REG - Flowtech Fluidpower - Organic & acquisition strategy underpins future <Origin Href="QuoteRef">FLOL.L</Origin> - Part 2
12/09/2017 07:06
- Part 2: For the preceding part double click ID:nRSL4315Qa
(1,909) 3,392
Flowtechnology £000 Power Motion Control£000 Process £000 Inter-segmental transactions£000 Central costs£000 Total continuing operations£000
Six months ended 30 June 2016
Income statement - continuing operations:
Revenue from external customers 18,093 8,268 1,026 - - 27,387
Inter segment revenue 859 327 24 (1,210) - -
Total revenue 18,952 8,595 1,050 (1,210) - 27,387
Underlying operating result 4,164 930 150 - (1,185) 4,059
Net financing costs (92) (1) 5 - (135) (223)
Underlying segment result 4,072 929 155 - (1,320) 3,836
Separately disclosed items (138) (27) (37) - (567) (769)
Profit/(loss) before tax 3,934 902 118 - (1,887) 3,067
Specific disclosure itemsDepreciation Amortisation 1956 55236 822 -- -- 258264
Reconciliation of underlying operating result to operating profit:Underlying operating resultSeparately disclosed items 4,164(138) 930(27) 150(37) -- (1,185)(568) 4,059(769)
Operating profit/(loss) 4,026 903 113 - (1,753) 3,290
Flowtechnology £000 Power Motion Control£000 Process £000 Inter-segmental transactions£000 Central costs£000 Total continuing operations£000
Year ended 31 December 2016
Income statement - continuing operations:
Revenue from external customers 35,113 15,830 2,837 - - 53,780
Inter segment revenue 1,645 585 199 (2,429) - -
Total revenue 36,758 16,415 3,036 (2,429) - 53,780
Underlying operating result 7,626 1,823 402 - (2,397) 7,454
Net financing costs (1) (65) (39) - (505) (610)
Underlying segment result 7,625 1,758 363 - (2,902) 6,844
Separately disclosed items (180) 40 (58) - (1,119) (1,317)
Profit/(loss) before tax 7,445 1,798 305 - (4,021) 5,527
Specific disclosure itemsDepreciation Amortisation 38916 113488 2465 -- -- 526569
Reconciliation of underlying operating result to operating profit:Underlying operating resultSeparately disclosed items 7,626(180) 1,82340 402(58) -- (2,397)(1,119) 7,454(1,317)
Operating profit/(loss) 7,446 1,863 344 - (3,516) 6,137
SEPARATELY DISCLOSED ITEMS
· 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 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 employee redundancies and IT integration.
Six months ended 30 June 2017£000 Six months ended 30 June 2016£000 Year ended 31 December 2016£000
Separately disclosed items within administration expenses:-Acquisition costs-Amortisation of acquired intangibles-Share based 5103251729015 238264149118- 41956935384(108)
payment costs-Restructuring-(Under)/over accrued contingent consideration
Total separately disclosed items 1,112 769 1,317
4. TAXATION
Six months ended 30 June 2017£000 Six months ended 30 June 2016£000 Year ended 31 December 2016£000
Current tax on income for the period - continuing operations:UK taxForeign taxDeferred tax creditAdjustments in respect of prior years 680-(46)- 620-(45)(54) 1,28520(171)12
Total taxation 634 521 1,146
The taxation for the period has been calculated by applying the estimated tax rate for the financial year ending 31 December 2017. Deferred tax liabilities have also been adjusted to £1,039,000 to reflect capital allowances more than depreciation and other short-term timing differences.
5. DIVIDENDS
Six months ended 30 June 2017£000 Six months ended 30 June 2016£000 Year ended 31 December 2016£000
Final dividend of 3.67p (2016: 3.50p) per share 1,878 1,499 1,499
Interim dividend of 1.84p per share - - 788
1,878 1,499 2,287
In addition, the Directors are proposing a half-year dividend in respect of the financial year ended 31 December 2017 of 1.93p per share which will absorb an estimated £1.0 million of shareholders' funds. It will be paid on the 24 October 2017 to Shareholders who are on the Register of Members at close of business on 29 September 2017.
