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AUG - Augean News Story

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Industrials
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Small Cap
Market Cap £244.1m
Enterprise Value £241.0m
Revenue £91.7m
Position in Universe 765th / 1809

Augean Plc - Final Results

Tue 26th February, 2019 7:00am
RNS Number : 0661R
Augean Plc
26 February 2019
 

 

 

Augean plc ("Augean" or the "Group")

Final results for the year ended 31 December 2018

 

 

Augean, one of the UK's leading specialist waste management businesses, is pleased to announce its preliminary results for the year ended 31 December 2018

 

Financial highlights

From continuing operations and excluding exceptional items and share based payments1:

 

·      Adjusted1 revenue excluding landfill tax increased by 22% to £68.8m (2017: £56.3m)

·      Adjusted profit before taxation1 increased by 69% to £11.4m (2017: £6.8m)

·      Adjusted1 basic earnings per share increased by 56% to 8.52 pence (2017: 5.47p)

·      Sale of loss-making Colt and Colt Property for £2.2m and AIS for £4.0m in 2018

·      East Kent sale completed in January 2019 for £3.35m

·      Net cash position of £8.2m at year end (2017: net debt of £10.8m), at 15 February 2019 further improved to £12.5m with additional £2.3m to come from sale of East Kent

 

Operational Highlights

 

·      Excellent progress on business optimisation programme with cost savings exceeding the target

·      Sales growth in all sites with Treatment & Disposal up 24% and North Sea 19%.

·      Double digit growth from residues from Energy from Waste (EfW) plants despite customers having a disproportionate amount of "downtime" and no new municipal EfW plants opening in 2018.  Recovery in the market position for soils reflecting a more focused team from the end of H1 - overall volumes up by around a third for the full year despite being down one third in H1

·      Continued diversification in North Sea into industrial services, decommissioning and waste management more than offsetting reduced drilling volumes resulting in profit more than doubling. The forward contract base is secured with a major contract renewal and new significant decommissioning contract out of Dundee

·      Contracts renewed in January 2019 representing one third of 2018 Group profit and new contract awards with EfW plants expected to start late 2019 with full impact by 2021

 

HMRC

 

·      The Group maintains its dialogue with HMRC with respect to landfill tax and has received final assessments in respect of two Group companies - Augean North and Augean South

·      Hardship has been granted for the assessments received by Augean North, confirming that no cash payment will be required for this Company before the conclusion of any tribunal.  The Group is legally challenging these assessments through tribunal

 

Outlook

 

·      Further growth targeted in the core key markets of Energy from Waste and North Sea Decommissioning

·      Strong start to initial trading in the first months of 2019 with results well ahead of prior year and in line with expectations.  The Board is confident in the Group's prospects for the year

 

Commenting on the Results, Jim Meredith, Executive Chairman, said:

 

"2018 was a pleasing year as the Group continued to make significant changes to streamline activities, enhance performance and focus on both cash generation and retention. Strong trading in the Group's underlying business, the exit from unprofitable businesses, good cash control and cost savings have enabled the Group to report a cash balance of £8.2m compared to the £10.8m debt position reported last year.  The Group is currently experiencing strong initial trading for the start of 2019 and the Board is confident in the Group's prospects for the year. Our focus will continue to be on cash control and so improving our cash position."

 

There will be a meeting for analysts at 9.00am today at the offices of N+1 Singer, 1 Bartholomew Lane, London EC2N 2AX

 

For further information, please call:

 

Augean plc

01937 844 980

Jim Meredith Executive Chairman

Mark Fryer, Group Finance Director

 

 

N+1 Singer

020 7496 3000

Shaun Dobson

Jen Boorer

 

 

1 From continuing operations and before exceptional items and share based payments.  Prior year comparatives have been restated to exclude operations discontinued in the current year.  A reconciliation between statutory and adjusted measures is included in note 10 to this announcement.

 

 

 

 

Executive Chairman's statement

 

During 2018, the Group continued to make significant changes to streamline activities, enhance performance and focus on both cash generation and retention. As a result, the adjusted profit before tax (note 10) increased 69% to £11.4m due to strong trading in the Group's underlying business, the exit from unprofitable businesses, cost savings which exceeded target and good cash control (capex and working capital). 

The Group is currently trading in line with expectations for 2019 with a continued focus on cash control being reflected in our net cash position.

At an operational level, the Group has achieved a number of key strategic goals including the disposal of the AIS business for a final consideration of £4.0m and the closure of the loss-making Colt business with the sale of the associated assets for a total of £2.2m.  Post year end, in January,  the Group also disposed of its site at East Kent, shown as an asset held for sale in this report, for £3.35m.  The Group continues to secure further contracts with top-tier customers and maintained double digit growth in Energy from Waste (EfW) volumes despite some delays in plants coming online.  The Group has maintained its investment in processing solutions to generate the most environmentally beneficial outcomes for our customers whilst ensuring that the associated cost base has been balanced to generate appropriate cash and profit.

Health and safety continues to remain the highest priority for the Board, management and employees across the Group. The management team has continually improved the safety environment by enhancing hazard recognition, risk evaluation and learning from incidents. As such, the number of accidents resulting in injuries in 2018 has reduced by 41%. 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 or as "Excellent" by the Scottish Environmental Protection Agency.

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 strong progress during a challenging year. 

Although the Group's balance sheet and operating cash flow have strengthened considerably in 2018 the Board will maintain its position of not paying a dividend for 2018 (2017 final: nil) whilst the HMRC matter is being resolved.  The Group maintains its dialogue with HMRC with respect to landfill tax and has received final assessments in respect of two Group companies.

