Flowtech Fluidpower (LSE:FLO) — Interim results for the six months ended 30 June 2025

0:02 Good morning, ladies and gentlemen, and welcome to the FLOWTECH FLUIDPOWER PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish our responses where it's appropriate to do so on the investor meet company platform. Before we begin, we would just like to

0:33 submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from FLOWTECH FLUIDPOWER PLC. Mike, good morning, sir. Thank you, Jake, and good morning, everybody. Thank you for joining us today for the FLOWTECH half year results presentation 2025. Just as by way of introduction, and for those of you that are joining us for the first time and joining the FLOWTECH story for the first time, I'm Mike England, CEO. I've been with the business a little over two years. Joined part of this really exciting transformation journey that we're on, the formation of a new highly energized team.

1:14 Prior to joining FLOWTECH, I was a little over seven years with RS Group, so the FTSE two fifty now business. So really exciting career there. From a degree side prior to that. So just a little under thirty years in industrial

1:44 products and service distribution, so a fair bit of experience to bring to to bear here. I'm so looking forward to giving you updates around our trading highlights today and giving you some progress reports on the the transformation journey that we're on. Ross, just a little bit on yourself. Yeah. Morning, everybody. Russell Cash. Time flies, doesn't it? I joined the business at the back end of 2018 when the the world was a fairly stable place, wasn't it, at the back end of 2018? My background prior to joining FLOWTECH was in the world of turnaround and restructuring, which actually came in quite handy when the world became a less stable place, reference to COVID nineteen, and came in quite handy actually with some of the recent acquisitions that we've progressed and completed, which were out of distress situations.

2:34 So, yeah, nearly seven years with the group now. Thanks, Ross. So we're just going to work through a set of slides briefly. We'll just recap on our strategy, the summary of of the first half of the year. We'll spend a little bit of time around the trading highlights. Most of that is concentrated around self help given the rather difficult market that we continue to operate within and some good progress being made there. Russ will talk you through the financial update, and then I'll just conclude with some updates around current trading and the outlook as we go forward. So I'll just play the video, Jake, just for those that don't understand the FLOWTECH business today. We're a specialist company within the world of hydraulics, pneumatics and process equipment headquartered up in Skelmersdale in the Northwest Of The UK.

3:21 But we also have locations across Ireland, across all of the G GB, but also across the Benelux. And our goal as a business is very much to keep businesses moving given that the specialist products that we supply go into virtually all industrial applications that there are that we see across industry or across across off highway, across utility segments of the market. But not only products. The business acquired a number of companies over a decade ago and built out actually a wide range of engineering service capability. And so not only do we sell products, but we also provide service and support in terms of maintenance and repair. But also, we manufacture systems.

4:06 Somebody just doesn't want a product but also wants a hydraulic power unit built, we can do that within our facilities. I'll just keep talking because I can see that the video is is being a bit laggard. We also have forty years experience in delivering major projects, and those major projects can be anything from installation of a of a hydraulic power unit and system within a a bridge infrastructure. And so Tower Bridge is a good example of that, which we got involved in a few years ago, replacing all of the hydraulic power units and pipe work on on Tower Bridge in London. But equally, we we would get involved in some fairly major turnkey projects, one recently with Jaguar Land Rover, where we were helping them in their test facility to be putting in a new hydraulic and energy transfer system there.

4:53 We are very much focused on technology first, and within that, we're underpinning the business with a digital platform, which I'll come on to in more detail. And we're very excited about the future now that we've consolidated our 17 different brands under the one FLOWTECH brand over the course of the last twelve months. So if we move forward, Jake and the video, by the way, is is on the is on the website, so you can go back and watch that. Apologies that that we didn't get the feed on that for some reason. In terms of our strategy, really, this is about unlocking FLOWTECH's full potential. When I joined the business in April 23, there was a decision really as to whether we want it to be a house of brands or a branded house. And what I mean by that was that we were operating under 17 different brands across our geographies, and we were very much operating as as separate businesses within that and very limited amount of integration work. And so, you know, for me, I think this business was was very much an opportunity to look to see how we could utilize the strength and the power of the FLOWTECH brand, but also how do we combine the full strength of the offering that we have across product services and projects in order to bring complete turnkey solutions to to customers, whether that be a large corporate industrial end user all the way through through to a small SME.

6:13 Equally, at the heart of this business historically and for over forty years has been a very, very strong partnership with with indirect channels, so FLOWTECH operating as a master distributor selling to smaller distributors and making sure that we're holding the inventory. And within that, we also provide a white label solution for those distributors. And so making sure that we continue to provide that level of partnership is very important to our business. So we set out a strategy under three very simple pillars, putting the customer first. And this was a vision to be able to drive an omnichannel experience. And, you know, there's there's some very, very well trodden McKinsey research over the last decade that that continues with the one third rule. One third of customers want to have a a seamless online only experience. One third of customers want to have a online and experience where they want to interact and talk to people. And actually, third of customers only want to speak to people or send emails and have human interaction. And so the omnichannel experience when you're a product, a service, and a project provider is really, really important as it links to technical products as a specialist.

7:20 So we've been working very hard on joining up the dots around our business, bringing that together from a from a new operating model perspective, but most importantly, thinking about how we underpin what we do with a much more forward looking progressive digital platform which we'll come on to. The power of one is, as I've just described, is about bringing all of our brands under one FLOWTECH. But actually, it's about a singular value proposition to market. And we've worked very hard to launch that value proposition to market now and and make sure that that our customers do understand the full strength of what we have as a business underpinned by a lean and scalable operating model. And we've done a huge amount of restructuring over the last twenty four months to set the business up for scale for the future. And then finally, a world of motion, which is very much our externalized brand strap line as well. We want to be supporting a world to move in what we do, but equally, when customers come to FLOWTECH, we want them to access a world of motion.

