Preliminary Results 6th March 2008/media/Files/A/... · Trading Margin 21.7% 21.3% Second half...

Preliminary Results 6th March 2008

Philip RogersonChairman

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Aggreko plc 2007 Preliminary Results

• Very strong trading performance with good growth across all our businesses

• Revenue up 28.2% to £693.2m

• Trading profit up 54.8% to £134.2m (1)

• PBT up 51.0% at £125.5m (1)

• Earnings per share up 52.9% at 30.65 pence (1)

• Proposed final dividend increase of 20.0% to 5.02 pence

• Integration of GE Energy Rentals completed, and benefits well ahead of expectations at the time of acquisition

• We expect to make good progress in 2008; the trading performance in the first few weeks of the year, particularly in our International business, has further increased our confidence since the last trading Update in December 2007

(1) All figures are stated before amortisation of intangible assets (2007:£1.3m pre-tax, £0.9m post-tax; 2006: £nil) arising from business combinations.

Aggreko plc2007 Preliminary Results

Financial Review

Angus CockburnFinance Director

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2007(2) 2006(1) Movement

£m £m As reported Const curr.

Revenue 693.2 540.7 28.2% 35.1%

Trading profit 134.2 86.7 54.8% 66.1%

Operating profit 137.2 89.5 53.2% 64.4%

Net interest expense (11.7) (6.4) (81.7)%

Profit before tax 125.5 83.1 51.0%

Taxation (43.9) (29.9) (46.8)%

Profit after tax 81.6 53.2 53.4%

Dividends per share (pence)(3) 8.06 6.72 20.0%

Basic earnings per share (pence) 30.65 20.05 52.9%

(1) 2006 numbers are pre-exceptional items. There were no exceptional items in 2007.

(2) 2007 numbers are pre-amortisation of intangible assets arising from business combinations.

(3) Dividends per share are on a declared basis.

Note: Post amortisation 2007 PBT £124.2m, PAT £80.7m, EPS 30.33p

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Bridge Revenue£m

Trading Profit* £m

2006 540.7 86.7

Currency translation impact (27.7) (5.9)

2006 North America storm revenues(estimated)

(4.2) (2.1)

2006 pass-through fuel (43.4) (1.6)

2007 pass-through fuel 59.4 2.2

Underlying growth (includes impact of GE-ER acquisition)

168.4 54.9

2007 693.2 134.2

Headline growth 28.2% 54.8%

Constant Currency growth 35.1% 66.1%

Underlying growth in constant currency

*before amortisation of intangible assets arising from business combinations

36.2% 71.2%

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2007£m

2006Restated*

£mIntangible fixed assets/goodwill 48.0 49.3

Tangible fixed assets 444.6 353.0

Working capital 52.8 63.4

Retirement benefit obligation (8.1) (13.1)

Provisions for liabilities and charges (2.0) (6.2)

Derivative financial instruments (4.7) 1.7

Provisions for taxes (34.7) (16.7)

Net borrowings (202.6) (205.2)

NET ASSETS 293.3 226.2

Balance Sheet

* 2006 numbers have been restated to reflect the final fair value adjustments relating to the GEER acquisition

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Financial Position 2007 2006

Gearing 69% 91%

Net debt/EBITDA (1) 0.87 times 1.26 times

Interest cover (1)(2) 11.7 times 13.9 times

Cash flow from operating activities

Acquisition

£230.2m

£0.4m

£160.2m

£95.8m

Capital investment £180.6m £128.0m

Net borrowings £202.6m £205.2m

Effective tax rate 35.0% 36.0%

Dividend Cover (declared basis) (1)(2) 3.80 times 2.98 times

Return on average capital employed(1)(2) 27.0% 22.1%

(1) Pre 2006 exceptional items

(2) Before amortisation of intangible assets arising from business combinations

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Cash Flow from Operating Activities (£m) 2007 2006

Operating profit*

Exceptional items

137.2

-

89.5

(9.2)

Depreciation & amortisation* 93.1 73.3

Changes in working capital 2.7 (0.3)

Movements in provisions for liabilities and charges (4.2) 4.3

Other non-cash movements 1.4 2.6

Net cash inflow from operating activities 230.2 160.2


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Cash Flow Statement (£m) 2007 2006

Net cash inflow from operating activities 230.2 160.2

Net interest paid (11.3) (6.0)

Taxation paid (21.4) (26.2)

Acquisitions (0.4) (95.8)

Purchase of fixed assets (180.6) (128.0)

