Positioned for
growth in a changing
energy market
Aggreko plc Annual Report
and Accounts 2019
Decarbonisation, decentralisation, digitalisation and
demographic change are increasing complexity and
the demand for power. At Aggreko, we are embracing
these changes and delivering innovative solutions to
meet the evolving needs of our customers.
Investing in new technology to reduce the cost of
energy and its environmental impact, while delivering
operational and capital efficiency by optimising our
resources, means that we are well placed to benefit
through the energy transition.
CONTENTS
Strategic report
Governance
Financial statements
Shareholder information
01 Performance highlights
46 Chairman’s introduction
84 Independent auditor’s
139 Notice of Annual General
02 Aggreko at a glance
48 Our Board
03 The challenge of the
energy transition
04 Chairman’s statement
05 CEO Chris Weston’s view
50 2019 Board highlights
52 Our Culture and Values
53 Ethics & Corporate
Responsibility report
06 Our business model
56 Nomination Committee
10 Our strategic priorities
20 Group performance review
26 Financial review
30 Principal risks and
uncertainties
38 Sustainability
40 Our role in the energy
transition
42 Section 172 statement
report
58 Audit Committee report
62 Remuneration Committee
report
78 Statutory disclosures
83 Statement of Directors’
responsibilities
report
Meeting and notes
88 Group income statement
145 Shareholder information
88 Group statement of
comprehensive income
89 Group balance sheet
90 Group cash flow statement
91
Reconciliation of net
cash flow to movement
in net debt
92 Group statement
of changes in equity
94 Notes to the Group
accounts
130 Company balance sheet
131 Company statement of
comprehensive income
132 Company statement
of changes in equity
133 Notes to the Company
accounts
137 Definition and calculation
of non-GAAP measures
Learn more about us at
www.plc.aggreko.com
The actions we are taking to
reposition the business for the
changes our industry is facing are
beginning to deliver, and we have
reported strong profit growth
and cash generation during 2019.
Chris Weston
Chief Executive Officer
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
PERFORMANCE HIGHLIGHTS
OUR PURPOSE
Revenue
£1,613m
2018: £1,760m
Profit before tax
£199m
2018: £182m
Diluted EPS
50.7p
2018: 49.2p
Operating profit
£241m
2018: £219m
We believe in the positive impact of power
and the ability to control temperature.
We believe it opens up opportunity and
creates potential for individuals, communities,
industries and societies all over the world.
Together and over time, we believe our
services make a massive difference.
Return on capital employed1
Dividend per share
OUR INVESTMENT CASE
27.65p
2018: 27.12p
11.2%
2018: 10.3%1
1 ROCE calculation is detailed
on page 137.
Read more on page 20
Attractive markets with opportunity
for growth
Read more about our markets on page 03
Focus on key sectors where our
specialism differentiates us
Read more about our business model on page 06
Renewable and storage integration capability
Read more about our technology strategy on page 14
Actions in place to improve free cash flow
and capital returns
Read more about our capital efficiency on page 16
Attractive dividend and capital
return policy
Read more about our capital allocation on page 08
Aggreko plc Annual Report and Accounts 2019
01
AGGREKO AT A GLANCE
The world-leading provider of mobile
modular power, temperature control
and energy services
We are working at the forefront of a rapidly changing energy market and
are focused on solving our customers’ challenges to provide cost-effective,
flexible and greener solutions across the globe.
Our global reach
79
countries
190
sales and service centres
6,000+
permanent
employees
6,381 MW
average power
on hire
>50 MW
of hybrid projects
on hire
Rental Solutions
We provide power, heating and cooling
in developed markets, focused on seven
key sectors. Our customer requirements
tend to revolve around smaller, short-
term but often complex projects and
key events.
Power Solutions
We provide power, heating and cooling focused on seven key sectors across
emerging markets for customers with generally longer-term power needs.
Industrial (PSI)
Comprises medium-term projects
for industrial customers, as well
as shorter-term rental contracts.
Utility (PSU)
Longer-term projects providing
power to national utility customers.
Revenue*
£319m
20% of Group revenue
Operating profit
£44m
18% of Group operating profit
* PSU revenue excludes pass-through fuel.
100% of revenue is derived
from national utility customers.
Revenue
£833m
53% of Group revenue
Operating profit
£133m
Revenue
£434m
27% of Group revenue
Operating profit
£64m
55% of Group operating profit
27% of Group operating profit
Key sectors % of revenue
1. Petrochemical & refining
2. Building services & construction
3. Oil & gas
4. Utilities
5. Events
6. Manufacturing
7. Mining
8. Other
Key sectors % of revenue
1. Oil & gas
2. Mining
3. Events
4. Building services & construction
5. Manufacturing
6. Utilities
7. Petrochemical & refining
19%
18%
18%
10%
9%
7%
6%
13%
8. Other
41%
15%
13%
10%
7%
4%
2%
8%
See page 20 for financial performance
02 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
S
h
h
a
a
r
r
e
e
h
h
o
o
d
d
e
e
r
r
l
l
i
i
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
o
n
THE CHALLENGE OF THE ENERGY TRANSITION
Four megatrends are changing
energy markets
Demand for power continues to grow, with a projected 465 TWh global increase in 2019. At the same
time we are seeing a transformational shift in regulatory, environmental and societal expectations.
The challenge is to find the best way to secure more energy, affordably and sustainably.
→ Demand for lower-cost generation
technologies, renewables, flexibility and
security of supply has led to rapid growth
in the demand for decentralised power
generation, including distributed or off-
grid solutions, with over $55 billion invested
. These
in distributed energy hardware. These
projects affect all segments of the energy
the energy
nd
market – business, residential and
merging
communities, particularly in emerging
ower
markets where decentralised power
portant
systems are an increasingly important
self-supply solution.
Decentralisation
leads to demand for smaller, flexible
power solutions on a localised basis.
8.4 GW
of installed microgrids globally
Source: BNEF
Demographic change
means that investment in grid
infrastructure is failing to keep up with
population growth and urbanisation.
Digitalisation
will help optimise operations,
driving down cost and ensuring
reliable integration of intermittent
renewable power.
Decarbonisation
drives investment towards
renewables and lower emission fuels.
→ Global population is expected to increase
by one billion over the next 10 years,
with 94% of this in urban populations
of less developed regions where power
supply is often unreliable. The World
Bank reports that electricity supply in 46
countries has deteriorated since 2017 and
there are currently 850 million people,
mainly in Africa, without access to power.
There are also vast geographic areas
where the population density does
not, and may never, support national
grid investment.
→ The impact of digitalisation in renewable
→ Decarbonisation represents both risks
energy is expected to be profound.
The integration of diverse energy systems,
including distributed generation,
intermittent renewable power and
energy storage, requires smart energy
management to help balance the system
in the most efficient way. Implementing
digitalisation at each stage of the value
chain of the energy system can enable
increased efficiency, stability and reliability
through monitoring and optimisation
of a grid and associated power assets.
and opportunities for Aggreko. Pressure
to improve the efficiency of existing
installations and to limit emissions comes
at a time when population and economic
growth are pushing up both energy
demand and CO2 emissions. The falling
cost of renewable technologies relative
to traditional thermal capacity will drive
investment in wind, solar and storage.
Hybrid systems, which include a level
of thermal generation, provide a pathway
to integrate more renewable energy while
reducing CO2 emissions, but will require
demand management to effectively
balance the system.
850m
people, mainly in Africa, without
access to power
Source: IEA
17 GWh
new energy storage project
announcements in 2019
Source: BNEF
Aggreko plc Annual Report and Accounts 2019
03
CHAIRMAN’S STATEMENT
Adaptability has always been
one of our strengths
Transparent reporting
In line with the new reporting
requirements of the 2018 UK Corporate
Governance Code, we have evolved
last year’s stakeholder engagement
section to describe how our
stakeholders, and the matters set
out in section 172 of the Companies
Act 2006, have been considered
in Board discussions and decision-
making. The Board actively engages
with our shareholders, employees
and wider stakeholder groups when
making decisions, and considers
the impact of the Group’s activities
on the community, environment
and its reputation.
Read our section 172 statement
on page 42
Aggreko has been a pioneer
in modular, mobile power
for over 50 years and I am
proud that we continue
to lead the way as energy
markets transform.
Ken Hanna
Chairman
The last year has proved decisive for
the Group and I am delighted that the
significant work done over the last five
years is now beginning to show through
in an improved financial performance.
Profit before tax has increased 13% on
an underlying basis and our return on
capital employed (ROCE) has improved
year on year to 11.2%* and provides good
momentum as we go into 2020. For the
first time in nine years, we have seen
a working capital inflow driven by a
£78 million inflow from receivables,
as we have worked to reduce the overdue
balances. As a result, as we enter 2020
we have a solid foundation from which
to deliver on our mid-teens ROCE target.
Dividend
We remain committed to a sustainable
dividend. Accordingly, to reflect the
progress achieved in 2019, the Board is
proposing to increase the final dividend
by 3% to 18.27 pence per share. Subject
to shareholder approval, this will result
in a full year dividend of 27.65 pence
(2018: 27.12 pence) per Ordinary Share.
The increase represents the first increase
in the ordinary dividend since 2014.
Energy in transition
Our continued focus on the strategic
priorities has repositioned the Group
financially, and also, importantly, in the
context of the energy transition. Around
the world, 2019 has seen a significant shift
in public opinion towards the issue of
climate change and in particular the
impact of fossil fuels. As a result, energy
markets are changing ever more
quickly, with customers and many other
stakeholders asking for cleaner methods
of producing power. During the year, we
launched the Y.Cube, our battery storage
product, and we have been positively
surprised by the market interest with
a substantial pipeline of opportunities.
Our technology team is also looking
at alternative fuels and new technologies
and how they could be adapted for
our modular, mobile business model.
As we enter 2020, we are working on
what we can do as a Group to reduce our
environmental footprint and continue to
play a pivotal role in the energy transition.
Safety
Over the last few years our injury rate has
been falling, and it has continued to trend
downwards this year. However, tragically,
one of our employees was involved in a
fatal road traffic accident in December.
Safety is always, and has always been,
our first priority and we continue to work
closely with management and the wider
business to implement changes to
ensure that all our employees return
home safely at the end of each day.
Looking ahead
As we enter the new year, there is
much to be optimistic about. Although
geopolitical events remain unpredictable,
we are excited to be delivering our
largest ever event this year, the
Tokyo 2020 Olympics, for which our
preparations are well under way. We are
focused on delivering our 2020 ROCE
expectations, while also reviewing our
purpose and strategic priorities for the
next chapter in the company’s future.
We look forward to updating you on this
later in the year.
Coronavirus
Our primary concern is for the welfare
of our people, their families and the
local communities in which we work.
We are following the development
of the coronavirus outbreak and have
implemented several measures to protect
our people and to prepare for possible
consequences of the virus. It is unclear
how the outbreak will develop and,
therefore, the potential impact on our
business. We will continue to follow
developments closely and will take
further action as appropriate.
Thank you
Finally, I would like to thank everyone
in Aggreko for continuing to embrace
our values, adapt to the changing
market conditions and evolving our
business. Each person’s hard work and
determination has delivered substantial
change and is central to how the
Group makes a massive difference
for all its stakeholders.
* Refer to page 137 for calculations
Ken Hanna
Chairman
04 Aggreko plc Annual Report and Accounts 2019
CEO CHRIS WESTON’S VIEW
Focused on delivering
improved returns
Our strong performance
in 2019 provides good
momentum, and we
believe that a continued
focus on our four strategic
priorities will underpin
the objective of mid-teens
ROCE in 2020.
Chris Weston
Chief Executive Officer
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Q
What are your key reflections on 2019?
A
2019 was a busy and successful year for
Aggreko, with much going on all over
the world. From providing power to the
Rugby World Cup in Japan, to dealing
with the aftermath of a hurricane in the
Caribbean, I would like to thank all our
people for their hard work in delivering
for our customers this year. It gives me
immense pride to think that across the
world, Aggreko has been centre stage,
quietly getting on with what we do
best to deliver for all our customers.
That is not to say the year did not
include disappointments, and we were
all reminded of the critical importance
of safety this year following a motor
vehicle accident on a remote ice road in
Russia, in which one of our employees,
Vladimir Antonov lost his life. This tragic
accident serves to highlight some of
the challenging environments in which
we operate.
We take safety very seriously at Aggreko –
working safely is our licence to operate
– and it remains our number one priority.
We are committed to doing everything
we can to share the learnings from
incidents across the Group, so we can
achieve zero harm.
Q
You have reiterated confidence in
achieving the mid-teens ROCE target
in 2020, what underpins that?
A
Delivery of the mid-teens ROCE target in
2020 will require both growth in operating
profit and a reduction in the Group’s
capital employed. Our confidence in
achieving this is underpinned by the
progress we have made in 2019 on
delivering on our four strategic priorities.
Specifically, the 13% growth in operating
profit on an underlying basis and the
significant improvement in working
capital that we have achieved this year
provide strong momentum as we move
into 2020.
This performance reflects the various
self-help measures we have taken to
manage down our capital employed,
including a continued focus on fleet
utilisation, a disciplined approach to
capital investment and tighter inventory
management. Significant progress has
also been achieved in reducing the levels
of outstanding debt through proactive
engagement with customers, which
we expect to continue this year.
And finally, we are very busy preparing
to deliver our Tokyo 2020 Olympics
contract, which will contribute
significantly to the Group’s financial
performance this year. We are monitoring
closely the development and potential
impact of the coronavirus outbreak,
both in terms of the Tokyo Olympics
and the Group more widely.
Q
Do you think that the shape of
the business today enables you
to effectively pursue the right
opportunities in your markets?
A
We are primarily focused on the growth
opportunities that we see in both the
Rental Solutions and Power Solutions
Industrial markets through our shift
towards a sector-focused sales approach,
which leverages the benefits of the
sector-specialisation of our salesforce
and the investment we have made
in our systems and processes.
In Power Solutions Utility, we have
absorbed a substantial decline in contract
profitability as our legacy contracts have
either re-priced or off-hired over the last
few years, reflecting the considerable
changes in this market as competition
has increased. However, the actions
we have taken, including our increased
sales discipline and cost reduction
programme, are delivering improving
returns in this business.
Q
How well are you positioned for the
longer term to meet your customers’
needs through the energy transition?
A
The energy sector is in transition,
undergoing greater change and
uncertainty than ever, which brings
fresh challenge and new opportunities.
I am excited by our actions to innovate
and meet the evolving needs of our
customers. In 2019, this included the
continued programme to upgrade our
existing diesel and gas fleets, and the
first deployments of our new Y.Cube
mobile and modular storage system.
With the launch of battery storage, we
now have a product that enables us
to offer an optimised solution that is
designed to fit seamlessly within the
Aggreko thermal fleet and can be
easily combined with solar and thermal
products to reliably meet critical power
applications. Our innovation and
investment in this important technology
has the overall aim of lowering the total
cost of energy for customers through
increased fuel efficiency, while at the
same time reducing the environmental
impact of our products.
The considerable interest in battery
storage across our key sectors validates
the work undertaken by our Global
Products and Technology team to
identify, evaluate and develop the future
technologies that our customers value.
Aggreko delivered uninterrupted
power for the Rugby World Cup
2019 in Japan
Our new Y.Cube 1 MW battery storage
unit is housed entirely within a
standard 20ft container
Aggreko plc Annual Report and Accounts 2019
05
OUR BUSINESS MODEL
We have the right business model to
succeed as energy markets transform
We solve our customers’
energy problems whatever,
and wherever, they are
Working at the forefront of a rapidly
changing energy market, we are focused
on solving our customers’ energy
problems by providing cost-effective,
flexible and greener power and
temperature control solutions.
Our customers are generally other
businesses, but also include governments
and individuals, who have a specific and
often critical need for a short period of
time. Over 90% of our revenue comes
from seven key sectors where we have
developed a deep understanding of
customer needs.
How we do it
Along with our mobile and modular equipment, we bring
sector-specific expertise in any location, from the world’s
busiest cities to its most remote places, for a wide range
of commercial and industrial projects, events, emergencies
and utilities.
We offer maximum fuel flexibility, using diesel, gas, heavy
fuel oil (HFO) and renewable fuel sources, as well as
microgrid and storage solutions. We also have the tools to
help our customers adapt to the global energy transition,
including our energy management system which enables
the seamless integration of multiple energy sources.
Through our two geographic business units, Rental
Solutions and Power Solutions, our sales teams are focused
on key sectors and, with their deep understanding of the
sector dynamics, are able to work with our customers and
understand their problems. Together with our technicians
and engineers, we then design a solution and deploy our
equipment to the customer site.
The solutions we deliver may be very simple, where the
customer rents and operates the equipment themselves;
or may be complex, in which case we are on hand to
support; in other cases, we act as a power producer for
our customers, installing and operating power plants.
In all cases, we retain asset ownership and responsibility
for servicing and maintenance.
06 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
An Aggreko project
from start to finish
Build relationships
and understand
the requirement
Customers will find us through our
website, word of mouth, advertising
or existing relationships. For simple
enquiries, we direct customers through
our inside sales channel, where they
can speak to one of our sales team.
For more complex customer needs,
we operate a sector approach with
sales specialists who take the time to
really understand the characteristics
of the sector and our customers’
problems, often meeting with our
customers on site to assess their needs.
Proposal / tender
Having understood the challenge our
customer is facing, we demonstrate
the bespoke solutions we can offer
and put together a proposal and quote.
For larger government-funded projects
there is often a formal tender process.
Design and plan
Once the contract has been agreed,
detailed design work is undertaken
for the more complex projects. This
will involve our engineering experts
who develop bespoke applications
and solutions. For large projects,
there may be a number of design
iterations. The design informs the
operations team planning for fleet,
people and logistics.
96%
Rental Solutions salespeople
specialise in 1 or 2 sectors
60,135
opportunities quoted for,
excluding projects
~30,000
pages of designs were completed
for Tokyo 2020 tender process
Mobilise and install
Mobilisation may take hours, days,
weeks or months depending on the
scale and location of the contract.
Rental contracts usually mobilise faster
with equipment sourced from local
service centres; project contracts
may require civil works and equipment
to be brought in from further away.
Our technicians then work to install
and commission the solution.
Operate
Customers who rent our equipment
will generally choose to run it
themselves after our engineers have
explained the operating procedures.
Our equipment is fitted with sensors
and is monitored 24 hours a day from
our operations centre in Louisiana, USA.
Through collecting this data and our
historic experience we can see how
equipment is performing and address
any potential issues before they arise.
Servicing by our engineers can
therefore be based on condition,
rather than time, which should improve
our operational efficiency. Where our
contract is for power, heat or cool air,
our skilled technicians remain on site
and operate the equipment; we aim
for a mix of experienced Aggreko
employees and a local workforce
which we train up.
Demobilise and redeploy
At the end of a contract customers
have the ability to extend and, in
the case of rental contracts, this can
be done using our customer app.
When a customer does off-hire we
will remove the equipment and for
our project contracts we will remediate
the site to leave it as we found it.
Using our data monitoring and fleet
management systems to determine
whether maintenance is required,
the fleet is either moved on to the
next customer or returned to one
of our service centres. This reduces
costs and improves utilisation through
more efficient fleet logistics and
condition-based maintenance.
~20,000 km
the distance our equipment will sail up
the Amazon river to deliver power to
remote locations in the Amazon basin
>31,000
65%
contracts operating globally in 2019
group fleet utilisation
Aggreko plc Annual Report and Accounts 2019
07
OUR BUSINESS MODEL CONTINUED
How we make money
There are four main ways in which we generate revenue
for the Group.
Capacity charge
The charge for having each
equipment item on rent.
Technical services
This includes any design work
that is done to develop a
customer solution, installation,
and service and maintenance
during operations.
In some instances, we act as a power producer for our customer, operating the
site and supplying power. In these cases, the revenue streams are the same,
but it will be charged as an “all-in” price to the customer. These items are
closely linked and contribute to the three revenue generating performance
obligations detailed in the accounting policies on page 96.
How we allocate capital
Effective capital allocation is critical to delivering long-term
value to shareholders given the capital-intensive nature of
our business.
We aim to support this by maintaining gearing of around one
times net debt to EBITDA. We believe this appropriately reflects
the Group’s operational risk profile, although from time to time
it may be higher as investment opportunities arise.
1. Reinvest for
organic growth
Capital spend across the fleet,
including refurbishments,
replacement and new
technology; investment in
training our people; and IT
infrastructure, including digital.
3. Strategic investments
Investment in structural
changes to our business
activities in either capability
or scale; these tend to
be infrequent.
08 Aggreko plc Annual Report and Accounts 2019
Production
Based on an agreed rate for
the power, heating or cooling
generated, we derive revenue
from our customers’ use of our
equipment.
Fuel and logistics
We recover our costs and can
provide a fully managed fuel
service.
2. Sustainable
dividend policy
Committed to a sustainable
dividend in the context of the
business, delivering regular
cash returns to shareholders.
4. Return excess capital
to shareholders
Review our future cash generation
reflecting growth, productivity and
investment plans, while considering
the external environment. When
excess cash is identified it will be
returned to shareholders through
additional dividends or share
buy-backs.
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
What sets us apart
We compete with national, regional and local businesses, many of which are privately
owned specialist rental businesses, general rental companies or divisions of large plant
hire companies of OEM (Original Equipment Manufacturer) dealerships. We believe
Aggreko has a number of differentiating factors:
6. Delivery of bespoke
solutions for customers
We excel in the most challenging
conditions where Group-wide
engineering and operational expertise
are brought together to deliver specific
solutions in the most complex situations.
The extensive technical capability and
experience of our people, together with
our values, continue to reinforce our
reputation for appropriate, reliable and,
where necessary, innovative solutions
for every customer.
1. Brand strength
and reputation
Customers value our flexibility, reliability,
innovation in offering options for lower
cost and emissions, and our ethics.
2. Global network of sales
and service centres
We are truly global, with operations
in 79 countries and 190 sales and service
centres. This diversity means that we
can respond to events as they happen
anywhere around the world and can
move our equipment between end-user
sectors and countries to wherever we
can deliver the best returns.
3. Investment in our
digital capability
As we own our equipment for its useful
life, we have a vast amount of fleet
performance data which we can use
to improve customer experience and
operating efficiency. Combined with our
market intelligence platform, customer
relationship management (CRM) and
other customer-facing systems, this
gives us the edge in the digital field.
4. Continuous innovation
Our product and technology team
is always working to optimise our
existing applications and equipment,
while testing and developing future
technologies to deliver the reliability,
flexibility and innovation our
customers value.
5. Highly trained team
of experts
Our technical engineering expertise,
combined with our sector specialisation
and depth of experience, differentiates
us from our competitors.
The value we create
£262m*
free cash flow
* Refer to page 138 for calculations
11%
reduction in CO2 emissions on
hybrid contracts vs. thermal
baseline
817 days
supporting our local communities
through our Orange Days of Difference
£427m
wages and benefits
expended
82%
local workforce
£272m
taxes borne and collected
Aggreko plc Annual Report and Accounts 2019
09
OUR STRATEGIC PRIORITIES
A clear focus on our four strategic priorities will help
us to prosper in a changing world
We have evolved the strategy that we set out in 2015 to reflect the changes in the markets in
which we operate to continue to create value by providing mobile and modular temporary
power, temperature control and energy services on a global basis. To achieve this over the next
few years we will remain focused upon the following four strategic priorities to drive growth.
Customer focus
Tailoring our solutions to
improve customer experience
Technology investment
Reducing the total cost of
energy through innovation
Being particular about the sectors we target
→ Continued focus on our seven key sectors
→ Using our technical capability to enable us to tackle
higher-value, more complex challenges
→ Developing hybrid solutions using solar power and
battery storage to regulate and integrate power
Offering specialist solutions
→ Applying sales and marketing discipline and
process enhancements
→ Developed segmentation and channel approach,
including telesales and e-commerce
→ Adopted real-time pricing governance
Being simple to do business with
→ System investment to improve customer experience
and manage the end-to-end customer journey
Developing competitive configurable
products
→ Continued focus on reducing the total cost of energy
→ Improving our fuel efficiency, hybrid solutions and
emissions management
Smarter use of connected systems
& data analytics
→ Complex sector-specific applications leveraging
the technical capability of our people
→ Creating specific applications leveraging
relevant experience
Integrating renewable & storage
technology
→ Developing our remote monitoring platform
and data analytics capability
→ Integrating renewables, storage and thermal assets
→ Innovating across existing sites to improve efficiency
and reliability
>
Read more on page 12
>
Read more on page 14
10 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Capital efficiency
Optimising deployment
of resources
Expert people
Cultivating a high –
performance organisation
Being mobile & modular
→ More centralised fleet management to drive utilisation
Getting the very most out of our assets
→ Completing the roll-out of remote monitoring
and data analytics tools across our fleet
→ Reducing maintenance costs and improving utilisation
→ Improving our working capital performance
Striving for the most competitive
cost base
→ Deploy Rental Solutions systems into Power
Solutions Industrial
→ Achieving back-office and process efficiencies
→ Cost reduction programme to deliver £50 million
of savings in Power Solutions Utility by 2021
Living Always Orange
→ Our values underpin all we do and how we behave
→ Extensive internal communication ensures that this
is fully embraced
Nurturing our full potential
→ Valuing our people, incentivising them, monitoring
their performance and enabling them to achieve
greater things
Staying safe and professional
at all times
→ Safety is the top priority for our people
→ Professionalism remains core to our reputation
and customer relationships
>
Read more on page 16
>
Read more on page 18
Aggreko plc Annual Report and Accounts 2019
11
OUR STRATEGIC PRIORITIES CONTINUED
Customer
focus
Tailoring our solutions to
improve customer experience
>
→ Targeting particular sectors
→ Offering specialist solutions
→ Being simple to do
business with
Targeting particular sectors
Our customers share a common need
for critical power, heating and cooling
to solve complex challenges and ensure
operational reliability. We focus on each
customer interaction that we have,
how we sell, deliver and maintain our
products and solutions, to ensure
exceptional customer service. Our deep
understanding of customer needs
across seven key sectors enables us to
continually evolve our offering to solve
their challenges while expanding our
market opportunity.
Utilities
Expertise in high voltage and grid
connections, providing solutions from
emergency response to base load power.
Oil & gas
Solutions where the grid is unavailable,
to eliminate bottlenecks and monetise
gas by-products, from exploration to
production.
Building services & construction
Provision of reliable power, heating,
cooling and dehumidification solutions
to our customers in construction,
services and contracting.
Petrochemical & refining
Complex power & temperature control
solutions to optimise turnaround and
daily maintenance processes that
improve production rates.
Events
A valued and trusted partner, offering
high-profile event knowledge, cost-
efficient design capability combined
with flexibility and reliability.
Mining
Fully flexible, cost-effective solutions
for every stage of the mining lifecycle.
Manufacturing
Solutions to enhance processes and
overcome power and temperature
control challenges, reducing costly
downtime.
Offering specialist solutions
By being particular about the sectors
we serve, we can develop tailored
applications and, through greater
experience and expertise, ensure
that our customers receive a
superior solution.
Our customers’ requirements range
from short-term, simple equipment
rental, through providing power
for three to six months where the
complexity depends on the sector
and geography, to longer-term projects
where we may be providing a solution
for a number of years.
Our ability to manage and deliver
increasingly complex, higher-value
solutions, such as hybrids, emergency
response, off-grid work and critical
power, generates the majority of our
revenue; the balance of revenue
comprises shorter, more transactional
rental contracts.
Being simple to
do business with
Implementing customer-focused
systems and processes make us simpler
and more efficient to do business with.
The implementation of our enhanced
CRM system was completed during 2019.
It provides a better understanding of
customer requirements by analysing our
operating history and service provision
to increase internal collaboration and
the speed of our service delivery. For
more transactional sales, we are
deploying an e-commerce platform,
providing a more agile, cost-effective
telesales channel and a better service
proposition. We reached a milestone
in July 2019 with our first online order
which means our sales offering now
includes telesales, online and outside
sales together, to suit all types of
customer. Alongside this, the systems
we previously implemented enable
real-time pricing, building in much
more discipline and governance,
to help improve rates and recoveries.
Remote monitoring and data analytics
enhance the service we provide
our customers by improving our
management of asset downtime,
servicing and the efficient running
of our equipment. This also builds
our understanding of our equipment
and the sharing of knowledge across
the Group to feed back into the
development of our products and
bespoke solutions.
We continue to enhance the skills and
capabilities of our employees, and
during the year we launched the
Technician Learning Cycle to provide
development for our technical
workforce within a globally consistent
framework. Similarly, we revised the core
competency model for our sales team
to drive a global sales model focusing
on processes and tools, as well as sector
and product knowledge. We also
developed a consistent leadership suite
of programmes aligned to the global
leadership model for the Company.
The ongoing evolution of our Market
Intelligence Platform provides us with
an accessible, in-depth understanding
of the market dynamics affecting
customers in each of our sectors and
geographic markets, helping us to focus
on the greatest opportunities for our
business. It draws data from multiple
sources to give our sales teams a detailed
view of their markets, factoring in
economic and political stability, ability
of customers to pay, the electricity
supply and demand balance, and
fuel availability and pricing.
During the year, we launched the
Cost of Electricity Calculator (CoEC).
This proprietary tool is designed to cut
through cost complexity to enable our
customers to make the best energy
choices for their business. Using the
CoEC, we can input different parameters
to provide numerous comparison points
for customers, including emissions,
to help them make more informed
energy decisions.
12
Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Working safely,
under frozen ground
Challenge
Paris Metro is expanding by three new Metro stations.
This was no ordinary construction programme with the
tunnel for the prospective stations created before the stations
themselves. Being 25 metres underground, the site had hazards
not common in ground-level work, and proximity to a large
volume of water requiring new construction methods to
ensure that this major potential risk was managed.
Solution
Our experts designed an application utilising a Very Low
Temperature Cooler (VLTC) to freeze the surrounding ground
and maintain the integrity of the subterranean site from the
threat of water leaks and subsidence. Our VLTC and ancillary
equipment with our expertise maintained a consistent very
low temperature to minimise site risks compared with
conventional means.
Impact
The station projects remained on track with workers kept safe
as a result of our engineering expertise combined with the
reliable equipment we deployed. Our experience and ability
to operate in dangerous environments is made possible by
our dedication to safety that allows every person on site to
concentrate on performing their own tasks.
-25m
depth of site
-450C
temperature of
frozen ground
84
wireless
temperature
probes per
station
Measuring our performance
Customer loyalty
Measure
We use an industry standard known
as Net Promoter Score (NPS) to
measure and benchmark our
performance against competitors
and other B2B organisations.
Relevance
It is important that we understand
the extent to which we meet our
customers’ expectations. The statistical
insight we collect is driving our customer-
focused change agenda to improve
overall customer satisfaction and enable
us to be simple to do business with.
Target
Sustainable improvements in the NPS
over time.
Performance
We have continued to focus on improving
our customer experience during 2019
and this is demonstrated by an NPS
score of 65% (2018: 59%). Our encouraging
progress further consolidates our
position within the top 5% of B2B service
organisations on a global basis.
Customer activity
Measure
Group average megawatts (MW)
of power on hire.
Net Promoter Score
65%
Relevance
Average megawatts on hire across the
year provides a good measure of the
activity of the business globally.
Target
Our focus on returns means that we will
not increase average megawatts on hire
at the expense of price or the quality of
our customer offering.
Performance
During the year, we have seen a
reduction in the average megawatts on
hire primarily reflecting off-hires within
the Power Solutions Utility business, and
the focus on increased pricing discipline
across the wider business.
2019
2018*
2017
2016
2015
65%
59%
65%
63%
63%
* Reflects a change in how we measure.
Group average power on hire (MW)*
6,381 MW
2019
2018
2017
2016
2015
* Excludes hybrids.
6,381
6,659
6,613
6,571
6,771
Aggreko plc Annual Report and Accounts 2019
13
OUR STRATEGIC PRIORITIES CONTINUED
Technology
investment
Reducing the total cost of
energy through innovation
>
→ Developing competitive
configurable products
→ Smarter use of connected
systems and data analytics
→ Integrating renewable
and storage technology
Developing competitive
configurable products
Our knowledge of the regulatory
requirements and the environments in
which the fleet operates has significantly
strengthened our capability to adapt
as energy markets evolve, and drive
innovation that reduces costs and/or
emissions.
→ Through understanding local
emissions requirements and
leveraging our in-house technical
expertise, we continually innovate to
deliver lower cost, greener solutions
for our customers.
→ The in-house design of our equipment
and the development of unique,
tailored solutions for our customers,
some of which are patented, have
considerable value to the Group.
This is managed centrally and
shared globally across Aggreko.
→ The energy transition is opening
up opportunities to support the
deployment of renewables. Their
intermittent nature creates inherent
grid instability, which requires
complex control systems to integrate
existing power sources with battery
storage and start to effectively
manage security of supply.
→ Our newly formed Global Products &
Technology function drives innovation
and development of our existing fleet,
while looking to the future in terms
of assessing potential new technology
and platforms. This enables sales and
delivery to be managed by Rental
Solutions and Power Solutions.
Smarter use of connected
systems and data analytics
→ Increasing utilisation is a key focus
for improving our returns. Our fleet
is modular and mobile, so it can be
flexibly configured to provide any
number of different solutions and
moved to where it is needed around
the world, which ensures a quick
response as well as optimum
utilisation. We work closely with our
strategic suppliers and, using market-
leading but established technology,
we design and assemble our fleet in
a modular, mobile format, typically
using 20ft shipping containers
which facilitate transport logistics
and lower costs.
→ Remote monitoring and data analytics
are helping increase fleet longevity.
Our supplier agreements cover the
life of the assets, but we have scope to
reduce the initial build cost as well as
planned and unplanned maintenance.
The performance data collected on
our equipment provides valuable
insight into the optimum operating
conditions to benefit our customers.
→ Part of our cost-saving programme
is reducing planned maintenance
by introducing condition-based
maintenance regimes across our fleet.
Integrating renewable
and storage technology
→ In 2019, 99% of our greenhouse gas
emissions came from the operation
of our fleet. We recognise our
responsibility to mitigate the carbon
footprint of our products where
possible. Aside from running hours,
the three main factors which drive
our emissions are: the fuel type
our customers choose; the pattern
of usage; and the fuel efficiency
of our fleet.
→ We constantly explore new ways
to reduce emissions from our fleet
and increase fuel efficiency. Our
technology team assess new products
and has recently been assessing
whether bio-fuels, fuel cells and waste
heat recovery could be adapted into
our product portfolio.
→ We also work to assess and reduce
the impact of other environmental
effects of our operations, such as
refrigerant emissions and noise
pollution, in which we have made
significant advances using custom-
built acoustic enclosures, high-
performance isolation and
attenuation systems to reduce noise.
→ At a minimum, all of our equipment
and processes are designed to
comply with applicable laws,
regulations and industry standards
wherever we operate in the world.
Read more about our greenhouse
gas emissions on page 81
We are constantly upgrading our fleet to improve efficiency and offer greater choice
Diesel
Gas
HFO
Renewables
Average MW on hire 5,064 MW
1,264 MW
53 MW
Integration of new
technology
Refurbished 43% of
our 1 MW fleet to G3+
Benefits
> 5% improvement
in fuel efficiency
> 15% improvement
in power output
Addition of 392 MW
of new gas engines
since 2016
> 11% improvement
in fuel efficiency
> 33% improvement
in power output at
lower capital cost
14 Aggreko plc Annual Report and Accounts 2019
Fleet of 181 MW introduced
in 2016
We have now 10 MW of
renewables on hire across
various hybrid projects in
Argentina, Ireland and
Eritrea
> 8% improvement
in efficiency vs. G3
> Modular and mobile
offering using proven
engine technology
> Emissions reduced
by up to 13%
> Provides a reduction
in the overall total cost
of energy
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Cutting carbon,
cost and downtime
Challenge
An oil & gas customer, at a remote site in Argentina, required
a solution to replace ageing infrastructure and improve
its ability to manage frequency response and stability.
The location made the project more challenging as onsite
communications were limited, so planning and preparation
ahead of time was key to a successful deployment.
Solution
Our experts designed an application for the customer
including our latest technology offering, the Y.Cube, our new
mobile and modular battery storage system. The package
delivered consists of four 1.5 MW gas generators and
a 1 MW Y.Cube to provide the flexibility to meet the site’s
varied demand profile.
Impact
The project will enable the production of cheaper, cleaner
and more reliable power over the next five years. The
successful deployment represents the result of collaboration
between our experts in battery storage working alongside
regional colleagues to deliver one of the first examples of
energy storage in Argentina.
~5 year
Contract duration
6 MW
Next generation
gas assets
1 MW
Y.Cube
storage
Measuring our performance
Fleet size and composition
Measure
Total power fleet size (in MW), split
between generation type (diesel, diesel
G3+, gas, next generation gas (NGG)
and HFO).
Relevance
Our strategy is to grow ahead of the
market. To remain competitive we have
to offer our customers cheaper and
cleaner sources of energy that can be
adapted to meet their needs. The best
way to do this is through more fuel-
efficient engines and using cheaper
and cleaner fuels where appropriate.
Target
Increasing proportions of our market-
leading products in fuel efficiency,
the diesel G3+ and NGG engine, and
introducing clean energy sources such
as solar and storage.
Performance
During the year, work has continued to
refurbish and upgrade more of our diesel
engines to the G3+ standard, while also
introducing more NGG engines. We are
making progress towards introducing
more renewable technology such as solar
and battery storage. This includes the
launch of our new mobile and modular
battery storage system, the Y.Cube, of
which 30 of the 42 built in the year will
be used in our fleet. While renewables
are currently a small part in the context
of the overall fleet, when deployed as
part of a hybrid solution, they enable
us to leverage our thermal fleet more
efficiently for the duration of a project.
Power fleet composition
9,700 MW
4 5
1
3
2
1. Diesel
2. Diesel G3+
3. Gas
4. NGG
5. HFO
2019
60%
17%
17%
4%
2%
2018
62%
16%
17%
3%
2%
Total includes 46 MW (2018: 8 MW) of storage and
solar assets
(2018 total power fleet composition: 10 GW)
Aggreko plc Annual Report and Accounts 2019
15
OUR STRATEGIC PRIORITIES CONTINUED
Capital
efficiency
Optimising deployment
of resources
>
→ Being mobile and modular
→ Getting the most out
of our assets
→ Striving for the most
competitive cost base
Capital allocation strategy
Effective capital allocation is critical
to delivering value given the capital
intensive nature of our business. This
keeps the business focused on ROCE
as a key metric to measure how effective
we have been at delivering long-term
value. The approach to allocating capital
is disciplined both in terms of capital
expenditure and working capital. We
maintain a ROCE hurdle rate for all new
projects, while improving our working
capital management remains a key
objective to help drive returns.
This is underpinned by maintaining a
balance sheet structure that safeguards
our financial position through economic
cycles. Given the proven ability of the
business to fund organic growth from
operating cash flows, together with the
nature of our business model, we believe
it is appropriate to run the business with
a modest amount of debt.
Given the high operational gearing
of our business, we do not believe it
is appropriate to couple this with high
financial gearing. Therefore, we target
gearing of around one times net debt
to EBITDA, recognising from time to
time it may be higher as investment
opportunities present themselves.
At the end of 2019, net debt to EBITDA*
was 1.0 times (2018: 1.3 times) despite
the impact of adopting IFRS 16 ‘Leases’.
During the year, cash flows from
operations were £628 million (2018:
£423 million).
How we allocate our
capital
01 Reinvest for organic growth
02 Sustainable dividend policy
03 Strategic investments
04 Return excess capital to
shareholders
We remain committed to a sustainable
ordinary dividend and, where we have
excess capital, will look to distribute it to
our shareholders. Subject to shareholder
approval, the proposed final dividend
will increase by 3% to 18.27 pence (2018:
17.74 pence), combined with the interim
dividend of 9.38 pence (2018: 9.38 pence),
will result in a full year dividend of
27.65 pence (2018: 27.12 pence) per
Ordinary Share, our first increase in
the ordinary dividend for five years.
Being mobile and modular
Our scale brings operational efficiencies
and minimises our capital costs, but
the opportunity exists to improve
the utilisation of our assets through
increasingly centralised fleet
management, making it easier to deploy
fleet across the world, particularly from
our Power Solutions Utility business to
the faster growing businesses of Rental
Solutions and Power Solutions Industrial.
Capital expenditure is allocated where
it can deliver the best returns over the
long term. We invested £189 million in
our fleet during 2019, which compares
with £196 million in 2018. Fleet capital
expenditure is expected to increase
in 2020 to between £200 and
£250 million reflecting further
investment to fulfill new contracts
and support continued fleet renewal.
Getting the very most out
of our assets
We see the benefit of continued
investment in asset monitoring and
condition-based servicing to facilitate
reductions in fleet redundancies and
maintenance while extending the
useful life of our assets.
Much work has been undertaken within
Aggreko in the past few years to remove
duplication through to significant
savings from procurement discipline
and improved productivity from new HR
policies which better align performance
and remuneration.
The management of our receivables
position has been a major focus during
the year. Our Group-wide focus on
working capital management has
delivered significant benefits during
2019. However, some customers across
Venezuela, Yemen and parts of Africa are
taking longer to pay and face issues of
liquidity and access to foreign currency
leading to delays in payment. We have
taken proactive steps to address this.
Having defined an engagement process
with our customers based around clear
targets with increased frequency and
level of review, and the deployment of
additional resources. In 2019, we have
demonstrated our ability to reduce the
receivables balance through strong cash
collection in Power Solutions Utility.
We have also embedded inventory
initiatives put in place during 2018 to
increase levels of systematisation and
enable automation improvements
to our Group procurement processes.
A centralised approach to inventory
management ensures that we are able
to utilise stock more efficiently across
all our geographies. Closer relationships
with suppliers enable us to establish
more efficient stock arrangements and,
where appropriate, put in place stock
sales and buy-backs.
We seek to adopt best practice principles
into our supply chain to further improve
our payables performance.
Striving for the most
competitive cost base
We are targeting improved operating
efficiency in our businesses through
the sharing of best practice and
adoption of standardised systems.
This includes implementing effective
customer-journey and remote asset
monitoring systems from Rental
Solutions into Power Solutions Industrial
and utilising data analytics to reduce
the costs of regular servicing and
maintenance in the Group. In addition,
in 2019 we implemented a new global
HR system, Workday, to more effectively
and efficiently manage our people.
A cost reduction programme, which
is focused on Power Solutions Utility,
remains on track to achieve net savings
of £50 million in 2021. Work includes
condition-based maintenance to reduce
servicing costs; procurement savings
through expansion of our spare parts
supplier base; optimisation of fleet
logistics and project manning; reviewing
regional and support function locations
alongside training and development
courses to drive sales productivity.
* Net debt to EBITDA calculation is
on page 138
16 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Real-time intelligence
from thousands of sensors
Challenge
For the continued development of our products across the
globe, we needed to increase our capability to remotely
monitor the thousands of sensors across our mixed fleet of
power generation and temperature control assets to enable
increased performance and prevent disruption of our fleet,
with the goal of improving customer service.
Solution
Aggreko has invested further to increase our capacity to
monitor the fleet, partnering our deep knowledge of the
fleet we operate with our digital and data science expertise
to expand our capacity to provide remote digital monitoring
of our diversified fleet.
Impact
The solutions developed are part of our commitment to
expand our capability to utilise digital tools that provide
real-time intelligence to help manage performance across
more of our fleet. With the ability to draw 100 data points
from each asset, there is an opportunity to leverage data to
drive improved asset availability and operations productivity
that deliver better service for customers, while improving
our market competitiveness.
>14,000
assets currently
monitored
>100
data points can
be monitored
on each asset
58%
62%
56%
52%
55%
Rental Solutions:
Rental Solutions utilisation
58%
68%
71%
69%
63%
65%
2019
2018
2017
2016
2015
65%
66%
73%
79%
77%
Aggreko plc Annual Report and Accounts 2019
17
Measuring our performance
Capital efficiency
Measure
Fleet utilisation.
Relevance
We are a capital-intensive business and
in order to generate strong returns on
our capital investment our fleet needs to
be well utilised. Across our businesses we
use megawatt utilisation as the metric
(average MW on hire divided by the total
fleet size in MW).
Target
In our Rental Solutions and Power
Solutions Industrial businesses we are
targeting utilisation of 60–70%, while
in our Power Solutions Utility business
we target over 80%.
Performance
In 2019, we saw utilisation across the
Group marginally reduce compared
with 2018. Work continues to drive
long-term improvements in the
utilisation of our assets.
Power Solutions:
Industrial utilisation
68%
2019
2018
2017
2016
2015
Power Solutions:
Utility utilisation
65%
2019
2018
2017
2016
2015
OUR STRATEGIC PRIORITIES CONTINUED
Expert
people
Cultivating a high-
performance organisation
>
→ Living Always Orange
→ Staying safe and professional
at all times
→ Nurturing our full potential
Living Always Orange
At Aggreko we believe our culture
is a strategic lever for growth and we
developed and implemented Always
Orange in 2017 as a guide for the culture
we need. Our four key values set out
below, and their respective day-to-day
behaviours, govern the way in which
we work, remain safe and professional,
develop the expertise of our people,
influence our social interaction across
our markets and ultimately allow us
to successfully deliver our business
objectives.
Be Together
Asking the best of each other, harnessing
our scale and diverse skills to grow
stronger together.
Be Expert
Using our blend of experience,
expertise and planning to keep
us ahead of the game.
Be Dynamic
Using our entrepreneurial passion to
deliver and make great things happen.
Be Innovative
Learning from the world for a better
today and for great leaps tomorrow.
→ Our 2019 Be Heard employee
engagement survey achieved an
overall engagement score of 76%,
in line with 2018, with 88% of our
people declaring an overall pride
in working for Aggreko. Our people
embrace the Always Orange culture
and recognise its importance in
helping us to grow, with 88% of our
people in the 2019 Be Heard survey
stating their belief in our ability to
make a difference to the individuals,
customers and communities we serve.
→ We expect all our people to act like
owners and have increased our
commercial acumen through the
virtual ROCE learning experience
on our internal business strategy
microsite.
→ We focus on the importance of
managing our assets as well as the
more obvious area of improving
operating profit, thereby increasing
the understanding of the levers we
can exercise to influence ROCE.
→ Recognising the importance of the
technical capability of our people
to serve our customers, and the
importance of our brand, we
continually invest in ongoing training
and development, and sharing
of experience.
Staying safe and professional
at all times
Safety remains a key priority for everyone
at Aggreko, our 2019 Be Heard survey
showed that 92% of staff recognised
the efforts we take to continue this.
Through our Standard Zero approach,
we have set the foundation for how we
manage risks to ensure that we stay
safe and professional at all times across
the world. We continue to embed the
13 specific HSE risk aspects directly
related to our people and our business
to ensure that we are staying safe and
responsible, with work ongoing to
refine our global standard operating
procedures to manage these key
risk aspects.
→ The extent of our safety culture can
be seen in the results of our Be Heard
employee survey, in which 97% of our
people continue to state that they
would use their ‘stop-work authority’
if a colleague placed themselves in
immediate danger or they personally
were tasked to do something that
was unsafe. We have also seen a 12%
increase in safety walks in the year.
→ Towards the end of the year we
introduced a ‘Safer behind the Wheel’
initiative to support our refreshed
Driving at Work standard. This update
has a particular focus on mobile
phone use to minimise the risks
associated with driving.
→ We were reminded of the risks
involved with driving when one of
our employees, Vladimir Antonov,
lost his life in a road traffic accident
that occurred on an ice road in
Northern Siberia, Russia. An in-depth
internal investigation into the cause
of this accident has been carried out
and we have taken steps to reduce
the likelihood of such an event
occurring again.
→ Our people have access to a bespoke
Security Incident Reporting app so
that, wherever they are, they can
effectively report a security incident
at any time.
18 Aggreko plc Annual Report and Accounts 2019
→ We conducted our first Safety
Climate survey in 2017, implementing
several safety initiatives through the
business as a result. We conducted
our second Safety Climate survey
in December 2019 to measure our
progress on the safety journey, and
inform the steps we must take to
drive further improvements.
Nurturing our full potential
→ We remain committed to improving
our scores across all areas by acting on
feedback to make Aggreko an even
better place to work and our Value
Difference team was established in
2018 to improve diversity and inclusion
in our workforce.
→ The team’s focus in 2019 was
on building awareness and
implementing the systems
improvements required to support
the initiatives. We began training our
senior leaders to identify difference,
understand what it means and value
it, and to learn how a more inclusive
culture enhances capability and
performance. Analysis of our
employee engagement survey
from the perspective of gender
helped inform activities such as
inclusion workshops and further
research among senior leaders to
generate ideas and commitment
to drive workplace improvements
through 2020. Our latest Gender
Pay Gap Report is available on our
corporate website.
→ The introduction of a globally
consistent approach to performance
and development (Be Your Best)
is encouraging the best from our
people. Be Your Best offers training
and development opportunities and
financial incentives through personal
objectives and performance-based
remuneration. We now align any
potential bonus payments to
individual performance, including
behavioural aspects, alongside
Company and strategic business
unit performance.
Read about our employee gender
diversity statistics on page 57
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Critical support for
disaster-hit families
Challenge
Globally, at least 85 million people need emergency shelter
every year following disasters. Relief charity ShelterBox
supports families with essential aid items to help rebuild
homes. ShelterBox is reaching more families than ever,
and it needs effective partners to support that growth.
Solution
We have a three-year partnership with ShelterBox to provide
wide-ranging support such as skills sharing from our people
to expand ShelterBox’s capacity to respond to a range
of scenarios faced by a growing charity, from volunteer
recruitment, logistics and international fundraising, to
providing funding to help more families rebuild their lives.
Impact
Aggreko and ShelterBox together have already made a
difference in supporting people following severe weather
events. For example, Aggreko’s funding supported
distribution of Shelter Kits to more than 130 families in
Malawi following Cyclone Idai in March 2019, while over
500 families were supported following Category 5 Typhoon
Mangkhut which hit the Philippines in September 2018.
~3 year
partnership with
ShelterBox
>130
families supported
in Malawi
>500
families supported
in Philippines
Measuring our performance
Safety
Measure
Lost time injury frequency rate (LTIFR).
Employee satisfaction
Measure
Employee turnover.
Relevance
Rigorous safety processes are absolutely
essential if we are to avoid accidents or
incidents which could cause injury to
people and damage to property and
reputation. The main metric we use to
measure safety performance is LTIFR
which is calculated by dividing the
number of recorded LTI cases by
the number of hours worked at the
Company, multiplied by 200,000.
A lost time accident is a work-related
injury that results in an employee’s
inability to work the shift after the
initial injury.
Target
Continued reduction in accident rates.
Performance
Our overall LTIFR improved to 0.13
(2018: 0.20). Our safety culture remains
empowered with ‘stop-work authority’
to ensure that employees act rather than
putting themselves or others at risk, and
this year we refreshed and re-authorised
employees and contractors in our
Energy Safety Rules, part of our ongoing
commitment to evolve our standards
consistently across the Group.
Relevance
It is the attitude, skill and motivation of
our people which makes the difference
between mediocre and excellent
performance. We monitor permanent
employee turnover as a proxy for how
our employees feel. It is measured as
the number of employees who leave the
Group (other than through redundancy)
during the period as a proportion of the
total average number of employees
during the period.
Target
We expect to see permanent
employee turnover levels around
10% in order to retain the skill base
that we have developed.
Performance
Our employee engagement score is
76% which is the same as the prior year.
Our employee turnover rate is in line
with our average over the last five years.
Lost time injury frequency rate
0.13
(2018: 0.20)
2019
2018
2017
2016
2015
Employee turnover
10%
2019
2018
2017
2016
2015
Employee engagement score
76%
(2018: 76%)
0.13
0.20
0.25
0.45
0.39
10%
8%
8%
9%
11%
Aggreko plc Annual Report and Accounts 2019
19
GROUP PERFORMANCE REVIEW
Strong performance
amid industry change
Our 2019 results demonstrate
the significant progress we
have made to improve the
Group’s financial performance.
Chris Weston
Chief Executive Officer
Group Revenue
£1,613m
2018: £1,760m
Operating margin
14.9%
2018: 12.5%
ROCE*
11.2%
2018: 10.3%
1 Underlying excludes pass-through
fuel and currency.
* Refer to pages 137 and 138 for calculations
Group trading performance
Underlying1 Group revenue decreased
1%. Excluding revenue from the Winter
Olympics in 2018 and early design
and project management revenue
for the Tokyo 2020 Olympics this year,
underlying1 Group revenue was in line
with the prior year. Underlying1 profit
before tax was up 13% at £199 million.
The operating margin was 14.9% (2018:
12.5%), with improved underlying margins
in both Rental Solutions and Power
Solutions Utility. Diluted earnings per
share (DEPS) were 50.7 pence (2018: 49.2
pence), up 6% on an underlying1 basis.
The Group’s return on capital employed
(ROCE*) increased to 11.2% (2018: 10.3%),
despite a 4% reduction in the overall
volume on hire and lower levels of
utilisation. This was driven by an increase
in the underlying profitability of Rental
Solutions, as a result of higher rates in
key sectors within North America, our
emergency work in Belgium and an
ongoing focus on cost efficiency and
pricing discipline throughout this
business, along with the benefit of the
cost reduction programme in Power
Solutions Utility. The increase in ROCE
provides good momentum into 2020
and beyond, with the group on track
to deliver mid-teens ROCE in 2020.
Reported financial measures
Reported revenue and operating profit
include the translational impact of
currency as Aggreko’s revenue and profit
are earned in different currencies (most
notably the US Dollar), which are then
translated and reported in Sterling. The
movement in exchange rates in the
period had the translational impact of
increasing revenue by £6 million and
decreasing operating profit by £9 million.