We maintain our position that we have correctly collected and paid the appropriate landfill tax, based on legal advice received and will robustly defend against the assessments.  We have not provided against the assessments and have received notification,  in relation to the final assessment which has been issued for Augean North, that we will not need to make a cash payment until the outcome of the tax tribunal is known.  I look forward to giving shareholders further clarity and certainty with respect to the Group's position in 2019.

As in previous years, I am pleased to note the addition of new shareholders to our register during the year and again I am thankful for the continued support from all of our investors.  After making significant contribution to the Board, Rod Holdsworth leaves the Board in 2019.  I thank him for his contribution whilst with the Group. 

The Group set ambitious targets for the 2018 year which it met, and indeed in many instances pleasingly exceeded. Undoubtedly 2019 contains uncertainties for the UK economy as a whole whilst the Brexit scenario plays out, but with limited direct exposure to EU, coupled with a strong start to 2019 trading, the Board feels confident in the Group's prospects for the forthcoming year. 

I look forward to updating shareholders on our progress during the current financial year.

 

Jim Meredith

Executive Chairman

25 February 2019

 

 

 

Operating Review

Introduction

The Group's core strategic markets within its reported segments are Energy from Waste, treatment, nuclear decommissioning and North Sea decommissioning. As previously announced, in order to facilitate cost savings and to focus on profitable cash generative growth in these core markets the Group has amended its business unit infrastructure for 2018 as follows:

 

 

Adjusted continuing revenues (£'m)

 

Adjusted operating profit before PLC costs (£'m)

 

2018

2017

 

2018

2017

Treatment and Disposal

47.1

38.1

 

10.9

7.9

North Sea Services

21.7

18.2

 

2.1

0.7

Revenues

68.8

56.3

 

-

-

Operating Profit pre-central costs

-

-

 

13.0

8.6

Central (PLC) costs

 

 

 

(0.8)

(1.0)

Operating profit post central costs

 

 

 

12.2

7.6

 

Adjusted revenues exclude intra segment trading, discontinued operations and landfill tax.  Adjusted operating profit excludes exceptional items, share based payment charges and loss from discontinued operations.  A reconciliation of these adjusted metrics is shown in note 10. 

Business performance

The Group operated through two business units during 2018 being Treatment & Disposal and North Sea Services; a change from the five business units reported in 2017.  The new structure reflects the operational management of the business subsequent to the reduction in cost base implemented in 2017. 

Treatment and Disposal

The principal activity of this business unit is the treatment and disposal of waste from Energy from Waste (EfW) incinerators, construction and industrial sites. The largest waste stream by revenue and profit is the disposal of ash from EfW sites which comprises bottom ash and ash from the burning of biomass and municipal waste to generate energy. The largest waste stream by tonnage is contaminated waste materials and soils (including asbestos), mainly from the manufacturing and construction sectors. A key growth market in Treatment and Disposal is low level radioactive waste decommissioning. 

Adjusted revenues, excluding landfill tax, increased by 24% to £47.1m (2017: £38.1m), with growth across landfill and treatment inputs. Ash inputs increased 29% to 189,000 tonnes (2017: 147,000). This was despite no new municipal EfW plants coming online in the year and the high downtime experienced by some EfW customers due to operational challenges.  Radioactive waste volumes were improved on 2017 with an increase from 6,000 tonnes to 10,600 tonnes. 

The adjusted operating profit of Treatment and Disposal increased to £10.9m (2017: £7.9m) due to the increased sales as well as previously announced cost savings.

The Treatment and Disposal strategy is to continue to win new treatment contracts, optimise the use of our treatment plants, and maximise the market opportunity from growth in EfW ash waste volumes, nuclear decommissioning and construction sector wastes. As announced, the Group signed a three-year framework agreement with Land & Water Ltd, the market leading specialist for dredging of inland waterways, to preferentially treat and landfill hazardous materials arising from their dredging activities in February 2019.

 

North Sea Services (NSS)

The NSS business unit operates in the North Sea Oil & Gas market. The primary revenue streams are from drilling waste management (DWM), including the rental of offshore engineers and equipment to customers, production waste management, onshore & marine industrial services, decommissioning and water treatment.

NSS revenue increased by 19% to £21.7m (2017: £18.2m) on new customer wins in Industrial Services and Waste Management.  This segment saw an increase in adjusted operating profit to £2.1m (2017: £0.7m) due to revenue increase, cost savings, better mix and the impact of increased decommissioning activity in the North Sea.  Reduced drilling volumes were more than offset by diversification into industrial services, decommissioning and waste management.

The NSS strategy continues to gain traction as the business moves up the supply chain, dealing directly with Oil & Gas operators and top-tier customers, so providing opportunities to widen its service scope more directly with those customers. The NSS facility at the Port of Dundee for the management of waste arising onshore from the decommissioning of offshore assets is now fully operational.  This enhances 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.  NSS actively markets these facilities alongside other operators at the port, which in turn cements its international position as a decommissioning facility for the North Sea.  At the end of 2018 the Group was awarded a decommissioning contract with Shell for the Curlew vessel; a significant milestone for both Dundee Port and Augean.

Discontinued operations

Augean Integrated Services (AIS) and Colt Industrial Services

AIS was sold on 16th March 2018 to Regen Holdings for total cash consideration of £4.0m. The fixed assets of the Colt business were sold to Future Industrial on 22nd June 2018 for £1.0m and the freehold land and buildings associated with the Colt business was sold for £1.2m on 21 December 2018 in cash consideration. The total consideration of £6.2m has been used to reduce net debt.

