14th Sep 2006 07:01
Aggreko PLC14 September 2006 Aggreko plc INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2006 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 2006. Movement Six months to Six months to As reported Constant 30 June 2006 30 June 2005 Currency Group revenue £238.0m £167.2m 42.4% 38.1% Trading profit (1) £30.7m £17.8m 72.3% 63.7% Profit before tax £29.6m £16.6m 78.4%Earnings per share 7.14p 4.16p 71.9%Dividend per share 2.53p 2.34p 8.0% (1) Trading profit represents operating profit before gain on sale ofproperty, plant and equipment. Key points include: • Strong revenue growth across all our businesses • Rolling 12-month return on capital employed increases from 15.6% to 21.1% • Local businesses: o North America: revenue and trading profit increased by 37% and 141% respectively as new structure continues to deliver strong base business growth and margin improvement. o Europe: revenues grew 14%, and profits slightly ahead. Expectation that second half will be much stronger than last year. o Middle East, Asia, Australia, South America: revenue increased by 40% and trading profit increased by 52%. • International Power Projects: o New contract wins and strong renewals drove 40% revenue growth and 20% trading profit increase. o Slight reduction in trading margin due to contract mobilisation costs, but return on capital improved from 18% to 20% o Major new contracts won in first half in Yemen, Uganda, Kenya o Recent Tanzanian gas power contract win • Initial rollout of ERP system completed in both Europe and North America • Good start to the second half in all businesses. Expectations of further year-on-year progress, notwithstanding $32 million exceptional hurricane-related revenue in the second half of 2005. The Group had a very strong first half. Reported revenue increased by 42.4% to£238.0 million. Group revenue in constant currency and excluding pass-throughfuel revenue increased by 31.3% to £219.7 million; on the same basis tradingprofits increased by 60.4% to £30.1 million. Group pre-tax profits rose to £29.6million, an increase of 78.4% on last year's profits, and basic earnings pershare grew by 71.9% to 7.14 pence. The interim dividend will be increased by8.0% to 2.53 pence. Philip Rogerson, Chairman, commented: "I am pleased to report that Aggreko has produced a very strong set of resultsfor the first half of 2006, with earnings per share 72% ahead of last year. Thebusinesses in North America and International have continued to grow strongly,and we are also making good progress in Europe." "At a Group level, we now expect Aggreko's performance for the year to be aheadof our previous expectations." Rupert Soames, Chief Executive, commented: "We are delighted by Aggreko's performance during the first half of 2006. OurLocal businesses grew revenue by 29% in constant currency, and trading profitsby 93%. The International Power Projects business also grew underlying revenueby 40% and trading profit by 20%. We believe that Aggreko will continue toperform strongly in the second half." - ENDS - Enquiries to : Rupert Soames / Angus CockburnAggreko plcTel. 0141 225 5900 Wendy TimmonsMaitland Tel: 020 7379 5151 Chairman's Statement Introduction I am pleased to report that Aggreko has produced a very strong set of resultsfor the first half of 2006. The businesses in North America and Internationalhave continued to grow strongly, while we have made some encouraging progress inEurope. Trading Reported revenue in the first half increased by 42.4% to £238.0 million.Revenue, in constant currency (1) and excluding £18.3 million of pass-throughfuel revenue (2) from our International business, increased by 31.3%. Pre-tax profits rose to £29.6 million, an increase of 78.4% and basic earningsper share grew by 71.9% to 7.14 pence; diluted earnings per share grew by 71.4%to 7.08 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 £70.6 million, compared with £29.1 million in the same period last year. Itis expected that capital expenditure for the full year will be around £130million compared with £80.2 million in 2005. This increase in capitalexpenditure reflects the continued high levels of utilisation across the Group,most notably in our North American and International businesses. This investmentwill support continued revenue growth and includes further additions to our newfleet of gas-powered generators. The flexibility and short lead-time of ourdesign and assembly operation allows Aggreko to increase or reduce capitalexpenditure very quickly in response to market conditions. Largely as a consequence of the higher level of capital expenditure, net debtincreased during the period by £27.3 million to £130.2 million; this compareswith £99.7 million at 30 June 2005. Aggreko's financial position remains strong,as measured by net assets of £213.0 million (30 June 2005: £183.4 