AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 POWERING THE FUTURE 2015 contents 1 Overview Performance highlights 2 Operational overview 3 Reorganised to better focus on our customers 4 Powering the future of spectator events 6 Strategic report 8-53 2 Our business Our business today 8 Our marketplace 10 How we create value 14 Our business priorities 22 How we performed – our KPIs 24 Watch and download the online report: Risk factors that could affect business performance 26 www.annualreport2015.aggreko.com Assessment of prospects and viability 33 Powering the future of Myanmar 34 Our investment case 36 3 Performance review Performance review 37 Financial review 40 Powering the future of Eritrean mining 46 4 Sustainability Building a sustainable business 48 Powering the future of Romanian oil & gas 52 5 Governance Corporate Governance 54 Audit Committee report 70 Ethics Committee report 74 Nomination Committee report 76 Remuneration Committee report 78 Statutory disclosures 94 Statement of Directors’ responsibilities 99 Powering the future of Russian oil refining 100 6 Accounts & other information Independent auditors’ report 102 Group income statement 108 Group statement of comprehensive income 108 Group balance sheet 109 Group cash flow statement 110 Reconciliation of net cash flow to movement in net debt 110 Group statement of changes in equity 111 Notes to the Group accounts 113 Company balance sheet 147 Company statement of comprehensive income 148 Company statement of changes in equity 149 Notes to the Company accounts 150 Shareholder information 154 Definition and calculation of non GAAP measures 156 Financial summary 158 Glossary 159 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 1 POWERING THE FUTURE OVERVIEW We live in a world reliant on power which CORPORATE VIDEO VISIT OUR WEBSITE TO VIEW OUR is an essential part of everyday life. CORPORATE VIDEO. BUSINESS OUR www.aggreko.com/about-aggreko Aggreko is the leading global provider of modular, mobile power and related solutions, operating in around 100 countries worldwide. REVIEW PERFORMANCE For over 50 years we have fulfilled this critical need. We specialise in providing a fast and flexible service to our customers anywhere in the world, through balancing our global scale with local operations. SUSTAINABILITY We aim to remain the leader in our market and we will do so by increasing our focus on customers, investing more resources in technology and improving GOVERNANCE efficiency. Delivering on these areas will enable us to grow the business and help our customers power their future. & OTHER INFORMATION ACCOUNTS ACCOUNTS 2 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 OVERVIEW PERFORMANCE HIGHLIGHTS 1, 4 1 Trading profit Revenue Trading profit represents operating profit before gain on sale of property, plant and equipment. 2 The Board is £1,561m £270m recommending a final dividend of 17.74 pence per 2014: £1,577m 2014: £306m Ordinary Share, which when added to the interim dividend of 9.38 pence, gives a total for the year of 27.12 pence per 4 4 Profit before tax Diluted earnings per share EPS Ordinary Share. 3 Calculated by dividing operating profit for the year by the average net operating assets as £252m 71.68p at 1 January, 30 June and 31 December. 4 2015 and 2012 2014: £289m 2014: 82.49p numbers are pre- exceptional items. Exceptional items are explained in Note 7 to the accounts. Dividend per share2 Return on capital employed3, 4 27.12p 16% 2014: 27.12p 2014: 19% Revenue £m Trading profit1,4 £m 15 1,561 15 270 14 1,577 14 306 13 1,573 13 352 12 1,583 12 381 11 1,396 11 338 Profit before tax4 £m Diluted EPS4 pence 15 252 15 71.68 14 289 14 82.49 13 333 13 92.03 12 360 12 100.40 11 324 11 86.76 Dividend per share2 pence Return on capital employed3,4 % 15 27.12 15 16 14 27.12 14 19 13 26.30 13 21 12 23.91 12 24 11 20.79 11 28 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 3 OPERATIONAL OVERVIEW OVERVIEW BUSINESS PRIORITIES STRUCTURE OF THE BUSINESS BUSINESS OUR Having undertaken a strategic review, in August 2015 we outlined our new business priorities for the Group around the customer, our technology and our efficiency. These priorities will deliver growth at attractive margins and returns. Customer REVIEW PERFORMANCE During the year we reorganised the business to better focus on our customers. We have Technology two mutually beneficial businesses: Rental Solutions operating in developed markets and Power Solutions operating in emerging markets. Organising the Group in this Efficiency way allows us to improve our customer service through better strategic and operational execution. Read more about our business priorities Read more about our business units SUSTAINABILITY Page 22 Pages 8 to 17 LEADERSHIP TEAM A Senior Leadership Team was established, comprising our top 65 managers. During the year GOVERNANCE Chris Weston, CEO, hosted two off-site briefings with the aim to better engage this level