Notes to the Interim Accounts

For the six months ended 30 June 2012 (unaudited)

1 General information

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The address of the registered office is 120 Bothwell Street, Glasgow G2 7JS, UK.

This condensed interim financial information was approved for issue on 2 August 2012.

This condensed consolidated interim financial information does not comprise Statutory Accounts within the meaning of Section 434 of the Companies Act 2006. Statutory Accounts for the year ended 31 December 2011 were approved by the Board on 9 March 2012 and delivered to the Registrar of Companies. The report of the auditors on those Accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The condensed consolidated interim financial information is unaudited but has been reviewed by the Group's auditors, whose report can be viewed here. 

2 Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June 2012 has been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Services Authority and IAS 34 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.

Going-concern basis
The Group's banking facilities are primarily in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement notes; facilities totalled £868 million at 30 June 2012.The financial covenants attached to these facilities are that EBITDA should be no less than 4 times interest (30 June 2012: 26.3 times) and net debt should be no more than 3 times EBITDA (30 June 2012: 1.2 times). The Group does not consider that these covenants are restrictive to its operations. The maturity profile of the borrowings is detailed in Note 13 to the Accounts. The Group's forecasts and projections show that the facilities in place are currently anticipated to be ample for meeting the Group's operational requirements for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated interim financial statements.

3 Accounting policies

The accounting policies are consistent with those of the annual financial statements for the year ended 31 December 2011, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

New and amended standards and interpretations need to be adopted in the first interim financial statements issued after their effective date (or date of early adoption). There are no new IFRSs or IFRICs that are effective for the first time for this interim period that would be expected to have a material impact on the Group.

4 Cashflow from operating activities

	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million
Profit for the period	108.3	85.1	260.1
Adjustments for:
Tax	38.0	33.9	63.6
Depreciation	110.2	86.5	185.5
Amortisation of intangibles	2.1	1.7	3.6
Finance income	(0.2)	(0.2)	(1.0)
Finance cost	12.0	8.4	19.7
Profit on sale of PPE	(1.6)	(1.8)	(4.6)
Share based payments	8.2	10.7	19.8
Changes in working capital   (excluding the effects of exchange differences on consolidation):
Increase in inventories	(26.2)	(28.6)	(29.3)
Increase in trade and other receivables	(124.7)	(102.3)	(74.4)
Increase in trade and other payables	7.6	61.8	65.8
Cash generated from operations	133.7	155.2	508.8

5 Cash and cash equivalents

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
Cash at bank and in hand	21.5	33.0	16.8
Short-term bank deposits	1.0	30.0	36.4
	22.5	63.0	53.2

Cash and bank overdrafts include the following for the purposes of the cashflow statement:

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
Cash and cash equivalents	22.5	63.0	53.2
Bank overdrafts (Note 13)	(28.5)	(18.2)	(18.7)
	(6.0)	44.8	34.5

6 Segmental reporting

(a) Revenue by segment

	Total revenue			Inter-segment revenue			External revenue
	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million
Middle East & Developing Europe	70.0	55.8	133.8	–	–	0.1	70.0	55.8	133.7
Europe	94.8	76.4	168.9	–	0.1	0.1	94.8	76.3	168.8
North America	131.8	114.6	258.8	0.1	–	0.1	131.7	114.6	258.7
International Local	107.3	78.5	173.5	0.3	0.3	0.6	107.0	78.2	172.9
Local business	403.9	325.3	735.0	0.4	0.4	0.9	403.5	324.9	734.1
International Power Projects	330.5	312.7	662.8	0.3	0.4	0.8	330.2	312.3	662.0
Eliminations	(0.7)	(0.8)	(1.7)	(0.7)	(0.8)	(1.7)	–	–	–
Group	733.7	637.2	1,396.1	–	–	–	733.7	637.2	1,396.1

(b) Profit by segment

	Trading profit/(loss) pre intangible asset amortisation			Amortisation of intangible assets arising from business combinations			Trading profit/(loss)
	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million
Middle East & Developing Europe	12.1	10.0	11.7	–	–	(0.1)	12.1	10.0	11.6
Europe	2.4	(0.3)	30.0	(0.1)	(0.1)	(0.1)	2.3	(0.4)	29.9
North America	21.0	17.0	51.8	(1.2)	(1.2)	(2.5)	19.8	15.8	49.3
International Local	18.5	14.6	30.7	(0.8)	(0.4)	(0.7)	17.7	14.2	30.0
Local business	54.0	41.3	124.2	(2.1)	(1.7)	(3.4)	51.9	39.6	120.8
International Power Projects	104.6	85.8	217.1	–	–	(0.1)	104.6	85.8	217.0
Group	158.6	127.1	341.3	(2.1)	(1.7)	(3.5)	156.5	125.4	337.8

