Flowtech Fluidpower plc (FLO) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to the Flowtech Fluidpower plc 2024 Full Year Results Presentation. My name is Mike England. I'm the Chief Executive Officer, and I'm joined today by Russell Cash, who's our CFO. So without further ado, I just wanted to say before we head into the presentation. If you do have questions through the presentation content today, if you could ask -- use the ask question button on the webcast page. And then when we have some time at the end, we'll make sure that we deal with those questions as much as we can. And if we don't get to the questions for any reason, then we'll certainly make sure that we follow up post the presentation today. So if we could bring up the presentation deck, that would be great. And if we could just move forward to the next slide, that's great. So for those of you today that are joining us, and thank you so much for taking the time to be here today. We know that time is precious, and everybody is very busy right now. It's important that everybody understands who Flowtech is and what we do. And we're going to come on to that in a bit more detail. But just as a real summary to start with, everything we do at Flowtech is very much about keeping business moving. And that's from supplying a single product, all the way up to designing and building a complex engineered solution. We're going to bring that to life through the course of the presentation. And you also start to see that we've done a lot of work in resetting our brand, our purpose and ultimately, our strategy over the course of the last 12 months and arguably the last 18 months. So if we go to the next slide, please. So in terms of today and the agenda, as I said I'm Mike England, I've been with the business now just under 2 years. It's been a great couple of years joining Flowtech. This has been a real transformation journey. We've been taking a business that was operating at 17 different brands, quite fragmented, and we've been bringing that business on a journey to consolidate under the One Flowtech brand. And with that, quite a lot of restructuring and setting the business up to build a scalable business for the future. I've got over 28 years of experience working within industrial distribution and service space. And I'm really excited to be part of Flowtech. And as I said to Russ earlier, actually. But as excited, if not more now, given that we've been through quite a lot of the work to drive the change in the business required than I've been in my time here. We see a huge opportunity for Flowtech. It's a very fragmented market, and we're going to be explaining a little bit more around what we've achieved so far and what's still to come. Russ, quick introduction.

Yes. Good morning, everybody. I've been in role for almost 6.5 years. And I guess, put another way, 30% of that period have been in the post Mike England era and 70% of that was prior to meeting, Mark in March, April '23.

Thanks, Russ. So we're going to cover off today 3 areas. We're going to give a very quick summary of 2024, but also just a quick overview of Flowtech for those of you that are new to our story. We're going to do a look back on 2024, just bring that to life both from a financial point of view and just talk a bit better around some of the achievements along the way. And we're going to then spend a bit of time talking about 2025 trading and outlook. And given that we're here in April, I'm sure that's of great interest to everybody. Picture in the background here. Just a point of reference, this is a major hydraulics project, which we secured in Q4 last year. It's a narrow water bridge. It's a new infrastructure project, which is going to connect Northern Ireland and Southern Ireland. And as you can see, the bridge swings up and swings down to let the boats go past and the traffic go across. That's all powered by hydraulics. And we're very excited about that project. Circa GBP 4 million over the next couple of years in terms of the revenue, and we're excited to get going on that in the second half of this year. Next slide, please. Let's get into the overview of 2024, and we're going to be opening this up a lot more as we go through the presentation, but I just wanted to pick out a few points and just a bit of positioning upfront. I'd break 2024 down into 2 key areas or 2 key messages. It was a very, very important year of transition for Flowtech, and we've simplified the business through our performance improvement plan, creating one Flowtech, a clarity of our value proposition, restructuring the business into a simpler operating model, building some core capability, bringing in new leadership across the organization that really helps us to scale up for growth for the future. We've made material improvements to our customer service. This was an issue as I joined. Our service levels were not good, and we had a high level of customer frustration and complaints. I'm pleased to report that customer satisfaction has improved. Complaints are down significantly, and we're now in the process now of having a much more stable and solid platform in terms of our ability to provide great service for our customers. And we've made significant operational progress in the year in putting some of the fundamental basics in place, which Russ will talk to as we go forward. But the business transformation that we will set out within our strategy is broadly complete in terms of making sure that we get the business set up rightsized and focused in a new way of working. And with that, last year, we've also added 2 acquisitions, 1 last year, which was Thorite. Again, we'll come on to that in more detail. We're very pleased with the progress there. And more recently in March this year, we acquired a small business called Allswage, both of which we believe are very, very accretive to earnings as we go forward. The second point I'd say is that it was a very challenging year and a very tough market in which we operate. And fair to say that, that market got tougher in the second half of the year, something that I don't think anybody within the industrial space was expecting, but something that we all had to lead into. And we'll come into some data points to underpin that. So sales declined, but we do believe that we gain market share when we look at the overall performance of our sector. We've made strong continued improvements in gross margin. It's a very, very important KPI for a distributor and service company. And we've addressed our cost base through the course of the year. We've taken cost out of the business, but we've also reinvested in areas which will support that platform for growth for the future. And again, Russ will cover that off. Overall, though, the EBITDA decline in 2024, primarily reflects the operating leverage in reverse as a distribution and service company, we do have a higher fixed cost base. We don't see a reduction in the frequency of ordering, but we do see sometimes the order value dropping as we go through these downturn periods. But also we had a little bit of dilutive impact of the Thorite acquisition, that was loss-making when we acquired it in August. And obviously, we've been making sure that we address that through the fourth quarter -- through the second half of the year. Net debt broadly flat. We've had some positive gains around cash generation, and that's really down to strong working capital management through the year. Again, Russ will speak confidently around that. So the summary of 2024 from my side, is that we have achieved a lot. We've transformed the business, but a lot of the heavy lifting done. Performance, we would have liked it to be better, where we don't believe that the decline in growth is anything other than market related. Now we have a high customer relation -- high customer retention rate. But we remain very steadfast. We are very determined, and we're very confident in our plan, and we're certainly entering 2025 and sitting here in April, irrespective of what's going on in the world around us, feeling that we're in a much stronger business now than we were 12 months ago and if not 18 months ago. Okay. Russ, would you like to just quickly just give an overview of some of the control -- the controllable elements that we worked through last year as well. If we go to the next slide.

