Porvair Regulatory News (PRV)

30 Jan 2007 07:01

Porvair PLC30 January 2007 For immediate release 30 January 2007 Porvair plc ("Porvair" or "the Company") Preliminary results for the year ended 30 November 2006 Good earnings growth and encouraging technical progress in key development opportunities Porvair plc ("Porvair"), the specialist filtration and environmental technologygroup, today announces its preliminary results for the year ended 30 November2006. Highlights • Profit before tax up 12% to £3.1m (2005: £2.7m); • Operating profits up 11% to £3.7m (2005: £3.3m); • Earnings per share up 40% to 5.2p (2005: 3.7p); • Demonstrable progress again made in key development projects: more orders for coal and biomass gasification filters; first orders for bipolar plates; and encouraging developments in bioscience components; • The acquisition in January 2007 of the business and assets of Omnifilter, a US filter business, opens the way for further Microfiltration growth. Commenting on the results Ben Stocks, Chief Executive, said: It is a pleasure to report on another year of progress at Porvair for the yearended 30 November 2006. Earnings and profits were up and demonstrable strideswere made in our key development projects. The Microfiltration division has again delivered steady growth. We will continueto develop this business in 2007 both organically and, where appropriate, byacquisition. The Metals Filtration division underwent a restructuring programme early in thenew financial year. It enters 2007 with a greater focus on its core markets anda lower cost base. The Advanced Materials division has been focused on its two most promisingdevelopment projects - diesel exhaust substrates and bipolar plates. Theprospects for both these opportunities are encouraging. After several years of investment, Porvair has reached the point where itscurrent business and future prospects are attractively set. 2007 trading hasstarted well and the Company is well positioned for the future. For further information please contact:Porvair plc 0207 466 5000 (today)Ben Stocks, Chief Executive 01553 765 500 (thereafter)Chris Tyler, Group Finance DirectorBuchanan Communications 0207 466 5000Charles Ryland / Ben Willey/ Susanna Gale Statement by the Chairman and the Chief Executive Overview of 2006 It is a pleasure to report on another good set of results at Porvair for theyear ended 30 November 2006, of which the highlights were: • Profit before tax up 12% to £3.1m (2005: £2.7m); • Operating profits up 11% to £3.7m (2005: £3.3m); • Earnings per share up 40% to 5.2p (2005: 3.7p); • Demonstrable progress again made in key development projects: more orders for coal and biomass gasification filters; first orders for bipolar plates; and encouraging developments in bioscience components; • The acquisition in January 2007 of the business and assets of Omnifilter, a US filter business, opens the way for further Microfiltration growth. Business Overview - focus on specialist filtration and environmentaltechnologies Porvair aims to develop and exploit its expertise in specialist filtration andenvironmental technologies for the sustainable benefit of its shareholders,staff and other stakeholders. The Company develops, designs and manufactures specialist filtration andseparation equipment. We serve a range of market segments of which aviation,molten metal and life science filtration are the three largest. Specialist filters share several common characteristics. They typically protectlarger and more costly systems from break-down. Consequently, productperformance is often more important than unit price. Specialist filters tend tobe consumable and replaced as part of a maintenance or production routine. Theyare often bespoke designs which, once approved, are used by customers for manyyears. In our view these are attractive characteristics that we aim to foster inour business wherever possible. At the heart of what we do is the filtration andengineering expertise which allows us to solve customer problems across all themarkets we serve. Porvair's strategy Porvair looks for opportunities to grow its business where technicallychallenging applications and design expertise can give us a competitive edge. Weseek to acquire businesses that complement our existing skills and invest inprojects that offer the prospect of attractive growth. We see significantpotential in environmental technologies and our current development portfolioincludes: • filters to clean gasified coal and biomass; • substrates to reduce diesel exhaust emissions; • fuel cell components; • bioscience