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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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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 |
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0 | 0 | N/A | 0 |
TIDMAUG
RNS Number : 0970R
Augean Plc
19 September 2017
Augean plc ("Augean" or "the Group")
Interim results for the six months ended 30 June 2017
Augean, one of the UK's leading specialist waste management businesses, announces its unaudited interim results for the six months ended 30 June 2017.
Financial Summary
-- Revenue increased by 14.4% to GBP42.1m (2016: GBP36.8m) -- Operating profit before exceptional items decreased by 8.0% to GBP3.3m (2016: GBP3.5m) -- Adjusted(1) profit before taxation decreased by 7.2% to GBP2.9m (2016: GBP3.1m) -- EBITDA(2) decreased 16.9% to GBP5.6m (2016: GBP6.7m) -- Net operating cash flows decreased by 9.9% to GBP3.9m (2016: GBP4.3m) -- Adjusted basic earnings per share decreased by 7.4% to 2.24p (2016: 2.42p)
-- Net debt increased to GBP12.5m, from GBP10.8m at December 2016 (GBP12.9m at June 2016) with unused banking facilities and cash of GBP7.3m
Operational summary
-- Two significant contract awards for Radioactive Waste Services with total potential revenue of around GBP4m
-- Increase in Total Waste Management (TWM) contracts and further long-term contract wins for Augean Integrated Services and the High Temperature Incinerator achieving break-even by the half year
-- The total volume of waste disposed by the Energy & Construction business decreased by 23.7% despite strong growth, as expected, in the more profitable APCR(3) volumes of 17.6%
-- Continued focus on diversification of revenue streams in Augean North Sea Services, with significant contract wins from strengthened relationships with tier-1 customers and sustained growth in profitability
Commenting on the Results, Dr Stewart Davies, Chief Executive, said:
"The Group has had a mixed first half of 2017, with improved performance from its Radioactive Waste Services and North Sea Services businesses offset by losses in its Industry & Infrastructure business primarily due to a legacy Colt contract.
The Group will continue to challenge the recent HMRC assessment. We expect to deliver full year financial results broadly in line with market expectation albeit the uncertain environment caused by this assessment is unhelpful."
There will be a meeting for analysts at 9.30am today at the offices of FTI Consulting, 9(th) Floor, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. For further information please call 020 3727 1203.
For further information, please call:
Augean plc Dr Stewart Davies, Chief Executive Mark Fryer, Group Finance Director 01937 844 980 N+1 Singer Shaun Dobson Alex Price 020 7496 3000 FTI Consulting Oliver Winters Fiona Walker 020 3727 1000
(1) Adjusted means before exceptional items
(2) EBITDA means adjusted earnings before interest, taxation, depreciation and amortisation
(3) APCR means Air Pollution Control Residues
Strategic report
Business performance
The Group operated through five business units during the period, with the performance of each set out below.
Reported Reported External Operating Sales GBPm Profit/(Loss) GBPm ----------------------------- -------------- ----------------- 2017 2016 2017 2016 ----------------------------- ------ ------ -------- ------- Energy and Construction 16.9 17.5 3.7 4.3 Radioactive Waste Services 1.2 0.6 0.5 (0.1) Integrated Services 4.9 3.7 (0.2) (0.2) Industry and Infrastructure 11.1 9.1 (0.5) (0.4) North Sea Services 8.0 6.0 0.3 (1.4) ----------------------------- ------ ------ -------- ------- Total 42.1 36.8 3.8 2.2 ------ ------ -------- ------- Central costs (0.5) (0.4) -------- ------- Operating profit 3.3 1.8 -------- -------
Energy & Construction (E&C)
Revenues decreased by 3.4% to GBP16.9m (2016: GBP17.5m) with a 24% decrease in the total volume of waste disposed by the E&C business to 230,172 tonnes in 2017, from 301,500 tonnes in the first half of 2016. The most profitable waste stream, APCR, saw volume increase of 17.6% to 60,900 tonnes while the less profitable other wastes declined overall by 32.2% to 169,272 tonnes. Construction soils declined around the time of the General Election campaign, reflecting uncertainty in the construction market, resulting in second quarter volumes behind expectations. The operating profit of the E&C business unit fell by 14% to GBP3.7m (2016: GBP4.3m) with the overall reduction in volume partially offset by better mix of more profitable APCR and the benefit of landfill tax savings as result of the commissioning of a new soil wash facility in ENRMF.
