Fast-track power solutions business, Apr Energy (LSE: APR) delivered an impressive second-quarter trading update today. The company revealed second quarter revenues of $134m, up 203% compared to the year ago period.
Moreover, Apr revealed that during the quarter, utilisation of the company’s generator fleet remained above 70%, even after including fleet expansion of 37% to 2,194MW. Year to date, Apr has signed new contracts amounting to 142MW and extended existing customer contracts for 1,063MW, which translates into a contract renewal rate above 80%.
These are all very impressive figures, but should you buy in?
Past mistakes
While the second quarter of this year may have been a good few months for Apr, the company is still trying to make up for past mistakes. Indeed, Apr is still trying to support a high level of debt after winning a high-profile contract within Libya to supply 1m homes with electricity.
Net debt has surged over the past few years and now stands at around $500m. Back during 2010 Apr had a net cash balance of $646m. Net debt of $500m is around ten times Apr’s 2013 reported operating income.
Still, Apr’s management remains confident that the company’s level of debt is comfortably within financial covenants. Additionally, the group is in active discussions with its banks to undertake a refinancing, which is expected to be completed during the third quarter.
Profits rising
Nevertheless, despite Apr’s high debt load the company’s profits are surging. Pre-tax profits hit $28m last year, or 14.4p per share. City analysts are expecting the company to report pre-tax profits of £74m this year, 62.4p per share. These figures put the company on a forward P/E of 8.2.
Further, the City has pencilled in profits of £90m, or 80.1p per share for 2015, which puts Apr on a staggeringly low 2015 P/E of 6.4.
That’s not all. Over the long term, the sky really is the limit for Apr as the world’s demand for power continues to grow. Indeed, Apr has plenty of opportunity for growth within key markets, particularly in the market mobile gas turbines.
Management is currently focused on securing a number of longer-term, larger-scale power projects in the Americas, Africa and Asia Pacific. And Apr’s existing presence and experience within these markets should give the company an advantage over its peers.