components and devices; • plates to improve gas combustion efficiency; • high-value metal alloys filters to reduce process waste; • aviation air-cleaning filters for fuel tank inerting. Our development projects are funded from core business cash flows, and for someyears this has had a considerable impact on cash flow and Group profits. TheBoard expects the scale of this investment to start reducing in 2007 as projectscome to fruition across the Group. Trading summary Overall we were pleased with the 2006 result, the first under InternationalFinancial Reporting Standards ("IFRS"). Profit before tax grew 12% to £3.1m(2005: £2.7m) on Group sales up 3% to £46.2m (2005: £44.9m). Operating profitsrose by 11% to £3.7m (2005: £3.3m). These figures include the losses associatedwith the Group's Advanced Materials division which were £1.3m (2005: £1.7m). Netborrowings were £8.4m (2005: £8.5m). Interest cover remained at 6 times (2005: 6times). The prior year's results included two exceptional items which are described infull in the Finance Director's review. Throughout this statement the comparisonsof divisional performance with the prior year excludes these exceptional items.We believe that this analysis allows for greater clarity of actual performance. Divisional performance: Microfiltration The Microfiltration division, which comprises the Porvair Filtration Group andPorvair Sciences, had an excellent year with operating profit growth of 14% to£5.5m (2005: £4.8m) on sales up 4% to £26.4m (2005: £25.4m). The prospects formany parts of this division are encouraging and during the year additional staffwere recruited into the commercial and engineering teams. Aviation sales wereparticularly strong during the year. Several notable account wins contributed torevenue; including a 5 year, $5m sales revenue programme for a filter system forAirbus aircraft; and a $1m commercial aircraft filter retrofit programme. Apreviously announced aviation project, the fuel tank inerting system developedin association with Parker Hannifin for Boeing, underwent several unforeseendesign changes and associated delays. This is one of the Group's key developmentprojects and so was a concern, but we now expect to start production in theSpring of 2007. Encouraging developments late in 2006 are opening the way forfurther adoption of this product by other commercial fleets. The filtration of gasified coal and biomass - one of the Group's key developmentprojects - is undertaken in this division and had another year of excitingprogress. In the first half we signed a joint development agreement with a majoroil company and leading provider of gasification technology under which we areable to develop new products in an existing gasification power plant. This willadd further to our proven expertise in this fast growing area. The amount ofengineering design, sales proposals, and prototype filter sales grew steadilythroughout the year. A further suite of filters was delivered to SG SolutionsLLC (owners of the Wabash River IGCC power plant) as part of the $20m supplyagreement signed with them in 2005. Our focus in the bioscience field is on proprietary processes, which change thesurface properties of a material. We have a range of projects using thistechnology at beta and development trial stages. The first of these, a filterfor an inhaling device, began commercial sales during the year. Divisional performance: Metals Filtration As reported at the Interim stage, Metals Filtration had a challenging start tothe year and management took action to reduce costs and pass on input costrises. Encouragingly, the benefit of these actions came through in the secondhalf, in which Metals Filtration returned to profitability and the operatingprofit margin recovered to more normal levels with several parts of theorganisation finishing strongly. For the full year, sales grew to £19.1m (2005:£18.9m) and operating profits were £0.4m (2005: £1.0m). Engineered Ceramics, a part of Metals Filtration which makes molten metalhandling equipment, had a second successive record year. The iron foundryproduct line also did well, particularly in the final quarter, and sales intothe specialist alloy market were strong throughout. Sales into the aluminiumcast shop industry were marginally down on the prior year as US based customersheld back on production in the face of their own rises in input costs. Exportsales however finished the year strongly, helped in part by the weaker USdollar. Late in the year, an agreement was reached with Howmet, a majorprecision investment casting company, to supply them with a new range ofhigh-value metal alloy handling equipment. This will become a key growth projectfor the Group. Sales will start early in 2007 and will help to secure a strongrebound by Metals Filtration in the year ahead. Divisional performance: Advanced Materials Porvair Advanced Materials is developing several of the Group's key projects.Operating losses in this division were £1.3m (2005: £1.7m). As noted in previousresults' statements, this sort of work is complex and determining when newproducts will generate commercial revenues is difficult. 