Flowtech Fluidpower plc (FLO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Flowtech Fluidpower plc Full Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question recieved during the meeting itself. However, the company can review all questions submitted today and we'll publish our responses where it's appropriate to do so. Before begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to the executive management team from Flowtech Fluidpower plc, Mike. Good morning, sir.

Good morning. Thank you, everybody, for joining the call this morning. We really appreciate your time. There's a lot happening around the world at the moment. So thank you for taking the time to join us. I'm joined today by Russell. We're down in London today, and we really appreciate the opportunity to talk to you about our journey through 2025 and importantly, our journey ahead as we think to 2026 and beyond. For those of you joining our story for the first time, our aim as an organization is to provide customers across Europe and across the world with power motion and control solutions. And we're an organization that can supply a single component all the way through to an integrated engineering system. And we do that, helping our customers to create cost-effective ways of doing their engineering and their work, working with some of the biggest and best global brands with a wide range of products and services and also making sure that we're bringing on board some of the best engineers in the marketplace. For today, just a quick introduction. I'm Mike, the Chief Exec. I've been in the business since April 2023. So coming up to 3 years, which seems unconceivable. This feels like there's a lot happened in those 3 years, particularly in terms of the market around us. But delighted to have been on this journey. And I'm going to come on to shortly the transformational story and journey that we've been on and why that set this business now up for what we believe to be some fruitful years ahead. Russ?

Yes. Just very briefly, I joined the business at the back end of 2018 when I guess the world was a relatively stable place actually. So 7.5 years has flown by. The last 3 years have been working closely with Mike and other members of the leadership team. So yes, enjoyed the journey today and looking forward to enjoying it for years to come.

So for our presentation this morning, we're going to just quickly recap on our strategy. Russ will provide some details around the 2025 financials. I will walk you through some business highlights for 2025 and also just some recent updates for the start of 2026. And then we'll just finish with the outlook. So just on strategy. And for those of you that are new to the story as well, Flowtech is operating in a world of motion. Motion control underpins critical infrastructure and industrial activity across all major sectors. And the diagram in the middle here just illustrates the industry sectors that we serve, which are plenty very much involved in all aspects of industry from the food we eat to bridges that need to move to utility segments of the marketplace, agriculture, automated production lines. More recently, we're getting quite heavily involved in data centers, which is quite an exciting growth area. Effectively, economies around the world do very much need controlled movement force and flow. And our business focuses in 3 principal areas of that. Hydraulic systems, which is very much about fluid to generate force and movement. And that's very much involved in powering heavy lifting, construction equipment, infrastructure across all manner of different industry segments. Pneumatic systems is compressed air, and that's driving high-speed automation and precision control and process control systems all about regulation of pressure, temperature and flow, and that's about safety, efficiency and consistency. So that's the world in which we play. And over the last 3 years, we brought together quite a disparate group of businesses actually into one integrated platform. That's not been without its challenges as any business transformation is. But we're very proud to be here today, certainly as we've opened up 2026 and a quarter in with a very, very clear identity under the One Flowtech brand with 3 simple pillars to our value proposition. The first, our ability to provide products across a wide range of technologies through a high service distribution capability, and that's very much about depth of stock availability and service. The second is around services. So we get involved in diagnostics, repair. We get involved in manufacturer and subassembly, particularly for original equipment manufacturers. We do on-site services and system optimization. And so this is very much going up the engineering curve -- value curve. And then I guess, at the top end, when we talk about those complex engineering solutions, we get involved in some quite exciting large-scale projects where we're designing, building and integrating complex systems, and we'll come on to some examples of that as we go through the presentation. We work across a very fragmented and complex supply chain, and we're supporting that into different areas of the market. And I guess what we're looking to do here is to connect complex customer needs with our specialist supply. And it is combining that high service distribution capability with deep engineering expertise as a specialist in that world of motion. We typically will be working across global component manufacturers and trade, a big part of our business is actually supplying to distributors and resellers with the technologies that we have available. We support systems builders, maintenance providers and ultimately, end users operating critical assets. So that's the breadth and scope of how we go to market. We set out our strategic plan in late 2023. And very much it was made up of a short-term performance improvement plan, but then also backed up with a very, very clear 3-pillar strategy that will allow us to ultimately drive a more customer-centric, lean and scalable platform for growth in time. The first is very much around customer focus and really understanding deeply our customers. But underpinning that, creating a much more diverse customer base. And I'll come on to that in terms of some of the pivoting that we've done into high-growth segments of the market through our self-help activity, but also recognizing digitization, data