East Kent Incinerator

A review of this asset was completed in 2018 and the Group decided that the facility would be mothballed early in the New Year. The assets associated with the facility less committed costs to prepare for sale are therefore classified as an asset held for sale in this report.  The previously recognised impairment to the assets associated with this site has been reversed in 2018.  On 25 January 2019 the Group sold the land, buildings and plant associated with East Kent High Temperature Incinerator for a total cash consideration of £3.35m.

HMRC assessment

Two Group companies are currently in receipt of final assessments from HMRC for Landfill tax (LFT).  As previously announced, Augean has maintained positive discussions with HMRC in an effort to resolve the matter and since the initial pre-assessment notifications the quantum of the assessment has reduced significantly although the basis for assessment is not entirely clear.  The amounts for which Augean has been assessed (excluding interest and penalties) total approximately £30.0m.

The Group will now robustly challenge the LFT Assessments that it has or may receive from HMRC, through the tax tribunal system.  No payments have been made as a result of the assessments and hardship has been granted in relation to the received final assessment for Augean North, meaning that no payments will fall due for this Company until the outcome of the tax tribunal is completed. The Group remains hopeful that any application for hardship in relation to Augean South Limited will be similarly granted.

The Group intends to account for the legal costs of the dispute with HMRC as an exceptional item but does not intend to make a provision for assessments received to date based on the strength of independent legal and professional advice. 

Augean continues to work with stakeholders in the waste and other affected industry sectors on the broader adverse implications for the treatment of hazardous waste. Further announcements will be made at the appropriate time.

Legislative environment

Regulation underpins the demand for Augean's services and accordingly the business follows closely the development of legislation and guidance and engages proactively with policy makers and regulators.  The Department for Environment, Food and Rural Affairs (DEFRA) confirmed in 2017 that there is no clear justification or environmental benefit for removal of the derogations supporting the Augean practice for safe treatment of air pollution control residues.  This means that the Group continues to treat and landfill these residues in the safest and most appropriate manner.

Planning and permitting

The current site planning permissions extend to 2026 in the case of East Northants Resource Management Facility (ENRMF), 2034 for the Thornhaugh site and for a period of more than 50 years in the case of Port Clarence. 

Financial performance

Group overview

A summary of the Group's financial performance, from continuing operations and excluding exceptional items, is as follows.  The 2017 comparative has been re stated where appropriate to exclude operations discontinued in 2018.

 

£'m except where stated

2018

2017

Adjusted Revenue

68.8

56.3

Adjusted Operating profit

12.2

7.6

Adjusted Profit before taxation

11.4

6.8

Adjusted Profit after taxation

9.4

6.4

Net operating cash flow

17.2

12.6

Basic adjusted earnings per share

8.52p

5.47p

Return on capital employed

22.1%

9.4%

 

Adjusted metrics exclude intra segment trading, discontinued operations and landfill tax.  Adjusted operating profit excludes share based payments, exceptional items and loss from discontinued operations.  A reconciliation between the adjusted and statutory metrics is shown in note 10 to the accounts.

A consideration of the operational factors affecting performance is included in the operating review.

Exceptional items are detailed below.

Trading, adjusted operating profit and EBITDA

Adjusted revenue from continuing operations, excluding landfill tax, for the 12 months ended 31 December 2018 increased by 22% to £68.8m (2017: £56.3m).

Adjusted operating profit increased by 60% to £12.2m (2017: £7.6m) and adjusted profit before tax increased by 69% to £11.4m (2017: £6.8m), on the same basis.

Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA), from continuing operations and before exceptional items, is determined as follows:

 

 

2018

£'m

2017

£'m

Adjusted Operating profit

12.2

7.6

Depreciation from continuing operations

6.7

6.9

EBITDA

18.9

14.5

 

Exceptional items

Exceptional items in 2018 totalled a net profit of £3.3m before taxation.  £0.3m exceptional expense related to continuing operations, being £0.2m of net landfill tax legal costs and £0.1m of other costs.  £3.6m exceptional profit related to discontinued operations, being the profit on the sale of AIS after fees and internal costs of £0.7m, a profit on disposal of Colt assets of £0.2m and a reversal of impairment in relation to the held for sale East Kent incinerator assets of £2.7m.

 

Finance costs

Total finance charges were £0.7m (2017: £0.9m) including the interest on bank debt, other financial liabilities and the non-cash unwinding of discounts on provisions.

Earnings per share

Adjusted basic earnings per share (EPS), from continuing operations and excluding exceptional items, increased by 56% to 8.52 pence (2017: 5.47 pence) due to the increased sales and lower costs.

The Group made an adjusted profit after taxation of £9.4m (2017: £6.4m), all of which was attributable to equity shareholders.

The total number of ordinary shares in issue increased during the period from 102,948,036 to 103,786,792 with the weighted average number of shares in issue increasing from 102,808,863 to 103,408,043 for the purposes of basic EPS due to the issue of share to satisfy options granted in previous years.

Dividend

Due to the HMRC position, the Board has decided not to declare a dividend (2017 interim and final: Nil). 

