TIDMAGK
RNS Number : 7448G
Aggreko PLC
06 March 2018
AGGREKO PLC
RESULTS FOR THE TWELVE MONTHS
ED 31 DECEMBER 2017
6 MARCH 2018
Results in-line with expectations; investing for
growth
Chris Weston, Chief Executive Officer, commented:
"I am pleased that we are seeing revenue growth return, with
strong performances in both Rental Solutions and Power Solutions
Industrial. As expected, the challenges in Power Solutions Utility
held back the Group overall.
"Over the last three years we have stabilised the business,
enhanced our service offering and positioned ourselves to prosper
in rapidly changing energy markets. We have delivered over GBP100
million in cost savings, invested in new systems and processes and
developed new technology, all of which enables us to provide high
quality solutions for customers. We expect 2018 Group profit before
tax to be in line with last year, on a constant currency
basis."
Financial highlights
-- Group revenue of GBP1,730 million, up 4% excluding the impact
of currency and pass-through fuel;
-- Operating profit (pre-exceptional items) down 10% excluding
the impact of currency and pass-through fuel;
-- On the same basis and excluding the impact of legacy
contracts in Argentina, revenue was up 9%(1) and operating profit
was up 13%(1) ;
-- Profit before tax and exceptional items of GBP195 million in
line with expectations (2016: GBP221 million);
-- Full year dividend maintained at 27.12 pence;
-- Improved operating cash inflow of GBP450 million (2016:
GBP388 million), as the working capital initiative begins to
deliver results;
-- Financial position of the Group remains strong, with net debt
to EBITDA of 1.2 times (2016: 1.2 times).
Business Unit commentary
-- Rental Solutions returns to growth; underlying(4) revenue up
9%, with GBP23 million benefit from hurricanes in North
America;
-- Power Solutions Industrial underlying(4) revenue increased 20%, driven by Eurasia;
-- Power Solutions Utility underlying(1,4) revenue flat excluding Argentina;
-- Group average megawatts on hire across the year of 6,613 MW (2016: 6,571 MW).
Operational initiatives
-- Delivered over GBP100 million in cost savings and invested
GBP20 million in new systems over the past three years, positioning
the business for future growth;
-- Focusing on growth opportunities through our new business
unit Global Solutions, with over GBP52 million, including the
acquisition of Younicos, invested in 2017;
-- We are well positioned to provide modular, flexible, data
driven energy, using our existing fleet, combined with Younicos'
integration and data capabilities.
Group performance[1]
GBPM
2017 PRE-EXCEPTIONAL 2016 PRE-EXCEPTIONAL CHANGE EXCL.
ITEMS([2]) ITEMS(2) PASS-THROUGH FUEL([3])
CHANGE & CURRENCY([4])
Group revenue 1,730 1,515 14% 4%
Operating profit 229 248 (8)% (10)%
Operating profit margin 13% 16%
Profit before tax 195 221 (12)%
Diluted earnings per
share (p) 53.94 61.95 (13)%
Dividend per share (p) 27.12 27.12 -%
Return on capital
employed([5]) 11% 13%
GBPM
2017 POST-EXCEPTIONAL 2016 POST-EXCEPTIONAL CHANGE EXCL. PASS-
ITEMS(2) ITEMS(2) THROUGH FUEL(3) &
CHANGE CURRENCY(4)
Group revenue 1,730 1,515 14% 4%
Operating profit 188 199 (6)% (7)%
Operating profit margin 11% 13%
Profit before tax 154 172 (11)%
Diluted earnings per
share (p) 41.51 48.86 (15)%
Dividend per share (p) 27.12 27.12 -%
Return on capital
employed 9% 10%
-------------------------- ------------------------- ------------------------- --------- -------------------------
Business Unit performance
PRE-EXCEPTIONAL REVENUE OPERATING PROFIT
ITEMS GBPM
CHANGE CHANGE
EXCL. EXCL.
PASS-THROUGH PASS-THROUGH
FUEL FUEL
2017 2016 CHANGE AND CURRENCY 2017 2016 CHANGE AND CURRENCY
Rental Solutions 720 629 15% 9% 81 52 57% 49%
Power Solutions
Industrial 340 262 30% 20% 55 32 71% 53%
Utility
excl.
pass-through
fuel 531 564 (6)% (9)% 96 164 (42)% (42)%
Pass-through
fuel 139 60 129% 103% (3) - (100)% (100)%
Total Power
Solutions 1,010 886 14% -% 148 196 (25)% (26)%
-------- ------ ------- ------------- ---------- ----- ------- -------------
Group 1,730 1,515 14% 4% 229 248 (8)% (10)%
------------------- -------- ------ ------- ------------- ---------- ----- ------- -------------
POST-EXCEPTIONAL
ITEMS GBPM REVENUE OPERATING PROFIT
CHANGE CHANGE
EXCL. EXCL.
PASS-THROUGH PASS-THROUGH
FUEL FUEL
2017 2016 CHANGE AND CURRENCY 2017 2016 CHANGE AND CURRENCY
Rental Solutions 720 629 15% 9% 68 12 509% 450%
Power Solutions
Industrial 340 262 30% 20% 44 29 52% 34%
Utility
excl.
pass-through
fuel 531 564 (6)% (9)% 79 158 (51)% (51)%
Pass-through
fuel 139 60 129% 103% (3) - (100)% (100)%
Total Power
Solutions 1,010 886 14% -% 120 187 (37)% (37)%
-------- ------ ------- ------------- ---------- ----- ------- ---------------
Group 1,730 1,515 14% 4% 188 199 (6)% (7)%
------------------ -------- ------ ------- ------------- ---------- ----- ------- ---------------
Future reporting
19 April 2018 Ex-dividend date
20 April 2018 Record date to be eligible for the final dividend
26 April 2018 Annual General Meeting
22 May 2018 Final dividend payment
1 August 2018 Half year results for the six months to 30 June 2018
To reflect the evolution of our business, the markets we serve
and to enhance understanding, we are making some changes to the way
we report.
The utility sector was traditionally the mainstay of the Power
Solutions business. Opportunities are increasingly spread across a
number of sectors, such as Oil & Gas and Mining and we will, in
future, provide more sectoral detail and commentary within Power
Solutions. In particular, we will reassign non-Utility sector work,
which has historically been reported in Power Solutions Utility,
into Power Solutions Industrial so that the actual performance of
Utility sector project work can be clearly understood. This will
apply from 2018 and restated numbers will be provided ahead of the
half year results.
We have previously announced Power Solutions Utility contract
wins of over 100 MW and over 6 months in duration. As the mix of
the business is changing and the relative contribution from this
type of contract is reducing across our portfolio, we will no
longer be routinely announcing these contracts. We will continue to
provide details of the Group's key contract wins as part of our
results announcements.
Our first quarter trading update has historically been announced
in late April, alongside our AGM. Given the proximity to the full
year results, and following feedback from investors, we believe
that the additional content in these statements is of limited value
and, consequently, will no longer provide first quarter trading
updates.
As we approach the three year anniversary of outlining our
strategic priorities and associated performance targets, we will
provide an update on our progress with our interim results in
August.
Management changes
During 2017 there were two changes in the Executive management
team. Stephen Beynon joined Aggreko in May as the Managing Director
of Power Solutions, replacing Nicolas Fournier, who left the
organisation. In December Carole Cran stepped down from her role as
CFO, following her resignation in June 2017. Carole has been
succeeded by Heath Drewett, who joined Aggreko on 3 January
2018.
Enquiries
Investors & Analysts
+44 7813 210
809
Louise Bryant, Aggreko plc +44 7342 056
Tom Hull, Aggreko plc 727
Media
+44 7919 615
John Sunnucks 222
+44 7990 003
Liz Morley 314
Analyst presentation
A presentation will be held for analysts and investors today at
9am (GMT) 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 and Dan Ibbetson discuss the business
performance and changes in the energy market, and watch our year in
review video, on our website:
www.plc.aggreko.com/investors/investor-centre.
OPERATING & FINANCIAL REVIEW
Group trading performance
As previously disclosed, this year's performance has been
materially impacted by the repricing and off-hire of our utility
contracts in Argentina, which masks the underlying improvement in
performance across the rest of the business. These contracts were
signed in 2008 when market conditions were significantly more
favourable and the country was a much higher risk environment. We
will make clear the impact of these contracts on the Group's
performance where appropriate.
Underlying[6] Group revenue was up 4% on the prior year. Rental
Solutions underlying6 revenue was up 9%, with solid growth in
Europe and a small increase in Australia Pacific. North America saw
an uplift from hurricane related work, with revenue up 10% on the
prior year (4% excluding hurricanes). Although revenue from Oil
& Gas in North America was lower year on year, it has
stabilised and delivered growth in the second half. Outside of this
sector, revenue in North America grew 14%. Power Solutions
Industrial underlying6 revenue increased 20% with strong growth
from Eurasia and Africa, while Power Solutions Utility underlying6
revenue was down 9% due to repricing and off-hires in Argentina.
Excluding the impact of Argentina, underlying Power Solutions
Utility revenue was in line with the prior year(1) .
The Group operating margin[7] was 13% (2016: 16%), with the year
on year decline driven by Power Solutions Utility. In Rental
Solutions the margin7 was up three percentage points on last year,
at 11%, driven by the increase in revenue together with the
benefits from the implementation of our Business Priorities
investment programme in North America. The Power Solutions
Industrial margin7 was up four percentage points at 16%, due to the
growth in Eurasia and restructuring of our businesses in Latin
America. The Power Solutions Utility margin7 was down eleven
percentage points at 18%, driven by the volume and price reduction
in Argentina, an increase in our overall overdue debt provision for
the business, and also the impact of one-off benefits in the prior
year. The lower Group margin impacted the Group's return on capital
employed (ROCE) 7, which was 11% (2016: 13%).
