Entu sees FY17 operating profits below market expectations

Shares in AIM-listed Entu, a provider of energy efficient boilers, plummeted as it announced it expects earnings before interest, taxes, depreciation and amortisation to be materially below current market expectations for the 2017 financial year.

In a trading update for the year ending 31 October, the company said it expects operating profits on an EBITDA-basis to come in at between £3.6m and £4m.

Savings of about £900,000 are expected to yield about £2m in the 2017 financial year, with additional cost savings expected to be reinvested in the business.

The company said this investment coupled with the work to address several issues in its divisions and management adopting a “cautious position means that, despite the expected improvement in profitability in the 2017 financial year, 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.”

The company expects the “improved performance” from the energy generation and savings division to be offset by the delays in realising the benefits of the restructuring of the home improvements arm in May, which has had a mixed performance in the second half.

Although the company maintained that the actions taken earlier in the year to reduce costs and restructure has led to an improved performance in areas across the division, challenges in its installation capability have taken longer than anticipated to resolve.

Whilst improvements are being made, the division's overall results will be below the company’s previous expectations.

The insulation and new commercial LED installations businesses are performing in line with the company’s plan while the Astley Façades business has had a “strong second half” but its final result is dependent on a project due in October, but is expected to be ahead of expectations.

Borrowings by the end of the financial year are expected to be higher than expected at around £5m, due to restructuring costs and issues within the home improvements division.

The company expects to pay a final dividend of 1p per share, in line with expectations, resulting in a total dividend of 1.5p, subject to cash position at the time of the publication of the full-year results.

It said it intends to move towards a dividend policy of distributing one half of its post-tax profits as dividends, split broadly one third as an interim dividend and two thirds as a final dividend each year.

Shares in Entu were down 14.45% to 20.96p at 1241 BST.