Shares in engineering firm Aggreko plc (LSE: AGK) rose 10% this morning following the release of an interim management statement, which reflects a ‘bottoming out’ of the economic decline. While revenues have fallen compared to 2008, the group has reduced debt by £61m since June and achieved a considerable improvement to group margins. The company now expects full year profits to exceed 2008 levels.
Aggreko plc specialises in temporary power and temperature control, it delivers rental solutions across a wide range of industries throughout the world, including construction, contracting, shipping to roadshow events. Aggreko services over 100 locations in 29 countries.
On a like-for-like basis revenues have decreased 8%, but group margins have benefited from a strong performance in the International Power Projects business, where margins increased more than 10% in the quarter.
Margins have continued to improve, and trading profits from this business increased much faster than revenues.
The third quarter saw an improvement in order intake for new work, and the number of megawatts produced through Aggreko’s rental generators was noticeably higher than in the previous two quarters.
Conditions in the Local business continue to be difficult, with revenues down 28%. The apparently weak comparative year-on-year comparative is partially due to the strong performance in 2008. Last year’s H2 performance was flattered somewhat by increased demand due to record storm revenues in North America and the Beijing Olympics.
Aggreko’s net debt has decreased sharply in the past three months, at £227 million Aggreko’s debt has reduced by £61m. The improvement reflects the group’s lower levels of capital expenditure.
Despite the difficult macro-economic conditions Aggreko believe that going forward it International Power Projects division will continue to perform well. Aggreko states that conditions in the Local business are unlikely to get any worse. The company expects that constant-currency profits will be slightly above the level achieved in 2008.