Aggreko strategy review highlights emerging markets opportunity

Aggreko expects to maintain its track record of double digit annual revenue growth and profit margins in excess of 20% for the next five years driven by continued demand in emerging markets for its local rental and major power project services.

The power rental company has just completed its latest five year strategic review for the period 2013-2018 and said the demand for local rental services – those contracts within a few hours travel distance from a depot – would continue to grow at double the rate of GDP.

The company said many of the 64 new local branches established in emerging markets since 2006 had still to achieve the average US$5 million annual revenues of a mature location.

With power projects, Aggreko said the shortfall between power supply and demand in emerging countries would grow at an average rate of 13% per year, which it estimated would translate into annual growth of 10-15% in its business.

Ken Hanna, Aggreko’s chairman, said the strategic review underlined “the strong position the group holds in fast-growing markets, and the exciting prospects that lie ahead for the next five years."

He added; “The lesson we see every day is that it takes decades to achieve the sort of global scale which Aggreko now enjoys, and there are no short cuts.”

Aggreko results for the full year 2012 revealed revenue growth of 13% to £1583 million and trading profits up 11% to £367 million. Sales in North America rose by 16% to $482 million; in Europe/Middle East by 5% to £367 million; and the international local business increased 20% to £234 million. The power projects business reported revenues of $1012 million in 2012, up 15%.

Rupert Soames, chief executive, said Aggreko’s local business had made a strong start to 2013; “Encouragingly, growth in the local business has been broadly spread, with most areas other than Europe showing healthy year-on-year increases in MW on hire.

“In power projects, we have signed new contracts totalling 140 MW in the year to date, and importantly, we have secured our first large order for our new Heavy Fuel Oil engine, with a 56 MW contract in the Caribbean. We have also secured a contract for 57 MW of diesel-powered generation in Djibouti."

The heavy fuel oil engine – which uses fuel that is much cheaper than diesel – was introduced earlier this year and is the fruit of a three year, £6 million investment programme in partnership with Ricardo plc.