TIDMAGK
RNS Number : 2862V
Aggreko PLC
06 August 2020
RESULTS FOR THE SIX MONTHS
ED 30 JUNE 2020
6 AUGUST 2020
"Strong balance sheet and cash generation demonstrating
resilience"
Chris Weston, Chief Executive Officer, commented:
" Firstly, I would like to recognise and thank everyone at
Aggreko for the great job they have done in responding to the
COVID-19 pandemic, in the way they have adapted and continued to
serve our customers safely and reliably through these challenging
times. My primary concern since the start of the COVID-19 pandemic
has been the welfare of our people, their families and the local
communities in which we operate and the response right across the
company makes me very proud to be part of Aggreko. The immediate
steps we took to reduce our cost base and increase our focus on
cash generation have enabled us to maintain the strong financial
position in which we entered the crisis, while supporting national
efforts through practical assistance and without drawing on UK
government financial support."
" We entered the year with positive momentum and we continue to
believe that our focus on the disciplined execution of our four
strategic priorities positions us well to meet our customers'
evolving needs in the changing energy market. While the outlook
remains uncertain and we do not expect to see our usual second half
seasonality, the gradual improvement in demand we have seen in some
sectors since May gives us confidence that we can deliver a
pre-exceptional profit before tax this year in the range GBP80-100
million. Looking further ahead, we continue to expect the Group to
deliver improved margins and achieve its mid-teens ROCE target,
underpinned by our ongoing focus on operational efficiencies. As a
consequence of our financial strength and the Board's confidence in
the medium-term outlook, I am pleased to confirm that we will pay
an interim dividend of five pence per share for 2020."
Results summary
Underlying
1H20 1H20 Change pre- change [2]
pre-exceptional 1H20 exceptional post-exceptional exceptional pre- exceptional
GBPm items (1) items items 1H19 items items
Group revenue 667 - 667 768 (13)% (12)%
Operating
profit/(loss) 64 (181) (117) 81 (21)% (15)%
Operating
profit/(loss)
margin (%) 9.6 (27.2) (17.6) 10.5 (0.9)pp (0.3)pp
Profit/(loss)
before tax 47 (181) (134) 60 (21)% (13)%
Diluted EPS (p) 10.3 (68.1) (57.8) 15.3 (33)% (26)%
Dividend per
share (p) 5.00 - 5.00 9.38
Operating cash
inflow 250 - 250 210
Net debt (499) - (499) (784) 36%
ROCE (%) 11.2 (9.1) 2.1 10.2 1.0pp 1.2pp
----------------- ---------------- ----------------- ----------------- ------ ---------------- -----------------
(1) Unless otherwise stated all figures are pre-exceptional
costs of GBP181 million (GBP173 million post tax). These
exceptional costs result from a detailed impairment review carried
out during the period, as explained further on page 5 and in Note 6
to the Accounts.
(2) Underlying excludes exceptional items, pass-through fuel and
currency. A reconciliation between reported and underlying
performance is detailed on page 12.
Financial highlights
-- Underlying(2) Group revenue down 12% driven by the impact of
COVID-19 and the lower oil price
-- Underlying(2) operating profit of GBP64 million (down 15%)
and profit before tax of GBP47 million (down 13%)
- Rental Solutions underlying(2) operating profit of GBP44
million (69% of Group), down 7% driven by oil and gas where revenue
was down 32%
- Power Solutions Industrial underlying(2) operating profit of
GBP11 million (16% of Group), down 45% primarily driven by a more
challenging trading environment in Eurasia
- Power Solutions Utility underlying(2) operating profit of GBP9
million (15% of Group), up 9% driven by cost saving initiatives
-- Strong liquidity and cash position:
- Operating cash inflow of GBP250 million supported by a working
capital inflow of GBP100 million, resulting from a continued focus
on cash collections
- Immediately available liquidity of over GBP700 million,
including cash on hand of GBP123 million
- Net debt of GBP499 million, a reduction of GBP285 million on
June 2019, representing net debt to EBITDA of 0.9 times (2019: 1.5
times)
- Payment of an interim dividend of 5p per share reflects the
Board's confidence in the medium term, with the reduction on the
prior year reflecting lower current year earnings
-- Comprehensive balance sheet review, resulting in a non-cash
exceptional impairment charge of GBP181 million reflecting the
consequential impact of the COVID-19 pandemic, the lower oil price
and an acceleration in the energy transition to lower carbon
technologies
-- ROCE of 11.2% reflects a strong profit performance in the
second half of 2019 and a reduction in net operating assets driven
by working capital improvements, continued capital investment
discipline and the impact of the exceptional impairment charge
-- Decisive actions taken to reduce costs, preserve cash and
emerge stronger post the COVID-19 pandemic include the cancellation
of the 2020 annual bonus and salary review, together with a 29%
reduction in the Group's more discretionary spend and our ongoing
cost reduction programme in Power Solutions
-- We are beginning to see stabilisation in trading, although
conditions remain difficult in the oil and gas and events sectors;
despite the uncertain economic outlook, we expect to deliver
pre-exceptional profit before tax for the year in the range
GBP80-100 million.
Business data table
1H20 1H19 Change
AVERAGE MEGAWATTS ON HIRE (MW) 5,976 6,407 (7)%
Rental Solutions average megawatts
on hire 1,252 1,404
(11)%
Power Solutions Industrial average
megawatts on hire 2,497 2,530 (1)%
Power Solutions Utility average
megawatts on hire 2,227 2,473 (10)%
TOTAL POWER SOLUTIONS ORDER INTAKE
(MW) 460 458 -
Power Solutions Industrial (ex.
Eurasia) 75 86 (13)%
Power Solutions Industrial (Eurasia
only) 148 127 17%
Power Solutions Utility 237 245
(3)%
UTILISATION**
Rental Solutions 55% 56% (1.3)pp
Power Solutions Industrial 65% 68%
Power Solutions Utility 65% 66%
(3.1)pp
(1.1)pp
FINANCIAL
Effective tax rate 45%* 35% 10pp
Fleet capex (GBPm) 86 83 4%
Fleet depreciation (GBPm) 118 138 (14)%
Average net operating assets (GBPm) 1,999 2,192 (9)%
Net debt (GBPm) (499) (784) 36%
----------------------------------------- ---------- --------- --------
*Pre-exceptional items
**Average fleet size includes impaired fleet; going forward
impaired fleet will be removed
Board changes
We have announced today the appointment of Mark Clare as a Non-executive
Director and Chair Designate with effect from 1 October 2020. Subject
to shareholder approval of his election to the Board, Mark will
become Chair of the Board following our Annual General Meeting
in April 2021. This will allow for a managed and orderly transition
from the current Chairman, Ken Hanna. Ken, who has been Chairman
since 2012, will step down as Chairman and Non-executive Director
at the conclusion of the 2021 Annual General Meeting.
Enquiries
Investors and analysts
Louise Bryant, Aggreko plc +44 7813 210 809
Richard Foster, Aggreko plc +44 7989 718 478
Financial media
Andy Rivett-Carnac, Headland +44 7968 997 365
Sophie O'Donoghue, Headland +44 7798 687 042
Analyst and investor presentation
A live webcast of the interims presentation will be held for analysts
and investors today at 08:30am (BST). This web-cast and a copy
of the slides will be available on our website at www.plc.aggreko.com/investors
. If you wish to ask questions, please also dial into the conference
call, details below.
Conference call details:
United Kingdom (Local): 020 3936 2999
All other locations: +44 20 3936 2999
Participant Access Code: 860275
Use of alternative performance measures
Throughout this release we use a number of 'adjusted measures'
to provide users with a clearer picture of the underlying
performance of the business. This is in line with how management
monitors and manages the business on a day-to-day basis. These
adjustments include the exclusion of:
-- Exceptional items - these are explained on page 5.
-- The translational impact of currency in comparing year on
year performance - further information is on page 12.
-- Fuel revenue, which is separately reported for certain
contracts in the Power Solutions Utility business in Brazil, where
we manage fuel on a pass-through basis on behalf of our customers.
The fuel revenue on these contracts is entirely dependent on fuel
prices and the volume of fuel consumed, which can be volatile and
may distort the view of the underlying performance of the
business.
OPERATING REVIEW
IMPACT OF COVID-19
At the point that the COVID-19 pandemic impacted the worldwide
economy, Aggreko had been on track to deliver a 2020 performance in
line with market expectations. The material effects of the pandemic
on our business include:
-- A sharp reduction in the oil price and the potential for this
to be sustained for a prolonged period, impacting two of our key
market sectors (oil & gas and petrochemical &
refining);
-- Cancellation or postponement of events including, most
significantly, the postponement of the Tokyo Olympic &
Paralympic Games until the summer of 2021;
-- Reduced economic activity more generally as a result of a combination of the above;
-- Reduced liquidity and/or access to foreign currency for some of our customers;
-- Travel restrictions imposed to contain the spread of the
virus, impacting the mobilisation and demobilisation of
projects;
-- Increased freight and logistics costs as a result of the
reduced supply available in the market;
-- An acceleration in the energy transition towards lower carbon solutions and technologies.
In response, we established four key near-term priorities to
manage through the crisis, namely: 'looking after our people';
'maintaining our financial strength'; 'supporting our customers';
and 'emerging stronger'. We believe that prioritising our efforts
in these areas will ensure we remain focused on the right
activities for the business today, while also helping us exit the
crisis stronger and better prepared for the future.
Looking after our people: Although many of us are able to work
from home, we have put enhanced health and safety procedures in
place for the protection of the significant number of our
colleagues who, as key workers, continue to operate on-site each
day delivering for our customers. These have included the provision
of personal protective equipment (PPE) and testing, a dedicated
intranet site with guidance, policies and procedures, alongside
specific guidelines for high-risk work environments (for example,
temperature control services at temporary hospitals, where any air
movement risks circulating the virus).
Maintaining our financial strength: We have taken various steps
to strengthen our liquidity position and reduce costs across the
Group. These include the imposition of travel restrictions,
limiting our fleet capital expenditure to that required to fulfil
secured orders and meet known demand, and action on various
employee related costs such as the cancellation of our 2020 annual
bonus scheme and annual salary review process, the introduction of
hiring freezes and a significant reduction in our temporary
workforce . Combined with the existing cost saving programme in
Power Solutions, these actions have enabled us to avoid the need
for employee redundancies, and to continue to pay all our people's
salaries in full, thereby supporting national efforts by not
putting any staff on government-funded furlough.
Supporting our customers: In addition to the support we are
giving to our people, Aggreko is committed to providing practical
assistance to our customers and to help the COVID-19 relief effort.
We prioritised support for critical services and have been helping
our customers in the healthcare, pharmaceutical and food &
beverage industries to manage the increase in demand driven by the
pandemic. We also made an offer to the UK government for the use of
up to 1,300 small generator units to support the NHS in the
roll-out of COVID--19 testing sites across the UK.
Emerging stronger: Building on our objective to emerge stronger
post the pandemic, we have focused on improving the capability of
our people and the condition of our fleet. This has included
virtual learning and development training, servicing fleet to
ensure that it is rental ready, and reviewing fleet and inventory
at a local level to identify that which is now surplus to our needs
and requires impairment. We are also undertaking a comprehensive
review of our depot network and project portfolio, seeking to
improve or exit from those with currently sub-optimal financial
returns. While we took the decision earlier in the period to defer
our strategic update until the year end, we have continued to
develop our strategic thinking in order to position the business to
support our customers through the energy transition. Further detail
on the impairment and the energy transition can be found on pages 5
and 8 respectively.
GROUP TRADING PERFORMANCE
Underlying(2) Group revenue fell 12% driven by the oil and gas,
petrochemical and refining, and events sectors, with Rental
Solutions showing the most significant decline down 18%. The
underlying(2) operating margin was 9.6% (2019: 10.5%), with
increases through good cost control in both Rental Solutions and
Power Solutions Utility being more than offset by a fall in Power
Solutions Industrial, where difficult trading conditions
significantly impacted our business performance in Eurasia.
