Eco Investor June 2015

Core Securities

More Downside from Energy Action

Energy Action's shares continued their downward trend by plunging 44 per cent or 87 cents to an all time low of $1.11 after the company downgraded its earnings forecast for the full year.

The new operating net profit is expected to be between $2.6 million and $3 million compared to $4.5 million for 2014-15.

Chief executive Scott Wooldridge said profitability has been impacted by lower sales revenue than anticipated and the write off of some old accounts receivable that are expected to have a $630,000 impact on net profit.

The previous guidance indicated an increase in sales revenue of 30 per cent above 2013-14, but this is now expected to be a 25 per cent increase. The revenue lines impacted means the reduction correlates to a reduction in operating net profit.

Energy Action said a comprehensive audit back to 2007-08 was undertaken by Energy Action's largest contracted metering provider. This identified a number of accumulated discrepancies, and an agreement was reached to reconcile these on a full and final basis and pu in place measures to prevent a recurrence.

On the plus side, the organizational restructure to align the cost base with revenue has identified over $1.5 million in annualized cost reductions. The restructure will be completed by 30 June and will impact up to 15 per cent of employees. The costs have not yet been finalized and will be accounted for as a significant item.

Mr Wooldridge said the focus is on restoring the company's profitability to acceptable levels, realizing the benefits of the three most recent acquisitions, and extracting the necessary earnings from the company's energy management services. (ASX: EAX)

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