debt reconciliation 2021 2020
GBPm GBPm
Net debt at 1 December (8.7) (11.2)
Decrease/(increase) in borrowings 3.7 (1.5)
Paycheck Protection Program forgiven 1.4 -
Increase in cash and cash equivalents - 2.8
Decrease in lease liabilities 1.1 1.8
Exchange gains/(losses) 0.5 (0.6)
Net debt at 30 November (2.0) (8.7)
------- -------
Net cash and bank debt 10.2 4.9
Lease liabilities (12.2) (13.6)
------- -------
Net debt at 30 November (2.0) (8.7)
------- -------
Generating free cash flow is key to the Group's business model
and operating cash flow of GBP18.6 million (2020: GBP13.2 million)
represented a 94% (2020: 80%) conversion rate of operating profit
before depreciation and amortisation. Net working capital increased
by GBP0.8 million (2020: GBP6.3 million). Receivables decreased by
GBP0.2 million (2020: decrease GBP4.1 million), despite the revenue
growth, with strong collections throughout the year. Inventories
increased by GBP0.5 million (2020: GBP0.3 million), as certain
businesses were required to manage the impact of supply chain
disruption. Payables and provisions reduced by GBP0.5 million
(2020: decrease of GBP10.1 million), despite increased trading
activity in the year.
Provisions and contingent liabilities
The Group has GBP4.7 million (2020: GBP4.6 million) of
provisions for dilapidations and warranty risks. GBP1.0 million of
warranty provisions have been created in relation to sales made in
the year. GBP0.9 million of warranty provisions have been released
in the year, following the latest estimate of the expected costs to
be incurred.
At 30 November 2021, 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:
$m EURm
Advanced payment bonds - 0.3
Performance bonds 2.5 0.8
At 30 November 2021 2.5 1.1
---- -----
$m EURm
Advanced payment bonds - 0.2
Performance bonds 2.5 0.8
At 30 November 2020 2.5 1.0
---- -----
The uncalled performance bonds, which are classified as
contingent liabilities, are expected to be called or released no
later than December 2024.
Capital expenditure
Capital expenditure on property, plant and equipment was GBP3.2
million in the year (2020: GBP3.6 million), as the Group continued
to invest in capital projects within each of the three
divisions.
Acquisitions
On 25 February 2021, the Group purchased 100% of the share
capital of Kbiosystems Limited ("Kbio") (see note 6). Consideration
paid in the year was GBP4.0 million (net of cash acquired). A
further GBP2.0 million of consideration is contingent on Kbio
meeting profit targets for the years ending 31 March 2022 and
2023.
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.
The Group's net retirement benefit obligation measured in
accordance with IAS 19 Employee Benefits was GBP12.6 million (2020:
GBP15.4 million). The Plan's liabilities increased to GBP49.6
million (2020: GBP48.6 million). The Plan's assets increased to
GBP37.0 million (2020: GBP33.4 million). An actuarial gain in the
year of GBP1.4 million (2020: loss GBP2.0 million) was recognised
within the statement of comprehensive income.
The Group's cash contributions paid to The Plan were GBP2.3
million (2020: GBP2.2 million), which included deficit recovery
payments of GBP1.6 million (2020: GBP1.6 million).
The triennial actuarial valuation of The Plan determines the
cash contributions that the Group makes to The Plan. The next full
actuarial valuation will be based on The Plan's position at 31
March 2021 and is expected to be completed before 30 June 2022.
Borrowings and bank finance
At 30 November 2021, the Group had cash balances of GBP15.4
million (2020: GBP15.6 million) and borrowings of GBP5.2 million
(2020: GBP10.7 million); with net cash (excluding lease
liabilities) being GBP10.2 million (2020: GBP4.9 million).
On 18 May 2021, the Group agreed a EUR28 million (GBP24 million)
four year secured revolving credit facility, with an option to
extend by one year, plus a EUR17 million (GBP14 million) accordion
facility, with Barclays Bank plc and Citibank N.A., London Branch.
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.
The Group also has a GBP2.5 million overdraft facility provided by
Barclays Bank plc.
