Strong fourth quarter
Profit before tax expected to be up 25% to around £305 million in 2010
Accelerating pace of investment: fleet capex expected to be 23% higher in 2011 than in 2010
Aggreko plc, the world leader in the provision of temporary power and temperature control solutions, is today issuing the following trading update for the year ending 31st December 2010. In the statement below, references to "underlying" revenues and profit mean revenue and profit adjusted, where appropriate, for currency movements, pass through fuel, the impact of both the 53rd week in 2009 and of three major sporting events (the FIFA World Cup, the Winter Olympics and the Asian Games). Together these events accounted for around £90 million of revenue in 2010, and we have excluded them from our calculation of underlying revenues and profit because there will be no events of comparable size in 2011.
Trading in the fourth quarter has been better than we anticipated, with continued strong performance in the Local business and a sharp drop in the off-hire rate in International Power Projects. We now expect that reported Group revenues for the year will be in the region of £1.22 billion (up 20%), and profit before tax and amortisation will be around £305 million (up 25%). Underlying growth in revenue and trading profit for the year, as defined above, is expected to be around 11%.
We expect to end the year with net debt of around £145 million - a reduction of £30 million over the course of the year. This is in spite of record levels of capital expenditure and the recently announced acquisition of Northland Power Services for about £15 million. Fleet capital expenditure in 2010 will be around £260 million, which is about 1.8 times fleet depreciation; our ability to deliver substantial reductions in net debt while investing at such a rate underlines the strength of the Group's operating cashflows.
As anticipated, trading in International Power Projects improved in the fourth quarter, with the record order-intake secured in the first half now generating revenues, and the quarter also saw a much reduced off-hire rate. On an underlying basis, we expect revenues in the fourth quarter to grow by about 12%, with growth for the year as a whole being around 10%. Underlying trading margins in International Power Projects have remained strong in the fourth quarter and for the full year are anticipated to be broadly similar to 2009.
In the Local business, the improved year-on-year growth rates seen in the third quarter have continued in the fourth quarter. We expect underlying revenues in the quarter to be around 20% higher than in 2009, with about 30% underlying growth in North America and in Aggreko International, and 10% underlying growth in Europe and the Middle East. Underlying volumes and rates have improved in most markets, and underlying trading margins across the Local business are expected to show year-on-year improvement.
Around £90 million revenue from major events in 2010 will not recur in 2011, and this will make for tough comparators next year. Notwithstanding this, we anticipate that trading profit in 2011 will be at a similar level to 2010; this would represent strong underlying year-on-year growth. Activity levels in International Power Projects are encouraging, and we expect to start the year with about 12% more MW on rent than we had a year ago. In the Local business, we currently anticipate that the recovery we have seen in the second half of 2010 will continue, although this will depend on the level of economic growth in our markets. We also plan to accelerate the expansion of our service centre network in our Local businesses in Latin America and Asia.
In terms of capital expenditure, we plan to continue to invest heavily in our fleet. We currently expect to spend around £320 million on new fleet in 2011, £60 million more than in 2010, and about 1.7 times fleet depreciation. This expenditure reflects both an increase in fleet capacity, and a higher proportion of the investment accounted for by gas fleet, which is about twice the cost per megawatt of diesel fleet. We also plan to continue upgrading our North American fleet to the latest emissions standards as well as investing in fleet for our new service centres in Asia and South America. However, as we have demonstrated in the past, we can adjust capital spending rapidly, and we will manage the rate of fleet investment through the course of the year in the light of demand.
Preliminary Results will be announced on 10th March 2011.