TIDMFLO
RNS Number : 4519B
Flowtech Fluidpower PLC
04 April 2017
Issued on behalf of Flowtech
Fluidpower PLC
Date: Tuesday, 4 April 2017
approved Zeus 17.52hrs
Immediate Release
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014. Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31
December 2016
"Our business has shown resilience in a difficult market, with
our most recent acquisitions beginning to deliver organic growth.
The Board remains confident in the strategy, commercial
opportunities and the prospects of the Group as a whole, and
expects to deliver ongoing solid growth over the coming years
building on the performance seen in 2016."
Malcolm Diamond MBE, Chairman
FINANCIAL HIGHLIGHTS 2016 2015
GBP53.8m GBP44.8m
* 20% GROWTH IN GROUP REVENUE*
GBP6.14m GBP5.49m
* 12% UPLIFT IN GROUP OPERATING PROFIT*
* EARNINGS PER SHARE* 10.17p 9.85p
* 5% INCREASE IN DIVID: 1.84p 1.75p
3.67p 3.50p
5.51p 5.25p
Ø Half year paid
Ø Proposed final dividend
Ø Total for the year
GBP5.51m GBP7.36m
* CASH GENERATION FROM OPERATIONS
GBP13.1m GBP9.0m
* NET DEBT
* ACQUISITIONS:
Ø Three during the year, including creation
of a 'Process' division
Ø Post year end, one further acquisition
* There continues to be significant opportunity to
achieve organic growth through a wide range of
revenue enhancing development programmes linked to
our focused acquisition strategy.
------------------------------------------------------------------
* All results relate to continuing operations
"The Flowtech Group now operates three divisions:
Flowtechnology, Power Motion Control & Process. This structure
has delivered greater opportunity to focus on fluid power solutions
while at the same time developing a deeper technical expertise
within our complementary businesses; specialising our offering in
the fluid power sector and, delivering high service levels to all
our customers across our business. This formulation gives us a
solid platform for growth as well as opening and creating
opportunities in new and exciting sectors."
Sean Fennon, CEO
Enquiries:
Flowtech Fluidpower plc
Sean Fennon, Chief Executive
Officer
Bryce Brooks, Chief Financial
Officer
Tel: +44 (0) 1695 52796
AIM: symbol: FLO
email: info@flowtechfluidpower.com
website: www.flowtechfluidpower.com
Zeus Capital Limited (Nominated
Adviser and Broker)
Andrew Jones, Jonathan
Sharp (corporate finance)
Dominic King, John Goold
(sales & broking)
Tel: +44 (0) 203 829 5000
finnCap Limited (Joint
Broker)
Ed Frisby, Kate Bannatyne
(corporate finance)
Rhys Williams, Emily Morris
(sales & broking)
Tel: +44 (0) 20 7220 0500
TooleyStreet Communications
(IR and media relations)
Fiona Tooley
Tel: +44 (0) 7785 703523
or email: fiona@tooleystreet.com
EDITORS' NOTE
Flowtech Fluidpower plc, founded as Flowtech in 1983,
is the UK's leading specialist supplier of technical
fluid power products. The Group has three divisions:
Flowtechnology, Power Motion Control and Process.
All three of the Group's divisions have overlapping
product sets, allowing procurement synergies to be
maximised.
The Flowtechnology division focuses on supplying
distributors and resellers of industrial MRO (maintenance,
repair and operation) products, primarily serving
urgent orders rather than bulk offerings. It is formed
from Flowtechnology UK, Flowtechnology Benelux and
Indequip. It offers an unrivalled range of Original
Equipment Manufacturer (OEM) and Exclusive Brand
products to over 3,400 distributors and resellers
and the catalogues are recognised as the definitive
source for fluid power products, containing 100,000
individual product lines and are distributed to more
than 80,000 industrial Maintenance, Repair and Overhaul
end users (MRO). The Power Motion Control division
specialises in the design, assembly and supply of
engineering components and hydraulic systems and
is further enhanced by a service and repair function.
The division is formed from Primary Fluid Power,
Nelson Hydraulics, TSL Fluidpower and HTL. The Process
division focuses on the supply of industrial components
to the process sectors.
The Group's main distribution centre is in Skelmersdale,
Lancashire with further distribution centres in the
Netherlands and China. The Power Motion Control division
(PMC) has operations in Merseyside, Northern Ireland,
the Republic of Ireland, Shropshire and Yorkshire;
Process operates from the West Midlands. In total
the business employs 319 people.
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December
2016
INTRODUCTION
BY THE CHAIRMAN, MALCOLM DIAMOND MBE
I think it is widely acknowledged amongst our investor community
that the majority of UK based listed companies have found 2016 to
be not only a challenging period, but for some, also revealing some
opportunities for sector consolidation.
When Flowtech came to market, our Board presented their
investment case on the basis of not only a strong commitment to
organic growth, whilst resolutely maintaining their proven track
record of margin retention, but also to take advantage of
acquisition opportunities within what is an extremely fragmented UK
and European market within the fluid power sector.
The founding core business within the Group, the Flowtechnology
division, devotes itself to supplying a vast range of high quality
equipment and components, both branded and generic, with a market
beating technical and delivery service to specialist trade
distributors and resellers. This stock range is managed dynamically
in relation to demand, and in the past year alone has enlarged
customer choice by a further 3,500 new items, thus sustaining the
division's reputation for being the UK market leader.
It is a key policy of the Group to separate end user business
from trade distribution in order to maintain customer loyalty and
stability. This has led to the formation of a Power Motion Control
("PMC") division by acquiring a growing number of small, profitable
specialist businesses managed by our new senior colleague Nick
Fossey.
PMC provides a wide capability from custom made hydraulic hoses
and fittings to sophisticated high value digitally controlled power
packs for use by assembly and process industry customers. The PMC
division markets itself to end user customers as a technical
solutions provider via its in house engineering, sourcing and
assembly resources; therefore, making a clear sector distinction
from Flowtechnology's distribution activities.
In addition to three important acquisitions made in 2016 (along
with a busy target pipeline extending into 2017 and beyond), there
have been investments made in marketing, product range extensions
and product data consolidation to facilitate cross selling within
the rapidly expanding Group and new plant to support the burgeoning
customised hydraulic hose production output.
To summarise, it is clear that the Group is now entering an
exciting stage of its development as its ambitions for growth
increasingly improve its market share within the UK and the
Republic of Ireland, whilst being vigilant for opportunities to
spread further into Europe, having managed the Benelux business
into a healthy level of consistent performance.
Brexit consequences remain a relative unknown at this time,
whilst forex movements and UK import prices have been well managed
to date by our highly experienced and focused commercial management
teams. Finally, it was very pleasing to be given such valuable and
widespread support for both the Board and the Executive Management
team during the recent successful process to raise GBP10 million
(before expenses) in new capital for the Group. I am certain this
will provide a very important springboard for the next stage of
development of the Group.
DIVID
Subject to Shareholder approval at the Annual General Meeting
which is to be held on 25 May 2017, the Directors are proposing a
final dividend of 3.67p per share. This, together with the interim
dividend of 1.84p (paid on 25 October 2016), brings the total for
the year to 5.51p which again matches the commitment made at the
date of the IPO of 5% growth. The outlook for further enhancement
to dividend flow remains good and the Board would like to reiterate
its view that the retention of a strong dividend policy is a
foundation for the investment case in the Group.
