Interim Results

3 August 2016

Group Performance

Group summary

· Difficult economic backdrop impacting a number of our markets, particularly North America

· Strong Power Solutions Utility order intake of 875MW

· Utility business debtor provision increased by $17m

· Good progress around business priorities of customer, technology and efficiency

· Interim dividend maintained reflecting confidence in the strength and prospects for the Group

Chris Weston, Chief Executive Officer, commented:

"The trading environment in this first six months has been difficult, with the lower oil price continuing to impact a number of our markets. We are holding our guidance for the full year while recognising the importance of securing key contract extensions and the seasonal weighting of our North American business to the second half.

I am pleased with the good progress we continue to make with our business priorities and the strong level of order intake in Power Solutions Utility to date."

Business unit performance

Business unit highlights

Rental Solutions

· North American revenue down 20% driven by:

o Upstream oil & gas decline that started in Q2 2015

o Petrochemical & refining slow first half after strong 2015

· Good growth in AUSPAC and Europe

· Double digit growth in temperature control

Power Solutions

Industrial

· Revenue down 12%; excluding European Games from comparative revenue down 2%

· Latin America markets difficult, in particular our transactional business in Brazil

· Strong performances in Russia and Africa and solid performance in Middle East despite low oil price

Utility

· Revenue decrease driven by Bangladesh contract renewal and off-hiring of Mozambique and Panama contracts

· Strong order intake of 875MW (2015: 451MW)

· First half off hires of 20% (H1 2015: 8%); driven by Mozambique

· Order book over 68,000MW months includes multi-year contracts in Brazil and Zimbabwe

· Payment challenges; in particular Venezuela driving $17m debtor provision increase

Enquiries

Interviews with Management

Interviews with Chris Weston and Carole Cran discussing the interim results are available on our website at www.aggreko.com/investors/reports-results-and-presentations/financial-results-centre.aspx

Analyst Presentation

A presentation will be held for analysts and investors today at 9am (GMT) at the London Stock Exchange. A live web-cast and a copy of the slides will be available on our website and investor relations app at www.aggreko.com/investors.

INTERIM MANAGEMENT REPORT

The trading results for the 6 months to 30 June 2016 are set out below. All numbers in this section are pre-exceptional items.

Group Trading Performance

Group revenue was down 12% over the same period last year on an underlying basis. Rental Solutions revenue was down 8% driven by the decline in North America in upstream oil and gas that started to impact us from quarter two 2015 and softness in the petrochemical and refining sector from the start of 2016, following a strong 2015. Outside North America, Rental Solutions grew year on year in both Europe and AUSPAC. Power Solutions underlying revenue was down 15%. Within this, our Industrial business revenue decreased 12% primarily due to the comparatives including revenue from the European Games, excluding this, revenue was down 2%. Power Solutions Utility revenue was down 16% driven by the off hiring of our diesel contract in Panama which ended in June 2015, the new contract terms in Bangladesh which took effect from the second quarter of last year and the demobilisation at the beginning of this year of 108MW from our gas-fuelled plants in Mozambique, where permanent power came on line. A further 65MW came out of contract, but remains installed in Mozambique, and latterly the majority is being sold into the Southern Africa Power Pool spot market.

Overall, the Group trading margin was 11% (2015: 15%). Rental Solutions margin was down eight percentage points reflecting the decline in North America oil and gas and petrochemical and refining revenue. Power Solutions Industrial margin was down three percentage points reflecting the incremental benefit from the European Games in the prior year numbers. Power Solutions Utility margin was up one percentage point with lower mobilisation costs and lower indirect tax costs, offset by a higher debtor provision driven by slower payments, in particular from our customers in Venezuela and to a lesser extent a customer in Africa. The lower Group margin impacted the Group return on capital employed, which was 14% (2015: 17%).

The movement in exchange rates in the period had the translational impact of increasing revenue by £4 million and decreasing trading profit by £10 million.

Earnings and Dividends

The Group delivered profit before tax of £71 million (2015: £102 million). Diluted earnings per share (DEPS) was 19.81 pence, 33% lower than the prior year. The Board has proposed an interim dividend of 9.38 pence per ordinary share (2015: 9.38 pence), which maintains the dividend in line with the prior year.