Yes. Thank you, Mike. It's a busy slide because we've been quite busy certainly in the post Mike England period, which is 2 years now. I'm going to resist the temptation to demonstrate just how hard we've worked. And indeed, in at least 4 of those 6 boxes, we'll talk on later slides. But what I'll say to this slide, just picking up on 2 of the boxes there. Firstly, the web traffic up by 2%. So 70% of our activity in our product distribution channel comes through the web. And we're on the cusp of launching what we strongly believe will be a materially better experience for that web audience. It's fair to say there hasn't been a huge positive sentiment as regard to the previous experience. So we do think that will signal a material improvement and a step change in that regard. So it's coming soon very soon, in fact, but I shall not steal much thunder on that one. The second one I'd just pick up on is own brand. We have transitioned what were 11 own brands into 1 own brand. We call it FT Pro, and it has done nicely in 2024. Actually, it has increased its level of revenue. And the audience won't be surprised to be reminded that the gross margin on own brand activity is particularly strong. So like I said, we're going to cover the other 4 boxes in more detail in later slides. So I'll leave it to that for now.

Thank you. If we go to the next slide. So for those that are new to our story, one of the first questions people always ask me is, what's Fluid Power? What does that actually mean? Well, Fluid Power is utilized in nearly every industrial powered system that there is. If you look at -- I call them diggers, if you think about off-highway equipment, if you think about OEM mobile equipment such as agricultural machinery. If we think about powered bridges, if we think about utility markets, if we think about garbage lorries. If we think about factories, anything that really is creating movement, we'll have some element of Fluid Power within it. It's at the heart of every industrial application. And in reality, it's a breaking down of hydraulic technology, which typically is a fluid or a pneumatic technology, which is typically a gas, which generates controls and transmits power. And the way I look at it quite simply is that hydraulics is moving and lifting the big stuff. So that typically tends to be construction, agriculture, defense, aerospace, oil and gas, heavy machinery type applications. Pneumatics is where you've got lots of high moving fast activity that takes place. That's around food processing, electronics, medical and automotive packaging. The applications are very, very, very broad. The hydraulics sort of proportion of the market is more than 70% to pneumatics in terms of ratio. It's also very, very fragmented. It covers a broad range of products whereas pneumatics is a smaller proportion, a little bit more concentrated in terms of the supply base. And again, that's an area which has a degree -- high degree of specialism. So that's the area that we play, which is Fluid Power. And that goes across virtually every industry sector that you can imagine. And we have a very, very diverse customer base, of which 1/3 of that customer base is us selling through to other distributors and resellers as a master distributor. 1/3 of it is to the end users to end markets and 1/3 of that is to original equipment manufacturers. And we have a very, very broad spread of industries that we serve. If we go to the next slide then in terms of -- and what that means for Flowtech? Well, we're the leading Fluid Power products and service specialist, certainly in the U.K. and Ireland, and we're seeking to rapidly grow through our footprint that we have within the Benelux and then ultimately, into broader Europe. We've got over 21 operational locations in the geographies by which we operate, but we also export, albeit our export today is smaller, we do export. We have 620 highly skilled technical people, knowledge as a specialist is important. Experience is important, and we're very proud to have great people in our business. And we work with some of the biggest global brands in the space. Some of those are detailed on the right-hand side, whether that be pneumatics, automation, hydraulics or the broader motion control sector, which we'll come on to. We have very, very strong, long-standing relationships and we're the biggest stockist certainly in the U.K. in this area. We essentially break the business into sort of 2 sort of focused areas. One is we're a high-service product distributor. So we carry inventory within fulfillment center and that tends to service an MRO and OpEx maintenance, repair and operational requirement, where something's broken, and we need to get it to the customer quickly. And we do a proportion of that business through a transactional web platform. And then we have a very, very strong manufacturing service and repair capability across multiple locations where local does matter. And in that instance, we're doing more than selling a product. We're building a system. We're servicing a system or overhauling a complete system. And that means that we can be an end-to-end service provider. The market is big and fragmented. I'll come on to a world of motion, as you can see that under our logo. But the technologies that I talked about earlier, hydraulic, pneumatic, mechanical, electrical, electronic technologies with digital factory with digitization, with the sustainability agenda. And ultimately, with the advancement in technology, we're starting to see a much greater level of interdependency across technologies. And so from Fluid Power, we believe we can expand our product range out into that world of motion, so power motion and control. That's a GBP 30 billion European market in terms of total addressable market, of which we have a less than 1% market share in what is a very fragmented market in Europe and less than 10% market share in the U.K. So all to play for. And part of 2024 was getting this business set up in the right way for us to be able to go and attack that market in the future. If we go to the next slide, our strategy, which we put in place right at the end of 2023 is all about unlocking Flowtech's full potential. So as we exited 2023, we were operating 17 different brands across the 3 markets that we talk about. And those brands were not very interconnected. They typically were operating as separate businesses. Many of which we acquired during 2014 to 2018, a limited amount of business integration. And the business integration that we have done over the time of '21, 2022 had caused some customer disruption as well. And so there was a bit of rectification of that, that was needed. So the strategy was set in 3 very simple pillars. One was making sure that everything we do is focused on our customers. We have a very diverse customer base, but we have a very omni-channel approach. This is a very traditional market today. And we believe that we can be a frontrunner in digitization of this market, utilizing data and started to harness the true power of the platforms that we're building, which we'll talk about later. And by doing that, we believe there's an opportunity to drive 2x the market growth rate. The power of one is about how do we unlock the potential of those 17 different businesses, and we've since added on 2 more and really harness all of that under one Flowtech, a singular value proposition to market, real clarity and assurance to customers that they understand what they can get access to, integrating the business to drive efficiency of scale through that. And we believe by doing that, that allows us to move towards mid-teens EBITDA margins in time. And a world of motion is then how do we expand our products, services and geographical reach out further in order to address that GBP 30 billion market opportunity. And we'll talk more through the presentation about our sales growth levers and our gross and operating margin levers. But needless to say, we're very, very pleased in 2024 at the work we've done to drive clearer customer messaging we've implemented, for example, some fundamentals around having a very, very clear group-wide order book and group-wide sales pipeline methodology, implementing CRM tools, customer relationship management tools, a singular customer data platform so that we can start to identify and unlock opportunities across the whole group with relating to our customers, making sure we're doubling down on our service level improvements. As Russ mentioned, really focusing on our own brand growth and on product range expansion and refinement. And then on the growth in operating margin levers, really getting on top of price discipline to improve gross margins, leveraging our purchasing power and building a capability in the group to be able to leverage our purchasing power. Previously, that was very fragmented across the different businesses that we had, making sure that we're driving a focus around the product mix and higher-margin plays and improving our overall operational efficiency, both through some investment in CapEx, but also making sure that we're driving standardization and harmonization across the group. If we go on to the next slide, Russ, could you just talk through the plan around these 6 margin growth engines?