Soils volumes in the second half of the year to date have recovered from the lower levels experienced in the first half, particularly the second quarter. APCR volumes are expected to continue to grow and there are new additional contracts which the Group expects to be awarded in the second half of the year. It is now considered that the E&C business profit will be in line with market expectations.
Radioactive Waste Services (RWS)
The total revenue from the disposal and treatment of low level radioactive waste doubled to GBP1.2m (2016: GBP0.6m) in the period, with an increase in operating profit to GBP0.5m (2016: loss of GBP0.1m). Two significant contracts with total revenue of circa GBP4m were awarded in the first half of 2017 with waste on the first of these two moving in the second quarter. These two contracts will take around two years to complete.
RWS is expected to meet market expectations for the year. Further medium-term opportunities are being pursued for RWS through growth in the market for treatment of naturally occurring radioactive material and the thermal treatment of low level radioactive waste.
Augean Integrated Services (AIS)
Total revenue, excluding inter-segment sales, was GBP4.9m, an increase of 33% compared to the same period last year (2016: GBP3.7m). This included GBP3.6m from the total waste management (TWM) business (2016: GBP2.4m). The first half of 2017 saw further TWM contract wins with terms of three years and above, which will positively impact the second half of 2017, with further positive impacts expected in 2018 and beyond.
The AIS business recorded an operating loss of GBP0.2m, in line with the loss in the same period in 2016. The improvement plan successfully implemented at the East Kent high temperature incinerator has resulted in this asset breaking even in the first half.
The further contract wins and the improved East Kent performance are expected to positively impact margins in the second half of 2017. Management believe that the full year performance of the AIS business unit will be in line with market expectations while noting that this implies a significant uplift in performance in the second half as increased revenues from contract wins in the first half come through in gross margin.
Industry & Infrastructure (I&I)
The I&I business unit generated revenue, excluding inter-segment sales, of GBP11.1m during the first six months of 2017, a 23% increase over the same period last year (H1 2016: GBP9.1m). This result includes the sales attributable to the Colt Industrial Services business for the entire period in 2017 compared with two months post-acquisition in 2016. Trading in I&I has been robust and in line with management expectations. The exception to this performance has been the performance of Colt which was loss making in the first half, predominantly as a result of a single legacy contract which was bid and won pre-acquisition by Augean but entered into in the second half of 2016. The Colt underperformance led to an I&I operating loss of GBP0.5m compared with an operating loss of GBP0.4m in the same period in the prior year.
Given the performance of the I&I business unit in 2017 to date, it is now anticipated that the I&I will be loss making for the full year. The Group believes that I&I will be profitable moving forward as geographic expansion of industrial services from Colt's traditional Humberside base, cost reductions and strategic initiatives are delivered.
Augean North Sea Services (ANSS)
Revenue increased by 33.3% to GBP8.0m (H1 2016: GBP6.0m), with an increase in operating profit from a loss of GBP1.4m (including exceptional items of GBP1.1m), in the first half of 2016 to an operating profit of GBP0.3m in 2017. The recovery in performance shown by NSS in the second half of 2016 has continued throughout 2017.
The ANSS business continues to execute its strategic drive to diversify away from exploration and development drilling waste services, towards production-based waste streams which are less impacted by reduced oil price. The business generated 58% of its revenue from non-drilling waste management activities in the first half of 2017, in line with 58% in the same period in 2016, and maintained incumbency on an average of 3.8 drilling rigs, compared with 3.3 in the same period in 2016. ANSS continued to maintain its direct commercial relationships with oil & gas operators and tier-1 customers in this market, and increases the potential for it to widen its service scope directly with those customers as a result. 90% of total ANSS revenues were directly generated from our commercial relationships with those customers in the first half of 2017 (H1 2016: 91%).
The on-going growth in revenue streams from term contracts relating to activities other than drilling waste services, combined with the reputation of the business in the market and its commercial pipeline, leads to an expectation of meeting market expectations for this segment.
Cost reduction
As previously announced, the Group has completed a cost reduction programme in July 2017 which will generate annual savings of around GBP1.3m from August 2017. The one-off cost of GBP0.7m will all be incurred in the second half of 2017 and is anticipated to be treated as an exceptional item.
