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.

 

 

 

A close-up of a logo Description automatically generated

 

 

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

30 June 2024

Unaudited

Half year ended

30 June 2023

Unaudited

Year ended

31 December 2023

Audited

 

·      Revenue

£55.7m

£59.1m

£112.1m

 

·      Gross profit

·      Gross profit %

£21.4m

38.4%

£21.0m

35.5%

£41.3m

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

ended

30 June 2024

 

£000

Six months

ended

31 December 2023

(re-stated**)

£000

%

Change

 

Six months

ended

30 June 2023

(re-stated**)

£000

%

Change

 

Year

ended

31 December 2023 (re-stated**)

£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

ended

30 June 2024

 

 

£000

Return on revenue

%

Six months

ended

31 December 2023

(re-stated***)

£000

Return on revenue

%

Six months

ended

30 June 2023

(re-stated***)

 

£000

Return on revenue %

Year

ended

31 December 2023

(re-stated***)

£000

Return on revenue %

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

30 June

2024

Unaudited

30 June

2023

Audited

31 December

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

 

£000

Share

premium

 

£000

Other reserves

 

£000

Shares owned by EBT £000

Merger reserve

 

£000

Merger relief

reserve

£000

Currency

translation

reserve

£000

Retained

losses

 

£000

Total

equity

 

£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)

(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)

(1,818)

Interest on lease liabilities

(117)

(221)

Other interest

(792)

(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

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.

 

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.

 

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

 

£000

Island of Ireland

 

£000

Benelux

 

 

£000

 

Inter-segmental transactions

£000

CentralCosts

 

£000

Total

continuing

operations

£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

(re-stated)

Great Britain

 

£000

Island of Ireland

 

£000

Benelux

 

 

£000

 

Inter-segmental transactions

£000

Central

 Costs

 

£000

Total

continuing

operations

£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

(re-stated)

Great Britain

 

 

£000

Island of Ireland

 

£000

Benelux

 

 

£000

 

Inter-segmental transactions

£000

Central

 Costs

 

£000

Total

continuing

operations

£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 2023 to prior year report

Great Britain

 

 

£000

Island of Ireland

 

£000

Benelux

 

£000

 

Inter-segmental transactions

£000

Central

 Costs

 

£000

Total

continuing

operations

£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 Segment

(2,084)

2,084

-

-

-

-








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 categorised from the Great Britain Segment

(691)

691

-

-

-

-








Underlying operating results, re-stated

(7,416)

2,609

1,487

-

(7,047)

(10,367)

 

SEPARATELY DISCLOSED ITEMS

Six months ended

30 June

2024

£000

Six months ended

30 June

2023

£000

Year ended

31 December

2023

£000

Separately disclosed items within administrative expenses:







3

8

8

453

452

906

-

-

-

-

-

13,026

-

-

456

-

-

(412)

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

30 June

2024

£000

Six months ended

30 June

2023

£000

Year ended

31 December

2023

£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 December 2023

 

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

30 June

2024

£000

Six months ended

30 June

2023

£000

Year ended

31 December

2023

£000

Weighted average number of ordinary shares for basic and diluted earnings per share

61,763

61,493

61,493

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

30 June

2024

£000

Six months ended

30 June

2023

£000

Year ended

31 December 2023

£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

Website: 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


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

 

 

 

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.

 

 

 

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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