Proceeds from disposal of fixed assets 8.1 4.7

Dividends paid (19.2) (16.7)

Cash inflow/(outflow) in period 5.4 (107.8)

Issue of shares 1.8 0.5

Purchase of own shares held under trust (4.2) (2.6)

Exchange (0.4) 7.6

Movement in net debt in period 2.6 (102.3)

Aggreko plc2007 Preliminary Results

Operating Review

Rupert SoamesChief Executive

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Another strong performance

• Highlights:– GE-ER integration completed faster and at a lower cost than originally

anticipated– Underlying growth in trading profit 71%– £181m of capital expenditure (1.9x depreciation), including £172m of rental

fleet– Very strong operating cash performance– Exceptionally strong performance in IPP – unprecedented levels of utilisation

on a fleet significantly larger than last year– European recovery continues with revenues and profits well ahead of 2006– Beijing Olympics secured for 2008

• Lowlights– Very high levels of utilisation in International Power Projects– Lack of major storms and weakening economy in North America– Macro-economic uncertainty

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Full Year Segmental Analysis

REVENUE TRADING PROFIT*

2007£m

2006£m

Const Curr%

2007£m

2006£m

Const Curr%

Local Business 452.6 372.3 26.5% 82.6 60.4 45.2%

Trading Margin: 18.3% 16.2%

ROCE: 23.3% 21.7%

Int’nl Power Projects 181.2 125.0 57.4% 49.4 24.7 120.9%

excl pass-through fuel Trading Margin: 27.4% 19.8%

ROCE: 34.4% 21.9%

Pass-through fuel 59.4 43.4 2.2 1.6

Total 693.2 540.7 35.1% 134.2 86.7 66.1%

Trading Margin: 19.4% 16.0%

ROCE: 27.0% 22.1%


| 14Aggreko plc Local Business – North America


2007$m

2006$m

Change%

2007$m

2006$m

Change%

Full year 337.1 293.1 15.0% 73.0 62.3 17.2%Trading Margin 21.7% 21.3%

Second half 189.7 163.8 15.8% 50.1 40.3 24.3%Trading Margin 26.5% 24.6%

• Good performance in 07, particularly in H2 , without any help from storms

• Base business growth in most areas and sectors

• Macro-economic issues make outlook uncertain, but solid Q1 in prospect

• Some early signs of weakening in certain sectors and geographies

*before amortisation of intangible assets arising from business combinations.

| 15Aggreko plc Local Business – Europe


2007€m

2006€m

Change%

2007€m

2006€m

Change%



• Momentum continues from 2006 into 2007; good growth in both revenues and margins across multiple territories

• Growing strength in Power Projects

• Expect to make continued good progress in 2008


| 16Aggreko plc Local Business – Aggreko International


2007$m

2006$m

Change%

2007$m

20064m

Change%



• Excellent performance across all areas

• Middle East temperature control business almost doubled year on year

• Acquisition of GE-ER greatly strengthened our position in South America

• New service centre in Shanghai makes a promising start

• Demand remains robust


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Aggreko plc International Power Projects


2007$m

2006$m

Change%

2007$m

20064m

Change%



• Outstanding year: very high levels of utilisation, record levels of investment – fleet is c40% larger than a year ago ~2,000MW

• Strong growth across all areas especially Africa and Middle East

• Good progress in South America

• 105 MW of new projects won in H2

• Beijing Olympics secured for 2008

*before amortisation of intangible assets arising from business combinations.

International Power Projects gives better visibility

• International Power Projects, now 38% of Group trading profit, is bringing greater forward visibility

– “MW months order book” = number of MW months contracted / current MW month run-rate

• International Power Projects Order book MW months @ 1st January– 2005: 4,000 MW months ~ 9 months order book– 2006: 6,000 MW months ~ 9 months order book– 2007: 11,000 MW months ~12 months order book– 2008: 17,000 MW months ~14 months order book

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Update on markets and drivers of demand

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We regularly review positioning, markets and strategy

• We review products, markets and strategy every two years– 2003– 2005– 2007

• In 2007– Developed model for forecasting future supply/demand gap for power in

International Power Projects– Developed “Aggreko GDP” model for local business– Studied market for gas-powered generation– Studied emissions issues

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THE LOCAL BUSINESS

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The Local business – 71% of revenues, 62% of Trading Profit*

• Diverse by market– North America, Central & South America, Europe, Middle East, Asia,

Australasia

• Diverse by end-user– Manufacturing, Oil & Gas, Entertainment, Utilities, Construction, Telecoms,

