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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Aggreko Plc | LSE:AGK | London | Ordinary Share | GB00BK1PTB77 | ORD 4 329/395P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 869.50 | 869.00 | 869.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMAGK
RNS Number : 7632M
Aggreko PLC
02 August 2017
FOR PDF VERSION PLEASE CLICK HERE:
http://www.rns-pdf.londonstockexchange.com/rns/7632M_-2017-8-1.pdf
AGGREKO PLC
INTERIM RESULTS FOR THE SIX MONTHS
ED 30 JUNE 20172 AUGUST 2017
Business priorities delivering; full year guidance unchanged Chris Weston, Chief Executive Officer, commented:
"I am confident that the changes we have made in the last two years are delivering results, with our first half performance supporting our view that, Argentina aside, we will grow this year. In particular, we have made good progress enhancing our product offering, improving our customer experience and reducing our cost base, all of which makes us more competitive. As we look forward, energy markets and technologies are evolving and we continue to invest and grow our capabilities to take advantage of the opportunities this presents."
Financial Highlights
-- Group revenue of GBP792 million in line with prior year excluding impact of currency and pass-through fuel
o Excluding legacy contracts in Argentina, revenue was up 6%
-- Half year profit before tax and exceptional items of GBP63 million (2016: GBP71 million) in line with market expectations
-- Full year guidance unchanged -- Interim dividend maintained at 9.38 pence
-- Strong operating cash inflow of GBP184 million (2016: GBP100 million) as working capital initiative begins to deliver results
o Improvement on payables, further work required on receivables
Business Unit Highlights
-- Power Solutions Utility order intake of 430 MW year to date (2016: 875 MW); off-hire rate of 15% (2016: 20%)
-- Power Solutions Industrial revenue grew 20%, Eurasia year to date order intake of 179 MW (2016: 165 MW)
-- Rental Solutions revenues grew 2%; excluding oil and gas, revenue grew 7% Business Priorities Highlights -- Expect the initiatives outlined in 2015 to be delivered by the end of 2018
-- New CRM and website live across much of the business significantly improving customer experience, with full roll-out complete in 2018
-- On track to deliver cash savings of more than GBP100 million
-- Product portfolio continues to develop, with market leading diesel, gas and HFO solutions and the recent addition of solar and storage, to further reduce cost of energy for our customers
Hot Features
Premium
Group Performance
GBPM
2017 PRE-EXCEPTIONAL 2016 PRE-EXCEPTIONAL CHANGE EXCL.
ITEMS(1) ITEMS(1) PASS-THROUGH FUEL(2) &
CHANGE CURRENCY(3)
Group revenue 792 685 16% -%
Operating profit 79 82 (3)% (11)%
Operating profit margin 10% 12%
Profit before tax 63 71 (10)%
Diluted earnings per
share (p) 17.88 19.81 (10)%
Dividend per share (p) 9.38 9.38 -%
Return on capital
employed(4) 12% 14%
GBPM
2017 POST-EXCEPTIONAL 2016 POST-EXCEPTIONAL CHANGE EXCL. PASS-
ITEMS(1) ITEMS(1) THROUGH FUEL(2) &
CHANGE CURRENCY(3)
Group revenue 792 685 16% -%
Operating profit 69 72 (4)% (12)%
Operating profit margin 9% 11%
Profit before tax 53 61 (12)%
Diluted earnings per
share (p) 14.98 16.77 (11)%
Dividend per share (p) 9.38 9.38 -%
Return on capital
employed 10% 12%
-------------------------- ------------------------- ------------------------- --------- -------------------------
Business Unit Performance
PRE-EXCEPTIONAL REVENUE OPERATING PROFIT
ITEMS GBPM
CHANGE CHANGE
EXCL. EXCL.
PASS-THROUGH PASS-THROUGH
FUEL AND FUEL AND
2017 2016 CHANGE CURRENCY 2017 2016 CHANGE CURRENCY
Rental Solutions 319 280 14% 2% 14 11 36% 14%
Power Solutions
Industrial 167 117 43% 20% 23 10 134% 76%
Utility excl.
pass-through
fuel 264 264 -% (11)% 44 61 (28)% (33)%
Pass-through
fuel 42 24 75% 38% (2) - (100)% (100)%
Total Power
Solutions 473 405 17% (1)% 65 71 (9)% (15)%
----- ----- ------- -------------- ----- ----- ------- --------------
Group 792 685 16% -% 79 82 (3)% (11)%
------------------ ----- ----- ------- -------------- ----- ----- ------- --------------
POST-EXCEPTIONAL
ITEMS GBPM REVENUE OPERATING PROFIT
CHANGE CHANGE
EXCL. EXCL.
PASS-THROUGH PASS-THROUGH
FUEL AND FUEL AND
2017 2016 CHANGE CURRENCY 2017 2016 CHANGE CURRENCY
Rental Solutions 319 280 14% 2% 11 5 123% 68%
Power Solutions
Industrial 167 117 43% 20% 18 8 113% 56%
Utility excl.
pass-through
fuel 264 264 -% (11)% 42 59 (29)% (34)%
Pass-through
fuel 42 24 75% 38% (2) - (100)% (100)%
Total Power
Solutions 473 405 17% (1)% 58 67 (14)% (20)%
----- ----- ------- -------------- ----- ----- ------- --------------
Group 792 685 16% -% 69 72 (4)% (12)%
------------------ ----- ----- ------- -------------- ----- ----- ------- --------------
Future Reporting
11th October 2017 Customer Business Priority teach-in
November 2017 Q3 2017 trading update
Enquiries
Investors & Analysts
Louise Bryant, Aggreko plc +44 7876 478 272
Tom Hull, Aggreko plc +44 7342 056 727
Media
John Sunnucks / Liz Morley, Bell
Pottinger +44 20 3772 2500
Analyst Presentation
A presentation will be held for analysts and investors today at 9am (BST) at the London Stock Exchange, 10 Paternoster Square, EC4M 7LS. A live web-cast and a copy of the slides will be available on our website at www.plc.aggreko.com/investors.
Watch Chris Weston discuss the highlights on our website: www.plc.aggreko.com/investors/investor-centre.
INTRODUCTION FROM CHRIS WESTON, CEO
"Two years ago, in response to changing market conditions, we announced our Business Priorities; we acknowledged that the world had changed, economic growth had slowed and competition had increased and that we needed to better understand the needs of our customers. In response, we implemented an extensive change programme focused on three areas, Customer, Technology and Efficiency. I am pleased that we are now beginning to see the results of these initiatives, allowing us to effectively respond to the changing needs of our customers. There is still work to do, and energy markets are evolving, with decarbonisation, decentralisation and digitisation becoming increasingly apparent, and we continue to position Aggreko to take advantage of these opportunities."
RESULTS FOR THE SIX MONTHS TO 30 JUNE 2017
Group Trading Performance
Unless otherwise stated, the figures quoted below are pre-exceptional items and exclude the impact of currency and pass-through fuel. We believe reporting our financial results on this basis provides a better understanding of the performance of the business over the period under review.
It is also worth noting that in our Power Solutions Utility business, there has been significant repricing and some off-hires of contracts we have held in Argentina since 2008. As a result, on occasion we will refer to performance excluding the impact of these contracts.
Group revenue was in line with the prior year. Rental Solutions revenue was up 2% with solid growth in Europe partially offset by a small decrease in Australia Pacific, with the comparator including an emergency contract in Tasmania. North American revenue was up 1% on prior year with growth in most sectors helping to offset the year on year decrease in oil and gas revenue; excluding the impact of oil and gas, revenue was up 8%. Power Solutions Industrial revenue increased 20% with strong growth from Eurasia, the Middle East and Africa. Power Solutions Utility revenue was down 11% due to repricing and off-hires in Argentina. Excluding the impact of Argentina, Power Solutions Utility revenue grew 1% and Group revenue grew 6%.
The Group operating margin was 10% (2016: 12%). The Rental Solutions margin was up one percentage point on the same period last year, at 5%. The Power Solutions Industrial margin was up six percentage points at 14%, due to the growth in Middle East and Eurasia and restructuring of our businesses in Latin America. The Power Solutions Utility margin was down six percentage points at 17%, driven by the volume and price reduction in Argentina and also one-off benefits in the prior year comparators, most notably in indirect tax and service material costs. The lower Group margin impacted the Group return on capital employed (ROCE), which was 12% (2016: 14%).
The Group delivered profit before tax of GBP63 million (2016: GBP71 million). Diluted earnings per share (DEPS) was 17.88 pence (2016: 19.81 pence).
Reported Financial Measures
Reported revenue and operating profit include the translational impact of currency as Aggreko's revenues and profits are earned in a number of different currencies (most notably the US Dollar), which are then translated and reported in sterling. The movement in exchange rates in the period had the translational impact of increasing revenue by GBP93 million and operating profit by GBP9 million.
