Flowtech Fluidpower excites analysts, despite falling sales and rising losses
Flowtech Fluidpower, the AIM-listed Wilmslow-based hydraulics business, suffered lower annual turnover and deeper pre-tax losses in the year to December 31, 2024 – but analysts this morning recommended the company as a ‘Buy’ to investors.
Sales of £107.3m were a 4.3% fall on the previous year’s level, while last year’s pre-tax loss of £12.1m soared to £27.1m in 2024.
Today’s statement reported separately disclosed items totalling £27.9m, which includes £25.6m in respect of impairment of goodwill, intangible assets and fixed assets.
Net cash from operating activities rose slightly, from £8.2m to £8.7m, but net debt increased from £14.7m to £15.1m. No final dividend has been recommended, compared with a 2.2p per share payout the previous year.
During the reporting period the company said it restructured to a simplified operating model, at a cost of £1.7m, which resulted in a further 2.2% year-on-year, like-for-like headcount reduction, without limiting its future growth ambitions.
It also concluded the successful acquisition and integration of Thorite, the largest independent pneumatic distributor in the UK, adding new customers and seven new branch locations.
Post reporting period the business acquired Allswage last month, a specialist in the supply, repair and servicing of static and mobile hydraulic swaging equipment and assets, in a deal worth £50,000 with the company’s liquidator.
The company said market headwinds persisted throughout the year with the British Fluid Power Association (BFPA) consistently citing market decline of above 10% in the UK in hydraulics and pneumatics and macro indicators continuing to weaken, particularly in the second half of the year as consumer and industry confidence fell.
Trading headwinds have continued to persist into the first quarter of the 2025 fiscal year, the company said, with expected market uncertainty to continue, given the current global trade wars.
However, it said trading has been in line with expectations. It said its order book and sales pipeline remain strong and it is concentrating efforts in higher growth sectors, including defence, waterways and flood defence, data centres, construction and infrastructure and transportation.
CEO, Mike England, said: “We have made strong progress to implement our strategic plan with further operational improvements delivering enhancements to gross margins, working capital optimisation, service levels, and operational efficiencies.
“Group rebranding and restructuring are complete, and the successful integration and financial contribution of Thorite is well ahead of our expectations. With much of the business transformation concluded we have a firm, stable and scalable platform from which to deliver profitable growth into 2025 and beyond.”
He added: “We are well on track with the development of our new digital platform to be launched to market in H1’25 and there is confidence that the broader strategy and actions taken to grow our addressable market and improve operational efficiency within the business will drive strong returns and improved shareholder value.”
Non-executive chair, Roger McDowell, said: “Although key operational and strategic milestones have been reached, I am disappointed with the financial outcome, with like-for-like revenue declining by 8.6% as customers reduced volumes, destocked, and delayed project timelines in response to a volatile macroeconomic backdrop.
“Whilst we outperformed the overall market trend, our decline in sales reflects the tough trading conditions present in our end markets.
“However, our improved gross margin to 38.2% in conjunction with our strengthened sales pipeline and order book as a result of a number of new and exciting orders secured for execution in 2025 is a positive lead indicator of the team’s commitment and execution in 2024.”
Following publication of the results, Panmure Liberum analyst, Sanjay Vidyarthi recommended the stock as a ‘Buy’, saying: “Market conditions remain difficult, but self-help levers are driving outperformance.
“The order book is strong and the launch of the new web platform should support growth in H2 25E.
“Thorite has been rapidly integrated and Flowtech has made another small, opportunistic acquisition where the integration playbook will be repeated.
“No dividend will be paid for FY24, which we see as sensible. This reduces leverage and provides headroom for further bolt-ons.
“We make no change to our adjusted EBITDA forecasts. On a CY25E PE of 11.5x, the shares are cheap.”
