Flowtech Fluidpower plc (FLO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I apologize for the late running of the meeting this morning, and welcome to the Fluid Flowtech Power plc Investor Presentation for the half year results ended 30 June 2021. [Operator Instructions] I'd also like to remind you this presentation is being recorded. Before we begin, we'd like to submit the following poll. And I'd now like to hand over to Bryce Brooks, CEO; and Russell Cash, CFO of Flowtech Fluidpower. Good morning.

Good morning, and thanks very much for that introduction. Good morning to everybody on the call. Again, first thing, slight apologies 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 and that my symptoms reflected some of the characteristics of the COVID-19. So hence, we've had to split, Russell and I so far, I should let you know I've had a negative lateral flow test this morning. So it's just a normal, old-fashioned sore throat, and we'll get through the presentation without any major 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, we spent at our previous Investor meet company presentation quite a section of time talking about the fundamental characteristics of the group and where it sits. And I would suggest that if you'd like to talk to that in more detail or 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, we are a Fluidpower business that's hydraulics, pneumatics principally, but it also has some associated areas in industrial tubes and fittings. And essentially, is pressurized liquids or gases to create motion or some of the formal activity in industrial applications. Why are we a preeminent investment, well, in essence, we operate in a fragmented marketplace. And we -- there's a GBP 1 billion -- circa GBP 1 million Fluidpower market in the U.K. and Ireland. We Equally have representation in New Europe in the Netherlands, which is part of a EUR 5 billion European market. We are circa GBP 100 million, GBP 110 million depending on where you put normal. Our biggest number in 2019 was about GBP 110 million guidance at the moment for us in the marketplace, it's just over GBP 100 million as we recover from the COVID-19 situation. In terms of our footprint, we operate, as I say, through over 20 sites in Ireland, the U.K. and 2 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 outlined some of the characteristics in this presentation, both organic growth characteristics and potential inorganic through M&A activity. And we'd like to think we've got a leadership team that has a strong balance of experience and ambition and obviously headlined by myself and Russell. So we're going to start with some of the financials, a simple overview, and I'll hand over to my colleague Russell Cash to go through this side of our presentation.

Yes. Good morning, everybody. Because myself and Bryce were separated, I've asked a 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. And I'm assuming 1 of the guys at IMC can send me some sort of message if you just simply can't hear me or Bryce will...

Russell, you're absolutely perfect. Sorry to step in, but you're absolutely perfect.

Thank you very much. Okay. So I mean, I think the truck line 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 having that out. In terms of revenue, I think Bryce alluded to, in a normal world perhaps we delivered circa GBP 110 million. In the abnormal year of 2020, it dipped down 15% to GBP 95 million. Pleased to say that we're well on our road to recovery. And it's obviously, more meaningful to benchmark the first half of '21 against the first half of '19. And when you do that, you know that we're 7% behind where we once were in that normal world. 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 second segment of our business, we call it solutions, which is more correlated with the OEM market, was hit worse and is taking slightly longer to each other. But as Bryce alluded to, I think consensus has our revenue in that circa GBP 103 million, GBP 104 million, bang in the middle of the normal GBP 110 million and the abnormal GBP 95 million. So we're pleased with the way that we have recovered today and continue to recover. In terms of margin, again, key message is there. 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 that will remain the case going forward. There's a fractional improvement that I don't think we should put ourselves on the back too much when there's margin improvement 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 3 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 1 pleasing aspect is 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. 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, H1 '21 versus H1 '20, but there's a message beneath that, and that message is that we did take quite a lot of action with several of our businesses 12 or 18 months ago and it attracted some overhead savings circa GBP 1.5 million on an annualized run rate. And that's allowed us to, if you like, self-invest in some of the more exciting, go-forward investment areas of our in 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 different reasons. In terms of net debt, I'm going to 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 4, 5 months ago. I said that don't expect much, if anything, in the way of debt reduction. So as you'll see from the bridge in a couple of slides tone that is very much on plan and under control. The dividend there, we just included a quote from our RNS 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 know that the analysts, I think, have got us in for something like 2p per share and dividend -- final dividend in respect to 2021 payable midway through '22, that would be. So I'm going to hand over to Bryce to talk about our investment in inventory and then there'll be a linkage to the net debt bridge.