and ultimately, AI is transforming how businesses go to market. So creating that omnichannel approach has been a key underpin of our strategy. And ultimately, we want to outgrow the market. The Power of One has been right at the center of the last 2 years of business transformation, bringing everything that we have as a company under one singular value proposition for our customers, but ultimately consolidating our operating model and rebranding our business and ultimately driving scale. And that for us gives us the belief that we can move this business in time towards mid-teens EBITDA margins. And award of motion is very much about expanding our products, our services and geographical reach in the areas that we've previously discussed there. Across Europe, this is a GBP 30 billion market opportunity. So we have a lot of upside in terms of market consolidation as we go forward. And so building that scalable platform is very, very important for us. And everything we do being underpinned by digital and data, and we've been building some important infrastructure to support that. And then in terms of that strategy, it's underpinned by 6 defined growth engines. I'm not going to go through them all in detail here. You can look at those in your own time. But everything that we do, all of our priorities as a management team is hinged around these 6 areas and very much that's driving a lot of our focus as a business. So just to recap on that strategic road map since 2023 or certainly from the second half of 2023, that was all about diagnostics initially from coming into the business and trying to understand how do we improve performance and also get some control, particularly around restoring operational discipline, which was solely needed, particularly in terms of our service proposition to market. And we also made some immediate decisions in terms of pairing up our leadership capabilities in order to scale, bringing leaders into the organization that perhaps have worked in larger organizations and perhaps could see what the future needed and then how we scale towards that. In earnest, in 2024, we kicked off a fairly stringent restructuring and integration program. We brought 17 brands all under one Flowtech, which was concluded actually during the start of 2025. And that was very much about simplifying the operating model, building out some group functional capability to drive better economies of scale, whilst recognizing our regional nuance in operating in GB, in the Island of Ireland and in the Benelux and in time, building a scalable model that can be expanded out into Europe and also exploiting our export capabilities that we have as an organization. That continued into 2025, where the focus there was very much on returning to quality growth, but also completing the work around our digital ramp-up, delivering the digital platform and data foundations, but also making sure that the organization was embedding those ways of working with a real focus on sales discipline, sales growth and powering up our marketing engines as well. And then we'll come on to the story of that improvement, certainly coming through in the second half of the year and building that momentum in the sales pipeline and the order book as we've moved into 2026. And when we look at the next 2 years, '26 to '28, this is very much now all about leveraging the growth platform and embedding the culture around One Flowtech. So that's building on those foundations over the last 2 to 3 years. It's making sure that we absolutely convert that platform capability into a sustainable growth and profitability period. And with that, we'll come on to the updates on the 3 acquisitions that we've made up to the end of 2025 and then more recently at the start of -- in February, sorry, the Q Plus acquisition in the Benelux, which is then providing us a bigger platform in order to scale in Europe as well. So we've completed the bulk of the transformation, and this is about leveraging the growth platform and embedding our culture. So just a few more words then in terms of the strategic focus from here, very much as a leadership team, 3 areas that I just wanted to strengthen for you. The first is scalable integrated platform being in place. We believe that we're in a much stronger position than we were 3 years ago. And so our strategic focus now is very much on growth. It's optimizing the operating leverage that we built into the system that ultimately will be driven as a distribution and service business by that top line growth. But it's also then exploiting digital data and AI enablement and optimizing that journey as we go forward. We're also heavily focused now on deleveraging, and that is certainly set to improve. And we do expect improved EBITDA and increased free cash flow as we move forward. notwithstanding within that real tight control of capital expenditure. We've obviously been enveloping that up over the last 2 years as we've been working through the transformation journey, that's certainly looking to step down to reduce levels. And that continued work around working capital, where we've done a great job and there's still more work to do, and Russell is going to talk to that as we go forward. And then we will continue to look at earnings accretive inorganic growth. As I've said, expanding the product service and geographical reach in what is a very fragmented market. And I think we've proven over the last 2 years, notwithstanding opportunities to acquire companies that perhaps have been struggling, but also value-based strategic acquisitions such as Q Plus. Our focus is very much on integrating and growing those 4 existing acquisitions, and we continue to explore further opportunities to strategically grow, aligning to the need to enhance shareholder value as we go forward. So those are the 3 key areas of our strategic focus as we look ahead now. So on that as a backdrop, I'll pass over to Russ, who's going to give us an update from a financial perspective. Just a picture on the right-hand side here, it's just an illustration of type of projects that we get involved in. This was a project we completed a couple of years ago in London. And what you can see here is a bridge that moves up and down in order to let pedestrians cross. And these are the hydraulic systems that we got involved in designing and building and installing on that particular project. So Russ on the financial highlights.

