Flowtech Fluidpower (LSE:FLO) — Annual Results

0:01 Good morning, and welcome to the FLOWTECH FLUIDPOWER PLC annual results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time or the q and a tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Russell Cash, CFO and Bryce Brooks, CEO. Good morning to you both. Morning. Good morning to everybody joining us this morning for our full year twenty twenty one annual results presentation. We're going to follow the basic format that we've used for the past two IMC presentations, where an initial period of time will discuss the hard numbers that we've produced for last year, and then we'll move on to a section on our overall strategy and the development, of which there's been quite a great deal

1:03 occurring during the course of the last six to twelve months. In terms of initially, though, we'd just like to reiterate some of the fundamentals as to why, from an investment perspective, we've got several positive aspects to where we sit today. You'll hear a lot today, though, particularly about our organic growth potential, investing significantly in e business and the reorganization commercial reorganization of the group in order to create the right the correct platform for growth. We'll touch a little bit on the fact that our leadership team has been significantly expanded and recently enhanced with two appointments at nonexecutive director level. And overall, confirm the fact that the capital structure of the group have, the capacity within our banking facilities has allowed us to react to the difficulties that our marketplace has had with supply in a way that's helped us positively grow the business over the past twelve months.

2:00 Okay, Russell. Over to you in terms of the financial review. Yeah. Good morning, everybody. Hope everybody's well. Myself and Bryce are sat on the same side of the same table in some nice offices in London, but we remain 2.01 meters apart. You know, we obviously remain in a highly uncertain world where actors come up on the stage and and punt presenters. So in that uncertain world, we think we've done a reasonably good job. Yeah. We'll turn the camera off when that happens. So I've only got

2:34 four slides, but the short version of the short presentation from me is that we've effectively done what we said we would do. We begin to see some encouraging trends, and we're very much looking forward to what 2022 and beyond will deliver for us and our investors. You'll hear more from Bryce rather than myself, in terms of things such as the five to one project, which is done and early signs are very encouraging and, on the e business investment we've made where there's still, stuff to be done. But in terms of the numbers, the headlines, I'll touch on each of these points. In terms of revenue, yes, it's up 15% against the difficult 2020 year, but clearly, a more meaningful comparison is against a normal world year of 2019.

3:27 So we we are 3% down. To be fair to ourselves, we did sign post 2021 as a year in which we'll be recovering rather than fully recovered. And that's exactly what happened. You know, on average, 2021, we were recovering, but the trends, as I'll go on to show in a later slide, were progressive. And broadly speaking, right here, right now, we are fully recovered in terms of our revenue streams. Bryce will touch on a little bit of segment by segment commentary, but broadly speaking, we were recovering, but we're now recovered. In terms of gross margin percentage, no apologies. I tend to say the same thing year on year. This is my fourth year doing this. And our margin remains consistent and strong.

4:15 And, you know, we're just not in the business of sacrificing basis points of of margin in the pursuit of revenue. So I think, you know, I I always always say, don't we'll we won't pat on ourselves, pat our pat ourselves on the back too strongly if it's at 35 something, but we wouldn't beat ourselves up too badly if it was 33.8, I think, the lowest percentage I can remember. But consistent and strong, and we won't do anything other than maintain our focus in that area. In terms of overheads, there has been a modest increase in operating overheads if you take them in total, 400,000 or 9% in distribution expenses. But I think in the world of inflationary pressures and 15% revenue increase, people will view that as a decent number.

5:05 And the balance of our overheads, we've mitigated the impact of inflationary pressures and costs that we've necessarily had to put into our supply chain and logistics functions. There's a linkage there to the build and inventory, which I'll cover a little bit later. But we've mitigated that through the full year effect of prior period restructuring activity that we've obviously messaged in previous presentations such as this. So we feel our overheads have been controlled pretty well. As I said, Bryce will comment on the segment by segment piece in terms of the profit per segment. In terms of debt, again, I think we signposted this. 2019 and 2020, just to remind you, we took just north of 10,000,000 out of our debt position on a like for like basis.

