Aggreko plc Annual Report 2015

Plain-text annual report

AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 POWERING THE FUTURE Watch and download the online report: www.annualreport2015.aggreko.com 2015 contents 1 Overview Performance highlights Operational overview Reorganised to better focus on our customers Powering the future of spectator events Strategic report 2 Our business Our business today Our marketplace How we create value Our business priorities How we performed – our KPIs Risk factors that could affect business performance Assessment of prospects and viability Powering the future of Myanmar Our investment case 3 Performance review Performance review Financial review Powering the future of Eritrean mining 4 Sustainability Building a sustainable business Powering the future of Romanian oil & gas 5 Governance Corporate Governance Audit Committee report Ethics Committee report Nomination Committee report Remuneration Committee report Statutory disclosures Statement of Directors’ responsibilities Powering the future of Russian oil reﬁning 6 Accounts & other information Independent auditors’ report Group income statement Group statement of comprehensive income Group balance sheet Group cash ﬂow statement Reconciliation of net cash ﬂow to movement in net debt Group statement of changes in equity Notes to the Group accounts Company balance sheet Company statement of comprehensive income Company statement of changes in equity Notes to the Company accounts Shareholder information Deﬁnition and calculation of non GAAP measures Financial summary Glossary 2 3 4 6 8-53 8 10 14 22 24 26 33 34 36 37 40 46 48 52 54 70 74 76 78 94 99 100 102 108 108 109 110 110 111 113 147 148 149 150 154 156 158 159 POWERING THE FUTURE AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 1 We live in a world reliant on power which is an essential part of everyday life. CORPORATE VIDEO VISIT OUR WEBSITE TO VIEW OUR CORPORATE VIDEO. www.aggreko.com/about-aggreko Aggreko is the leading global provider of modular, mobile power and related solutions, operating in around 100 countries worldwide. For over 50 years we have fulﬁlled this critical need. We specialise in providing a fast and ﬂexible service to our customers anywhere in the world, through balancing our global scale with local operations. We aim to remain the leader in our market and we will do so by increasing our focus on customers, investing more resources in technology and improving efﬁciency. Delivering on these areas will enable us to grow the business and help our customers power their future. & O T H E R I N F O R M A T O N I O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 2 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 OVERVIEW PERFORMANCE HIGHLIGHTS Revenue £1,561m 2014: £1,577m Trading proﬁt1, 4 £270m 2014: £306m Proﬁt before tax4 £252m 2014: £289m Dividend per share2 27.12p 2014: 27.12p Diluted earnings per share4 EPS 71.68p 2014: 82.49p Return on capital employed3, 4 16% 2014: 19% 1 2 3 4 Trading proﬁt represents operating proﬁt before gain on sale of property, plant and equipment. The Board is recommending a ﬁnal dividend of 17.74 pence per Ordinary Share, which when added to the interim dividend of 9.38 pence, gives a total for the year of 27.12 pence per Ordinary Share. Calculated by dividing operating proﬁt for the year by the average net operating assets as at 1 January, 30 June and 31 December. 2015 and 2012 numbers are pre- exceptional items. Exceptional items are explained in Note 7 to the accounts. Revenue £m Trading proﬁt1,4 £m 15 14 13 12 11 1,561 1,577 1,573 1,583 1,396 15 14 13 12 11 Proﬁt before tax4 £m Diluted EPS4 pence 15 14 13 12 11 252 289 333 360 324 15 14 13 12 11 Dividend per share2 pence Return on capital employed3,4 % 15 14 13 12 11 27.12 27.12 26.30 23.91 20.79 15 14 13 12 11 270 306 352 381 338 71.68 82.49 92.03 100.40 86.76 16 19 21 24 28 OPERATIONAL OVERVIEW AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 3 BUSINESS PRIORITIES Having undertaken a strategic review, in August 2015 we outlined our new business priorities for the Group around the customer, our technology and our efﬁciency. These priorities will deliver growth at attractive margins and returns. Customer Technology Efﬁciency Read more about our business priorities Page 22 STRUCTURE OF THE BUSINESS During the year we reorganised the business to better focus on our customers. We have two mutually beneﬁcial businesses: Rental Solutions operating in developed markets and Power Solutions operating in emerging markets. Organising the Group in this way allows us to improve our customer service through better strategic and operational execution. Read more about our business units Pages 8 to 17 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I LEADERSHIP TEAM A Senior Leadership Team was established, comprising our top 65 managers. During the year Chris Weston, CEO, hosted two off-site brieﬁngs with the aim to better engage this level of management below the Executive Committee whilst gaining their input into developing the Group’s strategy and direction. Read more about our Senior Leadership Team Pages 18 to 19 and page 59 POWER SOLUTIONS In our industrial business we saw good growth in our Middle East, Russian and African businesses and successfully supplied power for the European Games in Baku. Challenging conditions in our utility business resulted in revenues being down, however, order intake was 640MW and we secured key contract extensions in Argentina, Ivory Coast, Japan and Bangladesh. Read more about Power Solutions performance Page 39 RENTAL SOLUTIONS Strong performance across Europe, with all countries showing growth year on year. In North America, the ongoing weakness in the oil and gas sector has been offset by continued growth in other sectors such as petrochemical and reﬁning and events. Our Australia Paciﬁc business continued to face difﬁcult market conditions driven by the slowdown in the mining sector. Read more about Rental Solutions performance Page 38 G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 4 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 OVERVIEW REORGANISED TO BETTER FOCUS ON OUR CUSTOMERS POWER IS AN ESSENTIAL PART OF EVERYDAY LIFE. WE HAVE MADE GOOD PROGRESS OVER THE LAST 12 MONTHS TO IMPROVE OUR COMPETITIVE POSITION AND MAKE OUR POWER SOLUTIONS MORE ATTRACTIVE TO CUSTOMERS. Chris Weston Chief Executive Ofﬁcer Since joining Aggreko in January of last year we have had a very busy year and, although trading conditions have undoubtedly been difﬁcult, I am pleased with the progress we have made. On a personal note I have thoroughly enjoyed my ﬁrst year at Aggreko and, having seen the Group in action all over the world, I reiterate the view that I laid out in August; that we have an entirely appropriate business model, a great market position and a respected brand, all made possible by dedicated and skilled people who are passionate about the business. It is clear that we fulﬁl a critical need, we provide modular, mobile power wherever it is needed most in the world and I believe that if we focus on our three priorities: our customers, our technology and our efﬁciency, then we will drive growth across all our businesses in the medium term, at attractive margins and returns. Trading performance Overall, 2015 has been a challenging year with the impact of lower commodity prices and difﬁcult trading conditions in a number of our markets having an impact on our performance; resulting in revenues down 3% and trading proﬁt down 14%, on an underlying basis. However, as was discussed at the Business Priorities presentation in August, Aggreko has a number of advantages, including scale and sector and geographic diversity. This has beneﬁted the Group this year and despite oil and gas revenue being down 14% and Power Solutions Utility revenue being down 11%, the Group overall is only 3% down. It is also important, particularly at times of volatility, to have the stability of a strong balance sheet and core to this, ﬂexibility around capital expenditure. I am pleased to say that in this regard we have maintained our ﬁnancial gearing at 0.9 times (net debt to EBITDA), within the range that had been previously communicated. BUSINESS MODEL OUR BUSINESS MODEL IS STRONG AND UNIQUE. Read more Page 14 Business Priorities In August of last year I laid out the priorities for the business for the coming years which will deliver growth in margins and returns of around 20% in the medium term. These priority areas are our customer, our technology and our efﬁciency. Against the ﬁrst priority, our customers, we have a number of initiatives underway, each of which is sponsored by one of the Executive team. These include reﬁning our understanding of our customers’ requirements; customer segmentation; strategies for key sectors; sales training, deployment and incentives. In turn these are supported by a plan to enhance our CRM systems and to provide a digital platform for our customers. To date I am pleased with our progress. Under our technology, the objective is to reduce the overall cost of power for our customers, thereby bringing a beneﬁt to our customers whilst at the same time making us more competitive. In terms of our diesel product, we have made good progress in the past by introducing the G3+ engine into our ﬂeet; this requires an in-house retroﬁt of our original G3 engines, improving both power output and fuel efﬁciency. The retroﬁt programme will continue and we have plans to further improve the efﬁciency of this engine. Regarding our gas product, the next generation gas engine is currently undergoing ﬁeld trials and performing as we expected. From this point forward any gas engine produced will be the next generation engine. Finally, we continue to assess HFO product options, particularly proven technology that could be adapted to our business model, that is mobile, modular and able to produce the required returns. I will update you at the appropriate time in terms of our progress. To manage and drive this we have a fully resourced Manufacturing and Technology team based in Dumbarton, led by Volker Schulte, who is a member of my Executive team. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 5 DELIVERING SUSTAINABLE GROWTH OUR EQUIPMENT IS DESIGNED TO MEET THE TOUGHEST COMPLIANCE LEGISLATION AROUND THE WORLD. Read more about sustainability Page 48 Outlook Our Power Solutions Utility business has started the year with a strong order book; a healthy prospect pipeline; 140MW of new orders; and the signing of a two year extension of our 148MW of diesel contracts in Japan. We expect the level of contracts off-hiring in the year to go back up to a more normal level, of around 30%. Due to the timing of contract start and end dates there will be a reduction in ﬁrst half proﬁts at a Group level. We continue to monitor the geopolitical situation in Yemen, Libya and Venezuela. In our Power Solutions Industrial business we are seeing softer trading conditions in Singapore and some of our markets that are more exposed to the mining sectors. However year to date power volumes are up on the prior year, driven by continued good performances in the Middle East, Russia and Africa. The Rental Solutions business unit, in particular our North American business, has had a slow start to 2016 following a lower run rate exiting 2015 than we had expected and we are cautious on our outlook for this part of our business. At a Group level we anticipate investing around £250 million on ﬂeet capex, focussing on investment in our more fuel efﬁcient gas and diesel engines; as ever we will maintain our capital discipline and ﬂex this spend according to market conditions. Overall, we expect proﬁt before tax and exceptional items to be slightly lower than the prior year on a constant currency basis1, in line with current consensus. & O T H E R I N F O R M A T O N I Finally, on efﬁciency, there are a number of steps we are taking. These are designed to improve our competitive position and to help drive growth. The most immediate action was to reorganise the business, to remove duplication and to improve the management of our procurement function. The reorganisation of Aggreko into Rental Solutions and Power Solutions was a major step; it allowed management to focus on unique priorities in each business, in turn allowing for more effective and efﬁcient delivery. This work is on track and will deliver a reduction in our cost base (capital and operating costs) of £80 million by 2017. Other initiatives under this last priority include assessing our depot infrastructure and network; site deployment; and the systems and processes that underpin our operations. People and Culture We employ close to 7,300 people in around 100 countries. In my ﬁrst year I certainly cannot claim to have visited all 100 countries. I have, as you would expect, visited a number of them and I have consistently found a team that is committed, very focused on delivering for our customers, and doing so with great passion and pride for the business. In short, I recognise the importance of “orange blood” in doing what we do so well. Clearly 2015 has been a difﬁcult year for our people, particularly in terms of the reorganisation and dealing with the removal of over 700 roles from the business. I know that we have work to do to ﬁnalise and to embed the new structure and to enhance and reinforce Aggreko’s powerful culture: it is an area that we are going to be working on in the early part of this year. Finally, I would like to thank the whole team for their hard work and commitment in 2015 and also those that have left Aggreko for their service to the business. It is a great business and I am proud to be part of it. WE HAVE AN ENTIRELY APPROPRIATE BUSINESS MODEL, A GREAT MARKET POSITION, AND A RESPECTED BRAND. Watch Chris’ video online: www.annualreport2015.aggreko.com 1 The constant currency impact is a headwind of £16 million applying the end of January 2016 spot rates, including the step devaluation of the Argentinian peso. In relation to 2016 the Power Solutions Utility contracts in Argentina have contractual protection that offsets the impact of the devaluation. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 6 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 POWERING THE FUTURE OF SPECTATOR EVENTS 1 CHALLENGE 2 SOLUTION The Red Bull Air Race is the world’s fastest motorsport series in the sky. Set across multiple continents and differing landscapes, the breathtaking race event brings with it a series of geographical and commercial challenges. Millions of fans rely on uninterrupted power supply to big screens and broadcasting compounds in order to see coverage of the events unfolding in the skies above. Meanwhile, the safety of the pilots and control of the race require power supply to temporary race control towers. In order to deliver the events, Red Bull Air Race needs a reliable and ﬂexible power solution. Aggreko has been supporting Red Bull events for a number of years; building on this relationship we formed a global partnership and provided power to four of the 2015 Air Race events. Given the geographic diversity of the contract, the global events team handled the design and project management for each race, while local Aggreko teams handled the installation and operational phases of the project. Design plans were customised to provide the most cost-effective solutions for each race and this was complemented by the standardised ﬂeet which delivered continuity and reliability. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 7 3 FUTURE Looking forward, we hope to further develop our global partnership with Red Bull to help support the wider family of Red Bull events as they continue to delight fans around the world. Ascot UK l a s U S A D a l L a s V e g a s U S A Rovinj Croatia Producing 7MW of power Aggreko provided 61 generators Using 35km of electrical cables 8 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS OUR BUSINESS TODAY We are a global business serving customers in around 100 countries through 204 sales and service centres and with over 7,300 permanent and temporary employees. In August 2015 we reorganised Aggreko into two business units to better focus on our customers and enable us to more efﬁciently deliver mission critical power and related solutions. As part of the reorganisation we also appointed a Group Manufacturing and Technology Director, based in Dumbarton, to work directly with our strategic partners to develop market leading products aimed at reducing the overall cost of power for our customers. Globally organised to serve our customers’ needs Key Rental Solutions Power Solutions Ofﬁces/service centres Rental Solutions includes our businesses in North America, Europe, Australia Paciﬁc and Mexico. Power Solutions includes all our other businesses around the world. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 9 Rental Solutions (previously Local Business in developed markets) A transactional business focused on key sectors and operating in developed markets, providing power and related solutions to a diverse range of customers who need it quickly and typically for a short period of time. Read more about Rental Solutions Pages 11 and 38 Key sector focus Revenue Sales and service centres 11 10 9 1 8 7 6 5 2 4 3 Customer type 1. Petrochemical & Reﬁning 2. Oil & Gas 3. Events 4. Utilities 5. Manufacturing 6. Services 7. Contracting 8. Construction 9. Mining 10. Shipping 11. Other % 20 18 11 10 8 8 6 5 5 3 6 £618m 41% of Group 128 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I Power Solutions (previously Power Projects and the Local Business in emerging markets) Operating across key sectors in emerging markets, we typically serve both industrial and utility customers with larger, longer-term and often complex solutions to fulﬁl their power requirements. Read more about Power Solutions Pages 12 to 13 and 39 Key sector focus Revenue Sales and service centres 8 6 5 9 7 4 3 2 Customer type 1. Utilities 2. Oil & Gas 3. Mining 4. Events 5. Construction 6. Manufacturing 7. Petrochemical & Reﬁning 8. Military 9. Other (excluding pass-through fuel) 1 % 59 12 6 5 4 3 1 2 8 £883m 59% of Group 76 Supported by a strong infrastructure Dedicated sales force – Efﬁcient support functions Established distribution network – Leading technology I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 10 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS OUR MARKETPLACE STRONG PROSPECTS FOR LONG-TERM GROWTH Overview Our industry delivers electricity to businesses and homes around the world. In developed markets, power and related products like temperature control are an essential part of everyday life and are taken for granted until they are not there. In emerging markets power helps countries to industrialise and grow, hospitals to provide medical care and schools to educate future generations. Demand for Aggreko’s services is generally created by events: our customers turn to us when something happens which means that they need a fast and ﬂexible solution for power. The nature of the demand differs by country and therefore we address the market through our two business units, each of which has strong prospects for long-term growth. We are well positioned to help our customers meet their energy needs. EXAMPLES OF INFREQUENT EVENTS: EXAMPLES OF FREQUENT EVENTS: (cid:333)(cid:3) Large-scale power shortage South Africa, Bangladesh, Argentina (cid:333)(cid:3) Major sporting occasions Olympic Games, FIFA World Cup, Commonwealth Games (cid:333)(cid:3) Natural disasters Japan post-tsunami, Hurricane Sandy in North America in 2012, Brisbane ﬂoods in 2011 (cid:333)(cid:3) An oil reﬁnery needs additional cooling during the Summer to maintain production throughput. (cid:333)(cid:3) A glass manufacturer suffers a breakdown in its plant and needs power while its own equipment is being repaired. (cid:333)(cid:3) A city centre needs chillers to create an ice-rink for the Christmas period. (cid:333)(cid:3) A remote mine needs power to operate as it cannot access (cid:333)(cid:3) Post-conﬂict reconstruction and military support Democratic Republic of Congo, Iraq and Afghanistan the grid. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 11 Rental Solutions (previously Local Business in developed markets) The Rental Solutions business is linked to local economies and varies in size and nature from country to country. The customer base is diverse, both geographically and by sector, which gives us protection against the vagaries of any one particular market. Being global allows us to quickly move resources between sectors and countries in response to customer demand. Demand drivers GDP As an economy grows, so does demand for reliable and ﬂexible power. As businesses grow they may choose to rent additional power and related solutions rather than lose productivity; this is also a more efﬁcient use of their capital. Propensity to rent In deciding whether to rent or buy our customers take into account issues such as the tax treatment of capital assets; the growing awareness of outsourcing; and the availability and cost of ﬁnance for purchasing equipment. Events High value/low frequency events change the size of a market on a temporary basis; for example, in 2015 the Pan-American Games in Toronto and the European Games in Baku. Customers, market size and prospects Our customers within Rental Solutions tend to be more transactional in nature and are predominantly operating in the Oil & Gas, Mining, Events, Petrochemical & Reﬁning, Utilities and Contracting sectors. Whilst overall cost is always important to them, they are most interested in a solution, in reliability and ﬂexibility. Our average contract duration within Rental Solutions is 45 days. We operate in a niche segment of the broader rental market across a number of countries. Furthermore, major events can inﬂuence market size in the short term. As a result it is difﬁcult to accurately determine the size of the Rental Solutions market; therefore our approach is to use a “market potential estimation”. From this, we estimate that our Estimated worldwide market share Rental Solutions competition 25% market potential £2bn market share is around 25%, which implies Rental Solutions “market potential” of around £2 billion based on Aggreko’s 2015 Rental Solutions revenue. Read more about market potential estimation Page 159 The Rental Solutions market has historically grown in line with GDP. The average GDP growth of the countries in which we operate is forecast to be around 2% per annum over the next few years (Source: IMF, April 2015). Our strategy is to focus on key sectors including Oil & Gas, Petrochemical & Reﬁning, Mining and Events, which in many cases are expected to grow faster than the overall market. Competitors Customers have the choice to either buy or rent and therefore our competitors are not just rental companies but also equipment manufacturers. Where the need is urgent or for a short time, customers tend to rent. In the Rental Solutions market competitors are either privately-owned specialist rental businesses, divisions of large plant hire companies or OEM dealerships; few provide the sector speciﬁc solutions that Aggreko does. We are the only company with a global footprint. However, in every region there is a large number of regional, national and local businesses in the market; but few competitors are able to compete for large-scale or technically demanding work. Global Global Aggreko Aggreko 10–15 regional Hertz, URI, Sunbelt, Speedy Hire, CAT Hundreds of national competitors Thousands of local small businesses What this means for Aggreko In our four largest markets, North America, Australia, the UK and Germany, we have a leading competitive position; however, our analysis suggests that we are under- penetrated in the key sectors which provide our opportunity for growth. In most of our markets, we have a strong market share position and make good returns. There is opportunity to increase market share in all markets, particularly some of our smaller European markets where we have not grown as strongly. Overall, growth in Rental Solutions will be driven by a number of factors: market and sector growth, market share accretion and sector penetration; and through organic and inorganic options, including growth through power adjacencies such as temperature control and loadbanks. Read more about our business priorities Pages 22 to 23 Market during the year We saw a slowdown in business from the Oil & Gas sector from the second quarter of 2015, which resulted in a signiﬁcant adverse impact on our market, particularly in North America, but also in our North Sea business. The slowdown in the Mining sector, which was particularly acute in 2014, has continued, albeit at a slower rate of decline. Elsewhere, lower oil prices have stimulated demand in other sectors, in particular Petrochemical & Reﬁning which has grown strongly, enabling us to offset the decline in the Oil & Gas sector. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 12 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS OUR MARKETPLACE STRONG PROSPECTS FOR LONG-TERM GROWTH Power Solutions (previously Power Projects and the Local Business in emerging markets) Power Solutions largely operates in emerging markets, serving both utility and industrial customers. As populations continue to grow and urbanise, and as industrialisation drives economic growth, demand for power increases. Electriﬁcation rates are typically low in many emerging market countries and even in those places where power is available reliability is often poor. These countries may have plans for permanent capacity, but raising the signiﬁcant funding that is required can take a considerable period of time to realise and the amount of investment required can be challenging to obtain from traditional sources; it typically takes between ﬁve and 10 years for a new permanent plant to be commissioned. Delays in realising new capacity, ageing infrastructure and reliance on intermittent hydropower can also exacerbate an existing shortfall. Meanwhile, the global population is forecast to grow by over 1% per annum until 2020, and double this rate in the least developed countries according to the United Nations; therefore the power shortfall is likely to increase. In the long term, the drivers of growth – increasing demand for electricity and insufﬁcient investment in permanent supply – are structural. The decision by governments to purchase power using ﬂexible solutions is usually a political one and given slower economic growth in recent years, the opportunity cost of not having power is less acute; businesses that are growing, but that are unable to rely on utility power or where it is simply unavailable, are seeking alternative sources of power. The structural shortfall creates substantial opportunities for Aggreko and we will continue to win work by understanding the market, customer needs and offering solutions that meet their requirements. Demand drivers Demand In emerging markets demand is growing, driven by population growth, economic growth, industrialisation and urbanisation. Under-investment Investment in new and replacement permanent power infrastructure has not kept pace with demand and so frequent breakdowns and damaging power cuts have resulted, with many regions remaining off- grid entirely. Financing Capital markets are less willing to support long-term infrastructure projects in many emerging market countries, particularly when de-carbonisation and ageing infrastructure in developed countries requires trillions of dollars in investment. Utility customer decision making factors WHY (cid:333)(cid:3) Economic growth (cid:333)(cid:3) Hydro shortage (cid:333)(cid:3) Social pressure (cid:333)(cid:3) Permanent capacity delays/shortfall (cid:333)(cid:3) Ageing infrastructure OPTIONS (cid:333)(cid:3) Do nothing (cid:333)(cid:3) Mobile and modular power (cid:333)(cid:3) Temporary power CONSIDERATIONS (cid:333)(cid:3) Fuel availability (cid:333)(cid:3) Transmission capacity (cid:333)(cid:3) Affordability (cid:333)(cid:3) Opportunity cost Decision making Flexibility Speed Modularity Pay-as-you-go Flexible power AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 13 Market during the year In 2015 our Utility business had order intake of 640MW which compared to 757MW in the prior year, albeit the prior year included 170MW of short term peak shaving work which didn’t recur. Generally speaking, the level of enquiries has stayed up at historic levels; however, conversion to new orders has been more muted in the last three years, than in the preceding 10 years. We attribute this to a combination of lower economic growth in emerging markets combined with currency devaluation in many of these markets, which makes the funding of power, both on a permanent or temporary basis, more difﬁcult, meaning that customers are choosing to accept blackouts and load shedding rather than allocate scarce funds. That said, for many of these markets an oil price that has been considerably lower now for over a year may act as a catalyst for conversion as temporary power becomes relatively more affordable, given that the majority of the cost to the customer is the fuel. In our Industrial business we saw strong growth in Africa where mining remains strong, and particularly in South Africa where the business is growing rapidly on the back of the worsening power outages and regular load shedding. In Russia, despite the lower oil price, we continue to see good growth, particularly with our gas product where customers are outsourcing the provision of power. The economic environment in Brazil remains challenging and elsewhere in Latin America the mining sector slowdown has impacted our businesses in Chile and Peru. & O T H E R I N F O R M A T O N I Power Solutions market data (Compound Annual Growth Rate) 140 130 120 110 100 2014 2015 2016 2017 Source: IMF/Aggreko 6% 5% GDP Power Gap (adjusted from 2016) 2018 2019 Customers, market size and prospects Within Power Solutions contracts tend to be longer and more complex. For our customers reliability and ﬂexibility are important, however, cost is a key consideration. In many instances, especially within the utility market segment, the customers are state owned utilities, who use a public tendering process and the overall cost of generation is always front of mind. Power Solutions operates in three market segments: (cid:333)(cid:3) Industrial – customers that are typically looking for power either where the grid is unstable and they seek backup, or where the grid doesn’t exist and they need a primary form of power. The largest customers in this segment tend to be in Oil & Gas and Mining and are often in remote locations. It is extremely difﬁcult to accurately determine the size of this market given its immaturity. Our focus is on increasing rental penetration and therefore current market size and share is less relevant given the growth prospects. In many of these markets we are the market leader, but each individually may be small. The Industrial market is expected to grow in line with GDP. The average GDP growth of the countries in which we operate is forecast to be around 5% per annum over the next few years. (Source: IMF, April 2015) (cid:333)(cid:3) Utility – this is generally linked to the power shortfall in a particular country and our customer is normally the state owned utility. These customers require base load, peaking and in some cases, backup power. There are a wide variety of factors that inﬂuence the decision to contract with us and they vary between countries; our analysis suggests that GDP growth typically needs to be around 5% for conversion from an enquiry into a contract in this segment. We estimate that our market share in 2015 was around 40%, based on the volume of contract wins and extensions across the industry. In our Power Solutions Utility markets, demand for power is expected to continue to grow faster than supply, and we estimate that the shortfall of power generating capacity will be around 100GW by 2020, almost twice UK peak power demand; this implies a compound growth rate of 6% over the next ﬁve years. (cid:333)(cid:3) Reactive – this demand is caused by events that happen infrequently and cause a power shortage for a period of time. This is impossible to predict, but important work to secure; reputation and ﬂeet availability are essential to be able to respond to such an emergency, for example in Japan where we provided power following the Tsunami. Competitors The largest competitive force that we face in the utility market is for a share of a government’s budget. In most emerging market countries the utilities are state controlled and money spent on power is money that cannot be spent elsewhere. In addition, we compete with a number of companies around the world, we have one competitor with whom we compete on a global basis and a number of businesses compete with us either locally or regionally, in particular some of the larger Caterpillar dealers. Our key differentiator is our global scale and large homogenous ﬂeet, which facilitates fast deployment and economies of scale. What this means for Aggreko Aggreko operates in each of the market segments, which allows us to utilise our infrastructure more effectively, improve our awareness of business opportunities, and improve our proﬁle, all of which maximises growth and returns. Across Power Solutions we are repositioning the business and through the actions that we are taking expect to deliver market share gain, increased sector penetration and growth from new country entry. Overall, we anticipate that this will result in growth ahead of the market. Read more about our business priorities Pages 22 to 23 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 14 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS HOW WE CREATE VALUE OUR BUSINESS MODEL Our business model is strong and unique. Our customers are the focus of everything that we do and investing in our resources enables us to provide solutions that help them to power their future. Our resources What sets us apart People & Culture We have a highly skilled, passionate and professional workforce of over 7,300 employees worldwide with a strong can-do and customer focused culture. Expertise Over 50 years of operational experience and expertise in sector speciﬁc and complex projects. When this is combined with our engineering capability it gives us a unique understanding of our customer needs and the ability to deliver whilst managing risk. Scale Our scale and global reach allows us to serve customers in around 100 countries today. We have an Aggreko presence in all of these markets, meaning that we are close to our customers. Our scale also provides a capital cost advantage, and to have a large ﬂeet available which means we can respond quickly whilst also running at good levels of utilisation. Finally, our scale means we have a diversiﬁed portfolio and an inherent risk management mechanism. Technology We aim to have a ﬂeet that is mobile, modular and standard in design so that it can serve any customer, anywhere in the world. Our Group Manufacturing and Technology functions work directly with our strategic partners to develop market leading products aimed at reducing the overall cost of power for our customers. Financial The Group has a strong balance sheet with good ﬁnancial ﬂexibility. Read more about our resources Page 18 Why our customers choose Aggreko Rental Solutions We operate in developed markets and provide solutions for, and rent our equipment to, customers who either operate it themselves or contract us to provide a full turn-key solution; we retain responsibility for servicing and maintaining it. We provide a multi- product offering with power adjacencies, such as temperature control, oil-free air and loadbanks across a diverse sector base. Contracts tend to be short term and transactional in nature. Revenue Trading margin £ 618m 16% ROCE 19% Our business units are supported by a Fleet Power 9,818MW £889m assets2 Chillers 1,126MW £51m assets2 Maintain and service 204 Sales and service centres worldwide operating a hub and spoke model AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 15 Our project life cycle is explained on the next page Understand the requirement Design and plan Proposal Mobilise, install and commission Operate Service and maintain Demobilise Service and refurbish Power Solutions We operate in emerging markets serving both Utility and Industrial customers. Initial contracts in our Industrial business are on average around three months and around one year in our Utility business and are often complex in nature. For Utility customers we act as a power producer, installing and operating modular, mobile power plants; we charge both for providing the generating capacity, and for the electricity we produce. Our Industrial customers are across key sectors such as Oil & Gas, Petrochemical & Reﬁning and Mining. Here, we develop solutions for and rent our equipment to customers who then operate it for themselves. Revenue1 excluding pass- through fuel Trading1 margin £ 883m 19% ROCE1 15% Key outputs Powering the future The value we create Supporting industry and commerce Providing power for countries and communities Enabling major events around the world Innovating to build a sustainable business shared ﬂeet, a global footprint and logistics Global employment Oil-free air 588CFM £12m assets2 Ancillaries £97m assets2 1 Excluding pass-through fuel 2 Net asset value Strong brand and good reputation Rewarding careers Shareholder returns O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 16 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS HOW WE CREATE VALUE ACROSS THE PROJECT LIFE CYCLE The typical life cycle of a project Rental Solutions > 100,000 > 360 people 2,225MW quotes per year dedicated sales force of power equipment hours – days installation time Customers approach us through sales channels or existing relationships; our sales people also offer solutions before problems arise. We meet the customer, discuss their needs and conduct a site survey. Typically, we meet the production manager on-site to get a better indication of what is needed. Then we draw up a design, taking account of any environmental or regulatory requirements. Based on the plan, a quote is drawn up using the internal pricing model. A proposal is then made to the customer and once agreed, a contract is signed. Once the contract is signed, we begin mobilising the equipment. We install it on-site, test it and commission the contract. In most cases the customer is responsible for providing the fuel. Understand the requirement 1 Design and plan 2 Proposal 3 Mobilise, install and commission 4 Power Solutions Utility: 225 Industrial: 15,000 > 240 people Utility: 4,837MW Industrial: 2,756MW quotes per year dedicated sales force of power equipment In the case of most Utility customers, a tender is produced. Our Industrial customers approach us through sales channels or existing relationships. In both cases we present solutions to show how we can meet their power needs. Both involve meeting the customer and understanding their requirements. For our Utility customers we conduct a site survey and additional exploratory work and then we draw up a plan to meet the customer requirements, including all the logistics and site civil works, which can vary considerably in complexity. For our Industrial customers we will meet them on-site to better understand the brief before drawing up a design. In both parts of the business, a quote is drawn up based on the customer speciﬁcation. In the Utility business this is either presented directly to the customer, or in the case of a tender, the bid is often opened publicly in front of the local press. Typically there are then some negotiations before a ﬁnal price is agreed and a contract signed. For our Industrial customers, a proposal is made based on the quote and once agreement is reached, a contract is signed. weeks – months installation time Equipment is shipped from the nearest service centre, hub or another project which has recently demobilised and usually travels by sea, rail and road to the site. Installing a project typically takes from a few days to a number of months, depending on the size and complexity and once this is complete the site is commissioned and operational. In most instances, the customer is responsible for providing the fuel. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 17 45 days average contract duration > 950 dedicated engineers 64,000 sets off-hired in 2015 After an explanation of operating procedures, customers operate the equipment themselves and call us if there are any issues. Our service engineers will visit the site as necessary. Our remote monitoring equipment can alert customers and engineers to potential problems before they occur. For some short contracts, servicing may not be needed. At the end of the initial contract duration, the customer retains the right to determine whether or not to off-hire the equipment or extend the contract. When they choose to off-hire, we remove our equipment and demobilise. 3 days average time to turnaround a diesel generator Equipment coming off-hire is returned to our service centres, where it is serviced and made available to go back out on-hire. Operate 5 Service and maintain 6 Demobilise 7 Service and refurbish 8 Utility: 1 year Industrial: 3 months > 1,700 Utility: 870MW Industrial: 17,700 Sets 240MW & O T H E R average contract duration dedicated engineers off-hired and demobilised in 2015 of refurbishments in Utility businesses in 2015 Our Industrial customers operate the equipment for themselves, after an explanation of the operating procedures; we maintain and service the equipment. In the case of our Utility customers, we sell them power. We own and operate our facilities which are run by Aggreko employees. These tend to be a combination of locally trained teams and Aggreko personnel. The equipment needs regular servicing and maintaining, the frequency of which depends on how hard it is running. Our engineers are either permanently on-site (Utility business) or will visit as necessary and will service and maintain equipment as required (Industrial business). At the end of the initial contract term, customers have the option to off-hire or extend the contract. In the Utility business, typically around a third of contracts on-hire at the beginning of the year will off-hire during the year. When a customer decides to off-hire, we remove our equipment and leave the site exactly as we found it. Equipment that is demobilised is returned to one of the service centres, where it is serviced or refurbished. Our 1MW diesel generators that have reached the end of their life are refurbished. Refurbishment can include an upgrade to our more fuel efﬁcient/ higher electrical output engine at around 75% of the original cost and giving another eight years of useful life. I N F O R M A T O N I O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 18 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS HOW WE CREATE VALUE USING OUR RESOURCES People are our greatest asset; their passion, pace and commitment are a critical contributor to our success. They are highly skilled and are used to reacting quickly; they respond effectively under pressure; do a professional job; and above all, deliver it in a safe manner. These attributes underpin the can-do, customer focused culture for which Aggreko is known. We are therefore focused on providing an environment in which our people can ﬂourish and make the greatest possible difference to the Company’s performance. HEALTH, SAFETY AND ENVIRONMENTAL (HSE) MANAGEMENT Read more about health, safety and environmental management Page 50 SOCIAL CONTRIBUTION Read more about social contribution Page 51 Organisation During the year we reorganised the business, the objective of which was to enhance our customer service by improving our strategic and operational execution through two clearly deﬁned business units, Rental Solutions and Power Solutions. The reorganisation became effective from 1 August 2015; Bruce Pool was appointed President Rental Solutions in December 2015, with Nicolas Fournier appointed Managing Director Power Solutions in November 2015. In addition we appointed Volker Schulte as the new Group Manufacturing and Technology Director and also appointed a Group Director of HSE. As part of the change in structure we undertook to remove a signiﬁcant number of roles from our structure. This was completed by the end of November 2015 and communication with employees on how the reorganisation was progressing was maintained throughout. Each of the new business units now has strong management teams in place, and the majority have been ﬁlled with existing Aggreko employees. Safety and security Given that we operate in many areas of the world which can be categorised as high risk, we consider the safety of our employees working in these locations to be our most critical issue. During the year we have enhanced our Group security function which has overseen the implementation of standard tools and processes to ensure the safety and security of our people. We also have an ongoing partnership with external advisers, who provide us with the on- the-ground knowledge that we need to make decisions on our operations in high risk areas. During the year we appointed a Group Director of HSE with a direct reporting line to the CEO. Read more about safety and security risk Pages 30 to 31 Case study: Inaugural Senior Leadership Team brieﬁng In April 2015, the ﬁrst Senior Leadership Team (SLT) brieﬁng was held in London. Held across two days, the event comprised presentations on the progress of the business priorities, workshops to develop key strategic and cultural ideas and a presentation on how Aggreko is perceived by the investment community. Following the event, the input from the two days was used in formulating the Group’s Business Priorities. A follow up event was held in Amsterdam in November, where the strategic priorities were discussed. These events will be hosted at least once a year in future to ensure that senior managers are kept up to date with business developments. THE IDEAS AND CONCERNS RAISED WERE TAKEN BACK AND USED IN FORMULATING THE GROUP’S BUSINESS PRIORITIES CRITICAL ISSUE WE CONSIDER THE SAFETY OF OUR EMPLOYEES TO BE OUR MOST CRITICAL ISSUE. Read more Page 50 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 19 LOCAL TALENT WE ACTIVELY RECRUIT LOCAL TALENT WHEREVER POSSIBLE; AS PART OF OUR BUSINESS PRIORITIES WE PLAN TO HIRE AND TRAIN MORE LOCAL EMPLOYEES. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I Talent management Learning and development continues to be an area of focus and is built around the core capabilities required by the business. We ﬁrmly believe that investment in our employees has a direct and positive impact on our employee retention rates and the engagement levels of our staff. It is essential that our people are properly trained and each part of the business has training programmes in place to provide our employees with the necessary skills to perform their role; training is a combination of on-the-job learning and speciﬁc skill development through training courses. In 2015 we delivered over two hundred thousand hours of training across the Group. Many of our training programmes are tailored speciﬁcally for Aggreko employees and utilise case studies and examples taken from employee experience. During the year we established a Senior Leadership Team (SLT), comprising our top 65 managers, and CEO, Chris Weston hosted two off-site brieﬁngs. Through these brieﬁngs we engaged the level of management below the Executive Committee as part of their development and also to get the SLT’s input into formulating the Group strategy. We also recognise that localisation of talent provides many beneﬁts to the Group and to the communities in which we operate, which is why we actively recruit local people wherever possible and use programmes like Aggreko University (Ivory Coast), SelecTech (USA) and our apprenticeship programme at our Dumbarton manufacturing facility (UK) to develop the skills of school leavers. As part of our business priorities, we are also looking to improve operational efﬁciency by hiring more local employees, training them and providing them with career opportunities with the Group. Across the Group Aggreko employs over 100 different nationalities. Reward for performance Learning and development is only one part of the way we retain our best people. It is equally important that they are rewarded and incentivised appropriately. The Company’s remuneration policy is aligned with the key objectives of growing earnings and delivering strong returns on capital employed. These metrics are used for the Group’s long-term incentive scheme and senior managers’ annual bonuses. During the year, following shareholder consultation, we reviewed the remuneration policy, including the LTIP scheme for our top 190 managers, and updated it to reﬂect current market trends. We also encourage all employees to own shares in the Company and currently nearly 2,000 people participate in the Sharesave programme. Read more about remuneration policy Page 78 Engagement We are proud that so many of our employees enjoy what they do and we seek to increase employee satisfaction through more than just ﬁnancial incentives. We encourage mobility across countries and divisions by prioritising internal transfers and ensuring that positions are advertised internally. Our last Global Opinion Survey was in 2013 and another one was due in 2015. Given the focus on the reorganisation and business priorities in 2015 we did not conduct a Global Opinion survey. However, throughout the reorganisation, we actively solicited feedback from employees through Pulse surveys which measured employee sentiment across the business. We were pleased to see that despite employees naturally feeling unsettled during this time of transition, the majority of employees who responded to the surveys would still recommend Aggreko as an employer to family and friends. Read more about employee turnover Page 24 During the year we launched MyAggreko, a company-wide intranet that encourages collaboration between employees and enables knowledge sharing across the Group. Internal Communications continues to be an area of focus and we have recently appointed a Director of Internal Communications in order to further develop our communications programme and ensure that our people are engaged and understand our business priorities. 20 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS HOW WE CREATE VALUE USING OUR RESOURCES Expertise Technology Key attributes of our equipment are: It has taken over ﬁfty years to develop the enormous strength and depth of expertise throughout the business. Our sales, supply chain and commercial teams are highly trained and understand the ﬁnancial, regulatory and environmental logistics of operating in challenging markets; our engineers and technicians are trained to problem solve in the most difﬁcult situations and to keep our equipment operating; they are all supported by strong back ofﬁce functions. Scale Our scale and global reach, which allows us to serve customers in around 100 countries, means that we are close to, and aware of, market opportunities as they arise. Our scale also provides a capital cost advantage on our equipment and enables us to work closely with OEMs on technology development. We are able to ensure that ﬂeet is always available and therefore are able to respond quickly, whilst having a large and globally mobile ﬂeet enables us to run at good levels of utilisation and therefore generate strong returns on capital. Importantly, given the risk of operating in some of our markets, our scale means that we have a diversiﬁed portfolio and an inherent risk management mechanism. Technology is an important enabler for our business and we have built a competitive advantage by designing our own equipment that is ﬁt for purpose. Our specialist in-house teams based in Dumbarton, Scotland, understand intimately the requirements of the environment in which the ﬂeet operates and our customers highly value our equipment reliability. We operate equipment for its useful life; we do not build our equipment to sell. This gives a powerful incentive to maintain it well, which gives a longer life and better reliability. In recent years we have invested in the underlying technology to deliver better performance and new capability in our 1MW generators. We were the ﬁrst company in the world to develop and assemble 1MW gas generators in 20 foot containers; and we have developed a process to allow us to refurbish our large diesel generators at the end of their useful life for signiﬁcantly less than the cost of a new generator, whilst at the same time increasing the power output by 15% and improving fuel efﬁciency by 5 percent. We plan to increase our investment in technology with the ultimate aim of reducing the overall cost of power generation for our customers and we have strong relationships with many of our suppliers, allowing us to create products that are optimised for the markets we operate in. We currently purchase most of our temperature control equipment externally to suit the needs of local markets. Fleet is managed on a real time basis across the world and is transferable across all sectors and applications, which enables us to optimise utilisation and therefore its deployment and returns. Read more about technology in our business priorities Pages 22 to 23 (cid:333)(cid:3)Safe (cid:333)(cid:3)Durable and mobile – has to be lifted and transported hundreds of times during its life (cid:333)(cid:3)Ability to work in extreme conditions, both temperature and altitude (cid:333)(cid:3)Fuel efﬁcient (cid:333)(cid:3)Quiet (cid:333)(cid:3)Reliable (cid:333)(cid:3)Compliant with environmental and safety regulations within the markets in which we operate Fleet is at the heart of any rental business; it is the core of the service we offer and managing it effectively is necessary to ensure the long-term sustainability of our business. Designing and assembling our own ﬂeet gives us a unique competitive advantage: (cid:333)(cid:3)Optimise equipment to meet our particular operational requirements (cid:333)(cid:3)Design equipment for reliability and longevity (cid:333)(cid:3)Capital cost advantage through economies of scale and not paying the ﬁnal assembly margin (cid:333)(cid:3)React quickly to customer requirements with lead times of only a few months from engine order to the equipment being in the ﬂeet O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 21 Our design and assembly capability 235 20,774 9,818MW Permanent Dumbarton employees Power units available Power in the ﬂeet Purpose-built facility with the ability to ﬂex volume Flexible employee base 235 permanent staff and 43 contractors 2,225MW of power in Rental Solutions 7,593MW of power in Power Solutions 6,750 units of power that are common to both business units Capital cost advantage on new diesel and gas generators Refurbished and upgraded diesel for c.75% of original cost per MW In the ﬂeet within 10-12 weeks of order Design and assembly with 50 years’ experience Major sub-assembly bought in from key strategic suppliers (cid:333)(cid:3)Engine c.50% (cid:333)(cid:3)Alternator c.10% (cid:333)(cid:3)Container c.15% 80% of cost is major sub-assemblies £237m ﬂeet capex in 2015 Financial The Group has sufﬁcient facilities to meet our funding requirements over the medium term. At 31 December 2015 these facilities totalled £891 million in the form of private placement notes and committed bank facilities arranged on a bilateral basis with a number of international banks with whom we have strong relationships. These facilities have a range of maturities and are satisﬁed by the covenants opposite. The Group does not consider these covenants restrictive and under normal business conditions looks to operate the business with net debt/EBITDA ratio of around one times. The Group believes that this is the appropriate level given the characteristics of the Group, including the inherently risky nature of where we operate, in particular in the Power Solutions Utility business. G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I Funding source Lenders Covenants EBITDA ≥4x interest Net debt/EBITDA ≤3x Performance as at December 2015 EBITDA to interest: 24x Net debt/EBITDA: 0.9x 22 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS OUR BUSINESS PRIORITIES Aggreko is a growth business In the medium term we expect to deliver at the Group level: (cid:333)(cid:3) Revenue – growth ahead of our markets (cid:333)(cid:3) Margins – around 20% (cid:333)(cid:3) Return on capital – around 20% Our objective is to be the leading global provider of power and related solutions that are modular and mobile. During the year, we undertook a comprehensive review of the business and from this identiﬁed three clear priorities to provide a framework for implementation in each business unit. Customer Technology Efﬁciency (cid:333)(cid:3)(cid:55)(cid:68)(cid:76)(cid:79)(cid:82)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:70)(cid:75)(cid:68)(cid:81)(cid:81)(cid:72)(cid:79)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86) (cid:333)(cid:3)(cid:41)(cid:82)(cid:70)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:81)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86) (cid:333)(cid:3)(cid:51)(cid:88)(cid:85)(cid:86)(cid:88)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:86)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) 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(cid:82)(cid:73)(cid:3)(cid:85)(cid:72)(cid:86)(cid:82)(cid:88)(cid:85)(cid:70)(cid:72)(cid:86) (cid:333)(cid:3)(cid:44)(cid:80)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:86) Read more about customer service Read more about our technology Read more about improved efﬁciency Page 23 Page 23 Page 23 Case study: Acquisition of ICS Case study: Case study: Next generation gas engines Procurement savings (cid:44)(cid:81)(cid:3)(cid:54)(cid:72)(cid:83)(cid:87)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:44)(cid:38)(cid:54)(cid:15)(cid:3)(cid:68)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:68)(cid:79)(cid:76)(cid:86)(cid:87)(cid:3) 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Shareholders 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(cid:69)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:87)(cid:3)(cid:69)(cid:68)(cid:70)(cid:78)(cid:3)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:17)(cid:3) AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 23 Rental Solutions Power Solutions Improving customer service Improving customer service The actions that we are taking are designed to more effectively allocate our resources whilst tailoring the service level to different customer requirements (cid:333)(cid:3) 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which we go to market and address customer requirements (cid:333)(cid:3) (cid:44)(cid:80)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3) 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(cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:69)(cid:82)(cid:79)(cid:87)(cid:16)(cid:82)(cid:81)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:30)(cid:3)(cid:90)(cid:72)(cid:3)(cid:70)(cid:68)(cid:81)(cid:3)(cid:69)(cid:72)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:71)(cid:72)(cid:83)(cid:82)(cid:87)(cid:3)(cid:81)(cid:72)(cid:87)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:87)(cid:82)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17) Enhancing processes and systems We are taking actions to leverage our scale and enhance our capability in order to reduce the cost of service delivery, provide a better service to customers and enable growth (cid:333)(cid:3) (cid:41)(cid:88)(cid:85)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:68)(cid:88)(cid:87)(cid:82)(cid:80)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:288)(cid:72)(cid:72)(cid:87)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:30)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:69)(cid:72)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3) 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(cid:44)(cid:81)(cid:87)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:81)(cid:75)(cid:68)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) Reducing the overall cost of power Customers value reliability and speed of deployment, but the total cost of energy is critically important. Technology, and our technical capability, have a key role to play and will improve our competitive position (cid:333)(cid:3) (cid:36)(cid:83)(cid:83)(cid:82)(cid:76)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:3)(cid:81)(cid:72)(cid:90)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:55)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)(cid:3)(cid:50)(cid:73)(cid:287)(cid:70)(cid:72)(cid:85)(cid:3)(cid:90)(cid:75)(cid:82)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:72)(cid:84)(cid:88)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3) 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(cid:71)(cid:72)(cid:80)(cid:68)(cid:81)(cid:71)(cid:30)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:68)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:74)(cid:68)(cid:86)(cid:30)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:81)(cid:72)(cid:90)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:17) Optimising deployment of resources Efﬁciency is a critical priority for Power Solutions; the actions that we take here will reduce our cost base, improve our competitive position and underpin our returns (cid:333)(cid:3) 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(cid:44)(cid:80)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:73)(cid:287)(cid:70)(cid:76)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:92)(cid:30)(cid:3)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:76)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:86)(cid:81)(cid:322)(cid:87)(cid:3) (cid:68)(cid:79)(cid:90)(cid:68)(cid:92)(cid:86)(cid:3)(cid:77)(cid:88)(cid:86)(cid:87)(cid:76)(cid:287)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:70)(cid:82)(cid:81)(cid:82)(cid:80)(cid:76)(cid:70)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:85)(cid:3) (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)(cid:81)(cid:72)(cid:72)(cid:71)(cid:86)(cid:17) (cid:333)(cid:3) (cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:81)(cid:83)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:80)(cid:76)(cid:91)(cid:15)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:79)(cid:3) (cid:90)(cid:82)(cid:85)(cid:78)(cid:73)(cid:82)(cid:85)(cid:70)(cid:72)(cid:30)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:71)(cid:71)(cid:72)(cid:71)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:287)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:77)(cid:82)(cid:69)(cid:86)(cid:15)(cid:3)(cid:87)(cid:85)(cid:68)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:86)(cid:78)(cid:76)(cid:79)(cid:79)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:79)(cid:3)(cid:83)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:86)(cid:87)(cid:68)(cid:76)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:80)(cid:82)(cid:71)(cid:72)(cid:79)(cid:17) Read more about Rental Solutions Page 11 Read more about Power Solutions Page 12 & O T H E R I N F O R M A T O N I O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 24 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS HOW WE PERFORMED (cid:50)(cid:56)(cid:53)(cid:3)(cid:46)(cid:51)(cid:44)(cid:54) There are ﬁve Key Performance Indicators (KPIs) which we use to analyse business performance. There are a large number of other performance indicators used to