Notes to the Group Accounts

For the year ended 31 December 2013

1 ACCOUNTING POLICIES

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The address of the registered office is 120 Bothwell Street, Glasgow G2 7JS, UK.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

BASIS OF PREPARATION

The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities (including derivative instruments) at fair value.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

CHANGES IN ACCOUNTING POLICY AND DISCLOSURES

(a) New and amended standards adopted by the Group
The following new standards are mandatory for the first time for the financial year beginning 1 January 2013: 

• Amendment to IAS 1, 'Financial statement presentation' regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in 'other comprehensive income' (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). 
• IAS 19, 'Employee benefits' was amended in June 2011. The impact on the Group was to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability. The impact of this in the income statement is less than £0.1 million. Prior year numbers have not been restated as the amounts are not material. 
• Amendment to IFRS 7, 'Financial instruments: Disclosures', on asset and liability offsetting. This amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. 
• IFRS 13, 'Fair value measurement', aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs.

(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2013 and not early adopted
There are no IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

BASIS OF CONSOLIDATION

The Group financial statements consolidate the financial statements of Aggreko plc and all its subsidiaries for the year ended 31 December 2013. Subsidiaries are those entities over which the Group has the power to govern financial and operating policies, generally accompanying a shareholding that confers more than half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

REVENUE RECOGNITION

Revenue for the Group represents the amounts earned from the supply of temporary power, temperature control, oil-free compressed air and related services and excludes sales taxes and intra-Group revenue. Revenue can comprise a fixed rental charge and a variable charge related to the usage of assets or other services. In all cases, revenue is recognised in accordance with the contractual arrangements, for fixed rental charges, over the rental period and for variable elements as the asset is utilised or service is provided. Revenue is accrued or deferred at the balance sheet date depending on the date of the most recent invoice issued and the contractual terms.

SEGMENTAL REPORTING

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the plc Board of Directors.

In September 2012 the Group announced a new organisational structure comprising three regions: The Americas; Europe, the Middle East and Africa (EMEA) and Asia, Pacific and Australia (APAC). This new structure took effect from 1 January 2013.

This is reflected by the Group's divisional management and organisational structure and the Group's internal financial reporting systems.

Aggreko's segments comprise these three new regions comprising: The Americas, EMEA and APAC as well as the Total Local business and the Total Power Projects business.

The risks and rewards within the Power Projects business are significantly different from those within the Group's Local business. The Local business focuses on smaller, more frequently occurring events, whereas the Power Projects business concentrates on large contracts, which can arise anywhere in the world.

Central administrative costs are allocated between segments based on revenue.

LEASES

Leases where substantially all of the risks and rewards of ownership are not transferred to the Group 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.

EXCEPTIONAL ITEMS

Items are classified as exceptional gains or losses where they are considered by the Group to be material and are different from events or transactions which fall within the ordinary activities of the Group and which individually, or if of a similar type, in aggregate, need to be disclosed by virtue of their size or incidence if the financial statements are to be properly understood.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is carried at cost less accumulated depreciation and impairment losses. Cost includes purchase price, and directly attributable costs of bringing the asset into the location and condition where it is capable for use. Borrowing costs are not capitalised since the assets are assembled over a short period of time.

Freehold properties are depreciated on a straight line basis over 25 years. Short leasehold properties are depreciated on a straight line basis over the terms of each lease.

Other property, plant and equipment 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. Assets in the course of construction are not depreciated. Non rental fleet assets which are contract specific are depreciated over the life of the contract. The periods of depreciation are reviewed on an annual basis and the principal periods used are as follows:

Rental fleet		8 to 10 years
Vehicles, plant and equipment		4 to 15 years

 

INTANGIBLES

Intangible assets acquired as part of a business combination are capitalised, separately from goodwill, at fair value at the date of acquisition if the asset is separable or arises from contractual or legal rights and its fair value can be measured reliably. Amortisation is calculated on a straight-line method to allocate the fair value at acquisition of each asset over their estimated useful lives as follows: customer relationships: 10 years; non compete agreements: over the life of the non-compete agreements.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight line basis over their estimated useful lives, which is currently deemed to be 4 years.

The useful life of intangible assets is reviewed on an annual basis.

GOODWILL

On the acquisition of a business, fair values are attributed to the net assets acquired. Goodwill arises where the fair value of the consideration given for a business exceeds the fair value of such assets. Goodwill arising on acquisitions is capitalised and is subject to impairment reviews, both annually and when there are indicators that the carrying value may not be recoverable.

For the purpose of the impairment testing, goodwill is allocated to each of the Group's cash generating units expected to benefit from the synergies of the combination. Cash generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, then the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. Any impairment of goodwill is recognised immediately in the income statement.

IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND OTHER INTANGIBLE ASSETS (EXCLUDING GOODWILL)

Property, plant and equipment and other intangible assets are amortised 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 (cash-generating units).

FOREIGN CURRENCIES

Items included in the financial statements for each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (functional currency). The Group's consolidated financial statements are presented in Sterling, which is the Group's presentational currency.

At individual Company level, transactions denominated in foreign currencies are translated at the rate of exchange on the day the transaction occurs. Assets and liabilities denominated in foreign currency are translated at the exchange rate 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 Group enters into forward contracts and foreign currency options.

On consolidation, assets and liabilities of subsidiary undertakings are translated into Sterling at closing rates of exchange. Income and cash flow statements are translated at average rates of exchange for the period. Gains and losses from the settlement of transactions and gains and losses on the translation of monetary assets and liabilities denominated in other currencies are included in the income statement.

DERIVATIVE FINANCIAL INSTRUMENTS

This accounting policy is included in Note 28 – Notes to Group Accounts – Appendices.

TAXATION

Deferred tax
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill, negative goodwill nor from the acquisition of an asset, which does not affect either taxable or accounting income. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Provision for income taxes, mainly withholding taxes, which could arise on the remittance of retained earnings, principally relating to subsidiaries, is only made where there is a current intention to remit such earnings.

Current tax
The charge for the current tax is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using taxation rates that have been enacted or substantially enacted by the balance sheet date.

INVENTORIES

Inventories are valued at the lower of cost and net realisable value, using the weighted average cost basis. Cost of raw materials, consumables and work in progress includes the cost of direct materials and, where applicable, direct labour and those overheads that have been incurred in bringing the inventories to their present location and condition.

Inventory is written down on a case by case basis if the anticipated net realisable value declines below the carrying amount of the inventories. Net realisable value is the estimated selling price less cost to completion and selling expenses. When the reasons for a write-down of the inventory have ceased to exist, the write-down is reversed.

EMPLOYEE BENEFITS

Wages, salaries, social security contributions, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by the employees of the Group. Where the Group provides long-term employee benefits, the cost is accrued to match the rendering of the services by the employees concerned.

The Group operates a defined benefit pension scheme and a number of defined contribution pension schemes. The cost for the year for the defined benefit scheme is determined using the attained age method with actuarial updates to the valuation being carried out at each balance sheet date. Remeasurements are recognised in full, directly in retained earnings, in the period in which they occur and are shown in the statement of comprehensive income. The current service cost of the pension charge, interest income on scheme assets, interest on pension scheme liabilities and administrative expenses are included in arriving at operating profit.

The retirement benefit obligation recognised in the balance sheet is the present value of the defined benefit obligation at the balance sheet date less the fair value of the scheme assets. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using interest rates of high-quality corporate bonds.

Contributions to defined contribution pension schemes are charged to the income statement in the period in which they become chargeable.

TRADE RECEIVABLES

Trade receivables are recognised initially at fair value (which is the same as cost). An impairment is recorded for the difference between the carrying amount and the recoverable amount where there is objective evidence that the Group will not be able to collect all amounts due. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or large and old outstanding balances, particularly in countries where the legal system is not easily used to enforce recovery, are considered indicators that the trade receivable is impaired. When a trade receivable is uncollectible it is written off against the provision for impairment of trade receivables.

TRADE PAYABLES

Trade payables are recognised initially at fair value (which is the same as cost).

PROVISIONS

Provisions are recognised where a legal or constructive obligation has been incurred which will probably lead to an outflow of resources that can be reasonably estimated. Provisions are recorded for the estimated ultimate liability that is expected to arise, taking into account the time value of money where material.

A contingent liability is disclosed where the existence of the obligation will only be confirmed by future events, or where the amount of the obligation cannot be measured with reasonable reliability. Contingent assets are not recognised, but are disclosed where an inflow of economic benefits is probable.

SHARE-BASED PAYMENTS

This accounting policy is included in Note 28 – Notes to Group Accounts – Appendices.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash on hand and deposits with a maturity of three months or less.

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.

DIVIDEND DISTRIBUTION

Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.

KEY ASSUMPTIONS AND SIGNIFICANT JUDGEMENTS

The Group uses estimates and makes judgements in the preparation of its Accounts. The most sensitive areas affecting the Accounts are discussed below.

Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost. An impairment is recorded for the difference between the carrying amount and the recoverable amount where there is objective evidence that the Group may not be able to collect all amounts due. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default, or large and old outstanding balances, particularly in countries where the legal system is not easily used to enforce recovery, are considered indicators that the trade receivable is impaired.

The majority of the contracts the Group enters into are small relative to the size of the Group and, if a customer fails to pay a debt, this is dealt with in the normal course of business. However, some of the contracts the Group undertakes in developing countries are very large, and are in jurisdictions where payment practices can be unpredictable. The Group monitors the risk profile and debtor position of all such contracts regularly, and deploys a variety of techniques to mitigate the risks of delayed or non-payment; these include securing advance payments and guarantees. As a result of the rigorous approach to risk management, historically the Group has had a low level of bad debt write-offs. When a trade receivable is uncollectible it is written off against the provision for impairment of trade receivables. At 31 December 2013 the provision for impairment of trade receivables in the balance sheet was £61 million (2012: £63 million).

Taxation
Aggreko's tax charge is based on the profit for the year and tax rates in force at the balance sheet date. As well as corporation tax, Aggreko is subject to indirect taxes such as sales and employment taxes across various tax jurisdictions in the approximately 100 countries in which the Group operates. The varying nature and complexity of the tax law requires the Group to review its tax positions and make appropriate judgements at the balance sheet date. In addition the recognition of deferred tax assets is dependent upon an estimation of future taxable profits that will be available against which deductible temporary differences can be utilised. In the event that actual taxable profits are different, such differences may impact the carrying value of such deferred tax assets in future periods. Further information is shown at Notes 9 and 21 to the Annual Report and Accounts.

