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Annual Report
for the year ended 31 December 2021
A Vital Partner in the Fluid Power Supply Chain
Flowtech Fluidpower is a Group of specialist fluid power businesses. Working in partnership with customers and suppliers, we
deliver essential components, custom solutions, and high-quality servicing support to keep global industry moving.
Our business is separated into three distinct segments: Flowtech, Fluidpower Group Solutions and Fluidpower Group Services.
www.flowtechfluidpower.com
Below are some of the leading brands we sell and partner with:
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Shareholder enquiries can be directed to:
The Company Secretary, Flowtech Fluidpower plc
Tel: +44 (0) 1695 52759
Email: info@flowtechfluidpower.com
Contents
About the business
Strategic Report
2021 Financial & Operational Highlights
Chair’s Statement
Group Overview
CEO’s Year in Review
Our Business Model
Our Strategy for Growth
Key Performance Indicators
Marketplace
Global Landscape
Sustainability Report
Corporate Social Responsibility - Section 172 Statement
Financial Review
Risk Management
Governance
The Board
Corporate Governance Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
Financial Statements
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Information
Company Income Statement
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company’s Financial Information
Glossary of Terms
Company information
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FY2021
Financial & Operational Highlights
1.
2.
3.
4.
5.
6.
7.
8.
As anticipated 2021 was a year in which the business recovered strongly from
the impact of the COVID-19 pandemic
Revenue was 15% up on 2020 but remained marginally below levels achieved
in 2018 and 2019
Underlying Operating Profit (*) of £5.7m (2020: £1.1m)
Operating profit of £3.7m was £5.1m in excess of 2020, however, remains
below that achieved in 2019 (£5.7m)
The benefits of cost base restructuring activities undertaken over the last two
years limited the impact of inflationary and supply chain related pressures
Invested in inventory levels (£8.5m increase) to mitigate the impact of supply
chain uncertainties and ensure we managed the availability of our core
products
Strong progress was made with our plans to develop our e-business platform
and we successfully aggregated the Flowtech businesses at the start of 2022
2022 expected to be the year in which the business demonstrates a full
recovery and delivers growth compared to pre COVID-19. Encouraging start
to the year, with revenue and gross margin ahead of expectations
(*) Underlying Operating Profit is used as an alternative performance measure by management to assess the trading performance of the business and is
operating profit before amortisation and impairment of acquired intangibles and share based payment, and restructuring costs.
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FY2021 Financial Highlights
Revenue £000
Gross profit £000 / %
,
8
0
1
2
1
1
£
,
8
1
4
2
1
1
£
,
7
0
1
9
0
1
£
,
1
8
0
5
9
£
,
7
8
2
8
7
£
34.7%
35.7%
,
9
4
9
8
3
£
,
3
8
1
0
4
£
35.3%
8
9
4
8
3
£
,
34.3%
,
4
9
5
2
3
£
33.9%
,
5
6
5
6
2
£
35.5%
,
6
6
0
9
1
£
2017
2018
2019
2020
2021
2016
2017
2018
2019
2020
2021
Operating profit/(loss) £000
Net debt (*)
8
7
6
7
£
,
4
1
6
6
£
,
5
4
7
5
£
,
4
9
3
1
£
-
,
2
1
7
3
£
,
HMRC support
£19.9m
£14.9m
£16.6m
£15.4m
£10.7m
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
*Net Debt is Bank Debt less cash and cash equivalents. It excludes lease liabilities
under IFRS 16
Net cash from operating activities £000
Working capital as a % of total revenue
,
6
4
2
3
1
£
5
6
6
8
£
,
7
7
9
£
0
0
6
6
£
,
0
9
7
3
£
,
33.5%
32.2%
26.8%
23.9%
28.8%
2017
2018
2019
2020 (*)
2021 (†)
2017
2018
2019
2020
2021 (†)
(*) FY 2020 cash flow restated for £1,418k VAT for Q1 2020 deferred and paid
in FY 2021 to reflect normalised net cash from operating activity
(†) FY 2021 net cash flow materially impacted by £8.6m increase in inventory
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Chair’s Statement
“By the end of the year we believe that most of the key components of
our strategic plan will be in place with the business benefitting from
solid foundations enabling us to move forward aggressively to unlock
our undoubted growth potential in both offline and, increasingly, online
markets”
Roger McDowell, Chair
Introduction
My second report, and first following a full year in role, is inevitably impacted by the ongoing
effects of the global pandemic. Whilst we have continued to prioritise the wellbeing of our
employees through the COVID-19 period, 2021 presented fresh challenges, most notably linked
to the disruption of supply chains as they were rebuilt, and which has created significant
inflationary pressures right across our product set. In any distribution business inventory is its
lifeblood, we anticipated lead time extension and built stocks whilst maintaining our focus on
margins and availability.
Review of 2021
Many of our business units performed well against our early expectations, particularly in our Flowtech and Solutions Divisions,
aided by our decision to build inventory. However, performance across our Services Division has not been uniformly successful.
We have dedicated significant management resources to these specific operations and, with confirmed order books positive as
we enter 2022, we remain committed to improving returns in this Division in the near term.
Whilst our core operational centres are in England, we do have a significant presence in the Island of Ireland and the Netherlands.
We have necessarily had to operate within differing COVID-19 environments and adapt our approach accordingly. With the
majority of key suppliers being based overseas, we have not been able to benefit from traditional face to face interactions, so we
look forward to a resumption and the consequent commercial advantages.
As detailed in our Sustainability Report on page 21, we have made good progress with the main framework of both our ESG and
risk management agenda, with particular focus on employee related issues. In this regard the introduction of HR expertise at
Management Board level for the first time will ensure the pace of improvement should now take a further step forward.
Strategic progress
Following our strategic review in late 2020, despite the ongoing challenges presented by the effects of the COVID-19 pandemic,
it has been a year of solid progress; detail is provided in the Chief Executive’s report.
Of particular significance is our new web trading platform, now close to implementation, with state-of-the art digital marketing
tools established in parallel, and are confident this will see us with a class leading offering. We firmly believe that this new online
infrastructure will provide competitive advantage and, over time, significant organic sales growth which will drive an increase in
shareholder value.
In addition, the businesses in our Flowtech Division have now all rebranded under a single style, including a significant project to
adopt a common IT platform. This represented the largest internal project that the Group has undertaken and it is encouraging to
see the expected uplift in commercial presence, additional margin insight and cost control is showing early promise.
Dividend
We stated previously our ambition to return to dividend payments, albeit at levels commensurate with the needs of the business.
I can confirm that the Board will be recommending a dividend of 2p per ordinary share in respect of 2021 at the AGM in June
2022. Moving forward we will maintain a balanced approach to dividend distribution.
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Board changes
In March 2022, we announced an expansion to the Board with new Non-Executive Directors, Ailsa Webb and Jamie Brooke,
adding considerable additional experience and skills. We are very pleased to welcome them both and I look forward to their
contribution. I would also like to thank Paul Gedman who stepped down in November 2021 and wish him well for the future.
2021 Annual report
The majority of Shareholders now elect to receive key information in an electronic format. Given the availability of other
information via our website, we have chosen to limit the number of graphics within the document, enabling us to release the full
document in real time via the Regulatory News Service and upload to the website. We believe this approach is more efficient, cost
effective and environmentally friendly.
Conflict in Ukraine
We are appalled at the events in Ukraine. Having carefully assessed the associated risks to the Group we have concluded they are
minimal. We do not trade directly with Ukraine or Russia. It is possible there will be some limited supply chain disruption and there
are some direct inflationary effects, such as fuel and energy costs that we will seek to pass on.
Outlook
We entered 2021 with significant work to do and, despite the array of challenges, it is pleasing to report that much has been
achieved. For 2022, we have clear prioritised actions, notably exploiting our new digital capability, creating the Fluidpower Group
to sit alongside the now aggregated Flowtech business and, re-focusing on improving all our important KPIs. The start to the year
has been encouraging, with revenue and gross margin ahead of expectations.
By the end of the year we believe that most of the key components of our strategic plan will be in place with the business
benefitting from solid foundations enabling us to move forward aggressively to unlock our undoubted growth potential in both
offline and, increasingly, online markets. The Board therefore believes that the outlook for the business remains positive over both
the near and long-term.
I would like to thank all my colleagues across the Group for all their efforts during the COVID-19 pandemic; it is a great credit to
them that despite the obvious difficulties in managing a multi-site organisation across four countries, the Group exits the pandemic
having made significant progress against its strategic goals.
Roger McDowell
Chair
28 March 2022
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Group Overview
A Vital Partner in the Fluid Power Supply Chain
“Flowtech Fluidpower is a Group of specialist fluid power businesses.
Working in partnership with customers and suppliers, we deliver
essential components, custom solutions and high-quality servicing
support to keep global industry moving”
78.5%
77.0%
Group Revenue %
Geographies
19.2%
21.5%
United
Kingdom
Europe
2.3%
1.5%
Rest of the
World
2021
2020
Flowtech
Share of segment revenue
48%
£52.1m
£46.1m
Revenue by Division
FY2021
FY2020
Employees*
FY2021
FY2020
267
252
Our focus
Channels to Market
Our Strengths
E-commerce websites, customer
white label e-commerce websites,
70,000+ catalogues, own and
customer trade counters.
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 original equipment
manufacturers (OEMs).
1. Consistent cash generator,
high profits
2. Widest set of leading
brands from extensive
stock inventory
3. Purchasing synergies
through common product
set
4. Essential urgent delivery,
critical for MRO market
5. Supply chain consolidation
for suppliers and
customers
6. Added value customer
services
Fluidpower Group Solutions Our focus
Share of Segment Revenue
Channels to Market
Our Strengths
Engineering collaboration,
through sales offices providing
national and local coverage. In
2022 enhanced by new e-
commerce capabilities.
Supply specialist technical
hydraulic components &
systems, predominantly into
Original Equipment
Manufacturer and End User
channels to all industry markets,
supported by supply
agreements with a broad range
of manufacturer brands.
36%
£39.6m
£33.6m
Revenue by Division
FY2021
FY2020
Employees*
FY2021
FY2020
173
203
*Average for the year. Excludes central employees (FY21: 41, FY20: 47)
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1. Large volume /regular orders
into OEMs
1. High degree of technical
knowledge with the ability to
source products for urgent
customer needs
2. High levels of customer
retention
3. Strong long-term strategic
relationships with leading
manufacturers
4. Bespoke product
configurated to customers’
requirements
Fluidpower Group Services
Share of segment revenue
16%
£17.4m
£15.4m
Revenue by Division
FY2021
FY2020
Employees*
FY2021
FY2020
131
125
Our focus
Channels to Market
Our Strengths
In-house design and build,
combined with on-site
installation, servicing and
support.
Bespoke design, manufacturing,
commissioning, installation and
servicing of systems to
manufacturers of specialised
industrial and mobile hydraulic
OEMs and additionally a wide
range of industrial end users.
Capital project-based revenue.
1. Highly valued engineering
support to customers
2. Working in partnership with
suppliers and customers on
large industry projects with
cross-sell opportunities for
the Group and additionally
ongoing repeat business for
Flowtech and Solutions.
3. Bespoke assembled
4.
customer solutions and deep
technical support
Installation, commissioning
and local servicing
5. Leading manufacturer
brands in system builds
* Average for the year. Excludes central employees (FY21: 41, FY20: 47)
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CEO’s Year in Review
“It is encouraging to see that the Group, in its restructured and
refreshed form, is taking shape, and we have already been able to
see some of the benefits. This will be further enhanced when our
new digital capabilities come on-stream”
Bryce Brooks, CEO
At the date of my report a year ago we were starting to see the UK economy recovering
strongly from the shock of lockdown in 2020, and giving us significant encouragement
about the resilience in our key markets. We targeted a return to the benchmark of 2019
volumes as being achievable by the close of 2021, and whilst the line has inevitably not
been straight in that regard, there is a clear sense that this is now being seen in the early
part of 2022.
What was not immediately apparent was that this market resurgence would also transition
into a period of strong inflationary pressure, both at product and resources level, and be
coupled with the most stretched and inconsistent supply chains seen in our industry for many years. This was highlighted when
certain of our major European suppliers published lead times that had previously been measured in weeks to out beyond a
year. The “sellers” market at supplier level meant that our previous core skills of improving margins through a cost-out focus,
while improving stock turn KPIs, have had to change in the short-term to one where depth of inventory becomes the key, and
margin enhancement can only be achieved with back-to-back increases in selling prices. Dealing with this is part and parcel of
being a large scale distributor, and the manner in which the Group has adapted to many of these challenges has been
particularly pleasing, with the one percentage point year on year increase in gross margin representative of this effort.
At customer level, the MRO markets serviced by Flowtech have essentially consumed what stock was immediately available.
An important KPI in the division is a measure of the number of lines out of stock in our Top 2000 selling items. As a result of
the lockdown impact we started the year at around 12% out of stocks, and with the subsequent upsurge in demand, well ahead
of restocking capabilities, this measure peaked at 16% in Q1. It has been a challenge to improve this position, with much of
the replenishment having a Far-East supply element, and it was not until much later in the year that we were able to bring this
down to a more normalised 4%. It has continued to sit at this level as we entered 2022, and we believe this currently places us
ahead of our direct competitors. The significant increase in “buffer” stock required has led to an increase in Net Debt, which
we expect to support sales growth in 2022 and then naturally reduce to reach a more normalised position by the end of 2023,
when a focus on improving turn and earn KPIs can be resumed.
In Solutions the inventory challenge is quite different. Here, core OEM customers have a specified product from largely
European based manufacturers, and when demand surged sales were fundamentally restricted by the ability to obtain the
product. We have sought wherever possible to work with customers in examining alternatives from within our range to
overcome some of these issues, however, in most aspects, sales were deferred rather than lost, and this has given us some
tailwind in the early part of 2022. It is also noteworthy that demand from sectors specifically related to the airline industry only
began to show signs of improvement late in the year, and should hopefully provide further impetus to our 2022 sales target.
In Services, the Covid impact has been different again. For our assembly operations we are in the same position as all other
OEMs – where disrupted supply of as little as a single component can mean that full units cannot be completed and invoiced,
and we ended 2021 with considerable overhang in our order book for that reason. In parallel, onsite operations have had
persistent disruption with completing and invoicing work in progress, and new projects have been consistently deferred by
contractors.
Behind this, we have had to respond to more pronounced salary inflation and the well-publicised increases in utilities and
property cost, and, at the end of the year, we also had to manage disruption in parcel delivery networks when the Omicron
wave gained a foothold in the UK population. All contributed towards a drag on profitable growth in 2021, but we feel confident
that each aspect has been dealt with and the basis for improved profitability is in place.
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Financial overview
2021£000
Total revenue
Underlying Segment Operating Profit (*)
Contribution %
Flowtech
52,135
7,101
13.6%
Solutions
39,575
3,505
8.9%
2020 (£000)
Total revenue
Underlying Segment Operating Profit / (loss) (*)
Contribution %
46,060
5,038
10.9%
33,578
1,790
5.3%
Services
17,397
140
0.8%
15,443
(1,236)
-8.0%
Total
109,107
10,746
9.8%
95,081
5,592
5.9%
(*) Underlying Segment Operating Profit is continuing operations’ operating profit before central costs and separately disclosed items detailed in note 3
As expected, we experienced a rebound in the contribution from each reporting segment in 2021 as volumes returned. In
Flowtech a contribution rate of 13.6% was achieved (2020: 10.9%), and with the completed restructuring detailed below we
expect further improvements in overall contribution as we target well above 15% for the segment in the longer term. Solutions
will also benefit in due course as part of the Fluidpower Group and here we will also be targeting to improve contribution to
above 10%. Both Divisions have seen the benefits of warehouse restructuring work done in 2020, although to some degree
this has been offset by strong cost inflation, one-off costs of working to deal with the inventory build, and increased costs of
delivery to Ireland following Brexit.
Alongside this whilst the contribution from Services has improved, we have been disappointed that some momentum did not
push through into the second half of the year. We suffered significant unexpected overruns in completing one “onsite” contract,
and as mentioned above later in the year component supply hampered our ability to convert orders to fulfilled sales. That said,
the position of the current order book , should allow us to improve financial performance to satisfactory levels, and we remain
of the view that this is achievable in the short-term.
Developments in Group strategy and progress in 2021
We outlined 12 months ago what we saw as the key aspects of our development strategy and the timetable to which we
were planning to operate. The progress made in each specific area is as follows:
E-business
In 2021 our internal project team has been working with external providers on a completely rebuilt e-commerce architecture.
In parallel we will also be using enhanced SEO capabilities for the first time, and in conjunction we will also introduce a group
wide Customer Data Platform with associated digital marketing tools to exploit the undoubted value in our commercial data.
Behind the new website is a hugely expanded Product Information Management system, via an upgraded platform which we
believe will become the most extensive available to our market and the engine for both transactional sales growth, and lead
generation for our offline sales teams. To date the total capital investment has been £761K, with a further cost in 2022 expected
in the region of £145k. In connecting the new web architecture to our legacy ERP systems, our testing regime has been robust
in identifying any necessary “debugging” and whilst overall delayed from our original timetable, we are now in the advanced
testing stage with “go live” date now expected within the next few weeks.
Overall our market assessment suggests that in the UK and Irish marketplace, marginal sales from search driven enquiries could
be substantial and increasing, with no single dominant player having emerged. We therefore look forward to updating investors
on progress over the coming months and expect this new capability to be a key element for organic growth. In addition, by
focusing through the newly established Flowtech structure detailed below, we should be able to ensure that cost to serve is
managed tightly.
Branding and organisation
Our sector has a long-term heritage based around single or dual site companies, with a strong focus on local service, and
typically cornerstoned by a single supplier brand. In many respects the Group has historically mirrored this structure. However,
as part of our need to support the new e-business capabilities, and the obvious potential for us to share resources more
effectively, we firmly believe we are better served by a move to a more consolidated approach in many aspects, and our 2020
strategy review identified this.
In 2021 we completed a plan to integrate those businesses that were operating as part of our Flowtech segment - namely
Flowtechnology UK, Indequip, Beaumanor Fluidpower, and Hydravalve to come together into a single commercial entity, and
importantly with a single online presence www.flowtech.co.uk.
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This project, which in many aspects also included the Dutch operation, Flowtechnology Benelux (and hence the working title “5 to
1”) brought together over 300 people, 100,000 products, and the amalgamation of three distinct IT systems into a common
platform. Using our recently enhanced project management capabilities, the project overall was delivered on time and on budget,
with go-live day being 4 January 2022. In conjunction, the Division was also able to issue its first new catalogue in nearly three
years, but for the first time now offering additional discrete publications for each of our key product areas - Pneumatics, Hydraulics,
Industrial, and Process and Instrumentation - in a structure that aligns directly with how many of our customers approach the
market. Whilst in the long-term hard copy catalogues will reduce in importance, the impact that this change has made to our
customer set was best reflected with the considerable uptake of the new format where over 70,000 copies were sold, which was
ahead of our expectations, and we believe strongly representative of the positivity for the changes we have made. With 70,000+
products covered, the catalogues reinforce our offline position, but with all fully supported in our online presence therefore
provides direct impetus for our e-business aspirations. Whilst it is still relatively early days, trading in the year to date is
encouraging, with improvements in margin control, and over time an expected reduction in overall “cost per transaction” KPIs.
In parallel with this we have continued to progress our strategy that the remainder of the Group - Solutions and Services will also
consolidate under the single Fluidpower Group banner, albeit with regional variations such as the NHP brand in Ireland and which
was established as part of our reorganisation work in 2020. The incumbent elements of the Fluidpower Group have almost
exclusively operated in an “offline” market with deep-seated customer relationships. We shall use the experience of the Flowtech
“5 to 1” project to continue our development and produce a concise two brand strategy - Flowtech, with a high service offer for
MRO supplies and class leading online capabilities, and the Fluidpower Group servicing a technically able hydraulics offer to niche
OEMs. A key target for 2022 is to complete the Fluidpower Group project in full and exit the year with our commercial framework
in place, and therefore create the best platform for organic sales growth, and in a structure that allows us to rationalise our cost
base.
IT development
We previously outlined a requirement to start the process of transitioning from our legacy IT platforms to a new single ERP
provider. However, during the course of the year we have been able to secure a more long-term support arrangement for our
most widely used system, and which is the single environment used in Flowtech. This gives us greater scope to carefully assess the
next stage of our development in this area, although we do expect to identify our likely long-term option by the end of 2022.
Away from this we are continuing to refine the security of our various platforms, both in terms of business continuity and cyber
risk.
Operational cost savings
After the work undertaken in 2020 and early 2021, focus for the majority of recent times has been dealing with supply chain
challenges. However, in 2022 we expect to return to removing further elements of our cost base where refinement of our facilities
infrastructure will bring about productivity improvements in both warehousing and back-office functions. Our overall objective is
to ensure that we can now complete the work programme that was previously identified but deferred due to lockdown measures.
The creation of the Flowtech single entity has already brought benefits in certain areas of cost control, and as we develop the
Fluidpower Group along similar lines we have identified similar areas of potential benefit. For the combination of all areas of
efficiency improvement we have set a target of achieving underlying annualised cost savings of around £1million per annum, with
an estimated c.£0.5m impact in 2022.
Dealing with the effects of the COVID-19 pandemic and Brexit
A year ago we praised our staff for the way in which they had dealt with the challenges of the Covid19 lockdown periods, and in
the 12-months since there has been no change to the stoical manner in which they have continued to operate. It is therefore right
that we thank everyone employed by the Group for the determined efforts that have been made to continue to protect and
support colleagues during what has been a difficult time for all. We are particularly proud of the way in which mental health issues
for small sections of our employee base have been dealt with using Company sponsored resources.
I have commented above on the significant impact on global supply chains as the “new normal” was created. At the date of this
Report there are certainly signs that this disruption is reducing but is nowhere near returning to the consistency previously enjoyed
by our sector, and therefore in certain areas will offset the overall strong demand that is currently prevalent.
After the UK left the European Union in January 2021, we experienced the inevitable short-term impacts associated with essentially
the redesign of paper flow. Thankfully, this quickly dissipated and by the end of the first quarter it was not seen as an undue hurdle
for us to be able to operate effectively. However, in overview across the year there is one area that has supressed overall growth
and this relates specifically to sales from within our mainland UK profit centres into the island of Ireland as a whole. For deliveries
from our Flowtech Division, customers have found certain elements of the new trading requirements cumbersome, and direct
supply from within the European Union has therefore become more attractive.
We are therefore reviewing our Irish sales strategy to understand whether an expansion in our local capabilities would provide a
return to the strong position we previously enjoyed.
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People
In what remains an essentially people focused business, and in an increasingly competitive marketplace for good quality
employees, we believe that building the best people infrastructure we can is a key element in safeguarding our future success.
However, an extensive change programme is challenging for all, and on the back of this, and the pandemic period, we did
experience a slight fall back overall in our engagement score when tested in October 2021, falling from 69% to 66%. The
introduction of our first HR Director is now giving us the knowledge from which we can return quickly to a path of proactive
engagement. Our target is to create the best Learning & Development programme in the industry, giving employees a clear line
of sight for career progression, and representing our commitment to ensuring good social governance aspects are to the fore in
our ESG agenda.
In addition in early 2022 we have also created and appointed externally into the new role of Group Head of Health, Safety and
Environment, to provide a further depth of skill and knowledge to our infrastructure of local HS&E officers, and we remain
absolutely committed to improving standards and going beyond our industry peer group.
The expanded senior management team created in the early part of 2021 has provided the intended stability and scope for future
growth management, and has undoubtedly provided a strong platform from which we can now move forward.
Members of our team have also been playing a leading role when it comes to shaping the priorities for the next decade for our
sector with Group employees holding the positions of both President of the British Fluid Power Association, our industry body,
and Chairmanship of the British Fluid Power Distributors Association.
Current trading and outlook
The strategy that we defined in late 2020 has involved significant development, and we laid out a year ago that our attitude
towards the pace of change required. We will continue to act with energy to ensure the building blocks of this strategy are all in
place during the course of 2022. It is encouraging to see that the Group in its restructured and refreshed form is taking shape, and
we have already been able to see some of the benefits. In the near future, this will be further enhanced when our new digital
capabilities come on-stream.
We believe we are being successful at sensibly passing through the considerable pressures upwards on pricing, and we will seek
to ensure that the strength of our stock holding position provides enhanced benefits in the short and medium term. At both
sector and geographical level the fundamentals of demand are currently good, and after working through the considerable
headwinds of the past two years, the outlook for profitable growth is positive.
Conflict in Ukraine
Our commentary is given against the backdrop of the escalating conflict in Ukraine, and the resultant sanctions against Russia. We
have conducted a review of all customer and supplier relationships to understand any potential for short-term negative impacts.
This assessment confirms that we have no direct supply from Ukraine or Russia, with only a single customer serviced via our
Netherlands operation. Beyond this there is some evidence of secondary customer effects, but overall we believe any immediate
reduction in sales will be immaterial.
However, as was clear during 2020 and 2021, many of our largest suppliers may be impacted by raw material shortages, and with
Russia in particular being a significant supplier of steel, nickel and oil based products, including black carbon used in hydraulic
hose production, this may exacerbate the already tight supply situation. At the date of reporting we have not been advised of any
specific deferment from suppliers, but there have been some examples of notification around pricing commitments being subject
to review.
Bryce Brooks
Chief Executive Officer
28 March 2022
13 | P a g e
Our Business Model
High Quality Fluid Power Products & Solutions
As the largest and leading player in the UK and Irish market, we aim to provide high-quality fluid power products and solutions, based
around the distribution of leading global brands. Our sustainable business model, enhanced by sector-leading online capabilities,
makes fluid power supply convenient and efficient for customers and suppliers, driving growth and returns for Shareholders.
Resources
1.
Widest product choice
5.
Expertise in our market
2.
3.
4.
6.
7.
8.
Leading industry brands (500+) through key supplier
partnerships
Central purchasing, allowing cost saving synergies
Extensive stocks £30m net
Established businesses between 10 and 50 years in
operation
Highly skilled, highly knowledgeable employees with
extensive supplier and business training
Robust IT, systems and processes by working with
expert third parties, e.g. e-commerce and logistic
partners
Key Group Activities
Unrivalled, low-cost full-service provision in fluid power
9.
Vital products & solutions
10.
11.
12.
Vital high-quality service
13.
Driving Force
14.
Strong leadership culture
15.
We have a healthy balance of operational and capex
driven revenue. We have the largest market share in our
sector for the indirect supply of urgently required fluid
power components, vital for maintenance and repair
operations across all industry segments
Additionally, we design, manufacture and install
bespoke solutions across all industry sectors,
predominantly sold to OEMs and driven by capital
investment
High-quality service, which is both responsive and
delivers significant value to customers, whether that be
next day delivery from stock, technical support,
customer training, on-site servicing or added value
services such as bespoke sales and marketing support
or e-commerce solutions
Through our decentralised structure, we promote an
entrepreneurial spirit, where the leaders of each
business within the Group have the freedom to run their
businesses independently and at the same time benefit
from central resource and support. Each business and its
employees are further empowered through access to
training and reward schemes
14 | P a g e
Our Strategy for Growth
“Our sustainable business model makes fluid power supply
convenient and efficient for customers and suppliers and drives
growth and returns for Shareholders”
Sales growth
Procurement &
productivity
improvement
Cash generation &
management of Net
Debt
IT strategy
People
Value created
1.
Short to medium-term
6.
Long-term
2.
3.
4.
5.
7.
8.
9.
10.
11.
12.
