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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 | |
---|---|---|---|---|---|---|---|---|---|---|
-4.00 | -3.48% | 111.00 | 110.00 | 112.00 | 114.50 | 110.00 | 110.50 | 43,087 | 16:35:21 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Fluid Powr Cylindrs,actuatrs | 112.1M | -12.13M | -0.1973 | -5.58 | 67.64M |
TIDMFLO
RNS Number : 0485B
Flowtech Fluidpower PLC
18 September 2018
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, 18 September 2018
FLOWTECH FLUIDPOWER PLC
Specialist full service supplier of technical fluid power products and services
(Flowtech, the Group or Company)
"We are again pleased to report further significant progress in the development of the Group during the first half of 2018 with acquisitions having also contributed significantly towards growth in sales and underlying operating profits."
HALF YEAR REPORT
FOR THE SIX MONTHSED 30 JUNE 2018
HY2018 HY2017 GROWTH 30.6.18 30.6.17 % FINANCIAL HIGHLIGHTS unaudited unaudited ========================================= =========== =========== ======= * REVENUE GBP56.422m GBP34.173m 65.1% * UNDERLYING OPERATING RESULT GBP5.701m GBP4.504m 26.6% * OPERATING PROFIT GBP4.153m GBP3.392m 22.4% * HALF-YEAR DIVID 2.03p 1.93p 5.2% * EARNINGS PER SHARE (basic) 5.78p 5.22p 10.7% * NET DEBT GBP18.0m GBP8.4m 114.3% OPERATIONAL HIGHLIGHTS ===================================================================================== * REVENUE AGAIN REFLECTS GROWTH ACROSS ALL DIVISIONS * COMPLETED ACQUISITION OF DIRECT COMPETITORS IN THE UK - BEAUMANOR FLUIDPOWER AND DEREK LANE * GBP11.0 MILLION CASH PLACING COMPLETED * GROSS MARGIN % REMAINS STRONG AT 36.1% * 26.6% GROWTH IN UNDERLYING OPERATING PROFIT * DIVID INCREASED IN LINE WITH PREVIOUS COMMITMENTS POST PERIOD HIGHLIGHT * REVISED LEADERSHIP TEAM FOR NEXT STAGE OF BUSINESS DEVELOPMENT "Our activities have created many more opportunities to grow through acquisition and we plan to take advantage of this in the medium to long term. However, in the short term it is appropriate to work with the infrastructure we presently have and continue to focus on delivering on our four layered synergy approach - back office, procurement, operational efficiency and commercial. We constantly seek to learn from the experiences, both positive and challenging, observed in each deal, and we strive to build a team attitude to risk management. However, our key experience to date is that our philosophy of allowing individual trading units to continue to trade independently under the umbrella of a "shared services" organisation, is giving us significant commercial traction post deal, with employee engagement established and, in many cases, enhanced." "Our markets have experienced a strong period of growth over 2017 and early 2018, and we have been able to enhance this with our own commercial activities, again bolstered by the benefits from our acquisition programme. Whilst recent trading has remained positive, there are some signs, particularly in some engineering businesses, that growth may be softening. As such while we remain confident in the prospects for the future growth in both our markets, and the enhancement our coordinated activities will bring, we are cautious about prospects in the short term until clarity is achieved on the post - Brexit UK economy. Beyond this short-term view, the Board remains confident in the overall Group strategy being adopted." MALCOLM DIAMOND, NON-EXECUTIVE CHAIRMAN Presentation of HY results: a conference call facility will be held today at 09.30hrs (UK time) - dial in details can be obtained by calling +44 (0) 7785 703523 or emailing fiona@tooleystreet.com ENQUIRIES: =================================================================== FLOWTECH FLUIDPOWER PLC Malcolm Diamond MBE, Non-Executive Chairman Bryce Brooks, Chief Executive Officer and Chief Financial Officer Today: +44 (0) 20 7220 0500 or +44 (0) 20 3829 5000 Thereafter: Tel: +44 (0) 1695 52796 Email: info@flowtechfluidpower.com Zeus Capital Limited (Nominated Adviser and Joint Broker) Andrew Jones, Alistair Donnelly (corporate finance) Dominic King, John Goold (sales and broking) Tel: +44 (0) 20 3829 5000 FinnCap Ltd (Joint Broker) Ed Frisby, Kate Bannatyne (corporate finance) Rhys Williams, Andrew Burdis (sales and broking) Tel: +44 (0) 20 7220 0500 TooleyStreet Communications (IR and media relations) Fiona Tooley Tel: +44 (0) 7785 703523 Email: fiona@tooleystreet.com FLOWTECH FLUIDPOWER PLC HALF YEAR REPORT FOR THE SIX MONTHSED 30 JUNE 2018 HALF YEAR FINANCIAL PERFORMANCE AND DIVISIONAL ANALYSIS We are again pleased to report further significant progress in the development of the Group during the first half of 2018, with four acquisitions completed in the second half of 2017 being Hi-Power, Orange County, Hydroflex Hydraulics and Group HES and more recently in March 2018, Beaumanor Fluidpower and Derek Lane & Co. These acquisitions have contributed significantly towards growth in sales of 65.1% and underlying operating profits of 26.6%. Revenue Six Six % Year months months Change ended ended ended 31 30 June 30 June December 2018 2017 2017 GBP000 GBP000 GBP000 ---------------------------------- ------------------- ------------------- ------------------- -------------------- Flowtechnology 23,483 19,336 21.4% 37,239 Power Motion Control 28,957 12,706 127.9% 34,806 Process 3,982 2,131 86.9% 6,242 ---------------------------------- ------------------- ------------------- ------------------- -------------------- Total Group revenue 56,422 34,173 65.1% 78,287 ---------------------------------- ------------------- ------------------- ------------------- -------------------- Gross profit % 36.1% 34.1% ---------------------------------- ------------------- ------------------- ------------------- -------------------- Although not defined under IFRS, the Directors believe that the underlying operating results give a better understanding of the business' profit performance. The table below details this is in summary and further information is contained in note 3 of this Report. Continuing operations Six Six % Year Underlying operating months months Change ended result* ended ended 31 30 June 30 June December
