60% increase in profits at Eaga

Jan 30 2008 by Graeme King, The Journal

ENVIRONMENTAL efficiency business Eaga has posted a 60% rise in profits for its maiden half-year results.

The Jesmond-based company saw pre-tax profits reach £14.5m for the six months to November 30, up from just over £9m for the same period in 2006 – before Eaga listed on the stock exchange.

And sales at the fast growing business soared to a huge £309m in the same period – a rise of 44%, part fuelled by a series of four acquisitions.

Eaga made its name as an energy efficiency business, operating the Government’s Warm Front scheme to insulate thousands of homes around the country.

But now it is more diversified, also looking at heating systems, renewable energy, and growing into water conservation and reducing carbon emissions.

The group now has 4,000 employees, with operations right across the UK, as well as Ireland, Canada and India.

Yesterday chief executive John Clough revealed he could call on bank backing of some £100m to make further acquisitions, if he sees the right opportunities.

He said: “Even after our recent acquisitions, we still have cash on the balance sheet. We have good support from the banks, with a £35m credit facility and we have indications from them that they would be comfortable going north of £100m if we chose.

“As ever, we will look for acquisitions, but we have to make use of the rifle, rather than the shotgun. Any acquisition has to be strategic, and there has to be an opportunity for organic growth.

“There is nothing particularly in the cross hairs at the moment, but there could be one or two ‘tuck in’ acquisitions where the market is particularly strong, as in the North-West and South-East.”

He went on to explain Eaga’s new businesses, firstly in offsetting the impact of carbon emissions, known as ‘Balance Trading’, which involves Eaga helping to reduce the carbon emissions of existing businesses, to offset the impact of new development.

He said: “Planning authorities are already requiring plans for carbon or water neutral development. So if you are going to build 100 homes, you had best have a planning proposal to offset the carbon.

“A few authorities have already adopted our proposals for local offsetting.

“With water efficiency, we have pilot contracts in place for water saving and water affordability, but we need scale. There is a 1,000 home pilot, but we need a 10,000, 20,000 or 30,000 home programme for it to be commercially viable.”

Even after flotation, around half of Eaga is still held by employees. This includes 37.5% in the hands of the Employee Partnership Trust, for the majority of staff, and 12.5% in the hands of board members and senior managers.