The Directors present their Annual Report, together with the audited Group and Company financial statements for the year ended 31 December 2018. The Group financial statements have been prepared in accordance with International Reporting Standards as approved by the European Union (IFRS). The Company financial statements have been prepared in accordance with Financial Reporting Standard 101 'Reduced disclosure framework' (FRS 101).
A review of the Group's trading and an indication of future developments are contained in the Strategic Report. Details of revenue and operating profits for each operating segment are contained in note 3 to the consolidated financial statements. The principal subsidiaries contributing to the profits and net assets of the Group are listed in note 12 to the consolidated financial statements.
Flowtech Fluidpower plc is incorporated in England (company registration number 09010518) and has its registered office at Bollin House, Bollin Walk, Wilmslow, SK9 1DP.
Results and dividends
The results for the year ended 31 December 2018 are set out in the consolidated income statement. The Group has reported an operating profit from its continuing activities of £7,678 million (2017: £6.614 million). After accounting for net finance costs, the consolidated income statement shows a profit from continuing operations before taxation of £6,923 million (2017: profit of £6.039 million).
The Directors are recommending a final dividend of 4.04 pence per ordinary share amounting to £2.5 million payable on 12 July 2019 to Shareholders on the Company's register at the close of business on 7 June 2018. The shares will be quoted ex dividend from 6 June 2019.
The Directors who held office during the year and up to the date of approval of the financial statements are as follows:
Malcolm Diamond MBE
Russell Cash (from 1 November 2018)
Bill Wilson (from 18 September 2018)
Short biographies of each Director are provided on in The Board page.
Those Directors serving at the end of the year, or at date of this report, had an interest in the ordinary share capital of the Company, and its subsidiaries, at 31 December 2018 which is disclosed in the Directors' Remuneration report.
Details of the Directors' share options are provided in the Directors' Remuneration report.
Material interest in contracts
No Director, either during or at the end of the financial year, was materially interested in any significant contract with the Company or any subsidiary undertaking.
Details of the Company's share capital are in note 25 to the consolidated financial statements.
The Company's share capital comprises one class of ordinary shares and as at 29 April 2019 there were in issue 60,920,386 fully paid ordinary shares of 50p each. All shares are fully transferable and rank pari passu for voting and dividend rights.
The Company has been notified of the following interest in more than 3% of the Company's issued share capital at 29 April 2019 (being the last practicable date before the publication of this report):
|Number of shares held||% of issued share capital|
|Close Brothers Asset Management||5,838,908||9.58|
|Premier Fund Management||5,338,886||8.76|
|Chelverton Asset Management||4,250,000||6.98|
|Miton Asset Management||4,201,401||6.90|
|Canaccord Genuity Wealth Management||3,217,840||5.28|
|Lazard Freres Gestion||2,573,774||4.22|
|Hargreaves Lansdown Asset Management||2,408,112||3.95|
|Janus Henderson Investors||1,955,802||3.21|
Financial instruments and risk management
Information about the use of financial instruments by the Company and its subsidiaries, and the Group's financial risk management policies are given in note 30. It is not the Group's policy to trade in financial instruments.
The Board takes regular account of the significance of social, environmental and ethical matters. The following specific matters fall under the broad definition of 'social responsibility':
Details of the number of employees and related costs can be found in note 5 to the consolidated financial statements. The Group is committed to providing staff and management with training designed to develop attitudes and skills and give opportunities for advancement. The Group promotes good communication and consultation with regular management meetings, staff briefings, and a staff consultative committee to involve staff in the progress of the Group and its future.
The Group operates various performance bonus schemes related to KPI achievements and profitability within the operational functions. The Group believes that these schemes demonstrate the Group's commitment to involving employees in performance.
It is the policy of the Group that no employee, or potential employee, is discriminated against on the grounds of disability, age, race, religion, sex, sexual orientation or political belief and offer the same employment opportunities, training, career development and promotion prospects to all.
Employee share scheme incentives
Flowtech Fluidpower plc operates two share-based Enterprise Management Incentive (EMI) option schemes for the benefit of its staff and senior management. The aim of the share-based EMI option schemes is to align the interests of employees with those of the Company's Shareholders. Employees may exercise their options at any time between May 2017 and May 2024.
At 31 December 2018 the total shares in the Company held by the Enterprise Management Incentive Plans were 644,999 representing 1.1% of the issued capital. Further details are provided in note 23 to the consolidated financial statements.
