TIDMAUG
RNS Number : 8206S
Augean Plc
22 March 2016
22 March 2016
Augean plc ("Augean" or "the Group")
Final results for the year ended 31 December 2015
Augean, one of the UK's leading specialist waste management
businesses, announces its preliminary results for the year ended 31
December 2015.
Financial highlights
From continuing operations and excluding exceptional items
-- Revenue increased by 11% to GBP61.0m (2014: GBP55.0m)
-- Profit before tax increased by 12% to GBP6.0m (2014: GBP5.4m)
-- Net operating cash flows increased by 45% to GBP11.1m (2014: GBP7.7m)
-- Return on capital employed (1) increased to 11.4%, from 10.7% in 2014
-- EBITDA(2) increased by 20% to GBP12.1m (2014: GBP10.0m)
-- Basic earnings per share increased by 13% to 4.65p (2014: 4.13p)
-- Net debt decreased by GBP1.4m to GBP4.3m (2014: GBP5.7m)
-- Proposed dividend per share of 0.65 pence, an increase of 30% (2014: 0.50 pence)
-- GBP20m Bank facility renewed on 21 March 2016 with extra
GBP10m specifically to fund acquisitions
Operational highlights
-- Strong performance from Energy & Construction driven
primarily by high level of construction soils activity during the
year
-- Positive revenue and margin performance in Radioactive Waste
Services ("RWS") despite lower volumes of waste received
-- Turnaround plan underway within Industry & Infrastructure
focused on extending the range of services and increasing market
penetration
-- Very strong results from Augean North Sea Services ("ANSS")
with a number of significant contract wins with oil & gas
operators and tier-1 customers
-- Purchase of the remaining 19% of shares in ANSS from the
minority shareholder, for a cash consideration of GBP1.05
million
-- Further progress within Augean Integrated Services with
additional total waste management contracts secured with blue-chip
customers
Outlook
-- Encouraging start to 2016 with a number of contracts secured
with Tier-1 customers across the Group's businesses
-- Continued emphasis on moving Group revenues to long-term contracts and frameworks
-- Board focused on further improving the returns from capital employed across the Group
-- Group as a whole is trading in line with market expectations.
Commenting on the Results, Dr Stewart Davies, Chief Executive
Officer, said:
"2015 was a year of significant progress for the Group resulting
in double digit growth in revenue, operating cash flow and EBITDA.
The results were driven by a strong performance across a number of
the Group's businesses in which we have built sustainable market
positions. Our ability to work closely with customers to provide
specialist services focused on hazardous waste throughout the
supply chain was reflected in a number of strategically important
contract wins during the year.
The Group remains focused on the execution of its strategy to
deliver shareholder value and further direct contracts with tier-1
producers have been secured, improving forward visibility of
earnings. The portfolio effect of maintaining five businesses in
diverse markets and the continued focus of the Group on further
increasing returns on its investments means that the Board remains
confident of maintaining its track record of year-on-year increases
in profitability in 2016."
There will be a meeting for analysts at 9.30am today at the
offices of FTI Consulting, 9(th) Floor, 200 Aldersgate, Aldersgate
Street, London, EC1A 4HD. For further information please call 020
3727 1614.
For further information, please call:
Augean plc
Dr Stewart Davies, Chief Executive 01937 844 980
Richard Laker, Group Finance Director
N+1 Singer
Shaun Dobson 020 7496 3000
Richard Lindley
Jennifer Boorer
FTI Consulting
Oliver Winters 020 3727 1000
Adam Cubbage
Fiona Walker
(1) Return on capital employed is defined as operating profit
divided by average capital employed, where capital employed is net
assets excluding net debt
(2) EBITDA means earnings before interest, taxation,
depreciation and amortisation
Chairman's statement
2015 was another encouraging year for the Group, with
year-on-year increases in revenue, profit, operating cash flows and
return on capital employed, compared to 2014. The Group is
currently trading in line with expectations in 2016.
The strategy for growth, developed and implemented by Stewart
Davies and his team, is delivering tangible results with further
evidence of traction across several areas of the business both
commercially and in financial terms.
Total revenue, from continuing operations, increased to GBP61.0m
(2014: GBP55.0m). Profit before tax from continuing operations and
before exceptional items increased by 12% to GBP6.0m (2014:
GBP5.4m), with an increase in basic earnings per share on the same
basis of 13% to 4.65 pence (2014: 4.13 pence).
Operating cash flows, before exceptional items, increased from
GBP7.7m to GBP11.1m. The Board continues to support reinvestment in
strategic business growth, including GBP1.1m paid to purchase the
remaining 19% of shares in Augean North Sea Services in March 2015.
The Group has successfully refinanced its bank facility on improved
commercial terms, increasing the available debt funding to GBP20m,
with the option of a further GBP10m exclusively to fund potential
acquisitions. All investments are made with the expectation of
increasing levels of return and acceptable EBITDA(1) payback
periods. Our return on capital employed(2) for the year increased
to 11.4% (2014: 10.7%) and our total net debt fell by GBP1.4m
during the year to GBP4.3m, after total capital expenditure of
GBP7.5m.
Our Energy and Construction business had a strong year, with
levels of material into landfill above initially anticipated input
volumes. In 2016 we anticipate a more normalised level of inputs,
subject to activity in the construction market. The impact of the
revised Landfill Tax excise notice issued by HMRC in December 2015
on volumes of waste sent to landfill in England and Wales is not
yet fully apparent. However the level of construction soils
received by the business in 2016 to date has been in line with
management expectations. Air pollution control residues ("APCR")
arising from the Energy-from-waste sector volumes were lower than
last year, however significant volumes of other waste streams
contributed strongly to the growth in profit of that business as
well as the significant operating cash flow generation of the Group
in the year. There remains clear management focus on growing
contracted APCR volumes into the business, as maintaining our share
of this growth market is a key strategic imperative in the short
and medium term. We continue to actively tender for APCR contracts,
as they arise, with both existing and new customers.
The Radioactive Waste Services business saw a reduction in
volumes in 2015 but was able to optimise pricing and deliver a
pleasing increase in revenue and profit. Through 2015 and early
2016 we have seen reductions in the level of customer expenditure
to treat the waste, in part due to UK Government spending reviews
and we expect this theme to continue in 2016. However, the Group's
site at East Northants remains a key element of national
infrastructure for the disposal of low-level radioactive waste in
the medium term. The Group remains actively engaged with customers
to obtain further clarity regarding their predictions of output for
the year.
The Industry & Infrastructure business suffered a setback in
the performance of its Avonmouth site during 2015, however a
turnaround plan is underway to return it to profitability in
2016.
The second year of trading for the Augean Integrated Services
business saw further progress, with increased revenues and a number
of three year total waste management contracts won with blue-chip
customers, the benefits of which will be seen in future years. This
contributed to the growth seen in the contracted business which
increased 44% over the prior year. The high temperature incinerator
at the Group's East Kent site provided further unexpected
challenges during the first half of 2015, which was frustrating.
However, equipment replacement was undertaken in the second half of
2015 and subsequent management actions have been taken to improve
the operational uptime of this asset, which remains of high
strategic importance to the Group as more contracts are
secured.
Augean North Sea Services (ANSS) responded positively to changes
in its market by securing several new contract wins during 2015 and
early 2016. This evidences the continued execution of the strategy
to diversify this business away from exploration drilling waste
management, on which the business was originally built, to an
increased proportion of revenue generated from production waste
management and onshore industrial services, while maintaining the
high proportion of total revenues generated directly from major oil
& gas operators. Subsequent to the year end, a strategic
investment was made in a site at Great Yarmouth to support a new
contract with a major operator. This represents a new location for
the Group and opens up further potential commercial prospects from
the southern North Sea. As previously anticipated, the Board
expects 2016 to be a more challenging year for the ANSS business
than 2015, particularly in light of further reductions in oil
prices during 2015 and reducing drilling activity, but notes that
management is broadening the service offering to customers and
focus on cost control in the current conditions. The strategic move
by ANSS to generate a lesser proportion of its revenues from
exploration drilling waste management has led the Board to conclude
that a write down of certain thermal treatment assets on Teesside
was necessary, based on our view of drill cuttings to be
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March 22, 2016 03:01 ET (07:01 GMT)
processed by those assets in the short to medium term. As
previously announced, a non-cash impairment loss of GBP2.9m has
been reflected as an exceptional item in our income statement for
the 2015 financial year.
Health and safety continues to remain the highest priority for
the Board, management and employees across the Group. Total
accident levels remained at the same low level in 2015 as in 2014,
underpinned by further improvement in positive indicators of safe
behaviour. The Board continues to recognise the risks faced by our
people, who work in environments moving, treating and disposing of
hazardous wastes. In November 2015, the Group celebrated the
achievement by ANSS of its tenth anniversary without a lost time
incident in its offshore activities.
Protecting the environment is not only a matter of compliance
with permits, but encompasses our broader responsibilities to
society and future generations. The Group diligently monitors its
performance in this regard, the results of which are regularly
reported to the Board. All sites in England are ranked by the
Environment Agency as Category A or B and the Scottish
Environmental Protection Agency rates all of the Group's sites in
Scotland as Excellent.
The Board recognises that our business success is dependent on
the quality, diligence and hard work of all Augean's employees and
I would like to take this opportunity on behalf of the Board to
thank everyone who has contributed to the Group's continued
progress during the year.
As in previous years, I was pleased to note the addition of new
shareholders to our register during the year and again I am
thankful for the continued support from all of our investors.
The Board welcomed John Grant as a non-executive director in
August 2015. I am pleased to see the Group benefitting from the
extensive experience that John has brought. Rory Macnamara has
declared his intention to step down from the Board at this year's
AGM. I would like to thank Rory for his contribution to the Board
over a period of almost ten years and for his diligent Chairmanship
of the Audit Committee. In advance of Rory's departure, I also look
forward to welcoming Rod Holdsworth to the Board on 23 March 2016.
Rod will also assume the Chairmanship of the Audit Committee, upon
Rory's departure, and I am confident that he will also add further
qualities to the Board as a whole, given his current and past
executive experience.
The Group's balance sheet and operating cash flow remain robust
and the Board has proposed a 30% increase in the dividend payment
to 0.65p per share. This reflects confidence in the prospects of
the Group and the Board's ongoing commitment to pay a progressive
dividend to its shareholders, with the dividend being covered(3)
7.2 times (2014: 8.3 times).
The Board continues to remain focused on improving the returns
from capital employed for the Group as a whole whilst being
prepared to invest in opportunities for the future, to build on the
progress delivered to date. I look forward to another year of
profitable growth for the Group.
