REG - Flowtech Fluidpower - Half-year Report - six months ended 30 June 2022
31/08/2022 07:00
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RNS Number : 6816X Flowtech Fluidpower PLC 31 August 2022
WEDNESDAY, 31 AUGUST 2022
FLOWTECH FLUIDPOWER PLC
("Flowtech", the "Group" or "Company")
"A vital partner in the fluid power supply chain"
Flowtech Fluidpower is a Group of specialist fluid power businesses. Working
in partnership with customers and suppliers, we deliver essential components,
custom solutions and high-quality servicing support to keep global industry
moving.
2022 HALF-YEAR REPORT
For the six months ended 30 June 2022
"We achieved a solid trading performance in H1 2022. In the current period
of widespread uncertainty our focus is on the key pillars of our long-term
strategy balanced with maximising all opportunities to protect profitability"
Bryce Brooks, Chief Executive Officer
TRADING AND OPERATIONAL HIGHLIGHTS
· Revenue 4.8% up on like for like trading day basis
· 89bps improvement on already strong gross margin to 36.3% (H1 21
35.4%)
· Inflationary pressures offset by cost savings and productivity
improvements
· Underlying EBIT at £4.3m, an increase of £0.9m on the
comparative period
· £4.3m increase in net debt resulting from investment in
inventory to support delivery of trading performance
· Successful implementation of 5 to 1 reorganisation project
· Launch of new e-commerce website in May 2022 with enhanced
functionality
Half year ended Half year ended Year ended
30 June 2022 30 June 2021 31 December 2021
FINANCIAL HIGHLIGHTS Unaudited Unaudited Audited
· Revenue £57.5m £55.3m £109.1m
· Gross profit % 36.3% 35.4% 35.3%
· Operating profit £3.6m £2.7m £3.7m
· Underlying operating profit* £4.3m £3.4m £5.7m
· Profit before tax £3.1m £2.3m £2.9m
· Earnings per share (basic) 4.24p 3.02p 3.48p
· Net debt** £19.7m £13.2m £15.4m
* Underlying operating profit is continuing operations' operating profit
before separately disclosed items (note 3).
** Net debt is Bank Debt less cash and cash equivalents. It excludes lease
liabilities under IFRS 16.
RESULTS PRESENTATION:
CEO Bryce Brooks and CFO Russell Cash will provide a 'live' presentation via
the Investor Meet Company platform (IMC) at 9.00am (BST)
today (31 August 2022):
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)
ENQUIRIES:
Flowtech Fluidpower plc
Bryce Brooks, Chief Executive
Russell Cash, Chief Financial Officer
Tel: +44 (0) 1695 52759
Email: info@flowtechfluidpower.com (mailto:info@flowtechfluidpower.com)
Liberum Capital Limited (Nominated adviser and Sole Broker)
Richard Lindley / Ben Cryer / William Hall / Will King
Tel: 44 (0) 20 3100 2000
TooleyStreet Communications (IR and media relations)
Fiona Tooley
Tel: +44 (0) 7785 703523 or email: fiona@tooleystreet.com
(mailto:fiona@tooleystreet.com)
ABOUT FLOWTECH FLUIDPOWER PLC
Founded as Flowtech in 1983, the Flowtech Fluidpower Group is a group of
specialist fluid power businesses. Working in partnership with customers and
suppliers, we deliver essential components, customer solutions and
high-quality servicing support to keep global industry moving. The business
joined the AIM market in 2014.
To read more about the Group please visit www.flowtechfluidpower.com
(http://www.flowtechfluidpower.com) .
