Flowgroup Plc Share Discussion Threads

[cyberbub] 28/5/2015 10:50

The company have made several references to focusing investment and attention on reducing unit manufacturing costs.Once this starts to drop towards £1000, the boiler (whichever model) will start to become a no-brainer IMO, even ignoring any FIT etc.NAI

[cyberbub] 28/5/2015 10:47

Depends supernumerary. They may already have 5000 orders, they have had several extra months to build them up! :-)Frankly I don't really care whether they install 20k, 15k, or 10k this year. As long as (a) there are no technical problems and (b) the installation trend is firmly upwards, I will be happy.Successful accelerated development of the combi, and substantial reduction in unit manufacturing costs, are the key to success in the medium term.International expansion is the key to success in the longer term.NAI

[supernumerary] 28/5/2015 10:30

15000 in 2015 is over 2000 a month from a standing start. Is that realistic starting at the beginning of summer? I would have thought an installer would want to put no more than 1 or 2 in until they were certain there were no problems with either the device or the installation procedures?

The risk now looks not so much that they'll run out of money, but that they'll have to announce at the end of the year that they're a long way off hitting their installation target, and the negative reaction that would cause.

[jscowi] 28/5/2015 10:28

I think so Larry. The way I see it, final tweaks are all but done then they are ready to install in homes under regular domestic usage within a 5 week deadline they have set themselves/informed the market of. I presume a shortish monitoring period will then occur with paying customer installations then to begin shortly after subject to the monitoring period not throwing up any major issues.

They have caused uncertainty over the last few months no doubt, just look at the share price reaction, however the story is unchanged. Obviously there is a process to follow with the final tweaks and these take time. The placing now gives them the working capital to develop products and move forward faster. 800k energy customers is not to be sniffed at on its own

The story is unchanged, a little more patience is needed that is all. The share price is -3p from the placing price not exactly earth shattering movement given the delay. Now we are not in a closed period I would however like to see some director buys to show their resolve and confidence.

Currently £80m mktcap, lots of news to come as the roll out story begins imo.

[larry335] 28/5/2015 10:07

jscowi
Yes, exactly, it can only be the MCS accreditation that we are waiting for...I've been regularly harping about that since January.

I presume the target has reduced from 20,000 to 15,000 because originally they expected to start installs end of March/April so they lose a few months.
This delay just causes a bit of uncertainty.

[jscowi] 28/5/2015 09:53

They have stated they have orders:

In January 2015 the Group launched the Flow boiler. Subsequently there has been significant market interest in both the Flow boiler and the initial sales proposition with there now being a number of confirmed sales orders.

[larry335] 28/5/2015 09:37

JohnSmith
The contract is a manufacturing contract between Jabil and Flow...it is not a sales or order contract...i.e. no guaranteed sales.
Manufacturing capacity at Jabil in Scotland is about 100,000 boilers a year.

In my opinion they already have orders but are awaiting the MCS approval which allows the claim of FIT (feed in tariff)...then first installations will start.

The uncertainty is because no-one is sure how many orders have been taken or even if they will now meet the reduced sales target of 15,000 boilers this year.

[cyberbub] 28/5/2015 09:32

It's true that the management have not covered themselves in glory in the last 3 months. I think perhaps they were being unrealistic to not expect to need more cash. An innovative and disruptive business like this is always going to face unexpected delays, and requirements to change tack strategically. I am a little surprised at how it's panned out, given the obvious high quality of the management, much better than most AIM outfits.Having said that, at the risk of repeating myself, it seems like it is only a short delay, and the company has successfully arranged a large fundraising (further boosted by Jabil's participation) which will definitely see them through to profitability... assuming that profitability does arrive... that risk hasn't changed and is faced by all 'growth' companies...Having slightly lambasted the management in the first para, they do seem to have successfully and flexibly changed tack, which is a good sign. People who are willing to grasp nettles rarely get stung.NAI

[johnsmithmmxiii] 28/5/2015 09:28

Received the following from Equity Development. Are Flow not yet manufacturing any boilers? Seems to be a big contract for 500k boilers? How realistic is this contract and over what time period?