In addition, the Group separately reports fuel revenue from contracts in our Power Solutions Utility business in Brazil and Mozambique, where we manage fuel on a pass-through basis on behalf of our customers. The reason for the separate reporting is that fuel revenue on these contracts is entirely dependent on fuel prices and volumes of fuel consumed, and these can be volatile and may distort the view of the performance of the underlying business. In 2017, fuel revenue from these contracts was GBP42 million (2016: GBP24 million).
Reported Group revenue was up 16% on prior year with Rental Solutions up 14% and Power Solutions Industrial and Utility up 43% and 6% respectively.
During the period the Group incurred exceptional costs relating to the implementation of our Business Priorities of GBP10 million (2016: GBP10 million) which are split: Rental Solutions GBP3 million (2016: GBP6 million), Power Solutions Utility GBP2 million (2016: GBP2 million) and Power Solutions Industrial GBP5 million (2016: GBP2 million). These are explained on page 15.
Group operating margin post exceptional items was 9% (2016: 11%). The Rental Solutions margin was up two percentage points on a post-exceptional basis at 4%. The Power Solutions Industrial margin was up four percentage points, post exceptional items due to the growth in Middle East and Eurasia. The Power Solutions Utility margin, excluding pass-through fuel on post-exceptional item basis, was down six percentage points driven by the volume and price reduction in Argentina and also one-off benefits in the prior year comparatives, most notably in indirect tax and service material costs.
Group ROCE post exceptional items was 10% (2016: 12%). Profit before tax and post exceptional items was GBP53 million (2016: GBP61 million) and diluted earnings per share post-exceptional items was 14.98p (2016: 16.77p).
Dividends
The Group is proposing to maintain the interim dividend at 9.38 pence per share (2016: 9.38 per share), this equates to dividend cover pre-exceptional items of 1.9 times (2016: 2.1 times). Dividend cover post-exceptional items is 1.6 times (2016: 1.8 times). Dividend cover is calculated as basic earnings per share for the period divided by dividend per share.
Cashflow and Balance Sheet
During the first six months, we generated an operating cash inflow of GBP184 million (2016: GBP100 million). The increase in operating cash flow is mainly driven by lower working capital outflows year on year with an outflow of GBP38 million in 2017 compared to GBP101 million outflow in 2016. This year's outflow is the net of a GBP65 million inflow from trade and other payables, as our now established procurement function has worked to improve supplier terms and leverage our scale and spend. However, trade and other receivables has more than offset this improvement, increasing GBP103 million, explained as follows.
The increase in trade and other receivables is analysed by business unit as a: GBP5 million decrease in Rental Solutions; a GBP34 million increase in Power Solutions Industrial and a GBP74 million increase in the Power Solutions Utility business. The increase in Power Solutions Industrial is driven by the 20% increase in revenue. In Power Solutions Utility, GBP36 million of the increase in the debtor book relates to new contracts in Brazil which have recently been commissioned and include fuel, therefore the revenue per megawatt generated is much greater; the balance outstanding is in line with commercial terms and there is no issue with the recoverability. The remaining increase is driven by a few customers in Africa who are taking longer to pay given restrictions on liquidity and access to US Dollars. None of these customers dispute the debt, amounts have been received from each in the year to date and payment plans are being agreed to clear the overdue amounts. Recognising the increase in overdue debt, the Power Solutions Utility debtor provision has increased to $73 million, $10 million higher than December 2016.
At the start of this year we initiated a project to reduce our working capital. In the first six months, we have focused on our largest businesses and have dedicated work streams for payables, receivables and inventory. We have made good progress on payables and are starting to make progress with inventory. As we anticipated, the biggest challenge is the Power Solutions Utility debtor book which is an area of particular focus. The project is ongoing and we will provide a further update at the year end.
Fleet capital expenditure was GBP115 million (2016: GBP91 million) which was 0.8 times fleet depreciation. Of this, GBP41 million was invested to continue to develop our medium speed HFO fleet and GBP21 million in continuing to refurbish our diesel fleet to the more fuel efficient, higher output G3+ engine; this now makes up around 30% of the Power Solutions Utility diesel fleet.
Net debt was GBP683 million at 30 June 2017, GBP49 million higher than the prior year. There are a number of movements driving the increase, including GBP10 million in currency, notably the weakening of sterling against the US Dollar, and the acquisitions noted on page 11. This resulted in net debt to EBITDA on a rolling 12-month basis of 1.3 times compared to 1.2 times at June 2016.
Outlook
Our full year guidance remains unchanged. The changes we have made in the last two years are delivering results, with performance in the first half supporting our view that, Argentina aside, we will grow this year.
We have made three acquisitions so far this year, which strengthen our position in two key markets and bring capability in the integration of energy systems based on battery storage, which we believe will present opportunities as energy markets and technologies continue to evolve.
We continue to expect fleet capital expenditure for the full year to be GBP300 million.
BUSINESS UNIT PERFORMANCE REVIEW
RENTAL SOLUTIONS
REVENUE OPERATING PROFIT
CHANGE CHANGE
EXCLUDING EXCLUDING
2017 2016 CHANGE CURRENCY 2017 2016 CHANGE CURRENCY
Pre-exceptional
items GBPm 319 280 14% 2% 14 11 36% 14%
Operating Margin 5% 4%
pre-exceptional
items
Post-exceptional
items GBPm 319 280 14% 2% 11 5 123% 68%
Operating Margin 4% 2%
post-exceptional
items
------------------ ----- ----- ------- ----------- ----- ----- ------- -----------
Headlines
-- Revenue and operating profit up 2% and 14% respectively, excluding currency and exceptional items
-- Revenue on the same basis and excluding oil and gas, grew 7% -- 24 MW next generation gas contracts won -- Strong growth in temperature control, up 13% excluding currency
Commentary
Our Rental Solutions business had a solid performance in the first six months with revenue excluding the impact of currency up 2% on the prior year and operating profit (excluding exceptional items) up 14%. The increase in operating profit relative to the increase in revenue is driven by cost reduction in our North American business and lower mobilisation and service costs in Australia Pacific, with the comparator including costs relating to the 108 MW emergency response contract in Tasmania last year.
North American revenue, excluding currency, was up 1% on the prior year. Oil and gas sector revenues in North America, although 28% lower when compared to the first half of 2016, were up on the fourth quarter of 2016. Most of the other sectors in North America grew, with revenue excluding oil and gas increasing 8%, with a particularly strong performance in temperature control, up 17%.
In our Australia Pacific business, revenue excluding currency decreased 2%, a good performance given the large Tasmania contract in the comparatives. We saw good growth in the mining and construction sectors, however this was offset by a decline in oil and gas and utilities.
Our Continental European business saw revenue excluding currency increase 3% aided by good growth in Germany and Eastern Europe, partially offset by a decrease in the Netherlands. The Northern European business delivered good growth with revenue excluding currency increasing 11%, driven by the utility and construction sectors.
POWER SOLUTIONS
PRE-EXCEPTIONAL REVENUE OPERATING PROFIT
ITEMS GBPM
CHANGE
EXCL. CHANGE
PASS-THROUGH EXCL.
FUEL PASS-THROUGH
AND FUEL
2017 2016 CHANGE CURRENCY 2017 2016 CHANGE AND CURRENCY
Industrial 167 117 43% 20% 23 10 134% 76%
Utility excl.
pass-through
fuel 264 264 -% (11)% 44 61 (28)% (33)%
Pass-through
fuel 42 24 75% 38% (2) - (100)% (100)%
----- ----- ------- -------------- ----- ----- ------- --------------
Total Power Solutions 473 405 17% (1)% 65 71 (9)% (15)%
----- ----- ------- -------------- ----- ----- ------- --------------
Operating Margin
Industrial 14% 8%
Utility excl. pass-through
fuel 17% 23%
Total Power Solutions excl. pass-through
fuel 16% 19%
------------------------------------------------ -------------- ----- ----- ------- --------------
POST-EXCEPTIONAL REVENUE OPERATING PROFIT
ITEMS GBPM
CHANGE
EXCL. CHANGE
PASS-THROUGH EXCL.
FUEL PASS-THROUGH
AND FUEL
2017 2016 CHANGE CURRENCY 2017 2016 CHANGE AND CURRENCY
Industrial 167 117 43% 20% 18 8 113% 56%
Utility excl.
pass-through
fuel 264 264 -% (11)% 42 59 (29)% (34)%
Pass-through
fuel 42 24 75% 38% (2) - (100)% (100)%
----- ----- ------- -------------- ----- ----- ------- --------------
Total Power Solutions 473 405 17% (1)% 58 67 (14)% (20)%
----- ----- ------- -------------- ----- ----- ------- --------------
Operating Margin
Industrial 11% 7%
Utility excl. pass-through
fuel 16% 22%
Total Power Solutions excl. pass-through
fuel 14% 18%
------------------------------------------------ -------------- ----- ----- ------- --------------
Headlines
-- Power Solutions Industrial revenue and operating profit excluding currency increased 20% and 76% respectively driven by growth in our Eurasia, Middle East and Africa businesses and cost savings from restructuring in Latin America
-- Power Solutions Utility revenue and operating profit reflect impact of offhires and repricing of legacy contracts in Argentina
o Reduction in price and volume in Argentina had a GBP34 million impact on revenue excluding currency
-- Power Solutions Utility order intake year to date of 430 MW plus 200 MW from KBT acquisition in Indonesia (2016: 875 MW)
-- Secured 28 MW of next generation gas contracts and initial HFO and solar-diesel contracts
-- Power Solutions Utility debtor provision increased by $10 million due to slower payments in Africa
Commentary
Overall, our Power Solutions business saw revenue excluding pass-through fuel and currency decline by 1% and on the same basis operating profit pre-exceptional items decrease by 15% (operating profit post-exceptional items decreased by 20%).
