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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% | 110.25 | 110.00 | 110.50 | 113.00 | 113.00 | 113.00 | 16,325 | 16:35:22 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Fluid Powr Cylindrs,actuatrs | 112.1M | -12.13M | -0.1973 | -5.73 | 69.49M |
TIDMFLO
RNS Number : 7251K
Flowtech Fluidpower PLC
30 August 2023
WEDNESDAY, 30 AUGUST 2023
FLOWTECH FLUIDPOWER PLC
("Flowtech", the "Group" or "Company")
"a world of motion"
Our aim is to provide our customers with power, motion & control solutions, from a single component to integrated engineering systems, in the most cost-effective way, harnessing the best global brands & products, services and engineers in the market.
2023 HALF-YEAR REPORT
For the six months ended 30 June 2023
"Despite increasingly challenging economic conditions, overall Group revenue increased by 2.8% in the period with a more positive performance in our solutions and services segments and a weaker performance in the product distribution segment, as previously reported. We have continued to make positive progress on working capital management, continuing to improve our debt position whilst maintaining tight cost controls. We expect these market headwinds to continue through H2 23 and into 2024 but I am pleased to report good progress is being made in deploying an immediate performance improvement plan and the refreshed strategy, strengthening the leadership team and simplifying the operating model building the capabilities to deliver mid-term scalable growth in a highly fragmented market." Mike England, Chief Executive Officer TRADING AND OPERATIONAL HIGHLIGHTS =================================================================== * Revenue increased by 2.8% with varying performance across segments * Sustained strong gross margin of 35.5% (H1 22 36.3%) * Inflationary pressures partially offset by cost savings initiatives * Underlying operating profit of GBP3.4m, a decrease of GBP0.9m on the comparative period * GBP4.3m decrease in net debt (pre-leases) Half year Half year Year ended ended ended 31 December 2022 FINANCIAL HIGHLIGHTS 30 June 30 June 2022 Audited 2023 Unaudited Unaudited =========================================== =========== ============== ================== * Revenue GBP59.1m GBP57.5m GBP114.8m * Gross profit % 35.5% 36.3% 35.7% * Underlying EBITDA* GBP5.0m GBP5.8m GBP11.6m * Underlying operating profit** GBP3.4m GBP4.3m GBP8.6m * Operating profit / (loss) GBP2.4m GBP3.6m (GBP4.4m) * Profit / (loss) before tax GBP1.6m GBP3.1m (GBP5.6m) * Earnings per share (basic) 2.28p 4.24p (10.17p) * Net debt*** GBP15.4m GBP19.7m GBP16.0m * Underlying EBITDA is profit before interest, taxation, depreciation and separately disclosed items. ** Underlying operating profit is operating profit for continuing operations before separately disclosed items (note 3). *** Net debt is bank debt less cash and cash equivalents. It excludes lease liabilities under IFRS 16. RESULTS PRESENTATION: Today, 30 August 2023, at 10.00am (BST) CEO Mike England and CFO Russell Cash will provide a 'live' presentation via the Investor Meet Company platform (IMC) at: https://www.investormeetcompany.com/flowtech-fluidpower-plc/register-investor Website: www.investormeetcompany.com =============================================================================== FLOWTECH FLUIDPOWER PLC 2023 HALF-YEAR REPORT For the six months ended 30 June 2023
2023 HALF-YEAR FINANCIAL PERFORMANCE AND DIVISIONAL ANALYSIS
Revenue by current Six Six months % Year segment months ended Change ended ended 30 June 2022 31 December 30 (re-stated**) 2022 June GBP000 (re-stated**) 2023 GBP000 GBP000 =================================== ================== ========================= ================== ========================= Flowtech (Product Distribution) 26,606 28,192 -5.6% 53,273 Fluidpower Group Solutions 22,019 19,749 11.5% 40,368 Fluidpower Group Services 10,445 9,516 9.8% 21,125 =================================== ================== ========================= ================== ========================= Total Group revenue 59,070 57,457 2.8% 114,766 =================================== ================== ========================= ================== ========================= Gross profit % 35.5% 36.3% 35.7% =================================== ================== ========================= ================== ========================= Underlying segment operating Six months Return Six months Return Year Return profit* on revenue on revenue on revenue ended ended ended 30 June 30 June 31 December 2023 2022 2022 % (re-stated) % (re-stated) % GBP000 GBP000 GBP000 ========================================== ======================= ====================== ======================== ====================== ======================== ====================== Flowtech (Product Distribution) 2,275 8.6% 3,617 12.8% 6,206 11.7% Fluidpower Group Solutions 2,462 11.2% 2,707 13.7% 5,086 12.6% Fluidpower Group Services 1,202 11.5% 234 2.5% 1,804 8.5% Central costs (2,515) (2,245) (4,510) ========================================== ======================= ====================== ======================== ====================== ======================== ====================== Underlying operating profit* 3,424 4,313 8,586 ========================================== ======================= ====================== ======================== ====================== ======================== ====================== * Underlying operating profit is operating profit for continuing operations before separately disclosed items (note 3). ** H1 22 and FY 22 figures have been re-stated to reflect the movement of certain revenue streams between segments, however there is no impact on Group profitability.
