Flowtech Fluidpower (LON: FLO) the specialist full-service supplier of technical fluid power products and services has today provided its Half-Year Report for the six months ended 30th June 2019.
| HY2019 | HY2018 | FY2018 | GROWTH | |
| 30.6.19 | 30.6.18 | 31.12.18 | % | |
| FINANCIAL HIGHLIGHTS | unaudited | unaudited | Audited | HY2019 v HY2018 |
| · REVENUE | £59.6m | £56.4m | £111.1m | 5.70% |
| · GROSS PROFIT %* | 35.60% | 34.30% | 34.70% | |
| · OPERATING PROFIT | £4.3m | £4.5m | £7.7m | -2.90% |
| · UNDERLYING OPERATING PROFIT** | £6.1m | £5.7m | £11.4m | 7.00% |
| · PROFIT BEFORE TAX | £3.8m | £4.1m | £6.9m | -8,5% |
| · UNDERLYING PROFIT BEFORE TAX | £5.6m | £5.4m | £10.7m | 3.30% |
| · EARNINGS PER SHARE (basic) | 5.00p | 5.78p | 8.34p | -10.70% |
| · HALF-YEAR DIVIDEND | 2.13p | 2.03p | 5.00% | |
| · NET BANK DEBT (EXCLUDING IFRS16 RELATED DEBT) | £18.8m | £18.0m | £19.9m |
· ORGANIC SALES GROWTH OF 2.9%
· GROSS MARGIN REMAINS STRONG AT 35.6% (H1 2018: 34.3%)
· UNDERLYING OPERATING PROFIT OF £6.1M (H1 2018: £5.7m)
· STRONG CASH GENERATION; NET DEBT REDUCED BY £1.1M in HY2019 AFTER £1.6M OF PAYMENTS IN RESPECT OF PRIOR YEAR ACQUISITION ACTIVITY (H1 2018 SAW NET DEBT INCREASE BY £3.0M)
· DIVIDEND INCREASED BY 5.0% TO 2.13 PENCE PER SHARE
OUTLOOK
· RECENT TRADING IMPACTED BY BREXIT RELATED NERVOUSNESS
· EXPECT 2019 ADJUSTED PBT TO BE IN THE RANGE OF £10.8M TO £11.2M
Malcolm Diamond MBE, Flowtech Fluidpower Non-Executive Chairman
“We are pleased with the progress being made across our strategic initiatives and we remain confident in the long-term outlook for the Group. In the short term we expect more subdued trading conditions and it is important we remain focused on controlling what we can control, in particular our cost improvement and working capital initiatives.”
OUR GROWTH STRATEGY
During 2019, the Group has made major progress on all our strategic imperatives
· Sales Growth
· Cost Improvement
· Cash Generation,
· IT Development and,
· People.
Sales Growth
Reconfigured our business into two focused segments that give greater potential to exploit the concentrated product knowledge and technical skills – Components and Services.
In July 2019, Ian Simpson was appointed Divisional Director within the Components segment. Since joining the Group in February 2016, Ian has proven his capability to grow sales by exploiting the Group’s wider resources and he will now look to apply his knowledge across a much larger part of the Group’s activities. In March 2019, Jon Burke took overall responsibility for Services and is now working to co-ordinate all sales and operational matters across the various businesses within the division.
Cost Improvement
The Executive Team have completed a Group-wide review of operational resources and productivity. Our concentration now is to develop a plan to harness the benefits of the many areas of potential improvements identified. We expect that most of the work and the associated savings will be completed by the end of 2020. Action has already commenced with the integration of TSL Fluidpower and the UK operations of Hi-Power into our Knowsley site.
We also believe that there are major opportunities in our supply chain to reduce cost, rationalise range and reduce inventory. We have therefore appointed John Farmer into a new role of Group Commercial Director. John has most recently acted as Managing Director for our largest subsidiary Flowtechnology UK. and is now actively co-ordinating our supply strategy and building on the huge steps forward we have taken in extracting procurement data, a significant by-product of our IT and central services investment in creating a network of common accounting and management information systems.
Cash Generation
The Group has clearly designated leadership roles in efficient debt collection and agreed supplier term expansion. This is coupled with an invigorated culture at Profit Centre level towards effective inventory management practices backed up by our return-on-capital based Profit Share scheme. An initial positive step is highlighted by the significant improvement in cash generation compared to H1 2018 as detailed in the following financial section.
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 providers, backed up by a cloud-based hardware solution that was successfully established in May 2019.
The Group has long been a leading player in the use of digital capabilities to improve efficiency for itself and its customers, and in our core ‘master’ distribution operations as high as 70% of sales are transacted via e-commerce platforms. However, embracing digital marketplaces is essential for any progressive industrial distributor and we are committed to pursuing best practice. As a forerunner to a plan to develop our entire operation in this area, the Group established an online presence in Flowtechnology World in March 2019 (www.flowtechnologyworld.com) and this is already giving us cross-border selling opportunities from our existing product range. Beyond this, our market penetration and premium position with the leading global suppliers means we are well placed to develop from this e-commerce platform into a fully fledged E-Business operation and place us at the forefront of the sector.
People
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 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 both now and for future growth. This investment has increased costs in the short term but has been part funded by reduced costs at local level, and we are convinced has given us the correct stable position from which to move forward.
To listen to the management team discussing the Half-year results please follow this link:
To listen to an overview of the business with the CEO and the management team please follow this link:
