TIDMAGK

RNS Number : 1048H

Aggreko PLC

30 July 2019

INTERIM RESULTS FOR THE SIX MONTHS

ED 30 JUNE 2019

30 JULY 2019

 
 Good start to the year; on track to deliver mid-teens ROCE in 2020 
 
 
 Chris Weston, Chief Executive Officer, commented: 
 

"We have had a good start to the year and are on track to deliver full-year earnings in line with market expectations. Focus on delivery in our key sectors, combined with operational and cost efficiencies and the benefit from our investments in systems, has delivered improved profitability. We continue to innovate to meet our customers' evolving needs through the energy transition, and during the period we launched the Y.Cube, our new modular and mobile energy storage system. Progress on receivables has also been encouraging, particularly in Africa, and this all underpins our confidence in achieving our mid-teens ROCE target in 2020."

 
 Results summary 
 
 
                                                             UNDERLYING 
 GBPm                             1H19     1H18     CHANGE    CHANGE(1) 
 Group revenue                     768      857      (10)%         (4)% 
 Operating profit                   81       76         6%          12% 
 Operating profit margin (%)      10.5      8.9      1.6pp        1.5pp 
 Profit before tax                  60       59         2%           9% 
 Diluted EPS(p)                  15.33    15.85       (3)%           4% 
 Operating cash inflow             210      160 
 Dividend per share (p)           9.38     9.38 
 ROCE (%)                         10.2     10.5    (0.3)pp        0.6pp 
-----------------------------  -------  -------  ---------  ----------- 
 

(1) Underlying excludes pass-through fuel and currency. A reconciliation between reported and underlying performance is detailed on page 10.

   --      Underlying(1) Group revenue down 4% 

o Rental Solutions underlying(1) revenue up 1%

o Power Solutions Industrial underlying(1) revenue down 9%, up 4% excluding the Winter Olympics

o Power Solutions Utility underlying(1) revenue down 7%

   --      Profit before tax of GBP60 million, up 9% on an underlying(1) basis 

-- Operating cash inflow of GBP210 million, an increase of GBP50 million, partly driven by a GBP31 million lower working capital outflow

-- ROCE of 10.2% (2018: 10.5%) shows an improvement of 0.6 percentage points on an underlying(1) basis

   --      Interim dividend maintained at 9.38p per share 
   --      Mobilised our first Y.Cubes as hybrid pipeline continues to build 

-- On track to deliver full year earnings in line with market expectations and mid-teens ROCE in 2020

RESULTS FOR THE SIX MONTHS TO 30 JUNE 2019

GROUP TRADING PERFORMANCE

 
 GBPm 
                                                           UNDERLYING 
                                 1H19    1H18     Change      CHANGE1 
 Group revenue                    768     857      (10)%         (4)% 
 Operating profit                  81      76         6%          12% 
 Operating profit margin (%)     10.5     8.9      1.6pp        1.5pp 
 Profit before tax                 60      59         2%           9% 
 Diluted EPS(p)                 15.33   15.85       (3)%           4% 
 Operating cash inflow            210     160 
 Dividend per share (p)          9.38    9.38 
 ROCE (%)                        10.2    10.5    (0.3)pp        0.6pp 
-----------------------------  ------  ------  ---------  ----------- 
 

Underlying(1) Group revenue decreased 4%. Excluding the benefit from the Winter Olympics in 2018, underlying(1) Group revenue was in-line with the prior year, reflecting a small increase in Rental Solutions and solid growth in Power Solutions Industrial, offset by a decline in Power Solutions Utility. Underlying(1) profit before tax was up 9% at GBP60 million. The operating margin was 10.5% (2018: 8.9%) with growth in all three business units. Diluted earnings per share (DEPS) were 15.33 pence (2018: 15.85 pence), up 4% on an underlying basis.

The Group's return on capital employed (ROCE) decreased to 10.2% (2018: 10.5%) due to the impact of currency. On an underlying(1) basis ROCE rose 0.6 percentage points.

Reported financial measures

Reported revenue and operating profit include the translational impact of currency as Aggreko's 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 increased revenue by GBP3 million and decreased operating profit by GBP4 million.

In addition, the Group separately reports fuel revenue from a few contracts in the Power Solutions Utility business 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 volumes of fuel consumed, which can be volatile and may distort the view of the performance of the underlying business. Fuel revenue from these contracts was GBP20 million (2018: GBP89 million), with the year on year decrease due to lower fuel consumption.

Reported Group revenue was down 10% on prior year, with Rental Solutions up 4%, Power Solutions Industrial down 9% and Power Solutions Utility down 33%.

Outlook

Our full year earnings outlook is in line with market expectations and we remain on track to deliver mid-teens ROCE in 2020.

DIVISIONAL HEADLINES

 
 REVENUE GBPm 
                                                           UNDERLYING 
                                  1H19   1H18    CHANGE     CHANGE(1) 
 Rental Solutions                  400    386        4%            1% 
 Power Solutions 
    Industrial                     198    219      (9)%          (9)% 
    Utility excl. pass-through 
     fuel                          150    163      (8)%          (7)% 
    Pass-through fuel               20     89     (78)%         (77)% 
 Group                             768    857     (10)%          (4)% 
-------------------------------  -----  -----  --------  ------------ 
 
 
 OPERATING PROFIT GBPm 
 
                                1H19   1H18     CHANGE   UNDERLYING CHANGE(1) 
 Rental Solutions                 47     40        17%                    12% 
 Power Solutions 
  Industrial                      21     23       (8)%                   (4)% 
  Utility excl. pass-through 
   fuel                           13     14       (2)%                    52% 
  Pass-through fuel                -    (1)       100%                   100% 
 Group                            81     76         6%                    12% 
-----------------------------  -----  -----  ---------  --------------------- 
 

Rental Solutions underlying(1) revenue was up 1%, mainly driven by North America where revenue was up 7% with strong growth in oil & gas. The operating margin rose 1.1 percentage points to 11.8%, reflecting both higher rates and the benefit of our work in support of the power shortages in Belgium.

Power Solutions Industrial underlying(1) revenue decreased 9%. Excluding the benefit of the South Korea Winter Olympics in the prior year revenue increased 4%, with good growth in Latin America, Africa and the Middle East, partially offset by a slowdown in Eurasia and Asia. The operating margin was 10.5%, up 0.6 percentage points.

Power Solutions Utility underlying(1) revenue was down 7% primarily due to 2018 off hires in Mozambique and Japan. The operating margin (excluding pass-through fuel) was up 3.5 percentage points on an underlying basis, to 8.9%.

Cash flow and balance sheet

During the first six months, we generated an operating cash inflow of GBP210 million (2018: GBP160 million). The increase in operating cash flow is mainly driven by a year on year increase in EBITDA of GBP23 million and a reduction in working capital outflows of GBP31 million, partially offset by a higher cash outflow of GBP9 million relating to mobilisation (fulfilment assets) and demobilisation activities.

The working capital outflow in the period of GBP16 million (2018: GBP47 million) comprises a GBP34 million inflow from trade and other receivables, a GBP48 million outflow from trade and other payables and a GBP2 million outflow from inventory.

The decrease in trade and other receivables is analysed by division as a GBP42 million decrease in Power Solutions Utility and a GBP8 million increase in Power Solutions Industrial. Rental Solutions was flat year on year, comprising a decrease in accrued income offset by an increase in trade debtors as the business targeted a reduction in the level of unbilled revenue that had built up through the end of 2018. The decrease in Power Solutions Utility was driven by strong collections in the period, while the increase in Power Solutions Industrial reflects activity levels in the period.

The movement in the fulfilment asset and demobilisation provisions mainly relates to mobilisation costs on our 15-year PIE A contract in Brazil, our latest HFO contract in Burkina Faso and the Tokyo 2020 Olympics.

The decrease in trade and other payables balances since the year end is primarily driven by lower fuel consumption in our contracts in Brazil.

Fleet capital expenditure was GBP83 million (2018: GBP87 million). Within this, GBP29 million was invested in our Rental Solutions business, primarily in relation to temperature control and oil free air (OFA) products, and GBP54 million in Power Solutions, which included investment related to our contracts for the Tokyo 2020 Olympics and our ongoing fleet refurbishment programme.

Net debt at 30 June 2019 was GBP784 million. This was GBP43 million higher than the prior year with the increase driven by the recognition within net debt of a GBP102 million lease creditor following the Group's adoption of IFRS 16 'Leases' from 1 January 2019, absent which net debt would have reduced GBP59 million year on year. A detailed cash flow is included on page 16 of the financial statements.

This resulted in net debt to EBITDA on a rolling 12-month basis of 1.5 times compared to 1.4 times(2) at 30 June 2018. The increase on prior year is driven by the impact of IFRS 16 'Leases' which increased net debt to EBITDA by 0.2 times.

Dividends

The Group is proposing to maintain the interim dividend at 9.38 pence per share (2018: 9.38 per share), which equates to dividend cover of 1.6 times (2018: 1.7 times). Dividend cover is calculated as basic earnings per share for the period divided by the dividend per share.

