Focused Strategies
Delivering the Best Overall
Environmental Outcomes
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Annual Report & Accounts
for the year ended 31 December 2014
Stock Code: AUG
24010.04 21 April 2015 1:34 PM Proof 5
Welcome
Augean is one of the UK’s leading waste management businesses,
providing specialist services focused on managing hazardous wastes.
The Augean Group of companies provides a range of waste recovery,
recycling, treatment and disposal solutions, ensuring that our customers
have a safe, secure and environmentally compliant solution for all their
waste management needs.
The Group operates from nine locations across the UK, from Lerwick in the north
to Kent and Avonmouth in the south. The Group’s Head Office is located near
Wetherby, West Yorkshire.
At Augean we are committed to providing sustainable waste management
solutions for our customers. Our employees have expertise vital to delivering
our services to exacting standards and understand the needs of our customers.
We continue to develop the range of technical, compliance, development and
laboratory resources appropriate to a forward-looking business working in the
hazardous waste sector.
Investor website
We maintain a corporate website at www.augeanplc.com
containing a wide range of information of interest to institutional
and private investors including:
{ Latest news and press releases
{ Annual reports and investor presentations
Getting around this report
For further information within this document
and relevant page numbers
www.augeanplc.com Stock code: AUG
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What’s inside
STRATEGY
Augean builds competitive
advantage by working
with customers to provide
solutions delivering
specialist services
focused on hazardous
waste.
Read more on pages 14 and 15
PERFORMANCE
All five Augean businesses
grew revenue and profit
in 2014. Four of these
businesses continue to
face growth markets.
Read more on pages 16 to 41
CSR
Augean is committed to
conducting its business
operations in an open
and responsible manner
and we recognise the
need to continually
improve our operations.
Read more on pages 30 and 31
Strategic Report
Overview
Highlights
Our Organisation
Chairman’s statement
Our Business and Strategy
Marketplace
Our Business Model
Our Strategy
Our Performance
Operating Review
– Energy & Construction (E&C)
– Radioactive Waste Services (RWS)
– Industry & Infrastructure (I&I)
– Augean Integrated Services (AIS)
– Augean North Sea Services (ANSS)
Corporate Social Responsibility
(CSR) performance
Financial performance
How the Business Manages Risk
Directors’ Report
Directors’ Report
Our Governance
Board of Directors
Our Governance
Chairman’s Corporate Governance letter
Corporate Governance Summary
Audit Committee Report
Nominations Committee Report
Remuneration Committee Report
Directors’ Remuneration Report
04
06
08
10
12
14
16
18
20
22
24
26
30
32
38
42
48
50
51
52
53
54
55
56
Our Financials
Independent Auditor’s Report to the Members
of Augean PLC
62
Consolidated Statement of Comprehensive Income 63
Statements of Financial Position
64
65
Statements of Cash Flow
Statements of Changes in Shareholders’ Equity
66
Notes to the Financial Statements
68
Shareholder Information
Notice of Annual General Meeting
Advisers and Company Information
110
IBC
Augean PLC Annual Report and Accounts for the year ended 31 December 2014
01
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Strategic Report
Contents
Overview
Highlights
Our Organisation
Chairman’s statement
Our Business and Strategy
Marketplace
Our Business Model
Our Strategy
Our Performance
Operating Review
– Energy & Construction (E&C)
– Radioactive Waste Services (RWS)
– Industry & Infrastructure (I&I)
– Augean Integrated Services (AIS)
– Augean North Sea Services (ANSS)
Corporate Social Responsibility
(CSR) performance
Financial performance
How the Business Manages Risk
Directors’ Report
Directors’ Report
04
06
08
10
12
14
16
18
20
22
24
26
30
32
38
42
02
www.augeanplc.com Stock code: AUG
24010.04 14-02-2015 Design A
Augean PLC Annual Report and Accounts for the year ended 31 December 2014
03
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Highlights
Financial highlights
Profit before tax
(£’000)
£5.4m
3.9
4.4
Earnings per share
(p)
5.4
4.13p
4.13
2.86
3.29
12
13
14
12
13
14
Operating cash flows
(£‘000)
£7.7m
4.6
Return on capital employed
(%)
7.7
10.7%
6.5
8.4
8.9
10.7
12
13
14
12
13
14
Group revenue by business unit
Group revenue (top 20 customers)
Energy & Construction
32%
Radioactive Waste Services
4%
Industry & Infrastructure
26%
Integrated Services
8%
North Sea Services
30%
Not contracted
Contracted or
framework
20%
80%
All the above graphs show results from continuing operations before exceptional items.
See Financial Review on page 32 to 37
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www.augeanplc.com Stock code: AUG Strategic Report Overview
“Augean is well placed in
strategic markets…where we have
expertise and assets.”
Stewart Davies Chief Executive
Operational highlights
Growth
During 2014, the Group
operated through five business
units and the above Group
results were achieved as a
result of underlying growth in
all five businesses in the year.
Operating cashflow
Net operating cashflows
increased by 18% to £7.7m
and were used to fund the
future growth of the Group, pay
increased dividend and pay
down debt.
Long term contracts
In 2014, revenue from the
top-20 customers of the Group
made up 50% of total Group
revenue (2013: 47%), of which
80% was through a formalised
agreement (2013: 68%).
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05
Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Our Organisation
Assets: ENMRF, Port Clarence,
Thornhaugh
Assets: ENMRF, Port Clarence,
East Kent
Assets: Avonmouth, Paisley,
Port Clarence WaRP
Assets: Cannock, East Kent
Assets: Aberdeen (x4), Lerwick
Waste treatment and
disposal solutions
Specialist treatment
and disposal
Recovery of resources
from wastes
Integrated solutions for
waste-producing clients
Complete waste services
for North Sea operators
Key services:
{ Soil treatment
{ EfW Ash stabilisation
{ Hazardous waste disposal
{ Energy and mineral resources
Key services:
{ Stabilisation
{ Thermal treatment
{ Secure disposal
{ Client site services
Key services:
{ Industrial wastewater treatment
{ Industrial services
{ Thermal recovery
{ Secondary Fuels production
Key services:
{ Client solutions
{ Hazardous waste management
{ Support services
{ High temperature incineration
Key services:
{ Drilling waste management
{ Water treatment
{ Marine services
{ Hazardous waste management
{ Industrial services
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www.augeanplc.com Stock code: AUG Strategic Report Overview
Our Group Model
2012
2014
No uniform
coordinated
approach
Head
office
A group of
individual
divisions
Group
Individual
BUs
working as
a Group
To deliver our strategy, Augean has re focused the
internal organisation of the company. Previously a group
of companies who made individual decisions, the group
has transitioned to a sophisticated organisation with
its constituent business units working together for the
optimum group outcome.
Learn more about how our new Group Model
is delivering performance in the Operating
Review on page 16 and 17
Number of sites
3
Revenue
£22.0m
Number of sites
3
Revenue
£1.8m
Number of sites
3
Revenue
£12.5m
Number of sites
Number of sites
2
••
Number of employees
Revenue
••
Revenue
£4.2m
••
Number of sites
5
Revenue
£14.5m
Read more about waste hierarchy in the
Marketplace review on page 10
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07
Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Chairman’s Statement
“OPERATING CASH FLOWS, FROM
OUR CONTINUING OPERATIONS
AND BEFORE ExCEPTIONAL ITEMS,
INCREASED FROM £6.5M TO £7.7M.”
It is pleasing to note the Group’s solid
progress during 2014, evidenced
by increasing revenues, profit and
operating cash flows, from growth
across our key markets.
The foundation for this performance
is a clear strategy, developed and
implemented by Stewart Davies and
his management team, focusing
and organising the business into five
sectors of activity and ensuring the
appropriate management is in place
to deliver the plan.
Total revenue, from continuing
operations, increased by 26% to
£55.0m (2013: £43.5m). Profit before
tax from continuing operations and
before exceptional items increased
to £5.4m (2013: £4.4m) with an
increase in basic earnings per share
on the same basis to 4.13 pence
(2013: 3.29 pence).
Operating cash flows, from our
continuing operations and before
exceptional items, increased
from £6.5m to £7.7m. The Board
continues to support reinvestment
of this cash in business growth,
including £1.5m paid to purchase the
high temperature incinerator at East
Kent in May 2014. All investments
are made with the expectation
of increasing levels of return and
acceptable EBITDA1 payback periods.
Our return on capital employed for the
year increased to 10.7% (2013: 8.9%)
and our total net debt fell by £2.8m
during the year, after total capital
expenditure of £6.9m.
Augean Integrated Services (AIS)
had its first full year of trading as a
business formed from the retained
elements of the Waste Network
business. AIS spearheads the
Group’s expansion of its Total Waste
Management offering, notably in
high-value manufacturing sectors,
delivering customer value through a
combination of consultative expertise,
client-site services and the specific
capabilities of our East Kent facility,
including incineration.
Radioactive Waste Services,
having been extracted and grown
from our Energy & Construction
business, had its first full year
of trading. This business is well
positioned to take advantage of
the leading sector expertise of
its management team and has
attained a place on the Low Level
Waste Repository Waste Treatment
Services Framework, whose ultimate
customer is a Government agency,
and has benefited from growth in
the volumes arising from nuclear
decommissioning.
Augean North Sea Services
performed well during the year and
has continued that performance
during the early part of 2015.
We recognise the potential impact
that the recent fall in oil prices could
have on this business, but note
the success of management in
increasing the proportion of business
transacted directly with operators
and tier-1 customers, which positions
the business well to increase its
service offering to those customers.
Furthermore, we support the
diligence of management, who have
already implemented a pay freeze
and maintain a comparatively low
level of operational gearing, resulting
in the business being able to adjust
its cost base quickly in the event that
a significant reduction in revenues
were to occur.
Health and safety remains the highest
priority for the Board, management
and employees across the Group,
so it was pleasing to see yet further
reduction in accident levels of 12%
during 2014, as well as the positive
indicators of safe behaviour.
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“the board remains
focused on continuing to
improve the returns from
capital employed for the
Group as a whole”
Roger McDowell has declared his intention to step down
from the Board at this year’s AGM. The Board would
like to thank Roger for his diligent service to the Group
as variously Non-executive Director, interim CEO and
Chairman during his ten years on the Board.
I believe that Augean has achieved positions of increased
strength in its key markets during 2014. Accordingly,
the Board has proposed a 43% increase in the dividend
payment to 0.50p per share, which reflects confidence
in the prospects of the Group and continues the Board’s
commitment to pay a progressive dividend to its
shareholders, with the dividend being covered 8.3 times
(2013: 9.4 times).
The Board remains focused on continuing to improve the
returns from capital employed for the Group as a whole
and being prepared to invest in opportunities for the future,
to build on the progress delivered during 2014. I look
forward to another year of profitable growth for the Group.
Jim Meredith
Non-executive Chairman
23 March 2015
1 EBITDA means earnings before interest, tax and depreciation.
2 Dividend cover based on earnings per share from continuing
operations and excluding exceptional items.
3 Return on capital employed (ROCE) is defined as operating
profit divided by average capital employed, where capital
employed is net assets excluding net debt.
The Board continues to recognise the risks faced by
our people, who work in environments moving, treating
and disposing of hazardous wastes. Augean North Sea
Services completed a ninth consecutive year without
a lost time incident in its offshore activities. The Group
remains absolutely committed to the highest standards
of safety and compliance and, in that regard, the Board
maintains additional scrutiny of executive management of
safety and compliance, through a Non-executive Director
who attends certain executive safety and compliance
meetings during the year.
Protecting the environment is not just a matter of
compliance with permits, which provides business
protection, 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 Board recognises that business 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 progress during the year.
As in 2013, I was pleased to note the addition of new
shareholders to our register during the year and I remain
thankful for the continued support from many of our
longer-holding investors.
The Board welcomed Richard Laker as Group Finance
Director in September 2014, and I am pleased to see the
Group benefiting from the B2B experience and financial
expertise that Richard brings.
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09
Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Marketplace
The five business units of the Group operate across three
primary UK-based markets, being the broad hazardous
waste market, waste from nuclear decommissioning
and services related to waste from North Sea Oil & Gas
exploration and production.
The market for hazardous waste in the UK is based on a
legislative environment underpinned by the implementation
of the European Union’s Waste Framework Directive and
the UK’s own hazardous waste National Policy Statement
(NPS), which encourage sustainable methods of managing
waste and the development of treatment, recycling
and recovery facilities as the key focus of future waste
management activities. The Waste Hierarchy provides a
framework for waste management and implementation
of infrastructure which will allow sustainable waste
management solutions. The adoption of the NPS in June
2013 confirmed the need for the portfolio of facilities and
services developed by Augean over the past five years.
Importantly, the Group plays an active part in five of the
seven sectors identified as essential for the management
of hazardous wastes in the UK.
The hazardous waste market is highly segmented with a
total volume of approximately 4 million tonnes of waste
handled in the UK each year. Within this arena Augean
continues to focus on the treatment and disposal of
waste from construction and demolition activities, energy
from waste operators, specialist manufacturers and
other industrial producers. The Group’s high temperature
incinerator at East Kent operates mainly within the
narrower segment of clinical and pharmaceutical wastes.
Data published by the Environment Agency during 2014
on the production of hazardous waste indicated that
approximately 1 million tonnes are disposed to hazardous
4m tonnes
OF HAzARDOUS WASTE
HANDLED IN THE UK EACH YEAR
WASTE
HIERARCHY
Favoured
option
1
Prevention
2
Minimisation
3
Reuse
4
Recycling
5
Energy
Recovery
6
Disposal
Least
favoured
option
landfill sites per annum (the most recent data available)
(Source: Environment Agency) and the total UK capacity
for hazardous landfill was approximately 16 million tonnes.
Augean’s Energy & Construction business continues to be
a leading provider within this market, holding approximately
40% of the UK’s remaining hazardous landfill capacity.
Augean’s treatment and disposal to landfill includes the
management of certain by-products from Energy-from-
waste incinerators (EfW). These facilities produce air
pollution control residues (APCR) and also bottom ash. The
Group has developed the capability to treat and dispose
of APCR at our sites at Port Clarence and East Northants
Resource Management Facility (ENRMF), handling
approximately 40% of the total traded volume during 2014.
This market, of approximately 250,000 tonnes per annum,
is expected to double over the period 2013-2020, as the
number of EfW facilities increases.
The landfill market is underpinned by legislation
derived from the Landfill Directive, within which certain
exemptions (known as ‘derogations’) were originally
allowed for the disposal of wastes to landfill with elevated
levels of specific contaminants. These derogations are
being progressively removed as the waste industry
develops new treatment methods for the control of these
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www.augeanplc.com Stock code: AUG Strategic Report Our Business and Strategy
The nuclear decommissioning market relates to the closure
and dismantling of the UK’s redundant nuclear power
and research facilities, managed on behalf of the UK
Government by the Nuclear Decommissioning Authority
(NDA). In addition to this, the disposal of naturally occurring
radioactive material (NORM) generated in the exploration
for and production of oil and gas is also a key radioactive
waste market for the Group. The NDA publishes regular
updates on the inventory of radioactive wastes requiring
disposal, whilst reliable statistics on the scale of the NORM
market remain limited. Augean has planning permission
and environmental permits in place to dispose of low
activity low level waste (LLW), very low level waste (VLLW)
and NORM. Based on public information and our own
estimates we believe that up to 4,400 tonnes of LLW/
VLLW are generated in the UK each year. We also estimate
that up to 2,000 tonnes of NORM may be produced per
annum.
The markets for waste produced in the exploration for
North Sea Oil & Gas are centred on Aberdeen and extend
to the Shetland Isles for the northern sector, and for
the southern sector are centred on Great Yarmouth.
The Group provides services for a range of offshore
wastes, including the cuttings from drilling of oil and
gas wells, oil-contaminated water (known as ‘slops’)
and a more general range of industrial hazardous wastes.
The market for drill cuttings represents 44,000 tonnes per
annum and for slops a further 55,000 tonnes per annum.
substances prior to landfilling, or indeed their complete
diversion from landfill disposal. The majority of derogations
have now been removed but the remaining few are being
reviewed by DEFRA which has indicated they will make a
decision in the third quarter of 2015. It is understood that
the final tranche of derogations will not be removed before
the end of 2016. Augean has anticipated the removal of
derogations and invested in new treatment facilities at
the ENRMF and Port Clarence sites, meaning that the
business is well placed to deal with the impact of future
derogations removals and, with further investment under
review, to provide a comprehensive hazardous waste
treatment service for the growing EfW market.
16m tonnes
TOTAL UK CAPACITY
FOR HAzARDOUS LANDFILL
2,000 tonnes
OF NORM ESTIMATED TO BE
PRODUCED PER ANNUM
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11
Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Our Business Model
Specialist
Waste
Expertise
We are known as the ‘go to’
company for waste management
that is fully compliant and resilient
for the future
Service
Solutions
We are trusted to deliver our
clients’ critical but non-core
operational services
Client
Focus
We understand our chosen
market sectors and what
drives value for clients
Developing sustainable market positions...
Client focus
{ We focus on market sectors
which are attractive and where we
can build competitive advantage
{ Augean has the expertise to
understand these markets and
what drives value for specific
customers
{ We start with customer needs and
address these innovatively, taking
a long term perspective
Service solutions
{ Being close to customers enables
us to work with the outcomes they
need, not just the specification
they have procured to
Specialist waste expertise
{ Augean has the know-how, assets
and permissions that make us a
‘go to’ company for hazardous and
radioactive waste management
{ We deliver services that are critical
for our customers’ operations
(safety, compliance, time, quality,
cost) but are not their core
capabilities
{ Augean has a successfully growing
track-record in service solutions
{ Our strategic perspective
on regulatory and market
developments provides clients with
assurance that Augean’s treatment
and final disposal is fully compliant
and resilient for the future
{ Resource efficiency is a growing
part of the solutions we provide,
through recovery and recycling
12
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Growth
in profit
Growing
profitable business
Improving margins
Growth in
asset base
Investments returning
above WACC
Retained profit
Growth
in returns
Increasing trading
cash flow
Appropriate
funding model
www.augeanplc.com Stock code: AUG
Specialist
Waste
Expertise
We are known as the ‘go to’
company for waste management
that is fully compliant and resilient
for the future
Developing sustainable
market positions to grow
shareholder value
Strategic Report Our Business and Strategy
Service
Solutions
We are trusted to deliver our
clients’ critical but non-core
operational services
Client
Focus
We understand our chosen
market sectors and what
drives value for clients
Growth
in profit
Growing
profitable business
Improving margins
Growth in
asset base
Investments returning
above WACC
Retained profit
Growth
in returns
Increasing trading
cash flow
Appropriate
funding model
…to increase shareholder value
Growth in profit
{ Maintaining position in growth
markets and investing in new
markets and services support
growth in revenues
{ Further reduction in end-to-end
processing costs drives margin
improvement
Growth in asset base
{ Prioritised approach to strategic
Growth in returns
{ The maintenance capex for
projects ensures quality of
investments
{ Maintaining hurdle rate > WACC
for investment projects
the asset-intensive parts of the
business remains stable, hence
increasing free cash flow
{ Appropriate funding model will use
debt to fund growth so far as that
optimises returns to shareholders
{ Dividends to progressively
increase in line with improvements
to business performance
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13
Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Our Strategy
SPECIALIST SERvICES FOCUSED
ON MANAGING HAzARDOUS WASTES.
Core strategy
The core strategy of the Group set out in March 2014
is focused on growing shareholder value by developing
sustainable market positions. Augean builds competitive
advantage by working with customers to provide solutions
whereby Augean delivers specialist services focused on
hazardous waste. The three core elements of the strategy
are described below.
Develop sustainable market positions
Augean is well positioned in attractive markets, both
sectoral and regional, where we have expertise and
assets, including treatment technologies that differentiate
our service and reinforce barriers to entry. Understanding
these markets enables us to progressively develop the
capabilities required to maintain and build our position,
often against the background of changing environmental
regulation or client requirements. These capabilities
require timely investments that are anticipated through
inclusion in the business planning process.
Progressively moving more of the Group’s revenues from
‘spot’ or short-term contracts to long-term contracts and
frameworks is vital to improving the forward visibility of
the order book. Growing the proportion of our revenues
that come from service offerings to our hazardous
waste customers is driving further profitable revenue
growth. During 2014 we have built new relationships
with customers and 80% of our top 20 customers (by
sales revenue) are now serviced through a formalised
agreement, either in the form of a contract or other
framework agreement. This compares to 68% in 2013.
With these customers representing 50% of total Group
sales revenues for the year (2013: 47%), the transition to
a contract-led business model is well underway and is
evident in all of our business units.
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www.augeanplc.com Stock code: AUG Strategic Report Our Business and Strategy
Grow through client-focused solutions
Instilling a culture of understanding our clients’ needs,
in order to develop solutions for them, by leveraging the
knowledge of sector experts, has been identified as a
fundamentally important focus for the Group. Bringing our
hazardous and radioactive waste management capability
together with expertise in offering associated support
services, we can target the critical but non-core needs of
clients requiring specialist waste management.
Selling and delivering one complete Augean capability
brings consequent benefits to the client of working with a
uniquely capable partner and to the Group of accessing
its share of value created through this longer-term, more
integrated relationship with customers. Examples of our
progress in this element of the strategy are set out in case
studies on pages 18 to 27.
Grow shareholder value
The Group is well-positioned to identify potential
corporate investments associated with its key market
sectors that would accelerate the strategy and provide
clear operational and market synergies. Any such
investments, whether organic or potential acquisitions,
are undertaken to grow the asset base of the Group and
provide superior returns for shareholders. A total of £6.9m
was spent on capital investment in 2014, including the
purchase of the high temperature incinerator in East Kent,
one of the few commercial high temperature incinerators
in the UK. The return on capital employed of the Group,
from continuing operations and before exceptional items,
was 10.7% for the year (2013: 8.9%) from an increased
asset base, which is consistent with this strategy.
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15
Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Operating Review
Introduction
The Group delivered a strong set of financial results in 2014.
Having taken the decision to close the underperforming
Waste Network business in late 2013, the results of
the Group, from continuing operations and excluding
exceptional items, show that:
{ Total revenue increased by 26% to £55.0m;
{ Profit before taxation increased 22% to £5.4m;
{ Net operating cash flows increased by 18% to £7.7m;
{ Basic earnings per share increased by 26% to 4.13
pence; and
{ Return on capital employed increased from 8.9% to
10.7%.
During 2014, the Group operated through five business
units and the above Group results were achieved as a
result of underlying growth in all five businesses in the year.
Having transferred part of the legacy Waste Network
business into a new business, Augean Integrated
Services, the remaining discontinued business was closed
in early 2014, with certain residual assets sold for a cash
consideration of £1.2m in March 2014.
2014 was also the first full year of trading for the new
Radioactive Waste Services business, which was
decoupled from the Land Resources business (now
Energy & Construction) and achieved notable strategic
successes during the year.
“THE GROUP REMAINS
COMMITTED TO GROWTH
IN ALL OF ITS BUSINESSES
AND MARKETS, THROUGH
BOTH ORGANIC AND
ACqUISITIvE MEANS.”
The operating cash flow of the Group was used to fund
the future growth of the Group, with £1.5m spent on the
purchase of the high temperature incinerator at East Kent,
which had previously been leased, and other total capital
expenditure1 investment of £5.2m, of which £2.5m was
incurred to lengthen the productive life of existing assets
(maintenance capital expenditure) and £2.7m was for
other future growth (development capital expenditure).
The Group operates a business in the North Sea Oil
& Gas market, Augean North Sea Services in which
Augean held an 81% equity share throughout 2014.
This business performed well in 2014, a performance
which has continued into 2015, despite the recent
reductions in world oil prices. With this in mind, the
Board continues to monitor this market very closely and
prudently but remains confident that the positioning of
that business and the capability of its management team
leave the business well placed in the medium to long
term. Consequently, in March 2015, the Board took the
strategic opportunity to purchase the remaining 19%
of shares in the business from the minority shareholder,
for a cash consideration of £1.05m, equivalent to 3.7
times 2014 EBITDA1. This transaction is expected to be
immediately accretive to earnings per share.
The Group remains committed to growth in all of its
businesses and markets, through both organic and
acquisitive means. Aside from its strong operating cash
flows, the Group also successfully refinanced its banking
facilities during 2014, with a £14.25m facility in place
as at 31 December 2014, compared to net debt of
£5.7m, equivalent to 0.6 times EBITDA, from continuing
operations and before exceptional items. This leaves
the Group well placed to take advantage of investment
opportunities that accelerate the strategy and are value
enhancing for shareholders.
1 Excluding intangible asset payments of £0.2m.
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The Group employed an average of 300 staff (2013: 292)
over the course of the year. The number of employees in
the Group initially fell in early 2014 following redundancies
associated with the sale of the Waste Network business,
but has increased steadily during 2014 as the Group
has invested in high-quality employees who are key to
the future growth plans and continuing execution of the
strategy of the Group.
Business performance
The Group operated through five business units during
the year (Energy & Construction, Radioactive Waste
Services, Industry & Infrastructure, Augean Integrated
Services and Augean North Sea Services), having
operated through four businesses in 2013.
At the end of 2013, the radioactive waste operation of
the Group was split from the Land Resources business
to form a separate business unit, Radioactive Waste
Services. The remaining business was renamed from
Land Resources to Energy & Construction.
In late 2013, the Waste Network business was closed,
with certain elements of that business transferred to a
new business unit, Augean Integrated Services, and the
remaining business shown as a discontinued operation in
the 2013 annual report.
The performance of each of the five business units in
2014 is set out below. All revenues are stated net of
landfill tax and intra-group trading.
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Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Operating Review continued
Energy & Construction (E&C)
The principal activity of this business unit is the disposal
of air pollution control residues (APCR), furnace bottom
ash, asbestos and other contaminated waste materials
and soils, mainly from Energy-from-waste facilities and the
construction industry. This is primarily achieved through
treatment and ultimate landfill in permitted hazardous and
non-hazardous sites at Port Clarence, East Northants
Resource Management Facility (ENRMF) and a permitted
non-hazardous site at Thornhaugh, near Peterborough.
Revenues, excluding landfill tax and intra-group trading,
were £15.6m. The 2013 revenue of £15.2m included £1.6m
of revenue from treatment of radioactive waste, recognised
in the separate Radioactive Waste Services business in
2014. The 2014 E&C revenue, therefore, represents an
increase of £2.1m (16%) on a like-for-like basis.
Operating profit before exceptional items improved to
£6.3m (2013: £6.2m excluding operating profit from
radioactive waste), driven by increasing volumes of APCR
and other wastes, with an increase in average gate fees
seen for APCR and a modest reduction in average gate
fees for other wastes. EBITDA increased by 17% to
£8.4m (2013: £7.1m) on the same basis.
The total volume of waste disposed by the E&C
business increased to 331,998 tonnes in 2014, from
290,754 tonnes in 2013, with the 2013 volume excluding
4,718 tonnes of radioactive waste.
This total volume increase of 14% included a 35% growth in
APCR to 85,000 tonnes (2013: 63,000), primarily from new
contracts in the year. This, together with an improvement in
the average gate fee of 1.8%, contributed to an increase
of £1.9m in revenues from this waste stream.
