TIDMFLO
RNS Number : 7251K
Flowtech Fluidpower PLC
30 August 2023
WEDNESDAY, 30 AUGUST 2023
FLOWTECH FLUIDPOWER PLC
("Flowtech", the "Group" or "Company")
"a world of motion"
Our aim is to provide our customers with power, motion & control solutions,
from a single component to integrated engineering systems, in the most cost-effective
way, harnessing the best global brands & products, services and engineers
in the market.
2023 HALF-YEAR REPORT
For the six months ended 30 June 2023
"Despite increasingly challenging economic conditions, overall Group revenue
increased by 2.8% in the period with a more positive performance in our solutions
and services segments and a weaker performance in the product distribution
segment, as previously reported. We have continued to make positive progress
on working capital management, continuing to improve our debt position whilst
maintaining tight cost controls.
We expect these market headwinds to continue through H2 23 and into 2024 but
I am pleased to report good progress is being made in deploying an immediate
performance improvement plan and the refreshed strategy, strengthening the
leadership team and simplifying the operating model building the capabilities
to deliver mid-term scalable growth in a highly fragmented market."
Mike England, Chief Executive Officer
TRADING AND OPERATIONAL HIGHLIGHTS
===================================================================
* Revenue increased by 2.8% with varying performance
across segments
* Sustained strong gross margin of 35.5% (H1 22 36.3%)
* Inflationary pressures partially offset by cost
savings initiatives
* Underlying operating profit of GBP3.4m, a decrease of
GBP0.9m on the comparative period
* GBP4.3m decrease in net debt (pre-leases)
Half year Half year Year ended
ended ended 31 December 2022
FINANCIAL HIGHLIGHTS 30 June 30 June 2022 Audited
2023 Unaudited
Unaudited
=========================================== =========== ============== ==================
* Revenue GBP59.1m GBP57.5m GBP114.8m
* Gross profit % 35.5% 36.3% 35.7%
* Underlying EBITDA* GBP5.0m GBP5.8m GBP11.6m
* Underlying operating profit** GBP3.4m GBP4.3m GBP8.6m
* Operating profit / (loss) GBP2.4m GBP3.6m (GBP4.4m)
* Profit / (loss) before tax GBP1.6m GBP3.1m (GBP5.6m)
* Earnings per share (basic) 2.28p 4.24p (10.17p)
* Net debt*** GBP15.4m GBP19.7m GBP16.0m
* 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.
RESULTS PRESENTATION:
Today, 30 August 2023, at 10.00am (BST) CEO Mike England and CFO Russell Cash
will provide a 'live' presentation via the Investor Meet Company platform
(IMC) at:
https://www.investormeetcompany.com/flowtech-fluidpower-plc/register-investor
Website: www.investormeetcompany.com
===============================================================================
FLOWTECH FLUIDPOWER PLC 2023 HALF-YEAR REPORT
For the six months ended 30 June 2023
2023 HALF-YEAR FINANCIAL PERFORMANCE AND DIVISIONAL ANALYSIS
Revenue by current Six Six months % Year
segment months ended Change ended
ended 30 June 2022 31 December
30 (re-stated**) 2022
June GBP000 (re-stated**)
2023 GBP000
GBP000
=================================== ================== ========================= ================== =========================
Flowtech (Product
Distribution) 26,606 28,192 -5.6% 53,273
Fluidpower Group
Solutions 22,019 19,749 11.5% 40,368
Fluidpower Group
Services 10,445 9,516 9.8% 21,125
=================================== ================== ========================= ================== =========================
Total Group revenue 59,070 57,457 2.8% 114,766
=================================== ================== ========================= ================== =========================
Gross profit % 35.5% 36.3% 35.7%
=================================== ================== ========================= ================== =========================
Underlying segment operating Six months Return Six months Return Year Return
profit* on revenue on revenue on revenue
ended ended ended
30 June 30 June 31 December
2023 2022 2022
% (re-stated) % (re-stated) %
GBP000 GBP000 GBP000
========================================== ======================= ====================== ======================== ====================== ======================== ======================
Flowtech (Product
Distribution) 2,275 8.6% 3,617 12.8% 6,206 11.7%
Fluidpower Group Solutions 2,462 11.2% 2,707 13.7% 5,086 12.6%
Fluidpower Group Services 1,202 11.5% 234 2.5% 1,804 8.5%
Central costs (2,515) (2,245) (4,510)
========================================== ======================= ====================== ======================== ====================== ======================== ======================
Underlying operating
profit* 3,424 4,313 8,586
========================================== ======================= ====================== ======================== ====================== ======================== ======================
* Underlying operating profit is operating profit for continuing operations
before separately disclosed items (note 3).
