The Chancellor Alistair Darling is coming to the aid of the struggling economy with a fiscal stimulus package and several listed outsourcing companies look set to benefit from the spending highlighted in last month's pre-budget report (PBR).
At the front of the queue is Eaga. The company specialises in providing energy efficient heating systems and other measures to make homes warmer and greener, such as installing insulation. The group also manages the government's Warm Front initiative, which is the UK's largest grant-funded programme for tackling fuel poverty. So news that the government will commit another £100m to this programme and bring forward a further £50m of spending is a big plus for the Newcastle-upon-Tyne-based group. It also suggests that energy efficiency will be subject to continued government support which could help ease concerns about Eaga's reliance on big individual contracts. The group is also handling the digital TV switch-over.
Eaga also looks like it should benefit from increased spending commitments to social housing. The PBR stomped up £60m to provide energy efficiency solutions to social housing. However, Eaga is far from alone in this part of the market. The UK's big social housing maintenance firms, Connaught and Mears, are also very well positioned, and repair and maintenance specialist Spice also has some exposure. Connaught and Mears's shares were recently hit by a profit warning from building contractor Rok which had suffered as private sector financing fell through for a number of social housing building projects. But even if social housing providers fold, the work undertaken by maintenance providers should actually be fairly secure as it is funded from rent which goes into a special regulated vehicle called the Housing Revenue Account. So maintenance goes on.