measure day-to-day operational and ﬁnancial activity. Frequency accident rating Staff turnover % 15 14 13 12 11 0.39 0.40 0.68 0.94 0.98 15 14 13 12 11 11 13 11 12 14 Safety Staff turnover Relevance (cid:44)(cid:81)(cid:3)(cid:68)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:68)(cid:86)(cid:3)(cid:36)(cid:74)(cid:74)(cid:85)(cid:72)(cid:78)(cid:82)(cid:15)(cid:3) (cid:76)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:87)(cid:87)(cid:76)(cid:87)(cid:88)(cid:71)(cid:72)(cid:15)(cid:3)(cid:86)(cid:78)(cid:76)(cid:79)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:82)(cid:87)(cid:76)(cid:89)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:87)(cid:68)(cid:73)(cid:73)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:76)(cid:73)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3) (cid:69)(cid:72)(cid:87)(cid:90)(cid:72)(cid:72)(cid:81)(cid:3)(cid:80)(cid:72)(cid:71)(cid:76)(cid:82)(cid:70)(cid:85)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:79)(cid:79)(cid:72)(cid:81)(cid:87)(cid:3) (cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:17)(cid:3)(cid:54)(cid:87)(cid:68)(cid:73)(cid:73)(cid:3)(cid:85)(cid:72)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3) (cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:75)(cid:82)(cid:90)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:3) (cid:73)(cid:72)(cid:72)(cid:79)(cid:3)(cid:68)(cid:69)(cid:82)(cid:88)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:3) (cid:80)(cid:82)(cid:81)(cid:76)(cid:87)(cid:82)(cid:85)(cid:3)(cid:86)(cid:87)(cid:68)(cid:73)(cid:73)(cid:3)(cid:87)(cid:88)(cid:85)(cid:81)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3) (cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:3) (cid:90)(cid:75)(cid:82)(cid:3)(cid:79)(cid:72)(cid:73)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:11)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3) (cid:85)(cid:72)(cid:71)(cid:88)(cid:81)(cid:71)(cid:68)(cid:81)(cid:70)(cid:92)(cid:12)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3) 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(cid:68)(cid:73)(cid:87)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:77)(cid:88)(cid:85)(cid:92)(cid:18)(cid:76)(cid:79)(cid:79)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17) Performance (cid:55)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:322)(cid:86)(cid:3)(cid:41)(cid:36)(cid:53)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3) (cid:19)(cid:17)(cid:22)(cid:28)(cid:17)(cid:3)(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:73)(cid:68)(cid:89)(cid:82)(cid:88)(cid:85)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3) (cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:72)(cid:81)(cid:70)(cid:75)(cid:80)(cid:68)(cid:85)(cid:78)(cid:3)(cid:82)(cid:73)(cid:3)(cid:20)(cid:17)(cid:19)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:72)(cid:71)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3)(cid:56)(cid:54)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:72)(cid:85)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3) (cid:48)(cid:68)(cid:70)(cid:75)(cid:76)(cid:81)(cid:72)(cid:85)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:53)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:47)(cid:72)(cid:68)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:15)(cid:3)(cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:86)(cid:75)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:54)(cid:3) (cid:39)(cid:72)(cid:83)(cid:68)(cid:85)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:47)(cid:68)(cid:69)(cid:82)(cid:85)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:23)(cid:17)(cid:3)(cid:44)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3) (cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:79)(cid:68)(cid:86)(cid:87)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:23)(cid:19)(cid:3) (cid:47)(cid:82)(cid:86)(cid:87)(cid:3)(cid:55)(cid:76)(cid:80)(cid:72)(cid:3)(cid:44)(cid:81)(cid:77)(cid:88)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:11)(cid:47)(cid:55)(cid:44)(cid:86)(cid:12)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:76)(cid:81)(cid:3)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:79)(cid:68)(cid:86)(cid:87)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17) Read more about health and safety Page 50 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 25 Net promoter score Diluted EPS pence Return on average capital employed % 15 14 13 12 11 63 58 64 62 60 15 14 13 12 11 71.68 82.49 92.03 100.40 86.76 15 14 13 12 11 16 19 21 24 28 Customer loyalty Earnings per share (EPS) ROCE Relevance (cid:48)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:85)(cid:72)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3) (cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:91)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:88)(cid:70)(cid:75)(cid:16)(cid:71)(cid:72)(cid:69)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:83)(cid:76)(cid:70)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:40)(cid:51)(cid:54)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3) (cid:83)(cid:72)(cid:85)(cid:73)(cid:72)(cid:70)(cid:87)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:86)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:86)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3) (cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3) (cid:75)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:72)(cid:85)(cid:76)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:69)(cid:72)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:90)(cid:72)(cid:79)(cid:79)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:82)(cid:82)(cid:71)(cid:17)(cid:3)(cid:54)(cid:82)(cid:15)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:68)(cid:86)(cid:3) (cid:68)(cid:3)(cid:90)(cid:75)(cid:82)(cid:79)(cid:72)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:75)(cid:82)(cid:85)(cid:87)(cid:16) (cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:287)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:71)(cid:76)(cid:79)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3) (cid:40)(cid:51)(cid:54)(cid:15)(cid:3)(cid:83)(cid:85)(cid:72)(cid:16)(cid:72)(cid:91)(cid:70)(cid:72)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:86)(cid:17)(cid:3)(cid:40)(cid:51)(cid:54)(cid:3)(cid:76)(cid:86)(cid:3) (cid:70)(cid:68)(cid:79)(cid:70)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:83)(cid:85)(cid:82)(cid:287)(cid:87)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)(cid:11)(cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3) (cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:86)(cid:12)(cid:3)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:76)(cid:79)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:72)(cid:76)(cid:74)(cid:75)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)(cid:3)(cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3) (cid:82)(cid:73)(cid:3)(cid:50)(cid:85)(cid:71)(cid:76)(cid:81)(cid:68)(cid:85)(cid:92)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:85)(cid:68)(cid:81)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)(cid:3) (cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:72)(cid:89)(cid:68)(cid:81)(cid:87)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:17) Performance (cid:40)(cid:51)(cid:54)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:20)(cid:22)(cid:8)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:83)(cid:85)(cid:72)(cid:89)(cid:76)(cid:82)(cid:88)(cid:86)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:79)(cid:92)(cid:3)(cid:71)(cid:85)(cid:76)(cid:89)(cid:72)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3) (cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:72)(cid:80)(cid:72)(cid:85)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:50)(cid:76)(cid:79)(cid:3)(cid:9)(cid:3)(cid:42)(cid:68)(cid:86)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:17) Read more about our earnings per share Page 123 Relevance (cid:44)(cid:81)(cid:3)(cid:68)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3) (cid:36)(cid:74)(cid:74)(cid:85)(cid:72)(cid:78)(cid:82)(cid:322)(cid:86)(cid:15)(cid:3)(cid:83)(cid:85)(cid:82)(cid:287)(cid:87)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:79)(cid:82)(cid:81)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:68)(cid:81)(cid:3) (cid:68)(cid:71)(cid:72)(cid:84)(cid:88)(cid:68)(cid:87)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:29)(cid:3)(cid:76)(cid:87)(cid:3) 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(cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:322)(cid:86)(cid:3)(cid:47)(cid:82)(cid:81)(cid:74)(cid:16)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3) (cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:17) Read more about our remuneration policy Page 78 Relevance (cid:55)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:71)(cid:72)(cid:68)(cid:79)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:82)(cid:88)(cid:86)(cid:68)(cid:81)(cid:71)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3) (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:72)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:3) 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(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:90)(cid:75)(cid:82)(cid:3) (cid:87)(cid:75)(cid:76)(cid:81)(cid:78)(cid:3)(cid:90)(cid:72)(cid:3)(cid:71)(cid:82)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:79)(cid:79)(cid:72)(cid:81)(cid:87)(cid:3)(cid:77)(cid:82)(cid:69)(cid:3)(cid:68)(cid:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:87)(cid:3) (cid:87)(cid:75)(cid:82)(cid:86)(cid:72)(cid:3)(cid:90)(cid:75)(cid:82)(cid:3)(cid:87)(cid:75)(cid:76)(cid:81)(cid:78)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:68)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)(cid:3) (cid:82)(cid:85)(cid:3)(cid:90)(cid:82)(cid:85)(cid:86)(cid:72)(cid:17) Performance (cid:44)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:72)(cid:81)(cid:70)(cid:82)(cid:88)(cid:85)(cid:68)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:70)(cid:82)(cid:85)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3) (cid:75)(cid:76)(cid:74)(cid:75)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)(cid:68)(cid:3)(cid:86)(cid:70)(cid:82)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:75)(cid:76)(cid:74)(cid:75)(cid:3) (cid:287)(cid:73)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:79)(cid:82)(cid:90)(cid:3)(cid:86)(cid:76)(cid:91)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:85)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:3) 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(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:82)(cid:83)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:76)(cid:79)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:3)(cid:69)(cid:72)(cid:81)(cid:70)(cid:75)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:71)(cid:3) (cid:90)(cid:82)(cid:85)(cid:79)(cid:71)(cid:90)(cid:76)(cid:71)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:16)(cid:87)(cid:82)(cid:16) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)(cid:3) O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 26 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS RISK FACTORS THAT COULD AFFECT BUSINESS PERFORMANCE RISKS The Group recognises the importance of identifying and actively managing the ﬁnancial and non-ﬁnancial risks facing the business. We want our people to feel empowered to take advantage of attractive opportunities yet we wish them to do so within the risk appetite set by the Board. It is important that we have in place a robust, repeatable risk management framework to facilitate this. Managing risk is embedded in our culture and how we conduct our day-to- day business activities. Whilst the Board retains overall responsibility, all of our employees have an integral part to play. Approach to managing risk (cid:44)(cid:81)(cid:3)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:82)(cid:88)(cid:86)(cid:3)(cid:76)(cid:80)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3) (cid:90)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:72)(cid:71)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:68)(cid:70)(cid:75)(cid:3)(cid:87)(cid:82)(cid:3) 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(cid:85)(cid:82)(cid:69)(cid:88)(cid:86)(cid:87)(cid:15)(cid:3)(cid:85)(cid:72)(cid:83)(cid:72)(cid:68)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:15)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:73)(cid:85)(cid:68)(cid:80)(cid:72)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:73)(cid:287)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:68)(cid:70)(cid:75)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) 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(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:53)(cid:76)(cid:86)(cid:78)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:53)(cid:76)(cid:86)(cid:78)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:82)(cid:88)(cid:81)(cid:71)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:322)(cid:86)(cid:3) (cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:69)(cid:88)(cid:76)(cid:79)(cid:87)(cid:17)(cid:3) (cid:48)(cid:68)(cid:76)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:3)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3) (cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:75)(cid:72)(cid:79)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:37)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:56)(cid:81)(cid:76)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:41)(cid:88)(cid:81)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:76)(cid:81)(cid:83)(cid:88)(cid:87)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:87)(cid:90)(cid:76)(cid:70)(cid:72)(cid:3)(cid:68)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17) (cid:58)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:79)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:68)(cid:70)(cid:75)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:90)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:68)(cid:78)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:76)(cid:73)(cid:92)(cid:15)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:76)(cid:87)(cid:76)(cid:86)(cid:72)(cid:15)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:80)(cid:82)(cid:81)(cid:76)(cid:87)(cid:82)(cid:85)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:68)(cid:85)(cid:76)(cid:86)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:83)(cid:76)(cid:81)(cid:81)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:322)(cid:86)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:68)(cid:83)(cid:83)(cid:72)(cid:87)(cid:76)(cid:87)(cid:72)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3) (cid:76)(cid:86)(cid:3)(cid:71)(cid:72)(cid:287)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3) (cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:79)(cid:92)(cid:17)(cid:3) (cid:53)(cid:76)(cid:86)(cid:78)(cid:3)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:41)(cid:85)(cid:68)(cid:80)(cid:72)(cid:90)(cid:82)(cid:85)(cid:78) 1. Identify 4. Monitor Risk Appetite 2. Prioritise 3. Assess 1. Identify:(cid:3)(cid:39)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:80)(cid:76)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3) (cid:82)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:88)(cid:81)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:3) (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:74)(cid:74)(cid:85)(cid:72)(cid:78)(cid:82)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:72)(cid:72)(cid:87)(cid:3) (cid:76)(cid:87)(cid:86)(cid:98)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:17)(cid:3) 2. Prioritise:(cid:3)(cid:53)(cid:76)(cid:86)(cid:78)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:76)(cid:87)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:86)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:92)(cid:3)(cid:82)(cid:70)(cid:70)(cid:88)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:76)(cid:75)(cid:82)(cid:82)(cid:71)(cid:3) (cid:82)(cid:73)(cid:3)(cid:82)(cid:70)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:69)(cid:82)(cid:87)(cid:75)(cid:3)(cid:69)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:73)(cid:87)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:71)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:44)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:86)(cid:70)(cid:82)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3) (cid:76)(cid:86)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:73)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:29)(cid:3) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:30)(cid:3)(cid:43)(cid:54)(cid:40)(cid:30)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:15)(cid:3)(cid:53)(cid:72)(cid:83)(cid:88)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:30)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:82)(cid:85)(cid:92)(cid:17)(cid:3) 3. Assess:(cid:3)(cid:40)(cid:68)(cid:70)(cid:75)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:3) (cid:90)(cid:75)(cid:72)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:73)(cid:88)(cid:85)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:3) (cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:87)(cid:82)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:322)(cid:86)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:68)(cid:83)(cid:83)(cid:72)(cid:87)(cid:76)(cid:87)(cid:72)(cid:17)(cid:3) (cid:58)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:15)(cid:3)(cid:73)(cid:88)(cid:85)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:87)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:85)(cid:68)(cid:70)(cid:78)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3) 4. Monitor:(cid:3)(cid:50)(cid:81)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:82)(cid:81)(cid:76)(cid:87)(cid:82)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:76)(cid:86)(cid:3) (cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:88)(cid:87)(cid:76)(cid:79)(cid:76)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:79)(cid:72)(cid:89)(cid:68)(cid:81)(cid:87)(cid:3)(cid:46)(cid:51)(cid:44)(cid:86)(cid:3)(cid:90)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:68)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3) 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(cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:53)(cid:76)(cid:86)(cid:78)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:17) O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 28 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS RISK FACTORS THAT COULD AFFECT BUSINESS PERFORMANCE Principal risks and uncertainties The Directors have carried out a robust assessment of the principal risks and uncertainties facing Aggreko, including those which would threaten our business model, our future performance, and our solvency and liquidity. These are as set out over the following pages. This list is not exhaustive; our operations are large and geographically diverse and the list might change as something that seems immaterial today assumes greater importance tomorrow. Risks that have been commented upon for the ﬁrst time in this section are indicated with an asterisk. The order in which they are presented is aligned to our risk categorisation model. STRATEGIC Macro-economic activity Executive responsible: Chris Weston, Chief Executive Ofﬁcer Risk Background and impact Mitigation Challenging global economic conditions adversely impact revenue and proﬁt and hinder growth in key markets. 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(cid:44)(cid:80)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:17)(cid:3) Changes during 2015: (cid:58)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:86)(cid:79)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3)(cid:68)(cid:70)(cid:85)(cid:82)(cid:86)(cid:86)(cid:3)(cid:72)(cid:80)(cid:72)(cid:85)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:86)(cid:72)(cid:72)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:79)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:71)(cid:76)(cid:87)(cid:92)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:86)(cid:15)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:88)(cid:79)(cid:68)(cid:85)(cid:79)(cid:92)(cid:3)(cid:82)(cid:76)(cid:79)(cid:15)(cid:3)(cid:3) (cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:53)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:54)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)(cid:3) Market conditions Executive responsible: Chris Weston, Chief Executive Ofﬁcer * Risk Background and impact Mitigation The impact of a major project off-hiring with no equivalent replacement. (cid:58)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:51)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:54)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:56)(cid:87)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:90)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:80)(cid:68)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:83)(cid:3)(cid:68)(cid:3)(cid:86)(cid:76)(cid:93)(cid:72)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17) (cid:333)(cid:3) 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(cid:55)(cid:75)(cid:72)(cid:3)(cid:81)(cid:68)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:90)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3) 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(cid:87)(cid:82)(cid:3)(cid:287)(cid:81)(cid:71)(cid:3)(cid:68)(cid:3)(cid:86)(cid:88)(cid:76)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:85)(cid:72)(cid:83)(cid:79)(cid:68)(cid:70)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:288)(cid:72)(cid:72)(cid:87)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:68)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:79)(cid:92)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3) (cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:73)(cid:16)(cid:75)(cid:76)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3) (cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:287)(cid:87)(cid:86)(cid:17) (cid:333)(cid:3) (cid:51)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:83)(cid:76)(cid:83)(cid:72)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:288)(cid:72)(cid:72)(cid:87)(cid:3)(cid:88)(cid:87)(cid:76)(cid:79)(cid:76)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:3)(cid:68)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:82)(cid:81)(cid:87)(cid:75)(cid:79)(cid:92)(cid:3) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:98)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:86)(cid:17)(cid:3) (cid:333)(cid:3) (cid:36)(cid:86)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:74)(cid:85)(cid:68)(cid:80)(cid:80)(cid:72)(cid:3)(cid:85)(cid:88)(cid:81)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:287)(cid:70)(cid:3)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:80)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:70)(cid:68)(cid:83)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:51)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3) (cid:54)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:79)(cid:86)(cid:87)(cid:3)(cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:3)(cid:88)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3) (cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:87)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:17)(cid:3) Changes during 2015: (cid:58)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:70)(cid:75)(cid:76)(cid:72)(cid:89)(cid:72)(cid:71)(cid:3)(cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:3)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3)(cid:75)(cid:82)(cid:90)(cid:72)(cid:89)(cid:72)(cid:85)(cid:3)(cid:90)(cid:72)(cid:3)(cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:3)(cid:73)(cid:82)(cid:70)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:68)(cid:3)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:83)(cid:75)(cid:68)(cid:86)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:73)(cid:73)(cid:16)(cid:75)(cid:76)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:18)(cid:20)(cid:26)(cid:17) Change management relating to our new business priorities * Executive responsible: Chris Weston, Chief Executive Ofﬁcer and Tom Armstrong, Chief Information Ofﬁcer and Group Programme Director Risk Background and impact Mitigation Failure to deliver the expected beneﬁts from our business priorities. 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(cid:51)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:85)(cid:72)(cid:86)(cid:82)(cid:88)(cid:85)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3) (cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:17)(cid:3) Read more about our business priorities Page 22 Changes during 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(cid:86)(cid:88)(cid:70)(cid:70)(cid:72)(cid:86)(cid:86)(cid:73)(cid:88)(cid:79)(cid:79)(cid:92)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:72)(cid:86)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:17) AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 29 Key Increased risk in 2015 No change in 2015 Decreased risk in 2015 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I Talent management and succession planning Executive responsible: Chris Weston, Chief Executive Ofﬁcer Risk Background and impact Mitigation Failure to attract, retain and develop key employees or to implement appropriate succession planning. 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(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:82)(cid:73)(cid:3)(cid:79)(cid:82)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:17) Competition Executives responsible: Bruce Pool, President – Rental Solutions; Nicolas Fournier, Managing Director – Power Solutions Risk Background and impact Mitigation Increased competition erodes market share, margins and returns. 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(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:74)(cid:85)(cid:68)(cid:80)(cid:80)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:73)(cid:82)(cid:70)(cid:88)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:3)(cid:88)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3) (cid:69)(cid:72)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:87)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:17)(cid:3) Read more about our markets Pages 10 to 13 Changes during 2015: 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(cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:17) Technology * Executive responsible: Volker Schulte, Group Manufacturing & Technology Director Risk Background and impact Mitigation Ineffective new product development hinders growth. 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during 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REPORT OUR BUSINESS RISK FACTORS THAT COULD AFFECT BUSINESS PERFORMANCE OPERATIONAL Cyber security Executive responsible: Tom Armstrong, Group Programme Director and Chief Information Ofﬁcer Risk Background and impact Mitigation * A cyber security breach leads to a loss of data, a loss of data integrity or a disruption to operations. 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2015:(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:76)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:92)(cid:69)(cid:72)(cid:85)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:69)(cid:85)(cid:72)(cid:68)(cid:70)(cid:75)(cid:72)(cid:86)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:68)(cid:86)(cid:87)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:72)(cid:72)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:91)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:68)(cid:71)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:90)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3) (cid:86)(cid:82)(cid:88)(cid:74)(cid:75)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:86)(cid:87)(cid:85)(cid:72)(cid:81)(cid:74)(cid:87)(cid:75)(cid:72)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:82)(cid:76)(cid:81)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:3)(cid:44)(cid:55)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:79)(cid:72)(cid:68)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:70)(cid:92)(cid:69)(cid:72)(cid:85)(cid:16)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:88)(cid:80)(cid:17) Service delivery * Executives responsible: Bruce Pool, President – Rental Solutions; Nicolas Fournier, Managing Director – Power Solutions Risk Background and impact Mitigation Major contractual failure. 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(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:287)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:30)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:87)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:71)(cid:68)(cid:80)(cid:68)(cid:74)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:322)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:88)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3) (cid:333)(cid:3) (cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:87)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17) (cid:333)(cid:3) (cid:53)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:81)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:3)(cid:82)(cid:73)(cid:73)(cid:17) (cid:333)(cid:3) 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(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:91)(cid:3)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:86)(cid:17) Changes during 2015: (cid:58)(cid:72)(cid:3)(cid:71)(cid:82)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17) HAZARD Security Executive responsible: Chris Weston, Chief Executive Ofﬁcer Risk Background and impact Mitigation Security threat increases in key markets. 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(cid:83)(cid:72)(cid:82)(cid:83)(cid:79)(cid:72)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3) (cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:17) (cid:333)(cid:3) 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(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:74)(cid:76)(cid:89)(cid:72)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:81)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3) 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(cid:39)(cid:76)(cid:86)(cid:68)(cid:86)(cid:87)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:89)(cid:68)(cid:70)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:70)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:75)(cid:76)(cid:74)(cid:75)(cid:72)(cid:86)(cid:87)(cid:3) (cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17) (cid:333)(cid:3) (cid:58)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:70)(cid:76)(cid:85)(cid:70)(cid:88)(cid:80)(cid:86)(cid:87)(cid:68)(cid:81)(cid:70)(cid:72)(cid:86)(cid:3)(cid:71)(cid:76)(cid:70)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3)(cid:90)(cid:72)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:72)(cid:89)(cid:68)(cid:70)(cid:88)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:81)(cid:72)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:3)(cid:87)(cid:75)(cid:76)(cid:85)(cid:71)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17) Changes during 2015:(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)(cid:75)(cid:82)(cid:90)(cid:72)(cid:89)(cid:72)(cid:85)(cid:3)(cid:90)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:73)(cid:68)(cid:70)(cid:72)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:70)(cid:75)(cid:68)(cid:79)(cid:79)(cid:72)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:47)(cid:76)(cid:69)(cid:92)(cid:68)(cid:15)(cid:3)(cid:44)(cid:85)(cid:68)(cid:84)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:60)(cid:72)(cid:80)(cid:72)(cid:81)(cid:17) AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 31 Key Increased risk in 2015 No change in 2015 Decreased risk in 2015 Health & Safety Executive responsible: Chris Weston, Chief Executive Ofﬁcer Risk Background and impact Mitigation Operational environment or failure to maintain compliance with health and safety standards results in serious illness, injury or death. 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2015:(cid:3)(cid:49)(cid:82)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:75)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:43)(cid:54)(cid:40)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:40)(cid:50)(cid:17)(cid:3)(cid:50)(cid:85)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:53)(cid:88)(cid:79)(cid:72)(cid:86)(cid:3)(cid:11)(cid:82)(cid:88)(cid:85)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:43)(cid:54)(cid:40)(cid:3) (cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:12)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:81)(cid:82)(cid:90)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:85)(cid:82)(cid:79)(cid:79)(cid:72)(cid:71)(cid:16)(cid:82)(cid:88)(cid:87)(cid:3)(cid:68)(cid:70)(cid:85)(cid:82)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17) COMPLIANCE Failure to conduct business dealings with integrity and honesty Executive responsible: Peter Kennerley, Group Legal Director & Company Secretary Risk Background and impact Mitigation An employee or person acting on our behalf makes a payment which is or could be perceived to be a bribe. 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(cid:49)(cid:82)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:90)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:68)(cid:78)(cid:72)(cid:3)(cid:72)(cid:87)(cid:75)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3)(cid:86)(cid:72)(cid:85)(cid:76)(cid:82)(cid:88)(cid:86)(cid:79)(cid:92)(cid:17) O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 32 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT OUR BUSINESS RISK FACTORS THAT COULD AFFECT BUSINESS PERFORMANCE FINANCIAL Exchange controls Executive responsible: Carole Cran, Chief Financial Ofﬁcer Risk Background and impact Mitigation Continuation and further tightening of exchange controls. 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2015:(cid:3)(cid:47)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:71)(cid:76)(cid:87)(cid:92)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:72)(cid:83)(cid:85)(cid:72)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:80)(cid:72)(cid:85)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:86)(cid:82)(cid:80)(cid:72)(cid:3)(cid:72)(cid:80)(cid:72)(cid:85)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3) (cid:82)(cid:85)(cid:98)(cid:87)(cid:76)(cid:74)(cid:75)(cid:87)(cid:72)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:17) Exchange rate ﬂuctuations Executive responsible: Carole Cran, Chief Financial Ofﬁcer Risk Background and impact Mitigation The impact of adverse foreign exchange rate movements. 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(cid:72)(cid:81)(cid:86)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:72)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:68)(cid:85)(cid:76)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:322)(cid:86)(cid:3) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:79)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:3)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:76)(cid:287)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:98)(cid:68)(cid:70)(cid:70)(cid:72)(cid:83)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:86)(cid:17)(cid:3) (cid:333)(cid:3) (cid:44)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:322)(cid:86)(cid:3)(cid:83)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:75)(cid:72)(cid:71)(cid:74)(cid:72)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:288)(cid:82)(cid:90)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:88)(cid:81)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:92)(cid:3)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3)(cid:90)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:17)(cid:3) Changes during 2015: (cid:44)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:72)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:80)(cid:82)(cid:89)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:88)(cid:81)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:92)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:71)(cid:85)(cid:76)(cid:89)(cid:72)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:68)(cid:81)(cid:3) (cid:68)(cid:83)(cid:83)(cid:85)(cid:72)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:54)(cid:3)(cid:71)(cid:82)(cid:79)(cid:79)(cid:68)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:72)(cid:83)(cid:85)(cid:72)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:80)(cid:72)(cid:85)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86)(cid:17) Taxation Executive responsible: Carole Cran, Chief Financial Ofﬁcer * Risk Background and impact Mitigation Direct and indirect tax risks in developing countries. (cid:39)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:36)(cid:74)(cid:74)(cid:85)(cid:72)(cid:78)(cid:82)(cid:322)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:91)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:73)(cid:82)(cid:82)(cid:87)(cid:83)(cid:85)(cid:76)(cid:81)(cid:87)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3) (cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:68)(cid:86)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:86)(cid:29)(cid:3) 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(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:98)(cid:68)(cid:98)(cid:87)(cid:75)(cid:76)(cid:85)(cid:71)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:92)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:75)(cid:68)(cid:81)(cid:71)(cid:79)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:68)(cid:73)(cid:73)(cid:68)(cid:76)(cid:85)(cid:86)(cid:3)(cid:18)(cid:3) (cid:80)(cid:68)(cid:78)(cid:72)(cid:3)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:69)(cid:72)(cid:75)(cid:68)(cid:79)(cid:73)(cid:17) (cid:56)(cid:81)(cid:83)(cid:85)(cid:72)(cid:71)(cid:76)(cid:70)(cid:87)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:331)(cid:3)(cid:53)(cid:76)(cid:86)(cid:78)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:80)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:86)(cid:82)(cid:80)(cid:72)(cid:3) (cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:69)(cid:72)(cid:76)(cid:81)(cid:74)(cid:3)(cid:79)(cid:72)(cid:86)(cid:86)(cid:3)(cid:90)(cid:72)(cid:79)(cid:79)(cid:3)(cid:72)(cid:86)(cid:87)(cid:68)(cid:69)(cid:79)(cid:76)(cid:86)(cid:75)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:76)(cid:81)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) 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(cid:68)(cid:81)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:75)(cid:72)(cid:81)(cid:3)(cid:90)(cid:72)(cid:3)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:72)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:76)(cid:81)(cid:98)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:85)(cid:92)(cid:17) Changes during 2015:(cid:3)(cid:55)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:81)(cid:82)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17) (cid:333)(cid:3) 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2015 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I Failure to collect payments or to recover assets Executive responsible: Carole Cran, Chief Financial Ofﬁcer Risk Background and impact Mitigation Non-payment by customers or the seizure of assets. 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2015:(cid:3)(cid:39)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)(cid:82)(cid:85)(cid:3)(cid:71)(cid:68)(cid:92)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:51)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:54)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:88)(cid:87)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:71)(cid:85)(cid:76)(cid:89)(cid:72)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:86)(cid:79)(cid:82)(cid:90)(cid:3)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:69)(cid:92)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:57)(cid:72)(cid:81)(cid:72)(cid:93)(cid:88)(cid:72)(cid:79)(cid:68)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:60)(cid:72)(cid:80)(cid:72)(cid:81)(cid:30)(cid:3) (cid:87)(cid:75)(cid:72)(cid:98)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:17)(cid:3) Assessment of prospects and viability (cid:39)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:87)(cid:82)(cid:82)(cid:78)(cid:3)(cid:68)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:79)(cid:76)(cid:74)(cid:75)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:76)(cid:70)(cid:3)(cid:82)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:82)(cid:81)(cid:72)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:86)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:80)(cid:82)(cid:71)(cid:88)(cid:79)(cid:68)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:82)(cid:69)(cid:76)(cid:79)(cid:72)(cid:15)(cid:3) (cid:86)(cid:72)(cid:72)(cid:3)(cid:73)(cid:88)(cid:85)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:71)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:82)(cid:81)(cid:3)(cid:83)(cid:68)(cid:74)(cid:72)(cid:3)(cid:21)(cid:21)(cid:17)(cid:3)(cid:43)(cid:68)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:79)(cid:76)(cid:86)(cid:87)(cid:72)(cid:81)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:15)(cid:3)(cid:76)(cid:87)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:70)(cid:79)(cid:72)(cid:68)(cid:85)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:36)(cid:74)(cid:74)(cid:85)(cid:72)(cid:78)(cid:82)(cid:3)(cid:75)(cid:68)(cid:71)(cid:3)(cid:87)(cid:90)(cid:82)(cid:3) (cid:80)(cid:88)(cid:87)(cid:88)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:287)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:72)(cid:86)(cid:17)(cid:3)(cid:41)(cid:85)(cid:82)(cid:80)(cid:3)(cid:20)(cid:3)(cid:36)(cid:88)(cid:74)(cid:88)(cid:86)(cid:87)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:86)(cid:83)(cid:79)(cid:76)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3) (cid:76)(cid:81)(cid:87)(cid:82)(cid:3)(cid:53)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:54)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:51)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:54)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:53)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:54)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3) (cid:76)(cid:81)(cid:3)(cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:72)(cid:71)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:88)(cid:86)(cid:88)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:72)(cid:86)(cid:86)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:91)(cid:15)(cid:3)(cid:86)(cid:75)(cid:82)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:17)(cid:3)(cid:51)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:54)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:85)(cid:15)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:91)(cid:3) (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:79)(cid:92)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:72)(cid:80)(cid:72)(cid:85)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:86)(cid:3) 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(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:36)(cid:74)(cid:74)(cid:85)(cid:72)(cid:78)(cid:82)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3) (cid:74)(cid:85)(cid:82)(cid:90)(cid:3)(cid:68)(cid:87)(cid:3)(cid:69)(cid:72)(cid:87)(cid:90)(cid:72)(cid:72)(cid:81)(cid:3)(cid:21)(cid:8)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:25)(cid:8)(cid:15)(cid:3)(cid:75)(cid:82)(cid:90)(cid:72)(cid:89)(cid:72)(cid:85)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:72)(cid:71)(cid:76)(cid:88)(cid:80)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:90)(cid:72)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:3)(cid:73)(cid:68)(cid:86)(cid:87)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:3)(cid:80)(cid:68)(cid:85)(cid:74)(cid:76)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3)(cid:68)(cid:85)(cid:82)(cid:88)(cid:81)(cid:71)(cid:3)(cid:21)(cid:19)(cid:8)(cid:17)(cid:3) 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(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:73)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:74)(cid:68)(cid:86)(cid:3)(cid:76)(cid:81)(cid:86)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:86)(cid:90)(cid:76)(cid:87)(cid:70)(cid:75)(cid:74)(cid:72)(cid:68)(cid:85)(cid:3) (cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:16)(cid:86)(cid:76)(cid:87)(cid:72)(cid:17)(cid:3)(cid:39)(cid:72)(cid:86)(cid:83)(cid:76)(cid:87)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:80)(cid:82)(cid:87)(cid:72)(cid:3) (cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:73)(cid:85)(cid:68)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:20)(cid:21)(cid:19)(cid:3)(cid:71)(cid:68)(cid:92)(cid:86)(cid:17)(cid:3) EQUIPMENT SOURCED FROM 12 COUNTRIES (cid:54)(cid:83)(cid:72)(cid:70)(cid:76)(cid:68)(cid:79)(cid:76)(cid:86)(cid:87)(cid:3)(cid:74)(cid:68)(cid:86)(cid:3) (cid:72)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:46)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:37)(cid:85)(cid:68)(cid:93)(cid:76)(cid:79) (cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3) (cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:81)(cid:71)(cid:76)(cid:68) AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 35 3 FUTURE The site provides reliable and constant power supply to a district that would normally experience intermittent power failure during the dry season. This supports local community and economic needs, including schools and one of the country’s largest steel mills which is undergoing signiﬁcant expansion. Furthermore, through employing local people we are implementing an effective knowledge transfer programme to up-skill the local workforce, and provide them with transferrable skills for the future. MYANMAR PROJECT SITE YANGON 120 days to deliver Local workforce on-site 77% 36 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT PERFORMANCE REVIEW OUR INVESTMENT CASE Our objective is to be the number one global provider of power and related solutions that are modular and mobile. Market Competitive advantage (cid:333)(cid:3)Structural power shortfall in emerging markets (cid:333)(cid:3)Increased sector penetration in developed markets (cid:333)(cid:3)Diversiﬁed portfolio by geography and sector (cid:333)(cid:3)People & culture (cid:333)(cid:3)Expertise (cid:333)(cid:3)Scale (cid:333)(cid:3)Technology (cid:333)(cid:3)Financial strength Read more about our markets Read more about our markets page 10 (cid:83)(cid:68)(cid:74)(cid:72)(cid:3)(cid:62)(cid:333)(cid:64)(cid:3) Read more about our competitive advantage Read more about our competitive advantage page 14 (cid:83)(cid:68)(cid:74)(cid:72)(cid:3)(cid:62)(cid:333)(cid:64)(cid:3) Business priorities Shareholder returns (cid:333)(cid:3)Clearly deﬁned business priorities – Customer, Technology, Efﬁciency (cid:333)(cid:3)Path to return to growth (cid:333)(cid:3)Focused on margins and returns (cid:333)(cid:3)Priority is to invest for long-term growth (cid:333)(cid:3)Through self-help we will balance revenue growth with support to margins and returns (cid:333)(cid:3)Where opportunities for investment are limited we will look to return capital to Shareholders Read more about our business priorities Read more about our strategy page 22 (cid:83)(cid:68)(cid:74)(cid:72)(cid:3)(cid:62)(cid:333)(cid:64)(cid:3) Useful links for Shareholders Useful links for shareholders page 154 (cid:83)(cid:68)(cid:74)(cid:72)(cid:3)(cid:62)(cid:333)(cid:64)(cid:3) PERFORMANCE REVIEW GROUP AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 37 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I Earnings and dividends The Group delivered proﬁt before tax of £252 million (2014: £289 million). Diluted earnings per share (DEPS) was 71.68 pence, 13% lower than the prior year. Reﬂecting our continued conﬁdence in the strength and prospects of the business, the Group is proposing to maintain the ﬁnal dividend at 17.74 pence per share. Subject to Shareholder approval, this will result in a full year dividend of 27.12 pence (2014: 27.12 pence) per Ordinary Share; this equates to dividend cover of 2.6 times (2014: 3.0 times). Cash ﬂow and balance sheet During the year, we generated an operating cash inﬂow of £461 million (2014: £498 million). We continued to manage our capital expenditure tightly and to adjust the amount we spend up or down in response to market conditions whilst investing sustainably for the future. Fleet capital expenditure was £237 million (2014: £226 million), of which £63 million was invested in our gas ﬂeet and £29 million to refurbish our diesel ﬂeet to the more fuel efﬁcient, higher output G3+ engine, which now represents 13% of our Utility business diesel ﬂeet. Net debt was £489 million at 31 December 2015; £5 million lower than the prior year. This resulted in net debt to EBITDA of 0.9 times, maintaining it at the 2014 level. Outlook Our Power Solutions Utility business has started the year with a strong order book; a healthy prospect pipeline; 140MW of new orders; and the signing of a two year extension of our 148MW of diesel contracts in Japan. We expect the level of contracts off-hiring in the year to go back up to a more normal level, of around 30%. Due to the timing of contract start and end dates there will be a reduction in ﬁrst half proﬁts at a Group level. We continue to monitor the geopolitical situation in Yemen, Libya and Venezuela. In our Power Solutions Industrial business we are seeing softer trading conditions in Singapore and some of our markets that are more exposed to the mining sectors. However year to date power volumes are up on the prior year, driven by continued good performances in the Middle East, Russia and Africa. The Rental Solutions business unit, in particular our North American business, has had a slow start to 2016 following a lower run rate exiting 2015 than we had expected and we are cautious on our outlook for this part of our business. At a Group level we anticipate investing around £250 million on ﬂeet capex, focussing on investment in our more fuel efﬁcient gas and diesel engines; as ever we will maintain our capital discipline and ﬂex this spend according to market conditions. Overall, we expect proﬁt before tax and exceptional items to be slightly lower than the prior year on a constant currency basis1, in line with current consensus. Carole Cran Chief Financial Ofﬁcer Watch Carole’s video online: www.annualreport2015.aggreko.com The trading results for the 12 months to 31 December 2015 are set out below. All numbers in this section are pre-exceptional items. Group trading performance Underlying Group revenue was down 3% on the prior year. Rental Solutions revenue was in line with last year with growth in the majority of our key sectors, particularly petrochemical & reﬁning and events, offsetting the impact lower commodity prices had on our oil & gas and mining revenues. Power Solutions revenue was down 5%. Within this, our Industrial business grew strongly with revenues 10% higher driven by growth in our Middle East, Russian and African businesses. In contrast, trading conditions in Brazil remain difﬁcult given the macro environment and we have taken steps to further reduce the cost base as a result. Power Solutions Utility revenue was down 11% driven by the renegotiation of our 325MW gas contract in Bangladesh and the off-hiring of our 104MW contract in Panama. Overall, the Group trading margin was 17% (2014: 19%). Rental Solutions margin was down slightly on last year driven by North American pricing and volumes in the oil & gas sector. Power Solutions margin was down three percentage points overall. Within this, Industrial was up four percentage points, reﬂecting the incremental beneﬁt we get from major events. Utility margin was down ﬁve percentage points due to the contract renegotiation in Bangladesh and a higher debtor provision driven by slower payments, particularly in Venezuela and Yemen. The lower margin, as well as a slight increase in net operating assets, impacted the Group return on capital employed, which was 16% (2014: 19%). The movement in exchange rates in the period had the translational impact of increasing revenue by £22 million and trading proﬁt by £6 million. This was driven by the strength of the US Dollar against Sterling partially offset by the weakness of the majority of our other major currencies against Sterling. 1 The constant currency impact is a headwind of £16 million applying the end of January 2016 spot rates, including the step devaluation of the Argentinian peso. In relation to 2016 the Power Solutions Utility contracts in Argentina have contractual protection that offsets the impact of the devaluation. 38 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT PERFORMANCE REVIEW BUSINESS UNIT PERFORMANCE REVIEW PERFORMANCE BY RENTAL SOLUTIONS In June 2015 we announced a new organisation structure comprising the Rental Solutions and Power Solutions business units. This new structure took effect from 1 August 2015. The performance of these business units for the year ended 31 December 2015 is described below. Revenue 2015 £ million 2014 £ million Reported change % Underlying change1 % 618 616 – – 299 584 883 60 943 1,561 288 625 913 48 961 1,577 4% (7)% (3)% 26% (2)% (1)% 10% (11)% (5)% 17% (5)% (3)% 1,501 1,529 (2)% (3)% Trading proﬁt 2015 £ million 2014 £ million Reported change % Underlying change1 % 100 107 (7)% (9)% 45 126 171 (1) 170 270 32 170 202 (3) 199 306 41% (26)% (15)% 53% (14)% (12)% 44% (28)% (17)% 56% (17)% (14)% 271 309 (12)% (14)% Rental Solutions Power Solutions Industrial Utility excl pass-through fuel Pass-through fuel Group Group excluding pass-through fuel Rental Solutions Power Solutions Industrial Utility excl pass-through fuel Pass-through fuel Group Group excluding pass-through fuel 1 “Underlying” is deﬁned as: adjusted for currency movements and pass-through fuel revenue from Power Solutions, where we provide fuel to our contracts in Mozambique on a pass- through basis. Reported 2015 £ million Reported 2014 £ million Reported change % Underlying change2 % Revenues Trading proﬁt Trading margin 618 100 16% 616 107 17% –% (7)% –% (9)% 2 Underlying excludes currency. Rental Solutions Key messages (cid:333)(cid:3) Underlying revenue maintained at ﬂat despite oil price pressure; margins and returns in high teens (cid:333)(cid:3) Oil & gas revenue decline offset by growth in majority of other sectors, particularly petrochemical & reﬁning and events (cid:333)(cid:3) Strong performance in TC; successful acquisition of ICS, a specialist heating business (cid:333)(cid:3) On a geographic basis: Europe showed good growth; North America was ﬂat; and AUSPAC challenged by commodity prices and impact on mining sector Despite the considerable impact of a lower oil price, our Rental Solutions business delivered a solid performance with underlying revenue in line with the prior year and trading proﬁt declining by 9%. Trading margin decreased by one percentage point to 16%. Rental revenue decreased by 3% and services revenue increased by 6%. Within rental revenue, power decreased by 7% and oil free air was down 8%. Offsetting this, we saw good growth in temperature control with revenues up 11%, reﬂecting our renewed focus on this adjacent product line. Overall revenues in our North American business were in line with the prior year despite diesel and gas pricing and volume pressure in the oil & gas sector, where revenue was down 26% year on year. Offsetting this was growth in many of the other key sectors we serve, particularly in events, and in petrochemical & reﬁning, now our largest sector in North America, where revenue was up 25%, and the lower oil price acted as a stimulus. Our Australia Paciﬁc business continued to face difﬁcult market conditions driven by persistently lower commodity prices and the impact this has had on our mining sector revenues. However, the rate of decline has slowed, with revenue down 5% in the year compared to a decrease of 18% in the previous year. Our business in New Zealand grew, driven by emergency response work from the cyclones which hit the country and the ICC World Cup. Across Europe all countries have seen growth year on year. Our Continental European business saw revenues increasing 11% aided by good growth in Romania, Germany, Italy and the Netherlands. The Northern European business had a solid year with revenue increasing 4%. Our business in Northern Europe also felt the impact of a lower oil price; however, the reduction in oil & gas revenue was offset by increases in the manufacturing, shipping and construction sectors. Rental Solutions trading margin was 16% with the slight reduction being driven by the pricing pressure on our North American oil & gas business, to which we have responded by reducing costs and capital expenditure. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 39 PERFORMANCE BY POWER SOLUTIONS Reported 2015 £ million Reported 2014 £ million Reported change % Underlying change3 % Revenues Industrial Utility excl pass- through fuel Pass-through fuel Total Trading proﬁt Industrial Utility excl pass- through fuel Pass-through fuel Total Trading margin Total excl pass- through fuel Industrial Utility excl pass- through fuel 299 584 60 943 45 126 (1) 170 19% 15% 22% 288 625 48 961 4% 10% (7)% 26% (2)% (11)% 17% (5)% 32 41% 44% (26)% 53% (14)% (28)% 56% (17)% 170 (3) 199 22% 11% 27% 3 “Underlying” is deﬁned as: adjusted for currency movements and pass-through fuel revenue from Power Solutions, where we provide fuel to our contracts in Mozambique on a pass- through basis. Power Solutions Key messages (cid:333)(cid:3) Strong performance from Industrial markets in Middle East, Russia & Africa (cid:333)(cid:3) Brazilian market remains difﬁcult (cid:333)(cid:3) Good progress with key extensions in Argentina, Ivory Coast, Japan and Bangladesh (cid:333)(cid:3) At the year end our order book was over 40,000MW months, highest in recent years (cid:333)(cid:3) Payment challenges; in particular Yemen and Venezuela Overall, our Power Solutions business saw revenues decline by 5% and trading proﬁt decline by 17% on an underlying basis. Our Industrial business had a good year with underlying revenue up 10% and trading proﬁt increasing 44%. Trading margin increased to 15% (2014: 11%). Our Utility business, however, had a challenging year with underlying revenue decreasing 11% and trading proﬁt decreasing 28%. Trading margin was ﬁve percentage points lower at 22% (2014: 27%). Underlying revenue in our Industrial business unit increased 10% with rental revenue up 12% and services revenue up 1%. On a geographic basis we saw strong growth in Africa where mining remains strong, and particularly in South Africa where the business is growing rapidly on the back of the worsening power outages and regular load shedding. In Russia, despite the lower oil price, we continue to see good growth, particularly with our gas product as we beneﬁt from a structural shift towards outsourcing. In the Middle East, we saw good growth in Saudi Arabia, Qatar, Oman and Turkey. However, revenue decreased in Kuwait and the UAE, whilst Iraq is a continued challenge from a security perspective. In Brazil, the economic environment remains difﬁcult and elsewhere in Latin America the mining sector slowdown has impacted our businesses in Chile and Peru, although we did have a strong year in Argentina. In our Asia business we had a good performance in South Korea; however, we faced more challenging conditions in Singapore and India. We were also pleased to have successfully supplied power for the ﬁrst European Games in Baku. In total, we provided 35MW of temporary power across the Games’ ﬁfteen venues and the International Broadcast Centre. The prior year comparatives include revenue from the World Cup in Brazil; excluding this from last year and revenue from the European Games in 2015, the year on year increase in revenue, in our Industrial business unit, was 7%. Our Utility business saw underlying revenue decrease by 11% and trading proﬁt by 28%. Trading margin decreased to 22% (2014: 27%). The decrease in revenue was driven by the renegotiation of our 325MW of gas contracts in Bangladesh where permanent power was brought on line; the off-hiring of our contract in Panama; and lower volumes on hire in Indonesia, Military and Yemen. The main reasons for the margin decline were the Bangladesh extension and a higher debtor provision driven by slower payment by a handful of customers, particularly in Venezuela and Yemen, partially offset by improved payments in Argentina. Order intake for the year was 640MW (2014: 757MW); last year’s comparative includes 170MW of lower rate, summer peak shaving work in Saudi Arabia and Oman, which did not repeat in 2015. New contracts in 2015 included 150MW in Argentina, 95MW in Myanmar and 40MW in each of the Bahamas and Guam. With regards to contract extensions, we are pleased to have extended our contracts in Argentina, Ivory Coast, Japan and Bangladesh. At the year end, our order book was over 40,000MW months, the equivalent of 14 months’ revenue at the current run-rate (2014: 8 months) and the highest level in recent times. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 40 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT PERFORMANCE REVIEW FINANCIAL REVIEW A summarised income statement for 2015 as well as related ratios are set out below. Revenues Revenues excl pass- through fuel Trading proﬁt Operating proﬁt Net interest expense Proﬁt before tax Taxation Proﬁt after tax Diluted earnings per share (pence) Trading margin Underlying Trading margin ROCE Revenue (excluding pass- through fuel) to average gross rental assets 2015 £m 1,561 1,501 270 275 (23) 252 (69) 183 Movement 2014 £m As reported Underlying4 change 1,577 (1)% (3)% 2014 – As reported 1,529 306 310 (21) 289 (74) 215 (2)% (12)% (11)% (8)% (13)% 7% (15)% (3)% (14)% Currency 2014 pass-through fuel 2015 pass-through fuel Underlying growth 2015 – As reported As reported growth Underlying growth 71.68 82.49 (13)% 17% 18% 16% 19% 20% 19% (2)pp (2)pp (3)pp 56% 62% (6)pp 4 “Underlying” is deﬁned as: adjusted for currency movements and pass-through fuel revenue from Power Solutions, where we provide fuel to our contracts in Mozambique on a pass- through basis. Currency translation The movement in exchange rates in the period had the translational impact of increasing revenue by £22 million and trading proﬁt by £6 million. This was driven by the strength of the US Dollar against Sterling, partially offset by the weakness of the majority of our other major currencies against Sterling compared to average rates in 2014 as shown in the table below. Currency translation also gave rise to a £68 million decrease in the value of net assets as a result of year on year movements in the exchange rates. Set out in the table below are the principal exchange rates which affected the Group’s proﬁts and net assets. (per £ sterling) Average Year end Average Year end 2015 2014 Principal Exchange Rates United States Dollar Euro UAE Dirhams Australian Dollar Brazilian Reals Argentinian Peso (Source: Bloomberg) 1.53 1.38 5.61 2.03 5.10 14.17 1.48 1.36 5.44 2.03 5.87 19.18 1.65 1.24 6.06 1.83 3.87 13.37 1.55 1.27 5.71 1.92 4.18 13.29 Reconciliation of underlying growth to reported growth The table below reconciles the reported and underlying revenue and trading proﬁt growth rates: Revenue £ million Trading proﬁt £ million 1,577 22 (48) 60 (50) 1,561 (1)% (3)% 306 6 3 (1) (44) 270 (12)% (14)% Exceptional items The deﬁnition of exceptional items is contained within Note 1 of the 2015 Annual Report & Accounts. An exceptional charge of £26 million before tax was recorded in the year to 31 December 2015 in respect of the Group’s reorganisation and business priorities review. These costs include professional fees, severance costs, relocation costs and travel & expenses directly related to the reorganisation. The cash cost in the year was £16 million. Interest The net interest charge of £23 million was £2 million higher than last year reﬂecting higher average net debt year on year, and arrangement fees included in the 2015 interest number for facilities reﬁnanced during the year. Interest cover, measured against rolling 12-month EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation), remained strong at 24 times (2014: 27 times) relative to the ﬁnancial covenant attached to our borrowing facilities that EBITDA should be no less than four times interest. Taxation Tax strategy Aggreko’s tax strategy is approved by the Board and is applicable to all taxes, both direct and indirect in all countries in which we operate. Our strategy is to ensure that we pay the appropriate amount of tax proportionate to the activities performed in each country in which we operate. While the tax strategy has remained unchanged for a number of years, it is reviewed and revalidated annually and would be revised in the light of factors such as material changes to the business strategy, our business model or in tax legislation. In applying the strategy, we undertake to comply with the applicable tax legislation in all countries in which we operate and utilise, where appropriate, available legislative reliefs. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 41 Total taxes In 2015, Aggreko’s worldwide operations resulted in direct and indirect taxes of £194 million (2014: £178 million) being paid to tax authorities. This amount represents all corporate taxes paid on operations, payroll taxes paid and collected, import duties, sales taxes and other local taxes. The breakdown of the £194 million by type of tax is shown in Figure 1. Figure 1: Total taxes paid and collected Our tax governance framework is laid out in documented policies and procedures covering the application of the strategy and operational aspects of tax. Ultimate responsibility for tax risk and tax operations rests with our CFO while day-to-day responsibility is delegated to the Director of Tax and the tax function. To ensure that we fully understand our tax obligations and keep up to date with changing legislation across the Group we engage advisers as required. The Group’s appetite for risk is reviewed regularly. Our appetite for tax risk is considered to be cautious. Given the risk proﬁle of many countries in which we operate, we seek to structure our tax affairs in a way that has a low degree of downside risk. Only the Director of Tax is permitted to consider any planning opportunities that may bring a tax beneﬁt and appropriate permission to implement any planning must be obtained from the Board or Finance Committee, comprising our Chairman, CEO, CFO and Company Secretary. As a result of this, we will not actively seek to implement any tax planning that is not driven by commercial aims or the sole aim of which is to deliver tax beneﬁt. Corporate taxes Payroll taxes – collected Payroll taxes – paid We seek to deal with the tax authorities in the countries where we operate in a transparent and cooperative manner. To this end, where possible, we seek to proactively engage, either directly or through local advisers, with the tax authorities. Where possible we seek opportunities to meet with the tax authorities to ensure that our business and tax positions are understood and we aim to conﬁrm our tax positions in a timely manner. Import duties Sales taxes Other taxes We recognise the importance of the tax we pay to the economic development of the countries in which we operate, with the geographic spread of where we pay corporate tax by geography broken down in Figure 2 overleaf. Given the uncertain nature of the tax environment in many of the countries in which we operate, local compliance and governance is a key area of focus. This is particularly so for our Power Solutions Utility business, where we will generally be in a country for a relatively short period of time. While we will always seek to manage our tax affairs to agree and conﬁrm our tax positions in a timely manner, it can often take some time to settle our tax position. We therefore create tax provisions for signiﬁcant potential uncertain or contentious tax positions and these are principally measured using the most likely outcome method. Provisions are considered on an individual basis. As at 31 December 2015 we had tax provisions totalling £61 million covering both direct (£48 million) and indirect (£13 million) tax risks (2014: total provisions £69 million, £54 million for direct taxes and £15 million for indirect taxes). Through the course of 2015 we continued to closely monitor developments in the OECD’s work on Base Erosion and Proﬁt Shifting (“BEPS”) and Country-By-Country Reporting (“CBCR”). We do not expect that any of our tax arrangements should be materially impacted by any legislative changes arising from the BEPS recommendations. However, we recognise that the proposals are not ﬁnalised and so we continue to closely follow developments. £0 £10 £20 £30 £40 £50 £60 £70 £80 £90 £100 GBP millions 2015 2014 The increase of £14 million in corporate taxes paid in 2015 compared to 2014 is principally due to an increase in tax paid in the UK. In 2014 we received refunds of tax, largely as a result of double tax relief and closing earlier year tax returns with HMRC which did not reoccur in 2015. Figure 2 shows where the £91 million (2014: £77 million) of corporate tax was paid. Indirect tax payments were broadly in line with the prior year with £103 million paid in 2015 (2014: £101 million). The small increase mainly relates to sales taxes in the US and Argentina. & O T H E R I N F O R M A T O N I 91 77 37 37 30 29 9 10 19 18 8 7 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 42 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT PERFORMANCE REVIEW FINANCIAL REVIEW Corporate taxes paid During 2015, our business was reorganised into two business units: Power Solutions and Rental Solutions. Figure 2 shows the corporate tax paid allocated between the two business units and then split by the geographies that comprise those business units. The 2014 numbers have been restated from those originally shown in the 2014 annual report to reﬂect the new business conﬁguration. Figure 2 – Corporate taxes paid – Rental Solutions versus Power Solutions Rental Solutions Power Solutions 35% 65% Rental Solutions Power Solutions 37% 63% 2015 2014 Figure 2a – Corporate taxes paid – Rental Solutions Figure 2b – Corporate taxes paid – Power Solutions Europe AusPac North America AusPac North America 33% 7% 60% 18% 82% Africa Asia Russia, Caspian and Middle East South America Africa Asia Russia, Caspian and Middle East South America 30% 10% 11% 49% 18% 16% 13% 53% 2015 2014 2015 2014 In 2014 the UK tax authorities closed their review of prior year tax returns and agreed claims for Double Tax Relief resulting in repayments of tax being made. These repayments in the UK exceeded the amount of corporate tax paid by the rest of our European business. The increase in tax paid in Africa mainly relates to Angolan withholding tax and a tax payment following the closure of a tax audit in Senegal. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 43 Tax charge The Group’s pre-exceptional effective corporation tax rate for the year was 27% (2014: 26%) based on a tax charge of £69 million (2014: £74 million) on a pre-exceptional proﬁt before taxation of £252 million (2014: £289 million). Further information, including a detailed tax reconciliation of the current year tax charge, is shown at Note 10 in the Annual Report and Accounts. Reconciliation of income statement tax charge and cash tax paid The Group’s total cash taxes borne and collected were £194 million, reﬂecting £103 million of non-corporate taxes and £91 million of corporate taxes. This is reconciled to the post exceptional tax charge reported in the income statement, of £64 million, in the table below. Cash taxes paid Non-corporate taxes Corporate tax paid Movements in deferred tax Double Tax Relief claimed but not yet received Differences relating to timing of tax payments – US Differences relating to timing of tax payments – Australia Other differences relating to timing of payment of taxes Post exceptional corporate tax charge per income statement £ million 194 (103) 91 (13) (5) (3) (2) (4) 64 Capital structure & dividends The objective of Aggreko’s strategy is to deliver long-term value to its Shareholders whilst maintaining a balance sheet structure that safeguards the Group’s ﬁnancial position through economic cycles. From an ordinary dividend perspective our objective is to provide a progressive, through cycle dividend, recognising the inherent lack of visibility and potential volatility of our business. Subject to Shareholder approval the proposed ﬁnal dividend of 17.74 pence will result in a full year dividend of 27.12 pence (2014: 27.12 pence) per ordinary share, giving dividend cover (Basic EPS divided by full year declared dividend) of 2.6 times (2014: 3.0 times). Cash ﬂow The net cash inﬂow from operations during the year totalled £461 million (2014: £498 million). This funded capital expenditure of £254 million; in line with the prior year. Of the £254 million, £237 million was spent on ﬂeet of which £63 million was invested in our gas ﬂeet and £29 million to refurbish our diesel ﬂeet to the more fuel efﬁcient, higher output G3+ engine. Net debt of £489 million at 31 December 2015 was £5 million lower than the prior year. Net debt to EBITDA was maintained at 0.9 times, in line with our strategy of keeping ﬁnancial leverage around one times. There was an £80 million working capital outﬂow in the year (2014: £73 million outﬂow) mainly driven by an increase in accounts receivable balances, particularly in our Power Solutions Utility business, where debtor days increased to 123 days (2014: 110 days) and an increase in inventory at our manufacturing facility due to the timing of next generation gas engine purchases. The Group monitors the risk proﬁle and debtor position of all contracts regularly, particularly those in the Power Solutions Utility business, and deploys a variety of techniques to mitigate the risk of delayed or non-payment; these include securing advance payments, bonds and guarantees. The increase in debtor days reﬂects slower payments by our customers in Yemen and Venezuela. We have operated in both countries for a number of years and although neither customer contests that the debt is due the current security situation in the Yemen and the impact of a lower oil price in Venezuela has meant that payments have been slower. In response to this, the Power Solutions Utility debtor provision at 31 December 2015 of £48 million was £10 million higher than at 31 December 2014. Our teams in both markets are working closely with the customers to resolve the issue. Net operating assets The net operating assets of the Group (including goodwill) at 31 December 2015 totalled £1,707 million, £17 million higher than 2014. The main components of net operating assets are: £ million Rental Fleet Property & Plant Inventory Net Trade Debtors 2015 1,049 90 189 320 2014 1,086 91 163 326 Movement headline Const Curr.5 (3)% (1)% 16% (2)% (3)% 1% 15% 2% 5 Constant currency takes account of the impact of translational exchange movements in respect of our businesses which operate in currency other than Sterling. A key measure of Aggreko’s performance is the return (expressed as operating proﬁt) generated from average net operating assets (ROCE). The average net operating assets in 2015 were £1,682 million, up 3% on 2014. In 2015, the ROCE decreased to 16% compared with 19% in 2014. This decrease was mainly driven by the reduction in trading margin in our Power Solutions Utility business. Property, plant and equipment Rental ﬂeet accounts for £1,049 million, or around 92%, of the net book value of property, plant and equipment used in our business. The great majority of equipment in the rental ﬂeet is depreciated on a straight-line basis to a residual value of zero over eight years, with some classes of non-power ﬂeet depreciated over 10 years. The annual ﬂeet depreciation charge of £259 million (2014: £243 million) relates to the estimated service lives allocated to each class of ﬂeet asset. Asset lives are reviewed regularly and changed if necessary to reﬂect current thinking on their remaining lives in light of technological change, prospective economic utilisation and the physical condition of the assets. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 44 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT PERFORMANCE REVIEW FINANCIAL REVIEW Acquisition of ICS Group, Inc. (ICS) On 2 September 2015, the Group acquired substantially all of the trade and assets associated with, and used in connection with, the equipment rental business of ICS Group, Inc. (ICS), a specialist heating business headquartered out of Western Canada. The total consideration was £18 million and in the twelve months to July 2015, ICS had revenues of £9 million. Shareholders’ equity Shareholders’ equity increased by £37 million to £1,115 million, represented by the net assets of the Group of £1,604 million before net debt of £489 million. The movements in Shareholders’ equity are analysed in the table below: Movements in Shareholders’ equity £ million £ million As at 1 January 2015 Proﬁt for the ﬁnancial year post exceptional items Dividend6 Retained earnings Employee share awards Issue of shares to employees under share option schemes Return of value to Shareholders Remeasurement of retirement beneﬁts Currency translation Movement in hedging reserve Other As at 31 December 2015 162 (69) 1,078 93 8 2 (1) 4 (68) – (1) 1,115 6 Reﬂects the ﬁnal dividend for 2014 of 17.74 pence per share (2014: 17.19 pence) and the interim dividend for 2015 of 9.38 pence per share (2014: 9.38 pence) that were paid during the year. The £183 million of post-tax proﬁt (pre-exceptional items) in the year represents a return of 16% on Shareholders’ equity (2014: 20%) which compares to an estimated Group weighted average cost of capital of 8%. Pensions Pension arrangements for our employees vary depending on best practice and regulation in each country. The Group operates a deﬁned beneﬁt scheme for UK employees, which was closed to new employees joining the Group after 1 April 2002. Most of the other schemes in operation around the world are varieties of deﬁned contribution schemes. Under IAS 19: ‘Employee Beneﬁts’, Aggreko has recognised a pre-tax pension deﬁcit of £2 million at 31 December 2015 (2014: £7 million) which is determined using actuarial assumptions. The decrease in the pension deﬁcit is primarily driven by an increase in corporate bond yields resulting in a higher discount rate which has decreased the value placed on the liabilities of the scheme. The main assumptions used in the IAS 19 valuation for the previous two years are shown in Note 30 of the Annual Report and Accounts. The sensitivities regarding these assumptions are shown in the table below. Assumption Rate of increase in salaries Rate of increase in pensions Discount rate Inﬂation (0.5% increases on pensions increases, deferred revaluation and salary increases) Longevity Increase/ (decrease) Deﬁcit (£m) change Income statement cost (£m) change 0.5% 0.5% (0.5)% 0.5% 1 year (1) (7) (14) (13) (3) – (1) (1) (1) – Treasury The Group’s operations expose it to a variety of ﬁnancial risks that include liquidity, the effects of changes in foreign currency exchange rates, interest rates, and credit risk. The Group has a centralised treasury operation whose primary role is to ensure that adequate liquidity is available to meet the Group’s funding requirements as they arise, and that ﬁnancial risk arising from the Group’s underlying operations is effectively identiﬁed and managed. The treasury operations are conducted in accordance with policies and procedures approved by the Board and are reviewed annually. Financial instruments are only executed for hedging purposes, and transactions that are speculative in nature are expressly forbidden. Monthly reports are provided to senior management and treasury operations are subject to periodic internal and external review. Liquidity and funding The Group maintains sufﬁcient facilities to meet its funding requirements over the medium term. At 31 December 2015, these facilities totalled £891 million in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement lenders. The ﬁnancial covenants attached to these facilities are that EBITDA should be no less than 4 times interest and net debt should be no more than 3 times EBITDA; at 31 December 2015, these stood at 24 times and 0.9 times respectively. The Group does not consider that these covenants are restrictive to its operations. The maturity proﬁle of the borrowings is detailed in Note 18 in the Annual Report and Accounts. Net debt amounted to £489 million at 31 December 2015 (2014: £494 million) and, at that date, undrawn committed facilities were £385 million. Interest rate risk The Group’s policy is to manage the exposure to interest rates by ensuring an appropriate balance of ﬁxed and ﬂoating rates. At 31 December 2015, £321 million of the net debt of £489 million was at ﬁxed rates of interest resulting in a ﬁxed to ﬂoating rate net debt ratio of 66:34 (2014: 62:38). Foreign exchange risk The Group is subject to currency exposure on the translation into Sterling of its net investments in overseas subsidiaries. In order to reduce the currency risk arising, the Group uses direct borrowings in the same currency as those investments. Group borrowings are predominantly drawn down in the currencies used by the Group, namely US Dollar, Canadian Dollar, Mexican Peso, Brazilian Reals and Russian Ruble. The Group manages its currency ﬂows to minimise foreign exchange risk arising on transactions denominated in foreign currencies and uses forward contracts and forward currency options, where appropriate, in order to hedge net currency ﬂows. Credit risk Cash deposits and other ﬁnancial instruments give rise to credit risk on amounts due from counterparties. The Group manages this risk by limiting the aggregate amounts and their duration depending on external credit ratings of the relevant counterparty. In the case of ﬁnancial assets exposed to credit risk, the carrying amount in the balance sheet, net of any applicable provision for loss, represents the amount exposed to credit risk. Insurance The Group operates a policy of buying cover against the material risks which the business faces, where it is possible to purchase such cover on reasonable terms. Where this is not possible, or where the risks would not have a material impact on the Group as a whole, we self-insure. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 45 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 46 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 POWER THE FUTURE OF ERITREAN MINING 1 CHALLENGE 2 SOLUTION Situated in an isolated region of Eritrea, the Bisha mine is unable to access the Eritrean national grid. Prior to commencing construction, the mining company had to satisfy its investors that they would be able to provide a stable and reliable power supply. As the power required would vary throughout the construction, commissioning and operation of the mine, the customer needed a fast and ﬂexible solution. Following a number of meetings to better understand the power requirement, we determined that once operational the mine would need 20MW of power. The power package that was provided is the only source of operational power for the mine. Our understanding of the critical nature of the power need, combined with experience operating at similar sites, speed of deployment and modular ﬂexibility was appreciated by the customer. Power provided 24 hours a day AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 47 3 FUTURE By contracting with Aggreko, the customer was able to include the power costs as part of the monthly operating expenses of the mine, rather than investing in capital up front. This has made the project and the mining company more economically viable in the long term and it will therefore be able to continue to invest in other mines in future. ERITREA BISHA MINE ASMARA The Bisha mine is c.300km from the Red Sea Providing 20MW of power, which is the only source of operational power for the mine 48 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT SUSTAINABILITY BUILDING A SUSTAINABLE BUSINESS THE BIGGER PICTURE Aggreko’s role in society We live in a world reliant on power; it is an essential part of everyday life. Huge numbers of people across the globe do not have access to reliable on-demand power and sometimes this is forgotten in the developed world. Perhaps more importantly, electricity helps ensure survival in hospitals and educate children in schools, whilst also helping to improve people’s quality of life through simple appliances such as air conditioning units and fridges. Our Power Solutions Utility business typically provides power to government utilities to support a country’s grid infrastructure, thus helping to keep the lights on. In our Power Solutions Industrial and Rental Solutions businesses, we provide temporary power or adjacent products to individual businesses across many sectors, including Oil & Gas and Mining, helping them to grow and by extension helping economies grow. We service the sport and entertainment industry and have powered some of the world’s most famous events, such as the Olympics and the World Cup. In 2015 we powered the Red Bull Air Race Championships, the PanAm/Parapan American Games, the inaugural European Games in Baku and Glastonbury, the world’s largest music festival. Read more about our activities in 2015 at www.aggreko.com/media-centre/press-releases It is important that we conduct ourselves with integrity at all times. We are committed to ensuring we conduct our business dealings ethically and safely and aim to minimise our impact on the environment whilst working to support our customers and their communities. Case study: Panama Powering a future generation: Helping a local school Aggreko’s commitment to the communities we operate in continues long after a temporary power plant goes online. Aggreko operated at Cerro Azul, Panama from March 2014 to June 2015, providing power directly to the grid to support Panama’s hydro-electric plants during the dry season. The local Aggreko team identiﬁed a need to create a safe, secure learning environment for the children attending Vista Hermosa school, a school in the village close to the Cerro Azul site. Aggreko provided the materials and manpower to build a perimeter fence around the school to protect the children, providing a safe and secure learning environment and area to play between classes. Aggreko also provided much needed equipment for the school’s kitchen and local staff volunteered for a day to clean and decorate classrooms to improve the health and wellbeing of over 850 children, aged between ﬁve and 13 years old attending the school. Watch the video online: www.annualreport2015.aggreko.com AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 49 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I Our approach to sustainability Sustainability reporting is an evolving process and one that we plan to develop further; we have recently hired a manager who will be responsible for sustainability. The Group is committed to ensuring that our success also brings long-term social and economic beneﬁts to the communities and countries where we operate. Responding to our customers The provision of power and temperature control are essential activities in our global economy; however, they come with challenges, particularly environmental challenges. We are committed to growing our business and supporting our customers. As a consequence of the products that we use it is inevitable that some of our activities will have an impact on the environment. Our equipment and solutions are designed to comply with applicable laws, regulations and industry standards wherever we operate in the world. We innovate both in response to customer demand and to improve the efﬁciency of our products and therefore reduce their environmental impact where we can. As fuel is the greatest element of cost in producing temporary power, particularly diesel, we have worked to improve the fuel efﬁciency of our diesel engines and will continue to do so under our new business priorities. In the last couple of years we have introduced a solution for our customers in the Oil & Gas sector whereby we are able to take the gas by-product from wells and rather than ﬂare it, use it to run our gas generators. In addition, we support low-carbon emissions generation such as wind and hydro, and help to make these solutions viable. Renewable energy is intermittent and therefore providing support is a core part of our business. There are four areas of sustainability focus within the business: What matters most HEALTH, SAFETY AND ENVIRONMENTAL MANAGEMENT SOCIAL CONTRIBUTION Priorities Priorities Ensure the health and safety of our people at work Engage with local communities and work in partnership Minimise our environmental impact Recruit, train and develop local people Be accountable and transparent with regards to our environmental footprint Outcome for the business Maintain our reputation for consideration of health, safety and environmental matters Gain commercial beneﬁt Read more about HSE Page 50 Participate in activities that make a difference Outcome for the business Build business longevity Gain new talent for the organisation Read more about social contribution Page 51 ETHICS AND INTEGRITY OUR PEOPLE Priorities Priorities Ensure we operate with integrity and honesty Promote equal opportunities Make sure that we are in compliance with laws and regulations Provide career and personal development through engagement Outcome for the business Maintain our reputation for integrity Ensure security whilst at work Operate with due regard for human rights Outcome for the business Attract and retain the best people Read more about ethics and integrity Page 74 Read more about our people Page 19 50 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT SUSTAINABILITY BUILDING A SUSTAINABLE BUSINESS HEALTH, SAFETY AND ENVIRONMENTAL MANAGEMENT Context Our activities, the generation of power, cool air and heat, while essential to the global economy, produce waste and greenhouse gases and pose health and safety risks in the ordinary course of business. We are committed to minimising these wherever possible, which not only reduces harm to the environment and keeps people safe, but helps us to gain commercial beneﬁt. Our approach Aggreko’s equipment is designed to function in all environments. By careful design and use of the most suitable technology, we manage all of our operations in such a manner to ensure minimal negative impact on our people, our neighbours and the environment in which we operate. We take a robust approach, considering each element of HSE in our product design, system design and client interfaces. We complete task and activity risk assessments to manage our on-site operations during the installation and operation of our equipment. The two major environmental issues we have to deal with are emissions-to-air from our generators and the safe handling and disposal of fuel and oil. HSE policy The Executive Director with overall responsibility for HSE is Chris Weston, Chief Executive Ofﬁcer, and our commitment to HSE is reﬂected in our Global HSE Policy Statement. During the year we appointed a Group Director of HSE, whose responsibility is to ensure that the HSE policy is effective, implemented and its operation monitored throughout Aggreko. The Board and the Executive Committee are committed to ensuring that the necessary organisation and resources exist to facilitate the achievement of our HSE goals and we monitor this through monthly reporting. We recognise our responsibility to understand the risks associated with our operations and how they could potentially affect people and the environment. Aggreko is committed to monitoring and ensuring the effectiveness of designed control measures and taking action as appropriate. Furthermore, Aggreko complies with legal requirements as a minimum and takes a transparent approach to reporting any incidents that may occur. Safety Rigorous safety processes are absolutely essential if we are to avoid accidents which could cause injury to people and damage to property and reputation. Leadership on safety comes from the Executive Committee and we consider safety processes a basic benchmark of operational discipline. Aggreko monitors safety performance using “Frequency Accident Rating” (FAR); this is one of our KPIs. Read more about FAR Page 24 Key HSE actions in 2015 and future actions During 2015, we initiated a number of actions to help us further improve our capabilities in mitigating HSE risk. (cid:333)(cid:3) Appointment of Group Director of HSE: Ken Bradley joined in September 2015 and reports to the Group Chief Executive, raising the proﬁle of HSE. (cid:333)(cid:3) HSE Review: In January we engaged a specialist consultant to undertake an independent review of HSE, benchmarking our policies and processes against global best practice and we are implementing the recommendations. (cid:333)(cid:3) Energy Safety Rules: Controlling worker exposure to energy sources, including electricity. These were ﬁrst introduced in 2014 and are being rolled out across the entire group in 2015/16. (cid:333)(cid:3) HSE Metrics: The new Group Director of HSE is undertaking a full review of the HSE processes used across the business. Emissions-to-air Emissions-to-air are an inevitable by-product of hydrocarbon fuelled engines. Over the years, as engines have become more efﬁcient and legislation to limit emissions has become stricter, emissions have reduced sharply. Aggreko works in cooperation with the manufacturers of engines in order to meet new emission requirements. It is essential for us to manage emissions-to-air and to ensure that we meet new emissions requirements in order to enable us to continue operating in a number of countries. It is equally important that we play our part in helping to reduce the global environmental impact of burning hydrocarbons. Carbon dioxide emissions We are constantly exploring new ways of reducing emissions and have gradually over the last few years increased the use of more environmentally friendly gas fuelled generators. Gas generators now represent 10% of our ﬂeet. Natural gas is a fossil fuel, however, it is more environmentally attractive, with emissions of sulphur dioxide that are negligible in comparison to coal or oil and levels of NOx and CO2 that are signiﬁcantly lower. Where gas fuel is essentially a by-product of production, such as in the US shale exploration, or derived from a biological source, we can help reduce CO2 and greenhouse gas. In addition to the work we have undertaken developing natural gas-powered generators, we are regularly reviewing product technologies, looking for advances that we can adopt into our product portfolio, including bio-fuels, fuel cells and renewables. Read more about our greenhouse gas emissions Page 98 Exhaust gases and particulates In an increasing number of countries, air quality regulations stipulate emission standards for new equipment. Generally, countries allow mobile equipment already operating to continue to do so for its useful life; this is called “grandfathering”. All our engine suppliers produce engines which comply with the latest emissions standards and we gradually introduce these new engines to our ﬂeet. Our generator range to meet USA engine emissions for the Tier 4 Interim level is complete, with 700 units in use. The next step in the USA legislation programme to reduce emissions is called Tier 4 Final and we have now introduced the ﬁrst 150 generators into our rental ﬂeet in line with this stringent speciﬁcation. The European engine emissions regulations are different to USA and the current level in EU is referred to as Stage 3a. We also have a complete product range of generator products to meet this standard. We continue to work closely with engine manufacturers and primary technology developers to derive appropriate solutions for these requirements. Minimising noise Noise pollution is another important environmental factor that we take very seriously. We aim to provide helpful solutions to our customers, minimising the noise associated with producing power or air solutions. We have built a competitive advantage through a ﬂeet that minimises external noise. This is done through the use of custom-built acoustic enclosures as well as high performance isolation and attenuation systems. In addition, in designing a Power Solutions Utility site, we aim to position the equipment such that the noise it does produce has the least effect on the immediate environment. Our equipment achieves noise performance standards that are within the maximum levels permitted by current European legislation. Waste and re-cycling In the normal course of our business, we regularly have to replace consumables such as engine oil and ﬁlters. If these are not appropriately disposed of, they can cause environmental damage such as leakage into the ground water and contamination of the local water supplies. If left unattended they are also unsightly and typically not biodegradable. Therefore it is imperative that we remove and safely dispose of our waste products. These are normally returned to our service centres where they are safely disposed of, or re-cycled where appropriate. On our project sites we have procedures in place to collect waste on-site and then site-speciﬁc arrangements are made for the safe handling of these items. We commit to returning our project sites to the condition in which we found them, and therefore work very hard to minimise the impact we have. To further reduce emissions-to-air for speciﬁc projects, we have developed an after- treatment that can be applied to our existing ﬂeet at our customers’ request. In Japan we have used a special unit to reduce NOx by 90%, in order to meet Japanese air quality standards. This technology can be readily applied globally as an operational bolt on to our standard equipment. Refrigerant emissions In accordance with the timelines set out by the Montreal protocol, Aggreko has phased out chloroﬂuorocarbon (CFC) plant from its temperature control rental ﬂeet and is in the process of phasing out hydrochloroﬂuorocarbon (HCFC) plant. Hydroﬂuorocarbon (HFC) product, the replacement for CFC and HCFC, is available across our full equipment range and has been adopted as standard for all new ﬂeet. Pollution incidents Aggreko and its customers handle a considerable quantity of diesel fuel and the occurrence of accidental fuel spills is an area that we monitor very closely. The management of pollution is extremely important to Aggreko, both from a safety and environmental perspective. Our equipment is speciﬁcally designed to minimise the risk of ﬂuid spillage through features such as double-walled storage tanks and fail-safe valves. In the event of a fuel spill, corrective action is taken immediately to reduce any potential impact, with spill kits used by trained staff for small-scale spills and for large quantity spills the appointment of specialist contractors to assist with the collection of spilt ﬂuid and ground remediation. Following any instances, we review our processes and equipment to identify any potential improvements. Reporting of fuel spills is reviewed monthly by the Executive Committee. The performance measure used is the “Petroleum Release Rating” (PRR), which is calculated as follows: PRR = Litres of Diesel/Oil Spilt to Ground MW on Rent PRR performance in 2015 was 0.17, which is a signiﬁcant improvement over our 2014 performance and way ahead of our 2015 target of 0.35. Statement on United Nations Paris Conference The United Nations Climate Change Conference held at the end of the year in Paris resulted in a global agreement to pursue efforts to limit the increase in global temperature to 1.5°C. Overall in the energy sector the agreement will increase the emphasis on: (cid:333)(cid:3) Reducing greenhouse gas emissions from burning fossil fuels by: To support this most countries have already outlined how they propose to control their emissions of greenhouses gasses typically for the period up to 2030. For many developing countries the commitments made are conditional on receiving funding. – more efﬁcient generation and distribution; – the increased use of natural gas (that has a lower carbon ratio than diesel or coal); AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 51 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I SOCIAL CONTRIBUTION Context Aggreko is fortunate to work in a wide variety of countries and our social contribution is one way of giving back to the community. It’s about supporting the communities in which we work, whilst being respectful of different cultures. Our approach Each year, Aggreko engages in a number of initiatives which give back to the communities in which we work. During 2015, Aggreko contributed to a range of charitable, community and disaster relief organisations. Our policy encourages employees to support local initiatives, particularly those relating to children’s welfare, education and social health projects, and is based on giving donations to many organisations which are involved with the communities in which we work. Community investment We actively engage in supporting the local communities we work in and we do this in a number of ways. We are proactive in recruiting locally from the community; for example, in Medan in Indonesia, 90% of the workforce is comprised of local Indonesian staff. We provide extensive on-the-job training for new recruits and give them the skills to become technicians. This beneﬁts the business as we are able to train people on our equipment. It also helps us build relationships in the local community which are very important when we might be operating a contract for a number of years. Our charitable donations are largely focused on the education and wellbeing of children. In 2015, we contributed to a school and a community health centre in the vicinity of our Cerro Azul site in Panama. (cid:333)(cid:3) Renewables including solar, wind and biogas as part of the energy mix; and (cid:333)(cid:3) Stopping highly polluting practices like ﬂaring gas and either processing the gas for general use or burning it in a controlled and therefore cleaner way to produce power. There are likely to be some local legislation and incentives to drive these changes, but for many developing countries the priority will remain providing affordable power. 52 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 POWERING THE FUTURE OF ROMANIAN OIL & GAS 1 CHALLENGE 2 SOLUTION OMV Petrom is the largest oil and gas group in Eastern Europe. During the oil extraction process, associated gas is also produced and traditionally this is ﬂared as a waste product. In Romania, the Group faced environmental regulations around greenhouse gas emissions across its numerous remote sites and was therefore looking for a solution to minimise emissions and better exploit the available energy sources. In order to utilise the associated gas, Aggreko installed gas treatment skids which cleaned the gas by-product which was then used to power gas engines. The resulting excess power was then transferred into the national power grid enabling the customer to generate some additional income. Excess power is fed into the Romanian national grid Aggreko provided 25 generators AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 53 3 FUTURE The project has helped to secure the oil production in mature-ﬁeld environments as a result of reducing operating costs. Furthermore, the signiﬁcant reduction in greenhouse gas emissions is beneﬁcial to us all and helps to protect our environment for future generations. 54 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE A LETTER FROM OUR CHAIRMAN This year has been about re-organisation and creating a strong platform for sustainable profitable growth. Ken Hanna Chairman Introduction 2015 has been a challenging year for Aggreko with the impact of low commodity prices, in particular oil, together with slower economic growth in many emerging markets resulting in a disappointing ﬁnancial performance for the Group. Board and People As a result of the difﬁcult environment and our focus on efﬁciency, approximately 700 employees have left the Group. This was unfortunate but inevitable, given the impact of the external “macro” factors and the slowdown in our growth. I am pleased that our new CEO, Chris Weston, has settled in well and despite the “macro headwinds”, has quickly learnt the business and decisively launched a new set of business priorities for Aggreko. During the year, three Executive Directors left the business: Debajit Das, Regional Director Asia Paciﬁc and Australia left in October 2015; PRIORITIES OUR THREE PRIORITIES ARE DESIGNED TO DELIVER GROWTH AT ATTRACTIVE MARGINS Read more Page 4 The strategy review was an extremely comprehensive exercise led by Chris and the Executive team, supplemented by external resources. The Non-executive Directors were also heavily involved in the process and the new priorities were launched in August 2015. As a consequence of our new priorities, we reorganised the Group from three regions (Americas, EMEA and Asia Paciﬁc and Australia) into two business units, Rental Solutions and Power Solutions. Rental Solutions, representing approximately 40% of Group revenues, is a transactional business operating in developed markets providing power to customers who need it quickly and typically for a short period of time. Power Solutions, representing approximately 60% of Group revenues, is predominantly a “projects” business operating in emerging markets providing power to customers with larger and more complex requirements, typically for longer periods. The strategic direction of the Group will not change dramatically; we will still be focused on providing modular, mobile power and related solutions anywhere in the world. However, we have recognised that Aggreko needed to evolve in order to maintain our clear, market-leading position and the increased focus on three priorities of our customers, our technology and our efﬁciency are designed to deliver growth at attractive margins and returns. David Taylor-Smith, Regional Director EMEA left in August 2015; and Asterios Satrazemis, President Americas left in December 2015. Also during the year, Rebecca McDonald stepped down as a Non-executive Director after serving a three-year term. I would like to thank all four ex- colleagues for their service and contribution to Aggreko and to wish them well. Bruce Pool, who has been with Aggreko in a number of roles over 17 years, was appointed President Rental Solutions in December 2015 and Nicolas Fournier, who brings over 25 years of international experience including many years with the Lafarge Group, was appointed Managing Director Power Solutions in November 2015. Following the reorganisation of the Group into two business units, we considered what implications this should have for the structure and composition of the Board. After careful consideration, the Board decided that it was not necessary for the heads of the two new business units to be members of the Board. We do however believe that it is important for the Board to interact with the heads of the Rental Solutions and Power Solutions businesses and they will regularly attend Board meetings. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 55 OUR PEOPLE IN A SERVICE BUSINESS SUCH AS AGGREKO, IT IS THE ATTITUDE, SKILL AND MOTIVATION OF OUR STAFF WHICH MAKES THE DIFFERENCE BETWEEN MEDIOCRE AND EXCELLENT PERFORMANCE. Read more about our people Page 19 COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE Aggreko is committed to maintaining high standards of corporate governance; it is the way we do business and it is at the core of everything we do. Summarised below and explained in detail throughout this report we have described the key elements which we believe are essential for good corporate governance. We follow the UK Corporate Governance Code (the “Code”), as published by the Financial Reporting Council in September 2014 and are pleased to report that Aggreko has complied in full with all relevant provisions of the Code throughout the year. Leadership Your Board rigorously challenge strategy, performance, responsibility and accountability to ensure that every decision we make is of the highest quality. Read more about our leadership on Page 59 Effectiveness Your Board continuously evaluates the balance of skills, experience, knowledge and independence of the Directors. We ensure that all new Directors receive a tailored induction programme and we scrutinise our performance in an annual effectiveness review. Read more about our effectiveness on Page 64 Accountability All of our decisions are discussed within the context of the risks involved. Effective risk management is central to achieving our strategic objectives. Read more about our accountability on Page 66 Relations with Shareholders Maintaining strong relationships with our Shareholders, both private and institutional, is crucial to achieving our aims. We hold events throughout the year to maintain an open dialogue with our investors. Read more about Shareholders’ relations on Page 68 Remuneration Having a formal and transparent procedure for developing policy on remuneration for Executive Directors is crucial. Our remuneration policy aims to attract, retain and motivate by linking reward to performance. Read more about our remuneration on Page 78 In February 2016 we were delighted to appoint Dame Nicola Brewer as a Non-executive Director. Nicola is currently Vice Provost of University College London and has previous extensive geopolitical and diplomatic experience in a number of roles in the UK Foreign and Commonwealth Ofﬁce. She has worked all over the world and her experience in Africa, South America, Middle East and India will be of great beneﬁt to Aggreko. Nicola will also join the Ethics and Nomination Committees. Board evaluation This year, we conducted an external Board evaluation and whilst the review concluded that the Board was performing effectively there were three areas that were identiﬁed for increased Board focus and attention. More time will be allocated in the Board agenda for a more comprehensive review of our competitors and the market landscape, succession planning and talent management and a deeper discussion on risk and control. Dividend The Board is pleased to recommend a ﬁnal dividend for the year ended 31 December 2015 of 17.74 pence (2014: 17.74 pence). When added to the interim dividend of 9.38 pence this results in a full year dividend of 27.12 pence (2014: 27.12 pence). Looking ahead The market for our products and services remains large and the global “power gap” is forecast to increase. However, there is no doubt that signiﬁcant external factors are currently impacting our customers’ ability to invest in our solution. We are however fully committed to our business priorities and will continue to invest in our people to be in a position to take advantage of market opportunities. Finally, I would like to thank our employees for all of their hard work during 2015. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 56 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE OUR BOARD Ken Hanna Chairman Appointed: Non-executive Director in October 2010 and Chairman in April 2012. Chris Weston Chief Executive Ofﬁcer Appointed: January 2015. Experience Ken has international experience, bringing ﬁnancial and leadership expertise to Aggreko. He possesses knowledge of many different business sectors and is an experienced senior executive and leader, promoting robust debate and a culture of openness in the Boardroom. Ken is also currently Chairman of Inchcape Plc and Chairman of Shooting Star CHASE Charity. Until 2009, Ken spent ﬁve years as Chief Financial Ofﬁcer of Cadbury Plc. He has also held positions as Operating Partner for Compass Partners, Group Chief Executive at Dalgety Plc, Group Finance Director of United Distillers Plc and Group Finance Director of Avis Europe Plc. Experience Chris has experience at a senior level in the energy industry, proven leadership skills in a large international business and has consistently succeeded in driving performance and growth in his career. Prior to his appointment as Chief Executive Ofﬁcer in January 2015, Chris was Managing Director, International Downstream at Centrica plc, where he was the Executive Director responsible for the Group’s largest division. In this role Chris was operationally responsible for both British Gas in the UK and Direct Energy in the USA. He joined Centrica in 2001 after a successful career in the telecoms industry, working for both Cable & Wireless and One.Tel. Before that, Chris served in the Royal Artillery. He has a BSc in Applied Science, as well as an MBA and PhD from Imperial College London. Carole Cran Chief Financial Ofﬁcer Appointed: June 2014. Russell King Senior Independent Director Appointed: Non-executive Director in February 2009 and Senior Independent Director in April 2014. Experience Carole has corporate ﬁnance and accounting experience acquired over a number of years in senior ﬁnancial roles with considerable exposure to emerging markets. Carole was appointed to the Board as Chief Financial Ofﬁcer on 1 June 2014, following her appointment as Interim Chief Financial Ofﬁcer on 24 April 2014. Having joined Aggreko in 2004, her previous roles include Group Financial Controller and Director of Finance. A key member of the senior management team, Carole has worked to align ﬁnancial strategies with the strategic direction of the business. Carole was also appointed as a Non-executive Director of Halma plc on 1 January 2016. Prior to joining Aggreko, Carole spent seven years at BAE Systems, in a range of senior ﬁnancial positions, including four years in Australia. Carole is also a chartered accountant, having trained at KPMG whilst working in their audit divisions in the UK and Australia. Experience Russell brings international experience, acquired across a number of sectors including mining and chemicals, together with strong experience in strategy. An experienced Non-executive Director, Russell currently sits on the boards of Spectris Plc as Senior Independent Director and Remuneration Committee Chairman and Interserve plc as Senior Independent Director. He is Chairman of Hummingbird Resources plc and Sepura plc. He is also a senior adviser to Heidrick & Struggles and is a member of the Investment Association’s Executive Remuneration Working Group. Prior to this, Russell spent eight years at Anglo American Plc, latterly as Chief Strategy Ofﬁcer and spent 20 years in senior roles at ICI. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 57 Key to committee membership Audit Ethics Nomination Remuneration O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I Uwe Krueger Non-executive Director Appointed: February 2015. Diana Layﬁeld Non-executive Director Appointed: May 2012. Experience Uwe brings expertise of the engineering, services and renewable energy sectors. He is a physicist with a PhD and an honorary professorship from the University of Frankfurt and an honorary PhD from Heriot-Watt University. Most of his career has been spent leading engineering and consulting organisations. Uwe is currently Chief Executive Ofﬁcer of WS Atkins plc. He also sits on the boards of SUSI Partners AG and Ontex S.A. and lectures at the University of Frankfurt on renewable energy. Before joining WS Atkins plc, Uwe was Chief Executive Ofﬁcer of Oerlikon, Senior Advisor at Texas Paciﬁc Group, President of Cleantech Switzerland, and held various senior leadership positions at Hochtief AG. Experience Diana brings extensive international experience and detailed understanding of how to operate successfully across emerging markets, particularly in Africa and Asia. She also brings experience in sales, technology and strategy. Diana was formerly Chief Executive, Africa Region for Standard Chartered Plc. Previous positions held over 11 years at Standard Chartered include: Chief Operating Ofﬁcer for the Wholesale Bank; Group Head of Strategy & Corporate Development; and Global Head of Corporate Clients. Prior to Standard Chartered, Diana was Chief Executive Ofﬁcer of Finexia Ltd, a technology ﬁrm, and spent ﬁve years with McKinsey & Co, an international strategy consulting ﬁrm. Diana has a BA from the University of Oxford and a Master’s degree in International Economics and Public Administration from Harvard University. Ian Marchant Non-executive Director Appointed: November 2013. Robert MacLeod Non-executive Director Appointed: September 2007. Experience Ian brings knowledge of the domestic and international energy markets, along with a substantial understanding of associated strategic, ﬁnancial and regulatory issues. Until his retirement in June 2013, Ian spent 21 years at SSE Plc, most recently as Chief Executive, and prior to that as Finance Director. Experience Robert has corporate ﬁnance, accounting and industrial experience acquired over a number of years in senior ﬁnancial roles across the international engineering and chemicals sectors; he also has a detailed understanding of strategy and business development. Ian is an experienced Non-executive Director, currently serving as Chairman of John Wood Group Plc and former Chairman of Inﬁnis Energy Plc. He is also Chairman of Maggies Cancer Charity, a Member of the Prince’s Council of the Duchy of Cornwall and former Chairman of Scotland’s 2020 Climate Group. Dame Nicola Brewer Non-executive Director Appointed: February 2016. Experience Nicola Brewer brings extensive geo-political and diplomatic experience to Aggreko, having worked in many of the developing regions in which we operate, including Latin America, Asia and Africa. Nicola was a senior diplomat at the UK Foreign and Commonwealth Ofﬁce (FCO) and from 2009 to 2013 was High Commissioner to South Africa, Lesotho and Swaziland. Her FCO postings also included Mexico and India. She has served as Director General at the Department for International Development where she supervised all UK overseas bilateral aid programmes in Africa, Asia, Eastern Europe, the Middle East and Latin America. She was also Director General for Europe and on the Management Board at the FCO. She is currently the Vice Provost International at University College London. Robert was appointed as Chief Executive of Johnson Matthey Plc in June 2014, having served as Group Finance Director for ﬁve years. Prior to this, Robert served ﬁve years as Group Finance Director for WS Atkins Plc and one year as Group Financial Controller, having previously worked in a variety of senior ﬁnancial roles at Enterprise Oil Plc. Robert is also a chartered accountant, having trained at KPMG. Robert will retire as Non-executive Director with effect from the close of the 2016 AGM. Company Secretary Peter Kennerley Appointed: October 2008. Peter is our Group Legal Director & Company Secretary. Further details appear on page 58. Other Directors who served during 2015 Debajit Das Regional Director APAC until 1 August 2015 and Interim Managing Director, Asia until 15 October 2015 David Taylor-Smith Regional Director EMEA until 1 August 2015 Asterios Satrazemis President, Americas until 1 August 2015 and President, Rental Solutions until 17 December 2015 Rebecca McDonald Non-executive Director until 1 December 2015 58 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE OUR EXECUTIVE COMMITTEE The Executive Committee operates under the direction and authority of the Chief Executive Ofﬁcer; it is responsible for supporting him in all aspects of his role. The Executive Committee members have also been assigned responsibility for each of the principal risks and uncertainties outlined in the Strategic Report. We have decided to introduce our Executive Committee members in the corporate governance report as they have played a key role in the strategic review undertaken this year. The Executive Committee also sponsor and have overall accountability for delivering against the initiatives designed to underpin the new business priorities of customer, technology and efﬁciency to enhance our existing competitive advantages. From left to right: Tom Armstrong, Bruce Pool, Nicolas Fournier, Chris Weston, Carole Cran, Volker Schulte, Peter Kennerley Chris Weston Chief Executive Ofﬁcer Carole Cran Chief Financial Ofﬁcer Appointed: January 2015. Tenure with Aggreko: 1 year. Appointed: June 2014. Tenure with Aggreko: 11 years. Full biography appears on Full biography appears on Page 56 Page 56 Nicolas Fournier Managing Director, Power Solutions Appointed: November 2015. Tenure with Aggreko: less than 1 year. Nicolas has responsibility for the leadership of the Power Solutions business and overseeing the delivery of our new business priorities (customer, efﬁciency and technology) within Power Solutions. The Power Solutions business is our Power Projects business and our local businesses in developing markets: Latin America, Africa, Middle East, Russia, Caspian and Asia. Bruce Pool President, Rental Solutions Appointed: December 2015. Tenure with Aggreko: 17 years. Bruce has responsibility for the leadership of the Rental Solutions business, the Global Events team and Group Sales & Marketing. He is also responsible for overseeing the delivery of our new business priorities in relation to customer and efﬁciency within Rental Solutions. The Rental Solutions business is our local businesses in developed markets: North America, Europe and Australia Paciﬁc. Tom Armstrong Chief Information Ofﬁcer (CIO) and Group Programme Director Appointed: CIO August 2001 and Group Programme Director August 2015. Tenure with Aggreko: 14 years. Tom has responsibility for the implementation of our new business priorities (customer, technology and efﬁciency) programme designed to enhance our competitive advantage and deliver sustainable growth. Tom is also responsible for our IT infrastructure, cyber security and the Programme Management Ofﬁce (PMO). Peter Kennerley Group Legal Director & Company Secretary Volker Schulte Group Manufacturing and Technology Director Appointed: October 2008. Tenure with Aggreko: 7 years. Peter has overall responsibility for the management of legal and ethical risk and for supporting the Board in setting and maintaining standards of corporate governance. Appointed: August 2015. Tenure with Aggreko: less than 1 year. Volker is responsible for building on our current engineering capability in Dumbarton and focusing on enhancing our product strategy, product development and product management with the objective of delivering market leading products to our customers. Group Human Resources Director The Executive Committee also includes the role of Group HR Director, with responsibility for Human Resources and Internal Communications. This role is currently vacant with a new appointee set to take up the position in mid 2016. LEADERSHIP AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 59 Diversity metrics as at 31 December 2015 Executive/Independent Non-executive composition of Board Executive Non-executive* No. 2 5 % 29% 71% * As required by Code provision B.1.2, this calculation excludes the Chairman when looking at the independent Non-executive composition of the Board Building the pipeline for Board diversity Gender of senior management* Male Female No. 51 14 % 78% 22% * We have selected the composition of our Senior Leadership Team as we believe this to be a better reﬂection of our senior management structure than the composition of our subsidiary companies, which is made up of 84 males and ﬁve females. The Senior Leadership Team is made up of direct reports of the Executive Committee and other key roles. Gender of Board Gender of permanent employees* Male Female No. 6 2 % 75% 25% Tenure of Non-executive Directors Nationality diversity 0-3 years 3-6 years 6-9 years No. 2 1 2 % 40% 20% 40% Male Female No. 5,055 960 % 84% 16% * There are 102 nationalities across Aggreko’s permanent employees. European (inc Russia) Latin American North American Asian African Australian Middle Eastern % 26% 21% 19% 18% 11% 4% 1% Sector experience of Board Energy Rental Finance Engineering 75% 13% International 63% 25% 100% & O T H E R How we divide up our responsibilities Chairman Responsible for leading the Board, its effectiveness and governance. Setting the agenda to take full account of the issues and concerns of the Directors and ensuring the links between the Shareholders, Board and management are strong. Chief Executive Ofﬁcer Responsible for the day-to-day leadership, management and control of the Group, for recommending the Group strategy to the Board and ensuring that the strategy and decisions of the Board are implemented via the Executive Committee. Chief Financial Ofﬁcer Responsible for the day-to-day management of the ﬁnancial risk of the Group and providing general support to the Chief Executive Ofﬁcer including the operational performance of the business. Senior Independent Director Provides a sounding board for the Chairman, acts as an intermediary for the other Directors when necessary and is available to meet with Shareholders. Independent Non- executive Directors Company Secretary Constructively challenge the Directors and monitor the delivery of the Group strategy within the risk and control environment set by the Board. Supports the Chairman and Chief Executive Ofﬁcer and is available to all Directors for advice and support. Informs the Board and Committees on governance matters and responsible for development of corporate governance policies. I N F O R M A T O N I O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 60 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE LEADERSHIP Role of the Board and Committees The Board is responsible for the long-term success of the Group. It sets our strategy and oversees its implementation, ensuring decisions made reﬂect our risk appetite. It provides leadership and direction and has responsibility for corporate governance and the overall ﬁnancial performance of the Group. The Board is supported in this role by its principal committees, outlined in the table below. To retain control of key decisions, the Board has a schedule of matters reserved for the Board that only it can approve, with other matters, responsibilities and authorities delegated to its Committees. Read our schedule of matters reserved for the Board: www.aggreko.com/pdf/matters_reserved_for_the_board.pdf Board Audit Committee Monitors and reviews the integrity of Aggreko’s ﬁnancial statements, the relationship with the external auditor and oversight of our systems for internal control and risk management. Remuneration Committee Determines the remuneration for Executive Directors and the Executive Committee members and oversees Aggreko’s overall remuneration policy, strategy and implementation. Nomination Committee