STRATEGY FOR GROWTH
The Group has a clear view of its growth objectives - to create
a specialist fluid power organisation that remains focused on its
core competencies through its delivery of 'class-leading' service
and support. Our long-term growth model is based on both organic
growth, coupled with complementary acquisitions in the UK and
Europe in a very fragmented marketplace.
The successful integration of new businesses into the Group is
critical, maintaining momentum and ensuring an ability to continue
to trade with their customers seamlessly. To support this an
experienced integration team has been created tasked with
delivering a smooth and speedy transitions process. During 2016,
Indequip, Hydravalve & TSL, were acquired and successfully
integrated into the Group - these acquisitions fit within the
defined strategy previously outlined of developing a Focused Fluid
Power Group.
SUMMARY OF 2016 RESULTS
BY SEAN FENNON, CHIEF EXECUTIVE OFFICER & BRYCE BROOKS,
CHIEF FINANCIAL OFFICER
Operational Review
2016 2015
------------------------------------ ---------- ---------- -------
* GROUP REVENUE* GBP53.8m GBP44.8m +20%
------------------------------------ ---------- ---------- -------
* GROSS PROFIT*
GBP19.1m GBP15.3m +25%
* GROSS PROFIT % 35.5% 34.2% +1.3%
------------------------------------ ---------- ---------- -------
* GROUP OPERATING PROFIT* GBP6.14m GBP5.49m +11.8%
------------------------------------ ---------- ---------- -------
* UNDERLYING OPERATING PROFIT GBP7.45m GBP6.87m +9.5%
------------------------------------ ---------- ---------- -------
* All results relate to continuing operations
Underlying operating result is continuing operations' operating
profit before acquisition costs, amortisation of intangible assets,
share-based payment costs and restructuring costs.
We are very pleased to again report a period of significant
progress in the scope of our activities as a Group, with an uplift
in revenue of 20% (2015: 19%), a 11.8% increase in operating
profit, and 9.5% improvement in underlying operating profit
(2015:12%). The movements in underlying operating result by segment
are detailed in the section below. A reconciliation of underlying
operating profit to operating profit in the consolidated income
statement is detailed in the segmental analysis note (note 2). The
separately disclosed items which represent the bridge between the
two amounts have remained consistent at GBP1.3m.
A year ago, we announced strong growth figures underpinned by an
active acquisition programme, against a backdrop of a market with
headwinds making organic progress challenging. Twelve months down
the line we have a similar message, but this time we can add
material currency movements which rapidly increased input prices
across our product portfolio when sourced from Europe or the Far
East, and a further knock on effect into market confidence.
We therefore believe that the result achieved is further
justification that our focused approach in maintaining strong gross
margins, while developing market share and commercial synergy by
acquisition, is creating an expanding and resilient platform for
long-term profitable growth.
Gross profit margins
One of our most important KPIs remains Gross Profit %, and it is
also pleasing to report that in 2016 we were able to increase
margins in each of our divisions as shown below:
Gross profit 2016 % 2015 %
%
---------------- -------------------- --------------------
Flowtechnology 37.2 35.3
---------------- -------------------- --------------------
Power Motion
Control 29.2 28.3
---------------- -------------------- --------------------
Process 42.6 -
---------------- -------------------- --------------------
Group 35.5 34.2
---------------- -------------------- --------------------
Following the Brexit result in June 2016, the latter part of the
year was dominated by the movement in currencies and the subsequent
issues around pricing. In this regard, the Group is split into two
separate and distinct pricing models:
-- "Distribution" businesses - Flowtechnology and Process -
these operate pricing policies based around smaller parcel size, a
broader mix of Global Brand and Own-Brand products, and a "list
less discount" model. During 2016 these businesses set out a clear
pricing strategy to increase selling prices as required and
culminating in a more general uplift by 1 January 2017. In
addition, the depth of our relationships with factory owners in
China has helped with some medium-term pricing support, coupled
with volume related discounts, that have meant we have now come
through a potentially difficult period with our gross profit %
intact, and I am pleased to report that in Q1 2017 we have achieved
a similar margin position when compared with Q1 2016.
-- In contrast, our PMC businesses work in both pure component
sales, that overlap with our distribution model, but also in
markets where the precedent is for a more fixed approach to pricing
to Original Equipment Manufacturers (OEMs), and therefore have more
challenging pricing issues to address. At the same time, we know
that much of our competitor landscape is less able to withstand
such pressures for any length of time, and we have consequently
chosen to take a more watchful approach to this customer segment.
As we enter 2017, the early signs of this approach are broadly
encouraging with good volumes on parts of our OEM business coming
through that are more than offsetting any margin compression.
Acquisitions
Since 2014 we have developed a capacity to identify, acquire and
integrate complementary businesses in line with our channel
strategy, both in the UK and Europe. This strategy has included the
development of a Service Centre team structured to support the
operations and remove back-office processes, as well as the new
development of a Shared Logistics Centre.
All the acquisitions to date (totalling 7) have been integrated
quickly into the Group, with retention of brand identity,
reputation and customer relationships being critical. The Group
philosophy therefore is to maintain the acquired business' branding
and help enhance it.
Following this simple initial integration, a focus on synergy
gain has a four-layered approach:
-- Back Office
Typically, quick wins in 'soft' areas such as accounting,
insurance, banking, HR and IT. Our Service Centre team covering all
these disciplines will work over a relatively short period to both
ensure a full take-on, as well as enhancements where possible,
including production of prompt management accounts and central
control of payment processes.
-- Procurement
Whilst a comprehensive and systematic approach to supplier
pricing optimisation is a long-term goal for the Group, our
acquisition process focuses again on the quick wins that can simply
be achieved by straightforward face to face communication between
purchasing teams of new and current operations, with an obvious
emphasis on supplier overlap.
-- Operational
The Group now has over 180,000 square feet of operational
facilities across its nine sites. Each business is encouraged to
work with its colleagues across the Group, and this has allowed
each operation to use its resources more effectively. Furthermore,
we have begun the development of a 'Shared Logistics Centre'
("SLC") based on the operation previously set up to exclusively
support the Flowtechnology UK business, with the aim to create a
'best of breed' logistic facility and service which will be
utilised by other Group companies. This infrastructure has been
established for over 20 years and is already providing a class
leading distribution service. An obvious early example of this
concept is in Indequip, which has effectively removed its own
logistics structure in its entirety, whilst retaining complete
commercial control, with a significant reduction in its own cost
base. We expect this type of interaction using operational assets
more efficiently to become a recurring theme over the coming years
- and achieved without significant risk added to our core trading
assets.
-- Commercial
Finally, the cross selling of ideas and opportunities across the
Group is allowing our complementary skill sets - from logistics to
product to technical expertise - to be exploited for selling leads
wherever possible. With our expansion from four to eight operating
brands during the past twelve months we are seeing real tangible
benefit from our strategy. For example, sales from Flowtechnology
UK to other Group companies rose by 78% in 2016, and from PMC to
other divisions by 154%.