Widest brand choice from a single source, with tailored
options, supported by technical expertise, efficient
solutions, and reliable added-value services for
customers (98% on-time delivery for MRO)
Respected collaborative supplier partnerships with the
world’s leading brands
Rewarding and progressive careers for employees,
through training and incentive schemes. Support for our
local communities through local apprenticeships and
charitable work
As we emerge from the worst effects of COVID-19,
sustained annual growth with strong financial
performance and attractive returns for investors
Most cost-efficient provider of a high-quality service in
fluid power
Sector-leading e-business platform and digital insight
capabilities
Sustainable long-term growth, through reliable repeat
business
Experience, stability and strength to support large
long-term projects
Critical mass, with resources to adapt and explore new
market opportunities
Thought leadership in fluid power with innovative
solutions for industry
The Group has a clear view of 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 organic growth
through offline and online activities, coupled with complementary acquisitions in the UK, Ireland, and the Benelux, in a very
fragmented marketplace. The Board regularly monitors a range of financial and non-financial performance indicators to allow it
to measure performance against expected targets. In late 2020, we completed a full strategy review to create focus and provide a
framework for future developments, including our ambition to achieve significant growth. Whilst progress in many areas has been
slowed by COVID-19, we believe that significant development has been undertaken in 2021, and the CEO’s Year in Review details
progress made in our structural goals.
15 | P a g e
The KPIs we established at that time remain relevant, our comments in each area being provided below:
Strategic Focus
KPIs
Sales growth
Daily Gross Profit £000
2019:
2020:
2021:
£161
£130
£155
Total value of sales
from online & EDI £000
2019:
2020:
2021:
£28,643
£25,501
£27,637
FY2022 Plan
We will complete the transition to a
single e-business platform available
to all business units, and supported
by new market leading SEO
capabilities
We will introduce advanced data
analysis tools using a new Customer
Data Platform across all business
units, and which will be enhanced by
e-marketing campaigns built around
the data insight provided
In addition to the Flowtech Division,
which now operates on a single
platform, we will now look to create a
consolidated structure in the
Solutions and Services segments
under the “Fluidpower Group” banner
1.
1.
Target to ensure continuous above ‘market’
sales growth with strong gross and
net margin contribution. At Profit Centre
level, we review sales and gross profit on a
daily basis, comparing performance
against prior year and plan. Each business
has additional reporting available from
local systems detailing overall sales and
gross margin performance on a
summarised customer and product group
basis, with further detail available at
individual product level. The Group also
measures organic sales growth on a
quarterly basis and compares this to
market information produced by our
industry trade associations. Whilst there
are some differences in the composition of
the index to our own business, this does
give us a guide as to how we are
performing against the sector.
A key component in our strategy is to
develop our e-business capabilities which
are referred to in both the Chair’s Statement
and the CEO’s Year in Review sections of
this Report.
1.
Procurement & productivity
improvement
Group Cost Per Pick*
2019: £3.32
2020: £4.32
2021: £4.54
*Being the Group’s total cost of warehousing,
including property and people, divided by number
of invoiced lines in the year
KPIs are measured to cover service levels
including stock availability. However, the
Group has developed a number of
additional measures to be able to
compare efficiency levels accurately
between Business Units, and these will
include such KPIs as overall cost per pick,
cost per delivery (both in overall quantum
and as percentage of sales) and number of
suppliers for both stock and expense
supplies, with an overall view to support
the various cost improvement initiatives
being undertaken.
In 2020 and 2021, our ability to make
substantial improvements has been made
difficult with firstly dealing with the
immediate fallout from the 2020
lockdown, and more latterly substantial
disruption in supply chains. In 2022 we
believe that markets will continue to
normalise, and we can then return to a
clear focus on productivity improvement.
1. Significant progress was made in
2020 and we intended to complete
the Group-wide warehouse and
logistics plan in 2021. This was not
possible due to the continued
Covid19 restrictions, but has resumed
in 2022, when underlying annualised
savings of £1m are being targeted
2. Return on sales in each operating
segment will be a key metric to
ensure productivity measures across
the Group are improved
3. The volumes in 2020 and 2021 were
affected by COVID-19 factors and
therefore the cost per pick was
higher than would be expected; we
expect 2022 and beyond to result in
materially lower cost per pick metrics
and continue to target below £3.00
cost per pick in the fullness of time
16 | P a g e
KPIs
FY2022 Plan
Cash generation &
management of Net Debt
Working capital as a %
of Total Revenue
26.8%
2019
23.9%
2020
28.8%
2021
Net Debt*
excludes lease liabilities
under IFRS 16.
2019: £16.6m
2020: £11.6m**
2021: £15.4m
*Bank Debt less cash and cash equivalents
**Includes £0.9m HMRC COVID-19 related
support
Turn & Earn %
2019: 95%
2020: 81% *
2021: 84%
Turn & Earn Index is calculated by
multiplying gross margin by stock
turn. In 2021, the gross margin
(achieved was 35.33% and the
average stock turn achieved was
2.37, therefore the Turn & Earn
index was 84%.
DSO (days)
2020: 58.1
2021: 60.5
IT strategy
Process systems
2019: 7
2020: 5
2021: 4
Accounting systems
2019: 2
2020: 2
2021: 2
17 | P a g e
A continued focus on reducing gearing
in the balance sheet, and the creation
of excess cash positions, will protect
the business from any macroeconomic
uncertainties.
1. Due to COVID-19, the Group has focused
on short-term trends. Once supply chains
are normalised, we will resume our
progress with a target to now achieve a Turn
& Earn KPI of 130% by 2025
This proved beneficial in the pandemic
period when working capital reduction
allowed Net Debt to be managed
down, and now that volumes have
increased, we are using the capacity
created to invest in an enhanced
inventory profile.
2.
Inventory levels are continually monitored.
Whilst we have targets for improved stock
turn in the medium term, in the short-term
we have increased buffer stocks to mitigate
challenges in global supply chains
3. Continued management of trade debtors is
A continued focus on controlling credit
risk and, where possible, putting in
place more favourable terms.
4.
fundamental
Internal reports are included in Board
papers to ensure tight control is maintained
and managed by monthly reviews with each
business unit leader
Cost-effective, secure IT
environments that provide long-term
stability for the Group’s activities
remains a key part of the Group’s
strategy.
The Board believes that a reduction
in the number of IT systems that
operate within the Group is a key
element in improving overall
efficiency and control and reducing
risk. The long-term objective is to
have a single integrated process and
accounting system. However, in the
medium term, the focus will be on
reducing the number of process
systems to four or less, and with a
single accounting system for
aggregating financial performance
summaries, sales credit management
and supplier payment processing.
1. Work is on-going to further reduce the
number of process systems by the end of
2023
2. Our focus in the short-term continues to be
the development of a single IT architecture
and the Customer Data Platform to support
our e-business strategy and the
opportunities we believe this presents. We
expect that all aspects of this development
will have been fully implemented during
the course of 2022
3. In the medium term, we are developing
plans to transition to one ERP system, and
expect to have identified the timetable to
this position during the course of the year
retention
Investing in our management teams
and staff brings the benefits of
improved
talent
identification for succession planning.
We see training and development of
employees as key to our long-term
success.
and
To improve leadership skills at
management levels all senior staff will
undertake training at Leadership Trust.
The Group conducts an annual
Employee Engagement Survey to
measure employee satisfaction, and
subsequent activities are tailored to
improve overall engagement.
FY2022 Plan
1. We had targeted to improve our
overall engagement score from
64% to 75%. In 2021 this was not
achieved. However, this was
against the backdrop of
widespread lockdown periods in
the UK, Netherlands and Ireland
2. Our ambition to achieve a score of
75%, ideally more, remains; we will
certainly be focussing on
behaviours which we believe are
important to support this.
3. All Profit Centre Directors and
above to complete Leadership
Trust training by the end of 2022
4. Within the sustainability section of
this report, we refer to a number of
areas we have invested in, notably
the mental well-being programme.
We believe the manner in which
we treated our people during the
pandemic conditions has been of
huge significance and serves to
ensure we have
motivated/committed people to
assist us in delivering our strategic
objectives
KPIs
People
Group employment
engagement
2019: 64%
2020: 69%
2021: 66%
18 | P a g e
Marketplace
A growing fluid power market
We operate in a growing fluid power market, worth £1.1 billion in the UK, €13.9 billion across Europe and $49.2 billion globally*.
It is broadly estimated that ‘distribution’ accounts for between 30% and 40% of this market, with the balance covered by direct
supply from product manufacturers to eventual end user.
Our market
Fluid power technology is widely utilised in all industrial sectors. It is split into two distinct sectors: hydraulics and pneumatics. Of
the total UK fluid power market, hydraulics represents approximately 70%, pneumatics 20% and the remaining 10% in industrial
products which act as conduits for gases and liquids.
Hydraulics
The hydraulic market is highly fragmented, comprising a large number of manufacturers, supplying direct to manufacturers of
specialised equipment (OEMs) or resellers who sell onto OEMs. This market is further split between mobile hydraulics (56%) and
industrial hydraulics (44%).
Core products include:
• Pumps
• Motors
• Valves
• Cylinders
• Filters
• Hose and tubing
• Fittings equipment
Key industry drivers include:
• Construction
• Agriculture
• Defence
• Aerospace
• Oil and gas
• Heavy machinery for lifting and moving equipment
Pneumatics
The pneumatic market comprises a smaller number of key players, who supply direct to end users or to resellers who then sell
onto the end user.
Core products include:
• Compressors
• Filtration
• Valves
• Cylinders
• Vacuum products
Key industry drivers include:
• Food processing
• Electronics
• Medical
• Automotive
• Packaging
19 | P a g e
*British Fluid Power Association (2017) CETOP (2019)
Global Landscape
In the UK and Ireland, we estimate Flowtech Fluidpower currently holds around 10% market share in fluid power. Across the
Benelux, we hold around 2% market share (Benelux is €646 million – BFPA, latest available statistics). We partner with over 500
supplier brands, giving us potential access to a large share of the €13.9 billion European fluid power market. As global
manufacturers lean towards supply chain consolidation through closer partnerships with major distributors , the Group aims to
further support this consolidation and grow its market share. Some of the key manufacturers include Parker Hannifin, with turnover
of £10.8bn, Rexroth £4.3bn & Festo £2.3bn. During 2021, two of the largest hydraulic manufactures joined when Danfoss acquired
Eaton Hydraulics, resulting in Danfoss total business increasing to £6.9bn. Overall manufacturers direct supply accounts for
approximately 65% of demand, with an increasing emphasis on the balancing distribution channel.
Market trends in the UK & Ireland
The British Fluid Power Association (BFPA) captures market insight based on two key channels: direct sales from manufacturers to
OEMs/end users and indirect sales via distribution (the pneumatic market). The former having a higher involvement in more
volatile capex spending, and the latter supporting maintenance, repair, and operations (MRO), present different trends in the fluid
power market. While the pandemic led to sharp declines across the Fluid Power sector in Q2 2020. Since that time UK
manufacturing has recovered strongly, albeit with demand outstripping supply as global supply chains have been rebuilt.
Prepared in October 2021, the BFPA 2022 outlook prepared by Oxford Economics was positive with growth expected in both
Hydraulics and Pneumatics in the period from 2022 to 2025 (a full table of their predictions is shown below). However, there is an
element of caution within the BFPA forecast, uncertainty due to the quality of recovery in manufacturer the supply chains. This
uncertainty is more prevalent in the automotive sector. Across our Group the automotive sector accounts for less than 1% of
demand. We expect to mitigate these risks through our relationships with many manufacturers and offer customers alternative
options to meet their requirements.
In terms of the normal composition of Flowtech Group sales in the UK & Ireland, we believe that we are broadly around 40%
Pneumatic and Industrial and 60% Hydraulic overall, with a similar makeup to our sales in the Benelux.
BFPA UK fluid power forecast 2021: % change (year-on-year)
2019
2020
2021
2022
2023
2024
2025
-0.8%
-23.3%
28.6%
3.1%
4.5%
1.6%
2.3%
0.0%
-3.7%
13.8%
-0.8%
3.8%
1.8%
2.8%
Hydraulic equipment
UK Home Sales Index
Pneumatic equipment
UK Home Sales Index
UK indirect sales
Hydraulic
30.8%
29.8%
31.3%
30.7%
31.4%
30.2%
30.2
Pneumatic
39.9%
38.5%
36.8%
37.1%
38.8
39.1%
39.2
Source: BFPA / Oxford Economics
20 | P a g e
Sustainability Report
“This is our second year reporting on our Environmental, Social and
Governance (ESG) agenda. Our Sustainability Report examines our
Environmental and Social aspects, with the important area of Governance
being covered elsewhere in the Report. This focuses on three core areas:
Our Environment, Our People and Our Communities”
Our environment
The Group is mindful of the impact that its operations have on the environment; we are committed to reducing our carbon footprint
by encouraging individual sites to introduce and promoting environmentally friendly practices.
As a norm we:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Use low energy, motion-sensored and LED lighting within warehouses and most of our offices
Recycle as much as possible (100% paper, oil rags and cardboard bails across all sites)
Personal recycling bins are used at most sites., and recycle non re-usable pallets
Over 80% of Group HES’s power is generated by solar panels and we are examining the feasibility of
using this technology elsewhere
Encourage cycle use through local government initiatives in both the UK and the Netherlands
Aim to reduce paper usage, e.g., by Electronic Data Interchange (EDI) for ordering and invoicing,
reducing print frequency of catalogues and investing in e-commerce
Use FedEx as our main carrier, who are undertaking a “reduce, replace, revolutionise” campaign – this
plans to significantly improve energy efficiency and reduce emissions in Europe across aircraft, vehicles,
and facilities by 2025
We continue to utilise our Engineering Modification Centre – instead of scrapping products, a product
life-cycle inspection takes place to assess options to change the product, price, place it is sold, how it
is used and promoted, thus prolonging its life, and reducing waste disposal, and,
As a result of the COVID-19 pandemic, we have embraced the concept of hybrid working and
supported our employees who wish to do so; this has reduced unnecessary travel. This has been
enhanced by our usage of online meeting software.
Company vehicles
In 2021, we leased 52 (2020:17) new company vehicles, with 96% (2020: 71%) of new UK leases being either hybrid or fully electric.
This has increased our hybrid and electric vehicle total to 72% (2020: 56%) across the Group.
Working alongside our vehicle partners at Alphabet GB and BMW Group, we have also arranged for early terminations for our
diesel vehicle leases. Our lease providers liaised directly with our diesel drivers to provide new hybrid or electric vehicles on shorter
lead times.
Packaging
We currently source packaging from Forest Stewardship Council (FRC) certified sources, utilising reusable, or recyclable packaging
materials for the majority of our products. Further we use suitable packaging that reduces damages and returns to lower the
overall carbon footprint and in doing so utilise automated solutions where possible to optimise the correct amount of packaging
required. In our processes we ensure that waste packaging is sorted for recycling, which is monitored through an external
accredited third party.
21 | P a g e
Carbon reporting
This is our second year of reporting and as such we are able to report year-on-year changes for the first time. This report was
prepared by Carbon Responsible using the GHG (greenhouse gas) Corporate Reporting & Accounting Standard and UK
Government Reporting & Conversion methodology and conversion factors, on the 3 March 2021. It covers data for 2020 and 2021.
We have used the financial control approach. Most of the emissions impact comes from our own offices, premises, and staff. It
includes all businesses within the Group. It also includes significant impacts from activities that are not owned by us, but over
which we exert financial control. We currently use FY20 as our baseline reporting year, and expect to revise our baseline, in line
with further improvement in our reporting framework to be undertaken during FY22.
As yet we have not set reduction targets for our business; this will be done once we have completed further analysis of our
emissions profile and associated plans for the business. This will be based on our 2021 energy assessment, alongside improved
reporting, and monitoring of our impact in FY22.
We continue to use revenue and FTE intensity from Scope 1, 2 and 3 emissions, as we think they form the best available intensity
measures for our business. Our intensity metrics for FY21 are as follows:
Tonnes CO2e per £100,000 of Revenue
Tonnes CO2e per FTE
2020
2021
1.52
2.38
1.37
2.37
We have measured our Scope 1, 2 and certain Scope 3 emissions and estimated emissions where we have reasonable supporting
data to do so. Where we have not estimated a percentage for exclusions, it is because we have not carried out this estimation yet,
or an estimation is not possible from the currently available data.
Our emissions for FY21 have marginally increased by 3% over FY20. This is primarily due to the inclusion of Scope 3 freight impacts,
for which only limited data was available in FY20. On a like-for-like basis, there has been a 46% reduction primarily driven by a
significant fall in fuel consumption.
The Scope 3 impact is mitigated by changes in the composition of our energy use mix, which reflect improved data capture in this
area. The acquisition of new hybrid and electric vehicles has reduced our owned vehicle emissions by 83%.
Based on currently available data, CO2e represented in metric tons (tCO2e), by Scope and related kWh totals are as follows:
2020
2021
tCO2e
kwh
tCO2e
kwh
Scope 1 (Fuel Consumption)
Scope 2 (Electricity Consumption)
Scope 3 (Other Direct Emissions)
Totals
939.37
418.21
85.94
1,443.52
4,412,097
1,617,471
0
6,029,568
507.09
402.57
578.88
1,488.54
2,334,538
1,824,653
80,882
4,240,073
Our main emissions sources from fuel and energy included in our total CO2e impacts are as follows:
Source
Global tCO2e
Stationary Fuel Combustion
Electricity
Mobile Fuel Combustion
500.69
402.57
6.40
We have not yet purchased any carbon offsets for the reported period. This is currently under consideration by the Board and our
report will be updated in the event of purchase.
Our full emissions report covers all the main emissions sources that are required to be reported under the Streamlined Energy &
Carbon Reporting requirements and for which data has been collected. Optional disclosure of Scope 3 impacts has been
undertaken as far as practicable to reflect the impact from our core operations.
22 | P a g e
Our people
We continually strive to ensure we invest in our people through a broad range of areas
including Learning & Development and career progression planning but equally taking
account of important areas such as mental and physical wellbeing and our rounded reward
package.
Fundamental to this vision is a strong culture focused on recruiting and developing the right
people in the right roles within our business – encouraging employees to work collaboratively
with customers, suppliers and each other and empowering them to directly shape the future of
our business and fluid power. This, we feel, breeds passion and a genuine desire to achieve the
best solutions for our customers, and through a friendly, supportive culture focused on
efficiency, technical competence, and unrivalled service, we are in a strong position to drive
added value right through the fluid power supply chain.
Mental health training
We recognise the importance of supporting our teams in maintaining a sense of positive mental
well-being, but with the COVID-19 pandemic having taken a heavy toll on many, it is now more
essential than ever.
Stigma and fear around mental health conversations, especially in the workplace often mean
such conversations have traditionally been avoided altogether. As mental health disorders are
invisible, a person can appear healthy while concealing suffering. Training helps to recognise
distress and hopefully inspires more people to seek help. The training that many within our
business have now received focuses on growing awareness and building a positive culture of
support, empathy and treating others well. Individuals are empowered to build resilience and
recognise when others need support.
Mental health training programmes aim to teach employees and managers about common
mental health conditions, how to spot the warning signs and reduce the stigma surrounding
them. It helps to normalise stress, depression, and anxiety so that employers are less likely to
suffer in silence.
Mental health champions
In March 2021 we appointed 15 Mental health champions across the Group to cover all sites.
Each member has completed online training with Mental Health First Aid England (MHFA) which
teaches practical skills to spot triggers and signs of mental health issues in their colleagues.
The champions meet on a monthly basis to discuss any issues they have supported across the
Group, looking at external factors that may affect well-being, such as COVID-19, or working from
home.
Employees are encouraged to contact any Champions with any work or home related concerns
or obstacles with the hope that this will support their mental wellbeing.
Employee assistance programme (EAP)
AXA Health operates our EAP, which is a confidential employee benefit programme that provides 24/7 mental health support in the
workplace. Our goal is that our EAP will help employees deal with personal problems that might adversely impact their health, wellbeing,
and work performance.
Almost two-thirds of people say they have suffered from mental health issues at some point in their life. This number increases to 7 in 10*
when applied to women, young adults and those that live alone. With AXA, our employees now have access to speak to teams of nurses,
pharmacists, and midwives as well as their Life Management™ team who are ready to support and guide employees through any worries
they have. AXA also offers up to five counselling sessions for employees that need it and is available to all employees across the Group.
*Mental Health Foundation, 2017
“5 to 1” project
23 | P a g e
The Flowtech Division has recently completed a project that has seen four of our UK based businesses become one entity called
Flowtech. We have striven to ensure a robust level of communication with our people and our legacy customers throughout the
journey. As part of our frequent communications, we ensured all employees were aware of any new roles created as part of the
restructuring process and announced our aim to align and harmonise all hours and holidays within Flowtech. This has been
received very positively, with people settling into new roles, ensuring we delivered these huge changes efficiently and with
enthusiasm.
Assessment of staff benefits
We currently provide a range of benefits such as holiday, pension and healthcare, employee assistance programmes and mental
health champions. We plan to review the benefits available to ensure that they are aligned with our employees needs and confirm
that suppliers are providing quality services. We are now working with ISIO, a leading, pensions administration, investment
advisory, employee benefits and wealth management consultancy. ISIO are currently gathering information about our employee
demographics and circumstances, to understand what is seen as most important and how this compares with benefits currently
provided. This work will be progressed with a view to putting in place a robust, meaningful, and proportionate basket of benefits
which suits our business and our people.
Training & collaboration
The Group recognises that investing in our teams brings many benefits to the organisation and are committed to ensuring that
all staff are prepared with the tools, knowledge, skills, and
behaviours needed to do productive and high-quality work
that will allow the Company to serve its customers
effectively.
At Flowtech Fluidpower, we want our staff to be recognised
as the most efficient providers of exceptional service and
support in the fluid power industry. In order to achieve this,
the Group HR Director has recently engaged the services of
a Learning & Development Consultant. His remit is to
support the Group in developing a collaborative training
programme that meets the requirements of all parts of the
business and creates a model that supports career
development, succession planning, talent management and
assures the safety of our people.
We believe that effective learning and development benefits
individuals and the Group as a whole and contributes to the
attainment of our business objectives.
These benefits include:
1.
2.
3.
4.
5.
6.
7.
8.
Higher standards of safety & work performance
Greater understanding and appreciation of factors affecting work performance
Effective management and implementation of change
Building strong, effective, and high performing teams
Increased motivation and job satisfaction for individuals
Sharing ideas and dissemination of good practices
Professional development, and
Greater understanding of Group business.
Since October 2021, the Learning & Development Consultant has been working with some of the key stakeholders within the Group
to create a framework that will support not only the organisations goals, but also the individual goals of our staff. As a result, we have
created a robust framework that helps the organisation and the individuals to identify areas for development and a pathway of growth
within the organisation.
Apprentices
We are keen to attract and retain apprentices and currently employ fourteen apprentices across the Group, with fourteen more
planned to commence in 2022.
Since 2017, we have been contributing towards the governments Apprenticeship Levy. The Apprenticeship Levy requires all
employers operating in the UK, with a wage bill of over £3m each year, to invest in apprenticeships and contribute 0.5% of their
annual wage bill into the levy, not an insignificant amount.
The Group, in collaboration with our Learning & Development Consultant, are looking at ways to access the levy funding to
24 | P a g e
support and develop our staff and provide opportunities for them to gain real knowledge, skills and experience required for
their specific careers to provide a long-term career path and increase their earning potential.
Industrial placement
As part of our Leaning and Development programme, we have set up an industrial placement scheme for university students, to
provide an extended period of work experience for students looking to supplement their degree with professional development.
We have in the first instance targeted those seeking a career in Mechanical Engineering but will expand the programme over the
next few years. This provides benefits to both parties, by allowing students to better prepare themselves for the workplace through
the development of practical skills and training, and for the business by filling key resourcing gaps. Our scheme is targeted to
encourage students to make Flowtech Fluidpower Plc a career destination choice when they finish their graduate studies.
Health & safety
The business continues to adopt successful health and safety management policies, which in spite of another year of the COVID-
19 pandemic, has seen developments in all aspects of the companies’ policies, in providing a safe and healthy environment for
our employees.
Our Chief Executive Officer continues to hold overall responsibility for Health and Safety and chairs the monthly Health Safety
Steering Group which is attended by key business heads, ensuring that all risks and concerns raised by the profit centre Managing
Directors, are dealt with through validated risk assessment, and follow up audits.
During 2021, in partnership with external specialist consultancies we have worked to refine our approach in both auditing and
reviewing our Health and Safety policies within all our businesses. To further embrace these policies, we have recruited a Group
Head of Health, Safety and Environment, to lead the ongoing implementation of best practice programmes. At the heart of these
programmes is the engagement of our employees, and in particular, the rewarding and celebration of success for the adoption of
new and innovative approaches to Health and Safety in the workplace. We now have a structured Health and Safety organisation
embedded within all areas of the Group’s operations aligned to specific employee training and development needs. During 2022
we will be launching the quarterly connect programme to ensure that all those in the organisation with Health and Safety
responsibilities are connected to Group wide initiatives and campaigns.
Human rights & modern slavery
The Group does not tolerate bullying or harassment. We are committed to fair employment practices and comply with national
legal requirements regarding wages and working hours.
The Company recognises that the respect for human rights is an integral part of its Health & Safety and social responsibility and
that is has a responsibility to take a robust approach to slavery and human trafficking. We understand the requirements of the
Modern Slavery Act 2015 are committed to ensuring that no modern slavery takes place within our organisation.
We are committed to preventing workers from being subjected to modern slavery in our supply chains and within the businesses
of our partners and affiliates.
We are committed to continuous improvement in relation to our practices to combat slavery and human trafficking.
The respect for human rights in implicit in our employment practices; the rights of every employee is treated with dignity an d
consideration.
We do not use child labour, nor do we use forced labour.
We make regular supplier visits to ensure our supply chain maintains the same standards of integrity and is free from modern
slavery. We will continue to audit supply chains, mitigate risk, monitor, and track progress, and immediately inform our customers
if and when a supplier risk is no longer acceptable, and the source of supply has been disengaged.
Maintaining & promoting diversity
It is our Group policy to recruit and promote based on ability and attitude, regardless of gender, sexuality, ethnicity, disability,
age, religion or belief, parenting, caring or marital status.
Promoting a culture of respect and equal opportunity is as important as ensuring the right skills fit our business. In instances
where an employee becomes disabled, where practicable the Group has policies to providing continuing employment and career
development where appropriate.
The Group recognises the importance of work-life balance, especially for employees with family commitments. Where the
demands of the business allow, flexible working is encouraged. We have witnessed a very high return rate of female employees
25 | P a g e
following parental leave, additional flexibility, and in many cases career progression, has increased their commitment and attitude
towards the business.
Gender pay gap
We are striving to ensure we have an inclusive workforce with no unconscious bias and that employees in similar roles are
paid equitably; we are determined that where pay differences exist, they are not based on gender. This is not the same as
Equal Pay. Equal Pay deals with pay differences between men and women who carry out the same jobs, similar jobs, or work
of equal value.
This is the first gender pay gap report published by the Group. It has been prepared in accordance with legislation that came
into force in April 2017, whereby UK employers, with more than 250 employees, are required to publish the gender pay gap
using 5th April as the snapshot date. Hourly rates include basic pay, allowances and shift premium pay, but not overtime. For
the purposes of these calculations, only the UK based workforce have been included. Under the requirements of the Gender
Pay gap regulation, only relevant employees have been included. This excludes any employees who for whatever reason did
not receive a full months’ pay, including sick leave and parental leave.
Difference between Men & Women
Gender pay gap
Gender bonus gap
Mean (Average) % Median (Middle) %
22.6
23.0
16.38
28.12
Key findings
1.
2.
73% of our UK employees are male
There are proportionately fewer females working in our more senior roles and it is this which explains
the 22.6% and 23% gap in gender pay and bonus.
The main cause of our mean and median pay gaps in favour of men is the demographic profile of our workforce, which has
proportionately less women across the business, including the most senior roles. This is reflective of the distribution and
engineering sectors in general, which typically employ more men than women. The Group is actively encouraging more females
to enter our industry, aided by our female HR Director.
