Final Results

6 March 2014

2013 PERFORMANCE IN LINE WITH EXPECTATIONS

£200M RETURN OF CAPITAL TO SHAREHOLDERS

· Full year results in line with expectations;

o Underlying revenue up 4% on prior year; trading profit up 1%;

o Good underlying growth in trading profit in EMEA (+14%) and Americas (+20%); challenging conditions in APAC (-27%);

o Reported results reflect impact of lower revenues from Military and Japan, as well as no revenues from London Olympics (£60 million in 2012);

· Good Local business performance particularly in the Americas and EMEA;

o Underlying revenue up 7% and trading profit up 11%;

· Power Projects trading was subdued with order intake of 725MW in the year; underlying revenue similar to prior year; margins down 2pp;

· Good progress on low-cost power generation technology;

o Over 1,000MW of gas on rent and revenues up 30%;

o New HFO product well received in both the Local and Power Projects businesses with eight contracts signed;

· Strong cash generation resulted in a £230m reduction in net debt and net debt : EBITDA of 0.6 times;

· Substantial increase in returns to shareholders;

o £200m return of capital in June 2014, equivalent to 75p per share;

o Dividend up 10% with full year dividend of 26.30p per share;

· Business performing in line with our expectations: trading for the full year is expected to be at similar levels to 2013 on a constant currency basis;

· As previously announced, Rupert Soames to step down as Chief Executive after 11 successful years;

o Angus Cockburn, Group CFO appointed Interim CEO;

o Carole Cran, Group Director of Finance appointed Interim CFO.

Ken Hanna, Chairman, commented:

"After nine consecutive years of growth, 2013 proved to be a challenging year; despite this Aggreko delivered a creditable performance and good progress on many fronts. Our Local business delivered underlying revenue growth of 7% and margins strengthened; trading in our Power Projects business was, however, more challenging, with underlying revenue at similar levels to last year and margins a little lower. As a result of a disciplined approach to capital expenditure, we generated strong cashflow and net debt reduced by £230 million; I am therefore delighted that we can announce a £200 million return of cash to shareholders as well as a 10% increase in the dividend."

"The Group has made an encouraging start to 2014. The Local business has continued to show good growth with volumes on rent currently up 7% on the prior year. In Power Projects, year to date order intake is 64MW; in addition, we have recently signed a contract in Libya for 120MW which we would normally have taken into the order book. However, given the volatile situation in the country, we will not include it in order intake until we are certain we will be able to execute it. Assuming that we are able to proceed in Libya, we expect that order intake for the first quarter will be at a similar level to the final quarter of 2013. Off-hires in the first quarter are expected to run at a lower rate than has been the case for the last few years and our 150MW of diesel contracts in Japan have now been extended until December 2014. Whilst this is all welcome, customers in the Power Projects market continue to be cautious, and at this early stage in the year, so do we."

"Overall, since we last reported in December, the business has performed in line with our expectations. For the full year we expect trading profit to be similar to 2013 on a constant currency basis, as growth in the Local business is offset by weaker trading in Power Projects. However, the latest spot rates for some of our major trading currencies4 have moved against the average exchange rates of 2013; if these rates pertain for the rest of the year, we would see a marked translational impact on our 2014 reported results."

Regional performance metrics:

Future Reporting

The Group will report its Q1 IMS on Tuesday 15 April 2014.

Enquiries

Analyst Presentation

A presentation will be held for analysts by invitation today at 9am (GMT) at UBS, 1 Finsbury Avenue, London EC2M 2PP. A live web-cast and a copy of the slides will be available on our website from 8.45am at www.aggreko.com/investors.

CHAIRMAN'S STATEMENT

Introduction

After nine consecutive years of growth, during which Aggreko's trading profits increased at a compound rate of 28%, 2013 proved to be a challenging year. A number of factors contributed to this: weaker market conditions in our Power Projects business; comparatives with an exceptionally strong 2012, which included the London Olympics as well as peak revenues from Military work in Afghanistan and post-Fukushima Japan reconstruction; and weakening exchange rates. Against these headwinds, Aggreko delivered a creditable performance, with reported revenue at similar levels to 2012 and the decline in reported trading profit was contained to 8%. Reported profit before tax decreased by 8% to £333 million (2012: £360 million) and diluted earnings per share also decreased by 8% to 92.03 pence (2012: 100.40 pence). On an underlying1 basis (which excludes the impact of the London Olympics, the Poit Energia acquisition, pass-through fuel2 and currency movements) revenue increased 4% and trading profit increased 1%.

Our Local business had a strong year; excluding the 2012 Olympics, average megawatts of power were up 9% driven largely by our strategy of expanding in emerging markets. We opened a further eight service centres and offices and successfully completed the integration of the Poit acquisition in Brazil. Our strategy of driving closer links between Power Projects and the Local business has brought many benefits: by the end of the year we had over 260MW of mini-projects on rent; fleet was also transferred from Power Projects to the Local business, saving us capex; and from a product perspective, the Local business is now renting material volumes of gas-fuelled generators developed for the Power Projects business, and has won its first contracts for our new Heavy Fuel Oil engines.

We knew at the beginning of the year that trading would be difficult in Power Projects; the run-down in our contracts for the US Military and in Japan was compounded by a weaker macro-economic environment in emerging markets. But there were was good progress on many fronts: we launched our world-leading G3+ generators and the unique G3+ HFO; we ramped up our re-build and conversion capability to 10 units a week; and our power-plant in Mozambique, which is the largest of its type in the world, is delivering 229MW to Namibia, South Africa and Mozambique.

A feature of our business model and capital expenditure discipline is that in a period of weaker demand the business delivers very strong cash generation. Net cash inflow from operations increased by 26% to £603 million (2012: £479 million), which funded reduced total capital expenditure of £228 million (2012: £440 million). As a result, net debt of £363 million at 31 December 2013 was £230 million lower than the prior year.

Our financial position continues to be very strong with net debt to EBITDA (Earnings before Interest Tax Depreciation & Amortisation) of 0.6 times (2012: 0.9 times) at 31 December 2013, compared to our bank covenant of 3 times. Interest cover, measured on an EBITDA basis, is at 26 times (2012: 25 times), far ahead of our covenant of 4 times.

Dividend

The Board is recommending a 10% increase in the dividend for the year as a whole; this will comprise a final dividend of 17.19 pence per ordinary share which, when added to the interim dividend of 9.11 pence, gives a total for the year of 26.30 pence. At this level, the dividend would be covered 3.5 times (2012: 4.2 times), which is in line with our declared policy of reducing cover towards 3 times over time. Subject to approval by shareholders, the final dividend will be paid on 27 May 2014 to ordinary shareholders on the register as at 25 April 2014, with an ex-dividend date of 23 April 2014.

Additional return to shareholders

As set out in our Strategy Review, presented to investors in March 2013, we believe that under normal trading conditions an appropriate level of gearing for the business is around 1 times net debt to EBITDA. At this level the company retains flexibility to react to opportunities for fleet investment and "normal course" acquisitions, and also ensures that the business does not hold on to cash it does not need. This gearing level is a guide, but our policy is that, in the event that the gearing level materially falls below 1 times, we will consider supplementing the ordinary dividend with additional returns of value to shareholders.