Yes. Thanks very much, Mike. I mean those 6 boxes there probably do capture the highlights, but perhaps next slide, Mike, I'm going to touch on each of them. So I'll perhaps deliver you a headline and a subheadline on the key components of the profit and loss account. Firstly, in terms of turnover, revenue did increase by 9%, but on a like-for-like basis, fell back by 3%, albeit the subheadline there, it's very pleasing to see the story of 2 halves there in that the second half of the year showed strong growth relative to its comparator, which materially mitigated against the deficit in the first half. The actual numbers, half year, half 1, half 2 were GBP 49 million and just over GBP 50 million. And that's unusual for a business like us to outperform in the second half because of the typically soft months of August and December and obviously pointing towards holiday periods in that regard. So we actually ended the year with strong momentum, and I'll come back to that when I talk about EBITDA actually. Within our geographies, there were similar like-for-like declines in each of the geographies actually 2.5% in Great Britain and 3% and 5% in Ireland and Benelux, respectively. As it relates to gross profit margins, 100 basis points improvement in 2025, which builds on some decent progress in recent years. If I relate that back to maybe 4 or 5 years ago, we were typically in and around the 35% region at that point in time. And actually, when you take account of the impact on the acquisitions that we've made, the underlying improvement is a touch stronger than 100 basis points actually because notwithstanding a lot of good stuff we've done in particular, as it relates to Thorite, the gross margins in the acquired businesses are a little bit lower than the legacy businesses. So we're pleased with the disciplines over gross margin. And equally, moving to operating overheads there, to achieve a GBP 0.6 million underlying reduction, which in percentage terms is 4%. Again, we're quite pleased with that, not least against the background of the increase in national minimum wage, which is a massive issue for us given the demographics of our people and the employer national insurance increase, that probably cost us GBP 0.5 million. So had it not been for that, I think we would have been pointing to a more like 7% like-for-like reduction. So not that easy to achieve when you're faced with certain inflationary pressures. In terms of the EBITDA story, I mean, linking to the comments I was making about the differential in turnover H2 stronger than H1. For the first time, I can certainly remember the EBITDA performance in the second half of GBP 4.2 million is stronger than the first half at GBP 3.5 million. And we ended 2025 with strong momentum in a number of areas. I could point there to the strength of the order book and pipeline, and I'll touch on that in a short while as it relates to our major projects actually. I could talk about the tremendous progress that we've made with the acquisitions, and I will talk to that in a slide or 2 [indiscernible]. And it's pleasing to see some of the sectors that were significantly down trading some green shoots of recovery. I'm pointing in particular to the crushing and screening sector with that comment, which has got some focus in Northern Ireland. And equally the progress we're making on the digital agenda, which Mike is going to touch on. Go to the next slide, please. So as it relates to debt, I've used the expression once, I'm going to use it again. But this itself is a story of 2 halves because in the first half of 2025, we absorbed cash of GBP 3.4 million. And in the second half, we substantially clawed all of that back with a generation of GBP 3.3 million. The reason for that is primarily linked to the working capital cycle. You'll appreciate at the end of the calendar year, we typically got a low receivables book, again, with reference to the short trading month of December. So that always happens. You absorb cash in the first half, you claw it back in the second half. The shape of that graph for 2025 is not dissimilar to the shape of the graph for 2024. So I thought the best way of summarizing where we're at and pointing to Mike's comment about on a go-forward basis, the cash conversion should be a lot stronger. If I look back over a 2-year period, our aggregate EBITDA, underlying EBITDA, that is, is GBP 13.6 million. And when I look at the aggregation of the capital investment and the necessary restructuring costs, they've been significant. They've been GBP 10.6 million in that 2-year period. And if I look at the combination of lease and interest costs of GBP 7.5 million and dividend and tax at GBP 2.5 million. If you do all those sums, you come to a deficit of GBP 8 million. And it's that strong discipline over working capital that Mike mentioned, GBP 2.1 million in 2025. The box was bigger in 2024. It was more like GBP 6 million actually. And that's enabled us to fund that blend of surgery, if we call restructuring surgery and capital investment without increasing the debt position. Importantly, on a look-forward basis, obviously, we're backing ourselves to increase our profitability. Our EBITDA is set to be materially stronger. It's trending in the right directions. And equally, we won't be performing anything like the same degree of surgery. In fact, we feel stable with growth, growth, growth is the mindset now. The surgery is complete. So the aggregation of CapEx and restructuring costs will be lower. So we should see as the consensus numbers will point to some reasonably strong debt reduction over the next 2 or 3 years.

