FLOWTECH FLUIDPOWER PLC — Interim / Quarterly Report 2014

Sep 16, 2014

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RNS Number : 7459R

Flowtech Fluidpower PLC

16 September 2014

Issued on behalf of Flowtech Fluidpower PLC Date: Tuesday, 16 September 2014 Immediate Release

FLOWTECH FLUIDPOWER PLC

INTERIM REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2014

AT A GLANCE Continuing operations	Change HY 2014  v HY 2013	HY2014 30.6.14	HY 2013 30.6.13	Full year 31.12.13
·      Group revenue	+6.3%	£17.191m	£16.167m	£32.104m
·      Gross profit	+3.9%	£6.119m	£5.887m	£11.330m
·      Underlying operating profit*	+7.3%	3.281m	£3.058m	£5.324m
·      Operating profit	-61%	£1.062m	£2.697m	£4.963m
·      Maiden interim dividend		1.67p	-	-
·      Net debt		£6.132m	£69.479m	£69.762m

*Underlying operating profit is continuing operations operating profit before share based payment costs, restructuring costs and IPO costs

Sean Fennon, Chief Executive Officer said: "We are delighted to have completed a successful IPO on AIM and thank you to all shareholders who have supported the company. Trading continues to be encouraging and in line with our expectations. In addition, we have a number of opportunities we are perusing with a view to accelerating channel development and geographic expansion"

HIGHLIGHTS
·     Strong institutional support at IPO in May 2014  - Private Equity exit complete
·     Clear focus on strategy going forward: commenced delivering on stated IPO objectives with first acquisition completed post period and from within existing resources - enhancing the Flowtech footprint, brand portfolio and customer offering
·     Trading remains in line with expectations, whilst a number of new opportunities currently being investigated
·     Management remain confident about the future ·     An interim dividend of 1.67p will be paid on 24 October 2014

Editors' note:

Flowtech, founded in 1983, is the UK's leading specialist supplier of technical fluid power products with modern distribution facilities in the UK and Benelux.  It offers an unrivalled range of Original Equipment Manufacturer (OEM) and Own Brand products to c 3,000 distributors and resellers. Its catalogues is recognised as the definitive source for fluid power products, containing approximately 47,000 individual product line and  is distributed to more than 90,000 industrial Maintenance, Repair and Overhaul end users (MRO).  Over 80% of product is stocked and ordered by 10pm, can be delivered next day in the UK, providing 'best in industry' service offering.  The Group's headquarters and main distribution centre is in Skelmersdale, Lancashire with further centres in the Netherlands and China; in total the business employs 203 people.

Enquiries:

Flowtech Fluidpower plc     AIM: FLO

Sean Fennon, Chief Executive Officer

Bryce Brooks, Chief Financial Officer

Tel: +44 (0) 1695 52796

Email: info@flowtechfluidpower.com

www.flowtechfluidpower.com

Zeus Capital Limited

(Nominated Adviser and Broker)

Tim Metcalfe

Ross Andrews, Dominic King

Tel: +44 (0) 207 533 7727

TooleyStreet Communications

(IR and media relations)

Fiona Tooley

Tel: +44 (0) 7785 703523

Email: fiona@tooleystreet.com

FLOWTECH FLUIDPOWER PLC

INTERIM REPORT

SIX MONTHS ENDED 30 JUNE 2014

STATEMENT BY NON EXECUTIVE CHAIRMAN, MALCOLM DIAMOND MBE

AND CHIEF EXECUTIVE, SEAN FENNON

INTRODUCTION

Firstly as a Group, we would like to thank all shareholders who since our Admission to AIM in May 2014 have so enthusiastically supported us - investing in our business, its philosophy and culture. We are now entering a period we see as an exciting stage of evolution, not only for the Flowtech Group but the fluid power market as a whole.

As a team we firmly believe that the business is now well positioned to improve further through successfully building on its leading position and taking advantage of the opportunities that lie ahead.

The AIM market provides a platform for smaller companies like ourselves with aspirations to grow, to enhance our profile, and access new channels to support future development.  We look forward to keeping an open dialogue with all investors and delivering on our key objectives.

DIVIDEND

As we indicated in the Admission document, the Board intend to implement a progressive dividend policy by paying both an interim and a final dividend - split approximately one third, two thirds - in respect of the year ending 31 December 2014.

The Board is therefore pleased to declare an interim dividend of 1.67p; this will be paid on 24 October 2014 to Shareholders on the Register at the close of business on 26 September 2014.  The shares will become ex-dividend on 24 September 2014. 

BUSINESS REVIEW

The portfolio businesses have continued to perform well in their individual market places, although the economic conditions remain challenging in both the UK and Europe. The Group strategy of continued development of the product range, targeted at specific market sectors, has ensured that the businesses have been able to deliver sustained growth and continue to add value to its customer base.

The focus on core competencies within the fluid power market has been central to the continued success of the Group, and this focus will support the long term strategy of the Group, which we expect to be enhanced by further complementary acquisitions. This continued refinement of the offering has ensured that the Group maintained its competitive advantages in each of the markets in which it trades.

The UK business has maintained its growth focus and a continued investment in staff training and resource which has underpinned this development process.