2006 demonstrated thiswell. Our diesel exhaust substrate underwent successful development trials, butcommercial sales have not yet been forthcoming. Towards the end of 2006 weswitched partners on our most near term project and are now working directlywith Deutz AG, an international diesel engine manufacturer, who are conductingthe primary trials. We expect these trials to finish towards the end of 2007. Wehave also begun to work with several other exhaust specialists who areevaluating metal foam as part of their solution in the more complex exhaustsystems required to meet the next generation of emission standards. The Advanced Material division made great strides in its bipolar platedevelopment. Qualification trials of our low-cost bipolar plate finishedsuccessfully in the early part of the year and we received our first order forthe new plates in May. Production began in September and we are now shippingplates regularly. Sales are modest at this stage, but the income nonethelesscontributes to the technical expenditure of the division. After five years ofdevelopment it was a real pleasure to see a demonstration of our latest low costbipolar plates installed in a 2007 fuel cell car. They outperform previousgenerations of plates while offering substantial cost savings. The developmentteam on this project has done a terrific job. Our principal customer, UnitedTechnologies Power, anticipates growth in 2007 and beyond. Our next objective isto achieve qualification on a second plate design. This design work will finishin early 2008. Acquisitions In January 2007, we announced the acquisition of the business and assets ofOmniFilter and Manufacturing Inc ("Omnifilter"), based in Richmond, Virginia.Omnifilter's product range is complementary to that of the Porvair FiltrationGroup ("PFG"), of which it will become a part. Its US location will help PFGwith its trans-Atlantic customer base, which has been growing for the last fewyears. The acquisition was made for cash and is expected to be immediatelyearnings enhancing. We are pleased to welcome the Omnifilter staff to Porvairand offer our thanks to the Gerschick family - Omnifilter's founders - for theirhelp and support through the transition process. Earnings per share and dividend Earnings per share increased 40% to 5.2p (2005: 3.7p). Growth in profit aftertax and the benefit of acquiring the minority interest in the Porvair FiltrationGroup in 2005 account for the growth in earnings per share. The Directorsrecommend a final dividend of 1.1p (2005: 1.05p) per share for 2006. TheDirectors see this progressively increasing dividend as appropriate, given theGroup's growth prospects. Employees and the Board Charles Matthews took over from John Morgan as Chairman of Porvair plc earlierin the year. John had been with the Group for 25 years and guided it from itsdebut as a public Company in 1988. Porvair evolved under John's stewardship froma single product polymer business to today's filtration and environmentaltechnologies group. He was a much-valued colleague, and we were pleased to passon the many expressions of gratitude we received from staff and shareholders onhis retirement in April. We are pleased to welcome Dr John Sexton to the Board as an Executive Directorfrom 29 January 2007. Dr Sexton joined the Group with its acquisition of Filtersfor Industry in 2001, and since then he has been very successful in hisleadership of the Porvair Filtration Group. He will bring thirty years offiltration and engineering experience to the Board, and we look forward to hiscontribution both in the further development of the Porvair Filtration Group andin wider technology and engineering projects. On behalf of the Board, we would like to thank our excellent staff for theirhard work in 2006. We have a talented workforce, which has risen to thechallenges of continuing to develop the business. Outlook The Board believes that after several years of investment, Porvair is ready tomove to the next stage of its development