The proportion of males and females in each quartile pay band is as follows:
Gender mix across the Group
The Board
Management Board
Senior Management All Other Employees
Male headcount
Female headcount
100%
0%
67%
33%
94%
6%
73%
27%
On the 8 March 2022 we appointed two additional Non-Executive Directors to the Board, Jamie Brook and Ailsa Webb who is the
first female to join the PLC Board. Biographies on both can be read on page 40 of this Report.
*Based on relevant UK employees for Gender Pay Gap Reporting purposes
26 | P a g e
Our Communities
Aligned with our strategy to support and develop our people, we believe it is important to extend this focus to local communities,
which is why our charitable activities are geared towards supporting and developing people outside our organisation. This in turn
brings together employees outside of work, further promoting cohesion in the workplace.
Local community engagement
In regard to community engagement, Flowtech sponsors several local sports teams.
Kickstart scheme
The Kickstart Scheme provides funding to create new jobs for 16-24-year-olds on Universal Credit who are at risk of long-term
unemployment. The scheme involves a six-month paid job with local employer, funded by the government.
Flowtech is currently working towards collaborating alongside local job centres to engage with individuals for this programme.
This scheme links into our chosen Group charity, the Prince’s Trust, which aims toward better futures for 11-30-year-olds. We
believe that this scheme is mutually beneficial to both the individuals employed and our business.
Rainbows Hospice
Since 2014, we have partnered with Rainbows Hospice for Children and Young People, and within that time we have raised over
£21.5K. Throughout the pandemic we also donated some of our standard stock line items of PPE to help keep them safe and well
in the challenging times.
During the pandemic, we encountered fundraising obstacles and so introduced new fundraising methods via our LinkedIn profile
that promised donations for every ‘Like’ on our fundraising posts.
The Prince’s Trust
The Prince’s Trust is our Groups chosen charity, which helps vulnerable young people int the UK through education and upskilling.
The impact of COVID-19 has affected the plans we had to work more closely with the Prince’s Trust. We have re-engaged with the
team over the last six months and are now making plans to support on work-based learning and skills development projects as
well as Group-wide charity events.
27 | P a g e
Corporate Social Responsibility (CSR)
“As a quoted company with a leading position in the fluid power
industry, we are acutely aware of the potential impact that our
decisions may have on all our stakeholders”
Section 172 Statement
In accordance with Section 172 of the Companies Act 2006 (S172) the Directors, collectively and individually, confirm that
during the year ended 31 December 2021, they have acted in good faith and have upheld their ‘duty to promote the success
of the Company’ to the benefit of its members, with consideration to its wider stakeholders.
As a quoted company with a leading position in the fluid power industry, we are acutely aware of the potential impact that our
decisions may have on our stakeholders, including our employees, customers and suppliers, as well as our Shareholders. Our
reputation is of paramount importance to us and we always seek to ensure that whatever decisions we take, we do so by
maintaining suitable high ethical mindsets, always seeking to treat each category of stakeholder with respect and in the same
manner we would like to be treated ourselves.
The Board seeks to ensure there is always an appropriate balance between the impact any key decision may have on the short
as well as the medium to long-term. It is also recognised that certain decisions may be more aligned to the interests of one
category of stakeholder over another and this is always taken account of when debating options and ultimately making
decisions.
Our sustainable business model makes the procurement and supply of fluid power supply products efficient for customers and
suppliers, thereby supporting our ambition of delivering growth and return for Shareholders.
The Board is committed to effective engagement with all stakeholders and takes steps to ensure this mindset is filtered down
throughout the business. Whilst our business model delegates certain day to day operational decisions to local management,
we encourage all involved to adopt the same behaviours by which the PLC Board is measured in their day to day activities. We
have recently introduced a “balanced scorecard” approach to our reward scheme which is designed to flex reward based on a
number of behaviours, including those captured within the spirit of the s172 legislation.
Section 172 describes a diverse range of stakeholders whose interests are said to feature in the ‘success of the Company’;
comments on each of these areas are provided below:
Colleagues
The investment we have made in the Engagement Surveys across each of our businesses, combined with the training and
career development plans we have put in place for a number of employees, demonstrates our commitment to ensuring our
workplaces provide a positive environment for our staff
Of course, on occasion, decisions necessarily have to be taken which adversely impact on employees; in such scenarios we are
careful to provide the necessary degree of compassion with the processes we adopt without removing the focus to deliver the
commercial benefit for the greater good of the business. Through our flexible approach, our Group employees are driven
towards finding solutions which create efficiencies for ourselves but, more importantly, our customers. This requires extensive
knowledge, creativity and collaboration with customers and suppliers. The Board always aims to act fairly towards employees,
further information outlining our approach to recruitment, development and diversity can be found earlier in this section, and
Key matters are discussed at Board meetings at which our recently appointed HR Director has presented, and new reporting
framework for all HR related matters has been instigated.
28 | P a g e
Suppliers
We work closely with our key suppliers, developing relationships in partnership with them. Suppliers are keen for their products,
to be distributed via a professional distribution channel and for their brand/reputation to be protected when doing so. We regularly
meet with key suppliers to develop these relationships, largely with a view to accomplishing a collective ambition of achieving the
best possible experience for our vast network of customers.
Issues associated with supplier relations are discussed, when necessary, at Board meetings and our Management Board includes
representation from the Supply Chain and Logistics side of our business. On occasions presentations are delivered to the Board
to provide up to date commentary and to enable any issues to be discussed, debated and, if necessary, addressed.
Customers
The interests of our customers are at the heart of our business all of the time. We aim to be the most cost-effective provider of a
quality service to all customers, ensuring we deliver end-to-end fluid power solutions from a single source,
We are a member of a number of trade bodies in the fluid power industry, including the British Fluid Power Association (BFPA)
and the British Fluid Power Distributors Association (BFPDA). We work closely with these organisations and invest in them with
representation from the Group at their various gatherings throughout the year. In November 2019, the Group’s Commercial
Director, John Farmer, was appointed as Vice President for the BFPA, which is a positive step towards further aligning our Group
activities within the industry bodies and helping to shape our industry for the future, especially in the areas of compliance and
talent management.
Environment and communities
Our businesses have been supporting their local communities for many years and the Board encourages them to continue this
good work. This takes many forms, including supporting charitable events, recruitment of local apprentices, open day support for
local schools, and educational events with local communities where Group members carry out projects to make the environment
or services better.
The Group remains committed to providing a safe and healthy working environment and supports individual business unit efforts
which reduce the Group’s overall impact on the environment. Through sharing ideas and resources, every year we find new ways
to reduce our impact on the environment. Many of our businesses also proudly support industrial users who are increasingly
implementing more stringent environmental practices and seeking hydraulic and pneumatic solutions to facilitate this. Further
information can be found earlier in this section.
Investors
The Group works alongside investor relations specialists who are well known and, we believe, highly respected by a number of our
key investors. We have, and will continue to, work hard to improve the quality of our communication to provide existing, and
potential new investors, with the information they require in a format which they wish to see. We believe progress has already
been made and the Board is committed that this will remain a key priority throughout 2022 and beyond.
To ensure the Board is aware of Shareholder opinion and concerns, the Non-Executive Directors receive regular Shareholder
feedback which is communicated at Board meetings. Additionally from time to time, independent information is received through
the Company’s Advisers, from both investors and analysts. On an ongoing basis, the Board is also furnished with brokers’ and
analysts’ reports when published.
The Group aims to maintain a regular dialogue with both existing and potential Shareholders through an established investor
relations programme, managed by the CEO, CFO and Company stockbroker.
29 | P a g e
Communication with shareholders
All Shareholders who have elected for paper copies receive a printed copy of the Annual Report and Accounts and all
Shareholders receive the Notice of the Annual General Meeting (AGM) along with a proxy form, should Shareholders wish to
vote in advance of the AGM. In light of the COVID-19 pandemic, this year Shareholders will be invited to vote online and a
virtual AGM will be held with a minimum quorum of two Directors. As normal, this provides a forum for results to be
considered and questions may be answered by the Board. Following each AGM, a notice is posted on the corporate website
confirming that all resolutions have been passed, including the specific results of voting on all resolutions, including any
actions to be taken as a result of resolutions for which votes against have been received from at least 20% of independent
Shareholders.
Beyond the Annual General Meeting, the Chief Executive Officer, Chief Financial Officer and, where appropriate, other members
of the senior management team meet regularly with investors, analysts and media to provide them with updates on the Group’s
business and to obtain feedback regarding the market’s expectations of the Group.
The Company engages in a minimum of two investor roadshows per annum. Given the pandemic related constraints in recent
times these have been conducted through use of technology (Zoom/Teams meetings) but we intend to return to offering in-
person meetings going forward provided conditions allow.
Presentations by the Executive Directors of interim and full-year results are offered to all major Shareholders. Other
Shareholders are welcome to contact the Company and, wherever possible, their concerns or questions are responded to by a
Director in person.
Furthermore, the Group invites investors and potential investors to visit the premises of its subsidiary companies, should they
wish to see day-to-day operations and speak with representatives from the Group in a more informal setting.
General information about the Group is also available via the Company’s corporate website, www.flowtechfluidpower.com
which includes further information about the business, reports and key documents and recent Company announcements.
Interested parties have the opportunity to register for RNS alerts, to keep them informed when important announcements are
released.
The Company maintains a dedicated email address and telephone number which investors may use to contact the Company
which, together with the Company’s address, are prominently displayed on the Contacts page of the Company’s website.
Investors may also make contact requests through the Company’s Nominated Adviser and Sole Broker, Liberum Capital (see
page 118 for details).
30 | P a g e
Financial Review
We expect 2022 to see us benefitting from a full recovery in our revenues, the
impact of our restructuring activities as well as the beginnings of what we believe
our investment in our e-business platform can deliver.
Operational review
2021
2020
2019
Change
2021 v 2020
2021 v 2019
Group revenue (*)
£109.1m
£95.1m
£112.4m
£38.5m
£32.6m
£40.2m
14.7%
18.1%
-2.9%
-4.2%
Gross profit (*)
Gross profit %
Operating profit / (loss)
Underlying Operating Profit /
(Loss)
35.3%
£3.7m
£5.7m
34.3%
35.7%
100bps
-42bps
£(1.4)m
£1.1m
£5.7m
£9.6m
£5.1m
£(2.0)m
£4.6m
£(3.9)m
Net Debt (**)
£15.4m
£11.6m
£16.6m
£3.8m
£(1.2)m
*All results relate to continuing operations
** Net debt at 31 December 2020 comprised £10.7m Bank Debt and £0.9m of COVID-19 related HMRC support. All figures exclude lease liabilities under IFRS16
Revenue
Revenue recovered strongly against the heavily impacted 2020 period but was down 3.0% against the more meaningful 2019
comparison. Broadly speaking we exited 2021 with Revenue in our Flowtech Division fully recovered but still continuing to
recover in other areas of our business.
Gross profit margins
Our overall gross profit margin remains strong and is consistent with recent years. Sustaining such a margin remains towards the
top of our list of priorities and we are confident that, over time, this can become even stronger.
Operating overheads
Underlying operating overheads were £32.8m in 2021 compared to £31.5m in 2020. £0.4m of the increase related to distribution
costs, in line with our recovery of volumes, with the balance of £0.9m related to inflationary pressures and increased activity
levels, notably within the supply chain area of the business. This increase has been mitigated by the impact of our cost reduction
initiatives, some of which were performed in 2020 where 2021 has a full year benefit coming through.
31 | P a g e
Operating profit
It is pleasing to see a strong return to operating profit; we are expecting this will improve as our recovery from pandemic conditions
continues and we eventually benefit from a more stable supply chain environment.
Results by Division
Revenue
Flowtech
Solutions
Services
Group
Gross profit
Flowtech
Solutions
Services
Group
Underlying Segment Operating Profit / (Loss)
Flowtech
Solutions
Services
Total Segment
Less allocation of Central costs
Underlying Group operating profit
Less Separately disclosed items
Group operating profit/ (loss)
37.1%
34.5%
31.7%
35.3%
2021
£000
52,135
39,575
17,397
109,107
19,318
13,659
5,521
38,498
2021
7,101
3,505
140
10,746
(5,056)
5,690
(1,978)
3,712
2020
£000
46,060
33,578
15,443
95,081
16,604
11,675
4,315
32,594
2020
5,038
1,790
(1,236)
5,592
(4,520)
1,072
(2,466)
(1,394)
36.0%
34.8%
27.9%
34.3%
Separately disclosed items
Following the integration of brands under the 5-to-1 project, the written down value of the Beaumanor brand intangible asset
was impaired. The impairment charge of £673k is included in separately disclosed items.
Central costs
Central costs are approximately £0.5m in excess of 2020; this results in part from the involvement of an interim professional to
assist with the profit improvement plan within Services and in part to the recruitment of additional senior members of the team,
notably in HR, Operations Development and Customer Insight. We believe this investment in people provides the infrastructure
to support the organic growth plans which are the cornerstone of our strategic objectives.
Taxation
The tax charge for the year was £741k (2020: £24k). The effective tax rate for the year is 25.7%.
Dividends
As referred to in the Chair’s letter, our ambition to return to dividend payments, albeit at levels commensurate with the needs of
the business. I can confirm that the Board will be recommending a dividend of 2p in respect at the AGM in June 2022. Moving
forward we will maintain a balanced approach to dividend distribution.
32 | P a g e
Statement of financial position & cash flow
On a like for like basis our Debt position increased by £3.8m (£4.7m increase in Bank debt offset by the repayment of £0.9m o f
residual COVID-19 related HMRC support).
The investment we chose to make in increasing stock levels, combined with the impact of improved revenue, lead to a £8.7m
increase in working capital. This negated the £8.0m cash generated from trading activities. Other key outflows included capital
expenditure, net of sale proceeds (£1.9m), repayment of lease liabilities (£1.6m) and finance costs (£0.8m).
The key components impacting on the movement in Bank debt are summarised in the chart below:
£0.8m
£1.6m
£1.8m
£15.4m
£18.0m
£16.0m
£14.0m
£12.0m
£10.0m
£8.0m
£6.0m
£4.0m
£2.0m
£0.0m
£8.0m
£8.7m
£10.7m
£0.2m
FY20 (*).
Cash generated
from operations
Other
Working capital
movement
Assets purchased,
net of sales
proceeds
Repayment of
lease liabilities
Interest
FY21 (*)
(*) Opening and closing figures exclude (1) £0.9m HMRC COVID-19 related support at 31/12/20 and (2) IFRS 16 related liabilities
Stockbroker changes
In early 2022 we announced that we would revert to a single broker policy and look forward to working with Liberum moving
forward. Many thanks must go to the previous brokers, Zeus Capital and FinnCap for their considerable support over the last eight
years since joining AIM.
33 | P a g e
Risk Management
The Board is ultimately responsible for risk and internal control systems across the Group.
Each of our business units Profit Centres is asked to provide input into this thinking on at least an annual basis. This oversight
ensures regular and consistent challenge is applied to all parts of the organisation.
During 2021 the following incremental actions have been taken:
1.
2.
3.
The establishment of a Risk Committee, comprising members of our Management Board and chaired by Russell Cash,
which meets once every two months to discuss all aspects of the Risk Agenda
Further engagement with Marsh, specialist consultants, to enhance our approach to Business Continuity planning.
This proved difficult to focus on during the COVID-19 impacted periods, but the thinking is now very much re-
energised, and
Under the leadership of our Operations Development Director, we have revisited each area of identified risk and
formulated an appropriate and proportionate action plan. Actions are regularly reviewed at Management Board
meetings and any issue of sufficient significance escalated to the PLC Board.
We continually look to integrate new risk mitigations into the way we work to ensure risk management is effective and
practically embedded throughout the organisation. This ensures the safety of our staff, the public and protection of the
business.
2021 Challenges & New Areas of Focus
2021 saw us continue to face the combined challenges of Brexit planning, which we were clearly expecting, alongside the
unforeseen and much greater issues which COVID-19 presented.
Brexit
We are pleased with the way we have dealt with the challenges presented by Brexit. We planned for the implications of the
UK’s departure from the European Union and feel we have done all we could have been expected to do ahead of and beyond
1 January 2021. There have been challenges with supply chain disruption during 2021 and we have worked hard to mitigate the
impact of these issues, notably via an investment in our inventory levels
COVID-19
COVID-19 presented what we hope is once-in-a-lifetime challenge for the business. We are proud with the manner in which our
organisation and our people within it came together to manage the situation. At the onset of the pandemic, we saw our Revenue
reduced by 41% in April 2020 however, we are very pleased with the gradual recovery we have seen since that point.
We have established a COVID working group to focus on all the situation – initially this group of senior management met daily
to deal with the impact; over time the frequency of the meetings has reduced with emphasis maintained in ensuring turning to
ensure our staff’s wellbeing is an area of focus.
We feel we have demonstrated the business is capable of taking remedial action and that our markets have a degree of resilience
to manage any such situation.
Having revisited the risk agenda, we have identified the following key areas:
1.
2.
5.
3. Health & safety
Site disruption
Systems disruption
4.
(Refer following pages for detailed discussion of 1-4)
Competition
Notwithstanding our position as market leader in the UK, our businesses constantly remain alert to the potential threat of our
competitors. We believe investments we have made in an array of areas provide resilience in this regard and should lead to our
position in the market further improving; this is an ongoing mindset and one which is certainly continued in 2020, notwithstanding
the challenges presented by COVID-19. Of note is the investment we have made in our people, both those that have been with us
for a time and those who we recruited and welcomed into our businesses more recently.
People issues
6. Website offering
A further area of particular significance is the focus we have applied to developing our already strong website offering with the
aim of improving our reach to an ever-increasing proportion of our customers who purchase through this forum. This is viewed
as crucial to our ambition to achieve future growth and further develop the relationship with key suppliers who want to put
increasing volumes through a limited number of trusted distribution partners.
34 | P a g e
Site disruption ^
Owner:
Operations Development Director
Description
Mitigation
There is heavy operational dependence
on the resilience of warehousing and IT
infrastructure to support business
operations and maintain high service
levels. The risk is that unplanned events
could disrupt the functioning of key
elements of the operational
infrastructure, damaging customer service
and business reputation.
Off-site disaster recovery provision for IT
systems, including cloud-based
technologies.
The Group has a formal Business
Continuity Process underpinned by
monthly Steering Group to assess and
refresh risk mitigation plans at key
locations.
Continual improvement is being made on
testing the robustness of our systems,
Steps are taken to enhance processes; we
see this as an important, ongoing work
stream to ensure our business is
continually alert to future challenges.
We have what we believe to be adequate
insurance cover in place to compensate
for any loss which proved difficult to
recover.
Systems disruption v
Owner:
Systems Director
Description
Mitigation
The Group recognises there is an
increasing exposure to cyber risk,
including advanced techniques to disrupt
our websites and direct attacks on Group
systems with the potential loss of
confidential information.
Part of our strategic focus has been, and
continues to be, a desire to reduce the
number of process systems operated by
the Group.
Current mitigation measures for local
business systems include anti-virus
software, virus scans on incoming
emails and firewall protection.
All systems bar one is now hosted in
the cloud, with dual servers ensuring
automatic switchover should one fail,
with daily backup procedures.
We have taken measures to highlight
this risk in several communications
with all of our employees and worked
with external providers to ensure that
these messages are embedded in all
that we do within the business.
Regular on-site IT reviews are carried
out including reviews of networks and
controls.
Under the leadership of the Systems
Director, the central services function
has invested heavily in full-time skills
in user acceptance testing and project
management.
In addition, the Group has also
engaged external support from
reputable consultants with a view to
defining an internal ‘Standard Practice
Instruction’ covering project
management best practice generally
and have introduced the main
components defined by this process to
all current IT change projects.
35 | P a g e
Health & safety —
Owner:
Group Head of Health & Safety
Description
Mitigation
Many of the key components and
products supplied by the Group are for
industrial use, often in hazardous
environments. They must be fit for
purpose to ensure that their reliability,
performance and safety is of the
necessary standard. Failure in this
quality will cause damage to the
Group’s reputation and customer
relationships, and potential legal
consequences.
Inadvertent breaches of regulations could
lead to prosecution and significant fines.
Regulations impacting the Group include
Health and Safety at Work, Control of
Substances Hazardous to Health;
packaging waste regulations.
Whilst the business sources certain
products from the Far-East, the majority
of products are sourced from respected
‘brands’ in the UK and Europe. Group
representatives often visit suppliers’
manufacturing sites to ensure that high
quality standard operating procedures
are being adhered to.
The majority at Group sites comply with
ISO 9001, ensuring quality standards
are maintained through all its
operations. Continual testing
procedures are in place for both
components and manufactured products.
Employees involved in assembly
processes are qualified with the
relevant industry body and continue
with regular internal and external
training.
There is an ongoing review of relevant
national and international compliance
requirements.
2021 has seen us build on the
establishment of the Health & Safety
Steering Committee in 2020 and the
appointment of Senior Managers
dedicated to ensuring compliance in all
areas. These Senior Managers now
report into a recently appointed Group
Head of Health & Safety, a new role
further evidencing the importance we
attach to this area.
Trend
^
—
v
Risk increasing
No risk movement
Risk decreasing
36 | P a g e
People issues v
Owner: HR Director
Description
Mitigation
There is a risk that the business is not
able to attract and retain high
performing employees. The Group also
needs to maintain engagement with the
employees to ensure they remain
supportive of the business strategy.
Attraction and retention of
employees is supported by bonus
plans, recognition and reward
programmes and innovative benefit
packages.
Succession planning process introduced
to identify and develop key employees.
Training forms a key part of all
employees’ development within their
roles. Training is arranged to support
the Group’s business plans and the
personal goals of all employees.
In recent years there has been a
programme put in place to support the
development of each member of our
Profit Centre, Divisional and executive
management teams. The feedback we
have received from participants has
been exceptionally good with each
person acknowledging the relevance of
the content to their role within the
business.
Group-wide technical and sales
conferences to aid skills sharing.
Further details are provided in the
sustainability section of this Report.
We have recently appointed a Director
of Human Resources and a Learning &
Development Consultant. We are
currently reviewing the reward
packages made available to all of our
staff and the options available to
ensure continuous learning and
development opportunities where this
makes sense for both the business
and the individuals concerned.
The Strategic report, as set out on pages 04 to 37, has been approved by the Board.
Bryce Brooks
Chief Executive Officer
28 March 2022
37 | P a g e
The Board
Roger McDowell,
Non-Executive Chair
Bryce Brooks
Chief Executive Officer
Russell Cash
Chief Financial Officer
& Company Secretary
38 | P a g e
Appointed
June 2020 as Independent Director, and
Non-Executive Chair from August 2020
Skills & experience
Roger is a highly successful businessman
and entrepreneur, with a strong record of
delivering shareholder value. He was
Managing Director of Oliver Ashworth for
18 years before IPO and subsequent sale
to Saint-Gobain, and won the Sunday
Times AIM Non-Executive Director of the
Year award in 2017 for his Chairmanship
of Avingtrans plc, a precision engineering
business.
Board Committees
• Chair of Nomination Committee
• Member of the Audit, Remuneration
and AIM Compliance and Corporate
Governance Committees
External appointments
1. Non-Executive Chair of Hargreaves
Services plc, Avingtrans plc and Brand
Architekts Group plc
2. Senior Non-Executive Director of Tribal
Appointed
March 2010 as CFO, promoted to CEO in
September 2018
Group plc
3. Non-Executive Director of Proteome
Sciences plc, Augean plc and British
Smaller Companies VCT II plc
Skills & experience
Holds a degree in civil engineering and
qualified as a chartered accountant with
Deloitte Haskins & Sells (now PwC) in
1989. Ten years as a Finance Director at
Marlowe Holdings, an American-owned
industrial products distribution group, as
well as a Group corporate development
role.
Board Committees
• Member of the AIM Compliance and
External appointments
None
Corporate Governance Committee
• Other committees by invitation
Appointed
November 2018
Board Committees
• Member of the AIM Compliance and
Corporate Governance Committee
• Other committees by invitation
Skills & experience
Qualified as a chartered accountant with
Deloitte Haskins & Sells (now PwC) in
1991. Spent 27 years working as a
turnaround and restructuring
professional, 20 years with PwC prior to
taking Partner roles at Baker Tilly (now
RSM International) from 2008 to 2013 and
FRP Advisory from 2013 to 2018.
At both Baker Tilly and FRP he played a
key role in the success and expansion at
both firms. Russell’s experience in
effecting change both in terms of
operational improvement and cash
management have already served the
Group well given the focus in each of
these areas in 2019 and beyond.
External appointments
None
Nigel Richens
Non-Executive Director &
Senior Independent Director
Appointed
May 2014
Board Committees
• Chair of the Audit, Remuneration and
External appointments
Trustee of various charities
AIM Compliance and Corporate
Governance Committees
• Member of the Nomination and
Remuneration Committees
Skills & experience
23 years within the accountancy sector at
partner level with PwC. Experienced
adviser to listed and private equity-owned
businesses across manufacturing,
distribution, construction and engineering
sectors, bringing wide commercial
experience and extensive knowledge of
corporate governance, compliance, risk
management and financial matters.
other
In his role as Senior Independent Director,
Nigel acts as a sounding board and
intermediary for the Chair and other
Board members. He also leads the
performance evaluation of the Chair.
On 30 November 2021 Paul Gedman who joined the Board in July 2020 resigned from the Board. We would like to thank him
for his significant contribution to the development of our e-business platform during his tenure.
On 8 March 2022 Jamie Brooke and Ailsa Webb were appointed to the PLC Board as Non-Executive Directors.
Their biographies can be read on the next page.
39 | P a g e
Ailsa G Webb
Non-Executive Director
Appointed
March 2022
External appointments
None
Board Committees
• Member of the Audit, Remuneration
and AIM Compliance and Corporate
Governance Committees
Skills & experience
lead-
Ailsa has held a number of
operational management roles including
at TNT and Brammer Buck and Hickman.
Until 2019, Ailsa was Chief Operating
Officer for the UK, Ireland and Iceland
territories at Brammer Buck and Hickman,
the UK subsidiary of Rubix Group, Europe’s
largest supplier of industrial maintenance,
repair and overhaul products and services.
In 2019, Ailsa joined HSS Hire Services,
Scotland, one of
largest
equipment rental companies, where she is
Managing Director and, in early 2021 she
took over as Managing Director for ABird
and Apex Power Solutions, two service
business parts of HSS Group. Ailsa has a
deep understanding of the industrials
distribution sector, including within e-
commerce where she has a wealth of
digital transformation expertise driving
revenue growth through e-commerce
strategies.
the UK’s
Jamie Brooke
Non-Executive Director
Appointed
March 2022
External appointments
Chapel Down Group Plc
Maitland Capital Limited
Board Committees
• Member of the Audit, Remuneration
and AIM Compliance and Corporate
Governance Committees
Skills & experience
Jamie has had successful roles in listed
and private equity fund management,
originally starting out with 3i plc. Over his
30-year career, having sat on 20 different
boards, he has
focused on driving
shareholder value and has gained
experience covering fund management
and investing, strategy and governance,
M&A, audit and consultancy. Most
recently he worked with Hanover
Investors and, prior to this, Jamie spent
twelve years with the Volantis team under
the umbrellas of
Lombard Odier,
Henderson and Gartmore. He trained as
an ACA with Deloitte.
40 | P a g e
Corporate Governance Report
Chair’s statement on corporate governance
A key component of my role is to oversee the development of the Group’s corporate governance model and ensure there is a clear
focus on this increasingly important area of our business.
The Company is committed to maintaining high standards of corporate governance and has adopted the Quoted Companies
Alliance Corporate Governance Code 2018 (“the QCA code”). The Company’s’ approach in relation to complying with each of the
ten principles of the QCA code is set out below.
I am pleased to report that we continue to consider we are compliant with all aspects of the requirements of the QCA Code.
Framework for corporate governance
As an AIM listed entity, the Company complies with the corporate governance principles of the Quoted Companies Alliance Corporate
Governance Code (the QCA Code). The QCA Code identifies ten principles to be followed as a guide to help companies deliver value
for shareholders. This relies on effective management by the Board, accompanied by good communication which serves to develop
confidence and trust.