** H1 22 and FY 22 figures have been re-stated to reflect the movement of
certain revenue streams between segments, however there is no impact on
Group profitability.
REVENUE
Revenue increased by 2.8% in H1 23 compared to H1 22. The growth
achieved in both the Solutions (11.5%) and Services (9.8%) segments
was pleasing; this served to mitigate the impact of a disappointing
performance within the Product Distribution segment where revenue
declined by 5.6%. The second quarter of the year provided more
challenging trading conditions across each segment than the first
quarter.
Gross profit margin
Our gross profit margin remains strong at 35.5% (H1 22 36.3%);
the modest movement relates primarily to the change in sales mix
due to divisional margins being lower in the Solutions and Service
segment as compared to the Product Distribution segment.
OPERATING Costs
Underlying operating costs have increased by GBP1.0m (6.2%),
compared to the comparative 2022 period. Approximately two thirds
of our cost base relate to people costs; our average number of
employees in H1 23 decreased by 5.8% compared to H1 22 but this was
offset by inflation on wages and other costs alongside the impact
of investment in senior personnel (building future capability and
scale).
UNDERLYING OPERATING PROFIT
Underlying operating profit of GBP3.4m is a decrease of GBP0.9m
from the comparative period (H1 22: GBP4.3m).
The performance of the Product Distribution segment was
disappointing, as explained under the "Trading Review" section
below. We are pleased with the performance in the Solutions and
Services divisions which both continued to show strong growth at
attractive margins.
NET DEBT
Net debt (pre-lease debt) was GBP15.4m at 30 June 2023 (H1 22:
GBP19.7m), with headroom of GBP9.6m under the Group's banking
facilities. Key to achieving this reduction was a GBP3.9m reduction
in inventory levels. We expect this trend to continue as we benefit
from a less volatile supply chain environment. If leases are taken
into account, the reduction in Group debt was GBP5.1m.
TRADING REVIEW
We have highly skilled and capable people, passionate about
providing the highest levels of technical and engineering expertise
and customer service. In a technical industrial market, this is a
source of competitive advantage. Positive progress has been made in
H1 23 building our people capabilities including increased
investment in training, learning and development, investment in
health, safety and wellbeing and supporting them through these more
challenging economic times. We thank our people for their continued
commitment and dedication.
In our Product Distribution segment (which accounts for 45% of
Group revenue), the performance has been disappointing for over 12
months continuing through H1 23 with revenue decline of 5.6%. This
is in part due to the more volatile economic and industrial
landscape but also due to internal challenges resulting from the
consolidation of five businesses into one during 2021/2022
including the closure of the Leicester Distribution Centre,
consolidating inventory into the main Skelmersdale Distribution
Centre. Whilst this consolidation has enabled improved scale and
efficiency, aspects of this integration have impacted some parts of
the customer experience. Interventions are in flight to address
this to ensure we have quickly returned to the levels of high
service expected by our customers including further improvements to
our website, catalogue, commercial discipline and our service.
In our Solutions and Services segments, we are pleased with the
performance with H1 23 revenue growth of 11%. We have improved the
focus in offering a wide range of engineering services, further
building our reputation for delivering technical products,
designing, manufacturing and supporting our distributors,
industrial end users and original equipment manufacturers across
our geographies.
Our international businesses in the Island of Ireland and
Benelux which contribute c.28% of Group revenue have continued to
perform well. Ireland in particular, where we have consolidated our
two businesses into one has seen revenue growth in H1 23 of 19%.
