Introduction to Aggreko. March 2016

Transcription

1 Introduction to Aggreko March 2016

2 Overview Investment Case Strategy Our History Financial Information Where We Operate Shareholder Information Our Equipment Further Information Rental Solutions Power Solutions 2

3 Investment Case Twangiza Mine, DRC 3

4 The leading global provider of modular, mobile power and related solutions 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 units: Rental Solutions rents power and temperature control equipment to a broad range of users across developed markets Power Solutions sells electricity, supplying and operating utility power plants to government utilities and other key sectors in emerging markets 2015 Highlights (pre exceptional items) Revenue 1,561m PBT 252m D-EPS 71.7p DPS 27.1p ROCE 16% Power Fleet 9,818 MW Employees 7,300 4

5 Reasons to invest in Aggreko Market Structural power shortfall in emerging markets Increased sector penetration in developed markets Diversified product and sector portfolio Competitive advantage People & culture Expertise Scale Technology Strategy Clearly defined business priorities Customer, Technology, Efficiency Path to return to growth Focused on margins and returns Shareholder returns Priority is to invest for long term growth Through self-help we will balance revenue growth with support to margins and returns 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 Acquisition of ICS Group in Canada 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, UAE 8

9 A global business Serving customers in c.100 countries at any time Rental Solutions Revenue 618m Trading Profit 100m Service Centres & Offices 128 Power Fleet (MW) 2,225 Temperature control fleet (MW) 1,017 Power Solutions Revenue (ex fuel) 883m Trading Profit (ex fuel) 171m Service Centres & Offices 76 Power Fleet (MW) 7,593 Temperature control fleet (MW) 279 Industrial 299m Utility (ex fuel) 584m 9

10 Balanced geographic spread Revenue by geography 22% 19% 24% North America Europe Middle East Revenue 1,501m FY15 Group Revenue (excl. passthrough fuel) 14% 19% 10% 14% Africa Asia & Australasia Latin America 10

11 Our Equipment 11

12 Narrow product range Product Type Power Gas & diesel generators 5KW- 2MW; ancillaries. Fleet Size Key Regions FY15 Revenue c. 20,700 units All 1,036m Temperature Control Chillers; heaters; air conditioners; air handlers; de-humidifiers; cooling towers. c. 5,100 units All 135m Oil-free Air Electric and diesel oil-free air compressors. c. 500 units North America 28m 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 15% more power than a standard G3 Optimised for Utility duty materially improved, market-leading fuel consumption c. 75% of original cost 13

14 Rental Solutions Houston Refinery, USA 14

15 Rental Solutions Key facts Average contract value: 15k Average contract duration: 45 days FY15 Revenue by customer type Petrochemical and refining Average installation time: Employees: 2,700 Power fleet (MW): 2,225 Temperature control fleet (MW): 1,017 Hours - days Service Centres: 128 across 19 Countries Application: Power, temperature control and oil-free compressed air Oil and gas Events Utilities Services Manufacturing Contracting Construction Other 16% 5% 5% 7% 8% 10% 20% 11% 18% Revenue 618m (41% of Group excl. fuel) Keys to our competitive advantage Broad range of equipment Ability to deploy quickly Local reputation and brand 15

16 Major events Commonwealth Games 2014, Glasgow, UK 16

17 Commercial Manufacturing, USA 17

18 Shipping Belfast 18

19 Oil & Gas North America 19

20 ROCE Rental Solutions operates in growth markets We have a leading competitive position in our four main markets (North America, Australia, UK, Germany) Expected Market Growth % Delivered strong performance in key sectors where we have focused attention 5% 0% North America UK Germany Australia Further opportunity for growth Average GDP growth of c.2%* and key sectors growing ahead of the market Gain market share and increase sector penetration M&A and adjacencies -5% GDP Oil & Gas Mining Petrochem & Refining Returns vs. Market Share Germany UK Source: IMF, IHS Global Insight North America Spain France Benelux Australia Italy Relative Market Share Source: Aggreko, Bain * Source: IMF; Includes: Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, UK, USA 20

21 Rental Solutions 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 Global Aggreko regional Hertz, URI, Sunbelt, Speedy Hire, CAT We believe that we have a c.25% market share Hundreds of national Thousands of local small businesses 21

