Andy Hanson
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Flowtech Fluidpower plc* (FLO LN)

Flowtech has announced the complementary acquisition of Balu Limited, for £8.2m (EV of £10.2m), alongside a proposed placing to raise £11m (gross). Balu comprises two subsidiaries: Beaumanor Engineering, a Leicester-based fluid power equipment distributor and a long-standing competitor to Flowtechnology, with annual sales of £8.1m; and Derek Lane & Co, a specialist fluid power engineering business that has crossover with Flowtech’s Power Motion Control (‘PMC’) Division (sales of £3.3m). The purchase expands the footprint by providing a second logistics centre in Leicester, alongside new customers and product lines from which to extract commercial synergies. There is scope to drive operational improvement, within Balu and across the wider Group, and this is a key area of focus for management in 2018. We forecast FY2018E/19E EPS to be broadly unchanged following the transaction, including the dilution from the placing. Nevertheless, the platform on which to deliver future expansion is significantly stronger, and now at a sufficient scale to explore consolidation opportunities in the €12.6bn European market, albeit most likely in FY2019.
Flowtech Fluidpower

Flowtech FluidPower is engaged in the distribution of engineering components and assemblies, concentrating on the fluid power industry. Co. has operations in the U.K., Republic of Ireland, Benelux and China. Co. has three operating divisions: Flowtechnology, which focuses on supplying technical fluid power distributors and resellers, primarily serving urgent orders rather than bulk offerings; Power Motion Control, which focuses on the design and assembly of engineering components and hydraulic systems, and further enhanced by component supply and a service and repair function; and Process, which focuses on the distribution of valves and industrial components to the process sectors.

Zeus Capital
Zeus Capital

All research provided by Zeus Capital is sponsored by the issuer and is therefore specifically exempt from the inducement rules. The research is therefore freely available to all Institutional Investors.

Zeus Capital is an independent investment banking boutique, providing the highest quality advice to clients across a range of sectors and transactions. £3.6bn+ has been raised by Zeus Capital as Sole or Joint broker and/or book-runner over the last four years. Our expertise enables us to guide companies through the often complex process of making acquisitions, selling a business, management buy-outs/ins and IPOs. Zeus Capital acts as Nominated Adviser and Broker on public market admissions, along with offering continued support to AIM listed businesses.

Andy Hanson

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