Our two businesses in Benelux have made a positive contribution of
16% return on revenues and we see further opportunity here to drive
greater synergy and to further increase market share gains.
Group Gross Margin performance was stable, and management has
remained focused ensuring we stay ahead of supplier price rises and
service labour costs during a continued inflationary market. There
is though gross profit impact resulting from the revenue mix
between the higher gross margin Product Distribution segment and
the Solutions and Services segment. We see further opportunity for
gross margin enhancement across the Group by improving our
commercial effectiveness, pricing discipline and building greater
procurement capability.
Our cost management remains disciplined and whilst we have taken
all necessary action to react to inflationary market pressures, we
continue to support our highly skilled and talented workforce and
build enhanced capabilities as we look to underpin our mid-term
strategy to deliver scalable and sustainable growth and value
creation. However, we see significant further opportunity for
delivering efficiencies across the Group as we scale through the
deployment of our refreshed strategy, further simplifying the
operating model, underpinned by investment in improved automation,
technology and processes.
We have continued to focus on cash and optimising our working
capital which resulted in the GBP5.1m reported reduction in net
debt. As we look forward, our focus will remain on achieving
further working capital optimisation and improved cash efficiencies
across the Group whilst seeking to improve overall stock
availability and service by adopting a more rigorous approach to
inventory and supplier management.
STRATEGY
We are pleased to report good progress in implementing an
immediate Performance Improvement Plan and the refreshed strategy
(our journey to the future), across the Group.
i) Performance Improvement Plan
The Performance Improvement Plan focusses on near-term
performance improvement to quickly deliver a more customer centric,
lean and scalable platform for growth. It consists of three key
components;
a) Simple - we are implementing a simple operating model
releasing the full potential of our people and our
capabilities,
b) Customer centric - moving decision making and activities to
be more centred around the customer with a renewed growth focus
across all channels, and
c) Scalable - Re-focusing on doing the basics brilliantly whilst
improving our operational and technology infrastructure to power
future growth.
ii) Refreshed strategy
Our refreshed strategy (our journey to the future) sets out our
ambition and has two key components;
a) A world of motion - We will expand on our product and
engineering capabilities across the wider power, motion and control
sector. In doing so, we increase our market share opportunity in
Europe from cGBP10bn to cGBP30bn. We will target two times market
growth rate. This also serves to future proof the Group with a
focus on new emerging technologies.
b) The power of one - we will release the full potential,
scalability and efficiency of the Group by transitioning to a
single brand and operating model. We will launch a simplified value
proposition for our target customers.
As part of the strategy, we are focused on delivering a
measurable value creation plan consisting of defined strategic
focus areas to deliver mid-teens underlying operating profit
margin.
The Performance Improvement Plan and refreshed strategy is
enabled by the formation of a new, diverse and highly skilled
leadership team organised into a functional, country led structure
where we are building greater core competence and capabilities.
Five of the previous leadership team have exited the business and
the new team, consisting of a strong mix of existing and new
talent, has now been appointed; a number of the new members of the
team are already operating within the business with the final three
leaders onboarding in October. The a ccountability of this team
will be to deliver the defined areas of strategic focus, known
internally as growth engines.
The immediate priority is on short-term 'self-help'
interventions to deliver improved performance throughout H2 23 and
into 2024 focused on improvements in a) our growth capabilities
(including our marketing, digital and sales capabilities), b) our
core service and delivery capabilities (doing the basics
brilliantly) and c) simplifying how we work (to deliver greater
speed, agility and efficiencies).
OUTLOOK
We expect external economic headwinds to continue to bite
through H2 23 and into 2024 with continued slowdown in industrial
output and production. We have deployed a number of focused
interventions to address weaker performing areas underpinned by a
change in leadership and capability and providing greater clarity
on our forward strategy and plans. Our people are motivated and
committed to delivering high performance and whilst we expect H2 23
to remain challenging, we are optimistic in our outlook in building
our momentum and capabilities into 2024 and beyond through the
deployment of our refreshed strategy.