Financial performance
Group overview
A summary of the Group's financial performance, excluding exceptional items, along with the change compared to the same period in 2016 is as follows:
GBP'm except where 2017 2016 Change stated ------------------------ ------ ------ -------- Revenue 42.1 36.8 14.4% ------------------------ ------ ------ -------- Operating profit 3.3 3.5 (8.0)% ------------------------ ------ ------ -------- Profit before taxation 2.9 3.1 (7.2)% ------------------------ ------ ------ -------- EBITDA (defined below) 5.6 6.7 (16.9)% ------------------------ ------ ------ -------- Net operating cash flow 3.9 4.3 (9.9)% ------------------------ ------ ------ -------- Basic earnings per share 2.24p 2.42p (7.4)% ------------------------ ------ ------ -------- Return on capital employed 11.3% 11.4% (0.1)% ------------------------ ------ ------ --------
Trading, operating profit and EBITDA
Net revenue for the six months ended 30 June 2017 increased by 14% to GBP42.1m (H1 2016: GBP36.8m). Operating profit before exceptional items decreased by 8% to GBP3.3m (H1 2016: GBP3.5m). Profit before tax and after exceptional items increased 111% to GBP2.9m (H1 2016: GBP1.4m).
Earnings before interest, taxation, depreciation and amortisation (EBITDA), before exceptional items, is calculated as follows:
2017 2016 GBP'm GBP'm ------------------ ------- ------- Operating profit 3.3 3.5 ------------------ ------- ------- Depreciation and amortisation 2.3 3.2 ------------------ ------- ------- EBITDA 5.6 6.7 ------------------ ------- -------
Exceptional items
There were no exceptional charges in the period (H1 2016: GBP1.7m). The charge in 2016 comprises GBP0.5m of costs associated with the acquisition of Colt Holdings Limited, GBP1.1m of costs related to the settlement of a commercial dispute with a customer and GBP0.1m of other charges.
Earnings per share
Basic earnings per share (EPS), excluding exceptional items, decreased by 7% to 2.24 pence (H1 2016: 2.42 pence).
The Group made a profit after taxation attributable to equity shareholders, excluding exceptional items, of GBP2.3m (H1 2016: GBP2.7m).
The total number of ordinary shares in issue increased as a result of the exercise of share options by a former employee and was 102,844,072 with the weighted average number of shares in issue increasing from 102,249,083 to 102,748,383, for the purposes of basic EPS.
Dividend
The Board's policy is to pay a single annual dividend following the Annual General Meeting. A payment of GBP1.0m, based on a dividend of 1.00 pence per share was made to shareholders in June 2017 in respect of the year ended 31 December 2016 (2016: GBP0.7m, 0.65 pence per share). Accordingly, no interim dividend has been recommended.
Cash flow and net debt
The post-maintenance free cash flow of the Group, as defined above, excluding exceptional items, decreased by 43% to GBP1.7m (H1 2016: GBP3.0m) including net operating cash outflows from exceptional items of GBPnil (H1 2016: GBP0.9m).
The operating cash flow was used to fund the growth of the Group, with total organic capital investment of GBP4.7m, of which GBP2.2m was maintenance capital expenditure and GBP2.5m was development capital expenditure, for future growth. The main development capital was on the soil washing equipment at the ENRMF.
The cash flow of the Group is summarised as follows:
2017 2016 GBP'm GBP'm --------------------------------- ------- ------- Net operating cash flows before exceptional items 3.9 5.3 --------------------------------- ------- ------- Net operating cash flows from exceptional items - (0.9) --------------------------------- ------- ------- Total net operating cash flows 3.9 4.4 --------------------------------- ------- ------- Maintenance capital expenditure (2.2) (1.4) --------------------------------- ------- ------- Post-maintenance free cash flow 1.7 3.0 --------------------------------- ------- ------- Development capital expenditure (2.5) (2.2) --------------------------------- ------- ------- Acquisition of Colt Holdings - (8.9) --------------------------------- ------- ------- Free cash flow (0.8) (8.1) --------------------------------- ------- ------- Dividend payments (1.0) (0.7) --------------------------------- ------- ------- Net cash (consumption) / generation (1.8) (8.8) --------------------------------- ------- -------
Net operating underlying cash flows were generated from continuing trading as follows:
2017 2016 GBP'm GBP'm -------------------------------- ------- ------- EBITDA before exceptional items 5.6 6.7 -------------------------------- ------- ------- Net working capital movements (0.8) (0.4) -------------------------------- ------- ------- Interest and taxation payments (0.9) (1.0) -------------------------------- ------- ------- Net operating cash flows before exceptional items 3.9 5.3 -------------------------------- ------- -------
Net operating cash flow as a percentage of EBITDA represented 70% in 2017 (H1 2016: 79%).
