Half Yearly Report

2 August 2012

Aggreko plc

INTERIM RESULTS

Aggreko plc, the world leader in the supply of temporary power and temperature control, announces its interim results for the six months to 30 June 2012.

·; Strong performance in the first half; reported revenue and trading profit increased by 15% and 25% respectively; underlying revenue and trading profit up by 16% and 23% respectively. Earnings per share up 30%.

·; Both International Power Projects and the Local business grew trading profits by over 20%.

·; International Power Projects underlying revenue grew 17% and trading profit by 22%

o 669 MW of new work won: 196 MW in Asia, 116 MW in Latin America; and 357 MW in Africa & Middle East

o Record order book up 16% on prior year; 14 months' revenue at current run rate

o Doubled amount of gas-fired capacity on rent.

·; Local business underlying revenue grew 15% and trading profit by 24%

o Increases in power volumes and rates in North America drive a strong first half; continued growth expected in second half

o Europe & Middle East will have strong year, helped by the Olympics. Underlying growth is patchy

o Aggreko International's Local business underlying revenue and trading profit grew 27% and 34% respectively in first half; further strong growth expected in second half.

·; Successful start to London Olympics with over 550 generators and 1,500 kilometres of cable deployed on 44 sites; contract will be worth around £55 million.

·; Poit Energia acquisition completed and performing in line with our expectations.

·; Interim dividend to increase by 15%.

Rupert Soames, Chief Executive, commented:

"Aggreko delivered another strong performance in the first half of 2012 with underlying growth of 16% in revenue and 23% in trading profit."

"It's been a very successful six months. We substantially expanded our Latin American business with the acquisition of Poit Energia in Brazil; we have built a new temporary power plant in Mozambique, which, uniquely, is providing power both to both the South African and Mozambique utilities, and which will deliver revenues of over $200 million over the next two years; our order-book is at record levels; we have opened our new manufacturing facility in Scotland; and we have delivered what will be the world's largest contract for temporary power for a major sporting event, in the form of our work as the exclusive supplier of temporary power for the London Olympics."

"Looking ahead, we continue to believe that we will deliver another year of good growth in 2012, and we reiterate our previous guidance of fleet capital expenditure of around £415m."

Regional performance metrics:

- ENDS -

Enquiries to:

Interim management report

Group Trading Performance

Aggreko delivered another strong performance in the first half of 2012. Reported revenue and trading profit1 increased by 15% and 25% respectively, while underlying2 revenue grew 16% and trading profit by 23%.

Group revenue, as reported, increased by 15% to £734 million (2011: £637 million), while trading profit of £157 million (2011: £125 million) increased by 25%. Group trading margin was 21% (2011: 20%). Underlying revenue and trading profit increased by 16% and 23% respectively. On the same basis trading margin was 23% (2011: 21%).

Group profit before tax increased by 23% to £146 million (2011: £119 million) and profit after tax increased by 27% to £108 million (2011: £85 million), reflecting the reduction in the tax rate from 28.5% to 26.0%. Group return on capital employed (ROCE)3, measured on a rolling 12-month basis, was 26.2% (2011: 28.5%). This decrease was driven by the Local business with the 2011 comparative including the favourable impact from major events in the second half of 2010, as well as the year one impact of the Poit Energia acquisition, where the assets are included in the calculation, but only two months trading is reflected. International Power Projects return on capital employed was flat year-on-year. The ratio of revenue (excluding pass-through fuel4) to average gross rental assets decreased marginally from 72% to 71%.

The movement in exchange rates in the period had the effect of increasing revenue by £7 million and trading profit by £3 million, mainly as a result of the slight weakening of sterling against the US dollar. Pass-through fuel accounted for £20 million (2011: £53 million) of reported revenue of £734 million.

Fleet capital expenditure for the period was £220 million, £50 million higher than the prior year, and 213% of the depreciation charge in the period; a large part of the year-on-year increase was accounted for by equipment purchased to serve the London Olympics contract, which, following the Games, will be put to use in the wider business. The Aggreko International business accounted for 54% of fleet investment. In addition, we acquired £48 million of property, plant and equipment as part of the Poit Energia acquisition. The total cash paid in the period for this acquisition was £130 million.

