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Porvair stated that its outlook for the second year is promising
The feared Apache attack helicopter is known for its versatility in being able to deploy in the heat of the desert to the cold of the arctic. This is in no small part due to the special engine filters produced by Porvair (LON:PRV). Aerospace is a key driver for the group helping to lift profits up by over a quarter at the half-year stage.
It is in specialist areas like this that Porvair is seeking to generate higher margins in its business. The bottom line for the group is that its markets are continuing to recover driving revenue up 5%. This is having a geared affect on the bottom line with profits increasing 27% to £1.6m in the first half.
Porvair’s key markets are aviation, energy and industrial process, environmental laboratories and non-ferrous metals. The business is split into two divisions with the Metals Filtration making porous ceramic filters for the filtration of molten metals. The second division is microfiltration and this makes specialist filters for use in aerospace, energy, bioscience, water and industrial applications.
At Metals Filtration the cyclical recovery is continuing with revenue up 8% for H1. Revenues in 2010 were 20% below the 2008 peak in this division so there looks to be room for further improvement. What is positive is that the company has managed to improve margins from patented products rather than just the boost that higher revenue provides.
Furthermore the group's satellite plant in Wuhan, China has produced its maiden profit and doubled revenue. The main focus of Metals Filtration is the aluminium production process and stronger end use demand has been positive: US car production increased while airline passenger numbers have risen worldwide.
Looking at the Microfiltration division and although revenue growth was tepid at 3%, strong opportunities for growth remain. Aviation looks set to have annual growth of 5.3% to 2029, energy and industrial processes comes in at 13.5% to 2015 and Environmental laboratory supplies at 8.6% annually to 2012.
The key reason for Microfiltration’s low overall revenue growth was Seal Analytical where revenue fell 9% due to a strong period last year but the pipeline of orders is strong with a new filter - Seal AA1 - launched in March.
Turning to the bottom line and as a manufacturer with relatively fixed overheads the moderate revenue increase of 5% led to a 27% increase in profits before tax. The new products outlined also drove margins forward with new and patented products accounting for 30% of sales against 20% in 2010 and 13% in 2009. Earnings per share rose by 29% to 2.7p and net debt fell by £5.4m to £8.9m.
With the interim results Porvair stated that its outlook for the second year is promising and therefore management have increased their revenue expectations. The business is clearly strong in Metals Filtration, with improving margins, while the key is to take the Microfiltration division into new product segments such as nuclear and water filtration.
This report was produced by Senior Research Analyst, Andrew Latto.
