Flowgroup ponders new direction or sale of microCHP business

16th Nov 2016 11:31

(ShareCast News) - Although its energy supply business is going from strength to strength, Flowgroup said it had slowed production of its combined heat-and-power boilers and was mulling a sale or exit from the business due to doubts over government support for the green technology.On the upside, trials of its mCHP boiler in Europe have been so positive that the AIM-listed company has been able to announce its test partner is French utility giant Engie.Despite the health of the energy business and the strength of the technology, investors have focused on the UK government's wavering support for microCHP, with the shares chopped down from an 18-month peak in May after a government review was announced into the feed-in-tariff.The Department for Business, Energy and Industrial Strategy's consultation on whether to significantly reduce support for the microCHP FiT was expected to be decided by mid November but has been pushed back to at least at least April 2017.Flowgroup and manufacturing partner Jabil are discussing whether to further reduce production and switch the commercialisation focus on Europe from the UK, more FiT support exists on the Continent, as the connection with Engie suggests.If this is found to be unfeasible the board will look at a potential sale of the microCHP business, with the last resort being a full exit, which would not only be costly but would also mean the business had completely abandoned the core business around which it was floated as Energetix in 2006.Chief executive Tony Stiff said: "The ongoing uncertainty around our microCHP business is frustrating. However, we are taking positive steps to find a solution that works for our business and for our shareholders."While we do that, we are continuing to grow the business as a whole, producing good results in our energy business and generating the first sales of the Flow Eco RF boiler, both to new leads and to existing energy customers."The Flow Energy business has grown customer fuel accounts more than 150% this year, with annualised revenues now running at over £127m."We believe that current market conditions favour more established providers like Flow with more robust energy trading strategies, systems and processes, and we believe we can continue to grow this part of the business in 2017," Stiff added.House broker Cenkos said the Engie tests "potentially extends the boiler's validation to the major economies of Italy, Germany and now France" but it cut its 2016 revenue forecasts as boiler deliveries in the UK are expected to be "minimal" in light of the decision to slow production, predicting 50 mCHP and 500 third-party boilers to be installed this year versus 500 and 1,500 previously.Shares in Flowgroup fell another 10% to 10.47p,