Much of the growth came from the smaller metals filtration division, where revenue rose 12 per cent to £25.9m and operating profit tripled to £1.5m. Operating margins improved, too – from 2 per cent to 6 per cent – reflecting greater emphasis on new and patented products and a manufacturing shift to China. Now, management wants 10 per cent. That's close to the 13 per cent at Porvair's microfiltration unit, where sales rose just 4 per cent to £42.2m. Still, strip out one-off costs and 15 per cent growth in aviation easily offset weakness at the water unit, helping drive underlying profit growth of 11 per cent to £6.1m. Energy was strong, too, and a deal with steel giant POSCO worth at least $10m has the order book at record levels.
After increasing forecasts 11 per cent for 2012, broker Peel Hunt expects adjusted pre-tax profit of £5m, giving adjusted EPS of 8p (from £4.5m and 7.3p in 2011).
|ORD PRICE:||108p||MARKET VALUE:||£46m|
|TOUCH:||106-110p||12-MONTH HIGH:||125p||LOW: 16p|
|DIVIDEND YIELD:||2.2%||PE RATIO:||15|
|NET ASSET VALUE||99p*||NET DEBT:||12%|
Strong cash generation halved net debt and Porvair could win more big contracts. Signs that the US, worth 41 per cent of group sales, can offset European weakness are also encouraging. So, trading on an undemanding 13.5 expected earnings, the shares are a long-term buy.
Last IC view: Buy, 120p, 1 Jul 2011