In our Power Solutions Industrial business revenue excluding the impact of currency increased 20%. In Eurasia revenue grew 71%, with order intake of 179 MW (2016: 165 MW) in the first six months. In the Middle East and Africa we also delivered double-digit growth with particular strength in Qatar, Dubai, Nigeria and Angola, although weaker in Saudi Arabia given the impact of the lower oil price. In Asia, revenues were up 1% with a decrease in South Korea offset by an increase in Indonesia. The restructuring work in Latin America has progressed well, with operating profit pre-exceptional items up by GBP5 million.
Our Power Solutions Utility business saw revenue excluding currency and pass-through fuel decrease by 11% due to repricing and off-hires in Argentina, an impact of GBP34 million on prior year. Excluding the impact of Argentina revenue grew 1%. Operating margin pre-exceptional items decreased to 17% (2016: 23%) driven by the reduction in Argentina and also one-off benefits in the prior year comparatives, most notably in indirect tax and service material costs. Excluding the impact of Argentina, the operating margin increased. Operating margin post-exceptional items was 16% (2016: 22%). In Argentina we are contracted to provide 174 MW of fixed site capacity and 30 MW of standby capacity until the end of 2017. In addition, we are still running a further 65 MW on a day-to-day basis.
We continued to see delays in payments in Power Solutions Utility, in particular from customers in Africa. As a result our bad debt provision increased by $10 million to $73 million. While the situation is clearly challenging and many customers are struggling with liquidity, none dispute the debt, payments have been made by each customer and we are working closely with them to agree payment plans to clear the overdue amounts. The situation also continues to be very challenging in Venezuela where we are operating at a considerably reduced number of megawatts. The overdue debt is well provided given the political instability.
Order intake year to date is 430 MW (2016: 875 MW) with a higher conversion rate than in Q1. New business included 95 MW in Bangladesh, 60 MW in Yemen, 60 MW in Sri Lanka and 20 MW in Sierra Leone. We are pleased to have won 28 MW of next generation gas and initial contracts for HFO (28 MW, Madagascar) and solar-diesel (7 MW). The sales pipeline for HFO and NGG contains a number of opportunities which we expect to convert during the second half of the year; this is supported by the build plan which will deliver a fleet in line with market demand.
At the end of the period, our order book was over 72,000 MW months, the equivalent of 25 months' revenue at the current run-rate (30 June 2016: 25 months). The off-hire rate in the first half was 15% (2016: 20%). In addition we completed the acquisition of KBT in Indonesia in the first half which adds growth of a further 200 MW to our Power Solutions Utility order book.
BUSINESS PRIORITIES
Two years ago, we launched our business priorities focussing on our customer, our technology and our efficiency, all of which were designed to improve our customer proposition, make us more competitive and drive growth.
Rental Solutions
In Rental Solutions, we have focused on improving the customer journey, making it easier to do business with us, primarily through implementing a number of systems and creating a digital platform. Our new website, which was launched in May, is designed to be easier to navigate and more user friendly; since its launch we have seen a marked increase in activity and people are staying longer on the site. We have made good progress with the roll-out of our Customer Relationship Management system (CRM) and it is now live in the UK and North America; implementation in Continental Europe and Australia Pacific is planned for later this year. We will also be launching Field Service Management, an operations system which will provide real-time visibility of assets and technicians. We expect the full suite of systems / applications to improve customer satisfaction, whilst improving utilisation and productivity.
Power Solutions
In Power Solutions, we have focused on understanding the needs of our customers and enhancing our sales capability. We have increased our sales presence in key markets, particularly in the Power Solutions Utility business, and we have overhauled our training programme. This ensures that our sales people better understand the energy markets they operate in, our product offering and how to tailor it for each customer in that market. The new CRM system has been deployed in the Power Solutions Utility business and is providing better visibility of the sales pipeline; it will be implemented in the Power Solutions Industrial business early next year.
We have developed our product offering, with the introduction of HFO and solar/diesel hybrid products, the first contracts for which have been signed and we are now in the process of mobilising. In addition, we have introduced a new generation of gas products which provides significantly improved fuel efficiency and we have continued to develop our market leading diesel product. The product road maps are multi-generational with upgrades at refurbishment, allowing us to improve capital and fuel efficiency with less risk of stranded capital.
Efficiency
In addition to the business specific initiatives, across the Group we have been focused on reducing our cost base. We initially committed to making annualised cash savings of around GBP80 million, delivered by removing duplication and improving our procurement practices. In March we committed to a further GBP25 million of annualised cash savings achieved by further work right-sizing our Power Solutions businesses in Latin America, Asia and Africa. This latter piece of work removed over 200 roles from these businesses, with the majority of these in Latin America. We have closed seven facilities across Brazil, Chile and Peru while transferring over 450 generators to other regions where demand is stronger. We remain on track to deliver these savings by the end of 2017. The use of these savings will be balanced between reinvestment to drive growth and supporting margins and returns.
Our procurement function is now well embedded across the Group and a number of their key activities such as improved supplier terms, more competitive tendering practices and new sourcing tools, are now used throughout the business. In addition, we now have framework agreements in place with our key OEM suppliers, focussed on building sustainable partnerships and reducing the costs associated with ongoing maintenance of our equipment. In Power Solutions Utility, we are currently reviewing our hub and logistics model to ensure this is optimally aligned to our markets.
We have made considerable progress across these initiatives, with a number completed and the balance to be concluded during 2018. To ensure that the initiatives continue to deliver we are developing KPIs with which to monitor the business and we will continue to identify other areas for improvement on an ongoing basis.
ACQUISITIONS
As previously disclosed, we are continuously assessing the market landscape and typically have a small pipeline of potential acquisitions. We invest for both scale and capability, including adjacencies, and acquisitions are subject to our disciplined capital allocation process and have to meet appropriate hurdle rates of return. In 2016 we acquired DRYCO, a specialist in moisture control, drying, heating and cooling applications in key sectors in North America, and have made three small acquisitions so far in 2017.
Younicos
Last month we announced the acquisition of Younicos for GBP40 million(5) , a pioneer and global market leader in the development and deployment of integrated energy systems. This supports our strategy of investing in technology that provides a lower cost of energy and broadens the range of products available to our customers.
Younicos' proprietary software and control systems, and its knowledge of batteries, together enable the seamless integration of multiple energy sources, both thermal and renewable, providing a reliable source of power and an optimised energy management system. We can leverage Younicos' expertise and combine this with our generating technology, deployment capability and global scale to provide customers with a reliable, cheaper and cleaner source of energy.
We see the initial opportunities from Younicos within Aggreko in Rental Solutions and Power Solutions Industrial. In particular there are compelling opportunities in supporting off grid applications in a number of sectors, such as mining and events; and grid connected opportunities, such as spinning reserve displacement, where storage is used to provide extra capacity in case of excess demand; and in supporting distributed generation, where the combination of a number of generation sources (renewable, thermal) are required to provide a low cost, reliable solution. As energy markets evolve, particularly in developed markets, with higher renewable penetration and more distributed generation we expect such opportunities to become more prevalent and the capabilities Younicos brings, coupled with Aggreko's mobile, modular and more efficient products, to become more important.
Younicos is an investment in the future of Aggreko. In 2016 it made a loss of GBP15 million, but it is expected that performance will improve across 2017 and become profitable during the latter part of 2018.
Kerta Bumni Tekindo (KBT)
In June 2017 Aggreko purchased KBT for GBP25 million. KBT are an Indonesian Utility business with over 200 MW of work on hire. As an archipelago of over 17,000 islands, Indonesia is a good market for Aggreko's solutions and this acquisition strengthens our business in this important power market.
TuCo
Aggreko also completed the purchase of TuCo Industrial Products Inc., for GBP3 million. TuCo are a US based temporary heat and air conditioning business based in Washington State with a focus on key sectors, including events.
MEDIUM TERM RETURN OBJECTIVES
Aggreko has return targets of around 20%, to be achieved in the medium term. The plans and actions undertaken as a result of the business priorities and the acquisitions made, are all designed to support the achievement of these objectives.
FINANCIAL REVIEW
A summarised Income Statement for 2017 as well as related ratios are set out below. The first table excludes exceptional items and the second table includes exceptional items.
PRE-EXCEPTIONAL ITEMS
GBPM
CHANGE EXCL.
