For immediate release 3 July 2023
Porvair plc
Interim results for the six months ended 31 May 2023
Porvair plc ("Porvair" or "the Group"), the specialist filtration, laboratory and environmental technology group, announces its interim results for the six months ended 31 May 2023 ("H1 2023" or the "period").
Highlights:
· Revenue 10% higher at £90.6 million (2022: £82.3 million), 5% higher on a constant currency basis*.
· Operating profit 16% higher at £11.7 million (2022: £10.1 million).
· Adjusted operating profit* 17% higher at £12.2 million (2022: £10.4 million).
· Profit before tax 18% higher at £11.2 million (2022: £9.5 million).
· Adjusted profit before tax* 20% higher at £11.8 million (2022: £9.8 million).
· Basic earnings per share 20% higher at 19.3 pence (2022: 16.1 pence).
· Adjusted basic earnings per share* 22% higher at 20.3 pence (2022: 16.6 pence).
· Cash at £19.7 million (31 May 2022: £12.2 million; 30 November 2022: £18.3 million) after investing £2.9 million (2022: £2.3 million) in capital expenditure and acquisitions.
· Interim dividend increased 0.1 pence per share to 2.0 pence (2022: 1.9 pence).
Commenting on the results and outlook, Ben Stocks, Chief Executive, said:
"This is a record set of results for the half-year and shows the Group performing well overall, despite inconsistency of demand across markets served. Aerospace, petrochemical and water quality markets are having a strong year. As expected at the time of the results announcement in January, orders in industrial and laboratory consumable segments have been lower as they go through a de-stocking cycle and lead-times return to more normal levels.
"Looking ahead, while noting that inconsistent order patterns pose risks to forecasting, the Board expects the Group's full year result to be ahead of that for 2022. The aggregate Group order book, which has been at record levels for much of 2023, remains high. Porvair's long-term earnings record is supported by established global trends: tightening environmental regulations; growth in analytical science; the need for clean water; carbon-efficient transportation; the replacement of plastic and steel with aluminium; and the drive for manufacturing process quality and efficiency. The Board expects the momentum of this strong start to 2023 will carry through to a satisfactory conclusion to the year and views the longer-term with confidence."
*See notes 1, 2 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 / Simon Compton / Jack Devoy | | |
An analyst briefing will take place at 9:30 a.m. on Monday 3 July 2023, please contact Buchanan for details.
An audiocast of the meeting and the presentation will subsequently be made available at www.porvair.com.
Operating review
The Group has begun 2023 with a record set of results, delivering 10% revenue growth (5% constant currency) which with improved margins has generated 17% adjusted operating profit growth (around 11% constant currency). Cash generation was as expected, leaving cash reserves of £19.7 million at 31 May 2023.
Beneath the headlines, trading has been mixed across segments. Stronger demand in aerospace and petrochemical markets is supporting both the Metal Melt and Aerospace & Industrial divisions; and new products, along with steady demand for water quality assurance, are responsible for the growth in Seal Analytical. This is balanced by the anticipated de-stocking in laboratory and industrial consumable markets with supply chain issues now mainly resolved. Inflation in wages and services remains a concern but raw material cost pressure is less acute than was the case twelve months ago.
The Group order book was at record levels for most of the period, and remains high at the start of the second half, but again the detail on a market-by-market basis is more nuanced. Lead times which were stretched in 2022 have started to return to more normal levels in 2023 and while this is advantageous in terms of customer service, and will benefit inventory turns in the second half, it makes near-term forecasting in these markets difficult.
The Group continues its consistent investment programme. In addition to the Ratiolab acquisition which we hope to close in the second half, investments have been made in productivity and margin enhancements.
Financial summary
| H1 2023 |
| H1 2022 | | Growth |
| £m |
| £m | | % |
Revenue | 90.6 | | 82.3 | | 10 |
Operating profit | 11.7 | | 10.1 | | 16 |
Adjusted operating profit* | 12.2 | | 10.4 | | 17 |
Profit before tax | 11.2 | | 9.5 | | 18 |
Adjusted profit before tax* | 11.8 | | 9.8 | | 20 |
|
| | | | |
| Pence | | Pence | | |
Earnings per share | 19.3 | | 16.1 | | 20 |
Adjusted earnings per share* | 20.3 | | 16.6 | | 22 |
|
| | | | |
| £m |
| £m | | |
Cash generated from operations | 8.2 | | 7.2 | | |
Net cash (excluding lease liabilities) | 19.7 | | 12.2 | | |
*See notes 1, 2 and 3 for definitions and reconciliations.
Strategy and purpose
Porvair's strategy and purpose has remained consistent for over 19 years, a period that now encompasses two recessions and a pandemic. This longer-term growth record gives the Board confidence in the Group's capabilities and is the basis for capital allocation and planning decisions.
The Group's record for growth, cash generation and investment is:
| 5 years |
| 10 years | 15 years |
| CAGR* |
| CAGR* | CAGR* |
Revenue growth | 8% |
| 9% | 9% |
Earnings per share growth | 10% |
| 12% | 12% |
Adjusted earnings per share growth | 13% |
| 13% | 12% |
|
|
| | |
| £m |
| £m | £m |
Cash from operations | 94.1 |
| 158.3 | 194.9 |
Investment in acquisitions and capital expenditure | 40.8 |
| 81.5 | 97.0 |
* Compound annual growth rate
Strategic statement and business model
Porvair's strategic purpose is the development of specialist filtration, laboratory and environmental technology businesses for the benefit of all stakeholders. Principal measures of success include consistent earnings growth and selected ESG measures. The Group publishes a full ESG report at the time of the annual Final Results.