Segment: What we do: Locations:
Flowtech
Our focus
Supply of both hydraulic and pneumatic consumables, predominantly through Flowtech (Skelmersdale, Leicester, Birmingham)
distribution for maintenance and repair operations across all industry markets
but supported by supply agreements direct to a broad range of original Flowtechnology Benelux (Deventer)
equipment manufacturers (OEMs)
Channels to market:
E-commerce websites, customer white label e-commerce websites,
70,000+catalogues, own and customer trade counters
Fluidpower
Group Solutions Our focus
Supply specialist technical hydraulic components & systems, predominantly Primary Fluid Power Components (Skelmersdale)
into OEMs and end-user channels to all industry markets, supported by supply
agreements with a broad range of manufacturer brands Nelson Hi-Power (Dublin, Cork, Dungannon)
HTL (Ludlow)
Channels to market: Hydroflex (Brussels, Rotterdam and OudBeijerland)
Engineering collaboration through sales offices providing national and local Derek Lane & Co (Newton Abbot)
coverage. In 2022 enhanced by new e-commerce capabilities
HES Tractec (Gloucester)
Fluidpower
Group Services Our focus
Bespoke design, manufacturing, commissioning, installation, and servicing of Primary Fluid Power Systems (Knowsley)
systems to manufacturers of specialised industrial and mobile hydraulic OEMs,
and additionally a wide range of industrial end users. Capital project-based Branch Hydraulic Systems (Gloucester)
revenue.
HES Onsite (Leeds, Gloucester)
Orange County (Spennymoor)
Channels to market:
Hi Power Transport (Dublin, Cork, Belfast)
In-house design and build, combined with on-site installation, servicing and
support
All the Group's divisions have overlapping product sets, allowing procurement
synergies to be maximised. The above segments are supported by a centralised
back-office teams based at Skelmersdale and Wilmslow sites in the UK. In
total, the business employs 605 people.
For more information please visit, Our business | Flowtech Fluidpower plc
(https://www.flowtechfluidpower.com/our-business/)
FLOWTECH FLUIDPOWER PLC 2021 HALF-YEAR REPORT
For the six months ended 30 June 2022
2022 HALF-YEAR FINANCIAL PERFORMANCE AND DIVISIONAL ANALYSIS
Revenue by division Six months Six months % Year
ended ended Change ended
30 June 2022 30 June 2021 31 December 2021
£000 £000 £000
Flowtech 26,751 26,688 0.2% 52,135
Fluidpower Group Solutions 21,190 20,084 5.5% 39,575
Fluidpower Group Services 9,516 8,522 11.7% 17,397
Total Group revenue 57,457 55,294 3.9% 109,107
Gross profit % 36.3% 35.4% 35.3%
Underlying segment operating profit/(loss)* Six months Return on revenue Six months Return on revenue Year Return on revenue
ended ended ended
30 June 2022 % 30 June 2021 % 31 December 2021 %
£000 £000 £000
Flowtech 3,725 13.9% 3,962 14.8% 7,101 13.6%
Fluidpower Group Solutions 2,952 13.9% 2,053 10.2% 3,505 8.9%
Fluidpower Group Services 328 3.4% 194 2.3% 140 0.8%
Central costs (2,692) (2,827) (5,056)
Underlying operating profit* 4,313 3,382 5,690
* Underlying operating profit is continuing operations' operating profit before
separately disclosed items (note 3).
REVENUE
Revenue was 3.9% up on H1 2021, 4.8% on a like for like trading day basis.
Revenue across our three segments increased at differing rates, with the
growth in the Flowtech division coming via price rather than volume; this is
to be expected given the different focus each of our segments has. Data
collated by our industry body suggests the pneumatics sector declined in H1
2022 whilst there was growth in the hydraulics sector; this correlates with
the figures seen in our segments with Flowtech being pneumatics biased whilst
Solutions and Services are more closely aligned with the hydraulics market.
Further information is shown in our Trading Review section below.
Gross profit margin
Our gross profit margin remains strong at 36.3% (H1 21 35.4%). It can vary
from one period to another based on market conditions and mix of sales; in H1
2022 our ability to reflect inflationary pressures in our selling prices has
assisted in further improving this key performance measure.
OPERATING Costs
Underlying operating costs are £0.3m (2%) up on the comparative 2021 period.
Our ability to restrict the increase to a modest level reflects the impact
of operational savings we have achieved to offset inflationary pressures and
areas we have chosen to invest in. Our average number of employees in H1
2022 was 2.1% down on the comparative period with headcount at the end of June
2022 of 605 compared with 636 at June 2021; we are anticipating that this
number will reduce further in the second half of the year based on
restructuring activities which have already been announced.