8:16 And what that means is not only around hydraulic, pneumatic, and process products and services and projects, but actually, as we go forward with key macro themes such as sustainability, digitization, electrification, there's for there's a a constant stream of new product opportunity and new product evolution that we can add to our portfolio as we go forward. That delivers us a 30,000,000,000 European market opportunity to go at a highly fragmented market. We believe that this business in the midterm can achieve mid teens EBITDA margins, and that would certainly be our ambition. And we believe that as the market continues to recover, we there's no reason why we couldn't be outgrowing the market times two. Everything we do is data and digitally enabled, and we'll come on to that again because there's been a lot of investment and work done in order to set those platforms up for the future.

9:10 In order to execute against our strategy framework, we introduced six margin growth engines. So our plan in terms of execution of our strategy sits under these six headings. And in short, the customer growth is about a consistent and well executed go to market approach both in terms of sales activity, engineering, and service activity, but also the introduction of our digital platforms over time. Commercial excellence is about buying better. It's about selling well. It's about good management and control of gross margin. But also it's about inventory optimization, working capital management, and good cash generation. Products and service expansion is not only expanding into new areas, but it's also range filling and and where we don't have certain brands, making sure that we have those brands within our portfolio. And, again, I'll come on to some successes in the first half where we've been executing against number three very, very well.

10:04 Around about a little under 20,000,000 of our business today is own brand. Own brand was operating as as many, many different brands. Previously, we brought that at the end of twenty twenty three and launched in early twenty twenty four a new brand, which is Feet Pro so that we can really start to galvanize around that own brand portfolio. And we've been very pleased with the ongoing growth of our own brand outperforming the base business in the first half of this year. And operating for less, this is very much about driving efficiency in the operating model, but it's also about making sure that we drive standardization across the business as we integrate and we find ways of doing things once rather than on multiple times. And so having a federated operating model both from a regional perspective with the right amount of entrepreneurial ship within region, but also making sure that where we can, we have a group overlay is really important for future scalability.

10:59 And that operating model is also important as we think about m and a and being able to quite easily clip new businesses into the platform over time. And then finally, underpinning everything we do, and arguably the most important, is around our people, our talent, and our capability. And that's something that we've been working very hard on both in terms of strengthening our leadership capability, but also right the way through the organization, upskilling, and expanding the capabilities that we have as a business. So that's our strategy and plan on a page. For more details on the execution of those six, growth margin engines, if you do want to download the presentation pack, there's a slide towards the end in the appendix, which just gives a bit more color on the the twenty three to twenty seven rollout plan as it relates to those six growth engines.

11:46 As an h one summary, I won't regurgitate what we're we're going to talk about in much more detail through the coming slides. But really just as a headline, the market hasn't been our friend, and I don't think in across industry, it's been anybody's friend, and I'll talk to the markets and some data points shortly. But we have been very much doubling down on our self help initiatives and very much focusing on improving our growth momentum, our gross margins, and our operational gearing, and we'll bring that to life through the presentation as we go forward. So let me move on to some trading highlights. We've been very active in the market under our new brand new branding and our new value proposition. This was an exhibition that we attended during q one, which is called LAMA in at the NEC near Birmingham. So this is one of the biggest agricultural exhibitions in the in the in The UK market, and we're very proud to be exhibiting there.

12:38 This is a big market for us in terms of agriculture, as you can appreciate with the products that we supply. And these exhibitions are great for raising our profile, but also for attracting new customers to to to FLOWTECH. From a self help point of view, the first point that I would just wanted to to call out is that this is really helping us to outperform the market. As we can see on the right hand side, you know, we haven't seen particularly strong PMIs, and and they remain in a position of contracting market. And the the chart below is UK manufacturing production, which, as you can see, has been very, very bumpy both through 2024 and and also into 2025. As a business, and and it's just important to to mention this, around about two thirds of our business is is more MRO related, so helping industry to keep moving. If something breaks, we will either replace the product or we might overhaul a system in order to do maintenance repair and an overhaul.

13:40 Around a third of our business is supplying into original equipment manufacturers. And I would say that that third is certainly more cyclical, albeit, you know, all parts of of industry have been holding back on the purse and reducing their inventory, but also reducing their expenditure over this period. So, you know, we do have a have a business trend that that is linked quite closely to the PMI. And equally, you know, UK manufacturing production, whilst that doesn't go across all industry sectors that we serve, it's a good barometer, and we've

14:11 certainly been seeing that sort of trend in in our business. On the left hand side, some some positives, but also a bit of a reality check, really. You know, we focus and have focused very, very much on customer retention and focusing very much on our top 100 customers and our larger customers, which are are very, very strategically important to us in terms of volumes. Within that portfolio, we're we're seeing some good progress. These make up today around about 30% of our revenue and of which 65% of those top 100 customers are in a a good steady state of growth now, which is an increased velocity on where we were coming through the second half of last year as the market certainly fell away. And I think what's most encouraging, and this is what the chart is representing underneath, when we look at the uptraders and the downtraders within that, there's far more industry sectors now which are trading up.