Thank you, Russ. So just moving on to the business update. This is a fuel system that we installed at the University of Bath and just to give you another idea of some of the work we're doing on the engineering side as an organization. So we've been consistent certainly through late '24 and into 2025 around self-help activity, which is driving growth momentum because the market around us, certainly over the last 2 years has been very, very difficult. Industrial markets and PMIs have been very suppressed. If we look at things like construction PMIs, they continue to be very difficult even through the second half of the year. And so we don't really see that the market has been our friend. But our view has been we've needed to double down in key areas and stay very focused and drive that self-help activity. Now here, I'm going to talk more around self-help for growth. Russ just mentioned around gross margin improvement, which has been sustained over that 2-year period, in fact, longer than that, but also the work that we've done, particularly around our cost base and making sure that the business is operating in a more efficient manner. Those are also areas around self-help that we've been focusing on. From a growth perspective, these 4 areas I wanted to just expand on, the new digital platform, which we launched in August last year in the U.K. The work we've done around products and service expansion in the year, which has given us some really exciting new growth opportunities and the fantastic success we're having around some of the engineering projects, not just the very large projects, but right across the board and with a strong order book and an increasing amount of project work that's coming through. Notwithstanding, the market has been holding back investment. The market has been holding back on cash because of worries of inflationary pressure. And it's pleasing to see in the second half of the year that we actually saw the building of projects in the order book, which was good. And the inorganic opportunities, which we'll come on to as well. Right at the start of the year, we took a strategic decision to make sure that we were doubling down our sales and marketing efforts in what we felt to be slightly higher growth sectors of the market, noting that some areas of our customer base have been more suppressed. Russ mentioned crushing and screening, which did pleasingly start to show some signs of recovery in the second half of the year. But there are segments of the market which do remain more suppressed linked to construction. So that focus around our trade customers, aerospace and defense, infrastructure, data centers and areas like transportation have been really important pivots for us. And we've seen some good successes. In fact, when we look at our sort of top 50 uptraders and down traders through 2025, segments of the market such as food and beverage, defense, transportation, agriculture and some of the water infrastructure projects that we've been involved in are certainly delivered some exciting growth. One of the reasons why we've been able to outperform in the second half of the year, but segments such as construction and crushing and screening are still a bit laggard from where they were. But we are seeing more of the segments of the market now moving back into a state of growth than those that aren't, and that's an encouraging sign. And we don't believe that the market has improved through 2025, nor do we really expect the market to get particularly better through 2026. And so the self-help focus absolutely continues. Underpinning all of that has been a ruthless focus as a team on the customer experience and on customer service. That's an area that we're very, very proud of sustaining our service levels, which we believe are best-in-class. We're maintaining out of our fulfillment center 99.8% on time to promise and a 97% stock availability on our core ranges. And that's important because when things break in industry, there is a requirement to be able to respond to that very, very quickly and have the stock available. So I'll come on to that in more detail as we go forward. So if we just take the digital platform transformation, I will just point out that this is more than just a new website that we've launched. We've actually taken a step back to look at the complete digital platform and infrastructure that we want to be building to help us to scale for the future. So it's part of -- the website is part of a scalable digital offering, which is very much replacing outdated legacy platforms, which was certainly a constraint to growth, and I'll come on to some examples of that. But also within that, because we do have such an important long-standing relationship with distributors and resellers, we also provide white label paper-based catalogs and have done for over 40 years to that customer cohort. There has been an important transition towards the requirement for a white label website and digital platform. And we're pleased to say that during the start of 2026, we're now starting to roll out the web platform to those trade distributors as a white label solution as well under the brand of FT Digital, which is our new go-to-market brand, helping our industry to digitize. So when we think about the website, which we launched in August, just a few data points we thought were useful to share, when we looked at all of the customer feedback over the last 2 years around the previous web platform, a lot of the negativity was linking to the customer experience, how easy it is to find a product. It was quite slow. The load time on it was between 8 and 9 seconds, for example. And it wasn't as stable as we would like. We did suffer from outages. And for example, when we wanted to amend pricing or we wanted to upload en masse, a large-scale new range, for example, the website couldn't accommodate that, and it was very painful for us. And so we're delighted to see with the new web platform that the orders completed within 5 minutes, which is an important statistic has increased now to 48%. So we're starting to see real progress there. And of course, a fact of that, if you like, ease of working through the website, is a 31% increase in customer satisfaction, which is an important indicator, arguably the most important indicator for us at this early stage of going live with the new platform. We've eliminated downtime risk. The platform is incredibly stable. And it's also being built with a very, very strong cybersecurity and information security within it. And so that's important as we're forever under attack of external forces in that regard. We are really pleased to see in the first 6 months of go-live, the stronger demand and conversion within the new web platform. Traffic is up by 24%. So we're really seeing improved acquisition efficiency within the website. But also, we're now seeing 70% more customer orders through the product distribution sales which is a key area for the website as we measure it today. And that really is starting to demonstrate that increased digital channel adoption. Still lots of work to do, but we're really pleased with the progress. From a cost efficiency point of view, we've seen a 78% reduction in infrastructure costs with the new platform, which is quite material on a month-on-month basis for us. And the delivery capability is really transformed. So we're moving from -- and delivery capability there in terms of being able to release updates and improvements to the website. We were able to do something on a quarterly basis. We can now -- we're much more agile. We can make changes on a bi-weekly basis. We're doing releases all of the time. And we're doing that with 0 downtime as well. And that's really comforting to know. And certainly, with my background and some experience of operating digital at a much bigger scale than this, it's really good to see that core infrastructure in place for the future. And for me, a critical area is the product scalability. We work with 2,500 suppliers. We've got access today to around about 200,000-plus products. But there's no reason why we can't expand that exponentially over time as we expand our product and brand portfolio as a business. And the new platform, we've built scale into our product information management system and into our product master data management to allow us to materially increase the number of products that we can ingest at any point in time. But also, if we want to do mass price changes, for example, we know that the platform can accept that and will be very, very stable. Since we've gone live, we've been able to introduce another 130,000 stock-keeping units into the web platform. We were constrained to do hundreds at a time previously. So that really does give us some extra firepower as we want to use that as a channel for growth going forward. And now we've got it up and running. We've got some exciting forward plans, and we will continue to invest and grow in the digital platforms that we've built. As I've said before, the website is only one component of an integrated digital platform. And this is all about driving multichannel growth, notwithstanding starting to bring our engineering services capabilities to bear in the web platform as well. So we're going to be launching areas of self-service and conversion. So for example, online quote tools is an important one. There's still quite a lot of manual tasking that happens in the business. We want to be utilizing the AI tools now built into the machine to drive more cross-selling and upselling opportunities to attract more new customers into our environment. We see market share growth and scalability internationally of the web platform. We will be rolling out the platform into the Benelux and Ireland early next quarter. And finally, really starting to drive competitive differentiation. So not only being able to sell products and showcase our services, but starting to introduce things like product configurators so that we can really start leading the way as it relates to technical engineering customer experiences in a digital world. So we're pleased with the progress, very early days. And then just some other business highlights to share. We made 2 further acquisitions during the course of 2025, Allswage and Thomas, which is well documented, limited consideration on both of these acquisitions, relatively small, but really, really good strategic fits and also gives us new geographical footprints of which we can build out from. Russ will talk a little bit more about these shortly. We've introduced a number of new supplier partnerships in the year. One particular partnership with SMC Corporation, a world-leading fluid control and automation solutions provider has really given us a springboard to drive incremental growth, and that continues certainly through the second half of '25, and we continue to see that momentum building at the start of 2026. On the compressed air side, we've been really proud to reconnect with HPC KAESER, a leading global compressed air provider. And we've now won new territories across the U.K. where we're providing compressed air services to a bigger territory to provide accelerated growth. And also, we've got new launches of additional brands such as Piab, Gast and Graco. And these are quite significant pneumatic brands that we brought into the group through the Thorite acquisition that we've now increased our stockholding and we're placing that into our Flowtech offering more broadly to our customers. So just some examples of those new supply partnerships. And that's going to be featuring now as a key part of our growth strategy going forward as we look at our new product introduction plans for the future. Russ, do you want to talk about the new major projects that we've won?

