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Soames hails strong results from Aggreko

OUTGOING Aggreko chief executive Rupert Soames believes the company has made an encouraging start to the year, with its share price climbing 3.5% on the back of annual results which hit market expectations.

PARTING SHOT: Outgoing CEO Rupert Soames announced the dividend. Picture: Andrew Cowan/Scottish Parliament
PARTING SHOT: Outgoing CEO Rupert Soames announced the dividend. Picture: Andrew Cowan/Scottish Parliament

Mr Soames said the temporary power supplier had managed to negotiate a number of headwinds in 2013, including a reduction in revenue from Japan and military contracts in Afghanistan winding down.

However, having reduced capital spending in the year, the Glasgow business yesterday announced it would be returning £200 million to its shareholders, equivalent to 75p per share, in June.

Mr Soames said that payment should not be seen as his leaving present to investors: "It was done because we have got the cash and we are able to do it.

"As a shareholder in Aggreko myself, I can say that I welcome it.

"It takes to just short of £600m we have given back to shareholders in the past three or four years."

The company expects to pay a final dividend of 26.3p for the year, up from 23.91p.

Revenue was relatively flat at £1.57 billion, from £1.58bn, although pre-tax profit dipped from £360m to £333m.

The company said on an underlying basis, which includes stripping out the London Olympics contract, currency fluctuations, pass-through fuel and the acquisition of the Poit Energia business in South America, revenue had grown by 4% and trading profit by 1%.

Overall, the local business, which delivers a vast array of generally shorter-term projects, including sporting and entertainment events and provision of power following natural disasters, saw revenue dip  from £905m to £904m, with trading profit falling from £175m to £163m. In power projects, which provides longer-term generation, revenue not including fuel was down from £638m to £627m, with trading profit dropping from £212m to £196m.

Mr Soames said: "The year turned out as we expected. There were some quite strong headwinds but all the same, we managed to do a creditable performance."

Aggreko powered the Superbowl in 2013 and also signed a long-term contract with the Cirqu du Soleil circus troupe.

In 2014, it has already announced contracts for the football World Cup in Brazil and the Glasgow Commonwealth Games.

The company highlighted a growing deployment of its new fleet of lower-cost heavy fuel oil generators, with eight contracts signed across 2013.

Mr Soames said: "We are on a mission to bring the cost of temporary power down towards the cost of permanent power.

"That way, because temporary power is much more flexible, then more people will want to use it.

"That comes down to the fuel type. If you can use gas, we can generate electricity very cheaply."

The local business has started 2014 with its rental volumes 7% ahead of the prior year.

Chairman Ken Hanna said that the company was still cautious on the power projects market, but that  the division had taken in orders for 64 megawatts of power so far, with a further 120MW for Libya signed.

Aggreko said that it would not be booking the Libya contract until it was sure it would be able to carry it out.

However, the inclusion of that in its order book would put intake in the first three months of this year at  a similar level to the final quarter of 2013.

Mr Soames, who was overseeing his final set of annual results before joining Serco in the summer, said: "It is an encouraging start to the year. I think Africa is going to be very strong this year."

Aggreko said it expects trading profit for 2014 to be at a similar level as last year when taken on a constant currency basis.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: "Profits have materialised at the upper end of expectations, with an encouraging start made to 2014.

"Strong management judgment in previously reducing capital expenditure has allowed for ongoing shareholder returns, whilst conservative accounting is being displayed, with a signed Libyan contract, given national uncertainty, not yet in the order book."

Aggreko shares closed up 55p to 1628p.

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