Cash flow and net debt

Adjusted net operating cash flows were generated from continuing trading as follows:

 

2018

£'m

2017

£'m

EBITDA from continuing operations and before exceptional items

18.9

14.5

Net working capital movements for continuing operations

(0.3)

(0.8)

Interest and taxation payments

(1.4)

(1.1)

Net operating cash flows from continuing operations and before exceptional items

17.2

12.6

 

The cash flow of the Group is summarised as follows:

 

2018

£'m

2017

£'m

Net operating cash flows from continuing operations

17.2

12.6

Net operating cash flows from continuing adjusted items

(0.3)

(1.3)

Net operating cash flows from discontinued operations

(0.9)

(1.9)

Total net operating cash flows

16.0

9.4

Maintenance capital expenditure

(2.0)

(4.5)

Post-maintenance free cash flow

14.0

4.9

Development capital expenditure

(1.4)

(4.3)

Free cash flow

12.6

0.6

Sale of Business and assets

6.2

-

Net cash generation before dividends

18.8

0.6

Dividend payments

-

(1.0)

Net cash generation

18.8

(0.4)

 

Adjusted net operating cash flow as a percentage of EBITDA was 84% in 2018 (2017: 87%).

The operating cash flow of the Group of £16.0m was used to pay down debt and fund the future growth of the Group, with Capital investment in property, plant & equipment and intangible assets made by the Group totalling £3.4m (2017: £8.8m), split between maintenance capital (to lengthen the productive life of existing assets) of £2.0m and expansion capital (for targeted future growth) of £1.4m.

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.

As a result of the above net cash inflow, net cash was at £8.2m at 31  December 2018 compared with net debt of £10.8m at 31 December 2017. Gearing, defined as net debt divided by net assets, is therefore nil (31 December 2017: 22%). The ratio of net debt to EBITDA, from continuing operations and before exceptional items, was negative 0.4 times (2017: 0.8 times).

Financing

During 2018, 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 £20m.The maturity of the facility is October 2020 and the overdraft is reviewed annually. HSBC has, at 31 December 2017 and without expiry, waived breach of the taxation clause of the bank credit facility which requires potential liabilities associated with tax disputes to be less than £0.1m. 

Balance sheet and return on capital employed

Consolidated net assets were £60.3m on 31 December 2018 (2017: £50.1m) and net tangible assets, excluding goodwill and other intangible assets, were £40.5m (2017: £30.0m), of which all was attributable to equity shareholders of the Group in both years. 

Return on capital employed, defined as adjusted operating profit divided by average capital employed, where capital employed is net assets excluding net cash or net debt, increased to 21.6% in 2018 (2017: 9.4%).

Impairment reviews

In accordance with IAS36 'Impairment of Assets', an annual impairment review was carried out for each cash-generating unit (CGU) to which significant goodwill is allocated and also any other CGU where management believed there may have been an indication of potential impairment to the carrying values of assets in those CGUs.

For the continuing operations of the Group, this exercise was completed for the CGUs within the Treatment & Disposal and North Sea Services reportable segments.

Based on these reviews, no impairments were noted and no reversal of prior year impairments was required.

The cash flows for all CGUs were discounted using a pre-tax discount rate of 8.0% (2017: 8.2%).

Employees

The Group employed an average of 385 staff (2017: 469) over the course of the year.  The number of employees in the Group has declined during 2018 reflecting the full year impact of the re-positioning of the cost base of the Group and elimination of the business unit structure.

Brexit

The Group is focussed on trading in Britain and uses disposal infrastructure almost entirely based in the UK.  Where disposal routes in mainland Europe are used the financial impact of different scenarios which could result from this external change have been modelled.  The impact of Brexit on these routes is difficult to predict but the position is being closely monitored with the Group board having access to expert advice.  Coupled with UK Government advice that current waste movement structures will be rolled over in most EU States and the Group's work to establish alternatives, the risk of significant business disruption as a result is expected to be limited.

 

Key performance indicators

 

The Augean plc Board of Directors, Group Management Board and local management teams regularly review the performance of the Group as a whole along with the performance of individual business units. This includes the use of a balanced scorecard for applicable key performance indicators (KPIs) to monitor progress towards delivery of the Group's principal targets. These KPIs are consistent with those reported in 2017.  The Group regard the performance in 2018 compared to their benchmark, which is the prior year performance, to be satisfactory.

 

The focus of the Group is in three priority areas.

 

1.     Health & safety: monitored through near miss incidents and the number of accidents incurred;

2.     Compliance with regulations, in particular Environment Agency and Scottish Environment Protection Agency audit results; and

3.     Financial performance.

 

 

KPI

2018

Outcome

2017

Outcome

Number of incidents (1)

 

16

27

Number of near misses reported (2)

 

2,320

2,935

Compliance scores (3)

 

Landfill & Treatment: Excellent/A-B

ANSS: Excellent/E

Discontinued operation: E

E&C: A

RWS: A

I&I: B/Excellent

AIS: B

ANSS: Excellent

Adjusted profit before taxation (4)

£11.4m

£6.8m

Post-maintenance free cash flow (5)

£14.0m

£4.9m

Return on capital employed (6)

21.6%

9.4%

Volumes of waste disposed to our landfill sites

523,000 t

458,000 t

 

Ash Volumes treated

189,000t

147,000t

 

Amount of North Sea Oil & Gas revenue generated directly from operators and Top-Tier customers

 

87% of ANSS revenue

 

 

89% of ANSS revenue

 

 

 

(1)       The number of total reported accidents, that has resulted in injury, including those resulting in damage to plant or equipment. This is an absolute figure which has not been normalised for changes in employee numbers.

(2)       The total number of incidents reported which could have resulted in an accident or injury or damage to property.

(3)       The average of audit scores notified during the year by the Environment Agency (EA) in England or the Scottish Environment Protection Agency (SEPA) in Scotland. The EA notifies results on the scale A-F and SEPA notifies on the scale Excellent-Very Poor

(4)       Group profit before taxation, from continuing operations and excluding exceptional items and IFRS 2 charges

(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.