The Group is positioned to benefit from global 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 businesses have certain key characteristics in common:
· Specialist design, engineering or commercial 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 or commercial service at an acceptable 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; and
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 complex 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: 51% of revenue was in the Americas; 18% in Asia; 20% 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: 56% of revenue was manufactured in the US; 27% in the UK; 14% in Continental Europe; and 3% in China; and
· 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 safety and 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 was published in February 2023 setting out:
· Porvair's ESG management framework, goals and TCFD reporting;
· How climate change and a net zero carbon future might affect markets served by the Group;
· ESG metrics and results; and
· How the Group has acted for the benefits of its stakeholders in 2022.
This ESG report will be updated in February 2024.
Divisional review
Aerospace & Industrial
| H1 2023 |
| H1 2022 |
| Growth |
| £m |
| £m |
| % |
Revenue | 36.5 | | 30.7 | | 19 |
Operating profit | 5.1 | | 2.9 | | 76 |
Adjusted operating profit* | 5.4 | | 3.1 | | 74 |
*See notes 1 and 2 for definitions and reconciliations.
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; quality accreditations; and technical customer service.
Revenue in the period increased by 19%. Better aerospace orders supported an increase in output and margins benefitted from productivity investments made in recent years. Royal Dahlman, based in Holland and mainly serving the petrochemical market with emissions control filters, is having a much better year supported by orders through our Indian engineering team. In the US, industrial consumable demand is lower, notably in microelectronics where de-stocking is affecting near-term demand. Acquired in March, HRW expands the machining and product design skills of our facility in Idaho, and this will help to support microelectronic margins over the balance of the year.
Laboratory
|
| H1 2023 |
| H1 2022 |
| Growth |
|
| £m |
| £m |
| % |
Revenue | | 29.1 | | 30.8 | | (6) |
Operating profit | | 4.7 | | 5.9 | | (20) |
Adjusted operating profit* | | 4.9 | | 6.1 | | (20) |
*See notes 1 and 2 for definitions and reconciliations.
The Laboratory division has two operating businesses: Porvair Sciences (including JGF Finneran and Kbio) and Seal Analytical.
· Porvair Sciences manufactures laboratory filters, small instruments and associated consumables. Differentiation is achieved through proprietary manufacturing capabilities; filtration media; and technical customer service.
· 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 and technical customer service.
After several years of robust growth, revenues in the Laboratory division fell 6% in the period.
Seal Analytical had another strong half, supported by demand for both their new AQ700 instrument and associated automation devices. De-stocking of laboratory consumables from the second quarter affected Porvair Sciences, where lead-times have now fallen to more normal levels. This helps levels of customer service and inventory turns, but challenges manufacturing efficiency. In the plants affected, cost-reduction programmes have been undertaken to balance changing order patterns.
As outlined in the results announcement in January, the Board anticipated this de-stocking cycle and does not see any fundamental changes in the underlying growth drivers of the Laboratory division, in which investment continues. The acquisition of Ratiolab was announced in May, subject to regulatory approval. Ratiolab GmbH, located outside Frankfurt, distributes a wide range of laboratory consumables in Europe and the Middle East, offering technical customer service to a wide range of customers, only some of which are already served by the Group. Ratiolab Kft., located close to Budapest, manufactures laboratory consumables in a modern and well-invested facility, the freehold of which is included in the acquisition. Ratiolab has annual external revenues of around €12 million. The transaction is expected to be earnings neutral (after acquisition costs) in 2023, and earnings accretive thereafter.
The Board believes Ratiolab will fit well into the Group's Laboratory division, offering a complementary product range and adding European manufacturing capabilities, injection moulding expertise, new routes to market and additional engineering and customer service capabilities.
Metal Melt Quality
| H1 2023 |
| H1 2022 |
| Growth |
| £m |
| £m |
| % |
Revenue | 24.9 | | 20.8 | | 20 |
Operating profit | 3.7 | | 2.8 | | 32 |
Adjusted operating profit* | 3.7 | | 2.8 | | 32 |
*See notes 1 and 2 for definitions and reconciliations.
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 grew by 20%, helped by further recovery of aerospace-related filters; the switch from plastic to recyclable aluminium in beverage packaging; and the higher proportion of aluminium used in electric and hybrid vehicles. Margins at 15% remain ahead of their 10% - 12% target level.
The satellite manufacturing plant in China has had a strong start to the year. Covid restrictions were lifted at the start of the period enabling staff to return to work consistently. An increasing proportion of the filters made in China for the Chinese market are for higher-grade metal alloys where filtration efficiency is more important.
Alternative performance measures - profit
| H1 2023 |
| H1 2022 |
| Growth |
| £m |
| £m |
| % |
Adjusted operating profit | 12.2 | | 10.4 | | 17 |
Adjusted profit before tax | 11.8 | | 9.8 | | 20 |
Adjusted profit after tax | 9.3 | | 7.6 | | 22 |
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 adjusting item provides a more consistent assessment of the Group's trading. Adjusting items comprise a £0.4 million charge (2022: £0.3 million) for the amortisation of acquired intangible assets, together with a £0.2 million charge (2022: £nil) for costs incurred in relation to the acquisition of both HRW and Ratiolab (see note 9).
Finance costs
The Group incurred a net interest charge of £0.4 million (2022: £0.6 million) which consisted of the finance cost on the pension deficit, lease liability interest, and the unwind of discounted provisions and other payables. The Group also incurred undrawn commitment fees on the Group's banking facilities, though there were largely offset by interest receivable on deposits.