2018 2017 2017 GBP000 GBP000 GBP000 ---------------------------------- -------------------- -------------------- ------------------ -------------------- Flowtechnology 4,531 4,138 9.5% 7,524 Power Motion Control 1,901 1,088 74.7% 2,788 Process 537 278 93.2% 1,105 Total Divisions 6,969 5,504 26.6% 11,417 Central Costs (1,268) (1,000) 26.8% (2,336) ---------------------------------- -------------------- -------------------- ------------------ -------------------- Underlying operating result* 5,701 4,504 26.6% 9,081 ---------------------------------- -------------------- -------------------- ------------------ -------------------- *Underlying operating result is continuing operations' operating profit before the fair value uplift of inventory acquired through business combinations, acquisition costs, amortisation of acquired intangibles, share-based payment costs and restructuring costs. Underlying operating result is reconciled to statutory profit before tax in note 3 to the HY Report. Flowtechnology - the original core operation of the Group's portfolio has now been further strengthened with the acquisition of its competitor, Beaumanor Fluidpower. We are pleased to report that in the six months since the deal was completed the Beaumanor business has traded strongly. Our decision to continue operating as an autonomous trading brand has underpinned strong engagement in the business by staff and customers alike and ensured service levels have remained high. This has given us a good basis from which to move forward with synergy initiatives, particularly with combining order requirements for generic product supported from the Far East. As detailed later in this Report, we are also currently reviewing projects with our IT advisory partners with regard to the transition to a common platform in the medium-term, with the significant potential for further synergy in both warehousing costs and stock values, particularly in our Flowtechnology operations. Our Power Motion Control ("PMC") division was established in 2014 through the acquisition of Primary Fluid Power and, since then it has developed into a broad based fluidpower division, focused on hydraulic component distribution and engineering. The result for the first half of the year represents a period of steady progress with comparisons for previous years boosted by the acquisitions of Hi-Power, Group HES and Hydroflex Hydraulics in 2017, and Derek Lane & Co. in 2018. This division is predominantly focused on supplying OEMs and broader manufacturing environments which have also performed well during the first half of 2018. The Process Division covers the Hydravalve and Orange County profit centres, both of which have traded favourably in the period. The sector represents an area with huge potential for development, with valves and actuators alone accounting for an estimated 46% of the EUR12.6bn European fluidpower market, and whilst in the past three years acquisition activity has focused on progressing our Flowtechnology and PMC operations, the Board expects to take advantage of the many options for further expansion in this division in the years ahead. As previously announced the development of an Onsite Services division has not progressed as quickly as planned following the acquisition of Group HES in October 2017. Although the delivery of these services remains an important activity for the Group whether as a separate division or part of a larger operation the Board considers that a focus on a wider initiative to integrate activities within the PMC division sites, where opportunities to reduce operating costs, maximise technical capabilities and further improve our offer are clear. Consequently, Stuart Diesel, the previous owner and Managing Director of Group HES, has been asked to prioritise this initiative in preference to developing a stand-alone onsite services division for the time being. We look forward to updating on this project at the year end. Gross profit margins Overall Gross Margin %, one of our most important KPIs, has increased year on year by 2% to 36.1% (2017 H1: 34.1%) and on full year 2017 by 2.2%. The main factor behind these increases are mix related with our recent acquisitions being in high gross margin operations. However, it is important to note that amongst our legacy operations, Flowtechnology UK and Hydravalve we have seen some immediate benefit from co-ordinated activities in Q2 following the acquisition of Beaumanor. In the medium-term the Board believes that the broad spread of our offer, both in product, customer base and diverse trading sites will continue to provide resilience in this key measure in each division, particularly with the present apparent risk of further currency disruption post Brexit. OPERATING Costs In the first half of the year our underlying cost base can be analysed as follows: Unaudited Unaudited Audited Six months Six months Year ended ended ended 31 December 30 June 2018 30 June 2017 2017 GBP000 GBP000 GBP000 =============================== ============== ============== ============= Distribution expenses 2,090 1,452 3,175 As % of turnover 3.7% 4.2% 4.1% Administrative expenses*: -Divisional 11,291 4,698 11,973 % of turnover 20.0% 13.7% 15.3% -Central 1,268 1,000 2,336 % of turnover 2.2% 2.9% 3.0% Total administrative expenses 12,577 5,698 14,309 % of turnover 22.3% 16.6% 18.3% ------------------------------- -------------- -------------- ------------- *before separately disclosed items Distribution expenses are primarily costs paid to the various parcel and pallet carriers, principally FedEx, across the Group, and have moved in line with the mix of activities.