in 2007. The Microfiltration division has delivered steady growth since its formation in2002. Its development will continue in 2007 both organically and, whereappropriate, by acquisition. The weaker US dollar may provide a headwind in theshort term, but the opportunities to manufacture in the US offered by theacquisition of Omni will help to mitigate this. We are excited by prospects inthe pipeline: for sales of filters into coal and biomass gasification; forbioscience diagnostic components; and for aviation filters. We expect these tocontribute in 2007 and grow further thereafter. Towards the end of 2006 an extensive review was undertaken at the MetalsFiltration division. A restructuring programme was completed early in the newfinancial year. The business enters 2007 with a greater focus on its coremarkets and a lower cost base. This will help the business rebound from achallenging 2006, as will export prospects enhanced by the weaker US dollar andrecent contract wins in high-value metal alloys filtration. The same strategic review addressed the Advanced Materials division. It has alsobeen restructured to concentrate on its two most promising development projects- diesel exhaust substrates and bipolar plates. We expect to complete dieselexhaust field trials with Deutz towards the end of 2007. Bipolar plates havealready generated initial commercial sales and we will build on the recentencouraging progress. The Board believes that Porvair has reached the point where its current businessand future prospects are attractively set. 2007 trading has started well and theBoard believes that Porvair is well positioned for the future. Charles Matthews: ChairmanBen Stocks: Chief Executive Officer29 January 2007 Finance Director's review Adoption of International Financial Reporting Standards The Group has adopted International Financial Reporting Standards ("IFRS") witheffect from 1 December 2005. In adopting the new requirements, the Group hasrestated the comparatives for the year ended 30 November 2005. A reconciliationof the differences between UK GAAP and IFRS and the principal accountingpolicies adopted under IFRS was published on 19 May 2006. Key performance indicators The Group considers its key performance indicators to be: the sales andoperating profit performance of its principal operations, the profit before tax,operating cash flow and earnings per share of the Group measured against apredetermined budget; and the development progress towards commercialisation ofits key growth opportunities. These indicators are discussed in detailthroughout the Statement by the Chairman and Chief Executive and the FinanceDirector's review. Group operating performance Group sales were £46.2m (2005: £44.9m) and operating profits rose by 11% to£3.7m (2005: £3.3m). The operating performance of the Microfiltration, MetalsFiltration and Advanced Materials Division are described in detail in theStatement by the Chairman and the Chief Executive. The operating loss associatedwith the Other Unallocated segment was £0.9m (2005: £1.0m before exceptionalitems, £1.6m including exceptional items). The Other Unallocated segment mainlycomprises Group corporate costs, some research and development costs, newbusiness development costs and general financial services. The unallocated lossbefore tax in 2006 includes provisions written back of £0.3m, principallyrelated to a reduced expected onerous lease cost arising on a building that wasrefurbished and sublet in 2006. Exceptional items In 2005, the Group benefited from a net £0.1m exceptional credit. This comprisedan exceptional credit of £0.7m arising on a collection of a debt inMicrofiltration which was written off prior to the acquisitions of 2001 and acharge of £0.6m principally relating to additional property costs associatedwith buildings retained following the disposals of 2003. Finance costs Net interest payable increased by 8% to £0.6m (2005: £0.6m). The Group holds asignificant amount of its borrowings in US dollars ($14m at 30 November 2006)and interest rates on US borrowings have more than doubled in the past twoyears. The additional cost of the US dollar borrowing has been offset by thefinance costs in relation to the closed defined benefit pension scheme reducingto zero (2005: £0.2m). Interest cover was 6 times (2005: 6 times). Tax The Group tax charge of £1.0m (2005: £0.8m) represents an effective tax rate of32% on profits before tax. The tax charge comprises current tax of £0.9m (2005:£1.0m) and a deferred tax charge of £0.1m (2005: £0.2m credit). The Groupcarries a deferred