Building the future - Aggreko/media/Files/A/... · Combined Cycle Gas Turbine Open Cycle Gas Turbine Advanced Coal Next Gen Gas G3+ Mobile Permanent Based on 100MW, 30 year project,

Building the future

6 August 2015

2

Introduction

3

Where we are today

Our objective

4

Our objective is to be the leading global provider of modular, mobile power

and related solutions, delivering long-term value to shareholders,

outstanding service to customers and rewarding careers to our employees.

Our business model is strong and unique

5

Our People &

Culture

• Committed and passionate people

• Fast pace

• Strong customer service

• Can-do attitude

Expertise • Over 50 years of operational experience

• Sector specific and complex project expertise

• In-house manufacturing and engineering capability

Scale • Global business with network of depots and hubs

• Lower equipment cost, good levels of utilisation and fleet availability

• Speed and reliability

• Sector and geographic diversity

Technology • Strong relationships with OEMs and other partners

• Optimised fleet for varied rental environments

• New product design

Our business model is underpinned by a strong balance sheet

Base business is strong but slower more recently

6

Business grew strongly 2008 - 2012

benefiting from exceptional events

Since 2012 we have faced £100m

profit headwind

• Gradual off-hire in Japan / Military in

Power Projects

• Events in Local boosted ROCE in 2008,

2010 and 2012

Base business top line has grown 4%

since 2012 with margins and returns

maintained

Margins and returns in both

businesses are strong

Local Business ROCE

Group Trading Profit Bridge (£m)

0

100

200

300

400

500

2008 Japan/Military

London2012

BaseBusiness

2012 Japan/Military

London2012

BaseBusiness

2014

0%

10%

20%

30%

40%

2008 2010 2012 2014

Large Events

0%

10%

20%

30%

40%

2008 2010 2012 2014

Japan / Military

Power Projects ROCE

Note: Trading profit excludes pass through fuel

The market environment has changed

7

• Broader range of

competitors

• Competitors looking

for volume have lower

return expectations

• Libya

• Yemen

• Iraq

• Russia

195

105

2012 2015 2012 2013 2014 2015

Iron Ore CopperCrude Oil

2020 Projected Shortfall1

(GW)

Relative Commodity Prices

Lower EM GDP

has reduced

projected power

shortfall….but still

forecast to grow

6% CAGR

Competitive

environment has

intensified in

emerging

markets….but we

are still #1 or #2 in

all our markets

Commodity prices

have fallen from

their highs….we

are well placed for

the recovery &

other sectors

present

opportunities

Geopolitical and

security concerns

have increased….

harder to do

business but we

have many years

of experience

1: Projected power shortfall is defined as the gap between power supply and power demand

We need to evolve

8

0

2

4

6

8

10

12

14

0 1 2 3 4 5 6 7 8 9 10 11

Revenue (

£m

)

Depot Age (years)

Invested heavily in depot infrastructure

Local Business Revenue by Depot

Mixed success in technology

G3+

HFO

39%

36%

43%

38%

Cost of Sales Overheads

2010 2014

Our cost base has grown Costs as a % of revenue

Immature Sub-Scale

9

Listeningto our customers

Developing markets

Larger, longer term projects

Concentrated sector base

Power main product

Competition varied & increasingly present

Developed markets

Transactional, mature business

Diverse sector base

Multi product offering

Competition highly fragmented but stable

Reorganising to better focus on our customers

10

Rental Solutions Power Solutions Aggreko never let

us down… they’ve

done a fantastic job.

Michael Eavis

Founder of Glastonbury Festival

2014 Revenue £616m

• 7% CAGR between 2010-2014

• Trading margin 17%

• ROCE 22%

Industrial: 2014 Revenue £288m

• 15%* CAGR between 2010-2014


• ROCE 7%

Utility: 2014 Revenue £625m (ex fuel)

• 8% CAGR between 2010-2014


• ROCE 25%

* Excludes 2010 World Cup and Asian Games revenue

Note: ROCE is calculated by taking the operating profit on a rolling 12-month basis and expressing it as a percentage of the average net operating assets at 31

December, 30 June and previous 31 December.

