Premium kitchen equipment supplier Aga has warmed its investors with the promise of a special dividend, and predicted it would benefit from growing awareness of environmental issues.
Aga Foodservice Group, best known for its eponymous cast iron ovens, announced a near 8% increase in pre-tax profits for 2006, to £46m.
However, this excludes losses from its US home furnishings business, Domain, which it has now put up for sale. Including Domain, pre-tax profits at the group were 6% lower at £40.1m.
Aga will return £56m to shareholders through a one-off dividend of 43p per share, on top of the expected final dividend of 7p per share.
William McGrath, chief executive, said that Aga hoped to increase its share of the commercial market for cookers, fridges and other units as energy efficiency becomes a more important issue.
“The commercial kitchen environment could be a lot more efficient,” said Mr McGrath. “A lot of progress could be made if people saw energy-saving as more of a priority.”
Mr McGrath predicted that the commercial sector will accelerate its capital expenditure on new products that waste less energy.
“Companies like ourselves which have invested in developing energy-efficient products should benefit,” he said.
More than half of Aga’s revenue comes from sales to the residential market. Last year it sold around 20,000 of its cast iron cookers under its Aga, Rayburn and Stanley ranges.
Mr McGrath said that many of its sales came from existing customers who upgraded to larger, three or four-oven units. Wood-powered ovens also grew in popularity, which he said was partly caused by enthusiasm for carbon-neutral fuel.
Aga also hopes to grow its green credentials in the residential market by launching a new programmable model that will allow users to set the temperature. It will go on sale in the middle of 2007.
Analysts predicted that pre-tax profits for the current year will grow to £52m, an estimate that Mr McGrath said was in line with Aga’s own ambitions.
Aga also announced that it is putting its underperforming US home furnishings business, Domain, up for sale. Domain’s revenues for 2006 were down 7.4%, and it made an operating loss of £2.9m including costs for reorganisation and stock clearances. Aga hopes to complete the sale of Domain within the next three months.
After rising at the start of the day, Aga’s share price had dropped back to its opening price of 409p by mid-afternoon.
Graeme Wearden
Friday March 16, 2007
Guardian Unlimited