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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Flowtech Fluidpower Plc | LSE:FLO | London | Ordinary Share | GB00BM4NR742 | ORD 50P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 12.65 | 12.73% | 112.00 | 108.00 | 112.00 | 112.00 | 100.50 | 100.50 | 235,949 | 16:12:26 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Fluid Powr Cylindrs,actuatrs | 114.77M | -6.25M | -0.1017 | -11.01 | 68.87M |
From Apr 2019 to Apr 2024
TIDMFLO
RNS Number : 0975L
Flowtech Fluidpower PLC
17 April 2018
Issued on behalf of Flowtech Fluidpower PLC Date: Tuesday, 17 April 2018 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.
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FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December
2017
"The benefits of our acquisition strategy are apparent in the financial performance of the Group, with six new companies acquired throughout the year. This acquisition activity has strengthened our position with important pan-European and global branded suppliers, enhanced our technical strength, and reinforced our position in our current core geographies of UK, Ireland, and Benelux."
Malcolm Diamond MBE, Chairman
FINANCIAL HIGHLIGHTS 2017 2016
----------------------------------------- -------- --------
GBP78.3m GBP53.8m
* GROUP REVENUE(1)
GBP6.61m GBP6.14m
* GROUP OPERATING PROFIT(1)
* EARNINGS PER SHARE(1) 9.69p 10.17p
* 5% INCREASE IN DIVID: 1.93p 1.84p
3.85p 3.67p
5.78p 5.51p
Ø Half year paid
Ø Proposed final dividend
Ø Total for the year
GBP6.60m GBP4.17m
* CASH GENERATION FROM OPERATIONS
GBP14.9m GBP13.1m
* NET DEBT
------------------------------------------ -------- --------
1. All results relate to continuing operations
UNDERLYING FINANCIAL HIGHLIGHTS 2017 2016
------------------------------------- -------- --------
GBP9.08m GBP7.45m
* UNDERLYING OPERATING PROFIT(2)
------------------------------------- -------- --------
2. Underlying operating profit is continuing operations' operating profit before acquisition costs, amortisation of intangible assets, share-based payment costs and restructuring costs
"We aim to have a market position as a full-service supplier of fluid power products and services. The ongoing expansion of ranges will see the Group capture a greater percentage of current customer spend and also open up new business opportunities in the wider market".
Sean Fennon, CEO
-- Revenue growth of 46% on previous year
-- Underlying operating profit growth of 21.9% on
previous year, and in line with market expectations
-- Group operating profit growth of 7.7% on previous
year
-- Divisional gross margins maintained despite negative
currency pressures
-- Six acquisitions in 2017 in line with strategy,
followed by Balu Limited in early 2018.
-- Redevelopment of office space and creation of a
centralised logistics centre in England's North West.
-- New Onsite Services division announced
-- Pan European expansion commenced with acquisition
of Hydroflex
-- New Regional Managing Directors appointed for UK
and Ireland, and Benelux.
Presentation of results: a presentation of results will be held today 10.30am-11.30am at the offices of our joint broker, finnCap, 60 New Broad Street, London EC2M 1JJ. A dial in facility is also available on request; please call Fiona Tooley on +44 (0) 7785 703523 or email fiona@tooleystreet.com.
Note:
The Group has today also released its Trading Update for the period ended 31 March 2018 http://www.rns-pdf.londonstockexchange.com/rns/0975L_1-2018-4-16.pdf
Enquiries:
Flowtech Fluidpower plc
Sean Fennon, Chief Executive
Bryce Brooks, Chief Financial Officer
Tel: +44 (0) 1695 52796
Email: info@flowtechfluidpower.com
Zeus Capital Limited (Nominated Adviser and Joint Broker)
Andrew Jones, Alistair Donnelly (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, Emily Morris (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
EDITORS NOTES
--------------------------------------------------------------------------------------
About Flowtech Fluidpower plc
--------------------------------------------------------------------------------------
Founded as Flowtech in 1983, the Flowtech Group is
the UK's leading specialist supplier of technical fluid
power products. The business joined AiM in 2014. Today,
the Group has four distinct divisions:
Division: What we do: Locations:
--------------- ------------------------------ -------------------------------------
Flowtechnology Focus on supplying Flowtechnology Benelux
distributors and resellers (Deventer)
of industrial MRO Flowtechnology China (Guangzhou)
products, primarily Flowtechnology UK (Skelmersdale)
serving urgent orders Indequip (Skelmersdale)
rather than bulk offerings. Beaumanor (Leicester)
It offers an unrivalled
range of OEM and Exclusive
Brand products to
over 3,400 distributors
and resellers. The
division has created
a definitive co-ordinated
approach to three
major catalogue brands
in the UK market place,
providing the definitive
source for fluid power
products, containing
over 100,000 individual
product lines and
are distributed to
more than 80,000 industrial
MRO end users.
--------------- ------------------------------ -------------------------------------
Power Motion Specialise in the Primary Fluid Power (Knowsley)
Control design, assembly and Nelson Fluid Power (Dublin,
(PMC) supply of engineering Dungannon, Lisburn,)
components and hydraulic TripleSix (West Yorkshire)
systems and is further Albroco (Knowsley)
enhanced by a service Hydraulics & Transmissions
and repair function. (Ludlow)
HiPower Hydraulics (Belfast,
Cork, Dublin, Manchester)
Hydroflex (Brussels, OudBeijerland,
Rotterdam)
Hydraulic Equipment Supermarkets
(Birmingham, Durham, Gloucester,
Leeds)
Branch Hydraulics (Gloucester)
Derek Lane (Newton Abbot)
--------------- ------------------------------ -------------------------------------
Process Focus on the supply Hydravalve (Willenhall)
of industrial components Orange County (Spennymoor)
and solutions to the
process sectors.
--------------- ------------------------------ -------------------------------------
Onsite In 2018, the Group HES Onsite (Birmingham,
Services will extend its service Durham, Leeds, Gloucester)
offering to include
Onsite Technical Maintenance
through highly skilled
engineers.
--------------- ------------------------------ -------------------------------------
All four of the Group's divisions have overlapping
product sets, allowing procurement synergies to be
maximised.
The above divisions are supported by a centralised
back office team at the Skelmersdale operation, shared
logistics centres in Skelmersdale and Leicester and,
a procurement and quality control team in Shanghai.
In total, the business now employs over 550 people.
For more information please visit, www.flowtechfluidpower.com
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December 2017
INTRODUCTION BY THE CHAIRMAN, MALCOLM DIAMOND MBE
When we floated our company in May 2014, it was with a commitment from the Board to instigate a medium to long term consolidation of the highly fragmented hydraulic and pneumatic industry, firstly, in the UK, and then to extend this strategy into Europe over the next foreseeable few years.
Our 2017 result reaffirms the Board's confidence in our strategy as we continue to expand and develop our capabilities both within the UK and internationally.
Despite a challenging outlook for the UK economy, in 2017 the fluid power market experienced a significant turnaround following two years of soft trading; presenting a period of opportunity, strengthened by European demand.
The Group achieved 46% growth in total revenue to GBP78.3m, 8% of which came from organic growth, 38% from acquisitions. Profit before tax for 2017 totalled GBP6m versus GBP5.5m in 2016. Earnings per share reached 9.69p in 2017 versus 9.96p in 2016.
This year there was a major refurbishment and redesign at the Skelmersdale site expanding capacity and streamlining the logistics operation will provide considerable scope for the profitable integration of future acquisitions. Moreover, it created modern office and meeting facilities for Flowtechnology UK, Indequip and Group employees. Pleasingly, this transition was completed with no disruption to customer service for the businesses which utilise this facility.
The benefits of our acquisition strategy are apparent in the financial performance of the Group, with six new companies acquired throughout the year, supported by the successful capital raising in March 2017. This acquisition activity has strengthened our position with important pan-European and global branded suppliers, enhanced our technical strength, and reinforced our position in our current core geographies of UK, Ireland, and Benelux. In addition to expanding our Process division, we have significantly expanded our Power Motion Control operations, offering additional design, build and component supply into new market sectors including; mobile, rail, and aerospace. I am confident these acquisitions will provide a solid foundation for future profitable growth.
From the outset, the Flowtech Fluidpower strategy has remained the same; to build a fluid power Group to serve all customer needs within the fluid power market. The addition of a fourth, 'Onsite Services' division will in time enable the Group to provide total fluid power solutions in technical component supply, niche product supply and installation, bespoke designed solutions and finally planned onsite maintenance and repair.
By focusing on selected customers, utilising the Group status and investing in machinery many of our businesses have been successful in winning new and ongoing sizeable supply contracts with billion-pound companies. Two such investments include the automatic hose-cutting machine at Nelson Hydraulics and the Parker pipework machinery at Group HES.
