TIDMFLO
RNS Number : 2825Y
Flowtech Fluidpower PLC
08 September 2020
NEWS RELEASE
Issued on behalf of Flowtech
Fluidpower plc
Immediate Release
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014. Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
Tuesday, 8 September 2020
FLOWTECH FLUIDPOWER PLC
("Flowtech", the "Group" or "Company")
Specialist full-service supplier of technical fluid power
products and services
HALF-YEAR REPORT
For the six months ended 30 June 2020
"We are pleased that the trend in market conditions since April
2020 has been positive and we look forward to an improvement in
performance in H2 2020 and into 2021"
HY2020 HY2019 FY2019
30.6.20 30.6.19 31.12.19
FINANCIAL HIGHLIGHTS unaudited unaudited Audited
========================================== =========== =========== ==========
GBP59.6m
* Revenue GBP46.6m GBP112.4m
* Gross profit % 35.1% 35.6% 35.7%
GBP4.3m GBP5.7m
* Operating (loss) / profit GBP (0.5m)
GBP6.1m GBP9.8m
* Underlying operating profit* GBP0.9m
GBP (0.9) GBP3.8m GBP4.7m
* (Loss) / profit before tax m
* Earnings per share (basic) (1.37) p 5.00p 6.12p
GBP18.8m GBP16.6m
* Net debt** GBP14.5m**
* Resilient response to COVID-19
* Organic sales down 21.8% (Q1-11%, Q2-33%)
* Gross margin strong at 35.1% (H1 2019: 35.6%)
* Underlying operating profit of GBP0.9m (H1 2019:
GBP6.1m)
* Strong cash generation and net debt down GBP2.1m,
GBP4.3m lower than H12019
* Continued progress on reducing cost base
" I'm pleased with the way our team responded to the challenges
presented by COVID-19. We were already engaged in a process of
rationalising operating sites and reducing costs, but, given the
ongoing uncertainty, it is now imperative we accelerate this activity.
Our cash management has been good and whilst we remain well funded,
it is important to recognise that one of the keys to our success
is inventory availability and that this must not be compromised.
Looking forward, an important element of our future strategy is
our digital and data capability, this is an area of close focus
and ongoing investment. Given the impact of COVID-19 it is difficult
to predict underlying levels of demand so notwithstanding our plans
to achieve further efficiency and organic growth coupled with our
inherent resilience we will be affected by overall market conditions
and will react appropriately."
Roger McDowell, Non-Executive Chair
* Underlying operating result is continuing operations' operating
profit before separately disclosed items (note 3) and the impact
of fair value adjustment to inventory acquired through business
combinations (IFRS 3)..The FY2019 comparative has been adjusted
as explained in note 3.
**Net Debt excludes benefit obtained by deferring c.GBP1.6m (2019:
GBPnil) of VAT linked to Government COVID-19 related support schemes.
ENQUIRIES:
----------------------------------------------------------------
FLOWTECH FLUIDPOWER PLC
Roger McDowell, Non-Executive Chair
Bryce Brooks, Chief Executive Officer
Russell Cash, Chief Financial Officer
Tel: +44 (0) 1695 52759
Email : info@flowtechfluidpower.com
Corporate Marketing Manager: Eve Rigby Tel: +44 (0) 1695 577780
Zeus Capital Limited (Nominated Adviser and Joint Broker)
Andrew Jones, Kieran Russell (Corporate Finance)
Dominic King, John Goold (Sales & Broking)
Tel: + 44 (0) 20 3829 5000
finnCap Limited (Joint Broker)
Ed Frisby, Kate Bannatyne (Corporate Finance)
Rhys Williams, Andrew Burdis (Sales & Broking)
Tel: + 44 (0) 20 7220 0500
TooleyStreet Communications (IR and media relations)
Fiona Tooley
Tel: +44 (0) 7785 703523 or email: fiona@tooleystreet.com
ABOUT FLOWTECH FLUIDPOWER PLC
Founded as Flowtech in 1983, the Flowtech Fluidpower Group is the UK's
leading specialist supplier of technical fluid power products and services.
The business joined AIM in 2014 (AIM: Symbol FLO). Today, the Group
has two distinct divisions:
Division: What we do: Locations:
----------- ------------------------------------------- ----------------------------------
Components Supply of hydraulic and pneumatic Flowtechnology Benelux
consumables, predominantly through (Deventer)
distribution for urgent maintenance Flowtechnology UK (Skelmersdale)
and repair operations across Indequip (Skelmersdale)
all industry sectors. Additionally, Beaumanor (Leicester)
support a broad range of original Hydravalve (Willenhall)
equipment manufacturers (OEMs) Primary Fluid Power Components
supplying off-the-shelf and tailored (Skelmersdale)
components and assemblies. Nelson Hydraulics (Dublin,
Lisburn, Dungannon)
HTL (Ludlow)
Hi-Power Hydraulics (Cork,
Dublin, Belfast, Knowsley)
Hydroflex (Brussels, Rotterdam
and OudBeijerland)
Hydraulic Equipment Supermarkets
(Gloucester, Leeds)
Derek Lane & Co (Newton
Abbot)
Tractec (Gloucester)
----------- ------------------------------------------- ----------------------------------
Services Bespoke design, manufacturing, Primary Fluid Power Systems
commissioning, installation, (Knowsley)
and servicing of systems to manufacturers TSL (Knowsley)
of specialised industrial and Branch Hydraulic Systems
mobile hydraulic original equipment (Gloucester)
manufacturers (OEMs) and additionally Lubemec (Gloucester)
a wide range of industrial end Fluidpower Group Services
users. (Spennymoor, Leeds, Gloucester)
FlowConnect (Gloucester)
Orange County (Spennymoor)
----------- ------------------------------------------- ----------------------------------
Both Group's divisions have overlapping product sets, allowing procurement
synergies to be maximised.
