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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Augean Plc | LSE:AUG | London | Ordinary Share | GB00B02H2F76 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 371.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMAUG
RNS Number : 0091A
Augean Plc
21 March 2017
21 March 2017
Augean plc ("Augean" or the "Group")
Final results for the year ended 31 December 2016
and
Board changes
Augean, one of the UK's leading specialist waste management businesses, is pleased to announce its preliminary results for the year ended 31 December 2016.
Financial highlights
From continuing operations and excluding exceptional items
-- Total revenue increased by 25% to GBP76.0m -- EBITDA (1) increased by 17% to GBP14.1m -- Profit before taxation increased 16% to GBP7.0m -- Net operating cash flows increased by 22% to GBP13.5m -- Post maintenance cashflow increased 44% to GBP7.3m -- Adjusted basic earnings per share decreased by 5% to 4.42 pence -- ROCE (2) increased from 11.4% to 11.8% -- Net debt increased by GBP6.5m to GBP10.8m (2015: GBP4.3m) -- Proposed dividend per share of 1.0 pence, an increase of 54% (2015: 0.65 pence)
From continuing operations including exceptional items
-- Profit before tax reduced 50% to GBP1.3m (2015: GBP2.5m) after exceptional items of GBP5.7m
-- Exceptional items of GBP5.7m principally include GBP3.3m non-cash impairment of East Kent, GBP1.2m related to a trade dispute settlement, and GBP0.8m of Colt acquisition fees.
-- Basic earnings per share decreased from 1.60 pence to 0.40 pence
Operational highlights
-- Continued strong performance from Energy & Construction, with 48% growth in Air Pollution Control Residue (APCR) volumes
-- Improved performance from Industry & Infrastructure across all of the main sites and the Avonmouth turnaround plan successfully implemented. Colt, acquired in May 2016, has had a slower start than anticipated and broke even for the year
-- Continued strategic traction at Augean Integrated Services with further success in winning additional Total Waste Management contracts with top-tier customers. Although the Group has impaired the East Kent asset during the year it remains a key point of differentiation in the pharmaceutical and high tech market
-- Augean North Sea Services has traded strongly in the second half of 2016 with further progress on its diversification objective including the partnership with Forth Ports Limited for the management of waste arising from the decommissioning of offshore equipment at the Port of Dundee
-- Radioactive Waste Services is in line with expectations but has been impacted by a sharp reduction in volumes from UK nuclear decommissioning as previously reported
Outlook
-- Encouraging start to 2017 with a growing sales pipeline -- Continued emphasis on moving Group revenues to long-term contracts and frameworks -- Board focused on further improving shareholder returns -- Group trading in line with market expectations for 2017
Commenting on the Results, Dr Stewart Davies, Chief Executive Officer, said:
"2016 saw the Group deliver double digit growth in revenue, operating cash flow and EBITDA. 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 APCR volumes, reaffirming our integrated waste management proposition with our customers.
We have seen good momentum across our portfolio of businesses and remain well positioned to take advantage of opportunities across a broad number of sectors. The Group's cash generation and balance sheet remain robust and the Board remains confident of maintaining its track record of year-on-year increases in profitability in 2017."
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
Dr Stewart Davies, Chief Executive 01937 844 980
Mark Fryer, Group Finance Director
N+1 Singer
Shaun Dobson 020 7496 3000
Alex Price
FTI Consulting
Oliver Winters 020 3727 1000
Fiona Walker
(1) EBITDA means earnings before interest, taxation, depreciation and amortisation
(2) Return on capital employed is defined as operating profit divided by average capital employed, where capital employed is net assets excluding net debt
Chairman's statement
During 2016, the Group again produced year-on-year double digit increases in revenue, adjusted profit before tax and operating cash flows, compared with 2015. The Group is currently trading in line with expectations for 2017, evidencing the strategy for growth, developed and implemented by the executive management team.
Revenue from continuing operations increased by 25% to GBP76.0m (2015: GBP61.0m). Profit before tax from continuing operations, before exceptional items and amortisation of acquired intangible assets increased by 18% to GBP7.1m (2015: GBP6.0m). Statutory profit before tax reduced to GBP1.3m (2015: GBP2.5m) after exceptional items of GBP5.7m.
Operating cash flows, before exceptional items, increased from GBP11.1m to GBP13.5m. Net debt increased by GBP6.5m during the year to GBP10.8m, after capital expenditure of GBP8.3m.
The Board continues to support investment in strategic business growth and, in May 2016, GBP8.9m net was paid to purchase the share capital of Colt Holdings Limited. Significant headroom remains on the Group's banking facility of GBP20m, with a further GBP10m available exclusively to fund potential acquisitions. All investments are made with the expectation of acceptable payback periods and increasing levels of return. The Group's return on capital employed(2) for the year increased to 11.8% (2015: 11.4%).
Our Energy and Construction business had another strong year, with input volumes of material into landfill above initially anticipated levels. Volumes of construction related materials, which had the potential to be impacted by the update to landfill tax guidance, declined on 2015. As previously announced, volumes of Air pollution control residues ("APCR") arising from the Energy-from-waste sector grew strongly in 2016; maintaining our share of this growth market is a key strategic imperative in the short and medium term. 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 Radioactive Waste Services business saw a reduction in volumes in 2016 because of UK Government spending reviews although we expect to see a modest recovery in the second half of 2017. Cost in this division remains under close scrutiny whilst volumes remain depressed. The Group's site at East Northants remains a key element of the UK's national infrastructure for the disposal of low-level radioactive waste in the medium and long term. The Group has made progress in diversifying its range of treatments to protect its investments in this sector.
The Industry & Infrastructure business has had a pleasing year, with the turnaround plan at Avonmouth successfully completed. The addition of the Colt business to the Group bolsters our specialist Industrial Services capacity and although this business has had a slower than expected start there are positive signs of improved performance and a growing sales pipeline. It is currently trading to plan.
The third year of trading for the Augean Integrated Services (AIS) business saw further progress, with revenues increased by 28% and a number of three-year term total waste management contracts won with blue-chip customers. The sales pipeline has grown substantially over the year. This contributed to the growth seen in the contracted business which increased 65% over the prior year. The high temperature incinerator at the Group's East Kent site continued to experience challenges during 2016 which has led the Board to take the decision to impair the asset. Despite this, it does remain of high importance to AIS and the team continues to work to improve performance.
Augean North Sea Services (ANSS) responded positively to changes in its market by securing several new contract wins during 2016 and delivering the cost reduction plan announced in the Interim Statement. This evidences the continued execution of the strategy to diversify this business away from exploration drilling waste management, on which the business was originally built, to an increased share of revenue generated from production waste management and onshore industrial services, maintaining the high proportion of total revenues generated directly from major oil & gas operators. During the year a strategic investment was made in a site at Great Yarmouth to support a new contract with a major operator which has opened up further potential commercial prospects from the southern North Sea.
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. 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 the year.
Following Mark Fryer's appointment as Group Finance Director in December 2016, I am delighted to welcome Mark to the Board of Augean. He is a highly experienced Finance Director with a strong track record across a number of sectors and I look forward to working with him as the Group continues to build on its successful strategy for growth.
Rod Holdsworth joined the Board on 23 March 2016 and has assumed the Chairmanship of the Audit Committee. After 11 years with the Group Andrew Bryce has indicated that he will stand down from the Board at the Annual General Meeting in June 2017. The Group is meeting potential replacements and an announcement will be made at the appropriate time. I would like to thank Andrew for the legal and environmental expertise he has brought our Board and for his long service. I offer him best wishes for the future.
The Group's balance sheet and operating cash flow remain robust and the Board has proposed a 54% increase in the dividend payment to 1.0p per share. This reflects confidence in the prospects of the Group and the Board's ongoing commitment to pay a progressive dividend to its shareholders, with the dividend being covered(3) 4.4 times (2015: 7.2 times).
As in previous years, I was pleased to note the addition of new shareholders to our register during the year and again I am thankful for the continued support from all of our investors.
The Board continues to remain focused on improving shareholder returns for the Group and building on the progress delivered to date. I look forward to another year of profitable growth for the Group.
Jim Meredith
Non-Executive Chairman
20 March 2017
(1) EBITDA means Earnings before interest, tax and depreciation
(2) Return on capital employed (ROCE) is defined as operating profit divided by average capital employed, where capital employed is net assets excluding net debt
(3) Dividend cover based on earnings per share from continuing operations and excluding exceptional items
Operating review
Introduction
The Group delivered a strong set of financial results in 2016.
The results of the Group, excluding exceptional items, show that:
-- Total revenue increased by 25% to GBP76.0m; -- Profit before taxation increased 16% to GBP7.0m; -- Net operating cash flows increased 22% to GBP13.5m; -- Post maintenance cashflow increased 44% to GBP7.3m; -- Basic earnings per share decreased 5% to 4.42 pence; and -- Return on capital employed increased from 11.4% to 11.8%.
The results of the Group show a profit before tax of GBP1.3m after exceptional items of GBP5.7m and a profit after tax of GBP0.4m.