Capital investment in property, plant and equipment made by the Group totalled GBP4.7m (H1 2016: GBP3.6m) and is shown in the table below, split between maintenance investment, focused on constructing landfill cells and upgrading existing facilities, and development investment on new activities:
2017 2017 2017 2016 Maintenance Development TOTAL TOTAL GBP'm GBP'm GBP'm GBP'm --------------------------- ------------- ------------- ------- ------- Energy & Construction 1.0 1.4 2.4 0.9 --------------------------- ------------- ------------- ------- ------- Radioactive Waste - Services - - - --------------------------- ------------- ------------- ------- ------- Industry & Infrastructure 0.7 0.1 0.8 0.1 --------------------------- ------------- ------------- ------- ------- Augean Integrated Services 0.4 0.3 0.7 1.0 --------------------------- ------------- ------------- ------- ------- Augean North Sea Services 0.1 0.5 0.6 1.2 --------------------------- ------------- ------------- ------- ------- Other/corporate - 0.2 0.2 0.4 --------------------------- ------------- ------------- ------- ------- Total 2.2 2.5 4.7 3.6 --------------------------- ------------- ------------- ------- -------
As a result of the above, net debt, defined as total borrowings less cash and cash equivalents, increased to GBP12.5m at 30 June 2017, from GBP10.8m at 31 December 2016. This represented gearing, defined as net debt divided by net assets, of 22.2% (31 December 2016: 19.8%, 30 June 2016: 23.4%). The ratio of net debt to EBITDA, before exceptional items, was 1.0 times (31 December 2016: 0.8 times, 30 June 2016: 1.0 times).
Financing
The activities of the Group are substantially funded by a bank facility, comprising a committed revolving credit facility (RCF) of GBP19m, a bank overdraft of GBP1m and an uncommitted GBP10m accordion facility for acquisitions. The maturity of the facility is October 2020 and the overdraft is reviewed annually. This facility, along with the underlying cash generation of the Group, subject to resolution of the HMRC issue with ongoing support of HSBC, is expected to provide the required funds to support the business over that period. As at 30 June 2017, the undrawn committed funds available to the group totalled GBP4.5m, further cash of GBP2.8m for total headroom of GBP7.3m. The interim results have been prepared on the going concern basis noting the material uncertainty around the HMRC issue. See note 3 for further details.
Balance sheet and return on capital employed
Consolidated net assets were GBP56.2m on 30 June 2017 (30 June 2016: GBP55.0m) and net assets, excluding goodwill and other intangible assets, were GBP30.1m (30 June 2016: GBP29.0m), all of which was attributable to equity shareholders of the Group.
Return on capital employed, from continuing operations and excluding exceptional items, defined as operating profit divided by average capital employed, where capital employed is net assets excluding net debt, decreased to 11.3% in the twelve months ended 30 June 2017 (H1 2016: 11.4%).
HMRC assessment
On 25 August 2017 the Group announced that it had received an assessment by HMRC for landfill tax of GBP1.9m with interest of GBP0.2m for the three months ended 31 August 2013. HMRC has been discussing with the Group whether it has paid sufficient landfill tax in relation to its treatment and disposal of hazardous waste. Those discussions are ongoing. Based on the legal and other advice received by the Group over several years, Augean is very confident that the Group has met its obligations in respect of landfill tax, consistent with the law and official guidance at the time. We believe this has been issued in order to protect HMRC against that period falling out of time (a four year look back applies for landfill tax) whilst they undertake further enquiries and discussion with Augean. The Group believes this assessment to be without merit and an appeal is ongoing.
Should HMRC make further such assessments, for this and one other subsidiary, the total amount that could be claimed could potentially be very large. Supported by advice from leading counsel and its solicitors, the Group will robustly challenge this landfill tax assessment and any other subsequent assessment it may receive from HMRC, through the tax tribunal system if appropriate. The Group currently intends to account for the legal costs of the dispute with HMRC as an exceptional item but not to make a provision for this assessment based on the strength of independent legal and professional advice received.
