Aggreko plc Begins Year From A Sprint Start

Aggreko plc (LON: AGK) is among the morning’s top risers on boosted revenues.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 15 April, 2014 10:08 am BST

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Shares in Aggreko (LSE: AGK) added 39p, or 2.6%, to 1,550p during early trade this morning, after the temporary power supplier reported revenue growth of 5% in the three months to 31 March.

The firm, whose power generators are used in major events, including the 2012 Olympics, saw particularly strong performance from its business in the Americas (revenue up 11%) and Europe (up 15%), while difficult trading conditions in Asia (down 21%) pegged back progress.

Agrekko added that net debt decreased by £43m to £320m, compared to debt of £587m at the same point last year. The easing of debt was attributed to a “disciplined” approach to capital expenditure.

Aggreko noted the encouraging start to the year, commenting:

“Order intake year to date in Power Projects has been strong, but a significant proportion of this is for relatively short-term work, so we continue to be cautious.”

“We expect fleet capital expenditure in 2014 to be at similar levels to last year, with around £130 million in the first half and around £215 million for the year as a whole; as always, we will adjust our rate of investment depending on market conditions.”

Based on this morning’s share price movement shares in Aggreko may trade on a P/E of 19, while analysts project a 2014 full-year dividend of 28p, covered three times by earnings.

As announced in the firm’s full-year results, £200m will be returned to shareholders, approval pending, to be paid in June 2014. Owing to its impressive cash generation, Aggreko is an income stock that, while not yielding the highest around (1.9%), is predicted to grow impressively in the coming years.