At 30 November 2021, the Group had EUR21.5 million/GBP18.3
million (2020: EUR12.6 million/GBP11.3 million) of unused credit
facilities and an unutilised GBP2.5 million (2020: GBP2.5 million)
overdraft facility.
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.
James Mills
Group Finance Director
28 January 2022
Consolidated income statement
For the year ended 30 November
Note 2021 2020
Continuing operations GBP'000 GBP'000
Revenue 1,2 146,310 135,011
Cost of sales (99,353) (91,469)
--------- ---------
Gross profit 46,957 43,542
Distribution costs (2,391) (2,373)
Administrative expenses (28,724) (28,612)
Adjusted operating profit 1,2 15,885 13,571
Adjustments:
Amortisation of acquired intangible
assets 1 (740) (611)
Other acquisition-related adjustments 1 (98) 442
Settlement of project-related
warranties 1 - 4,005
Impairment of assets and restructuring
costs 1 (542) (4,850)
Paycheck Protection Program 1 1,337 -
Operating profit 1,2 15,842 12,557
Finance income 2 1
Finance costs (1,086) (1,001)
Profit before income tax 1,2 14,758 11,557
------------------------------------------- ----- --------- ---------
Adjusted income tax expense (3,210) (2,642)
Adjustments:
Tax effect of adjustments to
operating profit 1 396 (472)
---------
Income tax expense (2,814) (3,114)
Profit for the year 11,944 8,443
--------- ---------
Earnings per share (basic) 3 26.0p 18.4p
Adjusted earnings per share
(basic) 3 25.2p 21.6p
Earnings per share (diluted) 3 26.0p 18.4p
Adjusted earnings per share
(diluted) 3 25.2p 21.6p
Consolidated statement of comprehensive income
For the year ended 30 November
2021 2020
GBP'000 GBP'000
Profit for the year 11,944 8,443
--------- ---------
Other comprehensive income
Items that will not be reclassified to
profit and loss
Actuarial gain/(loss) in defined benefit
pension plans net of tax 1,600 (1,334)
--------- ---------
Items that may be subsequently reclassified
to profit and loss
Exchange gains/(losses) on translation
of foreign subsidiaries 12 (1,713)
Changes in fair value of foreign exchange
contracts held as a cash flow hedge - (35)
--------- ---------
12 (1,748)
--------- ---------
Other comprehensive income/(expense) for
the year 1,612 (3,082)
--------- ---------
Total comprehensive income for the year
attributable to the owners of Porvair plc 13,556 5,361
--------- ---------
Consolidated balance sheet
As at 30 November
Note 2021 2020
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 21,235 20,716
Right-of-use assets 11,014 12,762
Goodwill and other intangible
assets 5 74,103 70,039
Deferred tax asset 1,821 2,614
108,173 106,131
Current assets
Inventories 24,650 23,355
Trade and other receivables 21,344 20,674
Derivative financial instruments - 23
Cash and cash equivalents 15,442 15,563
--------- -----------
61,436 59,615
Current liabilities
Trade and other payables (21,702) (20,197)
Current tax liabilities (853) (192)
Borrowings - (1,379)
Lease liabilities (2,207) (2,007)
Derivative financial instruments (20) -
Provisions 7 (4,372) (4,365)
(29,154) (28,140)
Net current assets 32,282 31,475
--------- -----------
Non-current liabilities
Borrowings (5,217) (9,303)
Deferred tax liability (2,425) (2,839)
Retirement benefit obligations (12,602) (15,395)
Other payables (945) -
Lease liabilities (10,024) (11,609)
Provisions 7 (296) (268)
--------- -----------
(31,509) (39,414)
--------- -----------
Net assets 108,946 98,192
--------- -----------
Capital and reserves
Share capital 924 923
Share premium account 37,078 36,927
Cumulative translation reserve 7,657 7,645
Retained earnings 63,287 52,697
--------- -----------
Equity attributable to owners
of the parent 108,946 98,192
Total equity 108,946 98,192
--------- -----------
Consolidated cash flow statement
For the year ended 30 November
Note 2021 2020
GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 9 18,624 13,220
Interest paid (307) (347)
Tax paid (2,215) (2,551)
--------- ---------
Net cash generated from operating
activities 16,102 10,322
--------- ---------
Cash flows from investing activities
Interest received 2 1
Acquisition of subsidiaries (net of
cash acquired) 6 (3,968) (588)