Further announcements will be made at the appropriate time.
Outlook
The Group will continue to challenge the recent HMRC assessment. We expect to deliver full year financial results broadly in line with market expectation albeit the uncertain environment caused by this assessment is unhelpful.
Dr Stewart Davies
Chief Executive
19 September 2017
Unaudited consolidated statement of comprehensive income
For the six months ended 30 June 2017
Unaudited Unaudited Audited Six months Six months Year Ended Ended ended 30 June 30 June 31 December 2017 2016 2016 Note GBP'000 GBP'000 GBP'000 ------------------------------------- ---- ---------- ---------- ----------- Continuing operations Revenue 4 42,107 36,810 75,959 Operating expenses (38,848) (33,265) (68,161) ------------------------------------- ---- ---------- ---------- ----------- Operating profit before exceptional items 3,259 3,545 7,798 Exceptional items - (1,722) (5,719) ------------------------------------- ---- ---------- ---------- ----------- Operating profit 3,259 1,823 2,079 Net finance charges (408) (473) (812) Profit before tax 2,851 1,350 1,267 Taxation 5 (550) (361) (862) ------------------------------------- ---- ---------- ---------- ----------- Profit from continuing operations and total comprehensive income Attributable to equity shareholders 2,301 989 405 ------------------------------------- ---- ---------- ---------- ----------- Earnings per share Basic 2.24p 0.97p 0.40p Diluted 6 2.20p 0.94p 0.39p
Unaudited consolidated statement of financial position
At 30 June 2017
Unaudited Unaudited Audited 30 June 30 June 31 December 2017 2016 2016 GBP'000 GBP'000 GBP'000 ------------------------------ --------- --------- ----------- Non-current assets Goodwill 23,997 23,531 23,997 Other intangible assets 2,121 2,410 2,265 Property, plant and equipment 47,097 45,381 44,475 Deferred tax asset 1,176 1,642 1,176 74,391 72,964 71,913 ------------------------------ --------- --------- ----------- Current assets Inventories 458 388 379 Trade and other receivables 16,053 18,281 18,461 Cash and cash equivalents 2,849 2,498 3,188 ------------------------------ --------- --------- ----------- 19,360 21,167 22,028 ------------------------------ --------- --------- ----------- Current liabilities Trade and other payables (13,794) (16,456) (17,192) Current tax liabilities (808) (701) (658) Borrowings (3) (36) (171) Provisions (65) (25) (50) ------------------------------ --------- --------- ----------- (14,670) (17,218) (18,071) ------------------------------ --------- --------- ----------- Net current assets 4,690 3,949 3,957 ------------------------------ --------- --------- ----------- Non-current liabilities Borrowings (15,356) (15,315) (13,833) Provisions (7,553) (6,629) (7,470) ------------------------------ --------- --------- ----------- (22,909) (21,944) (21,303) ------------------------------ --------- --------- ----------- Net assets 56,172 54,969 54,567 ------------------------------ --------- --------- ----------- Equity Share capital 10,284 10,225 10,275 Share premium account 795 612 748 Retained earnings 45,093 44,132 43,544 ------------------------------ --------- --------- ----------- Total equity 56,172 54,969 54,567 ------------------------------ --------- --------- -----------
Unaudited consolidated statement of cash flows
For the six months ended 30 June 2017
Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2017 2016 2016 Note GBP'000 GBP'000 GBP'000 -------------------------------------- ---- ----------- ----------- ----------- Operating activities Cash generated from operations 7 4,794 5,385 12,859 Finance charges paid (477) (438) (704) Tax paid (400) (599) (941) Net cash generated from operating activities 3,917 4,348 11,214 -------------------------------------- ---- ----------- ----------- ----------- Investing activities Purchases of property, plant, equipment and intangibles (4,728) (3,563) (8,386) Purchase of business (net of cash acquired) - (8,901) (8,901) Net cash used in investing activities (4,728) (12,464) (17,287) -------------------------------------- ---- ----------- ----------- ----------- Financing activities Issue of equity - - 186 Drawdown of loan facilities 1,500 7,750 6,208 Repayments of obligations under finance leases (1) (24) (21) Dividends paid (1,027) (665) (665) -------------------------------------- ---- ----------- ----------- ----------- Net cash generated from financing activities 472 7,061 5,708 -------------------------------------- ---- ----------- ----------- ----------- Net (decrease) / increase in cash and cash equivalents (339) (1,055) (365) Cash and cash equivalents at beginning of period 3,188 3,553 3,553 -------------------------------------- ---- ----------- ----------- ----------- Cash and cash equivalents at end of period 2,849 2,498 3,188 -------------------------------------- ---- ----------- ----------- -----------
