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Flowtech Fluidpower (FLO)

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Thursday 30 April, 2020

Flowtech Fluidpower

Annual results for the year ended 31 December 2019

RNS Number : 4024L
Flowtech Fluidpower PLC
30 April 2020
 

Issued on behalf of Flowtech Fluidpower PLC

Date: Thursday, 30 April 2020

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")

leading specialist supplier of technical fluid power components and services

 

Annual results for the year ended 31 December 2019

 

 

Flowtech Fluidpower plc (AIM: FLO) today publishes its Annual results for the year ended 31 December 2019.

 

The Annual Report & Financial Statements for the year ended 31 December 2019 can be viewed and downloaded from the website later today at www.flowtechfluidpower.com .  Details of the AGM, together with the Notice of Meeting will be sent to Shareholders in due course.

The following summarises the 2019 financial results and performance:

 

2019 OPERATIONAL HIGHLIGHTS

 

· £13.2m positive cash flow from operating activities, £9.4m in excess of £3.8m in 2018.

· 100bps improvement in GP%.

· Organic revenue decline but at a modest level in difficult market conditions.

· Underlying operating profit of £9.6m in the year.

· Profit before tax of £4.7m in the year (2018: £6.9m).

 

2019 FINANCIAL HIGHLIGHTS

Year ended 31 December

 

2019

 

2018

 

· GROUP REVENUE1

· GROSS PROFIT %1

 

£112.4

35.7%

 

£112.1m

34.7%

· GROUP OPERATING PROFIT

· GROUP PROFIT BEFORE TAX

£5.7m

£4.7m

£7.7m

£6.9m

· EARNINGS PER SHARE2

6.12p

8.34p

· DIVIDEND4:

Ø Half year paid

Ø Final dividend

Ø Total for the year

 

2.13p

0.00p

2.13p

 

2.03p

4.04p

6.07p




· NET DEBT

£16.6m

£19.9m




· UNDERLYING OPERATING PROFIT3

£9.6m

£11.4m

 

 

1.

All results relate to continuing operations. Prior year values have been restated as described in Note 2.8

2.

Basic Earnings per Share

3.

Underlying operating profit is continuing operations' operating profit before separately disclosed

items (note 4), the impact of fair value adjustment to inventory (note 3). Underlying operating profit for

2019 also excludes the impact of re-stating operating lease rentals under IFRS 16 (note 2.3 and note 3)

4.

In the light of the economic uncertainty due to COVID-19, the Directors have suspended all dividend payments in order to retain

as much cash in the business as possible. No final dividend will be paid in respect of the financial year ended 31 December 2019

 

 

 ENQUIRIES:  

FLOWTECH FLUIDPOWER PLC

Malcolm Diamond MBE, Non-Executive Chairman

Bryce Brooks, Chief Executive Officer

Russell Cash, Chief Financial Officer

Tel: +44 (0) 1695 52759

Email : [email protected]

For more information please visit, www.flowtechfluidpower.com


Zeus Capital Limited (Nominated Adviser and Joint Broker)

Andrew Jones, Kieran Russell (Corporate Finance)

Dominic King, John Goold (Sales & Broking)

Tel: + 44 (0) 20 3829 5000


finnCap Limited (Joint Broker)

Ed Frisby, Kate Bannatyne (Corporate Finance)

Rhys Williams, Andrew Burdis (Sales & Broking)

Tel: + 44 (0) 20 7220 0500


TooleyStreet Communications (IR and media relations)

Fiona Tooley

Tel: +44 (0) 7785 703523 or email: [email protected]

 

 

 

FLOWTECH FLUIDPOWER PLC

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

Annual statement of results for the year ended 31 December 2019

 

 

INTRODUCTION BY THE CHAIRMAN, MALCOLM DIAMOND MBE

 

"Ultimately, the best thing we can do for all our stakeholders is to ensure that when life does return to normal, the measures we take during this upheaval leave us stronger in every respect"

"I would like to thank all my Flowtech colleagues for their passion and commitment over my period at the helm and, once the obvious threat of COVID-19 has passed, I am sure the business will prosper in a way that rewards all those who have invested in its future"

 

It will possibly come as no surprise to you for me to confirm that 2019 has been not only a challenging year, but also a transformative one. With the UK political situation at least appearing to have some sense of stability re-established, the Group was very much looking forward to 2020 as a year in which this transformation would be fully embedded. However, the global impact of the COVID-19 pandemic has clearly forced many companies, including our own, to take emergency action to protect all stakeholders as best as can be achieved.

 

To this end, I would firstly like to cover our main asset, our staff. Despite many businesses needing to take immediate action to cut costs, we took the view that, for at least March and April, we would guarantee that all our staff, whether currently working or furloughed, would continue to be paid in full. For the many that remain working but cannot work remotely, we have implemented robust procedures to ensure we protect staff as best we can, whilst at the same time ensuring that we continue to provide a service to industry, including many of those sectors specifically involved in dealing with the crisis.

 

We also recognise that there are several of our smaller suppliers and customers under stress, and we have been assisting them as much as we can by ensuring that cash continues to flow through the system while keeping all doors open to support urgent supplies.

 

Despite the difficulties associated with working from home in what is a 'teams' and physical assets business, we have continued to progress our rationalisation and productivity improvement programmes, and all activities outlined in our CEO's report have not been derailed - if anything, with the support of the whole management team, these activities have gathered pace in a way that emphasises the skill and commitment of everyone involved in the Group. Over time, we are therefore confident of achieving further reductions in both operating cost and working capital investment, which will further underpin our financial defence against the COVID-19 crisis. Along with our decision to cancel the final dividend for 2019, this gives us the strong belief that the business will continue to generate positive cash flow in 2020.

 

We are only too aware of the patience and understanding displayed by our staff and managers as we have gone through this major refocus and the challenges of COVID-19, for which we are extremely appreciative. Ultimately, the best thing we can do for all our stakeholders is to ensure that when life does return to normal, the measures we take during this upheaval leave us stronger in every respect.

 

The situation we find ourselves in is moving rapidly but we feel our business, and our balance sheet, will prove resilient. However, following a detailed re-forecasting exercise including downside scenario planning, the Directors assessment on going concern will include reference to material uncertainty in common with many other businesses. Further details around the consideration the Directors have given to going concern are contained elsewhere in this report, notably note 2.2. Notwithstanding this, the Directors confirm that, after due consideration, they have an expectation that the Group has adequate resources to continue for the foreseeable future and we have thereby continued to adopt the going concern basis in preparing the financial statements. We believe we are in a much better position than ever to deal with these unexpected challenges. Bryce Brooks' CEO's Year in Review includes further comments on the impact and our response to COVID-19.

 

Moving on to our broader activities, having executed a number of acquisitions between 2014 and 2018, due to the fact that we do not consider turnaround targets, and all the additions were profitable in themselves, revealing cost synergies via consolidation of duplicated activities was not seen as a priority whilst we focused on transitioning local leadership teams from an owner-managed model to a Group format. However, having made significant changes to our organisational structure since Bryce Brooks became CEO in late 2018, and invested in the necessary central functions, notably finance, systems and project management to provide the resources and infrastructure to support a change programme, we have now very much moved our focus towards releasing the undoubted productivity and cost out opportunities that our business possesses. Just as importantly, all our staff engaged in front line sales have undergone retraining in sales techniques as we drive towards order makers - rather than order takers. This is also supported with individual performance monitoring going forward.

 

I refer you to Russell Cash's Financial Review later in this announcement for a fuller account of our results for 2019.  

 

Finally, given the pivotal point that we are now at in our transformation, I have decided to retire as Chairman with effect from the AGM and hand over the reins to my colleague, Bill Wilson. Whilst this will be Bill's first time as a PLC Chairman, he has extensive experience in similar and larger organisations in both the role and the sector, and I know I will leave the Group in very good hands. Having been Chair since 2014, I have had the pleasure of working with ambitious and dedicated colleagues over the past six years as we have expanded rapidly, dealing with several challenges along the way. It has been a pleasure to support Bryce as he stepped up to be CEO, and welcome Bill, Nigel Richens and Russell Cash on to the Board. I feel that the benefits of our actions are now becoming tangible, and it is therefore the right time to retire. In addition, I look forward to working with Roger McDowell when he joins the team following the AGM. Roger is a highly successful businessman and entrepreneur, with a strong record of delivering shareholder value. The Board's objective is to have three Executive Directors, supported by three Non-Executives. A search has already commenced for the additional Non-Executive Director so I can fully step down, but until the right candidate has been identified I will continue to serve until the search is concluded.

 

I would like to thank all my Flowtech colleagues for their passion and commitment over my period at the helm and, once the obvious threat of COVID-19 has passed, I am sure the business will prosper in a way that rewards all those who have invested in its future.

