 DSM interim report comment on FLO (also DSM announces that it will be winding down over time) :-
Flowtech Fluidpower plc (7.5% of NAV. Detracted 2.3% from performance and saw share price fall by 22.8% in the period) had a profit warning in the period combined with a tweak to the strategic direction of the business. In some ways this was inevitable with a change of CEO and now the business is led by a through-and-through distributor with Mike England having come from Electrocomponents and prior to that Brammer and Hagemeyer/ Rexel. If anyone should know what good looks like for Flowtech, it ought to be Mike.
The new strategy will build on many of the foundations already put in place but will create a simpler and more cohesive customer proposition going forward. Distribution relies on delighting customers consistently and Flowtech stumbled through a reorganisation in the first half of the year which resulted in negative growth in the highest margin segment of the group. While we had no direct evidence of a reduction in customer confidence in previous periods, we had noticed some negative commentary around some of the reorganisation undertaken by management previously. In hindsight, this was probably already being reflected in some weaker than expected performance, which we unfortunately boiled down to a weaker market overall. The simpler operating model going forward, consolidated under a single brand, should return focus to the customer and the business can build from here on its already strong market position.
The other significant change introduced by Mike is to increase the size of the addressable market by moving into the power, motion, and control sector. This will triple the market size and provide the opportunity to accelerate growth from a low base. The e-commerce offering, while receiving a lot of attention, still lacks traction and is not as progressed as it should be. Once running properly, and with a refreshed sales and marketing effort, the opportunity to generate incremental cross-selling should begin to play through.
Overall, whilst it’s disappointing that progress has been slow and, in some cases, negative, the strategic shift sounds sensible driven by an experienced distributor has significant merit and increases revenue and earnings potential for the future. We remain of the view that Flowtech can be a mid-teens EBITDA business if run correctly and that presents attractive upside over the coming years. Management will have to work hard to achieve the £13m expected EBITDA in 2024 but a prospective EV/ EBITDA of sub 6x and free cash flow yield well north of 10% provides sufficient reward if execution is flawless from here. |
Management are putting their money where their mouth is. |
certainly did a lot of strategising on the call this morning, ambition to raise margin and reduce their brands laudable but they're hostage to the general economy one feels so outlook tough in the immediate and opaque thereafter. |
I haven't looked in any detail at the accounts, but despite the fact they always seem to report fairly decent profits, they haven't made any sort of dent in the debt for as long as I've followed the company. |
Thanks for the clarification, having checked, Flomerics was bid for back in 2008,
by a US listed company. |
Cerrito:- Agreed - However dodged my questions as to interest rate being paid (very understandable!!) BARC are not a charity but I have no reference data as to how much above bank rate they could be paying.
Anyone any thoughts/knowledge? |
No essentialinvestor, they have always been listed since AIM launch in 2014 as Flowtech so not connected to any other business.
Youvall keep mentioning 'good presentations' but that sits awkwardly with the crashed share price.
No excuse for being in at 121p as l pointed out Yr ago they are a sub £1 share.
Their core Flowtech business which was the building block, is going backwards, as is the Margin. They just keep changing The Chiefs and a few of you are so gullible. |
Agree PUGUGLY good if not v good presentation but as you say need to walk the walk.
Bad that H2 trading conditions will be tough.
Better that they have their bank facilities sorted till Feb 26 so will not have the immediate financing pressures.
Better that as of tomorrow their good Chairman gets back into the saddle.
Not one of my better decisions to be here at an average in price of 1.21.
Not selling but feel I have enough so will not be buying.
Ps
As known in a fragmented industry so prone to consolidation. A theoretical chance that a bid will come in from a consolidator but given the shareholder register in this probably unlikely scenario they would not be sold on the cheap. |
Is this flowmeric that was previously listed back in the day.
They were HQ'd nr Hampton Court from memory.
Jade, good call. I see you specialise in this one company from your posts!. |
Encouraging IMC presentation - OK they certainly walked the walk - So continuing to hold and might top up - Now to see if they can walk the walk in these stressing times for UK plc. |
 I am pleased edmund has been missing me, I just didn't want to post and appear to rub salt into your wounds. All these previous remarks about 180p etc !!. I did warn you the price was heading well below £1. You can't keep chopping CEO's, Finance Directors and other senior management and expect anything else. What warning signs do you need ?. As for those hanging on for the 6p or 7p dividend payments, dream on.
You can't change the business from effectively a wholesaler to supplying YOUR customers customers direct, for bigger margins, and expect that to be taken lightly by your former distributors. You will have noticed it is the Flowtech division that has suffered the worst !!.
I gather a recent change in management did not sit well with the affected individual and there are rumours of him seeking recompense.
It's not too cheap. Where is the upside ?. Unless it becomes a takeover target. I prev said my calc was 75p was the floor, I am not being ridiculed now.. I take it that those sat on massive losses are keeping their heads down. Of course, if you think it is too cheap, the simple solution is go and fill your boots !!. I suspect 99% have more sense. |
It's too cheap |
Where is milliejade? I am missing her... :)) |
Possibly expecting an update on Monday with notice of half-year results. (Last year there was one on the equivalent Monday.) |
Good to see this chased into the close - decent volume too |
Probably marked up to 'accommodate' reinvested dividends. |
Well the share price has been recovering over last few weeks.
The fact that inflation fell unexpectedly seems to have boosted markets generally even small caps. |
Unexpected boost today.
Having just received my fourth takeover offer this year one gets suspicious! |
MJ probably got in at the bottom. I mean you don't spend this much time on a board if you are not interested do you ? |
MJ, hope you got back in. Well above 100p now and further to rise. |
Everyone, hope you all got out as l advised. Well below 100p now and further to slide. New strategy required. |
Guys, you seemed shocked. I did warn you. |
They have an 'Investor Meet Company' event arranged for next Monday, 17th which you can register for.
This link may help (if it works for you?).
(There is a 'Register now' link just below the 'Log in with Google' line.) |
I cannot make head nor tale of the outlook. Generating cash for investment? As woolly as a Christmas jumper. Hopefully the new CEO will enlighten us in due course - maybe this year. |
edmundshaw - I was about to make the same comment about the dreadful grammatical construction of the results announcement. Sentences have been mangled in an attempt to incorporate the obligatory buzz-words and the punctuation is random. It is almost unreadable. I hope their fluids flow more smoothly and that the report is not symptomatic of their strategic thinking!
The actual figures are not too bad. I'll allow latitude for the write off of goodwill and intangibles and focus more on underlying cash flow which is reasonable. The dividend paid was about half covered by cash flow, i.e cash flow would have been positive without the dividend.
There is also £4.5m of potentially retrievable cash cost attached to the combination of an increase in receivables and a reduction in payables, so the underlying cash position is healthy provided the receivables all perform.
I recall that many years ago (about 50 yrs actually!) I heldg shares in a construction company (Brown & Jackson) that came out with a report which could only be described as illiterate. However, their figures added up well and I doubled my money.
Perhaps Flowtech could ease the pain by arranging an edit before the eventual audited report. |
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