Tax
The Group tax charge was £2.4 million (2022: £2.1 million), including the tax effect of adjusting items (see note 1). The adjusted income tax expense was £2.4 million (2022: £2.2 million), with the effective rate of income tax on adjusted profit before tax at 21% (2022: 22%).
Earnings per share and dividends
The basic earnings per share for the period was 19.3 pence (2022: 16.1 pence). Adjusted earnings per share was 20.3 pence (2022: 16.6 pence).
The Board has declared an interim dividend of 2.0 pence (2022: 1.9 pence) per share.
Investment
In the last five years, £40.8 million has been invested in acquisitions and capital expenditure. In the first half of 2023, the Group invested £0.7 million on the HRW acquisition and £2.2 million on capital expenditure (2022: £2.3 million).
Cash flow, cash and net debt
Cash generated from operations in the six months to 31 May 2023 was £8.2 million (2022: £7.2 million). The Group normally sees an outflow of working capital in the first half of the year. Working capital increased by £5.0 million (2022: £4.9 million) in the period.
Net cash at 31 May 2023 was £19.7 million (31 May 2022: £12.2 million; 30 November 2022: £18.3 million). Lease liabilities were £11.0 million (31 May 2022: £11.5 million; 30 November 2022: £11.5 million).
Provisions and contingent liabilities
The Group has £4.4 million (31 May 2022: £4.5 million; 30 November 2022: £4.0 million) of provisions for dilapidations and performance warranties.
The Group has outstanding performance bonds with customers at 31 May 2023 of $nil (31 May 2022: $2.5 million; 30 November 2022: $1.0 million) and €0.2 million (31 May 2022: €0.4 million; 30 November 2022: €0.3 million).
Return on capital employed
The Group's return on capital employed was 16% (2022: 13%). Excluding the impact of goodwill and retirement benefit obligations, the return on operating capital employed was 37% (2022: 33%).
Outlook
This is a record set of results for the half-year and shows the Group performing well overall, despite inconsistency of demand across markets served. Aerospace, petrochemical and water quality markets are having a strong year. As expected at the time of the results announcement in January, orders in industrial and laboratory consumable segments have been lower as they go through a de-stocking cycle and lead-times return to more normal levels.
Looking ahead, while noting that inconsistent order patterns pose risks to forecasting, the Board expects the Group's full year result to be ahead of that for 2022. The aggregate Group order book, which has been at record levels for much of 2023, remains high. Porvair's long-term earnings record is supported by established global trends: tightening environmental regulations; growth in analytical science; the need for clean water; carbon-efficient transportation; the replacement of plastic and steel with aluminium; and the drive for manufacturing process quality and efficiency. The Board expects the momentum of this strong start to 2023 will carry through to a satisfactory conclusion to the year and views the longer-term with confidence.
Ben Stocks
Group Chief Executive
30 June 2023
Related parties
Other than remuneration of key management personnel, there were no related party transactions in the six months ended 31 May 2023 (2022: none).
Principal risks
Each division considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are reviewed by the Board and updated at least annually. Further details of the Group's risk profile analysis can be found in the Strategic Report section of the Annual Report & Accounts for the year ended 30 November 2022.
Certain elements of the Group's order position can change quickly in the face of changing economic circumstances. The Metal Melt Quality division, Laboratory division and general industrial filtration within the Aerospace & Industrial division all have relatively short lead times and order cycles and, therefore, revenue is subject to fluctuations which could have a material effect on the Group's results for the balance of 2023.
Forward-looking statements
Certain statements in this interim financial information are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Condensed consolidated income statement
For the six months ended 31 May
| |
| Six months ended 31 May | ||
| |
| 2023 |
| 2022 |
| Note |
| Unaudited |
| Unaudited |
Continuing operations | | | £'000 | | £'000 |
Revenue | 1,2 | | 90,552 | | 82,280 |
Cost of sales | | | (59,924) | | (55,018) |
Gross profit | | | 30,628 | | 27,262 |
Other operating expenses | | | (18,975) | | (17,185) |
Adjusted operating profit | 1,2 | | 12,226 | | 10,412 |
Adjustments: | | |
| | |
Amortisation of acquired intangible assets | | | (370) | | (335) |
Other acquisition-related costs | | | (203) | | - |
Operating profit | 1,2 | | 11,653 | | 10,077 |
Finance costs | | | (437) | | (566) |
Profit before tax | | | 11,216 | | 9,511 |
Adjusted income tax expense | | | (2,449) | | (2,202) |
Adjustments: | | |
| | |
Tax effect of adjustments to operating profit | 1 | | 82 | | 67 |
Income tax expense | | | (2,367) | | (2,135) |
Profit for the period | | | 8,849 | | 7,376 |
| | |
| | |
Earnings per share (basic) | 3 | | 19.3p | | 16.1p |
Earnings per share (diluted) | 3 | | 19.3p | | 16.1p |
| | |
| | |
Adjusted earnings per share (basic) | 3 | | 20.3p | | 16.6p |
Adjusted earnings per share (diluted) | 3 | | 20.3p | | 16.6p |
Condensed consolidated statement of comprehensive income
For the six months ended 31 May
|
| Six months ended 31 May | |||
|
| 2023 Unaudited £'000 | | 2022 Unaudited £'000 | |
|
| | |||
Profit for the period |
| 8,849 | | 7,376 | |
Other comprehensive income/(expense) |
|
| | | |
Items that will not be reclassified to profit and loss: |
|
| | | |
Actuarial gain in defined benefit pension plans net of tax | 750 | | 3,037 | ||
Items that may be subsequently reclassified to profit and loss: |
| | | ||
Exchange (loss)/gain on translation of foreign subsidiaries | (2,751) | | 3,329 | ||
Total other comprehensive (expense)/income for the period | (2,001) | | 6,366 | ||
Total comprehensive income for the period |
| 6,848 | | 13,742 | |
|
|
| | | |
The accompanying notes are an integral part of this interim financial information.