Cashflow and Balance Sheet

During the first six months, we generated an operating cash inflow of £100 million (2015: £255 million). The reduction in operating cash inflow is driven by working capital outflows of £101 million, lower operating profit of £33 million and cash outflow from exceptional items of £15 million. The majority of the working capital outflow is due to increased activity related to the mobilisation of new orders and the production of our medium speed HFO and gas products as well as an increase in trade debtors in our Power Solutions Utility business (this movement is explained in more detail in the Financial Review on page 12). Fleet capital expenditure was £91 million (2015: £138 million), of which £10 million was invested in our gas fleet and £23 million to continue the refurbishment programme of our diesel fleet to the more fuel efficient, higher output G3+ engine, which now makes up around 20% of the Power Solutions Utility diesel fleet. We applied good discipline around capital expenditure, spending less in period than anticipated in reaction to market conditions.

Net debt was £634 million at 30 June 2016, £167 million higher than the prior year. £101 million of this movement relates to currency movements, notably the recent weakening of sterling against the US dollar, following the UK's decision to leave the European Union. The movement excluding currency of £66 million was driven by cash flow from operating activities in the twelve months to 30 June 2016 of £306 million, capital expenditure of £205 million, ordinary dividend payments of £69 million as well as purchase of shares and interest and tax payments. This resulted in net debt to EBITDA on a rolling 12-month basis of 1.2 times compared to 0.8 times at June 2015.

Outlook

Rental Solutions is a seasonal business normally weighted to the second half. More broadly we continue to see challenging conditions in North America, more than offsetting good growth in our other regions and our outlook for the balance of this year remains cautious.

Performance in Power Solutions Industrial is expected to improve in the second half as we see the benefit of new work won in the first half in Eurasia and the Middle East.

The Power Solutions Utility business has strong order intake for this stage in the year, however not all of it will benefit 2016. The prospect pipeline remains healthy but the environment continues to be competitive. We continue to expect contract off hire levels to be around 30%, which is back to historic levels. The guidance assumes the extension of our largest current contract in Argentina as well as those in Venezuela and Yemen. We are also working hard to recover the overdue debt in Venezuela.

Our guidance for fleet capital expenditure of around £270 million remains unchanged.

Overall, we are holding our expectations for the full year of profit before tax and exceptional items being slightly lower than last year on an underlying basis.

BUSINESS UNIT PERFORMANCE REVIEW

The performance of our business units is described below.

Rental Solutions

Our Rental Solutions business had a challenging six months with underlying revenue down 8% on the prior year and trading profit declining by 71%. Trading margin decreased by eight percentage points with the reduction driven by the decrease in our North American oil and gas business, both upstream and downstream. The reduction in trading profit was compounded by lower pricing in these sectors and the seasonality of the business model, where there are relatively fixed costs applied across the year, but a revenue weighting towards the second half.

Rental revenue decreased by 10% and services revenue decreased by 5%. Within rental revenue power decreased by 19% and oil free air was down 12%. Offsetting this, we saw good growth in temperature control with revenue up 15% including the 2015 acquisition of ICS, a specialist heating business combined with good base business growth.

Overall, revenue in our North American business was down 20% driven principally by two sectors as noted above. First, the decline that affected us from quarter two last year in upstream oil and gas has continued through the first half of 2016 reflecting the continued impact of a lower oil price on our business in the shale basins, offshore Gulf of Mexico and the Canadian oil sands. Secondly, our petrochemical and refining sector has had a weak first half following double digit growth in 2015. The margins of customers in this sector have been under pressure, with a warm winter increasing inventory levels, while since the start of the year oil prices have gone up and this has tightened margins. In this environment our customers look to cut costs, including the deferral of maintenance turnarounds and generally have less need for our services where they are not running at full production. In response to the current trading environment our North American business has reduced headcount and capital expenditure as well as more recently reorganising and simplifying the business structure in line with our business priorities.

Our Australia Pacific business had a good first half with revenue increasing 11% driven by our 108MW emergency response contract in Tasmania which runs to early August. This contract was in response to the lack of hydro power in the region and a fault in the Basslink interconnector to the mainland.

Across Europe nearly all countries have seen growth year on year despite the lower oil price having an impact on our businesses in Scotland and the Nordics. Our Continental European business saw revenue increasing 8% aided by good growth in France and the Netherlands. The Northern European business also had a good first half with revenue increasing 10% with good growth in the construction and events sectors.

