Good morning, everybody. Welcome to the presentation of the results of Porvair for the financial year ending the 30th of November, 2023. We're recording this, so we will go through the slides in the normal fashion, but we'll go quite quickly, as most of you've heard much of the story before. So on the opening slide, you know, I think mainly that we've been following the same strategy for nearly 20 years now, almost exactly 20 years of filtration, laboratory, and environmental markets. And if we can-- Oh, right. No, wait a minute. I've got it. I've got it. Marvelous. Same strategy for 20 years, and at the bottom of the page here, we set out what this strategy does for us on a five, 10, and 15-year view.
We've added the TSR numbers for you this time. TSR is a slightly capricious set of numbers, so I don't promise to show them every year, but every now and again. So that's what the strategy delivers. In terms of what it's delivered in this particular year, it's been an unusual year. Revenue's up a little bit. Last year they were up 18%, the year before that, 8%, so this year's 2% isn't quite as good, but the general trend we are content with. And then you'll hear from James, the margins are ahead, so operating profit and earnings per share up 12%. Decent year for cash. We'll talk about what we've done with that.
And mixed trading across the divisions, actually, and we will talk a bit more about that. It's the second, if not third, year of mixed trading. We've been perhaps fortunate this year that the swings have matched the roundabouts more or less, and we'll talk a bit more about that. So there's a little bit more to talk about than usual. Before we get on to that, just the basics of who we are. As you know, we are a filter company. We make regularly replaced engineered products. Those sorts of products, the sort of compounding work that we do, has attractive business characteristics along the bottom of the table, bottom of the slide, niche positions, barriers to entry, either quality accreditation, some patents, and so on.
But what really moves us is this, the fundamental demand drivers and the list of things in the top right-hand box, all of which you'll be more than familiar with, and all of which we see in various parts of our business. When we look at the five, 10, and 15-year record, it's really this top right-hand box that is the tailwind, which is so helpful. In terms of then how we operate the business and where we are, three divisions, as you know, helpfully color-coded here. This slide has a lot on it, but the share of revenues, we try and work in markets that are regulated in some way. In aerospace, it's very clear.
You can't make an aerospace part unless you're regulated, accredited by the FAA or the CAA or equivalent. That's true, to a greater or lesser extent, across all the markets that we serve. The growth drivers, I've covered. The growth rates, those market growth rates, we update every year. So these, some of these numbers have changed a little bit, but not significantly. Then the competitive advantage in this line of work is really the advantage of the incumbent. If you are the person who has provided a particular filter for a particular application, on the whole, it's a very sticky line of work.
To requalify a competitor, generally speaking, is an onerous task, and therefore, as long as you don't make a mess of it, you tend to stick with the work that you've got. And that has some advantages and disadvantages. It certainly leads through to the strategy. No change here at all. As I say, for 20 years, principal measures of success are consistent earnings growth, consistency being the key thing, we think, particularly in small cap, in the small cap public world, and some ESG metrics, which I'll come to later on. And then, in what are quite cash generative businesses, be very clear about where you allocate your cash.
So for us, it's back into the markets, and you'll hear a lot about that in terms of investment from James. Customer-led product development. That's important, of course, because in a market where the incumbent is king and market share doesn't move around very much, if you wanna move forward ahead of the market, then you've got to bring new products to it, and we have now a very good record of doing that steadily. And then allocate cash. Organic growth, mainly, margin enhancement, acquisitions when they become available. Actually, we made three in 2023, which is unusual for us. And a progressive dividend, and we've announced that this morning. So that's a canter through, you know, the background, the strategy, the purpose, and so on.
Now, in terms of then the key themes of the year, not much has changed since we last saw you in July. There are really three things going on. We have strong or steady demand in aerospace and in petrochemical world. Aerospace, obviously, airframes and engines, petrochemical, largely emissions control in large industrial markets, and clean water, which is always a pretty steady performer, normally pretty steady performer. That's been balanced by destocking, and I'll talk about that in just a sec. And those swings and roundabouts don't really put us off the day job, which is to focus on reinvesting, generating cash, and continued investment. So in terms of the first of those two, the swings and the roundabouts, aerospace does look pretty good, looks pretty good through 2024 now.
