Aggreko shares soar as it returns £200m to shareholders
Shares in generators giant Aggreko climbed almost 10 per cent in early London trading today after it set out plans to return £200 million of cash to shareholders.
This is despite 2013 bringing an end to Aggreko’s decade-long run of consecutive growth.
Pre-tax profit fell 8 per cent to £338 million last year, in part because of an exceptionally strong 2012, when the group powered the London Olympics as well as working on US military contracts in Afghanistan and the post-Fukushima reconstruction in Japan.
But Aggreko, which last week learnt it is losing its chief executive Rupert Soames to struggling outsourcer Serco, said “disciplined” spending and the trimming of net debt by £230 million allowed the hefty return of cash to investors as well as a 10 per cent increase in the dividend.
The temporary power firm said the run-down in its contracts for the US military and in Japan was worsened by a weaker macro-economic environment in emerging markets — meaning lower demand for power.
However, it did power the broadcasters at the Sochi Winter Olympics and chairman Ken Hanna said: "The group has made an encouraging start to 2014."
Aggreko, which has appointed finance director Angus Cockburn as interim chief executive, has just signed a contract in Libya for 120MW of power, but the group admitted that it hadn’t put the deal in its order book because, "given the volatile situation in the country, we will not include it until we are certain we will be able to execute it".
Keith Bowman, analyst at Hargreaves Lansdown, said the £200 million cash payout to investors would buy time for Aggreko as it hunts for a new boss.
"Increased shareholder returns help to fuel investor patience as a hoped-for return to growth is awaited," he said.
"The loss of the group’s chief executive to Serco is a major blow. Tough comparatives and increased challenges in the emerging markets conspired to make 2013 a difficult year for Aggreko.
"Nonetheless, it continues to capitalise on the world’s growing addiction for power."
Shares in the Glasgow-head- quartered business, which also sounded a warning over the risks of Scottish independence, rose 137p to 1710p.
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