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Strategy

All numbers quoted in the Business Review exclude the impact of exceptional items unless otherwise stated.

Our strategy, which was initially developed as a result of an in-depth review of Aggreko's business in 2003, has remained consistent for the last three years, and continues to be the basis of our business planning. At its heart, Aggreko's mission is to deliver long-term shareholder value by investing in, and managing effectively, its core business of renting mission-critical equipment on a global basis. The last three year's trading results, shown below, indicate to us that the strategy is the right one, and we continue to work relentlessly to implement it.

Aggreko Group – (excluding pass-through fuel)

	2007	2003	CAGR
Revenue (£m)	634	324	18%
Trading profit (£m)	131	42	33%
Trading margin Return on capital	21%	13%
employed (ROCE)*	26%	13%

*calculated using average net operating assets

In Aggreko, strategy is developed by an iterative process of examining the factors which will affect the business in the years ahead. We seek to develop a deep understanding of the drivers of demand, changing customer requirements, the competitive environment, as well as likely developments in technology and regulation. We look at our own strengths and weaknesses, and at the opportunities and threats that are likely to face us. From this analysis we develop a list of investment and operational options, and analyse their relative risks and rewards, bearing in mind the capabilities and resources of the Group.

Business Line Strategy

Supporting the Group strategy, Aggreko develops operational strategies for our two different lines of business:

• The Local business, which delivers the complete range of our services to customers who are typically within a few hours driving time of our service centres;
• The International Power Projects business which provides large power plants on a global basis to power utilities, the military and major industrial users.

Looking Ahead

The strategy we developed in 2003, and updated in 2006, is working well and has produced excellent results. We have strengthened our competitive position in North, Central & South America, the Middle East, Africa, Asia and Australasia. Our performance in Europe has not been as strong, but 2006 was a turning point for the region with good revenue and profit growth giving us the confidence that the business is on its way to recovery.

The acquisition of GE Energy Rentals, completed in December 2006, has been a major step forward in the implementation of our strategy. The strategic rationale behind the acquisition was that, at a time when Aggreko was growing rapidly, it increased our fleet by about 30%, and at a lower cost than buying new fleet. Secondly, it strengthened our position in important markets, such as South and Central America, USA, Europe, and in certain important market sectors such as Major Events (for example, the Football World Cup and the Olympics). Thirdly, GE Energy Rentals employed a large number of talented people who could help support our future growth. An update on the progress of the integration of the business is set out in the Trading Review, however the early indications are that the strategic rationale for the acquisition was sound.

In terms of the Local business, a short-term priority is to get the GE Energy Rentals fleet re-branded and ready-for-rent. We will continue to drive operational improvement, focusing on turning our ERP system into a competitive advantage. We intend to grow our market share in North America and Europe and we will expand the footprint of our Local business in Asia and South America. As well as organic growth, we will also look for opportunities to grow our business through the acquisition of companies or assets in our core markets.

The International Power Projects business has made good progress expanding further in Africa, South America and Asia. Our strategy is to continue to invest heavily in this business to enable it to further increase its scale and reach. This will deliver increasing revenues and profits and will reduce the volatility inherent in the power projects business. A growing proportion of our future investment is likely to be in gas-fuelled generators, which produce lower emissions and which, for some customers, are cheaper to run than diesel generators. We think that this technology could become an important niche in the International Power Projects marketplace in the years ahead.

We believe that the drivers of demand in International Power Projects are strong, and will remain so for as long as developing countries are growing their economies faster than they can invest in new permanent power generation capacity. Aggreko's ability to offer large amounts of reliable power, immediately available and delivered to the point of need, without the requirement for customers to commit large amounts of capital is a compelling proposition for many customers, and will remain so for years to come.