6th Mar 2008 07:01
Aggreko PLC06 March 2008 Thursday 6 March 2008 Aggreko plc PRELIMINARY RESULTS FOR THE TWELVE MONTHS TO 31 DECEMBER 2007 Aggreko plc, the world leader in the supply of temporary power, temperaturecontrol and oil-free compressed air services, announces its preliminary resultsfor the twelve months to 31 December 2007. Movement pre-intangible asset amortisation 2007 post- 2007 pre- 2006(2) As Constant intangible intangible reported Currency asset asset amortisation amortisation Group revenue £693.2m £693.2m £540.7m 28.2% 35.1% Trading profit(1) £132.9m £134.2m £86.7m 54.8% 66.1% Profit before tax £124.2m £125.5m £83.1m 51.0% Earnings per share 30.33p 30.65p 20.05p 52.9% Dividend per share 8.06p 8.06p 6.72p 20.0% (1) Trading profit represents operating profit before gain on sale of property, plant and equipment. (2) 2006 numbers are pre-exceptional items of £9.2m pre-tax (£7.0m post-tax) related to the acquisition of GE Energy Rentals. (3) All figures below are stated before amortisation of intangible assets arising from business combinations (2007: £1.3m pre-tax, £0.9m post-tax; 2006: £nil) as management believe that the exclusion of such items provides a better comparison of business performance. Highlights: • Excellent results driven by strong demand, record levels of investment in new rental fleet, and the successful integration of the GE Energy Rentals acquisition - Results achieved despite currency movements reducing revenues by £28m and trading profit by £6m - Contribution from GE Energy Rentals acquisition has exceeded expectations • Local business revenue, in constant currency, increased by 26% and trading profit by 45% - Another year of good progress in Europe; trading profit almost doubled and margins improved - Revenues grew by over 20% in UK, Italy, Spain, Middle East, Asia, South America and Australia - Solid performance from North America: 15% increase in revenues and 18% increase in trading profit • Strong demand in International Power Projects drove record levels of fleet utilisation - Revenues (excl pass-through fuel) increased by 57% to $363m and trading profit increased by 121% to $99m. Trading margin increased from 20% to 27% - 27 new contracts signed in 2007 and many customers extending existing projects - 40% increase in fleet capacity to over 2,000 MW, makes Aggreko's Power Projects fleet largest in the world • £172m invested in new fleet (2006: £114m); strong operating cashflow • £1bn to be invested in rental fleet over next five years Philip Rogerson, Chairman, commented: "Aggreko has delivered another outstanding performance in 2007 with good growthacross all our businesses, especially in Aggreko International where the strongdemand we have seen over the last few years is unabated. Our European businesshas continued to build momentum while our North American business has alsoperformed well despite the difficult macro-economic backdrop." "Looking ahead, at this early stage it is always hard to come to a definitiveview of the outcome for the year as a whole, and particularly so when faced bythe current level of uncertainty about the future direction of the variouseconomies in which we operate. Demand is extremely strong in International PowerProjects and across many parts of the Local business, and we believe that theperformance in these areas will more than outweigh any weakness that might arisein North America." "In our December 2007 Trading Update, we said that we expected to make goodprogress in 2008; the trading performance in the first few weeks of the year,particularly in our international business, has reinforced this view and hasfurther increased our confidence." Rupert Soames, Chief Executive, commented: "We have achieved our objective for 2007 of delivering substantial growth insales and profits, through significantly increased investment in new fleet andthe successful integration of GE Energy Rentals. "Looking ahead, we believe that the structural imbalance that exists betweenburgeoning demand for power and insufficient investment in permanent capacitywill increase the demand for temporary solutions. Our ability to deliver largeamounts of reliable power within days or weeks anywhere in the world, makes usuniquely well-placed to serve this rapidly growing market." - ENDS - Enquiries to:Rupert Soames / Angus CockburnAggreko plcTel. 0141 225 5900 Neil Bennett / Charlotte WalshMaitlandTel: 020 7379 5151 CHAIRMAN'S STATEMENT Introduction Aggreko has delivered another outstanding performance in 2007 with good growthacross all our businesses, especially in Aggreko International where the strongdemand we have seen over the last few years is unabated. Our European businesshas continued to build momentum while our North American business has alsoperformed well considering the difficult macro-economic backdrop. Strategy During 2007 we conducted one of our regular reviews of strategy. As a result ofthis review, we have concluded that Aggreko's current markets afford it plentyof opportunity to grow. We believe that world-wide, demand for power andtemperature control rental (excluding International Power Projects) will grow byGDP plus 2-3% on average over the cycle. However, because of our strongpositions in markets where demand will grow much faster than the market average,we believe that our Local businesses can achieve premium rates of growth. In our International Power Projects business, which accounts for about a thirdof our revenues, we think demand is growing rapidly - probably around 20% perannum in terms of megawatts on hire. This demand is being driven by a structuralimbalance between burgeoning demand for power - particularly in developingcountries - and inadequate investment in permanent power infrastructure. Taking these two business segments together, it is our ambition to grow revenuesover the next five years at double-digit rates, on average. There have to besome caveats to this. First, there will be peaks and troughs from year to year.Second in setting ourselves this ambition, we are making the assumption thatconditions in the world economy over the next five years will be broadly similarto those of the last five years. Thirdly, our margins at the moment areextremely high, and we do expect there to be some dilution in the coming years.Finally, such a rate of growth is going to require significant levels ofinvestment; we will probably need to spend around £1 billion on new fleet overthe next five years. We believe, however, that our balance sheet is strongenough to allow us to do so without recourse to shareholders. Overall, we believe that the company is now extremely well positioned to growand to create further value for our shareholders. Acquisition of GE Energy Rentals In December 2006 the Group acquired the Energy Rentals business of GeneralElectric and I am pleased to say that the integration of this business is nowcompleted with the two businesses fully combined. This acquisition hascontributed more than we expected at the time we announced it, and we are verypleased with the progress we have achieved. Trading Reported revenue of £693.2 million (2006: £540.7 million) was 28.2% higher than2006 while revenue in constant currency(1) and excluding pass-through fuel(2)from our contracts in Sri Lanka and Uganda increased by 34.0%. Profit before taxincreased by 49.4% to £124.2 million (2006: £83.1 million) and earnings pershare increased by 51.3% to 30.33 pence (2006: 20.05 pence). During 2007 we increased capital investment to £180.6 million (2006: £128.0million), the equivalent of 1.9 times depreciation. Around 95% of this capitalwas invested on our rental fleet to support the growth in the business. Lookingahead, we expect that fleet capital investment in 2008 will increase further toaround £235 million. The reduction in net debt in the year to £202.6 million (2006: £205.2 million)was particularly pleasing, given the significant increase in capital expenditurein the year. (1) Constant currency takes account of the impact of translational exchange movements in respect of our businesses which operate in currency other than sterling. (2) Pass-through fuel revenue relates to two contracts in Sri Lanka and Uganda in our International Projects business where we provide fuel on a pass-through basis. Dividend The Board is recommending a final dividend of 5.02 pence per ordinary sharewhich, when added to the interim dividend of 3.04 pence, gives a total for theyear of 8.06 pence, a 20.0% increase on 2006. At this level, the dividend wouldbe covered 3.76 times. Subject to approval by shareholders, the final dividendwill be paid on 16 May 2008 to ordinary shareholders on the register as at 18April 2008, with an ex-dividend date of 16 April 2008. Employees The excellent progress we have made in 2007, particularly with the integrationof the GE Energy Rentals business, is due to the leadership of our managementteam and the commitment and professionalism of our people. In a business thatprides itself on its work ethic, 2007 has been particularly demanding, and onbehalf of the Board I would like to thank all of our employees