Full year results For the year ended 31 December 2018 1 Results - - PowerPoint PPT Presentation

1 Results Presentation March 2019

For the year ended 31 December 2018

Full year results

6 MARCH 2019

2 Results Presentation March 2019

Introduction

Chris Weston CEO

3 Results Presentation March 2019

Headlines

Good results and positive momentum

 Group revenue growth of 8%  PBT up 10% and in line with market expectations  ROCE up 0.5pp  Dividend maintained

Building on transformed platform to deliver strategy

 Strategy to deliver growth and improve returns  Stronger portfolio  Confident we will deliver ROCE in the mid teens in 2020

4 Results Presentation March 2019

2018 full year results review

Heath Drewett CFO

5 Results Presentation March 2019

Group summary

 Good underlying growth in

revenue and operating profit

 No exceptional items in 2018

(2017: £41m)

 Effective tax rate of 31%  ROCE of 10.3%, up 0.5pp on an

underlying basis

Results in line with market expectations, despite currency headwinds

Movement £m pre-2017 exceptional items FY18 FY17 CHANGE CHANGE

excluding pass-through fuel and currency

Revenue 1,760 1,698 4% 8% Operating profit 219 224 (2)% 10% Net interest expense (37) (34) (9)% Profit before tax 182 190 (4)% 10% Taxation (57) (56) (2)% Profit after tax 125 134 (6)% Diluted earnings per share 49.2 52.4 (6)% 7% Dividend per share 27.1 27.1

• Operating margin

12.5% 13.2% (0.7)pp 0.2pp ROCE 10.3% 10.7% (0.4)pp 0.5pp

6 Results Presentation March 2019

Movement

pre-2017 exceptional items

FY18 FY17 CHANGE CHANGE

excluding currency

Revenue (£m) 822 690 19% 22% Operating profit (£m) 105 81 30% 34% Operating margin 12.9% 11.8% 1.1pp 1.2pp ROCE 14.7% 12.2% 2.5pp 2.7pp Fleet capital expenditure (£m) 79 55

Business performance

% REVENUE BY SECTOR

Building services & construction Petrochemical & refining Oil & Gas Utilities Events Manufacturing Mining Other

UTILISATION

at 31 December (MW on hire)

52%

Rental Solutions

Strong growth and improved margin and returns

FY18 FY17

18% 18% 13% 12% 10% 7% 5% 17%

REVENUE

(% OF GROUP excl. pass-through fuel) 62% 56%

7 Results Presentation March 2019

Business performance

Movement

pre-2017 exceptional items

FY18 FY17 CHANGE CHANGE

excluding currency

Revenue (£m) 424 429 (1)% 7% Operating profit (£m) 71 73 (3)% 10% Operating margin 16.6% 16.9% (0.3)pp 0.4pp ROCE 10.7% 11.3% (0.6)pp 0.1pp Fleet capital expenditure (£m) 47 50

% REVENUE BY SECTOR

Oil & Gas Events Mining Building services & construction Manufacturing Utilities Petrochemical & refining Other

27%

Power Solutions Industrial

Good growth and support from the Winter Olympics

UTILISATION

at 31 December (MW on hire) FY18 FY17

REVENUE

(% OF GROUP excl. pass-through fuel)

39% 13% 13% 11% 8% 6% 2% 8%

71% 69%

8 Results Presentation March 2019

Business performance

Movement

pre-2017 exceptional items & excluding pass-through fuel

FY18 FY17 CHANGE CHANGE

excluding pass- through fuel and currency

Revenue (£m) 342 440 (22)% (14)% Operating profit (£m) 46 73 (37)% (23)% Operating margin 13.4% 16.4% (3)pp (1.4)pp ROCE 6.2% 9.2% (3.0)pp (1.6)pp Fleet capital expenditure (£m) 70 141