PASS-THROUGH
2017 2016 CHANGE FUEL AND CURRENCY
Revenues 792 685 16% -%
Operating profit 79 82 (3)% (11)%
Net interest expense (16) (11) (41)%
Profit before tax 63 71 (10)%
Taxation (18) (20) 10%
Profit after tax 45 51 (10)%
Diluted earnings per
share (pence) 17.88 19.81 (10)%
Operating margin 10% 12% (2)pp
ROCE 12% 14% (2)pp
----------------------- ------ ------ --------- -------------------
POST-EXCEPTIONAL ITEMS
GBPM
CHANGE EXCL.
PASS-THROUGH
2017 2016 CHANGE FUEL AND CURRENCY
Revenues 792 685 16% -%
Operating profit 69 72 (4)% (12)%
Net interest expense (16) (11) (41)%
Profit before tax 53 61 (12)%
Taxation (15) (18) 14%
Profit after tax 38 43 (12)%
Diluted earnings per
share (pence) 14.98 16.77 (11)%
Operating margin 9% 11% (2)pp
ROCE 10% 12% (2)pp
------------------------ ------ ------ --------- -------------------
Currency Translation
The movement in exchange rates in the period had the translational impact of increasing revenue by GBP93 million and operating profit by GBP9 million. This was driven by the strength, against Sterling, of all the principal currencies impacting the Group, most notably the US Dollar. Currency translation also gave rise to a GBP54 million decrease in the value of net assets from December 2016 to June 2017. Set out in the table below are the principal exchange rates which affected the Group's profits and net assets.
PRINCIPAL EXCHANGE JUNE 2017 JUNE 2016 DEC 2016
RATES
(PER GBP STERLING)
AVERAGE PERIOD AVERAGE PERIOD AVERAGE PERIOD
United States Dollar 1.26 1.30 1.43 1.33 1.36 1.23
Euro 1.16 1.14 1.28 1.19 1.22 1.17
UAE Dirhams 4.63 4.76 5.26 4.88 4.98 4.53
Australian Dollar 1.67 1.69 1.95 1.78 1.83 1.71
Brazilian Reals 4.01 4.28 5.29 4.27 4.74 4.01
Argentinian Peso 19.80 21.40 20.50 19.99 20.00 19.61
Russian Rouble 73.04 76.69 100.26 85.21 91.04 75.23
(Source: Bloomberg)
---------------------- -------- ------- -------- ------- -------- -------
Reconciliation of Adjusted Movement to Reported Movement
The tables below reconcile the reported and adjusted revenue and operating profit movements:
Revenue
RS PSI PSU GROUP
2017 2016 CHANGE 2017 2016 CHANGE 2017 2016 CHANGE 2017 2016 CHANGE
GBPM GBPM % GBPM GBPM % GBPM GBPM % GBPM GBPM %
As reported 319 280 14% 167 117 43% 306 288 6% 792 685 16%
Pass-through
fuel - - - - (42) (24) (42) (24)
Currency
impact - 33 - 22 - 38 - 93
Adjusted 319 313 2% 167 139 20% 264 302 (11)% 750 754 -%
------------- ---- ---- ------ ---- ---- ------ ---- ---- ------ ---- ---- ------
Operating profit
RS PSI PSU GROUP
2017 2016 CHANGE 2017 2016 CHANGE 2017 2016 CHANGE 2017 2016 CHANGE
GBPM GBPM % GBPM GBPM % GBPM GBPM % GBPM GBPM %
As reported 11 5 123% 18 8 113% 40 59 (33)% 69 72 (4)%
Pass-through
fuel - - - - 2 - 2 -
Currency
impact - 2 - 3 - 4 - 9
Exceptional
items 3 6 5 2 2 2 10 10
Adjusted 14 13 14% 23 13 76% 44 65 (33)% 81 91 (11)%
------------- ---- ---- ------ ---- ---- ------ ---- ---- ------ ---- ---- ------
Note (i): RS - Rental Solutions; PSI - Power Solutions Industrial; PSU - Power Solutions Utility
Note (ii): the currency impact is calculated by taking 2016 numbers in local currency and retranslating them at 2017 average rates.
Exceptional Items
An exceptional charge of GBP10 million before tax was recorded in the six months to 30 June 2017 in respect of the Group's business priorities implementation. These costs include employment costs, professional fees, severance costs and facility closure costs directly related to the implementation.
Interest
The net interest charge of GBP16 million was GBP5 million higher than last year reflecting higher average net debt year on year and an increase in the effective interest rate. Interest cover, measured against rolling 12-month EBITDA (Earnings before Interest, Taxes, Depreciation and Amortisation) remained strong at 17 times (2016: 25 times) relative to the financial covenant attached to our borrowing facilities that EBITDA should be no less than 4 times interest.
Effective Tax Rate
The current forecast of the effective tax rate for the full year, which has been used in the interim accounts, is 28% which is the same as the first half last year.
Dividends
The Board has decided to pay an interim dividend of 9.38 pence per ordinary share which is maintained in line with last year; dividend cover is 1.9 times (30 June 2016: 2.1 times). This interim dividend will be paid on 6 October 2017 to shareholders on the register at 8 September 2017, with an ex-dividend date of 7 September 2017. Dividend cover is calculated as basic earnings per share for the period divided by dividend per share.
Cashflow
The net cash inflow from operations during the period totalled GBP184 million (2016: GBP100 million). The increase in cash inflow from operations was mainly driven by reduction in the working capital outflow of GBP63 million. This funded capital expenditure of GBP128 million (2016: GBP98 million). Of the GBP128 million, GBP115 million (2016: GBP91 million) was spent on fleet.
Net debt was GBP683 million at 30 June 2017, GBP49 million higher than the prior year. There are a number of movements driving the increase, including GBP10 million in currency, notably the weakening of sterling against the US dollar, and the acquisitions noted above. This resulted in net debt to EBITDA on a rolling 12-month basis of 1.3 times compared to 1.2 times at June 2016.
The increase in operating cash inflow is mainly driven by lower working capital outflows year on year with an outflow of GBP38 million in 2017 compared to GBP101 million outflow in 2016. This year's outflow is the net of a GBP65 million inflow from trade and other payables, as our now established procurement function has worked to improve supplier terms and leverage our scale and spend. However trade and other receivables has more than offset this improvement increasing GBP103 million which is explained as follows.
The increase in trade and other receivables is broken down by business unit as a: GBP5 million decrease in Rental Solutions; a GBP34 million increase in Power Solutions Industrial and a GBP74 million increase in the Power Solutions Utility business. The increase in Power Solutions Industrial is driven by the 20% increase in revenue. In Power Solutions Utility, GBP36 million of the increase in the debtor book relates to new contracts in Brazil which have recently been commissioned and include fuel, therefore the revenue per megawatt generated is much greater; the balance outstanding is in line with commercial terms and there is no issue with the recoverability. The remaining increase is driven by a few customers in Africa who are taking longer to pay given restrictions on liquidity and access to US Dollars. None of these customers dispute the debt, amounts have been received from each in the year to date and payment plans are being agreed to clear the overdue amounts.
Recognising the increase in overdue debt, the Power Solutions Utility debtor provision has increased to $73 million, $10 million higher than December 2016.
At the start of this year we initiated a project to reduce our working capital. In the first six months, we have focused on our largest businesses and have dedicated work streams for payables, receivables and inventory. We have made good progress on payables and are starting to make progress with inventory. As we anticipated, the biggest challenge is the Power Solutions Utility debtor book which is an area of particular focus. The project is ongoing and we will provide a further update at the year end.
Financial Resources
The Group maintains sufficient facilities to meet its normal funding requirements over the medium term. At 30 June 2017, these facilities totalled GBP1,295 million in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement notes. The financial covenants attached to these facilities are that EBITDA should be no less than 4 times interest and net debt should be no more than 3 times EBITDA; at 30 June 2017, these stood at a comfortable 17 times and 1.3 times respectively. The maturity profile of the borrowings is detailed in Note 11 in the Accounts.
Net debt amounted to GBP683 million at 30 June 2017 and, at that date, un-drawn committed facilities were GBP625 million.
Net Operating Assets
The net operating assets of the Group (including goodwill) at 30 June 2017 totalled GBP2,070 million, GBP79 million higher than the same period in 2016. Excluding the impact of currency net operating assets are GBP34 million higher. The main components of net operating assets are detailed in the table below.
GBP MILLION 2017 2016 MOVEMENT MOVEMENT EXCLUDING THE
IMPACT OF CURRENCY
Rental Fleet 1,157 1,131 2% -%
Property & Plant 106 99 7% 6%
Inventory 238 233 2% -%
Net Trade Debtors 480 376 27% 25%
------------------- ------ ------ --------- -----------------------
A key measure of Aggreko's performance is the return (expressed as adjusted operating profit) generated from average net operating assets (ROCE). For each half year reporting period, we calculate ROCE by taking the operating profit on a rolling 12-month basis and expressing it as a percentage of the average net operating assets at 30 June, 31 December and the previous 30 June. In the first half of 2017 the ROCE decreased to 12% compared with 14% for the same period in 2016 driven by the decrease in the Group operating margin.