Jim Meredith
Non-Executive Chairman
21 March 2016
(1) EBITDA means earnings before interest, tax and
depreciation
(2) Return on capital employed (ROCE) is defined as operating
profit divided by average capital employed, where capital employed
is net assets excluding net debt
(3) Dividend cover based on earnings per share from continuing
operations and excluding exceptional items
Strategic report
Marketplace
Augean operates in market sectors that have distinct strategic
drivers and this is the rationale for the focus of the five
business units of the Group to develop the customer focus relevant
to each sector. There are certain regulatory matters that are
common for all of the units, relating to hazardous waste. The
primary market sectors are:
-- Hazardous waste
-- Energy-from-Waste and Biomass Energy
-- Construction waste
-- Nuclear decommissioning
-- Oil recovery from waste
-- North Sea Oil & Gas
Our Strategy
The strategy of the Group set out in March 2014 is focused on
growing shareholder value by developing sustainable market
positions. Augean builds competitive advantage by working with
customers to provide solutions whereby Augean delivers specialist
services focused on hazardous waste. The three core elements of the
strategy are:
-- Develop sustainable market positions
-- Grow through client-focused solutions
-- Grow shareholder value
Further information in respect to the Group's market and
strategy can be found in the Group's Annual Report.
Operating review
Introduction
The Group delivered a strong set of financial results in
2015.
The results of the Group, from continuing operations and
excluding exceptional items, show that:
-- Total revenue increased by 11% to GBP61.0m;
-- Profit before taxation increased 12% to GBP6.0m;
-- Net operating cash flows increased by 45% to GBP11.1m;
-- Basic earnings per share increased by 13% to 4.65 pence; and
-- Return on capital employed increased from 10.7% to 11.4%.
During 2015, the Group operated through five business units.
The operating cash flow of the Group was used to fund the future
growth of the Group, with total capital expenditure investment of
GBP7.5m. This comprised GBP5.5m of maintenance capital expenditure
to lengthen the productive life of existing assets (including
GBP1.3m on landfill cell engineering and GBP0.2m of cell capping)
and GBP1.8m of development capital expenditure for targeted future
growth, along with a GBP0.2m deferred consideration payment
relating to the purchase of the East Kent site.
The Group remains committed to growth in all of its businesses
and markets, through both organic and acquisitive means, where
appropriate. Aside from its strong operating cash flows, the Group
also had a GBP13.25m bank facility in place as at 31 December 2015,
compared to net debt of GBP4.3m, equivalent to 0.4 times EBITDA(1)
, from continuing operations and before exceptional items. The
Group has successfully completed the refinancing of its bank loan
facility in March 2016, at an increased level of GBP20m, plus a
further optional GBP10m facility increase exclusively to fund
acquisitions. This facility leaves the Group well placed to take
advantage of investment opportunities that accelerate the strategy
and are value enhancing for shareholders.
As previously announced, during 2015 the Board took the
strategic opportunity to purchase the remaining 19% of shares in
the Augean North Sea Services business from the minority
shareholder, for a cash consideration of GBP1.05 million. This is
equivalent to 2.7 times 2015 EBITDA and the transaction was
accretive to earnings per share in the year. The business has
performed well, despite challenging conditions in the North Sea oil
& gas market. The Board continues to monitor this market very
closely but remains confident that the market positioning of that
business, including the on-going execution of its diversification
strategy, leave the business well placed in the medium to long
term.
The Group employed an average of 345 staff (2014: 300) over the
course of the year. The number of employees in the Group has
increased during 2015 as the Group has continued to invest in
high-quality employees who remain key to the future growth plans
and continuing execution of the strategy of the Group.
Business performance
The Group operated through five business units during 2015 and
2014 (Energy & Construction, Radioactive Waste Services,
Industry & Infrastructure, Augean Integrated Services and
Augean North Sea Services). The performance of each of the five
business units in 2015 is set out below.
Energy & Construction (E&C)
The principal activity of this business unit is the disposal of
air pollution control residues (APCR), incinerator bottom ash
(IBA), asbestos and other contaminated waste materials and soils,
mainly from the Energy-from-Waste, biomass energy and construction
sectors. This is primarily achieved through treatment and ultimate
landfill in permitted hazardous and non-hazardous sites at Port
Clarence, a permitted hazardous site at East Northants Resource
Management Facility (ENRMF) and a permitted non-hazardous site at
Thornhaugh, near Peterborough.
Revenues, excluding landfill tax and intra-group trading,
increased by 29% to GBP20.2m (2014: GBP15.6m), with the significant
increase primarily due to high volumes of construction soils, which
continued through the second half of the financial year, and
compensated for a reduction in the volumes of APCR treated in 2015
compared to 2014.
The total volume of waste disposed by the E&C business
increased by 31% to 434,000 tonnes in 2015, from 332,000 tonnes in
2014, with APCR volumes decreasing by 11% from 85,000 tonnes to
75,000 tonnes and other waste streams increasing by 45% from
247,000 tonnes to 359,000 tonnes. Average gate fees on APCR streams
increased by 8% and decreased by 1% on soils and other waste
streams with an overall decrease in APCR revenue of 5% and increase
in other waste revenue of 42%, as a result of the changes in
volumes on those waste streams, compared to 2014. Non-waste revenue
streams, from mineral extraction royalties and energy generation
from landfill gas, totalled GBP0.7m in the year (2014:
GBP0.7m).
The higher volumes of lower margin contaminated soils received
by the business unit caused the operating profit and EBITDA of the
business unit to grow at a lower rate than revenue, with EBITDA
increasing by 15% to GBP9.5m (2014: GBP8.3m), against the 29%
increase in revenue and this EBITDA growth contributing to the
strong operating cash flow of the Group as a whole during 2015.
Operating profit before exceptional items improved by 3% to GBP6.5m
(2014: GBP6.3m), with depreciation in this business unit primarily
driven by the input volume and thus the rate of engineered landfill
cell capacity consumption, rather than the passage of time.
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The high level of construction soils activity during the year
was attributed to high levels of activity in the preparation of
construction sites. It is not anticipated that volumes of
construction soils will be as high in 2016 and beyond. In December
2015 HM Revenue & Customs issued a revised excise notice in
respect of landfill tax, updating the landfill tax treatment of
various waste streams, which could potentially impact the amount of
landfill tax arising on the disposal of certain waste materials,
including construction soils, and, in turn, the disposal or
treatment route selected by the customer for those materials. The
impact of the revised excise notice on customer behaviour in the
market is not yet fully apparent. The early part of 2016 has seen a
reduced level of construction soils received by Augean sites,
albeit that the reduction is from the unusually high level of 2015,
back to a more normalised level which, accordingly, is in line with
management expectations.
APCR volumes in the second half of 2015 were similar to those
seen in the first half (1% higher). An increase in the volume of
APCR treated by the Group remains a key strategic objective in the
short and medium term, with the business well-positioned to utilise
its additional investment in treatment capacity to service the
growth in Energy from Waste and biomass capacity in the areas of
the UK served by our sites.
Total capital investment in the E&C business was GBP3.8m in
the year (2014: GBP2.3m), of which GBP2.8m was in respect of
lengthening the productive life of existing assets (maintenance
capital expenditure) and GBP1.0m was investment in the targeted
future growth of the business (development capital expenditure).
The maintenance capital expenditure included GBP1.3m in respect of
landfill cell engineering and GBP0.2m in respect of the capping of
full landfill cells. Excluding landfill cell-related capital
expenditure, total capital spend was lower than 2014, due to
certain one-off site infrastructure projects occurring in 2014.
Radioactive Waste Services (RWS)
The principal activity of this business unit is the treatment
and disposal of low level radioactive waste generated from the UK
nuclear estate. The disposal of the waste is facilitated by the
Nuclear Decommissioning Authority (NDA) as the waste is generated
primarily from the decommissioning of redundant power plants and
research facilities, with the RWS business bidding to dispose of
the waste through a framework with Low Level Waste Repository
Limited (LLWR).
The total revenue from the disposal and treatment of low level
radioactive waste, excluding landfill tax and intra-group trading,
increased by 5% to GBP1.9m (2014: GBP1.8m). Operating profit
increased by 9% to GBP1.1m (2014: GBP1.0m) and EBITDA increased 13%
to GBP1.2m (2014: GBP1.1m). This was generated from a total volume
of 3,186 tonnes, a decrease of 26% compared to 4,323 tonnes in
2014.
The revenue generated by RWS has historically been dominated by
waste related to nuclear decommissioning, with revenues steadily
increasing as activity on the Government-owned sites increased. In
the final quarter of 2015, LLWR issued a revised projection, which
indicated a 43% reduction in waste volumes for disposal to the
market during the Government fiscal year 2015-16 (April 2015 to
March 2016). This significant reduction was due to two main issues,
being the latest status of individual decommissioning projects,
including delays caused by changes in management companies for
various NDA-controlled sites as previously communicated, and the
outcome of the UK Government Spending Review. In line with those
predictions, Augean has seen significantly lower volumes of waste
from the NDA estate since May 2015 and this is now expected to
continue during the first quarter of the Group's 2016 financial
year.
Throughout 2015, RWS has strategically sought to reduce its
dependence upon the disposal of waste from LLWR, with actions taken
including increasing the average price per tonne for waste into
Augean facilities, diversification of its customer base, with 49%
of revenue in 2015 generated from customers other than LLWR,
compared to 31% in 2014; and widening the range of treatment
options, with the first radioactive wastes received for thermal
processing in late 2015.
LLWR predicts that volumes for the 2016-17 Government fiscal
year (April 2016 to March 2017) will be 42% higher than the current
2015-16 forecasts, and should, therefore, lead to an increase in
volumes in the second half of 2016 and early 2017, compared to late
2015 and early 2016.
Based on the forecast activity of the RWS business, taking into
account the timing of the increase in volumes between late 2016 and
early 2017, as well as the reduced activity seen in the first
quarter of 2016 to date, it is now considered that this business
unit will trade significantly below management expectations for the
year ended 31 December 2016.
Focus remains on the medium-term growth strategy for this
business, whilst continuing discussions with key stakeholders
within Government organisations, in an effort to obtain greater
predictability and consistency in waste volumes for the Group,
which operates a number of essential assets for the delivery of the
Government's strategy for dealing with radioactive waste.
Industry & Infrastructure (I&I)
The principal activity of this business unit is the recovery and
recycling of oil and solvents and the generation of secondary
liquid and solid fuels from waste, as well as the provision of
specialist industrial cleaning and other waste management services
to a range of markets, including chemical processing &
manufacturing, port & shipping operations, water treatment
& supply and onshore demolition & clean up. This includes
the treatment of drill cuttings from the North Sea oil & gas
market, which are supplied through the Augean North Sea Services
business, with oil and gas operators the end customer of the Group.
