Flowtech Fluidpower (LSE:FLO) — Half-year results for the period ended 30 June 2021

0:00 Good morning to everybody. Sorry, Bryce. Let me just give the quick introduction before we start. So thank you. Good morning, ladies and gentlemen. I for the late running of the meeting this morning, and welcome to the FLUIDPOWER PLC Investor Presentation for the Half Year Ended 06/30/2021. The Company may now be in a position to answer every question received during the meeting itself. I will now all questions submitted today and publish responses where it's appropriate to do so. These will be available via our investor dashboard on the Investor Meet company platform. I'd also like to remind you that this presentation is being recorded. Before we begin, I'd like to submit the following poll, and I'd now like to hand you over to Bryce Brooks, CEO and Russell Cash, CFO of FLOWTECH FLUIDPOWER. Good morning.

0:52 Good morning, and thanks very much for that introduction. Good morning to everybody on the call. Again, first thing, a slight apology for the for the delay. You may like to know that it's associated by the fact I sound a bit gruff this morning, that I felt suitably that my symptoms reflected some of the characteristics of the COVID nineteen. So hence, we've had to split Russell and I up. I'm I'm self isolating at home, but I've had a negative lateral flow test this morning. So hopefully, voice is just a normal old fashioned sore throat, and we'll get through the presentation without any undue issue. So for many of you who have heard this before, you'll know the background to FLOWTECH, but some of you won't have done. We spent on our previous investor meets company presentation quite a section of time talking about the fundamental characteristics of the group and where it sits.

1:45 And I would suggest that if you'd like to look into that in more detail, you've not heard it before, you maybe look at back in the previous presentation. We won't be covering that particular area this morning. But in a nutshell, you know, we are a fluid power business. That's hydraulics and pneumatics principally, but it also has some associated areas in industrial tubes and fittings. And, essentially, it's pressurized liquids or gases to create motion or some other form of activity in industrial applications. Why are we a preeminent investment? Well, in essence, we operate in a fragmented marketplace. We there's a £1,000,000,000 circa £1,000,000,000 fluid power market in The UK and Ireland. We equally have representation in Europe and The Netherlands, which is part of a €5,000,000,000 European market. We are circa a 100 and a 100 to 110,000,000 depending on where you put normal.

2:45 Our biggest number 2019 was about a 110. Guidance at the moment for us in the marketplace is just over a 100 as we recover from the COVID nineteen situation. In terms of our footprint, we operate, as I say, through over 20 sites in Ireland, The UK, and two sites in The Netherlands. We've got a strong balance sheet due to a lot of work we've done around our working capital position. We're well resourced with a strong group of shareholders. We've got, as we'll outline some of the characteristics in this presentation, both organic growth characteristics and potential inorganic through m and a activity. And we'd like to think we've got a leadership team that has a strong balance of experience and ambition, obviously, head headlined by myself and Russell.

3:34 So we're gonna start with some of the financials, the simple overview, and I'll hand over to my colleague, Russell Cash, to go through this side of of our presentation. Yeah. Good morning, everybody. Because myself and Bryce were separated, I lost the guy who knows how to press the right buttons in the right order. So I'm told that the sound isn't great, so apologies if I end up shouting throughout this presentation. I'm assuming one of the guys at IMC can send me some sort of message if you just simply can't hear me or Bryce will pick up on this. Russell, you're absolutely perfect. Sorry to step in, but you're absolutely perfect. Thank you very much. Okay.

4:16 Many I think the strapline on the first slide was returning to growth. We could equally say delivering to plan, actually. And pretty much everything I'm about to say on this slide is under that heading of delivering to plan. So that would be a bit brief, wouldn't it? So let me spend a minute or so padding that out. In terms of revenue, I think Bryce alluded to, in a normal world, perhaps we deliver circa 110,000,000. In the abnormal year of 2020, it dipped down 15% to 95,000,000. Pleased to say that we're well on our road to recovery, and it's obviously more meaning meaningful to benchmark the first half of twenty one against the first half of nineteen. When you do that, you know that we're 7% behind where we once were in that normal world.

