Notes to the Company Accounts
For the year ended 31 December 2012
30 Company accounting policies
Accounting convention
These financial statements have been prepared on the going concern basis, under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities (including derivative instruments) at fair values in accordance with the Companies Act 2006 and applicable accounting standards in the United Kingdom. A summary of the more important Company accounting policies is set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
Tangible assets
Tangible assets are carried at cost less accumulated depreciation and impairment losses. Cost includes purchase price, and directly attributable costs of bringing the assets into the location and condition where it is capable for use. Borrowings costs are not capitalised.
Fixed assets are depreciated on a straight line basis at annual rates estimated to write off the cost of each asset over its useful life from the date it is available for use. The principal period of depreciation used is as follows:
Vehicles, plant and equipment 4 to 15 years.
Impairment of tangible assets
Tangible assets are depreciated and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Value in use is calculated using estimated cashflows. These are discounted using an appropriate long-term pre-tax interest rate. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (income-generating units).
Foreign currencies
At individual Company level, transactions denominated in foreign currencies are translated at the rate of exchange on the day the transaction occurs. At the year end, monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary assets are translated at the historical rate. In order to hedge its exposure to certain foreign exchange risks, the Company enters into forward foreign exchange contracts. The Company's financial statements are presented in Sterling, which is the Company's functional currency.
Derivative financial instruments
The accounting policy is identical to that applied by the consolidated Group as set out within the Notes to the Group Accounts however the UK GAAP standards are applied specifically FRS 26 'Financial instruments: Measurement' and FRS 29 'Financial Instruments: Disclosures'.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds, net of transaction costs, and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate.
Cash flow statement and related party disclosures
The Company is included in the Group Accounts of Aggreko plc, which are publicly available. Consequently, the Company is not required to produce a cash flow statement under the terms of Financial Reporting Standard 1 'Cash Flow Statements (revised 1996)'. The Company is also exempt under the terms of Financial Reporting Standard 8 'Related Party Disclosures' from disclosing related party transactions with entities that are part of the Group.
Taxation
The charge for ordinary taxation is based on the profit/loss for the year and takes into account full provision for deferred tax, using the approach set out in FRS 19, 'Deferred Tax' in respect of timing differences on a non-discounted basis. Such timing differences arise primarily from the differing treatment for taxation and accounting purposes of provisions and depreciation of fixed assets.
Pensions
The Company operates both a defined benefit pension scheme and a defined contribution pension scheme. The accounting policy is identical to that applied by the consolidated Group as set out within the Notes to the Group Accounts.
Investments
Investments in subsidiary undertakings are stated in the balance sheet of the Company at cost, or nominal value of the shares issued as consideration where applicable, less provision for any impairment in value. Share-based payments recharged to subsidiary undertakings are treated as capital contributions and are added to investments.
Leases
Leases where substantially all of the risks and rewards of ownership are not transferred to the Company are classified as operating leases. Rentals under operating leases are charged against operating profit on a straight line basis over the term of the lease.
Share-based payments
The accounting policy is identical to that applied by the consolidated Group as set out within the Notes to the Group Accounts with the exception that shares issued by the Company to employees of its subsidiaries for which no consideration is received are treated as an increase in the Company's investment in those subsidiaries.
Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's shareholders.
31 Dividends
Refer to Note 11 of the Group Accounts.
32 Auditors' remuneration
|
|
2012 £000 |
2011 £000 |
|
Fees payable to the Company's auditor for the audit of the Company's annual accounts |
182 |
160 |
|
Fees payable to the Company's auditor and its associates for other services: |
|
|
|
– Other assurance related services |
34 |
57 |
|
– Tax advising |
– |
42 |
33 Tangible assets
|
|
Total £ million |
|
Cost |
|
|
At 1 January 2012 |
21.2 |
|
Additions |
2.4 |
|
At 31 December 2012 |
23.6 |
|
|
|
|
Accumulated depreciation |
|
|
At 1 January 2012 |
16.6 |
|
Charge for the year |
2.2 |
|
At 31 December 2012 |
18.8 |
|
|
|
|
Net book values: |
|
|
At 31 December 2012 |
4.8 |
|
At 31 December 2011 |
4.6 |
The tangible fixed assets of the Company comprise vehicles, plant and equipment.