(2) Not restated for IFRS 16 'Leases'

ADDITIONAL PERFORMANCE METRICS

 
 
                                                 1H19       1H18    CHANGE 
 AVERAGE MEGAWATTS ON HIRE (MW)                 6,407      6,560      (2)% 
   Rental Solutions average megawatts 
   on hire                                      1,425      1,504 
                                                                      (5)% 
     Power Solutions Industrial average 
      megawatts on hire                         2,509      2,376        6% 
     Power Solutions Utility average 
      megawatts on hire                         2,473      2,680      (8)% 
 
 TOTAL POWER SOLUTIONS ORDER INTAKE 
  (MW)                                            458        366       25% 
     Power Solutions Industrial (ex. 
      Eurasia)                                     86        133     (35)% 
     Power Solutions Industrial (Eurasia 
      only)                                       127        131      (3)% 
      Power Solutions Utility                     245        102 
                                                                      140% 
 
   UTILISATION 
     Rental Solutions                             56%        61%   (5.0)pp 
      Power Solutions Industrial                  68%        70% 
      Power Solutions Utility                     66%        65% 
                                                                   (2.0)pp 
                                                                     1.0pp 
 
   FINANCIAL 
     Effective tax rate                           35%        31%     4.0pp 
     Fleet capex (GBPm)                            83         87      (5)% 
     Fleet depreciation (GBPm)                    138        134        3% 
     Average net operating assets (GBPm)        2,192      2,089        5% 
     Net debt (GBPm)                           (784)*      (741)      (6)% 
-----------------------------------------  ----------  ---------  -------- 
 

* Includes GBP102 million of a lease creditor on adoption of IFRS 16 'Leases' from 1 January 2019.

 
 Investors, analysts and financial media enquiries 
 
   Louise Bryant, Aggreko plc                        +44 7813 210 809 
 Richard Foster, Aggreko plc                       +44 7989 718 478 
 Analyst presentation 
 
        A presentation will be held for analysts and investors today at 
        09:00am (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. The presentation 
        will also feature a live telephone coverage, please see call details 
        below: 
 
        Participant dial-in numbers 
        United Kingdom (Local): 020 3936 2999 
        All other locations: +44 20 3936 2999 
        Participant Access Code: 830208 
 Financial calendar 
 5 September                                      Ex-dividend date - interim dividend 
 6 September                                      Record date to be eligible for the interim dividend 
 1 October                                        Interim dividend payment for the year to 31 December 
                                                   2019 
 
 

BUSINESS UNIT PERFORMANCE REVIEW

RENTAL SOLUTIONS

 
 REVENUE GBPm 
 
                 1H19   1H18     CHANGE   UNDERLYING CHANGE(1) 
 
                  400    386         4%                     1% 
--------------  -----  -----  ---------  --------------------- 
 
 
 OPERATING PROFIT GBPm 
 
               1H19    1H18     CHANGE   UNDERLYING CHANGE(1) 
                 47      40        17%                    12% 
 Operating 
  Margin %    11.8%   10.5%      1.3pp                  1.1pp 
 
 ROCE         14.3%   15.6%    (1.3)pp                (1.2)pp 
-----------  ------  ------  ---------  --------------------- 
 
   --      Underlying(1) revenue and operating profit, up 1% and 12% respectively 
   --      Strong performance in key sectors, notably oil & gas and petrochemicals & refining 
   --      Improved operating margin of 11.8%, up 1.1 percentage points on an underlying(1) basis 

-- ROCE of 14.3% reflects an underlying(1) decrease of 1.2 percentage points, primarily driven by the impact of the transition to IFRS 16

North American underlying(1) revenue was up 7% on the prior year (up 16% excluding hurricane revenue in 2018). Our sector focus has continued to drive growth and we saw good performance in most of our key sectors, particularly in oil & gas, petrochemical & refining and events. This top-line growth enabled us to leverage our fixed cost base more effectively, leading to an improved operating margin.

In our Australia Pacific business, underlying(1) revenue decreased 14% as good growth in the mining sector was offset by a 100MW emergency contract in the prior year numbers. Despite this revenue reduction, our focus on cost efficiencies helped to drive an improvement in operating margin.

Our Continental European business grew underlying(1) revenue 12%, aided by revenue earned from work in response to power shortages in Belgium and the FIFA Women's World Cup in France.

Underlying(1) revenue in Northern European was down 9%, as Next Generation Gas contracts in Ireland began to off-hire as planned, together with a slowdown in wider market activity related to Brexit. Notwithstanding the revenue reduction, ongoing cost discipline helped drive a first half improvement in operating margin.

Operating margin on an underlying(1) basis was up 1.1 percentage points, reflecting higher rates in key sectors within NAM and our emergency work to support the power shortages in Belgium; this was despite lower fleet utilisation as the prior year hurricane work off-hired. We are also beginning to see benefits arising from the systems implementation, enabling us to focus on more profitable work and improve cost recoveries.

 
 
 OPERATIONAL SUMMARY 
                                  1H19     1H18    CHANGE 
 
 Rental Solutions average MW 
  on hire                        1,425    1,504      (5)% 
 Rental Solutions utilisation      56%      61%   (5.0)pp 
------------------------------  ------  -------  -------- 
 

POWER SOLUTIONS

 
 REVENUE GBPM 
                               1H19   1H18    CHANGE   UNDERLYING CHANGE(1) 
 
 Industrial                     198    219      (9)%                   (9)% 
 Utility excl. pass-through 
  fuel                          150    163      (8)%                   (7)% 
 Pass-through fuel               20     89     (78)%                  (77)% 
----------------------------  -----  -----  --------  --------------------- 
 
 
 
   OPERATING PROFIT GBPM 
                                                          UNDERLYING 
                                1H19    1H18     CHANGE    CHANGE(1) 
 
 Industrial                       21      23       (8)%         (4)% 
 Utility excl. pass-through 
  fuel                            13      14       (2)%          52% 
 Pass-through fuel                 -     (1)       100%         100% 
 
 OPERATING MARGIN % 
 Industrial                    10.5%   10.5%          -        0.6pp 
 Utility excl. pass-through 
  fuel                          8.9%    8.3%      0.6pp        3.5pp 
 
 ROCE 
 Industrial                    10.6%    9.7%      0.9pp        1.6pp 
 Utility excl. pass-through 
  fuel                          6.0%    6.7%    (0.7)pp        0.9pp 
----------------------------  ------  ------  ---------  ----------- 
 
   --      Power Solutions Industrial 
   -    Underlying(1) revenue decreased 9%; up 4% excluding the 2018 Winter Olympics 
   -    Underlying(1) profit decreased 4% 
   -    Operating margin at 10.5% was up 0.6 percentage points on an underlying(1) basis 
   -    ROCE of 10.6% is up 1.6 percentage points on an underlying(1) basis 
   --      Power Solutions Utility 
   -    Underlying(1) revenue was down 7% due primarily to 2018 off hires in Mozambique and Japan 
   -    Underlying(1) operating profit was up 52% as a result of improved operational performance 
   -    ROCE up 0.9 percentage points to 6.0% on an underlying(1) basis 

Power Solutions Industrial

Power Solutions Industrial underlying(1) revenue decreased 9%. Revenue excluding the 2018 Winter Olympics was up 4% on the prior year. Revenue in Latin America increased 16%, primarily driven by industrial projects, most notably in the oil and gas sector in Ecuador. In the Middle East revenue increased 6% with good growth in Oman, partially offset by reduced revenue in Kuwait. Revenue in Africa increased 29%, driven by Nigeria and industrial projects in the Democratic Republic of Congo (DRC). In Eurasia revenue decreased 10%, with the slower order intake seen in the second half of 2018, and pressure on rates from increased competition, continuing. Revenue in Asia decreased 21% mainly driven by South Korea (excluding 2018 Winter Olympics) due to a reduction in work related to mining, and oil and gas.

Operating margin on an underlying(1) basis was up 0.6 percentage points on the prior year at 10.5%, supported by a good performance in both Africa and Latin America in leveraging their respective cost bases.

Power Solutions Industrial order intake was 213 MW (2018: 264 MW) including 127 MW in Eurasia (2018: 131 MW) with the prior year intake reflecting a large industrial project in the DRC.

Power Solutions Utility

Power Solutions Utility saw underlying(1) revenue decrease 7% due primarily to 2018 off hires in Mozambique and Japan. The operating margin (excluding pass-through fuel) was up 0.6 percentage points to 8.9%, and on an underlying(1) basis the operating margin was up 3.5 percentage points due to the early benefit of our cost reduction programme.

Average megawatts on hire in this business was 2,473 (2018: 2,680), with the year on year reduction reflecting higher off-hires than on-hires over the last 12 months, as projects off-hired in Myanmar, Indonesia and Argentina. The off-hire rate in the first half was 15% (2018: 27%) and we expect the full year off-hire rate to be around 35% (2018: 42%). Order intake year to date for Utility sector projects is 245 MW (2018: 102 MW), including 60MW in Gabon and 60MW in Senegal.

Managing the trade receivables in our Power Solutions Utility business continues to be a major focus, with active ongoing engagement with our customers a key priority. Encouragingly our Power Solutions Utility cash collections in the first six months were $295 million compared with amounts invoiced of $244 million.

