Filtration technology supplier Porvair (LON: PRV) had a tough first half with destocking holding back progress. The outlook for the second half appears more positive although destocking is still ongoing.
In the six months to May 2024, revenues grew from £90.6m to £94.6m, but higher interest charges meant that underlying pre-tax profit fell from £11.8m to £11.5m. This includes an initial contribution from mist elimination filters producer European Filter Corporation (EFC) of £1m to operating profit and it accounted for the growth in revenues of the aerospace and industrial division.
There was a like-for-like decline in revenues in each of the three divisions. The largest decline was in the metal melt quality division where demand in the US was weak. There was higher demand for turbine blade filters.
The laboratory division had a contribution from last year’s acquisition, Ratiolab. The integration costs of this business held back margins and they should improve.
All three divisions should grow revenues in the second half. Peel Hunt expects an improvement in full year pre-tax profit from £21.4m to £22.5m.
The interim dividend was raised by 5% to 2.1p/share and the full year forecast is 6.3p/share. Net cash was £4.1m after the payment for EFC and it should recover to £10.4m by November 2024, down from £14m one year earlier.
Ben Stocks will be stepping down as chief executive next year and the process of appointing a replacement has commenced.
The underlying demand for the many of the company’s products remains strong, even though there are short-term weaknesses, with clean water and other clean technology areas propelling growth.
At 658p, the prospective multiple is just over 17. There is scope for further recovery in demand this year and next year.