UNDERLYING OPERATING RESULT
The underlying operating result* can be summarised as
follows:
Continuing operations
Underlying operating 2016 2015 Change Change
result* GBP000 GBP000 GBP000 %
------------------------------ --------- --------- --------- --------
Flowtechnology 7,627 7,571 56 0.7
------------------------------ --------- --------- --------- --------
Power Motion Control 1,823 1,228 595 48.5
------------------------------ --------- --------- --------- --------
Process 401 - 401
------------------------------ --------- --------- --------- --------
Central costs (2,397) (1,931) (466) 24.1
------------------------------ --------- --------- --------- --------
Underlying operating result 7,454 6,868 586 8.5
------------------------------ --------- --------- --------- --------
* Underlying operating result is continuing operations'
operating profit before acquisition costs, amortisation of
intangible assets, share-based payment costs and restructuring
costs.
Flowtechnology
Turnover +6% (2015: -2%)
Operating profit +0.6% (2015: +2.9%)
Underlying operating profit +0.7% (2015: +2.4%)
A highlight during the year was when the division acquired a
direct UK competitor, Indequip, with a plan to retain the clear
identity of the business as a separate trading brand under the
leadership of Managing Director, Ian Simpson, whilst at the same
time integrating the operational side of the business into the
logistics infrastructure of the rest of the Group. We know that Ian
and his team initially viewed the acquisition by the Group with a
sense of trepidation. However, in Ian's own words, "the move has
proved to be a springboard for the reinvigoration of the Indequip
business and has set it off with new impetus to develop and grow".
Indequip's new catalogue arrived in December, prepared with the
input of the Group's creative services team, and this was released
in January to a very positive response. In 2015 Indequip was
struggling, with resources being limited and the efforts of an
energetic and well-lead team being stifled. Today, confidence is
renewed with a clear focus on the future with a clear trading style
as part of the Group.
As a result of the general market difficulties previously
described, volumes within the original Flowtechnology UK business
have been under negative pressure, but our clear focus is to ensure
we retain strong gross margins and a high service offer. Continued
work on our "Data Repository" will also begin to deliver benefit in
2017, with a new web trading platform launched in March.
The Benelux market remains buoyant, with the short to medium
term outlook encouraging. Having previously been fixed on the value
of Global Brands, the region has become open to change, and this
has allowed the Flowtechnology operation to promote our Exclusive
Brands, all developed within the wider Group - a move which has
begun to show benefits in both revenue and margin growth. The
continued re-sourcing work carried out in conjunction with our
purchasing Group should allow Flowtechnology Benelux to develop its
position further over the coming year and increase its market
penetration, particularly in the hydraulic segment where the
business has previously had little activity.
Power Motion Control (PMC)
Turnover +36% (2015: +197%)
Operating profit +55% (2015: +209%)
Underlying operating profit +48% (2015: +233%)
When the Group came to market in 2014, the creation of a Power
Motion Control division, based around the supply of hydraulic
components, hose assemblies and systems to a largely OEM customer
base, was a key part of our strategy. PMC now has four trading
"brands" operating from six sites across the UK and Ireland, with a
current total revenue of over GBP20m - all under the leadership of
Nick Fossey who joined us in March 2016.
With the full year effect of the Nelson and Albroco acquisitions
from early 2015 now evident, backed up by a consistent performance
from Primary, the division has made encouraging progress against a
challenging backdrop for volumes and margins. In 2016 and now 2017
the addition of TSL and HTL adds to the portfolio, now supported by
a newly formed cross-selling team. From a standing start in 2014,
the division is now established and growing.
Compared to the UK, the wider Irish market in which Nelson
Hydraulics operates has remained relatively buoyant. This has
enabled Nelson to consolidate its overall market share and gain
business from its customer base. The Irish OEM export market
appears to be holding up well moving into 2017, with market
optimism being driven by the weak pound and the strong export
opportunities.
Process
We welcomed Hydravalve to the Group in March 2016, as the start
of our Process division focused on developing our presence in
broader markets for valves and actuation. Core product areas have
strong overlap with Far East supply in Flowtechnology UK and this
has allowed the two operations to combine purchases and obtain
significant price advantage which will assist in underpinning
margins in 2017 and beyond. Based in Willenhall in the West
Midlands, Hydravalve is also now diverting generic product from
direct supply and instead is sourcing using the SLC in
Skelmersdale. Managed by the former owner Andy Newham, Hydravalve
is now well established and has proven to be an excellent
cornerstone acquisition for the Process division.
Central Costs
2016 2015 Change
GBP000 GBP000 GBP000
------------------ ------- ------- -------
Commercial 359 269 90
------------------ ------- ------- -------
Finance, IT and
Management 1,646 1,294 352
------------------ ------- ------- -------
PLC 392 368 24
------------------ ------- ------- -------
Central Costs 2,397 1,931 466
------------------ ------- ------- -------
In order to add clarity to our reporting process we now provide
further stratification on this cost area to illustrate how the
acquisition programme can develop with only a limited increase in
central costs to support this. The three areas now identified are
as follows:
Commercial - being Creative Services (catalogue design and
marketing materials production) and Marketing departments, and as a
main addition in 2016 a new sales resource.
Finance, IT and Management - which includes the employment costs
of the executive team. During the year a bonus was paid to the
Executive team totalling GBP113,000 in recognition of progress made
by the Group since 2014, with the balance being the development of
the necessary team to support the growth programme for the long
term, including the recruitment of the PMC Divisional Managing
Director, Nick Fossey.
PLC - being non-executive director costs, broker and legal fees,
and all other costs relating to the operation and marketing of the
public company. Finncap were appointed as joint broker alongside
Zeus Capital in January 2017.
Acquisition and restructuring costs
The total cost for the year of GBP419,000 represents 9.5% (2015:
3.8%) of the total consideration paid for acquisitions (as detailed
in notes 8, 9 and 10). This includes both the transaction cost,
including legal and professional fees, and the cost for post deal
IT and Finance integration, and we believe this again represents a
fair cost for transactions of this type.
Restructuring costs incurred during the year of GBP84,000 (2015:
GBP323,000) primarily relate to relate to redundancies in
administrative functions following acquisition, as well as a
streamlining of the Group structure following advice from our legal
and tax advisers.
Taxation
The tax charge for the year was GBP1.1m (2015: GBP1.1m), with an
effective tax rate of 20.3% and a blended tax rate based on the
geographical regimes of 19.5%.
Statement of financial position and Managing Working Capital
The net debt position at the year-end was GBP13.10m (2015:
GBP9.0m). Under the debt facilities extended in 2015, our revolving
credit facility agreed with Barclays Bank plc for up to GBP15
million, is now fully available but with ample headroom under a
comfortable covenant headroom. Cash inflows of around GBP9.6m under
the recent placing have also now been received, which leaves the
business lowly geared and well positioned for further investment in
the immediate future.
In late 2015 the Group took the strategic decision to increase
order values from some of its Far East suppliers, with a view to
obtaining better pricing in a softer market at the time. This has
assisted the drive to retain gross margins in the difficult markets
experienced in 2016, but this has meant that overall stock holding
levels have been above optimum with broad stock turns across the
Group of around two. From 1 January 2017, a new "profit sharing"
scheme has been introduced that operates at local level, and as
well as rewarding staff for profit growth, an added element can be
obtained for improvements in working capital management - with
stock at its core. Whilst always being mindful of not undermining
service levels, a long-term drive towards stock turns of 2.5 to 3
is being targeted, and as the Group expands, we believe this is
achievable in the medium term. Any cash released will then be
re-invested in further growth. With debtor collections consistent
(the total charge for bad and doubtful debt related issues was
GBP67,000 (2015: GBP62,000), representing only 0.12% of turnover)
and lengthening of supplier terms being negotiated, a focus on the
management of working capital is at the forefront of the Group's
thinking.