FINANCIAL RISK MANAGEMENT

Financial risk factors
The Group's operations expose it to a variety of financial risks that include liquidity, the effects of changes in foreign currency exchange rates, interest rates and credit risk. The Group has a centralised treasury operation whose primary role is to ensure that adequate liquidity is available to meet the Group's funding requirements as they arise, and that financial risk arising from the Group's underlying operations is effectively identified and managed.

The treasury operations are conducted in accordance with policies and procedures approved by the Board and are reviewed annually. Financial instruments are only executed for hedging purposes and transactions that are speculative in nature are expressly forbidden. Monthly reports are provided to senior management and treasury operations are subject to periodic internal and external review.

Liquidity, funding and capital management
The intention of Aggreko's strategy is to deliver long-term value to its shareholders whilst maintaining a balance sheet structure that safeguards the Group's financial position through economic cycles. Total capital is equity as shown in the Group balance sheet.

Given the proven ability of the business to fund organic growth from operating cashflows, and the nature of our business model, we believe it is sensible to run the business with a modest amount of debt. We say 'modest' because we are strongly of the view that it is unwise to run a business which has high levels of operational gearing with high levels of financial gearing. Given the above considerations, we believe that a Net Debt to EBITDA ratio of around 1 times is appropriate for the Group over the longer term. Absent a major acquisition, or the requirement for an unusual level of fleet investment, this level gives us the ability to deal with the normal fluctuations in capital expenditure (which can be quite sharp: +/– £200 million in a year) and working capital, and is well within our covenants to lenders which stand at 3 times Net Debt to EBITDA.

At the end of 2013, Net Debt to EBITDA had decreased to 0.6 times from 31 December 2012 when the ratio of Net Debt to EBITDA was 0.9 times.

The Group maintains sufficient facilities to meet its normal funding requirements over the medium term. At 31 December 2013 these facilities totalled £846 million in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement notes During the year committed bank facilities of £332 million were arranged. The financial covenants attached to these facilities are that EBITDA should be no less than 4 times interest and net debt should be no more than 3 times EBITDA; at 31 December 2013, these stood at 26 times and 0.6 times respectively. The Group does not consider that these covenants are restrictive to its operations. The maturity profile of the borrowings is detailed in Note 17 in the Annual Report and Accounts. Net debt amounted to £363 million at 31 December 2013 and, at that date, un-drawn committed facilities were £489 million.

Interest rate risk
The Group's policy is to manage the exposure to interest rates by ensuring an appropriate balance of fixed and floating rates. At 31 December 2013, £287 million of the net debt of £363 million was at fixed rates of interest resulting in a fixed to floating rate net debt ratio of 79:21 (2012: 52:48). The Group monitors its interest rate exposure on a regular basis by applying forecast interest rates to the Group's forecast net debt profile after taking into account its existing hedges. The Group also calculates the impact on profit and loss of a defined interest rate shift for all currencies. Based on the simulations performed, the impact on profit or loss of a +/– 100 basis-point shift, after taking into account existing hedges, would be £1 million (2012: £3 million). The sensitivity analysis is performed on a monthly basis and is reported to the Board.

Foreign exchange risk
The Group is subject to currency exposure on the translation of its net investments in overseas subsidiaries into Sterling. In order to reduce the currency risk arising, the Group uses direct borrowings in the same currency as those investments. Group borrowings are predominantly drawn down in the principal currencies affecting the Group, namely US Dollar, Canadian Dollar, Euro and Brazilian Reais.

The Group manages its currency flows to minimise foreign exchange risk arising on transactions denominated in foreign currencies and uses forward contracts where appropriate in order to hedge net currency flows.

The negative impact of currency decreased our revenues by £10 million (2012: decreased by £6 million) and trading profit by £6 million (2012: decreased by £1 million) for the year ended 31 December 2013. The Group monitors the impact of exchange closely and regularly carries out sensitivity analysis. For every 5 cents movement in the US Dollar to GBP exchange rate there is an approximate impact of £8 million (2012: £9 million) in trading profit¹ in terms of translation.

Currency translation also gave rise to a £89 million decrease in reserves as a result of year on year movements in the exchange rates (2012: decrease of £58 million). For every 5 cents movement in the Dollar, there is an approximate impact in equity of £9 million (2012: £16 million), arising from the currency translation of external borrowings which are being used as a net investment hedge, however this will be offset by a corresponding movement in the equity of the net investment being hedged.

Credit risk
Cash deposits and other financial instruments give rise to credit risk on amounts due from counterparties. The Group manages this risk by limiting the aggregate amounts and their duration depending on external credit ratings of the relevant counterparty. In the case of financial assets exposed to credit risk, the carrying amount in the balance sheet, net of any applicable provisions for loss, represents the amount exposed to credit risk.

Management of trade receivables
The management of trade receivables is the responsibility of the operating units, although they report monthly to Group on debtor days, debtor ageing and significant outstanding debts. At an operating unit level a credit rating is normally established for each customer based on ratings from external agencies. Where no ratings are available, cash in advance payment terms are often established for new customers. Credit limits are reviewed on a regular basis. Some of the contracts undertaken in our Power Projects business are substantial, and are in jurisdictions where payment practices can be unpredictable. The Group monitors the risk profile and debtor-position of all such contracts regularly, and deploys a variety of techniques to mitigate the risks of delayed or non-payment; these include securing advance payments, bank guarantees and various types of insurance. On the largest contracts, all such arrangements are approved at Group level. Contracts are reviewed on a case by case basis to determine the customer and country risk.

Insurance
The Group operates a policy of buying cover against the material risks which the business faces, where it is possible to purchase such cover on reasonable terms. Where this is not possible, or where the risks would not have a material impact on the Group as a whole, we self-insure.

1 Trading profit represents operating profit before gain on sale of property, plant and equipment.

2 CASHFLOW FROM OPERATING ACTIVITIES

	2013 £ million	2012 £ million
Profit for the year	246	276
Adjustments for:
Tax	87	91
Depreciation	273	236
Amortisation of intangibles	5	5
Finance income	(1)	(2)
Finance cost	26	27
Profit on sale of PPE (see below)	(6)	(4)
Share based payments	(2)	14
Changes in working capital (excluding the effects of exchange differences on consolidation):
Decrease/(increase) in inventories	23	(33)
Increase in trade and other receivables	(32)	(53)
Decrease in trade and other payables	(10)	(84)
Net movement in provisions for liabilities and charges	(6)	6
Cash generated from operations	603	479

In the cash flow statement, proceeds from sale of PPE comprise:

	2013 £ million	2012 £ million
Net book amount	8	8
Profit on sale of PPE	6	4
Proceeds from sale of PPE	14	12

Profit on sale of PPE is shown within other income in the income statement.

3 CASH AND CASH EQUIVALENTS

	2013 £ million	2012 £ million
Cash at bank and in hand	23	23
Short-term bank deposits	15	–
	38	23

The effective interest rate on short-term bank deposits was 21% (2012: 1.0%); these deposits have a maturity  of less than 90 days. Cash is only held in banks which have been approved by Group Treasury.

Cash and bank overdrafts include the following for the purposes of the cashflow statement: 

	2013 £ million	2012 £ million
Cash and cash equivalents	38	23
Bank overdrafts (Note 17)	(26)	(22)
	12	1

 

4 SEGMENTAL REPORTING
(A) REVENUE BY SEGMENT 

	Total revenue		Inter-segment revenue		External revenue
	2013 £ million	2012 £ million	2013 £ million	2012 £ million	2013 £ million	2012 £ million
Americas	645	607	–	–	645	607
Europe, Middle East and Africa	625	627	–	1	625	626
Asia, Pacific and Australia	303	351	–	1	303	350
Eliminations	–	(2)	–	(2)	–	–
Group	1,573	1,583	–	–	1,573	1,583
Local business	904	906	–	1	904	905
Power Projects	669	679	–	1	669	678
Eliminations	–	(2)	–	(2)	–	–
Group	1,573	1,583	–	–	1,573	1,583

• (i) Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third-parties.
• (ii) In September 2012 the Group announced a new organisational structure comprising three regions: Americas; Europe, the Middle East and Africa (EMEA) and Asia, Pacific and Australia (APAC). This new structure took effect from 1 January 2013. All prior year numbers have been restated in accordance with this new structure.
• (iii) Trading profit in table 4(B) below is defined as operating profit of £358 million (2012: £385 million) excluding gain on sale of property, plant and equipment of £6 million (2012: £4 million).

(B) PROFIT BY SEGMENT

	Trading profit pre intangible asset amortisation		Amortisation of intangible assets arising from business combinations		Trading profit
	2013 £ million	2012 £ million	2013 £ million	2012 £ million	2013 £ million	2012 £ million
Americas	151	133	(4)	(4)	147	129
Europe, Middle East and Africa	114	128	–	–	114	128
Asia, Pacific and Australia	92	125	(1)	(1)	91	124
Group	357	386	(5)	(5)	352	381
Local business	163	175	(5)	(5)	158	170
Power Projects	194	211	–	–	194	211
Group	357	386	(5)	(5)	352	381

	Trading profit		Gain on sale of PPE		Operating profit
	2013 £ million	2012 £ million	2013 £ million	2012 £ million	2013 £ million	2012 £ million
Americas	147	129	3	2	150	131
Europe, Middle East and Africa	114	128	2	1	116	129
Asia, Pacific and Australia	91	124	1	1	92	125
Group	352	381	6	4	358	385
Local business	158	170	4	4	162	174
Power Projects	194	211	2	–	196	211
Operating profit pre exceptional items	352	381	6	4	358	385
Exceptional items					–	7
Operating profit post exceptional items					358	392
Finance costs – net					(25)	(25)
Profit before taxation					333	367
Taxation					(87)	(91)
Profit for the year					246	276

(C) DEPRECIATION AND AMORTISATION BY SEGMENT

	2013 £ million	2012 £ million
Americas	107	91
Europe, Middle East and Africa	109	88
Asia, Pacific and Australia	62	62
Group	278	241
Local business	144	126
Power Projects	134	115
Group	278	241

(D) CAPITAL EXPENDITURE ON PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS  BY SEGMENT 

	2013 £ million	2012 £ million
Americas	103	225
Europe, Middle East and Africa	68	168
Asia, Pacific and Australia	57	110
Group	228	503
Local business	117	290
Power Projects	111	213
Group	228	503

Capital expenditure comprises additions of property, plant and equipment (PPE) of £228 million (2012:  £440 million), acquisitions of PPE of £nil million (2012: £47 million), and acquisitions of other intangible assets of £nil million (2012: £16 million).

