Flowtech Fluidpower - continuing share price decline

Tuesday, Dec 01 2015 by

Can fellow investors shed any light on the continuing share price decline of Flowtech Fluidpower. Admittedly several industrial stocks, particularly those with oil and gas exposure have suffered significant reductions in their share prices in recent times. However in my view the 30% plus decline in the share price of FLO since the interims in September appears excessive. The question is whether the current price captures the challenges faced by the company and therefore represents a buying opportunity or is it a portent of further declines to come? 

There have been no trading announcements from the Company since the interims in September.  This indicates, at present, that it is broadly trading within expectations for the current year ending December 2015.  However as mentioned below there appears to be limited information as to what those expectations are.

I have set out what I perceive as the current positives and negatives for Flowtech and would welcome views from the Stockopedia community.


  1. Sound balance sheet; debt of £7.5m and renewed banking facilities at the September interims.  Also see Paul Scott's small cap report of 14 April.
  2. Very diverse product catalogue and customer base; approximately 52,000 individual products and 85,000 end users.
  3. Recent acquisitions at reasonable prices (see commentary by Simon Thompson in IC).
  4. Institutional small cap shareholder register to die for; Miton 17%, Premier Asset Managers 12%, Hargreaves Hale 12%. (figures from Morning Star and RNS).
  5. Operations overwhelming UK based with minimal exposure to the Eurozone; FX exposure hedged.
  6. Funds available for further acquisitions, which are  being sought.  See video presentation post September interims by Sean Fennon, CEO on the company website


  1. Trading conditions challenging.  The outlook statement refers to "ongoing weakness and competitive pressures" within certain sectors.
  2. Some exposure to oil and gas.  My impression is that this is relatively contained although I have been able to quantify its extent.
  3. Difficult trading conditions experienced by perceived competitors e.g. Brammer 
  4. Limited analyst coverage and information available on the outcome for the current year. Stockopedia currently shows EPS of 13.9, but this I feel is somewhat optimistic.  

There are no doubt several points that I have missed and would be grateful for any comments.  I am currently a holder of Flowtech, but as always DYOR.

Good Luck.

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Flowtech Fluidpower plc is a United Kingdom-based distributor of technical fluid power products. The Company operates through two divisions: Flowtechnology, which is geographically split into Flowtechnology UK (FTUK) and Flowtechnology Benelux (FTB), and Power Motion Control (PMC). FTUK and FTB focus on supplying distributors and resellers of industrial maintenance, repair and operation (MRO) products, primarily serving urgent orders rather than bulk offerings. The PMC division is engaged in the design and assembly of engineering components and hydraulic systems, which are managed by component supply along with a service and repair function. Its business is focused on its distribution offering in over three categories: Pneumatics (products that enable the use of gases to provide mechanical motion), Hydraulics (products that enable the use of fluids to provide mechanical motion) and Industrial (products and accessories that act as conduits for gases and liquids). more »

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  Is LON:FLO fundamentally strong or weak? Find out More »

4 Posts on this Thread show/hide all

herbie47 1st Dec '15 1 of 4

Had a quick look and I suspect its the oil and gas exposure that is the reason for the decline.

In positives you can add recent directors share buying. Looks interesting one will do some more research.

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garbetklb 1st Dec '15 2 of 4

Thanks for flagging up - I was interested a while back, but didn't invest. Might be more interesting now / soon.

I'm pretty unimpressed by the director buying - looks completely co-ordinated and relatively small amounts. Did they all really decide to buy independently? And the CEO buy 20k, the others 10k each completely by chance?!

On my watch list - and let's see what the next news is.

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kalkanite 2nd Dec '15 3 of 4

Morning Jonno

My observations FWIW - I just don't buy into to this company. If you look at the profits pre IPO year the company had 3 years of losses and then hey presto, 2014 was a wonderfully profitable year. To me it looks like the owners have done this in order to offload the company at an opportune price to the waiting public. This is often done at the expense of future operations/profit.

The margins as Paul Scott mentions are very high for a distributer. If you compare them with Soli who are a distributer in similar industries but who also design / upgrade some of their products their operating margin is only 7.3% so I would expect FLO to be South of this. I think that the only way that profits can grow here is through acquisitions.

I think also that the narrative in their last full year and interim results suggest there is a profit warning coming.

Having said the above, I think that the current price is about right. On the face of it, there are some good fundamentals to this company but I just don't buy them, I hope I'm wrong and good luck with your investment.

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gus 1065 2nd Dec '15 4 of 4

For what it's worth (I am no chartist), the share price went through a death cross on Nov 19th (30dma cuts down through the 200dma) which some see as a very bearish signal.

Also, Stockopedia suggests a high risk of earnings manipulation on the Stock Report. Coupled with some recent bad experiences with recent IPOs coming out with profit warnings e.g. DX, I can maybe understand why current sentiment is unfavourable.

None of this is substantive, just a sense of "bad odour"?

Good luck.

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