With the strong cash generation seen during the year, our net debt at the end of 2013 has fallen to £363 million which is 0.6 times our 2013 EBITDA of £636 million; accordingly the Board believes that it is appropriate to supplement the ordinary dividend with an additional return to shareholders of approximately £200 million, which would result in adjusted net debt at the end of 2013 being £563 million or 0.9 times 2013 EBITDA. Subject to shareholder approval, each shareholder will receive a return of value of 75 pence in respect of each existing ordinary share they hold on 27 May 2014.

As was the case in our previous return of value in 2011, when shareholders received £149 million (55 pence per share), the return will be made by way of a B share scheme, which will give shareholders a choice as to when, and in what form, they receive their proceeds from the return of value. Notably, it should allow most individual UK taxpayers to receive the return in the form of a capital receipt, if they so wish. The B share scheme will be accompanied by a share consolidation designed to maintain comparability of share price and return per share of the ordinary shares before and after the creation of the B shares.

A circular will be sent to shareholders setting out the details of these proposals later in March.

Strategy

We review our strategy on a regular basis. Every five years we do a fundamental review of all our business segments with the results of these quinquennial reviews having been presented to investors at our full year results in 2004, 2008 and 2013. The 2013 review confirmed that the targets set out in our 2008 review had all been exceeded; that looking ahead there were numerous opportunities for growth in both the Local and Power Projects business; and that our product and service offering was highly competitive. A detailed description of our strategy is set out in the Strategy section of the Annual Report, but, in summary, we said that over the five years to 2018 we should be able to achieve, on average and subject to year-on-year variation, double-digit rates of growth in revenues3, with margins and returns on capital in excess of 20%. On the basis used for the Strategy Review, 2013 Group revenues were 6% higher than the prior year, trading margin was 22% and return on capital employed was 21%.

Board

On 28 February we announced that, after 11 very successful years as Group Chief Executive, Rupert Soames has tendered his resignation from the Group to enable him to take up a new role as CEO of Serco Group plc. He will leave Aggreko after the Annual General Meeting on the 24 April 2014.

The Board has commenced a process to identify a permanent successor and has appointed Angus Cockburn, currently Chief Financial Officer, as Interim CEO from April 24 and Carole Cran, currently Director of Group Finance, as Interim CFO.

Rupert has been an excellent CEO for Aggreko and the Group has achieved an enormous amount during his tenure. We are delighted that Angus has agreed to become interim CEO whilst we identify a permanent CEO from strong internal and external candidates. Angus has the support of an extremely capable interim CFO in Carole and an excellent management team, who will continue to drive the business forward. The Board would like to thank Rupert for the last 11 years and wish him well as he seeks fresh challenges elsewhere.

On 1 November 2013 we were delighted that Ian Marchant joined the Board as a Non-executive Director. Ian was until recently Chief Executive of SSE plc having previously been Finance Director of SSE and Finance Director of Southern Electric plc. Ian's extensive knowledge of the domestic and international energy markets, combined with his substantial finance background will bring further strength to Aggreko's board. Ian has also been appointed to the Audit Committee and the Ethics Committee.

David Hamill has decided to step down from the Board after this year's annual general meeting. David has served as a Non-executive director for seven years, most recently as Senior Independent Director. David's experience and insight have proved invaluable to the Board during his tenure, and he has made a marked contribution to Aggreko's development. We all wish him well for the future. I am pleased to be able to say that Russell King has agreed to succeed him as Senior Independent Director.

Employees

On behalf of the Board, I wish to express my sincere thanks to all our colleagues across the Group for their outstanding commitment and support in 2013.

Outlook for 2014

The Group has made an encouraging start to 2014. The Local business has continued to show good growth with volumes on rent currently up 7% on the prior year. In Power Projects, year to date order intake is 64MW; in addition, we have recently signed a contract in Libya for 120MW which we would normally have taken into the order book. However, given the volatile situation in the country, we will not include it in order intake until we are certain we will be able to execute it. Assuming that we are able to proceed in Libya, we expect that order intake for the first quarter will be at a similar level to the final quarter of 2013. Off-hires in the first quarter are expected to run at a lower rate than has been the case for the last few years and our 150MW of diesel contracts in Japan have now been extended until December 2014. Whilst this is all welcome, customers in the Power Projects market continue to be cautious, and at this early stage in the year, so do we.

Overall, since we last reported in December, the business has performed in line with our expectations. For the full year we expect trading profit to be similar to 2013 on a constant currency basis, as growth in the Local business is offset by weaker trading in Power Projects. However, the latest spot rates for some of our major trading currencies4 have moved against the average exchange rates of 2013; if these rates pertain for the rest of the year, we would see a marked translational impact on our 2014 reported results.

Ken Hanna

Chairman

6 March 2014

Review of Trading

Group Trading Performance

After nine consecutive years of growth, during which Aggreko's trading profits increased at a compound rate of 28%, 2013 proved to be a challenging year. A number of factors contributed to this: weaker market conditions in our Power Projects business; comparatives with an exceptionally strong 2012 which included the London Olympics as well as peak revenues from Japan and Military contracts in Afghanistan; and weakening exchange rates. Against these headwinds, Aggreko delivered a creditable performance.

In aggregate, Group revenue was flat on a reported basis, while trading profit1 was down 8%. On an underlying2 basis Group revenue increased by 4% while trading profit was up 1%. Our Local business, representing around 60% of revenue, delivered good underlying revenue growth of 7% and margins strengthened; trading in our Power Projects business was, however, more difficult, with underlying revenue at similar levels to the prior year and margins a little lower than the prior year.

To give added perspective, the table below shows the reported versus underlying growth rates for both 2012 and 2013.

A summarised Income Statement for 2013 is set out below.  

As reported, Group revenues at £1,573 million (2012: £1,583 million) were at similar levels to last year, while Group trading profit of £352 million (2012: £381 million) was 8% lower than 2012. This delivered a Group trading margin of 22% (2012: 24%). Underlying revenues and trading profit increased by 4% and 1% respectively. On the same basis trading margin decreased to 23% (2012: 24%).

Group profit before tax decreased by 8% to £333 million (2012: £360 million), and profit after tax decreased by 8% to £246 million (2012: £266 million). Diluted earnings per share decreased by 8% to 92.03 pence (2012: 100.40 pence). Return on capital employed (ROCE4) was 21% (2012: 24%) and the ratio of revenue (excluding pass-through fuel) to average gross rental assets* was 64% (2012: 71%). The reduction in trading margins, ROCE and the ratio of revenue to average gross rental assets was driven by the Power Projects business, mainly due to a lower level of diesel fleet utilisation and a reduction in Japan and Military revenues, partly offset by a movement in the provision for bad debts.

The movement in exchange rates in the year had the effect of decreasing reported revenue by £10 million and trading profit by £6 million. Pass-through fuel accounted for £42 million (2012: £40 million) of reported revenue of £1,573 million.

In response to the subdued trading conditions in our Power Projects business we reacted promptly to reduce the rate of capital expenditure in our rental fleet; we spent £205 million on new fleet in the period (2012: £415 million), equivalent to 80% of the depreciation charge (2012: 187% of the depreciation charge). As a consequence, net debt fell to £363 million at 31 December 2013, £230 million lower than the prior year.