Underlying(2) profit before tax was down 13% at GBP47 million,
while diluted earnings per share (DEPS) were 10.3 pence (2019: 15.3
pence), down 26% on an underlying(2) basis, due to a combination of
the profit reduction and an increase in the Group's tax rate.
The Group's return on capital employed (ROCE) increased to 11.2%
(2019: 10.2%). While the ROCE calculation at the half year uses a
12-month rolling profit before exceptional costs, the average net
operating assets reflect values at 30 June, 31 December and the
previous 30 June and therefore take account of the exceptional
impairment at June 2020. The impact of this on ROCE is c. 0.3
percentage points, with the remainder of the year on year
improvement reflecting the strong profit performance in the second
half of 2019 and a significant reduction in working capital over
the last twelve months. Fleet capital expenditure in the first half
was GBP86 million (2019: GBP83 million), including GBP15 million
relating to the Tokyo Olympics, GBP26 million for the ongoing
renewal of our oil free air and temperature control fleet, and
GBP15 million in support of our next generation gas contract
pipeline.
On a reported basis, Group revenue was down 13% on the prior
year, with Rental Solutions down 18%, Power Solutions Industrial
down 7% and Power Solutions Utility down 10%. The operating margin
was a loss of 17.6% (2019: operating profit margin of 10.5%),
within which the Rental Solutions margin was down 6.4 percentage
points on a post-exceptional basis at 5.5%; the Power Solutions
Industrial margin was down 28.8 percentage points on a
post-exceptional items basis; and the Power Solutions Utility
margin, excluding pass-through fuel and on a post-exceptional items
basis, was down 84.5 percentage points. Group ROCE post-exceptional
items was 2.1% (2019: 10.2%). Loss before tax and post-exceptional
items was GBP134 million (2019: profit before tax of GBP60 million)
and diluted earnings per share post-exceptional items was a loss of
57.8 pence (2019: 15.3 pence).
Exceptional items
The Board considered the impact of the COVID-19 pandemic, the
lower oil price and the consequent deterioration in the short to
medium term economic outlook, as well as the acceleration in the
transition to lower carbon technologies, and concluded that they
present impairment indicators for certain of the Group's assets. As
a result, we completed a detailed review across all asset classes,
which identified four specific areas for impairment, as summarised
below:
-- Trade and other receivables (GBP69 million)
-- Property, plant & equipment (GBP59 million)
-- Inventory (GBP36 million)
-- Other intangible assets (GBP17 million)
Given the size and nature of these impairment charges, both
individually and in aggregate, they have been treated as
'exceptional items' in the Interim Financial Statements. In
addition, we have recorded an exceptional write--down of GBP5
million in relation to the Group's deferred tax assets, which has
been recorded as an exceptional item within the Group's overall
exceptional tax credit of GBP8 million.
There is no impact on cash flow from any of these exceptional
impairment charges.
A brief summary on each category is provided below, with further
detail in Note 6 to the accounts:
Trade and other receivables (GBP69 million)
The COVID-19 pandemic has created cash flow, liquidity and, in
some cases, future viability challenges for some of our customers.
While we continue to make progress on cash collections, it is our
judgment that the more challenging economic outlook post COVID-19
for several of our larger PSU debtors is such as to require
impairment of our residual balance sheet exposure. Specifically,
this has resulted in an impairment across our PSU debtor book of
GBP57 million, primarily relating to legacy debts in parts of
Africa, Venezuela, Yemen and Brazil, reducing the carrying value of
the debtors to zero. In addition, we have impaired GBP12 million
across certain other specific debtors within Rental Solutions and
Power Solutions Industrial, the majority of which operate in the
oil & gas and events sectors. While we continue to pursue these
debtor balances, we no longer consider their recovery probable
given the customers' financial position.
Property, plant & equipment (GBP59 million)
The combined effects of a sustained lower oil price environment
and reduced economic activity have impacted the Group's growth
expectations in the near term. Accordingly, there are certain
specific categories of assets that we have judged as impaired at
June 2020, namely:
-- Assets which have not been on hire in the past 12 months and
are now considered unlikely to be put on rent anywhere across the
Group due to reduced forecast demand;
-- Assets currently "stranded" in countries where, in the
current social and economic climate, there is little or no
likelihood of the fleet being put on hire;
-- Assets beyond economic repair in the current market, where
demand for the fleet no longer supports the case for investment to
return the fleet to a rental--ready state;
-- Assets within our HFO fleet for which we now expect reduced
demand due to the acceleration in the transition to lower carbon
solutions and technologies, and for which the lower oil price
reduces the customer benefit of the cost advantage of HFO over
diesel.
As we consider the impact of the acceleration in the transition
to lower carbon technologies, further to the impairment we are also
reviewing our depreciation policy for our HFO fleet assets to help
prevent future obsolescence, and will provide an update on this
with our full year results in March 2021.
Inventory, including parts, cable, duct and hose (GBP36
million)
Consistent with the analysis on our fleet, we have reviewed the
Group's inventory using similar criteria, impairing those items
that were slow or non-moving (with the time period reviewed for
parts being the last 24 months and for cable, duct & hose being
a 3-year average utilisation), or unlikely to be consumed given the
lower demand outlook. We have also impaired items that are
currently "stranded" alongside our "stranded" fleet, items beyond
economic repair in the current market and those relating to fleet
that is now considered obsolete as a result of the acceleration in
the energy transition.
Other intangible assets (GBP17 million)
We have reviewed in detail our capitalised development
expenditure, highlighting several projects, particularly in
relation to our HFO product, where, as a consequence of the faster
energy transition towards lower carbon solutions and technologies,
the future demand for the products or applications no longer
supports the capitalised development spend.
While the above impairment review considered various independent
external and internal data sources regarding the future economic
outlook for the Group, the exercise also included significant
commercial judgment. As a result, there is a wide range of
potential outcomes. Notwithstanding this, given the level of detail
at which the review has been undertaken, we believe that the
overall risk of a further impairment within these asset classes, or
indeed the Group's other asset classes where no impairment has been
made, is not material.
Cash flow and liquidity
During the first six months cash generated from operations was
GBP250 million (2019: GBP210 million). There was a GBP116 million
year on year improvement in working capital cash flows, excluding
exceptional non-cash impairments (2020: GBP100 million inflow,
2019: GBP16 million outflow). The 2020 working capital inflow
comprised a GBP104 million inflow from trade and other receivables,
a GBP24 million inflow from trade and other payables and a GBP28
million outflow from inventory. Further details on the working
capital movements are provided on page 13.
EBITDA (pre-exceptional items) decreased GBP37 million and there
was a GBP33 million higher cash outflow relating to mobilisation
(fulfilment assets) and demobilisation activities, primarily
relating to the Tokyo Olympics. Capital expenditure in the period
was GBP95 million (2019: GBP99 million), of which GBP86 million
(2019: GBP83 million) was spent on fleet assets.
Net debt (including GBP95 million of a lease creditor) at 30
June 2020 was GBP499 million, GBP285 million lower than the prior
year. Net debt to EBITDA was 0.9 times (2019: 1.5 times), and
undrawn committed facilities were GBP584 million.
The Group continues to maintain sufficient committed facilities
to meet its normal funding requirements over the medium term and,
at 30 June 2020, these committed facilities totalled GBP1,088
million. We have refinanced all the committed facilities that would
have matured in 2020 and recently refinanced a GBP30 million
committed bank facility that was due to mature in Q1 2021, leaving
GBP232 million of committed facilities maturing in 2021. In
addition, the Group has been allocated a credit limit (greater than
the level of our current committed bank facilities) under the Bank
of England's COVID Corporate Financing Facility to issue commercial
paper with a term of up to 12 months, until February 2021; to date
we have not used this facility.
For the purposes of the Group's going concern assessment, we
have stress-tested our cash flow forecasts and, even in the severe
but plausible worst-case scenario, the Group expects to comply with
the financial covenants in its committed debt facilities and to
meet its funding requirement over the seventeen months from the
date of approval of this interim report and ending 31 December
2021, without refinancing or drawing on the Bank of England's COVID
Corporate Financing Facility. Consequently, the Directors are con
dent that it is appropriate for the going concern basis to be
adopted in preparing the interim nancial statements. Further
details on the Group's going concern assessment can be found in
Note 2 to the Accounts.
Dividend
In line with steps taken to preserve the Group's cash position
through the COVID-19 crisis, the Board withdrew its recommendation
to pay the 2019 final dividend at its AGM in April and will not be
revisiting this decision. However, given its confidence that the
actions that the Group has taken, together with the continued,
disciplined execution of its strategy, will increase further the
resilience of the business and position it well for the future, the
Board has approved the payment of an interim dividend of 5 pence
per share for 2020. The reduction on the prior year does not
represent a change in the Group's dividend policy, but rather
reflects lower current year earnings and a continued level of
market uncertainty.
Outlook
We expect the various markets in which we operate around the
world to recover fully from the crisis, but there remains a high
degree of uncertainty as to the time it will take. While we have
seen a gradual improvement in demand in some sectors since May,
given that the first few months of the year were largely unimpacted
by the pandemic, and that the events and petrochemical and refining
sectors are typically busier in the second half of the year, we do
not expect to see our usual second half seasonality. As a
consequence, we currently expect to deliver a pre-exceptional
profit before tax for the year in the range GBP80-100 million.
Looking further ahead, despite our expectations of a slower
economic recovery, we continue to expect the Group to deliver
improved margins and achieve its mid-teens ROCE target.
The Group's effective tax rate for the year is expected to be
around 45%. This is considerably higher than our previous guidance
of 35%, due primarily to a change in the geographic mix of profit,
and an increase in the proportion of our tax charge which relates
to irrecoverable withholding tax.
Fleet capital expenditure for the full year is expected to be
slightly below GBP200 million, lower than our previous guidance of
GBP200-250 million. This spend is focused on secured projects,
ongoing renewal programmes and targeted investment to improve our
fleet readiness.
THE ENERGY TRANSITION
As previously announced, we will provide a full strategic update
alongside our full year results in March 2021. In the meantime, we
have continued to review our strategy over the last few months,
with a specific focus on understanding how the energy transition
will impact our business over time, particularly on our four
strategic priorities of customer, technology (including our fleet),
capital efficiency and people.
It is increasingly clear that the pace at which this transition
will happen across different sectors and geographies will vary. In
the events sector, for example, customers are actively seeking
cleaner solutions; and in mining there is a clear value creation
opportunity through the integration of renewables to create hybrid
power systems. By contrast, the oil and gas and petrochemical and
refining sectors are facing a tougher market environment where
their needs may not be so easily met by greener technologies at
this stage; operations are often remote and, while there are some
opportunities for cost reduction with renewables, in many cases
there is no alternative to fossil fuel for reliable power.
The take-up of our hybrid solutions continues to grow, with
revenue in the first half of the year up 103%, albeit on relatively
low volumes. While our contracted projects are across a variety of
regions and sectors, including mining, utilities and data centres,
the main applications are spinning reserve displacement and
frequency response. The pipeline remains strong, with mining the
largest sector, particularly across Africa and Australia.
We continue to look at new fuels, applications and technologies
and are currently trialling a variety of new products, including
hydrogen fuel. We are also evolving our existing diesel offering,
both through regulated sets (Tier 4f and Stage V) and more
efficient, and therefore lower cost and emission, solutions for our
customers through the introduction of small battery storage units.
This technology, along with our data collection and analytics
capability, will be central to the evolution of our fleet.
Aggreko provides customers with flexibility: be it fuel type,
volume that can be adjusted over time, technology that can be
varied over time, speed of deployment, or service level; and this
flexibility will help support customers in managing the energy
transition in their sector. As a result, we expect to evolve our
business, our fleet and our customer proposition to remain a market
leader in a low carbon, low emissions, energy environment. We will
provide more detail on how we expect these changes to affect our
business in March 2021.