At least our order books are relatively settled. In terms of consumables, this time last year, we were saying that the laboratory business is starting to see destocking, mainly as a result of the sort of post-COVID supply disruption issues and people finding that the supply disruption was settling down, and therefore, they didn't need very long lead times anymore. And that theme worked its way out through the year. Right by the end of the year, we were starting to see things coming to normality. So February of last year, we might have had 24-week lead times in the factories against ordinarily four to six weeks. We're now back down to four to six weeks, so that's actually quite encouraging. But of course, that destocking process can be a little troubling.
So that was very much sort of post-COVID through 2023. Actually, what we're seeing now, I think, particularly in industrial markets, is not so much that, but I think we're seeing corporate treasurers squeezing working capital with, you know, much higher interest rates, and people working their balance sheets more than they had to for, for quite a long period prior to that. So we are still seeing destocking in industrial markets, and as we say in the statement, we think that's got a few more months to run. So it's definitely still with us in February 2024. Meanwhile, we have worked for some years, quite hard on margins. That's very much price increases through 2022 and 2023. I would say the inflation, the last two times we've seen inflation has been very much top of mind.
It's less of a problem today than was the case 6, 12, or 18 months ago. Still with us, wage inflation is still with us, but less scary than 18 months ago. Cash generation has been very strong. James will take you through that. I'll come back and do the acquisitions in just a minute, and the productivity improvements are incremental, small, and everywhere. James will talk you through the CapEx. So those have been the sort of themes of the year. So I'll now let James do a little bit, get a little more granular with the numbers.
Okay. Thank you, Ben. Just grab the clicker. So, good morning to you all. The financial summary here just simply summarizes just the headlines, really, for the year. Moving top left-hand side, moving left to right. Revenue is up 2%, with 4% growth in aerospace and industrial, a 4% reduction in laboratory, and 6% top line growth in Metal Melt Quality . The performance, fair to say, has been mixed across the year, and I'll add a bit of color to the divisional performance in a slide or two. Bottom left-hand side, adjusted PBT is up 10% to GBP 21.4 million, while adjusted EPS up a little more at 12% to GBP 0.372.
And at the year-end close, following a busy year for investment, we closed the year with GBP 14.1 million of net cash on the balance sheet. Moving over to the income statement then, and as usual, just presenting the adjusted results this morning, and details of the adjusting items could be found in the announcement from this morning. So the 2% revenue growth has delivered GBP 176 million in the year. The year-on-year impact of foreign exchange on the retranslation of overseas subsidiaries is relatively minor this year. Constant currency revenue growth is at 1%. Operating profit of GBP 22.6 million, up 10% year-on-year, with margin improvement to 12.8%, up from the 11.9% that we reported and delivered this time last year.
Interest is up a little, and the effective rate of tax is down a little to 20% versus the 21% that we had last year. So with the movements across interest and tax, the 10% OP growth has dropped to 12% growth through the EPS line to the GBP 0.372 at the bottom of the slide here. Moving across to the simplified cash flow, and then just pulling out a few headlines for the year. So the cash generated from operations was GBP 24.1 million. Included in this was the extra GBP 0.5 million that we paid this year into the U.K. defined benefit scheme, which, as previously signaled, takes our annual deficit repair payments up to GBP 2.1 million for this year.
We had a GBP 2.8 million working capital outflow, which was broadly flat on prior year. Moving down the cash flow then, you can see it's been a busy year for investment. We have spent close to GBP 14 million on acquisitions, and that includes the third and final earn-out on K Bio from back in 2021, but also HRW and Ratiol ab, which completed in July this year. Also spent GBP 4.8 million on CapEx, and that CapEx number is broadly similar to the spend that we incurred last year. GBP 2.7 million paid out in dividends, and in maintaining the group's progressive dividend policy, the board is recommending a final dividend of GBP 0.04, taking the full year dividend to GBP 0.06.