The above divisions are supported by a centralised back office team
based in Wilmslow, Cheshire, UK and a procurement and quality control
team in Shanghai, China. In total, the business employs c.600 people.
For more information please visit, www.flowtechfluidpower.com
FLOWTECH FLUIDPOWER PLC
HALF-YEAR REPORT
FOR THE SIX MONTHSED 30 JUNE 2020
COVID-19 IMPACT AND RESPONSE
Since the COVID-19 lockdown we have prioritised the health and
wellbeing of our people. All our sites in the UK, Ireland and the
Benelux have been adapted to become safer working environments, and
whilst this has created some challenges in our larger facilities,
we are extremely grateful to all our employees for the resilience
and adaptability they have shown throughout recent months. This has
ensured that high levels of customer service have been
maintained.
All our key customers have returned and the recovery is
encouraging; our revenue in August was 12% down on the comparative
period, a much-improved position from April which was down 41%.
Over the last two months we have welcomed back most of our UK
furloughed employees. 15 remain furloughed at the start of
September, compared with a peak of 189 in April. Although most of
our supplier base is located overseas, the quality of the working
relationships we have with them has been invaluable throughout this
period. Overall, it is pleasing to report that our supply chain has
continued to function effectively, with only minor disruptions post
lockdown.
DELIVERING ON OPERATIONAL COST SAVINGS
Despite COVID-19 we have continued with our plans to remove cost
from our businesses, with most savings coming from a reduction in
people and property. Highlights in the first half of 2020 include
the move from Knowsley into Skelmersdale of the Primary Fluid Power
Components function, and the transition of the logistics operations
of Hydravalve from Willenhall on 1 May and 1 June respectively.
Both have incorporated significant IT implementations, the
establishment of an Engineering & Modifications Centre in the
main logistics hub, and new ways of working to service different
customer requirements. As well as the associated cost savings we
are already seeing benefits in the form of more efficient picking
and delivery.
In Q2 we announced internally that our two Irish businesses -
Nelson Hydraulics and Hi-Power - would merge their operations and
relocate most warehousing functions to the UK. During the second
half of the current year we will also be undergoing a similar
change process at Group HES, our Gloucester operation. When fully
implemented we expect further savings, with the removal of two
properties and a further reduction in headcount
Whilst certain projects have been slightly delayed due to
lockdown restrictions, in some cases so we can take additional cost
out, we remain confident of delivering annualised savings of at
least GBP1.6m. We expect these savings to be fully reflected in
2021. These are in addition to the cost cutting we took in response
to COVID-19, including the 25 redundancies actioned post this
reporting date.
CONTINUING TO DE-LEVERAGE
We are pleased to see more progress in this area despite
profitability having been materially affected by COVID-19. Net Debt
reduced by GBP2.1m in H1 2020 and GBP4.3m in the 12-month period
ended 30 June 2020.
Management of working capital has remained high on our list of
priorities, and whilst debtor collections have slowed slightly, we
have where necessary worked proactively with our customers and
suppliers to ensure net cash generation.
We continually review inventory levels to ensure sufficient
stock to service the demands of our customer base. We anticipate
that further reductions in inventory are achievable, although at
more modest levels than seen over the past 24-months. From a peak
in June 2018 of GBP29.0m, inventories are now down to GBP22.6m.
DIGITAL CAPABILITIES
In 2019, we said we would use our market penetration and premium
position with the leading global suppliers to develop a
fully-fledged e-business operation. This year a specialist team has
been working on the next stage of this, and identified a clear
strategy to redesign our IT architecture, create the most extensive
Product Information System in the sector, and build a data driven
approach to sales development using a single Customer Data
Platform. When this is coupled with the integration of all the
Group's legacy IT systems to create a single stock holding
framework, we will be in a very strong position to exploit the
changing digital landscape. This initiative will also have input
and support from our new Non-Executive Director Paul Gedman, who
joined us in August, having held senior positions including as
Divisional CEO at The Hut Group . Paul has extensive experience in
the global e-commerce industry and a wealth of practical knowledge
in growing international businesses through leveraging data and
digital capabilities.