for thecontributions they have made to the success of Aggreko in 2007. Board changes I am delighted to welcome two new Non-Executive Directors to the Board ofAggreko. David Hamill, who joined the Board on 1 May 2007, is responsible formanaging the combined Decorative Coatings businesses of Akzo Nobel and ICI, andhas considerable experience in businesses which, like Aggreko, operate on aglobal basis. Robert MacLeod who joined the Board of Aggreko on 10 September2007, is Group Finance Director of WS Atkins Plc and also has substantialexperience gained in an international environment. Outlook for 2008 Looking ahead, at this early stage it is always hard to come to a definitiveview of the outcome for the year as a whole, and particularly so when faced bythe current level of uncertainty about the future direction of the variouseconomies in which we operate. Demand is extremely strong in International PowerProjects and across many parts of the Local business, and we believe that theperformance in these areas will more than outweigh any weakness that might arisein North America. In our December 2007 Trading Update, we said that we expected to make goodprogress in 2008; the trading performance in the first few weeks of the year,particularly in our international business, has reinforced this view and hasfurther increased our confidence. Philip G RogersonChairman6 March 2008 REVIEW OF TRADING Group Trading Performance 2007 was another excellent year for Aggreko. Revenues and profits increasedsignificantly as a result of strong demand, increased fleet investment and thesuccessful integration of the GE Energy Rentals (GE-ER) business which weacquired in December 2006. 2007 2006 (2) Movement £m £m As reported Constant Currency Revenue 693.2 540.7 28.2% 35.1%Revenue excl pass-through fuel 633.8 497.3 27.5% 34.0%Trading profit (1) 132.9 86.7 53.3% 64.5%Operating profit 135.9 89.5 51.8% 62.8%Net interest expense (11.7) (6.4) (81.7)%Profit before tax 124.2 83.1 49.4%Taxation (43.5) (29.9) (45.3)%Profit after tax 80.7 53.2 51.8%Basic earnings per share (pence) 30.33 20.05 51.3% (1) Trading profit represents operating profit before gain on sale of property, plant and equipment. (2) 2006 numbers are pre-exceptional items of £9.2 million pre-tax (£7.0 million post tax) related to the acquisition of GE-ER. As reported, Group revenue at £693.2 million (2006: £540.7 million) was 28.2% higher than 2006, while Group trading profit of £132.9 million (2006: £86.7 million) was 53.3% ahead of 2006. This delivered an increase in Group trading margin from 16.0% in 2006 to 19.2% in 2007. Return on capital employed, measured as operating profit divided by average net operating assets, improved to 26.7% (2006: 22.1%). Group profit before tax increased by 49.4% to £124.2 million (2006: £83.1million); profit after tax was £80.7 million (2006: £53.2 million), up 51.8%.Earnings per share grew 51.3% to 30.33 pence (2006: 20.05 pence). The impact of currency movements - mainly the US dollar exchange rate - has beento decrease revenue by £27.7 million and trading profit by £5.9 million. In 2007pass-through fuel revenues amounted to £59.4 million (2006: £43.4 million) andgenerated a trading profit of £2.2 million (2006: £1.6 million). On anunderlying basis, excluding the impact of the currency movements and thepass-through fuel, Group revenue grew by 34.0% (as reported: 28.2%) and tradingprofit by 64.9% (as reported: 53.3%). On the same basis trading margin was 20.6%(as reported: 19.2%) which compares with 17.1% in 2006 (as reported: 16.0%). The Group's growth was made possible by the fleet acquired from GE-ER at the endof December 2006 and another significant increase in investment in new fleetduring the year. Total capital expenditure for the year was £180.6 million,£52.6 million up on the prior year, at which level it represented 195% of thedepreciation charge (2006: 176% of depreciation charge). £172.4 million (2006:£114.1 million) was investment in new fleet. We also received a further £4.9million of equipment in relation to the final completion of the GE-ERacquisition. Notwithstanding this substantial increase in fleet capacity, theratio of revenue (excluding pass-through fuel) : gross rental assets, which is akey measure of capital productivity, remained in line with last year at 74%. EBITDA (earnings before interest, taxes, depreciation and amortisation) for theyear amounted to £230.3 million, up 41.5% on 2006 (pre-exceptional items). Netcash inflow was £2.6 million (2006: outflow of £102.3 million), which isparticularly pleasing given that capital expenditure was £87.8 million higherthan depreciation. Working capital movements in the year reflected focused cashmanagement with revenue: debtors in line with last year and revenue: inventoriesonly decreasing slightly, notwithstanding the acquisition of GE-ER. Update on the acquisition of GE Energy Rentals The Group acquired the Energy Rentals business of GE-ER in December 2006. Thisacquisition increased our world-wide power and temperature control fleet byabout 30%, and the integration of the two businesses is now complete. Theorganisational challenges associated with integrating the employees from GEEnergy Rentals into the Aggreko business are now behind us and we are delightedby the calibre of our new colleagues and the speed with which they assimilatedthemselves into Aggreko. All the major property changes have been executed andthe GE business was very quickly transferred onto Aggreko's informationtechnology platform. In terms of the acquired fleet, the great majority has nowbeen re-branded and serviced. Regional Trading Performance as reported in £ million Revenue Trading ProfitManagement Geography / 2007 2006 Change 2007 2006 ChangeGroup Line of business £ million £ million % £ million £ million % Local Business North America USA & Canada 168.3 159.0 5.9% 35.6 33.8 5.5%Europe Northern Europe 80.8 66.1 22.3% 9.8 3.5 181.6%Europe Continental Europe 87.1 69.6 25.1% 11.5 7.4 55.4% International:Local BusinessesBusinesses Middle East, 116.4 77.6 50.1% 24.5 15.7 55.3% Asia-Pacific, South America Sub-total Local Business 452.6 372.3 21.6% 81.4 60.4 34.7% InternationalPower Projects International International 181.2 125.0 44.9% 49.3 24.7 100.1% Power Projects excl. pass-through fuelInternational Pass-through fuel 59.4 43.4 2.2 1.6 Sub-total InternationalPower Projects 240.6 168.4 42.8% 51.5 26.3 95.8% Group 693.2 540.7 28.2% 132.9 86.7 53.3% North America 168.3 159.0 5.9% 35.6 33.8 5.5% Europe 167.9 135.7 23.7% 21.3 10.9 95.8% International 357.0 246.0 45.1% 76.0 42.0 80.6% Group 693.2 540.7 28.2% 132.9 86.7 53.3% Group excluding 633.8 497.3 27.5% 130.7 85.1 53.7% pass-through fuel The performance of each of these regions is described below: Local Business: North America 2007 2006 Change % $million $million % Revenue 337.1 293.1 15.0%Trading profit 71.4 62.3 14.6% Our Local business in North America, helped by the acquisition of GE-ER,performed well in 2007 with revenue increasing 15.0% to $337.1 million andtrading profit increasing by 14.6% to $71.4 million. Trading margin was in linewith last year at 21.2%. Most areas showed healthy growth in the year, althoughrevenue in the Gulf area and in our cooling tower business, both of whichbenefited from the reconstruction work in the aftermath of the 2005 hurricaneseason, were below last year. Revenue in the majority of our sectors increasedon last year, particularly in the petrochemical, manufacturing, utilities andevents sectors, however revenue in the construction and contracting sectorsdeclined on the prior year. In terms of business mix, rental revenue grew 15.9% and services revenue grew13.0%. Power rental revenue for 2007 was 15.3% ahead of the prior year whiletemperature control revenue for the year was 18.9% ahead of last year. Oil-freeair rental revenue was 10.8% ahead of the prior year. As we said at the time of the acquisition, the main challenge in North Americawas putting to work the 45% increase in power fleet arising from the GE EnergyRentals acquisition. This fleet is now fully integrated into the Aggreko fleetand the majority of the equipment has been serviced and re-branded. It remains difficult to forecast future levels of demand for our services inNorth America, particularly since so much of our profit is generated during thesummer season. Our business has a broad geographic footprint and diverse base ofcustomers in sectors such as manufacturing, petro-chemical industries, oil & gasextraction and utilities, which will be impacted differently by any change inthe macro-economic outlook. Residential construction inevitably continues to beweak but this has always been a very small proportion of our revenues (less than5% in 2007). However we are beginning to see some early signs of a slowdown incertain regions and sectors. Local business: Europe Revenue 2007 2006 Change % • million • million % Northern Europe 118.2 96.9 21.9%Continental Europe 127.3 102.1 24.7%Total Europe 245.5 199.0 23.3% Trading Profit 2007 2006 Change % • million • million % Northern Europe 14.4 5.1 180.7%Continental Europe 16.8 