 

29 April 2020

 

 

CHIEF EXECUTIVE'S REVIEW BY BRYCE BROOKS, CEO

 

" The Board believes that further progress will be made in improving productivity across the Group and looks forward to updating investors as we make further progress during the remainder of 2020 "

 

 

INTRODUCTION

2018 was a year in which relatively buoyant conditions in the first half were replaced with more benign conditions in the latter part of the year - this, combined with the deferment of planned activity on one project resulted in a downgrade to profit expectations being reported in September 2018. The start of 2019 saw a return to more favourable trading conditions. Creating the framework for change has involved some short-term increase in resources, which, when coupled with the more negative sales environment, has affected our profit growth, but it is particularly satisfying for the Executive team to see strong cash flow underlying this position, with Net Cash Generated from Operations of £13,246,000 (2018: £3,790,000), leaving Net Debt at the year-end of £16.6m (2018: £19.9m). The COVID-19 crisis has cast a considerable shadow across most sectors, but the improvement in cash resources created, and the change programme detailed below, will stand the Group in good stead when markets start to take shape again after the lockdown, and the Board is confident that the changes being made will become a real differentiator against our competitors.

 

GROUP STRATEGY & PROGRESS IN 2019

In 2018, we laid out a clear vision focused on the delivery of best-in-class service and support as the UK's leading fluid power distributor within a highly fragmented marketplace. We have looked to maintain the majority of our sales being associated with maintenance, repair and overhaul (MRO) applications, and the consistency of return that this sector brings, complemented by the supply of products and services to a broad base of industries engaged in the manufacture of capital equipment. At the same time we outlined a change in our structure to a two segment approach - Components and Services - with different divisional management teams that has allowed us to develop strategy in each segment to suit their specific characteristics and requirements, and which the Board firmly believes will lead to enhanced profit growth over the medium term. We have also established a Group central services team and facility in South Manchester and invested in the necessary skills in Accounting, Credit Management, IT Operations and Project Management to ensure we have the best platform to support the business as it currently stands, most crucially in the extensive change process now being implemented and detailed below, and to ensure future growth is long term in nature. Whilst this investment has increased overall costs in the short term, we are convinced this has given us a resilient position from which to move forward in a controlled manner. After a four-year period of significant growth had given the Group 'critical mass', in 2019 we therefore used our new structure and resources to focus on extracting the considerable synergy potential available, with emphasis on the following:

 

Optimisation of our operational cost base

At the date of this report last year we had completed an initial review of our resources and made a preliminary assessment of what our optimal operating structure might look like with regard to warehousing and logistics within our Components division, and how this might then support the engineering capabilities of our Services division. The Executive team progressed this plan during the remainder of the year and has actioned several elements to date, with further activity planned in 2020. In summary, the multiple sites and IT systems acquired as part of our acquisition programme since IPO can now be combined into a 'hub and spoke' system, with the majority of pick and ship activities undertaken by a centrally operated structure, predominantly our distribution centres based in Skelmersdale and Leicester, led by a network of customer-facing sales units. These two sites currently undertake around 70% of the Group's warehouse movements, producing class-leading efficiency rates, and following the assessment the Board is convinced that with only relatively modest capital investment, their activity levels can be  enhanced to absorb the majority of similar activity for the UK and Republic of Ireland, without undermining the service to the legacy Flowtechnology and Beaumanor businesses.

 

This has resulted in the following actions designed to both reduce cost and improve service:

 

· In September 2019, Hi-Power in Stockport, Cheshire, was closed and merged with Primary Fluid Power in Knowsley.

· In October 2019, TSL in Mytholmroyd, West Yorkshire, was closed and also merged with Primary Fluid Power.

· In January 2020, we announced that the Components element of Primary Fluid Power would move to Skelmersdale site with a target for full implementation by May 2020.

· Also, in January 2020, we announced that Hydravalve, in Willenhall in the West Midlands, would move to Skelmersdale with a target for full implementation by May 2020.

· Again, in January 2020, we announced that HES Durham would close with immediate effect and relocate to Orange County in Spennymoor, County Durham.

· In February 2020, we announced that Nelson Hydraulics in Lisburn, Northern Ireland, would close and its operation relocated to either Dungannon in County Tyrone or Skelmersdale with a target for full implementation by June 2020.

· Also, in February 2020, we announced that the warehousing and distribution of HES Gloucester, Birmingham and Leeds would close and be serviced from Leicester, with a target for full implementation by June 2020.

 

All the above projects require both IT implementations as well as physical stock movements under tightly managed project governance supported by the investment we have made in the last 12 months. I am pleased to confirm that to date all have been completed or are progressing to timetable and within expected budget.

 

The annualised savings attached to the above are estimated at £1.6m, with a £0.8m impact in 2020. The cash cost of this restructuring is estimated at £1.8m (of which £0.5m was incurred in 2019), with £0.9m relating to capital investment in IT upgrades and additional Kardex racking systems.

 

Making efficient use of our considerable working capital base, and wherever possible making improvements.

As a natural by-product of reducing our warehousing requirements, and beginning the process of 'centralisation' of the bulk of our stockholding, the Executive team were also keenly aware that the stockholding profile of the Group should be improved substantially. During 2019, via a mixture of stock clearance programmes and improved supply chain management, the Group has reduced its investment in Net Inventory (being Inventories less Trade and Other Payables) from £10,295,000 at 31 December 2018 to £8,490,000 at 31 December 2019, and Gross Inventory was reduced by c£7m, without any reduction in service levels. Whilst an element of this reduction results from scrappage of slow-moving items and a resultant reduction in our stock provision, a bigger proportion reflects the underlying reduction in the level of stock our businesses are carrying; this element of the reduction naturally flows into free cash flow. This remains a focus of the business in 2020 and we anticipate further reductions being achieved.  The overall metric that we use to measure against will be 'Turn and Earn'* with a target by 2022 of 130% versus an average of 95% achieved in 2019. This indicates an optimum stock investment of between £20m and £21m which compares with an actual of £24.0m at year end (2018: £28.7m).

 

*Turn and Earn Index is calculated by multiplying gross margin by stock turn. In 2019, the gross margin achieved was 35.7% and the average stock turn achieved was 2.67, therefore the Turn and Earn index was 95.

 

Improved procurement terms from our major supplier partners

In July 2019, the Group appointed John Farmer into a new role of Group Commercial Director, with the express focus on actively co-ordinating our supply strategy and building on the huge steps forward we have taken in extracting regular procurement data from across the Group's trading systems. A clearly defined supplier strategy has now been developed, focused on enhancing terms with a much narrower group of multinational manufacturers with global standing and operational infrastructure, thereby improving pricing and Net Inventory investment. Whilst the direct effects in 2019 can only be limited, it is pleasing to see that Gross Margins have again improved to 35.7% (2018: 34.7%) and I expect this trend to continue in 2020.

 

Organic sales growth

The above three elements of our strategic focus will ensure we build the best platform from which to operate. At the same time, the Group must ensure that it continues to develop a 'proactive' sales organisation, building on the important position of its legacy Profit Centre operations. To this end, long term strength is being built from the following focused initiatives:

 

1.  E-business capabilities - the Group already holds a sector-leading position with regard to e-commerce trading with over £28m of sales transacted by its customers online. However, with advances made by both our supplier base and the multi-sector international distribution organisations, we must continue to enhance our resources in this area in order to ensure competitive advantage remains and gives scope for considerable organic growth. The Group is currently improving the customer experience with a view to overlaying a single platform for its online trading which, when coupled with the transition of stockholding to a reduced number of sites described above, will mean that all the Group's stock will be within 'one click' of being sold by the close of 2020.

2.  Key Account Management - in 2019, the Group traded with over 10,000 live accounts. Within this, only 200 accounts accounted for around 50% by value and they represent most of the leading players in our marketplace. Building an effective cross-selling infrastructure to support these key accounts will be an important engine for growth.

3.  Training and Technical Capabilities.

 

Importantly, we believe there is further scope for significant cost savings, particularly in warehousing, our procurement activity (where we expect to take the number of suppliers down from over 1,000 to around 500), and the centralising of certain back office functions. The Board looks forward to updating investors as we make further progress during the remainder of 2020, with a target to complete all activity in this area by the end of the calendar year.

 

BUSINESS MODEL

Since our first acquisition, the Group has operated a distinct 'Profit Centre' structure, where each business leader acts in a semi-autonomous manner, which has encouraged local decision-making and ensured that we have been able to successfully transition previously owner-managed businesses to a Group structure. The move to the centralisation of supply chain activities within the Components division refocuses some of this local management responsibility. However, the key elements of customer-facing activities and importantly price management remain local. This approach will continue to support an entrepreneurial culture across the Group and ensures that we remain focused on delivering customer service at its highest level, responsive to both immediate and strategic needs, and safeguards growth before any centrally sponsored initiatives need to enhance this.

