REG - Flowtech Fluidpower - 2023 Annual Unaudited Results
26/03/2024 07:30
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RNS Number : 3016I Flowtech Fluidpower PLC 26 March 2024
NEWS RELEASE
Issued on behalf of Flowtech Fluidpower plc
Immediate Release
Tuesday, 26 March 2024
The information contained within this announcement is deemed by the Company to
constitute inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014 4 as it forms part of UK domestic law pursuant to the Market
Abuse (Amendment) (EU Exit) regulations (SI 2019/310) ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR. Upon the publication of this announcement via the Regulatory Information
Service, this inside information is now considered to be in the public domain.
Flowtech Fluidpower plc
("Flowtech" or "the Company")
2023 Unaudited Annual Results
AIM listed Flowtech Fluidpower plc (LSE: symbol FLO), today releases unaudited
preliminary results for the year ended 31 December 2023 and extracts from the
2023 Annual report and financial statements which will be published in due
course.
Financial highlights FY2023 FY2022
unaudited audited
· Revenue £112.1m £114.8m
· Gross profit percentage 36.8% 35.7%
· Underlying EBITDA* £9.4m £11.6m
· Underlying operating profit* £6.0m £8.6m
· Operating loss (after separately disclosed items) £(10.4)m £(4.4)m
· Net cash generated from operating activities £8.2m £5.0m
· Net Debt** £14.7m £16.0m
· Final dividend 2.1p 2.0p
2023 Operational highlights
· Simplified operating model to build platform to unlock
full margin potential of the Group
· New leadership team in place, tightly managed overheads
with 7.5% headcount reduction in H2
· Focus on commercial excellence delivered 111bps of
gross margin improvement
· Continued focus on working capital management
delivering £1.8m improvement
· 9%-point improvement in product distribution stock
availability, fast moving products now at 97%
· Restructured sales and marketing, new catalogue
prepared and reset of the digital growth strategy
· Improved customer experience, complaints down by
>50%, customer satisfaction 73.1 (aiming higher)
· Fulfilment centre efficiency gains, 22% increase in
operator capacity and 35% headcount reduction
Roger McDowell, Non-executive Chair said:
"We have addressed what we believe to be the root causes of underperformance
in our GB Product Distribution business and are confident that 2024 will see
the beginnings of a return to historic EBITDA margins in this side of our
business. We are pleased with the progress that has been made in other areas
of our business, most notably in Ireland where we have achieved significant
growth."
"As we look ahead to 2024 and beyond, despite the continued challenging
external market, I am enthusiastic and optimistic. We have a new and
energised Leadership Team, with a Performance Improvement Plan now beginning
to deliver measurable results and clarity of our strategy which serves to
unlock the full potential of the Group across six defined EBITDA growth
engines."
"We are well positioned to capitalise on the opportunities available to us.
We have much work to do, but we have a strong team in place and an unwavering
determination to provide a solid foundation for sustained growth and value
creation in the years to come."
Commenting on the development of the business, Mike England, CEO added:
"Many of the foundations needed to recover performance and scale have been put
in place and we are confident that 2024 will be an important turning point for
Flowtech."
"Our outlook is positive and optimistic. Despite a challenging market, with
the ongoing focus on the Performance Improvement Plan initiatives, we expect
continued improvement in gross margins and further efficiencies, a positive
recovery in our product distribution channel with the benefits of the improved
service levels, launch of our new catalogue and enhancements to the website
experience. We are focussed on many self-help opportunities and with the
rebranding to 'One Flowtech' in Q2 '24, this unlocks further synergies
including cross selling and upselling the combined product and solutions
proposition to our customers."
Further enquiries please contact:
Flowtech Fluidpower plc Tel: +44 (0) 1695 52759
Mike England, Chief Executive Officer
Russell Cash, Chief Financial Officer & Company Secretary
Email: info@flowtechfluidpower.com (mailto:info@flowtechfluidpower.com)
Liberum (Nominated adviser and Sole Broker) Tel: +44 (0) 20 3100 2000
Richard Lindley / Ben Cryer / Will King
TooleyStreet Communications (IR and media relations)
Fiona Tooley; Tel: +44 (0) 7785 703523 or email: fiona@tooleystreet.com
(mailto:fiona@tooleystreet.com)
NOTES:
*Underlying operating profit is used as an alternative performance measure to
assess the trading performance of the business and is operating profit before
separately disclosed items which are amortisation and impairment of acquired
intangibles, impairment of goodwill, impairment of right of use assets, share
based payments, and restructuring costs.
** Net Debt is Bank Debt less the value of cash and cash equivalents. It
excludes lease liabilities under IFRS16. Bank Debt is the value of the
Barclays Revolving Credit Facility of £20m and any utilised value of the £5m
overdraft facility, less any unamortised value of loan arrangement fee
2023 webcast presentation:
The Company will be holding a 'live' presentation via the Investor Meet
Company the following day on Wednesday, 27 March at 11.30am. Those wishing
to join the session can do so via the platform link:
https://www.investormeetcompany.com/flowtech-fluidpower-plc/register-investor
(https://www.investormeetcompany.com/flowtech-fluidpower-plc/register-investor)
A copy of this report can be viewed
here: http://www.rns-pdf.londonstockexchange.com/rns/3016I_1-2024-3-26.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3016I_1-2024-3-26.pdf)
Annual General Meeting (AGM)
The AGM is to be held at 10.00am on Tuesday, 11 June 2024 at the Group's
Headquarters, Flowtech Fluidpower plc, Bollin House, Bollin Walk, Wilmslow SK9
1DP. The Notice convening the Company's 2024 Annual General Meeting shall be
published on the Company's website and posted to shareholders who have elected
postal copies in due course.
News updates, regulatory news, and financial statements can be viewed and
downloaded from the Group's website, www.flowtechfluidpower.com
(http://www.flowtechfluidpower.com) . Copies can also be requested from: The
Company Secretary, Flowtech Fluidpower plc, Bollin House, Bollin Walk,
Wilmslow, SK9 1DP. Email: info@flowtechfluidpower.com
(mailto:info@flowtechfluidpower.com) .
FORWARD-LOOKING STATEMENTS
This document contains certain forward-looking statements which reflect the
knowledge and information available to the Company during the preparation and
up to the publication of this document. By their very nature, these
statements depend upon circumstances and relate to events that may occur in
the future thereby involving a degree of uncertainty. Therefore, nothing in
this document should be construed as a profit forecast by the Company.
Statement by Roger McDowell, Non-executive Chair
Our year
2023 was a year of important change at Flowtech, with the arrival of our new
CEO Mike England in April. I would like to take this opportunity to thank
our former CEO Bryce Brooks for his valued contribution and commitment to the
business during his 13-year tenure.
I am pleased with the positive progress made since Mike's arrival, the renewed
energy that he has brought across the Company, the refocus of our strategic
direction and the implementation of the Performance Improvement Plan including
assembling a new and highly motivated leadership team.
Revenue was weaker than originally expected at the beginning of the year. In
part this was due to service disruption resulting from the business
integration within product distribution that was implemented in 2022, but also
due to the ever-increasing market headwinds experienced from Q2 onwards,
including a slowing of demand from a small number of larger original equipment
manufacturer customers. Our year end net debt was higher than originally
expected at £14.7m, due in part to over £1m of investment in high running
products to recover service levels.
Despite lower revenues, I am happy to report that we have achieved £9.4m,
very slightly ahead of revised underlying EBITDA expectations, and the Board
is therefore recommending a final dividend of 2.2p, which also reflects our
confidence in our future strategy.
Returning to a customer first business
We have spent more time listening to our customers, ensuring they are truly at
the heart of our business, which is something I believe we had unfortunately
lost sight of. By putting customers first and leaning into the feedback they
have given us, we have clearer insights into where we are doing well and where
we need to focus. The Performance Improvement Plan we implemented in Q3 2023
focused on those areas and I am encouraged with the early results that this
has had.
With this renewed focus on performance improvement, getting back to doing the
basics well, I have been particularly encouraged by the overall service level
recovery, the emphasis on optimising gross margins and also, the actions taken
to control and manage costs. These areas of focus all gathered positive
momentum throughout the second half of the year.
With near-term improvements in place, we are continuing to listen to our
customers to understand their needs both now and for the future and have
turned our attention as a Board to longer term thinking and our renewed
strategic plan. Our strategy is simple, focusing around three pillars:
Customer First Our customers will always be at the heart of what we do. We know our
customers' needs are changing and we are evolving as a business to meet and
exceed expectations enabled more by digital and data.
