LONDON (Alliance News) - Temporary power company Aggreko PLC on Thursday warned on its short-term outlook for its profit margin and return on capital in the short term as it undertakes a restructuring programme following a sharp fall in pretax profit in the first half.
Aggreko said its pretax profit in the six months to the end of June was down to GBP102.0 million, 21% lower than the GBP130.0 million it posted a year earlier, following a decline in its trading margin in the first half. In July, Aggreko saw its shares plunge after it issued a profit warning for 2015, saying its business was taking a heavy hit from the protracted slowdown in the US oil and gas market and from "ongoing security challenges" in Yemen, which is in the grips of a civil war.
Total revenue for Aggreko was marginally higher in the half, up to GBP781 million from GBP768 million, boosted by a rise in local business revenue, including from the delivery of the European Games. But power projects revenue was down by 9% in the half, hit by pricing pressures in Bangladesh and by a lower utilisation on its contract in Panama.
Aggreko said it will pay a flat interim dividend of 9.38 pence per share.
As a result of the challenges the group faces, Chief Executive Chris Weston has outlined a series of measures it will take in order to mitigate the challenges it faces, including targeting cost savings of GBP80 million in 2017, which will result in it booking exceptional costs totalling GBP30 million. As a result of the restructuring programme, Aggreko said 2016 will be a "year of change", with market conditions set to remain difficult and its returns and margins to take a short-term hit.
"The performance of the group in the first half was impacted by difficult trading conditions in a number of our markets, notably Bangladesh, and external factors, including the impact of a lower oil price and ongoing security concerns in Yemen," said Weston.
"The performance of the group in the first half was impacted by difficult trading conditions in a number of our markets, notably Bangladesh, and external factors, including the impact of a lower oil price and ongoing security concerns in Yemen," Weston added. "I am impressed by the commitment of our people and our culture, and I am confident that our new focus and structure will see the business return to growth."
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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