The firm has struggled with supply chain problems, fit capacity constraints, and competition
Shares in Entu collapsed on Wednesday after the home improvement group gave a disappointing trading update that showed the firm struggling with supply chain problems, fit capacity constraints, and intense competition in some of its businesses.
Broker Zeus Capital cut its forecasts to reflect the revised expectations, saying Entu's H1 performance had been held back by supply chain problems and fit capacity constraints, which additional challenges in its non-core boilers business.
"Tighter market conditions have also meant the postponement of planned reductions to customer discounting, and the Group now expects to report an underlying LBITDA of c£2.0m for H1. The Group remains committed to executing the action plan outlined alongside preliminary results in March and has appointed an external consultant to accelerate its implementation."
The Group said it had faced "intense" competition in its non-core boilers and energy-switching business which had to result in a loss of around £200k in the first half. As a result, the company has discontinued these activities.
Home Improvements revenue "held up well" in the period, but the operational and supply chain difficulties meant that fit capacity in late March and April could not be scaled up to meet demand.
The company is going to scale back its LED business to focus on its core Home Improvements business. It also says plans to reduce customer discounts have been postponed to ensure it remains competitive in a tighter market.
Looking forward, the Group said H2 EBITDA was likely to be short in the range of £2.5-£3.5m compared to forecasts, despite the improvement in its ECO business which should offset some of the reduction.
"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, it now expects to make a slight EBITDA profit in the second-half, but a LBITDA of £1.2-2.2m for the year, and a loss-before-tax of about £2.5-£3.5m after accounting and restructuring costs.
The Group added that it has a detailed action plan to reduce costs, improve efficiency, to leverage its supply chain, improve cash collection and strengthen controls.