Interim Results

15th Sep 2005 07:02

Aggreko PLC15 September 2005 Thursday 15 September AGGREKO plc INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2005 Aggreko plc, the world leader in the supply of temporary power, temperaturecontrol and oil-free compressed air services, announces its interim results forthe six months to 30 June 2005 in accordance with International FinancialReporting Standards (IFRS). The Group made good progress in the first half. Reported revenue increased by10.9% to £167.2 million. Group revenue in constant currency(1) and excluding£4.9 million of pass-through fuel revenue(2) increased by 9.8% to £162.3million; on the same basis trading profits increased by 8.0% to £17.8 million.Group pre-tax profits rose to £16.6 million, an increase of 5.8% on last year'sprofits before exceptional items, and basic earnings per share grew by 4.1% to4.16 pence. The interim dividend will be increased by 4.0% to 2.34 pence. Movement Six months Six months As Constant to 30 June to 30 June reported Currency 2005 2004 Group revenue £167.2m £150.8m 10.9% 12.0%Trading profit * £17.8m £16.8m 6.1% 8.0%Profit before tax * £16.6m £15.7m 5.8%Earnings per share * 4.16 3.99 4.1%Dividend per share 2.34p 2.25p 4.0% * Pre- 2004 exceptional items Key points include: •New strategy launched in March 2004 delivered solid progress in the first half. Implementation running to plan. •Outlook for full year sharply increased: prospect of strong growth in both revenues and profits in the second half •New area structure driving continued improvement in North American performance - revenues up 11% and trading profit up 47%. €33% revenue growth in the Middle East, Asia, Australia and South America; infrastructure investment and oil & gas driving strong demand. •International Power Projects revenue up 10%. Strategy of expanding sales reach producing results with project wins in seven new countries •Europe remains challenging, with lower profits, but some signs of improvement. Second half expected to be ahead of prior year •Separate announcement gives update of latest situation regarding the operational impact of Hurricane Katrina. No material balance sheet impact foreseen, and Aggreko's 2005 storm-related revenues likely to be towards the upper end of the historic levels. Chairman Philip Rogerson commented:"I am pleased to report that good progress has been made in both theimplementation of our strategy and in our trading performance in the first half.We expect further progress to be made in the second half, and for profits to bewell ahead of the prior year. For the year as a whole we now expect profits tobe at least £50 million." Rupert Soames, Chief Executive of Aggreko commented:"The first half has seen the benefits of our strategy, announced in March 2004,beginning to show through. In our Local businesses, constant currency revenuesgrew by 10%, and trading profits by 23%. The International Power Projectsbusiness, which also grew underlying revenues by 10%, continued to improve itssales reach, winning projects in seven new countries. We expect to have a strongsecond half and sharply improved profits for the year as a whole." - ENDS - Enquiries to :Rupert Soames / Angus CockburnAggreko plcTel. 0141 225 5900 Fiona PiperThe Maitland ConsultancyTel: 020 7379 5151--------------------------(1) Constant currency takes account of the impact of translational exchangemovements in respect of our businesses which operate in currency other thansterling.(2) Pass through fuel revenue relates to contracts in our International Projectsbusiness where we pass on fuel costs to the customer at no profit margin. Chairman's Statement I am pleased to report that the first half of 2005 has seen good progress bothin terms of trading and implementation of our strategy. Strategy Update In March 2004 we announced the outcome of an in-depth review of strategy. Thisreview concluded that Aggreko needed to have two different business models: aLocal business which markets the complete range of our services to customers whoare local to our service centres, and an International Power Projects businesswhich provides large temporary power plants on a global basis to powerutilities, governments and major industrial users. The two business models face different strategic challenges. For theInternational Power Projects business, the strategy is to grow beyond itshistoric customer base in the Middle East and Sri Lanka, into new markets inAfrica, Asia and South America. The objective is to increase the scale of thebusiness and the diversity of the customer base, thereby reducing volatility. For the Local business, and specifically in the more mature markets in NorthAmerica and Europe, the strategy is to implement a new hub-and-spoke operatingmodel, and to re-organise the management of the business into areas, with rentalcentres providing centralised call handling and administration. The objective ofthis strategy is to improve the management of our sales and service teams and ofour fleet, and to make our business scalable in the sense of being able to growrevenues without attracting proportionate additional costs. Taken together, these two strategies will allow Aggreko to grow revenues,profits, and returns on capital, while also enabling us to deliver world-leadinglevels of customer service and thus build our competitive differentiation. As described in the Operating and Financial Review, Aggreko has continued tomake good progress against our plan during the first half of 2005. At the sametime as we implement our new strategy, we are rolling-out our new EnterpriseResource Planning ("ERP") system. This implementation is proceeding well, withapproximately one third of our North American business and about one half of ourEuropean business on the new system. We anticipate completing the ERP roll-outin Europe and North America during 2006, to be followed by a more limitedimplementation in Aggreko International. We remain confident that we have the right strategy, and I am pleased with theprogress we have made so far. Trading Reported revenue increased by 10.9% to £167.2 million. Group revenue in constantcurrency(1) and excluding £4.9 million of pass-through fuel revenue(2) from ourcontracts in Sri Lanka and Uganda increased by 9.8% to £162.3 million. Against last year's performance before exceptional items, Group pre-tax profitsrose to £16.6 million, an increase of 5.8%, and basic earnings per share grew by4.1% to 4.16 pence; on the same basis, diluted earnings per share grew by 3.9%to 4.13 pence. Earnings per share growth has been slightly slower than growth inpre-tax profits due to a higher tax charge arising from the changing geographicmix in our regional profits. During the first six months of the year Aggreko's capital expenditure amountedto £29.1 million, compared with £27.6 million in the same period last year. Itis expected that capital expenditure for the full year will be around £85million, compared with £56 million in 2004. This increase in capital expenditurereflects additional investment in our rental fleet to support revenue growth,and includes investment in the new fleet of gas-powered generators, as well asthe acquisition of the temperature control rental assets of Prime Energy inNorth America. Net debt increased during the period by £17.6 million to £99.7 million; thiscompares with £97.9 million at 30 June 2004. Interest cover improved from 9.6times to 10.1 times in the first half. The Board has decided to declare an interim dividend of 2.34 pence, whichrepresents an increase of 4.0% over the 2004 interim dividend. This interimdividend will be paid on 18 November 2005 to shareholders on the register at 21October 2005, with an ex-dividend date of 19 October 2005. Board Change I am delighted to welcome Kash Pandya, the new Managing Director of AggrekoEurope, to the Board. Kash brings extensive international experience to Aggreko,most recently as Chief Executive of Johnston Group plc. Before joining JohnstonGroup, Kash was President of APW Europe, Asia and South America havingpreviously been Director of European Operations of the Radiator Division ofCaradon plc. Outlook We have made a strong start to the second half with good levels of activity. In North America, our base business, helped by high summer temperatures, hasbeen trading very strongly. Following Hurricane Katrina, we now believe thatstorm-related revenues in North America will be towards the upper end ofhistoric levels of $6-13 million, and that the balance sheet impact of anyequipment losses caused by the storm will not be material. Our European businesshas experienced a slight improvement in activity levels during the summer and,with the worst of the disruption associated with the implementation of the newbusiness model behind it, the business is better able to focus on driving growthand improving efficiency. In Aggreko International, the International PowerProjects business is very busy, and demand remains robust in its Localbusinesses. Overall, we now expect that profit before tax for the full year will be at least£50 million. Philip G RogersonChairman 15 September 2005 --------------------------(1) Constant currency takes account of the impact of translational exchangemovements in respect of our businesses which operate in currency other thansterling.(2) Pass through fuel revenue relates to contracts in our International Projectsbusiness where we pass on fuel costs to the customer at no profit margin. Operating and Financial Review All figures below are before the impact of exceptional items related to 2004unless otherwise stated. Introduction Aggreko's performance during the first half of 2005 has been encouraging, withboth revenue and profits growing, and the business continues to make goodprogress against the strategy announced in March 2004. The business is also wellpositioned to enjoy a strong second half to the year. As ever, the headline reported results reflect a number of factors which candistort the picture of underlying trading performance. In 2005, we have had aless dramatic impact from currency movements than in 2004. In the first half,the impact of currency movements has been to reduce revenues by £1.4 million andtrading profit by £0.3 million on a like-for-like basis. Our new contract inUganda has brought with it a very large fuel supply element, which we passthrough to the customer at no profit margin, in a similar arrangement to thatwhich we have successfully operated in Sri Lanka for many years. This can leadto very large variations in our reported revenue, with no impact on profits;consequently, there can also be large movements in our reported trading marginpercentages. In the first half, Sri Lankan and Ugandan fuel accounted for £4.9million (2004: £1.5 million) of reported revenues of £167.2 million. As a management team, we focus on underlying trading performance - i.e. takingout currency movements and the impact of these two large fuel contracts. On thisunderlying basis, revenue increased by 9.8% (as reported: 10.9%), and tradingprofit by 8.0% (as reported: 6.1%). Trading margin in the first half was 11.0%(as reported: 10.7%), which compares with 11.3% in 2004. Return on capitalemployed, measured on a rolling 12-month basis, improved to 15.6% from 13.3%. Segmental analysis As part of our adoption of International Financial Reporting Standards (IFRS),we are changing the way we report our trading to provide a more detailedsegmental breakdown of revenue and profits. This will give greater visibility ofthe performance of the component parts of the business. As we set out in our strategy review, Aggreko operates two distinct businessmodels. The Local business rents power, temperature control and oil-free airequipment through a network of service centres in North America, South America,Europe, the Middle East and Asia Pacific. Our International Power Projectsbusiness provides a single offering of large temporary power plants in SouthAmerica, Africa and Asia, mainly to power utilities and governments. Thisbusiness has its headquarters in Dubai, and has a small number of strategicallylocated staging points around the world. In terms of management structure,Aggreko's operations are managed by three Regional Directors reporting to theChief Executive, each of whom is responsible for a geographic area. GeorgeWalker and Kash Pandya (who joined the business in June 2005) manage our Localbusinesses in, respectively, North America and Europe; Derek Shepherd managesAggreko International, which comprises the International Power Projects businessas well as our Local businesses in the Middle East, South America andAsia-Pacific. Revenue Trading profit/(loss) 2005 2004 Change 2005 2004 ChangeManagement Group Line of Business £ million £ million % £ million £ million % Local BusinessNorth America USA & Canada 50.4 46.5 8.3% 4.9 3.4 43.6% Europe Northern Europe 26.8 26.4 1.5% 1.2 2.2 (45.2%) South & Central Europe 24.4 23.4 4.5% (0.8) (0.2) (271.2%) International Middle East, Asia-Pacific, 24.1 18.7 29.0% 4.7 2.7 72.4% South America Sub-total Local business 125.7 115.0 9.3% 10.0 8.1 22.9%International International Power Projects 41.5 35.8 15.9% 7.8 8.7 (9.5%) Group 167.2 150.8 10.9% 17.8 16.8 6.1% North America 50.4 46.5 8.3% 4.9 3.4 43.6% Europe 51.2 49.8 2.9% 0.4 2.0 (79.6%) International 65.6 54.5 20.4% 12.5 11.4 10.1%Group 167.2 150.8 10.9% 17.8 16.8 6.1% Group excluding fuel 162.3 149.3 8.8% 17.8 16.8 6.1% Note 1 Pass-through fuel revenue in 2005 was £4.9 million (2004: £1.5 million) The performance of each of these regions in the first half is described below,segmented as appropriate to reflect the new IFRS segmental reporting:- North America North America 2005 2004 Change $ million $ million %In local currencyRevenue 94.4 84.8 11.3%Trading profit 9.1 6.2 47.4% Our Local business in North America had an excellent first half, building on thesuccessful turnaround achieved in the business during 2004. Revenue of $94.4million for the six months ended 30 June 2005 was 11.3% ahead of the previousperiod, driven by strong growth in the base business, particularly in the firstquarter. The continuing benefits of the restructuring were reflected in the47.4% increase in trading profit for the period to $9.1 million. One of the keyobjectives of our strategy is to make our Local businesses more scalable,allowing us to grow revenues faster than costs. It is therefore encouraging tonote that the trading margin improved to 9.7% in 2005, which compares with 7.3%in the same period in 2004 and 1.1% in 2003. While the business has reduced itscost base and closed depots, the primary driver of improved performance over thelast two years has been increasing revenues, which grew from $79.1 million in2003, to $84.8 million in 2004, and stand at $94.4 million in the first half of2005.Most business areas performed well in the first half, with particularly strongperformances in the Great Lakes and in the South East where high levels of basebusiness activity were underpinned by continuing reconstruction work in theaftermath of the hurricanes in 2004. The new management team is performing well,and the area structure is starting to produce real benefits as sales, serviceand fleet resources are managed on an area basis, rather than depot-by-depot. In terms of business mix, rental revenue grew by 9.2% and services revenue grew16.3%. Power revenue for the first half was 6.9% ahead of the prior year, whichwas a very strong performance given the high level of military work in the firsthalf of last year. Temperature control revenue for the period was 16.6% ahead oflast year, largely due to improved demand in our cooling tower business whichbenefited from a combination of higher levels of both base business andemergency work. Oil-free air revenue was 2.8% ahead of the prior period. Despite the 11.3% increase in revenue, headcount at the end of the first halfwas similar to the previous year at 605. The remaining two rental centres becameoperational, and the first phase of the North American roll-out of our ERPsystem was completed during the period. By the end of the first half, two areas,representing 32% of North American revenues, were live on the system. Theremaining areas will be rolled out during the fourth quarter of 2005 and early2006, once the peak summer trading period has passed. During the first half of 2005 we completed the acquisition of the temperaturecontrol rental fleet of Prime Energy for a consideration of $5.2 million. Therental fleet acquired included more than 150 chillers, air-conditioning unitsand cooling towers with an aggregate capacity of over 20,000 tonnes. As part ofthe agreement, Prime Energy will use Aggreko exclusively for the supply oftemporary temperature control solutions to its North American customers. Thisacquisition has expanded our rental fleet, gives us access to new customers andstrengthens our position as the leading provider of temperature control rentalsolutions in North America. We have made an excellent start to our key summer trading period, and have seenstrong growth in our base business in North America. Following HurricaneKatrina, we now believe that storm-related revenues in North America will betowards the upper end of historic levels, and that the balance sheet impact ofany equipment losses caused by the storm will not be material. Europe In Europe, our profits were lower than in the prior period as the businesscontinued to work through the effects of the very substantial restructuringcarried out in 2004. The first quarter was particularly poor but, during thesecond quarter, the business began to build momentum and performance was at asimilar level to the prior year. Under the new reporting arrangements, European performance is set out in twosegments:- Northern Europe comprises our Local businesses in the UK, Ireland andthe Nordic countries; South & Central Europe covers our Local businesses inGermany, Benelux, France, Spain and Italy. Europe Revenue 2005 2004 ChangeLocal currency • million • million %Northern Europe 39.1 39.3 (0.4%)South & Central Europe 35.6 34.7 2.6% ---------------------------Total Europe 74.7 74.0 1.0% Trading Profit/(Loss) 2005 2004 ChangeLocal currency • million • million %Northern Europe 1.8 3.3 (46.2%)South & Central Europe (1.2) (0.3) (264.6%) ---------------------------Total Europe 0.6 3.0 (80.0%) Overall in Europe, revenue of €74.7 million for the first six months was 1.0%ahead of the prior period, while trading profit at €0.6 million was €2.4 millionlower than 2004. In Northern Europe, revenue of €39.1 million for the first six months was 0.4%below the prior period. Rental revenue declined by 2.8%, with power andtemperature control revenue declining by 2.7% and 9.4% respectively, whilstoil-free air revenues increased by 18.8%. Services revenue, which mainlycomprises fuel and transport, grew by 4.7%, but direct costs rose sharply due tothe rapid increase in the price of fuel, which can now represent some two-thirdsof the cost of renting a generator. This has impacted not only our fuel andtransport recoveries, but also has made customers more sensitive to rentalrates. There were some encouraging signs of recovery in the Northern Europeanbusiness in the second quarter: revenues were ahead of the prior year, and fueland transport recoveries improved over the first quarter. Revenue in South & Central Europe was 2.6% higher than the previous period at€35.6 million. Rental revenue grew by 1.2%, while services revenue grew by 5.8%.Within rental revenue, power increased by 2.5%; temperature control declined by1.4%; and oil-free air increased by 5.4%. The trading loss increased by €0.9million over the previous period, reflecting the same issues with higher directcosts as the Northern European business. Southern Europe, however, also boreadditional costs as the ERP system went live in France in June, andinfrastructure was put in place to support the growth of our Spanish and Italianbusinesses. During the first half we saw continued improvement in the performance of ourrental centres. The operations in Cannock, Paris and Aachen all managed wellunder the pressure of the run-up to peak summer trading, and the ERP system isnow live in some 50% of the European business. Roll-out in the UK, on anarea-by-area basis, will start in the fourth quarter and will be completed in2006. We are delighted that the new European Managing Director, Kash Pandya, has nowjoined the business. The European business has performed poorly over the lasttwo years - in part because of the disruption caused by our restructuring, andin part because of the