Notes to the Group Accounts

For the year ended 31 December 2011

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
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2011 that would be expected to have a material impact on the Group.

(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2011 and not early adopted

• IAS 19, 'Employee benefits' was amended in June 2011. The impact on the Group will be 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. We do not expect this to have a material impact on the Group.
•  IFRS 9, 'Financial instruments', issued in November 2009. This standard is the first step in the process to replace IAS 39, 'Financial instruments: recognition and measurement'. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Group's accounting for its financial assets. The standard is not applicable until 1 January 2015 but is available for early adoption. However, the standard has not yet been endorsed by the EU.

There are no other 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 2011. 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. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportion of the share of the acquiree's net assets.

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.

Aggreko's segments comprise Europe, Middle East & South East Europe, North America and International Local (together the Group's Local business) and International Power Projects (IPP). IPP is managed as a single business, with the deployment of assets varying from year to year depending on the location of projects.

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

This is reflected by the Group's divisional management and organisational structure and the Group's internal financial reporting systems. The segmental analysis is in Note 4 to the Accounts.

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. Details of the exceptional items are provided in Note 9 to the financial statements. 

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. 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.

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

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 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 hedge

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 finance costs 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 finance costs in 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 other income in the income statement.

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 FIFO or 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. Actuarial gains and losses are recognised in full, directly in retained earnings, in the period in which they occur and are shown in the statement of comprehensive income and expense. The current service cost of the pension charge as well as the expected return on pension scheme assets and interest on pension scheme liabilities 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 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 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 and subsequently measured at amortised 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

IFRS 2 'Share-based Payment' has been applied to all grants of equity instruments. The Group issues equitysettled 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 for employee sharesave options. The fair value of the Long-term Incentive Plans is calculated by reference to the Aggreko plc share price on the date of grant.

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.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and deposits with a maturity of three months or less. The definition is also used for the cashflow statement.

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.

Property, plant and equipment

Rental fleet accounts for £1,015 million, or around 93%, of the net book value of property, plant and equipment used in our business; the great majority of equipment in the rental fleet is depreciated on a straight-line basis to a residual value of zero over 8 years, although we do have some classes of non-power fleet which we depreciate over 10 years. The annual fleet depreciation charge of £175 million (2010: £147 million) relates to the estimated service lives allocated to each class of fleet asset. Asset lives are reviewed regularly and changed if necessary to reflect current thinking on their remaining lives in light of technological change, prospective economic utilisation and the physical condition of the assets..

Intangible assets

In accordance with IFRS 3 (revised) 'Business Combinations' goodwill arising on acquisition of assets and subsidiaries is capitalised and included in intangible assets. IFRS 3 (revised) also requires the identification of other acquired intangible assets. The techniques used to value these intangible assets are in line with internationally used models but do require the use of estimates and forecasts which may differ from actual outcomes. Future results are impacted by the amortisation period adopted for these items and, potentially, by any differences between forecast and actual outcomes related to individual intangible assets. The amortisation charge for intangible assets in 2011 was £4 million (2010: £3 million). Substantially all of this charge relates to the amortisation of intangible assets arising from business combinations.

Goodwill of £65 million (2010: £60 million) is not amortised but is tested annually for impairment and carried at cost less accumulated impairment losses. The impairment review calculations require the use of forecasts related to the future profitability and cash generating ability of the acquired assets. There were no impairment charges in 2011 and 2010.

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. 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, the Group has historically had a low level of bad debt. When a trade receivable is uncollectible it is written off against the provision for impairment of trade receivables. At 31 December 2011 the provision for impairment of trade receivables in the balance sheet was £36 million (2010: £33 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 20 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.

In the last five years we have delivered growth of 394% in Total Shareholder Return – which compares with 8% and 4% for the FTSE 100 and FTSE 250 respectively. This value creation comes from two sources. First, our share price has increased as a result of the 34% compound growth in earnings per share; this earnings growth is the result of very high rates of capital investment in the business (about £1.4 billion invested over the last five years, compared with depreciation over the same period of about £770 million), along with one large and several small acquisitions (about £146 million spent over the last five years). The second source of investor return has been dividends which have grown at a compound rate of 25%. In addition, in 2011 we had a special return to shareholders of 55 pence per share, worth £148 million.

With respect to our balance sheet structure, our objective is to safeguard the Group's financial position through economic cycles. Given the proven ability of the business to fund organic growth from operating cashflows, and the nature of our business model, it seems 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 which is the level the Group has run at, on average, since the Group listed on the Stock Exchange in 1997. 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: +/- £100 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 2010, Net Debt to EBITDA was around 0.3 times despite investing significantly ahead of depreciation over the previous few years. This reflected the highly cash generative nature of the business model and in particular the high returns earned in our fast growing International Power Projects business. Given this level of gearing relative to our target of around 1 times, we decided to make a return of capital to shareholders thereby increasing the ratio of Net Debt to EBITDA to 0.7 times at 31 December 2011. This was completed in July 2011 by way of a B share scheme which returned 55 pence per share (approximately £148 million) to shareholders. Our priority remains to invest in the organic growth of our business supported by bolt on acquisitions but if we still have the capacity, we will continue to review the potential for future returns of value.

The Group maintains sufficient facilities to meet its normal funding requirements over the medium term. At 31 December 2011 these facilities totalled £669 million in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement notes. The private placement was completed during the first half of 2011. 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 2011, these stood at 28 times and 0.7 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. Since the year end we have put in place a further £30 million of committed facilities.

Net debt amounted to £365 million at 31 December 2011 and, at that date, un-drawn committed facilities were £289 million.

Interest rate risk

The Group's policy is to minimise the exposure to interest rates by ensuring an appropriate balance of fixed and floating rates. The Group's primary funding is at floating rates through its bank facilities. In order to manage the associated interest rate risk, the Group uses interest rate swaps to vary the mix of fixed and floating rates. At 31 December 2011, £260 million of the net debt of £365 million was at fixed rates of interest resulting in a fixed to floating rate net debt ratio of 71:29 (2010: 84:16). 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 £1.2 million (2010: £0.5 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, Euro and Sterling.

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, largely due to the movement in the US Dollar, decreased our revenues by £26.0 million (2010: increased by £23.4 million) and trading profit by £8.7 million (2010: increased by £6.5 million) for the year ended 31 December 2011. 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 £9.2 million (2010: £9.1 million) in trading profit¹ in terms of translation. For every 5 cents movement in the Euro to GBP exchange rate there is an approximate impact of £0.5 million (2010: £0.5 million) in trading profit in terms of translation. Currency translation also gave rise to a £11.9 million decrease in reserves as a result of year on year movements in the exchange rates (2010: increase of £39.1 million). For every 5 cents movement in the Dollar and Euro, there is an approximate impact in equity of £10.4 million and £0.5 million respectively (2010: £3.3 million and £0.6 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 IPP 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

	2011 £ million	2010 £ million
Profit for the year	260.1	213.1
Adjustments for:
Tax	63.6	91.3
Depreciation	185.5	158.3
Amortisation of intangibles	3.6	2.8
Finance income	(1.0)	(0.5)
Finance cost	19.7	10.6
Profit on sale of PPE (see below)	(4.6)	(2.7)
Share based payments	19.8	18.7
Changes in working capital (excluding the effects of exchange differences on consolidation):
Increase in inventories	(29.3)	(27.7)
Increase in trade and other receivables	(74.4)	(73.5)
Increase in trade and other payables	65.8	77.5
Cash generated from operations	508.8	467.9

