By Martin Clark
Specialist filtration and environmental technology group, Porvair continues to make headway with its stock rising nicely over recent months, though key challenges loom on the horizon. Share prices have been fairly consistent but drifting gently upwards for the most part.
The company, headquartered in King’s Lynn, Norfolk, has a market capitalisation of around £300 million, and has operations spanning the UK, USA, Germany, the Netherlands and China, employing around 700 people. It provides filtration and engineering expertise to a range of industries, across three core divisions: Aerospace & Industrial; Laboratory; and Metal Melt Quality.
Porvair is set to release its full-year 2021 results on 31 January 2022, with a further pre-close trading update this December, but it provided a small teaser of what’s to come in the middle of last month. Trading in the third quarter had been “modestly ahead of expectations” it noted on 14 September 2021, based on healthy order books in the industrial process, laboratory and aluminium sectors.
But other areas, like aerospace, which makes up about 45 per cent of the business, are continuing to feel the impact from Covid-19. This segment was the hardest hit by the pandemic, though orders are now improving, the company says, albeit still below pre-pandemic levels. Perhaps the greater threat could be elsewhere, along the supply chain, a challenge for any international business right now, as well as with the spectre of rising inflation.
Porvair’s business has a wide geographic spread in terms of both sales and manufacturing.“Supply chain dislocation is a significant near-term issue and while thus far the group is navigating supply, logistics and inflationary pressures satisfactorily, it is too early to determine to what extent they will affect full year performance,” its September statement noted.
Nonetheless, it is a turnaround from a year and a half ago when Covid-related lockdowns clearly affected Porvair’s 2020 results in terms of reduced orders and enforced shut downs. Recovery has been underway for some time, however, with order books filling up again from mid-2020 onwards, after the initial shock of the lockdowns and other imposed measures.
Half year results for the six months ended 31 May 2021 showed revenues 5 per cent lower at £69.7 million (compared to £73.2 million in the same period in 2020), but just 2 per cent lower on a constant currency basis.
The Laboratory division notched up a very healthy 33 per cent growth, highlighting the continued weakness in Aerospace & Industrial. Overall operating profits for the half-year period reached £9.3 million, the same as the year previously. Ben Stocks, Porvair’s chief executive, said on 5 July 2021 that while demand in aerospace has remained markedly lower than pre-pandemic levels, other segments are indeed showing good signs of recovery. He also said there are signs that activity levels in aerospace are starting to rebound.
Looking ahead, he said the underlying drivers of growth for Porvair all remain in place. These include: tightening environmental regulations; the need for clean water; expansion of analytical science; the drive for manufacturing efficiency; the replacement of steel and plastic with aluminium; and the development of carbon-efficient transport.
This, in part, explains the confidence in the future of its business, following a further acquisition at the start of this year, with the February purchase of Basildon-based Kbiosystems, a specialist in laboratory instruments. Since 2004, Porvair has grown on average by 8 per cent each year mainly by purchasing smaller companies, which it has done predominantly using its own cash from operations without taking on significant debt.
It is a measure of self-assurance that Porvair is now coming through it, and once again on the expansion trail, after a time in which pretty much all businesses around the globe were hit by the unprecedented challenges posed by the Covid crisis.