Acquisitions
The Group completed two acquisitions in the six months to 30 June 2017. On 14 June 2017, the Group acquired Kerta Bumni Tekindo (KBT), an Indonesia-based power rental company for a total consideration of GBP25 million ($33 million). On 27 January 2017, the Group acquired TuCo Industrial Products Inc., a temporary heat and air conditioning company for a total consideration of GBP3 million. Details of these acquisitions is contained in Note 15 to the Accounts. In addition on 3 July we announced an agreement to acquire Younicos, a global market leader in the development and deployment of integrated energy systems, based on battery storage. The cost of the acquisition was GBP40 million and in addition there will be a net debt/cash adjustment of circa GBP7 million payable.
Shareholders' Equity
Shareholders' equity decreased by GBP56 million to GBP1,312 million in the six months ended 30 June 2017, represented by the net assets of the Group of GBP1,995 million before net debt of GBP683 million. The movements in shareholders' equity are analysed in the table below:
MOVEMENTS IN SHAREHOLDERS' EQUITY
GBP MILLION GBP MILLION
AS AT 1 JANUARY 2017 1,368
Profit for the period post exceptional
items 38
Dividend(6) (45)
------------
Retained earnings (7)
Employee share awards 4
Re-measurement of retirement benefits (1)
Currency translation (54)
Movement in hedging reserve 2
------------
AS AT 30 JUNE 2017 1,312
---------------------------------------- ------------ ------------
Principal Risks and Uncertainties
In the day to day operations of the Group, we face risks and uncertainties. We aim to mitigate and manage these risks and to aid this the Board has a risk management process which is described on pages 52 to 53 of the 2016 Annual Report and Accounts. Also set out on pages 52 to 60 of that report are the principal risks and uncertainties which we believe could potentially impact the Group, and these are summarised below:
-- Market dynamics - Rental Solutions; -- Market dynamics - Power Solutions; -- Change management relating to our business priorities; -- Talent management; -- Technology - market introduction; -- Cyber security; -- Security; -- Health and safety; -- Environment; -- Failure to conduct business dealings with integrity and honesty; -- Taxation; -- Failure to collect payments or to recover assets.
In the main we do not believe that the principal risks and uncertainties facing the business have changed materially since the publication of the Annual Report and we believe these will continue to be the same in the second half of the year.
Shareholder information
Our website can be accessed at www.plc.aggreko.com. This contains a large amount of information about our business, including a range of charts and data, which can be downloaded for easy analysis. The website also carries copies of recent investor presentations, as well as Stock Exchange announcements.
Chris Weston Carole Cran Chief Executive Officer Chief Financial Officer 2 August 2017
GROUP INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2017 (UNAUDITED)
6 MONTHSED 30 JUNE 6 MONTHSED 30 JUNE
2017 2016
TOTAL BEFORE EXCEPTIONAL TOTAL BEFORE
EXCEPTIONAL ITEMS EXCEPTIONAL EXCEPTIONAL
ITEMS (NOTE 6) ITEMS ITEMS
2017 2017 2017 2016 2016 2016
NOTES GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Revenue 4 792 - 792 685 - 685
Cost of sales (375) (1) (376) (309) - (309)
------------- ------------ ------------ ------------- ------------ ------------
Gross profit 417 (1) 416 376 - 376
Distribution
costs (232) (3) (235) (214) - (214)
Administrative
expenses (108) (6) (114) (85) (10) (95)
Other income 2 - 2 5 - 5
------------- ------------ ------------ ------------- ------------ ------------
Operating profit 4 79 (10) 69 82 (10) 72
Net finance costs
- Finance cost (17) - (17) (12) - (12)
- Finance income 1 - 1 1 - 1
------------- ------------ ------------ ------------- ------------ ------------
Profit before
taxation 63 (10) 53 71 (10) 61
Taxation 8 (18) 3 (15) (20) 2 (18)
------------- ------------ ------------ ------------- ------------ ------------
Profit for the period 45 (7) 38 51 (8) 43
------------- ------------ ------------ ------------- ------------ ------------
All profit for the
period is attributable
to the owners of the
Company.
Basic earnings
per share
(pence) 7 17.89 (2.91) 14.98 19.83 (3.04) 16.79
------------- ------------ ------------ ------------- ------------ ------------
Diluted earnings
per share
(pence) 7 17.88 (2.90) 14.98 19.81 (3.04) 16.77
------------------ ------ ------------- ------------ ------------ ------------- ------------ ------------
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2017 (UNAUDITED)
6 MONTHS 6 MONTHSEDED
30 JUNE 30 JUNE
2017 2016
GBP MILLION GBP MILLION
Profit for the period 38 43
------------ ------------
Other comprehensive (loss)/income
Items that will not be reclassified
to profit or loss
Remeasurement of retirement benefits (1) (9)
Items that may be reclassified subsequently
to profit or loss
Cash flow hedges 2 1
Net exchange (losses)/gains offset
in reserves (54) 150
------------ ------------
Other comprehensive (loss)/income
for the period (53) 142
------------ ------------
Total comprehensive (loss)/income
for the period (15) 185
---------------------------------------------- ------------ ------------
GROUP INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2016
TOTAL BEFORE
EXCEPTIONAL EXCEPTIONAL
ITEMS ITEMS
2016 2016 2016
NOTES GBP MILLION GBP MILLION GBP MILLION
Revenue 4 1,515 - 1,515
Cost of sales (664) (30) (694)
------------- ------------ ------------
Gross profit 851 (30) 821
Distribution costs (430) - (430)
Administrative expenses (182) (19) (201)
Other income 9 - 9
------------- ------------ ------------
Operating profit 4 248 (49) 199
Net finance costs
- Finance cost (29) - (29)
- Finance income 2 - 2
------------- ------------ ------------
Profit before taxation 221 (49) 172
Taxation 8 (63) 16 (47)
------------- ------------ ------------
Profit for the year 158 (33) 125
------------- ------------ ------------
All profit for the period is attributable to the
owners of the Company.
Basic earnings per share
(pence) 7 61.98 (13.10) 48.88
------------- ------------ ------------
Diluted earnings per share
(pence) 7 61.95 (13.09) 48.86
---------------------------- ------ ------------- ------------ ------------
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
2016
GBP MILLION
Profit for the period 125
------------
Other comprehensive income/(loss)
Items that will not be reclassified to profit
or loss
Remeasurement of retirement benefits (29)
Taxation on remeasurement of retirement benefits 5
Items that may be reclassified subsequently to
profit or loss
Cashflow hedges 1
Taxation on cashflow hedges -
Net exchange gains offset in reserves 220
------------
Other comprehensive income for the period (net
of tax) 197
------------
Total comprehensive income for the period 322
------------
GROUP BALANCE SHEET
AS AT 30 JUNE 2017 (UNAUDITED)
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
NOTES GBP MILLION GBP MILLION GBP MILLION
Non-current assets
Goodwill 153 144 159
Other intangible assets 23 17 24
Property, plant and equipment 9 1,263 1,230 1,309
Deferred tax asset 52 32 51
------------ ------------ ------------
1,491 1,423 1,543
------------ ------------ ------------
Current assets
Inventories 238 233 247
Trade and other receivables 10 736 611 656
Cash 51 51 44
Derivative financial instruments 1 3 1
Current tax assets 25 29 20
------------ ------------ ------------
1,051 927 968
------------ ------------ ------------
Total assets 2,542 2,350 2,511
------------ ------------ ------------
Current liabilities
Borrowings 11 (137) (65) (60)
Derivative financial instruments (1) (2) (2)
Trade and other payables (358) (277) (299)
Current tax liabilities (44) (57) (58)
Provisions (1) (2) (1)
------------ ------------ ------------
(541) (403) (420)
------------ ------------ ------------
Non-current liabilities
Borrowings 11 (597) (620) (633)
Derivative financial instruments (4) (7) (5)
Deferred tax liabilities (55) (58) (55)
Retirement benefit obligation (30) (11) (30)
Contingent consideration 15 (3) - -
------------ ------------ ------------
(689) (696) (723)
------------ ------------ ------------
Total liabilities (1,230) (1,099) (1,143)
------------ ------------ ------------
Net assets 1,312 1,251 1,368
============ ============ ============
Shareholders' equity
Share capital 42 42 42
Share premium 20 20 20
Treasury shares (8) (15) (14)
Capital redemption reserve 13 13 13
Hedging reserve (net of deferred
tax) (1) (3) (3)
Foreign exchange reserve 17 1 71
Retained earnings 1,229 1,193 1,239
------------ ------------ ------------
Total shareholders' equity 1,312 1,251 1,368
============ ============ ============
GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2017 (UNAUDITED)
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
NOTES GBP MILLION GBP MILLION GBP MILLION
Operating activities
Profit for the period 38 43 125
Adjustments for:
Exceptional items 10 10 19
Exceptional - impairment charge - - 30
Tax 15 18 47
Depreciation 149 135 281
Amortisation of intangibles 2 2 4
Finance income (1) (1) (2)
Finance cost 17 12 29
Profit on sale of PPE (2) (5) (9)
Share based payments 4 2 6
Changes in working capital (excluding
the effects of exchange differences
on consolidation):
Increase in inventories - (22) (21)
Increase in trade and other receivables (103) (73) (81)
Increase/(decrease) in trade and
other payables 65 (6) (17)
Cash flows relating to exceptional
items (10) (15) (23)
------------ ------------ ------------
Cash generated from operations 184 100 388
Tax paid (33) (22) (64)