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

	2011 £ million	2010 £ million
Net book amount	8.0	5.1
Profit on sale of PPE	4.6	2.7
Proceeds from sale of PPE	12.6	7.8

3 Cash and cash equivalents

	2011 £ million	2010 £ million
Cash at bank and in hand	16.8	20.0
Short-term bank deposits	36.4	6.4
	53.2	26.4

The effective interest rate on short-term bank deposits was 0.2% (2010: 0.2%); these deposits have an average 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:

	2011 £ million	2010 £ million
Cash and cash equivalents	53.2	26.4
Bank overdrafts (Note 17)	(18.7)	(16.2)
	34.5	10.2

4 Segmental reporting
(a) Revenue by segment

	Total revenue		Inter-segment revenue		External revenue
	2011 £ million	2010 £ million	2011 £ million	2010 £ million	2011 £ million	2010 £ million
Middle East & South East Europe	113.2	97.6	0.1	–	113.1	97.6
Europe	189.5	164.3	0.1	0.1	189.4	164.2
North America	258.8	246.8	0.1	0.9	258.7	245.9
International Local	173.5	188.8	0.6	1.1	172.9	187.7
Local business	735.0	697.5	0.9	2.1	734.1	695.4
International Power Projects	662.8	536.0	0.8	1.5	662.0	534.5
Eliminations	(1.7)	(3.6)	(1.7)	(3.6)	–	–
Group	1,396.1	1,229.9	–	–	1,396.1	1,229.9

(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) International Power Projects (IPP) is a global segment administered from Dubai. At the end of 2010 and 2011 the assets of the IPP segment are predominantly located in the Middle East, Asia-Pacific, Latin America and Africa.

(b) Profit by segment

	Trading profit pre intangible asset amortisation		Amortisation of intangible assets arising from business combinations		Trading profit
	2011 £ million	2010 £ million	2011 £ million	2010 £ million	2011 £ million	2010 £ million
Middle East & South East Europe	19.9	23.1	(0.1)	(0.1)	19.8	23.0
Europe	21.8	18.7	(0.1)	(0.1)	21.7	18.6
North America	51.8	46.8	(2.5)	(1.7)	49.3	45.1
International Local	30.7	55.9	(0.7)	(0.7)	30.0	55.2
Local business	124.2	144.5	(3.4)	(2.6)	120.8	141.9
International Power Projects	217.1	170.0	(0.1)	(0.1)	217.0	169.9
Group	341.3	314.5	(3.5)	(2.7)	337.8	311.8

	Gain/(loss) on sale of PPE		Operating profit
	2011 £ million	2010 £ million	2011 £ million	2010 £ million
Middle East & South East Europe	(0.3)	0.1	19.5	23.1
Europe	(0.1)	1.4	21.6	20.0
North America	2.7	2.3	52.0	47.4
International Local	0.7	0.2	30.7	55.4
Local business	3.0	4.0	123.8	145.9
International Power Projects	1.6	(1.3)	218.6	168.6
Group	4.6	2.7	342.4	314.5
Finance costs – net			(18.7)	(10.1)
Profit before taxation			323.7	304.4
Taxation			(63.6)	(91.3)
Profit for the year			260.1	213.1

(c) Depreciation and amortisation by segment

	2011 £ million	2010 £ million
Middle East & South East Europe	20.2	18.5
Europe	21.1	20.7
North America	33.3	28.2
International Local	24.1	20.3
Local business	98.7	87.7
International Power Projects	90.4	73.4
Group	189.1	161.1

(d) Capital expenditure on property, plant and equipment and intangible assets by segment

	2011 £ million	2010 £ million
Middle East & South East Europe	29.0	26.3
Europe	25.8	27.0
North America	67.6	54.1
International Local	74.2	23.8
Local business	196.6	131.2
International Power Projects	229.5	146.3
Group	426.1	277.5

Capital expenditure comprises additions of property, plant and equipment (PPE) of £418.2 million (2010: £268.8 million), acquisitions of PPE of £4.8 million (2010: £5.6 million), and acquisitions of other intangible assets of £3.1 million (2010: £3.1 million).

(e) Assets/(liabilities) by segment

	Assets		Liabilities
	2011 £ million	2010 £ million	2011 £ million	2010 £ million
Middle East & South East Europe	147.6	121.7	(14.9)	(13.2)
Europe	173.3	162.6	(44.8)	(39.8)
North America	310.4	273.8	(40.4)	(43.2)
International Local	243.7	174.9	(37.8)	(30.1)
Local business	875.0	733.0	(137.9)	(126.3)
International Power Projects	876.7	656.8	(259.4)	(197.7)
	1,751.7	1,389.8	(397.3)	(324.0)
Tax and finance payable	20.5	14.7	(75.4)	(110.1)
Derivative financial instruments	0.2	0.1	(13.9)	(10.5)
Borrowings	–	–	(399.0)	(142.4)
Retirement benefit obligation	–	–	(5.5)	(3.2)
Total assets/(liabilities) per balance sheet	1,772.4	1,404.6	(891.1)	(590.2)

(f) Average number of employees by segment

	2011 Number	2010 Number
Middle East & South East Europe	320	300
Europe	828	799
North America	865	810
International Local	655	492
Local business	2,668	2,401
International Power Projects	1,594	1,313
Group	4,262	3,714

(g) Reconciliation of net operating assets to net assets

	2011 £ million	2010 £ million
Net operating assets	1,354.4	1,065.8
Retirement benefit obligation	(5.5)	(3.2)
Net tax and finance payable	(54.9)	(95.4)
	1,294.0	967.2
Borrowings and derivative financial instruments	(412.7)	(152.8)
Net assets	881.3	814.4

5 Profit before taxation

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

	2011 £ million	2010 £ million
Staff costs (Note 7)	270.9	238.7
Cost of inventories recognised as an expense (included in cost of sales)	72.9	68.7
Depreciation of property, plant and equipment	185.5	158.3
Amortisation of intangibles (included in administrative expenses)	3.6	2.8
Gain on disposal of property, plant and equipment	(4.6)	(2.7)
Trade receivables impairment	4.8	9.5
Other operating lease rentals payable
– Plant and equipment	15.4	14.5
– Property	13.2	11.3

6 Auditors' remuneration

	2011 £000	2010 £000
Audit services
Fees payable to the Company's auditor for the audit of the Company's annual accounts and consolidated financial statements	160	130
Fees payable to the Company's auditor and its associates for other services:
– The audit of the Company's subsidiaries, pursuant to legislation	492	419
– Other services pursuant to legislation	29	28
– Tax services	86	180
– All other services	131	156

7 Employees and Directors

Staff costs for the Group during the year:

	2011 £ million	2010 £ million
Wages and salaries	221.7	194.3
Social security costs	22.1	18.4
Share-based payments	19.8	18.7
Pension costs – defined contribution plans	5.6	5.1
Pension costs – defined benefit plans (Note 25)	1.7	2.2
	270.9	238.7

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

The key management comprise Executive and Non-executive Directors.

	2011 £ million	2010 £ million
Salaries and short-term benefits	4.5	4.1
Post-employment benefits	0.3	0.2
Share-based payments	3.9	4.0
	8.7	8.3

8 Net finance charge

	2011 £ million	2010 £ million
Finance costs on bank loans and overdrafts	(19.7)	(10.6)
Finance income on bank balances and deposits	1.0	0.5
	(18.7)	(10.1)

9 Taxation

	2011 £ million	2010 Restated £ million
Analysis of charge in year
Current tax expense:
– UK corporation tax	47.1	44.8
– Double taxation relief	(24.5)	(21.0)
	22.6	23.8
– Overseas taxation	71.7	70.7
	94.3	94.5
Adjustments in respect of prior years:
– UK	(2.8)	(0.1)
– Overseas	(5.4)	(4.6)
	(8.2)	(4.7)
	86.1	89.8
Deferred taxation (Note 20):
– temporary differences arising in current year	8.1	(5.4)
– movements in respect of prior years	(2.0)	6.9
– exceptional release	(28.6)	–
	63.6	91.3

Prior year numbers have been restated to reflect a change between UK corporation tax and overseas taxation.