BUSINESS UNIT PERFORMANCE REVIEW
RENTAL SOLUTIONS
Revenue GBPm
1H20 1H19 Change Underlying change(2)
326 396 (18)% (18)%
-------------- ----- ----- --------- ---------------------
Operating profit
GBPm
Underlying
change 2
1H20 1 1H20 Change pre- pre-
pre-exceptional Exceptional post-exceptional exceptional exceptional
items items items 1H19 items items
Operating profit 44 (26) 18 47 (6)% (7)%
Operating margin
% 13.6% (8.1)% 5.5% 11.9% 1.7pp 1.7pp
ROCE 17.1% (3.4)% 13.7% 14.3% 2.8pp 2.6pp
----------------- ---------------- ----------------- ----------------- ------- ---------------- ----------------
-- Underlying(2) revenue down 18% and operating profit down 7%
-- Operating margin of 13.6%, up 1.7 percentage points on an underlying(2) basis
-- ROCE of 17.1% represents an underlying(2) increase of 2.6
percentage points, reflecting the increase in profitability in the
twelve months to 30 June 2020
-- Our business in the oil and gas, petrochemical and refining
and events sectors has been most impacted by COVID-19 and the low
oil price environment
North American underlying(2) revenue was down 19% on the prior
year. The deterioration in market conditions as a result of the
COVID--19 pandemic and the lower oil price has been compounded by a
strong comparator in the prior year. The most significant
reductions were in the oil and gas sector, which accounts for 22%
of revenue, and which was down 30%; while our events business,
albeit a much smaller sector, experienced a 47% drop in revenue.
Encouragingly, we have seen good growth in utilities and building
services and construction. Excluding oil and gas, power volumes are
up 21% year on year, with pricing down 5%.
Our Continental European business underlying(2) revenue
decreased 21%. Excluding revenue earned in the prior year related
to power shortage work in Belgium, revenue was down 10%, with the
reduction predominantly driven by the events sector (including the
impact of the FIFA Women's World Cup in France in the prior
year).
Underlying(2) revenue in Northern Europe was down 23%, as data
centre contracts in Ireland off-hired throughout
2019 and a one-off job in the oil & gas sector came to an
end in the second half of 2019. We also saw the impact of the
COVID-19 pandemic more generally across our base business, although
this was partially offset by work to support the UK's medical
response to the crisis. Most sectors were down against the prior
year, but most notably oil and gas, petrochemical and refining and
events.
In our Australia Pacific business underlying(2) revenue
decreased 5%. COVID-19 has had a more limited impact in this
region, due in part to the slightly longer average contract length
across its mining projects. The transactional business has been
most impacted by the pandemic, although this was offset in part by
revenue from the bush fires early in the year.
Overall, across Rental Solutions our operating margin on an
underlying(2) basis was up 1.7 percentage points, as we implemented
various cost saving initiatives, including reductions in temporary
employment, service material and discretionary costs. In addition,
we recorded a GBP6 million gain on sale of assets as part of our
asset disposal programme.
POWER SOLUTIONS
Revenue GBPm
Underlying change
1H20 1H19 Change 2
Industrial 188 202 (7)% (4)%
Utility excl. pass-through
fuel 133 150 (12)% (7)%
Pass-through fuel 20 20 -% 27%
---------------------------- ----- ----- -------- ------------------
Operating profit
GBPm
Underlying
Change change
1H20 (1) 1H20 pre- 2
pre-exceptional Exceptional post-exceptional exceptional pre- exceptional
items items items 1H19 items items
Industrial 11 (45) (34) 21 (50)% (45)%
Utility excl.
pass-through
fuel 9 (110) (101) 13 (29)% 9%
Pass-through fuel - - - - -% -%
OPERATING MARGIN
%
Industrial 5.6% (24.1)% (18.5)% 10.3% (4.7)pp (4.2)pp
Utility excl.
pass-through
fuel 7.1% (82.7)% (75.6)% 8.9% (1.8)pp 1.0pp
ROCE
Industrial 9.0% (7.5)% 1.5% 10.6% (1.6)pp (1.4)pp
Utility excl.
pass-through
fuel 6.0% (17.1)% (11.1)% 6.0% -pp 1.3pp
------------------ ----------------- ------------ ------------------ ------- ----------------- -----------------
-- Power Solutions Industrial
- Underlying(2) revenue down 4% and operating profit down 45%,
mainly driven by a challenging environment in Eurasia
- Operating margin at 5.6% is down 4.2 percentage points on an
underlying(2) basis driven by a reduction in profitability,
particularly in our Eurasia oil and gas business
- ROCE of 9.0% is down 1.4 percentage points on an underlying(2) basis
-- Power Solutions Utility
- Underlying (2) revenue down 7%, primarily due to known
off-hires and the planned repricing of our Ivory Coast contract
- Underlying (2) operating profit up 9%, driven by various cost saving initiatives
- ROCE of 6.0%, up 1.3 percentage points on an underlying(2) basis
- Order intake of 237 MW is only slightly down on the prior year
(245 MW), although we are experiencing delays in the mobilisation
of several new contracts
Power Solutions Industrial
Power Solutions Industrial underlying(2) revenue decreased 4%.
Revenue was down in most regions, and across the majority of
sectors, with the Middle East down 8%, Asia 13%, Eurasia 16% and
Latin America 12%. By contrast, we delivered good growth in Africa,
with revenue up 14%, mainly driven by mining contracts in Mali and
Mauritania. In Eurasia, the low oil price environment has
compounded the already competitive environment across the region,
putting further pressure on rates, particularly in gas. We also
recognised GBP8 million (2019: GBP nil) of revenue from the Tokyo
Olympics in the period.
Overall Power Solutions Industrial operating margin was 5.6%, a
decrease of 4.2 percentage points on the prior year, with the most
significant reduction in profitability seen in our Eurasia business
where we have seen the revenue impact as outlined above, alongside
increased costs, in part due to the devaluation of the Rouble, and
pre-positioning of fleet and people for future work.
Power Solutions Industrial order intake was 223 MW (2019: 213
MW), including 148 MW in Eurasia (2019: 127 MW).
Power Solutions Utility
Power Solutions Utility saw underlying (2) revenue decrease 7%,
primarily due to off-hires in Benin and Brazil, together with the
planned rate reduction in the Ivory Coast. These impacts were
partially offset by on--hires in Brazil (PIE) and Burkina Faso.
Despite the revenue reduction, the operating margin of 7.1% was up
1.0 percentage point on the prior year on an underlying basis
driven by cost savings, including our previously announced cost
saving programme and initiatives taken in response to the
pandemic.
Average megawatts on hire in this business were 2,227 (2019:
2,473), with the year on year reduction reflecting an overall
reduction in diesel projects across Africa. The overall off-hire
rate for Power Solutions Utility in the first half was 14% (2019:
15%) and we expect the full year off-hire rate to be around 24%
(2019: 33%). Order intake was 237 MW (2019: 245 MW), including 165
MW in Iraq. Due to travel and border restrictions in a number of
territories we are facing challenges in the mobilisation of new
work, resulting in delays in our ability to generate revenue and
also, in some cases, increasing the level of mobilisation assets
held on our balance sheet in the short term.
Managing the trade receivables in our Power Solutions Utility
business continues to be a major focus, with active ongoing
engagement with our customers a key priority. While we have
continued to maintain good cash collections during the period in
relation to our more recent and current contracts, the more
challenging outlook post COVID-19 for a number of our older
contracts has resulted in an increase in the overall level of the
Power Solutions Utility bad debt provision at 30 June 2020 to
GBP124 million (December 2019: GBP61 million). This increase is
primarily driven by the exceptional impairment of GBP56 million
noted above (see further details in Note 6 to the Accounts).
FINANCIAL REVIEW
Currency translation
The movement in exchange rates in the period had the
translational impact of decreasing revenue by GBP16 million and
operating profit by GBP6 million. Currency translation also gave
rise to a GBP9 million decrease in the value of the Group's net
assets from December 2019 to June 2020. Set out in the table below
are the principal exchange rates which affected the Group's profit
and net assets.
PRINCIPAL EXCHANGE JUNE 2020 JUNE 2019 DEC 2019
RATES
(PER GBP STERLING)
AVERAGE PERIOD AVERAGE PERIOD AVERAGE PERIOD
United States Dollar 1.26 1.24 1.29 1.27 1.28 1.31
Euro 1.15 1.11 1.15 1.11 1.14 1.17
UAE Dirhams 4.63 4.56 4.75 4.66 4.69 4.80
Australian Dollar 1.92 1.80 1.83 1.81 1.83 1.88
Brazilian Reals 6.16 6.65 4.98 4.85 5.03 5.30
Argentinian Peso 81.21 87.05 53.61 54.17 61.10 78.28
Russian Rouble 87.54 85.83 84.42 79.97 82.61 80.94
(Source: Bloomberg)
---------------------- -------- ------- -------- ------- -------- -------
Reconciliation of reported to underlying results
The tables below reconcile the reported and underlying revenue
and operating profit movements:
Revenue
GBPm RENTAL SOLUTIONS INDUSTRIAL UTILITY GROUP
2020 2019 CHANGE 2020 2019 CHANGE 2020 2019 CHANGE 2020 2019 CHANGE
As reported 326 396 (18)% 188 202 (7)% 153 170 (10)% 667 768 (13)%
Pass-through
fuel - - - - (20) (20) (20) (20)
Currency
impact - 3 - (7) - (8) - (12)
Underlying 326 399 (18)% 188 195 (4)% 133 142 (7)% 647 736 (12)%
------------- ----- ---- ---- ---- ---- ---- ----
Operating profit
RENTAL SOLUTIONS INDUSTRIAL UTILITY GROUP
GBPm
2020 2019 CHANGE 2020 2019 CHANGE 2020 2019 CHANGE 2020 2019 CHANGE
As reported 18 47 (62)% (34) 21 (266)% (101) 13 (878)% (117) 81 (245)%
Pass-through
fuel - - - - - - - -
Currency
impact - 1 - (2) - (5) - (6)
Exceptional
items 26 - 45 - 110 - 181 -
Underlying 44 48 (7)% 11 19 (45)% 9 8 9% 64 75 (15)%
------------- ----- ---- ---- ----- ---- ----- --------
Notes:
1. The currency impact is calculated by taking the 2019 results
in local currency and retranslating them at the 2020 average
rates.
2. The currency impact line included in the tables above
excludes the currency impact on pass-through fuel in Power
Solutions Utility, which in 2020 was GBP4 million on revenue and
GBPnil on operating profit.
Interest
The net interest charge of GBP17 million was GBP4 million lower
than the prior year, primarily due to a reduction in average net
debt during the period. Interest cover, measured against rolling
12-month EBITDA (earnings before interest, taxes, depreciation and
amortisation) remained strong at 14 times (2019: 13 times).
Effective tax rate
Our current forecast of the effective tax rate for the full
year, which has been used in the interim accounts, is 45% (30 June
2019: 35%). The year on year increase is due to the geographical
mix of taxable profit, in particular a relatively greater reduction
in profit in lower tax jurisdictions such as North America,
together with an increase in the proportion of our tax charge which
relates to irrecoverable withholding tax.
Cash flow
During the first six months cash generated from operations was
GBP250 million (2019: GBP210 million). There was a GBP116 million
year on year improvement in the movement in working capital,
excluding exceptional non-cash impairments (2020: GBP100 million
inflow, 2019: GBP16 million outflow). The 2020 working capital
inflow comprised a GBP104 million inflow from trade and other
receivables, a GBP24 million inflow from trade and other payables
and a GBP28 million outflow from inventory. In addition, there was
a GBP33 million higher cash outflow relating to mobilisation
(fulfilment assets) and demobilisation activities during the
period.
