The words "we have disappointed our shareholders" are not ones Ian Blackhurst would have wanted to utter in his first year as head of a listed company. And neither did the entu (ENTU) chief executive expect this summer's precipitous decline in demand for residential photovoltaic panels, which prompted a profit warning and a move to scrap the solar division. Shareholders duly ran for the exit, sending the stock down almost 30 per cent on Tuesday. Mr Blackhurst added he could "only assure them that we are entirely focused on restoring earnings" and that the decision "will be seen to be correct".
The solar problems are two-fold. Entu now believes that following an EU ruling in June, speculation around a possible VAT hike from 5 per cent to 20 per cent for solar panels has seriously dented customer appetite. When Mr Blackhurst spoke to the Investors Chronicle just six weeks ago, he said he did not expect the rumours to materially impact demand, citing energy generation as a "key growth area".
But resilient solar panel sales failed to materialise in July and August, when they are normally at their strongest, and the company now says the solar division will post a loss "in excess of £2m" for the year to October 2015, down from a previously forecast £1.6m profit.
The nail in the coffin came last Thursday when the Department of Energy & Climate Change unveiled plans to slash the feed-in-tariff subsidies paid to small-scale green energy producers by roughly 90 per cent from January. "This is a complete u-turn by the government," said Mr Blackhurst. "With the VAT change on its own, we could have discounted and adjusted, but this change has killed it."
And despite re-affirming its core strategy and reminding the market of a record £30m order book, entu will now halve the final dividend for 2015 to 2.67p, giving a final payout of 5.3p (excluding March’s 1.5p special). Broker Zeus Capital has downgraded pre-tax profit forecasts for 2016 and 2017 to £10m and £11m (previously £13.4m/£14.6m).
