Introduction to Aggreko. March 2015

Transcription

1 Introduction to Aggreko March 2015

2 Overview Investment Case Strategy Our History Financial Information Where We Operate Shareholder Information Our Equipment Further Information Local Business Power Projects 2

3 Investment Case Twangiza Mine, DRC 3

4 The global leader in flexible power and temperature control Customers in c.100 countries use us when the need is urgent or for a limited period Services are asset-intensive, often involve significant engineering input and are frequently in response to emergencies Two business models: Local Business rents power and temperature control equipment to a broad range of users Power Projects sells electricity, supplying and operating utility power plants, mainly in emerging markets to utility government users 2014 Highlights Revenue 1,577m PBT 289m EPS 82.5p DPS 27.1p ROCE 19% Power Fleet 9,695 MW Employees 7,700 4

5 Reasons to invest in Aggreko Market Structural growth in emerging markets drives demand in Power Projects Local business market is growing at 2x GDP Global operations Diversified product portfolio Competitive advantage Global scale and reach enables us to respond to rapidly shifting demand Complimentary business models which diversify short term variability Focused product range ensures unrivalled expertise In-house design and assembly delivers optimised fleet at a lower capital cost Strategy Clearly defined business strategy Supported by a strong management team Delivering on strategic targets in a challenging environment Shareholder returns Priority is to invest for long term growth Cash generation set to increase over the next few years Excess liquidity will be returned to shareholders Gentle warning This business has high variability and low visibility; progress is not smooth Returns in Power Projects are risk-unadjusted 5

6 Our History London 2012, Olympics 6

7 History of the Group Founded in the Netherlands Became a wholly owned subsidiary of Salvesen Group Entered the temperature control rental business through the acquisition of Mobile Air and Pierce Industrial in the US Demerged from Salvesen Group and listed on the LSE Acquired GE Energy Rentals Acquisition of Cummins India Acquisition of N.Z. Generator Hire Ltd, New Zealand UK business established in Scotland Entered the US market through the acquisition of Electric Rental Systems Entry into Asia Pacific region with acquisition of Yeow Kong Electrical Company in Singapore Established Aggreko International Projects (Power Projects) in Jebel Ali Acquisition of Power Plus Rentals Ltd, Canada Acquisition of Northland Power Services and entry into US shale market Acquisition of Poit Energia in Brazil 7

8 Where We Operate Manufacturing, USA 8

9 A global business Serving customers in c.100 countries Americas Revenue 684m Trading Profit 141m Service Centres & Offices 100 Local Business Fleet (MW) 1,860 Temperature control fleet (MW) 663 EMEA Revenue (ex fuel) 599m Trading Profit (ex fuel) 119m Service Centres & Offices 73 Local Business Fleet (MW) 2,232 Temperature control fleet (MW) 483 APAC Revenue 246m Trading Profit 49m Service Centres & Offices 38 Local Business Fleet (MW) 722 Temperature control fleet (MW) 148 Key local business sectors Oil & gas; petrochem & refining Key local business sectors Oil & gas & events Key Local business Sectors Mining; oil & gas Note: FY14 numbers 9

10 Customer base well diversified Revenue by geography 22% North America 21% 22% Europe Middle East Revenue 1,529m FY14 Revenue excl. pass-through fuel 16% 17% 9% 15% Africa Asia & Australasia Latin America 10

11 Our Equipment Manufacturing, USA 11

12 Narrow product range Product Type Power Gas, diesel and HFO generators 5KW-2MW; ancillaries. Fleet Size Key Regions FY14 Revenue c. 20,000 units All 1,062m Temperature Control Chillers; heaters; air conditioners; air handlers; de-humidifiers; cooling towers. c. 4,900 units All 119m Oil-free Air Electric and diesel oil-free air compressors. c. 600 units Americas 29m Note: Revenue excludes service and pass-through fuel 12

13 In-house product development Design and manufacture most of our equipment in-house using major sub assemblies Developed the Aggreko G3+ Refurbishment from our existing G3 engine Produces 14% more power than a standard G3 Optimised for Utility duty materially improved, market-leading fuel consumption >20% lower cost / MW than a new Aggreko standard G3 The Aggreko G3+ HFO 1MW continuous 20ft containerised genset running on HFO Cost / MW less than half that of new product from leading manufacturer Conversion of G3 to G3+ and G3+ HFO carried out as part of standard 25,000 hours rebuild 13