FINANCIAL STATEMENT
HALF-YEAR FINANCIAL PERFORMANCE AND DIVISIONAL ANALYSIS
Revenue Six Six % Year
months months Change ended
ended ended 31
30 30 December
June June 2019
2020 2019 GBP000
GBP000 GBP000
----------------------- ------------------ ------------------ ------------------ --------------------
Components 39,124 50,001 -21.8% 96,348
Services 7,443 9,639 -22.8% 16,070
----------------------- ------------------ ------------------ ------------------ --------------------
Total Group
revenue 46,567 59,640 -21.9% 112,418
----------------------- ------------------ ------------------ ------------------ --------------------
Gross
profit % 35.1% 35.6% 35.7%
----------------------- ------------------ ------------------ ------------------ --------------------
Underlying Six Six Change Year
operating months months ended
result* ended ended 31
30 June 30 June GBP000 December
2020 2019 2019
GBP000 GBP000 GBP000
----------------------- ------------------- ------------------- ------------------- --------------------
Components 3,331 7,945 (4,614) 14,138
Services (94) 241 (335) (53)
Central
costs (2,305) (2,091) (214) (4,331)
----------------------- ------------------- ------------------- ------------------- --------------------
Underlying
operating
result * 932 6,095 (5,163) 9,754
----------------------- ------------------- ------------------- ------------------- --------------------
* Underlying operating result is continuing operations'
operating profit before separately disclosed items (note
3) and the impact of fair value adjustment to inventory acquired
through business combinations (IFRS 3)..The FY2019 comparative
has been adjusted as explained in note 3.
REVENUE
Overall revenue was down 22% against prior year comparatives, 11% in
Q1 and 33% in Q2. We had expected a modest decline in Q1 against a strong
2019 quarter, but COVID-19 further impacted on this and then affected
the whole of Q2.
Gross profit margin
Although this can vary from period to period dependent on market conditions
and mix of sales, in H1 it was virtually unchanged at 35.1%. This is
higher than 2017 and 2018 and we are confident that our focus in this
area will continue to see further improvements .
OPERATING Costs
Our operating costs in H1 2020 were GBP15.4m, marginally ahead of the
comparative period in 2019. A significant factor contributing to this
was the investment made in the business in mid-2019 when market conditions
were far more favourable. The impact of this and a number of COVID-19
related initiatives will see operating costs in H2 2020 well below those
in H2 2019. At the start of the year headcount across the Group was
651, and at the time of writing this was down to 614, with further reductions
expected in the second half.
UNDERLYING OPERATING PROFIT
Our underlying operating result was impacted by COVID-19, reducing from
GBP6.1m to GBP0.9m, the majority of which was in our Components businesses.
FINANCIAL POSITION INCLUDING CASH FLOW AND BANK DEBT
We are pleased with the GBP4.6m of cash generated from operating activities
(after discounting the GBP1.6m VAT deferral support from HMRC), which
is in line with the comparative period. Our focus on managing working
capital has enabled us to achieve this result despite the significant
reduction in underlying profitability. This has allowed us to fund our
restructuring activity as well as achieving a GBP2.1m reduction in Net
Debt in H1 2020 and a position which is GBP4.3m lower than at the end
of H1 2019.
We have recently agreed the renewal of our Banking facilities, with
the GBP25m aggregate facilities in place for a further three years.
These facilities are currently being documented by lawyers, a process
which we hope will be complete by the end of September 2020.
FUTURE REGULATORY REPORTING
Flowtech announces that following a review of its financial reporting
practices it will no longer publish quarterly operational trading updates
for Q1 and Q3 in addition to its regular financial reporting calendar.
The Company will continue to provide, in conjunction with preliminary
and interim reports, qualitative updates covering market and business
developments. This change in reporting will take immediate effect. Shareholders
will be able to view the financial calendar of events on our website
https://www.flowtechfluidpower.com/shareholder-information/financial-calendar/
.
OUTLOOK & DIVID
The fluid power sector has previously shown resilience in economic downturns
and this characteristic, when coupled with the Group's wide mix of customers
and sectors, has been evident in recent months. The trend in demand
since the April nadir has been encouraging. If this pattern continues
and is combined with our internal cost reduction programme it leads
us to expect an improvement in performance in H2 2020 and into 2021.
However, as it still remains difficult to predict short term market
conditions, we therefore consider it prudent to withhold both formal
financial guidance and the payment of a dividend. We will keep this
position under constant review and intend to reinstate both guidance
and dividend as soon as is practicable.
Our priorities continue to be: - excellent customer service, careful
management of cash, margin protection and the accelerated execution
of our restructuring and cost reduction programme. We will also continue
to invest in our digital capability and endeavour to maximise the opportunities
offered by our strong market position through our high quality and committed
team of people. We approach the future with measured optimism.
