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Flowtech Fluidpower – states dividend “in line with current market expectations”, but not profit. Wonder why?...

By Steve Moore | Monday 23 January 2017


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Updating on its 2016 performance, fluid power products supplier Flowtech (FLO) notes that it intends to propose a 5% increased dividend “in line with current market expectations” and “expects underlying profit before tax will be in the range £7.0m to £7.2m”. How does the latter compare with expectations then?

With the announcement not mentioning expectations in that respect, unsurprisingly not greatly – an already slightly downgraded £7.6 million (earnings per share of 14p+) previously expected.

The performance is attributed to that “some margin contraction was experienced in H2 while prices were managed upwards on products sourced in Euro and USD and sold in GBP markets” and “investment in central and sales resources aimed at optimising cross channel opportunities, and future acquisition integration programme”.

There was net debt at the year-end of “c.£13 million”, though the company has also announced an initial £1.65 million (including assumption of £0.9 million of net debt, with also a further £1 million subject to earn-out) acquisition of hydraulic equipment and components distributor Hydraulics & Transmissions Ltd. This business delivered an operating profit of £0.3 million on revenue of £5.2 million in 2015.

The company argues that the overall group has “a solid platform for growth as well as opening and creating new opportunities in new and exciting sectors”, but I note forecasts for 2017 also trimmed today (earnings per share from 15.5p+ to sub 15p).

However, the shares are now further down from 140p reached earlier this month to below 130p – and, with also a dividend per share of 5.50p (inclusive of the 1.84p interim dividend paid in October), there looks potentially interesting value. The downward forecast trend sees me still deterred for now, but on the watchlist.


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