Eaga on track to increase profits by 25% to £47m

Dec 12 2008 by Peter McCusker, The Journal

ONE of the region’s most successful listed companies is expected to have a New Year cash pile of £25m to fund acquisitions, as it reported further strong overall growth for the last six months.

In a half-year trading update for the period up to November 30, 2008, Newcastle-based Eaga said the recession was having little impact on its business as much of its revenue generation is rooted in public sector contracts.

The environmental services company says it is on track to hit its full year turnover target of around £677m and increase its profits by around 20% to £47m. The company says anticipated growth over the coming 18 months will see it add to its 4.500-strong workforce.

Eaga chief executive John Clough said: “We are encouraged by our ongoing progress, and are pleased to have further strengthened our position within what are sustainable, growing and increasingly high profile core markets.

“The board remains confident that Eaga will continue to make progress over the second half of the year and beyond.”

The company is set to benefit from announcements in last month’s pre-budget report of an additional £150m spending on the Whitehall-funded Warm Front scheme, which provides grants to low income households and pensioners on benefits to improve homes’ energy efficiency. Measures include better heating systems and insulation.

The Warm Front scheme accounts for around 40% of Eaga’s revenue and the company believes it well-placed to take advantage of the increasing carbon reduction responsibilities being placed on utility companies.

Since it launched on the stock market in June 2006 the company has made four acquisitions and it appears to have an appetite and the ability to make more.

Financial director Ian McLeod said the company was comfortable with analysts’ estimates that Eaga will have cash reserves of £25m by the end of its financial year next spring.

“We are always attuned to whatever strategic opportunities are available and are well-placed to take advantage if any should arise.

“In the current economic environment distressed companies may become available, but as a company we are also keen to focus on further organic growth.”

Analysts at Brewin Dolphin said: “Eaga is uniquely positioned to capitalise on the many opportunities arising in the rapidly emerging energy efficiency sector.

“Our year end net cash forecast is £25m and this provides resilience and significant scope for bolt-on acquisitive growth in due course.”