(E) ASSETS/(LIABILITIES) BY SEGMENT

	Assets		Liabilities
	2013 £ million	2012 £ million	2013 £ million	2012 £ million
Americas	819	881	(107)	(123)
Europe, Middle East and Africa	726	710	(160)	(166)
Asia, Pacific and Australia	375	478	(55)	(72)
Group	1,920	2,069	(322)	(361)
Local business	1,071	1,137	(144)	(168)
Power Projects	849	932	(178)	(193)
Group	1,920	2,069	(322)	(361)
Tax and finance payable	44	44	(123)	(106)
Derivative financial instruments	11	11	(9)	(14)
Borrowings	–	–	(375)	(594)
Retirement benefit obligation	–	–	(6)	(4)
Total assets/(liabilities) per balance sheet	1,975	2,124	(835)	(1,079)

(F) AVERAGE NUMBER OF EMPLOYEES BY SEGMENT

	2013 Number	2012 Number
Americas	2,771	2,393
Europe, Middle East and Africa	2,075	2,033
Asia, Pacific and Australia	903	890
Group	5,749	5,316
Local business	3,768	3,332
Power Projects	1,981	1,984
Group	5,749	5,316

(G) RECONCILIATION OF NET OPERATING ASSETS TO NET ASSETS

	2013 £ million	2012 £ million
Net operating assets	1,598	1,708
Retirement benefit obligation	(6)	(4)
Net tax and finance payable	(79)	(62)
	1,513	1,642
Borrowings and derivative financial instruments	(373)	(597)
Net assets	1,140	1,045

5 PROFIT BEFORE TAXATION

The following items have been included in arriving at profit before taxation:

	2013 £ million	2012 £ million
Staff costs (Note 7)	311	301
Cost of inventories recognised as an expense (included in cost of sales)	73	82
Depreciation of property, plant and equipment	273	236
Amortisation of intangibles (included in administrative expenses)	5	5
Gain on disposal of property, plant and equipment	(6)	(4)
Trade receivables impairment (included in administrative expenses)	–	32
Operating lease rentals payable	36	34

6 AUDITORS' REMUNERATION

	2013 £000	2012 £000
Audit services
Fees payable to the Company's auditor for the audit of the Company's annual accounts and consolidated financial statements	178	207
Fees payable to the Company's auditor and its associates for other services:
– The audit of the Company's subsidiaries	730	635
– Other assurance related services	107	79
– Tax compliance	45	74
– Tax advising	27	30

7 EMPLOYEES AND DIRECTORS

Staff costs for the Group during the year:

	2013 £ million	2012 £ million
Wages and salaries	276	254
Social security costs	27	23
Share-based payments	(2)	14
Pension costs – defined contribution plans	8	8
Pension costs – defined benefit plans (Note 28.A6)	2	2
	311	301

Full details of Directors' remuneration are set out in the Remuneration Report.

The key management comprise Executive and Non-executive Directors. 

	2013 £ million	2012 £ million
Short-term employee benefits	5	4
Post-employment benefits	1	–
Share-based payments	–	3
	6	7

8 NET FINANCE CHARGE

	2013 £ million	2012 £ million
Finance costs on bank loans and overdrafts	(26)	(27)
Finance income on bank balances and deposits	1	2
	(25)	(25)

9 TAXATION

	2013 £ million	2012 £ million
Analysis of charge in year
Current tax expense:
– UK corporation tax	5	10
– Double taxation relief	(1)	–
	4	10
– Overseas taxation	78	73
	82	83
Adjustments in respect of prior years:
– UK	(5)	(7)
– Overseas	15	1
	10	(6)
	92	77
Deferred taxation (Note 21):
– temporary differences arising in current year	3	7
– movements in respect of prior years	(8)	10
	87	94
Tax on exceptional items	–	(3)
	87	91

The tax (charge)/credit relating to components of other comprehensive income is as follows:

	2013 £ million	2012 £ million
Deferred tax on hedging reserve movements	(1)	(1)
Deferred tax on retirement benefits	1	1
Current tax on exchange movements	2	–
	2	–

The tax (charge)/credit relating to equity is as follows:

	2013 £ million	2012 £ million
Current tax on share-based payments	3	21
Deferred tax on share-based payments	(3)	(20)
	–	1

Variances between the current tax charge and the standard 23.3% (2012: 24.5%) UK corporate tax rate when applied to profit on ordinary activities for the year are as follows:

	2013 £ million	2012 £ million
Profit before taxation – post-exceptional	333	367
Exceptional items	–	(7)
Profit before taxation – pre-exceptional	333	360
Tax calculated at 23.3% (2012: 24.5%) standard UK corporate rate	77	90
Differences between UK and overseas tax rates	6	4
Permanent differences	(1)	(4)
Deferred tax effect of future rate changes	(1)	–
Deferred tax assets not recognised	4	–
Tax on current year profit	85	90
Prior year adjustments – current tax	10	(6)
Prior year adjustments – deferred tax	(8)	10
Total tax on profit – pre-exceptional	87	94
Tax on exceptional items	–	(3)
Total tax on profit – post-exceptional	87	91
Effective tax rate – pre-exceptional	26.0%	26.0%

10 DIVIDENDS

	2013 £ million	2013 per share (p)	2012 £ million	2012 per share (p)
Final paid	42	15.63	36	13.59
Interim paid	24	9.11	22	8.28
	66	24.74	58	21.87

In addition, the Directors are proposing a final dividend in respect of the financial year ended 31 December 2013 of 17.19 pence per share which will absorb an estimated £46 million of shareholders' funds. It will be paid on 27 May 2014 to shareholders who are on the register of members on 25 April 2014.

11 EARNINGS PER SHARE

Basic earnings per share have been calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during the year, excluding shares held by the Employee Share Ownership Trusts which are treated as cancelled.

	2013	2012
Profit for the year (£ million)	246	276
Weighted average number of ordinary shares in issue (million)	267	265
Basic earnings per share (pence)	92.15	104.14

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

	2013	2012
Profit for the year (£ million)	246	276
Weighted average number of ordinary shares in issue (million)	267	265
Adjustment for share options and B shares (million)	–	1
Diluted weighted average number of ordinary shares in issue (million)	267	266
Diluted earnings per share (pence)	92.03	103.86

Aggreko plc assesses the performance of the Group by adjusting earnings per share, calculated in accordance with IAS 33, to exclude items it considers to be non-recurring and believes that the exclusion of such items provides a better comparison of business performance. The calculation of earnings per ordinary share on a basis which excludes exceptional items is based on the following adjusted earnings:

	2013 £ million	2012 £ million
Profit for the year	246	276
Exclude exceptional items	–	(10)
Adjusted earnings	246	266

An adjusted earnings per share figure is presented below.

	2013	2012
Basic earnings per share pre-exceptional items (pence)	92.15	100.67
Diluted earnings per share pre-exceptional items (pence)	92.03	100.40

12 GOODWILL

	2013 £ million	2012 (Restated) £ million
Cost
At 1 January	145	65
Acquisitions	–	89
Fair value adjustments	–	2
Exchange adjustments	(12)	(11)
At 31 December	133	145
Accumulated impairment losses	–	–
Net book value	133	145

During the year the Group has finalised the fair values of the net assets acquired from Poit Energia on 16 April 2012. Accordingly the fair values previously reported at 31 December 2012 have been restated with an increase in goodwill and a corresponding decrease in property, plant and equipment of £2 million at December 2012.

Goodwill impairment tests

Goodwill has been allocated to cash generating units (CGUs) as follows:

	2013 £ million	2012 £ million
Americas	113	125
Europe, Middle East and Africa	12	12
Asia, Pacific and Australia	8	8
Group	133	145
Local business	131	143
Power Projects	2	2
Group	133	145

Goodwill is tested for impairment annually or whenever there is an indication that the asset may be impaired. Goodwill is monitored by management at an operating segment level. The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for value in use calculations are those relating to expected changes in revenue and the cost base, discount rates and long-term growth rates. The discount rate used for business valuations was 8.6% after tax (2012: 8.9%), based on the weighted average cost of capital (WACC) of the Group. Before tax the estimated discount rate was 11.7% (2012: 12.2%). The WACC was calculated using the market capitalisation basis as at 31 December 2013 (i.e. equity valued basis).

On the basis that the business carried out by all CGUs is closely related and assets can be redeployed around the Group as required, a consistent Group discount rate has been used for all CGUs. Values in use were determined using current year cashflows, a prudent view of future market trends and excludes any growth capital expenditure. A terminal cash flow was calculated using a long-term growth rate of 2.0%.

As at 31 December 2013, based on internal valuations, Aggreko plc management concluded that the values in use of the CGUs significantly exceeded their net asset value.

The Directors consider that there is no reasonably possible change in the key assumptions made in their impairment calculations that would give rise to an impairment.

13 OTHER INTANGIBLE ASSETS

Refer to Note 28.A2.

14 PROPERTY, PLANT AND EQUIPMENT

Year ended 31 December 2013
	Freehold properties £ million	Short leasehold properties £ million	Rental fleet (Restated) £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2013 (Restated Note 12)	59	18	2,328	95	2,500
Exchange adjustments	(1)	(1)	(108)	(5)	(115)
Additions	7	2	205	14	228
Disposals	(2)	–	(52)	(20)	(74)
At 31 December 2013	63	19	2,373	84	2,539
Accumulated depreciation
At 1 January 2013	18	10	1,134	62	1,224
Exchange adjustments	–	–	(54)	(3)	(57)
Charge for the year	2	2	257	12	273
Disposals	(1)	–	(46)	(19)	(66)
At 31 December 2013	19	12	1,291	52	1,374
Net book values:
At 31 December 2013	44	7	1,082	32	1,165
At 31 December 2012	41	8	1,194	33	1,276

Year ended 31 December 2012 (Restated, Note 12)
	Freehold properties £ million	Short leasehold properties £ million	Rental fleet (Restated) £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2012	58	17	2,013	79	2,167
Exchange adjustments	(2)	–	(89)	(3)	(94)
Additions	3	2	415	20	440
Acquisitions	–	–	44	3	47
Fair value adjustments	–	–	(2)	–	(2)
Disposals	–	(1)	(53)	(4)	(58)
At 31 December 2012	59	18	2,328	95	2,500
Accumulated depreciation
At 1 January 2012	17	9	998	56	1,080
Exchange adjustments	(1)	–	(40)	(1)	(42)
Charge for the year	2	2	222	10	236
Disposals	–	(1)	(46)	(3)	(50)
At 31 December 2012	18	10	1,134	62	1,224
Net book values:
At 31 December 2012	41	8	1,194	33	1,276
At 31 December 2011	41	8	1,015	23	1,087

The 2012 comparatives have been restated for the final fair value adjustments arising on the acquisition of Poit Energia which totalled a £2 million reduction in rental fleet cost at 31 December 2012.