11

Focusing on the market opportunity

Rental Solutions operates in growth markets

12

We have a leading competitive

position in our four main markets

(North America, Australia, UK,

Germany)

• Delivered strong performance in

key sectors where we have focused

attention

Further opportunity for growth

• Average GDP growth of c.2%* 2014-

2019 and key sectors growing ahead

of the market

• Gain market share and increase

sector penetration

• M&A and adjacencies

Expected Market Growth 2014-2019

Returns vs. Market Share

-5%

0%

5%

10%

North America UK Germany Australia

GDP Oil & Gas Mining Petrochem & Refining

France

UK

Australia

NorthAmerica

ItalySpain

Benelux

Germany

RO

CE

Relative Market Share

* Source: IMF; Includes: Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, UK, USA

Source: Aggreko, Bain

Source: IMF, IHS Global Insight

Power Solutions operates in three market segments

13

Market by Type of Customer Demand

• 20-30% reactive demand (wars/disasters,

utility emergencies, and droughts reducing

hydro output)

• 40-60% power shortfall linked utility

demand (bridging, peaking)

• Power shortfall conversion varies widely

between countries

More

proactive

demand

More

reactive

demand

Industrial • 10-20% industrials demand

- On grid industrials requiring backup for grid failure

- Off grid industrial projects, particularly mining and O&G

projects often in remote locations

• 37%* of Power Solutions revenue in 2014

Utility - Power Shortfall Linked • 40-60% power shortfall linked utility demand

• Power shortfall conversion varies widely between countries


Reactive Demand • 20-30% reactive demand (wars/disasters, utility emergencies,

and droughts reducing hydro output)


* Excluding pass through fuel

The market for Industrial customers is growing…

14

Presence in largest developing

countries

• Scale presence in countries with

high GDP growth

Linked to power shortfall where

customers cannot rely on the grid

Opportunity for growth

• Average GDP growth of c.5%*

2014-2019 and key sector growth

• Gain market share and

create markets

• Increased sector penetration

• New country entry

-1%

0%

1%

2%

3%

4%

5%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

MENA Brazil Russia Average otherwith presence

(ex India &China)

Averagewith no

presence

US

D b

n

2014 GDP (USD bn)

CAGR 14 - 19

* Source: IMF; Includes: Argentina, Brazil, Chile, China, Colombia, India, Middle East, Nigeria, Peru, Poland, Romania, Russia, Singapore, South Africa and Turkey

GDP of Developing Countries with Aggreko Presence

… and for Utility customers the power shortfall continues to increase

15

Demand is projected to grow faster

than supply

• Growth in shortfall has slowed in line

with slower GDP growth

• New generation has not prevented the

shortfall increasing

Expect c.6% Power Shortfall CAGR

Good market growth opportunity

• Sensitivity to GDP growth

• Market share gain

0

20

40

60

80

2008 2009 2010 2011 2012 2013 2014

GW

New Generation Capacity Shortfall

New Power Generation vs. Shortfall

Source: EIA; Platt's; Country Research; Economist; IMF; World Bank

2014 2015 2016 2017 2018 2019

Power Shortfall GDP (non OECD ex China)

Forecast Growth in Shortfall vs. GDP

CAGR

(14-19)

6%

5%

Source: EIA; Platt's; Country Research; Economist; IMF; World Bank

16

Delivering sustainable growth

Business priorities to deliver sustainable growth

17

We are enhancing our existing competitive advantages

Customer • Tailoring sales and service channels to customers

• Focusing on key sectors

• Pursuing adjacencies

• Evaluating bolt-on M&A opportunities

Technology • Working with our strategic partners to develop market leading products