In addition, the Group separately reports
fuel revenue from certain contracts in the
Power Solutions Utility business in Brazil
and Sri Lanka, where we manage fuel
on a pass-through basis on behalf of our
customers. The reason for the separate
reporting is that fuel revenue on these
contracts is entirely dependent on fuel
prices and the volume of fuel consumed,
which can be volatile and may distort
the view of the performance of the
underlying business. In 2019, fuel revenue
from these contracts was £27 million
(2018: £172 million), with the year on year
decrease due to lower fuel consumption
in Brazil as contracts off-hired.
Reported Group revenue was down 8%
on the prior year, with Rental Solutions
up 1%, Power Solutions Industrial up 3%
and Power Solutions Utility down 33%.
Cash flow and balance sheet
During the year cash generated from
operations was £628 million (2018: £423
million). The increase in operating cash
flow is mainly driven by a £163 million year
on year improvement in working capital
cash flows (2019: £107 million inflow, 2018:
£56 million outflow). The 2019 £107 million
comprised a £78 million inflow from
trade and other receivables, a £21 million
inflow from trade and other payables
and a £8 million inflow from inventory.
EBITDA* also increased £47 million,
although this was partially offset by a
£24 million higher cash outflow relating
to mobilisation (fulfilment assets) and
demobilisation activities. The higher
fulfilment and demobilisation cash flows
in 2019 primarily relate to contracts in
Brazil and Burkina Faso, as well as the
Tokyo 2020 Olympics.
The decrease in trade and other
receivables of £78 million included a
£93 million decrease in Power Solutions
Utility (2018: £1 million decrease) which
reflects an increased focus and
implementation of process
improvements to drive cash collection
in this business. This was partially offset
by a £10 million increase in Power
Solutions Industrial (2018: £2 million
increase) reflecting activity levels and
some prepayments in the period relating
to the Tokyo 2020 Olympics, together
with a £5 million increase in Rental
Solutions (2018: £9 million increase).
Despite this slight increase in the year,
Rental Solutions has made good progress
in reducing the level of unbilled revenue
20 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
that had built up through the end of
2018, and reducing its trade receivables
balance continues to be a key focus
for 2020.
In Power Solutions Utility, the level
of our bad debt provision is broadly
unchanged at $81 million (2018: $83
million) and we remain focused on
managing the trade receivables which
have risen over recent years, primarily
as a result of our customers’ limited
liquidity and access to foreign currency.
The various initiatives established during
last year drove an £8 million decrease in
inventory, mainly in Power Solution Utility,
which was partially offset by an increase
in Power Solutions Industrial as we
prepare for the Tokyo 2020 Olympics.
The increase in trade and other payables
balances was primarily as a result of
deferred revenue for the Tokyo 2020
Olympics, partially offset by lower trade
and other payables on our fuel contracts
in Brazil due to lower fuel consumption
as these contracts off-hired.
Fleet capital expenditure was £189 million
(2018: £196 million), representing 0.7
times fleet depreciation (2018: 0.7 times).
Within this, £71 million was invested in
Rental Solutions, primarily in relation
to temperature control and the ongoing
renewal of our oil free air (OFA) fleet,
and £118 million in Power Solutions,
which included our ongoing fleet
refurbishment programme and
£26 million of investment related
to the Tokyo 2020 Olympics.
Net debt was £584 million at
31 December 2019. This was £102 million
lower than the prior year, despite the
recognition within net debt of a £101
million lease creditor following the
Group’s adoption of IFRS 16 ‘Leases’
from 1 January 2019. A detailed cash
flow is included on page 90 of the
financial statements.
Net debt to EBITDA* at 31 December 2019
was 1.0 times (2018: 1.3 times, pre IFRS 16).
Capital structure and dividends
The objective of our strategy is to deliver
long-term value to shareholders while
maintaining a balance sheet structure
that safeguards the Group’s financial
position through economic cycles. Given
the operational risk profile of the Group
we believe gearing of around one times
net debt to EBITDA is appropriate,
recognising that from time to time it
may be higher than this as investment
opportunities present themselves.
More detail on our capital allocation
policy will be outlined as part of the
update on our four strategic priorities
alongside our interim results. Prior to
this, and subject to shareholder approval,
the Board is proposing a final dividend
of 18.27 pence (2018: 17.74 pence)
representing an increase of 3%. This will
result in a 2% increase in the full year
dividend to 27.65 pence (2018: 27.12 pence)
per Ordinary Share, giving dividend
cover* (basic EPS divided by the full year
declared dividend) of 1.8 times (2018:
1.8 times). This increase reflects the
Board’s confidence in the sustainability
of performance, and its recognition
of the dividend’s importance in providing
returns to our shareholders. The retained
earnings of the Company as at
31 December 2019 were £416 million
and the majority of these earnings
are distributable.
Outlook
Our underlying performance during
2019 provides good momentum into
2020 and our preparations for the Tokyo
2020 Olympic and Paralympic Games
are progressing well. Notwithstanding
this, we are monitoring closely the
development and potential impact of
the coronavirus outbreak, both in terms
of the Tokyo Olympics and the Group
more widely. At this point, however, we
currently expect to deliver results in-line
with expectations for 2020.
We expect to make further progress
on working capital and will continue
our capital expenditure discipline with
expected fleet capital expenditure
of around £200-£250 million. This,
combined with our performance outlook,
underpins our confidence in delivering
our mid-teens ROCE target this year and
beyond, and we look forward to providing
an update on our strategic priorities
alongside our interim results in August.
A G G R E K O P E R S P E C T I V E S - C O S T O F E L E C T R I C I T Y C A L C U L A T O R
What’s behind the numbers?
IT’S TIME TO CUT THROUGH THE NOISE
(cid:199)(cid:577)(cid:3)(cid:577)(cid:566)(cid:457)(cid:1272)(cid:624)(cid:520)(cid:707)(cid:457)(cid:3)(cid:624)(cid:577)(cid:546)(cid:653)(cid:637)(cid:520)(cid:577)(cid:566)(cid:3)(cid:677)(cid:520)(cid:546)(cid:546)(cid:3)(cid:457)(cid:676)(cid:457)(cid:616)(cid:3)(cid:505)(cid:520)(cid:637)(cid:3)(cid:387)(cid:546)(cid:546)(cid:1245)(cid:3)(cid:75)(cid:676)(cid:457)(cid:616)(cid:688)(cid:3)(cid:613)(cid:616)(cid:577)(cid:538)(cid:457)(cid:442)(cid:637)(cid:1239)(cid:3)(cid:441)(cid:653)(cid:624)(cid:520)(cid:566)(cid:457)(cid:624)(cid:624)(cid:1239)(cid:3)(cid:505)(cid:387)(cid:442)(cid:637)(cid:577)(cid:616)(cid:688)(cid:1239)(cid:3)(cid:564)(cid:520)(cid:566)(cid:457)(cid:3)(cid:577)(cid:616)(cid:3)(cid:566)(cid:387)(cid:637)(cid:520)(cid:577)(cid:566)(cid:387)(cid:546)(cid:3)(cid:508)(cid:577)(cid:676)(cid:457)(cid:616)(cid:566)(cid:564)(cid:457)(cid:566)(cid:637)(cid:3)(cid:515)(cid:387)(cid:624)(cid:3)
(cid:653)(cid:566)(cid:520)(cid:615)(cid:653)(cid:457)(cid:3)(cid:676)(cid:387)(cid:616)(cid:520)(cid:387)(cid:441)(cid:546)(cid:457)(cid:624)(cid:3)(cid:637)(cid:515)(cid:387)(cid:637)(cid:3)(cid:677)(cid:520)(cid:546)(cid:546)(cid:3)(cid:520)(cid:564)(cid:613)(cid:387)(cid:442)(cid:637)(cid:3)(cid:520)(cid:637)(cid:624)(cid:3)(cid:577)(cid:613)(cid:457)(cid:616)(cid:387)(cid:637)(cid:520)(cid:577)(cid:566)(cid:1245)(cid:3)(cid:121)(cid:616)(cid:577)(cid:564)(cid:3)(cid:616)(cid:457)(cid:564)(cid:577)(cid:637)(cid:457)(cid:566)(cid:457)(cid:624)(cid:624)(cid:1239)(cid:3)(cid:442)(cid:546)(cid:520)(cid:564)(cid:387)(cid:637)(cid:520)(cid:442)(cid:3)(cid:442)(cid:577)(cid:566)(cid:449)(cid:520)(cid:637)(cid:520)(cid:577)(cid:566)(cid:624)(cid:1239)(cid:3)(cid:457)(cid:566)(cid:457)(cid:616)(cid:508)(cid:688)(cid:3)(cid:449)(cid:457)(cid:564)(cid:387)(cid:566)(cid:449)(cid:3)
profiles and differing demand priorities – the variables are endless.
Have you (cid:441)(cid:457)(cid:457)(cid:566)(cid:3)(cid:613)(cid:616)(cid:457)(cid:624)(cid:457)(cid:566)(cid:637)(cid:457)(cid:449)(cid:3)(cid:677)(cid:520)(cid:637)(cid:515)(cid:3)(cid:387)(cid:3)(cid:616)(cid:457)(cid:442)(cid:577)(cid:564)(cid:564)(cid:457)(cid:566)(cid:449)(cid:457)(cid:449)(cid:3)(cid:624)(cid:577)(cid:546)(cid:653)(cid:637)(cid:520)(cid:577)(cid:566)(cid:1239)(cid:3)
(cid:677)(cid:520)(cid:637)(cid:515)(cid:577)(cid:653)(cid:637)(cid:3)(cid:676)(cid:520)(cid:624)(cid:520)(cid:441)(cid:520)(cid:546)(cid:520)(cid:637)(cid:688)(cid:3)(cid:577)(cid:505)(cid:3)(cid:515)(cid:577)(cid:677)(cid:3)(cid:637)(cid:515)(cid:457)(cid:3)(cid:442)(cid:577)(cid:566)(cid:442)(cid:546)(cid:653)(cid:624)(cid:520)(cid:577)(cid:566)(cid:3)(cid:515)(cid:387)(cid:624)(cid:3)(cid:441)(cid:457)(cid:457)(cid:566)(cid:3)(cid:616)(cid:457)(cid:387)(cid:442)(cid:515)(cid:457)(cid:449)(cid:1239)(cid:3)(cid:577)(cid:616)(cid:1239)(cid:3)(cid:677)(cid:515)(cid:457)(cid:637)(cid:515)(cid:457)(cid:616)(cid:3)
(cid:624)(cid:613)(cid:457)(cid:442)(cid:520)(cid:718)(cid:442)(cid:3)(cid:676)(cid:387)(cid:616)(cid:520)(cid:387)(cid:441)(cid:546)(cid:457)(cid:624)(cid:3)(cid:505)(cid:577)(cid:616)(cid:3)(cid:688)(cid:577)(cid:653)(cid:616)(cid:3)(cid:613)(cid:616)(cid:577)(cid:538)(cid:457)(cid:442)(cid:637)(cid:3)(cid:515)(cid:387)(cid:676)(cid:457)(cid:3)(cid:441)(cid:457)(cid:457)(cid:566)(cid:3)(cid:637)(cid:387)(cid:543)(cid:457)(cid:566)(cid:3)(cid:520)(cid:566)(cid:637)(cid:577)(cid:3)(cid:442)(cid:577)(cid:566)(cid:624)(cid:520)(cid:449)(cid:457)(cid:616)(cid:387)(cid:637)(cid:520)(cid:577)(cid:566)(cid:3)(cid:3)?
YOU ARE NOT ALONE...
50%*
of energy decision makers identify that cost is their primary
consideration when comparing different power providers
67%
state electricity costs are impacting
the competitiveness of their
business
48% of business
decision makers believe their
energy provider doesn’t do
enough to help improve their
business’s competitiveness
50% say time taken to get ROI is a
key factor when comparing total cost of power
from suppliers.
Aggreko’s Cost of Electricity Calculator is designed to cut through the cost
complexity to enable our customers to make the best energy choices for
their business
Read our report(cid:3)(cid:637)(cid:577)(cid:3)(cid:718)(cid:566)(cid:449)(cid:3)(cid:577)(cid:653)(cid:637)(cid:3)(cid:564)(cid:577)(cid:616)(cid:457)(cid:3)(cid:387)(cid:566)(cid:449)(cid:3)(cid:515)(cid:577)(cid:677)(cid:3)(cid:688)(cid:577)(cid:653)(cid:3)(cid:442)(cid:387)(cid:566)(cid:3)empower your
decision making
* Statistics taken from in-depth interviews carried out as part of an Aggreko survey of over 80 energy decision makers conducted in May 2019.
(cid:283)(cid:515)(cid:457)(cid:3)(cid:4)(cid:508)(cid:508)(cid:616)(cid:457)(cid:543)(cid:577)(cid:3)(cid:442)(cid:577)(cid:624)(cid:637)(cid:3)(cid:577)(cid:505)(cid:3)(cid:457)(cid:546)(cid:457)(cid:442)(cid:637)(cid:616)(cid:520)(cid:442)(cid:520)(cid:637)(cid:688)(cid:3)(cid:442)(cid:387)(cid:546)(cid:442)(cid:653)(cid:546)(cid:387)(cid:637)(cid:577)(cid:616)(cid:3)(cid:520)(cid:624)(cid:3)(cid:566)(cid:577)(cid:637)(cid:3)(cid:387)(cid:3)(cid:613)(cid:616)(cid:520)(cid:442)(cid:457)(cid:3)(cid:442)(cid:577)(cid:564)(cid:613)(cid:387)(cid:616)(cid:520)(cid:624)(cid:577)(cid:566)(cid:3)(cid:637)(cid:577)(cid:577)(cid:546)(cid:1245)(cid:3)(cid:1309)(cid:142)(cid:637)(cid:3)(cid:515)(cid:387)(cid:624)(cid:3)(cid:441)(cid:457)(cid:457)(cid:566)(cid:3)(cid:449)(cid:457)(cid:676)(cid:457)(cid:546)(cid:577)(cid:613)(cid:457)(cid:449)(cid:3)(cid:505)(cid:577)(cid:616)(cid:3)(cid:653)(cid:624)(cid:457)(cid:3)(cid:441)(cid:688)(cid:3)(cid:4)(cid:508)(cid:508)(cid:616)(cid:457)(cid:543)(cid:577)(cid:3)(cid:457)(cid:687)(cid:613)(cid:457)(cid:616)(cid:637)(cid:624)(cid:3)(cid:637)(cid:577)(cid:3)(cid:624)(cid:653)(cid:613)(cid:613)(cid:577)(cid:616)(cid:637)(cid:3)(cid:637)(cid:515)(cid:457)(cid:3)(cid:613)(cid:616)(cid:520)(cid:442)(cid:520)(cid:566)(cid:508)(cid:3)(cid:577)(cid:505)(cid:3)(cid:442)(cid:577)(cid:564)(cid:613)(cid:546)(cid:457)(cid:687)(cid:3)(cid:613)(cid:577)(cid:677)(cid:457)(cid:616)(cid:3)(cid:613)(cid:616)(cid:577)(cid:538)(cid:457)(cid:442)(cid:637)(cid:624)(cid:3)(cid:637)(cid:577)(cid:3)
enable us to give clearer indicative costs to our customers
Visit us at aggreko.com/electricitycalculator
We launched our Cost of Electricity
Calculator to increase industry
transparency.
Read more at: aggreko.com/en/
aggreko-perspectives
/cost-of-electricity
We won the Experian Data
Excellence Award at the Lloyds
National Business Awards for our
approach to utilising data to deliver
more efficient and cost-effective
solutions for our customers.
Large events are complex and
require considerable design and
engineering, demonstrated by our
interactive experience.
Try it out at: aggreko.com/en/
sectors-and-services/events/
an-interactive-events-experience
* Refer to pages 137 and 138 for calculations
Aggreko plc Annual Report and Accounts 2019
21
GROUP PERFORMANCE REVIEW CONTINUED
Measuring our performance
Underlying revenue growth
-1%
2019
2018
2017
2016
2015
Operating profit margin
14.9%
2019
2018
2017
2016
2015
(1)%
8%
4%
(10)%
(3)%
14.9%
12.5%
13.2%*
16.4%
17.6%
Measure
Revenue growth excluding the impact
of currency movements and pass-
through fuel.
Relevance
As a business that is exposed to different
cycles, we look at revenue growth over
time in order to deliver shareholder value.
This is calculated as the adjusted revenue
growth over the previous year.
Further detail including why we exclude
the impact of currency movements and
pass-through fuel is provided in the
reported financial measures on page 20.
Target
Our medium-term target is to grow
ahead of our markets.
Performance
Rental solutions was down 1% with the
year on year decrease driven by the
Northern Europe and Australia Pacific
regions. North America and Continental
Europe performed well. Power Solutions
Industrial grew 2%, with good growth
in Latin America, Middle East and Africa;
Eurasia and Asia had a challenging year.
Power Solutions Utility was down 5%
due primarily to off hires in Africa
and Myanmar.
Measure
Pre-exceptional operating profit margin.
Relevance
Our business has a large fixed cost
base, therefore strong operating profit
margins demonstrate disciplined variable
cost control and our ability to leverage
the fixed asset base. This is calculated as
operating profit pre-exceptional items
divided by revenue.
Target
Our medium-term target is for Group
operating profit margins to achieve
levels that support mid-teens ROCE
in 2020.
Performance
The operating margin was up 1.8pp after
adjusting for currency and pass-through
fuel. In Rental Solutions, the margin was
up due to higher rates and an increased
focus on cost. In Power Solutions, the
Industrial margin fell as a result of the
weaker performance in Eurasia, while
the Utility margin was up driven by the
cost reduction programme.
Target
While we are exposed to different
cycles and EPS varies accordingly,
we target growing EPS in line with
our strategic aims.
Performance
EPS was up 3% however after adjusting
for currency and pass-through fuel EPS
was up 6% driven by the growth in profit.
The significant increase in profit does
not fully fall through to EPS due to
the Group’s tax charge. Read more
on page 107.
Target
Our target is to achieve mid-teens
ROCE in 2020.
Performance
ROCE increased 0.9pp, and 1.1pp
excluding the impact of fuel and pass-
through fuel, reflecting the increase
in underlying profit.
Diluted earnings per share
Measure
Pre-exceptional diluted EPS.
50.70p
2019
2018
2017
2016
2015
50.70p
49.18p
52.44p*
61.95p
71.68p
Relevance
We believe that EPS, while not perfect,
is a good measure of the returns we
are generating as a Group for our
shareholders, and reflects both revenue
growth and trading margins. So, for the
Group as a whole, the key measure of
short-term financial performance is
diluted EPS, pre-exceptional items. EPS
is calculated based on profit attributable
to equity shareholders (adjusted to
exclude exceptional items) divided by
the diluted weighted average number
of ordinary shares ranking for dividend
during the relevant period.
Return on capital employed
11.2%**
2019
2018
2017
2016
2015
11.2%
10.3%
10.7%
12.8%
16.3%
* 2017 numbers are shown on a pre-exceptional basis
and have been restated for the implementation of
IFRS 15.
** ROCE calculation is on page 137.
Measure
Pre-exceptional return on capital
employed (ROCE).
Relevance
In a business as capital intensive as
Aggreko’s, profitability alone is not an
adequate measure of performance:
it is perfectly possible to be generating
good margins, but poor value for
Shareholders, if assets (and in particular,
fleet) are not managed efficiently.
We calculate ROCE by dividing operating
profit pre-exceptional items in the period
by the average of the net operating
assets as at 1 January, 30 June and
31 December.
22 Aggreko plc Annual Report and Accounts 2019
Rental Solutions
I am pleased with the performance
of Rental Solutions in 2019. Our
continued focus on key sectors and
customer solutions, combined with
our focus on cost management, has
improved our profitability.
Bruce Pool
President, Rental Solutions
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Revenue £m
Operating profit £m
Operating margin %
ROCE
2019
833
2019
133
15.9%
16.7%
2018
822
Change
1%
2018
Change
105
12.9%
14.7%
25%
3.0pp
2.0pp
Underlying
change1
(1)%
Underlying
change1
22%
2.9pp
1.7pp
1 Underlying excludes currency. A reconciliation between reported and underlying performance is detailed
on page 26.
Rental Solutions
→ Underlying1 revenue down 1%
but operating profit up 22%
→ Improved operating margin of
15.9%, up 2.9 percentage points
on an underlying1 basis
→ ROCE of 16.7% reflects an underlying1
increase of 1.7 percentage points,
driven by profit growth in North
America
→ Strong performance in key sectors
within North America
Underlying1 revenue in Northern Europe
was down 15%, as data centre contracts
in Ireland off-hired, as planned, together
with the effects of continuing market
uncertainty.
Operating margin on an underlying1
basis was up 2.9 percentage points,
reflecting higher rates in key sectors
within North America and our
emergency work to support the power
shortages in Belgium; this was despite
lower fleet utilisation as a result of prior
year hurricane work off-hiring. In addition,
we have begun to realise the benefits
of our investment in new systems and
processes that enable us to focus on
more profitable work and improve our
ability to recover costs.
North American underlying1 revenue was
up 5% on the prior year (up 12% excluding
hurricane revenue in 2018). Our sector
focus has continued to drive growth and
we saw good performance in most of our
key sectors, particularly in oil & gas and
building services & construction. This
top-line growth enabled us to leverage
our fixed cost base more effectively,
supporting the business to an improved
operating margin.
In our Australia Pacific business,
underlying1 revenue decreased 13% as
good growth in the mining sector was
offset by a 100MW emergency contract
in the prior year numbers. Despite this
revenue reduction, our focus on cost
efficiencies helped to drive an
improvement in operating margin.
Our Continental European business grew
underlying1 revenue 3%, supported by
revenue earned from work in response to
power shortages in Belgium and the FIFA
Women’s World Cup in France (which
was partially offset by the Ryder Cup
revenue in the prior year).
Inside sales in Houston, USA
Shovel walk solution developed for
a mining customer in Australia
Average MW on hire
1,444 MW
2018: 1,531 MW
Utilisation
58%
2018: 62%
Aggreko plc Annual Report and Accounts 2019
23
GROUP PERFORMANCE REVIEW CONTINUED
Power Solutions
Across the Industrial business, sector specialisation
and our technology strategy have enabled us to
develop industry leading customer solutions, such
as the one for Resolute’s Syama Gold mine. I’m also
pleased that our cost efficiency programme and
relentless focus on cash collection have delivered
an underlying improvement in our Utility business.
Stephen Beynon
President, Power Solutions
Revenue £m
Industrial
Utility excl. pass-through fuel
Pass-through fuel
Operating profit £m
Industrial
Utility excl. pass-through fuel
Pass-through fuel
Operating margin %
Industrial
Utility excl. pass-through fuel
ROCE
Industrial
Utility excl. pass-through fuel
2019
434
319
27
2019
64
43
1
2018
424
342
172
Change
3%
(7)%
(84)%
Underlying
change1
2%
(5)%
(84)%
2018
Change
Underlying
change1
71
46
(3)
(9)%
(7)%
154%
(7)%
21%
155%
14.8%
13.3%
16.6%
13.4%
(1.8)pp
(0.1)pp
(1.4)pp
2.9pp
10.4%
5.8%
10.7%
6.2%
(0.3)pp
(0.4)pp
(0.2)pp
1.1pp
1 Underlying excludes pass-through fuel and currency. A reconciliation between reported and underlying
performance is detailed on page 26.
Power Solutions Industrial
→ Underlying1 revenue increased 2%;
up 6% excluding the 2018 Winter
Olympics and the early design
revenue for the Tokyo 2020
Olympics recorded in 2019
→ Underlying1 profit decreased
7%, driven by a challenging year
in our Eurasia business
→ Operating margin at 14.8% was
down 1.4 percentage points on
an underlying1 basis
→ ROCE of 10.4% is down
0.2 percentage points
on an underlying1 basis
Power Solutions Utility
→ Underlying1 revenue was down 5%,
primarily due to off hires
→ Underlying1 operating profit was
up 21% as a result of improved
operational performance
→ ROCE up 1.1 percentage points
to 5.8% on an underlying1 basis
24 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Power Solutions Industrial
Power Solutions Industrial underlying1
revenue increased 2%. Excluding both
the 2018 Winter Olympics in the prior
year and early design and project
management revenue for the Tokyo 2020
Olympics in 2019, revenue was up 6%.
Revenue in Latin America increased 3%,
primarily driven by the mining and oil &
gas sectors. In the Middle East revenue
increased 10%, with good growth in
Oman and Saudi Arabia, partially offset
by Kuwait. Africa revenue grew 29%,
driven by our local business in Nigeria
and industrial projects in the Democratic
Republic of Congo (DRC). As previously
disclosed, Eurasia had a challenging year
with revenue down 8% due to slower
order intake and pressure on rates from
increased competition. Revenue in Asia
(excluding the 2018 Winter Olympics and
Tokyo 2020 Olympics) decreased 17%,
mainly driven by a reduction in work
related to mining and oil & gas.
The operating margin, on an underlying1
basis, was down 1.4 percentage points on
the prior year at 14.8%, primarily driven
by pricing pressure and a reduction in the
number of available market opportunities
in Eurasia, partially offset by a good
performance in Africa and Latin America.
Power Solutions Industrial order
intake for the year was 506 MW (2018:
604 MW), including 282 MW in Eurasia
(2018: 333 MW).
Average MW on hire
2,532 MW
2018: 2,445 MW
Order intake
506 MW
2018: 604 MW
Utilisation
68%
2018: 71%
Power Solutions Utility
Power Solutions Utility saw underlying1
revenue decrease 5%, primarily due to
off hires in Africa (including Angola,
Benin and Mozambique) and Myanmar.
The operating margin (excluding
pass-through fuel) on an underlying1
basis was up 2.9 percentage points to
13.3%, primarily as a result of the ongoing
cost reduction programme.
Average megawatts on hire were down
10% to 2,405 (2018: 2,683), impacted most
significantly by projects off-hiring in
Africa and Asia. The full year off-hire
rate was 33% (2018: 42%). Order intake
for the year was 497 MW (2018: 398 MW),
including 150MW in the Philippines.
In addition, we have agreed contract
extensions with a number of customers
including an agreement to extend our
200MW Ivory Coast contract until
December 2021.
Managing the trade receivables in
our Power Solutions Utility business
continues to be a major focus, with
active ongoing engagement with our
customers a key priority. Encouragingly
our Power Solutions Utility cash
collections in the year were $584 million
compared with amounts invoiced of
$484 million. However, we continue to
experience delays in receiving payments
in Venezuela, Yemen and parts of Africa
due to our customers’ more limited
liquidity and access to foreign currency.
While we believe that we remain
relatively well positioned to recover
the Group’s net exposure in Venezuela
and Yemen when the current situation
in each of these countries stabilises,
we also recognise that there is a range
of potential outcomes for each. The
customer with whom we have our
largest net exposure (in the range
$30-40 million) is within the Africa region
and, while there is no dispute over the
amount outstanding, we remain in
regular dialogue with this customer
regarding the likely process and timing
of future payments.
Overall the Power Solutions Utility bad
debt provision at 31 December 2019 was
$81 million (2018: $83 million). Although
the overall provision is broadly in line
with the prior year, to reflect the differing
circumstances and payment progress
made by customers, the Group has
increased its provision against specific
customers in Yemen and Venezuela
by $8m, while reducing its provision
against other customers by $10 million.
In addition, we have revalued private
placement notes relating to one
customer in Venezuela (PDVSA)
to £1 million (2018: £4 million).
Designing a customer solution in
Tyumen, Russia
We won the Argus LPG Award for
Excellence in the New Frontier
category for delivery of a utility-
scale power solution for the Virgin
Island of St Croix
Monitoring power supply during
the Rugby World Cup, Tokyo, Japan
Average MW on hire
2,405 MW
2018: 2,683 MW
Order intake
497 MW
2018: 398 MW
Utilisation
65%
2018: 66%
Aggreko plc Annual Report and Accounts 2019
25
FINANCIAL REVIEW
The right capital structure
to support our strategy
We have delivered strong
profit growth and cash
generation resulting in
a proposed 3% increase
in the final dividend.
Heath Drewett
Chief Financial Officer
Currency translation
The movement in exchange rates in the period had the translational impact of increasing revenue by £6 million and decreasing
operating profit by £9 million. Currency translation also gave rise to a £75 million decrease in the value of the Group’s net assets.
Set out in the table below are the principal exchange rates which affected the Group’s profit and net assets.
Principal exchange rates
(Per £ sterling)
United States Dollar
Euro
UAE Dirhams
Australian Dollar
Brazilian Reals
Argentinian Peso
Russian Rouble
(Source: Bloomberg)
2019
2018
Average
Year end
Average
Year end
1.28
1.14
4.69
1.83
5.03
61.10
82.61
1.31
1.17
4.80
1.88
5.30
78.28
80.94
1.34
1.13
4.91
1.79
4.87
37.48
83.70
1.27
1.11
4.66
1.80
4.91
48.62
88.02
Reconciliation of reported to underlying results
The tables below reconcile the reported and underlying revenue and operating profit movements:
Rental Solutions
Industrial
Utility
Group
Revenue £m
As reported
Pass-through fuel
Currency impact
Underlying
Operating profit £m
As reported
Pass-through fuel
Currency impact
Underlying
2018 Change
2019
2018 Change
2019
833
–
–
833
2018 Change
822
–
16
838
1%
(1)%
2019
434
–
–
434
2018 Change
424
–
1
425
3%
2%
2019
346
(27)
–
319
514
(172)
(6)
336
(33)%
(5)%
Rental Solutions
Industrial
Utility
2019
133
–
–
133
2018 Change
2019
2018 Change
2019
2018 Change
105
–
3
108
25%
22%
64
–
–
64
71
–
(1)
70
(9)%
(7)%
44
(1)
–
43
43
3
(11)
35
2%
21%
1,613
(27)
–
1,586
2019
241
(1)
–
240
(8)%
(1)%
1,760
(172)
11
1,599
Group
2018 Change
219
3
(9)
213
10%
13%
1 The currency impact is calculated by taking the 2018 results in local currency and retranslating them at the 2019 average rates.
2 The currency impact line included in the tables above excludes the currency impact on pass-through fuel in Utility, which in 2019 was £5 million on revenue and £nil on
operating profit.
26 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Interest
The net interest charge of £42 million
was £5 million higher than the prior year,
primarily due to an increase in interest
of £5 million associated with the adoption
of IFRS 16 ‘Leases’. The lower average net
debt has been offset by an increase in
the effective interest rate and an increase
in arrangement fees for refinancing
committed debt. Interest cover* (including
the impact of IFRS 16) measured against
rolling 12-month EBITDA (Earnings
before Interest, Taxes, Depreciation
and Amortisation) remained strong
at 13 times (2018: 14 times).
Taxation
Tax strategy
We operate in an increasingly complex
global environment, doing business
in 79 countries, many of which have
uncertain or volatile tax regimes. To
ensure that our tax affairs are correctly
and consistently managed, Aggreko’s
tax strategy is applied across all taxes
in all countries where we operate.
Our tax strategy is reviewed and
revalidated annually and revised as
appropriate to reflect any material
changes in our business or tax legislation.
Our strategy is to ensure that we pay, in
a timely manner, the appropriate amount
of tax commensurate with the activities
performed in each country in which we
operate. We recognise the importance
of the tax we pay to the economic
development of the countries in
which we operate. We aim to be
transparent in terms of the geographic
spread of where we pay tax, with a
breakdown provided in the figures
overleaf. In applying the tax strategy,
we undertake to comply with the
applicable tax legislation utilising,
where appropriate, any available
legislative reliefs.
Our engagement with tax authorities
We seek to build good working
relationships with local tax authorities
based on trust, respect and
professionalism. We proactively
engage, either directly or through local
advisers, with the authorities to ensure
that our business and tax positions
are well understood and that our tax
positions are confirmed in a timely
manner.
Tax governance
Our tax governance framework
is encompassed within a set
of documented policies and procedures
covering both the application of the
strategy and operational aspects of tax.
Ultimate responsibility for managing the
Group’s tax risk and its tax affairs rests
with our Chief Financial Officer, with
day-to-day responsibility delegated to the
Director of Tax and the tax function. To
ensure that we fully understand our tax
* Refer to pages 137 and 138 for calculations
obligations and the impact on our
business of any legislative change,
advisory and technical support is
provided by major accounting firms with
which the Group has a long association.
The use of the Group’s external auditor
for tax work of any kind is prohibited.
Approach to tax risk
The Group’s appetite for risk, including
tax risk, is reviewed regularly by the Group
Risk Committee and ratified annually
by the Board. Given the overall risk profile
of many of the countries in which we
operate, we seek to structure our tax
affairs in a way that carries a low degree
of risk. Only the Director of Tax is
permitted to consider any tax planning
opportunities, with permission to
implement any planning required from
the Board or Finance Committee as
appropriate. We will not implement
any tax planning that is not driven by
commercial aims or where the sole
objective is to deliver tax benefit.
Tax management and provisioning
Given the complex, uncertain and often
volatile nature of the tax environment
in which we operate, strong local
compliance and governance are key.
This is particularly so for our Power
Solutions business, where we may only
be present in a country on a temporary
basis. While we will always seek to
manage our tax affairs and agree our tax
positions in a timely manner, it can often
take some time to settle our tax position
and uncertainties may therefore exist
for a period of time, particularly with
complex tax regimes or where legislation
is changing.
We may therefore need to create tax
provisions for potential uncertain
positions. These provisions are based
on reasonable estimates of the range
of possible outcomes. Management
uses its best judgement to determine the
appropriate level of provision, recognising
that differences of interpretation and
a range of possible outcomes may arise,
depending on the facts in each case.
The provisions are principally held to
manage the tax impact of various
potential historic tax exposures, largely
in connection with our Power Solutions
Utilities business, together with potential
transfer pricing risks faced by the Group
with respect to how we transact
internationally across the business. In
order to ensure that all potential risks are
properly understood and mitigated, we
look to ensure that our local tax filings
are made on a timely basis, appropriate
advice is taken and that we proactively
work with local tax authorities when
issues arise.
The risk that the application of
management judgements and
estimates in our tax forecasting fails
to represent a true and fair view of our
tax position is an area that receives focus
from management, our tax advisers and
the Group’s external auditor (to the extent
necessary for them to form a view on
the truth and fairness of the financial
statements). In order to mitigate this risk,
our tax position is internally reviewed four
times per year by the Group tax team
and any unanticipated variances to the
forecast are reconciled and explained.
In addition to the work done by the
Group’s external auditor to confirm the
appropriateness of our tax provisioning,
tax is a matter that is regularly considered
and discussed by the Audit Committee.
The Group’s internal audit team also
periodically reviews management’s
assessment on the effectiveness of our
tax controls and will also consider any
relevant tax risks as part of its core
assurance programme.
Legislative changes
While we continue to monitor global
legislative change, the pace of change
in our main operating countries slowed
in 2019. Specifically, the tax reform
agenda in North America has now largely
been enacted into legislation and any
impact of this change is reflected in
our 2019 results.
In terms of Brexit, we continue to believe,
based on our ongoing assessment, that
it will not have a material tax impact on
the Group.
Cash taxes paid
In 2019, Aggreko’s worldwide operations
resulted in direct and indirect tax
payments of £272 million (2018: £241
million) to tax authorities in the various
countries in which we operate.
This amount represents all corporate
taxes paid on operations, payroll taxes
paid and collected, import duties, sales
taxes and other local taxes.
Within this overall total, corporate taxes
paid increased by £15 million to £76
million. We paid £4 million more in Africa
(Senegal and the Democratic Republic
of Congo) and a further £4 million in Asia
(Indonesia), where we made a one-off tax
payment following an audit by the local
tax authorities. The remaining additional
tax paid was principally in Europe, where
we benefited in 2018 from a tax refund
in the UK which did not reoccur in 2019.
Our indirect taxes paid increased by
£16 million to £196 million. The main
contributors to this were a £5 million
increase in Africa as a result of increased
activity in Malawi and Burkina Faso,
coupled with a lack of VAT recoveries
in Mozambique compared with 2018,
together with an increase of £12 million
in North America due to increased
activities leading to higher sales and
payroll tax payments.
Aggreko plc Annual Report and Accounts 2019
27
FINANCIAL REVIEW CONTINUED
Corporate taxes paid by region £m
Total indirect taxes paid by region £m
Total taxes paid by region £m
25
20
15
10
5
a
A fric
2019
a s t
A
sia &
d le E
A
M i d
2018
80
70
60
50
40
30
20
10
c
u r a sia
E
e
p
u r o
E
a
L
a ti n
A m e ric
a
N
o rt h
A m e ric
a
A fric
2019
a s t
A
sia &
d le E
A
M i d
2018
100
80
60
40
20
c
u r a sia
E
e
p
u r o
E
a
L
a ti n
A m e ric
a
N
o rt h
A m e ric
a
A fric
2019
a s t
A
sia &
d le E
A
M i d
2018
u s tr a lia
ci fi
a
P
c
u r a sia
E
e
p
u r o
E
a
L
a ti n
A m e ric
a
N
o rt h
A m e ric
u s tr a lia
ci fi
a
P
u s tr a lia
ci fi
a
P
Tax charge
The Group’s effective corporation tax rate
for the year was 35% (2018: 31%), based
on a tax charge of £70 million (2018:
£57 million) on a profit before taxation
of £199 million (2018: £182 million). The
Group’s effective tax rate has risen in
2019 largely due to the geographic mix
of the Group’s profit and the impact
of non-recurring prior year credits in
2018. Further information, including a
reconciliation of the current year tax
charge, is shown at Note 9 to the
Accounts. Looking beyond 2019, our
effective tax rate will continue
to be driven principally by our geographic
mix of profit, the ongoing resolution of
open issues and changes in tax legislation
in the Group’s most significant countries
of operation.
Reconciliation of the Group’s income
statement tax charge and cash taxes
The Group’s total cash taxes borne and
collected were £272 million, comprising
£196 million of indirect taxes and £76
million of corporate taxes. The difference
between the corporate taxes paid of
£76 million and the Group’s tax charge
of £70 million as reported in the income
statement is analysed in the table below.
£m
Cash taxes paid
Non-corporate taxes
Corporate tax paid
Movements in deferred tax and
prior year adjustments
Differences relating to timing of
tax payments
Corporate tax charge per the
income statement
272
(196)
76
(5)
(1)
70
Cash flow
During the year cash generated from
operations was £628 million (2018:
£423 million). The increase in operating
cash flow is mainly driven by a year on
year improvement in working capital
cash flows of £163 million (2019: £107
million inflow, 2018: £56 million outflow)
and an increase in EBITDA* of £47 million,
partially offset by a higher cash outflow
of £24 million relating to mobilisation
(fulfilment assets) and demobilisation
activities. The working capital movements
in the period are explained in more detail
on page 20. Capital expenditure in the
year was £230 million (2018: £216 million),
of which £189 million (2018: £196 million)
was invested in fleet assets.
Net operating assets
The net operating assets of the Group (including goodwill) at 31 December 2019 totalled £1,997 million, £162 million lower than
31 December 2018, as detailed in the table below.
£m
Goodwill/intangibles/investments
Rental fleet
Property & plant
Working capital (excl. interest creditors)
Fulfilment asset & demobilisation provision
Cash (incl. overdrafts)
Total net operating assets
2019
227
939
227
496
72
36
1,997
2018
235
1,057
112
646
33
76
2,159
Movement
Movement excluding the
impact of currency
(3)%
(11)%
103%
(23)%
118%
(53)%
(8)%
(1)%
(9)%
106%
(20)%
125%
(51)%
(5)%
A key measure of our performance is the return generated from the Group’s average net operating assets (ROCE). We calculate
ROCE* by taking the operating profit (pre-exceptional items) for the year and expressing it as a percentage of the average net
operating assets at 31 December, 30 June and the previous 1 January. In 2019 ROCE increased to 11.2% compared with 10.3% in 2018.
On an underlying basis ROCE rose 1.1 percentage points, driven by a strong performance in Rental Solutions and the benefits of the
cost-saving programme in Power Solutions Utility.
* Refer to pages 137 and 138 for calculations
28 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Property, plant and equipment
Our rental fleet accounts for £939 million,
which is around 80% of the net book
value of the Group’s property, plant and
equipment. The 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 rental fleet depreciated over 10 and
12 years. The annual fleet depreciation
charge of £265 million (2018: £273 million)
reflects the estimated service lives
allocated to each class of fleet asset.
Asset lives are reviewed at the start of
each year and changed, if necessary, to
reflect their remaining lives in light of
technological change, prospective
economic utilisation and the physical
condition of the assets. No changes
were made in 2019.
Shareholders’ equity
Shareholders’ equity decreased by
£8 million to £1,359 million, represented
by the net assets of the Group of £1,943
million less net debt of £584 million.
The movements in shareholders’ equity
are analysed in the table below:
Movements in shareholders’
equity
As at 1 January 2019
Profit for the period
Dividend
Retained earnings
Employee share awards
Purchase of Treasury
shares
Re-measurement of
retirement benefits
Currency translation
Other
As at 31 December 2019
£m
129
(69)
£m
1,367
60
11
(4)
(1)
(75)
1
1,359
Pensions
Pension arrangements for our employees
vary depending on market 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 defined
contribution schemes.
Under IAS 19: ‘Employee Benefits’,
Aggreko has recognised a pre-tax
pension surplus of £4 million at 31
December 2019 (2018: £1 million surplus)
which is determined using actuarial
assumptions. The improvement in
pension funding is primarily driven by
the additional contributions paid by the
Company during the year. These were
partially offset by the growth in liabilities
being greater than the returns on the
Scheme’s assets. The Scheme’s liability
growth was primarily driven by a fall in
interest rates, thereby reducing the
discount rate applied to the liability,
while all asset categories provided
better than expected returns.
The sensitivities regarding the main
valuation assumptions are shown in
the table below.
Potential
change
Increase/
(decrease)
Deficit
impact
(Increase)/
decrease
(£m)
Profit
impact
(Increase)/
decrease
(£m)
0.5%
(0.5)%
(1)
(14)
–
(1)
0.5%
1 year
(10)
(4)
-
–
Assumption
Rate of
increase
in salaries
Discount rate
Inflation (0.5%
increases on
pensions
increases,
deferred
revaluation
and salary
increases)
Longevity
Treasury
Liquidity and funding
The Group maintains sufficient facilities
to meet its funding requirements over
the medium term. At 31 December 2019
these facilities totalled £1,027 million,
in the form of committed bank facilities
arranged on a bilateral basis with several
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.
The covenants exclude the impact
of IFRS 16 ‘Leases’ and, on that basis,
at 31 December 2019, these ratios were
14* times and 0.9* times respectively. The
Group does not expect to breach these
covenants in the year from the date of
approval of these financial statements.
Net debt (including £101 million of a lease
creditor on the Group’s adoption of IFRS
16 from 1 January 2019) amounted to
£584 million at 31 December 2019 (2018:
£686 million) and, at that date, un-drawn
committed facilities were £516 million.
Further detail can be found in the Going
Concern disclosure on page 94.
Risks
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’s policy is to manage its
exposure to interest rates by ensuring an
appropriate balance of fixed and floating
rate debt. At 31 December 2019, £478
million of the gross debt of £570 million
(excluding the lease creditor of £101
million) was at fixed rates of interest
resulting in a fixed to floating rate debt
ratio of 84:16 (2018: 77:23).
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, to hedge net currency flows.
The Group’s foreign currency exposure on
the translation into Sterling of its net
investments in overseas subsidiaries is
managed using debt in the same
currency as those investments.
The group manages its credit risk on cash
deposits and other financial instruments
by limiting the aggregate amounts and
their duration depending on external
credit ratings of the relevant
counterparty.
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.
* Refer to pages 137 and 138 for calculations
Aggreko plc Annual Report and Accounts 2019
29
PRINCIPAL RISKS AND UNCERTAINTIES
As our market and business changes,
so do the 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, but to do so within
the risk appetite set by the Board. It is important that we have in place a robust
risk management framework to facilitate this.
Risk management framework – roles and responsibilities
The Board has implemented a risk management framework that is summarised in the diagram below.
Ultimate responsibility
Board
→ Ultimate responsibility for risk and internal control
→ Approves the risk management framework
→ Approves risk appetite and monitors compliance
→ Approves the Group Register of Principal Risks
→ Approves the viability statement
Oversight
Audit Committee (makes
recommendations to the Board)
→ Responsible for reviewing the effectiveness of the Group’s
systems for internal control and risk management
→ Reviews and challenges the risk management framework
→ Reviews the effectiveness of the control environment
→ Reviews the effectiveness of and approves the approach
for the viability statement
Management
and monitoring
Group Risk Committee (makes
recommendations to the Audit
Committee and Board)
→ Responsible for implementing and embedding risk
management and internal controls
→ Defines the risk management process to be followed
by the business (including risk appetite)
→ Reviews and challenges the Group Register of Principal Risks
ensuring that the controls identified are operating and that
open issues are closed out
→ Facilitates the Group’s risk process, collating risk registers
and consolidating the Group Register of Principal Risks
→ Aligns assurance activity
Ownership
Business units and Group
functions leadership teams
(supported by Group Risk)
→ Responsible for identification, prioritisation, assessment
and monitoring of risks which may arise in the business
→ Risks and associated controls are designed, owned and
operated by management
→ Risk registers are maintained and form the basis of the
Group Register of Principal Risks
30 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Integrating risk and assurance
Risk management has always had a high
profile at Aggreko, given what we do and
where we work. We have developed a
quantitative approach to measuring the
residual risk that Aggreko is exposed to
within its current control environment.
We have started to integrate our
approach to risk with that of assurance.
The main components of our risk
management approach are:
→ A risk event universe: We have
defined a universe of 25 risk events
that might prevent Aggreko from
delivering its strategic plan. These risk
events are a simple expression of what
might go wrong and a reference point
for working out the causes of risk
events, identifying critical control
activities and describing risk scenarios.
→ A set of critical control activities:
We have identified the critical control
activities that could stop each risk
event happening or mitigate the
consequences of the risk event if it did
happen. We have asked ourselves how
good we are at these critical control
activities and used the answers to
estimate how likely it is that our 25 risk
events might occur and how severe
the consequences might be if they do.
→ An impact yardstick: We have
developed a yardstick that allows us
to measure the relative level of concern
we have for the environmental,
financial, operational, regulatory,
reputational and safety consequences
of a risk event.
→ Quantitative risk scores: We combine
our level of concern for a particular
risk event with the likelihood that it
will occur to calculate its risk score.
Tracking the Group’s risk scores over
time allows us to see how our risk
environment is changing.
→ Risk registers: We describe risk
scenarios as routes from a cause
through the preventative controls
to a risk event and then through
the mitigating controls to the
consequences. We consolidate risk
scenarios into registers at business
unit level for Global Products &
Technology, Power Solutions and
Rental Solutions and at functional
level for Aggreko Technology Services,
Finance, HR and Legal. We use risk
scores to rank risk scenarios by our
level of concern for them and include
those with the highest risk scores in
the Group Register of Principal Risks.
→ Emerging risks: We expect new risk
scenarios to emerge when the Group’s
activities or environment changes or
when the effectiveness of our critical
control activities changes. By applying
a consistent quantitative approach
to risk scoring in all our risk registers
we get a better understanding of
emerging risks before they reach
the Group Register of Principal Risks.
→ Risk appetite: The Group is willing
to take and manage considered risk
within clear boundaries set by the
Executive Committee and approved
by the Board. We set our appetite for
each of the risk scenarios in our
registers by agreeing a maximum
acceptable risk score for each scenario.
If a risk scenario’s score is outside our
appetite, we look at our critical control
activities to identify remedial actions
that will lower the risk score to bring
it within appetite.
Managing risk and assurance together
helps us to see whether our control
environment is operating effectively.
We want to take the same standardised,
quantitative approach to assurance as we
do to risk so that we can see whether our
assurance findings validate our estimates
of risk.
We are integrating our approach to
assurance with our approach to risk
management as follows:
→ Assurance coordination: We have
begun to coordinate the Group’s
assurance activities using an assurance
calendar that reduces duplication of
effort by eliminating overlapping
audits by different assurance teams,
reducing potential audit fatigue within
the business and lowering the total
cost of assurance for the Group.
→ Assurance standardisation: We are
defining minimum standards for
controls and introducing standard
work programmes for all assurance
teams to use in testing critical control
activities.
→ Assurance findings database: We
have launched a shared database to
record all findings from the work that
our assurance teams do using our risk
scoring methodology.
→ Risk experience history: We are
maintaining a historical dataset of our
risk experiences as they are identified
by the Group’s assurance teams that
will allow the assumptions in our risk
framework to be validated and
updated as the environment changes.
By thinking in the same way about
assurance and risk and by managing
them together, we can achieve better
control, lower risk and higher efficiency.
Changes since 2018
Our Group Register of Principal Risks will
change from time to time as the business
environment in which we operate evolves
and as we take action to manage our
risk exposure.
Risks promoted to the Group
Register of Principal Risks:
→ Climate change: We have isolated the
contribution to the Group’s aggregate
level of risk that is attributable to
climate change. This has been done
to reflect our increased focus on
this issue.
→ Service delivery – major contract
failure: This risk returned to the Group
Register of Principal Risks at the half
year. The severity of this risk fluctuates
with the number, scale and scope of
major contracts that we are delivering
at any time. The successful delivery of
the Japan Olympics is a key priority for
2020 with associated risks gaining
additional scrutiny as a result.
Risks removed from the Group
Register of Principal Risks:
The risk scores of the following risks have
fallen below the threshold for inclusion in
the Group’s Register of Principal Risks. In
both cases, additional control measures
have been put in place to reduce the
likelihood of a risk event occurring.
→ Security: Our Group security policy
sets the standards in this area.
Our Group security team provides
guidance and monitors the security
environment. In 2019, additional
security training, security audits
and a security incident reporting
app were implemented.
→ Failure to conduct business dealings
with integrity and honesty: You can
read more about our code of conduct
and compliance framework on page
54. In 2019, a new code of conduct and
associated training, increased oversight
of third-party sales representatives
and an improved supplier onboarding
process were implemented to
strengthen our compliance framework
further.
These risks remain on the risk registers
of the relevant business units and
corporate functions and, given their
nature, will continue to be areas of focus
for the Board.
Aggreko plc Annual Report and Accounts 2019
31
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
The Directors have carried out a robust assessment of the
principal and emerging risks and uncertainties facing Aggreko,
including those that would threaten our future performance,
business model, solvency and liquidity.
The list below is not exhaustive; our operations are large and geographically diverse and the list
might change if something that seems immaterial today becomes more important tomorrow.
The Group’s Principal Risks are presented in categories (strategic, hazard, operational,
compliance and financial) for ease of reference.
Strategic
Global macroeconomic uncertainty
Lower than expected global GDP reduces demand
Executive responsible
Chris Weston, Chief Executive Officer
Background and impact
Several geopolitical factors have the
potential to impact upon our ability
to meet our forecast performance.
An increased trend towards
protectionism in several jurisdictions
in which we operate; US trade policy
shifts; oil price volatility; Russian
foreign policy unpredictability; Brexit
uncertainty; the potential for a global
economic slowdown resulting from
sluggishness in China; and the impact
of the Coronavirus on global GDP, each
have the potential to impact upon
our forecasts.
As we move into 2020, any shifts in GDP
growth outside of those which we have
factored into our forecasts could impact
on our returns.
Key preventions and mitigations
→ Market analysis and monitoring
→ Market and product diversification
→ Mobile, modular, homogenous
equipment
→ Improved sector focus: structure,
resourcing and capabilities
→ Improved technology offerings make
us more competitive
→ Internal efficiency improvements
Link to strategic priorities
Related KPIs
→ Revenue growth
→ Customer activity
→ Customer loyalty
→ Operating profit margin
→ Fleet utilisation
→ Return on capital employed
Changes during 2019
The factors noted above have remained
consistent over the course of the year.
Increased uncertainty as to global
growth levels in 2020 has resulted
in our increasing the risk score.
Read more about our perspectives
on Brexit on page 37
Market dynamics
Challenging market dynamics reduce volumes and profitability
Executive responsible
Bruce Pool, President Rental Solutions
Stephen Beynon, Managing Director
Power Solutions
specialist energy and temperature
control providers is critical to us
maintaining market share and
profitability.
Background and impact
Power Solutions
Commodity price variations will impact
on the economies of developing
countries, reducing their capacity to pay
for temporary power. Customer buying
power increases as more competitors
enter the market. The power gap in
developing markets may reduce as
permanent power comes online.
Given the changing profile of our
project portfolio, our results are less
exposed to the impact of a major
contract off-hiring.
Rental Solutions
Customer buying power increases as
the supply of fleet in the market and
the level of competition increases.
Our ability to differentiate our services
from those of our competitors as
Key preventions and mitigations
→ Improved sector focus: structure,
resourcing and capabilities
→ Improved sales capability, resourcing
and performance management
→ Sales and marketing strategy
→ Market and product diversification
→ Developing new and improving
existing technology offerings make
us more competitive
→ Internal efficiency improvements
→ Market analysis and monitoring
→ Mobile, modular, homogenous
equipment
Link to strategic priorities
Related KPIs
→ Revenue growth
→ Customer activity
→ Customer loyalty
→ Operating profit margin
→ Fleet utilisation
→ Return on capital employed
Changes during 2019
Our 2019 results were driven by a
strong performance in Rental Solutions
and a significant working capital
improvement. We improved underlying
operating margins in both Rental
Solutions and Power Solutions Utility.
We will continue to focus on delivering
our strategic priorities as we move into
2020.
Read more about our business
performance on page 20
32 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Link to strategic priorities
Risk change during 2019
Customer focus
Technology investment
Capital efficiency
Expert people
Increased
No change
Lowered
New
Technology developments
Failure to identify, develop and deploy new technology hinders growth
Executive responsible
Dan Ibbetson, Managing Director
Global Products & Technology
Background and impact
Alternative energy sources are
becoming increasingly available
and affordable. New energy business
models using technology to manage
the on and off-grid environment
are emerging. Disruptive technology
could reduce the size of the market
for energy generated from fossil fuels
faster than our expectations.