Condensed consolidated balance sheet
As at 31 May
|
|
As at 31 May | | As at 30 November | ||
|
Note | 2023 Unaudited | | 2022 Unaudited | | 2022 Audited |
| | £'000 | | £'000 | | £'000 |
Non-current assets | |
| | | | |
Property, plant and equipment | | 24,710 | | 22,705 | | 24,311 |
Right-of-use assets | | 9,614 | | 10,207 | | 10,144 |
Goodwill and other intangible assets | | 76,470 | | 75,630 | | 77,900 |
Deferred tax asset | | 740 | | 342 | | 1,046 |
| | 111,534 | | 108,884 | | 113,401 |
Current assets | |
| | | | |
Inventories | | 32,803 | | 28,266 | | 30,973 |
Trade and other receivables | | 26,278 | | 28,109 | | 24,471 |
Derivative financial instruments | | 335 | | - | | 554 |
Cash and cash equivalents | | 19,678 | | 15,988 | | 18,297 |
| | 79,094 | | 72,363 | | 74,295 |
| |
| | | | |
Current liabilities | |
| | | | |
Trade and other payables | | (28,664) | | (28,478) | | (27,881) |
Current tax liabilities | | (572) | | (1,246) | | (309) |
Lease liabilities | | (2,046) | | (2,097) | | (2,156) |
Derivative financial instruments | | - | | (269) | | (319) |
Provisions | 5 | (4,028) | | (4,177) | | (3,692) |
| | (35,310) | | (36,267) | | (34,357) |
Net current assets | | 43,784 | | 36,096 | | 39,938 |
| |
| | | | |
Non-current liabilities | |
| | | | |
Borrowings | | - | | (3,754) | | - |
Deferred tax liability | | (2,698) | | (2,472) | | (2,811) |
Retirement benefit obligations | | (6,759) | | (7,102) | | (9,816) |
Other payables | | - | | (900) | | - |
Lease liabilities | | (8,968) | | (9,395) | | (9,316) |
Provisions | 5 | (345) | | (312) | | (328) |
| | (18,770) | | (23,935) | | (22,271) |
Net assets | | 136,548 | | 121,045 | | 131,068 |
| |
| | | | |
Capital and reserves | |
| | | | |
Share capital | | 927 | | 924 | | 927 |
Share premium account | | 37,778 | | 37,078 | | 37,626 |
Cumulative translation reserve | | 12,702 | | 10,986 | | 15,453 |
Retained earnings | | 85,141 | | 72,057 | | 77,062 |
Equity attributable to owners of the parent | 136,548 | | 121,045 | | 131,068 |
The interim financial information was approved by the Board of Directors on 30 June 2023 and was signed on its behalf by:
Ben Stocks James Mills
Group Chief Executive Group Finance Director
The accompanying notes are an integral part of this interim financial information.
Condensed consolidated cash flow statement
For the six months ended 31 May
| | Six months ended 31 May | ||
|
Note | 2023 Unaudited |
| 2022 Unaudited |
| | £'000 | | £'000 |
Cash flows from operating activities | |
| | |
Cash generated from operations | 7 | 8,211 | | 7,239 |
Interest paid | | (154) |
| (194) |
Tax paid | | (2,057) |
| (1,400) |
Net cash generated from operating activities | | 6,000 |
| 5,645 |
| |
|
| |
Cash flows from investing activities | |
|
| |
Interest received | | 39 |
| - |
Acquisition of subsidiaries | | (678) |
| - |
Purchase of property, plant and equipment | | (2,221) |
| (2,310) |
Purchase of intangible assets | | (30) |
| (43) |
Proceeds from sale of property, plant and equipment | | - |
| 16 |
Net cash used in investing activities | | (2,890) |
| (2,337) |
| |
|
| |
Cash flows from financing activities | |
|
| |
Proceeds from issue of ordinary shares | | 152 |
| - |
Purchase of Employee Benefit Trust shares | | (372) |
| (406) |
Decrease in borrowings | 8 | - |
| (1,350) |
Repayment of lease liabilities | | (1,259) |
| (1,208) |
Net cash used in financing activities | | (1,479) |
| (2,964) |
| |
|
| |
Net increase in cash and cash equivalents | 8 | 1,631 |
| 344 |
Effects of exchange rate changes | (250) |
| 202 | |
| | 1,381 |
| 546 |
Cash and cash equivalents at the beginning of the period | | 18,297 |
| 15,442 |
Cash and cash equivalents at the end of the period | | 19,678 |
| 15,988 |
The accompanying notes are an integral part of this interim financial information.