Compliance with the QCA corporate governance code
Within our Annual Report, we are required to demonstrate compliance with each of the Principles:
Principle 1
“Establish a strategy and business model which promote long-term value for shareholders”
Our strategy, ever evolving business model and related key performance measures are clearly articulated in pages 15-18; the
associated risks and the Board’s view thereon are set out in the Risk Management section of this Report. We believe this provides
existing, and potential new, Investors with evidence of our determination to achieve long-term shareholder value.
Principle 2
“Seek to understand and meet shareholder needs and expectations”
We continue to work with respected external advisers. We work hard to ensure we achieve a quality delivery of meaningful
information on a consistent basis. We are looking forward to working closely with Liberum who we recently appointed as sole
broker and NOMAD; we expect this will serve to further develop the content and quality of our messaging.
The Board is updated on the latest shareholder information and feedback they provide on a regular basis, in particular following
our presentations after the announcement of half year and full year results. Prior to the challenges resulting from COVID-19, all
Directors were encouraged to attend the Annual General Meeting.
Should Investors wish to make contact, details are provided via our website.
Principle 3
“Take into account wider stakeholder and social responsibilities and their implication for long-term success”
The Board recognises that its relationship with customers, suppliers and employees are critical to its success. Efforts have always,
and will continue to be, made to develop strong relationships with customers and suppliers and increasing emphasis has been
placed on engagement with employees, something which proved invaluable during the unforeseen challenges of COVID-19. The
CEO regularly engages with Divisional Directors and Senior Management within each of our businesses to keep them suitably
appraised of key developments; this information is then cascaded through the organisation through specific reporting channels.
Included within this is an increased emphasis on all aspects of health and safety as well as our responsibilities under the ESG
agenda.
Linked to all of this our comments in respect of Section 172 of the Companies Act 2006 requirements and in a variety of other
areas are provided in our Sustainability report on pages 21-27.
41 | P a g e
Principle 4
“Embed effective risk management, considering both opportunities and threats, throughout the organisation”
Our approach to risk is set out within the Risk Management section of this report. Whilst the Board has overall responsibility, the
importance of developing our processes and controls is an area of focus for many others within the business. The Audit Committee
has responsibility for reviewing internal controls and in this regard, there is regular communication between the Committee and
the Internal Audit team and Executive Management.
In addition we retain the services of Marsh, specialist Risk Management advisers, who provide regular external reviews of the
progress we make and highlight areas for future improvement. On pages 34-37 we have sought to identify our key areas of risk
and provide comments throughout this section to demonstrate the investment we have made to put measures in place to address
each of these. In particular, the systems of internal controls and the investment we have made in our Business Systems, Internal
Audit and Project Management functions demonstrates how important these areas are, and will always remain, to us. We have
also made a significant investment in our Health & Safety agenda over the course of the last two years.
Principle 5
“Maintain the Board as a well-functioning team led by the Chair”
Details of the Board, and their roles within the Board environment and within Committees, is set out on pages 38-47.
The Board is chaired by Roger McDowell and meets regularly with formal Board meetings taking place in most months of the year.
Audit Committee meetings are held regularly around announcement activity and Remuneration Committee and Nomination
Committee meetings on an as and when needed basis.
The Non-Executive Directors are considered to be independent of management and from any business relationship which could
materially interfere with their independent judgement. The Senior Non-Executive Director is Nigel Richens and is available to
Shareholders if they have any concerns.
We have recently welcomed Jamie Brooke and Ailsa Webb to the Board and we very much look forward to the contribution they
are set to make see page 40.
Principle 6
“Ensure that between them, the Directors have the necessary up-to-date experience, skills and capabilities”
A key role of the Nomination Committee is to ensure that the requisite skills and relevant experience are evident in candidates for
Board roles. At the time of appointment, each Director is provided with training provided by our NOMAD and legal advisers,
covering the responsibilities of a Director generally and in particular the requirements when involved in the Board of a listed
company.
The appointments of Jamie Brook and Ailsa Webb bring further valuable experience as well as incremental areas of expertise to
the Boardroom.
Brief biographies of each of our Directors are outlined on pages 38-40.
Principle 7
“Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement”
The Board undertakes an annual evaluation of its effectiveness. This exercise involves each Board member completing an
assessment which provides numeric scoring against specific categories as well as an opportunity for recommendations for
improvement to be provided.
The areas reviewed include:
1. Board/Committee composition (including succession planning)
2. Board/external reporting and information flows
3. Board processes, internal control and risk management
4. Board accountability
5. Executive management effectiveness, and
6. Standards of conduct.
Any areas where improvement is deemed necessary are discussed and appropriate action plans put in place.
42 | P a g e
Principle 8
“Promote a corporate culture that is based on ethical values and behaviours”
The Board aims to promote and maintain a culture of integrity across all businesses within the Group.
An open culture is encouraged within the Group, with regular communications to employees regarding progress and business
updates. Employee feedback is encouraged through line management and committee discussions.
The Group has systems in place designed to ensure compliance with all applicable laws and regulations and conformity with all
relevant codes of business practice.
Compliance with the Bribery Act 2010 involves the adoption of Standard Practice initiatives with appropriate training being
provided.
The Group takes appropriate steps to comply with the provisions of the Market Abuse Regulations and the Modern Slavery Act.
The Group has invested heavily in Health & Safety agenda with appointments being made across each of our businesses and
initiatives put in place to ensure this is consistently uppermost in our thoughts.
Ever increasing emphasis is being placed on the Environmental, Social & Governance agenda, evidence of which can be seen via
the comments provided on pages 28-30 in this Report. We believe good progress has been made during the course of 2021.
Principle 9
“Maintain governance structures and processes that are fit for purpose and support good decision making by the Board”
We have made significant investment in certain of our central functions and feel we now have a mature and robust infrastructure
to manage the business we currently have and, over time, effectively manage an expanded operation. The narrative which follows
later in this section of the report explains the roles and responsibilities across Board members and its various Committees.
In 2018, the Audit Committee reconsidered the need to establish an internal audit function; this has further developed during 2021
with the team focusing on ensuring standard processes are complied with throughout the Group. We are pleased with the progress
which is being made and the Board welcomes the added accountability which our local businesses now feel. The Board is in receipt
of regular updates summarising the key findings of Internal Audit reviews, in particular assessments as to the degree of compliance
with key operating procedures. This enables decisive action to be taken in the event any issues are identified.
Principle 10
“Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and
other relevant stakeholders”
Details relating to this are contained in the Group’s website – www.flowtechfluidpower.com. This provides details of matters
reserved for the Board, the role of Board Committees and other aspects relating to corporate and social responsibility.
The website provides further detail relating to some of these requirements.
43 | P a g e
The Board
The main responsibilities of the Board are the creation and delivery of sustainable Shareholder value by promoting the long-
term success of the Company and upholding good corporate governance.
In addition to routine consideration of both financial and operational matters, the Board determines the strategic direction of
the Group. The Board has a formal schedule of matters specifically reserved for it which includes:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Development and approval of the Group’s strategic aims and objectives
Approval of annual operating and capital expenditure budgets
Oversight of the Group’s operations
Approval of the Group’s announcements and financial statements
Approval of new Bank facilities or significant changes to existing facilities
Declaration and recommendation of dividends
Approval of major acquisitions, disposals, and capital expenditure
Succession planning and appointments to the Board and its Committees
Review of the Group’s overall corporate governance arrangements and reviewing the performance
of the Board and its Committees
Maintenance of sound internal control and risk management systems, and
Approval of the division of responsibilities between the Chair, Chief Executive and other Executive
Directors and the terms of reference of the Board Committees.
The Chair
The main responsibilities of the Chair are to lead the Board, ensuring its effective management of the Group’s operations and
governance. The Chair sets the Board’s agenda and promotes a strong culture of challenge and debate. He also plays a key role in
investor relations and corresponds with major with major Shareholders as he sees fit.
This is achieved by:
1.
2.
3.
4.
5.
6.
7.
Chairing Board meetings, setting agendas in consultation with the Chief Executive Officer and
encouraging the Directors to participate actively in Board discussions
Leading the performance evaluation of the Board, its Committees, and individual Directors
Promoting high standards of corporate governance
Ensuring timely and accurate distribution of information to the Directors
Ensuring effective communication with Shareholders
Periodically holding meetings with fellow Non-Executive Directors without the Executive Directors
being present, and
Establishing an effective working relationship with the Chief Executive Officer by providing support
and advice whilst respecting executive responsibility.
The Chief Executive Officer
The CEO is responsible for the day-to-day management of all the Group’s activities and the implementation and delivery of the
Board’s strategic objectives. He also promotes appropriate cultural values and standards and seeks to maintain good relationships
and communications with investors.
Company Secretary
Russell Cash, our Chief Financial Officer, is the Company Secretary and as such is responsible for legal and regulatory compliance
as well as assisting the Chair in preparation for, and the effective running of, Board meetings.
Senior Independent Director
Nigel Richens, as the Senior Independent Director and Chairman of the Audit Committee, acts as a conduit for all Directors, giving
advice and guidance where appropriate.
44 | P a g e
Board composition
The Board comprises an independent Non-Executive Chair, two Executive Directors and three other Non-Executive Directors.
Details of the Directors’ remuneration and terms of appointment are set out in the Directors’ Remuneration report on pages 48-
50. Biographical details of the Directors are included on pages 38-40.
Roger McDowell is Chair of the Board and the Nomination Committee. Nigel Richens is the Senior Independent Director and
Chairman of the Audit and AIM Compliance and Remuneration Committees.
The Executive Directorships are full-time positions. The roles of Chair and Non-Executive Director require a commitment of
approximately five days per month. All the Non-Executive Directors have confirmed their ability to meet such commitment. Each
Non-Executive Director is required to inform the Board of any changes to their other appointments.
Re-election
All Directors of the Board are subject to election by the Shareholders at the first AGM following their appointment by the Board
and all Directors will also stand for re-election annually at the AGM.
Meetings of the Board
There were 11 formal Board meetings during the year. All meetings were attended by all eligible Directors.
Formal meetings are supplemented, when circumstances dictate, by other meetings often making use of teleconference facilities.
In addition, the Chair and Non-Executive Directors have met during the year without the Executive Directors.
Board Committees
Executive Management
To support the two Executive Directors, we have a Management Board which sits beneath PLC level. This Group includes individuals
who lead each of our divisions as well as those focused on Operational and Human Capital matters and manages all aspects of
day-to-day management, including:
1.
2.
3.
4.
5.
6.
7.
8.
Implementing the strategy as set out/agreed by the Board
Overseeing all commercial operations of the Group, ensuring good and effective communication in key
areas and alignment of local business objectives to the strategic direction at Group level
Assessment of growth opportunities, both organic and potential acquisition opportunities
Talent management and succession planning
Product quality
Health and safety
Financial control and systems, including IT infrastructure and development, and
Risk management.
The Board formally delegates responsibility to four committees: the Audit, Remuneration, Nomination, and the AIM Compliance
& Corporate Governance Committees. Full terms of reference for each committee can be found on our website.
The Nomination Committee - Chaired by Roger McDowell
This Committee is responsible for ensuring that the Board is sufficiently well equipped to ensure that the Group continues to
be governed by suitably qualified people with the breadth and depth of experience required to effectively lead the business.
The Committee recommends and reviews nominees for the appointments of new Directors to the Board and ensures that
there is due process used in selecting candidates.
During 2021 members of the Nominations Committee met to discuss the remuneration packages of the Executive Directors.
This culminated in share options being granted to Russell Cash (CFO) and a Long-Term Incentive Plan scheme being introduced
for both Bryce Brooks (CEO) and Russell Cash. Full details are provided in the Directors Remuneration section of this Report
(pages 4-50).
The Remuneration Committee - Chaired by Nigel Richens
The Remuneration Committee meets at least once a year to determine and agree remuneration packages of the Chair and
Executive Directors and other employee benefits. In the year being reported the Committee met three times to discuss approve
and implement salary, bonus, and share option packages for the Executive Directors. (14 January, 19 April, and 21 May 2021).
The measures put in place to reward the Executive Directors is detailed in the Directors’ Remuneration section of this Report.
45 | P a g e
Where appropriate, the Committee seeks advice from remuneration consultants to gain an understanding of current trends and
latest developments. In addition, taxation and legal advisors will usually be involved in drafting and finalising reward agreements.
The remuneration of the Non-Executive Directors is agreed by the Chair and Executive Directors. Details of Directors’ remuneration
are set out in the Directors’ Remuneration Report on pages 48-50.
The AIM Compliance & Corporate Governance Committee - Chaired by Nigel Richens
The AIM Compliance & Corporate Governance Committee usually meets twice a year. It is responsible for establishing, reviewing,
and monitoring the Group’s procedures and controls for ensuring compliance with the AIM Rules and the timely disclosure of
information to satisfy the Group’s legal and regulatory obligations. The meetings in January and November were attended by all
Directors.
As part of our transition to working with Liberum all Directors attended a briefing by Liberum which served as a reminder of
all responsibilities each Director has whilst in office.
The Audit Committee - Chaired by Nigel Richens
The Audit Committee meets at least twice a year with the Group’s Auditor and as otherwise required. Its duties are to:
1.
2.
Monitor the integrity of the financial statements
Review the quality of the Group’s internal controls, ethical standards, and risk management systems
3.
4.
5.
Review the Group’s procedures for detecting and preventing bribery and fraud, corruption, sanctions,
and whistleblowing.
Ensure that the financial performance of the Group is properly reported on and monitored, including
reviews of the annual and interim accounts, results announcements, and accounting policies, and
Oversee the relationship with the Group’s external Auditor.
During the year, the Audit Committee discharged its responsibilities by:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Reviewing the Group’s draft financial statements, preliminary announcements and interim results
statement prior to Board approval and reviewing the external Auditor’s reports thereon
Reviewing the external Auditor’s plan for the audit of the Group financial statements, confirmations of
auditor independence and proposed audit fee and approving terms of engagement for the audit
Considering the effectiveness and independence of the external Auditor and recommending to the
Board the reappointment of Grant Thornton UK LLP as external Auditor
Considering the review of material business risks
Monitoring of reporting and follow-up of items reported by employees
Considering the significant risks and issues in relation to the financial statements and how these were
addressed including: revenue recognition; impairment of inventory; impairment reviews of goodwill;
impairment of investments and intercompany receivables; going concern.
Considering the adequacy of accounting resource and the development of appropriate systems and
control
Engaging with external providers to assist with certain aspects of accounting disclosure
Review of progress in introducing best practice systems and procedures Group-wide
Considering policies on non-audit engagements for the Company’s Auditor, and
Review of reports from the Internal Audit Function.
The Audit Committee met twice during 2021 (April and November) and meetings were attended by all Directors. In accordance
with best practice, the Chairman of the Audit Committee met separately with the Audit Engagement Leader to provide an
opportunity for any relevant issues to be raised directly with him.
46 | P a g e
Board effectiveness
Knowledge & training
Each newly appointed Director is provided with an induction programme comprising visits to Group locations, meetings with
key personnel and introductions to the Group’s advisers. In addition, care is taken to ensure each new Director has as good
understanding as soon as possible with regards to the Group’s strategy, risks, challenges and control and governance
procedures.
The Chair is responsible for ensuring that each Director is supplied with timely and relevant information of a quality, and in a
form, which enables them to discharge their duties.
The Chair leads an exercise performed on an annual basis to evaluate the effectiveness of the Board.
There is a policy in place by which a director may obtain independent professional advice at the Group’s expense where their
duties so require.
The training needs of Directors are discussed, and appropriate arrangements put in place. We work closely with external training
providers and have a programme in place to deliver tailored training to all members of our central and Divisional management
teams. This his has proven more difficult than normal given the challenges presented by COVID-19.
Each Director is required to keep up to date with developments in the Group’s areas of operation and their own knowledge base.
Regular discussions with senior members of Group management and the Group’s advisers, together with their own professional
development obligations and experience in other roles, are usually sufficient to achieve this.
Our Nominated Adviser is invited to the AIM Compliance and Corporate Governance Committee to inform the Board of
developments in these areas.
Diversity
The Board is committed to a policy of equal opportunity and diversity to attract and retain the talent needed to fulfil our
strategic aspirations. Our culture recognises the need for diversity across a wide spectrum of factors including experience, skills
and potential, as well as ethnicity, sexual orientation and gender.
Appointment and advancement are based on merit with no positive or negative discrimination. We recognise that further
strengthening our diversity as and when opportunities arise is important to our future well-being.
The Nomination Committee reviews various matters when considering the constitution of the Board, including diversity
alongside other important factors such as experience and capabilities.
This year sees us including comments on gender pay gap for the first time. As we state in the Sustainability section of the
Report, we are determined that gender plays no part in any decisions we make relating to recruitment, remuneration or career
progression.
Internal controls & risk management
The Directors are responsible for the Group’s system of internal control. However, such a system is designed to manage, rather
than eliminate, the risk of failures to achieve business objectives and can provide only reasonable and not absolute assurance
against misstatement or loss.
The key elements within the Group’s system of internal control are as follows:
1.
2.
3.
4.
5.
6.
7.
Regular Board meetings to consider matters reserved for Directors’ consideration
Regular management reporting
Regular Board reviews of corporate strategy, including a review of material risks and uncertainties facing
the business.
Established organisational structure with clearly defined lines of responsibility and levels of authority
Documented policies and procedures
Regular review by the Board of financial budgets, forecasts and covenants with performance reported
to the Board monthly, and
Detailed investment process for major projects, including capital investment analysis.
47 | P a g e
Directors’ Remuneration Report
The Remuneration Committee
The Directors’ Remuneration report sets out the key pillars of the remuneration policy for the Group, as well as the rationale for
any major decisions made by the remuneration committee during the year. This is intended to help investors assess and
understand the remuneration policy in the light of the strategy for the Group. This report is voluntarily disclosed.
The role of the Remuneration Committee is to assist the Board in fulfilling its responsibilities in establishing appropriate
remuneration levels and incentive policies for employees, Executives and Directors, including all share-based compensation. The
remuneration of the Non-Executive Directors is approved by the Board of Directors.
Remuneration policy
The remuneration policy of the Group is:
1. To provide a suitable remuneration package to attract, motivate and retain Executive
Directors who will run the Group successfully, and
2. To ensure that all long-term incentive schemes for the Directors are in line with the
Shareholders’ interests
The Committee makes recommendations to the Board. No Director plays a part in any discussion about their own remuneration.
The Remuneration Committee members are expected to draw on their experience to judge where to position the Group, relative
to other companies’ and other groups’ rates of pay when considering remuneration packages for Executives.
Benefits in kind are the provision of medical insurance premiums and, in the case of Bryce Brooks, a motor vehicle.
The Executive Directors have service contracts which provide for notice periods of twelve months. Each of the Non-Executive
Directors has a service contract which provides for a notice period of three months.
The Executive Directors participate in the EMI option scheme; these options are exercisable and will lapse if the Directors leave
employment for any other reason than being a ‘good leaver’ as defined within the scheme rules, or at the end of the tenth
anniversary of the date of grant.
Developments during 2021
During the year the Board, following the recommendations of the Remuneration Committee, agreed to the following actions:
1.
2.
3.
4.
The Board implemented a new long-term incentive plan (LTIP) which provides annual awards of options
to the Executive Directors conditional upon the achievement of stretching targets based on total
shareholder return and/or earnings per share over a vesting period of three years. The awards are
capped at 100% of salary and subject to appropriate malus and claw back provisions
The Board also established a cash bonus scheme for the Executive Directors in respect of the financial
year 2021, conditional upon the achievement of results above market expectations and capped at
100% of salary. Appropriate malus and claw back provisions also apply. Annual bonus plans will be
established in respect of future periods although the levels of award and performance conditions
may vary as circumstances dictate
The Board granted Russell Cash an option over ordinary shares of 50 pence each in the Company
(“Ordinary Shares”) pursuant to the rules of the Unapproved Sub-Plan of the Flowtech Fluidpower
plc Enterprise Management Incentive Plan. The award provides for an option to acquire a total of
150,000 Ordinary Shares at an exercise price of £1 per Ordinary Share. The option will be exercisable
upon the publication of the Company’s accounts for the financial period to 31 December 2022 and
is not subject to the achievement of any performance criteria, and
The rules of the Flowtech Fluidpower plc Enterprise Management Incentive Plan were amended to
empower the Board to reduce future awards in certain circumstances, including the underlying
financial performance of the Company, and to include appropriate malus and claw back provisions.
48 | P a g e
Long-term incentive plans and annual bonus plans are established, controlled, and operated by the Remuneration Committee who
have the authority to vary payments from amounts arising from agreed formulae/structures and vary the structure and policy each
year. The Remuneration Committee will act fairly and reasonably and in the interests of the Company and Shareholders.
Directors’ detailed remuneration
Executives
Bryce Brooks
Russell Cash
Non-Executives
Roger McDowell
(appointed to the plc June 2020 and Chair,1 August 2020)
Nigel Richens
Paul Gedman (resigned November 2021)
Malcolm Diamond MBE (retired August 2020)
Bill Wilson (resigned 10 June 2020)
Salary
and fees
£000
Benefits
£000
Bonus
£000
Total 2021
£000
Total 2020
£000
225
200
80
55
42
-
-
602
7
2
–
–
–
–
–
9
56
50
-
-
-
-
-
288
252
80
55
42
-
-
242
192
41
54
19
46
31
106
717
625
In 2020 Messrs Brooks, Cash, Richens and Diamond each waived £1,250 of remuneration during the early stages of the pandemic;
similar salary sacrifices were made by other senior employees.
Directors’ share interests
The table below shows the interests of the Directors in office at the end of the year in the share capital of the Company:
As at 31 December 2021
number of ordinary shares
As at 31 December 2020
number of ordinary shares
299,160
48,175
750,000
73,500
299,160
48,175
-
73,500
Executives
Bryce Brooks
Russell Cash
Non-Executives
Roger McDowell
Nigel Richens
49 | P a g e
Directors’ share interests continued
The table below shows the interests of the Directors in office at the end of the year in the share capital of the Company’s subsidiary,
Flowtech MIP Limited:
Executives
Bryce Brooks
As at 31 December 2021
As at 31 December 2020
A shares
£1
ordinary
B shares
£1
ordinary
D shares
£1
ordinary
-
77
3,100
3,100
5
5
A and B shares were issued on admission to AIM at a cost of £10 per share on 21 May 2014. The D shares were issued at a cost of
£400 per share on 1 June 2016. All shares were issued as part of an employee share-based remuneration scheme called the ‘Management Incentive
Plan.’ For further details refer to note 22.
Directors’ share options
Details of share options held by the Directors over the ordinary shares of the Company are set out below:
Bryce Brooks
Bryce Brooks
Russell Cash
Russell Cash
Scheme
As at 31
December
2020
Granted
Exercised
Cancelled
EMI (Approved)
159,999
-
LTIP
-
187,500
EMI (Unapproved)
150,000
150,000
LTIP
-
166,667
-
-
-
-
-
-
-
-
As at 31
December
2021
159,999
187,500
300,000
166,667
The shares were issued as part of an employee share-based remuneration scheme called the ‘Enterprise Management Incentive
Plan’ and ‘Long-Term Incentive Plan.’ Further details are provided in note 22 to the consolidated financial statements.
50 | P a g e
Directors’ Report
The Directors present their Annual Report, together with the audited Group and Company financial statements for the year ended
31 December 2021. The Group financial statements have been prepared in accordance with UK-adopted international accounting
standards. The Company financial statements have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’ (FRS 101).
A review of the Group’s trading and an indication of future developments are contained in the Strategic report on pages 06-15.
Details of revenue and operating profits for each operating segment are contained in note 3 to the consolidated financial
statements. The principal subsidiaries contributing to the profits and net assets of the Group are listed in note 12 to the
consolidated financial statements.
Flowtech Fluidpower plc is incorporated in England (Company registration number 09010518) and has its Registered Office at
Bollin House, Bollin Walk, Wilmslow, SK9 1DP.
Results and dividends
The results for the year ended 31 December 2021 are set out in the consolidated income statement on page 66.
The Group has reported an operating profit from its continuing activities of £3.7 million (2020: loss of £1.4 million). After accounting
for net finance costs, the consolidated income statement shows a profit from continuing operations before taxation of £2.9 million
(2020: loss of £2.1 million).
As already stated, our ambition is to return to dividend payments, albeit at levels commensurate with the needs of the business.
The Board will be recommending a dividend of 2p in respect of 2021 at the AGM in June 2022. Subject to Shareholder approval,
the dividend will be paid on 22nd July 22 to Members on the Register as at 1st July 22 with an ex-Dividend date of 30th June 22.
Moving forward we will maintain a balanced approach to dividend distribution.
Directors
The Directors who held office during the year and up to the date of approval of the financial statements are as follows:
• Nigel Richens
•
Bryce Brooks
•
Russell Cash
•
Roger McDowell (appointed 10 June 2020)
•
Paul Gedman (appointed 28 July 2020, (resigned 30 November 2021)
• Ailsa Webb (appointed 8 March 2022)
•
Jamie Brook (appointed 8 March 2022)
Short biographies of each Director currently in office, including two new Non-executive Directors appointed on 8 March 2022 are
provided on page 38-40.
The interest which the Directors serving at the end of the year, or at the date of this Report, had in the ordinary share capital of
the Company, and its subsidiaries, at 31 December 2021 is disclosed in the Directors’ Remuneration report on page 49.
Details of the Directors’ share options are provided in the Directors’ Remuneration report on page 50.
Material Interest in contracts
No Director, either during or at the end of the financial year, was materially interested in any significant contract with the Company
or any subsidiary undertaking.
Share capital
Details of the Company’s share capital are in note 23 to the consolidated financial statements.
The Company’s share capital comprises one class of ordinary shares and as at 01 March 2022 there were in issue 61,492,673 fully
paid ordinary shares of 50p each. All shares are fully transferable and rank pari passu for voting and dividend rights.
51 | P a g e
The Company has been notified of the following interest in more than 3% of the Company’s issued share capital.
The table below shows the position as at 9 March 2022 (being the last practicable date before the publication of this Report):
Shareholders – 9 March 2022
Number of shares held
% of share capital
Odyssean Investment Trust
Harwood Capital
Downing
Close Brothers Asset Management
Charles Stanley
Gresham House Asset Management
Lazard Freres Banque (PB)
Janus Henderson
River and Mercantile Asset Management
BGF
10,000,001
4,945,826
4,939,352
4,852,738
3,166,893
2,673,210
2,620,080
2,537,190
1,969,502
1,896,724
16.26
8.04
8.03
7.89
5.15
4.35
4.26
4.13
3.20
3.08
Financial instruments & risk management
Information about the use of financial instruments by the Company and its subsidiaries, and the Group’s financial risk management
policies, are given in note 27. It is not the Group’s policy to trade in financial instruments.
Directors’ responsibility under Section 172
The Directors welcome the requirement under Section 172 of the Companies Act 2006. Comments on how the Directors have had
regard for the interests of various stakeholders whilst making key decisions are contained on page 28, under the Corporate Social
Responsibility section.
Conflicts of interest
In line with the Companies Act 2006, all Directors have a duty to avoid situations where they have or could have a direct or indirect
conflict of interest with the Company. The Act allows Directors of public companies to authorise conflicts and potential conflicts
where appropriate to avoid a breach of duty. The Group has specific procedures in place to deal with any potential conflicts of
interest and during this financial year, no actual or potential conflicts have arisen.
Board composition
The Board aims to ensure it has the required balance of skills and experience.
Re-election
All Directors of the Board are subject to election by the Shareholders at the first AGM following their appointment by the Board
and in accordance with the Code, all Directors will also stand for re-election annually at the AGM.