Yes. Thanks, Mike. So on the previous slide, it stated our ambition of achieving a mid-teens EBITDA margin and a question what top line needs to be achieved to deliver that. The answer to what my opinion is in the region of GBP 160 million, GBP 170 million, but top line delivers that. But our ambition is obviously underpinned by what we believe to be a robust plan. And within that, we have what we call 6 EBITDA growth engines. Each of those engines has 3 components attached to it. And as a senior management team, we do make each other accountable for delivery of all of these points. But certainly, as regards to first 5 engines, they all have material tangible financial benefits attached to them. And as we'll come on to later in the presentation, we feel we've done a particularly good job with Engine 2 commercial excellence and Engine 5, operate for less, operate for sensibly less. I'll explain the why I'm using the word sensibly later on. So each of them in isolation has a material impact. All of them aggregated together delivers about mid-teens EBITDA position. Fairly obviously, number one, that's been challenging in the market that we've been operating in, in the last 12, 18 months and fairly, obviously, number 1 is the one with most fuel in its engine, I think. So I hand it back to Mike who is perhaps just going to build on where we're at with each of those engines.

Yes. Go to the next slide. So again, end of 2023, we -- alongside the EBITDA engines, we introduced a very focused and stage delivery plan, which took us from 2023 through to 2026 ultimately beyond. But what we were explaining here was that we're going to be taking some steps to initiate, develop, advance and embed those engines as we start to go through the business transformation. And it's fair to say that we achieved a lot through 2024 with the focus around, as Russ has mentioned, the commercial -- embedding commercial excellence and making sure fundamentals were in place there and making sure that we have the business set up in the right way operating for less, but with the right investments to power our growth. Whilst we start to initiate and develop the other engines. I think engine 1 was the one that I think for us was the biggest surprise. And we've just highlighted because from the version of this that we had certainly, at our half 2 results last year, our expectation was that the market during 2024 was going to be difficult coming out of 2023, certainly for the first half of 2024 that we should start to see an easing in the market and an improvement of the market in the second half of the year. And that was certainly all of the market indicators and certainly from our supply base from the British Fluid Power Association and other data points that we use, I think that was definitely the viewpoint. As it was, we came to September still with some optimism, but we then saw the market deteriorate quite rapidly through the second half of the year, which has continued certainly into 2025, not helped, I think, by the budget announcement and some uncertainty around that for sure. And clearly, that's had an impact in terms of the margin delivery more so than we would have expected. That said, the self-help, we believe that blue bar on the self-help has actually continued to be expanded further into 2025, and we'll come on to that in terms of self-help relating to growth. We've made smart CapEx decisions through the period. And we believe that the investment in our new digital platform and some of the efficiency gains we've had within our fulfillment environment are certainly starting to bear fruit and will bear fruit. And this plan remains very much on track. This year, it's all about the digital ramp-up to happen starting this quarter. We're very much focusing now on the selling effectiveness because we've completed a lot of the heavy lifting of the transformation. And then it's very much around the own brand power, the offer expansion. And as we'll come on to, we see a very good opportunity now for more inorganic plays. As they present themselves as we go forward. And then that takes us into a more embedded state into 2026, where we believe that we'll really start to see improvements in terms of the market, but most importantly, in terms of our value creation as a company. If we go to the next slide then and Russ is just going to take us through the look back on 2024.