15 INVENTORIES

	2013 £ million	2012 £ million
Raw materials and consumables	144	172
Work in progress	5	6
	149	178

16 TRADE AND OTHER RECEIVABLES

	2013 £ million	2012 £ million
Trade receivables	346	356
Less: provision for impairment of receivables	(61)	(63)
Trade receivables – net	285	293
Prepayments	26	24
Accrued income	64	69
Other receivables	42	35
Total receivables	417	421

The value of trade and other receivables quoted in the table above also represent the fair value of these items.

The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:

	2013 £ million	2012 £ million
Sterling	9	13
Euro	53	44
US Dollar	210	212
Other currencies	145	152
	417	421

Movements on the Group's provision for impairment of trade receivables are as follows:

	2013 £ million	2012 £ million
At 1 January	63	36
Net provision for receivables impairment	–	32
Receivables written off during the year as uncollectable	(1)	(3)
Exchange	(1)	(2)
At 31 December	61	63

Credit quality of trade receivables

The table below analyses the total trade receivables balance per operating segment into fully performing, past due and impaired.

31 December 2013
	Fully performing £ million	Past due £ million	Impaired £ million	Total £ million
Americas	29	82	35	146
Europe, Middle East and Africa	69	59	20	148
Asia, Pacific and Australia	18	28	6	52
Group	116	169	61	346
Local business	74	64	12	150
Power Projects	42	105	49	196
Group	116	169	61	346
31 December 2012
	Fully performing £ million	Past due £ million	Impaired £ million	Total £ million
Americas	55	65	47	167
Europe, Middle East and Africa	63	57	12	132
Asia, Pacific and Australia	23	30	4	57
Group	141	152	63	356
Local business	82	62	10	154
Power Projects	59	90	53	202
Group	141	152	63	356

Trade receivables are classified as impaired if they are not considered recoverable. 43% of the amounts past due are less than 30 days past due (2012: 42%).

The Group assesses credit quality differently in relation to its two business models as explained below:

Local business

Our Local business serves customers in North, Central and South America, Europe, the Middle East, Africa, Asia and Australasia. It is a high transaction intensive business focused on frequently occurring events and the majority of the contracts in this business are small relative to the size of the Group. There is no concentration of credit risk in this business other than in the case of a major event, for example, the London Olympics, which was included in the Europe, Middle East and Africa business in 2012. Apart from these type of major events there are a large number of customers who are unrelated and internationally dispersed.

The management of trade receivables is the responsibility of the operating units, although they report monthly to Group on debtor days, debtor ageing and significant outstanding debts. At an operating unit level a credit rating is normally established for each customer based on ratings from external agencies. Where no ratings are available, cash in advance payment terms are often established for new customers. Credit limits are reviewed on a regular basis. The effectiveness of this credit process has meant that the Group has historically had a low level of bad debt in the Local business. Receivables written off during the year as uncollectable as a percentage of total gross debtors was 1% (2012: 2%).

Power Projects
Our Power Projects business concentrates on medium to very large contracts. Most projects in this business are worth over £1 million. Customers are mainly in developing countries and include power utilities, governments, armed forces, oil companies and mining companies.

In addition the majority of the contracts above are in jurisdictions where payment practices can be unpredictable. The Group monitors the risk profile and debtor position of all such contracts regularly, and deploys a variety of techniques to mitigate the risks of delayed or non-payment; these include securing advance payments, bonds and guarantees. On the largest contracts, all such arrangements are approved at a Group level. Contracts are reviewed on a case by case basis to determine the customer and country risk. To date the Group has also had a low level of bad debt in the Power Projects business although the risk of a major default is high.

The total trade receivables balance as at 31 December 2013 for our Power Projects business was £196 million (2012: £202 million). Within this balance, receivable balances totalling £105 million (2012: £117 million) had some form of payment cover attached to them. This payment cover guards against the risk of customer default rather than the risk associated with customer disputes. The risk associated with the remaining £91 million (2012: £85 million) is deemed to be either acceptable or payment cover is not obtainable in a cost effective manner.

17 BORROWINGS

	2013 £ million	2012 £ million
Non-current
Bank borrowings	138	199
Private placement notes	227	232
	365	431
Current
Bank overdrafts	26	22
Bank borrowings	10	163
	36	185
Total borrowings	401	616
Short-term deposits	(15)	–
Cash at bank and in hand	(23)	(23)
Net borrowings	363	593

Overdrafts and borrowings are unsecured. 

(i) Maturity of financial liabilities
The maturity profile of the borrowings was as follows:

	2013 £ million	2012 £ million
Within 1 year, or on demand	36	185
Between 1 and 2 years	38	–
Between 2 and 3 years	100	174
Between 3 and 4 years	–	25
Between 4 and 5 years	45	–
Greater than 5 years	182	232
	401	616

(ii) Borrowing facilities
The Group has the following undrawn committed floating rate borrowing facilities available at 31 December 2013 in respect of which all conditions precedent had been met at that date:

	2013 £ million	2012 £ million
Expiring within 1 year	30	190
Expiring between 1 and 2 years	185	–
Expiring between 2 and 3 years	202	54
Expiring between 3 and 4 years	–	50
Expiring between 4 and 5 years	72	–
Expiring after 5 years	–	–
	489	294

(iii) Interest rate risk profile of financial liabilities
Refer to Note 28.A3.

(iv) Interest rate risk profile of financial assets
Refer to Note 28.A3.

(v) Preference share capital
Refer to Note Note 28.A3.

18 FINANCIAL INSTRUMENTS

Refer to Note 28.A4.

(i) Fair values of financial assets and financial liabilities
Refer to Note 28.A4.

(ii) Summary of methods and assumptions
Refer to Note 28.A4.

(iii) Derivative financial instruments
Refer to Note 28.A4.

(iv) The exposure of the Group to interest rate changes when borrowings reprice
Refer to Note 28.A4.

19 TRADE AND OTHER PAYABLES

	2013 £ million	2012 £ million
Trade payables	71	124
Other taxation and social security payable	9	8
Other payables	87	76
Accruals	113	107
Deferred income	20	23
	300	338

The value of trade and other payables quoted in the table above also represent the fair value of these items.

20 PROVISIONS

	Reorganisation and Poit integration £ million
At 1 January 2013	6
Utilised during year	(6)
At 31 December 2013	–

The provision for reorganisation and Poit integration comprises the estimated costs of the Group reorganisation and also the integration of the Poit Energia acquisition into the Group. The provisions were generally in respect of professional fees, severance costs, relocation costs and travel expenses directly related to the reorganisation and integration.

21 DEFERRED TAX

	2013 £ million	2012 £ million
At 1 January	(28)	8
Impact of reduction in UK CT rate	1	–
Deferred tax on acquisitions	–	1
Credit/(charge) to the income statement (Note 9)	4	(17)
Debit to equity	(3)	(20)
Exchange differences	(2)	–
At 31 December	(28)	(28)

The UK Corporation tax rate reduced from 24% to 23% from 1 April 2013 and results in a UK corporation tax rate for the year ended 31 December 2013 of 23.3%. During the year, further changes in the UK corporation tax rate were substantively enacted as part of the Finance Bill 2013 on 2 July 2013. These include reductions in the main rate of corporation tax from 23% to 21% from 1 April 2014 and to 20% from 1 April 2015. The relevant deferred tax balances have been re-measured accordingly.

No deferred tax liability has been recognised in respect of unremitted earnings of subsidiaries. It is likely that the majority of the overseas earnings will qualify for the UK dividend exemption and the Group can control the distribution of dividends by its subsidiaries. In some countries, local tax is payable on the remittance of a dividend. Were dividends to be remitted from these countries, the additional tax payable would be £18 million.

The movements in deferred tax assets and liabilities (prior to off setting of balances within the same jurisdiction as permitted by IAS 12) during the period are shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.

Deferred tax assets are recognised to the extent that the realisation of the related deferred tax benefit through future taxable profits is probable. The Group did not recognise deferred tax assets of £5 million (2012: £1 million) of which £5 million (2012: £1 million) relates to carried forward tax losses as our forecasts indicate that these assets will not reverse in the near future.

Deferred tax assets of £13 million (2012: £8 million) have been recognised in respect of entities which have suffered a loss in either the current or preceding period.

Deferred tax liabilities
	Accelerated capital depreciation £ million	Other temporary differences £ million	Total £ million
At 1 January 2013	(68)	19	(49)
Credit/(charge) to the income statement	4	(1)	3
Debit to equity	–	(3)	(3)
Exchange differences	–	(2)	(2)
At 31 December 2013	(64)	13	(51)
Deferred tax assets
	Accelerated capital depreciation £ million	Other temporary differences £ million	Total £ million
At 1 January 2013	4	17	21
Credit/(charge) to the income statement	(2)	4	2
At 31 December 2013	2	21	23

The net deferred tax liability due after more than one year is £28 million (2012: liability of £28 million).

22 SHARE CAPITAL

	2013 Number of shares	2013 £000	2012 Number of shares	2012 £000
(i) Ordinary shares of 13 549/775 pence (2012: 13 549/775 pence)
At 1 January	268,366,083	36,789	266,719,246	36,563
Share conversion (1 ordinary share for every 39.4 B shares as at 31 May 2012)	–	–	94,280	13
Employee share option scheme	663,462	91	1,552,557	213
At 31 December	269,029,545	36,880	268,366,083	36,789
(ii) Deferred ordinary shares of 6 18/25 pence (2012: 6 18/25 pence)
At 1 January and 31 December	182,700,915	12,278	182,700,915	12,278
(iii) B shares of 6 18/25 pence (2012: 6 18/25 pence)
At 1 January	–	–	6,663,731	448
Transfer to capital redemption reserve	–	–	(2,947,585)	(198)
Share conversion	–	–	(3,716,146)	(250)
At 31 December	–	–	–	–
(iv) Deferred ordinary shares of 1/775 pence (2012: 1/775 pence)
At 1 January	18,352,057,648	237	–	–
Share conversion	–	–	18,352,057,648	237
At 31 December	18,352,057,648	237	18,352,057,648	237

During the year 303,348 ordinary shares of 13 ⁵⁴⁹/₇₇₅ pence each have been issued at prices ranging from £4.37 to £14.27 (US $22.52) to satisfy the exercise of options under the Savings-Related Share Option Schemes ('Sharesave') by eligible employees. In addition 360,114 shares were allotted to US participants in the Long-term Incentive Plan by the allotment of new shares at 13 ⁵⁴⁹/₇₇₅ pence per share.

