TIDMAUG
RNS Number : 2088I
Augean Plc
20 March 2018
20 March 2018
Augean plc ("Augean" or the "Group")
Final results for the year ended 31 December 2017
Augean, one of the UK's leading specialist waste management
businesses, is pleased to announce its preliminary results for the
year ended 31 December 2017.
Financial highlights
From continuing operations and excluding exceptional items
-- Total revenue increased by 11% to GBP84.7m (2016: GBP76.0m)
-- Adjusted profit before taxation(1) and share based payment
charges decreased 19% to GBP5.8m (2016: GBP7.2m)
-- Net operating cash flows decreased by 21% to GBP10.7m (2016: GBP13.5m)
-- Adjusted(2) basic earnings per share decreased by 4% to 4.23 pence (2016: 4.42p)
-- Net debt remained in line with the prior year at GBP10.8m
-- No proposed dividend given the ongoing discussions with HMRC (2016: 1.0p per share)
-- As at 19 March net debt is GBP8.9m. A further GBP0.8m
consideration in relation to the sale of AIS is expected in the
next month
Commenting on the Results, Jim Meredith, Executive Chairman,
said:
"2017 was a challenging year with the HMRC Landfill Tax
assessments and a decline in Group profitability. We remain in
active discussions with HMRC but do not anticipate a swift
resolution. Steps have been taken to reduce the Group cost base by
GBP4m and we have also reduced Group debt from over GBP18m in the
Autumn to under GBP11m by year-end. Trading has commenced the year
in line with board expectations."
There will be a meeting for analysts at 9.00am today at the
offices of FTI Consulting, 9(th) Floor, 200 Aldersgate, Aldersgate
Street, London, EC1A 4HD. For further information please call 020
3727 1000.
For further information, please call:
Augean plc 01937 844 980
Jim Meredith Executive Chairman
Mark Fryer, Group Finance Director
N+1 Singer 020 7496 3000
Shaun Dobson
Alex Price
FTI Consulting 020 3727 1000
Fiona Walker
(1) Profit before tax and exceptional items also adjusted to
exclude amortisation of acquired intangible assets of GBP0.3m
(2016: GBP0.2m)
(2) Before exceptional items
Executive Chairman's statement
During 2017, the Group profit before tax and exceptional items
decreased 21% to GBP5.5m because of losses on the legacy Colt
contract and cost increases committed through the second half of
2016.The legacy contract has now been completed and settlement
reached. The Group has enacted measures to reduce the cost base by
GBP4m on an annualised basis which has seen over 50 employees, or
over 15% of the workforce leave the business. The Group is
currently trading in line with expectations for 2018. A focus on
cash control is reflected in our debt position.
At an operational level, the Group has achieved a number of key
strategic goals including securing further contracts with top-tier
customers and a significant increase in Energy from Waste (EfW)
volumes, reaffirming our integrated waste management proposition
with our customers. It was particularly pleasing to see the 3x
Waste Acceptance Criteria (WAC) derogation unchanged by DEFRA
following almost four years of review and consultation. This
decision validates the Groups' successful investment in processing
solutions to generate the most environmentally beneficial outcomes
for our customers. The investment in these core assets for the
Group remains valid whilst we ensure that the associated cost base
(particularly overheads) has to be balanced to ensure appropriate
cash and profit generation.
Health and safety continues to remain the highest priority for
the Board, management and employees across the Group. The
management team has responded to an increase in accidents in 2016
by enhancing hazard recognition, risk evaluation and learning from
incidents. As such, number of accidents resulting in injuries in
2017 has reduced by 37%. The Board continues to recognise the risks
faced by our people, who work in environments moving, treating and
disposing of hazardous waste.
Protecting the environment is not only a matter of compliance
with permits but encompasses our broader responsibilities to
society and future generations. The Group diligently monitors its
performance in this regard, the results of which are regularly
reported to the Board. The majority of our sites in England are
ranked by the Environment Agency as Category A and the Scottish
Environmental Protection Agency rates all of the Group's sites in
Scotland as "Excellent".
The Board recognises that our business success is dependent on
the quality, diligence and hard work of all Augean's employees and
I would like to take this opportunity on behalf of the Board to
thank everyone who has contributed to the Group's continued
progress during a challenging year.
The Group's balance sheet and operating cash flow remain robust
but given the HMRC position, described in note 9, which has been
communicated to shareholders previously, the Board will not pay a
dividend for 2017 (2016 final: 1.0p per share).
Since our announcement on 27 October 2017, we have received a
further two assessments from HMRC on the same basis as the previous
assessments. We expect to receive further assessments to be issued
in order for HMRC to protect subsequent periods and we will
continue to provide appropriate and periodic updates without
announcing the receipt of each and every update. The total number
of quarterly assessments received to date is five, and the value of
these assessments received at the date of this report is GBP12.0m,
including interest of GBP1.2m. On 19 March 2018, we were advised by
HMRC that certain waste types assessed as standard rated in one of
the three assessments received for Augean South, will be treated as
exempt for the February 2014 quarter. The impact of this is to
potentially remove GBP1.5m from the February 2014 quarterly
assessment when this is formally re-issued. This represents 53% of
that quarter's GBP2.8m original assessment. Whilst this is clearly
a welcome development in proving our case with HMRC, there is still
substantial time and clarification required to fully justify our
position. Despite this, we believe the assessments are without
merit, we will robustly defend the assessments, have not provided
for these and do not expect to make a net cash payment.
As in previous years, I am pleased to note the addition of new
shareholders to our register during the year and again I am
thankful for the continued support from all of our investors.
I am pleased that we have been able to strengthen the Board with
the appointment of Christopher Mills and Roger McDowell and thank
Andrew Bryce for re-joining the Board to bring his particular
skills to bear in resolution of our HMRC issue.
