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Eaga (EAGA) – Interims PTP: £14.5m (£9m) Divi: 1p (n/a)

We tipped the green services group at 176p on 13 December as it was growing fast, set to pay dividends, an energy efficiency specialist and actually profitable. Then the share price fell 42% from September to a low of 125p last month. Chief executive John Clough couldn’t understand it, either. ‘The company has defensive qualities, we’re not really exposed to the consumer market and most of our work is funded by the government,’ he says.

Contributory to its price weakness was apprehension over the government’s Comprehensive Spending Review and whether it would deliver on funding proposals. The outcome arrived in December, when over £800 million investment was committed to the Warm Front Scheme over the next three years, much greater than expected.

Given that Eaga holds the contract to run the £1.5 billion scheme and help makes homes more energy efficient, expansion of Warm Front should have been the catalyst for a recovery in Eaga’s share price, but this didn’t happen until last week’s half-year results.

Pre-tax profit growth of 61% was marginally ahead of analyst forecasts. Fuel poverty and social housing activities were notable drivers to the earnings growth.

It made four acquisitions in the half-year period and plans to keep buying, most likely a specialist in the local government sector and an insurance services group.

Eaga has signed up with utility providers to advise on carbon reduction programmes and is exploring water efficiency schemes. Confirmation of solid trading pushed the shares up to 160.25p by last Friday.

Shares says: With government funding uncertainties addressed, Eaga looks more compelling with growth opportunities.

by: Dan Coatsworth