SHARE OPTIONS

Refer to Note 28.A5.

23 TREASURY SHARES

	2013 £ million	2012 £ million
Treasury shares	(24)	(34)

(i) Purchased at an average share price of £15.93 (2012: £21.64).

Interests in own shares represents the cost of 1,331,750 of the Company's ordinary shares (nominal value 13 ⁵⁴⁹/₇₇₅ pence). Movement during the year was as follows: 

	2013 Number of shares	2012 Number of shares
1 January	2,176,628	4,805,289
Purchase of shares (Note (i))	62,459	508,162
Long-term Incentive Plan Maturity	(855,501)	(3,136,823)
Sharesave maturity	(51,836)	–
31 December	1,331,750	2,176,628

(i) Purchased at an average share price of £15.93 (2012: £21.64).

These shares represent 0.5% of issued share capital as at 31 December 2013 (2012: 0.8%).

These shares were acquired by a Trust in the open market using funds provided by Aggreko plc to meet obligations under the Long-term Incentive Arrangements and Aggreko Sharesave Plans. The costs of funding and administering the scheme are charged to the income statement of the Company in the period to which they relate. The market value of the shares at 31 December 2013 was £23 million (31 December 2012: £38 million).

24 CAPITAL COMMITMENTS

	2013 £ million	2012 £ million
Contracted but not provided for (property, plant and equipment)	15	13

25 OPERATING LEASE COMMITMENTS – MINIMUM LEASE PAYMENTS

	2013 £ million	2012 £ million
Commitments under non cancellable operating leases expiring:
Within 1 year	25	21
Later than 1 year and less than 5 years	42	35
After 5 years	13	10
Total	80	66

26 PENSION COMMITMENTS

Refer to Note 28.A6.

27 INVESTMENTS IN SUBSIDIARIES

The subsidiary undertakings of Aggreko plc at the year end, and the main countries in which they operate, are shown below. All companies are wholly owned and, unless otherwise stated, incorporated in UK or in the principal country of operation and are involved in the supply of temporary power, temperature control and related services.

All shareholdings are of ordinary shares or other equity capital.

Aggreko Angola Lda		Angola
Aggreko Argentina S.R.L.		Argentina
Aggreko Generators Rental Pty Limited		Australia
Aggreko Barbados Limited		Barbados
Aggreko Belgium NV		Belgium
Aggreko Energia Locacao de Geradores Ltda		Brazil
Aggreko Cameroon S.R.L.		Cameroon
Aggreko Canada Inc		Canada
Aggreko Financial Holdings Limited +		Cayman Islands
Aggreko Chile Limitada		Chile
Aggreko (Shanghai) Energy Equipment Rental Company Limited		China
Aggreko Colombia SAS		Colombia
Aggreko Costa Rica S.A.		Costa Rica
Aggreko Cote d'lvoire S.A.R.L.		Cote d'Ivoire
Aggreko (Middle East) Limited		Cyprus*
Aggreko DRC S.P.R.L.	Democratic Republic of the Congo
Aggreko Dominican Republic	Dominican Republic
Aggreko Energy Ecuador CIA		Ecuador
Aggreko Finland Oy		Finland
Aggreko France S.A.R.L.		France
Aggreko Gabon S.A.R.L.		Gabon
Aggreko Deutschland GmbH		Germany
Aggreko Hong Kong Limited		Hong Kong
Aggreko Energy Rental India Private Limited +++		India
PT Aggreko Energy Services (Indonesia)		Indonesia
Aggreko Ireland Limited		Ireland
Aggreko Italia S.R.L.		Italy
Aggreko Japan Limited		Japan
Aggreko Kenya Energy Rentals Limited		Kenya
Aggreko Malaysia SDN BHD		Malaysia
Aggreko Shanduka Mauritius Limited***		Mauritius
Aggreko Energy Mexico SA de CV		Mexico
Aggreko Services Mexico SA de CV		Mexico
Aggreko SA de CV ++++		Mexico
Aggreko Mocambique Limitada		Mozambique
Aggreko Namibia Energy Rentals (Pty) Ltd		Namibia
Aggreko (NZ) Limited		New Zealand
Aggreko Projects Limited		Nigeria
Aggreko Gas Power Generation Limited ++++		Nigeria
Aggreko Norway AS		Norway
Aggreko Energy Rentals Panama SA		Panama
Aggreko Generator Rentals (PNG) Limited ++++		Papua New Guinea
Aggreko Peru S.A.C.		Peru
Aggreko Energy Solutions Inc		Philippines
Aggreko Polska Spolka Z Organiczona		Poland
Aggreko Trinidad Limited	Republic of Trinidad & Tobago
Aggreko South East Europe S.R.L.		Romania
Aggreko Eurasia LLC		Russia
Aggreko Rwanda Limited		Rwanda
Aggreko Senegal S.A.R.L.		Senegal
Aggreko (Singapore) PTE Limited		Singapore
Aggreko Energy Rental South Africa (Proprietary) Limited		South Africa
Aggreko South Korea Limited		South Korea
Aggreko Iberia SA		Spain
Aggreko (Thailand) Limited		Thailand
Aggreko Americas Holdings B.V. +		The Netherlands
Aggreko Euro Holdings B.V. +		The Netherlands
Aggreko Rest of the World Holdings B.V. +		The Netherlands
Aggreko (Investments) B.V. ++		The Netherlands
Aggreko Nederland B.V.		The Netherlands
Generatoren Koopmans B.V. ++++		The Netherlands
Aggreko Enerji ve Isi Kontrol Ticaret Anonim Sirketi		Turkey
Aggreko Middle East Limited FZE		UAE
Aggreko Finance Limited +		UK
Aggreko Holdings Limited +		UK
Aggreko European Finance ++		UK
Aggreko International Projects Holdings Limited		UK+
Aggreko International Projects Limited		UK**
Aggreko Pension Scheme Trustee Limited		UK
Aggreko UK Limited		UK
Aggreko US Limited		UK
Aggreko Generators Limited ++++		UK
Aggreko Luxembourg Holdings ++++		UK
Aggreko Quest Trustee Limited ++++		UK
CS1 Limited ++++		UK
Dunwilco (680) Limited ++++		UK
Rotor-Wheel UK Limited ++++		UK
Aggreko Uruguay S.A.		Uruguay
Delebau S.A.		Uruguay
Aggreko Holdings Inc +		USA
Aggreko USA LLC +		USA
Aggreko LLC		USA
Aggreko de Venezuela C.A.		Venezuela

*	Registered in Cyprus	**	Administered from Dubai and registered in the UK
***	Aggreko ownership is 70%, remainder is held by Shanduka Africa Investments Limited
+	Intermediate holding companies	++	Finance Company
+++	The financial year end of Aggreko Energy Rental India Private Limited is 31 March due to local taxation requirements
++++	Dormant Company

28 NOTES TO THE GROUP ACCOUNTS – APPENDICES

28.A1 ACCOUNTING POLICIES

DERIVATIVE FINANCIAL INSTRUMENTS

The activities of the Group expose it directly to the financial risks of changes in forward foreign currency exchange rates and interest rates. The Group uses forward foreign exchange contracts, foreign currency options and interest rate swap contracts to hedge these exposures. The Group does not use derivative financial instruments for speculative purposes.

Derivatives are initially recorded and subsequently measured at fair value, which is calculated using standard industry valuation techniques in conjunction with observable market data. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows using market interest rates and the fair value of forward foreign exchange contracts is determined using forward foreign exchange market rates at the reporting date. The treatment of changes in fair value of derivatives depends on the derivative classification. The Group designates derivatives as hedges of highly probable forecasted transactions or commitments ('cash flow hedge').

In order to qualify for hedge accounting, the Group is required to document in advance the relationship between the item being hedged and the hedging instrument. The Group is also required to document and demonstrate an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will be highly effective on an ongoing basis. This effectiveness testing is re-performed at each period end to ensure that the hedge remains highly effective.

CASH FLOW HEDGES

Changes in the fair value of derivative financial instruments that are designated, and effective, as hedges of future cash flows are recognised directly in equity and any ineffective portion is recognised immediately in the income statement. If the cash flow hedge is of a firm commitment or forecasted transaction that subsequently results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges of transactions that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit and loss.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise.

Hedge accounting is discontinued when the hedging instrument no longer qualifies for hedge accounting. At that time any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement.

OVERSEAS NET INVESTMENT HEDGES

Certain foreign currency borrowings are designated as hedges of the Group's overseas net investments, which are denominated in the functional currency of the reporting operation. 

Exchange differences arising from the retranslation of the net investment in foreign entities and of borrowings are taken to equity on consolidation to the extent the hedges are deemed effective. All other exchange gains and losses are dealt with through the income statement.

SHARE-BASED PAYMENTS

IFRS 2 'Share-based Payment' has been applied to all grants of equity instruments. The Group issues equity settled share-based payments to certain employees under the terms of the Group's various employee-share and option schemes. Equity-settled share-based payments are measured at fair value at the date of the grant. The fair value determined at the grant date of equity settled share-based payments is expensed on a straight line basis over the vesting period, based on an estimate of the shares that will ultimately vest. Fair value is measured using the Black-Scholes option-pricing model.

Own shares held under trust for the Group's employee share schemes are classed as Treasury shares and deducted in arriving at shareholders' equity. No gain or loss is recognised on disposal of Treasury shares. Purchases of own shares are disclosed as changes in shareholders' equity.

28.A2 OTHER INTANGIBLE ASSETS

	2013 £ million	2012 £ million
Cost
At 1 January	45	31
Acquisitions	–	16
Disposals	(2)	–
Exchange adjustments	(4)	(2)
At 31 December	39	45
Accumulated amortisation
At 1 January	19	15
Charge for the year	5	5
Disposals	(2)	–
Exchange adjustments	(1)	(1)
At 31 December	21	19
Net book values:
At 31 December	18	26

Amortisation charges in the year mainly comprised amortisation of assets arising from business combinations and have been recorded in administrative expenses.

