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Aggreko fails to shake off challenges

The shares have fallen sharply after a poor set of results and warning on profits
March 8, 2017

The first page of Aggreko's (AGK) results boasted pre-tax profits in line with market expectations. The market was telling a different story, sending the shares down 13 per cent on the day. That's perhaps because operating profit fell 20 per cent after exceptional items to £199m for the year.

IC TIP: Hold at 913p

The trouble was caused by the continued weakness at the temporary power specialist's stateside oil and gas clients, and the negative impact of pricing renegotiations on contract extensions in Argentina. Management said the impact of those contracts would more than offset overall growth in the group and £25m of annualised cost savings, pushing pre-exceptional profit before tax down in 2017. There was also a £30m impairment against its small gas generators for the North America market.

The group got a slight boost from positive currency movements, with the dollar's strength boosting revenues by £122m and operating profit by £1m. The underlying picture was worse: revenue in the rental solutions division was down 8 per cent at constant currencies and excluding fuel, with continental and northern Europe unable to offset problems across the pond. Power solutions revenue was down 12 per cent on the same measure.

Analysts at Peel Hunt expect 2017 pre-tax profits of £210m, down from its previous estimate of £222m, giving EPS of 58.6p (from £221m and 61.9p in 2016).

AGGREKO (AGK)

ORD PRICE:913pMARKET VALUE:£2.34bn
TOUCH:912-913p12-MONTH HIGH:1,305pLOW: 751p
DIVIDEND YIELD:3.0%PE RATIO:19
NET ASSET VALUE:534pNET DEBT:47%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20121.60367104.023.91
20131.6033392.226.30
20141.5828982.627.12
20151.5622663.527.12
20161.5217248.927.12
% change-3-24-23 

Ex-div: 20 Apr

Payment: 24 May