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Aggreko trounces expectations

Hurricane repairs and the Winter Olympics both boosted the group’s numbers, but it is unclear whether the long-term picture has improved
August 1, 2018

Luck (and major sporting events) were on Aggreko’s (AGK) side in the half year. The same extreme weather that has boosted rival Ashtead’s (AHT) US operations pushed rental revenues up by 32 per cent, while industrial power solutions was up 15 per cent thanks to the contribution of the Commonwealth Games and Winter Olympics. The result was earnings per share 18 per cent ahead of consensus, but investors should avoid getting too excited.

IC TIP: Hold at 816p

While rental solutions still posted a strong performance – up 26 per cent – once the impact of hurricanes is stripped out, industrial power was decidedly less impressive with 3 per cent growth. Investors might wonder, therefore, whether it was all just a one-off. After all, in spite of soundly beating consensus EPS, management still guides for full-year profits in line with 2017, excluding for currency impact.

As ever with Aggreko, it’s a mixed bag. Rental solutions is performing admirably with growth across different geographies and sectors and a whopping 6 percentage point expansion in the operating margin, while industrial and utility power solutions were less impressive. Operating margins in the power divisions contracted through the period, while the group’s Argentinian business continued to be a drag on performance, though an emergency contract in the country helped push revenues in Latin America up 16 per cent.

Analyst Jefferies now forecasts adjusted pre-tax profit of £180m, giving EPS of 48.74p in 2018 (£187m, 53.94p in 2017).

AGGREKO (AGK)   
ORD PRICE:816pMARKET VALUE:£ 2.09bn
TOUCH:816-816.8p12-MONTH HIGH:995pLOW: 637p
DIVIDEND YIELD:3.3%PE RATIO:19
NET ASSET VALUE:507pNET DEBT:57%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2017 (restated)77953.015.09.38
201885759.015.99.38
% change+10+11+6-
Ex-div:06 Sep   
Payment:02 Oct