28.A3 BORROWINGS

(i) Interest rate risk profile of financial liabilities
The interest rate profile of the Group's financial liabilities at 31 December  2013, 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 is fixed Years
Currency:
US Dollar	11	287	298	4.3	6.9
Euro	17	–	17	–	–
Canadian Dollars	14	–	14	–	–
New Zealand Dollars	6	–	6	–	–
South African Rand	5	–	5	–	–
Mexican Pesos	10	–	10	–	–
Russian Rubles	6	–	6	–	–
Brazil Reais	16	–	16	–	–
Indian Rupees	8	–	8	–	–
Singapore Dollars	5	–	5	–	–
Romanian Lieu	8	–	8	–	–
Colombian Peso	4	–	4	–	–
Other currencies	4	–	4	–	–
As at 31 December 2013	114	287	401
Currency:
US Dollar	206	295	501	4.3	7.9
Euro	–	16	16	5.0	0.6
Canadian Dollars	16	–	16	–	–
Australian Dollars	8	–	8	–	–
New Zealand Dollars	10	–	10	–	–
South African Rand	7	–	7	–	–
Mexican Pesos	7	–	7	–	–
Russian Rubles	6	–	6	–	–
Brazilian Reais	19	–	19	–	–
Indian Rupees	10	–	10	–	–
Peruvia Neuvo Sol	5	–	5	–	–
Colombian Peso	6	–	6	–	–
Other currencies	5	–	5	–	–
As at 31 December 2012	305	311	616

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 weighted average interest rate on fixed debt is derived from the fixed leg of each interest rate swap and coupons applying to fixed rate private placement notes.

The effect of the Group's interest rate swaps is to classify £60 million (2012: £78 million) of borrowings in the above table as fixed rate.

The notional principal amount of the outstanding interest rate swap contracts at 31 December 2013 was £60 million (2012: £78 million).

(ii) Interest rate risk profile of financial assets

	Cash at bank and in hand £ million	Short-term deposits £ million	Total £ million
Currency:
US Dollar	8	–	8
Euro	1	–	1
Brazilian Reais	2	–	2
Argentinian Pesos	2	15	17
Australian Dollar	2	–	2
Other currencies	8	–	8
At 31 December 2013	23	15	38
Currency:
US Dollar	4	–	4
Euro	1	–	1
United Arab Emirates Dirham	3	–	3
Brazilian Reais	3	–	3
Chilean Pesos	3	–	3
Other currencies	9	–	9
At 31 December 2012	23	–	23

All of the above cash and short-term deposits are floating rate and earn interest based on relevant LIBID (London Interbank Bid Rate) equivalents or market rates for the currency concerned.

(iii) Preference share capital

	2013 Number	2013 £000	2012 Number	2012 £000
Authorised:
Redeemable preference shares of 25p each	199,998	50	199,998	50

No redeemable preference shares were allotted as at 31 December 2013 and 31 December 2012. The Board is authorised to determine the terms, conditions and manner of redemption of redeemable shares.

28.A4 FINANCIAL INSTRUMENTS

As stated in our accounting policies Note 28.A1  the activities of the Group expose it directly to the financial risks of changes in foreign currency exchange rates and interest rates. The Group uses forward foreign exchange contracts and interest rate swap contracts to hedge these exposures. The movement in the hedging reserve is shown in the Statement of Changes in Equity.

(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 Group's financial assets and financial liabilities at 31 December 2013. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market values have been used to determine fair values.

	2013		2012
	Book value £ million	Fair value £ million	Book value £ million	Fair value £ million
Primary financial instruments held or issued to finance
the Group's operations:
Current borrowings and overdrafts	(36)	(36)	(185)	(185)
Non-current borrowings	(365)	(365)	(431)	(431)
Short-term deposits	15	15	–	–
Cash at bank and in hand	23	23	23	23
Derivative financial instruments held:
Interest rate swaps	(8)	(8)	(13)	(13)
Foreign currency options	11	11	11	11
Forward foreign currency contracts	(1)	(1)	(1)	(1)

(ii) Summary of methods and assumptions

Interest rate swaps and foreign currency derivatives
Fair value is based on market price of these instruments at the balance sheet date. In accordance with IFRS 13, interest rate swaps are considered to be level 2 with fair value being calculated at the present value of estimated future cash flows using market interest rates. Forward foreign currency contracts and currency options are considered to be level 1 as the valuation is based on quoted market prices at the end of the reporting period.

Current borrowings and overdrafts/Short-term deposits
The fair value of short-term deposits 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) Derivative 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.

	2013		2012
	Assets £ million	Liabilities £ million	Assets £ million	Liabilities £ million
Current:
Interest rate swaps – cash flow hedge	–	–	–	–
Forward foreign currency contracts – cash flow hedge	–	(1)	–	(1)
Currency options – cash flow hedge	11	–	5	–
Non-current:
Interest rate swaps – cash flow hedge	–	(8)	–	(13)
Currency options – cash flow hedge	–	–	6	–
	11	(9)	11	(14)

Net fair values of derivative financial instruments
The net fair value of derivative financial instruments that are designated as cash flow hedges at the balance sheet date was:

	2013 £ million	2012 £ million
Interest rate swaps	(8)	(13)
Currency options	11	11
Forward foreign currency contracts	(1)	(1)
	2	(3)

The net fair value losses at 31 December 2013 on open forward exchange contracts that hedge the foreign currency risk of future anticipated revenues are £1 million (2012: £1 million) and that hedge the foreign currency risk of future anticipated expenditure are £nil. These will be allocated to revenues when the forecast revenues occur (2012 anticipated future expenditure: £nil). The net fair value liabilities at 31 December 2013 on open interest swaps that hedge interest risk are £8 million (2012: liabilities of £13 million). These will be debited to the income statement finance cost over the remaining life of each interest rate swap. Currency options are financial assets which are considered to have two components (intrinsic element and time element). The intrinsic element hedges the foreign currency risk of future anticipated revenues and this will be allocated to revenues when the forecast revenues occur. The time element is expensed to the income statement in line with the life of the options.

Hedge of net investment in foreign entity
The Group has designated as a hedge of the net investment in its overseas subsidiaries foreign currency denominated borrowings as detailed in the table below. The fair value of these borrowings were as follows:

	2013 £ million	2012 £ million
US Dollar	287	500
Euro	17	16
Canadian Dollars	14	16
Australian Dollars	–	8
New Zealand Dollars	6	10
South African Rand	5	6
Mexican Pesos	10	8
Singapore Dollars	5	–
Russian Rubles	6	6

The foreign exchange gain of £8 million (2012: gain of £18 million) on translation of the borrowings into Sterling has been recognised in exchange reserves.

(iv) The exposure of the Group to interest rate changes when borrowings reprice is as follows: 

As at 31 December 2013
	<1 year £ million	1-5 years £ million	>5 years £ million	Total £ million
Total borrowings	36	183	182	401
Effect of interest rate swaps and other fixed rate debt	–	(45)	(242)	(287)
	36	138	(60)	114
As at 31 December 2012
	<1 year £ million	1-5 years £ million	>5 years £ million	Total £ million
Total borrowings	184	199	233	616
Effect of interest rate swaps and other fixed rate debt	(16)	–	(295)	(311)
	168	199	(62)	305

As at 31 December 2013 and 31 December 2012 all of the Group's floating debt was exposed to repricing within 3 months of the balance sheet date. The Group's interest rate swap portfolio is reviewed on a regular basis to ensure it is consistent with Group policy as described above.

The effective interest rates at the balance sheet date were as follows:

	2013	2012
Bank overdrafts	6.2%	8.6%
Bank borrowings	3.1%	2.7%
Private placement	4.2%	4.2%

Maturity of financial liabilities

The table below analyses the Group's financial liabilities and net-settled derivative financial liabilities into the relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

As at 31 December 2013
	<1 year	1-2 years	2-5 years	>5 years
Borrowings	36	38	145	182
Derivative financial instruments	1	–	–	8
Trade and other payables	72	1	8	61
	109	39	153	251
As at 31 December 2012
	<1 year	1-2 years	2-5 years	>5 years
Borrowings	184	–	199	233
Derivative financial instruments	1	–	–	13
Trade and other payables	131	–	3	80
	316	–	202	326

No trade payable balances have a contractual maturity greater than 90 days.

Derivative financial instruments settled on a gross basis
The table below analyses the Group's derivative financial instruments which will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

As at 31 December 2013
	<1 year
Forward foreign exchange contracts – cashflow hedges
Outflow	(76)
Inflow	75
	(1)
As at 31 December 2012
	<1 year
Forward foreign exchange contracts – cashflow hedges
Outflow	53
Inflow	(52)
	1

All of the Group's forward foreign currency exchange contracts are due to be settled within one year of the balance sheet date.

28.A5 SHARE CAPITAL

SHARE OPTIONS

The options under the Savings-Related Share Option Schemes have been granted at a discount of 20% on the share price calculated over the three days prior to the date of invitation to participate, mature after three to five years and are normally exercisable in the six months following the maturity date. The options under the US Stock Purchase Plan have been granted at a discount of 15% to the share price on the date of grant, mature after two years and are normally exercisable in the three months following the maturity date.