34 Investments
|
|
£ million |
|
Cost of investments in subsidiary undertakings: |
|
|
At 1 January 2012 |
414.4 |
|
Additions |
137.6 |
|
Net impact of share-based payments |
10.2 |
|
At 31 December 2012 |
562.2 |
To fund the acquisition of Poit Energia (see Note 29) the Company was allotted 1 share of £1 in Aggreko Holdings Limited for a total consideration of £134.2 million. The Company was allotted a further 2 shares of £1 each for a total consideration of £3.4 million to allow Aggreko Holdings Limited to finance a number of the Group's subsidiaries.
Details of the Company's principal subsidiary undertakings are set out in Note 28 to the Group Accounts. The Directors believe that the carrying value of the investments is supported by their underlying net assets.
35 Debtors
|
|
2012 £ million |
2011 £ million |
|
Prepayments and accrued income |
1.6 |
0.3 |
|
Other debtors |
0.6 |
0.6 |
|
Deferred tax asset (Note 39) |
4.7 |
7.6 |
|
Amounts due from subsidiary undertakings |
652.0 |
585.4 |
|
|
658.9 |
593.9 |
36 Borrowings
|
|
2012 £ million |
2011 £ million |
|
Non-current |
|
|
|
Bank borrowings |
189.3 |
202.5 |
|
Private placement notes |
232.7 |
178.3 |
|
|
422.0 |
380.8 |
|
|
|
|
|
Current |
|
|
|
Bank overdrafts |
1.5 |
1.8 |
|
Bank borrowings |
146.8 |
– |
|
|
148.3 |
1.8 |
|
Total borrowings |
570.3 |
382.6 |
The bank overdrafts and borrowings are all unsecured.
(i) Maturity of financial liabilities
The maturity profile of the borrowings was as follows:
|
|
2012 £ million |
2011 £ million |
|
Within 1 year, or on demand |
148.3 |
1.8 |
|
Between 1 and 2 years |
– |
170.0 |
|
Between 2 and 3 years |
164.5 |
– |
|
Between 3 and 4 years |
24.8 |
32.5 |
|
Between 4 and 5 years |
– |
– |
|
Greater than 5 years |
232.7 |
178.3 |
|
|
570.3 |
382.6 |
(ii) Borrowing facilities
The Company has the following undrawn committed floating rate borrowing facilities available at 31 December 2012 in respect of which all conditions precedent had been met at that date:
|
|
2012 £ million |
2011 £ million |
|
Expiring within 1 year |
190.3 |
– |
|
Expiring between 1 and 2 years |
– |
95.3 |
|
Expiring between 2 and 3 years |
54.4 |
– |
|
Expiring between 3 and 4 years |
49.6 |
193.2 |
|
Expiring between 4 and 5 years |
– |
– |
|
Expiring after 5 years |
– |
– |
|
|
294.3 |
288.5 |
Since the year end, £30 million of committed facilities have matured.
(iii) Interest rate risk profile of financial liabilities
The interest rate profile of the Company's financial liabilities at 31 December 2012, after taking account of the interest rate swaps used to manage the interest profile, was:
|
|
|
|
|
Fixed rate debt |
|
|
|
Floating rate £ million |
Fixed rate £ million |
Total £ million |
Weighted average interest rate % |
Weighted average period for which rate |
|
Currency: |
|
|
|
|
|
|
Sterling |
1.5 |
– |
1.5 |
– |
– |
|
US Dollar |
204.8 |
294.7 |
499.5 |
4.3 |
7.9 |
|
Euro |
– |
16.4 |
16.4 |
5.0 |
0.6 |
|
South African Rand |
6.2 |
– |
6.2 |
– |
– |
|
Mexican Pesos |
7.6 |
– |
7.6 |
– |
– |
|
Russian Rubles |
6.1 |
– |
6.1 |
– |
– |
|
Australian Dollars |
7.7 |
– |
7.7 |
– |
– |
|
Canadian Dollar |
15.6 |
– |
15.6 |
– |
– |
|
New Zealand Dollar |
9.7 |
– |
9.7 |
– |
– |
|
At 31 December 2012 |
259.2 |
311.1 |
570.3 |
|
|
|
Sterling |
1.5 |
– |
1.5 |
– |
– |
|
US Dollar |
97.0 |
243.2 |
340.2 |
4.5 |
7.9 |
|
Euro |
– |
16.8 |
16.8 |
5.0 |
1.6 |
|
Canadian Dollar |
15.2 |
– |
15.2 |
– |
– |
|
New Zealand Dollar |
8.9 |
– |
8.9 |
– |
– |
|
At 31 December 2011 |
122.6 |
260.0 |
382.6 |
|
|
The floating rate financial liabilities principally comprise debt which carries interest based on different benchmark rates depending on the currency of the balance and are normally fixed in advance for periods between one and three months.