Condensed consolidated statement of changes in equity
For the six months ended 31 May (unaudited)
|
Share capital £'000 | Share premium account £'000 | Cumulative translation reserve £'000 |
Retained earnings £'000 |
Total equity £'000 |
At 1 December 2021 | 924 | 37,078 | 7,657 | 63,287 | 108,946 |
Profit for the period | - | - | - | 7,376 | 7,376 |
Other comprehensive income | - | - | 3,329 | 3,037 | 6,366 |
Total comprehensive income for the period | - | - | 3,329 | 10,413 | 13,742 |
Purchase of own shares (held in trust) | - | - | - | (406) | (406) |
Share-based payments (net of tax) | - | - | - | 369 | 369 |
Dividends | - | - | - | (1,606) | (1,606) |
At 31 May 2022 | 924 | 37,078 | 10,986 | 72,057 | 121,045 |
At 1 December 2022 | 927 | 37,626 | 15,453 | 77,062 | 131,068 |
Profit for the period | - | - | - | 8,849 | 8,849 |
Other comprehensive (expense)/income | - | - | (2,751) | 750 | (2,001) |
Total comprehensive (expense)/income for the period |
- |
- |
(2,751) |
9,599 |
6,848 |
Purchase of own shares (held in trust) | - | - | - | (372) | (372) |
Issue of ordinary share capital | - | 152 | - | - | 152 |
Share-based payments (net of tax) | - | - | - | 597 | 597 |
Dividends | - | - | - | (1,745) | (1,745) |
At 31 May 2023 | 927 | 37,778 | 12,702 | 85,141 | 136,548 |
The accompanying notes are an integral part of this interim financial information.
Notes to the condensed interim consolidated financial information
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 (unaudited)
| | Six months ended 31 May |
| | ||
| | 2023 |
| 2022 |
| Growth |
Aerospace & Industrial |
| £'000 |
| £'000 |
| % |
Revenue at constant currency | | 34,503 | | 29,971 | | 15 |
Exchange | | 2,037 | | 714 | | |
Revenue as reported | | 36,540 | | 30,685 | | 19 |
| |
| | | | |
Laboratory |
|
| | | | |
Revenue at constant currency |
| 26,964 | | 29,840 | | (10) |
Exchange |
| 2,163 | | 935 | | |
Revenue as reported | | 29,127 | | 30,775 | | (5) |
| |
| | | | |
Metal Melt Quality | |
| | | | |
Revenue at constant currency | | 21,655 | | 19,355 | | 12 |
Exchange | | 3,230 | | 1,465 | | |
Revenue as reported | | 24,885 | | 20,820 | | 20 |
| |
| | | | |
Group |
|
| | | | |
Revenue at constant currency | | 83,122 | | 79,166 | | 5 |
Exchange | | 7,430 | | 3,114 | | |
Revenue as reported | | 90,552 | | 82,280 | | 10 |
Revenue at constant currency is derived from translating overseas subsidiaries results at budgeted fixed exchange rates. In 2023 and 2022, the rates used were $1.40:£1 and €1.20:£1, compared with actual rates of $1.22:£1 (2022: $1.31:£1) and €1.14:£1 (2022: €1.19:£1).
A reconciliation of the Group's adjusted performance measures to the reported IFRS measures is presented below:
|
|
| H1 2023 |
|
| | H1 2022 | |
|
| Adjusted | Adjustments | Reported |
| Adjusted | Adjustments | Reported |
|
| £'000 | £'000 | £'000 |
| £'000 | £'000 | £'000 |
Operating profit | 12,226 | (573) | 11,653 | | 10,412 | (335) | 10,077 | |
Finance costs | (437) | - | (437) | | (566) | - | (566) | |
Profit before tax | 11,789 | (573) | 11,216 | | 9,846 | (335) | 9,511 | |
Income tax expense | (2,449) | 82 | (2,367) | | (2,202) | 67 | (2,135) | |
Profit for the period | 9,340 | (491) | 8,849 | | 7,644 | (268) | 7,376 | |
An analysis of adjusting items is given below:
| 2023 |
| 2022 |
Affecting operating profit: | £'000 |
| £'000 |
Amortisation of acquired intangible assets | (370) |
| (335) |
Other acquisition-related costs | (203) |
| - |
| (573) | | (335) |
Affecting tax: | | | |
Tax effect of adjustments to operating profit | 82 | | 67 |
Total adjusting items | (491) | | (268) |
Adjusted operating profit excludes:
· The amortisation of intangible assets arising on acquisition of businesses of £0.4 million (2022: £0.3 million); and
· Other acquisition-related costs of £0.2 million (2022: £nil) in relation to the HRW acquisition and the planned acquisition of Ratiolab (see note 9).
2. Segmental 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. The key profit measure used to assess the performance of each reportable segment is adjusted operating profit/(loss). Management has determined the operating segments based on this reporting.