For the Sharesave and US Stock Options the Black-Scholes option-pricing model was used. The fair value per option granted and the assumptions used in the calculation are as follows:

Grant type	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave
Grant date	31-Oct-08	30-Oct-09	30-Oct-09	20-Nov-09	25-Oct-10	25-Oct-10	25-Oct-10	25-Oct-10
Share price at grant date (£)	4.3	7.6	7.6	7.5	16.9	16.9	16.9	16.9
Option price (£)	4.4	5.5	5.5	5.5	12.4	12.4	12.9	12.4
Number granted	211,082	70,609	8,439	16,577	48,187	111,294	3,119	13,793
Vesting period (years)	5	5	4	3	3	3	4	5
Expected volatility (%)	32.4	37.0	39.7	42.6	43.4	43.4	40.0	38.1
Expected life (years)	5.3	5.3	4.3	1.4	3.3	3.3	4.3	5.3
Risk free rate (%)	3.8	2.8	2.5	2.1	1.0	1.0	1.4	1.7
Expected dividends expressed as a dividend yield (%)	2.0	1.4	1.4	1.4	0.9	0.9	0.9	0.9
Fair value per option (£)	1.2	3.3	3.2	3.0	6.8	6.8	6.8	7.4

Grant type	Sharesave	Sharesave	Sharesave UK	Sharesave Australia	Sharesave Canada	Sharesave International	Sharesave UAE	Sharesave UK
Grant date	25-Oct-10	25-Oct-10	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11
Share price at grant date (£)	16.9	16.9	17.3	17.3	17.3	17.3	17.3	17.3
Option price (£)	12.4	12.9	12.6	13.4	12.7	12.8	12.1	12.6
Number granted	21,402	3,962	74,416	3,869	8,065	16,189	116,222	13,707
Vesting period (years)	5	5	3	3	3	3	3	5
Expected volatility (%)	38.1	38.1	41.6	41.6	41.6	41.6	41.6	38.8
Expected life (years)	5.3	5.3	3.3	3.3	3.3	3.3	3.3	5.3
Risk free rate (%)	1.7	1.7	0.9	0.9	0.9	0.9	0.9	1.5
Expected dividends expressed as a dividend yield (%)	0.9	0.9	0.8	0.8	0.8	0.8	0.8	0.8
Fair value per option (£)	7.4	7.1	6.9	6.5	6.8	6.8	7.2	7.7

Grant type	Sharesave Australia	Sharesave	Sharesave International	Sharesave Australia	Sharesave France	Sharesave France	US Stock Plan	Sharesave UK
Grant date	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	16-Oct-12
Share price at grant date (£)	17.3	17.3	17.3	17.3	17.3	17.3	17.3	22.8
Option price (£)	13.4	12.7	12.8	12.1	13.6	13.6	14.7	19.1
Number granted	2,378	588	889	31,756	10,826	6,725	75,769	65,861
Vesting period (years)	5	5	5	5	4	5	2	3
Expected volatility (%)	38.8	38.8	38.8	38.8	41.2	38.8	32.2	30.4
Expected life (years)	5.3	5.3	5.3	5.3	4.3	5.3	2.1	3.3
Risk free rate (%)	1.5	1.5	1.5	1.5	1.2	1.5	0.6	0.3
Expected dividends expressed as a dividend yield (%)	0.8	0.8	0.8	0.8	0.8	0.8	0.8	1.0
Fair value per option (£)	7.3	7.6	7.6	7.9	7.0	7.2	4.3	6.2
Grant type	Sharesave	Sharesave Canada	Sharesave France	Sharesave Germany	Sharesave France	Sharesave Netherlands	Sharesave Spain	Sharesave UAE
Grant date	16-Oct-12	16-Oct-12	16-Oct-12	16-Oct-12	16-Oct-12	16-Oct-12	16-Oct-12	16-Oct-12
Share price at grant date (£)	22.8	22.8	22.8	22.8	22.8	22.8	22.8	22.8
Option price (£)	18.9	19.1	19.2	19.2	19.2	19.2	19.2	19.3
Number granted	8,193	1,648	8,226	1,466	1,320	5,182	470	142,689
Vesting period (years)	3	3	4	3	3	3	3	3
Expected volatility (%)	30.4	30.4	38.4	30.4	30.4	30.4	30.4	30.4
Expected life (years)	3.3	3.3	3.3	3.3	5.3	5.3	5.3	5.3
Risk free rate (%)	0.3	0.3	0.6	0.3	0.3	0.3	0.3	0.3
Expected dividends expressed as a dividend yield (%)	1.0	1.0	1.0	1.0	1.0	1.0	1.0	1.0
Fair value per option (£)	6.3	6.2	7.9	6.1	6.1	6.1	6.1	6.1
Grant type	US Stock Plan	Sharesave UK	Sharesave Australia	Sharesave Canada	Sharesave France	Sharesave Germany	Sharesave Ireland	Sharesave Netherlands
Grant date	16-Oct-12	08-Oct-13	08-Oct-13	08-Oct-13	08-Oct-13	08-Oct-13	08-Oct-13	08-Oct-13
Share price at grant date (£)	22.8	14.7	14.7	14.7	14.7	14.7	14.7	14.7
Option price (£)	19.4	13.0	13.0	13.0	13.0	13.0	13.0	13.0
Number granted	67,808	131,591	7,911	11,222	2,987	735	1,186	11,778
Vesting period (years)	2	3	3	3	4	3	3	3
Expected volatility (%)	29.2	33.4	33.4	33.4	32.9	33.4	33.4	33.4
Expected life (years)	2.1	3.5	3.5	3.5	4.5	3.5	3.5	3.5
Risk free rate (%)	0.3	1.0	1.0	1.0	1.4	1.0	1.0	1.0
Expected dividends expressed as a dividend yield (%)	1.0	1.7	1.7	1.7	1.7	1.7	1.7	1.7
Fair value per option (£)	5.3	3.9	3.9	3.9	4.3	3.9	3.9	3.9
Grant type	Sharesave UAE	Sharesave Chile	Sharesave Mexico	Sharesave New Zealand	Sharesave Singapore	US Stock Plan
Grant date	08-Oct-13	08-Oct-13	08-Oct-13	08-Oct-13	08-Oct-13	08-Oct-13
Share price at grant date (£)	14.7	14.7	14.7	14.7	14.7	14.7
Option price (£)	13.0	13.0	13.0	13.0	13.0	12.5
Number granted	161,005	1,124	2,469	2,530	19,577	83,239
Vesting period (years)	3	3	3	3	3	2
Expected volatility (%)	33.4	33.4	33.4	33.4	33.4	35.1
Expected life (years)	3.5	3.5	3.5	3.5	3.5	2.2
Risk free rate (%)	1.0	1.0	1.0	1.0	1.0	0.5
Expected dividends expressed as a dividend yield (%)	1.7	1.7	1.7	1.7	1.7	1.7
Fair value per option (£)	3.9	3.9	3.9	3.9	3.9	3.7

The expected volatility is based on the volatility of the total return from the Company's shares over the period to grant equal in length to the expected life of the awards. The expected life is the average expected period to exercise. The risk free interest rate is the expected return on UK Gilts of a similar life.

A summary of movements in share options in Aggreko shares is shown below:

	Sharesave schemes Number of Shares	Weighted average exercise price (£)	US Stock option plans Number of Shares	Weighted average exercise price (£)	Long-term Incentive Plans Number of Shares	Weighted average exercise price (£)
Outstanding at 1 January 2013	1,174,842	10.65	146,248	16.82	921,902	nil
Granted	354,115	13.03	83,239	12.52	484,810	nil
Exercised	(297,592)	5.49	(57,592)	14.64	(360,114)	nil
Lapsed	(194,480)	15.80	(20,573)	17.02	(147,443)	nil
Outstanding at 31 December 2013	1,036,885	11.97	151,322	15.22	899,155	nil
Weighted average contractual life (years)	2		1		1

The weighted average share price during the year for options exercised over the year was £6.97 (2012: £4.97). The total credit for the year relating to employee share based payment plans was £2 million (2012: charge of £13 million), all of which related to equity-settled share based payment transactions.

Options outstanding over ordinary shares as at 31 December 2013 (including those of the Executive Directors), together with the exercise prices and dates of exercise, are as follows:

	Price per share	Earliest exercise date	Latest exercise date	2013 Number	2012 Number	Market price (£)1
Sharesave – Nov 2007	£5.04	Nov 2012	May 2013	–	31,435	5.73
	£4.91	Nov 2012	May 2013	–	4,390	5.73
Sharesave – Oct 2008 France 4 year	£4.37	Jan 2013	Jun 2013	–	25,921	4.33
Sharesave – Oct 2008 5 year	£4.37	Jan 2014	Jun 2014	125,092	132,220	4.33
Sharesave – Oct 2008 France 5 year	£4.37	Jan 2014	Jun 2014	8,617	8,617	4.33
Sharesave UK 3 year – Oct 2009	£5.53	Jan 2013	Jun 2013	–	94,166	7.60
Sharesave International 3 year – Oct 2009	US$8.77	Jan 2013	Jun 2013	–	113,029	7.60
	US$8.77	Jan 2013	Jun 2013	–	16,577	7.60
	€ 6.02	Jan 2013	Jun 2013	–	22,232	7.60
	CAD$9.53	Jan 2013	Jun 2013	–	3,515	7.60
Sharesave French 4 year – Oct 2009	€ 6.02	Jan 2014	Jun 2014	4,558	5,953	7.60
Sharesave UK 5 year – Oct 2009	£5.53	Jan 2015	Jun 2015	30,143	30,143	7.60
Sharesave International 5 year – Oct 2009	US$8.77	Jan 2015	Jun 2015	20,207	20,207	7.60
	€ 6.02	Jan 2015	Jun 2015	1,295	1,295	7.60
Long-term Incentive Plan – Apr 2010	–	Apr 2013	Oct 2013	–	502,140	11.89
US Stock Option Plan – Oct 2010	US$22.52	Nov 2012	Jan 2013	–	8,287	16.85
Sharesave UK 3 year – Oct 2010	£12.39	Jan 2014	Jun 2014	37,818	40,645	16.85
Sharesave International 3 year – Oct 2010	US$19.57	Jan 2014	Jun 2014	77,985	81,742	16.85
	CA$20.21	Jan 2014	Jun 2014	724	902	16.85
	AU$20.21	Jan 2014	Jun 2014	4,860	4,860	16.85
	€ 14.39	Jan 2014	Jun 2014	4,855	6,305	16.85
Sharesave French 4 year – Oct 2010	€ 14.52	Jan 2015	Jun 2015	1,996	2,855	16.85
Sharesave UK 5 year – Oct 2010	£12.39	Jan 2016	Jun 2016	8,000	11,337	16.85
Sharesave International 5 year – Oct 2010	US$19.57	Jan 2016	Jun 2016	11,797	11,818	16.85
	CA$20.21	Jan 2016	Jun 2016	296	296	16.85
	AU$20.21	Jan 2016	Jun 2016	3,602	3,602	16.85
	€ 14.39	Jan 2016	Jun 2016	416	416	16.85
Sharesave French 5 year – Oct 2010	€ 14.52	Jan 2016	Jun 2016	3,384	3,962	16.85
Long-term Incentive Plan – Apr 2011	–	Apr 2014	Oct 2014	153,863	157,350	15.35
US Stock Option Plan – Oct 2011	US$23.69	Nov 2013	Jan 2014	12,805	70,310	17.28
Sharesave UK 3 year – 28 Oct 2011	£12.60	Jan 2015	Jun 2015	61,290	70,822	17.28
Sharesave International 3 year – 28 Oct 2011	US$19.43	Jan 2015	Jun 2015	92,096	104,964	17.28
	CA$20.38	Jan 2015	Jun 2015	4,508	5,397	17.28
	AU$20.23	Jan 2015	Jun 2015	3,106	3,869	17.28
	€ 14.60	Jan 2015	Jun 2015	14,368	15,819	17.28
Sharesave French 4 year – 28 Oct 2011	€ 15.52	Jan 2016	Jun 2016	8,113	10,672	17.28
Sharesave UK 5 year – 28 Oct 2011	£12.60	Jan 2017	Jun 2017	12,946	13,707	17.28
Sharesave International 5 year – 28 Oct 2011	US$19.43	Jan 2017	Jun 2017	24,377	26,491	17.28
	AU$20.23	Jan 2017	Jun 2017	2,378	2,378	17.28
	€ 14.60	Jan 2017	Jun 2017	684	889	17.28
Sharesave French 5 year – 28 Oct 2011	€ 15.52	Jan 2017	Jun 2017	5,566	6,339	17.28
Long-term Incentive Plan – Apr 2012	–	Apr 2015	Oct 2015	260,482	262,412	21.86
US Stock Option Plan – 16 Oct 2012	US$31.15	Nov 2014	Jan 2015	55,771	67,651	22.78
Sharesave UK 3 year – 16 Oct 2012	£19.11	Jan 2016	Jun 2016	20,794	65,861	22.78
Sharesave International 3 year – 16 Oct 2012	US$31.00	Jan 2016	Jun 2016	69,266	142,689	22.78
	CA$30.26	Jan 2016	Jun 2016	1,648	1,648	22.78
	AU$29.61	Jan 2016	Jun 2016	6,153	8,193	22.78
	€ 23.74	Jan 2016	Jun 2016	3,568	8,438	22.78
Sharesave French 4 year – 16 Oct 2012	€ 23.74	Jan 2017	Jun 2017	7,437	8,226	22.78
Long-term Incentive Plan – Aug 2013	–	Aug 2016	Feb 2017	484,810	–	16.42
US Stock Option Plan – 8 Oct 2013	US$20.14	Nov 2015	Jan 2016	82,746	–	14.72
Sharesave UK 3 year – 8 Oct 2013	£13.03	Jan 2017	Jun 2017	130,418	–	14.72
Sharesave International 3 year – 8 Oct 2013	US$20.60	Jan 2017	Jun 2017	161,005	–	14.72
	CAD$21.29	Jan 2017	Jun 2017	11,222	–	14.72
	AU$22.12	Jan 2017	Jun 2017	7,911	–	14.72
	NZ$25.53	Jan 2017	Jun 2017	2,530	–	14.72
	SGD$26.12	Jan 2017	Jun 2017	19,577	–	14.72
	MXN269.78	Jan 2017	Jun 2017	2,469	–	14.72
	CLP 10377.02	Jan 2017	Jun 2017	1,124	–	14.72
	€ 15.49	Jan 2017	Jun 2017	13,699	–	14.72
Sharesave French 4 year – 8 Oct 2013	€ 15.49	Jan 2018	Jun 2018	2,987	–	14.72
				2,087,362	2,242,992

