Chairman's Statement
Introduction
Aggreko delivered another strong performance in the first half of 2010 with reported revenue increasing by 17% and reported trading profit increasing by 23%. Earnings per share increased by 21% to 32.49 pence. Our International Power Projects business continued to grow in the first half and, encouragingly, secured new contracts in 18 countries for a record 860MW. Trading in the Local business was also strong, largely due to the Vancouver Winter Olympics and FIFA World Cup contracts. These events were amongst the largest and most complex we have ever undertaken and I am pleased to report that they were executed to a very high standard.
Dividend
The Board has decided to pay an interim dividend of 6.55 pence per share, which is an increase of 50% over the 2009 interim dividend; the Board intends to propose at the appropriate time that this level of increase should also be applied to the final dividend, which would give a dividend for the year as a whole of 18.90 pence per share (2009: 12.60 pence). This increase reflects the very high level of profit increases over the last few years and the confidence that the Board has in the prospects for the business. This interim dividend will be paid on 20 October 2010 to shareholders on the register at 24 September 2010, with an ex-dividend date of 22 September 2010.
Trading
Reported revenue in the first half at £583.6 million (2009: £499.8 million) was 17% higher than 2009 while revenue, in constant currency and excluding pass-through fuel increased by 15%. Profit before tax increased by 19% to £125.7 million (2009: £105.7 million).
During the first six months we accelerated the investment in new fleet and total capital expenditure in the first half was £103.6 million, compared to £97.4 million in the same period last year. As highlighted in our June trading update it is expected that fleet capital expenditure for the full year will be around £265 million compared to £149.7 million in 2009.
Net debt decreased by £16.0 million to £159.5 million in the period. Aggreko’s financial position remains very strong with gearing of 23% (30 June 2009: 58%) and interest cover, measured on an EBITDA basis, of 28.5 times (30 June 2009: 23.6 times). Aggreko had bank facilities totalling £467.7 million at 30 June 2010, with the next significant maturity due in September 2011.
Board changes
Nigel Northridge will retire as a director of the Company on 31 August 2010. Nigel joined the Board in February 2002, and we have benefited enormously from his advice and experience during his time on the Board. We wish him well for the future. I am delighted to say that David Hamill has agreed to take on the role of senior independent director and that Russell King has agreed to chair the Remuneration Committee. We expect to announce the appointment of an additional independent non-executive director in the near future.
Outlook
We expect that conditions in the Local business will continue to improve. Volumes of equipment on rent are ahead of last year, and rates are beginning to strengthen in many areas; in particular there has been a sharp improvement in temperature control rentals. North America has had a strong start to the summer season, in part due to work supporting the clean-up efforts in the Gulf of Mexico and in responding to the floods in Nashville earlier in the year. Elsewhere, Europe & Middle East is a little ahead of last year, and Aggreko International’s Local businesses will have a strong second half, supported by revenue from the FIFA World Cup and improving trading in Australia and South America.
In International Power Projects, we expect continued growth in the second half as the record order intake seen in the first half feeds through to revenues in the second half, albeit partly mitigated by a high rate of off-hires, notably in the Middle East and Kenya, as contracts related to either hydro-shortfall or summer peak-shaving come to an end. The prospect pipeline remains strong for both gas and diesel projects.
Although the second half of 2009 included the benefit of both the 53rd week and the Vancouver Winter Olympics, we expect that the improving performance of the Local businesses, and the strong order-book and margins in International Power Projects, will enable us to make further good progress in the second half and that the outcome for the year as a whole will be slightly better than our previous expectations.
25 August 2010