Exchange rates and foreign currency exposure
As previously described, the Group is able to take a flexible
approach to currency risk management, as other than some smaller
elements of its PMC business with OEMs, it is not involved in fixed
price sales contracts. This has obviously been tested vigorously
since the Brexit decision. Whilst there have been some learning
points, we have again gained confidence that sales pricing can be
flexed as cost prices change and the Group will continue to operate
in this manner, as a focus on moving pricing to match market
conditions is believed to be an important aspect of our offer.
In addition, the Group derives income streams from its Benelux
and Republic of Ireland operations. In order to fix the value of
these profits, the Group continues to maintain foreign exchange
contracts on an annual basis for the estimated euro value of these
contributions. In 2016 this contract resulted in a loss of
GBP73,000 (2015: gain of GBP18,000), which is accounted for within
net financing costs, and is to some degree countered by the
increased "value" of the respective income streams on
conversion.
People
Each year of growth brings with it the advantage of an expanded
management team, with new focus and skills that can be used to
enhance our wider activities. Managing Directors appointed during
the year include Ian Simpson at Indequip; Andy Newham at
Hydravalve, ably supported by his sons Andrew and Edward; Steve
Rushworth at TSL, and most recently Kirk Duncan and Alan Willis at
HTL.
Our quarterly Operational Board structure is now divisionalised
with bi-annual cross Group meetings. Finally, the full PLC Board
led by Malcolm Diamond performs an in-depth assessment with each
business as part of an annual forecast process.
The Board is very encouraged by the progress made during the
year. However, we are keenly aware that none of this progress is
achievable without the continued commitment and effort of all our
employees - in both the "founding" Flowtechnology businesses, and
all our new colleagues in Primary Fluid Power, Nelson Hydraulics,
Indequip, Hydravalve, TSL and now HTL. We believe the team ethic
that is being created across the Group is allowing us to build for
the long-term.
Outlook
We have entered 2017 with renewed confidence. Our acquisition of
HTL in January 2017 adds a further element to our customer and
supplier base, and, on the back of our recent GBP10m capital raise,
the Group has the financial scope to support this confidence. We
will issue our first quarter trading update later today updating on
our performance to 31 March 2017.
"We have a relentless attitude to growth by organic and
acquisitive means, backed up by our four-layered approach to
extracting synergy gain over the short, medium and long term. Our
targeted approach ensures we can achieve both a concentration and
enhancement to our product set - which lies at the centre of our
business model - entirely focused on fluid power."
Sean Fennon CEO
"The Board is very encouraged by the progress made during the
year. However, we are very aware that none of this progress is
achievable without the continued commitment and effort of all our
employees - in both the "founding" Flowtechnology businesses, and
all our "new" colleagues in Primary Fluid Power, Nelson Hydraulics,
Indequip, Hydravalve, TSL and now HTL. We believe the team ethic
that is being created across the Group is allowing us to build for
the long-term."
Bryce Brooks CFO
4 April, 2017
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December
2016
Consolidated income statement
Note 2016 2015
GBP000 GBP000
Continuing operations
Revenue 53,780 44,848
Cost of sales (34,714) (29,503)
-------- --------
Gross profit 19,066 15,345
Distribution expenses (2,475) (2,245)
--------------------------------------- ---- -------- --------
Administrative expenses before
separately disclosed items: (9,137) (6,232)
- Acquisition costs (419) (299)
- Amortisation of acquired intangibles (569) (413)
- Share based payment costs (353) (342)
- Restructuring costs (84) (323)
- Release of over accrued contingent
consideration 108 -
--------------------------------------- ---- -------- --------
Total administrative expenses (10,454) (7,609)
-------- --------
Operating profit 6,137 5,491
-------- --------
Financial income 4 1 22
Financial expenses 4 (611) (233)
Net financing costs (610) (211)
-------- --------
Profit from continuing operations
before tax 5,527 5,280
-------- --------
Taxation 5 (1,146) (1,057)
-------- --------
Profit from continuing operations 4,381 4,223
-------- --------
Loss from discontinued operations,
net of tax (91) (131)
-------- --------
Profit for the year attributable
to the owners of the parent 4,290 4,092
-------- --------
Earnings per share 7
Basic earnings per share
Continuing operations 10.17p 9.85p
Discontinued operations (0.21p) (0.31p)
------- -------
Basic earnings per share 9.96p 9.54p
------- -------
Diluted earnings per share
Continuing operations 10.08p 9.73p
Discontinued operations (0.21p) (0.30p)
------- -------
Diluted earnings per share 9.87p 9.43p
------- -------
Consolidated statement of comprehensive income
2016 2015
GBP000 GBP000
Profit for the year 4,290 4,092
Other comprehensive income - items that
will be reclassified subsequently to
profit or loss
Exchange differences on translating foreign
operations 350 85
------- -------
Total comprehensive income for the year
attributable to the owners of the parent 4,640 4,177
======= =======
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December
2016
Consolidated Statement of financial position
Note 2016 2015
Assets GBP000 GBP000
Non-current assets
Goodwill 47,927 46,412
Other intangible assets 4,780 4,179
Property, plant and equipment 3,899 3,265
-------- --------
Total non-current assets 56,606 53,856
-------- --------
Current assets
Inventories 16,592 13,254
Trade and other receivables 13,012 10,367
Prepayments 304 316
Other financial assets - 32
Cash and cash equivalents 3,824 1,841
-------- --------
Total current assets 33,732 25,810
-------- --------
Liabilities
Current liabilities
Interest-bearing loans and borrowings 12,888 5,986
Trade and other payables 8,625 6,625
Deferred and contingent consideration 1,420 1,250
Tax payable 975 758
Provisions - 86
Other financial liabilities 57 15
-------- --------
Total current liabilities 23,965 14,720
-------- --------
Net current assets 9,767 11,090
-------- --------
Non-current liabilities
Interest-bearing loans and borrowings 4,081 4,874
Deferred and contingent consideration 212 898
Provisions 212 130
Deferred tax liabilities 1,019 901
-------- --------
Total non-current liabilities 5,524 6,803
-------- --------
Net assets 60,849 58,143
======== ========
Equity directly attributable to
owners of the parent
Share capital 11 21,539 21,539
Share premium 46,880 46,880
Share based payment reserve 733 380
Shares owned by the Employee Benefit
Trust (338) (338)
Merger reserve 293 293
Merger relief reserve 2,086 2,086
Currency translation reserve 257 (93)
Retained losses (10,601) (12,604)
-------- --------
Total equity 60,849 58,143
======== ========
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December
2016
Consolidated statement of changes in equity
Share Shares
based owned Merger Currency
Share Share payment by the Merger relief translation Retained Total
capital premium reserve EBT reserve reserve reserve losses equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
January 2015 21,414 46,664 148 - 293 2,086 (178) (14,521) 55,906
-------- -------- -------- -------- -------- -------- ------------ -------- -------
Profit for the
year - - - - - - - 4,092 4,092
Other comprehensive
loss - - - - - - 85 - 85
-------- -------- -------- -------- -------- -------- ------------ -------- -------
Total comprehensive
income for the
year - - - - - - 85 4,092 4,177
Transactions
with owners
Issue of share
capital 125 216 - - - - - - 341
Shares purchased
by the EBT - - - (338) - - - - (338)
Share-based
payment charge - - 342 - - - - - 342
Share options
settled - - (110) - - - - - (110)
Equity dividends
paid - - - - - - - (2,175) (2,175)
-------- -------- -------- -------- -------- -------- ------------ -------- -------
Total transactions
with owners 125 216 232 (338) - - - (2,175) (1,940)
-------- -------- -------- -------- -------- -------- ------------ -------- -------
Balance at 1