The decrease in trade and other receivables of GBP104 million
includes a GBP60 million decrease in Rental Solutions (2019: flat),
a GBP27 million decrease in Power Solutions Utility (2019: GBP42
million decrease) and a GBP17 million decrease in Power Solutions
Industrial (2019: GBP8 million increase). While obviously
reflecting lower revenue, we have also made good progress in
improving our invoicing and cash collection processes within Rental
Solutions this year, resulting in improved working capital
efficiency across this business.
The increase in inventory of GBP28 million is primarily driven
by a significant volume of cable purchased for the Tokyo Olympics,
together with increased inventory held within our manufacturing
facility in Lomondgate to support the build programme in the second
half. The movement in trade and other payables reflects increased
deferred revenue for the Tokyo Olympics (following a further
milestone payment receipt in the period), partially offset by lower
accruals, specifically following the cancellation of the Group's
2020 annual bonus programme.
Fleet capital expenditure was GBP86 million (2019: GBP83
million). Within this, GBP41 million was invested in Rental
Solutions, primarily in relation to the ongoing renewal of our oil
free air (OFA) and temperature control (TC) fleet, and GBP45
million in Power Solutions, which included GBP15 million related to
the Tokyo Olympics and GBP12 million on next generation gas (NGG)
sets .
Financial resources
The Group maintains sufficient committed facilities to meet its
normal funding requirements over the medium term. At 30 June 2020
these committed facilities totalled GBP 1,088 million, in the form
of committed bank facilities arranged on a bilateral basis with a
number of international banks and private placement notes. The
financial covenants attached to these committed facilities are that
EBITDA should be no less than 4 times interest and net debt should
be no more than 3 times EBITDA. At 30 June 2020 these ratios were
14 times and 0.9 times. The maturity profile of the Group's
borrowings is detailed in Note 13 in the Accounts.
Net operating assets
The net operating assets of the Group (following the impairment
and including goodwill) at 30 June 2020 totalled GBP1,811 million,
GBP379 million lower than 30 June 2019. The main components of net
operating assets are detailed below.
MOVEMENT EXCLUDING
GBPm 1H20 1H19 MOVEMENT THE IMPACT OF CURRENCY
Goodwill/intangibles/investments 206 237 (13)% (8)%
Rental fleet 863 1,003 (14)% (13)%
Property & plant 219 220 (1)% -%
Working capital (excl.
interest creditors) 298 649 (54)% (56)%
Fulfilment asset & demobilisation
provision 116 54 115% 152%
Cash (incl. overdrafts) 109 27 304% 289%
----------------------------------- ------- ------- ----------- -------------------------
Total net operating assets 1,811 2,190 (17)% (17)%
----------------------------------- ------- ------- ----------- -------------------------
A key measure of Aggreko's performance is the return (expressed
as underlying operating profit) it generates from its average net
operating assets (ROCE). For each half year reporting period, we
calculate ROCE by taking the underlying operating profit
(pre-exceptional items) on a rolling 12-month basis and expressing
it as a percentage of the average net operating assets at 30 June,
31 December and the previous 30 June. In the first half of 2020 the
ROCE increased to 11.2% compared with 10.2% for the same period in
2019. This increase is explained in more detail on page 5.
Shareholders' equity
Shareholders' equity decreased by GBP162 million to GBP1,197
million in the six months ended 30 June 2020, represented by the
net assets of the Group of GBP1,696 million before net debt of
GBP499 million. The movements in shareholders' equity are analysed
in the table below:
MOVEMENTS IN SHAREHOLDERS' EQUITY
GBPm
AS AT 1 JANUARY 2020 1,359
Loss for the period (147)
Employee share awards (5)
Re-measurement of retirement benefits 3
Currency translation (9)
Other (4)
------
AS AT 30 JUNE 2020 1,197
---------------------------------------- ------
Principal risks and uncertainties
In the day to day operations of the Group, we face various risks
and uncertainties. We seek both to prevent these risks from
materialising and to mitigate their impact if they do arise, and
the Board has developed a risk management framework to facilitate
this.
The principal risks that we believe could potentially affect the
Group are:
-- Global macroeconomic uncertainty
-- Technology developments
-- Talent management
-- Climate change
-- Health and safety
-- Contracts go wrong - major contract cancellation
-- Cyber security
-- Failure to collect payments or to recover assets
-- Unexpected funding requirements
The overall composition of the principal risks and uncertainties
facing the business has changed since the publication of the 2019
Annual Report and Accounts , primarily due to the COVID-19 pandemic
.
Risks promoted to the Group's principal risk register since the
year end are as follows:
-- Contracts go wrong - major contract cancellation: The
Olympics in Japan has been postponed until Summer 2021. There
remains a risk that the Games could ultimately be cancelled because
of COVID-19.
-- Unexpected funding requirements: We have considered a range
of scenarios to stress-test the Group's liquidity position. These
show that even in the severe but plausible downside scenario (as
defined in Note 2 in the Accounts) we expect to remain within the
Group's financial covenants, while maintaining headroom under our
existing committed facilities. However, uncertainty surrounding the
duration and economic impact of the pandemic result in a risk that
the business generates insufficient cash to fund the strategic plan
in its current form.
Risks removed from the Group's register since the year end
are:
-- Change management
-- Escalating sanctions
-- Market dynamics
-- Service delivery - major contractual failure
These risks remain on the risk registers of the relevant
business units and corporate functions and, given their nature,
will continue to be areas of focus for the Board.
UK withdrawal from the European Union
At this point, while the UK has left the EU, we do not know
whether a trade deal will be agreed before the end of the
transition period. We have completed an impact assessment to try to
identify the aspects of our business that might be affected most by
the UK's withdrawal from the EU. We do not expect the impact on the
Group's business activities to be severe because the majority of
them take place outside the UK and the EU. However, we have taken
some actions and developed contingency plans to reduce the
potential impact on the Group of the UK leaving the EU without a
deal at the end of December 2020. We will continue to monitor the
situation closely and re ne our contingency plans as the situation
develops.
Shareholder information
Our website can be accessed at www.plc.aggreko.com. This
contains a large amount of information about our business. The
website also carries copies of recent investor presentations, as
well as London Stock Exchange announcements.
Chris Weston Heath Drewett
Chief Executive Officer Chief Financial Officer
6 August 2020
GROUP INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2020 (UNAUDITED)
6 MONTHSED 30 JUNE 2020
TOTAL BEFORE EXCEPTIONAL
EXCEPTIONAL ITEMS 6 MONTHS YEARED
ITEMS (NOTE 6)ED 31 DECEMBER
30 JUNE
2020 2020 2020 2019 2019
NOTES GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Revenue 4 667 - 667 768 1,613
Cost of sales (291) (95) (386) (335) (644)
------------- ------------ ------------ ------------ -------------
Gross profit 376 (95) 281 433 969
Distribution costs (209) (2) (211) (225) (482)
Administrative
expenses (99) (17) (116) (127) (249)
Impairment loss
on trade receivables (14) (67) (81) (5) (7)
Other income 10 - 10 5 10
------------- ------------ ------------ ------------ -------------
Operating profit/(loss) 4 64 (181) (117) 81 241
Net finance costs
- Finance cost (18) - (18) (21) (46)
- Finance income 1 - 1 - 4
------------- ------------ ------------ ------------ -------------
Profit/(loss) before
taxation 47 (181) (134) 60 199
Taxation 8 (21) 8 (13) (21) (70)
------------- ------------ ------------ ------------ -------------
Profit/(loss) for the
period 26 (173) (147) 39 129
------------- ------------ ------------ ------------ -------------
All profit/(loss) for
the period is attributable
to the owners of the
Company.
Basic earnings
per share (pence) 7 (57.75) 15.34 50.80
------------- ------------ ------------ ------------ -------------
Diluted earnings
per share (pence) 7 (57.75) 15.33 50.70
------------------------- ------ ------------- ------------ ------------ ------------ -------------
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2020 (UNAUDITED)
6 MONTHSED YEARED
30 JUNE 31 DECEMBER
2019 2019
6 MONTHSED
30 JUNE
2020
GBP MILLION GBP MILLION GBP MILLION
(Loss)/profit for the period (147) 39 129
------------- ------------ -------------
Other comprehensive (loss)/income
Items that will not be reclassified
to profit or loss
Remeasurement of retirement benefits 4 (5) (1)
Taxation on remeasurement of retirement
benefits (1) 1 -
Items that may be reclassified subsequently
to profit or loss
Cash flow hedges (4) - 1
Net exchange losses offset in reserves (9) (1) (75)
------------- ------------ -------------
Other comprehensive loss for the period
(net of tax) (10) (5) (75)
------------- ------------ -------------
Total comprehensive (loss)/income for
the period (157) 34 54
--------------------------------------------- ------------- ------------ -------------
GROUP BALANCE SHEET
AS AT 30 JUNE 2020 (UNAUDITED)
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
NOTES GBP MILLION GBP MILLION GBP MILLION
Non-current assets
Goodwill 9 172 186 177
Other intangible assets 25 42 41
Investment 9 9 9
Property, plant and equipment 10 1,082 1,223 1,166
Deferred tax asset 36 36 44
Fulfilment assets 11 84 45 54
Retirement benefit surplus 11 1 4
------------ ------------ ------------
1,419 1,542 1,495
------------ ------------ ------------
Current assets
Inventories 212 233 216
Trade and other receivables 12 502 746 659
Fulfilment assets 11 47 22 32
Cash and cash equivalents 123 69 87
Derivative financial instruments 3 - 1
Current tax assets 25 20 21
------------ ------------ ------------
912 1,090 1,016
------------ ------------ ------------
Total assets 2,331 2,632 2,511
------------ ------------ ------------
Current liabilities
Borrowings 13 (165) (155) (59)
Lease liability 14 (33) (33) (33)
Derivative financial instruments (4) - (1)
Trade and other payables (425) (336) (388)
Current tax liabilities (35) (34) (42)
Demobilisation provision 15 (7) (4) (5)
Provisions - (1) -
------------ ------------ ------------
(669) (563) (528)
------------ ------------ ------------
Non-current liabilities
Borrowings 13 (362) (596) (511)
Lease liability 14 (62) (69) (68)
Deferred tax liabilities (33) (34) (36)
Demobilisation provision 15 (8) (9) (9)
(465) (708) (624)
------------ ------------
Total liabilities (1,134) (1,271) (1,152)
============ ============ ============
Net assets 1,197 1,361 1,359
============ ============ ============
Shareholders' equity
Share capital 42 42 42
Share premium 20 20 20
Treasury shares (7) (11) (13)
Capital redemption reserve 13 13 13
Hedging reserve (net of deferred
tax) (2) 1 2
Foreign exchange reserve (135) (52) (126)
Retained earnings 1,266 1,348 1,421
------------ ------------ ------------
Total shareholders' equity 1,197 1,361 1,359
---------------------------------- ------ ------------ ------------ ------------
GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2020 (UNAUDITED)
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
NOTES GBP MILLION GBP MILLION GBP MILLION
Operating activities
(Loss)/profit for the period (147) 39 129
Adjustments for:
Tax 13 21 70
Depreciation 143 163 315
Amortisation of intangibles 3 3 8
Exceptional - PPE impairment charge 6 59 - -
Exceptional - Intangible asset
impairment charge 6 17 - -
Fulfilment assets 11 12 6 21
Demobilisation provisions 15 6 4 9
Finance income (1) - (4)
Finance cost 18 21 46
Profit on sale of property, plant
and equipment (PPE) (10) (5) (10)
Share-based payments (5) 5 11
Changes in working capital (excluding
the effects of exchange differences
on consolidation):
Decrease/(increase) in inventories
(i) 8 (2) 8
Decrease in trade and other receivables
(i) 173 34 78
Increase/(decrease) in trade and
other payables 24 (48) 21
Cash flows relating to fulfilment
assets 11 (58) (28) (66)
Cash flows relating to demobilisation
provisions 15 (5) (2) (6)
Cash flows relating to prior period
exceptional items - (1) (2)
------------ ------------ ------------
Cash generated from operations 250 210 628
Tax paid (28) (30) (76)
Interest received 1 - 4
Interest paid (Note (ii)) (18) (22) (46)
------------ ------------ ------------
Net cash generated from operating
activities 205 158 510
Cash flows from investing activities
Purchases of PPE (95) (99) (230)
Purchase of other intangible assets (4) (4) (8)
Proceeds from sale of PPE 14 9 21
------------ ------------ ------------
Net cash used in investing activities (85) (94) (217)
------------ ------------ ------------
Cash flows from financing activities
Increase in long-term loans 168 206 393
Repayment of long-term loans (199) (189) (493)
Increase in short-term loans 2 30 2
Repayment of short-term loans (3) (101) (127)
Payment of lease liabilities (17) (14) (31)
Dividends paid to shareholders - (45) (69)
Purchase of treasury shares - - (4)
------------ ------------ ------------
Net cash used in financing activities (49) (113) (329)
------------ ------------ ------------
Net increase/(decrease) in cash
and cash equivalents 71 (49) (36)
Cash and cash equivalents at beginning
of the period 36 76 76
Exchange gain/(loss) on cash and
cash equivalents 2 - (4)
------------ ------------ ------------
Cash and cash equivalents at end
of the period 109 27 36
------------ ------------ ------------
i) Movements include an exceptional impairment for inventories
(GBP36 million) and trade and other receivables (GBP69 million).