weak economic environment. We have every confidence thatunder his leadership the business can start to recover, and we expect theperformance of the business in the second half to be much better than in thefirst half. Aggreko International Aggreko's International business as a whole performed well during the first halfwith strong growth in the International Local business offsetting a decline inprofits in the International Power Projects business.Aggreko International Revenue 2005 2004 ChangeLocal Currency, excl pass-through fuel $ million $ million %Local business: Middle East, Asia-Pacific, South America 45.2 34.1 32.5%International Power Projects 68.5 62.4 9.7% ------------------------------Total Aggreko International 113.7 96.5 17.8% Trading Profit 2005 2004 ChangeLocal currency $ million $ million %Local business: Middle East, Asia-Pacific, South America 8.8 5.0 77.0%International Power Projects 14.7 15.8 (7.0%) -----------------------------Total Aggreko International 23.5 20.8 13.0% Aggreko International - Local Business The Local businesses in the Middle East, Singapore, Australia, New Zealand andBrazil had an outstanding first half. In aggregate, period-on-period revenuegrew by 32.5% to $45.2 million, which resulted in trading profit growth of 77.0%to $8.8 million and a trading margin of 19.4% as against 14.5% in 2004. The businesses in the Middle East and Australia performed particularly strongly.The higher oil revenues have led to a number of major infrastructure projects inthe Middle East, while robust demand for commodities and a hot summer created abenign environment for our business in Australia. In both these businesses wehave increased our rate of capital investment to take advantage of thefavourable conditions. Our business in Singapore continued to benefit from thehigh levels of activity in shipping, while our recently established Brazilianbusiness has won a number of new contracts in the offshore oil market in Brazil. Overall, we expect the performance of Aggreko International's Local businessesto be ahead of the prior year in the second half, although the rate of growthwill be slower than that in the first half. Aggreko International - International Power Projects International Power Projects' revenue, excluding pass-through fuel, grew by 9.7%to $68.5 million in the first six months of 2005. This growth reflects the largenumber of new contracts secured during the first half of the year, with projectsin seven new countries. Among these is Uganda, where we won a three-yearcontract to install and operate a 50MW temporary power plant in Kampala for theUganda Electricity Transmission Company. At an estimated value over the threeyears of $160 million, including an estimated $120 million of fuel, this is thelargest contract in Aggreko's history. The business was successful in winning new contracts in South America, MiddleEast, Africa and Asia, many of them from power utilities. At the same time,military revenues remained robust, with two additional camps delivered in thefirst half; as a consequence, we expect military revenues for the year to beslightly higher in 2005 than in 2004. Overall, our strategy for theInternational Power Projects business, which is to diversify the customer baseof the business and to expand its geographic reach, is making good progress. The large number of new contract wins in the second quarter drove a sharpincrease in the fleet mobilisation costs as a proportion of revenues and,consequently, trading profit in the International Power Projects business was 7%lower than the prior year at $14.7 million; trading margin, excludingpass-through fuel, fell from 25.5% to 21.7%. We do not expect the mobilisationcosts in the second half to be as high and we will get the full contribution ofthe revenue from these new contracts. We therefore expect that profits in theInternational Power Projects business for the year as a whole will be ahead of2004. Financial Review Accounting Policies IFRS became mandatory for all listed groups within the European Union from 1January 2005 and the Interim Report for 2005 has been prepared in accordancewith accounting policies based on IFRS that the Group expects to be applicableat 31 December 2005. The comparative figures for 2004 have been restatedaccordingly and the notes to the Interim Results contain reconciliations to thepreviously reported figures. These reconciliations show that there are nomaterial changes to previously reported figures as a result of the adoption ofIFRS. We expect to use consistent accounting policies for the preparation of theresults for the year ending 31 December 2005. However there is a possibilitythat the accounting policies may need to be updated if new mandatoryinterpretations are issued by the International Financial ReportingInterpretations Committee, or new standards are issued by the InternationalAccounting Standards Board, or the interpretation of existing IFRS evolves. Overview The income statement for the six months ended 30 June 2005 is summarised below: 6 months ended Year ended 30 June 31 Dec 2004 2004 Pre- Pre- exceptional exceptional 2005 items items £ million £ million £ millionRevenue 167.2 150.8 323.6Operating profit 18.4 17.5 46.4Profit before taxation 16.6 15.7 42.5Taxation (5.6) (5.0) (13.5)Profit for the period 11.0 10.7 29.0 Note: An exceptional charge of £15.0 million (June 2004: £13.7 million) inrespect of our restructuring programme was recognised in the year ended 31December 2004 Earnings per ShareBasic earnings per share for the period of 4.16 pence represent an increase of4.1% over the 2004 figure of 3.99 pence (pre - exceptional items). Shareholders' EquityShareholders' equity increased by £4.9 million to £183.4 million in the sixmonths ended 30 June 2005, represented by the net assets of the Group of £283.1million less net debt of £99.7 million. The movements in shareholders' equityare analysed in Table 1 below: Table 1: Movements in Shareholders' Equity £ million £ millionAs at 31 December 2004 178.5 IAS 39 opening adjustment 0.6 -----As at 1 Jan 2005 179.1Profit for the period 11.0Dividend paid (1) (9.5) -------Retained earnings 1.5Purchase of own shares held under trust (3.2)Actuarial losses on retirement benefits (2.4)Exchange 9.1Other (2) (0.7) -------As at 30 June 2005 183.4 -------(1) Reflects the dividend of 3.57 pence per share that was paid during the period(2004:3.45 pence). An interim dividend for 2005 of 2.34 pence per share wasdeclared during the period (2004: 2.25 pence).(2) Other includes new share capital subscribed, credit in respect of employeeshare awards, tax on items taken directly to reserves and movements in thehedging reserve. Cashflow and Net DebtEBITDA (Earnings before Interest, Taxes, Depreciation, and Amortisation) for thefirst six months of 2005 amounted to £48.1 million, up 3.9% on 2004. Cash flowsfrom operating activities during the period reduced from £42.2 million at 30June 2004 to £36.0 million at 30 June 2005 as the favourable operatingperformance was offset by higher working capital commitments, mainly due toincreased inventory levels reflecting a higher number of contracts and locationsin our International Power Projects business as well as increased activity inour manufacturing operation and higher receivable and payable levels reflectinggrowth in our North American and International businesses. Capital expenditureof £29.1 million is up £1.5 million on the same period in 2004 while net debtincreased by £17.6 million during the period and, at £99.7 million, is £1.8million higher than at 30 June 2004. Financial PositionThe increase in net debt has been offset by the increase in shareholders' equityand, accordingly, gearing (net debt as a percentage of shareholders' equity) at30 June 2005 reduced to 54% from 56% at 30 June 2004. The net interest charge for the period was £1.8 million, which is in line withthe same period in 2004. Interest cover improved to 10.1 times, compared with9.6 times at 30 June 2004. Based on the proposed interim dividend of 2.34 penceper share, dividend cover is 1.8 times (30 June 2004: 1.8 times). Under IFRS theliability for an interim dividend is only recognised in the period when it isapproved and therefore these interim accounts do not reflect this interimdividend. The dividend in these accounts represents the final dividend for 2004of 3.57 pence per share which was paid during the first half of 2005. The current forecast of the effective tax rate for the full year, which has beenused in the interim accounts, is 33.5% as compared with 32.0% in the same periodlast year. This increase in the tax rate largely reflects the changes inregional mix of profits. Currency TranslationThe Group has sought consistently to hedge its net investment in overseassubsidiaries but not its major currency translation exposures arising fromtrading activities. The net overall impact of exchange rates on currencytranslation for the six months ended 30 June 2005 was to reduce revenue andoperating profit by £1.4 million and £0.3 million respectively. Set out in Table2 are the principal exchange rates affecting the Group's overseas profits andnet assets. Table 2 2005 2004(per £ sterling) Average Period End Average Period EndPrincipal Exchange RatesUnited States Dollar 1.87 1.77 1.82 1.83Euro 1.46 1.48 1.49 1.49Other Operational ExchangeRatesUAE Dirhams 6.87 6.51 6.69 6.72Australian Dollar 2.42 2.35 2.47 2.57(Source: Reuters) Rupert Soames Angus CockburnChief Executive Finance Director 15 September 2005 Group Income Statement For the six months ended 30 June 2005 (unaudited) 6 months ended 30 June Year ended 31 December Total before Exceptional Total before Exceptional exceptional items exceptional items Notes Items (Note 6) Items (Note 6) 2005 2004 2004 2004 2004 2004 2004 £ million £ million £ million £ million £ million £ million £ millionRevenue 5 167.2 150.8 - 150.8 323.6 - 323.6Operating expenses (148.8) (133.3) (13.7) (147.0) (277.2) (15.0) (292.2) ------- ------- ------- -------- ------- ------ -------Operatingprofit 5 18.4 17.5 (13.7) 3.8 46.4 (15.0) 31.4Finance costs:- Interest expense (1.9) (1.8) - (1.8) (4.2) - (4.2)- Interest income 0.1 - - - 0.3 - 0.3 --- ---- ---- ---- ----- ----- ------Profit beforetaxation 16.6 15.7 (13.7) 2.0 42.5 (15.0) 27.5Taxation 9 (5.6) (5.0) 4.4 (0.6) (13.5) 4.8 (8.7) ----- ------ ----- ------ ------ ------ ------Profit forthe period 11.0 10.7 (9.3) 1.4 29.0 (10.2) 18.8 ------ ------ ----- ------- ------- ------ ------ Earnings per share Basic (pence) 8 4.16 3.99 (3.47) 0.52 10.83 (3.82) 7.01 ----- ---- ------ ---- ----- ------ ----Diluted (pence) 8 4.13 3.98 (3.46) 0.52 10.79 (3.80) 6.99 ----- ---- ------ ---- ----- ------ ---- 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 six months ended 30 June 2005 (unaudited) 6 months ended 30 June Year ended 2005 2004 31 Dec 2004 £ million £ million £ million Profit for the period 11.0 1.4 18.8 Actuarial losses on retirement benefits (2.4) - (1.5)Net exchange adjustments offset inreserves 9.1 (3.6) (8.4) --- ----- -----Total recognised income/(expense) for theperiod 17.7 (2.2) 8.9 ---- ----- ----- Group Balance SheetAs at 30 June 2005 (unaudited) 30 Jun 2005 30 Jun 2004 31 Dec 2004 Notes £ million £ million £ million Non-current assets Intangible assets 1.8 1.8 1.8 Property, plant and equipment 272.4 270.8 261.0 Financial assets 0.5 - - Deferred tax asset 0.2 0.2 0.2 ----- ----- ------ 274.9 272.8 263.0 ----- ----- ----- Current assets Inventories 31.6 24.3 24.6 Trade and other receivables 88.4 67.1 70.2 Financial assets 0.1 - - Cash and cash equivalents 4 6.4 5.6 7.9 Current tax assets 4.2 3.8 3.2 ----- ----- ------ 130.7 100.8 105.9 ----- ----- ------ Total assets 405.6 373.6 368.9 ----- ----- ------ Current liabilities Financial liabilities - Borrowings 10 (5.0) (4.3) (6.8) - Derivative financial (1.1) - - instruments Trade and other payables (72.3) (54.3) (59.6) Current tax liabilities (7.1) (6.3) (6.6) Provisions 11 (3.5) (5.3) (3.7) ------ ----- ----- (89.0) (70.2) (76.7) ------- ------ ------ Non-current liabilities Financial liabilities - Borrowings 10 (101.1) (99.2) (83.2) - Derivative financial (0.5) - - instruments Deferred tax liabilities (18.1) (20.6) (17.9) Retirement benefit obligation (12.7) (8.4) (10.2) Provisions 11 (0.8) (3.3) (2.4) ------- ------ ----- (133.2) (131.5) (113.7) ------- ------- ------- Total liabilities (222.2) (201.7) (190.4) ------- ------- -------Net assets 183.4 171.9 178.5 ------- ------- ------- Shareholders' equity Share capital 53.6 53.6 53.6Share premium 6.1 5.7 6.0Treasury shares (6.5) (3.3) (3.3)Capital redemption reserve 0.1 0.1 0.1Hedging reserve (1.0) - -Foreign exchange reserve (10.2) (14.4) (19.3)Retained earnings 141.3 130.2 141.4 ----- ----- -----Total shareholders' equity 183.4 171.9 178.5 ----- ----- ----- Group Cash Flow StatementFor the six months ended 30 June 2005 (unaudited) 6 months 6 months Year ended ended ended 30 Jun 2005 30 Jun 2004 31 Dec 2004 Notes £ million £ million £ million Cash flows from operating activities Cash generated from operations 3 36.0 42.2 98.7Tax paid (7.3) (2.0) (10.4) ----- ----- ------Net cash generated from operating activities 28.7 40.2 88.3 ----- ----- ------ Cash flows from investing activities Purchases of property, plant and equipment (PPE) (29.0) (27.6) (56.0)Proceeds from sale of PPE 3 1.1 1.5 3.7Purchase of intangible assets (0.1) - (0.1) ----- ----- ------Net cash used in investing activities (28.0) (26.1) (52.4) ------ ------ ------ Cash flows from financing activities Net proceeds from issue of ordinary shares 0.1 - 0.3Increase in long term loans 20.0 16.7 29.0Repayment of long term loans (6.1) (20.3) (47.0)Net movement in short term loans (1.0) 2.7 2.6Interest received 0.1 - 0.3Interest paid (1.7) (2.1) (4.2)Dividends paid to shareholders (9.5) (9.2) (15.2)Purchase of treasury shares (3.2) (3.1) (3.3) ----- ------ ------Net cash used in financing activities (1.3) (15.3) (37.5) ----- ------ ------ Net decrease in cash and cash equivalents (0.6) (1.2) (1.6)Cash and cash equivalents at beginning of the period 4.9 6.6 6.6Exchange losses on cash andcash equivalents (0.1) (0.2) (0.1) ----- ----- -----Cash and cash equivalents at end of the period 4 4.2 5.2 4.9 ----- ----- ----- Reconciliation of net cash flow to movement in net debtFor the six months ended 30 June 2005 (unaudited) Decrease in cash and cash equivalents (0.6) (1.2) (1.6)Cash (inflow)/outflow from movement in debt (12.9) 0.9 15.4 ------ ----- ----- Changes in net debt arising from cash flows (13.5) (0.3) 13.8Exchange (4.1) 2.3 4.0 ----- ----- ----- Movement in net debt in period (17.6) 2.0 17.8Net debt at beginning of period (82.1) (99.9) (99.9) ------ ------ ------Net debt at end of period 10 (99.7) (97.9) (82.1) ------ ------ ------ Group Statement of Changes in EquityFor the six months ended 30 June 2005 (unaudited) Attributable to equity holders of the company Foreign Share Capital Exchange Ordinary Premium Treasury Redemption Hedging Reserve Retained Total share capital Account Shares Reserve Reserve (translation) Earnings Equity £ million £ million £ million £ million £ million £ million £ million £ millionBalance at 1 January 2004 53.6 5.7 - 0.1 - (10.8) 137.8 186.4 ---- ---- ---- ---- ---- ------- ------ -----Currency translation differences - - - - - (3.6) - (3.6)Actuarial losses on retirement benefits - - - - - - - - Purchase of treasury shares - - (3.3) - - - - (3.3)Credit in respect ofemployee share awards - - - - - - 0.2 0.2Profit for the period - - - - - - 1.4 1.4 --- --- --- --- --- --- ----- ----Total recognisedincome/(loss)for the - - (3.3) - - (3.6) 1.6 (5.3)periodDividends paid during 2004 - - - - - - (9.2) (9.2) ----- ------ ------ ----- ----- ------ ------- -------Balance at 30June 2004 53.6 5.7 (3.3) 0.1 - (14.4) 130.2 171.9 ----- ------ ------- ----- ------ ------ ------- ------- Balance at 1July 2004 53.6 5.7 (3.3) 0.1 - (14.4) 130.2 171.9Currency translationdifferences - - - - - (4.8) - (4.8)Deferred tax onitems taken to ortransferred from equity - - - - - (0.1) 0.5 0.4Actuarial losses onretirement benefits - - - - - - (1.5) (1.5)Credit in respect ofemployee share awards - - - - - - 0.8 0.8New share capitalsubscribed - 0.3 - - - - - 0.3Profit for the period - - - - - - 17.4 17.4 ---- ---- ----- ---- ---- ---- ---- ----Total recognisedincome/(loss)for period - 0.3 - - - (4.9) 17.2 12.6Dividends paidduring 2004 - - - - - - (6.0) (6.0) --- ---- ----- ---- ----- ----- ----- -----Balance at 31December 2004 53.6 6.0 (3.3) 0.1 - (19.3) 141.4 178.5Adoption of IAS 39 (Note 1) - - - - 0.6 - - 0.6 ---- ---- ------ ---- ---- ------ ------ ----- Balance at 1January 2005 53.6 6.0 (3.3) 0.1 0.6 (19.3) 141.4 179.1Cashflow hedges - - - - (1.6) - - (1.6)Currency translation differences - - - - - 9.1 - 9.1Current tax on itemstaken to or transferredfrom equity - - - - - - (0.9) (0.9)Deferred tax on itemstaken to or transferredfrom equity - - - - - - 1.1 1.1Actuarial losses onretirement benefits - - - - - - (2.4) (2.4)Purchase of treasuryshares - - (3.2) - - - - (3.2)Credit in respect ofemployee share awards - - - - - - 0.6 0.6New share capitalsubscribed - 0.1 - - - - - 0.1Profit for the period - - - - - - 11.0 11.0 ---- ---- ---- --- ---- --- ---- ----Total recognisedincome/(loss)for period - 0.1 (3.2) - (1.6) 9.1 9.4 13.8Dividends paid during 2005 - - - - - - (9.5) (9.5) ----- ---- ---- ---- ---- ----- ----- ------Balance at 30June 2005 53.6 6.1 (6.5) 0.1 (1.0) (10.2) 141.3 183.4 ----- ----- ----- ---- ----- ------ ------ ------ 1. Summary of significant accounting policies A Basis of preparationThe interim consolidated financial statements of Aggreko plc are for the sixmonths ended 30 June 2005 and have been prepared in accordance with theaccounting policies the Group expects to adopt in its 2005 annual report asdetailed below. The accounting policies are based on the InternationalAccounting Standards and International Financial Reporting Standards(collectively IFRSs) that the Group expects to be applicable at 31 December2005. Due to continuing work of the International Accounting Standards Board (IASB),further standards, amendments and interpretations could be applicable for theGroup's financial statements for the year ending 31 December 2005 as practicecontinues to evolve. Consequently, the group's accounting policies may changeprior to publication of those financial statements. On transition to IFRS, the group has taken advantage of the following exemptionscontained within IFRS 1' First-time Adoption of International FinancialReporting Standards': - Employee benefits: The cumulative actuarial losses relating to retirement benefits at the date of transition to IFRS have been recognised in retained earnings- Financial instruments: IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement' have been adopted from 1 January 2005, with no restatement of comparative information- Share-based payment: The Group has applied IFRS 2' Share-based Payment' to equity instruments granted after 7 November 2002 only.- Foreign currency translation reserve: Cumulative translation differences on foreign currency denominated operations are deemed to be £nil at 1 January 2004. Any gains and losses recognised in the income statement on subsequent disposals of foreign operations will therefore exclude translation differences arising prior to transition date The consolidated financial statements of Aggreko plc were prepared in accordancewith UK Generally Accepted Accounting Principles (GAAP) until 31 December 2004.The statutory accounts for 2004 have been delivered to the Registrar ofCompanies. The report of the auditors on those Accounts was unqualified and didnot contain a statement under either Section 237(2) or 237(3) of the CompaniesAct 1985. The amended policies, which are in accordance with the Group's expectation ofIFRSs which will be in force at 31 December 2005 and are detailed below, havebeen consistently applied to all years presented except for those relating tothe classification and measurement of financial instruments. The Group has madeuse of the exemption available under IFRS 1 from applying IAS 32 and IAS 39retrospectively from 1 January 2005. The policies applied to financialinstruments for 2004 and 2005 are disclosed separately below. Reconciliations between the Group's previously reported equity and net incomeunder UK GAAP and the IFRS equivalents are presented in Note 2 and thecomparative figures in respect of 2004 have been restated to reflect theseadjustments, except as described in the accounting policies. These consolidated interim financial statements have been