10.9 55.0%Total Europe 31.2 16.0 95.2% The European business has delivered a second year of substantial growth in bothrevenues (up 23.3%) and margins (increased from 8.0% to 12.7%). The margins andreturns are still not at the level we would like to see, but they are heading inthe right direction. Revenue in Northern Europe (which comprises our businesses in the UK, Irelandand the Nordic countries) of €118.2 million was 21.9% ahead of the prior yearwith revenue increasing in all areas. We had particularly strong performances inUK South East and UK North, with strong construction and utility sector growth,and in our Events business which undertook a number of large contracts in theperiod, including Glastonbury. Rental revenue increased by 18.0%, with power increasing by 26.3% buttemperature control decreased by 1.7% as a result of a generally cool summer.Revenue from our smallest product, oil-free air, decreased by 9.8%. Servicesrevenue, which mainly comprises fuel and transport, grew by 27.4%. Revenuegrowth was driven across most sectors most notably utilities, contracting andservices. It is particularly encouraging to see Northern Europe trading profitincreased by €9.3 million and the margin improving from 5.3% to 12.1%. Revenue in Continental Europe was 24.7% ahead of 2006 at €127.3 million withtrading profit of €16.8 million being 55.0% ahead of last year, resulting in animprovement in trading margin from 10.6% in 2006 to 13.2% in 2007. Rentalrevenue grew by 28.7%, while services revenue grew by 17.1%. Within rentalrevenue, power increased by 37.2%, temperature control increased by 14.4% andoil-free air increased by 25.7%. Included within the headline numbers is revenuerelating to major power contracts in Russia and Greece. Excluding these majorcontracts, revenues increased by 21% over last year. Revenue in all areas was up on last year with strong performances from Spain,Italy and France. In terms of sectors we had good performances from theservices, utilities and manufacturing sectors. During the year we opened a newservice centre in Padova,Italy. The focus for our European business in 2008 is to continue the drive for salesgrowth and margin improvement. We do not expect revenue growth to be as high asin 2007, but we have already gained some useful contract wins, including acontract to provide power for the UEFA 2008 European Football Championship inAustria and Switzerland. Local Business: Aggreko International 2007 2006 Change % $ million $ million % Revenue 233.1 143.0 63.0%Trading profit 49.0 29.0 68.6% Aggreko International's Local businesses in the Middle East, Asia, Australia,New Zealand, South and Central America had another excellent performance in2007. In aggregate, year on year revenue grew by 63.0% to $233.1 million whichresulted in trading profit growth of 68.6% to $49.0 million and a trading marginof 21.0% as against 20.3% in 2006. The majority of our depots in the Middle East business reported another year ofsharply increased activity levels, with this growth driven by largeinfrastructure projects particularly in the UAE, Saudi Arabia and Qatar.Although power is the strongest product in this region, it is pleasing to seeour temperature control business almost doubling year on year. In our Australianbusiness, demand has been strong, driven by the mining industry and utilitywork.The GE-ER acquisition has transformed the scale and reach of our business inSouth & Central America. Revenues more than trebled, with strong demand in theoil & gas and utilities sectors. In Asia our Singapore business continued itsgood growth driven by shipping and shipyard activity and our new business inShanghai has had a strong start, winning its first major mining project withinmonths of opening. As a result of the success in Shanghai, we have decided tofocus our activities in China from there, and have closed our service centre inHong Kong. Demand continues to be strong throughout most of Aggreko International's Localbusinesses, and we expect continued growth in 2008, albeit at a slower rate thanin 2007. International Power Projects : Aggreko International 2007 2006 Change % $ million $ million % Revenue (excluding pass-through fuel) 362.8 230.5 57.4%Trading profit (excluding pass-through fuel) 99.1 45.6 117.3% Our International Power Projects business had another outstanding year, withrevenues and profits (excluding pass-through fuel) increasing by 57.4% and117.2% respectively. This business continues to run at very high levels of utilisation on a fleetwhich, as a consequence of record levels of investment, is about 40% larger thana year ago. During the year our International Power Projects business operatedin 52 countries, and signed 27 new contracts and many extensions to existingcontracts, including 100MW in Yemen, 40MW in Senegal, 20MW in Indonesia and 30MWin Angola. The business experienced an abnormally low number of off-hires duringthe year, as customers chose to extend contracts, and the consequence of thiswas both higher revenues (from reduced off-hire periods) and lower costs (fromlower mobilisation / de-mobilisation charges) which drove margins to 27.3%, upfrom 19.8% in 2006, which is an exceptionally high level. Much of the revenue growth came from Africa and the Middle East but Asia andSouth America also grew significantly. As anticipated, on a sector basis weincreased our utility revenues as a percentage of total revenue, althoughmilitary revenues continued to grow. Good progress has been made against our strategic objective to increase thescale of our Power Project business in South America and Asia. In South Americawe won several important multi-year contracts which, in aggregate, require over100MW of temporary power. In Asia, we have won an 18-month contract for thesupply of 20MW of gas-powered generation in Indonesia; this is an important stepforward for our new gas product, as well as for our Asian business. In January 2008 we were delighted to be awarded the supply contract for theBeijing 2008 Olympic Games. The value of this contract is expected to be in theregion of $35 million and we will provide up to 130 MW of power across 40Olympic venues in 6 cities. With this contract, and in light of the continuedstrong demand for power projects worldwide, we anticipate another strongperformance from this business in 2008. DETAILED FINANCIAL REVIEW Critical Accounting Policies The Group's significant accounting policies are set out in Note 1 to the Group'sAnnual Report and Accounts. Preparation of the consolidated financial statements requires Directors to makeestimates and assumptions that affect the reported amounts in the consolidatedfinancial statements and accompanying notes. Actual outcomes could differ fromthose estimated. The Directors believe that the accounting policies discussed below representthose which require the greatest exercise of judgement. The Directors have usedtheir best judgement in determining the estimates and assumptions used in theseareas but a different set of judgements could result in material changes to ourreported results. The discussion below should be read in conjunction with thefull statement of accounting policies, set out in Note 1 to the Group's AnnualReport and Accounts. Property, plant and equipmentRental fleet accounts for around 90% (£402 million) of the net book value ofproperty, plant and equipment used in our business; equipment in the rentalfleet is typically depreciated over a period between 8 and 10 years. The annualdepreciation charge is sensitive to the estimated service lives allocated toeach class of asset. Asset lives are reviewed regularly and changed if necessaryto reflect current thinking on their remaining lives in light of technologicalchange, prospective economic utilisation and the physical condition of theassets. Intangible assetsIn accordance with IFRS 3 'Business Combinations' goodwill arising onacquisition of assets and subsidiaries is capitalised and included in intangibleassets. IFRS 3 also requires the identification of other acquired intangibleassets. The techniques used to value these intangible assets are in line withinternationally used models but do require the use of estimates which may differfrom actual outcomes. Future results are impacted by the amortisation periodadopted for these items and, potentially, by any differences between estimatedand actual circumstances related to individual intangible assets. Theamortisation charge for intangible assets in 2007 was £1.6 million (2006:£0.8million). Included in this charge was £1.3 million related to the amortisationof intangible assets arising from the GE-ER acquisition (2006: £nil). Goodwill of £38.0 million (2006: £37.8 million) is not amortised, but is testedannually for impairment and carried at cost less accumulated impairment losses.The impairment review calculations require the use of estimates related to thefuture profitability and cash generating ability of the acquired assets. PensionsPension arrangements for our employees vary depending on best practice andregulation in each country. The Group operates a defined benefit scheme