 

YEAR IN REVIEW

The start of 2019 was characterised by a continuance of the generally buoyant sector conditions seen in 2018. However, as the year progressed it became clear that uncertainty in the UK political situation was acting as a drag on growth, in both domestic and export markets for our customers, and with a December general election this particularly affected Q4, which saw an organic decline in revenue. This resulted in two separate downgrades to our forecasts, one issued in September 2019 and one in January 2020. The new year did start with a clear view that the sector would return to growth quickly and this trend was beginning to appear just as the COVID-19 crisis took hold. Therefore, the Executive team has, for the duration of this period in which negative growth was the norm, operated with increasing focus on the mantra of 'controlling the controllable' and ensuring that both the cost base and working capital are managed downwards effectively. Therefore, whilst it is disappointing that overall underlying operating profit has reduced in the year, we believe that the platform for future strong growth is being established. In 2018, the operational highlight of the year was the acquisition of our major competitor, Balu Ltd, and its subsidiaries, Beaumanor Engineering and Derek Lane & Co, in March 2018. In 2019, the two businesses contributed an Operating Profit of £1,844,000 (2018: £1,347,000) and the level of integration achieved with the rest of the Group's operations has been particularly satisfying for the teams involved, and in line with our expectations. The organisational structure announced last year, where we moved into a two-division format based around 'Components' and 'Services', has also proved to be a significant change. The large-scale redevelopment of our logistics platform currently being implemented underpins the collective reporting for the Components division, and the focus that has been brought to the Services division is ensuring that shared engineering and technical support is now being used more effectively. The reduction in profitability seen in the Services division has been a function of the market downturn in late 2019, with many of the initiatives instigated by the divisional leadership team beginning to bear fruit in the early part of 2020. The division adds considerably to the technical resources of the whole Group. However, the sector as a whole operates at lower financial margins that the intrinsic niche value suggest should be achieved, and I remain focused on the clear need for this division to improve its overall profitability. The change to a single coordinated leadership team and reporting structure will assist in this process.

 

IT DEVELOPMENT

In conjunction with our operational review, we have reviewed our long-term IT strategy and we now believe that we can move towards an optimised position in the medium term without the need for enterprise-wide IT change. This will be achieved by focusing on only three or four providers with each being capable of being linked to each, thereby creating a single framework, backed up by a cloud-based hardware solution that was successfully established in May 2019. These platforms can all be used in conjunction with our developing e-business operation and place us at the forefront of the sector. As an example of how our investment in both resources and personnel has started to provide tangible benefit to the Group, following the announcement by the Government of the 'Work From Home' guidance on 16 March 2020, the Group successfully created a framework allowing over 200 people to effectively transfer their working base from office to home, including telecoms, within a working week using the cloud-based infrastructure established during the previous twelve months. This ensured that customer contact was retained and operations seamlessly transitioned during what became a stressful period for all.

 

PEOPLE

In March 2019, Jon Burke was promoted to take overall responsibility for Services and is now working to co-ordinate all sales and operational matters across the various businesses within the division. In July 2019, Ian Simpson was promoted to Divisional Director within the Components segment with a specific remit covering the cluster of business units that focus on catalogue and web sales with a high-service offering. Finally, in November 2019, having previously worked as a consultant to the Group, Anne Fogg was appointed to the new role of Systems Director with responsibility for all the Group's IT, Internal Audit and Project Management resources.

 

In addition to the senior appointments described above, we are committed to training and development with several initiatives implemented in the period in leadership, sales training, technical and employee engagement. We are always acutely aware that our progress is achieved with the continued commitment and effort of all our employees, and with our status in the sector developing, we are confident in our ability to retain and attract the best staff the industry can offer. The passion and commitment shown by the many staff members employed across the Group, particularly through periods of change, has been exemplary. On behalf of the Executive Management team, and the plc Board, I would like to thank everyone for their efforts, and the continued support that has been shown in 2020.

 

COVID-19

Prior to the COVID-19 lockdown, Q1 2020 performance was in line with our expectations at that time: down on the buoyant conditions

seen in early 2019, but with a return to growth in customer order patterns and outlook. However, the final few weeks of this period

created an altogether different position going into April 2020. Many of our suppliers and customers suspended operations, although recent indications suggest that some have either already reopened or are planning to reopen in May, albeit with reduced capacity.

 

On a daily basis the Board now receives reports on, amongst other things: headroom over banking facilities, use of governments' support, debtor collections, despatches from major distribution sites, COVID-19 staff illness, and the number of major suppliers and customers closed or reopening for business. In addition, we are holding weekly board meetings, as well as daily video conference calls amongst the operational leadership team, and our focus is on supporting our staff, suppliers and customers and matching our cost base to the emerging trends in activity. As a result of our actions, since safe working guidance was introduced last month, costs have been reduced by a combination of internal actions and the utilisation of 'furlough' or equivalent schemes introduced in the UK, Republic of Ireland, and the Netherlands. We estimate that our cost base has fallen by around 25%, with further savings still to come from our restructuring activities. We will therefore continue to pursue our rationalisation and cost reduction programmes, creating operational efficiencies in our procurement, logistics, sales, and back office activities.

 

Whilst the full impact of the COVID-19 lockdown remains unclear, it is not possible to make any accurate predictions for the remainder

of the year. A significant part of our sales depends on the manufacturing and construction sectors, both of which have seen large scale shut-downs. It is possible that these sectors will begin to reopen during early May, and our current plan is to ensure that we continue to support/service our customers and react as quickly and effectively as possible if this were to happen. However, if there is a need to undertake further cost reductions should the lockdown extend further into the year, we must ensure that we are in a position to initiate change without detriment to our future business and our customers. This being said, the work undertaken as part of our restructuring activities over the past 12 months is helping our planning enormously in this regard.

 

29 April 2020

 

 

 

SUMMARY OF 2019 FINANCIAL RESULTS BY RUSSELL CASH, CHIEF FINANCIAL OFFICER

 

" We continue to see benefits of the creation of a central Commercial/Procurement Director in prices we are achieving with our suppliers as buying decisions are made on a consolidated Group basis rather than by individual profit centres "

 

 

Operational Review

Operational review

2019

Audited

2018

Audited

Change %

 

Group revenue (*)

£112.4m

£112.1m

0.3%

Gross profit (*)

£40.2m

£38.9m

3.2%

Gross profit % (*)

35.7%

34.7%

100bps

Group operating profit

£5.7m

£7.7m

(25.2%)

Underlying operating profit (†)

£9.6m

£11.4m

(15.6%)

 

Reconciliation of underlying operating profit to operating profit

2019

Audited

£000

2018

Audited

£000

Underlying operating profit

Less impact of fair value adjustment to inventory (note 3)

9,607

(297)

11,381

(382)

Add impact of restatement under IFRS 16 on operating profit

147

-

Less separately disclosed items (note 4)

(3,712)

(3,321)

Operating profit

 5,745

7,678

(*) All results relate to continuing operations.  Prior year values have been restated as described in Note 2.8.

(†) Underlying operating profit is continuing operations' operating profit before separately disclosed items (note 4), the impact of fair value adjustment to inventory (note 3). Underlying operating profit for 2019 also excludes the impact of re-stating operating lease rentals under IFRS 16 (note 2.3 and note 3).

 

Given the background of increasingly challenging market conditions encountered in 2019, in particular the final quarter of the year, the Board is satisfied with the trading result.

 

The Board believes that areas capable of being controlled have been suitably focused on and results delivered. We are particularly pleased that the efforts to reduce working capital has been a key factor in a £3.3m reduction in our Net Debt (£19.9m reducing to £16.6m). The underlying reduction is £5.9m if account is taken of the c£2.6m paid out in respect of historic acquisition activities. Earlier in 2020 we announced our plans to take cost out of certain of our businesses to build on the more modest savings which were achieved in 2019. These plans revolve around getting much better benefit from certain of our more efficient distribution facilities. The Board remains confident that further, significant, savings will be achieved in the next two to three years.

 

Revenue

Revenue increased by 0.3% (2018: 42%). After accounting for the impact of the Balu acquisition (March 2018) there was underlying organic decline of 1.9% (2018: growth of 5.7%). 2019 was a story of two halves with organic growth of c3% in H1 being more than

offset by decline of c7% in H2 with Q4, in line with the overall market, being particularly challenging.

 

Gross Profit Margins

Our overall gross margin improved by 100bps. This is particularly pleasing and builds on a 81bps gain in 2018. Gross margin remains a key indicator for each of our businesses; this, combined with increasing focus on businesses within the Group working together to generate improved terms, sees us well placed to retain and improve on these strong margins in the future.

 

Underlying Operating Profit

Underlying operating profit reduced by £1.8m (15.6%). After taking account of separately disclosed items, statutory operating profit

reduced by £1.9m (25.2%).

 

RESULTS BY SEGMENT

During 2019 we began to review and measure our business under the two reporting segments of Components and Services. The rationale for this was to enable us to draw a distinction between the relatively predictable Components business with a large proportion of business being maintenance and repair related and, in contrast, the Services division which provides a broader spectrum of offering and which is more difficult to predict but which our key suppliers view as being a major reason why they wish to develop strategic partnerships with the Group.