Yes. Thanks, Mike. Well, 2024 in many ways, a really challenging year. And of course, we're not happy that the revenue declined, albeit there's a strong argument. I'll come back to it that our decline was less than the overall market. And of course, we're not happy that our profit is materially less than the previous year. But an awful lot was achieved, and a lot of it was really rewarding to be honest. So the picture on the screen is shortly after the acquisition of Thorite, which was a brand that, believe it or not, goes back to 1850. and was acquired out of administration at the end of August 2024. So whilst one could talk about own team financial measures when you're looking back for me, probably the highlight of 2024 came shortly before Christmas when on a call, we obviously talked about revenue and margin and profit and things were trending beautifully well at that point. I'll come back to the 4 arc story later. But the question was how does everybody feel? And it was just brilliant to hear a number of voices who would transition from one end of the spectrum, the doom and gloom of wondering what the business was doing, would it survive, what does it mean for me? We're seeing 3 or 4 months into the under Flowtech's ownership, but there was a real buzz people are enjoying coming to work and funny enough, happy people tend to deliver astonishing results. And that's -- somebody asked me what the culture within Flowtech is like and the feel part of the family, the family talks to each other. The 7 branches of Thorite now communicate, they didn't used to. There's a general joined up feeling and target setting. So for me, my highlight of the year wasn't anything to do with gross profit or operational efficiencies, it was a sentiment within the recently acquired business. So if you could turn to the next slide, please. Turning to the headline numbers, and I'll say a little bit about most things on this slide. In terms of revenue, on a like-for-like basis, 8.6% down. I'll come back to the split by our different geographies in a later slide -- on the next slide, I think. The -- sorry, no, not the next slide, I've said I'll come back on previous slide, please, sorry. So an 8.6% reduction over the full year. If we look at that through the lens of the 2 halves, it was roughly 6% down in the first half and roughly 12% down in the second half. It's fair to say, and I think Mike alluded to it that we were expecting back in May, June, July, we're expecting the second half of the year to be materially stronger than it actually was. Industry stack suggests that the industry generally in terms of the -- what we do within that industry was 11% down. So obviously, whilst we're not happy at all about an 8.6% reduction, there is an argument that it was better than some people are experiencing. And that actually points towards a number of our competitors finding life really, really tough. There's a reason for I went into administration. There's a reason a company called Allswage, which I'll come back to went into liquidation, and they create opportunities for us to buy a couple of businesses, fabulous businesses at bargain purchase prices. In terms of the gross margin, my headline on that is that we're now operating 2 years into the Mike England era. We're operating with a gross margin that's 300 basis points higher than at any point in the previous 5 years. That's worth possibly repeating, 300 basis points higher than at any point in the previous 5 years. So that's material and continue to trend positively as we're progressing through '25. Managing overheads. Managing overhead sensibly. There's a modest reduction in the head count overall. We took some significant steps in the final quarter of last year to take full-time heads out of the business and cut some external costs. Had we not done that, we would have been carrying approximately GBP 2.5 million more OpEx into 2025, but we took the action. So our OpEx base is GBP 200,000 a month, roughly lower than it would be had we not done that. We feel we've been balanced and sensible because against that, we have invested in certain areas, the area that I'll pick out would be to build in-house digital capability, talked about coming soon, the website rather than being overly reliant upon third parties. Let's be honest, they don't care as much as an in-house team that's been built from scratch. So we're delighted with that. Could we have operated for even less? Possibly. But for us, it's all about stability now, having gone through a lot of change and our ambition to grow, grow, grow, our G3 agenda. The debt position, as Mike said, broadly neutral. The reason that it's broadly -- and I think it's a particular positive than a year of depressed profitability. The net cash from operating activities. You can see on the table there, has actually increased by GBP 0.8 million. I'll come back to that because that's the biggest reason for that unsurprisingly is the management of working capital. If anybody's wondering about the relationship with the bank by the way, in covenant compliance. I can't confirm that we've been covenant compliant. We expect to continue that to be the case. We have healthy headroom within our aggregate 25 million banking facilities. And in my opinion, my previous life, was spent in the world of turnaround and restructuring actually. There's a link there to the full right on Allswage acquisition shortly. actually. But relationship, very good with the bank and no issues with covenant compliance. In terms of impairment, for those of you who have read the release, there's a material impairment, GBP 25.6 million gone through separately disclosed noncash items relates to acquisition activity, 7 to 11 years ago. And for those of you who understand the way these things work, the 2 fundamental assumptions that drive that are top line growth assumptions for the next 5 years and in perpetuity as well as the discount rate you have to apply to get your cash flows back to the present day. Now despite the ambition and confidence that we as the management team have in growing that top line significantly, GBP 160 million, GBP 170 million delivers the 15% mid-teens EBITDA margin. When you are challenged and obviously have to go through the scrutiny of the year-end audit process, you're simply not allowed to build in anything other than really conservative assumptions into those numbers. And sadly, the algorithm spits down a material impairment. So we enter 2025 with goodwill on the balance sheet, GBP 13 million, GBP 14 million, I think, the figure is now, which is materially lower than the position 2 or 3 years ago. But just to repeat related to historic acquisitions, it's noncash to separately disclosed item. We've taken the decision not to pay a dividend in 2025. 2 reasons for that. Firstly, we do expect there to be incremental opportunities to buy businesses out to different degrees of distress. Thorite and Allswage are recent examples of that, but we think there's probably more to follow. And we think the GBP 1.5 million that would have been paid out in dividend could be valuable in the year we're currently in. And fairly, obviously, I'll come on to explain this, the returns on those investments are fantastic. And secondly, I've said because it's true that the debt is fine. Relationship with the bank is brilliant, covenant compliant, but we do recognize that the leverage isn't where we'd ideally want it to be. So we'll -- that will help in terms of managing down our debt position just as we're managing up our EBITDA performance, obviously. Now to the next slide, please. In terms of how that looks through our 3 geographical segments, I'm only going to pick up a couple of points here, but I referenced the story of 2 halves in terms of the revenue performance, put some like-for-like numbers on that. We delivered GBP 56 million of revenue in the first half of '24 and GBP 47 million in the second half. The second half was difficult. Best example I've got is the Island of Ireland against a strong -- very strong performance in 2023 and therefore, strong comparators, its revenue declined by 20% 2-0, 20% in the second half of last year, but that was predominantly down to the crushing and screening sector, which is concentrated in Northern Ireland, which was a GBP 6 million revenue stream that became broadly half that number in the difficult year of 2024. The better news is that there are green shoots of recovery coming through in the early part of 2025. We're particularly pleased with how the Irish business is performing right now, to be honest. The other shout-out would be Benelux, where if you thought the PMI index was challenging in GB, it was even worse in the Netherlands throughout most of 2024. So unsurprisingly, it lost some top line. But important point there is that we've invested in our people in the Benelux in some of the new local leadership, Francisco Terol joined the business roughly 12 months ago and Francisco has strengthened his supporting management teams and fabulous hires there. We think it's beautifully poised to capitalize on better market conditions. It's just moved into a fabulous new location in the Rotterdam Harbor. So again, that comes back to a balanced approach to managing our cost base really, really hard, but equally not being scared to put investment into areas where we think we can get really good upside dividends in the medium term. Next slide, please. So I refer to a couple of slides you go to notwithstanding a disappointing profit performance. We have generated more cash from operations. You can see the biggest bar on that debt bridge there is the working capital a GBP 5.2 million reduction. If you look back over a 2-year period, I think it's the best way to describe this, it's a 2-year period is the under new management period, of course. But our working capital overall has reduced by 23% or put another way, GBP 8 million. For the cynics in the audience, if they say, well, that's because your revenue is reduced, if I strip out the receivables element of what I just said, the like-for-like reduction isn't 23%, it's 34%. So I think we have demonstrated and we've done a good job. We know what we're doing in that regard. I'll probably just pick out one other bar there, the GBP 3.3 million assets purchased, our CapEx, the single biggest component of that is GBP 1.8 million with regards to investment in the web. We said previously that we're on the cusp of launching that. We're excited about what it will bring. I guess, the reward will be incremental. It will be something in 2025, but we can look forward to something more in '26 and beyond. So yes, if you could move on to the next slide, please. So just 3 charts there, which I think are nice visuals to arguably what I've already said, but the left-hand chart there to show the GP percentage materially up in the last couple of years compared to what it previously was. The middle chart there, the different components of the working capital story that I've just given you. So you can see that the debtors bar has fallen back in line with a reduction in revenue, albeit there has been an improvement in the debtor days outstanding. I can assure you that. So it's not all related to revenue. But as I said, overall, the 23% reduction, I think it's a 2-year period, actually rather than a 3-year period. The chart on the right, I could have chosen different ways of illustrating this, but I thought this was quite a good example. This relates to our Skelmersdale site, the biggest stockholding sites, roughly 50% of our inventories in Skelmersdale and over a 12-, 15-month period, the orange chart is a line is a degree of activity, which has trended upwards if anything. But we've picked and dispatched more items with 30% fewer people. 30% fewer people is probably a 7-digit cost saving all in all. So we've got other examples of that, but I think those are 3 quite neat charts to -- you probably link back to the control in the controllable slide, I showed a while ago. Next slide, please.