Power Solutions

Overall our Power Solutions business saw revenue decline by 15% and trading profit decline by 7% on an underlying basis. Revenue in our Industrial business decreased by 12% and trading profit by 39%. Trading margin decreased to 8% (2015: 11%) with 2015 benefitting from the European Games. Our Utility business saw revenue decreasing 16% and trading profit flat. Trading margin was one percentage point higher at 22% (2015: 21%).

Underlying revenue in our Industrial business unit decreased 12% with rental revenue down 8% and services revenue down 26%. The comparatives included revenue from the European Games, excluding this, revenue was down 2%. On a geographic basis we continued to see growth in Russia and Africa and our Middle East business delivered a solid performance, especially in the face of lower oil prices. These performances were offset by more difficult trading conditions in Asia and Latin America, in particular Brazil and Chile. Since we began implementing our business priorities we have closed two depots in Latin America, with the scope of a further eight locations right-sized for current market conditions. In addition we have reduced headcount and the size of our fleet and will further consider the right model for our Brazilian business in the second half. During the period we opened our first depot in the Philippines following some utility contract awards and we hope to see progress addressing the industrial customer base during half two and beyond.

Our Utility business saw underlying revenue decrease by 16% driven by the off hiring of our diesel contract in Panama which ended in June 2015, the new contract terms in Bangladesh which were not effective until the second quarter of last year and the off-hire of 173MW of our gas-fuelled plants in Mozambique. Trading margin increased slightly to 22% (2015: 21%) driven by lower mobilisation costs and lower indirect tax costs, offset by a higher debtor provision driven by slower payment by our Venezuela customers and to a lesser extent a customer in Africa.

Order intake year to date was 875MW (2015: 451MW) with contracts signed at terms consistent with our medium-term return targets. New business included 200MW in Zimbabwe, 312MW in Brazil, 40MW in the Bahamas and 30MW in Mali. At the end of the period, our order book was over 68,000MW months, the equivalent of 25 months' revenue at the current run-rate (30 June 2015: 13 months). The increase reflects the 15 and 3 year durations respectively of the Brazilian and Zimbabwean contract wins. The off-hire rate in the first half was 20% (2015: 8%) driven by the Mozambique off hire.

In Argentina we have 450MW on hire and have been operating since 2008 over 11 sites. Since the period end, and subject to contract, we have extended 120MW for a period of three months until 30 September 2016 at rates lower than we had expected. The customer has indicated that they will issue a tender for the extension of this 120MW and we anticipate that the extension period will cover the whole of 2017. The contracts for the balance expire between the end of October 2016 and June 2017.

BUSINESS PRIORITIES

In August last year we laid out the three priority areas on which the business would focus to allow us to deliver sustainable growth: our customer, our technology and our efficiency. There are a number of initiatives underway against each of the priorities covering both Rental Solutions and Power Solutions. These two businesses operate in different market environments and we have identified actions specific to each, on which we have made positive progress over the last twelve months.

Progress across all initiatives continues to be governed and measured by a Programme Management Office, which provides assurance and risk management to the Executive team and the Board. This allows the remainder of the business to focus on ongoing customer and operational requirements.

As part of the re-organisation announced last year, we committed to making £80 million of cash savings, predominantly focussed on removing duplication of resources (i.e. effectively taking out a layer of overhead) and improving our procurement practices. On the former we have removed over 700 roles from the business, which has delivered the intended savings. On the latter, our procurement function has also made good progress, driving savings from improved supplier terms, implementing more competitive tendering practices as well as adding a number of new sourcing tools. We have improved our relationships with key suppliers, particularly our engine OEMs, Cummins, GE Jenbacher and MAN, where framework agreements are being put in place, focussed on building long-term, sustainable partnerships. We expect to see these activities continue through the rest of this year and to support ongoing cost reductions in 2017 and beyond.

Rental Solutions

Besides the cost reductions noted above, the focus for Rental Solutions has been on its customers and the services we currently provide. We have spoken to over a thousand customers to better understand their requirements and what changes we need to make to serve them better. A major outcome from this was the need to streamline the customer experience by segment and sector and we are investing in an improved digital offering to facilitate this.

