3rd Quarter Trading Update

16 November 2016

TRADING UPDATE

The trading update covers the period from 1 July 2016 to 15 November 2016. Unless otherwise stated, figures quoted in this statement are for the quarter ended 30 September 2016.

Chris Weston, Chief Executive, commented: "Whilst the environment over the last nine months has been challenging I am pleased with our strong order intake of over 1GW and with the progress that we are making on the implementation of our business priorities. We are working through the status of our contracts in Argentina and continue to navigate the tough conditions in upstream oil and gas in North America. We expect the 2016 full year results to be broadly in-line with current market expectations, with pre-exceptional profit before tax of around £225 million1. I am confident that our continued focus on delivering our priorities is creating a stronger and more resilient Group for the future."

Trading

Underlying2 revenue for the third quarter was 7% behind last year with reported revenue up 8%. All movements set out below are on an underlying basis.

Rental Solutions revenue in the third quarter was down 7% on last year. North America revenue was materially lower year on year driven by the ongoing weakness in upstream oil and gas with further pricing pressure and a reduction in gas volumes. Given this continued decline we are reviewing the carrying value of specialist equipment for the oil and gas market, notably our small gas generators. In our other key sector, Petrochemical and Refining, we have seen greater activity in recent months with a sequential improvement in seasonally adjusted revenues. Outside North America, the Rental Solutions business has performed well, with growth in both Europe and Australia Pacific. Our temperature control business has also performed well, up 5% in the quarter including the two acquisitions we have made in the last year.

Power Solutions Industrial revenue was up 3% excluding the impact from the European Games in the prior year comparatives, or 9% lower as reported. We continued to see growth in Russia and Africa and revenues were at similar levels in the Middle East, although this was offset by more difficult trading conditions in some of our other markets, particularly in Asia which has been negatively impacted by the decline in the shipping sector.

Power Solutions Utility revenue was 6% lower than last year driven, as expected, by the off-hire of 173MW of our gas-fuelled plants in Mozambique at the beginning of the year. However, the year to date order intake remains strong at 1,034MW, compared to 561MW at the 2015 third quarter trading update; the 143MW, 15 year contract we were awarded in Brazil does not go on hire until the second half of 2017. The third quarter off hire rate was 4% (Q3 2015: 10%) and we continue to expect the full year off-hire rate to be around 30% (2015: 24%).

The payment situation in Venezuela continues to be very challenging. However, discussions with both our customers are regular and constructive, and we have had success in getting some of our overdue invoices converted into a debt instrument. Overall we expect the Power Solutions Utility debtor book provision at the year-end to be similar to that at the half year.  

Update on Argentina Contracts

We have been operating in Argentina since 2008 and these are the last significant legacy contracts signed before the market dynamics changed in 2012. There are two types of contract in Argentina: standby3 and fixed. We have 270MW of standby contracts out of an estimated total of over 500MW in the market and 180MW of fixed contracts out of an estimated total of over 900MW in the market. The majority of these contracts are due to expire between now and June 2017 and 56MW of our standby volume has now off-hired.

Since our half year announcement there has been a public tender for 200MW of standby volume. Our understanding is that this is intended to replace all standby volume in the market. The contract is expected to run for a period of 13 months effective from 1 December 2016 and the customer is currently in the process of analysing economic and technical proposals. We made a competitive offer at a price level that represents a significant discount to the historic pricing and estimate that we could be eligible for the majority of the volume, however this is subject to the outcome of the evaluation.

Discussions with the customer about our 180MW of fixed contracts and their future requirements are ongoing. (See schedule on page 3 of this release for a breakdown of contract expiry dates).

Balance Sheet

We now expect fleet capital expenditure for the current year to be around £260 million (2015: £237 million). Net debt to EBITDA at 30 June 2016 was 1.2 times and our expectation is that the year-end position will be similar.4

We currently expect first half 2017 fleet capital expenditure to be around £150 million (2016: £91 million). The year on year increase is a combination of continued investment in the conversion of our diesel sets to the more fuel efficient G3+ on refurbishment, as well as investment in our next generation gas sets and our new HFO product, which commenced in the second half of this year; and the impact of a stronger dollar on the largely dollar denominated spend. We are still going through our budget process and retain the flexibility to adjust this spend level according to market conditions.

Business Priorities

We continue to make good progress on the business priorities that we announced last year.

· Customer: approved the implementation of a new CRM system and online web presence which will be launched in phases beginning this month.

· Technology: next generation gas and HFO products are in field trial on customer sites and we are developing prospects for our solar/diesel hybrid product.

· Efficiency: roll-out of our new site performance management tool has begun which will allow us to move to condition based maintenance and which we expect to generate savings in unplanned maintenance costs from the second half of 2017 onwards. We also continue to make good progress on procurement and expect to generate savings beyond the original £40 million from 2018. More broadly we continue to identify opportunities to improve the efficiency of our operations to adapt to current market conditions.

In line with our priorities, we announced a bolt-on acquisition on 9 August 2016 of DRYCO, a specialist in moisture control, drying, heating, and cooling applications within the shipping, manufacturing, food processing, construction, and industrial painting industries.

Full Year Outlook

We expect the 2016 full year results to be broadly in-line with current market expectations, with pre-exceptional profit before tax of around £225 million5.

Conference Call

A conference call will be held today for investors and analysts at 8.30am (GMT), hosted by Chris Weston, CEO and Carole Cran, CFO.

Dial in: + 44 20 3059 8125

Conference call name: Aggreko Q3 Trading Update

Password: Aggreko Trading Update

A recording of the call will be available on demand for 7 days.

Audio playback: + 44 121 260 4861

Reference: 4688432#

Argentina Contracts

Original contract volumes and expiry dates

· 56 MW stand-by off-hired October 2016

· 145 MW fixed sites October 2016

· 64 MW stand-by November 2016

· 10 MW fixed sites November 2016

· 50 MW stand-by December 2016

· 100 MW stand-by March 2017

· 25 MW fixed sites June 2017

Revenues

As disclosed in March 2016, our 2015 revenues in Argentina were £124m.

Future Reporting

The Group will report its 2016 full year results on 7 March 2017.

Enquiries

1 Note that this is based on the average exchange rates for the ten months to the end of October 2016 and October 2016 spot rate for the remainder of the year.

2“Underlying” is defined as: adjusted for currency movements and pass-through fuel revenue from Power Solutions, where we provide fuel to our contracts in Mozambique and Brazil on a pass-through basis.

3 There are 270MW of contracts that are referred to as “standby” which are despatched on a call off basis by the customer and 180MW of “fixed” contracts which are installed sites across 11 locations.

4 Note this may be impacted by foreign exchange translation given that around 80% of our debt is US dollar denominated.

5 Note that this is based on the average exchange rates for the ten months to the end of October 2016.