By Scott Wright

SHARES in Aggreko surged by more than five per cent after the Glasgow-based firm generated a big rise in profits and declared it was forging ahead with preparations to provide power to the Olympic Games in Japan this summer.

The temporary power specialist said it was fully expecting Tokyo 2020 to go ahead in July and August despite worries it could fall victim to the spread of coronavirus.

The comments from Aggreko chief executive Chris Weston came as it emerged Japan may be allowed to postpone the Games until later in the year. There were 274 cases of the virus in Japan as of yesterday.

Mr Weston said the virus has not had a material impact on Aggreko, noting that the company’s supply chain has minimal exposure to China.

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Asked whether he was concerned the Tokyo Games could be postponed, Mr Weston said: “We have the vast majority of our equipment in Japan and we are deploying it to sites as I speak. We are working closely with the local organising committee as you would expect.

“They are taking some sensible day-to-day precautions, but it is very much business as usual and they are planning for an opening ceremony on the 24th of July. Until we hear otherwise, and I’m not going to speculate, I’m expecting to deliver an Olympic Games in July and August.”

Aggreko will ultimately have 500 people deployed in Japan at the height of the Games under the $200 million (£155m) contract, which will see it provide power to 44 venues as well as the athletes’ village and the international broadcast centre. It will also work on the Games’ opening and closing ceremonies.

The company told the City that it is closely monitoring the development and potential impact of the coronavirus, both in terms of the Tokyo Games and for the group generally.

Mr Weston said the group has “very little” of its supply chain in China. Some containers and heating, ventilation and air conditioning units are supplied from the country, and he said: “We are seeing little in the way of delays, maybe a week or two”.

Mr Weston added: “We do have delivery dates, but there are a few delays. The vast majority of our equipment comes from elsewhere in the world.”

Aggreko said it expects to meet its profit expectations for this year as it served up bumper results for 2019. It reported a strong performance by its dominant rental solutions business, which helped lift pre-tax profits by nine per cent £199 million, ahead of expectations.

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Analysts at Jeffries are guiding on Aggreko making a pre-tax profit of £246m for 2020, while Citi lowered its forecast to £245m from £251m.

Mr Weston highlighted strong cash flow generation and return on capital expenditure as the firm said it would increase its dividend for the first time in five years. The board is proposing a full-year dividend of 27.7p per share for 2019, up 2% on 2018.

Aggreko reported a 1% fall in underlying group revenue to £1.6 billion. However, that was in line with the previous year after revenue from the 2018 Winter Olympics and project management from the Tokyo Olympics was stripped out.

The rental solutions arm, which provides power, heating and cooling to various industries and events in developed markets, saw its underlying operating profit climb by 22% to £133m.

However, underlying revenue dipped by 1% to £833m as Northern Europe and Australia Pacific weighed on its performance. Good growth in mining in Australia Pacific was offset by a 100 megawatt (MW) emergency contract in previous year numbers, Aggreko said.

Revenue growth of 5% was reported for North America, with Mr Weston highlighting growth potential in the shale gas market. Around 70% of Aggreko’s activity in this sector is in the Permian Basin and west Texas.

The rental solutions arm benefited also from revenue growth of 3% in continental Europe, helped by its response to power shortages in Belgium and the FIFA Women’s World Cup in France, partially offset by revenue from activity supporting the 2018 Ryder Cup in France.

Meanwhile, Mr Weston highlighted strong demand during the year for its new battery storage product amid “growing interest in lower-carbon technology”.

He noted that the company has 185MW of hybrid work secured and 30 Y.Cubes (ready to install battery storage systems) now under contract, which he said was “more than I expected”.

And Mr Weston said the pipeline of orders was strong, with demand from across a broad range of sectors, including events, mining and oil and gas. Aggreko strengthened its capability in battery solutions with the £40m acquisition of Younicos in 2017.

Mr Weston said he will update the market on the company’s strategic priorities in August.

Shares in Aggreko closed up 34.4p, or 5.1%, at 709.2p.