Interest received 1 1 2
Interest paid (18) (12) (28)
------------ ------------ ------------
Net cash generated from operating
activities 134 67 298
------------ ------------ ------------
Cash flows from investing activities
Acquisitions (net of cash acquired) 15 (10) - (22)
Acquisitions: repayment of loans
and financing 15 (18) - -
Purchases of property, plant and
equipment (PPE) (128) (98) (263)
Purchase of other intangible assets (2) - (5)
Proceeds from sale of PPE 6 14 23
------------ ------------ ------------
Net cash used in investing activities (152) (84) (267)
------------ ------------ ------------
Cash flows from financing activities
Increase in long-term loans 615 204 393
Repayment of long-term loans (551) (159) (373)
Net movement in short-term loans (10) 22 18
Dividends paid to shareholders (45) (45) (69)
Purchase of treasury shares - (8) (8)
------------ ------------ ------------
Net cash from/(used in) financing
activities 9 14 (39)
------------ ------------ ------------
Net decrease in cash and cash equivalents (9) (3) (8)
Cash and cash equivalents at beginning
of the period 25 32 32
Exchange gain on cash and cash
equivalents - 2 1
------------ ------------ ------------
Cash and cash equivalents at end
of the period 16 31 25
------------------------------------------- ------ ------------ ------------ ------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
FOR THE SIX MONTHSED 30 JUNE 2017 (UNAUDITED)
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
NOTES GBP MILLION GBP MILLION GBP MILLION
Decrease in cash and cash equivalents (9) (3) (8)
Cash inflow from movement in debt (54) (67) (38)
------------ ------------ ------------
Changes in net debt arising from
cash flows (63) (70) (46)
Exchange gain/(loss) 29 (75) (114)
------------ ------------ ------------
Movement in net debt in period (34) (145) (160)
Net debt at beginning of period (649) (489) (489)
------------ ------------ ------------
Net debt at end of period 11 (683) (634) (649)
--------------------------------------- ------ ------------ ------------ ------------
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2017 (UNAUDITED)
AS AT
30 JUNE
2017 ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
ORDINARY SHARE CAPITAL FOREIGN
SHARE PREMIUM TREASURY REDEMPTION HEDGING EXCHANGE RETAINED
CAPITAL ACCOUNT SHARES RESERVE RESERVE RESERVE EARNINGS TOTAL
GBP GBP GBP GBP GBP (TRANSLATION) GBP EQUITY
MILLLION MILLLION MILLLION MILLLION MILLLION GBP MILLLION MILLLION GBP MILLLION
Balance
at 1 January
2017 42 20 (14) 13 (3) 71 1,239 1,368
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Profit for
the period - - - - - - 38 38
Other comprehensive
(loss)/income:
Fair value
gains on
interest
rate swaps - - - - 2 - - 2
Currency
translation
differences
(Note (i)) - - - - - (54) - (54)
Re-measurement
of retirement
benefits
(net of
tax) - - - - - - (1) (1)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Total
comprehensive
income for
the period
ended 30
June 2017 - - - - 2 (54) 37 (15)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Transactions
with owners:
Employee
share awards - - - - - - 4 4
Issue of
ordinary
shares to
employees
under share
option schemes
(Note (ii)) - - 6 - - - (6) -
Dividends
paid during
the period - - - - - - (45) (45)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
- - 6 - - - (47) (41)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Balance
at 30 June
2017 42 20 (8) 13 (1) 17 1,229 1,312
---------------- --------- --------- --------- ----------- --------- -------------- ---------- -------------
(i) The currency translation difference is explained in the Financial Review on page 14.
(ii) During the period 435,760 Ordinary shares have been transferred from the Employee Benefit Trust to satisfy the Restricted Stock Schemes. In addition 1,698 shares were transferred from the Employee Benefit Trust to participants in the Long Term Incentive Plan.
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2017 (UNAUDITED)
AS AT
30 JUNE
2016 ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
ORDINARY SHARE CAPITAL FOREIGN
SHARE PREMIUM TREASURY REDEMPTION HEDGING EXCHANGE RETAINED
CAPITAL ACCOUNT SHARES RESERVE RESERVE RESERVE EARNINGS TOTAL
GBP GBP GBP GBP GBP (TRANSLATION) GBP EQUITY
MILLLION MILLLION MILLLION MILLLION MILLLION GBP MILLLION MILLLION GBP MILLLION
Balance
at 1 January
2016 42 20 (9) 13 (4) (149) 1,202 1,115
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Profit for
the period - - - - - - 43 43
Other comprehensive
(loss)/income:
Fair value
gains on
foreign
currency
cash flow
hedge - - - - 2 - - 2
Transfers
from hedging
reserve
to revenue - - - - (1) - - (1)
Currency
translation
differences - - - - - 150 - 150
Re-measurement
of retirement
benefits
(net of
tax) - - - - - - (9) (9)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Total
comprehensive
income for
the period
ended 30
June 2016 - - - - 1 150 34 185
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Transactions
with owners: - - - - - - - -
Purchase
of treasury
shares - - (8) - - - - (8)
Employee
share awards - - - - - - 4 4
Issue of
ordinary
shares to
employees
under share
option schemes
(Note (i)) - - 2 - - - (2) -
Dividends
paid during
the period - - - - - - (45) (45)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
- - (6) - - - (43) (49)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Balance
at 30 June
2016 42 20 (15) 13 (3) 1 1,193 1,251
---------------- --------- --------- --------- ----------- --------- -------------- ---------- -------------
(i) During the period 109,434 Ordinary shares have been transferred from the Employee Benefit Trust to satisfy the Restricted Stock Schemes. In addition 19,638 shares were transferred from the Employee Benefit Trust to participants in the Long Term Incentive Plan.
NOTES TO THE INTERIM ACCOUNTS
For the six months ended 30 June 2017 (unaudited)
1. GENERAL INFORMATION
The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The address of the registered office is 120 Bothwell Street, Glasgow, G2 7JS, UK.
This condensed interim financial information was approved for issue on 2 August 2017.
This condensed consolidated interim financial information does not comprise Statutory Accounts within the meaning of Section 434 of the Companies Act 2006. Statutory Accounts for the year ended 31 December 2016 were approved by the Board on 7 March 2017 and delivered to the Registrar of Companies. The report of the auditors on those Accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
The condensed consolidated interim financial information is unaudited but has been reviewed by the Group's auditors, whose report is on page 38.
2. BASIS OF PREPARATION
This condensed consolidated interim financial information for the six months ended 30 June 2017 has been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Conduct Authority (previously the Financial Services Authority) and IAS 34 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.
Going concern basis
The Group's banking facilities are primarily in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement notes; facilities totalled GBP1,295 million at 30 June 2017. The financial covenants attached to these facilities are that EBITDA should be no less than 4 times interest (30 June 2017: 17 times excluding exceptional items) and net debt should be no more than 3 times EBITDA (30 June 2017: 1.3 times excluding exceptional items). The Group does not consider that these covenants are restrictive to its operations. The maturity profile of the borrowings is detailed in Note 11 to the Accounts. Having reassessed the principal risks and the Group's forecasts and projections, the directors considered it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.
3. ACCOUNTING POLICIES
Except as described below, the accounting policies are consistent with those of the annual financial statements for the year ended 31 December 2016, as described in those annual financial statements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
New and amended standards adopted by the Group
There are no new IFRSs or IFRICs that are effective for the first time this year that have a material impact on the Group.
New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2017 and not early adopted
IFRS 15, 'Revenue from contracts with customers' deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018. The Group has substantially completed its assessment of the impact of this standard and the main changes we expect from adopting IFRS 15 are:
-- Mobilisation costs will be amortised over the contact period instead of being recognised as incurred as equipment is mobilised before power is produced. Demobilisation costs, if they can be measured reliably, will also be amortised over the contract period instead of being recognised as incurred at the end of the contract. There is a difference in the definition of contract period for mobilisation costs and demobilisation costs. In the former the contract period is re-assessed for agreed extensions. In the latter the contract period is re-assessed if there is a high probability of an extension however it doesn't need to be agreed with the customer.
-- Mobilisation and demobilisation income (where timing is specifically stipulated in the contract in order to match the timing of associated costs) will be recognised during the period of provision of power.
-- Judgement will be required around whether there is any restriction in recognising variable revenue due to penalty clauses in the contracts however the probability of this is small.
-- On some contracts there may be more than one performance obligation however we expect the impact of this to be small.