However, as noted on page 103 in the Group's 2018 Annual Report and Accounts with respect to the prior year, we continue to experience delays in receiving payments in parts of Africa, Venezuela and Yemen due to our customers' liquidity positions and their limited access to foreign currency. While the overall Power Solutions Utility bad debt provision of $84 million at 30 June 2019 was broadly in line with 31 December 2018 ($83 million), reflecting the differing circumstances by customer, within this amount we have increased by $3 million the bad debt provision against specific contracts in Yemen.

Operational summary

 
 
 OPERATIONAL SUMMARY 
                                                      1H19     1H18    CHANGE 
 
 Power Solutions Industrial average 
  MW on hire                                         2,509    2,376        6% 
  Power Solutions Utility average MW 
   on hire                                           2,473    2,680 
                                                                         (8)% 
 
 Power Solutions order intake (MW)                     458      366       25% 
     Power Solutions Industrial (ex. Eurasia)           86      133     (35)% 
     Power Solutions Industrial (Eurasia 
      only)                                            127      131      (3)% 
      Power Solutions Utility                          245      102 
                                                                         140% 
 
 
 Utilisation 
  Power Solutions Industrial                           68%      70%   (2.0)pp 
 Power Solutions Utility                               66%      65%     1.0pp 
----------------------------------------------  ----------  -------  -------- 
 

FINANCIAL REVIEW

A summarised Income Statement for the first six months of 2019 is set out below.

 
 
   INCOME STATEMENT 
 
 GBPm                     1H19    1H18     CHANGE   UNDERLYING CHANGE(1) 
 
 Revenue                   768     857      (10)%                   (4)% 
 Operating profit           81      76         6%                    12% 
 Net interest expense     (21)    (17)      (21)% 
 Profit before tax          60      59         2%                     9% 
 Taxation                 (21)    (18)      (14)% 
 Profit after tax           39      41       (3)% 
 Diluted EPS (p)         15.33   15.85       (3)%                     4% 
 Operating margin        10.5%    8.9%      1.6pp                  1.5pp 
 ROCE                    10.2%   10.5%    (0.3)pp                  0.6pp 
----------------------  ------  ------  ---------  --------------------- 
 
 

Currency translation

The movement in exchange rates in the period had a minimal impact on revenue and decreased operating profit by GBP4 million. Currency translation also gave rise to a GBP1 million decrease in the value of the Group's net assets from December 2018 to June 2019. Set out in the table below are the principal exchange rates which affected the Group's profit and net assets.

 
 
   PRINCIPAL EXCHANGE        JUNE 2019          JUNE 2018           DEC 2018 
   RATES 
 (PER GBP STERLING) 
                         AVERAGE   PERIOD   AVERAGE   PERIOD   AVERAGE   PERIOD 
 
 United States Dollar       1.29     1.27      1.38     1.32      1.34     1.27 
 Euro                       1.15     1.11      1.14     1.13      1.13     1.11 
 UAE Dirhams                4.75     4.66      5.06     4.84      4.91     4.66 
 Australian Dollar          1.83     1.81      1.78     1.78      1.79     1.80 
 Brazilian Reals            4.98     4.85      4.72     5.09      4.87     4.91 
 Argentinian Peso          53.61    54.17     29.72    36.99     37.48    48.62 
 Russian Rouble            84.42    79.97     81.85    82.53     83.70    88.02 
 (Source: Bloomberg) 
----------------------  --------  -------  --------  -------  --------  ------- 
 

Reconciliation of reported to underlying results

The tables below reconcile the reported and underlying revenue and operating profit movements:

Revenue

 
GBPm                RENTAL SOLUTIONS        INDUSTRIAL           UTILITY              GROUP 
                   2019   2018  CHANGE  2019  2018  CHANGE  2019  2018  CHANGE  2019  2018  CHANGE 
 
As reported         400    386      4%   198   219    (9)%   170   252   (33)%   768   857   (10)% 
Pass-through 
 fuel                 -      -             -     -          (20)  (89)          (20)  (89) 
Currency impact       -     10             -   (1)             -   (2)             -     7 
Underlying          400    396      1%   198   218    (9)%   150   161    (7)%   748   775    (4)% 
----------------         -----          ----  ----          ----  ----          ----  ---- 
 

Operating profit

 
                    RENTAL SOLUTIONS        INDUSTRIAL           UTILITY              GROUP 
  GBPm 
                   2019   2018  CHANGE  2019  2018  CHANGE  2019  2018  CHANGE  2019  2018  CHANGE 
 
As reported          47     40     17%    21    23    (8)%    13    13      -%    81    76      6% 
Pass-through 
 fuel                 -      -             -     -             -     1             -     1 
Currency impact       -      2             -   (1)             -   (5)             -   (4) 
Underlying           47     42     12%    21    22    (4)%    13     9     52%    81    73     12% 
----------------         -----          ----  ----          ----  ----          ----  ---- 
 

Notes:

1. The currency impact is calculated by taking the 2018 results in local currency and retranslating them at 2019 average rates.

2. The currency impact line included in the tables above excludes the currency impact on pass-through fuel in PSU, which in 2019 was GBP4 million on revenue and GBPnil on operating profit.

Interest

The net interest charge of GBP21 million was GBP4 million higher than last year, primarily due to an increase in interest of GBP3 million associated with the adoption of IFRS 16 'Leases'. Interest cover, measured against rolling 12-month EBITDA (Earnings before Interest, Taxes, Depreciation and Amortisation) remained strong at 13 times (2018: 15 times).

Effective tax rate

The current forecast of the effective tax rate for the full year, which has been used in the interim accounts, is 35% (30 June 2018: 31%). The increase in the effective rate is driven primarily by a change in the expected geographic profit mix for the year.

Dividends

The Board has decided to pay an interim dividend of 9.38 pence per ordinary share, in line with last year; dividend cover is 1.6 times (30 June 2018: 1.7 times). This interim dividend will be paid on 1 October 2019 to shareholders on the register at 6 September 2019, with an ex-dividend date of 5 September 2019. Dividend cover is calculated as basic earnings per share for the period divided by the dividend per share.

Cash flow

During the first six months we generated an operating cash inflow of GBP210 million (2018: GBP160 million). The increase in operating cash flow is mainly driven by a year on year increase in EBITDA of GBP23 million and a GBP31 million reduction in working capital outflows, partially offset by higher cash outflows relating to mobilisation (fulfilment assets) and demobilisation activities of GBP9 million. Capital expenditure in the period was GBP99 million (2018: GBP95 million), of which GBP83 million (2018: GBP87 million) was spent on fleet assets. The working capital movements in the period are explained on page 3.

Financial resources

The Group maintains sufficient facilities to meet its normal funding requirements over the medium term. At 30 June 2019 these facilities totalled GBP1,077 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. The covenants exclude the impact of IFRS 16 'Leases' and, on that basis, at 30 June 2019 these ratios were 14 times and 1.3 times. The maturity profile of the Group's borrowings is detailed in Note 11 in the Accounts.

Net debt (including GBP102 million of a lease creditor on adoption of IFRS 16 from 1 January 2019) amounted to GBP784 million at 30 June 2019 and, at that date, undrawn committed facilities were GBP432 million.

Net operating assets

The net operating assets of the Group (including goodwill) at 30 June 2019 totalled GBP2,190 million, GBP67 million higher than 30 June 2018. The main components of net operating assets are detailed in the table below.

 
 
                                                                           MOVEMENT EXCLUDING 
   GBPm                                 1H19     1H18     MOVEMENT     THE IMPACT OF CURRENCY 
 
 Goodwill/intangibles/investments        237      222           7%                         4% 
 Rental fleet                          1,003    1,078         (7)%                       (9)% 
 Property & plant                        220      106         108%                       104% 
 Working capital (excl. 
  interest creditors)                    649      637           2%                       (1)% 
 Fulfilment asset & demobilisation 
  provision                               54       15         260%                       260% 
 Cash (incl. overdrafts)                  27       65        (58)%                      (60)% 
-----------------------------------  -------  -------  -----------  ------------------------- 
 Total net operating assets            2,190    2,123           3%                         1% 
-----------------------------------  -------  -------  -----------  ------------------------- 
 

A key measure of Aggreko's performance is the return (expressed as underlying operating profit) generated from average net operating assets (ROCE). For each half year reporting period, we calculate ROCE by taking the underlying 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 2019 the ROCE decreased to 10.2% compared with 10.5% for the same period in 2018, primarily due to the impact of currency. On an underlying(1) basis ROCE rose 0.6 percentage points.

Shareholders' equity

Shareholders' equity decreased by GBP6 million to GBP1,361 million in the six months ended 30 June 2019, represented by the net assets of the Group of GBP2,145 million before net debt of GBP784 million. The movements in shareholders' equity are analysed in the table below:

 
 
   MOVEMENTS IN SHAREHOLDERS' EQUITY 
                                           GBPm    GBPm 
 AS AT 1 JANUARY 2019                             1,367 
 Profit for the period                       39 
 Dividend(3)                               (45) 
                                          ----- 
 Retained earnings                                  (6) 
  Employee share awards                               5 
  Re-measurement of retirement benefits             (5) 
 Currency translation                               (1) 
 Other                                                1 
                                                 ------ 
 AS AT 30 JUNE 2019                               1,361 
----------------------------------------  -----  ------ 
 

(3) Reflects the final dividend for 2018 of 17.74 pence per share (2017 17.74 pence) that was paid during the period.