The UK Finance Act 2011 introduced legislation exempting the profits of foreign branches of UK resident companies from UK corporation tax; this is applicable to a significant portion of our International Power Projects business. The impact of this exemption was that in 2011 there was a release to the income statement of a previously created deferred tax liability of £28.6 million which will no longer crystallise. Given its size and nature, this release is treated as an exceptional item.

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

	2011 £ million	2010 £ million
Deferred tax on hedging reserve movements	0.7	0.9
Deferred tax on retirement benefits	1.2	0.2
Current tax on exchange movements	1.0	(5.1)
	2.9	(4.0)

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

	2011 £ million	2010 £ million
Current tax on share-based payments	7.3	2.7
Deferred tax on share-based payments	5.5	11.1
	12.8	13.8

Variances between the current tax charge and the standard 26.5% (2010: 28.0%) UK corporate tax rate when applied to profit on ordinary activities for the year are as follows:

	2011 £ million	2010 £ million
Profit before taxation	323.7	304.4
Tax calculated at 26.5% (2010: 28.0%) standard UK corporate rate	85.8	85.2
Differences between UK and overseas tax rates	15.5	3.0
Permanent differences	(1.2)	1.5
Deferred tax effect of future rate changes	0.8	(0.8)
Deferred tax assets not recognised	1.3	0.2
Tax on current year profit	102.2	89.1
Prior year adjustments – current tax	(8.0)	(4.7)
Prior year adjustments – deferred tax	(2.0)	6.9
Total tax on profit – pre-exceptional	92.2	91.3
Deferred tax – exceptional release	(28.6)	–
Total tax on profit – post-exceptional	63.6	91.3
Effective tax rate – pre-exceptional	28.5%	30.0%

10 Dividends

	2011 £ million	2011 per share (p)	2010 £ million	2010 per share (p)
Final paid	33.2	12.35	22.1	8.23
Interim paid	18.9	7.20	17.6	6.55
	52.1	19.55	39.7	14.78

In addition, the Directors are proposing a final dividend in respect of the financial year ended 31 December 2011 of 13.59 pence per share which will absorb an estimated £35.6 million of shareholders' funds. It will be paid on 22 May 2012 to shareholders who are on the register of members on 20 April 2012.

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.

	2011	2010
Profit for the year (£ million)	260.1	213.1
Weighted average number of ordinary shares in issue (million)	265.6	268.5
Basic earnings per share (pence)	97.91	79.37

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.

	2011	2010
Profit for the year (£ million)	260.1	213.1
Weighted average number of ordinary shares in issue (million)	265.6	268.5
Adjustment for share options and B shares (million)	1.1	1.3
Diluted weighted average number of ordinary shares in issue (million)	266.7	269.8
Diluted earnings per share (pence)	97.49	78.98

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:

	2011 £ million	2010 £ million
Profit for the year	260.1	213.1
Exclude exceptional items	(28.6)	–
Adjusted earnings	231.5	213.1

An adjusted earnings per share figure is presented below.

	2011	2010
Basic earnings per share pre-exceptional items (pence)	87.14	79.37
Diluted earnings per share pre-exceptional items (pence)	86.76	78.98

12 Goodwill

	2011 £ million	2010 £ million
Cost
At 1 January	60.4	51.3
Acquisitions (Note 27)	4.8	7.2
Exchange adjustments	(0.2)	1.9
At 31 December	65.0	60.4
Accumulated impairment losses	–	–
Net book value	65.0	60.4

Goodwill impairment tests

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

	2011 £ million	2010 £ million
Middle East & South East Europe	1.2	1.2
Europe	10.9	11.2
North America	40.0	40.3
International Local	11.4	6.2
Local business	63.5	58.9
International Power Projects	1.5	1.5
Group	65.0	60.4

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 7.4% after tax (2010: 9.3%), 10.0% before tax (2010: 12.9%) based on the weighted average cost of capital (WACC) of the Group. 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 longterm growth rate of 2.0%.

As at 31 December 2011, 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

	2011 £ million	2010 £ million
Cost
At 1 January	28.9	24.1
Acquisitions (Note 27)	3.1	3.1
Exchange adjustments	(0.5)	1.7
At 31 December	31.5	28.9
Accumulated amortisation
At 1 January	11.9	8.6
Charge for the year	3.6	2.8
Exchange adjustments	(0.3)	0.5
At 31 December	15.2	11.9
Net book values:
At 31 December	16.3	17.0

Amortisation charges in the year comprised amortisation of assets arising from business combinations of £3.5 million (2010: £2.7 million) and amortisation of other intangible assets of £0.1 million (2010: £0.1 million). Amortisation charges in the year have been recorded in administrative expenses.

14 Property, plant and equipment

Year ended 31 December 2011
	Freehold properties £ million	Short leasehold properties £ million	Rental fleet £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2011	46.2	15.8	1,659.8	71.4	1,793.2
Exchange adjustments	(0.1)	(0.4)	(0.5)	(0.6)	(1.6)
Additions	12.3	1.4	392.4	12.1	418.2
Acquisitions (Note 27)	–	0.1	4.2	0.5	4.8
Disposals	(0.1)	(0.2)	(43.3)	(4.5)	(48.1)
At 31 December 2011	58.3	16.7	2,012.6	78.9	2,166.5
Accumulated depreciation
At 1 January 2011	15.3	8.1	858.1	52.9	934.4
Exchange adjustments	–	(0.3)	0.5	(0.5)	(0.3)
Charge for the year	1.5	1.4	174.7	7.9	185.5
Disposals	(0.1)	(0.2)	(35.5)	(4.3)	(40.1)
At 31 December 2011	16.7	9.0	997.8	56.0	1,079.5
Net book values:
At 31 December 2011	41.6	7.7	1,014.8	22.9	1,087.0
At 31 December 2010	30.9	7.7	801.7	18.5	858.8

Included within freehold properties are assets in the course of construction totalling £17.2 million (2010: £6.0 million) in relation to the Group's new manufacturing facility.