By order of the Board
29 August 2023
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2023
Notes Unaudited Unaudited Audited
============================================ ======
Six months Six months Year ended
ended ended
============================================ ======
30 June 30-June 31-December
2023 2022 2022
GBP000 GBP000 GBP000
============================================ ====== =========== =========== ============
Continuing operations
======
Revenue 59.070 57,457 114,766
======
Cost of sales (38,089) (36,611) (73,792)
============================================ ====== =========== =========== ============
Gross profit 20,981 20,846 40,974
======
Distribution expenses (2,288) (2,159) (4,428)
============================================ ====== =========== =========== ============
Administrative expenses before separately
disclosed items: (15,269) (14,374) (27,960)
- separately disclosed items 3 (987) (690) (12,966)
============================================ ====== =========== =========== ============
Total administrative expenses (16,256) (15,064) (40,926)
Operating profit / (loss) 2,437 3,623 (4,380)
Financial expenses (813) (474) (1,192)
============================================ ====== =========== =========== ============
Profit / (loss) from continuing operations
before tax 1,624 3,149 (5,572)
Taxation 4 (220) (542) (680)
============================================ ====== =========== =========== ============
Profit / (loss) from continuing operations 1,404 2,607 (6,252)
============================================ ====== =========== =========== ============
Earnings per share 5
Basic earnings per share - continuing
operations 2.28p 4.24p (10.17p)
============================================ ====== =========== =========== ============
Diluted earnings per share - continuing
operations 2.28p 4.19p (10.17p)
============================================ ====== =========== =========== ============
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2023
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended
30 June 30-June 31-December
2023 2022 2022
GBP000 GBP000 GBP000
======================== =========== ============
Profit for the period 1,404 2,607 (6,252)
Other comprehensive income
Items that will be reclassified subsequently
to profit or loss
-Exchange differences on translating foreign
operations (225) 153 318
============================================== ======================== =========== ============
Total comprehensive income in the period 1,179 2,760 (5,934)
============================================== ======================== =========== ============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2023
Unaudited Unaudited Audited
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
========================================= ---------- ---------- -------------
Assets
Non-current assets
Goodwill 53,092 63,164 53,092
Other intangible assets 2,979 4,107 3,523
Right of use assets 5,921 6,805 6,091
Property, plant, and equipment 7,900 6,904 7,234
========================================= ========== ========== =============
Total non-current assets 69,892 80,980 69,940
========================================= ========== ========== =============
Current assets
Inventories 30,843 34,731 31,486
Trade and other receivables 25,257 24,293 24,620
Prepayments 1,130 1,129 387
Cash and cash equivalents 4,446 273 3,972
========================================= ========== ========== =============
Total current assets 61,676 60,426 60,465
========================================= ========== ========== =============
Liabilities
Current liabilities
Interest bearing borrowings - - 19,967
Lease liability 1,453 1,868 1,705
Trade and other payables 20,248 20,539 19,569
Tax Payable 1,123 1,154 1,219
========================================= ========== ========== =============
Total current liabilities 22,824 23,561 42,460
========================================= ========== ========== =============
Net current assets 38,852 36,865 18,005
========================================= ========== ========== =============
Non-current liabilities
Interest-bearing borrowings 19.889 19,947 -
Lease liability 4,705 5,178 5,008
Provisions 339 302 317
Deferred tax liabilities 1,196 1,437 1,281
========================================= ========== ========== =============
Total non-current liabilities 26,129 26,864 6,606
========================================= ========== ========== =============
Net assets 82,615 90,981 81,339
========================================= ========== ========== =============
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) (124) (141) (124)
Merger reserve 293 293 293
Merger relief reserve 3,646 3,646 3,646
Currency translation reserve (66) 66 159
Retained losses (13,026) (4,775) (14,527)
========================================= ========== ========== =============
Total equity attributable to the owners
of the parent company 82,615 90,981 81,339
========================================= ========== ========== =============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022
Share Share Other Shares Merger Merger Currency Retained Total
capital premium reserves owned reserve relief translation losses equity
