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FTSE slips lower as investors ditch Aggreko

Banks and miners make small losses, but Aggreko (AGGK.L) is the standout stock, dropping sharply after issuing a cautious outlook.

 
FTSE slips lower as investors ditch Aggreko

Shares in FTSE 100-listed Aggreko (AGGK.L) plunged this morning after the world's biggest temporary power firm provided a cautious outlook and warned investors of growing bad debts.

Aggreko, which has provided power generation and temperature control systems at events as large as the Olympic Games, the football World Cup and the US Superbowl, was the biggest faller on London’s blue chip index, losing nearly 7% to hit 2,146p.

Although the company reported underlying sales growth of 13% in the third quarter of the year, investors were fretting over the announcement of high costs for a project in Mozambique, alongside the increase in its bad debt provision.

‘Since our last trading update in early August… exchange rates have moved against us, and we have also increased our bad debt provisions; we expect that, between them, these two factors will impact our anticipated profits for the year by about 2.5%,’ the company warned.

'Buying opportunity'

Analysts kept the faith with the stock, suggesting any share price weakness after today’s trading statement could mean the shares are ripe to buy. ‘Given our belief in the longer-term structural growth case, we would especially utilise any weakness as a buying opportunity,’ wrote Justin Jordan of Jefferies in a note, with a 'buy' recommendation.

Caroline de La Soujeole of Seymour Pierce agreed: ‘We remain buyers. On our current numbers the shares are trading on a prospective P/E of 21.2x which we believe is not demanding for a business expected to deliver double digit earnings growth over the foreseeable future.

Andrew Nussey at Peel Hunt was less forgiving, warning that the shares could be 'vulnerable' in the near term, maintaining his 'hold' recommendation.

Calm FTSE

The broader FTSE 100, meanwhile, at 5,909, was marginally down after a week of gains; a mill pond in sharp contrast to the day exactly 25 years ago when share price falls were so steep that it became known as Black Monday.

Bad news from US tech stocks overnight – Google unveiled a weak third-quarter earnings report – led to small losses on Wall Street and on Asian markets.

In London this morning, investors were taking profits in miners – which have been at the forefront of much of the share price rises this week – with Rio Tinto (RIO.L) down 0.7% to 3,237p, Xstrata (XTA.L) 0.7% lower to 997p and Anglo American (AAL.L) trading down 0.4% at 1,892p.

Banks also dropped, with Barclays (BARC.L) down 0.8% to 238p and Lloyds (LLOY.L) 1.2% lower to 41p.

Burberry (BRBY.L) was the biggest riser on the FTSE 100, up 1.1% to 1,193p after Investec upped its rating on the luxury fashion company from ‘hold’ to ‘buy’, with a new price target of 1,300p.

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1 comment so far. Why not have your say?

joe stalin

Oct 19, 2012 at 15:06

It is always the same at Options expiration as the cockroaches come out to play. The Google "leak" was beautifully timed. The problem with tech stocks such as Google is that the "analytical" community don't have an understanding of what drives earnings growth of this type of stock and rely heavily on spoon feeding by the company. It is just like the dot com boom every is projecting hyperbolic growth leading to ridiculous price earnings ratios. Facebook another example. The "angels" got out leaving it to the retail punters a bit like Gordon Brown getting the job from Tony Blair. Tony kept on teasing until Goro was so enraged that he did not see what can of worms he was about to get himself into. I think a few more valuations in the tech sector will come home to roost. Maybe some p pushing highereople are discovering this and buying into bricks and mortar . Persimmon, TW ,Galliford are all pushing higher hard hats over back to front baseball caps and hoodies who would have thought it :)

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