Independent Auditors' Report
REPORT ON THE FINANCIAL STATEMENTS
Our opinion
In our opinion:
- The financial statements, defined below, give a true and fair view of the state of the Group's and of the Company's affairs as at 31 December 2013 and of the Group's profit and of the Group's cash flows for the year then ended;
- The Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;
- The Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
- The financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
This opinion is to be read in the context of what we say in the remainder of this report.
What we have audited
The Group financial statements and Company financial statements (the 'financial statements'), which are prepared by Aggreko plc, comprise:
- the Group balance sheet and Company balance sheet as at 31 December 2013;
- the Group income statement and statement of comprehensive income for the year then ended;
- the Group cash flow statement for the year then ended;
- the Reconciliation of net cash flow to movement in net debt for the year then ended;
- the Group statement of changes in equity for the year then ended; and
- the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.
The financial reporting framework that has been applied in the preparation of the Group financial statements comprises applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Certain disclosures required by the financial reporting framework have been presented elsewhere in the Annual Report and Accounts 2013 (the 'Annual Report'), rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.
What an audit of financial statements involves
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ('ISAs (UK & Ireland)'). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
- whether the accounting policies are appropriate to the Group's and Company's circumstances and have been consistently applied and adequately disclosed;
- the reasonableness of significant accounting estimates made by the Directors; and
- the overall presentation of the financial statements.
In addition, we read all the financial and nonfinancial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Overview of our audit approach
Materiality
We set certain thresholds for materiality. These helped us to determine the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements both individually and on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the Group financial statements as a whole to be £17 million, being approximately 5% of profit before tax.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £1 million as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Overview of the scope of our audit
The scope of our audit reflected the new organisational structure of the Group across three regional units which combined large local businesses with Power Projects businesses; APAC, EMEA and Americas.
In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at reporting units by us, as the Group engagement team, or component auditors within PwC UK and from other PwC network firms operating under our instruction. Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those reporting units to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Group financial statements as a whole.
Through a combination of full scope audits and directed scope procedures, we performed Group audit work at the reporting units across the Group that we considered to be most significant. This, together with additional procedures performed at the Group level, gave us the evidence we needed for our opinion on the Group financial statements as a whole.
Areas of particular audit focus
In preparing the financial statements, the Directors made a number of judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We primarily focused our work in these areas by assessing the Directors' judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.
In our audit, we tested and examined information, using sampling and other auditing techniques, to the extent we considered necessary to provide a reasonable basis for us to draw conclusions. We obtained audit evidence through testing the effectiveness of controls,substantive procedures or a combination of both.
We considered the following areas to be those that required particular focus in the current year. This is not a complete list of all risks or areas of focus identified by our audit. We discussed these areas of focus with the Audit Committee. Their report on those matters that they considered to be significant issues in relation to the financial statements is set out in the Audit Committee Report section.
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Areas of focus |
How the scope of our audit addressed the areas of focus |
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Contract receivables and associated provisioning One of the biggest risks to the Group is non-payment by customers under some of the larger contracts in the Power Projects business.
We focused on this area due to the magnitude of both the accounts receivable balances and the associated provisions, which are determined based on management's estimates. |
We tested significant contract receivables, challenging management's basis for determining the recoverability of (and resultant provisioning for) balances that were outstanding at the year end, had not been paid in accordance with contractual terms or were subject to dispute. |
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Provision for taxation (Direct and Indirect Taxes) in higher risk territories We focused on this area given the varied, complex and often uncertain nature of tax rules in certain countries, in particular where the Group has Power Projects businesses. |
We challenged management's processes for determining the required provision and the judgements they made.
We discussed and considered the potential tax exposures with Group management and in-house tax specialists.
We utilised our experience of similar situations elsewhere to independently assess the evidence described above. |
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Areas of focus required/ |
How the scope of our audit addressed the areas of focus |
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Risk of management override of internal controls ISAs (UK & Ireland) require that we consider this. |
We tested key reconciliations and manual journal entries. We considered whether there was evidence of bias by the Directors in the significant accounting estimates and judgements relevant to the financial statements. We also assessed the overall control environment of the Group, including the arrangements for staff to 'whistle-blow' inappropriate actions, and interviewed management and the Group's internal audit function. |
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Fraud in revenue recognition ISAs (UK & Ireland) presume there is a risk of fraud in revenue recognition. |
We focused our audit procedures on testing revenue recognition from significant customer contracts within the Power Projects business by agreeing revenue recognised to contract documentation and payments. |
Going concern
Under the Listing Rules we are required to review the Directors' Statement, in relation to going concern. We have nothing to report having performed our review.
As noted in the Directors' Statement, the Directors have concluded that it is appropriate to prepare the Group's and Company's financial statements using the going concern basis of accounting. The going concern basis presumes that the Group and Company have adequate resources to remain in operation, and that the Directors intend them to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the Directors' use of the going concern basis is appropriate.
However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group's and Company's ability to continue as a going concern.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion:
- the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
- the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
- we have not received all the information and explanations we require for our audit; or
- adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or
- the Company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors' remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors' remuneration specified by law have not been made. We have no exceptions to report arising from this responsibility.
Corporate Governance Statement
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the Company's compliance with nine provisions of the UK Corporate Governance Code ('the Code'). We have nothing to report having performed our review.
In the Annual Report, as required by the Code Provision C.1.1, the Directors state that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group's performance, business model and strategy. As required by C.3.8 of the Code, the Audit Committee has set out the significant issues that it considered in relation to the financial statements, and how they were addressed. Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
- the statement given by the Directors is materially inconsistent with our knowledge of the Group acquired in the course of performing our audit; or
- the section of the Annual Report describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee, as required by the Code Provision C.3.8.
We have no exceptions to report arising from this responsibility.
Other information in the Annual Report
Under ISAs (UK & Ireland), we are required to report to you if, in our opinion, information in the Annual Report is:
- materially inconsistent with the information in the audited financial statements; or
- apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group and Company acquired in the course of performing our audit; or
- is otherwise misleading.
We have no exceptions to report arising from this responsibility.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Our responsibilities and those of the Directors
As explained more fully in the Directors' Responsibilities, the Directors are responsible for the preparation of the Group and Company financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the Group and Company financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Graham McGregor
(Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Glasgow
6 March 2014