Chris Weston, Chief Executive Officer, commented:
“Whilst the trading environment over the last twelve months has been challenging I am pleased with the progress that we are making across the Group implementing our transformation programme to return the business to growth. We are investing in the right technologies to reduce costs to our customers; improving our customer focus and delivering the efficiencies we set out in August 2015. These improvements, taken with our market leadership, technical capability and the need for our products being as relevant as ever mean I am confident we are well on track to create a stronger business for the future.”
- Full year profit before tax in line with market expectations
- Strong Power Solutions order intake of over 1.3GW (Eurasia Industrial: 299MW (2015: 125MW))
- Low oil price impacted a number of our markets, particularly North America
- Full year dividend maintained reflecting confidence in the strength and prospects of the Group
Business Priorities Highlights
- Customer: New Customer Relationship Management (CRM) system introduced as part of broader digitisation
- Technology: New HFO in production; increasing the proportion of market leading diesel and gas engines in the fleet
- Efficiency: On track to deliver cash savings across the Group in excess of £100 million
Business unit highlights
- North American revenue down 18% driven by low oil price
- Oil and gas and petrochemical and refining sectors significantly down in volume and price impacting both revenues and margins
- Impairment charge of £30m relating to small gas generators
- Offsets solid growth in construction and shipping sector
- Solid growth in Continental and Northern Europe, revenues up 5% and 9% respectively
- Temperature control grew by 7%, supported by two bolt-on acquisitions
- Revenue in line with the prior year excluding the European Games
- Strong performances in Eurasia and Africa and stable performance in Middle East
- Eurasia: 28% growth in revenue excluding currency; 299MW of order intake (2015: 125MW)
- Challenging market conditions across much of Latin America and parts of Asia
- Revenue decrease driven by off-hiring of Mozambique
- Strong order-intake of 1,057MW (2015: 640MW); pricing consistent with medium term return targets
- Progress made with Venezuelan overdue debt
- Reduced volumes and material discount to original Argentina contracts, majority of impact in 2017
- Awaiting result of 200MW standby volume tender; very competitive process
In Rental Solutions, our North American business is showing signs of stabilisation after a difficult 2016. Most sectors are up on the prior year to date and the higher oil price is giving ground for cautious optimism. We expect our Europe and Australia Pacific businesses to continue to perform well throughout 2017.
In Power Solutions, the Industrial business is expected to perform well, driven by two of our largest businesses, the Middle East and Eurasia.
In Power Solutions Utility, the pipeline remains healthy and is well spread geographically, although at this early stage in the year the order intake has been lower than in the prior year. Results in this division will also reflect the material impact of pricing renegotiations in Argentina, our last legacy contract.
Fleet capital expenditure is expected to be £300 million, with investments in HFO and in our more fuel efficient diesel engines. As usual, this spend will be flexed as required depending on market conditions.
We expect to see growth across the group, augmented by incremental annualised cost savings of £25 million from the second half (with a similar one off charge). However, this will be more than offset by the significant impact of Argentina and as a result we expect full year profit before tax and pre-exceptional items to be lower than last year.
View the Read the press release for more information.