AGGREKO PLC ANNUAL REPORT 2014 WorldReginfo - 6862ca4a-e7bb-4f01-b3ee-8db39d1a7e72 INSIDE OUR Performance highlights 2 2014 REPORT 1 Strategic report A solid performance – with Ken Hanna 4 A fresh perspective – with Chris Weston 6 What we do 10 Where we operate 11 Our markets 12 How we create value 16 Our strategy 22 How we performed – our KPIs 26 Risk factors that could affect business performance 28 Our investment case 34 Performance review 35 – Americas 38 – APAC 42 – EMEA 46 Financial performance 50 Building a sustainable business 55 2 Governance Corporate Governance 68 – Our Board 72 Audit Committee report 84 Ethics Committee report 88 Nomination Committee report 90 Remuneration Committee report 92 Statutory disclosures 119 Statement of Directors’ responsibilities 124 3 Accounts Independent auditors’ report 126 Group income statement 132 Group statement of comprehensive income 132 Group balance sheet 133 Group cash flow statement 134 Reconciliation of net cash flow to movement in net debt 134 Group statement of changes in equity 135 Notes to the Group accounts 137 Company balance sheet 172 Company statement of total recognised gains and losses 173 Notes to the Company accounts 174 4 Additional information Shareholder information 184 Definition and calculation of non GAAP measures 186 Financial summary 188 POWERING COMMUNITIES IN IVORY COAST Glossary Inside back cover The cover image shows our 200 MW gas-fired Power Project in Ivory Coast. With a booming economy and GDP growth of around 9%, demand for energy has been increasing steadily in recent years. The Aggreko plant injects vital capacity into the local grid, helping keep essential infrastructure and services running, while also ensuring power supplies are maintained to both business and domestic users. WorldReginfo - 6862ca4a-e7bb-4f01-b3ee-8db39d1a7e72 GLOBAL SCALE LOCAL OPERATION We live in a world reliant on power. It is an essential part of everyday life. Aggreko is the global leader in temporary power and temperature control solutions, operating in around 100 countries worldwide. For over 50 years we have specialised in providing fast and flexible customer solutions. We do this in two ways: through renting our equipment directly to a wide range of customers who operate it for themselves; and by operating as a power producer and selling electricity to customers at the point of need. Our business model balances our global scale with local operations to deliver fast, effective solutions and therefore help to keep the world working. Watch the corporate video online: Online report: www.aggreko.com/about-aggreko www.annualreport2014.aggreko.com Aggreko plc Annual report and accounts 2014 1 WorldReginfo - 6862ca4a-e7bb-4f01-b3ee-8db39d1a7e72 PERFORMANCE HIGHLIGHTS Revenue Trading profit1 £1,577 m £306 m 2013: £1,573m 2013: £352m Profit before tax Diluted earnings per share (EPS) £289 m 82.49 pence 2013: £333m 2013: 92.03 pence Dividend per share2 Return on capital employed3 27.12 pence 19 % 2013: 26.30 pence 2013: 21% Revenue Trading profit4 Profit before tax4 £m £m £m 1,583 1,573 1,577 381 360 352 333 1,396 338 324 312 304 1,230 306 289 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 Diluted EPS4 Dividend per share2 Return on capital employed3,4 pence pence % 100.40 26.30 27.12 32 92.03 86.76 23.91 28 82.49 78.98 20.79 24 18.90 21 19 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 1 Trading profit represents operating profit before gain on sale of property, plant and equipment. 2 The Board is recommending a final dividend of 17.74 pence per Ordinary Share, which when added to the interim dividend of 9.38 pence, gives a total for the year of 27.12 pence per Ordinary Share. 3 Calculated by dividing operating profit for the year by the average net operating assets as at 1 January, 30 June and 31 December. 4 2012 numbers are pre-exceptional items. 2 Aggreko plc Annual report and accounts 2014 WorldReginfo - 6862ca4a-e7bb-4f01-b3ee-8db39d1a7e72 1 2 3 4 STRATEGIC REPORT 1 Strategic report A solid performance – with Ken Hanna 4 A fresh perspective – with Chris Weston 6 What we do 10 Where we operate 11 Our markets 12 How we create value 16 – Our business model 16 – Project life cycle 18 – Using our resources 20 Our strategy 22 How we performed – our KPIs 26 Risk factors that could affect business performance 28 Our investment case 34 Performance review 35 – Americas 38 – APAC 42 – EMEA 46 Financial performance 50 Building a sustainable business 55 Aggreko plc Annual report and accounts 2014 3 WorldReginfo - 6862ca4a-e7bb-4f01-b3ee-8db39d1a7e72 STRATEGIC REPORT CONTINUED SOLID TRADING PERFORMANCE CHAIRMAN’S STATEMENT “The Group delivered a solid trading performance in a challenging year Ken Hanna Chairman The Group delivered a solid trading performance in 