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Aggreko suffering from cheap oil

Aggreko's first half was patchy but we are keeping faith in the power hire group
August 4, 2016

Aggreko 's (AGK) shares powered down 13 per cent on these results, making them the FTSE All-Share's biggest loser on the day. A strong run since the start of the year had left room for profit taking, but results were more downbeat than the bulls were hoping for.

IC TIP: Buy at 1067p

Underlying operating profit fell to £77m from £114m in last year's first half. That gave a margin of 11 per cent, down from 15 per cent. The temporary power group cited a tough economic backdrop, with particular softness in North American oil and gas markets. Rental revenue fell by a fifth in the region, dragging trading profit at the rental solutions division 71 per cent lower to £10m.

The power solutions division - which serves emerging markets - fared better, with underlying trading profit just 7 per cent lower at £67m. And, pleasingly, orders for utility-type power plants nearly doubled to 875 megawatts. But the risky nature of operating in emerging markets was made clear with a $17m (£12.3m) increase in bad debt provisions.

Aggreko is sticking to full-year guidance for only a slight drop in underlying pre-tax profit. But making good on that guidance rests on key contract extensions and a seasonal pick-up in North America. Broker Peel Hunt forecasts full-year pre-tax profit of £250m, giving EPS of 69.8p (from £252m and 71.7p in 2015).

 

AGGREKO (AGK)
ORD PRICE:1,067pMARKET VALUE:£2.73bn
TOUCH:1,067-1,070p12-MONTH HIGH:1,305pLOW: 763p
DIVIDEND YIELD:2.5%PE RATIO:21
NET ASSET VALUE:488pNET DEBT:51%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201578110229.79.38
20166856116.89.38
% change-12-40-43 -

Ex-div: 1 Sep

Payment: 30 Sep