Thanks.Interesting listen, they certainly have a good list of reasons for investing! |
Downing Strategic Micro-cap Investment Trust up to 7% ownership now. Fils |
Its around 25 minutes only took 5 secs to locate using the slider.
They only go into detail on Real Good Food, Volex, Flowtech and Tactus which may indicate that these are their most fancied stocks. |
It's a 50 minute presentation.When is the bit about FLO?? |
Flowtech features in the Downing Strategic Micro I.T Investor Meets Company presentation :-
They ask whether Flowtech can be another Volex ? |
Heck of a trading volume today. Strong support at this price. I can see this moving up again before we get to Autumn. Fils |
 Latest comment from Downing Strategic Micro I.T. :-
Flowtech Fluidpower PLC (Flowtech) (4.50% of net assets)
Cost: £1.58m. Value as at 28 February 2021, £1.91m
Background
Flowtech Fluidpower is a value‐added distributor of hydraulic and pneumatic consumables into a wide array of sectors predominantly in the UK and Ireland. The group is a leading UK player in this space, with pre‐Covid revenues of over £110 million. It sits between much larger global manufacturers and a highly fragmented and localised cohort of smaller distributors. The company’s high service levels, broad stock offering and exposure to maintenance, repair and overhaul markets were key attractions, and these attributes facilitate Flowtech’s relatively high gross margins of over 35%.
Update to the investment case
Covid challenges led to 15% reduction in revenues
Modest increase in market share
Reduction in net debt
Delivering on operational cost savings
Cautious optimism – dividend policy and reinstatement of earnings guidance under review
Progress against investment case
DSM invested in mid-2020 which seemed a reasonably de‐risked entry point given the temporary effect that Covid-19 would have on the company’s revenues, falling from a peak of £110 million to a little over £95 million, with a more significant fall in earnings due to operating leverage. We think that there is a strong natural recovery case, buoyed by macro spending tailwinds which should provide future growth. Coupled with the cost savings and better working capital which management has enacted, we think that the business has strong prospects to significantly exceed historic levels of earnings and generate healthy free cash flow. |
This is looking like a decent sustained rise. Recent results presentation must have impressed enough people. Fils |
Share volume still stubbornly higher than usual. I don't think we will hear much from Bryce and Russell for the next few months. When we next hear from them I'm hoping a turnaround has been effected in the services division. Fils |
hxxps://masterinvestor.co.uk/equities/flowtech-fluidpower-look-ready-to-flow-higher/ |
Thanks sidam. That feels about right to me... |
Finn are projecting 3p for next (not current) year out of EPS of 11.8p with target of 175p based on projected PER of just under 15. Hope this helps. |
2p final sounds like perhaps 3p or so for FY 2022 potentially. That is definitely a change from the plan outlined on flotation.
I'll be happy with that, though, if they are effective in executing organic growth and possibly even going back to carefully selected acquisitions in 2022 and beyond. Raising more capital is the alternative to cutting the dividend, but in the end it's pound notes for investment whichever way you acquire them.
Management do certainly sound like they are full of ideas for improving the bottom line and updating their industry. I thought the presentation was very good. |
Thanks fills. More evidence of executive focus and competence. Great to see. |
sharw - thanks for putting the Chairman's purchase in context. I think what you are saying is he is not short of a bob or two. One man's £750K is another man's £7.5K.
One point neither of us have mentioned is Bryce and Russell's discussion about margin. It has dropped slightly 2020 compared to 2019 but that is explained away by Russell. They go on to reiterate that they do their utmost to defend the 35% margin. They also talk about cost to pick etc - financial metrics that are collected from all business units on a daily basis. Oh - one last thing - headcount reduced by 45 and business premises reduced to 19 from 27. I think I've got that right from memory. Fils |
1) yes, it is good that the Chairman bought but that must be seen in the context of him rebalancing his portfolio between his numerous directorships - he sold 1m AUG @ 217.065p (a third of his holding) and bought 900k PRM @ 5p (previous holding 2,500k).
2) have now watched the IMC presentation. It is ably summed up by Fils above so I will not repeat that except to agree that they came across very much 'tell it as it is' - no management-speak obfuscation.
3) there are some comments/speculation here about the dividend. Just watch the presentation - it will only take 2 minutes from 37.15 to 39.15 in to get it from the horses' mouths. |
edmundshaw - 2p dividend would be fine by me as a starter, but I agree that 2.1p (ie 5% growth) for the following year doesn't sound very ambitious as a target so is probably better not mentioned. With growth opportunities possibly requiring cash, the dividend may be less important than conserving the cash and growing the company. I didn't buy it for its yield: for that I would buy something like NG.. |
No sooner had I posted this morning's post I saw the RNS about the Chairman's 750K purchase. I presume the MMs have been collecting those for him. Wowzas! Excellent money where mouth is (although we didn't hear direct from Chair yesterday). No wonder share price rising today. Fils |
Thanks for that analysis fills...
I have no problem with a 2p dividend for this year if that is warranted by trading and risk metrics for this year and next. It is the "5% in subsequent years" that makes no sense to me, as 5% of 2p would be excessively modest, but if it's not that, what exactly is it 5% of? The 2019 dividend? As there is no guidance and the management is redirecting focus, I think we just have to wait and see... anyway I am not fixated on dividends; dividends do often keep less well organized managements than this one better focused, as it acts as an effective discipline. Total return expectation is my preferred target.
I do like the sound of the management focus. Seems very professional and sensible. Also love the chair's investment. Our interests are aligned! :)) |
Huge purchase by the new chair. Big vote of confidence. |
Very good write up Fils. Thank you. They have got their eyes on the ball. Small board facilitates faster decisions and leaves room for good ambitious executives to progress rather than jump ship. All looking good, if a bit steady as she goes.
Seems that if the Services guy can't get it to wash its face he could need a job elsewhere! |
My own view of the presentation. Bryce and Russell presented a tight team. Get the impression they are instilling a good financial discipline on the business. Their "capital allocation" seems modest and sensible - mainly re-stocking their own shelves (so some working capital absorbed) and an investment in e-business and conversion to a data driven business. Bryce used a word "amazonisation" to describe how the world of business in general is going. The business is being re-shaped to two brands although the financial reporting remains three divisions. Of those three divisions the services division is not performing financially acceptably. Bryce said it needs to "wash its face". The management team below board level has been strengthened with some new appointments. The board looks an acceptable size - just five members. The new non-exec chair is very interested in diving into the detail of the business. Russell's bridging slide which shows how net debt has changed throughout the year was really interesting and he was able to explain already that net debt is not expected to change this year and the reasons why. I think Russell knows the Company's financial numbers very well.
My own view - with strategic investors like Gresham - I think the two execs of CEO and CFO are creating a pragmatic no-nonsense business strategy that is set to focus on growing their business into the large fragmented market whilst at the same time ensuring each investment is financially justified and carries acceptable risk. Although acquisitions are not ruled out - I don't think they are the priority - concentrating on running what they have better , tight control of financial metrics. Analyst guidance of £102 million for this financial year a good starting point that doesn't scare them. Watch the video. I do like Russell's language - no flowery stuff! Fils |
I failed to watch the presentation live but I listened late last night to the recorded presentation and finished it this morning. Listening to the Q&A as I type. First of I note the healthy share volume yesterday - near a million. Edmundshaw - Russell Cash said dividend policy would not be formulaic - Bryce stated they always saw themselves as a cash generative business but that some investors have asked why don't you reinvest for organic growth. At the moment analysts are guiding for 2p this year and the Company isn't unhappy with that guidance. Fils |
thx for posting davebowler |
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