# Flowtech Fluidpower Acquisition of Group HES, New Division established

- Link: https://www.directorstalkinterviews.com/flowtech-fluidpower-acquisition-group-hes-new-division-established/412737995
- Published: 2017-10-12T07:10:50+01:00
- Author: Giles Arbor

**Flowtech Fluidpower Plc** (LON:FLO) the AIM listed specialist in technical fluid
power products and supplier announced today the further strengthening of its Power
Motion Control (PMC) division through the acquisition of Group HES Ltd (“HES”) (
www.grouphes.com).

**Background to the Acquisition**

Founded in 1965 and, today headquartered in Gloucester, England, HES is a multi-
faceted solutions provider to the Fluidpower sector. HES employs 89 people across
is network of branches located in Birmingham, Durham, Gloucester and Leeds. The 
business operates under five trading brands: Hydraulic Equipment Supermarkets; Branch
Hydraulic Systems, and more recently established specialist distributor brands in
HES Tractec, HES Lubemec and HES Automatec.

The acquisition provides another complementary business to the Group’s PMC division,
delivering incremental revenue through a mix of wider technical applications, reinforces
our offer to the off-highway market and adds aerospace to our sector coverage. In
addition, the acquisition extends Flowtech’s position with important global suppliers,
including Danfoss Power Solutions (www.powersolutions.danfoss.com).

HES will operate within the PMC division and continue to be managed by the current
senior management team. Previous owner and Managing Director, Stuart Diesel, who
has been with the business for over 20 years will remain with the HES business during
a transition period, and in 2018 he will then take up a new role as Divisional Managing
Director – Onsite Services. Working with the existing resources available within
the PMC and Flowtechnology operations Stuart will build this new division within
the Flowtech Group. The launch of this new division represents the final element
of the multi-channel strategy outlined at the time of the Group’s IPO in 2014.

For the year ended 30 June 2017, HES achieved sales of £10.0 million producing adjusted
EBIT of £0.7 million. Net assets excluding Net Debt at the same date were £3.0 million.

Unaudited Net Debt at 30 September was £0.75 million, which includes c.£0.5m relating
to a large project currently being installed with the contractor, Galliford Try,
on behalf of Airbus in the UK. Following completion of this contract Net Debt is
expected to return to a “normalised” level of c.£0.1 million by 31 December 2017.

The Group expects to deliver synergy opportunities over the short and medium term
through coordinated operational, procurement and back office activities.

**Purchase Consideration**

The consideration of £4.1 million is to be satisfied as to £3.1 million in cash 
on completion, and the balance of £1.0 million by the allotment of 661,805 new ordinary
shares in Flowtech (the “Consideration Shares”) to Stuart Diesel.

The Consideration Shares have been credited as fully paid and will rank pari passu
in all respects with the existing ordinary shares in the capital of the Company 
in issue, including the right to receive all dividends and other distributions declared,
made or paid in respect of such shares after the date of issue of the shares. Application
has been made for the Consideration Shares to be admitted to trading on AIM and 
it is expected that admission will become effective and that dealings will occur
on or around 18 October 2017 (“Admission”). The vendor has agreed not to dispose
of any of the Consideration Shares for a period of 12 months (except under limited
circumstances with the approval of the Board) from completion and thereafter orderly
market arrangements for a further period of 12 months.

> **Sean Fennon, Chief Executive, Flowtech Fluidpower plc commented:** “We are delighted
> to add the technical skills and knowledge of this long-established business to
> the Group; HES adds new brands and sectors to our portfolio; it also gives us 
> the opportunity to build our fourth leg in technical maintenance which enhances
> our overall service offering to our customer network. This move clearly reinforces
> our ongoing strategy to develop a focused Fluid Power Group that serves a wide
> number of industry sectors, allowing a de-risking of some of the cyclic nature
> of the business.”
> **Stuart Diesel, former owner and Managing Director of Group HES added:** “The
> opportunity to join Flowtech as it rolls out an exciting Group strategy was instrumental
> in my decision to sell the business. This change also considerably enhances several
> aspects of our HES business and offers new and exciting prospects for all our 
> employees. My team and I are looking forward to being part of this industry respected
> business – we recognise that the strategy and the resources available to us opens
> up new prospects and makes it possible to attain significant growth beyond what
> was achievable as an independent business.”

**Summary and Notice of Q3 Trading Update**

The Board of Flowtech remain very encouraged about the future and remain confident
that the Group’s current performance will deliver another year of solid progress.
As a business, it is confident in its strategy, commercial opportunities and the
prospects of the Group.

Flowtech will be releasing its Q3 Trading Update on Tuesday 17 October 2017.

**Total Voting Rights (TVR)**

On Admission, of the above, the Company’s issued share capital will consist of 52,819,000
ordinary shares. There are no ordinary shares held in treasury. Therefore, in accordance
with the FCA’s Disclosure Guidance and Transparency Rule 5.6.1, the Company confirms
that following Admission, the total number of voting rights (TVR) in the Company
will be 52,819,000.

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