Entu (UK) plc, the home improvement group providing energy efficiency products and services to homeowners and businesses in the UK, gave the following trading update this morning.
EBITDA on the Group’s continuing activities before exceptional items for the year ending 31 October 2016 is expected to be between £3.6million and £4.0million, with an improved performance in the Energy Generation and Savings Division being offset by delays in realising the benefits of the May restructuring in the Home Improvements Division.
The Energy Generation and Savings Division will produce a result ahead of plan in the second half. The insulation and new commercial LED installations businesses are both performing in line with plan. Astley Façades has had a strong second half, successfully managing down risk on a number of completed contracts. Astley’s final result is dependent on a major project due to complete in October, but is expected to be ahead of plan regardless.
Performance in the Home Improvements Division has been mixed in the second half. The actions taken earlier in the year to reduce costs and restructure the Group have led to improved performance in many areas across the Division, although challenges in the Division’s installation capability have taken longer than anticipated to address. Whilst significant improvements are being made, the Division’s overall results will be below management’s previous expectations.
Borrowings at the year-end are also anticipated to be higher than expected at around £5million mainly due to exceptional restructuring costs and issues identified within the Home Improvements Division. The Board expects to be able to pay a final dividend of 1.0p per ordinary share, in line with expectations, resulting in a total dividend for the year of 1.5p per ordinary share, subject to the reserves and cash position at the time the Group announces its preliminary results. It is the Board’s intention to move towards a dividend policy of distributing one half of its post-tax profits as dividends each year split broadly one third as an interim dividend and two thirds as a final dividend each year.
Outlook
The year ending 31 October 2017 is expected to benefit from the restructure. Savings in the current year of approximately £0.9m, are expected to yield an annualised benefit of approximately £2.0m in FY 2017. Additional cost savings expected to be realised in FY17 are now anticipated to be reinvested in the business to strengthen management, the balance sheet and to improve controls and processes.
This reinvestment, coupled with the work still to be done in addressing the issues outlined above and management adopting a more cautious position, means that despite the expected improvement in profitability in FY17, the EBITDA outturn for the year ending 31 October 2017 is expected to be materially below current market expectations.
The underlying core business is stable, and attractive opportunities for growth remain. It is anticipated that the restructuring and improvement actions being taken by Management will build a stable platform for a return to profitable growth in subsequent years.
