Eaga Plc, which runs the U.K. state-funded Warm Front heating insulation program, reported a loss of 3.8 million pounds ($6 million) in the first half as the government cut spending on the program to reduce its deficit.
The loss for the six months to Nov. 30 compares with a profit of 11.2 million pounds in the same period a year earlier, the Newcastle Upon Tyne, England-based provider of energy solutions said in a Regulatory News Service statement. Revenue fell 21 percent to 308.1 million pounds, while adjusted earnings per share fell to 3.61 pence from 6.74 pence.
The U.K. Treasury said in October that the Warm Front program will be phased out “over time,” saving the government 345 million pounds by the 2013-14 tax year. The current program was allocated 959 million pounds for the three tax years ending in April 2011, according to the National Audit Office, which monitors government spending.
“We now believe all the bad news has come out,” Mike Foster, an analyst at Fairfax IS in London, with a “hold” recommendation, said in a report. “They are cheap.”
Eaga rose 4.2 percent to 74.5 pence at the 4:30 p.m. close in London, giving it a market value of 187.3 million pounds.
“There have been certain events which have significantly impacted the operating environment of the group in the short term,” said Chairman Charles Berry in today’s statement. “The speed and scale of the reduction in Warm Front funding required us to take swift action to change the group’s operational structure.”
Eaga booked restructuring costs of 10.7 million pounds during the period, the first phase of a program set to cost about 20 million pounds by May 2013. The costs included redundancy payments, a charge for vacating properties, and matters related to the warm front program, Eaga said.
More redundancy notifications were made to partners in the company in December and the group expects that 700 will leave the business by March 31, with additional cuts expected in the next fiscal year, Eaga said in the statement.