The business primarily operates from sites in Avonmouth and
Paisley, as well as operating the Port Clarence Waste Recovery Park
(PCWRP) on Teesside and providing industrial services on client
sites.
I&I total revenue, excluding inter-segment sales, fell by 6%
to GBP11.7m in 2015 (2014: GBP12.5m) and the business unit made an
operating loss of GBP0.7m, compared to a GBP0.6m operating loss in
2014, although the performance of the business unit improved in the
second half of the year with an operating loss of GBP0.2m, compared
to a first half operating loss of GBP0.5m. The business generated a
positive EBITDA of GBP0.4m, compared to a positive EBITDA of
GBP0.5m in 2014, with the second half of 2015 generating a positive
EBITDA of GBP0.5m compared to a negative EBITDA of GBP0.1m in the
first half.
The disappointing overall outcome for the I&I business unit
is primarily due to performance issues at the Avonmouth site, with
the other areas of the business performing in line with management
expectations for 2015. As noted in the interim results, measures
have been taken at Avonmouth to improve the performance of the
site. This has included the appointment of management to oversee
improvements at the site, in order to execute an agreed plan to
return the site to profitability during 2016. Avonmouth trading in
2016 to date is in line with management plans.
The PCWRP site includes certain thermal treatment and recovery
assets that have been substantially used for the treatment of drill
cuttings from the North Sea in recent years. As explained below,
the diversification strategy of Augean North Sea Services means
that there is now an expectation of reduced activity by those
assets on Teesside. Accordingly, the recoverable value of the
relevant assets was determined to be lower than their carrying
value and, as previously announced, an impairment loss of GBP2.9m
has been recognised as an exceptional item in the consolidated
income statement of the Group in 2015.
Industrial Services has been a service line of increasing
importance to the I&I business, with a number of term contracts
secured with customers, providing opportunities to leverage the
Group's specialist waste knowledge with support services, in line
with Company strategy. With an increasing scope of opportunity, the
optimum means of resourcing the growth of this part of the business
has been under active consideration during 2015, resulting in
additional targeted sales resource, restructuring parts of the
business to position it for growth in this specific area and modest
capital investment in the business to increase scope and
capability. Focus has been on broadening the range of services and
increasing market penetration through new and existing customers
using downstream I&I and other Augean-wide assets to support
and provide end-to-end supply chain security. Several term
contracts have been secured in the Infrastructure sector.
A total of GBP0.6m of capital investment was undertaken in the
I&I business, of which c. GBP0.4m represented maintenance
capital expenditure and GBP0.2m related to development capital
expenditure.
Augean Integrated Services (AIS)
This business unit operates from a site in Cannock and a high
temperature incinerator (HTI) in Sandwich, East Kent. It offers a
total waste management (TWM) service, through a team of highly
knowledgeable experts, who work with customers on a consultative
basis to address their waste management and compliance needs, as
well as leveraging the specialist HTI asset in East Kent, which is
designed to incinerate high-value, low volume goods, such as
pharmaceutical or other specialist waste. The Group purchased the
East Kent HTI in 2014, for a total of GBP1.9m. The purchase price
included a deferred element of GBP0.4m, of which GBP0.2m was paid
in 2015 and the remaining GBP0.2m was paid in early 2016.
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Total revenue, excluding inter-segment sales, grew by 44% to
GBP6.0m (2014: GBP4.2m). This included GBP3.9m from total waste
management (2014: GBP2.5m), of which GBP2.3m was from contracted
business (2014: GBP1.6m). The business reduced its operating loss
by 22% to GBP0.6m (2014: GBP0.7m), and cut its negative EBITDA by
56% to negative GBP0.2m (2014: negative GBP0.4m).
The below-expectation profitability of this business unit was
primarily due to the performance at the East Kent HTI which
realised an operating loss of GBP0.3m (2014: loss of GBP0.5m). The
disappointing performance of the HTI resulted from unplanned
operational downtime, particularly in the first half of the
financial year, which led to higher operating costs and a temporary
reduction in processing capacity. Equipment replacement was carried
out, during planned shutdowns in August 2015 and December 2015.
This, along with an improved schedule of planned, preventative
maintenance and the appointment of a new, experienced general
manager at the plant in February 2016, will enable the HTI to deal
with the increased commercial pipeline arising from new contract
wins. The Board remains confident in the long-term strategic value
of this asset to the Group.
As previously noted, the AIS business has built a commercial
team with sector-specific expertise, which has enabled the wider
AIS business to secure further TWM contracts with high-value
customers in 2015, the full year impact of which is expected to
occur in 2016 and beyond. A number of TWM contracts have been
extended to run until 2019 and all contracts won in 2015 were at
least three years in length, with potential for further in-life
revenue growth. The AIS business excluding East Kent made an
operating loss of GBP0.3m (2014: GBP0.2m) as it continues to invest
for growth.
Other than payments to purchase the HTI, a total of GBP0.8m of
capital expenditure was undertaken in the AIS business in 2015,
most of which related to the East Kent site, to address the plant
reliability issues referred to above.
Augean North Sea Services (ANSS)
The ANSS business unit operates in the North Sea oil & gas
market, primarily from four sites in Aberdeen, a site at Lerwick,
in the Shetland Islands and, since February 2016, from a site in
Great Yarmouth. The primary revenue streams are from drilling waste
management, which includes drill cuttings management and the rental
of offshore engineers and equipment to customers, with a
diversification strategy underway, leading to growth in production
waste management, onshore & marine industrial services and
water treatment. Throughout 2014 and early 2015, the Augean Group
owned 81% of the shares in ANSS. As previously announced, the Group
purchased the remaining 19% of shares in March 2015 such that ANSS
became a wholly-owned subsidiary of the Group from that date.
ANSS revenue grew by 2% to GBP14.8m (2014: GBP14.5m) and saw an
increase in operating profit of 32% to GBP1.3m (2014: GBP1.0m) and
an increase in EBITDA of 34% to GBP2.0m (2014: GBP1.5m). The
operating profit margin increased from 7% to 9% due to adverse
weather conditions in 2014 which adversely impacted the margin at
that time.
During 2015, ANSS outperformed expectations, despite
increasingly challenging conditions in the North Sea Oil & Gas
market which have been evident since the latter part of 2014. Key
to this successful performance has been the continued strategic
traction of the business in moving up the supply chain and dealing
directly with oil & gas operators and tier-1 customers in this
market, which increases the potential for the business to widen its
service scope directly with those customers. 89% of total ANSS
revenues were directly generated from those customers during 2015,
compared to 75% in 2014. During 2015, the business maintained
incumbency on an average of 4.6 rigs, compared to 4.3 in 2014.
During 2015 and the early part of 2016, ANSS has achieved the
following noteworthy contract wins:
-- As previously announced, in June and July 2015 ANSS was
successful in winning three new contracts, with terms of between
three and five years, all of which are with operators and tier-1
customers. Those contracts include production platform waste
management, onshore waste management and decommissioning work, the
latter of which includes NORM wastes and is delivered in
conjunction with the Radioactive Waste Services business;
-- As previously announced, in January 2016 ANSS entered into a
contract to provide production waste management and onshore
industrial services to a major oil & gas operator. This
represents both further progress on the strategy of diversification
and also a significant entry-point for the Group to the market
which exists in the southern part of the North Sea. The contract,
which is directly with the operator, is for a period of three
years, with the customer having the option for further annual
extensions, up to a maximum period of seven years. Linked to this
contract, in February 2016, the Group purchased certain freehold
land and assets in Great Yarmouth for GBP0.5m, plus associated
taxes and fees. The site, which has been purchased from a waste
management company, and already holds relevant planning and
environmental permits, will enable the Group to supplement those
services already provided to customers in the Northern and Central
North Sea, which will continue to be mainly delivered from
Aberdeen.
-- In February 2016, ANSS entered into a new contract to provide
onshore waste management and industrial cleaning services to a
major oil & gas operator, in the North West of England. The
contract is for a period of three years, with the option of further
annual extensions, up to a maximum period of five years.
All of the above contract wins are strategically important in
diversifying the ANSS business away from dependence on exploration
drilling and further underpin existing management expectations for
2016 revenues and profits from this business. Going forward, it is
expected that an increasing proportion of revenues will be
generated from onshore and offshore waste-related industrial
services work, rather than exploration drilling waste
management.
Despite these strategic successes during 2015 and the early part
of 2016, the Board remains mindful of the prevailing conditions in
the North Sea oil & gas market. As previously stated,
management continues to monitor events closely and ensure that
costs are tightly controlled to match industry demands for cost
efficiencies, whilst sufficient investment is made to allow the
business to pursue its growth strategy and take advantage of the
opportunities that continue to emerge, even in the current
challenging environment. Capital expenditure totalled GBP1.6m
during 2015 (2014: GBP1.6m).
ANSS is a support service business, with 2015 operating expenses
comprising 68% of variable costs, 5% depreciation and 27% other
fixed costs.
The low proportion of fixed operating expenses gives the
business the agility to effectively adjust its cost base should a
reduction in current activity levels occur or commercial
opportunities not come to fruition. The cost base of this business
is monitored closely by management, alongside the continuous
improvement in safety and service delivery performance that has
continued to earn the business increasing recognition from
operators and tier-1 customers in the sector, which has been key to
the successful award of the contracts referred to above.
The Board remains confident that the ANSS business has the
capability and credibility in its core market to maintain high
levels of operational efficiency in the short term and to position
the business for continued profitable growth in the medium and long
term but the Board continues to monitor events in the North Sea oil
& gas market, given their potential impact on the ANSS
business.
Long Term Contracts
The Group aims to increase the proportion of its customer base
which is served through a formalised agreement, consisting of
either a contract or framework agreement. In 2015, the top-20
customers of the Group made up 47% of total Group revenue (2014:
50%), of which 95% was through a formalised agreement (2014:
80%).
Transactions
On 10 March 2015, the Group purchased the 19% of shares in
Augean North Sea Services Limited not already held by the Group,
thereby making the company a wholly-owned subsidiary of the Group
at that date. The consideration paid for the shares was
GBP1,050,000, excluding applicable stamp duty and fees, which was
paid in cash on the same date.
On 2 July 2015, the Group purchased the entire issued share
capital of ASB Environmental Limited (ASB) for a total
consideration of GBP40,000, which was paid in cash on the same
date, along with an acquired overdraft of GBP51,000. The
acquisition of ASB does not have a material impact on the results
of the Group.
