Energy efficiency services provider eaga’s interim figures were in line with expectations after a tough trading period hampered by government policy changes. The cuts to the government’s Warm Front energy efficiency programme mean that eaga’s profit could continue to decline for the next couple of years.
Carbon Emissions Reduction Target (CERT) demand is going to be second half weighted and local authorities are not keen to commit to spending cash on the Community Energy Saving Programme (CESP).
Revenue fell from £391.5m to £308.1m in the six months to November 2010. Stripping out exceptionals and amortisation, profit declined from £23.9m to £12.8m. There was a £10.7m restructuring charge and voluntary redundancy costs of £2.9m in the period. The total cash cost of restructuring is likely to reach £20m over the next couple of years.
Maintaining the dividend at 1.21p a share is eaga’s way of indicating that it is confident about its medium-term future. The dividend remains well covered and there is little in the way of debt. An unchanged total dividend of 4p a share for the year as a whole would still be covered three times by forecast earnings.
There are negotiations about extending the Warm Front contract until the end of March 2013 but no guarantee of the outcome.
Broker Peel Hunt is concerned that eaga has still not secured debt funding for its solar panel special purpose vehicle. The company says that the planned bank facilities will provide enough cash for “significant installation activity across the next 18 months”. Peel Hunt expects £225m to be provided by the funder. There will be equity partners and eaga will have a minority stake.
Peel Hunt forecasts a full year profit of £43.6m, falling to £38.2m in 2011-12.
|< Prev||Next >|