I look forward to updating shareholders on our progress during
the current financial year.
Jim Meredith
Executive Chairman
19 March 2018
Operating Review
Introduction
The adjusted Group profit before tax of GBP5.5m (2016: GBP7.0m)
is after intangible asset amortisation of GBP0.4m (2016: GBP0.3m),
share option expense of GBP0.2m (2016: GBP0.2m) and before
exceptional items of GBP8.6m (2016: GBP5.7m) with a loss after tax
and exceptional costs of GBP3.5m (2016: GBP0.4m profit).
During 2017, the Group operated through five business units. To
generate the savings made and because of the need to focus on
profitable cash generative growth more heavily, the Group has
amended the business unit infrastructure for 2018. Going forward,
the Group will therefore be reported as two segments, with the
results of the North Sea Service business separately disclosed and
all others combined to produce one new segment. The results for
2017 are therefore shown for the last time under the five business
units, the results of which were:
Adjusted revenues Adjusted operating IFRS basis
profit before operating profit
interest, tax before interest,
and central tax and central
costs costs
----------------------------- -------------------- --------------------- --------------------
2017 2016 2017 2016 2017 2016
----------------------------- --------- --------- ---------- --------- --------- ---------
Energy and Construction 21.0 25.3 6.6 8.3 5.3 8.1
Radioactive Waste Services 3.1 1.2 1.2 0.3 1.0 0.1
Industry and Infrastructure 21.1 18.8 (0.8) 0.5 (7.4) 0.2
Augean Integrated Services 10.7 7.6 (0.4) (0.7) (0.7) (4.2)
Augean North Sea Services 18.2 12.9 0.7 0.5 0.5 (1.0)
--------- --------- ---------- --------- --------- ---------
Total 74.1 65.8 7.3 8.9 (1.3) 3.2
----------------------------- --------- --------- ---------- --------- --------- ---------
Adjusted revenues exclude intra segment trading and landfill
tax, adjusted operating profit excludes exceptional items and
intangible asset amortisation.
The operating cash flow of the Group of GBP9.4m was used to fund
the future growth of the Group, with total capital expenditure
investment of GBP8.8m. This comprised GBP4.5m of maintenance
capital expenditure to lengthen the productive life of existing
assets (including GBP1.7m on landfill cell engineering) and GBP4.3m
of development capital expenditure for targeted future growth.
As has been announced previously, the acquisition of Colt has
not met the Board's expectations. The goodwill and associated
intangible assets of GBP6.1m has therefore been impaired to GBPnil
and a further impairment of GBP0.2m against Property Plant and
Equipment has been recognised. Other significant exceptional items
relate to redundancy costs to reduce the Group cost base of GBP1.0m
and costs of dispute relating to Landfill Tax with HMRC of
GBP1.1m.
Business performance
The Group operated through five business units during 2017 and
2016 (Energy & Construction, Radioactive Waste Services,
Industry & Infrastructure, Augean Integrated Services and
Augean North Sea Services). The performance of each of the five
business units in 2017 is set out below.
Energy & Construction (E&C)
The principal activity of this business unit is the disposal of
Energy from Waste including APCR, asbestos and other contaminated
waste materials and soils, mainly from construction sectors.
Adjusted revenues, excluding landfill tax and inter group sales,
reduced by 17% to GBP21.0m (2016: GBP25.3m), with the reduction
primarily caused by lower construction soil volumes.
The total volume of waste disposed by the E&C business
reduced by 20% to 458,000 tonnes in 2017, from 574,000 tonnes in
2016. APCR volumes increased by 10% from 111,000 tonnes to 122,000
tonnes and all other waste streams decreased by 27% from 463,000
tonnes to 336,000 tonnes.
The adjusted operating profit of the business unit declined by
20% to GBP6.6m (2016: GBP8.3m) compared with adjusted revenue
decline of 17%.
APCR volumes have shown strong growth as a result of contract
wins for the Group. An increase in the volume of APCR treated by
the Group remains a key strategic objective in the short and medium
term, with the business well-positioned to utilise its additional
investment in treatment capacity to service the growth in Energy
from Waste and biomass energy capacity in the areas of the UK
served by our sites. The Group is committed to obtaining recycling
credit for its treatment of APCR which, after cost, is important
for the operators of the EfW plants, the municipal authorities and
ultimately the British public in lower Council taxes.
Radioactive Waste Services (RWS)
The principal activity of this business unit is the treatment
and disposal of low level radioactive waste generated from the UK
nuclear estate.
The total adjusted revenue from the disposal and treatment of
low level radioactive waste increased by 258% to GBP3.1m (2016:
GBP1.2m) due to a number of new contract awards from the Nuclear
Decommissioning Authority. Operating profit before exceptional
items increased by fourfold to GBP1.2m (2016: GBP0.3m). The Group
in 2017 has benefitted from reasonable inputs of radioactive
material during the year, however, the control and contracting
environment (not under Group Control) for these materials means
volumes released are very unpredictable, albeit welcome when
received.
The Group has successfully won contracts to maintain revenue for
2018 subject to expected release rates of the waste although these
will be more heavily weighted to the second half of 2018. Further
medium-term opportunities exist for the RWS business through
anticipated growth in the market for treatment and disposal of
naturally occurring radioactive material (NORM) and low level
radioactive waste from other sectors.
The Group operates a number of essential assets for the delivery
of the Government's strategy for dealing with radioactive waste and
will seek to expand the range of our permits for the treatment of
this waste through 2018.
Industry & Infrastructure (I&I)
The principal activity of this business unit is the recovery and
recycling of oil and solvents and the generation of secondary
liquid and solid fuels from waste. This business also provides
specialist industrial cleaning and other waste management services
to a range of markets, including refinery chemical processing &
manufacturing, port & shipping operations and water
treatment.
