Aga Food Service Group could cash in on #2.2 billion a year of 'energy inefficiency' in commercial kitchens, a senior executive has said.
Chief operating officer Stephen Rennie spoke out as the Solihull-based business notched up an 18.5 per cent rise in annual pre tax profits and revealed it had considerable potential to expand.
The group said it had seen continued growth in its consumer business driven by sales of its Aga and Rangemaster cookers, which are made in the Midlands.
There had been international expansion in the US, Ireland and France and the group also revealed there had been improved commercial appliance sales in Europe.
Mr Rennie said yesterday: "The cost of gas for commercial kitchens has gone up by 91 per cent and far too many operations are using 20-year-old to 30-year-old equipment. We estimate that in the UK alone, the commercial sector would save #2.2 billion a year by switching to modern, efficient equipment, and that could be a major area of growth for us, both at home and abroad."
The company's commercial equipment bases are in Stirling, King's Lynn and Swansea.
Mr Rennie said the business intended to continue substantial investment in its Aga and Rangemaster operations at Coalbrookdale, Telford and Leamington Spa.
The Aga operations at Telford and Coalbrookdale employ nearly 1,000 people and around 800 people work at the Leamington Rangemaster site, with a further 250 in Nottingham.
The group said overall pre tax profits in the year to the end of December rose to #43 million from #36.3 million in 2004.
And operating profits also lifted by 18.5 per cent to #41.7 million, while revenues gained 15.7 per cent to #501.8 million. The full-year dividend is increased by almost 11 per cent to 9.2p per share from 8.3p previously.
Chief executive William McGrath said: "With new products, strong routes to market and major commercial customers raising investment levels, we believe there is considerable expansion potential available to us."
Aga said the European consumer markets remained the "heartland" of its business, generating 42.9 per cent of total revenue.
UK markets were quiet during the period, but strong new product programmes and marketing campaigns for Aga and Rangemaster enabled the group to offset this and to implement its growth plans in international markets.
The group said its tiling, flooring and paint business Fired Earth saw sales fall as its core tile business proved challenging in 2005.
It said it had taken decisive action to improve performance by cutting overheads and focusing on new kitchen-orientated products.
European food service increased revenue by 14.1 per cent and operating profits by 37.3 per cent and Aga Bakery continued to increase market share in the UK and France and is building a presence in Eastern Europe and the US.
In North America, performance was mixed as the bakery operations progressed well, but margins in commercial refrigeration remained weak.
The consumer refrigeration appliances business was strong, but home fashions retail stayed flat in the face of subdued consumer spending on furniture.
Overall, the US contributed 22.7 per cent of total revenue and #11.3 per cent of operating profit.
The group made several acquisitions in 2005 including Irish cooker company Waterford Stanley, Ontario-based cooker and refrigeration operation Heartland and London-based kitchenware business Divertimenti.
"With cash resources to invest, we will sustain our development approach while retaining the option to buy back shares if market conditions provide appropriate opportunities," the company said.