Okay. Thanks, Russell. We made quite a play in our RNS about the well-publicized issues in supply chains in nearly all sectors. And by way of illustration, we pick up here a couple of KPIs that we use as part of our Board reporting with specific investments to our Flowtech division that has, in essence, as part of its mantra is the higher service offer typically driven by MRO, typically driven with the next-day demand sort of profile. So we've got 2 graphs, the green element which profiles the total stock plus what is on what we call open purchase order. So it's what's with us 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, the volumes were increasing quite significantly, and on the back of 2020 that we know was affected by the COVID-19 situation. So we took some quite proactive action there to place some quite significant orders midway through Q1, as highlighted here by circa GBP 2.7 million of additional volumes to reflect both the escalation volumes, but equally what we were seeing in terms of extension of lead times. So therefore, we have to provide some additional buffer for that particular process as we look down the piece. What was actually happening is reflected in the boom line. So this is just 1 simple metric where A lines, those top-selling lines, we measure each week, just how many lines, we don't have stock at all. 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. And many of the Flowtech customers are comfortable with if it's on its way and in the next week, put it on to back orders soon as it pulls in services with the product. So it typically operates at about 95%. You'll see here, though, a scaled on the right-hand side of the page, it was over 12%, where A lines were out of stocks are quite high from our perspective. So you have the job to position of increasing the amount, difficulty get all the stock and therefore, you have to be so collective to go down less exactly what we did. And you've seen the results that the non -- the out-of-line starts for A lines 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 continue our uplift over the summer months. So you've got an uplift in stock that will feed through to greater stockholding position. We've gone from 18.8 million outlook stock in February to over 24 million in 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 that side of it. And that's reflected from the things that Russell talked about in terms of our net debt bridge. However, there are a couple of other points to note here. But 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 have an order book 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. I think not better than the majority of our competitors. And certainly, in our solutions businesses and our services businesses, is effectively a prescribed branded product anyway. So they have to come through our particular channel. So if we can't get the stock, we can't supply the customer, and the customer therefore has to wait and you're slowing down yourself on production. Now those particularly large OEMs have also experienced supply chain issues in other parts of the manufacturing process. So there's generally been a drag on demand to order books, we're looking ahead of the ability to actually service that and that will normalize, we'd like to think back into 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-19 situation. Again, the restriction on supply that was 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 achieved. So GP percentages from that we track on a daily basis, measuring against prior years. And again, 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 if we handle it well. So we are dealing with that particular position at the moment.

Hopefully, Bryce [indiscernible] was getting some red buttons popping up, I'm afraid. But yes, you can hear me okay. The debt bridge, not the most complicated bridges, there's a green blob and there's a red blob and they're about the same size, though not a lot has happened to our debt position beyond that. I mean, it's increased by GBP 1 million exactly as we planned. And as Bryce alluded to, we've deliberately invested in our inventory. And obviously, as our revenues recover from the back end of 2020 is a fairly significant increase in our debtor book. I would remind people that 2 years ago, the debt was GBP 18.8 million. So the fact that it's GBP 13.2 million, obviously, GBP 5 million or more reduction in a 2-year time frame. And equally, it's nice that we can operate with headroom with typically GBP 12 million, GBP 13 million within our GBP 25 million banking facility that still has in excess of 2 years to run. So all in all, again, it's getting a bit more and this is -- it's what we expected. We're delivering to plan, and that's under control.