IFRS 16 'Leases'

The Group adopted IFRS 16 from 1 January 2019 using the modified retrospective approach and therefore the comparative information has not been restated.

IFRS 16 addresses the accounting for leases and requires lessees to recognise all leases on balance sheet with limited exemptions. This results in the recognition of a right-of-use asset and corresponding liability on the balance sheet, with the associated depreciation and interest expense being recorded in the income statement over the lease period. Limited exemptions apply for short-term leases (leases with a term of 12 months or less) and low value leases (<$10,000). The payments for the exempt leases are recognised as an expense in the income statement on a straight-line basis over the lease term.

The impact from applying IFRS 16 for the six months ended 30 June 2019 was:

Income statement

   --      Improvement in operating profit of GBP2 million 
   --      Increase in depreciation of GBP14 million 
   --      Increase in interest costs of GBP3 million 
   --      Reduction in profit before tax of GBP1 million 

Balance sheet/Cash flow statement

-- Right of use asset included within property, plant & equipment of GBP101 million as at 30 June 2019 (1 January 2019: GBP104 million)

   --      Lease liabilities of GBP102 million as at 30 June 2019 (1 January 2019: GBP104 million) 
   --      Net debt at 30 June 2019 is higher by GBP102 million 

Ratios

   --      An increase in EBITDA of GBP16 million 
   --      An increase in net debt/EBITDA of 0.2 times 
   --      Reduction in Group ROCE of 0.3pp 

Principal risks and uncertainties

In the day to day operations of the Group we face various risks and uncertainties. We seek both to prevent these risks from materialising and to mitigate their impact if they do arise. The Board has developed a risk management framework to facilitate this. The principal risks that we believe could potentially affect the Group are summarised below:

   --      Global macroeconomic uncertainty; 
   --      Market dynamics; 
   --      Disruptive technology; 
   --      Talent management; 
   --      New technology market introduction; 
   --      Change management; 
   --      Service delivery: major contractual failure; 
   --      Cyber security; 
   --      Escalating sanctions; 
   --      Health and safety; 
   --      Security; 
   --      Failure to conduct business dealings with integrity and honesty; and 
   --      Failure to collect payments or to recover assets. 

Other than the one change noted below, we do not believe that the principal risks and uncertainties facing the business have changed materially since the publication of the 2018 Annual Report and Accounts.

One risk has returned to the Group risk register following our six-monthly update process: "Service delivery: major contractual failure". The level of this risk is likely to fluctuate with the number of major contracts that we are delivering at any point in time.

Shareholder information

Our website can be accessed at www.plc.aggreko.com. This contains a large amount of information about our business. The website also carries copies of recent investor presentations, as well as London Stock Exchange announcements.

 
 Chris Weston              Heath Drewett 
 Chief Executive Officer   Chief Financial Officer 
 
 30 July 2019 
 

GROUP INCOME STATEMENT

FOR THE SIX MONTHSED 30 JUNE 2019 (UNAUDITED)

 
                                                     6 MONTHS       6 MONTHS    YEAREDEDED   31 DECEMBER 
                                                 30 JUNE 2019   30 JUNE 2018          2018 
                                         NOTES    GBP MILLION    GBP MILLION   GBP MILLION 
 Revenue                                     4            768            857         1,760 
 Cost of sales                                          (335)          (420)         (824) 
                                                -------------  -------------  ------------ 
 Gross profit                                             433            437           936 
 Distribution costs                                     (225)          (230)         (476) 
 Administrative expenses                                (127)          (129)         (241) 
 Impairment loss on trade receivables                     (5)            (4)           (7) 
 Other income                                               5              2             7 
                                                -------------  -------------  ------------ 
 Operating profit                            4             81             76           219 
 Net finance costs 
 - Finance cost                                          (21)           (17)          (41) 
 - Finance income                                           -              -             4 
                                                -------------  -------------  ------------ 
 Profit before taxation                                    60             59           182 
 Taxation                                    7           (21)           (18)          (57) 
                                                -------------  -------------  ------------ 
 Profit for the period                                     39             41           125 
                                                -------------  -------------  ------------ 
 All profit for the period is attributable 
  to the owners of the Company. 
 
 Basic earnings per share (pence)            6          15.34          15.85         49.22 
                                                -------------  -------------  ------------ 
 Diluted earnings per share 
  (pence)                                    6          15.33          15.85         49.18 
--------------------------------------  ------  -------------  -------------  ------------ 
 

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHSED 30 JUNE 2019 (UNAUDITED)

 
                                                                   6 MONTHS     YEAREDED    31 DECEMBER 
                                                               30 JUNE 2018           2018 
                                                   6 MONTHSED 
                                               30 JUNE 2019 
                                                GBP MILLION     GBP MILLION    GBP MILLION 
 
 Profit for the period                                   39              41            125 
 Other comprehensive (loss)/income 
 Items that will not be reclassified 
  subsequently to profit or loss 
   Remeasurement of retirement benefits 
   Taxation on remeasurement of retirement 
   benefits                                             (5)              21             26 
                                                          1             (4)            (5) 
 Items that may be reclassified 
  subsequently to profit or loss 
 
  Cash flow hedges                                        -               1              2 
   Net exchange losses offset in 
    reserves                                            (1)            (28)           (24) 
                                             --------------  --------------  ------------- 
 Other comprehensive loss for the 
  period                                                (5)            (10)            (1) 
 
 Total comprehensive income for 
  the period                                             34              31            124 
                                             ==============  ==============  ============= 
 
 

GROUP BALANCE SHEET

AS AT 30 JUNE 2019 (UNAUDITED)

 
                                                 30 JUNE       30 JUNE        31 DEC 
                                                    2019          2018          2018 
                                     NOTES   GBP MILLION   GBP MILLION   GBP MILLION 
 Non-current assets 
 Goodwill                                            186           180           184 
 Other intangible assets                              42            33            42 
 Investment                                            9             9             9 
 Property, plant and equipment           8         1,223         1,184         1,169 
 Deferred tax asset                                   36            34            36 
 Fulfilment asset                        9            45            17            29 
 Retirement benefit surplus                            1             -             1 
                                            ------------  ------------  ------------ 
                                                   1,542         1,457         1,470 
                                            ------------  ------------  ------------ 
 Current assets 
 Inventories                                         233           244           229 
 Trade and other receivables            10           746           740           781 
 Fulfilment asset                        9            22             8            15 
 Cash and cash equivalents                            69            76            85 
 Derivative financial instruments                      -             -             1 
 Current tax assets                                   20            27            23 
                                            ------------  ------------  ------------ 
                                                   1,090         1,095         1,134 
                                            ------------  ------------  ------------ 
 Total assets                                      2,632         2,552         2,604 
                                            ------------  ------------  ------------ 
 
 Current liabilities 
 Borrowings                             11         (155)         (175)         (144) 
 Lease liability                                    (33)             -             - 
 Derivative financial instruments                      -           (1)           (1) 
 Trade and other payables                          (336)         (346)         (371) 
 Current tax liabilities                            (34)          (52)          (47) 
 Demobilisation provision               12           (4)           (8)           (6) 
 Provisions                                          (1)           (4)           (2) 
                                            ------------  ------------  ------------ 
                                                   (563)         (586)         (571) 
                                            ------------  ------------  ------------ 
 Non-current liabilities 
 Borrowings                             11         (596)         (642)         (627) 
 Lease liability                                    (69)             -             - 
 Deferred tax liabilities                           (34)          (22)          (34) 
 Retirement benefit obligation                         -           (2)             - 
 Demobilisation provision               12           (9)           (2)           (5) 
                                                   (708)         (668)         (666) 
                                            ------------  ------------ 
 
 Total liabilities                               (1,271)       (1,254)       (1,237) 
                                            ============  ============  ============ 
 
 Net assets                                        1,361         1,298         1,367 
                                            ============  ============  ============ 
 Shareholders' equity 
 Share capital                                        42            42            42 
 Share premium                                        20            20            20 
 Treasury shares                                    (11)          (14)          (17) 
 Capital redemption reserve                           13            13            13 
 Hedging reserve (net of deferred 
  tax)                                                 1             -             1 
 Foreign exchange reserve                           (52)          (55)          (51) 
 Retained earnings                                 1,348         1,292         1,359 
                                            ------------  ------------  ------------ 
 Total shareholders' equity                        1,361         1,298         1,367 
                                            ============  ============  ============ 
 
 

GROUP CASH FLOW STATEMENT

FOR THE SIX MONTHSED 30 JUNE 2019 (UNAUDITED)