Continuing to develop, build and deploy
our power storage solution is a key
component of our strategic objectives.
We continue to monitor developments
in this evolving area to ensure that we
take advantage of opportunities and
manage any associated risks.
Key preventions and mitigations
→ Diversified product portfolio
→ Technology roadmap for existing and
alternative technologies and fuels
→ Future Technology team to nurture
future innovation
→ Market requirements monitoring
→ New product introduction process –
design and build
→ Standard operating practices and
training for new products
Link to strategic priorities
Related KPIs
→ Revenue growth
→ Operating profit margin
→ Customer activity
→ Fleet size and composition
→ Fleet utilisation
→ Return on capital employed
Changes during 2019
We now have a specialist team which
identifies, monitors and researches
new technology innovations. We have
continued to develop our existing fleet
in line with market requirements.
Read more about the technology
developments taking place as
part of our strategic priorities
on page 14
Talent management
Failure to attract, retain and develop key personnel
Executive responsible
Richard Stokes, Interim Group Human
Resources Director
Background and impact
Our people make the difference
between great performance and
mediocre performance. The high-
quality technical capability and
exemplary attitude of our people is a
competitive advantage that we wish
to retain.
We are keenly aware of the need to
attract the right people, establish
them in their roles and manage their
development. Failure to do so could
result in loss of productivity and
intellectual capital, increased
recruitment costs and lower staff
morale.
Where we seek to reorganise our
business operations to better serve our
customers, we engage with our people
to ensure that we minimise the impact
to their wellbeing.
Key preventions and mitigations
→ Recruitment policy and succession
planning
→ Talent management reviews and
development plans
→ Feedback from staff surveys
incorporated into strategic priorities
→ Benchmarking of remuneration and
benefits to attract and retain the
required talent
→ Long-term incentive plans
→ Performance management
→ Promoting our culture
Link to strategic priorities
Related KPIs
→ Employee satisfaction
Changes during 2019
While, in general, attrition rates have
remained broadly consistent with those
in 2018, we have seen a slight increase
in certain parts of our business which
has seen us raise the relevant risk score.
We expect that steps being taken to
enact our succession and retention
plans and to recruit more effectively will
allow us to reduce the score in 2020.
Read more about People on
page 18
Change management
Failure to successfully transform the Rental Solutions business to match customer needs
Executive responsible
Bruce Pool, President Rental Solutions
Background and impact
We have successfully introduced new
internal systems to manage customer
requirements and to allow us to more
efficiently deliver our services. We are
continuing to refine these systems
and the associated business processes.
If we do not successfully execute these
changes in a timely and sustainable
manner it could result in a material
impact on future revenue and profit
in our Rental Solutions business.
Key preventions and mitigations
→ Senior leadership sponsorship
→ Project management resources
to provide challenge, assurance
and risk oversight
→ Adequate resourcing to deliver
planned improvements
→ Business user acceptance testing
and training
Link to strategic priorities
Related KPIs
→ Customer activity
→ Revenue growth
→ Operating profit margin
→ Customer loyalty
→ Fleet utilisation
→ Return on capital employed
Changes during 2019
We remain in a critical period of
implementation as we seek to embed
revised processes, during which the
likelihood of disruption to operations
is higher.
Read more about the efficiency
developments taking place as part
of our strategic priorities on page 16
Aggreko plc Annual Report and Accounts 2019
33
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Strategic
Climate change
Climate change has a greater effect on our business than expected
Executive responsible
Chris Weston, Chief Executive Officer
Key preventions and mitigations
→ Monitoring industry laws and
regulations
→ Market requirements monitoring
→ Diversified product portfolio
→ Technology roadmap for existing
and alternative technologies
→ Future Technology team to nurture
future innovation
→ Demand forecasting
→ Capital expenditure management
Link to strategic priorities
Background and impact
There is growing global awareness
of the implications for the planet of
global warming caused by greenhouse
gas emissions.
Business risks we might face relate to
physical risks (i.e. events arising due
to extreme weather events or shifts in
climate patterns) and transition risks
(i.e. risks arising as a result of legal,
technology or market changes as we
move to a lower-carbon economy).
The most prevalent of these is the risk
that we fail to win contracts due to our
inability to service changing customer
and legal requirements, for example
not having appropriate equipment in
our fleet.
Hazard
Related KPIs
→ Revenue growth
→ Customer activity
→ Customer loyalty
→ Operating profit margin
→ Fleet size and composition
→ Fleet utilisation
→ Return on capital employed
Changes during 2019
As we move to further develop our
environmental and social responsibility
strategy, we have undertaken a risk
assessment of the business risks that
we might face due to climate change.
Health and safety
A health and safety incident occurs that results in serious illness, injury or death
Executive responsible
Chris Weston, Chief Executive Officer
Key preventions and mitigations
→ Senior leadership focus area with
Link to strategic priorities
Background and impact
Our business involves transporting,
installing and operating equipment
which is heavy, can produce high
voltages or high pressure air and
involves the use of millions of litres of
fuel. All of these could cause serious
injury or ill health to our people and
third parties if not managed correctly.
In addition, some of our people work
in high-risk locations. Besides the
security considerations, issues facing
these employees include: poor road
infrastructure, a lack of access to
healthcare services and exposure to
contagious diseases. We also operate on
customer sites, which present their own
health and safety risks, such as offshore
oil and wind platforms and mine sites.
accountability replicated throughout
line management
→ Management safety walks
→ Group HSE policy supported by
standard operating procedures
→ Incident response procedures
→ HSE training (against HSE standards
and job-specific)
→ ‘Stop work’ protocol in place
→ HSE compliance audits conducted
→ Rigorous testing and ongoing
maintenance of equipment
→ Health testing and monitoring
implemented, where required
→ Comprehensive employee induction
programme
Related KPIs
→ Safety
→ Employee satisfaction
Changes during 2019
During 2019, we began to re-authorise
employees and contractors in our
Energy Safety Rules (last authorisation
in 2016) and we have supplemented our
HSE standards with additional standard
operating procedures. Tragically, one of
our employees was fatally injured in a
motor vehicle accident on a remote ice
road in Russia. We have taken steps to
reduce the likelihood of such an event
occurring again.
Read more about Health and Safety
on page 18
34 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Operational
Cyber security
A cyber security incident leads to a loss of data, a loss of data integrity or disruption to operations
Executive responsible
Grant Nairn, Chief Information Officer
Key preventions and mitigations
→ Cyber security forum that monitors
risk threats and directs actions
→ Security technologies including:
antivirus and malware software;
firewalls; monitoring of data
egress points
→ Third-party expertise engaged for
incident response and security
penetration testing
→ IT user policy and training
→ Data encryption and security
incorporated to all new systems
Link to strategic priorities
Background and impact
A cyber security incident may be caused
by an external attack, internal attack or
user error.
Such an incident may lead to the loss
of commercially sensitive data, a loss of
data integrity within our systems or the
loss of financial assets through fraud.
A successful cyber attack on our
back-office or operational control
systems could also result in our not
being able to deliver service to our
customers. As a result, we could suffer
reputational damage, revenue loss and
financial penalties.
We recognise that this is an area where,
if we stand still, the level of risk will
continue to rise.
Service delivery: major contractual failure
Failure to deliver critical contracts effectively
Related KPIs
→ Revenue growth
→ Operating profit margin
→ Customer loyalty
→ Fleet utilisation
→ Return on capital employed
Changes during 2019
A continued focus on delivery of our
cyber security strategy in 2019 has
allowed us to reduce the risk score.
We have raised awareness internally
through training and certification
and invested further in the security
technologies we employ. We will
continue to improve in this area
in 2020.
Executive responsible
Dan Ibbetson, Managing Director Global
Products & Technology
Background and impact
The Group operates large and often
technically complex contracts around
the world. There is a risk that we
commit to a contract that we cannot
fulfil, either due to circumstances
outside our control or due to a failure
in our operational processes.
If this were to be one of our larger
contracts, this could have a material
financial impact and could damage
the Group’s reputation.
Among other large contracts, the
successful delivery of the Japan
Olympics is a key priority for 2020 with
associated risks gaining additional
scrutiny as a result. Aided by this
additional focus, contract delivery
is progressing well.
Key preventions and mitigations
→ Recruitment, training and
performance management
→ Equipment redundancy built into
planning and execution
→ Rigorous servicing and maintenance
regimes
→ Equipment performance monitoring
→ Group contract risk management
policy – compliance and monitoring
→ Enhanced project management
oversight and disciplines
→ Third-party insurance
Link to strategic priorities
Related KPIs
→ Operating profit margin
→ Revenue growth
→ Customer loyalty
→ Fleet utilisation
→ Return on capital employed
Changes during 2019
The scale and scope of the Japan
Olympics contract in particular has seen
this risk added to the Group Register
of Principal Risks following our update
process at the half year.
Aggreko plc Annual Report and Accounts 2019
35
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Compliance
Escalating sanctions
Escalating sanctions impact upon our ability to service customers and win new work.
We are prosecuted as a result of trading with an entity subject to sanctions
Executive responsible
Peter Kennerley, Group Legal Director
& Company Secretary
Key preventions and mitigations
→ Improved sector focus: structure,
resourcing and capabilities
→ Group contract risk management
policy – compliance and monitoring
→ Due diligence on all contracts in
high-risk jurisdictions
→ Targeted training of employees
and third parties
→ Recruitment, training and
performance management
Link to strategic priorities
Background and impact
We believe that we have appropriate
procedures in place to manage
our compliance with current and
developing sanctions regulations.
There is the potential that any further
sanctions might impede our ability to
service current customers or win new
work.
In addition, changes to existing
sanctions may result in contractual
relationships that are currently within
regulations becoming out of line with
regulations.
Financial
Related KPIs
→ Revenue growth
→ Customer loyalty
→ Operating profit margin
→ Employee satisfaction
Changes during 2019
Sanctions have been extended in
some countries in which we operate.
We continue to operate robust
processes to ensure that we are
assessing each new contract against
current regulations while staying
abreast of any changes in regulations
that might impact on existing contracts.
Failure to collect payments or to recover assets
Significant customer payment default or impounding of assets
Executive responsible
Heath Drewett, Chief Financial Officer
Background and impact
The Group has some large contracts
in emerging market countries
where payment processes can be
unpredictable, where liquidity has
been adversely affected by a fall in
commodity prices or our customers
have competing demands on
limited budgets.
There is a risk that we do not obtain
payment for a large project (or
combination of projects) and/or that a
material value of assets is confiscated.
We continue to take a rigorous
approach to credit risk management
and to date have not suffered a
significant loss.
A customer’s non-payment would result
in an increased bad debt provision or
write-off of the debt. Should our assets
be seized, we would also lose future
revenue and profit associated with that
equipment while having to write off its
residual net book value.
Key preventions and mitigations
→ Regular monitoring of the risk profile
and debtor position for large
contracts
→ Contract risk management policy
application
→ Mitigation techniques vary, though
may include: obtaining advance
payment; letters of credit; or
insurance against losses
→ Ongoing customer relationship
management
→ Business scale and customer
portfolio diversification make it less
likely that any unprovided bad debt
or equipment seizure would be
material
Link to strategic priorities
Related KPIs
→ Operating profit margin
→ Fleet size and composition
→ Fleet utilisation
→ Return on capital employed
Changes during 2019
While we have not suffered a significant
loss in 2019, we continue to monitor
closely overdue debt in our Power
Solutions Utility business in particular
and are pleased to report that we have
reduced the level of aged debt this year.
We continue to believe that the primary
reason for delay in payments is liquidity
and access to foreign currency, rather
than customer dispute.
36 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Coronavirus
As the situation continues to evolve, our primary concern is for the welfare of our people, their families and the local communities
in which we work. We are following the development of the coronavirus outbreak and have implemented several measures to
protect our people and to prepare for possible consequences of the virus. It is unclear how the outbreak will develop and, therefore,
the potential impact on our business. We will continue to follow developments closely and will take further action to protect our
people and business as appropriate.
Brexit
The UK has now left the EU and is currently in a transition period until the end of 2020 while the UK and the EU negotiate
additional future arrangements. At this point, we do not know what the result of these negotiations will be or whether the current
transition period will be extended.
We have completed an impact assessment to try to identify the aspects of our business that might be affected most by the UK’s
withdrawal from the EU. We do not expect the impact on the Group’s business activities to be material because the large majority
of them take place outside the UK and the EU. However, we have taken some actions and developed contingency plans to reduce
the potential impact on the Group of the UK leaving the EU without a new trade agreement at the end of December 2020.
Delays in our supply chain and in the export of finished products, changes to customs duties on the movement of equipment,
changes to tax legislation and the associated system changes have the potential to affect our business the most, on top of the
impact of changes in the value of Sterling and GDP growth in our UK and EU markets.
The Group earns approximately 5% of its revenue from the UK and 11% from EU markets. Demand for our services in these markets
is, in part, GDP dependent. A significant change in the GDP growth in these markets is likely to have a knock-on effect on our level
of activity there.
We will continue to monitor the situation closely and refine our contingency plans as the situation develops.
Assessment of prospects and viability
The prospects for our Rental Solutions business are linked to growth in local economies and commodity cycles. Our Power Solutions
Industrial business is driven by growth in developing markets, which can be commodity dependent, while Power Solutions Utility
is driven by shortfalls in permanent capacity caused by economic growth, ageing power infrastructure, hydroshortages and
social pressures.
The Executive Committee and the Board regularly discuss factors that might affect Aggreko’s prospects. The 11 principal risks which
the Board concluded could affect business performance are set out on the previous pages.
With the above as background, the Board approached the viability assessment as follows:
→ It took the decision to carry out the assessment over a three-year period to 2022. Although the prospects of the Group
are considered over a longer period, three years was deemed appropriate for the viability assessment as:
– The Group’s funding requirement can be forecast with sufficient accuracy over the viability period
– The Board expects to be able to arrange sufficient finance to meet its funding requirement over the viability period
– Power Solutions Utility’s historical off-hire rate of 30% suggests an average contract life of three years. Rental Solutions
and Power Solutions Industrial have shorter hire periods than Power Solutions Utility
→ It stress-tested the Group’s strategic plan to 2022 by modelling scenarios linked to each principal risk, together with scenarios
of combinations of principal risks
The results of this stress-testing showed that the Group has sufficient scale, diversity and balance sheet strength to withstand
the impact of these scenarios by making adjustments to its operating plans within the normal course of business.
Based on the results of this analysis, the Directors have a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the three-year period of their detailed assessment.
Aggreko plc Annual Report and Accounts 2019
37
SUSTAINABILITY
It is important that
we do the right thing
To be a sustainable
company means we have
to manage our impact on
society, by which we mean
the environment, our
people, the communities
in which we operate, and
our customers. We do
all this to the highest
standards of integrity
and honesty.
Chris Weston
Chief Executive Officer
The environment
Social and community issues
We have always worked to minimise
our environmental impact, but
environmental preservation is now
critical and so our traditional approach
is no longer enough. Towards the end
of the year, we began developing an
environmental strategy which we expect
to set out in 2020.
Priorities
→ Minimise our environmental impact
→ Be accountable and transparent with
regard to our environmental footprint
Outcomes
→ Maintain our reputation for
responsible management
of environmental matters
→ Gain commercial benefit through
development of new solutions
to environmental problems
Action in the year
→ Introduced our battery storage
product, Y.Cube
→ Worked to optimise our existing fleet
by improving fuel, and operating,
efficiency and thus reduce its
environmental impact
→ Continued assessment of, and
investment in, future technologies
and alternative fuels which are more
environmentally friendly
Read more about our technology
strategy on page 14 and our role in
the energy transition on page 40
Read more about our greenhouse
gas (GHG) emissions on page 81
The nature of the services we provide
mean we are often powering critical
services on which local economies and
communities depend. We have a
responsibility to listen to the needs of
local people and where possible work
with them to make a lasting difference.
Priorities
→ Engage with local communities
and work in partnership
→ Recruit, train and develop local people
→ Participate in activities that make
a difference
Outcomes
→ Build business longevity
→ Gain new talent for the organisation
→ Support local industry and commerce
→ Provide power for communities
that need it
→ Create local employment and
enable skills development
Action in the year
→ 817 Orange Days of Difference where
our people volunteered their time to
support the communities in which
we work
→ Increased the proportion of local
people we employ, with 82% now
working in their home country
→ Supported over 130 families in Malawi
following cyclone Idai through our
partnership with ShelterBox
Using waste
biogas to
generate power
in Thailand
Northern Biogas is a clean power
enterprise that strives to improve the
environment and the lives of local
communities. The company was
looking for a partner in Thailand to
replace an existing HFO power plant
at a manufacturing site and use the
waste biogas to generate power.
We designed a 6 MW gas generator
package that allows the customer
to scale up or down in line with its
operations. The design also enables
excess power to be exported to the
grid for use by the local community.
The tailored solution we delivered
helped Northern Biogas meet the
project’s demands six months earlier
than its initial capital-intensive choice.
Earlier provision of power allowed
increased revenue generation while
also saving $1 million in annual power
costs and significantly reducing the
impact of the manufacturing plant
on the environment.
100,000 Nm3
of biogas converted per day
$1m
cost saving per annum
38 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Ethics, human rights, anti-
bribery and anti-corruption
→ Ethics, anti-bribery and anti-corruption
policies are well embedded in the
business and critical for our licence to
operate. While acting with due regard
for human rights has been implicit in
our ethical policies, we are reviewing
our human rights impacts and expect
to provide further detail on this in 2020.
Priorities
→ Ensure we operate with integrity
and honesty
→ Make sure that we are in compliance
with laws and regulations
Outcomes
→ Maintain our reputation for integrity
→ Benefit operationally from good
working practices
Action in the year
→ Launched a new Code of Conduct
which sets out the standards of
behaviour that are expected across the
business, based on our #AlwaysOrange
values; 99% of our people completed
the online training at launch
Read more about our approach in the
Ethics and Corporate Responsibility
Committee report on page 53
Our people
Health and safety has always been, and
will always be, our number one priority
– our people have the right to return
home safely each day. We are also
committed to creating an inclusive
working environment where everyone
can reach their full potential and this
remains an area of focus for the Group.
Priorities
→ Ensure the health and safety of
our people and others at work
→ Promote equal opportunities and
an inclusive culture
→ Provide career and personal
development
→ Operate with due regard to human
rights
Outcomes
→ Attract and retain the best people
→ Keep our people safe and reduce
downtime
Action in the year
→ Delivered a learning video on our
Orange Rules to improve the
application of our global standards
→ Hosted our second global safety
climate survey to aid us in
understanding where we need to
refocus our efforts moving forward
→ Launched our Safer behind the Wheel
initiative to mitigate the risk of mobile
phone use while driving
→ Built awareness around diversity
and inclusion, ensuring our senior
leaders really understand what
valuing difference means and the
value it can bring.
Read more about our UK Gender
Pay Gap on our website at www.plc.
aggreko.com/responsibility/
gender-pay-gap
Read more about our strategic
objective of Expert people on page 18
817
Orange Days
of Difference
Orange Days
of Difference
inspired by the
Sustainable
Development
Goals
In November, Aggreko Technology Services
(ATS) in Glasgow focused its Orange
Days of Difference on three UN Sustainable
Development Goals (SDGs). The team
chose three local community projects
to support, including a food bank
(Zero Hunger), collecting rubbish on the
shoreline (Life Below Water) and working
with a local not-for-profit educational
organisation, CodeYourFuture, to prepare
students for job interviews (Quality
Education). By thinking globally and acting
locally, the team enjoyed a fun day out while
making a big difference to the community
in which they live.
251
food bank boxes
35
bags of rubbish
9
students
Scan the QR code to find out
more about ShelterBox. Or visit
https://www.youtube.com/
watch?v=hLcQD4d8NK8
Aggreko plc Annual Report and Accounts 2019
39
OUR ROLE IN THE ENERGY TRANSITION
We are helping our customers
reduce their emissions
Ensuring reliability
with battery storage
1 MW
of power in 30 minute
or 60 minute durations
-20°C to
+50°C
operating range
Once installed, solar and wind produce
power at very low costs, but unlike thermal
generation the power is inherently variable.
This creates instability in grids and results
in operational uncertainty, particularly on
micro-grids. Battery storage strengthens
the grid by buffering the impact of
fluctuating power demand and supply.
This allows thermal generation equipment
to run at an optimal level, burning less fuel
and delivering a substantial reduction in
emissions, while also increasing its life span.
The Y.Cube, which we launched this year, is
our fully integrated, ready-to-install lithium-
ion battery system. Housed entirely within
a standard 20ft container, the 1 MW units
can be delivered and quickly deployed almost
anywhere, creating cleaner power solutions,
while ensuring reliability.
What we do goes well beyond
mitigating our impact on the
environment. Aggreko is playing
a leading role in the critical shift
to a lower-carbon economy.
Chris Weston
Chief Executive Officer
Improving
flexibility with
cleaner fuels
Our technology and engineering team is
continuously looking at new technology
and testing new fuel types, such as biodiesel,
for our existing technology. We are helping
customers switch from diesel to natural gas
through bespoke applications such as high-
pressure reduction facilities and adaptations
for our engines to run on non-standard gases.
At the Glastonbury festival in the UK, we used
a special blend of hydrotreated vegetable oil
(HVO) in our diesel generators. HVO fuel is
derived from a mix of 100% used vegetable
oils and waste fats. All carbon is removed in
the production process resulting in a biofuel
of higher consistency, quality and purity than
other biofuels.
HVO advantages over diesel
>80%
saving on
greenhouse
gas emissions
Zero
sulphur
emissions
Scan the QR code to find out
more. Or visit aggreko.com/
en/news
Scan the QR code to find out
more. Or visit aggreko.com/en-
gb/products/energy-storage
40 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Bringing it all
together with a
hybrid solution
To maximise the efficiency of our customer’s
energy system, we have created an energy
package that smartly combines solar,
thermal and battery storage – all seamlessly
integrated and efficiently managed by our
sophisticated software. This provides reliable
power around the clock, come rain or shine,
saving money and helping the environment.
Towards the end of 2019, we commissioned
our first fully hybridised project supporting
Gold Fields to introduce renewables at its
Granny Smith gold mine in Australia. We have
built, and will now operate, 8 MW of solar
power generation and a 2 MW / 1 MWh
battery system alongside the existing 22 MW
of gas power generation. This allows Gold
Fields to leverage the benefits of hybrid
energy solutions providing the mine with
reliable, flexible power at lower cost and with
a significant reduction in carbon emissions.
The renewable power
microgrid is a welcome
addition to our suite of
onsite energy solutions,
and enables us to reduce
our carbon footprint.
Stuart Mathews
Gold Fields
Granny Smith gold mine, Australia
20,000
solar panels integrated
into the microgrid
18 GWh
of clean energy produced
per year
80,000
tonnes of CO2 less over
six years
Learn more about the energy
transition at www.aggreko.
com/en/aggreko-perspectives
Aggreko plc Annual Report and Accounts 2019
41
SECTION 172 STATEMENT
Listening to and understanding
our stakeholders is critical
Transparent reporting
In line with the new reporting requirements of the 2018 UK Corporate Governance Code
and the Companies (Miscellaneous Reporting) Regulations 2018 for a separately identifiable
section 172 (s172) statement, we have evolved our stakeholder engagement section to
describe our stakeholders and how the matters set out in s172 of the Companies Act 2006
have been considered in Board discussions and decision-making. Our s172 statement is set
out on pages 42 and 43. We have identified our key stakeholders, the issues that matter
most to them, and engagement activities during the year; on pages 44 and 45 we describe
how stakeholder considerations have been taken into account in a selection of Board
decisions in 2019, along with a discussion of capital allocation.
Employees
Material issues
→ Working for a company they can be
proud of and the difference we can
make in the world
→ Working environment, health and
safety, reward, training, progression
and inclusion
→ Ensuring our employees feel engaged
with, and listened to, about what
matters most to them
→ Understanding our strategy and
values, how to promote them and how
their performance can influence them
Engagement in 2019
Be Heard surveys: Our quarterly Be Heard
employee engagement surveys achieved
a very high engagement score of 76% in
2019 (2018: 76%). 88% of our employees
say they are proud to work for Aggreko
and 88% are proud of the difference we
make, up 6% on 2018.
Safety culture surveys: Our biennial safety
culture surveys attract a high response
rate, which we follow up with regional
workshops and actions for implementation.
The actions implemented following our last
survey in 2017 resulted in improvements
across our 2019 metrics for lost time injuries,
recordable injuries and vehicle accidents.
In November 2019 we issued another survey
and will hold workshops in early 2020 to
identify areas for improvement.
Plan on a Page: We share our annual Plan
on a Page to help our teams align behind
the key actions to deliver our budget,
updating our employees with progress
on a quarterly basis.
Senior Leadership Team: Given the
diverse and dispersed nature of our
teams, we regularly brief a core group
of senior leaders through calls, emails
and face-to-face meetings to help
manage communications, priorities
and sentiment across the business.
High performance culture: We are living
and breathing Always Orange, it is part of
the fabric of our Group – our people are
demonstrating our values and have a
good understanding of the important
part our culture plays in helping us to
grow. 85% of our people stated they agree
with this sentiment in our 2019 employee
survey (Be Heard), up 2% on 2018.
The Board takes its responsibilities for
workforce engagement seriously and
engages with our employees via our
Ethics & Corporate Responsibility
Committee.
Read more about our approach to
workforce engagement on page 46
Read more about how we nurture our
full potential on page 18
Environment
The impact of our operations
What we do, and the way that we do it,
can affect the world around us. We take
that responsibility seriously by focusing
on working in safe, responsible and
honest ways. From designing our
equipment, to building, installing and
operating it, health and safety is our top
priority for our people, our customers and
our communities. We are also progressive
in the way we provide power, by looking
into alternative fuels, developing
renewable energies and storage
solutions, we aim to keep noise to a
minimum and find ways to be more
efficient with fuel burnt and energy
used. Wherever we operate, we fully
comply with regulations and follow
strict standards for our equipment.
Read more about our approach
to the environment on page 38
Customers
Material issues
→ Cost is nearly always top of the list for
our customers
→ Offering tailored solutions and sector
specialist knowledge
→ Reliability of supply, efficiency,
customer service and product quality
are also key
→ Pressure to reduce emissions is
increasingly important and will likely
play a pivotal role in the coming years
Engagement in 2019
Voice of Customer surveys: These provide
both transactional and relationship-
based feedback on what matters most
to our customers.
Net Promoter Score (NPS): We use the
industry standard NPS to measure our
performance and customer loyalty.
We use this score to identify areas for
improvement. We were delighted with
an NPS of 65% in 2019, an increase of six
percentage points since 2018.
CRM system: This is an enhanced
customer relationship management
system which gives us a better
understanding of customer requirements
by analysing our operating history and
service provision, improving the speed
of our service delivery.
Online platforms: An online customer
portal which will enable customers to
see their account with Aggreko including
for example, what they have on rent,
fuel usage and invoices. For more
transactional services, we have evolved
our e-commerce platform, providing
a more agile and cost-effective sales
channel.
Read more about our strategic priority
of Customer Focus on page 12
Read more about our Net Promoter
Score on page 13
42 Aggreko plc Annual Report and Accounts 2019
S
S
t
t
r
r
a
a
t
t
e
e
g
g
i
i
c
c
r
r
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
i
i
F
F
n
n
a
a
n
n
c
c
a
a
i
i
l
l
s
s
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
S
S
h
h
a
a
r
r
e
e
h
h
o
o
d
d
e
e
r
r
l
l
i
i
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Investors
Suppliers
Material issues
→ Financial performance, including
working capital and the strength
of our balance sheet
→ Capital allocation, including how
we think about investment in new
technology and the potential for
capital returns
→ Development of new, and deployment
of existing, technology in the broader
context of climate change
→ Understanding the strategy and
operations of the Group
→ Strong relationships, with open
communication channels to the
Board and senior management
→ Emerging issues include
understanding our policies in relation
to the environment (including specific
actions to reduce consumption and
emissions), management succession
and inclusion
Engagement in 2019
Annual Report: Each year we aim
to improve our overall explanation
and provide simple messaging.
AGM: An opportunity for direct
engagement with the Board.
Webcasts: Live presentation and Q&As
for our full and half year results and a
conference call for our Q3 trading update.
Investor website: A central resource to
view announcements and associated
materials.
We also have engagement activities
designed to specifically target the needs
of the following investors:
→ Institutional investor engagement
during the year involved formal events,
site visits, teach-ins, small group and
one-to-one meetings. The investor
relations team and senior
management conducted 146 meetings
in 2019, engaging with 128 institutions.
During the year we implemented a
new online tool which enables us to
ask for, and receive, feedback directly
from investors
→ Our lenders receive an annual briefing
with the executive and senior
management
→ Private shareholder engagement
on an ad hoc basis by request
Material issues
→ Working with them in partnership
→ Commitment to integrity and honesty,
and conducting business in a socially
responsible and sustainable way
→ Open channels of communication
enable an understanding of our
strategy and how they can work
best with us to support its delivery
Engagement in 2019
Supplier performance management:
Our dedicated global procurement team
focus on developing and managing our
relationships with suppliers. This has
enabled us to improve product quality
and relationships with suppliers,
introduce regular account review
meetings and generate cost savings
across the Group.
Code of Conduct: We expect our suppliers
to share our commitment to conducting
business with integrity, honesty and in
a socially responsible and sustainable
way, and to work in partnership with
us to achieve this goal. We expect all
our suppliers to sign up to our Code
of Conduct and ways of doing business.
We monitor compliance and can
terminate a relationship in the event
a supplier falls short of the standards
expected.
Development agreements and
sharing data: Subject to appropriate
confidentiality and intellectual property
protections we share field data with our
key suppliers. We are reducing the total
cost of ownership of our fleet while
continuously innovating to drive
performance improvements.
Local communities
Material issues
→ Minimising the impact of our activities
on the local area and environment
around a site
→ Contributing to the communities
we work in: providing opportunities
for local employment and training,
investing in children’s welfare,
education and health, partnering
with local charities
Engagement in 2019
Generating power can be a noisy
business, so we have developed sound-
proofed generators that reduce noise
levels in line with industry standards. At
night, we can switch to battery-operated
hybrid power to make sure operations do
not disturb the environment and people
around a site.
We seek to employ and train local people
wherever we work; 82% of our global
workforce are locally employed. We
provide extensive on-the-job training for
new recruits and give them the skills to
become technicians. This helps us build
relationships in the local community
which are very important when we might
be operating a contract for a number
of years. We also run apprenticeship
schemes at our largest locations and
employ c.90 apprentices in around
eight countries.
Orange Days of Difference, our approach
to corporate community investment,
enabled 817 of our people to volunteer
their time supporting the communities
we served in 2019.
Read more about our activities in local
communities on page 38
The Board empowers our
people to engage with
stakeholders and implement
solutions
Creating a new
customer tool
Power Solutions conducted a global
survey to better understand the
priorities of customer decision-makers.
Of those surveyed, 50% said that cost
is their primary consideration, but the
biggest barrier to better costing, and
better decision-making from energy
purchasers, is a lack of transparency
of that cost. Decision-making has
become more complicated, driven
by the transformation in the global
energy market and pressure to reduce
emissions, with 57% of decision-
makers thinking the fuel they use to
generate electricity will change in the
next five years.
The lowest cost and the cleanest
options cannot consistently meet the
demand for reliable and stable supply.
Balancing the two is a constant
challenge. There is also no one-size
solution for all customers, each one
has unique variables that will impact
their options for the best operation.
We created a new Cost of Electricity
Calculator to equip our customers
with the right tools and information
to make good decisions, balancing
cost, efficiency, performance and
emissions. Each customer’s variables
can be input into the calculator to
build a complete picture of their
project and present the most efficient
solutions available.
Read more about the Cost
of Electricity Calculator at
aggreko.com/en/aggreko-
perspectives/cost-of-electricity
Aggreko plc Annual Report and Accounts 2019
43
SECTION 172 STATEMENT CONTINUED
Key Board decisions in 2019
Investing in new technology
Working with our suppliers
to develop new ideas
Giving our employees more
control over their data
42 Y.Cubes
built in 2019
How we engaged
Environmentally friendly power solutions
are becoming increasingly important
for our customers, and Aggreko needs
to offer products to meet these needs.
With this in mind, our Microgrid Storage
Solutions Team developed our battery
storage product, the Y.Cube. This is a
new 1 MW mobile and modular energy
storage system, housed entirely in a 20ft
container, working seamlessly with the
rest of our Aggreko kit, meeting our
customers’ needs for energy storage
and a lower carbon product.
Assessing the potential
Any investment in new technology is
time consuming and expensive, but
meeting the needs of our customers
and investors, reducing emissions and
producing more environmentally
friendly projects is key for the long-term
sustainability of Aggreko.
Long-term implications
The Y.Cube has successfully combined
battery expertise from Younicos with
Aggreko’s containerisation experience.
The Y.Cube enables us to provide cheaper,
cleaner and smarter energy wherever
it is needed. It is designed to fit
seamlessly within the Aggreko thermal
fleet and can be combined easily with
solar and thermal products to provide
our customers with the lowest cost of
energy. We are now building a fleet of
Y.Cubes, which will enable us to quickly
deploy on short notice. Of the 42 Y.Cubes
built in 2019, 30 are now under contract.
Read more about our solar hybrid and
Y.Cube power project at Gold Fields’
Granny Smith gold mine on page 41
40 MW
secured contract to build, operate and
maintain a hybrid power plant at the
Syama gold mine
How we engaged
In June 2019, the Board approved
entering into a cooperation agreement
with Wärtsilä, a global leader in smart
technologies and complete lifecycle
solutions for energy markets. The
partnership agreement allows us to
pursue a new concept in the power
market of providing ready-to-go power
plants using the Wärtsilä Modular Block
solution.
Assessing the potential
Under the agreement, Wärtsilä provides
the technology and designs for core
thermal power generation equipment
with Aggreko incorporating Wärtsilä’s
Modular Block within its Rental Solutions
and Power Solutions sales offering.
Working with an external party brings its
own challenges and it is important that
we ensure that both parties are able to
protect their intellectual property.
Long-term implications
This product will lead to major savings in
fuel consumption and operating costs for
our customers for long-duration projects
(more than five years). The engines can
run on a variety of fuels, including
natural gas, as well as biofuel for a fully
sustainable solution, thereby reducing
greenhouse gas emissions. The Wärtsilä
Modular Block is easy to integrate with
Aggreko’s renewable energy and storage
systems. This new concept responds
to the growing market for distributed
generation and the increasing need
for new thermal power solutions that
are cost competitive with permanent
generation.
Read more about our cooperation
agreement with Wärtsilä and our
40MW contract in Syama at
aggreko.com
Modular block
100%
of employees have transferred
to People+
How we engaged
In September 2019, we launched a new
portal for our employees called People+.
The new system provides a self-service
approach for our employees and is the
one place where employees can view
and manage their personal information
and easily keep everything up to date.
Assessing the potential
Introducing a new employee system and
launching it across the Group at the same
time certainly brings some challenges
and frustrations. A communications plan,
designed to educate our employees on
the new system, ran for three months in
advance of the launch. A new support
network was implemented with global
help desks and ‘how to’ training videos
were launched to support our employees
with this transition.
Long-term implications
People+ enables us to deliver solid
analytics which will allow us to make
use of people data to drive our
business forward. Processes have been
streamlined and are largely consistent
across all of our regions. The self-service
model also puts our employees in control
of their personal information and gives
line managers immediate access to
whatever they need. Also live is the
Be Welcomed Onboarding Toolkit.
Designed to work alongside People+,
it will help line managers deliver a brilliant
Always Orange welcome for every new
team member, creating a great first
impression that lasts.
Read more about our employee
engagement mechanisms on
page 46
Y Cube
Y Cube
44 Aggreko plc Annual Report and Accounts 2019
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Continuing with the current
strategy
4
priorities to deliver growth
How we engaged
The Board discussed strategy over a
number of meetings which culminated
in a one-day strategy session in June 2019.
We reviewed our current strategy and
goals; looking at the markets and sectors
in which we operate, our priorities within
them and the competition. We reviewed
data and feedback from our global sector
leads, customers, investors and suppliers,
and examined the impact of the global
energy transition. The Board had a further
strategy update in October 2019 on
technology, in particular which emerging
technologies might be appropriate for
the business in the future.
Assessing the potential
Our environmental impact, and our
approach to addressing this, is now
a key concern for all stakeholder groups,
particularly our customers and investors
as emissions legislation and social
pressures increase. The Board discussed
the risks and opportunities of investing
in new technologies and this was
weighed up against other factors
including financing, existing fleet,
internal resources and our existing
strategic priorities.
Long-term implications
As energy markets continue to evolve
and we execute on our strategy, we will
look to optimise our existing fleet and
innovate for the future. The proportion
of purely diesel engines within our fleet
will reduce as hybrid, renewable and
storage products increase in proportion.
These new products will drive growth and
help to address environmental concerns,
while optimising our existing assets will
deliver efficiencies and improve returns.
We are confident that our strategy is the
right one and will enable us to remain
the global leader in providing mobile,
modular power, temperature control
and energy services. There is always more
to do and the Board intends to spend
more time on our ESG strategy in 2020.
Read more about our strategic
priorities on page 10
Capital allocation
Capital allocation and dividend policy decisions also have
an impact on the long-term prospects of our business.
This year’s budget was approved by the
Board following a comprehensive review
of our strategic priorities and risks to
our business.
We regularly review how we allocate
capital and invest across the business.
As part of the budget process we conduct
a thorough review of our fleet which
considers the age, utilisation, legislative
requirements and sales pipeline in each
of the geographies in which we operate
by product line. This review considers
whether the business needs can be met
by transferring existing fleet or whether
they require the purchase of new fleet.
During the year; there is a monthly
process where the regional teams submit
requests to spend their budgeted capex;
and these requests are reviewed and
approved by the Executive team. Monthly
and year to date spend versus budget is
reported to the Board on a regular basis.
During the annual budget process and
as part of our regular strategy reviews
we look at our funding requirements.
This ensures that our capital allocation
supports the strategy of the business
with due consideration to enabling
organic growth, investing in the capability
and scale of the business, and meeting
shareholder expectations by paying
sustainable dividends and returning
capital to shareholders as appropriate.
Our plans are demanding but will
position Aggreko well against our
longer-term value creation ambition,
while honouring our commitments
to our stakeholders.
Read more about capital allocation
on page 8
Read about our investment in fleet
on page 14
Non-financial information statement
We comply with the non-financial reporting requirements contained in sections
414CA and 414CB of the Companies Act 2006. The table below is intended to guide
stakeholders to where relevant non-financial information is included within
our Annual Report.
Reporting requirement
Page Our approach, outcomes and additional information
Environmental
matters
Employees
Social matters
Human rights
Anti-bribery and
anti-corruption
Business model
description
Principal risks
and uncertainties
Non-financial KPIs
40
38
14
15
81
39
18
18
46
57
38
19
The environment
Our role in the energy transition
Mitigating our environmental impact
Cutting cost, carbon and downtime
GHG emissions
Our people
Cultivating a high-performance organisation
Leading by example, and promoting our culture
and values
Workforce engagement
Gender diversity metrics
Social and community issues
Critical support for disaster hit families
39 Ethics, human rights, anti-bribery and anti-corruption
39
53
Ethics, human rights, anti-bribery and anti-corruption
Ethics & Corporate Responsibility Committee Report
06 Our business model
30 Risk management
13
15
17
19
Customer focus
Technology investment
Capital efficiency
Expert people
Aggreko plc Annual Report and Accounts 2019
45
GOVERNANCE
Chairman’s introduction
Updating and improving
our approach
Aggreko is committed to high
standards of corporate governance;
it is the way we do business and
is at the core of everything we do.
Ken Hanna
Chairman
Corporate governance
developments affecting
our 2019 Annual Report
In our 2018 Annual Report we highlighted
the regulatory changes that would
impact our corporate reporting for 2019
and the preparation we had undertaken
to date to ensure compliance. These
regulations were, the new UK Corporate
Governance Code (2018 Code), and the
Companies (Miscellaneous Reporting)
Regulations 2018 (Reporting Regulations).
There are a number of overlapping
requirements between the 2018 Code
and the Reporting Regulations.
Subject to a few additional disclosures,
compliance with the 2018 Code has,
for the most part, enabled Aggreko to
comply with the Reporting Regulations.
Our approach
The UK Corporate Governance Code
(2018 Code) calls for companies to focus
on the application of the principles, with
high quality reporting on the provisions.
We have used this as an opportunity to
restructure parts of the annual report,
moving more meaningful content to the
front and enhancing our disclosures in
relation to culture and stakeholders.
Much of what Aggreko already does
reflects the best practice embodied in the
2018 Code. We carefully reviewed the 2018
Code against the 2016 Code to identify
gaps or areas for improvement, made
recommendations and monitored the
application of those recommendations
in 2019 to ensure the guidance and
measures we put in place for the 2019
financial year reflected the new
requirements. The new measures
adopted to ensure compliance with
the 2018 Code include:
→ New disclosures on the Board’s role
in defining our culture, aligning values
with strategy and the mechanisms we
use to monitor culture are included on
page 52.
→ Enhanced stakeholder disclosures and
a new section 172 statement on pages
42 to 45.
46 Aggreko plc Annual Report and Accounts 2019
→ New responsibilities for the Ethics &
Corporate Responsibility Committee
in relation to workforce engagement
and monitoring the effectiveness of our
Speaking Up policies and procedures.
Our rationale for appointing the
Ethics and Corporate Responsibility
Committee as the formal mechanism
for Board engagement with the
workforce is described in more detail
in the section below.
→ A larger role for the Nomination
Committee: monitoring the application
of our diversity and inclusion policy,
supporting a diverse pipeline for
succession planning purposes and
appointments to the Board and
Executive Committee and additional
gender diversity reporting
requirements in the Nomination
Committee report on page 56.
→ An enhanced role for the
Remuneration Committee to review
workforce remuneration and its
alignment with culture when setting
the policy for Executive Director
remuneration. There are also additional
remuneration reporting requirements.
These additional requirements are
explained in more detail in the
Remuneration Committee report
on page 62.
Compliance statement
Aggreko is committed to high standards
of corporate governance; it is the way
we do business and is at the core of
everything we do. We work hard to
ensure compliance with the principles
and provisions of the 2018 Code and fully
support the “comply or explain” basis of
reporting against it. Except as referred
to below, Aggreko has complied with
all relevant provisions of the 2018 Code
throughout the year.
Workforce engagement
Provision 5 of the 2018 Code requires the
Board to explain if it has not chosen one,
or a combination of, the methods set out
in provision 5 for board engagement with
the workforce. The Guidance on Board
Effectiveness (the Guidance) supporting
the 2018 Code notes that the methods set
out in provision 5 are not mandatory and
other methods may be more effective.
In deciding what method would be best
for workforce engagement at Aggreko
we: reviewed the three options suggested
by the 2018 Code; undertook a detailed
review of the Guidance for the 2018 Code;
and reviewed the existing engagement
mechanisms we had in place. We also
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Aggreko already has
a well-established
approach to workforce
engagement.
Ken Hanna
Chairman
considered this against the structure
of our highly diversified workforce,
operating in around 79 countries, with
many different languages. We concluded
that Aggreko already had a well-
established and effective approach to
workforce engagement. We identified
some areas for improvement, including
scope for expansion and greater
participation from the Non-executive
Directors and articulating the formal
mechanism for workforce engagement.
Given the highly diversified nature of our
workforce, we decided that to appoint a
Director from the workforce, or to have
a formal workforce advisory panel would
be impractical. We also decided that the
global scale of the business meant that
oversight by a single Non-executive
Director would be too onerous. We
therefore decided to give the task to
the newly named Ethics & Corporate
Responsibility (ECR) Committee, while
ensuring that it was adequately
resourced for this task. In support of the
ECR Committee’s new role, we agreed
the following:
→ Support from a core team led by the
Group HR Director and members
of the HR team
→ Review and approval of a formal
planner of Board engagement
activities to oversee and report back
to the Board
→ Additions to the ECR Committee
planner, including a biannual
presentation on workforce
engagement from the HR team
→ A requirement for the ECR Committee
Chair to formally report to the Board
on workforce engagement annually,
in addition to the informal updates
at each Board meeting
→ Review and update of the ECR
Committee terms of reference
All of the items described above were
in place and operating from 1 January
2019. The Chair of the ECR Committee
presented a formal report on workforce
engagement activities to the Board
in December 2019, which included a
review of the effectiveness of the current
arrangements. The Board confirmed
that workforce engagement mechanisms
for 2019 were effective.
Chair tenure
Provision 19 of the Code states that the
chair should not remain in post beyond
nine years from the date of their first
appointment to the board. To facilitate
effective succession planning and the
development of a diverse board, this
period can be extended for a limited
time, particularly in those cases where
the chair was an existing Non-executive
Director on appointment.
I was appointed as a Non-executive
Director in October 2010 and as Chairman
in April 2012, so my overall tenure with
Aggreko is just over nine years, my
tenure as Chairman being almost eight
years as at the date of this report in
March 2020. In March 2018 (before the
publication of the 2018 Code) the
Nomination Committee extended my
appointment as Chairman for a further
three years, expiring at the conclusion
of the 2021 AGM.
Although this will take my overall tenure
as a Non-executive Director beyond the
total nine year tenure described in the
2018 Code (this includes 18 months as
a Non-executive Director before my
appointment as Chairman), the Board
believes that it is important to ensure
an orderly succession for the role of
Chairman and we should retain the
existing timescale. We expect to make
an announcement about the succession
of the Chairman later in the year.
Looking ahead to reporting
in 2020
The Board will continue to monitor
emerging practices in corporate
governance and reporting. We are
acutely aware of the change in sentiment
towards improved ESG strategies and
associated reporting, and are closely
monitoring the potential impact of the
increasing volume of reports, guidance
documents and items of potential
legislation. The Board intends to review
the Group’s ESG strategy in 2020 and we
will report on the outcome of this review
in our 2020 Annual Report.
Ken Hanna
Chairman
Aggreko plc Annual Report and Accounts 2019
47
GOVERNANCE CONTINUED
Our Board
Ken Hanna
Chairman
Appointed: Non-executive Director in
October 2010 and Chairman in April 2012.
Experience: Ken brings international
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 Arena
Events Group Plc, an AIM-listed company,
and Chairman of RMD Kwikform, a
privately owned engineering services
company. Until 2009, Ken spent five years
as Chief Financial Officer of Cadbury Plc.
He has also held positions as Chair of
Inchcape Plc, 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. He is also
a fellow of the Institute of Chartered
Accountants.
Chris Weston
Chief Executive Officer
Heath Drewett
Chief Financial Officer
Appointed: January 2015.
Appointed: January 2018.
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 CEO 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. Chris was also appointed as
a Non-executive Director of the Royal
Navy in January 2017.
Experience: Heath is an experienced
CFO and proven leader with experience
in the engineering, leisure, transportation
and industrial sectors. He has 30 years
of experience within various finance,
corporate finance, business performance,
financial and strategic planning roles.
He has extensive international
experience in both M&A and
corporate development activities.
Prior to his appointment at Aggreko,
Heath was Group Finance Director
for eight years at WS Atkins plc where,
following the acquisition of WS Atkins
by SNC Lavalin, he was appointed
President, with responsibility for its
global engineering, design, project
and programme management business.
Before that, Heath worked at British
Airways plc within corporate strategy,
business planning and finance. Heath
is a chartered accountant, having trained
at PwC, with an MA in Mathematics from
Cambridge University.
Sarah Kuijlaars
Non-executive Director
Appointed: October 2019.
Diana Layfield
Non-executive Director
Appointed: May 2012.
Experience: Sarah brings extensive
international finance expertise, together
with experience in many of our most
important markets.
Sarah is currently Chief Financial Officer
and a Member of the Executive Board
of Arcadis NV, a global design and
consultancy organisation for natural and
built assets, with a listing on the Euronext
Amsterdam Stock Exchange. Prior to
joining Arcadis, Sarah was Deputy Chief
Financial Officer at Rolls-Royce Holdings
plc, and held a number of senior financial
leadership roles during a 25-year career
at Royal Dutch Shell plc.
Sarah has a Master’s degree in
Mathematics from Oxford University,
is a Fellow of the Chartered Institute
of Management Accountants and
an Associated Member of Corporate
Treasurers.
Experience: Diana brings extensive
international experience and detailed
understanding of how to operate
successfully across emerging markets,
particularly in Asia and Africa. She also
brings experience in technology, finance,
sales and strategy.
Diana is Vice President, Next Billion Users
at Google Inc, developing products and
services for users in emerging markets,
and in Fintech. Before joining Google,
she was Chief Executive, Africa Region
for Standard Chartered Plc and held a
number of senior leadership roles over
11 years at Standard Chartered. Prior
to Standard Chartered, Diana was
Chief Executive Officer of Finexia Ltd, a
technology firm, and a consultant with
McKinsey & Co, an international strategy
consulting firm. Diana has a BA from
Oxford University and a Master’s degree
in International Economics and Public
Administration from Harvard University.
Ian Marchant
Non-executive Director
Appointed: Non-executive Director
in November 2013 and Chair of the
Audit Committee in April 2016.
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.
Ian is an experienced Non-executive
Director, currently serving as Chair of
Thames Water Utilities, having recently
retired as Chair of John Wood Group Plc.
He is also a Member of the Prince’s
Council of the Duchy of Cornwall,
Honorary President of RZSS, Chair
of the advisory board of the Centre of
Energy Policy at Strathclyde University
and former Chair of Scotland’s 2020
Climate Group.
48 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Key to committee membership
Audit
Remuneration
Nomination
Ethics & Corporate Responsibility
Committee Chair
Dame Nicola Brewer
Non-executive Director
Barbara Jeremiah
Non-executive Director
Uwe Krueger
Senior Independent Director
Appointed: Non-executive Director in
February 2016 and Chair of the Ethics
& Corporate Responsibility Committee
in January 2019.
Experience: Nicola brings extensive
geo-political and diplomatic experience
to Aggreko, having worked in many of the
developing regions in which we operate.
Nicola is currently Vice Provost at
University College London, responsible
for international strategy. She is also a
Non-executive Director of Scottish Power
and a trustee of Prince Harry’s southern
African charity, Sentebale. In her previous
diplomatic career, she worked in Mexico,
India and France, was a member of the
Foreign and Commonwealth Office
Board from 2004 to 2007, and was
High Commissioner to South Africa,
Lesotho and Swaziland from 2009
to 2013. As a member of the board
of the Department for International
Development, she supervised all UK
bilateral aid programmes in Africa, Asia,
Eastern Europe, the Middle East and
Latin America.
Appointed: Non-executive Director
in March 2017 and Chair of the
Remuneration Committee in April 2018.
Appointed: Non-executive Director in
February 2015 and Senior Independent
Director in April 2018.
Experience: Barbara brings extensive
international non-executive experience,
largely in the USA and Australia, together
with an executive career in the mining,
exploration and energy industries.
An experienced Non-executive Director,
Barbara is Senior Independent Director
for the Weir Group and sits on the
boards of Russel Metals and Premier Oil,
having retired as Chair of Boart Longyear,
a US-based company in the minerals
drilling sector. Until her retirement in
2009, Barbara spent over 30 years in a
number of roles in Alcoa Inc, the world
leader in the production of aluminium
and related products. Her roles in Alcoa
included Assistant General Counsel, VP
Corporate Development and Executive
VP in charge of strategy and M&A.
Barbara is an American citizen with
a BA in Political Science and is a
qualified lawyer.
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 Senior Managing
Director, Head of Industrials/Business
Services/Energy & Resources and Joint
Head of EMEA for Temasek. He also sits
on the Board of Gategroup AG and
lectures at the University of Frankfurt
on renewable energy. Before joining
Temasek, Uwe was Chief Executive
Officer of WS Atkins plc and his past
roles include Chief Executive Officer
of Oerlikon, Senior Advisor at Texas
Pacific Group, President of Cleantech
Switzerland, and various senior leadership
positions at Hochtief AG.
Miles Roberts
Non-executive Director
Appointed: March 2017.
Experience: Miles brings extensive
international business experience both
as a Chief Executive and Finance Director.
Miles is currently Group Chief Executive
of DS Smith Plc, a FTSE 100 international
packaging group with operations in
nearly 40 countries. Prior to joining DS
Smith Plc in 2010, Miles was Group
Chief Executive of McBride plc having
previously been Group Finance Director.
Prior to this, Miles worked for Costain
Group plc and Vivendi UK. He also has
non-executive experience, having served
on the boards of Poundland Group plc
as Senior Independent Director and
Care UK plc as a Non-executive Director.
Miles has a degree in Engineering and
is also a chartered accountant.
Executive/Independent
Non-executive composition
of Board (excludes Chairman)
Board attendance in 2019
Board meetings
Executive
Non-executive
No.
2
7
Tenure of Non-executive Directors
0 - 3 years
3 - 6 years
6 - 9 years
No.
3
2
2
Sector experience of the Board
Customer
Finance
Energy
Geo-politics/diplomacy
Operational
Technology
%
22
78
%
42
29
29
%
90
60
50
20
70
40
Independence
The Board reviews the independence
of its Non-executive Directors as part
of its annual Board evaluation process.
We are committed to ensuring that
the Board comprises a majority
of independent Non-executive
Directors who objectively challenge
management, balanced against the
continuity on the Board. All of our
Non-executive Directors bring strong
independent oversight and continue
to demonstrate independence.
Name of Director
Ken Hanna
Chris Weston
Heath Drewett
Dame Nicola
Brewer
Barbara Jeremiah
Uwe Krueger
Sarah Kuijlaars*
Diana Layfield
Ian Marchant
Miles Roberts**
A
6
6
6
6
6
6
2
6
6
6
%
attended
100
100
100
100
100
100
50
100
100
83
B
6
6
6
6
6
6
1
6
6
5
A Maximum number of meetings Director could
have attended.