Monitors and reviews the composition and balance of the Board and its Committees to ensure Aggreko has the right structure, skills and experience in place for the effective management of the Group. Ethics Committee Monitors compliance and oversees the effectiveness of our ethical policies and procedures to ensure that Aggreko conducts its business with integrity and honesty and in accordance with the law. Committee report Page 70 Committee report Page 78 Committee report Page 76 Committee report Page 74 CEO Executive Committee Operates under the direction and authority of the CEO. It is responsible for supporting the CEO in all aspects of his role. The Executive Committee also sponsors and has overall accountability for delivering against the initiatives designed to underpin the new business priorities and enhance our existing competitive advantages. Disclosure Committee Supports the Board in approving the ﬁnal form of any announcement or statement relating to the performance of the Group. Finance Committee Responsible for funding and treasury decisions. Allotment Committee Responsible for decisions regarding the allotment of shares. Key to Committees Non-Board Board AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 61 Board meetings in 2015 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Board meetings In 2015, the Board held six scheduled meetings. At each meeting the Board received reports from: (cid:333)(cid:3) The CEO on strategic, operational and business developments and health and safety; (cid:333)(cid:3) The CFO on the performance of the business, capital structure, ﬂeet, budget, treasury and investor relations; and (cid:333)(cid:3) Each of the Board Committees on matters discussed at their meetings. The Board also received reports on our ethics compliance framework and new technology and product updates. In addition to the regular items, the key areas of focus were: Topic Strategy Activity/Discussion Actions arising Progress Undertake a review to analyse the full sustainable potential for the Aggreko business and the operating model required to deliver that potential. Review was sponsored by the CEO, with the support of the Executive Committee. An external adviser was appointed to provide analytical support. A number of workshops were held with the Executive Committee and a working session with the Senior Leadership Team to examine our markets, customers, technology, competition, operating model, cost base, our people and culture. Agreed three business priorities to deliver sustainable growth: customer, technology and efﬁciency. Agreed a number of initiatives to underpin the business priorities and enhance our existing competitive advantages. Approved the reorganisation of the business from the regional model of Americas, APAC and EMEA to two business units: Power Solutions and Rental Solutions. Appointed a Group Programme Director to lead the Programme Management Ofﬁce, to drive delivery of the initiatives underpinning the business priorities, provide challenge, assurance, risk management and regular reports to the Board on progress. Monitor opportunities for acquisitions. Reviewed a number of opportunities in 2015. Acquired ICS Group Inc (independent provider of portable climate control services in Canada) in September 2015. Read more about our business priorities Page 22 Risk management and internal control Review the Group risk register, risk appetite and effectiveness of the risk management process to ensure we have a robust, repeatable risk management framework which delivers an effective and efﬁcient approach to risk management and positively contributes to effective decision making and business growth. Clearly articulate our risk appetite, review the risk management framework, review and update our approach to identify and manage principal risks. Deﬁned our risk appetite and agreed a new risk management framework, taking account of the new UK Corporate Governance Code requirements. Revised management tool to capture, assess and proactively manage the risks facing Aggreko. Group risk register substantially updated to reﬂect our new organisational structure and business priorities. Robust assessment of our principal risks, risk management framework and internal control systems undertaken across the year. Agreed to continue to monitor best practice and reﬁne the risk management framework as appropriate. Read more about our risk management process and principal risks Page 26 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 62 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE LEADERSHIP Topic Activity/Discussion Actions arising Progress Leadership and employees Review composition of Board and Committees to maintain balance throughout the review of our business priorities. The reorganisation of the business required a number of changes to the structure of our Board and Executive Committee. Initiated a search for a candidate to ﬁll the permanent role of Managing Director, Power Solutions. Approved the appointment of Bruce Pool as President, Rental Solutions. Approved the appointment of Nicolas Fournier as Managing Director, Power Solutions. Discussed employee engagement, organisational culture and structure. Ensure continued employee engagement throughout the review of business priorities. Increased number of PULSE employee surveys to monitor the impact of the reorganisation on our employees. Senior Leadership Team established to feed into review of business priorities and improve cascade of communications to employees. Ongoing training and development for Board members. Encourage interaction between Board members and employees across the Group. Board visits to Singapore head ofﬁce, Singapore site, Medan site in Indonesia and Manufacturing facility in Dumbarton. Inductions completed by end of Q2 2015. Read more about our new appointments Read more about our visit to Singapore Inductions for new Directors: Chris Weston and Uwe Krueger. Page 54 Governance Discussed format for Board evaluation in 2015. Discussed impact of the new Market Abuse Regulation. Oversaw external audit tender process conducted by the Audit Committee. Page 63 Appointed an external facilitator, Boardroom Review, for the 2015 Board evaluation, discussed the outcome of the process and reviewed progress against Board evaluation actions for 2015. Ensure existing policies and procedures are in line with best practice and prepare for regulatory changes in 2016. Implemented all of the action points for 2015 identiﬁed as part of our internal evaluation in 2014 and all of the key priorities for 2015 identiﬁed in our 2014 Annual Report. Agreed 2016 action plan for the Board. Refreshed training for Persons Discharging Managerial Responsibilities on their obligations under the existing regime and likely impact of the Market Abuse Regulation. Adopted new share dealing code for employees and procedures for listing rules compliance. Reviewed the recommendations made by the Audit Committee. Appointed new external auditor (KPMG), subject to Shareholder approval at our 2016 AGM. Read more about our Board evaluation Page 64 Shareholders Strong engagement with stakeholders and investors. Actively support engagement opportunities and understand investor views. Provided a detailed update to the market, Shareholders and analysts on the reorganisation and business priorities. As well as reviewing regular feedback on the updates provided to the market and investor roadshows, we have also commissioned an investor audit to gather detailed feedback from our Shareholders, the results of which will be reviewed in early 2016. Complete the return of capital. Following Shareholder approval at the 2015 AGM, make a second offer to purchase B Shares. Following completion of the second purchase of B Shares, approved the conversion of any remaining B Shares to Ordinary Shares. Read more about our shareholder engagement programme Page 68 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 63 GOVERNANCE IN ACTION: BOARD MEETING IN SINGAPORE, JUNE 2015 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I The Board visiting a 40MW diesel Power Solutions site in Medan, Indonesia, June 2015. Site visits give the Board key insights into the business; at least one meeting each year is held at a location outside London or Glasgow to give the Directors an opportunity to review operations and meet local employees. In June 2015, the Board met in Singapore, the head ofﬁce location for our Asia business. During their visit the Directors received presentations from the Asia Paciﬁc leadership team, hosted a dinner with the Asia Paciﬁc leadership team to give the Board the opportunity to engage with those individuals informally and received a guided tour of the Singapore facility. This is our largest depot in Asia and the supply chain hub for Asia, supporting all of our Power Solutions sites and depots for parts and inventory. It is also a dedicated training centre for Asia with facilities for both technical and soft skills training. The Board also spent time with the operations team, learning about how they develop the capability of their people, operations processes and the efﬁciency management processes in place for the warehouse and ﬂeet to maximise utilisation and minimise inventory. The trip concluded with a visit to our 40MW diesel site in Medan, Indonesia. The Board learnt about the management of the site, the on-site project undertaken to convert from standard G3 diesel engines to higher efﬁciency G3+ diesel engines and the process to train and employ local Indonesian staff resulting in 90% of the site being operated by local Indonesian staff. The Board also met the local Indonesian team and the customers for the Medan site. Key priorities for 2016 (cid:333)(cid:3) Closely monitor the work of the Programme Management Ofﬁce to ensure the initiatives underpinning the business priorities are delivered on time and in accordance with the plan. (cid:333)(cid:3) Review and approve succession plans and talent management to take account of the reorganisation to Power Solutions and Rental Solutions. (cid:333)(cid:3) Implement the key recommendations of the externally facilitated Board evaluation. (cid:333)(cid:3) Plan a Board visit to the Rental Solutions business in North America to review the North American business and engage with local employees. We will report on this in our 2016 Annual Report. Board attendance in 2015 Name of Director Ken Hanna Chris Weston Carole Cran Debajit Das1 Asterios Satrazemis2 David Taylor-Smith3 Russell King Uwe Krueger4 Diana Layﬁeld Robert MacLeod Ian Marchant Rebecca McDonald5 Board meetings Percentage attended A 6 6 6 5 6 3 6 6 6 6 6 5 B 6 6 6 5 6 3 6 5 6 6 6 5 100% 100% 100% 100% 100% 100% 100% 83% 100% 100% 100% 100% A – maximum number of meetings Director could have attended. B – actual number of meetings Director attended. 1 Debajit Das retired from the Board on 15 October 2015. 2 Asterios Satrazemis retired from the Board on 17 December 2015. 3 David Taylor-Smith retired from the Board on 1 August 2015. 4 Uwe Krueger joined the Board on 1 February 2015 and had a pre-existing commitment for the June meeting. 5 Rebecca McDonald retired from the Board on 1 December 2015. 64 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE EFFECTIVENESS GOVERNANCE IN ACTION: BOARD VISIT TO MANUFACTURING INDUCTION, DEVELOPMENT AND SUPPORT We make sure that all new Directors receive a full, formal and tailored induction on joining the Board. We also plan our Board calendar to ensure that Directors are able to visit different business locations and are briefed on a wide range of topics throughout the year. These topics range from those with particular relevance for our business, such as world energy demand, to more general matters such as developments in corporate governance. We recognise that our Directors have a diverse range of experience, and so we encourage them to attend external seminars and brieﬁngs that will assist them individually. The Board at our Manufacturing facility in Dumbarton, Scotland, April 2015. Whilst the Board was in Scotland for the AGM in April 2015, they took the opportunity to visit our manufacturing facility in Dumbarton. As part of the tour the Board attended a number of workshops, run by the relevant manufacturing manager. The workshops included: health and safety, development of a new gas generator, manufacturing developments in 2015, future capability and the apprentice programme, where they also met a number of current apprentices. Typical induction programme for a Non-executive Director Our induction programme aims to give new Non-executive Directors a thorough grounding in Aggreko’s business and a clear understanding of their roles and responsibilities. Each newly appointed Director will spend time with the Company Secretary to ensure an understanding of directors’ duties, conﬂicts of interest, corporate governance, Board procedures, Group policies and the use of our electronic Board packs. Whilst we do take into account the Directors’ background and experience, the induction programme will include a broad introduction to our business, on a Group and business unit basis, and areas of signiﬁcant risk. Key elements include meeting the Executive Directors, senior management in the Group and senior management within the business units and visiting our main sites for brieﬁngs on Group strategy and the business units. We also arrange for new Non- executive Directors to meet the External Audit Partner. This year’s Board evaluation exercise In line with the UK Corporate Governance Code, we undertake a formal and rigorous annual evaluation of our own performance and that of our Committees and Directors each year. The evaluation is required to be externally facilitated at least every three years. Aggreko’s last externally facilitated evaluation took place in 2011, and so we were due another one in 2014. However, the Board agreed to postpone the externally facilitated evaluation until Autumn 2015, principally as a result of the signiﬁcant changes to the Board composition. In August 2015, we appointed Dr Tracy Long of Boardroom Review Limited to facilitate our 2015 Board evaluation in line with the UK Corporate Governance Code. Neither Dr Tracy Long nor Boardroom Review Limited has any other connection with Aggreko. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 65 Board evaluation framework STEP ONE ONE Brieﬁng and preparation (cid:333)(cid:3) The Chairman prepared a comprehensive brief (cid:333)(cid:3) The Company Secretary provided copies of for Dr Long. governance materials: policies; Board papers; minutes, etc. for review. STEP TWO TWO Interviews and observation (cid:333)(cid:3) Dr Long conducted individual interviews with each member of the Board and the Company Secretary. (cid:333)(cid:3) Dr Long attended the October Board meeting as an observer. THREE STEP THREE Presentation of ﬁndings and discussion (cid:333)(cid:3) Dr Long prepared a draft discussion (cid:333)(cid:3) Dr Long then discussed the document with document, identifying strengths, challenges and recommendations in the areas of: – Strategy; – Risk and control; – People; each member of the Board. (cid:333)(cid:3) Dr Long then presented her ﬁndings at the December Board meeting. (cid:333)(cid:3) The Chairman led a discussion of those ﬁndings, and of the views of Directors generally. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I STEP FOUR FOUR Conclusion and actions – Board contribution (Chairman, CEO and culture); and – Board basics (agendas and information). The main conclusions we drew from the external ﬁndings and our internal discussion were that: we made efﬁcient use of time; there was an open and uninhibited culture and we paid attention to the right issues. But there were a number of areas where the Board could increase its effectiveness and improve the quality of debate and decision making. In line with our strategic priorities, we agreed we should focus on three main areas: (cid:333)(cid:3) Strategic Issues (including competitive and market landscape); (cid:333)(cid:3) Risk and Control; and (cid:333)(cid:3) Succession and Talent Management. In addition, there were a series of recommendations of a more “housekeeping” nature designed to improve Board logistics and basics. At our March 2016 Board meetings we agreed the following priorities for 2016: Strategic Issues (including competitiveness and market landscape) (cid:333)(cid:3) A comprehensive Strategy update to include a review of our major customers and competitors. (cid:333)(cid:3) A regular review of the technology aspects of the strategic landscape. (cid:333)(cid:3) Development of strategic KPIs to report our progress against our business priorities. Risk and Control (cid:333)(cid:3) Establish a Risk Committee as a sub- committee of the Executive Committee, chaired by Carole Cran, the Chief Financial Ofﬁcer. (cid:333)(cid:3) Clarify internal responsibility for Risk processes under the Group Treasurer. (cid:333)(cid:3) Continue to review the Risk Register twice each year. Succession and Talent Management (cid:333)(cid:3) Annual review of Executive Committee succession and succession and talent management for the Senior Leadership. (cid:333)(cid:3) Continue to encourage the Board to attend events and visit locations in order to meet other members of the Senior Leadership Team. & O T H E R I N F O R M A T O N I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 66 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE ACCOUNTABILITY RISK MANAGEMENT AND INTERNAL CONTROL The Board is responsible for the Group’s risk management framework and internal control systems. The Group operates deﬁned internal control systems across ﬁnance, operations and compliance, with key controls identiﬁed and assessed across the year. Whilst predominantly conducted by Group Internal Audit, internal control teams operate within the business to monitor and assess the effective operation of these controls. The Board, via the Audit Committee, monitors the internal control systems on an ongoing basis. The process is designed to manage rather than eliminate risk, and can only provide reasonable and not absolute assurance against material misstatement or loss. A full review of the risk register and resulting principal risks was completed during June and July 2015 for our half year reporting. This exercise continued following the announcement of our reorganisation to Power Solutions and Rental Solutions and was applied again at the year end. Details of the process the Board has in place to identify, evaluate and manage signiﬁcant risks faced by the Group can be found in the risk section of the Strategic Report. This process has been in place for the period under review and up to the date of approval of the Annual Report and Accounts. In addition, we monitor the effectiveness of the risk management framework and internal control systems on an ongoing basis. No signiﬁcant failings or weaknesses have been identiﬁed. Further detail on the process for ﬁnancial controls can be found in the Audit Committee Report. Read about our risk assessment process, risk appetite statement, principal risks and viability statement Page 26 Read more in our Audit Committee report Page 70 In 2015, the Board, with the support of the Audit Committee and Group Internal Audit, reviewed and updated our approach to identifying and managing principal risks. The objective in improving our risk management framework was to provide the Board, Audit Committee and Executive Committee with a more useful management tool to capture, assess and proactively manage the risks we face. The review also ensured that we would be able to comply with the new requirement in the UK Corporate Governance Code for a viability statement, which requires an interconnected approach, taking account of our business model and strategy, ensuring that they are aligned with our risk appetite, our supporting risk framework and controls to mitigate risk. Risk appetite: As part of the review of our risk management framework, we developed our approach to risk appetite in line with the UK Corporate Governance Code. By articulating the type and level of risk we are willing to take in order to achieve our strategic objectives, we aim to support consistent, risk-informed decision making across the Group. In order to deﬁne our risk appetite, Group Internal Audit held a number of sessions with the Executive Committee, before presenting a risk appetite statement to the Board for approval in December 2015. Once approved, our risk appetite was incorporated into the overall risk management framework and used to monitor business activities and decision-making. In future the Board and Executive Committee will monitor compliance with the risk appetite by receiving regular reports on our risk appetite against agreed metrics. The risk appetite will also be subject to annual review and challenge. Risk management framework: A number of improvements were also made to the wider risk management framework as part of this review. They included: formalising the process for compiling the risk register, removing any ambiguity; introducing risk categories to aid the risk identiﬁcation process; clarifying the notions of gross and net risk to assist in focusing assurance efforts; improved deﬁnition of impact scoring; requiring an assessment of key controls for each risk with actions for further risk mitigation captured in the register; and updating the overall format of the risk register to improve usability. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 67 The Board recognises its responsibility to present a fair, balanced and understandable assessment of Aggreko in all of our reporting obligations. This responsibility covers the Annual Report and extends to the interim report and other regulatory announcements. The Directors consider this Annual Report, taken as a whole, to be fair, balanced and understandable, providing the information necessary for Shareholders to assess the Company’s performance, business model and strategy. In arriving at this position, the Board asked the Audit Committee to review and conﬁrm the process we have in place to support this assessment. The Audit Committee conﬁrmed that we have a robust approach in place to support the fair, balanced and understandable assessment. GOVERNANCE IN ACTION: FAIR, BALANCED AND UNDERSTANDABLE REPORTING FAIR, BALANCED AND UNDERSTANDABLE REPORTING For the 2015 Annual Report, this process included: (cid:333)(cid:3)Comprehensive management and statutory accounts processes, with written conﬁrmations provided by the regional senior management teams on the “health” of the ﬁnancial control environment; (cid:333)(cid:3)Detailed reviews of the Annual Report and Accounts undertaken at different levels of the Group and by the senior management team that aim to ensure consistency and overall balance; (cid:333)(cid:3)A veriﬁcation process, involving our internal audit team, dealing with the factual content of the Annual Report; (cid:333)(cid:3)A key accounting judgements paper covering contract and tax provisions, along with a summary of any changes in our accounting policies for 2015; and (cid:333)(cid:3)Both the Audit Committee and Board received an early draft of the Annual Report to enable time for review and comment. THE DIRECTORS CONSIDER THIS ANNUAL REPORT, TAKEN AS A WHOLE, TO BE FAIR, BALANCED AND UNDERSTANDABLE. & O T H E R I N F O R M A T O N I O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 68 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE RELATIONS WITH SHAREHOLDERS Shareholder engagement calendar 2015 March April May June Roadshows in the UK, USA and Canada following the preliminary results announcement Citi Business Services Conference Roadshows in France, Switzerland, the Netherlands, Japan and China AGM Bank of America Merrill Lynch Business Services Conference Analyst and investor site visit to Dumbarton Roadshow in the USA Conference calls and meetings with investors following the ﬁrst quarter trading update How our investors can ﬁnd us Online 2015 Report www.annualreport2015.aggreko.com Our Group website www.aggreko.com/investors Download the IR app www.aggreko.com/investors AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 69 Key to committee activities Half year results Investor meetings Full year results AGM Trading update Site visit Shareholder engagement calendar 2015 August September October November December Strategic priorities announcement Conference calls and meetings with investors following the interim results and strategic priorities announcement Roadshows in the USA, UK and France following the interim results and strategic priorities announcement UBS Business Services conference Bernstein Strategic Decisions Conference Oil and gas investor site visit to Houston with Morgan Stanley Introductory roadshow in Canada and the USA Conference calls and meetings with investors following the third quarter trading update Analyst and investor site visit to Dumbarton Morgan Stanley Business Services Conference Credit Suisse European Business Services and Transport Conference UBS Equipment Rental Conference During the year, the Head of Investor Relations and senior management conducted almost 460 meetings, met or spoke to over 400 institutions and participated in seven conferences. Meetings are conducted by at least one of the Chairman, Chief Executive Ofﬁcer, Chief Financial Ofﬁcer or Head of Investor Relations and these meetings occurred in a number of different locations around the world to reﬂect the global nature of our Shareholder base; during the year we met investors in the UK, USA, Canada, France, Switzerland, the Netherlands, Belgium, Italy, China, Hong Kong and Japan. We also aim to include broader management in investor meetings throughout the year, to allow investors to gain a broader perspective of management and the business. We also enjoy meeting and engaging in discussion with our private Shareholders at the Company’s Annual General Meeting (AGM). The 2016 AGM will be held in Glasgow on Thursday 28 April 2016. What our Shareholders have asked us about this year: Power Solutions Utility pipeline and prospects Exposure to oil and gas and emerging markets Strategic priorities Performance outlook Organisational changes and morale Cash ﬂow, capital expenditure, debt and dividend cover Shareholder returns Understanding what analysts and investors think about us is a key part of driving our business forward and we actively seek dialogue with the market. This provides us with the opportunity to communicate with analysts and investors and to understand their views on the Company’s strategy and performance. The Board receives regular updates on the views of Shareholders through brieﬁngs and reports from the Head of Investor Relations, Directors, Makinson Cowell, our retained advisers, and the Company brokers. In addition, our Senior Independent Director, Russell King, is available to meet Shareholders if they wish to raise any issues separately. Towards the end of the year the Board commissioned Makinson Cowell to conduct an independent report on investor perceptions of the Group, its management, strategy and governance. Concurrently, Makinson Cowell also undertook a comprehensive benchmarking exercise on all aspects of the Investor Relations programme. The results were presented to the Board in early 2016, with suggestions and improvements being taken forward by management. Results and other news releases such as contract wins and changes to our strategy are published via the London Stock Exchange’s Regulatory News Service (RNS). Any announcement published via RNS is also available on the Group’s Investor Relations website at www.aggreko.com/investors; a subscription service is available for interested parties to receive these updates by email. We continually seek to enhance our communications and in early 2015 we launched an Investor Relations and Media App that can be downloaded to tablet and smartphone devices; this enables a wider audience to view results, announcements, presentations, videos, webcasts and images on the move. The Group has an ofﬁce in London, where the Head of Investor Relations is based, and maintains ongoing relations with analysts and investors through telephone calls and meetings. Throughout 2015, we have continued to maintain open and transparent communication with analysts and investors through meetings, presentations, conferences and site visits. In August 2015, we announced our new strategic priorities with a presentation and networking event in London. Read more about our strategy Page 22 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 70 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE AUDIT COMMITTEE REPORT Robert MacLeod Audit Committee Chairman THE ROLE OF THE AUDIT COMMITTEE IS TO MONITOR AND REVIEW THE INTEGRITY OF THE GROUP’S FINANCIAL STATEMENTS TO DETERMINE WHETHER THE JUDGEMENTS TAKEN BY MANAGEMENT ARE APPROPRIATE. WE ALSO MONITOR THE INDEPENDENCE AND EFFECTIVENESS OF THE EXTERNAL AUDITOR AND OVERSEE THE GROUP’S SYSTEMS FOR INTERNAL CONTROL AND RISK MANAGEMENT. 2015 Key achievements (cid:333)(cid:3) Oversaw the external audit tender process, making a recommendation to the Board on the appointment of a new external auditor. (cid:333)(cid:3) Reviewed and ensured compliance with the new UK Corporate Governance Code requirements for going concern and viability statements. (cid:333)(cid:3) Reviewed the effectiveness of the risk management process. (cid:333)(cid:3) Monitored the changes made to the ﬁnancial control environment following the reorganisation. (cid:333)(cid:3) Provided oversight on the Group’s risk management processes, receiving presentations from the Group Financial Controller on ﬁnancial controls under the new structure, the Director of Tax on the structure of the tax team, strategy and control framework and the Chief Information Ofﬁcer on our cyber governance framework. Areas of focus for 2016 (cid:333)(cid:3) Oversee the transition of responsibilities to the new external auditor. (cid:333)(cid:3) Continue risk management oversight with presentations scheduled from the Directors of Finance for Power Solutions and Rental Solutions. (cid:333)(cid:3) Managing the transition of responsibilities for the Chairmanship of the Committee from Robert MacLeod to Ian Marchant. Audit Committee terms of reference: www.aggreko.com/pdf/audit-committee-terms-of-ref-oct-2014.pdf Introduction by Robert MacLeod, Audit Committee Chairman The Audit Committee is currently made up of four independent Non-executive Directors. I have been Chairman of the Committee since December 2008; I am a chartered accountant and, until my appointment as Chief Executive of Johnson Matthey in June 2014, I served as Johnson Matthey’s Group Finance Director for ﬁve years. The members of the Committee, together with my own experience, bring an appropriate balance of ﬁnancial and accounting experience with a deep understanding of Aggreko’s business and markets. Diana Layﬁeld, Ian Marchant and I are the members of the Audit Committee identiﬁed with recent and relevant ﬁnancial experience. At our scheduled meetings we also invite the Chairman, Chief Executive Ofﬁcer and Chief Financial Ofﬁcer to attend, together with the Group Financial Controller, Director of Internal Audit and the External Audit Partner. In 2015, the Committee held three scheduled meetings and several ad hoc meetings. The ad hoc meetings related to agreeing the process and decision making criteria for the external audit tender and then following the tender process, reviewing the proposals and agreeing on a recommendation to make to the Board. The scheduled meetings are aligned to the Group’s ﬁnancial reporting timetable and allow sufﬁcient time for full discussion of key topics and to enable early identiﬁcation and resolution of risks and issues. To the left there is a summary of the key actions of the Committee in 2015 and intended areas of focus in 2016. Further detail on our actions in 2015 are included in the full Audit Committee report detailed over the next few pages. Role of Audit Committee (cid:333)(cid:3) Monitor the integrity of the ﬁnancial statements, including reviewing signiﬁcant ﬁnancial reporting issues and judgements alongside the ﬁndings of the external auditor. (cid:333)(cid:3) Advise the Board on the effectiveness of the fair, balanced and understandable review of the Annual Report. (cid:333)(cid:3) Oversee the relationship with the external auditor, external audit process, nature and scope of the external audit, including their appointment, effectiveness, independence and fees. (cid:333)(cid:3) Oversee the nature and scope of internal audit, ensuring coordination with the activities of the external auditor. Members in 2015 Robert MacLeod – Audit Committee Chairman Russell King – Senior Independent Director Diana Layﬁeld – Non-executive Director Ian Marchant – Non-executive Director Meetings attended control, ﬁnancial reporting and risk management. (cid:333)(cid:3) Review the effectiveness of the Group’s systems for internal ﬁnancial CMA Order on Audit Committee compliance The Company has complied with the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibility) Order 2014 during the year. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 71 Main Activities of the Audit Committee during the year Financial reporting During the course of the year, the Committee met with the external auditors and management as part of the 2015 Annual and Interim Report approval process. We reviewed the draft ﬁnancial statements and considered a number of supporting papers, including: information presented by management on signiﬁcant accounting judgements to ensure all issues raised have been properly dealt with; key points of disclosure and presentation to ensure adequacy, clarity and completeness; external audit reports; documentation prepared to support the viability statement and going concern statements given on pages 33 and 113; and information presented by management on the process underpinning the fair, balanced and understandable assessment and conﬁrmation made by the Board on page 67. The external auditor carried out their work using an overall materiality of £12.6 million, as stated in their report on page 102, and conﬁrmed to the Committee that there were no material unadjusted misstatements. We also agreed with the external auditor that they would inform us of any unadjusted misstatements above £1 million, as well as misstatements below that amount that warranted reporting for qualitative reasons. None were reported to the Committee. Following completion of the above steps, we agreed to recommend the approval of the 2015 Annual and Interim Reports to the Board. The primary areas of judgement considered by the Committee in relation to the 2015 Annual Report were: Signiﬁcant ﬁnancial judgements for 2015 Contract provisions Direct and indirect tax provisions One of the biggest risks facing the Group is non-payment by customers under some of the larger contracts in our Power Solutions Utility business (see Principal Risks and Uncertainties – Failure to collect payment or to recover assets on page 33). Identiﬁed as an area of judgement in our report last year, contract receivables and associated provisions within Power Solutions Utility is a key risk for the Group, and one of the areas of particular external audit focus. The Group policy is to consider each debtor and customer individually, within the relevant environment to which it relates, taking into account a number of factors, in accordance with accounting standards. The Group’s tax strategy is to manage all taxes, both direct and indirect, such that we pay the appropriate amount of tax in each country where we operate whilst ensuring that we respect the applicable tax legislation and utilise where appropriate any legislative reliefs available. However, given the varied, complex and often uncertain nature of tax rules in certain countries, in particular in those in which we have our Power Solutions business, we recognise that it makes sense to carry an appropriate level of provision for both direct and indirect taxes. The tax team monitors the status of tax risks monthly and in detail at the half and full year. This monitoring process together with consideration of any relevant legislative change is then used to determine the appropriate level of provisions. How the Audit Committee addressed those judgements Contract provisions Direct and indirect tax provisions The Committee addressed contract provisions by considering an accounting judgements paper at the August 2015 and March 2016 meetings, which was tabled by the Chief Financial Ofﬁcer. This detailed the latest position of debtors outstanding at the half year and year end and gave an assessment of the likelihood of collecting future payments. It was against this assessment that the Audit Committee assessed the adequacy of the provisions. PricewaterhouseCoopers reported on these contract provisions at both the August 2015 and March 2016 meetings in the context of the half year review and the year end audit respectively. In addition, the Committee is aware that the Executive Committee receives a report on contract exposures each month and has assessed the Group’s processes for calculating and regularly monitoring contract risk provisions. We concluded that the judgements and estimates were reasonable and appropriate. The Committee addressed tax provisions by considering an accounting judgements paper at both the August 2015 and March 2016 meetings, which was tabled by the Chief Financial Ofﬁcer. PricewaterhouseCoopers reported on these provisions at the August 2015 meeting in the context of the half year review, and at both the December 2015 and March 2016 meetings in the context of the year end audit. We have monitored and assessed the Group’s processes for calculating and regularly monitoring tax provisions. We concluded that the judgements and estimates were reasonable and appropriate. More information on Aggreko’s tax strategy and payments in 2015 can be found in the ﬁnancial review on page 40. & O T H E R External auditor The Committee is responsible for making recommendations to the Board in relation to the appointment of our external auditor. We also approve the audit plan, terms of engagement and fees and assess their effectiveness. Audit plan PricewaterhouseCoopers presented their audit plan at the August 2015 meeting, setting out the scope and objectives of the audit together with an overview of the planned approach, an assessment of the Group’s risks and controls and proposed areas of audit focus. In setting the audit plan, PricewaterhouseCoopers work with Internal Audit and management at a Group and business unit level to identify risk areas for the audit to determine where audit effort should be focused. I N F O R M A T O N I O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 72 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE AUDIT COMMITTEE REPORT Effectiveness The Committee believes that the independence, objectivity and effectiveness of PricewaterhouseCoopers and their processes is safeguarded and strong. This is displayed through their robust internal processes, their continuing challenge, focused reporting and their discussions with management and the Committee. During 2015, the Committee met with PricewaterhouseCoopers without management present and the Committee Chairman also maintained regular contact with the audit partner throughout the year. We assess PricewaterhouseCoopers through the quality of their audit ﬁndings and management responses. We also use an internal questionnaire sent to Committee members, the Business Unit Finance Directors and Group Functional Heads in December 2015; respondents were asked to rate PricewaterhouseCoopers effectiveness in a number of areas, including robustness of the audit process, quality of delivery and quality of people and services. Results were collated and presented at the March 2016 meeting of the Committee for discussion. Management concluded that there had been appropriate focus and challenge on the primary areas of audit risk and assessed the quality of the audit process to be effective. The Committee concurred with this view. The Committee has identiﬁed the 2016 ﬁnancial year as a potential period of increased risk given the transition of the statutory auditor and will focus closely on this matter throughout the year. Non-audit services To safeguard the objectivity and independence of the external auditor from becoming compromised, the Committee has a formal policy governing the engagement of the external auditor to provide non-audit services. Non-audit services are normally limited to assignments that are closely related to the annual audit or where the work is of such a nature that a detailed understanding of the Group is necessary. Any proposal to use the external auditor for non-audit work requires prior approval of the Chief Financial Ofﬁcer and depending on the nature of the service and fee involved, authorisation may also be required from the Committee Chairman or the Committee. The non-audit services policy is available on our website at: www.aggreko.com/pdf/Non_audit_service_policy.pdf Non-audit fees are monitored by the Committee and this year we were satisﬁed that all non-audit work undertaken was in line with our policy and did not detract from the objectivity and independence of the external auditor. The majority of the non-audit work carried out by PricewaterhouseCoopers during the year related to tax and minor local compliance services. As a percentage of the overall audit fee for the year, other assurance services and non-audit fees are 16% (2014: 26%). Further details of the fees paid to the external auditor are set out in Note 6 to the accounts on page 121. Tender of external audit PricewaterhouseCoopers have been the Company’s external auditor since 1997 when Aggreko plc was incorporated, upon the de-merger from the Salvesen Group. The Committee has closely followed the legislative developments on audit tendering and rotation from the EU and the Competition & Markets Authority and at our March 2015 meeting we discussed the new requirements. Despite the ﬂexibility offered by the transitional arrangements to delay a rotation until 2023, we agreed to put the external audit out to tender in 2015, given the changes in management and to ﬁt in with the timing of the next rotation of the current audit partner, scheduled for 2016. The tender process and the Committee’s involvement in that process is outlined in the below diagram. Robert MacLeod and Carole Cran met with a number of ﬁrms when making the decision as to which ﬁrms should be invited to tender. In making that decision a number of factors were considered, including: ability and appetite for our audit, ability to be independent in time for 1 January 2016, our own non-audit services policy and the list of prohibited non-audit services under the EU regulations, and whether a joint audit would be appropriate for Aggreko. Following that decision we decided not to invite PricewaterhouseCoopers to tender in light of the longevity of their appointment and not to invite any ﬁrm that would require a joint audit due to considerable concerns around audit quality, consistency of reporting and day-to-day practicalities. March Audit Committee decision to tender. April Audit Committee agreed approach to tender, key decision criteria and appointed a selection panel, with a majority of Non-executive Directors (Robert MacLeod, Ian Marchant and Carole Cran). Robert MacLeod and Carole Cran met with a number of ﬁrms to ascertain ability and appetite for our audit and decide which ﬁrms to invite to tender. May Invitation to tender sent to KPMG, Deloitte and EY. Data room opened: contained documentation to allow the ﬁrms to gain a better understanding of how the Group is structured and operates. Information gathering meetings between the ﬁrms and Aggreko’s ﬁnancial leadership team to obtain information and insight into the way the Group operates. June Meeting between the ﬁrms engagement partners and Chris Weston and Carole Cran to discuss how the ﬁrms would structure their audit at an operational level and work with our management team. Written proposals received outlining the audit team, geographic footprint alignment, audit approach, transition approach/ challenges, independence considerations and fee proposal. Review of the written proposals to shortlist two ﬁrms to present to the Audit Committee selection panel. Shortlisted ﬁrms present on audit approach, with a question and answer session to the Audit Committee selection panel. Audit Committee selection panel meeting to evaluate the ﬁrms using agreed key decision criteria. July Audit Committee selection panel make recommendation to the Board. Board accepts recommendation of the Audit Committee selection panel and announces the decision to the London Stock Exchange. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 73 Viability statement During the course of 2015, the Committee, along with the Board, has received a number of detailed updates in relation to the requirements for the new viability statement. Updates included agreeing the methodology and approach, length of the assessment period, risks and uncertainties to be modelled, qualiﬁcations and assumptions made. An early draft of the viability statement was circulated to the Committee and Board in late January 2016 for review, to enable timely sign off of the viability statement at the March 2016 meeting. Read our viability statement on page 33. Internal audit Internal Audit undertakes ﬁnancial, operational and strategic audits across the Aggreko Group using a risk based methodology and in accordance with the changing risk proﬁle of the Company. The Committee reviewed and agreed the programme of 2015 internal audit work, including the proposed approach, coverage, and allocation of resources. We also reviewed progress, audit results and remedial actions during the year through reports at each meeting. The Committee assessed the effectiveness of the internal audit function by reviewing their reports, progress against the 2015 plan, ensuring implementation of the improvements identiﬁed from the 2014 internal review and meeting with the Director of Internal Audit without management being present. In line with the Institute of Internal Auditors’ guidance, we plan to undertake an external evaluation of Internal Audit in 2016, with internal evaluations in the intervening years; our last external evaluation was undertaken in 2011. Speaking up The Group Ethics Policy, supported by a separate Speaking Up Policy, encourages all employees to report any potential improprieties in ethical standards via our international whistle-blowing hotline. All matters reported are investigated and where appropriate, we ask Internal Audit to investigate the issue and report to us on the outcome. We also receive reports on hotline call volumes and the general nature and location of matters reported. We review these processes each year, and can conﬁrm that they are appropriate for the size and scale of the Group. Review of the effectiveness of the Audit Committee The independent Board evaluation exercise undertaken in 2015 conﬁrmed that the Audit Committee was working effectively. & O T H E R I N F O R M A T O N I Having concluded the process in June 2015, the Committee recommended to the Board that KPMG be appointed as the Group’s statutory auditor for the ﬁnancial year ending 31 December 2016. The Board accepted the Audit Committee’s recommendation, accordingly, a resolution proposing the appointment of KPMG as our auditor will be put to the Shareholders at the 2016 AGM. There are no contractual obligations restricting the Committee’s choice of external auditor and we do not indemnify our external auditor. Following the external audit tender process and in line with our non- audit services policy, Group Finance put our global tax compliance work out to tender in August 2015, resulting in a change of ﬁrm from KPMG to PricewaterhouseCoopers. Risk management and internal control Aggreko’s objective is to have a strong and regularly monitored control environment that minimises ﬁnancial risk and, as part of our responsibilities, we review the effectiveness of systems for internal ﬁnancial control, ﬁnancial reporting and risk management. In 2015, we reviewed the risk management process in detail with Group Internal Audit and oversaw the implementation of a new risk management framework. Further detail on the process for the new risk management framework can be found in the accountability section of the Corporate Governance Report on page 66 and further details on the new risk management framework can be found in the risk section of the Strategic Report on page 26. We aim to ensure that the same high standards are applied throughout the business with the framework set at Group level. Across the Group, there is a strong focus on training and development and this helps to underline the standards that we require. We then monitor this process through regular ﬁnancial control reviews and a ﬁnancial control checklist. This also enables us to set targets and identify and monitor areas for improvement. We agreed ﬁnancial control deliverables for 2015, as proposed by the Chief Financial Ofﬁcer, including addressing countries with lower ﬁnancial control checklist scores and ensuring sufﬁcient support at a Group or regional level for our less mature businesses. At the end of the year, we reviewed progress for 2015 and agreed proposed priorities for 2016. Our ﬁnancial control priorities for 2016 have been set after going through the following process: (cid:333)(cid:3) Setting out the key challenges for ﬁnancial control and then reviewing the control environment and risk mitigation in place to help address these challenges; (cid:333)(cid:3) Reviewing the 2015 ﬁnancial control checklist scores for all of our locations globally and cross referring them against the 2015 internal audit reports; (cid:333)(cid:3) The Financial Leadership team reviewed the above data and analysis to set clear priorities for 2016; and (cid:333)(cid:3) The Chief Financial Ofﬁcer then proposed these priorities to the Audit Committee and we have agreed with the approach. The key priorities for 2016 include a number of speciﬁc actions which focus on embedding our ﬁnancial control framework into the new business structure, meeting set targets for internal audit gradings and providing assurance to the Committee that ﬁnancial controls are in place for applicable items on the Group Risk Register. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 74 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE ETHICS COMMITTEE REPORT Introduction by Ken Hanna, Ethics Committee Chairman Integrity and honesty are core values for Aggreko. We expect all Aggreko employees, consultants and those acting on behalf of Aggreko to adopt these values at all times. We are proud that we have a reputation for conducting business fairly and professionally and we are committed to maintaining these values in all of our business dealings. We recognise that our business is exposed to risks of unethical conduct because of the nature and value of many of our contracts; standards of integrity are not consistent across all the countries in which we operate. However, we have a robust compliance programme in place which allows us to manage these risks effectively. The effectiveness of the compliance programme is monitored by the Ethics Committee. The Ethics Committee is currently made up of two independent Non- executive Directors, with myself as Chairman. I have been a member of the Committee since its ﬁrst meeting in February 2011 and became Chairman of the Committee in April 2012. In 2015, the Committee met three times. To the left there is a summary of the key actions of the Committee in 2015 and intended areas of focus in 2016. Role of Ethics Committee (cid:333)(cid:3) Advise the Board on the development of strategy and policy on ethical matters. (cid:333)(cid:3) Advise the Board on steps to be taken to establish a culture of integrity and honesty in all of the Company’s business dealings. Ken Hanna Ethics Committee Chairman THE ROLE OF THE ETHICS COMMITTEE IS TO ENSURE THAT AGGREKO CONDUCTS BUSINESS WITH INTEGRITY AND HONESTY AND IN ACCORDANCE WITH THE LAW. 2015 Key achievements (cid:333)(cid:3) Reviewed and approved changes to the ethics policies. (cid:333)(cid:3) Monitored the implementation of an ethics training programme for employees. (cid:333)(cid:3) Monitored the introduction of a Supplier Code of Conduct and the phased implementation of a risk based due diligence programme for suppliers. (cid:333)(cid:3) Oversee the Company’s policies and procedures for the identiﬁcation, assessment, management and reporting of ethical risk. (cid:333)(cid:3) Monitored the introduction of ethics as a performance factor in employee appraisals. (cid:333)(cid:3) Reviewed the ﬁndings of an independent review of the effectiveness of the compliance controls relating to sales consultants and the wider compliance programme. (cid:333)(cid:3) Reviewed the compliance procedures in place to manage sanctions risks. Members in 2015 Meetings attended Ken Hanna – Ethics Committee Chairman Diana Layﬁeld – Non-executive Director Ian Marchant – Non-executive Director Areas of focus for 2016 (cid:333)(cid:3) Oversee the full integration of the risk based due diligence into the supply chain processes. (cid:333)(cid:3) Oversee the implementation of the refresher ethics training course for all employees. (cid:333)(cid:3) Oversee the implementation of measures to manage modern slavery risks in the supply chain. (cid:333)(cid:3) Oversee the implementation of the revised ethics policies. Ethics Committee terms of reference: www.aggreko.com/pdf/ethics-committee-terms-of-ref-oct-2014.pdf (cid:333)(cid:3) Oversee the Company’s policies and procedures to prevent persons associated with the Company from engaging in unethical behaviour. (cid:333)(cid:3) Monitor and review the operation of the Company’s ethics policies and procedures. Main activities of the Ethics Committee during the year Third-party monitoring We recognise that the conduct of third-party sales consultants remains one of the most signiﬁcant risks to Aggreko. The number of third-party sales consultants used by the business has reduced over the last few years but there is a continued requirement for third parties to help support some areas of the business. We have risk management measures in place which require all third-party sales consultants engaged by Aggreko to conduct business in compliance with the standards set out in our ethics policy and allow us to monitor compliance with these requirements. We also have controls in place in relation to the remuneration of sales consultants and we monitor all payments to sales consultants. At the ﬁrst meeting of each year, we receive a brieﬁng on all payments made to sales consultants during the prior year to ensure that the payments were appropriate and in line with policy requirements. We recognise that there are also other categories of third-party supplier relationships which potentially could also attract risk for the business. In response to this risk we received a brieﬁng on the risk based supplier due diligence process which is currently in the process of being implemented across the business. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 75 Effectiveness of the compliance programme We reviewed the ﬁndings of two separate reports completed by Internal Audit following its independent review of the effectiveness of the compliance controls relating to sales consultants and the effectiveness of the wider compliance programme. The review provided comfort that the programmes are working well to effectively manage risk and highlighted some areas where further improvements could be introduced to further enhance the compliance programme. An overview of our compliance programme Our compliance programme is coordinated by our full-time Head of Compliance with support from the business units and the central functions. Our compliance programme has a number of elements designed to ensure that we effectively manage compliance risks: Ethics policies In 2015, we approved revised versions of our Gifts, Entertainment & Hospitality Policy, Charitable Donations Policy and Sponsorship Policy. These policies were amended to reﬂect the structural changes to the business following the reorganisation and to take account of recommendations made following a risk assessment and review of the effectiveness of the ethics policies. Whilst the policies were working well in ensuring that all employees comply with the high ethical standards expected throughout Aggreko, we introduced certain improvements to ensure that the policies remain robust and continue to meet the needs of the business. Online learning platform We are committed to providing regular training on ethical issues to employees to ensure that employees remain alert to risks and are regularly reminded of the standards expected by Aggreko. An online training programme was launched in 2013 and has been successfully rolled out to all employees. A separate online module was launched in January 2015 which required all employees to read and acknowledge compliance with Aggreko’s Ethics Policy. The Committee received brieﬁngs at each of the meetings of the Committee on the progress of the training and the ethics policy acknowledgement throughout the business. This training has also been supplemented by additional ethics workshops with senior management. The ethics training programme has recently been refreshed and will be launched again in early 2016 for all employees to complete. Sanctions review We received a brieﬁng on the compliance procedures currently in place to manage sanctions risks including new measures implemented in response to the introduction of sanctions relating to Russia and Crimea. Review of the effectiveness of the Ethics Committee The independent Board evaluation exercise undertaken in 2015 conﬁrmed that the Ethics Committee was working effectively. Ethics Policy Every employee receives a copy of, and is required to sign, the Ethics Policy when they join Aggreko. We also require all employees to sign an annual compliance statement conﬁrming that they have complied with and will continue to comply with our Ethics Policy and the relevant laws. Training Every employee receives training, which is refreshed every two years via our multi-lingual online ethics compliance training programme. This online training is supplemented by additional ethics workshops with senior management to ensure they remain alert to risks. Third-party risks All of our sales consultants are comprehensively reviewed before they are engaged by Aggreko and this exercise is refreshed at least every two years. Our sales consultants are contractually required to comply with our Ethics Policy and we require our sales consultants to conﬁrm compliance with the policy annually. We also provide ethics training to our sales consultants to ensure they remain alert to potential risks. We also have controls in place in relation to the remuneration of consultants and we monitor all payments to sales consultants to ensure that the remuneration structure does not incentivise unethical behaviour. We recognise that some supply chain partners could also potentially attract risk for the business owing to the nature of the services performed. We have adopted a risk based due diligence process for our supply chain partners which is currently being implemented globally. Gifts, entertainment and hospitality We have a clear approval process for all gifts, entertainment and hospitality offered by or given to Aggreko employees. All gifts, entertainment and hospitality above a nominal value are recorded centrally and monitored by the Head of Compliance. & O T H E R I N F O R M A T O N I Sponsorship and charitable donations We have a clear approval process for all sponsorships and charitable donations made by Aggreko. All sponsorships and charitable donations require senior management approval and are recorded centrally and monitored by the Head of Compliance. Speaking up We encourage all employees to speak up if they have any concerns. We have an independent compliance hotline operated by an external agency. This multi-lingual hotline is available to all employees and allows any employee who has any concerns to report them on an anonymous basis. All reports are followed up, and we regularly analyse the types of reports we receive. Where appropriate, our Group Internal Audit team is asked to investigate the issue and report on the outcome. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 76 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE NOMINATION COMMITTEE REPORT Introduction by Ken Hanna, Nomination Committee Chairman The Nomination Committee is currently made up of all of the Non- executive Directors, each of whom is independent, in addition to myself as Chairman. I have been Chairman of the Committee since my appointment as Chairman of Aggreko in April 2012, although I would not chair the Committee when it is dealing with succession to the chairmanship of Aggreko. The main element of focus for the Committee in 2015 was, naturally, the changes to the Board and Executive Committee to reﬂect the reorganisation of our business and business priorities. You will see from the table on the left that the Committee met formally on four occasions. In addition, we held a number of informal meetings and discussions with the CEO and others on the new organisational structure and Executive Committee appointments. To the left there is a summary of the key actions of the Committee in 2015 and intended areas of focus in 2016. Further detail on our actions in 2015 are included below. Role of Nomination Committee (cid:333)(cid:3) Review the structure, size and composition (including skills, knowledge, experience, diversity and balance of Executive and Non-executive) of the Board and its Committees and make recommendations to the Board with regard to any changes. (cid:333)(cid:3) Identify and nominate for the approval of the Board, candidates to Ken Hanna Nomination Committee Chairman THE NOMINATION COMMITTEE’S ROLE IS TO MONITOR AND REVIEW THE COMPOSITION AND BALANCE OF THE BOARD AND ITS COMMITTEES ON A REGULAR BASIS TO ENSURE AGGREKO HAS THE RIGHT STRUCTURE, SKILLS AND DIVERSITY FOR THE EFFECTIVE MANAGEMENT OF THE GROUP. 