Services

• Diverse by product– Power– Temperature Control Small / Medium / Large– Oil-free compressed air

• Diversity brings huge advantages, because– We can move between sectors– We can move between markets– We can move between products

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*before amortisation of intangible assets arising from business combinations and excluding fuel

From small to very large| 23

Economic activity drives demand

• Aggreko addresses just about every area of economic activity, but weighting might change from country to country

– More construction in Middle East, less financial services in UK, lots of refinery work in US, little in Australia

• Aggreko has developed with Oxford Economics an “Aggreko GDP”model, with GDP by sector by country weighted to our actual revenues

• Aggreko GDP generally grows slightly slower than total GDP in North America and Europe, but faster-growing in developing economies

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Aggreko-weighted nominal GDP by country 03-07| 25

INTENTIONALLY LEFT BLANK – COMMERCIALLY SENSITIVE

Local business revenues grow at a premium to GDP

• Growth in propensity to rent ……..– More sophisticated approach to Capital Expenditure– Supply-side improvements, greater willingness to outsource– Increased focus on Health & Safety; increased regulation amongst utilities– Increasing unreliability of installed equipment

• ……. magnified in fast-growing economies– Need for speed; need for reliability– Labour constraints– Desire to focus on core activities in times of rapid growth– Inability of utilities or manufacturers to supply permanent solutions fast

enough

• Aggreko’s experience over the last four years– At nominal GDP-growth of under 5%, our businesses tend to grow at 2-3pp

above GDP– At nominal GDP-growth of over 5%, our businesses grow much faster

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Local business revenues grow at a healthy premium to GDP| 27

Source: Oxford Economics, Aggreko management accounts; Note: includes GE-ER revenues in 07


So…the strategy for the Local business

Expand in economies with fast-growing Aggreko GDP

– Central & South America• Mexico, Brazil

– S&E Europe, Russia– India, China, S Africa– Asia, Australia– Middle East

In markets where GDP growth is likely to be slower:-

– Expand footprint and infill with spokes => increase market share & scale efficiency

– Go after under-exploited opportunities

• Power projects in North America

• Cooling Towers in Europe and AME

• TC / APS solutions in Europe, AME, Asia, South America

INTERNATIONAL POWER PROJECTS

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International Power Projects

• Demand for power is growing very rapidly in the developing world– The major forecasting institutions have consistently under-estimated the rate of growth

in demand

• There is a replacement cycle just beginning which means that about 25% of the current installed capacity will need to be replaced in the next 7-10 years

– Supply side for permanent power is very tight

• There has been under-investment in new and replacement power infrastructure

– Power utilisation factors are reaching critical points in many developing countries => more frequent and damaging power cuts

• In this scenario, Aggreko’s temporary power solution is compelling– Delivery in weeks– No need for capital raising – pay as you go– Can provide efficient “peaking” capacity as well as 24x7– Distributed generation means that additional power does not need additional

transmission– Send it away when you don’t need it – ie when permanent capacity can cope

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A lot of current capacity was installed in the 70’s and early 80’s

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Source: Platts

Boom Bust

~ 25% current capacity will be ready for replacement in next 7 years| 32

MW of installed capacity > 40 years old>1,000,000 MW by 2015

Source: Platts; assumes 40-year average life for a permanent power plant

Growth-rate in power consumption between poor and rich countries has sharply diverged

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Source: IEA, Oxford Economics

Population whose power consumption is growing faster than GDP is growing rapidly

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GDP per capita$ PPP

Del

ta +

/-of

gro

wth

in p

ower

con

sum

ptio

n vs

GD

P g

row

th

Source: Oxford Economics Analysis

Consumption growing faster than GDP: Pop. bn

2000 2006 2010e2.9 4.3 4.7

Consumption growing slower than GDP Pop. Bn

2000 2006 2010e3.0 2.1 2.0

Capacity shortfall is set to widen sharply| 35

Aggreko estimate that the shortfall between power supply and demand is likely to increase from about 50 GW in 2004 to between 500 GW and 1,000 GW by 2015

World GW shortfall estimates 2015 Demand CAGR556 3.00% 3.30% 3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 4.90%

3.10% (22) (194) (311) (461) (614) (772) (933) (1,098) (1,199) Net 3.25% 63 (109) (226) (376) (530) (687) (848) (1,013) (1,114)

Additional 3.50% 207 35 (82) (232) (385) (543) (704) (869) (970) Capacity 3.75% 355 183 66 (84) (238) (395) (556) (721) (822)

