Thursday, 2 April 2020
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. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
Flowtech Fluidpower plc
Business Update - COVID-19 and Notice of Final results
It is at times such as this we are all forced to reflect on what is most important to us. When family, friends and colleagues are faced with challenges that would have been inconceivable only a few weeks ago, we need to be there to support them.
With that in mind we are guaranteeing that all our staff, whether currently working or furloughed, will continue to be paid in full, at least until the end of April when we will review the situation. For those that are working but cannot work remotely, we have implemented robust self-distancing procedures. We also recognise that there are several of our smaller suppliers and customers already under stress, and we will be trying to assist them as much as we can. Ultimately, the best thing we can do for all our stakeholders is to ensure that when life does return to normal, the measures we take during this upheaval leave us stronger in every respect.
During Q1 the business has performed in line with our expectations at the time of the February trading update. Naturally the final few weeks of Q1 suggest an altogether different position going into Q2. While several of our suppliers and customers have suspended operations, these currently only account for 10-15% of revenue, and there has been little slippage in customer receipts helped enormously by the timely Government action. Overall, revenues are currently trending down by around 30%, with expectations that volumes may dip further before recovering. Therefore, we do not believe it prudent to provide formal guidance for the current financial year.
However, factoring in the cash savings from all elements of the Government support mechanisms, we would need a prolonged 35% drop in revenue run rates before the business becomes broadly break-even. This is based on furloughing 181 of our 590 UK and ROI employees, combined with similar support from the Dutch/Belgium Governments. Should the need arise, we have scope to make further cost savings.
Net debt at 31 March 2020 was £15.6m, a £1m reduction from the position at 31 December 2019. We have recently extended our aggregate banking facilities of £25m out to the end of June 2021. Discussions with our Bank are constructive, and they are looking to support us in ensuring all covenants are complied with, and to secure extended facilities beyond the 15-months remaining with our existing arrangements.
We continue to pursue our rationalisation and cost reduction programmes. These centre around the implementation of operational efficiencies in relation to our procurement and warehousing activities, as well as the centralisation of back office functions. Over time we hope to achieve further significant reductions in both working capital and operating costs. Despite the short-term trading disruption, the business should generate positive cashflow through 2020 and 2021, helping to further reduce net debt
Although in our February update we indicated that we would look to propose a final dividend, given current levels of uncertainty it is prudent that we suspend all dividend payments and retain as much cash in the business as possible until the situation becomes clearer.
These circumstances are undoubtedly the biggest challenge most of us will face in our lifetimes, but Flowtech has a culture and a business model that we believe will prove resilient. If we continue to act calmly and responsibly, then all those that depend on us can be confident in the long-term success of the business.
Notice of results
We will provide a further trading update on the release of our 2019 results, scheduled for 21 April 2020.
Flowtech Fluidpower plc
Malcolm Diamond MBE, Non-Executive Chairman
Bryce Brooks, Chief Executive Officer
Russell Cash, Chief Financial Officer
Tel: 44 (0) 1695 52796
Zeus Capital Limited (Nominated Adviser and Broker)
Andrew Jones, Kieran Russell (corporate finance)
Dominic King, John Goold (sales & broking)
Tel: 44 (0) 161 831 1512
finnCap Limited (Joint Broker)
Ed Frisby, Kate Bannatyne (corporate finance)
Rhys Williams, Andrew Burdis (sales & broking)
Tel: 44 (0) 20 7220 0500
TooleyStreet Communications (IR and media relations)
Tel: 44 (0) 7785 703523 or email: firstname.lastname@example.org