Management team considers capital fundraising to avoid disposal of retail business

Flow Group has revealed it is in the advanced stages of preparing a “significant” capital fundraising initiative as an alternative to the sale of its energy retail business, Flow Energy.

Flow Group aired its intention to dispose of Flow Energy in a February trading update when it said it would “actively pursue” a sale.

It explained that, although the business “has progressed well and is delivering growth” wholesale market volatility had caused gross margins to come “under pressure”.

It added that this pressure was exacerbated because “we have priced to compete with a range of new entrants offering reduced tariffs to customers to gain market share”.

At the time, Flow Group also said it hoped that the sale of Flow Energy would unlock capital for investment in its microCHP boiler business, allowing it to be fully commercialised for the European market. It insisted that the boiler technology had the potential to be “market leading”.

In a fresh announcement yesterday however, Flow Group said that while it is still in talks with a preferred bidder for its retail arm, concurrent discussions around the downsizing of it microCHP boiler business may impact its desire to Flow Energy.

Should the sale not go ahead, the company will look to fall back on “a capital injection into the Group of in excess of £20 million”.

The statement also explained that, should any such fundraising take place, “it is likely that the investment will be made in the form of convertible securities and new equity and it is expected that the equity issue and convertible security conversion prices will be at 1.5p and 1.8p respectively.”

A final decision on the fundraising proposal, and the fate of Flow Energy will be subject to the approval of shareholders at the company’s general meeting.

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