Power supply firm Aggreko's shares storm ahead

Published on Friday 17 November 2006 01:52

AGGREKO'S shares climbed to a fresh record high yesterday after the company revealed that a fall in hurricane-related work this year had failed to hit trading.

The Glasgow-based company, which provides temporary power supply units across the world - often in the wake of natural disasters - said trading since its last announcement in September had "continued to be very strong".

Aggreko said the board now expected profits of "at least 80 million" in 2006, compared with market forecasts of about 74m.

Despite no income from storms in the US hurricane season this year, Aggreko said its North American division was just as busy overall as last year. Profits from elsewhere in its international operations would grow even faster than the 32 per cent recorded last year, and its troubled European division was "well on the way to recovery", the company said.

Already trading at record levels, Aggreko shares climbed almost 5 per cent, or 19p, to 404p yesterday, valuing the company at almost 1.1 billion.

Work from Hurricane Katrina gave the company a bumper profit from its North American division in 2005, including 5m from the disaster alone. Despite no major storms in the US this season, the company had lost no income this season.

Chief executive Rupert Soames said a fall in turnover from hurricane supply had been completely made up for with "good day-to-day business", in particular serving events and the oil and petrochemical industry.

"Normally we would expect to get $10m to $12m [5.3-6.3m] in storm revenue. Last year we got $32m, this year we got none, but all of that has been replaced with other business," Soames said.

He said Aggreko believed the North American division had good momentum and was now shaking off its reliance on emergencies in the US. "This is showing we don't need storms to grow the underlying profits, so we're much less storm-dependent, which is very good for the business," he said.

The remaining divisions were also in strong health in the second half. Aggreko International, covering South America, Africa, Australia and the Middle East, expects trading profits to rise faster than the 32 per cent last year.

The strength across the division was prompted by droughts in East Africa causing hydro-electric power stations to stop operating, as well as growth in the Middle East, where the building boom "continues apace".

Trading in the troubled European division was also strong, helped by a recent temporary power contract win in Corsica.

Soames said what had been Aggreko's poorest performer for several years was "now well on the way to recovery".

Numis analyst Paul Jones raised his 2007 pre-tax profit forecast from 79m to 90m, placing an "add" rating on the stock with a target price of 432p. He added that further upgrades were possible.