Power Solutions Utility

Performance reflects known contract off-hires

 This segment now includes only Utility customer projects

UTILISATION

at 31 December (MW on hire) FY18 FY17

21%

REVENUE

(% OF GROUP excl. pass-through fuel) 66% 73%

9 Results Presentation March 2019

Cash flow

£m FY18 FY17 EBITDA 517 524 Working capital (56) (53) Cash flows relating to fulfilment assets/demob provisions (48) (22) Other 10 1 Operating cash flow 423 450 Tax (61) (69) Net interest (32) (34) Acquisitions and investments (33) (73) Purchase of fixed assets (216) (272) Other fixed asset movements 5 9 Free cash flow 86 11 Dividends (69) (69) Changes in equity (12)

• Net cash flow

5 (58) Exchange (39) 55 Movement in net debt (34) (3) Net debt (686) (652)

 Mobilisation spend primarily in

Bangladesh, Brazil and St Croix

 Reduced fleet capex £196m

(2017: £246m), to drive improved utilisation

 Increased free cash flow £86m

(2017: £11m)

 Net debt/EBITDA 1.3x

Working capital movement

£m FY18 FY17 Trade and other receivables (10) (163) Trade and other payables (60) 111 Inventory 14 (1) Working capital (56) (53)

10 Results Presentation March 2019

Net working capital change

Main drivers of working capital in 2018

 Detailed initiatives delivering

Decrease in inventory

£14m

£61m

Overall working capital outflow of £56m (2017: £53m)

 Increased volume of activity in North America  Power Solutions Utility debtors stabilising

Increase in trade and other receivables

£(10)m

 Increased capital discipline resulting in reduced

manufacturing and overall capex

 Release of deferred revenue associated with the Winter

Olympics in South Korea

 Timing of some contract payments in Power Solutions Utility

Decrease in trade and other payables

£(60)m

11 Results Presentation March 2019

Power Solutions

 Central team established to review all orders

and set safety stock levels

 Movement of excess inventory across regions  Buy-back procedure with key suppliers  Consignment stock arrangements with key

suppliers

Rental Solutions

 System automation of stock categorisation  Virtual stock sharing warehouse  Buy-back procedure with key suppliers

Improving efficiency as detailed plans implemented

Inventory

0% 4% 8% 12% 16% 20% 50 100 150 200 250

FY14 FY15 FY16 FY17 FY18

INVENTORY (£m)

Inventory % of revenue

12 Results Presentation March 2019

0% 10% 20% 30% 40% 50%

200 400 600

FY14 FY15 FY16 FY17 FY18

Trade receivables

GROUP TRADE RECEIVABLES (£m)

RS / PSI trade receivables % of revenue

Performance stabilising

Actions continue to take effect

 Monthly cash collection targets by region

(and customer on major projects) with structured stakeholder engagement

 Regular review of top debtors and unbilled

accounts to agree remedial actions

 Temporary resources added to clear

unbilled backlog and support collections

 New regional senior positions increase focus

and provide escalation path

 Tighter enforcement of contract provisions

PSU trade receivables

13 Results Presentation March 2019

Invoicing/receipts performance - Utility

POWER SOLUTIONS UTILITY ($m)

40 80 120 160 200

Q1 Q2 Q3 Q4

Invoicing Receipts

FY 2018

$m 2018 2017 Invoicing 713 750 Receipts 694 637 Net total (19) (113)

Improved performance through significant focus

Bad debt provision broadly unchanged at $83 million

14 Results Presentation March 2019

Improving Group returns

Confident in generating mid-teens returns in 2020

Operating profit Working capital Fixed assets

2020 2018 Mid-teens %

10.3%

Drivers of ROCE

Operating profit

 Revenue growth: sector focus, specialisation,

new system investment and Olympics contribution

 Margin improvement: higher value contracts

and cost management

Working capital

 Receivables: legacy debt collection and billing /

collections process improvements

 Payables: improved supplier management and

payment terms

 Inventory: detailed plans across the Group

Fixed assets

 Disciplined capex and higher utilisation  Selective asset disposal programme

15 Results Presentation March 2019

IFRS 16 – Lease accounting

Effective from 1 January 2019 with NO prior year restatement Expected impact:

 Income statement

− Improvement in operating profit of c. £3m (including c. £30m additional depreciation in lieu of

• perating lease rental cost)

