Boost for executives as Aggreko powers its way through £1bn sales barrier

Published on Saturday 27 February 2010 14:39

THE surge in Aggreko's share price as its global growth takes sales through the £1 billion barrier this week is building multi-million pound fortunes for executives at the group.

The market value of the Glasgow-based temporary power provider, which has been supplying the Winter Olympics, rose to a record high last week ahead of full-year results on Thursday. Last Friday alone the company saw its shares rise by 3.5 per cent to 975p, almost treble the level they achieved at one point last year and a 500 per cent increase since 2005.

The rise in market capitalisation to more than 2.6bn has seen Aggreko leapfrog firms such as Weir Group, Stagecoach and Wood Group to fifth place in the league table of Scotland's listed companies. According to some analysts, despite the strong share price rise there could be further gains to come. Nick Spoliar of Altium Capital, who recently raised his price target on the shares to 10.75, believes Aggreko looks well-placed to deliver continued growth.

"Their business model has really got wheels. I'm very positive about the company and it has a tremendous management team in place," he said.

The executive team, which has been led by chief executive Rupert Soames for the past six years, look set to be rewarded well for the success thanks to the share price gains. The company's strong performance over the past year is expected to see them at least equal the 1.18m they shared in performance bonuses last year.

But the dramatic share price rise in recent years means they are also sitting on bumper paper profits on shares held in option schemes and performance related share schemes on top of gains seen on their existing holdings.

Soames owns about 352,000 shares in the company – worth 3.43m – but also holds shares potentially now worth more than 5m in long term performance-related option schemes.

The biggest boardroom gainer from the company's stock market success has been non-executive director Andrew Salvesen. Aggreko was originally formed as a division of family logistics company Christian Salvesen before being spun-off in 1997.

He owns just under 8m shares in the company currently worth 78m, up from around 15m five years ago.

According to the company's annual report there were some 2.2m shares options outstanding last year with exercise prices ranging from 189p to 327p, a potential paper profit of more than 13m at current share prices.

In its final results Aggreko expects revenues this year to have topped 1bn, with a higher-than-expected 27 per cent rise in operating profits to 260m. The firm also plans to spend around 180m on new fleet in 2010. Since its pre-close trading update, a number of new contract wins have also been announced.

Spoliar said one of the key factors in Aggreko's success has been the impact of constrained credit in energy-scarce economies.

He said: "It is more difficult than before to get the financing for a power plant and even if there is money available there is a long lead time to get that power online."

Aggreko's international power arm serves utilities, governments, armed forces and major industrial customers with power plants ranging from 10MW to 100MW on a single site.

It has provided power for events such as the Glastonbury music festival and the Beijing Olympics.The firm's local business, which operates from 133 service centres in 31 countries supplying smaller customers with equipment from small generators to large cooling plants, has been hit harder by the recession.

Fourth-quarter revenues fell around 21 per cent, although in its trading update Aggreko said conditions were "getting no worse" in the division while margins were protected through tight cost controls.