Yes, briefly I will, yes. I mean, major projects is an area of our business that we've invested in, in the last 12 months. The work which we're currently doing, just referenced there to bridge contracts in Ireland aggregate EUR 9.4 million, provided you manage them properly, they're super profitable. And we view the major projects growth as a key, key part of our planned organic growth over the years to come. And so we've invested in that part of the business. We've invested in some good quality people. And actually, when you do that, it's unsurprising that when we link it to things like employee engagement scores, obviously, really important metric. That's the part of our business that scores higher than any. So we're excited about what that part of our business has done, is doing and most importantly, should be capable of doing with reference to the opportunities in front of it going forward.

And we also believe that these infrastructure projects that we're involved in, these are long term. These are less sensitive to market fluctuations. And so we've got a long pipeline of opportunity here, and we will continue to grow our capabilities in that regard. Another key area of focus has been optimizing our branch and service network, notwithstanding welcoming new locations into the group through Thorite, through Allswage and Thomas, but also a modernization program of existing locations, which continues. In the year, we've been delighted to move into new premises in the West Midlands, which was a combination of a relocation of a Thorite unit, but also we've established a new process center of excellence in the West Midlands. And that's on a very large -- one of the largest industrial states in Europe. I'm very excited about the opportunity there with that new facility. We've relocated a Thorite location in South Yorkshire. We've opened a new engineering solutions center in Leicester, an area with some very, very large standing original equipment manufacturers where we already have existing relationships, and that's very much about putting some capability on the ground there to be able to accelerate our growth vector within those customers and within that particular region. We've welcomed Allswage and Thomas with new locations in West Bromwich and Ashford, and we've been doing modernization in both of those locations as part of the integration plan. And quite a significant piece of work has been done in our Benelux business. This is prior to the Q Plus acquisition in February, where we brought together 2 legacy locations in Rotterdam into one new state-of-the-art location near Rotterdam Port, which is a huge, big area for growth and for commerce and for industry. Notwithstanding, we also have our existing location in Deventer, which is a fulfillment center, and we've actually started to integrate the businesses together as they were trading under different brands and didn't really have any connection in the past. We're now operating very much as one Flowtech in the Benelux. We've built a platform by which we now can integrate Q Plus onto, which has been an important part of our journey. All of that also is with a view of scale, but also a view of optimization and efficiency as we grow, which is an important factor. And then just in terms of the performance momentum from the tactical acquisitions, and then we'll just say a few words on Q Plus. And perhaps, Russ, I'll just pass over to you here in this regard.

Yes. Thanks, Mike. So I'll touch on the Q Plus acquisition, which is quite different to these 3 shortly. But the 3 on the screen there were all acquisitions of distressed businesses. The first was out administration, the second without liquidation. And when you're seeking to negotiate deals of distressed businesses, it's quite handy that I've got 25 years' experience working in turnaround and restructuring. So on occasions I used to be an administrator or a liquidator. So quite handy when you're at the negotiating table. So August '24 was Thorite also Thomas partway through '25. But we paid literally nothing for these 3 businesses, which manifests itself in aggregate GBP 2.4 million of negative goodwill. We inherited about GBP 18 million of turnover and the businesses combined were probably EBITDA loss of GBP 1.5 million. But I'm pleased to say -- really pleased to say that the exit run rate as we left '25 and into '26 was those 3 businesses combined generating approximately GBP 20 million and growing of top line and approximately GBP 2 million and growing of bottom line EBITDA. So obviously, very, very pleased with that. And if we think briefly about the acquisition of Q Plus, which is different end of the spectrum, far from a distressed business, a prosperous business generating nice positive EBITDA. And if we take the 4 acquisitions combined and think about what they're likely to contribute in the current year, it will be well in excess of GBP 30 million of top line, I think in excess of GBP 3.5 million of EBITDA. And when you take account of the pound notes paid out, both in terms of acquisition costs, of which there was nil on the 3 distressed, but maybe we put a little bit into the working capital sensibly so, you're probably talking about GBP 7 million or GBP 8 million of cash that has gone into those 4 acquisitions. The fact that they should generate close to 50%, if not 50% of that GBP 8 million in 1 year, we think means that those deals are coming together really quite nicely actually.