5:09 Beneath that headline, in terms of the segment by segment piece, it's equally true to say that we're broadly fully recovered in our FLOWTECH division. That's the division that is focused upon the MRO marketplace. And I guess it's unsurprising that the the second segment of our business, call we call it it solutions, which is more correlated with the OEM market, was hit worse and is taking slightly longer to recover. But, you know, as Bryce alluded to, I think consensus has our revenue in it circa hundred and three, hundred and four, bang in the middle of the normal one ten and the and the abnormal '95. So so we're pleased with the way that we have recovered today and continue to recover.

5:58 In terms of margin, again, key message is there. You know, it's strong. It's stable. We're proud of it. We don't sacrifice margin in the pursuit of revenue in any market conditions, and and that that will remain the case going forward. There's a fractional improvement, but I don't think we should pat ourselves on the back too much when there's marginal improvements and we shouldn't get too down on ourselves when it dips down a little bit. The reality is since I've been in the group, which is still less than three years, I've seen that margin as low as 33.8 and as high as 35.7. It's steady. It's stable. But if there is one pleasing aspect, it's our services division is beginning to improve its margin. There's a separate slide on services, which we'll come on to in a short while.

6:45 In terms of overheads, if you do compare an apple with an apple, and by that, I mean, if you remove the benefit we received from furlough last year, our operating overheads are an extremely similar level, h one twelve one versus h one twenty. But there's an a message beneath that, and that message is that we did take quite a lot of action with several of our businesses twelve, eighteen months ago and extracted some overhead savings, circa 1,500,000 on an annualized run rate.

7:22 And that's allowed us to, if you like, self invest in some of the more exciting go forward investment areas of our OpEx. Particular, we'll talk later about our e business and digital agenda. And we've previously mentioned about strengthening the management team and our ability to deliver a multitude of projects. So the headline number is very similar, but for different reasons.

7:50 In terms of net debt, I'm gonna come back in a couple of slides time with the classic debt bridge, but suffice to say that's in line with the message we gave to investors four, five months ago. I said that don't expect much, if anything, in the way of debt reduction. So as you'll see in the from the bridge in a couple of slides time, is very much on plan and under control. The dividend there, we've just included a quote from our r and s. For those who are keen on the words, you'll notice that the word keen to reintroduce has been replaced with determined. You'll equally note that the analysts, I think, have got us in for something like 2p per share of dividend final dividend in respect to 2021 payable midway through '22, that would be.

8:40 So I'm gonna hand over to Bryce to talk about our investment in inventory, and then there'll be a linkage to the net debt bridge, which I'll come back on. Okay. Thanks, Russell. We made quite a play in our RNS about the the well publicized issues in in supply chains in in nearly all sectors. And by way of illustration, we pick up here a couple of KPI that we use as part of our board reporting with specific reference to our FLOWTECH division that has, in essence, as it part of its mantra is the highest service offer typically driven by MRO, typically driven with the next day demand sort of profile. So we've got two two graphs, the the green element, the the which profiles the total stock plus what is on what we call open purchase order. So it's what's with those and what's on its way and gives us a sort of representation of what our typical profile may look like. We trailed in April that we identified early on in the year that volumes were increasing quite significantly.

9:48 And on the back of a 2020 year that we know was affected badly by the COVID nineteen situation. So we took some quite proactive action there to to place some quite significant orders midway through q one as highlighted here by circa 2,700,000 of additional volumes to reflect both the escalation of volumes, but equally, what we were seeing in terms of extension of lead times. So therefore, we have to provide some additional buffer, you know, for that particular process as we look down the piece. What what was actually happening is reflected in the blue line. So this is just one simple metric where our a lines, those top selling lines, we measure each week just how many lines we don't have stock at all.

10:34 Now, typically, in FLOWTECH, you would not have a 99% availability here. You typically operate at about 95 because this is moving through by definition quite quickly.

