Temporary power provider Aggreko (AGK) is seeing growth slow, bad debts rise and is cutting investment in its fleet of mobile generators. There was no problem with the third quarter in which revenue rose 22 per cent on the prior period – or 13 per cent excluding the Olympic effect – but the fears are that the punchy share rating does not match the slowing growth.
Brokers downgraded, with Panmure Gordon reducing forecasts for 2012's pre-tax profit from £376m to £365m (EPS of 104p), and from £391m to £379m (EPS of 108p) for next year. When you are paying more than 20 times earnings for the shares and receiving a dividend of around 1 per cent you want that growth to come through. That is proving difficult against a sluggish global economy.
The International Power Projects division reported revenue growth of 15 per cent in the third quarter, down from 17 per cent in the second and 21 per cent in the first. Order intake was also down from 944 megawatts (MW) at this stage last year to 870MW. There are other concerns, too – margins have slipped on mobilising difficult contracts and supplying power to less stable regimes has resulted in bad debts rising to $82m (£51m).
The local business is faring better than originally expected, revenue there rose 32 per cent. But, following the acquisition of Poit Energia in Brazil, net debt rose £7m to £685m and management warned that, given the weakening macroeconomic outlook, capital spending would be lower in the first half of next year.
