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High sterling set to take sparkle from Aggreko results

Despite enjoying a bumper year in its home market and having won lucrative contracts to supply power to this year's Commonwealth Games and the Ryder Cup, temporary power firm Aggreko has seen currency worries dampen expectations for its half-yearly results to be posted on Tuesday.

Market analysts are expecting Glasgow-based Aggreko, one of the UK's largest companies and the world's largest temporary-power generation company, to announce adjusted earnings of 33p per share while sales for the first half of this financial year are expected to be £724 million, resulting in pre-tax profits of £118.5m.

Although the FTSE-100 company also won a high-profile contract to supply temporary electricity as well as air-conditioning for this summer's World Cup in Brazil, the strength of sterling has taken the edge off expectations for the company's half-year results to June 30.

As most of Aggreko's power supply business is overseas, with the UK accounting for less than 10% of its revenues, the last 12 months of high sterling value has impacted the company's global results. Since an interim statement in April, the company's shares have risen in value by almost 14%.

With an order book slightly more focused on UK events which benefit from a lack of currency exposure, shares could start to return closer to July 2013's high of 1834p.

Over the last 12 months, Aggreko's shares reached a low of 1501p in October but, despite a dip in early spring, have since recovered well. On Friday, shares in the company closed at 1720p.

Last week, Aggreko's shares received an average recommendation of "hold" from the 25 ratings firms that cover the company's stock. Five analysts rated the stock with a sell rating, 10 with a hold rating and 10 a buy rating.

In March, Aggreko returned £200m to shareholders despite announcing an expected drop in profits. In 2013, the company made pre- tax profits of £338m, down 8% on 2012 when the company provided power for the London Olympics and reconstruction projects in Japan.

Aggreko operates in more than 30 countries around the world and employs more than 5700 people, of which around one-tenth are employed in Scotland. The company rents out products ranging from small generators to large cooling plants, heaters, chillers and air-conditioners.

The company's equipment is used in a wide variety of settings including film studios, power stations, mines, offshore oil platforms, shipyards and high-demand power applications related to emergency response and disaster management. Its international power arm serves utilities, governments, armed forces and major industrial customers with power plants ranging from 10 to 100 megawatts on a single site.

Agrekko's international projects division is based in Dubai, from where the company can ship power-plants capable of powering entire cities to anywhere in the world.

In March this year, the company courted controversy when it said in its annual report that a Yes vote in September's independence referendum would cause it years of uncertainty, claiming that it would be hit with significant extra costs and administrative complexity if Scotland leaves the UK.

The comments came after the company's then chief executive, Rupert Soames, told Holyrood's economy committee that international investors were getting worried about the possible implications of Scottish independence.

After 11 years as chief executive, Soames left Aggreko following the company's AGM in April to head up the Serco Group. He was replaced on an interim basis by the company's financial director Angus Cockburn. But in May, Agrekko announced that British Gas boss Chris Weston would take over as chief executive in 2015.

A research note by analysts at Union Bank of Switzerland published on Tuesday said that the appointment of Carole Cran as Aggreko's chief financial officer would help to provide continuity during the transition period.

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