Power of One Unlocking the full value proposition across the Group in bringing together all
of our businesses under the Flowtech brand.
World of Motion Expanding our product & service offer to increase our reach to further
meet the needs of our customers across the wider power, motion and control
market.
Our commitment to a safer and more sustainable world
Our refreshed purpose-led culture and strategy underpins our ESG commitment,
and I am pleased to report that we have continued to build on the good
progress already made with our objective to launch our 2030 ESG plans later in
2024. In terms of progress, over the past year we have:
Ø Implemented a new senior leadership team of which half of the team are
female. At the next tier, we have also increased our female leadership
population by 50%
Ø Increased focus and leadership attention on the health, safety and
wellbeing of our people, customers, suppliers and stakeholders. We have had
zero Reporting of Injuries, Diseases and Dangerous Occurrences (RIDDORs) and
due to improved reporting, have increased near miss reporting by over 100%
Ø Continued to make progress in reducing our overall environmental impact as
a company, 23% reduction in like for like carbon emissions, recycling over
52,000kg of general and non-hazardous waste along with 13,000 litres of
hazardous waste diverted away from landfill and increased the number of
electric or hybrid vehicles in our fleet to over 50% of the total
Our investors
It is vital that we maintain an active and open dialogue with our investors.
In conjunction with Mike, we have reinvigorated our focus to increase our
investor facing activity and I have been encouraged that we have hosted a
number of investor visits to Flowtech to demonstrate the progress and
improvements we are making first hand underpinned by the Performance
Improvement Plan and our refreshed and refocused strategy. We look forward
to speaking with many of our investors during the forthcoming roadshows.
Our People and the Board
I am delighted with both the response to our new leadership and the energy
demonstrated by our people during a period of rapid change and I would thank
them all for their efforts, their contribution is invaluable. I am also
pleased with the positive progress made in embedding an excellent Board with a
varied and relevant experience combined with a positive but challenging
approach to strive for the high performance expected by our customers.
Welcoming Mike England, alongside his other senior leadership hires, brings a
new depth of relevant industry and leadership knowledge and experience to
complement our existing team. I would like to sincerely thank the Board
members for their continued commitment and positive contributions.
Looking ahead
As we look ahead to 2024 and beyond, despite the continued challenging
external market, I am enthusiastic and optimistic. We have a new and
energised Leadership Team with a Performance Improvement Plan now beginning to
deliver measurable results and clarity of our strategy which serves to unlock
the full potential of the Group across six defined EBITDA growth engines:
1. Customer growth
2. Commercial excellence
3. Product and service expansion
4. Own brand
5. Operating for less, and
6. Building talent and capabilities
We are well positioned to capitalise on the opportunities available to us.
We have much work to do, but we have a strong team in place and an
unwavering determination to provide a solid foundation for sustained growth
and value creation in the years to come.
25 March 2024
Statement by Mike England, CEO
"2023 focus has been on fixing the basics and unlocking near-term self-help
opportunities whilst building the stronger foundations needed to scale and
deliver accelerated growth in earnings."
Reflections of the year
When joining the business in April 2023, I saw an exciting opportunity to
transform and grow Flowtech to unlock the full potential across the Group and
improve shareholder value.
Flowtech has over 40 years as a leader and specialist product distributor of
Fluid Power products. In the past decade, the Group has acquired several
product distribution and engineering solutions businesses, delivering a number
of benefits including expansion of its geographical footprint into Island of
Ireland ("Ireland") and Benelux.
The Company has a unique customer value proposition which has significant
further potential. Competitive advantage comes from being a 'specialist' in
the power, motion and control sector, combining the strength of the product
distribution offering which includes an excellent 'own brand' range, with a
broad and highly technical engineering systems and solutions capability across
the UK, Ireland, and Benelux. There are future growth opportunities in
broadening out this product and service offer and geographical reach over
time.
Since joining in April, I have certainly been energised and motivated by the
passionate and knowledgeable people that we have across the businesses. It
has been a priority to engage with a broad spectrum of customers to listen
carefully to their feedback and meet with a wide cross section of our
strategic supplier partners to identify opportunities to strengthen our
partnerships. In doing so, we are building a deeper understanding of the
market and the current position, assessing what is working well, where there
are key areas for improvement and how we can unlock the value and exciting
opportunity ahead of us.
This has resulted in the implementation of the Performance Improvement Plan in
Q2, and we have overlayed this with the clarity of the Strategic Plan
initiated in Q3. There has also been a restructure and simplification of the
operating model, including establishing and embedding a newly formed Group
Leadership Team. This work has built the platform for mid-term growth, setting
in motion the plan to unlock the many EBITDA growth opportunities within the
Group into 2024 and beyond, creating increased value for our shareholders.
It is our people that make the difference, with their dedication and passion
in helping our customers to keep industry moving across a wide range of
technical power, motion and control products and services.
We thank our people, new and existing, who have embraced the important changes
being implemented.
Whilst not without challenge, we are proud of the strong progress that has
been made in the past year to initiate the required change to set our business
up for near and mid-term success.
Reviewing 2023
While overall revenue reduced by 2.3%, the highlight within this was the
Ireland growing at 11.9% with strong market share gains. We saw moderate
growth in Benelux with underperformance in Great Britain reflective of both a
weaker market from Q2 onwards, with increased slowdown in some OEM volume and
ongoing customer service issues within product distribution (a legacy from the
2022 business integration) which we largely resolved in H2.
From Q2, leadership attention concentrated on implementing the Performance
Improvement Plan designed to fix many of the core basics required to improve
near-term customer service and performance and to lay the foundations needed
to transition the business to a more customer-centric, lean, and scalable
platform for growth.
This is broadly structured under three headings:
1. A new, simplified operating model - To unlock the full potential of our
people and capabilities across the Group
From August, we initiated the transition away from a complex, fragmented
multi-brand divisional structure to a simple functional, country-led structure
and one brand model. In doing so, we created a newly structured leadership
team with a strong mix of existing and new high potential talent to power up
our capabilities. This team was fully in place from October powering up the
functional capabilities needed to scale. In Q4, we completed a full
organisational re-structure across all functions to ensure that we have the
right people in the right roles with the right capability to do the right
things better.
2. Customer centric - Winning back customer confidence, powering up our
growth capabilities to increase the quality and frequency of customer
interactions underpinned by improved customer service
From Q3, we have accelerated changes needed to fire up our growth engines
including restructuring the GB sales organisation underpinned by a sales
development programme and the introduction of professional sales processes. We
have made strong progress improving our customer service levels introducing
key performance indicators for service and in Q4, we initiated for the first
time a customer satisfaction measurement so that we use customer feedback to
guide our decision making and priorities.
Digital and data enablement is critical to our future success. In Q3 we
completed a full audit and review of our digital, data and technology
platforms and conducted extensive customer research to inform our digital
strategy. Our roadmap is now implemented. We have ensured stability of the
existing platform with improvements ongoing whilst we transition to a new and
improved scalable platform during 2024, powering up digital leadership and
talent across the Group. Phase one is the launch of a new white label web
platform in Q3 '24 to underpin our growth ambitions across our Distributor
Partner channel.
3. Getting back to doing the brilliant basics -
Delivering operational and service excellence
In H2, our focus in Product Distribution has been to increase the service
levels from the fulfilment centre and in particular, increasing the stock
availability on our fastest running products from 88% in July to more than 97%
in December, putting in place new processes to ensure consistent availability
and optimising working capital. In doing so, we have reduced overall customer
complaints by more than 50%, increased capacity per operator by 22% and
reduced overall headcount in the fulfillment centre by 35%.
We have initiated the plans and actions to introduce automation and control to
drive greater efficiency within the Fulfilment Centre which will be fully
implemented during 2024. We plan to further consolidate our supply chain to
ensure greater supplier collaboration and brand partnerships which we see as a
key enabler for growth over the coming years.
Setting our strategy for the future
We have implemented a simple strategic framework consisting of three pillars
underpinned by six defined EBITDA growth engines where we have identified
opportunities for increased value creation.