Purchase of property, plant and equipment (3,182) (3,458)
Purchase of intangible assets 5 (47) (166)
Proceeds from sale of property, plant 9 -
and equipment
Net cash used in investing activities (7,186) (4,211)
--------- ---------
Cash flows from financing activities
Proceeds from issue of ordinary shares 152 425
Purchase of EBT shares (716) (726)
Receipt of Payment Protection Plan
loan - 1,507
Repayment of revolving credit facility (3,687) -
borrowings
Dividends paid to shareholders 4 (2,345) (2,253)
Repayments of lease liabilities (2,292) (2,297)
Net cash used in financing activities (8,888) (3,344)
--------- ---------
Net increase in cash and cash equivalents 28 2,767
Exchange losses on cash and cash equivalents (149) (93)
--------- ---------
(121) 2,674
Cash and cash equivalents at 1 December 15,563 12,889
--------- ---------
Cash and cash equivalents at 30 November 15,442 15,563
--------- ---------
Reconciliation of net cash flow to movement in net debt
2021 2020
GBP'000 GBP'000
Net debt at 1 December (8,735) (11,204)
Decrease/(increase) in borrowings 3,687 (1,507)
Paycheck Protection Plan loan waiver 1,337 -
Net increase in cash and cash equivalents 28 2,767
Decrease in lease liabilities 1,147 1,778
Effects of exchange rate changes 530 (569)
Net debt at 30 November (2,006) (8,735)
--------- ---------
Net cash and bank debt 10,225 4,881
Lease liabilities (12,231) (13,616)
Net debt at 30 November (2,006) (8,735)
--------- ---------
Consolidated statement of changes in equity
Share Cumulative
Share premium translation Retained
capital account reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- -------- ------------ ---------- ----------------------------
Balance at 30 November
2019 921 36,504 9,358 48,552 95,335
--------- -------- ------------ ---------- ----------------------------
Profit for the year - - - 8,443 8,443
Other comprehensive expense - - (1,713) (1,369) (3,082)
Total comprehensive income
for the year - - (1,713) 7,074 5,361
--------- -------- ------------ ---------- ----------------------------
Consideration paid for
purchase of own shares
(held in trust) - - - (726) (726)
Employee share option
schemes:
* value of employee services net of tax - - - 50 50
Proceeds from shares issued 2 423 - - 425
Dividends paid (note 4) - - - (2,253) (2,253)
--------- -------- ------------ ---------- ----------------------------
Total transactions with
owners recognised directly
in equity 2 423 - (2,929) (2,504)
--------- -------- ------------ ---------- ----------------------------
Balance at 30 November
2020 923 36,927 7,645 52,697 98,192
--------- -------- ------------ ---------- ----------------------------
Profit for the year - - - 11,944 11,944
Other comprehensive income - - 12 1,600 1,612
Total comprehensive income
for the year - - 12 13,544 13,556
--------- -------- ------------ ---------- ----------------------------
Consideration paid for
purchase of own shares
(held in trust) - - - (716) (716)
Employee share option
schemes:
* value of employee services net of tax - - - 107 107
Proceeds from shares issued 1 151 - - 152
Dividends paid (note 4) - - - (2,345) (2,345)
--------- -------- ------------ ---------- ----------------------------
Total transactions with
owners recognised directly
in equity 1 151 - (2,954) (2,802)
--------- -------- ------------ ---------- ----------------------------
Balance at 30 November
2021 924 37,078 7,657 63,287 108,946
--------- -------- ------------ ---------- ----------------------------
Notes
1. Alternative performance measures
Alternative performance measures are used by the Directors and
management to monitor business performance internally and exclude
certain cash and non-cash items which they believe are not
reflective of the normal course of business of the Group. The
Directors believe that disclosing such non-IFRS measures enables a
reader to isolate and evaluate the impact of such items on results
and allows for a fuller understanding of performance from year to
year. Alternative performance measures may not be directly
comparable with other similarly titled measures used by other
companies.
