Shares in temporary power provider Aggreko dived by 15 per cent earlier today after it announced that profits for the first six months of 2016 were down nearly a third on the previous year.
Although revenues were down 12 per cent at £685m, trading margin plummeted from 15 per cent to 11 per cent (pre-exceptionals). Profit before tax stood at £71m, down from £102m in 2015.
While rental revenues dropped by five per cent, it was income from Aggreko's power solutions divisions that was a key detractor, falling 17 per cent, from £458m to £381m.
Rental revenues were significantly impacted by a drop of 20 per cent in North America, offset by growth in Europe, Australia and Pacific regions.
Operational cash flow dived from £255m to £100m. Aside from falling profits, this was principally driven by a significant increase in working capital: stocks increased by £22m and debtors by £73m which included a debtor provision of $17m (£12.7m).
Why it's interesting
Despite the headline numbers, the company is standing by its full-year profit guidance that results will be slightly lower than the previous year - in 2015 profit before tax (pre-exceptional items) was £252m.
Aggreko is already £31m behind last year's profit numbers, so at the half way stage it has some catching up to do.
But the Glasgow-based company remains confident as it says that its rental business is weighted more to the second half of the year. Although it admitted that North America is still likely to be a tough market, the rental growth in experience in other regions underpins the company view.
In addition, new work wins in Eurasia and the Middle-East is expected to provide a boost to its power solutions division.
3 August 2016 @ 11:30amAggreko (AGK)
What Aggreko said
Chief executive Chris Weston said:
"The trading environment in this first six months has been difficult, with the lower oil price continuing to impact a number of our markets. We are holding our guidance for the full year while recognising the importance of securing key contract extensions and the seasonal weighting of our North American business to the second half.
I am pleased with the good progress we continue to make with our business priorities and the strong level of order intake in power solutions utility to date."