1. Customer First
2. The Power of One
3. A World of Motion
We have powered up leadership capability in strategic delivery and implemented
our plan "WOLF", which defines as, - "Winning team", "Operational Excellence"
- "Love our customers"-"Fabulous performance".This is to make sure everyone
across the Company understands the strategy, the part they play and the
milestones and deliverables we need to achieve. All of which underpins our six
EBITDA growth engines with a new standardised Group-wide set of key
performance indicators.
Our commitment to a safer and more sustainable world
We have increased focus of the new leadership onto ESG, concentrating on three
immediate areas whilst we build out our 2030 plans to be launched later in
2024:
· Our environment and becoming more sustainable
We have an increased passion and focus to become the leading distributor in
our market with a sustainability focused end-to-end supply chain. We continue
to make good progress in reducing our environmental impact across our fleet,
in our efforts towards reducing waste to landfill and in our overall carbon
emissions
· Our culture and the health, safety, and wellbeing of our people
A key change in the business is a shift to become a customer-first,
purpose-led company. I am particularly pleased with the progress made on a
50/50 gender diversity split within the new leadership team. Diversity remains
a key focus for the business and our future growth
· Our governance and policies as we make the shift to a One Flowtech
As a new leadership team, we are adopting a One Flowtech approach and have
initiated strategic review of all of our policies and processes across the
organisation
In summary
Our outlook is positive and optimistic. Despite a challenging market, with the
ongoing focus on the Performance Improvement Plan initiatives, we expect
continued improvement in gross margins and further efficiencies, a positive
recovery in our product distribution channel with the benefits of the improved
service levels, launch of our new catalogue and enhancements to the website
experience. We are focussed on many self-help opportunities and with the
rebranding to 'One Flowtech' in Q2 '24, this unlocks further synergies
including cross selling and upselling the combined product and solutions
proposition to our customers.
We have an energised, and motivated team with a culture that has shifted to
being customer centric with leadership attention focused on delivering the
highest operating standards and performance. Many of the foundations needed to
recover performance and scale have been put in place and, while the market
remains challenging, we are confident that 2024 will be an important turning
point for Flowtech.
25 March 2024
Our Performance Improvement Plan
In the summer of 2023 we identified a number of areas that needed some urgent
attention and swiftly implemented our Performance Improvement Plan to drive
immediate change. Our objective was to deliver a more customer centric, lean
and scalable platform for growth. Our Performance Improvement Plan is
underpinned by three key principles:
We have been pleased to see some excellent results because of this plan. By
implementing some simple improvements, in line with the needs of our customers
we have seen a number of positive results:
· Tightly managed overheads with 7.5% headcount reduction in H2.
· Focus on commercial excellence delivered 111bps of gross margin
improvement.
· Continued focus on working capital management delivering £1.8m
improvement.
· 9%-point improvement in product distribution stock availability,
fast moving products now at 97%.
· Restructured sales and marketing, new catalogue prepared and
reset of digital growth strategy.
· Improved customer experience, complaints down by >50%,
customer satisfaction 73.1 (aiming higher)
· Fulfilment centre efficiency gains, 22% increase in operator
capacity and 35% headcount reduction
We were proud to partner with the Institute of Customer Service (ICS) in 2023.
We have adopted the UK Customer Satisfaction Index to understand how our
customers feel about our business and to benchmark the service we provide our
customers. Our customers scored us at 73.1, - with the UK all-sector average
of 76.6. We have used this feedback to build our Strategic Plan and are
focusing on improving this result to be in the top quartile.
In 2023 we started to track our Net Promoter Score. Our activity so far has
helped us establish our baseline and we will develop our approach to this in
2024, to encompass all areas of our business and enable us to respond to
timely, in the moment feedback from our customers.
Introducing our Strategic Plan 2023-2026
We have set out our refreshed strategy to deliver mid-term market growth and
value creation.
Customer First
Our customers' needs are changing with increased digitisation across products
and services. The need to operate machines and operations more sustainably
drives increased adoption of electrification and opens up new opportunities
such as one of industry's megatrends, hydrogen. There is increased market
consolidation happening and supply chains becoming more regionalised meaning
strategic supplier partnerships are a critical enabler to drive customer
satisfaction. With a shortage of skilled engineers in industry, this increases
the demand on suppliers to move up the value chain to deliver complete systems
and solutions not only the supply of products.
The Power of One
Unlocking this potential is made possible by simplifying the operating model
under one brand, Flowtech. In doing so, shifting from a fragmented house of
brands to a leveraged and integrated branded house. This includes rebranding
over ten 'own brand' product ranges into one, FT Pro, then to increase brand
building activity around a simple and compelling customer value proposition.
We have put the building blocks in place in H2 2023 to enable this rebranding
and transition to One Flowtech in H1 2024 including the launch of a new
catalogue in April 2024 and the new and improved next generation Flowtech
website, starting with a white label digital offering for Distribution
Partners, ready for launch in Q3 2024.
A World of Motion
The fluid power market is changing and we need to evolve to meet our customer
needs and accelerate our commercial advantage. Expanding our product and
service offering across the power, motion and control sectors increases our
addressable market opportunity in Europe from £10bn to more than £30bn
helping us to increase customer penetration and future proofing our business.
Bringing together our full capabilities and potential under one brand, one
simple operating model and one value proposition.
Flowtech is well positioned to create competitive advantage by unlocking the
full Group potential with a broad technical product offering and engineering
service capability across our indirect distributor network and our direct
channels. This includes a mature own brand product portfolio with the
opportunity to continue to expand and grow its share. The mid-term opportunity
is to expand our product and service offering into the wider 'World of Motion'
to better support our collective customers and their evolving needs.
Strategy Execution
Underpinning our strategic pillars is a comprehensive strategy delivery
framework consisting of six EBITDA growth engines and clearly defined
deliverables which will be phased in over the coming three years. Supporting
this is an increased focus on performance management and the introduction of a
standard set of financial and non-financial key performance indicators that we
will report on to track and monitor our progress.
Within our strategic delivery plan, there are a small number of larger
projects that we are initiating in 2024 to deliver core foundations that we
need to scale and to deliver increased efficiency and margin growth. Below
are two examples of projects that are already in flight.
i) Increasing Throughput
Following a review of our fulfilment centre in Skelmersdale during H2 2023, we
identified a number of critical operational improvements that were needed to
improve efficiency and ultimately ensure a high level of service for our
customers. We started by getting the basics right, encouraging collaboration
across teams, improving stock availability, reducing inefficient working
practices, and introducing continual improvement principles. As a result of
this, stock availability on fast moving stock lines has increased from 88% to
97% over 6 months and customer complaints have reduced by over 50%.
In the next phase during 2024, we will introduce a level of automation with a
conveyor system to support product put away, picking and packing processes to
reduce walking time and accuracy of the operation. There will be an
integration of a new Warehouse Management System (WMS) with our ERP system to
manage customer orders being picked and packed more efficiently whilst
improving the overall customer service. Additionally, with expansion of the
fulfilment centre capacity by over 10,000 pick locations, we remove the need
for outside storage.
ii) Our Digital approach
Having a clear digital approach is necessary to thrive in the digital age. It
provides a structured approach to leveraging digital technologies to achieve
business goals, stay relevant, maintain a competitive position in the market,
and avoid being left behind.
Being "digital" is more than having a fantastic website. Digital is how we
interact with our customers across all sales channels and service touchpoints
to provide a seamless, consistent, personalised experience to maximise value
and drive conversion-an "Omni Channel" experience. Digital will be a
differentiator in selling and applying our engineering solutions.
In 2024 we will be focusing on:
Ø Growing our customer base by improving and increasing uptake in the digital
channels (White Label, Punchout, EDI) - with the emphasis being on launching a
new white label web offering for Distributor Partners in Q3 '24.
Ø Increasing average order value by employing data-driven upsells and
cross-selling
Ø Increasing the frequency of customer purchases with intelligent omnichannel
marketing (right time, right place and right price)
Ø Optimising the customer experience of our website to drive conversion,
giving our sales team the opportunity to convert engineering services and
product distribution leads and sell more
Ø Building out self-service and automation to reduce the cost to serve,
lowering our overhead needs in sales and customer service as we scale
iii) Integrating our business
Today, the Flowtech Fluidpower group consists of 17 different brands, split
across our product distribution and engineering services businesses. These
businesses were acquired between 2012-2018 but never fully integrated and the
true value and synergy opportunity not realised. This has created confusion
in the marketplace, with our customers unaware of the size of our business and
the breadth of our offer. We have had no clear value proposition to convey
our full offering to our customers, which has resulted in value being left off
the table.