Alternative revenue measures
2021 2020 Growth
Aerospace & Industrial GBP'000 GBP'000 %
Revenue at constant currency 54,888 59,787 (8)
Exchange 888 2,193
Revenue as reported 55,776 61,980 (10)
-------- -------- -------
Laboratory
Underlying revenue 46,863 37,829 24
Acquisitions 5,428 -
-------- -------- -------
Revenue at constant currency 52,291 37,829 38
Exchange 885 2,298
-------- -------- -------
Revenue as reported 53,176 40,127 33
-------- -------- -------
Metal Melt Quality
Revenue at constant currency 36,225 30,020 21
Exchange 1,133 2,884
-------- -------- -------
Revenue as reported 37,358 32,904 14
-------- -------- -------
Group
Underlying revenue 137,976 127,636 8
Acquisitions 5,428 -
-------- -------- -------
Revenue at constant currency 143,404 127,636 12
Exchange 2,906 7,375
-------- -------- -------
Revenue as reported 146,310 135,011 8
-------- -------- -------
Revenue at constant currency is derived from translating
overseas subsidiaries results at budgeted fixed exchange rates. In
2021 and 2020 the rates used were $1.4:GBP1 and EUR1.2:GBP1,
compared with reported rates of $1.37:GBP1 (2020: $1.28:GBP1) and
EUR1.16:GBP1 (2020: EUR1.13:GBP1).
Underlying revenue is revenue at constant currency adjusted for
the impact of acquisitions made in the current and prior year.
The acquisition line relates to the revenue in relation to the
acquisition of Kbio, which was acquired in February 2021.
Alternative profit measures
A reconciliation of the Group's adjusted performance measures to
the reported IFRS measures is presented below:
2021 2020
Adjusted Adjustments Reported Adjusted Adjustments Reported
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Operating profit 15,885 (43) 15,842 13,571 (1,014) 12,557
Finance income 2 - 2 1 - 1
Finance costs (1,086) - (1,086) (1,001) - (1,001)
Profit before
income tax 14,801 (43) 14,758 12,571 (1,014) 11,557
Income tax expense (3,210) 396 (2,814) (2,642) (472) (3,114)
-------- ----- --------- ------------- ------------ ---------
Profit for the
year 11,591 353 11,944 9,929 (1,486) 8,443
-------- ----- --------- ------------- ------------ ---------
An analysis of adjusting items is given below:
2021 2020
Affecting operating profit GBP'000 GBP'000
Amortisation of acquired intangible assets (740) (611)
Other acquisition-related adjustments (98) 442
Settlement of project-related warranties - 4,005
Impairment of assets and restructuring costs (542) (4,850)
Paycheck Protection Program 1,337 -
(43) (1,014)
----------- ---------
Affecting tax
Tax effect of adjustments to operating profit 396 (472)
Total adjusting items 353 (1,486)
----------- ---------
Adjusted operating profit and adjusted profit before tax
exclude:
-- The amortisation of intangible assets arising on acquisition of businesses of GBP0.7 million (2020: GBP0.6
million);
-- Other acquisition-related costs of GBP0.1 million (2020: GBP0.4 million credit) in relation to the acquisition of
Kbio;
-- Provision releases of GBPnil million (2020: GBP5.1 million) arising from the settlement of outstanding warranty
issues and the cancellation of performance bonds related to the large gasification projects. Related to the
release in the prior year, the Group wrote-off a GBP1.1 million receivable due;
-- Covid-19 related impairment of assets and restructuring costs of GBP0.5 million, principally within the Aerospace
& Industrial division. The prior year consisted of a GBP2.3 million charge in relation to the Metal Melt Quality
operations in China, together with other covid-related restructuring and plant reconfigurations across the Group;
and
-- A credit of GBP1.3 million (2020: GBPnil) relating to the monies received in the prior year from the Truist Bank
under the Paycheck Protection Program ("PPP"). The PPP loan was forgivable provided the proceeds were used for
eligible purposes, including maintaining payroll levels. US operations used this money to keep jobs open and
active through the 2020 downturn and the eligible costs associated were recognised in 2020. However, formal
forgiveness of the loan was not received until 2021, leading to a timing difference between the costs incurred
and recognised in 2020; and the income recognised in 2021.