Regional Trading Performance

The performance of each of our regional businesses is described below.

Regional Trading Performance as reported in £ million

The performance of each of these regions is described below:

Americas

(1) Underlying excludes currency and the Poit Energia acquisition in April 2012.

Our Americas business delivered a strong performance with underlying revenue increasing by 8% and trading profit by 20%. Reported and underlying trading margin improved from 22% to 23%.

The Local business in the Americas performed well, and had the benefit of the full-year impact of the Poit acquisition in Brazil. Reported revenue increased by 11%, and underlying revenue, which excludes the Poit impact and currency, increased by 10%. Within the underlying number, rental revenue increased by 8% and services revenue increased by 14%; margins improved which was particularly pleasing given the faster growth of services revenues (which typically have significantly lower margins than rental revenues). Rental revenue increased across all our products: power increased by 9%, temperature control increased by 8% and oil-free compressed air increased by 7%. On a sector basis, demand has been strong in the upstream oil & gas as well as in petrochemical & refining in both North and Latin America; contracting and construction, although a small part of our revenues, also grew strongly. On a geographical basis we saw good growth in the majority of areas, although towards the end of the year we saw growth rates taper off in Brazil as a weaker economic environment led to some projects being delayed.

The integration of the Poit Energia business was completed in the first quarter and the combined business in Latin America has performed well, growing its revenues at around 20% on a pro forma basis. We are delighted to have been chosen as the supplier of temporary power for broadcast and critical services for the 2014 FIFA World Cup in Brazil.

Power Projects revenue, on an underlying basis, was up 4% on last year, despite a £10 million decline in our Military revenues; the rate of off-hires in Military revenues picked up pace in the second half as troops withdrew from Afghanistan and camps were closed; at the end of December MW on hire to the Military was down about one third year-on-year, in line with our expectations. On a more positive note, we were awarded our first large order for our new HFO engine for 56MW in the Caribbean and towards the end of 2013 we were awarded an 80MW diesel contract in Panama.

Europe, Middle East and Africa (EMEA)

(1) Underlying excludes currency, pass-through fuel and London 2012 Olympics.

Our EMEA business also had a good year with underlying revenue increasing by 9% and trading profit by 14%. Reported trading margins dropped from 22% to 20%; on an underlying basis trading margin increased from 19% to 20%. The major factor in the difference between reported and underlying growth rates is the London Olympics, which generated around £60 million of revenue in 2012 in the EMEA Local business.

Revenue in our EMEA Local business was up 4% on last year on an underlying basis, and, pleasingly, rental revenue increased by 7% while services revenue was down 2%. Within rental revenue, power increased by 8% and temperature control increased by 2%. We also secured two small HFO contracts in the Middle East. We are delighted to have been chosen as the supplier of temporary power for the Glasgow 2014 Commonwealth Games. On a sector basis there was good growth in oil & gas and services, but a decline in construction and utilities. In geographic terms we saw rental revenue growth in the UK, Germany, Norway, Russia and in the Middle East particularly in Iraq, Qatar and Saudi Arabia. Our new African local businesses all recorded revenue growth but we experienced continuing weak demand in a number of other countries in Continental Europe.

EMEA Power Projects had a strong year, notably in Africa, and particularly with our gas-fired technology, which is delivering electricity to customers at a cost which is comparable to many permanent power plants and far below that which is achievable with diesel-fuelled generation. Underlying revenues were up 17% on last year as we benefited from our 229MW gas-fired power plant in Mozambique, which is now delivering power to three countries (Namibia, South Africa and Mozambique) across the Southern African power grid; the first 107 MW of this plant went online in July 2012, so in 2013 we had the benefit of revenues for the full year. And in 2013 we installed an additional 122MW in Mozambique, which went online in June 2013, as did an additional 100MW in Cote d'Ivoire, which takes our capacity there to 200MW. We also signed diesel contracts for 120MW in Tunisia and 50MW in Guinea. These gains were partly offset by off-hires in Angola and Kenya.

Asia, Pacific and Australia (APAC)

(1) Underlying excludes currency.

Our APAC business had a challenging year with underlying revenue declining by 13% and trading profit declining by 27%. Reported and underlying trading margin declined from 35% to 30%.

APAC operates Local businesses in Australia, New Zealand, Singapore, China and India; the Australian business also executes "mini projects" in the Pacific Islands and Papua New Guinea. Around 70% of APAC Local revenue is generated by the Australian business, which delivered strong growth in the first half, and then went backwards in the second half as reduced levels of investment in the mining sector impacted demand. Across the year, Local business revenue increased on an underlying basis by 2%, within which rental revenue increased by 3% and services revenue was up 1%. Power revenue was flat while temperature control increased by 34% driven by emergency cooling jobs in Australia.

Elsewhere in the APAC Local business, India delivered good growth in its day-to-day transaction business, but was impacted in the second half by a deteriorating economic backdrop. We continue to struggle to build a business of scale in China and have decided to consolidate our operations into Shanghai and Dalian whilst we work out the best way to build a solid rental business in the country.

Power Projects in APAC had a very difficult year. As tends to be the case when sophisticated economies suffer power shortages, utilities in Japan were quick to re-build capacity after the Fukushima disaster, and most of the temporary power which came into the country in 2011 was gone by the end of 2012. Our largest contract in terms of value in Japan, for 100MW of gas-fired generation, finished at the end of the first quarter of 2013. Our other two contracted sites totalling 148MW of diesel were extended through the whole of 2013, and have recently been extended through to December 2014; however, in 2013 there was a significant year-on-year revenue drop in Japan. At the same time, in Indonesia, a combination of permanent power generation replacing temporary power on some of our sites, as well as intense competition for new and extension contracts, resulted in a sharp year-on-year drop in revenues. Combined, the impact of reduced revenues and margins in Japan and Indonesia had a material impact on APAC's trading result in 2013.

Power Projects Business Line

(1) Underlying excludes currency and pass-through fuel.

The performance of our Power Projects business as a whole was mixed. In terms of trading, it was a challenging year, but in terms of the strategic development of the business, we made a lot of progress. It was also mixed by geography; Africa was very strong and South and Central America made encouraging progress, but our Military and Asian businesses were both well down.

The decline in Military and Japanese revenues was inevitable, and, because of their above-average margins, this has had a disproportionate impact on profits. On top of this a number of competitors who were suffering from low rates of utilisation, focused on one of our key markets, Indonesia, to get excess capacity on rent, and rates on new work and extensions in that market dropped markedly.

In this environment we were pleased to hold Power Projects revenues at similar levels to last year and trading profits to a decline of 5%. Trading margin decreased to 31% (2012: 33%). There are a number of moving parts behind this margin movement; the completion of contracts in Japan and Military and a number of cost-lines that went against us, notably a £18 million increase in fleet depreciation due to the high levels of fleet investment in 2012, but we were able to release around £4 million of bad debt provision as we received payments against some of our overdue debt; this compares with 2012 when we charged £25 million.

