Bleak forecast hits Aggreko shares

Aggreko was the biggest faller on the FTSE 100 in early trading, losing 16%, after the company warned its 2013 forecasts had been too optimistic.

The temporary power firm said that with military orders falling, Japanese renewals not expected and the effect of the Olympics in 2012, it is likely to report lower revenue next year.

The market for international power projects was waning, the company said, but stressed that it expected growth in both domestic and international business.

However, this was not expected to be significant enough to offset the expected £100 million shortfall in revenue from the three factors outlined above.

Still, the update indicated that Aggreko would hit its targets for this year, with revenue up 13% to £1.6 billion. Pre-tax profits were expected to rise by around 12% to £365 million, in line with previous guidance.

The company said it expected to end the year with net debt of around £620 million, an increase of around £250 million over the prior year, with the main drivers being the acquisition of Poit Energia in April of this year, and higher levels of both capital expenditure and working capital, partly related to the Olympics.

Investec analyst John Lawson downgraded to 'hold' on the news, commenting: "We had assumed that the group would repeat the warning given at the last [interim management statement] but the group appears much more cautious on the economic outlook.

"That said, we continue to believe that there are many structural drivers that should continue to drive earnings in the years to come."

Analysts at Panmure Gordon downgraded their target price, but kept the 'hold' recommendation, saying: "With military work coming off, Japanese renewals not expected, and the year-on-year effect of the Olympics, we now expected 2013 to be below 2012 - something not seen at Aggreko for some time."