Aggreko PLC (LON:AGK) announced today that given the current and rapidly changing developments regarding COVID-19, the company issues this update.
Since the start of the COVID-19 outbreak our primary concern has been the welfare of our people, their families and the local communities in which we work. We have implemented several measures to protect our people and engaged in frequent communication to help them respond safely to the spread of the virus.
While we have not closed offices or depots around the world, we are supporting an increasing number of our people in working from home. We will continue to follow developments closely and will take further action as appropriate.
We have entered this period of uncertainty with a strong financial position. As at the end of February the Group had immediately available liquidity of £606 million, comprising £66 million of available cash, £458 million of undrawn committed facilities arranged on a bilateral basis with eight international banks and £82 million of undrawn uncommitted facilities. The financial covenants attached to the committed facilities are that EBITDA should be no less than 4 times interest and net debt should be no more than 3 times EBITDA. The covenants exclude the impact of IFRS 16 ‘Leases’ and, on that basis, at 31 December 2019, these ratios were 14 times and 0.9 times respectively.
The maturity profile of our current committed facilities is set out within the appendix to this announcement.
As noted above, we are in a strong financial position as we face the challenges presented by the spread of the virus. Notwithstanding this, our initial priority has been to understand better the potential impact on the Group’s financing and liquidity, and to take prompt action to preserve Aggreko’s financial position. These measures have included, but are not limited to, a detailed review of and reduction in discretionary spend, hiring freezes, travel restrictions and the limiting of our fleet capital expenditure to that required to fulfil secured orders and meet known demand.
As the situation has continued to develop with increasing uncertainty over its duration, we have considered a range of scenarios to stress-test the Group’s liquidity position through to the end of this year. These show that even in the reasonably probable worst case scenario, with appropriate mitigating actions, we expect to remain within the Group’s financial covenants, while maintaining headroom under our existing committed facilities.
We have already refinanced all our facilities that would have matured in 2020, and we expect to continue with our usual practice of refinancing our facilities well in advance of their maturity dates. In addition, we will explore the newly announced Covid Corporate Financing Facility (CCFF) from the Bank of England.
Since we last updated the market on 3 March, the impact on the Group’s revenue arising from COVID-19 has been limited and what we have experienced has been primarily in the events sector. However, as central governments and businesses take further action to contain and delay the spread of the virus, there is now significant uncertainty around future demand across several sectors and geographies. The recent sharp fall in the oil price has compounded this level of uncertainty. Additionally, we are beginning to face some operational challenges getting our people to project sites as countries close borders and restrict travel. In terms of our supply chain, there has been relatively little impact to date although, specifically, we are experiencing delays of a few weeks in equipment orders from China.
We are in regular dialogue with our customer on the Tokyo 2020 Olympic and Paralympic Games and, in line with the current International Olympic Committee guidance, we are continuing our work in support of delivering the Games, which are due to start on 24 July 2020.
As a reminder of the sector, geographic and contract length diversity of the Group, we have provided some key details on the split of the Group’s business within the appendix to this announcement.
Despite the strong financial position of the Group, given the rising level of uncertainty as to how the situation will develop, alongside the other measures we are taking to preserve the Group’s cash position the Board has decided to withdraw its recommendation to pay a final dividend at the forthcoming AGM. We will review this decision again later in the year once the outlook becomes clearer. We recognize that this is a significant decision, but the Board believes that it is an appropriate and prudent measure to take at this point as the Group seeks to preserve its strong liquidity, cashflow and financial position through these most uncertain times.
While the challenges facing our business are unprecedented, as noted above our primary concern remains the welfare of our people, their families and the local communities in which we work.
We have a global, diversified business, with a robust balance sheet and we are taking immediate measures to contain our costs and protect our strong financial position.
However, given the continued uncertainty, we do not believe it is possible to retain the Group’s 2020 guidance as communicated at our full year results on 3 March. We will continue to monitor the situation closely and provide further updates as necessary.
Beyond the AGM on 23 April, our next scheduled announcement is the interim results on 6 August, alongside which we had planned to provide an update on our strategic priorities. While we believe that a continued focus on our four strategic priorities set out in 2015 will underpin the performance of the business over the longer term, given the current market uncertainties we have taken the decision to postpone this strategic update.