The Group delivered profit before tax7 of GBP195 million (2016:
GBP221 million). Diluted earnings per share7 (DEPS) was 53.94 pence
(2016: 61.95 pence).
Reported financial measures
Reported revenue and operating profit include the translational
impact of currency as our revenue and profit 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
GBP84 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 the volume 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 GBP139
million (2016: GBP60 million).
Reported Group revenue was up 14% on the prior year, with Rental
Solutions up 15% and Power Solutions Industrial and Utility up 30%
and 7% respectively.
During the period the Group incurred exceptional costs relating
to the implementation of our Business Priorities programme of GBP41
million (2016: GBP49 million). This spend was split across Rental
Solutions GBP13 million (2016: GBP40 million), Power Solutions
Utility GBP17 million (2016: GBP6 million) and Power Solutions
Industrial GBP11 million (2016: GBP3 million), and is explained
further on page 15.
Group operating margin post-exceptional items was 11% (2016:
13%). The Rental Solutions margin was up eight percentage points on
a post-exceptional basis at 10%. The increase in the margin on a
post-exceptional basis is higher than on a pre-exceptional basis
because of the higher exceptional charge in 2016, due to the prior
year impairment of small gas generators used in the North American
Oil & Gas sector. The Power Solutions Industrial margin was up
two percentage points on a post-exceptional items basis. The Power
Solutions Utility margin, excluding pass-through fuel and on a
post-exceptional items basis, was down 13 percentage points.
Group ROCE post-exceptional items was 9% (2016: 10%). Profit
before tax and post-exceptional items was GBP154 million (2016:
GBP172 million) and diluted earnings per share post-exceptional
items was 41.51p (2016: 48.86p).
Dividends
The Group is proposing to maintain the final dividend at 17.74
pence per share. Subject to Shareholder approval, this will result
in a full year dividend of 27.12 pence (2016: 27.12 pence) per
ordinary share; this equates to dividend cover pre-exceptional
items of 2.0 times (2016: 2.3 times). Dividend cover
post-exceptional items is 1.5 times (2016: 1.8 times). Dividend
cover is calculated as basic earnings per share for the period
divided by the full year dividend per share.
Balance sheet and Cash flow
During the year, we generated an operating cash inflow of GBP450
million (2016: GBP388 million). The increase in operating cash flow
is mainly driven by lower working capital outflows year on year,
with an outflow of GBP51 million in 2017 compared to GBP119 million
in 2016. This year's outflow reflects a GBP163 million increase in
trade and other receivables, offset by a GBP113 million inflow from
trade and other payables. The receivables and payables balances
include fuel balances from our contracts in Brazil.
At the start of 2017 we embarked on a global working capital
improvement initiative to drive a sustainable improvement across
the three main areas of working capital: receivables, payables and
inventory. Following an initial diagnostic and scoping phase, the
implementation began in Q2, focusing initially on the Aggreko
locations where we believed the largest improvements could be made.
The implementation was then extended to the rest of the Group
during Q3 and our heightened focus on working capital has continued
into this year.
The increase in trade and other receivables is analysed by
business unit as a GBP86 million increase in the Power Solutions
Utility business, a GBP30 million increase in Power Solutions
Industrial and a GBP47 million increase in Rental Solutions. The
increases in Power Solutions Industrial and Rental Solutions are
driven primarily by the growth and improved activity levels in
these businesses. In Power Solutions Utility, GBP54 million of the
increase in the debtor book relates to new contracts in Brazil
which were commissioned in the first half of 2017 and include fuel,
therefore the revenue per megawatt generated is much greater. The
remaining increase is driven by a few customers in Africa and
Venezuela who are taking longer to pay. No customers dispute the
debt and we continue to believe that the primary reason for delay
in payments is liquidity and access to US Dollars. We recognise the
increase in the debtor book and as a result we have increased the
Power Solutions Utility debtor provision to $86 million, $23
million higher than December 2016 and $13 million higher than June
2017.
The increase in trade and other payables balances is a reversal
after a number of years of outflow, following the establishment of
the Group's procurement function. We have improved supplier terms,
through the adoption of best practice, to fully leverage our scale
and spend. Despite increased levels of activity in 2017, inventory
has remained broadly flat year on year. Inventory held for the
production of NGG and HFO sets at the end of 2016 has been consumed
this year, offset by purchases during the second half supporting
major events and growth in Eurasia.
Fleet capital expenditure was GBP246 million (2016: GBP241
million) which was 0.9 times fleet depreciation (2016: 0.9 times),
reflecting our drive to increase asset utilisation. Of this, GBP78
million was invested to continue to develop our medium speed HFO
fleet and GBP46 million in continuing to refurbish our diesel fleet
to the more fuel efficient, higher output G3+ engine; this engine
now makes up around 31% of the Power Solutions Utility diesel
fleet.
Net debt of GBP652 million at 31 December 2017 was similar to
the prior year (2016: GBP649 million), with net debt to EBITDA on a
rolling 12-month basis of 1.2 times (2016: 1.2 times).
Going concern
The Directors are confident that it is appropriate for the going
concern basis to be adopted in preparing the financial statements.
The Group balance sheet shows consolidated net assets of GBP1,317
million (2016: GBP1,368 million) of which GBP1,104 million (2016:
GBP1,203 million) relates to fleet assets. The defined benefit
pension deficit is GBP25 million (2016: GBP30 million),
representing only 2% of the Group's net assets. The retained
earnings of the Company as at 31 December 2017 are GBP428 million
and the majority of these earnings are distributable, enabling the
Company to continue making dividend payments. As noted above, net
debt is similar to the prior year, resulting in significant
headroom under our committed facilities.
Outlook
We have seen good growth and improved profitability and returns
in our Rental Solutions and Power Solutions Industrial businesses
this year which we expect to continue into 2018 as we benefit from
our Business Priorities programme and further growth.
In Power Solutions Utility we have previously highlighted two
notable off-hires impacting 2018. In Argentina we have 174 MW of
fixed site contracts which at the time of our last market update we
expected to off-hire this year. We now expect that these sites will
renew, although at a further price discount to the extensions
secured in 2016. In Japan, we updated in Q3 that 74 MW of 148 MW
had off-hired early, and we continue to expect the remaining volume
to off-hire in March. Order intake in the year to date for 2018 is
137 MW (2017: 81 MW).
The global provision and consumption of power is experiencing a
significant transition as markets seek to decarbonise, decentralise
and digitalise. As a result, we are investing for future growth,
particularly in distributed energy solutions, where our modular,
mobile fleet combined with storage and renewables integration
capability position us well in this changing landscape. These
initiatives will be captured within our new Global Solutions
business, under the leadership of Dan Ibbetson. We see clear
opportunities, and to capitalise on these benefits for the future
we must invest today; in 2018 we expect this investment to be
around GBP9 million (2017: GBP7 million).
Overall, we anticipate that the Group's underlying profit before
tax in 2018, before the impact of currency, will be in line with
2017. As in 2017, these results will be weighted to the second
half.
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 720 629 15% 9% 81 52 57% 49%
Operating
Margin 11% 8%
Post-exceptional
items GBPm 720 629 15% 9% 68 12 509% 450%
Operating
Margin 10% 2%
------------------ ----- ----- ------- ----------- ----- ----- ------- -----------
Headlines
-- Revenue and operating profit up 9% and 49% respectively
excluding currency and exceptional items
-- 41 MW of contracts won for our new Next Generation Gas product
-- Temperature control revenue up 9% excluding currency, with a
strong performance in the base business
Commentary
Our Rental Solutions business had a good year with revenue
excluding the impact of currency up 9% on the prior year and
operating profit (pre-exceptional items) up 49%. This performance
was supported by incremental work following the hurricanes that
impacted the southern United States and Caribbean, which was in
part off-set by loss of work in our base business in these regions.
Excluding this net incremental activity revenue increased 5%.
The increase in operating margin for the year was driven by the
increase in revenue, together with the operational benefits from
the Business Priorities programme in North America.
North American revenue excluding currency was up 10% on the
prior year; 4% excluding the impact of the hurricanes. The decline
in the Oil & Gas sector that we saw throughout 2016 has
stabilised, although against stronger prior year comparators
revenue was down 10%; quarter on quarter Oil & Gas revenue has
been improving. Elsewhere in North America most of the other
sectors grew well, with revenue excluding Oil & Gas increasing
14%. There was also a strong performance in temperature control, up
10%. Overall operating profit (pre-exceptional items) was up
90%.
In our Australia Pacific business revenue excluding currency
increased 2%, a good performance given the 108 MW Tasmania utility
contract in the prior year. We saw good growth in the Mining and
Construction sectors, although this was partially offset by a
decline in Oil & Gas and Utilities.
In Continental Europe, revenue excluding currency increased 3%,
supported by growth in the German Manufacturing and Telecom sectors
and fuel revenue in Eastern Europe. This partially offset a weaker
Shipping sector in the Netherlands and tougher comparators in
France, which had revenue from the European Football Championships
in 2016. The Northern European business delivered good growth with
revenue excluding currency increasing 12%, driven by the Utility
and Construction sectors.
POWER SOLUTIONS
PRE-EXCEPTIONAL REVENUE OPERATING PROFIT
ITEMS GBPM
CHANGE CHANGE
EXCL. EXCL.