By order of the Board
8 September 2020
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2020
---------------------------------------------------------------------------------------------
Notes Unaudited Unaudited Audited
--------------------------------------------- ------
Six months Six months Year
ended ended ended
--------------------------------------------- ------
30 June 30-June 31-December
2020 2019 2019
GBP000 GBP000 GBP000
--------------------------------------------- ------ ----------- ----------- ------------
Continuing operations
------
Revenue 46,567 59,640 112,418
------
Cost of sales (30,226) (38,395) (72,235)
Gross profit 16,341 21,245 40,183
Distribution expenses (2,081) (2,139) (4,547)
Administrative expenses before separately
disclosed items (13,328) (13,099) (26,179)
- separately disclosed items 3 (1,481) (1,678) (3,712)
--------------------------------------------- ------ ----------- ----------- ------------
Total administrative expenses (14,809) (14,777) (29,891)
--------------------------------------------- ------ ----------- ----------- ------------
Operating (loss) / profit (549) 4,329 5,745
--------------------------------------------- ------ ----------- ----------- ------------
Financial income - - -
------
Financial expenses (380) (528) (1,038)
--------------------------------------------- ------ ----------- ----------- ------------
Net financing costs (380) (528) (1,038)
--------------------------------------------- ------ ----------- ----------- ------------
(Loss) / profit from continuing operations
before tax (929) 3,801 4,707
Taxation 4 88 (726) (968)
--------------------------------------------- ------ ----------- ----------- ------------
(Loss) / profit from continuing operations (841) 3,075 3,739
--------------------------------------------- ------ ----------- ----------- ------------
(loss) / profit for the period attributable
to:
------
Non-controlling interest - 22 -
------
Owners of the parent (841) 3,053 3,739
--------------------------------------------- ------ ----------- ----------- ------------
Earnings per share
Basic earnings per share - continuing
operations 6 (1.37p) 5.00p 6.12p
--------------------------------------------- ------ ----------- ----------- ------------
Diluted earnings per share - continuing
operations 6 (1.37p) 4.99p 6.10p
--------------------------------------------- ------ ----------- ----------- ------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2020
--------------------------------------------------------------------------------------
Unaudited Unaudited Audited
----------------------------------------------
Six months Six months Year
ended ended ended
----------------------------------------------
30 June 30-June 31-December
2020 2019 2019
GBP000 GBP000 GBP000
---------------------------------------------- ----------- ----------- ------------
(Loss) / profit for the period (841) 3,076 3,739
Other comprehensive income
-Exchange differences on translating foreign
operations 334 71 (394)
---------------------------------------------- ----------- ----------- ------------
Total comprehensive income in the period
attributable to: (507) 3,147 3,345
Non-controlling interest - 22 -
Owners of the parent (507) 3,125 3,345
---------------------------------------------- ----------- ----------- ------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
Unaudited Unaudited Audited
-----------------------------------------
30-June 30-June 31-December
-----------------------------------------
2020 2019 2019
GBP000 GBP000 GBP000
----------------------------------------- ---------- ---------- ------------
Assets
Non-current assets
Goodwill 63,216 62,959 63,014
Other intangible assets 6,047 7,089 6,573
Property, plant, and equipment 6,957 6,717 6,528
Right of use assets 7,385 8,752 8,228
---------- ----------
Total non-current assets 83,605 85,517 84,343
----------------------------------------- ---------- ---------- ------------
Current assets
Inventories 22,639 28,130 24,000
Trade and other receivables 20,050 27,034 21,377
Prepayments 1,672 1,057 759
Cash and cash equivalents 7,082 3,881 3,446
----------------------------------------- ---------- ---------- ------------
Total current assets 51,443 60,102 49,582
----------------------------------------- ---------- ---------- ------------
Liabilities
Current liabilities
Interest-bearing borrowings 16,000 18,605 16,055
Lease liabilities - current 1,845 1,426 1,635
Trade and other payables 18,344 18,403 15,510
Deferred and contingent consideration - 1,005 214
Tax Payable - 1,659 298
----------------------------------------- ---------- ---------- ------------
Total current liabilities 36,189 41,098 33,712
----------------------------------------- ---------- ---------- ------------
Net current assets 15,254 19,004 15,870
----------------------------------------- ---------- ---------- ------------
Non-current liabilities
Interest-bearing borrowings 4,000 4,000 4,008
Lease liabilities - non-current 5,773 7,394 6,735
Provisions 363 411 417
Deferred tax liabilities 1,417 1,709 1,519
----------------------------------------- ---------- ---------- ------------
Total non-current liabilities 11,553 13,514 12,679
----------------------------------------- ---------- ---------- ------------
Net assets 87,306 91,007 87,534
----------------------------------------- ---------- ---------- ------------
Equity directly attributable to owners
of the parent
Share capital 30,747 30,564 30,579
Share premium 60,959 60,959 60,959
Other reserves 187 187 187
Shares owned by the Employee Benefit
Trust (EBT) (372) (400) (372)
Merger reserve 293 293 293
Merger relief reserve 3,645 3,575 3,599
Currency translation reserve 711 727 244
Retained losses (8,864) (4,940) (7,955)
----------------------------------------- ---------- ---------- ------------
Total equity attributable to the owners
of the parent 87,306 90,965 87,534
----------------------------------------- ---------- ---------- ------------
Non-controlling interest - 42 -
----------------------------------------- ---------- ---------- ------------
Total equity 87,306 91,007 87,534
----------------------------------------- ---------- ---------- ------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2020
Share Share Other Shares Merger Merger Currency Retained Non-controlling Total
capital premium reserves owned reserve relief translation losses interest equity
by EBT reserve reserve GBP000
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ------- ------- -------- ------ ------- ------- ----------- --------- --------------- --------
Six months
ended 30
June 2020
unaudited
