1H18 results and strategic progress update

Transcription

1 1 AUGUST H18 results and strategic progress update Half year ended 30 June

2 Introduction Chris Weston CEO 2

3 Agenda Headlines 1H18 results review Strategic priorities Financial performance drivers Closing remarks 3

4 Headlines Financial results Encouraging H1 results Full year guidance unchanged Strategic progress Our 2015 strategy has evolved to reflect changing markets Execution of our strategy has strengthened the Group s foundations and is beginning to drive growth Detailed plans, focused on operating margin and capital efficiency and supported by cost savings of 50m, to deliver improved financial returns We expect to deliver ROCE in the mid teens in 2020, with potential for further improvement thereafter 4

5 1H18 results review Heath Drewett CFO 5

6 Group summary Encouraging H1 results m pre-2017 exceptional items 1H18 1H17 CHANGE Movement CHANGE excluding pass-through fuel and currency Revenue % 14% Operating profit (4)% 8% Net interest expense (17) (16) (8)% Profit before tax (7)% Taxation (18) (18) - Profit after tax (10)% Diluted earnings per share (11)% Dividend per share Operating margin 9% 10% (1)pp ROCE 11% 12% (1)pp Good underlying growth in revenue and operating profit No exceptional items in 2018 (2017: 10m) Effective tax rate of 31% Dividend in line with

7 Business performance REVENUE (% OF GROUP excl. pass-through fuel) 50% Rental Solutions Strong growth and improved margins pre exceptional items 1H18 1H17 CHANGE Movement CHANGE excluding currency Revenue ( m) % 32% Operating profit ( m) % 192% Operating margin 11% 5% ROCE (rolling 12 month) 16% 8% Fleet capital expenditure ( m) UTILISATION at 30 June (MW) 1H18 61% % REVENUE BY SECTOR 1H18 Business services & construction Petrochemical & refining 17% 19% 1H17 52% Oil & Gas Utilities 11% 12% Events 9% Manufacturing Mining 5% 7% Other 20% 7

8 Business performance REVENUE (% OF GROUP excl. pass-through fuel) 29% Power Solutions Industrial Profit impacted by Middle East headwinds pre exceptional items 1H18 1H17 CHANGE Movement CHANGE excluding currency Revenue ( m) % 15% Operating profit ( m) (24)% (15)% Operating margin 11% 14% ROCE (rolling 12 months) 10% 10% Fleet capital expenditure ( m) UTILISATION at 30 June (MW) 1H18 70% % REVENUE BY SECTOR 1H18 Oil & Gas Events 16% 39% 1H17 69% Mining Business services & construction 11% 10% Utilities 8% Manufacturing Petrochemical & refining Other 7% 2% 7% 8

9 Business performance REVENUE (% OF GROUP excl. pass-through fuel) 21% UTILISATION at 30 June (MW) Power Solutions Utility Performance reflects known contract off-hires pre exceptional items & excluding pass-through fuel 1H18 1H17 CHANGE Movement CHANGE excluding passthrough fuel and currency Revenue ( m) (25)% (15)% Operating profit ( m) (62)% (55)% Operating margin 8% 17% ROCE 7% 16% Fleet capital expenditure ( m) This segment now includes only Utility customer projects 1H18 1H17 65% 75% 9

10 Cash flow m 1H18 1H17 EBITDA Working capital (68) (51) Cash flows relating to prior period exceptionals (4) (10) Other 8 15 Operating cash flow Tax (33) (33) Net interest (18) (17) Acquisitions (33) (28) Purchase of fixed assets (95) (128) Other fixed asset movements - 4 Free cash flow (19) (18) Dividends (45) (45) Changes in equity (7) - Net cash flow (71) (63) Exchange (18) 29 Movement in net debt (89) (34) Net debt (741) (683) Working capital outflow of 68m Capital expenditure reduced by 33m as we increase our focus on utilisation Net debt/ebitda of 1.4x 10

11 Working capital performance In recent periods receivables have been the key driver, with some improvement in payables WORKING CAPITAL BREAKDOWN ( m) 1, m 770m 656m m 238m 232m m 740m FY16 H117 FY17 H (299)m (361)m (410)m Inventory Receivables Payables (346)m 11

12 Actions in place to tackle receivables Power Solutions Monthly cash collection targets by region (and customer on major projects) Augmented and structured stakeholder engagement Sales agent effectiveness measured and changes made New regional senior positions created (above project managers) to increase focus and provide escalation path Rental Solutions Monthly billing and collection targets by region Regular execution review of top debtors and unbilled accounts to agree remedial actions Temporary resources added to clear unbilled backlog and support collections Tighter enforcement of contract provisions, including application of late payment penalties 12

13 Utility Invoicing/receipts performance Improving performance as our actions begin to take effect POWER SOLUTIONS UTILITY ($m) Invoicing Receipts Jan Feb Mar Apr May Jun