Non-APCR waste streams showed a total volume
increase of 8% to 247,000 tonnes, with a net reduction in
revenue of £0.2m. The revenue from these waste streams
includes costs recharged to customers for moving certain
wastes from a customer site to our landfill sites, on which
“OPERATING PROFIT
BEFORE ExCEPTIONAL
ITEMS IMPROvED TO
£6.3M”
the Group makes negligible profit. The total amount of
haulage recharged fell by £0.4m in 2014, compared to
2013, due to the mix of wastes and customers dealt with
in the year. Excluding haulage, underlying revenue from
the treatment and disposal of these wastes increased by
£0.2m (8% increase) compared to 2013, with a reduction
in the average gate fee of 4.5% abating the total revenue
increase to 5%, as average gate fee increases in respect
of construction material and soils were offset by gate fee
reductions in asbestos contaminated and other wastes.
Non-waste revenue streams, from mineral extraction
royalties and energy generation from landfill gas, totalled
£0.7m (2013: £0.3m) in the year.
Having made significant investment in the APCR
treatment capability of the business in 2013, a further
£0.1m of capital investment was also made during 2014
to ensure that the business remains well-placed to take
advantage of this key growth market for this business,
with outputs from Energy-from-waste forecast to double
between 2013 and 2020.
Total capital investment in the E&C business was £2.2m
in 2014, of which £1.3m was in respect of lengthening the
productive life of existing assets (i.e. maintenance capital
expenditure) and £0.9m was investment in the future
growth of the business (development capital expenditure).
The total capital spend is lower than 2013, which included
significant investment in the construction of two new
hazardous landfill cells at both Port Clarence and ENRMF.
The investment was augmented in 2014 with additional
ash storage and treatment capacity at ENRMF, with those
works due to be completed in 2015. Investment was
also made in the storage facilities for liquid wastes and,
to ensure that the business remains well-invested to take
advantage of the growth markets that it now faces.
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Case Study
AV Dawson has successfully attracted several offshore
support companies to set up a permanent marine
base at its quays, situated on the River Tees. The
growing demand for this business led to a £3.2 million
deep-water quay development project which, once
completed, will be 150 metres long and 14 metres deep
at high tide.
The Augean Energy & Construction waste management
site at Port Clarence has the capability to handle and
treat the materials removed from the riverbed and
Augean provided specialist support for the removal and
treatment of dredgings from the site during the project.
The project required Augean to coordinate transport
and achieve efficient turnaround times when handling
the off-loading of the materials. This involved constant
communication with the site staff, specialist haulage and
the client to adapt to the varying characteristics of the
materials excavated. With Augean E&C’s support, AV
Dawson removed over 5,000 tonnes of dredging waste
and completed the project on time, with the Chairman
of AV Dawson praising the positive “can-do” attitude of
the Augean team.
Augean PLC Annual Report and Accounts for the year ended 31 December 2014
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Radioactive Waste Services (RWS)
“DURING 2014, THE
BUSINESS WAS
SUCCESSFUL IN
OBTAINING A PLACE ON
AN ADDITIONAL LLWE
FRAMEWORK FOR WASTE
TREATMENT SERvICES”
The total revenue from the disposal and treatment of
low level radioactive waste, excluding landfill tax and
intra-group trading, increased by 12% to £1.8m (2013:
£1.6m), with an increase in operating profit of 12% to
£1.0m (2013: £0.9m) and an increase in EBITDA of 19%
to £1.1m (2013: £0.9m). This was generated from a total
volume of 4,323 tonnes, a decrease of 8% compared to
4,718 tonnes in 2013.
During 2014, the business was successful in obtaining
a place on an additional LLWR framework for Waste
Treatment Services, which opened up the potential
for additional waste streams and associated revenues
in future years. Pleasingly, this business was also
able to offer advisory services to several customers,
demonstrating the value of the Group’s waste
management and disposal expertise, which was a key
factor in the increase in the average fee charged per
tonne of radioactive waste in the year. This maintains
the possibility that the business can extend the range of
services it offers, in line with the strategy of the Group.
This business unit was created in November 2013, with
radioactive waste having previously been managed by the
Energy & Construction business (formerly Land Resources).
The principal activity of this business unit is the
treatment and disposal of low level radioactive waste
generated from the UK nuclear estate. The disposal of
the waste is facilitated by the Nuclear Decommissioning
Authority as the waste is generated primarily from
the decommissioning of redundant power plants and
research facilities, with the RWS business bidding to
dispose of the waste through a framework with Low Level
Waste Repository Limited (LLWR). The ultimate primary
customer is a Government agency and the volume of
waste dealt with is seasonal, with significant volumes
ordinarily seen in the period from January to March each
year, such that the majority of revenue and profits from
this business are generally expected to occur in the first
half of the Augean financial year.
The RWS business also generates revenues from the
treatment of naturally occurring radioactive material
(NORM). During 2014, this revenue stream fell to £0.12m
compared to 2013 revenues of £0.24m, with more of the
waste in the market in 2014 being suitable for treatment
via incineration. This market remains an area for potential
high growth in future, in particular as the market for
decommissioning of North Sea oil and gas platforms
develops in the medium term.
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Case Study
The UK Atomic Energy Authority (UKAEA) is at the
forefront of international research on nuclear fusion,
the importance of which is widely recognised given
the challenges of global climate change. Augean
Radioactive Waste Services (RWS) engaged with
UKAEA throughout their Environmental Permitting
Regulations (EPR) permit process for the accumulation
and disposal of radioactive waste from their research
facilities at Culham.
Through this process, including collaborative work with
the customer, it was apparent that a new route for their
Low Activity – Low Level Waste was required.
Whilst assessing their planned approach, the UKAEA
team visited Augean’s East Northants Resource
Management Facility (ENRMF) where the staff
demonstrated their professional, safe and compliant
disposal methods, as well as delivering best available
technique (BAT), as required by Culham’s permit.
Augean’s facility at ENRMF is an important UK asset
which helps the research and decommissioning
industries manage the least harmful active waste. In
opening this route, Augean has provided a service to the
UK and set a standard of excellence for working with
their local community stakeholders.
The first movements of UKAEA’s Culham waste for
disposal at Augean’s ENRMF facility were completed in
late 2014.
Augean PLC Annual Report and Accounts for the year ended 31 December 2014
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Industry & Infrastructure (I&I)
“THE BUSINESS ACHIEvED
A SIGNIFICANT INCREASE
IN REvENUE AS A RESULT
OF ORGANIC GROWTH
FROM THE ExISTING
CLIENT BASE”
The increased level of revenue throughput led to a
reduced operating loss of £0.6m in the year (2013: loss
of £1.0m). Improved profitability was seen during the year,
such that the operating loss for the year comprised a loss
of £0.5m related to the first half of 2014 and a loss of
£0.1m related to the second half. The business generated
a positive EBITDA of £0.5m in the year, having reached
its short-term target of EBITDA break-even in 2013. With
improved profitability and margins achieved in 2014, as
well as positive EBITDA, management remains confident
of further progress in 2015.
A total of £0.5m of capital investment was undertaken
in the I&I business, of which c. £0.4m represented
maintenance capital expenditure and £0.1m related to
development capital expenditure.
This business unit was formerly called Oil & Gas Services
and its principal activity is the recovery and recycling of
oil and solvents, as well as the provision of specialist
industrial cleaning and other waste management services
to a range of markets, including chemical processing &
manufacturing, port & shipping operations, water treatment
& supply and onshore demolition & clean up. This includes
the treatment of drill cuttings from the North Sea Oil & Gas
market, which are supplied through the Augean North Sea
Services business, with oil rig operators the end customer
of the Group. The business primarily operates from sites
in Avonmouth and Paisley, as well as operating the Port
Clarence Waste Recovery Park on Teesside and providing
industrial services solutions on client sites.
This business has high operational gearing, with
increased levels of throughput and associated revenue
being achieved in order to increase margins and drive
improvements in profitability. The business achieved a
significant increase in revenue of 30% to £12.5m (2013:
£9.6m), primarily as a result of organic growth from the
existing client base.
Notable strategic achievements in the year included
partnering with technical industrial services operators, the
provision of 24/7 solutions to the water industry and the
continuation and strengthening of support to the Augean
North Sea Services business.
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Case Study
Our customer is a leading UK-based naval support
business and Tier-1 partner to the Ministry of Defence.
Operating ‘round-the-clock’, Augean Industry &
Infrastructure (I&I) provides tank cleaning, waste
collection and transport & waste treatment services at
two of the country’s key operational bases.
The contract is operated in accordance with the
client’s exacting specifications and requirements and
demonstrates a collaborative approach to working.
Specialist equipment and staff are supported from
I&I’s operational sites, which provide resilient support
to the contract and access to downstream waste
treatment capability.
Serving the two bases and their users, the contract
requires the highest levels of service capability to satisfy
significant fluctuations in demand, assisting in the
smooth running of key strategic vessel maintenance and
repair activities and in support of NATO naval exercises.
In successfully executing the contract over a number
of years, Augean has been able to apply knowledge,
expertise and capabilities to provide the high level of
response needed by the customers. I&I has brought
innovative solutions to some key and challenging issues,
as well as providing access to waste treatment and
recovery solutions, which help achieve 99.9% diversion
from landfill.
Augean PLC Annual Report and Accounts for the year ended 31 December 2014
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Augean Integrated Services (AIS)
“AIS OFFERS A SERvICE
THROUGH A TEAM OF
HIGHLY KNOWLEDGEABLE
ExPERTS AS WELL AS
LEvERAGING THE NICHE
HTI ASSET IN EAST KENT”
The AIS business generated revenue of £4.2m, a 60%
increase compared to equivalent revenue of £2.6m in
2013 from the continuing element of the Waste Network
business, which subsequently became the AIS business.
This revenue included £1.6m from contracted TWM
business (2013: £1.2m).
The business made an operating loss of £0.7m
(2013: operating loss £1.1m) and a negative EBITDA of
£0.5m (2013: negative EBITDA £0.9m). This reflects an
improvement in the second half of the financial year; with
a second half operating loss of £0.25m compared to
£0.45m in the first half, as a result of the additional new
contracted work secured.
A total of £0.4m of maintenance capital expenditure was
undertaken in the AIS business, most of which was at the
East Kent site.
The AIS business was newly formed at the start of 2014,
having been initially formed from certain of the assets
and direct customers from the continuing element of the
legacy Waste Network business.
The business operates from a site in Cannock and a high
temperature incinerator (HTI) in Sandwich, East Kent. The
HTI was previously held under a ten-year lease, which
commenced in 2012. In May 2014, the Group purchased
the HTI, along with related freehold land and buildings for
a total price of £1.9m, of which £1.5m was paid upon
completion of the purchase and £0.4m of the consideration
was deferred, with £0.2m due in each of January 2015 and
January 2016, saving rental costs of £0.3m per annum on
the remaining eight years of the lease.
AIS offers a total waste management (TWM) service, through
a team of highly knowledgeable experts, who work with
customers on a consultative basis to address their waste
management and compliance needs, as well as leveraging
the niche HTI asset in East Kent, which is designed
to incinerate high-value low volume goods, such as
pharmaceutical or other specialist waste, in a secure fashion.
Having experienced some operational issues with the East
Kent HTI during 2013, the 2014 financial year benefited
from improved operating reliability, with increased asset
availability compared to 2013, but saw the loss of two
key contracts which hindered the ability of the business to
maintain an optimal level of volume through the incinerator.
During 2014, the business recruited commercial resource
with sector-specific expertise, enabling the business to
secure new TWM contracts with high-value customers in
the latter part of the year, the full year impact of which is
expected to occur in 2015 and beyond.
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Case Study
Eaton Aerospace embarked on a waste reduction
programme at one of its key UK sites to eliminate
all wastes sent to landfill. When Augean Integrated
Services (AIS) commenced services at the site they had
already achieved 85% recycling diversion from landfill,
which was impressive for a manufacturing site of its size
but fell short of Eaton’s global CSR targets.
Eaton is an exemplar of the high value manufacturing
sector that is one of AIS’s key markets. The employees
working at this facility manufacture, assemble and test
aerospace fuel, air, actuation, electrical, hydraulic and
composite components and sub-systems for military,
commercial aviation, general aviation and motorsport
markets.
By working closely on site with the Eaton staff and
understanding their disposal challenges, AIS was able
to leverage its operational and market knowledge
and experience to establish recycling routes for the
remaining 15% of landfill waste. This has resulted in the
site achieving 100% landfill diversion. Further progress
has also been made in valorising waste material
streams, in line with Eaton’s corporate goals. This
demonstrates a passion by AIS to understand a client’s
strategic drivers and deliver benefits via incremental
improvements through a partnership approach.
Augean PLC Annual Report and Accounts for the year ended 31 December 2014
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Augean North Sea Services (ANSS)
ANSS has implemented a pay freeze for staff with effect
from 1 January 2015 and is in the process of multi-skilling
some of its employees to optimise operational efficiency
for key customers and support the broadening of service
scope. These measures, combined with leveraging
direct relationships with oil & gas operators and tier-1
customers, will further increase competitiveness for the
commercial opportunities which continue to arise.
As a support service business, 2014 operating expenses
included 74% variable costs, with the remainder
comprising 4% depreciation and 22% other fixed costs.
The low proportion of fixed operating expenses gives
the business the agility to effectively adjust its cost
base should a reduction in current activity levels occur
or commercial opportunities not come to fruition. The
cost base of this business is monitored closely by
management, alongside the continuous improvement in
safety and service delivery performance that is earning the
business increasing recognition from operators and tier-1
customers in the sector.
The Board remains confident that the ANSS management
team has the capability and credibility in the North Sea Oil
market to maintain high levels of operational efficiency in
the short term and to position the business for continued
profitable growth in the medium and long term. This
confidence is signalled by the decision, subsequent to
the year end, to take the opportunity to purchase the
remaining 19% of shares in ANSS, not already held by the
Group, from the minority shareholder, at a price which is
equivalent to less than four times 2014 EBITDA and would
still be considered to represent an attractive equivalent
multiple of future EBITDA, even in the event of a modest
reduction in financial performance in the short to medium
term. Based on latest management expectations, this
transaction is expected to be immediately accretive to
earnings per share.
Following the announcement of support for the UK
Continental Shelf Oil & Gas industry in the 2015 Budget,
it is anticipated that this will assist operators in their
investments, including drilling activity which is an
important sector for ANSS.
The Board continues to monitor events in the North Sea
Oil & Gas market, given their potential impact on the
ANSS business.
2014 was the second full year of trading of the ANSS
business as a subsidiary of the Group, which operates
in the North Sea Oil & Gas market, primarily from four
sites in Aberdeen but also from a site at Lerwick, in the
Shetland Islands. The primary revenue streams are from
drilling waste management, which includes drill cuttings
management and the rental of offshore engineers and
equipment to customers, as well as onshore and marine
industrial services and water treatment.
In 2014, the business saw significant revenue growth
of 57% to £14.5m, with an increase in operating profit
of 49% to £1.0m and an increase in EBITDA of 44%
to £1.5m. This significantly exceeded management
expectations and was despite an extremely poor start to
2014 due to adverse weather conditions in the North Sea
in the first quarter of the year. During 2014, the business
maintained incumbency on an average of 4.3 rigs,
compared to 3.0 in 2013.
The business has seen strategic traction in its aim to
move up the supply chain and deal directly with oil
& gas operators and tier-1 customers in this market,
with a total of 75% of revenues directly generated from
those customers in 2014 (2013: 67%). This increases
the potential for the business to widen its service scope
directly with those customers in the future.
Given the high growth seen in 2014, the Board continued
its position from 2013 of reinvesting all of the EBITDA of
the business into its future development. A total of £1.6m
of capital investment was made, compared to EBITDA of
£1.5m, of which £0.9m related to investment in skips to
contain and transport drilling waste, which had previously
been rented by the business.
The ANSS business delivered an impressive 2014 full
year performance with high activity levels continuing into
2015. However, the significant decline in world oil prices,
seen in the latter part of 2014 and in 2015, means that
there is increased risk surrounding the future profitability
of this business. In view of these market conditions,
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Case Study
Perenco, the independent oil & gas company, awarded
a specialist industrial services contract to Augean North
Sea Services (ANSS), to clean a separator, including
ultra-high pressure (UHP) cleaning and management of
naturally occurring radioactive material (NORM). ANSS
took responsibility for controlled access to the separator,
as well as the cleaning and decontamination scope,
including the removal of internal parts in preparation for
an upgrade project.
The proactive approach adopted by the ANSS team
allowed for the wide range of potential conditions
and requirements to be overcome, with the ANSS
crew safely and successfully removing over 16 tonnes
of contaminated sands and 130 separate internal
components during 24/7 operations.
ANSS contained all of the material in vacuum-rated
skips, for safe transportation of the material to the
Augean permitted facility at Port Clarence, where
the material was repackaged for final disposal at its
permitted ENRMF facility.
The ANSS crew worked well with the Perenco team,
achieving successful, early completion of the project,
which was safe, compliant and within budget. The work
undertaken during the shutdown has provided Perenco
with a greatly improved performance.
Augean PLC Annual Report and Accounts for the year ended 31 December 2014
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Waste Network
The Waste Network business was earmarked for closure
in late 2013, at which time the business was split into a
continuing element, which formed the basis of the new
Augean Integrated Services business explained above,
and an element which was subsequently closed and
shown as discontinued in the 2013 Group results.
Certain assets of the closed business were held for sale
as at 31 December 2013 and were subsequently sold in
March 2014, generating cash of £1.2m for the Group.
Long term contracts
The Group has continued to increase the proportion of
its customer base which is served through a formalised
agreement, consisting of either a contract or framework
agreement. In 2014, revenue from the top-20 customers
of the Group made up 50% of total Group revenue (2013:
47%), of which 80% was through a formalised agreement
(2013: 68%).
Planning and permitting
The securing of planning permission and maintenance of
appropriate environmental permits at the Group’s sites
is an essential part of the ongoing operation and future
development of the business. During 2014, we have
prepared planning and permit applications for extension
of the landfill sites at Thornhaugh and Port Clarence.
The application for Thornhaugh will enable Augean to
re-engineer part of the landfill site and remove historic
liabilities while creating new void and prolonging the life
of the site to 2034. At Port Clarence, the current consent
comes to an end in 2016 so we are seeking to secure
long term planning permission for the landfill site. It is
anticipated that the applications will be determined during
2015. In May 2014, the business acquired the East Kent
HTI, with additional contiguous land known as Bloody
Point. We immediately sought, and obtained from Kent
County Council, planning permission to develop the asset
for waste use. In parallel, we have varied the Environmental
Permits for the incinerator so that our hazardous and
radioactive waste storage activities can be extended to
Bloody Point. The permits were granted in early 2015.
On 10 July 2013, the Secretary of State for Communities
and Local Government granted a Development Consent
Order (DCO) for the extension of the landfill site at ENRMF.
This site provides treatment and disposal services for
a range of remediated soils and building rubble, APCR
and low activity radioactive wastes and is the principal
hazardous waste landfill site in the South of England.
To fully exploit the DCO it is necessary to vary the permits
for LLW and hazardous wastes. Extensive technical
work has been undertaken including environmental
impact and risk assessments to ensure that the on going
development will not cause harm to human health or
pollution of the environment. It is anticipated that the
revised permits will be issued by the end of 2015.
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29
Strategic ReportAugean PLC Annual Report and Accounts for the year ended 31 December 2014 Corporate Social Responsibility
(CSR) performance
The Board recognises the important role played by the
Group in the environment and communities within which
it operates. The health and safety of our employees and
compliance with regulations are two of the top three
business priorities (financial performance being the
third). Augean is committed to conducting its business
operations in an open and responsible manner and we
recognise the need to continually improve our operations
where practical to do so, in order to reduce our impact
on the environment, to continuously improve assets
and processes to ensure the safety and welfare of our
employees and to act as a good neighbour, minimising
the impact of our operations on the wider community.
The Group has a commitment to mitigating any adverse
effects of its operations and this is explained further in the
detailed CSR report, which will be published alongside the
Annual Report & Accounts.
The environment
All operating sites and activities are strictly regulated by
environmental authorities through a range of regulations
set out in the permits for each site. In the context of
hazardous waste, the principal instruments driving
standards are the Waste Framework Directive and the
Industrial Emissions Directive, which provide an integrated
approach to pollution control to prevent emissions into air,
land or water. The standards expect the techniques and
procedures adopted by the Group to represent the Best
Available Technique (BAT). BAT requires a review of each
activity and the implementation of the highest standards to
minimise emissions, be energy efficient, reduce waste and
consumption of raw materials, manage noise, vibration
and heat loss and ensure accident prevention is in place.
The Group continues to deliver the objectives of BAT
through its operations and works closely with the regulators
to ensure that Augean is a leader in compliance in the
sector. Activities are delivered subject to well-developed
environmental controls and compliance systems
(as defined in the Integrated Management System),
involving suitably competent people in the management
of all aspects of its operations. Environmental reports
are prepared and monitored within the Group and
supplemented by information from regulators. This includes
the Environment Agency’s own review of companies
operating in the waste sector which are subject to their
account management regime, of which Augean is one.
“THE HEALTH & SAFETY
OF OUR EMPLOYEES
AND COMPLIANCE WITH
REGULATIONS ARE THE
TOP TWO BUSINESS
PRIORITIES.”
The information available for 2013 indicates that the Group’s
operations do not result in a significant impact on the local
environment and in general our environmental performance
has improved significantly over the past five years. The
KPI table below includes the scores from the Environment
Agency (EA) in England and the Scottish Environmental
Protection Agency (SEPA) in Scotland and demonstrate
sustained high standards and low environmental impact.
As part of our commitment to implement the elements of
the waste hierarchy relevant to the hazardous sector, the
Group continues to take a strong role in the development
of regulation and policy for hazardous waste. By engaging
with Government departments, local authorities and
regulators, we promote the industry and modernisation
of the sector, seeking to establish a positive regulatory
and policy framework for the business. In previous years,
representatives from the Group took a high profile role
in the development of the National Policy Statement
for hazardous waste (NPS), directly engaging with
Government departments and giving evidence at the
Parliamentary Select Committee inquiry. In 2014 we
engaged actively and extensively in policy development
in a wide range of areas affecting the business including
Landfill Tax, landfill acceptance criteria, the development
of strategic BAT for organic low level wastes and the
review of low level waste strategy.
Employees
The Group’s employees are vital to its success and
during the year made a significant contribution to the
performance improvements outlined in this report. In
recognition of their commitment and effort the Board
approved a 1.8% pay award for all management and staff
from 1 January 2015, with the exception of Augean North
Sea Services where pay rises were not granted due to
the macroeconomic conditions currently being seen in
the North Sea Oil & Gas market. We also introduced a
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living wage policy and made adjustments accordingly in
respect of legacy pay from one of our acquisitions. The
pay awards seek to balance the inflationary pressures
on costs of living with the need for the Group to maintain
discipline on cost management, but also recognises the
progress made by the business over the past year which
would not have been possible without the commitment
and hard work of every employee.
Training and development activity during the year built
on the progress made during 2013, and investment was
made to ensure that all employees had the knowledge,
qualifications and skills to operate safely and compliantly
within their specific role and in the broader waste
management sector. A competency framework developed
for each role is used in the induction of new employees
and also as the basis of a rolling training programme.
The Group is committed to the principle of equal
opportunity in employment and to creating a harmonious
working environment which is free from harassment and
bullying and in which every employee is treated with
respect and dignity. Accordingly, well-established policies
are in place to ensure that recruitment, selection, training,
development and promotion procedures result in no job
applicant or employee receiving less favourable treatment
on the grounds of race, colour, nationality, ethnic or national
origin, religion or belief, disability, trade union membership
or non-membership, sex, sexual orientation, marital status,
age or status as a part-time or fixed-term employee.
The Group’s objective is to ensure that individuals are
selected, promoted and otherwise treated solely on the
basis of their relevant aptitudes, skills and abilities.
These equal opportunity policies are set out in the Group’s
Employee Handbook, a copy of which is provided to
each employee on joining the Group and made available
electronically. The Handbook is updated periodically
for changes in policy and regulations. The Group also
operates a clear whistle-blowing policy, providing every
employee the opportunity to raise concerns directly with
a nominated Director, without the intervention of line
management. Once an issue is reported the nominated
Director is required to undertake a thorough investigation
and make recommendations.
In order to provide a formal, recorded, regular review
of an individual’s performance, and a plan for future
development, all staff undertake an annual or
bi-annual Performance Appraisal with their line manager.
Appraisals assist in the development of individuals and
establish individual training needs, improve organisational
performance, and feed into business planning. Where
appropriate, the appraisal process establishes specific
training plans for each individual.
To support commitment to health and safety
improvements, reporting of near miss incidents continued
to be a key part of the health and safety programme
during the year, supplemented with safe act reporting
designed to applaud and encourage safe working
practice. Over 1,800 near misses and 300 safe acts were
reported during 2014 (achieving the target of one report
per operational employee per month) and at the same time
there was a 12% reduction from the previous year in the
number of accidents causing injury to a person or damage
to property, continuing the year on year improvement.
The community
Augean recognises the important role that it has within
local communities and aims to maintain an open dialogue
with its neighbours about its activities and plans. This is
achieved through regular liaison Committees, newsletters
and open days. The establishment of new businesses,
changes in the waste streams managed and active
planning processes during the year led to a high level of
interaction with local communities in some areas. As in
previous years the Group maintained a programme of
consultation in these localities to ensure that its plans
were well known and understood. This included attending
liaison meetings and hosting public exhibitions, in addition
to the more formal submissions to planning authorities.
The Group continued to contribute to the communities
around its landfill sites through the Landfill Tax Credit
Scheme and the Low Level Waste Fund. A total of
£417,000 was contributed through these schemes during
the year, providing funds for community projects including
a sports centre and a wildlife reserve.
Charitable donations made during the year included
ongoing support for the Underground Youth Club at
Kings Cliffe, the Cannock Chase Community Centre,
local sports teams and local events.
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31
Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Financial performance
“RETURN ON CAPITAL
EMPLOYED INCREASED
TO 10.7% IN 2014.”
Group overview
A summary of the Group’s financial performance, from
continuing operations and excluding exceptional items,
is as follows:
£’m except where stated
Revenue
Operating profit
Profit before taxation
Profit after taxation
EBITDA (defined below)
Net operating cash flow
Basic earnings per share
Return on capital employed
2014
55.0
6.1
5.4
4.3
10.0
7.7
4.13p
10.7%
2013
43.5
5.1
4.4
3.4
7.8
6.5
3.29p
8.9%
Exceptional items are detailed below.
On a statutory basis for continuing operations, operating
profit was £6.7m (2013: £4.9m), profit before tax was
£5.9m (2013: £4.2m), profit after tax was £4.8m (2013:
£3.2m), basic earnings per share were 4.64 pence (2013:
3.13 pence) and net operating cash flows were £8.4m
(2013: £6.3m).
Trading, operating profit and EBITDA
Net revenue from continuing operations for the year
ended 31 December 2014 increased by 26% to £55.0m
(2013: £43.5m).
Operating profit before exceptional items from continuing
operations increased by 20% to £6.1m (2013: £5.1m)
and profit before tax increased by 22% to £5.4m (2013:
£4.4m), on the same basis.