One Flowtech
In 2023, we took the decision to bring our organisation together with the
introduction of a simple operating model, releasing the full potential of our
people and our capabilities. We have adopted a country-led approach, with our
three geographies in Great Britain, the Ireland and the Benelux, with a
functional structure supporting those areas, in a matrix style.
This will enable us to truly put our customers at the heart of our business,
with a unique value proposition that encapsulates our full product
distribution and engineering service offer.
We will offer customers:
Ø Easy access to the widest technical product range.
Ø Expert engineered systems and solutions.
Ø A market leading distributor partner programme.
We now have a clear understanding of how we best go to market, either through
our distributor partner programme or direct to customers. With this approach
we will transition to a targeted go-to-market approach.
This also helps to simplify our business and as we transition to One Flowtech,
we move away from being a series of unconnected smaller companies to one
professional single integrated company.
Practically, this will mean we reduce 10 cash generating units to three. 60
statements of operations down to three. We will standardise on how we work
by introducing professional procurement, introducing an integrated digital and
marketing, aligning consistent processes and procedures and to simplification
and alignment of our human resource activities.
Statement by Russell Cash CFO
"The business has undergone significant change in the last 12 months - the new
leadership team is buoyed by the range and depth of performance improvement
opportunities we have identified. We remain focused on managing all aspects
of our working capital and reducing our net debt "
The Group trading performance at a glance 2023 2022 Change
£m £m £m/%
unaudited audited
Group revenue 112.1 114.8 -2.3%
Gross profit 41.3 41.0 0.7%
Gross profit % 36.8% 35.7% 111bps
Distribution expenses (4.5) (4.4) (0.1)
Administrative expenses before separately disclosed items (see note 2) (30.7) (28.0) (2.8)
Underlying operating overheads (35.3) (32.4) (2.9)
Less Central costs (refer note 3) (5.3) (4.5) (0.9)
Underlying segment operating overheads (30.0) (27.9) (2.0)
Underlying segment operating profit 11.4 13.1 (1.7)
Underlying operating profit* 6.0 8.6 (2.6)
Less separately disclosed items (16.4) (13.0) (3.4)
Operating loss (10.4) (4.4) (6.0)
Financing costs (1.7) (1.2) (0.5)
Loss before tax (12.1) (5.6) (6.5)
Tax (0.9) (0.7) (0.2)
Loss after tax (13.0) (6.3) (6.7)
Underlying EBITDA* 9.4 11.6 (2.2)
(*) Underlying operating profit is used as an alternative performance measure
to assess the trading performance of the business and is operating profit
before separately disclosed items which are amortisation and impairment of
acquired intangibles, impairment of goodwill, impairment of right of use
assets, share based payments, and restructuring costs. The £3.4m differential
between underlying operating profit and underlying EBITDA relates to £3.2m in
respect of depreciation charges (£1.4m relating to fixed assts and £1.8m in
respect of right of use assets) together with £0.2m relating to website
amortisation.
Our geographical segments at a glance
Great Britain ("GB") Benelux Ireland
2023 2022 Change 2023 2022 Change 2023 2022 Change
unaudited audited unaudited audited unaudited audited
Revenue (£m) 79.5 84.9 (5.4) 10.6 10.4 0.2 22.0 19.6 2.4
Underlying operating profit (£m) 7.2 9.8 (2.6) 1.6 1.3 0.3 2.5 1.9 0.6
Underlying operating margin 9.3% 11.5% (2.2) 15.0% 13.0% 2.0 11.4% 9.9% 1.5
Underlying profit before tax (£m) 7.0 9.6 (2.6) 1.6 1.3 0.3 2.5 1.9 0.6
Revenue
Overall revenue reduced by 2.3% with very different performances across each
of our three segments:
Ø In GB our revenue fell by 6.2%. With new leadership onboarded, we have
identified the reasons for that and are confident the position can be
recovered and we can build from this position. There are a significant number
of plans now in place to support a return to the growth agenda as outlined in
the CEO year in review section of this report.
Ø In Ireland we were pleased with the 11.9% growth; this builds on
successful prior year trading periods following the integration of the Nelson
and Hi-Power businesses in February 2021. We are confident this trend can
continue, not least when we see the expected benefits attached to going to
market as " one "Flowtech" coming through.
Ø In Benelux our revenue increased by a modest 2.0%. With the GB and
Benelux product distribution businesses beginning to work more closely
together, and with our plans to deliver a greater breadth of opportunities to
our customer base, we are confident we can achieve more significant growth in
coming years.
Gross profit
The 111bps improvement in our gross profit margin is pleasing, with gross
profit increasing by £0.3m despite the 2.3% reduction in Group revenue. We
have plans to maintain and build on this position.
Operating overheads
Administrative expenses increased by £2.8m (9.8%). Approximately two thirds
of our cost base relates to payroll and one third the aggregation of all other
operating overheads. With regards to people costs a reduction in our average
headcount has mitigated the impact of inflationary pay pressures and the
investment we have made in our new leadership team. Nevertheless, taking
account of inflationary related pay increases and the impact of the
incremental cost attached to the new leadership team our overall salary costs
have increased by £0.8m (3.5%) Other contributing factors include
depreciation (£0.3m higher), utility costs (£0.3m higher), professional and
banking costs (£0.3m higher) and project & IT costs (£0.2m higher) with
the balance of the increase reflecting inflationary pressures.
Central costs
A summary of central costs is provided below:
2023 2022
£000 £000
unaudited audited
Management salaries 2,271 2,083
Accounting & finance 935 864
Project & IT costs 723 572
PLC costs 589 532
Other central operating costs 784 458
5,302 4,509
Management costs include the employment costs of the Executive Officers, Group
Leadership Team members excluding those that have specific segment
responsibilities. Accounting and finance covers the salary costs of the
central finance and internal audit function. PLC costs capture the salaries of
Non-Executive Directors and professional fees associated with our PLC status.
Other areas of cost primarily relate to our project management and central
health and safety teams.
Separately disclosed items
2023 2022
Refer note 2 £000 £000
unaudited audited
Separately disclosed items within administrative expenses:
-Amortisation of acquired intangibles 906 943
-Impairment of acquired intangibles - 168
-Impairment of goodwill 13,026 10,072
-Impairment of right of use assets 456 -
-Share-based payment costs 462 372
- Release of lease liability (412) -
-Restructuring 1,918 1,411
Total separately disclosed items 16,356 12,966
Impairment of goodwill and right of use assets
The impairment of goodwill relates to two cash generating units:
Flowtechnology UK ("FTUK") (£12,821k) and Primary Systems (£205k). Details
relating to this are provided in Note 8. Both of these cash generating units
have been, and are expected to remain, profitable parts of our business.
The performance of FTUK has not been as strong as we had hoped but plans are
now in place, under the direction of new management, to restore the business
to previous levels of profitability. The reduction in profitability,
combined with an increase in the pre-tax discount rate from 13.1% used in 2022
to 17.5% has had a significant impact on the net present value of future cash
flows.
The impairment of right of use assets of £456k relates to the Hi-Power
Transport cash generating unit. Given that the associated goodwill and
intangibles were previously fully impaired, the current year impairment has
been to the right of use assets. Hi-Power Transport remains a profitable
part of our business; again the use of a higher discount rate in part explains
the need to impair.
Restructuring costs
The key components of restructuring costs are £0.8m relating to the exit of
former members of the senior management team including payment for notice
periods and £0.6m in relation to the closure of the Leicester warehouse. The
balance of the charges relate to costs associated with a broad range of
restructuring projects.
Taxation
The underlying profit before tax for 2023 was £4.3m; a variety of factors
convert this to a figure subject to corporation tax. The 2023 charge includes
a prior period charge relating to deferred tax of £217k. It has also been
impacted by the fact that FY22 Company tax returns were filed after the
reporting of the Group accounts; the actual calculation indicated that the
FY22 liability was understated and an adjusting entry of £184k has been made
in 2023.
Net Debt
Our Net Debt position (excluding lease liabilities) reduced by £1.3m from
£16.0m to £14.7m; for clarity £14.7m is the net of our £20m revolving
credit facility (RCF) and the £5.3m cash at bank we held at year end. If
IFRS16 lease liabilities are included the position reduced by £2.5m (from
£22.7m to £20.2m).