million) andinterest cover of 11.5 times (2005: 10.1 times). Dividend Taking account of the strong trading performance, the Board has decided todeclare an interim dividend of 2.53 pence per share, which is an increase of 8%over the 2005 interim dividend. This interim dividend will be paid on 17November 2006 to shareholders on the register at 20 October 2006, with anex-dividend date of 18 October 2006. Outlook Aggreko's International Power Projects business continues to trade strongly.Several large new contracts have been secured including 100 MW in Kenya, ourfirst large gas contract in Tanzania and additions to our contract in Uganda. Inaddition, we have recently signed a contract for a further 50 MW in the Yemen.As a result, we expect a strong performance from the International PowerProjects business in the second half. We also expect that the Local business inAggreko International will continue to grow year on year in the second half,although the rate of growth is likely to be slower than in the first half. In North America the momentum gained during the first half has enabled us tomake a good start to our key summer season. Although the second half of 2005benefited from $32 million of exceptional hurricane-related revenues, the growthof our base business is such that we expect the region to exceed the performanceachieved in the second half of last year. The European business has for many years been highly seasonal, with most of theprofits being made in the second half. We have had a strong start to the summertrading season, and revenues in the first two months of the second half havebeen well ahead of last year. Given this strong start we expect performance inthe second half, and for the year as a whole, to be materially better than 2005. At a Group level, we now expect Aggreko's performance for the year to be aheadof our previous expectations. Philip G RogersonChairman14 September 2006 (1) Constant currency takes account of the impact of translational exchange movements in respect of our businesses which operate in currency other than sterling.) (2) Pass-through fuel revenue relates to contracts in our International Projects business where we pass on fuel costs to the customer at little or no profit margin.) Operating and Financial Review Group Trading Performance Aggreko's performance during the first half of 2006 has been very strong, andthe Group has made good progress compared with the first half of 2005. Grouprevenue, as reported, was £238.0 million (2005: £167.2 million), which was 42.4%higher than 2005; Group trading profit of £30.7 million (2005: £17.8 million)was 72.3% ahead. Group trading margin improved from 10.7% in 2005 to 12.9% in2006 and return on capital employed, measured on a rolling 12-month basis,improved to 21.1% from 15.6%. Group profit before tax grew by 78.4% to £29.6 million (2005: £16.6 million). Anincrease in the proportion of profits arising in North America took the overalltax rate from 33.5% to 36.0% in 2006, resulting in profit after tax rising 71.7%to £19.0 million (2005: £11.0 million). Earnings per share increased by 71.9% to7.14 pence (2005: 4.16 pence). 2006 2005 Movement £m £m As reported Constant Currency Revenue 238.0 167.2 42.4% 38.1%Revenue excl pass-through fuel 219.7 162.3 35.4% 31.3%Trading profit 30.7 17.8 72.3% 63.7%Operating profit 32.4 18.4 76.0% 67.3%Net interest expense (2.8) (1.8) (54.1)%Profit before tax 29.6 16.6 78.4%Taxation (10.6) (5.6) (91.7)%Profit after tax 19.0 11.0 71.7%Basic earnings per share (pence) 7.14 4.16 71.9% In the first half, the impact of currency movements - mainly the US dollarexchange rate - has been to increase revenue by £5.2 million and trading profitby £0.9 million on a like-for-like basis while pass-through fuel accounted for£18.3 million (2005: £4.9 million) of reported revenue of £238.0 million. Excluding the impact of the currency movements as well as the pass-through fuelrevenue, Group revenue grew on an underlying basis by 31.3% (as reported: 42.4%)and trading profit by 60.4% (as reported: 72.3%). On the same basis, tradingmargin in the first half was 13.7% (as reported: 12.9%) which compares with11.0% in 2005 (as reported: 10.7%). The Group's growth was made possible by a large increase in investment in newfleet during the period. Total capital expenditure for the period was £70.6million, £41.5 million up on the prior year; notwithstanding this, the ratio ofRevenue (excluding pass-through fuel) : Gross Rental Assets, which is a keymeasure of capital efficiency, increased by over 10 percentage points over theprior year to 67.9%. Regional Trading Performance Revenue Trading Profit/ (Loss)Management Geography 2006 2005 Change 2006 2005 ChangeGroup £m £m % £m £m % Local business North America USA & Canada 72.2 50.4 43.3% 12.3 4.9 152.2%Europe Northern Europe 30.5 26.8 13.9% 1.0 1.2 (13.7)% Continental 28.3 24.4 15.7% (0.5) (0.8) 