PASS-THROUGH PASS-THROUGH
FUEL FUEL
AND AND
2017 2016 CHANGE CURRENCY 2017 2016 CHANGE CURRENCY
Industrial 340 262 30% 20% 55 32 71% 53%
Utility excl.
pass-through
fuel 531 564 (6)% (9)% 96 164 (42)% (42)%
Pass-through
fuel 139 60 129% 103% (3) - (100)% (100)%
------ ----- ------- -------------- ----- ----- ------- --------------
Total Power
Solutions 1,010 886 14% -% 148 196 (25)% (26)%
------ ----- ------- -------------- ----- ----- ------- --------------
Operating
Margin
Industrial 16% 12%
Utility excl. pass-through
fuel 18% 29%
Total Power Solutions
excl. pass-through fuel 17% 24%
----------------------------------------- -------------- ----- ----- ------- --------------
POST-EXCEPTIONAL REVENUE OPERATING PROFIT
ITEMS GBPM
CHANGE CHANGE
EXCL. EXCL.
PASS-THROUGH PASS-THROUGH
FUEL FUEL
AND AND
2017 2016 CHANGE CURRENCY 2017 2016 CHANGE CURRENCY
Industrial 340 262 30% 20% 44 29 52% 34%
Utility excl.
pass-through
fuel 531 564 (6)% (9)% 79 158 (51)% (51)%
Pass-through
fuel 139 60 129% 103% (3) - (100)% (100)%
------ ----- ------- -------------- ----- ----- ------- --------------
Total Power
Solutions 1,010 886 14% -% 120 187 (37)% (37)%
------ ----- ------- -------------- ----- ----- ------- --------------
Operating
Margin
Industrial 13% 11%
Utility excl. pass-through
fuel 15% 28%
Total Power Solutions
excl. pass-through fuel 14% 23%
------------------------------------------ -------------- ----- ----- ------- --------------
Headlines
-- Strong performance in Power Solutions Industrial with revenue
and operating profit excluding currency and exceptional items up
20% and 53% respectively
-- Power Solutions Utility performance reflects the impact of
repricing and a lower volume of legacy contracts in Argentina
-- Power Solutions Utility order intake of 799 MW (2016: 1,057 MW)
-- Secured 66 MW of Next Generation Gas contracts and initial HFO and solar-diesel contracts
-- Power Solutions Utility debtor provision increased by $23
million due to slower payments in Africa and Venezuela
Commentary
Overall, our Power Solutions business saw revenue excluding
currency and pass-through fuel in line with last year and operating
profit (pre-exceptional items) decrease 26%.
In our Power Solutions Industrial business revenue excluding
currency increased 20%. In Eurasia revenue grew 64% driven by
continued strength in the Oil & Gas sector. In the Middle East
revenue grew 7% with good growth in Dubai and Kuwait partially
offset by a decrease in Saudi Arabia. Revenue in Africa increased
15%, albeit off a low base, with particular strength in Nigeria and
Angola. In Asia, revenue was flat, while in Latin America the
restructuring work and cost base reduction has progressed well and,
despite revenue being down 15%, operating profit (pre-exceptional
items) was up by GBP7 million. We also benefited from the first
tranche of revenue from the South Korea Winter Olympics (GBP17
million).
Our Power Solutions Utility business saw revenue excluding
currency and pass-through fuel decrease 9% due to repricing and
off-hires in Argentina, which represented a reduction of GBP59
million on 2016. Excluding the impact of Argentina, revenue was in
line with the prior year8. The operating margin decreased to 18%
(2016: 29%); this was driven by a number of factors, including the
flow through from Argentina, an increase in the debtor provision,
and 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 decreased by four percentage
points[8]. In Argentina we expect our existing fixed site contract,
providing 174 MW, to be extended until the end of 2018 at a
discount to the current rates. The standby contract of 30 MW is in
the process of fully demobilising.
We continued to see delays in customer payments in Power
Solutions Utility, in particular on a handful of projects in Africa
and as a result of the ongoing economic situation in Venezuela. Our
overdue debt provision increased through the year by $23 million to
$86 million to reflect these issues.
Overall order intake for the year in our Power Solutions Utility
business was 799 MW (2016: 1,057 MW). New business included 295 MW
in Bangladesh, 78 MW in Malawi, 60 MW in Yemen and 60 MW in Sri
Lanka. We are pleased to have won 66 MW of Next Generation Gas
contracts (in addition to the 41 MW won in Rental Solutions) as
well as initial contracts for HFO (28 MW, Madagascar) and
solar-diesel (7 MW, Eritrea). Our sales pipeline for HFO and NGG
contains a number of opportunities which are well progressed.
At the end of the period, our order book was over 78,000 MW
months, the equivalent of 30 months' revenue at the current
run-rate (2016: 22 months), albeit off a lower revenue base. The
off-hire rate was 32% (2016: 30%).
BUSINESS PRIORITIES
In 2015 we set out three key priorities for the business,
namely: customer, technology and efficiency, which were designed to
improve our customer proposition, make us more competitive and
drive growth. The various business initiatives underpinning each of
these priorities have progressed well, creating a solid foundation
from which to drive future efficiencies and growth. Nearly three
years on, the initiatives are now embedded into 'business as usual'
and, as a result, after this update we will no longer report on
them separately.
Customer
In Rental Solutions, our most important area of focus has been
to better understand our customers. We are now focused on targeting
customers via a sector approach, where we can provide integrated
solutions allowing a competitive advantage, and we have structured
our organisation around this. We have also focused on improving the
customer journey by investing in new systems. We have launched a
new website, designed for usability, which has increased activity
and dwell times. Later this year we will introduce an e-commerce
offering. Our new Customer Relationship Management (CRM) and
Configure, Price, Quote (CPQ) systems are now live across the
majority of the Rental Solutions footprint, and we have also
launched Field Service Management, an operations system allowing
real time visibility of both physical assets and our workforce of
technicians. The full suite of applications is driving improvements
in customer service, utilisation and productivity.
In Power Solutions we have enhanced our understanding of key
markets and their individual demand drivers with the Market
Intelligence Platform, and used this to focus better our product
range and sales capability. We have invested in increased sales
capacity, mapped to key demand areas, and supported by tailored
online and on-the-ground training. We have also deployed the CRM
tool across the Utility business, with deployment across the
Industrial business planned for 2018. This is giving us much
greater visibility, and improving the accuracy, of our sales
pipeline.
Technology
Since 2015 we have introduced a number of new products as we aim
to reduce the total cost of energy and emissions for our customers.
Our product offering now includes medium speed HFO, more
fuel-efficient diesel and gas engines, and solar/diesel hybrids.
Additionally, through the acquisition of Younicos, we are able now
to integrate storage into our product offering. We have a
multi-generational product road map, with the design of new
products incorporating an option to refurbish in order to maintain
our competitive advantage and reduce the risk of obsolescence.
We have a good pipeline of interest in both our HFO and Next
Generation Gas products. Uptake of HFO has been slower than
anticipated, with utilisation at the end of 2017 at 17%, and we
have slowed production to match this. The Next Generation Gas
product, which was introduced into the fleet at the end of 2016,
has proved a success in both Rental Solutions and Power Solutions;
utilisation of the 252 MW fleet at the end of 2017 was 33% and
continues to grow.
Technology is also helping us improve the service we offer our
customers and making us more efficient. Our remote monitoring
system, which monitors the performance of our equipment, means we
can provide a better service to our customer while also gathering
data that will enable us to reduce spend on planned and unplanned
maintenance.
Efficiency
Finally, in response to the more competitive market place we
focused on rightsizing our cost base. Since the initial review
undertaken in 2015, we have identified further opportunities to
deliver savings and in total, across the efficiency programme, we
have delivered annualised savings of over GBP100 million, with a
one-off cost to achieve of GBP86 million.
We see further opportunities for savings across the business as
part of a continuous improvement programme, particularly in
relation to procurement, fleet utilisation and engineering and
service costs.
Our evolving strategy
As we approach the three year anniversary of establishing our
Business Priorities, we are reflecting on what has been achieved.
We believe that the initiatives we have delivered, particularly
around sector focus, systems and technology investment, were the
right actions to reposition this business for the future and this
has been demonstrated by the improved performance in our Rental
Solutions and Power Solutions Industrial businesses. Power
Solutions Utility remains difficult and the market has not
recovered as we expected when we outlined our priorities in 2015
and, as a result, our returns are not where we want them to be. We
continue to work on a number of initiatives to improve our returns,
including utilisation and working capital. Finally, we are evolving
our strategy to reflect the gathering pace of transition in the
energy markets, and we will provide a further update on our
strategic progress and its financial impact alongside our interim
results in August.
GLOBAL SOLUTIONS
Aggreko has a proven track record in responding quickly to
opportunities in the market and providing innovative solutions to
drive growth. It is clear that energy markets globally are in
transition as a result of decarbonisation, decentralisation and
digitalisation. We believe that our modular, mobile fleet, combined
with market leading integration capability for renewables and
storage, acquired via Younicos, position us well for future
opportunities.
In order to leverage our capability globally and incubate it in
its early stages, we have established a new business unit, Global
Solutions. This is being led by Dan Ibbetson and is focusing on
generating incremental revenue across the Group, while developing
and enhancing our capabilities.
Global Solutions will leverage our Group capabilities across the
business. The contracts will still be mainly delivered through the
Rental and Power Solutions businesses and, as the remainder of this
new business unit is not material at a Group level, it will not
result in any change in the structure of our external
reporting.