Administrative costs at Divisional level represent the operational infrastructure to run the Group's trading activities and after our prolonged period of acquisition activity is now spread across 29 sites in the UK, Ireland and the Netherlands. The increase in proportion of turnover (being from 13.7% to 20.0%) is largely mix related amongst our newer acquisitions when compared to our legacy operations and illustrates the potential for cost reduction initiatives over the medium term, and therefore the Board is confident that the prospects for the rationalisation of our operational cost base remain good. This will be an important measure for the newly established Executive team in 2019 and beyond. At Central cost level, which covers Service Centre activities such as accounting, as well as costs associated with operating the PLC, the Board is continuing to ensure that personnel are recruited to cover not just for today, but to provide resilience for the expected growth in the future. FINANCIAL POSITION INCLUDING CASH FLOW AND BANK DEBT After reaching a peak during Q2, inventory has fallen and the outlook for the remainder of 2018 and early next year is positive as the Group looks to leverage off the benefits of being a multi-site organisation. Trade Receivables at 30 June 2018 were GBP27.2m and clearly represent a significant element of our working capital. Credit collection resources remain spread across the Group, and with this is in mind the new position of Group Credit Manager has been created with an appointment expected in early Q4. The remit will be to ensure we improve cash collection efficiencies where possible. With a combined inventory and Trade Receivables value of over GBP55m, the Board is determined to use the benefits of being part of an integrated Group to optimise our working capital position over the short to medium term, whilst retaining a customer centric focus and high service offer at Profit Centre level. Away from this, the Group has continued to service its commitments in terms of dividend payments, under various deferred arrangements and, has worked effectively within bank facilities and covenants. BOARD UDPATE The Board changes announced earlier today are set out in a separate announcement. http://www.rns-pdf.londonstockexchange.com/rns/0485B_1-2018-9-18.pdf OUR PEOPLE After the period of significant growth, we have seen since coming to market in 2014, we are now able to call on a wide range of skilled directors and managers who lead our operations at local and group level. A key initiative over the next year and into the future, will be to ensure that these leaders, many of whom have come from previously family owned organisations, have access to the high quality training and mentoring resources that can be obtained as part of a public company, and we firmly believe the likelihood of significant return in both employee engagement and financial return is compelling. OUR BUSINESS STRATEGY FOR GROWTH Our placing in Spring 2018 for GBP11m allowed us to complete the acquisition of Balu Ltd, with its two trading subsidiaries Beaumanor Fluidpower and Derek Lane. After our previous placing for GBP10m in March 2017, and a series of twelve acquisitions starting in August 2014 with Primary Fluid Power the Group has established a strong commercial position in the UK and Irish markets, and a good position in the Benelux from which to expand. Our activities have created many more opportunities to grow through acquisition and we plan to take advantage of this in the medium to long term. However, in the short term it is appropriate to work with the infrastructure we presently have and continue to focus on delivering on our four layered synergy approach - back office, procurement, operational efficiency and commercial. We constantly seek to learn from the experiences, both positive and challenging, observed in each deal, and we strive to build a team attitude to risk management. However, our key experience to date is that our philosophy of allowing individual trading units to continue to trade independently under the umbrella of a "shared services" organisation, is giving us significant commercial traction post deal, with employee engagement established and, in many cases, enhanced. On the flip side, there remain important challenges around IT and accounting, with reporting to public company standards as well as the building of protections around cyber-crime, network and data security adding to local complexity, and to some degree, cost. INVESTMENT FOR THE FUTURE In late 2017, the Board engaged with our IT strategy advisor, PwC, to establish a clear framework on which to build a resilient plan for the future of our IT infrastructure. Whilst the plan that was subsequently approved was multi-faceted, there were essentially two clear building blocks. 1. A single IT system encompassing Business Process and Accounting must be the aim 2. The creation of a comprehensive cyber security framework and a resilient IT environment The strong belief of the Board is that the benefits of this simple approach are likely to be significant, both in operational efficiency - the drive to "best practice" - and the ability to leverage the value of the huge data pools on customers, products and suppliers that are held across the eight IT environments that we currently operate. Under the revised leadership team our plan is to move gradually towards this aim, whilst ensuring that local efficiency is not compromised. In short, the benefits of applying modern enterprise management systems, to industrial markets is clear, and now is the time to start to address this situation to further underpin our long-term growth strategy. The implementation of the first stage of this process - Sage X3 financials (now rebranded as Sage Enterprise Management) - is progressing well and is expected to significantly improve information flow in 2019. EARNINGS PER SHARE AND DIVID In the first half, earnings per share increased to 5.78p, from 5.22p in 2017. With the continued outlook for growth at "underlying" measures, the Board is pleased to declare a half year dividend of 2.03p (2017: 1.93p), a 5% increase. This interim dividend will be paid on 26 October 2018, to members on the Register at close of business on 28 September 2018. The shares will become ex-dividend on 27 September 2018. OUTLOOK Our markets have experienced a strong period of growth over 2017 and