Net cash generated from operating activities totalled £8.2m (2022: £5.0m);
this is the aggregation of operating cash inflow before working capital
movements of £7.5m, favourable working capital movements totalling £1.8m and
tax paid of £1.1m. After cash outflows of £2.1m associated with investing
activities, £3.6m relating to financing activities and the dividend payment
of £1.3m this left £1.3m available for Debt reduction.
This is summarised in the graph below:
(*) Opening and closing figures exclude IFRS 16 related liabilities. IFRS16
debt reduced by £1.2m in 2023. In the second half of the year we invested
£1.3m in increasing the inventory levels of our faster moving lines to
improve stock availability considerably.
Banking facilities
Our £20m revolving credit facility provided by Barclays Bank was extended to
May 2027. Covenant terms under the new agreement are consistent with before,
and the base charge for the credit facilities are Sterling Overnight Index
Average (SONIA)+2.40% and are subject to a non-utilisation fee of 0.84%.
The Group also has a £5m overdraft facility which was reviewed in February
2023 and on-going support was approved.
Summary
2023 has been a year in which the business has undergone significant change,
not least in the make-up of the new Leadership Team. Under Mike England's
leadership, the business has identified significant scope for profit
improvement, and we expect that over time each of our identified profit growth
engines will deliver significant incremental profit. We have addressed what
we believe to be the root causes of underperformance in our GB Product
Distribution business and are confident that 2024 will see the beginnings of a
return to historic EBITDA margins in this side of our business. We are
pleased with the progress that has been made in other areas of our business,
most notably in Ireland where we have achieved significant growth.
Our Net Debt position remains well under control; the extent of our Net Debt
reduction in the second half of 2023 was impacted by our decision to invest in
certain items of faster moving inventory to improve on the availability of our
core product ranges.
We look forward to the rest of 2024 and beyond, buoyed by the range of profit
improvement initiatives which are available to us.
25 March 2024
Consolidated Income Statement
For the year ended 31 December
Note 2023 2022
£000
£000
unaudited audited
Continuing operations
Revenue 3 112,095 114,766
Cost of sales (70,832) (73,792)
Gross profit 41,263 40,974
Distribution expenses (4,534) (4,428)
Administrative expenses before separately disclosed items: (30,740) (27,960)
- Separately disclosed items 2 (16,356) (12,966)
Total administrative expenses (47,096) (40,926)
Operating loss 4 (10,367) (4,380)
Financial expenses (1,735) (1,192)
Loss from continuing operations before tax 2 (12,102) (5,572)
Taxation 5 (875) (680)
Loss from continuing operations (12,977) (6,252)
Loss for the year attributable to:
Owners of the parent (12,977) (6,252)
(12,977) (6,252)
Earnings per share
Basic earnings per share - continuing operations 7 (21.10p) (10.17p)
Consolidated Statement of Comprehensive Income
For the year ended 31 December
2023 2022
£000
£000
unaudited audited
(Loss)/profit for the year (12,977) (6,252)
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
- Exchange differences on translating foreign operations (136) 318
Total comprehensive loss for the year (13,113) (5,934)
Total comprehensive loss for the year attributable to:
Owners of the parent (13,113) (5,934)
(13,113) (5,934)
Consolidated Statement of Financial Position
at 31 December
Note 2023 2022
£000
£000
unaudited audited
Assets
Non-current assets
Goodwill 8 40,066 53,092
Other intangible assets 9 2,529 3,523
Right-of-use assets 4,829 6,091
Property, plant and equipment 7,822 7,234
Total non-current assets 55,246 69,940
Current assets
Inventories 32,009 31,486
Trade and other receivables 23,725 24,620
Prepayments 856 387
Cash and cash equivalents 5,184 3,972
Total current assets 61,774 60,465
Liabilities
Current liabilities
Interest-bearing borrowings - 19,967
Lease liability 1,695 1,705
Trade and other payables 21,558 19,569
Tax payable 767 1,219
Total current liabilities 24,020 42,460
Net current assets 37,754 18,005
Non-current liabilities
Interest-bearing borrowings 19,915 -
Lease liability 3,822 5,008
Provisions 330 317
Deferred tax liabilities 1,534 1,281
Total non-current liabilities 25,601 6,606
Net assets 67,399 81,339
Equity directly attributable to owners of the Parent
Share capital 30,746 30,746
Share premium 60,959 60,959
Other reserves 187 187
Shares owned by the Employee Benefit Trust (124) (124)
Merger reserve 293 293
Merger relief reserve 3,646 3,646
Currency translation reserve 23 159
Retained losses (28,331) (14,527)
Total equity attributable to the owners of the Parent 67,399 81,339
Consolidated Statement of Changes in Equity
For the year ended 31 December
Share capital £000 Share Other Shares Merger Merger Currency translation Retained Total
premium
reserve
owned by the EBT
reserve
relief reserve
losses
equity
£000
£000
£000
£000
reserve
£000
£000
£000
£000
Balance at 1 January 2022 30,746 60,959 187 (276) 293 3,646 (286) (7,267) 88,002
audited
Loss for the year - - - - - - - (6,252) (6,252)
Other comprehensive income - - - - - - 318 - 318
Total comprehensive income for the year - - - - - - 318 (6,252) (5,934)
Transactions
with owners
Share options settled - - - 152 - - - (25) 127
Share-based payment charge - - - - - - - 372 372
Dividends paid - - - - - - - (1,228) (1,228)
Transfers between reserves - - - - - - 127 (127) -
Total transactions with owners - - - 152 - - 127 (1,008) (729)
Balance at 31 December 2022 30,746 60,959 187 (124) 293 3,646 159 (14,527) 81,339
Balance at 1 January 2023 30,746 60,959 187 (124) 293 3,646 159 (14,527) 81,339
unaudited
Loss for the year - - - - - - - (12,977) (12,977)
Other comprehensive income - - - - - - (136) - (136)
Total comprehensive income for the year - - - - - - (136) (12,977) (13,113)
Transactions
with owners
Share-based payment charge - - - - - - - 462 462
Dividends paid - - - - - - - (1,289) (1,289)
Total transactions with owners - - - - - - - (827) (827)
Balance at 31 December 2023 30,746 60,959 187 (124) 293 3,646 23 (28,331) 67,399
Consolidated Statement of Cash Flows
For the year ended 31 December
Note 2023 2022
£000
£000
unaudited audited
Cash flow from operating activities
Net cash from operating activities 10 8,202 5,014
Cash flow from investing activities
Acquisition of property, plant and equipment (2,092) (1,645)
Acquisition of intangible assets (121) (212)
Proceeds from sale of property, plant and equipment 135 65
Net cash used in investing activities (2,078) (1,792)
Cash flows from financing activities
Repayment of lease liabilities (1,818) (1,673)
Interest on lease liabilities (221) (227)
Other interest (1,567) (925)
Proceeds from sale of shares held by the EBT - 172
Dividends paid 6 (1,289) (1,228)
Net cash used in financing activities (4,895) (3,881)
Net change in cash and cash equivalents 1,229 (659)
Cash and cash equivalents at start of year 3,972 4,562
Exchange differences on cash and cash equivalents (17) 69
Cash and cash equivalents at end of year 5,184 3,972
Reconciliation of liabilities arising from financing activities
The changes in the Group's liabilities arising from financing activities can
be classified as follows:
Long-term borrowings Short-term borrowings Lease liabilities Total
£000
£000
£000
£000
At 1 January 2022 19,927 - 7,147 27,074
audited
Cash flows:
Repayment - - (1,673) (1,673)
Other movements 40 - - 40
Non cash:
Additions - - 1,369 1,369
Reclassification of liabilities (19,967) 19,967 - -
Other lease movements - - (190) (190)
Foreign exchange difference - - 60 60
At 31 December 2022 - 19,967 6,713 26,680
At 1 January 2023 19,967 6,713 26,680
unaudited
Cash flows:
Repayment - - (1,819) (1,819)
Other movements (52) - (52)
Non cash:
Additions - - 1,068 1,068
Disposals - - (425) (425)
Reclassification of liabilities 19,915 (19,915) - -
Other lease movements - - - -
Foreign exchange difference - - (21) (21)
At 31 December 2023 19,915 - 5,516 25,431
Other lease movements are adjustments for the reduction in value of the lease
liabilities following either the exercise of an early termination clause or an
agreement with the landlord.
