THE POWER TO make things happen ANNUAL REPORT AND ACCOUNTS 2016 AGGREKO PLC Contents OVERVIEW Introducing Aggreko 01 Our investment case 02 Performance highlights 03 Our business today 04 A personal perspective from our CEO 06 02 BUSINESS STRATEGY OUR INVESTMENT The power to drive major sporting events* 11 CASE Our global markets 12 The power to connect communities* 16 How we create value 18 How we make things happen 22 Our strategic priorities 27 The power to build a new product* 32 PERFORMANCE REVIEW How we performed – our key performance indicators 34 Group and business unit reviews 40 04 Financial review 44 The power to help rocket testing* 50 OUR BUSINESS Risk factors that could affect business performance 52 TODAY Assessment of prospects and viability 61 The power to keep the beat* 62 Making a massive difference 64 GOVERNANCE Chairman’s introduction 70 Audit Committee report 86 Ethics Committee report 90 Nomination Committee report 92 WHAT OUR CUSTOMER NEEDS 18 Remuneration Committee report 94 Statutory disclosures 115 HOW WE Statement of Directors’ responsibilities 121 CREATE VALUE ACCOUNTS & OTHER INFORMATION Independent auditors’ report 122 Group income statement 126 KEY OUTPUTS Group statement of comprehensive income 126 Group balance sheet 127 Group cash flow statement 128 Reconciliation of net cash flow to movement in net debt 129 Group statement of changes in equity 130 Notes to the Group accounts 132 Company balance sheet 169 Company statement of comprehensive income 170 70 Company statement of changes in equity 171 CORPORATE Notes to the Company accounts 172 Shareholder information 176 GOVERNANCE Definition and calculation of non GAAP measures 178 Financial summary 180 Glossary 181 Pages 1-69 comprise the Strategic report * Pages 11, 16, 32, 50 and 62 case studies demonstrate how we make things happen AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2016 01 Overview Around the world, people, businesses and countries are striving for a better future. A future that needs power. That’s why at Aggreko, we work round the clock, making sure our customers get the power, heating and strategy Business cooling they need, whenever they need it – delivered with our trademark passion, unrivalled international experience and local knowledge. From urban development to unique commercial projects and humanitarian emergencies, we bring our expertise and equipment to any location, from the world’s busiest cities to some of the most remote places on earth. Performance review Every project is different, so we listen first and design a system around our customers, delivering our service and support anywhere, to any scale. Transforming the lives and livelihoods of individuals, organisations and communities across the globe. Aggreko has the power to make things happen. Governance CASE STUDIES The case studies throughout this report demonstrate the work our employees do for our customers every day. Accounts & other information FIND OUT MORE VIEW AND DOWNLOAD Visit our website to find out more about Aggreko THE 2016 REPORT www.aggreko.com/about-us www.annualreport2016.aggreko.com 02 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2016 OVERVIEW Our investment case Our objective is to remain the leading provider of modular, mobile power and related solutions, delivering long-term value to shareholders, outstanding service to customers and rewarding careers to our employees. MARKET STRATEGIC PRIORITIES The business operates in markets that are diverse Defined strategic priorities: both by geography and sector Customer, Technology, Efficiency & People We work across 12 major sectors including Oil & Gas, Clear path to growth Petrochemical & Refining, Utilities and Events Business focused on margins and returns In emerging markets there is a structural power deficit creating a clear market demand READ MORE ABOUT OUR MARKETS READ MORE ABOUT OUR STRATEGIC PRIORITIES PAGE 12 PAGE 27 COMPETITIVE ADVANTAGES SHAREHOLDER RETURNS People & culture Priority is to invest for long-term growth Technology Will invest in bolt-on acquisitions where opportunities for growth or adjacencies (for example a cooling business Expertise may also drive demand for power) Scale Sustainable ordinary dividend policy Financial strength Where excess capital beyond these priorities will look to distribute to Shareholders READ MORE ABOUT OUR COMPETITIVE ADVANTAGES USEFUL LINKS FOR SHAREHOLDERS PAGE 22 PAGES 176 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2016 03 Performance highlights Overview REVENUE ADJUSTED PROFIT BEFORE TAX3 £1,515m £221m 2015: £1,561m 2015: £252m 2016 REPORTED PROFIT BEFORE TAX4 Business strategy Business £172m 2015: £226m ADJUSTED DILUTED EPS3 ADJUSTED OPERATING PROFIT3 61.95p £248m 2015: 71.68p 