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Flowgroup – now from customer growth “a key target” to “should maintain” number of customer accounts in just a few months

By Steve Moore | Friday 1 December 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.


The first paragraph of a Trading Update and Directorate Change announcement from Flowgroup (FLOW) includes “significant cost savings and management changes, to bring forward profitability by six months to the year commencing July 2018”. The shares are though approaching 10% lower, at 0.64p, on the back of the announcement…

The company believes that it has sufficient scale to achieve profitability sooner than previously expected having “taken a view that Flowgroup should maintain a total of just under 250,000 customer accounts, a level above which regulatory payments in the energy supply business significantly increase. The decision to remain below 250,000 customer accounts will save the company approximately £2.5 million. The directors believe this creates a strong foundation for further, profitable and sustainable growth”.

Hmmm. The cash saving note follows a net more than £25 million fundraising in June, with it then stated the business “well placed to deliver significant revenue and customer growth… set the stage for management to intensely focus on our core energy business where we believe high returns on invested capital are achievable”. This latest about-turn is also not the only one recently either – with earlier this year the company going in just a few months from “actively pursuing the sale” of the energy supply business to its development and growth becoming its “primary focus”!

Additionally, despite the noted fundraise, I also note it stated “loan note holders and other stakeholders remain fully supportive of the business and have given strong indications of their willingness to support any temporary and seasonal working capital requirements if needed”. Not the most convincing of positions there then either!

Bulls will point to the management changes – Tony Stiff “has resigned as CEO and from the board with immediate effect”, with CFO Nigel Canham assuming restructuring responsibility and this following the changing of Chairman last month. However, there looks much to do from here and, certainly before evidence that the company does actually look to be on a sustainable route, I continue to avoid.


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