	Gain/(loss) on sale of PPE			Operating profit/(loss)
	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million
Middle East & Developing Europe	–	(0.2)	(0.3)	12.1	9.8	11.3
Europe	0.1	–	(0.1)	2.4	(0.4)	29.8
North America	0.9	1.2	2.7	20.7	17.0	52.0
International Local	0.2	0.3	0.7	17.9	14.5	30.7
Local business	1.2	1.3	3.0	53.1	40.9	123.8
International Power Projects	0.4	0.5	1.6	105.0	86.3	218.6
Group	1.6	1.8	4.6	158.1	127.2	342.4
Finance costs – net				(11.8)	(8.2)	(18.7)
Profit before taxation				146.3	119.0	323.7
Taxation				(38.0)	(33.9)	(63.6)
Profit for the period				108.3	85.1	260.1

(c) Depreciation and amortisation by segment

	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million
Middle East & Developing Europe	13.5	11.3	24.0
Europe	8.7	9.0	17.3
North America	19.2	15.3	33.3
International Local	17.3	11.2	24.1
Local business	58.7	46.8	98.7
International Power Projects	53.6	41.4	90.4
Group	112.3	88.2	189.1

(d) Capital expenditure on property, plant and equipment and intangible assets by segment

	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million
Middle East & Developing Europe	25.5	18.0	29.5
Europe	41.0	13.7	25.3
North America	35.5	28.9	67.6
International Local	106.0	59.6	74.2
Local business	208.0	120.2	196.6
International Power Projects	89.0	69.0	229.5
Group	297.0	189.2	426.1

(e) Total assets by segment

	6 months ended 30 June 2012 £ million	6 months ended 30 June 2011 £ million	Year ended 31 Dec 2011 £ million
Middle East & Developing Europe	193.7	181.2	173.0
Europe	226.3	156.1	147.9
North America	321.7	294.4	310.4
International Local	433.8	213.0	243.7
Local business	1,175.5	844.7	875.0
International Power Projects	945.3	794.3	876.7
	2,120.8	1,639.0	1,751.7
Deferred and current tax asset	20.3	18.5	20.5
Derivative financial instruments	0.4	0.2	0.2
Total assets per balance sheet	2,141.5	1,657.7	1,772.4

7 Dividends

The dividends paid in the period were:

	6 months ended 30 June 2012	6 months ended 30 June 2011	Year ended 31 Dec 2011
Total dividend (£ million)	36.2	33.2	52.1
Dividend per share (pence)	13.59	12.35	19.55

An interim dividend in respect of 2012 of 8.28 pence (2011: 7.20 pence), amounting to a total dividend of £22.0 million (2011: £18.9 million) was proposed during the period. This interim dividend will be paid on 5 October 2012 to shareholders on the register on 7 September 2012, with an ex-dividend date of 5 September 2012.

8 Earnings per share

Basic earnings per share have been calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during the period, excluding shares held by the Employee Share Ownership Trusts which are treated as cancelled.

	30 June 2012	30 June 2011	31 Dec 2011
Profit for the period (£ million)	108.3	85.1	260.1
Weighted average number of ordinary shares in issue (million)	263.8	268.5	265.6
Basic earnings per share (pence)	41.03	31.69	97.91

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

	30 June 2012	30 June 2011	31 Dec 2011
Profit for the period (£ million)	108.3	85.1	260.1
Weighted average number of ordinary shares in issue (million)	263.8	268.5	265.6
Adjustment for share options (million)	0.8	1.0	1.1
Diluted weighted average number of ordinary shares in issue (million)	264.6	269.5	266.7
Diluted earnings per share (pence)	40.91	31.58	97.49

Aggreko plc assesses the performance of the Group by adjusting earnings per share, calculated in accordance with IAS 33, to exclude items it considers to be non-recurring and believes that the exclusion of such items provides a better comparison of business performance. The calculation of earnings per ordinary share on a basis which excludes exceptional items is based on the following adjusted earnings:

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
Profit for the period	108.3	85.1	260.1
Exclude exceptional items	–	–	(28.6)
Adjusted earnings	108.3	85.1	231.5

An adjusted earnings per share figure is presented below.