 

Revenue

2019

Audited

£000


2018 *

Audited

£000


Components

96,348


94,581


Services

16,070


17,527


Group

112,418


112,108


 

Gross Profit

2019

Audited

£000

%

2018 *

Audited

£000

%

 

 

Components

35,167

36.5

33,362

35.3

Services

5,016

31.2

5,587

31.9

Group

40,183

35.7

38,949

34.7

 

Underlying Operating Profit/(Loss)

2019

Audited

£000

%

2018

Audited

£000

%

 

 

 

Components

13,995

14.5

14,254

15.2

Services

(59)

(0.4)

314

1.8


13,936


14,568


Less allocation of central costs

(4,329)


(3,187)


Group

9,607


11,381


 

(*) Prior year values have been restated as described in Note 2.8.

 

REVENUES

Overall revenues grew by £0.3m, split:

· Components - £1.8m increase (£2.5m through acquisition activity and £0.7m (0.8%) organic decline.

· Services - £1.5m (9.1%) decline

 

GROSS PROFIT MARGINS

It is pleasing to see a 1.2% improvement in an already strong margin within our Components businesses.  We continue to see benefits of the creation of a central Commercial/Procurement Director in prices we are achieving with our suppliers as buying decisions are made on a consolidated Group basis rather than by individual Profit Centres.

 

The margin within the Services division typically vary more.  We have plans in place which should see both gross, and more importantly, net margins improving within this part of our business.

 

UNDERLYING OPERATING PROFIT

Underlying operating profit within our Components division remains strong at £13.9m, a margin of 14.5%.  Whilst the lack of contribution from our Services businesses is disappointing, the division remains key in developing our ever-stronger relationships with key suppliers. Actions are now in place to improve the performance, through a combination of extracting operational efficiencies and by charging more appropriately for certain of the services which are provided.

 

CENTRAL COSTS

Central costs comprise executive management, finance and IT departments, divisional sales and the cost of running the plc. We made significant investment in these areas during the second half of 2018 and early 2019. We believe an element of these costs will not recur in 2020; this, combined with the focus we have on managing our overall cost base down, means we are confident that these costs have reached a mature level and will not materially increase in the foreseeable future.

 

This provides a robust platform to deliver material cost and working capital savings. The Board believes we are well placed to capitalise on future growth opportunities, both organic and when the time is right through acquisition activity.

 

Statement of financial position and cash flow

In a year where trading conditions were challenging it is pleasing to see that we achieved a £3.3m reduction in Net Debt, in particular given £2.6m was paid out in respect of contingent consideration relating to historic acquisition activity.

 

This performance reflects the emphasis which the entire business placed on management of working capital. In 2019 cash generated from operations activities totalled £13.2m (2018: £3.8m).  In terms of working capital achievements:

 

· Net stock levels were reduced by c.£4.7m and our focus on achieving further reductions has continued into 2020

· The average payment term with suppliers was increased from c.45 days to c.55 days - this was achieved by agreeing enhanced terms with a number of our key suppliers

· We agreed reduced payment terms with a certain number of our customers - as a result our debtor days reduced by c3 days (c.£1.0m in cash terms).

 

The business generated £10.4m (2018: £10.1m) of positive operating cash flow.  This was augmented by the effect of the focus on management of working capital with an overall benefit of £5.8m in the year.  The aggregate total of £16.2m enabled the following to be funded:

 

· Dividends (£3.7m)

· Earn out consideration in respect of historic acquisitions (£2.6m)

· Taxation (£3.0m)

· Lease payments & IFR16 related interest (£1.9m)

· Capital expenditure (£0.8m)

· Interest (£0.8m)

· Other items (£0.2m)

· Reduction in bank debt (3.3m)

 

DIVIDENDS

Given the challenges presented by the COVID-19 pandemic, the Board has concluded it is in the best interests of all stakeholders to suspend the dividend policy.  As such, the interim dividend of 2.13p per share (paid on 29 October 2019), will not be added to. The Board will review the dividend policy once more stable conditions have returned.

 

TAXATION

The tax charge for the year was £0.97m (2018: £1.99m), with an effective tax rate of 20.6% (2018: 28.8%). The significant reduction in the effective rate primarily relates to the fact that there is a much lower level of disallowable acquisition-related expenditure in 2019 as compared with 2018.

 

29 April 2020

 

 

FLOWTECH FLUIDPOWER PLC

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

Annual results for the year ended 31 December 2019

 

Consolidated income statement

Note

2019

Audited

£000

2018

Audited

£000

Continuing operations




Revenue (**)

3

112,418

112,108

Cost of sales (**)


(72,235)

(73,159)

Gross profit (**)


40,183

38,949

Distribution expenses (**)


(4,547)

(4,561)

Administrative expenses before separately disclosed items*:


(26,179)

(23,389)

Separately disclosed items

4

 (3,712)

(3,321)

Total administrative expenses


(29,891)

(26,710)

Operating profit *

4

5,745

7,678

Financial income

5

-

11

Financial expenses (*)

5

(1,038)

(766)

Net financing costs


(1,038)

(755)

Profit from continuing operations before tax *

3

4,707

6,923

Taxation

6

(968)

(1,992)

Profit from continuing operations


3,739

4,931

Profit for the year attributable to:




Non-controlling interest


-

20

Owners of the parent


3,739

4,911



3,739

4,931

Earnings per share




Basic earnings per share - continuing operations

8

6.12p

8.34p

Diluted earnings per share - continuing operations


6.10p

8.28p

 

(*) In the current year, the company adopted IFRS 16 and applied the modified retrospective approach. The adoption of IFRS16 for 2019 has led to the elimination of lease payments of £1,833k and the introduction of additional depreciation of £1,701k, £15k gain on exchange movements and finance costs of £282k. The impact of this is an increase in operating profit of £147k and, after taking account of finance costs, a reduction in profit before tax of £135k.

(**) Prior year values have been re-stated as described in Note 2.8.

 

 

Consolidated statement of comprehensive income

2019

£000

2018

£000

Profit for the year

3,739

4,931

Other comprehensive income



- items that will be reclassified subsequently to profit or loss



Exchange differences on translating foreign operations

(394)

128

Total comprehensive income for the year

3,345

5,059

Total comprehensive income for the year attributable to:



Non-controlling interest (*)

-

20

Owners of the parent

3,345

5,039


3,345

5,059

 

(*) The Company purchased minority interest in Derek Lane & Co Limited in July 2019. Details of the purchase are given in note 9.

 

 

FLOWTECH FLUIDPOWER PLC

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

Annual results for the year ended 31 December 2019

 

Consolidated statement of financial position

Note

2019

Audited

£000

2018

Audited

£000

Assets




Non-current assets




Goodwill


63,014

63,022

Other intangible assets


6,573

7,624

Right-of-use assets


  8,228

-

Property, plant and equipment


6,528

6,735

Total non-current assets


84,343

77,381

Current assets




Inventories


24,000

28,667

Trade and other receivables


21,377

25,475

Prepayments


759

668

Cash and cash equivalents


3,446

2,248

Total current assets


49,582

57,058

Liabilities




Current liabilities




Interest-bearing borrowings


16,055

18,078

Lease liability


  1,635

-

Trade and other payables


15,510

18,372

Deferred and contingent consideration


214

2,240

Tax payable


298

2,115

Total current liabilities


33,712

40,805

Net current assets


15,870

16,253

Non-current liabilities




Interest-bearing borrowings


4,008

4,051

Lease liability


6,735

-

Provisions


417

399

Deferred tax liabilities


1,519

1,751

Total non-current liabilities


12,679

6,201

Net assets


87,534

87,433

Equity directly attributable to owners of the Parent




Share capital

10

30,579

30,460

Share premium


60,959

60,793

Other reserves


187

187

Shares owned by the Employee Benefit Trust


(372)

(413)

Merger reserve


293

293

Merger relief reserve


3,599

3,575

Currency translation reserve


244

664

Retained losses


(7,955)

(8,146)

Total equity attributable to the owners of the parent


87,534

87,413

Non-controlling interest


-

20

Total equity


87,534

87,433

 

 

FLOWTECH FLUIDPOWER PLC

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

Annual results for the year ended 31 December 2019

 

 

Consolidated statement of changes in equity


Share

capital

£000

Share

premium

£000

 

Other reserve £000

Merger reserve £000

Shares

owned by the EBT

£000

Merger relief reserve

£000

Currency translation

reserve

£000

Retained

losses

£000

Non-controlling interest £000

Total

equity

£000












Balance at 1 January 2018

26,409

52,370

187

293

(40)

3,194

536

(8,085)