The effect of the Company's interest rate swaps is to classify £78.4 million (2011: £81.7 million) of borrowings in the above table as fixed rate.
The notional principal amount of the outstanding interest rate swap contracts at 31 December 2012 was £78.4 million (2011: £81.7 million).
(iv) Preference share capital
|
|
2012 Number |
2012 £000 |
2011 Number |
2011 £000 |
|
Authorised: |
|
|
|
|
|
Redeemable preference shares of 25 pence each |
199,998 |
50 |
199,998 |
50 |
No redeemable preference shares were allotted as at 31 December 2012 and 31 December 2011. The Board is authorised to determine the terms, conditions and manner of redemption of redeemable shares.
37 Financial instruments
(i) Fair values of financial assets and financial liabilities
The following table provides a comparison by category of the carrying amounts and the fair values of the Company's financial assets and financial liabilities at 31 December 2012. Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction between informed and willing parties, other than a forced or liquidation sale and excludes accrued interest. Where available, market values have been used to determine fair values.
|
|
2012 |
2011 |
||
|
|
Book value £ million |
Fair value £ million |
Book value £ million |
Fair value £ million |
|
Primary financial instruments held or issued to finance the Company's operations: |
|
|
|
|
|
Current bank borrowings and overdrafts |
(148.3) |
(148.3) |
(1.8) |
(1.8) |
|
Amounts due to subsidiary undertakings |
(195.1) |
(195.1) |
(233.7) |
(233.7) |
|
Non-current borrowings |
(422.0) |
(422.0) |
(380.8) |
(380.8) |
|
|
|
|
|
|
|
Derivative financial instruments held: |
|
|
|
|
|
Interest rate swaps – cash flow hedge |
(12.9) |
(12.9) |
(13.5) |
(13.5) |
|
Forward foreign currency contracts – cash flow hedge |
(0.3) |
(0.3) |
– |
– |
(ii) Summary of methods and assumptions
Interest rate swaps and forward foreign currency contracts
Fair value is based on market price of these instruments at the balance sheet date.
Current borrowings and overdrafts/liquid resources
The fair value of liquid resources and current borrowings and overdrafts approximates to the carrying amount because of the short maturity of these instruments.
Non-current borrowings
In the case of non-current borrowings, the fair value approximates to the carrying value reported in the balance sheet.
(iii) Financial instruments
Numerical financial instruments disclosures are set out below. Additional disclosures are set out in the financial review and accounting policies relating to risk management.
|
|
2012 |
2011 |
||
|
|
Assets £ million |
Liabilities £ million |
Assets £ million |
Liabilities £ million |
|
Less than one year: |
|
|
|
|
|
Interest rate swaps – cash flow hedge |
– |
(0.4) |
– |
– |
|
Forward foreign currency contracts – cash flow hedge |
0.1 |
(0.4) |
– |
– |
|
More than one year: |
|
|
|
|
|
Interest rate swaps – cash flow hedge |
– |
(12.5) |
– |
(13.5) |
|
|
0.1 |
(13.3) |
– |
(13.5) |
Net fair values of derivative financial instruments
The net fair value of derivative financial instruments and designated for cash flow hedges at the balance sheet date were:
|
|
2012 £ million |
2011 £ million |
|
Contracts with positive fair values: |
|
|
|
Forward foreign currency contracts |
0.1 |
– |
|
Contracts with negative fair values: |
|
|
|
Interest rate swaps |
(12.9) |
(13.5) |
|
Forward foreign currency contracts |
(0.4) |
– |
|
|
(13.2) |
(13.5) |
The net fair value losses at 31 December 2012 on open interest rate swaps that hedge interest risk are £12.9 million (2011: losses of £13.5 million). These will be debited to the profit and loss account interest charge over the remaining life of each interest rate swap. The net fair value losses at 31 December 2012 on open forward exchange contracts that hedge the foreign currency risk of future anticipated expenditure are £0.3 million. These will be allocated to expenditure when the forecast expenditure occurs.
