Wil Aggreko ever make a recovery stick?

It was in the warm glow of London's successful Olympics Games in 2012 that Aggreko confirmed its status as darling of the FTSE 100 Index. Shares in the temporary power generation company were in record-breaking form, in keeping with events in the stadium it had just helped to illuminate and power.

How times have changed for the Glasgow-based firm, whose shares now languish at half the level seen in 2012 and have suffered yet more turbulence following a results-day slide of more than 10% Tuesday.

The trigger for this latest outage came with the company's warning that annual underlying profits will be lower than last year. Results for 2016 were also a little shy of some expectations, with revenues down 3% to £1.52 billion and underlying profits off 12% at £221 million.

The company's debt pile of £649 million increased £160 million, in part due to the impact of sterling weakness against the US dollar.

Aggreko said it was making progress with its transformation programme, but that this year's profits will be dented by pricing renegotiations on utility contracts in Argentina, where the company has been operating since 2008.

These contracts were signed at a time when the industry dynamics were much different and the risk of operating in Argentina was higher, including strict foreign exchange controls and bond defaults.

Many of Aggreko's other recent difficulties stem from the lower oil price, which has impacted a number of its markets. In North America, its rental solutions arm suffered an 18% drop in revenues last year due to weakness in the oil and gas and petrochemical and refining sectors.

A recent recovery in the oil price had helped shares a little in recent weeks, having slumped to a seven-year low in November after Aggreko revealed it was reviewing the carrying value of specialist equipment for the oil and gas market.

Panmure Gordon analyst Michael Donnelly has stuck with his sell recommendation on the stock, which he believes is still "extremely expensive".

He pointed to a price/earnings (PE) ratio of 17.2 "for a top line that won't look much different in the current year from its level in 2015". Donnelly also believes that 40% or more of this year's profits could be at "above-average risk".

The dividend for this year is also being held at 27.12p a share, and Donnelly continues to rate Aggreko a 'sell' with price target of 715p – that's a level not seen since 2009, although it came close in early 2016 and again in last November. Currently at 935p, that implies over 23% potential downside

However, despite the Argentina profits setback, chief executive Chris Weston remains hopeful that the group is on the right track after a challenging 12 months.

Most sectors are up on the prior year to date and the higher oil price is giving ground for cautious optimism. The North American rental solutions arm is showing signs of stabilisation and Aggreko also expects its Europe and Australia Pacific businesses to continue to perform well throughout 2017.

Mr Weston said: "We are investing in the right technologies to reduce costs to our customers; improving our customer focus and delivering the efficiencies we set out in August 2015."

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