REVENUE
Revenue increased by 2.8% in H1 23 compared to H1 22. The growth achieved in both the Solutions (11.5%) and Services (9.8%) segments was pleasing; this served to mitigate the impact of a disappointing performance within the Product Distribution segment where revenue declined by 5.6%. The second quarter of the year provided more challenging trading conditions across each segment than the first quarter.
Gross profit margin
Our gross profit margin remains strong at 35.5% (H1 22 36.3%); the modest movement relates primarily to the change in sales mix due to divisional margins being lower in the Solutions and Service segment as compared to the Product Distribution segment.
OPERATING Costs
Underlying operating costs have increased by GBP1.0m (6.2%), compared to the comparative 2022 period. Approximately two thirds of our cost base relate to people costs; our average number of employees in H1 23 decreased by 5.8% compared to H1 22 but this was offset by inflation on wages and other costs alongside the impact of investment in senior personnel (building future capability and scale).
UNDERLYING OPERATING PROFIT
Underlying operating profit of GBP3.4m is a decrease of GBP0.9m from the comparative period (H1 22: GBP4.3m).
The performance of the Product Distribution segment was disappointing, as explained under the "Trading Review" section below. We are pleased with the performance in the Solutions and Services divisions which both continued to show strong growth at attractive margins.
NET DEBT
Net debt (pre-lease debt) was GBP15.4m at 30 June 2023 (H1 22: GBP19.7m), with headroom of GBP9.6m under the Group's banking facilities. Key to achieving this reduction was a GBP3.9m reduction in inventory levels. We expect this trend to continue as we benefit from a less volatile supply chain environment. If leases are taken into account, the reduction in Group debt was GBP5.1m.
TRADING REVIEW
We have highly skilled and capable people, passionate about providing the highest levels of technical and engineering expertise and customer service. In a technical industrial market, this is a source of competitive advantage. Positive progress has been made in H1 23 building our people capabilities including increased investment in training, learning and development, investment in health, safety and wellbeing and supporting them through these more challenging economic times. We thank our people for their continued commitment and dedication.
In our Product Distribution segment (which accounts for 45% of Group revenue), the performance has been disappointing for over 12 months continuing through H1 23 with revenue decline of 5.6%. This is in part due to the more volatile economic and industrial landscape but also due to internal challenges resulting from the consolidation of five businesses into one during 2021/2022 including the closure of the Leicester Distribution Centre, consolidating inventory into the main Skelmersdale Distribution Centre. Whilst this consolidation has enabled improved scale and efficiency, aspects of this integration have impacted some parts of the customer experience. Interventions are in flight to address this to ensure we have quickly returned to the levels of high service expected by our customers including further improvements to our website, catalogue, commercial discipline and our service.
In our Solutions and Services segments, we are pleased with the performance with H1 23 revenue growth of 11%. We have improved the focus in offering a wide range of engineering services, further building our reputation for delivering technical products, designing, manufacturing and supporting our distributors, industrial end users and original equipment manufacturers across our geographies.
Our international businesses in the Island of Ireland and Benelux which contribute c.28% of Group revenue have continued to perform well. Ireland in particular, where we have consolidated our two businesses into one has seen revenue growth in H1 23 of 19%. Our two businesses in Benelux have made a positive contribution of 16% return on revenues and we see further opportunity here to drive greater synergy and to further increase market share gains.
Group Gross Margin performance was stable, and management has remained focused ensuring we stay ahead of supplier price rises and service labour costs during a continued inflationary market. There is though gross profit impact resulting from the revenue mix between the higher gross margin Product Distribution segment and the Solutions and Services segment. We see further opportunity for gross margin enhancement across the Group by improving our commercial effectiveness, pricing discipline and building greater procurement capability.
Our cost management remains disciplined and whilst we have taken all necessary action to react to inflationary market pressures, we continue to support our highly skilled and talented workforce and build enhanced capabilities as we look to underpin our mid-term strategy to deliver scalable and sustainable growth and value creation. However, we see significant further opportunity for delivering efficiencies across the Group as we scale through the deployment of our refreshed strategy, further simplifying the operating model, underpinned by investment in improved automation, technology and processes.
We have continued to focus on cash and optimising our working capital which resulted in the GBP5.1m reported reduction in net debt. As we look forward, our focus will remain on achieving further working capital optimisation and improved cash efficiencies across the Group whilst seeking to improve overall stock availability and service by adopting a more rigorous approach to inventory and supplier management.