Thanks, Russ. So just a word on the market. Clearly, through last year, it was a difficult market. As I said, that market seemed to deteriorate further in the second half of the year. We've got many different data points. We do need to keep an eye on the PMIs. Certainly, the U.K. PMIs have continued to drop as many people will know, Equally, Island of Ireland was not looking good, but it starts to improve certainly in the first quarter of this year. And as Russ alluded to, the Benelux continued to slide in some instances, worse than the U.K. Another data point is U.K. manufacturing production. Again, we can start to see that decelerating through the year. And we also do pay attention to the British Fluid Power Association and their trends in terms of what's happening within the market. Not only to understand the growth within the market, but also what's happening across the hydraulics space and the pneumatic space. So all lines, all graphs indicate that drop off. I think what is important though is that the sales decline when we look at it is tightly concentrated within some manageable areas. And we believe that, that gives us a high confidence of recovery, both in terms of -- that isn't business lost. It's either business delayed or it's market impacted, but it will recover. And when we look at it, 70% of the year-on-year sales decline on a like-for-like basis is from 10 larger OEM customers. In fact, one of those customers trades across both Thorite and Flowtech had been trading across both in 2022, combined with GBP 8 million, in 2024 was GBP 2 million. Now that was down to their own industry feeling the market declined on 2 levels. One, there were still some destocking and some overlay from the COVID period. But equally, just the market decline in general just meant that there was lower demand. And we're now starting to see some green shoots and there's starting to be some more positive signs of recovery there as an example. As Russ alluded to, specific industry verticals were particularly weak, crushing and screening is a good example, but there are others. We did see some down trading within the agricultural sector at the start of the year. But I think what is important as a business is that we're also looking at the average order frequency. And what we did see was very consistent average order frequency. In fact, we had broadly the same number of orders coming through in terms of average order frequency. We have a similar number of picks out of our fulfillment center in 2024, as we did in 2023. The average order value has reduced. So people are buying what they absolutely need, but they're not looking at those add-ons that perhaps we would see in a slightly upturn market. We also saw quite a lot of projects that were being committed to through 2024 being pushed back. And some of those got pushed back indefinitely into 2025. And as I say, certainly as we got closer to the budget in the second half, we started to see greater concern and perhaps people pushing back that cash outlay further. We do believe very strongly that 95% of the reduced revenue is market driven. That's not to say that we can't grow without the market recovery, and I'll come on to that in terms of self-help levers, but we have a very high customer retention rate, and we're proud of that. And as Russ said earlier, we've got good market share gains. We've got improved sales pipeline. The sales pipeline is materially stronger in both quantity and quality as we enter 2025 as it was when we entered 2024. And we've now got very, very clear visibility of the forward order book. And again, we can see that, that is materially stronger, 5.3% up at the start of 2025, on the start of 2024. So we're pleased with that progress. If we go to the next slide, and I think we can probably counter through this slide quite quickly. One of the things that I said at the beginning, is the progress we've made on operational gains. And we look at that primarily through growth and operating margin levers, but this really links back to the 6 EBITDA growth engines that Russ mentioned earlier. I think we've covered off the majority around customer growth. The only one I would just call out in addition would be our catalogs that we delivered to market, which went out in the summer, 53,000 catalog. So this is a catalog holding around 50,000 products. And because 1/3 of our revenue is with distributors and resellers, we provide that as a white label solution. We wrapped that catalog for them under delivery and then we hold the stock for them, and we put their brand and labels on the boxes and we ship to their customers. It's an interplay -- an interlinked end-to-end solution. The previous catalog, which was launched in around 2022 was not welcomed by our customers. It was an attempt to bring together different brands that we had acquired. And we effectively broke the formula, which have been in place for over 30 years. So we reset that. We relaunched that to market, I'm delighted with the customer feedback and the customer satisfaction relating to it. The next evolution, as Russ alluded to, is whilst we saw online traffic increased by 2% and some tick up with the work we did to improve the existing web platform. We know that it just isn't the experience that our customers want or need, and we're very, very much looking forward to progressing that in the months to come with a new platform, and then we can digitize the catalog offering as well as still continue with a catalog-based offer. Russ, anything on commercial excellence that we need to just call out?