5:54 Know, rounding the numbers, it went from 20,000,000 to 10,000,000. So we felt we'd earned the right really to invest put some more debt back in the balance sheet to invest in inventory in the year in which it was most needed, I would I would suggest, in 2021. So that's essentially without there's a there's a debt bridge coming up in a second, but essentially, you know, our cash profit has not been sufficient to fund what we view as a very sensible building inventory that's actually put us in a pretty good spot right here right now. We see, you know, beyond 2021, we do see a return to, a debt reduction mindset. We have reintroduced the dividend at a much more modest level. People who have followed us for a while will remember it did get up to north of 6p per share. We felt on balance, it was important to reinstate the dividend, but it's not at the top of the list of our priorities as one of my other slides will refer to in a short while.

6:58 This is the debt bridge. So there's a standout the standout bar is the big red bar, which is the inventory build, 8,500,000. Again, to remind people, we took 9,000,000 out of inventory in 2019 and '20. So it's not as if we've gone back up to levels we've never seen before, but it is fair to say that, you know, over time, our inventory position, which currently stands at circa 30,000,000, should be on a downward trend. But I do stress over time, people shouldn't expect much, if any, of that. It's certainly in the first half of this year, given the uncertainties

7:36 beyond actors punching presenters, there are obviously joking apart, lots of uncertainties that we need to recognize and be respectful to. There's a nice big green blob there in terms of our cash profit. Looking forward, of course, we expect that green blob to get materially bigger. And 2022, would expect there'll be a I'd describe it as a modest movement in working capital. I can't tell you which direction it's going to be in, to be honest, because clearly, as our revenues hopefully increase beyond the current position, there'll be a debtor build. And, you know, all things being equal, there should be a modest reduction in inventory in 2022. So I don't expect the working capital bar to be a big one next year, but I do expect the green bar to be trending in the right direction, obviously.

8:26 The only other thing I mentioned there is within our capital expenditure there, that figure of $1,600,000 there's about $6,700 of, if you like, exceptional project related spend. Our steady state number is circa £1,000,000 And we've also sorry, I should mention, we did repay that 900,000 of HMRC COVID related debt that was outstanding at the beginning of the year. So almost $10,000,000 of headroom within our $25,000,000 aggregate banking facilities, even after investing sensibly and heavily in our inventory build. Not gonna say too much on this. I mean, the dividend, I've already mentioned, on balance, we felt it was important to reinstate it, but it's at the bottom of that right hand box for a reason. You know, for us, it's all about organic profit growth, and we'll use our cash to invest whether or that investment be in, you know, projects, and Bryce will cover five to one on the business in more detail later or as we've recently seen in inventory build.

9:37 But we respect the dividend piece, but it will sort of fall off the bottom at after investment spend.

9:50 My final slide, colorful one. I'm quite proud of myself. I produced that all on my own, actually, but it does demonstrate the path to recovery. This is revenue per trading day And q two twenty twenty, to remind you, we were forty one four one four 41 down like for like when the pandemic first hit, and there's obviously been a nice road to recovery there. I've just highlighted q four twenty twenty one versus q four twenty nineteen, and it is pleasing to say we left 2021 with revenue per trading day in that final quarter being reasonably significantly in excess of Q4 of our last normal year. So when I said it early on in my introductory comments that there are some encouraging trends, the full recovery of our revenue is pleasing.

10:44 As it's going, we've not sacrificed our margins in doing that. And the start whilst Q1 twenty twenty two isn't on this slide, we are encouraged by the start that we've made, as I said, in margin as well as revenue. That's all I really wanted to cover. Over to Bryce to touch on the segment performance before he gets into more of the areas of strategy. Thanks, Russ. Clearly, we set out at the start of this year to ensure that each of our respective segments improved on the 2020 performance. Some of that would naturally happen out of the recovery from COVID. But in each of these areas, we're pretty pleased overall with the results, possibly the possible exception of the services division that didn't make as much progress as we would have liked.