During 2016, the Group operated through five business units, the results of which were:
Hot Features
Premium
Adjusted Adjusted GAAP basis Adjusted
revenues operating operating EBITDA
profit profit
----------------------------- ------------ -------------- -------------- -------------
2016 2015 2016 2015 2016 2015 2016 2015
----------------------------- ----- ----- ------ ------ ------ ------ ----- ------
Energy and Construction 25.3 20.2 8.3 6.5 8.1 6.4 12.0 9.5
Radioactive Waste
Services 1.2 1.9 0.3 1.1 0.1 1.0 0.4 1.2
Industry and Infrastructure 18.8 11.7 0.5 (0.7) 0.2 (3.7) 1.5 0.4
Augean Integrated
Services 7.6 6.0 (0.7) (0.6) (4.2) (0.7) - (0.2)
Augean North Sea
Services 12.9 14.8 0.5 1.3 (1.0) 1.2 1.3 2.0
----------------------------- ----- ----- ------ ------ ------ ------ ----- ------
Adjusted revenues exclude intra segment trading and landfill tax, adjusted operating profit excludes exceptional items and adjusted EBITDA represents earnings before exceptional items, interest, tax, amortisation and depreciation.
The operating cash flow of the Group was used to fund the future growth of the Group, with total capital expenditure investment of GBP8.3m. This comprised GBP3.9m of maintenance capital expenditure to lengthen the productive life of existing assets (including GBP1.7m on landfill cell engineering) and GBP4.4m of development capital expenditure for targeted future growth.
The Group remains committed to growth in all of its businesses and markets, through both organic and acquisitive means, as appropriate. Aside from its strong operating cash flows, the Group also had a GBP20m bank facility in place as at 31 December 2016, compared with net debt of GBP10.8m, equivalent to 0.8 times EBITDA(1) , from continuing operations and before exceptional items. The current facility, refinanced in March 2016, allows application for a further optional GBP10m facility increase exclusively to fund acquisitions. This facility leaves the Group well placed to take advantage of investment opportunities that accelerate the strategy and are value enhancing for shareholders.
As previously announced, during 2016 the Board took the strategic opportunity to purchase the entire share capital of Colt Holdings Limited ("Colt"), a specialist industrial services provider, for an initial net cash consideration of GBP8.9m. This has enhanced Augean's Industry & Infrastructure business unit by adding UK-wide industrial services coverage that complements the Group's existing service, treatment and disposal infrastructure. The acquisition has not traded as expected in 2016 as a result of the delay in certain contracts which were anticipated. Colt has traded in line with management expectations in the first months of 2017 and has developed a strong sales pipeline.
The Group employed an average of 377 staff (2015: 345) over the course of the year. The number of employees in the Group has increased during 2016 by acquisition and the Group has continued to invest in high-quality employees who remain key to the future growth plans and continuing execution of the strategy of the Group.
Business performance
The Group operated through five business units during 2016 and 2015 (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 2016 is set out below.
Energy & Construction (E&C)
The principal activity of this business unit is the disposal of air pollution control residues (APCR), asbestos and other contaminated waste materials and soils, mainly from the Energy-from-Waste, biomass energy and construction sectors. This is primarily achieved through treatment and landfill in permitted hazardous and non-hazardous sites at Port Clarence, a permitted hazardous site at East Northants Resource Management Facility (ENRMF) and a permitted non-hazardous site at Thornhaugh, near Peterborough.
Revenues, excluding landfill tax, increased by 25% to GBP25.3m (2015: GBP20.2m), with the significant increase primarily the growth in volumes of APCR treated in 2016 compared with 2015.
The total volume of waste disposed by the E&C business increased by 32% to 574,000 tonnes in 2016, from 434,000 tonnes in 2015, with APCR volumes increasing by 48% from 75,000 tonnes to 111,000 tonnes and other waste streams increasing by 29% from 359,000 tonnes to 463,000 tonnes. Average gate fees on APCR streams fell by 3% and decreased by 5% on soils and other waste streams. The overall increase in APCR revenue was 41% and the increase in other waste revenue was 17%, compared with 2015.
Volumes of construction soils, which had the potential to be impacted by the update to landfill tax guidance, issued by HMRC in December 2015, experienced a 20% reduction in volumes compared with the high levels in 2015.
The operating profit of the business unit grew at 28% compared with revenue growth of 25%, with EBITDA increasing to GBP12.0m (2015: GBP9.5m), and this EBITDA growth contributing to the strong operating cash flow of the Group as a whole during 2016. Operating profit before exceptional items improved to GBP8.3m (2015: GBP6.5m), with depreciation in this business unit primarily driven by the input volume and hence the rate of engineered landfill cell capacity consumption, rather than the passage of time.
APCR volumes have shown strong growth as a result of major contract wins for the Group, as announced in April 2016. 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.
Total capital investment in the E&C business was GBP3.7m in the year (2015: GBP3.8m), of which GBP2.6m was invested to lengthen the productive life of existing assets (maintenance capital expenditure) and GBP1.1m was investment in the targeted future growth of the business (development capital expenditure). The maintenance capital expenditure included GBP1.7m in respect of landfill cell engineering.
Radioactive Waste Services (RWS)
The principal activity of this business unit is the treatment and disposal of low level radioactive waste generated from the UK nuclear estate. The disposal of the waste is facilitated by the Nuclear Decommissioning Authority (NDA) as the waste is generated primarily from the decommissioning of redundant power plants and research facilities, with the RWS business bidding to dispose of the waste through a framework with Low Level Waste Repository Limited (LLWR).
The total revenue from the disposal and treatment of low level radioactive waste decreased by 37% to GBP1.2m (2015: GBP1.9m). Operating profit before exceptional items decreased by 72% to GBP0.3m (2015: GBP1.1m) and EBITDA decreased 67% to GBP0.4m (2015: GBP1.2m). This was generated from a total volume of 2,200 tonnes, a decrease of 31% compared with 3,186 tonnes in 2015.
The revenue generated by RWS has historically been dominated by waste related to nuclear decommissioning, with revenues steadily increasing between 2012 and 2015 as activity on the Government-owned sites increased. Since the final quarter of 2015 there has been a significant decrease in waste volumes consigned for disposal to the market. The total volume of waste disposed by the VLLW framework was 3,600 cubic metres in 2016 compared with 5,700 cubic meters in 2015. This significant reduction was caused by delays in changes in management companies for various NDA-controlled sites, and the outcome of the UK Government Spending Review resulting in individual planned waste movements being delayed.
LLWR predicts that volumes for the 2017-18 Government fiscal year (April 2017 to March 2018) will be 120% higher than the current 2016-17 forecasts, and should lead to an increase in volumes in either or both of 2017 and 2018, dependent on the phasing of release.
Aside from the potential recovery of NDA volumes, 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.
Throughout 2016, RWS has strategically sought to reduce its dependence upon the disposal of waste from LLWR. Focus remains on the medium-term growth strategy for this business, whilst continuing discussions with key stakeholders within Government organisations in an effort to obtain greater predictability and consistency in waste volumes for the Group, which operates a number of essential assets for the delivery of the Government's strategy for dealing with radioactive waste. The Group will continue to monitor the investment made in RWS to ensure appropriate returns are generated.
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. The business primarily operates from sites in Avonmouth, Paisley, Hull, the Port Clarence Waste Recovery Park (PCWRP) on Teesside as well as providing industrial services on client sites.
The business continues to pursue an integrated business model in respect of aligning its treatment and disposal assets with off-site capability to provide its customers with value-adding services. This generates waste volumes for treatment and disposal which are directed through its existing network of treatment activities. Further integration in this business unit is facilitated as increased industrial services work allows the business unit to process more resultant waste within their infrastructure.
I&I total revenue increased by 61% to GBP18.8m in 2016 (2015: GBP11.7m) and the business unit made an operating profit before exceptional items of GBP0.5m, compared to a GBP0.7m operating loss before exceptional items in 2015. The improvement in profitability was attributable to good performances across all of the I&I sites, including the Avonmouth site where a plan has been successfully executed to return the site to profitability during 2016.
Industrial Services is a service line of increasing importance to the growth of the I&I business, with progress also made in moving away from spot and 3(rd) party business to a number of term contracts secured with customers, providing opportunities to leverage the Group's specialist waste knowledge with support services. The strategy continues to be broadening the range of services and increasing market penetration through new and existing customers using Group treatment and disposal facilities to support and provide end-to-end supply chain security.
On 18 May 2016, the Group acquired Colt Industrial Services, which now forms part of the I&I business unit. This business improves the Group's Industrial Services capacity and expertise as well as bringing new customer relationships and synergy opportunities into the Group. The Colt business has had a slower than anticipated start and contributed GBP3.5m of sales and broke even in 2016. Based on recent trading and the strengthened sales pipeline, management remain confident in the medium term prospects for this business and expect the business to trade in line with expectations at the time of acquisition during 2017.
Realising the full value of Colt to the Group relies on a comprehensive integration into the I&I business to benefit from broader national opportunities and synergies with the Group to service complex contracts. It is therefore unlikely that Colt will remain as a separately identifiable financial entity for the future, although the trading and brand name will sustain as required. With the financial and legal integration into the Group, it is not expected that Colt will be treated as a separate CGU in the future.
