Flowtech Fluidpower will come through 2020 in a better position than most says Zeus Capital

Fluid power

The latest trading update highlights that Flowtech Fluidpower plc (LON:FLO) has traded well during lockdown having been breakeven across April and May. This highlights the strength of the model and the inherent resilience of the MRO market. The business is seeing an improving trading performance as lockdown restrictions have begun to ease and it should be hoped that the positive trend in profitability will continue through the Summer. Having navigated lockdown better than most and with further cost initiatives to come through alongside the stated improvement in working capital, Flowtech finds itself in a strong position to capitalise once trading and the wider economy return to more normal levels. Forecasts will be reintroduced once we have increased visibility on the trajectory of the recovery in revenue and the wider economy.  

Trading during lockdown resilient: FY20 had started positively but the introduction of lockdown at the end of March had a material impact with revenue declining 10.3% for Q1 with the last few weeks of March seeing revenue down 40%. This continued through April with May seeing an improvement but was still down 30% from the previous year. During this two month period the business traded at broadly breakeven in terms of EBITDA, in line with previous statements the Company had made about the breakeven level of the business.

  • Guidance to return as we move through the recovery phase: As we would expect, guidance is still withdrawn but with things easing we are hopeful that management will be in a position to reinstate guidance relatively soon. The Q2 trading update, usually scheduled for late July, would be the earliest opportunity, however, this is probably still too early to fully assess the recovery trajectory of the UK economy and the immediate damage COVID-19 has inflicted on underlying demand. Investors might have to wait until the interims in September. Whatever the timeline, it would appear that Flowtech Fluidpower will come through 2020 in a better position than most having seen a good level of profitability in the circumstances and relative to peers and with an improved balance sheet as net debt falls yoy.
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