Unaudited consolidated statement of changes in equity
For the six months ended 30 June 2017
Share Share Retained Shareholders' capital premium earnings equity account GBP'000 GBP'000 GBP'000 GBP'000 At 1 January 2016 10,225 612 43,561 54,398 Total comprehensive income for the period Retained profit - - 989 989 ----------------------- -------- -------- --------- ------------- Total comprehensive income for the period - - 989 989 ----------------------- -------- -------- --------- ------------- Transactions with owners of the Company Dividends paid - - (665) (665) Share-based payments - - 247 247 ----------------------- -------- -------- --------- ------------- Total transactions with the owners of the Company - - (418) (418) ----------------------- -------- -------- --------- ------------- At 30 June 2016 10,225 612 44,132 54,969 ----------------------- -------- -------- --------- ------------- Total comprehensive income for the period Retained profit - - (584) (584) ----------------------- -------- -------- --------- ------------- Total comprehensive income for the period - - (584) (584) ----------------------- -------- -------- --------- ------------- Transactions with owners of the Company Issue of equity 50 136 - 186 Share-based payments - - (4) (4) ----------------------- -------- -------- --------- ------------- Total transactions with the owners of the Company 50 136 (4) 182 ----------------------- -------- -------- --------- ------------- At 31 December 2016 10,275 748 43,544 54,567 ----------------------- -------- -------- --------- ------------- Total comprehensive income for the period Retained profit - - 2,301 2,301 ----------------------- -------- -------- --------- ------------- Total comprehensive income for the period - - 2,301 2,301 ----------------------- -------- -------- --------- ------------- Transactions with owners of the Company Issue of equity 9 47 - 56 Dividends paid - - (1,027) (1,027) Share-based payments - - 275 275 ----------------------- -------- -------- --------- ------------- Total transactions with the owners of the Company 9 47 (752) (696) ----------------------- -------- -------- --------- ------------- At 30 June 2017 10,284 795 45,093 56,172 ----------------------- -------- -------- --------- -------------
1 Statutory information
The financial information in the interim report does not constitute statutory accounts as defined by Section 434 of the Companies Act 2006 and has not been audited or reviewed.
The financial information relating to the year ended 31 December 2016 is an extract from the latest published financial statements on which the auditor gave an unmodified report that did not contain statements under Section 498 (2) or (3) of the Companies Act 2006 and which have been filed with the Registrar of Companies.
The interim financial statements for the six months ended 30 June 2017 are available from the Group's website at www.augeanplc.com.
2 Accounting policies
The Interim financial statements have been prepared in accordance with the AIM Rules for Companies and on a basis consistent with the accounting policies and methods of computation as published by the Group in its Annual Report for the year ended 31 December 2016, which is available on the Group's website.
3 Basis of preparation
The Group has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing these interim financial statements and therefore the Interim financial information is not in full compliance with International Financial Reporting Standards.
Having considered the material uncertainty around the HMRC issue and after making further enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Financial forecasts and projections, taking account of reasonably possible changes and sensitivities in trading performance and the market value of the Group's assets, have been prepared and show that the Group is expected to be able to operate within the level of the current banking facility.
The Directors are confident that the Company will be able to meet its liabilities as they fall due over the next 12 months. As a result, the financial statements have been prepared on a going concern basis.
4 Operating segments
The Group has five reportable segments. The five segments 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 Peterborough 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: 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: Augean provides waste management and waste processing services to oil and gas operators .
-- 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 Hull-based 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.
All activities arise almost exclusively within the United Kingdom. Inter-segment trading is undertaken on normal commercial terms.
