Small Cap Value Report (Tue 17 Apr 2018) - FLO, FLTA, PRV, CTG, FDL

Monday, Apr 16 2018 by

Hi, it's Paul here!

I've got a lot of preparation to do for this Saturday's UK Investor Show. So please forgive me if this week's SCVRs are a little shorter than usual.

I'll get started with a couple of reader suggestions;

Flowtech Fluidpower (LON:FLO)

Filta Group (LON:FLTA)

Flowtech Fluidpower (LON:FLO)

Share price: 174.25p (up 0.6% today)
No. shares: 56.4m
Market cap: £98.3m

Q1 2018 trading update

AIM listed specialist technical fluid power products supplier Flowtech Fluidpower plc (LSE: symbol FLO), is pleased to announce the following unaudited update on its performance for the three months ended 31 March 2018 and to the period up to this announcement: 

Strong revenue growth, but mainly from acquisitions.

Q1 revenues £26.5m (up 51.4% on prior year, which is slightly different to the 49.7% increase mentioned below, I'm not sure what the discrepancy is)

Six deals seems an awful lot to do in one year;

Group revenue during the first three months of the current year increased by 49.7%, of which 6.3% was organic, with the balance representing acquisitive growth from the six deals completed in the past twelve months.

Selling prices increased from 1 April 2018 - should boost Q2.

Order book for project-based work is ahead of last year.

Gross margin in line with market expectations.

Net debt - has risen considerably, from £5.5m a year ago, to £18.4m at 31 Mar 2018.

Placing - note that £5.2m additional cash was received shortly after the end of Q1, so we can adjust net debt to £13.2m.

Most recent acquisition is going well.

Results for y/e 31 Dec 2017- unusually, FLO has issued its Q1 update in a separate RNS to its 2017 results.

At first sight, these figures don't look madly exciting. EPS fell, from 10.17p in 2016, to 9.69p in 2017. The company doesn't seem to disclose an underlying EPS figure though. Looking at a broker note, the adjusted EPS for 2017 is given as 14.9p. Why didn't the company mention this figure in its results statement? That seems a glaring omission.

Underlying profit rose 21.9% to £9.08m, which the company says is in line with market expectations.

Dividends totalling 5.78p…

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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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Filta Group Holdings plc is a provider of various services to national and independent commercial kitchen operators and owners. The Company's principle service is FiltaFry, which is the micro-filtration of cooking oil, the vacuum-based cleaning of deep fryers and full Fryer Management. Its business operations are within the United Kingdom and the United States. The United States operations are operated as a franchise network, while the United Kingdom activities are operated under both franchise and direct sale business models. In addition to FiltaFry, Franchise Owners offer other fryer management services provided and managed by it, including waste cooking oil collection and removal (FiltaBio) and the supply of cooking oil (FiltaGold) and non-fryer related kitchen services, including the provision and servicing of moisture absorption panels for refrigeration units (FiltaCool). Its drain-related services include live bacteria drain dosing. The Company has over 180 Franchise Owners. more »

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Porvair plc is a specialist filtration and environmental technology company engaged in the development, design and manufacture of filtration and separation equipment. The Company's operating divisions include Metals Filtration and Microfiltration. The Metals Filtration Division designs and manufactures porous ceramic filters for the filtration of molten metals, principally aluminum. The Microfiltration Division designs and manufactures a range of filtration equipment for application in aerospace, energy, bioscience, water and industrial applications. It is developing a range of products, including the products for the manufacture of turbine blades, solar panel manufacture and energy storage. It operates Microfiltration division through its subsidiaries, Porvair Filtration Group, Seal Analytical and Porvair Sciences. It operates Metals Filtration Division through its subsidiary, Selee Corporation. It has plants located in the United States, the United Kingdom, Germany and China. more »

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

20 Comments on this Article show/hide all

gary3980 17th Apr '18 1 of 20

Morning Paul

Could you cover Filta Filta Group (LON:FLTA) please - revenue up 34%, PBT of £1.6m from a loss of £328k last year. Interesting franchise model and also expansion plan into Europe, starting with Germany this year. Board sounding confident for future expansion and growth.