-

74,864

Profit for the year

-

-

-

-

-

-

-

4,911

20

4,931

Other comprehensive income

-

-

-

-

-

-

128

-

-

128

Total comprehensive income for the year

-

-

-

-

-

-

128

4,911

20

5,059

Transactions with owners









-


Issue of share capital

3,450

8,423

-

-

-

381

-

-

-

12,254

Share owned by the EBT

-

-

-

-

(650)

-

-

-

-

(650)

Issue of shares in exchange for shares in subsidiary undertaking

601

-

-

-

-

-

-

(1,303)

-

(702)

Share-based payment charge

-

-

-

-

-

-

-

191

-

191

Share options settled

-

-

-

-

277

-

-

(302)

-

(25)

Equity dividends paid (note 8)

-

-

-

-

-

-

-

(3,558)

-

(3,558)

Total transactions with owners

4,051

8,423

-

-

(373)

381

-

(4,972)

-

7,510

Balance at 1 January 2019

30,460

60,793

187

293

(413)

3,575

664

(8,146)

20

87,433

Profit for the year

-

-

-

-

-

-

-

3,739

-

3,739

Other comprehensive income

-

-

-

-

-

-

(420)

26

-

(394)

Total comprehensive income for the year

-

-

-

-

-

-

(420)

3,765

-

3,345

Transactions with owners











Issue of share capital

25

45

-

-

-

-

-

-

-

70

Purchase of minority shares

-

-

-

-

-

-

-

(270)

(20)

(290)

Shares issued as

consideration

94

121

-

-

-

24

-

-

-

239

Other movements in share capital

-

-

-

-

-

-

-

133

-

133

Share-based payment charge

-

-

-

-

-

-

-

143

-

143

Share options settled

-

-

-

-

41

-

-

169

-

210

Equity dividends paid (note 8)

-

-

-

-

-

-

-

(3,749)

-

(3,749)

Total transactions with owners

119

166

-

-

41

25

-

(3,575)

 (20)

(3,244)

Balance at 31 December 2018

30,579

60,959

187

293

(372)

3,599

244

(7,955)

-

87,534

 

 

FLOWTECH FLUIDPOWER PLC

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

Annual results for the year ended 31 December 2019

 

 

Consolidated statement of cash flows

Note

2019

Audited

£000

2018

Audited

£000

Cash flow from operating activities




Net cash from operating activities (*)  

11

13,246

3,790

Cash flow from investing activities




Acquisition of businesses, net of cash acquired

9

(38)

(9,703)

Acquisition of property, plant and equipment


(756)

(1,343)

Proceeds from sale of property, plant and equipment


39

64

Payment of deferred and contingent consideration


(2,635)

(3,546)

Net cash used in investing activities


(3,390)

(14,528)

Cash flows from financing activities




Net proceeds from issue of share capital


70

10,161

Net change in short-term borrowings


-

1,000

Repayment of Right-of-use lease liabilities (*)


(1,561)

-

Repayment of lease liabilities


(71)

(343)

Interest on right-of-use leases (*)


(282)

-

Other interest paid


(756)

(722)

Proceeds from sale of shares held by EBT


47

276

Share option payments to staff


(61)

-

Dividends paid

7

(3,749)

(3,558)

Net cash (used in) / generated from financing activities


(6,363)

6,813

Net change in cash and cash equivalents


3,493

(3,925)

Cash and cash equivalents at start of year


253

4,199

Exchange differences on cash and cash equivalents


(300)

(21)

Cash and cash equivalents at end of year


3,446

253

Cash and cash equivalents


3,446

2,248

Bank overdraft


-

(1,995)

Cash and cash equivalents at end of year


3,446

253

 

(*) Following adoption of IFRS 16, payment of £1,843k of operating lease rentals have been reclassified from operating cash flow to repayment of lease liability under financing activity £1,561k and repayment of interest on right of use lease liability of £282k.

 

 

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 borrowings

£000

Short-term borrowings

£000

Finance Lease liabilities

£000

Right-of-use

lease liabilities

£000

Total

£000

At 1 January 2018

4,000

15,000

159

-

19,159

Cash flows:






Repayment

-

-

(343)

-

(343)

Proceeds

-

1,000

-

-

1,000

Non cash:






Acquisition

-

318

At 31 December 2018

4,000

16,000

134

-

20,134

 

 


Long-term borrowings

£000

Short-term borrowings

£000

Finance Lease liabilities

£000

Right-of-use

lease liabilities

£000

Total

£000

At 1 January 2019

-

20,134

Transition to IFRS 16 as at 1 January 2019

-

-

-

9,047

9,047

Cash flows:






Repayment

-

-

(71)

(1,561)

(1,632)

Proceeds

-

-

-

-

-

Other movements

-

-

-

(96)

(96)

Non cash:






Additions to right-of-use assets in exchange for increased lease liabilities

980

980

At 31 December 2019

4,000

16,000

63

8,370

28,433

 

 

 

 

FLOWTECH FLUIDPOWER PLC

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

Notes to the Financial statements

 

 

1.

GENERAL INFORMATION

The principal activity of Flowtech Fluidpower plc (the 'Company') and its subsidiaries (together, the 'Group') is the distribution of engineering components and assemblies, concentrating on the fluid power industry. The Company is a public limited company, incorporated and domiciled in the United Kingdom. The address of its registered office is Bollin House, Bollin Walk, Wilmslow, SK9 1DP. The registered number is 09010518.

 

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, Bollin House,

Bollin Walk, Wilmslow, SK9 1DP. Email: [email protected] .

 

 

2.

ACCOUNTING POLICIES

 

2.1 BASIS OF PREPARATION

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2019 or 2018 but is derived from those accounts. Statutory accounts for 2018 have been delivered to the registrar of companies with Companies House, and those for 2019 will be delivered in due course. The Auditor has reported on those accounts. Their report for 2019 was unqualified and contains a material uncertainty in respect of going concern to which the auditor drew attention by way of emphasis without modifying their report. Their report for the accounts of 2018 was unqualified and did not include a reference of any matters to which the auditor drew attention by way of emphasis without qualifying their report.

The full Financial Statements for the year ended 31 December 2019 are to be published on the Company's website, together with the Notice convening the Company's 2020 Annual General Meeting by 5 May 2020.  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, Bollin House, Bollin Walk, Wilmslow SK9 1DP or email to [email protected]

New standards adopted as at 1 January 2019

IFRS 16 Accounting for leases has become applicable for the current reporting period, and the Group had to change its accounting policies as a result of adopting IFRS 16. The impact of the adoption of the leasing standard and the new accounting policies are disclosed below.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in the consolidated financial statements.

 

2.2 GOING CONCERN

The financial statements are prepared on a going concern basis which the directors believe to be appropriate for the following reasons:

 

· The Group generated profit before tax of £4.7m in 2019 (2018: 6.9m).

· The Group is financed by revolving credit and non-amortising loan facilities totalling £20m (recently extended to 30 June 2021) and a £5m overdraft facility, repayable on demand.

· At the end of 2019 the Group's Net Debt was £16.6m (£8.4m within the aggregate banking facilities); this position reduced to £15.6m at 31 March 2020 (£9.4m within facilities).

 

The Directors have prepared forecasts covering the period to December 2021. Naturally these forecasts include a number of key assumptions notably relating, inter alia, to revenue, margins, costs and working capital balances.

 

In any set of forecasts there are inherent risks relating to each of these assumptions. If future trading performance significantly underperformed expectations, management believe there would be the ability to mitigate the impact of this by careful management of the Group's cost base and working capital and that this would assist in seeking to ensure all bank covenants were complied with and the business continued to operate well within its aggregate £25m banking facility.

 

Prior to COVID-19, results for the first quarter of 2020 were in line with management expectations. Whilst the Group's trading and cash flow forecasts have been prepared using current assumptions, the impact of the COVID-19 pandemic present challenges which could not previously have been contemplated. Clearly the ultimate impact of COVID-19 is difficult to predict; as such the Directors have considered a range of scenarios when stress testing the base financial forecasts for the period to December 2021. The Directors have based their stress testing on an assumption of a very significant reduction in Revenue in Q2 2020 with conditions remaining difficult for a further nine-month period before returning to a normal trading pattern by Q2 2021. In such a set of circumstances, and with the benefit of continued careful working capital management, the Directors believe it is still likely that the business would continue to operate within the aggregate £25m banking facility. However, it is possible that the leverage covenant would be breached; in such a case we would expect to work with the bank to reset the bank covenants to respond to the circumstances created by what would have to be a long-standing and significant COVID-19 impacted period. The Directors also note the range of Government and banking support which have been announced for businesses should the need arise.

 

The Directors have concluded that the potential prolonged impact of the COVID-19 pandemic on the business represents a material uncertainty that may cast significant doubt upon the Group and parent company's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the ordinary course of business. Nevertheless, after making enquiries, and considering the uncertainties described above, the Directors have a reasonable expectation that the Group and parent company has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts.

 

The financial statements do not reflect any adjustments which would result from the going concern basis of preparation proving to be inappropriate.

