REG - Flowtech Fluidpower - 2024 Half-year Report & Trading update
26/09/2024 07:00
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RNS Number : 7153F Flowtech Fluidpower PLC 26 September 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 as amended by the Market Abuse (Amendment) (EU Exit)
Regulations 2019. Upon the publication of this announcement via the Regulatory
Information Service, this inside information is now considered to be in the
public domain.
NEWS RELEASE
Issued on behalf of Flowtech Fluidpower plc
Thursday, 26 September 2024
FLOWTECH FLUIDPOWER PLC
("Flowtech", the "Group" or "Company")
"a world of motion"
Everything we do at Flowtech is focused on keeping business moving, whether
that's supplying a product or designing and building a complex engineering
solution. Our vision is to be the trusted advisor in a world of motion.
2024 HALF-YEAR REPORT
For the six months ended 30 June 2024
"Whilst there are ongoing challenging market conditions, we have delivered
further performance improvements, implemented cost control
measures and improved overall service levels, which have improved gross margin
in the period. However, our market has deteriorated further, and we have,
accordingly, significantly reduced our expectations for the full year outturn"
Mike England, Chief Executive Officer
SUMMARY HEADLINES
· Persistent headwinds in our marketplace have continued to impact
top line growth ambitions with revenue reducing 5.7% compared to H1 23
· Revenue reduction is partially offset by further improvement in
gross margin delivering 2% increase in gross profit in H1 24. Upward momentum
of 5.1% revenue growth against the second half of last year, underpinned by
our Performance Improvement Plan delivering greater service levels and
operational efficiencies
· Gross profit margin up 290bps against H1 23 and 160bps up on FY
2023; results in higher gross profit in H1 24 v H1 23 notwithstanding the
reduction in revenue
· Underlying EBITDA of £4.7m, reduction limited to £0.3m despite
£3.4m reduction in revenue compared to H1 23
· £1.9m decrease in net debt to £13.5m over 12-month period (pre
IFRS16 lease liabilities) supported by £4.0m reduction in inventory in H1 24,
with significant headroom versus bank facilities
Post period end
· The recent acquisition of the trade and assets of Thorite
increases our market share and delivers a strong platform for growth and
improved margins. The first five weeks of ownership has given management
confidence in its ability to drive significant value and profitability in the
near-term. Before this improvement is realised, we will absorb losses in 2024
although we expect to have repaid our acquisition costs within the next
financial year
Current trading and outlook
· Q3 24 has seen a greater than expected market slowdown across all
three geographical segments reducing underlying volumes and extending project
timelines. This will impact our full-year revenues and, combined with the
short-term impact of Thorite losses, will result in a significant downgrade in
earnings expectations for 2024
Moving forward:
· Positive momentum in building the forward orderbook with over
£50m of opportunities within the priority sales pipeline and over £15m of
secured business
· We are confident that the Performance Improvement Plan and
Strategy for Growth (including the ecommerce upgrade in Q1 2025) is firmly on
track and that we are well set to deliver the mid-term margin goals outlined
in our recent annual report
FINANCIAL HIGHLIGHTS
Half year ended Half year ended Year ended
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
· Revenue £55.7m £59.1m £112.1m
· Gross profit £21.4m £21.0m £41.3m
· Gross profit % 38.4% 35.5% 36.8%
· Underlying EBITDA* £4.7m £5.0m £9.4m
· Underlying operating profit** £2.9m £3.4m £6.0m
· Operating profit / (loss) £1.2m £2.4m (£10.4m)
· Profit / (loss) before tax £0.3m £1.6m (£12.1m)
· Earnings per share (basic) 0.41p 2.28p (21.10p)
· Net debt*** £13.5m £15.4m £14.7m
*Underlying EBITDA is profit before interest, taxation, depreciation and
separately disclosed items
**Underlying operating profit is operating profit for continuing operations
before separately disclosed items (note 3
***Net debt is bank debt less cash and cash equivalents. It excludes lease
liabilities under IFRS 16
2024 HALF-YEAR FINANCIAL PERFORMANCE AND DIVISIONAL ANALYSIS
Revenue by current segment Six months Six months % Six months % Year
ended ended Change ended Change ended
30 June 2024 31 December 2023 30 June 2023 31 December 2023 (re-stated**)
(re-stated**) (re-stated**) £000
£000 £000 £000
Great Britain 38,316 36,715 4.4% 40,713 -5.9% 77,428
Island of Ireland 11,786 11,507 2.4% 12,577 -6.3% 24,084
Benelux 5,610 4,803 16.8% 5,780 -2.9% 10,583
Total Group revenue 55,712 53,025 5.1% 59,070 -5.7% 112,095
Gross profit % 38.4% 38.3% 35.5% 36.8%
Underlying segment operating profit* Six months Return on revenue Six months Return on revenue Six months Return on revenue % Year Return on revenue %
ended % ended % ended ended
30 June 2024 31 December 2023 30 June 2023 31 December 2023
(re-stated***) (re-stated***) (re-stated***)
£000 £000
£000 £000
Great Britain 4,900 12.8% 3,911 10.7% 4,464 11.0% 8,375 10.8%
Island of Ireland 1,802 15.3% 1,615 14.0% 1,878 14.9% 3,493 14.5%
Benelux 738 13.2% 961 20.0% 881 15.2% 1,842 17.4%
Central costs (4,561) (3,922) (3,799) (7,721)
Underlying operating profit* 2,879 2,565 3,424 5,989
* Underlying operating profit is operating profit for continuing operations
before separately disclosed items (note 3)
** H1 23 and FY 23 figures have been re-stated between Great Britain and
Island of Ireland to reflect the fact that certain elements of Irish revenues
are now being controlled by Irish management.