Moving to the very bottom of the slide here, we finished the year, as I said, with GBP 14.1 million of net cash on the balance sheet and no debt, having invested GBP 18.7 million in acquisitions and CapEx. As usual, these, these numbers at the bottom here exclude the IFRS 16 lease liabilities, which form part of our reported position in the statement. Important to note, of the GBP 14.1 million, we spent GBP 10 million of that in the first week of December on a further acquisition, EFC, which Ben will, will cover in a moment. Skipping across then to the divisional highlights, add some color to the performance, and again, working from left to right.
Aerospace and Industrial revenue, GBP 67.6 million, up 4% on prior year, with operating profit at GBP 9.8 million and margin progress to 14.5%.... with this margin being broadly in line with the target margin for the division. Within the 4% top line growth, performance has been mixed within the division. Aerospace and petrochemical together, up around 20%, while industrials down as the effects of the market, destocking, were felt by these businesses. In terms of the margin progress in the year, lots of tiny steps forward, really. This year includes particularly productivity benefits, mainly from the manufacturing efficiencies that come with the return of aerospace volumes, and also from the CapEx returns, from investments in recent years. Mix has also been a factor this year within aerospace and industrial.
We completed the HRW acquisition in the first half of the year, and that has also been helpful this year when we've had a quieter year for microelectronics in the U.S. Moving across then to laboratory. Revenue of GBP 60.4 million, down 4% on prior year, with operating profit at GBP 9.2 million, and the margin at a little over 15% there, in line with the target margin for the division. As with other parts of the group, the performance has been mixed within the division. SEAL Analytical had another record year with the demand for water quality assurance continuing, and also supported by the recent product introductions.
Elsewhere in the division, the lab consumables market destocking had a significant impact on the year, with volumes down, following the highs of 2022, and lead times returning to more normal levels, as Ben has talked to. So within this division, certain cost reductions were taken earlier in the year, where appropriate, in order to mitigate the reduction in the volume on the top line, which included FTEs being reduced by around 8% within the division. And as previously said, destocking in laboratory was anticipated, and certainly don't see any fundamental changes in the market drivers for the division within which investment continues. So moving across then, lastly, to Metal Melt Quality.
Revenue of GBP 48 million, with operating profit of GBP 6.5 million, a margin improvement to 13.5%, above the target level of 10%-12% for this division. Demand for aero has also been strong within Metal Melt Quality , and the margin performance here, in particular this year, has benefited from the cost price squeeze, which overall has been positive, just for the moment. The China business, though relatively small in our numbers, has also had a good year, and that's been helpful in terms of margin. And we did see some destocking in the second half of the year, impacting aluminum demand, but again, the underlying demand drivers for that market remain strong. Ben?
Right. Three more slides. First of all, the acquisitions. Actually, the Ratiol ab, we've seen these pictures before in June. We just finished it in June or July of last year. And then, EFC was the fourth of December. Ratiol ab is a lab consumables business. EFC is an industrial filter business, but they have the same sort of strategic rationale at the bottom. They produce complementary products to the ones we already produce, and they represent new routes to market, in both cases, for us. In Ratiol ab's case, they also bring a really nice manufacturing facility and tool making capabilities in Hungary, which we are putting a lot of investment in very quickly. It's low cost, the tool making.
We haven't had that before, and it's revelatory. And so both of those should start to contribute in 2024. One slide on ESG. Now, you've all been given... We produced our ESG report this morning, along with our financials. It's a great read. You've got a copy to take home with you. In the middle of it, actually, starting on page five, is the strategic heart of the whole business. It's the two or three pages around which the whole business is built.
