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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 | |
---|---|---|---|---|---|---|---|---|---|---|
0.75 | 0.68% | 111.75 | 111.00 | 112.50 | 111.50 | 111.50 | 111.50 | 35,935 | 16:35:08 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Fluid Powr Cylindrs,actuatrs | 112.1M | -12.13M | -0.1973 | -5.65 | 68.56M |
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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