11:30 And in the main, the FLOWTECH division is the one that soaked up much of the inventory build. That's an MRO focused organization where, in essence, you need the stock on the shelf. And each year was characterized by initially not having a great picture as to where the year would work out. February to May ended up as quite a significant growth period where it was well ahead of the stock holding that we had as we exited the twenty twenty year. And when you come to buy the stock, you end up with issues overall supply chain, whether it be Far East, whether it be getting the containers, whether it be out of Europe, where you had continued shutdowns. And therefore, we took the decision that in order to ensure we retain the service levels to our customer base, we had to increase buffer stock significantly, and that has been done over the course of the year. We started in the Q1 where our category A stocks, in essence, our top 2,000 selling lines in certain weeks of the year with 16% out of stocks. We've never seen that before.

12:32 But by the end of the year, we'd return it back then to about 4% on a day to day basis, which is where it's historically sat. And therefore, we entered 2022 in that position, and that's been reflected in our early trading, which is certainly very encouraging. Overall, our target there in the short term is a move to a 15% return on sales, and we believe that well above that is achievable in the medium to longer term, particularly when our e business strategy starts to get some traction. Solutions is much more heavily focused around supplying directly into OEMs. There is an MRO element to what it does, but a heavy content that's directly into OEMs. So you're supplying typically a hydraulic component, typically a specified product as opposed to a generic product. So it might be a particular brand, a Parker, Bosch, Rexroth, etcetera.

13:21 And therefore, if that isn't immediately available, then you can't fulfill the order book. So again, certain similar characteristics, but no concept there of a replacement product being readily available, and it's had to work within that particular framework. So it took longer to get going during the course of the year. And again, had to restock itself, build larger buffer and enter 2022 in a good position. And again, we've seen that pull through into the early part of the year. Services, we thought we'd be significantly further forward. Our order book gave us some encouragement that, that would be the case. But in the second half of the year, the performance was a little patchy. There, if you can't get hold of a particular component, you can't make the GBP 30,000 power pack and therefore fill the order book.

14:08 So we have quite considerable overhang into 2022, underperformed against expectations in 2021. But again, we're quite confident that this year will bring about a resolution to the sort of minimum 5% return that we're targeting there. And obviously, our aspirations is much higher than that in the sort of medium term. As Russell talked about, a lot of the cost based restructuring work typically of warehousing facilities and warehouse employees that we did in 2020 and 2021 under the cover of the COVID period has helped us sort of under or protect against some of the inflationary pressures that are pulling through. And as we get into 2022, everything will be characterized by that. Quite strong pressures in both the product set itself and our ability to pass through those prices and equally strong pricing pressures in people, utilities, properties at our underlying sort of cost base. We're pretty confident that the work we've done to date is drawing fruits on that and protecting us against what the market pressures that are coming against us. So overall, we feel that each reporting segment, we've got growth good growth potential underpinning our aspirations for the 2022 and 2023 financial year.

15:23 And behind that, we've got a service center cost base that is now mature and expanded, and we'll talk about the resources now that we've got within the management board level. So overall, in each reporting segment, good positive growth in all aspects. Okay. I'm going to talk now about some of the fundamental growth strategy elements. We defined this in late twenty twenty, presented it in April 2021, a year ago this week, and reiterated some of the progress made in 2000 in our September two thousand and twenty twenty one presentations. Overall, what's our target with this? Well, it's to ensure that we are in all routes to market business completely integrated both internally and in our approach to external markets.

16:10 In its broadest sense, we have a historic legacy offline focused business in what is the FLOWTECH branding segment and the FLUIDPOWER Group branding segment. One largely focused on MRO, the other one largely focused on OEM, albeit there's some interchangeability between the two various legacy operations that we've got. But then linked into the one web presence has always been our target. So floatech.co.uk, all of that feeding off the single product file, therefore allowing the group to use all our resources to attack all the markets available to us both offline and online through our SEO activities. But what have we done during the course of this year to transition our business to maximize our our opportunities and our potential?

16:59 But the first big achievement was the creation of the FLOWTECH brand by combining all the previous legacy profit centers. These all acted independently. Yes. Under the umbrella, there was certainly sharing of resources from product sets, IT, commercial, but nothing like as integrated as needs to be to to to set the business up for all the near term. And this is now an all routes to market operation for the very first time. It's quite important that investors understand this because the initial conclusion may be, well, you can sell to everybody. Historically, these businesses have been a master distributor through a distributor format and therefore restricted effectively its access to the marketplace. In 2021, the creation of a single brand with all routes to market style is a major move forward from us. Very pleased to say that was by far the biggest project that we've undertaken.