B Actual number of meetings Director attended.
* Sarah was appointed to the Board in September
2019 and advised on appointment that she would
be unable to attend the December 2019 meeting
** Miles was unable to attend the June 2019 meeting
owing to a commitment at DS Smith
Company Secretary
Peter Kennerley
Appointed: October 2008
Aggreko plc Annual Report and Accounts 2019
49
GOVERNANCE CONTINUED
2019 Board highlights
A busy year for Aggreko
Key discussion and decisions
in the year
and dividend strategy. Read more
about our capital allocation process
on page 45.
business model requirements, an
overview of our current technology
and roadmaps, and environmental
and efficiency considerations.
In 2019, the Board held six scheduled
meetings. At each scheduled meeting
the Board received reports from the
CEO on the key issues affecting the
business, the CFO on the performance
of the business and the Committee
Chairs on matters discussed at the
Committee meetings.
Key priorities and discussions
in 2019 included:
Tracking progress against the actions
agreed upon following the strategy
review discussions in Q2 2018: At our
meetings in March, July and December,
the Chair presented an updated tracker
to the Board. We also held a one-day
strategy review session in June, and
received a number of updates through
the year from the CEO. Read more about
our strategy review on page 45.
Reviewed progress against our five year
plan: At our July meeting, the CEO
presented an update on our five year
plan, including progress against our
sector based and specialised approach.
The leaders of our Rental Solutions and
Power Solutions businesses also provided
in-depth reviews of their business units.
Monitored culture and workforce
engagement mechanisms: Through
regular reports from the Ethics &
Corporate Responsibility Committee.
You can read more about how the Board
monitors culture on page 52 and our
workforce engagement mechanisms
on page 46.
Approving the 2020 Budget: At our
meetings in October and December we
reviewed and approved the proposed
allocation of capital across the Group,
including investing in new technology
A deep dive into our approach to
technology: At our October meeting, the
Managing Director for Global Products
& Technology and the Director of Future
Technologies presented a review of our
technology. This included the external
factors driving technology evolution,
Approved entering a cooperation
agreement with our supplier Wartsila:
Read more about the cooperation
agreement and long-term benefits
for Aggreko on page 44.
Visit Dubai to learn more about the
Asia and Middle East business, engage
with the local workforce and other
stakeholder groups: In June the
Board visited the Middle East and
Power Solutions operations in Dubai.
Key areas of focus for 2020
→ ESG strategy, including a review of
our position and risk exposure to
climate change and consideration
of target setting.
→ Review our dividend policy.
→ Plan a visit to Argentina to learn
about the Power Solutions business
in Latin America and engage with
local stakeholder groups.
Spending time outside the confines of the boardroom,
experiencing Aggreko’s operating environment and
engaging with our people, is fundamental to increasing
our understanding of culture and the needs of our
workforce.
Dame Nicola Brewer
Non-executive Director
Our workforce engagement
activities from a Non-
executive Director’s
perspective
How has the remit of the Ethics
& Corporate Responsibility (ECR)
Committee changed in 2019?
In response to the new requirements
of the UK Corporate Governance Code
for greater involvement by the Board
in workforce engagement the role of
the ECR Committee was expanded
from 1 January 2019 to take responsibility
for workforce engagement and for
monitoring the effectiveness of our
Speaking Up policies and procedures.
This has brought an interesting new
dimension to the ECR Committee,
as we looked to review existing channels
of engagement with the workforce
and worked closely with Group HR
to develop a broader framework of
engagement activities with increased
Board involvement.
encouraging attendance at Senior
Leadership Team meetings and
increasing the number of site visits
in the year. I am confident that our
workforce engagement mechanisms
are effective.
How would you gauge the impact
of the ECR Committee on workforce
engagement mechanisms in 2019?
We were fortunate that Aggreko already
had a well-established and innovative
approach to workforce engagement.
In 2019 we were able to introduce
workforce focus groups to discuss
areas of concern following the Be
Heard surveys, each one was chaired
by a Non-executive Director. We also
introduced additional engagement
activities for the Non-executive Directors,
The outcomes of our focus groups in
Dubai confirmed, in particular, high
levels of awareness of the importance
of health and safety and satisfaction
with the visibility of senior managers.
They also revealed strong interest
in the future strategic direction and
structure of the company. There was
appetite for more development and
promotion opportunities.
Read more about our workforce
engagement activities in 2019
on page 55
50 Aggreko plc Annual Report and Accounts 2019
i
i
S
S
t
t
r
r
a
a
t
t
e
e
g
g
c
c
r
r
e
e
p
p
o
o
r
r
t
t
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
i
i
F
F
n
n
a
a
n
n
c
c
a
a
i
i
l
l
s
s
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
S
S
h
h
a
a
r
r
e
e
h
h
o
o
d
d
e
e
r
r
l
l
i
i
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
Our Board
evaluation
In line with the UK Corporate Governance
Code, we undertake a formal and
rigorous annual evaluation of the
performance of the Board, its
committees, the Chairman and individual
Directors. We operate a three-year cycle
of Chair’s review, Company Secretary’s
review and externally facilitated review.
Our 2018 evaluation was an externally
facilitated evaluation, and so this year
Ken Hanna, as Chairman, undertook
the evaluation.
Our approach for 2019
Given the depth and rigour of last year’s
external evaluation, our approach for 2019
was to ensure that:
→ we delivered on the agreed
recommendations and actions
set out in the 2018 Annual Report
→ we addressed any new issues relevant
to the business
Our process for 2019
Ken Hanna circulated a list of
recommendations and actions arising
from the 2018 evaluation. This included
the actions identified in the 2018 Annual
Report .The Board discussed and agreed
the list at its February meeting and then
discussed progress on the actions at
the June meeting. In addition, at the July
meeting, the Board discussed a number
of important developments facing the
Group, in particular, relating to risk
management, technology, ESG and
climate change, as referred to in the
table opposite.
In April, Uwe Krueger, as Senior
Independent Director, chaired a meeting
of the Non-executive Directors, including
an appraisal of Ken Hanna, who was not
present at the meeting. Ken Hanna then
joined the meeting for further discussion.
In June, October and December Ken
Hanna chaired further meetings of the
Non-executive Directors.
Recommendations and actions: 2018 External evaluation
What we committed to do in 2018
What we did in 2019
Agree approach to strategy discussions
for 2019
April: CEO presented proposals on strategy
to the Board
Continue to review the competitor and
supplier landscape in strategy discussions
Expand scope of Nomination Committee
to cover executive succession, talent
management and diversity pipeline
Ensure succession discussions take place
twice a year at the main Board, in tandem
with the Nomination Committee (annual
review and mid-year update)
June: Board strategy session
June: Strategy discussions included
detailed presentation on competitors
for each of Power Solutions and Rental
Solutions
December 2018: Nomination Committee
terms of reference were revised accordingly
July and December: Chris Weston
and Anna Filipopoulos , Group HR Director
presented to the Nomination Committee
Review Board composition to enhance the
international profile of the Board
September: Appointed Sarah Kuijlaars
as Non-executive Director
Increase the amount of contact between
Board members and the senior team, one
level below the Executive Committee
Throughout year: Executive Committee
direct reports joined the Board for dinners
May: Ken Hanna and Nicola Brewer
attended the Senior Leadership Team
meeting
June: Managing Director Asia & Middle East
and Head of Power Solutions Operations
presented to the Board. Afterwards their
teams joined the Board for dinner
November: Ian Marchant attended the
Senior Leadership Team meeting
Increase visibility of Non-executive
Directors in the organisation
June: Nicola Brewer and Ian Marchant
hosted focus groups in Dubai
October: Nicola Brewer visited Japan
Olympic team
October: Miles Roberts visited a UK Depot
November: Ian Marchant received
presentations on strategic projects
from LEAD participants
Recommendations and actions: 2019 evaluation
Recommendations
Actions
Requested more involvement in the
approval process of large and potentially
high risk projects
October: Approved a new contract
risk management policy, requiring
Board approval for certain projects over
designated thresholds
In light of the perceived increase in pace of
the energy market transition, requested an
update on the Group’s technology plans
October: Detailed review session on
technology with the senior management
of the Group Product & Technology team
Requested an increase in focus at the Board
on ESG and climate change
October and December: Ongoing
discussion at the Board to review Aggreko’s
position and strategy for ESG and climate
change
Aggreko plc Annual Report and Accounts 2019
51
GOVERNANCE CONTINUED
Leading by example, and promoting
our culture and values
Indicators of culture
reviewed by the Board
and its Committees:
→ Reviewing the results of our employee
surveys (Be Heard)
→ Reviewing the volume and nature of
whistleblowing reports and outcome
of any investigations
→ Our safety performance, uptake
of initiatives and trends
→ Internal audit reports and findings,
as attitudes to regulators and internal
audit can give an early indication
of potential culture-related issues
→ Monitoring our KPI on employee
satisfaction
→ Training completion rates
→ Feedback reports on workforce
engagement activities
→ Visiting Aggreko locations in the UK
and overseas to spend time with our
people, allowing us to assess culture
in the local context
→ Reviewing and monitoring compliance
with our Code of Conduct
→ Receiving reports from the Ethics &
Corporate Responsibility Committee
Read our purpose on page 1
Read more about our culture
on page 18
Defining our culture
After reorganising our business in 2015,
we spent some time researching and
refreshing the components of our
culture. Always Orange was launched in
2017 and is the cultural framework that
resulted, bringing together our purpose,
values and behaviours. Our four values,
and their respective day-to-day
behaviours, govern the way in which
we work, remain safe and professional,
develop the expertise of our people,
influence our interactions across our
markets and ultimately allow us to
deliver our business objectives.
The creation of Always Orange involved
employee workshops in Buenos Aires,
Houston, Dumbarton, Tanzania and
Dubai. We gathered input from our
online community and through
debate at the Board, with the Executive
Committee and Senior Leadership Team.
Setting the tone from the top
Our leaders have a critical role in setting
the tone of our organisation and
championing the behaviours we expect
to see. At Board level, commitment to
Always Orange values and behaviours
is demonstrated through transparent
operations and engagement outside
the boardroom, which ensures that the
Directors lead by example, reinforcing the
cultural tone and expected behaviours.
Our strategic initiatives for each year are
underpinned by Always Orange values
and behaviours. Specific behaviours are
selected for each year to help us deliver
our strategic initiatives, while highlighting
and reinforcing those behaviours.
Progress against those behaviours is
tracked and quarterly updates on
progress reported back to employees
by email and online videos. For 2019,
the behaviours selected were Playing for
Team Aggreko and Loving the Discipline.
These behaviours were selected to ensure
focus and embed them within the
organisation. For 2020, we will focus
on role modelling Always Orange
and demonstrating leadership in
collaborating, to deliver for our customers
and maximise the impact of our
expertise. Culture is also monitored
and assessed by the Board through
a combination of direct contact and
a number of recognised indicators.
52 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Ethics & Corporate Responsibility
Committee report
The role of the Ethics & Corporate Responsibility
Committee is to ensure that Aggreko conducts business
with integrity and transparency and in accordance with
the law, and to oversee workforce engagement.
Dame Nicola Brewer
Ethics & Corporate Responsibility Committee Chair
Attendance in 2019
Members in 2019
Position
Dame Nicola Brewer
Diana Layfield
Ken Hanna
Barbara Jeremiah
Committee Chair
Non-executive Director
Chairman, Aggreko plc
Non-executive Director
Meetings attended/
No. of meetings eligible to attend
3/3
3/3
3/3
3/3
Areas of focus for 2020
→ Oversee the implementation of a new
sanctions compliance framework
→ Review the anti-bribery and corruption
compliance framework
→ Implement the plan for increased
workforce engagement
→ Conduct a review of the policies which
fall under the remit of the Committee
→ Receive feedback on the
implementation of the policies
Areas of activity in 2019
→ Monitored the effectiveness of the
Third-Party Sales Representatives
Policy
→ Oversaw the development and
implementation of the new Code
of Conduct and updated Speaking
Up Policy
→ Monitored the completion of refresher
ethics training across the business
→ Monitored the effectiveness of the
Speaking Up Policy and procedures
→ Oversaw the completion of internal
investigations
→ Monitored actions taken to address
sanctions risks
→ Reviewed the existing workforce
engagement activities and developed
a broader framework of workforce
engagement activities for the Board
→ Undertook additional workforce
engagement activities and reported
to the Board on the findings from
this engagement
Introduction by Dame
Nicola Brewer, Ethics &
Corporate Responsibility
Committee Chair
The Ethics & Corporate Responsibility
Committee is made up of three
Independent Non-executive Directors
and the Chairman of Aggreko Plc. I was
appointed as the Chair of the Committee
from 1 January 2019. In 2019, we held
three meetings. We invited the Head
of Compliance, the Group Legal Director
and the CEO to attend all meetings.
A primary purpose of the Ethics &
Corporate Responsibility Committee is
to oversee the effectiveness of Aggreko’s
compliance programme. Aggreko aims
to conduct its business with integrity,
honesty and transparency. We expect all
Aggreko employees and any third parties
acting on behalf of Aggreko to adopt
these standards. 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 potential risks of unethical
conduct because of the nature and value
of many of our contracts and because
standards of integrity are not consistent
across all of the countries in which we
operate. However, we believe we have
a robust compliance programme in
place which allows us to manage these
risks effectively.
In 2019 we extended the remit of the
Committee to facilitate and monitor
engagement with the workforce in line
with the 2018 UK Corporate Governance
Code. In response to this increased scope,
we have reviewed the existing channels
of engagement with the workforce
and developed a broader framework
of activities to enable the Board to
understand the views of the workforce.
As part of this broader remit in 2019 the
Committee oversaw the conduct of the
quarterly Be Heard surveys and discussed
key themes. We also introduced focus
groups, which were held in Dubai this
year and we expanded the engagement
by Non-executive Directors through site
visits, Board dinners and meetings of
the Senior Leadership Team. We have
welcomed this increased engagement
with the workforce and we look forward
to continuing with this broader
engagement in 2020.
Ethics & Corporate Responsibility Committee terms of reference:
www.plc.aggreko.com
Aggreko plc Annual Report and Accounts 2019
53
GOVERNANCE CONTINUED
Ethics & Corporate Responsibility Committee report
continued
Main activities of the Ethics
& Corporate Responsibility
Committee during the year
Third-party monitoring
We recognise that it is not just our
employees who could be exposed to
ethics risks but also our third-party
sales representatives including sales
consultants, agents and joint venture
partners. Although the number of
third-party sales representatives used
by the business has reduced over the
past few years there are circumstances
in which we still need them to support
some areas of the business. A summary
of the measures we take to ensure these
representatives conduct business in line
with Aggreko’s standards is set out
below in the overview of our compliance
programme. In 2019, we received a
briefing from the Power Solutions
Managing Director on the outcome
of his review of all arrangements with,
and payments to, third-party sales
representatives. We are pleased to
observe the continued focus of the
business in monitoring all activities
in this area.
Effectiveness of the compliance
programme
We are committed to ensuring that our
compliance programme remains robust
and is in line with best practice. We
continually monitor the effectiveness
of the policies and procedures and
recommend areas where further
improvements could be made. In 2019
we reviewed the Ethics Policy, which
has been in place since 2011. This is an
important document, which sets out
the basic standards and behaviours we
expect from our employees, contractors
and third-party sales representatives.
It forms part of our employee induction
and all employees are required to
acknowledge compliance with it when
they join Aggreko. During our review we
identified some areas of emerging risk,
which were absent or not adequately
addressed in the Ethics Policy. This
included sanctions, facilitation of tax
evasion, data privacy and modern slavery.
In response we developed a new Code
of Conduct and Speaking Up Policy,
which addressed these gaps and
incorporated our Always Orange values
and behaviours. The new Code of
Conduct and Speaking Up Policy were
issued to all employees, together with
training, in 2019.
Speaking Up Policy and procedures
We monitor the volume and nature
of whistleblowing reports received
throughout the year to identify any
underlying concerns and/or trends and
to assess whether there are effective
processes in place to enable the
workforce to report any concerns. In 2019
we updated the Speaking Up Policy and
provided training on the procedures for
reporting concerns. We also reviewed
the volume and nature of the reports
received and the actions taken in
response to the reports. We are satisfied
that the mechanisms that are in place
to enable all members of the workforce
to raise any concerns are effective.
Sanctions
The introduction and extension of
sanctions in some of the countries in
which we operate potentially attracts
increased risk for the business. We
received briefings on developments
in relation to sanctions, the potential
impact to the business and the actions
being taken to manage potential risks.
This included a review of the sanctions
developments in relation to Russia
and Venezuela.
Workforce engagement
We recognise the valuable insight the
Board can obtain by engaging directly
and indirectly with the workforce. In 2019
we reviewed the activities already in place
to engage with the workforce and
developed a programme of activities to
increase this engagement. This included
overseeing the conduct of the quarterly
Be Heard surveys and reviewing the key
themes and proposed actions. We also
introduced focus groups, which were
held in Dubai this year and we expanded
the engagement by Non-executive
Directors through site visits, Board
dinners and meetings of the Senior
Leadership Team. Meetings in Dubai
confirmed, in particular, high levels of
awareness of the importance of health
and safety and satisfaction with the
visibility of senior managers. They also
revealed strong interest in the future
strategic direction and structure of the
company. There was appetite for more
development and promotion
opportunities. We shared with the
Board the key themes identified from
our workforce engagement in 2019 and
the actions underway across the business
in response to these findings.
Our engagement has focused on
individuals who have formal employment
contracts with Aggreko, wherever they
work. Aggreko also uses the services of
individual contractors, directly or through
agencies or third-party companies. Since
the tasks and terms on which contractors
work vary greatly throughout the
business, and there is no particular group
that provides a substantial element of our
workforce, we do not include them in our
formal engagement.
We will continue to broaden this
engagement in 2020 through oversight
of the Be Heard surveys and direct
engagement through site visits, focus
groups and team meetings.
An overview of our
compliance programme
Our compliance programme is
coordinated by our Head of Compliance
and Compliance Manager with support
from the business units and the central
functions. The programme has a number
of elements designed to ensure that
we effectively manage compliance risks.
Code of Conduct
Every employee receives a copy of
the Code of Conduct when they join
Aggreko. This code sets out the standards
and behaviours we expect from our
employees and is an effective tool to allow
us to challenge any improper behaviours
identified. It is supported by a number
of supplementary policies, procedures
and guidelines to cover due diligence,
gifts and hospitality, charitable donations,
facilitation payments, conflicts of interest
and speaking up. We provide training to
all employees on these policies and we
regularly monitor compliance with these
policies to obtain assurance that they
continue to work effectively.
Training
Every employee receives training, which
is regularly refreshed, via our multi-
lingual online ethics compliance training
programme. This online training is
supplemented by additional workshops
with senior management, which gives us
comfort that our employees remain alert
to risks.
Third-party risks
All of our sales consultants and agents
are comprehensively reviewed before
they are engaged and this exercise is
refreshed at least every two years.
Our sales consultants and agents are
contractually required to comply with
our Code of Conduct and we require
them to confirm compliance with the
code annually. We also provide ethics
training to our sales consultants and
agents to ensure that they remain alert to
potential risks. We have controls in place
in relation to the remuneration of sales
consultants and agents and we monitor
all payments to them to ensure that
the remuneration structure does not
incentivise unethical behaviour. This gives
us a robust framework to enable us to
clearly understand who our third-party
sales representatives are and the activities
they have undertaken on our behalf. This
policy also enables us to avoid engaging
with third parties who do not meet our
ethical standards.
54 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
We have a Supplier Code of Conduct
which sets out the standards we expect
from all other suppliers to Aggreko and
we require suppliers to confirm
adherence to these standards. Any
suppliers who do not agree to the
standards or an equivalent standard
will not be engaged by Aggreko.
Gifts, entertainment and hospitality
We have a clear approval process for 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.
This policy enables us to challenge any
proposed gifts or hospitality which could
be perceived as inappropriate.
Sponsorship and charitable donations
We have a clear approval process for
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. This policy
enables us to challenge any donations
or sponsorships which could be
perceived as inappropriate.
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 of
our workforce and allows anyone who
has any concerns to report them on an
anonymous basis. All reports are followed
up, and we regularly analyse the types of
report we receive. Where appropriate,
our Group internal audit team is asked
to investigate the issue and report
on the outcome.
Sanctions
We have procedures in place to ensure
that we conduct due diligence on any
proposed activities in countries targeted
by sanctions and/or export control
restrictions. Any activities involving
countries subject to the most extensive
sanctions require approval by the Board.
This currently includes the Crimea region
of Ukraine, Cuba, Iran, Myanmar, North
Korea, Sudan, Syria and Venezuela.
We have developed a sanctions
compliance framework documenting
our policies and procedures relating
to sanctions compliance, which will
be fully implemented in 2020.
Modern slavery
We apply high employment standards
across our business, complying with
relevant employment, health and safety
and human rights laws to ensure that
our workforce is safe. We also expect our
suppliers to adopt a similar approach in
relation to the protection of their workers.
Our Supplier Code of Conduct sets out
the minimum standards we require
from them. It specifically requires our
suppliers to comply with workers’
fundamental rights, including standards
of pay, working hours and freedom
of association. Our modern slavery
statement, available to read at
www.plc.aggreko.com, provides
more detail on the approach we
take in relation to modern slavery.
Non-executive Director workforce engagement activities in 2019
Power Solutions / Rental Solutions Leadership
January
Ken Hanna attended Power Solutions Leadership Team meeting and dinner
June
Ken Hanna met with Rental Solutions Leadership Team
Board lunches / dinners
February
Invited Managing Director of Northern Europe and Managing Director of Africa
April
June
Invited Managing Director Global Products & Technology, Managing Director for Events & Load Bank Services,
Group Chief Information Officer and Head of Analytics & Business Intelligence
Invited Director of Operations for Power Solutions and Managing Director for Asia & Middle East with their
direct reports
July
Invited Managing Director Continental Europe and Group Financial Controller
October
Invited Managing Director Eurasia and Managing Director Global Products & Technology
Focus groups
June
Nicola Brewer and Ian Marchant led two focus groups in Dubai
Executive Committee
May
Ken Hanna attended Executive Committee dinner
Senior Leadership Team Meetings
May
Ken Hanna and Nicola Brewer attended two days of meetings, break-out sessions and dinner
October
Ian Marchant attended two days of meetings, break out sessions and dinner
LEAD
October
Site visits
June
Ian Marchant met with participants in our LEAD programme, designed to provide exposure, education
and experience for high potential leaders and to prepare them for more senior roles
Barbara Jeremiah visited our facility in Dubai to meet with local employees
September Ken Hanna visited our manufacturing facility in Dumbarton to meet with local employees
Ian Marchant visited our Northern Europe team in Overburn, Dumbarton
October
Nicola Brewer met the Aggreko Olympic team in Tokyo
Miles Roberts met the Managing Director for Northern Europe in Sutton for a tour of operations
and to meet local employees
Aggreko plc Annual Report and Accounts 2019
55
GOVERNANCE CONTINUED
Nomination Committee report
Introduction by Ken Hanna,
Nomination Committee Chair
Monitoring and reviewing the composition
and balance of the Board and its
Committees is key to the role of the
Committee. By doing so we ensure that
Aggreko has the right structure, skills and
diversity for the effective management
of the Group.
The Nomination Committee is currently
made up of all of the Non-executive
Directors, each of whom is independent,
in addition to myself as Chair. I have been
Chair 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 Chairman of Aggreko.
In 2019, we had three formal meetings
to which we also invited the CEO.
Main activities of the
Nomination Committee
during the year
Appointment of a new
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. We decided to search
for two new Non-executive Directors, with
the aim of one starting in Q4 2019 and
the other in Q4 2020, to strengthen our
Board overall and add to our succession
planning. We appointed Lygon Group,
an independent search firm with no
other connection to Aggreko, or any of our
Directors, to assist in identifying suitable
candidates. In September 2019 we were
delighted to announce the appointment
of Sarah Kuijlaars as a Non-executive
Director with effect from October 2019.
Sarah is currently Chief Financial Officer
of Arcadis NV, a global design and
consultancy organisation for natural and
built assets, with a listing on the Euronext
Amsterdam Stock Exchange. Prior to this,
Sarah was Deputy Chief Financial Officer
at Rolls-Royce Holdings plc, and has held
a number of senior financial leadership
roles during a 25-year career at Royal
Dutch Shell plc. Sarah brings extensive
international finance expertise, together
with experience in many of our most
important markets and has joined the
Audit and Nomination Committees.
Reappointment of Directors
Since the Committee’s last report, the
Company has extended terms of
appointment as follows:
→ Diana Layfield, as Non-executive
Director, for a further year, expiring
on 1 May 2020. Since Diana had already
served for seven years, under the UK
Corporate Governance Code (2018 Code),
any proposal to extend a term beyond
six years should be subject to particularly
rigorous review, and should take into
account the need for progressive
refreshing of the Board. However,
The Nomination Committee’s role is to lead the
process for appointments to, and ensure orderly
succession for, the Board and Executive Committee.
Having a diverse pipeline for succession ensures
Aggreko has the right structure, skills and diversity
for the effective management of the Group.
Ken Hanna
Nomination Committee Chair
Attendance in 2019
Members in 2019
Ken Hanna
Nicola Brewer
Barbara Jeremiah
Sarah Kuijlaars1
Uwe Krueger
Diana Layfield
Ian Marchant
Miles Roberts
Position
Committee Chair and
Chairman, Aggreko plc
Non-executive Director
Non-executive Director
Non-executive Director
Senior Independent Director
Non-executive Director
Non-executive Director
Non-executive Director
Meetings attended/
No. of meetings eligible to attend
3/3
3/3
3/3
0/1
3/3
3/3
3/3
3/3
1 Sarah Kuijlaars was appointed to the Board in October 2019 and advised at the time of her appointment that
she would be unable to attend the December 2019 Nomination Committee meeting.
Areas of activity in 2019
→ Oversaw the recruitment,
appointment and induction of Sarah
Kuijlaars as a Non-executive Director
→ Reviewed succession plans
→ Monitored the work of the team
established to look at diversity across
the Group
→ Approved the terms of reappointment
for two Non-executive Directors
Areas of focus for 2020
→ Continued focus on succession
planning
→ Identify a suitable candidate for
appointment as a Non-executive
Director
→ Monitor and support the work
of the Value Difference team
Nomination Committee terms of reference: www.plc.aggreko.com
56 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Board Diversity Policy
A diverse Board makes prudent business sense and makes
for better corporate governance. Diversity promotes the
inclusion of different perspectives and ideas and ensures
that Aggreko has the opportunity to benefit from all
available talent.
Diversity metrics at 31
December 2019
Gender of Board
Male
Female
No.
6
4
Gender of Executive Committee
Male
Female
No.
7
1
Gender of Executive Committee
direct reports*
Male
Female
No.
46
18
%
60
40
%
87
13
%
72
28
* as required by the Companies Act 2006, the
composition of our subsidiary company Boards
is made up of 114 males and 9 females
Gender of permanent employees
Male
Female
No.
5,366
1,090
%
83
17
Aggreko seeks to maintain a Board
comprising dynamic, expert and
innovative individuals, who together
demonstrate our values and lead our
behaviours through a diverse mix
of expertise, experience, skills and
backgrounds. We aim to ensure that
the skills and backgrounds collectively
represented on the Board reflect
the diverse nature of the business
environment in which Aggreko
operates. In particular, we look for a
range of technical, financial and market
expertise. We aim to balance long
corporate memory with new insights
from other fields. For the purposes of
Board composition, diversity is taken to
refer to, but is not limited to, protected
characteristics covered by UK legislation;
other factors such as business
experience and geography will also be
relevant. We monitor our net diversity
but do not set formal targets or quotas.
Our focus is on finding talented
individuals from as wide a range
of backgrounds as possible.
Aggreko is committed to a merit-based
system for Board composition within
a diverse and inclusive culture, which
solicits multiple perspectives and views.
When assessing Board composition
or identifying suitable candidates for
appointment or re-election to the
Board, Aggreko will consider candidates
on merit against objective criteria,
having due regard for the benefits of
diversity and the needs of the Board.
Any search firm engaged to assist the
Board or a Committee of the Board in
identifying candidates for appointment
to the Board will be specifically directed
to include a diverse range of candidates
that reflects this policy.
the Committee was unanimously of
the view that Diana’s tenure had not
compromised her independence in any
way, and that it was important to retain
her market and financial experience
and knowledge of Aggreko.
→ Ian Marchant, as Non-executive
Director, for a further year, expiring on
1 November 2020. Since Ian had already
served for six years, we undertook a
rigorous review as required by the 2018
Code and were unanimous in our view
that Ian’s tenure had not compromised
his independence, and we should retain
his knowledge of Aggreko, particularly
in his critical role as Audit Committee
Chair.
Succession planning
Executive Committee and senior
management: The Committee spent a
considerable amount of time looking at
succession planning and top talent review
throughout the executive population in
2019. The Committee formally met with
the CEO and Group HR Director in July
and December 2019 to review succession
plans. The focus of these discussions was
to review our succession plans for each
of the CEO’s direct reports. Following the
implementation of the 2018 UK Corporate
Governance Code, we have increased our
visibility of the succession pipeline below
Executive Committee level and, at our
July 2019 meeting, reviewed the talent
replacement grid for approximately
40 employees at the CEO-2 level.
Board: The Committee monitors a
schedule on the length of tenure of the
Chairman and Non-executive Directors
and the mix and skills of the Directors.
The Committee is satisfied that adequate
succession planning is in place for the
Board, Executive Committee and senior
management and will keep succession
planning under review.
Diversity and inclusion
Aggreko acknowledges the importance
of diversity and inclusion to the effective
functioning of the Board and Group. While
we acknowledge that the current make
up of the Board has good gender diversity,
we are always mindful of the need to
recruit Board members from a wider
and more diverse population.
We also acknowledge that diversity
extends beyond the boardroom. The Board
continually encourages management to
be more mindful of diversity in the Group
and we fully support management in its
efforts to build a diverse and inclusive
organisation in order to effectively execute
our strategy. In 2019, we monitored the
work of the Value Difference team
established to look at diversity on a
Group-wide basis, determining what
changes need to be made and working
with the business to implement them.
Read more about the work of the Value
Difference team on page 18.
Aggreko plc Annual Report and Accounts 2019
57
Introduction by Ian Marchant,
Audit Committee Chair
Ensuring the integrity of the Group’s
financial statements and determining
whether the judgements taken by
management are appropriate are key
to the workings of the Committee.
This report provides an overview of the
significant issues we considered. This
report also shares some insight into
the work we have undertaken this
year to assess the independence and
effectiveness of the external auditor and
oversee the Group’s systems for internal
control and risk management.
The Committee is currently made up
of four Independent Non-executive
Directors, including myself as Chair. I have
been a member of the Committee since
November 2013 and was appointed as
Chair of the Committee in April 2016. I am
a chartered accountant and, prior to my
appointment as Chief Executive of SSE
(2002 to 2015), I served as Finance
Director of SSE for four years and of
Southern Electric for two and a half years.
As a Committee, we bring an appropriate
balance of financial and accounting
experience, together with a deep
understanding of Aggreko’s business
and market sector. All the members of
the Committee have recent and relevant
financial experience.
In 2019, we held three scheduled
meetings. The meetings are aligned
to the Group’s financial reporting
timetable, to allow sufficient time for full
discussion of key topics and enable early
identification and resolution of risks and
issues. We invited the Chairman of the
Board, the CEO and the CFO to attend
our meetings in 2019, together with
the Group Financial Controller, Director
of Internal Audit and the KPMG audit
partner.
GOVERNANCE CONTINUED
Audit Committee report
The role of the Audit Committee is to ensure the
integrity of the Group’s financial reporting and
provide oversight of our systems for internal control
and risk management.
Ian Marchant
Audit Committee Chair
Attendance in 2019
Members in 2019
Ian Marchant
Sarah Kuijlaars1
Diana Layfield
Miles Roberts
Position
Committee Chair
Non-executive Director
Non-executive Director
Non-executive Director
1 Sarah Kuijlaars was appointed to the Board in October 2019.
Meetings attended/
No. of meetings eligible to attend
3/3
1/1
3/3
3/3
Areas of activity in 2019
→ Close monitoring of key accounting
judgements, including contract
provisions, with a particular focus on
Yemen, Venezuela and Africa, and
tax provisions throughout the year,
receiving detailed updates in 2019
at all of our meetings
→ Monitored the position in relation
to fleet obsolescence
→ Ensured proper application of a new
accounting standard impacting the
Group in 2019: IFRS 16
→ Regular updates on the status of
the internal control environment
→ Monitored our cyber security strategy
and status
→ Presentation on managing financial
risks in our Rental Solutions business
→ Looked at the status of subsidiary
statutory accounts in overseas
jurisdictions following the
identification of control weaknesses
in Indonesia
→ Recommended some updates to the
Group Register of Principal Risks,
including a review of the overall number
of risks and the inclusion of a separate
risk for climate change
→ Monitored the closure of outstanding
internal audit findings
Areas of focus for 2020
→ Continue close monitoring of contract
provisions and tax provisions. Held an
additional meeting in February 2020,
ahead of the year-end meeting, to
discuss contract provisions in detail,
with a particular focus on Venezuela
and Africa
→ Receive regular updates on the status
of the internal control environment
→ Receive an update on the
management of financial risk
in our Power Solutions business
→ Continue to monitor the status
of subsidiary statutory accounts
in our overseas jurisdictions
→ Monitor our cyber security ratings
→ Receive an update on risk
management within our tax function
→ Monitor the closure of outstanding
internal audit findings
Audit Committee terms of reference: www.plc.aggreko.com
58 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
The primary areas of judgement considered by the Committee in relation to the
2019 Annual Report were:
Area of judgement Contract provisions – Power Solutions Utility (PSU)
Reporting issue
One of the most significant risks facing
the Group is that of non-payment by
customers under some of the larger
contracts in our PSU business. The Group
policy is to consider each significant
debtor individually, within its relevant
context, taking into account a number
of factors. These factors include, but are
not limited to, the political and economic
conditions in the relevant country, the
duration and quality of our relationship
with the customer, the age of the
outstanding debt and the customer’s
payment profile with us, together with
any relevant communication exchanges
with the customer (and other relevant
stakeholders) throughout the year.
How did the Audit Committee address
the judgement?
The Committee addressed contract
provisions by considering accounting
judgements papers, presented by the
CFO, at its July 2019, December 2019 and
February 2020 meetings. These papers
detailed the latest position of debtors
outstanding (at the half year and year end
respectively), including any cash received
against amounts invoiced during the year
and post the reporting period end, and
gave an assessment of the likelihood of
future receipts. The Committee discussed
in detail the main changes during the
period and assessed the adequacy of all
the provisions. In assessing the adequacy
of the Group’s overall provision,
consideration was given as to whether
it was both sufficient to cover the risks
identified and also whether it was in
excess of the risks identified. Historically,
the Group has experienced a low level
of bad debt write-offs. However, we do
operate in countries within our PSU
business where customer payments are
more unpredictable and volatile, and
where political and economic conditions
mean that there is a risk of default, and
therefore the Group’s bad debt history
may not be indicative of potential future
outcomes.
In forming its view on the appropriateness
of the Group’s provision against its
receivables balances the Committee
noted that PSU cash collections in the
year were $584 million compared with
amounts invoiced of $484 million. The
Committee also discussed the 16 most
significant debtors in the PSU business,
which accounted for 84% (2018: 84%) of
the total PSU overdue debtor value at
31 December 2019 (before taking into
account provisions or payment security/
guarantees). At 31 December 2019, 87%
(2018: 86%) of the PSU impairment
provision related to these top 16 debtors.
Among these debtors, the Group had a
net exposure, after taking into account
provisions or payment securities/
guarantees, of $30-40 million to one
customer (2018: two customers), a net
exposure between $20-30 million to one
customer (2018: four customers), a net
exposure of $10-20 million to three
customers (2018: three customers) and
a net exposure of less than $10 million
to each of the others.
While the Committee considered all of
the most significant debtors as detailed
above, the discussion focused on key
customers in Venezuela, Yemen and parts
of Africa, where we continued particularly
to see delays in payments during the year.
In Venezuela (where the Committee
included in its review some outstanding
balances within the PSI business), we
raised invoices for $2 million in the year.
Given the current political uncertainty we
provided for these invoices in full and also
recorded a further provision of $1.6 million
during the year. In line with past practice
we also marked to market the value of the
PDVSA private placement notes, which
resulted in a charge to the income
statement of $3 million. The Group’s net
exposure in Venezuela at 31 December
2019 of $12 million (2018: $17 million)
reflects a combination of bad debt
provisions and payment security/
guarantees representing 82% (2018: 78%)
of the gross debt and accrued income
together with a 91% (2018: 75%) fair value
adjustment against the private placement
notes with PDVSA.
stabilises, we also recognise that there
is a range of potential outcomes for each,
both above and below the net exposure.
Net exposure is defined here as the gross
debtor value plus accrued revenue, less
any payment security/guarantees and
bad debt provision.
In addition, we continue to monitor
closely the situation with regard to our
overdue debtors in Africa, as specifically,
the customer with whom we have our
largest net exposure (in the range $30- 40
million) is within the Africa region. While
there is no dispute over the amount
outstanding, we remain in regular
dialogue with the customer regarding
the likely process and timing of future
payments, with one of the customer’s
primary issues being its access to US
dollars to settle the debt. Given the
ongoing engagement with the customer
and other key stakeholders, the Group
does not hold a material provision against
this debt and, therefore, the likelihood of
receiving more cash than the net
exposure is low. Non-payment of this
particular debt represents one of the
Group’s key single risks.
KPMG also reported on these contract
provisions at both the July 2019 and
February 2020 meetings in the context
of its half year review and year end audit.
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.
Conclusion and outcome
We concluded that the judgements and
estimates with respect to the Group’s
contract provisions were reasonable
and appropriate.
In Yemen, given the ongoing civil war, the
Group increased its provision by $7 million
to provide fully for its legacy debt (pre the
current conflict). The net exposure
at December 2019 is $9 million (2018:
$10 million) and only relates to our current
trading in Yemen. This net exposure
position reflects a combination of bad
debt provisions and payment security/
guarantees representing 71% (2018: 59%)
of the gross debt and accrued income.
Overall the PSU contract provision
at 31 December 2019 was $81 million
(2018: $83 million). Although the overall
provision is broadly in line with the
prior year, reflecting the differing
circumstances and payment progress
made by customer, the Group increased
its provision against specific customers
in Yemen and Venezuela by $8 million,
while reducing its provision against other
customers by $10 million.
While we believe that we remain relatively
well positioned to recover these net
exposure amounts when the current
situation in each of these countries
More information on our risk profile and
mitigation for failure to collect payment
or to recover assets can be found on
page 36.
Area of judgement Direct and indirect tax positions – Bangladesh
Reporting issue
There is an ongoing dispute in relation
to a tax assessment in Bangladesh.
The matter is in court and is expected
to take many years to resolve. We have
strong legal opinion which supports
our case. However, we recognise that
this is a judgemental issue due to the
complexities and uncertainties of local
tax legislation.
How did the Audit Committee address
the judgement?
The Committee addressed this matter by
considering update papers tabled by the
Chief Financial Officer, which included
reference to updated legal opinions, at
our meeting in February 2020. These legal
opinions confirm there have been no
material developments on either our
case or other similar cases during the year.
As there have been no further material
developments, in line with expectations,
the Audit Committee remains
comfortable with the approach but
has specifically requested further
regular updates.
KPMG reported on this issue at the July
2019 meeting in the context of the half
year review and at the February 2020
meeting in the context of the year-end
audit.
Conclusion and outcome
We concluded that the judgement
and approach were reasonable
and appropriate at this time.
Aggreko plc Annual Report and Accounts 2019
59
GOVERNANCE CONTINUED
Audit Committee report continued
In addition to the primary areas of
judgement outlined in the table on the
previous page, the Committee also paid
close attention to the following items
during its assessment of Aggreko’s
financial reporting:
→ We considered whether there was a
risk of obsolescence in our fleet due
to changes in market conditions and
advances in technology and concluded
that there were no issues
→ We also reviewed the impact of IFRS 16,
a new accounting standard which
applied to the Group from 1 January
2019. IFRS 16 applies to leases and
further detail is provided in Note 1 to
the financial statements
→ We considered the appropriateness of
carrying a deferred tax asset in respect
of tax losses in Brazil and our ability
to use these in the foreseeable future,
taking into account current forecasts
and secured long term contracts
→ We reviewed the status of subsidiary
statutory accounts in overseas
jurisdictions following the identification
of control weaknesses in Indonesia
→ We also considered the overall level
of provisions for uncertain tax matters,
particularly in respect of historic
exposure in our Power Solutions
business
Following completion of the above steps,
we agreed to recommend the approval
of the 2019 Annual and Interim Reports
to the Board.
Main activities of the Audit
Committee during the year
Financial reporting
During the course of the year, the
Committee met with the external auditor
and management as part of the 2019
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 had 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 37 and 94
and information presented by
management on the process
underpinning the fair, balanced and
understandable assessment and
confirmation on page 83.
Fair, balanced and understandable
reporting
Aggreko recognises its responsibility
to present a fair, balanced and
understandable assessment in all of our
reporting obligations. This responsibility
covers the Annual Report and extends to
the Interim Report and other regulatory
announcements. At the request of the
Board, the Committee has considered
whether, in its opinion, the 2019
Annual Report is fair, balanced and
understandable, and whether it
provides the information necessary
for shareholders to assess the Group’s
position, performance, business model
and strategy.
For the 2019 Annual Report, this process
included:
→ Review in December 2019 of a
summary paper on key messages
and changes from 2018
→ Feedback provided by Committee
members on a number of drafts
during January and February 2020
→ Full draft provided to the Committee
and Board seven days prior to the
February 2020 meetings to enable
time for review and comment and
to provide a final opinion
→ Comprehensive management and
statutory accounts processes, with
written confirmations provided by the
business unit senior management
teams on the ‘health’ of the financial
control environment
→ Confirmations provided by the
business unit senior management
teams that the Performance Review
text is a fair reflection of their business
and performance in 2019
→ A verification process, involving our
internal audit team, dealing with the
factual content of the Annual Report
→ A key accounting judgements paper
covering contract and tax provisions
for 2019
Following its review, the Committee
was of the opinion that the 2019 Annual
Report is representative of the year
and presents a fair, balanced and
understandable overview, providing the
necessary information for shareholders to
assess the Group’s position, performance,
business model and strategy.
External auditor
The Committee is responsible for making
recommendations to the Board in
relation to the appointment of the
external auditor. We also approve the
audit plan, terms of engagement and
fees, and assess their effectiveness.
Audit plan
KPMG presented its audit plan at the
July 2019 meeting and an update at
the December 2019 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, proposed areas of audit
focus and coverage. In setting the audit
plan, KPMG works with internal audit and
management at a Group and business
unit level to identify risk areas for the
audit to determine where their effort
should be focused.
KPMG carried out its work using an
overall materiality of £9.9 million, as stated
in its report on page 85, and confirmed
that unadjusted audit differences were
not material. We also agreed with the
external auditor that it would inform us
of any unadjusted misstatements above
£0.5 million, as well as misstatements
below this amount that warranted
reporting for qualitative reasons.
Tenure
KPMG was appointed by shareholders
as the Group’s Statutory Auditor in
2016 following a formal tender process.
The external audit contract will be put
out to tender at least every 10 years.
The Committee recommends the
appointment of KPMG for 2020.
We believe the independence and
objectivity of the external auditor and
the effectiveness of the audit process
are safeguarded and strong. The
Company has complied with the
Statutory Audit Services Order for
the financial year under review.
Effectiveness
The Committee met with KPMG
on a number of occasions without
management present and the
Committee Chair also maintained
regular contact with the audit partner
throughout the year. This enabled the
Committee to closely monitor its work,
ensure independence was maintained
and a successful external audit of the
2019 Annual Report was carried out.
We also used an internal questionnaire
sent in December 2019 to Committee
members, CFO, Group Functional Heads,
Business Unit Finance Directors and
a selection of Business Unit Heads
of Finance (where a full scope audit
had been undertaken in the year);
respondents were asked to rate KPMG’s
effectiveness in a number of areas,
including quality of processes, audit team,
audit scope and communications. Results
were collated and presented at the
February 2020 meeting of the Committee
for discussion. Management concluded
that both KPMG and its audit processes
are considered to be effective, and
that a good working relationship is
complemented by a sufficiently rigorous
and challenging audit approach. The
Committee concurred with this view.
60 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
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 CFO and, depending on the
nature of the service and fee involved,
authorisation may also be required
from the Committee Chair or the
full Committee.
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 KPMG during the
year related to the June 2019 Interim
Review. In 2019, we spent £1,442,000 on
audit fees (2018: £1,361,000) and £51,000
on non-audit fees (2018: £46,000); this
accounted for 4% (2018: 3%) of the overall
audit fee for the year. Further details of
the fees paid to the external auditor are
set out in Note 6 to the Accounts.
The non-audit services policy is available
on our website: www.plc.aggreko.com
Risk management and internal
control
The objective of our risk framework is
to provide the Board, Audit Committee
and Executive Committee with a useful
management tool to capture, assess and
proactively manage the risks we face.
Our risk management process also
ensures that we take account of our
business model and strategy to ensure
alignment with our risk appetite,
framework and controls. In turn, this
enables us to fully comply with the UK
Corporate Governance Code requirement
for a viability statement. The process
is designed to manage rather than
eliminate risk, and can only provide
reasonable and not absolute assurance
against material misstatement or loss.
The Board assumes ultimate
responsibility for the effective
management of risk across the Group,
determining our risk appetite as well
as ensuring that each business unit
implements appropriate internal controls.
The Board has delegated responsibility
for oversight of risk management to
the Committee.
The Committee provides oversight by
reviewing the effectiveness of the Group’s
systems for risk management, internal
control and financial reporting. In 2019,
we worked closely with the Group Risk
Committee, receiving regular reports
which enabled us to review and
challenge the risk management
framework, review the effectiveness of
the control environment and approve the
methodology for the viability statement.
The Committee also maintains a
programme of in-depth review into
specific financial, operational and
regulatory areas of the business. These
reviews are critical to the role of the
Committee, as they allow us to meet key
members of the management team and
provide independent challenge to their
activities. Agenda items in 2019 included:
→ Reviewing our cyber security
arrangements with the Chief
Information Officer and Director of IT
Operations and Security to understand
progress against our security
programme, the results of a detailed
review of our microgrid and storage
solution product portfolio, an update
on the external threat landscape and
actions for 2020
→ Receiving a detailed presentation on
the management of financial risk in
our Rental Solutions business, focusing
on the capabilities of the finance
leadership team, the status of statutory
account filings, outstanding internal
audit actions and the results of the
financial control checklist
→ Receiving a detailed presentation on
the internal control environment in
place to protect the business from
material risks identified. Management
is responsible for establishing and
maintaining adequate internal controls
over financial reporting and the
Committee has responsibility for
ensuring the effectiveness of those
controls. In 2019, the Committee
continued to receive assurance that
financial controls were in place for
items on the Group Risk Register
→ Receiving an update on various
balance sheet controls issues identified
by management in Eurasia as part of
its year end close process. All issues
raised have now been addressed,
including the appointment of a new
Head of Finance for the region.
The Committee has completed its
review of the effectiveness of the Group’s
system of internal control, including risk
management, during the year and
up to the date of this Annual Report in
accordance with the requirements of the
Guidance on Risk Management, Internal
Control and related Financial and
Business Reporting published by the
FRC. Beyond the issues identified in
Eurasia, as noted above, the Committee
confirms that no significant failings or
weaknesses were identified in the review
for the 2019 financial year and allowed us
to provide positive assurance to the Board
to assist it in making the statements
required by the UK Corporate Governance
Code. Where areas for improvement
were identified, processes are in place to
ensure that the necessary action is taken
and that progress is monitored.
Viability statement
The Committee reviewed management’s
work in conducting a robust assessment
of those risks which could threaten
our business model and the future
performance or liquidity of Aggreko,
including our resilience to the threats
of viability posed by those risks in severe
but plausible scenarios. This assessment
included stress and sensitivity analyses
of these risks to enable us to evaluate
the impact of a severe but plausible
combination of risks. We then considered
whether additional financing would be
required in such eventualities. We also
considered the review period and
alignment with the Group’s strategic
plans and internal long-term forecasts.
Based on this analysis, we recommended
to the Board that it could approve the
viability statement included on page 37.
Internal audit
Monitoring and review of the scope,
extent and effectiveness of the activity
of internal audit is an agenda item at
each Committee meeting. We approve
the annual audit plan prior to the start of
each financial year and receive a detailed
report from the Group Internal Audit
Director on audit activities, audit results
and remedial actions at each meeting.
The audit plan is risk-based and includes
themed reviews based on an assessment
of the strategic risks faced by the Group
along with cyclical coverage of key
business processes and locations.
We also specifically followed up on
a selection of areas where audit actions
were outstanding to ensure that
the overall control environment
was still adequate.
The Committee assessed the
effectiveness of the internal audit
function by reviewing its reports, progress
against the 2019 plan and meeting with
the Director of Internal Audit without
management being present. We also
utilised a third-party risk assessment
tool to verify the results of our own
assessment and agreed the three-year
Strategic Plan and Group Internal Audit
Charter. Although the review found
internal audit to be effective, the following
actions were agreed for 2020: greater
use of technology to improve planning,
resourcing and data quality; and,
sharing of best practice within the
Group’s online community.
Aggreko plc Annual Report and Accounts 2019
61
Introduction by Barbara
Jeremiah, Remuneration
Committee Chair
Dear shareholders
On behalf of the Board and the
Remuneration Committee, I am pleased
to present to you our Remuneration
Committee report for 2019. Following
extensive consultation with our largest
shareholders and representative bodies,
Aggreko introduced our current
remuneration policy in 2018, so 2019
was its second year of adoption.
No changes are proposed to the
remuneration policy approved at the
2018 AGM. This report includes both
my annual statement and our annual
report on remuneration. For ease of
reference, we include a summary of
the key elements of our remuneration
policy with the full policy available in
the 2017 report. The annual report on
remuneration and this annual statement
will be subject to an advisory vote at
our AGM on 23 April 2020.
Annual remuneration statement
page 62
Annual report on remuneration
page 67
2018 remuneration policy summary
page 75
REMUNERATION
Remuneration
Committee report
The principal role of the Remuneration Committee
is to determine the remuneration for Executive
Directors and Executive Committee members.
We also oversee Aggreko’s overall remuneration
policy and practice for the wider workforce.
Barbara Jeremiah
Remuneration Committee Chair
Attendance in 2019
Members in 2019
Position
Barbara Jeremiah
Ken Hanna
Uwe Krueger
Ian Marchant
Committee Chair
Company Chairman
Senior Independent Director
Non-executive Director
Meetings attended/No. of meetings
eligible to attend
4/4
4/4
4/4
4/4
Areas of activity in 2019
→ Determined outcomes for the 2018
Annual Bonus for financial and
personal/strategic objectives
→ Set targets for the 2019 Long-term
Incentive Plan (LTIP) and Annual
Bonus Plan, both financial and
personal/strategic objectives
→ Approved awards under the 2019 LTIP
→ Ensured compliance with the revised
FRC UK Corporate Governance Code
in respect of remuneration
Areas of focus for 2020
→ Determine outcomes for the 2019
Annual Bonus for financial and
personal/strategic objectives
→ Set targets for the 2020 Annual Bonus
Plan, both financial and personal/
strategic objectives
→ Review the financial performance
measures for the LTIP to ensure that
they continue to be aligned with the
Group’s strategy for growth
→ Approve awards under the 2020 LTIP
→ Consult with shareholders on the
2021 remuneration policy renewal
→ Ensure continued compliance
with the revised FRC UK Corporate
Governance Code in respect of
remuneration
Remuneration Committee terms of reference: www.plc.aggreko.com
62 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Our remuneration policy
The aim of our remuneration policy
is to ensure that executive incentives
are aligned with Group strategy and
performance with, for example, a
continued focus on reducing working
capital, while investing in new technology
to reduce the cost of energy and its
environmental impact, leading to a
reduced level of net operating assets
and further improvement in ROCE.
Our policy also ensures alignment with
the shareholders of the Company with
deferral of a portion of annual bonuses
into shares.
Our reward package for Executive
Directors is structured such that:
→ The fixed element of pay – salary,
pension and benefits – is set at an
appropriate level by reference to the
talent markets in which we operate
→ The majority of executive remuneration
is linked to Aggreko’s performance,
with a heavier weighting on long-term
performance than on short-term
performance
→ The remuneration packages reward a
balanced portfolio of measures which
are designed to reflect our goal of
delivering sustainable profit growth
over the long term. We plan to achieve
this by focusing on our four business
priorities of customer focus, technology
investment, capital efficiency and
expert people
→ The Committee is regularly appraised
of developments in the market more
widely. The Committee plans to
commence work on the next policy
renewal (due to be presented to
shareholders at the 2021 AGM) in the
summer of 2020 and will consult with
our largest shareholders and their
representative bodies as part of that
process. Without pre-empting the
outcome of that review, it envisages full
consideration of such developments in
market practice and implementation
of any changes as appropriate.
Full details are set out on page 64
Summary of 2019 performance
outcomes
The Committee set challenging targets
for 2019 and we have reported strong
profit and cashflow growth. Both Chris
Weston, Chief Executive Officer and
Heath Drewett, Chief Financial Officer
earned a total annual bonus for 2019
of 71.54% of salary (54.04% related to
financial objectives and 17.5% to personal/
strategic objectives). For both Executive
Directors this was out of a maximum
175% of salary. Chris and Heath have
made good progress on the challenging
financial performance targets set and
will receive a payment of 38.60% of the
maximum available for the financial
element as set out on page 68.
