Aggreko expands UK presence amid rising sales

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TEMPORARY power specialist Aggreko has strengthened its position in the UK market with a deal to acquire a rival as it revealed a rise in third-quarter sales.

The Glasgow-based firm has paid an undisclosed sum for Golden Triangle Generators (GTG), which has annual sales of about £3 million throughout the north-west of England and North Wales.

The deal came as Aggreko reported a 6 per cent rise in underlying revenues for the three months to the end of September – although currency effects meant reported sales were down 3 per cent. Shares charged up by 3.4 per cent.

Trading in the Americas was described as “healthy”, with the business growing 15 per cent year-on-year, but a slowdown in the mining sector saw revenues fall 9 per cent in the Asia, Pacific and Australia region.

“Overall, we continue to expect underlying trading profit for the full year to be similar to 2013,” noted Aggreko, which last month said Scottish Gas boss Chris Weston will join as chief executive in January.

Aggreko’s local business arm, which rents out generators and air conditioning equipment, grew 4 per cent in the third quarter, which the company said was lower than the first half due to strong comparatives.

“We continue to deliver year-on-year growth in North America, the UK, parts of the Middle East and a number of our newer markets. However, more challenging trading conditions remain in Australia, Brazil and much of continental Europe,” the group said of the division.

The firm’s power projects arm, which provides large-scale schemes mainly for developing countries, enjoyed growth of 10 per cent in the third quarter, in line with forecasts.

Order intake in the division for the year to date is stronger than last year at 697 megawatts (MW) compared to 530MW last year. Latest contracts include ones in Benin, Gabon, Guinea Bissau and Panama.

Around 150MW of diesel contracts in Japan have been extended for a further three months.

Although Aggreko said it was encouraged with recent progress on contract extensions it cautioned that the market environment “continues to be uncertain”.

Aggreko’s net debt at 30 September stood at £511m, a fall of £26m since the end of June and after £200m was returned to shareholders. It expects capital expenditure on its fleet in 2014 to be around £235m.

Alex Joyner at Galvan Research said the update included some “encouraging figures”, particularly the 15 per cent growth in The Americas.

“It’s true that currency headwinds have taken their toll, but the market’s positive reaction suggests investors are looking beyond this. Aggreko remains the leading player in temporary power supply and has very little serious competition.” Whilst full-year profit is unlikely to be much higher than 2013, the long-term picture here looks good. Global demand for temporary power is set to soar and Aggreko is perfectly placed to benefit.”

John Lawson at Investec said the “somewhat unexciting” figures highlighted the challenge the company faces in how to grow underlying earnings in a meaningful way.

“Of course, the cause of the subdued results is the ending of some large contracts such the military work in the Middle East)and currency headwinds. That said, customers in Power Projects remain unwilling to commit to much new work despite strong market demand drivers,” he said.

Shares in Aggreko closed up 52p at 1,591p.


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