And then just a bit of an update on Q Plus and building on what Russ has just said. We were really pleased to welcome Q Plus to the group in early February, very much an earnings-enhancing strategic acquisition. This business is around about GBP 11.2 million and generating good accretive EBITDA margins. One of the largest independent pneumatic and air specialist businesses in the Netherlands, a great business, great culture, working out of one location. with a very, very strong customer base, primarily OEM and MRO, but with some trade and reseller customers as well, very much a business with deep technical heritage and roots. So have engineering and design expertise, in-house assembly and prefabrication capabilities, which we don't have today within that particular region, particularly in the world of pneumatics and air. The industry spread is very, very broad and wide, but also we're excited with some of the customers there in good high-growth sectors, one being, for example, food and dairy, where the business has actually built out an own brand at MelQ, which is very much specific towards the dairy and agricultural markets. And again, there's opportunities within the group to look at synergies here both ways from capabilities that we have within the wider group, but also capabilities that Q Plus brings that we can bring back into the group. So we're excited by the opportunity. This doubles the size of our Benelux business, and it gives us a stronger European footprint, and it very much aligns with our strategy, and it brings a much deeper capability and some fantastic people with great experience into the group. So that's as much as I'll say at this point on Q Plus, and I'll update on the outlook and just how we're performing at the moment. But fair to say, no surprises, really pleased with the acquisition, and it's progressing extremely well. Then I just wanted to touch on our ESG 2030 plan. We refreshed the ESG strategy during the 2024 period, and we actually introduced our 2030 targets, which we've been working hard on linked to the United Nations Sustainable Development Goals as outlined here. For me, it's always useful to look at some of the external data points. The ICG score on the right-hand side, we can see very, very strong progress based on 2024 over 2025 in all key areas of measurement, which is important. But for me, whilst 2024 was about embedding a lot of the targets and starting to get activity moving in earnest, I've been really delighted with the progress that the team have been making collectively during 2025. If we think about the environmental aspect, carbon reporting, quality has improved. We've seen an emissions reduction of 35.4% in the year, which we're delighted around. And examples of that, sustainable packaging now used across all of our U.K. sites. And obviously, we're rolling that out wider across the group. We've launched new employee assistance programs and well-being programs, which have been well received by our people. Health and safety training has increased by 44%. Not we weren't doing that before, but we've just put extra emphasis and extra rigor around these things. And overall, I think we're making good progress against our goals. Importantly, underpinning all of this is culture. creating a One Flowtech culture from a business that was operating with 17 different cultures ultimately 3 years ago. It has not been an easy task. It's probably one of the hardest things in business transformation is bringing everybody together on a journey. And we launched something called our blue book just before Christmas in Q4, which lays out now very clearly what it means to be One Flowtech, how we're going to work together, our purpose, our shared values as a team. And we're moving in earnest now around our learn development programs internally to really bring to bear what it means to work for Flowtech. And we want to create that environment now where people really do feel very proud to be part of the Flowtech journey. And that certainly is progressing well. We're also working very hard in areas such as our diversity agenda 66% of all internal promotions in 2025 were to women. And that's something that's been a real focus for the business has been making sure that we get an improved balance in terms of gender diversity, but diversity overall. So we're pleased with the progress around all aspects of our ESG goals as we go forward. So just in conclusion then on the outlook. Again, just an example here of some work that we've been doing for an energy management company in West Yorkshire. This is designing and installing an automated pneumatic solution. So it's good to see in real time some of the work that our teams are doing out there. But look, on outlook, it's an unsettled world out there, I think, is the summary. Our current trading is in line with our full year expectations. We've been very, very pleased with the momentum that we exited '25 with. I'm pleased to report that our order book and sales pipeline are continuing to demonstrate strong momentum, and that builds confidence beyond Q1 as we go forward. The focus that we've had on higher-growth sectors is continuing to give us opportunities for accelerated growth. The new digital platform is performing very well. We're seeing month-on-month improvements. So that's certainly showing positive signs, and we keep putting work into making sure that we're listening to our customer feedback and making relevant improvements. Management focus, as we've said earlier, on all aspects of capital investment and all aspects of working capital. And that confidence that our cash conversion in 2026 will be much stronger than in recent years is a key focus area for us as a leadership team. And I'm pleased to report, as I've just mentioned, that Q Plus performance and the integration process that remains ongoing is very much in line with our expectations. And in fact, we're delighted by the way the team have embraced this opportunity to become part of the group and the leadership that we brought across from Q Plus who are now helping and leading parts of the Flowtech estate within the Benelux. That's really, really going well. And so we're pleased with it. Notwithstanding, it would be wrong of us not to mention the continued market headwinds and ultimately, the recent activities that are pursuing in the Middle East. What I will say about this is that we've done a very strong risk assessment around our supply chain, and that remains very robust. We don't, at this stage, see a material concern around our ability to maintain our stock levels, and we are tracking our shipments around the world. And at the moment, we're very confident that, that will be sustainable as we go forward. Clearly, the topic of rising costs is going to impact market pricing. And ultimately, it's our goal to make sure that we do what we can, obviously, to mitigate that. But where we can't mitigate that, then we will be looking to be passing those increases on to market, which is a sensible approach. And ultimately, in terms of our customers today, we're actively talking to our customers, trying to understand implications for them, trying to help them through this period. But ultimately, at this stage, we're not seeing yet any material delaying or pushing back of projects or anything in the order book that's coming under pressure as it relates to the market situation around us. So we're monitoring the situation closely. Clearly, we'll manage accordingly. But at this point in time, trading remains positive. And a final word I just wanted to touch on was around AI. There's not many discussions I have or meetings that I go to where AI isn't mentioned or not asked questions around AI. I think we're taking a very, very sensible approach as it relates to AI. It's an area where everybody is learning in the business, and our suppliers are learning, our customers are learning. We're very much utilizing AI today in areas where we think we can maximize the short-term benefits, product data quality, product search, helping our customers be able to get to the products they want more effectively using AI, customer insight and analysis, so reducing the amount of time it takes to produce the insight. And also where there's manual effort and we can use data in that sort of engineering work or in that customer service activity work. Those are all areas where we're implementing strategies in order to help us to be more effective and more efficient. Of course, we are exploring more advanced AI, but the priority right now is making sure we get real-term near-term value from AI in the core of our business, and we don't want to race ahead of ourselves or race ahead of our foundations as we're building the capability going forward. So just a word there on AI. So that brings us to questions. So we'll just come out of the screen. Hopefully, that's been a useful update for today. And Russ we'll just quickly move to the questions over here.