January 2016 21,539 46,880 380 (338) 293 2,086 (93) (12,604) 58,143
-------- -------- -------- -------- -------- -------- ------------ -------- -------
Profit for the
year - - - - - - - 4,290 4,290
Other comprehensive
income - - - - - - 350 - 350
-------- -------- -------- -------- -------- -------- ------------ -------- -------
Total comprehensive
income for the
year - - - - - - 350 4,290 4,640
Transactions
with owners
Share-based
payment charge - - 353 - - - - - 353
Equity dividends
paid - - - - - - - (2,287) (2,287)
-------- -------- -------- -------- -------- -------- ------------ -------- -------
Total transactions
with owners - - 353 (338) - - - (2,287) (1,934)
-------- -------- -------- -------- -------- -------- ------------ -------- -------
Balance at 31
December 2016 21,539 46,880 733 (338) 293 2,086 257 (10,601) 60,849
-------- -------- -------- -------- -------- -------- ------------ -------- -------
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December
2016
Consolidated Statement of cash flows
Note 2016 2015
GBP000 GBP000
Cash flow from operating activities
Net cash from operating activities 12 4,166 5,943
------- -------
Cash flow from investing activities
Acquisition of businesses, net
of cash acquired (3,677) (3,063)
Acquisition of property, plant
and equipment (858) (750)
Proceeds from sale of property,
plant and equipment 52 7
Payment of deferred and contingent
consideration (1,031) (1,603)
------- -------
Net cash used in investing activities (5,514) (5,409)
------- -------
Cash flows from financing activities
Proceeds from new loan - 6,523
Repayment of long term borrowings (857) (2,357)
Net change in short term borrowings 7,000 (2,096)
Repayment of finance lease liabilities (37) (32)
Interest received 1 14
Interest paid (302) (244)
Purchase of own shares - (338)
Cash settled share options - (105)
Dividends paid (2,287) (2,175)
------- -------
Net cash generated from/(used in)
financing activities 3,518 (810)
------- -------
Net change in cash and cash equivalents 2,170 (276)
Cash and cash equivalents at start
of year 1,725 1,979
Exchange differences on cash and
cash equivalents (71) 22
------- -------
Cash and cash equivalents at end
of year 3,824 1,725
======= =======
FLOWTECH FLUIDPOWER PLC
("Flowtech" or the "Group" or "Company")
Final statement of results for the year ended 31 December
2016
NOTES TO THE PRELIMINARY STATEMENT
1. ACCOUNTING POLICIES
BASIS OF PREPARATION
The final statement has been prepared in accordance with
International Financial Reporting Standards (IFRS) adopted for use
in the European Union and IFRIC interpretations issued by the
International Accounting Standards Board and the Companies Act
2006.
The Group has applied all accounting standards and
interpretations issued relevant to its operations for the year
ended 31 December 2016. The consolidated financial statements have
been prepared on a going concern basis.
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined by
section 434 and 435 of the Companies Act 2006. The financial
information for the year ended 31 December 2016 has been extracted
from the Group's financial statements upon which the auditor's
opinion is unmodified and does not include any statement under
section 498(2) or 498(3) of the Companies Act 2006. The statutory
accounts for the year ended 31 December 2016 will be delivered to
the Registrar of Companies following the Annual General
Meeting.
The consolidated financial information has been prepared on the
basis of accounting policies set out in the Group's financial
statements which are unchanged from 2015.
DISCONTINUED OPERATIONS
An operation is classed as discontinued when management have
made the decision to either sell the operation or relocate the
operation. Discontinued operation costs relate to surplus property
costs.
GOING CONCERN
The Group meets it day-to-day working capital requirements
through its bank facilities. The Directors have carefully
considered the banking facilities and their future covenant
compliance in light of the current and future cash flow forecasts
and they believe that the Group are 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. As such, the Directors are satisfied that the Company
and Group have adequate resources to continue to operate for the
foreseeable future. For this reason they continue to adopt the
going concern basis for preparing the financial statements.
2. SEGMENTAL REPORTING
Segment information for the reporting periods is as follows:
For the year ended 31 December 2016
Power Total
Motion Inter-segmental Central continuing
Flowtech-nology Control Process transactions Costs operations
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Income statement
- continuing operations:
Revenue from external
customers 35,113 15,830 2,837 - - 53,780
Inter segment revenue 1,645 585 199 (2,429) - -
--------------- -------- ----------- --------------- ------- -----------
Total revenue 36,758 16,415 3,036 (2,429) - 53,780
--------------- -------- ----------- --------------- ------- -----------
Underlying operating
result 7,626 1,823 401 - (2,397) 7,454
Net financing costs (1) (65) (39) - (505) (610)
--------------- -------- ---- ---------------------- ------- -----------
Underlying segment
result 7,625 1,758 362 - (2,902) 6,844
Separately disclosed
items (see note 3) (180) 40 (57) - (1,119) (1,317)
--------------- -------- ---- ---------------------- ------- -----------
Profit/(loss) before
tax 7,445 1,798 305 - (4,021) 5,527
--------------- -------- ---- ---------------------- ------- -----------
Specific disclosure
items
Depreciation 389 112 24 - - 526
Amortisation 16 488 65 - - 569
--------------- -------- ---- ---------------------- ------- -----------
Reconciliation of
underlying operating
result to operating
profit:
Underlying operating
result 7,626 1,823 401 - (2,397) 7,454
Separately disclosed
items (see note 3) (180) 40 (57) - (1,119) (1,317)
--------------- -------- ---- ---------------------- ------- -----------
Operating profit/(loss) 7,446 1,863 344 - (3,516) 6,137
--------------- -------- ---- ---------------------- ------- -----------
For the year ended 31 December
2015
Power Total
Motion Inter-segmental Central continuing
Flowtechnology Control transactions Costs operations
GBP000 GBP000 GBP000 GBP000 GBP000
Income statement - continuing
operations:
Revenue from external
customers 33,169 11,680 - - 44,848
Inter segment revenue 959 231 (1,190) - -
--------------------- -------- ---------------- ------- -----------
Total revenue 34,127 11,911 (1,190) - 44,848
--------------------- -------- ---------------- ------- -----------
Underlying operating
result 7,571 1,228 - (1,931) 6,868
Net financing costs (65) 3 - (149) (211)
--------------------- -------- ---------------- ------- -----------
Underlying segment result 7,506 1,231 - (2,080) 6,657
Separately disclosed
items (see note 3) (166) (505) - (706) (1,377)
--------------------- -------- ---------------- ------- -----------
Profit/(loss) before
tax 7,339 726 - (2,786) 5,280
Specific disclosure
items
Depreciation 412 93 - - 505
Amortisation - 413 - - 413
--------------------- -------- ---------------- ------- -----------
Reconciliation of underlying
operating result to
operating profit:
Underlying operating
result 7,571 1,228 - (1,931) 6,868
Separately disclosed
items (see note 3) (166) (505) - (706) (1,377)
--------------------- -------- ---------------- ------- -----------
Operating profit/(loss) 7,404 723 - (2,637) 5,491
--------------------- -------- ---------------- ------- -----------
The Group's revenues from external customers and its non-current
assets (other than financial instruments and deferred tax assets)
are divided into the following geographic areas:
31 December 2016 31 December 2015
Revenue Non-current Revenue Non-current
assets assets
GBP000 GBP000 GBP000 GBP000
United Kingdom 44,133 55,118 36,329 52,326
Europe 8,806 1,488 7,760 1,530
Rest of world 841 - 759 -
------- ----------- ------- -----------
Total 53,780 56,606 44,848 53,856
------- ----------- ------- -----------
All revenue is derived from the sale of goods. No customers of
the Group account for 10% or more of the Group's revenue for either
of the years ended 31 December 2016 or 2015. Non-current assets are
allocated based on their physical location. The above table does
not include discontinued operations for which revenue and assets
can be attributed to the UK.