Liability insurance
In line with market practice, each Director is covered by appropriate Directors’ and Officers’ liability insurance (D&O) at the
Company’s expense. The D&O insurance covers the Directors and Officers against the costs of defending themselves in legal
proceedings taken against them in that capacity and in respect of any damages resulting from those proceedings. The Company
also indemnifies its Directors and Officers to the extent permitted by law. Neither the insurance nor the indemnity provides cover
where the Director or Officer has acted fraudulently or dishonestly.
Annual general meeting
Whilst Shareholders have the right to attend, speak and vote at the meeting if they so wish, we are strongly encouraging
Shareholders to submit a proxy vote in advance of the Annual General Meeting and to appoint the Chairman of the meeting as
their proxy rather than attend the meeting in person. We are also providing a facility which will enable Shareholders to view the
meeting electronically (although they will not be able to vote through this facility) and to submit questions prior to the AGM,
which will be addressed at the meeting or otherwise responded to.
The AGM will be held on 1 June 2021 at 10.00 hrs. The Company is facilitating an online AGM experience via the IMC platform,
details of which are contained in the Notice of Meeting. Those joining the meeting in this fashion, will have the opportunity to
join the meeting from any remote location and to listen to the proceedings of the meeting. The webcast will also be available on
the website after the event.
52 | P a g e
Subsequent events
In the opinion of the Board, there have been no significant events occurring since the balance sheet date.
Corporate governance
The Group’s statement on corporate governance can be found in the Corporate Governance report on pages 41 to 47. This forms
part of this Directors’ report and is incorporated into it by way of this cross reference.
Our environment
The Group’s comments as regards the impact our operations have on the environment, and recent initiatives that have been
introduced with regards to streamlined energy and carbon reporting requirements, are referred to in the sustainability section of
this Report on pages 21 to 27. These comments form part of this Directors’ report by way of this cross reference.
Engagement with employees, suppliers, customers and others
The Group’s comments in these areas are included in the sustainability section of this Report on pages 28-29. These comments
form part of this Directors’ report by way of this cross reference.
Going concern
The financial statements are prepared on a going concern basis which the Directors believe to be appropriate for the following
reasons:
o As expected in 2021 the Group returned to a profitable trading performance following the challenges presented
o
o
by COVID-19;
The Group is expecting to continue to trade profitably in 2022 and beyond;
The Group is financed by revolving credit facilities totalling £20m (in place until November 2023) and a £5m
overdraft facility, repayable on demand, and;
o At the end of 2021 the Group’s Net Bank Debt was £15.4 million (£9.6 million within the aggregate banking
facilities which include a £5.0 million overdraft facility).
The Directors have prepared forecasts covering the period to September 2023. 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 banking facilities.
We have performed reverse stress testing, based on revenue reductions, to determine scenarios in which our banking covenants
could be breached. The Directors view the set of circumstances required for such a situation to crystallise as highly unlikely and
as such not reasonably plausible scenarios.
The Directors believe the business will continue to operate within its agreed banking facilities and comply with all banking
covenants. As such the Group therefore continues to adopt the going concern basis is preparing its financial statements.
Disclosure of information to auditor
The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each aware, there is
no relevant audit information of which the Company’s Auditor is unaware; and that each Director has taken all the steps deemed
necessary to make each aware of any relevant audit information and to establish that the Company’s Auditor is aware of that
information.
Auditor
Grant Thornton UK LLP was reappointed as Auditor of the Company during the year and a resolution to appoint them will be
proposed at the Annual General Meeting.
53 | P a g e
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report & Accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to
prepare the financial statements in accordance with UK-adopted international accounting standards.
The Company financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law) including FRS 101 ‘Reduced Disclosure Framework’. Under
company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view
of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the
Directors are required to:
select suitable accounting policies and then apply them consistently
✓
✓ make judgements and accounting estimates that are reasonable and prudent
✓
for the consolidated financial statements state whether UK-adopted international accounting standards
have been followed, subject to any material departures disclosed and explained in the financial
statements
for the Company financial statements state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the financial statements, and
✓
✓ prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that:
1.
2.
so far as each Director is aware, there is no relevant audit information of which the Company’s Auditor
is unaware; and
the Directors have taken all the steps that they ought to have taken as Directors in order to make
themselves aware of any relevant audit information and to establish that the Company’s Auditor is
aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
By order of the Board
Russell Cash
Chief Financial Officer & Company Secretary
28 March 2022
54 | P a g e
Independent Auditor’s Report to the Members of Flowtech Fluidpower plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Flowtech Fluidpower plc (the ‘Company’) and its subsidiaries (the ‘Group’) for the year
ended 31 December 2021, which comprise 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, the Company income statement, the Company statement of financial position, the Company statement of changes in equity and
notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has
been applied in the preparation of the Group financial statements is applicable law and UK-adopted international accounting
standards. The financial reporting framework that has been applied in the preparation of the Company financial statements is
applicable law and United Kingdom Accounting Standards including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’
(United Kingdom Generally Accepted Accounting Practice).
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Company’s
affairs as at 31 December 2021 and of both the Group’s and the Company’s profit for the year then
ended;
the Group financial statements have been properly prepared in accordance with UK adopted
international accounting standards;
the Company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our
report. We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Group’s and the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the
auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or
conditions may cause the Group or the Company to cease to continue as a going concern.
A description of our evaluation of management’s assessment of the ability to continue to adopt the going concern basis of accounting,
and the key observations arising with respect to that evaluation is included in the Key Audit Matters section of our report.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern for a
period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
The responsibilities of the directors with respect to going concern are described in the ‘Responsibilities of directors for the financial
statements’ section of this Report.
55 | P a g e
Our approach to the audit
Materiality
Key audit
matters
Scoping
Overview of our audit approach
Overall materiality:
Group: £545,000, which represents 0.5% of the Group’s revenue.
Parent company: £490,500, which represents approximately 0.4% of the
Company’s total assets, capped at a portion of Group materiality.
Key audit matters were identified as
• Going Concern assumption (same as previous year)
•
•
•
•
Improper revenue recognition – sale of goods (same as previous
year)
Carrying value of the Group’s goodwill (same as previous year)
Provision for impairment of inventories (same as previous year)
Recoverability of the Carrying Value of Investments in Subsidiaries
(same as previous year)
Our auditor’s report for the year ended 31 December 2020 did not include
any key audit matters that have not been included for the current year.
We have performed audits of the financial information (full scope audits)
using component materiality for Flowtech Fluidpower plc and the following
subsidiaries; Fluidpower Group UK Limited, Fluidpower Group Services
Limited, Flowtech Fluidpower Ireland Limited, Fluidpower Shared Services
Limited and Fluidpower MIP Limited.
We performed specific audit procedures on Flowtechnology Benelux Limited
and Hydroflex Hydraulics Group BV.
In total our audit procedures covered 99% of the Group’s total assets, 100%
of the Group’s revenue and 83% of the Group’s profit before tax.
We performed analytical procedures at Group level on the financial
information of all the remaining group components.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those that had the greatest effect on the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements
as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Description
Audit
reponse
KAM
Disclosures
Our results
56 | P a g e
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
High
Potential
financial
statement
impact
Low
Low
Cash and
bank
Debtors
Cost of sales
Inventory
Creditors &
Accruals
Carrying
value of
goodwill
Going
Concern
Carrying value
of investments
in subsidiaries
Impairment of
inventories
Revenue
recognition
Management
override of
controls
Share Options
Extent of management judgement
High
Key audit matter
Significant risk
Other risk
Key Audit Matter – Group
How our scope addressed the matter – Group
Going concern
We have identified a key audit matter related to going concern as one
of the most significant assessed risks of material misstatement due to
error as a result of the judgement required to conclude whether there
is a material uncertainty related to going concern.
In our evaluation, we considered the inherent risks associated with the
Group’s business model including the effects arising from macro-
economic uncertainties such as COVID-19. The Group was and
continues to be impacted by the COVID-19 pandemic The COVID-19
impact continues to remain uncertain and this could adversely impact
the future trading performance of the Group, leading to increased
judgement in respect of the forward-looking assessment.
In undertaking their assessment of going concern for the Group, the
Directors considered the impact of COVID-19 related events in their
forecast future performance of the Group, compliance with covenants
and anticipated cash flows.
As a result, there is significantly more judgment applied in developing
forecasted revenue and profits of the Group.
In responding to the key audit matter, we performed the
following audit procedures:
• Obtained an understanding of relevant controls
relating to the assessment of going concern
models, including the assessment of the inputs and
assumptions used in those models;
• Obtained and assessed management’s paper and
assessment of going concern, including forecasts
covering the period to 30 September 2023 and
tested the mathematical accuracy of the forecasts,
as approved by the Board;
•
•
•
•
•
•
Analysing how the reasonableness of forecasts and
related disclosures may be impacted by the
inherent risk associated with COVID-19 and how
this may affect the Group’s and the Company’s
financial resources or ability to continue operations
over the going concern period;
Considering management’s historic forecasting
accuracy and the extent to which this impacts the
forecasts produced;
Corroborating the existence of the Group’s loan
facilities and related covenant requirements for the
period covered by management’s forecasts;
Assessing the impact of the mitigating factors
available to management in response to the
downside sensitivity applied and the Group’s ability
to comply with covenant requirements;
Comparing post year end results achieved to those
forecasted to determine if the business is trading in
line with forecast;
Assessing scenario sensitivities and reverse stress
tests performed by management, and determining
if they are plausible;
57 | P a g e
Key Audit Matter – Group
How our scope addressed the matter – Group
Relevant disclosures in the Annual Report and Accounts 2021
•
The Group’s accounting policies on the Going concern
assumption are shown in Note 2.2, Summary of significant
accounting policies
Additional disclosures are included in the Directors Report on
page 53.
•
Improper revenue recognition – sale of goods
We identified the occurrence of revenue as one of the most significant
assessed risks of material misstatement due to fraud.
Under ISA 240 (UK) there is a presumed risk that revenue may be
misstated due to the improper recognition of revenue. This is also
considered to be a key audit matter given the importance of reported
revenue to key stakeholders.
The revenue recognised in respect of sale of goods totalled £82.81m
for the year ended 31 December 2021 (2020: £69.24m).
Revenue generated from the sale of goods is recognised at the point of
dispatch and includes delivery charged to customers as a single
performance obligation. The inherent risk identified in this revenue
stream relates to the potential for manipulation of revenue recognised
around the year end being recorded in the incorrect period.
•
•
•
•
Performing our own scenario sensitivities over and
above the sensitivities of management and
considering the available headroom and
compliance with covenants, including assessing the
impact on cash flow;
Testing the adequacy of the supporting evidence
for cash flow forecasts, assessed and considered the
headroom;
Comparing movement in net debt and assumptions
with movements in working capital; and
Assessing the adequacy of the going concern
disclosures within the financial statements.
Our results
We have nothing to report in addition to that stated in the
‘Conclusions relating to going concern’ section of our report.
In responding to the key audit matter, we performed
the following audit procedures:
•
•
•
•
•
•
Obtaining an understanding of the processes through
which the Group initiates, records, processes and
report’s revenue transactions and testing whether
they were implemented as designed;
Assessing whether revenue has been recognised in
accordance with the Group’s accounting policies
including IFRS 15 ‘Revenue from Contracts with
Customers’ and whether management accounted for
revenue in accordance with the accounting policies;
Utilising data analytics where possible to interrogate
and test the revenue populations, including the
analysis of revenue postings from inception to cash
and identifying non-standard revenue postings;
Testing a sample of revenue transactions from
material revenue streams to supporting evidence such
as customer contract, sales invoices delivery note and
proof of cash receipt;
Testing the appropriate allocation of sales to the
relevant year by testing a sample of revenue
recognised either side around the year end and
traced to delivery information to ensure the correct
allocation. We have performed an assessment of
those sales around the year end, using an expected
delivery timeframe using information we have
obtained throughout our testing; and
Testing the completeness of revenue by tracing a
sample of transactions from underlying purchase
orders to the revenue listing.
Relevant disclosures in the Annual Report and Accounts 2021
•
•
The Group’s accounting policies on revenue recognition are
shown in Note 2.15, Summary of significant accounting
policies.
Related disclosures are included in Note 3.
Our results
Based on our audit work we did not identify any material
misstatement in the revenue recognised in the year ended 31
December 2021.
58 | P a g e
Carrying value of the Group’s goodwill
We identified valuation of goodwill as one of the most significant
assessed risks of material misstatement due to error. We have
pinpointed the significant risk in relation to the carrying value of
goodwill to the Primary Fluidpower Systems and Orange County Cash
Generating Units (‘CGU’) in respect of the valuation and allocation
assertion. There is an increased risk that goodwill held by the group
relating to these two CGU’s is impaired due to the underperformance
in 2021 and higher level of estimation uncertainty in assessing the
future performance due to the nature of project work undertaken.
The carrying value of Goodwill of the Primary Fluidpower Systems and
Orange County CGU’s is £751,000 and £2,793,000 respectively in the
consolidated statement of financial position as at 31 December 2021.
Under International Accounting Standard IAS 36 ‘Impairment of Assets’,
management is required to assess at the end of each reporting period
whether there is any indication that an asset may be impaired and to
perform an annual assessment whether the Group’s goodwill within a
CGU is impaired.
The process for assessing whether impairment of assets exists under
IAS 36 is complex. Management prepare impairment models to assess
the recoverable amount. Calculating value in use, through forecasting
cash flows related to CGUs and the determination of the CGUs,
appropriate discount rate and other assumptions to be applied can be
highly judgemental and subject to management bias or error. The
selection of certain inputs into the cash flow forecasts can also
significantly impact the results of the impairment assessment.
These forecasts are subject to estimation uncertainty and significant
management judgement is required in forecasting future operating
cashflows and determining the appropriate discount rate.
In responding to the key audit matter, we performed the
following audit procedures:
• Obtaining an understanding of the design of the
controls in place over the impairment of goodwill
and testing whether they were implemented as
designed;
•
•
Assessing the competence, capabilities and
objectivity of the management’s expert used by the
Group;
Assessing the mechanical accuracy of the
impairment model and the methodology applied by
management for consistency with the requirements
of IAS 36, including their associated sensitivity
analysis
• Obtaining management’s assessment over carrying
value and value in use, understanding and
challenging sensitivities performed;
•
•
•
•
Testing the accuracy of management’s forecasting
through a comparison of prior forecasts to actual
data;
Considering the appropriateness of management’s
assumptions and sensitivities relating to the
calculations of the value in use of CGUs and
estimated future cash flows, including the growth
rate and discount rate used to assess the level of
headroom;
The client performed sensitivity analysis and reverse
stress test to understand the impact of any
reasonably possible changes in assumptions,
determining their impact on the carrying value of
the intangible assets;
Evaluating whether the goodwill and intangible
assets are allocated to the CGUs appropriately and
challenging whether the CGUs identified are
appropriate;
• We ascertained the extent to which a change in
these assumptions, both individually or in
aggregate, would result in a goodwill impairment,
and considered the likelihood of such events
occurring. We also considered the sufficiency and
appropriateness of disclosures included in the
Group’s consolidated financial statements regarding
such events;
• We used our internal valuation specialists to inform
our challenge of management, that the assumptions
used within the calculation of WACC are reasonable
and consistent with other similar groups; and
• We assessed whether the Group’s disclosures with
respect to the carrying value of Group goodwill are
adequate and the key assumptions are disclosed.
Relevant disclosures in the Annual Report and Accounts 2021
•
•
The Group’s accounting policies on goodwill and impairment
of intangible assets are shown in Note 2.9 summary of
significant accounting policies.
The related disclosures in respect of goodwill impairment are
included in Note 10.
Our results
Based on our audit work we have identified that the valuation
of goodwill was accounted for in accordance with the Group’s
accounting policies. We consider the disclosures with respect
to the carrying value of the Group’s goodwill to be in
accordance with IAS 36.
59 | P a g e
Provision for impairment of inventories
We identified provision for impairment of inventories as one of the
most significant assessed risks of material misstatement due to error.
The Group’s total inventory as at 31 December 2021 totals £30,531,000
(2020: £21,994,000), which is recorded net of a provision of £1,421,000
(2020: £1,710,000).
Inventory management is one of the key challenges facing
management and one of the main determinants of the Group’s
underlying performance.
The provision for impairment of inventories is calculated based on
historical sales trends, and management’s estimation of recoverability
of inventory on hand and is therefore subject to estimation uncertainty.
Key assumptions made by management include those in relation to
expected future sales and levels of excess inventory.
.
In responding to the key audit matter, we performed the
following audit procedures:
•
•
Assessing whether the Group’s accounting policy
for impairment of inventories is in accordance with
the financial reporting framework, including IAS 2
‘Inventories’;
Considering whether the Group’s inventory
provisions have been recognised in accordance
with the Group’s accounting policies;
• Understanding the design and evaluating the
•
•
•
•
implementation of processes and controls through
which the Group initiates, records, processes and
reports inventory provisions;
Challenging the reasonableness of the change in
management assumptions relating to the period of
sales data used to calculate the standard provision,
prior to management adjustments;
Challenging the appropriateness of the provision
percentage applied to excess stock over five years
and performing sensitivity on the assumptions used
in managements adjustments;
Agreeing the integrity of the underlying data used
in the calculation of the inventory provisions to
sales data;
Assessment of sales made at a loss, both during the
financial period and subsequent to the year end,
and an assessment of the historical accuracy of
prior period’s provisioning;
• On a sample basis we vouched post year end sales
to determine if inventory is held at lower of cost
and net realisable value;
•
Considering the suitability of the inventory
provision, including comparisons to competitors,
re-performance of the calculation and considering
historical performance relating to inventories.
Relevant disclosures in the Annual Report and Accounts 2021
•
•
The Group’s accounting policies on inventories are shown in
Note 2.10 of significant accounting policies.
The related disclosures in respect on inventories impairment
are included in Note 15.
Our results
Based on our audit work we have not identified any material
misstatements relating to the provision for inventories.
60 | P a g e
Key Audit Matter – Company
How our scope addressed the matter–Company
Recoverability of the Carrying Value of Investments in Subsidiaries
We identified the recoverability of the carrying value of investments in
subsidiaries as one of the most significant assessed risks of material
misstatement due to error.
The Company statement of financial position includes investments in
subsidiaries of £59,421,000 (2020: £59,358,000).
We have focused on this area due to the size of the investment balance
and the higher estimation uncertainty in determining the future
cashflows to support the balance.
There is a risk that the carrying value of investments may be overstated.
The process for assessing whether impairment exist under IAS 36
‘Impairment of Assets’ is complex and there is significant judgement in
forecasting future cashflows and therefore assessing the value.
Management has performed an assessment of the recoverable amount
of the investment and compared this to the carrying value using the
same cash flow methodology applied in the impairment test for
goodwill described above.
The judgements made by management in respect of the impairment
review are subject to significant measurement uncertainty.
Relevant disclosures in the Annual Report and Accounts 2021
•
•
The Company’s accounting policies on impairment of
investments is shown in note B to the Company financial
statements.
The related disclosures in respect of impairment of investment
is shown in note I to the Company financial statements.
In responding to the key audit matter, we performed the
following audit procedures:
•
•
Assessing management’s impairment review
including comparing management’s forecasts with
the latest Board-approved budget;
Assessing the accuracy of management’s
forecasting through a comparison of historical data
to actual results and projections for following
periods;
• Understanding the design and testing the
implementation of the processes and controls
through which the Company initiates, records,
processes and reports impairments of investments
in subsidiaries;
Assessing the competence, capabilities and
objectivity of the management expert used by the
Company;
Assessing the appropriateness of the methodology
and discount rate provided by management’s
expert and used in management’s impairment
review;
Challenging the assumptions included within
management’s calculation, which included gaining
an understanding of the key factors and
judgements applied in determining future forecast
results including the growth rate and discount
rates;
Assessing the accuracy of management’s forecasts
by comparing forecasts to historical results;
Considering any indicators of impairment such as
market capitalisation and current financial
performance;
Performing sensitivity analysis on key assumptions
to understand the potential impact on headroom.
This included sensitising the discount rate applied
to the future cash flows, and the short term growth
rates and operating income forecast; and
Assessing the adequacy of the disclosures in the
financial statements in accordance with the
requirements of IAS 36 ‘Impairment of Assets’.
•
•
•
•
•
•
•
Our results
Based on our audit testing, we did not identify any material
misstatements in respect of the recoverability of the carrying
value of investments in subsidiaries.
61 | P a g e
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements
on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Company
Materiality for financial statements as a whole
We define materiality as the magnitude of misstatement in the financial
statements that, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of these
financial statements. We use materiality in determining the nature,
timing and extent of our audit work.
Materiality threshold
£545,000 which is 0.5% of revenue.
Significant judgements made by auditor in determining the
materiality
In determining materiality, we made
the following significant judgements:
We determined that revenue was the
most appropriate benchmark for the
Group due to it being a key
performance indicator of the Group
(as part of the Sales growth KPI) and
provides a consistent year on year
basis for determining materiality as it
is less volatile than the earnings for
the Group.
Materiality for the current year is
higher than the level we determined
for the year ended 31 December
2020 to reflect the year on year
revenue growth.
£490,500 which is 0.4% of total
assets, capped at a portion of
Group materiality.
In determining materiality, we
made the following significant
judgements:
The primary objective of the
parent company is to hold the
investments in the group
undertakings, as well as to
provide financing.
Materiality for the current year is
higher than the level we
determined for the year ended
31 December 2020 to reflect the
higher Group materiality. Group
materiality is higher as a result of
revenue growth in the year.
Performance materiality used to drive the extent of our
testing
We set performance materiality at an amount less than materiality for the
financial statements as a whole to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a
whole.
Performance materiality threshold
£354,250, which is 65% of financial
statement materiality.
£318,825, which is 65% of
financial statement materiality.
Significant judgements made by auditor in determining the
performance materiality
In determining performance
materiality, we assessed the strength
of the control environment, including
the effect of misstatements identified
in previous audits, to make our
judgement. Therefore, we consider
the performance materiality
percentage to be appropriate.
In determining performance
materiality, we assessed the
strength of the control
environment, including the effect
of misstatements identified in
previous audits, to make our
judgement. Therefore, we
consider the performance
materiality percentage to be
appropriate.
62 | P a g e
Specific materiality
Specific materiality
We determine specific materiality for one or more particular classes of
transactions, account balances or disclosures for which misstatements
of lesser amounts than materiality for the financial statements as a
whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
For both the Group and Company we determined a lower level of
specific materiality for related party transactions and directors’
remuneration, excluding intercompany transactions.
Communication of misstatements to the audit committee We determine a threshold for reporting unadjusted differences to the
audit committee.
Threshold for communication
£27,250 and misstatements below
that threshold that, in our view,
warrant reporting on qualitative
grounds.
£24,525 and misstatements below
that threshold that, in our view,
warrant reporting on qualitative
grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
Overall materiality – Group
Overall materiality – Company
Revenue
£109m
PM
£354k,
65%
FSM
£545k,
0.5%
TFPUM
£191k,
35%
Total
Assets
£135m
PM
£319k,
65%
FSM
£491k…
TFPUM
£172k,
35%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the Group’s and the Company’s business and in particular matters
related to:
Understanding the Group, its components, and their environments, including Group-wide controls
•
•
The engagement team obtained an understanding of the Group and its environment, including Group-
wide controls, and assessed the risks of material misstatement at the Group level; and
The engagement team further considered the structure of the Group, including Group-wide processes
and controls, and used this to inform our assessment of risk
Identifying significant components
•
In order to address the risks identified, the engagement team performed an evaluation on components
to identify significant components and to determine the planned audit response based on a measure of
materiality, calculated by considering the component’s significance as a percentage of the Group’s total
assets, revenue, inventories and profit before taxation.
63 | P a g e
Type of work to be performed on financial information of parent and other components (including how it addressed the key audit
matters)
•
We have performed full scope audits using component materiality for, Flowtech Fluidpower plc and the
subsidiaries Fluidpower Group UK Limited, Fluidpower Group Services Limited, Flowtech Fluidpower
Ireland Limited, Fluidpower Shared Services Limited and Fluidpower MIP Limited.
We performed specific audit procedures over certain balances and transactions on Flowtechnology
Benelux Limited and Hydroflex Hydraulics Group BV.
•
Performance of our audit
•
•
•
•
Together, the components subject to full scope audits and specified audit procedures performed by the group auditor
were responsible for 99% of the Group’s total assets, 100% of the Group’s revenue and 83% of the Group’s profit before
tax. The components on which full scope audit procedures were performed provide an appropriate basis for undertaking
audit work to address the Key Audit Matters at Group level identified above;
For the remaining eight components we performed analytical procedures.
Testing of the consolidation process, including re-performance of management’s calculations; and
There were no changes in scope from the prior year.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic report or the Directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you
if, in our opinion:
•
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
the Company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
•
•
•
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
64 | P a g e
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the inherent
limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may not be detected, even
though the audit is properly planned and performed in accordance with the ISAs (UK).
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
• we obtained an understanding of the legal and regulatory frameworks applicable to the Group and the industry in which it
operates. We determined that the following laws and regulations were most significant; UK adopted international accounting
standards , FRS 101, Companies Act 2006 and Quoted Companies Alliance (QCA) Corporate Governance Code.
• We obtained an understanding of how the Company and the Group are complying with those legal and regulatory
frameworks by making inquiries of management, those responsible for legal and compliance procedures and the company
secretary. We corroborated our inquiries through our review of board minutes and papers provided to the Audit Committee.
• We assessed the susceptibility of the Company’s and Group’s financial statements to material misstatement, including how
fraud might occur. Audit procedures performed by the Group engagement team included:
Assessing the design and implementation of controls management has in place to prevent and detect fraud;
•
• Obtaining an understanding of how those charged with governance considered and addressed the potential for override of
controls or other inappropriate influence over the financial reporting process;
Challenging assumptions and judgments made by management in its significant accounting estimates;
Identifying and testing journal entries, in particular journal entries determined to be large or relating to unusual transactions.
•
•
• Making inquiries, in respect of fraud, of those outside the finance team, including key management and the internal process
•
•
•
audit team.
These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or
error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error,
as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed
non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely
we would become aware of it; and
The assessment of the appropriateness of the collective competence and capabilities of the engagement team included
consideration of the engagement team's knowledge of the industry in which the client operates, and the understanding of,
and practical experience with, audit engagements of a similar nature and complexity through appropriate training and
participation; and
The engagement team’s discussions in respect of potential non-compliance with laws and regulations and fraud included the
risk of fraud in revenue recognition. We identified improper revenue recognition as a key audit matter. The key audit matters
section of our audit report explains the matter in more detail and also describes the specific procedures we performed in
response to the key audit matter.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them
in an auditor’s 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 and the company’s members as a body, for our audit work, for this report, or for the opinions we have
formed.
