Companies: AGK   

Numis Securities' Paul Jones remains a seller of Aggreko, the supplier of temporary power, temperature control and oil-free compressed air services that suffered an 18% profits wane to £55.1m in calendar 2002 and is still hurting. His comments followed a trading statement for 2003 as the group entered its closed period. In North America, Aggreko is suffering from pricing pressure due to overcapacity in the rental power equipment market. Aggreko's international business has underperformed due to a hefty drop-off in Sri Lankan revenues, although a strong performance from the Middle East somewhat offset this problem. Meanwhile, Europe has suffered from a change in the business mix away from high margin project work towards lower margin depot-based business. Aggreko now sees 2004 as nothing better than a transitional year, with anything up to £15m in exceptionals likely to hit the P&L as it restructures its North American and European businesses and installs a new IT system. Jones is reassessing his 2003 and 2004 numbers, but suspects his £39m pre-tax forecast for 2004 is between £2m and £3m too high. The £39m figure gives earnings of 9.9p, putting the shares on a forward rating of 14.1 times. 'This looks too rich' muses Jones. We agree. Sell.