After a significant restructuring process in 2012 and 2013, the Benelux operation has performed positively in the first half of 2014, with the foundations put in place in that period now delivering strong revenue growth linked to progressive margin development. 

The Initial Public Offering ("IPO") in May 2014 had a fundamental positive impact on the Group's core financial position. We expect that this change will open up further opportunity for expansion of the Group within the fluid power sector, both organically and by strategic acquisitions.

ALIGNING GROWTH WITH OUR STRATEGY

The Directors are committed to the business strategy which was outlined as part of the Admission document in May 2014. 

Flowtech is a very successful business and a leader in its field; we have demonstrated that we can deliver profitable, consistent levels of service to our diverse customer base.  There is also significant opportunity for us to achieve, organic growth through product development and international expansion and enhancing this through adding 'niche bolt-on' businesses that have effective people who can assist us to deliver our corporate strategy as well as accelerate complementary channel development and geographic expansion. We continue to see this as paramount for all stakeholders.

Against this backdrop, we are delighted that we have already started to deliver on our aspirations and strategic objectives, adding a very successful business to the Group's portfolio and starting to further enhance customer offering.  As detailed in

Note 13, on 4 August 2014, we added Primary Fluid Holdings Limited to the Flowtech portfolio.  The trading business, Primary Fluid Power ('PFP'), based in Knowsley, Merseyside, in addition to a significant distribution operation in hydraulic parts, also designs and manufactures hydraulic systems and purifiers, which are complemented by a service and repair function.  The PFP business in total employs 59 staff, and like Flowtech has a strong brand and commanding position in its marketplace. Whilst we expect to deliver some positive synergies across the business over the coming year, we intend to retain the way the PFP and Flowtech portfolio models currently operate - highly focused, commercially independent operations delivering quality customer service at all times.

As a Board, we see PFP as the exciting first step in our development as a broad-based fluid power group. PFP adds significant value to the Group's current brand portfolio principally by strengthening our offering in hydraulics, a market which is widely predicted to continue its strong growth momentum.  We also see this as a great opportunity to extend our in-house knowledge and expertise in the design and manufacture of hydraulic systems and purifiers and not least, the further enhancement of our market leading position in the fluid power industry.

OUR PEOPLE

The Group today employs 203 people through its five locations across three countries.

As a Board, we would like to take this opportunity to thank all our people around the globe for their continued hard work, dedication and commitment, all of which has helped us to deliver these solid creditable results.  This year has marked a year of change and opportunity; we welcome everyone from PFP into the Group; together as a team we look forward to sharing with every one of our colleagues future success over many years to come.

FINANCIAL PERFORMANCE

The financial highlight during the period under review was the IPO in May which resulted in the exit of the previous Private Equity owners, coupled with a fundamental restructuring of the Group's debt position.  As detailed in Note 12, "Analysis of net debt", the total net debt position at the period end was £6.1m, compared to £69.8m at 31 December 2013.  After funding the overall costs of the IPO of £4.4m (which under accounting rules has been split as £2.2m charged to operating profit - see Note 3 for details - and £2.2m charged to share premium account), the balance of the £47.0m equity and net bank debt raised was used to part clear Shareholder loans.  The remaining £29.0m of shareholder loans were subject to a debt for equity swap with the resultant gain on settlement of £29.0m being recognised in the consolidated income statement. Other than the clear benefit of a significantly reduced leverage position, the Group now enjoys a low interest burden which is highlighted by the table below:

	Pre IPO 1 January to 21 May 2014 £000	Post IPO 22 May 2014 to 30 June 2014 £000
Shareholder loans	1,697	-
Bank loans and short term borrowing	234	28
Total finance expense	1,931	28

As detailed in Note 2, the Group has applied merger accounting principles in the creation of the consolidated balance sheet.  Under these principles the Group has a total equity position of £51.559m (30 June 2013 £(12.138m) and 31 December 2014 £(13.188m)).

In April 2014 our loss making subsidiary, Industrial Products and Supplies Ltd ("IPS"), was sold to its management for £1; IPS operated in the pipe, tube and valve sector and following its disposal we have been able to focus entirely on the fluid power sector.  Further details are given in Note 14.

For continuing operations, revenue in the first half grew by 6.3% to £17.191m, against £16.167m in the comparable 2013 period (year ended 31 December 2013 £32.104m).  This growth was achieved consistently across the UK and Benelux operations in line with the relative size of the two businesses.  This had a similar commensurate effect on gross profit which also increased by 3.9%, although dampened by the effect of growth related customer rebate payments. When coupled with a broadly static cost base, this progression has seen the Group report an underlying operating profit of £3.281m (2013: £3.058m and £5.324m respectively), an increase of 7.3% year on year.  Although not defined under IFRS, the Directors believe that the underlying results give a better understanding of the business' performance, and further detail is contained in note 3 contained in this report.

FINANCIAL POSITION

Working capital continues to be managed effectively with inventories at 30 June 2014 of £9.230 million (30 June 2013: £9.409 million and at 31 December 2013 £9.804 million).

The Group has enjoyed a stable trade receivables position, although as expected with an expanding Far East supply line, trade payables contracted in line with expectations from £4.555m at 31 December 2013 to £3.830m at the period end 30 June 2014.

As a business we currently have only a limited capex requirement with no material projects currently required or envisaged.

