19 October 2012
INTERIM MANAGEMENT STATEMENT
Aggreko plc, the world leader in the supply of temporary power and temperature control, is today issuing its Interim Management Statement covering the period from 1 July 2012 to date.
As a result of strong trading in the Local businesses, and helped by the London 2012 Olympics, Aggreko has delivered a robust performance in the third quarter, and trading at a Group level has been in line with our expectations. On a reported basis, revenues grew by 22%, whilst on an underlying(1) basis revenues grew by 13%.
International Power Projects' business revenues in the third quarter grew 15% excluding pass-through fuel and currency movements.Order intake in the third quarter was below last year at 115 MW, but shortly after the quarter end we signed two contracts including a second contract for 74 MW with the Hokkaido Electric Company in Japan, which takes year to date order intake to 870 MW; this compares with 944 MW at the same point in 2011. When this plant is commissioned, we will have more than 240 MW on rent in Japan, which is more than in the immediate post-tsunami period. Capacity on hire at the end of the quarter was 17% ahead of the prior year. Trading margin in the quarter in International Power Projects has been lower than last year, in large part because of the unusually high mobilisation costs relating to the Mozambique contract; we also increased further our bad debt provision in the quarter, which, set against a large release in the third quarter of 2011 depressed margins relative to the prior year.
The Local business delivered a better-than-expected performance in the third quarter, with revenues on a reported basis growing by 32%. On an underlying basis, revenues grew by 11% in the third quarter; within this North America grew by 13%; Europe & Middle East grew by 8%; and Aggreko International's Local business grew by 13%. Both underlying and reported trading margins in the Local business were higher in the third quarter than in the prior year. We have finalised the value of the London 2012 Olympics contract at £59 million, and we are all proud of the excellent performance of our events team in faultlessly delivering this demanding contract.
Net debt at £685 million has increased by £7 million in the three months to 30 September 2012. This compares to net debt of £424 million at 30 September 2011; the £261 million year-on-year increase is largely due to the acquisition of Poit Energia, and higher levels of both capital expenditure and working capital.
Poit Energia deferred consideration
The Poit Energia acquisition included a deferred consideration of up to £20 million, payable if stretching performance targets for the calendar year 2012 were met. Having completed the acquisition earlier than we anticipated, it now makes sense to integrate the two businesses as soon as possible, and accordingly we have agreed with the Vendors that we will terminate the earn out period early in return for a payment of £3 million of the possible £20 million. The £17 million release of the deferred consideration from the balance sheet will be treated as an exceptional credit in the full year income statement, which will be partially offset by Poit Energia integration costs and re-organisation costs related to the implementation of the new Group structure.
Having had a strong third quarter we now expect the Local business will have a better second half than we previously anticipated, supported both by better base business performance and additional work from the London Olympics. Margins for the Local business on both an underlying and reported basis are forecast to be better than last year for the full year.
International Power Projects will have a strong year, although second half revenue growth rates will be slightly lower than we expected at the time of our Interim Results. Margins and returns for the year will be lower than 2011 due to the high mobilisation costs in Mozambique and the increase in our bad debt provision, with our current assumption being that we will not be able to reduce the level of provisions held before the year end.
Overall, trading continues to run broadly in line with our expectations. Despite the increase in bad debt provisions during the year and unusually high mobilisation costs, we expect that Group margins for the year as a whole, both on a reported and underlying basis, will be at similar levels to last year. Since our last trading update in early August, however, exchange rates have moved against us, and we have also increased our bad debt provisions; we expect that, between them, these two factors will impact our anticipated profits for the year by about 2.5%.
Looking ahead, we expect to spend about £415 million on fleet capital expenditure in the current year. However, given the need to absorb into the wider business the fleet we built in the first half for the London Olympics, and being mindful also of a weakening macro-economic outlook in many developing economies, the rate of fleet capital expenditure in the first half of 2013 is likely to be lower than in 2012.
There will be a conference call for analysts and investors at 8.30am today. For dial-in details, please contact Sian Stanley on 020 7379 5151 or firstname.lastname@example.org.
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Rupert Soames / Angus Cockburn
Tel. 0141 225 5900
Neil Bennett / Tom Eckersley
Tel: 020 7379 5151
(1) Underlying revenue excludes revenue from major events (Asian Games in 2011 and London Olympics in 2012), Poit Energia acquisition, pass-through fuel and currency movements.