I&I total adjusted revenue increased by 12% to GBP21.1m in
2017 (2016: GBP18.8m) largely due to a full year of Colt revenues
(8 months in 2016) and the business unit made a loss before
exceptional items of GBP0.8m, compared with a GBP0.5m operating
profit before exceptional items in 2016. All the loss was generated
from a single Colt legacy contract and the lower I&I
performance is attributable to higher shared business costs in 2017
over 2016 which has been addressed in the cost reduction programme.
Colt lost GBP0.8m in 2017 (2016: GBPNil). All the Colt losses were
incurred on one tank cleaning contract with a major oil refiner.
This contract dispute is now settled and no other losses are
expected to be generated. Given the Colt loss, and the rest of the
business only being break-even, the Board has carried out an
impairment review and recorded an impairment of goodwill and
associated intangible assets of GBP6.3m.
Augean Integrated Services (AIS)
AIS operates a high temperature incinerator (HTI) in East Kent
and provides a total waste management (TWM) service at client sites
to address their waste management and compliance needs leveraging
the specialist HTI assets.
Total adjusted revenue grew by 41% to GBP10.7m (2016: GBP7.6m).
This included GBP7.5m from total waste management (2016: GBP5.5m).
Despite the revenue growth the division lost GBP0.4m (2016: GBP0.7m
loss). The lack of profitability of this business unit was
primarily caused by continuing high cost in the TWM business with
brokerage margin not able to sufficiently cover the cost base
expansion as new customers are won. The East Kent HTI almost broke
even. The board is closely monitoring the performance of the HTI
which needs to improve in the short term.
The AIS total waste management business was sold to Regen
Holdings on the 16 March for an initial consideration of GBP3.0m
with an additional GBP0.8m on agreement of completion accounts and
further amounts expected for delivery of working capital over
normalised levels. The impact of the sale is demonstrated in note
10.
Augean North Sea Services (ANSS)
The ANSS business unit operates in the North Sea Oil & Gas
market. The primary revenue streams are from drilling waste
management (DWM), including the rental of offshore engineers and
equipment to customers, production waste management, onshore &
marine industrial services, decommissioning and water
treatment.
ANSS revenue increased by 41% to GBP18.2m (2016: GBP12.9m) and
saw an increase in operating profit to GBP0.7m (2016: GBP0.5m).
The ANSS strategy continues to gain traction as the business
moves up the supply chain, dealing directly with Oil & Gas
operators and top-tier customers, so providing opportunities to
widen its service scope directly with those customers. Over 89% of
total ANSS revenues were directly generated from those customers
during 2017, compared with 84% in 2016.
The ANSS facility at the Port of Dundee for the management of
waste arising onshore from the decommissioning of offshore assets
opened in June. This facility will enhance the opportunity for
Augean to service the growing North Sea decommissioning market, a
multi-billion pound programme decommissioning hundreds of offshore
assets which is expected to be active for over 20 years.
The business has been successful in broadening scope in the
decommissioning market to encompass offshore work. A top-tier
operator which initially engaged ANSS to provide plug and
abandonment waste management containment services has now widened
the engagement to provide offshore radiation protection supervision
work. ANSS secured significant long term contracts, encompassing
all our segments of business, worth in excess of GBP10m with two
major North Sea operators, servicing, integrated waste management
and industrial cleaning, Offshore DWM /Plug & Abandonment /
Radiological Protection Service and specialist cleaning,
Decommissioning with decontamination and NORM disposals. These
contract wins further underpin existing management expectations for
2018 revenues and profits from this business.
Legislative environment
Regulation underpins the demand for Augean's services and
accordingly the business follows closely the development of
legislation and guidance and engages proactively with policy makers
and regulators. The Department for Environment, Food and Rural
Affairs (DEFRA) confirmed in 2017 that there is no clear
justification or environmental benefit for removal of the
derogations supporting the Augean practice for safe treatment of
air pollution control residues.
Planning and permitting
The key permitting work in 2017 has been development of an Oil
& Gas decommissioning hub and waste transfer station at Port of
Dundee.
The current planning permission time limits allow a life for the
Group's ENRMF site to 2026, Thornhaugh to 2034 and over 50 years
for Port Clarence.
Permit extensions will be sought for the Port Clarence landfill
in 2018.
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 2017 2016
---------------------------- ------ ------
Revenue 84.7 76.0
---------------------------- ------ ------
Operating profit 6.4 7.8
---------------------------- ------ ------
Profit before taxation 5.5 7.0
---------------------------- ------ ------
Profit after taxation 4.3 4.5
---------------------------- ------ ------
Net operating cash flow 10.7 13.5
---------------------------- ------ ------
Basic earnings per share 4.23p 4.42p
---------------------------- ------ ------
Return on capital employed
(defined below) 9.4% 11.8%
---------------------------- ------ ------
Exceptional items are detailed below.
On a statutory basis for continuing operations, operating loss
was GBP2.2m (2016: GBP2.1m profit), loss before tax was GBP3.1m
(2016: GBP1.3m profit), loss after tax was GBP3.5m (2016: GBP0.4m
profit), basic loss per share was 3.4 pence (2016: 0.4 pence
earning) and net operating cash flows were GBP9.4m (2016:
GBP11.2m).
Trading, operating profit and EBITDA
Revenue from continuing operations for the year ended 31
December 2017 increased by 11% to GBP84.7m (2016: GBP76.0m).
Operating profit before exceptional items from continuing
operations decreased by 18% to GBP6.4m (2016: GBP7.8m) and profit
before tax decreased by 21% to GBP5.5m (2016: GBP7.0m), on the same
basis.
