Flowtech Fluidpower Share Discussion Threads

[thorpematt] 13/2/2020 22:52

I think that for most, this is still a somewhat contrarian pick.

I am certainly bored explaining it to people now - hence no commentary from me from here on... except to say that I am very comfortable with today's update and with the mid term prospects for very healty returns on my investment here.

[egrid1] 13/2/2020 15:34

"If management are confident enough to hold the dividend, that can be taken as a sign that they do not expect the conditions to deteriorate in a material way."

From the RNS: The Board is therefore intending to propose a final dividend which will once again deliver 5% growth over the prior year.

Not "holding" but continuing to grow the dividend.

[sphere25] 13/2/2020 13:16

There is value here imo.

No position yet as the stock does have a tendency of multiple warnings in very short periods so it's a case of forming a view of when trading has stabilised. However, even with downgrades to forecasts to the tune of another 20-30% (a hypothetical figure assuming conditions are yet to bottom out), the valuation here on a recovery then still makes the stock look like value.

You can see the way this stock doesn't crater significant from recent highs even with a couple of downgrades. Alot is already baked into the valuation and thus buyers keep coming in and snapping up stock. It will take a complete disastrous turn of events to change this.

If management are confident enough to hold the dividend, that can be taken as a sign that they do not expect the conditions to deteriorate in a material way. Clearly their forecasting hasn't been great with the 10% downgrade to 2020 numbers today so we have to factor in some risk there.

On the whole though, this stock looks like an interesting proposition where any short term downside will be dwarfed by a longer term recovery.

All imo

[lord gnome] 13/2/2020 09:14

Brother humble, ashdean, 1Jimmysmith et al, et al. You must get up early in the morning to work at all your aliases. Do you ever forget who you are signed in as?

[pugugly] 13/2/2020 08:46

Hi - Are we sure that there may not be a structural decline in the market in consumption per using machine due to greater efficiency?

[edmundshaw] 13/2/2020 08:37

Positive action from management. Good news on debt and cashflow. Obviously there has been a downturn in business of late, but equally obviously that will reverse at some point.

In the meantime there is a healthy dividend well covered. So waiting for the upturn will not be too painful...

[davebowler] 13/2/2020 08:08

Zeus:Headwinds offset by self-help Flowtech Fluidpower has issued a trading update this morning, giving greater clarity on near term trading conditions and further detail on its operational cost reduction plan, with a further £1.4m in annualised savings identified to date. Trading conditions remain challenging with H1 FY20 now expected to see a decline in LFL revenue before a return to growth in H2. We take comfort from management's decisive actions around cost control, and its commitment to continuing to identify further savings. These self-help measures, alongside the investment made in the Group's centralised delivery platform should preserve profitability despite the anticipated near-term revenue weakness, in line with the wider industry.  A focus on cash generation is supportive of the Group's attractive dividend, with its progressive dividend policy unchanged and a 5% increase in the final FY19 dividend expected to be declared at full year results, representing an attractive FY20 yield of 6.7%.§  Near term trading pressures: As previously reported (14th January), recent trading conditions have been challenging, with a widespread slowdown across the industry. Data from the British Fluid Power Association shows a decline in distributor revenues of 8% in December, with manufacturers seeing a 14% fall in November and the Group reporting Q4 revenue consistent with these trends.§  Restructuring activities: The Group has identified a further £1.4m in annualised cost saving, driven primarily by efficiency gains in its warehousing and picking operations with four warehousing facilities to be closed. These cost savings are in addition to the £0.2m of annualised savings generated from the closure of three smaller sites over 2019. The Group remains confident that further significant cost savings can be identified, with a focus on driving efficiencies in both distribution and procurement, including the consolidation of its supplier base (from c.1000 suppliers to c.500) as well as centralising back office costs.§  Forecasts: Our FY19E forecasts are unchanged following an update to our numbers alongside the trading update released last month (14th January). Weak current trading means management now expect a small single digit decline in FY20E revenue, to be offset by identified cost reductions with FY20E profit to be broadly in line with FY19E. A return to growth alongside the full annualised benefit of identified cost savings should result in significant leverage to margins and profitability from FY21E. Full detail on our change to forecasts is presented in exhibit 1.§  Valuation: Trading on an FY20 P/E of 8.7x falling to 7.3x in FY21 the shares offer an attractive prospective yield of 6.7% supported by solid cash generation

[this_is_me] 13/2/2020 07:38

A positive spin on grim news this morning. I'm just glad that I sold in December at less than a 20% loss.

[egrid1] 12/2/2020 16:30

Some very large buys going through this afternoon

[creditcrunchies] 30/1/2020 12:32

This stock is getting slammed now though forward yield over 7% on the dividend

[fillspectre] 27/1/2020 23:08

This Company is getting cheap again. It is still set to make £9 million profit at least this year - we have already been told this. It seems to have suffered from an Industry wide downturn due to the Brexit uncertainties and other global worries. This Company sells fluid connectors - many product lines - sooner or later maintenance and new build activities have to return and the market for fluid connectors will get back to a norm. Ok so at the moment this isn't a growth success story following a acquisitional spending spree of a few years back but I don't see it as a no hoper and I don't see why the dividend will necessarily be cut this year. Fils
Concerns would arise with this share if it started to lose market share to competitors.