As mentioned earlier, post the period end, we completed the PFP transaction on 4 August 2014, which was part satisfied by £4.65 million in cash. However, this included the purchase of £1.7m of cash held by PFP and therefore the net cash outlay was £2.95m funded through our own resources at completion, with a final balance of £1.62 million due to be paid in August 2015. Further details are given in Note 13.

PRINCIPAL RISKS AND UNCERTAINTIES

In common with all organisations, the Group faces risks which may affect its performance. These are general in nature and include: obtaining business on competitive terms, retaining key personnel, successful integration of new business streams and market competition.  The Directors set out in the Admission document published in May 2014 under Part III the key risks that could have a material effect on our results.  The Board does consider that these risks, which were identified at the time, have not changed materially since that time.

The Group operates a system of internal control and risk management in order to provide assurance that we are managing risk whilst achieving our business objectives. No system can fully eliminate risk and therefore the understanding of operational risk is central to the management process within Flowtech Group.  The long-term success of the Group depends on the continual review, assessment and control of the key business risks it faces.

The future financial performance of the Group could be influenced by the success achieved in integrating the PFP business into the Group's wider operations, coupled with the reaction of both suppliers and customers to the Group venturing into complementary distribution channels which is highlighted by this acquisition.

IN SUMMARY

Trading continues to be encouraging and to date, in line with our expectations; in addition, we have a number of opportunities that we are pursuing which could accelerate complementary channel development and geographic expansion.  The Board remains confident that it can deliver the expected results at the end of the financial year.

