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Filta Group (LON:FLTA)

  • Shares price: 100p (+8%)
  • No. of shares: 27 million
  • Market cap: £27 million

Trading Update

I'm flagging this up as it's new to me and is another fairly recent flotation (November 2016).

According to its website, the core product is FiltaFry, which enables 5,000 food establishments to recycle their cooking oil. Two other subsidiaries are involved in providing refrigeration door seals, and general maintenance of refrigerators and air conditioning units.

Sounds like a "boring" industry which Peter Lynch would approve of!

Unfortunately, the company generated a loss last year (£200k), on revenue of £10.1 million. Adding back finance costs, AIM admission costs, and "special bonuses" to shareholder-directors, gets you an "underlying" operating profit of £1.15 million.

Today's update is concise but encouraging:

"We have enjoyed a strong start to the year with revenues for the first 4 months, on a constant exchange rate basis, over 25% ahead of the same period last year, with all of our business lines, franchise development, fryer management services and Company-owned operations contributing to the growth. 

The statement mentions new customers secured last last year, who are going to provide a full-year contribution in 2017, and describes how most company revenue is recurring in nature.

Overall, looks to be the type of boring stock which can often turn out to be a good investment.

I can see a broker forecast from April suggesting that 5.9 EPS could be achieved this year. Perhaps that forecast will be revised upwards, and this might start to look decent value?

A few other small points worth mentioning: it fulfilled its promise to pay a dividend in the first half of this year, and has pledged to pay interim and full-year dividends going forward.

It operates a franchise model - that's something that always gets me interested, because it means potentially high returns on capital (if you can get the franchisees or banks to put up the capital to fund local operations).

The balance sheet is no fortress but it looks ok, equity of £3.4 million or £0.9 million excluding non-current assets. £4.4 million of cash offset by £1 million in bank loans.


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