32.8% Europe International Middle East, 35.2 24.1 46.1% 7.5 4.7 59.2%Local Asia-Pacific,Businesses South America Sub-total Local business 166.2 125.7 32.2% 20.3 10.0 103.3% International Power Projects International International 53.5 36.6 46.3% 9.8 7.8 25.6% Power Projects excl. pass-through fuelInternational Pass-through 18.3 4.9 0.6 - fuel Sub-total InternationalPower Projects 71.8 41.5 73.3% 10.4 7.8 33.0% Group 238.0 167.2 42.4% 30.7 17.8 72.3% North America 72.2 50.4 43.3% 12.3 4.9 152.2% Europe 58.8 51.2 14.7% 0.5 0.4 24.3% International 107.0 65.6 63.3% 17.9 12.5 42.8%Group 238.0 167.2 42.4% 30.7 17.8 72.3% Group excluding 219.7 162.3 35.4% 30.1 17.8 68.9% pass-through fuel The performance of each of these regions in the first half is described below: Local business: North America 2006 2005 Change $ million $ million %Revenue 129.3 94.4 37.1%Trading profit 22.0 9.1 141.3% Our Local business in North America produced another excellent performance inthe first half with revenue increasing by 37.1% to $129.3 million and tradingprofit increasing by 141.3% to $22.0 million. Trading margin increased by morethan 7 percentage points from 9.7% to 17.0%. This growth has been driven byinvestment in new fleet as well as the excellent performance of our sales andservice teams. Encouragingly, revenue growth was very broadly based, coveringmany sectors and geographies. Amongst the sectors, we achieved particularlystrong growth in oil and gas, manufacturing and construction. About $7 millionof the $129 million of revenue arose from reconstruction work in the aftermathof the severe hurricane season in 2005. Reconstruction work, combined with highactivity levels in petrochemicals, were major contributing factors to the strongperformance of our business in the Gulf area during the first half; good growthwas also seen in several other areas, most notably our businesses in the Westand North East. In terms of business mix, rental revenue grew by 30.6% and services revenue grewby 51.9%. Power revenue for the first half was 45.0% ahead of the prior year,while temperature control revenue for the period was 24.0% ahead of last year.Oil-free air revenue was 14.0% ahead of the prior period. Our new Local business model is now well established in North America and theinitial roll-out of our new Enterprise Resource Planning (ERP) system is nowcomplete. The implementation having gone smoothly, the focus is now on drivingefficiency improvement and leveraging the full benefits of the real-timeinformation now available to run the business. The momentum gained during the first half has enabled us to make a good start toour key summer season. Although the second half of 2005 benefited from $32million of exceptional hurricane-related revenues, the growth of our basebusiness is such that we expect the region to exceed the performance achieved inthe second half of last year. Local business: Europe Revenue 2006 2005 Change • million • million %Northern Europe 44.4 39.1 13.6%Continental Europe 41.1 35.6 15.4%Total Europe 85.5 74.7 14.5% Trading Profit/(Loss) 2006 2005 Change • million • million %Northern Europe 1.5 1.8 (13.9)%Continental Europe (0.8) (1.2) 33.0%Total Europe 0.7 0.6 24.1% After a number of periods when we reported declining or flat revenues in Europe,it is encouraging to be able to report a second successive half-year tradingperiod when revenues have shown double-digit growth. In Northern Europe, revenue of €44.4 million for the first six months was 13.6%higher than the prior period. Rental revenue increased by 10.4%, with power andtemperature control revenue increasing by 12.8% and 6.6% respectively; whilerevenues from our smallest product, oil-free air, decreased by 6.7%. Servicesrevenue, which mainly comprises fuel and transport, grew by 19.8%. Our statedgoal of increasing penetration in the construction and utilities sectors wasreflected in the strong growth in the first half in both sectors, notablyconstruction where the revenues more than doubled compared with the first halfof 2005. This growth more than offset the continuing decline in telecoms wherenetwork roll-out activity is running at a greatly reduced level. Ourentertainment business will receive a boost in the second half as we secured thecontracts to provide power at both the Ryder Cup in September in Ireland and theOpen Golf Championship which took place in Liverpool in July. Revenue in Continental Europe was 15.4% higher than the previous period at €41.1million. Rental revenue grew by 11.9%, while services revenue grew by 23.1%.Within rental revenue, power increased by 17.9%; temperature control increasedby 3.6%; and oil-free air increased by 0.1%. The trading loss decreased by €0.4million over the previous period. Performance in most of the areas in Continental Europe was encouraging withparticularly strong growth in Benelux and Spain. Across