Year ended 31 December 2010
	Freehold properties £ million	Short leasehold properties £ million	Rental fleet £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2010	40.2	13.8	1,379.0	65.7	1,498.7
Exchange adjustments	0.4	0.6	66.3	2.2	69.5
Additions	5.7	1.6	254.4	7.1	268.8
Acquisitions	–	–	5.1	0.5	5.6
Disposals	(0.1)	(0.2)	(45.0)	(4.1)	(49.4)
At 31 December 2010	46.2	15.8	1,659.8	71.4	1,793.2
Accumulated depreciation
At 1 January 2010	12.7	6.7	718.7	47.6	785.7
Exchange adjustments	0.4	0.2	32.8	1.3	34.7
Charge for the year	2.3	1.4	146.8	7.8	158.3
Disposals	(0.1)	(0.2)	(40.2)	(3.8)	(44.3)
At 31 December 2010	15.3	8.1	858.1	52.9	934.4
Net book values:
At 31 December 2010	30.9	7.7	801.7	18.5	858.8
At 31 December 2009	27.5	7.1	660.3	18.1	713.0

15 Inventories

	2011 £ million	2010 £ million
Raw materials and consumables	140.6	110.6
Work in progress	6.8	7.2
	147.4	117.8

16 Trade and other receivables

	2011 £ million	2010 £ million
Trade receivables	300.5	225.4
Less: provision for impairment of receivables	(36.3)	(33.4)
Trade receivables – net	264.2	192.0
Prepayments and accrued income	89.0	84.4
Other receivables	29.6	33.0
Total receivables	382.8	309.4

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:

	2011 £ million	2010 £ million
Sterling	19.4	17.8
Euro	37.7	37.5
US Dollar	198.8	175.0
Other currencies	126.9	79.1
	382.8	309.4

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

	2011 £ million	2010 £ million
At 1 January	33.4	26.2
Net provision for receivables impairment	4.8	9.5
Receivables written off during the year as uncollectable	(2.0)	(3.3)
Exchange	0.1	1.0
At 31 December	36.3	33.4

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 2011
	Fully performing £ million	Past due £ million	Impaired £ million	Total £ million
Middle East & South East Europe	19.4	4.0	1.7	25.1
Europe	24.7	7.1	2.9	34.7
North America	23.8	18.6	1.4	43.8
International Local	15.8	12.3	1.6	29.7
Local business	83.7	42.0	7.6	133.3
International Power Projects	58.4	80.1	28.7	167.2
Group	142.1	122.1	36.3	300.5
31 December 2010
	Fully performing £ million	Past due £ million	Impaired £ million	Total £ million
Middle East & South East Europe	8.5	6.2	1.7	16.4
Europe	20.0	5.7	2.6	28.3
North America	18.0	14.4	1.4	33.8
International Local	10.4	13.2	2.4	26.0
Local business	56.9	39.5	8.1	104.5
International Power Projects	32.3	63.3	25.3	120.9
Group	89.2	102.8	33.4	225.4

Trade receivables are considered impaired if they are not considered recoverable. 38% of the amounts past due are less than 30 days past due (2010: 43%).

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

Local business

Our Local business serves customers in Middle East & South East Europe, Europe, North America, Asia, Australasia, Central & South America and Africa. 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 Asian Games in Guangzhou, which was included in the International Local business segment. 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.

International Power Projects (IPP)

Our International Power Projects business concentrates on medium to very large contracts. Most projects in this business are worth over £1 million and some can be worth over £10 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 IPP business although the risk of a major default is high.

The total trade receivables balance as at 31 December 2011 for our IPP business was £167.2 million (2010: £120.9 million). Within this balance receivable balances totalling £98.4 million (2010: £69.5 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 £68.8 million (2010: £51.4 million) is deemed to be either acceptable or payment cover is not obtainable in a cost effective manner.

17 Borrowings

	2011 £ million	2010 £ million
Non-current
Bank borrowings	202.5	111.3
Private placement notes	178.3	–
	380.8	111.3
Current
Bank overdrafts	18.7	16.2
Bank borrowings	18.2	31.1
	36.9	47.3
Total borrowings	417.7	158.6
Short-term deposits	(36.4)	(6.4)
Cash at bank and in hand	(16.8)	(20.0)
Net borrowings	364.5	132.2

Overdrafts and borrowings are unsecured.

(i) Maturity of financial liabilities

The maturity profile of the borrowings was as follows:

	2011 £ million	2010 £ million
Within 1 year, or on demand	36.9	47.3
Between 1 and 2 years	170.0	10.1
Between 2 and 3 years	–	81.8
Between 3 and 4 years	32.5	–
Between 4 and 5 years	–	19.4
Greater than 5 years	178.3	–
	417.7	158.6

(ii) Borrowing facilities

The Group has the following undrawn committed floating rate borrowing facilities available at 31 December 2010 in respect of which all conditions precedent had been met at that date:

	2011 £ million	2010 £ million
Expiring within 1 year	–	68.0
Expiring between 1 and 2 years	95.3	30.0
Expiring between 2 and 3 years	–	166.6
Expiring between 3 and 4 years	193.2	–
Expiring between 4 and 5 years	–	205.5
Expiring after 5 years	–	–
	288.5	470.1

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

(iii) Interest rate risk profile of financial liabilities

The interest rate profile of the Group's financial liabilities at 31 December 2011, 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:
Sterling	–	–	–	–	–
US Dollar	100.2	243.2	343.4	4.5	7.9
Euro	–	16.8	16.8	5.0	1.6
Canadian Dollars	15.2	–	15.2	–	–
Brazil Reais	11.0	–	11.0	–	–
Indian Rupees	9.0	–	9.0	–	–
New Zealand Dollars	8.9	–	8.9	–	–
Other currencies	13.4	–	13.4	–	–
At 31 December 2011	157.7	260.0	417.7
Sterling	–	–	–	–	–
US Dollar	13.7	93.6	107.3	4.6	5.8
Euro	0.1	17.3	17.4	5.0	2.6
Brazil Reais	16.2	–	16.2	–	–
Indian Rupees	10.1	–	10.1	–	–
Other currencies	7.6	–	7.6	–	–
At 31 December 2010	47.7	110.9	158.6

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 £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) Interest rate risk profile of financial assets

	Cash at bank and in hand £ million	Short-term deposits £ million	Total £ million
Currency:
Sterling	–	6.4	6.4
US Dollar	5.6	25.3	30.9
Euro	1.1	4.3	5.4
Other currencies	10.1	0.4	10.5
At 31 December 2011	16.8	36.4	53.2
Currency:
Sterling	0.1	2.1	2.2
US Dollar	5.0	2.2	7.2
Euro	1.8	2.0	3.8
South African Rand	7.1	–	7.1
Other currencies	6.0	0.1	6.1
At 31 December 2010	20.0	6.4	26.4

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 government bond rates for the currency concerned.

(v) Preference share capital

	2011 Number	2011 £000	2010 Number	2010 £000
Authorised:
Redeemable preference shares of 25p each	199,998	50	199,998	50

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.

18 Financial instruments

As stated in our accounting policies Note 1 within foreign currencies above, 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 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. Market values have been used to determine fair values.

	2011		2010
	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	(36.9)	(36.9)	(47.3)	(47.3)
Non-current borrowings	(380.8)	(380.8)	(111.3)	(111.3)
Short-term deposits	36.4	36.4	6.4	6.4
Cash at bank and in hand	16.8	16.8	20.0	20.0
Derivative financial instruments held:
Interest rate swaps	(13.5)	(13.5)	(9.5)	(9.5)
Forward foreign currency contracts	(0.2)	(0.2)	(0.9)	(0.9)

(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. In accordance with IFRS 7, 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. Foreign exchange contracts 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.

	2011		2010
	Assets £ million	Liabilities £ million	Assets £ million	Liabilities £ million
Current:
Interest rate swaps – cash flow hedge	–	–	–	(1.1)
Forward foreign currency contracts – cash flow hedge	0.2	(0.4)	0.1	(1.0)
Non-current:
Interest rate swaps – cash flow hedge	–	(13.5)	–	(8.4)
	0.2	(13.9)	0.1	(10.5)

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:

	2011 £ million	2010 £ million
Contracts with negative fair values:
Interest rate swaps	(13.5)	(9.5)
Forward foreign currency contracts	(0.2)	(0.9)
	(13.7)	(10.4)

The net fair value losses at 31 December 2011 on open forward exchange contracts that hedge the foreign currency risk of future anticipated expenditure are £0.2 million (2010: £0.9 million). These will be allocated to the cost of the asset as a basis adjustment when the forecast capital expenditure occurs. The net fair value liability at 31 December 2011 on open interest swaps that hedge interest risk are £13.5 million (2010: liability of £9.5 million). These will be debited to the income statement finance cost over the remaining life of each interest rate swap.