*** H1 23 and FY 23 figures have been re-stated between Great Britain and
Island of Ireland to reflect the associated profit relating to the Irish
revenues that are now being controlled by Irish management. Central costs have
been re-stated to capture certain items such as insurance and IT spend which
were previously recharged to operating segments.
REVENUE
Revenue reduced by 5.7% in H1 24 compared to H1 23 with persistent market
headwinds leading to reductions across all three geographical segments. The
comparison with H2 23 is more positive with a 5.1% increase.
Gross profit margin
We are pleased to report that the positive trend started in H2 23 has been
sustained into 2024; this has been particularly important in a market which is
not currently supporting our top line growth ambitions. As a result of this,
and despite the reduction in revenue, our gross profit margin increased to
38.4% (H1 23: 35.5%), delivering a £0.4m uplift in H1 24 v H1 23.
OPERATING Costs
Underlying operating costs have increased by £0.9m (5.6%), compared to the
comparative 2023 period. Approximately two thirds of our cost base relate to
people costs. Notwithstanding the average number of full-time equivalent
employees reducing by 3.7% compared to H1 23 our overall payroll costs have
increased by 2.7%. This reflects in part inflationary cost pressures and
equally the investment we have made in certain areas of our business,
including our outlay on in-house digital capabilities, and the breadth and
depth of our management team to build capability and scale to serve the future
needs of the business. The majority of the £0.9m increase relates to payroll
costs with the balance essentially representing inflationary increases across
other cost categories.
UNDERLYING OPERATING PROFIT
The £0.4m improvement in gross profit combined with the £0.9m increase in
operating costs resulted in a £0.5m reduction in underlying operating profit
to £2.9m in the first half ( H1 23: £3.4m).
NET DEBT
Net debt (pre IFRS16 lease liabilities) was £13.5m at 30 June 2024 (H1 23:
£15.4m), with significant headroom of £11.5m under the Group's £25m banking
facilities. If leases are taken into account, the reduction in Group debt
increases to £3.1m (June 2024: £18.5m: June 2023: £21.6m). A significant
factor in achieving this debt reduction was the management of inventory which
reduced by £4.0m in H1 24. The cash flow also benefitted by £1.4m from the
issue of new share capital, primarily relating to the exercise of a £1.2m
warrant instrument put in place when the Company was admitted to AIM in May
2014. As previously communicated ongoing net debt reduction remains a key
priority for the Board.
TRADING REVIEW
Market conditions proved more challenging than anticipated in H1 24 across all
geographical segments as further slowdown in many industrial verticals has led
to extended project cycles, reduced component basket size and a reduction in
project-based expenditure. Trading in Q3 24 has been weaker than anticipated
with customers, suppliers and competitors citing further challenges.
Nevertheless, it is encouraging to report that our orderbook remains healthy,
albeit a number of significant orders will now simply be pushed into 2025
where we anticipate a return to more normalised conditions.
Revenue performance impacted by persistent market slowdown
H1 24 revenue growth is 5.1% up on H2 23 with continued momentum in delivering
service improvements and increased sales force productivity.
The forward order book is beginning to build with increased quantity and
quality of the sales pipeline and order book. The timelines of some larger
secured projects have been extended out however, we are confident OEM recovery
and distribution volumes will bounce back although we recognise in part, this
will be dependent on the timing of market recovery. Revenue decline is
principally due to the following which we expect to continue through H2 based
on Q3 trading:
Ø Slowdown in overall OEM customer demand and delays to larger project work
Of the customers who have reduced orders (down-traders), 90% of the top ten
and 78% of the top fifty down-traders are OEM/project related. Down-trading
is largely external market related with our expectation being that more than
75% of these down-traders will increase orders as the market improves.