To summarise, it is clear that the Group is now entering an exciting stage of development as its ambitions for growth increasingly improve its market share within the UK and the Republic of Ireland, whilst being vigilant for opportunities to spread further into Europe, having managed the Benelux business into a healthy level of consistent performance.
Brexit consequences remain a relative unknown at this time, whilst forex movements and UK import prices have been well managed to date by our highly experienced and focused commercial management teams.
I continue to be impressed by the commitment and energy of not only our senior management, but also of our growing workforce and our business team leaders, and their ability to adapt to new and dynamic market opportunities that are arising constantly within our industry.
Finally, it was very pleasing to be given such valuable and widespread support for both the Board and the Executive Management team during the recent successful process to raise GBP11 million (before costs) in new capital for the Group in March and April of this current 2018 period. This has enabled us to complete the acquisition of our largest UK catalogue-based competitor Beaumanor, along with its sister business Derek Lane & Co.
The management will now focus its attention throughout the remainder of 2018 in leveraging the operational benefits that will accrue from not only this acquisition, but also the additions that were brought to the Group throughout this 2017 reporting period.
DIVID
Subject to Shareholder approval at the Annual General Meeting which is to be held on 6 June 2018, the Directors are proposing a final dividend of 3.85p per share. This, together with the interim dividend of 1.93p (paid on 24 October 2017), brings the total for the year to 5.78p which again matches the commitment made at the date of the IPO of 5% growth. The outlook for further enhancement to dividend flow remains good and the Board would like to reiterate its view that the retention of a strong dividend policy is a foundation for the investment case in the Group.
SUMMARY OF 2017 RESULTS BY SEAN FENNON, CHIEF EXECUTIVE OFFICER & BRYCE BROOKS, CHIEF FINANCIAL OFFICER
Operational Review
2017 2016 GROWTH
------------------------------------ ---------- ---------- ---------
* GROUP REVENUE* GBP78.3m GBP53.8m +45.5%
------------------------------------ ---------- ---------- ---------
GBP26.6m GBP19.1m +39.3%
* GROSS PROFIT* 33.9% 35.5% -1.6pps
* GROSS PROFIT %
------------------------------------ ---------- ---------- ---------
* GROUP OPERATING PROFIT* GBP6.61m GBP6.14m +7.7%
------------------------------------ ---------- ---------- ---------
* UNDERLYING OPERATING PROFIT GBP9.08m GBP7.45m +21.9%
------------------------------------ ---------- ---------- ---------
* All results relate to continuing operations
Underlying operating result is continuing operations' operating profit before acquisition costs, amortisation of intangible assets, share-based payment costs and restructuring costs.
Reconciliation of underlying operating profit to operating profit
2017 2016
GBP'000 GBP'000
--------------------------- --------- ---------
Underlying operating
profit 9,081 7,454
--------------------------- --------- ---------
Less separately disclosed
items (note 3) (2,467) (1,317)
--------------------------- --------- ---------
Operating profit 6,614 6,137
--------------------------- --------- ---------
We are again delighted to report a period of significant progress in the scope of our activities as a Group, with an uplift in revenue of 46% (2016: 20%), of which 38% is attributable to acquisition activity during the course of the year, with the balance of 8% derived from organic growth in our established operations. Below this we have seen a 7.7% (2016: 11.8%) increase in operating profit, and a 21.9% improvement in underlying operating profit (2016:8.5%). The well supported placing of shares in March 2017, which raised GBP9.6m, has been fully invested in businesses complementary to the Group's core strategy.
The material currency movements in 2016 which rapidly increased input prices across our product portfolio when sourced from Europe or the Far East, have predominantly been moved through our sales pricing structures, albeit with some initial resistance with OEM's. The UK fluid power sector has also experienced relatively buoyant conditions during 2017, which has continued into the early part of 2018, and it is particularly pleasing that the euro-based acquisitions made in the year, being Hi-Power and Hydroflex, have also made immediate contributions.
Gross profit margins
Gross profit % remains one of our most important KPIs, and with the currency effects mentioned above, downward pressures were seen as a key risk to our progress as we entered 2017.
As a reminder, the Group is largely split into two separate and distinct pricing models:
-- "Distribution" businesses - Flowtechnology and Process - who operate pricing policies based around smaller parcel size, a broader mix of Global Brand and Own-Brand products, and a "list less discount" model.
-- PMC businesses who work in both pure component sales, that overlap with our distribution model, but also in markets where the precedent is for a more fixed approach to pricing to OEMs, and therefore have more challenging pricing issues to address.
It is therefore pleasing to report that in 2017 we were able to broadly maintain margins in each of our divisions as shown below, and of particular note in our core Flowtechnology division, which after careful selling price initiatives in the early part of the year, had a final outturn only 0.1% down on prior year. Overall Group margins were 1.6% below previous year, which was attributable to mix effects from acquisitions in the lower gross margin (but higher average order size) Power Motion Control division.
Gross profit 2017 2016 % ---------------- -------------------- -------------------- Flowtechnology 37.1 37.2 ---------------- -------------------- -------------------- Power Motion Control 29.1 29.2 ---------------- -------------------- -------------------- Process 41.8 42.6 ---------------- -------------------- -------------------- Group 33.9 35.5 ---------------- -------------------- --------------------
Acquisitions
Following the successful March fundraise, 2017 was our most active period since coming to market in 2014, and if we include the recent "Beaumanor" transaction (note 11), we completed seven deals in just over twelve months. Throughout the year we have worked on our "four layered" focus on synergy gain:
1 Back Office - typically accounting, insurance, banking, HR and IT. 2 Commercial - cross selling allowing our complementary skill sets to be exploited.
3 Procurement - a comprehensive and systematic approach to supplier pricing optimisation.
4 Operational - with over 400,000 square feet of operational facilities across its 26 sites, the Group now has significant resources when compared to just two sites in 2014.
Whilst back office savings generally start to feed through within one year, we believe that retention of brand identity, reputation and customer relationships remains critical, and especially so during the initial period when often long-standing customer and supplier relationships are most tested. As such our pursuit of other gains, and in particular those achievable from operational activities, is always tempered by a low risk approach to change, and we believe that a proper perspective will be available after at least a three-year period.
UNDERLYING OPERATING PROFIT
The underlying operating profit* can be summarised as follows:
Continuing operations Underlying operating 2017 2016 Change Change profit* GBP000 GBP000 GBP000 % ------------------------------ --------- ------------ --------- -------- Flowtechnology 7,524 7,281** 243 3 ------------------------------ --------- ------------ --------- -------- Power Motion Control 2,788 1,823 965 53 ------------------------------ --------- ------------ --------- -------- Process 1,105 401 704 176 ------------------------------ --------- ------------ --------- -------- Central costs (2,335) (2,051) ** (284) 14 ------------------------------ --------- ------------ --------- -------- Underlying operating profit 9,081 7,454 1,627 22 ------------------------------ --------- ------------ --------- --------
* Underlying operating profit is continuing operations' operating profit before acquisition costs, amortisation of intangible assets, share-based payment costs and restructuring costs.
** Includes GBP346,000 of cost transferred from Central Costs to Flowtechnology following a department reorganisation effected on 1 January 2017.
Flowtechnology
% 2017 2016 ------------ ----- ----- Turnover +6% +6% Underlying operating profit +3% +1% ------------- ----- -----
Power Motion Control (PMC)
% 2017 2016 ------------ ------ ----- Turnover +120% +36% Underlying operating profit +53% +48% ------------- ------ -----
Process
% 2017 2016 ----------- ------ ----- Turnover +120% - Underlying +175% - operating profit ----------- ------ -----
Central Costs
Now in an established format comprising Executive Management, Finance and IT departments, Divisional Sales and the cost of running the PLC, we continue to manage cost carefully, with the overall increase of 7% (2016: 21%). Planned increases for 2018 and beyond remain limited and are in support of the cost-out synergies being targeted at divisional level.
AQuisition and restructuring costs
The total cost for the year represents 7.0% (2016: 9.5%) of the total consideration paid for acquisitions. The Group uses a mixture of professional advisers for due diligence services with a view to managing costs. Any initiatives to transfer to "internal" resources, with a view to reducing transaction costs, will be managed carefully.
Restructuring costs incurred during the year of GBP117,000 (2016: GBP84,000) primarily relate to the reorganisation of administrative functions following acquisition, as well as further streamlining of the Group following advice from our legal and tax advisers.
Taxation
The tax charge for the year was GBP1.21 million (2016: GBP1.15m), with an effective tax rate of 17% (2016: 20.3%) and a blended tax rate based on the geographical regimes of 18.8% (2016: 19.5%).
Statement of financial position and Managing Working Capital
The net debt position at the year-end was GBP14.9 million (2016: GBP13.1m). The principal cash flow movements during the year were; cashflow from operating activities of GBP6.6million, cash spent on acquisitions of GBP14.3million, net proceeds of the March 2017 placing of GBP9.5million and dividends of GBP2.9million."