14 Rental Solutions Trade receivables performance Steady improvement since the close of 2017 Month by month improvement across Rental Solutions, with improved collections making inroads into the overall trade receivables position TRADE RECEIVABLES INCLUDING UNBILLED ($m) Trade receivables/ revenue % 30% 25% 20% 15% 10% 50 5% 0 H117 FY17 Jan Feb Mar Apr May Jun % 14

15 Inventory The next area of focus Power Solutions Clear target to reduce inventory levels in 2018 Central team established to review and approve all new orders (to confirm the need ) Safety stock levels set by the central team Identification and movement of excess inventory across the regions to meet business needs Centrally managed global buyback procedure with key suppliers Regular stock counts and write-off reviews Rental Solutions Recently begun inventory system regional roll-out System automation of stock categorisation (9 box definitions: fast moving, slow moving, non moving etc.) to enable greater visibility and support inventory sharing Creation of virtual inventory sharing warehouse for depots/regions to identify stock availability prior to placing new orders Consignment stock arrangement established with key supplier Scrappage/third party sale process for surplus items, where no supplier buyback option exists 15

16 On track to deliver our 2018 guidance Growth in Rental Solutions and Industrial expected to offset Utility headwinds in the full year Expected effective tax rate of 31% Full year fleet capex down c.10% on prior year Working capital improves to small inflow in H2 Net debt/ebitda to reduce to x 2018 PBT expected to be in line with 2017, excluding currency effects 16

17 Strategic priorities Chris Weston CEO 17

18 2015 strategic priorities: A reminder CUSTOMER TECHNOLOGY EFFICIENCY Priority Tailor sales and service channels Focus on key sectors Pursue adjacencies Evaluate bolt-on M&A opportunities Priority Work with our strategic partners to develop market leading products Strengthen and expand strategic partnerships Reduce the overall cost of power for our customers Priority Streamlining our cost base Optimising deployment of resources Improving processes and systems 18

19 Group performance held back We have faced significant challenges as we have executed our strategy OPERATING PROFIT ( m) NEGATIVE DRIVERS Repricing and off-hires of legacy Utility contracts Customer liquidity increasing outstanding receivables Impact of oil price fall on North American oil & gas sector Rental Industrial Utility 19

20 Reviewing our strategy Comprehensive, business led exercise, supported by external consultants Progress in the strategic priorities has built a firm foundation and is beginning to drive growth Re-examined our strategy, the markets we operate in and the impact of renewables and storage Markets have evolved and our strategy has evolved with them Implementing detailed plans for the continued execution of the strategy Determined revised financial expectations 20

21 Our approach to the markets We have three inter-related, but distinct businesses Rental Solutions Focus on high value key sectors Deliver sector customer needs Build sector specific capability Technical expertise Sales approach Improve cost position Power Solutions Industrial Focus on natural resource & industrial sectors Low cost operating model Optimise fleet allocation and operating model Efficient hub & spoke depot network Power Solutions Utility Focus on utilities in emerging markets Flexible, innovative solutions to infrastructure issues Lowest cost of energy Efficient technology and operations 21

22 Our evolved strategy We have four clear strategic priorities Customer focus Technology investment Capital efficiency Expert people Being particular about the sectors we target Developing competitive configurable products Being mobile & modular Living Always Orange Offering specialist solutions Smarter use of connected systems & data analytics Getting the very maximum out of our assets Nurturing our full potential Being simple to do business with Integrating renewable & storage technology Striving for the most competitive cost base Staying safe and professional at all times 22

23 Customer focus TRANSLATING PRIORITIES INTO DETAILED PLANS Continued focus on key sectors Focus and technical capability: increase in higher value, complex solutions Hybrid solutions (off grid, mining) Customer focus Being particular about the sectors we target Offering specialist solutions Being simple to do business with Sales & marketing discipline and process enhancements Segmentation and channel development (telesales and ecommerce) Real time pricing governance System investment to improve customer experience End to end systems being deployed Remote monitoring and data analytics Improved customer service and product development 23

24 Results Presentation August March

25 Technology investment TRANSLATING PRIORITIES INTO DETAILED PLANS Continued focus on reducing the total cost of energy Fuel efficiency, hybrid solutions and emissions Complex sector specific applications Remote monitoring platform and data analytic capability Technology investment Developing competitive configurable products Smarter use of connected systems & data analytics Integrating renewable & storage technology Hybrid solutions and storage integration Integrating renewables, storage and thermal Deploy to existing fleet/sites to improve efficiency and reliability 25

26 Capital efficiency TRANSLATING PRIORITIES INTO DETAILED PLANS Centralised fleet management to drive utilisation Remote monitoring and data analytics Reduce maintenance costs Improve utilisation Deploy Rental Solutions systems into Industrial Back office and process efficiencies Capital efficiency Being mobile & modular Getting the very maximum out of our assets Striving for the most competitive cost base Cost reduction program to deliver 50m of savings Reduction in working capital Cost focus is key in Power Solutions Utility Addressing receivables and costs to ensure competitiveness 26