Flowgroup is a pioneering energy products/services business. Its patented combined heat and power (CHP) micro boiler is half the price of comparable products, and enables households to save literally £'000s on their fuel bills over the life of the appliance.


Last week the company finalised a £21m placing and £1.2m open offer (1 for 34) at 28.5p/share in order to accelerate the growth of its "game-changing" technology. We think this move makes absolute sense, since Flow' boiler has the potential to transform the global boiler market. 


This view is seemingly shared by Jabil (NYSE: JBL) - a global contract manufacturer with 2014 turnover of $15.8bn - who have agreed to produce 500k boilers, and stumped up £7.4m in the placing for an 8.1% stake. 


In terms of today's 2014 results, Flow achieved revenues and EBIT of £33.4m and -£10.0m respectively (nearly all Energy related), which was slightly better than our projections, with December net cash closing at £6.2m (or £8.4m gross). Looking ahead, due to CE certification being received slightly later than planned, our 2015 and 2016 forecasts have been trimmed to 15k (from 20k) and 35k (from 45k) units respectively.


Using a DCF valuation, a 15% discount rate and a 9x EBITA multiple for the terminal value, we reiterate our target price of 100p per share. Moreover the cost of capital should decline as the business matures and new cheaper lending facilities are brought on stream. 

Download full report here

[larry335] 28/5/2015 09:17

1fox1
Yes, I can see your point there...and I'm not arguing with that opinion...look above I never argued about that...I just didn't comment...

But to say recent events are because they made a mistake years ago when some previous management decided to develop the system boiler instead of a combi?

Anyway, my order below 25p has triggered, that's the last of my 44p profit tied back in.
Buy low, sell high (hopefully) :-)

[1fox1] 28/5/2015 09:02

Larry. You're missing the point mate. The company launched a boiler when it wasn't ready to launch. They have also done a fundraising after saying they had enough money through to profitability. Read all the previous RNS statements. All say how the company is ontrack blah blah blah... Now we are paying the price!!

[larry335] 28/5/2015 08:51

staverly
?
Maybe other investors would also be interested why my conclusions are flawed.
I think you could somehow find the energy to write some words and share in detail with everyone.
I mean, what are you actually saying? Do you think they have zero orders for the system boiler and that is the only reason they have installed none?..and that the MCS is nothing to do with the installation delays?

Note that at least half of the quoted £500 annual saving is due to FIT. If they started installing they make an agreement to pay the customer £80/month but without FIT they don't have means of recouping that...and then risk further delays to the MCS, that would not be so good for the finances...but you think that is ok because the government will step in and help out somehow because in future they may sell 100,000's?

Please explain simply, why have they not installed any boilers?

[cyberbub] 28/5/2015 08:49

I agree that I sense that a capitulation point has possibly now been passed? Touch wood... and good luck to LTHs...

[nw99] 28/5/2015 08:44

Doubled down here

[bl0] 28/5/2015 08:14

Done my last top up and it can go to £2 in 2 years now :-)

[staverly] 28/5/2015 00:27

Larry: I'm sorry mate but you're wrong, and no doubt understandably emotional after this weeks event. I haven't got the energy to debate with you here why your conclusions are flawed but happy to set you straight if you want to message me with view to speaking.

BTW Do you think that if the Flow boiler sells in the hoped for volumes (100,000s per annum) that the government would not be minded to take remedial action. Forget about the MCS, it's constellation.

[larry335] 27/5/2015 23:45

staverly
The development of a combi costs more (30kW heat exchanger instead of 18kW, size etc. etc.), the hot water use is less and the boiler is firing for less time for an equivalent energy use and payback is longer...the combi boiler market while larger has a smaller % of the market willing/able to pay the extra cost ...hence launch is more difficult and not as cost effective.
All companies developing mCHP products/boilers plan to launch with a system boiler. Reason...pay back is dependent on hot water use in summer and needs to run at lower power for longer to generate more electricity (system boiler) instead of high power for a short time (instantaneous water heating combi).
Possibly you have been following Fox You too much :-)

Your assumption seems to be that they are not getting enough orders of the system boiler to match their targets. There is no evidence of that. The existing issue is that they haven't been able to install any orders because they haven't got the necessary approvals yet, critically the MCS accreditation, without which there is no FIT (combi or system would be same situation) on which the payback model depends.