• Strengthen and expand strategic partnerships

• Reducing the overall cost of power for our customers

Efficiency • Streamlining our cost base

• Optimising deployment of resources

• Improving processes and systems

18

Rental Solutions

Improving customer service

19

Rental Solutions

Global and national a/c management

Key sector focus

• Oil & gas, mining, petrochemical & refining

and events

Developing a digital offering for highly

transactional part of business

Adjacencies

• Temperature control

– Regional temperature control heads in place

– 80% power pull through

• Loadbanks offer a further opportunity

Customer

Global Account

Management

• Global & large customers

• Single point of contact

• Consistency of service

• Sector specific expertise

National Account

Management

• Large customers




Sector Focus • Tailored solutions


Digital • Online offering for transactional

customers

• Sales and service

Enhancing processes and systems

20

Rental Solutions

Deploy new systems and automation in the field

• Fleet optimisation and planning

• Remote monitoring of equipment (ARM, Louisiana;

deployment across Rental Solutions)

Enhance CRM database

• Customer requirements, history and service provision

Streamlining back office processes to increase efficiency

Efficiency

Bolt-on acquisitions a viable growth opportunity

21

Rental Solutions

Geographic, sector and adjacent product opportunities

Synergies from using our distribution network

Cross selling where adjacent products are added

Good track record of integrating businesses

we have bought

Strong balance sheet which affords us the flexibility

to move quickly

Customer

22

Power solutions

Optimising deployment of resources

23

Power Solutions

Reducing the cost base

• Removing duplication

• Rightsizing functional support

Optimising the depot footprint

• Assessing local presence

• Moving to a regional hub and spoke model to reduce overhead costs

Reducing the cost of equipment in some markets

• Equipment is over specified in a few markets

• Reviewing the use of locally assembled equipment

Improving efficiency of project delivery

• Different levels of site specification

• Reducing site mobilisation and operational costs

• Increased proportion of local workforce on site

Aggreko-related

GDP

Size of

Power Shortfall

GDP growth

rate

Propensity

to Rent

Rental

Rates

Local Regs

& Laws

Competitor

landscape

Criteria for Evaluation of

In-Country Presence

Efficiency

Using technology to reduce the total cost of power

24

Overall cost of power generation

is important

Small units provide flexibility,

mobility and modularity

Simple portfolio minimises

complexity

Strategic relationships support

product development

• Engine efficiency

0

25

50

75

100

125

150

175

200

CombinedCycle Gas

Turbine

Open CycleGas Turbine

AdvancedCoal

Next Gen Gas G3+

Mobile Permanent

Based on 100MW, 30 year project, running 6250 hours a year; assumes oil at $75/bbl

Source: Platts, EIA, Bain

Technology

Relative Cost of Power

($/MWh)

Power Solutions

Assessing other market opportunities

25

Power Solutions

Increasing gas availability is an opportunity

• Monetise stranded gas

• CNG/LNG is 60% premium to permanent power

(85% for diesel)