Flowtech Fluidpower plc operates a share-based Company Share Option Plan scheme (CSOP) for the benefit of its staff and senior management. The aim of the share-based CSOP scheme is to align the interests of employees with those of the Company's Shareholders. Employees may exercise their options at any time between May 2018 and May 2026.
At 31 December 2018 the total shares in the Company held by the Company Share Option Plan was 597,300 representing 0.98% of the issued capital. Further details are provided in note 23 to the consolidated financial statements.
Health, safety and environmental management
The Group recognises the importance of its environmental responsibilities and operates in accordance with policies agreed through a health and safety committee and a staff consultative committee. Initiatives designed to minimise the Group's impact on the environment include recycling of waste where practical, use of low emission vehicles and low energy lighting.
The health and safety of the Group's employees, customers and members of the general public is a matter of primary concern. Accordingly, it is the Group's policy to manage its activities so as to avoid causing any unnecessary or unacceptable risk to the health of its employees and members of the public. The policy is based on the requirements of national employment legislation in the countries where the Group operates, including the Safety, Health and Welfare at Work Act 1989.
Operations are conducted such that they comply with all the legal requirements relating to the environments in which they operate. During the periods covered by this report no Group company has incurred any fines or penalties or been investigated for any breach of environmental regulations.
As a Group we are committed to supporting local and national charities and encourage employees to participate in regular fundraising events.
Conflicts of interest
In line with the Companies Act 2006, all Directors have a duty to avoid situations where they have or could have a direct or indirect conflict of interest with the Company. The Act allows directors of public companies to authorise conflicts and potential conflicts where appropriate to avoid a breach of duty. The Group has specific procedures in place to deal with any potential conflicts of interest and during this financial year, no actual or potential conflicts have arisen.
The Board aims to ensure it has the required balance of skills and experience. In 2018 the following changes were made at Board level:
- Sean Fennon (Chief Executive Officer) retired on 19 September 2018. He remained with the Company in an advisory role until 31 December 2018.
- Bryce Brooks was appointed as new Chief Executive Officer on 19 September 2018 and continued his role as Chief Financial Officer, until Russell Cash was appointed.
- Russell Cash joined the Group on 1 November 2018 as Chief Financial Officer.
- Bill Wilson joined the Group on 18 September 2018 as Non-Executive Director.
All Directors of the Board are subject to election by the Shareholders at the first AGM following their appointment by the Board and in accordance with the Code, all Directors will also stand for re-election annually at the AGM.
In line with market practice, each Director is covered by appropriate Directors' and Officers' liability insurance ("D&O"), at the Company's expense. The D&O insurance covers the Directors and Officers against the costs of defending themselves in legal proceedings taken against them in that capacity and in respect of any damages resulting from those proceedings. The Company also indemnifies its Directors and Officers to the extent permitted by law. Neither the insurance nor the indemnity provides cover where the Director or Officer has acted fraudulently or dishonestly.
Annual general meeting
The Annual General Meeting will be held on 5 June 2019 at 10.00 am at our head office, at Bollin House, Bollin Walk, Wilmslow, SK9 1DP.
UK company law requires the Directors to consider whether it is appropriate to prepare the financial statements on the basis the Company and the Group are going concerns. Throughout the financial statements there are various disclosures relating to going concern. This Directors' Report summarises the key themes and references those areas where greater disclosure is given.
The Group meets it day-to-day working capital requirements through its bank facilities. The year end amounts outstanding on each are discussed within note 18. The Directors have carefully considered the banking facilities and their future covenant compliance in light of the current and future cash flow forecasts and they believe that the Company and the Group are appropriately positioned to ensure the conditions of its funding will continue to be met and therefore enable the Company and the Group to continue in operational existence for the foreseeable future by meeting its liabilities as they fall due for payment.
Sensitised forecasts have been prepared for two years and have been reviewed by the Directors to ensure that the profit and cash generation derived from these forecasts are sufficient to ensure that the existing bank facilities are sufficient to meet the Group's requirements. This is discussed further within liquidity risk in note 30.3 and is the key factor in relation to going concern.
As a result of this review, the Directors are of the opinion that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, and have continued to adopt the going concern basis in preparing the financial statements.
Disclosure of information to Auditor
The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditor is unaware; and that each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
Grant Thornton UK LLP was reappointed as Auditor of the Company during the year and a resolution to appoint them will be proposed at the Annual General Meeting.
By order of the Board
Chief Financial Officer and Company Secretary
29 April 2019