Flowtech Fluidpower 2015 Annual Report
Whilst our acquisition activity has been fruitful, there continues to be significant opportunity to achieve organic growth through a wide range of revenue enhancing development programmes linked to this focused acquisition strategy.
Chief Executive Officer
The year has seen a period of continued strong development with an uplift in revenue of 19% over the previous year, our first as a PLC, and a 65% improvement in operating profit. At the same time, we can safely say that 2015 was a challenging year for all, with continued pressure being exerted on the industrial marketplace driven by the crisis in oil and gas markets and all its associated industries. In addition, this has been linked to more volatile currency fluctuations between sterling and our main trading partners.
Therefore, the result achieved gives a clear indication of the resilience of our core activities, and we firmly believe this represents a creditable outcome for the business as a whole.
The original strategy presented at IPO in 2014 was to deliver profitable growth while maintaining consistent high levels of service to our diverse customer base — this remains our core philosophy. Whilst our acquisition activity has been fruitful, there continues to be significant opportunity to achieve organic growth through a wide range of revenue enhancing development programmes linked to this focused acquisition strategy.
Our strategy has assisted us to further increase market penetration and positioning. In 2014, when we acquired Primary Fluid Power, we were able to establish a firm footing in the distribution of technically advanced hydraulic components and power packs. During 2015, by adding Albroco and Nelson Hydraulics, we had the critical mass to form a 'Power Motion Control' division ("PMC") thus giving us an overall advantage in the marketplace through the creation of an OEM-focused hydraulic specialist, backed by a strong technical offering, across a wide and varied customer base. The integration of Albroco and Nelson has been extremely smooth with the process beginning to deliver a series of synergies in addition to the new income streams brought into the Group.
As part of this development, we have now recruited Nick Fossey as Divisional Managing Director of the PMC division. Nick joined us from a senior position at Eaton Hydraulics, and he brings a wealth of knowledge and experience to the business, as well as a deep network of contacts across Europe, the Middle East and the USA.
Our linkage to Eaton Hydraulics has been further cemented through the signing in September 2015 of a master trade distributor agreement which creates a long term partnership for the supply of Eaton PMC products to the UK and Irish markets. In addition, Eaton has granted sole distribution rights for Eaton Winner hose, fittings and adaptors to the Group in the UK. The agreement represents a huge opportunity for both companies to develop and deliver a sales growth strategy using our combined strengths of world class manufacturing and distribution.
Finally, following the year end, we were very pleased to add Indequip, in February, and Hydravalve, in March, to our portfolio, the latter establishing a new "Process" division. Both will remain commercially independent, but now as part of the Flowtech Group they will be able to take advantage of the wider product offer, technical backup and marketing resources available.
A fundamental part of the Group strategy revolves around how we manage inventory. This is not only in terms of the financial investment, but also the product set that is used across all of the trading units and this subsequently affects how we are able to optimise the synergies these operations can achieve. In order to maximise these synergies, a major IT development project was instigated in mid-2015 with the aim of consolidating the Group's entire product set, allowing each autonomous business to reap the benefits of being part of a larger organisation without the need for wholesale system change. The use of cutting edge web and data warehouse systems will allow this to be completed cost effectively and ensure that our substantial data resources in both range, graphics and pricing can be exploited seamlessly across the Group.
The creation of this 'Global Data Repository' has been implemented to enable the Group to consolidate and optimise the product set across all trading units. This programme will feed the multi-trading platforms across the business units delivering major benefits, both financial and operational. This will be of increasing value as we expand via acquisition allowing further benefit to be exploited.
Pictured: Operational BoardSeated (left to right)Sean Fennon – CEO Flowtech Fluidpower plcMark Richardson – MD, Flowtechnology BeneluxBryce Brooks – CFO, Flowtech Fluidpower plc
Standing (left to right)Mark Nelson – MD, Nelson HydraulicsJohn Farmer – MD, Flowtechnology UKNick Fossey – Divisional MD, PMCPaul McGrady – MD, Primary Fluid Power
A further pleasing aspect of the year has been the development of our Operational Board which was established to promote information flow between the businesses and enable the Group to focus on key market, customer and supply chain initiatives. Initially, the Operations Board included the plc Executive Directors, Mark Richardson from Flowtech Benelux and Stephen Merrie. Following Stephen Merrie's retirement from Primary, Paul McGrady has been promoted to allow an unbroken transition which has already created a strong start to 2016. Following the acquisition of Nelson, the Managing Director, Mark Nelson joined the Operational Board. Working with new Divisional Director, Nick Fossey, our PMC teams will be able to exploit the solid foundation created during the year and use the undoubted advantages created as part of a wider group. In Flowtechnology, John Farmer has also stepped up into the leadership role following many years in the sales and purchasing functions, and has brought a top to bottom understanding of our core operation. Finally we are very pleased that Andy Newham Senior, who has successfully led the Hydravalve operation for many years, will join the Operational Board from May bringing with him over 30 years' knowledge of the process industries which we believe will be invaluable as we develop this new division over the coming years.
When our 2015 results are coupled with the more challenging conditions experienced across the majority of industrial sectors, we believe they give further evidence of the resilience of our technical distribution model, both in underlying profitability and crucially in cash generation. The past 12 months have seen us continue to develop our multi-channel strategy with four acquisitions expanding our product and infrastructure resources. In addition, we also have confidence that the groundwork in identifying further targets, as well as building the team capable of successfully integrating them, will continue to bear fruit over 2016 and beyond. From the core Flowtechnology operation that we brought to market in 2014, we are now able to use each addition to our "family" of companies by exploiting the synergy gains achieved, both commercially and operationally, and this underpins everything that we do. A live example of this is our Data Repository project. We therefore enter our third year as a public company with expanding confidence about what the Group can achieve for its staff and Shareholders.
The Board takes this opportunity to thank our other colleagues around the business for their continuous hard work, dedication and loyalty, which underpins both the high level customer relationships and the Group's overall performance.
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