10:45 And and many of the FLOWTECH customers are comfortable with, if it's on its way in in the next week, put it onto back order as soon as it comes in services with the product. So it typically operates at about 95. You'll see here, though, our scale on the right hand side of the page, it was over 12% where a lines were out of stocks, so quite high from our perspective. So you have the juxtaposition of increasing demand, difficult to get all the stock, and therefore, you have to be sort of proactive about that, and that's exactly what we did. And you've seen the results that the non the out of line stocks for airlines is coming down progressively. But equally, with demand picking up quite well, particularly in the FLOWTECH division, and we've had to go on top of that and continued our uplift over the summer months.

11:32 So you've got an uplift in stock that will feed through to greater stock holding position. We've gone from 18.8 OPO plus stock in February to over 24,000,000 in the the last test part of this at the end of August. And some of that, the majority of that will feed through into a stock investment. There's a creditor support on on that side of it, and that's reflected in some of the things that Russell talked about in terms of our net debt bridge. However, there are a couple of other points to note here. The whilst we're pretty, pleased with the way our sales have recovered, underneath that, we actually were fighting the fact that, stock availability, supply chains weren't as readily available as normal, and therefore, orders were in. We had an order book

12:18 that we couldn't service simply because we didn't have the stock. Now we haven't lost that sale because our stock profile remains as good and if not better than majority of our competitors. And certainly in our solutions businesses and our services businesses, it's effectively a prescribed branded product anyway. So they have to come through our particular channels. So if we can't get the stock, we can't supply the customer, but the customer therefore has to wait till we they're slowing down its own production. Now those particular particularly large OEMs have also experienced supply chain issues in other parts of the the manufacturing process. So there's generally been a drag on demand. So order books are working ahead of the ability to actually service that. Now that will normalize, we'd like to think, back end of this year, maybe into 2023, and therefore, the fundamental characteristics in the sector at the moment, again, are pretty sound in terms of what's happened in the post COVID nineteen situation.

13:15 The the restriction on supply is inevitably starting to lead into some price inflation. Again, in terms of guidance, we've been quite cautious about what that may mean in terms of sales profile. Our focus as a distributor, though, is on that exact percentage margin that we achieve. So GP percentage is somewhat that we track on a daily basis measuring against prior years. And, we feel pretty comfortable about where it sits now in terms of our medium term or short to medium term objectives. So overall, supply chain issues in the marketplace. We're dealing with it. We don't believe that there's any, factors that will overly impact on our profitability measures, in the short to medium term. And if anything, there might be an opportunity to exploit that, you know, if we handle it to handle it well. So, we are dealing with that particular position at the moment.

14:14 Hopefully, Bryce, thumbs up if you can hear me. I was getting some red buttons popping up, I'm afraid. But, yeah, you can hear me. Okay. The The debt bridge, not the most complicated bridge, is it? There's a green blob and there's a red blob, they're about the same size. So not a lot has happened to our debt position. Beyond that, I mean, we it's increased by 1,600,000 exactly as we planned. As Bryce alluded to, we deliberately invested in our inventory. And, as our revenues recover from the back end of twenty twenty, there's a fairly significant increase in our debtor book. I would remind people that two years ago, the debt was 18,800,000.

15:00 So the fact that it's 13.2, obviously, 5,000,000 or more reduction in a two year time frame. And equally, equally, it's nice that we can operate with headroom of typically $1,213,000,000 within our 25,000,000 banking facility that still has an excess of two years to run.

15:18 So So all in all, again, it's it's getting a bit boring, isn't it? It's what we expected. We're delivering to plan, and it's under control. Okay. We we were quite clear in our April presentation about the key planks of our strategy. So the next section of our presentation will just give you an update on those sort of key areas in particular that were our focus. The first one of which was our branding style. We've historically operated initially under the FLOWTECH coupled with Derry Lane. Well, we expanded the group considerably, both in the breadth of its offer, the brands that it offered, the types of markets that it actually serviced.

16:14 But we were left with a multi brand house that worked quite effectively at that particular point in time.