On top of strong operating profit growth, cash collections have remained consistent, with the total charge for bad and doubtful debt related issues being GBP38,000 (2016: GBP67,000), representing only 0.1% of turnover. In addition, net stock investment has been more than covered by trade supplier support, with a result that over the year the movement in total working capital has resulted in a net cash inflow of GBP0.1m (2016 an outflow of GBP1.8m).
The Group has undertaken its largest year of capital expenditure in its history with the central piece being redevelopment of the 25-year old facility at Skelmersdale. Expenditure to cover offices, car parking, racking, plant and IT development totalled GBP0.8m and has given the site a new long-term identity. Outside of this, IT systems development in order to ensure both resilience and efficiency remains a key focus, and again when coupled with our objective of achieving medium term synergy benefit from our acquisition programme.
On 1 March 2018, the Group entered into a restated facilities agreement with Barclays Bank plc to replace our existing facilities with a GBP16 million committed revolving credit facility and GBP4 million loan with a single "bullet" repayment at the end of a three- year term. Attached rates and terms were broadly consistent with those previously enjoyed.
People
As a direct result of our acquisition activity during the course of the year, the depth and quality of the management teams across the Group continues to improve. Managing Directors appointed during the year include Alan Willis at HTL, Maurice Kearney at Hi-Power, Spencer Rogers at Orange County, Chris Way at HES and Dave Maher at Branch Hydraulics. In addition, in early 2018, following a review of our overall medium-term objectives, we introduced a regional Managing Director structure with the following appointments:
-- Nick Fossey in the UK & Ireland with a focus on synergy extraction, cash generation and continued development of commercial and cross selling opportunities; and
-- Mark Richardson in the Benelux with a focus on operational efficiencies between Hydroflex and Flowtechnology Benelux, and providing a platform for future growth by organic and acquisitive means in the region.
This change will allow Sean Fennon to have specific responsibility for the Acquisition integration plan, and in particular Beaumanor.
We are always acutely aware that our progress is achieved with the continued commitment and effort of all our employees - in both "new" and "old" businesses - and with enhanced profit sharing arrangements now available across the Group we are confident of our ability to attract and retain the best staff the industry can offer.
Outlook
The growth made by acquisitive means in 2017 has resulted in time being invested in the careful integration of the businesses now covered by our operational reach. This focus will continue through 2018, as we seek to achieve synergistic benefit and capitalise on the entrepreneurial and technical skills of the new operations.
The Board does not intend to implement further significant acquisition activity in 2018, and our focus will therefore be on extracting valuable efficiencies from the businesses to date, and in particular:
-- Expanding inter-company procurement and stock holding benefits by using logistics centres in Skelmersdale (FTUK) and Leicester (Beaumanor);
-- A wider operational review to identify efficiencies that could be achieved through geographic consolidation of existing assets.
-- Upgrading information systems, with Sage X3 financials to be implemented Group-wide by the end of 2018 giving a single reporting system for the Group with multi lingual and multi-currency capabilities;
That said, the heightened profile that Flowtech Fluidpower has established has enabled opportunities for further expansion to continue to be presented. It therefore remains a key part of our strategy to ensure we can exploit these openings, whilst retaining a stable financial and operational structure to ensure that the progress made to date is only enhanced.
Our objective remains growth through both acquisitive and organic means over the short, medium and long term. Our targeted approach ensures we can achieve both a concentration and enhancement to our product set - which lies at the centre of our business model - entirely focused on fluid power.
We have entered 2018 with confidence. Following our recent placing of shares raising a further GBP10.5m (after fees) the acquisition of Beaumanor adds a further significant element to our customer and supplier base.
Sean Fennon CEO
Bryce Brooks CFO
17 April 2018
"Across our four divisions we employ over 550 skilled people throughout the UK, ROI and Benelux. Our ongoing strategy guides how we work together as a Group of complementary businesses to achieve one shared purpose; to be the trusted provider of products, solutions and services to the fluid power market"
Bryce Brooks, CFO
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December 2017
2017 2016
Consolidated income statement Note GBP000 GBP000
--------------------------------------- ------ -------- --------
Continuing operations
Revenue 78,287 53,780
Cost of sales (51,722) (34,714)
-------- --------
Gross profit 26,565 19,066
Distribution expenses (3,175) (2,475)
--------------------------------------- ------ -------- --------
Administrative expenses before
separately disclosed items: (14,309) (9,137)
- Acquisition costs (1,081) (419)
- Amortisation of acquired intangibles (768) (569)
- Share based payment costs (272) (353)
- Restructuring costs (117) (84)
- Change in amounts accrued for
contingent consideration (229) 108
--------------------------------------- ------ -------- --------
Total administrative expenses (16,776) (10,454)
-------- --------
Operating profit 6,614 6,137
-------- --------
Financial income 4 6 1
Financial expenses 4 (581) (611)
--------
Net financing costs (575) (610)
-------- --------
Profit from continuing operations
before tax 6,039 5,527
-------- --------
Taxation 5 (1,207) (1,146)
-------- --------
Profit from continuing operations 4,832 4,381
-------- --------
Loss from discontinued operations,
net of tax - (91)
-------- --------
Profit for the year attributable
to the owners of the parent 4,832 4,290
-------- --------
Earnings per share
Basic earnings per share
Continuing operations 79.69p 10.17p
Discontinued operations - (0.21p)
----- -------
Basic earnings per share 9.69p 9.96p
----- -------
Diluted earnings per share
Continuing operations 79.58p 10.08p
Discontinued operations - (0.21p)
----- -------
Diluted earnings per share 9.58p 9.87p
----- -------
Consolidated statement of comprehensive 2017 2016
income GBP000 GBP000
-------------------------------------------- ------- -------
Profit for the year 4,832 4,290
Other comprehensive income - items that
will be reclassified subsequently to
profit or loss
Deferred tax movement on share-based
payment reserve (28) -
Exchange differences on translating foreign
operations 279 350
------- -------
Total comprehensive income for the year
attributable to the owners of the parent 5,083 4,640
======= =======
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December 2017
Consolidated Statement of financial Note
position 2017 2016
-------------------------------------- ---- ------- --------
Assets GBP000 GBP000
Non-current assets
Goodwill 57,938 47,927
Other intangible assets 7,430 4,780
Property, plant and equipment 6,070 3,899
------- --------
Total non-current assets 71,438 56,606
------- --------
Current assets
Inventories 24,333 16,592
Trade and other receivables 20,866 13,012
Prepayments 800 304
Cash and cash equivalents 4,588 3,824
------- --------
Total current assets 50,588 33,732
------- --------
Liabilities
Current liabilities
Interest-bearing loans and borrowings 15,451 12,888
Trade and other payables 18,983 8,625
Deferred and contingent consideration 2,865 1,420
Tax payable 1,148 975
Other financial liabilities 11 57
------- --------
Total current liabilities 38,458 23,965
------- --------
Net current assets 12,130 9,767
------- --------
Non-current liabilities
Interest-bearing loans and borrowings 4,097 4,081
Deferred and contingent consideration 2,706 212
Provisions 341 212
Deferred tax liabilities 1,560 1,019
------- --------
Total non-current liabilities 8,704 5,524
------- --------
Net assets 74,864 60,849
======= ========
Equity directly attributable to
owners of the parent
Share capital 9 26,409 21,539
Share premium 52,370 46,880
Other reserves 187 -
Share based payment reserve 589 733
Shares owned by the Employee Benefit
Trust (40) (338)
Merger reserve 293 293
Merger relief reserve 3,194 2,086
Currency translation reserve 536 257
(8,674) (10,601)
Retained losses ))
------- --------
Total equity 74,864 60,849
======= ========
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December 2017
Consolidated statement of changes in equity
----------------------------------------------------------------------------------------------------------------------
Shares
Other Share owned
reserve based by Merger Currency
Share Share GBP000 payment the Merger relief translation Retained Total
capital premium reserve EBT reserve reserve reserve losses equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- -------- -------- --------- -------- -------- -------- -------- ------------ -------- -------
Balance at
1 January
2016 21,539 46,880 - 380 (338) 293 2,086 (93) (12,604) 58,143
Profit for
the year - - - - - - - - 4,290 4,290
Other
comprehensive
income - - - - - - - 350 - 350
-------------- -------- -------- --------- -------- -------- -------- -------- ------------ -------- -------
Total
comprehensive
income for
the year - - - - - - - 350 4,290 4,640
-------------- -------- -------- --------- -------- -------- -------- -------- ------------ -------- -------
Transactions
with owners
Share-based
payment
charge - - - 353 - - - - - 353
Equity
dividends
paid - - - - - - - - (2,287) (2,287)
-------------- -------- -------- --------- -------- -------- -------- -------- ------------ -------- -------
Total
transactions
with owners - - - 353 - - - - (2,287) (1,934)
-------------- -------- -------- --------- -------- -------- -------- -------- ------------ -------- -------
Balance at
1 January
2017 21,539 46,880 - 733 (338) 293 2,086 257 (10,601) 60,849
Profit for