14 Local Business Houston Refinery, USA 14

15 Local business Key facts Average contract value: 21k Average contract duration: Average installation time: 50 days Power fleet (MW): 4,814 Temperature control fleet (MW): 1,294 Hours - days Service Centres: 211 across 53 Countries Application: Power, temperature control and oil-free compressed air FY14 Revenue by customer type Oil & Gas Construction Contracting Services Other Petrochemical & Refining Events Manufacturing Shipping Utilities Military Mining 3% 7% 1% 8% 9% 10% 12% 5% 26% 6% 6% 7% Revenue 904m (59% of Group excl. fuel) Keys to our competitive advantage Broad range of equipment Ability to deploy quickly Low-cost operating model Local reputation and brand 15

16 Major events Commonwealth Games 2014, Glasgow 16

17 Industrial Oil Refinery, Tunisia 17

18 Commercial Manufacturing, USA 18

19 Shipping Belfast 19

20 Oil & Gas Brazil 20

21 Local business market drivers GDP In faster growing economies, businesses are busy and more likely to rent equipment to maintain production. Propensity to rent This is driven by tax treatment of assets, availability of financing and an awareness and acceptance of outsourcing. Events High value / low frequency events change the market size temporarily, e.g. Hurricane Sandy in Local business market is growing at c.2x GDP 21

22 Local business competition Aggreko is the only company with a global footprint Customers have a choice to buy or rent; largest competitors either general rental or equipment manufacturers Competitive environment has been stable Fierce local competition but no global competition Few local competitors are able to compete for large scale or technically demanding work Using market potential analysis we believe that the global local market is about 4bn and we have a 25% share Global Aggreko regional Hertz, URI, Sunbelt, Speedy Hire, CAT Hundreds of national Thousands of local small businesses 22

23 Local business customer proposition Fast deployment through proximity to customers Reliable in emergency situations Fungible range of customised products Covering variety of size and applications (from marquee, to a mine) Optimised for use in extremes of temperature and altitude Access to global pool of fleet when required In house technical expertise enables us to handle larger scale and more complex projects Flexibility over duration anything from 1 day Maintenance and servicing handled by Aggreko 23

24 Power Projects Utility, Mozambique 24

25 Power Projects business Key facts Average contract value: Average contract duration: Average contract size: Installation time: 5m per annum 1 year 30MW MW in power fleet: 4,881 Application: Hubs: Weeks - months Base-load and peakshaving power Dubai, Rotterdam, Singapore, Panama FY14 Revenue by customer type (excl. fuel) Oil & Gas Utilities Military Mining Other 3% 2% 3% 3% 89% Revenue 625m (41% of Group excl. fuel) Keys to our competitive advantage Ability to quickly deploy large fleet capacity globally Highly reliable, easily-transportable, standardised, purpose-built equipment Expertise in engineering, commercial, tax, logistics and risk management 25

26 100MW diesel For hydro shortfall support, Kenya 26

27 232MW gas Gas-fired, cross border power, Mozambique 27

28 Power Projects market drivers Demand Demand in developing countries is growing; 4% CAGR in electricity consumption driven by industrialisation and urbanisation. Financing Capital markets are unwilling to support longterm infrastructure projects in many developing countries. Under- Investment Under-investment in new and replacement permanent power has led to frequent breakdowns and damaging power cuts. Developed Markets De-carbonisation and ageing infrastructure in developed countries requires $trillions in investment. 28

29 Demand for power growing in developing countries 1. Demand Population growth, industrialisation and urbanisation drive demand Electrification rates in low income countries are around 30% Reliability of existing infrastructure is often poor Demand for power anticipated to grow at 3.7% pa between 2015 and 2020 We estimate that the resulting shortfall in power supply will be over 140GW in our core markets by 2020 From Hut to House (Illustrative) Power Demand (KW) Item load Base load 1 0 Lighting & Fan TV Fridge AC Water Heater Sound System House Lighting Computer CAGR: 25 years = 18%, 50 years = 9% 29

30 A number of countries cannot finance new infrastructure 2. Under investment New MW of Permanent Power Installed s World China World Ex China Source: Platts 30

31 A number of countries cannot finance new infrastructure 3. Financing Projected IRR s vs. Country Risk 25% 20% 15% 10% 5% 0% EU/USA Brazil India Unbankable 31

32 Installed base is ageing fast 4. Competition 1,000 GW of world generating capacity > 40 years old by 2015 In next 10 years North America and Europe will have to invest $tn s in power infrastructure to replace ageing capacity and respond to renewables This will draw investment away from countries with poor risk profiles at a time when their infrastructure is ageing rapidly Operating capacity (GW) reaching >40 years old in period Movement Africa % Anz-Oceania % Asia % China % CIS % Europe % Latin America % Middle East % North America % TOTAL % Source: Platts 32