Discontinued operations relate to the former Waste
Network business, which was substantially closed by
the end of 2013, with residual assets sold in 2014.
Discontinued operations recorded an operating loss of
£0.3m (2013: £5.3m loss).
Earnings before interest, taxation, depreciation and
amortisation (EBITDA), from continuing operations and
before exceptional items, is determined as follows:
Operating profit
Depreciation and amortisation
EBITDA
2014
£’m
6.1
3.9
10.0
2013
£’m
5.1
2.7
7.8
Exceptional items
Exceptional items totalled a net credit of £0.3m before
taxation, of which a charge of £0.2m related to the
closure of the Waste Network business and is accordingly
classified as discontinued.
Exceptional items from continuing operations totalled
a net credit of £0.5m and comprised an amount from
the settlement of litigation, with the previous owners
of an acquired subsidiary of the Group, of £1.6m less
associated professional fees of £0.7m, restructuring costs
of £0.2m and other items totalling £0.2m.
Finance costs
Total finance charges reflected the payment of interest on
bank debt and other financial liabilities, totalling £0.8m
(2013: £0.7m). This included the non-cash unwinding of
discounts on provisions totalling £0.1m (2013: £0.1m).
Taxation
The Group recognised an accounting tax charge of
£1.1m (2013: £1.0m) for its continuing operations and
a tax credit of £0.6m (2013: £0.4m credit) in respect of
discontinued operations.
The accounting tax charge of £1.1m for continuing
operations represents 19.0% of profit before taxation, on
the same basis. This compares against the headline rate
of corporation tax of 21.5%.
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Cash flow and net debt
The cash flow of the Group is summarised as follows:
Net operating cash flows from
continuing operations and
before exceptional items
Net operating cash flows
from exceptional items and
discontinued operations
Total net operating
cash flows
Maintenance capital
expenditure
Post-maintenance free
cash flow
Development capital
expenditure
Purchase of East Kent freehold
Proceeds from sale of assets
of discontinued operation
Free cash flow
Dividend payments
Proceeds from issuance
of equity
Net cash generation
2014
£’m
7.7
0.4
8.1
(2.7)
5.4
(2.7)
(1.5)
1.2
2.4
(0.4)
0.8
2.8
2013
£’m
6.5
(1.6)
4.9
(3.2)
1.7
(3.8)
—
—
(2.1)
(0.3)
—
(2.4)
Post-maintenance free cash flow, as set out in the table
above, represents the underlying cash generation of the
Group, before any investment in future growth or the
payment of dividends to shareholders.
The post-maintenance free cash flow of the Group,
from continuing operations and excluding exceptional
items, increased by 49% to £5.0m (2013: £3.3m), after
excluding net operating cash flows from exceptional items
and discontinued operations, of £0.4m inflow (2013:
£1.6m outflow).
The Group paid corporate tax of £0.8m during the year,
£0.5m in respect of 2014 liabilities and £0.3m in respect
of previous years. A current tax liability of £0.6m (2013:
£0.3m) remains in the balance sheet at the year end.
A deferred tax asset of £1.7m (2013: £1.1m) is
recognised in the balance sheet, which reflects the
extent to which the Board believes that the assets will
be recovered in the short to medium term. A deferred
tax asset of £0.9m is unrecognised (2013: £nil) as the
expected usage is not sufficiently predictable. This asset
is expected to be recovered in the ordinary course of
business and will, therefore, be re-recognised when its
recovery is foreseeable.
Earnings per share
Basic earnings per share (EPS), from continuing
operations and excluding exceptional items, increased by
26% to 4.13 pence (2013: 3.29 pence).
Statutory basic EPS, from continuing and discontinued
operations was 4.92 pence (2013: loss per share of
1.79 pence).
The Group made a profit after taxation, from continuing
operations and excluding exceptional items, of £4.3m
(2013: £3.4m), of which £4.1m (2013: £3.3m) was
attributable to equity shareholders.
The total number of ordinary shares in issue increased
during the year from 99,699,414 to 101,991,380 with the
weighted average number of shares in issue increasing
from 99,699,414 to 100,053,156, for the purposes of
basic EPS.
Dividend
The Board has recommended a dividend of 0.50p per
share (2013: 0.35p), payable on or after 12 June 2015,
following an ex-dividend date of 4 June 2015 and a record
date of 5 June 2015, subject to shareholder approval at
the Annual General Meeting. The dividend per share has
increased by 43% from the previous year, which continues
to reflect increased confidence over future prospects and
maintains the Board’s commitment to pay a progressive
dividend to shareholders. The proposed dividend is
covered 8.3 times (2013: 9.4 times) from the continuing
operations of the Group, before exceptional items.
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33
Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Financial performance continued
Net operating underlying cash flows were generated from
continuing trading as follows:
between maintenance and development, dependent upon
the specific nature of that capital expenditure:
EBITDA from continuing
operations and before
exceptional items
Net working capital movements
Interest and taxation payments
Other
Net operating cash flows
from continuing operations
and before exceptional
items
2014
£’m
10.0
(1.3)
(1.3)
0.3
2013
£’m
7.8
(0.4)
(1.0)
0.1
7.7
6.5
Net operating cash flow as a percentage of EBITDA
worsened to 77% in 2014 (2013: 83%), primarily as
a result of an increase of £3.1m in trade and other
receivables, from continuing operations, during the year.
This was impacted by the decision of three major
customers to defer their December 2014 payments into
early January 2015, which accounted for £0.8m of the
increase. Excluding this, total receivables increased by
£2.3m, equivalent to 24% against the 31 December
2013 position, which reflects an increase of 26% in total
revenue from continuing operations from 2013 to 2014.
The Group announced the purchase of the assets and
site at the East Kent Waste Recovery Facility during the
year for a total consideration of £1.9m, with £1.5m paid
in 2014 and £0.2m payable in each of January 2015 and
January 2016. The purchase of the freehold saves annual
rental expenses on the remaining eight years of the lease
of £0.3m per annum.
During the year, the Group sold certain residual assets
from the closure of the Waste Network business, for net
proceeds of £1.2m.
Excluding the East Kent and Waste Network transactions,
capital investment in property, plant and equipment made
by the Group totalled £5.4m (2013: £6.9m) and is shown
in the table below. This is split between maintenance
investment, focused on upgrading existing facilities and
development investment on new activities, with planning
investment to secure permissions to operate split
Energy &
Construction
Radioactive Waste
Services
Industry &
Infrastructure
Augean Integrated
Services
Augean North Sea
Services
Other/corporate
Total
Maintenance
£’000
Development
£’000
Total
£’000
1,345
930
2,275
—
376
402
278
105
2,506
84
146
9
1,334
231
2,734
84
522
411
1,612
336
5,240
During the year, the Group received a total of £0.8m
(2013: £nil) of equity proceeds from the exercise of share
options by current and former employees.
As a result of the above net cash generation, net debt,
defined as total financial liabilities less cash and cash
equivalents, fell to £5.7m at 31 December 2014, from
£8.5m at 31 December 2013. This represented gearing,
defined as net debt divided by net assets, of 10.6%
(2013: 17.7%). The ratio of net debt to EBITDA, from
continuing operations and before exceptional items, was
0.6 times (2013: 1.1 times).
Financing
The activities of the Group are substantially funded by a
bank facility, comprising an amortising term loan, revolving
credit facility and bank overdraft. That facility was
renewed in March 2014 with HSBC Bank plc, at an initial
total level of £15m, which had amortised, in the ordinary
course of business, to £14.25m by 31 December 2014.
The maturity of the term loan and amortising facility is July
2017 and the overdraft is reviewed annually. This facility,
along with the underlying cash generation of the Group,
is expected to provide the required funds to support
further growth of the business over that period. As at
31 December 2014, the undrawn funds available to the
group totalled £7.1m, excluding cash of £1.5m.
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In the prior year, an impairment loss of £3.9m was
recognised in respect of the Waste Network CGU, which
is reported as a discontinued operation and has now
been closed. That charge was recognised in the 2013
income statement as an exceptional item and included
£2.1m related to goodwill for this CGU.
Note 10 contains further details of the reviews performed
and the results for each CGU.
Key Performance Indicators
The Augean PLC Board of Directors, Group Management
Board and local management teams regularly review
the performance of the Group as a whole along with
the performance of individual business units. This
includes the use of a balanced scorecard for applicable
key performance indicators (KPIs) to monitor progress
towards delivery of the Group’s principal targets.
The focus of the Group is in three priority areas.
1. Health & safety, monitored through near miss incidents
and the number of accidents incurred;
2. Compliance with regulations, in particular Environment
Agency and Scottish Environment Protection Agency
audit results; and
3. Financial performance.
Certain KPIs are set out in the table overleaf for continuing
operations, each relating to these priorities and showing
the equivalent result for the previous year. An explanation
as to why these KPIs are important to the Group is also
included and where appropriate, KPIs are linked to the
core areas of the Group’s strategy, using the key shown
underneath the following table:
The bank facility includes the following two financial
covenants, which are tested on a quarterly basis:
Ratio of net debt to EBITDA
not more than 2.5 times
Ratio of operating profit to cash
interest costs (interest cover)
not less than 3.0 times
As at 31 December 2014, the Group was in compliance
with both covenants, with significant headroom.
Balance sheet and return on
capital employed
Consolidated net assets were £53.8m on 31 December
2014 (2013: £48.0m) and net tangible assets, excluding
goodwill and other intangible assets, were £33.9m
(2013: £28.2m), of which £1.0m (2013: £0.8m) was not
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, increased to
10.7% in 2014 (2013: 8.9%).
Impairment reviews
In accordance with IAS 36 ‘Impairment of Assets’, an
annual impairment review was carried out for each cash-
generating unit (CGU) to which significant goodwill is
allocated and also any other CGU where management
believed there may have been an indication of potential
impairment to the carrying values of assets in those CGUs.
For the continuing operations of the Group, this exercise
was completed for the Energy & Construction and
Industry & Infrastructure CGUs, which both contain
significant levels of goodwill, as well as the Augean
Integrated Services High Temperature Incinerator, as
a result of performance levels and the Augean North
Sea Services business, and as a result of the declining
macroeconomic conditions seen in the North Sea
Oil & Gas market in late 2014 and early 2015. Those
detailed reviews indicated that no change was required
to the carrying value of the goodwill, nor were any other
impairment losses to be recognised in the consolidated
balance sheet, in respect of the continuing operations of
the Group, at 31 December 2014.
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Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Financial performance continued
KPI
Link to
strategy
Applicable area(s)
of the Group
2014
outcome
2013
outcome
Number of accidents1
Health & safety is the highest priority of the Group
SMP
E&C, I&I, AIS,
ANSS
Number of near misses reported2
Health & safety is the highest priority of the Group
SMP
E&C, I&I, AIS,
ANSS
Compliance scores3
Augean operates in a highly regulated environment
and aims to carry on the highest levels of
compliance with relevant regulations and planning
and permitting conditions
SMP
E&C, RWS, I&I,
AIS, ANSS
E&C: 10
I&I: 13
AIS: 5
ANSS: 7
E&C: 319
I&I: 670
AIS: 287
ANSS:
522
E&C: C
RWS: A
I&I: B/
Excellent
AIS: D
ANSS:
Excellent
E&C: 17
I&I: 7
AIS: n/a
ANSS: 3
E&C: 732
I&I: 818
AIS: n/a
ANSS:
343
E&C: B
RWS: B
I&I: A/
Excellent
AIS: n/a
ANSS:
Excellent
Underlying profit before taxation4
This is the key measure of underlying profitability of
the Group
Post-maintenance free cash flow 5
This shows the efficiency of the Group in converting
its profits into cash, in a steady state, which is then
available to reinvest for future growth and distribute
to our shareholders
Return on capital employed 6
The Group has several capital intensive business
units and aims to generate a superior return for its
shareholders from its investments.
GSV
Group
£5.4m
£4.4m
GSV
Group
£5.0m
£3.3m
GSV
Group
10.7%
8.9%
Proportion of revenue from contracts or
framework agreements7
This is a measure of the relative certainty of future
cash flow
SMP,
CFS,
GSV
Group
volumes of waste disposed to our landfill sites
This is a prima facie indicator of successful growth
in the highly regulated markets in which we operate
SMP,
CFS,
GSV
E&C, RWS
80% of
top 20
Top 20:
50% of
Group
revenue
68% of
top 20
Top 20:
47% of
Group
revenue
E&C:
332,000 te
RWS:
4,300 te
E&C:
290,800 te
RWS:
4,700 te
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Link to
strategy
Applicable area(s)
of the Group
2014
outcome
2013
outcome
SMP,
CFS,
GSV
SMP,
CFS,
GSV
AIS
£1.6m
£1.2m
ANSS
75% of
ANSS
revenue
67% of
ANSS
revenue
KPI
Level of contracted revenue from
Total Waste Management
We aim to deliver a total solution to the
marketplace, which allows us to use our specialist
sector expertise to add value to our customers and
grow our returns in this capital-light, service-led
business area
Amount of North Sea Oil & Gas revenue
generated directly from operators and Tier-1
customers
We aim to generate an increasing proportion of
our revenues from these companies, moving up
the supply chain, increasing our credibility in the
marketplace and reducing both credit risk and the
risk of intermediary margin erosion
Strategic key
SMP
CFS
GSV
Develop sustainable market positions
Grow through client-focused solutions
Grow shareholder value
1 The number of total reported accidents, including those resulting in damage to plant or equipment. This is an absolute figure which
has not been normalised for changes in employee numbers. The RWS business uses the assets of other businesses in the Group
and, therefore, separate site results are not applicable for RWS.
2 The total number of incidents reported which could have resulted in an accident or injury or damage to property. The RWS business
uses the assets of other businesses in the Group and, therefore, separate site results are not applicable for RWS. Result excludes
corporate near misses reported.
3 The average of audit scores notified during the year by the Environment Agency (EA) in England or the Scottish Environment
Protection Agency (SEPA) in Scotland. The EA notifies results on the scale A-F and SEPA notifies on the scale Excellent-Very Poor.
4 Group profit before taxation, from continuing operations and excluding exceptional items.
5 Net operating cash flows, from continuing operations and excluding exceptional items, less maintenance capital expenditure.
6 Calculated as operating profit, from continuing operations and excluding exceptional items, divided by average capital employed,
where capital employed is the consolidated net assets of the Group excluding net debt.
7 Total revenue from top 20 customers, arising from commercial arrangements under contract or other framework agreement, divided
by the total revenue of those customers in the year.
Events since the end of the financial year
On 10 March 2015, the Group completed the purchase of the remaining 19% of shares, not already held by the
Group, in its subsidiary company, Augean North Sea Services Limited (ANSS), thereby making ANSS a wholly-owned
subsidiary of the Group. The consideration for the shares was £1,050,000, which was paid in cash on the same date.
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37
Augean PLC Annual Report and Accounts for the year ended 31 December 2014
How the Business Manages Risk
The performance of the business is linked to economic
activity in the waste markets it serves, including the
manufacturing, construction, nuclear decommissioning,
Energy-from-waste and oil & gas sectors. Fluctuations in
the UK economy in general and these sectors in particular
affect Group performance, as do inflationary and other cost
pressures. Risks are mitigated by diversifying the customer
base as far as possible and by linking gate fees and
other customer charges, wherever possible, to prevailing
operating costs and commodity prices, including the costs
of waste disposal outside of the Group. In addition to this
general economic risk, there are a number of risks specific
to the markets served by the Group which may have a
material impact on activities and results.
The Group uses a range of resources to manage and
mitigate its risks, including the adoption of a broad range
of internal controls, the use of risk registers and regular
reporting, monitoring and feedback of risks through
the business.
Risk description
Mitigation
Environmental legislation
Regulation is a key driver of the hazardous waste market. Changes in legislation (including tax legislation with
environmental goals) or its interpretation can have a significant and far reaching impact on waste markets. The Group
endeavours to mitigate this risk by employing high quality technical management to interpret the evolving legislative
framework and its potential and current impact on the Group’s operations. In addition, the Group maintains a presence
on a number of industry groups to influence the shaping of policy and liaises regularly with relevant regulators and
legislative bodies, including the Environment Agency, the Scottish Environment Protection Agency (SEPA), the
Department for Environment, Food & Rural Affairs (DEFRA) and the Department of Energy & Climate Change (DECC).
Environmental compliance
All operating sites and activities are regulated by environmental authorities in line with the requirements set out within
licences and permits. These licences and permits are required to carry on the business of the Group and compliance
with their terms is essential to its success. Withdrawal or temporary suspension could have a significant impact on
the Group’s ability to operate. Adherence to the highest environmental standards is also important to ensure the
maintenance of good relations with local communities and to satisfy customers that the techniques, practices and
procedures adopted by the Group are consistent with those of a responsible business.
Health and safety
The activities of the Group involve a range of health and safety risks, from offshore operations to the handling of
hazardous wastes. Health and safety is the first priority for all Directors, managers and employees across the Group and
investments in relevant assets and resources are made on an ongoing basis to ensure that the highest health and safety
standards are applied.
Price risk
Price pressure remains a key feature of the hazardous waste market, where customers often have a range of options for
the ultimate disposal of their wastes and access to several companies competing to service their needs.
The application of the waste hierarchy to the markets in which the Group operates, with its focus on reducing the
volume of waste disposed to landfill, could be perceived as a threat to the business in the long term. The Group
is mitigating this threat by developing treatment solutions for customers which utilise landfill when this is the most
appropriate commercial and environmental solution, but provide alternative approaches whenever they are suitable.
The Group mitigates this risk through the employment of technical experts, by working to well-established policies
and procedures described in its Integrated Management System, through the provision of training to develop the
knowledge and competence of its staff and through regular monitoring and review of compliance performance.
Further details of how the Group monitors and controls environmental compliance are set out in the Group’s
Corporate Social Responsibility (CSR) report.
Health and safety performance is constantly monitored and reviewed, including formal reviews at each Augean PLC
Board meeting and monthly reviews by the Group’s Management Board. These mechanisms also include detailed
reviews of any relevant incidents, which allow the lessons learnt from such incidents to be fed back to local teams,
in order to reduce the likelihood of recurrence.
The Group reviews its pricing policies on an ongoing basis to ensure that it influences and stabilises the market,
whilst responding to emerging trends and customer needs. As part of the Group’s established sales infrastructure,
specialist roles exist to assess and price waste consignments in line with market rates and available disposal
solutions. All services are kept under review to ensure that price changes in the market do not lead to uneconomic
activities being undertaken by the Group.
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Risk description
Environmental legislation
Regulation is a key driver of the hazardous waste market. Changes in legislation (including tax legislation with
environmental goals) or its interpretation can have a significant and far reaching impact on waste markets. The Group
endeavours to mitigate this risk by employing high quality technical management to interpret the evolving legislative
framework and its potential and current impact on the Group’s operations. In addition, the Group maintains a presence
on a number of industry groups to influence the shaping of policy and liaises regularly with relevant regulators and
legislative bodies, including the Environment Agency, the Scottish Environment Protection Agency (SEPA), the
Department for Environment, Food & Rural Affairs (DEFRA) and the Department of Energy & Climate Change (DECC).
Environmental compliance
All operating sites and activities are regulated by environmental authorities in line with the requirements set out within
licences and permits. These licences and permits are required to carry on the business of the Group and compliance
with their terms is essential to its success. Withdrawal or temporary suspension could have a significant impact on
the Group’s ability to operate. Adherence to the highest environmental standards is also important to ensure the
maintenance of good relations with local communities and to satisfy customers that the techniques, practices and
procedures adopted by the Group are consistent with those of a responsible business.
Mitigation
The application of the waste hierarchy to the markets in which the Group operates, with its focus on reducing the
volume of waste disposed to landfill, could be perceived as a threat to the business in the long term. The Group
is mitigating this threat by developing treatment solutions for customers which utilise landfill when this is the most
appropriate commercial and environmental solution, but provide alternative approaches whenever they are suitable.
The Group mitigates this risk through the employment of technical experts, by working to well-established policies
and procedures described in its Integrated Management System, through the provision of training to develop the
knowledge and competence of its staff and through regular monitoring and review of compliance performance.
Further details of how the Group monitors and controls environmental compliance are set out in the Group’s
Corporate Social Responsibility (CSR) report.
Health and safety
standards are applied.
Price risk
The activities of the Group involve a range of health and safety risks, from offshore operations to the handling of
hazardous wastes. Health and safety is the first priority for all Directors, managers and employees across the Group and
investments in relevant assets and resources are made on an ongoing basis to ensure that the highest health and safety
Health and safety performance is constantly monitored and reviewed, including formal reviews at each Augean PLC
Board meeting and monthly reviews by the Group’s Management Board. These mechanisms also include detailed
reviews of any relevant incidents, which allow the lessons learnt from such incidents to be fed back to local teams,
in order to reduce the likelihood of recurrence.
Price pressure remains a key feature of the hazardous waste market, where customers often have a range of options for
the ultimate disposal of their wastes and access to several companies competing to service their needs.
The Group reviews its pricing policies on an ongoing basis to ensure that it influences and stabilises the market,
whilst responding to emerging trends and customer needs. As part of the Group’s established sales infrastructure,
specialist roles exist to assess and price waste consignments in line with market rates and available disposal
solutions. All services are kept under review to ensure that price changes in the market do not lead to uneconomic
activities being undertaken by the Group.
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Augean PLC Annual Report and Accounts for the year ended 31 December 2014 How the Business Manages Risk continued
Risk description
Mitigation
Economic growth
The Group relies on economic activity in the UK, which in turn leads to production of the hazardous wastes which
form the basis of its sales revenues. Any downturn in the UK economy may restrict the volume of hazardous wastes
produced and therefore constrain the Group’s revenues.
Such macro economic risks are mitigated, in part, by following a strategy of developing positions in a range of
markets requiring specialist waste management capabilities and which have high barriers to entry. The Group also
continues to identify and invest in the techniques, assets and resources to provide a broad range of services to
customers, diversifying the revenue base of the Group.
Technological factors
Technological risk factors may cause treatment technology in use to become obsolete or too costly to maintain.
The Group monitors the development and application of the waste hierarchy and employs strategic planning to
make timely investments in existing and new equipment. Full evaluation of operational costs and market environment
is made before investment.
North Sea oil & gas investment
With a well-established business focused on providing waste management services to North Sea oil & gas operators,
the Group has some exposure to any fall in investment for oil & gas exploration activity in the North Sea, such as those
announced by certain major oil companies in early 2015. This may in turn reduce the volume of waste available for
management by Augean North Sea Services (ANSS).
To mitigate this risk, the ANSS business maintains a comparatively low level of operational gearing, with the business
therefore able to adjust its significant direct cost base in the event of a significant and permanent reduction in
revenues. Our North Sea activities are also diversified across a number of revenue-generating streams, with services
provided to customers offshore and onshore. The future growth of North Sea decommissioning volumes may
provide new market opportunities for ANSS that would be a further mitigation.
Transport disruption
The Group relies on the delivery of wastes to its sites to secure revenues and any disruption to local or national
networks, for example in severe weather conditions, can cause delays or lost revenue for the Group.
Tax legislation
The use of tax legislation to drive environmental objectives, particularly the diversion of wastes away from landfill disposal
and towards greater treatment and recycling, represents a long term risk. The full rate of landfill tax rose to £80/tonne
on 1 April 2014 and the UK Government announced in the 2014 Budget that those tax rates would not be reduced in
the medium term, with near term future increases being based on the retail price index. Whilst European and national
legislation encourages “zero landfill” solutions for a range of waste streams, disposal in properly engineered and
permitted landfills continues to be the most appropriate waste management solution for many hazardous wastes.
Mitigation is provided as far as possible through the use of its own fleet of vehicles and the ability to accept wastes
into sites in different geographical locations before onward transfer to their final treatment or disposal destinations.
To mitigate the risk that the Group will suffer a decline of landfill volumes as environmental taxes rise the Group has
developed a range of waste treatment solutions for customers and also broadened its capabilities to ensure its
landfill sites are able to accept all those wastes which do require landfill disposal.
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Risk description
Economic growth
The Group relies on economic activity in the UK, which in turn leads to production of the hazardous wastes which
form the basis of its sales revenues. Any downturn in the UK economy may restrict the volume of hazardous wastes
produced and therefore constrain the Group’s revenues.
Technological factors
Technological risk factors may cause treatment technology in use to become obsolete or too costly to maintain.
Mitigation
Such macro economic risks are mitigated, in part, by following a strategy of developing positions in a range of
markets requiring specialist waste management capabilities and which have high barriers to entry. The Group also
continues to identify and invest in the techniques, assets and resources to provide a broad range of services to
customers, diversifying the revenue base of the Group.
The Group monitors the development and application of the waste hierarchy and employs strategic planning to
make timely investments in existing and new equipment. Full evaluation of operational costs and market environment
is made before investment.
North Sea oil & gas investment
With a well-established business focused on providing waste management services to North Sea oil & gas operators,
the Group has some exposure to any fall in investment for oil & gas exploration activity in the North Sea, such as those
announced by certain major oil companies in early 2015. This may in turn reduce the volume of waste available for
management by Augean North Sea Services (ANSS).
To mitigate this risk, the ANSS business maintains a comparatively low level of operational gearing, with the business
therefore able to adjust its significant direct cost base in the event of a significant and permanent reduction in
revenues. Our North Sea activities are also diversified across a number of revenue-generating streams, with services
provided to customers offshore and onshore. The future growth of North Sea decommissioning volumes may
provide new market opportunities for ANSS that would be a further mitigation.
The Group relies on the delivery of wastes to its sites to secure revenues and any disruption to local or national
networks, for example in severe weather conditions, can cause delays or lost revenue for the Group.
Transport disruption
Tax legislation
The use of tax legislation to drive environmental objectives, particularly the diversion of wastes away from landfill disposal
and towards greater treatment and recycling, represents a long term risk. The full rate of landfill tax rose to £80/tonne
on 1 April 2014 and the UK Government announced in the 2014 Budget that those tax rates would not be reduced in
the medium term, with near term future increases being based on the retail price index. Whilst European and national
legislation encourages “zero landfill” solutions for a range of waste streams, disposal in properly engineered and
permitted landfills continues to be the most appropriate waste management solution for many hazardous wastes.
Mitigation is provided as far as possible through the use of its own fleet of vehicles and the ability to accept wastes
into sites in different geographical locations before onward transfer to their final treatment or disposal destinations.
To mitigate the risk that the Group will suffer a decline of landfill volumes as environmental taxes rise the Group has
developed a range of waste treatment solutions for customers and also broadened its capabilities to ensure its
landfill sites are able to accept all those wastes which do require landfill disposal.
Outlook
There has been a strong start to 2015 in each of our five
businesses, including Augean North Sea Services, and the
Board believes that the Group’s customer-focused, service-
led approach positions it to capitalise on opportunities
in the markets that it serves. The Group will continue to
leverage the expertise of our people and the targeted capital
investment that has been undertaken in pursuit of double-
digit profit growth. The Board notes the prevailing conditions
in the North Sea oil & gas market and the measures in the
Budget announced this month to stimulate investment by
the oil & gas operators, including exploration.
