Expect to be at the upper end of previous guidance

TRADING UPDATE 

17 NOVEMBER 2020

Key markets recovering, full year profit expected to be at the upper end of previous guidance

Note: Today we have also published a strategic update on our approach to the energy transition. Details to join the webcast for analysts and investors at 08:30am can be found on the Aggreko investor relations website.   

This trading update covers the period from 1 January 2020 to 30 September 2020. Unless otherwise stated, figures quoted in this statement are for the nine months ended 30 September 2020.

Underlying Group revenue reflects two quarters of COVID-19 and the lower oil price

Underlying Group revenue (excluding the impact of currency and pass-through fuel) for the period was down 14% on last year, driven by the significant impact of the pandemic in the last two quarters and the lower oil price. Reported revenue was down 15%.

Rental Solutions - Improving momentum in recovering markets

We have seen some recovery in most of our markets with activity levels and equipment on hire continuing to increase through the third quarter. Underlying revenue for the nine months declined 18%, in line with the first half. On a quarter by quarter basis, revenue in the third quarter itself was down 18%, an improvement on the 25% year on year decline in the second quarter.

• North America enjoyed a stronger third quarter, supported by significant hurricane-related work, mainly in Louisiana, and utility work in California, with underlying revenue down 19%, flat versus the first half. Quarter by quarter performance has improved with revenue down 19% in the third quarter, following a 30% decline in the second quarter. 
• Continental Europe underlying revenue for the nine month period was down 19%, compared to 21% in the first half, despite the impact of a second wave of the pandemic across the continent.
• Northern Europe underlying revenue for the nine month period was down 24%, just below the half year decline of 23%.
• Australia Pacific was down 5% for the nine month period, in line with the first half as activity in the third quarter increased in part due to the successful commissioning of the Granny Smith mine project in Western Australia. This is one of the world's largest hybrid microgrids utilising solar, battery storage and gas technology.

Power Solutions Industrial - Growth in Africa and signs of recovery in Latin America and Eurasia

The impact of the pandemic and the low oil price environment continued to be felt through the third quarter, with underlying revenue for the nine months down 12%, versus 4% in the first half. Excluding revenue earned from the 2019 Rugby World Cup and the Tokyo Olympics in both 2019 and 2020, underlying revenue declined 10%, compared with 7% at the half year. 

• The Middle East continued to see lower activity levels in events and oil & gas, with revenue down 13% for the nine month period, compared to 8% in the first half. 
• Asia saw pandemic-related shutdowns across Singapore and India which drove underlying revenue down 21% for the nine month period, versus 13% in the first half.
• Latin America underlying revenue decline of 11% for the nine month period, was a slight improvement on the first half.
• Eurasia underlying revenue decline for the nine months was at first half levels of 16%.  
• Africa underlying nine month revenue grew 9%, driven by mining contracts in Mali and Mauritania, although a prior year off-hire in Egypt meant growth was lower than the first half.

Power Solutions Utility - Extensions offset delays to new project mobilisations

Power Solutions Utility underlying revenue was down 6% for the nine months, an improvement on the first half decline of 7%. The year on year reduction reflects prior year off-hires in Benin and Brazil, together with the planned rate reduction in the Ivory Coast, as reported at the half year. Average megawatts on hire were down 9% at 2,218 MW (2019: 2,445 MW), as new project mobilisations have been delayed. These mobilisation delays have been somewhat offset with a lower year-to-date off-hire rate of 19% (2019: 23%).

Continuing to deliver strong cash generation

The Group continues to maintain its strong liquidity position, with an operating cash inflow for the nine months of £358 million. This was supported by a working capital inflow of £90 million, resulting from our continued focus on cash collections. Net debt at 30 September 2020 was £469 million, £257 million lower than the prior year.

Profit guidance for 2020 at the upper end of the range

We are encouraged by the increased levels of activity we are seeing and, despite continuing uncertainties surrounding the pandemic and the absence of our usual second half seasonality, we expect to deliver full year pre‑exceptional profit before tax at the upper end of our guided range of £80 to £100 million.  The Group's expected effective tax rate remains at around 45%. Our full year fleet capital expenditure is expected to be slightly below £200 million, as previously indicated.

Tokyo Olympics

Our work for the Tokyo Olympics continues to progress well, and we remain confident of delivering the Games to the revised schedule. We are also making good progress in our discussions with TOCOG on the necessary contract revisions to reflect both scope changes and the impact of the delay of the Games into 2021.

Outlook for 2021

There is continuing uncertainty as to the speed of the market recovery from the pandemic and the likely range for the oil price in 2021. However, our trading trends indicate increases in activity levels for our more transactional rental business and an improved outlook on the timing of our larger project mobilisations within Power Solutions.  

Based on our current assumptions of a continued gradual economic recovery, a relatively stable oil price, the Tokyo Olympics proceeding as planned at an increased overall contract value, and the resumption of the Group's all-employee annual performance bonus scheme, we expect to deliver profit before tax in 2021 in the range £170-190 million.