by EBT reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
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 options settled
======== ======== ========= ======= ======== ======== ============ ========= ========
Share-based payment
charge 97 97
======== ======== ========= ======= ======== ======== ============ ========= ========
Balance at 30 June
2023 30,746 60,959 187 (124) 293 3,646 (66) (13,026) 82,615
======== ======== ========= ======= ======== ======== ============ ========= ========
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-based payment
charge 135 (19) 116
======== ======== ========= ======= ======== ======== ============ ========= ========
Share options settled - - - - - - - 103 103
======== ======== ========= ======= ======== ======== ============ ========= ========
Balance at 30 June
2022 30,746 60,959 187 (141) 293 3,646 66 (4,775) 90,981
======== ======== ========= ======= ======== ======== ============ ========= ========
Twelve months ended
31 December 2022
audited
=============================================================================================
Balance at 1 January
2022 30,746 60,959 187 (276) 293 3,646 (286) (7,267) 88,002
======== ======== ========= ======= ======== ======== ============ ========= ========
Profit or the year - - - - - - - (6,252) (6,252)
======== ======== ========= ======= ======== ======== ============ ========= ========
Other comprehensive
income - - - - - - 318 - 318
======== ======== ========= ======= ======== ======== ============ ========= ========
Total comprehensive
income for the year - - - - - - 318 (6,252) (5,934)
======== ======== ========= ======= ======== ======== ============ ========= ========
Transaction with
owners:
======== ======== ========= ======= ======== ======== ============ ========= ========
Shares options settled - - - 152 - - - (25) 127
======== ======== ========= ======= ======== ======== ============ ========= ========
Share-based payment
charge - - - - - - - 372 372
======== ======== ========= ======= ======== ======== ============ ========= ========
Dividends paid - - - - - - - (1,228) (1,228)
======== ======== ========= ======= ======== ======== ============ ========= ========
Transfers between
reserves - - - - - - 127 (127) -
======== ======== ========= ======= ======== ======== ============ ========= ========
Total transactions
with owners - - - 152 - - 127 (1,008) (729)
======== ======== ========= ======= ======== ======== ============ ========= ========
Balance at 31 December
2022 30,746 60,959 187 (124) 293 3,646 159 (14,527) 81,339
======== ======== ========= ======= ======== ======== ============ ========= ========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2023
Note Unaudited Unaudited Audited
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
Net cash from operating activities 6 3,607 (2,505) 5,014
=============================================== ===== =========== =========== ============
Cash flow from investing activities
=====
Acquisition of property, plant, and equipment (1,340) (683) (1,645)
=====
Acquisition of intangible assets - (62) (212)
Proceeds from sale of property, plant,
and equipment 3 34 65
=============================================== ===== =========== =========== ============
Net cash used in investing activities (1,337) (711) (1,792)
=============================================== ===== =========== =========== ============
Cash flows from financing activities
Repayment of lease liabilities (880) (830) (1,673)
Interest on lease liabilities (116) (118) (227)
Other interest (776) (336) (925)
Proceeds from sale of shares held by EBT - 155 172
Dividends paid - - (1,228)
=============================================== ===== =========== =========== ============
Net cash generated from / (used in) financing
activities (1,772) (1,129) (3,881)
=============================================== ===== =========== =========== ============
Net change in cash and cash equivalents 498 (4,345) (659)
Cash and cash equivalents at start of
period 3,972 4,562 4,562
=====
Exchange differences on cash and cash
equivalents (24) 56 69
=============================================== ===== =========== =========== ============
Cash and cash equivalents at end of period 4,446 273 3,972
=============================================== ===== =========== =========== ============
Short-term Long-term Lease liabilities Total
borrowings borrowings
GBP000 GBP000 GBP000 GBP000
============ ============ ================== =======
At 1 January 2023 19,967 - 6,713 26,680
Cash flows
Repayment - - (880) (880)
Movement between short-term and long-term (19,967) 19,967 - -
Other movements - (78) 358 280
Non-cash
Foreign exchange - - (33) (33)
=========================================== ============ ============ ================== =======
At 30 June 2023 - 19,889 6,158 26,047
=========================================== ============ ============ ================== =======
NOTES TO THE HALF-YEAR REPORT
For the six months ended 30 June 2023
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 2023 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
29 August 2023.
The Group's financial statements for the year ended 31 December 2022 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 2023.