UNDERLYING OPERATING PROFIT
Underlying operating profit of £4.3m is an increase of £0.9m from the
comparative period (H1 21: £3.4m). The improvement is principally driven by
our Solutions segment which has shown a strong recovery from the impact of
COVID-19, and which is now yielding the benefit of the implementation of
recent operational improvements.
In our 2021 Annual Report we outlined our targets for our respective segments;
referencing return on revenue targets of 15% and 10% for Flowtech and
Solutions respectively. We are pleased that this target has been exceeded
for Solutions (H1 22: 13.9%) and we remain confident that we can achieve the
15% target for Flowtech (H1 22: 13.9%), where the closure of our Leicester
warehouse function (referred to below) will most benefit.
The first half contribution provided by Services is in line with our
expectations; we expect the result in the second half of the year will be
improved as it finished H1 2022 with a strong order book for delivery in the
second half of the year.
NET DEBT
Net debt was £19.7m at 30 June 2022 (H1 21: £13.3m), with headroom of £5.3m
compared to the Group's banking facilities. Given the supply chain related
pressures encountered in late 2021, and early 2022, we invested in inventory,
which has increased by £11m in the 12-month period to 30 June 2022. This
has supported the delivery of a solid trading performance in the first half of
2022. Inventory levels are a key focus of management; we expect a degree of
unwind of this position in the remainder of the year as we benefit from a more
predictable supply chain environment, and which will reduce the Group's net
debt position.
TRADING REVIEW
At the time of our annual reporting in March 2022 we reported that trading in
the year to date had been encouraging across all aspects of our business. In
hydraulic sectors, predominantly Solutions and Services and around 30% of
Flowtech, this positive market position has continued throughout Q2 and Q3,
albeit there are some signs of the rate of demand beginning to flatten.
However, in the pneumatic and broader industrial sectors of the Flowtech
division, there has been a noticeable decline in demand in Q2 when measured
against the 2021 comparative, and this is best reflected in the data provided
by our industry body, the BFPDA, which has indicated an overall decline in
pneumatic distribution sales of -6.3% for the year to June 2022 when compared
to the same period in 2021 (hydraulics +9.7%). This, combined with our
offering from the UK to our Irish customers being adversely impacted by the
post Brexit environment, has led to a more challenging market for our Flowtech
division as the year has progressed.
In our Services division, we have a profitable order book of scheduled
deliverables for this year for both assembled products and installations, and
therefore we are expecting a stronger contribution in the second half of the
year.
We indicated previously that our sector has been subject at product level to
the strong inflation experienced across many industries. Beyond this we have
also seen enhanced upward pressures on key cost areas, such as property
facilities and carriers, with salary uplift to some degree offset by
productivity improvements (outlined below). We have been successful in
passing these costs through in sales pricing and it is pleasing that our gross
margin is slightly enhanced in the first half of the year, and at the date of
this report we remain at, or above, the comparable measure from 12 months ago.
We are alert to the likelihood of inflationary pressures continuing,
potentially strengthening, and are confident all measures will be taken to
protect our profitability.
We previously flagged that due to the extended lead times and volatility of
supply from all our major supply partners, we felt it necessary to invest
significantly in additional buffer stocks. This has had the commensurate
positive impact on stock availability and customer service. However, a clear
impact is that we now have the burden of additional storage capacity that has
been built using a mixture of semi-permanent and temporary offsite resources,
with an associated annualised cost of approximately £400,000; when we are
able to rebalance to more normalised lead times and supplier performance,
which we are now starting to see, this additional cost will be reduced.
The last two and a half years has seen significant challenges, in the form of
the COVID-19 pandemic and related supply chain disruption, more recently
exacerbated by the difficulties in Ukraine. We believe we have responded and
demonstrated a robust and determined approach and the resilience of our
business.