Legislative environment
Regulation underpins the demand for Augean's services and
accordingly the business follows closely the development of
legislation and guidance and engages proactively with policy makers
and regulators. Of particular interest to the business in 2015 have
been changes to the landfill tax regime, the revised classification
of waste, WM3, and developments on the derogations for landfill
acceptance criteria. The Finance Act 2015 introduced requirements
for determining the landfill tax rate of screened wastes. From 1
June 2015, Augean smoothly implemented the transition to using the
Global Harmonised System for classification of chemicals and the
Environment Agency guidance WM3, which requires a change in the way
we classify waste. DEFRA has recently circulated a discussion paper
regarding the removal of derogations from the landfill acceptance
criteria. A decision will be made later this year but the removal
is considered unlikely until late 2017.
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DEFRA is consulting on its review of its 2010 Hazardous Waste
Strategy for England. Augean was directly involved in its
formulation and has monitored its implementation since 2010. In
general, Augean considers that, whilst the Strategy is fit for
purpose, there are concerns now apparent regarding the
implementation and application of the Strategy, particularly in
respect of persistent and toxic pollutants, which need addressing
urgently. The application of the strategy does not appear to
substantially consider whether the Best Overall Environmental
Outcome (BOEO) will be achieved, despite it being a requirement of
the Strategy. Clear policy guidance is being sought from DEFRA to
help direct investment in the sector.
On 16 December 2015, HM Revenue & Customs issued a revised
excise notice in respect of landfill tax, updating the landfill tax
treatment of various waste streams. This update potentially impacts
the market served by the Energy & Construction business unit,
as explained above.
Planning and permitting
The securing of planning permission and maintenance of
appropriate environmental permits at the Group's sites is an
essential part of the on-going operation and future development of
the business. During 2015, we gained planning permissions and
subsequently made permit applications for the extension of the
landfill sites at Thornhaugh and Port Clarence. The application for
Thornhaugh enables Augean to re-engineer part of the landfill site
and remove historic liabilities while creating new void and
prolonging the life of the site to 2034. At Port Clarence, the
previous consent was due to terminate in 2016 and has now been
extended for the remaining life of the site so we have secured
planning permission for the landfill site for a future period
estimated to exceed 50 years. In May 2014, the business acquired
the East Kent HTI, with additional contiguous land known as Bloody
Point. We immediately sought, and obtained from Kent County
Council, planning permission to develop the asset for waste use. In
parallel, we varied the Environmental Permits for the incinerator
so that our hazardous and radioactive waste storage activities can
be extended to Bloody Point.
In July 2013, the Secretary of State for Communities and Local
Government granted a Development Consent Order (DCO) for the
extension of the landfill site at ENRMF. This site provides
treatment and disposal services for a range of remediated soils and
building rubble, APCR and low activity radioactive wastes and is
the principal hazardous waste landfill site in the South of
England. To fully exploit the DCO it is necessary to vary the
permits for LLW and hazardous wastes. Extensive technical work was
undertaken including environmental impact and risk assessments to
ensure that the on-going development would not cause harm to human
health or pollution of the environment. Permits for the treatment
and disposal of hazardous waste were granted in 2015 while the
radioactive waste permit is expected to be issued during the first
half of 2016. The business has continued to actively engage with
local communities resulting in general acceptance of its proposals
and no objections.
Corporate Social Responsibility (CSR) performance
The Board recognises the important role played by the Group in
the environment and communities within which it operates. The
health & safety of our employees and compliance with
regulations are two of the top three business priorities (financial
performance being the third). Augean is committed to conducting its
business operations in an open and responsible manner and we
recognise the need to continually improve our operations where
practical to do so, in order to reduce our impact on the
environment, to continuously improve assets and processes to ensure
the safety and welfare of our employees and to act as a good
neighbour, minimising the impact of our operations on the wider
community.
The Group has a commitment to mitigating any adverse effects of
its operations and this is explained further in the detailed CSR
report, which will be published alongside the Annual Report &
Accounts.
The environment
All operating sites and activities are strictly regulated by
environmental authorities through a range of regulations set out in
the permits for each site. In the context of hazardous waste, the
principal instruments driving standards are the Waste Framework
Directive and the Industrial Emissions Directive, which provide an
integrated approach to pollution control to prevent emissions into
air, land or water. The standards expect the techniques and
procedures adopted by the Group to represent the Best Available
Technique (BAT). BAT requires a review of each activity and the
implementation of the highest standards to minimise emissions, be
energy efficient, reduce waste and consumption of raw materials,
manage noise, vibration and heat loss and ensure accident
prevention is in place.
The Group continues to deliver the objectives of BAT through its
operations and works closely with the regulators to ensure that
Augean is a leader in compliance in the sector. Activities are
delivered subject to well-developed environmental controls and
compliance systems (as defined in the Integrated Management
System), involving suitably competent people in the management of
all aspects of its operations. Environmental reports are prepared
and monitored within the Group and supplemented by information from
regulators. This includes the Environment Agency's own review of
companies operating in the waste sector which are subject to their
account management regime, of which Augean is one. The information
available for 2015 indicates that the Group's operations do not
result in a significant impact on the local environment and in
general our environmental performance has improved significantly
over the past five years. Scores received from the Environment
Agency (EA) in England and the Scottish Environmental Protection
Agency (SEPA) in Scotland and demonstrate sustained high standards
and low environmental impact.
As part of our commitment to implement the elements of the waste
hierarchy relevant to the hazardous sector, the Group continues to
take a strong role in the development of regulation and policy for
hazardous waste. By engaging with Government departments, local
authorities and regulators, we promote the industry and
modernisation of the sector, seeking to establish a positive
regulatory and policy framework for the business. In previous
years, representatives from the Group took a high profile role in
the development of the National Policy Statement for hazardous
waste (NPS), directly engaging with Government departments and
giving evidence at the Parliamentary Select Committee inquiry. In
2015, we engaged actively and extensively in policy development in
a wide range of areas affecting the business including Landfill
Tax, landfill acceptance criteria, the development of strategic BAT
for metallic low level wastes and the review of low level waste
strategy.
Employees
The Group's employees are vital to its success and during the
year made a significant contribution to the performance
improvements outlined in this report. However, no general pay
increase was awarded to staff or directors in 2016, in view of
general inflationary conditions approximating to zero in the
UK.
The Group is committed to the principle of equal opportunity in
employment and to creating a harmonious working environment which
is free from harassment and bullying and in which every employee is
treated with respect and dignity. Accordingly, well established
policies are in place to ensure that recruitment, selection,
training, development and promotion procedures result in no job
applicant or employee receiving less favourable treatment on the
grounds of race, colour, nationality, ethnic or national origin,
religion or belief, disability, trade union membership or
non-membership, sex, sexual orientation, marital status, age or
status as a part-time or fixed-term employee. The Group's objective
is to ensure that individuals are selected, promoted and otherwise
treated solely on the basis of their relevant aptitudes, skills and
abilities.
These equal opportunity policies are set out in the Group's
Employee Handbook, a copy of which is provided to each employee on
joining the Group and made available electronically. The Handbook
is updated periodically for changes in policy and regulations. The
Group also operates a clear whistle-blowing policy, providing every
employee the opportunity to raise concerns directly with a
nominated director, without the intervention of line management.
Once an issue is reported the nominated director is required to
undertake a thorough investigation and make recommendations.
In order to provide a formal, recorded, regular review of an
individual's performance, and a plan for future development, all
staff undertake an annual or bi-annual Performance Appraisal with
their line manager. Appraisals assist in the development of
individuals and establish individual training needs, improve
organisational performance, and feed into business planning. Where
appropriate the appraisal process establishes specific training
plans for each individual.
Training and development activity during the year built on the
progress made during 2014 and investment was made to ensure that
all employees had the knowledge, qualifications and skills to
operate safely and compliantly within their specific role and in
the broader waste management sector. A competency framework
developed for each role is used in the induction of new employees
and also as the basis of a rolling training programme.
Safety
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To support commitment to health and safety improvements,
reporting of near miss incidents continued to be a key part of the
health and safety programme during the year, supplemented with safe
act reporting designed to applaud and encourage safe working
practice. Over 2,000 near misses and 540 safe acts were reported
during 2015 (achieving the target of one report per operational
employee per month) and at the same time we maintained a low level
of accidents causing injury to a person or damage to property.
The community
Augean recognises the important role that it has within local
communities and aims to maintain an open dialogue with its
neighbours about its activities and plans. This is achieved through
regular liaison committees, newsletters and open days. The
establishment of new businesses, changes in the waste streams
managed and active planning processes during the year led to a high
level of interaction with local communities in some areas. As in
previous years the Group maintained a programme of consultation in
these localities to ensure that its plans were well known and
understood. This included attending liaison meetings and hosting
public exhibitions, in addition to the more formal submissions to
planning authorities.
The Group continued to contribute to the communities around its
landfill sites through the Landfill Tax Credit Scheme and the Low
Level Waste Fund. A total of GBP0.4m (2014: GBP0.4m) was
contributed through these schemes during the year, providing funds
for community projects including a sports centre and a wildlife
reserve. Charitable donations made during the year included
on-going support for the Underground Youth Club at Kings Cliffe,
the Stockton Sea Cadets, local sports teams and local events.
Financial performance
Group overview
A summary of the Group's financial performance, from continuing
operations and excluding exceptional items, is as follows:
GBP'm except where 2015 2014
stated
------------------------ ------ ------
Revenue 61.0 55.0
------------------------ ------ ------
Operating profit 6.8 6.1
------------------------ ------ ------
Profit before taxation 6.0 5.4
------------------------ ------ ------
Profit after taxation 4.8 4.3
------------------------ ------ ------
EBITDA (defined
below) 12.1 10.0
------------------------ ------ ------
Net operating cash
flow 11.1 7.7
------------------------ ------ ------
Basic earnings per
share 4.65p 4.13p
------------------------ ------ ------
Return on capital
employed 11.4% 10.7%
------------------------ ------ ------
Exceptional items are detailed below.
On a statutory basis for continuing operations, operating profit
was GBP3.3m (2014: GBP6.7m), profit before tax was GBP2.5m (2014:
GBP5.9m), profit after tax was GBP1.7m (2014: GBP4.8m), basic
earnings per share were 1.60 pence (2014: 4.64 pence) and net
operating cash flows were GBP10.5m (2014: GBP8.4m).
Trading, operating profit and EBITDA
Net revenue from continuing operations for the year ended 31
December 2015 increased by 11% to GBP61.0m (2014: GBP55.0m).
Operating profit before exceptional items from continuing
operations increased by 11% to GBP6.8m (2014: GBP6.1m) and profit
before tax increased by 12% to GBP6.0m (2014: GBP5.4m), on the same
basis.