2015 Key achievements (cid:333)(cid:3) Reviewed the structure of the Board and Executive Committee in line with ﬁll Board vacancies. the reorganisation of the business. (cid:333)(cid:3) Recommended the appointment of Uwe Krueger as Independent Non-executive Director. (cid:333)(cid:3) Recommended the extension of the appointments of the Chairman and three other Non-executive Directors. (cid:333)(cid:3) Reviewed Committee memberships and recommended the appointment of all Non-executive Directors as Members of the Nomination Committee with effect from March 2015 and recommended the appointment of Ian Marchant to the Remuneration Committee with effect from January 2016. Members in 2015 Meetings attended (cid:333)(cid:3) Keep under review the time commitment expected from the Chairman and the Non-executive Directors. Main activities of the Nomination Committee during the year Organisational Changes to the Board and Executive Committee The new organisational structure announced on 22 June 2015, resulted in some key management changes to the Board and Executive Committee. The three Regional Director roles for Americas, APAC and EMEA were replaced by two new positions: President, Rental Solutions and Managing Director, Power Solutions. Following a review of internal candidates, we recommended the appointment of Asterios Satrazemis as President, Rental Solutions. Meanwhile Debajit Das and David Taylor-Smith stepped down from the Board and Chris Weston agreed to run the Power Solutions business in the interim whilst the Committee initiated an external search to identify a permanent Managing Director for Power Solutions. Asterios Satrazemis subsequently left Aggreko in December 2015. The Committee also oversaw the process for the appointment of Nicolas Fournier as Managing Director, Power Solutions and Bruce Pool, President, Rental Solutions. Ken Hanna – Nomination Committee Chairman Russell King – Senior Independent Director Uwe Krueger – Non-executive Director1 Diana Layﬁeld – Non-executive Director Robert MacLeod – Non-executive Director Ian Marchant – Non-executive Director1 Rebecca McDonald – Non-executive Director1, 2 1 Uwe Krueger, Ian Marchant and Rebecca McDonald were appointed to the Committee on 3 March 2015 2 Rebecca McDonald retired from the Board on 1 December 2015. Rebecca was absent from one meeting convened at short notice owing to a prior engagement, but she was able to share her views with the Committee in advance of the meeting. Areas of focus for 2016 (cid:333)(cid:3) Review succession plans for the Board, Executive Committee and key senior management roles. (cid:333)(cid:3) Complete the appointment and induction of Dame Nicola Brewer as Non-executive Director. (cid:333)(cid:3) Implement outcome of 2015 external Board evaluation. Nomination Committee terms of reference: www.aggreko.com/pdf/nomination-committee-terms-of-ref-oct-2014.pdf AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 77 Russell King has also served on the Board for over six years, and again, in line with the UK Corporate Governance Code, we reviewed his tenure with particular care. We concluded that his tenure had not compromised his independence in any way, and it was important that we should retain his experience of Aggreko, both as Senior Non- executive Director and as Chairman of the Remuneration Committee, for at least a further year. We also considered the number and nature of Russell’s other commitments – details of which are set out in his biography on page 56 – particularly his roles on the boards of four other listed companies. We were satisﬁed that Russell’s other commitments do not detract from his ability to perform his role at Aggreko. In coming to this conclusion, we noted that: ﬁrst, in our view, the companies involved are not unusually complex, nor are they in regulated sectors; second, his respective positions as chairman, senior independent director and remuneration committee chairman of those companies strengthen, rather than detract from, the experience he brings Aggreko; third, he has not missed a Board or Committee meeting within the last two years. Moreover, he has in practice made an invaluable contribution to the Board and its commitments during the past two years of major change within Aggreko. The Committee unanimously recommends the re-election of each of our Directors at our 2016 Annual General Meeting. In making this recommendation, we evaluated each Director in light of their performance, commitment to the role, and capacity to discharge their responsibilities fully, given their time commitments to other companies. The preceding paragraph provides an example of what we take into account in this process. Board composition and diversity Our policy is to have a broad range of skills, background and experience. While we will continue to ensure that we appoint the best people for the relevant roles, we recognise the beneﬁts of greater diversity and will continue to take account of this when considering any particular appointment, although we do not set any particular targets. As part of the Company’s external evaluation of Board performance, all Directors were consulted on the composition of the Board, as to size, the appropriate range of skills and balance between Executive and Non-executive Directors. Review of the effectiveness of the Nomination Committee The independent Board evaluation exercise undertaken in 2015 conﬁrmed that the Nomination Committee was working effectively. & O T H E R I N F O R M A T O N I As part of the Company’s review of business priorities, we identiﬁed the need for a new organisational structure, based on two new business units. In turn, we considered what implications this might have for the structure and composition of the Board. We have always stressed the advantage of having the managers of the Group’s main businesses around the Board table: to hold them to account for business performance; to provide visibility; and to beneﬁt from their contribution to Board decisions. We still believe this, but as part of our review, we came to the conclusion that it is not necessary for the business heads to be formal members of the Board to achieve this: their presence and participation is more important than formal status. Moreover, since the two new business units are now more focused on separate business priorities than the former ones, we believe that not having the broader responsibilities of Directors helps to increase the accountability of the business unit heads for their own respective business units. Accordingly, the Committee has agreed that as a matter of general policy, future heads of business units should not be appointed to the Board, but should still be invited to attend Board meetings. Appointment of Non-executive Director During the year, the Committee undertook a broad review of the non-executive proﬁle of the Board, including skills, experience, tenure and diversity. One of the areas we identiﬁed for further strengthening was geopolitical experience in some of the more challenging markets in which we operate. We appointed the Inzito Partnership, an independent search ﬁrm with no other connection with the Company, to assist in identifying suitable candidates and in February 2016, we were delighted to appoint Dame Nicola Brewer as a Non-executive Director. Nicola is currently Vice Provost of University College London and has previous extensive geopolitical and diplomatic experience in a number of roles in the UK Foreign and Commonwealth Ofﬁce. She has worked all over the world and her experience in Africa, South America, Middle East and India will be of great beneﬁt to Aggreko. Nicola will also join the Ethics and Nomination Committees. A fuller biography is set out on page 57. Reappointment of Directors Since the Committee’s last report, the Company has extended the terms of appointment of myself as Chairman, Diana Layﬁeld, Robert MacLeod and Russell King. As Robert MacLeod has served as a Non-executive Director since September 2007, we reviewed his extension with particular care. Robert performs a vital role as Chairman of the Audit Committee and we wanted to maintain continuity of Audit Committee leadership through the external audit tender process and transition period for the new external auditor. We were satisﬁed that his length of tenure had not compromised his independence in any way, and therefore we recommended to the Board that his term of appointment should be extended until the conclusion of the 2015 reporting cycle – that is until the end of the 2016 Annual General Meeting. Robert will then step down from the Board and will not stand for re-election. I am delighted to report that Ian Marchant will succeed him as Chairman of the Audit Committee. Ian has been an independent Non-executive Director and member of the Audit Committee for over two years. He is a chartered accountant and his previous roles have included over ﬁve years as Finance Director of SSE plc. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 78 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE REMUNERATION SUMMARY Annual remuneration statement Summary Policy report Annual report on remuneration 79 82 84 Our remuneration strategy Our aim The aim of Aggreko’s remuneration policy is to reward executives for delivering the principal objective – our strategy of delivering long-term value to our Shareholders. Our reward package for Executive Directors comprises: (cid:333)(cid:3) a ﬁxed element: – salary; – pension; and – beneﬁts; generally based on market median. (cid:333)(cid:3) a variable element: – annual bonus, based on demanding annual performance targets, both ﬁnancial and personal; and – long-term incentives, based on long-term strategic ﬁnancial performance. Balance of elements We aim to balance these elements so that: (cid:333)(cid:3) the majority of executive remuneration is linked to Aggreko’s ﬁnancial performance; (cid:333)(cid:3) there is a heavier weighting on long-term performance than on short-term performance; and (cid:333)(cid:3) we use a balanced portfolio of measures which delivers long-term value to Shareholders, a safe operating environment, outstanding service to customers and rewarding careers to our employees. So for example, the potential future reward opportunities for the Chief Executive Ofﬁcer are as follows: Chris Weston Minimum Target Maximum 100% 45% 22% £998k 30% 29% 25% £2,217k 49% £4,560k £0 £1 million £2 million £3 million £4 million £5 million Fixed pay Annual bonus LTIP Read the summary of our Remuneration Policy on Read the full scenario analysis for all Executive Directors on Page 82 Page 83 Outcome for 2015 Single ﬁgure total pay for Executive Directors The following table shows a summary of total remuneration for 2015 for each of the Executive Directors: Base Salary £ Beneﬁts £ Annual Bonus £ PSP £ CIP £ Sharesave £ Pension £ LTIP Carole Cran Debajit Das Asterios Satrazemis David Taylor-Smith Chris Weston Read the full details in the Annual Report on Remuneration on 412,000 239,462 367,794 220,500 750,000 82,475 216,584 51,724 10,362 22,853 Page 84 – 56,812 – 151,594 – – – – – – 16,333 28,101 – 30,016 – – – – – 4,271 82,400 47,109 63,542 44,100 225,000 Other £ – – – – 483,392 Total £ 593,208 558,068 483,060 456,572 1,485,516 ANNUAL REMUNERATION STATEMENT AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 79 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I Introduction by Russell King, Remuneration Committee Chairman The Remuneration Committee is made up of ﬁve independent Non- executive Directors (Ken Hanna was considered by the Board to be independent on his appointment as Chairman of the Company). Rebecca McDonald retired from the Board in December 2015 and Ian Marchant joined the Committee in January 2016. I have been Chairman of the Committee since September 2010. Peter Kennerley is secretary to the Committee. We also invite the Chief Executive Ofﬁcer and Group HR Director to attend our meetings. In 2015, we held seven meetings of the Committee; we also took a number of decisions based on papers circulated outside the context of a formal meeting. This greater volume of activity was accounted for partly in order to implement the new LTIP and partly to consider issues arising from the Group’s reorganisation announced in June 2015. To the left there is a summary of the key achievements of the Committee in 2015 and intended areas of focus in 2016 and on the opposite page there is a quick read summary of some of the key elements of remuneration in 2015. Further details of our actions in 2015 are included in the full Remuneration Committee report detailed over the next few pages. Role of the Remuneration Committee (cid:333)(cid:3) Determine and agree with the Board the policy for remuneration for the Chairman, Executive Directors and Executive Committee. (cid:333)(cid:3) Within the terms of the remuneration policy, determine the total individual remuneration package for the Chairman, each Executive Director and each member of the Executive Committee, including base salary, pension, beneﬁts, annual bonus and long- term incentives. (cid:333)(cid:3) Determine, having taken appropriate legal advice, the level of any payment made to the Chairman, Executive Directors or member of the Executive Committee by way of compensation for, or otherwise in connection with, loss of ofﬁce or employment. (cid:333)(cid:3) Approve the design of, and determine targets for, performance related pay schemes operated by the Company and approve the total annual payments made under such schemes. (cid:333)(cid:3) Review the design of all share incentive plans for approval by the Board and Shareholders. For any plan, determine each year the overall amount of awards, along with the individual awards to Executive Directors and members of the Executive Committee. (cid:333)(cid:3) Determine the policy for and scope of pension arrangements for each Executive Director and members of the Executive Committee. (cid:333)(cid:3) Oversee any major changes in employee beneﬁts structures throughout the Group. (cid:333)(cid:3) Agree the policy for authorising claims for expenses from the Directors. Russell King Remuneration Committee Chairman THE ROLE OF THE REMUNERATION COMMITTEE IS TO DETERMINE THE REMUNERATION FOR EXECUTIVE DIRECTORS AND EXECUTIVE COMMITTEE MEMBERS. WE OVERSEE AGGREKO’S OVERALL REMUNERATION POLICY, STRATEGY AND IMPLEMENTATION. 2015 Key achievements (cid:333)(cid:3) Implemented new incentive arrangements following their approval by Shareholders at the 2015 Annual General Meeting. (cid:333)(cid:3) Finalised framework for new incentives. (cid:333)(cid:3) Agreed remuneration package for the new appointments of Managing Director, Power Solutions and President, Rental Solutions. (cid:333)(cid:3) Agreed the termination arrangements for David Taylor-Smith and Debajit Das. (cid:333)(cid:3) Undertook a detailed review of base pay for the Chief Financial Ofﬁcer upon her becoming fully established in her role. Members in 2015 Meetings attended Russell King – Remuneration Committee Chairman Ken Hanna – Company Chairman Uwe Krueger – Non-executive Director1 Robert MacLeod – Non-executive Director Rebecca McDonald – Non-executive Director1, 2 1 The two cases of absence related to two separate telephone meetings convened at short notice to consider issues relating to the Group’s reorganisation. In each case the Director concerned had a prior engagement, but was able to share his or her views on the issue with the Committee before the call. 2 Rebecca McDonald retired from the Board on 1 December 2015. Areas of focus for 2016 (cid:333)(cid:3) Set targets for the new Annual Bonus Plan, both ﬁnancial and the new personal/ strategic objectives. (cid:333)(cid:3) Decide awards under the Long-term Incentive Plan. (cid:333)(cid:3) Review the ﬁnancial performance measures for the LTIP to ensure they continue to be aligned with the Group’s strategy for growth. We will consult shareholders before proposing any change. Remuneration Committee terms of reference: www.aggreko.com/pdf/remuneration-terms-of-ref-oct-2014.pdf 80 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE ANNUAL REMUNERATION STATEMENT Our remuneration policy The aim of our remuneration policy is to reward executives for achieving the principal objective – our strategy of delivering long-term value to our Shareholders. Directors were not entitled to the 2015 bonus unless they continued to be employed, and had not given or been given notice, at the time the bonus became payable, although the Committee has discretion to relax this requirement, for example by agreeing a payment pro-rata. Our reward package for Executive Directors is structured such that: (cid:333)(cid:3) the ﬁxed element of pay – salary, pension and beneﬁts – is around the median for companies of similar size and complexity; (cid:333)(cid:3) the majority of executive remuneration is linked to Aggreko’s performance, with a heavier weighting on long-term performance than on short-term performance; and (cid:333)(cid:3) the remuneration packages reward a balanced portfolio of measures which deliver long-term value to Shareholders, a safe operating environment, outstanding service to customers and rewarding careers to our employees, each of which can be independently veriﬁed, and which give clear “line-of-sight” to the Executives. Performance outcomes for 2015 Performance and annual bonus In line with our remuneration policy, Aggreko operates an annual bonus plan with the aim of focussing Executive Directors on achieving demanding annual targets relating to company ﬁnancial performance and personal/strategic objectives. The initial regional ﬁnancial elements of the bonus were to be based on the 2015 full year outcome. However, following the reorganisation announced in June, the three regions ceased to exist. Moreover, two of the three regional Directors would be stepping down from the Board as a result of the reorganisation and subsequently leaving the business. In these circumstances, the Committee decided that: (cid:333)(cid:3) regional ﬁnancial performance would be measured based on the July full year forecast; and (cid:333)(cid:3) personal/strategic element performance for Debajit Das and David Taylor-Smith would be assessed at the effective date of their ceasing to have executive responsibilities. The ﬁnancial measure which we give most emphasis to is D-EPS. The threshold D-EPS, at which level Executive Directors would start to receive bonus was set at 83.86 pence, with budget D-EPS at 88.27 pence. The actual outcome was 69.1 pence (on a constant currency basis), which meant that no bonus was payable on that element. We have set out the details of all of the 2015 targets and outcomes for the ﬁnancial and personal/strategic objectives on page 86, but in summary: (cid:333)(cid:3) as D-EPS fell short of budget, none of that element will be payable; In summary, the bonus payout for Executive Directors for 2015 was as follows: (cid:333)(cid:3) as Group operating cash ﬂow fell short of budget, none of that element will be payable; (cid:333)(cid:3) Chris Weston, Chief Executive Ofﬁcer and Carole Cran, Chief (cid:333)(cid:3) for APAC and the Americas, both regional trading proﬁt and Financial Ofﬁcer received no bonus; (cid:333)(cid:3) Debajit Das and David Taylor-Smith, both regional Directors received part of their bonus; and (cid:333)(cid:3) Asterios Satrazemis, regional Director received no bonus. I explain below how the Committee set bonus targets for 2015, how we assessed performance against those targets, and how we decided on the level of bonus to be paid. For 2015, annual bonus payments were determined as to 80% based on ﬁnancial performance and, for the ﬁrst time, 20% based on personal/strategic objectives. The 80% ﬁnancial element was measured as follows: Chris Weston and Carole Cran: (cid:333)(cid:3) 75% against D-EPS and 25% against operating cash ﬂow. Debajit Das, Asterios Satrazemis and David Taylor-Smith: (cid:333)(cid:3) 50% against Group D-EPS, 40% against regional trading proﬁt and 10% against regional ROCE. The 20% personal/strategic element was based on personal objectives set individually for each Director by the Committee. All included measurable improvements in safety indicators and agreed outcomes for set strategic objectives speciﬁc to their roles. Those for Directors with regional responsibilities included improvements in customer satisfaction, as measured by Net Promotor Scores, and improvements in regional debtor days. If personal/strategic objectives are achieved but D-EPS is below threshold performance then the Committee has the discretion to reduce the amount that would be paid under the personal/strategic element. ROCE fell short of budget, and so no element attributable to those measures will be payable to Debajit Das or Asterios Satrazemis; (cid:333)(cid:3) for EMEA, as the July full year forecast trading proﬁt exceeded 110% of budget and July full year forecast ROCE exceeded budget, the elements attributable to each of those measures will be payable to David Taylor-Smith pro-rata for the period he was a Director; (cid:333)(cid:3) each of the Executive Directors largely met their personal/strategic goals for the year. However, as noted above, if EPS performance is below threshold, the Committee has discretion to reduce the amount of annual bonus that would be paid under the personal/ strategic element. In deciding whether to exercise that discretion, we considered the position of each Director individually. David Taylor-Smith and Debajit Das stepped down from the Board as a result of the reorganisation. They contributed to the business review and assisted in a smooth transmission to the new structure, but will not share in Aggreko’s new opportunities. In the circumstances, the Committee decided that to the extent that they had achieved their personal objectives, it would not be appropriate to reduce the amount that would otherwise be payable. But for the remaining Directors different considerations applied, and we decided that their bonus outcome should more closely reﬂect the underlying ﬁnancial performance of the Company, and so exercised our discretion to reduce the personal element to zero. In reaching that decision, we also took into account the fact other employees whose annual bonus was based on the overall performance of the Group would be receiving no bonus for the year; and (cid:333)(cid:3) Asterios Satrazemis was not entitled to a bonus for 2015, as he resigned as a Director in December. Full details of the performance outcomes for the Annual Bonus are set out on page 86. Read more and see our bonus entitlement and outcome tables Page 86 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 81 Executive Directors leaving during the year As a consequence of the new organisational structure, we also announced that David Taylor-Smith, Regional Director for EMEA, and Debajit Das, Regional Director for Asia Paciﬁc, would remain with the Group for a period of time to assist with the transition and then step down from the Board in due course. Asterios Satrazemis resigned as a Director on 17 December 2015 and received no compensation relating to his departure. Details of the exit arrangements are set out on page 89. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I Performance and LTIPs Based on performance to 31 December 2015, Executive Directors will receive only the Minimum Match Award under their 2013 long- term incentives. Our LTIPs are designed to align the interests of management with those of Shareholders in growing the value of the business over the long term. The awards which vest in August 2016 were granted in 2013, subject to demanding performance conditions based on real (i.e. excluding inﬂation) D-EPS annualised growth of 3-10% and return on capital employed (ROCE) of 20-25% measured over a three-year period to 31 December 2015. In summary, during that period real D-EPS showed no growth, and as a result, none of the shares subject to the D-EPS growth criterion will vest; average ROCE was 19% as against a target range of 20-25%, and similarly none of the shares subject to the ROCE condition will vest. Therefore, none of the performance element of the 2013 awards will vest; only the matching element, equivalent in each case to 15% of salary at the time of grant will vest. Further details of LTIPs which vested in 2015 are included in the table on page 87. Pay reviews for 2016 In June 2015, the Company announced a new organisational structure, with the appointment of Asterios Satrazemis as President of the Rental Solutions business. Given his new responsibilities, the Committee reviewed his base salary, taking into account the scope and size of the new Rental Solutions business and his global remit for Sales & Marketing and Global Events. Having considered comparable roles with our advisers, we agreed that the base pay for Asterios Satrazemis should be increased from $556,200 to $605,000 (8.8% increase). The increase took effect from 1 August 2015. Considering the context of a challenging performance year and a signiﬁcant cost reduction programme, the Committee decided that it would not generally be appropriate for Executive Directors and other members of the Executive Committee to receive salary increases as part of the December 2015 review, which would usually take effect from January 2016. However, as we explained in last year’s Annual Remuneration Statement, we committed to undertake a more detailed review for Carole Cran, in particular, once she was fully established in her role as Chief Financial Ofﬁcer. In view of Carole’s excellent performance and this commitment, the Committee conducted an external benchmarking exercise and proposed a base salary increase of 9.2% – which would have positioned her at the market median in line with our policy – and an increase in her maximum bonus opportunity for 2016 from 150% to 175% of base salary. However, given the challenges of 2015, Carole has said that she does not wish to receive the proposed base salary increase. The annual bonus for 2016 will operate broadly on the same basis as in 2015, with ﬁnancial performance – measured against D-EPS and operating cash ﬂow – accounting for 80% of total opportunity and the remaining 20% measured against personal/strategic objectives. Awards under the Long-term Incentive Plan will be made at the same level as the previous year. Further details can be found on page 92. 82 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE POLICY REPORT Summary of Aggreko’s remuneration policy for Executive Directors This section of our report summarises the key components of Aggreko’s remuneration policy for Executive Directors The table below summarises the main elements of remuneration for Aggreko’s Executive Directors. Element of remuneration Base salary Aim and link to strategy How it works To attract and retain talent by ensuring base salaries are competitive in the talent market(s) relevant to each individual. Pension To provide relevant statutory beneﬁts and be competitive in the market in which the individual is employed. Beneﬁts To be competitive in the market in which the individual is employed. Expatriate and relocation packages designed to ensure a geographically mobile management population related to business needs. Annual bonus scheme To focus Executive Directors on achieving demanding annual targets relating to Company performance. Long-term Incentive Plan To align the interests of management with those of Shareholders in growing the value of the business over the long term. Sharesave To align the interests of employees and Shareholders by encouraging all employees to own Aggreko shares. (cid:333)(cid:3) We aim to pay the market median for standard performance and within the market top quartile for top quartile performance, or to recruit outstanding candidates. (cid:333)(cid:3) We generally review base salaries annually; in determining the appropriate level of adjustment, we take into account: Company performance; the individual’s responsibilities and contribution to the business; salary levels for comparable roles at relevant comparators; and salary increases more broadly across the Group. (cid:333)(cid:3) All Executive Directors are entitled to a deﬁned contribution pension. They can opt to take a cash payment in lieu of all or part of their pension. (cid:333)(cid:3) Contributions of between 20% and 30% of salary per annum except where limited by local practice. (cid:333)(cid:3) Beneﬁts include healthcare, life assurance, a company car (or an allowance in lieu) and expatriate package. Where appropriate the Company will bear the cost of any local taxes payable on any expatriate beneﬁts. The Company will also bear any UK tax that Executive Directors resident overseas incur as a result of carrying out their duties in the UK. (cid:333)(cid:3) The maximum annual bonus opportunity is 175% of salary. (cid:333)(cid:3) Performance is assessed annually with 20% of the maximum bonus potential based on personal/strategic objectives and 80% on challenging budget and stretch targets for the Group. (cid:333)(cid:3) Bonus payments are typically delivered as to 75% in cash and as to 25% deferred into shares and released after three years. (cid:333)(cid:3) The deferred element is subject to clawback. (cid:333)(cid:3) The Performance Share Plan (PSP) provides for a nil-cost conditional award of shares worth up to an aggregate limit of 300% of salary per annum. (cid:333)(cid:3) There are two performance measures for the PSP, 75% of the PSP performance is based on three-year cumulative Diluted Earnings per Share and 25% against Return on Capital Employed. (cid:333)(cid:3) A proportion of shares which vest will be subject to a further retention period of up to two years, with one-third being released on vesting and a further third being released after each of one and two years from vesting. (cid:333)(cid:3) Awards are subject to malus and clawback. (cid:333)(cid:3) This is an all-employee scheme whereby all employees including Executive Directors with at least three months’ continuous service may save up to £500 (or local currency equivalent) per month over a period of two to ﬁve years. (cid:333)(cid:3) Options under the Sharesave Option Schemes and the US Stock Purchase Plan are granted at a discount of 20% and 15% respectively. (cid:333)(cid:3) Savings capped at £500 a month (or local currency equivalent), reﬂecting the statutory limit for UK schemes. Aggreko’s current remuneration policy was approved by Shareholders at our Annual General Meeting on 29 April 2015. The full policy is set out in the report of the Remuneration Committee on pages 98 to 100 of Aggreko’s Annual Report 2014, which can be found at www.aggreko.com/investors. Pay-for-performance: scenario analysis The graphs below provide estimates of the potential future reward opportunities for Executive Directors, and the potential split between the different elements of remuneration under three different performance scenarios: “Minimum”, “Target” and “Maximum”. Chris Weston Minimum Target Maximum 100% 45% 22% Carole Cran £998k 30% 29% 25% £2,217k 49% £4,560k Minimum Target Maximum £577k 29%25% 100% 46% 23% 28% £1,246k 49% £2,534k £0 £1 million £2 million £3 million £4 million £5 million Fixed pay Annual bonus LTIP Potential reward opportunities illustrated above are based on the remuneration policy applied to the base salary in force at 1 January 2016. For the annual bonus, the amounts illustrated are those potentially receivable in respect of performance for 2016. It should be noted that the LTIP awards granted in a year do not normally vest until the third anniversary of the date of grant. The projected value of LTIP amounts excludes the impact of share price movement. In illustrating potential reward opportunities the following assumptions are made: Fixed pay Annual bonus LTIP Minimum Target Maximum Latest base pay, pension and ongoing beneﬁts Latest base pay, pension and ongoing beneﬁts Latest base pay, pension and ongoing beneﬁts No annual bonus On target annual bonus Maximum annual bonus Threshold not achieved, so no amount vesting Performance warrants 25% of maximum vesting Performance warrants full vesting AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 83 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 84 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE ANNUAL REPORT ON REMUNERATION In the following section of our report we explain how we have implemented Aggreko’s remuneration policy during 2015. The policy in place for the year was the one which was approved by Shareholders at Aggreko’s 2015 Annual General Meeting. We have given brief details of the policy above on page 82, but full details of the policy can be found in Aggreko’s 2014 Report and Accounts, pages 98 to 100, which is available on our website at www.aggreko.com/investors. Single total ﬁgure of remuneration (audited) The table below sets out a single ﬁgure for the total remuneration received by each Director for the years ended 31 December 2015 and 31 December 2014. Executive Directors Carole Cran Carole Cran1 Debajit Das2 Debajit Das3 Asterios Satrazemis4 Asterios Satrazemis5 David Taylor-Smith6 David Taylor-Smith Chris Weston7 Non-executive Directors Ken Hanna Ken Hanna Russell King Russell King Uwe Krueger 8 Diana Layﬁeld Diana Layﬁeld Robert MacLeod Robert MacLeod Ian Marchant Ian Marchant Rebecca McDonald9 Rebecca McDonald Year 2015 2014 2015 2014 2015 2014 2015 2014 2015 2015 2014 2015 2014 2015 2015 2014 2015 2014 2015 2014 2015 2014 Base Salary/ 412,000 Fees £ Beneﬁts £ 82,475 42,44210 233,333 239,462 296,048 367,794 312,298 220,500 350,000 750,000 340,250 327,244 100,500 93,718 55,500 60,500 60,000 80,500 80,000 60,500 60,000 55,417 60,000 216,584 265,856 51,724 65,308 10,362 19,935 22,853 – – – – – – – – – – – – – Annual Bonus £ – 148,780 56,812 83,897 – 195,007 151,594 169,841 – – – – – – – – – – – – – – LTIP PSP £ – – – – – – – – – – – – – – – – – – – – – – CIP £ 16,333 13,600 28,101 23,618 – 27,670 30,016 Sharesave £ – Pension £ 82,400 Other £ – – – – – – – 46,667 47,109 59,561 63,542 24,984 44,100 – – – – – – Total £ 593,208 484,822 588,068 728,980 483,060 625,267 456,572 – – – – – – – – – – – – – – – 1,164 4,271 70,000 225,000 – 610,940 483,39211 1,485,516 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 340,250 327,244 100,500 93,718 55,500 60,500 60,000 80,500 80,000 60,500 60,000 55,417 60,000 1 Carole Cran’s remuneration for 2014 is from date of appointment, 1 June 2014. 2 Debajit Das’s remuneration for 2015 is to date of resignation as a Director, 15 October 2015, was paid in local currency and for the purposes of this table has been converted into Sterling using the average exchange rate for 2015 of £1 = SG$ 2.1007. 3 Debajit Das’s remuneration for 2014 was paid in local currency and for the purposes of this table has been converted into Sterling using the average exchange rate for 2014 of £1 = SG$2.0875. 4 Asterios Satrazemis’s remuneration for 2015 is to date of resignation as a Director, 17 December 2015, was paid in local currency and for the purposes of this table has been converted into Sterling using the average exchange rate for 2015 of £1 = US$1.5284. 5 Asterios Satrazemis’s remuneration for 2014 was paid in local currency and for the purposes of this table has been converted into Sterling using the average exchange rate for 2014 of £1 = US$1.6487. 6 David Taylor-Smith’s remuneration for 2015 is to date of resignation as a Director, 1 August 2015. 7 Chris Weston’s remuneration for 2015 is from date of appointment, 2 January 2015. 8 Uwe Krueger’s remuneration for 2015 is from date of appointment, 1 February 2015. 9 Rebecca McDonald’s remuneration for 2015 is to date of resignation as a Director, 1 December 2015. 10 During 2015, a review of Carole Cran’s time spent in the London ofﬁce was undertaken. Owing to the signiﬁcant amount of time spent in London, based on UK tax legislation, Carole has established a second place of employment in London. As a result, any home to London ofﬁce travel costs either reimbursed, or paid on Carole’s behalf are taxable. The review identiﬁed £18,126 of travel costs and £16,074 of associated tax paid by Aggreko that relate to travel undertaken in 2014. This amount was not previously reported in the 2014 Report and Accounts. 11 As set out on page 97 of our Annual Report 2014, Chris Weston received an amount of £483,392 to compensate him for his annual bonus from his previous employer he forfeited as a result of his resignation. This was paid as 75% in cash and the balance in Aggreko shares. The shares are shown in the table of Directors’ shareholdings on page 90. The ﬁgures have been calculated as follows: (cid:333)(cid:3) Base salary/fees: amount earned for the year. See Base salary below. (cid:333)(cid:3) Beneﬁts: the taxable value of beneﬁts received in the year. See Beneﬁts below. (cid:333)(cid:3) Annual bonus: the total bonus earned on performance during the year. See Annual bonus scheme on pages 85 and 86 below. (cid:333)(cid:3) 2015 remuneration for LTIPs refers to share awards granted on 5 August 2013 subject to a performance period ended 31 December 2015 and which are due to vest on 5 August 2016. The value is based on the average share price over the last quarter of 2015 of 967 pence. See Long-term Incentive Plan on page 87 below. (cid:333)(cid:3) 2014 remuneration for LTIPs refers to share awards granted on 16 April 2012 subject to a performance period ended 31 December 2014 which vested on 16 April 2015. The value is based on the share price on 16 April 2015 of 1621 pence. (cid:333)(cid:3) Sharesave: the value is based on the market price of an Aggreko share on the date of grant, less the option price, multiplied by the number of options. (cid:333)(cid:3) Pension: the amount of any Company pension contributions and cash in lieu. See Pensions on page 88 below. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 85 Base salary The base salaries for Executive Directors as at 1 January 2016, 1 January 2015 and 1 January 2014 were as follows: Executive Director Position Carole Cran Debajit Das Asterios Satrazemis David Taylor-Smith Chris Weston Chief Financial Ofﬁcer Former Regional Director, Asia Paciﬁc Former Regional Director, Americas/President, Rental Solutions Former Regional Director, Europe, Middle East & Africa Chief Executive Ofﬁcer 1 January 2016 £ Local currency increase % 1 January 2015 £ Local currency increase % 412,000 – 0 – 412,000 302,9942 395,8394 8.8 363,9105 – 750,000 – 0 378,000 750,000 3 3 8 8 – 1 January 2014 £ 400,0001 296,0483 312,3676 350,000 – 1 Carole Cran’s salary for 2014 is from date of appointment, 1 June 2014. The Committee conducted an external benchmarking exercise on her salary and proposed to award her an increase of 9.2% with effect from 1 January 2016, taking her salary to £450,000. However, in view of the challenging trading conditions, Carole decided not to accept this increase. 2 Debajit Das’s salary as at 1 January 2015 was paid in local currency SG$636,500 and for the purposes of this table has been converted into Sterling using the average exchange rate for 2015 of £1 = SG$2.1007. 3 Debajit Das’s salary as at 1 January 2014 was paid in local currency SG$618,000 and for the purposes of this table has been converted into Sterling using the average exchange rate for 2014 of £1 = SG$2.0875. 4 Asterios Satrazemis’s salary is shown as at date of resignation, 17 December 2015. His salary was increased to US$605,000 on 1 August 2015 on being appointed President, Power Solutions and for the purposes of this table has been converted into Sterling using the average exchange rate for 2015 of £1 = US$1.5284. 5 Asterios Satrazemis’s salary as at 1 January 2015 was paid in local currency US$556,200 and for the purposes of this table has been converted into Sterling using the average exchange rate for 2015 of £1 = US$1.5284. 6 Asterios Satrazemis’s salary as at 1 January 2014 was paid in local currency US$515,000 and for the purposes of this table has been converted into Sterling using the average exchange rate for 2014 of £1 = US$1.6487. Beneﬁts All Executive Directors received healthcare beneﬁts with the exception of Carole Cran. All Executive Directors were also provided with life assurance cover, income protection and accident insurance. David Taylor-Smith, Carole Cran and Chris Weston received a car allowance. Carole Cran received reimbursement of the cost of travelling to the London ofﬁce and associated taxes. Debajit Das received an overseas secondment package to cover housing, travel allowance, Company-funded car, fuel allowance, utilities allowance, a contribution to school fees and reimbursement of certain taxes. Asterios Satrazemis received a company car beneﬁt and reimbursement of certain taxes. The following table shows those beneﬁts that the Committee considers signiﬁcant: Executive Director Carole Cran Debajit Das Asterios Satrazemis David Taylor-Smith Chris Weston Car/fuel £12,000 £17,655 £11,056 £7,000 £12,000 Housing School fees – £72,234 – – – – £21,950 – – – Travel £40,167 £22,819 – – – Tax £26,991 £71,772 £29,852 – – Other £3,317 £10,154 £10,816 £3,362 £10,853 Total £82,475 £216,584 £51,724 £10,362 £22,853 Annual bonus scheme The maximum bonus opportunity for 2015 for the Chief Executive Ofﬁcer was 175% of salary, for the Chief Financial Ofﬁcer 150% of salary, and for Regional Directors 125% of salary. Bonus payments are payable as to 75% in cash, and as to 25% deferred into shares for three years unless, at the discretion of the Committee, the individual leaves with the Company’s consent. The Committee has discretion to reduce the number of shares that can vest in the event of gross misconduct or material misstatement of the accounts. The targets under the 2015 annual bonus scheme were based as to 80% on ﬁnancial performance measures set against the annual budget at the start of the year and as to 20% against personal/strategic objectives. Financial performance measures The ﬁnancial objectives for the Chief Executive Ofﬁcer (Chris Weston) and the Chief Financial Ofﬁcer (Carole Cran) were measured as to 75% against D-EPS and as to 25% against operating cash ﬂow. The ﬁnancial objectives for Directors with regional responsibilities were based as to 50% on the performance of the Group, measured against Group D-EPS and as to 50% on the performance of their regions, measured as to 40% against regional trading proﬁt and 10% against regional ROCE. The initial regional ﬁnancial elements of the bonus were based on the 2015 full year outcome. However, following the reorganisation announced in June, the three regions ceased to exist and so the Committee decided that regional performance would be measured based on the July full year forecast. For these ﬁnancial measures, Executive Directors would start to earn a bonus at threshold performance, calculated as a percentage below budget, increasing to half of the maximum that could be earned under that element at budget on a straight-line basis. The bonus would then increase on a straight-line basis to the maximum, calculated as a percentage above budget. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 86 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE ANNUAL REPORT ON REMUNERATION The table below shows the performance against budget of each of the ﬁnancial performance measures used for calculating the Annual Bonus for 2015: Measure Threshold Budget Maximum Outcome % budget % budget % budget % maximum of element D-EPS growth Operating cash ﬂow Regional trading proﬁt – APAC Regional ROCE – APAC Regional trading proﬁt – Americas Regional ROCE – Americas Regional trading proﬁt – EMEA Regional ROCE – EMEA 83.86p £569.5m US$90.9m – US$251.0m – US$221.9m – 95 90 95 – 95 – 95 – 21.0% 88.27p £632.8m 97.10p £696.1m US$95.7m US$105.3m – US$264.2m US$290.6m – US$233.6m US$256.9m – 22.2% 23.5% 110 110 110 – 110 – 110 – 69.1p1 £445.9m1 US$24.5m2 9.6%2 US$104.3m2 16.2%2 US$122.9m2 22.2%2 78 70 51 – 78 – 110 – 0 0 0 0 0 0 100 100 1 The reported D-EPS and operating cash ﬂow have been adjusted to a constant currency basis. 2 The outcome for trading proﬁt and ROCE for each of the three regions is based on July year to date, as shown by the management accounts of the Group. Personal/strategic performance measures Each Director was set four personal objectives, against each of which he or she could achieve up to 5% of the maximum bonus entitlement, or 20% in total. All included measurable improvements in safety indicators and agreed outcomes for set strategic objectives speciﬁc to their roles. In addition, Chris Weston’s objectives included the design of an organisational structure to deliver strategy and the creation of a new Executive team. Carole Cran’s objectives included creating a constructive and positive feedback from dialogue with Shareholders and identifying procurement savings and establishing a new procurement team structure. Those for each of the Directors with regional responsibilities included measurable improvements in customer satisfaction, as measured by Net Promoter Scores and improvements in regional debtor days. The Committee reviewed performance against these measures for each Director, and the table below shows the Committee’s assessment of each personal/strategic objective achieved as a percentage of maximum bonus entitlement and the total also as a percentage of salary. Executive Director Carole Cran1 Debajit Das Asterios Satrazemis2 David Taylor-Smith Chris Weston1 Personal/strategic objective achieved as a percentage of maximum bonus entitlement Full potential work Investor feedback Procurement and cost savings Net promoter score Regional debtor days Organisation design Executive team Total Total % achieved salary Total payable % salary 5% 5% 0% 5% 5% 5% – – – – 3% – – – – – 0% 0% 5% – – 5% 0% 0% – – – – – 5% – – – – 3% 18% 0% 27% 15% 18.75% 18.75% 0% 0% 15% 18.75% 18.75% 0% 31.5% 18% 0% Safety 5% 5% 0% 5% 5% 1 The Committee exercised its discretion to reduce the amount of the personal/strategic element of bonus payable for Carole Cran and Chris Weston to zero, as EPS threshold target had not been met. 2 Asterios Satrazemis was not entitled to a bonus for 2015 as he resigned as a Director on 17 December 2015. The table below sets out the total bonus entitlement for each Executive Director for 2015: D-EPS growth Operating cash ﬂow Regional trading proﬁt Regional ROCE Personal objectives Total payable Executive Director Carole Cran Debajit Das1 Asterios Satrazemis David Taylor-Smith2 Chris Weston Total max bonus % salary Max bonus % salary Outcome % salary Max bonus % salary Outcome % salary Max bonus % salary Outcome % salary Max bonus % salary Outcome % salary Max bonus % salary Outcome % salary % salary Pro-rata % salary £ 150 125 125 125 175 90 50 50 50 105 0 0 0 0 0 30 – – – 35 0 – – – 0 – 40 40 40 – – 0 0 40 – – 10 10 10 – – 0 0 10 – 30 25 25 25 35 0 18.75 0 18.75 0 – 18.75 – 68.75 – – 0 – 56,812 0 – 40.1 151,594 0 – 1 Debajit Das’s bonus for 2015 is payable in local currency SG$119,344 and for the purposes of this table has been converted into Sterling using the average exchange rate for 2015 of £1 = SG$2.1007. It will be paid in cash. 2 David Taylor-Smith’s bonus as a percentage of salary was pro-rated for the months that he was employed as a Director, that is seven months. It will be paid in cash. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 87 Long-term Incentive Plan The LTIP awards which are due to vest on 5 August 2016 were granted in 2013 under the old LTIP, which expired in 2014. The old LTIP consists of two distinct elements: the Performance Share Plan (PSP) and the Co-investment Plan (CIP). The PSP is a nil-cost conditional award of shares which vest depending on performance against the targets; it provides for annual awards of performance shares up to an aggregate limit of 100% of salary in normal circumstances and 200% of salary in exceptional circumstances. The CIP is a Co-investment plan, whose purpose it is to encourage executives to buy and hold shares in the Company. Participants can subscribe to purchase Aggreko shares up to a value of 30% of their salary, each year that they are invited to join the CIP; if they hold those shares for three years (or, if earlier, the date that their CIP award vests), they will be entitled to receive a minimum award of one share for every two they subscribed (the Minimum Match), plus a performance-related award of a further three shares for every two they subscribed. The Minimum Match is not subject to performance conditions. The PSP and CIP are both measured against performance over three ﬁnancial years and they share the same performance criteria. These are the real compound annual growth rate of Diluted Earnings per Share (D-EPS), and Return on Capital Employed (ROCE). The performance criteria for the LTIP awards granted in 2013 were as follows: (cid:333)(cid:3) 75% of the award was based on CPI inﬂation-adjusted compound annual growth in D-EPS over the three-year performance measurement period in a range of 3% to 10%. No performance shares would be awarded against this element if performance was below 3% and awards would increase straight-line to the maximum at 10% growth; and (cid:333)(cid:3) 25% of the award was based on average ROCE over the performance period in a range of 20% to 25%. No performance shares would be awarded against this element if performance was below 20% and awards would increase straight-line to the maximum at 25% ROCE. In addition to the above, and to reward truly exceptional performance, the number of shares awarded to participants in both elements of the 2013 LTIP might be increased by between one and two times if the real compound annual growth in D-EPS over the three-year performance measurement period was in a range of 10% to 20%. The performance period for the 2013 LTIP awards ended on 31 December 2015. Over the period: (cid:333)(cid:3) Aggreko’s aggregate D-EPS was 251.9 pence, which is the equivalent of no growth. Since this was less than the threshold of 3%, no shares will vest under this performance measure; and (cid:333)(cid:3) Aggreko’s actual average ROCE for the period was 19%. Since this was less than the threshold of 20%, no shares will vest under this performance measure. Accordingly, only the Minimum Match will vest. The table below shows: (cid:333)(cid:3) the resulting vesting of the 2013 LTIP awards. These are due to vest in August 2016; and (cid:333)(cid:3) by way of comparison the vesting of the 2012 LTIP awards which vested in April 2015. Executive Director Carole Cran Carole Cran Debajit Das Debajit Das Asterios Satrazemis Asterios Satrazemis David Taylor-Smith Performance Share Plan Co-Investment Plan Year of grant Vested Market price £ Value £ Vested Market price £ Value £ Total value £ 2013 2012 2013 2012 2013 2012 2013 – – – – – – – – – – – – – – – – – – – – – 1,689 839 2,906 1,457 – 1,707 3,104 967p 1621p 967p 1621p – 1621p 967p 16,333 13,600 28,101 23,618 – 27,670 30,016 16,333 13,600 28,101 23,618 – 27,670 30,016 Each of the 2013 LTIP awards was granted on 5 August 2013. Each of the 2012 LTIP awards was granted on 16 April 2012 and vested on 16 April 2015. The value of the 2013 LTIP on vesting is based on the average price of Aggreko shares over the last quarter of 2015 of 967 pence. The value of the 2012 LTIP on vesting is based on the market price of Aggreko shares on date of vesting, 16 April 2015, of 1621 pence. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 88 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE ANNUAL REPORT ON REMUNERATION Pensions Executive Directors participate in pension schemes or receive cash in lieu with a value appropriate to the median practice in their home countries. Carole Cran, Debajit Das and David Taylor-Smith are members of the Aggreko Group Personal Pension Plan, which is a deﬁned contribution scheme. Chris Weston is entitled to a Company contribution of 30% and other Executive Directors are entitled to a Company contribution of 20% of salary, but may elect to take all or part of the Company contribution in the form of a cash payment in lieu. Asterios Satrazemis is entitled to participate in the Employees’ Savings Investment Retirement plan and the Supplemental Executive Retirement plan of Aggreko LLC, which is governed by the laws of the United States. These plans allowed contributions by the employee and the Group to be deferred for tax. Contributions paid by the Company under the deﬁned contribution plans during the year are as follows: Executive Director Carole Cran Debajit Das Asterios Satrazemis David Taylor-Smith Chris Weston Paid to pension £ 37,340 8,301 63,5423 23,333 – 2015 Paid cash £ 45,060 38,8081 – 20,767 225,000 Total £ Paid to pension £ 82,400 47,109 63,542 44,100 225,000 22,233 10,504 24,9844 47,500 – 2014 Paid cash £ 24,434 49,0572 – 22,500 – Total £ 46,667 59,561 24,984 70,000 – 1 Debajit Das’s entitlement for 2015 was paid in local currency SG$81,523 and for the purposes of this table has been converted into Sterling using the average exchange rate for 2015 of £1 = SG$2.1007. 2 Debajit Das’s entitlement for 2014 was paid in local currency SG$102,408 and for the purposes of this table has been converted into Sterling using the average exchange rate for 2014 of £1 = SG$2.0875. 3 Asterios Satrazemis’s entitlement for 2015 was paid in local currency US$97,117 and for the purposes of this table has been converted into Sterling using the average exchange rate for 2015 of £1 = US$1.5284. 4 Asterios Satrazemis’s entitlement for 2014 was paid in local currency US$41,191 and for the purposes of this table has been converted into Sterling using the average exchange rate for 2014 of £1 = US$1.6487. Non-executive Directors (including the Chairman) The Board determines the remuneration policy and level of fees for the Non-executive Directors, within the limits set out in the Articles of Association. The Remuneration Committee recommends remuneration policy and level of fees for the Chairman of the Board (although the Chairman of the Board does not take part in discussions concerning his remuneration). Remuneration comprises an annual fee for acting as a Chairman or Non-executive Director of the Company. Additional fees are paid to Non-executive Directors in respect of service as Chairman of the Audit and Remuneration Committees and as Senior Independent Director. The Chairman and Non-executive Directors are not eligible for bonuses, retirement beneﬁts or to participate in any share scheme operated by the Company. The fees for the Chairman and Non-executive Directors as at 1 January 2016 and 1 January 2015 were as follows: Role Chairman fee1 Non-executive Director base fee2 Committee Chairman additional fee Senior Independent Director additional fee 1 The increase in the Chairman’s fee took effect from 1 April 2015. 2 The increase in the Non-executive Directors’ fees took effect from 1 July 2015. 1 January 2016 £ Increase 1 January 2015 £ 342,000 61,000 20,000 20,000 2.1% 1.7% 0% 0% 335,000 60,000 20,000 20,000 Share awards granted in 2015 (audited) In May 2015, Executive Directors were granted awards of shares under the 2015 Long-term Incentive Plan, in each case with a value equivalent to 300% of salary. The three-year performance period over which D-EPS and ROCE performance will be measured began on 1 January 2015 and will end on 31 December 2017. None of the awards granted under the LTIP are eligible to vest until 21 May 2018. The performance criteria for the LTIP awards granted in 2015 are as follows: (cid:333)(cid:3) 75% of the award is based on three-year cumulative D-EPS as compared to three-year compound growth in real (RPI-adjusted) D-EPS. No performance shares will be awarded against this element if performance is below an equivalent of RPI+3% per annum growth. Awards will then start to vest above that level and will increase straight-line to a maximum at an equivalent of RPI+15% per annum growth; and (cid:333)(cid:3) 25% of the award is based on average ROCE over the performance period in a range of 20% to 25%. No performance shares will be awarded against this element if performance is less than 20% and awards will increase straight-line to the maximum at 25% ROCE. A proportion of shares which vest will be subject to a further retention period of up to two years in accordance with the rules of the LTIP. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 89 In addition, as explained on page 97 of our Annual Report 2014, the Committee agreed to award Chris Weston shares under a restricted stock agreement to compensate him for the forfeiture of long-term incentives from his previous employment. The value of the award was determined as £2,238,000 and the number of shares to be awarded was based on the closing price of an Aggreko share of 1749 pence on 28 May 2014, being the day immediately prior to the date of announcement of his appointment, resulting in an award of 127,958 shares. This award was granted on 30 March 2015. The shares will be released as to 50% on 1 April 2016 and 50% on 1 April 2017, subject to his continuing employment on vesting or otherwise if he leaves the Company as a good leaver. The table below shows details of interests awarded to Executive Directors during 2015: Executive Director Carole Cran Debajit Das Asterios Satrazemis David Taylor-Smith Chris Weston LTIP Face Value1 £ % vesting on minimum performance 1,235,998 918,244 1,073,040 1,133,996 2,249,989 – – – – – Shares 76,485 56,822 66,401 70,173 139,232 Sharesave Face Value2 £ – – – – 4,271 Shares – – – – 2,168 % vesting on minimum performance – – – – 100 Other Face Value3 £ – – – – 1,957,757 Shares – – – – 127,958 % vesting on minimum performance – – – – 100 1 Face value of LTIP is the maximum number of shares that would vest if all performance targets are met multiplied by the average market price over the ﬁve business days prior to the date of grant of 21 May 2015, which was used to determine the number of shares awarded, being 1616 pence. 2 Face value of Sharesave is the market price of Aggreko shares on 13 October 2015, being the date of grant, of 1027 pence, less the option price multiplied by the number of options granted. 3 Face value is the number of shares awarded on 30 March 2015 multiplied by the market price of Aggreko shares on 30 March 2015, being 1530 pence. Arrangements with past Directors (audited) David Taylor-Smith David Taylor-Smith ceased to be a Director on 1 August 2015, but will remain an employee of the Company until 21 June 2016. The Committee exercised its discretion to agree that he would be entitled to his 2015 bonus, to the extent the objectives were achieved as outlined on page 80, but pro-rated for the months that he was employed as a Director, that is seven months. This will be paid in cash with no deferral in March 2016, following the announcement of the Group’s 2015 results. For the period 2 August 2015 to 31 December 2015, the value of his basic salary, pension and beneﬁts was £196,350; this amount is not included in the single total ﬁgure of remuneration on page 84. The Company agreed to pay for legal expenses and outplacement fees totalling £32,000. He received no compensation for loss of ofﬁce or other payment in connection with his leaving. He was treated as a “good leaver” for the purpose of Aggreko’s Long-term Incentive Plans, and accordingly the LTIP Awards made in 2013, 2014 and 2015 will remain subject to their terms and to relevant performance conditions being met. Any awards will vest pro-rata for the period he was employed by the Company. Full details of any awards vesting will be included in the Annual Report on Remuneration for the relevant year. Debajit Das Debajit Das ceased to be a Director on 15 October 2015, but will remain an employee of the Company until 15 October 2016. The Committee exercised its discretion to agree that he would be entitled to his 2015 bonus, to the extent the objectives were achieved as outlined on page 80. This will be paid in cash with no deferral in March 2016, following the announcement of the Group’s 2015 results. For the period 16 October 2015 to 31 December 2015, the value of his basic salary, pension and beneﬁts was £122,603; this amount is not included in the single total ﬁgure of remuneration on page 84. The Company agreed to pay for legal expenses and outplacement fees totalling £28,000. He received no compensation for loss of ofﬁce or other payment in connection with his leaving. He was treated as a “good leaver” for the purpose of Aggreko’s Long-term Incentive Plans, and accordingly the LTIP Awards made in 2013, 2014 and 2015 will remain subject to their terms and to relevant performance conditions being met. Any awards will vest pro-rata for the period he was employed by the Company. Full details of any awards vesting will be included in the Annual Report on Remuneration for the relevant year. Asterios Satrazemis Asterios Satrazemis resigned as a Director on 17 December 2015 and ceased to be an employee on 31 December 2015. He was paid his basic salary and beneﬁts up to 31 December 2015, but will receive no bonus for 2015. For the period 18 December to 31 December 2015 inclusive, the value of his basic salary, pension and beneﬁts was £20,411; this amount is not included in the single total ﬁgure of remuneration on page 84. He received no compensation for loss of ofﬁce in connection with his resignation. His outstanding LTIPs will lapse, in accordance with the rules of the schemes. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 90 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE ANNUAL REPORT ON REMUNERATION Directors’ shareholdings (audited) As at 31 December 2015, the shareholdings of the Directors were as follows: Director Carole Cran Debajit Das6 Asterios Satrazemis7 David Taylor-Smith8 Chris Weston Ken Hanna Russell King Uwe Krueger Diana Layﬁeld Robert MacLeod Rebecca McDonald Ian Marchant (A) Shares owned outright1 (B) Shares held subject to deferral Shares held subject to performance conditions2 Options held not subject to performance conditions3 Shareholding guidelines % salary 8,890 39,149 47,367 12,518 4,082 – – – – 135,6949 139,855 161,054 175,781 188,367 139,232 – – 23 1,363 2,168 200 200 200 200 200 Shares counting towards guidelines (A + B) 12,972 39,149 47,367 12,518 135,694 Current shareholding % salary4 29 118 109 30 165 Date of appointment5 1 June 2014 1 January 2013 1 January 2013 11 March 2013 2 January 2015 19,303 3,688 3,000 2,855 18,582 – 3,331 1 This includes shares held by connected persons. 2 Shares held subject to performance comprise LTIP awards over shares. 3 Options held under the Sharesave Plan. 4 Percentage is calculated using share price of 914 pence as at 31 December 2015. 5 Under the Company’s share ownership guidelines, Executive Directors have ﬁve years from their respective appointments to achieve the shareholding guideline of not less than two times base salary. 6 Debajit Das’s holding is as at date of leaving, 15 October 2015. 7 Asterios Satrazemis’s holding is as at date of resignation, 17 December 2015. The 175,781 shares held subject to performance conditions and the 23 options held not subject to performance conditions lapsed on date of leaving. 8 David Taylor-Smith’s holding is as at date of resignation, 1 August 2015. 