So if you want to really know what we do and why we do it, why we choose to do some things and choose not to do others, where we see opportunities, where we see challenges, and what we're doing about that, it's all in there, and I would recommend it for that purpose. As I said at the beginning, in our principal measures of success are consistent earnings growth and selected ESG metrics, and so we published those here today. I don't propose to go into them in any great detail. We've set a target of 10% reduction in carbon intensity between 2022 and 2025. We haven't made a blinding start at that in 2023, but we're actually pretty confident that we'll catch up in 2024 for various reasons, various investments going in now. Voluntary quit rate.
We actually think of all our stakeholders, that our staff are perhaps the most important. Obviously, there's shareholders, but, but... So we work really hard on employee engagement, two-way communication and so on, but you can't measure that. So a sort of proxy, which sometimes fits and sometimes doesn't, is the voluntary quit rate, percentage of people in any given site who are leaving, you know, of their own volition. Doesn't always work. If, you know, if Walmart or General Motors open up next door at a much higher pay rate, then, you know, we do... It's not perfect, but it's a useful proxy for how hard we try with our staff. Then the other things are, as you see.
So this is important, we come back to it every year. Then finally, the summary and the outlook, which is also important. So the summary for last year, a record year, but with a lot of variability again. We say in the statement, that's not unusual. You know, this is not a business that everything goes, you know, as you expect year in, year out. But there's been more variability, I think, in the last couple of years than we're normally used to. Last year, half one was very strong, half two, less strong. Three acquisitions, continued investment, nothing wrong with the basic markets in which we're operating, and we continue to have a pretty strong balance sheet to be able to act if we need to.
All that then runs through into how we feel about 2024, which is okay. Aerospace, petrochemical are fine. We can feel laboratory consumables starting to settle and recover a bit, and so that's pretty good news, I think. On top of that good news, we've got the three acquisitions, which are starting to contribute, and we've got some quite good products, actually, which this time around we haven't really talked about, particularly in SEAL, which are starting to come through and will support. Set against that, forex doesn't look all that comforting from where we're sitting at the moment. We're particularly exposed to the dollar, and so I think there will be a headwind probably in 2024.
As I've mentioned, we think there's a little bit further to go on industrial consumable destocking, particularly in the U.S. But we don't see that as being, you know, as being a runaway problem, but we've got to, particularly in the first half, I think we've got to just roll with that punch. That probably means that this year, the second half will be stronger than the first half. We would expect, and, you know, that's fine. No reason to think we can't continue to make reasonable progress both this year and beyond. So that's all we have in terms of the presentation. If there are any questions, I think we're gonna mic you up, actually, but if there are any questions, do put your hand up, and we'll see if we can answer them.
Thank you. Could you perhaps talk a little bit about the differences you're seeing in terms of the geographic markets, particularly, I guess, the U.S. was flat in the year just on. A lot of other industrial companies have pointed to the U.S. being the strongest market out there, so I'm assuming that's mixed specific for you guys. But could you just talk about the different regions and any variants you're seeing?
It very much depends on the market. U.S., so U.S. is half of what we do across the group. Aerospace in the U.S. has been good for 15 months, I suppose. The laboratory businesses had a difficult 2023 and are now looking much more settled. The industrial businesses had a really strong start to 2023, which is perhaps the echo that you're hearing. But since, perhaps since the fall, they have weakened a bit, and as I say, a few more months of that to run, we expect. Europe, pretty steady. And Asia, we have some presence in China, and actually, that's going pretty well for us at the moment. That's largely an aluminum business, so.
The destocking in industrial, is there any particular part of industrial?
No.
Just across the board?
No, across the board, which is why I think it's corporate treasury rather than-
Yeah.
-anything else.
Thank you.
Yeah. Any other questions?
Hi, Ben. Thanks for that. Just want to follow up on your comment on SEAL products, because I know the importance of new products-
Mm-hmm.
-and things about new pricings.
Mm-hmm.
How do you see pricings looking out?
In SEAL or in general?
In general.