15:04 And we can start to see that there is fewer industry sectors that are trading down, of which on the far right hand side, crushing and screening, which is, you know, a big OEM customer base that we have in in Northern Ireland, you know, has continued to be quite a difficult market. And whilst there is some signs of recovery there, you know, that is definitely causing us a drag. So overall, we're pleased with the progress. We're we're making our own success. We're increasing our share of wallet with our existing customers, and the decline is mainly concentrated around

15:34 specific industry sectors, and that's weighted more towards lower larger original equipment manufacturers and some larger projects, which potentially are being pushed back as customers are just tightening the purse on cash expenditure. What that does mean, though, is that we have a tail of smaller customers with reduced order value, And that's mixed in fairness, but broadly speaking, what we can see is a similar order frequency and there's certainly no issue in terms of customer retention. The order frequency is there, but what we're seeing is a lower order value, which is really

16:07 reflecting the current market volatility, and as I said, just just a holding back on on expenditure at the moment. We're very encouraged with the new web platform that we've launched recently, which I'll come on to, and we do believe that that improved ecommerce platform will help us over time to increase share of wallet with with a broader cohort of customers and importantly, accelerate new customer acquisition over time, which is not an engine that we've had properly fired up as a business until until we've been able to launch this new platform. So just a little bit of backdrop in terms of how we're viewing the market, but mainly around self help. And building on that story in terms of self help growth initiatives, we introduced these four areas in our full year results presentation earlier in the year, which are really the areas that we've been doubling down on. And I thought it was useful just to give some updates on our progress in these four areas and why that's giving us confidence that we'll be able to have a stronger performance in the second half of the year, both in terms of growth and and in terms of EBITDA and cash generation.

17:06 The first is around the new digital platform, which I'll come on to in some more detail. And the second is around product and service expansion, so that's about new product range launches and also continuously evolving our own brand offering to market. Engineering projects, the areas that we provide engineering services and projects is a key focus for us, and we've actually seen some really good velocity here, with lots of new contracts being secured, and that's going to certainly help us as the order book is building into the second half of the year and into 2026. And in inorganic opportunities, Russell just give us an update on the three acquisitions that we've done more recently, and I'll just make a comment in terms of the forward look around that. And I think underpinning that has been an acceptance that the markets have been tough, but there are markets which are showing good signs of growth. And so what we have done in the first half of twenty twenty five is we've very proactively pivoted not only to continue to drive the partnerships within the indirect channel, but also into segments such as aerospace and defense infrastructure, which is an important area with with with good government investment going in to projects both within The UK, but also into the Irish market and to some degree into the Benelux.

18:22 Areas such as data centers where we have a very, very strong portfolio in new builds of data centers and in all aspects of transportation. These are key areas that we've been focusing on, and that's really been helping us to build the order book. So let's just break that down in a little bit more detail. We're delighted to to talk to you about the launch of the new digital platform. We talked about this over the course of the last eighteen months to two years. It's been an ongoing project in the background to get to this point. This is not not so simple, actually. The previous web platform was suboptimal. Our customer satisfaction surveys fed back to us very strongly that the existing website or the previous website was not giving our customers what they needed.

19:07 And so, you know, we had an external assessment done during the end of twenty twenty three, and our conclusion was that we needed to rebuild a new platform. And not just the front end web platform, but some of the back end technology platforms underpin that, such as the customer data platform and improving product master data management so that we can expand and ingest more products. We can update pricing on a more frequent basis without the website having having service issues, which was what we were experiencing previously. Just to put it into context, the the

19:38 current website generates around 27% of group revenues today, but we don't have really any marketing effort that's been sitting heavily behind existing websites, and that's been very much servicing existing customers. We haven't been firing up performance marketing activity because the website hasn't really been capable of of doing that. In the background, we've also built a very strong marketing capability to support the website, and we've worked very strongly with an Austrian partner to build what we believe to be a a progressive and very much future proofed b to b web platform for for our customers. Our vision is very much to be the specialist in digitally enabled products and engineering solutions across hydraulics, pneumatics, and process and across that world of motion. And so we wanted to build a platform that we felt we could scale to achieve that.

20:28 The platforms went live in The UK from August. We did roll out the sites in July in a soft way, and we kept the existing websites up and running until middle of August until we were confident around the cut across, which happened successfully. And we're looking to roll out this web platform into Ireland and The Benelux in in the second half of this year. It's worth noting that the new website has materially has material improvements built within it, certainly around site speed, around the whole search experience, and being able to find products, display availability and stock information, the right data technical data sheets. But the overall customer experience, bearing in mind that in b to b, customers have accounts. They want to log in. They want to be able to look at previous purchases, previous baskets.

21:13 There is nuances in the way that we operate pricing for different customers. It's been very, very important that we've taken time to get that right. And most importantly, underpinning everything has been security and making sure that we have an extremely secure web platform both for us and also for our customers. We also have created a capability to white label this website. As I said earlier, a good proportion of of business that we have within our product distribution arm is servicing distributors and resellers. Historically, we provide them with a paper based catalog, which we white label for them that they take to market. When they place orders on FLOWTECH, we also brand the box, and we deliver it as a three p l logistics service to their end customers. So this is a very, very important and integrated approach. And our customers in that channel have openly been asking for a for a digital enablement instead of a paper based catalog. So we're delighted now to have four white label platforms now up and running. They've been very robust with our break of feedback, and we'll be looking to roll that out to our distribution partners as an offering over the course of the the coming months.

22:21 And so we're quite excited about that prospect. And then and then as as I said before, we've invested in the background in in some of the data platforms, most importantly around customer data. You know, it's very important that over time, we can personalize the customer experience much more. But also, we've built AI tools and enablement tools within the platform so that we can start to do that much more effectively going forward. And also on product master data management, you know, we have started to build much better interfaces with our suppliers so that we can start to ingest more products into the assortment. So over time, we can materially expand the offering, not just with existing suppliers, but also the onboarding of new suppliers, which we believe will be a key underpin for our growth moving forward.

23:08 So you can have a look at the website. It's up and running, and hopefully, that will also give you more information around the company. You can play the video that I showed earlier. And there's also an investor hub within it down at the bottom. And so please do have a look there, and, hopefully, that can give you a good good access to understand more about FLOWTECH in time. Product and service expansion is another key area of focus. In the first half of this year, we've been strengthening existing strategic supplier relationships as we've been bringing together a centralized procurement and product team to be much more effective in working with our key strategic supply partners as opposed to each individual business having relationships. Clearly, that has benefits in terms of synergy opportunities, and also that leverages the group more both in terms of The UK, but also looking at our group spend and group leverage with key strategic suppliers.