Chris and Heath shared a single personal/
strategic objective relating to capital
efficiency and ROCE targets were set at
the beginning of 2019. At the end of the
year, following a review of the strong
business performance and full year
progress on capital employed, the
Committee decided that the original
budget presented by management
was the appropriate measure for ROCE
improvement and this remained
consistent with the calculation of the
financial objective (D-EPS) and the
capital efficiency measure for the rest
of the organisation. This involved the
technical exercise of discretion as the
Committee initially set a ROCE scale
which was higher than the agreed plan.
25% of the total bonus is deferred in
Aggreko shares for three years.
Full details of the performance
outcomes for the annual bonus
are set out on pages 67 and 68
LTIP awards granted in June 2017 did not
meet the performance targets, so these
awards will lapse in full.
Full details are set out on page 68
All of these outcomes reflected the
operation of our incentive programme
formulas without the exercise of any
discretion by the Committee other than
the personal/strategic objective where
an on-target payout was deemed valid.
All outcomes were felt to reflect an
appropriate recognition for the year’s
performance.
Implementation of the policy
for 2020
The annual bonus for 2020 for the
Executive Directors will operate on the
same basis as in 2019, with financial
performance – measured against D-EPS
– accounting for 80% of total opportunity
and the remaining 20% measured
against personal/strategic objectives.
Further details can be found on page 65.
Awards under the LTIP will be made at
the same level as the previous year –
250% of salary. The LTIP is designed to
align the interests of management with
those of shareholders in growing the
value of the business over the long-term.
In line with our policy, performance
conditions are reviewed annually to
ensure they remain appropriate and
aligned with shareholder interests.
The awards will again be subject 50%
to EPS (5-12% CAGR on an aggregate
measurement basis) and 50% to ROCE.
The ROCE range of 13-18% (final year
measurement basis) has, consistent with
the policy approved in 2018, been set in
line with the aspirations of our business
performance over the next three years,
which we look forward to updating you
on later in the year. Further details can
be found on page 65.
Salary review – in December 2019 the
Committee undertook a detailed review
of the salaries of our Executive Directors.
Neither Executive Director has received
a salary increase since joining Aggreko
(in January 2015 in the case of the
Chief Executive Officer, Chris Weston).
Following this review the Committee
has agreed to increase the salaries of
Chris Weston and Heath Drewett, Chief
Financial Officer, by 2%. The increases
became effective on 1 January 2020 and
are in line with the budgeted level set
for the wider UK workforce in 2020.
The salaries of both these Executives
will be reviewed again in December 2020,
to take effect from January 2021.
Corporate Governance Code
changes
In response to the introduction of the
new Corporate Governance Code from
January 2019, the Committee’s remit
has been widened to include oversight
of all-colleague remuneration and the
Committee has received reports on
such practices. The Committee considers
that the objective of encouraging
shareholdings beyond cessation
is met through the combination of
holding periods and bonus deferral.
It will consider the adoption of more
formal post-cessation share ownership
guidelines as part of the 2021 policy
renewal.
The 2018 UK Corporate Governance Code
states ‘The pension rates for Executive
Directors or payments in lieu, should be
aligned with those available to the
workforce.’ The Committee notes that
shareholders have endorsed this change.
Thus, while this will also be considered
fully as part of the policy renewal, we
confirm that any new Executive Director
will be appointed with an allowance set
at a rate when expressed as a percentage
of salary no higher than the rate available
to the majority of colleagues either in
the UK or in the jurisdiction in which the
executive resides. The rate for the majority
of the UK workforce is currently 9% (but
subject to periodic review). The rate for
Chris Weston has been reduced for 2020
from 30% of salary to 24%. Both Chris
Weston’s rate and Heath Drewett’s rate
(currently 20%) will reduce to the rate
applicable to the UK workforce generally
with effect from 1 January 2023.
In conclusion
I welcome any shareholder feedback
in the meantime and hope you will
continue to be supportive of the
implementation of our policy in 2020.
Yours sincerely
Barbara Jeremiah
Remuneration Committee Chair
Aggreko plc Annual Report and Accounts 2019
63
REMUNERATION CONTINUED
Our remuneration at a glance
Summary of 2019 remuneration
Our aim
The aim of Aggreko’s remuneration policy is to reward executives for delivering long-term value to our shareholders.
The following table summarises how the policy was applied in 2019 and the components making up the reported single
figure on page 67.
Element of
remuneration
Salary
How the policy works
To pay at an appropriate level in the talent
market(s) relevant to each individual
Cap of £900,000
How it was
implemented in 2019
No increase in 2019
Benefits
To provide market normal benefits
Not expected to exceed 20% of salary
Market-competitive insured
benefits and company car
allowance
Total single figure
(% change from 2018)
CEO
CFO
£750,000
(0%)
£460,000
(0%)
£27,175
(3.2%)1
£19,342
(3%)1
30% of salary cash supplement for
the CEO and 20% for the CFO
£225,000
(0%)
£92,000
(0%)
Pension
Annual
bonus
Defined contribution and/or cash in lieu
Between 20% and 30% of salary
(with no more than 20% for new hires)2
Reward for delivery of annual targets
Cap of 175% for Executive Directors
75% paid in cash, 25% deferred into
shares for three years
D-EPS 80% weighting
Personal objectives 20%
weighting
Long-term
incentives
2019 LTIP grant subject to pre-vest
performance conditions over three years
50% subject to D-EPS
50% subject to ROCE
Legacy awards continue on their terms
2017 LTIP award: subject to
continued service, due to vest
in June 20203
D-EPS 0% vesting
ROCE 0% vesting
Total
40.88% of
maximum
(see page 67)
£536,550 (-17.6%)
40.88% of
maximum
(see page 67)
£329,084 (-19.2%)
0% of maximum
(see page 68)
£0 (0%)
n/a
£1,538,725
(-7.2%)
£900,426
(-8.3%)4
1 Any change in reported value reflects the cost of provisions rather than a change in the level of benefits.
2 The rate for Chris Weston has been reduced for 2020 from 30% of salary to 24%.
3 The 2017 LTIP award which is due to vest in June 2020 is subject to performance conditions over three years, ending on 31 December 2019, with 75% of the award
subject to D-EPS and 25% of the award subject to ROCE. These awards were granted under our previous remuneration policy.
4 Heath Drewett’s total single figure for 2018 included buy-out awards and buy-out payments. These have been excluded from the percentage change calculation.
Executive Directors’ remuneration scenarios
Chris Weston
Chief Executive Officer
Heath Drewett
Chief Financial Officer
2019 Actual
2019 On target
2019 Actual
2019 On target
Key:
Fixed pay
Bonus
LTIP
£1,002,175
£536,550
Total: £1,538,725
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
£1,002,175
£656,250
£468,750
Total: £2,127,175
£571,342
£329,084
£571,342
£402,500 £287,500
Total: £900,426
Total: £1,261,342
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
64 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Implementation of remuneration policy in 2020
The Committee intends to implement the remuneration policy
in 2020 as follows:
Base salaries
Chris Weston and Heath Drewett’s base salaries were reviewed
by the Committee in December 2019; an increase of 2% was
agreed. The increases became effective on 1 January 2020
and are in line with the budgeted level set for the wider UK
workforce in 2020. The Committee intends to confirm in
the new policy to be presented to shareholders in 2021 that
Executive Directors’ salary increases will normally be consistent
with the level of increase set for the wider workforce.
The base salaries for Executive Directors as at 1 January 2020
and 1 January 2019 were as follows:
Executive
Director
Chris Weston
Heath Drewett
Position
Chief Executive
Officer
Chief Financial
Officer
1 January
2020
£
Increase1
%
1 January
2019
£
765,000
2 750,000
469,200
2 460,000
1 The average increase across the Group for 2019 was 4.1%.
Pensions and benefits
Pensions and benefits will continue in line with policy. Any new
Executive Director’s allowance would be set at a rate (when
expressed as a percentage of salary) no higher than the rate
available to the majority of colleagues either in the UK or in
the jurisdiction in which the executive resides – currently 9% for
the majority of the UK workforce. The Committee has elected
to begin this transition for the incumbent Chief Executive
Officer in 2020 rather than deferring any action until 2023.
The rate for Chris Weston has been reduced for 2020 from
30% of salary to 24%. Heath Drewett’s rate is currently 20%.
Annual bonus
The Committee set annual bonus targets for the Executive
Directors on the same basis as in prior years as follows:
Executive Director
Chris Weston
Heath Drewett
D-EPS growth
Personal
objectives
Total max
bonus
% salary
Max bonus
% salary
On-budget
bonus
% salary
Max bonus
% salary
175
175
140
140
70
70
35
35
The personal objectives were set individually for each Director.
All include agreed outcomes for set strategic objectives specific
to their role.
Consistent with the Corporate Governance Code, the
Committee has appropriate discretion to adjust any
formulaic result if it concludes that it is not appropriate
in all the circumstances.
We do not disclose full details of the personal/strategic
objectives for the Executive Directors or the financial targets
in this report, as we consider them to be commercially sensitive.
It is, however, our intention to disclose retrospectively these
targets in next year’s annual report on remuneration.
Long-term Incentive Plan (LTIP)
The Committee approved the grant of 2020 LTIP awards to
Executive Directors with a face value of 250% of salary with the
same EPS performance target as the 2019 awards – 50% EPS
of 5–12% CAGR per annum (aggregate measurement basis).
However, the ROCE performance target will be revised to be
in line with our assessment of the range of performance
acceptable for the business for the next three years taking
into account all facets of our business – 50% ROCE of 13–18%
(final year measurement).
Awards are expected to be granted in March 2020.
As with the annual bonus, consistent with the Corporate
Governance Code, the Committee has appropriate discretion
to adjust any formulaic result if it concludes that it is not
appropriate in all the circumstances.
Aggreko plc Annual Report and Accounts 2019
65
REMUNERATION CONTINUED
Remuneration in context
How our remuneration policy relates
to reward in the wider employee context
The Committee has clear line of sight and oversight of workforce
remuneration and related policies when setting policies of
Executive Director remuneration and to enable it to advise the
Board whether Company policies and practices support culture
and strategy. The Group HR Director and Group Director of
Reward support the Committee in this and at the July meeting
of the Committee provided an overview of annual pay in
Aggreko. Throughout the year, the Committee reviews the
frameworks and budgets for key components of the wider
workforce remuneration, together with the broader structure
of Group bonus arrangements; which ensures appropriate
alignment with executive pay arrangements. The Committee,
as members of the Board, has oversight of the quarterly
Be Heard surveys and direct engagement with the workforce
through focus groups and team meetings.
Employee engagement
Share ownership – employees in a number of countries in
which we operate are offered the opportunity to participate
in our Sharesave plan – nearly 70% of our workforce.
Pay and bonus budgets – the Committee notes the total
budgeted salary and bonus expenditure for all Aggreko
employees, ensuring reward principles are aligned throughout
the business.
Direct engagement with our people – we will communicate a
link to the 2019 Annual Report through our “Orange Segments”
all-employee communication vehicle. Employees will be invited
to comment or ask questions through Orange Segments.
Chief Executive Officer’s pay ratio
The table below discloses the ratio of CEO pay for 2019 and has
been calculated using the statutory method A approach – the
general preference of institutional shareholders.
CEO
£
n/a
25th
percentile
ratio
50th
percentile
ratio
75th
percentile
ratio
44 : 1
30 : 1
21 : 1
£1,538,725
£750,000
£34,875
£27,591
£50,513
£44,521
£72,890
£59,876
CEO pay ratio
Total pay and
benefits
Base salary
Consistent with practice elsewhere, executives have a greater
proportion of their overall pay subject to performance than
other staff. Accordingly, the ratio may prove volatile. For the
delivery of an on-target bonus and LTIP vesting (even ignoring
share price appreciation) the median ratio would have been 41.
Percentage change in remuneration of CEO
The table below shows the change in remuneration of the
Chief Executive Officer in comparison with the average change
in remuneration of employees within the Group central
functions over that period.
Salary/fees
Benefits
Bonus
Percentage
change for
CEO
Percentage change
for Group central
functions
0
3.2
-17.6
4.0
10.5
-21.8
The comparator group relates to the employees within the
Group central functions in the UK, 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, while reducing the distortion that
would arise from including all of the many countries in which
the Group operates, with their different economic conditions.
Gender pay gap
In line with government requirements, we have published our
gender pay gap statistics as at 5 April 2019 and the reported
data is available on our website.
Our gender pay numbers this year show some improvement
from last year, and globally we have seen a small increase in the
proportion of senior women in the workforce. As these numbers
can be sensitive to quite small changes in our workforce profile,
we have clear plans and priorities to take us forward.
The focus in 2019 has been on building awareness and capability
among our most senior leaders so that they can take the
necessary action to build an inclusive culture in their teams
to ensure that Aggreko can support everyone in fulfilling
their potential. For 2020, we plan to continue to share our
commitment to inclusion and collaboration, rolling out a
leadership framework that incorporates inclusion as a key
component of leadership capability and effectiveness and
developing a set of actions and an integrated roadmap
to promote a culture of inclusion and collaboration.
For 2020
During the coming year, the Committee will be developing a
new remuneration policy for 2021. Consistent with the widening
of its remit, the Committee will also review arrangements which
extend beyond the Executive Directors and Executive
Committee members.
In the following section of our report we explain how we have
implemented Aggreko’s remuneration policy during 2019.
The policy in place for the year was the one which was approved
by shareholders at Aggreko’s 2018 Annual General Meeting,
a summary of which is set out on pages 75 to 77.
The full policy is available on the Company’s website:
www.plc.aggreko.com
66 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Annual report on remuneration
Single total figure of remuneration – Executive Directors (audited)
The table below sets out a single figure for the total remuneration received by each Executive Director for the years
ended 31 December 2019 and 31 December 2018.
Executive Director
Chris Weston
Chris Weston
Heath Drewett
Heath Drewett1
2019 Total
2018 Total
Year
2019
2018
2019
2018
Base
salary
£
750,000
750,000
460,000
458,820
1,210,000
1,208,820
Benefits
£
27,175
26,324
19,342
18,784
46,517
Annual
bonus
£
536,550
651,000
329,084
407,100
865,634
45,108
1,058,100
LTIP
£
Sharesave
£
Pension
£
Other
£
Total
£
–
–
–
–
–
–
–
225,000
5,612
–
5,612
–
11,224
225,000
92,000
92,000
317,000
317,000
–
–
–
984,417
–
1,538,725
1,657,936
900,426
1,966,733
2,439,151
984,417
3,624,669
1 Heath Drewett’s remuneration for 2018 is from date of appointment, 3 January 2018.
The figures have been calculated as follows:
→ Base salary: amount earned for the year.
→ Benefits: the taxable value of benefits received in the year. See Benefits below.
→ Annual bonus: the total bonus earned on performance during the year. See Annual bonus scheme below.
→ No LTIPs vested in relation to the 2019 final performance.
→ 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.
→ Pension: the amount of any Company pension contributions and cash in lieu. Chris Weston and Heath Drewett both received
payment entirely in cash.
Total aggregate emoluments for Executive and Non-executive Directors were £3.16 million in 2019.
Additional disclosures in respect of the single total figure of remuneration table
Benefits
Chris Weston and Heath Drewett received healthcare benefits, life assurance cover, income protection, accident insurance
and a car allowance.
The following table shows those benefits that the Committee considers significant:
Executive Director
Chris Weston
Heath Drewett
Annual bonus scheme
Car/fuel
£
12,000
12,000
Other
£
15,175
7,342
Total
£
27,175
19,342
Base
salary
Maximum
incentive
(% of salary)
Financial
performance
metrics
(80%)
Personal
objectives
(20%)
Annual bonus
outcome
Cash
(75%)
Deferred
shares
(25%)
The table below sets out the total bonus entitlement for 2019:
Executive Director
Chris Weston
Heath Drewett
Total max bonus
% salary
Max bonus
% salary
175
175
140
140
Outcome
% salary
54.04
54.04
Max bonus
% salary
Outcome
% salary
35
35
17.5
17.5
% salary
71.54
71.54
£
536,550
329,084
D-EPS growth
Personal objectives
Total payable1
1 The total bonus includes the 25% deferred shares element.
The maximum bonus opportunity for 2019 for both Executive Directors was 175% of salary.
Bonus payments are payable as 75% in cash and 25% deferred into shares for three years. The Committee has discretion to
reduce the number of shares that can vest in the event of gross misconduct, material misstatement of the accounts or any
other circumstances or events that arise which the Committee considers to be sufficiently exceptional to justify the operation
of malus/clawback.
Aggreko plc Annual Report and Accounts 2019
67
REMUNERATION CONTINUED
Annual report on remuneration continued
The targets under the 2019 annual bonus scheme were based 80% on financial performance measures set against the annual
budget at the start of the year and 20% against personal/strategic objectives.
Financial performance measures
The financial objectives for the Chief Executive Officer (Chris Weston) and Chief Financial Officer (Heath Drewett) were measured
against D-EPS.
For the financial measure, they 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 in between.
The bonus then increases on a straight-line basis to the maximum, calculated as a percentage above budget.
The table below shows the performance against budget of the financial performance measure used for calculating the annual
bonus for 2019:
Measure
Maximum
Threshold
Outcome
Budget
D-EPS1
48.0p
95
50.5p
55.6p
110
49.9p1
% budget
% budget
% budget
98.86
% maximum
earned
38.60
1 As provided for under the plan, the reported D-EPS has been adjusted to a constant currency basis.
Personal/strategic performance measures
Capital efficiency was a key priority for Aggreko in 2019. Chris Weston and Heath Drewett shared a single personal/strategic
objective relating to capital efficiency – to improve Group ROCE. Against this personal objective they could achieve the
maximum bonus entitlement of 35% of salary, 17.5% at target.
The Committee reviewed performance against this measure and the table below shows the Committee’s assessment
of the personal/strategic performance measure used for calculating the annual bonus for 2019:
Weighting (% total bonus) 20%
Metric
ROCE
Chosen to reflect strategic focus on capital efficiency
Target and assessment
Target range from 11.2% (budget) to 11.8% (ROCE measured using the average of 3 in-year data points)
All outcomes to be subject to post year qualitative assessment by the Committee of in-year
performance and full year progress on capital efficiency
11.2% ROCE (based on average of 3 in-year data points)
Following year end, the scale was re-aligned to the original budget. The Committee reviewed
the decision to approve a payout in line with the original budget metrics with the entire Board
and the Committee exercised its discretion accordingly. This resulted in an on-target outcome.
This is consistent with the use of the ROCE metric in Aggreko’s bonus plans generally for the
wider workforce.
17.5%
Outcome
% salary payable
An explanation of the Committee’s review of performance is detailed in the Committee Chair’s letter on page 63.
Long-term Incentive Plan (LTIP)
No. of
awards
granted
D-EPS
performance
(75%)
ROCE
performance
(25%)
Share
price on
vesting
LTIP
outcome
The performance criteria for the LTIP awards granted in 2017 were as follows:
→ 75% of the award is based on three-year cumulative D-EPS as compared with three-year compound growth in real terms
(RPI-adjusted). 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 on a straight-line basis to a maximum at
an equivalent of RPI+15% per annum growth
→ 25% of the award is based on average ROCE over the three-year 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 on a straight-line basis
to the maximum at 25% ROCE
→ The performance period for the 2017 LTIP awards ended on 31 December 2019. Over the three-year period:
– Aggreko’s aggregate D-EPS was 145.3 pence. Since the threshold of growth of RPI+3% was not achieved, no shares will
vest under this performance measure
– Aggreko’s actual average ROCE for the period was 10.7%. Since this was less than the threshold of 20%, no shares will
vest under this performance measure
As a result, all 2017 LTIP awards lapsed in full.
68 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Share awards granted in 2019 (audited)
Base
salary
Maximum
incentive
(% of salary)
Share
price at
grant
No. of
awards
granted
This simply determines the size of the grant. Whether the award ultimately delivers value will depend on the extent to which the performance targets are met over the
following three years (and to which a further two-year holding period is met).
In April 2019, Chris Weston and Heath Drewett were granted awards of shares under the LTIP, with a value equivalent to 250%
of salary. The three-year performance period over which D-EPS will be measured began on 1 January 2019 and will end on
31 December 2021. ROCE will be measured on a final year basis – in 2021. None of the awards granted under the LTIP are eligible
to vest until 1 April 2022.
The performance criteria for the LTIP awards granted in 2019 are as follows:
→ 50% of the award is based on three-year cumulative EPS. No performance shares will be awarded against this element if
performance is below an equivalent of 5% per annum growth. If performance is equivalent to 5% per annum growth, 25%
of the award will vest. Vesting will increase on a straight-line basis to a maximum at an equivalent of 12% per annum growth
→ 50% of the award is based on final year ROCE (2021) in a range of 15% to 22%. No performance shares will be awarded against
this element if performance is less than 15%. If performance is equivalent to 15% ROCE, 25% of the award will vest and awards
will increase on a straight-line basis to the maximum at 22% ROCE
Shares which vest will be subject to a further holding period of two years in accordance with the rules of the LTIP.
In addition, 25% of the 2018 bonus payments for Chris Weston and Heath Drewett were deferred into shares under the Deferred
Share Bonus Plan (DSBP). These shares will be released three years from the date of grant.
The table below shows details of interests awarded to Executive Directors during 2019:
Executive Director
Chris Weston
Heath Drewett
LTIP
Face value1
£
1,874,997
1,150,000
% vesting on
minimum
performance
25
25
Shares
242,561
148,771
DSBP
Face value2
£
162,747
101,773
% vesting on
minimum
performance
100
100
Shares
21,054
13,166
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 of Aggreko shares over the
five business days prior to the date of grant of 1 April 2019, which was used to determine the number of shares awarded, being 773 pence.
2 Face value of DSBP is the number of shares awarded on 1 April 2019 multiplied by the average market price of Aggreko shares over the five business days prior to the date
of grant which was used to determine the number of shares awarded, being 773 pence.
3 Both awards will further increase to reflect the value of any dividends paid over the vesting period.
Executive Directors’ shareholdings (audited)
As at 31 December 2019, the shareholdings of the Executive Directors were as follows:
Director
Chris Weston
Heath Drewett
(A)
Shares
owned
outright1
83,788
–
(B)
Shares
held subject
to deferral
Shares held
subject to
performance
conditions2
Options
held not subject
to performance
conditions3
Shareholding
guidelines
% salary
Shares counting
towards
guidelines
(A + B)
Current
shareholding
% salary4
51,163
42,936
759,776
395,400
2,727
2,727
250
250
134,951
42,936
150
78
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 a share price of 832.6 pence as at 31 December 2019. Under the Company’s share ownership guidelines, Executive Directors have a period
of five years to achieve the shareholding guideline of not less than 250% of base salary.
Departing executives only receive deferred share awards at the normal time of maturity so are required to maintain some level
of ownership post-cessation.
There have been no changes in the Executive Directors’ interests in Ordinary Shares between 31 December 2019 and 3 March 2020.
Chris Weston and Heath Drewett, as employees of the Company, have an interest in the holdings of the Aggreko Employee
Benefit Trust (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 2019, the trustees of the EBT held a total of 1,611,875 Aggreko plc Ordinary Shares and the holding at the date
of this report is 1,554,060. The dividend has been waived on these shares. All Aggreko share plans are settled through the use
of market purchase shares so the Company has not utilised any of its available dilution limits.
Aggreko plc Annual Report and Accounts 2019
69
REMUNERATION CONTINUED
Annual report on remuneration continued
Share awards and share options
The table below shows details of share awards or options over Ordinary Shares in the Company pursuant to the Company’s share-
based incentive plans for Executive Directors who were in office for any part of the 2019 financial year. Details of awards and options
granted to Executive Directors in 2019 under these plans are also included on page 69.
Options/
awards
granted
during
year
Options/
awards
exercised/
vesting
during
year
Options/
awards
lapsing
during
year
At
31 December
2019
Market
price at
date
awards
granted
(pence)4
Exercise
price –
options
(pence)
As at
1 January
2019
Chris Weston
LTIP1
2016
2017
2018
2019
DSBP2
2017
2018
2019
Sharesave
2015
2018
Heath Drewett
LTIP1
2018
2019
DSBP2
2019
Restricted stock
agreements3
2018
2018
Sharesave
2018
209,302
260,718
256,497
–
5,569
24,540
–
2,168
2,727
–
–
–
242,561
–
–
21,054
–
–
157,318
–
–
148,771
–
13,166
29,770
89,311
2,727
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
209,302
–
–
–
–
260,718
256,497
242,561
–
–
–
5,569
24,540
21,054
1,075
863
731
773
909
735
773
Normal
vesting date/
exercise period
May 2019
June 2020
May 2021
April 2022
March 2020
March 2021
April 2022
2,168
–
–
2,727
1,027
865.8
830
660
January – June 2019
January – June 2022
–
–
–
–
–
–
157,318
148,771
13,166
731
773
773
29,770
89,311
724.6
724.6
May 2021
April 2022
April 2022
August 2020
April 2021
2,727
865.8
660
January – June 2022
1 All LTIPs have performance periods of three financial years commencing with the financial year in which the award is granted.
2 Awards under the Deferred Share Bonus Plan (DSBP) are not subject to any performance conditions other than continued employment on the vesting date.
3 Restricted stock agreements – conditional share awards were granted under our restricted stock agreements on 3 May 2018 to compensate Heath Drewett for the forfeiture
of variable awards from his previous employment as explained on page 80 of our Annual Report 2017.
4 Market price at date awards granted is the average market price of an Aggreko share over the five business days prior to the date of grant for the LTIP and DSBP awards
(which was used to determine the number of shares awarded). Market price for Sharesave is the market price on the date of grant. For the awards granted under the
restricted stock agreements market price is the share price on date of grant, being 3 May 2018.
Arrangements with past Directors (audited)
Exit payments
There were no exit payments during the year.
70 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Relative importance of spend on pay
The chart below shows Aggreko’s profit after tax, dividend and total employee pay for the financial years ended 31 December 2018
and 31 December 2019, and the percentage change.
Profit after tax £m
2018
+3.2%
Dividend £m
2018
+2.9%
Total employee pay £m
2018
+1.2%
2019
2018
£129m
£125m
2019
2018
0
28
56
84
112
140
0
20
40
£71m
£69m
60
2019
2018
£427m
£422m
80
100
0
100
200
300
400
500
Dividends are the interim and final dividends paid in respect of the financial year ended 31 December 2018 and the interim
dividend paid and the final dividend recommended in respect of the financial year ended 31 December 2019.
Comparison of Company performance
The graph below shows the value, at 31 December 2019, of £100 invested in Aggreko’s shares on 31 December 2009 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.
£221
£192
£192
£161
£100
£100
£114
£111
£124
£171
£151
£149
£152
£106
£178
£109
£201
£98
£182
£93
£217
£109
250
200
150
100
50
0
Dec 2009
Dec 2010
Dec 2011
Dec 2012
Dec 2013
Dec 2014
Dec 2015
Dec 2016
Dec 2017
Dec 2018
Dec 2019
Aggreko
FTSE350 Index
Source: Thomson Reuters
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
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
CEO
Rupert Soames
Rupert Soames
Rupert Soames
Rupert Soames
Angus Cockburn
Chris Weston
Chris Weston
Chris Weston
Chris Weston
Chris Weston
Single figure
of total remuneration
£1
Annual bonus payout
against maximum
%
Long-term incentive
vesting rates against
maximum opportunity
%
5,839,209
8,501,865
2,685,840
1,779,144
1,290,9062
1,485,5163
1,909,1553
2,320,1123
1,657,936
1,538,725
100
82.4
6.4
49.6
42.4
0
15
55
50
40.9
100
100
100
72.5
5.8
0
0
0
0
0
1 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 the date of vesting
for the LTIP.
2 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.
3 The 2015 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 2016 figure includes an amount of £706,620 and the 2017 figure includes an amount of £598,865 to compensate him for the forfeiture of long-term
incentives from his previous employer.
Aggreko plc Annual Report and Accounts 2019
71
REMUNERATION CONTINUED
Annual report on remuneration continued
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 the remuneration policy and level of fees for the Chairman
of the Board (although the Chairman of the Board does not take part in the 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 Chair of the Audit, Remuneration and Ethics & Corporate Responsibility
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 Chairman’s fee has not increased
since April 2015 and the fees for the Non-executive Directors have not increased since July 2015. Uwe Krueger has opted to forego
any fees as a Non-executive Director for 2020, as he did in 2018 and 2019. The Company will make donations to ShelterBox (an
international disaster relief charity) and African Parks (an organisation that supports rehabilitation and long-term management
of national parks across Africa) equivalent, in total, to the fees foregone.
The fees for the Chairman and Non-executive Directors as at 1 January 2020 and 1 January 2019 were as follows:
Role
Chairman fee
Non-executive Director base fee
Committee Chair additional fee
Senior Independent Director additional fee
1 January 2020
£
342,000
61,000
20,000
20,000
Single total figure of remuneration – Non-executive Directors (audited)
Non-executive Director
Ken Hanna
Ken Hanna
Nicola Brewer
Nicola Brewer
Barbara Jeremiah
Barbara Jeremiah
Sarah Kuijlaars1
Uwe Krueger2
Uwe Krueger2
Diana Layfield
Diana Layfield
Ian Marchant
Ian Marchant
Miles Roberts
Miles Roberts
2019 Total
2018 Total
Year
2019
2018
2019
2018
2019
2018
2019
2019
2018
2019
2018
2019
2018
2019
2018
Fees
£
342,000
342,000
81,000
61,000
81,000
74,564
15,250
–
–
61,000
61,000
81,000
81,000
61,000
61,000
722,250
680,564
Increase
%
1 January 2019
£
0
0
0
0
Benefits
£
1,925
851
–
–
1,755
2,317
–
–
–
–
–
–
–
–
–
3,680
3,168
342,000
61,000
20,000
20,000
Total
£
343,925
342,851
81,000
61,000
82,755
76,881
15,250
–
–
61,000
61,000
81,000
81,000
61,000
61,000
725,930
683,732
1 Sarah Kuijlaars’ remuneration for 2019 is from date of appointment, 1 October 2019.
2 Uwe Krueger opted to forego any fees for 2018 and 2019. The Company made donations to ShelterBox and African Parks equivalent, in total, to the fees foregone.
The figures have been calculated as follows:
→ Fees: amount earned for the year
→ Benefits: the taxable value of benefits received in the year
72 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Non-executive Directors’ shareholdings (audited)
As at 31 December 2019, the shareholdings of the Non-executive Directors were as follows:
Director
Ken Hanna
Nicola Brewer
Barbara Jeremiah
Sarah Kuijlaars
Uwe Krueger
Diana Layfield
Ian Marchant
Miles Roberts
Shares
owned
outright1
15,644
1,450
1,000
–
3,101
2,855
3,331
–
1 This includes shares held by connected persons.
There have been no changes in the Non-executive Directors’ interests in Ordinary Shares between 31 December 2019
and 3 March 2020.
Directors’ service contracts
Each of the Directors will be proposed for election or re-election at the Company’s Annual General Meeting to be held
on 23 April 2020.
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
Heath Drewett
Chris Weston
Position
Effective date of contract
Chief Financial Officer
Chief Executive Officer
3 January 2018
2 January 2015
Notice period
From Director
From Company
12 months
12 months
12 months
12 months
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
Ken Hanna
Nicola Brewer
Barbara Jeremiah
Sarah Kuijlaars
Uwe Krueger
Diana Layfield
Ian Marchant
Miles Roberts
1 Replaces earlier letter of appointment.
Position
Effective date of letter of appointment
Unexpired term as at 31 December 2019
Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
29 April 20181
25 February 20191
7 March 2017
1 October 2019
1 February 20181
1 May 20191
1 November 20191
7 March 2017
1 year 4 months
2 years 2 months
2 months
2 years 9 months
1 year 1 month
4 months
10 months
2 months
External appointments
It is the Board’s policy to allow the Executive Directors to accept non-executive 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, Chris Weston did not hold any external directorships of other quoted companies.
He served as a Non-executive Director of the Royal Navy during the year. Fees for 2019 in relation to this appointment were £15,000.
Heath Drewett did not hold any external directorships.
Aggreko plc Annual Report and Accounts 2019
73
REMUNERATION CONTINUED
Annual report on remuneration continued
Our Remuneration Committee
Determining the remuneration for the Executive Directors and Executive Committee members is a key focus of the Committee.
The Committee oversees Aggreko’s overall remuneration policy, strategy and implementation to ensure that the policy is aligned
with the key objectives of growing earnings and delivering a strong return on capital employed.
Environmental, social and governance (ESG) factors are considered when assessing the personal element of the Executive
Directors’ performance and the Committee is satisfied that the design of the incentive plans does not pose undue ESG risks.
The Remuneration Committee is currently made up of four Independent Non-executive Directors. Peter Kennerley is Secretary
to the Committee. We also invite the Chief Executive Officer, Group HR Director and Group Director of Reward to attend our
meetings. The Chairman and the Executives are not present when their personal remuneration is discussed.
In 2019, as well as holding four meetings of the Committee, we also took a number of decisions based on papers circulated outside
the context of a formal meeting.
Our role is as follows:
→ Determine and agree with the Board the policy for remuneration for the Chairman, Executive Directors
and Executive Committee
→ 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 the Secretary)
→ 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
→ Review the design of all share incentive plans for approval by the Board and shareholders
→ Review the pay and other main terms of employment of employees more generally
→ Determine the policy for and scope of pension arrangements for each Executive Director and members
of the Executive Committee
→ Oversee any major changes in employee benefit structures throughout the Group
Read the full Terms of Reference for the Committee: www.plc.aggreko.com
Shareholder voting and shareholder engagement
The following table shows the results of the binding vote on the remuneration policy at the 2018 AGM and the advisory vote on the
2018 Remuneration Report at the 2019 AGM.
For
Against
Total votes cast (excluding withheld votes)
Votes withheld1
Total votes cast (including withheld votes)
Remuneration policy
Remuneration Report
Total number
of votes
187,861,052
2,606,948
190,468,000
20,902
190,488,902
% of
votes cast
Total number
of votes
% of
votes cast
98.63
1.37
100
–
–
186,342,627
9,203,889
195,546,516
421,848
195,968,364
95.29
4.71
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.
The Committee is committed to a continuous, open and transparent dialogue with shareholders on the issue of executive
remuneration. The Committee plans to consult extensively with our shareholders in 2020 as we develop the remuneration
policy for consideration by shareholders in 2021.
Consideration by the Directors of matters relating to Directors’ remuneration
The Committee was advised by FIT Remuneration Consultants LLP as the principal external adviser to the Committee for 2019. FIT
was appointed in 2017 by a sub-committee of the Committee comprising the current Chair, Barbara Jeremiah, and the previous
Chair, Russell King. FIT is a member of the Remuneration Consultants Group and signatory to its code of conduct and charges on
its normal terms. Taking these factors into account, the Committee is satisfied as to the impartiality and objectivity of FIT’s advice.
The fee paid to FIT in respect of work that materially assisted the Committee in 2019 was £29,143, which includes advice for and
attendance at all meetings of the Committee including a market and governance update. FIT provided no other services to
the Group.
74 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2018 remuneration policy summary
A summary of Aggreko’s remuneration policy approved by shareholders at the 2018 AGM is set
out below. For the full remuneration policy, please refer to the 2017 Directors’ Remuneration
Report available on the Company’s website www.plc.aggreko.com.
Executive Directors
Fixed pay
Base salary
Purpose and link to strategy
To attract, reward and retain talent
by ensuring base salaries are at an
appropriate level in the talent market(s)
relevant to each individual.
Operation
Base salaries are generally reviewed
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 comparator companies;
and salary increases more broadly across
the Group.
External benchmarking data is used
with caution, but will reflect the size
and complexity of the role in question.
Internal relativities are equally important
when determining the correct level at
which to set base salaries.
Opportunity
Any base salary increases are applied
in line with the outcome of the annual
review and generally expected to be in
line with those of the wider workforce,
although the Committee may award
a higher increase in exceptional
circumstances (such as to reflect
development in role).
Any salary will not exceed £900,000.
Performance measures
None, although continued good
performance is a factor considered
when reviewing salaries.
Pension
Purpose and link to strategy
To provide relevant statutory benefits
and be competitive in the market in
which the individual is employed.
Operation
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.
Opportunity
Contributions of between 20% and 30%
of salary per annum except where limited
by local practice.
For new hires, the pension contribution
will be up to 20% of salary per annum.
Benefits
Purpose and link to strategy
Designed 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.
Operation
Includes healthcare benefits, life
assurance cover, a company car (or an
allowance in lieu). Where appropriate,
we would provide an expatriate package,
including bearing the cost of any local
taxes payable on any expatriate benefits,
relocation costs, living allowances and
school fees.
Performance measures
None.
Any reasonable business-related
expenses (including tax thereon) can
be reimbursed if determined to be a
taxable benefit.
Executive Directors are eligible for other
benefits which are introduced for the
wider workforce on broadly similar terms.
Opportunity
Benefits vary by role and local practice,
and are reviewed periodically relative
to market.
Benefits (excluding travel and related
taxes and tax equalisation payments
where appropriate) payable to Executive
Directors will not exceed 20% of salary
(and did not exceed 10% of salary during
the most recent financial year). In line
with market practice, it is not anticipated
that in normal circumstances the cost
of benefits provided will exceed this level
of 10% over the next three years.
The Committee retains the discretion
to approve a higher cost in exceptional
circumstances (e.g. relocation and/or tax
equalisation) or in circumstances where
factors outside the Company’s control
have changed materially (e.g. increases
in insurance premiums, provider costs
or taxes).
Performance measures
None.
Aggreko plc Annual Report and Accounts 2019
75
REMUNERATION CONTINUED
2018 remuneration policy summary continued
Variable pay
Annual bonus scheme
Purpose and link to strategy
To focus Executive Directors on achieving
demanding annual targets relating to
Group performance.
Long-term Incentive Plan
Purpose and link to strategy
To align the interests of management
with those of shareholders in growing the
value of the business over the long term.
Operation
Performance measures and targets
are set at the start of the year and are
weighted to reflect the balance of Group
and, where appropriate, business unit
responsibilities for each Executive
Director.
At the end of the year the Committee
determines the extent to which these
have been achieved. The Committee has
the ability to exercise discretion to adjust
for factors outside management control.
Bonus payments are typically delivered as
75% in cash and 25% deferred into shares
and released after three years. Dividends
will accrue on the deferred share
element.
Malus and/or clawback provisions apply
as described in the 2017 Directors’
Remuneration Report.
Opportunity
The maximum annual bonus opportunity
for Executive Directors is 175% of salary.
The financial element of the bonuses
start to be earned for threshold
performance (for which no bonus is paid).
Performance measures
Performance is assessed annually with up
to 30% (currently 20%) of the maximum
bonus potential based on personal/
strategic objectives aligned to the
Group’s KPIs and the balance based
on appropriate Group and/or business
unit financial performance. The current
measure for financial performance
is D-EPS, but may vary each year
depending on business context
and strategy.
Further details of the performance
measures proposed for the 2020 annual
bonus are set out in the Annual
remuneration statement on page 65.
Vesting of awards is subject to
performance conditions based on the
long-term financial performance of the
Group; the value of the awards is based
on both the proportion vesting and the
movement in the share price over the
vesting period.
Operation
The LTIP comprises a single Performance
Share Plan (PSP).
Awards are normally granted annually.
Award levels and performance conditions
are reviewed from time to time to ensure
that they remain appropriate and aligned
with shareholder interests.
Awards normally vest after three years,
subject to performance and continued
office or employment. Awards which
vest will be subject to a further holding
period of two years. The holding period
will end early on a takeover, scheme of
arrangement or winding up of the
Company, upon the death of an
individual or in exceptional circumstances
on such other date determined by the
Committee. On vesting, participants
will be entitled to the equivalent of any
dividends on the shares between grant
and vesting or the earlier of the date
of exercise of an option and the expiry
of any holding period.
Malus and/or clawback provisions apply
to awards as described in the 2017
Directors’ Remuneration Report.
Opportunity
The PSP provides for a nil-cost conditional
award of shares worth up to an aggregate
limit of 250% of salary per annum for
Executive Directors.
Performance measures
The performance measures for the PSP
will be based on Group performance with
at least 75% linked to Group financial
performance.
The Committee has the discretion to
reduce vesting levels if, exceptionally,
it considers the strict application of
the performance conditions would
produce a result inconsistent with our
remuneration principles, where the
formulaic outcome does not genuinely
reflect the underlying performance of
the Group, or where necessary to avoid
unintended consequences.
The Committee also has the ability
to include additional or alternative
performance measures, weightings
and/or targets in future years to take
account of the Group’s key strategic
and operational aims and targets,
and business outlook at that time.
Further details of the 2020 performance
measures proposed are set out on
page 65.
Share ownership guidelines
The Committee has a policy of
encouraging Executive Directors to
acquire and retain a material number
of shares in the Company, with the
objective of further aligning their
long-term interests with those of other
shareholders. The minimum requirement
for Executive Directors is 250% of salary.
76 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Non-executive Directors and Chairman
Incentives and benefits
for Non-executive Directors
and Chairman
Non-executive Directors and the
Chairman do not participate in
incentive arrangements or receive
other remuneration in addition to
their fees. However, where appropriate,
the Company may provide additional
benefits in kind (for example,
reimbursement of travel costs and
taxes thereon), and the Chairman may
receive healthcare and/or other market
standard benefits. Overall, benefits
are not expected to exceed 20% of
the annual fee in any year.
This Report was approved by the Board
on 3 March 2020.
Barbara Jeremiah
Remuneration Committee Chair
Non-executive Directors’ and
Chairman’s fee
Purpose and link to strategy
To attract and retain Non-executive
Directors and a Chairman with an
appropriate degree of skills, experience,
independence and knowledge of the
Group and its business.
Operation
Fee levels for Non-executive Directors
are generally reviewed by the Board
annually. Remuneration comprises an
annual fee for acting as a Non-executive
Director and serving as a member of
any Committees. Additional fees are
paid in respect of service as Chairman
of a Committee or as Senior
Independent Director.
The Chairman’s remuneration comprises
an annual fee for acting as Chairman,
which includes serving as Chairman
or as a member of any Committees.
The Remuneration Committee sets
the Chairman’s remuneration, subject
to review when appropriate.
When reviewing fees, reference is made
to fees payable in companies of a similar
size and complexity, information provided
by a number of remuneration surveys,
the extent of the duties performed and
the expected time commitment of
the role.
Any reasonable business-related
expenses (including tax thereon) can
be reimbursed if determined to be
a taxable benefit.
Opportunity
Any fee increases are applied in line
with the outcome of the annual review.
Currently the maximum aggregate
annual fee for all Non-executive Directors,
including the Chairman, provided in the
Company’s Articles of Association is
£900,000.
Performance metrics
None.
Aggreko plc Annual Report and Accounts 2019
77
STATUTORY DISCLOSURES
Directors’ Report and
Strategic Report
The Directors’ Report and Strategic
Report for the year ended 31 December
2019 comprise pages 46 to 82 and pages
1 to 45 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 1 to 45. Specifically these are:
→ Future business developments on
page 10
→ Stakeholder information is included in
the Section 172 statement on page 42
Disclosures in relation to Listing Rule LR
9.8.4R, where applicable, are included
on page 68 in relation to Long-Term
Incentive Plans and on page 80
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.
a total for the year of 27.65 pence per
Ordinary Share (2018: 27.12 pence),
payable on 21 May 2020 to shareholders
on the register at the close of business
on 24 April 2020.
Dividend payments and DRIP
The Dividend Reinvestment Plan (DRIP)
allows shareholders to purchase
additional shares in Aggreko with their
dividend payments. Further information
and a mandate can be obtained from
our Registrar, Link Asset Services, whose
details are set out on page 145 and the
shareholder information pages of our
website at www.plc.aggreko.com.
Share capital
On 31 December 2019, 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%, 29.20%
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 22 to the
Accounts on page 117.
Material share interests
As at 31 December 2019, 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:
Division of responsibilities and
matters reserved for the Board
How we divide up our responsibilities at
Board level and the schedule of matters
reserved for the Board are available on
our website at www.plc.aggreko.com.
Shareholder
Capital Group
Companies LLP
Lion Investment
Partners LLP
M&G Plc
Number
of shares
% of total
voting rights
13,446,515
5.24
13,307,481
9,351,326
5.20
3.65
2020 Annual General Meeting
The Company’s Annual General Meeting
will be held at 11.00am on 23 April 2020
at 200 St Vincent Street, Glasgow G2 5RQ.
The Notice of Meeting is set out on pages
139 to 144 of this document and is also
available on the shareholder information
pages of our website at www.plc.
aggreko.com.
Dividends
The interim dividend of 9.38 pence per
Ordinary Share was paid on 1 October
2019. The Directors recommend a final
dividend of 18.27 pence per Ordinary
Share in respect of the year, making
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 of 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.
Restrictions on voting
No member is, unless the Board
otherwise decides, entitled in respect
of any share held by them 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 them
in respect of that share remain unpaid or
if they are a person with a 0.25% interest
(as defined in the Articles) and they have
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
78 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
A Director may be removed by special
resolution of the Company. In addition,
the office of a Director must be vacated
if: (i) they resign their office by notice in
writing delivered to the office or tendered
at a meeting of the Board; or (ii) by notice
in writing they offer to resign and the
Board resolves to accept such offer; or
(iii) their 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) they are
absent without the permission of the
Board from meetings of the Board
(whether or not an alternate Director
appointed by them attends) for six
consecutive months and the Board
resolves that their office is vacated; or
(vii) they become bankrupt or compound
with their creditors generally; or (viii) they
are prohibited by law from being a
Director; or (ix) they cease to be a Director
by virtue of the Companies Acts or are
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.
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 monies 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 monies 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.
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 quarters 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 them) 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 them (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:
→ Certain restrictions may from time
to time be imposed by laws and
regulations (for example, insider
trading laws), in particular we operate
a share dealing code which requires
Directors of the Company and certain
employees to obtain the approval
of the Company before dealing in
the Company’s Ordinary Shares
→ 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 www.plc.aggreko.com. Unless
expressly specified to the contrary in the
Articles, the Articles may be amended
by a special resolution of the Company’s
shareholders.
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/she was last
elected. However, in line with the 2018
UK Corporate Governance Code, all
Directors will stand for annual election
at the 2020 AGM.
Aggreko plc Annual Report and Accounts 2019
79
STATUTORY DISCLOSURES CONTINUED
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 2019 to allot relevant securities up to
a nominal amount of £4,126,149. That
authority will apply until the earlier of
30 June 2020 or at the conclusion of
the Annual General Meeting for 2020.
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 2021).
Special resolutions 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
2019 to make market purchases of
up to 25,612,820 Ordinary Shares. This
authorisation will expire on the earlier
of the conclusion of the Annual General
Meeting of the Company for 2020 or
30 June 2020.
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/her; 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
Estera Trust (Jersey) Limited, as Trustee
of the Aggreko Employee Benefit Trust,
holds 0.61% of the issued share capital
of the Company as at 3 March 2020 on
trust for the benefit of the employees and
former employees of the Group and their
dependants. 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.
Going concern and viability
statements
The going concern statement is included
on page 94 of the financial statements.
The viability statement is included on
page 37 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 to disclose 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 they ought to have taken
as a Director to make themselves 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.
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.
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.
80 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Human rights
As we continue to grow our business in
developing countries, we recognise that
human rights are a concern in many
regions in which we operate. 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. In addition,
we manage risks in relation to talent
management and health and safety
within our risk management framework.
While 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.
Greenhouse gas emissions
In line with the Company’s 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
emissions factors from recognised public
sources including the UK Department
for Business, Energy and Industrial
Strategy (BEIS), the US Energy
Information Administration (EIA), the
US Environmental Protection Agency
(EPA) and the Intergovernmental Panel
on Climate Change(IPCC).
Scope 1 emissions are from those
activities owned and operated by
Aggreko, and include fuel combusted in
the Aggreko generator fleet (by far the
greatest proportion of emissions); fuel
combusted in Aggreko premise’s boilers;
fuel combusted in Aggreko-owned
vehicles; refrigerant gas lost from
Aggreko A/C units or vehicles; and
emissions of SF6. Scope 1 emissions
are considered to be those over which
the Company has the most control.
Scope 2 emissions are from electricity
consumed in Aggreko-owned premises.
Although the consumption of the
electricity occurs at Aggreko premises,
the electricity itself is generated by a
third-party (i.e. the power station) and
actual emissions from the production
of the electricity occur without Aggreko’s
control, hence why this is a separate
scope.
Scope 3 emissions are everything else,
and consist primarily of the upstream
emissions from fuel combusted in the
Aggreko fleet (upstream emissions are
from all activities associated with the fuel
before it is actually combusted, so its
extraction, refining, transportation
etc.); other Scope 3 emissions include
transport of the fleet by third-party
vehicles; business travel (air and rail
travel etc); and waste and water supply/
treatment.
The tables below present the principal
findings from GHG analysis of the
previous three years:
Total GHG emissions by GHG
protocol scope
tCO2e/year
Scope 1
4,571,080
6,259,024
2019
2018
2017
14,716,676
Total GHG emissions by fleet/non-fleet
tCO2e/year
2017
Fleet
13,829,638
17,556,543
13,149,392
2019
2018
Non-fleet
139,978
126,277
135,652
Total
13,969,616
13,275,669
17,692,195
In 2019, we emitted 13,969,616 tonnes of
CO2e, an increase of 5.2% over 2018. 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.
As can be seen above, there is a slight
increase in fleet emissions of 5.2%. This is
due to an increase in calculated running
hours which were stated as 61,877,424 in
2019, a 16% increase from the 2018 value
of 53,193,209. It is understood that the
increase in running hours is due, in part
as least, to an improved method of
querying the generator meter reading
as outlined by the Aggreko ATS team.
In line with best practice, our GHG
accounting systems include an estimate
of the upstream GHG emissions
associated with fuel supply chains; in 2019
this contributed 16% of fleet combustion
emissions accounting for 23% of Scope 3
emissions.
In terms of the non-fleet activities,
emissions from activities associated with
premises use (energy, waste, water and
refrigerant gases) and company vehicles
have increased, while emissions from
business travel and third party freight
have decreased compared to 2018. The
most significant reduction is observed
within freight emissions (-26%) due in
part to more accurate freight data
collection.
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 to report Revenue Intensity
as a suitable metric to measure year-
on-year performance.
As can be seen from the chart below
relative emissions (expressed in tCO2e/k£)
have increased slightly (14%) from 2018
due to the aforementioned increase in
fleet emissions.
Scope 2
Scope 3
Total
21,94
17,017
21,414
9,376,572
6,999,628
2,954,104
13,969,616
13,275,669
17,692,195
Aggreko plc Annual Report and Accounts 2019
81
STATUTORY DISCLOSURES CONTINUED
Revenue utensity ratio tCO2e/ thousand £
15
12
9
6
3
0
2012 2013 2014 2015 2016 2017 2018 2019
* Please note the 2017 value has changed from 10.22
due to accounting changes
Whilst normalising emissions by Revenue
can be informative we feel that running
hours (the number of hours our fleet
are operational for) is a more suitable
intensity metric to measure year-on-year
performance. The chart below shows
relative emissions using the running
hours intensity metric for reporting years
2014 to 2019.
Running hour intensity ratio tCO2e/ running hour
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
2014
2015
2016
2017
2018
2019
In addition, Aggreko’s Northern Europe
business has been certified to the Carbon
Trust Standard (replacing our CEMARS
certification as referenced in previous
Annual Reports). The Carbon Trust
Standard recognises organisations
that follow best practice in measuring,
managing and reducing their
environmental impact, achieving year-
on-year reductions in carbon dioxide
emissions. The Northern Europe business
also achieved certification to ISO 50001,
which validates a best practice approach
to energy management, helping us to
set a framework to continually improve
energy performance. As part of this work,
the Northern Europe business changed
their electricity supplier for their service
centres to a supplier offering 100%
renewable electricity.
Branches
Subsidiaries of the Company have
established branches in a number of
different countries in which they operate.
Auditor
Resolutions re-appointing KPMG as the
Company’s and Group’s auditor and
authorising the Audit Committee to
determine its remuneration will be
proposed at the Annual General Meeting.
Important events since
31 December 2019
There have been no important events
affecting the Company or any subsidiary
since 31 December 2019.
Political donations
No political donations were made during
the financial year (2018: nil).
Approval of the Strategic
Report and Directors’ Report
The Strategic Report set out on pages
1 to 45 and Directors’ Report set out on
pages 46 to 82 were approved by the
Board on 3 March 2020 and have been
signed by the Company Secretary on
behalf of the Board.
In 2019, we undertook an Energy Saving
Opportunities Scheme (ESOS)
assessment in line with the UK
Environment Agency requirements and
can confirm that we remain compliant
with the regulations, since our first
assessment in 2015. Our next assessment
is scheduled for 2023.
Peter Kennerley
Group Legal Director and
Company Secretary
3 March 2020
82 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
We consider the Annual Report and
Accounts, taken as a whole, is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the Group’s
position and performance, business
model and strategy.
By order of the Board, 3 March 2020.
Ken Hanna
Chairman
Chris Weston
Chief Executive Officer
Statement of Directors’
responsibilities
The Directors are responsible for
preparing the Annual Report and the
Group and parent Company financial
statements in accordance with
applicable law and regulations.
Company law requires the Directors to
prepare Group and parent Company
financial statements for each financial
year. Under that law they are required to
prepare the Group financial statements
in accordance with International Financial
Reporting Standards as adopted by the
European Union (IFRSs as adopted by the
EU) and applicable law and have elected
to prepare the parent Company financial
statements in accordance with UK
accounting standards, including FRS 101
Reduced Disclosure Framework.
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 parent Company and
of their profit or loss for that period.