This digital offering will be underpinned by a new CRM, which will improve our interaction with customers as well as enhance our fleet management and back office processes. This is complemented by our existing remote monitoring offering, which provides monitoring services for assets throughout Rental Solutions and supports continuing improvements in our field operational efficiency and asset management. Our new systems and processes will also provide improved data and information flow, enhancing our ability to take advantage of our unique global position to serve customers internationally.

We remain committed to growing our other product lines, including temperature control and other ancillary products like loadbanks, both of which allow for the provision of associated power. In this regard, the integration of ICS, a specialist heating company based in Canada that we acquired in 2015 is complete and we continue to build a pipeline of similar M&A opportunities.

Power Solutions

Efficiency improvements were the first area of priority in Power Solutions and we have made good progress in reducing the cost base across the business. This has not only encompassed the Power Solutions share of the cost savings noted above, but has also seen us reduce the costs at our Power Solutions Utility project sites through lower material, infrastructure and manpower costs. Our procurement organisation is being leveraged to reduce costs in these areas, as well as across our mobilisation/demobilisation processes. These activities are ongoing and we are continually reviewing opportunities in this area to further improve our competitive position.

In Power Solutions Industrial, we are working on optimising the depot infrastructure ensuring that functional support structures are as lean as possible, particularly in those territories where the macro-economic conditions are challenging at present, like Brazil. We have established an improved low-cost operating model for new locations, which was successfully applied to our new depot opening in the Philippines and which will form the basis for future entry into growth markets.

We have undertaken work to better understand the needs of Power Solutions Utility customers and ensure that we are clear on the factors driving the power gap in existing and potential markets. Progress here has been slower than anticipated, however it will allow us to ensure we have sales resource properly allocated by geography and by market segment. We have also tightened management of our sales pipeline, although there is more work to complete in this area as well as on the recruitment, incentives and training of our salesforce. More generally we have streamlined our bidding processes and upgraded the CRM.

A lower cost of energy remains critical to most of our customers and our investment in technology is a key enabler in this area. We launched our medium speed HFO product this year, using proven, existing engine technology containerised to suit our mobile, modular business model. We are in the initial stages of production and anticipate the product being in the market in early 2017. We expect this to provide significant fuel savings to our customers when compared to diesel costs.

Work on improving the efficiency of our existing diesel fleet continues, through an extensive programme of refurbishments and upgrades which provide an engine with market leading efficiency that is now around 20% of our Power Solutions Utility diesel fleet. Our investment in new gas engine technology has also delivered improvements in fuel efficiency at a lower cost of capital compared to the current fleet and this new fleet will supplement and replace our current one through the rest of this year and beyond.

To further address the need to provide a lower cost of power to our customers, we are also in the early stages of launching a solar-diesel hybrid product. We will provide a modular renewable product using diesel for those periods where solar power is unavailable, something we aim to have in the market during 2017.

Execution

We expect the majority of this work to be complete by the end of 2017, and from the beginning of 2017 we expect to have delivered the £80 million cash savings previously noted, with £40 million of this benefiting 2016. As noted previously these savings provide options and are used in a balance between reinvestment to drive growth and supporting margins and returns. The cash impact to date of the one-off costs related to the delivery of these savings is £31 million, and we anticipate this to be £35 million by the end of the year.

FINANCIAL REVIEW

A summarised Income Statement for 2016 as well as related ratios are set out below.  

Currency Translation

The movement in exchange rates in the period had the translational impact of increasing revenue by £4 million and decreasing trading profit by £10 million. Currency translation also gave rise to a £150 million increase in the value of net assets from December 2015 to June 2016, in particular the recent weakening of sterling against the US dollar following the UK decision to leave the European Union with around 50% of the Group's assets being US dollar denominated. Set out in the table below are the principal exchange rates which affected the Group's profits and net assets.

Reconciliation of Underlying Movement to Reported Movement 

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

Exceptional Items

An exceptional charge of £10 million before tax was recorded in the 6 months to 30 June 2016 in respect of the business priorities implementation. These costs include professional fees, severance costs, and employment costs directly related to the implementation. The cash cost in the period was £15 million.

Interest

The net interest charge for the first half of 2016 of £11 million was £2 million lower than last year with the prior year number including arrangement fees for facilities refinanced during the period. Interest cover, measured against rolling 12-month EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation), remained strong at 25 times (June 2015: 23 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 28% which is two percentage points higher than the same period last year driven by the regional mix of profits. More broadly on tax we have been closely monitoring legislative changes including those relating to Base Erosion Profits Shifting (BEPS) but do not foresee a material change to our tax rate going forward as a result of this. 

Dividends

The Board has decided to pay an interim dividend of 9.38 pence per ordinary share which is maintained in line with last year; dividend cover is 2.1 times (30 June 2015: 3.2 times). This interim dividend will be paid on 30 September 2016 to shareholders on the register at 2 September 2016, with an ex-dividend date of 1 September 2016.

Cashflow

The net cash inflow from operations during the year totalled £100 million (June 2015: £255 million). The reduction in cash inflow from operations was mainly driven by a working capital outflow of £101 million as explained below as well as a reduction in operating profit of £33 million and a cash outflow from exceptional items of £15 million.

This funded capital expenditure of £98 million (June 2015: £147 million). Of the £98 million, £91 million was spent on fleet of which £10 million was invested in our gas fleet and £23 million to refurbish our diesel fleet to the more fuel efficient, higher output G3+ engine.

Net debt was £634 million at 30 June 2016, £167 million higher than the prior year. This resulted in net debt to EBITDA on a rolling 12-month basis of 1.2 times compared to 0.8 times at June 2015.

The £101 million working capital outflow in the year (June 2015: £1 million outflow) was made up of an increase in trade and other receivables of £73 million, an increase in inventory of £22 million and a decrease in trade and other payables of £6 million. The increase in inventories was driven by our manufacturing facility due to the timing of next generation gas and HFO engine purchases. The increase in trade and other receivables comprises an increase in trade debtors (including accrued income) of £33 million, an increase in prepayments of £30 million and an increase in other debtors of £10 million. The increase in trade debtors is mainly driven by our Power Solutions Utility business, where debtor days increased to 164 days (June 2015: 98 days) as explained below. The increase in prepayments is due to an advance made for the initial HFO engine purchases and an increase in prepaid mobilisation costs given the high order intake in the first half.

The Group monitors the risk profile and debtor position of all contracts regularly, particularly those in the Power Solutions Utility business, and deploys a variety of techniques to mitigate the risk of delayed or non-payment; these include securing advance payments, bonds and guarantees. The increase in debtor days reflects slower payments by our customers in Venezuela with the difficult economic situation driven by the impact of a low oil price on such an oil exporting dependent country. We have operated in Venezuela for many years and the customer does not contest that the debt is due. We are working to support our Venezuelan customers during this difficult period and in the meantime have increased the level of provision we are carrying against this debt. Overall, the Power Solutions Utility bad debt provision at 30 June 2016 of $88 million was $17 million higher than the provision at 31 December 2015 ($26 million higher than 30 June 2015). In the main this increase related to Venezuela but also to a lesser extent a customer in Africa. In Yemen, the level of payments received in the first half of the year have meant we have not had to add to our provision there but we continue to work with our partners in country to improve this position.

Financial Resources

The Group maintains sufficient facilities to meet its normal funding requirements over the medium term. At 30 June 2016, these facilities totalled £975 million in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement notes. 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 2016, these stood at a comfortable 25 times and 1.2 times respectively. The maturity profile of the borrowings is detailed in Note 12 in the Accounts with the next committed maturity of our borrowings being £337 million due in 2018.

Net debt amounted to £634 million at 30 June 2016 and, at that date, un-drawn committed facilities were £355 million.

Net Operating Assets

The net operating assets of the Group (including goodwill) at 30 June 2016 totalled £1,991 million, £341 million higher than the same period in 2015 with £235 million of the increase resulting from foreign exchange translation. Goodwill in the period increased by £27 million entirely due to foreign exchange translation. 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 half year reporting period, 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, 30 June and the previous 31 December. The average net operating assets for the 12 months to 30 June 2016 were £1,783 million, up 8% on the same period in 2015; operating profit for the same period was £242 million.

In the first half of 2016 the ROCE decreased to 14% compared with 17% for the same period in 2015 driven by the decrease in the Group trading margin.