As at 31 May 2023, 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 period ended 31 May 2023 are as follows:
2023 - Unaudited
|
Aerospace & Industrial |
|
Laboratory |
|
Metal Melt Quality |
|
Central |
|
Group |
| £'000 |
| £'000 |
| £'000 |
| £'000 |
| £'000 |
Total segment revenue | 36,553 | | 30,076 | | 24,885 | | - | | 91,514 |
Inter-segment revenue | (13) | | (949) | | - | | - | | (962) |
Revenue | 36,540 |
| 29,127 |
| 24,885 |
| - |
| 90,552 |
| | | | | | | | |
|
Adjusted operating profit/(loss) |
5,359 |
|
4,898 |
|
3,715 |
|
(1,746) |
|
12,226 |
Amortisation of acquired intangible assets |
(217) | |
(153) | |
- | |
- | |
(370) |
Other acquisition-related costs |
- | |
- | |
- | |
(203) | |
(203) |
Operating profit/(loss) | 5,142 |
| 4,745 |
| 3,715 |
| (1,949) |
| 11,653 |
Finance costs | - | | - | | - | | (437) | | (437) |
Profit/(loss) before tax | 5,142 |
| 4,745 |
| 3,715 |
| (2,386) |
| 11,216 |
The segment results for the period ended 31 May 2022 are as follows:
2022 - Unaudited
|
Aerospace & Industrial |
|
Laboratory |
|
Metal Melt Quality |
|
Central |
|
Group |
| £'000 |
| £'000 |
| £'000 |
| £'000 |
| £'000 |
Total segment revenue | 30,769 | | 31,797 | | 20,820 | | - | | 83,386 |
Inter-segment revenue | (84) | | (1,022) | | - | | - | | (1,106) |
Revenue | 30,685 | | 30,775 | | 20,820 | | - | | 82,280 |
| | | | | | | | | |
Adjusted operating profit/(loss) |
3,091 | |
6,064 | |
2,782 | |
(1,525) | |
10,412 |
Amortisation of acquired intangible assets |
(182) | |
(153) | |
- | |
- | |
(335) |
Operating profit/(loss) | 2,909 | | 5,911 | | 2,782 | | (1,525) | | 10,077 |
Finance costs | - | | - | | - | | (566) | | (566) |
Profit/(loss) before tax | 2,909 | | 5,911 | | 2,782 | | (2,091) | | 9,511 |
The segment assets and liabilities at 31 May 2023 are as follows:
At 31 May 2023 - Unaudited |
Aerospace & Industrial |
|
Laboratory |
|
Metal Melt Quality |
|
Central |
|
Group |
| £'000 |
| £'000 |
| £'000 |
| £'000 |
| £'000 |
Segmental assets | 70,099 | | 64,762 | | 34,099 | | 1,990 | | 170,950 |
Cash and cash equivalents | - | | - | | - | | 19,678 | | 19,678 |
Total assets | 70,099 |
| 64,762 |
| 34,099 |
| 21,668 |
| 190,628 |
| | | | | | | | |
|
Segmental liabilities | (20,488) | | (13,498) | | (6,587) | | (6,748) | | (47,321) |
Retirement benefit obligations | - | | - | | - | | (6,759) | | (6,759) |
Total liabilities | (20,488) |
| (13,498) |
| (6,587) |
| (13,507) |
| (54,080) |
The segment assets and liabilities at 31 May 2022 are as follows:
At 31 May 2022 - Unaudited |
Aerospace & Industrial |
|
Laboratory |
|
Metal Melt Quality |
|
Central |
|
Group |
| ||||
| £'000 |
| £'000 |
| £'000 |
| £'000 |
| £'000 |
| ||||
Segmental assets | 77,124 | | 57,114 | | 30,777 | | 244 | | 165,259 | |||||
Cash and cash equivalents | - | | - | | - | | 15,988 | | 15,988 | |||||
Total assets | 77,124 | | 57,114 | | 30,777 | | 16,232 | | 181,247 | |||||
| | | | | | | | | | |||||
Segmental liabilities | (20,481) | | (15,358) | | (7,015) | | (6,492) | | (49,346) | |||||
Retirement benefit obligations | - | | - | | - | | (7,102) | | (7,102) | |||||
Borrowings | - | | - | | - | | (3,754) | | (3,754) | |||||
Total liabilities | (20,481) | | (15,358) | | (7,015) | | (17,348) | | (60,202) | |||||
The segment assets and liabilities at 30 November 2022 are as follows:
At 30 November 2022 - Audited |
Aerospace & Industrial |
|
Laboratory |
|
Metal Melt Quality |
|
Central |
|
Group |
| £'000 |
| £'000 |
| £'000 |
| £'000 |
| £'000 |
Segmental assets | 68,033 | | 63,324 | | 36,063 | | 1,979 | | 169,399 |
Cash and cash equivalents | - | | - | | - | | 18,297 | | 18,297 |
Total assets | 68,033 | | 63,324 | | 36,063 | | 20,276 | | 187,696 |
| | | | | | | | | |
Segmental liabilities | (21,640) | | (13,168) | | (6,893) | | (5,111) | | (46,812) |
Retirement benefit obligations | - | | - | | - | | (9,816) | | (9,816) |
Total liabilities | (21,640) | | (13,168) | | (6,893) | | (14,927) | | (56,628) |
Geographical analysis
| Six months ended 31 May | ||||
| 2023 Unaudited |
| 2022 Unaudited | ||
Revenue | By destination £'000 | By origin £'000 |
| By destination £'000 | By origin £'000 |
United Kingdom | 8,975 | 24,018 |
| 8,735 | 25,794 |
Continental Europe | 18,475 | 14,054 |
| 18,961 | 10,146 |
United States of America | 43,250 | 49,701 |
| 37,171 | 43,961 |
Other NAFTA | 2,204 | - |
| 1,734 | - |
South America | 1,448 | - |
| 987 | - |
Asia | 15,395 | 2,779 |
| 13,558 | 2,379 |
Africa | 805 | - |
| 1,134 | - |
| 90,552 | 90,552 |
| 82,280 | 82,280 |
3. Earnings per share (EPS)
| Six months ended 31 May | |||||||
| 2023 Unaudited |
| 2022 Unaudited | |||||
As reported | Earnings
£'000 | Weighted average number of shares | Per share
Pence |
| Earnings
£'000 | Weighted average number of shares | Per share
Pence | |
Profit for the period - attributable to owners of the parent |
8,849 |
|
|
|
7,376 | | | |
Shares in issue |
| 46,343,604 |
|
| | 46,201,685 | | |
Shares owned by the Employee Benefit Trust |
|
(410,009) |
|
| |
(289,162) | | |
Basic EPS | 8,849 | 45,933,595 | 19.3 |
| 7,376 | 45,912,523 | 16.1 | |
Dilutive share options outstanding |
- |
18,087 |
- |
|
- |
42,640 |
- | |
Diluted EPS | 8,849 | 45,951,682 | 19.3 |
| 7,376 | 45,955,163 | 16.1 | |
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.
