Malcolm Diamond
Our management team's confidence in delivering growth mainly by driving consolidation in what is a fragmented market sector continues with unabated optimism.

Malcolm Diamond MBE

Non-Executive Chairman

Dear shareholder

Welcome to our Report and Accounts publication for the first full year of trading as a plc.

2015 and early 2016 has been an exciting period of positive development around the Group, encompassing the launching of over 6,300 new products along with broadened categories, four important acquisitions, strategic structural refinements for improved operating efficiencies and new data processing resources – all of which support and enhance market-leading customer service levels going forward.

Clearly, very few UK-based industrial organisations have totally escaped the impact of the oil price collapse, and in the first quarter of the year our subsidiary, Primary Fluid Power Limited suffered a 20% reduction in orders and revenue as a direct result; however, after a swift redirection of sales focus into automotive and pharmaceuticals it had recovered normal revenue dynamics by the time we published our Interim results.

In June, the hose assembly function known as Vitassem, formerly based in the Skelmersdale distribution centre, was moved to the Primary factory in Knowsley eight miles away, thus releasing space for additional warehousing in what is now a pure distribution facility and consolidating all UK assembly operations on the one site.

The acquisition pipeline has been very active throughout the year, resulting in Albroco being bought at the end of May, and totally absorbed into Primary's Knowsley site, thus yielding earnings enhancing synergies. In early July, Nelson Hydraulics (Northern Ireland and Dublin) joined the Group, along with its 40 staff and Managing Director Mark Nelson. These two additions when linked with Primary enabled the formation of a new specialist division, "Power Motion Control" (PMC) which is now under the leadership of Nick Fossey who joined us on 1 March 2016 from the Eaton Corporation. This realignment into two distinct divisions resulted in the decentralisation of the Group Marketing function and, after consultation, the departure of the Group Marketing Director Paul Watson on 22 October 2015. In turn, John Farmer, Flowtechnology UK's Product Development Director was immediately appointed Managing Director of the Flowtechnology UK division. I also welcome Paul McGrady to the Operational Board as Managing Director of Primary. Formerly Sales Director at Primary, he succeeds Stephen Merrie who has now retired following a successful year overseeing the integration of Vitassem and Albroco into the Knowsley site.

In early September, a unique Master trading agreement was signed with the Hydraulics Group of the Eaton Corporation for the distribution of PMC products and the sole distribution of Eaton Winner hose, fittings and adaptors. The Flowtech Board consider this to be a significant marketing and service advantage within the sector, with revenue flow through anticipated in the second half of 2016.

To underpin the Board's confidence in the dynamic progress of the Group over the past year, we committed to rewarding shareholders with a 5% increase in the dividend ahead of these results. Although at the time of writing, the negative macro-economic environment and Brexit focus could be constraining investor confidence, we remain very optimistic about the future development and progress of this business.

You can be assured that our management team's confidence in delivering growth mainly by driving consolidation in what is a fragmented market sector continues with unabated optimism, whilst we gratefully acknowledge the ongoing support and loyalty of our shareholders.

Yours sincerely

Malcolm Diamond signature

Malcolm Diamond MBE

Non-Executive Chairman

12 April 2015