Continental Europe,revenues grew strongly over the prior year in the construction, oil and gas andentertainment sectors. The growth in these sectors more than offset falls inboth the manufacturing and services sector. The trading margin in Europe was 0.9% (2005: 0.8%). Ongoing costs related to thefinalisation of the implementation of our new ERP system continue to impactmargins as the implementation in Northern Europe, planned towards the end of theroll-out programme, is the largest and most complex of our local businesses,with very high transaction volumes. This implementation has now beensuccessfully completed, and we expect to see an improvement in margins goingforward as these one-off costs drop away. We have also had to make significantoperational investments in building resources to support our utilities businessin Northern Europe. The European business has for many years been highly seasonal, with most of theprofits being made in the second half. We have had a strong start to the summertrading season, and revenues in the first two months of the second half havebeen well ahead of last year. Given this strong start we expect performance inthe second half, and for the year as a whole, to be materially better than 2005. Local business: Aggreko International 2006 2005 Change $ million $ million %Revenue 63.1 45.2 39.8%Trading profit 13.4 8.8 52.4% The Local businesses in the Middle East, Singapore, Australia, New Zealand, HongKong and Brazil had a very strong first half. In aggregate, period-on-periodrevenue grew by 39.8% to $63.1 million, which resulted in trading profit growthof 52.4% to $13.4 million and a trading margin of 21.2% as against 19.4% in2005. The businesses in the Middle East and Australia produced another excellentperformance. Increased oil revenues continue to drive development of newinfrastructure projects in the Middle East, particularly in the UAE, SaudiArabia and Qatar; while in Australia the robust demand for commodities and highlevels of utility shutdown maintenance work have resulted in strong revenuegrowth. Our business in Singapore continued to benefit from the high levels ofactivity in shipping; while revenues in our Brazilian business continue to grow,driven by the oil and gas sector. During the first quarter, we opened a newdepot in Hong Kong to capitalise on the strong shipping and industrial sectors,as well as providing a gateway in the longer term to generating projects inChina. We expect Aggreko International's Local businesses to continue to growyear-on-year in the second half, although the rate of growth is likely to beslower than in the first half. International Power Projects: Aggreko International In the International Power Projects business, the strong momentum built in thesecond half of 2005 carried through to the first half. 2006 2005 Change $ million $ million % Revenue (excluding pass-through fuel) 95.8 68.5 40.0%Trading profit (excluding pass-through fuel) 17.8 14.7 20.1% International Power Projects' revenue, excluding pass-through fuel, grew by40.0% to $95.8 million in the first six months of 2006 while trading profitsincreased by 20.1% to $17.8 million. The revenue growth reflects the benefit of new contracts signed in 2005 and thenumber of existing contracts being extended. In addition, the business has beensuccessful in winning new contracts across many parts of the world, a pleasingnumber of which have been from returning customers. These repeat wins are atribute to the operational excellence of our team in the International PowerProjects business. In terms of geography, our African business delivered very strong growth and,while much of this has been focused on East Africa where low rainfall has led toserious shortages of hydro-power, we have won numerous contracts throughout thecontinent. The biggest contract win during the first half was a contract tosupply 100MW of power in Kenya. We also secured an additional 50MW powercontract in Uganda, supplementing our first 50MW contract which has been runningsince mid 2005. The performance of the International Power Projects business in Asia was alsoencouraging after several years of building capability and relationships in theregion. Contracts are now running in several countries, including South Korea,Indonesia and Malaysia. Our South American business has continued to strengthenits position, while the business in the Middle East has been boosted by two 50MWcontract wins in Yemen. The military business has continued to perform well andrevenue is ahead of the prior period with additional equipment delivered toexisting contracts, many of which are being extended, and by the award of threenew military contracts including one supporting European peace-keeping effortsin the Democratic Republic of Congo. Our strategy of investing in developing and building gas power generators hasenabled us to secure