16:20 But with the increasing effect of online markets, we decided that we had to progress ourselves to a much more focused branding style. And we outlined the fact that we would operate under FLOWTECH and with POWER PLOWTECH in terms of our commercial position, and that we reported to the three channels of FLOWTECH solutions and services as the two subsections of the Fluid Power. Now the initial focus we've got here is around the FLOWTECH branding style, and this is quite a major change to the organization. Previously, the constituent parts of the FLOWTECH division, as I centered around FLOWTECH and and what's now itself rebranded as FLOWTECH, was a massive distributor to distributor relationship quite clear in that. But with the IndiQuip brand and the Bomano brand that we acquired, it was very much an all routes to market process within those of brands.

17:12 And therefore, culminating with a transition of the whole division under a single branding style with an all routes to market commercial position is quite a significant change for our organization. That's now well trailed in the marketplace with our key customers and our key suppliers. It's received very good well, obviously, been received very well. Many of our customers have multiple accounts, and they want it to be serviced by one account through one point of contact, and we're creating that. It involves not just commercial coordination, but IT, and we're on track to deliver that in q one next year. Crucially, this is also under the banner of the second part of our strategy, which was a significant investment in an upgrade to our e business capabilities.

18:00 So floatech.co.uk is a legacy website that's been around for many years, but it's essentially an order portal, a connection of distributor to mass distributor. That will be significantly upgraded with a major investment that we've made and a redesign goes live in q four this year. That's on track, you know, as we said. And it will have a much more immersive customer experience,

18:25 including web personalization, email marketing campaigns connected to it, artificial intelligence, and driving into search engine optimization act optimization activities that previously FLOWTECH has never touched from that perspective. As we pointed out in in April, we believe there's considerable scope here for growth just through the online capabilities and what we're building here, and that will be coupled with our offline capabilities. Just touching on the the SEO side of what we were talking about here. You know, how will SEO improve what we do? Well, it's an extra. It could be linked to the FLOWTECH branding style, and this all routes to market concepts.

19:06 Today, if you search by hydraulic hose or hydraulic fittings or many of the other basic terms of what we offer, you'll find that FLOWTECH is ranked well down in Google pages. Well, that was partly intentional because of the way that we operate as an organization. Our analysis that we've done over a two year period suggests that there may be as much as marginal revenue of circa £300,000 and an RGPs of, say, 35 Western distribution high twenties. There's quite a pool of potential revenue for us in that space, and we've identified that just this is sort of each search term. There may be a 100, maybe not 250 of these search terms. And therefore, as we progress through the early calendar next year, we'll couple the new capabilities of the website, the much deeper, more immersive product set that we have available to us online, all those to market concepts, but then coupled with that new search engine search engine optimization resources that we've implemented in q four and then into q one.

20:10 So quite an exciting phase of what we want to do, and we believe will give us a fairly rich pool of new customers and, yeah, big demand. Of course, that's equally coupled with our customer data platform that we trailed. So our CRM capabilities are relatively undeveloped. So we've implemented a CDP platform. We were targeting this to be available before the end of the year. There's been some slight slippage there, but nothing too material. And we're very, very confident in implementing that in the new year, and that will have both offline and online ramifications for us. And, again, will be another elements adding to our tool kit as an organization. So quite an exciting development and broadly on time with our original schedule. We've included in this presentation a further update on our servicing division because we know this is a particular interest.

21:05 We flagged in April that we believe we were on track to return this to a sensible level of return as a short term aspiration. Clearly, relatively modest in terms of its profitability in the first half. But, again, a lot of what it does is on-site, and then it's more larger ticket operations. So maybe it's on-site operations, you can't get on-site. So there's there's natural restrictions there. But the route and branch review that we flight is making good progress. So strong activities in all areas, both from leadership. We've we've changed and upgraded facilities there, improved our MRP functionality in certain of our businesses, particularly in those days. Russell said beforehand, we've we've increased our margin by better understanding of what we're trying to achieve and better control the sort of pricing, and we went to instigated a more wide ranging educational upgrade for our technical capabilities.

