Aggreko's impressive growth continues, with record results in 2009.
Today's business environment isn't really the kind that growth investors generally relish, with investment capital squeezed and much focus being on high-dividend blue-chips to keep us going until the economy starts to seriously grow again.
But there are a few good growth stories out there, and one of them, Aggreko (LSE: AGK), announced impressive full-year results this week, for the year ending December 2009. The company is in the, perhaps unglamorous, business of providing temporary power sources -- that is, generator rental. You can read about what the company does and its worldwide operations on its own web site.
Track record
What impresses me about Aggreko is its track record over the past few years. Between 2005 and 2009, Aggreko has more than doubled its annual turnover, from around £400m to over £1bn. At the same time, the company's earnings per share have more than quadrupled, from just under 14p to approximately 63p. Dividends have grown steadily too, from 6.1p in 2005 to 12.6p for the year just ended.
This year's highlights show record profits -- pre-tax profit is up 29% on 2008, with earnings per share up 37% and dividends up 25%. The company's International Power Projects was a big contributor last year, and the division has apparently made a strong start to 2010.
Opportunities
The next few years look good for Aggreko too, with potential for growth coming from two main directions. Firstly, as developing countries continue to, er, develop, growth in demand for power frequently outstrips growth in local suppliers' capacities. That scenario helped boost Aggreko's profits in Africa and South America last year, and is set to continue.
The other significant opportunity comes in the form of the de-carbonisation of developed countries' energy generation. As smoky old power stations are shut down in the move to renewable sources (the UK alone plans to rely on such sources for a third of its needs by 2020), there will be plenty of short-term gaps that need to be stopped.
Good value
The current share price, of approximately 1,033p, together with the 63p EPS reported this week, puts the shares on a P/E of 16. That would probably be about right if the company had gone ex-growth, and current forecasts for 2010 are actually quite flat, but I think there's some good growth still to come from this £2.8bn FTSE-100 company over the next few years, and I think the shares look good value.
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