Financial Releases
Aggreko PLC Trading Update
15 Dec 2003
Aggreko plc, the world leader in the supply of temporary power, temperature control and oil-free compressed air services, is issuing the following trading update prior to meeting analysts and going into its close period in respect of the year ending 31 December 2003.
Trading Overview
Overall, second half performance has been as anticipated, with the result that full year performance is expected to be in line with expectations.
In North America, local currency revenues in the second half will be slightly ahead of last year. Whilst the oversupply of rental power equipment, and consequently pricing pressure, persists, there are some early indications that the situation may be stabilising, although whether this will continue will only become clear in the first half of 2004. Although reported profits in the second half will be lower than in the prior year, partly as a result of exchange rate movements, underlying profitability in the second half increased year-on-year.
Our International business has performed at a lower level than last year as a result of the very considerable reduction in revenues from Sri Lanka; in the second half of the current year 20 Mw have been on hire in the country, compared with 200 Mw last year. The impact has to a considerable extent been offset by a continuation of the strong performance reported in the first half in the Middle
East. It is also notable that the International business won its first major utility contract in South America in the last quarter of the year.
Europe has continued to suffer from a change in mix in the business from high margin project work towards lower margin, but less volatile, depot-based business. It has also seen the full impact of investments made in equipment and infrastructure in the first half. The depot business has grown well, with the UK, Germany and France expected to show progress. Our new operations in Italy and Spain are growing strongly, albeit from a low base, but there are as yet few signs of improvement in market conditions in the Netherlands. Overall, profits are expected to be broadly in line with our forecast at the last trading update in June 2003.
A strong focus on cash management during the second half is expected to result in a noticeable reduction in net debt, both against the half year and the 2002 year end position. Capital expenditure for the year as a whole is expected to be around £63m (2002: £59m).
Strategy Review
The strategy review is progressing well and we are on target to present the key findings on 1st March 2004 at the same time as the Preliminary Results announcement. Whilst the strategy review is still ongoing, it is anticipated that the outcome is likely to lead to some re-organisation and restructuring of the European and North American businesses to enable them to achieve their full
potential. It is expected that the costs related to these changes will not exceed £15m, which will be charged to the P&L as exceptional items in 2004.
Outlook
2004 will be a year of transition for Aggreko, as we implement our new strategy and IT systems. Whilst it is expected that improving economic conditions may lead to some improvement in demand, there will inevitably be disruption to the company's operations as a result of the implementation of both of these initiatives. However, successful implementation will put the company in a much stronger position.
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For further information, please contact:
| Rupert Soames |
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| Angus Cockburn |
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| Aggreko plc |
Tel: 0141 225 5900 |
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| Fiona Piper |
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| The Maitland Consultancy |
Tel: 020 7379 5151 |