6. EARNINGS PER SHARE
Basic earnings/(loss) per share is calculated by
dividing the earnings/(loss) attributable to
ordinary shareholders by the weighted average
number of ordinary shares outstanding during the
period. For diluted earnings/ (loss) 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.
Six months ended 30 June 2017 Six months ended 30 June 2016 Year ended 31 December 2016
Earnings£000 Weighted average number of shares000's Earnings per sharePence Earnings£000 Weighted average number of shares000's Earnings per sharePence Earnings£000 Weighted average number of shares000's Earnings per sharePence
Basic earnings/(loss) per shareContinuing 2,476- 47,40247,402 5.22- 2,546- 43,07843,078 5.910.00 4,381(91) 43,07843,078 10.17(0.21)
operationsDiscontinued operations
Basic earnings per share 2,476 47,402 5.22 2,546 43,078 5.91 4,290 43,078 9.96
Diluted earnings/(loss) per shareContinuing 2,476- 47,88647,886 5.17- 2,546- 43,47243,472 5.860.00 4,381(91) 43,45643,456 10.08(0.21)
operationsDiscontinued operations
Diluted earnings per share 2,476 47,886 5.17 2,546 43,472 5.86 4,290 43,456 9.87
Six months ended30 June 2017£000 Six months ended30 June 2016£000 Year ended31 December 2016£000
Weighted average number of ordinary shares for basic and diluted earnings per shareImpact of share options 47,402484 43,078394 43,078378
Weighted average number of ordinary shares for diluted earnings per share 47,886 43,472 43,456
7. ACQUISITIONS
7.1 HYDRAULICS & TRANSMISSIONS LIMITED
On 20 January 2017, the Group acquired 100% of the share capital of Hydraulics &
Transmissions Limited ("HTL"), a UK-based company. HTL provides fluid power
solutions predominantly to the mobile market segment and supplies some of the market
leaders such as JCB, McConnell and Alamo. The acquisition strengthened our position
with key global suppliers including Eaton, Walvoil and Casappa, and complemented our
previous acquisitions of Primary Fluid Power and Nelson Hydraulics. The total
consideration was £1,669,000. This comprised £777,000 in cash and £892,000
contingent cash consideration. The additional consideration is based on profit
targets for the Company's customer base and is payable in three instalments over the
next two years. The fair value of £892,000 has been calculated using management
forecasts of HTL's performance discounted at the weighted average cost of capital.
GOODWILLGoodwill of £1,551,000 is primarily related to expected future profitability
and expected cost synergies. Goodwill has been allocated to the Power Motion Control
operating segment and is not expected to be deductible for tax purposes. INTANGIBLE
ASSETAn intangible asset of £438,000 has been provisionally identified related to
customer relationships. The estimated useful life has been determined as ten years
based on the expected future cash flows that they would generate in arriving at their
fair value. The customer relationships considered in the valuation comprise the sales
to significant customers. Long term sales growth over the ten-year period has been
assumed to be 5.2% with an attrition rate of 12.8% for customers. Growth and
attrition rates are based on management experience and expectations. Amortisation of
customer relationships is not expected to be deductible for tax purposes. Details of
the provisional fair value of identifiable assets and liabilities acquired, purchase
consideration, goodwill and intangible assets are as follows:
Book value£000 Fair value adjustment£000 Intangible asset recognised on acquisition£000 Provisional fair value£000
Property, plant and equipment 30 - - 30
Intangible assets 322 (322) 438 438
Inventories 1,226 - - 1,226
Trade and other receivables 1,019 - - 1,019
Cash and cash equivalents (1,010) - - (1,010)
Trade and other payables (1,456) - - (1,456)
Current tax balances (45) - - (45)
Deferred tax liability (5) - (79) (84)
Total net assets 81 (322) 359 118
£000
Fair value of consideration paid
Amount settled in cash 777
Fair value of contingent consideration 892
Total consideration 1,669
Less net assets acquired (617)
Goodwill on acquisition 1,551
7.2 HEWI SLANGEN
On 7 April 2017, the Group acquired the trade and certain assets of Hewi Slangen B.V., a Dutch based business. Complementary to our existing Dutch division, Flowtechnology Benelux, Hewi Slangen brings synergistic savings through relocation of operations and additional abilities and skills in hose production. The total consideration was £217,000 fully settled in cash. The provisional fair value of assets acquired was £170,000. Goodwill of £47,000 is primarily related to expected future profitability,
technical know-how and expected cost synergies from the closure of the operational site and transfer of activities into existing Group locations. Goodwill has been allocated to the Flowtechnology operating segment and is not expected to be deductible for tax purposes.
