A strong performance in Aggreko’s Rental Solutions business drove a 13% rise in underlying operating profit for the group in 2019.
Chris Weston, CEO of the UK-based temporary power specialist, said, “Our 2019 results demonstrate the significant progress we have made to improve the group’s financial performance.
“We delivered underlying profit growth of 13%, driven by a strong performance in Rental Solutions, and a significant working capital improvement.”
Rental Solutions underlying operating profit, which represents 55% of group operating profit, increased by 22%.
Meanwhile, underlying revenue for the business segment was down 1%. This decrease was driven by market uncertainty in Northern Europe and a poorer performance in the Australia Pacific region, with growth in Australian mining being offset by a 100MW emergency contract in the prior year numbers.
North America, however, performed well, with revenues up 5%, and revenues in Continental Europe grew by 3%, helped by work in response to power shortages in Belgium and the FIFA Women’s World Cup in France.
Aggreko’s underlying group revenue dropped by 1% to £1.61 billion, from £1.76 billion in 2018.
The increase in underlying profitability of Rental Solutions also drove an 11.2% improvement in ROCE (return on capital employed), despite a 4% reduction in the overall volume rented and lower levels of utilisation. The improvement was a result of higher rates in key sectors in North America, as well as emergency work in Belgium and an ongoing focus on cost efficiency and pricing discipline.
This momentum is expected to continue into 2020, though Aggreko said it is closely monitoring the development and potential impact of coronavirus, both in terms of the Tokyo Olympics and the group more widely. With that said, the company is continuing to work closely with the Tokyo 2020 Olympic and Paralympic Games Organising Committees with preparations progressing as expected.
Looking ahead, Aggreko will continue its capital expenditure discipline with expected fleet capital expenditure of around £200-250 million. This represents an increase on the £189 million invested in 2019.
Weston said, “We are well-positioned to meet our customers’ evolving needs in the changing energy market, with 185 MW of hybrid work secured and 30 Y.Cubes now under contract, reflecting the growing interest in lower-carbon technology and our new battery storage product.
“Going forward we believe that a continued focus on the four strategic priorities first set out in 2015 will underpin the achievement of our mid-teens ROCE target in 2020 and beyond.”