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Eaga takes £20m hit as government cutbacks start to affect industry

Heating and renewable supplier Eaga will take a £20 million restructuring charge as it adjusts its business following the scaling back of the government’s Warm Front scheme.

The firm is “taking steps to significantly reshape its operational structure”. It expects to see a cash outlay of around £25m over the next two financial years, probably to fund redundancies.

It is also reviewing the value of goodwill on its balance sheet, which could lead to further write-downs.

The company’s shares fell by 40 per cent as the Chancellor announced the cuts in his spending review.

The green energy and retrofit specialist said the Warm Front scheme represented 44 per cent of group revenues in the financial year ending 31 May 2010.

Funding for the programme in 2010/11 is £345m. This will fall to £110m for 2011/12 and £100m in 2012/13. During 2009/10, funding was around £369m.

At the end of the 2010 financial year, Eaga employed 1,668 people. It is unclear how many jobs could be at stake.

The company is discussing the cuts with the Department of Energy and Climate Change and will try to redeploy staff to other work, such as installing solar panels.

The statement said: “As a result of this lower funding, activity in both our managed services and heating and renewables segments, during both the current and next financial years, will be significantly lower than the board had expected prior to the CSR announcement.

“Given the change in scale of the operations in these divisions the operating margins (excluding restructuring charges) are likely to be lower than our previous estimates unless significant new work is won.”

The statement added: “Our carbon services segment will be minimally impacted by the changes to Warm Front programme and indeed demand in this part of the Group’s business remains strong.”

There is potential for the firm to recoup some of its lost revenue from expanding other parts of its business, but this is unlikely to happen quickly.


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