Aggreko braces investors for lower profits

PORTABLE power provider Aggreko has braced investors to expect lower profit levels, with market conditions remaining challenging.

However, the markets responded positively, with the share price rising a further 2.5% to near an eight-month high.

The company, which has a major base in Cannock, said it was encouraged by order intake during the first quarter but in a trading update for the period, the firm revealed that underlying Q1 revenue was 14% behind last year with reported revenue down 17%.  

Nevertheless chief executive Chris Weston said: “Performance in this first quarter has been in line with our expectations. Whilst some of the markets we operate in continue to be challenging I am encouraged by the order intake to date. Our guidance for the full year, of profit before tax slightly lower than 2015, remains unchanged.”

Rental Solutions revenue was down 9% on last year. Revenues in North America were lower year on year, which was the combination of soft markets and a volatile oil & gas sector.

Power Solutions Industrial revenue was 10% lower, primarily due to strong comparatives including revenues from the European Games. Elsewhere, it continued to see growth in Russia, Middle East and Africa offset by more difficult trading conditions in Latin America, in particular Brazil and Chile.

Power Solutions Utility revenue was 19% lower than last year. The first quarter of 2015 included revenues from a diesel contract in Panama which ended in June 2015, in addition new contract terms in Bangladesh were not effective until the second quarter of last year, which it said had also affected this year’s Q1 results. 

Fleet capital expenditure is expected to be around £250m (2015: £237m), with a focus on more efficient gas and diesel engines.

In outlook, it said: “The timing of contract start and end dates will have an impact on first half year on year profitability.  Overall the guidance of slightly lower year on year profit before tax and exceptional items on a constant currency basis remains unchanged.”