DEVELOPMENTS IN GROUP STRATEGY
We continue to have a clear focus on creating the platform to provide the best
base for future profitable growth. In the first part of the year, key
achievements in this regard are as follows:
· Digital - Our completely rebuilt web platform went 'live' on 17
May 2022, and in the months since that time we have continued to enhance
functionality with further upgrades that the new architecture allows us to
smoothly introduce. During this initial period we have had to transition our
long-term customers from a variety of legacy web platforms to this single
site; to date we are pleased with the progress that has been made. Having
delivered this and ensured stability, we look forward to yielding the benefit
of rolling out the digital marketing techniques which this investment should
enable us to deploy; we expect the impact of this to build over time.
· Branding - we updated shareholders previously on the creation of
the coordinated Flowtech division on 4 January 2022, and this has now been
augmented by the previous Primary Components operation merging into Flowtech
to form a significantly enhanced Flowtech Hydraulics team on 1 July 2022. We
are also pleased to update on progress elsewhere with the coordination of our
remaining businesses in England under the Fluidpower Group banner. This has
recently been announced internally with legacy operations integrating
commercially to service Mobile and Industrial sectors, with full rebranding by
the end of the year.
· Productivity - Following the deferment of more complex
integration work during the period of the COVID-19 pandemic, we have picked up
the pace with the change process originally envisaged. The largest such
project implemented during the course of this year is the relocation of our
Leicester warehousing operation to Skelmersdale; this is expected to be
complete by the end of 2022. As part of this process the commercial function
and all staff positions will relocate to an office environment in the
Leicester area. In addition, we have completed the restructuring of our
Gloucester Services facility, which has both improved throughput capacity and
allowed us to exit peripheral property leases. Since we started this
wide-ranging integration project in 2020, we have reduced our overall
facilities footprint by eight properties, focused all UK warehousing activity
for the Flowtech division in Skelmersdale, reduced our headcount from 636 in
June 2021, to just above 600, with the changes outlined above delivering
further reductions during the remainder of this year.
OUTLOOK
Global economies, including the UK, are now undoubtedly in a period of
uncertainty. Current run rates overall give us a degree of confidence,
however, in our Flowtech business in particular, our visibility beyond the
short term is limited. As a result, we are more than ever focused on
monitoring short term demand variations.
Management efforts are focused on alleviating these short-term risks, whilst
at the same time completing the key pillars of our long-term strategy,
supporting the legacy skill sets enshrined in our Flowtech and Fluidpower
Group divisions. The Group has also invested in sector leading digital
capability and has restructured the internal organisation of the business to
maximise efficiencies. As a result of these investments, the Group is well
placed to continue to grow and increase market share. We remain confident
that this strategy will bring future financial rewards in the medium term and
we look forward to updating shareholders on our progress in our next update in
the early part of 2023.
By order of the Board
30 August 2022
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2022
Notes Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30-June 31-December
2022 2021 2021
£000 £000 £000
Continuing operations
Revenue 57,457 55,294 109,107
Cost of sales (36,611) (35,727) (70,609)
Gross profit 20,846 19,567 38,498
Distribution expenses (2,159) (2,478) (4,683)
Administrative expenses before separately disclosed items: (14,374) (13,707) (28,125)
- separately disclosed items 3 (690) (676) (1,978)
Total administrative expenses (15,064) (14,383) (30,103)
Operating profit 3,623 2,706 3,712
Financial expenses (474) (414) (833)
Profit from continuing operations before tax 3,149 2,292 2,879
Taxation 4 (542) (435) (741)
Profit from continuing operations 2,607 1,857 2,138
Earnings per share 5
Basic earnings per share - continuing operations 4.24p 3.02p 3.48p
Diluted earnings per share - continuing operations 4.19p 3.01p 3.45p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2022
Unaudited Unaudited Audited
Six months ended Six months Year
ended ended
30 June 30-June 31-December
2022 2021 2021
£000 £000 £000
Profit for the period 2,607 1,857 2,138