Notes to the preliminary statement
1. General information
The principal activity of Flowtech Fluidpower plc (the 'Company') and its
subsidiaries (together, the 'Group') is the distribution of engineering
components and assemblies, concentrating on the fluid power industry. The
Company is a public limited company, incorporated and domiciled in the United
Kingdom. The address of its registered office is Bollin House, Bollin Walk,
Wilmslow, SK9 1DP. The registered number is 09010518.
Basis of preparation
These condensed unaudited consolidated financial statements have been prepared
in accordance with the accounting policies set out in the annual report for
the year ended 31 December 2022 except for new standards adopted for the year.
While the financial information included in this preliminary announcement has
been prepared in accordance with UK-adopted international accounting standards
in conformity with the requirements of the Companies Act 2006, this
announcement does not in itself contain sufficient information to comply with
UK-adopted international accounting standards.
The financial information set out in this preliminary announcement does not
constitute the Group's statutory financial statements for the years ended 31
December 2023 or 2022 as defined in section 435 of the Companies Act 2006 (CA
2006). The financial information for the year ended 31 December 2023 has been
extracted from the Group's unaudited financial statements. Statutory financial
statements for 2022 have been delivered to the Registrar of Companies. The
auditors reported on those accounts; their report was unqualified and did not
contain a statement under either Section 498(2) or Section 498(3) of the
Companies Act 2006.
2. Segment reporting
During 2023 , Management reviews the operations of the business based on three
geographical segments - Great Britain, Ireland and Benelux:
Great Britain:
Supply of both hydraulic and pneumatic consumables, along with the delivery of
specialist engineering solutions, services and systems. We operate through a
network of distributors and resellers as well as working directly with a broad
range of original equipment manufacturers across all industry sectors
Ireland:
Supply of specialist technical hydraulic components and systems predominantly
into original equipment manufacturers and end-user channels to all industry
sectors and supported by supply agreements direct to a broad range of
manufacturer brands.
Benelux:
Supply of bespoke hydraulic and pneumatic component and systems to
manufacturers of specialised industrial and mobile hydraulic original
equipment manufacturers and a wide range of industrial end users.
In previous periods management reviewed the operation of the business based on
three segments - Flowtech, Fluidpower Group Solutions and Fluidpower Group
Services. This change was implemented to better reflect the management
structure of the Group and decision making going forward. These operating
segments are monitored by the Group's Chief Operating Decision Maker and
strategic decisions are made on the basis of adjusted segment operating
results. Inter-segment revenue arises on the sale of goods between Group
undertakings.
The Directors believe that the Underlying Operating Profit provides additional
useful information on underlying trends to Shareholders. The term 'underlying'
is not a defined term under IFRS and may not be comparable with similarly
titled profit measurements reported by other companies. A reconciliation of
the underlying operating result to operating result from continuing operations
is shown below. The principal adjustments made are in respect of the
separately disclosed items as detailed later in this note; the Directors
consider that these should be reported separately as they do not relate to the
performance of the segments.
Segment information for the reporting periods are as follows:
For the year ended 31 December 2023 Great Britain Benelux Ireland Inter-segmental transactions Central costs Total continuing operations
£000
£000
£000
unaudited £000 £000 £000
Income statement - continuing operations:
Revenue from external customers 79,512 10,583 22,000 - - 112,095
Inter-segment revenue 3,141 652 585 (4,378) - -
Total revenue 82,653 11,235 22,585 (4,378) - 112,095
Underlying operating result (*) 7,200 1,585 2,506 - (5,302) 5,989
Net financing costs (172) (8) (30) - (1,525) (1,735)
Underlying segment result 7,028 1,577 2,476 - (6,827) 4,254
Separately disclosed items (13,925) (98) (588) - (1,745) (16,356)
Profit/(loss) before tax (6,898) 1,479 1,888 - (8,571) (12,102)
Specific disclosure items
Depreciation and impairment on owned plant, property and equipment 1,208 71 83 - 1 1,363
Depreciation on right of use assets 1,065 262 344 - 139 1,810
Impairment of right of use assets - - 456 - - 456
Impairment of goodwill 13,026 - - - - 13,026
Impairment of acquired intangibles - - - - - -
Amortisation 900 98 118 - - 1,116
Reconciliation of underlying operating result
Underlying operating result (*) 7,200 1,585 2,506 - (5,302) 5,989
Separately disclosed items (13,925) (98) (588) - (1,745) (16,356)
Operating (loss)/profit (6,725) 1,487 1,918 - (7,047) (10,367)
(*) Underlying operating result is continuing operations' operating profit
before separately disclosed items detailed later in this note.
For the year ended 31 December 2022 Great Britain Benelux Island of Inter-segmental transactions Central costs Total continuing operations
£000
£000
£000
(re-stated) £000 £000 Ireland
audited £000
Income statement - continuing operations:
Revenue from external customers 84,724 10,378 19,664 - 114,766
Inter-segment revenue 2,349 746 488 (3,583) -
Total revenue 87,073 11,124 20,152 (3,583) 114,766
Underlying operating result (*) 9,801 1,349 1,946 (4,510) 8,586
Net financing costs (176) (16) (22) - (978) (1,192)
Underlying segment result 9,626 1,332 1,924 - (5,488) 7,394
Separately disclosed items (11,748) (98) (508) (612) (12,966)
Profit/(loss) before tax (2,124) 1,234 1,416 - (6,100) (5,572)
Specific disclosure items
Depreciation and impairment on owned plant, property and equipment
1,067 64 72 2 1,205
Depreciation on right of use assets 981 267 228 - 194 1,670
Impairment of goodwill 9,898 - 174 - - 10,072
Impairment of acquired intangibles - - 168 - - 168
Amortisation 784 98 155 - 1,037
Reconciliation of underlying operating result
Underlying operating result (*) 9,801 1,349 1,946 - (4,510) 8,586
Separately disclosed items (11,748) (98) (508) (612) (12,966)
Operating profit/(loss) (1,947) 1,251 1,438 - (5,122) (4,380)
(*) Underlying operating result is continuing operations' operating profit
before separately disclosed items detailed below.
2023 2022
£000
£000
unaudited audited
Separately disclosed items
Separately disclosed items within administration expenses:
- Amortisation of acquired intangibles 906 943
- Impairment of acquired intangibles - 168
- Impairment of goodwill 13,026 10,072
- Impairment of right of use asset 456 -
- Share-based payment costs 462 372
- Release of lease liability of property closed in FY23 (412) -
- Restructuring 1,919 1,411
Total separately disclosed items 16,356 12,966
Acquisition costs relate to stamp duty, due diligence, legal fees, finance
fees and other professional costs incurred in the acquisition of businesses.
Share-based payment costs relate to charges made in accordance with IFRS 2
'Share-based payment' following the issue of share options to employees.
Restructuring costs relate to restructuring activities of an operational
nature following acquisition of business units and other restructuring
activities in established businesses. In 2023 restructuring costs included
£841K relating to the exit of members of the previous leadership team and
£197K related to the decommissioning of the distribution centre. Also
included is a credit of £412k which relates to the write off of a lease for a
property closed during the year, the corresponding asset was impaired during
FY22.
3. Geographical and category analysis of revenue
The Group operates primarily in the UK, The Netherlands, Belgium and the
Ireland. Revenue generated from distribution of hydraulic and pneumatic
consumables, bespoke manufacture, commissioning and installation of equipment
are categorised as sale of goods. Income from on-site services and revenue
arising from contracts is disclosed separately.
31 December 2023 Sale of goods Contracts On-site services Total revenue Non-current assets
unaudited £000 £000 £000 £000 £000
United Kingdom 83,178 3,041 1,087 87,306 64,979
Europe 23,148 - - 23,148 3,749
Rest of the World 1,641 - - 1,641 -
Total 107,967 3,041 1,087 112,095 68,728
31 December 2022 Sale of goods Contracts On-site services Total revenue Non-current assets
audited £000 £000 £000 £000 £000
United Kingdom 87,326 2,176 1,289 90,791 72,914
Europe 21,136 - - 21,136 4,492
Rest of the World 2,839 - - 2,839 -
Total 111,301 2,176 1,289 114,766 77,406
No customers of the Group account for 10% or more of the Group's revenue for
either of the years ended 31 December 2023 or 2023. Non-current assets are
allocated based on their physical location. Revenue recognised at a point in
time was £109,953k (2022: £113,207k) and revenue recognised over time was
£2,142k (2022: £1,559K).