the year - - - - - - - - 4,832 4,832 Other comprehensive loss - - - - - - - 279 (28) 251 -------------- -------- -------- --------- -------- -------- -------- -------- ------------ -------- ------- Total comprehensive income for the year - - - - - - - 279 4,804 5,083 -------------- -------- -------- --------- -------- -------- -------- -------- ------------ -------- ------- Transactions with owners Issue of share capital 4,870 5,490 - - - - 1,108 - - 11,468 Shares options issued as consideration - - 187 - - - - - - 187 Shares purchased by the EBT - - - - (246) - - - - (246) Share-based payment charge - - - 272 - - - - - 272 Share options settled - - - (416) 544 - - - - 128 Equity dividends paid - - - - - - - - (2,877) (2,877) -------------- -------- -------- --------- -------- -------- -------- -------- ------------ -------- ------- Total transactions with owners 4,870 5,490 187 (144) 298 - 1,108 - (2,877) 8,932 -------------- -------- -------- --------- -------- -------- -------- -------- ------------ -------- ------- Balance at 31 December 2017 26,409 52,370 187 589 (40) 293 3,194 536 (8,674) 74,864 -------------- -------- -------- --------- -------- -------- -------- -------- ------------ -------- -------
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December 2017
Consolidated Statement of cash flows
-------------------------------------------------------------------
2017 2016
Note GBP000 GBP000
Cash flow from operating activities
Net cash from operating activities 10 6,600 4,166
-------- -------
Cash flow from investing activities
Acquisition of businesses, net
of cash acquired (11,798) (3,677)
Acquisition of property, plant
and equipment (1,802) (858)
Proceeds from sale of property,
plant and equipment 22 52
Payment of deferred and contingent
consideration (1,649) (1,031)
-------- -------
Net cash used in investing activities (15,227) (5,514)
-------- -------
Cash flows from financing activities
Net proceeds from issue of share
capital 9,531 -
Repayment of long term borrowings (857) (857)
Net change in short term borrowings 3,000 7,000
Repayment of finance lease liabilities (58) (37)
Interest received 6 1
Interest paid (476) (302)
Repayment of loan by EBT 722 -
Dividends paid (2,877) (2,287)
-------- -------
Net cash generated from/ (used
in) financing activities 8,991 3,518
-------- -------
Net change in cash and cash equivalents 364 2,170
Cash and cash equivalents at start
of year 3,824 1,725
Exchange differences on cash and
cash equivalents 11 (71)
-------- -------
Cash and cash equivalents at end
of year 4,199 3,824
-------- -------
Cash and cash equivalents 4,588 3,824
Bank overdraft (389) -
-------- -------
Cash and cash equivalents at end
of year 4,199 3,824
-------- -------
Reconciliation of liabilities arising from financing activities
The changes in the Group's liabilities arising from financing activities can be classified as follows:
Long Short
term term Lease
borrowings borrowings liabilities Total
GBP000 GBP000 GBP000 GBP000
------------------------- ------------ ------------ ------------- --------
At 1 January 2017 4,000 12,857 112 16,969
Cash flows:
* Repayment - (857) (59) (915)
* Proceeds - 3,000 - 3,000
Non-cash:
* Acquisition - - 106 107
------------------------- ------------ ------------ ------------- --------
At 31 December 2017 4,000 15,000 159 19,161
------------------------- ------------ ------------ ------------- --------
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December 2017
NOTES TO THE PRELIMINARY STATEMENT
1. ACCOUNTING POLICIES --- --------------------
BASIS OF PREPARATION
The final statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union and IFRIC interpretations issued by the International Accounting Standards Board and the Companies Act 2006.
The Group has applied all accounting standards and interpretations issued relevant to its operations for the year ended 31 December 2017. The consolidated financial statements have been prepared on a going concern basis.
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 and 435 of the Companies Act 2006. The financial information for the year ended 31 December 2017 has been extracted from the Group's financial statements upon which the auditor's opinion is unmodified and does not include any statement under section 498(2) or 498(3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2017 will be delivered to the Registrar of Companies following the Annual General Meeting.
The consolidated financial information has been prepared based on accounting policies set out in the Group's financial statements which are unchanged from 2016.
DISCONTINUED OPERATIONS
An operation is classed as discontinued when management have made the decision to either sell the operation or relocate the operation. Discontinued operation costs relate to surplus property costs.
GOING CONCERN
These financial statements have been prepared on a going concern basis. The Directors have prepared cash flow projections and are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group's forecasts and projections, which take into account reasonably possible changes in trading performance, show that the Group will be able to operate within the level of its current facilities. Included in the forecasts and projections are cash inflows from the placing of new ordinary shares on 15 March 2018 and 4 April 2018, see note 11 for further details. Current banking facilities were renegotiated in March 2018 and are due for renewal in March 2021.
Accordingly, the Directors continue to adopt the going concern basis in preparing these financial statements.
2. SEGMENTAL REPORTING -----------------------
Segment information for the reporting periods is as follows:
For the year ended 31 December 2017
--------------------------------------------------------------------------------------------------------------
Power Total
Motion Inter-segmental Central continuing
Flowtech-nology Control Process transactions Costs operations
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- --------------- -------- ------- ------------------------ ------- -----------
Income statement
- continuing operations:
Revenue from external
customers 37,239 34,806 6,242 - - 78,287
Inter segment revenue 1,746 340 105 (2,191) - -
--------------- -------- ------- ------------------------ ------- -----------
Total revenue 38,985 35,146 6,347 (2,191) - 78,287
--------------- -------- ------- ------------------------ ------- -----------
Underlying operating
result 7,524 2,788 1,105 - (2,336) 9,081
Net financing costs (13) (15) (19) - (528) (575)
--------------- -------- ------- ------------------------ ------- -----------
Underlying segment
result 7,511 2,773 1,086 - (2,864) 8,506
Separately disclosed
items (see note 3) (103) (1,018) (200) - (1,146) (2,467)
--------------- -------- ------- ------------------------ ------- -----------
Profit/(loss) before
tax 7,408 1,755 886 - (4,010) 6,039
--------------- -------- ------- ------------------------ ------- -----------
Specific disclosure
items
Depreciation 446 179 24 - - 650
Amortisation 19 609 140 - - 768
--------------- -------- ------- ------------------------ ------- -----------
Reconciliation of
underlying operating
result to operating
profit:
Underlying operating
result 7,524 2,788 1,105 - (2,336) 9 081
Separately disclosed
items (see note 3) (103) (1,018) (200) - (1,146) (2,467)
--------------- -------- ------- ------------------------ ------- -----------
Operating profit/(loss) 7,421 1,770 905 - (3,482) 6,614
--------------- -------- ------- ------------------------ ------- -----------
For the year ended 31 December 2016
-----------------------------------------------------------------------------------------------------
Power Total
Motion Inter-segmental Central continuing
Flowtech-nology Control Process transactions Costs operations
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- --------------- -------- ------- --------------- ------- -----------
Income statement
- continuing operations:
Revenue from external
customers 35,113 15,830 2,837 - - 53,780
Inter segment revenue 1,645 585 199 (2,429) - -
--------------- -------- ------- --------------- ------- -----------
Total revenue 36,758 16,415 3,036 (2,429) - 53,780
--------------- -------- ------- --------------- ------- -----------
Underlying operating
result 7,626 1,823 402 - (2,397) 7,454
Net financing costs (1) (65) (39) - (505) (610)
--------------- -------- ------- --------------- ------- -----------
Underlying segment
result 7,625 1,758 363 - (2,902) 6,844
Separately disclosed
items (see note 3) (180) 40 (58) - (1,119) (1,317)
--------------- -------- ------- --------------- ------- -----------
Profit/(loss) before
tax 7,445 1,798 305 - (4,021) 5,527
--------------- -------- ------- --------------- ------- -----------
Specific disclosure
items
Depreciation 389 112 24 - - 526
Amortisation 16 488 65 - - 569
--------------- -------- ------- --------------- ------- -----------
Reconciliation of
underlying operating
result to operating
profit:
-------------------------- --------------- -------- ------- --------------- ------- -----------
Underlying operating
result 7,626 1,823 401 - (2,397) 7,454
Separately disclosed
items (see note 3) (180) 40 (57) - (1,119) (1,317)
--------------- -------- ------- --------------- ------- -----------
Operating profit/(loss) 7,446 1,863 344 - (3,516) 6,137
--------------- -------- ------- --------------- ------- -----------
The Group's revenues from external customers for each sales category is as follows:
2017 2016
------ ------
GBP000 GBP000
Sale of goods 76,688 53,780
Supply, installation
and commissioning 1,599 -
Total 78,287 53,780
------ ------
The Group's revenues from external customers and its non-current assets (other than financial instruments and deferred tax assets) are divided into the following geographic areas:
31 December 2017 31 December 2016
Revenue Non-current Revenue Non-current
assets assets
------- ----------- ------- -----------
GBP000 GBP000 GBP000 GBP000
United Kingdom 64,504 65,754 44,133 55,118
Europe 12,299 5,684 8,806 1,488
Rest of world 1,484 - 841 -
------- ----------- ------- -----------
Total 78,287 71,438 53,780 56,606
------- ----------- ------- -----------
No customers of the Group account for 10% or more of the Group's revenue for either of the years ended 31 December 2017 or 2016. Non-current assets are allocated based on their physical location. The above table does not include discontinued operations for which revenue and assets can be attributed to the UK.