Central costs relate to finance expenses associated with Group
loans and separately disclosed items (note 3).
3. SEPARATELY DISCLOSED ITEMS
2016 2015
GBP000 GBP000
Separately disclosed items within administration
expenses:
- Acquisition costs 419 299
- Amortisation of acquired intangibles 569 413
- Share based payment costs 353 342
- Restructuring 84 323
- Gain on release of over provision
for contingent consideration (108) -
------- -------
Total separately disclosed items 1,317 1,377
------- -------
-- 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 relate to restructuring activities of an
operational nature following acquisition of business units and
other restructuring activities in established businesses, including
redundancy costs
4. FINANCIAL INCOME AND EXPENSE
Finance income for the year consists
of the following:
2016 2015
GBP000 GBP000
Finance income arising from:
Interest income from cash and cash
equivalents 1 4
Fair value gains on forward exchange
contracts held for trading - 18
------- -------
Total finance income 1 22
------- -------
Finance expenses for the year consist of the following:
2016 2015
GBP000 GBP000
Finance expense arising from:
Interest on invoice discounting
and stock loan facilities 3 36
Interest on revolving credit facility 241 41
Finance lease interest 3 3
Bank loans - current facilities 116 132
Other credit related interest 1 4
------- -------
Total bank and other credit interest 364 216
Imputed interest on deferred and
contingent consideration 174 17
Fair value losses on forward exchange
contracts held for trading 73 -
------- -------
Sub total 247 17
------- -------
Total finance expense 611 233
------- -------
5. TAXATION
Recognised in the income statement 2016 2015
Continuing operations: GBP000 GBP000
Current tax expense
Current year charge 1,285 1,231
Overseas tax 20 3
Adjustment in respect of prior periods 12 (76)
------ ------
Current tax expense 1,317 1,158
------ ------
Deferred tax
Origination and reversal of temporary
differences (118) (97)
Adjustment in respect of prior periods (7) (11)
Change in tax rate (46) 7
------ ------
Deferred tax credit (171) (101)
------ ------
Total tax expense - continuing operations 1,146 1,057
------ ------
2015 2015
Discontinued operations: GBP000 GBP000
Current year credit (22) -
Total tax expense - discontinued operations (22) -
------ ------
Total tax expense in the income statement 1,057 1,057
------ ------
No income tax was recognised in other comprehensive income or
directly in equity for either of the years ended 31 December 2016
or 2015.
Reconciliation of effective tax rate
2016 2015
GBP000 GBP000
Profit for the year 4,290 4,092
Total tax expense 1,124 1,057
------ ------
Profit excluding taxation 5,414 5,149
Tax using the UK corporation tax rate
of 20.00% (2015: 20.25%) 1,083 1,042
Deferred tax movements not recognised 33 37
Effect of tax rates in foreign jurisdictions 1 (4)
Impact of change in tax rate on deferred
tax balances (46) 1
Income not chargeable (22) -
Amounts not deductible 70 68
Adjustment in respect of prior periods 5 (87)
------ ------
Total tax expense in the income statement
- continuing and discontinued 1,124 1,057
------ ------
6. DIVIDS 2016 2015
GBP000 GBP000
Final dividend of 3.50p (2015: 3.33p)
per share 1,499 1,426
Interim dividend of 1.84p (2015: 1.75p)
per share 788 749
------ ------
Total dividends 2,287 2,175
------ ------
The Directors are proposing a final dividend in respect of the
financial year ended 31 December 2016 of 3.67p (2015: 3.50p) per
share which will absorb an estimated GBP1.6 million of
Shareholders' funds. This has not been accrued as it had not been
approved at the year end. Subject to approval, it will be paid on
23 June 2017 to Shareholders who are on the register of members on
2 June 2017 with ordinary shares trading ex-dividend on 1 June
2017.
7. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary Shareholders by the weighted average
number of ordinary shares during the year.
For diluted earnings per share the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The dilutive shares are those
share options granted to employees where the exercise price is less
than the average market price of the Company's ordinary shares
during the year.
Year ended 31 December Year ended 31 December
2016 2015
Weighted Weighted
average average
number Earnings number Earnings
Earnings of shares per share Earnings of shares per share
GBP000 000s Pence GBP000 000s Pence
Basic earnings per
share
Continuing operations 4,381 43,078 10.17 4,223 42,869 9.85
Discontinued operations (91) 43,078 (0.21) (131) 42,869 (0.31)
------------------------ -------- ---------- ---------- -------- ---------- ----------
Basic earnings per
share 4,290 43,078 9.96 4,092 42,869 9.54
------------------------ -------- ---------- ---------- -------- ---------- ----------
Diluted earnings
per share
Continuing operations 4,381 43,456 10.08 4,223 43,387 9.73
Discontinued operations (91) 43,456 (0.21) (131) 43,387 (0.30)
------------------------ ----- ------ ------ ----- ------ ------
Diluted earnings
per share 4,290 43,456 9.87 4,092 43,387 9.43
------------------------ ----- ------ ------ ----- ------ ------
2016 2015
'000 '000
Weighted average number of ordinary shares
for basic and diluted earnings per share 43,078 42,869
Impact of share options 378 518
------ ------
Weighted average number of ordinary shares
for diluted earnings per share 43,456 43,387
------ ------
8. Acquisition of Indequip
On 19 February 2016 the Group acquired the trade and assets of
Indequip, a UK-based business. The acquisition was made to enhance
the Group's position in the technical pneumatic market.
Details of the provisional fair value of identifiable assets and
liabilities acquired, purchase consideration, goodwill and
intangible assets are as follows:
Intangible
Fair value asset recognised Provisional
Book value adjustment on acquisition fair value
GBP000 GBP000 GBP000 GBP000
----------------------------- ----------- ------------ ------------------ ------------
Property, plant and
equipment 68 (58) - 10
Intangible assets - - 96 96
Inventories 392 (228) - 164
Trade and other receivables 10 - - 10
Cash and cash equivalents - - - -
Trade and other payables - - - -
Current tax balances - - - -
Provisions - - - -
Deferred tax liability - - (19) (19)
----------------------------- ----------- ------------ ------------------ ------------
Total net assets 470 (286) 77 261
----------------------------- ----------- ------------ ------------------ ------------
GBP000
---------------------------------- -------
Fair value of consideration paid
Amount settled in cash 893
Total consideration 893
---------------------------------- -------
Less net assets acquired (261)
---------------------------------- -------
Goodwill on acquisition 632
---------------------------------- -------
Fair values are provisional as subject to management estimations
at the reporting date.