Some contract works begun during the year were still in progress at the end of
the year. For 2023, revenue includes £174K (2022: £580k) included in the
contract liability balance at the beginning of the reporting period.
Contract balances 31 December 2023 31 December 2022 1 January 2022
£000 £000 £000
unaudited audited
Trade receivables 946 1,216 253
Advances received for contract works - 174 193
Deferred service revenue - - 495
Total contract liabilities 946 174 688
4. Operating loss/profit
The following items have been included in arriving at the operating
loss/profit for continuing operations:
2023 2022
£000
£000
audited
unaudited
Depreciation of property, plant and equipment under right-of-use assets 1,810 1,670
Depreciation and impairment of tangible assets 1,363 1,205
Amortisation of intangible assets - website 210 94
Amortisation of intangible assets - customer relationships and brands 906 943
Impairment of intangible assets - customer relationships and brands - 168
Impairment of goodwill (note 2) 13,026 10,072
Impairment of right of use asset 456 -
Impairment loss/(gain) on trade receivables and prepayments 10 29
Loss on foreign currency transactions (9) 23
Repairs and maintenance expenditure on plant and equipment 292 113
Services provided by the Group's Auditor 2023 2022
£000
£000
unaudited audited
Audit of the statutory consolidated and Company financial statements of 95 78
Flowtech Fluidpower plc
Amounts receivable by the Company's Auditor and its associates in respect of: 226 182
Audit of financial statements of subsidiaries of the Company
No other services were provided to the Company and its subsidiaries by the
Group's auditor. Services are provided by other professional advisers as
deemed appropriate by the Board.
5. Taxation
Recognised in the income statement
Continuing operations: 2023 2022
£000
£000
audited
unaudited
Current tax expense
UK Corporation tax 146 734
Overseas tax 292 185
Adjustment in respect of prior periods 184 9
Current tax expense 622 928
Deferred tax
Origination and reversal of temporary differences 49 21
Adjustment in respect of prior periods 217 (183)
Change in tax rate (13) (86)
Deferred tax (credit)/charge 253 (248)
Total tax charge - continuing operations 875 680
Reconciliation of effective tax rate 2023 2022
£000 £000
unaudited audited
Loss profit for the year (12,977) (6252)
Total tax (expense) (875) (680)
Loss excluding taxation (12,102) (5,572)
Tax using the UK corporation tax rate of 23.5% (2022: 19.00%) (2,846) (1,058)
Deferred tax movements not recognised - (1)
Impact of change in tax rate on deferred tax balances 1 (86)
Amounts not deductible 3,412 2,045
Adjustment in respect of prior periods 401 (174)
Other adjustments 37 (60)
Other tax reliefs and transfers (130) 14
Total tax expense in the income statement - continuing operations 875 680
Change in corporation tax rate.
An increase in the UK corporation tax rate from 19% to 25% (effective 1 April
2023) was substantively enacted on 24 May 2021, and the UK deferred tax
position for the Group as at 31 December 2023 has been calculated based on
this rate.
6. Dividends
2023 2022
£000
£000
audited
unaudited
Final dividend of 2.1p (2022: 2.0p) per share 1,289 1,228
Total dividends 1,289 1,228
The final dividend will be paid, subject to shareholder approval at the Annual
General Meeting on 19 July 2024 to Members on the Register as at 21 June
2024. The ex-dividend date is 20 June 2024.
7. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary Shareholders by the weighted average number of ordinary shares
during the year.
For diluted earnings per share the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The dilutive shares are those share options granted to employees where
the exercise price is less than the average market price of the Company's
ordinary shares during the year. For diluted loss per share the weighted
average number of ordinary shares in issue is not adjusted since its impact
would be anti-dilutive.
Year ended 31 December 2023 Year ended 31 December 2022
unaudited audited
Loss Weighted average number of shares Loss Profit Weighted average number of shares Earnings
after tax
per share
after tax
per share
£000
Pence
£000
Pence
Basic earnings per share
Continuing operations (12,977) 61,493 (21.10p) (6,252) 61,493 (10.17p)
2023 2022
£000
£000
audited
unaudited
Weighted average number of ordinary shares for basic and diluted earnings per 61,493 61,493
share
Impact of share options 97 277
Weighted average number of ordinary shares for diluted earnings per share 61,590 61,894
8. Goodwill
2023 2022
£000
£000
audited
unaudited
Cost
Balance at 1 January 63,164 63,164
Balance at 31 December 63,164 63,164
Impairment
At 1 January 10,072 -
Impairment charge 13,026 10,072
At 31 December 23,098 10,072
Carrying amount at 31 December 40,066 63,164
Background
Goodwill has been allocated for impairment testing purposes to 10
cash-generating units ("CGU") across the 3 geographical segments. These CGUs
represent the lowest level within the Group at which goodwill is monitored for
internal management purposes.
The carrying amounts of goodwill allocated now stands as at 31 December 2023
are:
Cash generating unit £000
unaudited
FTUK 29,220
Primary Systems 546
HTL 3,938
HES 1,204
Hydroflex-Hydraulics Oud 2,050
Flowtechnology Benelux BV 1,015
Nelson Hi-Power 1,869
Derek Lane 224
Orange County -
Hi-Power Transport -
Total 40,066
Impairment tests
The carrying amount of each CGU was determined by calculating the sum of the
carrying amounts of all intangible assets (including goodwill) and tangible
assets attributable to that unit. These were then compared with the value in
use calculations for each CGU based on discounted cash flows of future period
forecasts. Management prepared forecasts for each CGU for a five year period
and all forecasts have been approved by the Board.
Cash flows beyond the period forecast by management for each CGU were
extrapolated at an expected long-term growth rate of 2%. This growth rate does
not exceed the long-term average growth rate for the market in which the Group
operates.
Goodwill impairment charges in 2023
In total an impairment charge of £13,482 has been taken in 2023, of which
£13,026k was taken against Goodwill and £456k was taken against right of use
assets. The split of impairment charge by CGU and asset is shown below:
Ø FTUK - £12,821k (Goodwill)
Ø Primary Systems - £205k (Goodwill)
Ø Hi-Power Transport - £456k (Right of Use Assets)
FTUK
An impairment charge of £12,821k has been taken leaving a balance of goodwill
of £29,220k. As with other CGUs the value in use calculation is sensitive to
a number of assumptions. In arriving at the impairment charge the forecasts
assumed a pre-tax discount rate of 17.5% (2022:13.1%) and revenue growth rates
of 11% in 2024, 21% in 2025, 4% in 2026 and 2027 and 2% in 2028. The
calculation is extremely sensitive to any movement in these assumptions. With
regards to discount rates a 1% reduction would lead to a £5.8m increase in
the carrying value, whilst a 1% increase leads to a £4.9m reduction in the
carrying value. With regards to movements in revenue growth assumptions, the
impact of a 1% movement is approximately £1.8m. Movements in revenue and
discount rates are considered the factors to which the value in use
calculation is most sensitive.
Following the appointment of Mike England as CEO in April 2023 and the
subsequent material changes made to the senior management team, we have
identified a significant number of opportunities to improve the profitability
of this business; we believe a combination of returning to do certain basic
things brilliantly and growth opportunities we have identified will lead to a
material improvement in profitability. We would hope that discount rates
return to more traditional, i.e. lower, levels.
Primary Systems
An impairment charge of £205k has been taken leaving a balance of goodwill of
£546k. As with other CGUs the value in use calculation is sensitive to a
number of assumptions. In arriving at the impairment charge the forecasts
assumed a pre-tax discount rate of 16.2% (2022:13.78%) and revenue growth
rates of 5% in 2024, 13% in 2025, 4% in 2026 and 2027 and 2% in 2028. The
calculation is extremely sensitive to any movement in these assumptions. It
should be noted that each 1% movement in the discount rate has an impact of
approximately £0.4m on the calculation and each 1% movement in revenue an
impact of approximately £0.1m. Movements in revenue and discount rates are
considered the factors to which the value in use calculation is most
sensitive.
Hi-Power Transport
An impairment charge of £456k has been taken to eliminate the carrying value
of right of use assets.