Central costs relate to the service centre team and central activities, the Executive Management team, plc costs and finance expenses associated with Group loans and separately disclosed items (note 3).
3. SEPARATELY DISCLOSED ITEMS
--------------------------------------------------------------------
2017 2016
GBP000 GBP000
------------------------------------------------- ------- -------
Separately disclosed items within administration
expenses:
- Acquisition costs 1,081 419
- Amortisation of acquired intangibles 768 569
- Share based payment costs 272 353
- Restructuring 117 84
- Change in amounts accrued for contingent
consideration 229 (108)
------- -------
Total separately disclosed items 2,467 1,317
------- -------
* Acquisition costs relate to stamp duty, due diligence,
legal fees, finance fees and other professional costs
incurred in the acquisition of businesses
* Share-based payment costs relate to charges made in
accordance with IFRS 2 "Share-based payment"
following the issue of share options to employees
* Restructuring costs related to restructuring
activities of an operational nature following
acquisition of business units and other restructuring
activities in established businesses. Costs include
employee redundancies and IT integration
4. FINANCIAL INCOME AND EXPENSE
------------------------------------- ------- -------
Finance income for the year consists
of the following:
2017 2016
GBP000 GBP000
------------------------------------- ------- -------
Finance income arising from:
Interest income from cash and cash
equivalents 6 1
Total finance income 6 1
------- -------
Finance expenses for the year consist of the following:
2017 2016
GBP000 GBP000
-------------------------------------- ------- -------
Finance expense arising from:
Interest on invoice discounting
and stock loan facilities 8 3
Interest on revolving credit facility 262 241
Finance lease interest 10 3
Bank loans 88 116
Other credit related interest 12 1
------- -------
Total bank and other credit interest 380 364
Imputed interest on deferred and
contingent consideration 190 174
Fair value losses on forward exchange
contracts held for trading 11 73
------- -------
Sub total 201 247
------- -------
Total finance expense 581 611
------- -------
5. TAXATION
------------------------------------------ ------ ------
Recognised in the income statement 2017 2016
Continuing operations: GBP000 GBP000
Current tax expense
Current year charge 1,258 1,285
Overseas tax 167 20
Adjustment in respect of prior periods (89) 12
------ ------
Current tax expense 1,336 1,317
------ ------
Deferred tax
Origination and reversal of temporary
differences (111) (118)
Adjustment in respect of prior periods - (7)
Change in tax rate (18) (46)
------ ------
Deferred tax credit (129) (171)
------ ------
Total tax expense - continuing operations 1,207 1,146
------ ------
No income tax was recognised in other comprehensive income or directly in equity for either of the years ended 31 December 2017 or 2016.
Reconciliation of effective tax rate
2017 2016
GBP000 GBP000
Profit for the year 4,832 4,290
Total tax expense 1,207 1,124
------ ------
Profit excluding taxation 6,039 5,414
Tax using the UK corporation tax rate
of 19.25% (2016: 20.25%) 1,162 1,083
Deferred tax movements not recognised 38 33
Effect of share option exercises (101) -
Effect of tax rates in foreign jurisdictions 29 1
Effect of foreign branch exemption (12) -
Impact of change in tax rate on deferred
tax balances (8) (46)
Income not chargeable (96) (22)
Amounts not deductible 284 70
Adjustment in respect of prior periods (89) 5
------ ------
Total tax expense in the income statement
- continuing and discontinued 1,207 1,124
------ ------
6. DIVIDS 2017 2016
---------------------------------------- ------ ------
GBP000 GBP000
Final dividend of 3.67p (2016: 3.50p)
per share 1,878 1,499
Interim dividend of 1.93p (2016: 1.84p)
per share 999 788
------ ------
Total dividends 2,877 2,287
------ ------
The Directors are proposing a final dividend in respect of the financial year ended 31 December 2017 of 3.85p (2016: 3.67p) per share which will absorb an estimated GBP2.3 million of Shareholders' funds. This has not been accrued as it had not been approved at the year end. Subject to approval, it will be paid on 13 July 2018 to Shareholders who are on the register of members on 8 June 2018.
7. 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 during the year.
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 year.
Year ended 31 December Year ended 31 December
2017 2016
Weighted Weighted
average average
number Earnings number Earnings
Earnings of shares per share Earnings of shares per share
GBP000 000s Pence GBP000 000s Pence
Basic earnings per
share
Continuing operations 4,831 49,835 9.69 4,381 43,078 10.17
Discontinued operations - 49,835 - (91) 43,078 (0.21)
------------------------ -------- ---------- ---------- -------- ---------- ----------
Basic earnings per
share 4,831 49,835 9.69 4,290 43,078 9.96
------------------------ -------- ---------- ---------- -------- ---------- ----------
Diluted earnings
per share
Continuing operations 4,831 50,409 9.58 4,381 43,456 10.08
Discontinued operations - 50,409 - (91) 43,456 (0.21)
------------------------ ----- ------ ---- ----- ------ ------
Diluted earnings
per share 4,831 50,409 9.58 4,290 43,456 9.87
------------------------ ----- ------ ---- ----- ------ ------
2017 2016
GBP000 GBP000
Weighted average number of ordinary shares
for basic and diluted earnings per share 49,835 43,078
Impact of share options 574 378
------- -------
Weighted average number of ordinary shares
for diluted earnings per share 50,409 43,456
------- -------
8. AcquisitionS
----------------
8.1 Acquisition of Hydraulics and Transmissions Limited
On 20 January 2017, the Group acquired 100% of the share capital of Hydraulics and Transmissions Limited ("HTL"), a UK-based company. HTL provides fluid power solutions predominantly to the mobile market segment and supplies some of the market leaders such as JCB, McConnell and Alamo. The acquisition strengthened our position with key global suppliers including Eaton, Walvoil and Casappa, and complemented our previous acquisitions of Primary Fluid Power and Nelson Hydraulics.
Details of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration, goodwill and intangible assets are as follows:
Intangible
asset
Fair value recognised Provisional
Book value adjustment on acquisition fair value
GBP000 GBP000 GBP000 GBP000
------------------------------- ----------- ------------ ---------------- ------------
Property, plant and equipment 31 - - 31
Intangible assets - - 449 449
Inventories 1,226 (81) - 1,145
Trade and other receivables 1,018 (22) - 996
Cash and cash equivalents (1,010) - - (1,010)
Trade and other payables (1,456) - - (1,456)
Current tax balances (45) - - (45)
Deferred tax liability (5) - (81) (86)
------------------------------- ----------- ------------ ---------------- ------------
Total net assets (241) (103) 368 24
------------------------------- ----------- ------------ ---------------- ------------
GBP000
Fair value of consideration paid
Amount settled in cash 830
Fair value of contingent consideration 1,641
---------------------------------------- -------
Total consideration 2,471
Less net assets acquired (24)
---------------------------------------- -------
Goodwill on acquisition 2,447
---------------------------------------- -------
Fair values are provisional as subject to management estimations at the reporting date.
Consideration transferred
The total consideration was GBP2,471,000. This comprised GBP830,000 in cash and GBP1,641,000 contingent cash consideration. The additional consideration is based on profit targets for the Company's customer base and is payable in two instalments over the next two years. The fair value of GBP1,641,000 has been calculated using management forecasts of HTL's performance discounted at the weighted average cost of capital.
Acquisition costs amounting to GBP44,000 have been recognised as an expense in the Consolidated Income Statement as part of separately disclosed administration costs.
Goodwill
Goodwill of GBP2,447,000 is primarily related to expected future profitability and expected cost synergies. Goodwill has been allocated to the Power Motion Control operating segment and is not expected to be deductible for tax purposes.
Intangible asset
An intangible asset of GBP449,000 has been provisionally identified related to customer relationships. The estimated useful life has been determined as ten years based on the expected future cash flows that they would generate in arriving at their fair value. The customer relationships considered in the valuation comprise the sales to significant customers. Long term sales growth over the ten-year period has been assumed to be 5.2% with an attrition rate of 12.8% for customers. Growth and attrition rates are based on management experience and expectations. Amortisation of customer relationships is not expected to be deductible for tax purposes.
