Aggreko profits slide 10pc on Argentine contract discounts

AGGREKO is continuing to struggle under the weight of legacy contracts in Argentina after it was forced to make discounts in order to secure a contract win, sending its profits down by 10pc.

The Glasgow-based firm, whose kit powers major events and covers electricity shortfalls, had previously warned that the Argentinian contracts would dent its figures this year, although many other parts of its business are growing.

Aggreko said pre-tax profit, before exceptional items, fell to £63m in the six months ending June 30, from £71m a year ago. Group revenue was 16pc up at £792m, although the Argentinian contracts wiped £34m off the total.

However, Chris Weston, chief executive, said he expected the business’s other markets to grow this year, with measures that the company put in place in 2015 expected to come to fruition next year. He pointed to some improvement in the North American market, which has struggled with subdued oil and gas prices, a sector where it does much of its business. The UK is a “market that looks fairly buoyant”, he said.

The firm’s dividend was unchanged in the six-month period, at 9.38p.

Mr Weston added that the company was seeking to marry the demand for energy against improving environmental credentials. While he said it would continue to invest in technology, he thought that fossil fuels and thermal generation of energy “will be around for a long time to come”.

He pointed to the purchase of energy storage firm Younicos last month, which uses battery technology to regulate intermittent renewable energy sources, as an example of Aggreko’s push to join new technology with traditional energy sources.

Shares in Aggreko opened at 890p yesterday, their highest price for almost a month, before slipping to end down 3pc at 842.5p.

Andrew Nussey, analyst at Peel Hunt, said that while the figures offered “no surprises”, the company’s order intake was “slightly disappointing”.

“Oil price volatility, emerging market uncertainty and unpredictable competitor behaviour continue to place returns under pressure,” he said.