--------------- ------- ------- -------- ------ ------- ------- ----------- --------- --------------- --------
Balance at 1
January
2020 30,579 60,959 187 (372) 293 3,599 244 (7,955) - 87,534
Profit for the
period - - - - - - - (841) - (841)
Other
comprehensive
income - - - - - - 467 (133) - 334
--------------- ------- ------- -------- ------ ------- ------- ----------- --------- --------------- --------
Total
comprehensive
income for
the period - - - - - - 467 (974) - (507)
--------------- ------- ------- -------- ------ ------- ------- ----------- --------- --------------- --------
Transaction
with owners
Issue of share
capital 168 - - - - 46 - - - 214
Share-based
payment
charge - - - - - - - 65 - 65
--------------- ------- ------- -------- ------ ------- ------- ----------- --------- --------------- --------
Total
transactions
with owners 168 - - - 46 - 65 - 279
--------------- ------- ------- -------- ------ ------- ------- ----------- --------- --------------- --------
Balance at 30
June
2020 30,747 60,959 187 (372) 293 3,645 711 (8,864) - 87,306
--------------- ------- ------- -------- ------ ------- ------- ----------- --------- --------------- --------
Six months ended 30
June 2019 unaudited
------------------------ ------ ------ --- ----- --- ----- --- ------- --- ------
Balance at 1 January
2019 30,460 60,793 187 (413) 293 3,575 664 (8,146) 20 87,433
Profit for the period - - - - - - - 3,053 22 3,075
Other comprehensive
income - - - - - - 63 8 - 71
------------------------ ------ ------ --- ----- --- ----- --- ------- --- ------
Total comprehensive
income for the period - - - - - - 63 3,061 22 3,146
------------------------ ------ ------ --- ----- --- ----- --- ------- --- ------
Transaction with owners
Issue of share capital 104 166 - - - - - - - 270
Share-based payment
charge - - - - - - - 96 - 96
Share options settled - - - 13 - - - 49 - 62
------------------------ ------ ------ --- ----- --- ----- --- ------- --- ------
Total transactions with
owners 104 166 - 13 - - - 145 - 428
------------------------ ------ ------ --- ----- --- ----- --- ------- --- ------
Balance at 30 June 2019 30,564 60,959 187 (400) 293 3,575 727 (4,940) 42 91,007
------------------------ ------ ------ --- ----- --- ----- --- ------- --- ------
Twelve months ended
31 December 2019 - audited
------------------------------- ------ ------ --- ------ --- ----- ------- ------- ---- -------
Balance at 1 January
2019 30,460 60,793 187 (413) 293 3,575 664 (8,146) 20 87,433
Profit for the year - - - - - - - 3,739 - 3,739
Other comprehensive
income - - - - - - (420) 26 - (394)
------------------------------- ------ ------ --- ------ --- ----- ------- ------- ---- -------
Total comprehensive
income for the year - - - - - - (420) 3,765 - 3,345
------------------------------- ------ ------ --- ------ --- ----- ------- ------- ---- -------
Transaction with owners
Issue of share capital 25 45 - - - - - - - 70
Purchase of minority
shares - - - - - - - (270) (20) (290)
Shares issued in consideration 94 121 - - - 24 - - - 239
Other movements in share
capital - - - - - - - 133 - 133
Share-based payment
charge - - - - - - - 143 - 143
Share options settled - - - 41 - - - 169 - 210
Equity dividends paid - - - - - - - (3,749) - (3,749)
------------------------------- ------ ------ --- ------ --- ----- ------- ------- ---- -------
Total transactions with
owners 119 166 - 41 293 24 - (3,574) (20) (3,244)
------------------------------- ------ ------ --- ------ --- ----- ------- ------- ---- -------
Balance at 31 December
2019 30,579 60,959 187 (372) 293 3,599 244 (7,955) - 87,534
------------------------------- ------ ------ --- ------ --- ----- ------- ------- ---- -------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2020
Notes Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30-June 30-Jun 31-Dec
2020 2019 2019
GBP000 GBP000 GBP000
Net cash from operating activities 8 6,203 4,443 13,246
----------------------------------------- ------ ----------- ----------- ---------
Cash flow from investing activities
------
Acquisition of property, plant, and
equipment (1,221) (519) (756)
------
Proceeds from sale of property, plant,
and equipment 189 24 39
Acquisition of subsidiary (202) - (38)
Payment of deferred and contingent
consideration (218) (1,630) (2,635)
----------------------------------------- ------ ----------- ----------- ---------
Net cash used in investing activities (1,452) (2,125) (3,390)
Cash flows from financing activities
Net proceeds from the issue of share
capital - 70 70
Repayment of lease liabilities (792) (778) (1632)
Net cash settled share options - (47) -
Interest on right of use leases (131) (141) (282)
Other interest paid (249) (387) (756)
Repayment of loan by EBT - 15 47
Dividends paid 5 - - (3,749)
Share option payments to staff - - (61)
----------------------------------------- ------ ----------- ----------- ---------
Net cash generated from / (used in)
financing activities (1,172) (1,268) (6,363)
----------------------------------------- ------ ----------- ----------- ---------
Net change in cash and cash equivalents 3,579 1,050 3,493
Cash and cash equivalents at start
of period 3,446 253 253
------
Exchange differences on cash and cash
equivalents 57 78 (300)
----------------------------------------- ------ ----------- ----------- ---------
Cash and cash equivalents at end of
period 7,082 1,381 3,446
----------------------------------------- ------ ----------- ----------- ---------
Cash and cash equivalents 7,082 3,881 3,446
----------------------------------------- ------ ----------- ----------- ---------
Bank overdraft - (2,500) -
----------------------------------------- ------ ----------- ----------- ---------
Cash and cash equivalents at end of
period 7,082 1,381 3,446
----------------------------------------- ------ ----------- ----------- ---------
Reconciliation of liabilities arising from financing activities
The changes in the Group's liabilities arising from financing activities
can be classified as follows:
Long-term Short term Lease liabilities Total
borrowings borrowings
------------------------
GBP000 GBP000 GBP000 GBP000
------------------------ ------------- ------------ ------------------ -------
At 1 January 2020 4,000 16,000 8,433 28,433
Cash flows
Repayment - - (792) (792)
Proceeds - - - -
Other lease movements - - (67) (67)
Non-cash
New leases - - 44 44
------------------------ ------------- ------------ ------------------ -------
At 30 June 2020 4,000 16,000 7,618 27,618
------------------------ ------------- ------------ ------------------ -------
NOTES TO THE HALF-YEAR REPORT
FOR THE SIX MONTHSED 30 JUNE 2020
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 09010519.