early 2018, and we have been able to enhance this with our own commercial activities, again bolstered by the benefits from our acquisition programme. Whilst recent trading has remained positive, there are some signs, particularly in some engineering businesses, that growth may be softening. As such while we remain confident in the prospects for the future growth in both our markets, and the enhancement our coordinated activities will bring, we are cautious about prospects in the short term until clarity is achieved on the post - Brexit UK economy. In late 2017 we were awarded an order for cGBP1.5m to design, manufacture and supply several hydraulic cylinders and power units to an appointed sub-contractor on the Thames Tideway project. The expected completion date was mid - 2018, however due to delays we currently understand that this project is unlikely to complete before early 2019 and further, that the contractual liabilities to be assumed have been subject to revision, to a point where we are currently discussing both these terms and pricing. The Board is firmly of the view that we will not accept risk that is disproportionate to our potential return, and inconsistent with our normal activities. Our ability to replace such income in the short term is very limited and it is likely, therefore, to result in a Group performance at underlying operating profit level being marginally below market expectations for the year ending 31 December 2018. Beyond this short-term view, the Board remains confident in the overall Group strategy being adopted. After a short period to allow the new leadership/executive team to become established, the outlook for future growth remains strong. We will continue to keep investors informed over the coming months and will provide further information on progress in our Q3 Trading Update which we expect to announce on 23 October 2018. By order of the Board 17 September 2018 CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHSED 30 JUNE 2018 Unaudited Unaudited Audited Notes Six months Six months Year ended ended ended 31 December 30 June 2018 30 June 2017 2017 GBP000 GBP000 GBP000 ---------------------------------------- -------- -------------- -------------- ------------- Continuing operations Revenue 56,422 34,173 78,287 Cost of sales before separately disclosed items: (36,054) (22,519) (51,722) -Fair value uplift of inventory acquired through business 3 (211) - - combinations ---------------------------------------- -------- -------------- -------------- ------------- Gross profit 20,157 11,654 26,565 Distribution expenses (2,090) (1,452) (3,175) ---------------------------------------- -------- -------------- -------------- ------------- Administrative expenses before separately disclosed items: (12,577) (5,698) (14,309) -Acquisition costs 3 (444) (510) (1,081) -Amortisation of acquired intangibles 3 (470) (325) (768) -Share based payment costs 3 (102) (172) (272) -Restructuring costs 3 (18) (90) (117) -Change in amounts accrued for contingent consideration - (15) (229) ---------------------------------------- -------- -------------- -------------- ------------- Total administrative expenses (13,611) (6,810) (16,776) ---------------------------------------- -------- -------------- -------------- ------------- Operating profit 4,456 3,392 6,614 ---------------------------------------- -------- -------------- -------------- ------------- Financial income - - 6 Financial expenses (303) (282) (581) ---------------------------------------- -------- -------------- -------------- ------------- Net financing costs (303) (282) (575) ---------------------------------------- -------- -------------- -------------- ------------- Profit from continuing operations before tax 4,153 3,110 6,039 Taxation 4 (867) (634) (1,207) ---------------------------------------- -------- -------------- -------------- ------------- Profit from continuing operations after tax 3,286 2,476 4,832 ---------------------------------------- -------- -------------- -------------- ------------- Profit for the period attributable to the owners of the parent 3,286 2,476 4,832 ---------------------------------------- -------- -------------- -------------- ------------- Earnings per share Basic earnings/(loss) per share Continuing operations 5.78p 5.22p 9.69p Discontinued operations - - - ---------------------------------------- -------- -------------- -------------- ------------- Basic earnings per share 6 5.78p 5.22p 9.69p ---------------------------------------- -------- -------------- -------------- ------------- Diluted earnings/(loss) per share Continuing operations 5.73p 5.17p 9.58p Discontinued operations - - - ---------------------------------------- -------- -------------- -------------- ------------- Diluted earnings per share 6 5.73p 5.17p 9.58p ---------------------------------------- -------- -------------- -------------- ------------- CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHSED 30 JUNE 2018 Unaudited Unaudited Audited Six months Six months Year ended ended ended 31 December 30 June 2018 30 June 2017 GBP000 2017 GBP000 GBP000 ------------------------------------------------ -------------- ------------ ------------- Profit for the period 3,286 2,476 4,832 Other comprehensive income -Items that will be reclassified subsequently to profit or loss (28) -Exchange differences on translating foreign operations 16 72 279 ------------------------------------------------ -------------- ------------ ------------- Total comprehensive income in the period attributable to the owners of the parent 3,302 2,548 5,083 ------------------------------------------------ -------------- ------------ ------------- CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 Unaudited Unaudited Audited 30 June 2018 30 June 31 December GBP000 2017 2017 GBP000 GBP000 ---------------------------------------- ---- -------------- ----------- ------------- Assets Non-current assets Goodwill 62,781 51,609 57,938
Other intangible assets 7,369 4,893 7,430 Property, plant and equipment 6,959 4,344 6,070 ----------- Total non-current assets 77,109 60,846 71,438 ---------------------------------------------- -------------- ----------- ------------- Current assets Inventories 28,974 17,317 24,333 Trade and other receivables 27,217 16,625 20,866 Prepayments 1,554 807 800 Cash and cash equivalents 2,414 4,142 4,588 ---------------------------------------------- -------------- ----------- ------------- Total current assets 60,159 38,891 50,588 ---------------------------------------------- -------------- ----------- ------------- Liabilities Current liabilities Interest-bearing loans and borrowings 16,218 8,527 15,451 Trade and other payables 18,896 11,627 18,983 Deferred and contingent consideration 3,977 1,637 2,865 Tax payable 1,657 1,074 1,148 Other financial liabilities - - 11 ---------------------------------------------- -------------- ----------- ------------- Total current liabilities 40,748 22,865 38,458 ---------------------------------------------- -------------- ----------- ------------- Net current assets 19,411 16,026 12,130 ---------------------------------------------- -------------- ----------- ------------- Non-current liabilities Deferred and contingent