The cold snap has given Aga Rangemaster a boost, with people scurrying home to their cast-iron cookers and wood-burning stoves.
After a bad first half when orders for its upmarket cookers plunged 20%, Aga enjoyed a bounce in the second half of last year. "The weather has been running something of a marketing campaign for us," chief executive William McGrath said today. "The benefits will probably come through in 2010." The idea of having a second energy source at home and being less reliant on the grid has become more appealing during the big freeze and highlighted the benefits of the firm's all-in-one cookers and boilers. With temperatures in Britain dropping well below zero, sales of Aga wood-burning stoves have soared.
The company is also benefiting from signs of life in the housing market, which should have underpinned a return to profitability in the full year, from a loss in the first half. The shares jumped by nearly a fifth on the news.
Orders were down 12% over 2009, but Aga's order book finished the year higher than a year ago.
The company's fortunes are closely tied to the housing market, which looks to be on the road to recovery. McGrath noted that mortgage approvals started to climb again a year ago, even though they are still running at half their peak levels. "With a bit of a time lag, you'd expect Aga to reflect the improvement in housing transactions," he said. And those people that decide not to move may spend more on upgrading their homes, he added.
He shrugged off the suggestion that bankers' wives were back buying Agas ahead of what promises to be a bumper bonus season.
McGrath defended Aga's green credentials, which have come under attack from Guardian commentator George Monbiot. He pointed to the benefits of the Rayburn all-in-one cookers and boilers. The company is also matching the government's boiler scrappage incentive by dropping the price of its Rayburn 480CD gas central heating range cooker by £400.
"Aga offers a strong stable of brands, a business clearly demonstrating operational and commercial self-help, and an earnings recovery profile geared into the improving housing market," said Numis analyst Andrew Wade. The broker raised its pre-tax profit forecast for 2009 to £3.5m from £1.4m.
To keep its pension scheme affordable, which moved into deficit last year, Aga has already frozen the pensionable salaries of senior staff, including management, and is now freezing those of the remaining 700 members. The scheme remains open to new members.
