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Our business has shown resilience in a difficult market, with our most recent acquisitions beginning to deliver organic growth. The Board remains confident in the strategy, commercial opportunities and the prospects of the Group as a whole, and expects to deliver ongoing solid growth over the coming years building on the performance seen in 2016.

Malcolm Diamond MBE

Chairman

Welcome to our 2016 Annual Report and Accounts for what is our second full year of listing on AIM.

I think it is widely acknowledged amongst our investor community that the majority of UK based listed companies have found 2016 to be not only a challenging period, but also a period of opportunity for sector consolidation.

When Flowtech came to market, our Board presented their investment case on the basis of not only a strong commitment to organic growth, whilst resolutely maintaining their proven track record of margin retention, but also to take advantage of acquisition opportunities within what is an extremely fragmented UK and European market within the fluid power sector.

The founding core business within the Group, the Flowtechnology division, devotes itself to supplying a vast range of high quality equipment and components, both branded and generic, with a market beating technical and delivery service to specialist trade distributors and resellers. This stock range is managed dynamically in relation to demand, and in the past year alone has enlarged customer choice by a further 3,500 new items, thus sustaining its reputation for being the UK market leader.

It is a key policy of the Group to isolate end user business from trade distribution in order to maintain customer loyalty and stability. This has led to the formation of the Power Motion Control ("PMC") division by acquiring a growing number of small, profitable specialist businesses managed by our new senior colleague Nick Fossey.

PMC provides a wide capability from custom made hydraulic hoses and fittings to sophisticated high value digitally controlled power packs for use by assembly and process industry customers. The PMC division markets itself to end user customers as a technical solutions provider via its in house engineering, sourcing and assembly resources; therefore, making a clear sector distinction from Flowtechnology's distribution activities.

In addition to three important acquisitions made in 2016 (along with a busy target pipeline extending into 2017), there have been investments made in marketing, product range extensions and product data consolidation to facilitate cross selling within the rapidly expanding Group and new plant to support the burgeoning customised hydraulic hose production output.

To summarise, it is clear that the Group is now entering an exciting stage of its development as its ambitions for growth increasingly improve its market share within the UK and the Republic of Ireland, whilst being vigilant for opportunities to spread further into Europe, having managed the Benelux business into a healthy level of consistent performance.

Brexit consequences remain a relative unknown at this time, whilst forex movements and UK import prices have been well managed to date by our highly experienced and focused commercial management teams.

I continue to be impressed by the commitment and energy of not only our senior management, but also of our growing workforce and our business team leaders, and their ability to adapt to new and dynamic market opportunities that are arising constantly within our industry.

Finally, it was very pleasing to be given such valuable and widespread support for both the Board and the Executive Management team during the recent successful process to raise £10 million (before expenses) in new capital for the Group. I am certain this will provide a very important springboard for the next stage of our development.

The Board looks forward to updating you on our progress on a regular basis going forward this year.

Yours sincerely

Malcolm Diamond MBE

Chairman

4 April 2017