2014, We spent £226 million on new fleet in the period admirably handling the change in senior management and (2013: £205 million), equivalent to 93% of the depreciation difficult operating conditions in a number of our markets. charge; non-fleet capital expenditure was £25 million. Net debt at 31 December 2014 of £494 million was only I am delighted that Chris Weston joined us as Chief Executive £131 million higher than last year, despite having returned at the beginning of January this year, and I know that he has £200 million to Shareholders in June. Cash flow from enjoyed spending the first two months in the role travelling operating activities was £498 million, which helped fund around the Group and getting to know customers, the total capital expenditure of £251 million, the return of value Aggreko team and the business. to Shareholders and dividend payments of £70 million. Across the year as a whole, two of our regions, the Americas Our financial position continued to be strong with net debt and EMEA, performed well, whilst APAC had a challenging to EBITDA (Earnings before Interest Tax Depreciation & year with difficult trading conditions in Australia and Indonesia. Amortisation) of 0.9 times (2013: 0.6 times) at 31 December 2014, compared to our bank covenant of 3 times. Interest cover, Solid trading performance measured on an EBITDA basis, was at 27 times (2013: 26 times), In 2014, the Group delivered a solid set of results with comfortably within our covenant of 4 times. underlying1 revenue increasing by 9% and trading profit decreasing by 2%. On the same underlying basis, revenue in our Local business grew 8%, while revenue in our Power Projects business grew 10%. The underlying trading margin decreased to 20% (2013: 22%) driven by our Japanese and US Military contracts off hiring and the competitive environment in Indonesia in our Power Projects business and by the impact of the mining sector decline on our Australian Local business. As we anticipated, the reported results were significantly impacted by adverse currency movements, largely in the US Dollar, with reported revenue in line with last year and trading profit down 13%. Reported profit before tax decreased by 13% to £289 million (2013: £333 million) and diluted earnings per share decreased by 10% to 82.49 pence (2013: 92.03 pence). 4 Aggreko plc Annual report and accounts 2014 WorldReginfo - 6862ca4a-e7bb-4f01-b3ee-8db39d1a7e72 1 2 3 4 Strong Shareholder returns People In June 2014 we completed a £200 million return of value Aggreko had a challenging year in 2014, with significant to Shareholders, equivalent to 75 pence per ordinary share. management change, difficult operating conditions in a In addition, the Board is recommending a 3% increase in the number of our markets and an unpredictable economic and dividend for the year as a whole; this will comprise a final geopolitical backdrop. Throughout this, the Group performed dividend of 17.74 pence per ordinary share which, when added very well, delivering a solid set of results; which is testament to the interim dividend of 9.38 pence, gives a total for the year to the Aggreko culture and the pragmatic, can-do, attitude of 27.12 pence (2013: 26.30 pence). In aggregate, on a cash of our people. On behalf of the Board, I would like to express basis Shareholders have received 102 pence per ordinary my sincere thanks to all of our colleagues across the Group share in 2014. for their outstanding commitment and support in 2014. Key business developments Looking ahead Over the last year we have seen two senior management The market for our services remains large, and continues to changes with Rupert Soames and Angus Cockburn leaving grow; exposure to both emerging and developed countries, Aggreko after 11 years and 14 years respectively. We are combined with sector diversity and a market leading position very grateful for their tireless dedication to the Group over leave us well positioned to benefit from this growth. that period and wish them well in their new endeavours. Our business model is intrinsically cash generative and Following a thorough process, further details of which are enables us to invest or return capital to shareholders as included in the Nominations Committee Report on page 90, market conditions determine. we appointed Chris Weston as Chief Executive Officer, Our new senior management team are settling in well and effective from 2 January 2015 and Carole Cran was are undertaking a review of the priorities for the business appointed Chief Financial Officer effective from 1 June 2014. going forward. Chris’ initial impressions of the business and The Group has performed broadly in line with its strategic thoughts on business priorities are covered overleaf, and we targets2 during the year.