prepared under thehistorical cost convention, as modified by the revaluation of financial assetsand financial liabilities (including derivative instruments) at fair value. The results for the half years to 30 June 2005 and 2004 are unaudited but havebeen reviewed by the Group's auditors, whose report in on page xx. B Basis of consolidation The Group financial statements consolidate the financial statements of Aggrekoplc and all its subsidiaries for the period ended 30 June 2005. Subsidiaries arethose entities over which the group has the power to govern financial andoperating policies, generally accompanying a shareholding that confers more thanhalf of the voting rights. C Revenue recognition Revenue for the Group represents the amounts earned from the supply of temporarypower, temperature control, oil-free compressed air and related services andexcludes sales taxes and intra-group revenue. Revenue is recognised through therental period the equipment and related services are utilised by the customer. D Segmental reporting Aggreko's primary reporting format relates to geographical segments and includesNorthern Europe, South & Central Europe, North America and a segment comprisingMiddle East, Asia-Pacific and South America. Together these segments representthe Group's Local business. International Power Projects is a global segment andrepresents the international projects business. Aggreko's secondary reporting format relates to the Group's two business typesdetailed above, namely the Local business and International Power Projectsbusiness. The Local business focuses on smaller, more frequently occurringevents, whereas the International Power Projects business concentrates on largecontracts, which can arise anywhere in the world. The risks and rewards of the Group's operations are determined by the differentgeographical locations. This is reflected by the Group's divisional managementand organisational structure and the Group's internal financial reportingsystems. Costs are allocated between segments based on revenue. E Leases Leases where substantially all of the risks and rewards of ownership are nottransferred to the Group are classified as operating leases. Rentals underoperating leases are charged against operating profit on a straight line basisover the term of the lease. F Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciationand impairment losses. Cost includes purchase price, and directly attributablecosts of bringing the asset into the location and condition where it is capablefor use. Borrowing costs are not capitalised. Freehold properties are depreciated on a straight line basis over 25 years.Short leasehold properties are depreciated on a straight line basis over theterms of each lease. Other property, plant and equipment are depreciated on a straight line basis atannual rates estimated to write off the cost of each asset over its useful lifefrom the date it is available for use. Assets in the course of construction arenot depreciated. The periods of depreciation are reviewed on an annual basis andthe principal periods used are as follows: Rental fleet 8 to 10 yearsVehicles, plant and equipment 4 to 15 years Government grants received are deducted from property, plant and equipment andreduce the depreciation charge accordingly. G Intangibles Computer softwareAcquired computer software licences are capitalised on the basis of the costsincurred to acquire and bring to use the specific software. These costs areamortised on a straight line basis over their estimated useful lives, which iscurrently deemed to be 4 years and is reviewed on an annual basis. H Impairment of property, plant and equipment and other intangible assets Property, plant and equipment and other intangible assets are amortised andreviewed for impairment whenever events or changes in circumstances indicatethat the carrying amount may not be recoverable. An impairment loss isrecognised for the amount by which the asset's carrying amount exceeds itsrecoverable amount. The recoverable amount is the higher of an asset's fairvalue less costs to sell and value in use. Value in use is calculated usingestimated cashflows. These are discounted using an appropriate long-term pre taxinterest rate. For the purposes of assessing impairment, assets are grouped atthe lowest levels for which there are separately identifiable cash flows(cash-generating units). I Foreign currencies At individual company level, transactions denominated in foreign currencies aretranslated at the rate of exchange on the day the transaction occurs. Assets andliabilities denominated in foreign currency are translated at the exchange rateruling at the balance sheet date. In order to hedge its exposure to certainforeign exchange risks, the Group enters into forward contracts and options. On consolidation, assets and liabilities of subsidiary undertakings aretranslated into sterling at closing rates of exchange. Income and cash flowstatements are translated at average rates of exchange for the period. Gains andlosses from the settlement of transactions and gains and losses on thetranslation of monetary assets and liabilities denominated on other currenciesare included in income. J Derivative financial instruments The Group accounts for financial instruments under IAS 32 ' FinancialInstruments: Disclosure and Presentation' and IAS 39 ' Financial Instruments:Recognition and Measurement'. The activities of the Group expose it directly to the financial risks of changesin foreign currency exchange rates and interest rates. The Group uses foreignexchange contracts and interest rate swap contracts to hedge these exposures.The Group does not use derivative financial instruments for speculativepurposes. Derivatives are initially recorded at fair value, which are calculated using standard industry valuation techniques in conjunction with observable marketdata. The fair value of the interest rate swaps are calculated as the presentvalue of estimated future cash flows using market interest rates and the fairvalue of the forward FX contracts is determined using forward FX market ratesat the reporting date. The treatment of changes in fair value of derivativesdepends on the derivative classification. Cash flow hedge Changes in the fair value of derivative financial instruments that aredesignated, and effective, as hedges of future cash flows are recogniseddirectly in equity and any ineffective portion is recognised immediately in theincome statement. If the cash flow hedge of a firm commitment or forecastedtransaction subsequently results in the recognition of an asset or a liability,then, at the time the asset or liability is recognised, the associated gains orlosses on the derivative that had previously been recognised in equity areincluded in the initial measurement of the asset or liability. For hedges thatdo not result in the recognition of an asset or a liability amounts deferred inequity are recognised in the income statement in the same period in which thehedged item affects net profit and loss. Changes in the fair value of derivative financial instruments that do notqualify for hedge accounting are recognised in the income statement as theyarise. Hedge accounting is discontinued when the hedging instrument no longer qualifiesfor hedge accounting. At that time any cumulative gain or losses on the hedginginstrument recognised in equity is retained in equity until the forecastedtransaction occurs. If a hedged transaction is no longer expected to occur, thenet cumulative gain or loss recognised in equity is transferred to the incomestatement. Overseas net investment hedges Certain foreign currency borrowings are designated as hedges of the Group's overseas net investments. Exchange differences arising from the retranslation of the net investment inforeign entities and of borrowings are taken to equity on consolidation to theextent the hedges are deemed effective. All other exchange gains and losses aredealt with through the income statement. Under UK GAAP, derivative financial instruments were used as hedges and were heldoff balance sheet with unrecognised gains and losses and fair values reported in the notes to the financial statements, fair values were based on market prices of these instruments at the balance sheet date. For interest rate swaps, amounts payable or receivable in respect of these agreements were recognised as adjustments to interest expense over the period of the debt they were hedging. For forward contracts, the cash flows were classified in a manner consistent with the underlying nature of the hedged transaction. Hence, unrealised gains and losses on contracts hedging forecast transactions were not accounted for until thematurity of the contract. Foreign currency debtors and creditors that were hedgedwith forward contracts were translated at the contracted rate at the balance sheet date. IAS 39 'Financial Instruments: Recognition and Measurement" requires recognition of all derivative financial instruments on the balance sheet and that they aremeasured at fair value. IFRS 1 allows that, for the year ended 31 December 2004,derivative financial instruments can continue to be accounted for under UK GAAP.Aggreko is taking advantage of this exemption and therefore IAS 39 will beapplied prospectively from 1 January 2005. To reflect the adoption of IAS39,there is an adjustment of £0.6 million to equity on 1 January 2005 to bring thefair value of the derivative financial instruments on balance sheet. K Taxation Deferred TaxDeferred tax is provided in full, using the liability method, on temporarydifferences arising between the tax base of assets and liabilities and theircarrying amounts in the financial statements. In principle, deferred taxliabilities are recognised for all taxable temporary differences and deferredtax assets are recognised to the extent that it is probable that taxable profitswill be available against which deductible temporary differences can beutilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill, negative goodwill nor from the acquisition ofan asset, which does not affect either taxable or accounting income. Deferredtax is determined using tax rates (and laws) that have been enacted orsubstantially enacted by the balance sheet date and are expected to apply whenthe related