A total of GBP0.4m of capital investment was undertaken in the I&I business, of which GBP0.3m represented maintenance capital expenditure and GBP0.1m related to development capital expenditure.
Augean Integrated Services (AIS)
This business unit services client sites around the UK, operating from Cannock and a high temperature incinerator (HTI) in Sandwich, East Kent. In early 2017 a customer service centre was opened in Corby. 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 specialist HTI asset in East Kent, which is designed to incinerate high-value, low volume waste, such as pharmaceutical or other specialist waste.
Total revenue grew by 28% to GBP7.6m (2015: GBP6.0m). This included GBP5.5m from total waste management (2015: GBP3.9m), 41% growth, of which GBP3.8m was from contracted business (2015: GBP2.3m). The operating loss attributable to this business increased by 17% to GBP0.7m (2015: GBP0.6m), although its EBITDA improved to breakeven (2015: negative GBP0.2m).
The below-expectation profitability of this business unit was primarily caused by the performance at the East Kent HTI which realised an operating loss of GBP0.8m (2015: loss of GBP0.3m). The disappointing performance of the HTI resulted from fixed and variable cost increases during periods of commissioning and sub optimal operation. Uptime and throughput increased through the second half of the year due to the improvement programme and overall tonnage processed in 2016 increased 12% on 2015.
Although the Group has impaired the East Kent HTI asset during the year it remains a key point of differentiation in the pharmaceutical and high tech market segments which this business unit targets. The Board remains confident in the strategic value of this asset to the AIS business unit.
As previously noted, the AIS business has built a commercial team with sector-specific expertise, which has enabled the wider AIS business to secure further total waste management (TWM) contracts with high-value customers in 2016, the full year impact of which is expected to occur in 2017 and beyond. New customers from the manufacturing, life sciences and pharmaceutical sectors have been won during the year and management are positive about continuing strong revenue growth for this business. Headway has been made in the manufacturing sectors with a number of large international companies contracting AIS on term contracts (typically 3 years) to manage their wastes across the UK. In addition, work has commenced on building up a prospect base in the food manufacturing and civil engineering sectors which represent significant new growth areas. The first contract wins from these sectors will be rolled out in early 2017.
The AIS business, excluding East Kent, made an operating profit before exceptional items of GBP0.1m (2015: GBP0.3m loss) as it continues to invest in the commercial expertise required for accelerated growth.
Other than the final deferred payment to purchase the HTI in early 2016 (GBP0.2m), a total of GBP1.2m of capital expenditure was undertaken in the AIS business in 2016, most of which related to the East Kent site, to address the plant reliability issues referred to above.
Augean North Sea Services (ANSS)
The ANSS business unit operates in the North Sea Oil & Gas market, primarily from four sites in Aberdeen, a site at Lerwick, in the Shetland Islands and a site in Great Yarmouth. The primary revenue streams are from drilling waste management, which includes drill cuttings management and the rental of offshore engineers and equipment to customers, production waste management, onshore & marine industrial services, decommissioning and water treatment.
ANSS revenue fell by 13% to GBP12.9m (2015: GBP14.8m) and saw a decrease in operating profit to GBP0.5m (2015: GBP1.3m) and a decrease in EBITDA to GBP1.3m (2015: GBP2.0m). These reductions are partly attributable to additional central overhead being charged against this business due to 2016 being the first year of 100% ownership by the Group. On the prior year basis EBIT would have decreased 14% and EBITDA decreased 4% against 2015.
The ANSS business continues to execute its strategic imperative of diversification to reduce the share of drilling waste services, towards production-based waste streams which are less impacted by reduced oil prices. Key to this has been the continued strategic traction of the business in moving up the supply chain, dealing directly with Oil & Gas operators and top-tier customers in this market, which increases the potential for the business to widen its service scope directly with those customers. Over 84% of total ANSS revenues were directly generated from those customers during 2016, compared with 89% in 2015. During 2016, the business maintained incumbency on an average of 3.7 rigs, compared to 4.6 in 2015. This fall in activity is in line with the North Sea drilling market contraction from the fourth quarter of 2015.
In January and February 2016 ANSS was successful in winning two new contracts, with terms of three years plus options, for major Oil & Gas customers. These are large total waste management contracts covering drilling and production platform waste management, onshore Gas Terminal Industrial Cleaning and waste management and related decommissioning works.
The Group purchased certain freehold land and assets in Great Yarmouth for GBP0.5m in February 2017. The site, which already holds relevant planning and environmental permits, has enabled the business to provide in the Southern North Sea those services already provided to customers in the Northern and Central North Sea from its Aberdeen and Lerwick sites;
As part of its strategic development, the business has entered into a partnership with Forth Ports Ltd to establish a facility at the Port of Dundee for the management of waste arising onshore from the decommissioning of offshore assets. 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.
A further framework contract was secured to provide drill cuttings, industrial services and total waste management services. The client's marine logistics are based in Peterhead and, with their support, ANSS is now operating in this location for the first time. All these contract wins represent strategic traction in diversifying the ANSS business away from dependence on exploration and development drilling into production waste management, full scope industrial service work and decommissioning, and further underpin existing management expectations for 2017 revenues and profits from this business.
The cost base of this business is monitored closely by management, alongside the continuous improvement in safety and service delivery performance that has continued to earn the business increasing recognition from operators and top tier customers in the sector, which has been key to the successful award of the contracts referred to above.
The Board remains confident that the ANSS business has the capability and reputation in its core market to position the business for continued profitable growth. The Board continues to monitor events in the North Sea Oil & Gas market, given their potential impact.
Long term contracts
The Group aims to increase the proportion of its customer base which is served through a formalised agreement, consisting of either a contract or framework agreement. In 2016, the top-20 customers of the Group made up 43% of total Group revenue at GBP33.0m (2015: 42% and GBP25.8m), of which 88% was through a formalised agreement (2015: 95%).
Legal case
The Group was involved in a commercial dispute with a customer during the year, which arose in the ordinary course of business. The matter was settled in the year, without a legal claim being made, the detailed terms of which are subject to a confidentiality agreement. The total cost of the settlement, including amounts paid to the customer, adviser fees and other related costs, is GBP1.2m and is recognised as an exceptional item in the income statement of the Group. A cash outflow of GBP1.0m occurred during 2016 and GBP0.1m of cash outflow has occurred in the first half of 2017 in respect of this settlement.
Transactions
On 18 May 2016, the Group purchased the entire issued share capital of Colt Holdings Limited (Colt) for a total consideration of GBP13.8m which was paid in cash on the same date. The consideration was offset by acquired cash of GBP4.9m.
Legislative environment
Regulation underpins the demand for Augean's services and accordingly the business follows closely the development of legislation and guidance and engages proactively with policy makers and regulators. Of particular interest to the business in 2016 have been the implications of Brexit and developments on the derogations for landfill acceptance criteria. The Department for Environment, Food and Rural Affairs (DEFRA) has recently confirmed 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.
During 2016 DEFRA undertook a light review of its 2010 Strategy for Hazardous Waste Strategy for England. Augean was directly involved in consultation on its original formulation and has monitored its implementation since 2010. In general, the Group considers that, whilst the DEFRA Strategy is fit for purpose, there are concerns apparent regarding the implementation and application of the Strategy, particularly in respect of persistent and toxic pollutants. The application of the strategy does not appear to effectively take into consideration whether the Best Overall Environmental Outcome (BOEO) will be achieved, despite it being a requirement of the Strategy.
HM Revenue & Customs has continued to develop proposals relating to the application of Landfill Tax. Whilst these proposals do not directly affect the business they seem piecemeal and the Group is seeking a review of the taxation objectives of these proposals to ensure that clarity of purpose is apparent.
Planning and permitting
The securing of planning permission and maintenance of appropriate environmental permits at the Group's sites is an essential part of the on-going operation and future development of the business. The key permitting work in 2016 has been development of an Oil & Gas decommissioning hub and waste transfer station at Port of Dundee. A suite of applications has been submitted for a wide range of wastes including NORM, hazardous and scrap specifically to provide total waste management services to the oil and gas industry working with Forth Ports Limited. It is anticipated that the permits will be issued in the first quarter of 2017.
In July 2013, the Secretary of State for Communities and Local Government granted a Development Consent Order (DCO) for the extension of the landfill site at ENRMF. This site provides treatment and disposal services for a range of remediated soils and building rubble, APCR and low activity radioactive wastes and is the principal hazardous waste landfill site in the South of England. To make full use of the DCO it has been necessary to vary the permits for LLW and hazardous wastes. Extensive technical work was undertaken including environmental impact and risk assessments to ensure that the on-going development would not cause harm to human health or pollution of the environment. Permits for the treatment and disposal of hazardous waste were granted in 2015 and the radioactive waste permit was issued during the first half of 2016. The Group has continued to actively engage with local communities resulting in general acceptance of its proposals and no objections.
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.
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 2016 2015 stated ------------------------ ------ ------ Revenue 76.0 61.0 ------------------------ ------ ------ Operating profit 7.8 6.8 ------------------------ ------ ------ Profit before taxation 7.0 6.0 ------------------------ ------ ------ Profit after taxation 4.5 4.8 ------------------------ ------ ------ EBITDA (defined below) 14.1 12.1 ------------------------ ------ ------ Net operating cash flow 13.5 11.1 ------------------------ ------ ------ Basic earnings per share 4.42p 4.65p ------------------------ ------ ------ Return on capital employed 11.8% 11.4% ------------------------ ------ ------
Exceptional items are detailed below.