• CNG/LNG could expand the market

Emerging opportunities in renewables

• Solar/Diesel hybrid opportunities in remote areas

• Investigating how we can adapt energy storage for our

business model

Technology

Improving sales expertise and customer service

26

Power Solutions

Continue to build sales expertise for

complex projects

• Market approach

• Training and best practice sharing

• CRM investment

Global account management and key sector focus

• Utilities, oil & gas, mining, petrochemical & refining

Develop strategic partnerships

• Bridging to permanent power

• Service and repowering

Customer

Sales expertise • Increase technical capability

• Improve skills for complex

projects

• Best practice sharing

Global Account

Management

• Global & large customers



• Key sector focus

Partnerships • OEMs and other technology

providers

• Global bodies

27

Group

Streamlining our cost base

28

Group

Reorganisation will remove duplication

• Regional structure led to duplication

• Streamlining our processes, improving customer service

Improving procurement practices

• New procurement organisation

• Defining global vs local purchasing

Improving project site efficiency

Identified £80m in savings

• One off cash costs of around £30m

• Expect to fully deliver in 2017

• Balance reinvestment for growth with margins and returns

Efficiency

Current

behavioursCommitted

Passionate

Fast paced

Can-do attitude

Customer focused

A high performance organisation

29

Group

Safety

• Enhancing Orange Rules

Training and developing our people

• Increasing expertise

• Technical leadership

Enhancing our culture

• Strong and unique

• Highly valued internally

• Nurture and develop

Aligning incentives and behaviours with business priorities

Programme Management Office todrive delivery

30

Customer

Efficiency

Technology

2H 2015 1H 2016 2H 2016

Tailoring sales and service channels

Pursuing adjacencies and evaluating bolt-on M&A opportunities

Focusing on key sectors

Reducing the cost of power

Investing in product design

Optimising deployment of resources

Streamlining our cost base

Improving processes and systems

1H 2017

Strengthen and expand strategic partnerships

31

Financial Implications

Aggreko is a growth business

32

With a strong focus on margins and returns

Revenue

• Markets are forecast to grow between 2% and 6%

• We expect to grow faster than our markets over the medium term

Margins and Returns

• Self help measures identified to help mitigate macro headwinds

• Savings identified of £80m to be delivered in 2017

• One-off cash cost to achieve of c.£30m

• Balance reinvestment for growth with margins and returns

• Group margins and returns of around 20% in the medium term

• 2016 year of change in the business; margins and returns lower in

the short term

Capital Discipline will be maintained

• We will continue to be disciplined and flexible in our use of capital

NOTE: * Reported twice a year; **Reported annually

Progress and performance

33

Business Unit Key Initiatives Relevant KPIs

Rental Solutions • Tailoring sales and service channels to

customers

• Increasing market penetration

• Improving processes and systems

• Revenue growth*

• Trading margin*

• ROCE*

• Fleet utilisation*

• Customer satisfaction**

• Safety**

Power Solutions • Streamlining our cost base

• Optimising depot network

• Optimal deployment of resources

• Investing in product development

• Reducing the cost of power

• Revenue growth*

• Trading margin*

• ROCE*

• Fleet utilisation*

• Order book*

• Order intake*

• Off-hire rate*

• Customer satisfaction**

• Safety**

How we plan to use our capital

34

Capital allocation framework

Invest for

growth

Bolt-on M&A

opportunities

Sustainable

ordinary

dividend

Return surplus

cash to

shareholders

Maintain strong balance sheetLeverage c.1x net debt/EBITDA

Likely to be a more capital intensive in the short term as we invest for growth

Building the future

35

Our business model is strong and unique

We see opportunities for growth in all of

our markets

Plans in place to execute on strategy and

deliver growth

• Customer

• Technology

• Efficiency

We expect to grow ahead of our markets

and deliver attractive margins and returns

36

Q&A

37

Appendix

There is opportunity for growth in all our markets

38

RENTAL

SOLUTIONS

POWER SOLUTIONS

Industrial Utility

Market Drivers • GDP growth

• Propensity to rent

• Commodity cycle

• GDP growth

• Propensity to rent

• Commodity cycle

• Power shortfall

• GDP growth: 5% threshold

for conversion

Aggreko

Growth Drivers


• Sector penetration

• M&A and adjacencies


• Market creation

• Sector penetration

• New market entry


• Increase conversion rates as

cost of generation falls

Competitive

Environment

• Stable • Increased competition • Increased competition

Market Growth

Rate

• 2% • 5% • 6%

Market engagement framework

39

Activity Timing Content included

Full Year Results March • Revenue growth

• Fleet utilisation

• Order book

• Order intake

• Off-hire rate

• Customer satisfaction

• Emissions

• Trading margins

• ROCE

• Staff turnover

• Safety (FAR)

Half Year Results August • Revenue growth

• Fleet utilisation

• Order book

• Order intake

• Off-hire rate

• Trading margins

• ROCE

Trading Update April (with AGM), November • Short update on current trading conditions

Investor briefings Ad hoc, at least annually • Short briefing to educate on parts of the business

Capital Market Days At least biannually • In-depth education and site visits for parts of the business

• Start with Rental Solutions in 2016

Contract Announcements Ad-hoc • New contracts over 100MW in size and six months

in duration

Disclaimer

40

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.

Building the future - Aggreko/media/Files/A/... · Combined Cycle Gas Turbine Open Cycle Gas Turbine Advanced Coal Next Gen Gas G3+ Mobile Permanent Based on 100MW, 30 year project,

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