tax asset in relation to the past losses in its USoperations. The tax credits associated with this year's losses in the US havenot been recognised as their recoverability is considered uncertain. Shareholders' funds Shareholders' funds at 30 November 2006 of £31.5m were £1.4m higher than at 30November 2005. Shareholders' funds were increased by profit after tax of £2.1m,actuarial gains net of deferred tax added £1.6m and £0.1m was added as aconsequence of issuing new shares on the exercise of share options.Shareholders' funds were reduced by exchange losses on retranslation of foreigncurrencies of £1.6m and dividends paid of £0.8m. Cash flow Net cash generated from operating activities was £2.3m (2005: £4.5m). Higherworking capital requirements to service the growth in Microfiltration and thepayment of certain provisions and accruals in 2006 reduced the cash generatedcompared with the prior year. Net interest paid was £0.7m (2005: £0.3m). Thehigher interest charge principally arises as a result of the increase in USinterest rates over the previous two years. Capital expenditure was £1.0m (2005:£0.9m) and the Group paid £0.8m (2005: £0.7m) in dividends. The Group's increase in borrowings was offset by the currency translationeffects of the US dollar denominated borrowings, resulting in an overallreduction in net debt of £0.1m. At the year end, the Group had net borrowings of £8.4m (2005: £8.5m) comprisinggross borrowings of £10.2m offset by cash balances of £1.8m. The Group hadunutilised borrowing facilities of £2.0m (2005: £4.5m) and an unutilisedoverdraft facility of £3m (2005: £3m). The Group's gearing (net debt as a percentage of shareholders' funds) reduced to27% (2005: 28%). Finance and treasury policy The treasury function at Porvair is managed centrally, under Board supervision.It is not a profit centre and does not undertake speculative transactions. Itseeks to limit the Group's exposure to trading in currencies other than itsoperations' local currency and to hedge its investments in currencies other thanSterling. The Group does not hedge against the impact of exchange rate movementson the translation of profits and losses of overseas operations. At the year end, the Group had $14.0m (2005: $18.1m) of US dollar borrowingsexposure which hedged underlying US net tangible assets on the balance sheet of$18.6m (2005: $17.1m). In addition, the Group has a Euro 1.6m interest bearingdebtor that was fully hedged by borrowings in Euros. The Group finances its operations by a combination of share capital and retainedprofits and short and long term loans. Borrowings are principally at floatingrate. Pension schemes The Group continues to support its defined benefit pension scheme in the UK,which is closed to new members, and to provide access to a defined contributionscheme for its US employees and other UK employees. During the year, the Group made a £550,000 payment to the defined benefitpension fund in addition to its ongoing funding commitments, bringing the totalcontributions to the fund, in excess of ongoing funding, over the last threeyears to £1.4m. The Group recorded a retirement benefit obligation of £4.3m (2005: £7.0m). Thereduction arose from an actuarial gain in the year of £2.3m and contributions tothe scheme in excess of the service charge of £0.4m. Risks and uncertainties There are a number of risks and uncertainties, described below, which could havea material impact on the Group's long term performance and prospects. Existing market risk The Group's strategy is to serve the needs of a range of specialist filtrationmarkets, such that it is not dependent upon any one market. No single marketsegment represents more than 17% of sales. However, three key segments:aluminium filtration; aviation filtration; and foundry products, contribute morethan 10% of the Group's revenue and the Group is exposed to a significantdecline in any of these segments. Aluminium is currently in a high demand phase. The production of aluminium is,however, gradually moving to larger smelters in regions of low cost energy. TheGroup is actively engaged in developing its overseas markets for its aluminiumcast shop business to reduce its reliance on the US market. The Aerospace market has traditionally been a very steady business as theproduct cycles are very long and the Group offers a broad range of products.There is unlikely to be such a rapid decline in the aerospace market that theGroup could not manage the consequences over time. The foundry filter business is being enhanced by developments of innovativeproducts and improved