A tax charge or credit has been calculated on each adjusting
credit or charge using the Group tax rate prevailing in each of the
local territories where it arises. Eligible costs in the prior year
associated with the US PPP loan were previously treated as
disallowed for tax; however it has since been established that
these costs are allowable in 2021. Furthermore, the PPP income,
arising on the forgiveness of the loan, in the current year does
not attract US tax. These items combined contribute to the 2021 tax
credit on net adjusting items.
Return on capital employed
The Group uses two return measures to assess the return it makes
on its investments:
-- Return on capital employed of 13% (2020: 12%) 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 31% (2020: 29%) 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 chief operating decision maker has been identified as the
Board of Directors. The Board of Directors has instructed the
Group's internal reporting to be based around differences in
products and services, in order to assess performance and allocate
resources. Management have determined the operating segments based
on this reporting.
As at 30 November 2021, the Group is organised on a worldwide
basis into three operating segments:
1) Aerospace & Industrial - principally serving the aviation, and energy and industrial markets;
2) Laboratory - principally serving the bioscience and
environmental laboratory instrument and consumables market; and
3) Metal Melt Quality - principally serving the global
aluminium, North American Free Trade Agreement (NAFTA) iron foundry
and super-alloys markets.
Other Group operations' costs, assets and liabilities are
included in the "Central" division. Central costs mainly comprise
Group corporate costs, including new business development costs,
some research and development costs and general financial costs.
Central assets and liabilities mainly comprise Group retirement
benefit obligations, tax assets and liabilities, cash and
borrowings.
The segment results for the year ended 30 November 2021 are as
follows:
2021 Aerospace Metal Melt
& Industrial Laboratory Quality Central Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment
revenue 55,918 54,965 37,358 - 148,241
Inter-segment
revenue (142) (1,789) - - (1,931)
-------------- ------------- ----------- ---------- ----------
Revenue 55,776 53,176 37,358 - 146,310
-------------- ------------- ----------- ---------- ----------
Adjusted operating
profit/(loss) 4,399 9,649 5,074 (3,237) 15,885
Adjustments:
Amortisation of
acquired intangible
assets (396) (344) - - (740)
Other acquisition-related
adjustments - - - (98) (98)
Impairment of
assets and restructuring
costs (542) - - - (542)
Paycheck Protection
Program 407 295 635 - 1,337
Operating profit/(loss) 3,868 9,600 5,709 (3,335) 15,842
Net finance costs - - - (1,084) (1,084)
-------------- ------------- ----------- ---------- ----------
Profit/(loss)
before income
tax 3,868 9,600 5,709 (4,419) 14,758
--------------------------- -------------- ------------- ----------- ---------- ----------
Adjusted income
tax expense - - - (3,210) (3,210)
Tax effect of
adjustments to
operating profit - - - 396 396
--------------------------- -------------- ------------- ----------- ---------- ----------
Income tax expense - - - (2,814) (2,814)
Profit/(loss)
for the year 3,868 9,600 5,709 (7,233) 11,944
-------------- ------------- ----------- ---------- ----------
2020 Aerospace Metal Melt
& Industrial Laboratory Quality Central Group
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
Adjustments:
Amortisation of
acquired intangible
assets (467) (144) - - (611)
Other acquisition-related
adjustments - 442 - - 442
Settlement of
project- related
warranties 4,005 - - - 4,005
Impairment of
assets and restructuring
costs (1,833) (55) (2,962) - (4,850)
--------------------------- -------------- ------------- ----------- ---------- ----------
Operating profit/(loss) 7,984 6,961 (159) (2,229) 12,557
Net finance costs - - - (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
-------------- ------------- ----------- ---------- ----------