 
                                                           6 MONTHS      6 MONTHS          YEAREDEDED 
                                                            30 JUNE       30 JUNE        31 DEC 
                                                               2019          2018          2018 
                                             NOTES      GBP MILLION   GBP MILLION   GBP MILLION 
 Operating activities 
 Profit for the period                                           39            41           125 
 Adjustments for: 
 Tax                                                             21            18            57 
 Depreciation                                                   163           145           293 
 Amortisation of intangibles                                      3             3             5 
 Fulfilment assets                                  9             6             3             9 
 Demobilisation provisions                         12             4             2             4 
 Finance income                                                   -             -           (4) 
 Finance cost                                                    21            17            41 
 Profit on sale of property, plant 
  and equipment (PPE)                                           (5)           (2)           (7) 
 Share based payments                                             5             5            10 
 Changes in working capital (excluding 
  the effects of exchange differences 
  on consolidation): 
     (Increase)/decrease in inventories                         (2)           (4)            14 
     Decrease/(increase) in trade and 
      other receivables                                          34             7          (10) 
     Decrease in trade and other payables                      (48)          (50)          (60) 
 Cash flows relating to fulfilment 
  assets                                           9           (28)          (20)          (44) 
 Cash flows relating to demobilisation 
  provisions                                       12           (2)           (1)           (4) 
 Cash flows relating to prior period 
  exceptional items                                             (1)           (4)           (6) 
                                                       ------------  ------------  ------------ 
 Cash generated from operations                                 210           160           423 
 Tax paid                                                      (30)          (33)          (61) 
 Interest received                                                -             -             4 
 Interest paid                                                 (22)          (18)          (36) 
                                                       ------------  ------------  ------------ 
 Net cash generated from operating 
  activities                                                    158           109           330 
 Cash flows from investing activities 
 Acquisitions (net of cash acquired)                              -          (24)          (24) 
 Purchases of PPE                                              (99)          (95)         (216) 
  Purchase of other intangible assets                           (4)           (4)          (10) 
 Purchase of investment                                           -           (9)           (9) 
 Proceeds from sale of PPE                                        9             4            15 
                                                       ------------  ------------  ------------ 
 Net cash used in investing activities                         (94)         (128)         (244) 
                                                       ------------  ------------  ------------ 
 Cash flows from financing activities 
 Increase in long-term loans                                    206           473           726 
 Repayment of long-term loans                                 (189)         (338)         (624) 
 Increase in short-term loans                                    30            11             5 
 Repayment of short-term loans                                (101)          (68)          (94) 
 Payment of lease liabilities                                  (14)             -             - 
 Dividends paid to shareholders                                (45)          (45)          (69) 
 Purchase of treasury shares                                      -           (7)          (12) 
                                                       ------------  ------------  ------------ 
 Net cash (used in)/from financing 
  activities                                                  (113)            26          (68) 
                                                       ------------  ------------  ------------ 
 
 Net (decrease)/increase in cash 
  and cash equivalents                                         (49)             7            18 
 Cash and cash equivalents at beginning 
  of the period                                                  76            59            59 
 Exchange loss on cash and cash 
  equivalents                                                     -           (1)           (1) 
                                                       ------------  ------------  ------------ 
 
 Cash and cash equivalents at end 
  of the period                                                  27            65            76 
                                                       ------------  ------------  ------------ 
 
 
 

Cash flows for the purchase and sale of rental fleet assets are presented as arising from investing activities because the acquisition of new fleet assets represents a key investment decision for the Group, the assets are expected to be owned and operated by the Group to the end of their economic lives, the disposal process (when the assets are largely depreciated) is not a major part of the Group's business model and the assets in the rental fleet are not specifically held for subsequent resale.

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

AS AT 30 JUNE 2019

 
                           At 1 JAN       IFRS 16                               OTHER NON-CASH    At 30 JUNE 
                               2019    TRANSITION     CASH FLOW      EXCHANGE        MOVEMENTS          2019 
 Analysis of 
  changes in 
  net debt              GBP MILLION   GBP MILLION   GBP MILLION   GBP MILLION      GBP MILLION   GBP MILLION 
---------------------  ------------  ------------  ------------  ------------  ---------------  ------------ 
 Cash and cash 
  equivalents                    76             -          (49)             -                -            27 
 Current borrowings: 
 Bank borrowings              (115)             -            52           (2)             (48)         (113) 
 Private placement 
  notes                        (20)             -            19             1                -             - 
---------------------  ------------  ------------  ------------  ------------  ---------------  ------------ 
 Lease liability                  -          (31)            14             -             (16)          (33) 
---------------------  ------------  ------------  ------------  ------------  ---------------  ------------ 
                              (135)          (31)            85           (1)             (64)         (146) 
---------------------                ------------  ------------                                 ------------ 
 Non-current 
  borrowings: 
 Bank borrowings              (134)             -          (17)             -               48         (103) 
 Private placement 
  notes                       (493)             -             -             -                -         (493) 
---------------------  ------------  ------------  ------------  ------------  ---------------  ------------ 
 Lease liability                  -          (73)             -             -                4          (69) 
---------------------  ------------  ------------  ------------  ------------  ---------------  ------------ 
                              (627)          (73)          (17)             -               52         (665) 
 
 Net debt                     (686)         (104)            19           (1)             (12)         (784) 
---------------------  ------------  ------------  ------------  ------------  ---------------  ------------ 
 
   Analysis of changes in liabilities from financing activities 
----------------------------------------------------------------------------------------------  ------------ 
 Current borrowings           (135)          (31)            85           (1)             (64)         (146) 
 Non-current 
  borrowings                  (627)          (73)          (17)             -               52         (665) 
                       ------------  ------------  ------------  ------------  ---------------  ------------ 
 Total financing 
  liabilities                 (762)         (104)            68           (1)             (12)         (811) 
---------------------  ------------  ------------  ------------  ------------  ---------------  ------------ 
 

Other non-cash movements include reclassifications between short term and long term borrowings, with GBP48 million being reclassified from non-current to current borrowings and GBP11 million from non-current to current lease liabilities. The remaining balance is due to GBP12 million of new lease liabilities in the period.

AS AT 30 JUNE 2018

 
                               At 1 JAN                                              OTHER NON-CASH         At 30 
                                   2018     CASH FLOW   ACQUISITIONS      EXCHANGE        MOVEMENTS     JUNE 2018 
 Analysis of changes 
  in net debt               GBP MILLION   GBP MILLION    GBP MILLION   GBP MILLION      GBP MILLION   GBP MILLION 
-------------------------  ------------  ------------  -------------  ------------  ---------------  ------------ 
 Cash and cash 
  equivalents                        59             7              -           (1)                -            65 
 Current borrowings: 
 Bank borrowings                   (72)             3              -           (2)             (74)         (145) 
 Private placement 
  notes                            (55)            54              -             -             (18)          (19) 
-------------------------  ------------  ------------  -------------  ------------  ---------------  ------------ 
                                  (127)            57              -           (2)             (92)         (164) 
-------------------------                ------------  -------------                                 ------------ 
 Non-current borrowings: 
 Bank borrowings                  (103)         (111)           (24)           (3)               74         (167) 
 Private placement 
  notes                           (481)             -              -          (12)               18         (475) 
-------------------------  ------------  ------------  -------------  ------------  ---------------  ------------ 
                                  (584)         (111)           (24)          (15)               92         (642) 
 
 Net debt                         (652)          (47)           (24)          (18)                -         (741) 
-------------------------  ------------  ------------  -------------  ------------  ---------------  ------------ 
 
 Analysis of changes in liabilities from financing activities 
---------------------------------------------------------------------------------------------------  ------------ 
 Current borrowings               (127)            57              -           (2)             (92)         (164) 
 Non-current borrowings           (584)         (111)           (24)          (15)               92         (642) 
 Financing derivatives              (2)             1              -             -                -           (1) 
                           ------------  ------------  -------------  ------------  ---------------  ------------ 
 Total financing 
  liabilities                     (713)          (53)           (24)          (17)                -         (807) 
-------------------------  ------------  ------------  -------------  ------------  ---------------  ------------ 
 

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHSED 30 JUNE 2019 (UNAUDITED)

 
 AS AT 
  30 JUNE 
  2019                                       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 
                    MILLION    MILLION    MILLION      MILLION    MILLION     GBP MILLION     MILLION    GBP MILLION 
 Balance 
  at 1 January 
  2019                   42         20       (17)           13          1            (51)       1,359          1,367 
 Profit for 
  the period              -          -          -            -          -               -          39             39 
 Other comprehensive 
  loss: 
 Currency 
  translation 
  differences 
  (Note (i))              -          -          -            -          -             (1)           -            (1) 
 Re-measurement 
  of retirement 
  benefits 
  (net of 
  tax)                    -          -          -            -          -               -         (4)            (4) 
                  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
 Total 
  comprehensive 
  income for 
  the period 
  ended 30 
  June 2019               -          -          -            -          -             (1)          35             34 
                  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
 Transactions 
  with owners: 
 Employee 
  share awards 
  Issue of 
  Ordinary                -          -          -            -          -               -           5              5 
  Shares to 
  employees 
  under share 
  option schemes 
  (Note (ii))             -          -          6            -          -               -         (6)              - 
 Dividends 
  paid during 
  the period              -          -          -            -          -               -        (45)           (45) 
                  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
                          -          -          6            -          -               -        (46)           (40) 
                  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
 Balance 
  at 30 June 
  2019                   42         20       (11)           13          1            (52)       1,348          1,361 
----------------  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
 
 
   (i)         The currency translation difference is explained in the Financial Review on page 9. 

(ii) During the period 654,496 Ordinary shares have been transferred from the Employee Benefit Trust to satisfy the Restricted Stock Schemes and Share Save Schemes.

