Aggreko plc Shareholders To Receive £200m Windfall

Aggreko plc (LON: AGK) readjusts to its post-London Olympics existence and manages to reduce debt.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 6 March, 2014 10:26 am GMT

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The temporary power outfit Aggreko (LSE: AGK) has revealed an 8% fall in full-year profit after nine years of consecutive growth, but the drop was expected, and the shares added 142p to 1,708p.

The profit fall resulted as the group transitioned from working on the London 2012 Olympics, as well as lower revenues from post-Fukushima reconstruction efforts in Japan and weakening exchange rates.

A profit of £338m was made against £365m in 2012. Outlook for the year ahead is better than some analysts had hoped for and the full-year dividend was increased 10% to 26p.

Based on a strong capital position — from strong cash generation which lead to a £230m fall in net debt — a special £200m dividend will be paid to shareholders in June.

The chairman, Ken Hanna, commented:

“Overall, since we last reported in December, the business has performed in line with our expectations. For the full year we expect trading profit to be similar to 2013 on a constant currency basis, as growth in the Local business is offset by weaker trading in Power Projects. However, the latest spot rates for some of our major trading currencies4have moved against the average exchange rates of 2013; if these rates pertain for the rest of the year, we would see a marked translational impact on our 2014 reported results.”

Based on today’s share price movement and the earnings per share figure revealed in Aggreko’s report, the shares may therefore trade on a price/earnings ratio of 18, while analyst predictions suggest a dividend yield of 1.8% in 2014.

Whether those metrics look appealing, or the wider prospects for the firm’s operations imply good growth prospects, the decision to ‘buy’ remains up to you.