21:57 And we enter, you know, h two with a pretty strong, you know, order book. And one of our challenges there is actually delivering that, again, with the ramification of the supply chain side was. So on the one hand, our ability to service our custom solutions plus FLOWTECH has some drag on it. Equally, there's a drag on our ability to service a fully manufactured product into our own customer set there. So a return to expected level of profitability is something that we believe that we're on track to deliver. Just to add a little bit to what Bryce said there, we've set us. Apologies in catching this, isn't it? We've set ourselves a short term objective of delivering something the reason of the 20% return on the 4,000,000 in capital that this division absorbs, so $800,000 for the full year.

22:54 Dollars 200,000 in the first half in isolation, we think that's not very good. But we do expect to H2 to be better and deliver that against that objective, again delivering to plan. And I'd equally sort of highlight the fact that the full year last year was a nasty number. It was it had a bracket around it, and it was 1,200,000. So if we do achieve that objective, it's obviously one year relative to the previous 2,000,000 improvement. That's not to say we're gonna stop when we when we get to 800 as those initiatives take us beyond that level. Okay. We've been on apologies for that. My phone just rang through and came through the audio. So in terms of our ESG agenda, again, this is a big area where for ourselves as as an SME and competing largely with smaller competitors, the ESG agenda, again, I believe, is gonna be quite a big differentiator for us.

23:58 We've now appointed a new role director of human capital for the first time, and they started tracing. Well, they started with a pretty full agenda around the employee life cycle that we illustrate here. And on the right hand side of the page, a lot of information was there to show just the breadth of the various activities that we're focusing on, particularly highlights, for example, of the engagement profile that we do with our staff. We do an annual test on that. The whole induction orientation process was significantly improving that. We've been all the work on the mental health and well-being, and we're involved in the kick start program. Why are we doing all this stuff? Well, ultimately, the modern world, attract, retain, develop staff. We're in a very competitive marketplace, not maybe perhaps in our niche, but against the wider offering that younger people have today in terms of the choice in their lives. So we see this as being an area that we've we've rightfully put a lot of emphasis into, but equally, it's gonna be a differentiator for us. And if we look at my time in industrial distribution, something that's really seen as quite a traditional employer base, this is something that's probably seen the biggest sea change. So you'll see this recurring theme of what we do heavily people influence in terms of our various activities as part of our ESG agenda.

25:18 Just a a couple of things on there from my end point of view. Obviously, the the wide range in ESG agenda, we know it's really important for lots of people that's important to us, and we've not forgotten that e stands for environment as well as employees, and we've not forgotten the g bit around governance. Surprised to say that there are work streams in play, but we just thought we'd talk to you about the area that we've invested most in and done most in in the last six months. It is encouraging that, you know, our one of our strap lines as we enter the pandemic was let's make sure our behaviors outperform our competition, and let's make sure we come out of it stronger with a more engaged

26:02 set of employees. And it's really pleasing to see that our engagement score during the pandemic actually improved. It was already fine, but it's got better. So, you know, it's not in my nature to pat ourselves on the back, but if I was gonna self congratulate us for one thing, it wouldn't be revenue or net debt or any of those foreign financial things. It would be the engagement of our people, which is crucial. It's at the heart of what we do, and it's part of our DNA. Okay. So in terms of summary, h one, we think despite the transition from, say, a health and well-being year in 2020, clearly, that was important in 2021. We've now got the commercial effects of the COVID nineteen and disruption to the supply chain place. We think we continue to deal with that pretty well, as well as Tracy William and not human capital. Just a reminder, equally recruited high high caliber people into operations development. Howard, well as John, is director of customer insight leading our thinking around search engine optimization, e marketing campaigns.

