It was a blue Monday for Flowtech Fluidpower PLC (LON:FLO) and its investors after the group said full-year pre-tax profits would come in below analysts’ expectations.
The specialist technical fluid power products supplier expects to report an underlying profit before tax of between £7mln and £7.2mln for the 12 months to 31 December, below the market consensus of around £7.6mln.
The lower-than-expected pre-tax profit is due to “significant” investment in central and sales resources, as well as margin contraction in the second half while prices were managed upwards post-Brexit.
On top of that, the sector as a whole seems to be struggling. Market data showed a 3.9% fall in overall distributor sales during the period, with hydraulics (5.9% down) particularly hard hit.
Net debt for the year also came in at £13mln, slightly above broker Cantor Fitzgerald’s estimate (£11.9mln).
Revenue for the year is forecast to be almost 20% ahead of last year’s figure at £53.7mln, though.
Away from the results, Flowtech also announced the acquisition of Hydraulics & Transmissions Limited (HTL) for £750,000, plus a further £1mln in additional payments.
Flowtech will also assume £0.9mln in net debt, bringing the total cost of the acquisition to £2.65mln.
HTL’s turnover was £5.2mln in 2015, with underlying earnings of £300,000. Broker finnCap has called the addition “an ideal bolt-on purchase”.
Lancashire-based Flowtech added that the acquisition pipeline remains strong and that it is ‘actively pursuing’ several possible targets.
The group’s full-year results are scheduled to be published on 4 April 2017.
Shares were down 12% to 118.2p in early trading.