Earnings before interest, taxation, depreciation and
amortisation (EBITDA), from continuing operations and before
exceptional items, is determined as follows:
2015 2014
GBP'm GBP'm
------------------ ------- -------
Operating profit 6.8 6.1
------------------ ------- -------
Depreciation and
amortisation 5.3 3.9
------------------ ------- -------
EBITDA 12.1 10.0
------------------ ------- -------
Exceptional items
Exceptional items in 2015 totalled a net charge of GBP3.5m
before taxation, of which GBP2.9m related to the non-cash
impairment of certain property, plant and equipment, as explained
below, GBP0.5m related to restructuring charges and GBP0.1m related
to business acquisition and other costs.
In 2014, exceptional items from continuing operations totalled a
net credit of GBP0.5m and comprised an amount from the settlement
of litigation, with the previous owners of an acquired subsidiary
of the Group, of GBP1.6m less associated professional fees of
GBP0.7m, restructuring costs of GBP0.2m and other costs totalling
GBP0.2m.
Finance costs
Total finance charges were GBP0.8m (2014: GBP0.8m) and include
the payment of interest on bank debt and other financial
liabilities, totalling. They also included non-cash unwinding of
discounts on provisions totalling GBP0.1m (2014: GBP0.1m).
Taxation
The Group recognised an accounting tax charge of GBP0.8m (2014:
GBP1.1m) for its continuing operations and a tax credit of GBPnil
(2014: GBP0.6m) in respect of discontinued operations. This
includes a credit of GBP0.4m (2014: GBPnil) in respect of
exceptional items.
The accounting tax charge of GBP1.2m for continuing operations
and excluding exceptional items (2014: GBP1.1m) represents 20.3% of
profit before taxation on the same basis (2014: 20.4%). This
compares against the headline rate of corporation tax of 20.25% for
2015 (2014: 21.5%).
The Group paid corporate tax of GBP1.1m during the year (2014:
GBP0.8m), of which GBP0.4m was in respect of 2015 liabilities and
GBP0.7m in respect of previous years. A current tax liability of
GBP0.9m (2014: GBP0.6m) remains in the balance sheet at the year
end.
A deferred tax asset of GBP2.3m (2014: GBP1.7m) is recognised in
the balance sheet, which reflects the probability that the Board
believes that the assets will be recovered in the short to medium
term. A deferred tax asset of GBP0.8m is unrecognised (2014:
GBP0.9m) as the expected usage is not sufficiently predictable.
This asset is expected to eventually be recovered in the ordinary
course of business and will, therefore, be re-recognised when its
recovery is probable.
Earnings per share
Basic earnings per share (EPS), from continuing operations and
excluding exceptional items, increased by 13% to 4.65 pence (2014:
4.13 pence).
Statutory basic EPS, from continuing and discontinued operations
was 1.60 pence (2014: 4.92 pence).
The Group made a profit after taxation, from continuing
operations and excluding exceptional items, of GBP4.8m (2014:
GBP4.3m), of which GBP4.8m (2014: GBP4.1m) was attributable to
equity shareholders.
The total number of ordinary shares in issue increased during
the year from 101,991,380 to 102,249,083 with the weighted average
number of shares in issue increasing from 100,053,156 to
102,139,647 for the purposes of basic EPS.
Dividend
The Board has recommended a dividend of 0.65p per share (2014:
0.50p), payable on or after 10 June 2016, following an ex-dividend
date of 2 June 2016 and a record date of 3 June 2016, subject to
shareholder approval at the Annual General Meeting. The dividend
per share has increased by 30% from the previous year, which
continues to reflect increased confidence over future prospects and
maintains the Board's commitment to pay a progressive dividend to
shareholders. The proposed dividend is covered 7.2 times (2014: 8.3
times) from the continuing operations of the group, before
exceptional items.
Cash flow and net debt
The cash flow of the Group is summarised as follows:
2015 2014
GBP'm GBP'm
---------------------------------- ------- -------
Net operating cash flows
from continuing operations
and before exceptional
items 11.1 7.7
---------------------------------- ------- -------
Net operating cash flows
from exceptional items
and discontinued operations (0.6) 0.4
---------------------------------- ------- -------
Total net operating cash
flows 10.5 8.1
---------------------------------- ------- -------
Maintenance capital expenditure (5.5) (2.7)
---------------------------------- ------- -------
Post-maintenance free cash
flow 5.0 5.4
---------------------------------- ------- -------
Development capital expenditure (1.8) (2.7)
---------------------------------- ------- -------
Purchase of remaining shares (1.1) -
in ANSS
---------------------------------- ------- -------
Acquisition of ASB Environmental (0.1) -
---------------------------------- ------- -------
Purchase of East Kent freehold (0.2) (1.5)
---------------------------------- ------- -------
Proceeds from sale of assets
of discontinued operation - 1.2
---------------------------------- ------- -------
Free cash flow 1.8 2.4
---------------------------------- ------- -------
Dividend payments (0.5) (0.4)
---------------------------------- ------- -------
Proceeds from issuance
of equity 0.1 0.8
---------------------------------- ------- -------
Net cash generation 1.4 2.8
---------------------------------- ------- -------
Post-maintenance free cash flow, as set out in the table above,
represents the underlying cash generation of the Group, before any
investment in future growth or the payment of dividends to
shareholders.
The post-maintenance free cash flow of the Group, from
continuing operations and excluding exceptional items, increased by
12% to GBP5.6m (2014: GBP5.0m), after excluding net operating cash
flows from exceptional items and discontinued operations, of
GBP0.6m outflow (2014: GBP0.4m inflow).
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Underlying net operating underlying cash flows were generated
from continuing trading as follows:
2015 2014
GBP'm GBP'm
------------------------------------ ------- -------
EBITDA from continuing
operations and before exceptional
items 12.1 10.0
------------------------------------ ------- -------
Net working capital movements 0.4 (1.3)
------------------------------------ ------- -------
Interest and taxation payments (1.8) (1.3)
------------------------------------ ------- -------
Other 0.4 0.3
------------------------------------ ------- -------
Net operating cash flows
from continuing operations
and before exceptional
items 11.1 7.7
------------------------------------ ------- -------
Underlying net operating cash flow as a percentage of EBITDA was
92% in 2015 (2014: 77%).
The Group announced in March 2015 that it had purchased the
remaining 19% of shares in Augean North Sea Services, not already
held by the Group, for a total consideration of GBP1.05m.
The Group purchased the assets and site at the East Kent Waste
Recovery Facility during the 2014 for a total consideration of
GBP1.9m, with GBP1.5m paid in 2014 and GBP0.2m paid in each of
January 2015 and January 2016.
During 2014, the Group sold certain residual assets from the
closure of the Waste Network business, for net proceeds of
GBP1.2m.
Capital investment in property, plant and equipment and
intangible assets made by the Group totalled GBP7.3m (2014:
GBP5.4m), excluding the payments to acquire East Kent, and is shown
in the table below. This is split between maintenance investment,
focused on upgrading existing facilities and development investment
on new activities, with planning investment to secure permissions
to operate split between maintenance and development, dependent
upon the specific nature of that capital expenditure:
2015 2015 2015 2014
Maintenance Development TOTAL TOTAL
GBP'm GBP'm GBP'm GBP'm
--------------------------- ------------- ------------- ------- -------
Energy & Construction 2.8 1.0 3.8 2.3
--------------------------- ------------- ------------- ------- -------
Radioactive Waste
Services - - - 0.1
--------------------------- ------------- ------------- ------- -------
Industry & Infrastructure 0.4 0.2 0.6 0.5
--------------------------- ------------- ------------- ------- -------
Augean Integrated
Services 0.6 0.2 0.8 0.4
--------------------------- ------------- ------------- ------- -------
Augean North Sea
Services 1.3 0.3 1.6 1.6
--------------------------- ------------- ------------- ------- -------
Other/corporate 0.4 0.1 0.5 0.5
--------------------------- ------------- ------------- ------- -------
5.5 1.8 7.3 5.4
--------------------------- ------------- ------------- ------- -------
During the year, the Group received a total of GBP0.1m (2014:
GBP0.8m) of equity proceeds from the exercise of share options by
current and former employees.
As a result of the above net cash generation, net debt, defined
as total borrowings less cash and cash equivalents, fell to GBP4.3m
at 31 December 2015, from GBP5.7m at 31 December 2014. This
represented gearing, defined as net debt divided by net assets, of
7.8% (2014: 10.6%). The ratio of net debt to EBITDA, from
continuing operations and before exceptional items, was 0.4 times
(2014: 0.6 times).
Financing
The activities of the Group are substantially funded by a bank
facility, comprising a revolving credit facility and bank
overdraft. That facility was renewed on improved commercial terms
on 21 March 2016 with HSBC Bank plc at a level of GBP20m with the
option of a further GBP10m exclusively to fund acquisitions. The
maturity of the facility is October 2020 and the overdraft is
reviewed annually. This facility, along with the underlying cash
generation of the Group, is expected to provide the required funds
to support further growth of the business over that period.
During 2015, the activities of the Group were substantially
funded by a bank facility, comprising an amortising term loan,
revolving credit faci6lity and bank overdraft. That facility had
amortised, in the ordinary course of business, to GBP13.25m by 31
December 2015 from an initial level of GBP15m. As at 31 December
2015, the undrawn funds available to the Group totalled GBP5.5m,
plus cash of GBP3.6m.
Both of the above facilities include the following two financial
covenants, which are tested on a quarterly basis:
Ratio of net debt to EBITDA: not more than 2.5 times
Ratio of operating profit to cash interest costs (interest
cover): not less than 3.0 times
As at 31 December 2015, the Group was in compliance with both
covenants, with significant headroom.
Balance sheet and return on capital employed
Consolidated net assets were GBP54.4m on 31 December 2015 (2014:
GBP53.8m) and net tangible assets, excluding goodwill and other
intangible assets, were GBP34.4m (2014: GBP33.9m), of which GBPnil
(2014: GBP1.0m) was not attributable to equity shareholders of the
Group. Net assets and net tangible assets as at 31 December 2015
are both stated after the recognition of a GBP2.9m impairment loss,
as explained further below.
Return on capital employed, from continuing operations and
excluding exceptional items, defined as operating profit divided by
average capital employed, where capital employed is net assets
excluding net debt, increased to 11.4% in 2015 (2014: 10.7%). This
outcome is not impacted by the GBP2.9m impairment loss recognised
by the Group, which is recognised as at 31 December 2015 but does
not form part of the calculation of average capital employed for
2015.