In general. Well, we're putting another price increase through now. As I said, we were much more active a year ago. So inflation really started for us, let's say early 2022, and so we put prices up through 2022 and into 2023. Not so much in 2023. Another price just gone through now. And while that has got more difficult, you know, we will get a low single-digit price increase delivered, you know, shooting for more, but that's what we'll get. And that's because I think people do understand that, you know, wages in particular are continuing to rise, and you know, so I think we'll be all right for one more round, at least.
SEAL products?
SEAL products, yeah. So SEAL Analytical is a business that measures inclusions in water, particularly inorganic inclusions in water. It's a highly regulated market, and it's a market that is increasingly consolidated around the large laboratory groups. You will all be familiar with Eurofins and others. And those larger laboratory groups need high throughput and more automated equipment to deliver for their customers, and SEAL is particularly well-placed with a suite of products in that regard, and has a set of incremental improvements. We're probably halfway through that in bringing out smaller equipment, faster equipment, smaller, you know, desktop size, faster higher detection limits, and so forth.
Does that all add up to be quite meaningful?
Well, you know, with us, a big new product is $1 million of revenues. So, we are very much a group that makes a whole series of small steps forward, and yeah, there are a number of small steps forward to be done, to be had there.
Thank you.
Thank you. Can you comment at all on the volume performance? Assuming there was a small price increase last year, or at least on an annualized basis, it would probably imply that volumes might have been down a bit. Also, could you comment on the organic performance that you've stripped out, constant currency, where if you can, sorry, FX movements, but could comment on the performance excluding acquisitions as well?
Yes.
Yep.
I'm not sure what we can say about volume. I'm not sure. Can you have a stab at volume?
Yeah, sure.
Because it's difficult for us to measure, isn't it?
It's mixed across the group, and I think probably where you're going, Tom, is in terms of the price increases that we put through on a broadly flat top line, 2% up. We've seen probably, I'd say about GBP 6 million or GBP 7 million drop off in volume, it's that sort of level, with price increases coming in, offsetting that.
What was the second half of the question?
Just the organic performance.
Organic. Yeah, we called out the organic performance in the note one, so 2% revenue growth, 1% constant currency. And if we strip out the effect of Ratiol ab, there's GBP 2.8 million of Ratiol ab that came in in the year, and we're negative 1%.
And finally, do you have an idea on the normalized laboratory margin? Obviously, it's been all over the place over the past few years.
It has, yeah. I mean, it was creeping up to 18%-19%, as you know, when the volumes were really thumping through. We've always guided on 15% plus for that division, and I think that's still a fair guide.
Thank you.
Mm-hmm.
Obviously saw return to M&A last year in quite decent fashion. Now, how fertile is the sort of M&A backdrop at the moment? Is pricing aspirations becoming more normalized after COVID? And how are you looking forward, or how are you seeing the landscape play out this year?
So pricing expectations depends the route down which a prospect comes. If it's somebody we've known for years and years and years, yes, I think people are a little bit more realistic as to the multiples they might, they might anticipate. If it comes through an intermediary, then, no, you have to go through the whole dance of, you know, how absolutely marvelous the asset is. So no change in that route. In terms of the landscape, for us, given, you know, the sort of very niche aspect of what we do, I don't think it changes very much year on year. You know, we sort of know exactly who we would like to buy, which is to say, we know exactly who we would-- we don't want to buy.
When one of the somebody in the first category comes up, then it's a question of, are we a willing buyer, and are they a willing seller, in which case, you know, things move quite quickly. But as you know, that doesn't happen very often. We didn't make an acquisition in 2022. I think we've now made 14 in 14 years, or something like that, where our average is just over one a year. So three last year was extraordinary. One was a tiny thing, really, so it's really only two. And I don't expect... You know, we need to digest those, and so I don't expect much activity in the first half of 2024, at least. Anything else? Are we done? Very good. Well, thank you all very much for coming out early on a Monday morning.
Have a great week. We'll see some of you later.