24:01 And we also have a very long tail of suppliers, over time, we would also want to consolidate that to be more efficient as we go forward. The two supplier agreements that I think are worth a mention, and we've recently published an RNS to announce these. The first is with SMC, arguably one of the world's largest pneumatics and automation OEMs. It's been really important for us to have an agreement with SMC. Actually, the FLOWTECH acquisition gained access to SMC, we've been in in discussions with SMC. And we're delighted that we're now appointed as the first UK wholesale distributor for SMC, we'll be looking to be consolidating and helping them to consolidate some of their tail of of of supply chain into FLOWTECH as we grow our relationship with SMC.

24:50 And the other relationship is with HPC Kaiser. This is in compressed air systems and solutions, a leading brand. Kaiser is the leading German compressed air brand, high quality. We in order to capitalize on that through the second half of this year and certainly as we start getting accelerated growth into 2026. And then finally, on our own brand, Feet Pro, we've continuously been improving the range. We've got more work to do in this area for sure. But really pleasingly, with the focus we put on this on this area, with the improvements we've made to product quality, search capability, we're outperforming the base business with with also stronger gross margins in that area, and and so that's very pleasing to see.

25:52 On engineering projects, this could be building a hydraulic power unit all the way up to designing, building, and installing a a hydraulic system to move a a bridge. The picture on the right hand side is the Narrow Water Bridge, which is a concept design, which is currently, the footings are now in, and this bridge is going to be built during the course of 2025 and across 2026. And this is a good example of what we refer to as wet infrastructure to do with bridges, flood defenses. That could be to do with slouch gates. Anything that's that's involved in wet infrastructure is typically moved by hydraulics, and this is an area where we have a high degree of specialism. And so we've been working hard in this area where there's a lot of investment going in to secure new contracts.

26:43 We've got a strong sales pipeline and forward order book. The sales order book and just to be clear on the order book, this would account for around 60% of our of our business today in revenue terms. So 60% of our business, broadly speaking, is order book driven, which means that we'll take a bill of materials or we'll we'll be looking at quoting against the project. There'll be a lead time on that project. We'll typically be the building or we'll be overhauling or servicing that particular project to completion. So that's around 60% where we track an order book. That order book is more than 25% higher at the end of twenty twenty five compared to the start of of twenty twenty five. So we're very pleased with the progress there, and we've got good visibility of that order book now going through to the end of twenty twenty six and beyond actually in terms of some future projects which we know are coming down the pipe, so to speak.

27:37 Of note, two significant contracts secured in the first half of the year. In fact, two bridge projects in Ireland. One is an overhaul of an existing bridge, which is the Edinburgh Rice Bridge in Waterford, the other is the Narrow Water Bridge, which is a completely new bridge being built in partnership with Banff Construction and other partners. And both of those projects are commencing in 2025, but also will continue through 2026. 9,000,000 combined euros in those two projects alone. And so with that, we've got increased confidence in the self help growth momentum. We've seen that coming through in q two, and we expect that to continue through the second half of the year. And, again, there's RNS reach articles to talk a bit more about those bridge contracts if you wanted to take a look.

28:27 And then finally, just moving on to the inorganic opportunities, and I'll just take a pause and have a sip of tea. And, Russ, if you want to just talk through the progress we're making here. Yeah. Thanks, Mike. So just before I come on to the recent acquisition activity, just a point to the past, if I may, that world when it was a stable place. The FLOWTECH came to the AIM market in 2014 and in a four year period made 15 separate acquisitions. Those 15 acquisitions, I think, were in the region of 60,000,000 of revenue and probably 6,000,000 of EBITDA. So in a stable going concern type environment, we paid about £40,000,000 for 60,000,000 of revenue.

29:15 I mentioned that because these three acquisitions deliver 18,000,000 of current run rate revenue. Clearly, we're looking to grow that and we effectively paid nothing for it. The to remind you that the FLOWREI acquisition which was, again, time flies, that was last August, was acquired out of administration. Allswage was a much smaller business. 2,000,000 revenue was acquired out of liquidation in March of this year. And Thomas Group, whilst it wasn't in an insolvency process, was an element of distress attached to it, and that's a 2,000,000 turnover business based in a nice new location for us, by the way, in Ashford in Kent. So those three businesses combined, 18,000,000 of inherited revenue, they were all loss making.

30:07 I'm very pleased to say that all three of them were very quickly returned to profitability. In the case of FLOWTECH and Thomas Group within three months of acquisition, in the case of Allswage, actually, bearing in mind it was in liquidation, within three weeks of its acquisition. We didn't pay much at all. Arguably, we paid nothing for these businesses and that manifested itself in aggregate 3,000,000 or thereabouts of negative goodwill. Now it was a fairly complicated accounting standard around negative goodwill. Essentially, the 3,000,000 figure represents the fact that we got 3,000,000 more than we paid on the in the case of Thomas Group, the liable the liabilities we adopted in exchange for the assets.

30:57 There's a question which I've spotted in terms of how are those businesses contributing today. Well, they are all contributing. They're all contributing positively. And, you know, bearing in mind we paid nothing for them, the return on investment is really quite impressive actually. The return on revenue is single digit in the current year. But I think we set all three of those business businesses up fantastically well to be delivering double digit return on revenues, you know, by this time next year, I would like to think.