STRATEGY
We are pleased to report good progress in implementing an immediate Performance Improvement Plan and the refreshed strategy (our journey to the future), across the Group.
i) Performance Improvement Plan
The Performance Improvement Plan focusses on near-term performance improvement to quickly deliver a more customer centric, lean and scalable platform for growth. It consists of three key components;
a) Simple - we are implementing a simple operating model releasing the full potential of our people and our capabilities,
b) Customer centric - moving decision making and activities to be more centred around the customer with a renewed growth focus across all channels, and
c) Scalable - Re-focusing on doing the basics brilliantly whilst improving our operational and technology infrastructure to power future growth.
ii) Refreshed strategy
Our refreshed strategy (our journey to the future) sets out our ambition and has two key components;
a) A world of motion - We will expand on our product and engineering capabilities across the wider power, motion and control sector. In doing so, we increase our market share opportunity in Europe from cGBP10bn to cGBP30bn. We will target two times market growth rate. This also serves to future proof the Group with a focus on new emerging technologies.
b) The power of one - we will release the full potential, scalability and efficiency of the Group by transitioning to a single brand and operating model. We will launch a simplified value proposition for our target customers.
As part of the strategy, we are focused on delivering a measurable value creation plan consisting of defined strategic focus areas to deliver mid-teens underlying operating profit margin.
The Performance Improvement Plan and refreshed strategy is enabled by the formation of a new, diverse and highly skilled leadership team organised into a functional, country led structure where we are building greater core competence and capabilities. Five of the previous leadership team have exited the business and the new team, consisting of a strong mix of existing and new talent, has now been appointed; a number of the new members of the team are already operating within the business with the final three leaders onboarding in October. The a ccountability of this team will be to deliver the defined areas of strategic focus, known internally as growth engines.
The immediate priority is on short-term 'self-help' interventions to deliver improved performance throughout H2 23 and into 2024 focused on improvements in a) our growth capabilities (including our marketing, digital and sales capabilities), b) our core service and delivery capabilities (doing the basics brilliantly) and c) simplifying how we work (to deliver greater speed, agility and efficiencies).
OUTLOOK
We expect external economic headwinds to continue to bite through H2 23 and into 2024 with continued slowdown in industrial output and production. We have deployed a number of focused interventions to address weaker performing areas underpinned by a change in leadership and capability and providing greater clarity on our forward strategy and plans. Our people are motivated and committed to delivering high performance and whilst we expect H2 23 to remain challenging, we are optimistic in our outlook in building our momentum and capabilities into 2024 and beyond through the deployment of our refreshed strategy.
By order of the Board
29 August 2023
CONSOLIDATED INCOME STATEMENT For the six months ended 30 June 2023 Notes Unaudited Unaudited Audited ============================================ ====== Six months Six months Year ended ended ended ============================================ ====== 30 June 30-June 31-December 2023 2022 2022 GBP000 GBP000 GBP000 ============================================ ====== =========== =========== ============ Continuing operations ====== Revenue 59.070 57,457 114,766 ====== Cost of sales (38,089) (36,611) (73,792) ============================================ ====== =========== =========== ============
Gross profit 20,981 20,846 40,974 ====== Distribution expenses (2,288) (2,159) (4,428) ============================================ ====== =========== =========== ============ Administrative expenses before separately disclosed items: (15,269) (14,374) (27,960) - separately disclosed items 3 (987) (690) (12,966) ============================================ ====== =========== =========== ============ Total administrative expenses (16,256) (15,064) (40,926) Operating profit / (loss) 2,437 3,623 (4,380) Financial expenses (813) (474) (1,192) ============================================ ====== =========== =========== ============ Profit / (loss) from continuing operations before tax 1,624 3,149 (5,572) Taxation 4 (220) (542) (680) ============================================ ====== =========== =========== ============ Profit / (loss) from continuing operations 1,404 2,607 (6,252) ============================================ ====== =========== =========== ============ Earnings per share 5 Basic earnings per share - continuing operations 2.28p 4.24p (10.17p) ============================================ ====== =========== =========== ============ Diluted earnings per share - continuing operations 2.28p 4.19p (10.17p) ============================================ ====== =========== =========== ============ CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30 June 2023 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30-June 31-December 2023 2022 2022 GBP000 GBP000 GBP000 ======================== =========== ============ Profit for the period 1,404 2,607 (6,252) Other comprehensive income Items that will be reclassified subsequently to profit or loss -Exchange differences on translating foreign operations (225) 153 318 ============================================== ======================== =========== ============ Total comprehensive income in the period 1,179 2,760 (5,934) ============================================== ======================== =========== ============ CONSOLIDATED STATEMENT OF FINANCIAL POSITION At 30 June 2023 Unaudited Unaudited Audited 30 June 30 June 31 December 2023 2022 2022 GBP000 GBP000 GBP000 ========================================= ---------- ---------- ------------- Assets Non-current assets Goodwill 53,092 63,164 53,092 Other intangible assets 2,979 4,107 3,523 Right of use assets 5,921 6,805 6,091 Property, plant, and equipment 7,900 6,904 7,234 ========================================= ========== ========== ============= Total non-current assets 69,892 80,980 69,940 ========================================= ========== ========== ============= Current