Yes. I said enough about gross margin, just developing a comment on inventory there like-for-like GBP 3 million plus reduction in 2024. Some people will say, well, at what expense that must have impacted upon your availability and customer experience? Well, yes, is the answer to that. But we've actually took using Skelmersdale as an example. We took out 15% of its roughly GBP 15 million inventory, GBP 2 million. And whilst doing so, we materially improved the availability. It went from low 80s to high 90s to 97%, which has been sustained. So we know what we're doing in terms of cutting the right type of stock in the right quantities. And some people say, well, what's the customer experience like and it's trending positively. We do hope that it will trend even more positively when we launch the materially better website experience, of course. So yes, just a couple of builds there, mike?

Great. And look, I'll just conclude on people, talent and capability because I think we've touched on a number of the points under the other under 3 areas. One of the areas that we've really focused on is creating a very aligned and unified culture within the business under the one Flowtech rebranding. And with that, aligning the business operating model around the customer value proposition, being able to take more of what we've got to offer in terms of our product, service and manufacturing capability to more of our customers and to make that readily available. But with that and with the restructuring and simplifying the operating model, there's been the requirement for us to create a number of new roles and to build new capabilities in the business. And in some instances, that's about the right people in the right roles. And in other instances, it's about powering up and bringing in the right capability into the enterprise, which we didn't have in place before. I'm really proud of the work we've done here. Notwithstanding this is never an easy process that we go through. And certainly, in the latter part of the year, we did work hard to address our cost base further through that restructuring. But we have made 6% of the top leaders roles changing through the business. And whilst that sounds quite extreme, actually, I think from within the business, that's given greater accountability. It's driving us as a team to be much more unified working as one Flowtech. And we've gone from around 10 cash-generating units down to 3 with the restructuring that we've done. So we're also simplifying our operating processes. We're harmonizing and standardizing our ways of working, still plenty to do, lots of self-help still to come there, but we've made very, very good progress in the year. If we go to the next slide, Russ, you're just going to just summarize then on the Thorite acquisition and obviously, the Allswage acquisition.