Net debt of £678 million at 30 June 2012 was £421 million higher than the same period last year driven by: the return of capital to shareholders (£149 million); the acquisition of Poit Energia (£130 million); higher capital expenditure in the 12 months to June 2012 compared to the 12 months to June 2011; and increased levels of working capital in International Power Projects. These increased outflows were in part offset by higher EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation).

Acquisition of Poit Energia

On 16 April 2012 we completed the acquisition of the entire share capital of Companhia Brasileira de Locacoes ("Poit Energia"), a leading provider of temporary power solutions in South America. The initial transaction price of £138 million (R$404 million) was made up of £105 million consideration payable to the owners of Poit Energia plus £33 million of debt, to be paid off by Aggreko on behalf of Poit Energia. In addition to the initial transaction price of £138 million, there is a further amount of up to £20 million conditional on the business achieving stretching performance targets for the year to 31 December 2012.

The acquisition of Poit Energia supports Aggreko's strategy of expanding its Local businesses in fast growing economies; it strengthens Aggreko's business in South America, both in terms of geographic footprint and access to sectors which Aggreko is currently not in or to which it has limited exposure. The business is performing in line with our expectations.

Regional Trading Performance as reported in £ million

The performance of each of these regions in the first half is described below:

Local business: North America

Our North American business delivered a strong performance in the first half. Underlying revenue, which for North America adjusts only for the impact of currency, increased by 12% to $208 million and trading profit by 22% to $31 million. Trading margin improved from 14% to 15%.

Rental revenue was up 10% and services revenue was up 19%. Revenue growth was driven by power rental revenue, which increased by 27%; much of this growth came from the oil and gas sector. Power volumes grew significantly and rates were also up on the prior period. Temperature control revenue was down 10% largely due to lower volumes in our Cooling Towers business; historically this has been a feast-or-famine business, with revenues varying by as much as $10 million between good years and poor years. So far, 2012 has been a lean year. Oil-free compressed air revenue was down 2%.

The North American business has taken significant steps in upgrading its diesel generator fleet with the latest emissions technology. The next stage of this has begun and we started taking delivery of the first Tier 4 interim engines this year. By the end of 2013, almost 50% of the fleet will be either Tier 3 or Tier 4 compliant.

The growth rate in North America was slower in the second quarter than in the first, in large part due to the absence in 2012 of several large emergency jobs which benefited temperature control revenues in 2011. The business has had a strong start to the second half, with volumes in power well ahead of the prior year, and we expect good growth in the second half, and for the year as a whole.

Local business: Europe & Middle East 

Europe

Middle East & Developing Europe

Our Europe & Middle East business had a good first half in 2012; on an underlying basis (i.e. excluding London Olympics and the impact of currency) revenue increased 10% and trading profit increased 20%. On the same basis trading margin increased to 9% from 8%. Reported performance was stronger, with over £21 million of Olympics revenue being recognised in the first half. At the time of publishing this report we are providing over 550 generators and 1,500 kilometres of cable across 44 sites for the Olympics, and we now expect that the total contract will be worth around £55 million.

Revenue in Europe, on an underlying basis, was in line with the prior period, reflecting the generally poor economic environment. Rental revenue decreased 2% while services revenue increased 2%. Within rental revenue, power increased by 1% but temperature control decreased by 9%. Geographic area performance continued to be mixed with increases in Scotland, Norway and Spain offset by decreases in other parts of the UK, Germany and Italy.

Underlying revenue in our Middle East & Developing Europe business grew by 25% with an increase of 20% in rental revenue and a 39% increase in lower margin services revenue. Within rental revenue, power increased 23%; temperature control revenue, however, decreased by 18%, albeit off a small base. In geographic terms, our business in Russia continued to grow with 150 MW on rent at the end of the first half. Elsewhere we had good growth in Oman, Saudi Arabia and Abu Dhabi as well as benefitting from an emergency contract in Cyprus.

Across Europe & Middle East power rates increased year-on-year but we have seen a decline in temperature control rates.

For the year as a whole we expect Europe & Middle East to deliver strong growth on a reported basis, which includes the Olympics. While we are seeing pockets of strong growth in some of our new markets and in parts of the Middle East, the overall weakness of the economies of Europe makes it difficult to achieve anything other than modest underlying growth for the region as a whole.

Local business: Aggreko International

Aggreko International's Local business operates in the Australia Pacific region, China, India and South East Asia, throughout Latin America, South Africa and most recently, Kenya. This business had a strong first half with underlying revenue (excluding currency, Asian Games in 2011 and the Poit Energia acquisition in 2012) increasing by 27% and trading profit by 31%. On the same underlying basis trading margin increased from 16% to 17%.

On an underlying basis rental revenue increased 29% and services revenue increased 20%. Within rental revenue power increased 30% and temperature control increased 24%. Revenue in nearly all geographies increased as compared with the same period last year, most notably in our more mature business in Australia Pacific where revenue increased 18%, driven by a strong performance in the mining sector and Brazil (excluding the Poit Energia acquisition) where revenue increased 33% driven by the mining, utilities and events sectors.  We also opened new locations in the first half in Cape Town and Nairobi as part of the continued expansion of our Local business service centre network in faster growing economies.

On a reported basis growth in Aggreko International's Local business is expected to be higher in the second half than the first, due to the impact of the Poit Energia acquisition. On an underlying basis, we expect the rate of growth to slow somewhat in the second half as comparatives become more challenging. However, we still expect to deliver a strong rate of underlying growth for the year as a whole.

International Power Projects: Aggreko International

Our International Power Projects business delivered a strong performance in the period with revenue, in constant currency and excluding pass-through fuel, growing by 17% to $490 million and trading profits increasing by 22% to $166 million. Trading margin increased to 34% (2011: 33%) notwithstanding a $25 million increase in our bad debt provision, similar to the $23 million of the first half of 2011. Revenue from our gas-powered units grew strongly and the average MW on rent has increased by around 100% year-on-year. 

Demand has been strong during the first half: we secured 24 new contracts and 669 MW of new work, 196 MW in Asia, 116 MW in Latin America and 357 MW in Africa & Middle East. At the end of the period, our order book was over 39,000 MW months, the equivalent of 14 months' revenue at the current run-rate, and an increase of 16% over the prior year. These numbers do not include our project in the Dominican Republic; at the time we announced this project, we said that it was subject to the customer completing a number of conditions precedent; largely as a result of recent elections and the subsequent change in administration, this process is taking longer than we anticipated, and we now think it unlikely that we will be earning revenue from the project this year. In Mozambique, on the other hand, we have completed all the conditions precedent with ESKOM and EDM, and the 107 MW site went into production on 18th July.

The record level of the order book means that we expect our International Power Projects business to have a strong second half and full year in terms of revenue growth. Whilst we anticipate that margins in the second half will be higher than in the first, they will be noticeably lower than the prior year, as we are currently assuming that we do not see a repeat of the $18 million release of bad debt provision which benefited the second half of 2011. We have also incurred very high mobilisation costs on the Mozambique project, which will be recovered over the next two years.

Outlook

We expect to report strong growth in revenue and profit in the Local business both in the second half and for the year as a whole, supported by the London Olympics and the Poit Energia acquisition. We anticipate underlying growth will be lower in the second half than in the first, in part because of tougher comparators, and in part because of continued macro-economic weakness in some of our larger mature markets. Margins on both an underlying and reported basis for both the second half and the full year are forecast to be better than last year.

In International Power Projects, the record level of the order book means that we expect that the business will have a strong year in terms of revenue growth. We anticipate that margins and returns will be lower than 2011 mainly as a result of our assumed increase in bad debt provisions and unusually high mobilisation costs.

We expect that Group margins for the year as a whole, both on a reported and underlying basis, will be at similar levels to last year as stronger margins in our Local business and favourable mix offset lower margins in International Power Projects.

Overall, we continue to believe that we will deliver another year of good growth in 2012, and we reiterate our previous guidance of fleet capital expenditure of around £415 million.

Financial Review

The movement in exchange rates during the period increased revenue and trading profit by £7 million and £3 million respectively, with the weakening of sterling against the US dollar having the greatest impact. Currency translation also gave rise to a £25 million decrease in net assets from December 2011 to June 2012. Set out in the table below are the principal exchange rates affecting the Group's overseas 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:

Interest

The net interest charge for the first half of 2012 was £12 million, an increase of £4 million on 2011 reflecting the higher level of average net debt, driven by the return of capital to shareholders, the Poit Energia acquisition, higher levels of capital expenditure and higher levels of working capital. Interest cover, measured against rolling 12-month EBITDA, remains strong at 26.3 times (June 2011: 36.2 times) relative to the financial covenant attached to our borrowing facilities that EBITDA should be no less than 4 times interest.

Effective Tax Rate

The current forecast of the effective tax rate for the full year, which has been used in the interim accounts is 26.0% as compared with 28.5% in the same period last year. The reduction is principally driven by the impact of the application of the UK branch profits election to our International Power Projects business.

Dividends

The Board has decided to pay an interim dividend of 8.28 pence per ordinary share which represents an increase of 15% compared with the same period in 2011; dividend cover is 5.0 times (30 June 2011: 4.4 times). This interim dividend will be paid on 5 October 2012 to shareholders on the register at 7 September 2012, with an ex-dividend date of 5 September 2012.

Cashflow

EBITDA for the period amounted to £270 million, up 26% on 2011. The net cash inflow from operations during the first six months of 2012 totalled £134 million (2011: £155 million). The reduction in cash inflow from operations was caused by working capital movements, in particular an increase in debtor days in our International Power Projects business and less of an increase in creditors year-on-year. In terms of the increase in debtor days, a small number of our customers had significant overdue balances at the period end, and this had a material impact on our working capital. None of the customers are disputing the payment liability and we are hopeful that we will see some improvement in this position during the second half.

Capital expenditure of £233 million in the 6 months to June 2012 was up £52 million on the same period in 2011 reflecting continued investment in our International Power Projects and Local business fleet. Capital expenditure in the 12 months to June 2012 increased by £123 million compared to the 12 months to June 2011. The Aggreko International business accounted for the majority of this spend reflecting the expansion of our Local business in Asia, Latin America and Africa.

This increase in total capital expenditure, the cash outflow related to the Poit Energia acquisition, the £149 million return of capital to shareholders (£148 million in July 2011 and £1 million in May 2012) and higher working capital requirements were the main drivers in net debt at 30 June 2012 being £421 million higher than the same period last year. On a rolling 12-month basis, net debt to EBITDA was 1.2 times compared with 0.5 times for the same period in 2011.

Financial Resources

The Group maintains sufficient facilities to meet its normal funding requirements over the medium term. At 30 June 2012, these facilities totalled £868 million in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement notes. Since the start of 2012, we have put in place £205 million of new facilities. 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 30 June 2012, these stood at 26.3 times and 1.2 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 13 in the Accounts. In addition, since 30 June 2012 we have put in place a new committed bank facility of £77 million with a maturity of four years.

Net debt amounted to £678 million at 30 June 2012 and, at that date, un-drawn committed facilities were £230 million.

Net Operating Assets

The net operating assets of the Group at 30 June 2012 totalled £1,667 million, up £415 million on the same period in 2011. The main components of net operating assets are:

A key measure of Aggreko's performance is Return on Capital Employed (ROCE) (expressed as operating profit as a percentage of average net operating assets). For each first half we calculate ROCE by taking the operating profit on a rolling 12-month basis and expressing it as a percentage of the average net operating assets at 30 June, 31 December and the previous 30 June. For the full year, we state the year's operating profit as a percentage of the average net operating assets as at 31 December, the previous 30 June and 31 December. The average net operating assets for the 12 months to 30 June 2012 were £1,424 million, up 30% on the same period in 2011; operating profit for the same period was £373 million. In the first half of 2012 the ROCE decreased to 26.2% compared with 28.5% for the same period in 2011. This decrease is driven by the Local business with the 2011 comparative including the favourable impact from major events in the second half of 2010, as well as the impact of the Poit Energia acquisition, for which the assets are included, but only two months of trading is reflected. International Power Projects return on capital employed is flat year-on-year.

Acquisitions

On 16 April 2012 we completed the acquisition of the entire share capital of Companhia Brasileira de Locacoes ("Poit Energia"), a leading provider of temporary power solutions in South America. The initial transaction price of £138 million (R$404 million) was made up of £105 million consideration payable to the owners of Poit Energia (£103 million paid at 30 June 2012) plus £33 million of debt, to be paid off by Aggreko on behalf of Poit Energia. Of the £33 million of debt, £27 million was settled by the half year and the remaining amount will be settled in the normal course of business as it falls due. In addition to the initial transaction price of £138 million, there is a further amount of up to £20 million conditional on the business achieving stretching performance targets for the year to 31 December 2012.

The total purchase consideration for accounting purposes was £125 million comprising the £105 million cash consideration plus the deferred consideration of £20 million. The fair value of net assets acquired was £38 million resulting in goodwill of £87 million. For accounting purposes the £33 million of debt does not form part of the purchase consideration. The detailed acquisition note is contained in Note 18 in the Accounts.

Shareholders' Equity

Shareholders' equity increased by £46 million to £927 million in the six months ended 30 June 2012, represented by the net assets of the Group of £1,605 million before net debt of £678 million. The movements in shareholders' equity are analysed in the table below:

Principal Risks and Uncertainties

In the day to day operations of the Group, we face risks and uncertainties. Our job is to mitigate and manage these risks and to aid this the Board has developed a formal risk management process which is described on page 59 of the 2011 Annual Report and Accounts. Also set out on pages 29 to 33 of that report are the principal risks and uncertainties which we believe could potentially impact the Group, and these are summarised below:

·; Economic conditions;

·; Political risk;

·; Failure to collect payments or to recover assets;

·; Events;

·; Failure to conduct business dealings with integrity and honesty;

·; Safety;

·; Competition;

·; Product technology and emissions regulation; and

·; People.

We do not believe that the principal risks and uncertainties facing the business have changed materially since the publication of the Annual Report and we believe these will continue to be the same in the second half of the year.

Shareholder information

Our website can be accessed at www.aggreko.com. This contains a large amount of information about our business, including a range of charts and data, which can be downloaded for easy analysis. The website also carries copies of recent investor presentations, as well as Stock Exchange announcements.

Group Income Statement

For the six months ended 30 June 2012 (unaudited)

Group Statement of Comprehensive Income

For the six months ended 30 June 2012 (unaudited)

Group Balance Sheet (Company Number: SC177553)

As at 30 June 2012 (unaudited)

Group Cash Flow Statement

For the six months ended 30 June 2012 (unaudited)

Reconciliation of net cash flow to movement in net debt

For the six months ended 30 June 2011 (unaudited)

Group Statement of Changes in Equity

For the six months ended 30 June 2012 (unaudited)

As at 30 June 2012

As at 30 June 2011

Notes to the Interim Accounts

For the six months ended 30 June 2012 (unaudited)

1 General information

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The address of the registered office is 120 Bothwell Street, Glasgow, G2 7JS, UK.

This condensed interim financial information was approved for issue on 2 August 2012.

This condensed consolidated interim financial information does not comprise Statutory Accounts within the meaning of Section 434 of the Companies Act 2006. Statutory Accounts for the year ended 31 December 2011 were approved by the Board on 9 March 2012 and delivered to the Registrar of Companies. The report of the auditors on those Accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The condensed consolidated interim financial information is unaudited but has been reviewed by the Group's auditors, whose report is on page 26.

2 Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June 2012 has been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Services Authority and IAS 34 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.

Going-concern basis 

The Group's banking facilities are primarily in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement notes; facilities totalled £868 million at 30 June 2012. The financial covenants attached to these facilities are that EBITDA should be no less than 4 times interest (30 June 2012: 26.3 times) and net debt should be no more than 3 times EBITDA (30 June 2012: 1.2 times). The Group does not consider that these covenants are restrictive to its operations. The maturity profile of the borrowings is detailed in Note 13 to the Accounts. The Group's forecasts and projections show that the facilities in place are currently anticipated to be ample for meeting the Group's operational requirements for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated interim financial statements.

3 Accounting policies

The accounting policies are consistent with those of the annual financial statements for the year ended 31 December 2011, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

New and amended standards and interpretations need to be adopted in the first interim financial statements issued after their effective date (or date of early adoption). There are no new IFRSs or IFRICs that are effective for the first time for this interim period that would be expected to have a material impact on the Group.

4 Cashflow from operating activities

5 Cash and cash equivalents

6 Segmental reporting

(a) Revenue by segment