We expect to be able to give an indication as to the likely effect on the annual results of implementing IFRS 15 in the 2017 Annual Report.
IFRS 9, 'Financial instruments' addresses the classification, measurement and recognition of financial assets and liabilities. The standard is effective for accounting periods beginning on or after 1 January 2018. An impact assessment will be carried out during half two 2017 but we do not expect this standard to have a material impact on the Group.
IFRIS 16, 'Leases' applies to annual periods beginning on or after 1 January 2019. IFRIS 16 requires lessees to recognise a lease liability reflecting future lease payments and a 'right-of-use asset' for virtually all lease contracts. The Group will assess the impact of IFRS 16 closer to the implementation date however the main impact is expected to be the recognition of GBP92 million of operating leases as right of use assets with a corresponding liability based on the information as at 31 December 2016. This will be updated during half two 2017.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
4. SEGMENTAL REPORTING
(a) Revenue by segment
EXTERNAL REVENUE
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 167 117 262
Utility 306 288 624
----------------- ---------------- ----------------
473 405 886
Rental Solutions 319 280 629
----------------- ---------------- ----------------
Group 792 685 1,515
---------------------------- ----------------- ---------------- ----------------
(i) Inter-segment transfers or transactions are entered into under
the normal commercial terms and conditions that would also be available
to unrelated third parties. All inter-segment revenue was less than
GBP1 million.
(b) Profit by segment
OPERATING PROFIT
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 23 10 32
Utility 42 61 164
------------ ------------ ------------
65 71 196
Rental Solutions 14 11 52
------------ ------------ ------------
Operating profit pre-exceptional items 79 82 248
Exceptional items (Note 6) (10) (10) (49)
------------ ------------ ------------
Operating profit post-exceptional items 69 72 199
Finance costs - net (16) (11) (27)
------------ ------------ ------------
Profit before taxation 53 61 172
Taxation (15) (18) (47)
------------ ------------ ------------
Profit for the period/year 38 43 125
----------------------------------------- ------------ ------------ ------------
(c) Depreciation and amortisation by segment
YEARED 31 DECEMBER 2016
6 MONTHS 6 MONTHS BEFOREEDED EXCEPTIONAL IMPAIRMENT
30 JUNE 30 JUNE CHARGES CHARGES TOTAL
2017 2016 2016 2016 2016
GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 36 30 63 - 63
Utility 67 61 127 - 127
------------ ------------ ------------ ------------ ------------
103 91 190 - 190
Rental Solutions 48 46 95 30 125
------------ ------------ ------------ ------------ ------------
Group 151 137 285 30 315
------------------- ------------ ------------ ------------ ------------ ------------
(d) Capital expenditure on property, plant & equipment and intangible assets by segment
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 14 24 43
Utility 108 34 144
------------ ------------ ------------
122 58 187
Rental Solutions 32 40 94
------------ ------------ ------------
Group 154 98 281
------------------- ------------ ------------ ------------
(i) The net book value of total Group disposals of PPE during the period were GBP4 million. (30 June 2016: GBP9 million, 31 Dec 2016: GBP14 million).
(ii) Capital expenditure comprises additions of property, plant and equipment (PPE) of GBP128 million (30 June 2016: GBP98 million, 31 December 2016: GBP263 million), additions of intangible assets of GBP2 million (30 June 2016: GBPnil, 31 December 2016: GBP5 million), acquisitions of PPE of GBP24 million (30 June 2016: GBPnil, 31 December 2016: GBP10 million), and acquisitions of intangible assets of GBPnil (30 June 2016: GBPnil, 31 December 2016: GBP3 million).
(e) Assets/(Liabilities) by segment
ASSETS LIABILITIES
30 JUNE 30 JUNE 31 DEC 30 JUNE 30 JUNE 31 DEC
2017 2016 2016 2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 588 514 491 (66) (45) (44)
Utility 1,116 1,013 1,169 (216) (153) (177)
------------ ------------ ------------ ------------ ------------ ------------
1,704 1,527 1,660 (282) (198) (221)
Rental Solutions 760 759 779 (112) (97) (94)
------------ ------------ ------------ ------------ ------------ ------------
Group 2,464 2,286 2,439 (394) (295) (315)
Tax and finance payable 77 61 71 (102) (119) (117)
Derivative financial
instruments 1 3 1 (5) (9) (7)
Borrowings - - - (699) (665) (674)
Retirement benefit obligation - - - (30) (11) (30)
------------ ------------ ------------ ------------ ------------ ------------
Total assets/(liabilities)
per balance sheet 2,542 2,350 2,511 (1,230) (1,099) (1,143)
------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
(f) Geographical information
REVENUE NON-CURRENT ASSETS
30 JUNE 30 JUNE 31 DEC 30 JUNE 30 JUNE 31 DEC
2017 2016 2016 2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
North America 167 150 337 259 289 286
UK 42 37 82 170 103 101
Continental Europe 60 53 123 131 100 110
Eurasia 39 16 41 66 43 61
Middle East 89 67 144 210 200 264
Africa 119 110 243 191 217 231
Asia 78 73 164 146 130 130
Auspac 46 39 80 67 68 69
Latin America 152 140 301 199 241 240
------------ ------------ ------------ ------------ ------------ ------------
792 685 1,515 1,439 1,391 1,492
-------------------- ------------ ------------ ------------ ------------ ------------ ------------
Non-current assets exclude Deferred tax.
5. DIVIDS
The dividends paid in the period were:
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
Total dividend (GBP million) 45 45 69
Dividend per share (pence) 17.74 17.74 27.12
------------------------------ --------- --------- -------
The interim dividend for the period was 9.38 pence (2016: 9.38 pence), amounting to a total dividend of GBP24 million (2016: GBP24 million). This interim dividend will be paid on 6 October 2017 to shareholders on the register on 8 September 2017, with an ex-dividend date of 7 September 2017.
6. EXCEPTIONAL ITEMS
An exceptional charge of GBP10 million before taxation was recorded in the period in respect of the Group's business priorities implementation. The costs comprise GBP7 million of employee costs, GBP2 million of professional fees and GBP1 million of property related costs. The employee costs relate to severance costs as well as the costs of employees who are working full time on the business priorities implementation. This exceptional charge can be split into Rental Solutions GBP3 million, Power Solutions - Industrial GBP5 million and Power Solutions - Utility GBP2 million.
7. EARNINGS PER SHARE
Basic earnings per share have been calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during the period, excluding shares held by the Employee Share Ownership Trusts which are treated as cancelled.
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
Profit for the period (GBP million) 38 43 125
-------- -------- -------
Weighted average number of ordinary shares in
issue (million) 254 256 255
-------- -------- -------
Basic earnings per share (pence) 14.98 16.79 48.88
----------------------------------------------- -------- -------- -------
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
Profit for the period (GBP million) 38 43 125
-------- -------- -------
Weighted average number of ordinary shares
in issue (million) 254 256 255
Adjustment for share options - - -
-------- -------- -------
Diluted weighted average number of ordinary
shares in issue (million) 254 256 255
-------- -------- -------
Diluted earnings per share (pence) 14.98 16.77 48.86
--------------------------------------------- -------- -------- -------
Aggreko plc assesses the performance of the Group by adjusting earnings per share, calculated in accordance with IAS 33, to exclude items it considers to be material and non-recurring and believes that the exclusion of such items provides a better comparison of business performance. The calculation of earnings per ordinary share on a basis which excludes exceptional items is based on the following adjusted earnings:
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION
Profit for the period 38 43 125
Exclude exceptional items (net of tax) 7 8 33
------------ ------------ ------------
Adjusted earnings 45 51 158
------------ ------------ ------------
An adjusted earnings per share figure is presented
below.
Basic earnings per share pre-exceptional items
(pence) 17.89 19.83 61.98
Diluted earnings per share pre-exceptional
items (pence) 17.88 19.81 61.95
---------------------------------------------------- ------------ ------------ ------------
8. TAXATION
The taxation charge for the period is based on an estimate of the Group's expected annual effective rate of tax for 2017 based on prevailing tax legislation at 30 June 2017. This is currently estimated to be 28% on profits before exceptional items and 25% for exceptional items (June 2016: 28%; December 2016: 28% on profits before exceptional items and June 2016: 19%; December 2016: 32% on exceptional items).