Order intake for the year was 725MW (2012: 1,029MW) which includes the 122MW cross-border power project supplying power to Namibia and Mozambique, a summer peak-shaving contract in Tunisia of over 100MW, 56MW in the Caribbean (our first major HFO contract) and a 50MW contract in Guinea. In the second half we signed a six-month 80MW diesel contract in Panama, under which we will provide power as a licenced generator to the Panamanian wholesale electricity market; this is, we believe, the first time that a temporary power supplier has entered a country's wholesale electricity market competing with permanent power generators. At the end of the year, our order book was over 25,000MW months, the equivalent of 10 months' (2012: 12 months) revenue at the current run-rate.

We have made excellent progress on the development of our product range. Our product strategy has a single objective: reducing the cost to our customers of each kilowatt-hour we generate. We do this by focusing on the three main costs of generating temporary power: fuel, capital cost, and operating costs. During the year we launched our new super-efficient G3+ generator, which offers world-leading fuel efficiency; our new G3+ HFO, allows customers to run HFO, a fuel which is typically 30% cheaper than diesel. We now have 35% of our Power Projects revenue being generated by gas-fuelled plant at costs per kilowatt hour that are competitive with many of our customers' permanent power plants.

Local Business Line

(1) Underlying excludes currency, Poit Energia acquisition and London 2012 Olympics.

Our Local business delivered a strong performance with underlying revenue increasing by 7%. Rental revenue increased by 7% and services revenue increased by 6%. Within rental, power increased 7%, temperature control increased 8% and oil-free air increased 7% with trading profit increased 11%. Reported trading margin dropped from 19% to 18%, with underlying trading margin having increased from 17% to 18%. The most significant difference between the reported and the underlying growth rates relates to the London Olympics, which generated around £60 million of revenue in 2012.

The strong underlying growth in both revenues and margins was driven by a number of factors. First, our strategy of expanding our Local business in emerging markets has delivered increased volumes; excluding the Olympics, average megawatts of power on rent were 9% up year-on-year, and within these emerging markets grew well above the average. Secondly, our strategy of sharing technology between our power projects and local businesses has enabled us to introduce gas-fuelled power to Local markets, and this is driving growth in both volumes and margins; average gas megawatts on hire in the Local business increased by 40% year-on-year. We have also won several contracts for our new HFO solution from industrial customers. The other driver of underlying volume and trading profit growth has been our strategy of using the Local business to execute "mini-projects"; these we define as power contracts of 12MW or over, and of a duration of 3 months or longer, and which, were they in a territory where we did not have a Local business, would be accounted for within the Power Projects business. As our Local business grows in scale and capability in emerging markets, these mini-projects are a fertile source of growth; and at the end of the year, we had over 260MW on rent in mini-projects.

Outlook for 2014

The Group has made an encouraging start to 2014. The Local business has continued to show good growth with volumes on rent currently up 7% on the prior year. In Power Projects, year to date order intake is 64MW; in addition, we have recently signed a contract in Libya for 120MW which we would normally have taken into the order book. However, given the volatile situation in the country, we will not include it in order intake until we are certain we will be able to execute it. Assuming that we are able to proceed in Libya, we expect that order intake for the first quarter will be at a similar level to the final quarter of 2013. Off-hires in the first quarter are expected to run at a lower rate than has been the case for the last few years and our 150MW of diesel contracts in Japan have now been extended until December 2014. Whilst this is all welcome, customers in the Power Projects market continue to be cautious, and at this early stage in the year, so do we.

Overall, since we last reported in December, the business has performed in line with our expectations. For the full year we expect trading profit to be similar to 2013 on a constant currency basis, as growth in the Local business is offset by weaker trading in Power Projects. However, the latest spot rates for some of our major trading currencies5have moved against the average exchange rates of 2013; if these rates pertain for the rest of the year, we would see a marked translational impact on our 2014 reported results.

Currency Translation

The movement of exchange rates during the year had the effect of reducing revenue and trading profit by £10 million and £6 million respectively. Currency translation also gave rise to an £89 million decrease in the value of net assets as a result of year-on-year movements in the exchange rates. Set out in the table below are the principal exchange rates which affect the Group's profits and net assets.

Reconciliation of underlying growth to reported growth 

The table below reconciles the reported and underlying revenue and trading profit growth rates:

Note 1: The values for Poit Energia in the 2011/12 table above were based on nine months (ie from date of acquisition on 16 April 2012 to 31 December 2012) whereas the values in the 2012/13 table are based on three months (ie from 1 January 2013 to 16 April 2013).

The definition and calculation of Non GAAP measures section in the Annual Report defines underlying in more detail.

Interest

The net interest charge at £25 million was similar to last year. Although net debt decreased by £230 million year-on-year, average net debt was at a similar level in 2013 as 2012. Interest cover*, measured against rolling 12-month EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation), remains very strong at 26 times (2012: 25 times) relative to the financial covenant attached to our borrowing facilities that EBITDA should be no less than 4 times interest.

Taxation

Tax Strategy

Our tax strategy is to manage all taxes, both direct and indirect, such that we pay the appropriate amount of tax in each country where we operate, whilst ensuring that we respect the applicable tax legislation and to utilise, where appropriate, any legislative reliefs available.

This tax strategy is aligned with the Group's business strategy and is reviewed and endorsed by the Board. In addition, the profile of our tax risk is reviewed by the Board on a regular basis. Responsibility for tax strategy and risk management sits with our Chief Financial Officer. Day to day delivery of the strategy is executed by a global team of tax professionals who are regionally aligned with our business and who are based in a variety of locations where they work closely with the Aggreko operations, local tax authorities and local advisors.

We recognise the importance of the tax we pay to the economic development of the countries in which we do business.

Given the varied nature of the tax environment in many of the 100 countries in which we operate, local compliance and governance is a key area of focus for Aggreko. This is particularly so for our Power Projects business, where we will generally only be in a country for a relatively short period of time. The complexity and often uncertain nature of tax rules in certain countries means we seek to manage our tax affairs proactively by engaging with local tax authorities and advisors as appropriate, to agree and confirm our tax positions in a timely manner.

Total Taxes

In 2013, Aggreko's worldwide operations resulted in direct and indirect taxes of £173 million (2012: £187 million) being paid to tax authorities. This amount represents all corporate taxes paid on operations, payroll taxes paid and collected, import duties, sales taxes and other local taxes.

Overall our indirect tax payments were largely flat with £105 million paid in 2013 (2012: £104 million). Within this, payroll taxes collected were £7 million lower relating to the value of the 2010 LTIP vesting when compared to the 2009 LTIP. Payroll taxes paid increased by £5 million reflecting the increased headcount across the Group and increased rates of personal tax in certain jurisdictions. Finally, the £7 million increase in sales tax is driven by Brazil, in part due to the full year impact of the acquisition of Poit Energia.

Tax Charge

The Group's effective corporation tax rate for the year was 26% (2012: 26%) based on a tax charge of £87 million (2012: £94 million) on profit before taxation of £333 million (2012: £360 million). 

Further information, including a detailed tax reconciliation of the current year tax charge, is shown at Note 9 in the Annual Report and Accounts.

Reconciliation of Income statement tax charge and cash tax paid

The Group's total cash taxes borne and collected was £173 million which differs from the tax charge reported in the income statement of £87 million. The income statement tax charge figure comprises corporate taxes only. These two figures are reconciled below:

*Other includes refunds and payments in respect of prior years and timing differences where payment for the 2013 tax liability is not due until future periods.

