Trading Update

This Announcement Contains Inside Information

Entu (UK) plc

Trading Update

Entu (UK) plc, ("Entu" or the "Company" or the "Group"), the home improvement group providing energy efficiency products and services to homeowners and businesses in the UK, issues the following trading update.

Summary

As set out in the full-year results statement on 29 March 2017, the Group has a detailed action plan to reduce costs, improve operational efficiency, leverage its supply chain, improve cash collection and strengthen controls. The strengthened Executive Team is progressing with the implementation of this plan but it has become clear that the operational issues outlined in the last full-year results statement are more complex and extend further into the supply chain than expected. As a result, it will take longer to resolve these issues.

Sales in the core Home Improvements business held up well throughout H1, but the operational and supply chain difficulties meant that fit capacity in late March and April could not be scaled up enough to meet seasonal demand. Driving up fit capacity to recover the lost contribution in the last weeks of H1 and meet seasonal demand in early H2 whilst the Group is addressing its complex operational and supply chain issues would be unsustainable and counter-productive. The Group has, therefore, made the difficult decision to hold fit capacity at current levels and bring sales into line in order to protect levels of customer service until the supply chain issues have been resolved.

To support and accelerate the Group's action plan, and contribute to the wider strategy, the Group has engaged a senior consultant with significant industry-relevant experience in business transformation and turnaround. As part of the Executive Team, this role will work closely with the recently appointed Group Operations Director who also brings to the Group a wealth of experience in operations process re-engineering and supply chain management.

Interim Results

The Group expects to report a loss before interest, tax, depreciation and amortisation on continuing operations before exceptional items for the six months ended 30 April 2017 of around £2.2-2.4m. Of this loss, c.£0.7m was lost contribution in late March and April resulting from the constraints in fit capacity, offset partly by additional profit on the Group's ECO-funded insulation business following a 15-month extension of the Group's contract with a major utility company. Net debt at 30 April 2017 was £6.5m.

As outlined in the last full-year results statement, the previous year comparators will be restated to reflect changes in accounting policies. This exercise is ongoing, but the half-year results are expected to show a comparable loss for the same period last year on an underlying basis.

Intense competition in the non-core boilers and energy-switching businesses resulted in a loss of c.£0.2m in H1. Following a review of these business units, the Group has discontinued these activities.

Trading Outlook

For the reasons outlined above, fit capacity will be held at current levels throughout H2 and sales brought into line. Whilst the improvement in the Group's ECO business is expected to offset some of this reduction, the overall impact on EBITDA in H2 is expected to be a shortfall in the range £2.5-3.5m.

To focus resources on the core Home Improvements business, the LED business and other commercial revenue streams will be scaled back in H2. Plans to reduce the levels of customer discounts have also been postponed, ensuring that the Group remains competitive in tighter market conditions. These actions, along with the closure of the boilers and energy-switching businesses and the loss of previously anticipated contribution, will reduce previously expected EBITDA further by £1.8-2.2m.

As a result of these challenges, but reflecting progress in the implementation of the Group's performance improvement plan, the Group expects to make a small profit at the EBITDA level in H2. Accordingly, the Group now expects a full-year LBITDA on continuing operations before exceptional items, in the range of £1.2-2.2m. Loss before tax for the full-year is expected to be in the range £2.5-3.5m after accounting for restructuring and finance costs.

Entu remains fully focussed on its five-point action plan to improve performance in its core Home Improvements business.

14 June 2017

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