7.3 HI-POWER LIMITED
Hi-Power Limited was acquired on 23 June 2017 for an initial consideration of £1.6million in cash with contingent consideration of £0.5million anticipated to be paid over the next two years. The cash consideration was funded out of existing Group resources. It is a specialist distributor of hydraulic equipment components predominantly to the mobile and transport sectors. It is based in Cork, Dublin and Belfast. In addition, the trade and certain assets of Hi-Power Hydraulics Limited, a UK division of Hi
-Power Limited were acquired on 30 June 2017 for a total cash consideration of £300,000. The cash consideration was funded out of existing Group resources. This division is based in Stockport. These acquisitions are complementary to the PMC division and will strengthen the Group position with key European suppliers. The Group will disclose the book value of the identifiable assets and liabilities and their fair values in the 2017 full year financial statements as required under IFRS 3 "Business
Combinations". The initial accounting and fair value exercise is incomplete at the time of this announcement due to the proximity of the accounting date.
8. SUBSEQUENT EVENTS
Orange County Limited was acquired on 7 July 2017 for an initial consideration of £1.5 million in cash
with contingent consideration of £2.1million anticipated to be paid over the next two years. The cash
consideration was funded out of existing Group resources. It is a specialist supplier and distributor
of high quality products for the storage and movement of fuel, liquid and gases based in Spennymoor,
County Durham. Orange County provides a further complementary business to the Group and establishes
relationships with world-leading manufacturers of pipes, valves, gauges and leak detection equipment.
It is focused on technical sales to a wide range of end users from fuel supply systems for the
automotive industry to cooling systems on the London Underground, as well as large Data Centres across
the UK. The business will form part of the Process division.The Hydraulic Group BV was acquired on 7
September 2017 for an initial consideration of £2.7million comprising in cash and £0.6m in shares. The
cash consideration was funded out of existing Group resources. Based in Rotterdam, with a sales
presence in Brussels, it is a distributor of hydraulic equipment and components, predominantly to the
mechanical engineering, marine and agricultural sectorsinto both Maintenance Repair and Operations
applications, as well as Original Equipment Manufacturers. The business will form part of the PMC
division.For both these acquisitions the Group will disclose the book value of the identifiable assets
and liabilities and their fair values in the 2017 full year financial statements as required under
IFRS 3 "Business Combinations". The initial accounting and fair value exercises were incomplete at
the time of this announcement due to the proximity of the accounting date.
9. NET CASH FROM OPERATING ACTIVITIES
Six months ended 30 June 2017£000 Six months ended 30 June 2016£000 Year ended 31 December 2016£000
Reconciliation of profit before taxation to net cash flows from operations:Profit from continuing 3,110-267-282-32517215 3,067-258-223(8)264149- 5,527(113)526(1)611(21)569353(108)
operations before taxLoss from discontinued operations before taxDepreciationFinancial incomeFinancial
expenseProfit on sale of plant and equipmentAmortisation Equity settled share-based payment
chargeUnder/(over) accrued contingent consideration
Operating cash inflow before changes in working capital and provisionsChange in trade and other 4,171(2,569)4521,383(9) 3,953(3,696)(1,299)1,915(36) 7,343(1,384)(1,486)1,126(86)
receivablesChange in stocksChange in trade and other payablesChange in provisions
Cash generated from operationsTax paid 3,428(644) 837(649) 5,513(1,347)
Net cash generated from operating activities 2,784 188 4,166
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 2016 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.
FORWARD-LOOKING STATEMENTSThis 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.
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Flowtech Fluidpower
See all newsREG - Flowtech Fluidpower - Holding(s) in Company
AnnouncementREG - Flowtech Fluidpower - Director/PDMR Shareholding
AnnouncementREG - Flowtech Fluidpower - 2023 Annual Unaudited Results
AnnouncementREG - Flowtech Fluidpower - Notice of Results
AnnouncementREG - Flowtech Fluidpower - Director/PDMR Shareholding
Announcement