Global Solutions also incorporates lines of business which span
the Group, such as loadbanks, temperature control and global
accounts. Managing these customer offerings on a global basis
enables us to better deploy applications developed in one region
across the world, thereby fully exploiting growth
opportunities.
We believe that this investment and focus in our future will
help position us to take advantage of growth opportunities as
energy markets continue to transform. In 2017 we acquired Younicos
for GBP45 million and invested GBP7 million in Global Solutions; we
anticipate investing a further GBP9 million in 2018, mainly on
people as we expand our microgrid offering and including the
anticipated loss in Younicos; this has been factored into our
guidance.
FINANCIAL REVIEW
A summarised Income Statement for 2017, as well as related
ratios, is set out below. The first table excludes exceptional
items and the second table includes exceptional items.
PRE-EXCEPTIONAL
ITEMS
GBPM
CHANGE EXCL.
PASS-THROUGH
FUEL AND
2017 2016 CHANGE CURRENCY
Revenues 1,730 1,515 14% 4%
Operating profit 229 248 (8)% (10)%
Net interest expense (34) (27) (28)%
Profit before tax 195 221 (12)%
Taxation (57) (63) 9%
Profit after tax 138 158 (13)%
Diluted earnings
per share (pence) 53.94 61.95 (13)%
Operating margin 13% 16% (3)pp
ROCE 11% 13% (2)pp
---------------------- ------ ------ --------- --------------
POST-EXCEPTIONAL
ITEMS
GBPM
CHANGE EXCL.
PASS-THROUGH
FUEL AND
2017 2016 CHANGE CURRENCY
Revenues 1,730 1,515 14% 4%
Operating profit 188 199 (6)% (7)%
Net interest expense (34) (27) (28)%
Profit before tax 154 172 (11)%
Taxation (48) (47) (1)%
Profit after tax 106 125 (15)%
Diluted earnings
per share (pence) 41.51 48.86 (15)%
Operating margin 11% 13% (2)pp
ROCE 9% 10% (1)pp
---------------------- ------ ------ --------- --------------
Currency translation
The movement in exchange rates in the period had the
translational impact of increasing revenue by GBP84 million and
operating profit by GBP9 million. This was driven by the strength,
against Sterling, of nearly all the principal currencies impacting
the Group, but most notably the US Dollar. Currency translation
also gave rise to a GBP98 million decrease in the value of net
assets. Set out in the table below are the principal exchange rates
which affected the Group's income statement and net assets.
PRINCIPAL EXCHANGE 2017 2016
RATES
(PER GBP STERLING)
AVERAGE YEAR AVERAGE YEAR
United States Dollar 1.29 1.35 1.36 1.23
Euro 1.14 1.13 1.22 1.17
UAE Dirhams 4.74 4.96 4.98 4.53
Australian Dollar 1.68 1.73 1.83 1.71
Brazilian Reals 4.12 4.48 4.74 4.01
Argentinian Peso 21.36 25.92 20.00 19.61
Russian Rouble 75.19 78.15 91.04 75.23
(Source: Bloomberg)
---------------------- -------- ------ -------- ------
Reconciliation of underlying movement to reported movement
The tables below reconcile the reported and underlying 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 720 629 15% 340 262 30% 670 624 7% 1,730 1,515 14%
Pass-through
fuel - - - - (139) (60) (139) (60)
Currency
impact - 34 - 22 - 28 - 84
Underlying 720 663 9% 340 284 20% 531 592 (9)% 1,591 1,539 4%
------------- ---- ---- ------ ---- ---- ------ ----- ---- ------ ----- ----- ------
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 68 12 509% 44 29 52% 76 158 (52)% 188 199 (6)%
Pass-through
fuel - - - - 3 - 3 -
Currency
impact - 3 - 4 - 2 - 9
Exceptional
items 13 40 11 3 17 6 41 49
Underlying 81 55 49% 55 36 53% 96 166 (42)% 232 257 (10)%
------------- ---- ---- ------ ---- ---- ------ ---- ---- ------ ---- ---- ------
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.
Group and PSU reconciliation excluding Argentina
PSU GROUP
2017 2016 CHANGE 2017 2016 CHANGE
GBPM GBPM % GBPM GBPM %
Revenue excl. pass-through
fuel and currency impact 531 592 (9)% 1,591 1,539 4%
Less Argentina (53) (112) (53) (112)
478 480 -% 1,538 1,427 9%
----- ------ ------- ------ ------ -------
Operating profit
(pre-exceptional
items) excl. pass-through
fuel and currency
impact 96 166 (42)% 232 257 (10)%
Less Argentina (23) (73) (23) (73)
73 93 (23)% 209 184 13%
----- ------ ------- ------ ------ -------
Operating Margin ex pass-through
fuel 18% 29% 14% 17%
Operating Margin ex pass-through
fuel & Argentina 15% 19% 14% 13%
----------------------------------- ----- ------ ------- ------ ------ -------
Exceptional items
An exceptional charge of GBP41 million before tax was recorded
in the year to 31 December 2017 in respect of the implementation of
the Group's Business Priorities programme. These costs include
employment costs, professional fees, severance costs and facility
closure costs directly related to the programme.
Interest
The net interest charge of GBP34 million was GBP7 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 16 times
(2016: 20 times) relative to the financial covenant attached to our
borrowing facilities that EBITDA should be no less than four times
interest.
Taxation
Tax charge
The Group's pre-exceptional effective corporation tax rate for
the year was 29% (2016: 28%) based on a tax charge of GBP57 million
(2016: GBP63 million) on a pre-exceptional profit before taxation
of GBP195 million (2016: GBP221 million). The increase in the
effective rate was driven by a change in profit mix in the year
offset by a one-off tax benefit, which reduced the effective tax
rate by 5 percentage points, arising as a result of US tax reform
which resulted in the revaluation of deferred tax liabilities.
Total cash taxes
In 2017, the Group's worldwide operations resulted in direct and
indirect taxes of GBP228 million (2016: GBP215 million) being paid
to tax authorities. This amount represents all corporate taxes paid
on operations, payroll taxes paid and collected, import duties,
sales taxes and other local taxes.
Capital structure & dividends
The objective of our strategy is to deliver long-term value to
Shareholders while maintaining a balance sheet structure that
safeguards the Group's financial position through economic cycles.
Given the risk profile of the Group we believe gearing of around
one times net debt to EBITDA is appropriate, recognising that from
time to time it may be higher for a period of time as investment
opportunities present themselves. From a capital allocation
perspective our priority is to invest in organic growth. As well as
investing organically, there are opportunities for growth through
acquisition, both for scale and capability, including into product
adjacencies such as temperature control and loadbanks. Acquisitions
are subject to our disciplined capital allocation process and will
have to meet appropriate hurdle rates of return. While our first
priority is investment to generate growth, we recognise the
importance of the dividend in providing value to our Shareholders.
Finally, as and when the opportunity arises, we will look at
returning surplus capital to Shareholders. The retained earnings of
the Company as at 31 December 2017 were GBP428 million and the
majority of these earnings are distributable.
Subject to Shareholder approval the proposed final dividend of
17.74 pence will result in a full year dividend of 27.12 pence
(2016: 27.12 pence) per Ordinary Share, giving dividend cover
(basic EPS pre-exceptional items divided by full year declared
dividend) of 2.0 times (2016: 2.3 times). Dividend cover
post-exceptional items is 1.5 times (2016: 1.8 times).
Cash flow
The net cash inflow from operations during the year totalled
GBP450 million (2016: GBP388 million). The increase in cash inflow
from operations was mainly driven by a reduction in the working
capital outflow of GBP68 million. This operating cash flow funded
capital expenditure of GBP272 million (2016: GBP263 million), of
which GBP246 million (2016: GBP241 million) was spent on fleet. The
working capital movements are explained on page 6.
Net operating assets
The net operating assets of the Group (including goodwill) at 31
December 2017 totalled GBP2,078 million, GBP46 million lower than
2016. Excluding the impact of currency net operating assets were
GBP101 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 1,104 1,203 (8)% (1)%
Property
& Plant 110 106 4% 9%
Inventory 232 247 (6)% -%
Net trade
debtors 490 454 8% 16%
-------------- ------ ------ --------- ------------------------
A key measure of Aggreko's performance is the return (expressed
as adjusted operating profit) generated from average net operating
assets (ROCE). We calculate ROCE by taking the operating profit for
the year and expressing it as a percentage of the average net
operating assets at 31 December, 30 June and the previous 31
December. In 2017 the pre-exceptional ROCE decreased to 11%
compared with 13% in 2016, primarily driven by the decrease in the
Group's operating margin.
Property, plant and equipment
Rental fleet accounts for GBP1,104 million, which is around 91%
of the net book value of property, plant and equipment used in our
business. The great majority of equipment in the rental fleet is
depreciated on a straight-line basis to a residual value of zero
over eight years, with some classes of rental fleet depreciated
over 10 and 12 years. The annual fleet depreciation charge of
GBP275 million (2016: GBP261 million) relates to the estimated
service lives allocated to each class of fleet asset. Asset lives
are reviewed at the start of each year and changed if necessary to
reflect their remaining lives in light of technological change,
prospective economic utilisation and the physical condition of the
assets.
Acquisitions
During the year we made three acquisitions, Younicos, a pioneer
and global market leader in the development and deployment of
integrated energy systems; KBT, an Indonesian utility business; and
TuCo a US based temporary heat and air conditioning business.
Further details on these acquisitions can be found in Note 10 to
the accounts.