Yes, I'll just take the question on how scalable is the product range expansion strategy and are there limits from supply capacity or competition? From past experience in this space, there aren't really limits. But strategically, we will set the limits. We want to operate within a world of motion. I'm very, very clear that our swimming lane is that world of motion. So we want to be a specialist within motion control. That starts very much within the world of fluid power, hydraulics, pneumatics and process, but we will be looking to expand out our product offering in associated and adjacent areas to that. What we don't want to become is a generalist, and we don't want to become a more broad-ranging maintenance repair and operations company because I've had experience there, and that's not this business. This business is a specialist, and we want to stay within our swimming lane, and we want to add products and services to our portfolio that allow us to go up that value curve and remain as a deep expert and a deep specialist. There's still plenty of runway for us to materially expand our product offering and our supplier line card in doing so, but I want to stay very, very focused. Russ, do you want to pick up a question?

Yes. Sorry, just running down. We've got about 10, I think. How much of the costs are exceptional and what is the normalized EBITDA Well, as it relates to exceptional costs within the separately disclosed disclosure, restructuring costs in 2025, which is another name for exceptional, GBP 1.5 million in 2025, and that was lower than the GBP 2.5 million in 2024. As I said earlier in the presentation, the aggregation of capital investment and restructuring or I might use the expression surgery costs, it was not insignificant, but GBP 2.5 million became GBP 1.5 million, should become very little indeed in 2026, which points towards the confidence we've got in much stronger cash conversion. Having said that. I'll just pick off the question much lower down the list. The question is around what would a normalized cash conversion percentage look like? I think what we say there is that we would be disappointed if we can't achieve 30% of our underlying EBITDA translating into debt reduction, hopefully a bit stronger than that even. So if you look at the numbers in the marketplace, which now go out to 2028, you'll see old-fashioned debt numbers reducing from today's GBP 15 million to more like tomorrow's GBP 5 million over the next couple of years. That's what we're hoping to achieve. And it obviously points towards -- I think it was the middle point on an important slide. I think it was Slide 8 in this deck, which those 3 key priorities as we look forward.

Thanks, Russ. I'll just pick off one around stock, and then I'll pick off the questions around Q Plus, if I may. Do all these stock keeping units mean that you have to hold huge amounts of stock if you were to provide quick reactive service? It's a great question and one I welcome to answer actually. The answer is no. Will we be looking to increase our stock holding? Yes, as we bring new brands and new ranges into our portfolio, there will be a desire for us to be able to put more stock in. But as we've said before, we will be carefully managing working capital. In this space, what we need to be doing is stocking products that are moving with high velocity. And ultimately, there is an acceptance that there will be a slower moving range of products, which will be on more of a back-to-back relationship with our suppliers. We will still put those into our web assortment, absolutely, but not everything that we put on to the web will need to be stocked. What we have done is we've built tools into our product master data system so that we can be a bit more intelligent to identify where products are starting to get regular and frequency hits from customers. And if we were to put new products into the assortment, we can start to monitor and measure where those customers see those high moving products. Same we work with our suppliers to try to identify what of their ranges is high moving. And we'll always be making sure that we're being very, very active in managing the working capital and the stock holding effectively in that regard. We do have capacity for growth within our fulfillment centers, but we'll be doing that in a smart way. And so it won't always require us to be putting stock in from day 1, certainly. And then in terms of the Q Plus questions, great question here. What can the rest of the group learn from Q Plus, and actually, I think you've also tried to answer the question there, higher engineering-led solutions, higher EBITDA margins, could that be transformative for the group? I think you're absolutely right, actually. For me, what I'm really impressed with, with Q Plus, it's very focused on a smaller range of customers actually and providing a very, very technical service to those customers. It is dealing quite a lot with systems builders and original equipment manufacturers and they're looking at complete solutions. So they're not just looking at selling an individual product, although that is part of their business, but they'd be looking to work with an OEM or an end user to design in a particular product that can help them to save money or to reduce costs or to improve efficiency. And I think that, that level of technical knowledge and experience that Q Plus has around the technology that they're specialist in, is really, really impressive. And we already do quite a lot of that within the U.K., particularly in our engineering solutions centers. But I'd say that Q Plus is a bit more advanced when it comes to the pneumatic and compressed air side, and we will be looking to be bringing that capability back into the other parts of the group as well. And there was another question, the number of SKUs that Q Plus deal in is significantly lower than within the core business. How quickly can this be ramped up? I'd say 2 things on that. One, Q Plus operates with a much smaller targeted customer group today. And as I said, it's more levered towards original equipment manufacturers, so do tend to carry a slightly narrower range, albeit they've also developed a very, very strong own brand, which we believe we can bring into the group. But we're also looking to open up the web platform in the Benelux during the first half of the year, of which we'll be bringing a much bigger assortment for Q Plus to take to market as well. So I think those topics combined will mean that as part of the integration plan, we'll start to see some traction on that through the course of 2026 and beyond. Russ, do you want to pick off another question?

Yes, I'll answer through some numbers on what level of depreciation are you anticipating in the year? Approximately the same as 2025, which is GBP 4.1 million is the answer to that. That obviously takes account of old fashioned depreciation as well as new world depreciation as it relates to right-of-use assets. And the question about what will the level of separately disclosed items be going forward. I've talked around the material reduction in restructuring or surgical costs. The other big one over the last couple of years has been impairment of goodwill. There wasn't any impairment of goodwill in 2025. There was some impairment of tangible assets and right-of-use assets as it relates to the Benelux business, all of which is obviously noncash and it all leads to looking forward [indiscernible] in perpetuity in terms of your financial forecast. And you're not allowed to be particularly bullish in those assumptions and the algorithm spits out the necessary need to impair assets. Clearly, with our EBITDA recovery story and the belief we've got in all of our plans, we'd be disappointed if there's much, if any impairment in '26 and beyond, to be honest. So I'd like to think that's behind us. There's a question about the company used to pay a dividend, but no future returns have been forecast. When do you feel you might be in a position to do so? Well, I guess everybody -- almost everybody has a different view on this, don't they? But we'd like to get back to paying a proportionate dividend. Of course, we would. I think it gets discussed regularly around the Board table. I think it will be discussed more so when we've improved that EBITDA and we've reduced the debt to the deleverage plans. If the EBITDA is in excess of debt, I think we're very definitely back in the dividend game. But until then, I think we'd just rather place that middle point on Slide 8, let's deleverage the balance sheet first and then and only then consider the quantum of the dividend return.