[fox you] 27/5/2015 19:58

Are you feeling positive?
Are you 'fillya boots'?
How much eletric will the boiler produce in summer?
Cost of installtion, lol
Cost of boiler, lol
Combi boiler - ROFL

Seriously chumps

LOL

[staverly] 27/5/2015 19:03

Larry, the reason for the fundraising was to fast-track the development of the combi unit for commercial launch ready to install before winter 2016-2017. They had originally budgeted to self-finance all the development costs (hence my previous assertion that i saw no obvious reason for a fundraising, which incidentally was an accurate prognosis)and launch a year later in 2017 but given the horlix they've made introducing the system boiler this put a spanner in the works. So long as Jabil are on board, which they are, this contingency plan makes sense. On the chicken and egg sideshow, we'll just have to agree to disagree. If you go to the forthcoming AGM you can set your record straight by asking Mr Stiff personally, or if a trip to Manchester doesn't appeal, try Alan Aubrey, who was the head honcho before TS arrival, and now chairs Ceres.

[1fox1] 27/5/2015 18:57

Cyber. The delay should have been stated in the previous RNS before the results. Stiff said then everything was on track when he must have known the boiler was going to be delayed or modified. There again this may have affected the share price before the fundraising. Bit naughty me thinks. I for one would not have participated in taking out extra shares.

[cyberbub] 27/5/2015 18:48

I agree staverley, the business model (for the initial higher-production-cost volumes) would only work with the higher energy consumers, hence focusing on the system boiler market first was very logical.Personally I don't think the dilution is an excessive percentage, and it is at a price 75% above the last placing 18 months ago, which is hard to complain about, especially for such a large amount of funding.Obviously it would have been better to have raised at a higher price, but it's likely that for that amount of money there would have been a substantial discount demanded.I *am* a bit frustrated at the delays, which, while inevitable in any growth company, should have been foreseen/avoided by the company much more effectively.This *must* also be the last fundraising before the company (hopefully) becomes cashflow positive next year. In this regard I am in some ways happy that they have raised such a large amount, because it should guarantee this to be the case, if they get their finger out.Jabil's substantial participation in the placing is also encouraging IMO.I'm as disappointed as most on here, but if you are a LTH and believe in the product and the management, then it's just short term delay.Just my view. NAI

[fox you] 27/5/2015 18:13

Any chartist here??

LOL

Fox You - LOL

[1fox1] 27/5/2015 18:06

Well I'm sorry Larry but I feel that we've all been spun a bit of a yarn. I was perplexed at the time of the "launch" back in January. On the day of the "launch" the share price fell considerably and continued to fall. I thought strange since we had all been waiting for launch day. The share price fell from circa 44p to I think circa 35p before our friend Tony Stiff came out with a reassuring statement to say there was no reason for the sharp fall. He stated everything was on track blah blah blah. What he failed to say was we had launched a boiler with no boilers to sell!! Hence the reason for the share price fall. Here we are six months on with still no boilers to sell. Why have a launch of a product when you have none ready to retail. It wasn't until the very recent RNS that the penny dropped. Hindsight is a wonderful thing.

[1fox1] 27/5/2015 18:06

Well I'm sorry Larry but I feel that we've all been spun a bit of a yarn. I was perplexed at the time of the "launch" back in January. On the day of the "launch" the share price fell considerably and continued to fall. I thought strange since we had all been waiting for launch day. The share price fell from circa 44p to I think circa 35p before our friend Tony Stiff came out with a reassuring statement to say there was no reason for the sharp fall. He stated everything was on track blah blah blah. What he failed to say was we had launched a boiler with no boilers to sell!! Hence the reason for the share price fall. Here we are six months on with still no boilers to sell. Why have a launch of a product when you have none ready to retail. It wasn't until the very recent RNS that the penny dropped. Hindsight is a wonderful thing.