2017 Trading Update & Notice of Full-Year Results

RNS Number : 5928C

Flowtech Fluidpower PLC

23 January 2018

 

NEWS RELEASE Issued on behalf of Flowtech Fluidpower plc Immediate Release

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.  Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

FLOWTECH FLUIDPOWER PLC

("Flowtech", the "Group" or "Company")

2017 Trading Update

and

Notice of Full-Year Results

"PBT in line with expectations, whilst the Group's heightened profile and enhanced technical skills capabilities created in both the UK and Europe has ensured that opportunities for further significant expansion have continued to be presented"

London: Tuesday 23 January 2018:  AIM listed specialist technical fluid power products supplier Flowtech Fluidpower plc (LSE: symbol FLO), is pleased to announce the following unaudited update on its performance for the year ended 31 December 2017 and to the period up to this announcement: 

GROUP Trading Update AND FINANCIALS

Revenue for the Year ended 31 December
Divisions:	2017 Unaudited £'m	2016 Audited £'m	Growth
Flowtechnology	37.1	35.1	6%
Power Motion Control (PMC)	34.5	15.8	118%
Process	6.3	2.9	117%
Total Group revenue for the period	77.9	53.8	45%
Net debt	14.7	13.1

Group revenue for the year ended 31 December 2017 increased by 45% over 2016, and c.43% in constant currency.  After removing the effects of acquisitions, organic sales growth in the year is c.8.0%, which is consistent with the organic growth seen in Q4.  For those Profit Centres with a greater bias towards project based work, and, Primary Fluid Power (PMC) and Orange County (Process), order books for the first part of 2018 are well ahead of the same point last year.  The short-term outlook therefore remains encouraging.

Divisional Gross margins remain broadly in line with the prior year.  As a result of a weightier mix towards the generally lower margin PMC operations, a slight reduction in overall margin % is projected, therefore, the Board expects underlying* Profit before tax for the year ended 31 December 2017 will be in the range £8.6m to £8.8m, which is in line with market expectations.

Net debt at c.£14.7m is marginally above market expectations.  The key drivers behind this variance are an increase in stock balances, driven by the desire to maintain service levels to our customers, in the context of a substantial lengthening in industry wide lead times during the second half of 2017, and a continued investment in operational and IT resources to support our developments plans for 2018 and beyond.  This includes the refurbishment of the Shared Logistics Centre (referred to below).

ACQUISITONS

During the financial year we have concluded six acquisitions, supported by the successful capital raising in March 2017 of £9.6m (after fees and costs):

Region	Division	Acquired business	Location
UK	PMC Process PMC	Hydraulics & Transmissions Orange County Group HES	Ludlow Spennymoor Birmingham, Durham, Gloucester, Leeds
Ireland	PMC	HiPower Hydraulics	Belfast, Cork, Dublin, Manchester
Benelux	Flowtechnology PMC	Hewi Slangen Hydroflex Hydraulics	Deventer Brussels, OudBeijerland, Rotterdam

Our acquisition activity throughout the year has strengthened our position with important pan-European and global branded suppliers, enhanced our technical strength, and reinforced our position in our current core geographies of UK, Ireland, and Benelux.  We have also established an "Onsite Services" operation that will look to leverage off the Group's wider technical resources in 2018 and beyond.

INVESTMENT FOR THE FUTURE

Work on the refurbishment of the redesigned Shared Logistics Centre was completed with no disruption to customer service and the Skelmersdale site has entered 2018 with an opportunity to deliver operational and stockholding improvements across the Group.  This will also provide considerable scope for the profitable integration of future acquisitions.

Previous updates have outlined a plan to develop a Shared Engineering Centre in Knowsley, on Merseyside, based around our existing Primary Fluid Power operation.  This initiative remains an important medium-term aspiration for the Group.  However, to-date the various new site reviews we have undertaken have not produced the necessary strong cash generative outlook required by the Board to commence this additional investment at this stage of our development.

DIVIDEND

The Directors are confident in the Group's overall performance and intends to propose to shareholders a final dividend, which will again deliver a 5% increase for the year over 2016.  The Board remains committed to ensuring a continued focus on cash generation as part of our model.