deferred tax asset is realised or the deferred tax liability issettled. Deferred tax is charged or credited in the income statement, exceptwhen it relates to items credited or charged directly to equity, in which casethe deferred tax is also dealt with in equity. Deferred tax is provided on temporary differences arising on investments insubsidiaries, except where the timing of the reversal of the temporarydifference is controlled by the Group and it is probable that the temporarydifference will not reverse in the foreseeable future. Provision for income taxes, mainly withholding taxes, which could arise on theremittance of retained earnings, principally relating to subsidiaries, is onlymade where there is a current intention to remit such earnings. Current TaxThe charge for the current tax is based on the results for the year as adjustedfor items, which are non-assessable or disallowed. It is calculated usingtaxation rates that have been enacted or substantially enacted by the balancesheet date. L Inventories Inventories are valued at the lower of cost and net realisable value, using theFIFO or weighted average cost basis. Cost includes the cost of direct materialsand, where applicable, direct labour and those overheads that have been incurredin bringing the inventories to their present location and condition. Inventory is written down on a case by case basis if the anticipated netrealisable value declines below the carrying amount of the inventories. Netrealisable value is the estimated selling price less cost to completion andselling expenses. When the reasons for a write-down of the inventory have ceasedto exist, the write-down is reversed. M Employee benefits Wages, salaries, social security contributions, paid annual leave and sickleave, bonuses, and non-monetary benefits are accrued in the year in which theassociated services are rendered by the employees of the Group. Where the Groupprovides long-term employee benefits, the cost is accrued to match the renderingof the services by the employees concerned. The Group operates a defined benefit plan and a number of defined contributionplans. The cost for the year for the defined benefit plan is determined usingthe projected unit credit method, with actuarial valuations being carried out ateach balance sheet date. Actuarial gains and losses are recognised in full,directly in retained earnings, in the period in which they occur and are shownin the statement of recognised income and expense. The current service cost ofthe pension charge as well as the expected return on pension scheme assets andinterest on pension scheme liabilities are included in arriving at operatingprofit. The retirement benefit obligation recognised in the balance sheet is thepresent value of the defined benefit obligation at the balance sheet date lessthe fair value of the plan assets. The present value of the defined benefitobligation is determined by discounting the estimated future cash flows usinginterest rates of high-quality corporate bonds.Contributions to defined contribution pension plans are charged to the incomestatement in the period in which they become chargeable. N Trade receivables Trade receivables are stated at their nominal value as reduced by appropriateallowances for estimated irrecoverable amounts. An allowance is recorded for thedifference between the carrying amount and the recoverable amount where there isobjective evidence that the Group will not be able to collect all amounts due. O Trade payables Trade payables are stated at their nominal value. P Provisions Provisions are recognised where a legal or constructive obligation has beenincurred which will probably lead to an outflow of resources that can bereasonably estimated. Provisions are recorded for the estimated ultimateliability that is expected to arise, taking into account the time value of moneywhere material. A contingent liability is disclosed where the existence of the obligation willonly be confirmed by future events, or where the amount of the obligation cannotbe measured with reasonable reliability. Contingent assets are not recognised,but are disclosed where an inflow of economic benefits is probable. A provision for restructuring is recognised when Aggreko has approved a detailedand formal restructuring plan and the restructuring has either commenced or beenannounced publicly. Costs relating to the ongoing activities of Aggreko are notrecognised until they have been incurred. Q Share-based payments IFRS 2 has been applied to all grants of equity instruments after 7 November2002 in accordance with the transitional provisions of the standard. The groupissues equity-settled share-based payments to certain employees under the termsof the group's various employee-share and option schemes. Equity-settledshare-based payments are measured at fair value at the date of the grant. Thefair value determined at the grant date of equity-settled share-based paymentsis expensed on a straight-line basis over the vesting period, based on anestimate of the shares that will ultimately vest. Fair value is measured using the Black-Scholes option-pricing model for employeesharesave options and using the Monte Carlo option-pricing model for Executiveshare options. Own shares held under trust for the group's employee share schemes are deductedin arriving at shareholders' equity. Purchases of own shares are disclosed aschanges in shareholders' equity. R Cash and cash equivalents Cash and cash equivalents comprise cash on hand and time, call and currentbalances with banks and similar institutions, which are readily convertible toknown amounts of cash and which are subject to insignificant risk of changes invalue and have a maturity of three months or less. This definition is also used for the cashflow statement. S Dividend distribution Dividend distribution to the Company's shareholders is recognised as a liabilityin the Group's financial statements in the period in which the dividends areapproved by the Company's shareholders. 2 Transistion to IFRS 2.1 Basis of transition to IFRS The Group's financial statements for the year ended 31 December 2005 will be thefirst annual financial statements that comply with IFRS. These interim financialstatements have been prepared as described in Note 1A. The Group's transitation date is 1 January 2004. The Group prepared its openingIFRS balance sheet at that date. The reporting date of these interimconsolidated financial statements is 30 June 2005. The Group's IFRS adoptiondate is 1 January 2005. 2.2 Reconciliations between IFRS and UK GAAP The following reconciliations provide a quantification of the effect of thetransition to IFRS and provide details of the impact of the transition on: - net income for the period ended 30 June 2004 and 31 December 2004- equity at 1 January 2004- equity at 30 June 2004- equity at 31 December 2004 Reconciliation of net income 31 Dec 30 June 2004 2004 Notes £ million million Profit for the period from continuing operationsunder UK GAAP 18.8 1.3Share based payment (j) (0.2) (0.1)Goodwill amortisation (h) 0.2 0.1Pensions (g) (0.3) -Depreciation on previously capitalised UK GAAPredeployment costs (i) 0.2 0.1Deferred tax on above adjustments (k) 0.1 - ---- ----Profit for the period from continuing operationsunder IFRS 18.8 1.4 ---- ---- Reconciliation of equity at 1 January 2004 (date of transition to IFRS)The effect of the changes to the Group's accounting policies on the equity of theGroup at 1 January 2004 was as follows: IFRS Measurement Adjustments ------------------------------ UK GAAP IFRS Dividends Employee Business Property, plant Deferred IFRS Reclassifications benefits combinations & equipment tax £m £m £m £m £ m £m £ m £ m Intangibleassets 3.0 1.9 - - (3.0) - - 1.9Property, plant & equipment 282.4 (2.2) - - - (0.4) - 279.8Deferred taxassets - 0.1 - - - - - 0.1 ----- ---- ------------------------------------------------------------------------Total non-currentassets 285.4 (0.2) - - (3.0) (0.4) - 281.8 ----- ------ -------------------------------------------------------------------------Inventories 23.1 - - - - - - 23.1Trade andotherreceivables 62.2 - - (0.8) - - - 61.4Cash and cashequivalents 6.6 - - - - - - 6.6Current taxassets - 1.3 - - - - - 1.3 ----- ---- -------------------------------------------------------------------------Total currentassets 91.9 1.3 - (0.8) - - - 92.4 ---- ----- ------------------------------------------------------------------------Financial liabilities- Borrowings (1.2) - - - - - - (1.2)Trade andother payables (57.8) 1.9 9.2 0.2 - - - (46.5)Current taxliabilities - (2.9) - - - - - (2.9)Provisions - - - - - - - - ------ ------ --------------------------------------------------------------------------Total currentliabilities (59.0) (1.0) 9.2 0.2 - - - (50.6) ------ ------ ------------------------------------------------------------------------Financialliabilities- Borrowings (105.3) - - - - - - (105.3)Deferred taxliabilities - (27.2) - - - - 4.0 (23.2)Retirementbenefitobligation - - - (8.4) - - - (8.4)Provisions (27.1) 27.1 - (0.3) - - - (0.3) ------ ------- -------------------------------------------------------------------------Total non-currentliabilities (132.4) (0.1) - (8.7) - - 4.0 (137.2) ------- ------- -------------------------------------------------------------------------Net assets 185.9 - 9.2 (9.3) (3.0) (0.4) 4.0 186.4 ------- ------- -------------------------------------------------------------------------Share capital 53.6 - - - - - - 53.6Share premium 5.7 - - - - - - 5.7Capitalredemptionreserve 0.1 - - - - - - 0.1Foreignexchangereserve (10.8) - - - - - - (10.8)Retainedearnings 137.3 - 9.2 (9.3) (3.0) (0.4) 4.0 137.8 ------- ------ -------------------------------------------------------------------------Total shareholders'equity 185.9 - 9.2 (9.3) (3.0) (0.4) 4.0 186.4 ------- ------ ------------------------------------------------------------------------- Reconciliation of equity at 30 June 2004The effect of the changes to the Group's accounting policies on the equity ofthe Group at 30 June 2004 was as follows. IFRS Measurement Adjustments --------------------------------- UK GAAP IFRS Dividends Employee Business Property, plant Deferred IFRS Reclassifications benefits combinations & equipment tax £m £m £m £m £ m £m £ m £ m Intangible