− Increase in interest costs of c. £5m − Reduction in PBT of c. £2m

 Balance sheet

− Increase in fixed assets of c. £100m, together with a corresponding liability of c. £100m

 Leverage

− Increase in Net debt / EBITDA of c. 0.1x (reflecting incremental debt, but also increased EBITDA)

 Return on capital

− Reduction in the Group’s ROCE of around c. 0.3pp

16 Results Presentation March 2019

Guidance

 On track to deliver PBT in line with market expectations

− Currency headwinds of c. 4% (see appendix 1) − IFRS 16 impact of c. £(2)m PBT − Effective tax rate of c. 35%, subject to geographic mix − Greater weighting to H2 than 2018

 Confident of achieving 2020 mid-teens ROCE target

− Full year fleet capex <£200m − Working capital improvement

 Net debt / EBITDA to reduce, despite IFRS 16 impact

17 Results Presentation March 2019

Developing our customer focus

Chris Weston CEO

18 Results Presentation March 2019

Our strategy

Four clear strategic priorities to drive growth

Being particular about the sectors we target Offering specialist solutions Being simple to do business with Developing competitive configurable products Smarter use of connected systems & data analytics Integrating renewable & storage technology Being mobile & modular Getting the very maximum out of our assets Striving for the most competitive cost base Living Always Orange Nurturing our full potential Staying safe and professional at all times

Customer focus Technology investment Capital efficiency Expert people

19 Results Presentation March 2019

Measures of success

 Increased level of

revenue from focus sectors

 YoY improvements in

customer experience and responsiveness

 Reducing total cost of

energy, emissions and noise

 Digitally connected

fleet

 A material change in

hybrid assets on hire

 A globally-managed

fleet

 Improved utilisation  Reduced cost base  Mid-teens ROCE in

2020

 Further improvements

to HSE performance

 1% of revenue spent on

people development

 Continuous

improvement in employee engagement

Customer focus Technology investment Capital efficiency Expert people

20 Results Presentation March 2019

Developing our customer focus

• 1. Being particular about

the sectors we target

• 2. Offering specialist

solutions

• 3. Being simple to do

business with

Customer focus

Global presence

 Provide consistent reliability and

quality of services across the world Sector expertise

 Market leadership across focus

sectors

 Ability to develop and share

applications around the Group Technical capabilities

 Reputation founded on our

technical capability

 Reinforced by the connected

fleet and data analytics

Our competitive advantage Our seven key sectors

17% 13% 8% 8% 6% 11% 6% O&G BS&C PCR Events RS / PSI Utilities Mining Manufacturing Other PS Utilities

2018 GROUP REVENUE %

10% 21%

21 Results Presentation March 2019

• 1. Being particular about the sectors we target

Focusing on our sales efforts to drive growth

 Rental Solutions sector specialisation

− 55% of sales team dedicated to 1 or 2 sectors only (2017: 25%) − 11% increase in transactions per sales person

 Sales channel flexibility

− Launched ‘inside-sales’, our expanded telesales capability − E-commerce roll out in 2019 to handle transactional volume

 Focus on higher value projects

− Telesales teams allow field sales to concentrate on complex solutions − Average revenue per agreement increasing

 Power Solutions Industrial applying a similar sales focus

− Rolling out CRM and configure price quote (CPQ) tools during 2019 − Sector-based knowledge sharing with Rental Solutions − Reverse of 60 / 40 balance of PSU / PSI sales people to 40 / 60

22 Results Presentation March 2019

1 10 9 8 12 25 16 1 8 8 9 20 26 13 5 8 9 12 9 16 21 5 7 10 12 13 18 18 Mining M'facturing Events Utilities O&G PCR BS&C

Rental Solutions

Deepening sector penetration Identified sub-sectors

− Manufacturing: food &

beverages and steel

− Utilities: T&D and

generation & renewables Increasing diversification

− North American O&G

20% of revenue

• vs. 33% in 2014
• 1. Being particular about the sectors we target

*Note: On a constant currency basis

2017 2018

Excludes Other 17% (2017: 20%) Excludes Other 15% (2017: 19%)

