Investment: Glamour deals add to Aggreko's solid start

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The Independent Online
HIRING OUT power and ventilation equipment to industry may not set the pulse racing, but Aggreko has proved a solid performer in the sector since it was spun out of Christian Salvesen last September.

From an initial price of just over 160p following demerger, the shares rose to 226.5p in May and have only recently shaded down in line with the market.

Chris Masters, the chief executive, has been busy building margins and return on capital across the group. Yesterday's half-year figures showing a 12 per cent rise to pounds 12.9m was just reward for a solid performance.

There have even been a few glamour contracts on the way. After last year's dabble with Hollywood blockbusters, which saw it provide the equipment for the making of the film Titanic, the first half has seen contract wins for the World Cup and others lined up for the Commonwealth Games in Malaysia next month.

The city likes Aggreko because of its wide geographic spread, which means no single region dominates earnings. In the UK, Dr Masters has sensibly been preparing for the downturn by taking out costs. In the US the market is competitive, and margins slipped as Aggreko chased sales, but contracting out remains a growth market there. Five new depots opened in the first half with the same number scheduled for the rest of the year. In the Far East exposure is minimal.

The introduction of oil-free compressors is going ahead in the UK and Europe. These machines, which can cost pounds 200,000 to buy, are popular in the food and electronics sectors as they emit no particles of oil in the air pumped out.

Analysts expect the business to grow at 10 per cent a year and be one of the more resilient performers in a downturn. But it is not entirely immune: a serious slump in manufacturing would hurt the business, whose rating leaves no margin for error. On Beeson Gregory's full-year forecast of pounds 37m, the shares, unchanged at 184 yesterday, trade on a forward rating of 21 - too high to chase at these levels, but a decent hold.