By order of the Board

Malcolm Diamond MBE

Non-Executive Chairman

Sean Fennon

Chief Executive Officer

15 September 2014

FORWARD-LOOKING STATEMENTS

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.  Although the Group believes that the expectations reflected in these statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Given that these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2014
	Notes	Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Continuing operations Revenue Cost of sales	3	17,191 (11,072)	16,167 (10,280)	32,104 (20,774)
Gross profit Distribution expenses		6,119 (897)	5,887 (902)	11,330 (1,704)
Administrative expenses before separately disclosed items: -Share based payment costs -Restructuring costs -IPO costs		(1,941) (20) - (2,199)	(1,927) - (361) -	(4,302) - (361) -
Total administrative expenses		(4,160)	(2,288)	(4,663)
Operating profit	3	1,062	2,697	4,963
Financial income Financial expenses Gain on settlement of debt	4 8	1 (1,959 29,043)	43 (2,662) -	- (5,197) -
Net financing income/(costs)		27,085	(2,619)	(5,197)
Profit/(loss) from continuing operations before tax Taxation	3 5	28,147 (636)	78 (353)	(234) (866)
Profit/(loss) from continuing operations		27,511	(275)	(1,100)
Loss from discontinued operations, net of tax	14	(473)	(485)	(699)
Profit/(loss) for the period attributable to the owners of the parent		27,038	(760)	(1,799)
Earnings/(loss) per share* Basic earnings/(loss) per share* Continuing operations Discontinued operations		311.03p (5.34p)	(275.00p) (485.00p)	(1,100.00p) (699.00p)
Basic earnings/(loss) per share*	7	305.69p	(760.00p)	(1,799.00p)
Diluted earnings/(loss) per share* Continuing operations Discontinued operations		306.39p (5.34p)	(275.00p) (485.00p)	(1,100.00p) (699.00p)
Diluted earnings/(loss) per share*	7	301.05p	(760.00p)	(1,799.00p)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2014
	Six months ended 30 June 2014 Unaudited £000	Six months ended 30 June 2013 Unaudited £000	Year ended 31 December 2013 Unaudited £000
Profit/(loss) for the period	27,038	(760)	(1,799)
Other comprehensive (expense)/income -items that will be reclassified subsequently to profit or loss Exchange differences on translating foreign operations	(27)	(38)	27
Total comprehensive income/(expense) in the period attributable to the owners of the parent	27,011	(722)	(1,772)
*The Company's IPO on 21 May 2014 necessitated a restructuring of the Company's capital structure. As at 30 June 2014, the Company had 40,000,000 shares in issue.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2014
	Notes	30 June 2014 Unaudited £000	30 June 2013 Unaudited £000	31 December 2013 Unaudited £000
Assets Non-current assets Property, plant and equipment Intangible assets		1,662 42,524	1,857 42,524	1,729 42,524
Total non-current assets		44,186	44,381	44,253
Current assets Inventories Trade and other receivables Prepayments Current tax assets Cash and cash equivalents	11	9,230 8,792 368 - 3,067	9,409 8,850 356 18 1,293	9,804 7,626 195 - 2,265
Total current assets		21,457	19,926	19,890
Liabilities Current liabilities Interest-bearing loans and borrowings Trade and other payables Tax payable Provisions Other financial liabilities	8	3,051 3,780 707 208 7	10,624 4,748 664 113 20	11,267 4,555 492 67 32
Total current liabilities		7,753	16,169	16,413
Net current liabilities		13,704	3,757	3,477
Non-current liabilities Interest-bearing loans and borrowings Provisions Deferred tax liabilities	8	6,149 105 77	60,148 60 68	60,760 104 54
Total non- current liabilities		6,331	60,276	60,918
Net assets/(liabilities)		51,559	(12,138)	(13,188)
Equity directly attributable to owners of the parent Share capital Share premium Share based payment reserve Merger reserve Currency translation reserve Retained losses	9	20,000 46,809 20 293 (64) (15,499)	50 - - 293 (26) (12,455)	50 - - 293 (37) (13,494)
Total equity		51,559	(12,138)	(13,188)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
	Share capital £000	Share Premium £000	Share based payment reserve £000		Merger reserve £000		Currency translation reserve £000	Retained losses £000		Total Equity £000
Six months ended 30 June 2013
Balance at 1 January 2013 Loss for the period Other comprehensive income	50 - -	- - -	- - -		293 - -		(64) - 38	(11,695) (760) -		(11,416) (760) 38
Total comprehensive (expense)/(income) for the period	-	-	-		-		38	(760)		(722)
Balance at 30 June 2013 - unaudited	50	-	-		293		(26)	(12,455)		(12,138)
Year ended 31 December 2013
Balance at 1 January 2013 Loss for the period Other comprehensive income	50 - -	- - -	- - -		293 - -		(64 - 27	(11,695 (1,799) -		(11,416) (1,799) 27
Total comprehensive (expense)/(income) for the period	-	-	-		-		27	(1,799)		(1,772)
Balance at 31 December 2013 - unaudited	50	-	-		293		(37)	(13,494)		(13,188)
Six months ended 30 June 2014
Balance at 1 January 2014 Profit for the period Other comprehensive loss	50 - --	- - -	- - -		293 - -		(37) - (27)	(13,494) 27,038 -		(13,188) 27,038 (27)
Total comprehensive (expense)/(income) for the period	-	-	-		-		(27)	27,038		27,011
Transaction with owners Issue of share capital Share issue expenses Gain on settlement of debt capitalised as share premium on issue of ordinary shares Share based payment charge	19,950 - - -	20,000 (2,234) 29,043 -	- - - 20		- - - -		- - - -	- - (29,043 -)		39,950 (2,234) - 20
Total transactions with owners	19,950	46,809	20		-		-	(29,043)		37,736
Balance at 30 June 2014 - unaudited	20,000	46,809	20		293		(64)	(15,499)		51,559
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2014
			Notes	Six months ended 30 June 2014 Unaudited £000		Six months ended 30 June 2013 Unaudited £000			Year ended 31 December 2013 Unaudited £000
Cash flow from operating activities
Net cash from operating activities			10	(1,040)		931			3,348
Cash flow from investing activities Proceeds from sale of property, plant and equipment Disposal of subsidiary, net of cash disposed of Acquisition of property, plant and equipment				- 103 (211)		- - (270)			11 - (385)
Net cash used in investing activities				(108)		(270)			(374)
Cash flows from financing activities Net proceeds from the issue of share capital Proceeds from new loan Repayment of long term borrowings Net change in short term borrowings Payment of finance lease liabilities Interest paid				37,767 7,000 (37,151) (5,324) (6) (336)		- 10,000 (9,500) 3,672 (9) (3,635)			- 10,000 (10,149) 3,692 (17) (4,339)
Net cash generated from/(used in) financing activities				1,950		528			(813)
Net change in cash and cash equivalents				802		1,189			2,161
Cash and cash equivalents at start of period				2,265		104			104
Cash and cash equivalents at end of period			11	3,067		1,293			2,265
1.    General information
The principal activity of the Flowtech Fluidpower plc (the "Company") and its subsidiaries (together, the "Group") is the distribution of engineering components, concentrating on the fluid power industry. The Company is incorporated and domiciled in the UK. The address of its registered office is Pimbo Road, Skelmersdale, Lancashire WN8 9RB. The registered number is 09010518. The figures for 31 December 2013 are an abridged version of the Group's full financial statements (subject to first time adoption of International Financial Reporting Standards) and together with other financial information contained in this interim report, do not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2013, prepared under UK GAAP, have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. This consolidated interim financial information has not been audited in accordance with the International Standards on Auditing (UK and Ireland). However, it has been reviewed by Grant Thornton UK LLP in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity', and their Report is set out at the end of this document. This interim financial information was approved by the Board of Directors on 15th September 2014. ELECTRONIC COMMUNICATIONS The Company is not proposing to bulk print and distribute hard copies of this interim financial report for the six months ended 30 June 2014 unless specifically requested by individual shareholders. The Board believes that by utilising electronic communication it delivers savings to the Company in terms of administration, printing and postage, and environmental benefits through reduced consumption of paper and inks, as well as speeding up the provision of information to shareholders. 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, Pimbo Road, Skelmersdale, Lancashire, WN8 9RB.