 

Outlook

The Group made significant progress against delivering its strategy during 2018 including generating £18.8m of cash and growing Profit before tax by 69%, therefore providing a stable platform for future growth.  A strong start to initial trading has been made in the first months of 2019 with results well ahead of prior year.  The Board is confident in the prospects of the Group for the full year.

 

 

 

 

Consolidated statement of comprehensive income 

for the year ended 31 December 2018

 

 

 

Note

2018

£'000

 

 

 

2017

£'000

 

Revenue

 

79,749

67,036

Operating expenses

 

(67,563)

(59,416)

Adjusted operating profit before share based payments

 

12,186

7,620

Share based payments

 

(523)

(194)

Exceptional items

3

(322)

(2,021)

Operating profit

 

11,341

5,405

Net finance charges

 

(748)

(850)

Profit before tax

 

10,593

4,555

Taxation

4

(2,043)

(563)

Profit from continuing operations

 

8,550

3,992

Discontinued operations

Profit / (Loss) from discontinued operations

 

 

1,389

(7,486)

Profit / (loss) for the year and total comprehensive income attributable to equity shareholders of Augean plc

 

9,939

(3,494)

Earnings per share

 

 

 

Basic

5 

9.61p

(3.40)p

Diluted

5

9.55p

(3.40)p

Earnings per share (continuing operations)

 

 

 

Basic

5

8.27p

3.88p

Diluted

5

8.21p

3.82p

 

Group Statement of financial position

As at 31 December 2018

 

 

 

Group

 

 

2018

£'000

2017

£'000

Non-current assets

 

 

 

Goodwill

 

19,757

19,757

Other intangible assets

 

66

323

Property, plant and equipment

 

40,373

46,678

Deferred tax asset

 

1,781

1,243

 

61,977

68,001

Current assets

 

 

 

Inventories

 

277

440

Trade and other receivables

 

18,628

19,570

Asset held for sale

 

3,304

-

 

11,162

6,579

 

33,371

26,589

Current liabilities

 

 

 

Trade and other payables

 

(21,222)

(18,287)

Current tax liabilities

 

(1,863)

(652)

 

(500)

(50)

 

(23,585)

(18,989)

 

9,786

7,600

Non-current liabilities

 

 

 

Borrowings

 

(2,922)

(17,378)

Employee benefit liability

 

(351)

-

 

(8,190)

(8,118)

 

 

(11,463)

(25,496)

Net assets

 

60,300

50,105

Shareholders' equity

 

 

 

Share capital

 

10,379

10,295

Share premium account

 

757

757

 

49,164

39,053

Total equity

 

60,300

50,105

 

 

 

 

Consolidated statement of cash flow

For the year ended 31 December 2018

 

 

 

Group

 

 

2018

£'000

2017

£'000

Operating activities

 

 

 

Cash generated from operations

6

17,413

10,530

Finance charges paid

 

(360)

(429)

Tax paid

 

(1,063)

(650)

Net cash generated from operating activities

 

15,990

9,451

Investing activities

 

 

 

Proceeds on disposal of property, plant and equipment

 

36

62

Purchases of property, plant and equipment

 

(3,407)

(8,457)

Purchases of intangible assets

 

(6)

(373)

Sale of business

 

6,176

-

Net cash generated from / (used in) investing activities

 

2,799

(8,768)

Financing activities

 

 

 

Dividends paid

 

-

(1,027)

Issue of equity

 

84

28

(Repayment) / drawdown of loan facilities

 

(14,290)

3,711

Repayments of obligations under finance leases

 

-

(4)

Net cash (used in) / generated from financing activities

 

(14,206)

2,708

Net increase in cash and cash equivalents

 

4,583

3,391

Cash and cash equivalents at beginning of year

 

6,579

3,188

Cash and cash equivalents at end of year

 

11,162

6,579

  

Statement of changes in shareholders' equity

for the year ended 31 December 2018

 

 

 

 

Share

capital

£'000

Share

premium

account

£'000

Retained

earnings

£'000

 

Total

equity

£'000

At 1 January 2017

10,275

748

43,544

54,567

Total comprehensive income for the year

 

 

 

 

Retained loss

-

-

(3,494)

(3,494)

Total comprehensive income for the year

-

-

(3,494)

(3,494)

Transactions with the owners of the company

 

 

 

 

Dividend

-

-

(1,027)

(1,027)

Issue of equity

20

9

-

29

Share-based payments

-

-

194

194

Tax relating to transactions with owners of the company

-

-

(164)

(164)

Total transactions with the owners of the company

20

9

(997)

(968)

At 31 December 2017

10,295

757

39,053

50,105

Total comprehensive income for the year

 

 

 

 

Retained profit

-

9,939

9,939

Total comprehensive income for the year

9,939

9,939

Transactions with the owners of the company

 

 

 

 

Issue of equity

84

-

-

84

Share-based payments

-

-

172

172

Total transactions with the owners of the company

84

-

172

256

At 31 December 2018

10,379

757 

49,164

60,300

 

 

 

 

1 Basis of preparation

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 435 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.

The preliminary results have been prepared on the going concern basis taking into account the Group's net cash, available headroom on bank facilities, the continuing support of the Group bankers HSBC, as well as noting the significant uncertainty around the HMRC issue. Reliance is being taken that HMRC has not required the Group to pay any of the assessments levied to date and advice received is that this will continue for 12 months. 