for UKemployees, which was closed to new employees joining the group after 1 April2002; most of the other schemes in operation around the world are varieties ofdefined contribution schemes. Under IAS 19: 'Employee Benefits' Aggreko has recognised a pre tax pensiondeficit of £8.1 million at 31 December 2007 (2006: £13.1 million). The decreasein the pension deficit is mainly as a result of additional contributions made bythe Company during the year of £5.0 million in line with the Recovery Planagreed for the Scheme following the actuarial valuation at 31 December 2005.These improvements were partially offset by a lower than expected return onscheme assets. The main assumptions used in the IAS 19 valuation for the previous two years areshown in note 28 of the Accounts. The sensitivities regarding the discount rateand longevity assumptions are shown in the table below. Assumptions Change in assumption Indicative effect on the scheme's liabilities Discount rate Increase/decrease by 0.5pp Decrease by 13.8%/increase by 16.5% Longevity Increase by 1 year Increase by 2.4% TaxationAggreko's tax charge is based on the profit for the year and tax rates in forceat the balance sheet date. Estimation of the tax charge requires an assessmentto be made of the potential tax treatment of certain items which will only beresolved once finally agreed with the relevant tax authorities. Currency Translation The net overall impact of exchange rates on currency translation in 2007 was todecrease revenue and trading profit by £27.7 million and £5.9 millionrespectively. Currency translation also gave rise to a £5.6 million increase inreserves as a result of year on year movements in the exchange rates. Set out inthe Table below are the principal exchange rates affecting the Group's overseasprofits and net assets. 2007 2006(per £ sterling) Average Year End Average Year EndPrincipal Exchange RatesUnited States dollar 2.00 1.99 1.84 1.96Euro 1.46 1.36 1.47 1.49Other Operational Exchange RatesUAE Dirhams 7.35 7.33 6.77 7.20Australian dollar 2.39 2.27 2.45 2.49(Source: Reuters) InterestThe net interest charge for the year was £11.7 million, an increase of £5.3million on 2006, reflecting the higher level of average net debt during theyear, mainly arising out of the acquisition of GE-ER. Interest cover decreasedto 11.7 times from 13.9 times in 2006 (pre-exceptional items) but still remainsvery strong. Effective Tax RateThe effective tax rate for the full year is 35.0% as compared with 36.0% in2006. This decrease in the tax rate largely reflects the changes in the regionalmix of profits. DividendsIf the proposed final dividend of 5.02 pence is agreed by shareholders, it wouldresult in a full year dividend of 8.06 pence per ordinary share, giving dividendcover of 3.76 times (2006: 2.98 times). CashflowThe net cash inflow from operations during the year totalled £230.2 million(2006: £160.2 million). This funded capital expenditure of £180.6 million, whichwas £52.6 million higher than in 2006. Although average net debt for the yearwas higher in 2007 than in 2006, the absolute level at 31 December 2007 was £2.6million lower than at the prior year end at £202.6 million. As a result of thedecrease in net debt and the increase in shareholders' equity, gearing (net debtas a percentage of equity) at 31 December 2007 decreased to 69% from 91% at 31December 2006. Net Operating AssetsThe net operating assets of the Group (including goodwill) at 31 December 2007totalled £554.0 million, up £83.8 million on 2006. The main components of NetOperating Assets are:- £ million 2007 2006 Movement Rental Fleet 401.8 311.1 29.2%Property, Plant 42.8 41.9 2.1%Inventory 60.0 40.8 47.1%Net Trade Debtors 114.7 96.3 19.1% A key measure of Aggreko's performance is the return (expressed as operatingprofit) generated from average net operating assets (ROCE). We calculate theaverage net operating assets for a period by taking the average of the netoperating assets as at 1 January, 30 June and 31 December; this is the basis onwhich we report our calculations of Return on Capital Employed (ROCE). Theaverage net operating assets in 2007 were £508.8 million, up 26.1% on 2006. In2007 the ROCE increased to 26.7% compared with 22.1% in 2006. A geographicanalysis of our returns on net operating assets is set out in the table below: 2007 2006 Europe 16.2% 9.7%International 33.8% 25.1%North America 25.4% 30.3%Group 26.7% 22.1% Acquisition of GE Energy RentalsOn 4 December 2006 the Group acquired the entire share capital of GE EnergyRentals Inc and the entire share capital of GE Energy do Brasil Ltda as well assubstantially all the other trade and assets of GE Energy Rentals (excludingthose relating to gas turbines). The maximum consideration payable was £112.0million and the fair value of net assets acquired was £65.3 million resulting inestimated goodwill of £46.7 million. The initial purchase consideration for thisacquisition (including transaction fees) was £97.1 million with a furtherpayment of up to £14.9 million dependent on the delivery by GE of additionalfleet assets during 2007. Due to the close proximity of this acquisition to theDecember 2006 year end the fair value adjustments made in the 2006 accounts wereprovisional. These fair value adjustments were finalised in the 2007 Accountsand the final purchase price adjustment was agreed with GE, resulting in a finalpurchase consideration of £96.7 million , fair value of net assets acquired of£59.1 million and goodwill of £37.6 million at date of acquisition. Shareholders' EquityShareholders' equity increased by £67.1 million to £293.3 million, representedby the net assets of the Group of £495.9 million before net debt of £202.6million. The movements in shareholders' equity are analysed in the table below: Movements in Shareholders' Equity £ million £ million As at 1 January 2007 226.2 Profit for the financial year 80.7Dividend (1) (19.2) -------- Retained earnings 61.5New share capital subscribed 1.9Purchase of own shares held under trust (4.2)Credit in respect of employee share awards 4.6Actuarial losses on retirement benefits (0.1) Currency translation difference 5.6Movement in hedging reserve (6.4)Other (2) 4.2 --------As at 31 December 2007 293.3 -------- (1) Reflects the final dividend for 2006 of 4.19 pence per share (2006: 3.77 pence) and the interim dividend for 2007 of 3.04 pence per share (2006: 2.53 pence) that were paid during the year. (2) Other includes tax on items taken directly to reserves. The £80.7 million of post-tax profit in the year represents a return of 27.5% onshareholders' equity (2006: 23.5%, pre-exceptional items). TreasuryThe Group's operations expose it to a variety of financial risks that includeliquidity, the effects of changes in foreign currency exchange rates, interestrates, and credit risk. The Group has a centralised treasury operation whoseprimary role is to ensure that adequate liquidity is available to meet theGroup's funding requirements as they arise, and that financial risk arising fromthe Group's underlying operations is effectively identified and managed. The treasury operations are conducted in accordance with policies and proceduresapproved by the Board and are reviewed annually. Financial instruments are onlyexecuted for hedging purposes, and transactions that are speculative in natureare expressly forbidden. Monthly reports are provided to senior management andtreasury operations are subject to periodic internal and external review. Liquidity, funding and capital management The Group's objective with respect to managing capital is to maintain a balancesheet structure that is both efficient in terms of providing long term returnsto shareholders and safeguards the Group's ability to continue as a goingconcern. As appropriate the Group can choose to adjust its capital structure byvarying the amount of dividends paid to shareholders, returns of capital toshareholders, issuing new shares or the level of capital expenditure. The Group maintains sufficient facilities to meet its normal fundingrequirements over the medium term. These facilities are primarily in the form ofcommitted bank facilities totalling £358.0 million at 31 December 2007, arrangedon a bilateral basis with a number of international banks. The financialcovenants attached to these facilities are that operating profit should be noless than 3 times interest, and net debt should be no more than 3 times EBITDA.The Group does not consider that these covenants are restrictive to itsoperations. Net debt amounted to £202.6 million at 31 December 2007 and at thatdate un-drawn committed facilities were £145.8 million. Interest rate risk The Group's policy is to minimise the exposure to interest rates by ensuring anappropriate balance of fixed and floating rates. The Group's primary funding isat floating rates through its bank facilities. In order to manage the associatedinterest rate risk, the Group uses interest rate swaps to vary the mix of fixedand floating rates. At 31 December 2007 £150.9 million of the net debt of £202.6million was at fixed rates of interest resulting in a fixed to