Yes. So slightly conscious of time, but it would be wrong not to spend at least a couple of minutes on this because I think it's important, not least because I think we briefly alluded to it, we do think that there'll be similar opportunities that present themselves to us at some future point. But Thorite, when we acquired it out of administration at the point that we acquired it, our assumptions were that it was about GBP 14 million revenue business. Incurring a pretty nasty loss with a depressed gross margin and an overhead base needed to be trimmed. So move forward what's been achieved, where we've held on and developed to the top line in the first 18 weeks of ownership, which was the period from the end of August to the end of '24, its revenue was GBP 4.8 million. So multiply that number by 3, we held on to the top line. We made material improvements to the quality of its gross profit, many hundreds of basis points improvement in the GP and we took steps to remove in excess of GBP 1 million out as cost base. So in a nutshell, we removed the bracket around the loss-making performance of the business, and we turned it into profit within a couple of months of our ownership. We didn't pay much for it at all. We -- if you look at it through -- some of you will have noted that there's a separately disclosed credit of GBP 2.3 million which relates to the negative goodwill, meaning we got more than we paid, we've got more assets than we paid. Just a little bit of detail on that. We paid GBP 700,000 to secure title to inventory that's been fair valued at GBP 2.1 million. And we paid GBP 1.7 million to acquire the debtor book, which we were confident would deliver a recovery of in excess of GBP 2 million, and it did, it delivered GBP 2.2 million. So there was GBP 500,000 upside on the debtor book, 1.4 million upside on the stock book. And then when you take account of -- we've had to value the 175-year-old brand, which we continue with Thorite to Flowtech companies, you can see there, and the customer list. That's how you get the negative goodwill of GBP 2.3 million. Brief shout-out to the Allswage acquisition, again, out of a distress this time out of liquidation. And spookily, you can almost divide Thorite number by 7 and get the Allswage deal. Thorite had 7 branches, Allswage has got 1 in West Brom. Thorite's revenue was GBP 14 million when we acquired it, Allswage is about GBP 2 million. We paid GBP 350,000 a day 1 consideration for Thorite. We paid GBP 50,000 for Allswage. So Allswage inherited a GBP 2 million revenue business. We can improve its margin. We can manage its overheads. And we're expecting that to generate a positive contribution in 2025 and the part of the future beyond '25. So bargain purchases comes back to the comment I made about we think there's going to be more to come with an influence on our attitude towards that dividend payment, too.