Refer to Note 6.
ii) Interest paid of GBP18 million (30 June 2019: GBP22 million,
31 December 2019: GBP46 million) includes GBP2 million relating to
leases (30 June 2019: GBP2 million, 31 December 2019: GBP5
million).
Cash flows for the purchase and sale of rental fleet assets are
presented as arising from investing activities because the
acquisition of new fleet assets represents a key investment
decision for the Group, the assets are expected to be owned and
operated by the Group to the end of their economic lives, the
disposal process (when the assets are largely depreciated) is not a
major part of the Group's business model and the assets in the
rental fleet are not specifically held for subsequent resale.
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
AS AT 30 JUNE 2020
At 1 JAN OTHER NON-CASH At 30 JUNE
2020 CASH FLOW EXCHANGE MOVEMENTS 2020
Analysis of
changes in
net debt GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
----------------------- ------------ ------------ ------------ --------------- ------------
Cash and cash
equivalents 36 71 2 - 109
Current borrowings:
Bank borrowings (8) 1 (3) - (10)
Private placement
notes - - - (141) (141)
----------------------- ------------ ------------ ------------ ---------------
Lease liability (33) 17 (1) (16) (33)
----------------------- ------------ ------------ ------------ --------------- ------------
(41) 18 (4) (157) (184)
----------------------- ------------ ------------
Non-current
borrowings:
Bank borrowings (33) 31 2 - -
Private placement
notes (478) - (25) 141 (362)
----------------------- ------------ ------------ ------------ ---------------
Lease liability (68) - (1) 7 (62)
----------------------- ------------ ------------ ------------ --------------- ------------
(579) 31 (24) 148 (424)
Net debt (584) 120 (26) (9) (499)
----------------------- ------------ ------------ ------------ --------------- ------------
Analysis of changes in liabilities from financing
activities
---------------------------------------------------------------------------------- ------------
Current borrowings (41) 18 (4) (157) (184)
Non-current
borrowings (579) 31 (24) 148 (424)
------------ ------------ ------------ ---------------
Financing derivatives - - - (1) (1)
----------------------- ------------ ------------ ------------ --------------- ------------
Total financing
liabilities (620) 49 (28) (10) (609)
----------------------- ------------ ------------ ------------ --------------- ------------
Other non-cash movements include reclassi cations between
short-term and long-term borrowings, with GBP141 million being
reclassi ed from non-current to current borrowings and GBP13
million from non-current to current lease liabilities. The
remaining balance is due to GBP10 million of new lease liabilities,
GBP2 million of interest, offset by GBP2 million of remeasurements
and GBP1 million of disposals.
AS AT 30 JUNE 2019
At 1 JAN IFRS 16 OTHER NON-CASH At 30 JUNE
2019 TRANSITION CASH FLOW EXCHANGE MOVEMENTS 2019
Analysis of
changes in
net debt GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
--------------------- ------------ ------------ ------------ ------------ --------------- ------------
Cash and cash
equivalents 76 - (49) - - 27
Current borrowings:
Bank borrowings (115) - 52 (2) (48) (113)
Private placement
notes (20) - 19 1 - -
--------------------- ------------ ------------ ------------ ------------ ---------------
Lease liability - (31) 14 - (16) (33)
--------------------- ------------ ------------ ------------ ------------ --------------- ------------
(135) (31) 85 (1) (64) (146)
--------------------- ------------ ------------ ------------
Non-current
borrowings:
Bank borrowings (134) - (17) - 48 (103)
Private placement
notes (493) - - - - (493)
--------------------- ------------ ------------ ------------ ------------ ---------------
Lease liability - (73) - - 4 (69)
--------------------- ------------ ------------ ------------ ------------ --------------- ------------
(627) (73) (17) - 52 (665)
Net debt (686) (104) 19 (1) (12) (784)
--------------------- ------------ ------------ ------------ ------------ --------------- ------------
Analysis of changes in liabilities from financing activities
---------------------------------------------------------------------------------------------- ------------
Current borrowings (135) (31) 85 (1) (64) (146)
Non-current
borrowings (627) (73) (17) - 52 (665)
------------ ------------ ------------ ------------ --------------- ------------
Total financing
liabilities (762) (104) 68 (1) (12) (811)
--------------------- ------------ ------------ ------------ ------------ --------------- ------------
Other non-cash movements include reclassifications between
short-term and long-term borrowings, with GBP48 million being
reclassified from non-current to current borrowings and GBP11
million from non-current to current lease liabilities. The
remaining balance is due to GBP12 million of new lease liabilities
in the period.
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2020 (UNAUDITED)
AS AT 30
JUNE 2020 ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
ORDINARY SHARE CAPITAL FOREIGN
SHARE PREMIUM TREASURY REDEMPTION HEDGING EXCHANGE RETAINED
CAPITAL ACCOUNT SHARES RESERVE RESERVE RESERVE EARNINGS TOTAL
GBP GBP GBP GBP GBP (TRANSLATION) GBP EQUITY
MILLION MILLION MILLION MILLION MILLION GBP MILLION MILLION GBP MILLION
Balance at
1 January
2020 42 20 (13) 13 2 (126) 1,421 1,359
Loss for
the period - - - - - - (147) (147)
Other comprehensive
(loss)/income:
Fair value
losses on
foreign
currency
cash ow hedge
(net of tax) - - - - (4) - - (4)
Currency
translation
differences
(Note (i)) - - - - - (9) - (9)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Re-measurement
of retirement
benefits
(net of tax) - - - - - - 3 3
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Total
comprehensive
loss for
the period
ended 30
June 2020 - - - - (4) (9) (144) (157)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Transactions
with owners:
Employee
share awards - - - - - - (5) (5)
Issue of
Ordinary
shares to
employees
under share
option schemes
(Note (ii)) - - 6 - - - (6) -
--------- --------- --------- ----------- --------- -------------- ---------- -------------
- - 6 - - - (11) (5)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Balance at
30 June 2020 42 20 (7) 13 (2) (135) 1,266 1,197
---------------- --------- --------- --------- ----------- --------- -------------- ---------- -------------
(i) The currency translation difference is explained in the Financial Review on page 12.
(ii) During the period 737,480 Ordinary shares have been
transferred from the Employee Benefit Trust to satisfy the
Restricted Stock Schemes and Share Save Schemes.
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2020 (UNAUDITED)
AS AT 30
JUNE 2019 ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
ORDINARY SHARE CAPITAL FOREIGN
SHARE PREMIUM TREASURY REDEMPTION HEDGING EXCHANGE RETAINED
CAPITAL ACCOUNT SHARES RESERVE RESERVE RESERVE EARNINGS TOTAL
GBP GBP GBP GBP GBP (TRANSLATION) GBP EQUITY
MILLION MILLION MILLION MILLION MILLION GBP MILLION MILLION GBP MILLION
Balance at
1 January
2019 42 20 (17) 13 1 (51) 1,359 1,367
Profit for
the period - - - - - - 39 39
Other comprehensive
(loss)/income:
Currency
translation
differences - - - - - (1) - (1)
Re-measurement
of retirement
benefits
(net of tax) - - - - - - (4) (4)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Total
comprehensive
income/(loss)
for the period
ended 30
June 2019 - - - - - (1) 35 34
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Transactions
with owners:
Employee
share awards
Issue of
Ordinary - - - - - - 5 5
Shares to
employees
under share
option schemes
(Note (i)) - - 6 - - - (6) -
Dividends
paid during
the period - - - - - - (45) (45)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
- - 6 - - - (46) (40)
--------- --------- --------- ----------- --------- -------------- ---------- -------------
Balance at
30 June 2019 42 20 (11) 13 1 (52) 1,348 1,361
---------------- --------- --------- --------- ----------- --------- -------------- ---------- -------------
(i) During the period 654,496 Ordinary shares have been
transferred from the Employee Benefit Trust to satisfy the
Restricted Stock Schemes and Share Save Schemes.
NOTES TO THE INTERIM ACCOUNTS
FOR THE SIX MONTHSED 30 JUNE 2020 (UNAUDITED)
1. GENERAL INFORMATION
The Company is a public limited company which is listed on the
London Stock Exchange and is incorporated and domiciled in the UK.
The address of the registered office is 120 Bothwell Street,
Glasgow, G2 7JS, UK.
This condensed interim report was approved for issue on 6 August
2020.
This condensed consolidated interim report does not comprise
Statutory Accounts within the meaning of Section 434 of the
Companies Act 2006. Statutory Accounts for the year ended 31
December 2019 were approved by the Board on 3 March 2020 and
delivered to the Registrar of Companies. The report of the auditor
on those Accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under Section
498 of the Companies Act 2006.
The condensed consolidated interim report is unaudited but has
been reviewed by the Group's auditor, whose report is on page
41.
2. BASIS OF PREPARATION
This condensed consolidated interim report for the six months
ended 30 June 2020 has been prepared in accordance with the
Disclosure and Transparency Rules (DTR) of the Financial Conduct
Authority (previously the Financial Services Authority) and IAS 34
'Interim financial reporting' as adopted by the European Union. The
condensed consolidated interim report should be read in conjunction
with the annual financial statements for the year ended 31 December
2019, which have been prepared in accordance with IFRSs as adopted
by the European Union.
Going concern basis
During the period the Group has been significantly impacted by
the global COVID-19 pandemic. The trading review on page 4 explains
how COVID-19 has impacted the business in the first six months of
the year and the risks section on page 15 explains how it has
impacted the Group's principal risks. Prior to the outbreak the
Group's balance sheet and liquidity position were strong and,
although impacted by COVID-19, the Group's financial position
remains robust.
The Group balance sheet shows consolidated net assets of
GBP1,197 million (30 June 2019: GBP1,361 million), of which GBP863
million (30 June 2019: GBP1,003 million) relates to fleet
assets.
The Group continues to maintain sufficient committed facilities
to meet its normal funding requirements over the medium term. At 30
June 2020, these committed facilities totalled GBP1,088 million, in
the form of committed bank facilities arranged on a bilateral basis
with a number of international banks and private placement notes.
The financial covenants attached to these committed facilities are
that EBITDA should be no less than 4 times interest and net debt
should be no more than 3 times EBITDA. At 30 June 2020 these ratios
were 14 times and 0.9 times. It has been the Group's custom and
practice to refinance its committed facilities in advance of their
maturity dates, providing that there is an ongoing need for those
facilities. The Group has refinanced all the committed facilities
that would have matured in 2020. In June 2020, the Group refinanced
a GBP30 million committed bank facility that was due to mature in
Q1 2021, which leaves GBP232 million of committed facilities
maturing in 2021. In addition, the Group has been allocated a
credit limit under the COVID Corporate Financing Facility to issue
Commercial Paper with a term of up to 12 months to the Bank of
England until February 2021, although to date it has not used this
facility.