The continued execution of the strategy of the wider
Augean Group and the portfolio effect of maintaining five
businesses in diverse markets, along with an expectation
of continuing general UK economic recovery, means that
the Board remains confident of another year of increasing
profitability and cash flows in 2015.
By order of the Board
Dr Stewart Davies
Chief Executive Officer
23 March 2015
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Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Directors’ Report
The Directors present their report and the audited financial
statements for the Group and Company for the year
ended 31 December 2014.
Principal activity and business review
The principal activity of the Group is the provision of
specialist services focused on hazardous waste. These
services include waste treatment, recovery, recycling and
secure disposal. The Group operates substantially entirely
within the United Kingdom.
The Strategic Report provides a review of the business of
the Group together with an indication of future prospects.
Results and dividends
The combined continuing and discontinued operations
profit after tax for the year was £5.1m (2013: £1.7m
loss) from revenue of £55.2m (2013: £47.1m). The profit
included exceptional items of £0.9m net credit (2013:
charge of £4.2m), of which a credit of £0.4m relates to
discontinued operations, which are now disposed.
The Board has recommended a dividend for the year of
0.50p per ordinary share, to be paid on or after 12 June
2015 for shareholders on the register at 5 June 2015
(2013: 0.35p).
Environmental policy
The quality of the environment is at the core of the Group’s
operations and the Board recognises its importance to
employees, customers, suppliers and the communities in
which the Group operates. Augean continues to adopt high
standards of environmental practice and aims to minimise
its impact on the environment wherever possible and to
support this publishes a clear Environmental Policy, which
is updated every twelve months. Further details of the
Group’s actions in this area can be found in the separately
published Corporate Social Responsibility (CSR) report.
Management of risks
The Group has developed procedures for the management
of risks relating to price, credit, liquidity and cash flow.
The management of the Group’s financial risks and the
related objectives and policies are the responsibility of
the executive Directors. The Directors regularly review
the Group’s financial risk management policies and
procedures to ensure that they appropriately reflect
the changing nature of the market and business. The
Group, through its training and management standards
and procedures, aims to develop a disciplined and
constructive control environment in which all employees
understand their roles and obligations. A risk register is
maintained and regularly reviewed by the Board.
The Group has maintained its policy that no trading in
financial instruments shall be undertaken. The Group’s
principal financial instruments during the period comprised
bank loans, cash and cash equivalents and finance leases.
The main purpose of these financial instruments is to
finance the Group’s operations. The Group’s other financial
instruments include short-term receivables and payables
which arise directly from its operations. There was no
material difference between the fair value of the financial
assets and financial liabilities and their book value.
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or
another financial asset. The Group seeks to maintain a
balance between continuity of funding and flexibility. The
objective is to maintain sufficient resources to meet the
Group’s funding needs for the foreseeable future.
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails
to meet its contractual obligations, and arises principally
from the Group’s receivables from customers. The Group
has a robust customer credit policy in place and the
exposure to credit risk is monitored on a daily basis. The
Group’s standard credit terms are 30 days from date of
invoice, with longer terms granted to certain customers.
Invoices older than agreed terms are assessed.
Employees
The Group’s policy is to ensure the adequate provision for
the health, safety and welfare of its employees and other
people who may be affected by its activities. Health and
safety is the first priority of the Group and to support this
all accidents are reported and thoroughly investigated and
all employees are encouraged to contribute to reporting
of ‘near-miss’ incidents and ‘safe acts’ to promote
greater awareness and proactive safety behaviours and,
therefore, accident reduction.
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The success of the Group depends on the skill and
motivation of its workforce and it is the Group’s policy
to ensure close consultation with employees on matters
of concern to them. Regular newsletters and briefings
are provided to employees and announcements and
notices are provided on the Group’s intranet website
and also directly through regular team briefings. The
Group produces a monthly ‘Augean Update’ newsletter,
available to all employees, which sets out a summary of
the performance of the Group and the key activities taking
place at each site.
The Group aims to recruit and retain people with the
appropriate skills and behaviours to fully contribute to
the future success of the business. All new employees
are provided with an appropriate induction, ensuring that
they have the knowledge required to perform their role,
and ongoing training is provided to ensure that skills and
experience are kept up to date.
The Group encourages the employment of disabled
persons wherever this is practicable. The Group has a clear
policy on employment of disabled persons and ensures
that disabled employees, and those who become disabled
whilst in the Group’s employment, benefit from training
and career development programmes in common with all
employees (please see the CSR section for more details).
In the event that changes are required to the operations
or structure of the Group, including closure or sale of
businesses, the Group has well established procedures
for consultation with individuals and, where required,
groups of employees. Consultation involves clear, ongoing
communication of factors affecting individuals and teams,
regular consultation meetings with line management
and internally published announcements of significant
decisions and updates.
Employees are included in bonus or incentive schemes
designed to align the Group’s priorities in safety, regulatory
compliance and profit generation to the rewards available
to individuals. Monthly and annual bonuses are made
available. Certain senior employees are also eligible to join
the Group’s share options scheme and long term incentive
plan, aligning personal performance with strategic plans
and targets and ensuring that management is incentivised
to deliver improving returns for shareholders.
Charitable and political donations
During the year the Group contributed £417,000
(2013: £359,000) of its landfill tax liability to registered
environmental bodies as permitted by Government
regulations. No political donations were made during the
year (2013: £nil).
Directors
The composition of the Board of Directors is shown on
page 48 and 49. Details of the Directors’ interests and
remuneration are given in the Directors’ Remuneration
Report on pages 56 to 58. Richard Laker was appointed
as Group Finance Director with effect from 2 September
2014 and offers himself for election to the Board at the
Annual General Meeting. On 23 March 2015, the Group
announced that Roger McDowell would be stepping
down from the Board. Mr McDowell will resign from the
Board at the Annual General Meeting. In accordance
with the articles of association of the Company, Rory
Macnamara will retire from the Board and will offer himself
for re-election at the Annual General Meeting.
Substantial shareholdings
The number of shares issued by the Company increased
during the year, from 99,699,414 as at 1 January 2014 to
101,991,380 at 31 December 2014. The Company had
been notified of the following interests of more than 3% in
its shares as at 12 March 2015:
Number
of shares
19,764,442
Ingot Capital Management
Cazenove Capital Management
19,534,000
J O Hambro Capital Management 11,475,000
10,949,965
Henderson Global Investors
5,782,173
UBS Investment Bank
3,173,431
Unicorn Asset Management
%
of total
19.38
19.15
11.25
10.74
5.67
3.11
Corporate governance
A separate corporate governance report follows this
Directors’ report.
Qualifying third party indemnity provisions (as defined in
the Companies Act 2006) have been entered into by the
Company for the benefit of all Directors, which indemnify
the Directors against third party claims brought against
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43
Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Directors’ Report continued
them in their capacity as Directors of the Company to the
extent permitted by law and such provisions continue in
force at the date of this report.
Contact with investors
All shareholders have access to the interim and annual
reports and are invited to attend the Annual General
Meeting (AGM) at which all Board Directors are present.
The Group periodically hosts presentations at its sites and
capital markets events for the investor community and
provides detailed information for shareholders and the
general public on its website at www.augeanplc.com.
Going concern
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the Strategic Report. Details of the
Group’s financial position, cash flows, liquidity position
and borrowing facilities are included in the financial review
section and further information on the Group’s financial
risks and their management is given in note 26 to the
financial statements.
As highlighted in note 26, the Group met its short term
working capital requirements during 2014 through an
overdraft and revolving loan facility (the Facility), which
was renewed and increased with HSBC Bank plc on
7 March 2014, providing access to a term loan and
revolving loan facility for an extended period to July 2017
(the New Facility). The overdraft is reviewed annually.
The New Facility provided debt funding to the Group
of up to £15.0m at the point of commencement of the
New Facility, which had subsequently amortised to
£14.25m in accordance with the New Facility agreement
by 31 December 2014. The provision of the New Facility
is subject to certain covenants, focused on the cover
of interest costs and the ratio of net debt to EBITDA.
Cash flow forecasts for the twelve months from the
date of approval of the financial statements indicate the
Group’s ability to operate within these covenants.
During 2014 the Group continued to demonstrate its
ability to generate cash flow from operating activities.
The single greatest influence on free cash flow over recent
years has been the level of capital investment required to
maintain the Group’s asset base. The Group retains some
discretion over the nature and timing of significant capital
expenditure, allowing future liquidity to be managed, with
the only exception to this being the need to engineer new
landfill cells as available void space nears exhaustion.
Landfill cell engineering is aligned with cash flows through
a comprehensive capital planning process. Other capital
expenditure includes that needed to maintain the existing
asset base and that deployed in the development of the
Group’s businesses (the table in the financial review shows
expenditure during 2014 in each of these categories).
Given the discretion available, the Board remains confident
that capital expenditure can be controlled and cash
generation can be expected in the future.
Impairment reviews have been performed for each
of the Group’s cash-generating units, the details of which
are disclosed in note 10 to the financial statements.
In addition, the tangible asset base of the Group has been
reviewed for impairment. The results of these reviews
indicate that no impairment is required in the Group results
and demonstrate the Group’s ability to continue operating
in its current structure and form for the foreseeable future.
Financial forecasts and projections, taking account of
reasonably possible changes 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 New Facility, both
for ongoing working capital funding and any capital
investment expenditure, during the life of the facility.
Having considered the items set out above 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. The Directors are confident that
the Company will be able to meet its liabilities as they fall
due over the next twelve months. As a result the financial
statements have been prepared on a going concern basis.
Directors’ responsibilities statement
The Directors are responsible for preparing the Strategic
Report, the Directors’ Report and the financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared Group financial statements,
and elected to prepare the parent Company financial
statements, in accordance with International Financial
Reporting Standards as adopted by the European
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Union (IFRSs). Under company law, the Directors must
not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs and profit or loss of the Company and Group for
that period. In preparing these financial statements, the
Directors are required to:
{ select suitable accounting policies and then apply
them consistently;
{ make judgements and accounting estimates that are
reasonable and prudent;
{ state whether applicable IFRSs have been followed,
subject to any material departures disclosed and
explained in the financial statements; and
{ prepare the financial statements on the going concern
basis unless it is inappropriate to assume that the
Company and Group will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and Group and enable them to ensure
that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the
assets of the Company and Group and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors’ confirm that:
{ so far as each Director is aware, there is no relevant
audit information of which the Company’s auditor is
unaware; and
{ the Directors have taken all steps that they ought to
have taken to make themselves aware of any relevant
audit information and to establish that the auditor is
aware of that information.
The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Audit partner rotation
The external auditor is required to rotate the lead
partner responsible for the Group audit every five years
in accordance with Ethical Standard 3 (ES3) ‘Long
association with the audit engagement’ issued by the
Auditing Practices Board. Having extended the term
of the lead audit partner to a sixth year for the year
ended 31 December 2013, due to the business being
in a transitional phase, the lead audit partner has duly
changed in advance of the 2014 financial year end, in
accordance with ES3.
Auditor
Grant Thornton UK LLP has expressed willingness to
continue in office. In accordance with Section 489(4)
of the Companies Act 2006, a resolution to reappoint
Grant Thornton UK LLP will be proposed at the Annual
General Meeting.
Annual General Meeting
At the Annual General Meeting on 4 June 2015,
Rory Macnamara will retire by rotation in accordance
with the articles of association. Being eligible, he will
offer himself for re-election as a Non-executive Director.
Richard Laker joined the Company and was appointed
to the Board on 2 September 2014. Being eligible, he will
offer himself for election as an executive Director at the
AGM. Roger McDowell will resign from the Board and not
seek re-election at the AGM in order to take up a new role
outside of the Company. No Director has a contract with
an unexpired notice period of more than twelve months.
By order of the Board
Richard Laker
Company Secretary
23 March 2015
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Augean PLC Annual Report and Accounts for the year ended 31 December 2014 Our Governance
Contents
Board of Directors
48
Our Governance
50
Chairman’s Corporate Governance letter 51
Corporate Governance Summary
52
Audit Committee Report
53
Nominations Committee Report
54
Remuneration Committee Report
55
Directors’ Remuneration Report
56
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47
Board of Directors
Jim Meredith
Chairman and Non-executive Director
Dr Stewart Davies
Executive Director and
Chief Executive Officer
Andrew Bryce
Non-executive Director and Chairman
of the Nominations Committee
Age 54
Age 54
Age 67
Jim has significant experience of the
waste industry, having held several
senior roles within the sector. He was
formerly Chief Executive of FCC’s
UK asset base with revenues of
approx. £700m,180 active business
units and 2,400 employees following
their acquisition in 2006 of Waste
Recycling Group (WRG) the UK’s
largest landfill and waste disposal
business, which also provides
services to the decommissioning
markets. He had previously worked
with TerraFirma Capital Partners
(TFCP) during the acquisition of
WRG in 2003. Prior to TFCP, he
was an executive Director of Shanks
plc. More recently, Jim was CEO of
SCAID Capital, whose main business
was Willerby Holiday Homes, the UK
market leader in the manufacture of
holiday homes.
He was appointed to the Board
of Augean in December 2010 and
became Chairman in June 2012.
Stewart joined Augean from Romec
Ltd, where he was Managing
Director for three years. Prior to this
Stewart held Managing Director
roles at Serco, Rugby Cement
and Corus, following ten years at
ICI in operations, commercial and
strategy roles. He studied Natural
Sciences (Physics) and then a PhD
in Materials Science at the University
of Cambridge and is a Fellow of the
Institute of Physics. Since 2009,
Stewart has been a Governing Board
Member of Innovate UK (formerly
the Technology Strategy Board),
the UK’s national innovation agency
which aims to accelerate economic
growth by stimulating and supporting
business-led innovation. In October
2013, he was appointed as a Director
of Decom North Sea, the industry
forum of offshore decommissioning in
the North Sea.
He was appointed to the Board and
became Chief Executive in August
2013.
Andrew has had a long career
in environmental law in the UK
and currently runs his own law
firm, Andrew Bryce & Co, which
specialises in regulatory defence and
board level advice on environmental
management, strategy and liability
issues. He was previously an equity
partner and head of environmental
services at City law firm Cameron
Markby Hewitt (now part of CMS
Cameron McKenna). He has held the
chairmanship of the United Kingdom
Environmental Law Association, of
which he is an honorary life member.
He was appointed to the Board of
Augean in June 2005 and carries on
liaison between the Board of Directors
and the Safety & Compliance
Committees that operate at an
executive level within the business.
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Richard Laker
Executive Director and Group Finance
Director
Rory Macnamara
Non-executive Director and Chairman
of the Audit Committee
Roger McDowell
Non-executive Director and Chairman
of the Remuneration Committee
Age 38
Age 60
Age 59
Rory is a Chartered Accountant
with a wide range of corporate
finance transaction experience.
He was previously head of mergers
and acquisitions at Deutsche
Morgan Grenfell and then became
a Managing Director at Lehman
Brothers. He is Chairman of Dunedin
Income Growth Investment Trust
plc and Essenden plc. Rory is also
a non-executive Director of Mears
Group plc and has a number of
Directorships and advisory roles with
other organisations.
He was appointed to the Board of
Augean in November 2006.
Roger is currently Chairman of Alkane
Energy plc, a role he has held since
2012, and since 2008 of Avingtrans
plc. He was appointed as Senior
Independent Director of Servelec
Group prior to its flotation on the
main market in December 2013. His
other current non-executive roles
include IS Solutions plc, Inspired
Capital plc, Proteome Sciences plc,
PTSG Group plc and Swallowfield
plc. His duties include chairing
several board committees.
Having been appointed to the Board
of Augean in 2004, he acted as
interim Chief Executive Officer during
2006-2007 and Chairman from
23 March 2010 until 8 June 2012.
He has indicated his intention to step
down from the Board at the AGM on
4 June 2015.
Richard joined Augean in September
2014 from Northgate plc, where
he had held a number of senior
finance roles since 2004, including
Group Financial Controller and,
since May 2011, UK Finance
Director. As Finance Director of
Northgate’s £400m revenue UK and
Irish business, Richard oversaw the
delivery of significant efficiencies
through its finance function and was a
key member of the management team
during a period when the business
executed a number of operational
and commercial improvements to
help maintain its position as market
leader in the UK B2B light commercial
vehicle rental sector.
Prior to Northgate, Richard worked for
PricewaterhouseCoopers LLP from
1998 until 2004, where he qualified as
a Chartered Accountant in 2001.
He was appointed to the Board and
became Group Finance Director on
2 September 2014.
49
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Governance
With effect from 1 October 2008, the Companies Act 2006
introduced a statutory duty on Directors to avoid conflicts of
interest. Shareholders approved new articles of association
at the 2008 AGM giving Directors authority to approve
situations involving any such conflicts and to allow conflicts
of interest to be dealt with by the Board. All Directors are
required to notify the Company on an ongoing basis of their
other commitments and these are held by the Company
Secretary and reviewed annually by the Company’s
auditor. The Company has established procedures
for ensuring that the Board’s powers for authorising
Directors’ conflicts of interest are operated effectively.
As explained in the Directors’ report, qualifying third
party indemnity provisions have been entered into by the
Company for the benefit of all Directors.
Our Governance
The Board of Directors
The Board currently comprises a Non-executive
Chairman, three further independent Non-executive
Directors, the Chief Executive Officer and a Group Finance
Director. A Senior Independent Director has not been
appointed, as given the size and nature of the Company,
the Directors do not believe that such an appointment
is necessary. The Chairman has primary responsibility
for running the Board and its effectiveness and the Chief
Executive Officer is responsible for developing strategic
plans and initiatives for consideration by the Board and
for their operational delivery. The Non-executive Directors
bring a variety of different experience to the Board, are
considered to be independent of management and
ensure that rigour is applied to Board decisions.
The composition of the Board is reviewed regularly.
Appropriate training, briefings and inductions are available
to all Directors on appointment and subsequently as
necessary, taking into account existing qualifications
and experience. All Directors have access to the advice
and services of the Group’s company secretarial partner,
Addleshaw Goddard LLP and any Director may take
independent professional advice, if necessary, at the
Company’s expense. The Board meets formally at least
eight times a year and additional meetings are held to
review and approve special matters if necessary.
Each Director is provided with sufficient timely information
to enable full consideration of matters in advance of
meetings and proper discharge of duties. There is a
formal schedule of matters reserved for the Board
which includes published financial statements, strategy,
acquisitions and disposals, significant capital projects,
annual budgets and loan facilities. Under the Company’s
articles of association one third of all Directors is required
to retire from office at each Annual General Meeting and
may stand for re-appointment by shareholders each year.
Additionally, each Director is required to retire in the third
calendar year following his last appointment and may
stand for re-election. Any Director appointed to the Board
during the year is subject to election by shareholders at
the following Annual General Meeting.
50
www.augeanplc.com Stock code: AUG Chairman’s Corporate Governance Letter
“THE BOARD REMAINS FOCUSED ON
...CORPORATE GOvERNANCE WHICH
DELIvERS COMPLIANCE...WHILST
ENHANCING PERFORMANCE...”
Jim Meredith
Non-executive Chairman
The Board has an active investor relations programme
and believes in maintaining good communication
with all stakeholders including institutional and private
shareholders, analysts and the press. This includes
making the executive Directors available to meet with
institutional shareholders and analysts following the
announcement of interim and final results. The Board
receives feedback from these meetings and uses this to
refine its approach to investor relations.
I look forward to meeting shareholders and other
stakeholders again during the year ahead. In the
meantime further information is available from the Group’s
website at www.augeanplc.com.
Jim Meredith
Chairman and Non-executive Director
23 March 2015
I am pleased to introduce the corporate governance
section of our report.
Augean is committed to high standards of corporate
governance in all its activities. The Company does not
comply with the UK Corporate Governance Code.
However, the Board recognises the value of the Code and
has regard to its requirements as far as is practicable and
appropriate for a public company of its size and nature.
The Board regularly reviews guidance from regulatory
bodies, supported by its Nominated Advisor, and
responds as appropriate.
As a business traded on the Alternative Investment
Market of the London Stock Exchange and operating
in markets based on regulatory frameworks, the Group
is familiar with the benefits and challenges associated
with maintaining strong and effective governance. In
this regard the Board remains focused on the need
for a system of corporate governance which delivers
compliance with regulation whilst enhancing the
performance of the Group. This includes recognising
the need to manage and mitigate the risks faced by the
business across all of its activities.
Each of the Board’s standing Committees (Audit,
Remuneration and Nomination) continued to be active
during the year. A report from each Committee Chairman
follows, and I am grateful to each for their diligence and
skill in ensuring that the Board plays an effective role in the
proper management of the Company and the wider Group.
As Chairman, one of my principal concerns is to maintain
excellent relationships with our shareholders and during
the year I again made myself available to shareholders
to discuss strategy and governance matters and was
pleased to have individual meetings with some of the
Group’s major shareholders during December 2014.
51
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Governance Corporate Governance Summary
{ regular visits by the Group’s technical team to all sites
to identify risks and propose improvements to be
implemented by senior management. This includes
powers to stop activities if they are deemed to
represent a danger, or are inappropriate in the context
of proper compliance;
{ a range of compliance management systems at the
Group’s sites subject to external review, including
certification to ISO 9001:2008; 14001:2004;
18001:2007 and the Publicly Available Specification
of common management system requirements PAS
99:2006;
{ an annual strategic planning and budgeting process;
{ reviews by senior management, the Management
Board and the Board of monthly financial and
operating information, including comparisons with
budgets and forecasts. The Group uses balanced
scorecard reports, containing key performance
indicator targets, as a mechanism for monitoring and
managing the monthly performance of key operations.
{ maintenance of a comprehensive insurance programme,
agreed with insurers following a detailed annual review
of the risks faced by the Group’s businesses.
To provide an overview of the risks faced by the Group,
the Audit Committee undertakes a six-monthly review of a
comprehensive corporate risk register, which considers a
broad range of risk items. This takes account of the entire
control environment and may lead to recommendations
which are implemented through the Management Board.
Corporate governance summary
The Board has overall responsibility for the Group’s
system of internal control and for reviewing its
effectiveness, while the role of management, through the
Management Board, is to implement Board policies on
risk management and control. The day to day activities
of the Group are managed by the Chief Executive Officer
through the Management Board, whose membership
includes the Chief Executive, Group Finance Director and
the Director of each of the Group’s operating business
units. The Management Board meets to formally review
performance and risk once each month and maintains
regular dialogue between these meetings.
The Management Board regularly reviews the control
environment of the Group and is responsible for managing
and mitigating commercial, operational, safety, compliance
and financial risks. This system is designed to provide
reasonable but not absolute assurance against material
misstatement or loss.
The Group operates a series of controls to meet its needs.
Key features of the control system include the following:
{ maintenance of an operational risk register, covering
the key health and safety, regulatory and operating
risks faced by the Group;
{ maintenance of a register of the major financial risks
faced by the Group;
{ monthly reviews of business risks affecting the Group,
identifying procedures and action required to manage
and mitigate those risks;
{ reports provided to the Board at every meeting setting
out the key risks and their management;
{ a clearly defined organisational structure with terms of
reference for Board Committees and responsibilities
and authorisation limits for executive and senior
management;
{ regular visits by the executive Directors and senior
management to operating locations to meet with
local management and staff and to review business
performance;
52
www.augeanplc.com Stock code: AUG Audit Committee Report
Chairman
Rory Macnamara
AUDIT COMMITTEE
Members
Rory Macnamara
Roger McDowell
Andrew Bryce
Jim Meredith
Meetings
Total number of Committee
meetings: 3
Prior to publication, the interim report, the preliminary results
announcement, the annual financial statements for 2013
and other information included in the 2013 Annual Report
were reviewed. The Committee made recommendations
on the content of each of these documents before
recommending them to the Board for publication.
The Board does not believe it is currently appropriate
to establish a separate, independent internal audit
function given the size of the Group and the Committee
considered this subject during the year, agreeing that no
change was required.
The Audit Committee comprises the Non-executive
Directors and is chaired by Rory Macnamara. The external
auditor and the executive Directors are regularly invited to
attend the meetings and the Committee also has access
to the external auditor’s advice without the presence of
the executive Directors. The Committee met on three
separate occasions during the year.
During the year the Committee considered the adequacy
and effectiveness of the risk management and control
systems of the Group and requested updates to the
Group’s corporate risk register. It also reviewed the
scope and results of the annual external audit, its cost
effectiveness and the objectivity and independence of
the external auditor. This review included a report from
executive management and the auditor concerning the
system of internal control and any control weaknesses,
which the Committee found to be satisfactory.
53
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Governance Nominations Committee Report
NOMINATION COMMITTEE
Chairman
Andrew Bryce
Members
Andrew Bryce
Rory Macnamara
Jim Meredith
Roger McDowell
Meetings
Total number of Committee
meetings: 3
The Nominations Committee comprises the Non-
executive Directors and is chaired by Andrew Bryce.
It meets as required in order to review the structure,
size and composition of the Board. It is responsible for
the selection and recommendation of suitable candidates
for appointment to the Board.
During 2014 the activities of the Committee focused
on the recruitment of a new Group Finance Director.
The Committee Chairman worked with a recruitment
consultant to identify suitable candidates and led the
interview process through to the appointment of Richard
Laker, as announced in May 2014.
54
www.augeanplc.com Stock code: AUG Remuneration Committee Report
REMUNERATION COMMITTEE
Chairman
Roger McDowell
Members
Roger McDowell
Jim Meredith
Rory Macnamara
Andrew Bryce
Meetings
Total number of Committee
meetings: 6
{ A company share options plan, allowing annual awards
of shares in the Company to be made to participants
{ A three year vesting period, with annual performance
conditions based on Group performance
{ Performance conditions for executives based on
targets for Total Shareholder Returns and EPS growth
{ Awards ranging from 75% of salary, for certain senior
managers, to 200% of salary, for the Chief Executive
Officer.
The Committee undertook a consultation exercise with
shareholders prior to finalising the details of the scheme,
which delayed the final issuance of awards to participants
until September 2014.
The Remuneration Committee comprises the Non-
executive Directors and is chaired by Roger McDowell.
The principal objective of the Committee is to
attract, retain and motivate talented people with a
competitive package of incentives and awards linked
to Group performance and aligned with the interests
of shareholders. The Committee uses the services of
independent external advisers as required.
The Committee met on six occasions during 2014, with
business including reviews of the remuneration for the
new Group Finance Director, decisions relating to bonus
awards and the granting of share options under the 2014
Long Term Incentive Plan (LTIP) as detailed below. The
Directors’ Remuneration Report includes the outcome of
these considerations.
During the final quarter of 2013 the Committee engaged
Deloitte LLP as external advisors to assist in the
development of the new LTIP. This work continued into
the first quarter of 2014 and resulted in a scheme with the
following attributes:
55
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Governance Directors’ Remuneration Report
Non-executive Directors
Remuneration of the Non-executive Directors, including
the Chairman, is determined by the Board as a whole,
including both base fees and fees for acting as Chair of a
relevant Committee.
(iii) Pension provision and other benefits
Pension provision is made at a rate of 10% of basic
salary for each executive Director, payable directly into
a nominated pension fund. Other benefits include a car
allowance, life assurance and private healthcare.