9 Chris Weston’s holding comprises 127,958 shares awarded on 30 March 2015 and 25% of his annual bonus forfeited from his previous employer which was deferred into shares (7,736 shares), as set out on page 97 of our 2014 Report and Accounts. There have been no changes in the Directors’ interests in ordinary shares between 31 December 2015 and 3 March 2016. Carole Cran, Debajit Das, Asterios Satrazemis, David Taylor-Smith and Chris Weston, as employees or former employees of the Company, have, or had up to their date of resignation, an interest in the holdings of the Aggreko Employee Beneﬁt Trust (the “EBT”) as potential beneﬁciaries. The EBT is a trust established to distribute shares to employees of the Company and its subsidiaries in satisfaction of awards granted under the Aggreko Long-term Incentive Plans and Sharesave Schemes. At 31 December 2015, the trustees of the EBT held a total of 535,538 Aggreko plc Ordinary Shares (2014: 824,036) and the holding at the date of this report is 499,067. The dividend has been waived on these shares. Comparison of Company performance The graph below shows the value, at 31 December 2015, of £100 invested in Aggreko’s shares on 31 December 2008 compared with the current value of the same amount invested in the FTSE 350 Index. The FTSE 350 Index is chosen because Aggreko has been a constituent member of this group over the entire period. Company performance 500 450 400 350 300 250 200 150 100 50 0 £100 £100 Dec 08 £212 £130 Dec 09 £470 £342 £409 £408 £363 £148 £144 £161 £194 £196 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 £225 £197 Aggreko FTSE350 Index Dec 15 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 91 For comparative purposes, the remuneration of the Director undertaking the role of Chief Executive Ofﬁcer for the same ﬁnancial years is set out below: Year 2009 2010 2011 2012 2013 2014 2015 CEO Rupert Soames Rupert Soames Rupert Soames Rupert Soames Rupert Soames Angus Cockburn Chris Weston Single Figure of Total Remuneration £ Annual Bonus payout against maximum % Long-term incentive vesting rates against maximum opportunity % 2,555,850 5,839,209 8,501,865 2,685,840 1,779,144 1,290,906 1,485,516 63.2 100 82.4 6.4 49.6 42.4 0 100 100 100 100 72.5 5.8 0 Angus Cockburn was Interim Chief Executive from 25 April to 30 September 2014, and his emoluments have been calculated on the assumption that he held the role for the full year at the rates of remuneration in place on 30 September 2014. The ﬁgure for Chris Weston includes an amount of £483,392 to compensate him for his annual bonus from his previous employer he forfeited as a result of his resignation. The data for this table was taken from the Remuneration Reports for the relevant years and adjusted to take account of the actual share price on date of vesting for the LTIP. Percentage change in remuneration of CEO The table below shows the change in remuneration of the Director undertaking the role of Chief Executive Ofﬁcer for 2014 (Angus Cockburn, Interim Chief Executive) and for 2015 (Chris Weston, Chief Executive Ofﬁcer) in comparison to the average change in remuneration of employees within the Group central functions over that period. Percentage change for CEO/Interim CEO Percentage change for Group central functions Salary/fees Beneﬁts Bonus 25 7.3 –100 6.8 5.6 –100 Angus Cockburn was Interim Chief Executive from 25 April to 30 September 2014, and his emoluments have been calculated on the assumption that he held the role for the full year at the rates of remuneration in place on 30 September 2014. The comparator group relates to the employees within the Group central function in the UK (103 employees), rather than all Group employees. As in the previous year, we have chosen this group because the Committee believes that it provides a sufﬁciently large comparator group to give a reasonable understanding of underlying increases, based on similar annual bonus performance measures utilised by Group central functions, whilst reducing the distortion that would arise from including all of the many countries in which the Group operates, with their different economic conditions. Relative importance of spend on pay The graph below shows Aggreko’s proﬁt after tax, pre-exceptional items, dividend, and total employee pay expenditure for the ﬁnancial years ended 31 December 2014 and 31 December 2015, and the percentage change. & O T H E R Proﬁt after tax £m Dividend £m Total employee pay expenditure £m −15% +1% +5% 15 14 £183m £215m 15 14 £70m £69m 15 14 £331m £314m 0 100 200 300 400 0 100 200 300 400 0 100 200 300 400 Dividends are the interim and ﬁnal dividends paid in respect of the ﬁnancial year ended 31 December 2014 and the interim dividend paid and the ﬁnal dividend recommended in respect of the ﬁnancial year ended 31 December 2015. I N F O R M A T O N I O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 92 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE ANNUAL REPORT ON REMUNERATION Implementation of Remuneration Policy in 2016 The Committee intends to implement the Remuneration Policy in 2016 as follows: Base salaries and fees Base salaries for Executive Directors were reviewed by the Committee in December 2015; details are set out on page 85. The Committee intends to next review the salaries in December 2016. The Chairman’s fee is due to be reviewed in April 2016 and the Non-executive Directors’ fees are due to be reviewed in June 2016. The Chairman and the Non-executive Directors have indicated that they will recommend that their reviews be deferred until April 2017 and June 2017 respectively. Pensions and beneﬁts Pensions and beneﬁts will continue in line with policy. Annual bonus On 1 March 2016, the Committee set annual bonus targets for the Executive Directors as follows: Executive Director Carole Cran Chris Weston D-EPS Operating cash ﬂow Personal objectives Total max bonus (% salary) Max bonus % salary On-budget bonus % salary Max bonus % salary On-budget bonus % salary Max bonus % salary 175 175 105 105 52.5 52.5 35 35 17.5 17.5 35 35 The personal objectives were set individually for each Director. All include measurable improvements in safety indicators and agreed outcomes for set strategic objectives speciﬁc to their roles. We have not disclosed full details of all objectives or ﬁnancial targets in this report, as we consider them to be commercially sensitive. It is, however, our intention to disclose ﬁnancial budget numbers in next year’s Annual Report on Remuneration. Long-term Incentive Plan The Committee proposes to approve the grant of 2016 LTIP awards to Executive Directors with a face value of 300% of salary. The performance criteria for the 2016 LTIP will be as follows: (cid:333)(cid:3) 75% of the award will be based on three-year cumulative D-EPS as compared to three-year compound growth in real (RPI-adjusted) D-EPS. No performance shares will be awarded against this element if performance is below an equivalent of RPI+3% per annum growth. Awards will then start to vest above that level and will increase straight-line to a maximum at an equivalent of RPI+15% per annum growth; and (cid:333)(cid:3) 25% of the award is based on average ROCE over the performance period in a range of 20% to 25%. No performance shares will be awarded against this element if performance is less than 20% and awards will increase straight-line to the maximum at 25% ROCE. A proportion of shares which vest will be subject to a further retention period of up to two years in accordance with the rules of the LTIP. Awards are expected to be granted in April 2016. Consideration by the Directors of matters relating to Directors’ remuneration The Committee re-appointed Kepler Associates, a brand of Mercer, and New Bridge Street (which is part of Aon plc) as the principal external advisers to the Committee for 2015. The fees paid to advisers in respect of work that materially assisted the Committee in 2015 are shown in the table below: Adviser Appointed by Kepler Associates Appointed by Russell King on behalf of the Committee Services provided to the Committee Fees paid by the Company for the Services Other Services Review of LTIP Award Calculations £31,430 Management and Reward Data Project Advice on DRR disclosure Charged on a time/cost basis Advice on current market practice Benchmarking of Executive pay Advice on design of new incentive arrangements Provided the Board with speciﬁc data on Non-executive Director benchmarking Benchmarking for speciﬁc below-Board roles Advice on RSP Awards New Bridge Street Appointed by the Group HR Director on behalf of the Committee Advice on Notice of Meeting and DRR regarding disclosure of new schemes and CEO awards £18,528 Charged on a time/cost basis General advice on implementation and operation of LTIP and Sharesave Schemes Allen & Overy Appointed by the Group HR Director on behalf of the Committee Legal advice on employment and termination of employment of Executive Directors £27,560 Charged on a time/cost basis AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 93 Except as provided above, none of these advisers provides any other services to the Group. Kepler Associates and New Bridge Street are members of the Remuneration Consultants Group and signatories to its code of conduct and Allen & Overy LLP is authorised and regulated by the Solicitors Regulation Authority. Taking these factors into account, the Committee is satisﬁed as to the impartiality and objectivity of their advice. The advisers were also chosen because of their existing knowledge of the Group’s remuneration arrangements. Statement of Shareholder voting The following table shows the results of the binding vote on the Remuneration Policy and advisory vote on the 2014 Remuneration Report at the 29 April 2015 AGM. Total number of votes % of votes cast Total number of votes % of votes cast Remuneration Policy Remuneration Report For Against Total votes cast (excluding withheld votes) Votes withheld1 Total votes cast (including withheld votes) 160,789,038 1,825,548 162,614,586 85,969 162,700,555 98.88 1.12 100 – – 151,991,882 9,066,467 161,058,349 1,642,206 162,700,555 94.37 5.63 100 – – 1 A withheld vote is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution. Directors’ service contracts Each of the Directors, other than Robert MacLeod, will be proposed for election or re-election at the Company’s Annual General Meeting to be held on 28 April 2016. The Executive Directors are employed under contracts of employment with Aggreko plc. The Remuneration Committee sets notice periods for the Executive Directors at 12 months or less. The principal terms of the Executive Directors’ service contracts (which have no ﬁxed term) are as follows: Executive Director Position Effective date of contract From Director From Company Carole Cran Chris Weston Chief Financial Ofﬁcer Chief Executive Ofﬁcer 1 June 2014 2 January 2015 12 months 12 months 12 months 12 months Notice period Non-executive Directors are appointed for a term of three years, subject to three months’ notice from either party. The dates of the Chairman’s and Non-executive Directors’ appointments are as follows: Non-executive Director Position Ken Hanna Nicola Brewer Russell King Uwe Krueger Diana Layﬁeld Robert MacLeod Ian Marchant 1 Replaces earlier contract. Chairman Non-executive Director Non-executive Director Non-executive Director Non-executive Director Non-executive Director Non-executive Director Effective date of contract 29 April 20151 29 February 2016 2 February 20151 1 February 2015 1 May 20151 10 September 20151 1 November 2013 Unexpired term as at 31 December 2015 2 years 4 months n/a 1 month 2 years 1 month 2 years 4 months 4 months 10 months & O T H E R External appointments It is the Board’s policy to allow the Executive Directors to accept directorships of other quoted companies. Any such directorships must be formally approved by the Chairman of the Board. Directors are generally permitted to retain any earnings from these appointments. During the year, none of the Executive Directors held any such external directorships. Since the year end, Carole Cran has been appointed as a Non-executive Director of Halma plc; fees in relation to this appointment will be disclosed in this report next year. This Report was approved by the Board on 3 March 2016. Signed on behalf of the Board Russell King Chairman of the Remuneration Committee 3 March 2016 I N F O R M A T O N I O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 94 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE STATUTORY DISCLOSURES Material share interests As at 31 December 2015, the Company had received notiﬁcations of the following major shareholdings, representing 3% or more of the voting rights attached to the issued Ordinary Share capital of the Company: Shareholder Black Rock Inc AKO Capital LLP Mackenzie Financial Corporation A E H Salvesen* Baillie Gifford Prudential Plc Number of shares % of total voting rights 12,820,770 12,781,545 10,300,485 9,995,283** 12,584,169 9,351,326 5.00 4.99 4.02 3.73 4.91 3.65 Including immediate family and trustee interests * ** Notiﬁcations received prior to the share capital consolidation in June 2014, number of shares disclosed relates to Ordinary Shares of 13549/775 pence each Between 31 December 2015 and 3 March 2016, the Company received no notiﬁcations of major shareholdings. The Directors are not aware of any other material interests amounting to 3% or more in the share capital of the Company. Rights and obligations attached to shares Subject to applicable statutes (in this section referred to as the Companies Acts) and to any rights conferred on the holders of any other shares, any share may be issued with or have attached to it such rights and restrictions as the Company may by ordinary resolution decide or, if no such resolution has been passed or so far as the resolution does not make speciﬁc provision, as the Board may decide. Voting Subject to any special terms as to voting upon which any shares may be issued or may for the time being be held and to any other provisions of the Articles of Association for the Company (the Articles), on a show of hands every member who is present in person or by proxy or represented by a corporate representative at a general meeting of the Company has one vote. On a poll every member who is present in person or by proxy or represented by a corporate representative has one vote for every share of which he or she is the holder. In the case of joint holders of a share the vote of the senior who tenders a vote, whether in person or by proxy, is accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority is determined by the order in which the names stand in the register in respect of the joint holding. The holders of the Deferred Shares are not entitled to receive notice of any general meeting of the Company or to attend, speak or vote at any such meeting. Directors’ Report and Strategic Report The Directors’ Report and Strategic Report for the year ended 31 December 2015 comprise pages 54 to 99 and pages 8 to 53 of this report, together with the sections incorporated by reference. We have included some of the matters normally included in the Directors’ Report which we consider to be of strategic importance in the Strategic Report on pages 8 to 53. Speciﬁcally these are: (cid:333)(cid:3) Future Business Developments on page 22 (cid:333)(cid:3) Risk Information on the Use of Financial Instruments on page 134 Disclosures in relation to Listing Rule LR 9.8.4R, where applicable, are included on pages 80 and 81 in relation to long-term incentive plans and on page 96 in relation to the dividend waiver arrangements in place for our Employee Beneﬁt Trust. Both the Directors’ Report and Strategic Report have been presented in accordance with applicable company law, and the liabilities of the Directors in connection with those reports are subject to the limitations and restrictions provided. Other information to be disclosed in the Directors’ Report is given in this section. Management report The Strategic Report and the Directors’ Report together include the “management report” for the purposes of Disclosure and Transparency Rule (DTR) 4.1.8R. 2016 Annual General Meeting The Company’s Annual General Meeting will be held at 11.00 am 28 April 2016 at the Grand Central Hotel, 99 Gordon Street, Glasgow G1 3SF. The Notice of Meeting is available on the Shareholder information pages of our website. Dividends The interim dividend of 9.38 pence per Ordinary Share was paid on 2 October 2015. The Directors recommend a ﬁnal dividend of 17.74 pence per Ordinary Share in respect of the year, making a total for the year of 27.12 pence per Ordinary Share (2014: 27.12 pence), payable on 24 May 2016 to Shareholders on the register at the close of business on 22 April 2016. Dividend payments and DRIP In 2015 we introduced a Dividend Reinvestment Plan (DRIP) for Shareholders. This allows Shareholders to purchase additional shares in Aggreko with their dividend payment. Further information and a mandate can be obtained from our Registrars, Capita, whose details are set out on page 155 and the Shareholder information pages of our website. Share capital On 31 December 2015 the Company had in issue 256,128,201 Ordinary Shares of 4329/395 pence each, 188,251,587 Deferred Shares of 984/775 pence each, 18,352,057,648 Deferred Shares of 1/775 pence each, 182,700,915 Deferred Shares of 618/25 pence each and 573,643,383,325 Deferred Shares of 1/306125 pence each comprising 29.43%, 40.77%, 0.56%, 29.19% and 0.04% respectively of the Company’s issued share capital. Details of the changes in issued share capital during the year are shown in Note 23 to the accounts on page 131. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 95 Variation of rights Subject to the provisions of the Companies Acts, rights attached to any class of shares may be varied either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class (excluding any shares of that class held as Treasury Shares) or with the sanction of a special resolution passed at a separate general meeting of the holders of those shares. The necessary quorum applying to any such separate general meeting is two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of the class (excluding any shares of that class held as Treasury Shares), (but at any adjourned meeting one holder present in person or by proxy (whatever the number of shares held by him) will constitute a quorum); every holder of shares of the class present in person or by proxy (excluding any shares of that class held as Treasury Shares) is entitled on a poll to one vote for every share of the class held by him (subject to any rights or restrictions attached to any class of shares) and any holder of shares of the class present in person or by proxy may demand a poll. Restrictions on transfer of securities in the Company There are no restrictions on the transfer of securities in the Company, except that: (cid:333)(cid:3) certain restrictions may from time to time be imposed by laws and regulations (for example, insider trading laws); (cid:333)(cid:3) pursuant to the Listing Rules of the Financial Conduct Authority certain employees and Directors of the Company require the approval of the Company to deal in the Company’s Ordinary Shares; and (cid:333)(cid:3) the Deferred Shares are not transferable except in accordance with the paragraph headed “Powers in relation to the Company issuing or buying back its own shares” below or with the written consent of the Directors. The Company is not aware of any agreements between holders of securities that may result in restrictions on the transfer of securities. Articles of Association Our Articles are available on our website at http://www.aggreko.com/ about-aggreko/corporate-governance/articles-of-association. Unless expressly speciﬁed to the contrary in the Articles, the Articles may be amended by a special resolution of the Company’s Shareholders. & O T H E R I N F O R M A T O N I Restrictions on voting No member is, unless the Board otherwise decides, entitled in respect of any share held by him to vote (either personally or by proxy or by a corporate representative) at any general meeting of the Company or at any separate general meeting of the holders of any class of shares in the Company if any calls or other sums presently payable by him in respect of that share remain unpaid or if he is a person with a 0.25% interest (as deﬁned in the Articles) and he has been served with a restriction notice (as deﬁned in the Articles) after failure to provide the Company with information concerning interests in those shares required to be provided under the Companies Acts. The Company is not aware of any agreement between holders of securities that may result in restrictions on voting rights. Dividends and other distributions Subject to the provisions of the Companies Acts, the Company may by ordinary resolution from time to time declare dividends in accordance with the respective rights of the members, but no dividend can exceed the amount recommended by the Board. Subject to the provisions of the Companies Acts, the Board may pay such interim dividends as appear to the Board to be justiﬁed by the ﬁnancial position of the Company and may also pay any dividend payable at a ﬁxed rate at intervals settled by the Board whenever the ﬁnancial position of the Company, in the opinion of the Board, justiﬁes its payment. If the Board acts in good faith, it shall not incur any liability to the holders of any shares for any loss they may suffer in consequence of the payment of an interim or ﬁxed dividend on any other class of shares ranking pari passu with or after those shares. The Deferred Shares confer no right to participate in the proﬁts of the Company. On a return of capital on a winding-up (excluding any intra-Group reorganisation on a solvent basis), holders of Deferred Shares are entitled to be paid the nominal capital paid up or credited as paid up on such Deferred Shares after paying to the holders of the Ordinary Shares the nominal capital paid up or credited as paid up on the Ordinary Shares held by them respectively, together with the sum of £100,000,000 on each Ordinary Share. The Board may deduct from any dividend or other moneys payable to a member by the Company on or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise in respect of shares of the Company. The Board may also withhold payment of all or any part of any dividends or other moneys payable in respect of the Company’s shares from a person with a 0.25% interest (as deﬁned in the Articles) if such a person has been served with a restriction notice (as deﬁned in the Articles) after failure to provide the Company with information concerning interests in those shares required to be provided under the Companies Acts. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 96 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE STATUTORY DISCLOSURES Appointment and replacement of directors The rules for the appointment and replacement of Directors are contained in the Company’s Articles. They include: the number of Directors must not be less than two or more than 15, the Board may appoint any person to be a Director; any Director so appointed by the Board shall hold ofﬁce only until the next general meeting and shall then be eligible for election; each Director must retire from ofﬁce at the third Annual General Meeting after the Annual General Meeting at which he was last elected. However, in line with the UK Corporate Governance Code, all Directors will stand for annual election at the 2016 AGM. A Director may be removed by special resolution of the Company. In addition, the ofﬁce of a Director must be vacated if: (i) he resigns his ofﬁce by notice in writing delivered to the ofﬁce or tendered at a meeting of the Board; or (ii) by notice in writing he offers to resign and the Board resolves to accept such offer; or (iii) his resignation is requested by all of the other Directors and all of the other Directors are not less than three in number; or (iv) a registered medical practitioner who is treating that Director gives a written opinion to the Company stating that that Director has become physically or mentally incapable of acting as a Director and may remain so for more than three months; or (v) by reason of a Director’s mental health, a court makes an order which wholly or partly prevents that Director from personally exercising any powers or rights which that Director would otherwise have; or (vi) he is absent without the permission of the Board from meetings of the Board (whether or not an alternate Director appointed by him attends) for six consecutive months and the Board resolves that his ofﬁce is vacated; or (vii) he becomes bankrupt or compounds with his creditors generally; or (viii) he is prohibited by law from being a Director; or (ix) he ceases to be a Director by virtue of the Companies Acts or is removed from ofﬁce pursuant to the Articles. Directors’ conﬂicts of interest The Company has procedures in place for monitoring and managing conﬂicts of interest. Should a Director become aware that they, or their connected parties, have an interest in an existing or proposed transaction with Aggreko, they should notify the Board in writing or at the next Board meeting. Directors have a continuing duty to update any changes to these conﬂicts. Powers of the Directors Subject to the provisions of the Companies Acts, the Articles and to any directions given by the Company in general meeting by special resolution, the business of the Company is managed by the Board, which may exercise all the powers of the Company whether relating to the management of the business of the Company or not. In particular, the Board may exercise all the powers of the Company to borrow money and to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or any third party. Powers in relation to the Company issuing or buying back its own shares The Directors were granted authority at the last Annual General Meeting held in 2015 to allot relevant securities up to a nominal amount of £4,125,579 in connection with an offer by way of a rights issue. That authority will apply until the earlier of 30 June 2016 and the conclusion of the Annual General Meeting for 2016. At this year’s Annual General Meeting Shareholders will be asked to grant an authority to allot relevant securities up to a nominal amount of £4,126,149, such authority to apply until the end of next year’s Annual General Meeting (or, if earlier, until the close of business on 30 June 2017). A special resolution will also be proposed to renew the Directors’ power to make non-pre-emptive issues for cash up to a nominal amount of £1,237,844. The Company was also authorised at the Annual General Meeting held in 2015 to make market purchases of up to 25,611,839 Ordinary Shares. This authorisation will expire on the earlier of the conclusion of the Annual General Meeting of the Company for 2016 and 30 June 2016. A special resolution will also be proposed at this year’s Annual General Meeting to renew the Directors’ authority to repurchase the Company’s Ordinary Shares in the market. The authority will be limited to a maximum of 25,612,820 Ordinary Shares and sets the minimum and maximum prices which may be paid. The Company may at any time, without obtaining the sanction of the holders of the Deferred Shares: (a) appoint any person to execute on behalf of any holder of Deferred Shares a transfer of all or any of the Deferred Shares (and/or an agreement to transfer the same) to the Company or to such person as the Directors may determine, in any case for not more than one penny for all the Deferred Shares then being purchased from him; and (b) cancel all or any of the Deferred Shares so purchased by the Company in accordance with the Companies Acts. Securities carrying special rights No person holds securities in the Company carrying special rights with regard to control of the Company. Rights under the employee share scheme Appleby Trust (Jersey) Limited, as Trustee of the Aggreko Employees’ Beneﬁt Trust, holds 0.19% of the issued share capital of the Company as at 3 March 2016 on trust for the beneﬁt of the employees and former employees of the Group and their dependents. The voting rights in relation to these shares are exercised by the Trustee and there are no restrictions on the exercise of the voting of, or the acceptance of any offer relating to, the shares. The Trustee is obliged to waive all dividends on the shares unless requested to do otherwise by the Company in writing. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 97 Equal opportunities Aggreko is committed to promoting equal opportunities for all, irrespective of disability, ethnic origin, gender or any other considerations that do not affect a person’s ability to perform their job. Our policies for recruitment, training, career development and promotion of employees are based on the suitability of the individual and give those who are disabled equal treatment with the able bodied where appropriate. Employees disabled after joining the Group are given suitable training for alternative employment with Aggreko or elsewhere. Human rights As we continue to grow our business in developing countries, we recognise that human rights are a concern in many regions that we operate in. We have a responsibility to all of our stakeholders, to ensure that all of our interactions with them meet or exceed the standards of compliance set out in our ethics policies, approach to equal opportunities, health and safety policies, environmental policies and grievance mechanisms, all of which are explained in detail throughout this report. We have also identiﬁed safety, emissions and people as matters to be considered as part of the principal risks facing the business. Whilst all these matters are linked, to a greater or lesser extent, to human rights, we prefer to address them as part of our operations, rather than as a separate issue. We continue to evaluate all potential risks and do not think that human rights present material issues for our business. Pensions The assets of the UK deﬁned-beneﬁt pension fund are controlled by the Directors of Aggreko Pension Scheme Trustee Limited; they are held separately from the assets of the Company and invested by independent fund managers. These segregated funds cannot be invested directly in the Company. Four trustees have been appointed by the Company and, in addition, two member-nominated trustees have been appointed. This fund was closed to new employees joining the Group after 1 April 2002; new UK employees are now offered membership of a Group Personal Pension Plan. Going concern and viability statements The going concern statement is included on page 113 of the ﬁnancial statements. The viability statement is included on page 33 of the strategic report. Change of control The Company has in place a number of agreements with advisers, ﬁnancial institutions and customers which contain certain termination rights which would have an effect on a change of control. The Directors believe these agreements to be commercially sensitive and that their disclosure would be seriously prejudicial to the Company; accordingly they do not intend disclosing speciﬁc details of these. In addition, all of the Company’s share schemes contain provisions which in the event of a change of control, would result in outstanding options and awards becoming exercisable, subject to the rules of the relevant schemes. There are no agreements between the Company and its Directors or employees providing for compensation for loss of ofﬁce or employment that occurs because of a takeover bid. Disclosure of information to the Company’s auditor In accordance with Section 418 of the Companies Act 2006 the Directors who held ofﬁce at the date of approval of this Directors’ Report conﬁrm that, so far as they are each aware, there is no relevant audit information (as deﬁned by Section 418(3) of the Companies Act 2006) of which the Company’s Auditor is unaware; and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information. Indemnity of ofﬁcers Under Article 154 of the Articles, the Company may indemnify any Director or other ofﬁcer against any liability, subject to the provisions of the Companies Acts, and the Articles grant an indemnity to the Directors against any liability for the costs of legal proceedings where judgement is given in their favour. Under the authority conferred by Article 154, the Company has granted indemnities to Directors and ofﬁcers of the Company and its subsidiaries. The indemnities do not apply to any claim which arises out of fraud, default, negligence or breach of ﬁduciary duty or trust by the indemniﬁed person. In addition, the Company may purchase and maintain for any Director or other ofﬁcer, insurance against any liability. The Company maintains appropriate insurance cover against legal action brought against its Directors and ofﬁcers and the Directors and ofﬁcers of its subsidiaries. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S & O T H E R I N F O R M A T O N I 98 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE STATUTORY DISCLOSURES As can be seen from the chart below, relative emissions have decreased, with a 1% reduction in the emissions per GBP revenue from 2014. Revenue intensity ratio tCO2e/£ 15 14 13 12 11.76 11.84 12.3 9.5 In addition, during the year we undertook an Energy Saving Opportunities Scheme (ESOS) assessment in line with the UK Environment Agency requirements and can conﬁrm that we are compliant with the Regulations. Branches Subsidiaries of the Company have established branches in a number of different countries in which they operate. Auditor Resolutions appointing KPMG as the Company’s and Group’s auditor and authorising the Audit Committee to determine their remuneration will be proposed at the Annual General Meeting. Important events since 31 December 2015 There have been no important events affecting the Company or any subsidiary since 31 December 2015. Political donations No political donations were made during the ﬁnancial year (2014: nil). Approval of the Strategic Report and Directors’ Report The Strategic Report set out on pages 8 to 53 and Director’s Report set out on pages 54 to 99 were approved by the Board on 3 March 2016 and have been signed by the Company Secretary on behalf of the Board. Peter Kennerley Group Legal Director & Company Secretary 3 March 2016 Carbon dioxide emissions In line with the Companies Act 2006, we are reporting on our greenhouse gas (GHG) emissions. We have used the method outlined in the GHG Protocol Corporate Accounting and Reporting Standard (revised edition), using the location-based scope 2 calculation method, together with the latest emission factors from recognised public sources including Defra, the International Energy Agency, the US Energy Information Administration, the US Environmental Protection Agency and the Intergovernmental panel on Climate Change. The tables below present the principal ﬁndings from GHG analyses of the previous two years: Total GHG emissions by GHG protocol scope 2015 tCO2e/year Scope 1 Scope 2 Scope 3 Total 15,486,377 18,987 2,849,565 18,354,928 2014 15,714,575 18,188 2,940,471 18,673,234 Total GHG emissions by ﬂeet/non-ﬂeet tCO2e/year 2015 2014 Fleet Non-ﬂeet Total 18,186,552 168,376 18,354,928 18,523,108 150,126 18,673,234 In line with previous years, the results show that 99% of GHG emissions arise from the operation of our ﬂeet when it is out on rent. There are three main factors driving our annual GHG emissions: the fuel type our customers use; the pattern of their usage; and the fuel efﬁciency of the ﬂeet. In 2015 we emitted 18,354,928 tonnes of CO2e, a decrease of 2% over 2014. In line with best practice, our GHG accounting systems include an estimate of the upstream GHG emissions associated with fuel supply chains; in 2015 this contributed 15.2% of combustion emissions, accounting for 97% of scope 3 emissions. As a result of a 6.1% decrease in running hours, a recorded decrease of 2% in GHG emission is reported for the Aggreko ﬂeet in 2015. This disparity is due to a shift in the ratio of running hours, from generators with low energy outputs to larger machines. In 2014, approximately 71% of ﬂeet running hours were attributed to generators of less than or equal to 200 kVA, in 2015 this percentage dropped to 47%. Accordingly, the larger and more fuel intensive generators with an output of over 200 kVA accounted for 53% of global running hours in 2015. In terms of the non-ﬂeet activities, emissions from activities on our premises have decreased. Conversely, emissions from third-party vehicle use, company vehicles and business travel have all increased. The largest increases are documented in reported travel in company- owned cars and vans and third-party road freight logistics. The intensity ratio expresses the GHG impact per unit of physical activity or economic output, with a declining intensity ratio reﬂecting a positive performance improvement. In 2013 we chose Revenue Intensity as the most suitable metric for our business for then and future years. STATEMENT OF DIRECTORS’ RESPONSIBILITIES AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 99 The directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the ﬁnancial statements in accordance with applicable law and regulations. Company law requires the directors to prepare ﬁnancial statements for each ﬁnancial year. Under that law the directors have prepared the group ﬁnancial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the parent company ﬁnancial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards), including FRS 101 “Reduced Disclosure Framework” and applicable law. Under company law the directors must not approve the ﬁnancial statements unless they are satisﬁed that they give a true and fair view of the state of affairs of the group and the company and of the proﬁt or loss of the group for that period. In preparing these ﬁnancial statements, the directors are required to: (cid:333)(cid:3) select suitable accounting policies and then apply them consistently; (cid:333)(cid:3) make judgements and accounting estimates that are reasonable and prudent; The directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of ﬁnancial statements may differ from legislation in other jurisdictions. The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess a company’s performance, business model and strategy. Each of the directors, whose names and functions are listed on pages 56 to 57 conﬁrm that, to the best of their knowledge: (cid:333)(cid:3) the group ﬁnancial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, ﬁnancial position and proﬁt of the group; and (cid:333)(cid:3) the Management Report contained in the Strategic Report and Directors’ Report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties that it faces. (cid:333)(cid:3) state whether IFRSs as adopted by the European Union and By order of the Board applicable UK Accounting Standards including FRS101 have been followed, subject to any material departures disclosed and explained in the group and parent company ﬁnancial statements respectively; (cid:333)(cid:3) prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufﬁcient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the ﬁnancial position of the company and the group and enable them to ensure that the ﬁnancial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the group ﬁnancial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Chris Weston Chief Executive Ofﬁcer Carole Cran Chief Financial Ofﬁce & O T H E R I N F O R M A T O N I O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E A C C O U N T S 100 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 POWERING THE FUTURE OF RUSSIAN OIL REFINING 1 CHALLENGE 2 SOLUTION Lukoil’s Nizhegorodnefteorgsintez oil reﬁnery has a productive capacity of 17 million tons of oil per year. In the course of upgrading their equipment the reﬁnery suffered a reduction in cooling capacity as a result of damage to heat exchange surfaces in the standard cooling tower, causing a 9MW cooling shortage. Aggreko designed a solution using cooling towers which were connected to the main power supply using 300 metres of power cable. The cooling towers were installed in the cooling circuit parallel to the standard cooling tower and processed up to 1850m3/ hour of water, providing the additional cooling the reﬁnery required to maintain production levels over the Summer period. Lukoil later requested an increase in cooling capacity to 26MW, enabling one of their cooling towers to be shut down for maintenance without investment in spare capacity and whilst enhancing production reliability. A reduction of 9MW in the standard cooling when upgrading equipment Producing 17 million tons of oil per year AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 101 3 FUTURE The Nizhegorodnefteorgsintez oil reﬁnery is Lukoil’s ﬂagship reﬁnery. Looking forward, we hope to provide Lukoil with cooling solutions to support their repair and maintenance programme across Russia, whilst also being the supplier of choice in the event of an emergency need for additional cooling. NIZHEGORODNEFTEORGSINTEZ OIL REFINERY RUSSIA Capable of cooling 1850m3/ hour of water Lukoil has requested an increase in cooling capacity to 26MW 102 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AGGREKO PLC Report on the ﬁnancial statements Our opinion In our opinion: (cid:333)(cid:3) Aggreko plc’s Group ﬁnancial statements and Company ﬁnancial statements (the “ﬁnancial statements”) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2015 and of the Group’s proﬁt and cash ﬂows for the year then ended; (cid:333)(cid:3) the Group ﬁnancial statements have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union; (cid:333)(cid:3) the Company ﬁnancial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and (cid:333)(cid:3) the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group ﬁnancial statements, Article 4 of the IAS Regulation. What we have audited The ﬁnancial statements, included within the Annual Report, comprise: (cid:333)(cid:3) the Group and Company Balance Sheets as at 31 December 2015; (cid:333)(cid:3) the Group Income Statement and Group Statement of Comprehensive Income for the year then ended; (cid:333)(cid:3) the Group Cash Flow Statement for the year then ended; (cid:333)(cid:3) the Group Statement of Changes in Equity for the year then ended; and (cid:333)(cid:3) the notes to the ﬁnancial statements, which include a summary of signiﬁcant accounting policies and other explanatory information. Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the ﬁnancial statements. These are cross-referenced from the ﬁnancial statements and are identiﬁed as audited. The ﬁnancial reporting framework that has been applied in the preparation of the Group ﬁnancial statements is applicable law and IFRSs as adopted by the European Union. The ﬁnancial reporting framework that has been applied in the preparation of the Company ﬁnancial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), comprising FRS 101 “Reduced Disclosure Framework”. Our audit approach Context As discussed in the Annual Report, during 2015 Aggreko changed business line reporting with Aggreko Power Solutions (Utility and Industrial) now encompassing the previous power projects business and local businesses in developing markets and Aggreko Rental Solutions encompassing local businesses in developed markets. This change in reporting did not require us to substantively change our Group audit process from the previous year. We did, however, focus this year on exceptional items relating to the Group reorganisation and business priorities review referred to in the Annual Report. Overview Materiality (cid:333)(cid:3) Overall Group materiality: £12.6 million which represents 5% of proﬁt before tax and exceptional items. Audit scope (cid:333)(cid:3) We worked closely with audit teams both within and outside the UK, including visiting (cid:333)(cid:3) In terms of Group audit scope, we conducted audit work at 12 reporting units within the Group, which together comprised 74% of the Group’s revenues and 81% of the Group’s proﬁt before tax. our team in Houston. In terms of our Group audit, our principal areas of focus were: (cid:333)(cid:3) Contract receivables balances and associated provisioning; Areas of focus (cid:333)(cid:3) Tax provisions (Direct and indirect); (cid:333)(cid:3) Revenue recognition; and (cid:333)(cid:3) Exceptional items relating to Group reorganisation and business priorities review. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 103 The scope of our audit and our areas of focus We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). We designed our audit by determining materiality and assessing the risks of material misstatement in the ﬁnancial statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of signiﬁcant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud. The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identiﬁed as “areas of focus” in the table below. We have also set out how we tailored our audit to address these speciﬁc areas in order to provide an opinion on the ﬁnancial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete list of all risks identiﬁed by our audit. Area of focus Contract receivables balances and associated provisioning One of the biggest risks to the Group is non- payment by customers under some of the larger contracts in the Power Solutions Utility business. Contract receivables provisions are, by their nature, highly judgmental, mainly due to the unpredictability and volatility of cash receipts in higher risk territories. We focused on this area due to the magnitude of both the accounts receivable balances £223 million (2014: £208 million) and the associated provisions, £48 million (2014: £38 million) which are determined based on management’s estimates. How our audit addressed the area of focus We documented and gained an understanding of the key controls and processes that management and the Directors have in place to assess the expected recovery of Power Solutions Utility contract receivables balances and associated provisioning. We checked, on a sample basis, that the pre-contract risk assessment procedures were in place in respect of the most signiﬁcant contracts entered into during the year and did not identify any where they were not. We obtained the contract receivables analyses and tested the gross receivables balances, on a sample basis, for example by tracing to outstanding invoices or subsequent cash receipt. We then applied various selection criteria, principally focusing on the largest contract balances within each region, to identify 18 contracts for testing (representing 83% of the total amount outstanding at 31 December 2015 and 97% of contract provisions at the year end). For those contracts selected, we: (cid:333)(cid:3) tested the relevant associated cover, including deposits and guarantees, to assess the residual contract receivable exposure; (cid:333)(cid:3) considered the contract terms and assessed their accounting impact; (cid:333)(cid:3) considered the history of cash payments, including post year end cash receipts from the customer and compared the consistency of assumptions used in calculating provisions, both over time within the contract and as between contracts with similar risk proﬁles; and (cid:333)(cid:3) used our knowledge and experience to consider the completeness and challenge the basis of contract provisioning. This is an area which requires signiﬁcant management judgement and has a range of possible outcomes. However from the evidence we obtained, we did not identify any material misstatement in the contract receivables provision. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 104 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION INDEPENDENT AUDITORS’ REPORT Area of focus How our audit addressed the area of focus Tax provisions (Direct and indirect) The Group’s direct and indirect tax provisions are, by their nature, highly judgmental. This is due to the complexity of the Group’s operations in multiple tax jurisdictions and the changing tax environments in which it operates. We focused on this area due to the magnitude of direct and indirect tax provisions which are determined based on management’s estimates. Total direct and indirect tax provisions at 31 December 2015 were £61 million (2014: £69 million), which is made up of direct tax provisions of £48 million (2014: £54 million) and indirect tax provisions of £13 million (2014: £15 million). Revenue recognition Revenue is recognised in accordance with the contractual arrangements and is accrued or deferred at the balance sheet date, depending on the date of the most recent invoice issued and other speciﬁc contractual terms. In the Power Solutions Utility business, we focused on adjustments for the accrual of income and deferral of revenue. In the Power Solutions Industrial and Rental Solutions businesses, revenue recognition is generally not complex. As a result, we focused on non-standard revenue transactions and the timing of recognition of transactions around the year-end to make sure they were recorded in the correct ﬁnancial year. Power Solutions revenues were £943 million (2014: £961 million) and Rental Solutions revenues were £618 million (2014: £616 million) for the year ended 31 December 2015. Exceptional item: Reorganisation and business priorities costs (£26 million) As a result of the reorganisation and business priorities review, Aggreko have incurred £26 million of exceptional costs during the year. We focused on this area because inclusion of costs not connected with the restructuring within exceptional costs could result in misstatement of the Group’s underlying proﬁt. We documented and gained an understanding of the key controls and processes that management and the Directors have in place to assess the tax risks and exposures and the associated direct and indirect tax provisioning. We obtained reports showing the components of the tax provisions and used them to identify the most signiﬁcant balances for detailed testing. We then applied various selection criteria, principally focusing on the largest balances and identiﬁed 23 provisions for testing (representing 82% of the total direct and indirect tax provisions at 31 December 2015). As appropriate, we tested the completeness, accuracy and valuation of the provisions as follows: (cid:333)(cid:3) understood and tested the provision calculation; (cid:333)(cid:3) read and considered the implications for our audit of relevant correspondence with tax authorities; (cid:333)(cid:3) used our tax expertise and our knowledge and experience of developments in the relevant tax jurisdictions to consider the completeness and challenge the basis of the signiﬁcant provision judgements made by management and in house tax specialists; and (cid:333)(cid:3) utilised our experience of similar situations elsewhere to independently assess the evidence supporting those direct and indirect tax provisions. This is an area which also requires signiﬁcant management judgement and has a range of possible outcomes. However from the evidence we have obtained, we did not identify any material misstatement in the direct and indirect taxation provisions. We understood key controls around revenue and receivables and performed testing where appropriate. Based on the results of our testing of controls, we did not amend our planned approach to auditing revenue for the year (and associated accrued income on deferred revenue at year end). For Power Solutions Utility revenue, we selected a sample of customer contracts and agreed that revenue was recognised in line with the contract. We recalculated, on a sample basis, accrued income and deferred revenue and tested the timing of revenue recognition by tracing back to supporting documentation; for example contract terms and invoices. We also considered accrued income and deferred revenue in the context of our work on contract receivables and associated provisioning. We analysed accrued income and deferred revenue by contract to check that the balances had been appropriately considered in the overall assessment of contract provisioning. For Power Solutions Industrial and Rental Solutions revenue, we used revenue data auditing techniques to provide assurance over standard revenue transactions and to check that transactions had been correctly recorded. This also enabled us to identify and substantively test a sample of non-standard transactions by tracing them to appropriate supporting documentation. We also tested a sample of accrued income and deferred revenue balances by reference to supporting documentation. For both businesses, our testing also focused on journals posted to revenue. From the evidence obtained, we found revenue recognition to be in accordance with Aggreko’s accounting policies and did not identify any material misstatements. We assessed the appropriateness of the accounting policy for exceptional items. We obtained a listing of the exceptional costs incurred by location and tested a sample to supporting documentation. We also considered whether there were other signiﬁcant costs which should have been included in exceptional items. We checked the nature of the costs and conﬁrmed they were treated appropriately as exceptional items within the income statement. We reviewed the disclosures in the annual report relating to exceptional items. From the audit work performed, we did not identify any material misstatements. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 105 How we tailored the audit scope The scope of our audit reﬂected the organisational structure of the Group within the two business units of Power Solutions and Rental Solutions. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the ﬁnancial statements as a whole, taking into account the structure of the Group, the accounting processes and controls and the areas of greatest audit risk. In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at each part of the business by the Group engagement team, or component auditors within PwC UK and from other PwC network ﬁrms. We sent detailed Group instructions to each of those component auditors, in which we identiﬁed and explained the areas where we wanted them to focus their work. We then held meetings and calls with them to clarify and discuss their audit approach, materiality and reporting requirements. Senior members of the Group audit team visited the component audit team in Houston to direct and supervise their work whilst the team was on site. We received written reports from each component auditor summarising the ﬁnal conclusions from their audit work. Through a combination of full scope audits and directed scope procedures we performed Group audit work in 12 reporting units across the Group which covered 74% of the Group’s revenues and 81% of the Group’s proﬁt before tax. This, together with additional procedures performed at the Group level, gave us the evidence we needed for our opinion on the Group ﬁnancial statements as a whole. Materiality The scope of our audit was inﬂuenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual ﬁnancial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the ﬁnancial statements as a whole. Based on our professional judgement, we determined materiality for the ﬁnancial statements as a whole as follows: Overall Group materiality £12.6 million (2014: £14 million). How we determined it 5% of proﬁt before tax and exceptional items (2014: 5% of proﬁt before tax) Rationale for benchmark applied We have historically applied the benchmark of proﬁt before tax, a generally accepted auditing practice, in the absence of indicators that an alternative benchmark would be more appropriate. This year, we excluded exceptional items so that our overall materiality was not impacted by these one off expenses. We applied a lower materiality to the audit of exceptional items. We agreed with the Audit Committee that we would report to them misstatements identiﬁed during our audit above £1 million (2014: £1 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Going concern Under the Listing Rules we are required to review the Directors’ statement, set out on page 113, in relation to going concern. We have nothing to report having performed our review. Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the Directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the ﬁnancial statements. We have nothing material to add or to draw attention to. As noted in the Directors’ statement, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the ﬁnancial statements. The going concern basis presumes that the Group and parent Company have adequate resources to remain in operation, and that the Directors intend them to do so, for at least one year from the date the ﬁnancial statements were signed. As part of our audit we have concluded that the Directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s and parent Company’s ability to continue as a going concern. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 106 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION INDEPENDENT AUDITORS’ REPORT Other required reporting Consistency of other information Companies Act 2006 opinion In our opinion, the information given in the Strategic Report and the Directors’ Report for the ﬁnancial year for which the ﬁnancial statements are prepared is consistent with the ﬁnancial statements. ISAs (UK & Ireland) reporting Under ISAs (UK & Ireland) we are required to report to you if, in our opinion: (cid:333)(cid:3) Information in the Annual Report is: – materially inconsistent with the information in the audited ﬁnancial statements; or – apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group and Company acquired in the course of performing our audit; or otherwise misleading. We have no exceptions to report. (cid:333)(cid:3) the statement given by the Directors on page 99, in accordance with provision C.1.1 of the UK Corporate Governance Code (the “Code”), that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group’s and parent Company’s position and performance, business model and strategy is materially inconsistent with our knowledge of the Group and parent Company acquired in the course of performing our audit. We have no exceptions to report. (cid:333)(cid:3) the section of the Annual Report on pages 70 to 71, as required by provision C.3.8 of the Code, describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee. We have no exceptions to report. The Directors’ assessment of the principal risks that would threaten the solvency or liquidity of the Group and the Company Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to: (cid:333)(cid:3) the Directors’ conﬁrmation on page 33 of the Annual Report, in accordance with provision C.2.1 of the Code, that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. We have nothing material to add or to draw attention to. (cid:333)(cid:3) the disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated. (cid:333)(cid:3) the Directors’ explanation on page 33 of the Annual Report, in accordance with provision C.2.2 of the Code, as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualiﬁcations or assumptions. We have nothing material to add or to draw attention to. We have nothing material to add or to draw attention to. Under the Listing Rules we are required to review the Directors’ statement that they have carried out a robust assessment of the principal risks facing the Group and the Directors’ statement in relation to the longer-term viability of the Group. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors’ process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review. Adequacy of accounting records and information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion: (cid:333)(cid:3) we have not received all the information and explanations we require for our audit; or (cid:333)(cid:3) adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or (cid:333)(cid:3) the Company ﬁnancial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 107 Directors’ remuneration Directors’ remuneration report – Companies Act 2006 opinion In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. Other Companies Act 2006 reporting Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration speciﬁed by law are not made. We have no exceptions to report arising from this responsibility. Corporate governance statement Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to ten further provisions of the UK Corporate Governance Code. We have nothing to report having performed our review. Responsibilities for the ﬁnancial statements and the audit Our responsibilities and those of the Directors As explained more fully in the Statement of Directors’ Responsibilities set out on page 99, the Directors are responsible for the preparation of the ﬁnancial statements and for being satisﬁed that they give a true and fair view. Our responsibility is to audit and express an opinion on the ﬁnancial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. What an audit of ﬁnancial statements involves An audit involves obtaining evidence about the amounts and disclosures in the ﬁnancial statements sufﬁcient to give reasonable assurance that the ﬁnancial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: (cid:333)(cid:3) whether the accounting policies are appropriate to the Group’s and the Company’s circumstances and have been consistently applied and adequately disclosed; (cid:333)(cid:3) the reasonableness of signiﬁcant accounting estimates made by the Directors; and (cid:333)(cid:3) the overall presentation of the ﬁnancial statements. We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the ﬁnancial statements. We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. In addition, we read all the ﬁnancial and non-ﬁnancial information in the Annual Report to identify material inconsistencies with the audited ﬁnancial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Graham McGregor (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Glasgow 3 March 2016 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 108 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION GROUP INCOME STATEMENT For the year ended 31 December 2015 Revenue Cost of sales Gross proﬁt Distribution costs Administrative expenses Other income Operating proﬁt Net ﬁnance costs – Finance cost – Finance income Proﬁt before taxation Taxation Proﬁt for the year All proﬁt for the year is attributable to the owners of the Company. Basic earnings per share (pence) Diluted earnings per share (pence) Total before exceptional items 2015 £ million 1,561 (676) 885 (429) (186) 5 275 Exceptional items (Note 7) 2015 £ million – (1) (1) (4) (21) – (26) (25) 2 252 (69) 183 – – (26) 5 (21) 2015 £ million 1,561 (677) 884 (433) (207) 5 249 (25) 2 226 (64) 162 2014 £ million 1,577 (674) 903 (407) (190) 4 310 (23) 2 289 (74) 215 71.73 71.68 (8.24) (8.23) 63.49 63.45 82.57 82.49 Notes 4 2 4 9 5 10 12 12 GROUP STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2015 Proﬁt for the year Other comprehensive (loss)/income Items that will not be reclassiﬁed to proﬁt or loss Remeasurement of retirement beneﬁts (net of tax) Items that may be reclassiﬁed subsequently to proﬁt or loss Cash ﬂow hedges (net of tax) Net exchange losses offset in reserves (net of tax) Other comprehensive loss for the year (net of tax) Total comprehensive income for the year 2015 £ million 162 2014 £ million 215 3 – (68) (65) 97 (3) (3) (9) (15) 200 GROUP BALANCE SHEET (COMPANY NUMBER: SC177553) As at 31 December 2015 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 109 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S Non-current assets Goodwill Other intangible assets Property, plant and equipment Deferred tax asset Current assets Inventories Trade and other receivables Cash and cash equivalents Derivative ﬁnancial instruments Current tax assets Total assets Current liabilities Borrowings Derivative ﬁnancial instruments Trade and other payables Current tax liabilities Provisions Non-current liabilities Borrowings Derivative ﬁnancial instruments Deferred tax liabilities Retirement beneﬁt obligation Provisions Total liabilities Net assets Shareholders’ equity Share capital Share premium Treasury shares Capital redemption reserve Hedging reserve (net of deferred tax) Foreign exchange reserve Retained earnings Total Shareholders’ equity Notes 13 30.A2 15 22 16 17 3 30.A4 18 30.A4 20 21 18 30.A4 22 30.A6 21 23 24 2015 £ million 2014 £ million 118 16 1,139 30 1,303 189 476 48 1 33 747 2,050 (31) (1) (259) (64) (8) (363) (506) (6) (58) (2) – (572) (935) 1,115 42 20 (9) 13 (4) (149) 1,202 1,115 130 18 1,177 22 1,347 163 474 37 5 21 700 2,047 (76) (1) (303) (67) – (447) (455) (7) (53) (7) – (522) (969) 1,078 42 20 (14) 13 (4) (81) 1,102 1,078 The ﬁnancial statements on pages 108 to 146 were approved by the Board of Directors on 3 March 2016 and signed on its behalf by: K Hanna Chairman C Cran Chief Financial Ofﬁcer 110 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION GROUP CASH FLOW STATEMENT For the year ended 31 December 2015 Cash generated from operating activities Cash generated from operations Tax paid Interest received Interest paid Net cash generated from operating activities Cash ﬂows from investing activities Acquisitions (net of cash acquired) Purchases of property, plant and equipment (PPE) Proceeds from sale of PPE Net cash used in investing activities Cash ﬂows from ﬁnancing activities Net proceeds from issue of Ordinary Shares Proceeds from long-term loans Repayment of long-term loans Net movement in short-term loans Dividends paid to Shareholders Return of capital to Shareholders Net cash used in ﬁnancing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Exchange loss on cash and cash equivalents Cash and cash equivalents at end of the year Notes 2 29 2 3 2015 £ million 2014 £ million 461 (91) 2 (26) 346 (18) (254) 17 (255) 2 454 (452) (11) (69) (1) (77) 14 26 (8) 32 498 (77) 2 (22) 401 (4) (251) 12 (243) 3 448 (335) 10 (70) (198) (142) 16 12 (2) 26 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT For the year ended 31 December 2015 Increase in cash and cash equivalents Cash outﬂow/(inﬂow) from movement in debt Changes in net debt arising from cash ﬂows Exchange loss Movement in net debt in year Net debt at beginning of year Net debt at end of year Notes 18 2015 £ million 14 9 23 (18) 5 (494) (489) 2014 £ million 16 (123) (107) (24) (131) (363) (494) GROUP STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2015 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 111 As at 31 December 2015 Balance at 1 January 2015 Proﬁt for the year Other comprehensive (loss)/income: Transfers from hedging reserve to revenue Fair value gains on foreign currency cash ﬂow hedge Fair value gains on interest rate swaps Currency translation differences (i) Remeasurement of retirement beneﬁts (net of tax) Total comprehensive (loss)/ income for the year ended 31 December 2015 Transactions with owners: Employee share awards Issue of Ordinary Shares to employees under share option schemes Return of capital to Shareholders Dividends paid during 2015 Balance at 31 December 2015 Attributable to equity holders of the Company Notes Ordinary Share capital £ million 42 – Share premium account £ million 20 – Treasury shares £ million (14) – Capital redemption reserve £ million 13 – Foreign exchange reserve (translation) £ million (81) – Hedging reserve £ million (4) – Retained earnings £ million 1,102 162 Total equity £ million 1,078 162 – – – – – – – – – – – 42 – – – – – – – – – – – 20 – – – – – – – 5 – – 5 (9) – – – – – – – – – – – 13 (3) 2 1 – – – – – – – – (4) – – – (68) – – – – – 3 (68) 165 – 8 (3) 2 1 (68) 3 97 8 – – – – (149) (3) (1) (69) (65) 1,202 2 (1) (69) (60) 1,115 30.A5 23 11 (i) Included in currency translation differences of the Group are exchange losses of £18 million arising on borrowings denominated in foreign currencies designated as hedges of net investments overseas, and exchange losses of £50 million relating to the translation of overseas results and net assets. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 112 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION GROUP STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2015 As at 31 December 2014 Balance at 1 January 2014 Proﬁt for the year Other comprehensive (loss)/income: Transfers from hedging reserve to revenue Fair value gains on foreign currency cash ﬂow hedge Fair value gains on interest rate swaps Currency translation differences (i) Remeasurement of retirement beneﬁts (net of tax) Total comprehensive (loss)/ income for the year ended 31 December 2014 Transactions with owners: Employee share awards Issue of Ordinary Shares to employees under share option schemes Return of capital to Shareholders Capital redemption reserve Dividends paid during 2014 Balance at 31 December 2014 Attributable to equity holders of the Company Notes Ordinary Share capital £ million 49 – Share premium account £ million 20 – Treasury shares £ million (24) – Capital redemption reserve £ million 6 – Foreign exchange reserve (translation) £ million (72) – Hedging reserve £ million (1) – Retained earnings £ million 1,162 215 Total equity £ million 1,140 215 – – – – – – – – – (7) – (7) 42 – – – – – – – – – – – – 20 – – – – – – – 10 – – – 10 (14) – – – – – – – – – 7 – 7 13 (6) 2 1 – – (3) – – – – – – (4) – – – (9) – (9) – – – – – – (81) – – – – (3) (6) 2 1 (9) (3) 212 200 3 3 (7) (198) – (70) (272) 1,102 3 (198) – (70) (262) 1,078 (i) Included in currency translation differences of the Group are exchange losses of £29 million arising on borrowings denominated in foreign currencies designated as hedges of net investments overseas, offset by exchange gains of £20 million relating to the translation of overseas results and net assets. NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 113 1 Accounting policies 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. The principal accounting policies applied in the preparation of these consolidated ﬁnancial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. Basis of preparation The Group ﬁnancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The ﬁnancial statements have been prepared under the historical cost convention, as modiﬁed by the revaluation of certain ﬁnancial assets and ﬁnancial liabilities (including derivative instruments) at fair value. The preparation of ﬁnancial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the ﬁnancial statements and the reported amounts of the revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Going concern Having assessed the principal risks and the other matters discussed in connection with the viability statement, the directors considered it appropriate to adopt the going concern basis of accounting in preparing the ﬁnancial statements. Changes in accounting policy and disclosures (a) New and amended standards adopted by the Group There are no new IFRSs or IFRICs that are effective for the ﬁrst time this year that have a material impact on the Group. (b) New standards, amendments and interpretations issued but not effective for the ﬁnancial year beginning 1 January 2015 and not early adopted IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of ﬁnancial statements about the nature, amount, timing and uncertainty of revenue and cash ﬂows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain beneﬁts from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018. The Group will access the impact of IFRS 15 closer to the implementation date. IFRS 9, ‘Financial instruments’ addresses the classiﬁcation, measurement and recognition of ﬁnancial assets and liabilities. The standard is effective for accounting periods beginning on or after 1 January 2018. IFRIS 16, ‘Leases’ was issued on 13 January 2016 and applies to annual periods beginning on or after 1 January 2019. IFRIS 16 requires lessees to recognise a lease liability reﬂecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. The Group will assess the impact of IFRS 16 closer to the implementation date. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group. Basis of consolidation The Group ﬁnancial statements consolidate the ﬁnancial statements of Aggreko plc and all its subsidiaries for the year ended 31 December 2015. Subsidiaries are those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identiﬁable assets and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Revenue recognition Revenue for the Group represents the amounts earned from the supply of temporary power, temperature control, oil-free compressed air and related services and excludes sales taxes and intra-Group revenue. Revenue can comprise a ﬁxed rental charge and a variable charge related to the usage of assets or other services. In all cases, revenue is recognised in accordance with the contractual arrangements, for ﬁxed rental charges, over the rental period and for variable elements as the asset is utilised or service is provided. Revenue is accrued or deferred at the balance sheet date depending on the date of the most recent invoice issued and the contractual terms. Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identiﬁed as the plc Board of Directors. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 114 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 1 Accounting policies continued During 2015 Aggreko reorganised into two business units: Rental Solutions and Power Solutions, to better focus on our customers. Within Power Solutions we serve both Utility and Industrial customers. Aggreko therefore has three segments comprising: Rental Solutions, Power Solutions – Industrial and Power Solutions – Utility. A description of these business units is contained on pages 8 to 17. This is reﬂected by the Group’s divisional management and organisational structure and the Group’s internal ﬁnancial reporting systems. Central administrative costs are allocated between segments based on revenue. Exceptional items 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. To monitor our ﬁnancial performance we use a proﬁt measure that excludes exceptional items. We exclude these items because, if included, these items could distort understanding of our performance for the year and comparability between periods. The income statement has been presented in a columnar format, which separately highlights exceptional items. This is intended to enable users of the ﬁnancial statements to determine more readily the impact of exceptional items on the results of the Group. Exceptional items for the year ended 31 December 2015 were £26 million before taxation (2014: £nil) and they relate to the Group reorganisation and business priorities review. They comprise employee related costs, professional fees and property related costs. These costs are explained in Note 7 to the Accounts. Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and impairment losses. Cost includes purchase price, and directly attributable costs of bringing the asset into the location and condition where it is capable for use. Borrowing costs are not capitalised since the assets are assembled over a short period of time. Freehold properties are depreciated on a straight line basis over 25 years. Short leasehold properties are depreciated on a straight line basis over the terms of each lease. Other property, plant and equipment are depreciated on a straight line basis at annual rates estimated to write off the cost of each asset over its useful life from the date it is available for use. Assets in the course of construction are not depreciated. Non-rental ﬂeet assets which are contract speciﬁc are depreciated over the life of the contract. The periods of depreciation are reviewed on an annual basis and the principal periods used are as follows: Rental ﬂeet Vehicles, plant and equipment 8 to 10 years 4 to 15 years Intangibles Intangible assets acquired as part of a business combination are capitalised, separately from goodwill, at fair value at the date of acquisition if the asset is separable or arises from contractual or legal rights and its fair value can be measured reliably. Amortisation is calculated on a straight-line method to allocate the fair value at acquisition of each asset over their estimated useful lives as follows: customer relationships: 10 years; non-compete agreements: over the life of the non-compete agreements. Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the speciﬁc software. These costs are amortised on a straight line basis over their estimated useful lives, which is currently deemed to be four years. The useful life of intangible assets is reviewed on an annual basis. Goodwill On the acquisition of a business, fair values are attributed to the net assets acquired. Goodwill arises where the fair value of the consideration given for a business exceeds the fair value of such assets. Goodwill arising on acquisitions is capitalised and is subject to impairment reviews, both annually and when there are indicators that the carrying value may not be recoverable. For the purpose of the impairment testing, goodwill is allocated to each of the Group’s cash generating units expected to beneﬁt from the synergies of the combination. Cash generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, then the impairment loss is allocated ﬁrst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. Any impairment of goodwill is recognised immediately in the income statement. Impairment of property, plant and equipment and other intangible assets (excluding goodwill) Property, plant and equipment and other intangible assets are amortised/depreciated and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Value in use is calculated using estimated cash ﬂows. These are discounted using an appropriate long-term pre-tax interest rate. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁable cash ﬂows (cash-generating units). Foreign currencies Items included in the ﬁnancial statements for each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (functional currency). The Group’s consolidated ﬁnancial statements are presented in Sterling, which is the Group’s presentational currency. At individual Company level, transactions denominated in foreign currencies are translated at the rate of exchange on the day the transaction occurs. Assets and liabilities denominated in foreign currency are translated at the exchange rate ruling at the balance sheet date. Non-monetary assets are translated at the historical rate. In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts and foreign currency options. On consolidation, assets and liabilities of subsidiary undertakings are translated into Sterling at closing rates of exchange. Income and cash ﬂow statements are translated at average rates of exchange for the period. Gains and losses from the settlement of transactions and gains and losses on the translation of monetary assets and liabilities denominated in other currencies are included in the income statement. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 115 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 1 Accounting policies continued Derivative ﬁnancial instruments This accounting policy is included in Note 30 – Notes to the Group Accounts – appendices. Taxation Deferred tax Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the ﬁnancial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable proﬁts will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill, negative goodwill nor from the acquisition of an asset, which does not affect either taxable or accounting income. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Provision for income taxes, mainly withholding taxes, which could arise on the remittance of retained earnings, principally relating to subsidiaries, is only made where there is a current intention to remit such earnings. Current tax The charge for the current tax is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using taxation rates that have been enacted or substantially enacted by the balance sheet date. Inventories Inventories are valued at the lower of cost and net realisable value, using the weighted average cost basis. Cost of raw materials, consumables and work in progress includes the cost of direct materials and, where applicable, direct labour and those overheads that have been incurred in bringing the inventories to their present location and condition. Inventory is written down on a case by case basis if the anticipated net realisable value declines below the carrying amount of the inventories. Net realisable value is the estimated selling price less cost to completion and selling expenses. When the reasons for a write-down of the inventory have ceased to exist, the write-down is reversed. Employee beneﬁts Wages, salaries, social security contributions, paid annual leave and sick leave, bonuses and non-monetary beneﬁts are accrued in the year in which the associated services are rendered by the employees of the Group. Where the Group provides long-term employee beneﬁts, the cost is accrued to match the rendering of the services by the employees concerned. The Group operates a deﬁned beneﬁt pension scheme and a number of deﬁned contribution pension schemes. The cost for the year for the deﬁned beneﬁt scheme is determined using the attained age method with actuarial updates to the valuation being carried out at each balance sheet date. Remeasurements are recognised in full, directly in retained earnings, in the period in which they occur and are shown in the statement of comprehensive income. The current service cost of the pension charge, interest income on scheme assets, interest on pension scheme liabilities and administrative expenses are included in arriving at operating proﬁt. The retirement beneﬁt obligation recognised in the balance sheet is the present value of the deﬁned beneﬁt obligation at the balance sheet date less the fair value of the scheme assets. The present value of the deﬁned beneﬁt obligation is determined by discounting the estimated future cash ﬂows using interest rates of high-quality corporate bonds. Contributions to deﬁned contribution pension schemes are charged to the income statement in the period in which they become chargeable. Trade receivables Trade receivables are recognised initially at fair value (which is the same as cost). An impairment is recorded for the difference between the carrying amount and the recoverable amount where there is objective evidence that the Group will not be able to collect all amounts due. Signiﬁcant ﬁnancial difﬁculties of the debtor, probability that the debtor will enter bankruptcy or ﬁnancial reorganisation and default, or large and old outstanding balances, particularly in countries where the legal system is not easily used to enforce recovery, are considered indicators that the trade receivable is impaired. When a trade receivable is uncollectible it is written off against the provision for impairment of trade receivables. Trade payables Trade payables are recognised initially at fair value (which is the same as cost). Provisions Provisions are recognised where a legal or constructive obligation has been incurred which will probably lead to an outﬂow of resources that can be reasonably estimated. Provisions are recorded for the estimated ultimate liability that is expected to arise, taking into account the time value of money where material. As at 31 December 2015 provisions totalled £8 million (2014: £nil) and they relate to the Group reorganisation and business priorities review. The provisions are generally in respect of employee related costs, professional fees and property related costs. These provisions are detailed in Note 21. A contingent liability is disclosed where the existence of the obligation will only be conﬁrmed by future events, or where the amount of the obligation cannot be measured with reasonable reliability. Contingent assets are not recognised, but are disclosed where an inﬂow of economic beneﬁts is probable. 116 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 Further information is shown at Notes 10 and 22 to the Annual Report and Accounts. Financial risk management Financial risk factors The Group’s operations expose it to a variety of ﬁnancial risks that include liquidity, the effects of changes in foreign currency exchange rates, interest rates and credit risk. The Group has a centralised treasury operation whose primary role is to ensure that adequate liquidity is available to meet the Group’s funding requirements as they arise, and that ﬁnancial risk arising from the Group’s underlying operations is effectively identiﬁed and managed. The treasury operations are conducted in accordance with policies and procedures approved by the Board and are reviewed annually. Financial instruments are only executed for hedging purposes and transactions that are speculative in nature are expressly forbidden. Monthly reports are provided to senior management and treasury operations are subject to periodic internal and external review. Liquidity, funding and capital management The intention of Aggreko’s strategy is to deliver long-term value to its Shareholders whilst maintaining a balance sheet structure that safeguards the Group’s ﬁnancial position through economic cycles. Total capital is equity as shown in the Group balance sheet. Given the proven ability of the business to fund organic growth from operating cash ﬂows, and the nature of our business model, we believe it is sensible to run the business with a modest amount of debt. We say ‘modest’ because we are strongly of the view that it is unwise to run a business which has high levels of operational gearing with high levels of ﬁnancial gearing. Given the above considerations, we believe that a Net Debt to EBITDA ratio of around one times is appropriate for the Group over the longer term. This is well within our covenants to lenders which stand at three times Net Debt to EBITDA. At the end of 2015, Net Debt to EBITDA was 0.9 times (31 December 2014: 0.9 times). The Group maintains sufﬁcient facilities to meet its normal funding requirements over the medium term. At 31 December 2015 these facilities totalled £891 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 facilities are that EBITDA should be no less than four times interest and net debt should be no more than three times EBITDA; at 31 December 2015, these stood at 24 times and 0.9 times respectively. The Group does not consider that these covenants are restrictive to its operations. The maturity proﬁle of the borrowings is detailed in Note 18 in the Annual Report and Accounts. Net debt amounted to £489 million at 31 December 2015 and, at that date, un-drawn committed facilities were £385 million. 1 Accounting policies continued Share-based payments This accounting policy is included in Note 30 – Notes to the Group Accounts – appendices. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and deposits with a maturity of three months or less. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds, net of transaction costs, and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate. Key assumptions and signiﬁcant judgements The Group uses estimates and makes judgements in the preparation of its Accounts. The most sensitive areas affecting the Accounts are discussed below. Trade receivables The trade receivables accounting policy is on page 115. The majority of the contracts the Group enters into are small relative to the size of the Group and, if a customer fails to pay a debt, this is dealt with in the normal course of business. However, some of the contracts the Group undertakes in developing countries are very large, and are in jurisdictions where payment practices can be unpredictable. The Group monitors the risk proﬁle and debtor position of all such contracts regularly, and deploys a variety of techniques to mitigate the risks of delayed or non-payment; these include securing advance payments and guarantees. As a result of the rigorous approach to risk management, historically the Group has had a low level of bad debt write-offs although the risk of a major default is high. When a trade receivable is uncollectible it is written off against the provision for impairment of trade receivables. At 31 December 2015 the provision for impairment of trade receivables in the balance sheet was £64 million (2014: £55 million). Taxation Aggreko’s tax charge is based on the proﬁt for the year and tax rates in force at the balance sheet date. As well as corporation tax, Aggreko is subject to indirect taxes such as sales and employment taxes across various tax jurisdictions in the approximately 100 countries in which the Group operates. The varying nature and complexity of the tax law requires the Group to review its tax positions and make appropriate judgements at the balance sheet date. Due to the uncertain nature of the tax environment in many of the countries in which we operate, it can take some time to settle our tax position. We therefore create appropriate tax provisions for signiﬁcant potential uncertain or contentious tax positions and these are principally measured using the most likely outcome method. Provisions are considered on an individual basis. As at 31 December 2015 we had tax provisions totalling £61 million, £48 million for direct taxes and £13 million for indirect taxes (2014: £69 million, £54 million for direct taxes and £15 million for indirect taxes). In addition the recognition of deferred tax assets is dependent upon an estimation of future taxable proﬁts that will be available against which deductible temporary differences can be utilised. In the event that actual taxable proﬁts are different, such differences may impact the carrying value of such deferred tax assets in future periods. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 117 Credit risk Cash deposits and other ﬁnancial instruments give rise to credit risk on amounts due from counterparties. The Group manages this risk by limiting the aggregate amounts and their duration depending on external credit ratings of the relevant counterparty. In the case of ﬁnancial assets exposed to credit risk, the carrying amount in the balance sheet, net of any applicable provisions for loss, represents the amount exposed to credit risk. Management of trade receivables The management of trade receivables is the responsibility of the operating units, although they report monthly to Group on debtor days, debtor ageing and signiﬁcant outstanding debts. At an operating unit level a credit rating is normally established for each customer based on ratings from external agencies. Where no ratings are available, cash in advance payment terms are often established for new customers. Credit limits are reviewed on a regular basis. Some of the contracts undertaken in our Power Solutions Utility business are substantial, and are in jurisdictions where payment practices can be unpredictable. The Group monitors the risk proﬁle and debtor-position of all such contracts regularly, and deploys a variety of techniques to mitigate the risks of delayed or non-payment; these include securing advance payments, bank guarantees and various types of insurance. On the largest contracts, all such arrangements are approved at Group level. Contracts are reviewed on a case by case basis to determine the customer and country risk. Insurance The Group operates a policy of buying cover against the material risks which the business faces, where it is possible to purchase such cover on reasonable terms. Where this is not possible, or where the risks would not have a material impact on the Group as a whole, we self-insure. 1 Trading proﬁt represents operating proﬁt before gain on sale of property, plant and equipment. 1 Accounting policies continued Interest rate risk The Group’s policy is to manage the exposure to interest rates by ensuring an appropriate balance of ﬁxed and ﬂoating rates. At 31 December 2015, £321 million of the net debt of £489 million was at ﬁxed rates of interest resulting in a ﬁxed to ﬂoating rate net debt ratio of 66:34 (2014: 62:38). The Group monitors its interest rate exposure on a regular basis by applying forecast interest rates to the Group’s forecast net debt proﬁle after taking into account its existing hedges. The Group also calculates the impact on proﬁt and loss of a deﬁned interest rate shift for all currencies. Based on the simulations performed, the impact on proﬁt or loss of a +/– 100 basis-point shift, after taking into account existing hedges, would be £2 million (2014: £2 million). The sensitivity analysis is performed on a monthly basis and is reported to the Board. Foreign exchange risk The Group is subject to currency exposure on the translation of its net investments in overseas subsidiaries into Sterling. In order to reduce the currency risk arising, the Group uses direct borrowings in the same currency as those investments. Group borrowings are predominantly drawn down in the currencies affecting the Group, namely US Dollar, Canadian Dollar, Mexican Peso, Brazilian Real and Russian Ruble. The Group manages its currency ﬂows to minimise foreign exchange risk arising on transactions denominated in foreign currencies and uses forward contracts where appropriate in order to hedge net currency ﬂows. The positive impact of currency increased our revenues by £22 million (2014: decreased by £126 million) and trading proﬁt by £6 million (2014: decreased by £40 million) for the year ended 31 December 2015. The Group monitors the impact of exchange closely and regularly carries out sensitivity analysis. For every 5% movement in the US Dollar to GBP exchange rate there is an approximate impact of £7 million (2014: £11 million) in trading proﬁt1 in terms of translation. Currency translation also gave rise to a £68 million decrease in reserves as a result of year-on-year movements in the exchange rates (2014: decrease of £9 million). For every 5% movement in the Dollar, there is an approximate impact in equity of £23 million (2014: £23 million) arising from the currency translation of external borrowings which are being used as a net investment hedge. However, this will be offset by a corresponding movement in the equity of the net investment being hedged. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 118 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 2 Cash generated from operating activities Proﬁt for the year Adjustments for: Exceptional items (Note 7) Tax Depreciation Amortisation of intangibles Finance income Finance cost Proﬁt on sale of PPE (see below) Share-based payments (i) Changes in working capital (excluding the effects of exchange differences on consolidation): Increase in inventories Increase in trade and other receivables Decrease in trade and other payables Cash ﬂows relating to exceptional items Cash generated from operations 2015 £ million 162 2014 £ million 215 26 64 277 4 (2) 25 (5) 6 (25) (29) (26) (16) 461 – 74 259 3 (2) 23 (4) 3 (11) (57) (5) – 498 (i) This relates to the employee share awards within the Statement of Changes in Equity excluding £2 million included as exceptional items (note 7). In the cash ﬂow statement, proceeds from sale of PPE comprise: Net book amount Proﬁt on sale of PPE Proceeds from sale of PPE Proﬁt on sale of PPE is shown within other income in the income statement. 3 Cash and cash equivalents Cash at bank and in hand Short-term bank deposits 2015 £ million 12 5 17 2014 £ million 8 4 12 2015 £ million 29 19 48 2014 £ million 30 7 37 The effective interest rate on short-term bank deposits was 29% (2014: 19%); these deposits have a maturity of less than 90 days. Cash is only held in banks which have been approved by Group Treasury. Cash and bank overdrafts include the following for the purposes of the cash ﬂow statement: Cash and cash equivalents Bank overdrafts (Note 18) 2015 £ million 48 (16) 32 2014 £ million 37 (11) 26 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 119 4 Segmental reporting (A) Revenue by segment Power Solutions Industrial Utility Rental Solutions Group External revenue 2015 £ million 2014 £ million 299 644 943 618 1,561 288 673 961 616 1,577 (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 £1 million. (ii) In June 2015 the Group announced a new organisational structure comprising: Power Solutions – Industrial, Power Solutions – Utility and Rental Solutions. This new structure took effect from 1 August 2015. All prior year numbers have been restated in accordance with the new structure. (iii) Trading proﬁt in table 4(B) below is deﬁned as operating proﬁt pre-exceptional items of £275 million (2014: £310 million) excluding gain on sale of property, plant and equipment of £5 million (2014: £4 million). (B) Proﬁt by segment Power Solutions Industrial Utility Rental Solutions Operating proﬁt pre-exceptional items Exceptional items (Note 7) Operating proﬁt post-exceptional items Finance costs – net Proﬁt before taxation Taxation Proﬁt for the year (C) Depreciation and amortisation by segment Power Solutions Industrial Utility Rental Solutions Group Trading proﬁt Gain on sale of PPE Operating proﬁt 2015 £ million 2014 £ million 2015 £ million 2014 £ million 2015 £ million 2014 £ million 45 125 170 100 270 32 167 199 107 306 1 2 3 2 5 – 2 2 2 4 46 127 173 102 275 (26) 249 (23) 226 (64) 162 32 169 201 109 310 – 310 (21) 289 (74) 215 2015 £ million 2014 £ million 67 128 195 86 281 63 119 182 80 262 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 120 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 4 Segmental reporting continued (D) Capital expenditure on property, plant and equipment and intangible assets by segment Power Solutions Industrial Utility Rental Solutions Group 2015 £ million 2014 £ million 50 124 174 90 264 76 78 154 102 256 Capital expenditure comprises additions of property, plant and equipment (PPE) of £254 million (2014: £251 million), acquisitions of PPE of £6 million (2014: £2 million), and acquisitions of intangible assets of £4 million (2014: £3 million). (E) Assets/(liabilities) by segment Power Solutions Industrial Utility Rental Solutions Group Tax and ﬁnance payable Derivative ﬁnancial instruments Borrowings Retirement beneﬁt obligation Total assets/(liabilities) per balance sheet (F) Average number of employees by segment Power Solutions Industrial Utility Rental Solutions Group (G) Reconciliation of net operating assets to net assets Net operating assets Retirement beneﬁt obligation Net tax and ﬁnance payable Borrowings and derivative ﬁnancial instruments Net assets Assets Liabilities 2015 £ million 2014 £ million 2015 £ million 2014 £ million 435 891 1,326 660 1,986 63 1 – – 2,050 487 872 1,359 640 1,999 43 5 – – 2,047 (16) (182) (198) (81) (279) (126) (7) (521) (2) (935) (44) (170) (214) (95) (309) (125) (8) (520) (7) (969) 2015 Number 2014 Number 1,621 2,297 3,918 2,515 6,433 2015 £ million 1,707 (2) (63) 1,642 (527) 1,115 1,612 2,000 3,612 2,500 6,112 2014 £ million 1,690 (7) (82) 1,601 (523) 1,078 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 121 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 5 Proﬁt before taxation The following items have been included in arriving at proﬁt before taxation: Staff costs (Note 8) Cost of inventories recognised as an expense (included in cost of sales) Depreciation of property, plant and equipment Amortisation of intangibles (included in administrative expenses) Gain on disposal of property, plant and equipment Trade receivables impairment (included in administrative expenses) Operating lease rentals payable 6 Auditors’ remuneration Audit services Fees payable to the Company’s auditor for the audit of the Company’s annual accounts and consolidated ﬁnancial statements Fees payable to the Company’s auditor and its associates for other services: – The audit of the Company’s subsidiaries – Other assurance related services – Tax compliance – Tax advice 2015 £ million 331 91 277 4 (5) 13 37 2014 £ million 314 78 259 3 (4) (4) 38 2015 £000 2014 £000 283 672 70 76 3 262 616 147 54 27 In addition to the above services, the Group’s auditors acted as auditor to the Group’s deﬁned beneﬁt pension scheme. The appointment of auditors to this pension scheme and the fees paid in respect of the audit and for any other services are agreed by the Trustee of the scheme, who act independently from the management of the Group. The aggregate fees paid to the Group’s auditors for audit and non-audit services to the pension scheme during the year were £10k (2014: £8k). 7 Exceptional items The deﬁnition of exceptional items is contained within Note 1 of the 2015 Annual Report & Accounts. The exceptional charge in the year of £26 million before taxation relates to the Group reorganisation and business priorities review and comprises £15 million of employee related costs, £8 million of professional fees, £1 million of property related costs and £2 million of other costs. On a business unit basis this exceptional charge can be split into Rental Solutions £10 million, Power Solutions – Industrial £5 million and Power Solutions – Utility £11 million. Out of the £26 million the cash outﬂow in the year was £16 million with a provision of £8 million at 31 December 2015 and £2 million included within Employee Share awards within the Statement of Changes in Equity. 8 Employees and Directors Staff costs for the Group during the year: Wages and salaries Social security costs Share-based payments Pension costs – deﬁned contribution plans Pension costs – deﬁned beneﬁt plans (Note 30.A6) Full details of Directors’ remuneration are set out in the Remuneration Report on page 78. The key management comprises Executive and Non-executive Directors. Short-term employee beneﬁts Termination beneﬁts Post-employment beneﬁts Share-based payments 2015 £ million 277 34 8 10 2 331 2015 £ million 4 – 1 1 6 2014 £ million 260 38 3 11 2 314 2014 £ million 4 1 – – 5 122 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 9 Net ﬁnance charge Finance costs on bank loans and overdrafts Finance income on bank balances and deposits 10 Taxation Analysis of charge in year Current tax expense: – UK corporation tax – Double taxation relief – Overseas taxation Adjustments in respect of prior years: – UK – Overseas Deferred taxation (Note 22): – temporary differences arising in current year – movements in respect of prior years Tax on exceptional items (i) 2015 £ million (25) 2 (23) 2014 £ million (23) 2 (21) 2015 £ million 2014 £ million 6 – 6 78 84 (5) 3 82 (16) 3 69 (5) 64 4 – 4 77 81 – (4) 77 (4) 1 74 – 74 (i) Exceptional items are explained in Note 7 and comprise costs of £26 million relating to the Group reorganisation and business priorities, £24 million of which are tax deductible and result in an exceptional credit of £5 million. During the year the UK corporation tax rate reduced from 21% to 20% with effect from 1 April 2015. This results in a UK corporation tax rate for the year ended 31 December 2015 of 20.3%. The tax (charge)/credit relating to components of other comprehensive income is as follows: Deferred tax on hedging reserve movements Deferred tax on retirement beneﬁts Current tax on exchange movements The tax (charge)/credit relating to equity is as follows: Current tax on share-based payments Deferred tax on share-based payments 2015 £ million – (1) – (1) 2014 £ million – – – – 2015 £ million – 2014 £ million – – – – – AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 123 10 Taxation continued Variances between the current tax charge and the standard 20.3% (2014: 21.5%) UK corporate tax rate when applied to proﬁt on ordinary activities for the year are as follows: Proﬁt before taxation Tax calculated at 20.3% (2014: 21.5%) standard UK corporate tax rate Differences between UK and overseas tax rates Permanent differences Impact of deferred tax rate changes Deferred tax assets not recognised Tax on current year proﬁt Prior year adjustments – current tax Prior year adjustments – deferred tax Total tax on proﬁt Effective tax rate 11 Dividends Final paid Interim paid Total before exceptional items 2015 £ million 252 Exceptional items 2015 £ million (26) 2015 £ million 226 2014 £ million 289 51 20 (3) – – 68 (2) 3 69 (5) – – – – (5) – – (5) 46 20 (3) – – 63 (2) 3 64 62 18 (3) (1) 1 77 (4) 1 74 27% 20% 28% 26% 2015 £ million 45 24 69 2015 per share (p) 17.74 9.38 27.12 2014 £ million 46 24 70 2014 per share (p) 17.19 9.38 26.57 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I In addition, the Directors are proposing a ﬁnal dividend in respect of the ﬁnancial year ended 31 December 2015 of 17.74 pence per share which will absorb an estimated £46 million of Shareholders’ funds. It will be paid on 24 May 2016 to Shareholders who are on the register of members on 22 April 2016. 12 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 year, excluding shares held by the Employee Share Ownership Trusts which are treated as cancelled. Proﬁt for the year (£ million) Weighted average number of Ordinary Shares in issue (million) Basic earnings per share (pence) 2015 162 256 63.49 2014 215 261 82.57 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 year. 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. Proﬁt for the year (£ million) Weighted average number of Ordinary Shares in issue (million) Adjustment for share options and B Shares (million) Diluted weighted average number of Ordinary Shares in issue (million) Diluted earnings per share (pence) 2015 162 256 – 256 63.45 2014 215 261 – 261 82.49 G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 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 non-recurring and 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. 124 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 12 Earnings per share continued Proﬁt for the year Exclude exceptional items Proﬁt for the year pre-exceptional items An adjusted earnings per share ﬁgure is presented below. Basic earnings per share pre-exceptional items (pence) Diluted earnings per share pre-exceptional items (pence) 13 Goodwill Cost At 1 January Acquisitions (Note 29) Exchange adjustments At 31 December Accumulated impairment losses Net book value Goodwill impairment tests Goodwill has been allocated to cash generating units (CGUs) as follows: Power Solutions Industrial Utility Rental Solutions Group 2015 £ million 162 21 183 2014 £ million 215 – 215 71.73 71.68 82.57 82.49 2015 £ million 2014 £ million 130 7 (19) 118 – 118 133 1 (4) 130 – 130 2015 £ million 2014 £ million 41 2 43 75 118 57 2 59 71 130 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. The key assumptions for value in use calculations are those relating to expected changes in revenue and the cost base, discount rates and long-term growth rates. The discount rate used for business valuations was 8.2% after tax (2014: 8.8%), based on the weighted average cost of capital (WACC) of the Group. Before tax the estimated discount rate was 10.6% (2014: 12.1%). The WACC was calculated using the market capitalisation basis as at 31 December 2015 (i.e. equity valued basis). 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. Values in use were determined using current year cash ﬂows, a prudent view of future market trends and excludes any growth capital expenditure. A terminal cash ﬂow was calculated using a long-term growth rate of 2%. As at 31 December 2015, based on internal valuations, Aggreko plc management concluded that the values in use of the CGUs exceeded their net asset value. The Directors consider that there is no reasonably possible change in the key assumptions made in their impairment calculations that would give rise to an impairment. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 125 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I Freehold properties £ million Short leasehold properties £ million Rental ﬂeet £ million Vehicles, plant and equipment £ million Total £ million 77 1 3 – – 81 23 1 3 – 27 54 54 20 (1) 1 – (1) 19 13 (1) 2 (1) 13 6 7 2,599 14 237 5 (77) 2,778 1,513 23 259 (66) 1,729 1,049 1,086 89 1 13 1 (7) 97 59 1 13 (6) 67 30 30 2,785 15 254 6 (85) 2,975 1,608 24 277 (73) 1,836 1,139 1,177 Freehold properties £ million Short leasehold properties £ million Rental ﬂeet £ million Vehicles, plant and equipment £ million Total £ million 63 2 12 – – 77 19 2 2 – 23 54 44 19 – 2 – (1) 20 12 – 2 (1) 13 7 7 2,373 68 226 2 (70) 2,599 1,291 42 243 (63) 1,513 1,086 1,082 G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 2,539 70 251 2 (77) 2,785 1,374 44 259 (69) 1,608 1,177 1,165 84 – 11 – (6) 89 52 – 12 (5) 59 30 32 2015 £ million 184 5 189 2014 £ million 158 5 163 14 Other intangible assets Refer to Note 30.A2. 15 Property, plant and equipment Year ended 31 December 2015 Cost At 1 January 2015 Exchange adjustments Additions Acquisitions (Note 29) Disposals At 31 December 2015 Accumulated depreciation At 1 January 2015 Exchange adjustments Charge for the year Disposals At 31 December 2015 Net book values: At 31 December 2015 At 31 December 2014 Year ended 31 December 2014 Cost At 1 January 2014 Exchange adjustments Additions Acquisitions Disposals At 31 December 2014 Accumulated depreciation At 1 January 2014 Exchange adjustments Charge for the year Disposals At 31 December 2014 Net book values: At 31 December 2014 At 31 December 2013 16 Inventories Raw materials and consumables Work in progress 126 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 17 Trade and other receivables Trade receivables Less: provision for impairment of receivables Trade receivables – net Prepayments Accrued income Other receivables Total receivables The value of trade and other receivables quoted in the table above also represent the fair value of these items. The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies: Sterling Euro US Dollar Other currencies Movements on the Group’s provision for impairment of trade receivables are as follows: At 1 January Net provision for receivables impairment Receivables written off during the year as uncollectible Exchange At 31 December 2015 £ million 384 (64) 320 26 96 34 476 2015 £ million 20 54 248 154 476 2015 £ million 55 13 (3) (1) 64 2014 £ million 381 (55) 326 32 82 34 474 2014 £ million 14 55 168 237 474 2014 £ million 61 (4) (3) 1 55 Credit quality of trade receivables The table below analyses the total trade receivables balance per operating segment into fully performing, past due and impaired. 31 December 2015 Power Solutions Industrial Utility Rental Solutions Group 31 December 2014 Power Solutions Industrial Utility Rental Solutions Group Fully performing £ million Past due £ million Impaired £ million Total £ million 34 32 66 42 108 22 143 165 47 212 9 48 57 7 64 65 223 288 96 384 Fully performing £ million Past due £ million Impaired £ million Total £ million 30 50 80 46 126 30 120 150 50 200 8 38 46 9 55 68 208 276 105 381 Trade receivables are classiﬁed as impaired if they are not considered recoverable. 32% of the amounts past due are less than 30 days past due (2014: 40%). AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 127 17 Trade and other receivables continued The Group assesses credit quality as explained below: Power Solutions – Industrial This is a high transaction intensive business and the majority of the contracts in this business are small relative to the size of the Group. There is no concentration of credit risk in this business and there are a large number of customers who are unrelated and internationally dispersed. The management of trade receivables is the responsibility of the operating units, although they report monthly to Group on debtor days, debtor ageing and signiﬁcant outstanding debts. At an operating unit level a credit rating is normally established for each customer based on ratings from external agencies. Where no ratings are available, cash in advance payment terms are often established for new customers. Credit limits are reviewed on a regular basis. The effectiveness of this credit process has meant that the Group has historically had a low level of bad debt in this business. Receivables written off during the year as uncollectible as a percentage of total gross debtors was 1% (2014: 2%). Power Solutions – Utility This business concentrates on medium to very large contracts. Customers are mainly state owned utilities in emerging markets. In many instances the contracts are in jurisdictions where payment practices can be unpredictable. The Group monitors the risk proﬁle and debtor position of all such contracts regularly, and deploys a variety of techniques to mitigate the risks of delayed or non-payment; these include securing advance payments, bonds and guarantees. On the largest contracts, all such arrangements are approved at a Group level. Contracts are reviewed on a case by case basis to determine the customer and country risk. To date the Group has also had a low level of bad debt in the Power Solutions – Utility business although the risk of a major default is high. The total trade receivables balance as at 31 December 2015 for our Power Solutions – Utility business was £223 million (2014: £208 million). Within this balance, receivable balances totalling £59 million (2014: £83 million) had some form of payment cover attached to them. This payment cover guards against the risk of customer default rather than the risk associated with customer disputes. The risk associated with the remaining £164 million (2014: £125 million) is deemed to be either acceptable or payment cover is not obtainable in a cost effective manner. Rental Solutions This business is similar to the Power Solutions Industrial business above and the management of trade receivables is similar. Again the Group has historically had a low level of bad debt in the Rental Solutions business. Receivables written off during the year as uncollectible as a percentage of total Gross Debtors was 3% (2014: 1%). O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I 18 Borrowings Non-current Bank borrowings Private placement notes Current Bank overdrafts Bank borrowings Total borrowings Short-term deposits Cash at bank and in hand Net borrowings Overdrafts and borrowings are unsecured. 2015 £ million 2014 £ million 253 253 506 16 15 31 537 (19) (29) 489 214 241 455 11 65 76 531 (7) (30) 494 G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 128 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 18 Borrowings continued (i) Maturity of ﬁnancial liabilities The maturity proﬁle of the borrowings was as follows: Within 1 year, or on demand Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years Between 4 and 5 years Greater than 5 years 2015 £ million 31 – 195 70 56 185 537 2014 £ million 76 191 – 71 16 177 531 (ii) Borrowing facilities The Group has the following undrawn committed ﬂoating rate borrowing facilities available at 31 December 2015 in respect of which all conditions precedent had been met at that date: 2015 £ million 30 – 117 78 160 – 385 2014 £ million 189 128 – 50 – – 367 Expiring within 1 year Expiring between 1 and 2 years Expiring between 2 and 3 years Expiring between 3 and 4 years Expiring between 4 and 5 years Expiring after 5 years (iii) Interest rate risk proﬁle of ﬁnancial liabilities Refer to Note 30.A3. (iv) Interest rate risk proﬁle of ﬁnancial assets Refer to Note 30.A3. (v) Preference share capital Refer to Note 30.A3. 19 Financial instruments Refer to Note 30.A4. (i) Fair values of ﬁnancial assets and ﬁnancial liabilities Refer to Note 30.A4. (ii) Summary of methods and assumptions Refer to Note 30.A4. (iii) Derivative ﬁnancial instruments Refer to Note 30.A4. (iv) The exposure of the Group to interest rate changes when borrowings reprice Refer to Note 30.A4. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 129 20 Trade and other payables Trade payables Other taxation and social security payable Other payables Accruals Deferred income The value of trade and other payables quoted in the table above also represent the fair value of these items. 21 Provisions At 1 January 2015 New provisions Utilised At 31 December 2015 Analysis of total provisions Current Non-current Total 2015 £ million 77 8 63 97 14 259 2014 £ million 82 8 78 113 22 303 Reorganisation £ million – 8 – 8 8 – 8 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I The provision for reorganisation comprises the estimated costs of the Group reorganisation and business priorities. The provisions are generally in respect of employee related costs, professional fees and property related costs. The provision is expected to be fully utilised by the end of 2016. 22 Deferred tax 31 December 2015 Fixed asset timing differences Retirement beneﬁt obligations Overseas tax on unremitted earnings Tax losses Derivative ﬁnancial instruments Other temporary differences 31 December 2014 Fixed asset timing differences Retirement beneﬁt obligations Tax losses Derivative ﬁnancial instruments Other temporary differences At 1 January 2015 £ million Credit/(debit) to income statement 2015 £ million Debit to other comprehensive income 2015 £ million Exchange differences 2015 £ million At 31 December 2015 £ million (71) 1 – 18 1 20 (31) 11 – (1) 1 – 2 13 – (1) – – – – (1) (9) – – – – – (9) (69) – (1) 19 1 22 (28) At 1 January 2014 £ million Credit/(debit) to income statement 2014 £ million Exchange differences 2014 £ million Impact of rate reduction 2014 £ million Deferred tax on acquisition 2014 £ million At 31 December 2014 £ million (62) 1 13 1 19 (28) (9) – 5 – 6 2 – – – – (5) (5) 1 – – – – 1 (1) – – – – (1) (71) 1 18 1 20 (31) G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 130 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 22 Deferred tax continued During the year, further changes to the UK corporation tax rate were substantively enacted as part of Finance (No 2) Bill 2015 on 26 October 2015. These include reductions in the main rate of corporation tax from 20% to 19% from 1 April 2017 and to 18% from 1 April 2020. The relevant deferred tax balances have been remeasured accordingly. A deferred tax liability of £1 million (2014: £nil) has been recognised in respect of unremitted earnings. The deferred tax relates to non-recoverable withholding tax which will be suffered on dividends to be paid in 2016. No other deferred tax liability has been recognised in respect of unremitted earnings of subsidiaries. It is likely that the majority of the overseas earnings will qualify for the UK dividend exemption and the Group can control the distribution of dividends by its subsidiaries. In some countries, local tax is payable on the remittance of a dividend. Were dividends to be remitted from these countries, the additional tax payable would be £15 million. The movements in deferred tax assets and liabilities (prior to off setting of balances within the same jurisdiction as permitted by IAS 12) during the period are shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net. Deferred tax assets are recognised to the extent that the realisation of the related deferred tax beneﬁt through future taxable proﬁts is probable. The Group did not recognise deferred tax assets of £6 million (2014: £6 million) of which £6 million (2014: £6 million) relates to carried forward tax losses as our forecasts indicate that these assets will not reverse in the near future. Deferred tax assets of £18 million (2014: £18 million) have been recognised in respect of entities which have suffered a loss in either the current or preceding period. Deferred tax assets have been recognised on the basis it is probable there will be future taxable proﬁts against which they can be utilised. The majority of these assets can be carried forward indeﬁnitely. Deferred tax assets and liabilities Fixed asset timing differences Retirement beneﬁt obligations Overseas tax on unremitted earnings Tax losses Derivative ﬁnancial instruments Other temporary differences Total Offset of deferred tax positions Net deferred tax 31 December 2015 31 December 2014 Assets £ million Liabilities £ million Net £ million Assets £ million Liabilities £ million Net £ million 9 – – 19 1 22 51 (21) 30 (78) – (1) – – – (79) 21 (58) (69) – (1) 19 1 22 (28) – (28) 7 1 – 18 1 20 47 (25) 22 (78) – – – – – (78) 25 (53) (71) 1 – 18 1 20 (31) – (31) The net deferred tax liability due after more than one year is £28 million (2014: liability of £31 million). AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 131 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 23 Share capital (i) Ordinary Shares At 1 January (2015: Ordinary Shares of 4329/395 pence; 2014: Ordinary Shares of 13549/775 pence) Share conversion (1 Ordinary Share for every 21.4 B Shares as at 28 May 2015) (Note (ii)) Employee share option scheme Share consolidation (79 for 83 shares as at 27 May 2014) Share split: Deferred Ordinary Shares B Shares Transfer to capital redemption reserve At 31 December (2015 and 2014: Ordinary Shares of 4329⁄395 pence) (ii) Deferred Ordinary Shares of 618⁄25 pence (2014: 618⁄25 pence) At 1 January and 31 December (iii) Deferred Ordinary Shares of 1⁄775 pence (2014: 1⁄775 pence) At 1 January and 31 December 2015 Number of shares 2015 £000 2014 Number of shares 2014 £000 256,118,395 9,806 – – – – – 256,128,201 12,378 – – – – – – 12,378 269,029,545 – 56,870 (12,968,020) – – – 256,118,395 36,880 – 8 – (17,147) (181) (7,182) 12,378 182,700,915 12,278 182,700,915 12,278 18,352,057,648 237 18,352,057,648 237 (iv) Deferred Ordinary Shares of 984⁄775 pence (2014: 984⁄775 pence) At 1 January and 31 December 188,251,587 17,147 188,251,587 17,147 (v) B Shares of 984⁄775 pence (2014: 984⁄775 pence) At 1 January Transfer to capital redemption reserve (Note (i)) Share conversion (Note (ii)) Share split At 31 December (vi) Deferred Ordinary Shares 1⁄306125 pence At 1 January Share conversion (Note (ii)) At 31 December 1,989,357 (1,778,422) (210,935) – – 573,643,383,325 573,643,383,325 181 (162) (19) – – 19 19 – – – 1,989,357 1,989,357 – – – – – – 181 181 – – – Following the return of capital using a B Share structure in June 2014, the Group made a further purchase of B Shares on 5 May 2015 and completed a conversion of B Shares into Ordinary Shares and Deferred Shares on 28 May 2015. The main terms of the further purchase and subsequent conversion of the B Shares were: (i) (ii) On 18 March 2015 an offer was made to the holders of the 1,989,357 B Shares to purchase the B Shares for 75 pence each. This resulted in the purchase and subsequent cancellation of 1,778,422 B Shares on 5 May 2015 resulting in a cash payment from the Company of £1.3 million. As a result of this transaction £162k was transferred from B Shares to the capital redemption reserve being 1,778,422 shares at par value 984⁄775 pence. This left a total of 210,935 B Shares in issue. On 28 May 2015 the Group converted all outstanding B Shares into 9,806 Ordinary Shares and 573,643,383,325 Deferred Shares of 1/306125 pence each. The ratio used for the conversion of B Shares to Ordinary Shares was 1 Ordinary Share for every 21.4 B Shares. This ratio was calculated on the basis of 1 Ordinary Share for every (M/75) B Share (Where M represents the average of the closing mid-market quotations in pence of the Ordinary Shares on the London Stock Exchange, as derived from the Ofﬁcial List for the ﬁve business days immediately preceding the Conversion Date). Fractional entitlements were disregarded and the balance of the aggregate nominal value of such shares were constituted by reclassifying B Shares as Deferred Shares of 1/306125 pence each, which have the same rights and restrictions as the Deferred Shares of 984⁄775 pence. (iii) The B Share Continuing Dividend accrued in respect of the period between 28 May 2014 and 27 May 2015 was paid to holders of B Shares on 28 May 2015. Share options Refer to Note 30.A5. 132 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 24 Treasury shares Treasury shares 2015 £ million (9) 2014 £ million (14) Interests in own shares represents the cost of 535,538 of the Company’s Ordinary Shares (nominal value 4329/395 pence). Movement during the year was as follows: 1 January Shares received from Aggreko plc Long-term Incentive Plan Maturity Sharesave maturity UK Deferred bonus plan Share consolidation (79 for 83 shares) 31 December 2015 Number of shares 824,036 – (78,430) (210,068) – – 535,538 2014 Number of shares 1,331,750 15 (183,306) (273,892) (6,105) (44,426) 824,036 These shares represent 0.2% of issued share capital as at 31 December 2015 (2014: 0.3%). These shares were acquired by a Trust in the open market using funds provided by Aggreko plc to meet obligations under the Long-term Incentive Arrangements and Aggreko Sharesave Plans. The costs of funding and administering the scheme are charged to the income statement of the Company in the period to which they relate. The market value of the shares at 31 December 2015 was £5 million (31 December 2014: £12 million). 25 Capital commitments Contracted but not provided for (property, plant and equipment) 26 Operating lease commitments – minimum lease payments Commitments under non-cancellable operating leases expiring: Within one year Later than one year and less than ﬁve years After ﬁve years Total 27 Pension commitments Refer to Note 30.A6. 2015 £ million 10 2014 £ million 18 2015 £ million 2014 £ million 22 37 12 71 24 40 11 75 28 Investments in subsidiaries The subsidiary undertakings of Aggreko plc at the year end, and the main countries in which they operate, are shown on the next page. All companies are wholly owned and, unless otherwise stated, incorporated in UK or in the principal country of operation and are involved in the supply of temporary power, temperature control and related services. All shareholdings are of Ordinary Shares or other equity capital. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 133 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I Papua New Guinea Peru Philippines Poland Romania Russia Rwanda Senegal Singapore South Africa South Korea Spain Sweden Thailand The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands Tanzania Republic of Trinidad & Tobago Turkey UAE UK UK UK UK UK UK UK UK UK UK UK Uruguay USA USA USA Venezuela G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S Aggreko Generator Rentals (PNG) Limited++++ Aggreko Peru S.A.C. Aggreko Energy Rental Solutions Inc Aggreko Polska Sp. z o. o. Aggreko South East Europe S.R.L. Aggreko Eurasia LLC Aggreko Rwanda Limited Aggreko Senegal S.A.R.L. Aggreko (Singapore) PTE Limited Aggreko Energy Rental South Africa (Proprietary) Limited Aggreko South Korea Limited Aggreko Iberia SA Aggreko Sweden AB Aggreko (Thailand) Limited Aggreko Americas Holdings B.V.+ Aggreko Euro Holdings B.V.+ Aggreko Rest of the World Holdings B.V.+ Aggreko (Investments) B.V.++ Aggreko Nederland B.V. Aggreko International Power Projects B.V. Aggreko Energy Rentals Tanzania Limited Aggreko Trinidad Limited Aggreko Enerji ve Isi Kontrol Ticaret Anonim Sirketi Aggreko Middle East Limited FZE Aggreko Finance Limited Aggreko Holdings Limited+ Aggreko International Projects Holdings Limited+ Aggreko International Projects Limited*** Aggreko Pension Scheme Trustee Limited++++ Aggreko UK Limited Aggreko US Limited Aggreko Generators Limited++++ Aggreko Luxembourg Holdings++++ Dunwilco (680) Limited++++ Golden Triangle Generators Limited Aggreko Uruguay S.A. Aggreko Holdings Inc+ Aggreko USA LLC+ Aggreko LLC Aggreko de Venezuela C.A. 28 Investments in subsidiaries continued Algeria Angola Argentina Australia Belgium Brazil Cameroon Canada Cayman Islands Chile Aggreko Algeria SPA* Aggreko Angola Lda Aggreko Argentina S.R.L. Aggreko Generators Rental Pty Limited Aggreko Belgium NV Aggreko Energia Locacao de Geradores Ltda Aggreko Cameroon Ltd Aggreko Canada Inc Aggreko Financial Holdings Limited+ Aggreko Chile Limitada Aggreko (Shanghai) Energy Equipment Rental Company Limited Aggreko Colombia SAS Aggreko Costa Rica S.A.++++ Aggreko Cote d’lvoire S.A.R.L. Aggreko (Middle East) Limited Aggreko DRC S.P.R.L. Aggreko Dominican Republic S.R.L. Aggreko Energy Ecuador CIA. LTDA Aggreko Finland Oy Aggreko France S.A.R.L. Aggreko Gabon S.A.R.L. Aggreko Deutschland GmbH Aggreko Hong Kong Limited Aggreko Energy Rental India Private Limited+++ PT Aggreko Energy Services (Indonesia) Aggreko Ireland Limited Aggreko Italia S.R.L. Aggreko Japan Limited Aggreko Kenya Energy Rentals Limited Aggreko Malaysia SDN BHD Aggreko Africa Limited Aggreko Energy Mexico SA de CV Aggreko Services Mexico SA de CV Aggreko SA de CV++++ Aggreko Mocambique Limitada Aggreko Myanmar Co Limited Aggreko Namibia Energy Rentals (Pty) Ltd Aggreko (NZ) Limited Aggreko Projects Limited Aggreko Gas Power Generation Limited++++ Aggreko Norway AS Aggreko Energy Rentals Panama SA China Colombia Costa Rica Ivory Coast Cyprus** Democratic Republic of the Congo Dominican Republic Ecuador Finland France Gabon Germany Hong Kong India Indonesia Ireland Italy Japan Kenya Malaysia Mauritius Mexico Mexico Mexico Mozambique Myanmar Namibia New Zealand Nigeria Nigeria Norway Panama * Aggreko ownership is 49%, remainder is held by RedMed. ** Registered in Cyprus. *** Administered from Dubai and registered in the UK. + ++ Finance Company. +++ The ﬁnancial year end of Aggreko Energy Rental India Private Limited is 31 March due to local taxation requirements. ++++ Dormant Company. Intermediate holding companies. 134 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 29 Acquisitions ICS Group Inc On 2 September 2015 the Group completed the acquisition of the business and assets of the equipment rental business of ICS Group Inc. The purchase consideration, paid in cash was C$37 million (£18 million). The revenue and operating proﬁt included in the consolidated income statement from 2 September 2015 to 31 December 2015 contributed by ICS was £2 million and £nil respectively. Had ICS been consolidated from 1 January 2015, the consolidated income statement for the year ended 31 December 2015 would show revenue and operating proﬁt of £10 million and £2 million respectively. The acquisition method of accounting has been adopted and the goodwill arising on the purchase has been capitalised. Acquisition related costs of £1 million have been expensed in the period and are included within administrative expenses in the income statement. The details of the transaction and fair value of assets acquired are shown below: Intangible assets Property, plant & equipment Inventories Net assets acquired Goodwill Consideration per cash ﬂow statement Fair value £ million 4 6 1 11 7 18 Goodwill represents the value of synergies arising from the integration of the acquired business. Synergies include direct cost savings and the reduction of overheads as well as the ability to leverage Aggreko systems and access to assets. 