A FIRMER FOCUS ON LONG-TERM PROSPERITY

Malcolm diamond mbe, chairman

Dear Shareholder,

It is widely accepted that one of the most demanding challenges for company senior managers is presiding over an organisation's desire to instigate continuous operational improvement preceded by structural changes.

During 2018, in order to achieve Group "joined up systemic thinking", it became obvious that with many immediate and achievable market opportunities on offer, there needed to be an evolving, strengthened and unified senior management team to take the Group to a higher resourced and performance level – both in the UK and Europe. I am proud to confirm to you that this action has now been successfully undertaken, resulting in a highly skilled and motivated senior team that has bedded in and is concentrating on the cost synergy consolidation and working capital management that awaits determined and immediate action.

I would also like to sincerely acknowledge our former CEO colleague, Sean Fennon's core strategic business foundations that he introduced over his nine-year tenure, and we all wish him well following his retirement in late 2018. Bryce Brooks (former CFO) has now taken on Sean's role as CEO. The Board has since brought in Russell Cash as the new CFO; Russell is a widely respected finance professional with an extensive advisory background, in particular in the key areas of cost and working capital management. In addition, we have expanded the role performed by Nick Fossey, the most senior non-board member of our team, who has been appointed as Chief Operating Officer for the Group with focus on ensuring each component of our business in both the UK and Europe is closely aligned in all commercial areas.

Finally, we have further strengthened our Board with Bill Wilson, a highly experienced international NED in the industrial distribution sector. I call our increased introduction of experienced and skilled managers as 'putting in an additional damp-proof course' where we can realistically achieve long-term prosperity as opposed to the short-term profitability that influences most plc boards.

It will probably come as no surprise to reiterate the feelings of insecurity and stress that corporate change can induce with staff, customers and suppliers; however, I am delighted to reassure you that all our stakeholders have been loyally supportive and upbeat throughout the 2018 realignment process, for which our Board is sincerely appreciative.

I would like to take this opportunity to thank several key Shareholders for their wise counsel in encouraging the Board to profitably leverage the cost benefits deriving from our existing acquisitions and demonstrate strong management in all areas of working capital before embarking on a subsequent buy and build period.

From a point that is now well into 2019, it remains disappointing that at the date of this report we are yet to gain clarity on the probable trading settlement between the United Kingdom and its main European trading partners after Brexit. Despite this our sector has remained resilient and we remain confident that whatever the outcome, any potential short-term effects will be suppressed by the strength of the wider Group and our position as the UK's leading fluid power distributor.

The scope for considerable future growth in investor returns from the amalgamation of our various synergy initiatives I believe remains compelling, and the restructured executive management team has a clear platform firmly established. I am honestly comforted by what the future holds for our Company - both within the UK and Europe, and we look forward to keeping you in regular touch with our positive progress.

Yours sincerely

Malcolm Diamond MBE
Chairman
29 April 2019

I call our increased induction of experienced and skilled managers as 'putting in an additional damp-proof course' where we can realistically achieve long-term prosperity as opposed to the short-term profitability that influences most plc boards."