AGGREKO hailed strong trading in the US as it reported a surge in revenue for 2018, though currency headwinds brought profits down at the temporary power specialist.
Glasgow-based Aggreko, led by former Centrica boss Chris Weston, saw group turnover rise by four per cent to £1.76 billion in the year ended December 31. That came as revenue at the company’s dominant rental solutions business rose by 19 per cent to £822 million, boosted by resurgent activity across the Atlantic.
However, profits dipped by 4% to £182m as currency movements weighed on the bottom line.
Despite the profits reverse, Mr Weston said the company’s results had been in line with market forecasts and come in ahead of guidance issued at the start of the year. And the firm said it was confident of meeting market expectations for 2019, with a company-compiled consensus of 13 analysts forecasting pre-tax profits of £196m.
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Aggreko’s rental division saw a 25% rise in US revenue, which included £27m earned from hurricane-related work, up from £22m in 2017. The division, which presents 52% of group revenue, also highlighted strong performances across the oil and gas, petrochemical and refining, and utilities sectors.
The US business built on the momentum highlighted by Aggreko in November when, reporting third-quarter results, the company said it was benefiting from the recovery of the North America oil and gas market, as well as increased activity in the Australian mining industry.
Mr Weston noted that revenue generated by the US oil and gas business was up 85% year on year, building on the upturn in shale activity which began to kick in around 15 months ago. And he told The Herald there was “no evidence” of a downturn in the market, citing “bullish” sentiment from key customers such as Chevron about the outlook for the Permian Basin, where 70% of Aggreko’s US work takes place. “It has been a bit of scramble [for fleet capacity],” Mr Weston said, “but long may that continue.”
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The renal solutions division saw an improvement in operating margins last year, which helped lift its operating profit by 30% to £105m. It booked £7m of revenue related to its work supporting the Commonwealth Games, held on the Gold Coast in Australia, in 2018, and highlighted the benefit of work at last year’s Ryder Cup, which took place near Paris.
However, the growth of the rental solutions unit was offset by falling revenue at its power solutions utility business, which dipped by 14% to £342m. This was attributed by Aggreko to off-hires in Zimbabwe, Bangladesh and Japan, as well as lower volumes and pricing in Argentina.
The firm’s power solutions industrial arm, which accounts for 27% of group revenue, saw turnover rise dip marginally at £424m. It was supported by strong activity supporting oil and gas drilling in Siberia. Revenue in Latin America increased by 31%, the company said, supported by an emergency contract in Argentina, with income also boosted by the Winter Olympics in South Korea.
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However, the power solutions industrial division saw revenue in the Middle East drop by 8% with “weakness in most areas” but particularly evident in Qatar and the United Arab Emirates (UAE). This was put by the firm down to the ongoing Qatar blockade, imposed by a Saudi-led coalition in response to Qatar’s alleged links to terrorism.
Mr Weston said Aggreko had noted in August that the downturn in the Middle East would “bottom out” and expressed the view that it now has, though pricing has yet to rebound.
Meanwhile, Mr Weston responded to comments from analyst Peel Hunt that Aggreko is vulnerable to the “fragile global macro-economic backdrop” by saying “nothing seems to be affecting us on the ground” – despite concerns about Brexit, rising interest rates and global trade wars.
Shares closed down 5.2p at 726p.
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