Impairment reviews
In accordance with IAS36 'Impairment of Assets', an annual
impairment review was carried out for each cash-generating unit
(CGU) to which significant goodwill is allocated and also any other
CGU where management believed there may have been an indication of
potential impairment to the carrying values of assets in those
CGUs.
For the continuing operations of the Group, this exercise was
completed for the Energy & Construction and Industry &
Infrastructure CGUs, which both contain significant levels of
goodwill, as well as the Augean Integrated Services High
Temperature Incinerator, as a result of performance levels, the
Augean North Sea Services business, as a result of the declining
macroeconomic conditions seen in the North Sea Oil & Gas market
in late 2014 and during 2015, and the Indirect Thermal Desorption
(ITD) unit at Port Clarence Waste Recovery Park, due to the high
proportion of revenues that it generates from the thermal treatment
of North Sea drilling muds and the consequent material impact on
its expected future activity as a result of on-going challenges in
the North Sea Oil & Gas market. Those detailed reviews
indicated that an impairment loss of GBP2.9m was to be recognised
in respect of the ITD CGU as at 31 December 2015 and that no change
was required to the carrying value of the goodwill, nor were any
other impairment losses to be recognised in the consolidated
balance sheet, in respect of the continuing operations of the
Group, at 31 December 2015.
Events since the end of the financial year
On 21 March 2016, the Group completed the refinancing of its
bank loan facilities. Subsequent to this, the Group has a facility
in place to provide a total level of funding of GBP20m with the
option of a further GBP10m exclusively to fund acquisitions,
maturing in October 2020.
Board appointment
Rod Holdsworth will join the Board on 23 March 2016 as a
non-executive director.
Outlook
Trading in the early part 2016 has started positively for the
Group with the exception of Radioactive Waste Services, where the
reduced volumes sent from the Nuclear Decommissioning Authority for
disposal, seen in the second half of 2015, has continued into early
2016. Accordingly, the Group as a whole is trading in line with
market expectations.
The Group remains focussed on the execution of its strategy to
deliver shareholder value and further direct contracts with tier-1
producers have been secured improving forward visibility of
earnings. The portfolio effect of maintaining five businesses in
diverse markets and the continued focus of the Group on increased
returns on its investments means that the Board remains confident
of maintaining its track record of year on year increases in
profitability in 2016.
By order of the Board
Dr Stewart Davies
Chief Executive
21 March 2016
Key Performance Indicators
The Augean plc Board of Directors, Group Management Board and
local management teams regularly review the performance of the
Group as a whole along with the performance of individual business
units. This includes the use of a balanced scorecard for applicable
key performance indicators (KPIs) to monitor progress towards
delivery of the Group's principal targets.
The focus of the Group is in three priority areas.
1. Health & safety: monitored through near miss incidents and the number of accidents incurred;
2. Compliance with regulations, in particular Environment Agency
and Scottish Environment Protection Agency audit results; and
3. Financial performance.
(MORE TO FOLLOW) Dow Jones Newswires
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Certain KPIs are set out in the table below for continuing
operations, each relating to these priorities and showing the
equivalent result for the previous year. An explanation as to why
these KPIs are important to the Group is also included and where
appropriate, KPIs are linked to the core areas of the Group's
strategy, using the key shown underneath the following table:
KPI Link Applicable 2015 2014
to strategy area(s) outcome outcome
of the Group
------------------------------- -------------- --------------- ------------------ ------------------
Number of accidents (1) SMP E&C, I&I, E&C/RWS: E&C/RWS:
Health & safety is the AIS, ANSS 8 10
highest priority of the I&I: 12 I&I: 13
Group AIS: 10 AIS: 5
ANSS: ANSS:
4 7
------------------------------- -------------- --------------- ------------------ ------------------
Number of near misses SMP E&C, I&I, E&C/RWS: E&C/RWS:
reported (2) AIS, ANSS 419 319
Health & safety is the I&I: 747 I&I: 670
highest priority of the AIS: 289 AIS: 287
Group ANSS: ANSS:
560 522
------------------------------- -------------- --------------- ------------------ ------------------
Compliance scores (3) SMP E&C, RWS, E&C: A E&C: C
Augean operates in a I&I, AIS, RWS: A RWS: A
highly regulated environment ANSS I&I: A/Excellent I&I: B/Excellent
and aims to carry on AIS: B AIS: D
the highest levels of ANSS: ANSS:
compliance with relevant Excellent Excellent
regulations and planning
& permitting conditions
------------------------------- -------------- --------------- ------------------ ------------------
Underlying profit before GSV Group GBP6.0m GBP5.4m
taxation (4)
This is the key measure
of underlying profitability
of the Group
------------------------------- -------------- --------------- ------------------ ------------------
Post-maintenance free GSV Group GBP5.6m GBP5.0m
cash flow (5)
This shows the efficiency
of the Group in converting
its profits into cash,
in a steady state, which
is then available to
reinvest for future growth
and distribute to our
shareholders
------------------------------- -------------- --------------- ------------------ ------------------
Return on capital employed
(6)
The Group has several
capital intensive business
units and aims to generate
a superior return for
its shareholders from
its investments. GSV Group 11.4% 10.7%
------------------------------- -------------- --------------- ------------------ ------------------
Proportion of revenue SMP, Group 95% of 80% of
from contracts or framework CFS, top 20 top 20
agreements (7) GSV Top 20 Top 20
This is a measure of 47% of 50% of
the relative certainty Group Group
of future cash flow revenue revenue
------------------------------- -------------- --------------- ------------------ ------------------
Volumes of waste disposed SMP, E&C, RWS E&C: 434,000 E&C: 332,000
to our landfill sites CFS, t t
This is a prima facie GSV RWS: 3,200 RWS: 4,300
indicator of successful t t
growth in the highly
regulated markets in
which we operate
------------------------------- -------------- --------------- ------------------ ------------------
Level of contracted revenue SMP, AIS GBP2.3m GBP1.6m
from Total Waste Management CFS,
We aim to deliver a total GSV
solution to the marketplace,
which allows us to use
our specialist sector
expertise to add value
to our customers and
grow our returns in this
capital-light, service-led
business area
------------------------------- -------------- --------------- ------------------ ------------------
Amount of North Sea Oil SMP, ANSS 89% of 75% of
& Gas revenue generated CFS, ANSS revenue ANSS revenue
directly from operators GSV
and Tier-1 customers
We aim to generate an
increasing proportion
of our revenues from
these companies, moving
up the supply chain,
increasing our credibility
in the marketplace and
reducing both credit
risk and the risk of
intermediary margin erosion
------------------------------- -------------- --------------- ------------------ ------------------
Strategic key
SMP Develop sustainable market positions
CFS Grow through client-focused solutions
GSV Grow shareholder value
(1) The number of total reported accidents, including those
resulting in damage to plant or equipment. This is an absolute
figure which
has not been normalised for changes in employee numbers. The RWS
business uses the assets of other businesses in the Group
and, therefore, separate site results are not applicable for
RWS.
(2) The total number of incidents reported which could have
resulted in an accident or injury or damage to property. The RWS
business
uses the assets of other businesses in the Group and, therefore,
separate site results are not applicable for RWS. Result
excludes
corporate near misses reported.
(3) The average of audit scores notified during the year by the
Environment Agency (EA) in England or the Scottish Environment
Protection
Agency (SEPA) in Scotland. The EA notifies results on the scale
A-F and SEPA notifies on the scale Excellent-Very Poor
(4) Group profit before taxation, from continuing operations and
excluding exceptional items
(5) Net operating cash flows, from continuing operations and
excluding exceptional items, less maintenance capital
expenditure
(6) Calculated as operating profit, from continuing operations
and excluding exceptional items, divided by average capital
employed,
where capital employed is the consolidated net assets of the
Group excluding net debt
(7) Total revenue from top 20 customers, arising from commercial
arrangements under contract or other framework agreement,
divided
by the total revenue of those customers in the year.
Managing risk
The performance of the business is linked to economic activity
in the waste markets it serves, including the manufacturing,
construction, nuclear decommissioning, Energy-from-waste and oil
& gas sectors. Fluctuations in the UK economy in general and
these sectors in particular affect Group performance, as do
inflationary and other cost pressures. Risks are mitigated by
diversifying the customer base as far as possible and by linking
gate fees and other customer charges, wherever possible, to
prevailing operating costs and commodity prices, including the
costs of waste disposal outside of the Group. In addition to this
general economic risk, there are a number of risks specific to the
markets served by the Group which may have a material impact on
activities and results.
The Group uses a range of resources to manage and mitigate its
risks, including the adoption of a broad range of internal
controls, the use of risk registers and regular reporting,
monitoring and feedback of risks through the business.
Environmental legislation
Regulation is a key driver of the hazardous waste market.
Changes in legislation (including tax legislation with
environmental goals) or its interpretation can have a significant
and far reaching impact on waste markets. The Group endeavours to
mitigate this risk by employing high quality technical management
to interpret the evolving legislative framework and its potential
and current impact on the Group's operations. In addition, the
Group maintains a presence on a number of industry groups to
influence the shaping of policy and liaises regularly with relevant
regulators and legislative bodies, including the Environment
Agency, the Scottish Environment Protection Agency (SEPA), the
Department for Environment, Food & Rural Affairs (DEFRA) and
the Department of Energy & Climate Change (DECC).
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:01 ET (07:01 GMT)
The simplistic application of the waste hierarchy to the markets
in which the Group operates, with its focus on reducing the volume
of waste disposed to landfill, could be perceived as a threat to
the business in the long term. The Group is mitigating this threat
by developing treatment solutions for customers which utilise
landfill when this is the most appropriate commercial and
environmental solution, but provide alternative approaches whenever
they are suitable. In addition, the importance of Best Overall
Environmental Outcome (BOEO) in moderating the simplistic
application of the waste hierarchy is being highlighted to
policymakers.
Environmental compliance
All operating sites and activities are regulated by
environmental authorities in line with the requirements set out
within licences and permits. These licences and permits are
required to carry on the business of the Group and compliance with
their terms is essential to its success. Withdrawal or temporary
suspension could have a significant impact on the Group's ability
to operate. Adherence to the highest environmental standards is
also important to ensure the maintenance of good relations with
local communities and to satisfy customers that the techniques,
practices and procedures adopted by the Group are consistent with
those of a responsible business. The Group mitigates this risk
through the employment of technical experts, by working to
well-established policies and procedures described in its
Integrated Management System, through the provision of training to
develop the knowledge and competence of its staff and through
regular monitoring and review of compliance performance. Further
details of how the Group monitors and controls environmental
compliance are set out in the Group's corporate social
responsibility (CSR) report.
Health and safety
The activities of the Group involve a range of health and safety
risks, from offshore operations to the handling of hazardous
wastes. Health and safety is the first priority for all directors,
managers and employees across the Group and investments in relevant
assets and resources are made on an on-going basis to ensure that
the highest health and safety standards are applied. Health and
safety performance is constantly monitored and reviewed, including
formal reviews at each Augean plc Board meeting and in depth
quarterly reviews by the Group's Management Board. These mechanisms
also include detailed reviews of any relevant incidents, which
allow the lessons learnt from such incidents to be fed back to
local teams, in order to reduce the likelihood of recurrence.
Price risk
Price pressure remains a key feature of the hazardous waste
market, where customers often have a range of options for the
ultimate disposal of their wastes and access to several companies
competing to service their needs. The Group reviews its pricing
policies on an on-going basis to ensure that it influences and
stabilises the market, whilst responding to emerging trends and
customer needs. As part of the Group's established sales
infrastructure, specialist roles exist to assess and price waste
consignments in line with market rates and available disposal
solutions. All services are kept under review to ensure that price
changes in the market do not lead to uneconomic activities being
undertaken by the Group.
Economic growth
The Group relies on economic activity in the UK, which in turn
leads to production of the hazardous wastes which form the basis of
its sales revenues. Any downturn in the UK economy may restrict the
volume of hazardous wastes produced and therefore constrain the
Group's revenues. Such macro-economic risks are mitigated, in part,
by following a strategy of developing positions in a range of
markets requiring specialist waste management capabilities and
which have high barriers to entry. The Group also continues to
identify and invest in the techniques, assets and resources to
provide a broad range of services to customers, diversifying the
revenue base of the Group.
Technological factors
Technological risk factors may cause treatment technology in use
to become obsolete or too costly to maintain. The Group monitors
the development and application of the waste hierarchy, invests
selectively in development, and employs strategic planning to make
timely investments in existing and new equipment. Full evaluation
of operational costs and market environment is made before
investment.
North Sea oil and gas investment
With a well-established business focused on providing waste
management services to North Sea oil and gas operators, the Group
has some exposure to any fall in investment for oil and gas
exploration activity in the North Sea, such as those announced by
certain major oil companies in early 2015. This may in turn reduce
the volume of waste available for management by Augean North Sea
Services (ANSS). To mitigate this risk, the ANSS business maintains
a comparatively low level of operational gearing, with the business
therefore able to adjust its significant direct cost base in the
event of a significant and permanent reduction in revenues. Our
North Sea activities are also diversified across a number of
revenue-generating streams, with services provided to production
customers offshore and onshore. The future growth of North Sea
decommissioning volumes may provide new market opportunities for
ANSS that would be a further mitigation.
Transport disruption
The Group relies on the delivery of wastes to its sites to
secure revenues and any disruption to local or national networks,
for example in severe weather conditions, can cause delays or lost
revenue for the Group. Mitigation is provided as far as possible by
the outsourcing of the majority of their haulage requirement,
augmented with the use of the Group's own fleet where appropriate.
The Group have the ability to accept wastes into sites in different
geographical locations before onward transfer to their final
treatment or disposal destinations.
Tax legislation
The use of tax legislation to drive environmental objectives,
particularly the diversion of wastes away from landfill disposal
and towards greater treatment and recycling, represents a long term
risk. The standard rate of landfill tax rose to GBP82.60 per tonne
on 1 April 2015 and will continue to rise in line with the retail
price index. Whilst European and national legislation encourages
"zero landfill" solutions for a range of waste streams, disposal in
properly engineered and permitted landfills continues to be the
most appropriate waste management solution for many hazardous
wastes. To mitigate the risk that the Group will suffer a decline
of landfill volumes as environmental taxes rise the Group has
developed a range of waste treatment solutions for customers and
also broadened its capabilities to ensure its landfill sites are
able to accept all those wastes which do require landfill
disposal.
Consolidated statement of comprehensive income
for the year ended 31 December 2015
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
2015 2015 2015 2014 2014 2014
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Continuing operations
Revenue 61,005 - 61,005 54,993 - 54,993
Operating expenses (54,185) (3,508) (57,693) (48,847) 543 (48,304)
-------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Operating profit 6,820 (3,508) 3,312 6,146 543 6,689
Net finance charges (788) - (788) (759) - (759)
Share of loss
of jointly controlled
entity - - - - (5) (5)
-------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Profit / (loss)
before tax 6,032 (3,508) 2,524 5,387 538 5,925
Taxation 4 (1,227) 390 (837) (1,097) (28) (1,125)
-------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Profit from continuing
operations 4,805 (3,118) 1,687 4,290 510 4,800
-------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Discontinued operations
(Loss) / profit
from discontinued
operations - - - (94) 374 280
-------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Profit / (loss)
for the year and
total comprehensive
income 4,805 (3,118) 1,687 4,196 884 5,080
-------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Profit / (loss)
and total comprehensive
income attributable
to :
Equity shareholders
of Augean plc 4,753 (3,118) 1,635 4,037 884 4,921
Non-controlling
interest 52 - 52 159 - 159
Earnings per share
From continuing and discontinued
operations
Basic 6 1.60p 4.92p
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:01 ET (07:01 GMT)
Diluted 6 1.56p 4.78p
From continuing
operations
Basic 6 1.60p 4.64p
Diluted 6 1.56p 4.51p
Group Statement of financial position
As at 31 December 2015
2015 2014
GBP'000 GBP'000
Non-current assets
Goodwill 19,757 19,602
Other intangible assets 214 296
Property, plant and
equipment 42,918 43,317
Deferred tax asset 2,316 1,688
------------------------------ --------- ---------
65,205 64,903
----------------------------- --------- ---------
Current assets
Inventories 306 410
Trade and other receivables 11,829 12,785
Cash and cash equivalents 3,553 1,502
------------------------------ --------- ---------
15,688 14,697
----------------------------- --------- ---------
Current liabilities
Trade and other payables (10,838) (11,213)
Current tax liabilities (940) (579)
Borrowings (1,054) (1,045)
Provisions (25) -
----------------------------- --------- ---------
(12,857) (12,837)
----------------------------- --------- ---------
Net current assets 2,831 1,860
Non-current liabilities
Borrowings (6,764) (6,169)
Provisions (6,874) (6,839)
------------------------------ --------- ---------
(13,638) (13,008)
----------------------------- --------- ---------
Net assets 54,398 53,755
------------------------------ --------- ---------
Shareholders' equity
Share capital 10,225 10,199
Share premium account 612 542
Retained earnings 43,561 42,059
------------------------------ --------- ---------
Equity attributable
to owners of Augean
plc 54,398 52,800
Non-controlling interest - 955
------------------------------ --------- ---------
Total equity 54,398 53,755
------------------------------ --------- ---------
Consolidated statement of cash flow
For the year ended 31 December 2015
Note 2015 2014
GBP'000 GBP'000
------------------------------- ---- -------- --------
Operating activities
Cash generated from operations 7 12,348 9,416
Finance charges paid (715) (516)
Tax paid (1,105) (801)
------------------------------- ---- -------- --------
Net cash generated from
operating activities 10,528 8,099
------------------------------- ---- -------- --------
Investing activities
Proceeds from disposal
of property, plant and
equipment - 30
Purchases of property,
plant and equipment (7,474) (6,741)
Purchases of intangible
assets (51) (192)
Proceeds from disposal
of discontinued operation - 1,161
Purchase of business (net
of overdraft acquired) (91) -
Net cash used in investing
activities (7,616) (5,742)
------------------------------- ---- -------- --------
Financing activities
Dividends paid 5 (511) (349)
Issue of equity 96 771
Acquisition of non-controlling
interest (1,050) -
Drawdown / (repayment)
of loan facilities 626 (1,785)
Repayments of obligations
under finance leases (22) (34)
------------------------------- ---- -------- --------
Net cash used in financing
activities (861) (1,397)
------------------------------- ---- -------- --------
Net increase in cash and
cash equivalents 2,051 960
Cash and cash equivalents
at beginning of year 1,502 542
------------------------------- ---- -------- --------
Cash and cash equivalents
at end of year 3,553 1,502
------------------------------- ---- -------- --------
Statement of changes in shareholders' equity
for the year ended 31 December 2015
Share Share Special Retained Shareholders' Non-
capital premium profit earnings equity controlling Total
Group GBP'000 account reserve GBP'000 GBP'000 Interest equity
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- --------- --------- ---------- -------------- ------------- ----------
At 1 January 2014 9,970 - 36,450 738 47,158 796 47,954
---------------------- --------- --------- --------- ---------- -------------- ------------- ----------
Total comprehensive
income for the
year
Retained profit - - - 4,921 4,921 159 5,080
Total comprehensive
income for the
year - - - 4,921 4,921 159 5,080
Transactions with
owners of the
company
Dividend - - - (349) (349) - (349)
Issue of equity 229 542 (771) 771 771 - 771
Reserve transfer - - (35,679) 35,679 - - -
Share-based payments - - - 286 286 - 286
Tax on items charged
to equity - - - 13 13 - 13
---------------------- --------- --------- --------- ---------- -------------- ------------- ----------
Total transactions
with the owners
of the company 229 542 (36,450) 36,400 721 -- 721
---------------------- --------- --------- --------- ---------- -------------- ------------- ----------
At 1 January 2015 10,199 542 - 42,059 52,800 955 53,755
---------------------- --------- --------- --------- ---------- -------------- ------------- ----------
Total comprehensive
income for the
year
Retained profit - - - 1,635 1,635 52 1,687
---------------------- --------- --------- --------- ---------- -------------- ------------- ----------
Total comprehensive
income for the
year - - - 1,635 1,635 52 1,687
Transactions with
owners of the
company
Dividend - - - (511) (511) - (511)
Issue of equity 26 70 - - 96 - 96
Acquisition of
non-controlling
interest - - - (43) (43) (1,007) (1,050)
Share-based payments - - - 421 421 - 421
Total transactions
with the owners
of the company 26 70 - (133) (37) -(1,007) (1,044)
---------------------- --------- --------- --------- ---------- -------------- ------------- ----------
At 31 December
2015 10,225 612 - 43,561 54,398 - 54,398
---------------------- --------- --------- --------- ---------- -------------- ------------- ----------
During the year, the Group acquired the remaining 19% of the
share capital of Augean North Sea Services Limited. As at 31
December 2015, the Group has no non-controlling interest.
The Special profit reserve was created in June 2012 upon a Court
order which ordered the cancellation of the share premium account
at that time and the creation of the Special Profit reserve, to
which part of the Share Premium account was transferred. The
Special Profit reserve was determined to be non-distributable until
all liabilities of the Company that existed as at the date of the
court order had been extinguished. The board determined that this
condition was met and the reserve was deemed distributable at 31
December 2014. Accordingly, the balance on this reserve was
transferred to Retainedearnings.
1 Basis of preparation
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The financial information set out in this announcement does not
constitute statutory accounts within the meaning of s495(2) or
s495(3) of the Companies Act 2006. Statutory accounts for the year
ended 31 December 2015 will be dispatched to shareholders by 25
April 2016 for approval at the Annual General Meeting to be held on
2 June 2016. The statutory accounts contain an unqualified audit
report, which did not include a statement under s498(2) or s498(3)
of the Companies Act 2006, and will be delivered to the Registrar
of Companies.
The statutory accounts for the year ended 31 December 2014,
which have been delivered to the Registrar of Companies, contained
an unqualified audit report and did not include a statement under
s498(2) or s498(3) of the Companies Act 2006.
2 Operating segments
The Group has five reportable segments which are the Group's
strategic business units. In 2014, a sixth business segment was
shown as discontinued. These business units are monitored and
strategic decisions are made on the basis of each business unit's
operating performance. The Group's business units provide different
services to their customers and are managed separately as they are
subject to different risks and returns. The Group's internal
organisation and management structure and its system of internal
financial reporting are based primarily on these operating business
units. For each of the business units, the Group's Chief Executive
Officer (CEO) (the chief operating decision-maker) reviews internal
management reports on at least a monthly basis. The following
summary describes the operations of each of the Group's reportable
segments:
-- Energy and Construction: Augean operates three modern
hazardous and non-hazardous landfill operating sites based at East
Northants Resource Management Facility (ENRMF), Thornhaugh in
Northamptonshire and Port Clarence on Teesside, providing waste
remediation, treatment and disposal services to its customers. The
business unit includes a site at Cooks Hole in Northamptonshire
where minerals are extracted and also generates energy as
electricity from closed landfill cells.
-- Radioactive Waste Services: Augean provides waste disposal
services of low level radioactive wastes and naturally occurring
radioactive material produced in the UK.
-- Augean Integrated Services (AIS): Augean operates a High
Temperature Incinerator at Sandwich, East Kent and a site in
Cannock focused on Total Waste Management solutions.
-- Augean North Sea Services: An 81% owned subsidiary company
which became a 100% owned subsidiary during the current year; this
business unit provides waste management and waste processing
services to offshore oil and gas operators in the North Sea.
-- Industry and Infrastructure: Augean operates three waste
processing sites across the UK, with activities focused on the
management of oil-contaminated waste. The business unit also
provides specialist industrial cleaning services.
Information regarding the results of each reportable segment is
included below. Performance is measured based on the segment
operating profit, as included in the internal management reports
that are reviewed by the Group's CEO. This profit measure for each
business unit is used to measure performance as management believes
that such information is the most relevant in evaluating the
results of each of the business units relative to other entities
that operate within these sectors.
All activities arise solely within the United Kingdom.
Inter-segment trading is undertaken on normal commercial terms.
2015
Energy Radioactive Augean Industry Augean Group
and Construction Waste Integrated and Infrastructure North GBP'000
GBP'000 Services Services GBP'000 Sea
GBP'000 GBP'000 Services
GBP'000
------------------ ------------ ------------ -------------------- ---------- ---------
Revenue
Hazardous landfill
activities 12,331 - - - - 12,331
Non-hazardous
landfill activities 2,048 - - - - 2,048
Waste treatment
activities - - 2,356 14,201 1,323 17,880
Total waste management
activities - - 3,871 - - 3,871
Energy generation 65 - - - - 65
APCR management 6,630 - - - - 6,630
Radioactive waste
management - 1,911 - - - 1,911
Processing of
offshore waste - - - - 8,400 8,400
Rental of offshore
equipment and
personnel - - - - 5,177 5,177
------------------------- ------------------ ------------
Total revenue
net of landfill
tax 21,074 1,911 6,227 14,201 14,900 58,313
Landfill tax 6,357 - - - - 6,357
------------------------- ------------------ ------------ ------------ -------------------- ---------- ---------
Total revenue
including inter-segment
sales 27,431 1,911 6,227 14,201 14,900 64,670
Inter-segment
sales (834) - (245) (2,473) (113) (3,665)
------------------------- ------------------ ------------ ------------ -------------------- ---------- ---------
Revenue 26,597 1,911 5,982 11,728 14,787 61,005
------------------------- ------------------ ------------ ------------ -------------------- ---------- ---------
Result
Operating profit/(loss)
before exceptional
items 6,528 1,110 (558) (695) 1,340 7,725
Exceptional items (119) (119) (144) (3,007) (119) (3,508)
------------------------- ------------------ ------------ ------------ -------------------- ---------- ---------
Operating profit/(loss) 6,409 991 (702) (3,702) 1,221 4,217
------------------------- ------------------ ------------ ------------ -------------------- ---------- ---------
Net finance charges (788)
Central costs (905)
------------------------- ------------------ ------------ ------------ -------------------- ----------
Profit before
tax 2,524
Tax (note 4) (837)
------------------------- ------------------ ------------ ------------ -------------------- ---------- ---------
Profit after
tax 1,687
------------------------- ------------------ ------------ ------------ -------------------- ---------- ---------
Attributable
to: Equity shareholders
of the parent
company 1,635
Non-controlling
interest 52
Other information
Capital expenditure 4,128 154 958 709 1,622 7,571
Depreciation
and amortisation 2,976 113 380 1,091 676 5,236
Impairment loss - - - 2,888 - 2,888
2014
Energy Radioactive Augean Industry Augean Group
and Waste Integrated and Infrastructure North GBP'000
Construction Services Services GBP'000 Sea Services
GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------ ------------ -------------------- -------------- ---------
Revenue
Hazardous landfill
activities 8,605 - - - - 8,605
Non-hazardous
landfill activities 1,550 - - - - 1,550
Waste treatment
activities - - 2,075 14,883 - 16,958
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:01 ET (07:01 GMT)
Total waste management
activities - - 2,458 - - 2,458
Energy generation 141 - - - - 141
APCR management 6,989 - - - - 6,989
Radioactive waste
management - 1,827 - - - 1,827
Processing of
offshore waste - - - - 6,312 6,312
Rental of offshore
equipment and
personnel - - - - 7,416 7,416
Waste transfer
activities - - - - 878 878
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Total revenue
net of landfill
tax 17,285 1,827 4,533 14,883 14,606 53,134
Landfill tax 6,319 - - - - 6,319
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Total revenue
including inter-segment
sales 23,604 1,827 4,533 14,883 14,606 59,453
Inter-segment
sales (1,638) - (370) (2,377) (75) (4,460)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Revenue 21,966 1,827 4,163 12,506 14,531 54,993
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Result
Operating profit/(loss)
before exceptional
items 6,341 1,019 (714) (597) 1,016 7,065
Exceptional items (77) (77) (85) 861 (79) 543
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Operating profit/(loss) 6,264 942 (799) 264 937 7,608
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Finance charges (759)
Central costs (919)
Share of loss
of jointly controlled
entity (5)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Profit before
tax 5,925
Tax (note 4) (503)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Profit after tax 5,422
Loss from discontinued
operations (342)
----------------------------------------- ------------ ------------ -------------------- -------------- ---------
Profit for the period
and total comprehensive
income 5,080
----------------------------------------- ------------ ------------ -------------------- -------------- ---------
Attributable to: Equity
shareholders of the
parent company 4,921
Non-controlling
interest 159
Other information
Capital expenditure 2,332 55 2,366 578 1,617 6,948
Depreciation and
amortisation 1,920 62 314 1,101 485 3,882
3 Exceptional items
The following pre-tax items have been charged/(credited) to
operating profit:
2015 2014
GBP'000 GBP'000
-------------------------------------------- -------- --------
Impairment of property, plant and equipment 2,8888 -
Net settlement of legal case - (939)
Restructuring charges 474 214
Refinancing charges - 33
Acquisition related costs 117 -
Other 29 149
-------------------------------------------- -------- --------
Exceptional charge / (income) from
continuing operations 3,508 (543)
-------------------------------------------- -------- --------
Loss on disposal of asset held for
sale and other charges (discontinued) - 218
-------------------------------------------- -------- --------
4 Taxation
Group 2015 2014
----------------------------------- -----------------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
------------------------ ----------- ------------- ------- ----------- ------------- -------
Current tax
UK corporation tax
on profit for the year 1,463 - 1,463 899 (26) 873
Adjustments in respect
of prior years 2 - 2 162 - 162
------------------------ ----------- ------------- ------- ----------- ------------- -------
1,465 - 1,465 1,061 (26) 1,035
------------------------ ----------- ------------- ------- ----------- ------------- -------
Deferred tax
Charge in respect of
the current year (430) - (430) 132 - 132
Adjustments in respect
of prior years (198) - (198) (68) (596) (664)
------------------------ ----------- ------------- ------- ----------- ------------- -------
(628) - (628) 64 (596) (532)
------------------------ ----------- ------------- ------- ----------- ------------- -------
Tax charge/(credit)
on the result for the
year 837 - 837 1,125 (622) 503
------------------------ ----------- ------------- ------- ----------- ------------- -------
Tax reconciliation
2015 2014
-------------- --------------
GBP'000 % GBP'000 %
---------------------------------- ------- ----- ------- -----
Profit before tax from continuing
operations 2,524 5,925
Tax at theoretical rate 511 20.3% 1,274 21.5%
Effects of:
- expenses / (income) not
deductible for tax purposes 162 6% (136) (2)%
- change in tax rate 169 7% (80) (1)%
- effect of share options 24 1% (27) (1)%
- adjustments in respect of
prior years 2 - 94 2%
- other (31) (1)% - -
Tax charge on results 837 33.2% 1,125 19.0%
---------------------------------- ------- ----- ------- -----
The main rate of corporation tax in the UK was 21% from 1
January 2015 and fell to 20% on 1 April 2015, such that the
weighted average headline rate for 2015 was 20.25%.
5 Dividends
2015 2014
GBP'000 GBP'000
Proposed final dividend for the year ended
31 December 2015 of 0.65 pence per share
(2014: 0.5 pence per share) 665 511
-------------------------------------------- -------- --------
Total 665 511
-------------------------------------------- -------- --------
At the forthcoming Annual General Meeting, the Board will
recommend to shareholders that a resolution is passed to approve
payment of a dividend for the year ended 31 December 2015. This has
not been included as a liability in these financial statements.
6 Earnings per share
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