26% 80% 34% 5% 26% (1)% 27%

YoY sector growth*

31% 97% 11% (5)% 44%

YoY sector growth*

6% 29%

NORTH AMERICA

% of revenue

TOTAL

% of revenue

23 Results Presentation March 2019

• 1. Being particular about the sectors we target

Power Solutions

Sector focus key to driving PSI revenue growth

 Diversifying sectors and

regions

 Sales processes evolving

Consistent with Rental Solutions strategy

*Note: 2014 revenues have been restated at 2018 average FX to enable comparison on a constant currency basis. All other revenue stated at constant currency

48% 25% 6% 21% 64% 18% 7% 11%

Continued diversification

Utilities BS&C O&G Other

2018

PSU order intake

398 MW

Oil price

$54

POWER SOLUTIONS

2014 – 2018*

£0.8bn

REVENUE

2018

£1.0bn

REVENUE*

2014

2014

PSU order intake

697 MW

Oil price

$112

2017 2018

Excludes Other 8% (2017: 8%)

28% 5% 54% (18)% 5%

YoY sector growth*

(16)% 27%

POWER SOLUTIONS INDUSTRIAL

% of revenue

13 10 8 6 39 2 14 13 8 13 6 39 2 11 Mining M'facturing Events Utilities O&G PCR BS&C

24 Results Presentation March 2019

Reputation, technical expertise and growing application portfolio

Sector specific complex application engineering

 Reinforces customer

relationship and trust

 Supports growth  Enhances our ability to

fulfil a broad range of work

 Broad suite of applications across all sectors

− Technical support of applications and alignment to sectors

 Sector experts enable skills leverage, knowledge transfer and

incremental revenue

• 2. Offering specialist solutions

Application Relevant sector Benefits

Alternative gases All sectors Emissions and cost Power ramp up pre- utility Data centres Critical power and reliability Prime & back-up O&G, on/offshore, Events, Other Zones 1&2, safe operation, critical operations Crude oil Utility, O&G Power from unrefined oil Rapid catalytic cooling PCR Reduced plant downtime, productivity Exhaust heat recovery BS&C, Manufacturing, Utility Lower TCOE Furnace applications All sectors Power for electric furnaces Bulk air cooling Mining Managing temperature at depth, productivity Regenerative loads BS&C Safe operation of lifts / hoists

25 Results Presentation March 2019

• 2. Offering specialist solutions

Application case study

Bulk air cooling application in the deep mine sector

Challenge To overcome deep mine heat issues in Western Australia’s high ambient temperatures Solution

 Surface-based solution:

continual ventilation and refrigeration

 Remote monitoring and

analytics delivering efficient performance Customer benefits

 Meets the specified

temperature of <18.5°C

 Prevents work stoppages,

ensuring continuous production

26 Results Presentation March 2019

• 2. Offering specialist solutions

Application case study

Innovative hybrid power for a critical data centre

Challenge To provide power pre-utility during the data centre ramp up phase while reducing emissions and fuel costs Solution

 Integrate Y Cube 1 (660kWh

battery) with a 14MW NGG Customer benefits

 Frequency stability  Reduced emissions by c.

2,000t CO2e per year

 Fuel savings for the customer

• f c. €250k per year

27 Results Presentation March 2019

• 3. Being simple to do business with

‘Know my history’ ‘Make it easy’ ‘Earn my trust’ ‘Minimise risks’ ‘Timely response’ ’Be reliable’ ‘Share knowledge’ ‘Deliver as ordered’

A seamless end-to-end experience

Understanding what our customers expect from us

 Detailed analysis informed our targeted investment in systems and processes  Engagement with existing and potential customers (1,000 surveyed; 50 interviewed)

Search & contact Transport & dispatch Install, operate & de-install Invoice & pay Refine & select Order process tailored to rental needs Real-time information Best-in-class transport and commissioning Flawless equipment reliability Best-in-class pick-up and decommissioning ‘Be transparent’ ‘Provide Value’ Simple, correct invoicing

