Aggreko shares power to an all-time high as profits poised to surge 5%

Published on Thursday 15 October 2009 21:47

AGGREKO shares surged to an all-time high yesterday as the temporary power provider said its profits would be ahead of last year, despite a sharp fall in third-quarter revenue.

Analysts said the Glasgow-based group was in line to increase its pre-tax profits by 5 per cent to about 237 million.

Aggreko, which provides diesel and gas-powered generators for major projects around the world, said revenue in the three months to September had fallen by 8 per cent compared with last year. The drop would have been greater but for the recent weakness of sterling.

However, strong first-half results, improving margins and signs that demand was recovering meant profits were expected to be slightly ahead of 2008, the company said in a trading statement. Shares surged as high as 800p in early trading, before closing up 57.5p at 786p.

Last night, Aggreko's market value stood at some 2.15 billion, its highest closing level.

Aggreko's value rose above 2bn for a few weeks in mid-2008. However, fears of the impact of a fall in demand saw shares halve in value over the following six months.

The group has also been targeted by short sellers – who profit from falling share prices – on expectations that a drop in profits would drive prices down.

Earlier this year, Aggreko became one of the UK's most "shorted" companies, with almost one in five shares "out on loan", the best available measure of short selling activity.

Despite a fall in industrial demand, the group has continued to report strong growth in developing economies, in particular Africa. In August, Aggreko announced that it had won a new $30m (18.5m) contract in Kenya, where droughts have closed down several hydroelectricity stations.

Yesterday, the firm said its international power projects business, which covers markets such as Africa and Latin America, grew by about 10 per cent.

Meanwhile, quotes for new work were "noticeably" higher at the end of the third quarter than at the start.

Aggreko's trading update showed more weak demand in established markets. Revenues in North America dropped by 33 per cent compared with the same quarter of 2008, although last year's results were flattered by record storm-related revenue, including from Hurricane Ike.

Its other international business saw revenue drop by 42 per cent. Last year's results had a major one-off boost from the Beijing Olympics.

Aggreko has been warning of weakening demand in established markets for about a year.

Yesterday, chief executive Rupert Soames appeared to call the worst of the recession for the company, saying demand was "unlikely to get any worse".