Consideration transferred
Indequip was acquired on 19 February 2016 for cash consideration
of GBP893,000. Acquisition costs amounting to GBP31,000 have been
recognised as an expense in the Consolidated Income Statement as
part of separately disclosed administration costs.
Goodwill
Goodwill of GBP632,000 is primarily related to expected future
profitability and expected cost synergies from the closure of the
operational site and transfer of activities into existing Group
locations. Goodwill has been allocated to the Flowtechnology
operating segment and is not expected to be deductible for tax
purposes.
Intangible asset
An intangible asset of GBP96,000 has been provisionally
identified related to the brand identity of Indequip. The estimated
useful life has been determined as five years based on the expected
future cash flows that it would generate in arriving at their fair
value. The components of the brand considered in the valuation
comprised the website, catalogue and awareness of brand in the
industry. Sales growth over the five-year period has been assumed
to be 1% with an attrition rate of 3% for customers. Growth and
attrition rates are based on management experience and
expectations. Amortisation of the brand is not expected to be
deductible for tax purposes.
Fair value adjustments
-- The value of property, plant and equipment has been decreased
by GBP58,000 to reflect alignment of the useful life review policy
with that of the Group.
-- The value of inventories has been decreased by GBP228,000 to
reflect the alignment of stock valuation methods with those of the
Group.
Indequip's contribution to the Group results
Indequip generated a profit after tax of GBP227,000 for the ten
months from 19 February 2016 to the reporting date. If Indequip had
been acquired on 1 January 2016, it is estimated revenue for the
Group would have been GBP54,173,000 and profit after tax for the
year would have increased by GBP19,000.
Summary aggregated estimated financial information on Indequip
for the period from 1 January 2016 to 19 February 2016, when it
became a subsidiary:
2016
GBP000
--------- --------
Revenue 393
Profit 19
--------- --------
9. Acquisition of Hydravalve Limited
On 18 March 2016, the Group acquired 100% of the share capital
of Hydravalve Limited, a UK-based business, thereby obtaining
control. The acquisition was made to establish the Group's position
in supply of valves and actuation to the process industries. The
total consideration was GBP2,727,000. This comprised GBP2,105,000
in cash and GBP622,000 contingent cash consideration. The
additional consideration is based on profit targets for the
Company's customer base and is payable on the first and second
anniversaries of the acquisition. The fair value of GBP622,000 has
been calculated using management forecasts of Hydravalve's
Limited's performance discounted at the Company's weighted average
cost of capital.
Details of the provisional fair value of identifiable assets and
liabilities acquired, purchase consideration, goodwill and
intangible assets are as follows:
Intangible
Fair value asset recognised Provisional
Book value adjustment on acquisition fair value
GBP000 GBP000 GBP000 GBP000
----------------------------- ----------- ------------ ------------------ ------------
Property, plant and
equipment 229 39 - 268
Intangible assets - - 879 879
Inventories 1,634 (163) - 1,471
Trade and other receivables 942 (19) - 923
Cash and cash equivalents (312) - - (312)
Finance leases (71) (48) - (119)
Trade and other payables (606) - - (606)
Current tax balances (216) - - (216)
Provisions - (72) - (72)
Deferred tax liability (41) - (176) (217)
----------------------------- ----------- ------------ ------------------ ------------
Total net assets 1,559 (263) 703 1,999
----------------------------- ----------- ------------ ------------------ ------------
GBP000
---------------------------------------- --------
Fair value of consideration paid
Amount settled in cash 2,105
Fair value of contingent consideration 622
---------------------------------------- --------
Total consideration 2,727
---------------------------------------- --------
Less net assets acquired (1,999)
---------------------------------------- --------
Goodwill on acquisition 728
---------------------------------------- --------
Fair values are provisional as subject to management estimations
at the reporting date.
Consideration transferred
Hydravalve Limited was acquired on 18 March 2016 for a total
consideration of GBP2,727,000 comprising GBP2,105,000 in cash and
GBP622,000 contingent cash consideration. The contingent
consideration is due in two instalments on 18 April 2017 and 18
April 2018. It is contingent on the earnings before interest and
tax exceeding a target EBIT of GBP727,000 per annum for the first
two years post acquisition. Performance under the target will
reduce consideration payable. The maximum contingent consideration
payable is GBP2,000,000. The fair value of GBP622,000 has been
estimated by management using a discount rate of 10.9%, being the
weighted average cost of capital of Hydravalve Limited and sales
forecasts prepared by management at the time of acquisition, these
have been reviewed for performance up to the reporting date.
Acquisition costs and stamp duty amounting to GBP112,000 have
been recognised as an expense in the Consolidated Income Statement
as part of separately disclosed administration costs.
Goodwill
Goodwill of GBP728,000 is primarily related to expected future
profitability and expected cost synergies. Goodwill has been
allocated to the Process operating segment and is not expected to
be deductible for tax purposes.
Intangible asset
An intangible asset of GBP879,000 has been provisionally
identified related to customer relationships. The estimated useful
life has been determined as ten years based on the expected future
cash flows that they would generate in arriving at their fair
value. The customer relationships considered in the valuation
comprise the sales to significant customers. Long term sales growth
over the ten-year period has been assumed to be 1.0% with an
attrition rate of 7.5% for customers. Growth and attrition rates
are based on management experience and expectations. Amortisation
of customer relationships is not expected to be deductible for tax
purposes.
Fair value adjustments
-- The value of property, plant and equipment has been decreased
by GBP9,000 to reflect to reflect alignment of the useful life
review policy with that of the Group and increased by GBP48,000 to
recognise a leased asset omitted from the books of the Company
prior to acquisition.
-- The value of inventories has been decreased by GBP163,000 to
reflect the alignment of the Hydravalve stock provisioning policy
with that of the Group.
-- The value of debtors has been decreased by GBP19,000 to
reflect the alignment of the Hydravalve debtor provisioning policy
with that of the Group.
-- The value of lease finance liabilities has been increased by
GBP48,000 to recognise a leased obligation omitted from the books
of the Company prior to acquisition.
-- The value of provisions has been increased by GBP72,000 to
reflect a provision for dilapidation costs relating to properties
leased by the Company.
Hydravalve Limited's contribution to the Group results
Hydravalve Limited generated a profit after tax of GBP337,000
for the nine months from 18 March 2016 to the reporting date. If
Hydravalve Limited had been acquired on 1 January 2016, revenue for
the Group would have been GBP54,714,000 and profit after tax for
the year would have increased by GBP16,000.
Summary aggregated financial information on Hydravalve Limited
for the period from 1 January 2016 to 18 March 2016 when it became
a subsidiary:
2016
GBP000
--------- --------
Revenue 934
Profit 16
--------- --------
10. Acquisition of Triplesix Limited
On 29 July 2016 the Group acquired the entire share capital of
Triplesix Limited, a UK-based business, thereby obtaining control.
The acquisition was made to enhance the Group's position in the
hydraulic cylinder and rotary actuator market. On 1st October 2016
the trade and assets of Triplesix Limited were transferred its
parent PMC Fluidpower Limited.