Thanks, Russ. A couple of more commercial questions. I'll just pick off. One about the pipeline. So how much higher is the pipeline versus this time last year? What I will say is that when we opened the books in January, if we exclude the major projects and the 2 very large bridge infrastructure projects, then the pipeline was 20% higher in the opening of January than it was in the opening of January 2025. And what I can say is that, that sales pipeline has continued to grow well through the first quarter of the year and starts to then transfer into order book to the point of having that forward confidence as we look ahead from Q1. If you include the bridge projects that we've got running through as well and products and projects within the major projects arena, then that sales pipeline increases exponentially. But for me, what I'm interested in is the in-year sales pipeline. Some of those larger infrastructure projects that are in the sales pipeline, we could win them this year, but that ultimately will deliver in '27 and '28. So I just want to be careful in terms of expectation setting around that. But clearly, there's a long pipeline of opportunity that we have looking out now almost 3 years in that regard. The last question that I saw at the bottom here, I thought was a really good one. And actually, I didn't say -- I didn't point to this, but -- could you outline the opportunities for the group in areas such as defense and data centers, please? And are we committing more resources here given their areas of clear structural growth? What we have in the appendix here, which you can look at in your own time, clearly, there's information around the numbers. But there's a little bit around the Fluidpower market. But I decided to put 3 case studies in here, one around infrastructure, which links to sort of the work we're doing in that sort of high-end infrastructure environment and a case study there. Some examples of what we're doing in the food and beverage sector, which is also a high-growth arena. And there's also just a little bit there in terms of what we're doing around data centers in that regard. And I think what I would say is that we're not materially investing up in terms of our teams in these areas. As we brought the business together under one Flowtech, what we've actually identified is that we have some really, really strong capabilities across the group. But when we combine it together, we can create a complete solution for data centers, for example, or a bigger solution into the defense and aerospace sector because when we start to unpack these different businesses that we have and the types of customers that they work with, and we're now starting to bring the data into our customer data platform, we can start to see where we've got patterns of opportunity. And so this is very much around focusing our teams now as a collective towards these segments of the marketplace, diverting some of our focus in terms of our sales efforts so that we can also extract more value. Data center specifically, we've exhibited at Data Center Ireland earlier late last year. And we've also just completed Data Center U.K. in London, which is a huge multi-day exhibition. And we've now created quite a suite of capabilities there in an industry sector guide within that segment of the market. And we've also got some very strong projects that we can talk to. And so this is arming our sales teams, arming our engineering teams with broader information around the full group capabilities that we can then start to take to market, arguably something that we've not done before. As we continue to see traction, of course, we will make the right level of investment and continue to bring the right experts into the business. The only one I didn't put in here, probably remiss of me was one on defense. But the same pathway follows. We already do a good amount of business into different areas of the defense market. We haven't brought that all together into one proposition, which we've now done, and that allows us to then start to engage in those industry sectors in time. Russ, any other ones you want to pick up? I'm conscious we're at time.

Yes, I think they are. Just a quick one. What's your full year underlying EBITDA for the current year? Well, the 2026 consensus number, I think, is GBP 10.2 million. We have 3 sets of numbers and GBP 10.2 is the average. And do you expect to issue more shares this year? No. No plans to do so is the answer to that one.

Okay. So I think on that note, we'll draw the Q&A to a close. Any questions that we haven't picked off, apologies because we were going up and down quite a lot. We'll make sure that we come back and answer those questions accordingly post the presentation today. Thank you.

Perfect, guys. If I may just jump back in there. Thank you very much indeed for addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. But Mike, perhaps before just now looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Yes. So I think I'll just recap on our strategic focus as we think about 2026, '27 and into 2028. We have now completed the very much the lion's share of the business transformation that we've embarked on over the last 2 years. And we've now got a scalable integrated platform that's very much in place. So this is now about getting that flywheel of growth, driving improved operating leverage within the business and ultimately making sure that we start to see the opportunity ahead of us as we've now brought the businesses together. Secondly, the focus on deleveraging is going to be at the top of mind for us as a leadership team. And thirdly, we will make sure that we stay very focused on extracting value from the 4 acquisitions that we've made, all very much in line with expectation. But equally, we'll continue to look at new opportunities as we go forward. And my final point I would just say is that we are seeing current trading in line with full year expectations. At this point in time, we're doing everything we can to stay very focused on delivering the numbers. We don't know what will happen as it relates to the Middle East situation. But I will just remind everybody that currently, we don't see a supply chain -- particular supply chain challenge to us at this point in time. We will deal with managing market pricing accordingly and react to that in a sensible and measured way. And we're monitoring that situation very, very closely. But we remain confident currently in terms of our outlook and our performance.

Perfect, Mike, Russell, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback. On behalf of the management team of Flowtech Fluidpower plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.