Aggreko's (AGK) decision in December to withdraw from the bidding process to supply power to the 2016 Rio Olympic and Paralympic Games topped what was a pretty dire year of trading for the group. Management took the decision after the group failed to win any of the first tranche of contracts for the event.
Shares in Aggreko have fallen 44 per cent since we tipped the group as a sell in February - more than any other sell tip in 2015. The temporary power provider has been beset by weak oil and gas end markets as well as security troubles in Yemen and Libya.
However, some analysts think the impact of the group's withdrawal from the Olympic bidding process is limited in scope. Analysts at Barclays said that, while the contract would have provided some welcome relief, "the revenue from Rio was always likely to be a fraction of the size of the £55m London Olympic contract".
Management will continue to put its recovery plan into action during 2016. In August the company announced it had restructured the business into two segments: power solutions and rental solutions. Management is also targeting cost savings of £80m by 2017 and is intent on delivering operating margins and returns on capital of around 20 per cent in the medium term.
Analysts at HSBC reckon weaker local currencies will limit affordability of dollar-denominated expensive temporary power contracts for emerging market government-owned utilities, meaning "they are unlikely to take the pain when the manufacturing growth is weak and investments in permanent capacity are closer to fruition".