Hedge of net investment in foreign entity

The Group has designated as a hedge of the net investment in its overseas subsidiaries its US Dollar, Euro, Canadian Dollar and New Zealand Dollar denominated borrowings. The fair value of the US Dollar borrowings at 31 December 2011 was £339.8 million (2010: £107.1 million), Euro borrowings £16.8 million (2010: £17.3 million), Canadian Dollar borrowings £15.2 million (2010: £nil) and New Zealand Dollar borrowings £8.9 million (2010: £nil). The foreign exchange loss of £14.3 million (2010: loss of £2.8 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 2011
	<1 year £ million	1-5 years £ million	>5 years £ million	Total £ million
Total borrowings	36.9	202.5	178.3	417.7
Effect of interest rate swaps and other fixed rate debt	–	(16.8)	(243.2)	(260.0)
	36.9	185.7	(64.9)	157.7
As at 31 December 2010
	<1 year £ million	1-5 years £ million	>5 years £ million	Total £ million
Total borrowings	47.3	111.3	–	158.6
Effect of interest rate swaps	(29.0)	(17.3)	(64.6)	(110.9)
	18.3	94.0	(64.6)	47.7

As at 31 December 2011 and 31 December 2010 all of the Group's floating debt was exposed to repricing within 3 months of the balance sheet date. No interest rate swaps are due to mature in 2012. The Group's interest rate swap portfolio is reviewed on a regular basis to ensure it is consistent with Group policy as described Interest Rate Risk section above.

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

	2011	2010
Bank overdraft	9.4%	10.9%
Bank borrowings	2.4%	2.3%
Private placement	4.5%	–

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 2011
	<1 year	1-2 years	2-5 years	>5 years
Borrowings	36.9	170.0	32.5	178.3
Derivative financial instruments	0.4	1.0	–	12.5
Trade and other payables	148.2	4.6	1.9	66.2
	185.5	175.6	34.4	257.0
As at 31 December 2010
	<1 year	1-2 years	2-5 years	>5 years
Borrowings	47.3	10.1	101.2	–
Derivative financial instruments	2.1	–	1.5	6.9
Trade and other payables	114.3	–	3.1	–
	163.7	10.1	105.8	6.9

No trade payable balances have a contractual maturity greater than 90 days. In respect of suppliers, the Group had approximately 91 days (2010: 86 days) credit outstanding as at the balance sheet date.

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 2011
	<1 year
Forward foreign exchange contracts – cashflow hedges
Outflow	21.7
Inflow	(21.3)
	0.4
As at 31 December 2010
	<1 year
Forward foreign exchange contracts – cashflow hedges
Outflow	50.7
Inflow	(49.8)
	0.9

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

19 Trade and other payables

	2011 £ million	2010 £ million
Trade payables	144.3	112.7
Other taxation and social security payable	18.5	5.4
Other payables	53.4	31.0
Accruals and deferred income	165.5	159.6
	381.7	308.7

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

20 Deferred tax

	2011 £ million	2010 £ million
At 1 January	(20.3)	(29.5)
Impact of reduction in UK CT rate	1.0	0.8
Charge to the income statement (Note 9)	(7.1)	(2.3)
Credit to other comprehensive income	1.9	1.1
Credit to equity	5.5	11.1
Exchange differences	(1.5)	(1.5)
Exceptional release	28.6	–
At 31 December	8.1	(20.3)

The proposed reductions in the main rate of UK corporation tax by 1 per cent per year to 23 per cent by 1 April 2014 are expected to be enacted separately each year. The overall effect of the changes from 25 per cent to 23 per cent, if these applied to the deferred tax balance at 31 December 2011 would be to reduce the deferred tax asset by approximately £1.4 million (being £0.7 million recognised in 2012 and £0.7 million recognised in 2013).

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 £8.1 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 £2.6 million (2010: £1.4 million) of which £2.6 million (2010: £1.4 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 £2.9 million (2010: £3.2 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 2011	(65.8)	33.9	(31.9)
(Charge)/credit to the income statement	(23.5)	13.3	(10.2)
Credit to other comprehensive income	–	1.9	1.9
Credit to equity	–	5.5	5.5
Exchange differences	(1.5)	–	(1.5)
Exceptional release (Note 9)	28.6	–	28.6
At 31 December 2011	(62.2)	54.6	(7.6)
Deferred tax assets
	Accelerated capital depreciation £ million	Other temporary differences £ million	Total £ million
At 1 January 2011	3.8	7.8	11.6
Credit to the income statement	0.6	3.5	4.1
At 31 December 2011	4.4	11.3	15.7

The net deferred tax asset due after more than one year is £8.1 million (2010: liability of £20.3 million).

21 Share capital

	2011 Number of shares	2011 £000	2010 Number of shares	2010 £000
(i) Ordinary shares of 13549/775 pence (2010: 20 pence)
At 1 January	274,318,271	54,864	273,473,338	54,695
Share consolidation (31 for 32 shares as at 8 July 2011*)	(8,601,897)	–	–	–
Share split:
Deferred ordinary shares (Note (i))	–	(12,278)	–	–
B shares (Note (iii))	–	(448)	–	–
Transfer to capital redemption reserve (Note (ii))	–	(5,772)	–	–
Employee share option scheme	1,002,872	197	844,933	169
At 31 December	266,719,246	36,563	274,318,271	54,864
(ii) Deferred ordinary shares of 6 18/25 pence (2010: nil)
At 1 January	–	–	–	–
Share split (Note (i))	182,700,915	12,278	–	–
At 31 December	182,700,915	12,278	–	–
(iii) B shares of 618/25 pence (2010: nil)
At 1 January	–	–	–	–
Share split (Note (iii))	6,663,731	448	–	–
At 31 December	6,663,731	448	–	–
* Based on 275,260,704 ordinary shares of 20 pence each on the record date of 8 July 2011.

In July 2011 the Group completed a return of capital using a B share structure. The main terms of the return of capital and related consolidation of ordinary shares were:

• the issue of 1 B share of par value 618/ 25 pence for every 1 existing ordinary share held on the record date (this resulted in the creation of 275,260,704 B shares); and
• the issue of 31 new ordinary shares of par value 13 549/ 775 pence for every 32 existing ordinary shares held on the record date.

As a result of the return of capital:

(i). From the 275,260,704 B shares created a special dividend of 55 pence per ordinary share was paid on 182,700,915 B shares, which then converted into deferred shares of negligible value resulting in a cash payment from the company of £100.5 million on 19 July 2011;

(ii). A further 85,896,058 B shares were bought back at 55 pence each resulting in a cash payment from the company of £47.2 million on 19 July 2011. As a result of this transaction £5,772k was transferred from ordinary share capital to the capital redemption reserve being 85,896,058 shares at par value 618/ 25; and

(iii). The Company intends to offer to purchase the remaining 6,663,731 B shares in the future at 55 pence each.

During the year 275,871 ordinary shares of 20 pence each and 60,439 ordinary shares of 13 549/ 775 pence 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 of 20 pence each.

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.

There is no legal obligation upon the Company to satisfy the options existing under the Savings-Related Share Option Schemes other than by the allotment of new issue shares.

It is intended to satisfy awards to US participants in the Long-term Incentive Programme by the allotment of new shares. The maximum award would be made on achieving the performance targets set out within the Remuneration Report.