30 Notes to the Group Accounts – appendices 30.A1 Accounting policies Derivative ﬁnancial instruments The activities of the Group expose it directly to the ﬁnancial risks of changes in forward foreign currency exchange rates and interest rates. The Group uses forward foreign exchange contracts, foreign currency options and interest rate swap contracts to hedge these exposures. The Group does not use derivative ﬁnancial instruments for speculative purposes. Derivatives are initially recorded and subsequently measured at fair value, which is calculated using standard industry valuation techniques in conjunction with observable market data. The fair value of interest rate swaps is calculated as the present value of estimated future cash ﬂows using market interest rates and the fair value of forward foreign exchange contracts is determined using forward foreign exchange market rates at the reporting date. The treatment of changes in fair value of derivatives depends on the derivative classiﬁcation. The Group designates derivatives as hedges of highly probable forecasted transactions or commitments (‘cash ﬂow hedge’). In order to qualify for hedge accounting, the Group is required to document in advance the relationship between the item being hedged and the hedging instrument. The Group is also required to document and demonstrate an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will be highly effective on an ongoing basis. This effectiveness testing is re-performed at each period end to ensure that the hedge remains highly effective. Cash ﬂow hedges Changes in the fair value of derivative ﬁnancial instruments that are designated, and effective, as hedges of future cash ﬂows are recognised directly in equity and any ineffective portion is recognised immediately in the income statement. If the cash ﬂow hedge is of a ﬁrm commitment or forecasted transaction that subsequently results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges of transactions that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net proﬁt and loss. Changes in the fair value of derivative ﬁnancial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise. Hedge accounting is discontinued when the hedging instrument no longer qualiﬁes for hedge accounting. At that time any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement. Overseas net investment hedges Certain foreign currency borrowings are designated as hedges of the Group’s overseas net investments, which are denominated in the functional currency of the reporting operation. Exchange differences arising from the retranslation of the net investment in foreign entities and of borrowings are taken to equity on consolidation to the extent the hedges are deemed effective. All other exchange gains and losses are dealt with through the income statement. Share-based payments IFRS 2 ‘Share-based Payment’ has been applied to all grants of equity instruments. The Group issues equity-settled share-based payments to certain employees under the terms of the Group’s various employee-share and option schemes. Equity-settled share-based payments are measured at fair value at the date of the grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on an estimate of the shares that will ultimately vest. Fair value is measured using the Black-Scholes option-pricing model. Own shares held under trust for the Group’s employee share schemes are classed as Treasury shares and deducted in arriving at Shareholders’ equity. No gain or loss is recognised on disposal of Treasury shares. Purchases of own shares are disclosed as changes in Shareholders’ equity. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 135 30.A1 Accounting policies continued Leases Leases where substantially all of the risks and rewards of ownership are not transferred to the Group are classiﬁed as operating leases. Rentals under operating leases are charged against operating proﬁt on a straight line basis over the term of the lease. Dividend distribution Dividend distribution to the Company’s Shareholders is recognised as a liability in the Group’s ﬁnancial statements in the period in which the dividends are approved by the Company’s Shareholders. Interim dividends are recognised when paid. 30.A2 Other intangible assets Cost At 1 January Acquisitions (Note 29) Exchange adjustments At 31 December Accumulated amortisation At 1 January Charge for the year Exchange adjustments At 31 December Net book values At 31 December 2015 £ million 2014 £ million 42 4 (4) 42 24 4 (2) 26 16 39 3 – 42 21 3 – 24 18 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I Amortisation charges in the year mainly comprised amortisation of assets arising from business combinations and have been recorded in administrative expenses. 30.A3 Borrowings (i) Interest rate risk proﬁle of ﬁnancial liabilities The interest rate proﬁle of the Group’s ﬁnancial liabilities at 31 December 2015, after taking account of the interest rate swaps used to manage the interest proﬁle, was: Currency: US Dollar Canadian Dollars New Zealand Dollars South African Rand Mexican Pesos Russian Rubles Brazil Reals Indian Rupees Singapore Dollars Romanian Lieu Colombian Peso Other currencies As at 31 December 2015 Floating rate £ million Fixed rate £ million Total £ million Fixed rate debt Weighted average interest rate % Weighted average period for which rate is ﬁxed Years 124 25 2 5 10 9 10 8 6 7 4 6 216 321 – – – – – – – – – – – 321 445 25 2 5 10 9 10 8 6 7 4 6 537 4.3 – – – – – – – – – – – 4.9 – – – – – – – – – – – G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 136 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 30.A3 Borrowings continued (i) Interest rate risk proﬁle of ﬁnancial liabilities continued Currency: US Dollar Canadian Dollars New Zealand Dollars South African Rand Mexican Pesos Russian Rubles Brazil Reals Indian Rupees Singapore Dollars Romanian Lieu Colombian Peso Chinese Renminbi Other currencies As at 31 December 2014 Floating rate £ million Fixed rate £ million Total £ million Fixed rate debt Weighted average interest rate % Weighted average period for which rate is ﬁxed Years 144 10 6 4 11 6 13 8 7 9 3 4 1 226 305 – – – – – – – – – – – – 305 449 10 6 4 11 6 13 8 7 9 3 4 1 531 4.3 – – – – – – – – – – – – 5.9 – – – – – – – – – – – – The ﬂoating rate ﬁnancial liabilities principally comprise debt which carries interest based on different benchmark rates depending on the currency of the balance and are normally ﬁxed in advance for periods between one and three months. The weighted average interest rate on ﬁxed debt is derived from the ﬁxed leg of each interest rate swap and coupons applying to ﬁxed rate private placement notes. The effect of the Group’s interest rate swaps is to classify £67 million (2014: £64 million) of borrowings in the above table as ﬁxed rate. The notional principal amount of the outstanding interest rate swap contracts at 31 December 2015 was £67 million (2014: £64 million). (ii) Interest rate risk proﬁle of ﬁnancial assets Currency: US Dollar Euro Brazilian Real Argentinian Peso Australian Dollar Other currencies At 31 December 2015 Currency: US Dollar Euro Brazilian Real Argentinian Peso Australian Dollar Chilean Peso Other currencies At 31 December 2014 Cash at bank and in hand £ million Short-term deposits £ million Total £ million 6 5 1 3 1 13 29 9 2 3 1 1 3 11 30 – – 2 17 – – 19 – – – 6 – – 1 7 6 5 3 20 1 13 48 9 2 3 7 1 3 12 37 All of the above cash and short-term deposits are ﬂoating rate and earn interest based on relevant LIBID (London Interbank Bid Rate) equivalents or market rates for the currency concerned. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 137 30.A3 Borrowings continued (iii) Preference share capital Authorised: Redeemable preference shares of 25p each 2015 Number 2015 £000 2014 Number 2014 £000 199,998 50 199,998 50 No redeemable preference shares were allotted as at 31 December 2015 and 31 December 2014. The Board is authorised to determine the terms, conditions and manner of redemption of redeemable shares. 30.A4 Financial instruments As stated in our accounting policies Note 30.A1 on page 134 the activities of the Group expose it directly to the ﬁnancial risks of changes in foreign currency exchange rates and interest rates. The Group uses forward foreign exchange contracts and interest rate swap contracts to hedge these exposures. The movement in the hedging reserve is shown in the Statement of Changes in Equity. (i) Fair values of ﬁnancial assets and ﬁnancial liabilities The following table provides a comparison by category of the carrying amounts and the fair values of the Group’s ﬁnancial assets and ﬁnancial liabilities at 31 December 2015. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market values have been used to determine fair values. Primary ﬁnancial instruments held or issued to ﬁnance the Group’s operations: Current borrowings and overdrafts Non-current borrowings Short-term deposits Cash at bank and in hand Derivative ﬁnancial instruments held: Interest rate swaps Foreign currency options Forward foreign currency contracts (ii) Summary of methods and assumptions 2015 2014 Book value £ million Fair value £ million Book value £ million Fair value £ million (31) (506) 19 29 (6) – – (31) (506) 19 29 (6) – – (76) (455) 7 30 (7) – 4 (76) (455) 7 30 (7) – 4 Interest rate swaps and foreign currency derivatives Fair value is based on market price of these instruments at the balance sheet date. In accordance with IFRS 13, interest rate swaps are considered to be level 2 with fair value being calculated at the present value of estimated future cash ﬂows using market interest rates. Forward foreign currency contracts and currency options are considered to be level 1 as the valuation is based on quoted market prices at the end of the reporting period. Current borrowings and overdrafts/short-term deposits The fair value of short-term deposits and current borrowings and overdrafts approximates to the carrying amount because of the short maturity of these instruments. Non-current borrowings In the case of non-current borrowings, the fair value approximates to the carrying value reported in the balance sheet. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 138 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 30.A4 Financial instruments continued (iii) Derivative ﬁnancial instruments Numerical ﬁnancial instruments disclosures are set out below. Additional disclosures are set out in the ﬁnancial review and accounting policies relating to risk management. Current: Interest rate swaps – cash ﬂow hedge Forward foreign currency contracts – cash ﬂow hedge Currency options – cash ﬂow hedge Non-current: Interest rate swaps – cash ﬂow hedge Currency options – cash ﬂow hedge 2015 2014 Assets £ million Liabilities £ million Assets £ million Liabilities £ million – 1 – – – 1 – (1) – (6) – (7) – 5 – – – 5 – (1) – (7) – (8) Net fair values of derivative ﬁnancial instruments The net fair value of derivative ﬁnancial instruments that are designated as cash ﬂow hedges at the balance sheet date was: Interest rate swaps Currency options Forward foreign currency contracts 2015 £ million 2014 £ million (6) – – (6) (7) – 4 (3) The net fair value gains at 31 December 2015 on open forward exchange contracts that hedge the foreign currency risk of future anticipated revenues are £nil (2014: gains of £4 million) and that hedge the foreign currency risk of future anticipated expenditure are £nil (2014: £nil). These will be allocated to revenues when the forecast revenues occur. The net fair value liabilities at 31 December 2015 on open interest swaps that hedge interest risk are £6 million (2014: liabilities of £7 million). These will be debited to the income statement ﬁnance cost over the remaining life of each interest rate swap. Currency options are ﬁnancial assets which are considered to have two components (intrinsic element and time element). The intrinsic element hedges the foreign currency risk of future anticipated revenues and this will be allocated to revenues when the forecast revenues occur. The time element is expensed to the income statement in line with the life of the options. Hedge of net investment in foreign entity The Group has designated as a hedge of the net investment in its overseas subsidiaries foreign currency denominated borrowings as detailed in the table below. The fair value of these borrowings were as follows: US Dollar Canadian Dollars New Zealand Dollars Mexican Pesos Singapore Dollars Russian Rubles 2015 £ million 2014 £ million 440 25 2 – 6 9 449 10 6 11 7 6 A foreign exchange loss of £18 million (2014: loss of £29 million) on translation of the borrowings into Sterling has been recognised in exchange reserves. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 139 30.A4 Financial instruments continued (iv) The exposure of the Group to interest rate changes when borrowings reprice is as follows: As at 31 December 2015 Total borrowings Effect of interest rate swaps and other ﬁxed rate debt As at 31 December 2014 Total borrowings Effect of interest rate swaps and other ﬁxed rate debt <1 year £ million 1-5 years £ million >5 years £ million Total £ million 31 – 31 321 (136) 185 185 (185) – 537 (321) 216 <1 year £ million 1-5 years £ million >5 years £ million Total £ million 76 – 76 278 (128) 150 177 (177) – 531 (305) 226 As at 31 December 2015 and 31 December 2014 all of the Group’s ﬂoating debt was exposed to repricing within three months of the balance sheet date. The Group’s interest rate swap portfolio is reviewed on a regular basis to ensure it is consistent with Group policy as described on page 117. The effective interest rates at the balance sheet date were as follows: Bank overdrafts Bank borrowings Private placement 2015 7.5% 2.1% 4.2% 2014 9.9% 2.4% 4.2% Maturity of ﬁnancial liabilities The table below analyses the Group’s ﬁnancial liabilities and net-settled derivative ﬁnancial liabilities into the relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash ﬂows. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I As at 31 December 2015 Borrowings Derivative ﬁnancial instruments Trade and other payables As at 31 December 2014 Borrowings Derivative ﬁnancial instruments Trade and other payables <1 year 1-2 years 2-5 years >5 years 31 1 78 110 – – – – 321 6 9 336 185 – 49 234 <1 year 1-2 years 2-5 years >5 years 76 1 84 161 191 – – 191 87 7 10 104 177 – 54 231 G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S No trade payable balances have a contractual maturity greater than 90 days. Derivative ﬁnancial instruments settled on a gross basis The table below analyses the Group’s derivative ﬁnancial instruments which will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash ﬂows. 140 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 30.A4 Financial instruments continued As at 31 December 2015 Forward foreign exchange contracts – cash ﬂow hedges Outﬂow Inﬂow As at 31 December 2014 Forward foreign exchange contracts – cash ﬂow hedges Outﬂow Inﬂow <1 year (91) 91 – <1 year (89) 93 4 All of the Group’s forward foreign currency exchange contracts are due to be settled within one year of the balance sheet date. 30.A5 Share capital Share options The options under the Savings-Related Share Option Schemes have been granted at a discount of 20% on the share price calculated over the three days prior to the date of invitation to participate, mature after three to ﬁve years and are normally exercisable in the six months following the maturity date. The options under the US Stock Purchase Plan have been granted at a discount of 15% to the share price on the date of grant, mature after two years and are normally exercisable in the three months following the maturity date. These schemes are explained in more detail in the Remuneration Committee Report on page 82. A summary of movements in share options in Aggreko shares is shown below: Outstanding at 1 January 2015 Granted Forfeited Exercised Lapsed Outstanding at 31 December 2015 Weighted average contractual life (years) Sharesave schemes Number of Shares 1,159,056 1,180,940 – (210,068) (669,926) 1,460,002 3 Weighted average exercise price (pence) 13.22 8.30 – 10.98 13.18 9.59 US Stock option plans Number of Shares 241,793 233,798 – – (130,477) 345,114 1 Weighted average exercise price (pence) 13.89 8.98 – – 14.63 10.26 Long-term Incentive Plans Number of Shares 793,682 329,057 (333,066) (16,086) (220,965) 552,622 3 Weighted average exercise price (pence) nil nil nil nil nil nil Deferred shares and restricted shares Number of Shares – 1,135,832 – (11,000) (38,316) 1,086,516 2 Weighted average exercise price (pence) nil nil nil nil nil nil The weighted average share price during the year for options exercised over the year was £10.98 (2014: £8.46). The total charge for the year relating to employee share-based payment plans was £8 million (2014: charge of £3 million), all of which related to equity-settled share-based payment transactions. The fair value of Sharesave and US Stock Options granted during the period was determined using the Black-Scholes option-pricing model. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 141 30.A5 Share capital continued The signiﬁcant inputs into the model are detailed below: Grant type Grant date Option price (£) Number granted Risk free rate (%) Fair value per option (£) Grant type Grant date Option price (£) Number granted Risk free rate (%) Sharesave UK 13-Oct-15 8.3 466,232 0.9 2.7 Sharesave Australia 13-Oct-15 8.6 16,847 1.9 2.7 Sharesave Canada 13-Oct-15 8.5 19,780 0.6 2.6 Sharesave France 13-Oct-15 8.5 15,237 – 2.5 Sharesave Germany 13-Oct-15 8.5 6,714 – 2.5 Sharesave Ireland 13-Oct-15 8.5 4,512 0.1 2.5 Sharesave Netherlands 13-Oct-15 8.5 38,503 – Sharesave UAE 13-Oct-15 8.4 575,513 1.0 Sharesave Mexico 13-Oct-15 8.5 2,974 4.7 Sharesave New Zealand 13-Oct-15 8.9 2,260 2.6 Sharesave Singapore 13-Oct-15 8.4 9,834 1.5 Sharesave Panama 13-Oct-15 8.4 2,374 1.0 Fair value per option (£) 2.5 2.7 3.2 2.7 2.8 2.7 Grant type Grant date Option price (£) Number granted Risk free rate (%) Fair value per option (£) Sharesave Norway 13-Oct-15 8.5 3,074 0.8 Sharesave Kenya 13-Oct-15 8.6 13,890 16.2 Sharesave Kenya GBP 13-Oct-15 8.3 1,075 0.9 Sharesave South Africa 13-Oct-15 8.4 2,121 7.7 Sharesave US Stock Plan 13-Oct-15 9.0 233,798 0.7 2.6 4.7 2.7 3.6 2.0 For all grants the share price at date of grant was £10.27, the expected volatility was 31% (US Stock Plan: 28%), dividend yield was 2.6% and the expected term is 3.5 years (US Stock Plan: 2.2 years). O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 142 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 30.A5 Share capital continued The expected volatility is based on the volatility of the total return from the Company’s shares over the period to grant equal in length to the expected life of the awards. The expected life is the average expected period to exercise. The risk free interest rate is the expected return on UK Gilts of a similar life. Options outstanding over Ordinary Shares as at 31 December 2015 (including those of the Executive Directors), together with the exercise prices and dates of exercise, are as follows: Sharesave UK 5 year – Oct 2009 Sharesave International 5 year – Oct 2009 Sharesave French 4 year – Oct 2010 Sharesave UK 5 year – Oct 2010 Sharesave International 5 year – Oct 2010 Sharesave French 5 year – Oct 2010 Sharesave UK 3 year – Oct 2011 Sharesave International 3 year – Oct 2011 Sharesave French 4 year – Oct 2011 Sharesave UK 5 year – Oct 2011 Sharesave International 5 year – Oct 2011 Sharesave French 5 year – Oct 2011 Long-term Incentive Plan – Apr 2012 US Stock Option Plan – Oct 2012 Sharesave UK 3 year – Oct 2012 Sharesave International 3 year – Oct 2012 Sharesave French 4 year – Oct 2012 Long-term Incentive Plan – Aug 2013 US Stock Option Plan – Oct 2013 Sharesave UK 3 year – Oct 2013 Sharesave International 3 year – Oct 2013 Sharesave French 4 year – Oct 2013 Long-term Incentive Plan – Apr 2014 US Stock Option Plan – Oct 2014 Sharesave UK 3 year – Oct 2014 Price per share £5.53 US$8.77 €6.02 €14.52 £12.39 US$19.57 CA$20.21 AU$20.21 €14.39 €14.52 £12.60 US$19.43 CA$20.38 AU$20.23 €14.60 €15.52 £12.60 US$19.43 AU$20.23 €14.60 €15.52 – US$31.15 £19.11 US$31.00 CA$30.26 AU$29.61 €23.74 €23.74 – US$20.14 £13.03 US$20.60 CAD$21.29 AU$22.12 NZ$25.53 SG$26.12 MXN269.78 CLP10377.02 €15.49 €15.49 – US$20.63 £13.36 Earliest exercise date Jan 2015 Jan 2015 Jan 2015 Jan 2015 Jan 2016 Jan 2016 Jan 2016 Jan 2016 Jan 2016 Jan 2016 Jan 2015 Jan 2015 Jan 2015 Jan 2015 Jan 2015 Jan 2016 Jan 2017 Jan 2017 Jan 2017 Jan 2017 Jan 2017 Apr 2015 Nov 2014 Jan 2016 Jan 2016 Jan 2016 Jan 2016 Jan 2016 Jan 2017 Aug 2016 Nov 2015 Jan 2017 Jan 2017 Jan 2017 Jan 2017 Jan 2017 Jan 2017 Jan 2017 Jan 2017 Jan 2017 Jan 2018 Apr 2017 Nov 2016 Jan 2018 Latest exercise date Jun 2015 Jun 2015 Jun 2015 Jun 2015 Jun 2016 Jun 2016 Jun 2016 Jun 2016 Jun 2016 Jun 2016 Jun 2015 Jun 2015 Jun 2015 Jun 2015 Jun 2015 Jun 2016 Jun 2017 Jun 2017 Jun 2017 Jun 2017 Jun 2017 Oct 2015 Jan 2015 Jun 2016 Jun 2016 Jun 2016 Jun 2016 Jun 2016 Jun 2017 Feb 2017 Jan 2016 Jun 2017 Jun 2017 Jun 2017 Jun 2017 Jun 2017 Jun 2017 Jun 2017 Jun 2017 Jun 2017 Jun 2018 Oct 2017 Jan 2017 Jun 2018 2015 Number – – – – 3,069 4,240 296 3,602 416 1,279 – – – – – 4,646 2,380 10,991 2,378 615 4,836 – – 6,941 33,344 236 5,079 837 3,398 20,040 51,175 35,171 42,866 5,528 4,737 1,437 13,690 924 917 6,327 2,678 269,926 67,994 36,885 2014 Number 26,770 20,207 1,295 1,996 7,263 9,383 296 3,602 416 2,435 57,328 89,514 3,795 2,394 12,833 5,829 10,328 24,377 2,378 684 4,836 18,449 41,762 13,845 58,221 710 6,093 2,422 5,700 469,481 75,895 112,971 148,717 9,324 7,110 1,789 18,888 2,123 1,090 12,060 2,987 305,7522 124,136 164,163 Market price (£)1 7.60 7.60 7.60 16.85 16.85 16.85 16.85 16.85 16.85 16.85 17.28 17.28 17.28 17.28 17.28 17.28 17.28 17.28 17.28 17.28 17.28 21.86 22.78 22.78 22.78 22.78 22.78 22.78 22.78 16.42 14.72 14.72 14.72 14.72 14.72 14.72 14.72 14.72 14.72 14.72 14.72 15.02 15.09 15.09 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 143 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 30.A5 Share capital continued Sharesave International 3 year – Oct 2014 Restricted Stock – Mar 2015 Deferred Share Bonus Plan – Mar 2015 Restricted Stock – Apr 2015 Restricted Stock – Apr 2015 Restricted Share Plan – May 2015 Restricted Share Plan – May 2015 Long-term Incentive Plan – May 2015 US Stock Option Plan – Oct 2015 Sharesave UK 3 year – Oct 2015 Sharesave International 3 year – Oct 2015 Restricted Share Plan – Nov 2015 Restricted Share Plan – Nov 2015 Restricted Share Plan – Nov 2015 Earliest Price per exercise share date Jan 2018 US$21.58 Jan 2018 CAD$23.66 Jan 2018 AU$23.57 Jan 2018 NZ$26.20 Jan 2018 SG$27.27 Jan 2018 MXN285.01 Jan 2018 NOK136.95 Jan 2018 €16.71 Mar 2016 – Mar 2017 – Mar 2018 – Mar 2018 – Apr 2016 – Apr 2017 – Apr 2016 – Apr 2017 – – Dec 2016 – May 2017 – May 2018 Nov 2017 Jan 2019 Jan 2019 Jan 2019 Jan 2019 Jan 2019 Jan 2019 Jan 2019 Jan 2019 Jan 2019 Jan 2019 Jan 2019 Jan 2019 Dec 2017 Dec 2018 Apr 2018 US$13.78 £8.30 US$12.88 CAD$16.97 AU$17.90 NZ$20.22 SG$18.00 MXN213.22 NOK104.73 KES1,364.88 ZAR171 £8.30 €11.40 – – – Latest exercise date Jun 2018 Jun 2018 Jun 2018 Jun 2018 Jun 2018 Jun 2018 Jun 2018 Jun 2018 Sep 2016 Sep 2017 Sep 2018 Sep 2018 Oct 2016 Oct 2017 Oct 2016 Oct 2017 Jun 2017 Nov 2017 Nov 2018 Jan 2018 Jun 2019 Jun 2019 Jun 2019 Jun 2019 Jun 2019 Jun 2019 Jun 2019 Jun 2019 Jun 2019 Jun 2019 Jun 2019 Jun 2019 Jun 2018 Jun 2019 Oct 2018 2015 Number 53,194 6,150 4,362 1,948 1,762 2,636 5,469 10,962 11,227 11,227 11,228 11,818 63,979 63,979 12,000 19,000 17,017 298,884 262,656 225,945 464,283 537,259 19,780 14,681 2,260 9,034 2,721 3,074 13,890 2,016 1,075 63,703 33,342 33,342 499,473 3,444,254 2014 Number 238,273 8,398 7,512 2,359 4,834 3,393 6,913 31,202 – – – – – – – – – – – – – – – – – – – – – – – – – 2,194,531 Market price (£)1 15.09 15.09 15.09 15.09 15.09 15.09 15.09 15.09 16.25 16.25 16.25 15.30 15.30 15.30 17.08 17.08 16.11 16.11 16.11 10.27 10.27 10.27 10.27 10.27 10.27 10.27 10.27 10.27 10.27 10.27 10.27 10.27 9.45 9.45 9.45 1 Market price as at the date of grant. 2 Maximum number of shares that could vest on the maturity of the Long-term Incentive Plan 2013. 30.A6 Pensions Overseas Pension arrangements for overseas employees vary, and schemes reﬂect best practice and regulation in each particular country. The charge against proﬁt is the amount of contributions payable to the deﬁned contribution pension schemes in respect of the accounting period. The pension cost attributable to overseas employees for 2015 was £8 million (2014: £9 million). United Kingdom The Group operates pension schemes for UK employees. The Aggreko plc Pension Scheme (‘the Scheme’) is a funded, contributory, deﬁned beneﬁt scheme. Assets are held separately from those of the Group under the control of the Directors of Aggreko Pension Scheme Trustee Limited. The Scheme is subject to valuations at intervals of not more than three years by independent actuaries. 144 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 30.A6 Pensions continued The Trustee of the Scheme has control over the operation, funding and investment strategy of the Scheme but works closely with the Company to agree funding and investment strategy. A valuation of the Scheme was carried out as at 31 December 2014 using the Attained Age method to determine the level of contributions to be made by the Group. The actuaries adopted a valuation basis linked to market conditions at the valuation date. Assets were taken at market value. The major actuarial assumptions used were: Return on investments Growth in average pay levels Increase in pensions 3.6% 4.8% 3.2% At the valuation date, the market value of the Scheme’s assets (excluding AVCs) was £92 million which was sufﬁcient to cover 92% of the beneﬁts that had accrued to members, after making allowances for future increases in earnings. As part of the valuation at 31 December 2014, the Company and the trustees agreed upon a Schedule of Contributions and a Recovery Plan. Company contributions for beneﬁts building up in the future increased from 35.9% to 41.0% on 1 February 2016. To address the Scheme deﬁcit the Company has already made an additional contribution of £1.25 million in January 2015 and plans to make further additional contributions of £1.25 million each year until 2022. Employee contributions are 6% of pensionable earnings. The Scheme closed to all new employees joining the Group after 1 April 2002. New employees are given the option to join a deﬁned contribution scheme. Contributions of £2 million were paid to the scheme during the year (2014: £2 million). There are no outstanding or prepaid balances at the year end. An update of the Scheme was carried out by a qualiﬁed independent actuary using the latest available information for the purposes of this statement. The major assumptions used in this update by the actuary were: Rate of increase in salaries Rate of increase in pensions in payment Rate of increase in deferred pensions Discount rate Inﬂation assumption Longevity at age 65 for current pensioners (years) Men Women Longevity at age 65 for future pensioners (years) Men Women The assets in the Scheme were: Equities – UK Equities – Overseas Equities – Diversiﬁed Growth – Absolute Return Property Index-linked Bonds Fixed interest Bonds Bonds Cash Total 31 Dec 2015 31 Dec 2014 4.9% 3.3% 3.4% 3.9% 3.4% 24.0 26.7 26.7 29.4 4.8% 3.2% 3.3% 3.8% 3.3% 24.0 26.6 26.7 29.4 Value at 31 Dec 2015 £ million Value at 31 Dec 2014 £ million Value at 31 Dec 2013 £ million 8 12 7 8 – 37 – 17 1 90 8 11 7 7 1 34 5 16 2 91 8 10 7 7 4 22 6 13 1 78 There is a risk of asset volatility leading to a deﬁcit in the Scheme. Working with the Company, the Trustee has agreed investment derisking triggers which, when certain criteria are met, will decrease corporate bond and ﬁxed interest gilt holdings and increase the holding of index linked bonds. Over time, this will result in an investment portfolio which better matches the liabilities of the Scheme thereby reducing the risk of asset volatility. However, there remains a signiﬁcant level of investment mismatch in the Scheme. This is deliberate and is aimed at maximising the Scheme’s long-term investment return whilst retaining adequate control of the funding risks. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 145 30.A6 Pensions continued The amounts included in the balance sheet arising from the Group’s obligations in respect of the Scheme are as follows: Fair value of assets Present value of funded obligations Liability recognised in the balance sheet 2015 £ million 2014 £ million 2013 £ million 90 (92) (2) 91 (98) (7) 78 (84) (6) An alternative method of valuation is the estimated cost of buying out beneﬁts at 31 December 2015 with a suitable insurer. This amount represents the amount that would be required to settle the Scheme liabilities at 31 December 2015 rather than the Company continuing to fund the ongoing liabilities of the Scheme. The Company estimates the amount required to settle the Scheme’s liabilities at 31 December 2015 is around £137 million which gives a Scheme shortfall on a buyout basis of approximately £47 million. The components of the deﬁned beneﬁt cost as follows: Current service costs Net interest cost – Interest expense on liabilities – Interest income on assets Administrative expenses and taxes The majority of the £2 million cost was included within administrative expenses in the income statement. Changes in the present value of the deﬁned beneﬁt obligation are as follows: 2015 £ million 2014 £ million 2 4 (4) – 2 2 4 (4) – 2 2015 £ million 2014 £ million O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I Present value of obligation at 1 January Service cost Interest cost Beneﬁts paid Remeasurements – Effect of changes in demographic assumptions – Effect of changes in ﬁnancial assumptions – Effect of experience adjustments Present value of obligation at 31 December Deﬁned beneﬁt obligation by participant status Actives Deferreds Pensioners 98 2 4 (5) – (1) (6) 92 37 35 20 92 84 2 4 (1) – 9 – 98 49 31 18 98 G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 146 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE GROUP ACCOUNTS For the year ended 31 December 2015 30.A6 Pensions continued The measurement of the deﬁned beneﬁt obligation is particularly sensitive to changes in key assumptions as described below: (cid:333)(cid:3) The discount rate has been selected following actuarial advice and taking into account the duration of the liabilities. A decrease in the discount rate of 0.5% per annum would result in a £14 million increase in the present value of the deﬁned beneﬁt obligation. The weighted average duration of the deﬁned beneﬁt obligation liabilities is around 28 years. (cid:333)(cid:3) The inﬂation assumption adopted is consistent with the discount rate used. It is used to set the assumptions for pension increases, salary increases and deferred revaluations. An increase in the inﬂation rate of 0.5% per annum would result in a £13 million increase in the present value of the deﬁned beneﬁt obligation. (cid:333)(cid:3) The longevity assumptions adopted are based on those recommended by the Scheme Actuary advising the Trustee of the Scheme and reﬂect the most recent mortality information available at the time of the Trustee actuarial valuation. The increase in the present value of the deﬁned beneﬁt obligation due to members living one year longer would be £3 million. There is a risk that changes in the above assumptions could increase the deﬁcit in the Scheme. Other assumptions used to value the deﬁned beneﬁt obligation are also uncertain, although their effect is less material. Present value of Scheme assets are as follows: Fair value of Scheme assets at 1 January Interest income Employer contributions Beneﬁts paid Remeasurements – return on plan assets (excluding interest income) Fair value of Scheme assets at 31 December Analysis of the movement in the balance sheet At 1 January Deﬁned beneﬁt cost included in income statement Contributions Beneﬁts paid Total remeasurements At 31 December Cumulative actuarial gains and losses recognised in equity At 1 January Actuarial losses recognised in the year At 31 December The actual return on Scheme assets was £nil million (2014: £11 million). 2015 £ million 2014 £ million 91 4 3 (5) (3) 90 78 4 4 (1) 6 91 2015 £ million 2014 £ million (7) (2) 3 – 4 (2) (6) (2) 4 – (3) (7) 2015 £ million 2014 £ million 38 (4) 34 35 3 38 Expected cash ﬂows in future years Expected employer contributions for the year ended 31 December 2016 are £3 million. Expected total beneﬁt payments: approximately £3 million per year for next 10 years. COMPANY BALANCE SHEET (COMPANY NUMBER: SC177553) As at 31 December 2015 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 147 Fixed assets Property, plant and equipment Investments Current assets Other receivables Cash and cash equivalents Derivative ﬁnancial instruments Deferred tax asset Current tax asset Creditors: amounts falling due within one year Borrowings Other payables Provisions Net current assets Total assets less current liabilities Creditors: amounts falling due after one year Borrowings Derivative ﬁnancial instruments Retirement beneﬁt obligation Net assets Shareholders’ equity Share capital Share premium Treasury shares Capital redemption reserve Hedging reserve Retained earnings Total Shareholders’ equity Notes 2015 £ million 2014 £ million 36 37 38 42 39 40 41 39 43 7 684 691 610 5 – 2 14 631 (3) (351) (1) 276 967 (506) (6) (2) 453 42 20 (9) 13 (4) 391 453 6 671 677 570 5 2 3 12 592 (47) (333) – 212 889 (455) (7) (7) 420 42 20 (14) 13 (5) 364 420 The ﬁnancial statements on pages 147 to 153 were approved by the Board of Directors on 3 March 2016 and signed on its behalf by: K Hanna Chairman C Cran Chief Financial Ofﬁcer O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 148 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION COMPANY STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2015 Proﬁt for the year Other comprehensive (loss)/income Items that will not be reclassiﬁed to proﬁt or loss – Remeasurement of retirement beneﬁts (net of tax) Items that may be reclassiﬁed subsequently to proﬁt or loss – Cash ﬂow hedges (net of tax) Other comprehensive income/(loss) for the year (net of tax) Total comprehensive income for the year 2015 £ million 89 2014 £ million 134 3 1 4 (3) 1 (2) 93 132 COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2015 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 149 As at 31 December 2015 Balance at 1 January 2015 Proﬁt for the year Other comprehensive (loss)/income: Fair value gains on interest rate swaps Remeasurement of retirement beneﬁts (net of tax) Total comprehensive (loss)/income for the year ended 31 December 2015 Transactions with owners: Employee share awards Issue of Ordinary Shares to employees under share option schemes Return of capital to Shareholders Dividends paid during 2015 Balance at 31 December 2015 As at 31 December 2014 Balance at 1 January 2014 Proﬁt for the year Other comprehensive (loss)/income: Fair value gains on interest rate swaps Remeasurement of retirement beneﬁts (net of tax) Total comprehensive (loss)/income for the year ended 31 December 2014 Transactions with owners: Employee share awards Issue of Ordinary Shares to employees under share option schemes Return of capital to Shareholders Capital redemption reserve Dividends paid during 2014 Balance at 31 December 2014 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I Attributable to equity holders of the Company Ordinary Share capital £ million 42 – Share premium account £ million 20 – Treasury shares £ million (14) – Capital redemption reserve £ million 13 – Hedging reserve £ million (5) – Retained earnings £ million 364 89 Total equity £ million 420 89 – – – – – – – – 42 – – – – – – – – 20 – – – – 5 – – 5 (9) – – – – – – – – 13 1 – 1 – – – – – (4) – 3 92 8 (3) (1) (69) (65) 391 1 3 93 8 2 (1) (69) (60) 453 Attributable to equity holders of the Company Ordinary Share capital £ million 49 – Share premium account £ million 20 – Treasury shares £ million (24) – Capital redemption reserve £ million 6 – Hedging reserve £ million (6) – Retained earnings £ million 505 134 Total equity £ million 550 134 – – – – – – (7) – (7) 42 – – – – – – – – – 20 – – – – 10 – – – 10 (14) – – – – – – 7 – 7 13 1 – 1 – – – – – – (5) – (3) 1 (3) 131 132 3 3 (7) (198) – (70) (272) 364 3 (198) – (70) (262) 420 G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 150 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE COMPANY ACCOUNTS For the year ended 31 December 2015 31 Company accounting policies 31.1 Basis of preparation These ﬁnancial statements have been prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’ (FRS 101). The ﬁnancial statements have been prepared under the historical cost convention, as modiﬁed by the revaluation of certain ﬁnancial assets and liabilities (including derivative instruments) at fair values in accordance with the Companies Act 2006. The preparation of ﬁnancial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. (cid:333)(cid:3) Paragraph 17 of lAS 24, ‘Related party disclosures’ (key management compensation) (cid:333)(cid:3) The requirements in lAS 24, ‘Related party disclosures’ to disclose related party transactions entered into between two or more members of a group. 31.1.1 Going concern Given the going concern disclosures in the Group Accounts on page 113 the Directors consider it appropriate to adopt the going concern basis of accounting in preparing these ﬁnancial statements. 31.1.2 Changes in accounting policy and disclosures The following exemptions from the requirements of IFRS have been applied in the preparation of these ﬁnancial statements, in accordance with FRS 101: New and amended standards adopted by the Company There are no new standards that are effective for the ﬁrst time this year that have a material impact on the Company. (cid:333)(cid:3) Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and weighted-average exercise prices of share options, and how the fair value of goods or services received was determined) (cid:333)(cid:3) IFRS 7, ‘Financial Instruments: Disclosures’ (cid:333)(cid:3) Paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques and inputs used for fair value measurement of assets and liabilities) (cid:333)(cid:3) Paragraph 38 of lAS 1, ‘Presentation of ﬁnancial statements’ comparative information requirements in respect of: – Paragraph 79(a)(iv) of lAS 1; – Paragraph 73(e) of lAS 16 ‘Property, plant and equipment’ – Paragraph 188(e) of lAS 38 ‘Intangible assets’ (reconciliations between the carrying amount at the beginning and end of the period) (cid:333)(cid:3) The following paragraphs of lAS 1, ‘Presentation of ﬁnancial statements’: – 10(d) (statement of cash ﬂows) – 10(f)(a) (statement of ﬁnancial position as at the beginning of the preceding period) – 16 (statement of compliance with all IFRS) – 38A (requirement for minimum of two primary statements, including cash ﬂow statements) – 38B-D (additional comparative information) – 40A-D (requirements for a third statement of ﬁnancial position) – 111 (cash ﬂow statement information), and – 134-136 (capital management disclosures) (cid:333)(cid:3) lAS 7, ‘Statement of cash ﬂows’ (cid:333)(cid:3) Paragraph 30 and 31 of lAS 8, ‘Accounting policies, changes in accounting estimates and errors’ (requirements for the disclosure of information when an entity has not applied a new IFRS that has been issued but is not yet effective) Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and impairment losses. Cost includes purchase price, and directly attributable costs of bringing the assets into the location and condition where it is capable for use. Borrowings costs are not capitalised. Property, plant and equipment is depreciated on a straight line basis at annual rates estimated to write off the cost of each asset over its useful life from the date it is available for use. The principal period of depreciation used is as follows: Vehicles, plant and equipment 4 to 8 years. Impairment of property, plant and equipment Property, plant and equipment is depreciated and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Value in use is calculated using estimated cash ﬂows. These are discounted using an appropriate long-term pre-tax interest rate. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁable cash ﬂows (income-generating units). Foreign currencies At individual Company level, transactions denominated in foreign currencies are translated at the rate of exchange on the day the transaction occurs. At the year end, monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary assets are translated at the historical rate. In order to hedge its exposure to certain foreign exchange risks, the Company enters into forward foreign exchange contracts. The Company’s ﬁnancial statements are presented in Sterling, which is the Company’s functional currency. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 151 31 Company accounting policies continued Derivative ﬁnancial instruments The accounting policy is identical to that applied by the consolidated Group as set out on page 115. Employee beneﬁts The Company operates both a deﬁned beneﬁt pension scheme and a deﬁned contribution pension scheme. The accounting policy is identical to that applied by the consolidated Group as set out on page 115. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds, net of transaction costs, and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate. Taxation The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in Shareholders’ funds. In this case, the tax is also recognised in other comprehensive income or directly in Shareholders’ funds, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the ﬁnancial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; or arise from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable proﬁt or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable proﬁt will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Investments Investments in subsidiary undertakings are stated in the balance sheet of the Company at cost, or nominal value of the shares issued as consideration where applicable, less provision for any impairment in value. Share-based payments recharged to subsidiary undertakings are treated as capital contributions and are added to investments. Leases Leases where substantially all of the risks and rewards of ownership are not transferred to the Company are classiﬁed as operating leases. Rentals under operating leases are charged against operating proﬁt on a straight line basis over the term of the lease. Share-based payments The accounting policy is identical to that applied by the consolidated Group as set out on page 116 with the exception that shares issued by the Company to employees of its subsidiaries for which no consideration is received are treated as an increase in the Company’s investment in those subsidiaries. Dividend distribution Dividend distribution to the Company’s Shareholders is recognised as a liability in the Company’s ﬁnancial statements in the period in which the dividends are approved by the Company’s Shareholders. 32 Critical accounting estimates and assumptions Taxation This is explained in Note 1 to the Group Accounts on page 116. 33 Transition to IFRS The Company’s ﬁnancial statements for the year ended 31 December 2015 are the ﬁrst annual ﬁnancial statements that comply with FRS 101 – Reduced Disclosure Framework. These ﬁnancial statements have been prepared as described in Note 31. The Company’s transition date is 1 January 2014. The Company prepared its opening IFRS balance sheet at that date. The reporting date of these ﬁnancial statements is 31 December 2015. The Company’s IFRS adoption date is 1 January 2015. The comparative ﬁgures for 2014 have been restated accordingly. No adjustments were required to either proﬁt or net assets for the year. 34 Dividends Refer to Note 11 of the Group Accounts. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 152 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES TO THE COMPANY ACCOUNTS For the year ended 31 December 2015 35 Auditors’ remuneration 39 Borrowings Fees payable to the Company’s auditor for the audit of the Company’s annual accounts Fees payable to the Company’s auditor and its associates for other services: – Other assurance related services – Tax advising 36 Property, plant and equipment Cost At 1 January 2015 Additions Disposals At 31 December 2015 Accumulated depreciation At 1 January 2015 Charge for the year Disposals At 31 December 2015 Net book values: At 31 December 2015 At 31 December 2014 37 Investments Cost of investments in subsidiary undertakings: At 1 January 2015 Additions Net impact of share-based payments At 31 December 2015 2015 £000 2014 £000 283 262 36 – 112 – Non-current Bank borrowings Private placement notes Current Bank overdrafts Bank borrowings Total £ million Total borrowings 2015 £ million 2014 £ million 253 253 506 2 1 3 509 214 241 455 – 47 47 502 11 3 (2) 12 5 2 (2) 5 7 6 The bank overdrafts and borrowings are all unsecured. (i) Maturity of ﬁnancial liabilities The maturity proﬁle of the borrowings was as follows: Within 1 year, or on demand Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years Between 4 and 5 years Greater than 5 years 2015 £ million 2014 £ million 3 – 195 70 56 185 509 47 191 – 71 16 177 502 (ii) Borrowing facilities The Company has the following undrawn committed ﬂoating rate borrowing facilities available at 31 December 2015 in respect of which all conditions precedent had been met at that date: £ million 671 12 1 684 Expiring within 1 year Expiring between 1 and 2 years Expiring between 2 and 3 years Expiring between 3 and 4 years Expiring between 4 and 5 years Expiring after 5 years The property, plant and equipment of the Company comprise vehicles, plant and equipment. Details of the Company’s subsidiary undertakings are set out in Note 28 to the Group Accounts. The Directors believe that the carrying value of the investments is supported by their underlying net assets. 38 Other receivables Amounts due from subsidiary undertakings Other receivables 2015 £ million 2014 £ million 608 2 610 569 1 570 40 Other payables Amounts owed to subsidiary undertakings Accruals and deferred income 2015 £ million 2014 £ million 30 – 117 78 160 – 385 189 128 – 50 – – 367 2015 £ million 2014 £ million 343 8 351 319 14 333 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 153 41 Provisions At 1 January 2015 New provisions Utilised At 31 December 2015 Analysis of total provisions Current Non-current Total Reorganisation £ million – 1 – 1 1 – 1 The provision for reorganisation comprises the estimated costs of the Group reorganisation and business priorities. The provisions are generally in respect of professional fees directly related to the reorganisation. The provision is expected to be fully utilised by the end of 2016. 42 Deferred tax At 1 January Debit to the Income Statement Debit to statement of comprehensive income At 31 December Deferred tax is provided in the accounts as follows: Deferred tax assets At 1 January 2014 Deferred tax debit in the income statement At 1 January 2015 Deferred tax debit in statement of comprehensive income At 31 December 2015 2015 £ million 2014 £ million 3 – (1) 2 4 (1) – 3 Other timing differences £ million Derivative ﬁnancial liabilities £ million Relating to retirement beneﬁt obligation £ million 1 (1) – – – 2 – 2 – 2 1 – 1 (1) – Total £ million 4 (1) 3 (1) 2 The net deferred tax asset due after more than one year is £2 million (2014: asset of £3 million). The UK corporation tax rate reduced from 21% to 20% with effect from 1 April 2015 and results in a UK corporation tax rate for the year ended 31 December 2015 of 20.3%. During the year, further changes to the UK corporation tax rate were substantively enacted as part of Finance (No 2) Bill 2015 on 26 October 2015. These include reductions in the main rate of corporation tax from 20% to 19% from 1 April 2017 and to 18% from 1 April 2020. The relevant deferred tax balances have been remeasured accordingly. 43 Share capital Refer to Note 23 of the Group Accounts. 44 Proﬁt and loss account As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own income statement and related notes. The proﬁt for the ﬁnancial year of the Company was £89 million (2014: £134 million). O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 154 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION SHAREHOLDER INFORMATION Financial calendar 21 April 2016 22 April 2016 28 April 2016 28 April 2016 24 May 2016 3 August 2016 Ex-dividend date – Final dividend Record date to be eligible for the ﬁnal dividend Annual General Meeting Q1 Trading Update for the year to 31 December 2016 Final dividend payment for the year to 31 December 2015 Half Year Results announcement for the year to 31 December 2016 early September 2016 early September 2016 Ex-dividend date – Interim dividend Record date to be eligible for the interim dividend late September/early October 2016 Interim dividend payment for the year to 31 December 2016 mid November 2016 Q3 Trading Update for the year to 31 December 2016 Our website Our corporate website provides access to share price and dividend information as well as sections on managing your shareholding online, corporate governance and other investor relations information. To access the website, please visit www.aggreko.com/investors. Managing your shares online Shareholders can manage their holding online by registering to use our Shareholder portal at https://shares.aggreko.com. This service is provided by our Registrar, Capita, giving quick and easy access to your shareholding, allowing you to manage all aspects of your shareholding online, with a useful FAQ section. Electronic communications We encourage Shareholders to consider receiving their communications electronically. Choosing to receive your communications electronically means you receive information quickly and securely and allows us to communicate in a more environmentally friendly and cost-effective way. You can register for this service online using our share portal at https://shares.aggreko.com. Payment of dividends Shareholders whose dividends are not currently paid directly into their bank accounts may wish to consider setting this service up. We encourage Shareholders to have dividends paid direct to their bank accounts as this has a number of advantages, including ensuring efﬁcient payment to receive cleared funds on the payment date. If Shareholders would like to receive their dividends directly to their bank account, they should call the Registrar, Capita, using the details opposite. UK Shareholders may also register using the share portal at https://shares.aggreko.com. Overseas Shareholders may also be able to have the dividend converted to local currency before payment to your bank account using the international payment service. Please call the Registrar, Capita, using the details opposite, or visit www.capitaregistrars.com/ international. Dividend Reinvestment Plan In 2015 we introduced a Dividend Reinvestment Plan (DRIP) for eligible Shareholders. This allows Shareholders to purchase additional shares in Aggreko with their dividend payment. Further information and a mandate can be obtained from our Registrars, Capita, using the contact details opposite, or by using the share portal at https://shares.aggreko.com. Duplicate documents Some Shareholders ﬁnd that they receive duplicate documentation and split dividend payments due to having more than one account on the share register. If you think you fall into this group and would like to combine your accounts, please contact our Registrar, Capita. Changes of address To avoid missing important correspondence relating to your shareholding, it is important that you inform our Registrar, Capita, of your new address as soon as possible. Investor Relations App We have recently published an Investor Relations and Media App, which is available for both Apple and Android devices. This allows you to easily access all our ﬁnancial publications, including the 2015 Annual Report. The online report and a link to download the App can be found at www.aggreko.com/investors. Sharegift If you have a very small shareholding that is uneconomical to sell, you may want to consider donating it to Sharegift (Registered Charity no.10526886), a charity that specialises in the donation of small, unwanted shareholdings to good causes. You can ﬁnd out more by visiting www.sharegift.org or by calling +44 (0) 207 930 3737. Shareholder queries Our share register is maintained by our Registrar, Capita. Shareholders with queries relating to their shareholding should contact Capita directly using one of the methods listed opposite. For more general queries, Shareholders can look at our website at www.aggreko.com/investors. USEFUL CONTACTS Registrar Capita Asset Services, Shareholder Solutions The Registry, 34 Beckenham Road Beckenham, Kent BR3 4TU United Kingdom Telephone 0871 664 0300 +44 (0) 20 8639 3399 Website www.capitaregistrars.com Email ssd@capitaregistrars.com Stockbrokers Bank of America Merrill Lynch – London Citigroup Global Markets – London Auditors PricewaterhouseCoopers – Glasgow Chartered Accountants Aggreko’s registered ofﬁce 8th Floor, 120 Bothwell Street Glasgow G2 7JS Scotland, United Kingdom Telephone +44 (0) 141 225 5900 Email investors@aggreko.com Registered in Scotland No. SC177553 Group Legal Director & Company Secretary Peter Kennerley AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 155 Additional documents An interactive summary version of our Annual Report is available online at www.aggreko.com/investors. Additionally the Annual Report is available for download in pdf format at www.aggreko.com/investors. Unsolicited mail and Shareholder fraud Shareholders are advised to be wary of unsolicited mail or telephone calls offering free advice, to buy shares at a discount or offering free company reports. To ﬁnd more detailed information on how Shareholders can be protected from investment scams visit www.fca.org.uk/consumers/scams/investment-scams/ share-fraud-and-boiler-room-scams. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 156 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION DEFINITION AND CALCULATION OF NON GAAP MEASURES Return on average capital employed (ROCE) DEFINITION: Calculated by dividing operating proﬁt pre-exceptional items for a period by the average net operating assets at 1 January, 30 June and 31 December. CALCULATION: Operating proﬁt pre-exceptional items Average net operating assets 1 January 30 June 31 December Average (i.e. total of 1 Jan, 30 June and 31 Dec divided by 3) ROCE (operating proﬁt pre-exceptional items divided by average operating assets) Note (a): Per June 2015 Interim Accounts Note 5(e) Assets Liabilities Net operating assets Accounts reference Income statement Note 4(g) of 2015 & 2014 Accounts Refer to Note (a) below Note 4(g) of 2015 & 2014 Accounts December 2015 £ million December 2014 £ million 275 310 1,690 1,650 1,707 1,682 1,598 1,616 1,690 1,635 16% 19% 1,976 (326) 1,650 1,948 (332) 1,616 Ratio of revenue to average gross rental assets DEFINITION: Revenue for the period (excluding pass-through fuel) divided by the average gross rental assets at 1 January, 30 June and 31 December. CALCULATION: Revenue Less pass-through fuel (Note 1) Revenue excl. pass-through fuel Average gross rental assets 1 January 30 June 31 December Average (i.e. total of 1 Jan, 30 June and 31 Dec divided by 3) Revenue/gross rental assets Accounts reference Income statement Note 15 Note 9 of June 15 Interim Accounts Note 15 December 2015 £ million December 2014 £ million 1,561 (60) 1,501 2,599 2,639 2,778 2,672 1,577 (48) 1,529 2,373 2,388 2,599 2,453 56% 62% Note 1: Pass-through fuel relates to our Power Solutions contracts in Mozambique where we provide fuel on a pass-through basis. AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 157 Earnings before interest, taxes, depreciation and amortisation (EBITDA) CALCULATION: Operating proﬁt pre-exceptional items (Earnings Before Interest and Taxation) Depreciation Amortisation EBITDA Interest cover: EBITDA divided by net ﬁnance costs CALCULATION: EBITDA (£ million) Net ﬁnance cost (£ million) Interest cover (times) Net debt to EBITDA CALCULATION: Net debt (£ million) EBITDA (£ million) Net debt/EBITDA (times) Dividend cover Accounts reference Income statement Note 5 Note 5 Accounts reference Per above Income statement Accounts reference Cash ﬂow statement Per above DEFINITION: Basic earnings per share (EPS) pre-exceptional items divided by full year declared dividend. CALCULATION: Basic EPS pre-exceptional items (pence) Full year declared dividend Interim dividend (pence) Final dividend (pence) Dividend cover (times) Accounts reference Income statement Note 11 Note 11 December 2015 £ million December 2014 £ million 275 277 4 556 310 259 3 572 December 2015 December 2014 556 23 24 572 21 27 December 2015 December 2014 489 556 0.9 494 572 0.9 December 2015 December 2014 71.73 82.57 9.38 17.74 27.12 9.38 17.74 27.12 2.6 3.0 O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 158 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION FINANCIAL SUMMARY Revenue £m Trading Proﬁt1, 3 £m 15 14 13 12 11 1,561 1,577 1,573 1,583 1,396 15 14 13 12 11 Trading Margin3 % Dividend per Share Pence 15 14 13 12 11 17 19 22 24 24 15 14 13 12 11 Proﬁt Before Tax3 £m Diluted EPS3 Pence 15 14 13 12 11 252 289 333 360 324 15 14 13 12 11 Average Number of Employees Net Operating Assets £m 15 14 13 12 11 6,433 6,112 5,749 5,316 4,262 15 14 13 12 11 Return on Average Capital Employed3 % Capital Expenditure £m 15 14 13 12 11 16 19 21 24 28 15 14 13 12 11 Net Debt £m Shareholders’ Funds £m 15 14 13 12 11 489 494 363 593 365 15 14 13 12 11 1 Trading proﬁt represents operating proﬁt before gain on sale of property, plant and equipment. 2 The Board is recommending a ﬁnal dividend of 17.74 pence per Ordinary Share, which, when added to the interim dividend of 9.38 pence, gives a total for the year of 27.12 pence per Ordinary Share. 3 2015 and 2012 numbers are pre-exceptional items. 270 306 352 381 338 27.122 27.122 26.30 23.91 20.79 71.68 82.49 92.03 100.40 86.76 1,707 1,690 1,598 1,708 1,354 254 251 228 440 418 1,115 1,078 1,140 1,045 881 GLOSSARY AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 159 CEO Chief Executive Ofﬁcer. CFO Chief Financial Ofﬁcer. CFM Cubic feet per minute. A unit of volumetric capacity. CO2 Carbon dioxide. DILUTED EARNINGS PER SHARE Proﬁt after tax divided by the diluted weighted average number of Ordinary Shares ranking for dividend during the relevant period, i.e. including the impact of share options. EPA Environmental Protection Agency. GHG Greenhouse gas emissions. g/kWh Emissions in grams per kilowatt hour. HFO Heavy fuel oil. kVA A thousand volt amperes. LOAD SHEDDING Load shedding is an intentional power shutdown, where electricity is stopped for a period of time over different parts of the distribution region. They are a last-resort measure to avoid a total blackout of the power system and are a demand response where the demand for electricity exceeds the supply capability of the network. LWA Sound power level at source. MARKET POTENTIAL ESTIMATION CALCULATION 1. In a market (say, oil-reﬁning in the US) in which we are well-established and have high market share, calculate our rental revenues (a known number) in the sector as a proportion of the total economic output of oil reﬁneries in the US (another known number). This produces a very small number, like 0.00001. 2. Make the assumption that if we can achieve, say, 0.00001 of the economic output of reﬁneries in the US as revenues, we should, in theory, be able to achieve the same in oil reﬁneries everywhere else. Therefore if we take the total economic output of oil reﬁneries in, say China, and then apply the same multiple to that which we achieve in the US, that tells us how big the potential market is. 3. Take this same technique, and apply it to about 20 segments in around 30 countries, and we have an estimate for the market potential and a number for our revenues in the sector (an accurate number), and therefore an estimate of our share of “market potential”. MW Megawatt – a million watts of electricity. NOx Oxides of nitrogen. ON-HIRE & OFF-HIRE When a contract is put out on rent, the equipment is referred to as on-hire. When a contract comes off rent, the equipment is referred to as off-hiring. The on and off-hire rates are calculated as the number of MW of equipment that either on or off-hire in the period, divided by the MW of equipment on-hire at the beginning of that period. OPERATING PROFIT (ALSO KNOWN AS EBIT) Proﬁt from operations after gain on sale of property, plant and equipment but before interest and tax. PARTICULATE In general this term relates to visible smoke. POWER SOLUTIONS BUSINESS The part of our business which operates in emerging markets. It has two divisions, Utility which handles very large power contracts, typically for utilities and Industrial which offers solutions from our local service centres to industrial customers. pp Percentage points. PROFIT AFTER TAX Proﬁt attributable to equity Shareholders. RENTAL SOLUTIONS BUSINESS The part of our business operating in North America, Europe and Australasia, looking after customers local to our service centres. tCO2e Tonnes of carbon dioxide equivalent. Temperature Control The temperature control ﬂeet includes chillers, air conditioners, cooling towers, boilers, heat exchangers, heaters, and the required ancillary products. It provides HVAC and moisture control equipment that helps customers minimise losses, manage risks and capture windows of economic opportunity. Applications include seasonal limitations or catastrophic failure of critical cooling equipment, planned and unplanned maintenance, process improvements, and temporary structures. Tier 1, Tier 2, Tier 3, Tier 4 US Federal Government target emission reduction levels. TRADING PROFIT Operating proﬁt before gain on sale of property, plant and equipment. O V E R V E W I O U R B U S N E S S I P E R F O R M A N C E R E V E W I I S U S T A N A B L T Y I I G O V E R N A N C E & O T H E R I N F O R M A T O N I A C C O U N T S 160 AGGREKO PLC ANNUAL REPORT AND ACCOUNTS 2015 ACCOUNTS & OTHER INFORMATION NOTES Design and production Radley Yeldar | www.ry.com Board photography George Brooks Print Park Communications on FSC® certiﬁed paper. Park is an EMAS certiﬁed company and its Environmental Management System is certiﬁed to ISO 14001. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled. This document is printed on Galerie Satin, a paper containing 15% recycled ﬁbre and 85% virgin ﬁbre sourced from well managed, responsible, FSC® certiﬁed forests. The pulp used in this product is bleached using an elemental chlorine free (ECF) process. Find us online www.aggreko.com Head ofﬁce Aggreko plc 8th Floor 120 Bothwell Street Glasgow G2 7JS United Kingdom T: +44 (0)141 225 5900 F: 0141 225 5949 www.aggreko.com Watch and download the 2015 report: www.annualreport2015.aggreko.com

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