These are consistent with the accounting policies used in the Financial
Statements for the year ended 31 December 2022.
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
GBP3.4m.
* The Group is financed by revolving credit facilities
totaling GBP20m (extended to February 2026) and GBP5m
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 2023. 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
GBP25m 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.
Segment information for the reporting periods is as follows:
Half year ended 30 June 2023 Flowtech Fluidpower Fluidpower Inter-segmental Central Total
Group Group Services transactions Costs continuing
Solutions GBP000 GBP000 operations
GBP000 GBP000 GBP000 GBP000
Income statement - continuing
operations:
Revenue from external customers 26,606 22,019 10,445 - - 59,070
Inter segment revenue 1,177 541 375 (2,093) -
Total revenue 27,783 22,560 10,820 (2,093) 59,070
Underlying operating result* 2,275 2,462 1,202 - (2,515) 3,424
Net financing costs (34) (75) (3) - (701) (813)
Underlying segment result 2,241 2,387 1,199 - (3,216) 2,611
Separately disclosed items
(see below) (205) (307) (66) (409) (987)
Profit before tax 2,036 2,080 1,133 - (3,625) 1,624
Specific disclosure items
Depreciation on owned plant
,property and equipment 477 83 85 - - 645
Depreciation on right-of-use
assets 386 394 35 - 65 880
Amortisation 200 288 57 - - 545
Reconciliation of underlying
operating result to operating
profit:
Underlying operating result* 2,275 2,462 1,202 - (2,515) 3,424
Separately disclosed items
(see below) (205) (307) (66) - (409) (987)
Operating profit/ (loss) 2,070 2,155 1,136 - (2,924) 2,437
================================= ========= =========== ================ ================ ======== ============
(*) 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.
Segment information for the half year ended June 2022 has been
re-stated following the movement of Primary Components, excluding
OEM customers, from Fluidpower Group Solutions to Flowtech, as this
reflects the information reported to the Chief Operating Decision
Maker. Segment information for the year ended December 2022 has
also been restated to include sales from OEM customers within the
Solutions segment. Some overheads costs relating to Divisional
management have been re-categorised as segment operating overheads
to present a more comparable segment result. The re-statement of
the prior year periods does not impact Group profitability.
(*) Underlying operating result is continuing operations'
operating profit before separately disclosed items
Half year ended 30 June 2022 Flowtech Fluidpower Fluidpower Inter-segmental Central Total
Group Group Services transactions
Solutions
(re-stated) GBP000 GBP000 GBP000 costs continuing
operations
GBP000 GBP000 GBP000
Income statement - continuing
operations:
Revenue from external
customers 28,192 19,749 9,516 - - 57,457
Inter segment revenue 863 652 409 (1,924) - -
Total revenue 29,055 20,401 9,925 (1,924) - 57,457
Underlying operating result* 3,617 2,707 234 - (2,245) 4,313
Net financing costs (72) (31) (8) - (363) (474)
Underlying segment result 3,545 2,676 226 - (2,608) 3,839
Separately disclosed items
(see below) (108) (335) (57) - (190) (690)
Profit before tax 3,437 2,340 169 - (2,798) 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* 3,617 2,707 234 - (2,245) 4,313
Separately disclosed items
(see below) (108) (335) (57) - (190) (690)
Operating profit/ (loss) 3,509 2,372 177 - (2,435) 3,623
=============================== ========== ============ =============== ================= ========= =============
Reconciliation of re-stated Flowtech Fluidpower Fluidpower Inter-segmental Central Total
segment information for the Group Group Services transactions costs continuing
half year ended 30 June 2022 Solutions GBP000 GBP000 operations
to prior year report GBP000 GBP000 GBP000 GBP000
========= ============ =============== ================= ========= =============
Revenue as per prior year
report 27,614 21,842 9,925 (1,924) 57,457
Revenue from Primary components
non-OEM customers categorised
to Flowtech Segment 1,441 (1,441) - - - -
Total re-stated revenue 29,055 20,401 9,925 (1,924) - 57,457
Underlying operating results
in prior year report 3,725 2,952 328 - (2,692) 4,313
Underlying operating result
for Primary Components