27:07 Really big step of effects almost from these sorts of people. We're working hard on the inventory, making sure we've got the right balance of control versus availability. You know, we we we could only sell. We've got the stock on the shelf from that perspective, and we're managing our margins. At the same time, fundamentally, we're ensuring that our e business agenda, which is a journey we set out on really pretty early in 2019, you know, reaches a a a starting point probably, shall we say, you know, in in line with our expectations at the end of the year. We're very encouraged by that. Second half is gonna be very very much more of the same, you know, dealing with what we're doing, make sure as well as that we develop the sustainability agenda around a heavy focus on on the quality of our people. And we've given a broad view in terms of outlook.

28:01 We are encouraged by what we're seeing in our sector per se in terms of broad based demand. We've got the supply chain issue to to support that, and we're sure that we'll work through that. We've said that we expect f y 2021 to be in line with market guidance, unless we give some further color on that, you know, if there's specific questions around it. And, overall, we're satisfied with where we're at, and we're pleased with our our performance during the course of the first half of the year. Okay. Well, that ends the sort of formal presentation element of this. Hopefully, my gruff voice, Russell being a separate room because of isolating, hasn't caused too much of a drag. And maybe I could hand back to Mark to see whether we can Absolutely. Bryce, Russell, thank you very much indeed for the presentation. Hopefully, it's not catching down the line there, Russell. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. Just click Q and A, type your question and press send. But just while the team take a few moments to review those investor questions submitted already, I'd like to remind you that recording the presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard on the Investor Meet company platform.

29:10 I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback in order the company can better understand your views and expectations. Perhaps before we move on to some of the live Q and A, we had received a number of pre submitted questions from investors. And perhaps if I may, I'll just read out the first one, and we'll work through those guys. The first one reads as follows. Pricing, I'd love to understand where you sit in terms of pricing versus your competitors. Are you the Audi, Tesco, or the Waitrose of your chosen markets? And given your relative large size in this space, is there value in very keen pricing on certain lines to pressure out smaller competitors? Well, that that's fairly easy, you know, to answer, I would say, with the waitrose. And and why do I say that?

29:55 Well, we're we're 85% of brand house. Excuse me. So patronage of the major global brands, Eton, Danfoss, Ross Parker, Festo, etcetera, is what we're all about. And we don't want to undermine those major multibillion pound organizations by trying to create an old brand label per se as the core of what we do. However, there is always a position for a spec line, or we do have an element within the FLOWTECH offer, but there is an element of of old label product. So it's very much around quality products and quality manufacturers, you know, at a price that means that it reflects the value of of historic investment in that particular line. So we are the waiters of our set.

30:51 The I think you might be surprised to learn that nowadays, only circa 10 to 15% of our procurement is directly from the Far East. That was very different many moons ago, the origins of the business. But so the vast majority of our stuff is is from enormous Far East locations. Fantastic. Thank you very much indeed, guys. Next question we have here is around delivery speed. Can you give me an idea of what sort of client most values on the day or next day delivery? Do you have any competitive edge and speed of order fulfillment, and do you plan to develop an edge here? The the next day offer for the FLOWTECH division, We have a a leading edge in that particular space, and we've had that for a number of years with our sort of 10:00 cut off.

31:43 In the main, the vast majority of them are talking 95 plus.

31:48 Now the customer will open his order pad in the morning. He'll be able to service out of his own stocks what's needed, and we're effectively a you're the warehouse concept for what's needed then in his customers' requirements. So, typically, that next day is perfectly satisfactory because we use FedEx offer parcel delivery rather our own service. We can then click into if there's a a desire for an 08:00 or a 09:00 or a pre 12:00 service, we can offer that. And at the same time, in extremis, we actually do also offer a taxi service and a twenty four seven service, you know, for an appropriate additional call length fee, but it's really a very thin sliver of the offer of the FLOWTECH division.

32:36 However, in the services sorry. The services and solutions, primarily certain solution businesses, you're largely, at the top end of their volume servicing to a, four week to twelve week schedule provided by a major OEM. So there isn't a sense of a service offer that gives you an edge in that particular space. It's having the patronage of the brand and the technical capabilities to back that up if there's any particular queries or areas that you need to support the customer on. So we're pretty comfortable with our service offer if you've got the availability. So that's always the focus of where you are in the high service end of what we do. Fantastic. Thank you. Next question we have here and support penultimate presubmitted question. Is your CRM where it needs to be? Are you able to rapidly identify customer preferences from their past buying browsing behavior and send them targeted offers and communications?