17:53 We've got over two fifty employees across these particular legacy businesses in two countries. We have to combine IT systems, combine pricing files, coordinate marketing, crucially aggregate ourselves under a single catalog with a master catalog and for the first time four subsidiary catalogs, which mirrored the marketplace in which we operate. And therefore, we set up specialisms in pneumatics, hydraulics process and instrumentation and industrial. So a major, major step forward for us and very successfully operated by the effectively new project management skill sets we've invested in over the past twelve months. And if investors wish to look at a wider sense about what happened during the five to one project that implemented on the January 4, they can look in the video library on our corporate website. So a major move forward for us.

18:48 That will now move through into 2022 when the sister elements of that, the creation of the single FLUIDPOWER group branding style will bring together all our other brands, brand consolidation of those legacies that you can see on the screen, all focused around the hydraulics market initially, but it'll give us the concept overall to provide similar services into the pneumatics market, which is a smaller market, but not insubstantial. The commercial integration that we'll create will mirror the supplier strategy as well as the market overall with a clear split between mobile applications and industrial applications. But crucially, and be able to create productivity gains by the use of the single trading website.

19:37 This will have a focus around building a mirror of the market, as I say, component distribution, fluid conveyancing.

19:46 Overall, the two segments that are critically important to this marketplace, hydraulic power units and equally on-site services. So a major focus of 2022 will be the creation of the FLOWIDPOWER brand, FLOWTECH FLOWTECH In parallel, we've created the new floatech FLOWTECH flowtech.co.uk website. We'd flagged that we were expecting this to be live in Q4 and then we hoped in Q1. The testing process has been rigorous and hasn't gone exactly as we would like in terms of timescale, but we're now in final build and are very encouraged that this will go live shortly for us and be transformation in terms of what it can achieve. In two particular areas, it will be a much more modern customer experience and transition from the previous order portal structure that we had.

20:33 But just as importantly as that customer experience will be the analytics capability that this will now bring and completely complement our offline strengths in our marketplace as the largest provider of what we do. And at its core is the product set. We'll effectively go from an analog process to the full digital age of what's called the PIM, consolidate the products right across the group rather than being just in the focus of the individual entities that we've got. We'll be able to extend our portfolio already from 50,000 SKUs to 125,000 SKUs will go live when the overall process comes to fruition in the near future. And crucially, it will be able to integrate with our major manufacturers. Again, if potentially

21:19 investors and investors wish to look at the sort of look and feel of the new website, there's a video link they can follow as shown on the screen there. So I talked about the digital insight that we're gonna get and the capabilities. But why we're doing this? Well, in essence, it will allow us to hopefully sell more. We've got a very strong customer set. And when we started this journey, we knew that we had about 17,000 product record or customer records from the way that we can manually put this together.

21:49 What's interesting out of the first run of the CDP, we overall got 47,000 customer records in total that FLOWTECH has acquired in its data pool over the last ten years. And to some degree, we got access to to a a further 120,000 records through all the sort of means. So the actual ability to digitize what we're doing using the capabilities that come out the new these new skill sets is enormous in terms of attacking the overall business universe that we've got available to ourselves.

22:20 Upsell, cross sell, retain, acquire, all the usual aspects of a fully fledged marketing brief is what will be available to us, and we'll be able to exploit that over the coming years and months and years. The level of sophistication, the ability to identify combinations, patterns within particular comparable suppliers,

22:43 integrate this with email marketing campaigns driven by artificial intelligence through all the means that we've got is really very exciting to us in terms of its potential. And behind that, this all routes to market web offering will use search engine optimization for very first time. To reiterate, originally, our catalog our our web presence was always a mass distributor mass distributor to distributor structure, But now we'll be able to look at this all routes to market. We've we've stepped up our key search terms. We originally identified 200 terms. Now we're to the next level of that. We're up to 600 terms. And when we get the Google Analytics assessment of our marketplace, yes, there are leading players there, RS components being the standout.

23:29 FLOWTECH is significantly down that list, and our plan is to drive us up in terms of the presence overall. And again, with the view that, that will allow us to increase sales and grow organically through the same product set, through the same logistics platform.

