Aggreko posted first half 2020 revenue of £667 million (about U.S. $870 million) in the first half of 2020 compared to £768 million in the first half of 2019, a 13.1-percent decrease. Operating profit was £64 million compared to £81 million in the first half last year, not including exception items, a 21-percent decline. Underlying group revenue, which does not include exceptional items, pass-through fuel or currency was down 12 percent, driven by the impact of COVID-19 and lower oil prices.
Aggreko’s Rental Solutions group reported underlying operating profit of £44 million, a decline of 7 percent driven by oil and gas, a segment where revenue was down 32 percent. The Power Solutions Industrial segment had underlying operating profit of £11 million, a 45-percent decrease, driven by a more challenging trading environment in Eurasia.
The Power Solutions Utility segment had underlying operating profit of £9 million, an improvement of 9 percent as a result of cost-saving initiatives.
The company has a strong liquidity and cash position, with operating cash inflow of £250 million, supporting by a working capital inflow of £100 million, and immediately available liquidity of more than £700 million, with cash on hand of £123 million.
“I would like to recognize and thank everyone at Aggreko for the great job they have done in responding to the COVID-19 pandemic, in the way they have adapted and continued to serve our customers safely and reliably through these challenging times,” said CEO Chris Weston. “My primary concern since the start of the COVID-19 pandemic has been the welfare of our people, their families and the local communities in which we operate and the response right across the company makes me very proud to be part of Aggreko. The immediate steps we took to reduce our cost base and increase our focus on cash generation have enabled us to maintain the strong financial position in which we entered the crisis, while supporting national efforts through practical assistance and without drawing on UK government financial support.
“We entered the year with positive momentum, and we continue to believe that our focus on the disciplined execution of our four strategic priorities positions us well to meet our customers’ evolving needs in the changing energy market. While the outlook remains uncertain and we do not expect to see our usual second half seasonality, the gradual improvement in demand we have seen in some sectors since May gives us confidence that we can deliver a pre-exceptional profit before tax this year in the range £80-100 million. Looking further ahead, we continue to expect the group to deliver improved margins and achieve its mid-teens ROCE target, underpinned by our ongoing focus on operational efficiencies. As a consequence of our financial strength and the board’s confidence in the medium-term outlook, I am pleased to confirm that we will pay an interim dividend of five pence per share for 2020.”
The company said it is beginning to see stabilization in trading, although conditions remain difficult in the oil and gas and events sectors.
The effects of the pandemic on Aggreko include a sharp reduction in oil prices, impacting the company’s oil & gas and petrochemical and refining businesses; the cancellation or postponement of events including the postponement of the Tokyo Olympic and Paralympic Games until the summer of 2021; reduced economic activity in general; reduced liquidity and access to foreign currency for some of its customers; travel restrictions imposed to contain the spread of the virus, impacting the mobilization and demobilization or projects; increased freight and logistics costs as a result of the reduced supply available in the market; and an acceleration in the energy transition towards lower carbon solutions and technologies.
Aggreko said the take-up of its hybrid solutions continues to grow with revenue in the first half of the year up 103 percent. It continues to look at new fuels, applications and technologies and are currently testing various new products including hydrogen fuel. It continues to evolve its existing diesel offerings and the introduction of small battery storage units. “This technology, along with our data collection and analytics capability, will be central to the evolution of our fleet,” the company said.
Underlying revenue in Aggreko’s North America business dipped 19 percent year over year because of the pandemic and lower oil prices. The most significant reductions were in the oil-and-gas sector, which accounts for 22 percent of revenue and declined 30 percent. Its events business, while a smaller sector, dropped 47 percent in revenue. But the company posted good growth in utilities and building services and construction. And excluding oil and gas, power volumes increased 21 percent year over year, with pricing down 5 percent.
The power generation, heating, cooling and oil-free air specialist Aggreko North America is No. 10 on the RER 100.
