The investment case for Flowgroup (FLOW) centres on the promise of its innovative boiler technology, but it is the Aim-listed firm's energy business which has really been motoring of late. In 2015, the division's customer base increased by half to 100,000, but thanks to strong customer feedback and the wholesale energy agreement signed with Shell in December, that figure has grown by more than 80 per cent so far this year.
If customers continue to switch from mainstream suppliers at this rate, Flowgroup management expects to have 275,000 customers by the end of 2016, and as many as half a million a year later. That provides a huge market for its electricity-generating mCHP boiler, installations of which began this month. But while costs per customer fall with the energy division's expansion, Flowgroup will remain lossmaking this year and next.
Management is confident that the accompanying strain on working capital - trade payables stood just shy of net cash at the end of December - will be supported by the excellent credit terms provided by Shell and boiler manufacturer Jabil. Good terms have also been struck with Japanese blue-chip Daikin, whose heating products Flowgroup will now exclusively supply - in addition to the Flow boiler - in the UK.
Analysts at Cenkos expect the pre-tax loss to extend to £28.9m this year, giving an adjusted loss per share of 8.9p.
FLOWGROUP (FLOW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 22.5p | MARKET VALUE: | £71m | |
| TOUCH: | 22-23p | 12-MONTH HIGH: | 30p | LOW: 10p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 9p* | NET CASH: | £16.7m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 0.15 | -6.7 | -10.3 | nil |
| 2012 | 0.01 | -5.0 | -5.6 | nil |
| 2013 | 13.8 | -10.2 | -7.4 | nil |
| 2014 | 33.4 | -10.1 | -3.9 | nil |
| 2015 | 40.4 | -17.1 | -5.3 | nil |
| % change | +21 | - | - | - |
Ex-div: na Payment: na *Includes intangible assets of £19.3m, or 6p a share. | ||||