In preparing each of the Group and
parent Company financial statements,
the Directors are required to:
→ Select suitable accounting policies
and then apply them consistently
→ Make judgements and estimates that
are reasonable, relevant, reliable and
prudent
→ For the Group financial statements,
state whether they have been prepared
in accordance with IFRSs as adopted
by the EU
→ For the parent Company financial
statements, state whether applicable
UK accounting standards have been
followed, subject to any material
departures disclosed and explained
in the parent company financial
statements
→ Assess the Group and parent
Company’s ability to continue
as a going concern, disclosing, as
applicable, matters related to going
concern and
→ Use the going concern basis of
accounting unless they either intend
to liquidate the Group or the parent
Company or to cease operations,
or have no realistic alternative but
to do so.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the parent Company
and enable them to ensure that its
financial statements comply with
the Companies Act 2006. They are
responsible for such internal control as
they determine is necessary to enable the
preparation of financial statements that
are free from material misstatement,
whether due to fraud or error, and have
general responsibility for taking such
steps as are reasonably open to them to
safeguard the assets of the Group and
to prevent and detect fraud and other
irregularities.
Under applicable law and regulations,
the Directors are also responsible for
preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statement
that comply with that law and those
regulations.
The Directors are responsible for the
maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the Directors
in respect of the annual financial report
We confirm that to the best of our
knowledge:
→ The financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and
fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken
as a whole; and
→ The Strategic Report includes a fair
review of the development and
performance of the business and
the position of the issuer and the
undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties
that they face.
Aggreko plc Annual Report and Accounts 2019
83
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AGGREKO PLC
1 Our opinion is unmodified
We have audited the financial statements of Aggreko Plc (“the Company”) for the year ended 31 December 2019 which comprise
the Group income statement, Group statement of comprehensive income, Group balance sheet, Group cash flow statement,
Group statement of changes in equity, and the related notes, including the accounting policies in Note 1 and the Company
balance sheet, Company statement of comprehensive income, Company statement of changes in equity, and the related notes,
including the accounting policies in Note 28.
In our opinion:
→ the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at
31 December 2019 and of the Group’s profit for the year then ended;
→ the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards
as adopted by the European Union;
→ the parent Company financial statements have been properly prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; and
→ 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is consistent with our report to the Audit Committee.
We were first appointed as auditor by the shareholders on 27 April 2016. The period of total uninterrupted engagement is for the
four financial years ended 31 December 2019. We have fulfilled our ethical responsibilities under, and we remain independent
of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest
entities. No non-audit services prohibited by that standard were provided.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit
significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as
required for public interest entities, our results from those procedures. These matters were addressed, and our results are based
on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and
in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on
these matters.
The risk
Recoverability of
Power Solutions
Utility overdue
receivables and
accrued income in
certain countries
including Yemen,
Venezuela, Brazil
and parts of Africa.
Refer to page 59
(Audit Committee
Report), page 99
(accounting policy)
and page 112
(financial
disclosures)
Risk vs 2018:
Subjective estimate – certain customers of the
Power Solutions Utility (“PSU”) business operate
in territories with volatile regimes and adverse
macroeconomic conditions where the risk of
customer default (the customer often being
the government) is high. In these territories, cash
receipts are volatile and unpredictable due to factors
such as regime change and economic stress,
resulting in significant judgement being applied
in the Group’s assessment of the recoverability
of receivables (both trade receivables and accrued
income) from customers in these territories.
We note this risk is in relation to ‘certain’ Power
Solutions Utility debtors in Yemen, Venezuela, Brazil
and parts of Africa, those being the receivables that
we consider give rise to our key audit matter. We
consider the overall net risk to have remained broadly
in line with last year reflecting a decrease in overdue
debt from those debtors offset by an increase in
the age of certain ongoing overdue receivables.
The effect of these matters is that, as part of our risk
assessment, we determined that the recoverability
of certain Power Solutions Utility overdue receivables
and accrued income in respect of certain countries
outlined above has a high degree of estimation
uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the
financial statements as a whole, and possibly
many times that amount.
Our response
Our procedures included:
→ Our experience: using our experience of
geographical issues, assessing and challenging the
Directors’ judgement as to the likely recoverable
amount of the receivables, which includes seeking
evidence of the status of receivables from the
latest communications with the relevant customer
(including deposits and guarantees) where
available, considering the Group’s previous
experience of recovery, considering any non-
corroborating evidence and our knowledge
of in-country exposures;
→ Tests of details: Assessing post year end debt
collection by vouching receipts to supporting
documentation and considering evidence of
planned payments; and
→ Assessing transparency: Assessing the adequacy
of the Group’s disclosures about the degree of
estimation involved.
Our results
→ We found the carrying amount of the trade
receivables and accrued income that were the
subject of the key audit matter to be acceptable
(2018: acceptable).
84 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
The risk
Consolidated and
parent company
taxation provisions
in relation to the
ongoing dispute
in relation to a tax
assessment in
Bangladesh
Refer to page 59
(Audit Committee
Report), page 100
(accounting policy)
and page 107
(financial
disclosures)
Risk vs 2018:
Subjective estimate – Provision for tax contingencies
require the Directors to make an estimate in relation
to a tax assessment in Bangladesh. This is highly
judgemental due to the complexities and
uncertainties of Bangladesh tax legislation.
The matter is in court proceedings and may take
many years to resolve. The risk to the financial
statements is that the eventual resolution of the
matter with the tax authorities is at an amount
materially different to the provision held.
The effect of this matter is that, as part of our risk
assessment, we determined that the provision
in relation the ongoing dispute in relation to the
Bangladesh tax assessment has a high degree
of estimation uncertainty, with a potential range
of outcomes greater than our materiality for the
financial statements as a whole, and possibly
many times that amount.
Our response
Our procedures included:
→ Our tax expertise: Assessing, together with our own
international and local tax specialists, the Group’s
tax position in relation to the ongoing tax
assessment in Bangladesh, inspecting relevant
correspondence with the tax authority and legal
opinions and analysing and challenging the
judgement about the likely conclusion used
to determine the tax provision based on our
knowledge and experience of the application
of the international and local legislation by the
relevant authority and courts; and
→ Assessing transparency: Assessing the adequacy
of the Group’s disclosures in respect of the
Bangladesh tax assessment.
Our results
We found the level of tax provisioning in the Group
and Company to be acceptable (2018: acceptable).
3 Our application of materiality and an overview of the scope of our audit
Materiality for the group financial statements as a whole was set at £9.9 million (2018: £9.0 million), determined with reference
to a benchmark of group profit before tax, of which it represents 5.0% (2018: 4.9%). Materiality for the parent company financial
statements as a whole was set at £5.9 million (2018: £6.5 million) based on component materiality. This is lower than we would
otherwise have determined with reference to a benchmark of company net assets, and represents 1.2% (2018: 1.5 %) of this
benchmark.
We agreed to report to the Audit Committee any corrected or uncorrected misstatements identified exceeding £500,000, in
addition to any other identified misstatements that warranted reporting on qualitative grounds. This level was selected and
agreed with the Audit Committee as, given the nature and scale of operations, adjustments under this level were not deemed
to be of specific interest to them.
The Group audit team instructed component auditors in Australia, Brazil and Russia as to the significant areas to be covered,
including the relevant risks detailed above and the information to be reported back. The Group team completed audit work
on components in Dubai, the UK and US including the parent company. The Group audit team approved the component
materialities, which ranged from £2.0 million to £5.9 million, having regard to the mix of size and risk profile of the Group across
the components. The components not included were not individually financially significant enough to require an audit for group
reporting purposes, and did not present specific individual risks that needed to be addressed.
The Group audit team visited the component location in Australia to participate in the planning meeting and assess the audit
risk and strategy. Telephone calls were also held with the component auditors in Australia, Brazil and Russia. On these calls, the
audit risks and strategy were discussed, the findings from the audit reported to the Group audit team were discussed in more
detail, and any further work required by the Group audit team was then performed by the component auditor as relevant.
Of the Group’s revenue, PBT and net assets we subject the following amounts to full audit and specified risk focussed audit
procedures (are revenue, cost of sales and accounts receivable)
Full audit
Specified on revenue, cost of sales and accounts receivable
66% (2018: 77%)
7% (2018: 0%)
67% (2018: 77%)
23% (2018: 0%)
71% (2018: 80%)
3% (2018: 0%)
Revenue
Profit before tax
Total assets
The remaining 27% of total Group revenue, 10% of Group profit before tax and 26% of total Group assets is represented by a
number of reporting components, none of which individually represented more than 7% of any of total Group revenue, Group
profit before tax or total group assets. For these components we performed analysis at an aggregated group level to re-examine
our assessment that there were no significant risks of material misstatement within these.
4 We have nothing to report on going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company
or the Group or to cease their operations, and as they have concluded that the Company’s and the Group’s financial position
means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements
(“the going concern period”).
Our responsibility is to conclude on the appropriateness of the Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit report. However, as we cannot predict all future events or
conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable
at the time they were made, the absence of reference to a material uncertainty in this auditor's report is not a guarantee
that the Group and the Company will continue in operation.
Aggreko plc Annual Report and Accounts 2019
85
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AGGREKO PLC CONTINUED
In our evaluation of the Directors’
conclusions, we considered the inherent
risks to the Group’s and Company’s
business model and analysed how those
risks might affect the Group’s and
Company’s financial resources or ability
to continue operations over the going
concern period. The risks that we
considered most likely to adversely affect
the Group’s and Company’s available
financial resources over this period were:
→ Global macroeconomic uncertainty
resulting in reduced demand; and
→ Market dynamics in the Power
Solutions Utility business impacting
on returns.
As these were risks that could potentially
cast significant doubt on the Company's
ability to continue as a going concern,
we considered sensitivities over the level
of available financial resources indicated
by the Company’s financial forecasts
taking account of reasonably possible
(but not unrealistic) adverse effects that
could arise from these risks individually
and collectively and evaluated the
achievability of the actions the Directors
consider they would take to improve
the position should the risks materialise.
We also considered less predictable but
realistic second order impacts, such as
the impact of Brexit on customs delays
impacting on the Group’s ability to meet
demand in certain areas.
Based on this work, we are required
to report to you if:
→ we have anything material to add
or draw attention to in relation to the
Directors’ statement in Note 1 to the
financial statements on the use of
the going concern basis of accounting
with no material uncertainties that
may cast significant doubt over the
Group and Company’s use of that
basis for a period of at least twelve
months from the date of approval
of the financial statements; or
→ the related statement under the
Listing Rules set out on page 29
is materially inconsistent with our
audit knowledge.
We have nothing to report in these
respects, and we did not identify going
concern as a key audit matter.
5 We have nothing to report
on the other information in
the Annual Report
The Directors are responsible for the
other information presented in the
Annual Report together with the
financial statements. Our opinion on
the financial statements does not cover
the other information and, accordingly,
we do not express an audit opinion or,
except as explicitly stated below, any
form of assurance conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider
whether, based on our financial
statements audit work, the information
therein is materially misstated
or inconsistent with the financial
statements or our audit knowledge.
Based solely on that work we have
not identified material misstatements
in the other information.
Strategic report and Directors’ report
Based solely on our work on the
other information:
→ we have not identified material
misstatements in the strategic
report and the Directors’ report;
→ in our opinion the information given
in those reports for the financial year
is consistent with the financial
statements; and
→ in our opinion those reports have
been prepared in accordance with
the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’
remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
Disclosures of principal risks and
longer-term viability
Based on the knowledge we acquired
during our financial statements audit,
we have nothing material to add or
draw attention to in relation to:
→ the Directors’ confirmation within
page 37 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
and liquidity;
→ the principal risks and uncertainties
disclosures describing these risks
and explaining how they are being
managed and mitigated; and
→ the Directors’ explanation in the
assessment of prospects and viability
statement of how they have assessed
the prospects of the Group, over what
period they have done so and why
they considered 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.
Under the Listing Rules we are required
to review the assessment of prospects
and viability statement. We have nothing
to report in this respect.
Our work is limited to assessing these
matters in the context of only the
knowledge acquired during our financial
statements audit. As we cannot predict
all future events or conditions and
as subsequent events may result in
outcomes that are inconsistent with
judgments that were reasonable at the
time they were made, the absence of
anything to report on these statements
is not a guarantee as to the Group’s
and Company’s longer-term viability.
Corporate governance disclosures
We are required to report to you if:
→ we have identified material
inconsistencies between the
knowledge we acquired during our
financial statements audit and the
directors’ statement that they consider
that the annual report and financial
statements taken as a whole is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the Group’s
position and performance, business
model and strategy; or
→ the section of the annual report
describing the work of the Audit
Committee does not appropriately
address matters communicated
by us to the Audit Committee.
We are required to report to you if
the Corporate Governance Statement
does not properly disclose a departure
from the eleven provisions of the UK
Corporate Governance Code specified
by the Listing Rules for our review.
We have nothing to report in these
respects.
6 We have nothing to report
on the other matters on
which we are required to
report by exception
Under the Companies Act 2006, we
are required to report to you if, in
our opinion:
→ adequate accounting records have
not been kept by the parent Company,
or returns adequate for our audit have
not been received from branches not
visited by us; or
→ the parent Company financial
statements and the part of the
Directors’ remuneration report to
be audited are not in agreement with
the accounting records and returns; or
→ certain disclosures of Directors’
remuneration specified by law
are not made; or
→ we have not received all the
information and explanations
we require for our audit.
We have nothing to report in these
respects.
86 Aggreko plc Annual Report and Accounts 2019
8 The purpose of our audit
work and to whom we owe
our responsibilities
This report is made solely to the
Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work
has been undertaken so that we might
state to the Company’s members those
matters we are required to state to them
in an auditor’s report and for no other
purpose. To the fullest extent permitted
by law, we do not accept or assume
responsibility to anyone other than the
Company and the Company’s members,
as a body, for our audit work, for this
report, or for the opinions we have
formed.
John Luke
(Senior Statutory Auditor)
for and on behalf of KPMG LLP,
Statutory Auditor
Chartered Accountants
319 St Vincent Street
Glasgow
G2 5AS
3 March 2020
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
7 Respective responsibilities
Directors’ responsibilities
As explained more fully in their
statement set out on page 83, the
Directors are responsible for: the
preparation of the financial statements
including being satisfied that they give
a true and fair view; such internal control
as they determine is necessary to enable
the preparation of financial statements
that are free from material
misstatement, whether due to fraud or
error; assessing the Group and parent
Company’s ability to continue as a going
concern, disclosing, as applicable,
matters related to going concern;
and using the going concern basis of
accounting unless they either intend
to liquidate the Group or the parent
Company or to cease operations, or
have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or other irregularities (see below),
or error, and to issue our opinion in an
auditor’s report. Reasonable assurance
is a high level of assurance, but does not
guarantee that an audit conducted in
accordance with ISAs (UK) will always
detect a material misstatement when
it exists. Misstatements can arise from
fraud, other irregularities or error and
are considered material if, individually
or in aggregate, they could reasonably
be expected to influence the economic
decisions of users taken on the basis
of the financial statements.
A fuller description of our responsibilities
is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and
regulations that could reasonably be
expected to have a material effect on the
financial statements from our general
commercial and sector experience and
through discussion with the Directors
and other management (as required by
auditing standards), and discussed with
the Directors and other management
the policies and procedures regarding
compliance with laws and regulations.
We communicated identified laws and
regulations throughout our team and
remained alert to any indications of
non-compliance throughout the audit.
This included communication from the
Group to component audit teams of
relevant laws and regulations identified
at Group level.
The potential effect of these laws and
regulations on the financial statements
varies considerably.
Firstly, the Group is subject to laws and
regulations that directly affect the
financial statements including financial
reporting legislation (including related
companies legislation), distributable
profits legislation and taxation legislation
and we assessed the extent of
compliance with these laws and
regulations as part of our procedures
on the related financial statement items.
Secondly, the Group is subject to many
other laws and regulations where the
consequences of non-compliance could
have a material effect on amounts or
disclosures in the financial statements,
for instance through the imposition of
fines or litigation. We identified anti-
bribery as the area most likely to have
such an effect, recognising the nature
of the group’s activities and the
Governmental nature of many of the
group's customers. Auditing standards
limit the required audit procedures
to identify non-compliance with these
laws and regulations to enquiry of the
directors and other management and
inspection of regulatory and legal
correspondence, if any. Through these
procedures, we became aware of actual
or suspected non-compliance and
considered the effect as part of our
procedures on the related financial
statement items. The identified actual
or suspected non-compliance was not
sufficiently significant to our audit to
result in our response being identified
as a key audit matter.
Owing to the inherent limitations of
an audit, there is an unavoidable risk
that we may not have detected some
material misstatements in the financial
statements, even though we have
properly planned and performed our
audit in accordance with auditing
standards. For example, the further
removed non-compliance with laws and
regulations (irregularities) is from the
events and transactions reflected in the
financial statements, the less likely the
inherently limited procedures required
by auditing standards would identify it.
In addition, as with any audit, there
remained a higher risk of non-detection
of irregularities, as these may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of
internal controls. We are not responsible
for preventing non-compliance and
cannot be expected to detect non-
compliance with all laws and regulations.
Aggreko plc Annual Report and Accounts 2019
87
GROUP INCOME STATEMENT
NOTES TO THE GROUP ACCOUNTS CONTINUED
For the year ended 31 December 2019
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Impairment loss on trade receivables
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)
Notes
4
16
2
4
8
5
9
11
11
2019
£ million
2018
£ million
1,613
(644)
969
(482)
(249)
(7)
10
241
(46)
4
199
(70)
129
1,760
(824)
936
(476)
(241)
(7)
7
219
(41)
4
182
(57)
125
50.80
50.70
49.22
49.18
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
Profit for the year
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss
Remeasurement of retirement benefits
Taxation on remeasurement of retirement benefits
Items that may be reclassified subsequently to profit or loss
Cash flow hedges
Net exchange losses offset in reserves
Other comprehensive loss for the year (net of tax)
Total comprehensive income for the year
2019
£ million
129
2018
£ million
125
(1)
–
1
(75)
(75)
54
26
(5)
2
(24)
(1)
124
88 Aggreko plc Annual Report and Accounts 2019
88
GROUP BALANCE SHEET (COMPANY NUMBER: SC177553)
As at 31 December 2019
Non-current assets
Goodwill
Other intangible assets
Investment
Property, plant and equipment
Deferred tax asset
Fulfilment assets
Retirement benefit surplus
Current assets
Inventories
Trade and other receivables
Fulfilment assets
Cash and cash equivalents
Derivative financial instruments
Current tax assets
Total assets
Current liabilities
Borrowings
Lease liability
Derivative financial instruments
Trade and other payables
Current tax liabilities
Demobilisation provision
Provisions
Non-current liabilities
Borrowings
Lease liability
Deferred tax liabilities
Demobilisation provision
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
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2019
£ million
2018
£ million
177
41
9
1,166
44
54
4
1,495
216
659
32
87
1
21
1,016
2,511
(59)
(33)
(1)
(388)
(42)
(5)
–
(528)
(511)
(68)
(36)
(9)
(624)
(1,152)
1,359
42
20
(13)
13
2
(126)
1,421
1,359
184
42
9
1,169
36
29
1
1,470
229
781
15
85
1
23
1,134
2,604
(144)
–
(1)
(371)
(47)
(6)
(2)
(571)
(627)
–
(34)
(5)
(666)
(1,237)
1,367
42
20
(17)
13
1
(51)
1,359
1,367
Notes
12
27.A2
13
21
14
27.A5
15
16
14
3
27.A4
17
18
27.A4
19
20
17
18
21
20
22
23
The financial statements on pages 88 to 129 were approved by the Board of Directors on 3 March 2020 and signed on its
behalf by:
K Hanna
Chairman
H Drewett
Chief Financial Officer
Aggreko plc Annual Report and Accounts 2019
89
GROUP CASH FLOW STATEMENT
For the year ended 31 December 2019
Operating activities
Profit for the year
Adjustments for:
Tax
Depreciation
Amortisation of intangibles
Fulfilment assets
Demobilisation provisions
Finance income
Finance cost
Profit on sale of property, plant and equipment (PPE)
Share-based payments
Changes in working capital (excluding the effects of exchange differences on consolidation):
Decrease in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Cash flows relating to fulfilment assets
Cash flows relating to demobilisation provisions
Cash flows relating to 2017 exceptional items
Cash generated from operations
Tax paid
Interest received
Interest paid(i)
Net cash generated from operating activities
Cash flows from investing activities
Acquisitions (net of cash acquired)
Purchases of PPE
Purchase of other intangible assets
Purchase of investment
Proceeds from sale of PPE
Net cash used in investing activities
Cash flows from financing activities
Increase in long-term loans
Repayment of long-term loans
Increase in short-term loans
Repayment of short-term loans
Payment of lease liabilities
Dividends paid to Shareholders
Purchase of treasury shares
Net cash used in financing activities
Net (decrease)/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
2019
£ million
2018
£ million
129
70
315
8
21
9
(4)
46
(10)
11
8
78
21
(66)
(6)
(2)
628
(76)
4
(46)
510
–
(230)
(8)
–
21
(217)
393
(493)
2
(127)
(31)
(69)
(4)
(329)
(36)
76
(4)
36
125
57
293
5
9
4
(4)
41
(7)
10
14
(10)
(60)
(44)
(4)
(6)
423
(61)
4
(36)
330
(24)
(216)
(10)
(9)
15
(244)
726
(624)
5
(94)
–
(69)
(12)
(68)
18
59
(1)
76
14
20
2
14
20
2
3
(i) Interest paid of £46 million (2018: £36 million) includes £5 million relating to leases (2018: £nil).
Cash flows for the purchase and sale of rental fleet assets are presented as arising from investing activities because the
acquisition of new fleet assets represents a key investment decision for the Group, the assets are expected to be owned and
operated by the Group to the end of their useful economic lives, the disposal process (when the assets are largely depreciated)
is not a major part of the Group’s business model and the assets in the rental fleet are not specifically held for subsequent resale.
90 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
For the year ended 31 December 2019
As at 31 December 2019
Analysis of changes in net debt
Cash and cash equivalents (Note 3)
At
1 January
2019
£ million
76
IFRS 16
Transition
£ million
Cash flow
£ million
Exchange
£ million
Other
non-cash
movements
£ million
At
31 December
2019
£ million
–
(36)
(4)
–
36
Current borrowings:
Bank borrowings
Private placement notes
Lease liability
Non-current borrowings:
Bank borrowings
Private placement notes
Lease liability
(115)
(20)
–
(135)
(134)
(493)
–
(627)
–
–
(31)
(31)
–
–
(73)
(73)
105
20
31
156
100
–
–
100
Net debt
(686)
(104)
220
Analysis of changes in liabilities from
financing activities
Current borrowings
Non-current borrowings
Total financing liabilities
(135)
(627)
(762)
(31)
(73)
(104)
156
100
256
2
–
–
2
1
15
2
18
16
2
18
20
–
–
(33)
(33)
–
–
3
3
(8)
–
(33)
(41)
(33)
(478)
(68)
(579)
(30)
(584)
(33)
3
(30)
(41)
(579)
(620)
Other non-cash movements include reclassifications between short term and long term borrowings, with £nil being reclassified
from non-current to current borrowings and £24 million from non-current to current lease liabilities. The remaining balance is
due to £25 million of new lease liabilities and £5 million of interest.
As at 31 December 2018
Analysis of changes in net debt
Cash and cash equivalents
Current borrowings:
Bank borrowings
Private placement notes
Non-current borrowings:
Bank borrowings
Private placement notes
At
1 January
2018
£ million
Cash flow
excluding
acquisitions
£ million
Cash flow–
acquisitions
£ million
Exchange
£ million
59
18
(72)
(55)
(127)
(103)
(481)
(584)
34
55
89
(78)
–
(78)
–
–
–
–
(24)
–
(24)
(1)
(2)
(2)
(4)
(4)
(30)
(34)
Net debt
(652)
29
(24)
(39)
Analysis of changes in liabilities from
financing activities
Current borrowings
Non-current borrowings
Financing derivatives
Total financing liabilities
(127)
(584)
(2)
(713)
89
(78)
2
13
–
(24)
–
(24)
(4)
(34)
–
(38)
Other
non-cash
movements
£ million
At
31 December
2018
£ million
–
76
(75)
(18)
(93)
75
18
93
–
(93)
93
–
–
(115)
(20)
(135)
(134)
(493)
(627)
(686)
(135)
(627)
–
(762)
Aggreko plc Annual Report and Accounts 2019
91
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
As at 31 December 2019
Balance at 1 January 2019
Profit for the year
Other comprehensive
(loss)/income:
Transfers from hedging reserve
to revenue
Fair value gains on foreign
currency cashflow hedge
(net of tax)
Currency translation
differences(i)
Remeasurement of retirement
benefits (net of tax)
Total comprehensive
income/(loss) for the year
ended 31 December 2019
Transactions with owners:
Purchase of Treasury shares
Employee share awards
Issue of Ordinary Shares to
employees under share
option schemes
Dividends paid during 2019
Balance at 31 December 2019
Attributable to equity holders of the Company
Ordinary
share
capital
£ million
Share
premium
account
£ million
Treasury
shares
£ million
Capital
redemption
reserve
£ million
Notes
Foreign
exchange
reserve
(translation)
£ million
Hedging
reserve
£ million
Retained
earnings
£ million
Total
equity
£ million
42
–
20
–
(17)
–
13
–
–
–
–
–
–
–
–
–
–
–
42
–
–
–
–
–
–
–
–
–
–
20
–
–
–
–
–
(4)
–
8
–
4
(13)
–
–
–
–
–
–
–
–
–
–
13
1
–
(1)
2
–
–
1
–
–
–
–
–
2
(51)
–
1,359
129
1,367
129
–
–
(75)
–
–
–
–
(1)
(1)
2
(75)
(1)
(75)
128
54
–
–
–
–
–
(126)
–
11
(4)
11
(8)
(69)
(66)
1,421
–
(69)
(62)
1,359
10
(i) Included in currency translation differences of the Group are exchange gains of £16 million arising on borrowings denominated in foreign currencies designated as
hedges of net investments overseas, and exchange losses of £91 million relating to the translation of overseas results and net assets. The currency translation difference is
explained in the Financial Review on page 26.
(ii) There is no impact on retained earnings at 1 January 2019 from the adoption of IFRS 16 ‘Leases’.
92 Aggreko plc Annual Report and Accounts 2019
As at 31 December 2018
Balance at 1 January 2018
as previously reported
Impact of change in accounting
policy in 2018
Restated balance at
1 January 2018
Profit for the year
Other comprehensive
(loss)/income:
Fair value gains on interest rate
swaps (net of tax)
Currency translation
differences(i)
Remeasurement of retirement
benefits (net of tax)
Total comprehensive
income/(loss) for the year
ended 31 December 2018
Transactions with owners:
Purchase of Treasury shares
Employee share awards
Issue of Ordinary Shares to
employees under share
option schemes
Dividends paid during 2018
Balance at 31 December 2018
Attributable to equity holders of the Company
Ordinary
share
capital
£ million
Share
premium
account
£ million
Treasury
shares
£ million
Capital
redemption
reserve
£ million
Notes
Foreign
exchange
reserve
(translation)
£ million
Hedging
reserve
£ million
Retained
earnings
£ million
Total
equity
£ million
42
–
42
–
–
–
–
–
–
–
–
–
–
42
20
–
20
–
–
–
–
–
–
–
–
–
–
20
(7)
–
(7)
–
–
–
–
–
(12)
–
2
–
(10)
(17)
13
–
13
–
–
–
–
–
–
–
–
–
–
13
(1)
–
(1)
–
2
–
–
2
–
–
–
–
–
1
(27)
1,277
1,317
–
(27)
–
–
(24)
–
(3)
(3)
1,274
125
1,314
125
–
–
21
2
(24)
21
(24)
146
124
–
–
–
–
–
(51)
–
10
(2)
(69)
(61)
1,359
(12)
10
–
(69)
(71)
1,367
(i) Included in currency translation differences of the Group are exchange losses of £46 million arising on borrowings denominated in foreign currencies designated
as hedges of net investments overseas, and exchange gains of £22 million relating to the translation of overseas results and net assets.
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Aggreko plc Annual Report and Accounts 2019
93
NOTES TO THE GROUP ACCOUNTS
For the year ended 31 December 2019
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 as adopted by the European
Union (EU IFRS), IFRIC interpretations
and the Companies Act 2006 applicable
to companies reporting under EU 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 EU 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 revenue and expense 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.
Adjusted measures
The Directors assess the performance
of the Group and its reportable
segments based on ‘adjusted measures’.
These measures are used for internal
performance management and are
believed to be most appropriate for
explaining underlying performance
to users of the accounts including
shareholders of the Company and other
stakeholders. The adjusted measures
in relation to profit exclude exceptional
items where appropriate. In comparing
performance year on year we also
exclude the impact of currency and
pass-through fuel. The Group reports
separately fuel revenue from contracts
in our Power Solutions Utility business
in Brazil and Sri Lanka where we
manage fuel on a pass-through basis
on behalf of our customers. The reason
for the separate reporting is that fuel
revenue on these contracts is entirely
dependent on fuel prices and volumes
of fuel consumed, and these can be
volatile and may distort the view of the
performance of the underlying business.
The financial covenants attached to
our borrowing facilities are that EBITDA
should be no less than four times
interest and net debt should be no more
than three times EBITDA. The covenants
exclude the impact of IFRS 16 ‘Leases’
therefore in monitoring performance
against these covenants we exclude
the impact of IFRS 16. This calculation
is included in the definition and
calculation of Non GAAP measures
on page 138.
Going concern
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 debt. 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.
The Group maintains sufficient facilities
to meet its normal funding requirements
over the medium term. At 31 December
2019, these facilities totalled £1,027
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 four times interest and
net debt should be no more than three
times EBITDA. The covenants exclude
the impact of IFRS 16 ‘Leases’ and,
on that basis, at 31 December 2019,
these rates are 14* times and 0.9* times
respectively. The Group does not expect
to breach these covenants in the year
from the date of approval of this report
and the Group expects to continue to
be able to arrange sufficient finance to
meet its future funding requirements.
It has been the Group’s custom and
practice to refinance its facilities in
advance of their maturity dates,
providing that there is an ongoing need
for those facilities. Net debt (including
£101 million of a lease creditor on
adoption of IFRS 16 from 1 January
2019) amounted to £584 million at
31 December 2019 and, at that date,
undrawn committed facilities were
£516 million.
The Group balance sheet shows
consolidated net assets of £1,359 million
(2018: £1,367 million) of which
£939 million (2018: £1,057 million) relates
to fleet assets. The defined benefit
pension surplus is £4 million (2018:
surplus of £1 million).
More detail can be found within the
Risks section on pages 30 to 36 and in
the assessment of prospects and viability
section on page 37.
Based on the above the Directors are
confident that it is appropriate for the
going concern basis to be adopted
in preparing the year end financial
statements.
Changes in accounting policy
and disclosures
(a) New and amended standards
adopted by the Group
IFRS 16 ‘Leases’
The Group adopted IFRS 16 from
1 January 2019 and, therefore, this is the
first set of the Group’s annual financial
statements where IFRS 16 has been
applied.
Prior to the adoption of IFRS 16, leases
where substantially all of the risks
and rewards of ownership were not
transferred to the Group were classified
as operating leases. Rentals under
operating leases were charged to
operating profit on a straight-line basis
over the term of the lease. IFRS 16
addresses the accounting for leases and
requires lessees to recognise all leases
on balance sheet with limited
exemptions. This results in the
recognition of a right-of-use asset and
corresponding liability on the balance
sheet, with the associated depreciation
and interest expense being recorded in
the income statement over the lease
period. Limited exemptions apply for
short-term leases (leases with a term of
12 months or less) and low-value leases
(which have been defined as <$10,000).
The payments for the exempt leases are
recognised as an expense in the income
statement on a straight-line basis over
the lease term.
The Group has adopted IFRS 16 using
the modified retrospective approach,
under which the cumulative effect of
initial application (£nil) is recognised
in retained earnings at 1 January 2019.
Accordingly, the comparative
information has not been restated
and continues to be reported under
IAS 17 ‘Leases’ and IFRIC 4 ‘Determining
Whether an Arrangement contains
a Lease’.
Definition of a lease
Previously, the Group determined
at contract inception whether an
arrangement was or contained a lease
under IFRIC 4. Under IFRS 16, a contract
is, or contains a lease, if the contract
conveys a right to control the use of
an identified asset for a period in
exchange for consideration.
* Calculation is on page 138.
94 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1 Accounting policies
continued
In applying IFRS 16 for the first time, the
Group has used the following practical
expedients permitted by the standard:
→ to grandfather the assessment
of which transactions are leases.
The Group applied IFRS 16 only
to contracts that were previously
identified as leases. Contracts that
were not identified as leases under
IAS 17 and IFRIC 4 were not reassessed.
Therefore, the definition of a lease
under IFRS 16 has been applied only
to contracts entered or changed on
or after 1 January 2019;
→ the use of hindsight in determining
the lease term if the contract contains
options to extend or terminate the
lease;
→ the accounting for operating leases
with a remaining lease term of less
than 12 months as at 1 January 2019
as short-term leases; and
→ to exclude initial direct costs from the
measurement of the right-of-use asset
at the date of initial application.
Accounting policy
On initial measurement the right-of-
use asset is recognised at cost, which
comprises the value of the lease liability
adjusted for any lease payments made
on or before the commencement date,
less any incentives received, any initial
direct costs incurred and an estimate
of costs to dismantle and remove the
underlying asset. The right-of-use asset
is depreciated using the straight-line
method from the commencement
date to the end of the lease term.
The right-of-use asset is periodically
adjusted for impairment, if any, and any
remeasurements of the lease liability.
The Group leases various properties,
vehicles, plant and equipment. Rental
contracts are typically for fixed periods
from 3 to 7 years but may have extension
options. Lease terms are negotiated on
an individual basis and contain a wide
range of different terms and conditions.
On initial measurement the lease liability
is measured at the present value of the
future lease payments, discounted using
the interest rate implicit in the lease or,
if that rate cannot be readily determined,
the Group’s incremental borrowing rate.
Generally, the Group uses its incremental
borrowing rate as the discount rate as
the majority of subsidiary debt is funded
by Group borrowings and therefore this
is the rate at which lessees obtain
funding for the asset. In addition, given
the types of leases entered and the
geographies of the majority of the
leasing activity the interest rates implicit
in these leases would be expected
to gravitate around the Group’s
incremental rate. If the discount rate
increased or decreased by 0.5% then
the lease liability would change by circa
£1 million.
The lease liability is measured at
amortised cost using the effective
interest rate method and is remeasured
when there is a change in the future
lease payments arising from a change
in index or a change in the original
assessment made. Each lease payment
is allocated between the liability and
finance cost. The finance cost is charged
to the income statement over the lease
period to produce a constant periodic
rate of interest on the remaining balance
of the liability for each period.
The Group presents the right-of-use
asset and lease liability on the balance
sheet.
Lease payments associated with
short-term and low-value leases are
recognised on a straight-line basis
as an expense in the profit or loss.
On transition to IFRS 16 the Group
recognised an additional £104 million
of right-of-use assets and £104 million
of lease liabilities at the present value
of the remaining lease payments,
discounted at the Group’s incremental
borrowing rate as at 1 January 2019. The
Group’s weighted average incremental
borrowing rate applied to the lease
liabilities on 1 January 2019 was 5%. This
rate has remained at 5% throughout
2019. On transition the right-of-use
assets were measured at an amount
equal to the lease liability, adjusted by
the amount of any prepaid or accrued
lease payments, which were not
material.
The recognised right-of-use assets relate to the following types of assets:
Freehold property
Vehicles, plant & equipment
The recognised lease liability at 1 January 2019 is detailed below.
Operating lease commitment at 31 December 2018 as disclosed in the Group’s consolidated financial statements
Impact of discounting
Discounted using the incremental borrowing rate at 1 January 2019
Recognition exemption for leases with less than 12 months of term at transition
Extension or termination options reasonably certain to be exercised
Lease liabilities recognised at 1 January 2019
1 January 2019
£ million
75
29
104
1 January 2019
£ million
117
(21)
96
(1)
9
104
Impact for the period
The impact from applying IFRS 16 for the
year ended 31 December 2019 was:
Income statement
→ Improvement in operating profit of
£3 million
→ Increase in depreciation of £30 million
→ Increase in interest costs of £5 million
→ Reduction in profit before tax of
£2 million
Balance sheet/cash flow statement
→ Right-of-use asset included within
property, plant & equipment of
£98 million at 31 December 2019
(1 January 2019: £104 million)
→ Lease liabilities of £101 million at
31 December 2019 (1 January 2019:
£104 million)
→ Net debt at 31 December 2019 is
higher by £101 million
Ratios
→ An increase in EBITDA of £33 million
→ An increase in net debt/EBITDA of
0.1 times
→ Reduction in Group ROCE of 0.4pp
Note 18 sets out more details on the
Group leases.
Aggreko plc Annual Report and Accounts 2019
95
NOTES TO THE GROUP ACCOUNTS CONTINUED
1 Accounting policies
continued
IFRIC 23 ‘Uncertainty over Income
Tax Treatments’
The Group adopted IFRIC 23 from
1 January 2019. There was no material
impact arising from the adoption of
this standard.
(b) New standards, amendments and
interpretations issued but not effective
for the financial year beginning
1 January 2019 and not early adopted
There are no standards, amendments
and 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 of its subsidiaries
for the year ended 31 December 2019.
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 deconsolidated
from the date that control ceases.
The Group uses the acquisition method
of accounting 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 is measured based on the
consideration specified in a contract
with a customer and excludes amounts
collected on behalf of third parties.
The Group recognises revenue when
it transfers control over a service to
a customer as detailed below.
As explained on page 2, Aggreko
has three operating segments as
detailed below:
→ Rental Solutions: This business
provides power, heating and cooling in
developed markets. These customers,
requirements tend to revolve around
smaller, short-term projects and
key events.
→ Power Solutions Industrial: This
business comprises medium-term
projects for industrial customers, as
well as shorter-term rental contracts.
→ Power Solutions Utility: This business
delivers longer-term projects providing
power to national utility customers.
The Group generally has three
performance obligations:
→ In Rental solutions and shorter-term
rental contracts within Power
Solutions Industrial the Group provides
rental contracts for the supply of
temporary power, temperature
control, oil-free compressed air and
related services (for example, fuel,
logistics and technical services).
→ In Power Solutions Utility and
medium-term projects for industrial
customers the Group supplies
temporary power, temperature
control, oil-free compressed air and
related services (for example, fuel,
logistics and technical services).
→ In some contracts the Group is
responsible for the design and project
management phase of the project
(for example, in some of the major
events contracts) and at the end of
this phase the Group will hand over
the design documentation and
project management knowledge/
documentation to the customer
who can then take this documentation
and use someone else for the provision
of power if they so wish. This is
different from the technical services in
the first two performance obligations
where the design phase is part of the
normal running and not handed over
to the customer.
In the first two performance obligations
revenue is recognised over time based,
on outputs provided to the customer,
because this is the most accurate
measurement of the satisfaction of the
performance obligation. Revenue can
comprise a fixed rental charge and a
variable charge related to the usage
of assets or other services (including
pass-through fuel). The Group earns
a fixed charge on certain contracts
by providing agreed levels of power
generation capacity to the customer
and this is recognised when availability
criteria in the contract are met. Variable
charges are earned as the Group
provides power or rental and associated
services in accordance with contractual
arrangements and are recognised as
the power is produced or the service
is provided.
In the third performance obligation
revenue is recognised over the period of
the performance obligation which ends
when the documentation/knowledge
is transferred to the customer.
Revenue is accrued or deferred at the
balance sheet date depending on the
period covered by the most recent
invoice issued and the contractual terms.
A receivable is recognised by the
Group when the service is provided
to the customer. Payment terms vary
across the Group and the majority of
receivables across the Group are paid
within or close to the payment terms.
However, some of the contracts the
Group undertakes in developing
countries in our Power Solutions Utility
business are very large and are in
jurisdictions where payment practices
can be unpredictable. These are
explained in more detail on page 99.
Variable consideration
The Group is liable to penalties on
certain contracts if we fail to fulfil
the relevant performance obligation.
The transaction price is reduced by the
amount of any penalties in the contract
unless it is highly likely that they will
not occur.
Disaggregation of revenue
In Note 4 to the Accounts revenue
from contracts with customers
is disaggregated by business unit,
geography and sector.
Contract balances
The following table provides information
about receivables, accrued income,
fulfilment assets (contract assets) and
demobilisation provisions (contract
liabilities) from contracts with
customers.
Notes
2019
£ million
2018
£ million
Receivables
Accrued income
Fulfilment assets
Demobilisation
provisions
16
16
14
20
444
124
86
502
169
44
14
11
Mobilisation and demobilisation
Mobilisation costs are classified as
fulfilment costs where they are
separately identifiable and specific to a
project and where the mobilisation does
not itself form a separate performance
obligation. In these circumstances,
mobilisation costs are capitalised as they
relate to future performance obligations,
i.e. the provision of power is the future
performance obligation, which begins
when the power starts to be generated.
During the phase of mobilisation this
service has not yet started and as such
represents a future performance
obligation. The costs incurred during
mobilisation are directly related to the
contract and enable Aggreko to earn
revenue from the provision of power.
They are expected to be recovered
because the contract is profitable,
although they will be reviewed carefully
for any indication of impairment if any
loss making contracts arise.
96 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1 Accounting policies
continued
With respect to demobilisation costs
the Group has a legal obligation to incur
demobilisation costs once the assets are
installed on site, as this is required by the
contract. This creates a legal obligation
from a past event. The majority of these
costs can be measured reliably and
therefore they meet the definition of
a provision. These costs are capitalised
as a fulfilment cost asset as they are
incurred in relation to a performance
obligation (delivering power) and are
expected to be recovered and generate
or enhance resources because they
facilitate Aggreko’s delivery of the
contract.
The fulfilment costs (mobilisation and
demobilisation costs) are amortised to
the income statement over the period
of the initial contract. The amortisation
starts when we start to earn revenue and
stops when the initial contract period
ends. If there is a signed extension, the
unamortised amount left in the balance
sheet when the extension is signed is
then amortised over the remaining
period of the initial contract and the
extension period. Generally there are
no options in contracts to extend at
an advantageous price.
In contracts where mobilisation and
demobilisation income timing is
specifically stipulated in the contract in
order to match the timing of associated
costs, then this income is generally
recognised during the period of
provision of power.
During the year £66 million of
fulfilment assets were capitalised
mainly relating to mobilisation costs
for our contracts in Brazil and Burkina
Faso, as well as the Japan Olympics.
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 Board of Directors.
Aggreko has two business units:
Rental Solutions and Power Solutions.
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 page 2.
This is reflected by the Group’s divisional
management and organisational
structure and the Group’s internal
financial reporting systems.
The Global Products and Technology
results and assets, as well as 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.
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 or over
the term of each lease. 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 or over the
term of each lease. Assets in the course
of construction are not depreciated. The
periods of depreciation are reviewed on
an annual basis and the principal periods
used are as follows:
Rental fleet
8 to 12 years
Vehicles, plant
and equipment 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:
5-10 years, non-compete agreements:
over the life of the non-compete
agreements, technology intangible
assets acquired: 4 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.
Research and development costs
All research expenditure is charged to
the income statement in the period in
which it is incurred.
Development expenditure is charged
to the income statement in the period
in which it is incurred unless it relates
to the development of a new product
or technology and it is incurred after
the technical feasibility and commercial
viability of the product has been proven,
the development cost can be measured
reliably, future economic benefits are
probable and the Group intends, and
has sufficient resources, to complete
the development and to use or sell
the assets. Any such capitalised
development expenditure is amortised
on a straight-line basis so that it is
charged to the income statement over
the expected useful life of the resulting
product or technology, which is currently
deemed to be between three to six years.
Impairment of property, plant and
equipment and other intangible
assets (excluding goodwill)
Property, plant and equipment
(including right-of-use-assets) 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.
Aggreko plc Annual Report and Accounts 2019
97
NOTES TO THE GROUP ACCOUNTS CONTINUED
1 Accounting policies
continued
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.
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
or 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 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.
Where the amount of tax payable or
recoverable is uncertain, in accordance
with IFRIC 23, provisions are based on
either: the Group’s judgement of the most
likely amount of the liability or recovery;
or, when there is a wide range of possible
outcomes, a probability weighted average
approach.
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 inventory or to
take account of inventory losses. 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
projected unit 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
and administrative expenses are included
in arriving at operating profit. Interest
income on scheme assets and interest
on pension scheme liabilities
are included in net finance costs.
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 payable.
Trade receivables
Trade receivables are recognised initially
at fair value (which is the same as cost).
Impairment of financial assets
Receivables (including accrued revenue)
are considered immediately for
impairment to reflect the possibility
of future default or non-collectability.
The Group assesses the Expected Credit
Loss (ECL) as explained below:
Power Solutions Industrial and Rental Solutions
The Group has taken advantage of the practical expedient in IFRS 9 to use a provision matrix to simplify the calculation where
accounts receivable are split into various risk categories (e.g. based on credit rating agencies) and then a percentage is applied
to each category to obtain the impairment allowances. An example of the provision matrix is detailed below:
Ageing
Risk
Low risk
Medium risk
High risk
Specific
Notes
Current
0-30
days
31-60
days
61-90 days
> 90 days
1
1
1
2
Notes: 1. Classification based on assessment of customer credit risk 2. Specific provision for customers.
98 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1 Accounting policies
continued
Each operating unit within the Power
Solution Industrial and Rental Solutions
businesses has used this provision
matrix to calculate the provision and
each matrix is specific to the economic
and operating conditions of each
operating unit. In applying this matrix
the operating units will also consider the
following: 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.
When a trade receivable is uncollectable
it is written off against the provision
for impairment of trade receivables.
More detail is contained below.
Power Solutions Utility (PSU)
Within our PSU business when
considering the risk profile of the
debtors and the relevant impairment
provision the Group considers each
debtor and customer individually, within
the relevant environment to which it
relates, taking into account a number
of factors. These factors include
advanced payments and guarantees, the
political and economic conditions in the
relevant country, duration and quality
of relationship with the customer, age of
debt, cash flows from the customer and
any relevant communication throughout
the year. We then apply the matrix
approach detailed above to any debtors
that do not have a specific provision.
Trade payables
Trade payables are recognised initially
at fair value and subsequently measured
at amortised cost using the effective
interest method.
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.
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.
Cash and cash equivalents
Cash and cash equivalents comprise
cash on hand, deposits with a maturity
of three months or less and short-term
overdrafts.
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 estimations
The Group uses estimates in the
preparation of its Accounts. The most
sensitive areas affecting the Accounts
are discussed below.
Trade receivables
The trade receivables accounting policy
is noted above.
The approach to exercising judgement
in this area is to consider each significant
debtor and customer individually, within
the relevant environment to which it
relates, taking into account a number
of factors. These factors include the
political and economic conditions in the
relevant country, duration and quality
of relationship with the customer, age
of debt, cash flows from the customer
and any relevant communication
throughout the year. A review of the
provision for bad and doubtful debts
is performed at each month end and
specifically at the end of each reporting
period. It is an assessment of the
potential amount of trade receivables
which will not be paid by the customer
after the balance sheet date. This is
calculated by reference to the factors
above as well as the information
disclosed in Note 16, notably the
ageing of past due but not impaired.
The management of trade receivables is
the responsibility of the operating units,
although they report monthly to the
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 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 in
our Power Solutions Utility business 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. On the largest contracts,
all such arrangements are approved
at Group level.
In forming its view on the appropriateness
of the Group’s provision against its
receivables balances the Audit
Committee noted that Power Solutions
Utility cash collections in the year were
$584 million compared with amounts
invoiced of $484 million. The Audit
Committee also discussed the 16 most
significant debtors in the PSU business,
which accounted for 84% (2018: 84%) of
the total PSU overdue debtor value at
31 December 2019 (before taking into
account provisions or payment security/
guarantees). At 31 December 2019, 87%
(2018: 86%) of the PSU impairment
provision related to these top 16 debtors.
Among these debtors, the Group had
a net exposure, after taking into account
provisions or payment securities/
guarantees, of $30-40 million to one
customer (2018: two customers), a net
exposure between $20-$30 million to
one customer (2018: four customers), a
net exposure of $10-20 million to three
customers (2018: three customers) and
a net exposure of less than $10 million
to each of the others.
While the Committee considered all of
the most significant debtors as detailed
above, the discussion focused on key
customers in Venezuela, Yemen and
parts of Africa, where we continued
particularly to see delays in payments
during the year.
In Venezuela (where the Committee
included in its review some outstanding
balances within the PSI business), we
raised invoices for $2 million in the year.
Given the current political uncertainty
we provided for these invoices in full
and also recorded a provision for a
further $1.6 million during the year.
In line with past practice we also marked
to market the value of the PDVSA private
placement notes, which resulted in
a charge to the income statement
of $3 million. The Group’s net exposure
at 31 December 2019 of $12 million
(2018: $17 million) reflects a combination
of bad debt provisions and payment
security/guarantees representing
82% (2018: 78%) of the gross debt
and accrued income together with
a 91% (2018: 75%) fair value adjustment
against the private placement notes
with PDVSA.
Aggreko plc Annual Report and Accounts 2019
99
NOTES TO THE GROUP ACCOUNTS CONTINUED
1 Accounting policies
continued
In Yemen, given the ongoing civil war,
the Group increased its provision by
$7 million to provide fully for the legacy
debt (pre the current conflict). The net
exposure at 31 December 2019 is $9
million (2018: $10 million) and only relates
to our current trading in Yemen. This net
exposure position reflects a combination
of bad debt provisions and payment
security/guarantees representing 71%
(2018: 59%) of the gross debt and accrued
income
While we believe that we remain
relatively well positioned to recover these
net exposure amounts when the current
situation in both of these countries
stabilises, we also recognise that there is
a range of potential outcomes for each,
both above and below the net exposure.
Net exposure is defined here as the
gross debtor value plus accrued revenue,
less any payment security/guarantees
and bad debt provision.
In addition, we continue to monitor
closely the situation with regard to our
overdue debtors in Africa as, specifically,
the customer with whom we have our
largest net exposure (in the range
$30-40 million) is within the Africa
region. While there is no dispute over
the amount outstanding, we remain
in regular dialogue with the customer
regarding the likely process and timing
of future payments, with one of the
customer’s primary issues being its
access to US dollars to settle the debt.
Given the ongoing engagement with
the customer and other key
stakeholders, the Group does not hold a
material provision against this debt and,
therefore, the likelihood of receiving
more cash than the net exposure is low.
Non-payment of this particular debt
represents one of the Group’s key single
risks.
Contracts are reviewed on a case by
case basis to determine the customer
and country risk. As a result of the
rigorous approach to risk management,
historically the Group has had a low level
of bad debt write-offs. The Group does
operate in countries, especially in our
PSU business, where payments are
unpredictable, where political and
economic conditions mean that there
is a risk of default and that risk can
increase quickly, therefore the Group’s
history in this area may not be indicative
of the likely future outcome. When a
trade receivable is uncollectable, it is
written off against the provision
for impairment of trade receivables.
Taxation
Ongoing tax dispute in Bangladesh
We continue to have an open tax issue
in Bangladesh. This was appealed in 2017
and is still waiting to be heard by the
courts. We do not anticipate that this
matter will progress to conclusion over
the course of the coming financial year
and believe that it may be many years
before the matter is resolved. Our
position is supported by a strong legal
opinion and so we remain of the opinion
that we will be successful in the courts.
We therefore believe that there is no
likelihood of further financial exposure
on this in the coming year.
Other areas of judgement
and consideration
Leases
Lessor
IFRS 16 ‘Leases’ requires that any
arrangement that is dependent on
the use of a specific asset or assets, and
that conveys a right to use the asset, is
accounted for as a lease. The Directors,
have concluded that none of the Group’s
contracts are dependent on the use of
a specific asset or assets as the Group
swaps in and out the rental fleet
required to provide the services to
our customers and the assets are not
contract specific (i.e. one asset could
work across many contracts).
Lessee
The Group has applied judgement to
determine the lease term for some lease
contracts that include renewal options.
The assessment of whether the Group
is reasonably certain to exercise such
options impacts the lease term, which
affects the amount of lease liabilities
and right-of-use assets recognised.
The overall impact of this is not material.
Hyperinflationary environments
The Group operates in Venezuela
which is considered a hyperinflationary
environment. The Group does not
consider that the provisions of IAS 29
‘Financial Reporting in Hyperinflationary
Economies’ apply to the Group’s
operations in Venezuela as the
functional currency of the Venezuelan
operation is US Dollars. The Group
operates in Argentina and Zimbabwe
which are considered hyperinflationary
environments, however the impact
is not material.
Supplier payment
The Group participates in a supply chain
finance programme under which its
suppliers may elect to receive early
payment of their invoice from a bank
by factoring their receivable from the
Group. Under the arrangement, a bank
agrees to pay amounts to a participating
supplier in respect of invoices owed by
the Group and receives settlement from
the Group at a later date. The principal
purpose of this programme is to
facilitate efficient payment processing
and enable the willing suppliers to sell
their receivables due from the Group
to a bank before their due date.
From the Group’s perspective, the
arrangement does not significantly
extend payment terms beyond the
normal terms agreed with other
suppliers that are not participating.
The Group does not incur any additional
interest towards the bank on the
amounts due to the suppliers.
The Group has not derecognised
the original liabilities to which the
arrangement applies because neither
a legal release was obtained, nor was
the original liability substantially
modified on entering into the
arrangement. The Group discloses the
amounts factored by suppliers within
trade payables (Note 19) because the
nature and function of the financial
liability remain the same as those of
other trade payables, but discloses
disaggregated amounts in the notes.
Revenue
Identification of performance
obligations
Judgement is required in determining
the number of performance obligations
in relation to each revenue stream
given a number of services (including
mobilisation and demobilisation) that
can be provided as part of the contract.
In the majority of cases Aggreko will
only have two performance obligations.