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 2020 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
8 September 2020.
The Group's financial statements for the year ended 31 December 2019 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 is not proposing to bulk print and distribute hard copies of
this Half-year Report unless specifically requested by individual shareholders.
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 .
Copies can also be requested from; The Company Secretary, Flowtech Fluidpower
plc, Bollin House, Bollin Walk, Wilmslow, SK9 1DP.
Email: info@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 Financial Reporting Standards (IFRS)
as adopted by the European Union 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 2020. These are consistent with
the accounting policies used in the Financial Statements for the year ended
31 December 2019.
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
GBP0.9m in a half year period which was materially
affected by the unprecedented, unforeseen
circumstances of COVID-19;
* July and August have seen improving trends in terms
of Revenue and profitability;
* The Group has achieved significant debt reduction
over the last 18months and has been consistently
operating with significant headroom against the
GBP25m banking facilities.
In addition we have recently agreed the renewal of our Banking facilities
which will see our aggregate GBP25m facilities in place for a further 3
year period; the facilities are currently being documented by lawyers and
we expect this to be complete by the end of September. As part of this we
have refreshed our Banking covenants to reflect the unexpected reduction
in our level of profitability as a result of COVID-19; as a result of this
we expect to continue to satisfy all covenant and other requirements within
the Banking agreement.
As referred to our 2019 Report & Accounts we continue to recognise that
the potential prolonged impact of the COVID-19 pandemic presents a material
uncertainty that could potentially cast doubt on the Group and Parent Company's
ability to continue as a going concern. Nevertheless, taking all factors
into consideration the Directors have a reasonable expectation that the
Group and Parent Company has adequate resources to continue in operational
existence for the foreseeable future. For these reasons the Directors continue
to adopt the going concern basis in preparing the half year report and accounts.
These financial statements do not reflect any adjustments which would result
from the going concern basis of preparation proving to be inappropriate.
3. OPERATING SEGMENTS
------------------------------------------------------------------------------------------------------
The Group comprises the following two operating segments which are defined
by trading activity:
* Components - Supply of hydraulic and pneumatic
consumables, predominantly through distribution for
maintenance and repair operations across all industry
markets but supported by supply agreements direct to
a broad range of OEMs.
* Services - Bespoke design, manufacturing,
commissioning, installation, and servicing of systems
to manufacturers of specialised industrial and mobile
hydraulic OEMs and additionally a wide range of
industrial end users.
The Board is the chief operating decision maker (CODM). The CODM manages
the business using an underlying profit figure. Only finance income and
costs secured on the assets of the operating segment are included in the
segment results. Finance income and costs relating to loans held by the
Company are not included in the segment result that is assessed by the CODM.
Transfer prices between operating segments are on an arm's length basis.
The Directors believe that the underlying operating profit provides additional
useful information on key performance 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 profit
/ (loss) from continuing operations is shown below. The principal adjustments
made are in respect of the separately disclosed items and are as detailed
at the end of this note. Segment information for the reporting periods is
as follows:
Inter-segmental
transactions Central Total
Components Services GBP000 costs continuing
GBP000 GBP000 GBP000 operations
GBP000
---------------- ------------ ---------- ---------------- --------- ---------------
Six months
ended 30 June
2020
---------------- ------------ ---------- ---------------- --------- ---------------
Income
statement -
continuing
operations:
Revenue from
external
customers 39,124 7,443 - - 46,567
Inter segment
revenue 2,490 504 (2,994) - -
---------------- ------------ ---------- ---------------- --------- ---------------
Total revenue 41,614 7,947 (2,994) - 46,567
---------------- ------------ ---------- ---------------- --------- ---------------
Underlying
operating
result* 3,331 (94) - (2,305) 932
Net financing
costs (131) (3) - (246) (380)
---------------- ------------ ---------- ---------------- --------- ---------------
Underlying
segment result 3,200 (97) - (2,551) 552
---------------- ------------ ---------- ---------------- --------- ---------------
Separately
disclosed
items (683) - - (798) (1,481)
---------------- ------------ ---------- ---------------- --------- ---------------
Profit / (loss)
before tax 2,517 (97) - (3,349) (929)
---------------- ------------ ---------- ---------------- --------- ---------------
Specific
disclosure
items
Depreciation 1,169 132 - 46 1,347
Amortisation 463 63 - - 526
---------------- ------------ ---------- ---------------- --------- ---------------
Reconciliation
of underlying
operating
result to
operating
profit:
Underlying
operating
result* 3,331 (94) - (2,305) 932
Separately
disclosed
items (683) - - (798) (1,481)
---------------- ------------ ---------- ---------------- --------- ---------------
Operating
profit/(loss) 2,648 (94) - (3,103) (549)
---------------- ------------ ---------- ---------------- --------- ---------------
*Underlying operating result is continuing operations' operating profit
before separately disclosed items (note 3) and the impact of fair value
adjustment to inventory acquired through business combinations (IFRS 3).