On a statutory basis for continuing operations, operating profit was GBP2.1m (2015: GBP3.3m), profit before tax was GBP1.3m (2015: GBP2.5m), profit after tax was GBP0.4m (2015: GBP1.7m), basic earnings per share were 0.40 pence (2015: 1.60 pence) and net operating cash flows were GBP11.2m (2015: GBP10.5m).
Trading, operating profit and EBITDA
Revenue from continuing operations for the year ended 31 December 2016 increased by 25% to GBP76.0m (2015: GBP61.0m).
Operating profit before exceptional items from continuing operations increased by 14% to GBP7.8m (2015: GBP6.8m) and profit before tax increased by 16% to GBP7.0m (2015: GBP6.0m), on the same basis.
Earnings before interest, taxation, depreciation and amortisation (EBITDA), from continuing operations and before exceptional items, is determined as follows:
2016 2015
GBP'm GBP'm
------------------ ------- -------
Operating profit 7.8 6.8
------------------ ------- -------
Depreciation and
amortisation 6.3 5.3
------------------ ------- -------
EBITDA 14.1 12.1
------------------ ------- -------
Exceptional items
Exceptional items in 2016 totalled a net charge of GBP5.7m before taxation, of which GBP3.3m related to 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 restructures and other costs.
In 2015, exceptional items totalled a net charge of GBP3.5m before taxation, of which GBP2.9m related to the non-cash impairment of certain property, plant and equipment, GBP0.5m related to restructuring charges and GBP0.1m related to business acquisition and other costs.
Finance costs
Total finance charges were GBP0.8m (2015: GBP0.8m) including the interest on bank debt and other financial liabilities of GBP0.4m (2015: GBP0.3m). They also included non-cash unwinding of discounts on provisions totalling GBP0.1m (2015: GBP0.1m).
Taxation
The Group recognised an accounting tax charge of GBP0.9m (2015: GBP0.8m) including a credit of GBP1.6m (2015: GBP0.4m) in respect of exceptional items.
The accounting tax charge of GBP2.5m for continuing operations and excluding exceptional items (2015: GBP1.2m) represents 35.3% of profit before taxation on the same basis (2015: 20.3%). This compares against the headline rate of corporation tax of 20% for 2016 (2015: 20.25%). The increase in tax charge in the current year reflects a higher level of disallowable costs due to acquisition and a reduction in the recognised deferred tax asset subsequent to a review of the Group's non-qualifying asset base. These factors are not expected to recur.
The Group paid corporate tax of GBP0.9m during the year (2015: GBP1.1m), of which GBP0.8m was in respect of 2016 liabilities and GBP0.1m in respect of previous years. A current tax liability of GBP0.7m (2015: GBP0.9m) remains in the balance sheet at the year end.
A deferred tax asset of GBP1.1m (2015: GBP2.3m) is recognised in the balance sheet, which reflects the probability that the Board believes that the assets will be recovered in the short to medium term. A potential deferred tax asset of GBP0.8m is unrecognised (2015: GBP0.8m) as the expected usage is not sufficiently predictable. This asset is expected to eventually be recovered in the ordinary course of business and will, therefore, be re-recognised when its recovery is probable.
Earnings per share
Basic earnings per share (EPS), from continuing operations and excluding exceptional items, decreased by 5% to 4.42 pence (2015: 4.65 pence) due to the high tax charge in the year.
Statutory basic EPS was 0.40 pence (2015: 1.60 pence).
The Group made a profit after taxation, from continuing operations and excluding exceptional items, of GBP4.5m (2015: GBP4.8m), of all of which was attributable to equity shareholders.
The total number of ordinary shares in issue increased during the year from 102,249,083 to 102,748,383 with the weighted average number of shares in issue increasing from 102,139,647 to 102,420,517 for the purposes of basic EPS.
Dividend
The Board has recommended a dividend of 1.0p per share (2015: 0.65p), payable on or after 29 June 2017, following an ex-dividend date of 15 June 2017 and a record date of 16 June 2017, subject to shareholder approval at the Annual General Meeting. The dividend per share has increased by 54% from the previous year, which reflects the Board's confidence in the outlook and maintains the Board's commitment to a progressive dividend policy. The proposed dividend is covered 4.4 times (2015: 7.2 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:
2016 2015
GBP'm GBP'm
--------------------------------- ------- -------
Net operating cash flows
from continuing operations 13.5 11.1
--------------------------------- ------- -------
Net operating cash flows
from exceptional items (2.3) (0.6)
--------------------------------- ------- -------
Total net operating cash
flows 11.2 10.5
--------------------------------- ------- -------
Maintenance capital expenditure (3.9) (5.5)
--------------------------------- ------- -------
Post-maintenance free cash
flow 7.3 5.0
--------------------------------- ------- -------
Development capital expenditure (4.1) (1.8)
--------------------------------- ------- -------
Purchase of remaining shares
in ANSS - (1.1)
--------------------------------- ------- -------
Acquisition of businesses (8.9) (0.1)
--------------------------------- ------- -------
Purchase of East Kent freehold (0.2) (0.2)
--------------------------------- ------- -------
Free cash flow (5.9) 1.8
--------------------------------- ------- -------
Dividend payments (0.7) (0.5)
--------------------------------- ------- -------
Proceeds from issuance
of equity 0.1 0.1
--------------------------------- ------- -------
Net cash generation (6.5) 1.4
--------------------------------- ------- -------
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 70% to GBP9.5m (2015: GBP5.6m), after excluding net operating cash flows from exceptional items and discontinued operations, of GBP2.2m outflow (2015: GBP0.6m outflow).
Underlying net operating cash flows were generated from continuing trading as follows:
2016 2015
GBP'm GBP'm
------------------------------------ ------- -------
EBITDA from continuing
operations and before exceptional
items 14.1 12.1
------------------------------------ ------- -------
Net working capital movements 0.8 0.4
------------------------------------ ------- -------
Interest and taxation payments (1.7) (1.8)
------------------------------------ ------- -------
Other 0.3 0.4
------------------------------------ ------- -------
Net operating cash flows
from continuing operations
and before exceptional
items 13.5 11.1
------------------------------------ ------- -------
Underlying net operating cash flow as a percentage of EBITDA was 96% in 2016 (2015: 92%).
The Group purchased the issued share capital of Colt Holdings Limited ("Colt") in 2016 for a headline
consideration of GBP9.2m in May 2016. The associated net cash outflow was GBP8.9m.
The Group announced in March 2015 that it had purchased the remaining 19% of shares in Augean North Sea Services, not already held by the Group, for a total consideration of GBP1.05m.
The Group purchased the assets and site at the East Kent Waste Recovery Facility during 2014 for a total consideration of GBP1.9m, with GBP1.5m paid in 2014 and GBP0.2m paid in each of January 2015 and January 2016.
Capital investment in property, plant & equipment and intangible assets made by the Group totalled GBP8.3m (2015: GBP7.3m), excluding the payments to acquire East Kent, and is shown in the table below. This is split between maintenance investment, focused on upgrading existing facilities and development investment on new activities, with planning investment to secure permissions to operate split between maintenance and development, dependent upon the specific nature of that capital expenditure:
2016 2016 2016 2015
Maintenance Development TOTAL TOTAL
GBP'm GBP'm GBP'm GBP'm
--------------------------- ------------- ------------- ------- -------
Energy & Construction 2.6 1.1 3.7 3.8
--------------------------- ------------- ------------- ------- -------
Radioactive Waste - - - -
Services
--------------------------- ------------- ------------- ------- -------
Industry & Infrastructure 0.3 0.1 0.4 0.6
--------------------------- ------------- ------------- ------- -------
Augean Integrated
Services 0.3 1.1 1.4 0.8
--------------------------- ------------- ------------- ------- -------
Augean North Sea
Services 0.1 1.9 2.0 1.6
--------------------------- ------------- ------------- ------- -------
Other/corporate 0.6 0.2 0.8 0.5
--------------------------- ------------- ------------- ------- -------
3.9 4.4 8.3 7.3
--------------------------- ------------- ------------- ------- -------
During the year, the Group received a total of GBP0.1m (2015: 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, increased to GBP10.8m at 31 December 2016, from GBP4.3m at 31 December 2015. This represented gearing, defined as net debt divided by net assets, of 19.9% (2015: 7.8%). The ratio of net debt to EBITDA, from continuing operations and before exceptional items, was 0.8 times (2015: 0.4 times).
Financing
During 2016, 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 with the option of a further GBP10m exclusively to fund acquisitions. The additional GBP10m is structured as an accordion facility and therefore is uncommitted and would require bank approval to draw down. The maturity of the facility is October 2020 and the overdraft is reviewed annually. This facility, along with the underlying cash generation of the Group, is expected to provide the required funds to support further growth of the business over that period. As at 31 December 2016, the net debt is GBP10.8m with headroom available to the Group totalling GBP19.2m including the GBP10.0m undrawn accordion.
