More on Aggreko
Aggreko
Despite a difficult first half in 2004, Aggreko (which supplies power, heating, air conditioning and compressed air systems on rent) increased turnover 6.5% at constant currency. This excludes revenues which represent costs reimburesments of costs for which a customer is liable. Trading profit was up 19% at constant currency
The biggest disappointment has been the European business which saw sharp falls in both turnover (£106, -6.1%) and profits (£7m, -45%). This was -partly due to disruption from the reorganisation which is now largely finished with new systems in place. We are also encouraged by the stronger margins in the second half (compared to the first), despite continued deterioration in turnover.
Aggreko’s North American busiensses had a good second half with hurricanes boosting demand. After a very difficult 2003 last year saw good recovery, with the second half strong than the first. Constant currency revenue growth of 8.6% was not sufficient to effest the weak dollar but with margins returning to reasonable levels profits bounced to £16m, up from £9m and doubling in constant currency term
After stripping out the impact of both exchange rates and flow through revenues (on Sri Lankan electricity generation contracts) the international (i.e.everything other than Europe and North America) business’s revenues of £110m were up 20% and profits of £40m were up 19%. This is now consistently the best performing of Aggreko’s regions (the greater profit growth in North America was from a lower base) and both the business as a whole and the power projects business within it (which supplies power utilities) in particular have good long term prospects, although
Aggreko is reasonbly cash generative with free cash flow slightly ahead of post tax profit - if price/free cash flow per share is slightly lower than the PE.
Aggreko’s current share price of 170p, puts it on a prospective PE of 16×. However given the strong second half performance we feel that forecasts are likely to need to be raised a little so it is a little cheaper than that.
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