Inter-segmental
transactions Central Total continuing
Components Services GBP000 costs operations
GBP000 GBP000 GBP000 GBP000
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
Six months ended 30 June 2019
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
Income statement - continuing
operations:
Revenue from external customers 50,001 9,639 - 59,640
Inter segment revenue 1,224 10 (1,234) - -
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
Total revenue 51,225 9,649 (1,234) 59,640
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
Underlying operating result* 7,945 241 - (2,091) 6,095
Net financing costs (33) - - (494) (528)
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
Underlying segment result 7,912 241 - (2,585) 5,567
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
Impact of fair value adjustment
to inventory (88) - - - (88)
Separately disclosed items (767) (20) - (892) (1,678)
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
Profit/(loss) before tax 7,058 221 - (3,477) 3,801
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
Specific disclosure items
Depreciation 1,212 90 - 21 1,323
Amortisation 473 62 - - 535
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
Reconciliation of underlying
operating
result to operating profit:
Underlying operating result* 7,945 241 - (2,091) 6,095
Impact of fair value adjustment
to inventory (88) - - - (88)
Separately disclosed items (767) (20) - (891) (1,678)
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
Operating profit/(loss) 7,090 221 - (2,982) 4,329
------------------------------------- ------------- ----------- ---------------- ---------- -------------------
*Underlying operating result is continuing operations' operating
profit before separately disclosed items (note 3) and the impact of
fair value adjustment to inventory acquired through business
combinations (IFRS 3).
Inter-segmental Total continuing
transactions Central operations
Components Services GBP000 costs GBP000
GBP000 GBP000 GBP000
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Year ended 31 December 2019
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Income statement - continuing
operations:
Revenue from external customers 96,348 16,070 - - 112,418
Inter segment revenue 3,199 232 (3,431) - -
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Total revenue 99,547 16,302 (3,431) 112,418
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Underlying operating result* 13,995 (59) - (4,329) 9,607
Net financing costs (46) (2) - (708) (756)
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Underlying segment result 13,949 (61) - (5,037) 8,851
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Impact of fair value adjustment
to inventory (297) - - - (297)
Impact of re-statement under IFRS
16 on profit before tax (126) 1 - (10) (135)
Separately disclosed items (1,114) (689) - (1,909) (3,712)
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Profit/(loss) before tax 12,412 (749) - (6,956) 4,707
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Specific disclosure items
Depreciation 2,266 245 - 106 2,617
Amortisation 927 124 - - 1,051
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Reconciliation of underlying operating
result to operating profit:
Underlying operating result* 13,995 (59) - (4,329) 9,607
Impact of fair value adjustment
to inventory (297) - - - (297)
Impact of re-statement under IFRS
16 on operating profit 143 6 - (2) 147
Separately disclosed items (1,114) (689) - (1,909) (3,712)
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Operating profit/(loss) 12,727 (742) - (6,240) 5,745
--------------------------------------- ------------- ----------- ---------------- ---------- -----------------
Reconciliation of underlying operating result in note 3 to financial highlights
on page 1
Total
continuing
operations
GBP000
Underlying operating result* shown
above 9,607
Add back impact of re-statements
under IFRS 16 on Operating profit 147
Underlying operating profit* shown
on page 1 of RNS 9,754
--------------------
*Underlying operating result is continuing operations' operating profit
before separately disclosed items (note 3), the impact of fair value adjustment
to inventory acquired through business combinations (IFRS 3) and IFRS 16
adjustments to operating lease rental costs. The inclusion of the IFRS16
adjustment was necessary to compare 2019 to prior periods because, as permitted
by the standard, prior periods were not restated for the introduction of
IFRS16. In order to compare 2019 with future periods this adjustment is
now unnecessary. Accordingly, the 2019 comparative in the table on page
1 and page 4 have been adjusted.
SEPARATELY DISCLOSED ITEMS
* Acquisition costs include stamp duty, due diligence,
legal fees, finance fees and other professional costs
incurred in the acquisition of businesses
* Share-based payment costs relate to the provision
made in accordance with IFRS 2 "Share-based payment"
following the issue of share options to employees
* Restructuring costs related to restructuring
activities of an operational nature following
acquisition of business units and other restructuring
activities in established businesses. Costs include
restructuring advice, asset write downs, employee
redundancies and IT integration.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBP000 GBP000 GBP000
====================== ====================== ========================
Share based payment costs 65 96 143
Amortisation of acquired
intangibles 526 535 1,051
Changes in amounts accrued for
contingent
and deferred consideration 218 596 596
Restructuring costs 644 394 1,739
Acquisition costs 28 57 183
============================================ ====================== ====================== ========================
Total 1,481 1,678 3,712
============================================ ====================== ====================== ========================
4. TAXATION
-------------------------------------------------------------------------------------------
Six months Six months Year
ended ended ended
---------------------------------------------------
30-June 30-June 31-December
2020 2019 2019
---------------------------------------------------
GBP000 GBP000 GBP000
--------------------------------------------------- ----------- ----------- ------------
Current tax on income for the period - continuing
operations:
UK tax (57) 907 888
Overseas tax 69 - 324
Deferred tax credit (100) (40) (232)
Adjustments in respect of prior years - (141) (12)
--------------------------------------------------- ----------- ----------- ------------
Total taxation (88) 726 968
--------------------------------------------------- ----------- ----------- ------------
The taxation for the period has been calculated by applying the estimated
tax rate for the financial year ending 31 December 2020.