22 Rental Solutions 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 22

23 Power Solutions Utility, Mozambique 23

24 Power Solutions Key facts Average contract value: Average contract duration: Average installation time: Employees: 4,600 Power fleet (MW): 7,593 Temperature control fleet (MW): 279 Service centres: 76 Application: Revenue 883m (59% of Group excl. fuel) From 20k in Industrial to 5m per annum in Utility A few months in Industrial to 1 year in Utility Days - months Power and temperature control in Industrial Base-load and peakshaving power in Utility FY15 Revenue by customer type (excl. fuel) Oil & Gas Utilities Mining Events Other 5% 6% 18% 12% 59% 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 24

25 95MW gas Myanmar 25

26 40MW diesel Guam 26

27 Industrial Oil Refinery, Tunisia 27

28 Oil & Gas Brazil 28

29 Power Solutions market drivers Demand Demand in developing countries is growing; growth 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. 29

30 USD bn Power Solutions Industrial market is growing 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%* and key sector growth Gain market share and create markets Increased sector penetration New country entry GDP of Developing Countries with Aggreko Presence 3,500 3,000 2,500 2,000 1,500 1, GDP (USD bn) CAGR % 4% 3% 2% 1% 0% - MENA Brazil Russia Average other Average with presence (ex India & with no presence China) -1% * Source: IMF; Includes: Argentina, Brazil, Chile, China, Colombia, India, Middle East, Nigeria, Peru, Poland, Romania, Russia, Singapore, South Africa and Turkey 30

31 GW Power Solutions Utility market grows as the power shortfall continues to increase 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 Forecast Growth in Shortfall vs. GDP Power Shortfall GDP (non OECD ex China) CAGR (14-19) 6% 5% Good market growth opportunity Sensitivity to GDP growth Market share gain New Power Generation vs. Shortfall 80 Source: EIA; Platt's; Country Research; Economist; IMF; World Bank New Generation Capacity Shortfall Source: EIA; Platt's; Country Research; Economist; IMF; World Bank 31

32 Power Solutions 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% 32

33 Power Solutions 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 33

34 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 Solutions Utility Gas Revenue $m

35 Strategy Events, UK 35

36 Opportunity for growth in all our markets RENTAL SOLUTIONS Industrial POWER SOLUTIONS 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 Market share gain Sector penetration M&A and adjacencies Market share gain Market creation Sector penetration New market entry Market share gain Increase conversion rates as cost of generation falls Competitive Environment Stable Increased competition Increased competition Market Growth Rate 2% 5% 6% 36

37 Business priorities on track to deliver sustainable growth We are enhancing our existing competitive advantages Priority Status Customer Tailor sales and service channels to customers Focus on key sectors Pursue adjacencies Evaluate bolt-on M&A opportunities Initiatives underway covering account management, market / sector specific strategies and sales expertise Plan to enhance our CRM and provide a digital platform for our customer ICS acquisition completed; building pipeline of M&A opportunities Technology Work with our strategic partners to develop market leading products Strengthen and expand strategic partnerships Reduce the overall cost of power for our customers Developing strategic relationships to support product development More fuel efficient gas engine in field trial Plan to further improve efficiency of the G3+ diesel engine Continue to evaluate HFO product offering Efficiency Streamlining our cost base Optimising deployment of resources Improving processes and systems On track to deliver 80m of cash savings by 2017 Deploying new systems to optimise fleet utilisation, fleet planning and allow remote monitoring Streamlining back office processes Improving efficiency of sites and project delivery 37

38 Improving customer service Rental Solutions Global and national a/c management Key sector focus Oil & gas, mining, petrochemical & refining and events Global Account Management Global & large customers Single point of contact Consistency of service Sector specific expertise Customer Developing a digital offering for highly transactional part of business Adjacencies National Account Management Large customers Single point of contact Consistency of service Sector specific expertise Temperature control Regional temperature control heads in place 80% power pull through Loadbanks offer a further opportunity Sector Focus Tailored solutions Sector specific expertise Digital Online offering for transactional customers Sales and service 38

39 Enhancing processes and systems Rental Solutions Deploy new systems and automation in the field Efficiency 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 39

40 Bolt-on acquisitions a viable growth opportunity Rental Solutions Geographic, sector and adjacent product opportunities Customer 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 Acquisition of ICS in line with bolt-on M&A strategy 40