Shareholders' Equity

Shareholders' equity increased by £136 million to £1,251 million in the six months ended 30 June 2016, represented by the net assets of the Group of £1,885 million before net debt of £634 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. We aim to mitigate and manage these risks and to aid this the Board has a risk management process which is described on page 26 of the 2015 Annual Report and Accounts. Also set out on pages 26 to 33 of that report are the principal risks and uncertainties which we believe could potentially impact the Group, and these are summarised below:

· Macroeconomic activity;

· Market conditions;

· Change management relating to our new business priorities;

· Talent management and succession planning;

· Competition;

· Technology;

· Cyber security;

· Service delivery;

· Security;

· Health and safety;

· Failure to conduct business dealings with integrity and honesty;

· Exchange controls;

· Exchange rate fluctuations;

· Taxation;

· Failure to collect payments or to recover assets.

In the main 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.

We do however note the result of the recent referendum in favour of the UK leaving the European Union. As with other businesses, we are closely following developments in this area, although our business in the UK and Europe makes up a relatively small part of the Group. A weaker pound has increased the sterling value of our revenue and assets, the majority of which are denominated in US dollars. The sterling values of our debt and borrowing facilities have increased by similar amounts, so our debt headroom has remained steady. More broadly, we believe it is too early to determine the impact of the UK leaving the European Union on the Group's activities, although we do not expect this to have a material impact on the Group.

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.

[1] Unless otherwise stated all figures are pre-exceptional costs of £10 million. These exceptional costs relate to the Business Priorities programme, details of which are explained in the Financial Review.

[2] "Underlying" is defined as: adjusted for currency movements and pass-through fuel revenue from Power Solutions, where we provide fuel to our contracts in Mozambique and Brazil on a pass-through basis. Pass-through fuel revenue in 2016 was £24m (2015: £29m) and the trading loss was negligible (2015: loss of £1m).

[3] Trading profit represents operating profit before gain on sale of property, plant and equipment.

[4] ROCE is calculated 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

previous 30 June.

[5] "Underlying" is defined as: adjusted for currency movements and pass-through fuel revenue from Power Solutions, where we provide fuel to our contracts in

Mozambique and Brazil on a pass-through basis.

[6] Underlying excludes currency

[7] "Underlying" is defined as: adjusted for currency movements and pass-through fuel revenue, where we provide fuel to our contracts in Mozambique and Brazil on a pass-through basis.

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

[9] Constant currency takes account of the impact of translational exchange movements in respect of our businesses which operate in currency other than sterling.

[10] Reflects the final dividend for 2015 of 17.74 pence per share (2015: 17.74 pence) that was paid during the period.

GROUP INCOME STATEMENT

For the six months ended 30 June 2016 (unaudited)

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2016 (unaudited)

GROUP BALANCE SHEETAs at 30 June 2016 (unaudited)

GROUP CASH FLOW STATEMENT

For the six months ended 30 June 2016 (unaudited)

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

For the six months ended 30 June 2016 (unaudited)

GROUP STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2016 (unaudited)

As at 30 June 2016

GROUP STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2016 (unaudited)

As at 30 June 2015

NOTES TO THE INTERIM ACCOUNTS

For the six months ended 30 June 2016 (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 3 August 2016.

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 2015 were approved by the Board on 3 March 2016 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 31.

2 Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June 2016 has been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Conduct Authority (previously 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 2015, 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 £975 million at 30 June 2016. The financial covenants attached to these facilities are that EBITDA should be no less than 4 times interest (30 June 2016: 25 times excluding exceptional items) and net debt should be no more than 3 times EBITDA (30 June 2016: 1.2 times excluding exceptional items). The Group does not consider that these covenants are restrictive to its operations. The maturity profile of the borrowings is detailed in Note 12 to the Accounts. Having reassessed the principal risks and the Group's forecasts and projections, the directors considered it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.

3 Accounting policies

Except as described below, the accounting policies are consistent with those of the annual financial statements for the year ended 31 December 2015, 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). No new accounting standards have been adopted by the Group that have a material impact on the half year results or balances. The following standards which have been issued have not yet been adopted by the Group:

i) IFRS 15 'Revenue from contracts with customers' is effective on 1 January 2018, subject to European Union (EU) endorsement;

ii) IFRS 9 'Financial instruments' which will be effective on 1 January 2018, subject to EU endorsement; and

iii) IFRS 16 'Leases' is effective on 1 January 2019, subject to EU endorsement.

4 Cashflow from operating activities

5 Segmental reporting

(a) Revenue by segment

(b) Profit by segment