2.    ACCOUNTING POLICIES
Basis of preparation The consolidated interim financial information presented is for the six months ended 30 June 2014 and has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards ("IFRS"). They have not been prepared in accordance with IA34 'Interim Financial Reporting'. The consolidated interim financial information is presented in sterling and have been rounded to the nearest thousand (£'000). The preparation of financial information in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual events ultimately may differ from those estimates. The Group has not previously prepared annual consolidated financial statements in accordance with EU endorsed IFRS. However three years of consolidated financial statements prepared under IFRS 1 "First time adoption of International Financial Reporting Standards" are presented in the Group's AIM Admission Document dated 9 May 2014. Reconciliations of how the Group's transition from UK GAAP to IFRS affected its reported financial position, financial performance and cash flows are presented in this document. The consolidated interim financial information has been prepared on the basis of accounting policies set out in the AIM Admission Document dated 9 May 2014 except as detailed below: 2.1    TAXES Taxes on income in the interim periods are accrued using the rate of tax that would be applicable to expected total annual earnings. 2.2    BASIS OF CONSOLIDATION On 24 April 2014, the Company was incorporated under the name Flowtech Fluidpower Limited. On 7 May 2014, Flowtech Fluidpower Limited acquired the entire issued share capital of Flowtech Holdings Limited via a share for share exchange with the shareholders of Flowtech Holdings Limited. On 7 May 2014, Flowtech Fluidpower Limited was re-registered as a public limited company with the name Flowtech Fluidpower plc. Following the share for share exchange referred to above, Flowtech Fluidpower plc became the ultimate legal parent of the Group. In the absence of an IFRS which specifically deals with similar transactions, management judges it appropriate to refer to other similar accounting frameworks for guidance in developing an accounting policy that is relevant and reliable. The directors consider the share for share exchange transaction to be a group reconstruction rather than a business combination in the context of IFRS3 (revised), 'Business Combinations', which has been accounted for using merger accounting principles. Therefore, although the share for share exchange did not occur until 7 May 2014, the consolidated financial statements of Flowtech Fluidpower plc are presented as if the Flowtech group of companies had always been part of the same Group. Accordingly, the results of the Group for the entire period ended 30 June 2014 are shown in the consolidated statement of comprehensive income and the comparative figures for the period ended 30 June 2013 and the year ended 31 December 2013 are also prepared on this basis. Accordingly, the following accounting treatment has been applied in respect of the share for share exchange: - The assets and liabilities of Flowtech Holdings Limited and its subsidiaries are recognised in the interim consolidated unaudited financial statements at the pre-combination carrying amounts, without restatement to fair value; - The retained losses and other equity balances recognised in the interim consolidated unaudited financial statements for the period ended 30 June 2014 reflect the retained losses and other equity balances of Flowtech Holdings Limited and its subsidiaries recorded before the share for share exchange. However the equity structure (share capital and share premium balances) shown in the interim consolidated unaudited financial statements reflects the equity structure of the legal parent (Flowtech Fluidpower plc), including the equity instruments issued under the share for share exchange. The resulting difference between the parent's capital and the acquired group's capital has been recognised as a component of equity being the 'merger reserve'; - Comparative figures have been restated on the same basis as above. The Company had no significant assets, liabilities or contingent liabilities of its own at the time of the share for share exchange and no such consideration was paid. 2.3   DISCONTINUED OPERATIONS The results of operations disposed of in the six months ended 30 June 2014 were consolidated up until the date on which control passed and are included  within 'profit or loss from discontinued operations' as part of a single line item. Any profit or loss arising from the sale of discontinued operations is presented as part of a single line item, 'profit or loss from discontinued operations'. 2.4    ADMISSION AND SHARE ISSUE COSTS Transaction costs of equity transactions relating to the issue of the company's shares are shown as a deduction from equity. Listing and Admission costs are charged to profit or loss as an administration expense. The Directors have reviewed the expenditure related to the Admission and, where appropriate, made judgments as to how much of the expenditure related to the Admission process and how much related to the issue of new equity and should therefore be charged against the share premium account. 2.5    Derecognition of financial liabilities The Group derecognises a financial liability (or its part) from the statement of financial position when, and only when it is extinguished, i.e. when the obligation specified in the contract is discharged, cancelled or expires.  The difference between the carrying amount of a financial liability (or a part of a financial liability) extinguished and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. GOING CONCERN The Group meets it day-to-day working capital requirements through its bank facilities. The directors have carefully considered the banking facilities and their future covenant compliance in light of the current and future cash flow forecasts and they believe that the Group are appropriately positioned to ensure the conditions of its funding will continue to be met and therefore enable the Group to continue in operational existence for the foreseeable future by meeting its liabilities as they fall due for payment. FOREIGN CURRENCY RISK The main currency related risk to the Group comes from forward purchasing of inventories and from its foreign operations. This risk is managed by entering into forward currency contracts. The Group does not apply hedge accounting in respect of these forward currency contracts, the changes in fair value have been recognised in the income statement.
3.    OPERATING SEGMENTS
The Group now comprises of the following main operating segments: ·      Flowtechnology UK - distribution and assembly of engineering components, principally to distributors in the UK and Eire ·      Flowtechnology Benelux - distribution of engineering components, to distributors and end user consumers in the Netherlands and Belgium On 4 April 2014, the Group completed the sale of its subsidiary Industrial Products and Supplies Limited which was considered to be a separate segment.  This segment was not a discontinued operation or classified as held for sale at 31 December 2013 and the comparative Consolidated Income Statement has been restated to show the discontinued operation separately from continuing operations.  Refer to note 14 for further details and segmental analysis in relation to this subsidiary. The Executive Directors of the Board are considered to be the chief operating decision maker (CODM).  The CODM manages the business using an underlying profit figure. The table below provides a reconciliation from this figure, to the reported operating profit in the Consolidated Income Statement. CODM assesses the performance of the operating segments based on a measure of operating profit.  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. 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 profit/(loss) from continuing operations is shown below.  The principal adjustments made are in respect of the separately disclosed items as defined on page 11.