Current remuneration package
The current remuneration package of the executive
Directors comprises:
(i) Basic salaries
Basic salaries for executive Directors take into account
the performance, experience and responsibilities of the
individuals concerned, as well as the salaries of those with
similar positions and responsibilities. External advice is taken
as appropriate and basic salaries are reviewed annually.
During 2014, an inflationary pay rise of 2% was awarded to
Stewart Davies. This was in line with the general inflationary
pay rise given to other staff in the Company in January
2014, but was deferred to 13 August 2014, being the first
anniversary of him joining the Company. Subsequent to this
pay review, it was determined that the date of annual pay
review for Dr Davies should change to 1 January each year,
in line with the other employees of the business.
No inflationary pay rise was given to Richard Laker as he
is not entitled to a salary review until 2 September 2015,
being the first anniversary of his joining the Company.
(ii) Performance-related bonus
The executive Directors participate in a bonus scheme
based on the achievement of annual profit targets
approved by the Remuneration Committee, as well as
minimum targets in respect of safety and compliance. The
achievement of these targets would result in a bonus of
up to 50% of basic salary. Safety and compliance targets
were met during the year and the level of profit before tax
achieved by the Group in the year ended 31 December
2014 means that bonuses are payable as follows:
Stewart Davies
Richard Laker
£24,848
£8,283
(iv) Long Term Incentive Plan
During 2014, a new Long Term Incentive Plan (“2014
LTIP”) was implemented. The 2014 LTIP was prepared
in conjunction with Deloitte LLP and was awarded after
the revised strategy for the Group was published and
after consultation with major shareholders as to the most
appropriate long term incentive mechanism.
Under the 2014 LTIP, participants are eligible to receive
options over shares in the Company, up to the following
maximum percentages of basic salary:
Chief Executive
Group Finance Director
Other senior management
200%
175%
100%
The options are granted at an exercise price of ten pence,
being the nominal value of each of the Ordinary shares
in the Company, with subsequent vesting subject to
the attainment of pre-determined financial performance
conditions over the three year period from 1 January
2014 to 31 December 2016. All financial performance
conditions relate to continuing operations.
In the case of all participants in the 2014 LTIP, no awards
can vest unless minimum return on capital employed
(“ROCE”) targets are met.
The ROCE used in the 2014 LTIP calculation (“LTIP ROCE”)
is determined as operating profit, excluding exceptional
items, divided by average LTIP capital employed, where
LTIP capital employed is the net assets of the Group,
excluding net debt and non-current liabilities in respect
of capping and restoration.
56
www.augeanplc.com Stock code: AUG The minimum LTIP ROCE targets for each of the three
years are as follows:
Minimum LTIP ROCE target
2014
2015
2016
8.2% 9.6% 10.6%
The actual Underlying LTIP EPS result for 2014 was 4.20
pence, meaning that 100% attainment occurs for the
Underlying LTIP EPS element of the one-third of the 2014
LTIP relating to 2014 performance.
The definition of LTIP ROCE differs from the traditional
definition of ROCE, used in the operational and financial
reviews, due to the exclusion of long term capping
provisions from the definition of capital employed.
The actual LTIP ROCE for 2014 was 9.5% compared to
the minimum target of 8.2% set out above.
The actual ROCE of the Group for 2014 was 10.7%, as
set out in the operating review and financial review.
The targets for other senior management comprise
Underlying LTIP EPS and Group earnings before interest,
taxation, depreciation and amortisation (EBITDA),
excluding exceptional items. The overall level of attainment
noted for these participants, in respect of the one-third of
the 2014 LTIP relating to 2014 performance, was 100%.
In all cases, attained share options will vest on the date of
the announcement of the results of the Group for the year
ended 31 December 2016, expected to be no later than
31 March 2017.
Once minimum LTIP ROCE targets are met, the performance
conditions for the executive Directors are as follows:
The expected costs of the scheme are given in note 20 to
the financial statements.
Total shareholder return relative to the
FTSE AIM All-Share (“Relative TSR”)
Basic earnings per share, before
exceptional items and intangible
amortisation (“Underlying LTIP EPS”)
25% weighting
75% weighting
Relative TSR element (in each of the three years)
Below median
Between median and
70th percentile
Above 70th percentile
Nil attainment
Straight line attainment
from 30% to 100%
100% attainment
In the year ended 31 December 2014, the Company ranked
between the 74th and 75th percentile, meaning that 100%
attainment occurs for the Relative TSR element of the one-
third of the 2014 LTIP relating to 2014 performance.
(v) Share options
Under the share options scheme the Remuneration
Committee may annually grant options of up to 100%
of basic salary, allowing participants to purchase shares
in the Company at a future date. These options may be
subject to the attainment of pre-determined performance
conditions but this is not an absolute requirement. No
awards were made during 2014.
(vi) Service contracts
Executive Directors have rolling service contracts with
notice periods of not more than twelve months.
Underlying LTIP EPS element
2014
Minimum
Maximum
Between minimum
and maximum
2015
2016
3.9 pence 4.6 pence 5.5 pence
4.2 pence 5.3 pence 6.3 pence
Straight line attainment
from 30% to 100%
57
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Governance Directors’ Remuneration Report continued
Directors’ interests
The beneficial, family and contingent interests of the Directors in the share capital of the Company are shown in the
table below.
At 31 December 2014
Jim Meredith
Stewart Davies
Andrew Bryce
Richard Laker
Rory Macnamara
Roger McDowell
Beneficial
shares
Number
500,000
105,000
11,419
—
15,224
691,342
Share
options
Number
—
1,000,000
—
—
—
—
LTIP
Number
—
963,855
—
555,859
—
—
Total
shares
Number
500,000
2,068,855
11,419
555,859
15,224
691,342
Directors’ emoluments
The emoluments of the Directors during 2014 were as follows:
Stewart Davies
Richard Allen (resigned 05/06/2014)
Richard Laker (appointed 02/09/2014)
Jim Meredith
Roger McDowell
Andrew Bryce
Rory Macnamara
Paul Blackler (resigned 08/04/2013)
2014
Basic
fee/salary
£’000
222
71
48
46
31
31
31
—
480
2014
Pension
contributions
£’000
22
7
5
—
—
—
—
—
34
2014
Bonus
£’000
25
9
8
—
—
—
—
—
42
2014
Other
emoluments
£’000
11
6
4
—
—
3
—
—
24
2014
Total
£’000
280
93
65
46
31
34
31
—
580
2013
Total
£’000
99
201
—
43
28
31
31
54
487
Fees for Roger McDowell include £3,000 for acting as Chair of the Remuneration Committee.
Fees for Andrew Bryce include £3,000 for acting as Chair of the Nomination Committee.
Fees for Rory Macnamara include £3,000 for acting as Chair of the Audit Committee.
Other emoluments for Stewart Davies, Richard Allen and Richard Laker include a car allowance and other benefits such
as medical insurance. For Andrew Bryce they relate to fees for acting as liaison between the Board of Directors and the
Safety & Compliance Committees that operate at an executive level within the business.
58
www.augeanplc.com Stock code: AUG
Directors’ share plans
Share Option Scheme
Stewart Davies
Richard Allen
2014 LTIP
Stewart Davies
Richard Laker
Award date
Earliest
vesting
date
12/08/2013 12/08/2016
18/05/2011 18/05/2014
Market
price at
award date
40.25p
29.00p
Number
of shares
2013
1,000,000
603,448
1,603,448
Exercised
in year
Number
of shares
2014
— 1,000,000
(603,448)
—
(603,448) 1,000,000
Award date
Earliest
vesting
date
23/09/2014 24/03/2017
23/09/2014 24/03/2017
Market
price at
award date
49.75p
49.75p
Number
Granted
of shares
in year
2013
963,855
—
—
555,859
— 1,519,714
Number
Lapsed
of shares
in year
2014
—
963,855
—
555,859
— 1,519,714
Options outstanding under the Share Option Scheme
are exercisable, once the vesting date is reached, at the
market price set out in the table above.
Richard Allen was allowed to retain his options, set out
above, for a period of one year after his departure from the
Company on 4 June 2014, under “good leaver” status.
He subsequently exercised his options in November 2014.
Other than options held by executive Directors of Augean
PLC, set out in the table above, there are also a further
1,014,706 options held by other participants in the
Share Option Scheme, none of whom are Directors
of Augean PLC.
Options outstanding under the 2014 LTIP are exercisable,
once the vesting date is reached and subject to the
attainment of financial performance targets as described
above, at a price of ten pence per share, being the
nominal value of the ordinary shares in the Company.
The number of options granted under the 2014 LTIP in
the year was based on the mean closing mid-market
share price of the Company in the thirty business
days preceding 1 January 2014, being the start of the
performance period of the 2014 LTIP.
Other than options held by executive Directors of Augean
PLC, set out in the table above, there are also a further
1,715,320 options held by other participants in the 2014
LTIP, none of whom are Directors of Augean PLC.
The latest date for exercise of all share options is ten
years after the award date.
The mid-market price of the Company’s shares at
31 December 2014 was 55.50p. The range of the share
price during the year was 42.50p to 56.25p.
On behalf of the Remuneration Committee
Roger McDowell
Chairman of the Remuneration Committee
23 March 2015
59
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Governance
Our Financials
Contents
Independent Auditor’s Report
to the Members of Augean PLC
Consolidated Statement of
Comprehensive Income
Statements of Financial Position
Statements of Cash Flow
Statements of Changes in
Shareholders’ Equity
Notes to the Financial Statements
62
63
64
65
66
68
60
www.augeanplc.com Stock code: AUG
24010.04 21 April 2015 1:34 PM Proof 5
Augean PLC Annual Report and Accounts for the year ended 31 December 2014
61
Independent Auditor’s Report to the
Members of Augean PLC
We have audited the financial statements of Augean PLC
for the year ended 31 December 2014 which comprise
the Group and parent Company statements of financial
position, the Group statements of comprehensive income,
the Group and parent Company statements of cash flow,
the Group and parent Company statements of changes in
shareholders’ equity and the related notes. The financial
reporting framework that has been applied in their
preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent Company financial
statements, as applied in accordance with the provisions
of the Companies Act 2006.
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for
this report, or for the opinions we have formed.
Respective responsibilities of Directors
and auditor
As explained more fully in the Directors’ Responsibilities
Statement set out on pages 44 and 45, the Directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial
statements
A description of the scope of an audit of financial
statements is provided on the Financial Reporting
Council’s website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
{ the financial statements give a true and fair view of
the state of the Group’s and of the parent Company’s
affairs as at 31 December 2014 and of the Group’s
profit for the year then ended;
{ the Group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
{ the parent Company financial statements have been
properly prepared in accordance with IFRSs as
adopted by the European Union and as applied in
accordance with the provisions of the Companies Act
2006; and
{ the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Opinion on other matter prescribed by the
Companies Act 2006
In our opinion the information given in the Strategic
Report and Directors’ Report for the financial year for
which the financial statements are prepared is consistent
with the financial statements.
Matters on which we are required to
report by exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
{ adequate accounting records have not been kept by
the parent Company, or returns adequate for our audit
have not been received from branches not visited by
us; or
{ the parent Company financial statements are not in
agreement with the accounting records and returns; or
{ certain disclosures of Directors’ remuneration specified
by law are not made; or
{ we have not received all the information and
explanations we require for our audit.
Mark Overfield
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
23 March 2015
62
24010.04 21 April 2015 1:34 PM Proof 5
www.augeanplc.com Stock code: AUG Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
Before
exceptional
items
2014
£’000
Exceptional
items
2014
£’000
Note
Before
exceptional
items
2013
£’000
Exceptional
items
2013
£’000
Total
2014
£’000
Continuing operations
Revenue
Operating expenses
Operating profit
Net finance charges
Share of loss of jointly controlled
entity
Profit before tax
Taxation
Profit from continuing
operations
Discontinued operations
(Loss)/profit from
discontinued operations
Profit/(loss) for the year and
total comprehensive income
Profit/(loss) attributable to :
Equity shareholders of
Augean PLC
Non-controlling interest
Earnings per share
From continuing and
discontinued operations
Basic
Diluted
From continuing operations
Basic
Diluted
3
4
9
6
15
3
8
8
8
8
Total
2013
£’000
43,488
(38,597)
4,891
(674)
(13)
4,204
(977)
54,993
(48,847)
6,146
(759)
—
5,387
(1,097)
—
543
543
—
(5)
538
(28)
54,993
43,488
(48,304)
(38,370)
6,689
(759)
(5)
5,925
(1,125)
5,118
(674)
(13)
4,431
(1,040)
—
(227)
(227)
—
—
(227)
63
4,290
510
4,800
3,391
(164)
3,227
(94)
4,196
4,037
159
374
884
884
—
280
(911)
(3,995)
(4,906)
5,080
2,480
(4,159)
(1,679)
4,921
159
2,372
108
(4,159)
(1,787)
—
108
4.92p
4.78p
4.64p
4.51p
(1.79)p
(1.79)p
3.13p
3.13p
The notes on pages 68 to 108 form an integral part of these financial statements.
24010.04 21 April 2015 1:34 PM Proof 5
63
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials Statements of Financial Position
As at 31 December 2014
Non-current assets
Goodwill
Other intangible assets
Investments in subsidiaries
Investment in jointly controlled entity
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Current tax asset
Cash and cash equivalents
Non-current assets classified as held for sale
Current liabilities
Trade and other payables
Current tax liabilities
Financial liabilities
Net current assets/(liabilities)
Non-current liabilities
Financial liabilities
Provisions
Net assets
Shareholders’ equity
Share capital
Share premium account
Special profit reserve
Retained earnings
Equity attributable to owners of Augean PLC
Non-controlling interest
Total equity
Group
2014
£’000
Company
2013
£’000
2014
£’000
2013
£’000
Note
10
11
12
9
13
6
14
15
16
17
17
18
19
20
20
20
25
19,602
296
—
—
43,317
1,688
64,903
410
12,785
—
1,502
14,697
—
14,697
(11,213)
(579)
(1,045)
(12,837)
1,860
(6,169)
(6,839)
(13,008)
53,755
10,199
542
—
42,059
52,800
955
53,755
19,602
198
—
5
40,192
1,143
61,140
296
9,806
—
542
10,644
1,200
11,844
(9,030)
(345)
(114)
(9,489)
2,355
(8,919)
(6,622)
(15,541)
47,954
9,970
—
36,450
738
47,158
796
47,954
—
284
51,478
—
1,077
80
52,919
—
14,922
797
27
15,746
—
15,746
(1,824)
—
(19,212)
(21,036)
(5,290)
(6,169)
—
(6,169)
41,460
10,199
542
—
30,719
41,460
—
41,460
—
187
57,943
512
788
104
59,534
—
4,755
136
—
4,891
—
4,891
(828)
—
(7,625)
(8,453)
(3,562)
(8,909)
—
(8,909)
47,063
9,970
—
36,450
643
47,063
—
47,063
The notes on pages 68 to 108 form an integral part of these financial statements.
The financial statements were approved by the Board on 23 March 2015 and signed on its behalf by:
R S Laker
Group Finance Director
Augean PLC Registered number: 5199719
64
24010.04 21 April 2015 1:34 PM Proof 5
www.augeanplc.com Stock code: AUG Statements of Cash Flow
For the year ended 31 December 2014
Note
23
15
7
Operating activities
Cash generated from/(used in) operations
Finance charges paid
Tax (paid)/refunded
Net cash generated from/(used in) operating activities
Investing activities
Proceeds from disposal of property, plant and equipment
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds from disposal of discontinued operation
Net cash used in investing activities
Financing activities
Dividends paid
Issue of equity
Repayments of borrowings
(Repayment)/drawdown of loan facilities
Repayments of obligations under finance leases
Net cash (used in)/generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Group
2014
£’000
9,416
(516)
(801)
8,099
30
(6,741)
(192)
1,161
(5,742)
(349)
771
—
(1,785)
(34)
(1,397)
960
542
1,502
2013
£’000
5,862
(629)
(316)
4,917
—
(6,898)
(146)
—
(7,044)
(249)
—
(549)
3,734
(272)
2,664
537
5
542
Company
2014
£’000
2013
£’000
(7,035)
(738)
(801)
(8,574)
—
(474)
(193)
—
(667)
(349)
771
—
8,847
—
9,269
28
—
28
(7,122)
(705)
187
(7,640)
—
(64)
(146)
—
(210)
(249)
—
—
8,099
—
7,850
—
—
—
24010.04 21 April 2015 1:34 PM Proof 5
65
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials Statements of Changes in Shareholders’ Equity
For the year ended 31 December 2014
Group
At 1 January 2013
Total comprehensive income
for the year
Retained (loss)/profit
Total comprehensive income for
the year
Transactions with the owners
of the Company
Dividend (note 7)
Acquisition of non-controlling
interest in subsidiary
Reserve transfer
Share-based payments
Tax on items charged to equity
Total transactions with the owners
of the Company
At 1 January 2014
Total comprehensive income
for the year
Retained profit
Total comprehensive income for
the year
Transactions with the owners
of the Company
Dividend (note 7)
Issue of equity
Reserve transfer (note 20)
Share-based payments
Tax on items charged to equity
Total transactions with the owners
of the Company
At 31 December 2014
Share
capital
£’000
9,970
Share
premium
account
£’000
—
Special
profit
reserve
£’000
32,076
Retained
earnings
£’000
6,913
Shareholders’
equity
£’000
48,959
Non-
controlling
interest
£’000
1,119
Total
equity
£’000
50,078
—
—
—
—
—
—
—
—
9,970
—
—
—
229
—
—
—
229
10,199
—
—
—
—
—
—
—
—
—
—
—
—
542
—
—
—
542
542
—
—
—
—
4,374
—
—
4,374
36,450
—
—
(1,787)
(1,787)
108
(1,679)
(1,787)
(1,787)
108
(1,679)
(249)
(249)
—
118
(4,374)
88
29
(4,388)
738
118
—
88
29
(14)
47,158
(431)
—
—
—
(431)
796
(249)
(313)
—
88
29
(445)
47,954
4,921
4,921
159
5,080
4,921
4,921
159
5,080
—
(771)
(35,679)
—
—
(349)
771
35,679
286
13
(349)
771
—
286
13
—
—
—
—
—
(349)
771
—
286
13
(36,450)
—
36,400
42,059
721
52,800
—
955
721
53,755
The Special Profit reserve was created in June 2012 upon a court order which ordered the cancellation of the share
premium account at that time and the creation of the Special profit reserve, to which part of the share premium account
was transferred. The Special profit reserve was determined to be non-distributable until all liabilities of the Company that
existed as at the date of the court order had been extinguished. The Board has determined that this condition has been
met during the year and the reserve was deemed distributable at 31 December 2014. Accordingly, the balance on this
reserve has been transferred to retained earnings.
66
24010.04 21 April 2015 1:34 PM Proof 5
www.augeanplc.com Stock code: AUG Statements of Changes in Shareholders’ Equity
For the year ended 31 December 2014
Company
At 1 January 2013
Total comprehensive income for the year
Retained profit
Total comprehensive income for the year
Transactions with the owners of the Company
Reserve transfer
Dividend (note 7)
Share-based payments
Tax on items charged to equity
Total transactions with the owners of the Company
At 1 January 2014
Total comprehensive income for the year
Retained loss
Total comprehensive income for the year
Transactions with the owners of the Company
Dividend (note 7)
Issue of equity
Reserve transfer (note 20)
Share-based payments
Tax on items charged to equity
Total transactions with the owners of the Company
At 31 December 2014
Share
capital
£’000
9,970
—
—
—
—
—
—
—
9,970
—
—
—
229
—
—
—
229
10,199
Share
premium
account
£’000
—
—
—
—
—
—
—
—
—
—
—
—
542
—
—
—
542
542
Special
profit
reserve
£’000
32,076
—
—
4,374
—
—
—
4,374
36,450
—
—
—
(771)
(35,679)
—
—
(36,450)
—
Retained
earnings
£’000
306
Shareholders’
equity
£’000
42,352
4,847
4,847
(4,374)
(249)
88
25
(4,510)
643
(6,324)
(6,324)
(349)
771
35,679
286
13
36,400
30,719
4,847
4,847
—
(249)
88
25
(136)
47,063
(6,324)
(6,324)
(349)
771
—
286
13
721
41,460
24010.04 21 April 2015 1:34 PM Proof 5
67
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials Notes to the Financial Statements
For the year ended 31 December 2014
1 Accounting policies
(a) Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards, IFRS,
International Financial Reporting Interpretations Committee (IFRIC) interpretations endorsed by the European Union
and those parts of the Companies Act 2006 that remain applicable to companies reporting under IFRS. The financial
statements have been prepared on the historical cost basis with the exception of certain items which are measured at
fair value as disclosed in the principal accounting policies set out below. These policies have been consistently applied
to all years presented unless otherwise stated.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Although these estimates are based on management’s best
knowledge of the amount, event or actions, actual results ultimately may differ from these estimates.
The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its individual
statement of comprehensive income in these financial statements. The Company’s overall result for the year is given in
the statement of changes in shareholders’ equity.
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the
power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
Results of subsidiary undertakings acquired or sold during the year are consolidated from or to the date on which
control passes. The trading results of companies acquired during the year are accounted for under the acquisition
method of accounting.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
(ii) Jointly controlled entities
A joint control is a contractual arrangement whereby two or more parties undertake an economic activity that is subject
to joint control. Joint control exists where the strategic, financial and operating decisions relating to the activity require
the unanimous consent of the parties. Jointly controlled entities are accounted for using the equity method under which
the carrying value of the Group’s investment is made up of the cost plus the Group’s share of post-acquisition profits
and less equivalent losses as recognised in the statement of comprehensive income. Should a jointly controlled entity
result in losses in excess of the Group’s interest they will be recognised where the Group has a legal or constructive
obligation to fund those losses.
Unrealised gains on transactions with jointly controlled entities are eliminated to the extent of the Group’s interest in the
jointly controlled entity. Unrealised losses are also eliminated unless the transactions provide evidence of impairment
of the asset transferred.
The Group ceases to use the equity method of accounting on the date from which it no longer has joint control in the
jointly controlled entity or when the interest becomes held for sale.
(iii) Business combinations
The acquisition method is used to account for all acquisitions. The cost of an acquisition is measured at the fair values
on the acquisition date, which is the date on which control is transferred to the Group. The consideration is calculated
as the sum of fair value of assets transferred and liabilities incurred. In assessing control, the Group takes into
consideration potential voting rights that currently are exercisable.
68
24010.04 21 April 2015 1:34 PM Proof 5
www.augeanplc.com Stock code: AUG The Group measures goodwill at the acquisition date as:
{ the fair value of the consideration transferred; plus
{ the recognised amount of any non-controlling interests in the acquiree; less
{ the net recognised amount of the identifiable assets acquired and liabilities assumed, measured at their fair value.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships.
Such amounts generally are recognised in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities that the Group incurs
in connection with a business combination, are expensed as incurred.
Acquisitions of non-controlling interests are accounted for as transactions with the owners in their capacity as owners
and therefore no goodwill is recognised as a result. Adjustments to non-controlling interests arising from transactions
that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.
Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity.
(iv) Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and
the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue
to adopt the going concern basis of accounting in preparing the financial statements. Further detail is contained in the
Business Review.
(b) Revenue recognition
The Group’s responsibility for waste arises as soon as the waste is accepted into one of its facilities. Revenue is
therefore recognised at the point of acceptance, except when contractual agreements provide for specific services
in which case revenue is recognised at point of delivery of each separate service. Revenue shown in the statement
of comprehensive income represents charges for all waste accepted, inclusive of landfill tax where appropriate, but
exclusive of value added tax.
Rental income from operating leases is recognised on a straight-line basis over the term of the lease. The related assets
are recorded as plant and machinery within property, plant and equipment and are depreciated on a straight-line basis
over the useful lives of the assets.
(c) Exceptional items
Items that are material in size and non-recurring in nature are presented as exceptional items in the statement of
comprehensive income. The Directors are of the opinion that the separate recording of the exceptional items provides
helpful information about the Group’s underlying business performance. Examples of events which may give rise to the
classification of items as exceptional include restructuring of the business, compensation for loss of office, impairment
of goodwill and non-recurring income or expenditure.
24010.04 21 April 2015 1:34 PM Proof 5
69
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials 1 Accounting policies continued
(d) Goodwill
Goodwill arising on the acquisition of subsidiary undertakings and businesses, representing the excess of the fair
value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is capitalised as
an intangible asset. On capitalisation, the goodwill is allocated to the specific Cash Generating Unit (CGU) to which it
relates. It is tested for impairment at least annually by reference to this CGU and is carried at cost less accumulated
impairment losses. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP
amounts subject to being tested for impairment at that date and on an annual basis going forward.
(e) Other intangible assets
Intangible assets purchased separately, such as software licences that do not form an integral part of related hardware,
are capitalised at cost and amortised on a straight-line basis. This is charged to operating expenses over the asset’s
useful economic life of three years.
Intangible assets acquired through a business combination such as customer contracts are initially measured at fair
value and amortised on a straight-line basis over their useful economic lives to the profit and loss account which are
taken to be the length of the contract. An intangible asset is considered identifiable only if it is separable or if it arises
from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or
from other rights and obligations. After initial recognition, assets acquired as part of a business combination are carried
at cost less accumulated amortisation and any impairment losses.
Methods of amortisation, residual value and useful lives are reviewed, and if necessary adjusted, at each statement
of financial position date.
(f) Investments
Investments are in respect of subsidiaries and a jointly controlled entity. Investments held as non-current assets are
stated at historic cost less any provision for impairment.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
The cost of an item of property, plant and equipment comprises its purchase price and any costs directly attributable
to bringing the asset into use. Borrowing costs related to the purchase of property, plant and equipment are capitalised
where the cost is directly attributable to the property, plant or equipment being purchased.
Subsequent costs are included in an asset’s carrying value or recognised as a separate asset, when it is probable that
future economic benefits associated with the additional expenditure will flow to the Group and the cost of the item can
be measured reliably. All other costs are charged to profit or loss when incurred.
The acquisition, commissioning and site infrastructure costs for each landfill site are capitalised when incurred. These
costs are then depreciated over the useful life of the site, which is assessed with reference to the usage of the void
space available.
Cell engineering costs are capitalised when incurred. The depreciation charged to profit or loss is calculated with
reference to actual costs to date and expected future costs for each cell including the cost of the future cap, the total
of which is spread over the useful economic life of the cell. Useful life is assessed by reference to the usage of the void
space available and the rate at which the void space is filled.
70
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG Freehold land which is not part of a landfill site is not depreciated. Depreciation is provided evenly on all other property,
plant and equipment at rates calculated to write off the cost, less estimated residual value, of each asset over its useful
life as follows:
Freehold buildings
Plant and machinery
– 50 years
– two to ten years
Methods of depreciation, residual values and useful lives are reviewed and adjusted, if appropriate, at each statement
of financial position date.
Assets held under finance leases are depreciated over the shorter of their expected useful lives or, where there
is no reasonable certainty that title will be obtained at the end of the lease term, the term of the relevant lease.
The gain or loss arising from the disposal or retirement of an item of property, plant and equipment is determined as
the difference between the net disposal proceeds and the carrying amount of the item and is included in profit or loss.
