AGGREKO share’s hit an eight-and-a-half year low yesterday as contract problems in Argentina continued to dog what was otherwise an encouraging performance by the temporary power supplier.
The company may have trailed it, but confirmation of a fall in pre-tax profits to £177 million and a forecast of a similar performance in 2018 did not impress investors.
Argentina is clearly a challenge for Aggreko, but it is not the only one. When contracts are renewed, albeit, at lower prices, the issue will leave a legacy but there remains late payments from customers in Africa and Venezuela, which led to a $23m increase in debtor provision within the same troubled power solutions utility divisions as the Argentina saga. The other issue is the slow erosion of operating margin. This contracted by three percentage points to 13 per cent. The year before it contracted by two points.
Arresting this decline will be key to recovering profits. Chief executive Chris Weston said yesterday the business has been stabilised and is “positioned to prosper” in changing energy markets.
The £45m acquisition of battery-storage specialist Younicos acquisition last year will help drive Aggreko’s new Global Solutions business, which aims to drive the renewables opportunity long-term.
But, with the company’s annual meeting taking place on April 26, and the share price down 35 per cent year on year, Mr Weston will be bracing himself for another tough run, after last year’s meeting saw one shareholder offer up the phone number of its former chief executive.
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