Key assumptions used in value in use calculations
The Group has determined that the recoverable amount calculations are most
sensitive to changes in revenue growth rates and discount rates. The growth
rates and gross margins assumed in the calculations are consistent with recent
historic trends and approved budget level, and where appropriate, these are
adjusted for expected changes.
Discount rates have increased substantially over prior year due to increase in
cost of borrowing and risk-free rates. This has had a significant impact on
the VIU calculations for all CGUs and was a key factor in the need to impair.
Sensitivity to changes in key assumptions
The calculations to assess the value in use of each CGU are naturally based on
a series of assumptions; of particular note are those relating to revenue and
discount rates. The calculations are obviously sensitive to deviations, in
either direction, to these assumptions; the comments below seek to provide
some analysis and commentary around the most sensitive areas.
9. Other intangible assets
Acquired Customer relationships Acquired Brands Asset under construction Website Total
2023 -unaudited
2022-audited
2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Balance at 1 January 9,371 9,371 1,173 1,173 - 761 973 - 11,517 11,305
Transfer between asset categories - - - - - (761) - 761 - -
Additions - - - - - - 121 212 121 212
Balance at 31 December 9,371 9,371 1,173 1,173 - - 1,094 973 11,638 11,517
Amortisation and impairment
Balance at 1 January 6,726 5,657 1,173 1,131 - - 94 - 7,993 6,788
Amortisation 906 901 - 42 - - 210 94 1,116 1,037
Impairment - 168 - - - - - - - 168
Balance at 31 December 7,632 6,726 1,173 1,173 - - 304 94 9,109 7,993
Carrying amount at 31 December 1,739 2,645 - - - - 790 879 2,529 3,523
The impairment charge in 2022 relates to the intangible assets associated with
the Hi-Power Transport business. In 2023 there is no impairment charge on
other intangible assets. Amortisation is charged to administration costs in
the Consolidated Income Statement. The amortisation of customer relationships
and brands of £906K (2022; £943k) is a separately disclosed item and is
referred to as the amortisation of acquired intangibles.
10. Net cash from operating activities
2023 2022
£000 £000
unaudited audited
Reconciliation of (loss)/profit before taxation to net cash flows from
operations
Loss from continuing operations before tax (12,102) (5,572)
Depreciation and impairment of property, plant and equipment 1,363 1,205
Depreciation on right-of-use assets (IFRS 16) 1,810 1,670
Impairment of right-of-use assets (IFRS 16) 456 388
Write off of right-of-use liability (IFRS 16) (387)
Finance costs 1,737 1,192
Loss on sale of plant and equipment 1 57
Other movements - -
Amortisation of intangible assets 1,116 1,037
Impairment of intangible assets - 168
Impairment of goodwill (note 8) 13,026 10,072
Cash settled share options - (42)
Equity-settled share-based payment charge 462 372
Exchange differences on non-cash balances (15) 65
Operating cash inflow before changes in working capital and provisions 7,467 10,612
Change in trade and other receivables 347 (2,945)
Change in stocks (619) (738)
Change in trade and other payables 2,086 (1,702)
Change in provisions 15 7
Cash generated from operations 9,296 5,234
Tax paid (1,094) (220)
Net cash generated/(used) from operating activities 8,202 5,014
About Flowtech Fluidpower plc
Founded as Flowtech in 1983, we provide customers with power, motion &
control solutions, from a single component to integrated engineering systems,
in the most cost-effective way, harnessing the best global brands &
products, services and engineers in the market. We operate across three
regions in Great Britain (70%), Ireland (20%), and The Benelux (10%) as well
as serving customers around the world. Flowtech joined the AIM market in
2014.
OUR PURPOSE | We provide power, motion and control products, systems and solutions, keeping
industry moving and creating a more sustainable world
OUR MISSION | To provide products and solutions to help our customers achieve their goals,
saving them time and money and operating more safely and sustainably
OUR VISION | To be the trusted adviser and solutions partner in a world of motion
The value we create for our customers
Flowtech works across all industry sectors serving the needs of customers who
are designing, building, maintaining and improving industrial plant, equipment
and operations. We add value by being a technical specialist and trusted
adviser to Maintenance, Repair & Operations (MRO) customers, Original
Equipment Manufacturers (OEMs) and through our long-standing Distributor
Partner channels. We provide essential technical products combined with a
broad range of specialist engineering services across the world of Power,
Motion & Control.
Easy access to the widest Technical Product range
We stock over 75,000 Power, Motion & Control products including hydraulic
and pneumatic consumables and trade through our channels including E-commerce
Websites, Central Sales, Technical and Customer Support teams and through our
localised Engineering Centres across GB, Ireland and Benelux. We partner and
distribute for the world's largest power, motion and control brands and have
access to over 0.5 million technical products through over 2,000 leading
suppliers. We provide a market leading quality own brand offering
complementing our branded supplier portfolio.
Market Leading Distributor Partner Programme
We operate a leading Distributor Partners Programme supplying our wide range
of Products and Engineering Services through our strategic network of
Distributors and Service Providers giving them the support they need to
service their end-customers. This is enabled by our tried and tested white
label catalogue, E-commerce and fulfilment business model.
Engineered Systems and Solutions
We supply specialist technical Power, Motion & Control components &
systems with our core being centred around pneumatics and hydraulic industrial
and mobile applications. This includes bespoke design, manufacturing,
commissioning, installation, and servicing of systems to manufacturers of
specialised industrial and mobile OEMs, and additionally a wide range of
industrial end users. From a simple technical system build such as a
Hydraulic Power Pack to the repair of pumps, values and cylinders through to
site-based diagnostics and services to fully integrated turn-key solutions, we
have a strong engineering pedigree at our core making us the trusted adviser
and solutions partner for our customers.
Our six engines towards mid-teens operating profit percentage
Today, we are a strong market leader in a highly fragmented £30bn European
market. We have a clear strategy and plan to accelerate value creation for
our stakeholders. We are transforming our Company and have plenty of room
for improvement and growth
1. Customer growth
2. Commercial excellence
3. Range expansion
4. Own brand
5. Operate for less
6. Building talent and capabilities.
To read more about the Group please visit: www.flowtechfluidpower.com
(http://www.flowtechfluidpower.com)
The value we create for our customers
Flowtech works across all industry sectors serving the needs of customers who
are designing, building, maintaining and improving industrial plant, equipment
and operations. We add value by being a technical specialist and trusted
adviser to Maintenance, Repair & Operations (MRO) customers, Original
Equipment Manufacturers (OEMs) and through our long-standing Distributor
Partner channels. We provide essential technical products combined with a
broad range of specialist engineering services across the world of Power,
Motion & Control.
Easy access to the widest Technical Product range
We stock over 75,000 Power, Motion & Control products including hydraulic
and pneumatic consumables and trade through our channels including E-commerce
Websites, Central Sales, Technical and Customer Support teams and through our
localised Engineering Centres across GB, Ireland and Benelux. We partner and
distribute for the world's largest power, motion and control brands and have
access to over 0.5 million technical products through over 2,000 leading
suppliers. We provide a market leading quality own brand offering
complementing our branded supplier portfolio.
Market Leading Distributor Partner Programme
We operate a leading Distributor Partners Programme supplying our wide range
of Products and Engineering Services through our strategic network of
Distributors and Service Providers giving them the support they need to
service their end-customers. This is enabled by our tried and tested white
label catalogue, E-commerce and fulfilment business model.
Engineered Systems and Solutions
We supply specialist technical Power, Motion & Control components &
systems with our core being centred around pneumatics and hydraulic industrial
and mobile applications. This includes bespoke design, manufacturing,
commissioning, installation, and servicing of systems to manufacturers of
specialised industrial and mobile OEMs, and additionally a wide range of
industrial end users. From a simple technical system build such as a
Hydraulic Power Pack to the repair of pumps, values and cylinders through to
site-based diagnostics and services to fully integrated turn-key solutions, we
have a strong engineering pedigree at our core making us the trusted adviser
and solutions partner for our customers.
Our six engines towards mid-teens operating profit percentage
Today, we are a strong market leader in a highly fragmented £30bn European
market. We have a clear strategy and plan to accelerate value creation for
our stakeholders. We are transforming our Company and have plenty of room
for improvement and growth
1. Customer growth
2. Commercial excellence
3. Range expansion
4. Own brand
5. Operate for less
6. Building talent and capabilities.
To read more about the Group please visit: www.flowtechfluidpower.com
(http://www.flowtechfluidpower.com)
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