floating rate netdebt ratio of 75:25. Foreign exchange risk The Group is subject to currency exposure on the translation of its netinvestments in overseas subsidiaries into sterling. In order to reduce thecurrency risk arising, the Group uses direct borrowings in the same currency asthose investments. Group borrowings are currently drawn down in the principalcurrencies used by the Group, namely US Dollar, Euro and Sterling. The Group manages its currency flows to minimise foreign exchange risk arisingon transactions denominated in foreign currencies and uses forward contractswhere appropriate in order to hedge net currency flows. Credit risk Cash deposits and other financial instruments give rise to credit risk onamounts due from counterparties. The Group manages this risk by limiting theaggregate amounts and their duration depending on external credit ratings of therelevant counterparty. In the case of financial assets exposed to credit risk,the carrying amount in the balance sheet, net of any applicable provision forloss, represents the amount exposed to credit risk. Management of trade receivablesThe management of trade receivables is the responsibility of the operatingunits, although they report monthly to Group on debtor days, debtor ageing andsignificant outstanding debts. At an operating unit level a credit rating isnormally established for each customer based on ratings from external agencies.Where no ratings are available, cash in advance payment terms are oftenestablished for new customers. Credit limits are reviewed on a regular basis.Some of the contracts undertaken in our International Power Projects businessare substantial, and are in jurisdictions where payment practices can beunpredictable. The Group monitors the risk profile and debtor position of allsuch contracts regularly, and deploys a variety of techniques to mitigate therisks of delayed or non-payment; these include securing advance payments, bankguarantees and various types of insurance. On large contracts, all sucharrangements are approved at Group level. Contracts are reviewed on a case bycase basis to determine the customer and country risk. InsuranceThe Group operates a policy of buying cover where possible for material risksfrom the global insurance market, while self-insuring risks which would not havea material impact on the Group as a whole. The Group monitors its insurancearrangements in such a way to ensure the quality and extent of cover. Shareholder informationOur website can be accessed at www.aggreko.com. This contains a large amount ofinformation about our business, including a range of charts and data, which canbe down loaded for easy analysis. The website also carries copies of recentinvestor presentations, as well as Stock Exchange announcements. Rupert Soames Angus CockburnChief Executive Finance Director6 March 2008 Group Income Statementfor the year ended 31 December 2007 Total before Exceptional exceptional items items (Note 2) 2007 2006 2006 2006 Notes £ million £ million £ million £ million Revenue 1 693.2 540.7 - 540.7Cost of sales (315.9) (263.8) (0.3) (264.1) --------- --------- --------- ---------Gross Profit 377.3 276.9 (0.3) 276.6Distribution costs (163.6) (131.4) (1.2) (132.6)Administrativeexpenses (80.8) (58.8) (7.7) (66.5)Other income 3.0 2.8 - 2.8 --------- --------- --------- ---------Operating profit 1 135.9 89.5 (9.2) 80.3Finance costs- Interest expense (13.2) (7.2) - (7.2)- Interest income 1.5 0.8 - 0.8 --------- --------- --------- ---------Profit before taxation 124.2 83.1 (9.2) 73.9Taxation: 3- UK (13.8) (6.1) 0.7 (5.4)- Overseas (29.7) (23.8) 1.5 (22.3) --------- --------- --------- ---------Profit for the year 80.7 53.2 (7.0) 46.2 ========= ========= ========= ========= Dividends paid inthe year 4 (19.2) (16.7) - (16.7) ========= ========= ========= ========= Dividends per share(pence) 4 7.23 6.30 - 6.30 ========= ========= ========= =========Earnings per share(pence) Basic 5 30.33 20.05 (2.64) 17.41 ========= ========= ========= =========Diluted 5 30.02 19.87 (2.62) 17.25 ========= ========= ========= ========= The above results relate to continuing operations and all profit for the periodis attributable to equity shareholders of the Company. Group Statement of Recognised Income and Expensefor the year ended 31 December 2007 2007 2006 £ million £ million Profit for the year 80.7 46.2Actuarial (losses)/gains on retirement benefits (0.1) 1.5Movement in deferred tax on pension liability - (0.4)Cashflow hedges (net of deferred tax) (4.6) 1.2Net exchange gains/(losses) offset in reserves 5.6 (20.5) -------- --------Total recognised income for the year 81.6 28.0 ======== ======== Group Balance Sheetas at 31 December 2007 2006 Restated Notes 2007 (Note 6) £ million £ millionNon-current assetsGoodwill 6 38.0 37.8Intangible assets 7 10.0 11.5Property, plant and equipment 8 444.6 353.0Derivative financial instruments - 1.1Deferred tax asset 14 2.4 1.7 --------- --------- 495.0 405.1 --------- ---------Current assetsInventories 9 60.0 40.8Trade and other receivables 10 165.4 156.6Derivative financial instruments 0.1 0.9Cash and cash equivalents 9.8 13.0Current tax assets 2.4 1.3 --------- --------- 237.7 212.6 --------- --------- Total assets 732.7 617.7 --------- --------- Current liabilitiesBorrowings 11 (0.2) (10.3)Derivative financial instruments (2.1) -Trade and other payables 12 (172.6) (134.0)Current tax liabilities (24.8) (9.4)Provisions 13 (1.3) (5.9) --------- --------- (201.0) (159.6) --------- --------- Non-current liabilitiesBorrowings 11 (212.2) (207.9)Derivative financial instruments (2.7) (0.3)Deferred tax liabilities 14 (14.7) (10.3)Retirement benefit obligation (8.1) (13.1)Provisions 13 (0.7) (0.3) --------- --------- (238.4) (231.9) --------- ---------Total liabilities (439.4) (391.5) --------- ---------Net assets 293.3 226.2 ========= =========Shareholders' equityShare capital 15 54.2 53.9Share premium 17 8.8 7.2Treasury shares 16 (10.5) (9.1)Capital redemption reserve 17 0.1 0.1Hedging reserve (net of deferred tax) 17 (3.4) 1.2Foreign exchange reserve 17 (19.7) (25.7)Retained earnings 17 263.8 198.6 --------- ---------Total shareholders' equity 293.3 226.2 ========= ========= The financial statements on pages x to x were approved by the Board of Directorson 6 March 2008 and were signed on its behalf by: P G Rogerson A G CockburnChairman Finance Director Group Cash Flow Statementfor the year ended 31 December 2007 Notes 2007 2006 £ million £ millionCash flows from operating activitiesCash generated from operations (i) 230.2 160.2Tax paid (21.4) (26.2) --------- ---------Net cash generated from operating activities 208.8 134.0 --------- --------- Cash flows from investing activitiesAcquisitions (net of cash acquired) (0.4) (95.8)Purchases of property, plant and equipment (PPE) (180.6) (128.0)Proceeds from sale of PPE 8.1 4.7 --------- ---------Net cash used in investing activities (172.9) (219.1) --------- --------- Cash flows from financing activitiesNet proceeds from issue of ordinary shares 1.8 0.5Increase in long-term loans 66.0 157.5Repayment of long-term loans (62.6) (43.7)Net movement in short-term loans (7.1) 0.1Interest received 1.5 0.8Interest paid (12.8) (6.8)Dividends paid to shareholders (19.2) (16.7)Purchase of treasury shares (4.2) (2.6) -------- ---------Net cash used in financing activities (36.6) 89.1 --------- --------- Net (decrease)/increase in cash and cashequivalents (0.7) 4.0Cash and cash equivalents at beginning of theyear 10.0 6.0Exchange gain on cash and cash equivalents 0.3 - --------- ---------Cash and cash equivalents at end of the year 9.6 10.0 --------- ---------Reconciliation of net cash flow to movement innet debt for the year ended 31 December 2007 (Decrease)/increase in cash and cash equivalents (0.7) 4.0Cash outflow/(inflow) from movement in debt 3.7 (113.9) --------- ---------Changes in net debt arising from cash flows 3.0 (109.9)Exchange (losses)/gains (0.4) 7.6 --------- ---------Movement in net debt in period 2.6 (102.3)Net debt at beginning of period (205.2) (102.9) --------- ---------Net debt at end of period 11 (202.6) (205.2) ========= ========= Notes to the Group Cash Flow Statementfor the year ended 31 December 2007 (i) Cashflow from operating activities 2007 2006 £ million £ million Profit for the year 80.7 46.2Adjustments for:Tax 43.5 27.7Depreciation 92.8 72.5Amortisation of intangibles 1.6 0.8Interest income (1.5) (0.8)Interest expense 13.2 7.2Profit on sale of PPE (see below) (3.0) (2.8)Share based payments 4.6 4.1Changes in working capital (excluding the effects ofexchange differences on consolidation):Increase in inventories (18.6) (5.5)Increase in trade and other receivables (13.4) (27.6)Increase in trade and other payables 34.7 32.8Net movements in provisions for liabilities andcharges (4.2) 4.3Net retirement benefit cost (0.2) 1.3 --------- ---------Cash generated from operations 230.2 160.2 ========= ========= In the cash flow statement, proceeds from sale of PPE comprise: 2007 2006 £ million £ million Net book amount 5.1 1.9Profit on sale of PPE 3.0 2.8 --------- ---------Proceeds from sale of PPE 8.1 4.7 ========= ========= Notes to the Accountsfor the year ended 31 December 2007 Note 1Segmental reporting (a) Revenue by segment Total revenue Inter-segment revenue External revenue 2007 2006 2007 2006 2007 2006 £ million £ million £ million £ million £ million £ million Northern Europe 80.8 66.1 - - 80.8 66.1Continental Europe 87.2 69.6 0.1 - 87.1 69.6North America 168.5 159.2 0.2 0.2 168.3 159.0Middle East, Asia-Pacific, South America 116.8 77.9 0.4 0.3 116.4 77.6 --------------------------------------------------------------------------Local Business 453.3 372.8 0.7 0.5 452.6 372.3International Power Projects 240.8 170.1 0.2 1.7 240.6 168.4Eliminations (0.9) (2.2) (0.9) (2.2) - - --------------------------------------------------------------------------Group 693.2 540.7 - - 693.2 540.7 ========================================================================== i) Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties. ii) International Power Projects (IPP) is a global segment administered from Dubai. At the end of 2007 and 2006 the assets of the International Power Projects segment are predominantly located in the Middle East, Asia-Pacific, South America and Africa. iii) In accordance with how management monitors the business the results and net assets of our projects business in Europe are now included in Continental Europe instead of Northern Europe as previously reported. Comparative figures have been restated but the effect is not considered material. (b) Profit by segment Amortisation of Trading profit pre intangible assets arising intangible asset from business amortisation combinations Trading profit 2007 2006 2007 2006 2007 2006 £ million £ million £ million £ million £ million £ million Northern Europe 9.8 3.5 - - 9.8 3.5Continental Europe 11.6 7.4 (0.1) - 11.5 7.4North America 36.4 33.8 (0.8) - 35.6 33.8 --------------------------------------------------------------------------------Middle East, Asia-Pacific, South America 24.8 15.7 (0.3) - 24.5 15.7 --------------------------------------------------------------------------------Local Business 82.6 60.4 (1.2) - 81.4 60.4International Power Projects 51.6 26.3 (0.1) - 51.5 26.3 --------------------------------------------------------------------------------Group 134.2 86.7 (1.3) - 132.9 86.7 ================================================================================ Gain/(loss) on Operating Profit sale of PPE 2007 2006 2007 2006 £ million £ million £ million £ million Northern Europe 0.2 0.6 10.0 4.1Continental Europe 0.7 0.1 12.2 7.5North America 1.0 2.2 36.6 36.0 -----------------------------------------------------Middle East, Asia-Pacific, South America 0.2 0.1 24.7 15.8 -----------------------------------------------------Local Business 2.1 3.0 83.5 63.4International Power Projects 0.9 (0.2) 52.4 26.1 -----------------------------------------------------Group 3.0 2.8 135.9 89.5 =========================Exceptional items (Note 2) - (9.2) -----------------------------------------------------Operating profit postexceptional items 135.9 80.3Finance costs- net (11.7) (6.4) ----------------------------Profit before taxation 124.2 73.9Taxation (43.5) (27.7) ----------------------------Profit for the year 80.7 46.2 ============================ (c) Depreciation and amortisation by segment 2007 2006 £ million £ millionNorthern Europe 10.5 9.4Continental Europe 13.0 10.7North America 23.6 19.6Middle East, Asia-Pacific, South America 16.1 10.1 ----------------------------Local Business 63.2 49.8International Power Projects 31.2 23.5 ----------------------------Group 94.4 73.3 ============================ (d) Capital expenditure on property, plant and equipment and intangible assets by segment 2007 2006 £ million £ million Northern Europe 10.0 18.4Continental Europe 14.0 21.8North America 27.9 47.8Middle East, Asia-Pacific, South America 32.2 27.7 ----------------------------Local Business 84.1 115.7International Power Projects 101.4 56.1 ----------------------------Group 185.5 171.8 ============================ Capital expenditure comprises additions of property, plant and equipment (PPE)of £180.6 million (2006: £128.0 million), acquisitions of PPE of £4.9 million (2006: £33.1 million) and acquisitions of intangible assets of £nil (2006: £10.7 million). (e) Assets/(liabilities) by segment Assets Liabilities 2006 2006 Restated Restated 2007 (Note 6) 2007 (Note 6) £ million £ million £ million £ million Northern Europe 67.8 72.8 (15.5) (12.2)Continental Europe 107.4 98.9 (24.3) (22.0)North America 163.3 169.8 (19.6) (27.4)Middle East, Asia-Pacific, South America 120.8 88.2 (26.1) (17.3) -----------------------------------------------------Local Business 459.3 429.7 (85.5) (78.9)International Power Projects 268.5 183.0 (88.3) (63.6) -----------------------------------------------------Group 727.8 612.7 (173.8) (142.5) ===================================================== Segment assets include goodwill, property, plant and equipment, intangibleassets, inventory, receivables and operating cash. Segment liabilities compriseoperating liabilities. They exclude taxation, the retirement benefit obligationand corporate borrowings. The 2006 segment assets and liabilities have beenrestated to include goodwill and the final fair value adjustments relating tothe GE Energy Rentals acquisition. (f) Average number of employees by segment 2007 2006 number numberNorthern Europe 366 352Continental Europe 419 370North America 828 719Middle East, Asia-Pacific, South America 446 303 ---------------------------Local Business 2,059 1,744International Power Projects 648 485 ---------------------------Group 2,707 2,229 --------------------------- (g) Segmental revenue by location of customer 2007 2006 £ million £ million UK 65.6 55.9Continental Europe 102.3 79.7North America 168.3 159.0Middle East 116.9 86.1Australasia 41.4 23.6Africa 137.4 97.6Other 61.3 38.8 ---------------------------Total 693.2 540.7 --------------------------- (h) Reconciliation of net operating assets to net assets 2007 2006 Restated £ million £ millionNet operating assets 554.0 470.2Retirement benefit obligation (8.1) (13.1)Net tax and finance payable (35.7) (17.4) --------------------------- 510.2 439.7Borrowings and derivative financial instruments (216.9) (213.5) ---------------------------Net assets 293.3 226.2 =========================== Note 2Exceptional items The exceptional charge in the prior period of £9.2 million related to theacquisition of GE Energy Rentals on 4 December 2006 and comprised £3.6 millionof integration costs, £2.4 million of redundancy and related costs, £1.0 millionof property costs and £2.2 million of other costs. Geographically thisexceptional charge can be split into Northern Europe £2.0 million, ContinentalEurope £1.3 million, North America £4.0 million, Middle East, Asia-Pacific,South America £1.6 million and IPP £0.3 million. Note 3Taxation 2007 2006 £ million £ millionAnalysis of charge in yearCurrent tax expense:UK Corporation tax 16.6 5.3Double taxation relief (5.4) (1.8) -------- -------- 11.2 3.5 -------- --------Overseas taxation 26.3 23.8 -------- -------- 37.5 27.3 Adjustments in respect of prior years:UK (0.5) (0.4)Overseas 0.6 0.4 -------- -------- 0.1 - -------- -------- 37.6 27.3Deferred taxation (Note 14):Temporary differences arising in current year 5.2 (0.3)Movements in respect of prior year 0.7 0.7 -------- -------- 43.5 27.7 ======== ======== 2007 2006 £ million £ millionTax on items charged to equity Current tax on exchange movementsoffset in reserves 0.4 1.3Current tax on share-based payments 1.8 -Deferred tax on IAS 39 movements 1.8 (0.5)Deferred tax on pension scheme deficit - (0.4)Deferred tax on share-based payments 0.7 3.4Deferred tax impact of rate changes on itemspreviously taken to equity (0.5) - -------- -------- 4.2 3.8 -------- -------- Variances between the current tax charge and the standard 30% UK corporate taxrate when applied to profit on ordinary activities for the year are as follows: 2007 2006 £ million £ millionProfit before taxation 124.2 73.9Exceptional items - 9.2 -------- --------Profit before taxation and exceptional items 124.2 83.1 ======== ======== Tax calculated at 30% standard UK corporate rate 37.3 24.9Differences between UK and overseas tax rates 1.8 1.9Permanent differences 4.1 2.4Deferred tax effect of future rate changes (0.8) -Deferred tax assets not recognised 0.3 - -------- --------Tax on current year profit before exceptionalitems 42.7 29.2Prior year adjustments - current tax 0.1 -Prior year adjustments - deferred tax 0.7 0.7 -------- --------Total tax on profit before exceptional items 43.5 29.9Tax credit on exceptional items - (2.2) -------- -------- 43.5 27.7 ======== ========Effective tax rate pre-exceptional items 35.0% 36.0% ======== ======== Note 4Dividends 2007 2007 2006 2006 £ million per share (p) £ million per share (p) Final paid 11.1 4.19 10.0 3.77Interim paid 8.1 3.04 6.7 2.53 ------- ------- ------- ------- 19.2 7.23 16.7 6.30 ======= ======= ======= ======= In addition, the directors are proposing a final dividend in respect of thefinancial year ended 31 December 2007 of 5.02 pence per share which will absorban estimated £13.4 million of shareholders' funds. It will be paid on 16 May2008 to shareholders who are on the register of members on 18 April 2008. Note 5Earnings per share Basic earnings per share have been calculated by dividing the earningsattributable to ordinary shareholders by the weighted average number of sharesin issue during the year, excluding shares held by the Employee Share OwnershipTrusts which are treated as cancelled. 2007 2006 Profit for the year (£ million) 80.7 46.2 ======== ========Weighted average number of ordinary shares in issue(million) 266.2 265.4 ======== ======== Basic earnings per share (pence) 30.33 17.41 ======== ======== For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all potentially dilutive ordinaryshares. These represent share options granted to employees where the exerciseprice is less than the average market price of the Company's ordinary sharesduring the year. The number of shares calculated as above is compared with thenumber of shares that would have been issued assuming the exercise of the shareoptions. 2007 2006 Profit for the year (£ million) 80.7 46.2 -------- -------- Weighted average number of ordinary shares in issue (million) 266.2 265.4Adjustment for share options (million) 2.8 2.4 -------- --------Diluted weighted average number of ordinary shares in issue(million) 269.0 267.8 -------- --------Diluted earnings per share (pence) 30.02 17.25 -------- -------- Aggreko plc assesses the performance of the Group by adjusting earnings pershare, calculated in accordance with IAS 33, to exclude items it considers to bematerial and non-recurring and believes that the exclusion of such itemsprovides a better comparison of business performance. The calculation ofearnings per ordinary share on a basis which excludes exceptional items is basedon the following adjusted earnings: 2007 2006 £ million £ million Profit for the year 80.7 46.2Exclude exceptional items (net of attributabletaxation) - 7.0 -------- --------Adjusted earnings 80.7 53.2 ======== ========An adjusted earnings per share figure is presentedbelow. 2007 2006Basic earnings per share pre-exceptional items (pence) 30.33 20.05 -------- --------Diluted earnings per share pre-exceptional items(pence) 30.02 19.87 -------- -------- Note 6Goodwill 2006 2007 (Restated) £ million £ millionCostAt 1 January 37.8 -Acquisitions - 46.7Fair value adjustments - (9.1)Exchange adjustments 0.2 0.2 -------- --------At 31 December 38.0 37.8 ======== ========Accumulated impairment losses - - ======== ========Net book value 38.0 37.8 ======== ======== During the year, the Group has finalised the fair values of the net assetsacquired from GE Energy Rentals on 4 December 2006 as permitted by IFRS 3'Business Combinations'. Accordingly, the fair values previously reported at 31December 2006 have been restated with a decrease in goodwill of £9.1 million,analysed as follows: £ million Property, plant and equipment (0.8)Trade and other receivables 3.4Inventories (0.7)Trade and other payables 7.4Deferred taxation (0.2) -------- 9.1 ======== Goodwill impairment testsGoodwill has been allocated to cash generating units (CGUs) as £ millionfollows:Northern Europe 2.6Continental Europe 7.3North America 19.1Middle East, Asia-Pacific, South America 5.8 --------Local Business 34.8International Power Projects 3.2 --------Group 38.0 ======== Goodwill is tested for impairment annually or whenever there is an indicationthat the asset may be impaired. The recoverable amounts of the CGUs aredetermined from value in use calculations. The key assumptions for value in usecalculations are those relating to expected changes in revenue and the costbase, discount rates and long-term growth rates. The discount rate used forbusiness valuations was 8.5% after tax based on the weighted average cost ofcapital (WACC) of the Group. Before tax the estimated discount rate was 11.6%.On the basis that the business carried out by all CGUs is closely related andassets can be redeployed around the Group as required, a consistent Groupdiscount rate has been used for all CGUs. Values in use were determined usingforecast cash flows which were based on experience as well as on future expectedmarket trends. A terminal cash flow was calculated using a long-term growth rateof 2.0%. As at 31 December 2007, based on internal valuations, Aggreko plc managementconcluded that the values in use of the CGUs significantly exceeded their netasset value. Note 7Intangible assets 2007 2006 £ million £ millionCostAt 1 January 13.6 2.8Acquisitions - 10.7Exchange adjustments 0.1 0.1 -------- --------At 31 December 13.7 13.6 ======== ========Accumulated amortisationAt 1 January 2.1 1.3Charge for the year 1.6 0.8 -------- --------At 31 December 3.7 2.1 ======== ========Net book values At 31 December 10.0 11.5 ======== ======== Amortisation charges in the year comprise amortisation of assets arising frombusiness combinations (£1.3 million) and amortisation of other intangible assets(£0.3 million). Amortisation charges in the year have been recorded inadministrative expenses. Note 8Property, plant and equipment Year ended 31 December 2007 Short Vehicles, Freehold leasehold Rental plant & properties properties fleet equipment Total £ million £ million £ million £ million £ millionCostAt 1 January 2007 (Restated) 28.5 6.6 720.0 48.5 803.6Exchange adjustments 0.4 0.2 11.6 0.8 13.0Additions 1.2 1.7 172.4 5.3 180.6Acquisitions - - 4.9 - 4.9Disposals (2.2) - (25.4) (2.9) (30.5) -------------------------------------------------------------At 31 December 2007 27.9 8.5 883.5 51.7 971.6 =============================================================Accumulated depreciationAt 1 January 2007 9.1 2.8 408.9 29.8 450.6Exchange adjustments - 0.1 8.6 0.3 9.0Charge for the year 0.9 0.8 85.6 5.5 92.8Disposals (1.9) - (21.4) (2.1) (25.4) -------------------------------------------------------------At 31 December 2007 8.1 3.7 481.7 33.5 527.0 =============================================================Net book values At 31 December 2007 19.8 4.8 401.8 18.2 444.6 =============================================================At 31 December 2006 (Restated) 19.4 3.8 311.1 18.7 353.0 ============================================================= Year ended 31 December 2006 (Restated, Note 6) Short Vehicles, Freehold leasehold Rental plant & properties properties fleet equipment Total £ million £ million £ million £ million £ millionCostAt 1 January 2006 25.0 6.1 653.0 44.6 728.7Exchange adjustments (2.0) (0.6) (61.7) (2.0) (66.3)Additions 7.2 1.1 114.1 5.6 128.0Acquisitions - - 32.2 0.9 33.1Fair value adjustments - - (1.0) 0.2 (0.8)Disposals (1.7) - (16.6) (0.8) (19.1) ------------------------------------------------------------At 31 December 2006 28.5 6.6 720.0 48.5 803.6 ============================================================Accumulated depreciationAt 1 January 2006 10.8 2.6 393.3 27.1 433.8Exchange adjustments (0.7) (0.2) (36.1) (1.5) (38.5)Charge for the year 0.7 0.4 66.5 4.9 72.5Disposals (1.7) - (14.8) (0.7) (17.2) ------------------------------------------------------------ At 31 December 2006 9.1 2.8 408.9 29.8 450.6 ============================================================Net book values At 31 December 2006 19.4 3.8 311.1 18.7 353.0 ============================================================At 31 December 2005 14.2 3.5 259.7 17.5 294.9 ============================================================The 2006 comparatives have been restated for the final fair value adjustmentsarising on the acquisition of GE Energy Rentals which totalled £1.0 millionreduction in rental fleet cost and a £0.2 million increase in vehicles, plantand equipment cost. Note 9Inventories 2006 Restated 2007 (Note 6) £ million £ million Raw materials and consumables 56.2 38.6Work in progress 3.8 2.2 -------- -------- 60.0 40.8 ======== ======== The 2006 comparatives have been restated for the final fair value adjustmentsarising on the acquisition of GE Energy Rentals which totalled a £0.7 millionreduction in raw materials and consumables. Note 10Trade and other receivables 2006 Restated 2007 (Note 6) £ million £ million Trade receivables 123.7 102.5Less: provision for impairment of receivables (9.0) (6.2) -------- --------Trade receivables - net 114.7 96.3 -------- --------Prepayments and accrued income 35.9 33.4Other receivables 14.8 26.9 -------- --------Total receivables 165.4 156.6 ======== ======== The 2006 comparatives have been restated for the final fair value adjustmentsarising on the acquisition of GE Energy Rentals which totalled an increase intrade receivables of £0.7 million and an increase in other receivables of £2.7million. Note 11Borrowings 2007 2006 £ million £ millionNon-currentBank borrowings 212.2 207.9 CurrentBank overdrafts 0.2 3.0Bank borrowings - 7.3 -------- -------- 0.2 10.3 -------- --------Total borrowings 212.4 218.2 -------- --------Short-term deposits (0.7) (0.5)Cash at bank and in hand (9.1) (12.5) -------- --------Net borrowings 202.6 205.2 ======== ======== The bank overdrafts and borrowings are all unsecured. Note 12Trade and other payables 2006 Restated 2007 (Note 6) £ million £ million Trade payables 66.3 43.9Other taxation and social security payable 3.6 5.4Other payables 12.5 14.8Accruals and deferred income 90.2 69.9 -------- -------- 172.6 134.0 ======== ======== The 2006 comparatives have been restated for the final fair value adjustmentsarising on the acquisition of GE Energy Rentals which totalled a decrease inother payables of £8.2 million and an increase in accruals and deferred incomeof £0.8 million. Note 13Provisions Statutory Reorganisation employee and termination restructuring benefit Total £ million £ million £ million At 1 January 2007 5.9 0.3 6.2Utilised during year (4.1) (0.1) (4.2) -------- -------- --------At 31 December 2007 1.8 0.2 2.0 -------- -------- -------- 2007 2006 £ million £ millionAnalysis of total provisionsCurrent 1.3 5.9Non-current 0.7 0.3 -------- --------Total provisions 2.0 6.2 -------- -------- (i) The provision for reorganisation and restructuring comprises the following: (a) Estimated costs of restructuring the Group's North American, European and International operations and the provisions are generally in respect of severance, property and related costs. The provision is expected to be fully utilised before the end of 2008. (b) Estimated costs related to the integration of the GE Energy Rentals business into the Group's global operations. These provisions are in respect of severance, property and other integration costs and are expected to be fully utilised before the end of 2014. (ii)The provision for statutory employee termination benefit relates to a statutory employee termination benefit scheme in France. The provision is expected to be utilised within 18 years. Note 14Deferred tax 2006 Restated 2007 (Note 6) £ million £ million At 1 January (8.6) (13.8)Charge to the income statement (Note 3) (5.9) (0.4)Credit to equity 2.0 2.5Deferred tax asset recognised on acquisitions - 1.0Exchange differences 0.2 2.1 -------- --------At 31 December (12.3) (8.6) ========= ======== The 2006 comparatives have been restated for the final fair value adjustmentsarising on the acquisition of GE Energy Rentals which totalled an increase indeferred tax of £0.2 million. Note 15Share capital 2007 2007 2006 2006 Number £000 Number £000Authorised:Ordinary shares of 20p each 349,750,010 69,950 349,750,010 69,950 ---------------------------------------------- Number Number of shares £000 of shares £000Allotted, called up and fully paid:Ordinary shares of 20p eachAt 1 January 269,510,986 53,902 269,178,880 53,836 Employee share option scheme 1,412,663 283 332,106 66 ----------------------------------------------At 31 December 270,923,649 54,185 269,510,986 53,902 ============================================== During the year 945,584 Ordinary shares of 20p each have been issued at pricesranging from £1.05 to £3.17 to satisfy the exercise of options under theSavings-Related Share Option Schemes ('Sharesave') and Executive Share OptionSchemes by eligible employees. In addition 467,079 shares were allotted to USparticipants in the Long-term Incentives Plan by the allotment of new shares fornil consideration. Note 16Treasury Shares 2007 2006 £ million £ million Treasury Shares (10.5) (9.1) ========== ========= Interests in own shares represent the cost of 3,459,679 of the Company'sordinary shares (nominal value 20 pence) (31 December 2006: 4,436,950) purchasedin June 2004 (2,016,720), May 2005 (1,661,621), October 2006 (758,609) and June2007 (735,728). During the year 1,712,999 of these shares were allotted toparticipants in the Long-term Incentive Plan. These shares represent 1.3% ofissued share capital as at 31 December 2007 (2006: 1.6%). These shares were acquired by a trust in the open market using funds provided byAggreko plc to meet obligations under the Long-term Incentive Arrangements. Thecosts of funding and administering the scheme are charged to the incomestatement of the Company in the period to which they relate. The market value ofthe shares at 31 December 2007 was £18.4 million (31 December 2006: £19.3million). Note 17Statement of changes in equity As at 31 December 2007 Attributable to equity holders of the company Foreign Ordinary Share Capital exchange share premium Treasury redemption Hedging reserve Retained Total capital account shares reserve reserve (translation) earnings equity £ million £ million £ million £ million £ million £ million £ million £ million Balance at 1 January 2007 53.9 7.2 (9.1) 0.1 1.2 (25.7) 198.6 226.2 Fair value losses on foreign currency cash - - - - (1.5) - - (1.5)flow hedge Transfers from hedging reserve toproperty, plant and - - - - (1.5) - - (1.5)equipment Fair value losses on interest rate - - - - (3.4) - - (3.4)swaps Currency translationdifferences (i) - - - - - 5.6 - 5.6 Current tax on items taken to or - - - - - 0.4 1.8 2.2 transferred from equity Deferred taxon items takento or transferred - - - - 1.8 - 0.2 2.0from equity Actuarial losses onretirement benefits - - - - - - (0.1) (0.1) Purchase of treasuryshares - - (4.2) - - - - (4.2) Credit in respect of employeeshare awards - - - - - - 4.6 4.6 Issue of ordinaryshares to employeesunder share option - - 2.8 - - - (2.8) -schemes New share capitalsubscribed 0.3 1.6 - - - - - 1.9 Profit forthe year - - - - - - 80.7 80.7 ----------------------------------------------------------------------------------------------------Total recogniseincome/(loss) 0.3 1.6 (1.4) - (4.6) 6.0 84.4 86.3for the year ---------------------------------------------------------------------------------------------------- Dividends paid - - - - - - (19.2) (19.2)during 2007 ---------------------------------------------------------------------------------------------------- Balance at31 December 2007 54.2 8.8 (10.5) 0.1 (3.4) (19.7) 263.8 293.3 ---------------------------------------------------------------------------------------------------- (i) Included in currency translation differences of the Group are exchange losses of £0.4 million arising on borrowings denominated in foreign currencies designated as hedges of net investments overseas, offset by exchange gains of £6.0 million relating to the translation of overseas results and net assets. As at 31 December 2006 Attributable to equity holders of the company Foreign Ordinary Share Capital exchange share premium Treasury redemption Hedging reserve Retained Total capital account shares reserve reserve (translation) earnings equity £ million £ million £ million £ million £ million £ million £ million £ million Balance at1 January 2006 53.8 6.8 (6.5) 0.1 - (6.5) 160.5 208.2 Fair value gains onforeign currencycash flow hedge - - - - 3.5 - - 3.5flow hedge Transfers from hedging reserve to property, plant and equipment - - - - (2.0) - - (2.0) Fair value gains oninterest rate swaps - - - - 0.2 - - 0.2 Currency translationdifferences (1) - - - - - (20.5) - (20.5) Current tax onitems taken to - - - - - 1.3 - 1.3or transferredfrom equity Deferred taxon items takento or transferred - - - - (0.5) - 3.0 2.5transferredfrom equity Actuarial gains on retirementbenefits - - - - - - 1.5 1.5 Purchase oftreasury shares - - (2.6) - - - - (2.6) Credit in respect of employeeshare awards - - - - - - 4.1 4.1 New share capitalsubscribed 0.1 0.4 - - - - - 0.5 Profit forthe year - - - - - - 46.2 46.2 ----------------------------------------------------------------------------------------------------Total recognisedincome/ (loss) 0.1 0.4 (2.6) - 1.2 (19.2) 54.8 34.7for the year ---------------------------------------------------------------------------------------------------- Dividends paid - - - - - - (16.7) (16.7)during 2006 ---------------------------------------------------------------------------------------------------- Balance at31 December 2006 53.9 7.2 (9.1) 0.1 1.2 (25.7) 198.6 226.2 ---------------------------------------------------------------------------------------------------- (i) Included in currency translation differences of the Group are exchange gains of £8.4 million arising on borrowings denominated in foreign currencies designated as hedges of net investments overseas, offset by exchange losses of £28.9 million relating to the translation of overseas results and net assets. Notes: 1. The above figures represent an abridged version of the Group's full Accounts for the year ended 31 December 2007, upon which the auditors have given an unqualified report. 2. The Annual Report will be posted to all shareholders on 17 March 2008 and will be available on request from the Secretary, Aggreko plc, 8th Floor, 120 Bothwell Street, Glasgow, G2 7JS. The Annual General Meeting will be held in Glasgow on 23 April 2008. The Annual Report contains full details of the principal accounting policies adopted in the preparation of these financial statements. 3. A final dividend of 5.02 pence per share will be recommended to shareholders and, if approved, will be paid on 16 May 2008 to shareholders on the register at 18 April 2008. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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