Notes to the Company Accounts

For the year ended 31 December 2011

28 Company accounting policies

Accounting convention

These financial statements have been prepared on the going concern basis, under the historical cost convention, as modified by the revaluation of certain financial instruments in accordance with the Companies Act 2006 and applicable accounting standards in the United Kingdom. A summary of the more important Company accounting policies is set out below.

Tangible fixed assets

Tangible fixed assets are carried at cost less accumulated depreciation and impairment losses. Cost includes purchase price, and directly attributable costs of bringing the assets into the location and condition where it is capable for use. Borrowings costs are not capitalised.

Fixed assets are depreciated on a straight line basis at annual rates estimated to write off the cost of each asset over its useful life from the date it is available for use. The principal period of depreciation used is as follows:

Impairment of tangible fixed assets

Tangible fixed assets are depreciated and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Value in use is calculated using estimated cashflows. These are discounted using an appropriate long-term pre-tax interest rate. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (income-generating units).

Foreign currencies

At individual Company level, transactions denominated in foreign currencies are translated at the rate of exchange on the day the transaction occurs. At the year end, monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary assets are translated at the historical rate. In order to hedge its exposure to certain foreign exchange risks, the Company enters into forward foreign exchange contracts. The Company's financial statements are presented in Sterling, which is the Company's functional currency.

Derivative financial instruments

The accounting policy is identical to that applied by the consolidated Group as set in Derivative Finacial Instruments within the Notes to the Group Reports, however the UK GAAP standards are applied specifically FRS 26 'Financial instruments: Measurement' and FRS 29 'Financial Instruments: Disclosures'.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds, net of transaction costs, and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate.

Cash flow statement and related party disclosures

The Company is included in the Group Accounts of Aggreko plc, which are publicly available. Consequently, the Company is not required to produce a cash flow statement under the terms of Financial Reporting Standard 1 'Cash Flow Statements (revised 1996)'. The Company is also exempt under the terms of Financial Reporting Standard 8 'Related Party Disclosures' from disclosing related party transactions with entities that are part of the Group.

Taxation

The charge for ordinary taxation is based on the profit/loss for the year and takes into account full provision for deferred tax, using the approach set out in FRS 19, 'Deferred Tax' in respect of timing differences on a nondiscounted basis. Such timing differences arise primarily from the differing treatment for taxation and accounting purposes of provisions and depreciation of fixed assets.

Pensions

The Company operates both a defined benefit pension scheme and a defined contribution pension scheme. The accounting policy is identical to that applied by the consolidated Group as set out on Employee benefits in the Notes to the Group Accounts.

Investments

Investments in subsidiary undertakings are stated in the balance sheet of the Company at cost, or nominal value of the shares issued as consideration where applicable, less provision for any impairment in value. Share-based payments recharged to subsidiary undertakings are treated as capital contributions and are added to investments.

Leases

Leases where substantially all of the risks and rewards of ownership are not transferred to the Company are classified as operating leases. Rentals under operating leases are charged against operating profit on a straight line basis over the term of the lease.

Share-based payments

The accounting policy is identical to that applied by the consolidated Group as set out in the Share-based Payments within the Notes to the Group Accounts with the exception that shares issued by the Company to employees of its subsidiaries for which no consideration is received are treated as an increase in the Company's investment in those subsidiaries.

Dividend distribution

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

29 Dividends

Refer to Note 10 of the Group Accounts.

30 Auditors' remuneration

31 Tangible fixed assets

The tangible fixed assets of the Company comprise vehicles, plant and equipment.

32 Investments

As part of a Group reorganisation the Company was allotted 21 shares of £1 each in Aggreko Holdings Limited for a total consideration of £342.2 million. The Company also disposed of a non-interest bearing receivable with Aggreko International Projects Limited which was classified as an investment under FRS 25 'Financial Instruments: Disclosure and Presentation' to Aggreko Holdings Limited. No gain or loss was recognised on the disposal as the consideration received was equal to book value. 

Details of the Company's principal subsidiary undertakings are set out in Note 26 to the Group Accounts.

33 Debtors

34 Borrowings

The bank overdrafts and borrowings are all unsecured.

(i) Maturity of financial liabilities

The maturity profile of the borrowings was as follows:

(ii) Borrowing facilities

The Company has the following undrawn committed floating rate borrowing facilities available at 31 December 2011 in respect of which all conditions precedent had been met at that date:

Since the year end, we have arranged a further £30 million of committed facilities.

(iii) Interest rate risk profile of financial liabilities

The interest rate profile of the Company's financial liabilities at 31 December 2011, after taking account of the interest rate swaps used to manage the interest profile, was:

The floating rate financial liabilities principally comprise debt which carries interest based on different benchmark rates depending on the currency of the balance and are normally fixed in advance for periods between one and three months.

The effect of the Company's interest rate swaps is to classify £81.7 million (2010: £110.9 million) of borrowings in the above table as fixed rate.

The notional principal amount of the outstanding interest rate swap contracts at 31 December 2011 was £81.7 million (2010: £110.9 million).

(iv) Preference share capital

No redeemable preference shares were allotted as at 31 December 2011 and 31 December 2010. The Board is authorised to determine the terms, conditions and manner of redemption of redeemable shares.

35 Financial instruments

(i) Fair values of financial assets and financial liabilities

The following table provides a comparison by category of the carrying amounts and the fair values of the Company's financial assets and financial liabilities at 31 December 2011. Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction between informed and willing parties, other than a forced or liquidation sale and excludes accrued interest. Where available, market values have been used to determine fair values.

(ii) Summary of methods and assumptions

Interest rate swaps and forward foreign currency contracts
Fair value is based on market price of these instruments at the balance sheet date.

Current borrowings and overdrafts/liquid resources
The fair value of liquid resources and current borrowings and overdrafts approximates to the carrying amount because of the short maturity of these instruments.

Non-current borrowings
In the case of non-current borrowings, the fair value approximates to the carrying value reported in the balance sheet.

(iii) Financial instruments

Numerical financial instruments disclosures are set out below. Additional disclosures are set out in the financial review and accounting policies relating to risk management.

Net fair values of derivative financial instruments

The net fair value of derivative financial instruments and designated for cash flow hedges at the balance sheet date were:

The net fair value losses at 31 December 2011 on open interest rate swaps that hedge interest risk are £13.5 million (2010: losses of £9.5 million). These will be debited to the profit and loss account interest charge over the remaining life of each interest rate swap.

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

As at 31 December 2011 and 31 December 2010 all of the Company's floating debt was exposed to repricing within 3 months of the balance sheet date.

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

36 Other creditors: amounts falling due within one year

37 Deferred tax

38 Pension commitments

39 Share capital

During the year 275,871 ordinary shares of 20 pence each and 60,439 ordinary shares of 13 549/ 775 pence each have been issued at prices ranging from £1.89 to £13.89 (US$22.52) to satisfy the exercise of options under the Savings-Related Share Option Schemes ('Sharesave') by eligible employees. In addition 666,562 shares were allotted to US participants in the Long-term Incentive Plan by the allotment of new ordinary shares at 20 pence per share. Net proceeds from the issue of ordinary shares were £1.6 million (2010: £1.7 million).

Further information on share capital, including in respect of the return on capital is provided in Note 21 to the Group financial statements.

40 Reconciliation of movements in shareholders' funds

41 Operating lease commitments – minimum lease payments

42 Profit and loss account

As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account and related notes. The profit for the financial year of the Company was £263.0 million (2010: £77.6 million).