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHSED 30 JUNE 2018 (UNAUDITED)

 
 AS AT 
  30 JUNE 
  2018                                       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 
                    MILLION    MILLION    MILLION      MILLION    MILLION     GBP MILLION     MILLION    GBP MILLION 
 Balance 
  at 1 January 
  2018 as 
  previously 
  reported               42         20        (7)           13        (1)            (27)       1,277          1,317 
 Impact of 
  change in 
  accounting 
  policy                  -          -          -            -          -               -         (3)            (3) 
                  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
 Restated 
  balance 
  at 1 January 
  2018                   42         20        (7)           13        (1)            (27)       1,274          1,314 
 Profit for 
  the period              -          -          -            -          -               -          41             41 
 Other comprehensive 
  (loss)/income: 
 Fair value 
  gains on 
  interest 
  rate swaps              -          -          -            -          1               -           -              1 
 Currency 
  translation 
  differences             -          -          -            -          -            (28)           -           (28) 
 Re-measurement 
  of retirement 
  benefits 
  (net of 
  tax)                    -          -          -            -          -               -          17             17 
                  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
 Total 
  comprehensive 
  income for 
  the period 
  ended 30 
  June 2018               -          -          -            -          1            (28)          58             31 
                  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
 Transactions 
  with owners: 
 Purchase 
  of Treasury 
  shares (Note 
  (ii))                   -          -        (7)            -          -               -           -            (7) 
 Employee 
  share awards            -          -          -            -          -               -           5              5 
 Dividends 
  paid during 
  the period              -          -          -            -          -               -        (45)           (45) 
                  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
                          -          -        (7)            -          -               -        (40)           (47) 
                  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
 Balance 
  at 30 June 
  2018                   42         20       (14)           13          -            (55)       1,292          1,298 
----------------  ---------  ---------  ---------  -----------  ---------  --------------  ----------  ------------- 
 
 

(i) During the period 41,543 Ordinary shares have been transferred from the Employee Benefit Trust to satisfy the Restricted Stock Schemes.

(ii) During the period 940,000 Ordinary shares were purchased at an average price of GBP7.39 and transferred to the Employee Benefit Trust.

NOTES TO THE INTERIM ACCOUNTS

FOR THE SIX MONTHSED 30 JUNE 2019 (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 report was approved for issue on 30 July 2019.

This condensed consolidated interim report does not comprise Statutory Accounts within the meaning of Section 434 of the Companies Act 2006. Statutory Accounts for the year ended 31 December 2018 were approved by the Board on 6 March 2019 and delivered to the Registrar of Companies. The report of the auditor 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 report is unaudited but has been reviewed by the Group's auditor, whose report is on page 33.

2. BASIS OF PREPARATION

This condensed consolidated interim report for the six months ended 30 June 2019 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 report should be read in conjunction with the annual financial statements for the year ended 31 December 2018, which have been prepared in accordance with IFRSs as adopted by the European Union.

Going concern basis

Given the proven ability of the business to fund organic growth from operating cash flows, and the nature of our business model, we believe it is sensible to run the business with a modest amount of debt. We say 'modest' because we are strongly of the view that it is unwise to run a business which has high levels of operational gearing with high levels of debt. Given the above considerations, we believe that a Net Debt to EBITDA ratio of around one times is appropriate for the Group over the longer term.

The Group maintains sufficient facilities to meet its normal funding requirements over the medium term. At 30 June 2019, these facilities totalled GBP1,077 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. The covenants exclude the impact of IFRS 16 'Leases' and, on that basis, at 30 June 2019 these ratios were 14 times and 1.3 times. The Group does not expect to breach these covenants in the year from the date of approval of this interim report and the Group expects to continue 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 GBP784 million at 30 June 2019 and, at that date, undrawn committed facilities were GBP432 million.

The Group balance sheet shows consolidated net assets of GBP1,361 million (30 June 2018: GBP1,298 million) of which GBP1,003 million (30 June 2018: GBP1,078 million) relates to fleet assets. The defined benefit pension surplus is GBP1 million (30 June 2018: deficit of GBP2 million).

Based on the above the Directors are confident that it is appropriate for the going concern basis to be adopted in preparing the half year financial statements.

3. ACCOUNTING POLICIES

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

Except as described below, the accounting policies are consistent with those of the annual financial statements for the year ended 31 December 2018, as described in those annual financial statements.

The Group adopted IFRS 16 'Leases' from 1 January 2019 and, therefore, this is the first set of the Group's financial statements where IFRS 16 has been applied. Changes to significant accounting policies are described below. The changes in accounting policies will be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2019.

IFRS 16

IFRS 16 addresses the accounting for leases and requires lessees to recognise all leases on balance sheet with limited exemptions. This results in the recognition of a right-of-use asset and corresponding liability on the balance sheet, with the associated depreciation and interest expense being recorded in the income statement over the lease period. Limited exemptions apply for short-term leases (leases with a term of 12 months or less) and low value leases (<$10,000). The payments for the exempt leases are recognised as an expense in the income statement on a straight-line basis over the lease term.

The Group has adopted IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application (GBPnil) is recognised in retained earnings at 1 January 2019. Accordingly, the comparative information has not been restated and continues to be reported under IAS 17 'Leases' and IFRIC 4 'Determining Whether an Arrangement contains a Lease'.

Definition of a lease

Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4. Under IFRS 16, a contract is, or contains a lease, if the contract conveys a right to control the use of an identified asset for a period in exchange for consideration.

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

- to grandfather the assessment of which transactions are leases. The Group applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts entered or changed on or after 1 January 2019;

- the use of hindsight in determining the lease term if the contract contains options to extend or terminate the lease;

- the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases; and

- to exclude initial direct costs from the measurement of the right-of-use asset at the date of initial application.

Accounting policy

On initial measurement the right-of-use asset is recognised at cost, which comprises the value of the lease liability adjusted for any lease payments made on or before the commencement date, less any incentives received, any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset. The right-of-use asset is depreciated over the shorter of the lease term and the useful life. The estimated useful life of the right-of-use asset is determined on the same basis as property, plant and equipment. The right-of-use asset is periodically adjusted for impairment, if any, and any remeasurements of the lease liability.

The Group leases various property, plant, equipment and vehicles. Rental contracts are typically for fixed periods from 3 to 7 years but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.

On initial measurement the lease liability is measured at the present value of the future lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The lease liability is measured at amortised cost using the effective interest rate method and is remeasured when there is a change in the future lease payments arising from a change in index or a change in the original assessment made.

3. ACCOUNTING POLICIES CONTINUED

Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

The Group presents the right-of-use asset and lease liability on the balance sheet.

The Group has applied judgement to determine the lease term for some lease contracts that include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which affects the amount of lease liabilities and right-of-use assets recognised. Lease payments associated with short-term and low-value leases are recognised on a straight-line basis as an expense in the profit or loss.

On transition to IFRS 16 the Group recognised an additional GBP104 million of right-of-use assets and GBP104 million of lease liabilities at the present value of the remaining lease payments, discounted at the Group's incremental borrowing rate as at 1 January 2019. The Group's weighted average incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 5%. On transition the right of use assets were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments, which were not material.

The recognised right-of-use assets relate to the following types of assets:

 
                                      1 JANUARY 
                                           2019 
                                    GBP MILLION 
  Freehold property                          75 
  Vehicles, plant & equipment                29 
                                   ------------ 
                                            104 
   ------------------------------  ------------ 
 

The recognised lease liability at 1 January 2019 is detailed below.

 
                                                                    1 JANUARY 
                                                                         2019 
                                                                  GBP MILLION 
 Operating lease commitment at 31 December 2018 as disclosed 
  in the Group's consolidated financial statements                        117 
 Discounted using the incremental borrowing rate at 1 January 
 2019                                                                      96 
 Recognition exemption for leases with less than 12 months 
  of term remaining at transition                                         (1) 
 Extension or termination options reasonably certain to 
  be exercised                                                              9 
                                                                 ------------ 
 Lease liabilities recognised at 1 January 2019                           104 
---------------------------------------------------------------  ------------ 
 

Impact for the period

The impact from applying IFRS 16 for the six months ended 30 June 2019 was:

Income statement

   --      Improvement in operating profit of GBP2 million 
   --      Increase in depreciation of GBP14 million 
   --      Increase in interest costs of GBP3 million 
   --      Reduction in profit before tax of GBP1 million 

Balance sheet/cash flow statement

-- Right of use asset included within property, plant & equipment of GBP101 million at 30 June 2019 (1 January 2019: GBP104 million)

   --      Lease liabilities of GBP102 million at 30 June 2019 (1 January 2019: GBP104 million) 
   --      Net debt at 30 June 2019 is higher by GBP102 million 

Ratios

   --      An increase in EBITDA of GBP16 million 
   --      An increase in net debt/EBITDA of 0.2 times 
   --      Reduction in Group ROCE of 0.3pp 

IFRIC 23 'Uncertainty over Income Tax Treatments'

The Group adopted IFRIC 23 from 1 January 2019. There was no material impact arising from the adoption of this standard.

4. SEGMENTAL REPORTING

(a) Revenue by segment

 
                                                                         EXTERNAL REVENUE 
                                                                        6 MONTHS      6 MONTHS          YEAREDEDED 
                                                                         30 JUNE       30 JUNE        31 DEC 
                                                                            2019          2018          2018 
                                                                     GBP MILLION   GBP MILLION   GBP MILLION 
 Power Solutions 
  Industrial (PSI)                                                           198           219           424 
  Utility (PSU)                                                              170           252           514 
                                                     ---------------------------  ------------  ------------ 
                                                                             368           471           938 
 Rental Solutions (RS)                                                       400           386           822 
                                                     ---------------------------  ------------  ------------ 
 Group                                                                       768           857         1,760 
---------------------------------------------------  ---------------------------  ------------  ------------ 
 
      (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 apart from revenue of GBP1 million from Power Solutions 
       Utility to Rental Solutions. 
 
       Disaggregation of revenue 
 
       In the tables below revenue is disaggregated by geography and sector. 
 
       Revenue by geography 
                                    6 MONTHS      6 MONTHS          YEAREDEDED 
                                     30 JUNE       30 JUNE        31 DEC 
                                        2019          2018          2018 
                                 GBP MILLION   GBP MILLION   GBP MILLION 
 
        North America                    237           203           460 
        UK                                36            58           106 
        Continental Europe                89            78           179 
        Eurasia                           36            40            77 
        Middle East                       77            69           148 
        Africa                            88            91           200 
        Asia                              62            91           166 
        Australia Pacific                 43            56           100 
        Latin America                    100           171           324 
                                ------------  ------------  ------------ 
                                         768           857         1,760 
          --------------------  ------------  ------------  ------------ 
 
 

4. SEGMENTAL REPORTING CONTINUED

Revenue by sector

 
                                           6 MONTHSED 30 JUNE 2019 
                                             PSI           PSU            RS         Group 
                                     GBP MILLION   GBP MILLION   GBP MILLION   GBP MILLION 
 
 Utilities                                     9           170            39           218 
 Oil & gas                                    89             -            73           162 
 Petrochemical & refining                      4             -            78            82 
 Building Services & construction             23             -            71            94 
 Events                                       13             -            34            47 
 Manufacturing                                15             -            24            39 
 Quarrying & mining                           29             -            24            53 
 Other                                        16             -            57            73 
                                             198           170           400           768 
----------------------------------  ------------  ------------  ------------ 
 
 
                                           6 MONTHSED 30 JUNE 2018 
                                             PSI           PSU            RS         Group 
                                     GBP MILLION   GBP MILLION   GBP MILLION   GBP MILLION 
 
 
 Utilities                                    18           252            44           314 
 Oil & gas                                    85             -            46           131 
 Petrochemical & refining                      5             -            67            72 
 Building Services & construction             22             -            75            97 
 Events                                       35             -            34            69 
 Manufacturing                                15             -            26            41 
 Quarrying & mining                           25             -            20            45 
 Other                                        14             -            74            88 
                                             219           252           386           857 
----------------------------------  ------------  ------------  ------------ 
 
 
                                           YEARED 31 DECEMBER 2018 
                                             PSI           PSU            RS         Group 
                                     GBP MILLION   GBP MILLION   GBP MILLION   GBP MILLION 
 
 Utilities                                    27           514            99           640 
 Oil & gas                                   163             -           110           273 
 Petrochemical & refining                      9             -           147           156 
 Building Services & construction             48             -           151           199 
 Events                                       53             -            80           133 
 Manufacturing                                32             -            56            88 
 Quarrying & mining                           53             -            43            96 
 Other                                        39             -           136           175 
                                             424           514           822         1,760 
----------------------------------  ------------  ------------  ------------ 
 

4. SEGMENTAL REPORTING CONTINUED

(b) Profit by segment

 
                                          OPERATING PROFIT 
                                  6 MONTHS      6 MONTHS          YEAREDEDED 
                                   30 JUNE       30 JUNE        31 DEC 
                                      2019          2018          2018 
                               GBP MILLION   GBP MILLION   GBP MILLION 
 Power Solutions 
  Industrial                            21            23            71 
  Utility                               13            13            43 
                              ------------  ------------  ------------ 
                                        34            36           114 
 Rental Solutions                       47            40           105 
                              ------------  ------------  ------------ 
 Operating profit                       81            76           219 
 Finance costs - net                  (21)          (17)          (37) 
                              ------------  ------------  ------------ 
 Profit before taxation                 60            59           182 
 Taxation                             (21)          (18)          (57) 
                              ------------  ------------  ------------ 
 Profit for the period/year             39            41           125 
----------------------------  ------------  ------------  ------------ 
 

(c) Depreciation and amortisation by segment

 
                           6 MONTHS      6 MONTHS          YEAREDEDED 
                            30 JUNE       30 JUNE        31 DEC 
                               2019          2018          2018 
                        GBP MILLION   GBP MILLION   GBP MILLION 
 Power Solutions 
  Industrial                     50            45            90 
  Utility                        53            53           104 
                       ------------  ------------  ------------ 
                                103            98           194 
 Rental Solutions                63            50           104 
                       ------------  ------------  ------------ 
 Group                          166           148           298 
---------------------  ------------  ------------  ------------ 
 

4. SEGMENTAL REPORTING CONTINUED

(d) Capital expenditure on property, plant & equipment and intangible assets by segment

 
                         6 MONTHS      6 MONTHS          YEAREDEDED 
                          30 JUNE       30 JUNE        31 DEC 
                             2019          2018          2018 
                      GBP MILLION   GBP MILLION   GBP MILLION 
 Power Solutions 
  Industrial                   29            33            55 
  Utility                      42            34            76 
                     ------------  ------------  ------------ 
                               71            67           131 
 Rental Solutions              44            45           109 
                     ------------  ------------  ------------ 
 Group                        115           112           240 
-------------------  ------------  ------------  ------------ 
 

(i) The net book value of total Group disposals of property, plant and equipment (PPE) during the period was GBP4 million (30 June 2018: GBP2 million, 31 December 2018: GBP8 million).

(ii) Capital expenditure comprises additions of PPE of GBP111 million (including GBP12 million in relation to leased right of use assets) (30 June 2018: GBP95 million, 31 December 2018: GBP216 million), additions of intangible assets of GBP4 million (30 June 2018: GBP4 million, 31 December 2018: GBP10 million), acquisitions of PPE of GBPnil (30 June 2018: GBP13 million, 31 December 2018: GBP13 million) and acquisitions of intangible assets of GBPnil (30 June 2018: GBPnil, 31 December 2018: GBP1 million).

(e) Assets / (Liabilities) by segment

 
                                                   ASSETS                                  LIABILITIES 
                                       30 JUNE       30 JUNE        31 DEC       30 JUNE       30 JUNE        31 DEC 
                                          2019          2018          2018          2019          2018          2018 
                                   GBP MILLION   GBP MILLION   GBP MILLION   GBP MILLION   GBP MILLION   GBP MILLION 
 Power Solutions 
  Industrial                               749           768           714         (115)         (102)          (94) 
  Utility                                  933           904           996         (170)         (169)         (214) 
                                  ------------  ------------  ------------  ------------  ------------  ------------ 
                                         1,682         1,672         1,710         (285)         (271)         (308) 
 Rental Solutions                          893           819           833         (100)          (97)          (76) 
                                  ------------  ------------  ------------  ------------  ------------  ------------ 
 Group                                   2,575         2,491         2,543         (385)         (368)         (384) 
 Tax and finance 
  asset/(liability)                         56            61            59          (75)          (77)          (90) 
 Derivative financial 
  instruments                                -             -             1             -           (1)           (1) 
 Borrowings                                  -             -             -         (709)         (806)         (762) 
 Lease liability                             -             -             -         (102)             -             - 
 Retirement benefit 
  surplus/(obligation)                       1             -             1             -           (2)             - 
                                  ------------  ------------  ------------  ------------  ------------  ------------ 
 Total assets/(liabilities) 
  per balance sheet                      2,632         2,552         2,604       (1,271)       (1,254)       (1,237) 
--------------------------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 
 

4. SEGMENTAL REPORTING CONTINUED

(f) Geographical information

 
                                                NON-CURRENT ASSETS 
 
                                   30 JUNE       30 JUNE        31 DEC 
                                      2019          2018          2018 
                               GBP MILLION   GBP MILLION   GBP MILLION 
 
 North America                         305           265           288 
 UK                                    171           123           161 
 Continental Europe                    148           126           137 
 Eurasia                                62            61            59 
 Middle East                           205           303           251 
 Africa                                192           162           153 
 Asia                                  156           169           151 
 Australia Pacific                      79            69            70 
 Latin America                         188           145           164 
                              ------------  ------------  ------------ 
                                     1,506         1,423         1,434 
 ----   --------------------  ------------  ------------  ------------ 
 
 

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 
                                     2019       2018     2018 
 
 Total dividend (GBP million)          45         45       69 
 Dividend per share (pence)         17.74      17.74    27.12 
------------------------------  ---------  ---------  ------- 
 

The interim dividend per share for the period was 9.38 pence (2018: 9.38 pence), amounting to a total dividend of GBP24 million (2018: GBP24 million). This interim dividend will be paid on 1 October 2019 to shareholders on the register on 6 September 2019, with an ex-dividend date of 5 September 2019.

6. 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.