of management below the Executive Committee whilst gaining their input into developing the Group’s strategy and direction. Read more about our Senior Leadership Team Pages 18 to 19 and page 59 & OTHER INFORMATION ACCOUNTS ACCOUNTS POWER SOLUTIONS RENTAL SOLUTIONS In our industrial business we saw Strong performance across Europe, good growth in our Middle East, with all countries showing growth Russian and African businesses year on year. In North America, and successfully supplied power the ongoing weakness in the oil for the European Games in Baku. and gas sector has been offset by Challenging conditions in our utility continued growth in other sectors business resulted in revenues such as petrochemical and refining being down, however, order intake and events. Our Australia Pacific was 640MW and we secured key business continued to face difficult contract extensions in Argentina, market conditions driven by the Ivory Coast, Japan and Bangladesh. slowdown in the mining sector. Read more about Power Read more about Rental Solutions performance Solutions performance Page 39 Page 38 4 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 OVERVIEW REORGANISED TO BETTER FOCUS ON OUR CUSTOMERS Since joining Aggreko in January of BUSINESS Business Priorities last year we have had a very busy In August of last year I laid out the year and, although trading conditions MODEL priorities for the business for the have undoubtedly been difficult, I am OUR BUSINESS coming years which will deliver growth pleased with the progress we have MODEL IS STRONG in margins and returns of around 20% made. On a personal note I have AND UNIQUE. in the medium term. These priority thoroughly enjoyed my first year at Read more areas are our customer, our technology Aggreko and, having seen the Group in Page 14 and our efficiency. action all over the world, I reiterate the view that I laid out in August; that we Against the first priority, our have an entirely appropriate business customers, we have a number of model, a great market position and a initiatives underway, each of which is respected brand, all made possible by sponsored by one of the Executive dedicated and skilled people who are team. These include refining our passionate about the business. understanding of our customers’ requirements; customer segmentation; It is clear that we fulfil a critical need, strategies for key sectors; sales OWER IS AN we provide modular, mobile power training, deployment and incentives. ESSENTIAL PART OF EVERYDAY wherever it is needed most in the In turn these are supported by a plan LIFE. WE HAVE MADE GOOD world and I believe that if we focus on to enhance our CRM systems and PROGRESS OVER THE LAST our three priorities: our customers, to provide a digital platform for our 12 MONTHS TO IMPROVE our technology and our efficiency, customers. To date I am pleased with POUR COMPETITIVE POSITION then we will drive growth across all our progress. AND MAKE OUR POWER our businesses in the medium term, SOLUTIONS MORE ATTRACTIVE at attractive margins and returns. Under our technology, the objective TO CUSTOMERS. is to reduce the overall cost of Trading performance power for our customers, thereby bringing a benefit to our customers Overall, 2015 has been a challenging whilst at the same time making us year with the impact of lower commodity more competitive. prices and difficult trading conditions Chris Weston in a number of our markets having an In terms of our diesel product, we have impact on our performance; resulting made good progress in the past by Chief Executive Officer in revenues down 3% and trading introducing the G3+ engine into our profit down 14%, on an underlying fleet; this requires an in-house retrofit basis. However, as was discussed at of our original G3 engines, improving the Business Priorities presentation both power output and fuel efficiency. in August, Aggreko has a number of The retrofit programme will continue advantages, including scale and sector and we have plans to further improve and geographic diversity. This has the efficiency of this engine. benefited the Group this year and despite oil and gas revenue being Regarding our gas product, the next down 14% and Power Solutions Utility generation gas engine is currently revenue being down 11%, the Group undergoing field trials and performing overall is only 3% down. as we expected. From this point forward any gas engine produced will It is also important, particularly at times be the next generation engine. of volatility, to have the stability of a strong balance sheet and core to this, Finally, we continue to assess HFO flexibility around capital expenditure. product options, particularly proven I am pleased to say that in this regard technology that could be adapted to we have maintained our financial our business model, that is mobile, gearing at 0.9 times (net debt to modular and able to produce the EBITDA), within the range that had required returns.