Have Aggreko plc And Randgold Resources Limited Finally Bottomed Out?

Aggreko plc (LON:AGK) and Randgold Resources Limited (LON:RRS) have both been big fallers this year. Is the worst now over, asks Roland Head?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in temporary power specialist Aggreko (LSE: AGK) and gold miner Randgold Resources Limited (LSE: RRS) have fallen by around 50% since September 2012, when both reached all-time highs.

Is it time to buy back into these previous high flyers, or is there worse to come? I’ve been taking a look at the latest results from each firm to find out more.

Pure gold

Mark Bristow, Randgold’s chief executive, is highly respected in the mining industry. Today’s results show why.

Should you invest £1,000 in BT right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BT made the list?

See the 6 stocks

Net profit for the first half of the year was $110.5m, down by 26% from $150m during the same period last year. However, the average gold price received during the first half was $91/oz. lower than last year, so this decline isn’t surprising.

To help combat the falling price of gold, Randgold is cranking up production, which hit a new record of 300,039 ounces during the second quarter. As a result, the group’s total cash cost per ounce fell to $684 during the second quarter, compared to $701 during the same period last year.

Net cash generated from operations was $71m, and the firm ended the first half with a net cash balance of $109m. That’s a big increase from just $26m at the end of June 2014, and shows that Randgold has been able to replenish the cash it has spent on developing its new Kibali mine, despite the weak gold price.

Randgold’s unique advantage over its peers is that it has no debt and all of its mines have been developed assuming a gold price of $1,000 per ounce. Gold has yet to fall below this level and Randgold’s results show that the firm can deliver on its promises.

The only question is whether gold has hit the bottom yet. Personally, I think there could be a little further to fall, so I won’t be rushing to buy Randgold shares just yet.

Generating a profit?

Unlike Randgold, Aggreko has not managed to hold onto its place in the FTSE 100. The firm was pushed down into the FTSE 250 earlier this year.

First-half revenue was 2% higher, at £781m, but trading profit fell by 18% to £114m. The underlying figures, which exclude the effect of exchange rates, were worse. Revenue fell by 2%, but trading profit fell by 22%.

These falling profits highlight Aggreko’s apparent loss of pricing power. This first became obvious in July, when the firm warned that a major contract in Bangladesh was likely to be renewed at much lower rates than previously.

The second headwind faced by the firm is the reduced level of activity in the US oil and gas market, where Aggreko often provides temporary power for drilling sites and the like. Much of this work has stopped, and where it is ongoing, Aggreko is likely to face considerable pressure to lower its prices as oil firms cut costs.

Aggreko confirmed its full-year pre-tax profit guidance of £250-£370m today, but said that margins were likely to remain lower in 2016. The shares currently trade on around 15 times 2015 forecast earnings.

I wouldn’t rush to buy at this price, as I think that Aggreko’s profit margins could fall further, and may remain low for several years.

Of course, I could be wrong about both firms — that’s what makes a market.

Should you invest £1,000 in BT right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BT made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

This world-class FTSE 100 company’s expecting up to 10% growth in 2025

This is one of the most profitable companies in the FTSE 100 index. And right now, it’s firing on all…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10k invested in Phoenix shares 10 years ago would have generated passive income of…  

Shares in this FTSE 100 insurance giant have done poorly over the last decade. Harvey Jones wonders if super-sized passive…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

This brilliant FTSE income share just paid me £458 for doing absolutely nothing – I love it!

Harvey Jones is sending some love to high-yielding FTSE 100 dividend income share M&G today in return for it sending…

Read more »

Black woman using smartphone at home, watching stock charts.
Investing Articles

Should I buy Palantir (PLTR) stock for my ISA in 2025?

Palantir stock's flying in 2025, having risen almost 60% already. Should Edward Sheldon take the plunge and buy the growth…

Read more »

Workers at Whiting refinery, US
Investing Articles

Drowning in debt amid falling oil prices, can the BP share price recover?

By far the worst-performing of the oil majors, Andrew Mackie assesses just what it will take to kick life back…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

As Cash ISA changes approach, is now the time to buy UK shares for long-term wealth?

Changes to the Individual Savings Account (ISA) could present an unexpected opportunity to try to get richer with UK shares.

Read more »

Emma Raducanu for Vodafone billboard animation at Piccadilly Circus, London
Investing Articles

What’s the point of investing in Vodafone, the FTSE 100’s 31st most valuable stock?

Our writer’s becoming increasingly frustrated with the share price performance of this FTSE 100 stock that was once the most…

Read more »

Lady taking a carton of Ben & Jerry's ice cream from a supermarket's freezer
Investing Articles

‘Britain’s Warren Buffett’ isn’t a fan of UK shares (except this one)

Terry Smith, founder and CEO of Fundsmith, has been described as a 'British Warren Buffett'. But he’s not that keen…

Read more »