In Rental Solutions and shorter-term
rental contracts within Power Solutions
Industrial the Group provides rental
contracts for the supply of temporary
power, temperature control, oil-free
compressed air and related services.
In Power Solutions Utility and medium-
term projects for industrial customers
the Group supplies temporary power,
temperature control, oil-free
compressed air and related services.
We believe these are performance
obligations as any services to mobilise
or demobilise assets are not considered
distinct from the provision of power.
The Group’s services are considered
to be a service or series of services that
are substantially the same and have the
same pattern of transfer to the customer.
In some cases the Group will have an
additional performance obligation
where the Group is responsible for the
design and project management phase
of the project (for example, in some of
the major events contracts) and at the
100 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
1 Accounting policies
continued
end of this phase the Group will hand
over the design documentation and
project management knowledge/
documentation to the customer who
can then take this documentation/
knowledge and use someone else for
the provision of power if they so wish.
Rehire arrangements
(Principal vs Agent)
Aggreko will sometimes hire equipment
from a third party to use on a contract.
Under IFRS 15 Aggreko is acting as an
agent rather than principal in this
instance mainly because Aggreko does
not control the provision of the service
due to factors such as the fact that the
third party is still responsible for repairs
to the equipment. Under IFRS 15 the cost
of the rehire is netted against revenue.
Judgement is required in determining
if there is a Principal/Agent relationship
in the relevant contracts.
Taxation
Other uncertain tax positions excluding
Bangladesh
Aggreko’s tax charge is based on the
profit for the year and the applicable 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 the tax
jurisdictions in which the Group
operates. The varying nature and
complexity of the tax laws 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 or contentious tax
positions, and these are measured using
the most likely outcome method.
Provisions are considered on an
individual basis. All provisions are
calculated in line with IFRIC 23 which
came into force on 1 January 2019.
There was no material change to any
provisions previously held as result of the
implementation of the new standard.
For other uncertain direct tax positions,
excluding Bangladesh, as at 31
December 2019, we had tax provisions
totalling £26 million (2018: £24 million).
The provisions are principally held to
manage the tax impact of various
potential tax exposures, largely in
connection with our Power Solutions
Utilities business, and potential transfer
pricing risks faced by the Group with
respect to how we transact
internationally within the business.
Due to the uncertainty associated with
such tax positions, it is possible that at a
future date, on conclusion of these open
tax positions, the final outcome may vary
significantly. While a range of outcomes
is reasonably possible, based on
management’s historic experiences of
these issues, we believe a likely range
of outcomes is additional liabilities of
up to £4 million and a reduction in
liabilities of around £15 million. The
range of sensitivities depends upon
quantification of the liability, risk
of technical error and difference in
approach taken by tax authorities in
different jurisdictions. In addition, the
recognition of deferred tax assets is
dependent upon an estimation of future
taxable profits available against which
deductible temporary differences can
be utilised.
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 risks arising from the
Group’s underlying operations are
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 while 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 31 December of 2019, Net Debt to
EBITDA was 1.0* times (2018: 1.3* times).
The Group maintains sufficient facilities
to meet its normal funding
requirements over the medium term.
At 31 December 2019, these facilities
totalled £1,027 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 four times interest and
net debt should be no more than three
times EBITDA. The covenants exclude
the impact of IFRS 16 ‘Leases’ and, on
that basis at 31 December 2019, these
ratios were 14* times and 0.9* times. The
Group does not expect to breach these
covenants in the year from the date of
approval of these financial statements.
The Group expects to be able to arrange
sufficient finance to meet its future
funding requirements. It has been
the Group’s custom and practice to
refinance its facilities in advance of their
maturity dates, providing that there
is an ongoing need for those facilities.
Net debt (including £101 million of a
lease creditor on adoption of IFRS 16
from 1 January 2019) amounted to
£584 million at 31 December 2019 and, at
that date, undrawn committed facilities
were £516 million. The maturity profile
of the borrowings is detailed in Note 17
to the Accounts.
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 2019, £478 million of
the gross debt of £570 million (excluding
the lease creditor of £101 million) was at
fixed rates of interest resulting in a fixed
to floating rate net debt ratio of 84:16
(2018: 77:23**).
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 £1 million (2018:
£1 million). The sensitivity analysis
is performed on a monthly basis
and is reported to the Board.
* Calculation is on pages 137 and 138.
** Prior year calculation was based on net debt. This has been changed to gross debt and the comparator has been re-stated from 86:14 to 77:23.
Aggreko plc Annual Report and Accounts 2019
101
NOTES TO THE GROUP ACCOUNTS CONTINUED
1 Accounting policies
continued
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. 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 impact of currency increased our
revenue by £6 million (2018: decreased
by £112 million) and decreased operating
profit by £9 million (2018: decrease
of £24 million) for the year ended
31 December 2019.
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 £4 million (2018: £4 million) in
operating profit in terms of translation.
Currency translation also gave rise to
a £75 million decrease in reserves as
a result of year on year movements
in the exchange rates (2018: decrease
of £24 million). For every 5% movement
in the US Dollar, there is an approximate
impact in equity of £24 million (2018:
£30 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.
The principal exchange rates which
impact the Group’s profit and net assets
are set out in the Financial Review on
page 26.
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 Refer
to page 99.
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.
2 Proceeds from sale of property, plant and equipment
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
Bank overdrafts (Note 17)
Cash and cash equivalents
4 Segmental reporting
(A) Revenue by segment
Power Solutions
Industrial
Utility
Rental Solutions
Group
2019
£ million
2018
£ million
11
10
21
8
7
15
2019
£ million
2018
£ million
87
(51)
36
85
(9)
76
External revenue
2019
£ million
2018
£ million
434
346
780
833
1,613
424
514
938
822
1,760
(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 apart from revenue of £1 million from Power Solutions Utility to Rental Solutions.
102 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
4 Segmental reporting continued
(A) Revenue by segment continued
Disaggregation of revenue
In the tables below revenue is disaggregated by geography and by sector.
Revenue by geography
North America
UK
Continental Europe
Eurasia
Middle East
Africa
Asia
Australia Pacific
Latin America
Revenue by sector
Utilities
Oil & gas
Petrochemical & refining
Building services & construction
Events
Manufacturing
Mining
Other
(B) Profit by segment
Power Solutions
Industrial
Utility
Rental Solutions
Operating profit
Finance costs – net
Profit before taxation
Taxation
Profit for the year
2019
£ million
2018
£ million
506
76
176
73
169
206
146
80
181
1,613
460
106
179
77
148
200
166
100
324
1,760
31 December 2019
31 December 2018
PSI
£ million
PSU
£ million
RS
£ million
Group
£ million
PSI
£ million
PSU
£ million
RS
£ million
Group
£ million
19
178
8
43
55
31
64
36
434
346
–
–
–
–
–
–
–
346
82
148
157
151
72
56
48
119
833
447
326
165
194
127
87
112
155
1,613
27
163
9
48
53
32
53
39
424
514
–
–
–
–
–
–
–
514
99
110
147
151
80
56
43
136
822
640
273
156
199
133
88
96
175
1,760
2019
£ million
2018
£ million
64
44
108
133
241
(42)
199
(70)
129
71
43
114
105
219
(37)
182
(57)
125
Aggreko plc Annual Report and Accounts 2019
103
NOTES TO THE GROUP ACCOUNTS CONTINUED
4 Segmental reporting continued
(C) Depreciation and amortisation by segment
Power Solutions
Industrial
Utility
Rental Solutions
Group
(D) Capital expenditure on property, plant and equipment and intangible assets by segment
Power Solutions
Industrial
Utility
Rental Solutions
Group
2019
£ million
2018
£ million
100
100
200
123
323
90
104
194
104
298
2019
£ million
2018
£ million
80
78
158
105
263
55
76
131
109
240
Capital expenditure comprises additions of property, plant and equipment (PPE) of £255 million (including £25 million in relation
to leased right-of-use assets) (2018: £216 million), additions of intangible assets of £8 million (2018: £10 million), acquisitions of PPE
of £nil (2018: £13 million), and acquisitions of intangible assets of £nil (2018: £1 million).
(E) Assets/(liabilities) by segment
Assets
Liabilities
2019
£ million
2018
£ million
2019
£ million
2018
£ million
768
828
1,596
845
2,441
65
1
–
–
4
2,511
714
996
1,710
833
2,543
59
1
–
–
1
2,604
(175)
(187)
(362)
(82)
(444)
(87)
(1)
(519)
(101)
–
(1,152)
(94)
(214)
(308)
(76)
(384)
(90)
(1)
(762)
–
–
(1,237)
2019
Number
2018
Number
2,071
1,227
3,298
2,906
6,204
1,954
1,314
3,268
2,759
6,027
Power Solutions
Industrial
Utility
Rental Solutions
Group
Tax and finance assets/(liabilities)
Derivative financial instruments
Borrowings
Lease liability
Retirement benefit surplus
Total assets/(liabilities) per balance sheet
(F) Average number of employees by segment
Power Solutions
Industrial
Utility
Rental Solutions
Group
104 Aggreko plc Annual Report and Accounts 2019
4 Segmental reporting continued
(G) Geographical information
North America
UK
Continental Europe
Eurasia
Middle East
Africa
Asia
Australia Pacific
Latin America
Non-current assets exclude deferred tax.
(H) Reconciliation of net operating assets to net assets
Net operating assets
Retirement benefit surplus
Net tax and finance payable
Borrowings and derivative financial instruments
Lease liability
Net assets
5 Profit before taxation
The following items have been included in arriving at profit before taxation:
Staff costs (Note 7)
Depreciation of property, plant and equipment (Note 13)
Amortisation of intangibles (included in administrative expenses) (Note 27.A2)
Fulfilment asset amortisation (Note 14)
Net gain on disposal of property, plant and equipment (Note 2)
Research costs
Net foreign exchange losses/(gains)(i)
Operating lease rentals
(i) The translational impact of currency on the Group’s revenue and profit is discussed in the Group Performance Review on page 20.
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Non-current assets
2019
£ million
2018
£ million
294
177
140
69
181
179
142
79
190
1,451
288
161
137
59
251
153
151
70
164
1,434
2019
£ million
2018
£ million
1,997
4
(22)
1,979
(519)
(101)
1,359
2,159
1
(31)
2,129
(762)
–
1,367
2019
£ million
2018
£ million
427
315
8
24
(10)
–
4
–
422
293
5
12
(7)
1
(1)
38
Aggreko plc Annual Report and Accounts 2019
105
NOTES TO THE GROUP ACCOUNTS CONTINUED
6 Auditor’s 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
2019
£000
2018
£000
363
1,079
48
3
332
1,029
43
3
In addition to the above services, the Group’s auditor acted as auditor to the Group’s defined benefit pension scheme.
The appointment of the auditor 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 acts independently from the management of the Group. The aggregate fees
paid to the Group’s auditor for audit and non-audit services to the pension scheme during the year were £8k (2018: £8k).
7 Employees and Directors
Staff costs for the Group during the year:
Wages and salaries (including severance costs)
Social security costs
Share-based payments
Pension costs – defined contribution plans
Pension costs – defined benefit plans (Note 27.A5)
2019
£ million
2018
£ million
367
34
11
13
2
427
363
33
10
14
2
422
Key management personnel compensation
Full details of the Directors’ remuneration are set out in the Remuneration Report on pages 62 to 77. The key management
comprises the Executive Committee as well as Non-executive Directors.
Key management compensation comprised the following:
Short-term employee benefits
Share-based payments
8 Net finance charge
Finance cost on bank loans and overdrafts
Finance cost on lease liability (Note 18)
Finance cost on employee benefit scheme liabilities (Note 27.A5)
Finance income on bank balances and deposits
Finance income on employee benefit scheme assets (Note 27.A5)
2019
£ million
2018
£ million
7
2
9
10
2
12
2019
£ million
2018
£ million
(38)
(5)
(3)
(46)
1
3
4
(37)
–
(4)
(41)
1
3
4
106 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
9 Taxation
Analysis of charge in year
Current tax expense:
– UK corporation tax
– Double tax relief
– Overseas taxation
Adjustments in respect of prior years:
– UK
– Overseas
Deferred taxation (Note 21):
– Temporary differences arising in current year
– Movements in respect of prior years
The tax charge relating to components of other comprehensive income is as follows:
Deferred tax on retirement benefits
2019
£ million
2018
£ million
6
(1)
5
70
75
(2)
5
78
(2)
(6)
70
6
–
6
62
68
(2)
(17)
49
5
3
57
2019
£ million
2018
£ million
–
–
(5)
(5)
Variances between the current tax charge and the standard 19% (2018: 19%) UK corporate tax rate when applied to profit on
ordinary activities for the year are as follows:
Profit before taxation
Tax calculated at 19% standard UK corporate tax rate
Differences between UK and overseas tax rates
Expenses not tax effected
Income not subject to tax
Impact of deferred tax rate changes
Tax on current year profit
Prior year adjustments – current tax
Prior year adjustments – deferred tax
Total tax on profit
2019
£ million
199
2018
£ million
182
38
32
3
(1)
1
73
3
(6)
70
35
32
6
(1)
1
73
(19)
3
57
Effective tax rate
35%
31%
Aggreko plc Annual Report and Accounts 2019
107
NOTES TO THE GROUP ACCOUNTS CONTINUED
10 Dividends
Final paid
Interim paid
2019
2019
£ million
per share (p)
2018
£ million
2018
per share (p)
45
24
69
17.74
9.38
27.12
45
24
69
17.74
9.38
27.12
In addition, the Directors are proposing a final dividend in respect of the financial year ended 31 December 2019 of 18.27 pence
per share which will utilise an estimated £47 million of Shareholders’ funds. It will be paid on 21 May 2020 to shareholders who
are on the register of members on 24 April 2020.
11 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)
2019
129.3
254.6
50.80
2018
125.4
254.8
49.22
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
Diluted weighted average number of Ordinary Shares in issue (million)
Diluted earnings per share (pence)
2019
129.3
254.6
0.4
255.0
50.70
2018
125.4
254.8
0.2
255.0
49.18
108 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
12 Goodwill
Cost
At 1 January
Acquisitions
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
2019
£ million
2018
£ million
184
–
(7)
177
–
177
184
3
(3)
184
–
184
2019
£ million
2018
£ million
56
20
76
101
177
59
22
81
103
184
Goodwill is tested for impairment annually or whenever there is an indication that the asset may be impaired. Goodwill is
monitored by management at an operating segment level. The recoverable amounts of the CGUs are determined from value in
use calculations which use cash flow projections based on the five-year strategic plan approved by the Board. The strategic plan
approved by the Board is based on past performance, the opportunity pipeline, and management’s best estimate of future
market developments. The key assumptions for value in use calculations are those relating to expected changes in revenue
(utilisation and rates) and the cost base, discount rates and long-term growth rates, are as follows:
Power Solutions Industrial
Power Solutions Utility
Rental Solutions
2019
2018
EBITDA
£ million
Post-tax
discount
rate
Pre-tax
discount
rate
164
144
256
7.3%
7.3%
7.3%
11.2%
11.2%
11.2%
Long-term
growth
rate
3%
3%
3%
EBITDA
£ million
Post-tax
discount
rate
Pre-tax
discount
rate
Long-term
growth
rate
161
147
209
8.4%
8.4%
8.4%
12.2%
12.2%
12.2%
3%
3%
3%
Values in use were determined using current year cash flows, a prudent view of the medium-term business strategy. A terminal
cash flow was calculated using a long-term growth rate of 3%. On the basis that the business carried out by all CGUs is closely
related and assets can be redeployed around the Group as required, a consistent Group discount rate has been used for all CGUs.
As at 31 December 2019, based on internal valuations, management concluded that the values in use of the CGUs exceeded
their net asset value with the highest headroom value being £2.5 billion and the lowest £486 million. Given these headroom
numbers the Directors consider that there is no reasonably possible change in the key assumptions made in their impairment
assessment that would give rise to an impairment.
Aggreko plc Annual Report and Accounts 2019
109
NOTES TO THE GROUP ACCOUNTS CONTINUED
13 Property, plant and equipment
Year ended 31 December 2019
Cost
At 1 January 2019
Exchange adjustments
Transition to IFRS 16
Additions (note (ii))
Disposals (note (iii))
IFRS 16 remeasurements (note (iv))
At 31 December 2019
Accumulated depreciation
At 1 January 2019
Exchange adjustments
Charge for the year
Disposals
At 31 December 2019
Net book values:
At 31 December 2019
At 31 December 2018
Freehold
properties
£ million
Short leasehold
properties
£ million
Rental fleet
£ million
Vehicles,
plant and
equipment
£ million
Total
£ million
92
(5)
75
17
(2)
6
183
40
–
21
(2)
59
124
52
23
(2)
–
1
–
–
22
16
(1)
1
–
16
6
7
3,612
(112)
–
189
(161)
–
3,528
2,555
(79)
265
(152)
2,589
939
1,057
168
(2)
29
48
(10)
(2)
231
115
(1)
28
(8)
134
97
53
3,895
(121)
104
255
(173)
4
3,964
2,726
(81)
315
(162)
2,798
1,166
1,169
(i) The net book value of assets capitalised in respect of leased right-of-use assets at 31 December 2019 is £98 million.
(ii) Additions of £255 million include £25 million in relation to leased right-of-use-assets.
(iii) Disposals include £1 million of cost and £1 million of depreciation in relation to leased right-of-use assets.
(iv) Remeasurements represent amendments to the terms of existing leases which are prospectively applied.
(v) Assets in the course of construction total £39 million (2018: £49 million).
Note 18 contains more information on leases.
Year ended 31 December 2018
Freehold
properties
£ million
Short leasehold
properties
£ million
Rental fleet
£ million
Vehicles,
plant and
equipment
£ million
Total
£ million
86
4
2
–
–
92
35
2
3
–
40
52
51
20
1
2
–
–
23
15
–
1
–
16
7
5
3,400
102
196
13
(99)
3,612
2,296
77
273
(91)
2,555
1,057
1,104
152
2
16
–
(2)
168
98
3
16
(2)
115
53
54
3,658
109
216
13
(101)
3,895
2,444
82
293
(93)
2,726
1,169
1,214
Cost
At 1 January 2018
Exchange adjustments
Additions
Acquisitions
Disposals
At 31 December 2018
Accumulated depreciation
At 1 January 2018
Exchange adjustments
Charge for the year
Disposals
At 31 December 2018
Net book values:
At 31 December 2018
At 31 December 2017
110 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
14 Fulfilment assets
Balance at 1 January
Capitalised in period
Provision created for future demobilisation costs
Amortised to the income statement
Exchange
Balance at 31 December
Analysis of fulfilment assets
Current
Non-current
Total
15 Inventories
Raw materials and consumables
Work in progress
2019
£ million
2018
£ million
44
66
3
(24)
(3)
86
32
54
86
8
44
3
(12)
1
44
15
29
44
2019
£ million
2018
£ million
214
2
216
226
3
229
The cost of inventories recognised as an expense within cost of sales amounted to £81 million (2018: £85 million). The write down
of inventories to net realisable value amounted to £4 million (2018: £5 million).
16 Trade and other receivables
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Prepayments
Accrued income
Other receivables (Note (i))
Total receivables
2019
£ million
2018
£ million
529
(85)
444
45
124
46
659
587
(85)
502
45
169
65
781
(i) In September 2016, the Group signed £14 million of private placement notes with one customer in Venezuela (PDVSA) to
progress clearing the overdue debt. This resulted in a financial instrument which replaced the net trade receivable balance.
The financial instrument is booked at fair value which reflects our estimation of the recoverability of these notes. This fair
value is calculated to be £1 million (2018: £4 million). This financial instrument is included in other receivables. Other material
amounts included in other receivables include indirect taxes receivable (such as sales taxes) of £23 million (2018: £21 million)
and deposits of £6 million (2018: £15 million).
(ii) The value of trade and other receivables quoted in the table above also represents 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:
2019
£ million
2018
£ million
20
84
347
208
659
24
125
373
259
781
2019
£ million
2018
£ million
At 1 January
Net provision for receivables impairment
Utilised
Receivables written off during the year as uncollectable
Exchange
At 31 December
85
7
(2)
(3)
(2)
85
Aggreko plc Annual Report and Accounts 2019
80
7
(2)
(2)
2
85
111
NOTES TO THE GROUP ACCOUNTS CONTINUED
16 Trade and other receivables continued
Credit quality of trade receivables
The table below analyses the total trade receivables balance per operating segment into fully performing, past due and impaired.
Concentrations of credit risk are limited in the Rental Solutions and Power Solutions Industrial businesses due to the Group’s
large number of internationally dispersed customers. Disclosures in relation to concentration of credit risk in the Power Solutions
Utility business are set out in Note 1 on page 99.
31 December 2019
Power Solutions
Industrial
Utility
Rental Solutions
Group
31 December 2018
Power Solutions
Industrial
Utility
Rental Solutions
Group
Fully performing
£ million
Past due
£ million
Impaired
£ million
Total
£ million
56
26
82
92
174
61
141
202
68
270
12
61
73
12
85
129
228
357
172
529
Fully performing
£ million
Past due
£ million
Impaired
£ million
Total
£ million
56
53
109
71
180
56
202
258
64
322
11
64
75
10
85
123
319
442
145
587
Total
£ million
4.9%
529
(24)
(61)
444
Ageing of gross trade receivables and the provision for impairment
31 December 2019
Expected loss rate
Gross trade receivables
Provision for impairment of trade
receivables – matrix approach (ECL)
Provision for impairment of trade
receivables – specific determination
Net trade receivables
Not
past due
£ million
0.2%
175
(1)
–
174
Less than
30 days
£ million
Between 30
and 60 days
£ million
Between 60
and 90 days
£ million
Greater than
90 days
£ million
0.1%
70
(1)
–
69
0.1%
42
(1)
–
41
0.2%
23
(1)
-
22
4.3%
219
(20)
(61)
138
Of receivables over 90 days £42 million of the gross receivables and £6 million of the total provision are less than 180 days overdue.
£35 million of the gross receivables and £9 million of the total provision are older than 180 days but less than one year overdue
whilst £142 million of gross receivables and £66 million of the total provision are older than 365 days. Of the specific provision
of £61 million £1 million is between 90 and 180 days, £5 million is between 180 days and 365 days and £55 million is over 365 days.
Of the ECL provision of £20 million £5 million is between 90 and 180 days, £4 million is between 180 days and 365 days and
£11 million is over 365 days. Of net receivables over 90 days overdue £36 million is less than 180 days overdue, £26 million is
between 180 and 365 days overdue and £76 million is over 365 days overdue.
31 December 2018
Expected loss rate
Gross trade receivables
Provision for impairment of trade
receivables – matrix approach
Provision for impairment of trade
receivables – specific determination
Net trade receivables
Not
past due
£ million
Less than
30 days
£ million
Between 30
and 60 days
£ million
Between 60
and 90 days
£ million
Greater than
90 days
£ million
–
180
–
–
180
–
72
–
–
72
–
50
–
–
50
0.1%
39
(1)
–
38
3.6%
246
(20)
(64)
162
Total
£ million
3.7%
587
(21)
(64)
502
The Group seeks to secure advance payments and guarantees and as at 31 December 2019 these amounted to £52 million
(advance payments: £15 million; guarantees: £37 million). In determining the Expected Credit Loss (as explained in the trade
receivables accounting policy on page 98) one of the factors taken into account of is the level of security obtained as we consider
that the security obtained is effective in mitigating credit risk. The Group assesses credit quality as explained below:
112 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
16 Trade and other receivables continued
Power Solutions – Industrial
This is a 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 is 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. Receivables written off during the year
as uncollectable as a percentage of total gross debtors was 1% (2018: 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 these 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; including 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.
The total trade receivables balance as at 31 December 2019 for our Power Solutions Utility business was £228 million (2018:
£319 million). Within this balance, receivable balances totalling £52 million (2018: £32 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 £176 million (2018: £287 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.
Receivables written off during the year as uncollectable as a percentage of total gross debtors was 1% (2018: 1%).
17 Borrowings
Non-current
Bank borrowings
Private placement notes
Current
Bank overdrafts
Bank borrowings
Private placement notes
Total borrowings
Cash at bank and in hand
Lease liability
Net borrowings
Overdrafts and borrowings are 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
2019
£ million
2018
£ million
33
478
511
51
8
–
59
570
(87)
101
584
134
493
627
9
115
20
144
771
(85)
–
686
2019
£ million
2018
£ million
59
138
10
–
146
217
570
144
104
157
11
–
355
771
Aggreko plc Annual Report and Accounts 2019
113
NOTES TO THE GROUP ACCOUNTS CONTINUED
17 Borrowings continued
(ii) Borrowing facilities
The Group has the following undrawn committed floating rate borrowing facilities available at 31 December 2019 in respect
of which all conditions precedent had been met at that date:
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
18 Leases
(i) Amounts recognised in the balance sheet
Property, plant and equipment comprise owned and leased assets.
Property, plant and equipment owned
Right-of-use assets
2019
£ million
2018
£ million
69
81
201
50
115
516
–
276
100
89
–
465
2019
£ million
1,068
98
1,166
The Group leases many assets including land and buildings, vehicles and machinery. Information about leases for which the
Group is a lessee is presented below.
Right-of-use assets
Freehold
properties
£ million
Vehicles,
plant &
equipment
£ million
75
16
6
(18)
(4)
75
29
9
(2)
(12)
(1)
23
Net book value at 1 January 2019
Additions for the year
Remeasurements
Depreciation charge for year
Exchange adjustments
Net book value at 31 December 2019
Lease liabilities
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 31 December
Impact of discounting
Lease liabilities included in the balance sheet
Current
Non-current
(ii) Amounts recognised in the income statement
Depreciation charge of right-of-use assets
Freehold property
Vehicles, plant & equipment
Interest on lease liabilities
Expenses relating to short-term leases
The short-term lease commitments are not dissimilar to the short-term lease expense in the year.
114 Aggreko plc Annual Report and Accounts 2019
Total
£ million
104
25
4
(30)
(5)
98
2019
£ million
35
63
23
121
(20)
101
33
68
2019
£ million
18
12
30
5
4
18 Leases continued
(iii) Amounts recognised in the statement of cash flows
Total cash outflow for leases
2019
£ million
36
This £36 million is included in the cash flow statement with £31 million included within cash flows from financing activities and
£5 million included in interest paid within net cash generated from operating activities.
19 Trade and other payables
Trade payables
Trade payables – supplier factoring facility
Other taxation and social security payable
Other payables
Accruals
Deferred income
2019
£ million
2018
£ million
106
3
17
106
96
60
388
134
–
15
99
115
8
371
The value of trade and other payables quoted in the table above also represents the fair value of these items.
The Group participates in a supply chain finance programme under which its suppliers may elect to receive early payment of
their invoice from a bank by factoring their receivable from the Group. Under the arrangement, a bank agrees to pay amounts
to a participating supplier in respect of invoices owed by the Group and receives settlement from the Group at a later date.
The principal purpose of this programme is to facilitate efficient payment processing and enable the willing suppliers to sell
their receivables due from the Group to a bank before their due date. From the Group’s perspective, the arrangement does
not significantly extend payment terms beyond the normal terms agreed with other suppliers that are not participating.
The Group does not incur any additional interest towards the bank on the amounts due to the suppliers.
The Group has not derecognised the original liabilities to which the arrangement applies because neither a legal release was
obtained, nor the original liability was substantially modified on entering into the arrangement. The Group discloses the amounts
factored by suppliers within trade payables because the nature and function of the financial liability remain the same as those
of other trade payables, but discloses disaggregated amounts in the notes.
The payments to the bank are included within operating cash flows because they continue to be part of the normal operating
cycle of the Group and their principal nature remains operating, i.e. payments for the purchase of goods and services.
The payments to a supplier by the bank are considered non-cash transactions and amounted to £4 million (2018: £nil).
We have undrawn bank facilities to cover a withdrawal of the supply chain finance programme.
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
20 Demobilisation provision
Balance at 1 January
New provisions
Utilised
Exchange
Balance at 31 December
Analysis of demobilisation provision
Current
Non-current
Total
2019
£ million
2018
£ million
11
9
(6)
–
14
5
9
14
10
4
(4)
1
11
6
5
11
Aggreko plc Annual Report and Accounts 2019
115
NOTES TO THE GROUP ACCOUNTS CONTINUED
21 Deferred tax
31 December 2019
Fixed asset temporary differences
Retirement benefit obligations
Overseas tax on unremitted earnings
Tax losses
Other temporary differences
31 December 2018
Fixed asset temporary differences
Retirement benefit obligations
Overseas tax on unremitted earnings
Tax losses
Other temporary differences
At
1 January
2019
£ million
Credit/(debit)
to income
statement
2019
£ million
Exchange
differences
2019
£ million
At
31 December
2019
£ million
(44)
–
(1)
30
17
2
–
(1)
–
(5)
14
8
(2)
–
–
–
–
(2)
(46)
(1)
(1)
25
31
8
At
1 January
2018
£ million
Debit to
income
statement
2018
£ million
Debit to other
comprehensive
income
2018
£ million
Exchange
differences
2018
£ million
At
31 December
2018
£ million
(40)
4
–
32
24
20
–
–
(1)
(2)
(5)
(8)
–
(5)
–
–
–
(5)
(4)
1
–
–
(2)
(5)
(44)
–
(1)
30
17
2
A deferred tax liability of £1 million (2018: £1 million) has been recognised in respect of unremitted earnings.
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 £17 million.
The movements in deferred tax assets and liabilities (prior to offsetting 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 based on current forecasts. The Group did not recognise deferred tax assets of £39 million (2018: £31 million)
of which £38 million (2018: £27 million) relates to carried forward tax losses and £1 million (2018: £4 million) relates to fixed asset
timing differences as our forecasts indicate that these assets will not reverse in the near future.
Deferred tax assets of £13 million (2018: £23 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 based on current forecasts and secured long term contracts. The majority of
these assets can be carried forward indefinitely.
Deferred tax assets and liabilities
Fixed asset temporary differences
Retirement benefit obligations
Overseas tax on unremitted earnings
Tax losses
Other temporary differences
Total
Offset of deferred tax positions
Net deferred tax
31 December 2019
31 December 2018
Assets
£ million
Liabilities
£ million
Net
£ million
Assets
£ million
Liabilities
£ million
Net
£ million
21
–
–
25
32
78
(34)
44
(67)
(1)
(1)
–
(1)
(70)
34
(36)
(46)
(1)
(1)
25
31
8
–
8
15
–
–
30
23
68
(32)
36
(59)
–
(1)
–
(6)
(66)
32
(34)
(44)
–
(1)
30
17
2
–
2
The net deferred tax asset due after more than one year is £8 million (2018: £2 million).
116 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
22 Share capital
2019
Number
of shares
2019
£000
2018
Number
of shares
2018
£000
(i) Ordinary Shares of 4329⁄395 pence (2018: 4329⁄395 pence)
At 1 January and 31 December
256,128,201
12,378
256,128,201
12,378
(ii) Deferred Ordinary Shares of 618⁄25 pence (2018: 618⁄25 pence)
At 1 January and 31 December
182,700,915
12,278
182,700,915
12,278
(iii) Deferred Ordinary Shares of 1⁄775 pence (2018: 1⁄775 pence)
At 1 January and 31 December
18,352,057,648
237
18,352,057,648
237
(iv) Deferred Ordinary Shares of 984⁄775 pence (2018: 984⁄775 pence)
At 1 January and 31 December
188,251,587
17,147
188,251,587
17,147
(v) Deferred Ordinary Shares of 1⁄306125 pence (2018: 1⁄306125 pence)
At 1 January and 31 December
Total
573,643,383,325
19
42,059
573,643,383,325
19
42,059
The rights and obligations attached to shares is described on pages 78 to 79.
23 Treasury shares
Treasury shares
2019
£ million
(13)
2018
£ million
(17)
Interests in own shares represents the cost of 1,611,875 of the Company’s Ordinary Shares (nominal value 4329/395 pence). Movement
during the year was as follows:
1 January
Purchase of shares
Deferred shares and restricted stock
Sharesave maturity expenses
31 December
2019
Number
of shares
1,949,676
510,082
(835,050)
(12,833)
1,611,875
2018
Number
of shares
527,373
1,601,295
(178,992)
–
1,949,676
These shares represent 0.6% of issued share capital as at 31 December 2019 (2018: 0.8%).
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 Plan 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 2019 was
£13 million (2018: £14 million).
24 Capital commitments
Contracted but not provided for (property, plant and equipment)
25 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
(1) The Group adopted IFRS 16 ‘Leases’ from January 2019 and as a result this disclosure is not applicable for 2019.
2019
£ million
39
2018
£ million
19
2019
£ million
2018
£ million
–
–
–
–
29
67
21
117
Aggreko plc Annual Report and Accounts 2019
117
NOTES TO THE GROUP ACCOUNTS CONTINUED
26 Investments in subsidiaries
The subsidiary undertakings of Aggreko plc at 31 December 2019, and the main countries in which they operate, are shown
below. All companies are wholly owned and, unless otherwise stated, incorporated in the UK or in the principal country of
operation and are involved in the supply of modular, mobile power, heating, cooling and related services.
All shareholdings are of Ordinary Shares or other equity capital.
Company
Aggreko Algeria SPA*
Aggreko Angola Lda
Aggreko Argentina S.R.L.
Aggreko Aruba VBA
Country of
incorporation
Registered address
Algeria
Extension La Zone Des Activities, N 01, Adrar, Algeria
Angola
Rua 21 Jan, Qunintalao Escola de Enfermagem, Bairro Morro Bento III, District
of Samba, Luanda, Angola
Argentina
465, 2D, Av. L.N. Alem, Buenos Aires, 1001, Argentina
Aruba Weststraat 13, Aruba
Aggreko Generators Rental Pty Limited
Australia
101, Woodlands Drive, Braeside, VIC, 3195, Australia
Aggreko Bangladesh Power Solutions Limited
Bangladesh
Aggreko Bangladesh Energy Solutions Limited
Bangladesh
Concord Baksh Tower, Level-6, Plot-11A, Road-48, Block-CWN(A), Kamal
Ataturk Avenue, Gulshan-2, Dhaka, Bangladesh
Concord Baksh Tower, Level-6, Plot-11A, Road-48, Block-CWN(A), Kamal
Ataturk Avenue, Gulshan-2, Dhaka, Bangladesh
Aggreko Belgium NV
Belgium 7, Smallandlaan, Antwerpen, 2660, Belgium
Aggreko Energia Locacao de Geradores Ltda
Aggreko Cameroon LTD
Aggreko Canada Inc
Brazil
3500, Av. das Américas, – Ed Toronto 2000 – 6° Andar – Barra da Tijuca, Rio de
Janeiro, 22640-102, Brazil
Cameroon
Centre des Affaires Flatters, Rue Flatters, BP 4999, Bonanjo, Doula, Cameroon
Canada
199, Bay Street, Suite 2800, Commerce Court West, Toronto, ON, M5L1A9,
Canada
Aggreko Financial Holdings Limited +
Cayman Islands
89, Nexus Way, Camana Bay, PO Box 31106, Grand Cayman, KY1-1205, Cayman
Islands
Aggreko Chile Limitada
Aggreko (Shanghai) Energy Equipment Rental
Company Limited
Shanghai Yude Aggreko Energy Equipments
Rental Co., Ltd##
Aggreko Colombia SAS
Chile
Galvarino 9450, Parque Industrial Buenaventura, Quilicura, Region
Metropolitana, Santiago, Chile
China
Building 16, No 99 HuaJia Road, SongJiang District, Shanghai, 201611, China
China
301 Rongle East Road, Songjang District, Shanghai, China
Colombia
Parque Industrial Gran Sabana Vereda Tibitoc Lote M Unidad 67-A,
Tocancipa, Colombia
Aggreko Power Solutions Colombia SA ESP
Colombia
Parque Industrial Gran Sabana, Carretera Snrto Zipaquira Lote 67, Tocancipa
– Cundinamarca, Colombia
Aggreko Costa Rica S.A.
Aggreko DRC S.A.R.L.
Aggreko Cote d’Ivoire SARL
Aggreko Curacao B.V.
Costa Rica
Centro Corporativo Forum I, Torre G, Piso 1, Santa Ana, San José, Costa Rica
Congo
50, Avenue Goma- Commune de la Gombe, Kinshasa
Cote d’Ivoire
Vridi Canal – Base Centrale thermique à gaz, Abidjan, Cote d’Ivoire
Curacao
Hoogstraat 30, PO Box 3961, Curacao
Aggreko (Middle East) Limited**
Cyprus
3 Themistokli Dervi, Julia House, P.C. 1066, Nicosia, Cyprus
Aggreko Denark ApS
Denmark
Rådhuspladsen 4, 4. 1550 København V
Aggreko Dominican Republic SRL
Dominican
Republic
Paseo de los Locutores No. 53, Santo Domingo, Dominican Republic
Aggreko Energy Ecuador CIA.LTDA
Ecuador
E 2324, Rumipamba y Av. Amazonas, Quito, NA, Ecuador
Aggreko Finland Oy
Aggreko France SARL
Aggreko Gabon S.A.R.L.
Finland
Hatanpaan Valtatie 13, Tampere, Finland
France
5, Rue Boole, Saint-Michel sur Orge, 91240, France
Gabon
Residence Du Golf, Libreville, BP: 4568, Gabon
Aggreko Deutschland GmbH
Germany
Barbarastraße 62, 46282 Dorsten, Germany
Younicos GmbH
Aggreko Hong Kong Limited
Germany
Am Studio 16, 12489 Berlin, Germany
Hong Kong
Lots 1845 and 1846 in DD125 Ho Tsuen, Yuen Long, N.T. Hong Kong, SAR,
00852, Hong Kong
Aggreko Energy Rental India Private Limited +++
India
“The Chambers”, Office No 501, Plot No 4/12/13, Viman Nagar, Pune, 411014,
India
Aggreko Energy Services Indonesia PT
PT Kertabumi Teknindo
Indonesia
Indonesia
Talavera Tower Lantai 5 Talavera Office Park, Jl. Letjend TB Simatupang Kav
22 – 26, Cilandak Barat Cilandak, Jakarta Selatan, DKI Jakarta 12430
Talavera Tower Lantai 5 Talavera Office Park, Jl. Letjend TB Simatupang Kav
22 – 26, Cilandak Barat Cilandak, Jakarta Selatan, DKI Jakarta 12430
118 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
26 Investments in subsidiaries continued
Company
Aggreko Ireland Ltd
Aggreko Italia S.R.L.
Aggreko Japan Limited
Aggreko Events Services Japan Ltd
Aggreko Kazakhstan LLC
Country of
incorporation
Registered address
Ireland
Riverside One, Sir John Rogerson’s Quay, Dublin 2, D02 X576, Ireland
Italy
29, Via A. Einstein, Assago (MI), 20090, Italy
Japan
Japan
Kazakhstan
4F, Ace Kudan Building, 2-2-1 Kudan-Minami, Chiyoda-ku, Tokyo, Japan
4F, Ace Kunda Building, 2-2-1 Kudan-Minami, Chiyoda-ku, Tokyo, Japan
Building 14/2, Oteshkaly Atambayev street, Atyrau city, Atyrau region,
Republic of Kazakhstan
Aggreko Kenya Energy Rentals Limited
Kenya
Plot 12100, Tulip House, Mombasa Road, P.O. Box 10729, 00100, Nairobi, Kenya
Aggreko Malaysia SDN BHD
Aggreko Mali S.A.R.L.
Aggreko Mauritania SARL
Aggreko Africa Limited
Aggreko Energy Mexico SA de CV
Aggreko Services Mexico SA de CV
Aggreko SA de CV ++++
Malaysia
Level 8 Symphony House Berhad Pusat Dagangan Dana 1 Jalan PJU 1A/46,
Petaling Jaya, 47301, Malaysia
Mali
Bamako-Lafiabougou ACI 2000, Immeuble Samassa, 1 Etage, porte 02
Mauritania
Tevragh Zeina, Lot ZRB, Villa No 225, Avenue Moctar Daddah, Nouakchott
Mauritius
co/o Abax Corporate Services Ltd, 6th Floor, Tower A, 1 CyberCity, Mauritius
Mexico
Mexico
Mexico
8, Carretera Coacalco Tultepec, Estado de Mexico, 55717, Mexico
8, Carretera Coacalco Tultepec, Estado de Mexico, 55717, Mexico
Mar Cantabrico No. 20, Co. Popotla C.P. 11400, Mexico, D.F., Mexico
Aggreko Mocambique Limitada
Mozambique
7 Andar, Av. 24 de Julho, No 7, Bairro Polana Cimento, Distrito Urbano 1,
Maputo, Mozambique
Aggreko Myanmar Co Limited
Myanmar
No. 112 (First Floor), 49th Street, Pazundaung Township, Yangon, Myanmar
Aggreko Namibia Energy Rentals (Proprietary)
Limited
Namibia
344 Independence Avenue, Windhoek, Namibia
Aggreko (NZ) Limited
Aggreko Projects Limited
New Zealand
Level 8, 188 Quay Street, Auckland, 1010, New Zealand
Nigeria
27 Festival Road, Victoria Island, Lagos, Nigeria
Aggreko Gas Power Generation Limited ++++
Nigeria
27 Festival Road, Victoria Island, Lagos, Nigeria
Aggreko Norway A/S
Aggreko Energy Rentals Panama SA
Norway
44, Dragonveien, Bygg 31, Oslo, Norway
Panama
Patton, Moreno & Asvat offices in Capital Plaza Building, 8th floor, Roberto
Motta y Costa del Este Avenue, Panama, PA, 507, Panama
Aggreko Latin America Inc
Panama
Street 50, PH 909, 14º floor, Panama City, Panama
Aggreko Generator Rentals (PNG) Limited
Papua New
Guinea
c/- Ashurst PNG, Level 4, Mogoru Moto Building, Champion Parade, Port
Moresby, National Capital District, Papua New Guinea
Aggreko Peru S.A.C.
Peru
Avenida Elmer Faucett 4800, Callao, Peru
Aggreko Energy Rental Solutions Inc
Philippines
Unit 1101, Picadily Star Building, 4th Avenue, 27th Street Bonifacio Global City,
Taguig City, 1634, Philippines
Aggreko Polska Sp. z o.o.
Graciolica Lda
Poland
Fort Ordona 6 street, Czosnow, 05-152, Poland
Portugal
Estrada Velha Do Quitadouro, Ilha da Graciosa, 9880 315 Santa Cruz da
Graciosa, Portugal
Aggreko South East Europe SRL
Romania
Soseaua de Centura 7A, Tunari, Ilfov, 077180, Romania
Aggreko Eurasia LLC
Aggreko Senegal SARL
Aggreko Singapore PTE Ltd
Milman International PTE LTD
Aggreko Energy Rental South Africa
Proprietary Ltd
Aggreko South Korea Limited
Aggreko Iberia SA
Russia
Building 1, House 8, 2nd km Stariy Tobolsky Trakt, Tyumen, 625000, Russian
Federation
Senegal
Route De Ngor 29912, Dakar, Senegal
Singapore
8B Buroh Street, Singapore, 627532
Singapore
8B Buroh Street, Singapore, 627532
South Africa
2 Eglin Road, Sunninghill, 2157, South Africa
South Korea
Unit 3203 S-Trenue, 37 Gukjegeumyung-ro 2-gil, Yeongdeungpo-gu, Seoul,
Republic of Korea
Spain
35-37, Avinguda Torre Mateu, Pol.Industrial Can Salvatella, Barbera del Valles,
08210, Spain
Aggreko Sweden AB
Sweden
Box 16285, Stockholm, 103 25, Sweden
Aggreko Energy Rentals Tanzania Limited
Tanzania
Ubungo Plaza Unit 209, 2nd Floor, PO Box 158, Dar Es Salaam, Tanzania
Aggreko (Thailand) Limited
Thailand
Central World, 29th Floor, Rama I Road, Pathumwan Sub-district,
Pathumwan District, Bangkok, Thailand
Aggreko Americas Holdings B.V. +
The Netherlands
Amstelveenseweg 760, 1081 JK Amsterdam, Netherlands
Aggreko plc Annual Report and Accounts 2019
119
NOTES TO THE GROUP ACCOUNTS CONTINUED
26 Investments in subsidiaries continued
Company
Country of
incorporation
Registered address
Aggreko Euro Holdings B.V. +
The Netherlands
Amstelveenseweg 760, 1081 JK Amsterdam, Netherlands
Aggreko Rest of the World Holdings B.V. +
The Netherlands
Amstelveenseweg 760, 1081 JK Amsterdam, Netherlands
Aggreko (Investments) B.V. ++
The Netherlands
3, Fuutweg, Haven 461b, Klundert, 4791PB, Netherlands
Aggreko Nederland B.V.
The Netherlands
3, Fuutweg, Haven 461b, Klundert, 4791PB, Netherlands
Aggreko International Power Projects B.V.
The Netherlands
Aggreko Trinidad Limited
Aggreko Enerji ve Isi Kontrol Ticaret Anonim
Sirketi
Aggreko Middle East Limited FZE
Aggreko Fujairah FZE
Aggreko Events Services Limited
Aggreko Finance Limited +
Aggreko Holdings Limited +
Aggreko International Projects Holdings
Limited +
Aggreko International Projects Limited
Aggreko Pension Scheme Trustee Limited
Aggreko Russia Finance Limited ++
Aggreko UK Finance Limited ++
Aggreko UK Limited
Aggreko Generators Limited ++++
Aggreko Luxembourg Holdings
Dunwilco (680) Limited ++++
Golden Triangle Generators Limited
Origami Energy Limited#
Aggreko Global Solutions Limited
Aggreko Indonesia Finance Limited ++
Aggreko Ukraine LLC
Aggreko Uruguay S.A.
Aggreko Holdings Inc +
Aggreko USA LLC +
Aggreko LLC
Younicos Inc
Between Roundabouts 7 and 8, Opposite Red Sea Housing, PO Box 17576,
Jebel Ali, Dubai, United Arab Emirates
5/7 Sweet Briar Road, St. Clair, Trinidad and Tobago
Republic of
Trinidad &
Tobago
Turkey
EGS Business Park B2 Blok Kat:6 D:227 Yeşilköy, Bakırköy, Istanbul, Turkey
UAE
E-LOB Office No E2-112F-40, PO Box 52462, Hamriyah Free Zone, Sharjah,
United Arab Emirates
UAE
PO Box 50283, Fujairah, United Arab Emirates
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
Overburn Avenue, Dumbarton, G82 2RL, Scotland, United Kingdom
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
120 Bothwell Street, Glasgow, G2 7JS, Scotland, United Kingdom
Aggreko House Orbital 2, Voyager Drive, Cannock, Staffordshire, WS11 8XP,
England, United Kingdom
Ashcombe Court, Woolsack Way, Godalming, Surrey, GU7 1LQ,
United Kingdom
8th Floor, 120 Bothwell Street, Glasgow, G2 7JS, Scotland
8th Floor, 120 Bothwell Street, Glasgow, G2 7JS, Scotland
Ukraine
77, 709, Sichovyh Strilstiv St, Kyiv, Ukraine, 04053
Uruguay
675, Of 20, Peatonal Sarandi, Montevideo, Uruguay
USA Wilmington Trust SP Services Inc, 1105 N. Market Street, Suite 1300,
Wilmington DE, 19801, United States
USA
USA
The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, DE, 19801, United States
The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, DE, 19801, United States
USA
3100 Alvin Devane Blvd, Building A, Suite 200, Austin, TX, 78741, United States
Aggreko de Venezuela C.A.
Venezuela
Av. Venezuela Edif. Lamaletto, piso 5, oficina Unica, El Rosal, Caracas
*
Aggreko ownership is 49%
** Registered in Cyprus
+
Intermediate holding companies
++
Finance company
+++ The financial year end of Aggreko Energy Rental India Private Limited is 31 March due to local taxation requirements
++++ Dormant company
#
Aggreko ownership is 14.47%
## Aggreko ownership is 21.5%
120 Aggreko plc Annual Report and Accounts 2019
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.
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.
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
27 Notes to the Group
Accounts – appendices
27.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, 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.
Aggreko plc Annual Report and Accounts 2019
121
NOTES TO THE GROUP ACCOUNTS CONTINUED
27 Notes to the Group Accounts – appendices continued
27.A2 Other intangible assets
Year ended 31 December 2019
Cost
At 1 January 2019
Additions
Exchange adjustments
At 31 December 2019
Accumulated amortisation
At 1 January 2019
Charge for the year
At 31 December 2019
Net book values
At 31 December 2019
At 31 December 2018
Customer
relationships
and non-
compete
agreements
£ million
Development
expenditure
£ million
Technology
£ million
Total
£ million
58
–
–
58
42
4
46
12
16
24
8
–
32
–
3
3
29
24
3
–
(1)
2
1
1
2
–
2
85
8
(1)
92
43
8
51
41
42
Amortisation charges in the year have been recorded in administrative expenses.
Year ended 31 December 2018
Cost
At 1 January 2018
Acquisitions
Additions
Exchange adjustments
At 31 December 2018
Accumulated amortisation
At 1 January 2018
Charge for the year
Exchange adjustments
At 31 December 2018
Net book values
At 31 December 2018
At 31 December 2017
Customer
relationships
and non-
compete
agreements
£ million
Development
expenditure
£ million
Technology
£ million
Total
£ million
56
1
–
1
58
38
4
–
42
16
18
10
–
10
4
24
–
–
–
–
24
10
3
–
–
–
3
–
1
–
1
2
3
69
1
10
5
85
38
5
–
43
42
31
Amortisation charges in the year have been recorded in administrative expenses.
122 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
27 Notes to the Group Accounts – appendices continued
27.A3 Borrowings
(i) Interest rate risk profile of financial liabilities
The interest rate profile of the Group’s financial liabilities at 31 December 2019, after taking account of the interest rate swaps
used to manage the interest profile, was:
Currency:
US Dollar
Euro
Mexican Pesos
Brazilian Reals
Great British Pounds
Indian Rupees
Other currencies
As at 31 December 2019
Currency:
US Dollar
Euro
Canadian Dollar
Mexican Pesos
Indonesian Rupiah
Other currencies
As at 31 December 2018
Floating rate
£ million
Fixed rate
£ million
Total
£ million
–
9
21
22
15
8
17
92
478
–
–
–
–
–
–
478
478
9
21
22
15
8
17
570
Floating rate
£ million
Fixed rate
£ million
Total
£ million
13
61
23
18
23
42
180
591
–
–
–
–
–
591
604
61
23
18
23
42
771
Fixed rate debt
Weighted
average
interest rate
%
Weighted
average
period for
which rate
is fixed
Years
3.8
–
–
–
–
–
–
5.5
–
–
–
–
–
–
Fixed rate debt
Weighted
average
interest rate
%
Weighted
average
period for
which rate
is fixed
Years
4.0
–
–
–
–
–
5.4
–
–
–
–
–
The floating rate financial liabilities principally comprise debt which carries interest based on different benchmark rates
depending on the currency of the balance and is 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 £nil (2018: £79 million) of borrowings in the above table as fixed rate.
The notional principal amount of the outstanding interest rate swap contracts at 31 December 2019 was £nil (2018: £79 million).
(ii) Interest rate risk profile of financial assets
Currency:
US Dollar
Euro
Brazilian Reals
Other currencies
As at 31 December 2019
Cash at bank
and in hand
£ million
19
10
8
50
87
Aggreko plc Annual Report and Accounts 2019
123
NOTES TO THE GROUP ACCOUNTS CONTINUED
27 Notes to the Group Accounts – appendices continued
27.A3 Borrowings continued
Currency:
US Dollar
Russian Roubles
Other currencies
As at 31 December 2018
Cash at bank
and in hand
£ million
22
9
54
85
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.
27.A4 Financial instruments
As stated in our accounting policies Note 27.A1 on page 121 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.
Net investment hedges
The sterling value of the Group’s net investments in overseas subsidiaries is exposed to changes in foreign currency exchange
rates. The Group uses foreign currency denominated debt to hedge part of that exposure. The carrying value of debt in a net
investment hedge was £478 million (2018: £665 million). A foreign exchange gain of £16 million (2018: loss of £46 million) relating
to the net investment hedges has been netted off within currency translation differences as presented in the group statement of
comprehensive income. We assess whether each of these hedges is effective by comparing (on a prospective and retrospective
basis) the changes in the sterling equivalent values of the net investment in the overseas subsidiary and the relevant foreign
currency denominated debt.
Foreign currency cashflow hedges
The Group manages its currency flows to minimise foreign exchange risk arising on transactions denominated in foreign
currencies and uses foreign currency forward contracts, where appropriate, to hedge net currency flows. A net foreign currency
gain of £1 million (2018: £nil), relating to those foreign currency forward contracts, has been recognised in the hedging reserve.
We assess whether each of these hedges is effective by comparing (on a prospective and retrospective basis) the changes in the
functional currency equivalent values of the foreign currency denominated transaction and the relevant foreign currency forward
contract.
(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 2019. 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
Lease liabilities
Cash at bank and in hand
Trade receivables
PDVSA private placement notes
Trade payables
Derivative financial assets
Derivative financial liabilities
2019
2018
Book value
£ million
Fair value
£ million
Book value
£ million
Fair value
£ million
(59)
(511)
(101)
87
444
1
(109)
1
(1)
(59)
(511)
(101)
87
444
1
(109)
1
(1)
(144)
(627)
–
85
502
4
(134)
1
(1)
(144)
(627)
–
85
502
4
(134)
1
(1)
All financial instruments are measured at amortised cost other than the PDVSA private placement notes and derivatives which
are measured at fair value with changes recorded in the income statement.
(ii) Summary of methods and assumptions
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 as 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. Private placement notes are Level 2.
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.
124 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
27 Notes to the Group Accounts – appendices continued
27.A4 Financial instruments continued
(iii) Derivative financial instruments
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.
US Dollar
Euro
2019
£ million
2018
£ million
478
–
604
61
A foreign exchange gain of £16 million (2018: loss of £46 million) on translation of the borrowings into Sterling has been
recognised in exchange reserves.