33:33 The simple answer to that is no. It's not. And that's really what the CDP initiative is about. We've got, you know, reading entry slice and dice analysis tools across the the organization. And, again, against our our our typical competitor base, we're probably ahead of where they sit. The CDP platform is a major investment in in taking us to that next level in terms of what we wish to to operate out. So you're quite correct. The connectivity of our 11,000 live customers to seventeen, eighteen thousand customer records that we've had over, say, a two to three year period. That's a huge area for us to exploit, and it's very much one of the the key planks around the whole e e business and data strategy that we started in 2019 and really starts to come to the first phase of implementation, q four, q one, you know, next year. Hopefully, our intention is that will be a key area of organic growth potential for us.

34:32 Fantastic. And just conscious of time, we've obviously got a number of questions that have come through during the meeting itself. If I may, guys, ask you just to click on that q and a tab and just start at the top, and where appropriate to do so, read out the question and give you a response. That would be wonderful. Well, Simon, see, thanks for this question. What's the strategy to grow international revenues? It's a it's a 40,000,000,000 agreed with the the sector, almost like a $100,000,000,000 global marketplace. We outlined very clearly, though, in our strategy paper in April that our focus will be around The UK and Ireland and The Netherlands in terms of our home geographies. We believe, primarily, you've got to be king of your castle, and we've got a lot of work to do to make ourselves king as our castle in that particular areas in the next one, two, or even sort of three years.

35:22 Beyond that, clearly, we can expand. It's the same brand supplying the similar customer sets on a global footing, But there are major competitors out in in particularly Mainland Europe and, obviously, further afield in The United States. It's a very well established manufacturer distributor footprint. As an organization, though, we believe our web capabilities will be leading edge, and that clearly can have effects beyond your local sort of geographies. And if if coupled with operational capabilities over overseas, that's something we may choose to exploit. So the potential is there very much, whether it be organic means, whether it be inorganic means through m and a. In the short term short to medium term, I would say, we're pretty clear that we've got to be king of our castle in The UK.

36:11 I just read The Netherlands, and that's what we aim to achieve. So I hope that answers Simon's question. We very usually could give a regional breakdown of global sales. Can you consider this in the future, please?

36:31 Well, obviously, we can consider in the future. I think our reporting would would typically have UK, rest of Europe, you know, rest of sort of world. Just off the top of me, I think in Ireland, Northern Ireland, Northern Ireland, we wanna try and give you that Brexit slant, we're circa 20% of our sales in that region. And Russell in The Netherlands first half. Just shy of 10% maybe. You know, in in The Netherlands. Outside of that, which is is The UK, which will be very, very heavily the premise around England, you know, from that perspective. Actually, I will certainly consider that as we saw move further afield. And just to reiterate, it's the same brand. So the same global brands that we partner with service effectively the whole global marketplace.

37:25 What impact has Brexit had on your operations profitability when you consider your long term strategy? In the short term, we had, some effects around, as we just pointed out, that 20% of what we do is in the island of Ireland, of which 15 is done in Ireland. So where we've got supply of product ex Europe, which inevitably we have further up the chain ex China going into Ireland servicing customers there. Now we have about 5% that we ship from our English businesses of sales into into Ireland next day. We did have some cost effects there. They ramped up our distribution costs, as you'll see in the first half of the year. But, essentially, that settled down reasonably quickly.

38:11 And we don't think that Brexit overall will actually cause us any great undue concern in terms of our, our ability to sort of trade. There's a much bigger macroeconomic question there in terms of where The UK sits in the global marketplace and the the competitive nature of its of its OEM operations. But, again, in in the short term, there's nothing at all that we perceive as an overall threat. The Oxford economic reviews that are done of our marketplace, again, are predicting, you know, three to five year growth characteristics. So I don't have any particular element that causes me undue concern about Brexit effects, you know, on where we sit, you know, as a company. There's there's many other characteristics, like I say, about the macroeconomic effects on The UK economy.