Northern Ireland revenues have been specifically impacted due to a small
number of long-standing large OEM customers with the crushing & screening
industry output reducing by over 20% over the last two quarters. Specific
larger, major turnkey projects Flowtech has won have been delayed or pushed
out for delivery into 2025.
Ø Continued depressed market recovery impacting core product distribution
revenues
We have maintained a consistent underlying order frequency but with reduced
basket size as customers curb general expenditure and burn off held
inventories. Larger projects are being delayed which is reducing expected
volumes. The market slowdown has increased price competitiveness as
customers seek cost reduction. Our strong commercial discipline has
protected our gross margin, and, in some cases, we have actively chosen to
walk away from lower margin business. The launch of the new catalogue in May
was very positively received; whilst there are early signs of an increase in
core catalogue product sales this has been more supressed than expected due to
market deterioration and the reduction in larger project related order volume.
Gross profit & cost management focus has partially offset revenue
headwinds
There has been continued progress executing all areas of self-help in the
Performance Improvement Plan with many improving data points indicating that
Flowtech is now in a far stronger position in commercial, operational and
service performance capability. Management focus has been on improving
commercial excellence in gross margin management and in identifying and
executing efficiency and cost reduction initiatives as part of the Plan. These
initiatives combined have resulted in a 200bps increase in gross profit
helping to offset the 5.7% reduction in H1 24 revenues. Management of our
cost base, in particular people related costs, restricted the increase in
operating overheads to 5.6% allowing investment to be made in certain key
areas.
Performance Improvement Plan continues to drive operational improvements
There has been further progress in the three areas of our improvement plan; 1)
to simplify the operating model, 2) become more customer centric and 3) to
build scalability.
1. Simplify
Group-wide aligned objectives, KPIs and reward mechanisms have driven improved
culture and performance.
The rebranding of fifteen brands to 'One Flowtech' across all UK and Island of
Ireland locations was completed in June 2024 including the consolidation of
over 50 websites and 20 social media accounts. Benelux rebranding will be
completed in Q4 24. The new leadership team is well embedded with over nine
months of learned experience working within a simplified, scalable functional
operating model. In doing so, we have implemented a 60% change in leadership
across the top 60 leaders as part of a Company-wide restructure with over 90%
of organisational and restructuring changes implemented. Operational basics
are embedded with a step change in service levels and commercial excellence.
2. Customer centric
There has been a sustained improvement in customer experience with a further
50% reduction in customer complaints in H1 24 and increase in customer enquiry
responsiveness of 10%. 40,000 new Flowtech catalogues were deployed to over
100 distributor partners in May. Selling effectiveness programmes were
delivered and resulted in more than 5% increase in sales force activity
productivity and quality of contact frequency resulting in quote conversion
improvement of over 10%.
Positive momentum in building the forward orderbook with over £50m
opportunity within the priority sales pipeline and over £15m of secured
business.
3. Scalable
Product availability has improved and been sustained; we have increased
product availability from a low point of 85% to approximately 96%; at the same
time, we achieved a £4m reduction in inventory. Improved accuracy and
throughput in operations leading to a 50% reduction in service complaints and
delivering stable and increased despatched volumes despite a further 25%
reduction in operational headcount.
Continued progress in delivering our ESG goals
Health & safety performance has improved with high-risk events reducing by
69% in the past 12 months and a further 33% in the past three months. There
has been positive progress in the diversity of leaders with a 40% increase in
leadership diversity over the last 12 months. There has also been strong focus
on Group-wide skills and capability development with a 176% increase in
training hours in the past 12 months with greater emphasis on upskilling
commercial and technical application.
Execution of our strategic plan into a world of motion
Customer First: We are on track with our plans to fully re-platform the
Flowtech website to a scalable and improved customer experience in readiness
for a Q1 25 launch. This being a key growth enabler for the Group.
The Power of One: The launch of the new One Flowtech value proposition to the
market in June 2024 as part of our rebrand event to over 200 customers,
suppliers and partners. This combining the high service product offering
with the extensive range of engineering solutions.
A World of Motion: Expanded the brand, product and service offering through
the acquisition of the business and certain assets of Thorite.
Thorite is a leading UK provider of pneumatics, compressed air, vacuum and
fluid handling products and systems and has traded since 1850. It operates
from seven sales and service centres across the UK.
The transaction completed immediately following the appointment of
Administrators, Interpath Advisory to Thorite. Under the terms of the
Acquisition, Flowtech acquired all the plant and machinery, vehicles, stocks,
and intangible assets of Thorite for a total cash consideration of £350,000
which was funded from the Group's existing bank facilities. Flowtech has also
repaid Thorite's outstanding debtor finance facility of c.£1.7m in return for
an assignment to the Group of a debtor book totalling c.£2.6m; this was also
funded from the Group's bank facilities. A sharing arrangement relating to the
excess of debtor book recoveries over and above the c.£1.7m paid has been
agreed with the Administrator of Thorite.