Details of the provisional fair value of identifiable assets and
liabilities acquired, purchase consideration, goodwill and
intangible assets are as follows:
Intangible
Fair value asset recognised Provisional
Book value adjustment on acquisition fair value
GBP000 GBP000 GBP000 GBP000
----------------------------- ----------- ------------ ------------------ ------------
Property, plant and
equipment 41 (6) - 35
Intangible assets - - 195 195
Inventories 16 - - 16
Trade and other receivables 193 (47) - 146
Cash and cash equivalents 409 - - 409
Trade and other payables (64) - - (64)
Current tax balances (63) - - (63)
Provisions - (10) - (10)
Deferred tax liability (8) - (35) (43)
----------------------------- ----------- ------------ ------------------ ------------
Total net assets 524 (63) 160 621
----------------------------- ----------- ------------ ------------------ ------------
GBP000
---------------------------------- -------
Fair value of consideration paid
Amount settled in cash 776
Total consideration 776
---------------------------------- -------
Less net assets acquired (621)
---------------------------------- -------
Goodwill on acquisition 155
---------------------------------- -------
Fair values are provisional as subject to management estimations
at the reporting date.
Consideration transferred
Triplesix Limited was acquired on 29 July 2016 for a total cash
consideration of GBP776,000. Contingent consideration with a
maximum value of GBP750,000 is included within the purchase
agreement and is due in four six monthly instalments starting 1
March 2017. It is contingent on the earnings before interest and
tax exceeding GBP112,000 per annum for the first two years' post
acquisition. Following review of performance post acquisition and
management forecasts for the next year, EBIT targets are not
expected to be met and no provision has been made for contingent
consideration.
Acquisition costs and stamp duty amounting to GBP17,000 have
been recognised as an expense in the Consolidated Income Statement
as part of separately disclosed administration costs.
Goodwill
Goodwill of GBP155,000 is primarily related to expected future
profitability and expected purchasing synergies from Group buying
arrangements. The employee base brings additional skill sets in
three-dimensional design capabilities and a design database which
can be utilised across the Group. Goodwill has been allocated to
the Power Motion Control operating segment and is not expected to
be deductible for tax purposes.
Intangible asset
An intangible asset of GBP195,000 has been identified related to
customer relationships. The estimated useful life has been
determined as ten years based on the expected future cash flows
that they would generate in arriving at their fair value. The
customer relationships considered in the valuation comprise those
purchasing bespoke cylinders and actuators, a product group which
is new to the segment, but complementary to existing sales streams.
Sales growth over the ten year period has been assumed to be 2%
with an attrition rate of 10% for customers. Growth and attrition
rates are based on a review of sales and customer records.
Amortisation of customer relationships is not expected to be
deductible for tax purposes.
Fair value adjustments
-- The value of property, plant and equipment has been decreased
by GBP6,000 to reflect the alignment of the useful life review
policy with that of the Group.
-- The value of debtors has been decreased by GBP47,000 to
reflect the alignment of the Triplesix Limited debtor provisioning
policy with that of the Group and to provide for significant bad
debts apparent at the date of acquisition.
-- The value of provisions has been increased by GBP10,000 to
reflect a provision for dilapidation costs relating to properties
leased by the Company.
Triplesix Limited's contribution to the Group results
Triplesix Limited generated a loss after tax of GBP10,000 for
the seven months from 29 July 2016 to the reporting date. If
Triplesix Limited had been acquired on 1 January 2016, revenue for
the Group would have been GBP54,504,000 and profit after tax for
the year would have increased by GBP111,000.
Summary aggregated financial information on Triplesix Limited
for the period from 1 January 2016 to 29 July 2016, when it became
a subsidiary:
2016
GBP000
--------- --------
Revenue 724
Profit 111
--------- --------
11. EQUITY
Share capital
The share capital of the Company consists only of fully paid
ordinary shares with a nominal value of 50p per share. All shares
are equally eligible to receive dividends and the repayment of
capital and represent one vote at Shareholders' meetings of the
Company.
Number GBP000
Allotted and fully paid ordinary shares
of 50p each at 31 December 2016 43,078,282 21,539
Shares authorised for share based payments 6,666,667 3,333
---------- ------
Total shares authorised at 31 December
2016 49,744,949 24,872
---------- ------
Number GBP000
Allotted and fully paid ordinary shares
of 50p each
At 1 January 2016 and 31 December 2016 43,078,282 21,539
---------- ------
12. NET CASH FROM OPERATING ACTIVITIES
2015
GBP000
2015
GBP000
2016 2015
Reconciliation of profit before taxation
to net cash flows from operations GBP000 GBP000
Profit from continuing operations before
tax 5,527 5,280
Loss from discontinued operations before
tax (113) (131)
Depreciation 526 505
Financial income (1) (22)
Financial expense 611 232
Profit on sale of plant & equipment (21) (7)
Amortisation 569 413
Equity settled share-based payment charge 353 342
Release of over accrued contingent consideration (108) -
------- -------
Operating cash inflow before changes in
working capital and provisions 7,343 6,612
Change in trade and other receivables (1,384) 1,628
Change in stocks (1,486) (688)
Change in trade and other payables 1,126 (136)
Change in provisions (86) (60)
------- -------
Cash generated from operations 5,513 7,356
Tax paid (1,347) (1,413)
------- -------
Net cash generated from operating activities 4,166 5,943
------- -------
13. POST BALANCE SHEET EVENTS
Hydraulics and Transmissions Limited (HTL) was acquired on 20
January 2017 for an initial consideration of GBP0.75 million in
cash with contingent consideration of GBP1 million anticipated to
be paid over the next two years. The cash consideration was funded
out of existing Group resources. The Company provides fluid power
solutions predominantly to the mobile market segment and is based
in Ludlow, Shropshire. The acquisition will add significantly to
the Group's procurement relationship with key global suppliers of
hydraulic components. The business now forms part of the PMC
division. The initial accounting for the business combination is
incomplete at the date of issue of these financial statements,
hence no further disclosure can be provided.
On 30 March 2017 Flowtech Fluidpower plc raised approximately
GBP10million (before expenses) via the placing of 8,333,333 new
ordinary shares at 120 pence per share.
There are no other material adjusting or non-adjusting events
subsequent to the reporting date.
14. ANNUAL GENERAL MEETING
The Annual General Meeting will be held on 25 May 2017 at 10am.
at the offices of our joint brokers, finnCap, 60 New Broad Street,
London EC2M 1JJ.
15. ELECTRONIC COMMUNICATIONS
The full Financial Statements for the year ended 31 December
2016 are to be published on the Company's website, together with
the Notice convening the Company's 2017 Annual General Meeting by
28 April 2017. Copies will also be sent out to those shareholders
who have elected to receive paper communications. Copies can be
requested by writing to The Company Secretary, Flowtech Fluidpower
plc, Pimbo Road, Skelmersdale, Lancashire WN8 9RB or email to
info@flowtechfluidpower.com.
FORWARD-LOOKING STATEMENTS
These Preliminary results were approved by the Board of
Directors and authorised for issue on 4 April 2017. This document
contains certain forward-looking statements which reflect the
knowledge and information available to the Company during the
preparation and up to the publication of this document. By their
very nature, these statements depend upon circumstances and relate
to events that may occur in the future thereby involving a degree
of uncertainty. Therefore, nothing in this document should be
construed as a profit forecast by the Company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KMGGDGFGGNZZ
(END) Dow Jones Newswires
April 04, 2017 02:00 ET (06:00 GMT)
Flowtech Fluidpower (LSE:FLO)
Historical Stock Chart
From Apr 2024 to May 2024
Flowtech Fluidpower (LSE:FLO)
Historical Stock Chart
From May 2023 to May 2024