| Six months ended 31 May | ||||||
| 2023 |
| 2022 | ||||
Adjusted |
Earnings
£'000 | Unaudited Weighted average number of shares |
Per share
Pence |
|
Earnings
£'000 | Unaudited Weighted average number of shares |
Per share
Pence |
Profit for the period - attributable to owners of the parent |
8,849 |
|
|
|
7,376 | | |
Adjusting items (note 1) | 491 |
|
|
| 268 | | |
Adjusted profit -attributable to owners of the parent |
9,340 |
|
|
|
7,644 | | |
Adjusted basic EPS | 9,340 | 45,933,595 | 20.3 |
| 7,644 | 45,912,523 | 16.6 |
Adjusted diluted EPS | 9,340 | 45,951,682 | 20.3 |
| 7,644 | 45,955,163 | 16.6 |
4. Dividends per share
| Six months ended 31 May | ||||
| 2023 |
| 2022 | ||
| Unaudited |
| Unaudited | ||
| Per share | £'000 |
| Per share | £'000 |
Final dividend approved | 3.8p | 1,745 |
| 3.5p | 1,606 |
The final dividend approved for the year ended 30 November 2022 was paid to shareholders on 7 June 2023.
The Directors have declared an interim dividend of 2.0 pence (2022: 1.9 pence) per share to be paid on 23 August 2023 to shareholders on the register at the close of business on 21 July 2023; the ex-dividend date is 20 July 2023.
5. Provisions
|
|
|
| Dilapidations £'000 |
| Warranty £'000 |
| Total £'000 |
At 1 December 2022 | | | | 328 | | 3,692 | | 4,020 |
Additional charge in period | | | | - | | 428 | | 428 |
Release of provision | | | | - | | (79) | | (79) |
Unwinding of discount | | | | 17 | | - | | 17 |
Exchange | | | | - | | (13) | | (13) |
At 31 May 2023 |
|
|
| 345 |
| 4,028 |
| 4,373 |
Provisions arise from potential claims on major contracts, sale warranties, and discounted dilapidations for leased property. Matters that could affect the timing, quantum and extent to which provisions are utilised or released, include the impact of any remedial work, claims against outstanding performance bonds, and the demonstrated life of the filtration equipment installed.
6. Contingent liabilities
At 31 May 2023, the Group has performance bonds totalling $nil and €0.2 million (30 November 2022: US$1.0 million and €0.3 million). The uncalled performance bonds are expected to be called or released no later than December 2024.
7. Cash generated from operations
| | Six months ended 31 May | ||
| | 2023 Unaudited £'000 | | 2022 Unaudited £'000 |
Operating profit | | 11,653 | | 10,077 |
Adjustments for: | |
| | |
Fair value movement of derivatives through profit and loss | (100) | | 249 | |
Share-based payments | | 552 | | 387 |
Depreciation of property, plant and equipment and amortisation of intangibles |
2,127 | |
1,862 | |
Depreciation of right-of-use assets | 1,124 | | 1,098 | |
Loss on disposal of property, plant and equipment | - | | 23 | |
Operating cash flows before movement in working capital | 15,356 | | 13,696 | |
Increase in inventories | | (2,301) | | (3,044) |
Increase in trade and other receivables | | (2,313) | | (6,162) |
(Decrease)/increase in trade and other payables | | (734) | | 4,582 |
Increase/(decrease) in provisions | | 351 | | (292) |
Increase in working capital | | (4,997) | | (4,916) |
Post employment benefits (net cash movements) | | (2,148) | | (1,541) |
Cash generated from operations | | 8,211 | | 7,239 |
8. Reconciliation of net cash flow to movement in net debt
| Six months ended 31 May | ||
| 2023 Unaudited £'000 |
| 2022 Unaudited £'000 |
Net cash/(debt) at the beginning of the period | 6,825 |
| (2,006) |
Increase in cash and cash equivalents | 1,631 |
| 344 |
Decrease in borrowings | - |
| 1,350 |
Decrease in lease liabilities | 348 |
| 878 |
Effects of exchange rate changes | (140) |
| 176 |
Net cash at the end of the period | 8,664 |
| 742 |
Cash and cash equivalents | 19,678 |
| 15,988 |
Borrowings | - |
| (3,754) |
Lease liabilities | (11,014) |
| (11,492) |
Net cash at the end of the period | 8,664 |
| 742 |
9. Acquisitions
On 3 March 2023, the Group acquired certain business and assets from HRW Inc., a small engineering operation in Nampa, Idaho, and key supplier to the Group's microelectronics filtration facility in Idaho. The acquisition expands machining and product design skills to that location.
The total maximum consideration is £0.9 million; consisting of initial and deferred and consideration. In the period since acquisition, the business has contributed £0.1 million of adjusted operating profit to the Group results. Had the acquisition been consolidated from 1 December 2022, the income statement would show adjusted operating profit of £12.3 million.
The following table sets out the purchase consideration, together with the provisional fair value of assets acquired and liabilities assumed:
|
|
| Total |
Purchase consideration: |
|
| £'000 |
Initial cash consideration |
|
| 668 |
Deferred cash consideration |
|
| 200 |
Total purchase consideration |
|
| 868 |
Provisional fair value of net assets acquired (below) |
|
| (679) |
Goodwill |
|
| 189 |
|
|
| Fair value |
Provisional fair value of identifiable assets acquired and liabilities assumed: | £'000 | ||
Technology and know-how | 343 | ||
Property, plant and equipment (including right-of-use assets) | 538 | ||
Inventory | 37 | ||
Trade and other payables (including lease liabilities) |
|
| (239) |
Provisional fair value of net assets acquired |
|
| 679 |
|
|
|
|
A preliminary valuation of the identifiable intangible assets has been carried out in the period. Acquisition-related intangible assets comprise technology and know-how of £0.3 million.
