City round-up: interims at Flowtech Fluidpower; Bodycote; Convatec

Flowtech Fluidpower, the AIM-listed Skelmersdale-based hydraulics business, is trading as forecast, it confirmed in a six month trading update for the period ended June 30, 2024, today.

In March this year the group revealed lower annual revenues and deeper losses for the 2023 fiscal year, but increased its dividend and said the group was well placed for recovery, evidenced by its rising share price.

Today, it revealed a 5.5% reduction in total revenues of £55.7m, but said the first half delivered profit performance in line with expectations with further improvements made to gross margins, cost control and overall service levels, offsetting more challenging market headwinds which have impacted top line growth.
It said revenue may have reduced by 5.5% compared with H1 2023, but with more positive momentum of 4.9% growth against the second half of last year, underpinned by continued progress in executing the Performance Improvement Plan.

Further progress is anticipated during the second half as the group sees the benefits of these improvement actions, together with an expectation of a slow market recovery.

Pre IFRS 16 net debt was £13.5m as at June 30, 2024, compared with £15.4m the same time a year ago, a reduction of £1.9m in the past year, leaving an unutilised £11.5m on the group’s £25m banking facilities.

Flowtech said market conditions proved more challenging than anticipated across all segments as a slowdown in many industrial verticals has led to extended project cycles, reduced component basket size and a reduction of project-based expenditure.

There has been continued progress executing all areas of self-help in the Performance Improvement Plan with many improving data points indicating that Flowtech is now in a far stronger position in commercial, operational and service performance capability, it said. The group remains on track with its plans to fully re-platform the Flowtech website to a scalable and improved customer experience during the second half of the year.

The new leadership team has nine months of learned experience, with the majority of brand and organisational changes implemented. Operational basics are now embedded with a step change in service levels and commercial excellence. The group sales pipeline and forward order book have begun to strengthen through the period aided by the refocusing of sales and marketing efforts around the ‘one Flowtech’ value proposition.

The group said: “We remain confident that the Performance Improvement Plan and Strategy for growth is on track and that we are setting ourselves up well to deliver the mid term value creation goals outlined in our recent annual report.”

Flowtech is planning to announce its unaudited interim results for the six months ended June 30, 2024, on Tuesday, September 10, 2024.

Sanjay Vidyarthi, analyst with investment bank Panmure Liberum, maintained his Buy call on Flowtech’s shares after today’s announcement.

He said: “Flowtech’s H1 update indicates a continuation of difficult trading conditions, but the Performance Improvement Plan has supported a strong gross margin, alongside tight cost control.

“We reduce our FY24E sales forecast by two per cent, but maintain adj EBITDA at £11m, reflecting this dynamic.

“We see this as an excellent performance in challenging markets. The strong momentum with strategic initiatives seen in H1 gives further confidence in management’s medium term growth and margin targets.

“A CY25E P/E of 11.2x is cheap for the growth opportunity. Maintain 150p target price and Buy.”

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Jim Fairbairn

Bodycote has posted half year revenues of £399.0m, 5.0% lower year-on-year (H1 2023: £420.1m). 

The company says this reflected £19.2m reduction in energy surcharges, which were around half the level of H1 2023, as well as a foreign exchange headwind of £12.2m. 

The Cheshire-headquartered engineering business said it enjoyed continued strength in Aerospace & Defence, while conditions were more challenging in Automotive and Industrial Markets. Supported by the more favourable conditions, as well as market share gains, growth was stronger in our ADE division than in AGI. The acquisition of Lake City, which completed in January, added £4.7m of revenue in the period.

Statutory operating profit reduced from £58.7m to £30.8m. This reflected the increase in headline operating profit, offset by acquisition costs for Lake City and the £28.3m exceptional impairment charge arising from the ERP write-down.

Commenting, Jim Fairbairn, Group Chief Executive, who took over the business in May, said: “We delivered good overall performance in the first half despite a mixed end market backdrop, with organic topline growth excluding surcharges and strong margin progression. This was underpinned by continued outperformance in Specialist Technologies, as well as margin improvement in our Aerospace, Defence & Energy (ADE) division. In our Automotive and General Industrial (AGI) division, where market conditions have been challenging, we have taken a number of decisive actions to balance costs and capacity with near-term demand. Supported by these actions, our outlook for the full year remains unchanged; we expect to deliver organic revenue growth excluding surcharges and year-over-year margin progression.

“Since joining Bodycote in March and taking over as CEO at the end of May, I have visited a significant number of plants spanning our core geographies, processes and markets. The foundations of the business are strong, with passionate people, a market-leading brand, differentiated services, and a unique carbon proposition for our customers. The business is well placed to build on these foundations, and I am excited by the considerable opportunities I see to unlock further value. These include fine-tuning our plant footprint, driving further improvements in operational excellence, optimising our strategy, and simplifying our reporting structure. I look forward to sharing more detail around these plans in due course.”

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Karim Bitar, chief executive of ConvaTec

Convatec Group, the Deeside-based medical products business, has announced strong broad-based revenue growth and further strategic progress in its interim results for the six months to June 30, 2024.

Revenues of $1.113bn were up on the previous year’s turnover of $1.055bn, and pre-tax profits soared from $76m a year ago to $104m. The dividend has been increased from 1.769 cent a share to 1.822 cents.

It said its innovation pipeline is delivering with new launches starting to grow segment shares, while its simplification and productivity drive is progressing well.

Free cash flow to equity was $57m (H1’23: $10m), up $47m, following improvements in working capital efficiency and capex investments to drive growth.

The group also confirmed its 2024 and medium term guidance, saying 2024 organic revenue growth of 5-7%, is now expected to be in the upper half of the range, while it expects an adjusted operating profit margin of at least 21% on a constant currency basis and double-digit growth in adjusted EPS and free cash flow to equity.

Over the medium term, Convatec expect 5-7% organic revenue growth pa, margin expansion to mid-20s in 2026 or 2027, and to achieve double digit compound annual growth in adjusted EPS and free cash flow to equity.

Chief executive, Karim Bitar, said: “The group’s performance during the first half demonstrated the improving strength of our business – showing broad-based growth across all four categories.

“Our pipeline of innovative new products is beginning to deliver growth in segment share and we made further progress improving our profitability. We are pleased with this performance and are confident of delivering another year of strong revenue growth and further progress on profit and cashflow.”

He added: “We are focused on further strengthening the business as we continue to execute our FISBE 2.0 strategy.”