Net debt (including GBP95 million of a lease creditor) amounted
to GBP499 million at 30 June 2020 and, at that date, undrawn
committed facilities were GBP584 million.
For the purposes of the Directors' assessment of the Group's
going concern position and to satisfy them of the Group's ability
to pay its liabilities as they fall due, the Directors have
prepared a Group cash flow statement for a period of seventeen
months from the date of approval of these financial statements,
ending 31 December 2021.
The base case forecast for this cash flow statement assumes a
slow recovery through the second half of 2020 and throughout 2021
in the Group's more transactional businesses, reflecting a more
cautious view of the future impact of COVID-19 and the lower oil
price on each of our key sectors and geographies in this part of
the business. By contrast, the
2. BASIS OF PREPARATION CONTINUED
majority of our key projects (primarily within Power Solutions)
continue to run as normal, with the main impact being delays in
getting new projects mobilised and on-hire. The base case assumes
that the Tokyo Olympics take place in 2021 as currently planned.
The base case forecast has been stress-tested with simulated
financial impacts of the Group's principal risks to generate a
severe but plausible downside scenario, in which the forecast
revenue and EBITDA over the period are reduced by around 10% and
30%, respectively. This results in a reduction in the Group's cash
generation, as compared with the base case forecast, of more than
GBP200 million over the seventeen month test period.
The above stress-test analysis shows that even in the severe but
plausible worst-case scenario, the Group does not expect to breach
its covenants in the seventeen months from the date of approval of
this interim report. Further, as we believe we will be able to
operate within our existing facilities, we do not currently
anticipate a need for the Group to use the COVID Corporate
Financing Facility, which is currently available to it until
February 2021.
Based on the above, the Directors are con dent that it is
appropriate for the going concern basis to be adopted in preparing
the interim nancial statements.
3. ACCOUNTING POLICIES
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
The accounting policies are consistent with those of the annual
financial statements for the year ended 31 December 2019, as
described in those annual financial statements.
4. SEGMENTAL REPORTING
Effective 1 January 2020 the operational and management control
of Mexico was transferred from Rental Solutions to Power Solutions
Industrial. Accordingly, the comparative prior year gures have been
restated. The impact was to reduce the previously stated Rental
Solutions balances and results, and to correspondingly increase the
Power Solutions Industrial balances and results, by the amounts
shown below.
6 MONTHS YEAREDED
30 JUNE 31 DEC
2019 2019
GBP MILLION GBP MILLION
Revenue 4 10
Operating profit - 1
Depreciation and amortisation 1 1
------------ ------------
Net operating assets 11 12
------------ ------------
Provision for impairment of receivables
(Note 12) 3 3
------------ ------------
(a) Revenue by segment
EXTERNAL REVENUE
6 MONTHS YEAR
6 MONTHSEDEDED 30 JUNE 31 DEC
30 JUNE 2019 2019
2020 RESTATED RESTATED
GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial (PSI) 188 202 444
Utility (PSU) 153 170 346
--------------------------- ------------ ------------
341 372 790
Rental Solutions (RS) 326 396 823
--------------------------- ------------ ------------
Group 667 768 1,613
--------------------------------------------------- --------------------------- ------------ ------------
(i) Inter-segment transfers or transactions are entered into under
the normal commercial terms and conditions that would also be available
to unrelated third parties. All inter-segment revenue was less than
GBP1 million.
Disaggregation of revenue
In the tables below revenue is disaggregated by geography and sector.
Revenue by geography
6 MONTHS YEAR
6 MONTHSEDEDED 30 JUNE 31 DEC
30 JUNE 2019 2019
2020 RESTATED RESTATED
GBP MILLION GBP MILLION GBP MILLION
North America 197 233 496
UK 30 36 76
Continental Europe 64 89 176
Eurasia 29 36 73
Middle East 67 77 169
Africa 91 88 206
Asia 60 62 146
Australia Pacific 39 43 80
Latin America 90 104 191
------------ ------------ ------------
667 768 1,613
-------------------- ------------ ------------ ------------
Revenue by sector
6 MONTHSED 30 JUNE 2020
PSI PSU RS Group
GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Utilities 11 153 37 201
Oil & gas 83 - 49 132
Petrochemical & refining 3 - 59 62
Building Services & construction 19 - 71 90
Events 16 - 15 31
Manufacturing 10 - 22 32
Mining 28 - 23 51
Other 18 - 50 68
188 153 326 667
---------------------------------- ------------ ------------ ------------
6 MONTHSED 30 JUNE 2019 (RESTATED)
PSI PSU RS Group
GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Utilities 9 170 39 218
Oil & gas 90 - 72 162
Petrochemical & refining 4 - 78 82
Building Services & construction 24 - 70 94
Events 14 - 33 47
Manufacturing 15 - 24 39
Mining 29 - 24 53
Other 17 - 56 73
202 170 396 768
---------------------------------- ------------ ------------ ------------
YEARED 31 DECEMBER 2019 (RESTATED)
PSI PSU RS Group
GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Utilities 19 346 82 447
Oil & gas 182 - 144 326
Petrochemical & refining 8 - 157 165
Building Services & construction 44 - 150 194
Events 58 - 69 127
Manufacturing 31 - 56 87
Mining 64 - 48 112
Other 38 - 117 155
444 346 823 1,613
---------------------------------- ------------ ------------ ------------
(b) Profit/(loss) by segment
6 MONTHSED 30 JUNE 2020
6 MONTHS
TOTAL BEFORE EXCEPTIONALED YEARED
EXCEPTIONAL ITEMS 30 JUNE 31 DEC
ITEMS (NOTE 6) 2019 2019
2020 2020 2020 RESTATED RESTATED
GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 11 (45) (34) 21 65
Utility 9 (110) (101) 13 44
------------- ------------ ------------ ------------ ------------
20 (155) (135) 34 109
Rental Solutions 44 (26) 18 47 132
------------- ------------ ------------ ------------ ------------
Operating profit/(loss) 64 (181) (117) 81 241
Finance costs - net (17) - (17) (21) (42)
------------- ------------ ------------ ------------ ------------
Profit/(loss) before
taxation 47 (181) (134) 60 199
Taxation (21) 8 (13) (21) (70)
------------- ------------ ------------ ------------ ------------
Profit/(loss) for
the period/year 26 (173) (147) 39 129
------------------------- ------------- ------------ ------------ ------------ ------------
(c) Depreciation, amortisation and impairment by segment
6 MONTHSED 30 JUNE 2020
6 MONTHS
TOTAL BEFOREED YEARED
EXCEPTIONAL EXCEPTIONALITEMS 30 JUNE 31 DEC
ITEMS (NOTE 6) 2019 2019
2020 2020 2020 RESTATED RESTATED
GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 48 20 68 51 101
Utility 41 44 85 53 100
------------- ----------------- ------------ ------------ ------------
89 64 153 104 201
Rental Solutions 57 12 69 62 122
------------- ----------------- ------------ ------------ ------------
Group 146 76 222 166 323
------------------ ------------- ----------------- ------------ ------------ ------------
(d) Capital expenditure on property, plant & equipment and
intangible assets by segment
6 MONTHS YEAR
6 MONTHSEDEDED 30 JUNE 31 DEC
30 JUNE 2019 2019
2020 RESTATED RESTATED
GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 31 29 80
Utility 25 42 78
------------ ------------ ------------
56 71 158
Rental Solutions 53 44 105
------------ ------------ ------------
Group 109 115 263
------------------- ------------ ------------ ------------
(i) Capital expenditure comprises additions of PPE of GBP105
million (including GBP10 million in relation to leased right-of-use
assets) (30 June 2019: GBP111 million, 31 December 2019: GBP255
million) and additions of intangible assets of GBP4 million (30
June 2019: GBP4 million, 31 December 2019: GBP8 million).
(e) Assets / (Liabilities) by segment
ASSETS LIABILITIES
30 JUNE 31 DEC 30 JUNE 31 DEC
30 JUNE 2019 2019 30 JUNE 2019 2019
2020 RESTATED RESTATED 2020 RESTATED RESTATED
GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 787 761 781 (221) (116) (176)
Utility 701 933 828 (168) (170) (187)
------------ ------------ ------------ ------------ ------------ ------------
1,488 1,694 1,609 (389) (286) (363)
Rental Solutions 768 881 832 (56) (99) (81)
------------ ------------ ------------ ------------ ------------ ------------
Group 2,256 2,575 2,441 (445) (385) (444)
Tax and finance
asset/(liability) 61 56 65 (77) (75) (87)
Derivative financial
instruments 3 - 1 (4) - (1)
Borrowings - - - (513) (709) (519)
Lease liability - - - (95) (102) (101)
Retirement benefit
surplus 11 1 4 - - -
------------ ------------ ------------ ------------ ------------ ------------
Total assets/(liabilities)
per balance sheet 2,331 2,632 2,511 (1,134) (1,271) (1,152)
-------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
(f) Geographical information
NON-CURRENT ASSETS
30 JUNE 31 DEC
30 JUNE 2019 2019
2020 RESTATED RESTATED
GBP MILLION GBP MILLION GBP MILLION
North America 300 302 290
UK 155 171 177
Continental Europe 143 148 140
Eurasia 69 62 69
Middle East 123 205 181
Africa 160 192 179
Asia 188 156 142
Australia Pacific 77 79 79
Latin America 168 191 194
------------ ------------ ------------
1,383 1,506 1,451
---- -------------------- ------------ ------------ ------------
Non-current assets exclude deferred tax.
5. DIVIDS
The dividends paid in the period were:
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
Total dividend (GBP million) - 45 69
Dividend per share (pence) - 17.74 27.12
------------------------------ ---------- --------- -------
The interim dividend per share for the period was 5.00 pence
(2019: 9.38 pence), amounting to a total dividend of GBP13 million
(2019: GBP24 million). This interim dividend will be paid on 1
October 2020 to shareholders on the register on 4 September 2020,
with an ex-dividend date of 3 September 2020.
6. EXCEPTIONAL ITEMS
The Directors believe that the impact of the COVID-19 pandemic ,
the lower oil price and the consequent deterioration in the short
to medium term economic outlook, as well as the acceleration in the
transition to lower carbon technologies presents a potential
impairment indicator for certain of the Group's assets and, as a
result, we have carried out a detailed impairment review across all
asset classes. We have concluded that the specific trigger for the
potential impairment and the resulting impacts mentioned above was
the World Health Organisation's declaration of the coronavirus
outbreak as a pandemic on 11 March 2020.
Following our review of all of the Group's asset classes, there
are four specific areas where we considered an impairment to be
necessary, totalling GBP181 million, as summarised below:
-- Trade and other receivables (GBP69 million)
-- Property, plant & equipment (GBP59 million)
-- Inventory (GBP36 million)
-- Other intangible assets (GBP17 million)
The accounting policy and definition of exceptional items was
contained in Note 1 to the 2019 Annual Report and Accounts, namely
that we believe exceptional items are items which individually or,
if of a similar type, in aggregate, need to be disclosed by virtue
of their size or incidence if the financial statements are to be
properly understood. Given the size and nature of these impairment
charges, both individually and in aggregate, they have been treated
as 'exceptional items' in the Interim Financial Statements in
accordance with this policy. In addition, we have reported an
exceptional tax credit
in the period of GBP8 million. This comprises an exceptional tax
credit of GBP13 million on expenses treated as exceptional items in
the accounts, which are deductible for tax purposes in either the
current or future periods, together with an exceptional write--down
of GBP5 million in relation to certain deferred tax assets. These
deferred tax assets are no longer expected to be utilised in the
foreseeable future due to the impact of COVID--19 and the lower oil
price on certain of Aggreko's markets and customers, which have
impacted our forecast taxable profit.