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	11-Nov-05	11-Nov-05	10-Nov-06	10-Nov-06	10-Nov-06	9-Nov-07	9-Nov-07	9-Nov-07
Share price at grant date (£)	2.5	2.5	3.7	3.7	3.7	5.7	5.7	5.7
Option price (£)	1.9	1.9	2.8	2.8	2.9	5.0	5.0	4.9
Number granted	143,559	33,118	308,910	109,230	19,433	264,698	84,907	9,792
Vesting period (years)	5.0	5.0	3.0	5.0	5.0	3.0	5.0	4.0
Expected volatility (%)	40.5	40.5	26.8	40.6	40.6	32.0	26.8	26.8
Expected life (years)	5.3	5.3	3.3	5.3	5.3	3.3	5.3	4.3
Risk free rate (%)	4.5	4.5	4.9	4.8	4.8	4.7	4.7	4.7
Expected dividends expressed as a dividend yield (%)	2.4	2.4	1.7	1.7	1.7	1.3	1.3	1.3
Fair value per option (£)	1.1	1.1	1.3	1.7	1.7	1.8	2.0	1.9

Grant type	US Stock Plan	Sharesave	Sharesave	Sharesave	US Stock Plan	Sharesave	Sharesave	Sharesave
Grant date	9-Nov-07	31-Oct-08	31-Oct-08	31-Oct-08	29-Oct-08	30-Oct-09	30-Oct-09	30-Oct-09
Share price at grant date (£)	5.7	4.3	4.3	4.3	3.8	7.6	7.6	7.6
Option price (£)	4.9	4.4	4.4	4.4	3.2	5.5	5.5	5.5
Number granted	93,503	567,259	211,082	44,223	317,923	281,110	70,609	8,439
Vesting period (years)	2.0	3.0	5.0	4.0	2.0	3.0	5.0	4.0
Expected volatility (%)	26.7	36.1	32.4	33.4	38.9	42.6	37.0	39.7
Expected life (years)	2.1	3.3	5.3	4.3	2.1	3.3	5.3	4.3
Risk free rate (%)	4.8	3.4	3.8	3.6	3.0	2.2	2.8	2.5
Expected dividends expressed as a dividend yield (%)	1.3	2.0	2.0	2.0	2.3	1.4	1.4	1.4
Fair value per option (£)	1.5	1.1	1.2	1.2	1.1	3.1	3.3	3.2

Grant type	US Stock Plan	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave
Grant date	30-Oct-09	20-Nov-09	25-Oct-10	25-Oct-10	25-Oct-10	25-Oct-10	25-Oct-10	25-Oct-10
Share price at grant date (£)	7.6	7.5	16.9	16.9	16.9	16.9	16.9	16.9
Option price (£)	6.5	5.5	12.4	12.4	12.9	12.4	12.4	12.9
Number granted	83,435	16,577	48,187	111,294	3,119	13,793	21,402	3,962
Vesting period (years)	2.0	3.0	3.0	3.0	4.0	5.0	5.0	5.0
Expected volatility (%)	48.4	42.6	43.4	43.4	40.0	38.1	38.1	38.1
Expected life (years)	2.1	1.4	3.3	3.3	4.3	5.3	5.3	5.3
Risk free rate (%)	0.9	2.1	1.0	1.0	1.4	1.7	1.7	1.7
Expected dividends expressed as a dividend yield (%)	1.4	1.4	0.9	0.9	0.9	0.9	0.9	0.9
Fair value per option (£)	2.5	3.0	6.8	6.8	6.8	7.4	7.4	7.1

Grant type	US Stock Plan	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave
Grant date	25-Oct-10	28-Oct-11	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	17.3	17.3	17.3	17.3	17.3	17.3	17.3
Option price (£)	14.3	12.6	13.4	12.7	12.8	12.1	12.6	13.4
Number granted	54,800	74,416	3,869	8,065	16,189	116,222	13,707	2,378
Vesting period (years)	2.0	3.0	3.0	3.0	3.0	3.0	5.0	5.0
Expected volatility (%)	45.2	41.6	41.6	41.6	41.6	41.6	38.8	38.8
Expected life (years)	2.1	3.3	3.3	3.3	3.3	3.3	5.3	5.3
Risk free rate (%)	0.8	0.9	0.9	0.9	0.9	0.9	1.5	1.5
Expected dividends expressed as a dividend yield (%)	0.9	0.8	0.8	0.8	0.8	0.8	0.8	0.8
Fair value per option (£)	5.3	6.9	6.5	6.8	6.8	7.2	7.7	7.3
Grant type	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	US Stock Plan
Grant date	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11
Share price at grant date (£)	17.3	17.3	17.3	17.3	17.3	17.3
Option price (£)	12.7	12.8	12.1	13.6	13.6	14.7
Number granted	588	889	31,756	10,826	6,725	75,769
Vesting period (years)	5.0	5.0	5.0	4.0	5.0	2.0
Expected volatility (%)	38.8	38.8	38.8	41.2	38.8	32.2
Expected life (years)	5.3	5.3	5.3	4.3	5.3	2.1
Risk free rate (%)	1.5	1.5	1.5	1.2	1.5	0.6
Expected dividends expressed as a dividend yield (%)	0.8	0.8	0.8	0.8	0.8	0.8
Fair value per option (£)	7.6	7.6	7.9	7.0	7.2	4.3

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 2011	1,645,288	5.44	156,131	3.57	2,106,292	nil
Granted	285,630	12.67	75,769	14.69	338,088	nil
Exercised	(252,189)	3.94	(86,221)	5.34	(666,562)	nil
Lapsed	(121,823)	5.56	(13,875)	10.39	(50,636)	nil
Outstanding at 31 December 2011	1,556,906	7.00	131,804	14.04	1,727,182	nil
Weighted average contractual life (years)	2		1		1

The weighted average share price during the year for options exercised over the year was £4.29 (2010: £2.63). The total charge for the year relating to employee share based payment plans was £19.8 million (2010: £18.7 million), all of which related to equity-settled share based payment transactions.