Earnings before interest, taxation, depreciation and
amortisation (EBITDA), from continuing operations and before
exceptional items, is determined as follows:
2017 2016
GBP'm GBP'm
------------------------------- ------- -------
Operating profit 6.4 7.8
------------------------------- ------- -------
Depreciation and amortisation 6.4 6.3
------------------------------- ------- -------
EBITDA 12.8 14.1
------------------------------- ------- -------
Exceptional items
Exceptional items in 2017 totalled a net charge of GBP8.6m
before taxation, of which the non-cash impairment of Colt assets is
GBP6.3m, redundancy costs GBP1.0m, and legal / professional fees of
the HMRC assessment and other costs GBP1.2m. The 2016 exceptional
items related to GBP3.3m of the non-cash impairment of the
Incinerator at East Kent, GBP0.8m related to the costs of
acquisition of Colt, GBP1.2m relates to the settlement of a trade
related dispute, which arose in the normal course of trade and
GBP0.4m related to restructure and other costs.
Finance costs
Total finance charges were GBP0.9m (2016: GBP0.8m) including the
interest on bank debt and other financial liabilities of GBP0.4m
(2016: GBP0.4m). They also included non-cash unwinding of discounts
on provisions totalling GBP0.1m (2016: GBP0.1m).
Taxation
The Group recognised an accounting tax charge of GBP0.4m (2016:
GBP0.9m) including a credit of GBP0.8m (2016: GBP1.6m) in respect
of exceptional items.
The accounting tax charge of GBP1.2m for continuing operations
and excluding exceptional items (2016: GBP2.5m) represents 21.1% of
profit before taxation on the same basis (2016: 35.3%). This
compares against the headline rate of corporation tax of 19% for
2017 (2016: 20%). The increased tax charge in the previous year
reflected a higher level of disallowable costs in the prior year
due to acquisition and a reduction in the recognised deferred tax
asset subsequent to a review of the Group's non-qualifying asset
base.
The Group paid corporate tax of GBP0.7m during the year (2016:
GBP0.9m). A current tax liability of GBP0.7m (2016: GBP0.7m)
remains in the balance sheet at the year end.
A deferred tax asset of GBP1.2m (2016: GBP1.2m) is recognised in
the balance sheet, which reflects the probability that the Board
believes that the assets will be recovered in the short to medium
term.
Earnings per share
Basic earnings per share (EPS), from continuing operations and
excluding exceptional items, was 4.23 pence (2016: 4.42 pence) due
to the lower tax charge in the year.
Statutory basic loss per share was 3.40 pence (2016 EPS: 0.40
pence).
The Group made a profit after taxation, from continuing
operations and excluding exceptional items, of GBP4.3m (2016:
GBP4.5m), of all of which was attributable to equity
shareholders.
The total number of ordinary shares in issue increased during
the year from 102,748,383 to 102,948,036 with the weighted average
number of shares in issue increasing from 102,420,517 to
102,808,183 for the purposes of basic EPS.
Dividend
The Board has decided not to declare a final dividend given the
HMRC situation as described in note 9 (2016: 1.0p). The dividend
paid in the year was the 2016 final dividend.
Cash flow and net debt
The cash flow of the Group is summarised as follows:
2017 2016
GBP'm GBP'm
------------------------------------------- ------- -------
Net operating cash flows from continuing
operations 10.7 13.5
------------------------------------------- ------- -------
Net operating cash flows from exceptional
items (1.3) (2.3)
------------------------------------------- ------- -------
Total net operating cash flows 9.4 11.2
------------------------------------------- ------- -------
Maintenance capital expenditure (4.5) (3.9)
------------------------------------------- ------- -------
Post-maintenance free cash flow 4.9 7.3
------------------------------------------- ------- -------
Development capital expenditure (4.3) (4.1)
------------------------------------------- ------- -------
Acquisition of businesses - (8.9)
------------------------------------------- ------- -------
Purchase of East Kent freehold - (0.2)
------------------------------------------- ------- -------
Free cash flow 0.6 (5.9)
------------------------------------------- ------- -------
Final dividend payments (1.0) (0.7)
------------------------------------------- ------- -------
Proceeds from issuance of equity - 0.1
------------------------------------------- ------- -------
Net cash generation (0.4) (6.5)
------------------------------------------- ------- -------
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.
Underlying net operating cash flows were generated from
continuing trading as follows:
2017 2016
GBP'm GBP'm
------------------------------------------ ------- -------
EBITDA from continuing operations
and before exceptional items 12.8 14.1
------------------------------------------ ------- -------
Net working capital movements (1.3) 0.8
------------------------------------------ ------- -------
Interest and taxation payments (1.1) (1.7)
------------------------------------------ ------- -------
Other 0.3 0.3
------------------------------------------ ------- -------
Net operating cash flows from continuing
operations and before exceptional
items 10.7 13.5
------------------------------------------ ------- -------
Underlying net operating cash flow as a percentage of EBITDA was
84% in 2017 (2016: 96%).
Capital investment in property, plant & equipment and
intangible assets made by the Group totalled GBP8.8m (2016:
GBP8.3m), split between maintenance of GBP4.5m and expansion of
GBP4.3m
During the year, the Group received a total of less than GBP0.1m
(2016: GBP0.1m) of equity proceeds from the exercise of share
options by current and former employees. As a result of the above
net cash outflow, net debt, defined as total borrowings less cash
and cash equivalents, was at GBP10.8m at 31 December 2017. This
represented gearing, defined as net debt divided by net assets, of
21.6% (2016: 19.9%). The ratio of net debt to EBITDA, from
continuing operations and before exceptional items, was 0.8 times
(2016: 0.8 times).
Financing
During 2017, the activities of the Group were substantially
funded by a bank facility, comprising a revolving credit facility
and bank overdraft. That facility was renewed on 21 March 2016 with
HSBC Bank plc at a level of GBP20m.The maturity of the facility is
October 2020 and the overdraft is reviewed annually. HSBC has, at
31 December 2017 and through to end of March 2019, waived breach of
the taxation clause of the bank credit facility which requires
potential liabilities associated with tax disputes to be less than
GBP0.1m. As at 31 December 2017, the net debt is GBP10.8m with
headroom available to the Group of GBP9.2m.