The segmental results for the six months ended 30 June 2017 were as follows:
Radioactive Augean Augean Energy Waste Integrated Industry North and Construction Services Services and Infrastructure Sea Services Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Revenue Hazardous landfill activities 5,036 - - - - 5,036 Non-hazardous landfill activities 2,027 - - - - 2,027 Waste treatment activities - - 1,500 12,082 - 13,582 Total Waste Management activities - - 3,570 - - 3,570 Energy generation 25 - - - - 25 APCR(*) management 5,551 - - - - 5,551 Radioactive waste management - 1,191 - - - 1,191 Processing of offshore waste - - - - 3,383 3,383 Rental of offshore equipment and personnel - - - - 2,794 2,794 Industrial Services activities - - - - 1,881 1,881 ---------------------- Total revenue net of landfill
tax 12,639 1,191 5,070 12,082 8,058 39,040 Landfill tax 4,441 - - - - 4,441 ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Total revenue including inter-segment sales 17,081 1,191 5,070 12,082 8,058 43,482 Inter-segment sales (199) - (174) (949) (52) (1,374) ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Revenue 16,882 1,191 4,896 11,133 8,006 42,107 ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Result Operating profit/(loss) 3,733 507 (188) (536) 283 3,799 ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Finance charges (408) Central costs (539) ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Profit before tax 2,852 Taxation (550) ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Profit after tax 2,301 ---------------------- ------------------ ------------ ------------ -------------------- -------------- --------
* APCR means Air Pollution Control Residues
The segmental results for the six months ended 30 June 2016 were as follows:
Radioactive Augean Augean Energy Waste Integrated Industry North and Construction Services Services and Infrastructure Sea Services Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Revenue Hazardous landfill activities 6,886 - - - - 6,886 Non-hazardous landfill activities 1,730 - - - - 1,730 Waste treatment activities - - 1,566 7,595 - 9,161 Total Waste Management activities - - 2,416 - - 2,416 Energy generation 38 - - - - 38 APCR(*) management 4,573 - - - - 4,573 Radioactive waste management - 571 - - - 571 Processing of offshore waste - - - - 2,579 2,579 Rental of offshore equipment and personnel - - - - 1,840 1,840 Industrial Services activities - - - 2,008 1,578 3,586 ---------------------- Total revenue net of landfill tax 13,227 571 3,982 9,603 5,997 33,380 Landfill tax 4,826 - - - - 4,826 ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Total revenue including inter-segment sales 18,053 571 3,982 9,603 5,997 38,206 Inter-segment sales (569) - (287) (538) (2) (1,396) ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Revenue 17,484 571 3,695 9,065 5,995 36,810 ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Result Operating profit/(loss) before exceptional items 4,262 (70) (211) 173 (242) 3,912 Exceptional items (11) (8) (8) (555) (1,140) (1,722) ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Operating profit/(loss) 4,251 (78) (219) (382) (1,382) 2,190 ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Finance charges (473) Central costs (367) ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Profit before tax 1,350 Taxation (361) ---------------------- ------------------ ------------ ------------ -------------------- -------------- -------- Profit after tax 989 ---------------------- ------------------ ------------ ------------ -------------------- -------------- --------
Exceptional items comprise GBP1,111,000 relating to a commercial dispute, GBP547,000 relating to acquisition costs and GBP64,000 of other costs.
5 Taxation
The taxation charge for the six month period ended 30 June 2017 has been based on the anticipated full year effective tax rate of 20.0% (six months ended 30 June 2016: 20%).
All deferred tax liabilities and assets have arisen on the temporary timing differences between the tax base of relevant assets and their carrying value in the statement of financial position. No change in deferred tax compared to the position at 31 December 2016 has been reflected in these statements. The taxation charge for the six month period to 30 June 2017 is all reflected within current tax, consistent with the 30 June 2016 position.