Okay. We're quite clear in our April presentation about the key plans of our strategy. So the next section of our presentation, we'll just give you an update on those key areas, in particular, where our focus. The first 1 of which was our branding style. We've historically operated initially under the fluid technology brand. Obviously, that's part of the Flowtech from our banner of the group and it floated in 2014. We have then done a series of acquisitions from '14 to '18, culminating the Beaumanor transaction in March 2018, the Beaumanor transaction, a coupled with Derek Lane, where we expanded the group considerably, both in the breadth of its software, the brands that it offered, the types of markets that it actually serviced, what we were left with a multi-brand house, that worked quite effectively at that particular point in time. 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 Fluidpower Group in terms of our commercial position and that were reported to the 3 channels of Flowtech solutions and services as the 2 subsections of Fluidpower. Now the initial focus we've got here is around the Flowtech branding style. And this is quite a major change for the organization. Previously, the constituent part of the Flowtech division as a center around Flowtechnology and got itself self-branded as Flowtech was a master distributor to distributor relationship, quite clear in that. But with the Indequip brand and the Beaumanor brand that we acquired, was very much on route-to-market process within those brands and therefore, culminating with a transition of the whole of it under single branding style with an all 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 -- obviously been received very well. Many of our customers have multiple accounts, and they wanted to be serviced by 1 account through 1 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 Q1 next year. Crucially, this is also under the banner at the second part of our strategy, which was a significant investment and an integrator to our e-business capabilities. So flowtech.co.uk is a legacy website that's been round for many years, but it's essentially an older portal, a connection of distributor to master distributor. That will be significantly upgraded with the major investment that we've made and the redesign goes live in Q4 this year, that's on track. As we said, it will have a much more immersive customer experience, including rent personalization, e-mail marketing campaigns connected to it, artificial intelligence and driving into search engine optimization activities, the previous Flowtech has never talked from that perspective. As we pointed out in April, we believe there's considerable scope here for growth jaw through the online capabilities and what we're building here, and that will be coupled with our off-line capabilities. Just touching on the SEO side of what we were talking about here. How will SEO improve what we do. Well, it's inextricably linked to the Flowtech branding style of when this all reaches to market concepts. To date, if you search rotavators 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 2-year period suggests that there may be as more as marginal revenue of circa GBP 300,000 and at our GP of, say, 35 with distribution high 20s. There's quite a pool of potential revenue for us in that space. And we've identified that just is sort of each search term, there may be 100, maybe not 150 of these search terms. And therefore, as we progress through the [ whole ] to next year, well, coupled with U.K. courts of the website, a much deeper, more immersive product set that we have available to us online always to the market concept, but then coupled with new search engine optimization resources that we've implemented in Q4 and then into Q1. So quite an exciting phase of what we want to do that we believe will give us a fairly rich pool of new customers and demand. Of course, that's equal [indiscernible] with our customer data platform that we trialed. 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 slides for this year, but nothing too material. And we're very confident and we're implementing that in the new year. And that will have both offline and online ramifications for us. And again, we'll be another elements adding to our toolkit 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 services division because we know this is particular interest like in April, and we believe we're on track to return this to a sensible level of return. There's 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 it's on-site operations, you can't get on site. So there's natural restrictions there. But the real ramp review that we played is making good progress. So strong activities in all areas, often leadership change and upgraded facilities there, improve our key functionality and [indiscernible] said before, and we've increased our margin by better understanding of what we're trying to achieve and better control of pricing and we instigated the more wide-ranging education or grade capabilities. And we enter H2 with a pretty strong order book. And one of our challenges there is actually delivering that again with the ramification of the supply chain back to what it was. So on the one hand, our ability to service our core solutions for Flowtech has some drag on it. Equally, there is a drag on our ability to service a fully manufactured products into our own customer set there. So return to expected levels of profitability is something that we believe that we're on track to deliver.