categorised
to Flowtech Segment 10 (10) - - - -
Re-allocation of costs between
segments (118) (235) (94) - 447 -
Underlying operating results,
re-stated 3,617 2,707 234 - (2,245) 4,313
================================ ========= ============ =============== ================= ========= =============
For the year ended 31 December Flowtech Fluidpower Fluidpower Inter-segmental Central Total
2022 Group Group Services transactions
Solutions
(re-stated) GBP000 GBP000 GBP000 costs continuing
operations
GBP000 GBP000 GBP000
Income statement - continuing
operations:
Revenue from external customers 53,273 40,368 21,125 - - 114,766
Inter segment revenue 1,706 1,008 868 (3,582) -
Total revenue 54,979 41,376 21,993 (3,582) 114,766
Underlying operating result* 6,206 5,086 1,804 - (4,510) 8,586
Net financing costs (141) (68) (5) - (978) (1,192)
Underlying segment result 6,065 5,018 1,799 - (5,488) 7,394
Separately disclosed items
(see below) (8,240) (785) (3,329) - (612) (12,966)
Profit / (loss) before tax (2,175) 4,233 (1,530) - (6,100) (5,572)
Specific disclosure items
Depreciation and impairment
on owned plant, property and
equipment 867 157 179 - 2 1,205
Depreciation on right-of-use
assets 707 695 73 - 195 1,670
Impairment of goodwill 7,105 - 2,967 - - 10,072
Impairment of acquired
intangibles - - 168 - - 168
Amortisation 230 683 124 - - 1,037
Reconciliation of underlying
operating result to operating
profit:
Underlying operating result* 6,206 5,086 1,804 - (4,510) 8,586
Separately disclosed items
(see below) (8,240) (785) (3,329) - (612) (12,966)
Operating profit/ (loss) (2,034) 4,301 (1,525) - (5,122) (4,380)
================================= ========== ============ =============== ================= ========= =============
(*) Underlying operating result is continuing operations'
operating profit before separately disclosed items
Reconciliation of re-stated Flowtech Fluidpower Fluidpower Inter-segmental Central Total
segment information for the Group Group Services transactions costs continuing
year ended 31 December 2022 Solutions GBP000 GBP000 operations
to prior year report GBP000 GBP000 GBP000 GBP000
Revenue as per prior year
report 57,271 39,084 21,993 (3,582) - 114,766
Revenue from former Primary
components OEM customers
categorised
from the Flowtech Segment (2,292) 2,292 - - - -
Total re-stated revenue 54,979 41,376 21,993 (3,582) - 114,766
Underlying operating results
in prior year report 6,887 4,405 1,804 - (4,510) 8,586
Underlying operating result
from Primary Components OEM
customers categorised from
the Flowtech Segment (681) 681 - - - -
Underlying operating results,
re-stated 6,206 5,086 1,804 - (4,510) 8,586
================================== ========= =========== ================ ================ ======== ============
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2022
2023 2022 GBP000
SEPARATELY DISCLOSED ITEMS GBP000 GBP000
============================================ ====================== ====================== ========================
Separately disclosed items
within administrative
expenses:
Acquisition costs 8 3 10
Amortisation of acquired
intangibles 452 472 943
Impairment of acquired
intangibles - - 168
Impairment of goodwill - - 10,072
Share-based payment costs 97 103 372
Restructuring costs 430 112 1,401
============================================ ====================== ====================== ========================
Total 987 690 12,966
============================================ ====================== ====================== ========================
* 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 Six months Year ended
ended ended 31 December
30 June 30 June 2022
2023 2023 GBP000
GBP000 GBP000
=================================================== =========== =========== =============
Current tax on income for the period - continuing
operations:
UK tax 61 511 734
Overseas tax 265 211 185
Adjustments in respect of prior periods/ other
differences - (89) 9
Deferred tax charge (106) (91) (248)
=================================================== =========== =========== =============
Total taxation 220 542 680
=================================================== =========== =========== =============
The taxation for the period has been calculated by applying the estimated
tax rate for the financial year ending 31 December 2023.
