Get into high-yielding Entu

Energy-efficient products are taking an increasing proportion of the £27bn home-improvement market and there's plenty of scope for future growth, with the Department of Energy and Climate Change estimating that 24m UK homes could benefit from loft insulation, 19m from cavity wall insulation and 27m from high-efficiency boilers.

The strong market backdrop was reflected in Entu's inaugural full-year results as a listed company. Revenues increased 25 per cent and underlying pre-tax profits surged 70 per cent to £10.3m. Growth in the group's insulation business was particularly strong, contributing 7 per cent of group sales in 2014 compared with 1.3 per cent last year and 27 per cent of profit compared with 7 per cent the year before. The energy generation and savings business was also a star performer, raising its underlying operating profits from £202,000 in 2013 to £1.8m, or 18 per cent of the total.

To exploit strong demand, Entu plans to push new energy-efficient products through its established national network of home improvement brands. To this end, it last month signed an agreement to supply and install the first ever electricity-generating domestic boiler, manufactured by fellow Aim-listed Flowgroup (FLO).

Growth is also likely to be boosted through acquisition, which is the strategy that has been used to build a group of 10 regional brands. Chief executive Ian Blackhurst says the company is "naturally quite acquisitive", and that the listing has already "increased the number of businesses before us as potential targets", suggesting Entu could benefit further from consolidation in a fragmented market. Rising sales will also give the group the opportunity to increase high-margin sales of repair and renewal service agreements. These activities accounted for just 2 per cent of last year's sales - but 19 per cent of profits.

Entu's business model means there should be plenty of money available to fund both acquisitions and its aim to pay an 8p dividend this year. The company's national network of installation centres buy products to order, using between three and four suppliers for each product to minimise the risk of stock depletion. Meanwhile, the company's sales, marketing and installation staff are all self-employed. This model means the group has very low cash requirements with cash conversion running at about 90 per cent. Entu generated net cash before financing of £7.5m last year, leaving it with a strong year-end net cash position.