Fair value adjustments
The value of inventories has been decreased by GBP81,000 to reflect the alignment of stock valuation methods with those of the Group.
The value of debtors has been decreased by GBP22,000 to reflect the alignment of HTL's debtor provisioning policy with that of the Group.
Hydraulics and Transmissions Limited's contribution to the group results
Hydraulics and Transmissions Limited was acquired on 20 January 2017, for the purpose of the Group's consolidated accounts it has been treated as if purchased on the 1 January 2017 and consolidated from that date as the difference would not have a material impact on the Group results.
Summary aggregated estimated financial information on HTL for the 12-month period consolidated:
2017
GBP000
--------- --------
Revenue 6,175
Profit 384
--------- --------
Profit is stated after deducting inter-company recharges and acquisition costs of GBP185,000.
8.2 Acquisition of Hewi Slangen
On 7 April 2017, the Group acquired the trade and certain assets of Hewi Slangen B.V., a Dutch based business. Complementary to our existing Dutch division, Flowtechnology Benelux, Hewi Slangen brings synergistic savings through relocation of operations and additional abilities and skills in hose production.
Details of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration, goodwill and intangible assets are as follows:
Intangible
Fair asset Provisional
Book value recognised fair
value adjustment on acquisition value
GBP000 GBP000 GBP000 GBP000
------------------------------- -------- ------------ ---------------- ------------
Property, plant and equipment 20 80 - 100
Inventories 197 (163) - 34
------------------------------- -------- ------------ ---------------- ------------
Total net assets 217 (83) - 134
------------------------------- -------- ------------ ---------------- ------------
GBP000
Fair value of consideration paid
Amount settled in cash 309
---------------------------------- -------
Total consideration 309
Less net assets acquired (134)
---------------------------------- -------
Goodwill on acquisition 175
---------------------------------- -------
Fair values are provisional as subject to management estimations at the reporting date.
Consideration transferred
The total consideration was GBP309,000 (EUR355,000) in cash.
Goodwill
Goodwill of GBP175,000 is primarily related to expected future profitability, technical know-how and expected cost synergies from the closure of the operational site and transfer of activities into existing Group locations. Goodwill has been allocated to the Flowtechnology operating segment and is not expected to be deductible for tax purposes.
Fair value adjustments
The value of property, plant and equipment has been increased by GBP80,000 based on market valuations at the time of acquisition.
The value of inventories has been decreased by GBP163,000 to reflect the alignment of stock valuation methods with those of the Group.
Hewi Slangen's contribution to the group results
Hewi Slangen generated a profit after tax of GBP12,000 for the nine months from 7 April 2017 to the reporting date. If Hewi Slangen had been acquired on 1 January 2017, revenue for the Group would have been GBP78,415,000 and profit after tax for the year would have increased by GBP33,000.
Summary aggregated financial information on Hew Slangen for the period from 1 January 2017 to 7 April 2017 when it became a subsidiary:
2017
GBP000
--------- --------
Revenue 128
Profit 33
--------- --------
8.3 Acquisition of Hi-Power Limited
On 23 June 2017 the Group acquired 100% of the share capital of Hi-Power Limited, a company based in the Republic of Ireland. It is a specialist distributor of hydraulic equipment components predominantly to the mobile and transport sectors. It is based in Cork, Dublin and Belfast. This acquisition is complementary to the PMC division and will strengthen the Group position with key European suppliers.
Details of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration, goodwill and intangible assets are as follows:
Intangible
Fair asset Provisional
Book value recognised fair
value adjustment on acquisition value
GBP000 GBP000 GBP000 GBP000
------------------------------- -------- ------------ ---------------- ------------
Property, plant and equipment 109 (8) - 101
Intangible assets - - 374 374
Inventories 1,319 (31) - 1,288
Trade and other receivables 1,818 (112) - 1,706
Cash and cash equivalents 185 - - 185
Trade and other payables (1,604) - - (1,604)
Current tax balances (26) - - (26)
Finance leases (16) - - (16)
Provisions - - - -
Deferred tax liability - - (67) (67)
------------------------------- -------- ------------ ---------------- ------------
Total net assets 1,785 (151) 307 1,941
------------------------------- -------- ------------ ---------------- ------------
GBP000
Fair value of consideration paid
Amount settled in cash 1,610
Fair value of contingent consideration 895
---------------------------------------- --------
Total consideration 2,504
Less net assets acquired (1,941)
---------------------------------------- --------
Goodwill on acquisition 564
---------------------------------------- --------
Fair values are provisional as subject to management estimations at the reporting date.
Consideration transferred
The total consideration was GBP2,504,000. This comprised GBP1,610,000 (EUR1,836,000) in cash and GBP895,000 contingent cash consideration. The additional consideration is based on profit targets for the Company's customer base and is payable in two instalments over the next two years. The fair value of GBP895,000 has been calculated using management forecasts of Hi-Power Limited performance discounted at the weighted average cost of capital.
Acquisition costs amounting to GBP142,000 have been recognised as an expense in the Consolidated Income Statement as part of separately disclosed administration costs.
Goodwill
Goodwill of GBP564,000 is primarily related to expected future profitability, the substantial skill and expertise of its workforce and expected cost synergies from the combined buying power of the Group. Goodwill has been allocated to the Power Motion Control operating segment and is not expected to be deductible for tax purposes.
Intangible asset
An intangible asset of GBP374,000 has been provisionally identified related to customer relationships. The estimated useful life has been determined as ten years based on the expected future cash flows that they would generate in arriving at their fair value. The customer relationships considered in the valuation primarily comprise those buying P.T.O.s, wet kits, bulk discharge, auto-greasing, speed limiters and winches which are new products to the segment. Long term sales growth over the ten-year period has been assumed to be 3.0% with an attrition rate of 10.0% for customers. Growth and attrition rates are based on management experience and expectations. Amortisation of customer relationships is not expected to be deductible for tax purposes.
Fair value adjustments
The value of property, plant and equipment has been decreased by GBP8,000 to reflect the alignment of the useful life review policy with that of the Group.
The value of inventories has been decreased by GBP31,000 to reflect the alignment of stock valuation methods with those of the Group.
The value of debtors has been decreased by GBP112,000 to reflect the alignment of Hi-Power's debtor provisioning policy with that of the Group.
Hi-Power Limited's contribution to the group results
Hi-Power Limited generated a profit after tax of GBP22,000 for the six months from 23 June 2017 to the reporting date. Profit is stated after deducting inter-company recharges and acquisition costs of GBP162,000. If Hi-Power Limited had been acquired on 1 January 2017, revenue for the Group would have been GBP82,060,000 and profit after tax for the year would have increased by GBP234,000.
Summary aggregated financial information on Hi-Power Limited for the period from 1 January 2017 to 23 June 2017 when it became a subsidiary:
2017
GBP000
--------- --------
Revenue 3,773
Profit 234
--------- --------
8.4 Acquisition of Hi-Power Hydraulics
On 30 June 2017, the Group acquired certain trade and assets of Hi-Power Hydraulics Limited, a UK division of Hi-Power Limited which was acquired on 23 June 2017 (see note 8.3). Hi-Power Hydraulics is the exclusive UK importer and stockist of Pedro Roquet S.A. products. This acquisition is complementary to the PMC division and will strengthen the Group position with key European suppliers.
Details of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration, goodwill and intangible assets are as follows:
Intangible
asset
Fair value recognised Provisional
Book value adjustment on acquisition fair value
GBP000 GBP000 GBP000 GBP000
------------------------------- ----------- ------------ ---------------- ------------
Property, plant and equipment 20 (14) - 6
Inventories 371 (35) - 336
------------------------------- ----------- ------------ ---------------- ------------
Total net assets 391 (49) - 342
------------------------------- ----------- ------------ ---------------- ------------
GBP000
Fair value of consideration paid
Amount settled in cash 345
---------------------------------- -------
Total consideration 345
Less net assets acquired (342)
---------------------------------- -------
Goodwill on acquisition 3
---------------------------------- -------
Fair values are provisional as subject to management estimations at the reporting date.
Consideration transferred
The total consideration was GBP345,000, paid in cash
Goodwill
Goodwill of GBP3,000 is primarily related to expected future profitability and expected cost synergies. Goodwill has been allocated to the Power Motion Control operating segment and is not expected to be deductible for tax purposes.
Fair value adjustments
The value of property, plant and equipment has been decreased by GBP14,000 to reflect the alignment of the useful life review policy with that of the Group.
The value of inventories has been decreased by GBP35,000 to reflect the alignment of stock valuation methods with those of the Group.
