By Kristy Dorsey

The Covid pandemic, low oil prices and exceptional costs combined to drain the profits out of Aggreko last year, but shares in the Scottish provider of portable power edged higher yesterday after it proposed a final dividend of 10p to reflect a brightening outlook.

The Glasgow-based company, which is the subject of a takeover approach, also managed to pay down its debts by more than a third despite the difficulties encountered during 2020. Meanwhile, work continues on the £4.5 million upgrade of its production facilities in Dumbarton to create a net zero operation for the 300 workers employed there.

Aggreko provides temporary power equipment to major events such as sporting competitions and music festivals, as well as to a range of industrial sectors around the world. With oil prices low and the postponement of events such as the Tokyo Olympics, underlying operating profit collapsed by nearly half in 2020 to £136m on revenues down 15 per cent at £1.37 billion.

Pre-tax profit would have come in at £102m but for £175m in exceptional costs linked to bad debts and write-downs on the value of equipment for which future rental demand is expected to remain depressed. About £57m of that was linked to legacy debts in Africa, Venezuela, Brazil and Yemen.

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Taking everything into account, the FTSE 250 firm made a pre-tax loss of £73m, versus the previous year’s profit of £199m.

But the group, led by chief executive Chris Weston, said it is now seeing recovery in “a number” of its end markets, with 2021 expected to be a year of transition before returning to pre-pandemic activity levels in 2022. Directors added that the company has exited the crisis “stronger” and better-prepared for the future.

“We enter 2021 well-positioned for the recovery which we are seeing in our markets and this momentum supports our confidence in the business going forward,” Mr Weston said.

The results statement from Aggreko was otherwise devoid of any commentary on future trading as the company remains in discussions about a potential takeover bid that has been pitched at 880p per share, valuing the business at about £2.25bn. The bid has come from a consortium of private equity groups led by TDR Capital and I Squared Capital.

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There was no further update yesterday on how those talks are progressing. The deadline for the consortium to either make a formal offer or walk away is on Friday.

The £4.5m investment in Dumbarton to create a “future energy hub” is part of Aggreko’s wider plans to become fully net zero by 2050. The first stage in that strategy, which was announced in November, is to become net zero in terms of the carbon emissions from its own operations by 2030.

All diesel at the consolidated site at Lomondgate Park will be replaced with low-emission HVO fuel, while smart battery storage and LED lighting systems will be used to improve energy efficiency.

Commenting on the impact from Brexit on its operations, Aggreko said the end of the transition period at the start of this year has not resulted in any material disruption to its supply chain or exports. However, new customs rules and tax legislation has slowed down shipments between the UK and the EU.

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"While it is early days, and the detail of the Brexit legislation is still being worked through, we do not expect these changes to have a material impact on the group's future performance as a large majority of its operations take place outside the UK and the EU," Aggreko said, adding that it earns approximately 5% of its revenue from the UK and 10% from the EU.

“Demand for our services in these markets is, in part, GDP dependent. A significant change in the GDP growth in these markets is likely to have a knock-on impact on our level of activity there. We will continue to monitor the situation closely and refine out contingency plans as the situation develops.”

Shares in Aggreko closed 10.5p higher yesterday at 810.5p.