Specialist technical
fluid power products supplier Flowtech Fluidpower plc
(AIM: FLO), has given DirectorsTalk the following update
on its performance for the year ended 31 December 2016,
together with details of acquisition and strategy update:-
2016 PERFORMANCE: Revenue 2016 2015
Year ended 31 (Unaudited) (Audited) % Change
December
GBP000 GBP000
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Flowtechnology 35.0 33.2 +5.4%
Power Motion Control 15.9 11.6 +37.1%
Process 2.8 -
----------------------- ------------- ----------- ---------
Group revenue 53.7 44.8 +19.9%
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The 2016 performance can be summarised as follows:
* Against difficult trading conditions the Group has
delivered a solid performance
* Group revenue was c.19.9% up on 2015 at approximately
c.GBP53.7 million (c.19.3% in constant currency)
* British Fluid Power Distributors Association Market
Survey indicates 2016 fluid power overall distributor
sales growth was negative 3.9% (hydraulics -5.9%,
pneumatics +0.2%)
* Post Brexit currency movements with resultant impact
on input prices have to date been successfully passed
on to customers due to our flexible pricing model,
with 2016 exit margins maintained. However, some
margin contraction was experienced in H2 while prices
were managed upwards on products sourced in Euro and
USD and sold in GBP markets
* Three acquisitions successfully integrated into the
Group, each delivering benefits, and a third
"Process" division established focused on process
industries, including Pharma, Environmental, and
Steam
* Net debt at year end was c.GBP13.0 million
* Significant investment in central and sales resources
aimed at optimising cross channel opportunities, and
future acquisition integration programme underpinning
long term growth
* As a result of these investments and the gross margin
contraction in H2, the Board expects underlying* PBT
will be in the range GBP7.0m to GBP7.2m.
DIVID
The Directors remain confident in the Group's overall
performance and future. As such the Board intends to
propose to shareholders a final dividend which will
deliver a 5% increase over 2015 and in line with current
market expectations. In addition, the Board is committed
to ensuring a continued focus on cash generation as
part of our model and believe that when appropriate
to do so, the Group will have the capacity to improve
on its current distribution policy and trend.
ACQUISITION OF HYDRAULICS & TRANSMISSIONS LIMITED ("HTL")
The Group is pleased to announce the further strengthening
of its Power Motion Control ("PMC") division through
the acquisition of HTL which completed on 20 January
2017. The consideration comprises GBP0.75 million on
completion and additional payments expected to be c.GBP1.0
million subject to an earn-out over the two-year period
to 31 December 2018. In addition, the Group will assume
a further GBP0.9 million being the net debt position
held at completion giving a total of GBP2.65 million.
The consideration is being funded from the Company's
own resources.
HTL (www.htluk.co.uk) was established in 1973, and
has been managed by the current ownership team since
an MBO in 2007. It currently employs 25 staff and distributes
hydraulic equipment and components from its location
in Ludlow, Shropshire. HTL provides fluid power solutions
predominantly to the mobile market segment and supplies
some of the market leaders such as JCB, McConnell and
Alamo. The acquisition provides incremental revenue
to the Group that we could not previously address,
strengthens our position with key global suppliers
including Eaton, Walvoil and Casappa, and complements
our previous acquisitions of Primary Fluid Power and
Nelson Hydraulics.
HTL will operate as an independent sister company within
PMC. Managing Director, Ian Teece and Commercial Director,
Richard Salisbury, who have led the business for over
10 years will also join the Group's Operational Board.
For the year ended 31 December 2015, HTL's turnover
was GBP5.2 million producing EBIT of GBP0.3 million.
Net assets at the same date were GBP0.5 million. As
well as some immediate back office savings, the Group
expects to deliver synergy opportunities over the medium
term through coordinated procurement and operational
activities.
STRATEGY UPDATE
The Group has a clear view of its growth objectives
- to create a specialist fluid power organisation that
remains focused on its core competencies through its
delivery of 'class-leading' service and support. Our
long-term growth model is based on both organic growth,
coupled with complementary acquisitions in the UK and
Europe in a very fragmented marketplace.
The successful integration of new businesses into the
Group is critical, maintaining momentum and ensuring
an ability to continue to trade with their customers
seamlessly. To support this an experienced integration
team has been created tasked with delivering a smooth
and speedy transitions process. During 2016, Indequip,
Hydravalve & TSL, were acquired and successfully integrated
into the Group - these acquisitions fit within the
defined strategy previously outlined of developing
a Focused Fluid Power Group.
As a result of the negative trends experienced by many
businesses in our marketplace during the second half
of 2016, the Group was more cautious in its pursuit
of opportunities, particularly in Q4. However, the
acquisition pipeline remains strong and continues to
develop; we have several acquisition and product opportunities
being actively pursued and, we are pleased to announce
our most recent acquisition detailed above.
LOOKING AHEAD
The Flowtech Group now operates three divisions: Flowtechnology,
Power Motion Control & Process. This structure has
delivered greater opportunity to focus on fluid power
solutions while at the same time, developing a deeper
technical expertise within our complementary businesses;
specialising our offering in the fluid power sector
and, delivering high service levels to all our customers
across our business. This formulation gives us a solid
platform for growth as well as opening and creating
new opportunities in new and exciting sectors.
SUMMARY
Our business has shown resilience in a difficult market,
with our most recent acquisitions beginning to deliver
growth. The Board remains confident in the strategy,
commercial opportunities and the prospects of the Group
as a whole, and expects to deliver further solid growth
over the coming years building on the resilient performance