33 Power Projects competition Only one other company that competes globally Estimated market share There are c CAT dealers that operate standalone and compete for power projects either locally or regionally Difficult to operate efficiently without a large homogenous fleet and infrastructure to market, sell and operate consistently across the world In some countries, e.g. Indonesia and Brazil where there are long standing power shortages, there are a number of local competitors Aggreko APR Others 35% 40% 25% 33

34 Power Projects customer proposition Speed Immediate solution to today s problems Instant result, immediately felt by industry and consumers Pay-as-you-go No need to raise capital for purchase Modularity Distributed generation means that power can go where it is most needed Flexibility No long-term commitment send it away when you don t need it Low risk, proven solution, used by many countries Technically extremely helpful to network operators Helps stabilise grid and supports other assets 34

35 Relative cost of permanent and temporary power Illustrative Permanent Power ($c/kwhr) Hydro 2-3 Nuclear 3-10 Gas 7-15 HFO Temporary Power ($c/kwhr) Diesel 7-15 C HFO 3-10 C Gas 2-3 C Fuel cost Rental Note: Based on oil at c.$100/bbl 35

36 Investment in gas has been a big success Proprietary Aggreko product, launched in 2006 Higher margin, similar ROCE to diesel Cheaper fuel, lower emissions Expanded market by reducing cost / KWh Enabled us to operate as an Independent Power Producer Operates in both Local & Power Projects Power Projects Gas Revenue $m

37 Strategy Mining, Australia 37

38 Aggreko s strategy Leading global provider of temporary power and temperature control Standard operating processes and systems Moveable fungible fleet Global reach Lowest capital cost Local Business Power Projects Service Efficiency Optimise Network Scale Product Innovation Orange Blood Culture: Passion, Pace, Performance 38

39 We will continue to grow faster than the market in our Local business Service Outstanding customer service High-quality rental fleet Result: Maintain clear differentiation from competitors Efficiency Use benefits of global scale to optimise utilisation Use Orange Excellence to drive efficiency Result: Make attractive returns Optimise network Expand network in faster growing markets of ME, Africa, Latam & Asia Focus on adding new service centres /upgrading existing centres in Europe & NA Drive performance of recently opened depots Exploit specific global verticals: major events, wind, oil & gas Result: Increase market share and extend global reach Through pursuing these actions we believe that over the five years from we can achieve: Underlying revenue growth between 8-12% Trading margins between 17-20% ROCE between 18-21% 39

40 Power Projects business will grow in line with the market Scale Address demand globally resulting in higher utilisation because demand moves Focus on non-oecd ex. China with ability to react to black swans Maintain a diverse customer portfolio, reducing the risk to the Group Optimise economies of scale to retain 20-40% capital cost / MW advantage Leverage links with the local business Result: Largest, most responsive operator with lower volatility of demand, better lifetime utilisation of equipment and lower capital costs Product innovation Continue to invest in product development of gas and HFO (cheaper fuels) Work towards bringing the cost of temporary power in line with permanent power Continue to develop capability to act as an Independent Power Producer Result: Market leading products and the ability to offer customers the best value Through pursuing these actions we believe that over the five years from we can achieve: Underlying revenue growth between 10-15% (subject to year on year variation) Trading margins between 27-32% ROCE between 25-30% 40

41 Group strategy for the next 5 years Implement business-line strategies for Local & Power Projects Build strength and depth in management team Keep looking for bolt-on acquisitions Build synergies between Local and Power Projects Drive operational efficiency & economies of scale Innovate in product development Aggreko has a proven strategy and the management to deliver it 41

42 Strategic targets & KPIs Strategy Targets 2 FY14 Progress Local Superior service Utilise global scale for efficiency Increase market share and extend presence in emerging markets Revenue growth: 8-12% Margin: 17-20% ROCE: 18-21% Revenue growth: 8% Margin: 16% ROCE: 15% Opened 9 new service centres (net of closures) NPS score of 58% in top quartile globally Commenced roll out of telemetry Power projects Grow to secure operating efficiencies and competitive advantage Be the largest global operator Develop technology to make temporary power competitive with permanent power Revenue growth: 10-15% Margin: 27-32% ROCE: 25-30% Revenue growth: 18% Margin: 27% ROCE: 25% Contracts in Panama and Mozambique competing with permanent power Additional 757 MW won in the year Group To be the leading global provider of temporary power and temperature control Revenue growth: >10% Margin: > 20% ROCE: > 20% Revenue growth: 12% Margin: 19% ROCE: 19% Refurbished 290 generators 25% of Power Projects fleet are now refurbished generators (1) Net of closures (2) These are averages over a five year period and there will be years when we may be outside one of these ranges. Revenue growth is underlying, i.e. excluding London Olympics, Poit acquisition, pass-through fuel and currency translation and adjusted to exclude Military and Japan. Margin and ROCE targets are on a reported basis post amortisation. 42