assets Inventories 30,843 34,731 31,486 Trade and other receivables 25,257 24,293 24,620 Prepayments 1,130 1,129 387 Cash and cash equivalents 4,446 273 3,972 ========================================= ========== ========== ============= Total current assets 61,676 60,426 60,465 ========================================= ========== ========== ============= Liabilities Current liabilities Interest bearing borrowings - - 19,967 Lease liability 1,453 1,868 1,705 Trade and other payables 20,248 20,539 19,569 Tax Payable 1,123 1,154 1,219 ========================================= ========== ========== ============= Total current liabilities 22,824 23,561 42,460 ========================================= ========== ========== ============= Net current assets 38,852 36,865 18,005 ========================================= ========== ========== ============= Non-current liabilities Interest-bearing borrowings 19.889 19,947 - Lease liability 4,705 5,178 5,008 Provisions 339 302 317 Deferred tax liabilities 1,196 1,437 1,281 ========================================= ========== ========== ============= Total non-current liabilities 26,129 26,864 6,606 ========================================= ========== ========== ============= Net assets 82,615 90,981 81,339 ========================================= ========== ========== ============= Equity directly attributable to owners of the parent Share capital 30,746 30,746 30,746 Share premium 60,959 60,959 60,959 Other reserves 187 187 187 Shares owned by the Employee Benefit Trust (EBT) (124) (141) (124) Merger reserve 293 293 293 Merger relief reserve 3,646 3,646 3,646 Currency translation reserve (66) 66 159 Retained losses (13,026) (4,775) (14,527) ========================================= ========== ========== ============= Total equity attributable to the owners of the parent company 82,615 90,981 81,339 ========================================= ========== ========== ============= CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2022 Share Share Other Shares Merger Merger Currency Retained Total capital premium reserves owned reserve relief translation losses equity by EBT reserve reserve GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 Six months ended 30 June 2023 Unaudited ============================================================================================= Balance at 1 January 2023 30,746 60,959 187 (124) 293 3,646 159 (14,527) 81,339 ======== ======== ========= ======= ======== ======== ============ ========= ======== Profit for the period 1,404 1,404 ======== ======== ========= ======= ======== ======== ============ ========= ======== Other comprehensive income (225) - (225) ======== ======== ========= ======= ======== ======== ============ ========= ======== Total comprehensive income for the year (225) 1,404 1,179 ======== ======== ========= ======= ======== ======== ============ ========= ======== Transaction with owners ======== ======== ========= ======= ======== ======== ============ ========= ======== Share options settled ======== ======== ========= ======= ======== ======== ============ ========= ======== Share-based payment charge 97 97 ======== ======== ========= ======= ======== ======== ============ ========= ======== Balance at 30 June
2023 30,746 60,959 187 (124) 293 3,646 (66) (13,026) 82,615 ======== ======== ========= ======= ======== ======== ============ ========= ======== Six months ended 30 June 2022 unaudited ============================================================================================= Balance at 1 January 2022 30,746 60,959 187 (276) 293 3,646 (286) (7,267) 88,002 ======== ======== ========= ======= ======== ======== ============ ========= ======== Profit for the period 2,607 2,607 ======== ======== ========= ======= ======== ======== ============ ========= ======== Other comprehensive income - - - - - - 352 (199) 153 ======== ======== ========= ======= ======== ======== ============ ========= ======== Total comprehensive income for the year - - - - - - 352 2,408 2,760 ======== ======== ========= ======= ======== ======== ============ ========= ======== Transaction with owners ======== ======== ========= ======= ======== ======== ============ ========= ======== Share-based payment charge 135 (19) 116 ======== ======== ========= ======= ======== ======== ============ ========= ======== Share options settled - - - - - - - 103 103 ======== ======== ========= ======= ======== ======== ============ ========= ======== Balance at 30 June 2022 30,746 60,959 187 (141) 293 3,646 66 (4,775) 90,981 ======== ======== ========= ======= ======== ======== ============ ========= ======== Twelve months ended 31 December 2022 audited ============================================================================================= Balance at 1 January 2022 30,746 60,959 187 (276) 293 3,646 (286) (7,267) 88,002 ======== ======== ========= ======= ======== ======== ============ ========= ======== Profit or the year - - - - - - - (6,252) (6,252) ======== ======== ========= ======= ======== ======== ============ ========= ======== Other comprehensive income - - - - - - 318 - 318 ======== ======== ========= ======= ======== ======== ============ ========= ======== Total comprehensive income for the year - - - - - - 318 (6,252) (5,934) ======== ======== ========= ======= ======== ======== ============ ========= ======== Transaction with owners: ======== ======== ========= ======= ======== ======== ============ ========= ======== Shares options settled - - - 152 - - - (25) 127 ======== ======== ========= ======= ======== ======== ============ ========= ======== Share-based payment charge - - - - - - - 372 372 ======== ======== ========= ======= ======== ======== ============ ========= ======== Dividends paid - - - - - - - (1,228) (1,228) ======== ======== ========= ======= ======== ======== ============ ========= ======== Transfers between reserves - - - - - - 127 (127) - ======== ======== ========= ======= ======== ======== ============ ========= ======== Total transactions with owners - - - 152 - - 127 (1,008) (729) ======== ======== ========= ======= ======== ======== ============ ========= ======== Balance at 31 December 2022 30,746 60,959 187 (124) 293 3,646 159 (14,527) 81,339 ======== ======== ========= ======= ======== ======== ============ ========= ======== CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30 June 2023 Note Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2023 2022 2022 GBP000 GBP000 GBP000 Net cash from operating activities 6 3,607 (2,505) 5,014 =============================================== ===== =========== =========== ============ Cash flow from investing