our first large gas-powered contract in Tanzania in July.This contract is for 40MW of power to be supplied to The Tanzanian ElectricSupply Company over a two year period, using gas from the offshore Songo Songogas field. The large number of new contract wins led to a high level of mobilisation costsas a proportion of revenues and consequently the trading margin, excludingpass-through fuel, fell from 21.7% in 2005 to 18.6%. We do not expectmobilisation costs to be as high in the second half and we will also receive thefull contribution of revenue and profits from these new contracts which weexpect will lead to an improvement in the trading margin relative to the firsthalf. With the new contracts secured in the first half, and with many existingcontracts extending, we anticipate a strong performance from our InternationalPower Projects business in the second half. Financial Review Currency Translation The net overall impact of exchange rates on currency translation in the firstsix months of 2006 was to increase revenue and operating profit by £5.2 millionand £0.9 million respectively. Set out in the table below are the principalexchange rates affecting the Group's overseas profits and net assets. (per £ sterling) 2006 2005 Average Period End Average Period EndPrincipal Exchange RatesUnited States dollar 1.79 1.84 1.87 1.77Euro 1.46 1.45 1.46 1.48Other Operational ExchangeRatesUAE Dirhams 6.58 6.77 6.87 6.51Australian dollar 2.41 2.48 2.42 2.35 (Source: Reuters) Interest The net interest charge for the first half of 2006 was £2.8 million, an increaseof £1.0 million on 2005, reflecting the higher level of net debt and risingglobal interest rates during the period. Interest cover increased to 11.5 timesfrom 10.1 times in 2005. Effective Tax Rate The current forecast of the effective tax rate for the full year, which has beenused in the interim accounts, is 36.0% as compared with 33.5% in the same periodlast year. This increase in the tax rate largely reflects the changes in theregional mix of profits. Dividends Based on the proposed interim dividend of 2.53 pence per ordinary share, anincrease of 8.0% as compared with the same period in 2005, dividend cover is 2.8times (30 June 2005: 1.8 times). Cashflow The net cash inflow from operations during the first six months of 2006 totalled£60.5 million (2005: £36.0 million). EBITDA (earnings before interest, taxes,depreciation and amortisation) for the period amounted to £67.5 million, up40.5% on 2005. This funded capital expenditure of £70.6 million, which was up£41.5 million on the same period in 2005 reflecting increased investment in ourrental fleet to support the growth of the business. Net debt increased by £27.3million during the period and, at £130.2 million, is £30.5 million higher thanat 30 June 2005. As a result of the increase in net debt, gearing (net debt as apercentage of equity) at 30 June 2006 increased to 61% from 54% at 30 June 2005. Shareholders' Equity Shareholders' equity increased by £4.8 million to £213.0 million in the sixmonths ended 30 June 2006, represented by the net assets of the Group of £343.2million before net debt of £130.2 million. The movements in shareholders' equityare analysed in the table below: Movements in Shareholders' Equity £ million £ million As at 1 January 2006 208.2Profit for the financial period 19.0Dividend (1) (10.0) -------- --------Retained earnings 9.0New share capital subscribed 0.1Credit in respect of employee share awards 1.8Actuarial gains on retirement benefits 1.9Currency translation difference (9.1) Other(2) 1.1 --------As at 30 June 2006 213.0 -------- (1) Reflects the dividend of 3.77 pence per share (2005: 3.57 pence) that was paid during the period. (2) Other includes tax on items taken directly to reserves and movements in the hedging reserve. Auditors During the period, the Company carried out a competitive tender in relation tothe provision of external audit services. Following the outcome of this exercisethe Board, on the recommendation of the Audit Committee, will propose aresolution re-appointing PricewaterhouseCoopers LLP as the Company's auditors atthe next Annual General Meeting. Shareholder information Our website can be accessed at www.aggreko.com. This contains a large amount ofinformation about our business, including a range of charts and data, which canbe down loaded for easy analysis. The website also carries further detail aboutour Strategy Review, as well as all recent Stock Exchange announcements. Rupert Soames Angus CockburnChief Executive Finance Director14 September 2006 Group Income StatementFor the six months ended 30 June 2006 (unaudited) Notes 6 months 6 months Year ended ended ended 30 Jun 30 Jun 31 Dec 2006 2005 2005 £ million £ million £ million Revenue 4 238.0 167.2 417.7Operating expenses (205.6) (148.8) (357.0) -------- --------- ---------Operating Profit 4 32.4 