9. PROPERTY, PLANT AND EQUIPMENT
SIX MONTHSED 30 JUNE 2017
VEHICLES,
FREEHOLD SHORT LEASEHOLD PLANT &
PROPERTIES PROPERTIES FLEET EQUIPMENT TOTAL
GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Cost
At 1 January 2017 91 22 3,475 136 3,724
Exchange adjustments (2) - (135) (3) (140)
Additions - - 115 13 128
Acquisitions (Note 15) - - 24 - 24
Disposals - (1) (34) (1) (36)
------------ ---------------- ------------ ------------ ------------
At 30 June 2017 89 21 3,445 145 3,700
------------ ---------------- ------------ ------------ ------------
Accumulated depreciation
At 1 January 2017 36 16 2,272 91 2,415
Exchange adjustments (1) - (92) (2) (95)
Charge for the period 2 1 138 8 149
Disposals - (1) (30) (1) (32)
------------ ---------------- ------------ ------------ ------------
At 30 June 2017 37 16 2,288 96 2,437
------------ ---------------- ------------ ------------ ------------
Net book values
At 30 June 2017 52 5 1,157 49 1,263
------------ ---------------- ------------ ------------ ------------
At 31 December 2016 55 6 1,203 45 1,309
-------------------------- ------------ ---------------- ------------ ------------ ------------
10. TRADE AND OTHER RECEIVABLES
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION
Trade receivables 553 458 521
Less: provision for impairment of receivables (73) (82) (67)
------------ ------------ ------------
Trade receivables - net 480 376 454
Prepayments 45 63 38
Accrued income 140 125 109
Other receivables (Note (i)) 71 47 55
------------ ------------ ------------
Total receivables 736 611 656
------------ ------------ ------------
Provision for impairment of receivables
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 7 8 7
Utility 56 67 52
------------ ------------ ------------
63 75 59
Rental Solutions 10 7 8
------------ ------------ ------------
Group 73 82 67
----------------------------------------------- ------------ ------------ ------------
(i) Other receivables include GBP8 million (30 June 2016: GBPnil, 31 December 2016: GBP8 million) of private placement notes with one customer in Venezuela (PDVSA). The financial instrument was booked at fair value which reflects our estimation of the recoverability of these notes.
11. BORROWINGS
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION
Non-current
Bank borrowings 96 338 329
Private placement notes 501 282 304
------------ ------------ ------------
597 620 633
------------ ------------ ------------
Current
Bank overdrafts 35 20 19
Bank borrowings 44 45 41
Private placement notes 58 - -
------------ ------------ ------------
137 65 60
------------ ------------ ------------
Total borrowings 734 685 693
------------ ------------ ------------
Short-term deposits (6) - (1)
Cash at bank and in hand (45) (51) (43)
------------ ------------ ------------
Net borrowings 683 634 649
------------ ------------ ------------
Overdrafts and borrowings are unsecured.
The maturity of financial liabilities
The maturity profile of the borrowings
was as follows:
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION
Within 1 year, or on demand 137 65 60
Between 1 and 2 years 82 225 97
Between 2 and 3 years 33 108 150
Between 3 and 4 years 135 81 127
Between 4 and 5 years - 132 178
Greater than 5 years 347 74 81
------------ ------------ ------------
734 685 693
------------------------------------------ ------------ ------------ ------------
Fair value estimation
The carrying value of non-derivative financial assets and liabilities, comprising cash and cash equivalents, trade and other receivables, trade and other payables and borrowings is considered to materially equate to their fair value. Derivative financial instruments, which are measured at fair value, comprise interest rate swaps representing a liability of GBP3 million categorised as level 2 and forward foreign currency contracts representing an asset of GBP1 million and a liability of GBP1 million, which are considered to be level 1. The fair value of interest rate swaps is calculated at the present value of estimated future cash flows using market interest rates. The valuation techniques employed are consistent with the year end Annual Report. The fair value of the other receivable referred to in Note 10 is based upon comparable bond prices and is considered to be level 2. The fair value of the KBT contingent consideration arrangement of GBP7 million (note 15) was estimated by assessing the expected growth of KBT post acquisition. No discount rate has been applied to the fair value estimate of the contingent consideration as this has a negligible effect on the fair value. This is considered to be level 2. There are no financial instruments measured as level 3.
12. CAPITAL COMMITMENTS
30 JUNE 30 JUNE 31 DEC
2017 2016 2016
GBP MILLION GBP MILLION GBP MILLION
Contracted but not provided for (property,
plant and equipment) 55 27 22
-------------------------------------------- ------------ ------------ ------------
13. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. There were no other related party transactions in the period.
14. SEASONALITY
The Group is subject to seasonality with the third quarter of the year being our peak demand period, accordingly revenue and profits have historically been higher in the second half of the year.
15. ACQUISITIONS
KBT (Kerta Bumni Tekindo)
On 14 June 2017 the Group acquired 95% of the share capital of KBT, an Indonesia-based power rental company for a maximum consideration of GBP25 million.
Included within this maximum consideration is GBP7 million which was deposited into an escrow account as contingent consideration. The total potential undiscounted amount of all future payments that the seller could be entitled to under the acquisition agreement is between GBPnil and GBP7 million payable after year 1 and year 3.
GBP MILLION
Current contingent consideration 4
Non-current contingent consideration 3
------------
Total contingent consideration 7
----------------------------------------- ------------
These amounts are dependent upon a number of conditions relating to the contracts in place at the acquisition date. Deductions will be made for the following:
-- Any contracts that:
- are off-hired
- are expired or have been terminated or
- have extended at terms lower than those currently in place
-- Any claims against the contract including overdue trade receivables, tax or misrepresentations,
The revenue and operating profit included in the consolidated income statement from 14 June 2017 to 30 June 2017 contributed by KBT was negligible. Had KBT been consolidated from 1 January 2017, the consolidated income statement for the period ended 30 June 2017 would show revenue and operating profit of GBP799 million and GBP69 million respectively.
The acquisition method of accounting has been adopted and the goodwill arising on the purchase will be capitalised. Acquisition related costs of GBP0.4 million have been expensed in the period and are included within administrative expenses in the income statement.
The details of the transaction and fair value of assets acquired are shown below:
FAIR VALUE
GBP MILLION
Property, plant & equipment 23
Trade and other receivables 3
Trade and other payables (1)
Loans and financing (18)
------------
Net assets acquired 7
Goodwill -
------------
Contingent consideration 7
Add loans and financing settled 18
------------
Net cash outflow 25
------------------------------------ ---- ------------
The fair values are provisional and will be finalised during half two 2017.
TuCo Industrial Products Inc
On 27 January 2017 the Group completed the acquisition of the business and assets of TuCo Industrial Products Inc (TuCo). TuCo specialises in providing temporary heat and air conditioning equipment to the construction, industrial, commercial and special events industries. The purchase consideration paid in cash was GBP3 million.
The revenue and operating profit included in the consolidated income statement from 27 January 2017 to 30 June 2017 contributed by TuCo was GBP1.4 million and GBP0.5 million respectively. Had TuCo been consolidated from 1 January 2017, the consolidated income statement for the period ended 30 June 2017 would show revenue and operating profit of GBP793 million and GBP69 million respectively.
The acquisition method of accounting has been adopted and the goodwill arising on the purchase has been capitalised. Acquisition related costs of GBP0.2 million have been expensed in the period and are included within administrative expenses in the income statement.
The details of the transaction and fair value of assets acquired are shown below:
FAIR VALUE
GBP MILLION
Property, plant & equipment 1
Inventory 1
------------
Net assets acquired 2
Goodwill 1
------------
Consideration per cash flow statement 3
------------------------------------------ ------------
Goodwill represents the value of synergies arising from the integration of the acquired business. Synergies include direct cost savings and the reduction of overheads as well as the ability to leverage Aggreko systems and access to assets.
16. POST BALANCE SHEET EVENTS
On 3 July 2017 the Group announced the acquisition of Younicos, a global market leader in the development and deployment of integrated energy systems based on battery storage. The cost of the acquisition was GBP40 million and in addition there will be a net debt/cash adjustment of circa GBP7 million payable. For the year ended 31 December 2016 Younicos had revenues of GBP7 million and made an operating loss of GBP15 million.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that to the best of their knowledge, these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- An indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- Material related party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The Directors of Aggreko plc are listed in the Aggreko plc Annual Report for 31 December 2016.
By order of the Board
Chris Weston Carole Cran Chief Executive Officer Chief Financial Officer 2 August 2017
INDEPENT REVIEW REPORT TO AGGREKO PLC
Conclusion
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet, Group Cash Flow Statement, Group Statement of Changes in Equity, and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
John Luke
for and on behalf of KPMG LLP
Chartered Accountants
319 St Vincent Street
Glasgow G2 5AS
2 August 2017
(1) Exceptional items relate to costs in respect of the Group's business priorities implementation. Further details are contained in the Financial Review on page 15 and Note 6 to the Accounts.
(2) Pass-through fuel relates to Power Solutions Utility contracts in Brazil and Mozambique where we provide fuel on a pass-through basis. Pass-through fuel revenue in 2017 was GBP42m (2016: GBP24m) and an operating loss of GBP2m (2016: GBPnil).
(3) A reconciliation between reported change and change excluding currency and pass-through fuel is detailed on page 14.
(4) ROCE is calculated by taking the operating profit on a rolling 12-month basis and expressing it as a percentage of the average net operating assets at 30 June, 31 December and previous 30 June.
(5) In addition, on completion there will be a net debt / cash adjustment of circa GBP7 million.
(6) Reflects the final dividend for 2016 of 17.74 pence per share (2015: 17.74 pence) that was paid during the period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UASARBNAWRAR
(END) Dow Jones Newswires
August 02, 2017 02:00 ET (06:00 GMT)
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