23:45 Overall, we believe there's about GBP 50,000,000 in The UK and Irish marketplace that we look to exploit. And obviously, our plan is to get as much of that as we possibly can. All those appointments have been made. Very pleased

24:25 with the input that we're getting from those individuals. And we'll stand as in good stead as we look to support organic and obviously, in time, possibly inorganic growth as we generate significant cash resources over the coming year. We also flagged the sense that we believe our target will be to move to a single ERP provider in the fullness of time.

24:47 But in the meantime, our main legacy system that we use, a key platform that now underpins the five the FLOWTECH division, the five to one project. The partner there has extended support in terms of that right out to 2026 and therefore has given us the scope to take time over that particular decision, particularly the fact now that everything is cloud based for the first time, another achievement by our IT systems people in 2021. So very pleased in the other areas away from our commercial branding developments. So again, hopefully, something that people recognize a great deal of change has taken place in the engine room of the FLOWTECH business. And overall, our target to create this integrated business model that we believe will drive organic sales growth over the course of the next twelve months in particular, but over the long term.

25:42 Okay. In terms of summary and outlook, the key achievements that we've got during the course of the last twelve months, our e business platform is built, it's in final testing, and it will shortly go live. That is a two point five year project that comes to fruition. We've managed our inventory. We've matched the demands of our particular marketplace to fit with the disruptive supply chain that we faced. But we're very pleased with the way that that's worked, and we use the capital resources that we built for ourselves during the previous two years to ensure that we could do that without recourse to further investment in the organization.

26:16 We've achieved the FLOWTECH five:one project, a massive project implementation for an organization that three years ago had no project management capabilities at all, delivered the biggest project in its history. We have grown operating profits in all our segments. Our exit rate was growing. We entered 2022 with a good platform built and early signs are encouraging for us. And we'd like to think we've dealt well with the COVID-nineteen impacts at both commercial and at people level. Our 2022 focus is to exploit those digital capabilities, create the FLOWIDPOWER group, ensure that our Services division, in particular, returns to the profitability level that we believe it should achieve for us.

27:02 Overall, our ESG agenda continues to develop, and we've got a sustainability plan built and in play, and hopefully, a return to strong cash generation as outlined by the analyst note that we've got.

27:17 Okay. We've counted through that hopefully relatively quickly. It's a reiteration of the messages that we delivered in the last twelve months, eighteen months overall. And I'd like to think that we'll get some questions that we can answer in the next five or so. Bryce, Russell, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right hand corner of your screen. But just while Bryce and Russell take a few moments review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. Bryce, Russell, as you can see, we've received a number of questions throughout today's presentation, and thank you to all the investors for submitting those. Could I just ask you to read out the questions and give responses where it's appropriate to do so? And then I'll pick up from you at the end.

28:04 Okay. So first question, Miles? Yeah. I mean, whilst Bryce has been speaking, I'll have a chance to sort of see the questions as they pop through. So perhaps if I begin to answer them, Bryce, and you can chip in. First question, if you mentioned struggles in the service division, have you lost any business there, or has it all just been delayed or broadly delayed and not lost? I mean, it's interesting to me that, you know, when things are tough, you can actually strengthen your relationship with your customers. I used to say that in the old world that I operated in for twenty five years, which was turnaround and restructuring. It ain't half interesting how you can cement and improve relationships if you're,

28:45 you know, speaking to people, communicating with people efficiently when things are tough. So broadly speaking, yeah, delayed and not gone away. And if anything, it's enabled us to get closer to to some of our our customers who do understand in a difficult world when, you know, Nando's can't get chicken, McDonald's can't get milkshakes. They do have some sympathy, but we can't find that one important component to deliver that 30,000 pound power pack, the example that Bryce alluded to. I don't know if you're gonna give me two out of 10 or 10 out of 10 for that answer, Bryce. Anything to add? No. I think that was that was spot on. So our services division, it's more an element of managing how it controls its margins, how it controls its costs. We talked a year ago about a route and branch review that's effectively been done.