STRATEGY UPDATE AND LOOKING AHEAD

The growth made by acquisitive means in 2017 has resulted in time being invested in the careful integration of the businesses now covered by our operational reach.  This focus will continue through 2018, along with further development to optimise our IT infrastructure, as we seek to achieve synergistic benefit and capitalise on the entrepreneurial and technical skills of the new operations.

In addition, the heightened profile and enhanced technical skills capabilities that Flowtech has established in both the UK and Europe has ensured that opportunities for further significant expansion have continued to be presented. It therefore remains a key part of our strategy to exploit these openings, whilst retaining a stable financial and operational structure to ensure that the substantial progress made to date is not undermined.  

SUMMARY

Our objective remains growth through both acquisitive and organic means over the short, medium and long term.  The progress made in the second half of 2017 has provided further scope for synergy extraction across the business, and it will be a key aspect of the Executive management team's activities in 2018.  Consequently, when looking at market expectations for 2018 and 2019, the extent of the wider commercial opportunities presently available, and the scope for synergy exploitation, gives us confidence that these expectations can be met.

NOTICE OF RESULTS

The Directors look forward to updating shareholders further on the Group's performance and the outlook for 2018 at the time of the 2017 preliminary results, scheduled to be released, on Tuesday, 17 April 2018. 

Note:

*Excludes acquisition costs, restructuring costs, share-based payment costs, amortisation of acquired intangibles and notional interest on deferred consideration

Enquiries: Flowtech Fluidpower plc Sean Fennon, Chief Executive Bryce Brooks, Chief Financial Officer Tel: [phone] Email: [e-mail]

Zeus Capital Limited (Nominated Adviser and Joint Broker) Andrew Jones, Alistair Donnelly (corporate finance) Dominic King, John Goold (sales & broking) Tel: [phone] finnCap Limited (Joint Broker) Ed Frisby, Kate Bannatyne (corporate finance) Rhys Williams, Emily Morris (sales & broking) Tel: [phone] TooleyStreet Communications (IR and media relations) Fiona Tooley Tel: [phone] or email: [e-mail]

EDITORS NOTES
About Flowtech Fluidpower plc
Founded as Flowtech in 1983, the Flowtech Group is the UK's leading specialist supplier of technical fluid power products.  The business joined AiM in 2014.  Today, the Group has four distinct divisions:
Division:	What we do:	Locations:
Flowtechnology	Focus on supplying distributors and resellers of industrial MRO products, primarily serving urgent orders rather than bulk offerings. It offers an unrivalled range of OEM and Exclusive Brand products to over 3,400 distributors and resellers.  The catalogue is recognised as the definitive source for fluid power products, containing 100,000 individual product lines and are distributed to more than 80,000 industrial MRO end users.	Flowtechnology Benelux (Deventer) Flowtechnology China (Guangzhou) Flowtechnology UK (Skelmersdale) Indequip (Skelmersdale)
Power Motion Control (PMC)	Specialise in the design, assembly and supply of engineering components and hydraulic systems and is further enhanced by a service and repair function.	Primary Fluid Power (Knowsley) Nelson Fluid Power (Dublin, Dungannon, Lisburn,) TripleSix (West Yorkshire) Albroco (Knowsley) Hydraulics & Transmissions (Ludlow) HiPower Hydraulics (Belfast, Cork, Dublin, Manchester) Hydroflex (Brussels, OudBeijerland, Rotterdam) Hydraulic Equipment Supermarkets (Birmingham, Durham, Gloucester, Leeds) Branch Hydraulics (Gloucester)
Process	Focus on the supply of industrial components and solutions to the process sectors.	Hydravalve (Willenhall) Orange County (Spennymoor)
Onsite Services	In 2018, the Group will extend its service offering to include Onsite Technical Maintenance through highly skilled engineers.	HES Onsite (Birmingham, Durham, Leeds, Gloucester)
All four of the Group's divisions have overlapping product sets, allowing procurement synergies to be maximised.
The above divisions are supported by a centralised back office team at the Skelmersdale site and a procurement and quality control team in Shanghai.  In total, the business employs over 400 people.  For more information please visit, www.flowtechfluidpower.com

 

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