There is no impact on cash flow from any of these exceptional
impairment charges.
Exceptional items by income statement category
PROPERTY,
TRADE & PLANT & OTHER INTANGIBLE TOTAL EXCEPTIONAL
OTHER RECEIVABLES EQUIPMENT INVENTORY ASSETS ITEMS
GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Cost of Sales - 59 36 - 95
Distribution costs 2 - - - 2
Administrative
expenses - - - 17 17
Impairment loss
on trade receivables 67 - - - 67
69 59 36 17 181
----------------------- ------------------- ------------ ------------ -----------------
Exceptional items by segment
PROPERTY,
TRADE & PLANT & OTHER INTANGIBLE TOTAL EXCEPTIONAL
OTHER RECEIVABLES EQUIPMENT INVENTORY ASSETS ITEMS
GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 10 15 15 5 45
Utility 57 38 9 6 110
------------------- ------------ ------------ ----------------- ------------------
67 53 24 11 155
Rental Solutions 2 6 12 6 26
Group 69 59 36 17 181
------------------ ------------------- ------------ ------------ -----------------
Trade and other receivables (GBP69 million)
COVID-19 and its impact on the wider economy, as stated above,
has created cash flow, liquidity and, in some cases, future
viability challenges for some of our customers in the most hard-hit
sectors (e.g. oil & gas, events). Equally, for some of our
larger, and mostly legacy, customers in Power Solutions Utility
(PSU), access to hard currency and funding has become increasingly
challenged for those whose governments rely on oil sales to
generate foreign currency reserves. As a consequence, despite some
signs of progress in recent years (and increased provisions where
this has not been the case), it is our judgment that the more
challenging outlook post COVID-19 for several of our larger PSU
debtors is such as to require full impairment of our residual
balance sheet exposure. Specifically, this has resulted in an
impairment, across our PSU debtor book, of GBP57 million
(comprising GBP56 million against trade receivables and GBP1
million against other receivables), primarily relating to legacy
debts in parts of Africa, Venezuela, Yemen and Brazil. In addition,
we have reviewed the trade receivables of all business units to
identify specific customers whose ability to pay has been
materially impacted by COVID-19 as well as the consequent fall in
oil price. As a result of this review we have identified an
impairment of GBP12 million across certain other specific debtors
within Rental Solutions and Power Solutions Industrial, the
majority of which operate in the oil & gas and events sectors.
While we continue to pursue these debtor balances, we no longer
consider their recovery probable given the customers' financial
position.
At 30 June 2020, 87% of the total provision (including the above
impairment of GBP56 million) across our PSU debtor book related to
the top 16 debtors (December 2019: 87%). Among these debtors the
Group had a net exposure, after taking into account provisions or
payment securities/guarantees, of $10-20 million to one customer
(December 2019: three customers) and a net exposure of less than
$10 million to each of the others. At 30 June 2020, there were no
customers to whom the Group had a net exposure in excess of $20m
(December 2019: two customers).
Property, plant & equipment (GBP59 million)
The combined effects of a sustained lower oil price environment
and reduced economic activity as a result of COVID-19 have impacted
the Group's growth expectations in the near term. While expert
views continue to vary on the likely speed/shape of the economic
recovery from the effects of COVID-19, there is increasing
certainty over the short-term impact. The latest IMF forecast for
this year is for a global contraction of 4.9% versus growth of 3.4%
expected last October; while the IEA estimates that energy demand
it is set to shrink by 6% this year, with global energy investment
expected to shrink by 20% in the same time period. This revised
market outlook has dampened our internal growth expectations for
the next few years. In the context of this reduced demand outlook,
to establish the need for any impairment across the fleet we have
first identified, at an individual fleet asset level, those items
that have not been on hire over the past 12 months. With the prima
facie assumption that there is unlikely to be stronger demand in
the future, as compared with the recent past, for these particular
assets, a review has been undertaken to determine whether there is
any likelihood of these items going on hire, either from their
current location or elsewhere in the Group, such that the item
should be retained at full value with no impairment. Additionally,
we have identified assets that are currently "stranded" in
countries where, in the current social and economic climate, there
is little/no likelihood of the fleet being put on hire . We have
also reviewed the fleet for assets beyond economic repair in the
current market, where demand for the fleet no longer supports the
case for investment to return the fleet to a rental ready
state.
In addition to a reduction in demand more generally, the
COVID-19 crisis has caused an acceleration in the transition to
lower carbon solutions and technologies. This acceleration,
combined with the lower oil price which has narrowed the gap
between the cost of diesel and HFO, has reduced the attractiveness
of our HFO product specifically and we have therefore impaired the
value of this fleet accordingly. In carrying out the impairment
review on our HFO fleet, we have determined the recoverable amount
by using 'value in use' calculations based on a discount rate of
8.9%.
Inventory (GBP36 million)
Consistent with the rationale and approach taken to the Group's
fleet, we have reviewed the Group's inventory to determine the
extent to which the projected fall in revenue creates a materially
reduced need for the inventory, and a consequent need for
impairment. We reviewed inventory for slow and non-moving items
(with the time period reviewed for parts being the last 24 months
and for cable, duct & hose being a 3-year average utilisation),
with our prima facie assumption being that there is unlikely to be
stronger demand in the future, as compared with the recent past,
for these items. We considered whether there is any likelihood of
these items being consumed, either at their current location or
elsewhere in the Group, such that the items should be retained with
no impairment. Additionally, we have identified items that are
currently "stranded" alongside our "stranded" fleet, as identified
above. Finally, we have reviewed our inventory for items beyond
economic repair in the current market (where future demand no
longer supports the case to repair them) and those relating to
fleet that is now considered obsolete as a result of the
acceleration in the energy transition.
Other intangible assets (GBP17 million)
As we have moved through the COVID-19 crisis, there is strong
evidence of an acceleration of the transition to lower carbon
solutions and technologies, with increased support for governments
and businesses to place sustainability at the heart of the global
recovery. It is against this changing market backdrop that we have
reviewed in detail our capitalised development expenditure,
highlighting several projects where, as a consequence of the faster
energy transition to lower carbon technologies and renewables, the
future demand for the products or applications no longer supports
the capitalised development spend.
Impairment charge sensitivities
In determining the impairment charge detailed above, in addition
to considering various independent external and internal data
sources regarding the future economic outlook for the Group,
management has exercised a significant level of commercial
judgment. As a result, there is a wide range of potential
outcomes.
Specifically, in terms of the amount relating to the Group's
trade and other receivables, the debts are largely undisputed by
our customers and our assessment is based on their ability, rather
than their willingness, to pay. Consequently, as we will continue
to pursue payment going forward, we may receive some monies in the
future. Consistent with the initial impairment, any such receipts
would be credited through the income statement as 'exceptional'
items. Further, it should be noted that for the legacy PSU debts,
against which we have recorded an impairment of GBP53 million, the
Group was already holding a provision of GBP48 million at 31
December 2019 against these customers, reflecting our assessment of
the risk of non-payment at that point. In terms of the potential
need for further future impairment, we believe that the combination
of continued good cash collections on our more current debts and
the impact of the impairment on our more legacy debtors has
significantly reduced the risk of a material bad debt exposure
across the Group.
Regarding the property, plant and equipment impairment of GBP59
million, for those assets that have been fully impaired (to GBPnil
book value), we may be able to recover some value in the future, in
the form of sale proceeds or through the potential future hire of
the equipment. We do not believe, however, that any such amounts
would be material. Approximately half of the overall property,
plant and equipment impairment relates to the Group's HFO fleet,
where we have recorded an impairment of c. 35% against the book
value of the total fleet, based on our conversion expectations of
the current pipeline of opportunities. There is clearly scope that
these expectations prove to be either over, or under, optimistic,
and therefore we will continue to keep the value of this fleet
under review going forward. The residual net book value, after the
impairment, of the Group's HFO fleet at 30 June 2020 is GBP51
million.
The inventory impairment covers items with a relatively low
individual unit value and, therefore, while it is possible that
some of the parts may be used in the future, the risk that this
results in a significant understatement of costs going forward is
considered to be immaterial. Equally, we do not believe that there
is any prospect of material value being generated through the
subsequent sale of any of the impaired inventory.
Finally, concerning the intangible assets impairment, this
amount represents the full capitalised value of the respective
development programmes, with an immaterial likelihood of any
subsequent revaluation.
With the exception of the HFO fleet assets and the Group's
inventory (which we reviewed at a total fleet and part number level
respectively), the above impairment review considered the assets
within each class at an individual basis. Given this level of
detail, we believe that the overall risk of a further impairment
within these asset classes, or indeed the Group's other asset
classes where an impairment has been made, is not material.
Key assumptions and estimates
The Group's significant key assumptions and estimates were
disclosed in the 2019 Annual Report and Accounts. These have been
reviewed at 30 June 2020 to determine if any changes are required
given the current situation. The valuation of certain assets and
liabilities are subject to greater uncertainty than when reported
in the 2019 Accounts and this has resulted in exceptional items
being recognised in the Group Income Statement, as detailed above.
There are no other changes to the key assumptions and
estimates.
7. EARNINGS PER SHARE
Basic earnings per share have been calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average number of shares in issue during the period, excluding
shares held by the Employee Share Ownership Trusts which are
treated as cancelled.
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
(Loss)/profit for the period (GBP million) (147.0) 39.0 129.3
--------- --------- -------
Weighted average number of ordinary shares
in issue (million) 254.6 254.2 254.6
--------- --------- -------
Basic earnings per share (pence) (57.75) 15.34 50.80
-------------------------------------------- --------- --------- -------
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive ordinary shares. These represent share options
granted to employees where the exercise price is less than the
average market price of the Company's ordinary shares during the
period. The number of shares calculated as above is compared with
the number of shares that would have been issued assuming the
exercise of the share options.
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
(Loss)/profit for the period (GBP million) (147.0) 39.0 129.3
--------- --------- -------
Weighted average number of ordinary shares
in issue (million) 254.6 254.2 254.6
Adjustment for share options 0.3 0.3 0.4
--------- --------- -------
Diluted weighted average number of ordinary
shares in issue (million) 254.9 254.5 255.0
--------- --------- -------
Diluted earnings per share (pence) (57.75) 15.33 50.70
--------------------------------------------- --------- --------- -------
Aggreko plc assesses the performance of the Group by adjusting
earnings per share, calculated in accordance with IAS 33, to
exclude items it considers to be material and non-recurring as it
believes that the exclusion of such items provides a better
comparison of business performance. The calculation of earnings per
ordinary share on a basis which excludes exceptional items is based
on the following adjusted earnings:
6 MONTHS 6 MONTHS YEAREDEDED
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
(Loss)/profit for the period (GBP million) (147.0) 39.0 129.3
Exclude exceptional items (net of tax) (GBP
million) 173.1 - -
--------- --------- -------
Adjusted earnings (GBP million) 26.1 39.0 129.3
--------- --------- -------
An adjusted earnings figure is presented below.
Basic earnings per share pre-exceptional items
(pence) 10.26 15.34 50.80
Diluted earnings per share pre-exceptional
items (pence) 10.25 15.33 50.70
------------------------------------------------- --------- --------- -------
8. TAXATION
The taxation charge for the period is based on an estimate of
the Group's expected annual effective rate of tax for 2020 based on
prevailing tax legislation at 30 June 2020. This is currently
estimated to be 45% on profits before exceptional items and 5% for
exceptional items (2019: 35%).