consideration 1,704 476 2,706 Interest-bearing loans and borrowings 4,150 4,000 4,097 Provisions 350 204 341 Deferred tax liabilities 1,162 1,039 1,560 ---------------------------------------------- -------------- ----------- ------------- Total non-current liabilities 7,366 5,719 8,704 ---------------------------------------------- -------------- ----------- ------------- Net assets 89,154 71,153 74,864 ---------------------------------------------- -------------- ----------- ------------- Equity directly attributable to owners of the parent Share capital 30,438 25,830 26,409 Share premium 60,853 52,435 52,370 Share-based payment reserve 162 690 589 Other reserves 480 293 480 Shares owned by the Employee Benefit Trust (EBT) (413) (507) (40) Merger relief reserve 3,548 2,086 3,194 Currency translation reserve 552 329 536 Retained losses (6,466) (10,003) (8,674) ---------------------------------------------- -------------- ----------- ------------- Total equity 89,154 71,153 74,864 ---------------------------------------------- -------------- ----------- ------------- CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHSED 30 JUNE 2018 Share Share Share-based Other Merger Currency Shares Retained Total capital premium payment reserves relief translation owned losses equity reserve reserve reserve by EBT GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 -------- -------- ----------- --------- -------- ------------ ------- -------- ------- Six months ended 30 June 2018 unaudited ---------------------------- ------ ------ ------- --- ----- --- ------- --------- --------- Balance at 1 January (8,674) 2018 26,409 52,370 589 480 3,194 536 (40) 3,286 74,864 Profit for the period - - - - - - - - 3,286 Other comprehensive income - - - - - 16 - 16 ---------------------------- ------ ------ ------- --- ----- --- ------- --------- --------- Total comprehensive income for the period - - - - - 16 - 3,286 3,302 ---------------------------- ------ ------ ------- --- ----- --- ------- --------- --------- Transaction with owners Issue of share capital 4,029 8,483 - - 354 - - - 12,866 Purchase of minority shares held in subsidiary undertakings - - - - - - - (1,304) (1,304) Shares owned by the EBT Share-based payment charge - - - - - - (650) - (650) Share options settled - - 102 - - - - - 102 - - (529) - - - 277 226 (26) ---------------------------- ------ ------ ------- --- ----- --- ------- --------- --------- Total transactions with owners 4,029 8,483 (427) - 354 - (373) (1,078) 10,988 ---------------------------- ------ ------ ------- --- ----- --- ------- --------- --------- Balance at 30 June 2018 30,438 60,853 162 480 3,548 552 (413) (6,466) 89,154 ---------------------------- ------ ------ ------- --- ----- --- ------- --------- --------- Six months ended 30 June 2017 unaudited Balance at 1 January 2017 21,539 46,880 733 293 2,086 257 (338) (10,601) 60,849 Profit for the period - - - - - - - 2,476 2,476 Other comprehensive income - - - - - 72 - - 72 ------- ------- -------- ---- ------ ---- -------- ---------- ---------- Total comprehensive income for the period - - - - - 72 - 2,476 2,548 ------- ------- -------- ---- ------ ---- -------- ---------- ---------- Transaction with owners Issue of share capital 4,291 5,555 - - - - - - 9,846 Shares owned by the EBT - - - - - - (244) - (244) Share-based payment charge - - 172 - - - - - 172 Share options settled - - (215) - - - 75 - (140) Equity dividends paid (note 5) - - - - - - - (1,878) (1,878) ------- ------- -------- ---- ------ ---- -------- ---------- ---------- Total transactions with owners 4,291 5,555 (43) - - - (169) (1,878) 7,756 ------- ------- -------- ---- ------ ---- -------- ---------- ---------- Balance at 30 June 2017 25,830 52,435 690 293 2,086 329 (507) (10,003) 71,153 ------- ------- -------- ---- ------ ---- -------- ---------- ---------- Twelve months ended 31 December 2017 - audited Share Share Share-based Other Merger Currency Shares Retained Total capital premium payment reserves relief translation owned losses equity reserve reserve reserve by EBT GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 -------- -------- ----------- --------- -------- ------------ ------- -------- ------- Balance at 1 January 2017 21,539 46,880 733 293 2,086 257 (338) (10,601) 60,849 Profit for the year - - - - - - - 4,832 4,832 Other comprehensive loss - - - - - 279 - (28) 251 -------------------- -------- -------- ----------- --------- -------- ------------ ------- -------- ------- Total comprehensive income for the year - - - - - 279 - 4,804 5,083 -------------------- -------- -------- ----------- --------- -------- ------------ ------- -------- ------- Transactions with owners Issue of share
capital 4,870 5,490 - - 1,108 - - - 11,468 Shares options issued as consideration - - - 187 - - - - 187 Shares purchased by the EBT - - - - - - (246) - (246) Share-based payment charge - - 272 - - - - - 272 Share options settled - - (416) - - - 544 - 128 Equity dividends paid (note 5) - - - - - - - (2,877) (2,877) -------------------- -------- -------- ----------- --------- -------- ------------ ------- -------- ------- Total transactions with owners 4,870 5,490 (144) 187 1,108 - 298 (2,877) 8,932 -------------------- -------- -------- ----------- --------- -------- ------------ ------- -------- ------- Balance at 31 December 2017 26,409 52,370 589 480 3,194 536 (40) (8,674) 74,864 -------------------- -------- -------- ----------- --------- -------- ------------ ------- -------- ------- CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHSED 30 JUNE 2018 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 2018 30 June 2017 31 December GBP000 GBP000 2017 GBP000 Cash flow from operating activities Net cash from operating activities (2,341) 2,784 6,600 ----------------------------------------------- -------------- -------------- ------------- Cash flow from investing activities Acquisition of businesses, net of cash/(debt) acquired (7,371) (4,345) (11,798) Acquisition of property, plant and equipment (944) (669) (1,802) Proceeds from sale of property, plant and equipment 18 14 22 Payment of deferred and contingent consideration (2,220) (411) (1,649) ----------------------------------------------- -------------- -------------- ------------- Net cash used in investing activities (10,517) (5,411) (15,227) Cash flows from financing activities Net proceeds from the issue of share capital 10,220 9,602 9,531 Repayment of long-term borrowings - (429) (857) Net change in short term borrowings 1,000 (4,000) 3,000 Repayment of finance lease liabilities (110) (13) (58) Net cash settled share options (23) (140) - Interest received - - 6 Interest paid (288) (186) (476) Repayment of loan by EBT 276 - 722 Dividends paid - (1,878) (2,877) ----------------------------------------------- -------------- -------------- ------------- Net cash generated from / (used in) financing activities 11,075 2,956 8,991 ----------------------------------------------- -------------- -------------- ------------- Net change in cash and cash equivalents (1,783) 329 364 Cash and cash equivalents at start of period 4,199 3,824 3,824 Exchange differences on cash and cash equivalents (2) (11) 11 ----------------------------------------------- -------------- -------------- ------------- Cash and cash equivalents at end of period 2,414 4,142 4,199 ----------------------------------------------- -------------- -------------- -------------