Michael Lowe, Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Manchester
28 March 2022
65 | P a g e
Consolidated Income Statement
For the year ended 31 December
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses before separately disclosed items:
- Separately disclosed items
Total administrative expenses
Operating profit /(loss)
Financial expenses
Net financing costs
Profit/(Loss) from continuing operations before tax
Taxation
Profit/(Loss) from continuing operations
Profit /(Loss) for the year attributable to:
Owners of the parent
Earnings per share
Note
2021
£000
2020
£000
3
3
4
6
3
7
109,107
(70,609)
38,498
(4,683)
95,081
(62,487)
32,594
(4,286)
(28,125)
(27,236)
(1,978)
(2,466)
(30,103)
3,712
(833)
(833)
2,879
(741)
(29,702)
(1,394)
(754)
(754)
(2,148)
(24)
2,138
(2,172)
2,138
(2,172)
2,138
(2,172)
Basic earnings per share - continuing operations
9
3.48p
(3.54p)
Diluted earnings per share - continuing operations
3.45p
(3.54p)
Consolidated Statement of Comprehensive Income
Profit/(Loss) for the year
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
- Exchange differences on translating foreign operations
Total comprehensive income /(loss) for the year
Total comprehensive income /(loss) for the year attributable to:
Owners of the parent
66 | P a g e
2021
£000
2,138
2020
£000
(2,172)
(342)
1,796
1,796
1,796
289
(1,883)
(1,883)
(1,883)
Consolidated Statement of Financial Position
Note
2021
£000
2020
£000
Assets
Non-current assets
Goodwill
Other intangible assets
Right-of-use assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Prepayments
Tax receivable
Cash and cash equivalents
Total current assets
Liabilities
Current liabilities
Lease liability
Trade and other payables
Tax payable
Total current liabilities
Net current assets
Non-current liabilities
Interest-bearing borrowings
Lease liability
Provisions
Deferred tax liabilities
Total non-current liabilities
Net assets
Equity directly attributable to owners of the Parent
Share capital
Share premium
Other reserves
Shares owned by the Employee Benefit Trust
Merger reserve
Merger relief reserve
Currency translation reserve
Retained losses
Total equity attributable to the owners of the Parent
10
11
21
13
15
16
17
18,21
19
18
18, 21
20
14
23
63,164
4,517
6,925
6,891
81,497
30,531
21,566
472
-
4,562
57,131
1,561
21,111
604
23,276
33,855
19,927
5,586
309
1,528
27,350
88,002
30,746
60,959
187
(276)
293
3,646
(286)
(7,267)
88,002
63,164
5,483
7,490
6,747
82,884
21,994
18,415
477
257
9,235
50,378
1,459
17,805
-
19,264
31,114
19,887
6,278
367
1,459
27,991
86,007
30,746
60,959
187
(372)
293
3,646
343
(9,795)
86,007
The financial statements on pages 65-115 were approved by the Board of Directors on 28 March 2022 and were signed on its behalf by:
Russell Cash
Chief Financial Officer
Company number: 09010518
67 | P a g e
Consolidated Statement of Changes in Equity
Issue of share capital
25
45
Share
capital
£000
Share
premium
£000
Other
reserve
£000
Shares
owned by
the EBT
£000
Merger
reserve
£000
Merger
relief
reserve
£000
Currency
translation
reserve
£000
Retained
losses
£000
Total
equity
£000
30,579
60,959
187
(372)
293
3,599
244
(7,955)
87,534
-
-
-
-
-
-
167
-
-
167
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47
-
-
-
(2,172)
(2,172)
381
(92)
289
381
(2,264)
(1,883)
-
-
-
-
70
214
(282)
282
-
-
142
142
47
(282)
424
356
30,746
60,959
187
(372)
293
3,646
343
(9,795)
86,007
30,746
60,959
187
(372)
293
3,646
343
(9,795)
86,007
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,138
2,138
-
-
(535)
193
(342)
(535)
2,331
1,796
-
-
-
-
-
-
-
96
-
-
-
96
-
-
-
-
-
-
-
-
-
(94)
(14)
82
166
45
166
(49)
(94)
197
199
30,746
60,959
187
(276)
293
3,646
(286)
(7,267)
88,002
Balance at
1 January 2020
(Loss) for the year
Other comprehensive
income
Total comprehensive
income for the year
Transactions
with owners
Shares issued as
consideration
Exchange reserve
realised
Share-based
payment charge
Total transactions
with owners
Balance at 31
December 2020
Balance at
1 January 2021
Profit for the year
Other
comprehensive
income
Total comprehensive
income for the year
Transactions
with owners
Share options
settled
Share-based
payment charge
Other movements
Total transactions
with owners
Balance at 31
December 2021
68 | P a g e
Note
2021
£000
2020
£000
24
(441)
10,083
13
11
-
(1,342)
(761)
525
-
(164)
(1,652)
-
105
(219)
(1,578)
(1,930)
21
(1,882)
(1,550)
(246)
(547)
108
(264)
(603)
-
(2,567)
(2,417)
(4,586)
9,235
(87)
4,562
5,736
3,446
53
9,235
Consolidated Statement of Cash Flows
Cash flow from operating activities
Net cash from operating activities
Cash flow from investing activities
Acquisition of subsidiary, net of cash acquired
Acquisition of property, plant and equipment
Acquisition of intangible assets (under construction)
Proceeds from sale of property, plant and equipment
Payment of deferred and contingent consideration
Net cash used in investing activities
Cash flows from financing activities
Repayment of lease liabilities
Interest on lease liabilities
Other interest
Proceeds from sale of shares held by the EBT
Net cash used in financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at start of year
Exchange differences on cash and cash equivalents
Cash and cash equivalents at end of year
17
69 | P a g e
Consolidated Statement of Cash Flows
Reconciliation of liabilities arising from financing activities
The changes in the Group’s liabilities arising from financing activities can be classified as follows:
At 1 January 2020
Cash flows:
Repayment
Long-term
borrowings
£000
Short-term
borrowings
£000
Lease
liabilities
£000
Total
£000
4,000
16,000
8,433
28,433
-
-
(1,550)
(1,550)
Transfer between facilities (note 18)
16,000
(16,000)
-
-
(113)
-
19,887
19,887
-
40
-
-
19,927
-
-
-
-
-
-
-
-
-
(116)
(229)
970
970
7,737
27,624
7,737
27,624
(1,882)
(1,882)
(59)
(19)
1,424
1,424
(73)
(73)
7,147
27,074
Other movements
Noncash:
Additions
At 31 December 2020
At 1 January 2021
Cash flows:
Repayment
Other movements
Non cash:
Additions
Foreign exchange difference
At 31 December 2021
70 | P a g e
Notes to the Consolidated Financial Information
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: info@flowtechfluidpower.com.
2. Accounting policies
2.1 Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with UK adopted international accounting
standards. The Company financial statements have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced
disclosure framework’ (FRS 101).
The consolidated financial statements have been prepared on a going concern basis and prepared on the historical cost basis.
The consolidated financial statements are presented in sterling and have been rounded to the nearest thousand (£’000). The
functional currency of the Company is sterling.
The preparation of financial information in conformity with UK-adopted international accounting standards 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.
Accounting standards issued but not yet effective.
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided not to adopt early. The most significant of these is as follows,
which are all effective for the period beginning 1 January 2022:
1. Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
2. Definition of Accounting Estimates (Amendments to IAS 8)
3. Disclosure of Accounting policies (Amendments to IAS 1 and FRS Practice Statement 2)
4. Onerous Contracts Ð Cost of Fulfilling a Contract (Amendments to IAS 37).
5. Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)
6. Reference to the Conceptual Framework (Amendments to IAS 16)
7. Annual Improvements to IFRS Standards 2018-2020 Cycle (Amendments to IFRS 1, IFRS 9, IFRS 16, IAS
41), and
8. Classification of Liabilities as Current or Non-current (Amendments to IAS 1).
These standards are not expected to have a material impact on the entity in the current or future reporting periods and on
foreseeable future transactions.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in the
consolidated financial statements.
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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:
o As expected in 2021 the Group returned to a profitable trading performance following the challenges presented
o
o
by COVID-19;
The Group is expecting to continue to trade profitably in 2022 and beyond;
The Group is financed by revolving credit facilities totalling £20m (in place until November 2023) and a £5m
overdraft facility, repayable on demand, and;
o At the end of 2021 the Group’s Net Bank Debt was £15.4 million (£9.6 million within the aggregate banking
facilities which include a £5.0 million overdraft facility).
The Directors have prepared forecasts covering the period to September 2023. 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 banking facilities.
We have performed reverse stress testing, based on revenue reductions, to determine scenarios in which our banking covenants
could be breached. The Directors view the set of circumstances required for such a situation to crystallise as highly unlikely and
as such not reasonably plausible scenarios.
The Directors believe the business will continue to operate within its agreed banking facilities and comply with all banking
covenants. As such the Group therefore continues to adopt the going concern basis is preparing its financial statements.
2.3 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 Fluidpower Shared Services (formerly Flowtech Holdings Limited)
via a share for share exchange with the Shareholders of Fluidpower Shared Services 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 judge 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 IFRS
3 (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 following accounting treatment was applied in respect of the share for share exchange:
1. The assets and liabilities of Fluidpower Shared Services Limited and its subsidiaries were recognised in the
consolidated financial statements at the pre-combination carrying amounts, without restatement
to fair value, and
2. The retained losses and other equity balances recognised in the consolidated financial statements for the
year ended 31 December 2013 reflect the retained losses and other equity balances of Fluidpower
Shared Services Limited and its subsidiaries recorded before the share for share exchange. However,
the equity structure (share capital and share premium balances) shown in the consolidated 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’.
3. 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.
Subsidiaries
The Group’s financial statements consolidate those of the Parent Company and all of its subsidiaries as of 31 December 2021.
The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and
has the ability to affect those returns through its power over the subsidiary. Subsidiaries, except for those specifically mentioned,
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have a reporting year ending in December. Beaumanor Engineering Limited has a reporting year ending in June, whilst BALU
Limited has a reporting year ending in July, however both of these entities are dormant.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses
on transactions between Group companies. Where unrealised losses on intra-Group asset sales are reversed on consolidation, the
underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective
date of acquisition, or up to the effective date of disposal, as applicable.
2.4 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 (i) 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.
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:
1. fixed payments (including in-substance fixed payments), less any lease incentives receivable;
2. variable lease payments that are based on an index or a rate
3. amounts expected to be payable by the lessee under residual value guarantees
4. the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
5. 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:
1. the amount of the initial measurement of lease liability
2. any lease payments made at or before the commencement date less any lease incentives received
3. any initial direct costs, and
4. 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 with a value of less than £3,500.
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.
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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.
2.5 Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:
1. they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash
or other financial assets or to exchange financial assets or financial liabilities with another party
under conditions that are potentially unfavourable to the Company (or Group), and
2. where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-
derivative that includes no obligation to deliver a variable number of the Company’s own equity
instruments or is a derivative that will be settled by the Company’s exchanging a fixed amount of
cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so
classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up
share capital and share premium account exclude amounts in relation to those shares.
2.6 Financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings,
and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at the transaction price in accordance with IFRS 15.
The Group makes use of a simplified approach in accounting for trade losses and other receivables as well as contract assets
and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cashflows,
considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its
historical experience, external indicators and forward looking information to calculate the expected credit losses using a
provision matrix.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method.
Cash and cash equivalents
Cash is defined as cash in hand and on demand deposits. Cash and equivalents are defined as short-term highly liquid
investments with original maturities of three months or less.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment
losses. Any change in their value through impairment or reversal of impairment is recognised in profit or loss. Discounting is
omitted where the effect is immaterial.
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.
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2.7 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items
of property, plant and equipment.
Depreciation is charged to the income statement over the estimated useful lives of each part of an item of property, plant and
equipment. Land is not depreciated. The estimated useful lives and depreciation methods are as follows:
Property
Plant, machinery and equipment
Motor vehicles
Right-of-use property
Right-of-use motor vehicles
Up to 50 years - straight line
3 to 20 years - straight line
4 to 5 years - straight line
2 to 12 years - straight line
2 to 5 years - straight line
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
2.8 Business combinations
Subject to the transitional relief in IFRS 1 ‘First time adoption of IFRSs’, all business combinations are accounted for by applying
the acquisition method. Business combinations are accounted for using the acquisition method as at the acquisition date, which
is the date on which control is transferred to the Group.
Acquisitions after 1 January 2011
For acquisitions on or after 1 January 2011, the Group measures goodwill at the acquisition date as:
1. the fair value of the consideration transferred; plus
2. the recognised amount of any non-controlling interests in the acquiree; plus
3. the fair value of the existing equity interest in the acquiree; less
4. the fair value of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred
and included in the separately disclosed ‘acquisition costs’ as part of administration expenses.
Any contingent consideration payable is recognised at fair value at the acquisition date. Implied interest cost of deferred
consideration is accounted as finance cost. Subsequent changes to the fair value of the contingent consideration are recognised
in profit or loss.
2.9 Intangible assets
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to operating segments and is not
amortised but is tested annually for impairment, or earlier if there is an indication of impairment.
Acquired intangibles
Intangible assets acquired as part of business combinations are capitalised at fair value at the date of acquisition. Following the
initial recognition, the carrying amount of an intangible is its cost less accumulated amortisation and any accumulated impairment
losses. Amortisation is charged on the basis of the estimated useful life on a straight-line basis and the expense is taken to the
income statement and included in the separately disclosed ‘amortisation of acquired intangibles’ as part of administration
expenses (note 11).
The Group has recognised customer relationships and brand identity as separately identifiable acquired intangible assets. The
useful economic life attributed to each intangible asset is determined at the time of the acquisition and ranges from five to ten
years. Impairment reviews are undertaken annually and whenever the Directors consider that there has been a potential indication
of impairment.
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Website development costs
Website development costs that generate economic benefits beyond one year are capitalised as intangible assets and amortised
on a straight-line basis over a period of up to six years, or by exception over a longer period where it is expected that economic
benefits are attributable over a longer period. The remaining useful life of assets is reviewed on an annual basis, or where a change
in the business or other circumstances would trigger a revision. Assets under development are not amortised but instead tested
for impairment annually. The amortisation expense on intangible assets is recognised in the income statement within
Administration costs. Software as a service (“SAAS”) contract costs are expensed to the Income Statement over the life of the
contract. For SAAS and cloud based technology, integration costs are capitalised only when they represent enhancements to
Group’s existing assets. Capitalised development expenditure is stated at cost less accumulated amortisation and less accumulated
impairment losses. Capitalised costs include employee costs incurred on project management, system architecture development
and testing.
2.10 Inventories
Inventories are stated at the lower of cost and net realisable value, after making allowance for obsolete and slow-moving items.
Cost includes expenditure incurred in acquiring the inventories and other costs in bringing them to their existing location and
condition.
2.11 Impairment
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine expected future
losses. A financial asset is impaired if the assessment reveals expected future losses based on detailed review of future expected
cash flows from the financial asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.
Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event
causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
Non-financial assets
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and
intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each
year at the same time.
The recoverable amount of an asset or operating segment is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually are grouped together by cash generating units. The goodwill
acquired in a business combination, for the purpose of impairment testing, is also allocated to the relevant cash generating
unit.
Goodwill acquired in a business combination is allocated to cash generating units that are expected to benefit from the
synergies of the combination and represent the lowest level within the Group at which management monitor the related
goodwill.
An impairment loss is recognised if the carrying amount of an asset or its cash generating units exceeds its estimated
recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of
cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating units,
and then to reduce the carrying amounts of the other assets in the cash generating unit on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior
periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
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2.12 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined
contribution pension plans are recognised as an expense in the income statement in the periods during which services are
rendered by employees.
2.13 Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured
at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. Fair
value is measured by use of the Black-Scholes model. An expert is used to assist management with the valuation.
2.14 Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a
result of a past event that can be reliably measured and it is probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks
specific to the liability.
2.15 Revenue
Revenue from sale of goods
Revenue from 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.
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 on-site services
Service revenues comprise installation and maintenance work at client sites. Revenue from on-site 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.
2.16 Cost of sales
Cost of sales includes all costs incurred up to the point of despatch including operating expenses of the warehouse.
2.17 Distribution expenses
Distributions costs are costs directly relating to despatch of goods and indirect costs including advertising and other sales related
expenses.
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2.18 Operating Divisions
Since the start of 2021, the Group has been operating under three distinct branded segments: Flowtech, Fluidpower Group
Solutions and Fluidpower Group Services. This has changed from the prior year, where Flowtech and Fluidpower Group Solutions
taken together were presented as “Components” segment. There is no change in the presentation of the Fluidpower Group
Services segment.
The Group monitors and reports business performance based on these three segments:
1. Flowtech:
Supply of both hydraulic and pneumatic consumables, predominantly through distribution for
maintenance and repair operations across all industry markets and supported by supply agreements direct
to a broad range of original equipment manufacturers
2. Fluidpower Group Solutions:
Supply specialist technical hydraulic components and systems predominantly into OEMs and end-user
channels to all industry markets and supported by supply agreements direct to a broad range of
manufacturer brands
3. Fluidpower Group Services:
Bespoke design, manufacturing, commissioning, installation and servicing of systems to manufacturers of
specialised industrial and mobile hydraulic OEMs and additionally a wide range of industrial end users.
The impact of segment reporting on the new segments is disclosed in the Financial Review.
The Board are 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.
2.19 Financing income and expenses
Financing expenses comprise interest payable, implied interest on deferred consideration and finance costs implied in leases
recognised in profit or loss using the effective interest method. Financing income comprises interest receivable on funds invested.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.
2.20 Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the
extent that it relates to items recognised in other comprehensive income, in which case it is recognised in other comprehensive
income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in
a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilised.
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2.21 Equity, reserves and dividend payments
Equity comprises the following:
1. ‘Share capital’ represents the nominal value of equity shares
2. ‘Share premium’ represents the excess over nominal value of consideration received for equity share net
of expenses of the share issue, less any costs associated with the issuing of shares.
3. ‘Other reserves’ relate to the issue of share options for consideration in respect of acquisition of
subsidiaries
4. ‘Share-based payment reserve’ represents the provision made to date for share-based payments as
detailed in note 2.13
5. ‘Shares owned by the EBT’ represents shares in the Group purchased for the Employee Benefit Trust.
6. ‘Merger reserve’ represents the difference between the Parent’s capital and the acquired Group’s capital
retained losses and other equity balances before and after the share for share exchange which
created the Group
7. ‘Merger relief reserve’ represents merger relief arising on the acquisition of subsidiaries for which some
or all of the consideration was settled in shares
8. ‘Currency translation reserve’ comprises all foreign exchange differences arising since 1 January 2011,
arising from the translation of foreign operations
9. ‘Retained losses’ represent retained losses of the Group, and
10. ‘Non-controlling interest’ relates to profits attributable to non-material non-controlling interests held in
subsidiaries.
All transactions with owners of the Parent are recorded separately within equity.
Dividend distributions payable to equity Shareholders are included in other liabilities when the dividends have been approved in
general meeting prior to the reporting date.
2.22 Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in sterling, which is also the functional currency of the Parent Company.
Foreign currency transactions and balances
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange
rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date
are re-translated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising
on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value are re-translated to the functional currency at foreign exchange
rates ruling at the dates the fair value was determined.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than
sterling are translated into sterling upon consolidation. The functional currency of the entities in the Group has remained
unchanged during the reporting period.
The assets and liabilities of foreign operations are translated to the Group’s presentational currency, sterling, at foreign exchange
rates ruling at the reporting date. The revenues and expenses of foreign operations are translated at an average rate for the year
where this rate approximates to the foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income and
accumulated in the currency translation reserve. The Group has taken advantage of the relief available in IFRS 1 to deem the
cumulative translation differences for all foreign operations to be zero at the date of transition to Adopted IFRSs (1 January 2011).
On disposal of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or
loss and are recognised as part of the gain or loss on disposal.
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2.23 Significant judgements, key assumptions and estimates
In the process of applying the Group’s accounting policies, which are described above, management have made judgements and
estimations about the future that have the most significant effect on the amounts recognised in the financial statements. The
estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if
the revision affects both current and future periods.
Significant management judgements
There are no significant judgements affecting the financial position this year (2020: nil).
Estimation uncertainty
Information about estimations and assumptions that may have the most significant effect on recognition and measurement of
assets, liabilities, income and expenses is provided below. Actual results may be substantially different.
Impairment of goodwill
The carrying value of goodwill must be assessed for impairment annually. This requires an estimation of the value in use of the
cash generating units (CGUs) to which goodwill is allocated. Value in use is dependent on estimations of future cash flows from
the CGU and the use of an appropriate discount rate to discount those cash flows to their present value. The carrying value of
goodwill as at 31 December 2021 is £63,164,000 (2020: £63,164,000). Refer to note 10 for further detail. There was no impairment
charge during the year.
Acquired intangibles
Intangible assets (customer relationships and brand identity) have been acquired as part of the net assets of certain subsidiaries.
These intangible assets were capitalised at their fair value at the date of acquisition. Determining the value of acquired intangibles
required the calculation of estimated future cash flows expected to arise from the intangible assets at a suitable discount rate in
order to calculate their present value. In addition, an estimate of the useful life of the intangible asset has to be made over the
period in which the cash flows were expected to be generated. The carrying amount of the acquired intangibles at the reporting
date was £4,517,000 (2020: £5,483,000). During the year, intangible assets of £673,000 relating to Brand name was impaired,
following discontinuation of its use as a trading name with effect from 4 January 2022. Refer to note 11 for further detail.
Provision for impairment of inventories
The carrying value of inventories as at 31 December 2021 was £30,530,000 (2020: £21,994,000) and included a provision against
the inventories of £1,421,000 (2020: £1,710,000). The provision for impairment of inventories is based on sales trends for all
inventory and management’s estimation of recoverability. Where appropriate, the provision contains an uplift to reflect the slower
rate of sale due to the impact of COVID-19. As always, there is a risk that the provision will not match the inventories that ultimately
prove to be impaired.
2.24 Separately disclosed items
Separately disclosed items are those significant items which in management’s judgement should be highlighted by virtue of their
size or incidence to enable a full understanding of the Group’s financial performance.
2.25 Investment in own shares
Own shares held by the Group’s Employee Benefit Trust (EBT) have been classified as deductions from Shareholders’ funds. The
costs of purchasing own shares held by the EBT are shown as a deduction within Shareholders’ equity. The gain from the sale of
own shares is recognised in Shareholders’ equity. Neither the purchase nor sale of own shares leads to a gain or loss being
recognised in the income statement.
2.26 Contingent consideration
Where acquisition consideration includes consideration contingent on performance outcomes being met, the consideration is
valued at the acquisition date based on performance forecasts available at the time. Those forecasts are reviewed at the reporting
date and the consideration revised where materially different.
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3. Segment reporting
From the beginning of 2021, Management reviews the operations of the business based on three segments – Flowtech, Fluidpower
Group Solutions and Fluidpower Group Services as explained in note 2.18. 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
later in this note; the Directors consider that these should be reported separately as they do not relate to the performance of the
segments.
Segment information for the reporting periods are as follows:
For the year ended 31 December 2021
Income statement - continuing operations:
Fluidpower
Group
Solutions
£000
Fluidpower
Group
Services
£000
Inter-
segmental
transactions
£000
Central
costs
£000
Total
continuing
operations
£000
Flowtech
£000
Revenue from external customers
52,135
39,575
17,397
-
109,107
Inter-segment revenue
5,164
970
833
(6,967)
Total revenue
57,299
40,545
18,230
(6,967)
Underlying operating result (*)
7,101
3,505
Net financing costs
(141)
(72)
Underlying segment result
6,960
3,433
140
(20)
120
Separately disclosed items
(925)
(723)
(124)
Profit/(loss) before tax
6,035
2,710
(4)
Specific disclosure items
Depreciation and impairment on owned
plant, property and equipment
Depreciation on right of use assets
Impairment of acquired intangibles
Amortisation
Reconciliation of underlying operating
result
773
656
673
247
137
615
-
175
192
-
683
124
Underlying operating result (*)
7,101
3,505
Separately disclosed items
(925)
(723)
Operating profit
6,176
2,782
140
(124)
16
(5,056)
(600)
(5,656)
(206)
(5,862)
-
180
-
-
(5,056)
(206)
(5,262)
-
-
-
-
-
-
-
-
-
109,107
5,690
(833)
4,857
(1,978)
2,879
1,084
1,643
673
1,054
5,690
(1,978)
3,712
(*) Underlying operating result is continuing operations’ operating profit before separately disclosed items detailed later in this note.
81 | P a g e
Segment information for 2020 has been re-stated following the division of segments into Flowtech, Fluidpower Group Solutions
and Fluidpower Group Services:
For the year ended 31 December 2020
Income statement - continuing
operations:
Fluidpower
Group
Solutions
£000
Fluidpower
Group
Services
£000
Inter-
segmental
transactions
£000
Central
costs
£000
Total
continuing
operations
£000
Flowtech
£000
Revenue from external customers
46,060
33,578
15,443
Inter-segment revenue
2,084
581
559
(3,224)
Total revenue
48,144
34,159
16,002
(3,224)
-
-
95,081
-
95,081
Underlying operating result (*)
Net financing costs
Underlying segment result
Separately disclosed items
Profit/(loss) before tax
Specific disclosure items
Depreciation and impairment on owned
plant, property and equipment
Depreciation on right of use assets
Amortisation
Reconciliation of underlying operating
result
Underlying operating result (*)
Separately disclosed items
Operating profit/(loss)
5,038
(146)
4,892
(862)
4,030
1,790
(1,236)
(4,520)
1,072
(104)
(6)
-
(498)
1,686
(1,242)
-
(5,018)
(862)
(240)
(502)
824
(1,482)
-
(5,520)
(754)
318
(2,466)
(2,148)
655
206
309
-
-
1,170
646
282
5,038
(862)
4,176
771
684
66
124
-
124
-
-
1,607
1,090
1,790
(1,236)
-
(4,520)
1,072
(862)
(240)
-
(502)
928
(1,476)
-
(5,022)
(2,466)
(1,394)
(*) Underlying operating result is continuing operations’ operating profit before separately disclosed items detailed below.
Separately disclosed items
Separately disclosed items within administration expenses:
- Acquisition costs
- Amortisation of acquired intangibles (note 11)
-Impairment of acquired intangibles (note 11)
- Share-based payment costs (note 22)
- Restructuring
- Changes in amounts accrued for contingent consideration
2021
£000
11
1,054
673
166
74
-
2020
£000
94
1,090
-
142
921
219
Total separately disclosed items
1,978
2,466
Acquisition costs relate to stamp duty, due diligence, legal fees, finance fees and other professional costs incurred in the acquisition
of businesses.
82 | P a g e
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 related 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 and, in 2019, includes
provision for stock in respect of businesses moving to integrated warehousing facilities, employee redundancies and IT integration.
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 2021
United Kingdom
Europe
Rest of the World
Total
31 December 2020
United Kingdom
Europe
Rest of the World
Total
Sale of goods
£000
Contracts
£000
On-site services
£000
Total revenue
£000
82,809
20,952
2,557
106,318
900
-
-
900
1,889
-
-
85,598
20,952
2,557
1,889
109,107
81,496
Non-current
assets
£000
76,914
4,582
-
Sale of goods
£000
Contracts
£000
On-site services
£000
Total revenue
£000
69,238
20,424
1,424
91,086
1,687
2,308
-
-
-
-
1,687
2,308
73,233
20,424
1,424
95,081
Non-current
assets
£000
78,208
4,676
-
82,884
Some contract works begun during the year were still in progress at the end of the year. As such the financial statements contain
contract assets worth £714k (2020: nil) and contract liabilities worth £688k (2020: nil).
No customers of the Group account for 10% or more of the Group’s revenue for either of the years ended 31 December 2021 or
2020. Non-current assets are allocated based on their physical location. 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 6 and
separately disclosed items, as detailed earlier in this note.
Revenue recognised at a point in time was £105,418k (2020: £93,394k) and revenue recognised over time was £900k (2020: £1,687k).
83 | P a g e
4. Operating profit / (loss)
The following items have been included in arriving at the operating profit for continuing operations:
Depreciation of property, plant and equipment under right-of-use assets (note 21)
Depreciation and impairment of tangible assets (note 13)
Amortisation of intangible assets (note 11)
Impairment of intangible assets (note 11)
Changes in amounts accrued for contingent consideration (27.1)
Impairment (gain)/loss on trade receivables and prepayments
Loss on foreign currency transactions
Repairs and maintenance expenditure on plant and equipment
Services provided by the Group’s Auditor
Audit of the statutory consolidated and Company financial statements of
Flowtech Fluidpower plc
Disclosure below based on amounts receivable in respect of other services to the Company
and its subsidiaries
2021
£000
1,643
1,084
1,054
673
-
(1)
24
95
2021
£000
88
2020
£000
1,607
1,170
1,090
-
219
152
240
100
2020
£000
92
Amounts receivable by the Company’s Auditor and its associates in respect of:
Audit of financial statements of subsidiaries of the Company
172
171
Services are provided by other professional advisers as deemed appropriate by the Board.