Dividends

If the proposed final dividend of 17.19 pence is approved by shareholders, it will result in a full year dividend of 26.30 pence (2012: 23.91 pence) per ordinary share, giving dividend cover (Basic EPS divided by full year declared dividend) of 3.5 times (2012: 4.2 times) and is consistent with our strategy of reducing our dividend cover towards 3 times over time.

Cashflow

The net cash inflow from operations during the year totalled £603 million (2012: £479 million). This funded total capital expenditure of £228 million which was down £212 million on the prior year. Of the £228 million, £205 million was spent on fleet which was split evenly between the Power Projects and the Local businesses. Within Power Projects, a substantial portion of the spend was on converting over 300 of our diesel sets to our new G3+/HFO engine which we launched at the time of our March 2013 strategy review. Net debt at 31 December 2013 was £230 million lower than the previous year mainly driven by the lower capital expenditure.  As a result of the decrease in net debt, gearing* (net debt as a percentage of equity) at 31 December 2013 decreased to 32% from 57% at 31 December 2012 while net debt to EBITDA* decreased to 0.6 times (2012: 0.9 times).

There was a £25 million working capital outflow in the year (2012: £164 million outflow) mainly driven by an increase in accounts receivable balances. The increase in accounts receivable balances is mainly driven by our Power Projects business where debtor days increased to 95 days (2012: 90 days). This increase reflects the reduced volume of Japanese and Military contracts where customers tended to pay faster than the average Power Projects debtor. Overall, the Power Projects bad debt provision at 31 December 2013 of £49 million was £4 million lower than at 31 December 2012 reflecting improved cash collections in the second half of the year.

Net Operating Assets

The net operating assets of the Group (including goodwill) at 31 December 2013 totalled £1,598 million, £110 million lower than 2012. The main components of net operating assets are:-

A key measure of Aggreko's performance is the return (expressed as operating profit) generated from average net operating assets (ROCE*). The average net operating assets in 2013 were £1,694 million, up 7% on 2012. In 2013, the ROCE decreased to 21% compared with 24% in 2012. This decrease was driven by the Power Projects business, mainly due to a lower level of diesel fleet utilisation and a reduction in Japan and Military revenues partially offset by a movement in the provision for bad debts.

Property, plant and equipment

Rental fleet accounts for £1,082 million, or around 93%, of the net book value of property, plant and equipment used in our business; the great majority of equipment in the rental fleet is depreciated on a straight-line basis to a residual value of zero over 8 years, although we do have some classes of non-power fleet which we depreciate over 10 years. The annual fleet depreciation charge of £257 million (2012: £222 million) relates to the estimated service lives allocated to each class of fleet asset. Asset lives are reviewed regularly and changed if necessary to reflect current thinking on their remaining lives in light of technological change, prospective economic utilisation and the physical condition of the assets.

Shareholders' Equity

Shareholders' equity increased by £95 million to £1,140 million, represented by the net assets of the Group of £1,503 million before net debt of £363 million. The movements in shareholders' equity are analysed in the table below:

The £246 million of post-tax profit in the year represents a return of 22% on shareholders' equity (2012: 26%) which compares to a Group weighted average cost of capital of 9%.

Pensions

Pension arrangements for our employees vary depending on best practice and regulation in each country. The Group operates a defined benefit scheme for UK employees, which was closed to new employees joining the Group after 1 April 2002; most of the other schemes in operation around the world are varieties of defined contribution schemes.

Under IAS 19: 'Employee Benefits', Aggreko has recognised a pre-tax pension deficit of £6 million at 31 December 2013 (2012: £4 million) which is determined using actuarial assumptions. The £2 million increase in the pension deficit is mainly driven by an increase in expectations for future inflation which has increased the defined benefit liability of the Scheme. This has been partially offset by the additional contribution of £2.5 million paid by the Company in January 2013 in line with the Recovery Plan agreed for the Scheme following the actuarial valuation at 31 December 2011.

The main assumptions used in the IAS 19 valuation for the previous two years are shown in Note 27 of the Annual Report & Accounts. The sensitivities regarding these assumptions are shown in the table below.

Capital Structure & Dividend Policy

The intention of Aggreko's strategy is to deliver long-term value to its shareholders whilst maintaining a balance sheet structure that safeguards the Group's financial position through economic cycles. From an ordinary dividend perspective our objective is to provide a progressive through cycle dividend recognising the inherent lack of visibility and potential volatility of our business.

Given the proven ability of the business to fund organic growth from operating cashflows, 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 financial gearing. Given the above considerations, we believe that a Net Debt to EBITDA ratio of around 1 times is appropriate for the Group over the longer term. Absent a major acquisition, or the requirement for an unusual level of fleet investment, this level gives us the ability to deal with the normal fluctuations in capital expenditure (which can be quite sharp: +/- £200 million in a year) and working capital, and is well within our covenants to lenders which stand at 3 times Net Debt to EBITDA.

At the end of 2013, Net Debt to EBITDA had decreased to 0.6 times compared to 31 December 2012 when the ratio of Net Debt to EBITDA was 0.9 times.

With respect to our ordinary dividend policy, our policy is to move dividend cover from the 4 times and greater levels of previous years towards a level of around 3 times over time. The proposed dividend increase of 10% takes us towards that target, and at the end of 2013 dividend cover was 3.5 times. 

Additional return to shareholders

With the strong cash generation seen during the year, our net debt at the end of 2013 has fallen to £363 million which is 0.6 times our 2013 EBITDA of £636 million; accordingly the Board believes that it is appropriate to supplement the ordinary dividend with an additional return to shareholders of approximately £200 million, which would result in adjusted net debt at the end of 2013 being £563 million or 0.9 times 2013 EBITDA. Subject to shareholder approval, each shareholder will receive a return of value of 75 pence in respect of each existing ordinary share they hold on 27 May 2014.

As was the case in our previous return of value in 2011, when shareholders received £149 million (55 pence per share), the return will be made by way of a B share scheme, which will give shareholders a choice as to when, and in what form, they receive their proceeds from the return of value. Notably, it should allow most individual UK taxpayers to receive the return in the form of a capital receipt, if they so wish. The B share scheme will be accompanied by a share consolidation designed to maintain comparability of share price and return per share of the ordinary shares before and after the creation of the B shares.

A circular will be sent to shareholders setting out the details of these proposals later in March.

Treasury

The Group's operations expose it to a variety of financial risks that include liquidity, the effects of changes in foreign currency exchange rates, interest rates, and credit risk. The Group has a centralised treasury operation whose primary role is to ensure that adequate liquidity is available to meet the Group's funding requirements as they arise, and that financial risk arising from the Group's underlying operations is effectively identified and managed.

The treasury operations are conducted in accordance with policies and procedures approved by the Board and are reviewed annually. Financial instruments are only executed for hedging purposes, and transactions that are speculative in nature are expressly forbidden. Monthly reports are provided to senior management and treasury operations are subject to periodic internal and external review.