The above 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 : not less than 3.0 times
As at 31 December 2016 the Group was in compliance with both covenants.
Balance sheet and return on capital employed
Consolidated net assets were GBP54.6m on 31 December 2016 (2015: GBP54.4m) and net tangible assets, excluding goodwill and other intangible assets, were GBP28.3m (2015: GBP34.4m), of which all was attributable to equity shareholders of the Group in both years. Net assets and net tangible assets as at 31 December 2016 are both stated after the recognition of a GBP3.3m 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, increased to 11.8% in 2016 (2015: 11.4%). This outcome is not impacted by the GBP3.3m impairment loss recognised by the Group, which is recognised as at 31 December 2016 but does not form part of the calculation of average capital employed for 2016.
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. Reviews were completed for the Augean North Sea Services business as a result of the prevailing macroeconomic conditions seen in the market and the Colt business given its level of performance.
Those detailed reviews indicated that an impairment loss of GBP3.3m was to be recognised in respect of the East Kent CGU as at 31 December 2016. No change was required to the carrying value of the goodwill, nor were any other impairment losses or reversals to be recognised in the consolidated balance sheet, in respect of the continuing operations of the Group, at 31 December 2016.
The cash flows for all CGUs were discounted using a pre-tax discount rate of 9.7%.
Outlook
2016 saw the Group deliver double digit growth in revenue, operating cash flow and EBITDA. 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 APCR volumes, reaffirming our integrated waste management proposition with our customers.
We have seen good momentum across our portfolio of businesses and remain well positioned to take advantage of opportunities across a broad number of sectors. The Group's cash generation and balance sheet remain robust and the Board remains confident of maintaining its track record of year-on-year increases in profitability in 2017.
Marketplace
Augean operates in market sectors that have distinct strategic drivers and these form the rationale for the focus of the five business units of the Group to develop the appropriate customer focus and growth strategy relevant to each sector. There are certain regulatory matters that are common for all of the units, relating to hazardous waste and these are addressed first below.
Hazardous waste overview
The market for hazardous waste in the UK is based on a legislative environment underpinned by the implementation of the European Union's Waste Framework Directive and the UK's own hazardous waste National Policy Statement (NPS), which encourage sustainable methods of managing waste and the development of treatment, recycling and recovery facilities as the key focus of future waste management activities. The adoption of the NPS in June 2013 confirmed the need for the portfolio of treatment and disposal facilities and services developed by Augean. Importantly, the Group plays an active part in five of the eight sectors identified as essential for the management of hazardous wastes in the UK. The Waste Hierarchy provides a framework for waste management and implementation of infrastructure which will allow sustainable waste management solutions. However, the Waste Hierarchy is a simplification of Best Overall Environmental Outcome, which is the goal of environmental strategy, policy and regulation, and for hazardous wastes there is a particular need to consider the fate of the persistent and toxic pollutants in the waste.
The hazardous waste market is highly segmented with a total volume of approximately 5 million tonnes of waste handled in the UK each year. Within this arena Augean continues to focus on the treatment and disposal of waste from construction and demolition activities, Oil & Gas, energy from waste operators, specialist manufacturers, clinical and pharmaceutical waste, and other industrial producers.
Hazardous landfill
Data published by the Environment Agency for 2015 (the most recent data available) on the production of hazardous waste indicated that approximately 0.9 million tonnes are disposed per annum to hazardous landfill sites and the total UK capacity for hazardous landfill was approximately 16 million tonnes (source: Environment Agency). Augean's Energy & Construction business continues to be a leading provider within this market, holding in excess of 40% of the UK's remaining hazardous landfill capacity.
Energy-from-Waste and Biomass Energy waste market
Augean's treatment and disposal to landfill includes the management of certain by-products from energy-from-waste (EfW) plants, required to deliver the UK's obligation to significantly reduce the landfilling of municipal solid waste by 2020, and from biomass energy plants. These facilities produce air pollution control residues (APCR). The Group has developed the capability to treat and dispose of APCR at our sites at Port Clarence and East Northants Resource Management Facility (ENRMF), handling approximately 111,000 tonnes, representing an approximate 40% market share (2015: approximate 35% share). This market, of approximately 300,000 tonnes per annum excluding EfW operators who treat and dispose of their own APCR arisings, is expected to grow at 9% compound average growth rate from 2016 to 2022. The Group actively monitors technological developments in the treatment and recycling of this material to ensure its long term competitive position in this market.
Construction waste market
Construction soils are a key input to the Group's landfill sites. In 2016, the Group received high volumes of this waste into its sites at ENRMF and Port Clarence where contaminated soils are treated and disposed to landfill. The volume of these soils available to the Group is variable and linked to activity in the construction sector, including the progress of large scale infrastructure projects. The market for these soils, by nature, is not operated on a long term contracted basis. It is sensitive to the prevailing market spot price, influenced by haulage costs and thus proximity to the disposal site.
HM Revenue & Customs issued a revised excise notice in respect of landfill tax in December 2015. Volumes of these waste streams into the Group's sites have reduced compared to 2015 but exceeded the Group's expectations for 2016. The Group invested in a trial of soil washing and treatment equipment to promote recycling of a proportion of such materials, the results of which will become apparent during 2017.
Radioactive waste market
The Group's key radioactive waste market is the nuclear decommissioning market, relating to the closure and dismantling of the UK's redundant nuclear power and research facilities. This is managed on behalf of the UK government by the Nuclear Decommissioning Authority (NDA). The disposal of naturally occurring radioactive material (NORM) generated principally from the Oil and Gas industry is the second key radioactive waste market for the Group. Augean has planning permission and environmental permits in place to dispose of low activity low level waste (LLW), very low level waste (VLLW) and NORM. The NDA publishes regular forecasts on the volumes of radioactive wastes requiring disposal and treatment, the latest of which was released in December 2016 and shows 120% year on year increase in LLW volumes from NDA sites to 8,000 cubic metres in 2017/18, albeit from a low base in 2016/17. We do not expect to see this increase impacting the Group until the second half of 2017.
Industrial waste market
The waste market has remained stable as a result of shutdown and maintenance work being carried out across a broad range of sectors and overall growth in the UK manufacturing sector.
Conditions in the mainland European recovered oil and waste organic fuels market have remained similar to 2015 with continued downward pressure on pricing in the recovered fuel oil market continuing throughout 2016.
As large energy-intensive industries have reduced production in the UK, the demand for organic waste derived fuels in the UK market has reduced. The market is reliant on facilities in mainland Europe for the recovery of energy from these fuels. The opportunity to send waste to energy recovery routes within mainland Europe continued to reduce with capacity being taken up by volume generated within the region, further displacing UK waste. This has resulted in an increase in costs and a decrease in rebates associated with these disposal routes. A resultant upward price pressure has been experienced in the UK kiln fuel market.
The waste oil market has experienced an upward price pressure although a shortage of available routes has led to stagnation in this market. Activity across both areas was dynamic as the markets responded to the fluctuations and the business reacted accordingly.
North Sea Oil & Gas waste services market
The markets for waste produced in the exploration, appraisal, development, production and decommissioning of North Sea Oil & Gas are centred on Aberdeen and extend to the Shetland Isles for the northern sector. The southern sector is centred on Great Yarmouth, with further activities in North West England, for the East Irish Sea. Augean North Sea Services (ANSS) provides a full range of services, equipment rental and manpower provision for the containment and treatment of offshore wastes. These include the cuttings and slop waters from drilling of oil and gas wells, contaminated waters from the oil production process, production wastes, oil sludges, including those contaminated with low level naturally-occurring radioactive material (NORM), wellbore and topside production equipment & water contaminated with NORM as well as a more general range of industrial general and hazardous wastes.
The Oil & Gas market has been adversely impacted since Q3 2015 as a result of significant reductions seen in oil prices, with Oil & Gas companies cutting capital expenditure and seeking efficiencies at all levels from the supply chain. Cost efficiencies are key to the sustainability of businesses in this area. 2015 saw a downturn in drilling activity which continued into 2016 and resulted in a significant reduction in the size of the market for drilling wastes, while there was an upturn in Decommissioning (DECOM) related plug and abandonment activities and associated waste containments and treatment.
The market for providing total waste management and industrial cleaning to oil & gas production facilities and the resultant decommissioning, has different drivers, as the Oil & Gas operator's assets are already invested, with stable levels of activity seen compared to drilling exploration and development since the oil-price dropped in mid-2015. The dependence of the UK's energy sector on oil and gas is anticipated to continue over several decades, leading to an expectation that levels of demand for specialised industrial service related waste management for production facilities and onshore industrial services will be stable. The growth sector of the market derives from the decommissioning of assets in the North Sea.
NORM builds up over time and before maintenance or decommissioning the downhole production equipment, processing lines and topside equipment may require decontamination with specialised industrial cleaning resulting in the generation of NORM scale and sludges. Reliable statistics on the scale of the NORM market remain limited although the Group estimate that typically 1,000 tonnes of NORM may be released per annum, requiring specialised decontamination, treatment and disposal.