31:28 So, you know, really, really strong stories behind all three of those that bring new locations. Mike's already mentioned some of the link benefits, SMC relationship being a good example of that. So, you know, overall, delighted with the progress we're we're making in all areas. So just a a quick mention that within that, we've added eight new locations, not just from the acquisitions, but we have added new locations by the acquisitions. But we've also done some work to consolidate existing locations that we had, utilizing that expanded footprint. So, for example, we've we've merged together two locations in the West Midlands and created one new location, which is, you know, far better place for our employees and our customers to to visit and to be part of. And we've also taken two locations in Rotterdam, and we've merged those into one brand new location as well. So we've done some work to tidy up the estate, so to speak.

32:23 But being local is important in our business, particularly from a service perspective, but we're really delighted with the the work that we've done to continue to run the business more efficiently and effectively whilst also expanding our geographical reach. In areas like Ashford, which came to us through the acquisition of Thomas, we didn't have any location in the Southeast Of The UK, and this was strategically important to us. So just a word on that as well, Russ. Thank you. Yeah. Thanks, man. So when the market's not your friend, you could argue a fierce enemy in recent times, it's important to do all you can to help yourself. There are three charts on this slide. I would suggest that each of them in isolation is quite powerful.

33:09 And the three charts combined, I think, leads the audience to conclude we've done a good job under the self help banner.

33:17 The first chart is gross profit percentage. You can see the positive trend there, you know, 39.2% in the most recent half year. That obviously compares very favorably to previous periods. But for us, you know, we often get asked the question, when's that gonna get to 40%? Don't know. It might never get to 40% because fairly obviously for us, it's not about GP percentage. It's about bottom line pound notes, actually. So there's an element of mix that can come into play there fairly obviously if we get increasingly involved in big projects such as the Irish bridges that Mike alluded to. There's some clever stuff goes into that, design work, some clever people's labor.

34:06 So unsurprisingly, the gross margins attached to that are very strong. So, you know, I I I I I just say our focus is on bottom line net margins and bottom line pound notes. Let's not get carried away with this GP percentage. It's always in our mind, but equally so is making sure we're setting our prices in all areas of our business at a very, very sensible level. I think some of the progress we've made in recent years have been just stuff that, simply speaking, wasn't being done very well rather than disturbing the DNA that, you know, our customers have experienced within the business for many, many years. The middle chart there, working capital, always important. I I would say that with knowing my background, remember I dealt in turnaround distress when often management of working capital made the difference between survival or failure.

34:58 So I pick I draw the the audience's attention to the light blue bar and the orange bar, assuming I've not gone color blind. I think those are the h h one twenty five and h one twenty four,

35:10 where if I strip out it's obviously important to compare an apple with an apple, but I strip if I strip out the acquisitions, it's an underlying 15% reduction. Put another way, over £5,000,000 of benefit by managing working capital effectively. Know, admittedly, some of that comes through a lower receivables book when you've got lower revenue levels, but by no means does all of it come through that. You can see that's why I've put

35:37 stock in particular and trade payables in there as well as receivables. So, you know, a strong and positive story there. You know, better disciplines nowadays in terms of managing inventory in particular. And the right hand chart there is underlying operating overheads. And recognize we've got this nasty word beginning with I, the inflation word. We necessarily do give modest pay increases in recent times to our people. We've had, like everybody else, to bear the burden of the employer national insurance piece. So to achieve, you know, a reduction in an underlying overheads of naught 500,000, I think, again, points towards the self help agenda.

36:22 We have taken some modest number of heads out of the business over the last twelve months. And I think all of that sets ourselves up really nicely for the second half of the year. Obviously, we're deep into that now, certainly deep into q three. And, you know, Mike's talked about the strength of the order book. I just touched upon the strength and stability of the gross margin. We've got a lower overhead base entering the second half of the year. And, you know, having delivered 3,500,000 of underlying EBITDA in the first half, And given our consensus number is 8.4, it obviously points itself to a stronger second half EBITDA period. And for all of those reasons, we're confident in our ability to deliver that.

37:13 I've already touched on probably the majority of the numbers on this slide. I'll talk briefly around revenue. It's 2.1% up. We think to a degree we deserve to say that actually given that, again, we've not paid anything for that incremental revenue. But on a like for like basis, it's close to 12% down against a relatively strong comparator in h one twenty four. And it's important to say that we're we're beginning, and beginning this code for June, July, and August have outperformed their prior month comparators. So we're beginning to see some green shoots of recovery. And the and the reduction there, I might already mention it, it's down trading sectors, it's down trading customers.

38:01 Customers haven't run away from us and, you know, we're confident that they will return and, you know, having helped ourselves, we're nicely poised to capitalize on that. Whenever the recovery comes, it must come at some point. More positively, I guess, the first half of the current year has outperformed a fairly nasty, miserable second half of last year overall by 5%. I think I've talked enough about gross profit and operating overheads, and I'm gonna talk about debt on the very next slide. So I can come with that one. So debt. Over a twelve month period, bank debt has increased by 5,000,000. The chart there is a backwards looking debt bridge, and I'll talk briefly about each of the two six month segments to that.

38:54 First of the second half of last year, which is fairly obviously the bit on the left of the chart, we didn't have any EBITDA, sadly. Trading cash flow, it says there. But after the cost of restructuring, you remember we've been doing an element of surgery to improve this business at the same time as making some sensible investment decisions, the most obvious example of which is on the new website. But overall, a lack of profitability is the burden that we're currently bearing in many ways in the second half of last year. Obviously, there's some other red blobs there. There's interest and lease payments. This is a CapEx that I referred to, which will be trending down moving forward, and we did pay a dividend, of course, in the back end of twenty twenty four. We're not doing that in 2025.