5. DIVIDS
----------------------------------------------------------------------------------------------------------------------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBP000 GBP000 GBP000
------------------------------------------ ----------------------- ----------------------- ------------------------
Final dividend (2019: 4.04p) per share - - 2,453
Interim dividend (2019: 2.13p) per share - - 1,296
Total dividends - - 3,749
------------------------------------------ ----------------------- ----------------------- ------------------------
In the light of economic uncertainty due to COVID-19, the Directors have
suspended all dividend payments.
6. EARNINGS PER SHARE
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Basic earnings / (loss) per share is calculated by dividing the earnings
/ (loss) attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period. For diluted earnings
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 2020 30 June 2019 31 December 2019
------------ ---------------------------------------------------------- -------------------------------------------------------- --------------------------------------------------------
Earnings Weighted Earnings Earnings Weighted Earnings Earnings Weighted Earnings
average per share average per average per share
number 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 (841) 61,354 (1.37p) 3,053 61,091 5.00p 3,739 61,067 6.12p
------------ ----------------- ------------------ ------------------- ----------------- ------------------ ----------------- ----------------- ------------------ -----------------
Diluted
earnings
per share
Continuing
operations (841) 61,354 (1.37p) 3,053 61,218 4.99p 3,739 61,286 6.10p
------------ ----------------- ------------------ ------------------- ----------------- ------------------ ----------------- ----------------- ------------------ -----------------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBP000 GBP000 GBP000
-------------------------------------------- ---------------------- ---------------------- ------------------------
Weighted average number of
ordinary shares
for basic and diluted earnings
per share 61,354 61,091 61,067
Impact of share options - 127 219
-------------------------------------------- ---------------------- ---------------------- ------------------------
Weighted average number of
ordinary shares
for diluted earnings per share 61,354 61,218 61,286
-------------------------------------------- ---------------------- ---------------------- ------------------------
7. SUBSEQUENT EVENTS
--------------------------------
Since the end of June 2020, we have announced further
restructuring activity involving our Group HES business in
Gloucester. We have also made progress in extending our Banking
facilities, terms having been agreed with the Bank and
documentation currently being progressed by lawyers; we expect this
to be formally in place by the end of September 2020.
8. NET CASH FROM OPERATING ACTIVITIES
----------------------------------------------------------------------------------------
Six months Six months Year
ended ended ended
------------------------------------------------
30-June 30-June 31-December
2020 2019 2019
------------------------------------------------
GBP000 GBP000 GBP000
------------------------------------------------ ----------- ----------- ------------
Reconciliation of profit before taxation to
net cash flows from operations:
(Loss) / profit from continuing operations
before tax (929) 3,802 4,707
Depreciation on property, plant, and equipment 533 507 916
Depreciation on right-of-use assets (IFRS
16) 814 816 1,701
Financial expense 249 387 756
Finance cost on right-of-use assets (IFRS
16) 131 141 282
Loss on sale of plant and equipment 70 7 6
Amortisation of intangible assets 526 535 ,051
Brought forward gain on sale of shares by
EBT, released to reserves - 140 140
Other financial items - - 123
FV Adjustment of stock - - 12
Equity settled share-based payment charge 65 96 143
Change in amounts accrued for contingent and
deferred consideration 218 596 596
------------------------------------------------ ----------- ----------- ------------
Operating cashflow before changes in working
capital and provisions 1,677 7,027 10,433
Change in trade and other receivables 642 (1,949) 4,006
Change in stocks 1,578 537 4,667
Change in trade and other payables 2 705 30 2,862)
Change in provisions (51) 12 18
------------------------------------------------ ----------- ----------- ------------
Cash generated from operations 6,551 5,657 16,262
Tax paid (348) (1,215) (3,016)
------------------------------------------------ ----------- ----------- ------------
Net cash generated from operating activities 6,203 4,442 13,246
------------------------------------------------ ----------- ----------- ------------
9. 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 2019 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.
10. FORWARD-LOOKING STATEMENTS
This document contains certain forward-looking statements which reflect
the knowledge and information available to the Company during the preparation
and up to the publication of this document. By their very nature, these
statements depend upon circumstances and relate to events that may occur
in the future thereby involving a degree of uncertainty. Although the Group
believes that the expectations reflected in these statements are reasonable,
it can give no assurance that these expectations will prove to have been
correct. Given that these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by these
forward-looking statements. The Group undertakes no obligation to update
any forward-looking statements whether because of new information, future
events or otherwise.
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END
IR LRMBTMTBMTRM
(END) Dow Jones Newswires
September 08, 2020 02:00 ET (06:00 GMT)
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