28 Results Presentation March 2019

• 3. Being simple to do business with

End-to-end system investment

Key benefits

 Improved customer

service: first time resolution

 Centralised operations  Intelligent planning - cost

reductions through logistics, transport and

• rder fulfilment

 Improved utilisation

Search Contact Select Price Order Schedule Receive Install Operate Off hire Return Invoice Pay Loyalty

Customer

Multi-touchpoint NPS surveys throughout

• Reduce depot

movements

• Increase equipment

utilisation

• Data analytics

− Efficient maintenance − Predictive diagnostics

• Smart asset allocation and field

engineer deployment

• Faster and

easier invoicing

More to implement Remote monitoring and field service management CRM / CPQ Order fulfilment and logistics

• Over 70% of sales

proposals now produced in the field

29 Results Presentation March 2019

• 3. Being simple to do business with

Targeting NPS (net promoter score) improvements

A more rigorous approach in 2018

 Surveys throughout the

customer journey (previously at end point

• nly)

 Driving greater clarity on

the issues

 Knowing more about our

customers

Q1 Q2 Q3 Q4

% NPS

NPS in top 5% of B2B service organisations globally

Encouraging momentum into 2019

Improvements as customer experience tools implemented

30 Results Presentation March 2019

Strengthened base for improving returns

Building on transformed platform

 Strategy to deliver growth and improve returns

− Evolved, but fundamentally unchanged − Customer focus, technology investment, capital efficiency and expert people

 Stronger portfolio

− Growth markets c. 80% of Group, with reduced exposure to Utilities

 Confident we will deliver ROCE in the mid teens in 2020

− Wide ranging initiatives to improve our operational and capital efficiency

31 Results Presentation March 2019 31 Results Presentation March 2019

Aggreko is a customer focused specialist provider of power, temperature control and energy services on a global basis. These services are based on modular and mobile equipment

• perated on a digital platform with a market leading

integration capability.

32 Results Presentation March 2019

Appendix

33 Results Presentation March 2019

Appendix 1 - FX impact into 2019

Note: UAE Dirhams included within US Dollar as it is pegged to the US dollar; Argentinian Peso includes Power Solutions Utility contracts which are pegged to the US Dollar but paid and reported in Argentinian Pesos.

FX RATES REVENUE (£m)

FY18 average February 2019 closing FY18 actual FY18 Restated at Feb 2019 closing rates Variance % Variance US Dollar 1.34 1.31 805 823 18 2% Euro 1.13 1.15 256 252 (4) (2)% Australian Dollar 1.79 1.82 91 89 (2) (2)% Argentinian Peso 37.48 52.92 40 28 (12) (29)% Brazilian Real 4.87 4.85 233 234 1

• Canadian Dollar

1.73 1.72 29 29

• Russian Rouble

83.70 85.79 73 71 (2) (2)% Other 233 228 (5) (2)% Total revenue 1,760 1,754 (6)

• Total operating profit

219 210 (9) (4)%

34 Results Presentation March 2019

Appendix 2 - Effective tax rate, components parts

Irrecoverable withholding tax and non-deductible costs play key role in ETR

St Stat atutory ry t tax ax rat rate

35 Results Presentation March 2019

Appendix 3 - ROCE definition

2018 £m 2017 £m Operating profit (pre-exceptional items) 219 224 Average net operating assets 1 January 2,074 2,124 30 June 2,123 2,071 31 December 2,159 2,074 3-point average 2,119 2,090 ROCE (operating profit pre-exceptional items divided by average net operating assets) 10.3% 10.7%

Calculated by dividing operating profit pre-exceptional items for the year by the average net operating assets at 1 January, 30 June and 31 December

36 Results Presentation March 2019

Disclaimer

The information contained in this presentation has largely been extracted from the results announcement for the twelve months ended 31 December 2018. This presentation may contain certain “forward-looking” statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of Aggreko speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. This presentation is published solely for information purposes. The distribution of this presentation in jurisdictions other than the UK may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the UK should inform themselves about, and

• bserve, any applicable requirements.

All opinions expressed in this presentation are subject to change without notice and may differ from opinions expressed elsewhere.