assets 2.8 1.8 - - (2.8) - - 1.8Property, plant& equipment 273.4 (2.3) - - - (0.3) - 270.8Deferred taxassets - 0.2 - - - - - 0.2 ----- ------ --------------------------------------------------------------- ------Total non-currentassets 276.2 (0.3) - - (2.8) (0.3) - 272.8 ------ ------ ---------------------------------------------------------------- ------Inventories 24.3 - - - - - - 24.3Trade andotherreceivables 67.7 - - (0.6) - - - 67.1Cash and cashequivalents 5.6 - - - - - - 5.6Current taxassets - 3.8 - - - - - 3.8 ----- ------ ---------------------------------------------------------------- ------Total currentassets 97.6 3.8 - (0.6) - - - 100.8 ----- ------ ---------------------------------------------------------------- -------Financialliabilities- Borrowings (4.3) - - - - - - (4.3)Trade andother (63.3) 3.0 6.0 - - - - (54.3)payablesCurrent taxliabilities - (6.3) - - - - - (6.3)Provisions - (5.3) - - - - - (5.3) -------- ------- --------------------------------------------------------------- ------Total currentliabilities (67.6) (8.6) 6.0 - - - - (70.2) -------- -------- --------------------------------------------------------------- ------Financialliabilities- Borrowings (99.2) - - - - - - (99.2)Deferred taxliabilities - (24.6) - - - - 4.0 (20.6)Retirementbenefitobligation - - - (8.4) - - - (8.4)Provisions (32.7) 29.7 - (0.3) - - - (3.3) -------- -------- ---------------------------------------------------------------- -------Totalnon-currentliabilities (131.9) 5.1 - (8.7) - - 4.0 (131.5) -------- --------- --------------------------------------------------------------- -------Net assets 174.3 - 6.0 (9.3) (2.8) (0.3) 4.0 171.9 -------- --------- --------------------------------------------------------------- -------Share capital 53.6 - - - - - - 53.6Share 5.7 - - - - - - 5.7premiumTreasuryshares - (3.3) - - - - - (3.3)Capitalredemptionreserve 0.1 - - - - - - 0.1Foreignexchangereserve (14.5) - - - 0.1 - - (14.4)Retainedearnings 129.4 3.3 6.0 (9.3) (2.9) (0.3) 4.0 130.2 ------ ------ ---------------------------------------------------------------- ------Totalshareholders'equity 174.3 - 6.0 (9.3) (2.8) (0.3) 4.0 171.9 ------ ------ ---------------------------------------------------------------- ------ Reconciliation of equity at 31 December 2004The effect of the changes to the Group's accounting policies on the equity ofthe Group at the date of the last financial statements presented under UK GAAP,31 December 2004 was as follows. IFRS Measurement Adjustments ---------------------------- UK IFRS Dividends Employee Business Property, plant Deferred IFRS GAAP Reclassifications benefits combinations & equipment tax £m £m £m £m £ m £m £ m £ m Intangibleassets 2.5 1.8 - - (2.5) - - 1.8Property,plant &equipment 263.5 (2.3) - - - (0.2) - 261.0Deferred taxassets - 0.2 - - - - - 0.2 ------ ------- ------------------------------------------------------------- -------Totalnon-currentassets 266.0 (0.3) - - (2.5) (0.2) - 263.0 ----- ------- ------------------------------------------------------------- --------Inventories 24.6 - - - - - - 24.6Trade andotherreceivables 70.8 - - (0.6) - - - 70.2Cash and cashequivalents 7.9 - - - - - - 7.9Current taxassets - 3.2 - - - - - 3.2 ------ ------ ------------------------------------------------------------ -------Total current assets 103.3 3.2 - (0.6) - - - 105.9 ------ ------ ------------------------------------------------------------- -------Financial liabilities- Borrowings (6.8) - - - - - - (6.8)Trade andother (73.0) 3.9 9.5 - - - - (59.6)payablesCurrent taxliabilities - (6.6) - - - - - (6.6)Provisions - (3.7) - - - - - (3.7) ------- ------- ------------------------------------------------------------- ------Total currentliabilities (79.8) (6.4) 9.5 - - - - (76.7) ------- ------- ------------------------------------------------------------- ------Financialliabilities- Borrowings (83.2) - - - - - - (83.2)Deferred taxliabilities - (22.4) - - (0.1) - 4.6 (17.9)Retirementbenefitobligation - - - (10.2) - - - (10.2)Provisions (28.0) 25.9 - (0.3) - - - (2.4) ------ -------- ----------------------------------------------------------- -------Totalnon-currentliabilities (111.2) 3.5 - (10.5) (0.1) - 4.6 (113.7) -------- ------- ------------------------------------------------------------- --------Net assets 178.3 - 9.5 (11.1) (2.6) (0.2) 4.6 178.5 -------- ------- ----------------------------------------------------------- --------Share capital 53.6 - - - - - - 53.6Share 6.0 - - - - - - 6.0premiumTreasuryshares - (3.3) - - - - - (3.3)Capitalredemptionreserve 0.1 - - - - - - 0.1Foreignexchangereserve (19.5) - - - 0.2 - - (19.3)Retainedearnings 138.1 3.3 9.5 (11.1) (2.8) (0.2) 4.6 141.4 ----- --------- ------------------------------------------------------------- --------TotalShareholders'equity 178.3 - 9.5 (11.1) (2.6) (0.2) 4.6 178.5 --------- -------- -------------------------------------------------------------- -------- Notes to the reconciliations IFRS Reclassifications (a) Property, plant and equipment included software costs under UK GAAP, butunder IFRS this has been reclassified as an intangible asset (1 January 2004:£1.9m, 30 June 2004: £1.8m, 31 December 2004: £1.8m). (b) Under UK GAAP, capital grants were included in deferred income and matchedwith the related depreciation. Under IFRS capital grants are netted against thecosts of the related asset (1 January 2004: £0.3m, 30 June 2004: £0.5m, 31December 2004: £0.5m). (c) Current corporate tax balances, previously netted off and included withinother creditors falling due within one year (1 January 2004: £1.6m, 30 June2004: £2.5m, 31 December 2004: £3.4m), have been reclassified to current taxassets (1 January 2004: £1.3m, 30 June 2004: £3.8m, 31 December 2004: £3.2m) andcurrent tax liabilities (1 January 2004: £2.9m, 30 June 2004: £6.3m, 31 December2004: £6.6m) and shown separately on the face of the balance sheet. (d) Deferred corporate tax balances, previously netted off and included withinnon current provisions for liabilities and charges (1 January 2004: £27.1m, 30June 2004: £24.4m, 31 December 2004: £22.2m) have been reclassified tonon-current deferred tax assets (1 January 2004: £0.1m, 30 June 2004: £0.2m, 31December 2004: £0.2m) and non-current deferred tax liabilities (1 January 2004:£27.2m, 30 June 2004: £24.6m, 31 December 2004: £22.4m) and shown separately onthe face of the balance sheet. (e) Provisions for liabilities and charges due within one year, previouslypresented within non-current liabilities in accordance with UK GAAP, have beenreclassified and shown within current liabilities (1 January 2004: £nil, 30 June2004: £5.3m, 31 December 2004: £3.7m). None of the above reclassifications have any effect on the Group's previouslyreported net assets or shareholders' equity. IFRS Measurement Adjustments (f) Dividends: dividends in respect of the Group's ordinary shares declaredafter the balance sheet date are not accrued in the balance sheet as required byIAS 10 'Events after the balance sheet date'. Previously under UK GAAP, suchdividends were accrued in the balance sheet. (g) Employee benefits: pensions and other post retirement benefits have beenaccounted for in accordance with IAS 19 which requires recognition of theoperating and financing costs of the defined benefit pension scheme in theincome statement. IAS 19 also requires recognition of any actuarial gains andlosses in full immediately in the statement of recognised income and expense.Accordingly the pension scheme deficit is included as a liability in the balancesheet. Previously, under UK GAAP, the Group's policy was to recognise a charge for itsdefined benefit pension scheme in arriving at operating profit. This costcomprised the regular cost of providing pensions and a charge or credit relatingto the amortisation of actuarial gains and losses over the average remainingservice lives of the employees covered by the scheme. The difference between thecumulative charge for pensions and cumulative contributions paid in respect ofthose arrangements was previously recognised as an asset or liability in thebalance sheet. Under IFRS a provision has been established for a statutory employee terminationbenefit scheme in France. Under UK GAAP no provision for this scheme wasrequired. (h) Business combinations: Aggreko has not taken the IFRS 1 exemption forbusiness combinations and has instead revisited the balance sheets acquired aspart of previous business combinations, separately identifying each intangibleasset and assessing useful lives for each. An adjustment has been made to thecarrying value of certain intangible assets to reflect each individual usefullife. Goodwill was amortised under UK GAAP over its useful economic life, but underIFRS 3 is now reviewed for impairment on an annual basis and no longeramortised. (i) Property, plant & equipment: under IFRS, certain costs of redeploying rentalassets which were previously capitalised under UK GAAP are no longercapitalised. An adjustment has been made to the reverse the related carryingvalue of property, plant and equipment against retained earnings. (j) Share-based payments: under IFRS 2, a charge is required for all share basedpayments including share options. The charge in the income statement is based onthe fair value of the options at the date of grant. There was no charge forAggreko under UK GAAP. (k) Deferred tax has been calculated in accordance with IAS 12 and arises ontemporary differences between the tax base of assets and liabilities and theircarrying amounts in the financial statements. Group Cash Flow Statement under IFRS The Group Cash Flow Statement prepared in accordance with FRS 1 (revised)presents substantially the same information as that required under IFRS. UnderIFRS, however, there are certain differences from UK GAAP with regard to theclassification of items within the cash flow statement and with regard to thedefinition of cash and cash equivalents. Under UK GAAP, cash flows are presented separately for operating activitiesreturns on investments and servicing of finance, taxation, capital expenditureand financial investment, equity dividends paid, management of liquid resourcesand financing. Under IFRS, only three categories of cash flow activity arereported: operating activities, investing activities and financing activities. Under IFRS, items which under UK GAAP would be included within management ofliquid resources fall within the definition of cash and cash equivalents. 