1 Market price as at the date of grant.

28.A6 PENSIONS

Overseas
Pension arrangements for overseas employees vary, and schemes reflect best practice and regulation in each particular country. The charge against profit is the amount of contributions payable to the defined contribution pension schemes in respect of the accounting period. The pension cost attributable to overseas employees for 2013 was £7 million (2012: £7 million).

United Kingdom
The Group operates pension schemes for UK employees. The Aggreko plc Pension Scheme ('the Scheme') is a funded, contributory, defined benefit scheme. Assets are held separately from those of the Group under the control of the Directors of Aggreko Pension Scheme Trustee Limited. The Scheme is subject to valuations at intervals of not more than three years by independent actuaries.

The Trustee of the Scheme has control over the operation, funding and investment strategy of the Scheme but works closely with the Company to agree funding and investment strategy.

A valuation of the Scheme was carried out as at 31 December 2011 using the Attained Age method to determine the level of contributions to be made by the Group. The actuaries adopted a valuation basis linked to market conditions at the valuation date. Assets were taken at market value. The major actuarial assumptions used were:

Return on investments	4.2%
Growth in average pay levels	4.9%
Increase in pensions	3.3%

At the valuation date, the market value of the Scheme's assets (excluding AVCs) was £59 million which was sufficient to cover 78% of the benefits that had accrued to members, after making allowances for future increases in earnings.

As part of the valuation at 31 December 2011, the Company and the trustees have agreed upon a Schedule of Contributions and a Recovery Plan. During 2012 the Company contributions for benefits building up in the future were 28.6% of pensionable earnings. Since 1 February 2013 the Company has paid contributions of 35.9% of pensionable earnings. To address the Scheme deficit the Company made contributions of £0.6 million in January 2012, £3.5 million in December 2012 and £2.5 million in January 2013.

The Company plans to make further additional contributions of £2 million in 2014 and £1.25 million each year until the year ended 31 December 2018. Employee contributions are 6% of pensionable earnings.

The Scheme closed to all new employees joining the Group after 1 April 2002. New employees are given the option to join a defined contribution scheme. Contributions of £1 million were paid to the scheme during the year (2012: £1 million). There are no outstanding or prepaid balances at the year end.

An update of the Scheme was carried out by a qualified independent actuary using the latest available information for the purposes of this statement. The major assumptions used in this update by the actuary were:

	31 Dec 2013	31 Dec 2012
Rate of increase in salaries	5.2%	4.8%
Rate of increase in pensions in payment	3.5%	3.2%
Rate of increase in deferred pensions	3.7%	3.3%
Discount rate	4.5%	4.5%
Inflation assumption	3.7%	3.3%
Longevity at age 65 for current pensioners (years)
Men	23.9	23.8
Women	26.5	26.3
Longevity at age 65 for future pensioners (years)
Men	26.6	26.5
Women	29.3	29.1

The assets in the Scheme were:

	Value at 31 Dec 2013 £ million	Value at 31 Dec 2012 £ million	Value at 31 Dec 2011 £ million
Equities
– UK Equities	8	12	11
– Overseas Equities	10	14	12
– Diversified Growth	7	–	–
– Absolute Return	7	–	–
Property	4	4	4
Index-linked Bonds	22	16	16
Fixed interest Bonds	6	–	–
Bonds	13	19	15
Cash	1	5	1
Total	78	70	59

There is a risk of asset volatility leading to a deficit in the Scheme. Working with the Company, the Trustee has agreed investment derisking triggers which, when certain criteria are met, will decrease corporate bond and fixed interest gilt holdings and increase the holding of index linked bonds. Over time, this will result in an investment portfolio which better matches the liabilities of the Scheme thereby reducing the risk of asset volatility. However there remains a significant level of investment mismatch in the Scheme. This is deliberate and is aimed at maximising the Scheme's long term investment return whilst retaining adequate control of the funding risks.

The amounts included in the balance sheet arising from the Group's obligations in respect of the Scheme are as follows:

	2013 £ million	2012 £ million	2011 £ million
Fair value of assets	78	70	59
Present value of funded obligations	(84)	(74)	(65)
Liability recognised in the balance sheet	(6)	(4)	(6)

An alternative method of valuation is the estimated cost of buying out benefits at 31 December 2013 with a suitable insurer. This amount represents the amount that would be required to settle the Scheme liabilities at 31 December 2013 rather than the Company continuing to fund the ongoing liabilities of the Scheme. The Company estimates the amount required to settle the Scheme's liabilities at 31 December 2013 is around £111 million which gives a Scheme shortfall on a buyout basis of approximately £33 million.

The components of the defined benefit cost as follows:

	2013 £ million	2012 £ million
Current service costs	2	2
Net interest cost
– Interest expense on liabilities	3	3
– Interest income on assets	(3)	(3)
Administrative expenses and taxes	–	–
	2	2

The majority of the £2 million cost was included within administrative expenses in the income statement. 

Changes in the present value of the defined benefit obligation are as follows:
	2013 £ million	2012 £ million
Present value of obligation at 1 January	74	65
Service cost	2	2
Interest cost	3	3
Benefits paid	(1)	(1)
Remeasurements
– Effect of changes in demographic assumptions	–	1
– Effect of changes in financial assumptions	6	5
– Effect of experience adjustments	–	(1)
Present value of obligation at 31 December	84	74
Defined benefit obligation by participant status
Actives	41	34
Deferreds	27	24
Pensioners	16	16
	84	74

The measurement of the defined benefit obligation is particularly sensitive to changes in key assumptions as described below: 

• The discount rate has been selected following actuarial advice and taking into account the duration of the liabilities. A decrease in the discount rate of 0.5% p.a. would result in a £13 million increase in the present value of the defined benefit obligation. The weighted average duration of the defined benefit obligation liabilities is around 27 years. 
• The inflation assumption adopted is consistent with the discount rate used. It is used to set the assumptions for pension increases, salary increases and deferred revaluations. An increase in the inflation rate of 0.5% p.a. would result in a £12 million increase in the present value of the defined benefit obligation. 
• The longevity assumptions adopted are based on those recommended by the Scheme Actuary advising the Trustee of the Scheme and reflect the most recent mortality information available at the time of the Trustee actuarial valuation. The increase in the present value of the defined benefit obligation due to members living one year longer would be £2 million.

There is a risk that changes in the above assumptions could increase the deficit in the Scheme. Other assumptions used to value the defined benefit obligation are also uncertain, although their effect is less material.

Present value of Scheme assets are as follows:
	2013 £ million	2012 £ million
Fair value of Scheme assets at 1 January	70	59
Interest income	3	3
Employer contributions	5	6
Benefits paid	(1)	–
Remeasurements – return on plan assets (excluding interest income)	1	2
Fair value of Scheme assets at 31 December	78	70
Analysis of the movement in the balance sheet
	2013 £ million	2012 £ million
At 1 January	(4)	(6)
Defined benefit cost included in income statement	(2)	(2)
Contributions	5	6
Benefits paid	–	1
Total remeasurements	(5)	(3)
At 31 December	(6)	(4)
Cumulative actuarial gains and losses recognised in equity
	2013 £ million	2012 £ million
At 1 January	30	28
Actuarial losses recognised in the year	5	2
At 31 December	35	30

The actual return on Scheme assets was £5 million (2012: £5 million).

Expected cash flows in future years
Expected employer contributions for the year ended 31 December 2014 are £4 million. Expected total benefit payments: approximately £1 million per year for next ten years.