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 borrowings borrowings liabilities Total GBP000 GBP000 GBP000 GBP000 ---------------------------- ------------ ------------ ------------- -------- At 1 January 2018 4,000 15,000 159 19,159 Cash flows: - Repayment - - (110) (110) - Proceeds - 1,000 - 1,000 Non-cash: - Acquisition - - 319 319 ---------------------------- ------------ ------------ ------------- -------- At 30 June 2018 4,000 16,000 368 20,368 ---------------------------- ------------ ------------ ------------- -------- NOTES TO THE HALF-YEAR REPORT FOR THE SIX MONTHSED 30 JUNE 2018 1 General information ======== ================================================================================ The principal activity of Flowtech Fluidpower plc (the "Company") and its subsidiaries (together, the "Group") is the distribution of engineering components, concentrating on the fluid power industry. The Company is incorporated and domiciled in the UK. The address of its registered office is Pimbo Road, Skelmersdale, Lancashire WN8 9RB. 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 Interim Report and the financial information for the six months ended 30 June 2018 does not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited. This unaudited Interim Report was approved by the Board of Directors on 17 September 2018. The Group's financial statements for the year ended 31 December 2017 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, www.flowtechfluidpower.com. Copies can also be requested from; The Company Secretary, Flowtech Fluidpower plc, Pimbo Road, Skelmersdale, Lancashire, WN8 9RB. email: info@flowtechfluidpower.com 2 aCCOUNTING POLICIES ======== ============================================================================== Basis of preparation The financial information set out in this consolidated Interim 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 2018. These are consistent with the accounting policies used in the Financial Statements for the year ended 31 December 2017, except for; * Taxes - taxes on income in the interim periods are accrued using the rate of tax that would be applicable to expected total annual earnings * Inventory acquired in business combinations has been measured at fair value as required by IFRS 3 (para 18) * IFRS 15 became effective on 1 January 2018, the standard has been implemented but has not had a material impact GOING CONCERN The Group meets its day-to-day working capital requirements through its bank facilities. The Directors have carefully considered the banking facilities and their future covenant compliance considering the current and future cash flow forecasts and they believe that the Group is appropriately positioned to ensure the conditions of its funding will continue to be met and therefore
enable the Group to continue in operational existence for the foreseeable future by meeting its liabilities as they fall due for payment. 3 OPERATING SEGMENTS ========= =================================================================================== The Group comprises the following three operating segments which are defined by trading activity: * Flowtechnology division - distribution and assembly of engineering components, principally to distributors and end users in the UK, the Republic of Ireland and the Benelux * Power Motion Control division - based in the UK and the Republic of Ireland, distribution and assembly of engineering components and hydraulic systems to distributors and end users in the international market * Process division - the distribution and supply of industrial components to the process sectors, principally in the UK 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: Power Inter-segmental Total Motion transactions Central continuing Flowtechnology Control Process GBP000 costs operations GBP000 GBP000 GBP000 GBP000 GBP000 ================ ========= ========== ================ ========== ============== Six months ended 30 June 2018 ---------------- --------- ---------- ---------------- ---------- -------------- Income statement - continuing operations: Revenue from external customers 23,483 28,957 3,982 - - 56,422 Inter segment revenue 1,034 190 62 (1,286) - - Total revenue 24,517 29,147 4,044 (1,286) - 56,422 ---------------- --------- ---------- ---------------- ---------- -------------- Underlying operating result 4,531 1,901 537 - (1,268) 5,701 Net financing costs (17) (6) (34) - (246) (303) ---------------- --------- ---------- ---------------- ---------- -------------- Underlying segment result 4,515 1,895 502 - (1,514) 5,398 Separately disclosed items (280) (381) (96) - (488) (1,245) ---------------- --------- ---------- ---------------- ---------- -------------- Profit/(loss) before tax 4,235 1,514 406 - (2,002) 4,153 ---------------- --------- ---------- ---------------- ---------- -------------- Specific disclosure items Depreciation 245 196 23 - - 464 Amortisation 10 364 96 - - 470 ---------------- --------- ---------- ---------------- ---------- -------------- Reconciliation of underlying operating result to operating profit: Underlying operating result Separately disclosed items 4,531 1,901 537 - (1,268) 5,701 (280) (381) (96) - (488) (1,245) ---------------- --------- ---------- ---------------- ---------- -------------- Operating profit/(loss) 4,251 1,520 441 - (1,756) 4,456 ---------------- --------- ---------- ---------------- ---------- -------------- Power Inter-segmental Total Motion transactions Central continuing Flowtechnology Control Process GBP000 costs operations GBP000 GBP000 GBP000 GBP000 GBP000 ================ ========= ========== ================ ========== ============== Six months ended 30 June 2017 Income statement - continuing operations: Revenue from external customers 19,336 12,706 2,131 - - 34,173 Inter segment revenue 823 159 40 (1,022) - - ---------------- --------- ---------- ---------------- ---------- -------------- Total revenue 20,159 12,865 2,171 (1,022) - 34,173 Underlying operating result 4,138 1,088 278 - (999) 4,504 Net financing costs - (10) (4) - (268) (282) ---------------- --------- ---------- ---------------- ---------- -------------- Underlying segment result 4,138 1,078 274 - (1,267) 4,222 Separately disclosed items (154) (48) - - (910) (1,112) ---------------- --------- ---------- ---------------- ---------- -------------- Profit/(loss) before tax 3,984 1,030 274 - (2,177) 3,110 ---------------- --------- ---------- ---------------- ---------- -------------- Specific disclosure items Depreciation 203 50 14 - - 267 Amortisation 10 271 44 - - 325 ---------------- --------- ---------- ---------------- ---------- -------------- Reconciliation of underlying operating result to operating profit: Underlying operating result Separately disclosed items 4,138 1,087 278 - (999) 4,504 (154) (48) - - (910) (1,112) Operating profit/(loss) 3,984 1,039 278 - (1,909) 3,392 Power Motion Inter-segmental Central Total continuing Flowtechnology Control Process transactions Costs operations GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ================================ ============== ======== ======= =============== ======= ================ For the year ended 31 December 2017 ================================ ============== ======== ======= =============== ======= ================ Income statement - continuing operations: Revenue from external customers 37,239 34,806 6,242 - - 78,287 Inter segment revenue 1,746 340 105 (2,191) - - -------------------------------- -------------- -------- ------- --------------- ------- ---------------- Total revenue 38,985 35,146 6,347 (2,191) - 78,287 -------------------------------- -------------- -------- ------- --------------- ------- ----------------
Underlying operating result 7,524 2,788 1,105 - (2,336) 9,081 Net financing costs (13) (15) (19) - (528) (575) -------------- -------- ------- --------------- ------- ---------------- Underlying segment result 7,511 2,773 1,086 - (2,864) 8,506 Separately disclosed items (103) (1,018) (200) - (1,146) (2,467) -------------- -------- ------- --------------- ------- ---------------- Profit/(loss) before tax 7,408 1,755 886 - (4,010) 6,039 -------------- -------- ------- --------------- ------- ---------------- Specific disclosure items Depreciation 447 179 24 - - 650 Amortisation 19 609 140 - - 768 -------------- -------- ------- --------------- ------- ---------------- Reconciliation of underlying operating result to operating profit: Underlying operating result 7,524 2,788 1,105 - (2,336) 9 081 Separately disclosed items (103) (1,018) (200) - (1,146) (2,467) -------------- -------- ------- --------------- ------- ---------------- Operating profit/(loss) 7,421 1,770 905 - (3,482) 6,614 -------------- -------- ------- --------------- ------- ---------------- SEPARATELY DISCLOSED ITEMS * The fair value uplift of inventory acquired through business combinations is recognised in accordance with IFRS 3 "Business Combinations" to record the inventory acquired at fair value and its subsequent release into the income statement * Acquisition costs relate to stamp duty, due diligence, legal fees, finance fees and other professional costs incurred in the acquisition of businesses * Share-based payment costs relate to 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 employee redundancies and IT integration. ====================================================================================================================== Six Six Year months months ended ended ended 31 30 30 June December June 2017 2017 2018 GBP000 GBP000 GBP000 =================================================== =================== ==================== ====================== Separately disclosed items within cost of sales: - Fair value uplift of inventory acquired through business combinations 211 - - Separately disclosed items within administration expenses: -Acquisition costs 444 510 1,081 -Amortisation of acquired intangibles 470 325 768 -Share-based payment costs 102 172 272 -Restructuring 18 90 117 -Change in amounts accrued contingent consideration - 15 229 --------------------------------------------------- ------------------- -------------------- ---------------------- Total separately disclosed items 1,245 1,112 2,467 --------------------------------------------------- ------------------- -------------------- ---------------------- 4 TAXATION =================================================== =================================================================================== Six months Six months Year ended ended ended 30 June 2018 30 June 2017 31 December GBP000 GBP000 2017 GBP000 ==================================================== ========================= ========================= ======================== Current tax on income for the period - continuing operations: UK tax 1,062 680 1,258 Foreign tax - - 167 Deferred tax credit (195) (46) (129) Adjustments in respect of prior years - - (89) ---------------------------------------------------- ------------------------- ------------------------- ------------------------ Total taxation 867 634 1,207 ---------------------------------------------------- ------------------------- ------------------------- ------------------------ The taxation for the period has been calculated by applying the estimated tax rate for the financial year ending 31 December 2018. Deferred tax liabilities have also been adjusted to GBP1,162,000 to reflect capital allowances more than depreciation and other short-term timing differences. 5 DIVIDS ======================================== ========================================================================== Six months Six months Year ended ended ended 30 June 30 June 31 December 2018 2017 2017 GBP000 GBP000 GBP000 ========================================= ======================= ====================== ======================== Final dividend (2017: 3.67p) per share - 1,878 1,878 Interim dividend (2017: 1.93p) per share - - 999 Total dividends - 1,878 2,877 ----------------------------------------- ----------------------- ---------------------- ------------------------ A final dividend of 3.85p per share was paid on 13 July 2018. In addition, the Directors are proposing a half-year dividend in respect of the financial year ending 31 December 2018 of 2.03p per share which will absorb an estimated GBP1.2 million of shareholders' funds. It will be paid on 26 October 2018 to Shareholders who are on the Register of Members at close of business on 28 September 2018. 