What: Energy management consultancy group Energy Action Ltd (ASX: EAX) offers an appealing service to clients, whereby it looks for ways to reduce their energy costs.
Despite the seeming appeal of this service; the latest results from the company were disappointing…
Revenues grew primarily thanks to the acquisition of Energy Advice. Operating profits meanwhile fell 41% to $2.7 million with management citing a number of causes for the weak result including lower revenues from Activ8, Project and Advisory (PAS) product mix and bad debt write-offs. The lower result has led to a corresponding lower dividend with the full year payment reduced by 50% to 3.65 cents per share.
So What: While the results weren't great, arguably the future could be brighter. In May 2015 an organisational restructure was announced with the process fully implemented in July. This reorganisation is expected to deliver ongoing savings of approximately $1.5 million per annum.
Now What: One of the appealing aspects to Energy Action's operations is the future contracted revenues the group maintains. Having peaked in financial year (FY) 2013 after a number of years of growth these contracted revenues declined in FY 2014, but pleasingly contracted revenues were once again higher (albeit only slightly) in FY 2015.
While the outlook statement from management doesn't provide investors with any hard numbers with the stock trading on a price-to-earnings multiple (based on operating profit) of approximately 11x, there is the potential for upside in the stock if the business has indeed stabilised and returns to its growth trend.
