Flowtech Fluid. Regulatory News (FLO)

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

FLOWTECH FLUIDPOWER PLC

("Flowtech Fluidpower", the "Group" or "Company")

Trading Update

 for the three-months ended 31 March (the "Period")

trading

Prior to the COVID-19 the lockdown Q1 performance was in line with our expectations: down on the buoyant conditions seen in early 2019, but with a return to growth in customer order patterns and outlook. However, the final few weeks of the Period created an altogether different position going into Q2. Many of our suppliers and customers suspended operations, although recent indications suggest that some have either already reopened or are planning to reopen in May, albeit with reduced capacity.

The most marked effect of the current situation has been in our Components segment, which are those profit centres where most sales are directly into OEMs. The Services segment had a good order book coming into the year, and whilst it was also affected by the downturn in late March, revenue for the quarter remained flat year on year.

While there are no first quarter industry statistics currently available from the BFPDA ** or BFPA***, the Board believes that the Group has generally traded in line with the sector during the period.

net debt/cashflow

Net debt at 31 March 2020 was £15.6m, a £1m reduction from the position at 31 December 2019 and well within our aggregate banking facilities of £25m. Net cash flow in April has been as expected, and whilst we have not entered the end of month collection period, we expect receipts to be received in full albeit with some slight delays in timing. We believe this should not create any significant disruption to the overall cash flow cycle.

Restructuring activities

In February 2020 we announced a major restructuring programme to transition warehousing and picking operations to more efficient centres. In the UK we are currently closing four warehousing facilities, the annualised savings from which are estimated to be £1.6m, with a £0.8m impact/benefit in 2020. The cash cost of this restructuring is estimated at £1.8m, of which £0.5m was incurred in 2019. We are pleased to confirm that this complex and tightly managed project is on time and within budget.

Since safe working guidance was introduced last month, costs have been reduced by a combination of internal actions and the utilisation of "furlough" or equivalent schemes introduced in the UK, Republic of Ireland, and the Netherlands. We estimate that our cost base has fallen by around 25%, with further savings still to come from our restructuring activities. We will continue to pursue our rationalisation and cost reduction programmes, creating operational efficiencies in our procurement, logistics, sales, and back office activities.

OUTLOOK

Whilst the full impact of the COVID-19 lockdown remains unclear it is not possible to make any accurate predictions for the remainder of the year. A significant part of our sales depends on the manufacturing and construction sectors, both of which have seen large scale shutdowns. It is possible that these sectors will begin to reopen during early May, and our current plan is to ensure that we continue to support/service our customers and react as quickly and effectively as possible if this were to happen. However, if there is a need to undertake further cost reductions should the lockdown extend further into the year, we must ensure that we are in a position to initiate change without detriment to our future business and our customers. This being said, the work undertaken as part of our restructuring activities over the past twelve months is helping our planning enormously in this regard.

We also thank all our people for the commitment to the business and the support of colleagues in these times. Overall we remain confident that despite the disruption, our business should generate positive cashflow through 2020 and 2021, helping to further reduce net debt and create a solid platform for growth when things return to a more normal situation.

** British Fluid Power Distributors Association

*** British Fluid Power Association