CAGR 4.00% 506 334 217 67 (86) (244) (405) (570) (671) 4.25% 661 489 372 222 69 (89) (250) (415) (516) 4.50% 820 648 531 381 227 70 (91) (256) (357) 4.75% 983 811 693 543 390 233 71 (94) (194) 5.00% 1,149 977 860 710 556 399 238 73 (28)

IEA Consumption OE DemandForecast Forecast

Latest modelling by Oxford Economics forecasts 5.1% CAGR in demand

South Africa is not alone in “load-shedding”| 36


SUMMARY & OUTLOOK

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Key points

• The consistent implementation of our strategy over the last five years has left us extremely well positioned

• In the Local business, we can achieve premium growth rates as a result of our presence in faster-growing markets

• Events confirm our analysis that imbalances between demand for and supply of power are leading to more frequent and damaging power shortages around the world

• The growing weight of International Power Projects in the business mix brings us greater visibility of revenues

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Some key influences on market growth

• Oil & commodities

• Lead-times for permanent power

• Competition

• GDP growth rates

• Emissions legislation

• Military activities

• Climate

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Long-term outlook

• Local business– In mature markets growth will average GDP +2-3% over the next

five years– But we believe Aggreko can achieve a premium

• Gain a little market share and geographic expansion• Investing in fast-growing economies

• International Power Projects– World-wide, market growth probably around 20% pa in terms of MW

on hire over the next five years– Aggreko growth rate will be market +/-5pp, but mix may change

• Diesel vs Gas, Military vs Utility vs Mining

• Our aim is to average double-digit revenue growth over the next five years– Assuming world economic growth is similar over the next five years

as it has been over the last five years

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Long-term outlook

• Forces for margin dilution– International Power Projects: customer mix, utilisation, rate of extensions on

contracts,– Investment in building Local businesses in new countries– North America

• Forces for margin accretion– International Power Projects becomes a larger proportion of our business– European margin recovery

• Capital investment– If revenue growth is double-digit, we would need ~ £1bn fleet capex over

next five years

• Cash resources– We can finance this rate of investment without recourse to shareholders

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Outlook for 2008

• Macro-economic uncertainty makes forming a clear view of the year more difficult than normal

• Any weakness in North America expected to be offset by strength elsewhere

• Solid trading in North America and Europe in first two months

• Demand remains extremely strong in Aggreko International

• Fleet capex will be around £235m (£172m in 07)

• We expect to make good progress in 2008; the trading performance in the first few weeks of the year, particularly in our International business, has further increased our confidence since the last trading Update in December 2007

Preliminary Results March 2008

Additional Information

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Revenue by Product (£m)REVENUE % OF REVENUE EXCL

PASS-THROUGH FUEL

2007 2006 Const Curr%

2007 2006 Changepp

Power 377.7 270.8 47.4% 59.6% 54.5% 5.1pp

Temperature Control 87.4 75.1 21.6% 13.8% 15.1% (1.3pp)

Oil-Free Air 23.5 23.0 9.0% 3.7% 4.6% (0.9pp)

Service Revenue 145.2 128.4 17.8% 22.9% 25.8% (2.9pp)

Revenue excl pass-through fuel

633.8 497.3 34.0% 100.0% 100.0%

Pass-through fuel 59.4 43.4

Total Revenue 693.2 540.7 35.1%

| 45Performance by management group: North America


2007$m

2006$m

Change%

2007$m

2006$m

Change%


Second half 189.7 163.8 15.8% 50.1 40.3 24.3%

Trading Margin 26.5% 24.6%


| 46Aggreko plc Local Business – Northern Europe


2007 2006 Change 2007 2006 Change

€m €m % €m €m %

Full year 118.2 96.9 21.9% 14.5 5.1 181.9%


Second Half 59.6 54.8 8.6% 8.6 4.9 77.6%



| 47Aggreko plc Local Business – Continental Europe


2007 2006 Change 2007 2006 Change

€m €m % €m €m %


Second Half 72.2 58.7 23.1% 15.2 10.4 46.3%Trading Margin 20.9% 17.8%


| 48Performance by management group: Aggreko International –excluding pass-through fuel


2007$m

2006$m

Change%

2007$m

2006$m

Change%


Second half 324.1 214.6 51.0% 81.9 43.4 88.4%



| 49Amortisation of intangible assets arising from business combinations

2007£k

Europe North 41

Europe Continental 85

Total Europe 126

North America 821

International Local 300

IPP 60

Total International 360

Group 1,307

Preliminary Results 6th March 2008/media/Files/A/... · Trading Margin 21.7% 21.3% Second half...

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