6 Earnings per share
The calculation of basic earnings per share (EPS) is based on the profit attributable to ordinary shareholders of GBP2,301,000 (six months ended 30 June 2016: GBP989,000, year ended 31 December 2016: GBP405,000) and a weighted average number of ordinary shares outstanding of 102,748,383 (six months ended 30 June 2016: 102,249,083, year ended 31 December 2016: 102,420,517), calculated as follows:
Unaudited Unaudited Audited Six months Six Year months ended ended ended 30 June 30 June 31 December 2017 2016 2016 GBP'000 GBP'000 GBP'000 --------------------------------------- ----------- ---------- ------------ Earnings for the purposes of basic and diluted EPS 2,301 989 405 Exceptional items (net of associated taxation) - 1,487 4,117 --------------------------------------- ----------- ---------- ------------ Earnings for the purposes of adjusted basic and diluted EPS 2,301 2,476 4,522 --------------------------------------- ----------- ---------- ------------ Number of shares Number Number Number Weighted average number of shares for basic earnings per share 102,748,383 102,249,083 102,420,517 Effect of dilutive potential ordinary shares from share options 1,995,302 2,826,458 1,775,783 --------------------------------------- ------------ ------------ ------------ Weighted average number of shares for diluted earnings per share 104,743,685 105,075,541 104,196,300 --------------------------------------- ------------ ------------ ------------ Earnings per share
Basic 2.24p 0.97p 0.40p Diluted 2.20p 0.94p 0.39p --------------------------------------- ------------ ------------ ------------ Adjusted earnings per share Basic 2.24p 2.42p 4.42p Diluted 2.20p 2.36p 4.34p --------------------------------------- ------------ ------------ ------------
The exceptional items have been adjusted, in the adjusted EPS, to better reflect the underlying performance of the business, when presenting basic and diluted EPS.
7 Reconciliation of operating profit to cash generated from operations
Unaudited Unaudited Audited Six months Six Year months ended ended ended 30 June 30 June 31 December 2017 2016 2016 GBP'000 GBP'000 GBP'000 --------------------------------------------- ----------- ---------- ------------ Operating profit 3,259 1,823 2,079 Amortisation of intangible assets 143 85 262 Depreciation 2,162 3,067 6,012 Impairment charge - - 3,348 --------------------------------------------- ----------- ---------- ------------ Earnings before interest, tax, depreciation and amortisation (EBITDA) 5,564 4,975 11,701 --------------------------------------------- ----------- ---------- ------------ Share-based payments 275 247 243 Increase in inventories (81) (145) (58) Decrease/(increase) in trade and other receivables 2,320 (3,099) (4,121) (Decrease)/increase in trade and other payables (3,114) 3,677 4,715 (Decrease) / increase in provisions (170) (270) 359 Loss on disposal of property, plant and equipment - - 20 --------------------------------------------- ----------- ---------- ------------ Cash generated from operations 4,794 5,385 12,859 --------------------------------------------- ----------- ---------- ------------
The above EBITDA and cash flow generated from operations both include a net cash outflow of GBPnil relating to exceptional items (H1 2016: outflow of GBP970,000).
8 Analysis of changes in net debt
Audited Unaudited 31 December Cash Other 30 June 2016 flow movement 2017 GBP'000 GBP'000 GBP'000 GBP'000 ---------------- ------------ -------- --------- ---------- Cash and cash equivalents 3,188 (339) - 2,849 Overdraft (166) 166 - - Bank loans (13,833) (1,500) (23) (15,356) Finance leases (5) 2 - (3) ---------------- ------------ -------- --------- ---------- Net debt (10,816) (1,671) (23) (12,510) ---------------- ------------ -------- --------- ----------
9 Contingent Liability
On 25 August 2017 the Group announced that it had received an assessment by HMRC for landfill tax of GBP1.9m with interest of GBP0.2m for the three months ended 31 August 2013. HMRC has been discussing with the Group whether it has paid sufficient landfill tax in relation to its treatment and disposal of hazardous waste. Those discussions are ongoing. Based on the legal and other advice received by the Group over several years, Augean is very confident that the Group has met its obligations in respect of landfill tax, consistent with the law and official guidance at the time. We believe this has been issued in order to protect HMRC against that period falling out of time (a four year look back applies for landfill tax) whilst they undertake further enquiries and discussion with Augean. The Group believes this assessment to be without merit and an appeal is ongoing.
Should HMRC make further such assessments, for this and one other subsidiary, the total amount that could be claimed could potentially be very large. Supported by advice from leading counsel and its solicitors, the Group will robustly challenge this landfill tax assessment and any other subsequent assessment it may receive from HMRC, through the tax tribunal system if appropriate. The Group currently intends to account for the legal costs of the dispute with HMRC as an exceptional item but not to make a provision for this assessment based on the strength of independent legal and professional advice received.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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September 19, 2017 02:01 ET (06:01 GMT)
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