Liquidity and funding

The Group maintains sufficient facilities to meet its normal funding requirements over the medium term. At 31 December 2013, these facilities totalled £846 million in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement notes. During the year committed bank facilities of £332 million were arranged. The financial covenants attached to these facilities are that EBITDA should be no less than 4 times interest and net debt should be no more than 3 times EBITDA; at 31 December 2013, these stood at 26 times and 0.6 times respectively. The Group does not consider that these covenants are restrictive to its operations. The maturity profile of the borrowings is detailed in Note 17 in the Annual Report & Accounts.

Net debt amounted to £363 million at 31 December 2013 (2012: £593 million) and, at that date, un-drawn committed facilities were £489 million.

The Group's policy is to manage the exposure to interest rates by ensuring an appropriate balance of fixed and floating rates. At 31 December 2013, £287 million of the net debt of £363 million was at fixed rates of interest resulting in a fixed to floating rate net debt ratio of 79:21 (2012: 52:48).

The Group is subject to currency exposure on the translation into Sterling of its net investments in overseas subsidiaries. In order to reduce the currency risk arising, the Group uses direct borrowings in the same currency as those investments. Group borrowings are predominantly drawn down in the principal currencies used by the Group, namely US Dollar, Canadian dollar, Euro and Brazilian Reals.

The Group manages its currency flows to minimise foreign exchange risk arising on transactions denominated in foreign currencies and uses forward contracts and forward currency options, where appropriate, in order to hedge net currency flows.

Cash deposits and other financial instruments give rise to credit risk on amounts due from counterparties. The Group manages this risk by limiting the aggregate amounts and their duration depending on external credit ratings of the relevant counterparty. In the case of financial assets exposed to credit risk, the carrying amount in the balance sheet, net of any applicable provision for loss, represents the amount exposed to credit risk.

Insurance

The Group operates a policy of buying cover against the material risks which the business faces, where it is possible to purchase such cover on reasonable terms. Where this is not possible, or where the risks would not have a material impact on the Group as a whole, we self-insure.

* The definition and calculation of Non GAAP measures in the Annual Report explains this in more detail.

Risks

In the day-to-day operations of the Group we face many risks and uncertainties. Our job is to mitigate and manage these risks, and the Board has developed a formal risk management process to support this. Set out below are the principal risks and uncertainties which we believe could adversely affect us, potentially impacting our employees, operations, revenue, profits, cash flows or assets. This list is not exhaustive - there are many things that could go wrong in an operation as large and geographically diverse as ours - and the list might change as something that seems immaterial today assumes greater importance tomorrow.

The foundation upon which the Group's risk management process is built is the Group Risk Register. This is compiled based on input from the businesses across the world as well as a top-down review by members of the Executive Committee and Board. This forms the basis of the mitigation strategies put in place for all the key identified risks. In the section below, we have picked from the Risk Register those items we currently consider to be our most important risks. The order in which they are presented is not significant.

Economic conditions

There is a link in our business between demand for our services and levels of economic activity; this link is particularly evident in the Local business albeit in the last two years we have also seen signs of lower levels of economic activity impacting our Power Projects business. In the Local business if GDP growth goes negative, demand for rental equipment is likely to shrink even faster and this impact is likely to be multiplied by pricing weakness at times of low demand. We also have some businesses which, by their nature, are exposed to particular sectors - for instance, a material proportion of our North American business comes from upstream and downstream oil & gas, our Australian business is highly dependent on mining activity and our Singapore business has a high proportion of shipping activity.

We are sometimes asked whether the drivers of growth in Power Projects are "cyclical" or "structural". The answer is that one is affected by the other; the immediate force of the structural drivers is affected by the economic environment. In the long-term, the drivers of growth - increasing demand for electricity and inadequate investment in supply - are structural. But the decision to spend hundreds of millions of pounds on sustaining electricity supply using temporary solutions is in most cases a political one. The budgets of utilities in developing countries are generally controlled by government, and money spent on temporary power is money that has to be diverted from elsewhere; the easiest, simplest thing to do is to just put up with power cuts and not spend the money. Only when the pressure becomes intolerable will the coffers be opened. Intolerable pressures include demands from industry and commerce desperate for power; from voters angry about lack of power.

The balance of pressure and availability of money are both affected by economic circumstance and sentiment. If economic growth is strong and tax revenues are growing; if industrial activity is expanding, and deficits under control; if debt is cheap, then customers will be more inclined to spend money on temporary power. This was generally the case in the decade up to 2012. In the last two years, economies in emerging markets have seen lower rates of growth and greater uncertainty, and accordingly the willingness and ability of governments to spend money on temporary power has been tempered.

We mitigate this risk in a number of ways. First, having a global footprint and a fleet that can work almost anywhere is a great advantage because we can move rental fleet between businesses; for example, in 2013, we satisfied the Local business' requirements for large generators out of our Power Projects business, where we currently have some excess capacity. Secondly, we try to ensure that, as they grow, our businesses build a customer-base which is as diverse as possible, to minimise exposure to any single sector or geography. In Brazil we continue to invest in temperature control to reduce our sectoral exposure to offshore oil & gas; while in Russia we are expanding to enable us to develop under-penetrated sectors such as mining. Thirdly, we can quickly reduce capital expenditure which was demonstrated in 2013 by our new fleet investment being £210 million lower than in 2012. Given the large depreciation element in the business' cost base (£273 million in 2013), reducing capital expenditure to a level close to depreciation makes the business very cash generative which, in turn, reduces debt and interest cost.

Another economic factor to consider is the price of fuel, which is usually the single biggest element in the cost of running a generator. Over the last few years, the price of fuel has been fairly stable, with the Brent Blend price1 at around $110. We would not say that the oil price staying persistently high has had a direct impact on people's willingness to rent; people rent generators because they need power, not because it is a cheap way of generating electricity, however, it is most likely a contributing factor when combined with lower levels of economic activity and currency devaluation in certain markets. The overall impact of the oil-price on our business is that, at times when it has been high it has produced huge wealth in oil-producing countries which has been re-cycled into infrastructure investment and this, in turn, stimulated demand for our services. If the oil-price is persistently low - by which we mean under $50 per barrel - we would expect to see an adverse impact on our business in a number of oil-producing countries.

Exchange rate fluctuations can have a dual impact on our performance. The first impact of exchange is a direct one when we translate into our reporting currency, Sterling, as the Group's asset values, earnings and cash flows are influenced by a wide variety of currencies owing to the geographic diversity of the Group's customers and areas of operation. Around two thirds of the Group's revenue and costs are denominated in US Dollars; the next largest currency exposures are the Euro and Australian Dollar, both of which account for around 6% and the Brazilian Real which accounts for around 5% of revenue and costs respectively. The relative value of currencies can fluctuate widely and could have a material impact on the Group's asset values, costs, earnings, debt levels and cash flows, expressed in Sterling. We manage the transactional exchange impact through hedging and denomination of borrowings but we do not try and manage translational exchange impact. In terms of translational exchange, a 5 percentage point movement in the Sterling/Dollar exchange rate would have had an impact in 2013 of around £49 million on revenue and £12 million on trading profit. With respect to our other major currencies a 5 percentage point movement would give rise to a translational impact in the region of £18 million on revenue and £5 million on trading profit. The second impact of exchange rate fluctuations is indirect and mainly impacts our Power Projects business where we tend to transact in US Dollars as the cost base of the Power Projects business is mainly in US Dollars, so we have a natural hedge against exchange rate movements. That said, most of our customers will be collecting their revenues in local currency and in countries where in the last year we have seen significant devaluation against the US Dollar, this will be impacting the affordability of temporary power.