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Lgarvey 17th Apr '18 2 of 20

Hi Paul

Flowtech Fluidpower (LON:FLO) Q1 update this morning. Looks positive at first glance .....

Group revenue during the first three months of the current year increased by
49.7%, of which 6.3% was organic, with the balance representing acquisitive
growth from the six deals completed in the past twelve months. We continue
to have positive momentum across all divisions. Our Flowtechnology operation
in the UK went through its annual catalogue launch and general sales price
increase on 1 April, which will provide further uplift in Q2, and with order
books for our more "project based" profit centres remaining ahead of the same
point last year, the short-term outlook is encouraging.

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Reacher 17th Apr '18 3 of 20

In reply to post #353908

Filta Group (LON:FLTA) looks to be an interesting business and significant progress has been made. Graham talked positively about it when it floated around the 100p mark. However, I wonder whether the share price has got ahead of itself with diluted eps for continuing and after discontinued operations coming in at 2.99p. Would definitely appreciate Paul's (and others) views. 

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timarr 17th Apr '18 4 of 20

In reply to post #353913

Flowtech Fluidpower (LON:FLO) finals also released today:

EPS is actually down and debt up, as a consequence of an acquisition spree. Reassuringly they state:

The Board does not intend to implement further significant acquisition activity in 2018, and our focus will therefore be on extracting valuable efficiencies from the businesses to date

The Q1 update shows net debt at £18.4 million, with a £20 million cap but they've since received another £5.2 million from last year's placing. So nothing to be complacent about but, broadly, steady as she goes with significant opportunities to capitalise on the platform created.


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MrContrarian 17th Apr '18 5 of 20

My morning smallcap tweet:

Findel (LON:FDL), Dialight (LON:DIA), Christie (LON:CTG)

Findel (FDL) guides FY performance at the upper end of market expectations: pretax £26m to £26.5m.
Dialight (DIA) AGM stmt. "As expected, these actions [to resolve production problems] are yet to yield significant results in the fulfilment of outstanding orders, although we have made progress in service levels of our smaller product lines. We are confident of an overall significant improvement in our operations over the coming months. The Board continues to expect the Group's results for 2018 to be heavily weighted to H2 reflecting the successful resolution of the issues." Downside risk.
Christie Group (CTG) FY rev up 11%, operating profit before exceptional items £3.8m (£1.1m) broadly in line with expectations. "We continued to deal with some challenges in our SISS division but, having made significant progress in this division in recent months, we are optimistic of its prospects for 2018." Guides H1 significantly ahead YoY.

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sheeza 17th Apr '18 6 of 20

Odd definition of EBITDA from 'falling star' TP Group (TPG), which appears to include depreciation; perhaps the results are rather better than they look at first glance - and the order book is showing another hefty increase. It's still sitting on the best part of £20m for acquisitions. Statement seems bullish - I'd be grateful for views

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dahokolomoki 17th Apr '18 7 of 20

In reply to post #353933

Another vote for Flowtech Fluidpower (LON:FLO). I'm a holder and struggled to form a clear opinion based on the FY results and Q1 update announced today.

While the strategy is crystal clear to bed down acquisitions this year, what is not clear to me is how much synergy they expect to extract to enhance EPS.

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Paul Scott 17th Apr '18 8 of 20

Good morning!

Sure, I'll look at Flowtech Fluidpower (LON:FLO) (which I've always liked), and Filta Group (LON:FLTA) - which is a new one for me, but the comments above have aroused my interest!

Regards, Paul.

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andrea34l 17th Apr '18 9 of 20

I'd be interested in any comments on Draper Esprit (LON:GROW) please following the announcement yesterday; an excerpt is below:

The Company has had another active year and is seeing strong growth within the portfolio, predominantly driven from revenue growth and from financing rounds and exits at higher valuations being achieved.

As a consequence of this growth and further realisations in the portfolio, the Directors anticipate that the gross primary portfolio* value will have increased to approximately £244m, up 50% from the £163m at 30 September 2017 and more than double the £113m at 31 March 2017. The increase in the value of the gross primary portfolio reflects investments made during the year of £71m (£27m during the six months ended September 2017) and a fair value increase of £51m in the six months ended 31 March 2018 in addition to the £24m increase reported in the six months ended 30 September 2017.