18.4 60.7Finance costs- Interest expense (3.2) (1.9) (4.8)- Interest income 0.4 0.1 0.5 -------- --------- ---------Profit before taxation 29.6 16.6 56.4Taxation: 7 - UK (2.4) (1.1) (6.1)- Overseas (8.2) (4.5) (13.6) -------- --------- ---------Profit for the period 19.0 11.0 36.7 ======== ========= ========= Dividends paid in the period 5 10.0 9.5 15.7 ======== ========= ========= Dividends per share (pence) 5 3.77 3.57 5.91 ======== ========= =========Earnings per share (pence)Basic 6 7.14 4.16 13.81Diluted 6 7.08 4.13 13.72 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 2006 (unaudited) 6 months 6 months Year ended ended ended 30 Jun 30 Jun 31 Dec 2006 2005 2005 £ million £ million £ million Profit for the period 19.0 11.0 36.7Actuarial gains/(losses) on retirementbenefits 1.9 (2.4) (7.9)Movement of deferred tax on pensionliability (0.6) 0.7 2.4Cashflow hedges (net of deferred tax) 1.3 (1.1) (0.4)Net exchange (losses)/gains offset inreserves (9.1) 9.1 14.1 -------- --------- --------Total recognised income for the period 12.5 17.3 44.9Prior year adjustment forimplementation of IAS 39 - 0.6 0.6 -------- --------- --------Total recognised income since lastAnnual Accounts 12.5 17.9 45.5 -------- --------- -------- Group Balance Sheetas at 30 June 2006 (unaudited) Notes 30 Jun 30 Jun 31 Dec 2006 2005 2005 £ million £ million £ million Non-current assetsIntangible assets 1.4 1.8 1.5Property, plant and equipment 315.5 272.4 294.9Financial assets 1.1 0.5 0.7Deferred tax asset 0.4 0.2 0.4 ------- -------- -------- 318.4 274.9 297.5 ------- -------- -------- Current assetsInventories 38.4 31.6 35.7Trade and other receivables 121.2 88.4 114.0Financial assets 0.9 0.1 0.1Cash and cash equivalents 3 8.6 6.4 8.3Current tax assets 2.5 4.2 1.6 ------- -------- -------- 171.6 130.7 159.7 ------- -------- --------Total assets 490.0 405.6 457.2 ------- -------- -------- Current liabilitiesFinancial liabilities- Borrowings 8 (56.2) (5.0) (9.5)- Derivative financial instruments - (1.1) (0.6)Trade and other payables (98.2) (72.3) (93.7)Current tax liabilities (10.5) (7.1) (10.4)Provisions 9 (0.3) (3.5) (0.8) ------- -------- -------- (165.2) (89.0) (115.0) ------- -------- -------- Non-current liabilitiesFinancial liabilities- Borrowings 8 (82.6) (101.1) (101.7)- Derivative financial instruments (0.1) (0.5) (0.2)Deferred tax liabilities (12.5) (18.1) (14.2)Retirement benefit obligation (15.6) (12.7) (16.8)Provisions 9 (1.0) (0.8) (1.1) ------- -------- -------- (111.8) (133.2) (134.0) ------- -------- -------- Total liabilities (277.0) (222.2) (249.0) ------- -------- --------Net assets 213.0 183.4 208.2 ======= ======== ======== Shareholders' equityShare capital 53.8 53.6 53.8Share premium 6.9 6.1 6.8Treasury shares (6.5) (6.5) (6.5)Capital redemption reserve 0.1 0.1 0.1Hedging reserve 1.3 (1.0) -Foreign exchange reserve (14.3) (10.2) (5.2)Retained earnings 171.7 141.3 159.2 ------- -------- --------Total shareholders' equity 213.0 183.4 208.2 ======= ======== ======== Group Cash Flow StatementFor the six months ended 30 June 2006 (unaudited) Notes 6 months 6 months Year ended ended ended 30 Jun 30 Jun 31 Dec 2006 2005 2005 £ million £ million £ million Cash flows from operating activitiesCash generated from operations 2 60.5 36.0 101.9Tax paid (12.2) (7.3) (18.3) ------- -------- -------- Net cash generated from operatingactivities 48.3 28.7 83.6 ------- -------- -------- Cash flows from investing activitiesPurchases of property, plant andequipment (PPE) (70.6) (29.0) (80.1)Proceeds from sale of PPE 2.7 1.1 3.8Purchase of intangible assets - (0.1) (0.1) ------- -------- --------Net cash used in investing activities (67.9) (28.0) (76.4) ------- -------- -------- Cash flows from financing activitiesNet proceeds from issue of ordinaryshares 0.1 0.1 1.0Net increase in borrowings 32.4 12.9 15.9Interest received 0.4 0.1 0.5Interest paid (3.0) (1.7) (4.6)Dividends paid to shareholders (10.0) (9.5) (15.7)Purchase of treasury shares - (3.2) (3.2) ------- -------- --------Net cash generated from/(used in)financing activities 19.9 (1.3) (6.1) ------- -------- -------- Net increase/(decrease) in cash andcash equivalents 0.3 (0.6) 1.1Cash and cash equivalents at beginningof the period 6.0 4.9 4.9Exchange loss on cash and cashequivalents (0.1) (0.1) - ------- -------- -------- Cash and cash equivalents at end of theperiod 3 6.2 4.2 6.0 ------- -------- -------- Reconciliation of net cash flow to movement in net debtFor the six months ended 30 June 2006(unaudited) Increase/(decrease) in cash and cashequivalents 0.3 (0.6) 1.1Cash inflow from movement in debt (32.4) (12.9) (15.9) ------- -------- -------- Changes in net debt arising from cashflows (32.1) (13.5) (14.8) Exchange gains/(losses) 4.8 (4.1) (6.0) ------- -------- -------- Movement in net debt in period (27.3) (17.6) (20.8)Net debt at beginning of period (102.9) (82.1) (82.1) ------- -------- -------- Net debt at end of period 8 (130.2) (99.7) (102.9) ------- -------- -------- Notes to the Interim AccountsFor the six months ended 30 June 2006 (unaudited) 1. Basis of preparation of Interim Accounts i. This interim financial information has been preparedin accordance with the Listing Rules of the Financial Services Authority and hasbeen prepared in accordance with International Financial Reporting Standards(IFRS) as adopted for use in the European Union. The interim accounts have beenprepared on the basis of the principal accounting policies as set out on pages63 to 69 of the Group's 2005 Annual Report and Accounts. As permitted, the Grouphas chosen not to adopt IAS 34 - Interim Financial Statements, in preparingthese interim financial statements, and therefore this information is not whollycompliant with International Financial Reporting Standards. ii. The results for the half years to 30 June 2006 and 30June 2005 are unaudited but have been reviewed by the Group's auditors, whosereport is on page x. iii. The Statutory Accounts for 2005 have been deliveredto the Registrar of Companies. The report of the auditors on those Accounts wasunqualified and did not contain a statement under either Section 237(2) or 237(3) of the Companies Act 1985. 2. Cashflow from operating activities 6 months 6 months Year ended ended ended 30 Jun 30 Jun 31 Dec 2006 2005 2005 £ million £ million £ million Profit for the period 19.0 11.0 36.7Adjustments for:Tax 10.6 5.6 19.7Depreciation 34.9 29.6 63.0Amortisation of intangibles 0.2 0.1 0.4Interest income (0.4) (0.1) (0.5)Interest expense 3.2 1.9 4.8Profit on sale of PPE (1.7) (0.6) (1.1)Share based payment 0.2 0.1 2.5Changes in working capital (excludingthe effects of exchange differences onconsolidation):Increase in inventories (4.1) (5.6) (9.0)Increase in trade and other receivables (11.4) (14.4) (35.9)Increase in trade and other payables 9.9 10.1 25.4Net movements in provisions forliabilities and charges (0.6) (1.8) (4.2)Net retirement benefit cost 0.7 0.1 0.1 -------- -------- -------- Cash generated from operations 60.5 36.0 101.9 -------- -------- -------- 3. Cash and cash equivalents 30 Jun 30 Jun 31 Dec 2006 2005 2005 £ million £ million £ million Cash at bank and in hand 8.2 5.7 7.9Short-term bank deposits 0.4 0.7 0.4 -------- -------- -------- 8.6 6.4 8.3 -------- -------- -------- Cash and bank overdrafts include the following for the purposes of the cashflowstatement: 30 Jun 30 Jun 31 Dec 2006 2005 2005 £ million £ million £ million Cash and cash equivalents 8.6 6.4 8.3Bank overdrafts (Note 8) (2.4) (2.2) (2.3) -------- -------- -------- 6.2 4.2 6.0 -------- -------- -------- 4. 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 2006 2005 2005 2006 2005 2005 2006 2005 2005 £ m £ m £ m £ m £ m £ m £ m £ m £ m Northern Europe 30.5 26.8 58.7 - - - 30.5 26.8 58.7Continental Europe 28.3 24.4 56.0 - - 0.1 28.3 24.4 55.9North America 72.4 50.4 141.8 0.2 - 0.1 72.2 50.4 141.7Middle East, Asia-Pacific,South America 35.4 24.2 52.5 0.2 0.1 0.5 35.2 24.1 52.0 ------ ------ ------ ------ ------ ------ ------ ------ ------ Local Business 166.6 125.8 309.0 0.4 0.1 0.7 166.2 125.7 308.3International Power Projects 72.5 42.0 110.7 0.7 0.5 1.3 71.8 41.5 109.4Eliminations (1.1) (0.6) (2.0) (1.1) (0.6) (2.0) - - - ------ ------ ------ ------ ------ ------ ------ ------ ------Group 238.0 167.2 417.7 - - - 238.0 167.2 417.7 ------ ------ ------ ------ ------ ------ ------ ------ ------ Inter-segment transfers or transactions are entered into under the normalcommercial terms and conditions that would also be available to unrelated thirdparties. International Power Projects is a global segment administered from Dubai. At theperiod end the assets of the International Power Projects segment arepredominantly located in the Middle East, Asia-Pacific, South America and Africa. (b) Profit/(loss) by segment Trading profit/(loss) Gain 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 2006 2005 2005 2006 2005 2005 2006 2005 2005 £ m £ m £ m £ m £ m £ m £ m £ m £ m Northern Europe 1.0 1.2 4.5 0.3 0.1 0.2 1.3 1.3 4.7Continental Europe (0.5) (0.8) 0.9 0.1 0.1 0.3 (0.4) (0.7) 1.2North America 12.3 4.9 26.5 1.2 0.3 0.3 13.5 5.2 26.8Middle East,Asia-Pacific,South America 7.5 4.7 9.5 - 0.1 0.1 7.5 4.8 9.6 ------ ------ ------ ------ ------ ------ ------ ------ ------ Local Business 20.3 10.0 41.4 1.6 0.6 0.9 21.9 10.6 42.3InternationalPower Projects 10.4 7.8 18.2 0.1 - 0.2 10.5 7.8 18.4 ------ ------ ------ ------ ------ ------ ------ ------ ------ Group 30.7 17.8 59.6 1.7 0.6 1.1 32.4 18.4 60.7 ------ ------ ------ ------ ------ ------Finance costs- net (2.8) (1.8) (4.3) ------ ------ ------Profit beforetaxation 29.6 16.6 56.4Taxation (10.6) (5.6) (19.7) ------ ------ ------Profit forthe period 19.0 11.0 36.7 ------ ------ ------ 5. Dividends The dividends paid in the period were: 6 months 6 months Year ended ended ended 30 Jun 2006 30 Jun 2005 31 Dec 2005 Total dividend (£ million) 10.0 9.5 15.7Dividend per share (pence) 3.77 3.57 5.91 An interim dividend in respect of 2006 of 2.53 pence (2005:2.34 pence),amounting to a total dividend of £6.7 million (2005:£6.2 million) was declaredduring the period. 