In the audited accounts for the year ended 31 March 2023, Thorite generated
revenue of £21.2m and delivered an operating profit of £79,000. The gross
value of asset classes being acquired at the same date was £8.8m, inclusive
of £3.8m in respect of the debtor book at that point in time. Thorite has
since experienced cash flow challenges and incurred operating losses due to a
combination of internal issues and market headwinds. Thorite's operating
losses in the year to 31 March 2024 are estimated at £1.2m.
There was a strong strategic rationale for the Acquisition and the potential
for significant synergies for the combined businesses including:
a) operational efficiencies, procurement leverage opportunities and economies
of scale, which will lead to material cost savings and improved margins for
the Group over the medium term
b) a well-developed value proposition, Thorite's trading locations and only
limited product overlap with Flowtech will provide expansion into new and
complementary geographies within the UK, together with new products and
services; and,
c) It is anticipated that the enlarged business will also benefit from strong
cross selling prospects across the respective complementary customer bases.
The business we inherited was heavily loss making but we are confident that
focus on revenue, gross profit margins and addressing the cost base will
quickly return the business to profitability.
OUTLOOK
Q3 24 has seen continued difficult conditions and a delay to recovery in the
global marketplace with a market recovery likely to be delayed into 2025. In
addition to some de-stocking, there have been further delays to some larger
OEM and major projects and continued suppression in underlying product
volumes. Notwithstanding our strong and growing orderbook and sales
discipline and focus on profitable growth, we are not yet seeing the
anticipated positive gains we had expected.
We are pleased with the Thorite acquisition and confident that it will pay for
itself and deliver accretive revenues and margins into 2025. However, in 2024
there will be a negative operating profit impact term on our results whilst
actions are taken to right size the cost base, improve gross margins and make
necessary investments to generate improved revenues and operational
stability.
Consequently, the impact of the Thorite acquisition and losses, combined with
the slower than expected market recovery will result in trading results for
the year ending 31 December 2024 being significantly below current market
expectations (1).
Despite this backdrop, the Directors remain confident that the Group's
Performance Improvement Plan, and the Strategy for Growth is on track to
deliver the increased mid-term earnings ambitions as we recently outlined in
our recent annual report. Underpinned by improved KPIs, we remain optimistic
that we are setting the foundations for the Company to deliver a stronger
performance in 2025 and 2026.
By order of the Board
26 September 2024
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2024
Notes Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£000 £000 £000
Continuing operations
Revenue 55,712 59,070 112,095
Cost of sales (34,301) (38,089) (70,832)
Gross profit 21,411 20,981 41,263
Distribution expenses (2,188) (2,288) (4,534)
Administrative expenses before separately disclosed items: (16,344) (15,269) (30,740)
- separately disclosed items 3 (1,663) (987) (16,356)
Total administrative expenses (18,007) (16,256) (47,096)
Operating profit / (loss) 1,216 2,437 (10,367)
Financial expenses (878) (813) (1,735)
Profit / (loss) from continuing operations before tax 338 1,624 (12,102)
Taxation 4 (87) (220) (875)
Profit / (loss) from continuing operations 251 1,404 (12,977)
Earnings per share 5
Basic earnings per share - continuing operations 0.41p 2.28p (21.10p)
Diluted earnings per share - continuing operations 0.41p 2.28p (21.10p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2024
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£000 £000 £000
Profit / (loss) for the period 251 1,404 (12,977)
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
-Exchange differences on translating foreign operations (158) (225) (136)
Total comprehensive income in the period 93 1,179 (13,113)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2024
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£000 £000 £000
Assets
Non-current assets
Goodwill 40,066 53,092 40,066
Other intangible assets 2,644 2,979 2,529
Right of use assets 4,307 5,921 4,829
Property, plant, and equipment 7,848 7,900 7,822
Total non-current assets 54,865 69,892 55,246
Current assets
Inventories 27,948 30,843 32,009
Trade and other receivables 24,260 25,257 23,725
Prepayments 1,653 1,130 856
Cash and cash equivalents 6,367 4,446 5,184
Total current assets 60,228 61,676 61,774
Liabilities
Current liabilities
Interest bearing borrowings - - -
Lease liability 1,568 1,453 1,695
Trade and other payables 18,378 20,248 21,558
Tax Payable 720 1,123 767
Total current liabilities 20,666 22,824 24,020
Net current assets 39,562 38,852 37,754
Non-current liabilities
Interest-bearing borrowings 19,883 19,889 19,915
Lease liability 3,436 4,705 3,822
Provisions 361 339 330
Deferred tax liabilities 1,422 1,196 1,534
Total non-current liabilities 25,102 26,129 25,601
Net assets 69,325 82,615 67,399
Equity directly attributable to owners of the parent
Share capital 31,637 30,746 30,746
Share premium 61,662 60,959 60,959
Other reserves 187 187 187
Shares owned by the Employee Benefit Trust (EBT) (124) (124) (124)
Merger reserve 293 293 293
Merger relief reserve 3,646 3,646 3,646
Currency translation reserve (135) (66) 23
Retained losses (27,841) (13,026) (28,331)
Total equity attributable to the owners of the parent company 69,325 82,615 67,399
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2024
Share capital Share Other reserves Shares owned by EBT £000 Merger reserve Merger relief Currency Retained Total
premium reserve translation losses equity
£000 £000 £000 £000 reserve
£000 £000 £000 £000
Six months ended
30 June 2024
Unaudited
Balance at 1 January 2024 30,746 60,959 187 (124) 293 3,646 23 (28,331) 67,399
Profit for the period - - - - - - - 251 251
Other comprehensive income - - - - - - (158) - (158)
Total comprehensive income for the year
- - - - - - (158) 251 93
Transaction with owners
Issue of share capital 891 703 - (200) - - - - 1,394
Share options settled - - - 200 - - - (71) 129
Share-based payment charge - - - - - - - 310 310
Balance at 30 June 2024 31,637 61,662 187 (124) 293 3,646 (135) (27,841) 69,325
Six months ended
30 June 2023
unaudited
Balance at 1 January 2023 30,746 60,959 187 (124) 293 3,646 159 (14,527) 81,339
Profit for the period - - - - - - - 1,404 1,404
Other comprehensive income - - - - - - (225) - (225)
Total comprehensive income for the year
- - - - - - (225) 1,404 1,179
Transaction with owners
Share-based payment charge - - - - - - - 97 97
Share options settled - - - - - - - - -
Balance at 30 June 2023 30,746 60,959 187 (124) 293 3,646 (66) (13,026) 82,615
Twelve months ended
31 December 2023
audited
Balance at 1 January 2023 30,746 60,959 187 (124) 293 3,646 159 (14,527) 81,339
Profit or the year - - - - - - - (12,977) (12,977)
Other comprehensive income - - - - - - (136) - (136)
Total comprehensive income for the year
- - - - - - (136) (12,977) (13,113)
Transaction with owners:
Shares options settled - - - - - - - - -
Share-based payment charge - - - - - - - 462 462
Dividends paid - - - - - - - (1,289) (1,289)
Transfers between reserves - - - - - - - - -
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 six months ended 30 June 2024
Note Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£000 £000 £000
Net cash from operating activities 6 2,799 3,607 8,202
Cash flow from investing activities
Acquisition of property, plant, and equipment (822) (1,340) (2,092)
Acquisition of intangible assets (633) - (121)
Proceeds from sale of property, plant, and equipment 20 3 135
Net cash used in investing activities (1,435) (1,337) (2,078)
Cash flows from financing activities
Net proceeds from issue of share capital 1,393 - -
Repayment of lease liabilities (854) (880) (1,818)
Interest on lease liabilities (117) (116) (221)
Other interest (792) (776) (1,567)
Proceeds from sale of shares held by EBT 200 - -
Dividends paid - - (1,289)
Net cash generated from / (used in) financing activities (170) (1,772) (4,895)
Net change in cash and cash equivalents 1,194 498 1,229
Cash and cash equivalents at start of period 5,184 3,972 3,972
Exchange differences on cash and cash equivalents (11) (24) (17)
Cash and cash equivalents at end of period 6,367 4,446 5,184
Short-term borrowings Long-term borrowings Lease liabilities Total
£000 £000 £000 £000
At 1 January 2024 - 19,915 5,517 25,432
Cash flows
Repayment - - (854) (854)
Movement between short-term and long-term - - - -
Other movements - (32) 358 326
Non-cash
Foreign exchange - - (17) (17)
At 30 June 2024 - 19,883 5,004 24,887
NOTES TO THE HALF-YEAR REPORT
For the six months ended 30 June 2024
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, Wilmslow, SK9
1DP.
The registered number is 09010518.
As permitted, this Half-year report has been prepared in accordance with the
AIM rules and not in accordance with IAS 34 "Interim Financial Reporting".
The consolidated financial statements are prepared under the historical cost
convention, as modified by the revaluation of certain financial instruments.
This consolidated Half-year report and the financial information for the six
months ended 30 June 2024 does not constitute full statutory accounts within
the meaning of section 434 of the Companies Act 2006 and are unaudited. This
unaudited Half-Year Report was approved by the Board of Directors on 27
September 2024.