Political Risk

Power Projects

This section should be read in conjunction with the subsequent section on failure to collect payments. The Group operates in around 100 countries, many in Africa, Asia and Latin America. In some jurisdictions there are significant risks of political instability which can result in civil unrest, equipment seizure, renegotiation or nullification of existing agreements, changes in laws, taxation policies or currency restrictions. Any of these could have a damaging effect on the profitability of our operations in a country.

Prior to undertaking a contract in a new country, we carry out a risk assessment process to consider risks to our people, to assets and to payments. By far the greatest exposure to political risk is in the Power Projects business. In all cases, the safety of our employees is always our first concern, and if the level of risk is considered unacceptable we will decline to participate in any contract; where there are potential risks, we develop detailed security plans to ensure the safety of our employees. In terms of asset risks, the Group uses a wide range of tools and techniques to manage risk, including insurances, bonds, guarantees and cash advances. Power Projects' financial exposures are monitored by the Board on a monthly basis and action plans to address assets, payments or tax exposures are reviewed.

Generally, we find that Governments are keen to behave in a fair way to suppliers of critical infrastructure, such as Aggreko. In the last five years, we have had two incidents, both of which were subsequently resolved, where our equipment was seized by authorities as a result of tax or import duty disputes. Neither of these were material to a Group of our size, but either could have been fatal to a small company. Both are indicative of the fact that we operate in countries where the behaviour of the authorities can be unpredictable, and not always in line with contractual commitments.

The quantum of political risk faced by the business has grown in recent years with the rapid expansion of our Power Projects business, but the benefit of scale is that the risk becomes more diversified.

Scottish Independence

Apart from the political risk which has always been an inherent part of our Power Projects business, we now face a new risk; this is the possibility that Scotland, which is where we are headquartered and have our global manufacturing and product development facility, might separate from the rest of the United Kingdom. Without wanting in any way to enter the political debate on this issue, we have a reporting responsibility to set out in our Annual Report the risks facing the business, and we believe that Scottish Independence could present a number of risks.

At an operational level, it is likely that we would have to deal with significant additional administration cost and complexity in our UK operations, which we currently run as a completely integrated unit, sharing fleet and people without impediment. Following Independence, our UK business operations would have to be split into two separate trading entities, and every time we moved an item of fleet across the border, invoices would have to be raised, and balance-sheets adjusted; we would have to account for tax purposes for our employees' days spent either side of the border. Second, we assume that an independent Scottish Government would wish to have its own distinctive approaches to the taxes and regulations which we currently deal with on a UK level; if Scotland were independent there would potentially be different rates of VAT, personal and corporate tax, different approaches to employment rights, pensions and health & safety. Managing these differences would add complexity and cost to our UK business.

There are also two major macro-economic risks which might affect us. The first is currency, where it seems that the two options for an independent Scotland are either a currency union with the rest of the UK, or a separate Scottish currency. Neither of these options are without risk for our business.

The second macro-economic risk relates to the European Union and the regulation of international trade. Operating as we do in over 100 countries, and with equipment being shipped daily around the world from our factory in Dumbarton, the regulation of international trade is important to us; at present, we are largely governed by agreements negotiated by the EU, which has the heft of being one of the largest trading blocs in the world. We also make extensive use of EU and UK trade promotion. There is a risk that an independent Scotland might not be able to continue in membership of the EU, and that could impact the terms under which we export equipment around the world.

In summary, if Scotland were to leave the United Kingdom and become an independent country, it would likely burden our UK business with added operating complexity and cost. There is also a risk that the outcome of the issues of currency and membership of the EU will not be helpful to our business. At the very least, if Scotland votes for independence we will face some years of uncertainty and hiatus. We will, of course, find ways to manage around this challenge if it arises. The major impact will be in the UK, which accounts for less than 10% of our revenues, and as a global business we will have plenty of options.

Failure to collect payments or to recover assets

Non-payment is one of the biggest risks the company faces. The vast majority of the contracts into which the Group enters are small relative to the size of the Group and, if a customer fails to pay a debt, this is dealt with in the normal course. However, the Group has some large contracts in developing countries where payment practices can be unpredictable. The truth is that, with contracts in around 100 countries, there are always two or three large customers who are misbehaving as far as payment is concerned, and we constantly monitor the risk profile and debtor position of such contracts, deploying a variety of techniques to mitigate the risks of delayed or non-payment. This mitigation will vary from customer to customer, but our armoury includes obtaining advance payments, letters of credit, bank guarantees and, in some cases, insurance against losses. As a result of the rigorous approach to risk management, the Group has never had a significant loss although we have had some very near misses. While the scale in our Power Projects business makes it less likely that any bad debt would be material to the Group's balance sheet, the increased number of contracts and countries in which we operate increases the likelihood of a loss and makes it highly likely that, at some stage, a major customer will default or prevent us from repatriating assets.

The risk of non-payment of a receivable presents a particular risk for a public company such as Aggreko, because our customers are rarely attuned to our obligations to update the market regularly on our performance. While we seek to ensure that no single country could cause the company material medium or long-term damage, failure to collect a major debt could result in an unexpected, and possibly significant, reduction in our profits in any given reporting period. The impact of failure to collect a debt is twofold; first we make a provision or write-off the debt, and secondly, we lose future revenue and profit. We continually make judgements as to whether we need to book a provision against particular debts and, if the debts are material, they could cause us to miss a forecast and lead to a negative share price reaction. Unless a customer actually seizes equipment, deciding whether a receivable will be collected or not is more art than science and there have been several occasions when we have had to make difficult judgements as to when to provide for a debt.

We take a prudent approach to providing for bad debt risk, and in 2013 held provisions of £49 million against this risk in the Power Projects business. Even though we have an ever broader portfolio of contracts, and therefore a more diversified portfolio of risk, we caution investors that the current high returns on capital that we earn, particularly in our Power Projects business, are in effect "risk-unadjusted", although by carrying large provisions we have partly mitigated this risk by taking a prudent approach to bad debt provisioning. So far, no customer has behaved badly enough to cause us a major problem but, as we repeatedly tell people, it is probably only a matter of time before they do.

Events

The business is, by nature, driven by events. People hire generators because some event or need makes it essential. Aggreko's revenues, cashflows and profits can be influenced significantly by external events as evidenced by the Japanese tsunami or by the contracts to supply power to the military camps in Afghanistan. These events are, by their nature, difficult to predict and, combined with the high operational gearing inherent in our business, can lead to volatility in trading outcomes. By developing the business globally, as well as by increasing and broadening the Group's revenue base, the impact of a single event on the overall Group will reduce. Additionally, the ability to move equipment around the world allows the Group to adjust to changes in utilisation caused by any changes in demand.

