I did warn you guys some months ago but you wouldn't listen. I really do hate to say l told you so. |
A mildly disappointing update in terms of revenue but marginally better than I had feared. Management assessment sounds realistic and the share is on a modest rating so no reason for a drastic fall. The price to revenue ratio is a reltively low 0.73 (at sp=130p) so there should be room for advance if reasonable margins can be obtained.
One encouraging note is that the results are expected to be issued by the end of March which is several weeks earlier than in prior years, implying that the financial aspect of the business integration is progressing well. When supply constraints eventually ease the inflated inventory requirement should follow thereby improving the cash position. In present circumstances a restrained dividend payout might be sensible. |
Macarre I have to say I think Flo has a good chance of being a rising share in 2022. Fils. |
Youtube link is the wrong time. Go to 51 minutes in.
He seems to be saying 200p a share in 2023 "would be a bit disappointing", once current management has fully integrated the disparate acquisitions. |
Christopher Mills talks positively about Flowtech (51:05) here.
www.linkedin.com/feed/update/urn:li:activity:6879354290515841026/
www.youtube.com/watch?v=cG7_82WZdmc&t=2135s |
Christopher Mills talks positively about Flowtech (51:05) here.
www.linkedin.com/feed/update/urn:li:activity:6879354290515841026/
www.youtube.com/watch?v=cG7_82WZdmc&t=2135s |
Agree. I think they are on top of this issue now. |
Why has FLO suddenly popped into your watch list macarre - do tell? In answer to your question - I think FLO's means of dealing with problem global supply chains are two fold - 1) making use of their longstanding relationships and distributor role and 2) using their sales knowledge to stock up effectively even if this takes increased working capital. Fils |
FLO has popped up on my watch list late last week. I like the business overall, but this bit on the half-year report concerns me: "we are proactively addressing the short-term headwinds associated with problematic global supply chains.". Obviously that's the case with many other companies that rely on global supply chains, and some done a great job at managing the issue whereas others not so much. Any thoughts on FLO management ability to address this? |
A rather thin market in FLO, so it's encouraging that the mm's did not need to slash prices in order to move the stock from yesterday's nervous sellers. |
 Downing Strategic Micro Cap half year report comment :-
Flowtech Fluidpower PLC ( Flowtech ) (7.26% of net assets)
Cost: £2.60m. Value as at 31 August 2021, £3.50m
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, and 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
Revenue recovering strongly post Covid
Sustained strong gross margin
Savings achieved from restructuring activities
Operating profit improvement directly linked to revenue recovery
Progress against investment case
Flowtech announced positive half-year results, which showed a strong recovery in trading in the period with group revenues of £55.3 million, up from £46.6 million for the comparative half-year period. The first part of our thesis is based around a post-Covid recovery, so we are encouraged to see the strong revenue performance. There was some caution around cost pressures in H2, particularly through supply chain and logistics, but we are confident that recovering demand, particularly in the OEM sector, can offset headwinds. Overall, we continue to believe that the company is guiding market estimates conservatively, and that there ought to be upside to current consensus over the course of the year. |
downing-strategic-micro-cap-investment-trust September Factsheet :-
Flowtech Fluidpower (+6.6%) delivered a reassuring set of interim results which demonstrate a recovery in trading post widespread lockdowns. We remain of the view that guidance is set conservatively and the business ought to upgrade earnings. Longer
term, the prospect of an e-commerce platform to generate customer synergies and scale is attractive and could drive a more premium rating than the business has achieved historically. |
Yes boadicea and the increased interest continues! |
This share has been consistently firm for some weeks and now we have a notable leap.
It will look bad if company news is released tomorrow! (other than a 'know no reason' one.)
Hoping it's not just a brief spike up. |
Yes Red Ninja - nice to see the share price break into the 140s. Definitely more interest. Any share volume over 50K is a lot more interest than normal. I have yet to complete watching the recent Investor Meet Company presentation - must get around to it. Fils |
One thing this pandemic has done in the manufacturing sector is to highlight those companies that can adapt and organise and then come out of the situation fighting fit. Fortunately for its shareholders FLO appears to be one of them - so congratulations and thanks to its management and workers.
I look forward to a profitable holding for the foreseeable future.
As a general philosophical position I have largely avoided investment in highly elective activities (holiday co's, travel, luxury goods, financial wizardry etc) some of which have suffered disproportionately. I prefer good old fashioned constructive activities, innovation, research, medical etc.
Nice to find this is now paying off handsomely. That has not always been the case! |
@muckshifter your patient and detailed explanation does you credit. I think most investors here are of the same view.
Agree with crystal ball and 20/20 hindsight some of the destocking likely ended up as not optimal. But it appeared a rational move at the time. |
The share volume today would indicate the half year report has sparked a bit of interest. Fils |
muckshifter> Good to see you still around - Fully agree with you. I hold. |
Don't know if your last three posts were a response to mine or not millie, but just in case they were, no, we do not agree on anything.
I watched FLO for a long time before buying shares, and from (fallible) memory, under the previous CEO they were buying up companies at breakneck speed. About ten buys in three years iirc. Then the previous CEO retired, the present one took over, and within a short period changed the basic strategy to one of rationalising the many different subsidiaries and making the past purchases work as one organisation before any more acquisitions, which seemed a very appropriate strategy to me. It convinced me enough to buy a few shares anyway. One obvious beneficial effect of this change of strategy, was to change working capital into cash by eliminating duplication of stocks held in the many recently acquired subsidiaries. At that time with easy availability of "just in time" replacement stocks, the strategy seemed to me to be working in this regard as well as many other planned improvements in operations.
Things have changed. Brexit and the pandemic have caused serious supply problems for many industries, including FLO's. Raising stocks in those circumstances seems eminently sensible to me, as the last thing the company would want would be to have to tell potential buyers that they couldn't supply, and worse still that they were unsure when they could. Good stocks in present circumstances perhaps make the difference between losing clients and gaining them, imo. |
Precisely, unfortunately FLO management haven't got a crystal ball |
Easy to call the shots with 20/20 hindsight. Unknowns such as covid shut-downs in a business like this call for contingency plans not just-in-time stocking.
I suspect the share price will drift as its that kind of share, but I am happy to hold a few defensives like this to counterbalance higher risk shares. |
So we agree it would have been better not to have reduced stock in the first place. Anyway we can see where the share price goes from here and that will be a good indicator of the current strategy. |
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