Major milestones hit, plus possible VAT boost
​Flowgroup is a pioneering energy products/services business, which we think could transform the global boiler market. Its patented combined heat and power micro (mCHP) boiler is half the price of comparable products, and enables households to save literally £000s on their fuel bills over the life of the appliance. It is also environmentally friendly and helps smooth peak electricity demand for the National Grid.
Encouragingly, its "ground breaking" mCHP (micro combined heat and power) boiler has just received MCS accreditation (Microgeneration Certification Scheme). Meaning that it can now be installed in UK households with the knowledge that the low carbon electricity it produces will qualify for government subsidies, known as Feed-in-Tariffs.
Better still, it appears the EU might be about to back-track on its (perhaps hasty) decision last June to increase VAT on domestic renewable energy products from 5% to 20%. Under pressure from UK politicians, it seems the Commission may soon reverse its ruling in favour of retaining the existing 5% rate. If correct, then we believe this could provide a major fillip to the adoption and profitability of Flow's energy saving and environmentally friendly product.
The company's power supply business has also made great strides in Q1, increasing its customer base from 100K as at the end of 2015, to 170k as of today. This comes on the back of the division's mutually beneficial supply deal with Shell in December, customer service commendations from 'Which magazine' in January, and the release of competitive tariffs on the back of lower wholesale prices.
Despite these very encouraging developments, we have prudently held our 2016 forecasts and 41p/share price target for now, but hope to upgrade based on a more favourable outlook at the prelims due on 29th April.
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