 

2.3 CHANGES IN ACCOUNTING POLICIES

The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17. This note explains the impact of the adoption of IFRS 16 on the Group's financial statements and discloses the new accounting policies that have been applied from 1 January 2019. The Group has adopted IFRS 16 retrospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019.

 

2.3.1 Adjustments recognised on adoption of IFRS 16

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate as of 1 January 2019. The weighted average incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 3.2%. In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

· the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;

· reliance on previous assessments on whether leases are onerous;

· the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases;

· the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and

· the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease. The Group has also elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.

 

2.3.2 Impact of transition to IFRS 16

 


Audited

£000

Operating lease commitments disclosed as at December 2018 (Restated) (*)

9,209

Operating lease commitments discounted using the lessee's incremental borrowing rate at the date of initial application

(1,370)

(Less): short-term leases recognised on a straight-line basis as expense

(54)

(Less): low-value leases recognised on a straight-line basis as expense

(79)

Add/(less): adjustments as a result of a different treatment of extension and termination options

1,253

Other movements

88

Lease liability recognised as at 1 January 2019

9,047

 

(*) Following a detailed review of the lease commitments on transition to IFRS 16, the opening balance of the operating lease commitments in respect of Land and Building disclosed as at 31 December 2018 was corrected.

 

The associated right-of-use assets for property leases and other assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

 


31 December

2019

£000

1 January

2019

£000

Land and property

7,504

8,343

Motor vehicles

724

704

Total right-of-use assets

8,228

9,407

 

The change in accounting policy affected the following items in the balance sheet on 1 January 2019:

· Right-of-use assets - increase by £9,047k.

· Lease liabilities - increase by £9,047k.

 

The net impact on retained earnings on 1 January 2019 was nil. For the year ending 31 December 2019, operating lease rentals of £1,833K have been restated as depreciation £1,701k, exchange gain £15k and finance costs £282k. Operating profit has increased by £147k whereas profit before tax has reduced by £135k. As a result, earnings per share for the year ending 31 December 2019 reduced by 0.22 pence per share.

 

2.3.3 The Group's leasing activities and how these are accounted for

The Group leases various offices, warehouses, and motor vehicles. Rental contracts are typically made for fixed periods of up to 12 years but may have extension options as described in (ii) below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

 

Until the 2018 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.

 

From 1 January 2019, operating leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

 

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value

of the following lease payments:

· fixed payments (including in-substance fixed payments), less any lease incentives receivable;

· variable lease payments that are based on an index or a rate;

· amounts expected to be payable by the lessee under residual value guarantees;

· the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

· payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

 

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

 

Right-of-use assets are measured at cost comprising the following:

· the amount of the initial measurement of lease liability;

· any lease payments made at or before the commencement

· date less any lease incentives received;

· any initial direct costs; and

· restoration costs.

 

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.

 

There are no leases with variable lease payments.

 

(i) Extension and termination options

Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor.

 

Critical judgements in determining the lease term

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). No potential future cash outflows have been included in the lease liability because it is not reasonably certain that the leases will be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee.

 

(ii) Residual value guarantees

To optimise lease costs during the contract period, the Group sometimes provides residual value guarantees in relation to equipment leases.

 

Estimating the amount payable under residual value guarantees

The Group initially estimates and recognises amounts expected to be payable under residual value guarantees as part of the lease liability. The amounts are reviewed, and adjusted if appropriate, at the end of each reporting period. At the end of reporting period, there is no liability on account of residual value guarantees.

 

2.4 REVENUE

Revenue from sale of goods

Revenue for sale of goods is the total amount receivable by the Group for goods supplied, excluding VAT and discounts. Revenue from the sale of goods is recognised in the income statement at a point in time at the point of despatch, when the control passes to the customer.

 

Revenue for sale of goods includes income from delivery charged to customers, excluding VAT. Delivery income is recognised at the same time as the corresponding revenue for sale of goods and is a single combined performance obligation.

 

Revenue from services

Service revenues comprise installation and maintenance work at client sites. Revenue from onsite work that is standard and on-going (as opposed to bespoke) is recognised when the performance obligations under the work order are completed and acknowledged by the customer, in accordance with the terms and conditions of the work order. Very occasionally, where routine maintenance work is agreed as part of a contract covering a year or number of years, the performance obligation is considered to be discharged evenly through the term of the contract and revenue is recognised over the life of the contract. Warranties offered to customers are usually on the back of warranties offered by suppliers of spare parts and involve negligible costs to the business. Revenue form bespoke longer-term services is accounted for in accordance with the policy on Revenue from contracts described below.

 

Revenue from contracts

Most contracts received by the Group involve shipping goods without customisation or further service, and revenue from these is recognised at a point in time as described above. Some contracts involve providing an end to end solution, involving design, customisation, installation and commissioning that can last several months or years. The goods and services under such contracts represent a single combined performance obligation over which control is transferred over a period. The combined product is unique to each customer (has no alternative use) and the Group has an enforceable right to payment for the work completed to date. The contracts contain milestones and the Group is entitled to stage payments on completion of the milestones. Revenues from such contracts is recognised based upon its stage of completion. Revenue is measured on an output basis, as the transfer of economic benefit depends on the value transferred relative to the remaining goods and services promised under the contract.

 

2.5 COST OF SALES

Cost of sales includes all costs incurred up to the point of despatch including operating expenses of the warehouse.

 

2.6 DISTRIBUTION EXPENSES

Distributions costs are costs directly relating to despatch of goods and indirect costs including advertising and other sales related expenses.

 

2.7 OPERATING SEGMENTS

In the current year, the Group has decided to monitor and report business performance based on two segments, Components and Services:

· Components - supply of both hydraulic and pneumatic consumables, predominantly through distribution for maintenance and repair operations across all industry markets, but supported by supply agreements direct to a broad range of OEMs.

· Services - bespoke design, manufacturing, commissioning, installation and servicing of systems to manufacturers of specialised industrial and mobile hydraulic original equipment manufacturers (OEMs) and additionally a wide range of industrial end users. Capital project-based revenue.

 

The Board is considered to be 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.

 

2.8 RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENT

Over the years, the Group has evolved its offer of value-added delivery services to its customers, and now holds a sector-leading position with respect to ecommerce trading. In response to the changing emphasis in fulfilment capabilities and the opportunities for enhancement of revenue, the management has reassessed and re-aligned its accounting policies with respect to income from delivery charged to customers and ensured these are applied consistently across the Group. All delivery income, excluding VAT will henceforth be included in revenue from sale of goods and shall no longer be netted off against delivery costs. The 2018 financial statements presented within this Annual Report have been restated to reflect £1,057k of delivery income in Revenue. These have been re-categorised from cost of sales and distribution costs as shown in the table below. There is no impact of the reclassification on reported profit or EPS for 2018 or on the opening reserves for 2019.

 

Consolidated income statement for 31 December 2018

 


Restated

£000

Original

£000

Variance £000

Revenue

112,108

111,051

1,057

Cost of sales

(73,159)

(72,447)

(712)

Gross profit

38,949

38,604

345

Distribution expenses

(4,561)

(4,216)

(345)

Operating profit

7,678

7,678

-

Profit from continuing operations

4,931

4,931

-

Gross profit % to revenue

34.76

34.74

2bps

 

3.  SEGMENT REPORTING

Management has decided to consolidate the operating segments of the business into two - Components and Services as explained in note 2.7. These operating segments are monitored by the Group's Chief Operating Decision Maker and strategic decisions are made on the basis of adjusted segment operating results. Inter-segment revenue arises on the sale of goods between Group undertakings.

 

The Directors believe that the underlying operating profit provides additional useful information on underlying trends to Shareholders.

The term 'underlying' is not a defined term under IFRS and may not be comparable with similarly titled profit measurements reported

by other companies. A reconciliation of the underlying operating result to operating result from continuing operations is shown below. The principal adjustments made are in respect of the separately disclosed items as detailed in note 4; the Directors consider that these should be reported separately as they do not relate to the performance of the segments.

 

Central costs relate to the Service Centre team and central activities, Executive Management team, plc costs and finance expenses associated with Group loans as detailed in note 5 and separately disclosed items, as detailed in note 4.