(iv) The exposure of the Company to interest rate changes when borrowings reprice is as follows:
|
As at 31 December 2012 |
|
|
|
|
|
|
<1 year £ million |
1-5 years £ million |
>5 years £ million |
Total £ million |
|
Total borrowings |
148.3 |
189.3 |
232.7 |
570.3 |
|
Effect of interest rate swaps and other fixed rate debt |
(16.4) |
– |
(294.7) |
(311.1) |
|
|
131.9 |
189.3 |
(62.0) |
259.2 |
|
|
|
|
|
|
|
As at 31 December 2011 |
|
|
|
|
|
|
<1 year £ million |
1-5 years £ million |
>5 years £ million |
Total £ million |
|
Total borrowings |
1.8 |
202.5 |
178.3 |
382.6 |
|
Effect of interest rate swaps and other fixed rate debt |
– |
(16.8) |
(243.2) |
(260.0) |
|
|
1.8 |
185.7 |
(64.9) |
122.6 |
As at 31 December 2012 and 31 December 2011 all of the Company's floating debt was exposed to repricing within 3 months of the balance sheet date.
The effective interest rates at the balance sheet date were as follows:
|
|
2012 |
2011 |
|
Bank overdraft |
1.9% |
1.9% |
|
Bank borrowings |
2.2% |
1.4% |
|
Private placement borrowings |
4.2% |
4.5% |
38 Other creditors: amounts falling due within one year
|
|
2012 £ million |
2011 £ million |
|
Accruals and deferred income |
14.6 |
21.9 |
|
Amounts owed to subsidiary undertakings |
195.1 |
233.7 |
|
|
209.7 |
255.6 |
39 Deferred tax
|
|
2012 £ million |
2011 £ million |
|
At 1 January |
7.6 |
6.7 |
|
(Debit)/credit to the profit and loss account |
(2.5) |
0.1 |
|
(Debit)/credit to equity |
(0.4) |
0.8 |
|
At 31 December |
4.7 |
7.6 |
|
Deferred tax provided in the Accounts is as follows: |
|
|
|
Accelerated capital allowances |
0.1 |
– |
|
Other timing differences |
4.6 |
7.6 |
|
|
4.7 |
7.6 |
|
Deferred tax asset relating to pension deficit: |
|
|
|
At 1 January |
1.4 |
0.9 |
|
Deferred tax charge to profit and loss account |
(1.0) |
(0.7) |
|
Deferred tax credited to Statement of Total Recognised Gains and Losses |
0.5 |
1.2 |
|
|
0.9 |
1.4 |
40 Pension commitments
|
|
2012 £ million |
2011 £ million |
|
FRS 17 Deficit in the scheme (Refer to Note 27 of the Group Accounts) |
(4.0) |
(5.5) |
|
Related deferred tax asset |
0.9 |
1.4 |
|
|
(3.1) |
(4.1) |
41 Share capital
|
|
2012 |
2012 |
2011 |
2011 |
|
(i) Ordinary shares of 13549/775 pence |
|
|
|
|
|
At 1 January |
266,719,246 |
36,563 |
274,318,271 |
54,864 |
|
Share conversion (1 ordinary share for every 39.4 B shares as at 31 May 2012) |
94,280 |
13 |
– |
– |
|
Share consolidation (31 for 32 shares as at 8 July 2011*) |
– |
– |
(8,601,897) |
– |
|
Share split: |
|
|
|
|
|
Deferred ordinary shares |
– |
– |
– |
(12,278) |
|
B shares |
– |
– |
– |
(448) |
|
Transfer to capital redemption reserve |
– |
– |
– |
(5,772) |
|
Employee share option scheme |
1,552,557 |
213 |
1,002,872 |
197 |
|
At 31 December |
268,366,083 |
36,789 |
266,719,246 |
36,563 |
|
|
|
|
|
|
|
(ii) Deferred ordinary shares of 618/25 pence |
|
|
|
|
|
At 1 January |
182,700,915 |
12,278 |
– |
– |
|
Share split |
– |
– |
182,700,915 |
12,278 |
|
At 31 December |
182,700,915 |
12,278 |
182,700,915 |
12,278 |
|
|
|
|
|
|
|
(iii) B shares of 618/25 pence (2011: 618/25 pence) |
|
|
|
|
|
At 1 January |
6,663,731 |
448 |
– |
– |
|
Transfer to capital redemption reserve |
(2,947,585) |
(198) |
– |
– |
|
Share conversion |
(3,716,146) |
(250) |
– |
– |
|
Share split |
– |
– |
6,663,731 |
448 |
|
At 31 December |
– |
– |
6,663,731 |
448 |
|
|
|
|
|
|
|
(iv) Deferred ordinary shares of 1/775 pence (2011: nil) |
|
|
|
|
|
At 1 January |
– |
– |
– |
– |
|
Share conversion |
18,352,057,648 |
237 |
– |
– |
|
At 31 December |
18,352,057,648 |
237 |
– |
– |
|
* Based on 275,260,704 ordinary shares of 20 pence each on the record date of 8 July 2011. |
||||
During the year 524,335 ordinary shares of 13549/775 pence each have been issued at prices ranging from £2.82 to £17.30 (US$ 23.69) to satisfy the exercise of options under the Savings-Related Share Option Schemes ('Sharesave') by eligible employees. In addition 1,028,222 shares were allotted to US participants in the Long-term Incentive Plan by the allotment of new shares at 13549/775 pence per share.