39:43 The big green blob there is obviously all of the good stuff around working capital. So there was, in some ways, a modest increase in the second half of last year from 13.5 to 15.1. And coming to the first half of this year, nobody should think that negative red blob for working capital is a bad thing, by the way, because fairly obviously, you've got a natural build of working capital when you swap out a obviously depressed revenue month of December. We've actually, in the in in the current year, a really buoyant revenue month in June, actually. A really strong performance in June. So don't think that negative blob in working that negative red blob in working capital means we've taken our eye off the ball. In my opinion, it's it's it's at least a stronger performance of the big green blob in the previous half year.

40:39 Good to see EBITDA, trading cash flow returning. You know, our EBITDA in the first half of this year is virtually three times the underlying EBITDA for the second half of last year. So a segue into the what do we think is gonna happen in the second half of this year. Well, stronger EBITDA combined with the natural unwind of working capital as we swap out June for December, combined with the fact we've taken the decision not to pay the dividend, combined with the fact that CapEx, in particular now we have launched the website, will be some spend on continuous improvement. Of course, there will be, but CapEx will be at lower levels going forward than we've than we've incurred in the past. So all those things point towards and substantiate our comment that we're expecting the second half of the year to not only be much stronger in terms of profitability, but much, much stronger in terms of cash generation.

41:39 18,500,000, by the way, leaves us with 6,500,000 of headroom within our banking facilities. Thanks, Russ. So just moving on to the trading and outlook, and then we'll move on to questions thereafter. So just in summary then of what we said, very much the focus for the for the leadership team and for the business in half two remains on the self help initiatives. And just a summary of those on the right hand side, clearly, we want to capitalize on the investments in the new digital platform. So, you know, over the course of of q three, this is about transferring the customers across, migrating the customers, making sure that we continue to drive steady improvements for existing customers. And as we move into q four, this is about them starting to trade the new FLOWTECH website in The UK, so ultimately making sure that we're driving upselling, cross selling activity, and then also rolling out that platform into islands in the Benelux market, which is equally as important in the second half of the year. That sets us up then well for some good momentum into 2026.

42:47 The forward momentum from the strong sales pipeline and order book is important. You know, we have got a a a very, very good and healthy order book. We've we've got some good, strong engineering projects. Fair to say that we've also built a lot more rigor into our project management around these larger projects so that we we want to make sure that we have, you know, far greater confidence that those projects will deliver to the to the schedules that have been laid out. There is always going to be some degree of risk to any project for sure. But to the best of our knowledge, we believe that we've we've we've got some very solid forecasting in terms of the phasing on those particular projects that we have. We want to be exploiting the new incremental strategic supplier agreements working in partnership, not just with the two suppliers that I mentioned, but across all of our supply partners.

43:33 And, again, the new web platform does offer the opportunity to improve our marketing drive and and and ultimately drive more traffic in that regard. There's value creation and the growth momentum from the three recently acquired businesses, remembering that two of those in the first half of the year, they're still very new to us. You know, they're still embedding. They're still concluding integration, but actually starting to perform very, very well. And FLOWTECH, we've just celebrated the one year anniversary of FLOWTECH. And and and whilst we're pleased with the progress there, we still see huge opportunity for that business to continue to contribute more positively both through self help, but also as some of their customers that have been down trading start to recover over time. But very pleasingly, we're we're on plan in terms of the profitability that we were expecting from from those acquisitions.

44:24 Notwithstanding, and I know that this is a question we've come on to, you know, we will continue to look at opportunities that the market represents. We're extremely well positioned, I think our leadership team have proven that, you know, we're capable of of making good decisions on acquisitions. We've built a model whereby we can quite easily integrate those acquisitions and create really good value. So, you know, we're we're continuously assessing both distressed opportunities, but also good businesses that the market presents right now to us. And, clearly, that's an ongoing assessment that we're working through. So we'll continue to focus on those self help growth initiatives. We'll continue to expedite that order book, and the sales pipeline is very healthy. So, you know, we've still got opportunity to be driving through into the order book as well. And so from our side, whilst we do see a continually challenging market, and we think that will will continue certainly through the second half of the year, You know, for us, this is about driving continued momentum in our top line based on either business that we won or business that we can see that we can win.

45:27 It's about sustaining the those improved gross margins that we've worked hard to to achieve, But also, it's about maintaining that lower cost base as we drive greater efficiency into the operational gearing of the business, and that therefore gives broad confidence on the year end profitability. But also, to Russ's point, the very important cash generation, which due to the second half of last year being weaker, you know, has has has not been to expectation. And so that's something that we're working very hard on. So I think that leaves us then, Russ, to move on to to questions. I've got a number of questions which I've just been jotting down and which have come through. The first was to do with, you know, our competitive positioning as an organization. I'd just say three areas there.

46:13 We're a specialist trusted brand. We've been in the market now for over forty years. FLOWTECH is a very, very well known and trusted brand, so I think that gives us a competitive advantage. We have the ability as a specialist to not only provide products through a high service distribution model, but we can also provide services and manufacturing capability in terms of complete systems. And if customers so choose, we can help them to design, problem solve, build and install and commission complete systems in terms of turnkey projects. And we think that that is a unique differentiator for us. And finally, size and scale matters. This is a very fragmented market. We're actually a very large business in terms of our our size and scale.

47:00 We we sit right across The UK, we sit across Ireland, and we sit across The Benelux. That also gives us an opportunity as well to grow further out, and we export to over 30 markets around the world, And we see a big opportunity there for us to continue to drive that competitive advantage of scale into the marketplace. But that's where I would just see us in terms of competitive positioning. On acquisitions, there was a question on the profitability, Russ, of the existing acquisitions. I think you've covered that off in what you said. And I said before in terms of m and a activity as we sort of look at this year and and ahead, you know, I think I'll say it again. We're very well positioned. We'll continue to review a long pipeline of opportunity. The market, as it is more difficult, is presenting opportunities, but not every opportunity is a good opportunity.