activities ===== Acquisition of property, plant, and equipment (1,340) (683) (1,645) ===== Acquisition of intangible assets - (62) (212) Proceeds from sale of property, plant, and equipment 3 34 65 =============================================== ===== =========== =========== ============ Net cash used in investing activities (1,337) (711) (1,792) =============================================== ===== =========== =========== ============ Cash flows from financing activities Repayment of lease liabilities (880) (830) (1,673) Interest on lease liabilities (116) (118) (227) Other interest (776) (336) (925) Proceeds from sale of shares held by EBT - 155 172 Dividends paid - - (1,228) =============================================== ===== =========== =========== ============ Net cash generated from / (used in) financing activities (1,772) (1,129) (3,881) =============================================== ===== =========== =========== ============ Net change in cash and cash equivalents 498 (4,345) (659) Cash and cash equivalents at start of period 3,972 4,562 4,562 ===== Exchange differences on cash and cash equivalents (24) 56 69 =============================================== ===== =========== =========== ============ Cash and cash equivalents at end of period 4,446 273 3,972 =============================================== ===== =========== =========== ============ Short-term Long-term Lease liabilities Total borrowings borrowings GBP000 GBP000 GBP000 GBP000 ============ ============ ================== ======= At 1 January 2023 19,967 - 6,713 26,680 Cash flows Repayment - - (880) (880) Movement between short-term and long-term (19,967) 19,967 - - Other movements - (78) 358 280 Non-cash Foreign exchange - - (33) (33) =========================================== ============ ============ ================== ======= At 30 June 2023 - 19,889 6,158 26,047 =========================================== ============ ============ ================== ======= NOTES TO THE HALF-YEAR REPORT For the six months ended 30 June 2023 1. General information =================================================================================== The principal activity of Flowtech Fluidpower plc (the "Company") and its subsidiaries (together, the "Group") is the distribution of engineering components and assemblies, concentrating on the fluid power industry. The Company is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is Bollin House, Wilmslow,
SK9 1DP. The registered number is 09010518. As permitted, this Half-year report has been prepared in accordance with the AIM rules and not in accordance with IAS 34 "Interim Financial Reporting". The consolidated financial statements are prepared under the historical cost convention, as modified by the revaluation of certain financial instruments. This consolidated Half-year report and the financial information for the six months ended 30 June 2023 does not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited. This unaudited Half-Year Report was approved by the Board of Directors on 29 August 2023. The Group's financial statements for the year ended 31 December 2022 have been filed with the Registrar of Companies. The Group's auditor's report on these financial statements was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. Electronic communications The Company does not intend to bulk print and distribute hard copies of this Half-year report, although copies can be requested by contacting: The Company Secretary, Flowtech Fluidpower plc, Bollin House, Bollin Walk, Wilmslow, SK9 1DP. Email: info@flowtechfluidpower.com . The Board believes that by utilising electronic communication it delivers savings to the Company in terms of administration, printing and postage, and environmental benefits through reduced consumption of paper and inks, as well as speeding up the provision of information to shareholders. News updates, regulatory news, and financial statements can be viewed and downloaded from the Group's website https://www.flowtechfluidpower.com . 2. aCCOUNTING POLICIES ============================================================================================= 2.1 Basis of preparation The financial information set out in this consolidated Half-year report has been prepared under International Accounting Standards in conformity with the requirements of the IFRIC interpretations issued by the International Accounting Standards Board (IASB) and the Companies Act 2006 and in accordance with the accounting policies which will be adopted in presenting the Group's Annual Report and Financial Statements for the year ended 31 December 2023. These are consistent with the accounting policies used in the Financial Statements for the year ended 31 December 2022. 2.2 Going concern The financial statements are prepared on a going concern basis. The Directors believe this to be the most appropriate basis for the following reasons: * The Group generated underlying operating profit of GBP3.4m. * The Group is financed by revolving credit facilities totaling GBP20m (extended to February 2026) and GBP5m overdraft facility, repayable on demand. * The Group has operated, and is expected to continue to operate, well within its Banking facilities. The Directors have revisited the forecasts and continue to anticipate a profitable performance in the second half of 2023. Updated cash flow forecasts continue to show the business operating well within the limits of its Banking facilities. Naturally, these forecasts include a number of key assumptions notably relating, inter alia, to revenue, margins, costs and working capital. In any set of forecasts there are inherent risks relating to each of these assumptions. If future trading performance significantly underperformed expectations, management believe there would be the ability to mitigate the impact of this by careful management of the Group's cost base and working capital and that this would assist in seeking to ensure all bank covenants were complied with and the business continued to operate well within its aggregate GBP25m banking facility. The Group therefore continues to adopt the going concern basis in preparing its financial statements. 3. OPERATING SEGMENTS ======================
The operations of the business are reviewed based on three segments - Flowtech, Fluidpower Group Solutions and Fluidpower Group Services (as explained in note 2.18 of the Annual report 2022). These operating segments are monitored by the Group's Chief Operating Decision Maker and strategic decisions are made on the basis of adjusted segment operating results. Inter-segment revenue arises on the sale of goods between Group undertakings.
