Strong growth for Flowgroup despite VAT wrangle
EFFICIENT energy specialist Flowgroup is reporting strong growth, despite having to postpone the volume launch of its new combination boiler until early 2016.
Revenue for the Chester-based company climbed 28% to £20.534m (H1 2014: £15.991m), in the six months to June 30, despite the delayed availability of the new Flow boiler – eagerly anticipating by its customers, according to the AIM-listed firm.
The hold-up has been caused by a European Court of Justice ruling that the UK’s 5% reduced rate of VAT on energy-saving products is in breach of EU laws with the potential that a higher rate would be applied.
Flowgroup chief executive Tony Stiff said that since a rate of 20% would add more than £500 to the cost of the Flow boiler for customers, and would increase the cost of installation by nearly 15%, the group took the decision to delay the launch and focus on cost reduction and engineering enhancements in close collaboration with manufacturing partner Jabil.
“If we had continued with our volume launch and the VAT increase had been applied, our core ‘boiler that pays for itself’ model may not have been viable, exposing us to significant financial risk,” said Stiff.
The delay is even more disappointing for the company, given that Flowgroup completed a successful equity fundraise of £21.3m to accelerate the development of the new boiler.
Meanwhile, the company’s energy supply division Flow Energy has enjoyed strong growth with more than 100,000 customer accounts targeted by the end of 2015.
The interim report for the six months ending June 30 claims Flow Energy maintains second place rating for the lowest complaints among all UK domestic energy suppliers in the first quarter of 2015.
Stiff said: “We plan to accelerate growth in our energy business and to add to the range of products we can offer our customers through new strategic partnerships, moving us closer to our goal of becoming an energy services business providing an all-encompassing energy and technology offer to the broadest range of customers.”
He said that cash in the business was ahead of expectations for £9m by year end.
“We are in line for up £15m or £16m, which is very pleasing,” he said.