The Group's financial statements for the year ended 31 December 2023 have been
filed with the Registrar of Companies. The Group's auditor's report on these
financial statements was unqualified and did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
Electronic communications
The Company does not intend to bulk print and distribute hard copies of this
Half-year report, although copies can be requested by contacting: The Company
Secretary, Flowtech Fluidpower plc, Bollin House, Bollin Walk, Wilmslow, SK9
1DP. Email: info@flowtechfluidpower.com (mailto:info@flowtechfluidpower.com)
.
The Board believes that by utilising electronic communication it delivers
savings to the Company in terms of administration, printing and postage, and
environmental benefits through reduced consumption of paper and inks, as well
as speeding up the provision of information to shareholders. News updates,
regulatory news, and financial statements can be viewed and downloaded from
the Group's website: https://www.flowtechfluidpower.com
(https://www.flowtechfluidpower.com) .
2. aCCOUNTING POLICIES
2.1 Basis of preparation
The financial information set out in this consolidated Half-year report has
been prepared under International Accounting Standards in conformity with the
requirements of the IFRIC interpretations issued by the International
Accounting Standards Board (IASB) and the Companies Act 2006 and in accordance
with the accounting policies which will be adopted in presenting the Group's
Annual Report and Financial Statements for the year ended 31 December 2024.
These are consistent with the accounting policies used in the Financial
Statements for the year ended 31 December 2023.
2.2 Going concern
The financial statements are prepared on a going concern basis. The Directors
believe this to be the most appropriate basis for the following reasons:
· The Group generated underlying operating profit
of £2.9m in the six months ended 30 June 2024.
· The Group is financed by revolving credit
facilities totaling £20m (extended to February 2027) and £5m overdraft
facility,
repayable on demand.
· The Group has operated, and is expected to
continue to operate, well within its Banking facilities.
The Directors have revisited the forecasts and continue to anticipate a
profitable performance in the second half of 2024. Updated cash flow forecasts
continue to show the business operating well within the limits of its Banking
facilities.
Naturally, these forecasts include a number of key assumptions notably
relating, inter alia, to revenue, margins, costs and working capital. In any
set of forecasts there are inherent risks relating to each of these
assumptions. If future trading performance significantly underperformed
expectations, management believe there would be the ability to mitigate the
impact of this by careful management of the Group's cost base and working
capital and that this would assist in seeking to ensure all bank covenants
were complied with and the business continued to operate well within its
aggregate £25m banking facility. The Group therefore continues to adopt the
going concern basis in preparing its financial statements.
3. OPERATING SEGMENTS
The operations of the business are reviewed based on three geographical
segments - Great Britain, Island of Ireland and Benelux (as explained in note
3 Segment Reporting (page 98) of the Annual report 2023). These geographical
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.
Segment information for the reporting periods is as follows:
Half year ended 30 June 2024 Great Britain Island of Ireland Benelux Inter-segmental transactions CentralCosts Total
£000 continuing
£000 £000 £000 operations
£000 £000
Income statement - continuing operations:
Revenue from external customers 38,316 11,786 5,610 - - 55,712
Inter segment revenue 2,078 226 260 (2564) - -
Total revenue 40,394 12,012 5,819 (2,564) - 55,712
Underlying operating result* 4,900 1,802 738 - (4,561) 2,879
Net financing costs (89) (16) (3) - (770) (878)
Underlying segment result 4,811 1,786 735 - (5,331) 2,001
Separately disclosed items (see below) (516) (66) (49) - (1,032) (1,663)
Profit before tax 4,295 1,720 686 - (6,363) 338
Specific disclosure items
Depreciation on owned plant ,property and equipment 634 48 36 - - 718
Depreciation on right-of-use assets 550 178 64 - 73 865
Amortisation 462 59 49 - - 570
Reconciliation of underlying operating result to operating profit:
Underlying operating result* 4,900 1,802 738 - (4,561) 2,879
Separately disclosed items (see below) (516) (66) (49) - (1,032) (1,663)
Operating profit/ (loss) 4,384 1,736 689 - (5,593) 1,216
(*) Underlying operating result is continuing operations' operating profit
before separately disclosed items
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.