29:34 It was disappointing that the back quarter of last year, our order book we weren't able to convert it into invoice sales. But in the early part of the year, we're certainly seeing that that overall come through. Okay. So the second question was you've talked about the promising start to '22. Has there been any change over the last few weeks? A Ukraine effect, question mark. Well, I'm gonna put another way. Are you enjoying a honeymoon period given mister Putin's efforts?

30:07 Difficult to say is the answer, but what I'd equally say is that we were equally encouraged pre Russia Ukraine as we have been post Russia Ukraine. The trends were already there. You know, there might be an element of people being nervous and stop building, but, you know, it was at least as good prior to mister Putin doing what he's done as to after he's done it. Again, Bryce, anything you want to add? Well, as we said in our reports, both Chairman's report and my report that's published today, we don't have any material supplier or customer impacts from that particular region. Obviously, the horrible things that are going on there. Russia is a major commodities provider, whether that be steel, nickel, black carbon is one in terms of all those that's used in hydraulic homes.

30:59 Equally, as I've said, our hydraulic oil supplies are quoting 2023 anyway in terms of supply. So they've got an issue to maybe resource from that perspective. It's been probably just make certain elements of the supply chain tighter, and we'll deal with that as it sort of comes through. It clearly won't help overall in terms of general market sentiment and confidence in the medium to longer term, but there are no direct impacts of that particular issue. Yeah. I have stopped printing things in color because the cost of paper has tripled in the last few weeks. But aside from that, it was at least as good before the invasion as after. Third question, presumably, your smaller competitors have suffered even more over the last year.

31:48 Could you comment on the competitive environment, any opportunistic m and a possibilities? Well, my answer to that is that, yeah, I think it on average, our competitors won't without the ability to add 35% to their inventory levels and benefit off the back of it. So they they will have probably, on average, suffered more than we did. But our our our aim is to is to hurt the opposition, not sort of go out proactively and acquire things. That's not to say if an opportunity hits our desk, we won't look at it. Of course, we would. But it's all about gaining market share through organic means. And in particular, you know, we've not said a lot about the e business and deliberately so today, but, you know, where we think that can reach into should hurt those competitors. So, no, we're not in a rush to proactively approach people and say, do you fancy selling yourselves?

32:46 We're just in the the market to hurt competitors by achieving organic revenue and therefore profit growth. Without question, there are opportunities out there for us now. But we're all about organic growth play. We need to strengthen our sort of cash position and create the opportunities in order to be able to acquire businesses within our own resources. But I think the other thing that's reiterated right through the COVID period, right through the last twelve months, in particular, is this sector is very resilient. And that's one of the things that we think the niche element in which you're investing in is something that despite what the markets attempt to do to it in several different ways, it finds a way of making good margins and good money.

33:34 And that's an organized that's reflected across all our competitor base who who equally are doing reasonably well out of the current position, and there is the constraints in the supply chain side of things. I'm gonna I'm gonna skip a few questions, Bryce, because I think there's a linked one come through. Your outlook seems more positive than the industry forecast, which show hydraulic growth of 3.1% in pneumatics declining by a fraction under 1%. Also wondered if you can expand on the issue with Ireland and Plant Solutions. Do you wanna touch on our growth versus the industry stats branch? Remember, these industry stats are put together last October by Oxford Economics. There was an element of difficulty in understanding supply chain constraints.

34:25 They they are pitching them at, say, constant prices. And one of the early questions here is about how do we how much of our growth is volume and how much of our growth is price. Again, very difficult to pitch across a close to 200,000 SKUs business through four or five different systems. But just to give you a sense of feel, we think that overall prices compared to about fifteen months ago are 5% to 7% higher than where they were today. But we're seeing further price inflation, you know, sort of coming through. So you've got volume, yes, underneath it. It's probably relatively modest through 2020 in terms of actual price inflation, though that's adding on top of that.

35:16 I don't think we, particularly in terms of the guidance of the market, have got anything too racy that certainly analysts are putting out for us. Overall, it's a 1 and 12,000,000, I think, for this year. Revenue, right, 115,000,000. 115,000,000. So overall, 4% growth. But given the quarter by quarter revenue figures that Russell went through beforehand, you can say that we've got some reasonable reasonable trajectory coming into this year that hopefully makes those reasonably secure for us. I I did pick up on one point, though, about our e business and what makes us different to other players. Clearly, the customer experience in a website is a fairly standard commodity, you know, these days and comparable with other websites. That, I would say, is exactly that. It's comparable with other websites.