Options outstanding over ordinary shares as at 31 December 2011 (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	2011 Number	2010 Number	Market price (£)1
Sharesave – Nov 2005	£1.89	Nov 2010	May 2011	–	75,991	2.50
	£1.90	Nov 2010	May 2011	–	19,963	2.50
Sharesave – Nov 2006	£2.82	Nov 2011	May 2012	70,157	77,206	3.74
	£2.87	Nov 2011	May 2012	16,985	16,985	3.74
Sharesave – Nov 2007	£5.04	Nov 2010	May 2011	–	157,584	5.73
	£4.91	Nov 2011	May 2012	3,880	5,402	5.73
	£5.04	Nov 2012	May 2013	31,435	31,435	5.73
	£4.91	Nov 2012	May 2013	4,390	4,390	5.73
Long-term Incentive Plan – Apr 2008	–	Apr 2011	Oct 2011	–	717,198	5.94
US Stock Option Plan – Oct 2008	£3.20	Oct 2010	Jan 2011	–	29,822	3.76
Sharesave – Oct 2008	£4.37	Oct 2011	Apr 2012	437,148	481,063	4.33
	£4.37	Oct 2012	Apr 2013	27,354	28,309	4.33
	£4.37	Oct 2013	Apr 2014	162,850	185,599	4.33
	£4.37	Oct 2013	Apr 2014	8,617	12,426	4.33
Long-term Incentive Plan – Apr 2009	–	Apr 2012	Oct 2012	1,059,278	879,774	5.23
US Stock Option Plan – Oct 2009	US$10.64	Nov 2011	Jan 2012	8,279	71,509	7.60
Sharesave UK 3 year – Oct 2009	£5.53	Jan 2013	Jun 2013	95,982	103,098	7.60
Sharesave International 3 year – Oct 2009	US$8.77	Jan 2013	Jun 2013	123,490	130,673	7.60
	US$8.77	Jan 2013	Jun 2013	16,577	16,577	7.60
	€6.02	Jan 2013	Jun 2013	22,232	22,232	7.60
	CAD$9.53	Jan 2013	Jun 2013	3,892	4,420	7.60
Sharesave French 4 year – Oct 2009	€6.02	Jan 2014	Jun 2014	7,865	7,865	7.60
Sharesave UK 5 year – Oct 2009	£5.53	Jan 2015	Jun 2015	30,143	30,930	7.60
Sharesave International 5 year – Oct 2009	US$8.77	Jan 2015	Jun 2015	25,719	31,151	7.60
	€6.02	Jan 2015	Jun 2015	1,295	1,893	7.60
Long-term Incentive Plan – Apr 2010	–	Apr 2013	Oct 2013	509,320	509,320	11.89
US Stock Option Plan – Oct 2010	US$22.52	Nov 2012	Jan 2013	48,154	54,800	16.85
Sharesave UK 3 year – Oct 2010	£12.39	Jan 2013	Jun 2013	44,505	48,187	16.85
Sharesave International 3 year – Oct 2010	US$19.57	Jan 2013	Jun 2013	90,411	95,018	16.85
	CAD$20.21	Jan 2013	Jun 2013	973	1,359	16.85
	AU$20.21	Jan 2013	Jun 2013	6,954	6,954	16.85
	€14.39	Jan 2013	Jun 2013	7,055	7,530	16.85
Sharesave French 4 year – Oct 2010	€14.52	Jan 2014	Jun 2014	3,119	3,119	16.85
Sharesave UK 5 year – Oct 2010	£12.39	Jan 2015	Jun 2015	11,337	12,565	16.85
Sharesave International 5 year – Oct 2010	US$19.57	Jan 2015	Jun 2015	13,473	13,473	16.85
Sharesave International 5 year – Oct 2010	CA$20.21	Jan 2015	Jun 2015	296	296	16.85
Sharesave International 5 year – Oct 2010	AU$20.21	Jan 2015	Jun 2015	7,217	7,217	16.85
Sharesave International 5 year – Oct 2010	€14.39	Jan 2015	Jun 2015	416	416	16.85
Sharesave French 5 year – Oct 2010	€14.52	Jan 2015	Jun 2015	3,962	3,962	16.85
Long-term Incentive Plan – Apr 2011	–	Apr 2014	Oct 2014	158,584	–	15.35
US Stock Option Plan – Oct 2011	US$23.69	Nov 2013	Jan 2014	75,371	–	17.28
Sharesave UK 3 year – 28 Oct 2011	£12.60	Jan 2014	Jun 2014	74,416	–	17.28
Sharesave International 3 year – 28 Oct 2011	US$19.43	Jan 2014	Jun 2014	113,034	–	17.28
Sharesave International 3 year – 28 Oct 2011	CA$20.38	Jan 2014	Jun 2014	8,065	–	17.28
Sharesave International 3 year – 28 Oct 2011	AU$20.23	Jan 2014	Jun 2014	3,869	–	17.28
Sharesave International 3 year – 28 Oct 2011	€14.60	Jan 2014	Jun 2014	16,189	–	17.28
Sharesave French 4 year – 28 Oct 2011	€15.52	Jan 2015	Jun 2016	10,826	–	17.28
Sharesave UK 5 year – 28 Oct 2011	£12.60	Jan 2016	Jun 2016	13,707	–	17.28
Sharesave International 5 year – 28 Oct 2011	US$19.43	Jan 2016	Jun 2016	26,491	–	17.28
Sharesave International 5 year – 28 Oct 2011	CA$20.38	Jan 2016	Jun 2016	588	–	17.28
Sharesave International 5 year – 28 Oct 2011	AU$20.23	Jan 2016	Jun 2016	2,378	–	17.28
Sharesave International 5 year – 28 Oct 2011	€14.60	Jan 2016	Jun 2016	889	–	17.28
Sharesave French 5 year – 28 Oct 2011	€15.52	Jan 2016	Jun 2016	6,725	–	17.28
				3,415,892	3,907,711

1 Market price as at the date of grant.

As at 31 December 2011 it is now assumed to be a maximum award on the maturity of Long-term Incentive Plan 2009.

22 Treasury shares

	2011 £ million	2010 £ million
Treasury shares	(48.9)	(49.6)

Interests in own shares represents the cost of 4,805,289 of the company's ordinary shares (nominal value 13549/775 pence). Movement during the year was as follows:

	2011 Number of shares	2010 Number of shares
1 January	6,087,304	4,422,419
Purchase of shares (Note (i))	589,000	2,286,161
Long-term Incentive Plan Maturity	(1,734,930)	(621,276)
Share consolidation (31 for 32 shares) (Note 21)	(136,085)	–
31 December	4,805,289	6,087,304

(i) Purchased at an average share price of £17.15 (2010: £11.90).

These shares represent 1.8% of issued share capital as at 31 December 2011 (2010: 2.2%).

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. 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 2011 was £96.9 million (31 December 2010: £90.2 million).

23 Capital commitments

	2011 £ million	2010 £ million
Contracted but not provided for (property, plant and equipment)	21.0	33.9

24 Operating lease commitments – minimum lease payments

	2011		2010
	Land and buildings £ million	Plant, equipment and vehicles £ million	Land and buildings £ million	Plant, equipment and vehicles £ million
Commitments under operating leases expiring:
Within 1 year	8.6	6.7	9.1	9.0
Later than 1 year and less than 5 years	16.5	7.9	17.8	10.8
After 5 years	9.4	–	9.0	–
Total	34.5	14.6	35.9	19.8

25 Pension commitments

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 2011 was £4.8 million (2010: £4.3 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.

A valuation of the Scheme was carried out as at 31 December 2008 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	4.8%
Rate of increase in salaries	4.6%
Increase in pensions	3.1%

At the valuation date, the market value of the Scheme's assets (excluding AVCs) was £32.6 million which was sufficient to cover 67% of the benefits that had accrued to members, after making allowances for future increases in earnings.

As part of the valuation at 31 December 2008, the Company and the trustees agreed upon a Schedule of Contributions and a Recovery Plan. From 1 January 2010 to 31 March 2010 the company paid contributions for benefits building up in future at a rate of 25.4% of pensionable earnings and from 1 April 2010 the company paid 28.0% of pensionable earnings plus administration costs. To address the Scheme deficit the Group made additional contributions of £3.5 million in December 2010 and £2.5 million in February 2011. The company plans to make further additional contributions of £0.6 million in subsequent years until December 2018. Employee contributions are 6% of pensionable earnings.

The Scheme will undergo a formal valuation at 31 December 2011. This valuation is expected to be completed during 2012.

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 £0.8 million were paid to the scheme during the year (2010: £0.8 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 2011	31 Dec 2010
Rate of increase in salaries	4.9%	5.2%
Rate of increase in pensions in payment	3.3%	3.5%
Rate of increase in deferred pensions	3.4%	3.7%
Discount rate	4.8%	5.3%
Inflation assumption	3.4%	3.7%
Expected return on Scheme assets	4.3%	5.4%
Longevity at age 65 for current pensioners (years)
Men	23.5	23.5
Women	26.4	26.4
Longevity at age 65 for future pensioners (years)
Men	25.3	25.3
Women	28.1	28.1

The expected return on Scheme assets is based on market expectations at the beginning of the period for returns over the entire life of the benefit obligation.