Finance leases and hire purchase arrangements
Where the Group enters into a lease which entails taking on substantially all of the risks and rewards of ownership of
an asset, the lease is treated as a finance lease and the asset is capitalised. Future instalments under such leases, net
of finance charges, are recognised as a liability. Rentals payable are apportioned between the finance element, which
is charged to profit or loss so as to give an approximate constant rate of charge on the outstanding obligation and the
capital element which reduces the outstanding obligation for future instalments.
The asset and associated liability are recorded in the statement of financial position within property, plant and
equipment and financial liabilities respectively at their fair value or, if lower, at the present value of the minimum lease
payments, both determined at the inception of the lease.
Depreciation is calculated in accordance with the above depreciation policies.
Other leases are treated as operating leases, the rentals for which are charged to profit or loss on a straight-line basis
over the lease term.
Restoration, capping and after-care provisions
The anticipated total cost of restoration, capping, post-closure monitoring and after-care is charged to profit or loss
over the expected useful life of the sites in proportion to the amount of void consumed at the sites during the period.
The costs of restoration and post-closure monitoring are charged against the provision when incurred. The provision
has been estimated using current costs and is discounted. When the effect is material, the expected future cash flows
required to settle the obligation are discounted at the pre-tax rate that reflects the current market assessments of the
time value of money and the risks specific to the obligation.
(h) Impairment of non-current assets
At each statement of financial position date, the Group assesses whether there is any indication that its assets have
been impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment, if any. If it is not possible to estimate the recoverable amount of the individual asset, the
recoverable amount of the CGU to which the asset belongs is determined.
The recoverable amount is defined as the higher of fair value less costs to sell and value in use at the date the
impairment review is undertaken. Value in use represents the present value of expected future cash flows discounted
on a pre-tax basis, using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset or CGU. If the recoverable amount of an asset is less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount. That reduction is recognised as an impairment loss.
24010.04 21 April 2015 1:34 PM Proof 5
71
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials 1 Accounting policies continued
An impairment loss relating to assets carried at cost less any accumulated depreciation or amortisation is recognised
immediately in profit or loss.
Goodwill is tested for impairment on an annual basis. An impairment loss is recognised for CGUs if the recoverable
amount of the unit is less than the carrying amount of the unit. The impairment loss is allocated to reduce the carrying
amount of the assets of the unit by first reducing the carrying amount of any goodwill allocated to the CGU and then
reducing the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.
If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its
recoverable amount but limited to the carrying amount that would have been determined had no impairment loss been
recognised in prior years. A reversal of an impairment loss is recognised in profit or loss. Any impairments of goodwill
cannot be subsequently reversed.
(i) Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased
asset and recognised on a straight-line basis over the lease term.
(j) Inventories
Inventories are stated at the lower of cost (measured on a first-in first-out basis) and net realisable value and, where
appropriate, are stated net of provisions for impairment.
(k) Tax
Current tax
Current tax is provided at amounts expected to be paid (or recovered) using tax rates and laws that have been enacted
or substantively enacted at the statement of financial position date. The tax currently payable is based on taxable
profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because
it excludes items of income that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible.
Deferred tax
Deferred tax on temporary differences at the statement of financial position date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes is accounted for using the statement of financial
position liability method.
Using the liability method, deferred tax liabilities are recognised in full for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against
which deductible temporary differences can be utilised. However, if the deferred tax asset or liability arises from the
initial recognition of goodwill or the initial recognition of an asset or liability in a transaction, other than a business
combination, that at the time of the transaction affects neither accounting nor taxable profit, it is not recognised.
Deferred tax on temporary differences associated with shares in subsidiaries and jointly controlled entities is not
provided if reversal of these temporary differences can be controlled by the Group and it is probable that the reversal
will not occur in the foreseeable future.
72
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply when the asset is
realised, or the liability settled, based on tax rates and laws enacted or substantively enacted at the statement of
financial position date.
Current and deferred tax are recognised in profit or loss except when they relate to items recognised in other
comprehensive income or equity, where they are similarly recognised in other comprehensive income or equity.
(l) Retirement benefits
Contributions made by the Group to individual money purchase pension schemes are charged to profit or loss during
the period to which they relate.
(m) Equity-settled share-based payments
IFRS 2 ‘Share-based Payments’ requires that an expense for equity instruments granted is recognised in the financial
statements based on their fair values at the date of the grant. This expense, which is in relation to employee share
options and executive LTIP schemes, is recognised over the vesting period of the scheme based on the number of
instruments expected to vest. The fair value of employee services is determined by reference to the fair value of the
awarded grant calculated using the Black Scholes model or Binomial Lattice model, excluding the impact of any non-
market vesting conditions.
At the statement of financial position date, the Group revises its estimate of the number of share incentives that
are expected to vest. The impact of the revisions of original estimates, if any, is recognised in profit or loss, with a
corresponding adjustment to equity, over the remaining vesting period.
(n) Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily
through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held
for sale, the assets, or components of a disposal group, are re-measured in accordance with the Group’s accounting
policies. Thereafter, generally the assets, or disposal group, are measured at the lower of their carrying amount and fair
value less costs to sell. Impairment losses on initial classification as held for sale and subsequent gains and losses on
revaluation are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.
Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or
depreciated.
(o) Cash and cash equivalents
Cash and cash equivalents comprise demand deposits and cash in hand together with short term highly liquid deposits
with a maturity of three months or less, from the date of acquisition, which are subject to an insignificant risk of change
in value.
(p) Financial instruments
(i) Financial assets
Financial assets are categorised as other loans and receivables. The Group’s trade and other receivables fall in the
‘loans and receivables’ category. Financial assets are assigned to this category on initial recognition, depending on the
characteristics of the instrument and its purpose. A financial instrument’s category is relevant for the way it is measured
and whether any resulting income and expenses are recognised in profit or loss or other comprehensive income.
Augean recognises all financial assets when the Group becomes party to the contractual provisions of the instrument.
Financial assets are recognised initially at fair value plus transaction costs. An annual assessment is made to ascertain
whether there is objective evidence that the financial assets are impaired. All income and expenses relating to financial
assets are recognised in profit or loss.
24010.04 21 April 2015 1:34 PM Proof 5
73
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials 1 Accounting policies continued
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. After initial recognition these are measured at amortised cost using the effective interest method, less
any provision for impairment. Any change in their value is recognised in profit or loss. Discounting, however, is omitted
where the effect is immaterial.
Significant receivables are considered for impairment on a case-by-case basis when they are past due at the statement
of financial position date or when objective evidence is received that a specific counterparty will default. Provision
against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts
due to it in accordance with the original terms of those receivables. The amount of the impairment is determined as the
difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the
original effective interest rate.
(ii) Financial liabilities
The Group’s financial liabilities include trade payables, debt and finance liabilities. Trade payables are not interest
bearing and are recognised initially at fair value and carried at amortised cost. Debt is initially recognised at fair value
less transaction costs and carried at amortised cost. The Group’s policy is that no trading in financial instruments or
derivatives shall be undertaken.
Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are
included in the statement of comprehensive income under ‘finance charges’.
(iii) Free cash flow
Free cash flow is a measure defined as net operating cash flow less purchase of property, plant and equipment. It is
determined as part of the capital management assessment and is reconciled in note 26.
(iv) EBITDA
EBITDA is a non-IFRS measure used by management as a tool for approximating operating cash flows. It represents
Earnings before Interest, Tax, Depreciation, Amortisation and impairment. It is determined as part of the cash flow
reconciliation shown in note 23.
(q) Equity
Equity comprises share capital, share premium, special profit reserve and retained profit and losses. Share capital
represents the nominal value of equity shares. Share premium account represents the excess over nominal value of the
fair value of consideration received for equity shares, net of expenses of the share issue. The Special profit reserve was
created in June 2012 upon a Court order which ordered the cancellation of the share premium account at that time
and the creation of the Special profit reserve, to which part of the Share premium account was transferred. The Special
profit reserve was determined to be non-distributable until all liabilities of the Company that existed as at the date of the
court order had been extinguished. The Board has determined that this condition has been met and the reserve was
deemed distributable at 31 December 2014. Accordingly, the balance on this reserve has been transferred to Retained
earnings. Retained profit and losses represent retained profit and losses and equity-settled share-based payment
employee remuneration.
(r) Significant judgements and key sources of estimation uncertainty
The preparation of the financial statements in conformity with IFRS requires management to make estimates and
assumptions that affect the application of policies and reported amounts of assets, liabilities, income, expenses and
related disclosures. The estimates and underlying assumptions are based on historical experience, the best available
information and various other factors that are believed to be reasonable under the circumstances. This forms the basis
of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
74
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG Actual results may however differ from these estimates. The estimates and underlying assumptions are reviewed on
an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on
which the estimate was based, or as a result of new information or further information. Such changes are recognised
in the period in which the estimate is revised. Certain accounting policies are particularly important to the preparation
and explanation of the Group’s financial information. Key assumptions about the future and key sources of estimation
uncertainty that have a risk of causing a material adjustment to the carrying value of assets and liabilities over the next
twelve months are set out below.
Impairment of goodwill and fixed assets
The Group has property, plant and equipment with a carrying value of £43,317,000 (note 13) and goodwill with a
carrying value of £19,602,000 (note 10). These assets are reviewed annually for impairment as described in these
financial statements to ensure that goodwill and property, plant and equipment are not carried above their estimated
recoverable amounts. To assess if any impairment exists, estimates are made of the future cash flows expected
to result from the use of the asset and its eventual disposal. Actual outcomes could vary from such estimates of
discounted future cash flows. Factors such as changes in expected use of property, plant and equipment, closure of
facilities, or lower than anticipated revenues could result in impairment. For further details of assumptions see note 10.
Site development and cell engineering/capping
Total anticipated site development and cell engineering/capping costs are charged to profit or loss as void usage
progresses. Costs of site development and cell engineering/capping are estimated using either the work of external
consultants or internal experts. Management uses its judgement and experience to provide for these estimated costs
over the life of the site and cell.
See note 18 for further details of calculation methodology, assumptions used and potential sensitivities to these
calculations.
After-care costs
Provision is made for after-care costs as soon as the obligation arises and is charged to profit or loss as void
usage progresses. After-care costs are estimated using either the work of external consultants or internal experts.
Management uses its judgement and experience to provide for these estimated costs over the life of the site. See note
18 for further details of calculation methodology, assumptions used and potential sensitivities to these calculations.
Other provisions
Other provisions are made where management judges that a probable future outflow of resources will occur, which
can be reliably estimated, arising from a past event. Estimates are based on the work of internal experts and previous
operational and commercial experience. See note 18 for further details of calculation methodology, assumptions used
and potential sensitivities to these calculations.
Income taxes
At 31 December 2014, the net liability relating to current income tax is £579,000 (2013: £345,000). A deferred tax
asset of £1,688,000 (2013: £1,143,000) has also been recognised. Estimates may be required in determining the level
of current and deferred income tax assets and liabilities, which the Directors believe are reasonable and adequately
recognise any income tax related uncertainties. Various factors may have favourable or adverse effects on the income
tax assets or liabilities. These include changes in tax legislation, tax rates and allowances, future levels of spending and
the Group’s level of future earnings.
24010.04 21 April 2015 1:34 PM Proof 5
75
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials 1 Accounting policies continued
(s) New IFRS standards and interpretations not applied
The following new standards, amendments to standards and interpretations will be mandatory for the first time in future
financial years.
{ IFRS 9 Financial Instruments (IASB effective date 1 January 2018)
{ IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016)
{ IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017)
{ IFRIC Interpretation 21 Levies (IASB effective 1 January 2014)
{ Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (IASB effective date 1 July 2014)
{ Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (IASB effective date
1 January 2016)
{ Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38
(IASB effective date 1 January 2016)
{ Annual Improvements to IFRSs 2010-2012 Cycle (IASB effective date generally 1 July 2014)
{ Annual Improvements to IFRSs 2011-2013 Cycle (IASB effective date 1 July 2014)
{ Annual Improvements to IFRSs 2012-2014 Cycle (effective 1 January 2016)
{ Amendments to IAS 16 and IAS 41: Bearer Plants (effective 1 January 2016)
{ Amendments to IAS 27: Equity Method in Separate Financial Statements (effective 1 January 2016)
{ Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10
and IAS 28 (effective 1 January 2016)
The revised standards will be adopted when effective in the Group’s consolidated financial statements, although are not
expected to have a significant impact on the Group.
76
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG 2 Operating segments
The Group has six reportable segments, one of which is discontinued, which are the Group’s strategic business units.
These business units are monitored and strategic decisions are made on the basis of each business unit’s operating
performance. The Group’s business units provide different services to their customers and are managed separately as
they are subject to different risks and returns. The Group’s internal organisation and management structure and its system
of internal financial reporting are based primarily on these operating business units. For each of the business units, the
Group’s Chief Executive Officer (CEO) (the chief operating decision-maker) reviews internal management reports on at least
a monthly basis. The following summary describes the operations of each of the Group’s reportable segments:
{ Energy and Construction (2013: Land Resources): Augean operates three modern hazardous and non-hazardous
landfill operating sites based at East Northants Resource Management Facility (ENRMF), Thornhaugh in
Northamptonshire and Port Clarence on Teesside, providing waste remediation, treatment and disposal services to
its customers. The business unit includes a site at Cooks Hole in Northamptonshire where minerals are extracted
and also generates energy as electricity from closed landfill cells.
{ Radioactive Waste Services: Augean provides waste disposal services of low level radioactive wastes and naturally
occurring radioactive material produced in the UK. 2013 activities were previously reported as part of the Land
Resources segment.
{ Augean Integrated Services (AIS): Augean operates a High Temperature Incinerator at Sandwich, East Kent and a
site in Cannock focused on Total Waste Management solutions.
{ Augean North Sea Services: An 81% owned subsidiary company during the year; this business unit provides waste
management and waste processing services to offshore oil and gas operators in the North Sea.
{ Industry and Infrastructure (2013: Oil & Gas Services): 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.
{ Waste Network (discontinued): Augean operated four waste transfer sites across the UK, transporting, recovering,
recycling and disposing of hazardous wastes on behalf of its customers. This business unit no longer exists and the
sites operated at Hinckley, Worcester and Rochdale were sold in March 2014. The site at Cannock became part of
the AIS operation in January 2014.
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.
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 Chief
Executive Officer. 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. Central costs for the proper governance and resources required to operate the plc
Board and listing have been separately reported.
All activities arise solely within the United Kingdom. Inter-segment trading is undertaken on normal commercial terms.
24010.04 21 April 2015 1:34 PM Proof 5
77
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials 2 Operating segments continued
Information about reportable segments
Energy and
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry
and
Infrastructure
£’000
Augean
North Sea
Services
£’000
Waste
Network
Discontinued
£’000
Group
£’000
2014
53,258
787
5,048
8,254
9,063
—
76,410
(10,071)
(203)
(1,104)
(3,016)
(3,748)
— (18,142)
1,688
1,502
79,600
(7,124)
(579)
(25,845)
Energy and
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry
and
Infrastructure
£’000
Augean
North Sea
Services
£’000
Waste
Network
Discontinued
£’000
Group
£’000
2013
43,605
680
1,311
17,533
6,285
1,880
71,294
5
1,143
542
72,984
(10,478)
(160)
(1,078)
(2,262)
(1,269)
(519)
(15,766)
(8,919)
(345)
(25,030)
Assets
Segment assets
Unallocated segment
assets
Deferred tax asset
Cash and cash equivalents
Group total assets
Liabilities
Segment liabilities
Unallocated segment
liabilities
Bank overdraft and loans
Current tax liabilities
Group total liabilities
Assets
Segment assets
Unallocated segment
assets
Investment in jointly
controlled entity
Deferred tax asset
Cash and cash equivalents
Group total assets
Liabilities
Segment liabilities
Unallocated segment
liabilities
Bank overdraft and loans
Current tax liabilities
Group total liabilities
78
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG Revenue
Hazardous landfill activities
Non-hazardous landfill
activities
Waste treatment activities
Total waste management
activities
Energy generation
APCR management
Radioactive waste
management
Processing of offshore waste
Rental of offshore equipment
and personnel
Waste transfer activities
Total revenue net of
landfill tax
Landfill tax
Total revenue including
inter-segment sales
Inter-segment sales
Revenue
Result
Operating profit/(loss)
before exceptional items
Exceptional items
Operating profit/(loss)
Finance charges
Central costs
Share of loss of jointly
controlled entity
Profit before tax
Tax (note 6)
Profit after tax
Attributable to: Equity
shareholders of the parent
company
Non-controlling interest
Other information
Capital expenditure
Depreciation and
amortisation
Energy and
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry
and
Infrastructure
£’000
Augean
North Sea
Services
£’000
Waste
Network
(discontinued)
£’000
2014
Group
£’000
8,605
1,550
2,075
—
—
—
— 17,341
—
—
—
—
—
218
218
—
141
6,989
1,827
6,312
7,416
1,096
53,352
6,319
218
59,671
(7)
(4,467)
211
55,204
8,605
1,550
—
—
141
6,989
—
—
—
—
17,285
6,319
23,604
(1,638)
21,966
—
—
—
—
—
—
1,827
—
—
—
1,827
—
1,827
—
1,827
6,341
(77)
6,264
1,019
(77)
942
—
—
2,075
—
—
—
2,458
14,883
—
—
—
—
—
—
—
6,312
7,416
878
—
—
—
—
—
—
14,883
—
14,606
—
14,883
14,606
(2,377)
(75)
12,506
14,531
—
—
—
—
—
—
4,533
—
4,533
(370)
4,163
(714)
(85)
(799)
(597)
861
264
1,016
(79)
937
(124)
(218)
(342)
6,941
325
7,266
(759)
(919)
(5)
5,583
(503)
5,080
4,921
159
6,948
3,882
79
2,332
1,920
55
62
2,366
578
1,617
314
1,101
485
—
—
24010.04 21 April 2015 1:34 PM Proof 5
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials 2 Operating segments continued
Energy and
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry
and
Infrastructure
£’000
Augean
North Sea
Services
£’000
Waste Network
(discontinued)
£’000
2013
8,831
1,063
—
128
5,089
—
—
—
—
15,111
6,849
21,960
(1,574)
20,386
6,182
(26)
6,156
Revenue
Hazardous landfill activities
Non-hazardous landfill
activities
Waste treatment activities
Energy generation
APCR management
Radioactive waste
management
Processing of offshore waste
Rental of offshore equipment
and personnel
Waste transfer activities
Total revenue net of
landfill tax
Landfill tax
Total revenue including
inter-segment sales
Inter-segment sales
Revenue
Result
Operating profit/(loss)
before exceptional items
Exceptional items
Operating profit/(loss)
Finance charges
Central costs
Share of loss of jointly
controlled entity
Loss before tax
Tax
Loss after tax
Attributable to: Equity
shareholders of the parent
company
Non-controlling interest
Other information
Capital expenditure
Depreciation and
amortisation
—
—
—
—
—
1,625
—
—
—
—
—
—
—
1,463
12,574
—
—
—
—
—
1,147
—
—
—
—
—
—
—
—
—
—
—
—
5,179
3,719
452
Group
£’000
8,831
1,063
—
—
— 14,037
—
—
—
—
—
3,982
128
5,089
1,625
5,179
3,719
5,581
1,625
2,610
12,574
9,350
3,982
45,252
—
—
—
—
—
6,849
1,625
2,610
12,574
9,350
3,982
52,101
—
—
1,625
2,610
(2,981)
9,593
(77)
9,273
(346)
(4,978)
3,636
47,123
908
—
908
(1,117)
(25)
(1,142)
(993)
(151)
(1,144)
682
(25)
657
(1,259)
(4,043)
(5,302)
4,403
(4,270)
133
(674)
(544)
(13)
(1,098)
(581)
(1,679)
(1,787)
108
3,292
956
—
—
612
1,154
1,051
177
6,286
229
1,044
360
82
2,671
80
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG
3 Operating profit
Total operating profit for the year is arrived at after charging/(crediting):
Fees payable to the Company’s auditor for the audit of the annual financial
statements
Fees payable to the Company’s auditor for other services:
– audit of the financial statements of the Company’s subsidiaries pursuant to legislation
– other services
Amortisation of intangible assets
Depreciation of property, plant and equipment:
– owned assets
– assets held under finance leases and hire purchase contracts
Operating leases:
– land and buildings
– plant and machinery
Loss on sale of property, plant and equipment
Exceptional items:
Net settlement of legal case
Restructuring charges
Refinancing charges
Legal and professional due diligence charges
Other
Exceptional (income)/charge from continuing operations
Loss on disposal of asset held for sale and other charges
Impairment of Waste Network business unit
Restructuring charges
2014
£’000
62
8
34
104
95
2013
£’000
61
8
72
141
71
3,751
36
2,481
189
290
580
6
(939)
214
33
—
149
(543)
218
—
—
525
484
—
—
218
—
9
—
227
—
3,870
173
Exceptional income from settlement of legal case relates to the settlement of litigation with the former owners of HiTech
Limited, a business Augean acquired during 2008. The above figure is stated net of £661,000 of legal and professional
charges associated with the litigation.
The loss on disposal of asset and impairment losses relate to the closure and sale of the Waste Network business.
24010.04 21 April 2015 1:34 PM Proof 5
81
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
4 Net finance charges
Interest payable
Interest and charges payable on bank loans and overdrafts
Interest on finance leases and hire purchase contracts
Unwinding of discount on provisions
Interest receivable
Bank and other interest receivable
Net finance charges
5 Group and Company employees
The average monthly number of employees analysed by function was:
Sales
Operations
Administration
Wages and salaries
Social security costs
Other pension costs
2014
£’000
2013
£’000
643
14
102
759
—
—
759
2014
Number
27
225
48
300
2014
£’000
11,401
1,291
431
13,123
559
20
100
679
(5)
(5)
674
2013
Number
49
213
30
292
2013
£’000
10,126
1,112
442
11,680
Details of other statutory Directors’ remuneration disclosures, as required by the AIM rules, are given in the Directors’
remuneration report under Directors’ emoluments and Directors’ share plans.
The Directors have identified 15 (2013: 16) key management personnel. The total key management personnel
compensation, including the Non-executive Directors, presented below, was as follows:
Short term employment benefits
Post employment benefits
Share-based payments
2014
£’000
1,224
105
101
1,430
2013
£’000
1,265
99
88
1,452
82
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG
6 Taxation
Group
2014
£’000
Continuing
operations
£’000
Discontinued
operations
(26)
—
(26)
—
(596)
(596)
(622)
Current tax
UK corporation tax on profit for the year
Adjustments in respect of prior years
Deferred tax
Charge in respect of the current year
Adjustments in respect of prior years
Tax charge/(credit) on the result for
the year
899
162
1,061
132
(68)
64
1,125
Tax reconciliation for continuing operations
Profit before tax from continuing operations
Tax at theoretical rate
Effects of:
– (income)/expenses not deductible for tax purposes
– other
– change in tax rate
– effect of share options
– adjustments in respect of prior periods
Tax charge on results
Deferred tax
Group
Deferred tax asset
Deferred tax liability
Company
Deferred tax asset
2013
£’000
Continuing
operations
£’000
Discontinued
operations
(300)
—
(300)
(96)
—
(96)
708
85
793
185
(1)
184
977
£’000
Total
873
162
1,035
132
(664)
(532)
503
£’000
Total
408
85
493
89
(1)
88
(396)
581
2014
2013
£’000
5,925
1,274
(136)
—
(80)
(27)
94
1,125
%
21.5
(2)
—
(1)
(1)
2
19.0
£’000
4,204
978
140
(337)
144
(33)
85
977
2014
£’000
1,688
—
1,688
2014
£’000
80
80
%
23.3
3
(5)
3
1
2
23.2
2013
£’000
1,169
(26)
1,143
2013
£’000
104
104
All deferred tax assets and liabilities have arisen on the temporary timing differences between the tax base of the assets
and their carrying value in the statement of financial position.
IAS 12 (Income Taxes) permits the offsetting of tax assets and liabilities within the same tax jurisdiction and which the
Company has the intention to realise and settle simultaneously. All of the deferred tax assets were available for offset
against deferred tax liabilities and as such have been presented net in the statement of financial position.
24010.04 21 April 2015 1:34 PM Proof 5
83
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
6 Taxation continued
The movement in the net deferred tax asset during the year was as follows:
Group
At beginning of the year
Charged to the income statement during the year
Credited directly to equity
Adjustment in respect of prior years
At end of the year
Company
At beginning of the year
(Charged)/credited to the income statement during the year
Adjustment in respect of prior years
At end of the year
2014
£’000
1,143
(132)
13
664
1,688
2013
£’000
1,231
(89)
—
1
1,143
2014
£’000
2013
£’000
104
(24)
—
80
41
85
(22)
104
The reduction in the main rate of corporation tax from 23% to 21% effective from 1 April 2014 and 21% to 20% from 1
April 2015 has been substantively enacted at the balance sheet date. Accordingly, deferred tax balances have been valued
at the lower rate of 20% in these accounts to the extent that timing differences are expected to reverse after this date.
No further reductions to the main rate of corporation tax from 20% have been proposed.
No deferred tax has been recognised during the year in respect of certain temporary differences of £3,615,000 (2013:
£145,000) to the extent that the expected benefit will occur more than two years into the future, as there is uncertainty
over the extent and timing of their recovery. The potential deferred tax assets in respect of those temporary differences
are analysed as follows:
Depreciation in excess of capital allowances
Other temporary differences
Unrecognised deferred tax asset
There are no unrecognised deferred tax assets in the Company (2013: £29,000).
7 Dividends
Proposed final dividend for the year ended 31 December 2014 of 0.5 pence per share
(2013: 0.35 pence per share)
Total
2014
£’000
—
924
924
2014
£’000
510
510
2013
£’000
—
29
29
2013
£’000
349
349
At the forthcoming Annual General Meeting, the Board will recommend to shareholders that a resolution is passed to
approve payment of a dividend for the year ended 31 December 2014. This has not been included as a liability in these
financial statements.
The payment of the dividend will not have corporation tax consequences for the Group.
84
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG
8 Earnings per share
The calculation of basic earnings per share (EPS) is based on the profit attributable to ordinary shareholders of
£4,921,000 (2013: £1,787,000 loss) and a weighted average number of ordinary shares outstanding of 100,053,156
(2013: 99,699,414), calculated as follows:
Earnings for the purposes of basic and diluted EPS
Exceptional items
Earnings for the purposes of adjusted basic and diluted EPS
Discontinued operations
Earnings for the purposes of basic and diluted adjusted EPS for continuing
operations only
2014
£’000
4,921
(884)
4,037
94
2013
£’000
(1,787)
4,159
2,372
911
4,131
3,283
The exceptional items (note 3) have been adjusted, in the adjusted earnings per share, to better reflect the underlying
performance of the business, when presenting the basic and diluted earnings per share.
