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Aggreko’s acquisition by Albion Acquisitions Limited (a consortium of TDR Capital LLP and I Squared Capital) was sanctioned by an Edinburgh court last Friday, signalling the last of formalities for the deal to be completed. The power rental company goes private post the transaction. The de-listing of stock will come into effect from 10 August 2021.
We will be suspending the coverage of the stock.
Companies: Aggreko plc
Aggreko has agreed to the £2.3bn all-cash acquisition bid from TDR Capital LLP and I Squared Capital. The Directors intend to recommend unanimously that the shareholders vote in favour of the deal. However, the news reports suggest there may be another interested acquirer.
Aggreko announced its FY20 results which were largely in line with market expectations. The company’s performance was negatively impacted by pandemic-induced restrictions and lower oil prices. However, the activity levels across key end-sectors are improving with management announcing a final dividend of £10/share. As a reminder, Aggreko is the target of an acquisition bid by a consortium of TDR Capital LLP and I Squared Capital in a deal worth £2.2bn.
Aggreko, the temporary supplier of power solutions, emerged as a takeover target for a consortium of PE firms last Friday. Management confirmed that it is in discussions with TDR Capital LLP and I Squared Capital for a possible cash takeover bid of 880p/share in a deal worth c.£2.2bn. The bid price represented a significant premium to the prevailing share price at the time. We have revised our target price upwards to capture the renewed investor sentiment.
Aggreko raised its FY20 PBT guidance, now expecting to be slightly above the previous range of £80-100m, as a result of an improvement in market activity. Management maintained the FY21 PBT guidance of £170-190m, on the back of a gradual recovery in economic activity.
Aggreko’s 9m FY20 results (-14% yoy revenue) were soft, amidst the COVID-19 pandemic and lower oil prices. However, with the improving market trends, management expects the FY20 underlying PBT to settle at the upper end of its previous guidance. Moreover, a strategic blueprint has been presented for the group’s mid-teen RoCE in the mid-term and to upgrade its fleet mix to achieve net zero carbon emission by 2030 and make both the group plus its services carbon-less by 2050.
Aggreko’s soft H1 FY20 performance was primarily infected by the COVID-19 pandemic during the last few months. But, as the virus continues to roam around freely and oil prices are unlikely to regain lost ground, the seasonally more important H2 FY20 is expected to be much more painful for the company. Amidst the challenging environment, management anticipates FY20 PBT to decline by at least 50% yoy and a higher tax rate to make matters worse.
Aggreko finished FY19 on a positive note – while its top-line dropped, the profitability improvement was noteworthy. But, challenges for this macro-play are far from over, amidst the uncertain clouds of the Coronavirus outbreak, the US-China trade war and the stretched US business cycle (longest boom period in American history). We will revise our target price downwards.
While Aggreko’s underlying revenue improved in Q3 FY19, it failed to overshadow the weak H1 FY19 performance. However, management has shown confidence in achieving the market consensus for FY19 PBT. The target of mid-teens RoCE by FY20 has also been held. No material change in our estimates.
Despite the weak top-line performance in H1 19, Aggreko beat street estimates, thanks to the surge in profitability in both businesses. Management has maintained the full-year earnings guidance, and remains confident in achieving the target of mid-teens ROCE by 2020. No material change in our estimates.
Aggreko clocked reasonable underlying revenue and operating profit growth in FY18. Rental Solutions’ strong performance more than compensated for Power Solutions Utilities’ weakness. Management expects FY19 PBT to meet the market’s current expectations, with a better progression in H2. Moreover, the group envisages good progress towards a mid-teen RoCE target in 2020, largely led by self-help actions.
Aggreko released double-digit growth in revenue in H1 18, while the underlying operating profit was 8% higher than last year’s (but -4% reported). Operating profit surged in Rental solutions (+169%) but was more than offset by a decline in Power Solutions Industrial and mainly Power Solutions Utility. The company aims to reduce operating costs and boost efficiency in the management of the organisation. FY18 guidance confirmed: profit before taxes expected to be in line with 2017 ex. currency im
Aggreko reported its FY17 results which were roughly in line with expectations, but with a disappointing 2018 guidance at the operating level (flat PBT). The bright spot was Power Solutions Industrial (+20% in revenue, +34% in OP) driven by Eurasia, while Power Utilities remains a drag (-9% in revenue and -42% in OP). 2018 will remain a challenging year, due to repricing, debt provisions and customer payment issues in the Power Utility business.
• H1 17 revenue amounted to £792m vs. £685m in H1 16, showing a 6% increase yoy excluding legacy contracts in Argentina;
• H1 17 profit before tax and exceptional items reached £63m vs £71m in H1 16;
• Strong operating cash inflow of £184m in H1 17 vs. £100m, mainly due to lower working capital outflows;
• Net debt has slightly deteriorated at £683m in June 2017, corresponding to a 1.3x net debt/EBITDA ratio (vs. 1.2x ytd);
• Interim dividend maintained at 9.38p/share;
Aggreko reported FY 2016 results, broadly in line with the company’s prior guidance.
- Revenues reached £1,515m in 2016 vs £1,561m in 2015 (down 3%).
- The operating profit before pre-exceptionnal items reached £221m and £199m post-exceptionals vs £249m in 2015 (down 20%) and the operating margin is 13% vs 16% in 2015.
- The diluted EPS is £48.86 vs £63.45 in 2015.
- The operating cash inflow is £388m vs £461m in 2015. The reduction was mainly driven by working capital outflows of £119m.
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