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
IR FVLLFDKFLBBX
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