Hi-Power Hydraulics' contribution to the Group results
Hi-Power Hydraulics generated a profit after tax of GBP114,000 for the six months from 1 July 2017 to the reporting date. If Hi-Power Hydraulics had been acquired on 1 January 2017, revenue for the Group would have been GBP78,833 and profit after tax for the year would have increased by GBP82,000.
Summary aggregated financial information on Hi-Power Hydraulics for the period from 1 January 2017 to 30 June 2017 when it became a subsidiary:
2017
GBP000
--------- --------
Revenue 546
Profit 82
--------- --------
8.5 Acquisition of Orange County Limited
On 7 July 2017, the Group acquired 100% of the share capital of Orange County Limited, a UK-based company. It is a specialist supplier and distributor of high quality products for the storage and movement of fuel, liquid and gases based in Spennymoor, County Durham. Orange County provides a further complementary business to the Group and establishes relationships with world-leading manufacturers of pipes, valves, gauges and leak detection equipment. It is focused on technical sales to a wide range of end users from fuel supply systems for the automotive industry to cooling systems on the London Underground, as well as large Data Centres across the UK.
Details of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration, goodwill and intangible assets are as follows:
Intangible
asset
Fair value recognised Provisional
Book value adjustment on acquisition fair value
GBP000 GBP000 GBP000 GBP000
------------------------------- ----------- ------------ ---------------- ------------
Property, plant and equipment 34 (4) - 30
Intangible assets - 1,049 1,049
Inventories 302 (26) - 276
Trade and other receivables 785 (23) - 762
Cash and cash equivalents 1,936 - 1,936
Trade and other payables (340) - - (340)
Current tax balances (284) - - (284)
Deferred tax liability (7) - (189) (196)
------------------------------- ----------- ------------ ---------------- ------------
Total net assets 2,426 (53) 860 3,233
------------------------------- ----------- ------------ ---------------- ------------
GBP000
Fair value of consideration paid
Amount settled in cash 3,200
Fair value of contingent consideration 2,823
---------------------------------------- --------
Total consideration 6,023
Less net assets acquired (3,233)
---------------------------------------- --------
Goodwill on acquisition 2,790
---------------------------------------- --------
Fair values are provisional as subject to management estimations at the reporting date.
Consideration transferred
The total consideration was GBP6,023,000. This comprised GBP3,200,000 in cash and GBP2,823,000 contingent cash consideration. The additional consideration is based on profit targets for the Company's customer base and is payable in four instalments over the next two years. The fair value of GBP2,823,000 has been calculated using management forecasts of Orange County Limited's performance discounted at the weighted average cost of capital.
Acquisition costs amounting to GBP76,000 have been recognised as an expense in the Consolidated Income Statement as part of separately disclosed administration costs.
Goodwill
Goodwill of GBP2,790,000 is primarily related to expected future profitability, the substantial skill and expertise of its workforce and technical know-how. Goodwill has been allocated to the Process operating segment and is not expected to be deductible for tax purposes.
Intangible asset
An intangible asset of GBP1,049,000 has been provisionally identified related to customer relationships. The estimated useful life has been determined as ten years based on the expected future cash flows that they would generate in arriving at their fair value. The customer relationships considered in the valuation comprise the sales to customers of equipment for storage and movement of fuel, liquid and gases, which are new products for the segment. Long term sales growth over the ten-year period has been assumed to be 2.0% with an attrition rate of 10.0% for customers. Growth and attrition rates are based on management experience and expectations. Amortisation of customer relationships is not expected to be deductible for tax purposes.
Fair value adjustments
The value of property, plant and equipment has been decreased by GBP4,000 to reflect the alignment of the useful life review policy with that of the Group.
The value of inventories has been decreased by GBP27,000 to reflect the alignment of stock valuation methods with those of the Group.
The value of debtors has been decreased by GBP23,000 to reflect the alignment of the debtor provisioning policy with that of the Group.
Orange County Limited's contribution to the Group results
Orange County Limited generated a profit after tax of GBP276,000 for the six months from 7 July 2017 to the reporting date. Profit is stated after deducting inter-company recharges of GBP57,000. If Orange County Limited had been acquired on 1 January 2017, revenue for the Group would have been GBP79,451,000 and profit after tax for the year would have increased by GBP114,000.
Summary aggregated financial information on Orange County Limited for the period from 1 January 2017 to 7 July when it became a subsidiary:
2017
GBP000
--------- --------
Revenue 1,164
Profit 114
--------- --------
8.6 Acquisition of The Hydraulics Group BV
On 7 September 2017, the Group acquired 100% of the share capital of The Hydraulics Group BV and its subsidiaries, a Dutch based company. Based in Oud-Beijerland and Rotterdam, with a sales presence in Brussels, it is a distributor of hydraulic equipment and components, predominantly to the mechanical engineering, marine and agricultural sectors into both maintenance, repair and operations applications, as well as original equipment manufacturers. The acquisition extends the Group's position with important global suppliers, in particular Eaton Corporation.
Details of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration, goodwill and intangible assets are as follows:
Intangible
asset
Fair value recognised Provisional
Book value adjustment on acquisition fair value
GBP000 GBP000 GBP000 GBP000
------------------------------- ----------- ------------ ---------------- ------------
Investments 387 (387) - -
Property, plant and equipment 225 - - 225
Intangible assets - - 976 976
Inventories 1,033 (33) - 1,000
Trade and other receivables 1,119 (173) - 946
Cash and cash equivalents 77 - - 77
Trade and other payables (1,048) - - (1,048)
Current tax balances (37) - - (37)
Finance leases (62) - - (62)
Provisions - (103) - (103)
Deferred tax liability 43 - (176) (133)
------------------------------- ----------- ------------ ---------------- ------------
Total net assets 1,737 (696) 800 1,841
------------------------------- ----------- ------------ ---------------- ------------
GBP000
Fair value of consideration paid
Amount settled in cash 2,885
Amount settled in shares in Flowtech Fluidpower
plc 687
Amount settled in share options in Flowtech Fluidpower
plc 187
-------------------------------------------------------- --------
Total consideration 3,759
Less net assets acquired (1,841)
-------------------------------------------------------- --------
Goodwill on acquisition 1,918
-------------------------------------------------------- --------
Fair values are provisional as subject to management estimations at the reporting date.
Consideration transferred
The total consideration was GBP3,759,000. This comprised GBP2,149,000 (EUR2,250,000) in cash, assumption of GBP736,000 (EUR802,000) of net debt at acquisition, GBP687,000 represented by the issue of new Flowtech Fluidpower plc ordinary shares at a value of 1.387p each and GBP187,000 represented by the issue of 495,178 unapproved share options in Flowtech Fluidpower plc. The premium on share issue arising of GBP439,000 has been credited to the merger relief reserve. The share options have been valued using a variation of the Black-Scholes model that takes into account factors specific to share incentive plans, such as the vesting period. The options are exercisable from April 2020 and have an exercise value of GBP1.387p. The fair value of the options of GBP187,000 has been recognised as an other reserve.
Acquisition costs amounting to GBP45,000 have been recognised as an expense in the Consolidated Income Statement as part of separately disclosed administration costs.
Goodwill
Goodwill of GBP1,918,000 is primarily related to expected future profitability and expected cost synergies from the combined buying power of the Group. Goodwill has been allocated to the Power Motion Control operating segment and is not expected to be deductible for tax purposes.
Intangible asset
An intangible asset of GBP976,000 has been provisionally identified related to customer relationships. The estimated useful life has been determined as ten years based on the expected future cash flows that they would generate in arriving at their fair value. The customer relationships considered in the valuation comprise the sales to significant customers. Long term sales growth over the ten-year period has been assumed to be 1.9% with an attrition rate of 10.0% for customers. Growth and attrition rates are based on management experience and expectations. Amortisation of customer relationships is not expected to be deductible for tax purposes.
Fair value adjustments
The value of investments has been decreased by GBP322,000 based on market valuations at the time of acquisition.
The value of inventories has been decreased by GBP31,000 to reflect the alignment of stock valuation methods with those of the Group.
The value of debtors has been decreased by GBP16,000 to reflect the alignment of The Hydraulics Group's debtor provisioning policy with that of the Group and also by GBP158,000 based on market valuations of other debt at the time of acquisition.
The value of provisions has been increased by GBP176,000 to reflect a provision for dilapidation costs relating to properties leased by the Company.
The Hydraulic Group BV's contribution to the Group results
The Hydraulic Group BV generated a profit after tax of GBP109,000 for the four months from 7 September 2017 to the reporting date. Profit is stated after deducting inter-company recharges and acquisition costs of GBP106,000. If The Hydraulic Group BV had been acquired on 1 January 2017, revenue for the Group would have been GBP82,939 and profit after tax for the year would have increased by GBP148,000.