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
Basic earnings per share pre-exceptional items (pence)	41.03	31.69	87.14
Diluted earnings per share pre-exceptional items (pence)	40.91	31.58	86.76

9 Taxation

The taxation charge for the period is based on an estimate of the Group's expected annual effective rate of tax for 2012 based on prevailing tax legislation at 30 June 2012. This is currently estimated to be 26.0% (2011: 28.5%).

10 Goodwill

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
Cost
Balance at beginning of period	65.0	60.4	60.4
Acquisition (Note 18)	86.9	4.7	4.8
Exchange adjustments	(0.7)	(0.3)	(0.2)
At end of period	151.2	64.8	65.0
Accumulated impairment losses	–	–	–
Net book value at end of period	151.2	64.8	65.0

11 Property, plant and equipment

Six months ended 30 June 2012

	Freehold properties £ million	Short leasehold properties £ million	Rental fleet £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2012	58.3	16.7	2,012.6	78.9	2,166.5
Exchange adjustments	(0.7)	(0.4)	(33.1)	(1.5)	(35.7)
Additions	0.6	1.1	219.6	11.3	232.6
Acquisitions (Note 18)	–	0.1	44.8	3.0	47.9
Disposals	(0.4)	(0.4)	(22.4)	(1.4)	(24.6)
At 30 June 2012	57.8	17.1	2,221.5	90.3	2,386.7
Accumulated depreciation
At 1 January 2012	16.7	9.0	997.8	56.0	1,079.5
Exchange adjustments	(0.4)	(0.2)	(15.7)	(0.8)	(17.1)
Charge for the period	0.9	0.9	103.4	5.0	110.2
Disposals	(0.4)	(0.4)	(19.2)	(1.2)	(21.2)
At 30 June 2012	16.8	9.3	1,066.3	59.0	1,151.4
Net book values
At 30 June 2012	41.0	7.8	1,155.2	31.3	1,235.3
At 31 December 2011	41.6	7.7	1,014.8	22.9	1,087.0

	Freehold properties £ million	Short leasehold properties £ million	Rental fleet £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2011	46.2	15.8	1,659.8	71.4	1,793.2
Exchange adjustments	(0.1)	–	(31.5)	–	(31.6)
Additions	–	1.1	169.4	10.5	181.0
Acquisitions	–	–	6.4	–	6.4
Disposals	–	(0.1)	(23.0)	(0.5)	(23.6)
At 30 June 2011	46.1	16.8	1,781.1	81.4	1,925.4
Accumulated depreciation
At 1 January 2011	15.3	8.1	858.1	52.9	934.4
Exchange adjustments	(0.1)	–	(14.9)	–	(15.0)
Charge for the period	0.6	0.8	81.3	3.8	86.5
Disposals	–	(0.1)	(19.4)	(0.4)	(19.9)
At 30 June 2011	15.8	8.8	905.1	56.3	986.0
Net book values
At 30 June 2011	30.3	8.0	876.0	25.1	939.4
At 31 December 2010	30.9	7.7	801.7	18.5	858.8

12 Trade and other receivables

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
Trade receivables	398.1	312.9	300.5
Less: provision for impairment of receivables	(53.6)	(45.7)	(36.3)
Trade receivables – net	344.5	267.2	264.2
Prepayments and accrued income	126.8	103.8	89.0
Other receivables	36.9	38.9	29.6
Total receivables	508.2	409.9	382.8

Provision for impairment of receivables

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
Middle East & Developing Europe	2.2	1.8	1.8
Europe	2.6	2.7	2.8
North America	1.8	1.3	1.4
International Local	2.6	0.9	1.6
Local Business	9.2	6.7	7.6
International Power Projects	44.4	39.0	28.7
Group	53.6	45.7	36.3

13 Borrowings

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
Non-current
Bank borrowings	397.3	281.1	202.5
Private placement notes	240.4	–	178.3
	637.7	281.1	380.8
Current
Bank overdrafts	28.5	18.2	18.7
Bank borrowings	34.6	20.9	18.2
	63.1	39.1	36.9
Total borrowings	700.8	320.2	417.7
Short-term deposits	(1.0)	(30.0)	(36.4)
Cash at bank and in hand	(21.5)	(33.0)	(16.8)
Net borrowings	678.3	257.2	364.5

Overdrafts and borrowings are unsecured.