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 2016 2015
to strategy area(s) Outcome Outcome
of the Group
------------------------------- -------------- --------------- ------------------ ------------------
Number of accidents (1)
Health & safety is the
highest priority of the E&C, I&I,
Group SMP AIS, ANSS 59 34
------------------------------- -------------- --------------- ------------------ ------------------
Number of near misses
reported (2)
Health & safety is the
highest priority of the E&C, I&I,
Group SMP AIS, ANSS 2,331 2,015
------------------------------- -------------- --------------- ------------------ ------------------
Compliance scores (3) SMP E&C, RWS, E&C: A E&C: A
Augean operates in a I&I, AIS, RWS: A RWS: A
highly regulated environment ANSS I&I: B/Excellent I&I: A/Excellent
and aims to carry on AIS: B AIS: B
the highest levels of ANSS: ANSS:
compliance with relevant Excellent Excellent
regulations and planning
& permitting conditions
------------------------------- -------------- --------------- ------------------ ------------------
Underlying profit before GSV Group GBP7.0m GBP6.0m
taxation (4)
This is the key measure
of underlying profitability
of the Group
------------------------------- -------------- --------------- ------------------ ------------------
Post-maintenance free GSV Group GBP9.6m GBP5.6m
cash flow (5)
This shows the efficiency
of the Group in converting
its profits into cash,
in a steady state, which
is then available to
reinvest for future growth
and distribute to our
shareholders
------------------------------- -------------- --------------- ------------------ ------------------
Return on capital employed
(6)
The Group has several
capital intensive business
units and aims to generate
a superior return for
its shareholders from
its investments. GSV Group 11.8% 11.4%
------------------------------- -------------- --------------- ------------------ ------------------
KPI Link Applicable 2016 2015
to strategy area(s) Outcome Outcome
of the Group
------------------------------ ------------- -------------- -------------- --------------
Proportion of revenue SMP, Group 88% of 95% of
from contracts or framework CFS, top 20 top 20
agreements (7) GSV Top 20 Top 20
This is a measure of 43% of 42% of
the relative certainty Group Group
of future cash flow revenue revenue
------------------------------ ------------- -------------- -------------- --------------
Volumes of waste disposed SMP, E&C, RWS E&C: 574,000 E&C: 434,000
to our landfill sites CFS, t t
This is a prima facie GSV RWS: 2,000 RWS: 3,200 indicator of successful t t growth in the highly regulated markets in which we operate ------------------------------ ------------- -------------- -------------- -------------- Level of contracted revenue SMP, AIS, ANSS GBP7.4m GBP4.8m from Total Waste Management CFS, We aim to deliver a total GSV solution to the marketplace, which allows us to use our specialist sector expertise to add value to our customers and grow our returns in this capital-light, service-led business area ------------------------------ ------------- -------------- -------------- -------------- Amount of North Sea Oil SMP, ANSS 84% of 89% of & Gas revenue generated CFS, ANSS revenue ANSS revenue directly from operators GSV and Top-Tier customers We aim to generate an increasing proportion of our revenues from these companies, moving up the supply chain, increasing our credibility in the marketplace and reducing both credit risk and the risk of intermediary margin erosion ------------------------------ ------------- -------------- -------------- --------------
Strategic key
SMP Develop sustainable market positions CFS Grow through client-focused solutions GSV Grow shareholder value
(1) The number of total reported accidents, including those resulting in damage to plant or equipment. This is an absolute figure which has not been normalised for changes in employee numbers.
(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
(7) Total revenue from top 20 customers, arising from commercial arrangements under contract or other framework agreement, divided by the total revenue of those customers in the year.
Managing risk
Risk description Mitigation
--------------------------------- ------------------------------------------------------------------
General Economic risk
* Diversification of customer base
The performance of the
business is linked to
economic activity in * Linking gate fees and other customer charges,
the waste markets it wherever possible, to prevailing operating costs and
serves, including the commodity prices, including the costs of waste
manufacturing, construction, disposal outside of the Group
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.
--------------------------------- ------------------------------------------------------------------
Environmental legislation
* Employ high quality technical management to interpret
Regulation is a key driver the evolving legislative framework and its potential
of the hazardous waste and current impact on the Group's operations.
market. Changes in legislation
(including tax legislation
with environmental goals) * Maintain a presence on a number of industry groups to
or its interpretation influence the shaping of policy and liaises regularly
can have a significant with relevant regulators and legislative bodies,
and far reaching impact including the Environment Agency (EA), the Scottish
on waste markets. Environment Protection Agency (SEPA), the Department
The simplistic application for Environment, Food & Rural Affairs (DEFRA) and the
of the waste hierarchy Department for Business Energy and Industrial
to the markets in which Strategy (BEIS).
the Group operates, with
its focus on reducing
the volume of waste disposed * Develop treatment solutions for customers which
to landfill, could be utilise landfill when this is the most appropriate
perceived as a threat commercial and environmental solution, but provide
to the business in the alternative approaches whenever they are suitable
long term.
* Highlight, the importance of Best Overall
Environmental Outcome (BOEO) in moderating the
simplistic application of the waste hierarchy by
regulators
--------------------------------- ------------------------------------------------------------------
Tax legislation
* Develop a range of waste treatment solutions for
The use of tax legislation customers
to drive environmental
objectives, particularly
the diversion of wastes * Broaden capabilities to ensure the Group's sites are
away from landfill disposal able to accept all those wastes which do require
and towards greater treatment landfill disposal
and recycling, represents
a risk in all time horizons.
Landfill tax regulations * Maintain specialist testing facilities and seek
(LFT1) were last updated appropriate external chemical, engineering, taxation
in December 2015. LFT and legal advice.
is not totally prescriptive
on the tax treatment
of the many alternate * Modelling of the financial impact under different
types of waste received external legislative positions
by the group. This could
lead to differences in
opinion on the treatment
and the applicable tax
rate. The standard rate
of landfill tax rose
to GBP84.40 per tonne
on 1 April 2016 and will
continue to rise in line
with the retail price
index. Whilst European
and national legislation
encourages "zero landfill"
solutions for a range
of waste streams, disposal
in properly engineered
and permitted landfills
continues to be the most
appropriate waste management
solution for many hazardous
wastes.
--------------------------------- ------------------------------------------------------------------
Environmental compliance
* Adherence to the highest environmental standards
All operating sites and
activities are regulated
by environmental authorities * Maintenance of good relations with local communities
in line with the requirements and to satisfy customers that the techniques,
set out within licences practices and procedures adopted by the Group are
and permits. These licences consistent with those of a responsible business.
and permits are required
to carry on the business
of the Group and compliance * Employment of technical experts who work to
with their terms is essential well-established policies and procedures described in
to its success. Withdrawal the Group's Integrated Management System
or temporary suspension
could have a significant
impact on the Group's * Provision of training to develop the knowledge and
ability to operate. competence of its staff
* Regular monitoring and review of compliance
performance
* Production of the Group's corporate social
responsibility (CSR) report.
--------------------------------- ------------------------------------------------------------------
Health and safety
* Health and safety is the first priority for all
The activities of the directors, managers and employees across the Group
Group involve a range
of health and safety
risks, from offshore * Investments in relevant assets and resources are made
operations to the handling on an on-going basis to ensure that the highest
of hazardous wastes. health and safety standards are applied
* Health and safety performance is constantly monitored
and reviewed, including formal reviews at each Augean
plc Board meeting and in depth quarterly reviews by
the Group's Management Board. These mechanisms also
include detailed reviews of any relevant incidents,
which allow the lessons learnt from such incidents to
be fed back to local teams, in order to reduce the
likelihood of recurrence
--------------------------------- ------------------------------------------------------------------
Price risk
* Review pricing policies on an on-going basis to
Price pressure remains ensure that the Group influences and stabilises the
a key feature of the market
hazardous waste market,
where customers often
have a range of options * Respond to emerging trends and customer need
for the ultimate disposal
of their wastes and access
to several companies * Specialist in-house resource to assesses and price
competing to service waste consignments in line with market rates and
their needs. available disposal solutions
* Regular review of all services to ensure that price
changes in the market do not lead to uneconomic
activities being undertaken by the Group
--------------------------------- ------------------------------------------------------------------
Economic growth
* Develop positions in a range of markets requiring
The Group relies on economic specialist waste management capabilities and which
activity in the UK, which have high barriers to entry
in turn leads to production
of the hazardous wastes
which form the basis * Identify and invest in the techniques, assets and
of its sales revenues. resources to provide a broad range of services to
Any downturn in the UK customers, diversifying the revenue base of the Group
economy may restrict
the volume of hazardous
wastes produced and therefore
constrain the Group's
revenues.
--------------------------------- ------------------------------------------------------------------
Technological factors
* Monitor the development and application of the waste
Technological risk factors hierarchy vs Best Overall Environmental Outcome.
may cause treatment technology
in use to become obsolete
or too costly to maintain. * Invest selectively in development
* Employ strategic planning to make timely investments
in existing and new equipment
* Evaluation of operational costs and market
environment is made before investment
--------------------------------- ------------------------------------------------------------------
North Sea oil and gas
investment * Maintain a comparatively low level of operational
gearing, with the business therefore able to adjust
With a well-established its significant direct cost base in the event of a
business focused on providing significant and permanent reduction in revenues
waste management services
to North Sea oil and
gas operators, the Group * Diversify North Sea activities across a number of
has some exposure to revenue-generating streams, with services provided to
any fall in investment production customers offshore and onshore
for oil and gas exploration
activity in the North
Sea, such as those announced * Pursue North Sea decommissioning as new market
by certain major oil opportunities for ANSS that would further mitigate
companies in early 2015. against risk
This may in turn reduce
the volume of waste available
for management by Augean
North Sea Services.
--------------------------------- ------------------------------------------------------------------
Transport disruption
* Outsourcing of the majority of the Group's haulage
The Group relies on the requirement, augmented with the use of the Group's
delivery of wastes to own fleet where appropriate
its sites to secure revenues
and any disruption to
local or national networks, * Maintenance of ability to accept wastes into sites in
for example in severe different geographical locations before onward
weather conditions, can transfer to their final treatment or disposal
cause delays or lost destination
revenue for the Group.
--------------------------------- ------------------------------------------------------------------
Brexit risk
* Engage with trade association (Environmental Services
Although the group is Association) to anticipate and attempt to influence
focussed on wastes arising government plans
in Britain and uses disposal
infrastructure almost
entirely based in the * Monitor market conditions to allow appropriate
UK, the Group may fail investment in infrastructure and management of costs
to anticipate and manage
the potential impact
of Britain leaving the * Maintenance of ability to accept wastes into sites in
European Union, notably different geographical locations before onward
potential increases in transfer to their final treatment or disposal
interest rate. destinations
* Modelling of the financial impact of different
scenarios which could result from this external
change
--------------------------------- ------------------------------------------------------------------
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.
Consolidated statement of comprehensive income
for the year ended 31 December 2016
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
2016 2016 2016 2015 2015 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------ ----------- -------- ------------ ----------- ---------
Continuing operations
Revenue 75,959 - 75,959 61,005 - 61,005
Operating expenses (68,161) (5,719) (73,880) (54,185) (3,508) (57,693)
-------------------------- ------------ ----------- -------- ------------ ----------- ---------
Operating profit 7,798 (5,719) 2,079 6,820 (3,508) 3,312
Net finance charges (812) - (812) (788) - (788)
Profit before
tax 6,986 (5,719) 1,267 6,032 (3,508) 2,524
Taxation 4 (2,464) 1,602 (862) (1,227) 390 (837)
-------------------------- ------------ ----------- -------- ------------ ----------- ---------
Profit / (loss)
from continuing
operations 4,522 (4,117) 405 4,805 (3,118) 1,687
Profit / (loss)
for the year and
total comprehensive
income 4,522 (4,117) 405 4,805 (3,118) 1,687
-------------------------- ------------ ----------- -------- ------------ ----------- ---------
Profit / (loss)
and total comprehensive
income attributable
to :
Equity shareholders
of Augean plc 4,522 (4,117) 405 4,753 (3,118) 1,635
Non-controlling
interest - - - 52 - 52
Earnings per share
From continuing and discontinued
operations
Basic 6 0.40p 1.60p
Diluted 6 0.39p 1.56p
Group
--------------------
2016 2015
GBP'000 GBP'000
Non-current assets
Goodwill 23,997 19,757
Other intangible assets 2,265 214
Property, plant and
equipment 44,475 42,918
Deferred tax asset 1,176 2,316
------------------------------ --------- ---------
71,913 65,205
----------------------------- --------- ---------
Current assets
Inventories 379 306
Trade and other receivables 18,461 11,829
Cash and cash equivalents 3,188 3,553
------------------------------ --------- ---------
22,028 15,688
----------------------------- --------- ---------
Current liabilities
Trade and other payables (17,192) (10,838)
Current tax liabilities (658) (940)
Borrowings (171) (1,054)
Provisions (50) (25)
------------------------------ --------- ---------
(18,071) (12,857)
----------------------------- --------- ---------
Net current assets 3,957 2,831
------------------------------ --------- ---------
Non-current liabilities
Borrowings (13,833) (6,764)
Provisions (7,470) (6,874)
------------------------------ --------- ---------
(21,303) (13,638)
----------------------------- --------- ---------
Net assets 54,567 54,398
------------------------------ --------- ---------
Shareholders' equity
Share capital 10,275 10,225
Share premium account 748 612
Retained earnings 43,544 43,561
------------------------------ --------- ---------
Total equity 54,567 54,398
------------------------------ --------- ---------
Group Statement of financial position
As at 31 December 2016
Consolidated statement of cash flow
For the year ended 31 December 2016
Group
------------------
2016 2015
GBP'000 GBP'000
---------------------------------- -------- --------
Operating activities
Cash generated from operations 7 12,859 12,348
Finance charges paid (704) (715)
Tax paid (941) (1,105)
---------------------------------- -------- --------
Net cash generated from
operating activities 11,214 10,528
---------------------------------- -------- --------
Investing activities
Purchases of property, plant
and equipment (8,335) (7,474)
Purchases of intangible
assets (51) (51)
Purchase of business (net
of cash or overdraft acquired) 10 (8,901) (91)
Net cash used in investing
activities (17,287) (7,616)
---------------------------------- -------- --------
Financing activities
Dividends paid 5 (665) (511)
Issue of equity 186 96
Acquisition of non-controlling
interest - (1,050)
Drawdown of Loan facilities 6,208 626
Repayments of obligations
under finance leases (21) (22)
---------------------------------- -------- --------
Net cash generated from
/ (used in) financing activities 5,708 (861)
---------------------------------- -------- --------
Net (decrease) / increase
in cash and cash equivalents (365) 2,051
Cash and cash equivalents
at beginning of year 3,553 1,502
---------------------------------- -------- --------
Cash and cash equivalents
at end of year 3,188 3,553
---------------------------------- -------- --------
Statement of changes in shareholders' equity
for the year ended 31 December 2016
Share Share Retained Shareholders' Non-
capital premium earnings equity controlling Total
Group GBP'000 account GBP'000 GBP'000 Interest equity
GBP'000 GBP'000 GBP'000
---------------------- --------- --------- ---------- -------------- ------------- ----------
At 1 January 2015 10,199 542 42,059 52,800 955 53,755
---------------------- --------- --------- ---------- -------------- ------------- ----------
Total comprehensive
income for the
year
Retained profit - - 1,635 1,635 52 1,687
---------------------- --------- --------- ---------- -------------- ------------- ----------
Total comprehensive
income for the
year - - 1,635 1,635 52 1,687
Transactions with
the owners of
the company
Dividend - - (511) (511) - (511)
Issue of equity 26 70 - 96 - 96
Acquisition of
non-controlling
interest - - (43) (43) (1,007) (1,050)
Share-based payments - - 421 421 - 421
Total transactions
with the owners
of the company 26 70 (133) (37) -(1,007) (1,044)
---------------------- --------- --------- ---------- -------------- ------------- ----------
At 1 January 2016 10,225 612 43,561 54,398 - 54,398
---------------------- --------- --------- ---------- -------------- ------------- ----------
Total comprehensive
income for the
year
Retained profit - - 405 405 - 405
---------------------- --------- --------- ---------- -------------- ------------- ----------
Total comprehensive
income for the
year - - 405 405 - 405
Transactions with
the owners of
the company
Dividend - - (665) (665) - (665)
Issue of equity 50 136 - 186 - 186
Share-based payments - - 243 243 - 243
Total transactions
with the owners
of the company 50 136 (422) (236) - (236)
---------------------- --------- --------- ---------- -------------- ------------- ----------
At 31 December
2016 10,275 748 43,544 54,567 - 54,567
---------------------- --------- --------- ---------- -------------- ------------- ----------
During 2015 the Group acquired the remaining 19% of the share capital of Augean North Sea Services Limited. As at 31 December 2016 and 31 December 2015, the Group has no non-controlling interest.
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 financial information for the period ended 31 December 2016 was approved by the Board on 20 March 2017 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 2016 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 2015 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 Chief Executive Officer (CEO) (the chief operating decision-maker) reviews internal management reports on at least a monthly basis. The following summary describes the operations of each of the Group's reportable segments:
-- Energy and Construction: Augean operates three modern hazardous and non-hazardous landfill operating sites based at East Northants Resource Management Facility (ENRMF), Thornhaugh in 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 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.
Activities arise almost exclusively within the United Kingdom. Inter-segment trading is undertaken on normal commercial terms.
2016
Energy Radioactive Augean Industry Augean Group
and Construction Waste Integrated and Infrastructure North
Services Services Sea
GBP'000 GBP'000 GBP'000 GBP'000 Services 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.