overseas distribution has broadened the Group's ability toaccess markets outside the US. Both these actions will reduce the business'sreliance on existing products in the US market. New markets risk The Group invests significant amounts into the development of new products fornew markets. Many of these new markets are at an early stage of development andare driven either by environmental imperatives or legislation. There is a riskthat the products that the Group is developing will either not be adopted aspart of the potential solutions or that the legislation or regulation will notdevelop in the way that the Group anticipates. The Group maintains a portfolio of potential products addressing differentmarket segments and recognises that not all of its potential products willbecome significant revenue generators. The Group maintains a close review ofeach of its major developments and is not significantly exposed if the marketfor any one product does not develop. Financing risk The Group maintains a level of borrowing to finance its operations. Damage to,or loss of, its banking relationships could have a material impact on theprofitability of the Group. To mitigate this risk, the Group has sufficientlong-term facilities in place for its expected requirements. It maintains aclose relationship with its bankers and carefully monitors the restrictions onits borrowings. Treasury and exchange rate risk The Group has operations in the UK and US and sells its products throughout theworld and as a result, the Group is exposed to fluctuations in exchange rates.The Group maintains certain of its borrowings in US dollars to hedge itsinvestments in the US and enters into forward sales of its principal foreigncurrency revenues to reduce the impact of exchange rate movements. Competitive risk Porvair operates in competitive global markets. The Group's achievement of itsobjectives is reliant on its ability to respond to many competitive factorsincluding, but not limited to, pricing, technological innovations, productquality, customer service, manufacturing capabilities and the employment ofqualified personnel. If the Group does not continue to compete in its marketseffectively by developing innovative solutions for its customers, it could losethem and its results could be adversely affected. Technological risk Porvair has a broad portfolio of products delivered to a diverse range ofmarkets. The Group's business could be affected if it does not: • continue to develop new designs for its customers that provide technical or cost advantages over its competitors; • develop new technologies and materials that are adopted by its customers to provide improved performance. The Group recognises that certain of its competitors are larger and have greaterfinancial resources. This may enable them to deliver products on more attractiveterms than the Group or to invest more resources, including research anddevelopment, than the Group. The Group carefully selects its development prospects and monitors theirprogress carefully to maintain a range of potential opportunities. The nature ofthe Group's development projects means that their potential commercial ortechnical success cannot be assessed with certainty throughout the developmentprocess. The ultimate commercial success of a project can often only be judgedwhen the development cycle is close to completion. Raw materials and resources risk The Group uses raw materials in its production processes. Prices for these rawmaterials can be volatile and are affected by the cyclical movement in commodityprices such as oil, alumina, silicon carbide and steel. The Group's ability topass on these price fluctuations to its customers is to some extent dependent onthe contracts it has entered into and the prevailing market conditions. Theremay be times when the Group's results are adversely affected by an inability torecover increases in raw material prices. Liability risk The Group manufactures products that are potentially vital to the safe operationof its customers' products or processes. A failure of the Company's productscould expose the Group to loss as a result of claims made by the Company'scustomers or users of their products. The company seeks to minimise this riskthrough limitations of liability in its contracts and carries insurance cover inthe event that claims are made. Global and regional economic, political risk and environmental risk The company sells its products throughout the world and derives a substantialportion of its revenue and earnings from outside the UK. The Group's ability