6 months 6 months Year ended ended ended 30 June 30 June 31 Dec 2005 2004 20043. Cashflow from operating activities £m £m £m Profit for the period 11.0 1.4 18.8Adjustments for:Tax 5.6 0.6 8.7Depreciation 29.6 28.7 58.0Impairment of fixed assets - 1.9 2.3Amortisation of intangibles 0.1 0.1 0.2Interest income (0.1) - (0.3)Interest expense 1.9 1.8 4.2Profit on sale of property, plant and equipment(see below) (0.6) (0.7) (1.3)Share based payment 0.1 0.1 0.2Changes in working capital (excluding the effectsof exchange differences on consolidation):Inventories (5.6) (1.5) (2.6)Trade and other receivables (14.4) (7.0) (11.5)Trade and other payables 10.1 8.5 15.9Net movements in provisions for liabilities andcharges (1.8) 8.3 5.8Increase in retirement benefit obligation 0.1 - 0.3 ----- ----- -----Cash generated from operations 36.0 42.2 98.7 ----- ----- ----- In the cash flow statement, proceeds from sale of property, plant and equipmentcomprise: 6 months 6 months Year ended 30 ended ended June 30 June 31 Dec 2005 2004 2004 £m £m £mNet book amount 0.5 0.8 2.4Profit on sale of property, plant and equipment 0.6 0.7 1.3 ---- ---- ----Proceeds from sale of property, plant and 1.1 1.5 3.7equipment ---- ---- ---- 4. Cash and cash equivalents 6 months 6 months Year ended 30 ended ended June 30 June 31 Dec 2005 2004 2004 £m £m £m Cash in bank and in hand 5.7 5.1 7.4Short-term bank deposits 0.7 0.5 0.5 ---- ---- ---- 6.4 5.6 7.9 ---- ---- ---- Cash and bank overdrafts include the followingfor the purposes of the cash flow statement:Cash and cash equivalents 6.4 5.6 7.9Bank overdrafts (Note 10) (2.2) (0.4) (3.0) ----- ----- ----- 4.2 5.2 4.9 ----- ----- ----- 5. Segmental reporting (a) Revenue by segment Total Revenue Inter-segment revenue External revenue 6 months 6 months Year 6 months 6 months Year 6 months 6 months Year ended ended ended ended ended ended ended ended ended 30 June 30 June 31 Dec 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2005 2004 2004 2005 2004 2004 2005 2004 2004 £m £m £m £m £m £m £m £m £m Northern Europe 26.8 27.0 54.8 - 0.6 0.7 26.8 26.4 54.1South & CentralEurope 24.4 23.7 52.7 - 0.3 0.6 24.4 23.4 52.1North America 50.4 46.6 107.6 - 0.1 0.2 50.4 46.5 107.4Middle East,Asia-Pacific,South America 24.2 18.8 39.2 0.1 0.1 0.3 24.1 18.7 38.9 ------------------------ ------------------------ ------------------------Local business 125.8 116.1 254.3 0.1 1.1 1.8 125.7 115.0 252.5InternationalPower Projects 42.0 36.0 71.7 0.5 0.2 0.6 41.5 35.8 71.1Eliminations (0.6) (1.3) (2.4) (0.6) (1.3) (2.4) - - - ------------------------- ------------------------- --------------------------Group 167.2 150.8 323.6 - - - 167.2 150.8 323.6 -------------------------- ------------------------- -------------------------- (b) Profit by segment Trading profit/(loss) Gain/(loss) on sale of PPE Operating profit/(loss) 6 months 6 months Year 6 months 6 months Year 6 months 6 months Year ended ended ended ended ended ended ended ended ended 30 June 30 June 31 Dec 30 June 30 June 31 Dec 30 June 30 June 31 Dec 2005 2004 2004 2005 2004 2004 2005 2004 2004 £m £m £m £m £m £m £m £m £m Northern Europe 1.2 2.2 3.7 0.1 0.3 0.3 1.3 2.5 4.0South & CentralEurope (0.8) (0.2) 3.2 0.1 0.2 0.3 (0.7) - 3.5North America 4.9 3.4 16.7 0.3 0.4 0.8 5.2 3.8 17.5Middle East,Asia-Pacific,South America 4.7 2.7 5.8 0.1 - (0.2) 4.8 2.7 5.6 ------------------------ ------------------------- --------------------------Local business 10.0 8.1 29.4 0.6 0.9 1.2 10.6 9.0 30.6InternationalPower Projects 7.8 8.7 15.7 - (0.2) 0.1 7.8 8.5 15.8 ------------------------ ------------------------- --------------------------Group 17.8 16.8 45.1 0.6 0.7 1.3 18.4 17.5 46.4 ------------------------ -------------------------Exceptional items (Note 6) - (13.7) (15.0) ---------------------------Operating profit post exceptional items 18.4 3.8 31.4Finance costs - net (1.8) (1.8) (3.9) ---------------------------Profit before taxation 16.6 2.0 27.5Taxation (5.6) (0.6) (8.7) ---------------------------Profit for the period 11.0 1.4 18.8 --------------------------- 6. Exceptional items The exceptional charge in 2004 related to the restructuring programme entered intoas a result of an in-depth review of the Group's strategy which was announced in March 2004. 7. Dividends The dividends approved in the period were: 6 months 6 months Year ended ended ended 30 June 30 June 31 Dec 2005 2004 2004Total dividend (£ million) 9.5 9.2 15.2Dividend per share (pence) 3.57 3.45 5.70 An interim dividend in respect of 2005 of 2.34 pence (2004: 2.25 pence),amounting to a total dividend of £6.2 million (2004: £6.0 million) was declaredduring the period 8. Earnings 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 period, excluding shares held by the Employee ShareOwnership Trusts which are treated as cancelled. 30 June 30 June 31 Dec 2005 2004 2004 Profit for the period (£ million) 11.0 1.4 18.8 ----- ------ -----Weighted average number of ordinary shares in issue (million) 265.8 267.8 266.9 ----- ------ -----Basic earnings per share (pence) 4.16 0.52 7.01 ----- ------ ----- For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential 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 period. The number of shares calculated as above is compared with thenumber of shares that would have been issued assuming the exercise of the shareoptions. 30 June 30 June 31 Dec 2005 2004 2004Profit for the period (£ million) 11.0 1.4 18.8 -------- ------- ------Weighted average number of ordinary shares in issue (million) 265.8 267.8 266.9Adjustment for share options (million) 1.5 1.2 1.0 -------- ------- ------Diluted weighted average number of ordinaryshares in issue (million) 267.3 269.0 267.9 -------- ------- ------Diluted earnings per share (pence) 4.13 0.52 6.99 -------- ------- ------ Aggreko plc assesses the performance of the Group by adjusting earnings pershare, calculated in accordance with IAS 33, to exclude items it considers to benon-recurring and believes that the exclusion of such items provides a bettercomparison of business performance. The calculation of earnings per ordinaryshare on a basis which excludes exceptional items is based on the followingadjusted earnings: 30 June 30 June 31 Dec 2005 2004 2004 £ million £ million £ millionProfit for the period 11.0 1.4 18.8Exclude exceptional items (net ofattributable taxation) - 9.3 10.2 ------- ------- -------Adjusted earnings 11.0 10.7 29.0 ------- ------- ------- An adjusted earnings per share figure ispresented below. 30 June 30 June 31 Dec 2005 2004 2004Basic earnings per share pre-exceptionalitems (pence) 4.16 3.99 10.83 ------- ------ -------Diluted earnings per share pre-exceptionalitems (pence) 4.13 3.98 10.79 ------ ------ ------- 9. Taxation The taxation charge for the period is based on an estimate of the Group'sexpected annual effective rate of tax for 2005 which is currently estimated tobe 33.5% (2004: 32.0%). 10. Financial liabilities - borrowings 30 June 30 June 31 Dec 2005 2004 2004Non-current £ million £ million £ millionBank borrowings 101.1 99.2 83.2 CurrentBank overdrafts 2.2 0.4 3.0Bank borrowings 2.8 3.9 3.8 ------------------------------------------ 5.0 4.3 6.8 ------------------------------------------ Total borrowings 106.1 103.5 90.0 ------------------------------------------ Liquid funds: Liquid resources (0.7) (0.5) (0.5)Cash at bank and in hand (5.7) (5.1) (7.4) ------------------------------------------Net borrowings 99.7 97.9 82.1 ------------------------------------------ The maturity profile of the borrowings was as follows: 30 June 30 June 31 Dec 2005 2004 2004 £ million £ million £ million Within 1 year, or on demand 5.0 4.3 6.8Between 1 and 2 years 49.9 - -Between 2 and 5 years 51.2 99.2 83.2 ---------------------------------------- 106.1 103.5 90.0 ---------------------------------------- The profile of the Group's financial liabilities at 30 June 2005 were asfollows: Floating rate Fixed rate Total £ million £ million £ millionSterling 11.4 7.5 18.9US Dollar 25.7 39.2 64.9Euro 2.4 18.9 21.3Other currencies 1.0 - 1.0 --------------------------------------------At 30 June 2005 40.5 65.6 106.1 -------------------------------------------- Sterling 7.1 12.6 19.7US Dollar 38.0 22.2 60.2Euro 18.5 4.7 23.2Other currencies 0.4 - 0.4 --------------------------------------------At 30 June 2004 64.0 39.5 103.5 -------------------------------------------- Sterling 5.4 7.5 12.9US Dollar 14.6 36.0 50.6Euro 5.8 19.6 25.4Other currencies 1.1 - 1.1 --------------------------------------------At 31 December 2004 26.9 63.1 90.0 -------------------------------------------- 11. Provisions Legal indemnity Reorganisation employee and termination restructuring benefit Total £ million £ million £ million At 1 January 2004 - 0.3 0.3New provisions 11.7 - 11.7Utilised during year (3.4) - (3.4) ------------------------------------At 30 June 2004 8.3 0.3 8.6 New provisions 1.0 - 1.0Utilised during year (3.5) - (3.5) -------------------------------------At 31 December 2004 5.8 0.3 6.1 Utilised during year (1.8) - (1.8) --------------------------------------At 30 June 2005 4.0 0.3 4.3 -------------------------------------- 30 June 30 June 31 Dec 2005 2004 2004 £ million £ million £ million Analysis of total provisionsCurrent portion of provisions 3.5 5.3 3.7Non-current portion of provisions 0.8 3.3 2.4 --------------------------------------Total provisions 4.3 8.6 6.1 -------------------------------------- (i) The provision for reorganisation and restructuring comprise the estimatedcosts of restructuring the Group's North America, European and Internationaloperations and the provisions are generally in respect of severance, propertyand related costs. The provision is expected to be fully utilised before the endof the next financial year. (ii) The provision for legal indemnity employee termination benefit relates to astatutory employee termination benefit scheme in France. 12. Date of Approval The Interim Accounts were approved by the Board of Directors on 15 September 2005. This information is provided by RNS The company news service from the London Stock Exchange

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