27 Improving outlook into 2019 and beyond Comprehensive business led review now completed We are already well advanced to respond to changing demand Customer focus and systems Technology Focus on operational excellence as well as growth Detailed plans to improve capital efficiency Fleet asset investment Working capital Expect to deliver ROCE in the mid-teens in 2020 Culture change driving an improved commercial understanding of what delivers value 27

28 Financial performance drivers Heath Drewett CFO 28

29 Improving ROCE ROCE is our key measure of performance OPERATING PROFIT Volume growth Pricing Operational efficiency CAPITAL EMPLOYED Working capital Capital investment Utilisation Plans to improve all elements 29

30 Growing returns: Rental Solutions Continued improvement KEY DRIVERS: 1 Sector focus and specialisation 16% Higher value, complex solutions 2 Remote monitoring & new systems 3 Inventory systems 4 5 Utilisation 6 Introduce e-commerce 1H Operating profit Working capital Fixed assets 30

31 Growing returns: Industrial Continued improvement KEY DRIVERS: 1 Sector focus and specialisation Higher value, complex solutions 2 3 Remote monitoring & new systems 3 10% Inventory management 4 5 Utilisation 1H Operating profit Working capital Fixed assets 31

32 Rental & Industrial actions Volume growth, improved pricing and operational efficiency GROWTH AND PRICING Embedding our dedicated sector sales resources Focus on specialty products and more complex solutions to support improved pricing New systems to enable real-time pricing and improved governance Plans to improve all metrics Introduction of e-commerce platform and telesales to service more transactional market Hybrid solutions provide new growth opportunities OPERATIONAL EFFICIENCY New systems to support the customer journey and improve efficiency Remote asset monitoring to drive down unplanned maintenance costs Introduction of data analytics to reduce costs of regular servicing Global fleet management 32

33 Growing returns: Utility Set to improve returns through self-help measures 7% KEY DRIVERS: Sales discipline to drive operating profit with focus on margin, not growth Cost reduction program Billing & collections under spotlight and part of sales process 4 Inventory management and systems investment 1H Optimising utilization, capital expenditure discipline Operating profit Working capital Fixed assets 33

34 Utility actions Capital efficiency and cost reductions REDUCE WORKING CAPITAL ROFIT Continue actions already in place (referenced earlier) DRIVE UTILISATION All capital expenditure requires CEO/CFO approval New product build programme limited to G16 upgrades in the short term Global fleet management and deployment Group Operations Council established to oversee and govern fleet operations Asset monitoring to improve site efficiency and remove fleet redundancy Plans to improve all metrics Surplus fleet transfers to Rental and Industrial Solutions to support volume growth REDUCE COSTS Planned maintenance cost reduction through introduction of condition-based maintenance regimes Procurement savings through extension of spare parts supplier base Optimisation of fleet logistics and project manning Review regional office and support function locations Improve sales productivity through training and development 34

35 Improving Group returns Generating mid-teens returns in 2020 Mid-teens % RENTAL & INDUSTRIAL Operating profit improvement the key driver Some uplift in working capital and fixed asset ratios 11% 1H UTILITY Broader base of improvement: Cost reductions Working capital Fixed asset utilisation Self-help measures are key Operating profit Working capital Fixed assets 35

36 Closing remarks Chris Weston CEO 36

37 Summary The first half results are encouraging: we are on track to achieve our full year guidance Our 2015 strategy has evolved to reflect changing markets Execution of our strategy has strengthened the Group s foundations and is beginning to drive growth Detailed plans, focused on operating margin and capital efficiency and supported by cost savings of 50m, to deliver improved financial returns We expect to deliver ROCE in the mid teens in 2020, with potential for further improvement thereafter We have built a strong platform to improve returns 37

38 Aggreko is a customer focused specialist provider of power, temperature control and energy services on a global basis. These services are based on modular and mobile equipment operated on a digital platform with a market leading integration capability. Results Presentation August March

39 Appendix 39

40 Foreign exchange impact FY17 average FX RATES July 2018 FYF average FY17 actual REVENUE ( m) FY17 Restated at July 2018 FYF average rates Variance % Variance US Dollar (34) (4)% Euro % Australian Dollar (4) (6)% Argentinian Peso (22) (35)% Brazilian Real (31) (15)% Canadian Dollar (1) (4)% Russian Rouble (7) (9)% Other (12) (5)% Total revenue 1,698 1,589 (109) (6)% Total operating profit (22) (10)% Note: UAE Dirhams included within US Dollar as it is pegged to the US dollar; Argentinian Peso includes Power Solutions Utility contracts which are pegged to the US Dollar but paid and reported in Argentinian Pesos. 40

41 Disclaimer The information contained in this presentation has largely been extracted from the Results Announcement for the six months ended 30 June 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. 41