Segmental reporting by geographic location	Flowtechnology  UK £000	Flowtechnology Benelux £000	Inter-segmental transactions £000	Central  costs £000	Total £000
Six months ended 30 June 2014
Income statement - continuing operations:
Revenue from external customers	15,204	1,987	-	-	17,191
Inter segment revenue	420	31	(451)	-	-
Total revenue	15,624	2,018	(451)	-	17,191
Underlying operating result	3,132	149	-	-	3,281
Net financing income/(costs)	(122)	(1)	-	27,208	27,085
Underlying segment result	3,010	148	-	24,208	30,366
Separately disclosed items (see page 11)	-	-	-	(2,219)	(2,219)
Profit before tax	3,010	148	-	24,989	28,147
Specific disclosure items Depreciation and amortisation	205	21	-	-	226
Reconciliation of underlying operating result to operating profit: Underlying operating result Separately disclosed items (see page 11)	3,132 -	149 -	- -	- (2,219)	3,281 (2,219)
Operating profit/(loss)	3,132	149	-	(2,219)	1,062

Segmental reporting by geographic location	Flowtechnology  UK £000	Flowtechnology Benelux £000	Inter-segmental transactions £000	Central  costs £000	Total £000
Six months ended 30 June 2013
Income statement - continuing operations:
Revenue from external customers	14,267	1,900	-	-	16,167
Inter segment revenue	340	23	(363)	-	-
Total revenue	14,607	1,923	(363)	-	16,167
Underlying operating result	3,025	33	-	-	3,058
Net financing costs	(28)	(5)	-	(2,586)	(2,619)
Underlying segment result	2,997	28	-	(2,586)	439
Separately disclosed items (see page 11)	(96)	-	-	(265)	(361)
Profit/(loss) before tax	2,901	28	-	(2,851)	78
Specific disclosure items Depreciation and amortisation	196	24	-	-	220
Reconciliation of underlying operating result to operating profit: Underlying operating result Separately disclosed items (see page 11)	3,025 (96)	33 -	- -	- (265)	3,058 (361)
Operating profit/(loss)	2,929	33	-	(265)	2,697

Segmental reporting by geographic location	Flowtechnology  UK £000	Flowtechnology Benelux £000	Inter-segmental transactions £000	Central  costs £000	Total £000
Year ended 31 December 2013
Income statement - continuing operations:
Revenue from external customers	28,578	3,526	-	-	32,104
Inter segment revenue	572	182	(754)	-	-
Total revenue	29,150	3,708	(754)	-	32,104
Underlying operating result	5,156	168	-	-	5,324
Net financing costs	(214)	(4)	-	(4,979)	(5,197)
Underlying segment result	4,942	164	-	(4,979)	127
Separately disclosed items (see page 11)	(96)	-	-	(265)	(361)
Profit/(loss) before tax	4,846	164	-	(5,244)	(234)
Specific disclosure items Depreciation and amortisation	380	48	-	-	428
Reconciliation of underlying operating result to operating profit: Underlying operating result Separately disclosed items (see page 11)	5,156 (96)	168 -	- -	- (265)	5,324 (361)
Operating profit/(loss)	5,060	168	-	(265)	4,963

SEPARATELY DISCLOSED ITEMS ·      Share based payment costs relate to the provision made in accordance with IFRS 2 "Share based payment" following the issue of share options to employees subsequent to admission to AIM. ·      Restructuring costs relate to restructuring activities of both an operational and financial nature. Operational restructuring covers the closure of business units; costs include employee redundancies within these units, continuing property costs post closure and other onerous lease obligations. The costs of financial restructuring includes bank arrangement fees and associated legal costs. ·      IPO costs comprise the professional and other fees related to the IPO and costs of settlement of certain cash settled directors' share obligations arising on the IPO accounted for in accordance with IFRS 2 "Share based payment".
	Six months ended 30 June 2014 £000	Six month ended 30 June 2013 £000	Year ended 31 December 2013 £000
Separately disclosed items within administration expenses: -Share based payment costs -Restructuring -IPO costs	(20) - (2,199)	- (361) -	- (361) -
Total separately disclosed  items	(2,219)	(361)	(361)

4.    FINANCIAL EXPENSES
	Six months ended 30 June 2014 £000	Six month ended 30 June 2013 £000	Year ended 31 December 2013 £000
Finance expense arising from: Invoice discounting and stock loan facilities Overdraft interest Finance lease interest Bank loans - existing loans Other interest Shareholder loans Bank loans - loans repaid in full	108 1 1 28 13 1,697 111	64 5 1 - 5 2,086 501	213 6 2 - 8 4,253 715
Total finance expense	1,959	2,662	5,197

5.    TAXATION
	Six months ended 30 June 2014 £000	Six month ended 30 June 2013 £000	Year ended 31 December 2013 £000
Current tax on income for the period - continuing operations: UK tax Foreign tax Deferred tax expense/(credit) Adjustments in respect of prior years	435 31 20 150	340 7 - 6	500 142 (24) 248
Total taxation	636	353	866
The taxation for the period has been calculated by applying the estimated tax rate for the financial year ending 31 December 2014 adjusted for the reduction in the rate of corporation tax to 20% from 23%.  Deferred tax liabilities have also been adjusted to £77,000 to reflect capital allowances in excess of depreciation and other short term timing differences.