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 2023 30 June 2022 31 December 2022
============ ======================================================= ======================================================= ============================================================
Earnings Weighted Earnings Earnings Weighted Earnings Earnings Weighted Earnings
average per average per average per share
number share number share number
of shares of shares of shares
============
GBP000 000's Pence GBP000 000's Pence GBP000 000's Pence
============ ================= ================== ================ ================= ================== ================ =================== ================== ===================
Basic
earnings
per
share
Continuing
operations 1,404 61,493 2.28 2,607 61,493 4.24 (6,252) 61,493 (10.17)
============ ================= ================== ================ ================= ================== ================ =================== ================== ===================
Diluted
earnings
per share
Continuing
operations 1,404 61,673 2.28 2,607 62,236 4.19 (6,252) 61,770 (10.17)
============ ================= ================== ================ ================= ================== ================ =================== ================== ===================
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2022
2023 2022 GBP000
GBP000 GBP000
============================================ ====================== ====================== ========================
Weighted average number of
ordinary shares
for basic and diluted earnings
per share 61,493 61,493 61,493
Impact of share options 180 743 277
============================================ ====================== ====================== ========================
Weighted average number of
ordinary shares
for diluted earnings per share 61,673 62,236 61,770
============================================ ====================== ====================== ========================
6. NET CASH FROM OPERATING ACTIVITIES
======================================================================================================================
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2022
2023 2022 GBP000
GBP000 GBP000
============================================ ====================== ====================== ========================
Reconciliation of profit before taxation
to net cash flows from operations:
Profit / (loss) from continuing operations
before tax 1,624 3,149 (5,572)
Depreciation and impairment on property,
plant, and equipment 645 671 1,205
Depreciation on right-of-use assets (IFRS
16) 880 848 1,670
Impairment of right-of-use assets (IFRS16) - - 388
Release of lease liability (IFRS16) (387) - -
Finance costs 890 474 1,192
(Gain) / Loss on sale of plant and
equipment 2 (24) 57
Loan arrangement fee charged to income (77) - -
statement
Amortisation of intangible assets 545 472 1,037
Impairment of intangible assets - - 168
Impairment of goodwill - - 10,072
Settled share options - (40) (42)
Equity settled share-based payment charge 97 103 372
Exchange differences on non-cash balances (56) - 65
============================================ ====================== ====================== ========================
Operating cash inflow before changes in
working capital and provisions 4,163 5,653 10,612
Change in trade and other receivables (1,664) (3,316) (2,945)
Change in stocks 601 (4,099) (738)
Change in trade and other payables 804 (642) (1,702)
Change in provisions 24 (7) 7
============================================ ====================== ====================== ========================
Cash generated from operations 3,928 (2,411) 5,234
Tax paid / (reclaimed) (321) (94) (220)
============================================ ====================== ====================== ========================
Net cash generated / (used) from operating
activities 3,607 (2,505) 5,014
============================================ ====================== ====================== ========================
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 2022 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.
ENQUIRIES:
======================================= =============================================================================
Flowtech Fluidpower plc Registered Office:
Mike England, Chief Executive Officer Bollin House, Bollin Walk,
Russell Cash, Chief Financial Officer Wilmslow, Cheshire, SK9
Tel: +44 (0) 1695 52759 1DP
email:
info@flowtechfluidpower.co
m
website:
www.flowtechfluidpower.com
Liberum Capital Limited (Nominated
adviser and Sole Broker)
Richard Lindley / Ben Cryer / 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
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END
IR UKVRROKUWUUR
(END) Dow Jones Newswires
August 30, 2023 02:00 ET (06:00 GMT)
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