[thorpematt] 18/1/2020 12:37

So update in brokers forecasts as detailed below (with previous years inserted for clarity).


Year End / Revenue. PBT, EPS, Div
(£m) (£m)
31/12/2015 44.85 5.28 9.85p 5.25p
31/12/2016 53.78 5.53 11.13p 5.51p
31/12/2017 78.29 6.04 9.69p 5.78p
31/12/2018 111.1 6.92 8.34p 6.07p
31/12/2019 112.4 7.42 9.61p 6.39p
31/12/2020 112.6 8.01 10.6p 6.39p

[creditcrunchies] 18/1/2020 11:59

Paul did a report on these in April 2019 went into great detail. Again critical of this company's dividend policy. His summary at the end where it pans out he hit the nail on the head:

I like various aspects of the figures here - low PER, big divi yield (even if it probably shouldn't be quite so high). Also the management focus on reducing working capital (and hence debt) is music to my ears.

On balance, if the company manages to avoid any banana skins re Brexit uncertainty, possible economic slowdown, etc, then it could pan out quite well. On the downside, there is risk - only today we had a profit warning from construction group Galliford Try (LON:GFRD) . If that spreads, then it could possibly cause problems for FLO perhaps?

This share could go either way - if it delivers a strong performance in 2019, then I could see this share re-rate to something like 150-200p. However, I can't shake off the hunch that it might have another profit warning in it, later this year, if the macro picture deteriorates. On balance then, I'm inclined to watch from the sidelines for now.

[shaker44] 15/1/2020 23:54

The RNs was very disappointing. I had viewed flowtech as a company with a wide and often unique range of products which were a must-have, at least from a maintenance view point.but the revenue and apparent margin hit tells me I was wrong and suggests more competition. Maybe from China. Don't know. I will hold but lack the faith to average down now

[edmundshaw] 15/1/2020 18:50

Odyssean Investment Trust registered as yesterday going from 7.21% (at its last announced holding) to 9.11%.

Someone it seems thinks £1 is cheap.

[thorpematt] 15/1/2020 11:07

I can't see that a divi cut makes sense. The company undertook a huge acquisition program throughout which it utilised some dilution but mostly loans. Those acquisitions are now all paid for and yet the debt has fallen throughout the trailing 12 months. FREE cashflow in that TTM was over 16p/s

A 5% RISE in divi next year would be twice covered... and the debt would fall significantly even then.

Let me be clear: I think that Paul is one of the absolute best stock / business analyst out there... but he can't hope to understand in historical depth all companies he covers from just one* TS (*Graham Neary covered FLO on the previous analysis)

And so: Where FLO is concerned the source of the debt needs to be understood along with the ability of the company to spin free cash if one wishes to understnd fully its ability to pay dividends.

My interpretation of the TS is that structurally the business is very well positioned. The Q4 slump in orders is an opportunity to buy a great company for a very reasonable price indeed.

[creditcrunchies] 14/1/2020 23:57

Paul Scott did a review of this one. Concerns about the trading conditions could continue into 2020 is of the view there is potential for the share price to go lower, noted that debt was reduced since last reporting which is a positive. Dividend cut is possible also due to trading conditions remaining unknown. Stand back wait and see before catching a falling knife.

[edmundshaw] 14/1/2020 13:07

Cash performance a bit below what I'd hoped, but understandable and in the current price. Moreover, debt moving in the right direction.

The effect of management streamlining actions we shall have to wait for. The noises are good, but I am too long in the tooth to get excited by a pudding before the proof of its eating...

[thorpematt] 14/1/2020 12:45

Yes Q4 was pretty brutal for UK focused business to business companies. Visibility is not particularly easy to forsee for the sector hence the Feb 10th update will be interesting. It could well see a bounce because de-stocking and held-projects may well have been reversed post-election.

Personally I see FLO as a steady business which is always going to see fluctuations. Usually such drops are opportunities - although there are no guarantees.

Fincap's flash note this AM say this on valuation:-

Valuation. In view of the reduction in 2020 outlook, we pull back our price target from 180p to 151p, maintaining a consistent 2020 P/E target of 10.8x and EV/EBITDA of 9.0x. While the reduction in EPS is a further disappointment, it should be tempered by the success in reducing debt levels as planned.

[edmundshaw] 14/1/2020 12:35

They should have a good idea of profit for the Y/E Dec 2019 by now. I would imagine profi will be over £9m but well less than £10m.

[creditcrunchies] 14/1/2020 12:13

Just one of many with profit warnings unfortunately