The auditors' reports on the accounts for 31 December 2018 and 31 December 2017 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The financial information for the year ended 31 December 2018 and the year ended 31 December 2017 does not constitute the company's statutory accounts for those years. Statutory accounts for the year ended 31 December 2017 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2018 were approved by the Board on 25 February 2019 and will be delivered to the Registrar of Companies in due course.  The statutory accounts for the period ended 31 December 2018 will be posted to shareholders at least 21 days before the Annual General Meeting and made available on our website www.augeanplc.com.

 

2 Operating segments

 

The Group has two reportable segments.  The two segments are the Group's strategic business units. This is a change from the five segments reported in 2017 and reflects the Group's revised operating structure as it has operationally restructured and disposed of non-core businesses. 

These business units are monitored and strategic decisions are made on the basis of each business unit's operating performance. The Group's business units provide different services to their customers and are managed separately as they are subject to different risks and returns. The Group's internal organisation and management structure and its system of internal financial reporting are based primarily on these operating business units. For each of the business units, the Group's Executive Chairman (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:

·       Treatment and disposal: Augean provides waste remediation, management, treatment and disposal services through its six sites across the UK. 

·       Augean North Sea Services: Augean provides waste management and waste processing services to oil and gas operators.

 

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 Executive Chairman. 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.

Materially all activities arise almost exclusively within the United Kingdom. Inter-segment trading is undertaken on normal commercial terms.

The 2017 comparative has been restated due to the change in reportable segments.  This note includes information in relation to the disaggregation of revenue as described in note 1. 

 

 

 

2018

 

Treatment & disposal

 

£'000

North Sea Services

 

£'000

Group

 

 

£'000

Revenue

 

 

 

Incinerator Ash and APCr management

12,461

12,461

Other landfill activities

14,301

14,301

Waste treatment activities

20,664

20,664

Radioactive waste management

3,517

-

3,517

Services to Oil production and exploration customers

-

21,669

21,669

Total revenue net of landfill tax

50,943

21,669

72,612

Landfill tax

10,991

-

10,991

Total revenue including inter-segment sales

61,934

21,669

83,603

Inter-segment sales

(3,853)

(1)

(3,854)

Revenue

58,081

21,668

79,749

Result

 

 

 

Operating profit before exceptional items

10,410

2,062

12,472

Exceptional items (note 3)

(322)

-

(322)

Operating profit from continuing operations

10,088

2,062

12,150

Net finance charges

 

 

(749)

Central costs

 

 

(808)

Profit before tax from continuing operations

 

 

10,593

Tax (note 4)

 

 

(2,043)

Profit after tax from continuing operations

 

 

8,550

Profit after tax from discontinued operations (note 11)

 

 

1,389

Profit for the year attributable to equity shareholders of Augean plc

 

 

9,939

 

 

 

 

2017

 

 

Treatment & disposal

 

£'000

North Sea Services

 

£'000

Group

 

 

£'000

Revenue

 

 

 

Incinerator Ash and APCr management

10,821

-

10,821

Other landfill activities

13,050

-

13,050

Waste treatment activities

13,492

-

13,492

Radioactive waste management

3,068

-

3,068

Services to Oil production and exploration customers

-

18,251

18,251

Total revenue net of landfill tax

40,431

18,251

58,682

Landfill tax

10,697

-

10,697

Total revenue including inter-segment sales

51,128

18,251

69,379

Inter-segment sales

(2,341)

(2)

(2,343)

Revenue

48,787

18,249

67,036

Result

 

 

 

Operating profit before exceptional items from continuing operations

7,736

656

8,392

Exceptional items (note 3)

(1,853)

(168)

(2,021)

Operating profit from continuing  operations

5,883

488

6,371

Net finance charges

 

 

(850)

Central costs

 

 

(966)

Profit before tax from continuing operations

 

 

4,555

Tax (note 4)

 

 

(563)

Profit after tax from continuing operations

 

 

3,992

Loss after tax from discontinued operations (note 11)

 

 

(7,486)

Loss for the year attributable to equity shareholders of Augean plc

 

 

(3,494)

 

 

 

3 Exceptional items

The following pre-tax items have been charged to operating profit:

 

2018

£'000

2017

£'000

Exceptional items:

Continuing operations

 

 

Restructuring and similar charges

166

928

Costs associated with Landfill tax dispute

156

1,093

Exceptional charge

322

2,021

 

4 Taxation

 

Group

 

2018

 

2017

 

£'000

Continuing operations

£'000

Discontinued operations

£'000

Total

£'000

Continuing operations

£'000

Discontinued operations

£'000

Total

Current tax

 

 

 

 

 

 

UK corporation tax on profit for the year

2,665

(554)

2,111

775

(38)

737

Adjustments in respect of prior years

(102)

439

337

(100)

-

(100)

 

2,563

(115)

2,448

675

(38)

637

Deferred tax

 

 

 

 

 

 

Charge / (credit)  in respect of the current year

(493)

16

(477)

(15)

(106)

(121)

Adjustments in respect of prior years

(27)

(207)

(234)

(97)

(18)

(115)

 

(520)

(191)

(711)

(112)

(124)

(236)

Tax charge on the result for the year

2,043

(306)

1,737

563

(162)

401

 

Tax reconciliation - continuing operations

 

2018

 

2017

 

£'000

%

£'000

%

Profit before tax

10,593

 

4,555

 

Tax at theoretical rate

2,013

19%

877

19.25%

Effects of:

 

 

 

 

- expenses not deductible for tax purposes

158

1%

244

5%

- change in tax rate

51

0%

47

1%

- effect of share options

(50)

0%

(5)

0%

- adjustments in respect of prior years

(129)

(1)%

(112)

(2)%

Tax charge on results

2,043

19%

563

12%

           

The main rate of corporation tax in the UK was 19.00% (2017: 19.25%).