Balance sheet and return on capital employed
Consolidated net assets were GBP50.1m on 31 December 2017 (2016:
GBP54.6m) and net tangible assets, excluding goodwill and other
intangible assets, were GBP30.0m (2016: GBP28.3m), of which all was
attributable to equity shareholders of the Group in both years. Net
assets and net tangible assets as at 31 December 2017 are both
stated after the recognition of a GBP6.3m impairment loss, as
explained further below. Return on capital employed, from
continuing operations and excluding exceptional items, defined as
operating profit divided by average capital employed, where capital
employed is net assets excluding net debt, decreased to 9.4% in
2017 (2016: 11.8%). This outcome is not impacted by the impairment
loss recognised by the Group, which is recognised as at 31 December
2017 but does not form part of the calculation of average capital
employed.
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 CGUs within the Energy & Construction and
Industry & Infrastructure reportable segments, which both
contain significant levels of goodwill, as well as Augean
Integrated Services and ANSS as a result of performance levels.
Based on these reviews, an impairment charge of GBP6.3m was
recorded in respect of Colt (part of the Industry and
Infrastructure reportable segment). No reversal of prior year
impairments was required.
The cash flows for all CGUs were discounted using a pre-tax
discount rate of 9.5% (2016: 9.7%).
Employees
The Group employed an average of 469 staff (2016: 437) over the
course of the year with a closing headcount of 452. The number of
employees in the Group has declined during 2017 to re-position the
cost base of the Group and eliminate the business unit
structure.
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. These KPIs are
consistent with those reported in 2016.
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.
KPI 2017 2016
Outcome Outcome
----------------------------------- ------------------ --------------------
Number of accidents (1) 27 43
----------------------------------- ------------------ --------------------
Number of near misses reported
(2) 2,935 2,331
----------------------------------- ------------------ --------------------
Compliance scores (3) E&C: A E&C: A
RWS: A RWS: A
I&I: B/Excellent I&I: B/Excellent
AIS: B AIS: B
ANSS: Excellent ANSS: Excellent
----------------------------------- ------------------ --------------------
Underlying profit before taxation GBP5.5m GBP7.0m
(4)
----------------------------------- ------------------ --------------------
Post-maintenance free cash flow GBP4.9m GBP7.3m
(5)
----------------------------------- ------------------ --------------------
Return on capital employed (6) 9.4% 11.8%
----------------------------------- ------------------ --------------------
Volumes of waste disposed to 458,000 574,000
our landfill sites t t
----------------------------------- ------------------ ------------------
APCR Volumes treated 122,000t 111,000t
----------------------------------- ------------------ ------------------
Amount of North Sea Oil & Gas 89% of ANSS 84% of ANSS
revenue generated directly from revenue revenue
operators and Top-Tier customers
----------------------------------- ------------------ ------------------
(1) The number of total reported accidents, that has resulted in
injury, including those resulting in damage to plant or equipment.
This is an absolute figure which has not been normalised for
changes in employee numbers.
(2) The total number of incidents reported which could have
resulted in an accident or injury or damage to property.
(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
Consolidated statement of comprehensive income
for the year ended 31 December 2017
Before Exceptional Before Exceptional
exceptional Items exceptional Items
items (note 3) Total items (note 3) Total
2017 2017 2017 2016 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------ ----------- -------- ------------ ----------- ---------
Revenue 84,691 - 84,691 75,959 - 75,959
Operating expenses (78,329) (8,605) (86,934) (68,161) (5,719) (73,880)
-------------------------- ------------ ----------- -------- ------------ ----------- ---------
Operating profit /
(loss) 6,362 (8,605) (2,243) 7,798 (5,719) 2,079
Net finance charges (850) - (850) (812) - (812)
Profit / (loss) before
tax 5,512 (8,605) (3,093) 6,986 (5,719) 1,267
Taxation (1,164) 763 (401) (2,464) 1,602 (862)
-------------------------- ------------ ----------- -------- ------------ ----------- ---------
Profit / (loss) 4,348 (7,842) (3,494) 4,522 (4,117) 405
Discontinued operations
Profit for the year
and total comprehensive
income attributable
to equity shareholders
of Augean plc 4,348 (7,842) (3,494) 4,522 (4,117) 405
-------------------------- ------------ ----------- -------- ------------ ----------- ---------
Earnings per share
Basic (3.40)p 0.40p
Diluted (3.40)p 0.39p
Group Statement of financial position
As at 31 December 2017
2017 2016
GBP'000 GBP'000
Non-current assets
Goodwill 19,757 23,997
Other intangible assets 323 2,265
Property, plant and equipment 46,678 44,475
Deferred tax asset 1,243 1,176
------------------------------------ --------- ---------
68,001 71,913
------------------------------------ --------- ---------
Current assets
Inventories 440 379
Trade and other receivables 19,570 18,461
Cash and cash equivalents 6,579 3,188
------------------------------------ --------- ---------
26,589 22,028
------------------------------------ --------- ---------
Current liabilities
Trade and other payables (18,287) (17,192)
Current tax liabilities (652) (658)
Borrowings - (171)
Provisions (50) (50)
------------------------------------ --------- ---------
(18,989) (18,071)
------------------------------------ --------- ---------
Net current assets / (liabilities) 7,600 3,957
------------------------------------ --------- ---------
Non-current liabilities
Borrowings (17,378) (13,833)
Provisions (8,118) (7,470)
------------------------------------ --------- ---------
(25,496) (21,303)
------------------------------------ --------- ---------
Net assets 50,105 54,567
------------------------------------ --------- ---------
Shareholders' equity
Share capital 10,295 10,275
Share premium account 757 748
Retained earnings 39,053 43,544
------------------------------------ --------- ---------
Total equity 50,105 54,567
------------------------------------ --------- ---------
Consolidated statement of cash flow
For the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