Summary aggregated financial information on The Hydraulic Group BV's for the period from 1 January 2017 to 7 September 2017 when it became a subsidiary:
2017
GBP000
--------- --------
Revenue 4,652
Profit 148
--------- --------
8.7 Acquisition of Group HES Limited
On 11 October 2017, the Group acquired 100% of the share capital of Group HES Limited ("HES") and its subsidiaries, a UK-based group. HES is a multi-faceted solutions provider to the Fluidpower sector located in Birmingham, Durham, Gloucester and Leeds. The business operates under five trading brands: Hydraulic Equipment Supermarkets; Branch Hydraulic Systems, and more recently established specialist distributor brands in HES Tractec, HES Lubemec and HES Automatec. The acquisition provides another complementary business to the Group's PMC division, delivering incremental revenue through a mix of wider technical applications, reinforces our offer to the off-highway market and adds aerospace to our sector coverage. In addition, the acquisition extends the Group's position with important global suppliers, including Danfoss Power Solutions.
Details of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration, goodwill and intangible assets are as follows:
Intangible
asset
Fair value recognised Provisional
Book value adjustment on acquisition fair value
GBP000 GBP000 GBP000 GBP000
------------------------------- ----------- ------------ ---------------- ------------
Property, plant and equipment 574 (26) - 548
Intangible assets - 570 570
Inventories 3,093 (200) - 2,893
Trade and other receivables 2,941 (28) - 2,913
Cash and cash equivalents (722) - - (722)
Trade and other payables (3,669) - - (3,669)
Finance leases (28) - - (28)
Current tax balances (25) - - (25)
Provisions - (90) - (90)
Deferred tax liability (84) - (103) (187)
------------------------------- ----------- ------------ ---------------- ------------
Total net assets 2,080 (344) 467 2,203
------------------------------- ----------- ------------ ---------------- ------------
GBP000
Fair value of consideration paid
Amount settled in cash 3,090
Amount settled in shares in Flowtech Fluidpower
plc 1,000
------------------------------------------------- --------
Total consideration 4,090
Less net assets acquired (2,203)
------------------------------------------------- --------
Goodwill on acquisition 1,887
------------------------------------------------- --------
Fair values are provisional as subject to management estimations at the reporting date.
Consideration transferred
The total consideration was GBP4,090,000. This comprised GBP3,090,000 in cash and GBP1,000,000 represented by the issue of new Flowtech Fluidpower plc ordinary shares at a value of 1.511p each. The premium on share issue arising of GBP669,000 has been credited to the merger relief reserve.
Acquisition costs amounting to GBP65,000 have been recognised as an expense in the Consolidated Income Statement as part of separately disclosed administration costs.
Goodwill
Goodwill of GBP1,887,000 is primarily related to expected future profitability, the substantial skill and expertise of its workforce and expected cost synergies from the combined buying power of the Group. Goodwill has been allocated to the Power Motion Control operating segment and is not expected to be deductible for tax purposes.
Intangible asset
An intangible asset of GBP570,000 has been provisionally identified related to customer relationships. The estimated useful life has been determined as ten years based on the expected future cash flows that they would generate in arriving at their fair value. The customer relationships considered in the valuation comprise the sales to the aerospace sector, HES's service division sales and customer revenue streams served by the LubeMec and Tractec brands; which are all new revenue streams to the segment. Long term sales growth over the ten-year period has been assumed to be 2.0% with an attrition rate of 10.0% for customers. Growth and attrition rates are based on management experience and expectations. Amortisation of customer relationships is not expected to be deductible for tax purposes.
Fair value adjustments
The value of property, plant and equipment has been decreased by GBP26,000 to reflect the alignment of the useful life review policy with that of the Group.
The value of inventories has been decreased by GBP200,000 to reflect the alignment of stock valuation methods with those of the Group.
The value of debtors has been decreased by GBP27,000 to reflect the alignment of the debtor provisioning policy with that of the Group.
The value of provisions has been increased by GBP90,000 to reflect a provision for dilapidation costs relating to properties leased by the Company.
Group HES Limited's contribution to the Group results
HES generated a loss after tax of GBP45,000 for the three months from 11 October 2017 to the reporting date. Losses are stated after deducting inter-company recharges and acquisition costs of GBP106,000. If HES had been acquired on 1 January 2017, revenue for the Group would have been GBP94,224,000 and profit after tax for the year would have increased by GBP1,009,000.
Summary aggregated financial information on Group HES Limited for the period from 1 January 2017 to 11 October 2017 when it became a subsidiary:
2017
GBP000
--------- --------
Revenue 15,957
Profit 1,009
--------- --------
9. EQUITY
----------
Share capital
The share capital of the Company consists only of fully paid ordinary shares with a nominal value of 50p per share. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at Shareholders' meetings of the Company.
Number GBP000
------------------------------------------- ---------- ------
Allotted and fully paid ordinary shares
of 50p each at 31 December 2017 52,818,997 26,409
Shares authorised for share-based payments 6,666,667 3,333
---------- ------
Total shares authorised at 31 December
2017 59,485,664 29,742
---------- ------
Number GBP000
Allotted and fully paid ordinary shares
of 50p each
At 1 January 2016 43,078,282 21,539
Shares issued 8,333,333 4,166
Shares issued in respect of exercise
of employee share options 15,000 7
Shares issued in respect of loan to
Employee Benefit Trust 235,400 118
Shares issued in respect of acquisition 495,178 248
Shares issued in respect of acquisition 661,804 331
---------- ------
At 31 December 2017 52,818,997 26,409
---------- ------
10. NET CASH FROM OPERATING ACTIVITIES
---------------------------------------------------------------
2017 2016
Reconciliation of profit before taxation
to net cash flows from operations GBP000 GBP000
Profit from continuing operations before
tax 6,039 5,527
Loss from discontinued operations before
tax - (113)
Depreciation 640 526
Financial income (6) (1)
Financial expense 581 611
Profit on sale of plant & equipment (3) (21)
Amortisation of intangible assets 768 569
Equity settled share-based payment charge 272 353
Cash settled share options (415) -
Change in amounts accrued for contingent
consideration 229 (108)
------- -------
Operating cash inflow before changes
in working capital and provisions 8,105 7,343
------- -------
Change in trade and other receivables (823) (1,384)
Change in stocks (931) (1,486)
Change in trade and other payables 1,922 1,126
Change in provisions (63) (86)
------- -------
Cash generated from operations 8,210 5,513
Tax paid (1,610) (1,347)
------- -------
Net cash generated from operating activities 6,600 4,166
------- -------
11. SUBSEQUENT EVENTS
----------------------
Balu Limited and it's UK subsidiaries was acquired on 19 March 2018 for an initial consideration of GBP4.65 million in cash, GBP0.5 million in shares with additional estimated consideration of GBP3 million anticipated to be paid within 12 months. The cash consideration was funded through existing resources, supplemented by a share issue on 4 April as detailed below. The acquisition will add significantly to the Group's procurement relationship with key global suppliers of hydraulic components, in particular, Parker Hannafin. Balu Limited has two trading subsidiaries; Beaumanor an importer and distributor of fluid power equipment in the UK. Based in Leicester it will form part of the Flowtechnology division. Secondly, Derek Lane is a supplier of fluid power products and engineered solutions based in Newton Abbot, Devon. Derek Lane will form part of the PMC division.
The Group will disclose the book value of the identifiable assets and liabilities and their fair values in the 2018 interim financial statements as required under IFRS 3 "Business Combinations". The initial accounting and fair value exercise is incomplete at the time of this announcement due to the proximity of the accounting date.
On 15 March 2018 and 4 April 2018 Flowtech Fluidpower plc raised approximately GBP11m (before expenses) via the placing of 6,470,589 new ordinary shares at 170 pence per share.
There are no other material adjusting or non-adjusting events subsequent to the reporting date.
12. ANNUAL GENERAL MEETING ---------------------------
The Annual General Meeting will be held on 6 June at 10am at the offices of our solicitors, DLA Piper, One St Peter's Square, Manchester M2 3DE.
13. ELECTRONIC COMMUNICATIONS ------------------------------
The full Financial Statements for the year ended 31 December 2017 are to be published on the Company's website, together with the Notice convening the Company's 2018 Annual General Meeting by 4 May 2018. Copies will also be sent out to those shareholders who have elected to receive paper communications. Copies can be requested by writing to The Company Secretary, Flowtech Fluidpower plc, Pimbo Road, Skelmersdale, Lancashire WN8 9RB or email to info@flowtechfluidpower.com.
FORWARD-LOOKING STATEMENTS
These Preliminary results were approved by the Board of Directors and authorised for issue on 16 April 2018. 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. Therefore, nothing in this document should be construed as a profit forecast by the Company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DMGMDLVFGRZM
(END) Dow Jones Newswires
April 17, 2018 02:00 ET (06:00 GMT)
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