Just to add a little bit to what Bryce said -- apologies [indiscernible]. We set ourselves a short-term objective of delivering something in the region of a 20% return on the GBP 4 million capital that this division absorbed. So GBP 800,000 for the full year, GBP 200,000 in the first [ part ] in isolation, we think that's not very good. But we do expect H2 to be better to deliver that against our objectives again delivering to 1. And I've equally sort of highlighted the fact that the full year last year was a nasty number, it was -- it had a bracket around it, and it was GBP 1.2 million. So if we do achieve our objective, it's obviously 1 year relative to the previous, it's a GBP 2 million improvement. That's not to say we're going to stop when we get to GBP 800,000 because this initiatives takes us beyond that level.

So in terms of ESG agenda. Again, this is a big area where for ourselves as an SME competing wisely with smaller competitors. The ESG agenda, again, I believe, is going to be quite a big differentiator for us. We've now appointed a new old retain capital for the first time, and they've started processing with a pretty full agenda around the employee life cycle as we illustrate here. And on the right-hand side of the page, a lot of information is there to show just the breadth of the various activities that we're focusing on, particularly high level [indiscernible] as 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 got all the mental health and well-being and we're involving a Kickstart program. Why are we doing all this [indiscernible] 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 greatly put a lot of emphasis into, but equally it's going to be a differentiator for us. And if I look at my time, this goes for 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 is the recurring theme of what we do heavily people influence in terms of our various activities as part of our ESG agenda.

Just a couple of things on that from my end point of view. Obviously, the wider end of the ESG agenda, we know it's really improving [indiscernible] 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. Suffice to say that the work stream's in play, but we just thought we then talk to you about the area that we've invested mostly in and done most in the last 6 months. It is encouraging that 1 of our [indiscernible] as we entered the pandemic is let's make sure our behaviors outperform our competition and let's make sure we come out of it stronger, with a more engaged set of employees. And it's really pleasant to see that our engagement score during the pandemic actually improved. It was already fine, but it's got better. So it's not in our nature to pat ourselves on the back, but if we're going to self-congratulate for 1 thing, it wouldn't be revenue or net debt or any of those boring 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 of H1. We think despite the transition from, say, a health and well-being year 2020, it was as important in 2021, we've now got a commercial effects on the COVID-19 disruption to the supply chain. We think we continue to deal with that pretty well as well as trace [indiscernible] and not unit capital. Just a reminder, equally recruited high-caliber team into operation development, Howard Ormesher as well as John, who is Director of Customer Insight, leading our thinking around search engine optimization, marketing campaigns really a big step up effect on us to meet these sorts of people. We're working hard on the inventory, making sure we've got the right balance of control versus availability. We could only sell what we've got in the stock ourself 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 -- in really pretty early in 2019 reaches a starting point is, shall we say, in line with our expectations at the end of the year. We're very encouraged by that. Second half, we've averaged very much more of the same. Clearly, we've got doing [indiscernible] development sustainability agenda around a heavy focus on the quality of our people. We've given a broad view in terms of outlook, 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, we want to be able to support that. And we're sure that we'll work through that. We've said that we expect FY 2021 to be in line with market guidance and will give some further color on that and there will be specific questions around it. And overall, we're satisfied with where we're at and we're pleased with our performance during the course of the first half of the year.

Okay. Bryce will start with presentation element of this. Hopefully, my gruff voice, also being in a separate room because of isolating hasn't caused too much of a drag. And maybe I can hand back to [ Lars ] 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. [Operator Instructions] But just wanted to take a few moments to review those investor questions submitted already. I'd like to remind you recording the presentation, along with a copy of the slides and the published Q&A can be accessed by your investor dashboard on the Investor Meet company platform. [Operator Instructions] And perhaps before we move on to some of the live Q&A, we had received a number of presubmitted questions from investors. And perhaps if I may, I'll just read out the first 1 and we'll work through those guys. The first 1 reads follows pricing. I'd love to understand where you sit in terms of pricing versus your competitors, i.e the Audi, Tesco or the Waitrose of your chosen markets. And given your relative large size in the space, is there value in very keen pricing on certain lines to pressure out smaller competitors?