 

5 Earnings per share

The calculation of basic earnings per share (EPS) is based on the profit attributable to ordinary shareholders of £9,761,000 (2017: loss of £3,494,000) and a weighted average number of ordinary shares outstanding of 103,408,043 (2017: 102,808,863), calculated as follows:

 

 

2018

£'000

2017

£'000

Profit / (loss) after tax for the purposes of basic and diluted earnings per share

9,939

(3,494)

Exceptional items net of tax

(3,155)

   8,163

Adjusted profit after tax for the purposes of basic and diluted earnings per share

6,784

4,669

Loss after tax from discontinued operations before exceptional items

2,026

956

Adjusted earnings for the purposes of basic and diluted EPS for continuing operations only

8,810

5,625

Loss after tax from continuing exceptional items

(260)

(1,633)

Earnings for the purposes of basic and diluted EPS for continuing operations only

8,550

3,992

       

 

Exceptional items above are stated net of a tax charge of £120,000 (2017: £442,000).  Loss after tax from discontinued operations is stated net of a tax credit of £487,000 (2017: £109,000).  Loss after tax from continuing exceptional items is stated net of a tax credit of £61,000 (2017: £389,000). Pre-tax adjusting items are detailed in notes 3 and 11.  The exceptional items 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.

 

 

2018

number

2017

number

Number of shares

 

 

Weighted average number of shares for basic earnings per share

103,408,043

102,808,863

Effect of dilutive potential ordinary shares from share options

709,119

1,790,587

Weighted average number of shares for diluted earnings per share

104,117,162

104,599,450

Earnings per share

 

 

Basic

9.61p

(3.40)p

Diluted

9.55p

(3.40)p

Adjusted earnings per share

 

 

Basic

6.56p

4.54p

Diluted

6.52p

4.46p

Adjusted earnings per share - continuing operations

 

 

Basic

8.52p

5.47p

Diluted

8.46p

5.38p

Adjusted earnings per share - discontinued operations

 

 

Basic

(1.96)p

(0.93)p

Diluted

(1.96)p

(0.93)p

Earnings per share - continuing operations

 

 

Basic

8.27p

3.88p

Diluted

8.21p

3.82p

 

 

6 Reconciliation of operating profit / (loss) to net cash generated from / (used in) operating activities

 

 

Group

 

2018

£'000

 

2017

£'000

 

 

Operating profit

11,341

5,405

 

Operating profit / (loss) from discontinued operations

1,083

(7,648)

 

Amortisation of intangible assets

58

447

 

Depreciation

7,032

5,938

 

Impairment (reversal) / charge

(2,644)

6,307

 

Earnings before interest, tax, depreciation and amortisation (EBITDA)

16,870

10,449

 

Share based payments

523

194

 

Decrease / (increase) in inventories

162

(59)

 

(Increase) in trade and other receivables

(2,473)

(1,109)

 

Increase in trade and other payables

4,372

474

 

(Profit) / Loss on disposal of property, plant and equipment

(1,969)

61

 

(Decrease) / increase in provisions

(72)

520

 

Cash generated from operations

17,413

10,530

 

Finance charges paid

(360)

(429)

 

Tax paid

(1,063)

(650)

 

Net cash generated from operating activities

15,990

9,451

 

 

The above EBITDA and net cash generated from operating activities includes a total net cash outflow of £322,000 relating to exceptional items (2017: outflow of £1,602,000).

 

 

7 Analysis of changes in net debt

The table below presents the net debt of the Group at the balance sheet date.

 

1

January

2018

£'000

Cash

flow

 

£'000

Other movement

 

£'000

31

December

2018

£'000

Cash and cash equivalents

6,579

4,583

-

11,162

Bank loans

(17,378)

14,290

166

(2,922)

Net (debt) / cash

(10,799)

18,873

166

8,240

 

The other movement relates to the amortisation of the fees incurred to set up the bank facility.

 

 

8 Contingent liabilities

In accordance with Environmental 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 £9.3m (2017: £8.9m). Future site restoration costs for each landfill site have been provided.

From August 2017, the Group has been in discussions with HMRC as to whether it has paid sufficient landfill tax in relation to its treatment and disposal of hazardous waste.

Based on the legal and other advice received by the Group over several years, Augean is confident that the Group has met its obligations in respect of landfill tax, consistent with the law and official guidance at the time.  

The Group is in receipt of final assessments in the name of two group companies for a total of approximately £30.0m before interest and tax.  We will robustly challenge this landfill tax assessment and any other subsequent assessment which may be received from HMRC, through the tax tribunal system.

The Group has been accounting for the legal costs of the dispute with HMRC as an exceptional item but has not made a provision for this assessment based on  the strength of independent legal and professional advice received.  The estimated cash outflow is £nil.

9 Post balance sheet events

On 25 January 2019 the Group sold the land, buildings and plant associated with East Kent High Temperature Incinerator for a total consideration of £3.35m.  £2.35m of the consideration is deferred and payable within 3 months of completion.

 

10 Reconciliation of performance metrics

The following metrics have been used in the Operating review.