--------------------------------------- -------- --------
Operating activities
Cash generated from operations 10,530 12,859
Finance charges paid (429) (704)
Tax paid (650) (941)
--------------------------------------- -------- --------
Net cash generated from operating
activities 9,451 11,214
--------------------------------------- -------- --------
Investing activities
Proceeds on disposal of property,
plant and equipment 62 -
Purchases of property, plant and
equipment (8,457) (8,335)
Purchases of intangible assets (373) (51)
Purchase of business (net of cash
or overdraft acquired) - (8,901)
Net cash used in investing activities (8,768) (17,287)
--------------------------------------- -------- --------
Financing activities
Dividends paid (1,027) (665)
Issue of equity 28 186
Drawdown of Loan facilities 3,711 6,208
Repayments of obligations under
finance leases (4) (21)
--------------------------------------- -------- --------
Net cash generated from financing
activities 2,708 5,708
--------------------------------------- -------- --------
Net increase / (decrease) in cash
and cash equivalents 3,391 (365)
Cash and cash equivalents at beginning
of year 3,188 3,553
--------------------------------------- -------- --------
Cash and cash equivalents at end
of year 6,579 3,188
--------------------------------------- -------- --------
Statement of changes in shareholders' equity
for the year ended 31 December 2017
Share Share Retained
capital premium earnings Total
Group GBP'000 account GBP'000 equity
GBP'000 GBP'000
At 1 January 2016 10,225 612 43,561 54,398
------------------------------ --------- --------- ---------- ----------
Total comprehensive
income for the year
Retained profit - - 405 405
------------------------------ --------- --------- ---------- ----------
Total comprehensive
income for the year - - 405 405
Transactions with the
owners of the company
Dividend - - (665) (665)
Issue of equity 50 136 - 186
Share-based payments - - 243 243
Total transactions
with the owners of
the company 50 136 (422) (236)
------------------------------ --------- --------- ---------- ----------
At 1 January 2017 10,275 748 43,544 54,567
------------------------------ --------- --------- ---------- ----------
Total comprehensive
income for the year
Retained loss - - (3,494) (3,494)
------------------------------ --------- --------- ---------- ----------
Total comprehensive
income for the year - - (3,494) (3,494)
Transactions with the
owners of the company
Dividend - - (1,027) (1,027)
Issue of equity 20 9 - 29
Share-based payments - - 194 194
Tax relating to transactions
with owners of the
company - - (164) (164)
Total transactions
with the owners of
the company 20 9 (997) (968)
------------------------------ --------- --------- ---------- ----------
At 31 December 2017 10,295 757 39,053 50,105
------------------------------ --------- --------- ---------- ----------
1 Basis of preparation
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined by
section 434 of the Companies Act 2006. It has been prepared in
accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS) adopted for use
in the European Union, including IFRIC interpretations issued by
the International Accounting Standards Board, and in accordance
with the AIM rules and is not therefore in full compliance with
IFRS. The principal accounting policies of the Group have remained
unchanged from those set out in the Group's 2016 annual report. The
financial statements have been prepared under the historical cost
convention, except for derivative financial instruments which are
carried at fair value.
The preliminary results have been prepared on the going concern
basis taking into account the Group's net debt, available headroom
on bank facilities, the continuing support of the Group bankers
HSBC, as well as noting the significant uncertainty around the HMRC
issue. Reliance is being taken that HMRC has not required the Group
to pay any of the assessments levied to date and advice received is
that this will continue for 12 months.
The financial information for the period ended 31 December 2017
was approved by the Board on 19 March 2018 and has been extracted
from the Group's financial statements upon which the auditor's
opinion is unmodified and does not include a statement under
section 498(2) or (3) of the Companies Act 2006.
The statutory accounts for the period ended 31 December 2017
will be posted to shareholders at least 21 days before the Annual
General Meeting and made available on our website
www.augeanplc.com. In due course, they will be delivered to the
Registrar of Companies. The statutory accounts for the period ended
31 December 2016 have been delivered to the Registrar of
Companies.
2 Operating segments
The Group has five reportable segments 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 Executive
Directors (the chief operating decision-makers) review internal
management reports on at least a monthly basis. The following
summary describes the operations of each of the Group's reportable
segments:
-- Energy and Construction: Augean operates three modern
hazardous and non-hazardous landfill operating sites based at East
Northants Resource Management Facility (ENRMF), Thornhaugh in
Peterborough and Port Clarence on Teesside, providing waste
remediation, treatment and disposal services to its customers. The
business unit includes a site at Cooks Hole in Northamptonshire
where minerals are extracted and also generates energy as
electricity from closed landfill cells.
-- Radioactive Waste Services: Augean provides waste disposal
services of low level radioactive wastes and naturally occurring
radioactive material produced in the UK.
-- Augean Integrated Services (AIS): Augean operates a High
Temperature Incinerator at Sandwich, East Kent and a site in
Cannock focused on Total Waste Management solutions.
-- Augean North Sea Services: This business unit provides waste
management and waste processing services to offshore oil and gas
operators in the North Sea.
-- Industry and Infrastructure: Augean operates three waste
processing sites across the UK, with activities focused on the
management of oil-contaminated waste. The business unit also
provides specialist industrial cleaning services including the Colt
Industrial Services business.
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 Directors. 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.
Activities arise almost exclusively within the United Kingdom.
Inter-segment trading is undertaken on normal commercial terms.