Great. Thank you, Russ. If we move on to the next slide. So again, just talk a little bit around the 2025 trading and outlook. And again, just a picture here is from a major ring main system design, build and in-store project that we completed last year for Jaguar Land Rover in Gaydon at their test facility. This was a project which benefited significantly for them in terms of sustainability and reducing their overall energy consumption. And I think just as a testament to the capability and the technical competence that we have within the group around some of the major projects that we get involved in. But with that, we move forward into the next slide, please. I just wanted to start the overview of 2025, really by looking at the sales growth levers that we're focusing on. And this is very much self-help. So whilst we recognize that the market continues to be laggard, and arguably, there's some high degree of uncertainty with recent events. We do recognize that we have attractive structural growth drivers, which we've been putting in place through 2024, which we want to make sure that we exploit. We've broken that into 4 areas. I think we've said enough about the new digital platform. It's just worth noting on that, that the white label opportunity, which is providing a Software as a Service solution to a very, very broad number of distribution partners, who ordinarily wouldn't necessarily have the capability to build type of web platform that we're creating. That, we believe, is a really important step to be able to help the industry to become more digital savvy. Whilst in parallel, launching our own U.K. web platform, all of it is within the same underpin. But we do think that, that gives us opportunities, certainly in half 1 to get that up and running, tested and working effectively. Subject to that, we will then look to roll that platform out into Thorite into Ireland, into Benelux and also start to ramp up the digital export capability, which will follow in the second half of the year. On products and service expansion, we've got some exciting new product range launches coming in 2024, including own brand expansion. This is an area that we didn't really get our teeth into last year. With the Thorite acquisition, we've got the introduction of some new brands that we can roll out across the group. And with that, that presents us with some growth opportunities, which we're going to be exploiting. And also, we've been very, very clear on some high-growth verticals, which we believe do play very way well to our capabilities. The first is around the indirect channel, as I mentioned, through that Software as a Service digitization model, seeing how we can improve our share of wallet within that channel. But areas such as aerospace and defense, where we know there's going to be some big inward investment. We already do a lot in the defense sector, and we do believe that there's an opportunity to take that capability and expand that further. In areas such as waterways and flood defense is working with the likes of the environmental agency here in the U.K. with Flemish water. There's a lot of investment that's been ring-fenced over the course of the next 3 to 5 years to upgrade and to improve waterways and flood defenses and infrastructure, much of which has some hydraulic content within moving assets. And then broadly speaking, with infrastructure, new bridge projects or reclamation of existing assets, which we believe is a big area for us to benefit from. We've been growing our capability within data centers. We've secured a very interesting project last year and which we successfully manage through. But our capability as a company, when we bring together the One Flowtech offering and starts to present a very unique opportunity for us to play a bigger role in the infrastructure of the building of new data centers, which certainly has some longevity given the investment being made there and the water transportation sector and whether that be through road, rail or air or shipping, we see that transportation very much sits within our sweet spot, and we have some core capabilities there. So that's about focus, focus, focus. Market recovery, if we went back a few weeks, we had this saying expect difficult markets in half 1 with some recovery in half 2. That was certainly how we and the market would see it. I think given recent events, outlook remains uncertain, and we're just going to have to ride through that as best as we can until there's more clarity. And if we go to the next slide, we'll touch on that a bit more. And in summary, we're continuing to make our own success. We have certainly improved momentum on revenue and EBITDA on Q4 2024. Q1 trading is certainly in line with management expectations. And so that gives us a degree of good confidence, irrespective of the market dynamics around us. We have the scale, the stable and scalable platform that we've now put in place in 2024. Focus is on building that order book expediting that sales pipeline, which is far stronger than it was last year, and we're certainly seeing some good wins already coming through with major projects and some of the engineering solutions that we are involved in. And we have the advantage of the new e-commerce platform which whilst we're not expecting that to be giving us an immediate injection, we do think that, that is going to be a very, very important long-term growth play. A word on Trump's tariff. We have very limited direct impact on the buy side in terms of what we buy from America and what we ship to America, but it's a watch out. But we don't see a material impact there. We're working very hard with our suppliers in Europe and ultimately in Asia to make sure that we just understand any implications. But again, we feel pretty well protected. We operate across a very, very broad and diverse set of market segments. We're not materially exposed for example, into areas like automotive, there may be some impact. But I think for us, we see that as being both opportunity and impact. So we can look at it both ways. But the reality is we don't quite know. But we sit here as a more dominated U.K. business, 70% of our revenue today is in the U.K. We have an eye on growing into Europe. And we do believe that whatever comes our way, we've got enough self-help to be able to continue to be confident that we can deliver improved performance this year. So we're steadfast. We're determined and we're confident in our plan. And I think that's the message that we really want to leave you with. We have a good plan, we're sticking to it, and we're going to continue to build that through 2025 into 2026 and beyond. So Russ, I think that leaves us then to move to the next slide, which is into questions. I'm conscious we don't have a huge amount of time, but perhaps we can pick up a few, and then we can follow up offline.

We're coming up to the hour mark, but arguably our timing is perfect because we only seem to have 1 question, Mike. The question is around our Benelux business. Reference to the decline in performance. And when was the new management team brought in and what improvements they delivered? So I think Francisco around about 12 months ago, and he's brought in some quality supporting management. We're beginning to see evidence of improved gross margins. Francisco comes with a pedigree, he's been involved with much, much bigger businesses. And the reason that we recruited him is that we're ambitious in terms of how we grow the business in the Benelux and beyond. We are beginning to see market conditions improve. The PMI in the Benelux is materially backing the PMI in the U.K. at the moment. So Mike, you probably just want to build on the comments I've just made.

Yes, it's worth noting that change is not easy. We've had 2 businesses operating within the Benelux, 2 different brands without any connectivity whatsoever. And in fact, there was very little engagement between those businesses. During the course of the 6 months of last year towards -- in the half 2. We brought those businesses together. We've rebranded under One Flowtech. We have started to integrate the data and the systems. We've moved inventory into Deventer, which is on the east side, not too far from the German border actually, which is a fulfillment center. So we started to look to see how we can harmonize the businesses into one. We've recently then just completed the move or we're in the process of completing the move of 2 locations in Rotterdam into 1 location. And we believe that we're setting the business up now for real success for the future. So for us, I think it's more market related. We have made more investment to make sure that we rightsize the business for the future. We don't want to stay as a GBP 10 million business. The market opportunity should be very confidently to double that and if not go beyond. And that can be both organically, but it can also be inorganically. And I think that's certainly something we've got our eye on, which is how do we expand our business, both in the Benelux, but also out into Europe in good order as we go forward for the future. Okay. So look, if there are no more questions, we very much thank everybody for taking the time to be here today with us and to listen to the journey that we're on. It's fair to say that we do see plenty of opportunities for Flowtech. I do think that the last year and arguably the last 18 months has been very difficult from an external market point of view. But I'll come back to what I said at the beginning. We've made a significant set of changes to transition the business through 2024. We have continued to deliver strong underlying performance, adding some new businesses in a very smart way. And we've entered 2025 in a far stronger position than we were entering 2024. We will keep an eye on what happens with the market. But ultimately, this is very much from my side coming in 2 years ago, this is a medium-term transformation, as Russ said earlier, in order for us to be able to really start to generate accretive earnings. We do need to be looking at that top line moving. For us, our first milestone is to get this business north of GBP 150 million and certainly to start to improve that EBITDA generation. And that's what we've got our eye set on. So thank you, everybody, and we look forward to updating you again around September, October time.

Thank you.