toachieve its financial objectives could be impacted by risks and uncertaintiesassociated with local legal requirements, the enforceability of laws andcontracts, changes in the tax laws and economic conditions, politicalinstability, war, terrorist activity, natural disasters or health epidemics. Christopher TylerGroup Finance Director29 January 2007 Consolidated income statementFor the year ended 30 November 2006 2005 2005 2005 Note Before Exceptional Total Exceptional items itemsContinuing operations £'000 £'000 £'000 £'000Revenue 1 46,204 44,873 - 44,873Cost of sales (31,436) (30,985) - (30,985)Gross profit 14,768 13,888 - 13,888Distribution costs (619) (510) - (510)Administrative expenses (10,476) (10,144) 67 (10,077)Operating profit 1 3,673 3,234 67 3,301Interest payable and similar (716) (757) - (757)chargesInterest receivable 119 205 - 205Profit before income tax 3,076 2,682 67 2,749Income tax expense (985) (800) (20) (820)Profit for the year 2,091 1,882 47 1,929Profit attributable to - (561) - (561)minority interestProfit attributable to 2,091 1,321 47 1,368shareholders Earnings per share (basic) 5.2p 3.6p 0.1p 3.7pEarnings per share (diluted) 5.1p 3.6p 0.1p 3.7p Consolidated statement of recognised income and expenseFor the year ended 30 November 2006 2005 £'000 £'000 Exchange differences on translation of foreign (1,598) 1,079subsidiariesActuarial gains on defined benefit pension scheme 2,300 300Taxation charge on items taken directly to equity (729) (73)Net (expense)/income recognised directly in equity (27) 1,306Profit for the year 2,091 1,929Total recognised income for the year 2,064 3,235Attributable to minority interests - (561)Attributable to shareholders of Porvair plc 2,064 2,674 Consolidated balance sheetAs at 30 November 2006 2005 £'000 £'000Non-current assetsProperty, plant and equipment 6,596 8,045Goodwill and other intangible assets 26,718 27,804Deferred tax asset 1,976 2,819Other receivable 968 1,159 36,258 39,827Current assetsInventories 6,499 6,103Trade and other receivables 8,195 7,970Derivative financial instruments 97 -Cash and cash equivalents 1,756 1,001 16,547 15,074 Current liabilitiesTrade and other payables (5,939) (6,710)Current tax liabilities (355) (676)Bank overdraft and loans (500) (500)Derivative financial instruments - (66)Provisions (150) (324) (6,944) (8,276) Net current assets 9,603 6,798 Non current liabilitiesBank loans (9,695) (9,012)Retirement benefit obligations (4,275) (7,031)Provisions (367) (485) (14,337) (16,528)Net assets 31,524 30,097 Capital and reservesShare capital 811 810Share premium account 32,615 32,513Cumulative translation reserve (3,296) (1,698)Retained earnings/(deficit) 1,394 (1,528)Total shareholders' equity 31,524 30,097 Consolidated cash flow statementFor the year ended 30 November Note 2006 2005 £'000 £'000Cash flows from operating activitiesCash generated from operations 2 2,303 4,497Interest received 60 185Interest paid (744) (494)Tax paid (1,266) (800)Net cash generated from operating 353 3,388activities Cash flows from investing activitiesAcquisition of subsidiaries (net of cash - (6,603)acquired)Purchase of property, plant and equipment (573) (835)Purchase of intangible assets (390) (47)Available for sale investments 500 1,288Net cash used in investing activities (463) (6,197) Cash flow from financing activitiesNet proceeds from issue of ordinary share 103 3,908capitalIncrease/(repayment) of borrowings 1,669 (2,508)Dividends paid to shareholders (832) (736)Net cash generated from financing 940 664activities Net increase/(decrease) in cash and cash 3 830 (2,145)equivalentsEffects of exchange rate changes (75) 99 755 (2,046)Cash and cash equivalents at the beginning 1,001 3,047of the periodCash and cash equivalents at the end of 1,756 1,001the period Notes 1. Segmental analyses The geographical analyses of the Group's turnover and segmental analyses ofturnover, operating profit/(loss) and net assets are set out below: Primary reporting format - business segments 2006 Metals Microfiltration Advanced Other Group Filtration Materials unallocated £'000 £'000 £'000 £'000 £'000Revenue 19,076 26,445 683 - 46,204 Operating profit/ 363 5,506 (1,271) (833) 3,765(loss) beforeshare based paymentsShare based (9) (4) (11) (68) (92)paymentsOperating profit/ 354 5,502 (1,282) (901) 3,673(loss)Finance costs - - - (597) (597)Profit/(loss) 354 5,502 (1,282) (1,498) 3,076before income taxIncome tax expense - - - (985) (985)Profit/(loss) for 354 5,502 (1,282) (2,483) 2,091the year 2005 Metals Microfiltration Advanced Other Group Filtration Materials