Further information on share capital, including in respect of the return on capital is provided in Note 23 to the Group financial statements.
42 Reconciliation of movements in shareholders' funds
|
|
Called up share capital £ million |
Share premium account £ million |
Capital redemption reserve £ million |
Treasury shares £ million |
Hedging reserve £ million |
Profit and loss account £ million |
Capital and reserves £ million |
|
1 January 2012 |
49.3 |
16.2 |
5.9 |
(48.9) |
(9.7) |
381.9 |
394.7 |
|
Profit for the financial year |
– |
– |
– |
– |
– |
95.5 |
95.5 |
|
Dividends |
– |
– |
– |
– |
– |
(58.2) |
(58.2) |
|
Fair value gains on interest rate swaps |
– |
– |
– |
– |
0.5 |
– |
0.5 |
|
Credit in respect of employee share awards |
– |
– |
– |
– |
– |
13.5 |
13.5 |
|
Issue of ordinary shares to employees under share option schemes |
– |
– |
– |
25.7 |
– |
(25.7) |
– |
|
Actuarial losses on retirement benefits |
– |
– |
– |
– |
– |
(2.2) |
(2.2) |
|
Deferred tax on items taken to equity |
– |
– |
– |
– |
(0.4) |
0.5 |
0.1 |
|
Return of capital to shareholders |
– |
– |
– |
– |
– |
(1.6) |
(1.6) |
|
Capital redemption reserve |
(0.2) |
– |
0.2 |
– |
– |
– |
– |
|
New share capital subscribed |
0.2 |
2.5 |
– |
– |
– |
– |
2.7 |
|
Purchase of treasury shares |
– |
– |
– |
(11.1) |
– |
– |
(11.1) |
|
31 December 2012 |
49.3 |
18.7 |
6.1 |
(34.3) |
(9.6) |
403.7 |
433.9 |
|
|
Called up share capital £ million |
Share premium account £ million |
Capital redemption reserve £ million |
Treasury shares £ million |
Hedging reserve £ million |
Profit and loss account £ million |
Capital and reserves £ million |
|
1 January 2011 |
54.9 |
14.8 |
0.1 |
(49.6) |
(6.5) |
313.5 |
327.2 |
|
Profit for the financial year |
– |
– |
– |
– |
– |
263.0 |
263.0 |
|
Dividends |
– |
– |
– |
– |
– |
(52.1) |
(52.1) |
|
Fair value losses on interest rate swaps |
– |
– |
– |
– |
(4.0) |
– |
(4.0) |
|
Credit in respect of employee share awards |
– |
– |
– |
– |
– |
19.8 |
19.8 |
|
Issue of ordinary shares to employees under share option schemes |
– |
– |
– |
10.8 |
– |
(10.8) |
– |
|
Actuarial losses on retirement benefits |
– |
– |
– |
– |
– |
(5.0) |
(5.0) |
|
Deferred tax on items taken to equity |
– |
– |
– |
– |
0.8 |
1.2 |
2.0 |
|
Return of capital to shareholders |
– |
– |
– |
– |
– |
(147.7) |
(147.7) |
|
Capital redemption reserve |
(5.8) |
– |
5.8 |
– |
– |
– |
– |
|
New share capital subscribed |
0.2 |
1.4 |
– |
– |
– |
– |
1.6 |
|
Purchase of treasury shares |
– |
– |
– |
(10.1) |
– |
– |
(10.1) |
|
31 December 2011 |
49.3 |
16.2 |
5.9 |
(48.9) |
(9.7) |
381.9 |
394.7 |
43 Operating lease commitments – minimum lease payments
|
|
2012 Land and buildings £ million |
2011 Land and buildings £ million |
|
Commitments under operating leases expiring: |
|
|
|
Within 1 year |
– |
0.1 |
|
Later than 1 year and less than 5 years |
0.4 |
– |
|
After 5 years |
– |
0.2 |
|
Total |
0.4 |
0.3 |
44 Profit and loss account
As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account and related notes. The profit for the financial year of the Company was £95.5 million (2011: £263.0 million).