 
                                               6 MONTHS   6 MONTHS     YEAREDEDED 
                                                30 JUNE    30 JUNE   31 DEC 
                                                   2019       2018     2018 
 
 Profit for the period (GBP million)               39.0       40.5    125.4 
                                              ---------  ---------  ------- 
 
 Weighted average number of ordinary shares 
  in issue (million)                              254.2      255.0    254.8 
                                              ---------  ---------  ------- 
 
 Basic earnings per share (pence)                 15.34      15.85    49.22 
--------------------------------------------  ---------  ---------  ------- 
 

6. EARNINGS PER SHARE CONTINUED

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.

 
                                                6 MONTHS   6 MONTHS     YEAREDEDED 
                                                 30 JUNE    30 JUNE   31 DEC 
                                                    2019       2018     2018 
 
 Profit for the period (GBP million)                39.0       40.5    125.4 
                                               ---------  ---------  ------- 
 
 Weighted average number of ordinary shares 
  in issue (million)                               254.2      255.0    254.8 
 Adjustment for share options                        0.3          -      0.2 
                                               ---------  ---------  ------- 
 Diluted weighted average number of ordinary 
  shares in issue (million)                        254.5      255.0    255.0 
                                               ---------  ---------  ------- 
 
 Diluted earnings per share (pence)                15.33      15.85    49.18 
---------------------------------------------  ---------  ---------  ------- 
 

7. TAXATION

The taxation charge for the period is based on an estimate of the Group's expected annual effective rate of tax for 2019 based on prevailing tax legislation at 30 June 2019. This is currently estimated to be 35% (June 2018: 31%; December 2018: 31%).

8. PROPERTY, PLANT AND EQUIPMENT

 
 SIX MONTHSED 30 JUNE 2019 
                                                                             VEHICLES, 
                                FREEHOLD   SHORT LEASEHOLD                     PLANT & 
                              PROPERTIES        PROPERTIES         FLEET     EQUIPMENT         TOTAL 
                             GBP MILLION       GBP MILLION   GBP MILLION   GBP MILLION   GBP MILLION 
 Cost 
 At 1 January 2019                    92                23         3,612           168         3,895 
 Exchange adjustments                  1                 -            22             4            27 
 Transition to IFRS 16                75                 -             -            29           104 
 Additions (Note (ii))                 9                 -            83            19           111 
 Disposals                             -                 -          (59)           (2)          (61) 
                            ------------  ----------------  ------------  ------------  ------------ 
 At 30 June 2019                     177                23         3,658           218         4,076 
                            ------------  ----------------  ------------  ------------  ------------ 
 
 Accumulated depreciation 
 At 1 January 2019                    40                16         2,555           115         2,726 
 Exchange adjustments                  1                 -            17             3            21 
 Charge for the period                10                 1           138            14           163 
 Disposals                             -                 -          (55)           (2)          (57) 
                            ------------  ----------------  ------------  ------------  ------------ 
 At 30 June 2019                      51                17         2,655           130         2,853 
                            ------------  ----------------  ------------  ------------  ------------ 
 
 Net book values 
 At 30 June 2019                     126                 6         1,003            88         1,223 
                            ------------  ----------------  ------------  ------------  ------------ 
 At 31 December 2018                  52                 7         1,057            53         1,169 
--------------------------  ------------  ----------------  ------------  ------------  ------------ 
 

(i) The net book value of assets capitalised in respect of leased right of use assets at 30 June 2019 is GBP101 million.

(ii) Additions of GBP111 million include GBP12 million in relation to leased right of use assets.

9. FULFILMENT ASSET

 
                                                    30 JUNE       30 JUNE        31 DEC 
                                                       2019          2018          2018 
                                                GBP MILLION   GBP MILLION   GBP MILLION 
 
 Balance at 1 January                                    44             8             8 
 Capitalised in the period                               28            20            44 
 Provision created for future demobilisation 
  costs                                                   1             2             3 
 Amortised to the income statement                      (7)           (5)          (12) 
 Exchange                                                 1             -             1 
 Balance at 30 June/31 December                          67            25            44 
                                               ------------  ------------ 
 
 Analysis of fulfilment assets 
 Current                                                 22             8            15 
 Non-current                                             45            17            29 
                                               ------------  ------------  ------------ 
 Total                                                   67            25            44 
---------------------------------------------  ------------  ------------  ------------ 
 

10. TRADE AND OTHER RECEIVABLES

 
                                                      30 JUNE       30 JUNE        31 DEC 
                                                         2019          2018          2018 
                                                  GBP MILLION   GBP MILLION   GBP MILLION 
 
 Trade receivables                                        588           562           587 
 Less: provision for impairment of receivables           (90)          (81)          (85) 
                                                 ------------  ------------  ------------ 
 Trade receivables - net                                  498           481           502 
 Prepayments                                               50            48            45 
 Accrued income                                           137           140           169 
 Other receivables (Note (i))                              61            71            65 
                                                 ------------  ------------  ------------ 
 Total receivables                                        746           740           781 
                                                 ------------  ------------  ------------ 
 
 Provision for impairment of receivables 
                                                      30 JUNE       30 JUNE        31 DEC 
                                                         2019          2018          2018 
                                                  GBP MILLION   GBP MILLION   GBP MILLION 
 Power Solutions 
  Industrial                                               13             6            11 
  Utility                                                  66            65            64 
                                                 ------------  ------------  ------------ 
                                                           79            71            75 
 Rental Solutions                                          11            10            10 
                                                 ------------  ------------  ------------ 
 Group                                                     90            81            85 
-----------------------------------------------  ------------  ------------  ------------ 
 

(i) Other receivables include GBP4 million (30 June 2018: GBP4 million, 31 December 2018: GBP4 million) of private placement notes with one customer in Venezuela (PDVSA). This financial instrument is booked at fair value which reflects our estimation of the recoverability of these notes. Other material amounts included in other receivables include taxes receivable of GBP27 million (30 June 2018: GBP26 million, 31 December 2018: GBP21 million) and deposits of GBP6 million (30 June 2018: GBP10 million, 31 December 2018: GBP15 million).

11. BORROWINGS

 
                                                 30 JUNE       30 JUNE        31 DEC 
                                                    2019          2018          2018 
                                             GBP MILLION   GBP MILLION   GBP MILLION 
 Non-current 
 Bank borrowings                                     103           167           134 
 Private placement notes                             493           475           493 
                                                     596           642           627 
                                            ------------  ------------ 
 Current 
 Bank overdrafts                                      42            11             9 
 Bank borrowings                                     113           145           115 
 Private placement notes                               -            19            20 
                                                     155           175           144 
                                            ------------  ------------ 
 
 Total borrowings                                    751           817           771 
                                            ------------  ------------  ------------ 
 
 Short-term deposits                                 (7)             -             - 
 Cash at bank and in hand                           (62)          (76)          (85) 
 Lease liability                                     102             -             - 
                                            ------------  ------------  ------------ 
 
 Net borrowings                                      784           741           686 
                                            ------------  ------------  ------------ 
 
 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 
                                                    2019          2018          2018 
                                             GBP MILLION   GBP MILLION   GBP MILLION 
 Within 1 year, or on demand                         155           175           144 
 Between 1 and 2 years                               198           137           104 
 Between 2 and 3 years                                34           164           157 
 Between 3 and 4 years                                 9             -            11 
 Between 4 and 5 years                               118             -             - 
 Greater than 5 years                                237           341           355 
                                            ------------  ------------  ------------ 
                                                     751           817           771 
------------------------------------------  ------------  ------------  ------------ 
 

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. Private placement notes are level 2. There are no derivative financial instruments at 30 June 2019. The valuation techniques employed are consistent with the 2018 Annual Report and Accounts.

12. DEMOBILISATION PROVISION

 
                                             30 JUNE       30 JUNE        31 DEC 
                                                2019          2018          2018 
                                         GBP MILLION   GBP MILLION   GBP MILLION 
 Balance at 1 January                             11            10            10 
 New provisions                                    4             2             4 
 Utilised                                        (2)           (1)           (4) 
 Exchange                                          -           (1)             1 
                                        ------------  ------------  ------------ 
 Balance at 30 June/31 December                   13            10            11 
                                        ------------  ------------  ------------ 
 
 Analysis of demobilisation provision 
 Current                                           4             8             6 
 Non-current                                       9             2             5 
                                        ------------  ------------  ------------ 
 Total                                            13            10            11 
--------------------------------------  ------------  ------------  ------------ 
 

13. CAPITAL COMMITMENTS

 
                                                   30 JUNE       30 JUNE        31 DEC 
                                                      2019          2018          2018 
                                               GBP MILLION   GBP MILLION   GBP MILLION 
 Contracted but not provided for (property, 
  plant and equipment)                                  49            64            19 
--------------------------------------------  ------------  ------------  ------------ 
 

14. RELATED PARTY TRANSACTIONS

Transactions between the Group 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.

15. 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.

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 2018 Annual Report and Accounts.

By order of the Board

 
 Chris Weston              Heath Drewett 
 Chief Executive Officer   Chief Financial Officer 
 
 30 July 2019 
 

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 2019 which comprises the condensed consolidated statements of profit or loss and other comprehensive income, condensed balance sheet, changes in equity and cash flows for the six-month period then ended, 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 2019 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

30 July 2019

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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