Number of shares
Weighted average number of shares for basic earnings per share
Effect of dilutive potential ordinary shares from share options
Weighted average number of shares for diluted earnings per share
Earnings per share
Basic
Diluted
Adjusted earnings per share
Basic
Diluted
Earnings per share – Continuing operations
Basic
Diluted
Adjusted earnings per share – Continuing operations
Basic
Diluted
Earnings per share – Discontinued operations
Basic
Diluted
2014
£’000
2013
£’000
100,053,156
2,894,941
102,948,097
99,699,414
—
99,699,414
4.92p
4.78p
4.03p
3.92p
4.64p
4.51p
4.13p
4.01p
(1.79)p
(1.79)p
2.38p
2.38p
3.13p
3.13p
3.29p
3.29p
(0.09)p
(0.09)p
(0.91)p
(0.91)p
24010.04 21 April 2015 1:34 PM Proof 5
85
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
9 Investment in jointly controlled entity
Terramundo Limited (‘Terramundo’) is a 50:50 jointly controlled entity between Augean PLC and DEC NV. No trading
has taken place during the current or previous year.
During the year ended 31 December 2014 the jointly controlled entity generated the following revenue and costs:
Revenue
Costs
Loss for the year
Augean PLC’s share of the loss for the year
2014
£’000
—
(10)
(10)
(5)
2013
£’000
—
(26)
(26)
(13)
At 31 December 2014 the jointly controlled entity held net liabilities of £1,032,000 (2013: £1,013,000), of which the
Group’s 50% share was £516,000 (2013: £507,000).
The liabilities of the jointly controlled entities related entirely to amounts due from the joint venture partners. Subsequent
to the period end it was agreed by both joint venture shareholders to begin proceedings to close the joint venture
company. The Group therefore considers the investment to be impaired and has written the investment down to its
recoverable amount. The recoverable amount is expected to be nil. The receivable from Terramundo has been fully
provided against. A loss of £5,000 was realised.
The cost of investment held by Augean PLC, in its 50% interest at 31 December 2014 was £nil (2013: £100).
The net liabilities of the jointly controlled entity are analysed below, for information purposes:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net liabilities
2014
£’000
—
10
—
(1,042)
(1,032)
2013
£’000
—
14
—
(1,027)
(1,013)
The overall position in respect of the jointly controlled entity is as below:
Investment in the long term future of the venture
Share of net liabilities of the jointly controlled entity
Investment in jointly controlled entity
Group
Company
2014
£’000
512
(512)
—
2013
£’000
512
(507)
5
2014
£’000
—
—
—
2013
£’000
512
—
512
86
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG
10 Goodwill
Cost
At 1 January 2013
At 1 January 2014
At 31 December 2014
Provision for impairment
At 1 January 2013
Impairment charge
At 1 January 2014
At 31 December 2014
Net book value
At 31 December 2014
At 1 January 2014
At 1 January 2013
£’000
103,768
103,768
103,768
(82,063)
(2,103)
103,768
(84,166)
19,602
19,602
21,705
The goodwill arose on the acquisition of subsidiary undertakings and businesses, and represents the excess of the fair
value of the consideration given over the fair value of the identifiable assets and liabilities acquired. The goodwill which
arose before the date of transition to IFRS has been retained at the previous UK GAAP amounts.
Goodwill has been allocated to the Group’s Cash Generating Units (CGU’s) which are defined as the Group’s reportable
segments, with the exception of AIS which is considered as two separate CGUs, one of which is the East Kent High
Temperature Incinerator (EKHTI). This is the lowest level at which CGUs are monitored for internal management purposes.
The goodwill previously held against the Waste Network has been written down as a result of the closure of this
business unit (note 15).
The allocation of goodwill by CGU is as follows:
Energy and Construction business unit
Industry and Infrastructure business unit
Total
2014
£’000
12,420
7,182
19,602
2013
£’000
12,420
7,182
19,602
Goodwill is tested for impairment annually at the balance sheet date and as and when other events or changes in
circumstance indicate that the carrying amount may not be fully recoverable. The goodwill impairment test is performed
by comparing the net book value of the goodwill and other non-current assets for a particular CGU to its value in use
estimated on a discounted cash flow basis.
Value in use calculations have also been carried out for the following assets or investments which do not contain
goodwill and which were not carried out in the prior year:
{ The High Temperature Incinerator at East Kent, due to the level of performance being lower than management’s
initial expectation.
{ Augean North Sea Services, due to the significant decline in world oil prices, seen in the latter part of 2014 and in
2015, leading to an increased risk surrounding the profitability of this business, in light of those macroeconomic factors
24010.04 21 April 2015 1:34 PM Proof 5
87
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
10 Goodwill continued
The discounted cash flows have been prepared separately for each CGU tested. The key assumptions for the Energy
& Construction CGU’s cash flows are:
{ based on approved budgets and plans for 2015 and, beyond this period, have been forecast for a total period of
20 years;
{ revenue growth over the time horizon is expected to achieve 1% per annum;
{ 1% increase in maintenance capital expenditure from 2016 onwards;
{ cash operating costs and maintenance capital expenditure are expected to increase by 1% per annum, reflecting
the impact of cost inflation offset by effective underlying cost control.
Using the discount rate below there is no indication of impairment with headroom of £10.8m (2013: £7.5m). Sensitivity
analysis has been performed over the key assumptions which indicate the following impact, meaning reduction or
increase in headroom:
Discount factor
EBITDA margin
Revenue growth rate
EBITDA is as described in note 1.
Sensitivity
1%
1%
1%
Impact in
2014
£3.4m
£1.5m
£1.3m
Impact in
2013
£3.4m
£0.3m
£1.2m
The key assumptions for the Industry and Infrastructure CGU’s cash flows are:
{ based on approved budgets and plans for 2015 and, beyond this period, have been forecast for a total period of
20 years;
{ revenue growth of 3% per annum in 2016, decreasing to 1% in 2021 and remaining constant at 1% from that date;
{ 1% increase in maintenance capital expenditure from 2016 onwards;
{ EBITDA margin growth of 1% per annum in 2016, decreasing to nil in 2020 and remaining constant thereafter.
Using the discount rate below there is no indication of impairment with headroom of £1.2m (2013: £2.7m). Sensitivity
analysis has been performed over the key assumptions which indicate the following impact, meaning reduction or
increase in headroom:
Discount factor
EBITDA margin
Revenue growth rate
Sensitivity
1%
1%
1%
Impact in
2014
£0.9m
£1.4m
£1.2m
Impact in
2013
£1.8m
£2.0m
£5.5m
The key assumptions for the EKHTI CGU’s cash flows are:
{ based on approved budgets and plans for the three year period 2015-2017 and, beyond this period, have been
forecast for a further period of 17 years;
{ revenue growth of 2% per annum until from 2018 until 2022, decreasing to 1% in 2023 and remaining constant at
1% from that date;
{ 1% increase in maintenance capital expenditure from 2016 onwards;
{ operating margin growth of nil per annum from 2018 onwards.
88
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG Using the discount rate below there is no indication of impairment with headroom of £0.7m. Sensitivity analysis has been
performed over the key assumptions which indicate the following impact, meaning reduction or increase in headroom:
Discount factor
EBITDA margin
Revenue growth rate
Sensitivity
1%
1%
1%
Impact in
2014
£0.3m
£0.3m
£0.2m
Impact in
2013
—
—
—
The key assumptions for the Augean North Sea Services CGU’s cash flows are:
{ based on approved budgets and plans for 2015, and subsequently adjusted downwards to reflect the increased
macroeconomic risk in the North Sea oil and gas market; and beyond this period, have been forecast for a total
period of 20 years;
{ no revenue or operating margin growth from 2016 onwards;
{ 1% increase in maintenance capital expenditure from 2016 onwards.
Using the discount rate below there is no indication of impairment with headroom of £3.9m. Sensitivity analysis has been
performed over the key assumptions which indicate the following impact, meaning reduction or increase in headroom:
Discount factor
EBITDA margin
Revenue growth rate
Sensitivity
1%
1%
1%
Impact in
2014
£0.6m
£1.4m
£1.2m
Impact in
2013
—
—
—
The cash flows for all CGUs have been discounted using a pre-tax discount rate of 10.5% (2013: 13.0%), which
reflects management’s best estimate of the current market’s assessment of the time value of money and the business,
operational and financial risks specific to the CGUs. The same discount rate has been used for all CGUs as any risks,
specific to those CGUs, are reflected in the projected cash flows.
The discount rate has been determined using the Capital Asset Pricing Model and has reduced compared to 2013
due to, inter alia, reduced relative volatility of the share price of the Company and reduced long term risk free rates
in the UK.
Based on the assumptions above and consideration of appropriate sensitivity analysis, management is satisfied that
no impairment of goodwill exists at the date of these financial statements, or of the other relevant assets of the CGUs
identified for testing, set out above.
The principal risks which will apply to future reviews of goodwill continue to include the changes in rate of waste
production in the markets in which the Group operates, significant increases to price competition beyond that
experienced to date or anticipated and the impact of changes in legislation on operations.
24010.04 21 April 2015 1:34 PM Proof 5
89
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials 11 Other intangible assets
Cost
At 1 January 2013
Additions
Disposals
At 1 January 2014
Additions
At 31 December 2014
Amortisation
At 1 January 2013
Charge for the year
Disposal
At 1 January 2014
Charge for the year
At 31 December 2014
Net book value
At 31 December 2014
At 1 January 2014
At 1 January 2013
Customer
contracts
£’000
Group
Computer
software
£’000
Company
Total
£’000
Total
£’000
374
—
(374)
—
—
—
374
—
(374)
—
—
—
—
—
—
464
146
—
610
193
803
341
71
—
412
95
507
296
198
123
838
146
(374)
610
193
803
715
71
(374)
412
95
507
296
198
123
409
146
—
555
192
747
300
68
—
368
95
463
284
187
109
90
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG 12 Investments in subsidiaries
Cost
At 1 January 2013
Additions
At 1 January 2014
At 31 December 2014
Provision for impairment
At 1 January 2013
At 1 January 2014
Charge for the year
At 31 December 2014
Net book value
At 31 December 2014
At 1 January 2014
At 1 January 2013
£’000
132,081
312
132,393
132,393
(74,450)
(74,450)
(6,465)
(80,915)
51,478
57,943
57,631
The principal trading subsidiary companies of the Group are as follows:
Name of company
Augean Treatment Limited
Augean North Limited
Augean South Limited
Augean North Sea Services Limited
Country of registration
or incorporation
England and Wales
England and Wales
England and Wales
England and Wales
Proportion
held %
100
100
100
81
Nature of business
Waste treatment
Landfill operations
Landfill operations
Waste treatment
These companies are owned directly by Augean PLC.
In addition to the above, the Company holds 50% of the issued share capital of Terramundo Limited, a jointly controlled
entity with DEC NV (note 9).
The full list of subsidiaries will be shown in the next annual return.
All other subsidiaries are dormant or non-trading.
During 2014, an impairment charge was recognised by the Company in respect of its investment in Augean Treatment
Limited. There is no impact on the results of the Group.
24010.04 21 April 2015 1:34 PM Proof 5
91
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
13 Property, plant and equipment
Group
Cost
At 1 January 2013
Additions
Disposals
Revision of cell capping provision (note 18)
Reclassified as held for sale (note 15)
At 1 January 2014
Additions
Disposals
At 31 December 2014
Accumulated depreciation
At 1 January 2013
Charge for year
Disposals
Revision of cell capping provision (note 18)
Impairment
Reclassified as held for sale (note 15)
At 1 January 2014
Charge for year
Disposals
At 31 December 2014
Net book value
At 31 December 2014
At 1 January 2014
At 1 January 2013
Freehold
land and
buildings
£’000
39,205
302
—
—
(2,454)
37,053
3,161
—
40,214
9,194
477
—
—
1,224
(1,623)
9,272
635
—
9,907
30,307
27,781
30,011
Leasehold
land and
buildings
£’000
Engineered
cells
£’000
Plant and
machinery
£’000
948
172
—
—
—
1,120
43
—
1,163
31
58
—
—
—
—
89
67
—
156
1,007
1,031
917
10,075
852
—
(601)
—
10,326
129
—
10,455
9,188
204
—
(601)
—
—
8,791
642
—
9,433
1,022
1,535
887
17,088
4,960
(18)
—
(1,089)
20,941
3,615
(1,404)
23,152
9,342
1,932
(1)
—
543
(720)
11,096
2,443
(1,368)
12,171
10,981
9,845
7,746
Total
£’000
67,316
6,286
(18)
(601)
(3,543)
69,440
6,948
(1,404)
74,984
27,755
2,671
(1)
(601)
1,767
(2,343)
29,248
3,787
(1,368)
31,667
43,317
40,192
39,561
There were outstanding contractual commitments for acquisitions of property, plant or equipment of £175,000 at
31 December 2014 (2013: £nil). Plant and machinery includes assets held under finance lease agreements with a
carrying value at 31 December 2014 of £102,000 (2013: £876,000).
The movement in engineered cells in 2013 relating to the revision of the cell capping provision occurred as the
Company had revised the cost expected to be incurred in capping landfill cells at the end of their useful life. An equal
reduction in cost and accumulated depreciation was recognised.
Certain assets are pledged as security for loans as disclosed in note 17.
92
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG Plant and machinery includes the following amounts in respect of assets held under finance leases and hire purchase
contracts:
Cost
Accumulated depreciation
Net book value
Company
Cost
At 1 January 2013
Additions
At 1 January 2014
Additions
At 31 December 2014
Accumulated depreciation
At 1 January 2013
Charge for year
At 1 January 2014
Charge for year
At 31 December 2014
Net book value
At 31 December 2014
At 1 January 2014
At 1 January 2013
2014
£’000
143
(41)
102
Freehold
land and
buildings
£’000
Plant and
machinery
£’000
778
—
778
—
778
97
13
110
11
121
657
668
681
527
64
591
476
1,067
391
81
472
175
647
420
120
136
14 Trade and other receivables
Current assets
Trade receivables
Amounts receivable from subsidiary undertakings
Prepayments and accrued income
Group
Company
2014
£’000
10,937
—
1,848
12,785
2013
£’000
8,143
—
1,663
9,806
2014
£’000
—
10,244
4,678
14,922
2013
£’000
1,560
(684)
876
Total
£’000
1,305
64
1,369
476
1,845
488
94
582
186
768
1,077
788
817
2013
£’000
—
3,660
1,095
4,755
All amounts are anticipated to be recoverable in the short term. All trade and other receivables have been reviewed for
indicators of impairment and the carrying amount of trade receivables is considered a reasonable approximation of fair value.
24010.04 21 April 2015 1:34 PM Proof 5
93
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
15 Discontinued operations
In September 2013 the Company announced the intention to dispose of the Waste Network business unit. The
Company subsequently entered into sale arrangements to dispose of the sites at Worcester, Hinckley and Rochdale.
The disposals were completed in March 2014 on which date the control of the sites passed to the acquirers.
The site at Cannock, which previously formed part of the Waste Network business unit, has been retained within the
Group. This site has been used from 1 January 2014 as the base for the newly-formed Augean Integrated Services
business, distinct from the transfer operation which previously existed.
The Company retained a small number of existing customers which were previously served by the divested sites. The
analysis below includes the closed site and the trading result for the customers who were not retained.
Revenue
Operating expenses
Loss before tax and exceptional items
Exceptional items
Loss before tax
Taxation
Profit/(Loss) after Tax
2014
£’000
211
(335)
(124)
(218)
(342)
622
280
2013
£’000
3,636
(4,895)
(1,259)
(4,043)
(5,302)
396
(4,906)
During the year the division contributed a net cash outflow of £(342,000) (2013: outflow of £1,350,000) to the Group’s
net operating cash flow. There was no cash flow associated with financing or investing activities except disposal
proceeds for these operations were £1,161,000 in 2014, net of disposal costs.
At 31 December 2013, assets held for resale relating to this operation were held at £1,200,000 in the Group Statement
of Financial Position.
In 2013, an impairment in carrying value of property, plant and equipment and attributable goodwill of £3,870,000 was
recognised in the financial statements as a result of remeasurement to fair value less costs to sell. This remeasurement
was recognised in the statement of comprehensive income within the loss from discontinued operations.
16 Trade and other payables
Current
Trade payables
Amounts due to subsidiary undertakings
Other taxes and social security
Accruals and deferred revenue
Group
Company
2014
£’000
2,021
—
2,544
6,648
11,213
2013
£’000
3,197
—
2,316
3,517
9,030
2014
£’000
152
—
343
1,329
1,824
2013
£’000
38
366
239
185
828
All amounts are anticipated to be payable in the short term. The carrying values are considered to be a reasonable
approximation of fair value.
94
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG
17 Financial liabilities
This note provides information about the Group’s and Company’s interest bearing borrowings which are carried
at amortised cost.
Group
Company
Current
Bank overdraft
Bank loans
Obligations under finance leases and hire purchase contracts
Non-current
Bank loans
Obligations under finance leases and hire purchase contracts
Analysis of total financial liabilities
Bank overdraft
Bank loans
Obligations under finance leases and hire purchase contracts
Total financial liabilities are repayable as follows:
– on demand or within one year
– in the second year
– in the third to fifth years inclusive
Obligations under finance leases and hire purchase contracts
are repayable as follows:
– on demand or within one year
– in the second year
2014
£’000
—
1,000
45
1,045
6,124
45
6,169
—
7,124
90
7,214
1,045
1,045
5,124
7,214
45
45
90
2013
£’000
—
—
114
114
8,909
10
8,919
—
8,909
124
9,033
114
10
8,909
9,033
114
10
124
2014
£’000
18,167
1,000
45
19,212
6,124
45
7,169
18,167
7,124
90
25,381
19,212
1,045
5,124
25,381
2013
£’000
7,625
—
—
7,625
8,909
—
8,909
7,625
8,909
—
16,534
7,625
—
8,909
16,534
45
45
90
—
—
—
The obligations under finance leases and hire purchase contracts are secured against the specific assets financed with
a carrying amount of £102,000 (2013: £876,000). The bank overdraft, bank loan and guarantees are secured by way
of a first legal charge over certain freehold properties, debentures, cross guarantees and indemnities across the Group.
During the year, the Company refinanced its bank debt, as explained in note 26.
For more information about the Group’s exposure to interest rate, credit risk and liquidity risk, see note 26.
24010.04 21 April 2015 1:34 PM Proof 5
95
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
18 Provisions
At 1 January 2013
Charged to profit or loss during the year
– unwinding of discount
– other
Utilised during the year
Change in capping provision
At 1 January 2014
Charged to profit or loss during the year
– unwinding of discount
– other
Utilised during the year
At 31 December 2014
Restoration
and after-care
costs of
landfill sites
£’000
2,692
Group
Capping
provision
£’000
4,277
Other
provisions
£’000
76
100
19
(53)
—
2,758
102
51
(65)
2,846
—
112
—
(601)
3,788
—
129
—
3,917
—
—
—
—
76
—
—
—
76
Total
£’000
7,045
100
131
(53)
(601)
6,622
102
180
(65)
6,839
The provision for restoration and after-care relates to closure and post-closure costs for all landfill sites, charged over the
estimated active life of the sites. The expenditure is incurred partially on completion of the landfill sites (restoration) and
in part after the closure of the landfill sites (after-care) over a period up to 60 years from the site closure dates. After-care
expenditure relates to items such as monitoring, gas and leachate management and may be influenced by changes in
legislation and technology. The provision is based on management’s best estimate of the annual costs associated with
these activities over the 60 year period, using current costs and discounted using a discount rate of 3%.
The capping provision reflects the expected costs of capping established and active landfill cells. Capping is required
following the end of a cell’s useful economic life and the build-up of the provision is based on the rate of use of the
available void space within each cell. This provision is not discounted as the costs are expected to be incurred shortly
after consumption of the void.
The other provisions relate to a tyre provision which is anticipated to be utilised during the next landfill cell construction cycle.
19 Share capital
Authorised – 103,000,000 (2013: 103,000,000) shares of 10p
Allotted, called up and fully paid – 101,991,380 (2013: 99,699,414) shares of 10p
2014
£’000
10,300
10,199
2013
£’000
10,300
9,970
During the year, 2,291,966 shares (2013: nil) were issued as a result of the exercise of share options. The total proceeds
were £771,000 (2013: £nil).
96
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG
20 Reserves
At 1 January 2014
Total comprehensive income for the year
Issue of equity
Reserve transfer (below)
Dividend (note 7)
Reserves transfer
Share-based payments
Deferred tax on share-based payments
At 31 December 2014
At 1 January 2014
Total comprehensive income for the year
Issue of equity
Reserve transfer (below)
Dividend (note 7)
Reserves transfer
Share-based payments
Deferred tax on share-based payments
At 31 December 2014
Group
Share
premium
£’000
—
—
542
—
—
—
—
—
542
Special profit
reserve
£’000
36,450
—
—
(771)
—
(35,679)
—
—
—
Company
Share
premium
£’000
—
—
542
—
—
—
—
—
542
Special profit
reserve
£’000
36,450
—
—
(771)
—
(35,679)
—
—
—
Retained
earnings
£’000
738
4,921
—
771
(349)
35,679
286
13
42,059
Retained
earnings
£’000
643
(6,324)
—
771
(349)
35,679
286
13
30,719
Total
£’000
37,188
4,921
542
—
(349)
—
286
13
42,061
Total
£’000
37,093
(6,324)
542
—
(349)
—
286
13
31,261
At the 2012 Annual General Meeting, the shareholders approved the capital reduction of Augean PLC (the Company).
This was subsequently confirmed by the High Court on 4 July 2012. To effect this reduction, the share premium
account of the Company was cancelled, creating a Special profit reserve in the Company and Group. This reduction
was transferred to retained earnings to the extent to which it cancelled existing losses. The remaining share premium
was transferred to a Special profit reserve. In addition, profits of the Company which were realised prior to 4 July 2012
were transferred to the Special profit reserve.
During 2013, the Group undertook an exercise to strike off dormant subsidiary entities. As part of that reorganisation,
dividends or £4,374,000 were paid up from these subsidiaries to Augean PLC. In line with the terms of the High Court
order, these amounts were transferred to the Special profit reserve.
During 2014 a transfer of £771,000 was made from the special profit reserve representing an amount equal to the
increase in Share capital and Share premium during the year, as permitted by the court order.
The Special profit reserve was determined to be non-distributable until all liabilities of the Company that existed as at
the date of the court order had been extinguished. The Board has determined that this condition has been met during
the year and the reserve was deemed distributable at 31 December 2014. Accordingly, the balance on this reserve has
been transferred to Retained earnings.
24010.04 21 April 2015 1:34 PM Proof 5
97
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials 21 Share-based payments
At 31 December 2014 outstanding awards to subscribe for ordinary shares of 10p each in the Company, granted in
accordance with the rules of the Augean share option schemes and the Augean LTIP, were as follows:
Exercise date
Augean Share Option Schemes
December 2004 – December 2014
December 2013 – December 2019
May 2014 – May 2021
August 2016 – August 2023
Augean LTIP Scheme
April 2017 – September 2024
Weighted average exercise price
Of which exercisable
Weighted average exercise price
Exercise
price
At
1 January
2014
Granted
Exercised
Lapsed
At
31 December
2014
180p
39.5p
29p
40.25p
10p
700,000
1,810,122
1,496,552
1,000,000
5,006,674
5,006,674
56.1p
2,510,122
49.3p
—
— (1,012,656)
— (1,279,310)
—
—
— (2,291,966)
—
(2,291,966)
33.6p
(700,000)
— (700,000)
—
—
797,466
—
217,242
— 1,000,000
2,014,708
— 3,239,894
5,254,602
22.0p
1,014,708
37.0p
(700,000)
180.0p
— 3,239,894
3,239,894
10.0p
Outstanding awards at 31 December 2013 were as follows:
Exercise
price
180.0p
39.5p
29.0p
40.25p
Exercise date
Augean Share Option Schemes
December 2004 – December 2014
December 2013 – December 2019
May 2011 – May 2021
August 2013 – August 2023
Weighted average exercise price
Of which exercisable
Weighted average exercise price
At
1 January
2013
Granted
Exercised
Lapsed
At
31 December
2013
—
—
—
— 1,000,000
1,000,000
40.0p
—
700,000
1,810,122
1,496,552
4,006,674
60.1p
2,510,122
49.3p
—
—
—
—
—
—
—
—
700,000
— 1,810,122
— 1,496,552
— 1,000,000
— 5,006,674
—
56.1p
— 2,510,122
49.3p
Share Option Scheme (equity settled)
On 12 August 2013, the Group established a share option programme that entitled the Group’s Chief Executive to
purchase shares in the Company. These options were granted on similar terms to the 12 May 2011 and 21 December
2009 grants, except for the exercise price.
LTIP Scheme
On 23 September 2014, the Group established an LTIP which entitled executive Directors and senior managers in
the Company to purchase shares in the Company. The options granted to executive Directors have total shareholder
return and EPS conditions attached to them, as set out in the remuneration report. The options granted to senior
management have EBITDA and EPS performance conditions associated with them.
The fair value of remaining share options has been calculated using the Monte Carlo for the LTIP and the Black Scholes
model for the Share Option Schemes. The assumptions used in the calculation of the fair value of the share options
outstanding during the year were:
98
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG
Grant date
Exercise period
Share price at grant date
Exercise price
Shares under option
Expected volatility
Expected life (years)
Risk-free rate
Expected dividend yield
Fair value per option
2014
LTIP
23 September 2014
April 2017 –
September 2024
49.5p
10.0p
3,239,894
24.80%
2.6 years
0.78%
0.70%
£0.22 – £0.39
2013
Share options
12 August 2013
August 2016 –
August 2023
40.0p
40.25p
1,000,000
35%
4 years
1.87%
0.59%
£0.30
2011
Share options
20 May 2011
May 2014 –
May 2021
28.9p
29.0p
217,242
35%
4 years
2.3%
0.0%
£0.09
2009
Share options
21 December 2009
December 2014 –
December 2019
39.5p
39.5p
797,466
43%
4 years
2.5%
0.0%
£0.14
Expected volatility was determined by reviewing the historical volatility of the Company’s share price over a period
commensurate with the expected life of the options.
The risk-free rate of return is the yield on zero coupon UK Government bonds of a term equal to the expected term of
the options.
The 2009, 2011 and 2013 grants of share options have a vesting period of three years but no market or non-market
performance criteria attached to them.
The 2014 LTIP has performance conditions associated with it as detailed in the Directors’ Remuneration Report.
For options outstanding at 31 December 2014, the weighted average remaining contractual life is 9.11 years (2013:
6.46 years).
22 Operating lease commitments
The Group has commitments to make minimum lease payments under non-cancellable operating leases as follows:
Plant and machinery
Payments due:
– within one year
– within two to five years
Land and buildings
Payment due:
– within one year
– within two to five years
– after five years
2014
£’000
2013
£’000
400
471
871
44
88
—
132
456
880
1,336
414
1,428
3,242
5,084
The significant reduction in lease commitments relating to land and buildings has mainly arisen due to the incinerator
and surrounding land at East Kent being purchased by the Group during 2014, which was leased during 2013.