2017
Energy and Radioactive Augean Industry Augean Group
Construction Waste Integrated and Infrastructure North
Services Services Sea Services
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Revenue
Hazardous landfill
activities 8,108 - - - - 8,108
Non-hazardous landfill
activities 4,890 - - - - 4,890
Waste treatment
activities - - 3,134 22,524 - 25,658
Total waste management
activities - - 7,687 - - 7,687
Energy generation 52 - - - - 52
APCR management 9,572 - - - - 9,572
Radioactive waste
management - 3,068 - - - 3,068
Processing of offshore
waste - - - - 6,657 6,657
Rental of offshore
equipment and personnel - - - - 5,736 5,736
Waste transfer
activities - - - - 5,858 5,858
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Total revenue net
of landfill tax 22,622 3,068 10,821 22,524 18,251 77,286
Landfill tax 10,697 - - - - 10,697
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Total revenue including
inter-segment sales 33,319 3,068 10,821 22,524 18,251 87,983
Inter-segment sales (1,663) - (156) (1,471) (2) (3,292)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Revenue 31,656 3,068 10,665 21,053 18,249 84,691
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Result
Operating profit/(loss)
before exceptional
items 6,577 1,207 (352) (760) 656 7,328
Exceptional items
(note 3) (1,280) (162) (313) (6,682) (168) (8,605)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Operating profit/(loss) 5,297 1,045 (665) (7,442) 488 (1,277)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Net finance charges (850)
Central costs (966)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Loss before tax (3,093)
Tax (note 6) (401)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Loss after tax (3,494)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Other information
Capital expenditure 4,958 62 1,273 1,355 1,130 8,778
Depreciation and
amortisation 3,465 173 373 1,377 997 6,385
Impairment loss - - - 6,307 - 6,307
2016
Energy and Radioactive Augean Industry Augean Group
Construction Waste Integrated and Infrastructure North
Services Services Sea Services
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Revenue
Hazardous landfill
activities 12,354 - - - - 12,354
Non-hazardous landfill
activities 4,505 - - - - 4,505
Waste treatment
activities - - 2,715 - - 2,715
Total waste management
activities - - 5,470 19,959 - 25,429
Energy generation 56 - - - - 56
APCR management 9,377 - - - - 9,377
Radioactive waste
management - 1,205 - - - 1,205
Processing of offshore
waste - - - - 5,313 5,313
Rental of offshore
equipment and personnel - - - - 4,013 4,013
Waste transfer
activities - - - - 3,609 3,609
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Total revenue net
of landfill tax 26,292 1,205 8,185 19,959 12,935 68,576
Landfill tax 10,091 - - - - 10,091
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Total revenue including
inter-segment sales 36,383 1,205 8,185 19,959 12,935 78,667
Inter-segment sales (1,005) (26) (547) (1,117) (13) (2,708)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Revenue 35,378 1,179 7,638 18,842 12,922 75,959
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Result
Operating profit/(loss)
before exceptional
items 8,349 308 (656) 457 481 8,939
Exceptional items
(note 3) (242) (162) (3,512) (280) (1,523) (5,719)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Operating profit/(loss) 8,107 146 (4,168) 177 (1,042) 3,220
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Net finance charges (812)
Central costs (1,141)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Profit before tax 1,267
Tax (note 4) (862)
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Profit after tax 405
------------------------- -------------- ------------ ------------ -------------------- -------------- ---------
Other information
Capital expenditure 3,819 200 1,390 844 1,983 8,236
Depreciation and
amortisation 3,648 135 655 1,044 792 6,274
Impairment loss - - 3,348 - - 3,348
Central costs relate to the costs of operating as a plc and are
not allocated between the business units.
3 Exceptional Items
The following pre-tax items have been charged to operating
profit:
2017 2016
GBP'000 GBP'000
---------------------------------------------- -------- --------
Impairment of property, plant and equipment 6,307 3,348
Net settlement of trade related legal case - 1,162
Restructuring charges 1,038 297
Acquisition and disposal related costs 137 820
Costs associated with Landfill tax dispute 1,093 -
Other 30 92
---------------------------------------------- --------
Exceptional charge from continuing operations 8,605 5,719
---------------------------------------------- -------- --------
4 Taxation
Group 2017 2016
GBP'000 GBP'000
Total Total
------------------------------------------------- ------- -------
Current tax
UK corporation tax on profit for the year 737 1,327
Adjustments in respect of prior years (100) (669)
------------------------------------------------- ------- -------
637 658
------------------------------------------------- ------- -------
Deferred tax
Charge / (credit) in respect of the current year (121) (802)
Reassessment of tax qualifying assets - 379
Adjustments in respect of prior years (115) 627
------------------------------------------------- ------- -------
(236) 204
------------------------------------------------- ------- -------
Tax charge on the result for the year 401 862
------------------------------------------------- ------- -------
Tax reconciliation for continuing operations
2017 2016
--------------- -------------
GBP'000 % GBP'000 %
------------------------------------------- ------- ------ ------- ----
(Loss) / profit before tax from continuing
operations (3,092) 1,267
Tax at theoretical rate (595) 19.25% 254 20%
Effects of:
- expenses / (income) not deductible
for tax purposes 1,120 (36)% 163 13%
- change in tax rate 47 (2)% 107 8%
- effect of share options 44 (2)% 67 5%
- adjustments in respect of prior years (215) 7% (42) (3)%
- reassessment of tax qualifying assets - - 379 30%
- other - - (66) (5)%
Tax charge on results 401 (13)% 862 68%
------------------------------------------- ------- ------ ------- ----
The main rate of corporation tax in the UK was 19%.
5 Dividends
2017 2016
GBP'000 GBP'000
Proposed final dividend for the year ended 31 December
2017 of nil pence per share (2016: 1.0 pence per share) - 1,027
---------------------------------------------------------- --------- --------
Total - 1,027
---------------------------------------------------------- --------- --------
At the forthcoming Annual General Meeting, the Board will not
recommend to shareholders that a dividend is paid for the year
ended 31 December 2017.