The goodwill is attributable to 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 Aerospace & Industrial division and is expected to be deductible for income tax purposes.
These estimates of fair value may be adjusted in future in accordance with the requirements of IFRS 3 Business Combinations.
On 4 May 2023, Group announced that it will acquire, subject to Hungarian regulatory approval, 100% of the issued share capital of two businesses, Ratiolab GmbH and Ratiolab Kft. (together "Ratiolab") as outlined in the Divisional review above.
The direct cost of acquisitions was £0.2 million. This cost has been charged to the income statement and is presented as an adjusting item (see note 1).
10. Exchange rates
Exchange rates for the US dollar and Euro during the period were:
| Average rate to 31 May 23 | Average rate to 31 May 22 | Closing rate at 31 May 23 | Closing rate at 30 Nov 22 |
| Unaudited | Unaudited | Unaudited | Unaudited |
US dollar | 1.22 | 1.31 | 1.23 | 1.19 |
Euro | 1.14 | 1.19 | 1.15 | 1.16 |
11. Basis of preparation
Porvair plc is a public limited company registered in the UK and listed on the London Stock Exchange.
This unaudited condensed interim consolidated financial information for the six months ended 31 May 2023 has been prepared in accordance with the Disclosure and Transparency Rules ('DTR') of the Financial Conduct Authority and with IAS 34 Interim Financial Reporting as contained in UK-adopted International Accounting Standards. The condensed interim consolidated financial information should be read in conjunction with the annual financial statements for the year ended 30 November 2022, which were prepared in accordance with applicable law and UK-adopted International Accounting Standards.
The accounting policies applied in these interim financial statements are consistent with those applied in the Group's consolidated financial statements for the year ended 30 November 2022. A number of new amendments are effective from 1 December 2022 but they do not have a material effect on the Group's financial statements.
Taxes on income in the interim period are accrued using the tax rate that would be applicable to expected total annual earnings.
This condensed interim consolidated financial information has been prepared on a going concern basis under the historical cost convention, as modified by the recognition of certain financial assets and financial liabilities (including derivative financial instruments) at fair value through profit or loss.
The preparation of condensed interim consolidated financial information, in conformity with generally accepted accounting principles, requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed interim consolidated financial information, and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. In preparing the condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 30 November 2022.
After having made appropriate enquiries, including a review of progress against the Group's budget for 2023, its current trading and medium-term plans; and taking into account the banking facilities available until May 2026, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of the condensed interim consolidated financial information. Accordingly, they continue to adopt the going concern basis in preparing this condensed interim consolidated financial information.
This condensed interim consolidated financial information and the comparative figures do not constitute full accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 November 2022, which were approved by the Board of Directors on 27 January 2023, and which include an unqualified audit report, no emphasis of matter paragraph and no statements under sections 498(2) or (3) of the Companies Act 2006, have been delivered to the Registrar of Companies. This condensed interim consolidated financial information has been reviewed, not audited.
The condensed interim consolidated financial information does not include all financial risk management information and disclosures required in the annual financial statements; it should be read in conjunction with the Group's annual financial statements for the year ended 30 November 2022. There have been no changes in any risk management policies since the year end.
This report will be available at Porvair plc's registered office at 7 Regis Place, Bergen Way, King's Lynn, PE30 2JN and on the Company's website, www.porvair.com.
Statement of directors' responsibilities
The Directors confirm that this condensed interim consolidated financial information has been prepared in accordance with IAS 34 Interim Financial Reporting as contained in UK-adopted International Accounting Standards, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the first six months of the year, their impact on the condensed interim consolidated financial information and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
· material related party transactions in the first six months of the year and any material changes in the related party transactions described in the last annual report.
The Directors of Porvair plc are listed in the Porvair plc Annual Report for the year ended 30 November 2022. A list of current Directors is maintained on the Porvair plc website, www.porvair.com.
By order of the board
Ben Stocks | James Mills |
Group Chief Executive 30 June 2023 | Group Finance Director |
INDEPENDENT REVIEW REPORT TO PORVAIR PLC
Conclusion
We have been engaged by Porvair plc ('the Company') to review the condensed set of financial statements of the Company and its subsidiaries (the 'Group') in the interim financial report for the six months ended 31 May 2023 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity and related notes 1 to 11. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements of fact or material inconsistencies with the information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 31 May 2023 is not prepared, in all material respects, in accordance with International Accounting Standard 34, "Interim Financial Reporting" as contained in UK-adopted International Accounting Standards, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ('ISRE (UK) 2410') issued for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 11, the annual financial statements of the Group are prepared in accordance with UK-adopted International Accounting Standards. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" as contained in UK-adopted International Accounting Standards.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the Group and the Company to cease to continue as a going concern.
Responsibilities of Directors
The interim financial report, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with International Accounting Standard 34, "Interim Financial Reporting" as contained in UK-adopted International Accounting Standards and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
In preparing the interim financial report, the directors are responsible for assessing the Group's and the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Review of the Financial Information
In reviewing the interim financial report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the interim financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK) 2410 "Review of Interim Financial Information performed by the Independent Auditor of the Entity". Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
RSM UK Audit LLP
Chartered Accountants
25 Farringdon Street
London EC4A 4AB
30 June 2023
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