39:02 In addition, biggest shareholder, value passive investor, have they played any role in guiding your strategy and board appointments? They're they're a a large shareholder Unlike anybody else, they've we speak to them like we do all our major shareholders, and I value their input. But I would not describe them as an active activist investor at all. I know I can understand where the the position of the questioning comes from there. And now they're they're no different than many of other senior investors. They clearly are are very interested in what we do. We have very open and informative conversations with them. And and I can speak on behalf of me in Russian. I'm very pleased with the input we get from all our, you know, major investors. The way I capture that one is that they've they've actively supported and and encouraged, but not actively interfered. That's the way I also met up. So that's all good. Yeah. Certainly. Certainly, I feel very positive about that relationship.

40:02 Daryl, what competitors do you aim to compete with on the business or SEO? Well, you can do your own sort of research if you if you put in hydraulic hose, hydraulic fittings, or the general hydraulic terms. You'll typically get a mixture of components, say, at the top end. You might pick up a bit of grammar grammar of nerdy badger sort of Rubix. And Eric, you might get a major manufacturer picture, but other than that, you typically get, let's say, smaller distributors who are very fleet of folks in that particular space. So, yes, there are competitors, but we're fairly clear that if you connect together the breadth of our offer, the technical depth of it, hopefully, the quality of our e business went when investors get to observe that themselves, They were pretty confident about making some some ground in that particular area. So, hopefully, that answers the first part of that question.

40:59 As you say, the beauty of web trading is it's cross border Using a FedEx solution, which we can do for 90% of our deliveries, you can obviously offer internationally. We already do that per se to support our Netherlands business. But equally, you can go further afield. So marrying together access to the product, quality website, technical nature, you know, and the global operational distribution footprint you can tap into, again, it's an area that we don't feel we've got any huge barriers against as we go to the medium to longer term. So The paper catalog clearly has a lifetime to it as part of the the rebranding to a single FLOWTECH offer. There's been an awful lot of work there of taking generic, very thick catalogs and making them much more focused and specific around particular red niches, hydraulics, pneumatics, industrial, you know, and other. And, again, that's been very well received by customers.

42:08 It's backed up by clearly a reflection in online presence and in iPad, either iPhone applications, smartphone applications, the volume that we do, yes, is significantly less than it was beforehand. There are elements to that that, therefore, we don't have a ready a and inbuilt income stream. But it does remain part of our offer. There are many people who like to fill the pages. It's a very quick way of referencing across a number of supplier brands. And it certainly remains well above the standard of our competitors in a paper based environment. Think that's Yeah. My was gonna say, Bryce, I think you've you've covered off every question that we've had through. So thank you very much indeed, and thank you for the investors who have submitted those.

42:55 And, of course, any further questions that are submitted, the company will be able to review those, and we can publish responses where appropriate to do so. And these will be available on the investor meet company platform. And as mentioned earlier, you will be notified once they're ready for your review. Bryce, perhaps I could just ask you for a few final words just to wrap up, please, before I redirect the investors to give you some feedback. So the key things coming out of our presentation, hopefully, we are we we trailed the way we want to operate our strategic developments. We are on track with the strict the strategy. We're very comfortable and pleased with the way we performed in the first half of the year. We're in control of what we're doing. Our guidance, we think, is is sensible, and we look forward to updating shareholders in April with further significant progress in our strategic objectives.

43:43 Thanks very much for bearing with me this morning with my sort of voice and and bearing with us as we got the technology working beforehand with my sort of short term lead, the thought to to remove myself from the office and get tested. Thankfully, showing is negative, but I'll back that up with the PCR. And I can say we look forward to updating investors in April. That's fantastic. Bryce Russell, thanks again for updating investors today. Could I please ask investors not to close the session? They should be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete and is 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. That concludes today's session. Thank you very much, and good morning.

44:28 Thank you.