Well, that's fairly easy to answer, I would say with the Waitrose. And why do I say that? Well, we're 85% of brand hopes. So patronage of the major global brands even [indiscernible] et cetera. It's what we're all about. And we don't look to, over the line, those major multibillion pound organizations, like 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 evidence of a whole label product. So it's very much around quality product and quality manufacturers under a price that means that it reflects the value of historic investments in that particular line. So we are the Waitrose of our set.

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 that -- so the vast majority of our stuff is from down the Far East location.

Fantastic. 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 next day offer for the Flowtech division, we have a leading edge in that particular space, and we've had that for a number of years with our [indiscernible]. In the main, the vast majority of [ customers ], I'm talking 95% plus, the customer will open [indiscernible] we'll be able to service to these own stocks, what's needed. And we're effectively a you're the warehouse concept for what's needed then in customers' requirements. So typically, that next day is perfectly satisfactory because we use FedEx of the parcel delivery rather our own service, we can then click into if there's a desire for an 8 o'clock-er or 9 o'clock-er or a 12:00, so we can offer that. And at the same time, in extremis, we actually do also offer a taxi service in a 24/7 service for an appropriate additional call, but it's really a very thin sliver of the offer of the Flowtech division. However, in the services -- sorry, the services and solutions, primarily service solution businesses, you're largely at the top end of their volume, servicing to a 4-week to 12-week schedule provided by a major OEM. So there is a sense of a service offer that gives you an edge in that particular space. It's in the patronage of the brand and the technical capabilities to back that up, if there's any particular queries or anything that they need to support the customer. 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. Next question we have here and it's an 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.

Listen, the answer that is no. [indiscernible] CDP initiative is about. We've got inventory slice and dice analysis tools across the organization. And again, against our typical competitor base. We're probably ahead of where they sit. The CDP platform is a major investment in taking us to that next level in terms of what we wish to operate out. So you're quite correct. The connectivity of our 11,000 live customers, the 17,000, 18,000 customer records if I'd over say, a 2- to 3-year period, that's a huge area for us to exploit. And is very much 1 of the key places around the whole business and data strategy. Then we started in 2019 and really start to come to the first phase of implementation Q4 or Q1. And actually, hopefully, our intention is that will be a key area of organic growth potential for us.

Fantastic. And just conscious of the time, we've actually got a number of questions that have come through during the meeting itself. [Operator Instructions]

[indiscernible] thanks for this question. What's the strategy to go international revenues. It's a GBP 40 billion of -- in fact, it's almost like GBP 100 billion global marketplace. We outlined very clearly though, in our strategy paper in April that our focus will be around the U.K. and Ireland and the Netherlands in terms of our home geographies. We believe primarily you've got to be [ a king ] of your cash flow and we've got a lot of work to do to make our sales kings as our customers, in no particular areas, in the next 1, 2 or even sort of 3 years. Beyond that, clearly, we can expand. It's the same brand supplying similar customer sets on a global footing. But there are main competitors, particularly in Mainland Europe and obviously further in the United States is a very well-established manufacturer distributor footprint. As an organization, though, we believe our work capabilities will be leading edge and that clearly can have effects beyond the local sort of geographies. And if it coupled with operational capabilities overseas, that's something we may choose to exploit. So the potential is there very much, whether it be organic means, but equally inorganic means through M&A. In the short to medium-term I would say, we're pretty clear that we've got a peaking of our customer in the U.K. and in the Netherlands, and that's what we aim to achieve. So hopefully that answers your question. We usually give a regional brand and a global sales, can you consider this in the future, please? Well, obviously, we consider in the future. I think our reporting typically out of the U.K., rest of Europe, rest of sort of world. Just talk about, I think, in Ireland, Northern Ireland if we want to try and [indiscernible] we're circa 20% of our sales in that region. And so in the Netherlands first half...

It was shy of 10%, maybe.

