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
IR DKLFLKDFFBBZ
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July 30, 2019 02:00 ET (06:00 GMT)
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