The segment assets and liabilities at 30 November 2021 are as
follows:
30 November Aerospace Metal Melt
2021 & Industrial Laboratory Quality Central Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental assets 70,038 51,720 30,087 2,322 154,167
Cash and cash
equivalents - - - 15,442 15,442
-------------- ------------- ----------- ----------- -----------
Total assets 70,038 51,720 30,087 17,764 169,609
-------------- ------------- ----------- ----------- -----------
Segmental liabilities (19,242) (12,675) (5,747) (5,180) (42,844)
Retirement
benefit obligations - - - (12,602) (12,602)
Borrowings - - - (5,217) (5,217)
-------------- ------------- ----------- ----------- -----------
Total liabilities (19,242) (12,675) (5,747) (22,999) (60,663)
-------------- ------------- ----------- ----------- -----------
The segment assets and liabilities at 30 November 2020 are as
follows:
30 November Aerospace Metal Melt
2020 & Industrial Laboratory Quality Central Group
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)
Borrowings - - - (10,682) (10,682)
-------------- ------------- ----------- ----------- -----------
Total liabilities (22,013) (11,875) (5,548) (28,118) (67,554)
-------------- ------------- ----------- ----------- -----------
Geographical analysis
2021 2020
By destination By origin By destination By origin
GBP'000 GBP'000 GBP'000 GBP'000
Revenue
United Kingdom 14,886 42,652 13,990 41,343
Continental Europe 31,534 25,873 24,136 23,118
United States of America 64,673 71,695 54,121 63,811
Other NAFTA 2,647 - 5,296 -
South America 2,642 - 1,883 -
Asia 28,688 6,090 34,562 6,739
Africa 1,240 - 1,023 -
--------------- ---------- --------------- ----------
146,310 146,310 135,011 135,011
--------------- ---------- --------------- ----------
3. Earnings per share
2021 2020
Total Weighted Weighted
average Per share average Per share
number amount number of amount
GBP'000 of shares (pence) GBP'000 shares (pence)
Profit for the
year - attributable
to ordinary shareholders 11,944 8,443
Number of ordinary
shares in issue 46,170,094 46,069,323
Number of ordinary
shares owned by
the Employee Benefit
Trust (198,822) (106,316)
---------- ------------- ------------ ---------- ------------- ------------
Basic EPS 11,944 45,971,272 26.0 8,443 45,963,007 18.4
Dilutive impact
of share options
outstanding - 38,370 - - 21,666 -
---------- ------------- ------------ ---------- ------------- ------------
Diluted EPS 11,944 46,009,642 26.0 8,443 45,984,673 18.4
---------- ------------- ------------ ---------- ------------- ------------
In addition to the above, the Group also calculates an earnings
per share based on adjusted profit as the Board believes this to be
a better measure to judge the progress of the Group, as discussed
in note 1.
2021 2020
Weighted Weighted
Adjusted average Per share average Per share
number amount number of amount
GBP'000 of shares (pence) GBP'000 shares (pence)
Profit for the
year - attributable
to ordinary shareholders 11,944 8,443
Adjusting items
(note 1) (353) 1,486
---------- ------------- ------------ ---------- ------------- ------------
Adjusted profit
- attributable
to equity holders
of the parent 11,591 9,929
---------- ------------- ------------ ---------- ------------- ------------
Basic EPS 11,591 45,971,272 25.2 9,929 45,963,007 21.6
Diluted EPS 11,591 46,009,642 25.2 9,929 45,984,673 21.6
---------- ------------- ------------ ---------- ------------- ------------
4. Dividends per share
2021 2020
Per share GBP'000 Per share GBP'000
Final dividend paid -
in respect of prior year 3.30p 1,517 3.20p 1,472
Interim dividend paid
- in respect of current
year 1.80p 828 1.70p 781
---------- -------- ---------- --------
5.10p 2,345 4.90p 2,253
---------- -------- ---------- --------
The Directors recommend the payment of a final dividend of 3.5
pence per share (2020: 3.3 pence per share) to be paid on 1 June
2022 to shareholders on the register on 29 April 2022; the
ex-dividend date is 28 April 2022. This makes a total dividend for
the year of 5.3 pence per share (2020: 5.0 pence per share).