47:48 You know, we do need to pick the the winners, and they won't always be distressed opportunities that we want to explore either, and that's something that we're continuously looking through. But I would just say that our absolute principal focus as we look at the second half of this year is making sure we deliver our organic expectations to market. From a website point of view, there were some questions in there in terms of, you know, how do we think that the website is going to drive growth both in the second half of this year, but also as we go forward. I would just say that we've not really built anything into the full year expectation as far as uplift in the in the new web platform. As I said before, this is about, you know, achieving stabilization through q three, then we're gonna be starting to turn on the marketing engines in terms of cross selling, driving more traffic, increasing conversion rates, making sure that we're much more active in terms of promotions as we go into q four.

48:43 And as I say, we built some great marketing tools within that to give us the capability to do that. I think we're currently 27% of revenue today. There's no reason why we couldn't be looking in the midterm to take that to 40% of our revenue. And bearing in mind, I said that 60% of our business today typically is more order book driven. That that might mean that the journey starts on the website, but normally, there would need to be some sort of human touch, some sort of consultation or some design work or some offline quote quotation work. But we do see that the website can be a very, very good tool in order to make sure that our proposition is well understood and it's got a far reach into the marketplace. So we do see this as a midterm growth opportunity and under pump for underpin for our business and a key part of our strategy. There's a question as to whether CRM creates a competitive advantage.

49:33 Arguably, the customer data platform and the customer relationship management tools that we've built, you know, they are a competitive advantage in a b to b world that is actually still quite laggard as it as it relates to b to b digital enablement, with some exceptions, I would say. You know, for us, the ability for us to be able to capture good customer intelligence and personalized experience for customers is is going to be an increasing competitive advantage, particularly across a multigenerational customer base. It does give us an opportunity to upsell, cross sell products and services. They're not just selling products and and alternatives to what they're currently buying or or or products that are associated, but also, you know, you're buying those products. You know, are you looking to build a system? We can also help you to build a system. And over time, there's opportunities digitally to provide configurator tools and and other digital enablers that could also help us to go up that value curve. And as I said before, the omnichannel experience is really at the heart of this.

50:32 That competitive advantage in an omnichannel is to allow a customer to seamlessly go to the website, come and talk to our people, get technical support, have somebody visit sites and assess a particular project, come back to a website. And so we do need to appreciate that this is an opportunity for us to create a great omnichannel, seamless and frictionless experience for our customers, which is something that we're working very hard on. Underpinning that, the master data the master product data, I think, is absolutely another critical enabler, making sure that we can ingest good quality product data, manage that effectively, and present that through the website. And finally, as I mentioned, the AI tools that underpin that. So, you know, if we have a good CRM and a good customer data platform, how do we how do we use AI to better inform us in terms of customers buying behavior and how we can help them and provide a more seamless experience? So, you know, the website itself is a competitive advantage, and clearly, of those tools that we built behind the website will give us greater intelligence as we go forward.

51:32 Question around long term growth ambitions. I think quite simply put, you know, we want to get this business to mid teens EBITDA margins as soon as we can. You know, we we believe that to achieve that, we're going to be north of $150,000,000 in terms of revenue, we feel that we've got the operational gearing now as as it needs to be, and it's all about getting that flywheel for growth moving. Not very much helped by the market right now, but we do believe that the self help is certainly getting us on the journey. But we've got work to do certainly as the market recovers to see if we can get that flywheel moving much quicker. There was a question around cyclical exposure. You know, are we going to be pivoting away from cyclical parts of our business? I think the balance actually is okay. And that two thirds, one third I mentioned earlier between maintenance repair and operational activity and OEM activity, I think, is is quite sensible given the capability that we have.

52:27 Just two areas, I think, that will help to mitigate some cyclicality. One is going to be the website. Clearly, expanding out our customer base more readily and more broadly is going to help us because that ultimately will drive more traffic and that will derisk. But, also, I would say that the focus around projects and major projects in industry segments that are less cyclical where there is long term investment. If I take the environmental agency as an example, you know, there's an investment of over 5,000,000,000 in the next five years in improving UK wet infrastructure and infrastructure, full stop. And those are all areas where, you know, something's being moved of load, then that's going to require the products and services that we can that we can deliver as a company. And so I think that's about us, you know, as I said before, rifle shooting segments of the market where we do see, you know, more positive growth opportunity for the future.

53:22 Now there was a question about the OEMs such as Parker Hannifin, and I'm sure, you know, SMC and others you could put into that bracket. You know, why do they come to FLOWTECH? Why why don't they just go direct to market? In short, they do go direct to market. Typically, anything from from 70% to 50% of their business would be direct to market. That's the role of an original equipment manufacturer. But they're looking very much at that top tier customer base where the real volume sit. They're not as geared up to provide the integration services and the the consolidation of of multiple products to multiple locations in terms of low order value. And, also, they're looking for partners in terms of integration projects whereby it might mean that it's not just a Parker installation, but it might require other product assortments to deliver a complete solution.

54:14 And that's why as a as a specialist, not only as a distributor of products, but also as an integrator of solutions, that's why we are an ideal partner for for somebody like Parker, who is a very critical supplier to us and and a company that we have an extremely strong relationship with. Is there a risk to project slippage in terms of some of the bigger projects? There's a question in here. Yes. There is always a risk. And in the current marketplace, I'd say that that always continues. But as I said before, you know, all what we do is work very, very closely with the with the end customer. We'll we'll work very closely around putting in the right schedules, working to their plans in terms of their investment profiles, making sure that we we stick to plan, working very hard with our suppliers to make sure that there's no delay in us receiving the products to be able to build systems and solutions.