IFRS 15
IFRS 15, 'Revenue from contracts with customers', is effective
for annual periods beginning on or after 1 January 2018. Under the
standard, revenue is recognised when an entity transfers control of
goods or services to a customer. The costs to fulfil the service to
a customer (mobilisation and demobilisation costs) will be
amortised over the period of the initial contract, in line with
when we are earning revenue. We have assessed the impact on 2017,
which would have been an immaterial impact on profit before tax;
revenue would have been GBP2 million higher, and costs GBP5 million
higher, resulting in a GBP3 million reduction in profit before tax.
When we report our 2018 interim and full year results, we will
restate the 2017 comparative numbers to take account of IFRS 15.
Note 1 to the 2017 Annual Report explains these changes in
detail.
Shareholders' equity
Shareholders' equity decreased by GBP51 million to GBP1,317
million, represented by the net assets of the Group of GBP1,969
million offset by net debt of GBP652 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 106
Dividend[9] (69)
------------
Retained earnings 37
Employee share awards 8
Re-measurement of retirement
benefits 5
Currency translation (98)
PDVSA private placement notes:
net change in fair value (4)
Movement in hedging reserve 3
(2)
------------
Other
------------
AS AT 31 DECEMBER 2017 1,317
-------------------------------- ------------ ------------
Pensions
Pension arrangements for our employees vary depending on best
practice and regulation in each country. The Group operates a
defined benefit scheme for UK employees, which was closed to new
employees joining the Group after 1 April 2002. Most of the other
schemes in operation around the world are defined contribution
schemes.
Under IAS 19: 'Employee Benefits', Aggreko has recognised a
pre-tax pension deficit of GBP25 million at 31 December 2017 (2016:
GBP30 million) which is determined using actuarial assumptions. The
decrease in the pension deficit is primarily driven by higher than
expected returns achieved on the scheme's assets over the year and
additional contributions by the Company, partially offset by the
impact of a lower discount rate being applied to the scheme's
liabilities.
The sensitivities regarding the main valuation assumptions are
shown in the table below.
INCOME
STATEMENT
DEFICIT (GBPM) COST (GBPM)
Assumption INC./(DEC.) (INC.)/DEC. (INC.)/DEC.
Rate of increase in
salaries 0.5% (2) -
Discount rate (0.5)% (21) (1)
Inflation (0.5% increases
on pensions increases,
deferred revaluation
and salary increases) 0.5% (20) (1)
Longevity 1 year (5) -
--------------------------- ------------ --------------- -------------
Treasury
The Group's operations expose it to a variety of financial risks
that include liquidity, the effects of changes in foreign currency
exchange rates, interest rates, and credit risk. The Group has a
centralised treasury operation whose primary role is to ensure that
adequate liquidity is available to meet the Group's funding
requirements as they arise, and that financial risk arising from
the Group's underlying operations is effectively identified and
managed.
The treasury operations are conducted in accordance with
policies and procedures approved by the Board and are reviewed
annually. Financial instruments are only executed for hedging
purposes, and transactions that are speculative in nature are
expressly forbidden. Monthly reports are provided to senior
management and treasury operations are subject to periodic internal
and external review.
Liquidity and funding
The Group maintains sufficient facilities to meet its funding
requirements over the medium term. At 31 December 2017, these
facilities totalled GBP1,283 million in the form of committed bank
facilities arranged on a bilateral basis with a number of
international banks and private placement lenders. 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 31 December 2017, these stood at 16 times and 1.2
times respectively. The Group does not expect to breach these
covenants in the year from the date of approval of these financial
statements.
The Group expects to be able to arrange sufficient finance to
meet its future funding requirements. It has been the Group's
custom and practice to refinance its facilities in advance of their
maturity dates, providing that there is an ongoing need for those
facilities.
Net debt amounted to GBP652 million at 31 December 2017 (2016:
GBP649 million) and, at that date, un-drawn committed facilities
were GBP624 million.
Interest rate risk
The Group's policy is to manage its exposure to interest rates
by ensuring an appropriate balance of fixed and floating rate debt.
At 31 December 2017, GBP610 million of the net debt of GBP652
million was at fixed rates of interest resulting in a fixed to
floating rate net debt ratio of 94:6 (2016: 59:41). The proportion
of our debt with fixed interest rates is higher than usual at the
year end ahead of some fixed rate debt maturities in the first half
of 2018.
Foreign exchange risk
The Group is subject to currency exposure on the translation
into Sterling of its net investments in overseas subsidiaries. In
order to reduce the currency risk arising, the Group uses direct
borrowings in the same currency as those investments. Group
borrowings are predominantly drawn down in the currencies used by
the Group, namely US Dollar, Indonesian Rupiah, Mexican Peso,
Indian Rupee, Brazilian Reals and Russian Rouble.
The Group manages its currency flows to minimise foreign
exchange risk arising on transactions denominated in foreign
currencies and uses forward contracts and forward currency options,
where appropriate, in order to hedge net currency flows.
Credit risk
Cash deposits and other financial instruments give rise to
credit risk on amounts due from counterparties. The Group manages
this risk by limiting the aggregate amounts and their duration
depending on external credit ratings of the relevant counterparty.
In the case of financial assets exposed to credit risk, the
carrying amount in the balance sheet, net of any applicable
provision for loss, represents the amount exposed to credit
risk.
Insurance
The Group operates a policy of buying cover against the material
risks which the business faces, where it is possible to purchase
such cover on reasonable terms. Where this is not possible, or
where the risks would not have a material impact on the Group as a
whole, we self-insure.
Principal risks and uncertainties
In the day to day operations of the Group, we face various risks
and uncertainties. We seek to both prevent these risks
materialising and also mitigate their impact if they do arise. To
facilitate this, the Board has developed a risk management
framework. The principal risks which we believe could potentially
impact the Group are summarised below:
-- Market dynamics - Rental Solutions;
-- Market dynamics - Power Solutions;
-- Disruptive technology;
-- Talent management;
-- New technology market introduction;
-- Cyber security;
-- Equipment obsolescence;
-- Health and safety;
-- Security;
-- Failure to conduct business dealings with integrity and honesty;
-- Failure to collect payments or to recover assets; and
-- Working capital management.
This year we have seen three risks elevated to the Group
register of principal risks and three risks have been removed.
Risks elevated to the Group's register this year:
-- Disruptive technology: Alternative and more distributed
energy sources are becoming increasingly available and affordable.
This could affect our competitiveness as power providers. In
recognition of this, we acquired Younicos in 2017, introducing a
new technology and micro-grid capability, and have evolved our
business strategy to incorporate this new offering.
-- Equipment obsolescence: We are introducing new fleet and
technologies into the business as some of our existing fleet is
approaching the end of its useful life. The older fleet is still
available for rent and is required for specific applications within
our business. We are focusing on ensuring the continued utilisation
of this fleet.
-- Working capital management: Our working capital has increased
in recent years mainly driven by an increase in trade and other
receivables. We have implemented a working capital improvement
initiative to drive a sustainable improvement and are already
seeing the results in trade and other payables.
Risks removed from last year's Group register:
-- Change management relating to our new business priorities: We
have made good progress towards delivery of the Business Priorities
programme and many of the initiatives have now been incorporated
into our business as usual activities.
-- An environmental incident occurs due to a project delivery
failure: While we do not believe this risk has been eliminated, we
believe we have improved our management of this area and will
continue to monitor this risk within our Business Unit risk
registers.
-- Unanticipated tax liabilities in developing countries: Robust
tax risk management processes have allowed us to reduce this risk's
expected impact and likelihood in the future. Determining whether
appropriate direct and indirect tax provisions are in place in
respect of contentious historic or current liabilities remains a
primary area of judgment for the Audit Committee.
The main impact of Brexit to date has been the depreciation of
the Pound. A weaker Pound has increased the Sterling value of our
revenue, the majority of which is denominated in US Dollars. The
Sterling value of our debt and borrowing facilities has increased
by similar amounts. We believe it is too early to determine the
impact of the UK leaving the European Union on the Group's
activities, although we do not expect it to be material because a
large majority of the Group's business is outside the UK and EU. We
will continue to follow developments closely.
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 Heath Drewett
Chief Executive Officer Chief Financial Officer
6 March 2018
GROUP INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2017
TOTAL TOTAL
BEFORE EXCEPTIONAL BEFORE EXCEPTIONAL
EXCEPTIONAL ITEMS EXCEPTIONAL ITEMS
(NOTE (NOTE
ITEMS 2) ITEMS 2)
2017 2017 2017 2016 2016 2016
GBP GBP GBP
NOTES GBP MILLION GBP MILLION MILLION GBP MILLION MILLION MILLION
Revenue 1 1,730 - 1,730 1,515 - 1,515
Cost of sales (805) (5) (810) (664) (30) (694)
------------ ------------ --------- ------------ ------------ ---------
Gross profit 925 (5) 920 851 (30) 821
Distribution
costs (481) (12) (493) (430) - (430)
Administrative
expenses (219) (23) (242) (182) (19) (201)
Other income 4 (1) 3 9 - 9
------------ ------------ --------- ------------ ------------ ---------
Operating
profit 1 229 (41) 188 248 (49) 199
Net finance
costs
- Finance
cost (36) - (36) (29) - (29)
- Finance
income 2 - 2 2 - 2
------------ ------------ --------- ------------ ------------ ---------
Profit before
taxation 195 (41) 154 221 (49) 172
Taxation 5 (57) 9 (48) (63) 16 (47)
------------ ------------ --------- ------------ ------------ ---------
Profit for the
year 138 (32) 106 158 (33) 125
------------ ------------ --------- ------------ ------------ ---------
All profit for
the year is attributable
to the owners
of the Company.
