We can beat the new kid on the block says Aggreko chief Soames

AGGREKO chief executive Rupert Soames yesterday shrugged off the threat from a newly-rejuvenated competitor after the Glasgow-based temporary power supplier increased its capital expenditure for the second time this year to cope with strong demand.

Soames is splashing out a further 30 million on new equipment, on top of the 70m promised in April, taking the firm's capex to 420m for the year.

He said the workforce at Aggreko's factory in Dumbarton - where engineers assemble its generators - had risen from 260 to 410 over the past year to cope with demand.

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In a brief trading update ahead of August's interim results, Aggreko said it expects group revenues to be about 9 per cent ahead of last year's 583.6m half-year figure, with underlying trading profit up 17 per cent.

News of the growth comes a week after Horizon, the investment vehicle run by Punch Taverns founder Hugh Osmond, bought APR - the world's second-largest temporary power supplier behind Aggreko - for 527m, equipping it with 168m to grow its fleet of generators.

Soames, fresh from visiting Aggreko's operations at the US Open in Maryland, said: "We've been competing with APR since 2003. We lock horns and we have a lot of respect for them and their business but, despite APR being there, we've still managed to grow our revenues by 20 per cent compounded over the past seven years and our market cap from 500m to 5.5 billion.

"So neither company has done that badly. Having APR listed in London may add another voice in the market calling for more structural investment in emerging markets."

Turnover at Aggreko's international power projects division, which competes with APR, out-stripped that of its US rival, at $711.5m (439m) versus $126m.

Soames said first-half growth was strong in North America and in South Africa, following last year's World Cup, which was powered by Aggreko.

He said: "Industrial growth in areas like oil and gas refineries are driving the business in North America, along with big events like the US Open.

"During the recession, we didn't cut large swathes out of our business and we kept our sales team intact. That's paid dividends because, now that the recovery has come along, we now have the feet on the street to drive growth."

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While Aggreko's underlying profits are expected to grow - with the benefit of last year's World Cup and Winter Olympics - the company warned that bottom-line growth would be swallowed up by the weak dollar, when its profits are turned into sterling.

Mike Murphy, an analyst at Numis, which has advised APR, warned Aggreko's shares were "expensive" and maintained his "sell" rating. He added: "While we are great admirers of the management and business model we are conscious of value."

But Seymour Pierce analyst Kevin Lapwood kept his "buy" rating and said: "Despite the recent noise over the change of ownership of a very small competitor, we retain our positive stance on the company as Aggreko is in our view a clear market leader in an industry with significant growth opportunities."

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