Flowgroup plc Trading Update and Directorate Change (9192X)
November 30 2017 - 1:01AM
UK Regulatory
TIDMFLOW
RNS Number : 9192X
Flowgroup plc
30 November 2017
Flowgroup plc
("Flowgroup" the "Company" or "the Group")
Trading Update and Directorate Change
Flowgroup plc (AIM: FLOW), which provides residential gas and
electricity supply and other energy services, announces a
restructuring of its business, including the implementation of
significant cost savings and management changes, to bring forward
profitability by six months to the year commencing July 2018.
In its Interim Statement on 19 September 2017, Flowgroup
reiterated its focus on building a profitable and sustainable
energy supply business by controlling costs and increasing the
Lifetime Value of its customers. The Company believes that it has
sufficient scale to achieve profitability sooner than previously
expected based on its existing customer account base and management
has intensified its focus on the retention of higher margin
customers and on winning new customers with a similar profile
through direct sales channels.
The Board has taken a view that Flowgroup should maintain a
total of just under 250,000 customer accounts, a level above which
regulatory payments in the energy supply business significantly
increase. The decision to remain below 250,000 customer accounts
will save the Company approximately GBP2.5 million. The Directors
believe this creates a strong foundation for further, profitable
and sustainable growth.
Board of Directors
As part of this cost saving initiative, the Company will
streamline the group structure to focus solely on the energy supply
business. Tony Stiff, Chief Executive Officer, has resigned as CEO
and from the Board with immediate effect. The resulting executive
team will be sized at a more commensurate level with the size of
the business. Nigel Canham, Flowgroup's Chief Financial Officer
since 2014, will assume responsibility for the restructuring and
Andrew Beasley, the Managing Director of Flow Energy since 2012,
will continue to run the day-to-day operations of the energy supply
business.
With the recent appointment of Alan Lovell as Chairman, the
Board is confident that this completes a strong team who are well
set to manage the restructuring and future growth of the
business.
Working Capital
Whilst profitability remains broadly in line with market
expectations, the flat level of customer accounts will have an
impact on the seasonal working capital needs of the Company. The
Company typically generates working capital in the summer and
autumn, and uses working capital in the winter and spring. Loan
note holders and other stakeholders remain fully supportive of the
business and have given strong indications of their willingness to
support any temporary and seasonal working capital requirements if
needed.
Green Energy
The Company has successfully transitioned 100% of energy
customers to 50% renewable electricity at no additional cost to
them. This is more than twice the proportion in the national
average energy mix. In addition, the Company launched the new Flow
Green tariff in October 2017. This tariff features a 100% renewable
electricity tariff and green gas offset available at a small
premium to the standard tariff.
Outlook
The decarbonisation, decentralisation and digitalisation of the
energy market is creating opportunities for new entrants and new
business models in the energy supply business. The proposed merger
between SSE and npower also highlights the changing dynamics of the
marketplace. With the appointment of Alan Lovell, the Board has
refined its strategy and the Directors believe that achieving
profitability earlier will put the Company in a stronger position
to take advantage of opportunities as the market continues to
change, consolidate and innovate.
Alan Lovell, Chairman, commented: "Flowgroup is focused entirely
on achieving profitability, and we will realign our corporate
structure to ensure that this goal is met as soon as practicable
without sacrificing the long-term promise to our customers. Energy
customers typically provide stable, consistent revenues and we
believe that a challenger energy business of our size should prove
its worth as early as possible by delivering profitability. I have
joined Flowgroup at this exciting time and I firmly believe that
driving towards profitability more quickly, by reducing costs and
increasing customer value, is the right decision. I'd like to thank
Tony Stiff, Group CEO, for his very significant contribution to the
Group over the years."
Enquiries:
Flowgroup plc www.flowgroup.uk.com
Alan Lovell, Chairman Tel: +44 (0)20 3817 3637
Nigel Canham, Chief Financial
Officer
Cenkos Securities plc (NOMAD Tel: +44 (0)20 7397 8900
and Broker)
Stephen Keys/Mark Connelly/Callum
Davidson (Corporate Finance)
Julian Morse (Sales)
Walbrook PR Ltd (Media Tel: +44 (0)20 7933 8780 or flowgroup@walbrookpr.com
Relations)
Paul McManus Mob: +44 (0)7980 541 893
Nick Rome Mob: +44 (0)7748 325 236
This information is provided by RNS
The company news service from the London Stock Exchange
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