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
-Exchange differences on translating foreign operations 153 (240) (342)
Total comprehensive income in the period 2,760 1,617 1,796
Total comprehensive income in the period attributable to owners of the
parent company 2,760 1,617 1,796
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2022
Unaudited Unaudited Audited
30 June 30 June 31 December
2022 2021 2021
£000 £000 £000
Assets
Non-current assets
Goodwill 63,164 63,164 63,164
Other intangible assets 4,107 4,958 4,517
Right of use assets 6,805 7,079 6,925
Property, plant, and equipment 6,904 6,996 6,891
Total non-current assets 80,980 82,197 81,497
Current assets
Inventories 34,731 23,896 30,531
Trade and other receivables 24,293 23,503 21,566
Prepayments 1,129 1,174 472
Cash and cash equivalents 273 7,536 4,562
Total current assets 60,426 56,109 57,131
Liabilities
Current liabilities
Lease liability 1,868 1,534 1,561
Trade and other payables 20,539 20,896 21,111
Tax Payable 1,154 875 604
Total current liabilities 23,561 23,305 23,276
Net current assets 36,865 32,804 33,855
Non-current liabilities
Interest-bearing borrowings 19,947 19,907 19,927
Lease liability 5,178 5,742 5,586
Provisions 302 378 309
Deferred tax liabilities 1,437 1,257 1,528
Total non-current liabilities 26,864 27,284 27,350
Net assets 90,981 87,717 88,002
Equity directly attributable to owners of the parent
Share capital 30,746 30,746 30,746
Share premium 60,959 60,959 60,959
Other reserves 187 187 187
Shares owned by the Employee Benefit Trust (EBT) (141) (337) (276)
Merger reserve 293 293 293
Merger relief reserve 3,646 3,646 3,646
Currency translation reserve 66 (46) (286)
Retained losses (4,775) (7,731) (7,267)
Total equity attributable to the owners of the parent company 90,981 87,717 88,002
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022
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 2022
unaudited
Balance at 1 January 2022 30,746 60,959 187 (276) 293 3,646 (286) (7,267) 88,002
Profit for the period 2,607 2,607
Other comprehensive income 352 (199) 153
Total comprehensive income for the year
352 2,408 2,760
Transaction with owners
Share options settled 135 (19) 116
Share-based payment charge 103 103
Balance at 30 June 2022 30,746 60,959 187 (141) 293 3,646 66 (4,775) 90,981
Six months ended
30 June 2021
unaudited
Balance at 1 January 2021 30,746 60,959 187 (372) 293 3,646 343 (9,795) 86,007
Profit for the period 1,857 1,857
Other comprehensive income - - - - - - (389) 149 (240)
Total comprehensive income for the year - - - - - - (389) 2,006 1,617
Transaction with owners
Share-based payment charge 63 63
Share options settled - - - 35 - - - (5) 30
Balance at 30 June 2021 30,746 60,959 187 (337) 293 3,646 (46) (7,731) 87,717
Twelve months ended
31 December 2021
audited
Balance at 1 January 2021 30,746 60,959 187 (372) 293 3,646 343 (9,795) 86,007
Profit or the year - - - - - - - 2,138 2,138
Other comprehensive income - - - - - - (535) 193 (342)
Total comprehensive income for the year (535) 2,331 1,796
Transaction with owners:
Shares options settled - - - 96 - - - (14) 82
Share-based payment charge - - - - - - - 166 166
Other movements (94) 45 (49)
Total transactions with owners - - - 96 - - (94) 197 199
Balance at 31 December 2021 30,746 60,959 187 (276) 293 3,646 (286) (7,267) 88,002
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2021
Notes Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30-June 30-June 31-December
2022 2021 2021
£000 £000 £000
Net cash from operating activities 6 (2,505) 170 (441)
Cash flow from investing activities
Acquisition of property, plant, and equipment (683) (808) (1,342)
Acquisition of intangible assets (62) - (761)
Proceeds from sale of property, plant, and equipment (*) 34 432 525
Net cash used in investing activities (711) (376) (1,578)
Cash flows from financing activities
Repayment of lease liabilities (*) (830) (1,015) (1,882)
Interest on lease liabilities (118) (123) (246)
Other interest (336) (271) (547)
Proceeds from sale of shares held by EBT 155 30 108
Net cash generated from / (used in) financing activities (1,129) (1,379) (2,567)
Net change in cash and cash equivalents (4,345) (1,585) (4,586)
Cash and cash equivalents at start of period 4,562 9,235 9,235
Exchange differences on cash and cash equivalents 56 (114) (87)
Cash and cash equivalents at end of period 273 7,536 4,562
(*) H1 2021 and FY 2021 includes net proceeds from disposal of right of use
property located at Willenhall £119k. The lease agreement included a clause
for compulsory purchase of the property on payment of £300k on termination of
lease, shown as repayment of lease liabilities. The right of use asset was
disposed immediately, realising £419k, after expenses.