Basic earnings
per share
(pence) 4 41.54 48.88
------------ ------------ --------- ------------ ------------ ---------
Diluted earnings
per share
(pence) 4 41.51 48.86
--------------------- ------ ------------ ------------ --------- ------------ ------------ ---------
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2017
2017 2016
GBP MILLION GBP MILLION
Profit for the year 106 125
------------ ------------
Other comprehensive income/(loss)
Items that will not be reclassified
to profit or loss
Remeasurement of retirement benefits 5 (29)
Taxation on remeasurement of
retirement benefits (1) 5
Items that may be reclassified
subsequently to profit or loss
Cash flow hedges 3 1
Taxation on cash flow hedges (1) -
PDVSA private placement notes:
net change in fair value (4) -
Net exchange (losses)/gains offset
in reserves (98) 220
------------ ------------
Other comprehensive (loss)/gain
for the year (net of tax) (96) 197
------------ ------------
Total comprehensive income for
the year 10 322
---------------------------------------- ------------ ------------
GROUP BALANCE SHEET
(COMPANY NUMBER: SC177553)
AS AT 31 DECEMBER 2017
2017 2016
NOTES GBP MILLION GBP MILLION
Non-current assets
Goodwill 184 159
Other intangible assets 31 24
Property, plant and equipment 6 1,214 1,309
Deferred tax asset 42 51
------------ ------------
1,471 1,543
------------ ------------
Current assets
Inventories 232 247
Trade and other receivables 7 770 656
Cash and cash equivalents 71 44
Derivative financial instruments - 1
Current tax assets 23 20
------------ ------------
1,096 968
------------ ------------
Total assets 2,567 2,511
------------ ------------
Current liabilities
Borrowings 8 (139) (60)
Derivative financial instruments (1) (2)
Trade and other payables 9 (408) (299)
Current tax liabilities (61) (58)
Provisions (8) (1)
------------ ------------
(617) (420)
------------ ------------
Non-current liabilities
Borrowings 8 (584) (633)
Derivative financial instruments (2) (5)
Deferred tax liabilities (22) (55)
Retirement benefit obligation (25) (30)
(633) (723)
------------ ------------
Total liabilities (1,250) (1,143)
------------ ------------
Net assets 1,317 1,368
============ ============
Shareholders' equity
Share capital 42 42
Share premium 20 20
Treasury shares (7) (14)
Capital redemption reserve 13 13
Hedging reserve (net of
deferred tax) (1) (3)
Foreign exchange reserve (27) 71
Retained earnings 1,277 1,239
------------ ------------
Total shareholders' equity 1,317 1,368
============ ============
The financial statements on pages 21 to 37 were approved by the
Board of Directors on 6 March 2018 and were signed on its behalf
by:
Ken Hanna Heath Drewett
Chairman Chief Financial Officer
GROUP CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2017
2017 2016
NOTES GBP MILLION GBP MILLION
Operating activities
Profit for the year 106 125
Adjustments for:
Exceptional items 2 41 19
Exceptional - impairment
charge - 30
Tax 48 47
Depreciation 296 281
Amortisation of intangibles 4 4
Finance income (2) (2)
Finance cost 36 29
Profit on sale of property,
plant and equipment (PPE)
(i) (4) (9)
Share based payments (ii) 8 6
Negative goodwill on acquisition 10 (2) -
Changes in working capital
(excluding the effects
of exchange differences
on consolidation):
Increase in inventories (1) (21)
Increase in trade and other
receivables (163) (81)
Increase/(decrease) in
trade and other payables 113 (17)
Cash flows relating to
exceptional items (30) (23)
------------ ------------
Cash generated from operations 450 388
Tax paid (69) (64)
Interest received 2 2
Interest paid (36) (28)
------------ ------------
Net cash generated from
operating activities 347 298
------------ ------------
Cash flows from investing
activities
Acquisitions (net of cash
acquired) 10 (55) (22)
Acquisitions: repayment
of loans and financing 10 (18) -
Purchases of PPE (272) (263)
Purchase of other intangible
assets (5) (5)
Proceeds from sale of PPE 14 23
------------ ------------
Net cash used in investing
activities (336) (267)
------------ ------------
Cash flows from financing
activities
Increase in long-term loans 905 393
Repayment of long-term
loans (826) (373)
Increase in short-term
loans 21 18
Repayment of short-term
loans (6) -
Dividends paid to shareholders (69) (69)
Purchase of treasury shares - (8)
------------ ------------
Net cash from/(used in)
financing activities 25 (39)
------------ ------------
Net increase/(decrease) in cash
and cash equivalents 36 (8)
Cash and cash equivalents
at beginning of the year 25 32
Exchange (loss)/gain on
cash and cash equivalents (2) 1
------------ ------------
Cash and cash equivalents
at end of the year 59 25
---------------------------------- ------ ------------ ------------
(i) Loss on disposal of GBP1 million is included in exceptional items.
(ii) This relates to employee share awards within the statement
of changes in equity. In 2016 there was also GBP2 million included
as exceptional items.
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
FOR THE YEARED 31 DECEMBER 2017
2017 2016
NOTES GBP MILLION GBP MILLION
Increase/(decrease) in
cash and cash equivalents 36 (8)
Change arising from acquisitions (73) (22)
Other changes (21) (16)
------------ ------------
Changes in net debt arising
from cash flows (58) (46)
Exchange gain/(loss) 55 (114)
------------ ------------
Movement in net debt in
year (3) (160)
Net debt at beginning
of year (649) (489)
------------ ------------
Net debt at end of year 8 (652) (649)
---------------------------------- ------ ------------ ------------
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2017
AS AT
31 DECEMBER
2017 ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
ORDINARY SHARE CAPITAL FOREIGN
SHARE PREMIUM TREASURY REDEMPTION HEDGING EXCHANGE RETAINED TOTAL
CAPITAL ACCOUNT SHARES RESERVE RESERVE RESERVE EARNINGS EQUITY
GBP GBP GBP GBP GBP (TRANSLATION) GBP GBP
MILLLION MILLLION MILLLION MILLLION MILLLION GBP MILLLION MILLLION MILLLION
Balance
at 1 January
2017 42 20 (14) 13 (3) 71 1,239 1,368
--------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
Profit
for the
period - - - - - - 106 106
Other comprehensive
(loss)/income:
Fair value
gains
on interest
rate swaps
(net of
tax) - - - - 2 - - 2
PDVSA
private
placement
notes:
net change
in fair
value - - - - - - (4) (4)
Currency
translation
differences
(Note
(i)) - - - - - (98) - (98)
Re-measurement
of retirement
benefits
(net of
tax) - - - - - - 4 4
--------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
Total
comprehensive
income
for the
year ended
31 December
2017 - - - - 2 (98) 106 10
--------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
Transactions
with owners:
Employee
share
awards - - - - - - 8 8
Issue
of ordinary
shares
to employees
under
share
option
schemes - - 7 - - - (7) -
Dividends
paid during
2017 - - - - - - (69) (69)
--------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
- - 7 - - - (68) (61)
--------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
Balance
at 31
December
2017 42 20 (7) 13 (1) (27) 1,277 1,317
---------------- --------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
(i) Included in currency translation differences of
the Group are exchange gains of GBP55 million arising
on borrowings denominated in foreign currencies
designated as hedges of net investments overseas,
and exchange losses of GBP153 million relating
to the translation of overseas results and net
assets.
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2017
AS AT
31 DECEMBER
2016 ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
ORDINARY SHARE CAPITAL FOREIGN
SHARE PREMIUM TREASURY REDEMPTION HEDGING EXCHANGE RETAINED TOTAL
CAPITAL ACCOUNT SHARES RESERVE RESERVE RESERVE EARNINGS EQUITY
GBP GBP GBP GBP GBP (TRANSLATION) GBP GBP
MILLLION MILLLION MILLLION MILLLION MILLLION GBP MILLLION MILLLION MILLLION
Balance
at 1 January
2016 42 20 (9) 13 (4) (149) 1,202 1,115
--------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
Profit
for the
year - - - - - - 125 125
Other comprehensive
(loss)/income:
Transfers
from
hedging
reserve
to fixed
assets - - - - (3) - - (3)
Fair value
gains
on foreign
currency
cash flow
hedge - - - - 3 - - 3
Fair value
gains
on interest
rate swaps - - - - 1 - - 1
Currency
translation
differences
(Note
(i)) - - - - - 220 - 220
Re-measurement
of retirement
benefits
(net of
tax) - - - - - - (24) (24)
--------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
Total
comprehensive
income
for the
year ended
31 December
2016 - - - - 1 220 101 322
--------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
Transactions
with owners:
Purchase
of treasury
shares - - (8) - - - - (8)
Employee
share
awards - - - - - - 8 8
Issue
of ordinary
shares
to employees
under
share
option
schemes - - 3 - - - (3) -
Dividends
paid during
2016 - - - - - - (69) (69)
--------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
- - (5) - - - (64) (69)
--------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
Balance
at 31
December
2016 42 20 (14) 13 (3) 71 1,239 1,368
---------------- --------- ---------- ---------- ----------- ---------- -------------- ---------- ----------
(i) Included in currency translation differences of
the Group are exchange losses of GBP117 million
arising on borrowings denominated in foreign currencies
designated as hedges of net investments overseas,
and exchange gains of GBP337 million relating to
the translation of overseas results and net assets.
