16th Nov 2016 09:13
LONDON (Alliance News) - Flowgroup PLC on Wednesday said it continues to wait for clarity from the UK government regarding feed-in-tariff changes, with any further delays or adverse outcome potentially resulting in the group being forced to sell or exit its microCHP business.
The energy technology and services supplier said it had expected further information early in the fourth quarter of 2016 on the scope on ongoing feed-in tariff support for the microCHP boiler units.
However, "this has not been forthcoming and indications from the Department for Business, Energy & Industrial Strategy are that any revised scheme will now not come into place until April 2017", Flowgroup said.
This follows the surprise outcome of the UK Department of Energy & Climate Change's consultation in May, of a potential recalibration of the scheme, whereby the number of qualifying microCHP units would be capped at a much lower level, thereby reducing the support significantly. Following this, Flowgroup slowed down production of the boilers, reduced the level of sales and marketing of the units and launched a strategic review into its microCHP business.
On Wednesday, Flowgroup said it has been considering options if the conclusion of the consultation is not in its favour or is delayed further, including continuing reducing production and accelerating its plans to launch in Europe.
Flowgroup said it is also considering selling the microCHP business or, if that fails, exiting the microCHP business, in the event its reduced production approach is "not found to be feasible".
"Whilst the uncertainty of the outcome of the consultation and the weakness of sterling has created issues, support for the technology in Europe remains very strong," Flowgroup said.
The group pointed to potential incentives, which vary across Europe, with "Italy understood to offer personal tax rebates, while Germany provides grants and other tax incentives to support deployment of the technology".
However, Flowgroup noted, whilst the previously announced reduction in microCHP production has "inevitably had a corresponding effect" on its expectations for revenue, it said its diverse model was "robust" and the rest of the business was trading well.
Flowgroup said it expects its earnings before interest, tax, depreciation and amortisation, and cash for 2016 to be in line with market expectations.
"While our microCHP technology platform has significant potential value for our business, and we will pursue every opportunity to realise that value, we have built an organisation that can flourish without it, should that be necessary, and believe that diversification remains one of Flowgroup's fundamental strengths. That said, we remain positive about the potential for microCHP," Chief Executive Tony Stiff said.
Shares in Flowgroup were down 9.7% at 10.50 pence on Wednesday morning.
By Hannah Boland; [email protected]; @Hannaheboland
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