Augean Plc Trading Update (7919M)
January 25 2016 - 2:00AM
UK Regulatory
TIDMAUG
RNS Number : 7919M
Augean Plc
25 January 2016
25 January 2016
Augean plc
("Augean" or "the Group")
Trading update
Augean, one of the UK's leading specialist waste management
businesses, provides the following update ahead of issuing its
preliminary results for the year ended 31 December 2015.
2015 Group performance
The Group confirms that underlying profit before tax is expected
to be in line with market expectations.
The Group generated strong net operating cash flows during 2015
and net debt, as at 31 December 2015, of GBP4.3 million is lower
than market expectations.
2015 business unit performance
The Group operates five business units, in diverse markets. The
2015 performance of those businesses is summarised as follows:
-- Strong performance from Energy & Construction throughout
2015, with a significant increase in volumes sent to landfill
compared to 2014. The high levels of construction wastes seen in
the first half of 2015 have continued to be received through the
second half of the year;
-- Improved performance from Radioactive Waste Services, with
higher average prices more than compensating for lower volumes and
leading to an overall increase in profit in 2015 compared to
2014;
-- Solid performances at Port Clarence Waste Recovery Park, due
to strong volumes of drill cuttings from the North Sea, and at
Paisley in the Industry & Infrastructure business were offset
by a disappointing performance at the Avonmouth site, where an
improvement plan is currently being executed with the aim of
delivering a profit in 2016;
-- Continued strategic traction at Augean Integrated Services,
with further success in winning additional Total Waste Management
contracts with tier-1 customers, for average periods of 3-5 years.
Additional investment was made in the East Kent High Temperature
Incinerator which has ensured increased levels of plant
availability were achieved in the latter part of 2015;
-- Significant growth in revenues and operating profit from
Augean North Sea Services ("ANSS") compared to 2014. This was
despite the slowdown in the exploration and development drilling
market which has continued during the year, with ANSS providing
services on fewer drilling rigs since mid-2015 as a result. The
business is gaining traction on its diversification objective, with
additional contract wins in production waste management and onshore
industrial services. Those contract wins are not expected to fully
offset the reduction in profitability of this business unit in
2016, compared to 2015; however this diversification enables the
business to be progressively less reliant on exploration and
development drilling activity.
Revised landfill tax excise notice
On 16 December 2015, HM Revenue & Customs issued a revised
excise notice in respect of landfill tax, updating the landfill tax
treatment of various waste streams. This update could potentially
impact the amount of landfill tax arising on the disposal of
certain waste materials and, in turn, the selected disposal or
treatment route for those materials. Although the impact of the
revised excise notice on the market is as yet uncertain, there is a
risk that volumes of those materials sent to hazardous landfill
sites, including the sites that are operated by Augean's Energy
& Construction business, may be reduced.
North Sea Services contract win
On 21 January 2016, ANSS entered into a new contract to provide
production waste management and onshore industrial services to a
major oil & gas operator. This represents both further progress
on the strategy of diversification and also a significant
entry-point for the Group to the market which exists in the
southern part of the North Sea. The contract, which is directly
with the operator, is for a period of three years, with the
customer having the option for further annual extensions, up to a
maximum period of seven years.
Impairment of assets
As described above, the strategy for ANSS to diversify its
service offering is gaining traction. However, as previously
highlighted at the time of the Group's interim results in September
2015, the Board anticipates that there will be a long-term
reduction in volumes of drill cuttings from the North Sea Oil &
Gas market and this is likely to cause a significant reduction in
the drill cuttings volumes transferred by ANSS to the Port Clarence
Waste Recovery Park, which forms part of Augean's Industry &
Infrastructure business. It is therefore determined that the
carrying value of our specialist thermal treatment assets should
now be reduced, to reflect the latest medium term view of expected
cash inflows to be generated from those assets. Accordingly, a
non-cash impairment loss of GBP2.9 million will be recognised as an
exceptional item in the consolidated income statement of the Group
for the year ended 31 December 2015.
Dr Stewart Davies, Chief Executive Officer, commented:
"We have enjoyed strong trading and have good momentum across a
number of our businesses as we start 2016. Despite some challenging
market conditions, we have secured further total waste management
contracts with tier-1 customers, including with oil & gas
operators as we continue the diversification of our North Sea
Services business. The Board remains confident in the Group's
delivery of further sustainable growth, in line with our
strategy."
The Group's preliminary results for the year ended 31 December
2015 are expected to be announced on 22 March 2016.
-Ends-
For further information, call:
Augean plc
Dr Stewart Davies, Chief
Executive
Richard Laker, Group Finance
Director 01937 844 980
N+1 Singer
Shaun Dobson
Richard Lindley
Jennifer Boorer 020 7496 3000
FTI Consulting
Oliver Winters
Adam Cubbage 020 3727 1000
This information is provided by RNS
The company news service from the London Stock Exchange
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