LONDON (Alliance News) - Temporary power provider Aggreko PLC's shares took a beating on Wednesday as the group said a soft market backdrop continued to drag on its performance in the first half of 2016, resulting in declining profit and revenue.
Aggreko shares were down 12% to 1,079.00 pence on Wednesday afternoon, the worst performer in the FTSE 250 by a distance.
The company, which rents electricity generators to airlines, industrial clients and sporting events, has been among the companies providing services to the oil and gas industry which has suffered from the sharp downturn in activity in the wake of the oil price collapsing.
Those problems continued apace in the first half of 2016. Revenue for Aggreko's Rental Solutions arm fell 8.0% in the first half after revenue fell a fifth in its North American arm. The North American operation suffered from a decline in sales to the upstream oil and gas market, and to petrochemical and refining sectors, the latter of which was set against a tough year-before comparator.
The bleak trading in North America offset growth in Europe and Asia Pacific in the first half, and the hit to the bottom line was compounded by Aggreko's trading margin for Rental Solutions declining 8 basis points year-on-year.
Power Solutions division revenue also declined, by 12%, though this includes an uplift in 2015 from the European Games athletics competition. Excluding that, revenue fell 2.0%. Utility-related revenue slumped 16%, hit by new contract terms on its deal in Bangladesh and a demobilisation in Mozambique as permanent power came on line at its project in the country.
Aggreko said Rental Solutions will continue to suffer from the North American weakness in the second half, which will more than offset any better performances in other regions. The outlook for Rental Solutions, Aggreko said, remains "cautious".
Power Solutions trading is expected to improve in the second half as new contracts come on line.
"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," said Chief Executive Chris Weston.
Pretax profit for the six months to the end of June sunk to GBP61.0 million from GBP102.0 million a year earlier, while group revenue declined to GBP685.0 million from GBP781.0 million.
Aggreko kept its dividend for the half flat at 9.38 pence per share.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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