43 Financial Information Wind Farm, Ireland 43

44 Solid financial performance Underlying revenue up 9% Underlying trading profit down 2% m FY14 FY13 Reported Change Underlying Change Revenue 1,577 1,573 -% 9% Underlying margin at 20% Revenue excl. pass-through fuel 1,529 1,531 -% 9% EPS down 10% driven by currency Dividend increase of 3% Trading profit (13)% (2)% Operating profit (13)% Net interest expense (21) (25) 15% Profit before tax (13)% Tax (74) (87) 15% Profit after tax (13)% Diluted earnings per share Dividends per share (declared) 82.5p 92.0p (10)% 27.1p 26.3p 3% Underlying excludes pass-through fuel and currency translation. 44

45 2014: Revenues of 1,577m from three product families Why Power & Temperature Control? Rental product is different to purchase product => Mission critical: availability, service and reliability more differentiated offering important than price => strong margins Long life of equipment => 10-year old equipment can get Fleet fungible between sector and geography => can same rate as new operate as a global business Power Temperature Control Oil-free Air Rental revenue 1,210m (80% of total revenues) 1,062m / 88% 119m / 10% 29m / 2% Gross Rental Assets 2,599m 2,174m / 84% 136m / 5% 72m / 3% Fleet also includes ancillaries with a gross value of 217m / 8% 45

46 Underlying growth across both businesses Solid performance in Local; underlying revenue up 8% Good performance in Power Projects; underlying revenue up 10% FY14 m Revenue FY13 m Underlying % FY14 m Trading profit FY13 m Underlying % Local Business % (4)% Trading Margin: 16% 17% Broadly in line with strategic targets Power Projects (ex fuel) Total (ex fuel) ROCE: 15% 17% % % Trading Margin: 27% 30% ROCE: 25% 27% 1,529 1,405 9% (2)% Trading Margin: 20% 22% ROCE: 19% 21% Underlying excludes pass-through fuel and currency translation. 46

47 Diverse geographic spread and complimentary business models Revenue (ex. fuel) by Market ( m) Trading Profit (ex. fuel) by Business ( m) Emerging markets 300 Developed markets Local Power Projects 50 Total Group Emerging markets = Local: Russia, Middle East, Asia, Africa, LATAM; Power Projects = everywhere excluding Japan 47

48 Very attractive returns on capital Returns are very attractive, and reflect relative risk profiles Power Projects peak returns driven by Japan & Military Local ROCE peaks in 2008 and 2010 due to Olympics and World Cup; diluted slightly 2011 to expansion in Emerging Markets; slight improvement in 2012 due to London Olympics 2014 ROCE diluted by challenging Power Projects environment and the mining slowdown in the Local business Return on Capital Employed % Local Power Projects Group

49 Shareholder Information Aggreko Service Centre, Jebel Ali 49

50 Shareholder information Share Types Ordinary: Listed on the LSE Treasury: Shares purchased by the Company out of distributable reserves. They hold no voting or preemption rights and receive no dividends Capital structure Priority is to invest in the business. Excess capital will be returned to shareholders. Dividend policy Reduce dividend cover to c.3x earnings between 2013 and 2015 Market information Listing: Ticker: Market Cap: ISC: London AGK:LN c. 4bn 256m Share price history Shareholder returns ( m) Our Shareholders AGK 500 FTSE100 0 FTSE350 Bus. Serv. Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan % 27% 7% 6% UK N America Europe (ex UK) Rest of World * Past performance is no indication of future performance; data correct at 30 January

51 Further Information Refining, USA 51

52 Further information Business Information For further information about Aggreko, please refer to the following: Website: ir.aggreko.com/investors Annual report: ir.aggreko.com/investors/financial-reports Investor Relations & Media app available for ios and Android devices References All data correct as of 31 December 2014 unless otherwise stated Stock market data from Reuters, 30 January 2015 unless otherwise stated Investor Relations Contact Louise Bryant, Head of Investor Relations 52

53 Disclaimer The information contained in this presentation has largely been extracted from the Results Announcement for the year ended 31st December 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 observe, any applicable requirements. All opinions expressed in this presentation are subject to change without notice and may differ from opinions expressed elsewhere. 53