Long-term borrowings Lease liabilities Total
£000 £000 £000
At 1 January 2022 19,927 7,147 27,074
Cash flows
Repayment (830) (830)
Other movements 20 (189) (169)
Non-cash
Foreign exchange 26 26
At 30 June 2022 19,947 7,046 27,066
NOTES TO THE HALF-YEAR REPORT
For the six months ended 30 June 2022
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 2022 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
30 August 2022.
The Group's financial statements for the year ended 31 December 2021 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 2022.
These are consistent with the accounting policies used in the Financial
Statements for the year ended 31 December 2021.
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 £4.3m.
· The Group is financed by revolving credit facilities totaling
£20m (extended to November 2023) 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 2022. 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 segments -
Flowtech, Fluidpower Group Solutions and Fluidpower Group Services (as
explained in note 2.18 of the Annual report 2022). 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 is as follows:
Half year ended 30 June 2022 Flowtech Fluidpower Group Solutions Fluidpower Group Services Inter-segmental transactions Central Total
£000 £000 £000 Costs (**) continuing
£000 operations
£000 £000
Income statement - continuing operations:
Revenue from external customers 26,751 21,190 9,516 - 57,457
Inter segment revenue 863 652 409 (1,924) -
Total revenue 27,614 21,842 9,925 (1,924) 57,457
Underlying operating result* 3,725 2,952 328 - (2,692) 4,313
Net financing costs (72) (31) (8) - (363) (474)
Underlying segment result 3,653 2,921 320 - (3,055) 3,839
Separately disclosed items (see below) (108) (335) (57) (190) (690)
Profit before tax 3,545 2,586 263 - (3,245) 3,149
Specific disclosure items
Depreciation on owned plant ,property and equipment 509 77 85 - 671
Depreciation on right-of-use assets 355 322 72 - 99 848
Amortisation 108 307 57 - 472
Reconciliation of underlying operating result to operating profit:
Underlying operating result* 3,725 2,952 328 - (2,318) 4,313
Separately disclosed items (see below) (108) (335) (57) - (190) (690)
Operating profit/ (loss) 3,617 2,617 271 - (2,882) 3,623
Half year ended 30 June 2021 Flowtech Fluidpower Group Solutions Fluidpower Group Services Inter-segmental transactions Central Total
£000 £000 £000 costs continuing
operations
£000 £000 £000
Income statement - continuing operations:
Revenue from external customers 26,688 20,084 8,522 - - 55,294
Inter segment revenue 2,789 461 662 (3,912) - -
Total revenue 29,477 20,545 9,184 (3,912) - 55,294
Underlying operating result* 3,962 2,053 194 - (2,827) 3,382
Net financing costs (71) (44) (2) - (297) (414)
Underlying segment result 3,891 2,009 192 - (3,124) 2,968
Separately disclosed items (see below) (159) (376) (62) - (79) (676)
Profit before tax 3,732 1,633 130 - (3,203) 2,292
Specific disclosure items
Depreciation on owned plant ,property and equipment 359 65 85 - - 509
Depreciation on right-of-use assets 295 358 37 - 74 764
Amortisation 121 343 62 - - 526
Reconciliation of underlying operating result to operating profit:
Underlying operating result* 3,962 2,053 194 - (2,827) 3,382
Separately disclosed items (see below) (159) (376) (62) - (79) (676)
Operating profit/ (loss) 3,803 1,677 132 - (2,906) 2,706
For the year ended 31 December 2021 Flowtech Fluidpower Group Solutions Fluidpower Group Services Inter-segmental transactions Central Total
£000 £000 £000 costs continuing
operations
£000 £000 £000
Income statement - continuing operations:
Revenue from external customers 52,135 39,575 17,397 - 109,107
Inter segment revenue 5,164 970 833 (6,967) -
Total revenue 57,299 40,545 18,230 (6,967) 109,107