NOTES TO THE ACCOUNTS
For the year ended 31 December 2017
1. SEGMENTAL REPORTING
(a) Revenue by segment
EXTERNAL REVENUE
2017 2016
GBP MILLION GBP MILLION
Power Solutions
Industrial 340 262
Utility 670 624
---------------------- ------------
1,010 886
Rental Solutions 720 629
---------------------- ------------
Group 1,730 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
2017 2016
GBP MILLION GBP MILLION
Power Solutions
Industrial 55 32
Utility 93 164
------------ ------------
148 196
Rental Solutions 81 52
------------ ------------
Operating profit pre-exceptional
items 229 248
Exceptional items (Note 2) (41) (49)
------------ ------------
Operating profit post-exceptional
items 188 199
Finance costs - net (34) (27)
------------ ------------
Profit before taxation 154 172
Taxation (48) (47)
------------ ------------
Profit for the year 106 125
----------------------------------- ------------ ------------
(c) Depreciation and amortisation by segment
BEFORE
EXCEPTIONAL IMPAIRMENT
CHARGES CHARGES TOTAL
2017 2016 2016 2016
GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 72 63 - 63
Utility 132 127 - 127
------------ ------------ ------------ ------------
204 190 - 190
Rental Solutions 96 95 30 125
------------ ------------ ------------ ------------
Group 300 285 30 315
------------------- ------------ ------------ ------------ ------------
(d) Capital expenditure on property, plant & equipment and
intangible assets by segment
2017 2016
GBP MILLION GBP MILLION
Power Solutions
Industrial 55 43
Utility 183 144
------------ ------------
238 187
Rental Solutions 75 94
------------ ------------
Group 313 281
------------------- ------------ ------------
(i) Capital expenditure comprises additions of property, plant
and equipment (PPE) of GBP272 million (2016: GBP263 million),
additions of intangible assets of GBP5 million (2016: GBP5
million), acquisitions of PPE of GBP28 million (2016: GBP10
million), and acquisitions of intangible assets of GBP8 million
(2016: GBP3 million).
(e) Assets/(Liabilities) by segment
ASSETS LIABILITIES
2017 2016 2017 2016
GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 628 491 (61) (44)
Utility 1,109 1,169 (263) (177)
------------ ------------ ------------ ------------
1,737 1,660 (324) (221)
Rental Solutions 765 779 (100) (94)
------------ ------------ ------------ ------------
Group 2,502 2,439 (424) (315)
Tax and finance
payable 65 71 (87) (117)
Derivative financial
instruments - 1 (3) (7)
Borrowings - - (711) (674)
Retirement benefit
obligation - - (25) (30)
------------ ------------ ------------ ------------
Total assets/(liabilities)
per balance sheet 2,567 2,511 (1,250) (1,143)
---------------------------- ------------ ------------ ------------ ------------
(f) Average number of employees by segment
2017 2016
NUMBER NUMBER
Power Solutions
Industrial 1,380 1,326
Utility 2,083 2,269
----------- -------
3,463 3,595
Rental Solutions 2,515 2,495
----------- -------
Group 5,978 6,090
--------------------------------- ----------- -------
(g) Geographical information
REVENUE NON-CURRENT ASSETS
2017 2016 2017 2016
GBP MILLION GBP MILLION GBP MILLION GBP MILLION
North America 391 337 253 286
UK 95 82 110 101
Continental Europe 141 123 119 110
Eurasia 86 41 70 61
Middle East 169 144 343 264
Africa 247 243 158 231
Asia 168 164 149 130
Auspac 90 80 67 69
Latin America 343 301 160 240
------------ ------------ ------------ ------------
1,730 1,515 1,429 1,492
--------------------- ------------ ------------ ------------ ------------
Non-current assets exclude deferred tax.
(h) Reconciliation of net operating
assets to net assets
------------------------------------------------ --------------------------
2017 2016
GBP MILLION GBP MILLION
Net operating assets 2,078 2,124
Retirement benefit
obligation (25) (30)
Net tax and finance
payable (22) (46)
------------ ------------
2,031 2,048
Borrowings and derivative
financial instruments (714) (680)
------------ ------------
Net assets 1,317 1,368
---------------------------------------- ------ ------------ ------------
2. EXCEPTIONAL ITEMS
An exceptional charge of GBP41 million before taxation was
recorded in the year to 31 December 2017 (2016: GBP19 million) in
respect of the Group's Business Priorities programme. The costs
comprise GBP22 million of employee costs (2016: GBP11 million),
GBP8 million of professional fees (2016: GBP7 million) and GBP11
million of property related costs (2016: GBP1 million). 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 GBP13 million (2016: GBP10 million), Power Solutions
Industrial GBP11 million (2016: GBP3 million) and Power Solutions
Utility GBP17 million (2016: GBP6 million). In 2016 there was also
an exceptional charge of GBP30 million relating to the impairment
of small gas generators used solely in the North American Oil &
Gas sector.
3. DIVIDS
2017 2017 2016 2016
GBP MILLION PER SHARE GBP MILLION PER SHARE
(P) (P)
Final paid 45 17.74 45 17.74
Interim paid 24 9.38 24 9.38
------------ ---------- ------------ ----------
69 27.12 69 27.12
-------------- ------------ ---------- ------------ ----------
In addition, the Directors are proposing a final dividend in
respect of the financial year ended 31 December 2017 of 17.74 pence
per share which will utilise an estimated GBP45 million of
Shareholders' funds. It will be paid on 22 May 2018 to shareholders
who are on the register of members on 20 April 2018.
4. 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.
2017 2016
Profit for the year (GBP million) 106 125
------ ------
Weighted average number of ordinary
shares in issue (million) 255 255
------ ------
Basic earnings per share (pence) 41.54 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.
2017 2016
Profit for the year (GBP million) 106 125
------ ------
Weighted average number of ordinary
shares in issue (million) 255 255
Adjustment for share options - -
------ ------
Diluted weighted average number
of ordinary shares in issue (million) 255 255
------ ------
Diluted earnings per share (pence) 41.51 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:
2017 2016
GBP MILLION GBP MILLION
Profit for the year 106 125
Exclude exceptional items 32 33
------------ ------------
Profit for the year pre-exceptional
items 138 158
------------ ------------
An adjusted earnings per share figure
is presented below.
Basic earnings per share pre-exceptional
items (pence) 53.98 61.98
Diluted earnings per share pre-exceptional
items (pence) 53.94 61.95
-------------------------------------------- ------------ ------------
5. TAXATION
TOTAL EXCEPTIONAL TOTAL
BEFORE ITEMS BEFORE
EXCEPTIONAL (i) EXCEPTIONAL EXCEPTIONAL
(Note
ITEMS 2) ITEMS ITEMS
2017 2017 2017 2016 2016 2016
GBP GBP
GBP MILLION GBP MILLION MILLION GBP MILLION GBP MILLION MILLION
Analysis of charge
in year
Current tax expense:
- UK corporation
tax 11 (2) 9 7 (1) 6
- Overseas taxation 78 (7) 71 73 (4) 69
------------- ------------ --------- ------------- ------------ ---------
89 (9) 80 80 (5) 75
Adjustments in
respect of prior
years:
- UK (2) - (2) - - -
- Overseas (3) - (3) (8) - (8)
------------- ------------ --------- ------------- ------------ ---------
84 (9) 75 72 (5) 67
Deferred taxation:
- temporary differences
arising in current
year (27) - (27) (13) (11) (24)
- movements in
respect of prior
years - - - 4 - 4
------------- ------------ --------- ------------- ------------ ---------
57 (9) 48 63 (16) 47
-------------------------- ------------- ------------ --------- ------------- ------------ ---------
(i) Exceptional items are explained in Note 2 and
comprise costs of GBP41 million relating to our
Business Priorities programme (2016: GBP19 million)
and GBPnil relating to asset impairment (2016:
GBP30 million). Of these costs GBP41 million are
tax deductible (2016: GBP45 million) and result
in an exception credit of GBP9 million (2016:
GBP16 million).
Variances between the current tax charge and the standard 19% UK
corporate tax rate when applied to profit on ordinary activities
for the year are as follows:
TOTAL BEFORE EXCEPTIONAL
EXCEPTIONAL ITEMS
ITEMS (Note 2)
2017 2017 2017
GBP
GBP MILLION GBP MILLION MILLION
Profit before taxation 195 (41) 154
Tax calculated at 19% standard
UK corporate tax rate 38 (8) 30
Differences between UK and
overseas tax rates 30 (1) 29
Expenses not tax effected 8 - 8
Income not subject to tax (3) - (3)
Impact of deferred tax rate
changes in relation to US
tax reform (10) - (10)
Impact of deferred tax rate
changes - non US (1) - (1)
------------- ------------ ---------
Tax on current year profit 62 (9) 53
Prior year adjustments -
current tax (5) - (5)
Total tax on profit 57 (9) 48
------------- ------------ ---------
Effective tax rate 29% 23% 31%
-------------------------------- ------------- ------------ ---------
6. PROPERTY, PLANT AND EQUIPMENT
YEARED 31 DECEMBER 2017
VEHICLES,
SHORT PLANT
FREEHOLD LEASEHOLD RENTAL &
PROPERTIES PROPERTIES FLEET EQUIPMENT TOTAL
GBP GBP
GBP MILLION GBP MILLION MILLION GBP MILLION MILLION
Cost
At 1 January 2017 91 22 3,475 136 3,724
Exchange adjustments (3) (1) (256) (7) (267)
Additions 1 1 246 24 272
Acquisitions (Note
10) - - 23 5 28
Disposals (3) (2) (88) (6) (99)
------------ ------------ --------- ------------ ---------
At 31 December
2017 86 20 3,400 152 3,658
------------ ------------ --------- ------------ ---------
Accumulated depreciation
At 1 January 2017 36 16 2,272 91 2,415
Exchange adjustments (2) - (172) (5) (179)
Charge for the
period 3 1 275 17 296
Disposals (2) (2) (79) (5) (88)
------------ ------------ --------- ------------ ---------
At 31 December
2017 35 15 2,296 98 2,444
------------ ------------ --------- ------------ ---------
Net book values
At 31 December
2017 51 5 1,104 54 1,214
------------ ------------ --------- ------------ ---------
At 31 December
2016 55 6 1,203 45 1,309
-------------------------- ------------ ------------ --------- ------------ ---------
7. TRADE AND OTHER RECEIVABLES
2017 2016
GBP MILLION GBP MILLION
Trade receivables 570 521
Less: provision for impairment
of receivables (80) (67)
------------ ------------
Trade receivables - net 490 454
Prepayments 57 38
Accrued income 139 109
Other receivables (Note (i)) 84 55
------------ ------------
Total receivables 770 656
------------ ------------
(i) In September 2016 the Group signed GBP14 million of private
placement notes with one customer in Venezuela (PDVSA) to progress
clearing the overdue debt. This resulted in a financial instrument
which replaced the net trade receivable balance. The financial
instrument was booked at fair value which reflects our estimation
of the recoverability of the notes. This fair value is estimated to
be GBP4 million (2016: GBP8 million). This financial instrument is
included in other receivables.