9. GOODWILL
30 JUNE
2020
GBP MILLION
Cost
At 1 January 177
Exchange (5)
Balance at 30 June 172
Accumulated impairment losses -
------------
Net book value 172
-------------------------------
Goodwill impairment tests
Goodwill has been allocated to cash generating units (CGUs) as
follows:
30 JUNE
2020
GBP MILLION
Power Solutions
Industrial 54
Utility 15
------------
69
Rental Solutions 103
------------
Group 172
------------------- ------------
Goodwill is tested for impairment annually or whenever there is
an indication that the asset may be impaired. Goodwill is monitored
by management at an operating segment level. The recoverable
amounts of the CGUs are determined from value in use calculations
which use cash flow projections based on the five year strategic
plan approved by the Board. The strategic plan approved by the
Board is based on past performance, the opportunity pipeline, and
managements best estimate of future market development. The key
assumptions for value in use calculations are those relating to
expected changes in revenue (utilisation and rates) and the cost
base, discount rates and long-term growth rates, are as
follows:
30 JUNE 2020
POST-TAX PRE-TAX
EBITDA PRE-EXCEPTIONAL DISCOUNT DISCOUNT LONG-TERM
ITEMS RATE RATE GROWTH RATE
Power Solutions Industrial 59 8.9% 16.1% 2%
Power Solutions Utility 50 8.9% 16.1% 2%
Rental Solutions 101 8.9% 16.1% 2%
---------------------------- ----------------------- ---------- ---------- -------------
Values in use were determined using current year cash flows and
a prudent view of the medium-term business strategy. A terminal
cash flow was calculated using a long-term growth rate of 2%. On
the basis that the business carried out by all CGUs is closely
related and assets can be redeployed around the Group as required,
a consistent Group discount rate has been used for all CGUs.
As at 30 June 2020, based on internal valuations and using the
key assumptions in the table above to calculate a base case
scenario, management concluded that the values in use of the CGUs
exceeded their net asset value with the highest headroom value
being GBP1.3 billion and the lowest is GBP141 million. Reasonably
possible downside sensitivities, where the long-term growth rate
was reduced to 1%, were then carried out which resulted in a
maximum headroom of GBP1.1 billion and a minimum headroom of GBP82
million. Given these headroom numbers the Directors consider that
there is no reasonably possible change in the key assumptions made
in their impairment assessment that would give rise to an
impairment.
10. PROPERTY, PLANT AND EQUIPMENT
VEHICLES,
FREEHOLD SHORT LEASEHOLD PLANT &
PROPERTIES PROPERTIES FLEET EQUIPMENT TOTAL
GBP MILLION GBP MILLION GBP MILLION GBP MILLION GBP MILLION
Cost
At 1 January 2020 183 22 3,528 231 3,964
Exchange adjustments 6 - 101 1 108
Additions (ii) 5 - 86 14 105
Disposals (iii) (1) (1) (60) (19) (81)
IFRS 16 remeasurements
(iv) (2) - - - (2)
------------ ---------------- ------------ ------------ ------------
At 30 June 2020 191 21 3,655 227 4,094
------------ ---------------- ------------ ------------ ------------
Accumulated depreciation
At 1 January 2020 59 16 2,589 134 2,798
Exchange adjustments 4 - 84 1 89
Charge for the period 10 1 118 14 143
Impairment (v) - - 59 - 59
------------ ---------------- ------------ ------------ ------------
Disposals (iii) - (1) (58) (18) (77)
------------ ---------------- ------------ ------------ ------------
At 30 June 2020 73 16 2,792 131 3,012
------------ ---------------- ------------ ------------ ------------
Net book values
At 30 June 2020 118 5 863 96 1,082
------------ ---------------- ------------ ------------ ------------
At 31 December 2019 124 6 939 97 1,166
-------------------------- ------------ ---------------- ------------ ------------ ------------
(i) The net book value of assets capitalised in respect of
leased right-of-use assets at 30 June 2020 is GBP92 million.
(ii) Additions of GBP105 million include GBP10 million in
relation to leased right-of-use assets.
(iii) Disposals include GBP3 million of cost and GBP2 million of
accumulated depreciation in relation to leased right-of-use
assets.
(iv) Remeasurements represent amendments to the terms of
existing leases which are prospectively applied.
(v) Further information about the impairment can be found in
Note 6
11. FULFILMENT ASSETS
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
GBP MILLION GBP MILLION GBP MILLION
Balance at 1 January 86 44 44
Capitalised in the period 58 28 66
Provision created for future demobilisation
costs 3 1 3
Amortised to the income statement (15) (7) (24)
Exchange (1) 1 (3)
Balance at 30 June/31 December 131 67 86
------------ ------------
Analysis of fulfilment assets
Current 47 22 32
Non-current 84 45 54
------------ ------------ ------------
Total 131 67 86
--------------------------------------------- ------------ ------------ ------------
12. TRADE AND OTHER RECEIVABLES
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
GBP MILLION GBP MILLION GBP MILLION
Trade receivables 475 588 529
Less: provision for impairment of receivables (168) (90) (85)
------------ ------------ ------------
Trade receivables - net 307 498 444
Prepayments 47 50 45
Accrued income 105 137 124
Other receivables (Note (i)) 43 61 46
------------ ------------ ------------
Total receivables 502 746 659
------------ ------------ ------------
Provision for impairment of receivables
30 JUNE 30 JUNE 31 DEC
2019 2019
2020 RESTATED RESTATED
GBP MILLION GBP MILLION GBP MILLION
Power Solutions
Industrial 31 16 15
Utility 124 66 61
------------ ------------ ------------
155 82 76
Rental Solutions 13 8 9
------------ ------------ ------------
Group 168 90 85
----------------------------------------------- ------------ ------------ ------------
The transfer of the operational and management control of Mexico
from Rental Solutions to Power Solutions Industrial (Note 4) has
reduced the Rental Solutions bad debt provision and increased the
Power Solutions Industrial provision by GBP3 million in June 2019
and December 2019.
(i) Material amounts included in other receivables include taxes
receivable of GBP27 million (30 June 2019: GBP27 million, 31
December 2019: GBP23 million) and deposits of GBP7 million (30 June
2019: GBP6 million, 31 December 2019: GBP6 million). At 30 June
2019 and 31 December 2019 other receivables also included the fair
value of private placement notes with one customer in Venezuela
(PDVSA) of GBP4 million and GBP1 million respectively. At 30 June
2020 the fair value of these notes is zero. Information regarding
exceptional impairment losses recognised during the period can be
found in Note 6.
13. BORROWINGS
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
GBP MILLION GBP MILLION GBP MILLION
Non-current
Bank borrowings - 103 33
Private placement notes 362 493 478
362 596 511
------------ ------------
Current
Bank overdrafts 14 42 51
Bank borrowings 10 113 8
Private placement notes 141 - -
165 155 59
------------ ------------
Total borrowings 527 751 570
------------ ------------ ------------
Short-term deposits (8) (7) -
Cash at bank and in hand (115) (62) (87)
Lease liability 95 102 101
------------ ------------ ------------
Net borrowings 499 784 584
------------ ------------ ------------
Overdrafts and borrowings are unsecured.
The maturity of financial liabilities
The maturity profile of the borrowings
was as follows:
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
GBP MILLION GBP MILLION GBP MILLION
Within 1 year, or on demand 165 155 59
Between 1 and 2 years - 198 138
Between 2 and 3 years - 34 10
Between 3 and 4 years 121 9 -
Between 4 and 5 years - 118 146
Greater than 5 years 241 237 217
------------ ------------ ------------
527 751 570
------------------------------------------ ------------ ------------ ------------
Fair value estimation
The carrying value of non-derivative financial assets and
liabilities, comprising cash and cash equivalents, trade and other
receivables, trade and other payables and borrowings is considered
to materially equate to their fair value. Private placement notes
are level 2. Forward foreign currency contracts are considered to
be Level 1 as the valuation is based on quoted market prices at the
end of the reporting period. The valuation techniques employed are
consistent with those detailed in the Group's 2019 Annual Report
and Accounts.
14. LEASES
(a) Amounts recognised in the balance sheet
Property, plant and equipment comprised owned and leased
assets.
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
GBP MILLION GBP MILLION GBP MILLION
Property, plant & equipment owned 990 1,122 1,068
Right-of-use assets 92 101 98
------------ ------------ ------------
1,082 1,223 1,166
----------------------------------- ------------ ------------ ------------
The Group leases many assets, including land and buildings,
vehicles and machinery. Information about leases for which the
Group is a lessee is presented below.
Right-of-use assets
VEHICLES,
FREEHOLD PLANT &
PROPERTIES EQUIPMENT TOTAL
GBP MILLION GBP MILLION GBP MILLION
Net book value at 1 January
2020 75 23 98
Additions for the period 4 6 10
Remeasurements (2) - (2)
Disposals (1) - (1)
Depreciation charge for period (9) (6) (15)
Exchange adjustments 1 1 2
Net book value at 30 June
2020 68 24 92
--------------------------------- ------------ ------------
Lease liabilities
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
GBP MILLION GBP MILLION GBP MILLION
Maturity analysis - contractual undiscounted
cash flows
Less than one year 33 34 35
One to five years 55 64 63
More than five years 21 22 23
------------ ------------ ------------
Total undiscounted lease liabilities at
30 June/31 December 109 120 121
Impact of discounting (14) (18) (20)
------------ ------------ ------------
Lease liabilities included in the balance
sheet 95 102 101
------------ ------------ ------------
Current 33 33 33
Non-current 62 69 68
---------------------------------------------- ------------ ------------ ------------
(b) Amounts recognised in the income statement
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
GBP MILLION GBP MILLION GBP MILLION
Depreciation charge of right-of-use assets
Freehold property 9 9 18
Vehicles, plant & equipment 6 5 12
------------ ------------ ------------
15 14 30
Interest of lease liabilities 2 2 5
Expenses relating to short-term leases 2 2 4
-------------------------------------------- ------------ ------------ ------------
The short-term lease commitments are not dissimilar to the
short-term lease expense in the year.
(c) Amounts recognised in the statement of cash flows
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
GBP MILLION GBP MILLION GBP MILLION
Total cash outflow for leases 19 16 36
------------------------------- ------------ ------------ ------------
This GBP19 million is included in the cash flow statement, with
GBP17 million included within cash flows from financing activities
and GBP2 million included in interest paid within net cash
generated from operating activities.
15. DEMOBILISATION PROVISION
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
GBP MILLION GBP MILLION GBP MILLION
Balance at 1 January 14 11 11
New provisions 6 4 9
Utilised (5) (2) (6)
Exchange - - -
------------ ------------ ------------
Balance at 30 June/31 December 15 13 14
------------ ------------ ------------
Analysis of demobilisation provision
Current 7 4 5
Non-current 8 9 9
------------ ------------ ------------
Total 15 13 14
-------------------------------------- ------------ ------------ ------------
16. CAPITAL COMMITMENTS
30 JUNE 30 JUNE 31 DEC
2020 2019 2019
GBP MILLION GBP MILLION GBP MILLION
Contracted but not provided for (property,
plant and equipment) 50 49 39
-------------------------------------------- ------------ ------------ ------------
17. RELATED PARTY TRANSACTIONS
Transactions between the Group and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. There were no other related party
transactions in the period.
18. SEASONALITY
The Group has historically been subject to seasonality, with the
third quarter of the year being its peak demand period. In previous
years, therefore, revenue and profit have been significantly higher
in the second half of the year. Given the timing, and continuing
impact, of the COVID-19 pandemic and the lower oil price this year,
we do not expect to see such marked seasonality in the year ending
31 December 2020.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that to the best of their knowledge, these
condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 as adopted by the European
Union, and that the interim management report includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8,
namely:
-- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
The Directors of Aggreko plc are listed in the Aggreko plc 2019
Annual Report and Accounts.
By order of the Board
Chris Weston Heath Drewett
Chief Executive Officer Chief Financial Officer
6 August 2020
INDEPENDENT REVIEW REPORT TO AGGREKO PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2020 which comprises the condensed
consolidated statements of profit or loss and other comprehensive
income, condensed balance sheet, changes in equity and cash flows
for the six-month period then ended, and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The Directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
John Luke
for and on behalf of KPMG LLP
Chartered Accountants
319 St Vincent Street
Glasgow G2 5AS
6 August 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UVRBRRNUWRAR
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