36:04 The bits is the key part of differentiation is our niche and the breadth of products that we've got and the support from our major suppliers in terms of what we're trying to achieve. I'll go back, though. The key hook for us is the analytical capabilities and the e marketing capabilities that coming out of having a modern web position. Not so much the marginal sale through the website itself, you know, just through its its overall functionality, shall we say. Just trying to think Then we've possibly touched on a couple of the questions. There was a question about the eight and a half million inventory build, the price versus volume. I think based on what Bryce was saying in terms of 8% inflation pressures, you could probably view that as roughly a 20% price, 80% volume answer.

36:53 Distribution costs have reduced from 2020 to 2021. I think that's more a facet of volume and the COVID sort of year. We're going to get pressure behind distribution costs. Obviously, fuel is a key element of that. We've already got fuel surcharge from FedEx coming through in sort of Q1. So I don't expect any fundamental change in distribution costs per se. The five:one project has helped us because we're able to consolidate parcels more effectively. And we've seen some slightly better than expected results out of that. So not anything particular sizable from there. Got a question on addressable markets.

37:43 It really is reiterating what we talked about in the past. The overall market size stays broadly a billion and growing. We've got, obviously, about 100,000,000 of The UK and Irish marketplace, the balance being in The Netherlands. Typically, 40% to 50% is seen as being addressable to a distributor. So we've got 20% to 25% of our UK and Irish marketplace. We've not talked in this presentation about wider aspirations, but anybody can say if you've got a developing web presence and digital analytical capabilities, The European marketplace, the same product sets through an efficient distribution platform is an area of quite significant potential organic growth for us in the medium term. We're focusing UK and Ireland certainly in the short term. So we're not short of addressable market for us to attack.

38:44 Five:one project, the obstacles to the group solution, the FLOWTECH We've got a lot of experience over the past couple of years. Great learning, you know, experiences that come out of that both for me as an individual and the team. But there are several moving parts to it, so we're just gonna work through it diligently and not be too gung ho about how we approach that, but nothing that particularly frances in terms of, you know, of overall complexity of what we got to achieve. I would like to think that by our end of August till the September half year training update, many aspects of that integration will have been done or anything that's remaining will have quite a clear path to its creation.

39:43 There's a question, what milestones or news flow should we look for through 2022? Well, we no longer do quarterly trading updates. So myself and Bryce will be updating, hopefully, this audience and a few others probably in August with reference to the half year results. But it probably is worth forgive me, Bryce, if you did mention it, but there's two or three clicks and links in our presentation to videos which are on our website, which I personally think are quite informative. It'll tell you a lot more about the five to one project. I mean, that's a two or three minute video explaining what's been done and what's been achieved. And, equally, there's a link to a video about e business. So, you know, watch this space in terms of videos that are uploaded to our website, but it's we'll obviously sort of speak to you if there's a need to speak to you.

40:33 But, you know, August with regards to the half year results is probably the the main information flow. Okay. We seem to counter through. There's a lot been removed. Thank you for that. And I think you've addressed those questions you can from investors. And, of course, the company will review all questions submitted today and will publish those responses responses on the Investor Me company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to you both, Bryce, could I just ask you for a few closing comments? Well, I'll reiterate the sense of what we're looking to achieve, and that's a fully integrated organization. You can balance off the sort of legacy offline skills that have created a 100 plus million business in the first place, often with deep roots going back fifty plus years in terms of the experience and position in the marketplace of its legacy operations.

41:26 We're now layering on top of that a leading edge platform, floatech.co.uk, and all the digital analytics skills that come behind that. So we think we are marrying together the best of the offline with the clear opportunities that the online world can bring and create the most powerful integrated fluid power business in The UK and Ireland. Bryce, thank you very much. Russell, thank you for updating investors today as well. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that management team can better understand your views and expectations? This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of FLOWTECH FLUIDPOWER PLC, we'd like to thank you for attending today's presentation, and good morning to you all.

42:16 Okay. Thank you.