Aggreko shares surge on hopes of record order haul

Shares in Aggreko surged today after the Glasgow-based temporary power provider said potential demand for major power projects had hit a record high.

Rupert Soames saw his firms share price surge 91p. Picture: Contributed

The firm, headed by chief executive Rupert Soames, also said its annual profits were on track to meet City forecasts of about £335 million, and its shares touched the highest levels in almost a month following the upbeat assessment.

Although the group said third-quarter revenues at its power projects business – which builds temporary power stations for miners and governments around the world – were down 2 per cent, order intake during the three months to September held steady at 105MW.

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The FTSE 100 member also revealed it had quoted on a record level of contracts over the past six months, although these are yet to translate into firm deals. Shares ended the day up 6 per cent or 91p at 1,608p, giving the firm a market value of about £4 billion.

Cantor Fitzgerald analyst Caroline de La Soujeole said: “In our view, the Aggreko business model remains attractive, although the ability to meet peak capacity demands in emerging markets continues to be an issue.

“We acknowledge that contract wins in power projects have been slow of late, however we believe this is temporary.”

Analysts at Deutsche Bank said they also believed the issues with converting quotes into firm orders was “cyclical rather than structural” and predicted a better performance next year.

Recent deals include a 50MW contract to supply power in Guinea and a 150MW diesel contract extension in Japan.

Second-half revenues at the power projects division are expected be down year-on-year but ahead of the first half figure of $482m (£298m) as higher sales from gas projects offset lower activity in Japan and among military customers.

In a trading update, Aggreko said overall revenues during the third quarter were slightly ahead of last year once one-off effects such as currency movements and £37m of revenues from the London Olympics are stripped out.

Its “local” business, which rents out power generators and cooling units around the world, saw underlying sales rise 4 per cent, boosted by a particularly strong performance in the Americas, where revenues were up almost 10 per cent on a year ago.

However, local business revenues across Africa, the Asia Pacific, Europe and Middle East were flat in the face of tougher trading conditions in Australia and the absence of two large contracts in Cyprus and Oman.

Aggreko expects to invest about £230m in equipment this year, lower than its previous forecast of £240m, but higher than the £200m predicted by Deutsche Bank analysts. Spending during the first half of 2014 will be about £140m, “reflecting the continued growth of our local business and further investment in our gas and heavy fuel oil fleets”.

Net debt stood at £469m at the end of September, £216m lower than a year earlier, and the firm said: “For 2013, we expect that group profit before tax will be in line with market expectations.”

Analysts’ consensus estimates point to a pre-tax profit of about £335m for the year to December.

John Lawson, an analyst at Investec, said he had pencilled in a pre-tax profit of £340m, but this could drop to about £330m because of the strength of sterling.

He added: “Whilst there are likely to be further currency-related forecast downgrades, the underlying message is largely unchanged – the local business continues to perform well against some tough comparisons and power projects need new customers to sign on the dotted line.”