5. 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 30 November
2020 64,871 82 818 4,268 70,039
Additions - - 47 - 47
Acquisitions 3,089 - - 2,232 5,321
Disposals - - (2) - (2)
Disposals amortisation - - 2 - 2
Amortisation
charges - (47) (226) (800) (1,073)
Exchange differences (114) (2) (22) (93) (231)
-----------
Net book amount
at 30 November
2021 67,846 33 617 5,607 74,103
----------- -------------- -------------- ------------- -----------
At 30 November Trademarks,
2021 Development knowhow
expenditure Software and other
Goodwill capitalised capitalised intangibles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost 86,489 896 1,800 9,645 98,830
Accumulated
amortisation
and impairment (18,643) (863) (1,183) (4,038) (24,727)
Net book amount 67,846 33 617 5,607 74,103
----------- -------------- -------------- ------------- -----------
6. Acquisitions
Acquisition of Kbio
On 25 February 2021 the Group purchased 100% of the share
capital of Kbiosystems Limited ("Kbio"). Kbio is based in Basildon,
UK and specialises in the design and manufacture of laboratory
instruments, with particular expertise in automated microplate
handling systems.
The total maximum consideration is GBP6.9 million; consisting of
initial, deferred and contingent consideration.
GBP3.0 million was paid in cash on acquisition. Deferred
consideration of GBP1.3 million, representing cash acquired and a
working capital adjustment, was paid in June 2021. Management has
forecast that payment of 100% of the contingent consideration is
the most probable outcome, of which GBP1.0 million was earned in
the period and also paid in June 2021. The balance is contingent on
Kbio meeting profit targets for the years ending 31 March 2022 and
2023. The remaining consideration has been discounted to GBP1.8
million using a discount rate of 10%.
In the period since acquisition, the business has contributed
GBP5.4 million of revenue and GBP1.3 million of adjusted operating
profit to the Group results. The direct costs of acquisition
charged to the income statement were GBP0.1 million and are
disclosed as adjusting items in note 1. Had the acquisition been
consolidated from 1 December 2020, the income statement would show
revenue of GBP148.7 million and adjusted operating profit of
GBP16.4 million.
The following table sets out the initial consideration, together
with the fair value of assets acquired and liabilities assumed:
Total
Purchase consideration: GBP'000
Initial cash consideration 3,000
Deferred cash consideration 1,274
Contingent consideration 2,646
--------
Total purchase consideration 6,920
Fair value of net assets acquired (below) (3,831)
--------
Goodwill 3,089
--------
Fair value
Fair value of identifiable assets acquired GBP'000
and liabilities assumed:
Property, plant and equipment (including
right-of-use-assets) 519
Customer order book and relationships (included
within intangible assets) 2,232
Inventory 822
Trade and other receivables 1,110
Cash 1,306
Lease liabilities (407)
Trade and other payables and tax liabilities (1,751)
-----------
Fair value of net assets acquired 3,831
-----------
Purchase consideration settled in cash 5,274
Cash acquired (1,306)
-----------
Net cash outflow on acquisition 3,968
-----------
An independent valuation of the identifiable intangible assets
has been carried out in the period. Acquisition-related intangible
assets comprise the customer order book of GBP0.1 million and
customer relationships of GBP2.1 million.
The goodwill is attributable to the non-contractual
relationships, the synergies between the business acquired and the
operations of the Group and the potential to develop the
technologies acquired. None of these meet the criteria for
recognition of intangible assets separable from goodwill. The
goodwill recognised is attributable to the Laboratory division and
is not expected to be deductible for income tax purposes.
The fair value of trade and other receivables of GBP1.1 million
includes net trade receivables of GBP0.9 million, all of which is
expected to be collectible.