The assets in the Scheme and the expected rate of return were:

	Long term rate of return expected at 31 Dec 2011	Value at 31 Dec 2011 £ million	Long term rate of return expected at 31 Dec 2010	Value at 31 Dec 2010 £ million	Long term rate of return expected at 31 Dec 2009	Value at 31 Dec 2009 £ million
Equities	5.5%	23.2	6.6%	24.5	6.9%	21.4
Property	5.5%	4.1	6.6%	5.0	n/a	n/a
Gilts	2.5%	15.5	3.6%	11.1	3.9%	5.1
Bonds	4.5%	14.8	4.8%	10.3	5.2%	11.0
Cash	0.0%	1.5	0.0%	2.1	0.0%	5.3
Total		59.1		53.0		42.8

The expected rate of return on assets is stated net of expenses.

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

	2011 £ million	2010 £ million	2009 £ million
Fair value of assets	59.1	53.0	42.8
Present value of funded obligations	(64.6)	(56.2)	(48.6)
Liability recognised in the Balance Sheet	(5.5)	(3.2)	(5.8)

An alternative method of valuation is the estimated cost of buying out benefits at 31 December 2011 with a suitable insurer. This amount represents the amount that would be required to settle the Scheme liabilities at 31 December 2011 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 2011 is around £85 million which gives a Scheme shortfall on a buyout basis of approximately £26 million.

The amounts recognised in the income statement are as follows:

	2011 £ million	2010 £ million
Current service costs	1.7	1.7
Interest cost	3.0	2.8
Expected return on Scheme assets	(3.0)	(2.3)
	1.7	2.2

Of the total charge of £1.7 million, £0.5 million (2010: £0.6 million) and £1.2 million (2010: £1.6 million)  were included, respectively in cost of sales and administrative expenses.

Changes in the present value of the defined benefit obligation are as follows:

	2011 £ million	2010 £ million
Present value of obligation at 1 January	56.2	48.6
Service cost	1.7	1.7
Interest cost	3.0	2.8
Contributions from Scheme members	0.4	0.4
Benefits paid	(0.8)	(0.5)
Actuarial losses	4.1	3.2
Present value of obligation at 31 December	64.6	56.2
Present value of Scheme assets are as follows:
	2011 £ million	2010 £ million
Fair value of Scheme assets at 1 January	53.0	42.8
Expected return on Scheme assets	3.0	2.3
Employer contributions	4.4	5.4
Contributions from Scheme members	0.4	0.4
Benefits paid	(0.8)	(0.5)
Actuarial (losses)/gains	(0.9)	2.6
Fair value of Scheme assets at 31 December	59.1	53.0
Analysis of the movement in the balance sheet
	2011 £ million	2010 £ million
At 1 January	(3.2)	(5.8)
Total expense as above	(1.7)	(2.2)
Contributions	4.4	5.4
Net actuarial losses	(5.0)	(0.6)
At 31 December	(5.5)	(3.2)
Cumulative actuarial gains and losses recognised in equity
	2011 £ million	2010 £ million
At 1 January	23.1	22.5
Actuarial losses recognised in the year	5.0	0.6
At 31 December	28.1	23.1

The actual return on Scheme assets was a gain of £2.1 million (2010: gain of £4.9 million).

History of experience gains and losses

	2011	2010	2009	2008	2007
Experience adjustments arising on Scheme assets:
Amount (£m)	(0.9)	2.6	2.8	(7.9)	(0.3)
Percentage of Scheme assets	(1.5%)	4.9%	6.5%	(24.2%)	(1.0%)
Experience adjustments arising on Scheme liabilities:
Amount (£m)	–	–	1.1	–	–
Percentage of present value Scheme liabilities	0.0%	0.0%	2.3%	0.0%	0.0%
Present value of Scheme liabilities (£m)	64.6	56.2	48.6	40.6	40.7
Fair value of Scheme assets (£m)	59.1	53.0	42.8	32.6	32.6
Deficit (£m)	5.5	3.2	5.8	8.0	8.1

The contributions expected to be paid during the financial year ending 31 December 2012 amount to £2.4 million.

26 Significant investments

The principal 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 Argentina S.R.L		Argentina
Aggreko Generator Rentals Pty Limited		Australia
Aggreko Barbados Limited		Barbados
Aggreko Belgium NV		Belgium
Aggreko Energia Locacao de Geradores Ltda		Brazil
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 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 Energy Ecuador CIA		Ecuador
Aggreko Finland Oy		Finland
Aggreko France SARL		France
Aggreko Deutschland GmbH		Germany
Aggreko Hong Kong Limited		Hong Kong
Aggreko Energy Rental India Private Limited +++		India
PT Aggreko Energy Services		Indonesia
Aggreko Ireland Limited		Ireland
Aggreko Italia S.R.L		Italy
Aggreko Japan Limited		Japan
Aggreko Malaysia SDN BHD		Malaysia
Aggreko Energy Mexico SA de CV		Mexico
Aggreko Services Mexico SA de CV		Mexico
Aggreko SA de CV ++++		Mexico
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 Polska Spolka Z Organiczona	Poland
Aggreko Trinidad Limited	Republic of Trinidad & Tobago
OOO Aggreko Eurasia		Russia
Aggreko (Singapore) PTE Limited		Singapore
Aggreko Energy Rental South Africa (Proprietary) Limited		South Africa
Aggreko Iberia SA		Spain
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 Turkey		Turkey
Aggreko Finance Limited +		UK
Aggreko Holdings Limited +		UK
Aggreko European Finance ++		UK
Aggreko International Projects Holdings 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
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	*** Registered in the Netherlands
+ Intermediate Holding Company	++ Finance Company
+++ The financial year end of Aggreko Energy Rental India Private Limited is 31 March due to local taxation requirements
++++ Dormant Company

27 Acquisitions

On 31 March 2011 the Group completed the acquisition of the business and assets of N.Z. Generator Hire Limited, a leading provider of temporary power solutions in New Zealand and the Pacific Islands. The acquisition of N.Z. Generator Hire Limited supports Aggreko's strategy of expanding its Local business and the acquisition strengthened Aggreko's business in Australia-Pacific. The total cash consideration was £14.4 million. The business acquired had revenue in 2010 of £6.0 million and operating profit of £1.1 million.

The revenue and operating profit included in the consolidated income statement from 31 March 2011 to 31 December 2011 contributed by N.Z. Generator Hire Limited was £8.1 million and £1.9 million respectively. Had N.Z. Generator Hire Limited been consolidated from 1 January 2011, the consolidated income statement for the year ended 31 December 2011 would show revenue and operating profit of £10.3 million and £2.5 million respectively.

The acquisition method of accounting has been adopted and the goodwill arising on the purchase has been capitalised.

The details of the transaction and fair value of assets acquired are shown below:

	Fair value £ million
Intangible assets	3.1
Property, plant and equipment	4.8
Inventories	0.2
Trade and other receivables	2.2
Trade and other payables	(0.7)
Net assets acquired	9.6
Goodwill	4.8
Consideration	14.4

Intangible assets represent customer relationships and a non-compete agreement.

Goodwill represents the value of synergies arising from the integration of the acquired business. Synergies include direct cost savings and the reduction of overheads as well as the ability to leverage Aggreko systems and assets.

During the period the Group received £0.2 million relating to the Northland Power acquisition which completed in December 2010.