Underlying operating result* 7,101 3,505 140 (5,056) 5,690
Net financing costs (141) (72) (20) - (600) (833)
Underlying segment result 6,960 3,433 120 - (5,656) 4,857
Separately disclosed items (see below) (925) (723) (124) (206) (1,978)
Profit / (loss) before tax 6,035 2,710 (4) - (5,862) 2,879
Specific disclosure items
Depreciation and impairment on owned plant, property and equipment
773 137 175 - 1,084
Depreciation on right-of-use assets 656 615 192 - 180 1,643
Impairment of acquired intangibles 673 - - - - 673
Amortisation 247 683 124 - 1,054
Reconciliation of underlying operating result to operating profit:
Underlying operating result* 7,101 3,505 140 - (5,056) 5,690
Separately disclosed items (see below) (925) (723) (124) - (206) (1,978)
Operating profit/ (loss) 6,176 2,782 16 - (5,262) 3,712
(*) Underlying operating result is continuing operations' operating profit
before separately disclosed items
SEPARATELY DISCLOSED ITEMS
Six months ended Six months Year
30 June ended ended
2022 30 June 31 December
£000 2021 2021
£000 £000
Separately disclosed items within administrative expenses:
Acquisition costs 3 3 11
Amortisation of acquired intangibles 472 526 1,054
Impairment of acquired intangibles - - 673
Share-based payment costs 103 63 166
Restructuring costs 112 84 74
Total 690 676 1,978
· 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
30 June 30 June ended
2022 2021 31 December
£000 £000 2021
£000
Current tax on income for the period - continuing operations:
UK tax 511 296 493
Overseas tax 211 149 241
Adjustments in respect of prior periods/ other differences (89) 104 (60)
Deferred tax credit / (charge) (91) (114) 67
Total taxation 542 435 741
The taxation for the period has been calculated by applying the estimated tax
rate for the financial year ending 31 December 2022.
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 2022 30 June 2021 31
Dec
emb
er
202
1
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 2,607 61,493 4.24 1,857 61,493 3.02p 2,138 61,493 3.48
Diluted earnings per share
Continuing operations 2,607 62,236 4.19 1,857 61,702 3.01p 2,138 61,894 3.45
Six months Six months Year
ended ended ended
30 June 30 June 31 December 2021
2022 2021 £000
£000 £000
Weighted average number of ordinary shares for basic and diluted earnings per 61,493 61,493 61,493
share
Impact of share options 743 209 401
Weighted average number of ordinary shares for diluted earnings per share 62,236 61,702 61,894
6. NET CASH FROM OPERATING ACTIVITIES
Six months Six months Year
ended ended ended
30 June 30 June 31 December 2021
2022 2021 £000
£000 £000
Reconciliation of profit before taxation to net cash flows from operations:
Profit from continuing operations before tax 3,149 2,292 2,879
Depreciation and impairment on property, plant, and equipment 671 497 1,084
Depreciation on right-of-use assets (IFRS 16) 848 764 1,643
Finance costs 474 414 833
(Gain) / Loss on sale of plant and equipment (24) (181) (209)
Other movements (95)
Amortisation of intangible assets 472 526 1,054
Impairment of intangible assets 673
Cash settled share options (40) - (26)
Equity settled share-based payment charge 103 63 166
Operating cash inflow before changes in working capital and provisions 5,653 4,375 8,002
Change in trade and other receivables (3,316) (5,660) (3,325)
Change in stocks (4,099) (1,743) (8,764)
Change in trade and other payables (642) 2,694 3,496
Change in provisions (7) 9 (59)
Cash generated from operations (2,410) (325) (650)
Tax paid / (reclaimed) (94) 495 209
Net cash generated / (used) from operating activities (2,505) 170 (441)
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
2021 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.
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