Aggreko
Revenue £768m Dividend 9.38p
Aggreko is apparently having a little difficulty prising Chris Weston away from British Gas. Blame the number of departures from Centrica, its parent, but the temporary power supplier has no idea when its new chief executive will arrive.
Halfway figures suggest the company is doing well enough in his absence, if you are prepared to look beyond the inevitable headwinds from the high pound for a business that gets more than half its revenues in dollars.
Strip out currency effects, and revenues at the power projects division, which supplies temporary generation units to countries unable to cope with domestic demand, rose 14 per cent in the first half.
The local business, which supplies one-off events such as festivals and the Commonwealth Games in Glasgow, enjoyed a 10 per cent rise. One of the closest followed numbers at Aggreko is the amount of capital spending it expects, a measure of its confidence in future workload. Power projects had suffered from falling demand from countries whose currencies had severely depreciated, and utilisation levels of its fleet had fallen to 70 per cent. They have since recovered, and Aggreko has raised its capex guidance for this year by £20 million to £235 million to pay for more plant.
It is impossible, though, to ignore currency effects. Trading profits were off by £25 million to £142 million after a £23 million currency hit. The figures mask a sharp second-quarter revenue acceleration for power projects, much of this down to a contract in Panama that is making up for a shortfall in generation from the local hydroelectric industry.
Against this, there was a loss of £30 million of profits from Japan, as the country recovered from the Fukushima disaster, and from the rundown of military work.
Its high cash generation has meant the return of £600 million to investors over the past three or four years, including £200 million in the second quarter. No further return is imminent, but the halfway dividend is raised by 3 per cent to 9.38p.
The shares have recovered well from their abrupt fall last autumn and, up 19p at £17.40, now sell on 22 times earnings. Not cheap; further upside looks limited.
My advice Hold
Why The shares have recovered well. Excluding currency effects, the company is moving forward, but that looks to be in the price
Pendragon
Revenue £2.07bn Dividend 0.3p
The Pendragon share price is an obstinate beast. The company, which nearly foundered under the weight of its debt as the car market hit the skids at the start of the downturn, is talking about opening new sites to fill in the gaps in its national coverage in the south.
Debt is back to normal levels, and Pendragon, with its advanced internet offering, is building its used car sales, which are now, in profit terms, almost as important as the new market.
This is because selling used cars is ideally suited to the internet, where customers can browse and then pick up their choice at the dealer. Over the past five years the market was flat, but Pendragon increased its sales by 65 per cent. This will continue as the increased supply of new cars is traded on and the rise in the number of cars on the road will benefit its after-sales business.
Underlying pre-tax profits were up by 39 per cent to £32.8 million in the first half. The halfway dividend is tripled to 0.3p and the final will probably also be raised, though this is not an income stock. The shares, up 1½p at 32½p, are unchanged over the past year and sell on 12 times earnings, which suggests some eventual upside.
My advice Long-term buy
Why Share price has taken time to respond to recovery
Inmarsat
Revenue $652m Div 18.68 cents
Investing in Inmarsat is never dull. The satellite operator still faces two uncertainties that need to be resolved. The first is the long-running question of what happens to the LightSquared wireless broadband venture in the United States.
This is now co-operating with Inmarsat again and payments to the UK company have been resumed, albeit sporadically. LightSquared is still on the auction block and a purchaser will eventually be found, at which stage those payments will be assured.
In May a Russian satellite launch using a Proton rocket failed at the Baikonur site in Kazakhstan. Inmarsat is using Protons for the next two satellites for its Global Xpress maritime satellite network, to complete its global coverage.
The failure will push these launches back by perhaps six months, to the middle of next year. Otherwise, the project is running on time and to budget, and lost revenues should be made up within a three-year time frame and an 8 per cent to 12 per cent forecast rise in group revenues be achieved.
Inmarsat is pushing ahead selling its services to the maritime and aviation industries, trying to make up the shortfall in military spending as a result of the drawdown from Afghanistan. Pre-tax profits were off by 9 per cent to $168.3 million in the first half, but the interim dividend is raised by 5 per cent to 18.68 cents as a sign of confidence.
The shares were off a mere 13½p to 708p and sell on 25 times earnings. One day Inmarsat will get there; the shares are still for those prepared to dig in for the long term.
My advice Long-term hold
Why Inmarsat has several issues still to resolve
And finally. . .
Note the 6 per cent rise in shares in Rotork since I tipped them in April and suggested that they seemed to have been unfairly overlooked. There had been some concern over the controls and actuators maker’s exposure to oil and gas, but the halfway figures showed that though activity levels in eastern Europe and the United States were slow, there were plenty of contract wins elsewhere. There was a surge of orders in the spring, which will feed through into revenues in the traditionally stronger second half.
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