6.    DIVIDENDS

The directors are proposing an interim dividend in respect of the financial year ended 31 December 2014 of 1.67p per share which will absorb an estimated £0.7million of shareholders' funds. It will be paid on the 24 October 2014 to shareholders who are on the register of members on 26 September 2014.

7.    EARNINGS PER SHARE
Six months ended 30 June 2014				Six months ended 30 June 2013
	Earnings £000	Weighted average number of shares 000's	Earnings per share Pence	Earnings £000	Weighted average number of shares 000's	Earnings per share Pence
Basic earnings/(loss) per share Continuing operations Discontinued operations	27,511 (473)	8,845* 8,845*	311.03 (5.34)	(275) (485)	100 100	(275.00) (485.00)
Basic earnings/(loss) per share	27,038	8,845*	305.69	(760)	100	(760.00)
Diluted earnings/(loss) per share Continuing operations Discontinued operations	27,511 (473)	8,979* 8,979*	306.39 (5.34)	(275) (485)	100 100	(275.00) (485.00)
Diluted earnings/(loss) per share	27,038	8,979*	301.05	(760)	100	(760.00)

Year ended 31 December 2013
	Earnings £000	Weighted average number of shares 000's	Earnings per share Pence
Basic earnings/(loss) per share Continuing operations Discontinued operations	(1,100) (699)	100 100	(1,100.00) (699.00)
Basic earnings/(loss) per share	(1,799)	100	(1,799.00)
Diluted earnings/(loss) per share Continuing operations Discontinued operations	(1,100) (699)	100 100	(1,100.00) (699.00)
Diluted earnings/(loss) per share	(1,799)	100	(1,799.00)

	Six months ended 30 June 2014 £000	Six month ended 30 June 2013 £000	Year ended 31 December 2013 £000
Weighted average number of ordinary shares for basic and diluted earnings per share Impact of share options	8,845 134	100 -	100 -
Weighted average number of ordinary shares for diluted earnings per share	8,979	100	100

*The Company's IPO on 21 May 2014 necessitated a restructuring of the Company's capital structure. As at 30 June 2014, the Company had 40,000,000 shares in issue. 

8.    INTEREST BEARING LOANS AND BORROWINGS
	30 June 2014 £000	30 June 2013 £000	31 December 2013 £000
Current liabilities Current portion of secured bank loans Stock loan facility Invoice discounting facility Current portion of finance lease liabilities	857 - 2,182 12	3,125 2,860 4,625 14	3,750 2,775 4,730 12
Total current liabilities	3,051	10,624	11,267
Non-current liabilities Secured bank loans Finance lease liabilities Shareholder loan	6,143 6 -	6,875 19 53,254	5,625 12 55,123
Non-current liabilities	6,149	60,148	60,760
Total	9,200	70,772	72,027
During the six months to 30 June 2014, the Group repaid shareholder loans of £27,826,028. In addition £29,042,987 of debt was exchanged for one, £1 ordinary share of Flowtech Fluidpower plc. Management have recognised a gain on settlement of the debt of £29,042,987 as the £1 ordinary share had minimal value. The share premium arising of £29,042,986 has been recognised by way of transfer from consolidated retained profits to share premium in the consolidated statement of changes in shareholders' equity. During the six months to 30 June 2014, the Group refinanced its banking facilities with its existing provider. The facilities were replaced with a bank loan of £7,000,000 which is repayable in instalments over the period to 8 May 2018. The stock loan facility was repaid during the period. The bank loans and invoice discounting facility are secured by legal charges over certain of the Group's assets which include trade receivables.

9.   SHARE CAPITAL
	Number	£000
Allotted and fully paid ordinary shares of 50p each
At 1 January 2014	-	-
Subscriber share issue	4	-
Shares issued pursuant to share for share exchange to acquire Flowtech group of companies	99,996	50
Share issued in respect of debt for equity swap (see note 8)	1	-
Share issue upon admission	39,899,999	19,950
At 30 June 2014	40,000,000	20,000
The number of shares in issue for each of the comparable periods represents the share capital issued by Flowtech Fluidpower plc in the share for share exchange that made the company the legal parent of the group adjusted for the subsequent 2 for 1 subdivision.

10.  CASH FLOW FROM OPERATIONS
	Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Reconciliation of profit/(loss) after taxation to net cash flows from operations
Profit/(loss) from continuing operations before tax	28,147	78	(234)
Loss from discontinued operations before tax	(325)	(485)	(689)
Depreciation and amortisation	228	390	608
Financial income	(1)	(43)	-
Financial expense	1,959	2,662	5,197
Gain on settlement of debt	(29,043)	-	-
Loss on sale of plant & equipment	-	5	10
Equity settled share-based payment charge	20	-	-
Operating cash inflow before changes in  working capital and provisions	985	2,607	4,892
Change in trade and other receivables	(1,596)	(1,379)	35
Change in stocks	515	(212)	(607)
Change in trade and other payables	(680)	38	(156)
Change in provisions	142	69	67
Cash generated from operations	(634)	1,123	4,231
Tax paid	(406)	(192)	(883)
Net cash (used in)/ generated from operating activities	(1,040)	931	3,348