 

Segment information for the reporting periods are as follows:

For the year ended 31 December 2019


Components

Audited

£000

Services

Audited

£000

Inter-segmental

transactions

Audited

£000

Central

Costs

Audited

£000

Total

continuing

operations

Audited

£000

Income statement - continuing operations:






Revenue from external customers

96,348

16,070

-

-

112,418

Inter-segment revenue

3,199

232

(3,431)

-

-

Total revenue

99,547

16,302

(3,431)

-

112,418

Underlying operating result (*)

13,995

(59)

-

(4,329)

9,607

Net financing costs (‡)

(46)

(2)

-

(708)

(756)

Underlying profit before tax

13,949

(61)

-

(5,037)

8,851

Impact of fair value adjustment to inventory

(297)

-

-

-

(297)

Impact of re-statement under IFRS 16 on profit before tax

(126)

1

-

(10)

  (135)

Separately disclosed items (see note 4)

(1,114)

(689)

-

(1,909)

(3,712)

Profit before tax

12,412

(749)

-

(6,956)

4,707

Specific disclosure items



-



Depreciation on owned, plant, property and equipment

763

153

-

-

916

Depreciation on right-of-use assets

1,503

92

-

106

1,701

Amortisation

927

124

-

-

1,051

Reconciliation of underlying operating result to operating profit:



-



Underlying operating result (*)

13,995

(59)

-

(4,329)

9,607

Impact of fair value adjustment to inventory

(297)

-

-

-

(297)

Impact of re-statement under IFRS 16 on operating profit

143

6

-

(2)

147

Separately disclosed items (see note 4)

(1,114)

(689)

-

(1,909)

(3,712)

Operating profit / (loss)

12,727

(742)

-

(6,240)

5,745

 

(*) Underlying operating result is continuing operations' operating profit before separately disclosed items (Note 4), the impact of fair value adjustment to inventory (Note 3) and IFRS 16 (Note 2.3). 

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.

(‡) Following adoption of IFRS 16, operating lease rentals of £1,833K have been restated as depreciation £1,701k, exchange gain £15k and finance costs £282k.

Operating profit increases by £147k whereas profit before tax reduces by £135k.

 

For the year ended 31 December 2018

Segment information for 2018 has been re-stated following the consolidation of segments into Components and Services.


Components

Audited

£000

Services

Audited

£000

Inter-segmental

transactions

Audited

£000

Central

Costs

Audited

£000

Total

continuing

operations

Audited

£000

Income statement - continuing operations:






Revenue from external customers ( )

94,581

17,527

-

-

112,108

Inter-segment revenue

2,894

60

(2,954)

-

-

Total revenue

97,745

17,587

(2,954)

-

112,108

Underlying operating result

14,254

314

-

(3,187)

11,381

Net financing (costs)/income

(127)

1

-

(629)

(755)

Underlying profit before tax

14,127

315

-

(3,816)

10,626

Impact of fair value adjustment to inventory

(382)

-

-

-

(382)

Separately disclosed items (see note 4)

(2,015)

162

-

(1,468)

(3,321)

Profit before tax

11,730

477

-

(5,284)

6,923

Specific disclosure items



-



Depreciation

842

99

-

-

941

Amortisation

916

124

-

-

1,040

Reconciliation of underlying operating result to operating profit:



-



Underlying operating result*

14,254

314

-

(3,187)

11,381

Impact of fair value adjustment to inventory

(382)

-

-

-

(382)

Separately disclosed items (see note 4)

(2,015)

(162)

-

(1,468)

(3,321)

Operating profit/(loss)

11,857

476

-

(4,655)

7,678

 

(*) Underlying operating result is continuing operations' operating profit before separately disclosed items (Note 4) and the impact of fair value adjustment to inventory (Note 3).  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.

(† ) Prior year valves have been restated as described in note 2.30.

 

 

Geographical and category analysis of revenue The Group operates primarily in the UK, The Netherlands, Belgium and Republic of Ireland. Revenue generated from distribution of hydraulic and pneumatic consumables, bespoke manufacture, commissioning and installation of equipment are categorised as sale of goods. Income from on-site services and revenue arising from contracts is disclosed separately.


31 December 2019

31 December 2018


Sale of goods

£000

Contracts£000

 

 

Services

£000

 

 

Total

Revenue

£000

Non-current assets

£000

Sale of goods (*)

£000

Contracts

£000

 

 

Services

£000

Total Revenue

£000

 

Non-current assets

£000

United Kingdom

86,757

744

2,274

89,775

79,318

84,943

732

1,916

87,591

75,701

Europe

21,589

-

-

21,589

5,025

22,606

-

-

22,606

1,680

Rest of the World

1,054

-

-

1,054

-

1,911

-

-

1,911

-

Total

109,400

744

2,274

112,418

84,343

109,460

732

1,916

112,108

77,381

 

(*) Prior year values have been re-stated as described in Note 2.8.

 

Revenue from contracts that cross over into 2020 are accounted for in accordance with IFRS 15.

No customers of the Group account for 10% or more of the Group's revenue for either of the years ended 31 December 2019 or 2018.

Non-current assets are allocated based on their physical location.

 

4.  SEPARATELY DISCLOSED ITEMS


2019

Audited

£000

2018

Audited

£000

Separately disclosed items within administration expenses:



Acquisition costs

183

824

Amortisation of acquired intangibles

1,051

1,040

Share-based payment costs

143

191

Restructuring

1,739

1,002

Changes in amounts accrued for contingent consideration

596

264

Total separately disclosed items

3,712

3,321

 

· 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 charges 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. Costs include consultancy for operational cost reviews, provision for stock in respect of businesses moving to integrated warehousing facilities, employee redundancies and IT integration.

 

5.  FINANCIAL INCOME AND EXPENSES

Finance income for the year consists of the following:




2019

Audited

£000

2018

Audited

£000

Finance income arising from:



Fair value gains on forward exchange contracts held for trading

-

11

Total finance income

-

11

 

Finance expenses for the year consist of the following:


2019

Audited

£000

2018

Audited

£000

Finance expense arising from:



Interest on invoice discounting and stock loan facilities

  -

20

Interest on revolving credit facility and bank overdraft

591

454

Lease interest

19

21

Right-of-use liability interest under IFRS 16 (*)

282

-

Bank loans

117

191

Other credit related interest

1

17

Total bank and other credit interest

1,010

703

Imputed interest on deferred and contingent consideration

28

63

Total non-credit related interest

28

63

Total finance expense

1,038

766

 

(*) Following implementation of IFRS 16, assets under qualifying operating leases have been capitalised as 'Right-of-use Assets'. Lease rental cost is now replaced by depreciation charge and implied interest calculated on each qualifying lease.

 

6.  TAXATION

Recognised in the income statement

Continuing operations:

2019

Audited

£000

2018

Audited

£000

Current tax expense



Current year charge

888

1,623

Overseas tax

324

164

Adjustment in respect of prior periods

(12)

202

Current tax expense

1,200

1,989

Deferred tax



Origination and reversal of temporary differences

(169)

(24)

Adjustment in respect of prior periods

(63)

27

Change in tax rate

-

-

Deferred tax (credit) / charge

(232)

3

Total tax expense - continuing operations

968

1,992

 

Reconciliation of effective tax rate


2019

Audited

£000

2018

Audited

£000

Profit for the year

3,739

4,931

Total tax expense

968

1,992

Profit excluding taxation

4,707

6,923




Tax using the UK corporation tax rate of 19.00% (2018: 19.00%)

894

1,315

Deferred tax movements not recognised

26

(40)

Effect of share option exercises

-

(38)

Effect of tax rates in foreign jurisdictions

(34)

(47)

Impact of change in tax rate on deferred tax balances

(5)

(4)

Deferred tax arising on acquisition

-

(6)

Income not taxable

(25)

(314)

Amounts not deductible

187

897

Adjustment in respect of prior periods

(75)

229

Total tax expense in the income statement - continuing operations

968

1,992

 

Change in corporation tax rate

A reduction in the UK corporation tax rate from 19% to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016, and the UK deferred tax asset/(liability) as at 31 December 2019 has been calculated based on this rate.  In the 11 March 2020 Budget, it was announced that the UK tax rate will remain at the current 19% and not reduce to 17% from 1 April 2020.  This change was substantively enacted post year end and therefore the deferred taxes at the balance sheet date continue to be measured at the enacted tax rate of 17%.

 

7.  DIVIDENDS PAID


2019

Audited

£000

2018

Audited

£000

Final dividend of 4.04p (2018: 3.85p) per share

2,453

2,330

Interim dividend of 2.13p (2018: 2.03p) per share

1,296

1,228

Total dividends

3,749

3,558

In the light of the economic uncertainty due to COVID-19, the Directors have suspended all dividend payments in order to retain as much cash in the business as possible. Therefore, no further dividend will be paid in respect of the financial year ended 31 December 2019 (2018: 4.04p).

 

8.  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 2019

Year ended 31 December 2018


Earnings

Audited

£000

Weighted average number of shares

Earnings

per share

Pence

Earnings

Audited

 000

Weighted average number of shares

Earnings

per share

Pence

Basic earnings per share - Continuing operations

3,739

61,067

6.12

4,911

58,889

8.34

Diluted earnings per share - Continuing operations

3,739

61,286

6.10

4,911

59,278

8.28

 


2019

Audited

£000

2018

Audited

£000

Weighted average number of ordinary shares for basic and diluted earnings per share

61,067

58,889

Impact of share options

219

389

Weighted average number of ordinary shares for diluted earnings per share

61,286

59,278

 

9.  ACQUISITIONS & DISPOSALS

Acquisition of minority interest in Derek Lane & Co Limited  

The Company entered into an agreement to purchase the minority shareholding of Derek Lane & Co. Limited for a total maximum consideration of £300,000, including initial consideration of £38,250 in consideration shares and £38,250 in cash. The remaining consideration is deferred and is subject to performance criteria ('contingent consideration'). The contingent consideration will become payable in 2020. On 29 July 2019, the Company issued 28,760 ordinary shares of 50 pence each in the Company ('consideration shares') at a price of £1.33 per share in part settlement of the initial consideration for the minority shareholding in Derek Lane & Co. Limited. It also made a cash payment of £38,250 to the minority shareholders as part settlement of the purchase consideration. Based on the performance of the underlying business, the Accounts contain an accrual of £213,877 towards settlement of the contingent consideration. The liability will be discharged by issuing number of ordinary shares in Flowtech Fluidpower Plc. The total investment value of £290,377 has been accounted for as a charge to retained earnings.

 

10.  EQUITY

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

£000

Allotted and fully paid ordinary shares of 50p each at 31 December 2019

61,157,124

30,579

Shares authorised for share-based payments

6,666,667

3,333

Total shares authorised at 31 December 2019

67,823,791

33,912

 


Number

£000

Allotted and fully paid ordinary shares of 50p each



At 1 January 2019

60,920,383

30,460

Shares issued in respect of exercise of employee share options

50,000

25

Shares issued in respect of settlement of contingent consideration

157,981

80

Shares issued in respect of acquisition of minority interest (note 9)

28,760

14

At 31 December 2019

61,157,124

30,579

 

On 16 May 2019, 157,981 ordinary shares of 50p each were issued at 126.6 pence each to Vendors of Hydraulics and Transmissions Limited to settle contingent consideration owed to the vendors.

 

On 13 June 2019, 50,000 ordinary shares of 50p each were issued at 140 pence each on exercise of share options by an employee.

 

On 29 July 2019, the Company issued 28,760 ordinary shares of 50 pence each in the Company ('Consideration Shares') at a price of £1.33 per share in part settlement of the initial consideration for the minority shareholding in Derek Lane & Co. Limited.

 

11.  NET CASH FROM OPERATING ACTIVITIES


2019

Audited

£000

2018

Audited

£000

Reconciliation of profit before taxation to net cash flows from operations



Profit from continuing operations before tax

4,707

6,923

Depreciation on property, plant and equipment

916

941

Depreciation on Right-of-use assets (IFRS 16)

1,701

-

Financial income

-

(11)

Financial expense

756

766

Finance cost on Right-of-use assets (IFRS 16)

282

-

Loss / (Profit) on sale of plant and equipment

6

(9)

Amortisation of intangible assets

1,051

1,040

Profit on sale of shares

140

-

Cash settled share options

-

(23)

Equity-settled share-based payment charge

143

191

Change in amounts accrued for contingent consideration

596

264

Other financial items

123

-

Fair value adjustment to stock

12

-

Operating cash inflow before changes in working capital and provisions

10,433

10,082

Change in trade and other receivables

4,006

(1,509)

Change in stocks

4,667

(844)

Change in trade and other payables

(2,862)

(2,843)

Change in provisions

18

(23)

Cash generated from operations

16,262

4,863

Tax paid

(3,016)

(1,073)

Net cash generated from operating activities

13,246

3,790

 

12. SUBSEQUENT EVENTS

On 21 April 2020, the Company released a trading update statement dealing with trading for the financial year to date, the net debt position, restructuring activities and an outlook statement with specific reference to the latest situation regarding the impact of the COVID-19 pandemic. That statement is reproduced below. There have been no significant changes to the matters set out in the statement since 21 April 2020.

 

Results for 3 months to 31 March 2020


Period

2020

Unaudited

£m

Period

2019

Unaudited

£m

Change

Revenue by Division:




Components

22.9

26.0

(11.9%)

Services

4.0

4.0

0.0%

Total Group revenue for the period

26.9

30.0

(10.3%)

Net debt ( )

15.6

20.5


 

(†) Net debt excludes IFRS16 lease debt.

 

Trading

Prior to the COVID-19 lockdown, Q1 performance was in line with our expectations: down on the buoyant conditions seen in early 2019, but with a return to growth in customer order patterns and outlook. However, the final few weeks of the Period created an altogether different position going into Q2. Many of our suppliers and customers suspended operations, although recent indications suggest that some have either already reopened or are planning to reopen in May, albeit with reduced capacity. The most marked effect of the current situation has been in our Components segment, which are those Profit Centres where most sales are directly into OEMs. The Services segment had a good order book coming into the year, and whilst it was also affected by the downturn in late March, revenue for the quarter remained flat year on year.

 

While there are no first quarter industry statistics currently available from the BFPDA* or BFPA**, the Board believes that the Group has generally traded in line with the sector during the period.

 

Net debt/cash flow

Net debt at 31 March 2020 was £15.6m, a £1m reduction from the position at 31 December 2019 and well within our aggregate banking facilities of £25m. Net cash flow in April has been as expected, and whilst we have not entered the end of month collection period, we expect receipts to be received in full albeit with some slight delays in timing. We believe this should not create any significant disruption to the overall cash flow cycle.

 

Restructuring activities

In February 2020, we announced a major restructuring programme to transition warehousing and picking operations to more efficient centres. In the UK, we are currently closing four warehousing facilities, the annualised savings from which are estimated to be £1.6m, with a £0.8m impact/benefit in 2020. The cash cost of this restructuring is estimated at £1.8m, of which £0.5m was incurred in 2019. We are pleased to confirm that this complex and tightly managed project is on time and within budget. Since safe working guidance was introduced last month, costs have been reduced by a combination of internal actions and the utilisation of 'furlough' or equivalent schemes introduced in the UK, Republic of Ireland, and the Netherlands. We estimate that our cost base has fallen by around 25%, with further savings still to come from our restructuring activities. We will continue to pursue our rationalisation and cost reduction programmes, creating operational efficiencies in our procurement, logistics, sales and back office activities.

 

Outlook

Whilst the full impact of the COVID-19 lockdown remains unclear, it is not possible to make any accurate predictions for the remainder of the year. A significant part of our sales depends on the manufacturing and construction sectors, both of which have seen large scale shut-downs. It is possible that these sectors will begin to reopen during early May, and our current plan is to ensure that we continue to support/service our customers and react as quickly and effectively as possible if this were to happen. However, if there is a need to undertake further cost reductions should the lockdown extend further into the year, we must ensure that we are in a position to initiate change without detriment to our future business and our customers. This being said, the work undertaken as part of our restructuring activities over the past twelve months is helping our planning enormously in this regard.

 

We also thank all our people for the commitment to the business and the support of colleagues in these times. Overall, we remain confident that, despite the disruption, our business should generate positive cash flow through 2020 and 2021, helping to further reduce net debt and create a solid platform for growth when things return to a more normal situation.

 

The most significant negative impact of the events since the balance sheet date is the economic disruption caused by the COVID-19 pandemic and, should this disruption continue for a prolonged period, the creation of a material uncertainty as to the ability of the Group to continue as a going concern and realise its assets and discharge its liabilities in the ordinary course of business.

 

Note 2.2 sets out the rationale underpinning the Directors' expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The Directors have also considered the possibility that any tangible assets, intangible assets and goodwill should be impaired and, based on the projections described in note 2.2, have determined that no impairment is necessary. The developing situation regarding the pandemic is kept under constant review.

 

The situation at 31 December 2019 was that a limited number of cases of an unknown virus had been reported to the World Health Organisation. The subsequent spread of the virus and its identification as a new coronavirus does not provide additional evidence about the situation that existed at 31 December 2019, and it is therefore a non-adjusting event.  Accordingly, the financial position and results of operations as of and for the year ended 31 December 2019 have not been adjusted. The financial position and results of the Group for future periods will be adjusted as and when sufficient information on the medium to long-term impact of COVID-19 becomes available and the prospects of the Company are determined to have deteriorated to such an extent that necessitates an impairment provision or other adjustment.

 

*British Fluid Power Distributors Association.

**British Fluid Power Association.

 

13.  ANNUAL GENERAL MEETING

The Annual General Meeting will be held on 10 June at 10am at our head office, Flowtech Fluidpower plc, Bollin House, Bollin Walk, Wilmslow SK9 1DP.  In light of the COVID-19 pandemic and current guidance on social distancing, which includes a prohibition on public gatherings of more than two people, this year's Annual General Meeting will be held as a closed meeting. Two Directors will attend in person to meet the quorum requirements. All other shareholders and/or representatives will not be permitted to attend in person. The Annual General Meeting will be purely functional and comprise of only the formal votes for each resolution with no business update or Q&A.


FORWARD-LOOKING STATEMENTS

These results were approved by the Board of Directors and authorised for issue on 30 April 2020.  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 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 [email protected] or visit www.rns.com.
 
END
 
 
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