5. Directors & employees
The average number of persons employed by the Group (including Directors) during each year, analysed by category, was as follows:
Assembly and distribution
Administration
Total
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Contributions to defined contribution pension plans
Share-based payments (note 22)
Total
84 | P a g e
Number
2021
Number
2020
269
343
612
2021
£000
262
365
627
2020
£000
20,538
18,925
2,126
2,040
658
166
630
142
23,488
21,737
Wages and salaries
Social security costs
Contributions to defined contribution pension plans
2021
£000
202
-
-
2020
£000
1,148
17
37
Total
202
1,202
Payroll costs, net of COVID-19 subsidy, charged to Income statement:
Wages and salaries
Social security costs
Contributions to defined contribution pension plans
Share based payments (note 22)
Total
2021
£000
20,336
2,126
658
166
2020
£000
17,777
2,023
593
142
23,286
20,535
(*) COVID-19 subsidy credit in FY 2021 relates to contribution to payroll costs received from the UK government. During FY 2020, COVID-19 subsidies were availed under the
respective schemes in UK, Netherlands and Republic of Ireland.
Key management compensation
The remuneration of the Directors and the Chair, who are all statutory Directors and are the key management of the Group, is
set out below in aggregate for each of the key categories specified in IAS 24 ‘Related Party Disclosures’.
Remuneration
Bonus
Social security costs
Benefits in kind
Total
2021
£000
602
106
73
9
790
-
2020
£000
604
76
21
701
Directors waived remuneration totalling £5k during the months of May-June 2020 as part of steps taken by the Group in order
to mitigate the impact of COVID-19 on the business. As part of this initiative, the wider management waived a further £15.4k of
remuneration. The amounts set out above include remuneration in respect of the highest paid Director as follows:
Highest paid Director’s remuneration
Remuneration
Bonus
Social security costs
Benefits in kind
2021
£000
2020
£000
225
224
56
27
7
-
30
18
Total highest paid Director’s remuneration
315
272
85 | P a g e
2021
£000
2020
£000
546
40
-
586
247
247
833
377
7
104
488
266
266
754
2021
£000
2020
£000
493
241
(60)
674
106
(112)
73
67
741
(73)
146
17
90
(80)
(16)
30
(66)
(24)
6. Financial expenses
Finance expenses for the year consist of the following:
Finance expense arising from:
Interest on revolving credit facility
Amortisation of loan arrangement fee
Bank loans
Total bank interest
Interest on lease liabilities
Total lease interest
Total finance expense
7. Taxation
Recognised in the income statement
Continuing operations:
Current tax expense
Current year charge/(credit)
Overseas tax
Adjustment in respect of prior periods
Current tax expense
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Change in tax rate
Deferred tax charge/(credit)
Total tax charge/(credit) - continuing operations
86 | P a g e
7. Taxation……continued
Reconciliation of effective tax rate
Profit/ (Loss) for the year
Total tax (expense)/ credit
Profit / (Loss) excluding taxation
Tax using the UK corporation tax rate of 19.00% (2020: 19.00%)
Deferred tax movements not recognised
Impact of change in tax rate on deferred tax balances
Income not taxable
Amounts not deductible
Adjustment in respect of prior periods
Other adjustments
Other tax reliefs and transfers
Total tax (credit)/expense in the income statement - continuing operations
2021
£000
2020
£000
2,138
(2,172)
(741)
24
2,879
(2,148)
547
64
181
-
61
(172)
60
-
741
(400)
149
31
(6)
233
1
-
16
24
Change in corporation tax rate
An increase in the UK corporation tax rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021,
and the UK deferred tax position for the group as at 31 December 2021 has been calculated based on this rate.
8. Dividends
In response to the COVID-19 pandemic, the Directors suspended dividend payments in order to retain as much cash in the business
as possible. Thereafter our dividend policy will recognise both the growth requirements of the business and the interests of our
Shareholders.
9. 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. For diluted loss per share the weighted
average number of ordinary shares in issue is not adjusted since its impact would be anti-dilutive.
87 | P a g e
9. Earnings per share……continued
Year ended 31 December 2021
Year ended 31 December 2020
Profit
after tax
£000
Weighted
average
number of
shares
Profit
per share
Pence
Loss
after tax
£000
Weighted
average
number of
shares
Loss
per share
Pence
Basic earnings per share
Continuing operations
2,138
61,493
3.48p
(2,172)
61,424
(3.54)
Diluted earnings per share
Continuing operations
2,138
61,894
3.45p
(2,172)
61,488
(3.54)
Weighted average number of ordinary shares for basic and diluted earnings per share
61,493
61,424
Impact of share options
401
64
Weighted average number of ordinary shares for diluted earnings per share
61,894
61,488
2021
£000
2020
£000
10. Goodwill
Cost
Balance at 1 January
Acquired through business combinations
Other movements
Balance at 31 December
Impairment
At 1 January
Impairment charge
At 31 December
2021
£000
2020
£000
63,164
63,014
-
-
195
(45)
63,164
63,164
-
-
-
-
-
-
Carrying amount at 31 December
63,164
63,164
Background
From the beginning of 2021, Management has reviewed the operations of the business based on three segments – Flowtech,
Fluidpower Group Solutions and Fluidpower Group Services. Goodwill has been allocated for impairment testing purposes to 14
cash-generating units across these 3 segments (2020 – 14 CGUs). These cash-generating units represent the lowest level within
the Group at which goodwill is monitored for internal management purposes.
No changes have been made in the current period in the identification of cash-generating units or the allocation of goodwill to
those units since the prior period.
88 | P a g e
The carrying amounts of goodwill allocated to these cash-generating units are as follows:
Cash generating unit
FTUK
Beaumanor Engineering
Orange County
Primary Fluid Power - Components
Primary Fluid Power - Systems
HTL
HES
Hydroflex-Hydraulics Oud
Flowtechnology Benelux BV
Nelson Hi-Power Components & Hose
assembly
Hydravalve
Indequip
Hi-Power Transport
Derek Lane
Total
£000
41,677
4,687
2,793
1,883
751
2,447
2,073
2,050
1,015
1,804
954
632
174
224
63,164
Impairment tests
During the year ended 31 December 2021, the Group determined that there was no impairment of any of its cash-generating
units containing goodwill.
The carrying amount of each cash-generating unit was determined by calculating the sum of the carrying amounts of all intangible
assets (including goodwill) and tangible assets attributable to that unit.
The recoverable amounts (i.e. higher of value in use and fair value less costs of disposal) of those units are determined on the
basis of value in use calculations. Management prepared forecasts for each cash-generating unit for periods of two years
(extending to 3 years where appropriate), all of which have been approved by the Board.
Cash flows beyond the period forecast by management for each CGU were extrapolated at an expected long-term growth rate of
2%. This growth rate does not exceed the long-term average growth rate for the market in which the Group operates
Key assumptions used in value in use calculations
The Group has determined that the recoverable amount calculations are most sensitive to changes in the following assumptions:
revenue growth rates, gross margins and discount rates.
Year 1 forecasts are based on CGU specific assumptions taking account of market conditions and expectations in the year ahead.
Beyond year 1, sensible CGU specific growth rates have been applied, in some cases, reflecting a recovery from COVID-19
supressed trading performance. Growth rates in all terminal periods are restricted to 2%.
The gross margins used in the calculations reflect the average gross margins of each cash-generating unit in the period
immediately before the forecast period, adjusted for expected future changes in selling prices and direct costs due to market
conditions.
The pre-tax discount rates used in the calculations ranged from 7.1% to 10.8% (2020 – 7.4% to 11.9%). This discount rate has been
derived from the Group's weighted average post-tax cost of capital. Based on work by an external expert, engaged by
management.
Sensitivity to changes in key assumptions
FTUK: The recoverable amount of the FTUK CGU is estimated to exceed the carrying value of the CGU at 31 December 2021 by
£2,485,000. The recoverable amount of this CGU would equal its carrying value if the key assumptions were to change as follows:
EBITDA margin
Discount rate
From
14.9%
10.3%
To
14.3%
10.7%
FTUK is a well-established business with a strong track record of profitability and cash generation. It is still recovering to a degree
from the impact of COVID-19 and has yet to see the benefit of operational improvements which have either already been made or
are in the process of being made, most notably the bringing together of five businesses to one as alluded to in the CEO’s year in
review section of this report. Management is confident that the base assumptions upon which this is based are all set at achievable
levels.
89 | P a g e
Orange County: The recoverable amount of the Orange County CGU is estimated to exceed the carrying value of the CGU at 31
December 2021 by £1,295,000. The recoverable amount of this CGU would equal its carrying value if the key assumptions were to
change as follows:
EBITDA margin
Discount rate
From
13.9%
10.8%
To
10.7%
13.6%
Orange County is a relatively difficult business to predict as can be seen by the differing historical trading performances. The
business is currently sat on a strong order book, and we believe the key assumptions upon which the impairment calculations are
based are appropriate.
Primary Systems: The recoverable amount of the Primary Systems CGU is estimated to exceed the carrying value of the CGU at
31 December 2021 by £882,000. The recoverable amount of this CGU would equal its carrying value if the key assumptions were
to change as follows:
EBITDA margin
Discount rate
From
13.9%
10.6%
To
12.8%
12.3%
Primary Systems has had a disappointing trading performance in 2021 but a variety of process and operational improvement plans
have now been put in place. This, combined with a healthy order book, give us confidence that the assumptions upon which these
calculations are based are sensible.
Hydroflex: The calculations resulted in an approximate breakeven position. This, combined with the expectation of improving
financial performance, resulted in a decision not to impair the goodwill value.
For illustrative purposes only we have considered the impact that movements in revenue, EBITDA margin and discount rate would
have on the extent of potential impairment:
1.
2.
3.
If revenue fell by 1% in the terminal period, the impact would be to increase the impairment by £306,000
If EBITDA margin fell by 100bps in the terminal period, the impact would be to increase the impairment by £718,000
If the discount rate increased from 9.8% to 10.8% the impact would be to increase the impairment by £463,000
11. Other intangible assets
Gross carrying value
Customer relationships
Brands
Assets under
construction (*)
Total
2021
£000
2020
£000
2021
£000
2020
£000
2021
£000
2020
£000
2021
£000
2020
£000
Balance at 1 January 2021
9,371
9,371
1,173
1,173
Additions
-
-
-
-
Balance at 31 December 2021
9,371
9,371
1,173
1,173
Amortisation and impairment
Balance at 1 January 2021
4,711
3,729
Amortisation
Impairment
946
-
982
-
350
108
673
Balance at 31 December 2021
5,657
4,711
1,131
242
108
-
350
-
761
761
-
-
-
-
-
-
-
-
-
-
-
10,544
10,544
761
-
11,305
10,544
5,061
3,971
1,054
1,090
673
-
6,788
5,061
Carrying amount at
31 December 2021
3,714
4,660
42
823
761
-
4,517
5,483
(*) The assets under construction relate to new website for the Flowtech Division comprising Online ordering, Customer Data Platform, Product information System and Fulfilment capabilities.
The amortisation of customer relationships and brands is charged to administration costs in the Consolidated Income Statement and is
referred to as the amortisation of acquired intangibles.
90 | P a g e
12. Subsidiary undertakings
Country of
incorporation
Principal activity
Ownership
Fluidpower MIP Limited
Fluidpower Group UK Limited
Fluidpower Group Services UK Limited
UK
UK
UK
Holding company
Distributors of engineering components
100%
100%
Assembly and distribution of engineering components
100%
Flowtech Fluidpower Ireland Limited
ROI
Assembly and distribution of engineering components
100%
Flowtechnology Benelux BV
Netherlands
Distributors of engineering components
The Hydraulic Group BV
Netherlands
Holding company
100%
100%
Hydroflex-Hydraulics BV
Netherlands
Assembly and distribution of engineering components
100%
Hydroflex-Hydraulics Rotterdam BV
Netherlands
Assembly and distribution of engineering components
100%
Hydroflex-Hydraulics Belgium NV
Belgium
Assembly and distribution of engineering components
100%
Fluidpower Shared Services Limited
Beaumanor Engineering Limited
Flowtech Europe Limited
Fluidpower Holdings Limited
Balu Limited
Indequip Limited
KR Couplings Limited
Betabite Hydraulics Limited
Hydraulics (Ireland) Limited
Haitima Flow Control UK Limited
Hydravalve UK Limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Hydraulic Equipment Supermarkets Limited UK
Branch Hydraulic Systems Limited
HES Tractec Limited
Weltac Limited
UK
UK
UK
Group Shared Service Centre
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
For all the subsidiaries above, the class of shares held are ordinary shares and all subsidiaries, except Fluidpower MIP Limited, are
indirect subsidiaries of Flowtech Fluidpower plc.
91 | P a g e
13. Property, plant & equipment
Cost
Balance at 1 January 2020
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2020 and 1 January 2021
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2021
Depreciation and impairment
Balance at 1 January 2020
Depreciation charge for the year
Impairment
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2020 and 1 January 2021
Depreciation charge for the year
Impairment
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2021
Net book value
At 31 December 2021
At 1 January 2021
At 1 January 2020
Land and
property
£000
Plant,
machinery and
equipment
£000
Motor vehicles
£000
Total
£000
1,184
12,411
23
-
-
1,207
82
-
-
1,419
(398)
58
13,490
1,234
(92)
(67)
1,289
14,565
157
50
-
-
-
207
36
-
-
243
1,046
1,000
1,027
7,324
856
50
(137)
41
8,134
908
-
(40)
(49)
8,953
5,612
5,356
5,087
764
212
(87)
9
898
26
(179)
(10)
735
350
152
62
(59)
2
507
140
-
(137)
(8)
502
233
391
414
14,359
1,654
(485)
67
15,595
1,342
(271)
(77)
16,589
7,831
1,058
112
(196)
43
8,848
1,084
-
(177)
(57)
9,698
6,891
6,747
6,528
Included in land and property is land at a cost of £145,000 which is not depreciated (2020: £145,000).
92 | P a g e
14. Deferred tax assets & liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Intangible assets
Property, plant and equipment
Provisions
Employee share-based payments
Losses and other deductions
Tax assets/(liabilities)
Net deferred tax liability
Movement in deferred tax during the year ended 31 December 2021
Intangible assets
Property, plant and equipment
Provisions
Employee share-based payments
Losses and other deductibles
Movement in deferred tax during the year ended 31 December 2020
Intangible assets
Property, plant and equipment
Provisions
Employee share-based payments
Losses and other deductibles
93 | P a g e
Assets
Liabilities
2021
£000
2020
£000
2021
£000
2020
£000
-
-
20
14
-
34
-
-
84
-
37
(806)
(1,117)
(756)
(463)
-
-
-
-
-
-
121
(1,562)
(1,580)
(1,528)
(1,459)
1 January
2021
£000
Recognised in
profit or loss
£000
31 December
2021
£000
(1,117)
(463)
84
-
37
(1,459)
311
(293)
(63)
14
(37)
(68)
(806)
(756)
20
14
-
(1,528)
1 January
2020
£000
Recognised in
profit or loss
£000
31 December
2020
£000
(1,315)
(342)
95
43
-
(1,519)
198
(121)
(11)
(43)
37
60
(1,117)
(463)
84
-
37
(1,459)
15. Inventories
Finished goods and goods for resale
2021
£000
30,531
2020
£000
21,994
Charges for finished goods recognised as cost of sales in the year amounted to £62,237,000 (2020: £54,974,000). The write-down
of inventories to net realisable value amounted to £21,000 (2020: £264,000). The write-downs and reversals are included in cost of
sales. The provision made against inventories at the year end was £1,421,000 (2020: £1,710,000).
Estimates are made of the net realisable value of inventory at the year end. In some circumstances, inventory is subsequently sold
in excess of the net realisable value determined, which results in a reversal of the write-down.
16. Trade & other receivables
Trade receivables
Other receivables
Trade and other receivables
The ageing of trade receivables at the balance sheet date was:
Not past due
Past due 0-30 days
More than 30 days
Gross
2021
£000
Impairment
2021
£000
17,711
2,283
720
20,714
27
9
262
298
Gross
2020
£000
16,574
1,151
480
18,205
The overall expected credit loss rate is 1.4% (2020: 1.6%).
The movement in the allowance of impairment in respect of trade receivables during each year was as follows:
2021
£000
333
(34)
(1)
298
Balance at 1 January 2021
Provision utilised
(Decrease)/increase in provision
Balance at 31 December 2021
94 | P a g e
2021
£000
2020
£000
20,416
17,872
1,150
543
21,566
18,415
Impairment
2020
£000
30
10
293
333
2020
£000
309
(128)
152
333
17. Cash & cash equivalents
Cash and cash equivalents:
Sterling
Euro
Dollar
2021
£000
3,285
1,251
26
2020
£000
7,980
1,226
29
Total cash and cash equivalents
4,562
9,235
18. Interest-bearing loans & borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are
measured at amortised cost. For more information about the Group’s exposure to interest rate and foreign currency risk, see note
27.
Non-current liabilities
Revolving credit facility ($)
Lease liabilities
Total non-current liabilities
Current liabilities
Lease liabilities
Total current liabilities
Total
2021
£000
2020
£000
19,927
5,586
25,513
1,561
1,561
19,887
6,278
26,165
1,459
1,459
27,074
27,624
($) RCF loan arrangement fee of £120k was paid in Nov 2020. The loan arrangement fee is amortised over the life of the loan (36 months). Accordingly, £40k amortisation charge
is charged to the income statement during 2021 (2020: £7k). The unamortised value of the loan fee as at 31 December 2021 of £73k is netted off against the RCF Facility of
£20,000k.
Terms and debt repayment
schedule
Currency
Nominal interest rate
Year of maturity
Carrying
value 2021
£000
Carrying
value 2020
£000
Secured revolving credit facility
GBP
SONIA+ 2.65%
2023
20,000
20,000
Lease liabilities
Lease liabilities
GBP
EUR
Various
Various
2021 to 2031
2021 to 2027
6,043
1,104
6,548
1,189
27,147
27,737
Under terms agreed in November 2020, the Group secured a revolving credit facility worth £20,000,000. The revolving credit facility
is subject to a non-utilisation fee of 0.9275% and is due for renewal in November 2023. The facility is secured by legal charges over
certain of the Group’s assets which include trade receivables and stock. Following the phase out of LIBOR, the Group agreed to
switch the benchmark rate to SONIA (Sterling Overnight Interbank Average Rate). The switch will take effect for any loans maturing
on or after 1st January 2022. The Group also has a £5,000,000 overdraft facility which is subject to annual review.
95 | P a g e
19. Trade & other payables
Current liabilities
Trade payables
Accrued expenses
Social security and other taxes (*)
20. Provisions
Opening balance
Amount utilised during the year
Amount (released)/ provided in the year
Closing balance
Provisions have been analysed between current and non-current as follows:
Current
Non-current
Total
2021
£000
2020
£000
15,719
10,792
3,555
1,837
3,088
3,925
21,111
17,805
2021
£000
367
-
(58)
309
2021
£000
-
309
309
2020
£000
417
(74)
24
367
2020
£000
-
367
367
Provisions comprise dilapidation provisions in respect of leasehold properties held by the Group and represents management’s
best estimate of the amount which is expected to be settled in respect of dilapidation costs for the relevant sites.
96 | P a g e
21. Right-of-use assets & lease liabilities
Right-of-use assets
Cost
Balance at 1 January 2021
Additions
Disposals
Effect of movement in foreign exchange
Balance at 31 December 2021
Depreciation and amortisation
Balance at 1 January 2021
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
Land and
property
£000
Plant,
machinery and
equipment
£000
Motor vehicles
£000
Total
£000
8,758
264
(703)
(100)
8,219
2,327
1,067
(454)
(41)
2,899
5,320
6,431
399
-
-
-
1,259
1,161
(328)
(14)
10,416
1,425
(1,031)
(114)
399
2,078
10,696
19
57
-
-
76
323
380
580
519
(295)
(8)
796
1,282
679
2,926
1,643
(749)
(49)
3,771
6,925
7,490
97 | P a g e
21. Right-of-use assets & lease liabilities continued
The statement of profit or loss shows the following amounts relating to right-of-use assets and liabilities:
Depreciation charge of right-of-use assets
Land and property
Plant, machinery and equipment
Motor vehicles
Interest expenses (included in finance cost)
Exchange movements in income statement
2021
£000
2020
£000
1,067
1,163
57
519
247
9
19
425
264
(3)
Total expense in the income statement relating to right-of-use assets
1,899
1,868
Analysis by length of liability
As at 31 December 2021
As at 31 December 2020
Plant,
machinery
and
equipment
£000
58
274
332
Land and
property
£000
970
4,576
5,546
Motor
vehicles
£000
533
736
1,269
Plant,
machinery
and
equipment
£000
Land and
property
£000
1,040
5,651
6,691
56
326
382
Total
£000
1,561
5,586
7,147
Motor
vehicles
£000
363
301
664
Total
£000
1,459
6,278
7,737
Current
Non-current
Total
The table below describes the nature of the Group’s leasing activities by type of right-of-use assets recognised on the balance
sheet.
Number of right-of-use assets leased
Range of remaining term
Number of leases with extension options
Number of leases with termination options
Plant,
machinery
and
equipment
Land and
property
Motor
vehicles
20
5
105
1-10 years
6 years
1-4 years
7
1
-
-
-
-
98 | P a g e
22. Employee benefits
23.1 Pension plans
Defined contribution plans
The Group operates a number of defined contribution pension plans. The total expense relating to these plans was £658,000 (2020:
£593,000) (net of COVID-19 Subsidy).
23.2 Share-based employee remuneration
As at 31 December 2021, the Group maintained five share-based payment schemes for employee remuneration: the Management
Incentive Plan; the Long-Term Incentive Plan, the Enterprise Management Incentive Plan, which has two sub plans, Approved and
Unapproved; and the Company Share Option Plan.
Management Incentive Plan
The Management Incentive Plan (‘MIP’) is part of the remuneration package of the Group’s senior management. Shares held in
Fluidpower MIP Limited under this plan may be sold if certain conditions, as defined in the Articles of Association of Fluidpower
MIP Limited, are met. It is based on the growth of Flowtech Fluidpower plc’s share value within a specified holding period. In
addition, participants in this scheme must be employed by the Group until the end of the agreed holding period. At the end of
the holding period the holder may sell their shares to the Company for either cash or shares at a value determined by the growth
of Flowtech Fluidpower plc’s share value within the specified holding period. The Plan is classified as an equity-settled scheme as
there is no present obligation to settle in cash. The number of shares in Fluidpower MIP Limited subject to options and the exercise
price are:
Date of grant
Exercise period
21 May 2014
11 April 2017 to 21 May 2021 (*)
1 June 2016
1 June 2019 to 1 June 2023
(*) 77 options granted on 21 May 2014 were allowed to lapse.
2021
number
2020
number
-
3,005
77
3,005
Long-Term Incentive Plan
The Group established a new Long-Term Incentive Plan ("LTIP") together with an initial grant under the LTIP to the Executive
Directors. The LTIP has been established to incentivise management to deliver long-term value creation for Shareholders and ensure
alignment with Shareholder interests.
The Directors were granted nil-cost options in accordance with the rules of the LTIP. The share options are subject to both share
price and EPS performance criteria measured on the results for the three year financial period to 31 December 2023. As the grants
made under the MIP in June 2016 can vest up to June 2023, there will be a period where the two incentive schemes will run
concurrently. As such, the Remuneration Committee have agreed for Bryce Brooks, that there will be up to a £1 for £1 of any value
accrued for the same period of performance. The fair values of the options granted were determined using a variation of the Black-
Scholes model that takes into account factors specific to share incentive plans, such as the vesting period. The following principal
assumptions were used in the valuation:
RC LTIPs
(Share price)
BB LTIPs
(EPS and share price)
Awards (*)
Number of awards
Grant date
Vesting period ends
Share price at date of grant
Volatility
Option life
Dividend yield
Risk-free investment rate
Fair value at grant date
Exercise price at date of grant
Exercisable from/to
RC LTIPs
(EPS)
83,333
83,334
28 May 2021
28 May 2021
28 May 2024
28 May 2024
£1.26
58.30%
10 years
0.00%
0.17%
£0.85
-
£1.26
58.30%
10 years
0.00%
0.17%
£0.57
-
187,500
28 May 2021
28 May 2024
£1.26
58.30%
10 years
0.00%
0.17%
£0.39
-
28 May 2024 to
28 May 2031
28 May 2024 to
28 May 2031
28 May 2024 to
28 May 2031
Weighted average remaining contractual life
10 years
10 years
10 years
(*) RC = Russell Cash, Director BB = Bryce Brooks, Director
99 | P a g e
Enterprise Management Incentive Plan
The Enterprise Management Incentive Plan (EMI) is part of the remuneration package of certain employees, the majority of
options being issued on the date the Company was admitted to the London Stock Exchange. The sub plans are named
Approved and Unapproved by virtue of whether the plans qualify for HMRC approval. Options under this scheme will vest if
the participant remains employed for the agreed vesting period. Upon vesting each option allows the holder to purchase one
ordinary share. The number of shares subject to options and the exercise price are:
Date of grant
Approved plan
21 May 2014
8 August 2014
Unapproved plan
21 May 2014
11 August 2015
1 July 2016
1 January 2019
25 October 2019
8 January 2020
28 May 2021
Exercise
price
Exercise period
2021
number
£000
2020
number
£000
£1.00
£1.26
£1.00
£1.32
£1.00
£1.13
£0.50
£0.50
£1.00
4 April 2017 to 20 May 2024
4 April 2017 to 7 August 2024
4 April 2017 to 20 May 2024
4 April 2018 to 10 August 2025
4 April 2019 to 30 June 2026
5 May 2022 to 1 September 2025
5 May 2022 to 28 January 2026
31 March 2022 to 8 February 2030
15 March 2023 to 28 May 2031
480
12
492
37
60
45
9
150
50
150
501
993
610
12
622
37
60
45
9
150
50
-
351
973
Share options and weighted average exercise prices are as follows for the reporting periods presented:
Enterprise Management Incentive Plan
Approved scheme
Unapproved scheme
Number
of shares
000
Weighted
average
exercise price
per share
Number
of shares
000
Weighted
average
exercise price
per share
Total number
of shares
000
622
-
(125)
-
(5)
492
1.01
-
1.00
-
1.00
1.01
351
150
-
-
-
0.76
1.00
-
-
-
501
0.83
973
150
(125)
-
(5)
993
Outstanding at 1 January 2021
Granted
Lapsed
Forfeited
Exercised
Outstanding at 31 December 2021
Exercisable at 31 December 2021
492
1.01
143
0.88
580
100 | P a g e
The fair values of the options granted were determined using the Binomial model.
The following principal assumptions were used in the valuation:
Grant date
Vesting period ends
Share price at date of grant
Volatility
Option life
Dividend yield
Risk-free investment rate
Fair value at grant date
Exercise price at date of grant
Exercisable from/to
Weighted average remaining contractual life
Unapproved
EMI scheme
28 May 2021
15 Mar 2023
£1.26
61.50%
10 years
0.00%
0.17%
£0.85
£1.00
15 Mar 2023 to
28 May 2031
10 years
The underlying expected volatility was determined by reference to historical share data of a group of the Company’s peers over
the past six years in accordance with the expected exercise period of the schemes.
Company Share Option Plan
The Company Share Option Plan (‘CSOP’) is part of the remuneration package of certain employees. Options under this scheme
will vest if the participant remains employed for the agreed vesting period. Upon vesting each option allows the holder to purchase
one ordinary share.