2015
Energy Radioactive Augean Industry Augean Group
and Construction Waste Integrated and Infrastructure North GBP'000
GBP'000 Services Services GBP'000 Sea
GBP'000 GBP'000 Services
GBP'000
------------------------- ------------------ ------------ ------------ -------------------- ---------- ---------
Revenue
Hazardous landfill
activities 12,331 - - - - 12,331
Non-hazardous
landfill activities 2,048 - - - - 2,048
Waste treatment
activities - - 2,356 14,201 1,323 17,880
Total waste management
activities - - 3,871 - - 3,871
Energy generation 65 - - - - 65
APCR management 6,630 - - - - 6,630
Radioactive waste
management - 1,911 - - - 1,911
Processing of
offshore waste - - - - 8,400 8,400
Rental of offshore
equipment and
personnel - - - - 5,177 5,177
------------------------- ------------------ ------------ ------------ -------------------- ---------- ---------
Total revenue
net of landfill
tax 21,074 1,911 6,227 14,201 14,900 58,313
Landfill tax 6,357 - - - - 6,357
------------------------- ------------------ ------------ ------------ -------------------- ---------- ---------
Total revenue
including inter-segment
sales 27,431 1,911 6,227 14,201 14,900 64,670
Inter-segment
sales (834) - (245) (2,473) (113) (3,665) ------------------------- ------------------ ------------ ------------ -------------------- ---------- --------- Revenue 26,597 1,911 5,982 11,728 14,787 61,005 ------------------------- ------------------ ------------ ------------ -------------------- ---------- --------- Result Operating profit/(loss) before exceptional items 6,528 1,110 (558) (695) 1,340 7,725 Exceptional items (119) (119) (144) (3,007) (119) (3,508) ------------------------- ------------------ ------------ ------------ -------------------- ---------- --------- Operating profit/(loss) 6,409 991 (702) (3,702) 1,221 4,217 ------------------------- ------------------ ------------ ------------ -------------------- ---------- --------- Net finance charges (788) Central costs (905) ------------------------- ------------------ ------------ ------------ -------------------- ---------- --------- Profit before tax 2,524 Tax (note 4) (837) ------------------------- ------------------ ------------ ------------ -------------------- ---------- --------- Profit after tax 1,687 ------------------------- ------------------ ------------ ------------ -------------------- ---------- --------- Attributable to: Equity shareholders of the parent company 1,635 Non-controlling interest 52 Other information Capital expenditure 4,128 154 958 709 1,622 7,571 Depreciation and amortisation 2,976 113 380 1,091 676 5,236 Impairment loss - - - 2,888 - 2,888
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:
2016 2015
GBP'000 GBP'000
-------------------------------------------- -------- --------
Impairment of property, plant and equipment 3,348 2,888
Net settlement of trade related legal
case 1,162 -
Restructuring charges 297 474
Acquisition related costs 820 117
Other 92 29
-------------------------------------------- --------
Exceptional charge from continuing
operations 5,719 3,508
-------------------------------------------- -------- --------
4 Taxation
Group 2016 2015
------- -------
GBP'000 GBP'000
Total Total
-------------------------------------- ------- -------
Current tax
UK corporation tax on profit for the
year 1,327 1,463
Adjustments in respect of prior years (669) 2
-------------------------------------- ------- -------
658 1,465
-------------------------------------- ------- -------
Deferred tax
Credit in respect of the current year (802) (430)
Reassessment of tax qualifying assets 379 -
Adjustments in respect of prior years 627 (198)
-------------------------------------- ------- -------
204 (628)
-------------------------------------- ------- -------
Tax charge on the result for the year 862 837
-------------------------------------- ------- -------
Tax reconciliation for continuing operations
2016 2015
------------- --------------
GBP'000 % GBP'000 %
---------------------------------- ------- ---- ------- -----
Profit before tax from continuing
operations 1,267 2,524
Tax at theoretical rate 254 20% 511 20.3%
Effects of:
- expenses / (income) not
deductible for tax purposes 163 13% 162 6%
- change in tax rate 107 8% 169 7%
- effect of share options 67 5% 24 1%
- adjustments in respect of
prior years (42) (3)% 2 -
- reassessment of tax qualifying
assets 379 30% - -
- other (66) (5)% (31) (1)%
Tax charge on results 862 68% 837 33.2%
---------------------------------- ------- ---- ------- -----
The main rate of corporation tax in the UK was 20%.
5 Dividends
2016 2015
GBP'000 GBP'000
Proposed final dividend for the year ended
31 December 2016 of 1.0p pence per share
(2015: 0.65 pence per share) 1,027 665
-------------------------------------------- -------- --------
Total 1,027 665
-------------------------------------------- -------- --------
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 2016. This has not been included as a liability in these financial statements.
The payment of the dividend will not have corporation tax consequences for the Group.
6 Earnings per share
The calculation of basic earnings per share (EPS) is based on the profit attributable to ordinary shareholders of GBP96,000 (2015: GBP1,635,000) and a weighted average number of ordinary shares outstanding of 102,420,517 (2015: 102,139,647), calculated as follows:
2016 2015
GBP'000 GBP'000
---------------------------------------- -------- --------
Earnings for the purposes of basic and
diluted EPS 405 1,635
Exceptional items 4,117 3,118
---------------------------------------- -------- --------
Earnings for the purposes of adjusted
basic and diluted EPS 4,522 4,753
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.
2016 2015
GBP'000 GBP'000
-------------------------------------- ----------- -----------
Number of shares
Weighted average number of shares for
basic earnings per share 102,420,517 102,139,647
Effect of dilutive potential ordinary
shares from share options 1,775,783 2,795,165
-------------------------------------- ----------- -----------
Weighted average number of shares for
diluted earnings per share 104,196,300 104,934,812
-------------------------------------- ----------- -----------
Earnings per share
Basic 0.40p 1.60p
Diluted 0.39p 1.56p
Adjusted earnings per share
Basic 4.42p 4.65p
Diluted 4.34p 4.53p
-------------------------------------- ----------- -----------
7 Reconciliation of operating profit to net cash generated from / (used in) operating activities
Group
------------------
2016 2015
GBP'000 GBP'000
Operating profit 2,079 3,312
Amortisation of intangible
assets 262 133
Depreciation 6,012 5,103
Impairment charge 3,348 2,888
Earnings before interest,
tax, depreciation and amortisation
(EBITDA) 11,701 11,436
------------------------------------- -------- --------
Share based payments 243 421
(Increase) / decrease in inventories (58) 105
(Increase) / decrease in trade
and other receivables (4,121) 956
Increase / (decrease) in trade
and other payables 4,715 (312)
Increase / (decrease) in provisions 359 (264)
Loss on disposal of property, plant and equipment 20 6 Cash generated from operations 12,859 12,348 Finance charges paid (704) (715) Tax paid (941) (1,105) ------------------------------------- -------- -------- Net cash generated from operating activities 11,214 10,528 ------------------------------------- -------- --------
The above EBITDA and net cash generated from operating activities includes a total net cash outflow of GBP2,371,000 relating to exceptional items (2015: outflow of GBP620,000).
8 Analysis of changes in net debt
The table below presents the net debt of the Group at the balance sheet date.
1 Cash Acquisitions Other 31
January flow GBP'000 movement December
2016 GBP'000 GBP'00 2016
GBP'000 GBP'000
--------------------------- --------- --------- ------------- ---------- ----------
Cash and cash equivalents 3,553 (5,253) 4,888 - 3,188
--------- ------------- ---------- ----------
Overdraft - (167) - - (167)
--------- ------------- ---------- ----------
Bank loans (7,750) (6,250) - 167 (13,833)
--------- ------------- ---------- ----------
Finance leases (68) 64 - - (4)
--------------------------- --------- --------- ------------- ---------- ----------
Net debt (4,265) (11,606) 4,888 167 (10,816)
--------------------------- --------- --------- ------------- ---------- ----------
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 GBP7.7m (2015: GBP8.2m).
10 Acquisition of subsidiary
On 18 May 2016, the Group acquired 100 percent of the issued share capital of Colt Holdings Limited, the holding company of Colt Industrial Services Limited, an industrial services business. The acquisition was made to enhance Augean's Industry & Infrastructure business unit, adding UK-wide industrial services coverage and complementing the Group's existing service, treatment and disposal infrastructure.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below:
2016 2016 2016
Book Provisional Fair
Value Fair Value
Value
adjustments
GBP'000 GBP'000 GBP'000
--------------------------- -------- ------------- --------
Intangible assets - 2,262 2,262
Property, plant
and equipment 2,524 - 2,524
Inventories 82 (32) 50
Trade and other
receivables 2,625 (78) 2,547
Cash and cash equivalents 4,888 - 4,888
Deferred tax liabilities (198) (438) (636)
Trade and other
payables (1,674) (412) (2,086)
--------------------------- -------- ------------- --------
Total identifiable
assets 8,247 1,302 9,549
--------------------------- -------- -------------
Goodwill 4,240
Total consideration 13,789
--------------------------- -------- ------------- --------
Net cash outflow
arising on acquisition:
Cash consideration 13,789
Less: cash balances
acquired (4,888)
--------------------------- -------- ------------- --------
Total cash outflow 8,901
--------------------------- -------- ------------- --------
The goodwill of GBP4,240,000 arising from the acquisition comprises, inter alia, staff expertise, skills and experience, general reputation of those individuals within their industry and future potential synergies to be realised by Augean.
The deferred consideration arrangement requires additional payments to the vendor subject to Colt securing certain contracts within specified timeframes. The potential undiscounted amount of all future payments that Augean plc could be required to make under this arrangement is GBP4,750,000
11 Annual Report & Accounts
The Annual Report will be sent to shareholders on or around 19 May 2017 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 27 June 2017 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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