8. BORROWINGS
2017 2016
GBP MILLION GBP MILLION
Non-current
Bank borrowings 103 329
Private placement notes 481 304
------------ ------------
584 633
------------ ------------
Current
Bank overdrafts 12 19
Bank borrowings 72 41
Private placement notes 55 -
------------ ------------
139 60
------------ ------------
Total borrowings 723 693
------------ ------------
Short-term deposits - (1)
Cash at bank and in hand (71) (43)
------------ ------------
Net borrowings 652 649
------------ ------------
Overdrafts and borrowings are
unsecured.
9. TRADE AND OTHER PAYABLES
2017 2016
GBP MILLION GBP MILLION
Trade payables 160 88
Other taxation and social security
payable
16 13
Other payables 78 68
Accruals 127 113
Deferred income 27 17
408 299
------------------------------------ ------------ ------------
The value of trade and other payables quoted in the table above
also represents the fair value of these items.
10. ACQUISITIONS
Younicos
On 3 July 2017 the Group acquired 100% of the share capital of
Younicos, a global market leader in the development and deployment
of integrated energy systems. This capability investment will help
us provide a lower cost, cleaner energy and broadens the range of
products available to our customers. The cost of the acquisition
was GBP47 million.
The revenue and operating loss included in the consolidated
income statement from 3 July 2017 to 31 December 2017 contributed
by Younicos was GBP10 million and GBP6 million respectively. Had
Younicos been consolidated from 1 January 2017, the consolidated
income statement for the year ended 31 December 2017 would show
revenue and operating profit of GBP1,735 million and GBP176 million
respectively.
The acquisition method of accounting has been adopted and the
goodwill arising on the purchase has been capitalised. Acquisition
related costs of GBP0.8 million have been expensed in the period
and are included within administrative expenses in the income
statement.
Goodwill represents the value of synergies arising from the
integration of the acquired business. Younicos' proprietary
software and control systems, together with its knowledge of
battery storage, enable the integration of multiple energy sources,
both thermal and renewable, to deliver an optimised energy 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.
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. Indonesia is a good market for
Aggreko's solutions and this acquisition strengthens our business
in this important power market.
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.
These amounts are dependent upon a number of conditions relating
to the contracts in place at the acquisition date. Deductions would
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.
These conditions were assessed post acquisition and resulted in
Aggreko recognising a receivable in relation to the full contingent
consideration value of GBP7 million.
The revenue and operating profit included in the consolidated
income statement from 14 June 2017 to 31 December 2017 contributed
by KBT was GBP7 million and GBPnil respectively. Had KBT been
consolidated from 1 January 2017, the consolidated income statement
for the year ended 31 December 2017 would show revenue and
operating profit of GBP1,737 million and GBP188 million
respectively.
The acquisition method of accounting has been adopted and the
goodwill arising on the purchase has been capitalised. Acquisition
related costs of GBP0.4 million have been expensed in the period
and are included within administrative expenses in the income
statement.
Negative goodwill has arisen as the seller required a quick sale
and believed Aggreko was a good fit for the business.
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 and strengthens our business in these sectors.
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 31 December 2017
contributed by TuCo was GBP2 million and GBPnil respectively. Had
TuCo been consolidated from 1 January 2017, the consolidated income
statement for the period ended 31 December 2017 would show revenue
and operating profit of GBP1,730 million and GBP188 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.
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.
The details of the transactions and the fair value of assets
acquired in the three acquisitions are shown in the table
below:
YOUNICOS KBT TUCO TOTAL
GBP MILLION GBP GBP MILLION GBP
MILLION MILLION
Property, plant
and equipment 5 22 1 28
Intangible assets 6 2 - 8
Inventory - - 1 1
Trade and other
receivables 6 4 - 10
Trade and other
payables (4) (8) - (12)
Deferred taxation (2) - - (2)
Loans and financing - (18) - (18)
Cash 2 - - 2
------------ --------- ------------ ---------
Net assets acquired 13 2 2 17
Goodwill (i) 34 (2) 1 33
------------ --------- ------------ ---------
Consideration (ii) 47 - 3 50
Loans and financing
settled - 18 - 18
Consideration in
escrow due to be
received - 7 - 7
Less cash and cash
equivalents acquired (2) - - (2)
------------ --------- ------------ ---------
Net cash outflow 45 25 3 73
------------ --------- ------------ ---------
(i) Negative goodwill of GBP2 million in relation to KBT is reflected in the income statement.
(ii) The effective purchase consideration for KBT was GBP7
million plus loans and financing settled of GBP18 million.
The fair values are provisional and will be finalised during the
first half of 2018.
11. POST BALANCE SHEET EVENTS
On 15 February 2018 the Group announced the acquisition in North
America of the business and assets of A Contact Electric Rentals.
The acquisition furthers Aggreko's leadership position in the
specialty rental market and long-term growth strategy to excel
through specialised rental solutions. A Contact specialises in the
rental of medium and high voltage electrical distribution
equipment. The cost of the acquisition was GBP21 million ($30
million). For the year ended 31 December 2017 A Contact had revenue
and operating profit of around GBP9 million and GBP4 million
respectively. The fair values will be calculated during the first
half of 2018.
NOTES:
1. The financial information set out above does
not constitute the company's statutory accounts
for the years ended 31 December 2017 or 2016
but is derived from those accounts. Statutory
accounts for 2016 has been delivered to the registrar
of companies, and those for 2017 will be delivered
in due course. The auditors have reported on
those accounts; their reports were (i) unqualified,
(ii) did not include a reference to any matters
to which the auditors drew attention by way of
emphasis without qualifying their report and
(iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006
2. The Annual Report will be posted to all shareholders
on 23 March 2018 and will be available on request
from the Secretary, Aggreko plc, 8(th) Floor,
120 Bothwell Street, Glasgow, G2 7JS. The Annual
General Meeting will be held in Glasgow on 26
April 2018. The Annual Report contains full details
of the principal accounting policies adopted
in the preparation of these financial statements.
3. A final dividend of 17.74 pence per share will
be recommended to shareholders and, if approved,
will be paid on 22 May 2018 to shareholders on
the register at 20 April 2018.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Annual Report for the year ended 31 December 2017, which
will be published on 23 March 2018, complies with the Disclosure
and Transparency Rules in respect of the requirement to produce an
Annual Financial Report. The Directors confirm that to the best of
their knowledge:
-- the consolidated financial statements contained in the Annual
Report for the year ended 31 December 2017, which have been
prepared in accordance with IFRS as adopted by the EU, give a true
and fair view of the assets, liabilities, financial position and
profit of the Group; and
-- the management report represented by the strategic report
contained in the Annual Report for the year ended 31 December 2017
includes a fair review of the development and performance of the
business and the position of the Group, together with a description
of the principal risks and uncertainties that the Group faces.
By order of the Board
Chris Weston Heath Drewett
Chief Executive Officer Chief Financial Officer
6 March 2018
[1] Group and PSU reconciliation excluding Argentina is detailed
on page 15.
[2] Exceptional items relate to costs in respect of the Group's
Business Priorities programme. Further details are contained in the
Financial Review on page 15 and Note 2 to the Accounts.
[3] 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 GBP139m
(2016: GBP60m) and an operating loss of GBP3m (2016: GBPnil).
[4] Underlying change excludes currency, pass-through fuel and
exceptional items. A reconciliation between reported change and
underlying change is detailed on page 14.
5 ROCE is calculated by taking the operating profit for the year
and expressing it as a percentage of the average net operating
assets at 1 January, 30 June and 31 December.
6 Underlying change excludes currency, pass-through fuel and
exceptional items. A reconciliation between reported and underlying
change is detailed on page 14.
[7] Pre exceptional items
[8] PSU reconciliation excluding Argentina is detailed on page
15.
[9] 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
FR LLFFRVIIEIIT
(END) Dow Jones Newswires
March 06, 2018 02:00 ET (07:00 GMT)
Aggreko (LSE:AGK)
Historical Stock Chart
From Apr 2024 to May 2024
Aggreko (LSE:AGK)
Historical Stock Chart
From May 2023 to May 2024