7. Provisions
Dilapidations Warranty Total
GBP'000 GBP'000 GBP'000
At 30 November 2020 268 4,365 4,633
Acquired - 130 130
Charged/(credited) to the
consolidated income statement:
* Unwinding of discount 28 - 28
* Warranty release - (896) (896)
* Warranty charge - 971 971
Utilised:
* Warranty - (194) (194)
Exchange - (4) (4)
-------------- --------- --------
At 30 November 2021 296 4,372 4,668
-------------- --------- --------
Dilapidations Warranty Total
GBP'000 GBP'000 GBP'000
At 30 November 2019 242 9,526 9,768
Charged/(credited) 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 - (2) (2)
-------------- --------- --------
At 30 November 2020 268 4,365 4,633
-------------- --------- --------
Provisions arise from potential claims on major contracts, sale
warranties, and discounted dilapidations for leased property. The
amount charged in the year of GBP971,000 arose on additional sales
made and long-term projects delivered in the year. The amount
released in the year of GBP896,000 follows management's latest
estimate of the expected costs to be incurred under warranty.
2021 2020
Analysis of total provisions GBP'000 GBP'000
Current 4,372 4,365
Non-current 296 268
--------
Net book value at 30 November 4,668 4,633
-------- --------
8. Contingent liabilities
At 30 November 2021, 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 - 320
Performance bonds 2,549 811
At 30 November 2021 2,549 1,131
------ --------
$'000 EUR'000
Advanced payment bonds - 162
Performance bonds 2,549 842
At 30 November 2020 2,549 1,004
------ --------
$2,520,000 (2020: $2,520,000) 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 7. The maximum potential
unprovided exposure under these contracts is limited to GBP10.3
million. The uncalled performance bonds are expected to be called
or released no later than December 2024.
9. Notes to the cashflow
Cash generated from operations
2021 2020
GBP'000 GBP'000
Operating profit 15,842 12,557
Adjustments for:
- Post-employment benefits (1,585) (1,288)
- Payment Protection Program loan waiver (1,337) -
- Fair value movement of derivatives
through profit and loss 43 (10)
- Share-based payments 247 89
- Depreciation of property, plant and
equipment and amortisation of intangibles 3,662 3,706
- Depreciation of right-of-use assets 2,138 2,055
- Impairment of property, plant and equipment 195 2,261
- Impairment of right-of-use assets 150 -
- Loss on disposal of property, plant
and equipment and intangibles 68 162
Operating cash flows before movement in
working capital 19,423 19,532
--------- ---------
Changes in working capital (excluding
the effects of exchange differences on
consolidation):
Increase in inventories (476) (276)
Decrease in trade and other receivables 215 4,139
Increase/(decrease) in trade and other
payables (256) (5,084)
Decrease in provisions (282) (5,091)
Decrease in working capital (799) (6,312)
--------- ---------
Cash generated from operations 18,624 13,220
--------- ---------
10. Basis of preparation
The results for the year ended 30 November 2021 have been
prepared in accordance International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
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 2021,
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 2020, upon which the auditors reported without
qualification, have been delivered to the Registrar of
Companies.
11. Annual general meeting
The Company's Annual General Meeting will be held at 11.00 a.m.
on Thursday 14 April 2022 at the offices of Buchanan
Communications, 107 Cheapside, London, EC2V 6DN.
12. Related parties
There were no related party transactions in the year ended 30
November 2021 other than Directors' compensation.
13. 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 applicable law and
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union,
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 2020. A list of current Directors is
maintained on the Porvair plc website, www.porvair.com . Since the
publication of the Annual Report for the year ended 30 November
2020, James Mills has joined the Group as Group Finance Director.
This followed the decision by Chris Tyler to step back from his
position as Group Finance Director and continue, in a part-time
role, as Company Secretary. Both changes became effective following
the Company's AGM in April 2021.
Copies of full accounts will be sent to shareholders in March
2022. Additional copies will be available from www.porvair.com.
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END
FR KBLFXLFLZBBZ
(END) Dow Jones Newswires
January 31, 2022 01:59 ET (06:59 GMT)
Grafico Azioni Porvair (AQSE:PRV.GB)
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