Half year ended 30 June 2023 Great Britain Island of Ireland Benelux Inter-segmental transactions Central Total
(re-stated) £000 Costs continuing
£000 £000 operations
£000 £000 £000
Income statement - continuing operations:
Revenue from external customers 40,713 12,577 5,780 - - 59,070
Inter segment revenue 1,177 375 541 (2,093) - -
Total revenue 41,890 12,952 6,321 (2,093) - 59,070
Underlying operating result* 4,464 1,878 881 - (3,799) 3,424
Net financing costs (86) (21) (5) - (701) (813)
Underlying segment result 4,378 1,857 876 - (4,500) 2,611
Separately disclosed items (see below) (419) (66) (49) - (453) (987)
Profit before tax 3,959 1,791 827 - (4,953) 1,624
Specific disclosure items
Depreciation on owned plant, property and equipment 575 38 33 - - 645
Depreciation on right-of-use assets 511 169 135 - 65 880
Amortisation 437 59 49 - - 545
Reconciliation of underlying operating result to operating profit:
Underlying operating result* 4,464 1,878 881 - (3,799) 3,424
Separately disclosed items (see below) (419) (66) (49) - (453) (987)
Operating profit/ (loss) 4,045 1,812 832 - (4,252) 2,437
(*) Underlying operating result is continuing operations' operating profit
before separately disclosed items
For the year ended 31 December 2023 Great Britain Island of Ireland Benelux Inter-segmental transactions Central Total
(re-stated) £000 Costs continuing
£000 operations
£000 £000 £000 £000
Income statement - continuing operations:
Revenue from external customers 77,428 24,084 10,583 - - 112,095
Inter segment revenue 3,141 585 652 (4,378) - -
Total revenue 80,569 24,669 11,235 (4,378) - 112,095
Underlying operating result* 6,509 3,197 1,585 - (5,302) 5,989
Net financing costs (172) (30) (8) - (1,525) (1,735)
Underlying segment result 6,337 3,167 1,577 - (6,827) 4,254
Separately disclosed items (see below) (13,925) (588) (98) - (1,745) (16,356)
Profit before tax (7,588) 2,579 1,479 - (8,572) (12,102)
Specific disclosure items
Depreciation on owned plant, property and equipment 1,208 83 71 - 1 1,363
Depreciation on right-of-use assets 1,065 344 262 - 139 1,810
Impairment of right of use assets - 456 - - - 456
Impairment of goodwill 13,026 - - - - 13,026
Amortisation 900 118 98 - - 1,116
Reconciliation of underlying operating result to operating profit:
Underlying operating result* 6,509 3,197 1,585 - (5,302) 5,989
Separately disclosed items (see below) (13,925) (588) (98) - (1,745) (16,356)
Operating profit/ (loss) (7,416) 2,609 1,487 - (7,047) (10,367)
(*) Underlying operating result is continuing operations' operating profit
before separately disclosed items
Reconciliation of re-stated segment information for the year ended 31 December Great Britain Island of Ireland Benelux Inter-segmental transactions Central Total
2023 to prior year report
£000 Costs continuing
£000 £000 operations
£000 £000 £000
Revenue as per prior year report 82,653 22,585 11,235 (4,378) - 112,095
Revenue from Flowtech Irish customers categorised from the Great Britain (2,084) 2,084 - - - -
Segment
Total re-stated revenue 80,569 24,669 11,235 (4,378) - 112,095
Underlying operating results in prior year report (6,725) 1,918 1,487 - (7,047) (10,367)
Underlying operating result from Revenue from Flowtech Irish customers (691) 691 - - - -
categorised from the Great Britain Segment
Underlying operating results, re-stated (7,416) 2,609 1,487 - (7,047) (10,367)
SEPARATELY DISCLOSED ITEMS Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£000 £000 £000
Separately disclosed items within administrative expenses:
Acquisition costs 3 8 8
Amortisation of acquired intangibles 453 452 906
Impairment of acquired intangibles - - -
Impairment of goodwill - - 13,026
Impairment of right of use asset - - 456
Release of lease liability of property closed in FY23 - - (412)
Share-based payment costs 310 97 462
Restructuring costs 897 430 1,910
Total 1,663 987 16,356
· Acquisition costs relate to outline research into potential acquisition
opportunities which are presented to us
· Share-based payment costs relate to the provision made in accordance with
IFRS 2 "Share-based payment" following the issue of share options to employees
· Restructuring costs related to restructuring activities of an
operational nature following acquisition of business units and other
restructuring activities in established businesses. Costs include
restructuring advice, service contract termination costs and employee
redundancies
4. TAXATION
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£000 £000 £000
Current tax on income for the period - continuing operations:
UK tax 145 61 146
Overseas tax 55 265 292
Adjustments in respect of prior periods/ other differences - - 184
Deferred tax charge (113) (106) 253
Total taxation 87 220 875
The taxation for the period has been calculated by applying the estimated tax
rate for the financial year ending 31 December 2024.
5. 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
outstanding during the period. 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 period. For diluted
loss per share the weighted average number of ordinary shares in issue is not
adjusted.