2015: £275m 2016 REPORTED DILUTED EPS4 2016 REPORTED OPERATING PROFIT4 Performance review 48.86p £199m 2015: 63.45p 2015: £249m ADJUSTED RETURN ON CAPITAL EMPLOYED2,3 DIVIDEND PER SHARE1 13% 27.12p 2015: 16% 2015: 27.12p 2016 RETURN ON CAPITAL EMPLOYED2 10 % Governance 2015: 15% MATERIALITY This report and financial statements aims to provide a fair, balanced and understandable assessment of our business model, strategy, performance and prospects in relation to material financial, economic, social, environmental and governance issues. The material focus areas were determined considering the following: Accounts & other information • Matters that are critical to achieving our strategic objectives • Key risks identified through our risk management process • Feedback from key stakeholders during the course of the year 1 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. 2 Calculated by dividing operating profit for the year by the average net operating assets as at 1 January, 30 June and 31 December. 3 Adjusted numbers exclude exceptional items. Exceptional items are explained in Note 7 to the accounts. 4 Reported is per the Accounts on pages 126 to 175. 04 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2016 OVERVIEW Our business today We are a global company organised into two business units. This enables us to focus on our customers, developing market leading products, whilst more efficiently delivering our expertise and equipment across the globe. We operate in around 100 countries through 208 sales and service centres and with around 7,000 permanent and temporary employees. GLOBALLY ORGANISED TO SERVE OUR CUSTOMERS’ NEEDS KEY Rental Power Offices/ Solutions Solutions Service centres Rental Solutions includes our businesses in North America, Europe, Australia Pacific and Mexico. Power Solutions includes all our other businesses around the world. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2016 05 READ MORE ABOUT RENTAL SOLUTIONS READ MORE ABOUT POWER SOLUTIONS PAGES 19 AND 41 PAGES 19 AND 42 Overview RENTAL SOLUTIONS POWER SOLUTIONS A transactional business serving a broad range of Operating in emerging markets, we typically serve sectors in developed markets. It provides power, both industrial and utility customers with larger, heating and cooling to a number of customer types who longer-term and often complex solutions need it quickly and typically for a short period of time. to fulfil their power requirements. KEY SECTOR FOCUS % KEY SECTOR FOCUS % 1 Petrochemical & Refining 18 1 Utilities 59 strategy Business 1 2 Oil & Gas 11 1 2 Oil & Gas 14 8 9 11 7 10 3 Events 11 6 3 Mining 7 9 2 4 Utilities 11 5 4 Events 2 4 8 5 Manufacturing 9 5 Construction 4 3 3 6 Services 8 6 Manufacturing 4 7 7 Contracting 8 7 Petrochemical & Refining 1 8 Construction 6 8 Military 2 6 4 2 5 9 Mining 5 9 Other 7 10 Shipping 3 (excluding pass-through fuel) 11 Other 10 Performance review REVENUE £M REVENUE £M* £629m £826m 43% of group 57% of group *excluding pass-through fuel WHO ARE OUR CUSTOMERS? A SELECTION: CONTRACTOR MINING Needs to run a specific piece of equipment requiring a generator A mining customer needs equipment for the length of the mine. – for example a crane. Orders the same equipment every time, Commodity prices can vary greatly over this time so they value a doesn’t need consultation just needs a quick and reliable supplier. capex free solution with flexibility to scale up or down depending on any movements in price. EVENT Needs a team who understand the complexities of an event – POOR TRANSMISSION Governance the timelines that need to be followed, challenges around a small Countries with poor transmission grids need flexible generation footprint for the required generation, or quieter equipment (for example sources that can be set up as small power stations, often with during a major golf tournament where concentration is vital). mini power grids to support them, around the areas where energy is demanded. EMERGENCY Can be a hospital needing back up power if their redundancy fails, BASELOAD ISSUES or a food manufacturer that needs to keep their product at a precise When a country has established baseload issues they often need temperature during an outage. Need quick response and reliability. a reliable source of generation to cover the gap while they resolve the longer-term issues. They can be sensitive to the total cost PETROCHEMICAL & REFINING TURNAROUND of energy, which is why having engines with the best possible A complex job needing an engineering solution. If a refinery efficiency is important. needs to perform maintenance it can need assistance in keeping Note: Power Solutions industrials customers tend to be of a similar everything at a stable temperature and maintaining