In total the fair value growth in the FY2018 represents a 66% increase in the gross primary portfolio. In addition, the Company continues to achieve a number of successful exits with over £15m in cash realisations made during the period. Notable exits include the sale of Clavis Insight, Aveillant and Moviepilot.

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MGinvestor 17th Apr '18 10 of 20

Hi Paul,

can you please cover APC Technology (LON:APC) today. Interim results look excellent. Market cap is approx £11m and its a turnaround story which is going well so far. They have revenues up at 14% with operating profit up 45% for the HY. Personally feel they are on track to beat FY results IMHO

I hold @mginvestor

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mrosbiston 17th Apr '18 11 of 20

In reply to post #354028

i struggle to see the turnaround story here - would be great if you could expand on this.

looking at the results, doesn't look like much in the way of organic growth, gross profit is up 3%, revenue is up 3%, so most of their improvement in adjusted operating profit is from cost control which is magnified in a low operating margin business.

The increase in receivables doesn't seem justified compared to the revenue increase - my initial view is the company are not managing their cash collections very well. Big increase in short term borrowings is slightly concerning - any more info on this?? Balance sheet is heavy on intangibles and has a negative NTAV.

outlook seems to be based on continuing to focus on growth through acquisition, how will this be financed - as the company doesn't really generate any real cashflow, this is likely to either be more short-term borrowings or equity.

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Nothingventured 17th Apr '18 12 of 20

In reply to post #353908

I vote for Filta too - seems like a nice simple business franchise model.


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matylda 17th Apr '18 13 of 20

Love the Flowtech Fluidpower (LON:FLO) write up Paul (amazing how you can make things much more understandable for those without the financial qualifications) - Much appreciated.

Blog: Briefed Up
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ricky65 17th Apr '18 14 of 20

Filta Group (LON:FLTA) looks like a Minervini growth stock to me. It meets his fundamental criteria with revenue, EPS, margins all moving in the right direction. Also, the technicals meet his Trend Template.

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peterthegreat 17th Apr '18 15 of 20

Re: Paul's comments on Flowtech Fluidpower (LON:FLO)
I would agree with Paul that six acquisitions in a year sounds quite challenging but my understanding is that these acquisitions are really about bringing additional fluid power products and development capabilities into Flowtech's portfolio, rather than doing anything fundamentally different. The companies it purchases appear to be similar to its existing business so this must also reduce risk and the products they produce are generally not subject to fashion or obsolescence, nor need much marketing which must also help. Even though I normally prefer organic to acquisitive growth, I would agree with Paul that Flowtech's business looks OK.

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herbie47 17th Apr '18 16 of 20

In reply to post #354113

Apart from it's below the 50MA?

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ricky65 17th Apr '18 17 of 20

In reply to post #354253

When I wrote that comment Filta Group (LON:FLTA) was above 50 MA.

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Aislabie 17th Apr '18 18 of 20

Paul has noted that Porvair (LON:PRV) is expensive and the thng about this company is that it is always expensive, but people are prepared to pay because the stickiness of its customer sales is unusually high. The filters on jet engines or helalth equipment or aluminium smelters are tested and approved , you can't (and would not want to) just put any old filter in these high spec areas.
On jet engines, once approved,Porvair can look forward to many, many years of regular renewal, I have heard that forecasting can be fairly solid for this area for the next six or seven years.
This reliability is what makes it necessary to pay up. I hold but have from time to time concluded that it was time to sell. only later ruefully admitting that I have missed out on another long term climb and bought back in at a higher price. Nothing goes on for ever but this is a long term keeper for me.

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jonesj 17th Apr '18 19 of 20

Thanks for another fine article Paul.
Look forward to hearing you on Saturday.

Location map   ......

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dahokolomoki 18th Apr '18 20 of 20

Thank you, Paul, for your analysis and commentary on Flowtech Fluidpower (LON:FLO), it was very useful and informative.

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 Are LON:FLO's fundamentals sound as an investment? Find out More »

About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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