24010.04 21 April 2015 1:34 PM Proof 5
99
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
23 Reconciliation of operating profit to net cash generated from operating activities
Operating profit
Loss from discontinued operations (note 2)
Amortisation of intangible assets
Depreciation
Impairment charge
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Share-based payments
Increase in inventories
Increase in trade and other receivables
Increase in net receivables from subsidiary undertakings
Increase/(decrease) in trade and other payables
(Decrease)/increase in provisions
Loss/(gain) on disposal of property, plant and equipment
Cash generated from/(used in) operations
Interest paid
Tax (paid)/refunded
Net cash generated from/(used in) operating activities
Group
Company
2014
£’000
6,689
(342)
95
3,787
5
10,234
286
(114)
(2,940)
—
1,959
(15)
6
9,416
(516)
(801)
8,099
2013
£’000
4,891
(5,302)
71
2,671
3,870
6,201
88
(78)
(1,262)
—
930
36
(53)
5,862
(629)
(316)
4,917
2014
£’000
(5,447)
—
95
186
6,976
1,810
286
—
(3,583)
(6,950)
1,402
—
—
(7,035)
(738)
(801)
(8,575)
2013
£’000
966
68
—
93
—
1,127
88
—
(501)
(7,782)
(54)
—
—
(7,122)
(705)
187
(7,640)
The above EBITDA includes a total net cash inflow of £201,000 relating to exceptional items and discontinued
operations (2013: outflow of £1,577,000).
The above net cash generated from operating activities includes a net cash inflow of £416,000 relating to exceptional
items and discontinued operations (2013: outflow of £1,577,000).
24 Analysis of changes in net debt
The table below presents the net debt of the Group at the balance sheet date.
Cash and cash equivalents
Bank loans
Finance leases
Net debt
31 December
2013
£’000
542
(8,909)
(124)
(8,491)
Cash flow
£’000
960
1,785
34
2,779
31 December
2014
£’000
1,502
(7,124)
(90)
(5,712)
100
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG 25 Non-controlling interest
In May 2013 Augean PLC increased its holding in the share capital of Augean North Sea Services Limited (ANSS) from
70% to 81% by way of a debt for equity swap. The Group cancelled debts of £312,000 with Scomi Oiltools (Europe) Ltd
in consideration of this share.
Balance at 1 January 2013
Share of profit for year
Adjustment arising from change in Non-controlling Interest
Balance at 1 January 2014
Share of profit for year
Balance at 31 December 2014
As explained in note 30, the equity holding in ANSS increased to 100% after the balance sheet date.
26 Financial instruments
The financial assets of the Group and Company are categorised as follows:
As at 31 December 2014
Goodwill
Other intangible assets
Investments in subsidiaries
Property, plant and equipment
Deferred tax asset
Inventories
Trade and other receivables
Current tax asset
Cash and cash equivalents
As at 31 December 2013
Goodwill
Other intangible assets
Investments in subsidiaries
Investment in jointly controlled entity
Property, plant and equipment
Deferred tax asset
Inventories
Trade and other receivables
Current tax asset
Cash and cash equivalents
Group
Non-
financial
assets
£’000
19,602
296
—
43,317
1,688
410
1,848
—
—
67,161
Group
Non-
financial
assets
£’000
19,602
198
—
5
40,192
1,143
296
1,588
—
—
63,024
Total
£’000
Loans and
receivables
£’000
19,602
296
—
43,317
1,688
410
12,785
—
1,502
79,600
Total
£’000
19,602
198
—
5
40,192
1,143
296
9,806
—
542
71,784
—
—
—
—
—
—
—
—
—
—
Financial
assets
£’000
—
—
—
—
—
—
—
—
—
—
—
Company
Non-
financial
assets
£’000
—
283
51,479
1,077
80
—
14,922
797
28
68,666
Company
Non-
financial
assets
£’000
—
187
57,943
512
788
104
—
4,755
136
—
64,425
Loans and
receivables
£’000
—
—
—
—
—
—
10,937
—
1,502
12,439
Financial
assets
£’000
—
—
—
—
—
—
—
8,218
—
542
8,760
£’000
1,119
108
(431)
796
159
955
Total
£’000
—
283
51,479
1,077
80
—
14,922
797
28
68,666
Total
£’000
—
187
57,943
512
788
104
—
4,755
136
—
64,425
24010.04 21 April 2015 1:34 PM Proof 5
101
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
26 Financial instruments continued
The financial liabilities of the Group and Company are categorised as follows:
As at 31 December 2014
Trade and other payables – current
Current tax liabilities
Financial liabilities – current
Financial liabilities – non-current
Provisions
As at 31 December 2013
Trade and other payables – current
Current tax liabilities
Financial liabilities – current
Financial liabilities – non-current
Provisions
Financial
liabilities at
amortised
cost
£’000
8,669
—
1,045
6,169
—
15,883
Financial
liabilities at
amortised
cost
£’000
6,714
—
114
8,919
—
15,747
Group
Liabilities
not within
scope
of IAS 39
£’000
2,544
579
—
—
6,839
9,962
Group
Liabilities
not within
scope
of IAS 39
£’000
2,316
345
—
—
6,622
9,283
Balance
sheet
total
£’000
11,213
579
1,045
6,169
6,839
25,845
Financial
liabilities at
amortised
cost
£’000
1,482
—
19,212
6,169
—
26,863
Balance
sheet
total
£’000
9,030
345
114
8,919
6,622
25,030
Financial
liabilities at
amortised
cost
£’000
589
—
7,625
8,909
—
17,123
Company
Liabilities
not within
scope
of IAS 39
£’000
343
—
—
—
—
343
Company
Liabilities
not within
scope
of IAS 39
£’000
239
—
—
—
—
239
Balance
sheet
total
£’000
1,825
—
19,212
6,169
—
27,206
Balance
sheet
total
£’000
828
—
7,625
8,909
—
17,362
The Group and Company’s financial liabilities have contractual maturities (including interest payments where applicable)
which are summarised below. As these amounts are the contractual undiscounted amounts they do not agree to the
amounts shown in the balance sheet for financial liabilities.
102
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG
Group
As at 31 December 2014
Trade and other payables – current
Financial liabilities – current
Financial liabilities – non-current
Total
As at 31 December 2013
Trade and other payables – current
Financial liabilities – current
Financial liabilities – non-current
Total
Company
As at 31 December 2014
Trade and other payables – current
Financial liabilities – current
Financial liabilities – non-current
As at 31 December 2013
Trade and other payables – current
Financial liabilities – current
Financial liabilities – non-current
Amounts
due in
less than
one year
£’000
11,213
1,045
—
12,258
Amounts
due in
less than
one year
£’000
9,030
114
—
9,144
Amounts
due in
less than
one year
£’000
1,824
—
—
1,824
Amounts
due in
less than
one year
£’000
828
—
—
828
Amounts
due in
second to
fifth year
£’000
—
—
6,169
6,169
Amounts
due in
second to
fifth year
£’000
—
—
8,960
8,960
Amounts
due in
second to
fifth year
£’000
—
19,212
6,169
25,381
Amounts
due in
second to
fifth year
£’000
—
7,625
8,909
16,534
Total
financial
liabilities
£’000
11,213
1,045
6,169
18,497
Total
financial
liabilities
£’000
9,030
114
8,960
18,104
Total
financial
liabilities
£’000
1,824
19,212
6,169
27,205
Total
financial
liabilities
£’000
828
7,625
8,909
17,362
Financial risk management objectives and policies
Overview
The Group has exposure to the following risks arising from financial instruments:
{ liquidity risk;
{ credit risk; and
{ interest rate risk.
The majority of the Group’s transactions take place in Pounds Sterling, with levels of transactions in Euro and US
Dollars not considered significant.
24010.04 21 April 2015 1:34 PM Proof 5
103
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
26 Financial instruments continued
The management of the Group’s financial risks and the related objectives and policies are the responsibility of the
executive Directors. The Directors regularly review the Group’s financial risk management policies and procedures to
ensure that they appropriately reflect the changing nature of the market and business. The Group, through its training
and management standards and procedures, aims to develop a disciplined and constructive control environment in
which all employees understand their roles and obligations. The Group has maintained its policy that no trading in
financial instruments shall be undertaken.
The Group’s principal financial instruments during the period comprised bank loans, cash and cash equivalents and
finance leases. The main purpose of these financial instruments is to finance the Group’s operations. The Group’s other
financial instruments include short term receivables and payables which arise directly from its operations. There was
no material difference between the fair value of the financial assets and financial liabilities and their book value.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset. The Group seeks to maintain a balance between
continuity of funding and flexibility. The objective is to maintain sufficient resources to meet the Group’s funding needs
for the foreseeable future. At 31 December 2014, the Group carried debt of £7,214,000 (2013: £9,032,000) and short
term flexibility is achieved through bank facilities comprising of a £14.25m revolving credit, term loan and overdraft facility.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers.
The Group has a robust customer credit policy in place and the exposure to credit risk is monitored on a daily basis.
The Group’s standard credit terms are 30 days from date of invoice but non-standard terms may be agreed with certain
customers. Invoices greater than agreed terms are assessed as overdue. The maximum exposure to credit risk is the
carrying value of each financial asset included on the statement of financial position as summarised below:
Cash and cash equivalents
Trade and other receivables
Group
Company
2014
£’000
1,502
12,785
14,287
2013
£’000
542
9,806
10,348
2014
£’000
28
14,922
14,950
2013
£’000
—
1,095
1,095
At 31 December 2014, £2.6m (2013: £1.1m) of the Group’s trade receivables were past due. A provision of £0.3m
(2013: £0.1m) is held to mitigate the exposure to potential bad and doubtful debts.
104
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG
The ageing of the Group’s trade receivables past their due date but not impaired is as follows:
Greater than one but not more than four months past due
More than four months past due
Total past due trade receivables
Trade receivables not yet past due
Total gross trade receivables
Bad debt provision
Total net trade receivables (note 14)
2014
£’000
2,276
294
2,570
8,621
11,191
(254)
10,937
2013
£’000
803
319
1,122
7,096
8,218
(75)
8,143
The Group’s management considers that all the above financial assets that are not impaired or past due for each of the
reporting dates under review are of good quality.
The Company has no trade receivables.
The movement on the bad debt provision in the year is analysed below. The Group provides for bad debts on a specific
basis with reference to the age profile of the trade receivables held at the year end.
Bad debt provision as at 31 December 2013
Amounts utilised
Amounts provided
Bad debt provision as at 31 December 2014
£’000
75
(40)
219
254
Interest rate risk
The Group finances its operations through a mixture of free cash flow, overdraft facilities, bank borrowings and hire
purchase leasing. Due to the relatively low level of the Group’s borrowings no interest rate swaps or other forms of
interest risk management has been undertaken. The Group regularly reviews its exposure to fluctuations in underlying
interest rates and will take appropriate action if required to minimise any impact on the performance and financial
position of the Group.
The interest rate profile of the Group and Company’s financial liabilities at 31 December 2014 was:
Group
Bank loans
Finance leases
At 31 December 2014
At 31 December 2013
Company
Bank loans
Finance leases
At 31 December 2014
At 31 December 2013
Floating
rate
£’000
7,124
90
7,214
9,032
Floating
rate
£’000
7,124
—
7,124
8,909
Total
£’000
7,124
90
7,214
9,032
Total
£’000
7,124
—
7,124
8,909
105
24010.04 21 April 2015 1:34 PM Proof 5
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
26 Financial instruments continued
The interest rate on the floating rate borrowings was 2.25% (2013: 2.7%) above GBP LIBOR. In March 2014 the Group
renegotiated its overdraft and loan facilities with HSBC Bank plc until 7 July 2017. The facility is structured as a £5m
term loan which attracts an interest rate of 2.25% above LIBOR and a £10m revolving credit facility which attracts an
interest charge which varies between above 1.95% and 2.75% above LIBOR. The term loan had amortised to £4.25m
from £5.0m at the balance sheet date. A change in interest rate of 0.5% affects the annual interest cost for both the
Group and Company by approximately £30,000 (2013: £40,000).
The hire purchase agreements of the Group under a floating rate contract have a weighted average interest rate
of 3.4% (2013: 3.5%) and a weighted average duration of two (2013: one) years. The Group has no hire purchase
agreements under a fixed rate contract.
The maturity profile of the Group’s financial liabilities is shown in note 17.
The Board feels that the current risk management policies described above continue to be appropriate but that they will
be regularly assessed to ensure this remains the case.
Capital management policies and procedures
The Group defines the capital that it manages as the Group’s share capital, share premium account and financial
liabilities, as shown in the table below:
Share capital
Share premium
Financial liabilities
Note
19
20
17
2014
£’000
10,199
542
7,214
17,955
2013
£’000
9,970
—
9,033
19,003
The Group’s capital management objectives which have remained unchanged during the year are:
{ to ensure the Group’s ability to continue as a going concern; and
{ to provide a strong financial base to deliver growth and adequate return to shareholders.
The Group’s primary sources of capital are equity (statement of changes in shareholders’ equity) and bank debt (note
17) secured against certain assets. By pricing products and services commensurately with the level of risk and focusing
on the effective collection of cash from customers, the Group aims to maximise revenues and operating cash flows.
Cash flow is further controlled by ongoing justification, monitoring and reporting of capital investment expenditures
and regular monitoring and reporting of operating costs. Working capital fluctuations are managed through employing
the overdraft facility available, which at the year end was £nil (2013: £nil).
The Group considers that the current capital structure will provide sufficient flexibility to ensure that appropriate
investment can be made, if required, to implement and achieve the longer term growth strategy of the Group. The
primary source of funding would be achieved through drawing on the recently renewed loan facility, which has £8.3m of
headroom at 31 December 2014 (2013: £1.5m).
Management sets targets against the following measures and monitors the Group’s performance against each
throughout the year:
{ bank facility covenants, which include Net debt to EBITDA and EBIT to net debt costs;
{ net debt to equity ratio; and
{ free cash flow generated.
106
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG The performance against each of these capital measures is shown in the table below:
Net debt to EBITDA*
EBIT* to net bank debt cash costs
Net debt to equity (“gearing”) (%)
Free cash flow (£’000s)
* from continuing operations and excluding exceptional items.
The value of net debt and free cash flow is monitored on a daily basis.
2014
Actual
0.6
24.6
2014
Target
<2.5
>3.5
10.8% prior year
prior year
1,358
2013
£’000
1.4
5.1
18.0%
(1,981)
Free cash flow represents net operating cash flows adjusted for capital investment. This is reconciled to the statement
of cash flows as follows:
Net operating cash flow (note 23)
Purchase of property, plant and equipment
Free cash flow
2014
£’000
8,199
(6,841)
1,358
2013
£’000
4,917
(6,898)
(1,981)
27 Retirement benefit obligations
The Group operates defined contribution retirement benefit schemes for all qualifying employees. The assets of the
schemes are held separately from those of the Group in funds under the control of trustees. Where there are employees
who leave the schemes prior to vesting fully in the contributions, the contributions payable by the Group are reduced by
the amount of forfeited contributions.
The total cost charged to income of £431,000 (2013: £392,000) represents contributions payable to these schemes
by the Group at rates specified in the rules of the schemes. As at 31 December 2014, contributions of £26,000 (2013:
£11,000) due in respect of the current reporting period had not been paid over to the schemes.
28 Contingent liabilities
In accordance with Pollution, Prevention and Control (PPC) permitting, the Group has to make such financial provision
as is deemed adequate by the Environment Agency to discharge its obligations under the relevant site permits for its
landfill sites. Consequently, guarantees have been provided, by certain subsidiaries of the Company, in favour of the
Environment Agency in respect of the Group’s landfill sites. Total guarantees outstanding at the year end were £8.4m
(2013: £8.1m). Future site restoration costs for each landfill site have been provided as disclosed in note 18.
24010.04 21 April 2015 1:34 PM Proof 5
107
Augean PLC Annual Report and Accounts for the year ended 31 December 2014Our Financials
29 Related party disclosures
IAS 24 ‘Related Party Transactions’ requires the disclosure of the details of material transactions between reporting
entities and related parties. The Group has taken advantage of the exemption under IAS 24 not to disclose transactions
between subsidiaries which are eliminated on consolidation.
Related party transactions of the Group which are not eliminated on consolidation and related party transactions of the
Company are both as follows:
Transactions and balances with jointly controlled entity
Group
Transactions with Terramundo Limited:
– revenue
– costs
Amounts owed by Terramundo Limited:
– more than one year
Further details regarding Terramundo Limited are disclosed in note 9.
Related party transactions of the Company are noted below:
Amounts owed to Terramundo Limited:
– less than one year
Amounts owed by Terramundo Limited:
– more than one year
2014
£’000
—
—
512
512
2014
£’000
—
512
512
2013
£’000
—
—
512
512
2013
£’000
—
512
512
There are no related party transactions within the Group which are not eliminated on consolidation.
Transactions and balances with subsidiary undertakings – Company
Included within current trade and other receivables (note 14) are amounts due from 100% subsidiary undertakings of
£14.9m (2013: £0.4m payables). These amounts are repayable on demand.
The movement in the Company’s balances with its subsidiaries reflects the Group’s banking facilities and inter-company
arrangements operating during the year.
30 Post balance sheet events
As referenced in note 9, after the year end, Augean PLC and their joint venture partner in the Terramundo entity agreed
to close the venture.
On 10 March 2015, Augean completed the purchase of the remaining 19% of shares, not already held by the Company,
in its subsidiary company, Augean North Sea Services Limited (ANSS), thereby making ANSS a wholly-owned
subsidiary of the Group. The consideration for the shares was £1,050,000, which was paid in cash on the same date.
108
24010.04 21 April 2015 1:34 PM Proof 5
Notes to the Financial Statements continuedFor the year ended 31 December 2014www.augeanplc.com Stock code: AUG
Augean PLC Annual Report and Accounts for the year ended 31 December 2014
109
24010.04 21 April 2015 1:34 PM Proof 5
Shareholder information Notice of Annual General Meeting
We are pleased to write to you with details of our 2015 Annual General Meeting (AGM) which will be held at the offices
of FTI Consulting, 9th Floor, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD on Thursday 4 June 2015 at
10.00am. The formal notice of Annual General Meeting is set out on pages 111 to 113 of this document.
In addition to the routine business of the AGM, there are two items of special business to be transacted, as summarised
and explained below:
Authority to allot shares (Resolution 7)
Article 4.6(a) of the Company’s Articles of Association contains a general authority for the Directors to allot shares in the
Company for a period (not exceeding five years) (the Section 551 prescribed period) and up to a maximum aggregate
nominal amount (the Section 551 amount) approved by a special or ordinary resolution of the Company.
The existing authority to allot shares granted at the Company’s last annual general meeting is due to expire at the AGM.
Resolution 7, which will be proposed as an ordinary resolution, seeks to renew the allotment authority so that the
Section 551 amount shall be £3,399,712.67 (being an amount equal to one third of the issued ordinary share capital
of the Company at the date of this document) and the Section 551 prescribed period shall be the period from the date
Resolution 7 is passed to 30 June 2016 or the conclusion of the Company’s next annual general meeting, whichever is
earlier.
Disapplication of pre-emption rights (Resolution 8)
Article 4.6(b) of the Company’s Articles of Association empowers the Directors for a period (not exceeding five years)
(the Section 561 prescribed period) to allot shares for cash in connection with a rights issue and also to allot shares
in any other circumstances up to a maximum aggregate nominal amount approved by a special resolution of the
Company (the Section 561 amount) without having to comply with statutory pre-emption rights.
The existing authority to disapply pre-emption rights granted at the Company’s last annual general meeting is due to
expire at the AGM.
Resolution 8, which will be proposed as a special resolution and which will only be effective if Resolution 7 is
passed, seeks to renew the disapplication authority so that the Section 561 amount shall be £509,957 (representing
approximately 5% of the Company’s issued share capital at the date of this document) and the Section 561 prescribed
period shall be the period from the date Resolution 8 is passed to 30 June 2016 or the conclusion of the Company’s
next annual general meeting, whichever is earlier.
Action to be taken by shareholders
Whether or not you intend to be present at the AGM you are requested to complete and submit a proxy appointment
in accordance with the notes to the Notice of AGM set out on page 112 and 113. To be valid, the proxy appointment
must be received at the address for delivery specified in the notes by no later than 10.00am on Tuesday 2 June 2015.
The completion and return of a proxy appointment form will not preclude you from attending and voting at the meeting,
should you so wish. A hard copy proxy appointment form is enclosed for your use.
Recommendation
The Directors consider that the proposals set out above are in the best interests of the Company and its shareholders
as a whole. They recommend that you vote in favour of the resolutions set out in the notice of meeting as they intend to
do in respect of their own beneficial holdings.
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Notice of Annual General Meeting
NOTICE IS HEREBY GIvEN that the 2015 Annual General Meeting of Augean PLC (the “Company”) will be held at the
offices of FTI Consulting, 9th Floor, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD on Thursday 4 June 2015
at 10.00am for the purpose of considering and, if thought fit, passing the resolutions set out below. Resolution 8 will be
proposed as a special resolution. All other resolutions will be proposed as ordinary resolutions.
1. THAT the reports of the Directors and the auditors and the audited financial statements for the year ended
31 December 2014 be received.
2. THAT Rory Patrick Macnamara be re-elected as a Director of the Company.
3. THAT Richard Stephen Laker be elected as a Director of the Company.
4. THAT Grant Thornton UK LLP be re-appointed auditors of the Company, to hold office until the next meeting
at which accounts are laid before the Company.
5. THAT the Directors be authorised to determine the auditors’ remuneration.
6. THAT a dividend of 0.5 pence per share be declared.
7. THAT the authority to allot shares and grant rights to subscribe for or to convert any security into shares, conferred
on the Directors by Article 4.6(a) of the Company’s articles of association, be granted for the period commencing on
the date of the passing of this resolution and expiring on 30 June 2016 or at the conclusion of the Company’s next
annual general meeting (whichever is the earlier) and for that period the Section 551 amount is £3,399,712.67.
8. THAT, subject to the passing of resolution 7, the power to allot equity securities as if s561(1) of the Companies Act
2006 did not apply to any such allotment conferred on the Directors by Article 4.6(b) of the Company’s articles of
association be granted for the period commencing on the date of the passing of this resolution and expiring on 30
June 2016 or at the conclusion of the Company’s next annual general meeting (whichever is the earlier) and for that
period the Section 561 amount is £509,957.
By order of the Board
R S Laker, ACA
Company Secretary
23 March 2015
Registered Office
4 Rudgate Court
Walton
Near Wetherby
West Yorkshire
LS23 7BF
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Our FinancialsAugean PLC Annual Report and Accounts for the year ended 31 December 2014Shareholder Information
Notice of Annual General Meeting continued
NOTES:
(a) Only those shareholders entered on the relevant register of members (the “Register”) for certificated or uncertificated
shares of the Company (as the case may be) at 6.00p.m. on Tuesday 2 June 2015 (the “Specified Time”) will be
entitled to attend and vote at the AGM in respect of the number of shares registered in their name at the time.
Changes to entries on the Register after the Specified Time will be disregarded in determining the rights of any
person to attend and vote at the AGM.
(b) Any member may appoint a proxy to attend, speak and vote on his/her behalf. A member may appoint more than
one proxy in relation to the AGM provided that each proxy is appointed to exercise the rights attached to a different
share or shares of the member, but must attend the meeting in person. A proxy need not be a member. Completion
of a proxy appointment form does not prevent a member from attending and voting in person if he/she is entitled to
do so and so wishes.
(c) Hard copy appointment of proxies: A hard copy proxy appointment form is enclosed for use at the AGM. To be
valid, it must be completed in accordance with the instructions that accompany it and delivered, together with any
authority under which it is executed or a copy of the authority certified notarially, by post or (during normal business
hours only) by hand to Computershare Investor Services plc, The Pavilions, Bridgwater Road, Bristol BS99 6zY so
as to be received no later than 10.00a.m. on Tuesday 2 June 2015.
To appoint more than one proxy you may photocopy the hard copy proxy form. Please indicate the proxy holder’s
name and the number of shares in relation to which they are authorised to act as your proxy (which, in aggregate,
should not exceed the number of shares held by you). Please also indicate if the proxy instruction is one of multiple
instructions being given. All forms must be signed and should be returned together in the same envelope.
(d) Electronic appointment of proxies: As an alternative to completing the hard-copy proxy form, you can appoint a
proxy electronically by going to www.investorcentre.co.uk/eproxy. You will be asked to enter the Control Number, the
Shareholder Reference Number and PIN all found on the front sheet your hard copy proxy form. For an electronic
proxy appointment to be valid, your electronic message confirming the details of the appointment in accordance the
relevant instructions must be transmitted so as to be received by Computershare Investor Services plc no later than
10.00a.m. on Tuesday 2 June 2015.
(e) Appointment of proxies through CREST: CREST members who wish to appoint a proxy or proxies by utilising the
CREST electronic proxy appointment service may do so for the AGM and any adjournment(s) of it by using the
procedures described in the CREST Manual (available from https://www.euroclear.com/site/public/EUI). CREST
Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting
service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST
Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“EUI”)
specifications and must contain the information required for such instructions, as described in the CREST Manual.
The message must be transmitted so as to be received by Computershare Investor Services plc as the issuer’s
agent (ID Reference: 3RA50) by 10.00a.m. on Tuesday 2 June 2015. For this purpose, the time of receipt will be
taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host)
from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by
CREST.
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CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI
does not make available special procedures in CREST for any particular messages. Normal system timings and
limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member
or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s))
such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service
providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the
CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of
the Uncertificated Securities Regulations 2001.
(f) Any corporation which is a member can appoint one or more corporate representatives who may exercise on its
behalf all of its powers as a member provided that they do not do so in relation to the same shares. Any such
representative should bring to the meeting written evidence of his appointment, such as a certified copy of a Board
resolution of, or a letter from, the corporation concerned confirming the appointment.
(g) Website giving information regarding the AGM is available from www.augeanplc.com. A member may not use
any electronic address provided by the Company in this document or with any Proxy Form or in any website for
communicating with the Company for any purpose in relation to the AGM other than as expressly stated in it.
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Our FinancialsAugean PLC Annual Report and Accounts for the year ended 31 December 2014Shareholder Information
Shareholder Notes
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www.augeanplc.com Stock code: AUG Advisers and Company Information
Secretary
R S Laker, ACA
Registered office
4 Rudgate Court
Walton
Wetherby
West Yorkshire LS23 7BF
Registered number
5199719
(incorporated and registered in England and Wales)
Website
www.augeanplc.com
Broker and nominated adviser
N+1 Singer Capital Markets
One Bartholomew Lane
London EC2N 2AX
Auditor
Grant Thornton UK LLP
No 1 Whitehall Riverside
Whitehall Road
Leeds LS1 4BN
Solicitors
Walker Morris LLP
Kings Court
12 King Street
Leeds LS1 2HL
Bankers
HSBC Bank PLC
City Point
29 King Street
Leeds LS1 2HL
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Printed on Cocoon Silk 50.
A recycled paper containing 50% recycled waste and 50% virgin fibre and manufactured
at a mill certified with ISO 14001 environmental management standard.
The pulp used in this product is bleached using an Elemental Chlorine Free process. (ECF)
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Our FinancialsAugean PLC Annual Report and Accounts for the year ended 31 December 2014Shareholder Information A
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Augean PLC
4 Rudgate Court
Walton
Wetherby
West Yorkshire LS23 7BF
Tel: 01937 844980
www.augeanplc.com
contact@augeanplc.com
Contacting Augean
To find out about how Augean can help
your business call us on 01937 844980
or email us at contact@augeanplc.com
to arrange for a sales adviser to call you.
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