unallocated £'000 £'000 £'000 £'000 £'000Revenue 18,861 25,392 620 - 44,873 Operating profit/ 1,032 4,819 (1,633) (903) 3,315(loss) beforeshare basedpaymentsShare based (11) (1) (17) (52) (81)paymentsOperating profit/ 1,021 4,818 (1,650) (955) 3,234(loss) beforeexceptional itemsExceptional items - 711 - (644) 67Operating profit/ 1,021 5,529 (1,650) (1,599) 3,301(loss) afterexceptional itemsFinance costs - - - (552) (552)Profit/(loss) 1,021 5,529 (1,650) (2,151) 2,749before income taxIncome tax expense - - - (820) (820)Profit/(loss) for 1,021 5,529 (1,650) (2,971) 1,929the year The Other Unallocated segment mainly comprises Group corporate costs, someresearch and development costs, new business development costs and generalfinancial services. The unallocated loss before tax in 2006 includes provisionswritten back of £0.3m, principally related to a reduced expected onerous leasecost arising on a building that was refurbished and sublet in 2006. Secondary reporting format - geographical segments 2006 2005 By By destination By origin destination By origin £'000 £'000 £'000 £'000 RevenueUnited Kingdom 13,581 26,445 12,181 25,392Continental 6,012 - 5,144 -EuropeAmericas 22,030 19,759 22,019 19,481Asia 3,385 - 4,376 -Australasia 506 - 503 -Africa 690 - 650 - 46,204 46,204 44,873 44,873 1. Segmental analyses continuedAs at 30 NovemberNet assets 2006 2005 Assets Liabilities Total Assets Liabilities Total £'000 £'000 £'000 £'000 £'000 £'000Metals 19,115 (1,504) 17,611 21,533 (2,020) 19,513FiltrationMicrofiltration 27,759 (3,698) 24,061 26,550 (3,315) 23,235Advanced 903 (50) 853 1,175 (100) 1,075MaterialsOtherunallocatedLong term 968 - 968 959 - 959receivableDeferred 200 - 200 700 - 700 consideration Cash and cash 1,756 - 1,756 1,001 - 1,001equivalents Retirement - (4,275) (4,275) - (7,031) (7,031)obligations Borrowings - (10,195) (10,195) - (9,512) (9,512)Other 2,104 (1,559) 545 2,983 (2,826) 157Continuing Group 52,805 (21,281) 31,524 54,901 (24,804) 30,097 2. Cash generated from operations 2006 2005 £'000 £'000Operating profit before exceptional items 3,673 3,234Exceptional items - 67Operating profit 3,673 3,301Non cash pension charge 113 125Share based payments 92 81Depreciation and amortisation 1,470 1,506Loss on disposal of property, plant and - 4equipmentOperating cash flows before movement in 5,348 5,017working capitalIncrease in inventories (634) (19)Increase in trade and other receivables (1,017) (235)Decrease in payables (1,102) (85)Decrease in provisions (292) (181)Cash generated from operating activities 2,303 4,497 3. Reconciliation of net cash flow to movement in net debt 2006 2005 £'000 £'000Net increase/(decrease) in cash and cash 830 (2,145)equivalentsEffects of exchange rate changes 911 (869)(Increase)/repayment of borrowings (1,669) 2,508Net debt at the beginning of the period (8,511) (8,005)Net debt at the end of the period (8,439) (8,511) 4. Dividends An interim dividend of 1.0p per share was paid on 15 September 2006. TheDirectors recommend the payment of a final dividend of 1.1p per share (2005:1.05p per share) on 16 May 2007 to shareholders on the register on 13 April2007, the ex-dividend date is 11 April 2007. This makes a total dividend for theyear of 2.1p per share (2005: 2.05p). 5. Basis of preparation The preliminary announcement for the year ended 30 November 2006 has beenprepared in accordance with International Financial Reporting Standards (IFRS)as adopted by the European Union as at 30 November 2006 and in accordance withthe accounting policies included in the IFRS transitional disclosure publishedby the Group on 19 May 2006. The financial information contained in thispreliminary announcement does not constitute statutory accounts as defined inSection 240 of the Companies Act 1985. The financial information has beenextracted from the financial statements for the year ended 30 November 2006,which have been approved by the Board of Directors and on which the auditorshave reported without qualification. The financial statements will be deliveredto the Registrar of Companies after the Annual General Meeting. The financialstatements for the year ended 30 November 2005, upon which the auditors reportedwithout qualification, have been prepared under United Kingdom GenerallyAccepted Accounting Principles (UK GAAP) and have been delivered to theRegistrar of Companies. 6. Annual general meeting The Company's annual general meeting will be held on Tuesday 17 April 2007 atBrampton House, Bergen Way, King's Lynn. This information is provided by RNS The company news service from the London Stock Exchange