Failure to conduct business dealings with integrity and honesty

Some of the countries in which the Group operates have a reputation for corruption and, given that many of our contracts involve large sums of money, we are at risk of being accused of bribery and other unethical behaviour. The first and most important way of avoiding this risk is to ensure that people, both inside and outside the Group, know that Aggreko does not engage in, and will not tolerate, bribery, corruption or unethical behaviour. We have a strict Ethics Policy, a copy of which is available on our website www.aggreko.com. Rather than just publishing it, we get every employee to sign it when they join the business; every consultant acting on our behalf agrees in writing to abide by it, and every consultancy or agency agreement has an explicit term stating that the agreement will be terminated immediately if the consultant or agent does not abide by our policy. We have a confidential, multi-lingual hotline, available world-wide, which allows any employee who has any ethical concerns to report them to an independent third party on an anonymous basis.

While the risk of unethical behaviour can take many forms, the most significant risk we run in this area is the behaviour of third party sales agents and consultants in our Power Projects business. Given the ephemeral nature of this business - there might be no business for us in a country for five years and then suddenly a power crisis might present an opportunity to supply 100 MW for six months - it is not practical to maintain full-time salespeople in each of the 150 countries where we do, or could conceivably do, business. Instead, we make agreements with organisations which know a country well, can keep our services on the radar of decision makers, and keep us briefed on opportunities. When an opportunity arises, we send in our own salespeople to work with them. These consultants do not get paid a retainer and may receive no compensation other than a "thank you" and a pat on the back for years; the reason why they are prepared to do this is because when we do win a contract they are well rewarded. And they work hard for the money, often taking responsibility for the supply of critical elements of the project such as finding power-plant sites, providing administration and technical services, labour and security. The fact that they are only paid on results might be seen to raise the risk that they are tempted to indulge in bribery to secure their income. How do we protect against this? In our view, it is all down to the choice of the sales consultant and, to this end, we carry out comprehensive due diligence on all potential candidates. Before we appoint an agent or consultant, we use specialist third-party investigators to conduct comprehensive background checks on them; these checks include obtaining bank references and searches for previous records of inappropriate behaviour or of any family or other links with the customer or government. Once a sales consultant has been appointed, we keep a close eye on them. Payments made to agents and sales consultants are subject to audit by internal auditors to ensure they are in accordance with the agreements, and we have a full-time Compliance Officer who continuously monitors our dealings with sales consultants and agents. In addition, we carry out regular training of managers and salespeople who deal in at-risk jurisdictions and, from time to time, we conduct independent reviews of contract files. We also structure our sales consultancy agreements to allow us to terminate any agreement immediately and without compensation in the event that we suspect any inappropriate behaviour. Given that these sales consultants have much to gain by working for us, this is a powerful incentive to behave.

We model our compliance regime around the requirements of the UK Bribery Act and the US Foreign Corrupt Practices Act (FCPA). A subcommittee of the main Board was formed in 2011, the Board Ethics Committee, which is composed entirely of Non-Executive Directors, who meet to approve our ethics-related policies and procedures, and the compliance thereof. A report from the Committee is set out in the Annual Report and Accounts.

Safety

The business of the Group involves transporting, installing and operating large amounts of heavy equipment, which produces lethal voltages or very high pressure air and involves the use of millions of litres of fuel which could cause serious damage to the environment. Every day, we manage the risks associated with this business, and we have carefully designed procedures to minimise the risk of an accident. If these procedures are not followed however, accidents can happen and might result in injury to people, claims against the Group, damage to its reputation and its chances of winning and retaining contracts.

The Group has a proactive operational culture that puts health and safety at the top of its agenda in order to reduce the likelihood of an accident. We work very closely with our customers, employees and Health & Safety authorities, to evaluate and assess major risks to ensure that health and safety procedures are rigorously followed. The Group has developed health and safety KPI's which are reviewed by the Board on a regular basis.

Competition 

Aggreko operates in a highly competitive business. The barriers to entry are low, particularly in the Local business and, in every major market in which we operate, competitors are constantly entering or leaving the market. We welcome this competition as it keeps us sharp and also helps to grow the overall rental market which, in many countries, is under-developed.

We monitor competitor activity carefully but, ultimately, our only protection from suffering material damage to our business by competitors is to work relentlessly to provide our customers with a high quality and differentiated service proposition at a price that they believe provides good value.

Product technology & emissions regulation

The majority of Aggreko's fleet is diesel-powered, and some of our equipment is over ten years old. As part of the increasing focus on environmental issues, countries continue to introduce legislation related to permissible levels of emissions and this has the potential to affect our business. Our engines are sourced from major manufacturers who, in turn, have to develop products which conform to legislation, so we are dependent on them being able to respond to legislation. We also have to be aware that when we buy a generator we want to be able to rent it for its useful life and to be able to move it between countries.

To mitigate these risks, we adopt a number of strategies. First, we retain considerable in-house expertise on engine technology and emissions - so we have a good understanding of these issues. Secondly, we have very close relationships with engine manufacturers so we get good forward visibility of their product development pipeline. When new products appear - particularly those with improved emissions performance - we aim to introduce them into the fleet as quickly as possible to ensure that, over time, our fleet evolves to ever-better levels of emissions performance. An example of this is the significant investment we have made in the development of our gas-fuelled technology in recent years: these engines have significantly reduced emissions compared with other fuel types. Gas powered generation now accounts for over 1,480 MW of our fleet. Thirdly, if emissions-compliance becomes such an issue that it begins to impact our business in a material way in some territories, our global footprint will be a major advantage as it gives us numerous options for the re-deployment of our fleet. An example of this is in our North American business where, by the end of 2013, around 40% of the fleet is either Tier 3 or Tier 4 compliant, with the previous fleet being re-deployed to other parts of the Group.

People

Aggreko knows that it is people who make the difference between great performance and mediocre performance. This is true at all levels within the business. We are keenly aware of the need to attract the right people, establish them in their roles and manage their development. As a framework for people development, we have in place a talent management programme which covers most of the management population. Under this programme, we try to identify the development needs of each individual from the outset, as well as identifying successor candidates for senior roles. We also have an ongoing relationship with one of the world's leading business schools, IMD, to deliver a tailor-made Group-wide management education programme.

Another risk is that competitors seek to recruit our key personnel. For many years, Aggreko has been a target for recruitment and we manage this on a daily basis. We actually regard it as a compliment that so many companies want to recruit our people. The main mitigation for this is to make sure that people enjoy working for Aggreko, that they feel that they are recognised, cared for, and have challenging and interesting jobs. Reward is also an important part of the equation, and there can be little doubt that our policy of rewarding people well for good performance, and of having a successful Long-Term Incentive Plan, has acted as a powerful retention tool.

(1) Bloomberg European Brent Blend Crude Oil spot price per barrel.

Group Income Statement

For the year ended 31 December 2013

All profit for the period is attributable to the owners of the Company.

Group Statement of Comprehensive Income

For the year ended 31 December 2013

Group Balance Sheet (Company Number: SC177553)

As at 31 December 2013

The financial statements on pages 28 to 44 were approved by the Board of Directors on 6 March 2014 and were signed on its behalf by:

Group Cash Flow Statement

For the year ended 31 December 2013

Reconciliation of net cash flow to movement in net debt

For the year ended 31 December 2013

Group statement of changes in equity

For the year ended 31 December 2013

Group statement of changes in equity (continued)