6. 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 Jun 30 Jun 31 Dec 2006 2005 2005 Profit for the period (£ million) 19.0 11.0 36.7 -------- -------- --------Weighted average number of ordinary shares inissue (million) 265.5 265.8 265.3 -------- -------- --------Basic earnings per share (pence) 7.14 4.16 13.81 -------- -------- -------- 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 Jun 30 Jun 31 Dec 2006 2005 2005 Profit for the period (£ million) 19.0 11.0 36.7 -------- -------- -------Weighted average number of ordinary shares inissue (million) 265.5 265.8 265.3Adjustment for share options (million) 2.3 1.5 1.8 -------- -------- -------Diluted weighted average number of ordinaryshares in issue (million) 267.8 267.3 267.1 -------- -------- -------Diluted earnings per share (pence) 7.08 4.13 13.72 -------- -------- ------- 7. Taxation The taxation charge for the period is based on an estimate of the Group'sexpected annual effective rate of tax for 2006 which is currently estimated tobe 36.0% (2005:33.5%). 8. Financial assets/liabilities 30 Jun 30 Jun 31 Dec 2006 2005 2005 £ million £ million £ million Non-current Bank borrowings 82.6 101.1 101.7 CurrentBank overdrafts 2.4 2.2 2.3Bank borrowings 53.8 2.8 7.2 -------- --------- -------- 56.2 5.0 9.5 -------- --------- --------Total borrowings 138.8 106.1 111.2 -------- --------- --------Short-term deposits (0.4) (0.7) (0.4)Cash at bank and in hand (8.2) (5.7) (7.9) -------- --------- --------Net borrowings 130.2 99.7 102.9 -------- --------- -------- The bank overdrafts and borrowings are all unsecured. Maturity of financial liabilities The maturity profile of the borrowings was as follows: 30 Jun 30 Jun 31 Dec 2006 2005 2005 £ million £ million £ million Within 1 year, or on demand 56.2 5.0 9.5Between 1 and 2 years - 49.9 49.0Between 2 and 3 years 82.6 - -Between 3 and 4 years - 51.2 52.7Between 4 and 5 years - - - -------- --------- -------- 138.8 106.1 111.2 -------- --------- -------- 9. Provisions Legal indemnity Reorganisation employee and termination restructuring benefit Total £ million £ million £ million At 1 January 2006 1.6 0.3 1.9Utilised during the period (0.6) - (0.6) ---------- --------- -------At 30 June 2006 1.0 0.3 1.3 ---------- --------- ------- 30 Jun 30 Jun 31 Dec 2006 2005 2005 £ million £ million £ million Analysis of total provisionsCurrent 0.3 3.5 0.8Non-current 1.0 0.8 1.1 ---------- --------- -------Total provisions 1.3 4.3 1.9 ---------- --------- ------- (i) The provision for reorganisation and restructuring comprises the estimatedcosts of restructuring the Group's North American, 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 2007. (ii) The provision for legal indemnity employee termination benefit relates to astatutory employee termination benefit scheme in France. The provision isexpected to be utilised within 20 years. 10. Statement of changes in equity Attributable to equity holders of the company Foreign Ordinary Share Capital exchange share premium Treasury redemption Hedging reserve Retained Total capital account shares reserve reserve (translation) earnings equity £m £m £m £m £m £m £m £m Balance at 1 January 2006 53.8 6.8 (6.5) 0.1 - (5.2) 159.2 208.2Net movement in foreigncurrency cash flow hedge - - - - 1.5 - - 1.5 Net movement on interestrate swaps - - - - 0.4 - - 0.4 Currency translationdifferences - - - - - (9.1) - (9.1) Current tax on items takento or transferredfrom equity - - - - - - (0.1) (0.1) Deferred tax on items taken to or transferredfrom equity - - - - (0.6) - (0.1) (0.7) Actuarial gains onretirement benefits - - - - - - 1.9 1.9 Credit in respect ofemployee share awards - - - - - - 1.8 1.8 New share capitalsubscribed (i) - 0.1 - - - - - 0.1 Profit for the period - - - - - - 19.0 19.0 ------ ------ ------ -------- ------ -------- ------ ------Total recognisedincome/(loss) for the period - 0.1 - - 1.3 (9.1) 22.5 14.8 ------ ------ ------ -------- ------ -------- ------ ------ Dividends paidduring the period - - - - - - (10.0) (10.0) ------ ------ ------ -------- ------ -------- ------ ------ Balance at 30 June 2006 53.8 6.9 (6.5) 0.1 1.3 (14.3) 171.7 213.0 ------ ------ ------ -------- ------ -------- ------ ------ (i) During the period 51,397 Ordinary shares of 20p each have been issued atprices ranging from £1.05 to £1.89. 11. Date of approval The Interim Accounts were approved by the Board of Directors on 14 September2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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