11.  ANALYSIS OF NET DEBT
	Six months ended 30 June 2014	Six months ended 30 June 2013	Year ended 31 December 2013
Cash and cash equivalents	3,067	1,293	2,265
Debt due within one year	(3,038)	(10,610)	(11,255)
Debt due after one year	(6,143)	(60,130)	(60,748)
Finance lease liabilities	(18)	(32)	(24)
Other interest-bearing loans and borrowings	(9,199)	(70,772)	(72,027)
Total net debt	(6,132)	(69,479)	(69,762)

12.  MOVEMENT IN NET DEBT
	At start of period £000	Cash flow £000	Net movement in short term debt £000	Repayment of loans £000	New loan issued £000	Non cash movement £000	At end of period £000
Cash and cash equivalents	2,265	802	-	-	-	-	3,067
Debt due within one year Debt due after one year Finance lease liabilities	(11,255) (60,748) (24)	- - 6	5,324 - -	3,750 33,401 -	(857) (6,143) -	- 27,347 -	(3,038) (6,143) (18)
Other interest-bearing loans and borrowings	(72,027)	6	5,324	37,151	(7,000)	27,347	(9,199)
Total net debt	(69,762)	808	5,324	37,151	(7,000)	27,347	(6,132)

Non cash movements represent a debt for equity swap of a long term loan of £29,042,987 net of capitalisation of associated interest costs of £1,696,277 charged pre the swap. The £29,042,987 of debt was exchanged for one, £1 ordinary share of Flowtech Fluidpower plc. Management have recognised a gain on settlement of the debt of £29,042,987 as the £1 ordinary share had minimal value.
13.  SUBSEQUENT EVENTS
Primary Fluid Holdings Limited was acquired on 4th August 2014 for a total consideration of £9,770,000 comprising £4,650,000 in cash, £1,620,000 deferred cash consideration and £3,500,000 represented by the issue of new Flowtech Fluidpower plc Ordinary shares. The cash consideration was funded out of existing cash resources. Included within the net assets of Primary Fluid Holdings Limited was £2,641,000 of cash retained within the business on acquisition. The Group will disclose the book value of the identifiable assets and liabilities and their fair values in the 2014 full year financial statements as required under IFRS 3 "Business Combinations". The initial accounting and fair value exercise is incomplete at the time of this announcement due to the proximity of the accounting date.

14.  DISCONTINUED OPERATIONS
The sale of the subsidiary Industrial Products and Supplies Limited was completed on 4 April 2014 for nil consideration. Industrial Products and Supplies Limited constitutes a reporting segment in accordance with IFRS 8 "Operating segments". The results of the discontinued operations included in the loss for the period are set out below. This segment was not a discontinued operation or classified as held for sale at 31 December 2013 and the comparative Consolidated Income Statement has been restated to show the discontinued operation separately from continuing operations. See note 8 for the earnings per share split between continuing and discontinued operations. ·      The write off of goodwill relates to liquidation of a subsidiary Merchantz Limited, 100% owned by Industrial Products and Supplies Limited. ·      Closure costs relate to the closure of business units. They include employee redundancies within these units, continuing property costs post closure and other onerous lease obligations. ·      The loss on disposal relates to the deficit of sale proceeds less net assets disposed of on the sale of the subsidiary. ·      Included in closure costs is £43,000 relating to professional fees incurred during the disposal.
	Six months ended 30 June 2014 £000	Six months ended 30 June 2013 £000	Year ended 31 December 2013 £000
Discontinued operations Revenue Cost of sales	415 (395)	1,140 (1,119)	2,168 (2,083)
Gross profit Distribution expenses	20 (20)	21 (59)	85 (119)
Administrative expenses before separately disclosed items: - Write off of goodwill - Closure costs	(53) - (272)	(149) (160) (138)	(264) (160) (231)
Total administrative expenses	(325)	(447)	(655)
Operating loss	(325)	(485)	(689)
Net financing costs	-	-	-
Loss from discontinued operations before tax	(325)	(485)	(689)
Taxation	-	-	(10)
Loss on disposal of subsidiary	(148)	-	-
Loss from discontinued operations	(478)	(485)	(699)
Specific disclosure items Depreciation	-	1-	20

EFFECT OF THE DISPOSAL ON THE FINANCIAL POSITION OF THE GROUP
	£000
Net assets disposed of Property, plant and equipment Deferred tax assets Inventories Trade and other receivables Prepayments Overdraft Other loans and borrowings Trade and other payables	49 7 58 243 15 (14) (89) (121)
Net assets and liabilities	148
Consideration received	-
Loss on disposal	(148)

Independent review report to flowtech fluidpower plc
Introduction We have been engaged by the company to review the financial information in the half-yearly financial report for the six months ended 30 June 2014 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the half yearly financial report, which comprises only the Executive Chairman and Chief Executive's joint statement, and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts. As disclosed in note 2 the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in Note 2. Our responsibility Our responsibility is to express to the Company a conclusion on the financial information in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with the basis of accounting described in note 2. Grant Thornton UK LLP Chartered Accountants Manchester 15 September 2014

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