Aggreko adds cautious note to upbeat forecasts for positive 2012

By Peter Ranscombe
Published on 20/12/2011 00:00

TEMPORARY power supplier Aggreko raised its full-year profits guidance again yesterday but warned it was more cautious about the outlook for 2012.

The Glasgow-based firm said it expects to make an underlying pre-tax profit of £324 million in the year to 31 December, up from its £320m forecast in October.

News of the rising profits came as the group signed a five-year extension to a contract to switch a power station in Bangladesh from diesel to gas, adding $100m (£65m) to the deal.

Although it starts next year in a “strong position” with 20 per cent more equipment on hire from its international power projects (IPP) division, Aggreko cautioned the downturn in global economic activity could hit demand during the second half.

But chief executive Rupert Soames remained upbeat, with the company highlighting the work it has won at the London 2012 Olympic Games.

“We have had a very successful year in 2011 and have grown our business significantly at the same time as returning capital to shareholders,” Soames said.

“As we enter 2012, demand for temporary power remains strong and we will continue to invest in the expansion of our fleet and our global network of service centres”.

Mike Murphy, an analyst at Numis Securities, said the pre-close trading update was “positive” but noted the “hint of caution about the outlook for the second half of 2012”.

Murphy added: “We continue to see the shares as slightly expensive and maintain a ‘reduce’ recommendation.”

But John Lawson, an analyst at Investec, maintained his “buy” recommendation and said: “Whilst some investors might see the more-cautious second-half comment as an opportunity to take some profits, we still see a very strong fundamental long-term story so we are not changing our underlying view today.”

Seymour Pierce analyst Caroline de La Soujeole said it had been “another strong year” for the company, adding: “Aggreko is the clear market leader in a fast-growing industry.”

In June, Soames brushed off fears about competition from APR, the second-largest player in the global temporary power market after Aggreko. APR was bought by Horizon, an investment vehicle run by insurance and restaurants tycoon Hugh Osmond, and listed in London, sparking analyst speculation about increasing competition.

Aggreko’s full-year revenues are expected to rise by 13 per cent to £1.4 billion, which – once major sporting events, currency movements and fuel costs are stripped out – will be an underlying increase of 25 per cent.

Aggreko’s net debt is expected to have increased to £400m by the end of the year, up by £270m year-on-year after £148m was returned to shareholders in July and the company invested £395m in buying equipment, up from the £320m suggested at this stage last year. The company expects to spend about £320m on machinery next year.