41 Optimising deployment of resources 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 Criteria for Evaluation of In-Country Presence Aggreko-related GDP Size of Power Shortfall GDP growth rate Propensity to Rent Rental Rates Competitor landscape Local Regs & Laws Efficiency 41

42 Using technology to reduce the total cost of power Power Solutions 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 Relative Cost of Power ($/MWh) Mobile Combined Cycle Gas Turbine Permanent Open Cycle Gas Turbine Advanced Coal Next Gen Gas G3+ Based on 100MW, 30 year project, running 6250 hours a year; assumes oil at $75/bbl Technology Source: Platts, EIA, Bain 42

43 Assessing other market opportunities Power Solutions Increasing gas availability is an opportunity Technology 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 43

44 Improving sales expertise and customer service 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 Sales expertise Increase technical capability Improve skills for complex projects Best practice sharing Global Account Management Global & large customers Single point of contact Consistency of service Key sector focus Partnerships OEMs and other technology providers Global bodies Customer 44

45 Streamlining our cost base Group Reorganisation will remove duplication Efficiency 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 35m On track to deliver 80m savings by 2017 Balance reinvestment for growth with margins and returns 45

46 Aggreko is a growth business 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 by 2017 One-off cash cost to achieve of c. 35m 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 46

47 Financial Information Wind Farm, Ireland 47

48 Solid financial performance in face of challenging market conditions Revenue drop contained in face of challenging markets Margin pressure from low oil price, Bangladesh contract extension and debtor provisions Dividend maintained in line with 2014 Exceptional charge of 26m ( 16m cash) to deliver first phase of business priorities m (pre-exceptional items) FY15 FY14 Reported Change Underlying Change (1) Revenue 1,561 1,577 (1)% (3)% Revenue excl. pass-through fuel 1,501 1,529 (2)% (3)% Trading profit (12)% (14)% Operating profit (11)% Net interest expense (23) (21) (8)% Profit before tax (13)% Tax (69) (74) 7% Profit after tax (15)% Diluted earnings per share Dividends per share (declared) 71.7p 82.5p (13)% 27.1p 27.1p -% Net Debt at period end (1) Underlying excludes pass-through fuel and currency translation. m (post-exceptional items) FY15 Trading profit 244 Profit before tax 226 Profit after tax 162 Diluted earnings per share 63.5p 48

49 2015: Revenues of 1,501m (ex-fuel) from three product families Why Power & Temperature Control? Mission critical: availability, service and reliability more important than price => strong margins Fleet fungible between sector and geography => can operate as a global business Rental product is different to purchase product => differentiated offering Long life of equipment => 10-year old equipment can get same rate as new Power Temperature Control Oil-free Air Rental revenue 1,199m (c.80% of total ex-fuel revenue) 1,036m / 87% 135m / 11% 28m / 2% Gross Rental Assets 2,778m 2,337m / 84% 276m / 10% 71m / 3% Fleet also includes ancillaries with a gross value of 94m / 3% 49

50 Diverse geographic spread and complimentary business models Revenue (ex. fuel) by Business ( m) Trading Profit (ex. fuel) by Business ( m) 1, ,450 1,350 1,250 1,150 1, Rental Solutions Power Solutions Total Group Rental Solutions 50 Power Solutions Total Group

51 Attractive returns on capital despite challenging markets Returns are attractive, and reflect relative risk profiles 2015 ROCE diluted by challenging Power Solutions environment and the oil and gas slowdown in North America Power Solution peak return in 2011 driven by Japan & Military Return on Capital Employed % 40% 35% 30% Rental Solutions Power Solutions Group 25% 20% 15% 10%

52 Shareholder Information Aggreko Service Centre, Jebel Ali 52

53 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 Maintain dividend cover of c.3x earnings. Market information Listing: Ticker: Market Cap: ISC: London AGK:LN c. 2.2bn 256m Share price history Shareholder returns ( m) Our Shareholders Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 AGK FTSE100 FTSE350 Bus. Serv % 31% 9% 6% UK N America Europe (ex UK) Rest of World * Past performance is no indication of future performance; data correct at January

54 Further Information Refining, USA 54

55 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 Investor Relations Contact All data correct as of 31 December 2015 Tom Hull, Head of Investor Relations unless otherwise stated Stock market data from Reuters, January 2016 unless otherwise stated 55

56 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. 56