Aggreko is to boost job numbers and expand its Dumbarton plant after announcing yesterday it is investing £1bn in new stock.
Aggreko is to boost job numbers and expand its Dumbarton plant after announcing yesterday it is investing £1bn in new stock.
The temporary power company has been a beneficiary of soaring economic growth and demand for power, particularly in emerging markets, allowing it to post 2007 pre-tax profits of £125.5m yesterday, in line with analysts' expectations but 51% up on 2006.
Aggreko, whose operations range from supplying small generators for construction sites to building a 100-megawatt power station outside an African city, is to attempt to renew and expand its generator stock to cope with rising demand and to cut the number of expensive repairs it has to carry out in the field.
The company, which has 120 staff based at its Dumbarton plant as well as a group head office in Glasgow, is to invest £1bn, paid for from reserves and cashflow, in new stock over the next five years, starting with a £235m investment in 2008.
Around 60% of this will be poured into its rapidly-growing international power projects business, which handles the firm's big power generation work and was responsible for 38% of company profits this year. The rest will go into its local businesses which supply smaller generators, of which 37% of revenue comes from the United States.
Around £400m will be spent replacing stock while £600m will go into new capacity.
Chief executive Rupert Soames told The Herald: "The substantial majority will be built in Dumbarton. It will mean security for those already there and a few more permanent jobs, although it will be in the tens not the hundreds. We will also invest in our facility there and build some more capacity."
The firm, which conducted business in more than 100 countries last year, has set itself a medium-term target of annual double-digit growth, noting that although demand for power and air conditioning rentals is only expected to grow by gross domestic product plus 2% to 3% on average, it is strongly positioned in faster-growing markets in Latin America and the Middle East.
It added that its power projects business will continue to benefit from an imbalance between power demand, particularly in developing countries, and permanent power plants. Last year its local business increased revenues by 26% and the power projects side by 57%.
Soames acknowledged that the biggest risk to his business was that North America's current economic woes spread to Europe, although he said "we did not see it doing that at the moment". He added: "On the whole we are more confident about 2008 than we were in December and we think we are going to make more money than we thought."
Soames, a colourful character in a relatively prosaic industry, said the company's figures would send City analysts "scurrying to their calculators" to see by how much to raise earnings forecasts.
But after an initial 3.5% gain in early trading quickly petered out and the stock closed down 0.33%, or 2p, at 598p, he predicted it would take a week for the share price to find a new level.