6 Earnings per share
The calculation of basic earnings per share (EPS) is based on
the loss attributable to ordinary shareholders of GBP3,494,000
(2016: profit of GBP405,000) and a weighted average number of
ordinary shares outstanding of 102,808,863 (2016: 102,420,517),
calculated as follows:
2017 2016
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Earnings for the purposes of basic and diluted EPS (3,494) 405
Exceptional items (net of associated tax) 7,842 4,117
--------------------------------------------------------- -------- --------
Earnings for the purposes of adjusted basic and diluted
EPS 4,348 4,522
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. In 2017 the exercise of share options would
decrease the loss per share and be antidilutive. They have
therefore been excluded from the calculation of the weighted
average number of shares for unadjusted diluted earnings per
share.
2017 2016
GBP'000 GBP'000
-------------------------------------------------------- ----------- -----------
Number of shares
Weighted average number of shares for basic earnings
per share 102,808,863 102,420,517
Effect of dilutive potential ordinary shares from share
options 1,790,587 1,775,783
-------------------------------------------------------- ----------- -----------
Weighted average number of shares for diluted earnings
per share 104,599,450 104,196,300
-------------------------------------------------------- ----------- -----------
Earnings per share
Basic (3.40)p 0.40p
Diluted (3.40)p 0.39p
Adjusted earnings per share
Basic 4.23p 4.42p
Diluted 4.16p 4.34p
-------------------------------------------------------- ----------- -----------
7 Reconciliation of operating profit to net cash generated from
/ (used in) operating activities
2017 2016
GBP'000 GBP'000
-------- --------
Operating (loss) / profit (2,243) 2,079
Amortisation of intangible assets 447 262
Depreciation 5,938 6,012
Impairment charge 6,307 3,348
Earnings before interest, tax, depreciation
and amortisation (EBITDA) 10,449 11,701
--------------------------------------------- -------- --------
Share based payments 194 243
(Increase) / decrease in inventories (59) (58)
(Increase) / decrease in trade and
other receivables (1,109) (4,121)
Increase / (decrease) in trade and
other payables 474 4,715
Increase / (decrease) in provisions 520 359
(Profit) / Loss on disposal of property,
plant and equipment 61 20
Cash generated from operations 10,530 12,859
Finance charges paid (429) (704)
Tax paid (650) (941)
--------------------------------------------- -------- --------
Net cash generated from operating activities 9,451 11,214
--------------------------------------------- -------- --------
The above EBITDA and net cash generated from operating
activities includes a total net cash outflow of GBP1,602,000
relating to exceptional items (2016: outflow of GBP2,371,000).
8 Analysis of changes in net debt
The table below presents the net debt of the Group at the
balance sheet date.
1 Cash Other 31
January flow movement December
2017 2017
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- --------- ---------- ----------
Cash and cash equivalents 3,188 3,391 - 6,579
--------- ---------- ----------
Overdraft (167) 167 - -
--------- ---------- ----------
Bank loans (13,833) (3,711) 166 (17,378)
--------- ---------- ----------
Finance leases (4) 4 - -
--------------------------- --------- --------- ---------- ----------
Net debt (10,816) (149) 166 (10,799)
--------------------------- --------- --------- ---------- ----------
9 Contingent liabilities
In accordance with Pollution, Prevention and Control (PPC)
permitting, the Group has to make such financial provision as is
deemed adequate by the Environment Agency to discharge its
obligations under the relevant site permits for its landfill sites.
Consequently, guarantees have been provided, by certain
subsidiaries of the company, in favour of the Environment Agency in
respect of the Group's landfill sites. Total guarantees outstanding
at the year-end were GBP8.9m (2016: GBP7.7m).
In August 2017, the Group announced that it had received an
assessment by HMRC for landfill tax for the three months ended 31
August 2013. The Group has continued to receive further assessments
for Augean North and Augean South. HMRC has been discussing with
the Group whether it has paid sufficient landfill tax in relation
to its treatment and disposal of hazardous waste. Those discussions
are ongoing. HMRC has not required the Group to make any cash
payment associated with these assessments.
Based on the legal and other advice received by the Group over
several years, Augean is very confident that the Group has met its
obligations in respect of landfill tax, consistent with the law and
official guidance at the time. We understand this has been issued
in order to protect HMRC against that period falling out of time (a
four year look back applies for landfill tax) whilst they undertake
further enquiries and discussion with the Group. The Group believes
this assessment to be without merit and an appeal is ongoing
supported by advice from leading counsel and its solicitors. We
will robustly challenge this landfill tax assessment and any other
subsequent assessment which may be received from HMRC, through the
tax tribunal system if appropriate. The Group currently intends to
account for the legal costs of the dispute with HMRC as an
exceptional item but not to make a provision for this assessment
based on the strength of independent legal and professional advice
received. The estimated cash outflow is GBPnil.
10 Post balance sheet events
On 16 March 2018, and as separately communicated to shareholders
on that date, the Group completed the disposal of the entire issued
share capital of its subsidiary engaged in total waste management
activity, Augean Integrated Services Limited, to Regen Holdings
Limited. This business has previously been reported by the group as
part of the Augean Integrated Services segment.
The consideration (subject to working capital adjustments) is
expected to be in the region of GBP4.1m and an exceptional gain on
disposal is expected to be recorded in the FY18 half yearly report
and full year financial statements.
11 Annual Report & Accounts
The Annual Report will be sent to shareholders on or around 16
May 2018 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 19 June 2018 at FTI Consulting, 200 Aldersgate,
London EC1A 4HD.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFUFAUFASEFD
(END) Dow Jones Newswires
March 20, 2018 03:00 ET (07:00 GMT)
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