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/ (loss) 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. ==================================================================================================================================================================================================================================== Six months ended Six months ended Year ended 30 June 2018 30 June 2017 31 December 2017 =========================== ================================================================= ================================================================== ================================================================ Weighted Weighted Weighted average average average number Earnings number number Earnings of per of Earnings of per Earnings shares share Earnings shares per share Earnings shares share GBP000 000's Pence GBP000 000's Pence GBP000 000's Pence --------------------------- --------------------- -------------------- -------------------- --------------------- -------------------- --------------------- -------------------- -------------------- -------------------- Basic earnings/(loss) per share Continuing operations Discontinued operations 3,286 56,888 5.78 2,476 47,402 5.22 4,831 49,835 9.69 - 56,888 - - 47,402 - - 49,835 - --------------------------- --------------------- -------------------- -------------------- --------------------- -------------------- --------------------- -------------------- -------------------- -------------------- Basic earnings per share 3,286 56,888 5.78 2,476 47,402 5.22 4,831 49,835 9.69 --------------------------- --------------------- -------------------- -------------------- --------------------- -------------------- --------------------- -------------------- -------------------- -------------------- Diluted earnings/(loss) per share Continuing operations Discontinued operations 3,286 57,355 5.73 2,476 47,886 5.17 4,831 50,409 9.58 - 57,355 - - 47,886 - - 50,409 - --------------------------- --------------------- -------------------- -------------------- --------------------- -------------------- --------------------- -------------------- -------------------- -------------------- Diluted earnings per share 3,286 57,355 5.73 2,476 47,886 5.17 4,831 50,409 9.58 --------------------------- --------------------- -------------------- -------------------- --------------------- -------------------- --------------------- -------------------- -------------------- -------------------- Six Six Year months months ended ended ended 31 30 June 30 December 2018 June 2017 GBP000 2017 GBP000 GBP000 ======================================================= =================== ================== ==================== Weighted average number of ordinary shares for basic and diluted earnings per share 56,888 47,402 49,835 Impact of share options 467 484 574 ------------------------------------------------------- ------------------- ------------------ -------------------- Weighted average number of ordinary shares for diluted earnings per share 57,355 47,886 50,409 ------------------------------------------------------- ------------------- ------------------ -------------------- 7 ACQUISITIONS =============
On 19 March 2018, the Company acquired 100% of the share capital of Balu Limited, a UK based holding company, and its UK subsidiaries, thereby obtaining control.
The initial consideration paid was GBP6,059,000 in cash, GBP500,000 in shares in the ultimate parent company, Flowtech Fluidpower plc with additional estimated consideration of GBP2,332,000 anticipated to be paid within 12 months. The cash consideration was funded through existing resources, supplemented by a share issue by Flowtech Fluidpower plc on 4 April. The acquisition will add significantly to the Company's procurement relationship with key global suppliers and enhance our position in the supply of MRO fluid power products in the UK and Ireland.
Details of the provisional fair value of identifiable assets and liabilities acquired, and purchase consideration are as follows:
Book value Fair value Provisional GBP000 adjustment fair value GBP000 GBP000 -------------------------------------- ---------------------- ----------------------- ----------------------- Fixed assets 918 - 918 Stocks 2,965 - 2,965 Trade and other debtors 3,274 - 3,274 Cash and cash equivalents (1,310) - (1,310) Trade and other creditors (2,359) - (2,359) Finance leases (319) - (319) Current tax balances 283 - 283 Deferred tax liability (57) - (57) -------------------------------------- ---------------------- ----------------------- ----------------------- Total net assets 3,395 - 3,395 -------------------------------------- ---------------------- ----------------------- ----------------------- GBP000 ------------------------------------------------ ------ Fair value of consideration paid Amount settled in cash 6,059 Amount settled in shares in Flowtech Fluidpower plc 500 Contingent consideration 2,332 Stamp duty 42 -------------------------------------------------- ------ Total consideration paid 8,933 -------------------------------------------------- ------
8 SUBSEQUENT EVENTS ============= =============================
There are no material adjusting or non-adjusting events subsequent to the reporting date.
9 NET CASH FROM OPERATING ACTIVITIES ======================================================= =============================================================================== Six months Six months Year ended ended ended 30 June 2018 30 June 2017 31 December GBP000 GBP000 2017 GBP000 -------------------------------------------------------- ------------------------- ------------------------- ------------------------ Reconciliation of profit before taxation to net cash flows from operations: Profit from continuing operations before tax 4,153 3,110 6,039 Depreciation 464 267 640 Financial income - - (6) Financial expense 303 282 581 Profit on sale of plant and equipment (5) - (3) Amortisation of intangible assets 470 325 768 Cash settled share options - - (415) Equity settled share-based payment charge 102 172 272 Change in amounts accrued contingent consideration - 15 229 -------------------------------------------------------- ------------------------- ------------------------- ------------------------ Operating cashflow before changes in working capital and provisions 5,487 4,171 8,105 Change in trade and other receivables (4,798) (2,569) (823) Change in stocks (1,003) 452 (931) Change in trade and other payables (1,506) 1,383 1,922 Change in provisions 9 (9) (63) -------------------------------------------------------- ------------------------- ------------------------- ------------------------ Net cashflow from operations (1,811) 3,428 8,210 Tax paid (530) (644) (1,610) -------------------------------------------------------- ------------------------- ------------------------- ------------------------ Net cashflow from operating activities (2,341) 2,784 6,600 -------------------------------------------------------- ------------------------- ------------------------- ------------------------ 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 2017 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. 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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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