Segment information for the reporting periods is as follows:
Half year ended 30 June 2023 Flowtech Fluidpower Fluidpower Inter-segmental Central Total Group Group Services transactions Costs continuing Solutions GBP000 GBP000 operations GBP000 GBP000 GBP000 GBP000 Income statement - continuing operations: Revenue from external customers 26,606 22,019 10,445 - - 59,070 Inter segment revenue 1,177 541 375 (2,093) - Total revenue 27,783 22,560 10,820 (2,093) 59,070 Underlying operating result* 2,275 2,462 1,202 - (2,515) 3,424 Net financing costs (34) (75) (3) - (701) (813) Underlying segment result 2,241 2,387 1,199 - (3,216) 2,611 Separately disclosed items (see below) (205) (307) (66) (409) (987) Profit before tax 2,036 2,080 1,133 - (3,625) 1,624 Specific disclosure items Depreciation on owned plant ,property and equipment 477 83 85 - - 645 Depreciation on right-of-use assets 386 394 35 - 65 880 Amortisation 200 288 57 - - 545 Reconciliation of underlying operating result to operating profit: Underlying operating result* 2,275 2,462 1,202 - (2,515) 3,424 Separately disclosed items (see below) (205) (307) (66) - (409) (987) Operating profit/ (loss) 2,070 2,155 1,136 - (2,924) 2,437 ================================= ========= =========== ================ ================ ======== ============
(*) Underlying operating result is continuing operations' operating profit before separately disclosed items
The Directors believe that the Underlying Operating Profit provides additional useful information on underlying trends to Shareholders. The term 'underlying' is not a defined term under IFRS and may not be comparable with similarly titled profit measurements reported by other companies. A reconciliation of the underlying operating result to operating result from continuing operations is shown below. The principal adjustments made are in respect of the separately disclosed items as detailed later in this note; the Directors consider that these should be reported separately as they do not relate to the performance of the segments.
Segment information for the half year ended June 2022 has been re-stated following the movement of Primary Components, excluding OEM customers, from Fluidpower Group Solutions to Flowtech, as this reflects the information reported to the Chief Operating Decision Maker. Segment information for the year ended December 2022 has also been restated to include sales from OEM customers within the Solutions segment. Some overheads costs relating to Divisional management have been re-categorised as segment operating overheads to present a more comparable segment result. The re-statement of the prior year periods does not impact Group profitability.
(*) Underlying operating result is continuing operations' operating profit before separately disclosed items
Half year ended 30 June 2022 Flowtech Fluidpower Fluidpower Inter-segmental Central Total Group Group Services transactions Solutions (re-stated) GBP000 GBP000 GBP000 costs continuing operations GBP000 GBP000 GBP000 Income statement - continuing operations: Revenue from external customers 28,192 19,749 9,516 - - 57,457 Inter segment revenue 863 652 409 (1,924) - - Total revenue 29,055 20,401 9,925 (1,924) - 57,457
Underlying operating result* 3,617 2,707 234 - (2,245) 4,313 Net financing costs (72) (31) (8) - (363) (474) Underlying segment result 3,545 2,676 226 - (2,608) 3,839 Separately disclosed items (see below) (108) (335) (57) - (190) (690) Profit before tax 3,437 2,340 169 - (2,798) 3,149 Specific disclosure items Depreciation on owned plant ,property and equipment 509 77 85 - - 671 Depreciation on right-of-use assets 355 322 72 - 99 848 Amortisation 108 307 57 - - 472 Reconciliation of underlying operating result to operating profit: Underlying operating result* 3,617 2,707 234 - (2,245) 4,313 Separately disclosed items (see below) (108) (335) (57) - (190) (690) Operating profit/ (loss) 3,509 2,372 177 - (2,435) 3,623 =============================== ========== ============ =============== ================= ========= ============= Reconciliation of re-stated Flowtech Fluidpower Fluidpower Inter-segmental Central Total segment information for the Group Group Services transactions costs continuing half year ended 30 June 2022 Solutions GBP000 GBP000 operations to prior year report GBP000 GBP000 GBP000 GBP000 ========= ============ =============== ================= ========= ============= Revenue as per prior year report 27,614 21,842 9,925 (1,924) 57,457 Revenue from Primary components non-OEM customers categorised to Flowtech Segment 1,441 (1,441) - - - - Total re-stated revenue 29,055 20,401 9,925 (1,924) - 57,457 Underlying operating results in prior year report 3,725 2,952 328 - (2,692) 4,313 Underlying operating result for Primary Components categorised to Flowtech Segment 10 (10) - - - - Re-allocation of costs between segments (118) (235) (94) - 447 - Underlying operating results, re-stated 3,617 2,707 234 - (2,245) 4,313 ================================ ========= ============ =============== ================= ========= ============= For the year ended 31 December Flowtech Fluidpower Fluidpower Inter-segmental Central Total 2022 Group Group Services transactions Solutions (re-stated) GBP000 GBP000 GBP000 costs continuing operations GBP000 GBP000 GBP000 Income statement - continuing operations: Revenue from external customers 53,273 40,368 21,125 - - 114,766 Inter segment revenue 1,706 1,008 868 (3,582) - Total revenue 54,979 41,376 21,993 (3,582) 114,766 Underlying operating result* 6,206 5,086 1,804 - (4,510) 8,586 Net financing costs (141) (68) (5) - (978) (1,192) Underlying segment result 6,065 5,018 1,799 - (5,488) 7,394 Separately disclosed items (see below) (8,240) (785) (3,329) - (612) (12,966) Profit / (loss) before tax (2,175) 4,233 (1,530) - (6,100) (5,572) Specific disclosure items Depreciation and impairment on owned plant, property and equipment 867 157 179 - 2 1,205 Depreciation on right-of-use assets 707 695 73 - 195 1,670 Impairment of goodwill 7,105 - 2,967 - - 10,072 Impairment of acquired intangibles - - 168 - - 168 Amortisation 230 683 124 - - 1,037 Reconciliation of underlying operating result to operating profit: Underlying operating result* 6,206 5,086 1,804 - (4,510) 8,586 Separately disclosed items (see below) (8,240) (785) (3,329) - (612) (12,966) Operating profit/ (loss) (2,034) 4,301 (1,525) - (5,122) (4,380) ================================= ========== ============ =============== ================= ========= =============
(*) Underlying operating result is continuing operations' operating profit before separately disclosed items
Reconciliation of re-stated Flowtech Fluidpower Fluidpower Inter-segmental Central Total segment information for the Group Group Services transactions costs continuing year ended 31 December 2022 Solutions GBP000 GBP000 operations to prior year report GBP000 GBP000 GBP000 GBP000 Revenue as per prior year report 57,271 39,084 21,993 (3,582) - 114,766 Revenue from former Primary components OEM customers categorised from the Flowtech Segment (2,292) 2,292 - - - - Total re-stated revenue 54,979 41,376 21,993 (3,582) - 114,766 Underlying operating results in prior year report 6,887 4,405 1,804 - (4,510) 8,586 Underlying operating result from Primary Components OEM customers categorised from the Flowtech Segment (681) 681 - - - - Underlying operating results, re-stated 6,206 5,086 1,804 - (4,510) 8,586 ================================== ========= =========== ================ ================ ======== ============ Six months Six months Year ended ended ended 31 December 30 June 30 June 2022 2023 2022 GBP000 SEPARATELY DISCLOSED ITEMS GBP000 GBP000 ============================================ ====================== ====================== ======================== Separately disclosed items within administrative expenses: Acquisition costs 8 3 10 Amortisation of acquired intangibles 452 472 943 Impairment of acquired intangibles - - 168 Impairment of goodwill - - 10,072 Share-based payment costs 97 103 372 Restructuring costs 430 112 1,401 ============================================ ====================== ====================== ======================== Total 987 690 12,966
============================================ ====================== ====================== ======================== * Acquisition costs relate to outline research into potential acquisition opportunities which are presented to us * Share-based payment costs relate to the provision made in accordance with IFRS 2 "Share-based payment" following the issue of share options to employees * Restructuring costs related to restructuring activities of an operational nature following acquisition of business units and other restructuring activities in established businesses. Costs include restructuring advice, service contract termination costs and employee redundancies 4. TAXATION ============================================================================================ Six months Six months Year ended ended ended 31 December 30 June 30 June 2022 2023 2023 GBP000 GBP000 GBP000 =================================================== =========== =========== ============= Current tax on income for the period - continuing operations: UK tax 61 511 734 Overseas tax 265 211 185 Adjustments in respect of prior periods/ other differences - (89) 9 Deferred tax charge (106) (91) (248) =================================================== =========== =========== ============= Total taxation 220 542 680 =================================================== =========== =========== ============= The taxation for the period has been calculated by applying the estimated tax rate for the financial year ending 31 December 2023. 5. EARNINGS PER SHARE ============================================================================================================================================================================================ Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive shares are those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. For diluted loss per share the weighted average number of ordinary shares in issue is not adjusted. ============================================================================================================================================================================================ Six months ended Six months ended Year ended ============ 30 June 2023 30 June 2022 31 December 2022 ============ ======================================================= ======================================================= ============================================================ Earnings Weighted Earnings Earnings Weighted Earnings Earnings Weighted Earnings average per average per average per share number share number share number of shares of shares of shares ============ GBP000 000's Pence GBP000 000's Pence GBP000 000's Pence ============ ================= ================== ================ ================= ================== ================ =================== ================== =================== Basic earnings per share Continuing operations 1,404 61,493 2.28 2,607 61,493 4.24 (6,252) 61,493 (10.17) ============ ================= ================== ================ ================= ================== ================ =================== ================== =================== Diluted earnings per share Continuing operations 1,404 61,673 2.28 2,607 62,236 4.19 (6,252) 61,770 (10.17) ============ ================= ================== ================ ================= ================== ================ =================== ================== =================== Six months Six months Year ended ended ended 31 December 30 June 30 June 2022 2023 2022 GBP000 GBP000 GBP000 ============================================ ====================== ====================== ======================== Weighted average number of ordinary shares for basic and diluted earnings per share 61,493 61,493 61,493 Impact of share options 180 743 277 ============================================ ====================== ====================== ======================== Weighted average number of ordinary shares for diluted earnings per share 61,673 62,236 61,770 ============================================ ====================== ====================== ======================== 6. NET CASH FROM OPERATING ACTIVITIES ====================================================================================================================== Six months Six months Year ended ended ended 31 December 30 June 30 June 2022 2023 2022 GBP000 GBP000 GBP000 ============================================ ====================== ====================== ======================== Reconciliation of profit before taxation to net cash flows from operations: Profit / (loss) from continuing operations before tax 1,624 3,149 (5,572) Depreciation and impairment on property, plant, and equipment 645 671 1,205 Depreciation on right-of-use assets (IFRS 16) 880 848 1,670 Impairment of right-of-use assets (IFRS16) - - 388 Release of lease liability (IFRS16) (387) - - Finance costs 890 474 1,192 (Gain) / Loss on sale of plant and equipment 2 (24) 57 Loan arrangement fee charged to income (77) - - statement Amortisation of intangible assets 545 472 1,037 Impairment of intangible assets - - 168 Impairment of goodwill - - 10,072 Settled share options - (40) (42) Equity settled share-based payment charge 97 103 372
Exchange differences on non-cash balances (56) - 65 ============================================ ====================== ====================== ======================== Operating cash inflow before changes in working capital and provisions 4,163 5,653 10,612 Change in trade and other receivables (1,664) (3,316) (2,945) Change in stocks 601 (4,099) (738) Change in trade and other payables 804 (642) (1,702) Change in provisions 24 (7) 7 ============================================ ====================== ====================== ======================== Cash generated from operations 3,928 (2,411) 5,234 Tax paid / (reclaimed) (321) (94) (220) ============================================ ====================== ====================== ======================== Net cash generated / (used) from operating activities 3,607 (2,505) 5,014 ============================================ ====================== ====================== ======================== 7. PRINCIPAL RISKS AND UNCERTAINTIES ================================================================================= In common with all organisations, Flowtech faces risks which may affect its performance. The Group operates a system of internal control and risk management to provide assurance that we are managing risk whilst achieving our business objectives. No system can fully eliminate risk and therefore the understanding of operational risk is central to management processes. The long-term success of the Group depends on the continual review, assessment, and control of the key business risks it faces. The Directors set out in the 2022 Annual Report and Financial Statements the principal risks identified during this exercise, including quality control, systems and site disruption and employee retention. The Board does not consider that these risks have changed materially in the last six months. 8. FORWARD-LOOKING STATEMENTS =============================================================================== This document contains certain forward-looking statements which reflect the knowledge and information available to the Company during the preparation and up to the publication of this document. By their very nature, these statements depend upon circumstances and relate to events that may occur in the future thereby involving a degree of uncertainty. Although the Group believes that the expectations reflected in these statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Given that these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no obligation to update any forward-looking statements whether because of new information, future events or otherwise. ENQUIRIES: ======================================= ============================================================================= Flowtech Fluidpower plc Registered Office: Mike England, Chief Executive Officer Bollin House, Bollin Walk, Russell Cash, Chief Financial Officer Wilmslow, Cheshire, SK9 Tel: +44 (0) 1695 52759 1DP email: info@flowtechfluidpower.co m website: www.flowtechfluidpower.com Liberum Capital Limited (Nominated adviser and Sole Broker) Richard Lindley / Ben Cryer / Will King Tel: 44 (0) 20 3100 2000 TooleyStreet Communications (IR and media relations) Fiona Tooley Tel: +44 (0) 7785 703523 or email : fiona@tooleystreet.com
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