The maturity of financial liabilities
The maturity profile of the borrowings was as follows:

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
Within 1 year, or on demand	63.1	39.1	36.9
Between 1 and 2 years	233.8	10.1	170.0
Between 2 and 3 years	–	80.5	–
Between 3 and 4 years	163.5	–	32.5
Between 4 and 5 years	–	18.7	–
Greater than 5 years	240.4	171.8	178.3
	700.8	320.2	417.7

Since 30 June 2012 we have put in place a new committed bank facility of £77 million with a maturity of four years.

14 Capital commitments

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
Contracted but not provided for (property, plant and equipment)	44.5	38.4	21.0

15 Pension commitments

Analysis of movement in retirement benefit obligation in the period:

	30 June 2012 £ million	30 June 2011 £ million	31 Dec 2011 £ million
At start of period	(5.5)	(3.2)	(3.2)
Income statement expense	(1.2)	(0.9)	(1.7)
Contributions	1.7	3.4	4.4
Net actuarial gain/(loss)	4.4	0.1	(5.0)
At end of period	(0.6)	(0.6)	(5.5)

16 Related party transactions

Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. There were no other related party transactions in the period.

17 Seasonality

The Group is subject to seasonality with the third quarter of the year being our peak demand period, accordingly revenue and profits have historically been higher in the second half of the year.

18 Acquisitions

On 16 April 2012 the Group completed the acquisition of the entire share capital of Companhia Brasileira de Locacoes ('Poit Energia'), a leading provider of temporary power solutions in South America. The acquisition of Poit Energia supports Aggreko's strategy of expanding its Local businesses in fast growing economies; it strengthens Aggreko's business in South America, both in terms of geographical footprint and access to sectors which Aggreko is currently not in or to which it has limited exposure.

The purchase consideration, paid in cash, comprises a fixed element of £104.7 million (£103.1 million of which has been paid at the half year and £1.6 million of which is payable in half two 2012) and further payments up to a maximum of £20.4 million if performance targets for the year to 31 December 2012 are met. The total £20.4 million has been accrued. This gives a maximum cash consideration of £125.1 million.

The initial transaction price of £137.5 million (R$404 million) disclosed at the time of the acquisition was made up of £104.7 million consideration payable to the owners of Poit Energia plus £32.8 million of debt (including loans and financing) to be paid off by Aggreko on behalf of Poit Energia. Of the £137.5 million, £130.3 million was settled by the half year comprising £103.1 million of the fixed consideration and £27.2 million of debt (£22.2 million of loans and financing and £5.0 million of working capital payments). The remaining consideration of £1.6 million will be paid in half two 2012 and the remaining debt amount of £5.6 million will be settled in the normal course of business as it falls due.

The revenue and operating profit included in the consolidated income statement from 16 April 2012 to 30 June 2012 contributed by Poit Energia was £10.9 million and £1.6 million respectively. Had Poit Energia been consolidated from 1 January 2012, the consolidated income statement for the six months ended 30 June 2012 would show revenue and operating profit of £26.2 million and £2.4 million respectively.

The acquisition method of accounting has been adopted and the good will arising on the purchase has been capitalised. Acquisition related costs of £1.6 million have been expensed in the period within Administrative expenses in the income statement.

The details of the transaction and fair value of assets acquired are shown below:

	Fair value £ million
Intangible assets	16.5
Property, plant and equipment	47.9
Inventories	2.8
Trade and other receivables	10.2
Deferred tax asset	5.9
Cash and cash equivalents	3.4
Trade and other payables	(19.4)
Deferred tax liability	(5.6)
Loans and financing	(23.5)
Net assets acquired	38.2
Goodwill	86.9
Consideration	125.1
Less contingent consideration	(20.4)
Less consideration payable in half two 2012	(1.6)
Less cash and cash equivalents acquired	(3.4)
Net cash outflow	99.7

Reconciliation to cash flow statement

	£ million
Acquisitions (net of cash acquired) per cash flow statement	99.7
Add back cash acquired	3.4
Total fixed consideration paid out at 30 June 2012	103.1
Acquisitions: repayment of loans and financing per cash flow statement	22.2
Working capital movements (included as part of working capital movements in Note 4)	5.0
Total cash outflow in the period	130.3

The fair values contain some provisional amounts which will be finalised in the 2012 Annual Report and Accounts. These include estimated values for inventory as well as the physical condition of fleet assets which have still to be finally assessed. Intangible assets represent customer relationships and a non-compete agreement.

Goodwill represents the value of synergies arising from the integration of the acquired business. Synergies include direct cost savings and the reduction of overheads as well as the ability to leverage Aggreko systems and access to assets.