Revenue

 

 

2018

 

2017

 

Revenue

£'000

Landfill

Tax

£'000

Adjusted Revenue

£'000

Revenue

£'000

Landfill

Tax

£'000

Adjusted Revenue

£'000

Treatment & disposal segment

58,081

(10,991)

47,090

48,787

(10,697)

38,090

North Sea Services segment

21,668

-

21,668

18,249

-

18,249

Continued operations

79,749

(10,991)

68,758

67,036

(10,697)

56,339

Discontinued Operations

7,062

 

7,062

17,655

-

17,655

Total Group

86,811

(10,991)

75,820

84,691

(10,697)

73,994

 

EBIT

 

2018

 

 

Statutory

Share based payments

Exceptional items

Adjusted

 

£'000

£'000

£'000

£'000

Treatment & disposal segment

10,087

523

322

10,932

North Sea Services segment

2,062

-

-

2,062

Central costs

(808)

-

-

(808)

Operating profit from continuing operations

11,341

523

322

12,186

Finance charges

(748)

-

-

(748)

Profit before tax from continuing operations

10,593

523

322

11,438

Taxation

(2,043)

-

-

(2,043)

Profit after tax from continuing operations

8,550

523

322

9,395

Discontinued Operations

1,389

-

(3,595)

(2,206)

Total Group Operating profit

9,939

523

(3,273)

7,189

 

 

 

2017

 

 

Statutory

Share based payments

Exceptional items

Adjusted

 

£'000

£'000

£'000

£'000

Treatment & disposal segment

5,883

194

1,853

7,930

North Sea Services segment

488

-

168

656

Central costs

(966)

-

-

(966)

Operating profit from continuing operations

5,405

194

2,021

7,620

Finance charges

(850)

-

-

(850)

Profit Before tax from continuing operations

4,555

194

2,021

6,770

Taxation

(401)

-

-

(401)

Profit after tax from continuing operations

4,154

194

2,021

6,369

Discontinued Operations

(7,648)

-

6,584

(1,064)

Total Group Operating profit

(3,494)

194

8,605

5,305

 

11 Discontinued operations

On 16 March 2018 the Group sold its total waste management business, Augean Integrated Services, for a consideration of £3,998,000.

On 22nd June 2018 the Property, Plant and Equipment of the Colt business was disposed of for £928,000 and the freehold land and buildings associated with the Colt business were subsequently sold for £1,250,000  on 21 December 2018.  During the year there was a total £6,176,000 cash inflow associated with investing activities (2017: £nil).

A review of the East Kent asset was completed in the year and the Group has decided and announced to the market that the Facility will be mothballed early in the New Year.  As this asset is available for immediate sale and the plan to mothball has been publicly announced and initiated this asset is classified as "held for sale" and the associated result is therefore disclosed as discontinuing.

The AIS and East Kent businesses were previously included in the Group's AIS business unit.  The Colt business was part of the Group's Industry and Infrastructure business unit.  Neither of these business units exist under the Group's current operating structure.

The analysis below shows the result from these operations:-

 

 

2018

 

AIS

Colt

East Kent

Total

 

£'000

£'000

£'000

£'000

Revenue

2,053

2,592

2,893

7,538

Operating expenses

(1,923)

(4,339)

(3,788)

(10,050)

Profit / (Loss) before tax and exceptional items

130

(1,747)

(895)

(2,512)

Exceptional items

728

223

2,644

3,595

Profit / (Loss) before tax

858

(1,524)

1,749

1,083

Taxation

 

 

 

306

Loss after Tax

 

 

 

1,389

 

 

 

 

 

 

2017

 

AIS

Colt

East Kent

Total

 

£'000

£'000

£'000

£'000

Revenue

7,687

6,834

3,134

17,655

Operating expenses

(7,931)

(7,546)

(3,242)

(18,719)

Loss before tax and exceptional items

(244)

(712)

(108)

(1,064)

Exceptional items

(313)

(6,271)

-

(6,584)

Loss before tax

(557)

(6,983)

(108)

(7,648)

Taxation

 

 

 

162

Loss after Tax

 

 

 

(7,486)

 

During the year these businesses contributed a net cash outflow of £665,000 (2017: outflow of £3,473,000)  to the Group's net operating cash flow. 

business after tax is £550,000.  The gain on selling the Colt assets and Freehold property after tax is £180,000.  A reversal of impairment of £2,644,000 on the East Kent site assets has also been recognised in exceptional costs.  The balance of the asset held for sale relates to amounts reclassified from Property Plant and Equipment, as shown in

The cash flows associated with these discontinued operations and reconciliation to total exceptional charge can be determined as follows:

 

2018

Total

 

£'000

Proceeds

6,176

Net assets disposed of:

 

Property, plant and equipment

(2,648)

Intangible assets

(337)

Trade and other receivables

(3,096)

Trade and other payables

1,730

Other

(874)

Gain on disposal before tax

951

Reversal of impairment (non cash)

2,644

Total exceptional charge

3,595

 

Other costs represent cash outflows in relation to the arrangement of the sales of discontinued operations.

The reversal of impairment relates to the incinerator at East Kent which was originally impaired in 2016.  Market conditions indicated that the asset's value on the open market is in excess of its current carrying value.  Therefore income at a level equal to the depreciated historical cost of the impaired assets has been recognised in exceptional items and an equivalent asset has been recognised and classified as an asset held for sale. 

 

12 Annual Report & Accounts

The Annual Report will be sent to shareholders on or before 16 May 2019 and will be available on the Company's website www.augeanplc.com from that date.  The Annual General Meeting will be held at 12 noon on 20 June 2018 at 6 Stratton Street, Mayfair, London W1J 8LD.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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