(iv) The exposure of the Group to interest rate changes when borrowings reprice is as follows:
As at 31 December 2019
Total borrowings
Effect of interest rate swaps and other fixed rate debt
As at 31 December 2018
Total borrowings
Effect of interest rate swaps and other fixed rate debt
<1 year
£ million
1-5 years
£ million
>5 years
£ million
Total
£ million
59
–
59
294
(261)
33
217
(217)
–
570
(478)
92
<1 year
£ million
1-5 years
£ million
>5 years
£ million
Total
£ million
144
(99)
45
272
(137)
135
355
(355)
–
771
(591)
180
As at 31 December 2019 and 31 December 2018, 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 the
Group policy as described on page 101.
The effective interest rates at the balance sheet date were as follows:
Bank overdrafts
Bank borrowings
Private placement
2019
5.4%
7.6%
3.8%
2018
9.4%
3.8%
3.9%
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.
As at 31 December 2019
Borrowings
Derivative financial instruments
Trade and other payables
As at 31 December 2018
Borrowings
Trade and other payables
No trade payable balances have a contractual maturity greater than 90 days.
<1 year
£ million
1-2 years
£ million
2-5 years
£ million
>5 years
£ million
59
1
109
169
145
–
–
145
178
–
–
178
284
–
–
284
<1 year
£ million
1-2 years
£ million
2-5 years
£ million
>5 years
£ million
145
134
279
104
–
104
179
–
179
454
–
454
Aggreko plc Annual Report and Accounts 2019
125
NOTES TO THE GROUP ACCOUNTS CONTINUED
27 Notes to the Group Accounts – appendices continued
27.A4 Financial instruments continued
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.
As at 31 December 2019
Forward foreign exchange contracts – cash flow hedges
Outflow
Inflow
As at 31 December 2018
Forward foreign exchange contracts – cash flow hedges
Outflow
Inflow
<1 year
£ million
(250)
250
–
<1 year
£ million
(114)
114
–
All of the Group’s forward foreign currency exchange contracts are due to be settled within one year of the balance sheet date.
27.A5 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 2019 was £11 million (2018: £12 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 an
independent actuary.
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 2017 using the Attained Age method to determine the level of
contributions to be made by the Group. The actuary 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 pre-retirement
Return on investments post-retirement
Growth in average pay levels
Increase in pensions
3.2%
1.9%
3.4%
3.1%
At the valuation date, the market value of the Scheme’s assets (excluding AVCs) was £109 million which was sufficient to cover
93% of the benefits that had accrued to members, after making allowances for future increases in earnings.
As part of the valuation at 31 December 2017, the Company and the Trustee agreed upon a Schedule of Contributions and a
Recovery Plan. Company contributions for benefits building up in the future increased from 41.0% to 50.4% on 1 April 2019.
To address the Scheme deficit the Company has already made additional contributions of £1.25 million in 2018 and £3.75 million
in 2019 (£1.25 million catch up for 2018 and £2.5 million for 2019) and plans to make further additional contributions of £2.5 million
each year until 2023. Employee contributions are 6% of pensionable earnings.
The Group has the right to a refund of any pension surplus at the end of the Scheme and as such has not recognised an
additional liability in accordance with IFRIC 14.
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 this defined contribution scheme during the year
(2018: £2 million). There are no outstanding or prepaid balances at 31 December 2019.
126 Aggreko plc Annual Report and Accounts 2019
27 Notes to the Group Accounts – appendices continued
27.A5 Pensions continued
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
Bonds
– Index – linked gilts
– Corporate bonds
– Liability driven investments
Cash
Total
31 Dec 2019
31 Dec 2018
3.3%
2.9%
3.0%
2.1%
3.0%
22.3
24.9
23.8
26.9
3.7%
3.2%
3.4%
3.0%
3.4%
22.4
24.5
24.0
26.6
Value at
31 Dec 2019
£ million
Value at
31 Dec 2018
£ million
–
15
20
–
–
33
44
2
114
9
12
8
1
43
19
–
5
97
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
Asset recognised in the balance sheet
2019
£ million
2018
£ million
114
(110)
4
97
(96)
1
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Aggreko plc Annual Report and Accounts 2019
127
NOTES TO THE GROUP ACCOUNTS CONTINUED
27 Notes to the Group Accounts – appendices continued
27.A5 Pensions continued
Movement in defined benefit surplus/(liability) during the year:
Defined benefit obligation
Fair value of Scheme assets
Net defined benefit surplus/(liability)
2019
£ million
(96)
2018
£ million
(134)
2019
£ million
97
2018
£ million
109
Balance at 1 January
Included in the income statement
Service cost
Interest cost
Interest income
Included in the statement of
comprehensive income
Remeasurements
– Effect of changes in demographic
assumptions
– Effect of changes in financial
assumptions
– Effect of experience adjustments
– Return on plan assets
(excluding interest income)
Other
Employer contributions
Benefits paid
(2)
(3)
–
(5)
–
(15)
–
–
(15)
–
6
6
(2)
(4)
–
(6)
15
13
5
–
33
–
11
11
–
–
3
3
–
–
–
14
14
6
(6)
–
2019
£ million
1
(2)
(3)
3
(2)
–
(15)
–
14
(1)
6
–
6
4
2018
£ million
(25)
(2)
(4)
3
(3)
15
13
5
(7)
26
3
–
3
1
–
–
3
3
–
–
–
(7)
(7)
3
(11)
(8)
97
Balance at 31 December
(110)
(96)
114
The Projected Unit method has been used for the valuation of the liabilities. Under this method each participant’s benefits
under the Scheme are attributed to years of service, taking into consideration future salary increases and the Scheme’s benefit
allocation formula. Thus, the estimated total pension to which each participant is expected to become entitled at retirement
is broken down into units, each associated with a year of past or future credited service. The benefit obligation is the total
present value (assessed using appropriate assumptions) of the individual’s attributed benefits for valuation purposes at the
measurement date. The discount rate was derived from the AA corporate bond yield curve and based on Scheme specific
cash flow data from the last actuarial valuation to arrive at an appropriate single-equivalent rate.
The fair value of the assets is based on the underlying ‘bid value’ statements issued by the various investment managers.
The manager statements reflect the relevant pricing basis of the units held in the underlying pooled funds. An alternative
method of valuation is the estimated cost of buying out benefits at 31 December 2019 with a suitable insurer. This amount
represents the amount that would be required to settle the Scheme liabilities at 31 December 2019 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 2019 is around £137 million which gives a Scheme shortfall on a buyout basis of approximately
£23 million.
128 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
27 Notes to the Group Accounts – appendices continued
27.A5 Pensions continued
Cumulative actuarial gains and losses recognised in equity
At 1 January
Actuarial losses/(gains) recognised in the year
At 31 December
2019
£ million
2018
£ million
32
1
33
58
(26)
32
The actual return on Scheme assets was a gain of £14 million (2018: loss of £7 million).
Risks to which the Scheme exposes the Group
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 holding 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 while retaining control of the funding risks.
Through the Scheme, the Group is exposed to a number of other risks:
→ Changes in bond yields – a decrease in corporate bond yields will increase Scheme liabilities.
→ Inflation risk – pension obligations are linked to inflation and higher inflation will lead to higher liabilities.
→ Life expectancy – an increase in life expectancy will result in an increase in the Scheme liabilities.
The measurement of the defined benefit obligation is particularly sensitive to changes in key assumptions as described below:
→ 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 25 years.
→ 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
£10 million increase in the present value of the defined benefit obligation.
→ 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 £4 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.
Defined benefit obligation by participant status
Actives
Deferreds
Pensioners
2019
£ million
2018
£ million
39
36
35
110
31
34
31
96
The duration of the liabilities is approximately 25 years.
Expected cash flows in future years
Expected employer contributions for the year ending 31 December 2020 are £4 million. Expected total benefit payments:
approximately £2 million per year for the next 10 years.
Aggreko plc Annual Report and Accounts 2019
129
COMPANY BALANCE SHEET (COMPANY NUMBER: SC177553)
As at 31 December 2019
Fixed assets
Property, plant and equipment
Investments
Retirement benefit surplus
Current assets
Other receivables
Cash and cash equivalents
Deferred tax asset
Current tax asset
Creditors: amounts falling due within one year
Borrowings
Lease liability
Other payables
Derivative financial instruments
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Borrowings
Lease liability
Net assets
Shareholders’ equity
Share capital
Share premium
Treasury shares
Capital redemption reserve
Retained earnings
Total Shareholders’ equity
Notes
32
33
27 A.5
34
35
36
37
35
36
22
2019
£ million
2018
£ million
38
804
4
846
660
10
1
13
684
(22)
(1)
(514)
(1)
146
992
(511)
(3)
478
42
20
(13)
13
416
478
29
752
1
782
706
7
–
13
726
(101)
–
(347)
(1)
277
1,059
(627)
–
432
42
20
(17)
13
374
432
The financial statements on pages 130 to 136 were approved by the Board of Directors on 3 March 2020 and signed on its
behalf by:
K Hanna
Chairman
H Drewett
Chief Financial Officer
130 Aggreko plc Annual Report and Accounts 2019
COMPANY STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
Profit/(loss) for the year
Other comprehensive (loss)/income
Items that will not be reclassified to profit or loss
– Remeasurement of retirement benefits
– Taxation on remeasurement of retirement benefits
Items that may be reclassified subsequently to profit or loss
– Cash flow hedges
Other comprehensive (loss)/income for the year (net of tax)
Total comprehensive income for the year
2019
£ million
109
2018
£ million
(14)
(1)
–
–
(1)
108
26
(5)
2
23
9
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Aggreko plc Annual Report and Accounts 2019
131
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
As at 31 December 2019
Attributable to equity holders of the Company
Balance at 1 January 2019
Profit for the year
Other comprehensive loss
Remeasurement of retirement benefits (net of tax)
Total comprehensive income for the year ended
31 December 2019
Transactions with owners:
Purchase of Treasury shares
Employee share awards
Issue of Ordinary Shares to employees under
share option schemes
Dividends paid during 2019
Balance at 31 December 2019
As at 31 December 2018
Balance at 1 January 2018
Loss for the year
Other comprehensive income
Fair value gains on interest rate swaps (net of tax)
Remeasurement of retirement benefits (net of tax)
Total comprehensive income for the year ended
31 December 2018
Transactions with owners:
Purchase of Treasury shares
Employee share awards
Issue of Ordinary Shares to employees under
share option schemes
Dividends paid during 2018
Balance at 31 December 2018
Ordinary
Share
capital
£ million
Share
premium
account
£ million
Treasury
shares
£ million
Capital
redemption
reserve
£ million
42
–
–
–
–
–
–
–
–
42
20
–
–
–
–
–
–
–
–
20
(17)
–
–
–
(4)
–
8
–
4
(13)
13
–
–
–
–
–
–
–
–
13
Retained
earnings
£ million
Total
equity
£ million
374
109
432
109
(1)
(1)
108
108
–
11
(8)
(69)
(66)
416
(4)
11
–
(69)
(62)
478
Attributable to equity holders of the Company
Ordinary
Share
capital
£ million
Share
premium
account
£ million
Treasury
shares
£ million
Capital
redemption
reserve
£ million
42
–
–
–
–
–
–
–
–
–
42
20
–
–
–
–
–
–
–
–
–
20
(7)
–
–
–
–
(12)
–
2
–
(10)
(17)
13
–
–
–
–
–
–
–
–
–
13
Hedging
reserve
£ million
Retained
earnings
£ million
Total
equity
£ million
(2)
–
428
(14)
494
(14)
2
–
2
–
–
–
–
–
–
–
21
7
–
10
(2)
(69)
(61)
374
2
21
9
(12)
10
–
(69)
(71)
432
132 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
NOTES TO THE COMPANY ACCOUNTS
For the year ended 31 December 2019
28 Company accounting
policies
28.1 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 judgement in the
process of applying the Company’s
accounting policies.
The following exemptions from the
requirements of IFRS have been applied
in the preparation of these financial
statements, in accordance with FRS 101:
→ 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).
→ IFRS 7, ‘Financial Instruments:
Disclosures’.
→ 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).
→ 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).
→ 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).
→ lAS 7, ‘Statement of cash flows’.
→ 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).
→ Paragraph 17 of lAS 24, ‘Related party
disclosures’ (key management
compensation).
→ The requirements in lAS 24, ‘Related
party disclosures’ to disclose related
party transactions entered into
between two or more members
of a group.
→ Paragraph 52, the second sentence
of paragraph 89 and paragraphs 90,
91 and 93 of IFRS 16.
28.1.1 Going concern
Given the going concern disclosures in
the Group Accounts on page 94, the
Directors consider it appropriate to
adopt the going concern basis of
accounting in preparing these financial
statements.
28.1.2 Changes in accounting policy
and disclosures
New and amended standards adopted
by the Company
IFRS 16 ‘Leases’
The Company adopted IFRS 16 from
1 January 2019 and, therefore, this is
the first set of the Company’s annual
financial statements where IFRS 16 has
been applied. Changes to significant
accounting policies are the same as the
Group changes and are detailed out on
pages 94 to 95.
On transition to IFRS 16 the Company
recognised an additional £5 million of
right-of-use assets and £5 million of
lease liabilities at the present value of the
remaining lease payments discounted at
the Group’s incremental borrowing rate
of 5% as at 1 January 2019. This rate has
remained at 5% throughout 2019. Note
36 gives more detail on the company
leases.
IFRIC 23 ‘Uncertainty over income tax
treatments”
The Company adopted IFRIC 23 from
1 January 2019. There was no material
impact arising from the adoption of
this standard.
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.
Share-based payments
The accounting policy is identical to that
applied by the consolidated Group as set
out on page 121 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.
The following accounting policies are
identical to that applied by the Group
Property, plant and equipment – refer
to page 97
Impairment of property, plant and
equipment – refer to page 97
Foreign currencies – refer to page 98
Derivative financial instruments –
refer to page 121
Borrowings – refer to page 99
Taxation – refer to page 98
Employee benefits – refer to page 98
Aggreko plc Annual Report and Accounts 2019
133
NOTES TO THE COMPANY ACCOUNTS CONTINUED
29 Critical accounting estimates and assumptions
Taxation
This is explained in Note 1 to the Group Accounts on pages 100 to 101.
30 Dividends
Refer to Note 10 of the Group Accounts.
31 Auditor’s remuneration
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
32 Property, plant and equipment
Cost
At 1 January 2019
Transition to IFRS 16
Additions
At 31 December 2019
Accumulated depreciation
At 1 January 2019
Charge for the year
At 31 December 2019
Net book values
At 31 December 2019
At 31 December 2018
(i) The net book value of assets capitalised in respect of leased right-of-use-assets at 31 December 2019 is £4 million.
33 Investments
Cost of investments in subsidiary undertakings:
At 1 January 2019
Additions
Net impact of share-based payments
At 31 December 2019
2019
£000
363
34
2018
£000
332
32
Freehold
properties
£ million
Vehicles,
plant &
equipment
£ million
Total
£ million
–
5
–
5
–
1
1
4
–
46
–
11
57
17
6
23
34
29
46
5
11
62
17
7
24
38
29
£ million
752
50
2
804
Details of the Company’s subsidiary undertakings are set out in Note 26 to the Group Accounts. The Directors believe that the
carrying value of the investments is supported by their underlying net assets.
Of the additional investments, £29 million was in Aggreko Holdings Limited to allow it to invest in Aggreko Luxembourg
Holdings, which then invested in Aggreko Energia Locacao de Geradores Ltda; £21 million was invested in Aggreko Holdings
Limited to allow it to invest in Aggreko Indonesia Finance Limited.
134 Aggreko plc Annual Report and Accounts 2019
34 Other receivables
Amounts due from subsidiary undertakings
Other receivables
35 Borrowings
Non-current
Bank borrowings
Private placement notes
Current
Bank overdrafts
Bank borrowings
Private placement notes
Total borrowings before lease liability
Lease liability
Total borrowings
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
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
2019
£ million
2018
£ million
654
6
660
699
7
706
2019
£ million
2018
£ million
33
478
511
22
–
–
22
533
4
537
134
493
627
2
79
20
101
728
–
728
2019
£ million
2018
£ million
22
138
10
–
146
217
533
101
104
157
11
–
355
728
(ii) Borrowing facilities
The Company has the following undrawn committed floating rate borrowing facilities available at 31 December 2019 in respect
of which all conditions precedent had been met at that date:
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
2019
£ million
2018
£ million
69
81
201
50
115
516
–
276
100
89
–
465
Aggreko plc Annual Report and Accounts 2019
135
NOTES TO THE COMPANY ACCOUNTS CONTINUED
36. Leases
(a) Amounts recognised in the balance sheet
Property, plant and equipment’ comprise owned and leased assets.
Property, plant and equipment owned
Right-of-use assets
The Company leases office space.
Information about leases for which the Company is a lessee is presented below:
Right-of-use assets
Net book value at 1 January 2019
Depreciation charge for year
Net book value at 31 December 2019
Lease liabilities
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
Total undiscounted lease liabilities at 31 December
Impact of discounting
Lease liabilities included in the balance sheet
Current
Non-current
(b) Amounts recognised in the income statement
Depreciation charge of right-of-use assets
Freehold property
The short-term lease commitments are not dissimilar to the short term lease expense in the year.
(c) Amounts recognised in the statement of cash flows
Total cash outflow for leases
37 Other payables
Amounts owed to subsidiary undertakings
Accruals and other income
2019
£ million
34
4
38
Freehold
properties
£ million
5
(1)
4
2019
£ million
1
3
4
–
4
1
3
2019
£ million
1
1
2019
£ million
1
2019
£ million
2018
£ million
493
21
514
324
23
347
38 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 £109 million (2018: loss of £14 million).
136 Aggreko plc Annual Report and Accounts 2019
DEFINITION AND CALCULATION OF NON GAAP MEASURES
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
Return on average capital employed (ROCE)
Definition:
Calculated by dividing operating profit for a period by the average net operating assets at 1 January, 30 June and 31 December.
Calculation:
Operating profit
Average net operating assets
Accounts reference
Income statement
1 January
30 June
31 December
Average (i.e. total of 1 Jan, 30 June and 31 Dec divided by 3)
(Note (a)) below
(Note (b)) below
Note 4 of 2019 and 2018 Accounts
2019
£ million
241
2018
£ million
219
2,263
2,190
1,997
2,150
2,074
2,123
2,159
2,119
ROCE (operating profit divided by net average operating assets)
11.2%
10.3%
Note (a) – Net operating assets as at 1 January 2019 for ROCE calculation
As reported at 31 December 2018
IFRS 16 ‘Right-of-use’ asset at 1 January 2019
Adjusted net operating assets at 1 January 2019
Note (b):
Per June 2019 Interim Accounts
Note 4 (E)
Assets
Liabilities
Net operating assets
Earnings before interest, taxes, depreciation and amortisation (EBITDA)
Calculation:
Operating profit
(Earnings Before Interest and Taxation)
Depreciation
Amortisation
EBITDA
Accounts reference
Income statement
Note 5
Note 5
Interest cover: EBITDA divided by net finance costs
Calculation:
EBITDA (£ million)
Net finance cost (£ million)
Interest cover (times)
Accounts reference
Per above
Income statement
2,159
104
2,263
2,575
(385)
2,190
2,491
(368)
2,123
2019
£ million
2018
£ million
241
315
8
564
2019
564
42
13
219
293
5
517
2018
517
37
14
Aggreko plc Annual Report and Accounts 2019
137
DEFINITION AND CALCULATION OF NON GAAP MEASURES CONTINUED
Interest cover excluding the impact of IFRS 16 ‘Leases’
EBITDA (£ million)
Impact of IFRS 16 (£ million)
Adjusted EBITDA (£ million)
Net finance cost (£ million)
Impact of IFRS 16 (£ million)
Adjusted net finance cost
Adjusted interest cover (times)
Net debt to EBITDA
Calculation:
Net debt (£ million)
EBITDA (£ million)
Net debt/EBITDA (times)
Accounts Reference
Per above
Income statement
Accounts reference
Cash flow statement
Per above
2019
584
564
1.0
Net debt to EBITDA excluding the impact of IFRS 16 ‘Leases’
Calculation:
Net debt (£ million)
Impact of IFRS 16 (£ million)
Adjusted net debt (£ million)
Adjusted EBITDA (£ million)
Adjusted net debt/EBITDA (times)
Accounts Reference
Cash flow statement
Per above
Dividend cover
Definition:
Basic earnings per share (EPS) divided by full year declared dividend.
Calculation:
Basic EPS (pence)
Full year declared dividend
Interim dividend (pence)
Final dividend (pence)
Dividend cover (times)
Accounts reference
Note 11
Note 10
Note 10
2019
564
(33)
531
42
(5)
37
14
2018
686
517
1.3
2019
584
(101)
483
531
0.9
2019
50.80
9.38
18.27
27.65
1.8
2018
49.22
9.38
17.74
27.12
1.8
Free cash flow
Definition:
Net cash generated from operating activities less net cash used in investing activities less payment of lease liabilities.
Net cash generated from operating activities
Net cash used in investing activities
Payment of lease liabilities
Free cash flow
Accounts Reference
Cash flow statement
Cash flow statement
Cash flow statement
2019
£ million
2018
£ million
510
(217)
(31)
262
330
(244)
–
86
138 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
NOTICE OF ANNUAL GENERAL MEETING
THE FOLLOWING INFORMATION IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt as to any matter referred to in this report or as to the action you should take, you should
seek your own personal financial advice from: (a) a stockbroker, bank manager, solicitor, accountant or other
independent professional adviser authorised under the Financial Services and Markets Act 2000 if you are resident
in the United Kingdom; or (b) another appropriately authorised independent financial adviser if you are not resident
in the United Kingdom.
If you have sold or otherwise transferred all of your shares in Aggreko plc please pass this report, together with
the accompanying documents (except the accompanying personalised form of proxy), as soon as possible to the
purchaser or transferee, or to the stockbroker, bank or other person who arranged the sale or transfer so they
can pass these documents to the person who now holds the shares.
Notice is hereby given that the Annual
General Meeting of Aggreko plc (the
“Company”) will be held at 200 SVS, 200
St Vincent Street, Glasgow G2 5RQ on
Thursday 23 April 2020 at 11.00am to
consider and, if thought fit, pass the
resolutions set out below. Resolutions 17
to 20 (inclusive) will be proposed as
special resolutions. All other resolutions
will be proposed as ordinary resolutions.
Ordinary resolutions
Resolution 1
To receive the reports of the Directors
and Auditors and to adopt the
Company’s accounts for the year ended
31 December 2019.
Resolution 2
To approve the Annual Statement by the
Remuneration Committee Chair as set
out on pages 62 to 66 and the Annual
Report on Remuneration (excluding the
Directors’ Remuneration Policy) as set
out on pages 67 to 74 of the Annual
Report and Accounts for the year ended
31 December 2019.
Resolution 3
To declare a final dividend on the
Company’s Ordinary Shares of 18.27
pence per share.
Resolution 4
To elect Sarah Kuijlaars as a Director
of the Company.
Resolution 5
To re-elect Ken Hanna as a Director
of the Company.
Resolution 6
To re-elect Chris Weston as a Director
of the Company.
Resolution 7
To re-elect Heath Drewett as a Director
of the Company.
Resolution 8
To re-elect Dame Nicola Brewer
as a Director of the Company.
Resolution 9
To re-elect Barbara Jeremiah
as a Director of the Company.
Resolution 10
To re-elect Uwe Krueger as a Director
of the Company.
Resolution 11
To re-elect Diana Layfield as a Director
of the Company.
Resolution 12
To re-elect Ian Marchant as a Director
of the Company.
Resolution 13
To re-elect Miles Roberts as a Director
of the Company.
Resolution 14
To re-appoint KPMG LLP as auditor of
the Company to hold office from the
conclusion of the meeting until the
conclusion of the next general meeting
at which accounts are laid before the
Company.
Resolution 15
To authorise the Audit Committee of
the Board of Directors of the Company
to determine the remuneration of the
Company’s auditor.
Resolution 16
That the Board of Directors of the
Company (the “Board”) be and is hereby
generally and unconditionally authorised
pursuant to and in accordance with
section 551 of the Companies Act 2006
(the “Act”) to exercise all the powers
of the Company to allot shares in the
capital of the Company and to grant
rights to subscribe for or to convert any
security into shares in the Company
up to an aggregate nominal amount
of £4,126,149, such authority to expire
on the earlier of 30 June 2021 or at the
conclusion of the next Annual General
Meeting of the Company after the
passing of this resolution, save that
the Company may before such expiry
make an offer or enter into an
agreement which would or might
require equity securities to be allotted
after such expiry and the Board may
allot equity securities in pursuance
of such an offer or agreement as if
the authority conferred hereby had
not expired.
Special resolutions
Resolution 17
That, if resolution 16 is passed, the Board
of Directors of the Company (the
“Board”) be and is hereby generally
empowered, pursuant to sections 570
and 573 of the Companies Act 2006
(the “Act”), to allot equity securities
(within the meaning of section 560 of
the Act) (including the grant of rights
to subscribe for, or to convert any
securities into, ordinary shares in the
capital of the Company (“Ordinary
Shares”)) wholly for cash pursuant to
any authority for the time being in force
under section 551 of the Act and/or by
way of a sale of treasury shares (within
the meaning of section 560(3) of the
Act), as if section 561(1) of the Act did
not apply to any such allotment or sale,
provided that this power shall be limited
to the allotment of equity securities and
the sale of treasury shares for cash:
(a) in connection with or pursuant to
a rights issue, open offer or other
pre-emptive offer in favour of holders
of Ordinary Shares (“Ordinary
Shareholders”) on the register of
members on a date fixed by the
Board where the equity securities
respectively attributable to the
interests of all such Ordinary
Shareholders are proportionate
(as nearly as may be practicable) to
the respective numbers of Ordinary
Shares held by them on that date
(subject to such exclusions or other
arrangements as the Board may
deem necessary or expedient to
deal with Treasury shares, fractional
entitlements or legal or practical
problems arising under the laws
of any overseas territory or the
requirements of any regulatory
body or stock exchange or by virtue
of shares being represented by
depositary receipts or any other
matter whatsoever); and
(b) otherwise than pursuant to sub-
paragraph (a) above, up to an
aggregate nominal amount of
£618,922
Aggreko plc Annual Report and Accounts 2019
139
NOTICE OF ANNUAL GENERAL MEETING
provided that this power shall (unless
previously renewed or revoked) expire
on the earlier of 30 June 2021 or at the
conclusion of the next Annual General
Meeting of the Company after the
passing of this resolution, save that the
Company may before such expiry make
an offer or enter into an agreement
which would or might require equity
securities to be allotted after such expiry
and the Board may allot equity securities
in pursuance of such an offer or
agreement as if the power conferred
hereby had not expired.
Resolution 18
That, if resolution 16 is passed, in addition
to any authority granted pursuant to
resolution 17 proposed at the Annual
General Meeting, the Directors of the
Company (the “Board”) be and are
hereby generally empowered pursuant
to sections 570 and 573 of the
Companies Act 2006 (the “Act”) to allot
equity securities (within the meaning
of section 560 of the Act) (including the
grant of rights to subscribe for, or to
convert any securities into, ordinary
shares in the capital of the Company
(“Ordinary Shares”) for cash pursuant to
any authority for the time being in force
under section 551 of the Act and/or by
way of a sale of treasury shares (within
the meaning of section 560(3) of the
Act), as if section 561(1) of the Act did
not apply to any such allotment or sale,
provided that this power shall:
(a) be limited to the allotment of equity
securities and the sale of treasury
shares for cash up to an aggregate
nominal amount of £618,922; and
(b) be used only for the purposes of
financing (or refinancing, if the
authority is to be used within six
months after the original transaction)
a transaction which the Directors
of the Company determine to
be an acquisition or other capital
investment of a kind contemplated
by the Statement of Principles on
Disapplying Pre-Emption Rights
most recently published by the
Pre-Emption Group prior to the
date of this notice
and shall expire on the earlier of 30 June
2021 or at the conclusion of the next
Annual General Meeting of the
Company after the passing of this
resolution, save that the Company may
before such expiry make an offer or
enter into an agreement which would
or might require equity securities to be
allotted after such expiry and the Board
may allot equity securities in pursuance
of such an offer or agreement as if the
power conferred hereby had not expired.
Resolution 19
That the Company be and is hereby
generally and unconditionally authorised
for the purposes of section 701 of the
Companies Act 2006 (the “Act”) to make
one or more market purchases (within
the meaning of section 693(4) of the Act)
of ordinary shares in the capital of the
Company (“Ordinary Shares”) on such
terms and in such manner as the
Directors of the Company may
determine, provided that:
(a) the maximum aggregate number
of Ordinary Shares hereby authorised
to be purchased is 25,612,820;
(b) the maximum price which may
be paid for any Ordinary Share is
an amount equal to the higher of
(i) 105% of the average of the middle
market quotations for an Ordinary
Share as derived from the London
Stock Exchange Daily Official List for
the five business days immediately
preceding the day on which the
share is contracted to be purchased;
and (ii) the higher of the price of
the last independent trade and the
highest current independent bid
on the trading venue where the
purchase is carried out, and the
minimum price which may be paid
for any Ordinary Share is its nominal
value (in each case exclusive of
associated expenses),
provided that the authority hereby
conferred shall expire on the earlier
of 30 June 2021 or at the conclusion
of the next Annual General Meeting
of the Company after the passing of
this resolution, save that a contract
of purchase may be made before such
expiry which will or may be completed
wholly or partly thereafter, and a
purchase of Ordinary Shares may be
made in pursuance of any such contract.
Resolution 20
That a general meeting of the Company
(other than an Annual General Meeting)
may be called on not less than 14 clear
days’ notice, provided that this authority
shall expire at the conclusion of the next
Annual General Meeting of the
Company.
By order of the Board
Peter Kennerley
Company Secretary
19 March 2020
Registered office:
Aggreko plc
8th Floor
120 Bothwell Street
Glasgow G2 7JS
Scotland
United Kingdom
Registered in Scotland
Number: SC177553
140 Aggreko plc Annual Report and Accounts 2019
Notes to the Notice of Annual
General Meeting
1 Attending the Annual General
Meeting in person
If you wish to attend the Annual General
Meeting in person, you should arrive
at the venue for the Annual General
Meeting in good time to allow your
attendance to be registered. It is
advisable to have some form of
identification with you as you may
be asked to provide evidence of your
identity to the Company’s Registrar
prior to being admitted to the Annual
General Meeting.
2 Appointment of proxies
Members are entitled to appoint one
or more proxies to exercise all or any
of their rights to attend, speak and vote
at the Annual General Meeting. A proxy
need not be a member of the Company
but must attend the Annual General
Meeting to represent a member. To
be validly appointed a proxy must be
appointed using the procedures set
out in these Notes and in the notes
to the accompanying form of proxy.
If members wish their proxy to speak
on their behalf at the meeting, members
will need to appoint their own choice of
proxy (not the Chairman of the Annual
General Meeting) and give their
instructions directly to them.
Members can only appoint more than
one proxy where each proxy is appointed
to exercise rights attached to different
shares. Members cannot appoint more
than one proxy to exercise the rights
attached to the same share(s). If a
member wishes to appoint more than
one proxy, they should contact the
Company’s Registrar, Link Asset Services,
on Tel: 0371 664 0300. Calls are charged
at the standard geographic rate and will
vary by provider. Calls outside the UK are
charged at the applicable international
rate. Lines are open between 9.00am
and 5.30pm, Monday to Friday excluding
public holidays in England and Wales.
A member may instruct their proxy
to abstain from voting on any of the
resolutions to be considered at the
meeting by marking the “Withheld”
option when appointing their proxy.
It should be noted that an abstention
is not a vote in law and will not be
counted in the calculation of the
proportion of votes “For” or “Against”
the relevant resolution.
The appointment of a proxy will not
prevent a member from attending the
Annual General Meeting and voting
in person if he or she wishes.
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
A person who is not a member of the
Company but who has been nominated
by a member to enjoy information
rights does not have a right to appoint
any proxies under the procedures set
out in these Notes and should read
Note 9 below.
3 Appointment of a proxy online
As an alternative to appointing a proxy
using the form of proxy or CREST,
members can appoint a proxy online
at http://shares.aggreko.com. In order
to appoint a proxy using this website,
members will need their personal
identification Investor Code. If for any
reason a member does not have this
information, they should contact the
Registrar on Tel: 0371 664 0300. Calls are
charged at the standard geographic rate
and will vary by provider. Calls outside
the UK are charged at the applicable
international rate. Lines are open
between 9.00am and 5.30pm, Monday
to Friday excluding public holidays in
England and Wales.
Members may appoint a proxy using
the website no later than 48 hours
(excluding non-working days) before
the time of the Annual General Meeting
or any adjournment of that meeting.
4 Appointment of a proxy using
a form of proxy
A form of proxy for use in connection
with the Annual General Meeting is
enclosed. To be valid, any form of proxy
or other instrument appointing a proxy,
together with any power of attorney or
other authority under which it is signed
or a certified copy thereof, must be
received by post or (during normal
business hours only) by hand to Link
Asset Services, The Registry, 34
Beckenham Road, Beckenham, Kent
BR3 4TU by no later than 48 hours
(excluding non-working days) before
the time of the Annual General Meeting
or any adjournment of that meeting.
If you do not have a form of proxy and
believe that you should have one, or you
require additional forms of proxy, please
contact the Registrar on Tel: 0371 664
0300. Calls are charged at the standard
geographic rate and will vary by provider.
Calls outside the UK are charged at the
applicable international rate. Lines are
open between 9.00am and 5.30pm,
Monday to Friday excluding public
holidays in England and Wales.
5 Appointment of a proxy
through CREST
CREST members who wish to appoint
a proxy or proxies through the CREST
electronic proxy appointment service
may do so by using the procedures
described in the CREST Manual and
by logging on to the following website:
www.euroclear.com/CREST. CREST
personal members or other CREST
sponsored members, and those CREST
members who have appointed (a) voting
service provider(s), should refer to their
CREST sponsor or voting service
provider(s) who will be able to take
the appropriate action on their behalf.
In order for a proxy appointment or
instruction made using the CREST
service to be valid, the appropriate
CREST message (a “CREST Proxy
Instruction”) must be properly
authenticated in accordance with
Euroclear UK & Ireland Limited’s
specifications, and must contain the
information required for such
instruction, as described in the CREST
Manual (available via www.euroclear.
com/CREST). The message, regardless
of whether it constitutes the
appointment of a proxy or is an
amendment to the instruction given
to a previously appointed proxy, must,
in order to be valid, be transmitted
so as to be received by the Registrar
(CREST ID RA10) no later than 48 hours
(excluding non-working days) before the
time of the Annual General Meeting or
any adjournment of that meeting. For
this purpose, the time of receipt will be
taken to be the time (as determined by
the timestamp applied to the message
by the CREST Application Host) from
which the Registrar is able to retrieve
the message by enquiry to CREST in
the manner prescribed by CREST.
After this time any change of
instructions to proxies appointed
through CREST should be
communicated to the appointee
through other means.
CREST members and, where applicable,
their CREST sponsors or voting service
provider(s) should note that Euroclear
UK & Ireland Limited does not make
available special procedures in CREST for
any particular message. Normal system
timings and limitations will, therefore,
apply in relation to the input of CREST
Proxy Instructions. It is the responsibility
of the CREST member concerned to take
(or, if the CREST member is a CREST
personal member, or sponsored
member, or has appointed (a) voting
service provider(s), to procure that his/
her CREST sponsor or voting service
provider(s) take(s)) such action as shall
be necessary to ensure that a message
is transmitted by means of the CREST
system by any particular time. In this
connection, CREST members and,
where applicable, their CREST sponsors
or voting system providers are referred,
in particular, to those sections of the
CREST Manual concerning practical
limitations of the CREST system and
timings.
The Company may treat as invalid
a CREST Proxy Instruction in the
circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities
Regulations 2001.
6 Appointment of a proxy
through Proxymity
If you are an institutional investor you
may be able to appoint a proxy
electronically via the Proxymity platform,
a process which has been agreed by the
Company and approved by the Registrar.
For further information regarding
Proxymity, please go to www.proxymity.
io. Your proxy must be lodged no later
than 48 hours before the time of the
Annual General Meeting, in order to be
considered valid. Before you can appoint
a proxy via this process you will need to
have agreed to Proxymity’s associated
terms and conditions. It is important
that you read these carefully as you
will be bound by them and they will
govern the electronic appointment of
your proxy.
Proxymity will then contract with your
underlying institutional account holder
directly to accept their vote instructions
through the platform.
7 Appointment of a proxy by
joint holders
In the case of joint holders, where more
than one of the joint holders purports
to appoint one or more proxies, only the
purported appointment submitted by
the most senior holder will be accepted.
Seniority is determined by the order in
which the names of the joint holders
appear in the Company’s register of
members in respect of the joint holding
(the first named being the most senior).
8 Corporate representatives
Any corporation which is a member
can appoint one or more corporate
representatives. Members can only
appoint more than one corporate
representative where each corporate
representative is appointed to exercise
rights attached to different shares.
Members cannot appoint more than
one corporate representative to exercise
the rights attached to the same share(s).
9 Entitlement to attend and vote
To be entitled to attend and vote at the
Annual General Meeting (and for the
purpose of determining the votes they
may cast), members must be registered
in the Company’s register of members
at 5.00pm on Tuesday 21 April 2020
(or, if the Annual General Meeting is
adjourned, at 5.00pm on the day, two
days prior to the adjourned meeting).
Changes to the register of members
after the relevant deadline will be
disregarded in determining the rights
of any person to attend and vote at the
Annual General Meeting.
Aggreko plc Annual Report and Accounts 2019
141
NOTICE OF ANNUAL GENERAL MEETING
10 Nominated persons
Any person to whom this notice is
sent who is a person nominated under
section 146 of the Companies Act 2006
(the “Act”) to enjoy information rights
(a “Nominated Person”) may, under
an agreement between him/her and
the member by whom he/she was
nominated, have a right to be appointed
(or to have someone else appointed) as
a proxy for the Annual General Meeting.
If a Nominated Person has no such
proxy appointment right or does not
wish to exercise it, he/she may, under
any such agreement, have a right to
give instructions to the member as
to the exercise of voting rights.
11 Website giving information
regarding the Annual General Meeting
Information regarding the Annual
General Meeting, including information
required by section 311A of the Act,
and a copy of this notice of Annual
General Meeting is available at
www.plc.aggreko.com.
12 Audit concerns
Members should note that it is possible
that, pursuant to requests made by
members of the Company under
section 527 of the Act, the Company
may be required to publish on a website
a statement setting out any matter
relating to: (a) the audit of the
Company’s accounts (including the
auditor’s report and the conduct of
the audit) that are to be laid before
the Annual General Meeting; or (b) any
circumstance connected with an auditor
of the Company ceasing to hold office
since the previous meeting at which
annual accounts and reports were laid
in accordance with section 437 of the
Act. The Company may not require the
members requesting any such website
publication to pay its expenses in
complying with sections 527 or 528 of
the Act. Where the Company is required
to place a statement on a website under
section 527 of the Act, it must forward
the statement to the Company’s auditor
not later than the time when it makes
the statement available on the website.
The business which may be dealt with
at the Annual General Meeting includes
any statement that the Company has
been required under section 527 of
the Act to publish on a website.
13 Members resolution
Under section 338 and section 338A
of the Act, members meeting the
threshold requirements in those
sections have the right to require the
Company (a) to give to members of the
Company entitled to receive notice of
meeting, notice of any resolution which
may properly be moved and is intended
to be moved at the meeting and/or (b)
to include in the business to be dealt
with at the meeting any matter (other
than a proposed resolution) which may
be properly included in the business.
A resolution may properly be moved
or a matter may properly be included
in the business unless (a) (in the case
of a resolution only) it would, if passed,
be ineffective (whether by reason of
inconsistency with any enactment or
the Company’s constitution or
otherwise), (b) it is defamatory of any
person, or (c) it is frivolous or vexatious.
Such a request may be in hard copy
form or in electronic form, must identify
the resolution of which notice is to be
given or the matter to be included in
the business, must be authorised by the
person or person making it, must be
received by the Company not later than
12 March 2020, being the date six weeks
before the meeting, and (in the case of
a matter to be included in the business
only) must be accompanied by a
statement setting out the grounds
for the request.
14 Voting rights
As at 3 March 2020 (being the latest
practicable date prior to the publication
of this notice), the Company’s issued
share capital consisted of 256,128,201
Ordinary Shares of 4329/395 pence
each, carrying one vote 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.
The deferred share classes do not carry
voting rights in any circumstances. In
addition, the Company did not hold any
shares in treasury. Therefore, the total
voting rights in the Company as at
3 March 2020 were 256,128,201 votes.
15 Notification of shareholdings
Any person holding 3% or more of the
total voting rights of the Company
who appoints a person other than
the Chairman of the Annual General
Meeting as their proxy will need to
ensure that both they, and their proxy,
comply with their respective disclosure
obligations under the UK Disclosure
Guidance and Transparency Rules.
16 Further questions and
communication
Under section 319A of the Act, the
Company must cause to be answered
any question relating to the business
being dealt with at the Annual General
Meeting put by a member attending
the meeting unless answering the
question would interfere unduly with
the preparation for the meeting or
involve the disclosure of confidential
information, or the answer has already
been given on a website in the form
of an answer to a question, or it is
undesirable in the interests of the
Company or the good order of the
meeting that the question be answered.
Members who have any queries about
the Annual General Meeting should
contact the Company Secretary by
writing to Aggreko plc, 120 Bothwell
Street, Glasgow G2 7JS.
Members may not use any electronic
address provided in this notice or in
any related documents (including
the accompanying form of proxy)
to communicate with the Company
for any purpose other than those
expressly stated.
17 Documents available for inspection
The following documents will be
available for inspection at the registered
office of the Company during normal
business hours on any weekday
(Saturdays, Sundays and public holidays
excepted) from the date of this notice
until the conclusion of the Annual
General Meeting and on the date of the
Annual General Meeting at the venue of
the Annual General Meeting at 200 SVS,
200 St Vincent Street, Glasgow G2 5RQ:
(a) copies of the service contracts of the
Company’s Executive Directors; and
(b) copies of the letters of appointment
of the Company’s Non-executive
Directors.
142 Aggreko plc Annual Report and Accounts 2019
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
EXPLANATORY NOTES
The following provide an explanation
of the resolutions to be considered
at the Annual General Meeting.
Resolutions 1 to 16 will be proposed as
ordinary resolutions. This means that
for each of those resolutions to be
passed, more than half of the votes cast
must be in favour of the resolution.
Resolutions 17 to 20 will be proposed as
special resolutions. This means that for
each of those resolutions to be passed,
at least three-quarters of the votes cast
must be in favour of the resolution.
Annual Report and Accounts
(Resolution 1)
This resolution deals with the receipt
and adoption of the accounts for the
financial year ended 31 December
2019 and the associated reports of
the Directors and Auditors.
Annual Statement and Annual Report
on Remuneration (Resolution 2)
Resolution 2 seeks approval of the
Annual Statement by the Remuneration
Committee Chair set out on pages 62 to
66 and the Annual Report on
Remuneration set out on pages 67 to 74
of this document.
We are required by law to seek
shareholders’ approval for the Annual
Statement and Annual Report on
Remuneration on an annual basis. The
current Directors’ Remuneration Policy
was approved by shareholders at the
2018 Annual General Meeting, and the
Annual Report on Remuneration sets
out the Company’s policy applied to
Directors’ remuneration in 2019. The
full Directors’ Remuneration Policy is
available on www.plc.aggreko.com.
This vote is advisory in respect of the
overall remuneration package and the
Directors’ entitlements to remuneration
are not conditional upon this resolution
being passed.
Final dividend (Resolution 3)
Shareholders are being asked to approve
a final dividend of 18.27 pence per
Ordinary Share for the year ended
31 December 2019. If shareholders
approve the recommended final
dividend, it will be paid on 21 May 2020 to
all Ordinary Shareholders who are on the
register of members on 24 April 2020.
Election and re-election of Directors
(Resolutions 4 to 13)
Resolution 4 refers to the newly
appointed Director standing for election
and resolutions 5 to 13 refer to the
Directors standing for re-election in line
with the UK Corporate Governance Code,
which states that all directors of FTSE
350 companies should be subject to
annual election by shareholders.
Biographical details for each of the
Directors seeking election and re-
election are set out on pages 48 and 49
of this document and are also available
to view online at www.plc.aggreko.com.
Following the announcement made by
Arcadis NV on 4 March 2020, Sarah
Kuijlaars has resigned from her position
as CFO and Member of the Executive
Board at Arcadis. With the exception of
this information, all other biographical
details set out on pages 48 and 49 of
this document remain unchanged as at
the date if the publication of the notice
of Annual General Meeting. The Board
confirms that, following a formal
performance evaluation, each of the
Directors standing for election or
re-election continues to perform
effectively, demonstrates commitment
to their role, and has the capacity to
discharge their responsibilities fully,
given their existing time commitments
to other organisations. Therefore, the
Board unanimously recommends
the election and re-election of the
Directors proposed.
External auditor (Resolutions 14
and 15)
These resolutions deal with the re-
appointment of KPMG LLP as auditor
of the Company and the authorisation
of the Audit Committee to determine
their remuneration.
Authority to allot shares
(Resolution 16)
In line with last year, this resolution will
authorise the Directors to allot Ordinary
Shares up to an aggregate nominal
value of £4,126,149 (representing
85,376,067 Ordinary Shares of 4329/395
pence each). This amount represents
approximately one third of the issued
Ordinary Share capital of the Company
as at 3 March 2020, being the latest
practicable date prior to the publication
of this circular. As at 3 March 2020, the
Company held no Treasury shares and
there were no warrants over Ordinary
Shares.
The authority sought under this
resolution will expire on the earlier
of 30 June 2021 (the latest date by
which the Company must hold an
Annual General Meeting in 2021)
or the conclusion of the Annual General
Meeting of the Company to be held
in 2021.
The Directors have no present intention
to issue new shares other than in relation
to the issue of shares under the
Company’s executive and employee
share schemes in circumstances where
they do not consider it appropriate to
satisfy awards vesting using market
purchase.
Disapplication of statutory pre-
emption rights (Resolutions 17 and 18)
Resolution 17 will be proposed as a
special resolution and will authorise
the Directors to disapply the statutory
pre-emption rights of shareholders
on allotment of equity securities for
cash up to an aggregate nominal value
of £618,922 (representing 12,806,410
Ordinary Shares of 4329/395 pence each),
being approximately 5% of the issued
Ordinary Share capital of the Company
as at 3 March 2020, being the latest
practicable date prior to the publication
of this document. This resolution also
disapplies statutory pre-emption rights
to the extent necessary to facilitate
rights issues.
Resolution 18 will also be proposed as
a special resolution and will authorise
the Directors to allot a further 5% of the
issued Ordinary Share capital of the
Company otherwise than in connection
with a pre-emptive offer to existing
shareholders for the purpose of
financing a transaction (or refinancing
within six months of the transaction)
which the Directors determine to be a
n acquisition or other capital investment
contemplated by the Pre-Emption
Group’s revised Statement of Principles,
published on 12 March 2015 (the “PEG
Principles”), being the Statement of
Principles on Disapplying Pre-Emption
Rights most recently published by the
Pre-Emption Group prior to the date
of this notice.
This additional disapplication authority
is in line with the PEG Principles, and
provides the Company with greater
flexibility by allowing the Company
to allot shares with a nominal value of
£618,922 (representing 5% of the issued
Ordinary Share capital of the Company
as at 3 March 2020) for cash pursuant
to this authority where that allotment
is in connection with an acquisition
or specified capital investment (as
described in the PEG Principles) which
is announced at the same time as the
allotment, or which has taken place in
the preceding six-month period and is
disclosed in the announcement of that
allotment.
The Board does not intend to allot shares
for cash on a non-pre-emptive basis
above 7.5% of the total issued Ordinary
Share capital of the Company over
a rolling three-year period without
consulting shareholders first. This
complies with the PEG Principles.
The authority under these resolutions
will expire at the conclusion of the
Annual General Meeting to be held
in 2021 or on 30 June 2021, whichever
is the earlier. The Directors intend to seek
renewal of this power at subsequent
Annual General Meetings.
Aggreko plc Annual Report and Accounts 2019
143
NOTICE OF ANNUAL GENERAL MEETING
Purchase of own shares (Resolution 19)
The Directors recommend that
shareholders renew the authority of the
Company to purchase its own Ordinary
Shares. Accordingly, this resolution will
be proposed as a special resolution
seeking authority to make such
purchases in the market. The Directors
will only use this authority when they
consider it to be in the best interests
of shareholders generally and an
improvement in earnings per share
would result. Any Ordinary Shares
purchased under this authority will
either be cancelled (and the number
of Ordinary Shares in issue reduced)
or be held in treasury.
This resolution specifies the maximum
number of Ordinary Shares which
may be purchased (representing
approximately 10% of the Company’s
issued Ordinary Share capital as at
3 March 2020, being the latest
practicable date prior to the publication
of this document) and the minimum
and maximum prices at which they
may be bought.
The Directors intend to seek renewal
of this power at subsequent Annual
General Meetings.
As at 3 March 2020, there were options
over 8,548,213 Ordinary Shares in the
capital of the Company which
represented 3.34% of the Company’s
issued Ordinary Share capital at that
date. If the authority to purchase the
Company’s Ordinary Shares were
exercised in full, these options would
represent 3.71% of the Company’s issued
Ordinary Share capital.
Notice of general meetings
(Resolution 20)
Under the Act, all general meetings of
the Company must be held on 21 clear
days’ notice unless shareholders agree
to a shorter notice period on an annual
basis and certain other conditions are
met. The Company is currently able to
call general meetings (other than Annual
General Meetings) on 14 clear days’
notice. The Board is proposing this
resolution as a special resolution at the
Annual General Meeting so that the
Company can continue to be able to
convene general meetings on 14 clear
days’ notice.
The Board intends that this shorter
notice period would not be used as
a matter of routine, but would only be
used where the flexibility was justified
by the business of the meeting and
it would be to the advantage of
shareholders as a whole.
If this resolution is passed, the authority
to convene general meetings on 14 clear
days’ notice will remain effective until
the Company’s next Annual General
Meeting, when it is intended that a
similar resolution will be proposed.
The notice period for Annual General
Meetings will remain 21 clear days.
Recommendation
The Board considers that all the
resolutions to be considered at the
Annual General Meeting are in the
best interests of the Company and
its shareholders as a whole. Your Board
will be voting in favour of them and
unanimously recommends that you
do so as well.
144 Aggreko plc Annual Report and Accounts 2019
SHAREHOLDER INFORMATION
Financial calendar
23 April 2020: Annual General Meeting
23 April 2020: Ex-dividend date –
Final dividend
24 April 2020: Record date to be eligible
for the final dividend
21 May 2020: Final dividend payment
for the year to 31 December 2019
6 August 2020: Half year results
announcement for the year to
31 December 2020
Early September 2020: Ex-dividend
date – Interim dividend
Early September 2020: Record date
to be eligible for the interim dividend
Early October 2020: Interim
dividend payment for the year
to 31 December 2020
Our 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.plc.aggreko.com
Managing your shares online
Shareholders can manage their holding
online by registering to use our share
portal at https://shares.aggreko.com.
This service is provided by our Registrar,
Link Asset Services, 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.
Payment of dividends
We encourage shareholders to have
dividends paid directly into 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 contact our Registrar, Link
Asset Services. UK shareholders may
also register using the share portal.
Overseas shareholders may be able to
have the dividend converted to local
currency before payment to their bank
account using the international payment
service. Please contact our Registrar,
Link Asset Services, for details.
Dividend reinvestment plan (DRIP)
This allows eligible shareholders to
purchase additional shares in Aggreko
with their dividend payment. Further
information and a mandate can be
obtained from our Registrar, Link Asset
Services, or by using the share portal.
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,
Link Asset Services.
Change of address
To avoid missing important
correspondence relating to your
shareholding, it is important that you
inform our Registrar, Link Asset Services,
of your new address as soon as possible.
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, Link Asset Services.
Shareholders with queries relating to
their shareholding should contact Link
Asset Services directly. For more general
queries, shareholders can look at our
website at www.plc.aggreko.com
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
Our Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Share portal: https://shares.aggreko.com
Website: www.linkassetservices.com
Email: enquiries@linkgroup.co.uk
Telephone: 0371 664 0300*
* Calls are charged at the standard geographic
rate and will vary by provider. Calls outside the UK
are charged at the applicable international rate.
Lines are open 9.00am – 5.30pm, Monday to Friday
excluding public holidays in England and Wales.
Registered office
8th Floor
120 Bothwell Street
Glasgow G2 7JS
Scotland
United Kingdom
Telephone: +44 (0) 141 225 5900
Email: investors@aggreko.biz
Registered in Scotland No. SC177553
Designed and produced by: Friend
www.friendstudio.com
Paper
This report is printed on Revive 100 Silk paper. Revive 100 Silk is made from 100 per cent de-inked post consumer waste and produced
in mills which hold IS0 9001 and ISO 14001 accreditation.
Printing
This publication is produced by a CarbonNeutral® company and Carbon Balanced with World Land Trust.
Balancing is delivered by World Land Trust, an international conservation charity, who offset carbon emissions through the purchase
and preservation of high conservation value land.
Through protecting standing forests, under threat of clearance, carbon is locked in that would otherwise be released. These protected
forests are then able to continue absorbing carbon from the atmosphere, referred to as REDD (Reduced Emissions from Deforestation
and forest Degradation). This is now recognised as one of the most cost-effective and swiftest ways to arrest the rise in atmospheric
CO2 and global warming effects. Additional to the carbon benefits is the flora and fauna this land preserves, including a number of
species identified at risk of extinction on the IUCN Red List of Threatened Species.
CBP00019082504183028
www.aggreko.com