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31
Dec
emb
er
202
3
Earnings Weighted average number of shares Earnings per share Earnings Weighted average number of shares Earnings per share Earnings Weighted average number of shares Earnings per share
£000 000's Pence £000 000's Pence £000 000's Pence
Basic earnings per share
Continuing operations 251 61,763 0.41 1,404 61,493 2.28 (12,977) 61,493 (21.10)
Diluted earnings per share
Continuing operations 251 61,848 0.41 1,404 61,673 2.28 (12,977) 61,590 (21.07)
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£000 £000 £000
Weighted average number of ordinary shares for basic and diluted earnings per 61,763 61,493 61,493
share
Impact of share options 85 180 97
Weighted average number of ordinary shares for diluted earnings per share 61,848 61,673 61,590
6. NET CASH FROM OPERATING ACTIVITIES
Six months ended Six months ended Year ended
30 June 30 June 31 December 2023
2024 2023 £000
£000 £000
Reconciliation of profit before taxation to net cash flows from operations:
Profit / (loss) from continuing operations before tax 338 1,624 (12,102)
Depreciation and impairment on property, plant, and equipment 717 645 1,363
Depreciation on right-of-use assets (IFRS 16) 864 880 1,810
Impairment of right-of-use assets (IFRS16) - - 456
Release of lease liability (IFRS16) - (387) (387)
Finance costs 910 890 1,737
(Gain) / Loss on sale of plant and equipment (2) 2 1
Loan arrangement fee charged to income statement (32) (77) -
Amortisation of intangible assets 569 545 1,116
Impairment of intangible assets - - -
Impairment of goodwill - - 13,026
Settled share options (75) - -
Equity settled share-based payment charge 310 97 462
Exchange differences on non-cash balances (29) (56) (15)
Operating cash inflow before changes in working capital and provisions 3,570 4,163 7,467
Change in trade and other receivables (1,407) (1,664) 347
Change in stocks 3,964 601 (619)
Change in trade and other payables (3,112) 804 2,086
Change in provisions 31 24 15
Cash generated from operations 3,046 3,928 9,296
Tax paid / (reclaimed) (247) (321) (1,094)
Net cash generated / (used) from operating activities 2,799 3,607 8,202
7. PRINCIPAL RISKS AND UNCERTAINTIES
In common with all organisations, Flowtech faces risks which may affect its
performance. The Group operates a system of internal control and risk
management to provide assurance that we are managing risk whilst achieving our
business objectives. No system can fully eliminate risk and therefore the
understanding of operational risk is central to management processes. The
long-term success of the Group depends on the continual review, assessment,
and control of the key business risks it faces. The Directors set out in the
2023 Annual Report and Financial Statements the principal risks identified
during this exercise, including quality control, systems and site disruption
and employee retention. The Board does not consider that these risks have
changed materially in the last six months.
8. 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. Although the Group
believes that the expectations reflected in these statements are reasonable,
it can give no assurance that these expectations will prove to have been
correct. Given that these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by these
forward-looking statements. The Group undertakes no obligation to update any
forward-looking statements whether because of new information, future events
or otherwise.
WEBCAST PRESENTATION - MONDAY 30 SEPTEMBER 2024
CEO Mike England and CFO Russell Cash will provide a 'live' presentation via
the Investor Meet Company platform (IMC) on Monday 30 September 2024 at
12noon.
To join please register via this link:
https://www.investormeetcompany.com/flowtech-fluidpower-plc/register-investor
(https://www.investormeetcompany.com/flowtech-fluidpower-plc/register-investor)
Website: www.investormeetcompany.com (http://www.investormeetcompany.com)
FURTHER ENQUIRIES TO:
Flowtech Fluidpower plc
Mike England, Chief Executive Officer
Russell Cash, Chief Financial Officer
Tel: +44 (0) 1695 52759
Email: info@flowtechfluidpower.com (mailto:info@flowtechfluidpower.com)
Panmure Liberum Limited (Nominated adviser and joint broker)
Richard Lindley, Director Investment Banking
Will King, Assistant Director, Investment Banking
Tel: +44 (0) 20 3100 2000
Singer Capital Markets (Joint broker)
Tom Salvesen, Head of Investment Banking
James Todd, Associate, Investment Banking
Tel: +44 (0) 207 496 3000
TooleyStreet Communications (IR and media relations)
Fiona Tooley
Tel: +44 (0) 7785 703523 or email: fiona@tooleystreet.com
(mailto:fiona@tooleystreet.com)
EDITORS NOTE:
Flowtech Fluidpower plc (AIM:FLO), is the largest supplier of fluid power
products, systems and solutions in the UK, Ireland, and Benelux. As a
specialist we have the expertise and experience our customers need to help
them minimise downtime, optimise performance and maximise the lifespan of
operations. Today, the Company is a strong market leader in a highly
fragmented £30bn European market. We work across virtually all industry
sectors, serving the needs of our customers who are designing, building,
maintaining, and improving industrial plant, equipment, and operations. To
read more about the Group, please visit: www.flowtechfluidpower.com
(http://www.flowtechfluidpower.com) .
Note: (1) Prior to this announcement consensus market forecasts for FY 2024
were: revenue £113.0m and underlying EBIT of £7.2m.
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