No, in the Netherlands. Other side of that is the U.K., which will be very, very heavily, present timing, from that perspective. Actually we will certainly consider that as we saw with [indiscernible]. And just to reiterate, it's the same brand. So the same global brands that we partner with service effectively the whole global marketplace. What impact 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 there, 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 products ex Europe, which inevitably will have further opportunity, ex China, going into Ireland and servicing customers there. And then we have about 5% that we see from our English businesses of sales into Ireland next day. We did have some cost effects there, the ramp up of our distribution costs, as you see in the first half of the year. Things then settled down reasonably quickly. And we don't think that Brexit overall, although that's because there's a great undue concern in terms of our ability to sell the trade. There's a much bigger macroeconomic question there in terms of where the U.K. sits in the global marketplace and the competitive nature of its OEM operations. But again, in the short term, there's nothing at all that we perceive as an overall threat. The Oxford economic reviews that are done about our marketplace, again, are predicting 3- to 5-year good growth characteristics. So I don't have any particular element that causes any undue concern about Brexit effects on where we sit as a company. There's many other characteristics, clearly, like I say, the macroeconomic effects on the U.K. economy.But this year, biggest shareholder, [indiscernible]. They're a large shareholder unlike anybody else, they've -- we speak to them, like we do with all our major shareholders, and I value their input, but I would not describe them as an active -- activist investor at all. Although, I can understand whether the position of the questioning comes from there. And now they're no different than many of the our senior investors. They clearly are very interested in what we do. We are very open and informative conversations with them, and I can speak on their behalf, they are very pleased [indiscernible] major investor.

The way I'd capture that is that they're actively supported and encouraged, but not actively interfered. That's the way I would sum up. So that's all good.

Yes. Certainly, they are very positive.

What competitor do you aim to compete with in terms of our SEO?

Well, you can do your own sort of research, if you put in hydraulic holes, hydraulic fittings, like the general hydraulic terms, you'll typically get a mixture of our components say at the top end, you might pick up a bit of a [indiscernible] number of you may have a major manufacturer. 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 or the technical depth of it, hopefully the quality of our new business when investors get to observe that themselves, we're pretty confident about making some ground in that particular area. So hopefully, that answers the first part of that question. As you say, the beauty of the web trading is it's crossover using a FedEx solution, which we can do for 90% of our deliveries. You can, obviously, offer international. We already do that per se, to support our Netherlands business [indiscernible]. So marrying together access to an [ actual ] website, technical nature, and a more global operational distribution footprint you can tap into. Again, a scenario that we don't feel we've got any huge barriers against this growth in medium term.

The paper catalog clearly has a live time to it as part of the rebranding to a single Flowtech offer. There's been an awful lot of work that we are taking a generic, very fat catalogs and making them much more focused and specific around particular ethnic or hydraulics, pneumatics, industrial and other. And again, that's been very well received by customers. It's backed up by clearly a reflection in online presence and in iPad, iPhone applications, smartphone applications. The volume that we do, yes, is significantly less than it was beforehand. And there are elements without that, we don't have a built-in income stream. But it does remain part of our offer. There are many people. We like to flip the pages is a very quick way of referencing across other supplier brands. And it certainly remains well above the standard of our competitors in a paper-based environment.

Yes, Bryce and Russell, I think 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. And of course, any further questions that are submitted, the company will be able to review those and we can publish responses where it's 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 trailed the way we want to operate our strategic developments. We are on track with the strategy. We're very comfortable and pleased with the way we've performed in the first half of the year. We're in control of what we're doing. Our guidance, we think is sensible and we look forward to updating our shareholders in April with further significant progress in our strategic objectives. Thanks very much for bearing with me this morning and my sore throat, and bearing with us as we got the technology working [indiscernible] to remove myself from the office and get tested. Thankfully, I'm showing as negative, but I'll back that up with a PCR. And I can say, we look forward to updating investors in April.

That's fantastic. Bryce, Russell, thanks again for updating investors today. Can I please ask investors not to close the session, as you'll 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.