55:03 And at this point in time, we feel that we've got a very, very robust forecast in terms of our ability to deliver on those projects in time. But, Mike, on that, if I may add, we've we've announced the two big bridge contracts in Ireland, aggregate €9,500,000 of revenue. When you've got a bridge that's being built to join Northern Ireland to the Republic Of Ireland, it's fairly obviously quite high profile and nobody wants the work to slip. Equally, when you've got a bridge down in the southern part of Ireland, Waterford area that needs repairing, nobody wants the bridge not functional for too lengthy a period. So there are some points there which would help in the risk of things slipping. And equally, the majority of that 9,500,000 revenue is not expected to be recognized in the current year. It's '26 and a little bit beyond as well, to be fair. Yeah. And then just a question on the order book, you know, the percentages of the order book that we talked to, which is those two bridge projects.

56:08 It's less than less than 50% of the order book is those bridge projects, so there's still plenty of headroom in the order book excluding those as we as we look forward. Ross, did you wanna pick up the question? There was a question on gross margin, and there's a question on net debt. The question on on gross margin really relates to do we think that the gross margin that we we've got to is a sustainable gross margin, and what makes us believe that that's the case? Yeah. I'm slightly conscious of time. We've actually got close to 30 questions, so forgive us. We will need to address some of these beyond this session. But just picking up on a couple of those, Mike. Yeah. I think when I was talking through the gross margin slide, I did reference the fact that, you know, I don't particularly like the question when are you gonna get to 40% GP percentage because it's sort of not the point.

56:58 There's always gonna be situations where we need to sacrifice GP percentage for the benefit of our bottom line, and there'll always be a situation where we can enjoy better quality gross margins. It's a balance. It's the art of the relationships with customers. There's a piece around given what I said about the second half of this year, where will the year end debt number be. Well, I think, you know, out in the market, we've got numbers in the region of 14,000,000 as a consensus position. And, you know, we'd we'd like to think that we can retain a decent proportion of that EBITDA in a normalized position. We do have interest in lease payments, and we do have CapEx. Of course, we have CapEx. We have maintenance CapEx in any period, but we should be able to retain a decent the majority of that EBITDA should be capable of being turned into positive cash flow and therefore enable debt reduction.

57:52 So, yeah, I think the question says, should we expect to end the year where we started? The answer is, yeah, in and around that level and ideally a little bit lower, actually. There's a piece in there about employer national insurance. Well, yeah, both elements of of what got announced cost us circa a 250,000 yeah, 250,000, aggregate 500,000. No. We didn't pass it on to our customers was the second half of the question. It just made us work harder to manage our own cost base, to be honest. And, Russ, just on the net debt, there's a there's a point in there that says, you know, based on the projections, would net debt get back to where we were at the start of the year or the end of the year? Yeah. I think I I just covered that. Okay. Yes.

58:37 And ideally, a little bit lower was my answer. Okay. There's a question around, you know, what what are our plans for Netherlands and Europe and and what what are our thoughts there. It's a really good question. I mean, for us, you know, we've we've talked quite a bit about the Irish market, and that continues to perform well with the with the with the exception of the crushing and screening industry that I talked about, which is in the North in in Northern Ireland. But in in the in the Benelux today, we have a fantastic business. We've got a great new leadership team in situ. The work we've done in the last twelve months really has been about getting the business set up for success. There's been a huge amount of work to bring two very separate businesses into one under one FLOWTECH, but also an amalgamation of inventory, so making sure that we're utilizing a distribution hub more effectively in the East Of The Netherlands to support the whole of the business, but also making sure that we amalgamate two locations in Rotterdam into one new location and expand out our offering in terms of our engineering solutions capability.

59:35 The the the final sort of piece in the jigsaw really for the for the for the Benelux business is the launch of the new web platform, which we'll be looking to roll out in the second half of the year. So that's something which is really important. And then that gives us a nice footing, not only to grow across The Benelux, but also to then start thinking more about European growth. And clearly, there's an opportunity there with that being a smaller proportion of our business today, but Europe being the largest growth opportunity. There's clearly opportunity for us to be able to grow both organically and inorganically in the existing markets of of The Netherlands and Belgium, but equally to be looking further afield in time. So I think, Russ, given that we're at 11:00, as you said, there's plenty more questions in there. Just one which I think was important.

1:00:23 Are we gonna be operating any investor visits through October? Just to say that we typically would look to be opening up a date once a quarter through the year to invite investors and and anybody up to come and see see the business. You know, that that's been something that we're we're very, very keen on. It's much better for you to come and see for yourself. You can answer some of these questions firsthand, and also you can speak to some of our people, and you can hear the journey that we've been on. So those dates will be made readily available via our brokers. And, certainly, you know, anybody is welcome to come up and be part of those investor visits. And I'm sure that whether it's October or November, there'll be something in q four for people to be able to come and attend. So, Russ, was there anything else that you saw that you wanted to quickly pick up? No. I mean, forgive us. There are probably about eight or nine unanswered questions, but we'll definitely get to those if not later today, certainly within the next forty eight, seventy two hours. So apologies if we didn't address your particular questions. Yeah. And and, again, you know, we've raced through that relatively quickly.

1:01:22 So if the answers that we've given aren't aren't sufficient, then do please reach back out. But, look, we hope that that's useful. We hope that that's an a good update. We're staying very focused on the self help. You know, we have high confidence that we're on the right track. The performance improvement plan and the strategy we have in place, we believe, is going to take us on a very, very exciting journey towards those mid teens operating margins. And, you know, I think, you know, that point around leverage, you know, we're working very hard in the second half of this year to make sure that we readdress the leverage position. So with that, we'd like to thank you all for your time today, and we really appreciate your your support and your interest in FLOWTECH. Jake, we'll hand back to you to close down the session, please. Perfect, guys. That's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback order the management team can really better understand your views and expectations.

1:02:18 This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of management team of FLOWTECH FLUIDPOWER PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.