logo-loader
RNS
viewAggreko

Aggreko PLC - COVID-19 Update

RNS Number : 1231H
Aggreko PLC
23 March 2020
 

 

           

AGGREKO PLC

23 MARCH 2020

 

 

 

COVID-19 UPDATE

 

Given the current and rapidly changing developments regarding COVID-19, Aggreko plc issues this update.  

 

Our people

Since the start of the COVID-19 outbreak our primary concern has been the welfare of our people, their families and the local communities in which we work.  We have implemented several measures to protect our people and engaged in frequent communication to help them respond safely to the spread of the virus.

 

While we have not closed offices or depots around the world, we are supporting an increasing number of our people in working from home.  We will continue to follow developments closely and will take further action as appropriate.

 

Financial position

We have entered this period of uncertainty with a strong financial position.  As at the end of February the Group had immediately available liquidity of £606 million, comprising £66 million of available cash, £458 million of undrawn committed facilities arranged on a bilateral basis with eight international banks and £82 million of undrawn uncommitted facilities.  The financial covenants attached to the committed facilities are that EBITDA should be no less than 4 times interest and net debt should be no more than 3 times EBITDA.  The covenants exclude the impact of IFRS 16 'Leases' and, on that basis, at 31 December 2019, these ratios were 14 times and 0.9 times respectively. 

 

The maturity profile of our current committed facilities is set out within the appendix to this announcement.

 

Financial priorities

As noted above, we are in a strong financial position as we face the challenges presented by the spread of the virus.  Notwithstanding this, our initial priority has been to understand better the potential impact on the Group's financing and liquidity, and to take prompt action to preserve Aggreko's financial position.  These measures have included, but are not limited to, a detailed review of and reduction in discretionary spend, hiring freezes, travel restrictions and the limiting of our fleet capital expenditure to that required to fulfil secured orders and meet known demand.

 

As the situation has continued to develop with increasing uncertainty over its duration, we have considered a range of scenarios to stress-test the Group's liquidity position through to the end of this year.  These show that even in the reasonably probable worst case scenario, with appropriate mitigating actions, we expect to remain within the Group's financial covenants, while maintaining headroom under our existing committed facilities.

 

We have already refinanced all our facilities that would have matured in 2020, and we expect to continue with our usual practice of refinancing our facilities well in advance of their maturity dates.  In addition, we will explore the newly announced Covid Corporate Financing Facility (CCFF) from the Bank of England.

 

Current trading

Since we last updated the market on 3 March, the impact on the Group's revenue arising from COVID-19 has been limited and what we have experienced has been primarily in the events sector.  However, as central governments and businesses take further action to contain and delay the spread of the virus, there is now significant uncertainty around future demand across several sectors and geographies.  The recent sharp fall in the oil price has compounded this level of uncertainty.  Additionally, we are beginning to face some operational challenges getting our people to project sites as countries close borders and restrict travel.  In terms of our supply chain, there has been relatively little impact to date although, specifically, we are experiencing delays of a few weeks in equipment orders from China.

 

We are in regular dialogue with our customer on the Tokyo 2020 Olympic and Paralympic Games and, in line with the current International Olympic Committee guidance, we are continuing our work in support of delivering the Games, which are due to start on 24 July 2020.

 

As a reminder of the sector, geographic and contract length diversity of the Group, we have provided some key details on the split of the Group's business within the appendix to this announcement.

 

Dividend

Despite the strong financial position of the Group, given the rising level of uncertainty as to how the situation will develop, alongside the other measures we are taking to preserve the Group's cash position the Board has decided to withdraw its recommendation to pay a final dividend at the forthcoming AGM.  We will review this decision again later in the year once the outlook becomes clearer.  We recognize that this is a significant decision, but the Board believes that it is an appropriate and prudent measure to take at this point as the Group seeks to preserve its strong liquidity, cashflow and financial position through these most uncertain times.

 

Outlook

While the challenges facing our business are unprecedented, as noted above our primary concern remains the welfare of our people, their families and the local communities in which we work.

 

We have a global, diversified business, with a robust balance sheet and we are taking immediate measures to contain our costs and protect our strong financial position.

 

However, given the continued uncertainty, we do not believe it is possible to retain the Group's 2020 guidance as communicated at our full year results on 3 March. We will continue to monitor the situation closely and provide further updates as necessary.

 

Beyond the AGM on 23 April, our next scheduled announcement is the interim results on 6 August, alongside which we had planned to provide an update on our strategic priorities.  While we believe that a continued focus on our four strategic priorities set out in 2015 will underpin the performance of the business over the longer term, given the current market uncertainties we have taken the decision to postpone this strategic update.   

 

Enquiries


Investors and analysts

Louise Bryant, Aggreko plc

+44 7813 210 809

Richard Foster, Aggreko plc

+44 7989 718 478

Financial media

Andy Rivett-Carnac, Headland

+44 7968 997 365



 

This announcement contains inside information. The person responsible for arranging for the release of this announcement on behalf of Aggreko plc is Richard Foster, Investor Relations Manager.



 

APPENDIX

 

Rental Solutions

Rental Solutions is a transactional business with forward order book clarity of around five weeks.  Average contract length is around three weeks.  The geographic split of Rental Solutions revenue for the year ended 31 December 2019 was as follows:

 

·      North America - 32% of total Group revenue (ex-fuel)

·      Northern Europe - 6% of total Group revenue (ex-fuel)

·      Continental Europe - 10% of total Group revenue (ex-fuel)

·      Australia Pacific - 5% of total Group revenue (ex-fuel)

 

Given the recent reduction in the oil price, the following breakdown of our oil and gas exposure in North America for the year ended 31 December 2019 should be noted:

 

·      25% of North America revenue is derived from the oil and gas (O&G) sector (33% at the peak in 2014)

·      90% of North America O&G revenue is from shale (i.e. 8% of total Group revenue, ex-fuel)

·      70% of North America O&G revenue is from the Permian basin (i.e. 6% of total Group revenue, ex-fuel)

·      Average contract length in O&G is around five months

 

Power Solutions Industrial

Power Solutions Industrial has both a transactional and a projects business. The most material geographic region is the Middle East, which represents 10% of Group revenue (ex-fuel) and has an average contract length of around five months.  The average contract length in the Power Solutions Industrial projects business, excluding Eurasia, is just under five years. In Eurasia, the majority of our contracts are between two and ten years in length. 

 

Power Solutions Utility

The average contract length of our utility projects is between five and six years. 

 

Events

The events sector represented 8% of Group revenue (ex-fuel) in the year ended 31 December 2019.

 

Maturity profile of the Group's current committed facilities

 

£ million

2020

2021

2022

2023

2024+

Total

Committed bank facilities (variable rate)

nil

71

150

200

125

546

US private placement notes (fixed rate)

nil

146

0

0

375

521

Total

nil

217

150

200

500

1,067

 

Note: Non-Sterling facilities have been translated at current spot rates

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
UPDDDGDXXGDDGGD

Quick facts: Aggreko

Price: 427.4

Market: LSE
Market Cap: £1.09 billion
Follow

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE