TIDMAUG
RNS Number : 2379I
Augean Plc
24 March 2015
24 March 2015
Augean plc ("Augean" or "the Group")
Final results for the year ended 31 December 2014
Augean, one of the UK's leading specialist waste management
businesses, announces its preliminary results for the year ended 31
December 2014.
Group financial highlights
From continuing operations and excluding exceptional items
-- Revenue increased by 26% to GBP55.0m (2013: GBP43.5m)
-- Profit before tax increased by 22% to GBP5.4m (2013: GBP4.4m)
-- Net operating cash flows increased by 18% to GBP7.7m (2013: GBP6.5m)
-- Return on capital employed (1) increased to 10.7%, from 8.9% in 2013.
-- EBITDA(2) increased by 29% to GBP10.0m (2013: GBP7.8m)
-- Basic earnings per share increased to 4.13p (2013: 3.29p)
-- Net debt decreased by GBP2.8m to GBP5.7m (2013: GBP8.5m)
-- Proposed dividend per share of 0.50 pence, an increase of 43% (2013: 0.35 pence).
Operational highlights and strategic developments
-- All five businesses grew revenue and profit in 2014
-- Strategy has traction - delivering financial performance
-- Growth in APCR(3) volumes, within the Energy &
Construction business, with returns made on 2013 investment
-- Increase in revenues from low level radioactive waste,
admittance to the LLWR(4) treatment framework, for the Radioactive
Waste Services business
-- Improved performance and profit from Industry & Infrastructure business
-- Key Total Waste Management contract wins for Augean Integrated Services
-- Further progress for East Kent HTI(5) since acquisition
-- Significant expansion of Augean North Sea Services (ANSS)
business throughout 2014, with 57% revenue growth
-- Appointment of Richard Laker to Board as Group Finance Director in September 2014
-- Growing portfolio of blue-chip customers, with 80% of our top
20 customers (by sales revenue) now serviced through formalised
agreements
Outlook
-- Strong start to 2015 across all five business units
-- Four out of the five businesses focused on growing markets
-- ANSS has low operational gearing and is diversifying into non-drilling related activities
-- Potential to leverage balance sheet and accelerate investment
-- Ongoing commitment to grow shareholder value
Commenting on the Results, Dr Stewart Davies, Chief Executive
Officer, said:
"The Group has delivered a strong set of results in 2014
underpinned by growth in revenue, profit and operating cash flow.
Growth was seen across all five businesses validating our focus on
growing shareholder value by developing sustainable market
positions in each business. We have made significant progress in
moving more of the Group's revenues from 'spot' or short-term
contracts to long-term contracts and frameworks which has provided
increased visibility for the order book.
The Board believes that the Group's customer-focused,
service-led businesses are well positioned to take advantage of
opportunities in each of the markets that they serve. The continued
execution of the strategy of the wider Group along with an
expectation of continuing general UK economic recovery, means that
the Board remains confident of another year of increasing
profitability and cash flows for the Group as a whole in 2015."
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 1203.
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
(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
(3) APCR means air pollution control residues, arising from the
Energy-from-waste sector
(4) LLWR means Low Level Waste Repository Limited
(5) HTI means high temperature incinerator
Chairman's statement
It is pleasing to note the Group's solid progress during 2014,
evidenced by increasing revenues, profit and operating cash flows,
from growth across our key markets.
The foundation for this performance is a clear strategy,
developed and implemented by Stewart Davies and his management
team, focusing and organising the business into five sectors of
activity and ensuring the appropriate management is in place to
deliver the plan.
Total revenue, from continuing operations, increased by 26% to
GBP55.0m (2013: GBP43.5m). Profit before tax from continuing
operations and before exceptional items increased to GBP5.4m (2013:
GBP4.4m) with an increase in basic earnings per share on the same
basis to 4.13 pence (2013: 3.29 pence).
Operating cash flows, from our continuing operations and before
exceptional items, increased from GBP6.5m to GBP7.7m. The Board
continues to support reinvestment of this cash in business growth,
including GBP1.5m paid to purchase the high temperature incinerator
at East Kent in May 2014. All investments are made with the
expectation of increasing levels of return and acceptable EBITDA(2)
payback periods. Our return on capital employed for the year
increased to 10.7% (2013: 8.9%) and our total net debt fell by
GBP2.8m during the year, after total capital expenditure of
GBP6.9m.
Augean Integrated Services (AIS) had its first full year of
trading as a business formed from the retained elements of the
Waste Network business. AIS spearheads the Group's expansion of its
Total Waste Management offering, notably in high-value
manufacturing sectors, delivering customer value through a
combination of consultative expertise, client-site services and the
specific capabilities of our East Kent facility, including
incineration.
Radioactive Waste Services, having been extracted and grown from
our Energy & Construction business, had its first full year of
trading. This business is well positioned to take advantage of the
leading sector expertise of its management team and has attained a
place on the Low Level Waste Repository Waste Treatment Services
Framework, whose ultimate customer is a Government agency, and has
benefited from growth in the volumes arising from nuclear
decommissioning.
Augean North Sea Services performed well during the year and has
continued that performance during the early part of 2015. We
recognise the potential impact that the recent fall in oil prices
could have on this business, but note the success of management in
increasing the proportion of business transacted directly with
operators and tier-1 customers, which positions the business well
to increase its service offering to those customers. Furthermore we
support the diligence of management, who have already implemented a
pay freeze and maintain a comparatively low level of operational
gearing, resulting in the business being able to adjust its cost
base quickly in the event that a significant reduction in revenues
were to occur.
Health and safety remains the highest priority for the Board,
management and employees across the Group, so it was pleasing to
see yet further reduction in accident levels of 12% during 2014, as
well as the 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.
Augean North Sea Services completed a ninth consecutive year
without a lost time incident in its offshore activities. The Group
remains absolutely committed to the highest standards of safety and
compliance and, in that regard, the Board maintains additional
scrutiny of executive management of safety and compliance, through
a non-executive director who attends certain executive safety and
compliance meetings during the year.
Protecting the environment is not just a matter of compliance
with permits, which provides business protection, 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.
The Board recognises that business 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 progress during the year.
As in 2013, I was pleased to note the addition of new
shareholders to our register during the year and I remain thankful
for the continued support from many of our longer-holding
investors.
The Board welcomed Richard Laker as Group Finance Director in
September 2014, and I am pleased to see the Group benefitting from
the B2B experience and financial expertise that Richard brings.
Roger McDowell has declared his intention to step down from the
Board at this year's AGM. The Board would like to thank Roger for
his diligent service to the Group as variously non-executive
director, interim CEO and Chairman during his ten years on the
Board.
I believe that Augean has achieved positions of increased
strength in its key markets during 2014. Accordingly, the Board has
proposed a 43% increase in the dividend payment to 0.50p per share,
which reflects confidence in the prospects of the Group and
continues the Board's commitment to pay a progressive dividend to
its shareholders, with the dividend being covered(6) 8.3 times
(2013: 9.4 times).
The Board remains focused on continuing to improve the returns
from capital employed for the Group as a whole and being prepared
to invest in opportunities for the future, to build on the progress
delivered during 2014. I look forward to another year of profitable
growth for the Group.
Jim Meredith
Non-Executive Chairman
23 March 2015
(6) Dividend cover based on earnings per share from continuing
operations and excluding exceptional items
Strategic Report
Our Strategy
Core strategy
The core 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 described below.
Develop sustainable market positions
Augean is well positioned in attractive markets, both sectoral
and regional, where we have expertise and assets, including
treatment technologies that differentiate our service and reinforce
barriers to entry. Understanding these markets enables us to
progressively develop the capabilities required to maintain and
build our position, often against the background of changing
environmental regulation or client requirements. These capabilities
require timely investments that are anticipated through inclusion
in the business planning process.
Progressively moving more of the Group's revenues from 'spot' or
short-term contracts to long-term contracts and frameworks is vital
to improving the forward visibility of the order book. Growing the
proportion of our revenues that come from service offerings to our
hazardous waste customers is driving further profitable revenue
growth. During 2014 we have built new relationships with customers
and 80% of our top 20 customers (by sales revenue) are now serviced
through a formalised agreement, either in the form of a contract or
other framework agreement. This compares to 68% in 2013. With these
customers representing 50% of total Group sales revenues for the
year (2013: 47%), the transition to a contract-led business model
is well underway and is evident in all of our business units.
Grow through client-focused solutions
Instilling a culture of understanding our clients' needs, in
order to develop solutions for them, by leveraging the knowledge of
sector experts, has been identified as a fundamentally important
focus for the Group. Bringing our hazardous and radioactive waste
management capability together with expertise in offering
associated support services, we can target the critical but
non-core needs of clients requiring specialist waste
management.
Selling and delivering one complete Augean capability brings
consequent benefits to the client of working with a uniquely
capable partner and to the Group of accessing its share of value
created through this longer-term, more integrated relationship with
customers.
Grow shareholder value
The Group is well-positioned to identify potential corporate
investments associated with its key market sectors that would
accelerate the strategy and provide clear operational and market
synergies. Any such investments, whether organic or potential
acquisitions, are undertaken to grow the asset base of the Group
and provide superior returns for shareholders. A total of GBP6.9m
was spent on capital investment in 2014, including the purchase of
the high temperature incinerator in East Kent, one of the few
commercial high temperature incinerators in the UK. The return on
capital employed of the Group, from continuing operations and
before exceptional items, was 10.7% for the year (2013: 8.9%) from
an increased asset base, which is consistent with this
strategy.
Operating review
Introduction
The Group delivered a strong set of financial results in
2014.
Having taken the decision to close the underperforming Waste
Network business in late 2013, the results of the Group, from
continuing operations and excluding exceptional items, show
that:
-- Total revenue increased by 26% to GBP55.0m;
-- Profit before taxation increased 22% to GBP5.4m;
-- Net operating cash flows increased by 18% to GBP7.7m;
-- Basic earnings per share increased by 26% to 4.13 pence; and
-- Return on capital employed(1) increased from 8.9% to 10.7%.
During 2014, the Group operated through five business units and
the above Group results were achieved as a result of underlying
growth in all five businesses in the year.
Having transferred part of the legacy Waste Network business
into a new business, Augean Integrated Services, the remaining
discontinued business was closed in early 2014, with certain
residual assets sold for a cash consideration of GBP1.2m in March
2014.
2014 was also the first full year of trading for the new
Radioactive Waste Services business, which was decoupled from the
Land Resources business (now Energy & Construction) and
achieved notable strategic successes during the year.
The operating cash flow of the Group was used to fund the future
growth of the Group, with GBP1.5m spent on the purchase of the high
temperature incinerator at East Kent, which had previously been
leased, and other total capital expenditure(7) investment of
GBP5.2m, of which GBP2.5m was incurred to lengthen the productive
life of existing assets (maintenance capital expenditure) and
GBP2.7m was for other future growth (development capital
expenditure).
The Group operates a business in the North Sea Oil & Gas
market, Augean North Sea Services, in which Augean held an 81%
equity share throughout 2014. This business performed well in 2014,
a performance which has continued into 2015, despite the recent
reductions in world oil prices. With this in mind, the Board
continues to monitor this market very closely and prudently but
remains confident that the positioning of that business and the
capability of its management team leave the business well placed in
the medium to long term. Consequently, in March 2015, the Board
took the strategic opportunity to purchase the remaining 19% of
shares in the business from the minority shareholder, for a cash
consideration of GBP1.05million, equivalent to 3.7 times 2014
EBITDA. This transaction is expected to be immediately accretive to
earnings per share.
The Group remains committed to growth in all of its businesses
and markets, through both organic and acquisitive means. Aside from
its strong operating cash flows, the Group also successfully
refinanced its banking facilities during 2014, with a GBP14.25m
facility in place as at 31 December 2014, compared to net debt of
GBP5.7m, equivalent to 0.6 times EBITDA, from continuing operations
and before exceptional items. This leaves the Group well placed to
take advantage of investment opportunities that accelerate the
strategy and are value enhancing for shareholders.
The Group employed an average of 300 staff (2013: 292) over the
course of the year. The number of employees in the Group initially
fell in early 2014 following redundancies associated with the sale
of the Waste Network business, but has increased steadily during
2014 as the Group has invested in high-quality employees who are
key to the future growth plans and continuing execution of the
strategy of the Group.
(7) Excluding intangible asset payments of GBP0.2m
Business performance
The Group operated through five business units during the year
(Energy & Construction, Radioactive Waste Services, Industry
& Infrastructure, Augean Integrated Services and Augean North
Sea Services), having operated through four businesses in 2013.
At the end of 2013, the radioactive waste operation of the Group
was split from the Land Resources business to form a separate
business unit, Radioactive Waste Services. The remaining business
was renamed from Land Resources to Energy & Construction.
In late 2013, the Waste Network business was closed, with
certain elements of that business transferred to a new business
unit, Augean Integrated Services, and the remaining business shown
as a discontinued operation in the 2013 annual report.
The performance of each of the five business units in 2014 is
set out below. All revenues are stated net of landfill tax and
intra-group trading.
Energy & Construction (E&C)
The principal activity of this business unit is the disposal of
air pollution control residues (APCR), furnace bottom ash, asbestos
and other contaminated waste materials and soils, mainly from
Energy-from-waste facilities and the construction industry. This is
primarily achieved through treatment and ultimate landfill in
permitted hazardous and non-hazardous sites at Port Clarence, East
Northants Resource Management Facility (ENRMF) and a permitted
non-hazardous site at Thornhaugh, near Peterborough.
Revenues, excluding landfill tax and intra-group trading, were
GBP15.6m. The 2013 revenue of GBP15.2m included GBP1.6m of revenue
from treatment of radioactive waste, recognised in the separate
Radioactive Waste Services business in 2014. The 2014 E&C
revenue, therefore, represents an increase of GBP2.1m (16%) on a
like-for-like basis.
Operating profit before exceptional items improved to GBP6.3m
(2013: GBP6.2m excluding operating profit from radioactive waste),
driven by increasing volumes of APCR and other wastes, with an
increase in average gate fees seen for APCR and a modest reduction
in average gate fees for other wastes. EBITDA increased by 17% to
GBP8.4m (2013: GBP7.1m) on the same basis.
The total volume of waste disposed by the E&C business
increased to 331,998 tonnes in 2014, from 290,754 tonnes in 2013,
with the 2013 volume excluding 4,718 tonnes of radioactive
waste.
This total volume increase of 14% included a 35% growth in APCR
to 85,000 tonnes (2013: 63,000), primarily from new contracts in
the year. This, together with an improvement in the average gate
fee of 1.8%, contributed to an increase of GBP1.9m in revenues from
this waste stream.
Non-APCR waste streams showed a total volume increase of 8% to
247,000 tonnes, with a net reduction in revenue of GBP0.2m. The
revenue from these waste streams includes costs recharged to
customers for moving certain wastes from a customer site to our
landfill sites, on which the Group makes negligible profit. The
total amount of haulage recharged fell by GBP0.4m in 2014, compared
to 2013, due to the mix of wastes and customers dealt with in the
year. Excluding haulage, underlying revenue from the treatment and
disposal of these wastes increased by GBP0.2m (8% increase)
compared to 2013, with a reduction in the average gate fee of 4.5%
abating the total revenue increase to 5%, as average gate fee
increases in respect of construction material and soils were offset
by gate fee reductions in asbestos contaminated and other
wastes.
Non-waste revenue streams, from mineral extraction royalties and
energy generation from landfill gas, totalled GBP0.7m (2013:
GBP0.3m) in the year.
Having made significant investment in the APCR treatment
capability of the business in 2013, a further GBP0.1m of capital
investment was also made during 2014 to ensure that the business
remains well-placed to take advantage of this key growth market for
this business, with outputs from Energy-from-waste forecast to
double between 2013 and 2020.
Total capital investment in the E&C business was GBP2.2m in
2014, of which GBP1.3m was in respect of lengthening the productive
life of existing assets (i.e. maintenance capital expenditure) and
GBP0.9m was investment in the future growth of the business
(development capital expenditure). The total capital spend is lower
than 2013, which included significant investment in the
construction of two new hazardous landfill cells at both Port
Clarence and ENRMF.
The investment was augmented in 2014 with additional ash storage
and treatment capacity at ENRMF, with those works due to be
completed in 2015. Investment was also made in the storage
facilities for liquid wastes and, to ensure that the business
remains well-invested to take advantage of the growth markets that
it now faces.
Radioactive Waste Services (RWS)
This business unit was created in November 2013, with
radioactive waste having previously been managed by the Energy
& Construction business (formerly Land Resources).
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 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 ultimate primary customer is a Government
agency and the volume of waste dealt with is seasonal, with
significant volumes ordinarily seen in the period from January to
March each year, such that the majority of revenue and profits from
this business are generally expected to occur in the first half of
the Augean financial year.
The RWS business also generates revenues from the treatment of
naturally occurring radioactive material (NORM). During 2014, this
revenue stream fell to GBP0.12m compared to 2013 revenues of
GBP0.24m, with more of the waste in the market in 2014 being
suitable for treatment via incineration. This market remains an
area for potential high growth in future, in particular as the
market for decommissioning of North Sea oil and gas platforms
develops in the medium term.
The total revenue from the disposal and treatment of low level
radioactive waste, excluding landfill tax and intra-group trading,
increased by 12% to GBP1.8m (2013: GBP1.6m), with an increase in
operating profit of 12% to GBP1.0m (2013: GBP0.9m) and an increase
in EBITDA of 19% to GBP1.1m (2013: GBP0.9m). This was generated
from a total volume of 4,323 tonnes, a decrease of 8% compared to
4,718 tonnes in 2013.
During 2014, the business was successful in obtaining a place on
an additional LLWR framework for Waste Treatment Services, which
opened up the potential for additional waste streams and associated
revenues in future years. Pleasingly, this business was also able
to offer advisory services to several customers, demonstrating the
value of the Group's waste management and disposal expertise, which
was a key factor in the increase in the average fee charged per
tonne of radioactive waste in the year. This maintains the
possibility that the business can extend the range of services it
offers, in line with strategy of the Group.
Industry & Infrastructure (I&I)
This business unit was formerly called Oil & Gas Services
and its principal activity is the recovery and recycling of oil and
solvents, 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
rig 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 on Teesside and providing
industrial services solutions on client sites.
This business has high operational gearing, with increased
levels of throughput and associated revenue being achieved in order
to increase margins and drive improvements in profitability. The
business achieved a significant increase in revenue of 30% to
GBP12.5m (2013: GBP9.6m), primarily as a result of organic growth
from the existing client base.
Notable strategic achievements in the year included partnering
with technical industrial services operators, the provision of 24/7
solutions to the water industry and the continuation and
strengthening of support to the Augean North Sea Services
business.
The increased level of revenue throughput, led to a reduced
operating loss of GBP0.6m in the year (2013: loss of GBP1.0m).
Improved profitability was seen during the year, such that the
operating loss for the year comprised a loss of GBP0.5m related to
the first half of 2014 and a loss of GBP0.1m related to the second
half. The business generated a positive EBITDA of GBP0.5m in the
year, having reached its short-term target of EBITDA break-even in
2013. With improved profitability and margins achieved in 2014, as
well as positive EBITDA, management remains confident of further
progress in 2015.
A total of GBP0.5m of capital investment was undertaken in the
I&I business, of which c. GBP0.4m represented maintenance
capital expenditure and GBP0.1m related to development capital
expenditure.
Augean Integrated Services (AIS)
The AIS business was newly formed at the start of 2014, having
been initially formed from certain of the assets and direct
customers from the continuing element of the legacy Waste Network
business.
The business operates from a site in Cannock and a high
temperature incinerator (HTI) in Sandwich, East Kent. The HTI was
previously held under a ten-year lease, which commenced in 2012. In
May 2014, the Group purchased the HTI, along with related freehold
land and buildings for a total price of GBP1.9m, of which GBP1.5m
was paid upon completion of the purchase and GBP0.4m of the
consideration was deferred, with GBP0.2m due in each of January
2015 and January 2016, saving rental costs of GBP0.3m per annum on
the remaining eight years of the lease.
AIS 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 niche HTI asset in East Kent,
which is designed to incinerate high-value low volume goods, such
as pharmaceutical or other specialist waste, in a secure
fashion.
Having experienced some operational issues with the East Kent
HTI during 2013, the 2014 financial year benefitted from improved
operating reliability, with increased asset availability compared
to 2013, but saw the loss of two key contracts which hindered the
ability of the business to maintain an optimal level of volume
through the incinerator. During 2014, the business recruited
commercial resource with sector-specific expertise, enabling the
business to secure new TWM contracts with high-value customers in
the latter part of the year, the full year impact of which is
expected to occur in 2015 and beyond.
The AIS business generated revenue of GBP4.2m, a 60% increase
compared to equivalent revenue of GBP2.6m in 2013 from the
continuing element of the Waste Network business, which
subsequently became the AIS business. This revenue included GBP1.6m
from contracted TWM business (2013: GBP1.2m).
The business made an operating loss of GBP0.7million (2013:
operating loss GBP1.1m) and a negative EBITDA of GBP0.5m (2013:
negative EBITDA GBP0.9m). This reflects an improvement in the
second half of the financial year; with a second half operating
loss of GBP0.25m compared to GBP0.45m in the first half, as a
result of the additional new contracted work secured.
A total of GBP0.4m of maintenance capital expenditure was
undertaken in the AIS business, most of which was at the East Kent
site.
Augean North Sea Services (ANSS)
2014 was the second full year of trading of the ANSS business as
a subsidiary of the Group, which operates in the North Sea Oil
& Gas market, primarily from four sites in Aberdeen but also
from a site at Lerwick, in the Shetland Islands. The primary
revenue streams are from drilling waste management, which includes
drill cuttings management and the rental of offshore engineers and
equipment to customers, as well as onshore & marine industrial
services and water treatment.
In 2014, the business saw significant revenue growth, of 57% to
GBP14.5m, with an increase in operating profit of 49% to GBP1.0m
and an increase in EBITDA of 44% to GBP1.5m. This significantly
exceeded management expectations and was despite an extremely poor
start to 2014 due to adverse weather conditions in the North Sea in
the first quarter of the year. During 2014, the business maintained
incumbency on an average of 4.3 rigs, compared to 3.0 in 2013.
The business has seen strategic traction in its aim to move up
the supply chain and deal directly with oil & gas operators and
tier-1 customers in this market, with a total of 75% of revenues
directly generated from those customers in 2014 (2013: 67%). This
increases the potential for the business to widen its service scope
directly with those customers in the future.
Given the high growth seen in 2014, the Board continued its
position from 2013 of reinvesting all of the EBITDA of the business
into its future development. A total of GBP1.6m of capital
investment was made, compared to EBITDA of GBP1.5m, of which
GBP0.9m related to investment in skips to contain and transport
drilling waste, which had previously been rented by the
business.
The ANSS business delivered an impressive 2014 full year
performance with high activity levels continuing into 2015.
However, the significant decline in world oil prices, seen in the
latter part of 2014 and in 2015, means that there is increased risk
surrounding the future profitability of this business. In view of
these market conditions, ANSS has implemented a pay freeze for
staff with effect from 1 January 2015 and is in the process of
multi-skilling some of its employees to optimise operational
efficiency for key customers and support the broadening of service
scope. These measures, combined with leveraging direct
relationships with oil & gas operators and tier-1 customers,
will further increase competitiveness for the commercial
opportunities which continue to arise.
As a support service business, 2014 operating expenses included
74% variable costs, with the remainder comprising 4% depreciation
and 22% 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 is
earning the business increasing recognition from operators and
tier-1 customers in the sector.
The Board remains confident that the ANSS management team has
the capability and credibility in the North Sea Oil 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. This confidence is signalled by the decision,
subsequent to the year end, to take the opportunity to purchase the
remaining 19% of shares in ANSS, not already held by the Group,
from the minority shareholder, at a price which is equivalent to
less than four times 2014 EBITDA and would still be considered to
represent an attractive equivalent multiple of future EBITDA, even
in the event of a modest reduction in financial performance in the
short to medium term. Based on latest management expectations, this
transaction is expected to be immediately accretive to earnings per
share.
Following the announcement of support for the UK Continental
Shelf Oil & Gas industry in the 2015 Budget, it is anticipated
that this will assist operators in their investments, including
drilling activity which is an important sector for ANSS.
The Board continues to monitor events in the North Sea Oil &
Gas market, given their potential impact on the ANSS business.
Waste Network
The Waste Network business was earmarked for closure in late
2013, at which time the business was split into a continuing
element, which formed the basis of the new Augean Integrated
Services business explained above, and an element which was
subsequently closed and shown as discontinued in the 2013 Group
results. Certain assets of the closed business were held for sale
as at 31 December 2013 and were subsequently sold in March 2014,
generating cash of GBP1.2m for the Group.
Long Term Contracts
The Group has continued to increase the proportion of its
customer base which is served through a formalised agreement,
consisting of either a contract or framework agreement. In 2014,
revenue from the top-20 customers of the Group made up 50% of total
Group revenue (2013: 47%), of which 80% was through a formalised
agreement (2013: 68%).
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 ongoing operation and future development of
the business. During 2014, we have prepared planning and permit
applications for extension of the landfill sites at Thornhaugh and
Port Clarence. The application for Thornhaugh will enable 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 current consent comes to an end
in 2016 so we are seeking to secure long term planning permission
for the landfill site. It is anticipated that the applications will
be determined during 2015. 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 have varied the Environmental Permits for the
incinerator so that our hazardous and radioactive waste storage
activities can be extended to Bloody Point. The permits were
granted in early 2015.
On 10 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 has
been undertaken including environmental impact and risk assessments
to ensure that the on-going development will not cause harm to
human health or pollution of the environment. It is anticipated
that the revised permits will be issued by the end of 2015.
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 2013 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. The KPI table below includes the scores
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
2014 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
organic 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. In recognition of their
commitment and effort the Board approved a 1.8% pay award for all
management and staff from 1 January 2015, with the exception of
Augean North Sea Services where pay rises were not granted due to
the macroeconomic conditions currently being seen in the North Sea
Oil and Gas market. We also introduced a living wage policy and
made adjustments accordingly in respect of legacy pay from one of
our acquisitions. The pay awards seek to balance the inflationary
pressures on costs of living with the need for the Group to
maintain discipline on cost management, but also recognises the
progress made by the business over the past year which would not
have been possible without the commitment and hard work of every
employee.
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, of 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 2013 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.
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 1,800 near misses and 300 safe acts were reported
during 2014 (achieving the target of one report per operational
employee per month) and at the same time there was a 12% reduction
from the previous year in the number of accidents causing injury to
a person or damage to property, continuing the year on year
improvement.
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 GBP417,000 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 ongoing
support for the Underground Youth Club at Kings Cliffe, the Cannock
Chase Community Centre, 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 stated 2014 2013
Revenue 55.0 43.5
------ ------
Operating profit 6.1 5.1
------ ------
Profit before taxation 5.4 4.4
------ ------
Profit after taxation 4.3 3.4
------ ------
EBITDA (defined below) 10.0 7.8
------ ------
Net operating cash flow 7.7 6.5
------ ------
Basic earnings per share 4.13p 3.29p
------ ------
Return on capital employed 10.7% 8.9%
------ ------
Exceptional items are detailed below.
On a statutory basis for continuing operations, operating profit
was GBP6.7m (2013: GBP4.9m), profit before tax was GBP5.9m (2013:
GBP4.2m), profit after tax was GBP4.8m (2013: GBP3.2m), basic
earnings per share were 4.64 pence (2013: 3.13 pence) and net
operating cash flows were GBP8.4m (2013: GBP6.3m).
Trading, operating profit and EBITDA
Net revenue from continuing operations for the year ended 31
December 2014 increased by 26% to GBP55.0m (2013: GBP43.5m).
Operating profit before exceptional items from continuing
operations increased by 20% to GBP6.1m (2013: GBP5.1m) and profit
before tax increased by 22% to GBP5.4m (2013: GBP4.4m), on the same
basis.
Discontinued operations relate to the former Waste Network
business, which was substantially closed by the end of 2013, with
residual assets sold in 2014. Discontinued operations recorded an
operating loss of GBP0.3m (2013: GBP5.3m loss).
Earnings before interest, taxation, depreciation and
amortisation (EBITDA), from continuing operations and before
exceptional items, is determined as follows:
2014 2013
GBP'm GBP'm
Operating profit 6.1 5.1
------- -------
Depreciation and amortisation 3.9 2.7
------- -------
EBITDA 10.0 7.8
------- -------
Exceptional items
Exceptional items totalled a net credit of GBP0.3m before
taxation, of which a charge of GBP0.2m related to the closure of
the Waste Network business and is accordingly classified as
discontinued.
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 items totalling
GBP0.2m.
Finance costs
Total finance charges reflected the payment of interest on bank
debt and other financial liabilities, totalling GBP0.8m (2013:
GBP0.7m). This included the non-cash unwinding of discounts on
provisions totalling GBP0.1m (2013: GBP0.1m).
Taxation
The Group recognised an accounting tax charge of GBP1.1m (2013:
GBP1.0m) for its continuing operations and a tax credit of GBP0.6m
(2013: GBP0.4m credit) in respect of discontinued operations.
The accounting tax charge of GBP1.1m for continuing operations
represents 19.0% of profit before taxation, on the same basis. This
compares against the headline rate of corporation tax of 21.5%.
The Group paid corporate tax of GBP0.8m during the year, GBP0.5m
in respect of 2014 liabilities and GBP0.3m in respect of previous
years. A current tax liability of GBP0.6m (2013: GBP0.3m) remains
in the balance sheet at the year end.
A deferred tax asset of GBP1.7m (2013: GBP1.1m) is recognised in
the balance sheet, which reflects the extent to which the Board
believes that the assets will be recovered in the short to medium
term. A deferred tax asset of GBP0.9m is unrecognised (2013:
GBPnil) as the expected usage is not sufficiently predictable. This
asset is expected to be recovered in the ordinary course of
business and will, therefore, be re-recognised when its recovery is
foreseeable.
Earnings per share
Basic earnings per share (EPS), from continuing operations and
excluding exceptional items, increased by 26% to 4.13 pence (2013:
3.29 pence).
Statutory basic EPS, from continuing and discontinued operations
was 4.92 pence (2013: loss per share of 1.79 pence).
The Group made a profit after taxation, from continuing
operations and excluding exceptional items, of GBP4.3m (2013:
GBP3.4m), of which GBP4.1m (2013: GBP3.3m) was attributable to
equity shareholders.
The total number of ordinary shares in issue increased during
the year from 99,699,414 to 101,991,380 with the weighted average
number of shares in issue increasing from 99,699,414 to
100,053,156, for the purposes of basic EPS.
Dividend
The Board has recommended a dividend of 0.50p per share (2013:
0.35p), payable on or after 12 June 2015, following an ex-dividend
date of 4 June 2015 and a record date of 5 June 2015, subject to
shareholder approval at the Annual General Meeting. The dividend
per share has increased by 43% 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 8.3 times (2013: 9.4
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:
2014 2013
GBP'm GBP'm
Net operating cash flows from continuing
operations and before exceptional
items 7.7 6.5
------- -------
Net operating cash flows from exceptional
items and discontinued operations 0.4 (1.6)
------- -------
Total net operating cash flows 8.1 4.9
------- -------
Maintenance capital expenditure (2.7) (3.2)
------- -------
Post-maintenance free cash flow 5.4 1.7
------- -------
Development capital expenditure (2.7) (3.8)
------- -------
Purchase of East Kent freehold (1.5) -
------- -------
Proceeds from sale of assets of 1.2 -
discontinued operation
------- -------
Free cash flow 2.4 (2.1)
------- -------
Dividend payments (0.4) (0.3)
------- -------
Proceeds from issuance of equity 0.8 -
------- -------
Net cash generation 2.8 (2.4)
------- -------
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
49% to GBP5.0m (2013: GBP3.3m), after excluding net operating cash
flows from exceptional items and discontinued operations, of
GBP0.4m inflow (2013: GBP1.6m outflow).
Net operating underlying cash flows were generated from
continuing trading as follows:
2014 2013
GBP'm GBP'm
EBITDA from continuing operations
and before exceptional items 10.0 7.8
------- -------
Net working capital movements (1.3) (0.4)
------- -------
Interest and taxation payments (1.3) (1.0)
------- -------
Other 0.3 0.1
------- -------
Net operating cash flows from continuing
operations and before exceptional
items 7.7 6.5
------- -------
Net operating cash flow as a percentage of EBITDA worsened to
77% in 2014 (2013: 83%), primarily as a result of an increase of
GBP3.1m in trade and other receivables, from continuing operations,
during the year.
This was impacted by the decision of three major customers to
defer their December 2014 payments into early January 2015, which
accounted for GBP0.8m of the increase. Excluding this, total
receivables increased by GBP2.3m, equivalent to 24% against the 31
December 2013 position, which reflects an increase of 26% in total
revenue from continuing operations from 2013 to 2014.
The Group announced the purchase of the assets and site at the
East Kent Waste Recovery Facility during the year for a total
consideration of GBP1.9m, with GBP1.5m paid in 2014 and GBP0.2m
payable in each of January 2015 and January 2016. The purchase of
the freehold saves annual rental expenses on the remaining eight
years of the lease of GBP0.3m per annum.
During the year, the Group sold certain residual assets from the
closure of the Waste Network business, for net proceeds of
GBP1.2m.
Excluding the East Kent and Waste Network transactions, capital
investment in property, plant and equipment made by the Group
totalled GBP5.4m (2013: GBP6.9m) 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:
Maintenance Development TOTAL
GBP'000 GBP'000 GBP'000
Energy & Construction 1,345 930 2,275
------------ ------------ ---------
Radioactive Waste Services - 84 84
------------ ------------ ---------
Industry & Infrastructure 376 146 522
------------ ------------ ---------
Augean Integrated Services 402 9 411
------------ ------------ ---------
Augean North Sea Services 278 1,334 1,612
------------ ------------ ---------
Other/corporate 105 231 336
------------ ------------ ---------
Total 2,506 2,734 5,240
------------ ------------ ---------
During the year, the Group received a total of GBP0.8m (2013:
GBPnil) 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 financial liabilities less cash and cash equivalents, fell
to GBP5.7m at 31 December 2014, from GBP8.5m at 31 December 2013.
This represented gearing, defined as net debt divided by net
assets, of 10.6% (2013: 17.7%). The ratio of net debt to EBITDA,
from continuing operations and before exceptional items, was 0.6
times (2013: 1.1 times).
Financing
The activities of the Group are substantially funded by a bank
facility, comprising an amortising term loan, revolving credit
facility and bank overdraft. That facility was renewed in March
2014 with HSBC Bank plc, at an initial total level of GBP15m, which
had amortised, in the ordinary course of business, to GBP14.25m by
31 December 2014. The maturity of the term loan and credit facility
is July 2017 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. As at 31 December 2014, the undrawn
funds available to the group totalled GBP7.1m, excluding cash of
GBP1.5m.
The bank facility includes 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 2014, the Group was in compliance with both
covenants, with significant headroom.
Balance sheet and return on capital employed
Consolidated net assets were GBP53.8m on 31 December 2014 (2013:
GBP48.0m) and net tangible assets, excluding goodwill and other
intangible assets, were GBP33.9m (2013: GBP28.2m), of which GBP1.0m
(2013: GBP0.8m) was not attributable to equity shareholders of the
Group.
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 10.7% in 2014 (2013: 8.9%).
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 and 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 early 2015. Those detailed reviews indicated 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 2014.
In the prior year, an impairment loss of GBP3.9m was recognised
in respect of the Waste Network CGU, which is reported as a
discontinued operation and has now been closed. That charge was
recognised in the 2013 income statement as an exceptional item and
included GBP2.1m related to goodwill for this CGU.
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.
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 2014 2013
to strategy area(s) of outcome outcome
the Group
Number of accidents (1) SMP E&C, I&I, E&C: 10 E&C: 17
Health & safety is the highest AIS, ANSS I&I: 13 I&I: 7
priority of the Group AIS: 5 AIS: n/a
ANSS: 7 ANSS: 3
-------------- ------------- ------------------ ------------------
Number of near misses reported SMP E&C, I&I, E&C: 319 E&C: 732
(2) AIS, ANSS I&I: 670 I&I: 818
Health & safety is the highest AIS: 287 AIS: n/a
priority of the Group ANSS: 522 ANSS: 343
-------------- ------------- ------------------ ------------------
Compliance scores (3) SMP E&C, RWS, E&C: C E&C: B
Augean operates in a highly I&I, AIS, RWS: A RWS: B
regulated environment and aims ANSS I&I: B/Excellent I&I: A/Excellent
to carry on the highest levels AIS: D AIS: n/a
of compliance with relevant ANSS: Excellent ANSS: Excellent
regulations and planning & permitting
conditions
-------------- ------------- ------------------ ------------------
Underlying profit before taxation GSV Group GBP5.4m GBP4.4m
(4)
This is the key measure of underlying
profitability of the Group
-------------- ------------- ------------------ ------------------
Post-maintenance free cash flow GSV Group GBP5.0m GBP3.3m
(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 10.7% 8.9%
-------------- ------------- ------------------ ------------------
Proportion of revenue from contracts SMP, Group 80% of top 68% of top
or framework agreements (7) CFS, 20 20
This is a measure of the relative GSV Top 20 50% Top 20 47%
certainty of future cash flow of Group of Group
revenue revenue
-------------- ------------- ------------------ ------------------
Volumes of waste disposed to SMP, E&C, RWS E&C: 332,000 E&C: 290,800
our landfill sites This is a CFS, te te
prima facie indicator of successful GSV RWS: 4,300 RWS: 4,700
growth in the highly regulated te te
markets in which we operate
-------------- ------------- ------------------ ------------------
Level of contracted revenue SMP, AIS GBP1.6m GBP1.2m
from Total Waste Management CFS,
We aim to deliver a total solution GSV
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 & Gas SMP, ANSS 75% of ANSS 67% of ANSS
revenue generated directly from CFS, revenue revenue
operators and Tier-1 customers GSV
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.
Events since the end of the financial year
On 10 March 2015, the Group completed the purchase of the
remaining 19% of shares, not already held by the Group, in its
subsidiary company, Augean North Sea Services Limited (ANSS),
thereby making ANSS a wholly-owned subsidiary of the Group. The
consideration for the shares was GBP1,050,000, which was paid in
cash on the same date.
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).
The 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.
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 ongoing 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 monthly 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 ongoing 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 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 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
through the use of its own fleet of vehicles and 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 full rate of landfill tax rose to GBP80/tonne on 1 April
2014 and the UK government announced in the 2014 Budget that those
tax rates would not be reduced in the medium term, with near term
future increases being based on 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.
Outlook
There has been a strong start to 2015 in each of our five
businesses, including Augean North Sea Services, and the Board
believes that the Group's customer-focused, service-led approach
positions it to capitalise on opportunities in the markets that it
serves. The Group will continue to leverage the expertise of our
people and the targeted capital investment that has been undertaken
in pursuit of double-digit profit growth. The Board notes the
prevailing conditions in the North Sea Oil & Gas market and the
measures in the Budget announced this month to stimulate investment
by the Oil & Gas Operators, including exploration. The
continued execution of the strategy of the wider Augean Group and
the portfolio effect of maintaining five businesses in diverse
markets, along with an expectation of continuing general UK
economic recovery, means that the Board remains confident of
another year of increasing profitability and cash flows in
2015.
By order of the Board
Dr Stewart Davies
Chief Executive
23 March 2015
Consolidated statement of comprehensive income
for the year ended 31 December 2014
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
2014 2014 2014 2013 2013 2013
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Continuing operations
Revenue 54,993 - 54,993 43,488 - 43,488
Operating expenses (48,847) 543 (48,304) (38,370) (227) (38,597)
----------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Operating profit 6,146 543 6,689 5,118 (227) 4,891
Net finance charges (759) - (759) (674) - (674)
-----------
Share of loss of jointly
controlled entity - (5) (5) (13) - (13)
----------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Profit before tax 5,387 538 5,925 4,431 (227) 4,204
Taxation 4 (1,097) (28) (1,125) (1,040) 63 (977)
----------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Profit from continuing
operations 4,290 510 4,800 3,391 (164) 3,227
----------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Discontinued operations
(Loss) / profit from
discontinued operations 15 (94) 374 280 (911) (3,995) (4,906)
----------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Profit / (loss) for
the year and total
comprehensive income 7 4,196 884 5,080 2,480 (4,159) (1,679)
----------------------------- ---- ------------ ----------- -------- ------------ ----------- ---------
Profit / (loss) attributable
to :
Equity shareholders
of Augean plc 4,037 884 4,921 2,372 (4,159) (1,787)
Non-controlling interest 159 - 159 108 - 108
Earnings per share
From continuing and discontinued
operations
Basic 6 4.92p (1.79)p
Diluted 6 4.78p (1.79)p
From continuing operations
Basic 6 4.64p 3.13p
Diluted 6 4.51p 3.13p
Group Statement of financial position
At 31 December 2014
2014 2013
GBP'000 GBP'000
Non-current assets
Goodwill 19,602 19,602
Other intangible assets 296 198
Investment in jointly controlled
entity - 5
Property, plant and equipment 43,317 40,192
Deferred tax asset 1,688 1,143
----------------------------------- --------- ---------
64,903 61,140
---------------------------------- --------- ---------
Current assets
Inventories 410 296
Trade and other receivables 12,785 9,806
Cash and cash equivalents 1,502 542
----------------------------------- --------- ---------
14,697 10,644
Non-current assets classified
as held for sale - 1,200
----------------------------------- --------- ---------
14,697 11,844
Current liabilities
Trade and other payables (11,213) (9,030)
Current tax liabilities (579) (345)
Financial liabilities (1,045) (114)
----------------------------------- --------- ---------
(12,837) (9,489)
Net current assets 1,860 2,355
Non-current liabilities
Financial liabilities (6,169) (8,919)
Provisions (6,839) (6,622)
----------------------------------- --------- ---------
(13,008) (15,541)
---------------------------------- --------- ---------
Net assets 53,755 47,954
----------------------------------- --------- ---------
Shareholders' equity
Share capital 10,199 9,970
Share premium account 542 -
Special profit reserve - 36,450
Retained earnings 42,059 738
----------------------------------- --------- ---------
Equity attributable to owners
of Augean plc 52,800 47,158
Non-controlling interest 955 796
----------------------------------- --------- ---------
Total equity 53,755 47,954
----------------------------------- --------- ---------
Consolidated statement of cash flow
For the year ended 31 December 2014
Note 2014 2013
GBP'000 GBP'000
------------------------------------------ ---- -------- --------
Operating activities
Cash generated from operations 8 9,416 5,862
Finance charges paid (516) (629)
Tax paid (801) (316)
------------------------------------------ ---- -------- --------
Net cash generated from operating
activities 8,099 4,917
------------------------------------------ ---- -------- --------
Investing activities
Proceeds from disposal of property,
plant and equipment 30 -
Purchases of property, plant and
equipment (6,741) (6,898)
Purchases of intangible assets (192) (146)
Proceeds from disposal of discontinued
operation 1,161 -
------------------------------------------ ---- -------- --------
Net cash used in investing activities (5,742) (7,044)
------------------------------------------ ---- -------- --------
Financing activities
Dividends paid 5 (349) (249)
Issue of equity 771 -
Repayments of borrowings - (549)
(Repayment) / drawdown of loan
facilities 9 (1,785) 3,734
Repayments of obligations under
finance leases 9 (34) (272)
------------------------------------------ ---- -------- --------
Net cash (used in)/generated from
financing activities (1,397) 2,664
------------------------------------------ ---- -------- --------
Net increase in cash and cash equivalents 960 537
Cash and cash equivalents at beginning
of year 542 5
------------------------------------------ ---- -------- --------
Cash and cash equivalents at end
of year 1,502 542
------------------------------------------ ---- -------- --------
Statement of changes in shareholders' equity
for the year ended 31 December 2014
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 2013 9,970 - 32,076 6,913 48,959 1,119 50,078
------------------------------ --------- --------- --------- ---------- -------------- ------------- ----------
Total comprehensive
income for the year
Retained (loss) / profit - - - (1,787) (1,787) 108 (1,679)
Total comprehensive
income for the year - - - (1,787) (1,787) 108 (1,679)
Transactions with owners
of the company
Dividend - - - (249) (249) - (249)
Acquisition of
non-controlling
Interest in subsidiary - - - 118 118 (431) (313)
Reserve transfer - - 4,374 (4,374) - - -
Share-based payments - - - 88 88 - 88
Tax on items charged
to equity - - - 29 29 - 29
------------------------------ --------- --------- --------- ---------- -------------- ------------- ----------
Total transactions
with the owners of
the company - - 4,374 (4,388) (14) (431) (445)
------------------------------ --------- --------- --------- ---------- -------------- ------------- ----------
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 31 December 2014 10,199 542 - 42,059 52,800 955 53,755
------------------------------ --------- --------- --------- ---------- -------------- ------------- ----------
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 has determined that
this condition has been met and the reserve was deemed
distributable at 31 December 2014. Accordingly, the balance on this
reserve has been transferred to Retained earnings.
1 Basis of preparation
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 2014 will be dispatched to shareholders by 27
April 2015 for approval at the Annual General Meeting to be held on
4 June 2015. 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 2013,
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 six reportable segments, one of which is
discontinued, which are the Group's strategic business units. 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 (2013: Land Resources): Augean
operates three modern hazardous and non-hazardous landfill
operating sites based at East Northants Resource Management
Facility (ENRMF) and 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. 2013 activities were
previously reported as part of the Land Resources segment
-- 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
during the year; this business unit provides waste management and
waste processing services to offshore oil and gas operators in the
North Sea.
-- Industry and Infrastructure (2013: Oil & Gas Services):
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.
-- Waste Network (discontinued): Augean operated four waste
transfer sites across the UK, transporting, recovering, recycling
and disposing of hazardous wastes on behalf of its customers. This
business unit no longer exists and the sites operated at Hinckley,
Worcester and Rochdale were sold in March 2014. The site at Cannock
became part of the AIS operation in January 2014.
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.
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 Chief Executive Officer. This
profit measure for each business units 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.
Central costs for the proper governance and resources required to
operate the plc board and listing have been separately
reported.
All activities arise solely within the United Kingdom.
Inter-segment trading is undertaken on normal commercial terms.
Information about reportable segments
2014
Energy Radioactive Augean Industry Augean Waste Group
and Waste Services Integrated and North Network
Construction Services Infrastructure Sea Discontinued
GBP'000 GBP'000 Services GBP'000 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 - - - 2,075
Total waste
management
activities - - 2,458 14,883 - - 17,341
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 - - - - 878 218 1,096
------------------- ------------ ----------------- ------------- -------------- --------- ------------ --------
Total revenue net
of landfill tax 17,285 1,827 4,533 14,883 14,606 218 53,352
Landfill tax 6,319 - - - - - 6,319
------------------- ------------ ----------------- ------------- -------------- --------- ------------ --------
Total revenue
including
inter-segment
sales 23,604 1,827 4,533 14,883 14,606 218 59,671
Inter-segment sales (1,638) - (370) (2,377) (75) (7) (4,467)
------------------- ------------ ----------------- ------------- -------------- --------- ------------ --------
Revenue 21,966 1,827 4,163 12,506 14,531 211 55,204
------------------- ------------ ----------------- ------------- -------------- --------- ------------ --------
Result
Operating
profit/(loss)
before exceptional
items 6,341 1,019 (714) (597) 1,016 (124) 6,941
Exceptional items (77) (77) (85) 861 (79) (218) 325
------------------- ------------ ----------------- ------------- -------------- --------- ------------ --------
Operating
profit/(loss) 6,264 942 (799) 264 937 (342) 7,266
------------------- ------------ ----------------- ------------- -------------- --------- ------------ --------
Finance charges (759)
Central costs (919)
Share of loss of
jointly
controlled entity (5)
------------------- ------------ ----------------- ------------- -------------- --------- ------------ --------
Profit before tax 5,583
Tax (503)
------------------- ------------ ----------------- ------------- -------------- --------- ------------ --------
Profit after tax 5,080
------------------- ------------ ----------------- ------------- -------------- --------- ------------ --------
Attributable to:
Equity
shareholders of
the
parent company 4,921
Non-controlling
interest 159
------------------- ------------ ----------------- ------------- -------------- --------- ------------ --------
2013
------------- -----------------------------------------------------------------------------------
Energy Radioactive Augean Industry Augean Waste Group
and Waste Integrated and North Network GBP'000
Construction Services Services Infrastructure Sea Discontinued
GBP'000 GBP'000 GBP'000 GBP'000 Services GBP'000
GBP'000
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
Revenue
Hazardous
landfill
activities 8,831 - - - - - 8,831
Non-hazardous
landfill
activities 1,063 - - - - - 1,063
Waste treatment
activities - - 1,463 12,574 - - 14,037
Energy
generation 128 - - - - - 128
APCR management 5,089 - - - - - 5,089
Radioactive
waste
management - 1,625 - - - - 1,625
Processing of
offshore
waste - - - - 5,179 - 5,179
Rental of
offshore
equipment and
personnel - - - - 3,719 - 3,719
Waste transfer
activities - - 1,147 - 452 3,982 5,581
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
Total revenue
net
of landfill tax 15,111 1,625 2,610 12,574 9,350 3,982 45,252
Landfill tax 6,849 - - - - - 6,849
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
Total revenue
including
inter-segment
sales 21,960 1,625 2,610 12,574 9,350 3,982 52,101
Inter-segment
sales (1,574) - - (2,981) (77) (346) (4,978)
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
Revenue 20,386 1,625 2,610 9,593 9,273 3,636 47,123
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
Result
Operating
profit/(loss)
before
exceptional
items 6,182 908 (1,117) (993) 682 (1,259) 4,403
Exceptional
items (26) - (25) (151) (25) (4,043) (4,270)
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
Operating
profit/(loss) 6,156 908 (1,142) (1,144) 657 (5,302) 133
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
Finance charges (674)
Central costs (544)
Share of loss of
jointly
controlled
entity (13)
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
Loss before tax (1,098)
Tax (581)
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
Loss after tax (1,679)
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
Attributable to:
Equity
shareholders
of the parent
company (1,787)
Non-controlling
interest 108
----------------- ------------- ------------ ----------- --------------- --------- ------------- ---------------
3 Exceptional items
The following pre-tax items have been charged/(credited) to
operating profit:
2014 2013
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Continuing operations:
Net settlement of legal case (939) -
Restructuring charges 214 218
Refinancing charges 33 -
Legal and professional due diligence charges - 9
Other 149 -
-------- --------
Total exceptional items for continuing operations (543) 227
-------- --------
Discontinued operations:
Loss on disposal of asset held for sale and other
charges 218 -
Impairment of Waste Network Division - 3,870
Restructuring charges - 173
-------- --------
Exceptional income from settlement of legal case relates to the
settlement of litigation with the former owners of of HiTech
Limited, a business Augean acquired during 2008. The above figure
is stated net of GBP661,000 of legal and professional charges
associated with the litigation.
The loss on disposal of asset and impairment losses relate to
the closure and sale of the Waste Network business.
4 Taxation
Group 2014 2013
----------------------------------- -----------------------------------
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 899 (26) 873 708 (300) 408
Adjustments in respect of
prior years 162 - 162 85 - 85
----------------------------- ----------- ------------- ------- ----------- ------------- -------
1,061 (26) 1,035 793 (300) 493
----------------------------- ----------- ------------- ------- ----------- ------------- -------
Deferred tax
Charge in respect of the
current year 132 - 132 185 (96) 89
Adjustments in respect of
prior years (68) (596) (664) (1) - (1)
----------------------------- ----------- ------------- ------- ----------- ------------- -------
64 (596) (532) 184 (96) 88
----------------------------- ----------- ------------- ------- ----------- ------------- -------
Tax charge/(credit) on the
result for the year 1,125 (622) 503 977 (396) 581
----------------------------- ----------- ------------- ------- ----------- ------------- -------
Tax reconciliation
2014 2013
------------------ ----------------
GBP'000 % GBP'000 %
--------------------------------------------- --------- ------- ------- -------
Profit before tax from continuing operations 5,925 4,204
Tax at theoretical rate 1,274 21.5% 978 23.3%
Effects of:
- (income) / expenses not deductible
for tax purposes (136) (2)% 140 3%
- other - - (337) (5)%
- change in tax rate (80) (1)% 144 3%
- effect of share options (27) (1)% (33) 1%
- adjustments in respect of prior periods 94 2% 85 2%
--------------------------------------------- --------- ------- ------- -------
Tax charge on results 1,125 19.0% 977 23.2%
--------------------------------------------- --------- ------- ------- -------
5 Dividends
2014 2013
GBP'000 GBP'000
Proposed final dividend for the year ended 31 December
2014 of 0.50 pence per share (2013: 0.35 pence per share) 510 349
------------------------------------------------------------ -------- --------
Total 510 349
------------------------------------------------------------ -------- --------
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 2014. This has
not been included as a liability in these financial statements.
6 Earnings per share
The calculation of basic earnings per share (EPS) is based on
the profit attributable to ordinary shareholders of GBP4,921,000
(2013: GBP1,787,000 loss) and a weighted average number of ordinary
shares outstanding of 100,053,156 (2013: 99,699,414), calculated as
follows:
2014 2013
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Earnings for the purposes of basic and diluted EPS 4,921 (1,787)
Exceptional items (884) 4,159
--------------------------------------------------------- -------- --------
Earnings for the purposes of adjusted basic and diluted
EPS 4,037 2,372
Discontinued operations 94 911
--------------------------------------------------------- -------- --------
Earnings for the purposes of basic and diluted adjusted
EPS for continuing operations only 4,131 3,283
--------------------------------------------------------- -------- --------
The exceptional items (note 3) have been adjusted, in the
adjusted earnings per share, to better reflect the underlying
performance of the business, when presenting the basic and diluted
earnings per share.
2014 2013
GBP'000 GBP'000
-------------------------------------------------------- ----------- ----------
Number of shares
Weighted average number of shares for basic earnings
per share 100,053,156 99,699,414
Effect of dilutive potential ordinary shares from share
options 2,894,941 -
-------------------------------------------------------- ----------- ----------
Weighted average number of shares for diluted earnings
per share 102,948,097 99,699,414
-------------------------------------------------------- ----------- ----------
Earnings per share
Basic 4.92p (1.79)p
Diluted 4.78p (1.79)p
Adjusted earnings per share
Basic 4.03p 2.38p
Diluted 3.92p 2.38p
-------------------------------------------------------- ----------- ----------
Earnings per share - Continuing operations
Basic 4.64p 3.13p
Diluted 4.51p 3.13p
Adjusted earnings per share - Continuing operations
Basic 4.13p 3.29p
Diluted 4.01p 3.29p
Earnings per share - Discontinued operations
Basic (0.09)p (0.91)p
Diluted (0.09)p (0.91)p
7 Discontinued operations
On 24 September 2013, the Company announced the intention to
dispose of the Waste Network division. The Company subsequently
entered into sale arrangements to dispose of the sites at
Worcester, Hinckley and Rochdale. The disposals were completed in
March 2014 on which date the control of the sites passed to the
acquirers.
The site at Cannock, which previously formed part of the Waste
Network division, has been retained within the Group. This site has
been used from 1 January 2014 as the base for the newly-formed
Augean Integrated Services business, distinct from the transfer
operation which previously existed.
The Company retained a small number of existing customers which
were previously served by the divested sites. The analysis below
includes the closed site and the trading result for the customers
who were not retained.
2014 2013
GBP'000 GBP'000
----------------------------------------------- ----------- ---------
Revenue 211 3,636
Operating Expenses (335) (4,895)
----------------------------------------------- ----------- ---------
Loss before tax and exceptional items (124) (1,259)
Exceptional items (218) (4,043)
----------------------------------------------- ----------- ---------
Loss before tax (342) (5,302)
Taxation 622 396
----------------------------------------------- ----------- ---------
Profit / (Loss) after Tax 280 (4,906)
----------------------------------------------- ----------- ---------
During the year the division contributed a net cash outflow of
GBP(342,000) (2013: outflow of GBP1,350,000) to the Group's net
operating cash flow. There was no cash flow associated with
financing or investing activities.
The disposal proceeds for these operations were GBP1.2m, net of
disposal costs.
8 Reconciliation of operating profit to net cash generated from
operating activities
Group
------------------
2014 2013
GBP'000 GBP'000
Operating profit 6,689 4,891
Loss from discontinued operations (342) (5,302)
Amortisation of intangible assets 95 71
Depreciation 3,787 2,671
Impairment 5 3,870
Earnings before interest, tax, depreciation
and amortisation (EBITDA) 10,234 6,201
--------------------------------------------- -------- --------
Share based payments 286 88
Increase in inventories (114) (78)
Increase in trade and other receivables (2,940) (1,262)
Increase in trade and other payables 1,959 930
(Decrease) / increase in provisions (15) 36
Loss / (gain) on disposal of property,
plant and equipment 6 (53)
Cash generated from operations 9,416 5,862
Interest paid (516) (629)
Tax paid (801) (316)
--------------------------------------------- -------- --------
Net cash generated from operating activities 8,099 4,917
--------------------------------------------- -------- --------
The above EBITDA includes a total net cash inflow of GBP201,000
relating to exceptional items and discontinued operations (2013:
outflow of GBP1,577,000).
The above net cash generated from operating activities includes
a net cash inflow of GBP416,000 relating to exceptional items and
discontinued operations (2013: outflow of GBP1,577,000).
9 Analysis of changes in net debt
The table below presents the net debt of the Group at the
balance sheet date.
31 31
December Cash December
2013 flow 2014
GBP'000 GBP'000 GBP'000
------------------------------ --------- -------- ---------
Cash and cash equivalents 542 960 1,502
--------- ---------
Bank loans due after one year (8,909) 1,785 (7,124)
--------- ---------
Finance leases (124) 34 (90)
------------------------------ --------- -------- ---------
Net debt (8,491) 2,779 (5,712)
------------------------------ --------- -------- ---------
10 Event after the balance sheet date
On 10 March 2015, Augean plc completed the purchase of the
remaining 19% of shares, not already held by the company, in its
subsidiary company, Augean North Sea Services Limited (ANSS),
thereby making ANSS a wholly-owned subsidiary of the Group. The
consideration for the shares was GBP1,050,000, which was paid in
cash on the same date.
11 Annual Report & Accounts
The Annual Report will be sent to shareholders on or around 27
April 2015 and will be available on the Company's website
www.augeanplc.com from that date. The Annual General Meeting will
be held at 10am on 4 June 2015 at FTI Consulting, 200 Aldersgate,
London EC1A 4HD.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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