Augean Plc - Final Results

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."

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.

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). 

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.