The number of shares subject to options and the exercise price are:
Date of grant
11 August 2015
1 July 2016
1 January 2019
Exercise
price
Exercise period
£1.43
11 August 2018 to 10 August 2025
£1.00
4 April 2019 to 30 June 2026
£1.13
5 May 2022 to 02 Sep 2025
2021
number
000
2020
number
000
110
260
27
397
110
352
27
489
101 | P a g e
Share options and weighted average exercise prices are as follows for the reporting periods presented:
Outstanding at 1 January 2021
Granted
Exercised
Forfeited
Outstanding at 31 December 2021
Exercisable at 31 December 2021
Exercisable at 31 December 2020
Weighted
average
exercise
price per
share
Number
of shares
489
-
(77)
(15)
397
370
462
1.07
-
1.00
1.00
1.13
1.13
1.13
In total, £166,000 (2020: £142,000) of employee remuneration expenses, all of which related to equity-settled share-based payment
transactions, has been included in the Consolidated Income Statement.
23. 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.
Allotted and fully paid ordinary shares of 50p each
At 1 January 2020
At 31 December 2021
Number
£000
61,492,673
30,746
61,492,673
30,746
102 | P a g e
24. Net cash from operating activities
Reconciliation of profit before taxation to net cash flows from operations
Profit / (loss) from continuing operations before tax
2,879
(2,148)
2021
£000
2020
£000
Depreciation and impairment of property, plant and equipment
Depreciation on right-of-use assets (IFRS 16)
Finance costs (note 6)
(Gain)/Loss on sale of plant and equipment
Write back liabilities
Other movements
Amortisation of intangible assets
Impairment of intangible assets
Cash settled share options
Equity-settled share-based payment charge
Change in amounts accrued for contingent consideration
Operating cash inflow before changes in working capital and provisions
Change in trade and other receivables
Change in stocks
Change in trade and other payables (*)
Change in provisions
Cash generated from operations
Tax reclaimed/(paid)
Net cash (used)/generated from operating activities
1,084
1,643
833
(209)
-
(95)
1,170
1,607
754
184
(19)
-
1,054
1,090
673
(26)
166
-
8,002
(3,325)
(8,764)
3,496
(59)
(650)
209
(441)
-
-
142
219
2,999
3,455
2,207
2,118
(47)
10,732
(649)
10,083
(*) Change in trade and other payables includes VAT payments of £1,418k relating to Q1 2020 VAT, deferred under the COVID-19 support scheme offered by HMRC.
25. Contingent liabilities & commitments
The Group had capital expenditure of £34,000 contracted for but not provided at 31 December 2021 (2020: £50,000).
26. Related party transactions
Transactions between the Company, its Employee Benefit Trust and its subsidiaries, which are related parties, have been eliminated
on consolidation and are not disclosed in this note.
Key management includes Executive and Non-Executive Directors. The compensation paid or payable to key management is disclosed
in the Directors' Remuneration report. The Group has not entered into any transactions other than those disclosed in the Directors’
Remuneration report, nor has it entered into any transactions with any related parties who are not members of the Group.
27. Financial instruments
27.1 Fair values of financial instruments
Fair values
The table below analyses financial instruments into a fair value hierarchy based on the valuation technique used to determine fair
value.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable input).
103 | P a g e
The Group is exposed to various risks in relation to financial instruments. Each of these is disclosed in the table below.
Loans and receivables
Cash and cash equivalents (note 17) (*)
Trade and other receivables (note 16) (*)
Total financial assets measured at amortised costs
Carrying
amount
2021
000
4,562
21,566
26,128
Fair value
2021
£000
Carrying
amount 2020
£000
Fair value
2020
£000
4,562
21,566
26,128
9,235
18,415
27,650
27,650
Financial assets
26,128
26,128
Financial liabilities measured at amortised cost
Other interest-bearing loans and borrowings (note 18)
(27,147)
(27,147)
(27,737)
Trade payables and accruals (note 19) (*)
(19,274)
(19,274)
(13,880)
Total financial liabilities measured at amortised cost
(46,421)
(46,421)
(41,617)
Total financial liabilities
(46,421)
(46,421)
(41,617)
Total financial instruments
(20,293)
(20,293)
(13,967)
9,235
18,415
27,650
27,650
(27,737)
(13,880)
(41,617)
(41,617)
(13,967)
(*) The Group has not disclosed the fair value for financial instruments such as short-term trade receivables and payables, interest bearing loans and borrowings, and cash and
cash equivalents, because their carrying amounts are a reasonable approximation of fair values.
Financial instruments measured at fair value
Valuation technique
Forward exchange contracts
Bank loans and other interest-bearing borrowings
The Group does not use forward exchange contracts, rather it
utilises natural hedges available as a result of its trading activities.
The net exposure is settled on maturity by purchasing the required
currency on spot basis.
Interest-bearing borrowings are recognised at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost using the
effective interest method, less any impairment losses.
27.2 Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers. The Group’s exposure to credit risk is influenced
mainly by the individual characteristics of each customer. Management also considers the factors that may influence the credit
risk of the Group’s customer base, including the default risk of the industry and country in which the customers operate. The credit
status of each new customer is reviewed before credit is advanced. This includes external evaluations where possible. Outstanding
balances are reviewed regularly by management.
The concentration of credit risk for trade receivables at the balance sheet date by geographic region was:
UK
Europe
Rest of the World
104 | P a g e
2021
£000
2020
£000
17,112
14,951
2,789
515
2,653
268
20,416
17,872
The Group establishes an allowance for impairment that represents its estimate of expected losses in respect of trade receivables,
see note 16. The allowance account for trade receivables is used to record impairment losses unless the Group is satisfied that no
recovery of the amount owing is possible; at that point, the amounts considered irrecoverable are written off against the trade
receivables directly.
27.3 Liquidity risk
Financial risk management
Liquidity risk is the risk that the Group will not be able to meet its financial commitments as they fall due or that it fails to satisfy
the requirements of its banking covenants. Management prepares robust annual and monthly cash flow forecasts which are fully
integrated with the core assumptions underpinning forecast profitability and balance sheet movements; in addition, a rolling 13-
week cash flow forecast is continually updated to provide visibility as regards likely quarter end Net Debt positions.
As a result, the business has all the requisite monitoring capability to assess the impact which any adverse trading conditions may
present. The business is as focused on managing its working capital base as it is its profitability, a combination which the Board
views as key in continually managing this risk.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
Year ended 31 December 2021
Non-derivative financial liabilities
Liabilities relating to right-of-use assets
Revolving credit facility
Trade payables
Year ended 31 December 2020
Non-derivative financial liabilities
Carrying
amount
£000
Contractual
cash flows
£000
1 year
or less
£000
1 to 2
years
£000
2 to 5
years
£000
7,147
19,927
15,719
42,793
7,906
21,562
15,719
45,187
1,758
545
15,719
18,022
1,597
545
–
2,889
20,472
–
2,142
23,361
Carrying
amount
£000
Contractual
cash flows
£000
1 year
or less
£000
1 to 2
years
£000
2 to 5
years
£000
Liabilities relating to right-of-use assets
7,737
8,910
1,689
1,422
3,054
Revolving credit facility
20,000
21,492
535
535
20,422
Trade payables
10,792
38,529
10,792
41,194
10,792
13,016
–
–
1,957
23,476
There are no contractual maturities over five years, save for liabilities relating to right-of-use assets.
105 | P a g e
27.4 Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the
Group’s income or the value of its holdings of financial instruments.
Market risk - foreign currency risk
The main currency related risk to the Group comes from forward purchasing of inventories and from its foreign operations. The
Group utilises natural hedges available as a result of its trading activities. The net exposure is settled on maturity by purchasing
the required currency on spot basis.
The Group’s exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments
except derivatives when it is based on notional amounts.
31 December 2021
Cash and cash equivalents
Trade and other receivables
Sterling
£000
Euro
£000
US Dollar
£000
Other
£000
3,285
1,251
18,583
2,982
Revolving credit facility
(19,927)
-
Liabilities relating to right-of-use assets
(6,043)
(1,104)
Trade payables
Net exposure
(10,145)
(5,517)
(14,247)
(2,388)
31 December 2020
Cash and cash equivalents
Trade and other receivables
Revolving credit facility
Sterling
£000
7,980
15,654
(20,000)
Euro
£000
1,226
2,635
-
Liabilities relating to right-of-use assets
(6,549)
(1,188)
Trade payables
Net exposure
(7,699)
(3,711)
(10,614)
(1,038)
Total
£000
4,562
21,566
(19,927)
(7,147)
(15,719)
(16,665)
Total
£000
9,235
18,415
(20,000)
(7,737)
(10,792)
26
1
-
-
(40)
(13)
-
-
-
-
(17)
(17)
US Dollar
£000
Other
£000
29
99
-
-
618
746
-
27
-
-
-
27
(10,879)
Sensitivity analysis
A 10% weakening of the following currencies against the pound sterling at 31 December 2021 would have increased/(decreased)
equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at the reporting date
and had been applied to risk exposures existing at that date. This analysis assumes that all other variables, in particular other
exchange rates and interest rates, remain constant.
The analysis is performed on the same basis for the year ended 31 December 2021.
Profit or loss and equity
2021
£000
195
1
2020
£000
94
(68)
€
$
A 10% strengthening of the following currencies against the pound sterling at 31 December 2021 would have
increased/(decreased) equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred
at the balance sheet date and had been applied to risk exposures existing at that date. This analysis assumes that all other variables,
in particular other exchange rates and interest rates, remain constant.
106 | P a g e
The analysis is performed on the same basis for the year ended 31 December 2021.
Profit or loss and equity
2021
£000
(238)
(1)
2020
£000
(115)
83
€
$
Market risk - interest rate risk
Profile: At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments was:
Variable rate instruments
Financial liabilities (carrying value)
2021
£000
19,927
2020
£000
19,887
Sensitivity analysis
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by
the amounts shown below. This calculation assumes that the change occurred at the reporting date and had been applied to risk
exposures existing at that date.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial
instruments with variable interest rates, financial instrument at fair value through profit or loss and the fixed rate element of interest
rate swaps. The analysis is performed on the same basis for the year ended 31 December 2020.
Equity
Increase of 100 basis points
Decrease of 100 basis points
Profit or loss
Increase of 100 basis points
Decrease of 100 basis points
2021
£000
(199)
199
(199)
199
2020
£000
(199)
199
(199)
199
27.5 Capital management
The capital structure of the Group is presented in the statement of financial position and includes equity, cash and borrowings. The
statement of changes in equity provides details of equity and note 18 provides details of loans and overdrafts. Funding requirements
are provided by a combination of revolving credit (£20m) and overdraft (£5m) facilities. The Group’s objectives when managing
capital is to safeguard its ability to continue as a going concern and to have access to adequate funding for business opportunities,
so that it can provide returns for Shareholders and benefits for other stakeholders. The Group manages the capital structure and
makes adjustments in the light of changes in economic conditions and risk characteristics of the underlying assets. In order to
maintain or adjust the capital structure the Group may issue new shares or draw down debt. The Group is not subject to externally
imposed regulatory capital requirements and there are no specific ratios used by the Group in assessing its management of capital
levels.
The Group is subject to covenants in respect of its bank facilities and remains covenant compliant. There were no changes in the
Group’s approach to capital management during each year.
The Group maintains sufficient cash levels to enable it to meet its liabilities as they fall due. Management review cash flow forecasts
on a regular basis to determine whether the Group has sufficient cash reserves to meet future working capital requirements,
financing obligations and to take advantage of business opportunities. In reviewing cash flows and identifying the need for further
funds, management consider the nature of cash flow requirements and take appropriate action.
28. Subsequent events
There are no material adjusting or non-adjusting events subsequent to the reporting date.
107 | P a g e
Company income statement
Note
Continuing operations
Administrative expenses
Operating loss
Financial income
Financial expenses
Net financing income
Profit from continuing operations before tax
Taxation
Profit for the year attributable to the owners of the parent
E
E
F
Company statement of financial position
Note
I
J
L
K
N
Fixed assets
Investments
Total fixed assets
Current assets
Cash and cash equivalents
Trade and other debtors
Total current assets
Creditors: amounts falling due within one year
Trade and other creditors
Total creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Interest-bearing loans and borrowings
Total creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves
Merger relief reserve
Retained earnings
Total equity
108 | P a g e
2021
£000
(861)
(861)
3,000
(585)
2,415
1,554
(38)
1,516
2021
£000
59,421
59,421
15
75,964
75,979
7,250
7,250
68,729
128,150
19,927
19,927
2020
£000
(827)
(827)
9,000
(488)
8,512
7,685
39
7,724
2020
£000
59,358
59,358
15
73,059
73,074
5,990
5,990
67,084
126,442
19,887
19,887
108,223
106,555
30,746
60,959
187
453
15,878
108,223
30,746
60,959
187
453
14,210
106,555
Share
premium
£000
Other
reserve
£000
Merger relief
reserve
£000
Retained
earnings (*)
£000
Company statement of changes in equity
Balance at 1 January 2020
Profit for the year
Total comprehensive income for the year
Transactions with owners
Issue of share capital
Share options Ð granted to subsidiary
employees
Total transactions with owners
Share
capital
£000
30,579
-
-
167
-
167
60,959
187
-
-
-
-
-
-
-
-
-
-
Balance at 1 January 2021
30,746
60,959
187
Profit for the year
Total comprehensive income for the year
Transactions with owners
Share options Ð granted to subsidiary
employees
Share options settled
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
equity
£000
98,475
7,724
7,724
214
142
356
6,344
7,724
7,724
-
142
142
14,210
106,555
1,516
1,516
1,516
1,516
166
(14)
152
166
(14)
152
406
-
-
47
-
47
453
-
-
-
-
-
Balance at 31 December 2021
30,746
60,959
187
453
15,878
108,223
(*) Retained earnings and share based payment reserve.
The financial statements on pages 65-115 were approved by the Board of Directors on 28 March 2022 and were signed on its
behalf by:
Russell Cash
Chief Financial Officer
Company Registration Number: 09010518
109 | P a g e
Notes to the Company’s Financial Information
A. Authorisation of financial statements & statement of compliance with FRS 101
The financial statements of Flowtech Fluidpower plc for the year ended 31 December 2021 were authorised for issue by the Board
of Directors on 28 March 2022 and the Statement of Financial Position was signed on the Board’s behalf by Russell Cash. Flowtech
Fluidpower plc is incorporated and domiciled in England and Wales.
These financial statements were prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’
(FRS 101) and in accordance with applicable accounting standards. The Company’s financial statements are presented in sterling.
These financial statements have been prepared on a going concern basis and on the historical cost basis except for the
modification to a fair value basis for certain financial instruments as specified in the accounting policies below.
The principal accounting policies adopted by the Company are set out in note B.
B. Accounting policies
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended
31 December 2021.
The Company has taken advantage of the following disclosure exemptions under FRS 101:
a. the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in respect
of:
i. paragraph 79(a)(iv) of IAS 1;
ii. paragraph 73(e) of IAS 16 ‘Property, Plant and Equipment’;
b. the requirements of paragraphs 10(d), and 134-136 of IAS 1 ‘Presentation of Financial Statements’ and the requirements of
IAS 7 ‘Statement of Cash Flows’;
c. the requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’;
d. the requirements of paragraph 17 of IAS 24 ‘Related Party Disclosures’;
e. the requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered into between two or more
members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.
f. disclosure requirements of IFRS 7 ‘Financial Instruments’.
Investments
All investments are initially recorded at cost, being the fair value of consideration given including the acquisition costs associated
with the investment. Subsequently, they are reviewed for impairment on an individual basis if events or changes in circumstances
indicate the carrying value may not be fully recoverable.
Financial instruments
Non-derivative financial instruments comprise trade and other debtors, cash and cash equivalents, loans and borrowings, and
trade and other creditors
Trade and other debtors
Trade and other debtors are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method, less any impairment losses.
Trade and other creditors
Trade and other creditors are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash, bank balances net of bank overdrafts and short-term deposits held with banks by the
Company, and are subject to insignificant risk of changes in value.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment
losses. Any change in their value through impairment or reversal of impairment is recognised in profit or loss. Discounting is
omitted where the effect is immaterial.
Derivative financial instruments
Derivative financial instruments held by the Company include forward foreign currency contracts and are recognised at fair value.
The gain or loss on remeasurement to fair value is recognised immediately in profit or loss.
110 | P a g e
Derecognition of financial liabilities
The Company 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.
Share-based payments
The fair value of employee share plans is calculated using a variation of the Black-Scholes model. In accordance with IFRS 2 ‘Share-
based payment’, the resulting cost is charged to the profit and loss account over the vesting period of the plans.
Where the individuals are employed by the Parent Company, the fair value of options granted is recognised as an employee
expense with a corresponding increase in equity. Where the individuals are employed by a subsidiary undertaking, the fair value
of options to purchase shares in the Company that have been issued to employees of subsidiary companies is recognised as an
additional cost of investment by the Parent Company. An equal amount is credited to other equity reserves.
Financing income and expenses
Financing expenses comprise interest payable. Financing income comprises interest receivable on funds invested. Interest income
and interest payable is recognised in profit or loss as it accrues, using the effective interest method.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the
extent that it relates to items recognised in other comprehensive income, in which case it is recognised in other comprehensive
income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in
a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilised.
Dividends
Dividend distributions payable to equity Shareholders are included in other liabilities when the dividends have been approved in
general meeting prior to the reporting date.
Pensions
Company employees are members of defined contribution pension schemes where the obligations of the Company are charged
to the profit and loss account as they are incurred.
Significant judgements, key assumptions and estimates
In the process of applying the Company’s accounting policies, which are described above, management have made judgements
and estimations about the future that have the most significant effect on the amounts recognised in the financial statements. The
estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if
the revision affects both current and future periods.
Significant management estimates
The following estimates have the most significant effect on the financial statements.
Impairment of investments
The carrying value of investments are assessed for impairment. This requires an estimation of the value in use of the operations
underpinning the investments.
The value in use of the investment is calculated from cash flow projections for the relevant entity based on financial projections
covering a period of 2 years plus a terminal value, assumed growth rates and discount rates relevant to the individual entity.
The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected cash flows.
Changes in revenues and expenditure are based on past experience and expectations of future growth.
The pre-tax discount rate applied in the impairment review ranged from 7% to 11% (2020: 8%-12%). This discount rate is derived
from the Group’s weighted average post-tax cost of capital.
111 | P a g e
The carrying value of the investments at 31 December 2021 is £59,421,000 (2020: £59,358,000). The value in use of investment
in subsidiaries is in excess of the carrying value. Consequently, there was no impairment charge during the year.
Impairment of Group balances
The carrying value of Group balances are assessed for impairment based expected credit loss model. At each reporting date, the
management assesses whether any events have occurred which have had a detrimental effect on the ability of each of the Group
companies to repay the amounts due.
The amounts owed by subsidiary undertakings were £75,688,000 (2020: £72,648,000). There was no impairment charge during
the year.
C. Services provided by the Company’s auditor
During the period, the Company obtained the following services provided by the Company’s Auditor at the costs detailed below:
Audit of the statutory financial statements of Flowtech Fluidpower plc
2021
£000
88
2020
£000
92
D. Directors & employees
Details of Directors and employees are shown in note 5 to the consolidated financial statements. The average number of persons
employed by the Company (including Directors) during each year was as follows:
2021
£000
4
2021
£000
602
106
73
9
790
2020
£000
4
2020
£000
604
-
85
21
710
2021
£000
2020
£000
225
224
56
27
7
-
30
18
315
272
Administration
The aggregate payroll costs of these persons were as follows:
Remuneration
Bonus
Social security costs
Benefits in kind
The amounts set out above include remuneration in respect of the highest paid Director as follows:
Highest paid Director’s remuneration
Remuneration
Bonus
Social security costs
Benefits in kind
Total highest paid Director’s remuneration
112 | P a g e
E. Financial income & expense
Finance income for the year consists of the following:
Finance income arising from:
Dividends received from Group undertakings
Total finance income
Finance expenses for the year consist of the following:
Finance expense arising from:
Bank loans and revolving credit facility, and amortisation of loan arrangement fee
Total finance income
F. Taxation
Reconciliation of effective tax rate
Profit for the year
Total (credit)/tax expense
Profit excluding taxation
Tax using the UK corporation tax rate of 19.00% (2019: 19.00%)
Deferred tax movements not recognised
Group relief
Income not taxable
Amounts not deductible
Total (credit)/tax expense in the income statement
Change in corporation tax rate
2021
£000
3,000
3,000
2021
£000
585
585
2021
£000
1,516
38
1,554
295
(1)
421
2020
£000
9,000
9,000
2020
£000
488
488
2020
£000
7,724
(39)
7,685
1,461
(2)
212
(570)
(1,710)
15
38
-
(39)
An increase in the UK corporation tax rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021,
and the UK deferred tax position for the group as at 31 December 2021 has been calculated based on this rate.
G. Dividends
In response to the COVID-19 pandemic, the Directors suspended dividend payments in order to retain as much cash in the
business as possible. Thereafter our dividend policy will recognise both the growth requirements of the business and the interests
of our Shareholders.
H. Share-based payments
Details of share-based payments are shown in note 22 to the consolidated financial statements.
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I. Investments
Cost and net book value
At 1 January 2020
Shares issued in consideration for acquisition of indirect subsidiaries
Additions net of exercise of options in the year
At 31 December 2020
At 1 January 2021
Additions net of exercise of options in the year
At 31 December 2021
The subsidiaries of the Company are listed below:
Investments in
subsidiaries’
unlisted shares
£000
Subsidiaries’
share-based
payment reserves
£000
Total
£000
58,810
192
59,002
214
-
59,024
59,024
-
59,024
-
142
334
334
63
397
214
142
59,358
29,358
63
59,421
Fluidpower MIP Limited
Fluidpower Group UK Limited
Fluidpower Group Services UK Limited
Flowtech Fluidpower Ireland Limited
Country of
incorporation
Principal activity Ownership
UK
UK
UK
ROI
Holding company
Distributors of engineering components
Assembly and distribution of engineering components
Assembly and distribution of engineering components
Flowtechnology Benelux BV
Netherlands
Distributors of engineering components
The Hydraulic Group BV
Hydroflex-Hydraulics BV
Netherlands
Holding company
Netherlands
Assembly and distribution of engineering components
Hydroflex-Hydraulics Rotterdam BV
Netherlands
Assembly and distribution of engineering components
Hydroflex-Hydraulics Belgium NV
Belgium
Assembly and distribution of engineering components
Fluidpower Shared Services Limited
Beaumanor Engineering Limited
Flowtech Europe Limited
Fluidpower Holdings Limited
Balu Limited
Indequip Limited
KR Couplings Limited
Betabite Hydraulics Limited
Hydraulics (Ireland) Limited
Haitima Flow Control UK Limited
Hydravalve UK Limited
Hydraulic Equipment Supermarkets Limited
Branch Hydraulic Systems Limited
HES Tractec Limited
Weltac Limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Holding company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
For all the subsidiaries above, the class of shares held are ordinary shares and all subsidiaries, except Fluidpower MIP Limited,
are indirect subsidiaries of Flowtech Fluidpower plc.
114 | P a g e
J. Trade and other debtors
Current:
Deferred tax asset
Prepayments and accrued income
Amounts owed by Group undertakings
Total trade and other debtors
K. Interest-bearing loans and borrowings
Non-current liabilities:
Revolving credit facility
Total non-current liabilities
Total current liabilities
Total interest-bearing loans and borrowings
2021
£000
2020
£000
1
275
39
372
75,688
72,648
75,964
73,059
2021
£000
2020
£000
19,927
19,887
19,927
19,887
-
-
19,927
19,887
The revolving credit facility is subject to a non-utilisation fee of 0.9275% and is due for renewal in 2023. The facility is secured by
legal charges over certain of the Group’s assets which include trade receivables and stock. The Group also has a £5,000,000
overdraft facility which is subject to annual review, next such review due on 31 July 2022.
L. Trade and other creditors
Social security and other taxes
Accruals and deferred income
Amounts owed to other Group undertakings
Total trade and other creditors
M. Deferred taxation
Deferred tax assets comprise:
At start of year
Total deferred tax credit in profit and loss account for the year
At end of year
2021
£000
107
144
6,999
7,250
2021
£000
39
(38)
1
2020
£000
92
213
5,685
5,990
2020
£000
-
39
39
A deferred tax asset of £nil (2020: nil) in respect of cumulative share-based payments of £77k (2020: nil) has not been recognised
due to uncertainty surrounding the availability of future profits, against which these payments can be utilised.
N. Share capital
Allotted, called up and fully paid:
At 1 January 2021
At 31 December 2021
115 | P a g e
Number
£000
61,492,673
30,746
61,492,673
30,746
O. Contingent liabilities & commitments
The Company has no capital expenditure contracted for but not provided as at 31 December 2021 (2020: nil).
P. Related party transactions
The Company has taken advantage of the exemption under paragraph 8(k) of FRS 101 not to disclose transactions with entities that
are wholly owned subsidiaries of the Flowtech Fluidpower plc Group. Amount owing by Flowtech Fluidpower Employee Benefit Trust
is £276,000 remains outstanding. There are no other related party transactions other than those relating to Directors that have been
disclosed in note 28 to the consolidated financial statements.
Q. Ultimate controlling party
The Directors consider that there is no ultimate controlling party.
116 | P a g e
Glossary of terms
Daily Gross Profit
DSO (days)
Group Cost Per Pick
Net Debt
Turn & Earn
Underlying Operating Profit
Daily Gross Profit is Gross profit divided by number of trading days in
a year. FY 2021 had 249 trading days whereas FY 2020, being a leap
year, had 250 trading days.
Debtors Sales Outstanding (days) is the gross value of trade receivables
as shown in Note 16 divided by the daily revenue recorded during the
quarter Oct – Dec. Daily revenue is the revenue for the quarter,
including VAT on revenue at a standard rate of 20% divided by 92
(being number of days in the quarter).
Group Cost Per Pick is the Group’s total cost of warehousing, including
property and people, divided by the number of invoiced lines in the
year.
Net Debt is Bank Debt less the value of cash and cash equivalents. It
includes value of unpaid COVID-19 related HMRC support (applicable
only for FY 2020) but excludes lease liabilities under IFRS16. Bank
Debt is the value of Barclays RCF facility of £20m and any utilised value
of £5m overdraft facility (NIL for FY 2020 and FY 2021).
Turn & Earn Index is calculated by multiplying gross margin by average
stock turn. Average stock turn is the finished goods recognised as cost
of sales in the year divided by the average of opening and closing
inventory ((note 15).
Underlying Operating Profit is continuing operations’ operating profit
before separately disclosed items detailed in note 3, namely,
amortisation and impairment of acquired intangibles, share based
payment costs, restructuring costs and acquisition costs.
Underlying Segment Operating Profit Underlying Segment Operating Profit is continuing operations’
operating profit before central costs and separately disclosed items
detailed in note 3. 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 6.
Working Capital is inventories (Note 15), trade and other receivables
(Note 16) and prepayments less trade and other payables (Note 19).
Working Capital
117 | P a g e
Company information
Flowtech Fluidpower plc
Registered Office
Bollin House
Bollin Walk
Wilmslow
Cheshire
SK9 1DP
Company number: 09010518
Company Secretary
Russell Cash
Contact:
Tel: +44 (0) 1695 52759
Email: info@flowtechfluidpower.com
Website: www.flowtechfluidpower.com
Nominated adviser and sole stockbroker
Liberum Capital Limited
Ropemaker Place
Level 12 25 Ropemaker Street
London
EC2Y 9LY
Auditor
Grant Thornton UK LLP
Landmark
St Peter’s Square
1 Oxford Street
Manchester
M1 4PB
Bankers
Barclays Bank PLC
1 Churchill Place
London
E14 5HP
Investor & media relations
TooleyStreet Communications Ltd
15 Colmore Row
Birmingham
B3 2BH
118 | P a g e
Solicitors
DLA Piper UK LLP
1 St Peter's Square
Manchester
M2 3DE
Company registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Flowtech Fluidpower plc
Registered Office
Bollin House
Bollin Walk
Wilmslow
Cheshire
SK9 1DP
info@flowtechfluidpower.com
www.flowtechfluidpower.com
119 | P a g e