Focused Strategies
Delivering the Best Overall
Environmental Outcomes
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Annual Report & Accounts
for the year ended 31 December 2015
Stock Code: AUG
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24612.04 25 April 2016 1:18 PM Proof 6Notes-headingLevelOneNotes-headingLevelTwoNotes-headingLevelTwoContNotes-headingLevelThreeNotes-headingLevelFourNotes-straplineNotes-body {Notes-bullets {Notes-bulletsBespoke hNotes-bulletsChevron –Notes-bulletsDasha. Notes-alphaList2. Notes-numbersListiii. Notes-romanListWelcomeAugean is one of the UK’s leading waste management businesses, providing specialist services focused on managing hazardous wastes.Overview Highlights 01Our Organisation 04Our Business Model 06Chairman’s statement 08Strategic Report Our Business and Strategy Marketplace 12Our Strategy 16Our Performance Operating Review 20– Energy & Construction (E&C) 22– Radioactive Waste Services (RWS) 24– Industry & Infrastructure (I&I) 26– Augean Integrated Services (AIS) 28– Augean North Sea Services (ANSS) 30Financial performance 34Corporate Social Responsibility (CSR) performance 38How the Business Manages Risk 40Our Governance Board of Directors 46Our Governance 48Chairman’s Corporate Governance letter 49Corporate Governance Summary 50Audit Committee Report 51Nominations Committee Report 52Remuneration Committee Report 53Directors’ Remuneration Report 54Directors’ Report 58Our Financials Independent Auditor’s Report to the Members of Augean PLC 64Consolidated Statement of Comprehensive Income 65Statements of Financial Position 66Statements of Cash Flow 67 Statements of Changes in Shareholders’ Equity 68Notes to the Financial Statements 70Shareholder Information Notice of Annual General Meeting 112Advisers and Company Information IBCFor further information within this document and relevant page numbersGetting around this reportCSR reportWe also produce a dedicated CSR report, available to download at www.augeanplc.com, containing a wide range of information including: {How we interact with the local and wider community {Our compliance with our environment obligationsInvestor websiteWe 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 presentationsAugean AR2015.indd 425/04/2016 13:24:24 Financial Highlights
Overview
Profit before tax
(£m)
£6.0m
Earnings per share
(p)
6.0
4.65p
5.4
4.13
3.29
4.65
2.86
4.4
3.9
12
13
14
15
12
13
14
15
Operating cash flows
(£m)
£11.1m
6.5
7.7
4.6
Return on capital employed
(%)
11.1
11.4%
10.7
11.4
8.9
8.4
12
13
14
15
12
13
14
15
All the above graphs show results from continuing operations before exceptional items.
See Financial Review on pages 34 to 37
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Operational Highlights
“2015 was a year of significant
“Augean is well placed in
progress for the Group resulting
strategic markets…where we have
in double digit growth in revenue,
expertise and assets.”
operating cash flow and EBITDA”
Stewart Davies Chief Executive
Stewart Davies Chief Executive
Operating cashflow:
Net operating cashflows
increased by 45% to £11.1m
and were used to fund the
future growth of the Group, pay
an increased dividend and pay
down debt.
Refinance
The Group’s Bank facility has
been renewed at £20m with an
extra £10m specifically to fund
acquisitions.
Strategic Investment
In 2015, the Group purchased
the remaining 19% of shares
in Augean North Sea Services
from the minority shareholder
for £1.05m.
See Operational Review on page 20 to 33
Our Values
We at Augean believe in...
As demonstrated
by our behaviours
Respect
We show we value
our people and others
we work with
Treating everyone how we would want to be treated
Valuing every individual’s contribution and voice
Looking out for each other
Considerate
Recognition
Caring
Integrity
We demonstrate
we can be trusted
Being open and trustworthy
Empowering people to do the right thing
Taking responsibility for our actions
Teamwork
We work better
together
Working better together to achieve more
Effective, clear and consistent communication
Creating opportunities for everyone to fulfil
their potential
Trustworthy
Empowering
Responsible
Collaborative
Communicative
Supportive
Excellence
We strive to achieve
our ambition
Challenging ourselves to continuously improve
Proactively seeking and acting on feedback
Being innovative and learning from experience
Challenging
Proactive
Learning
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Overview
Our Values
We at Augean believe in...
As demonstrated
by our behaviours
Respect
We show we value
our people and others
we work with
Treating everyone how we would want to be treated
Valuing every individual’s contribution and voice
Looking out for each other
Considerate
Recognition
Caring
Integrity
We demonstrate
we can be trusted
Being open and trustworthy
Empowering people to do the right thing
Taking responsibility for our actions
Teamwork
We work better
together
Working better together to achieve more
Effective, clear and consistent communication
Creating opportunities for everyone to fulfil
their potential
Excellence
We strive to achieve
our ambition
Challenging ourselves to continuously improve
Proactively seeking and acting on feedback
Being innovative and learning from experience
2012
Head
office
Trustworthy
Empowering
Responsible
Collaborative
Communicative
Supportive
Challenging
Proactive
Learning
A group of
individual
divisions
Our Group Model
2014
2015
Group
Individual
BUs
working as
a Group
Working as
a cohesive
team
Our Cohesive Group
All Together Better is a framework of behaviours launched
in 2015 and centred around Augean’s four core values of
‘Respect’, ‘Integrity’, ‘Teamwork’ and ‘Excellence’.
The development of the behaviours was led by a team of
senior managers representing all of the Group’s business
units. This team facilitated workshops with colleagues and
collated opinions, knowledge and attitudes representing
the whole of the Augean Group. This information was
then refined and distilled to become the values, beliefs
and behaviours shown on this page.
These internally generated behaviours allow Augean
colleagues, and the business units they serve, to work
cohesively even when they have disparate roles. Everyone
within Augean is able to understand how their work
contributes to serving our customers and can be clear
that the way in which we work is as important as the
tasks we undertake.
All Together Better is key to achieving our Group strategy
and ensuring we conduct ourselves appropriately
whilst pursuing our vision of “creating value for our
customers through innovative services that protect
future generations.”
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Our Organisation:
Our Business Units
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
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,
Great Yarmouth
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Overview
Our Locations
Lerwick
Aberdeen
Paisley
Waste Recovery Park
Port Clarence
Cannock
Thornhaugh
Avonmouth
Great Yarmouth
East
Northants
RMF
East Kent
Number of sites
3
Revenue
£26.6m
Number of sites
3
Revenue
£1.9m
Number of sites
3
Revenue
£11.7m
Number of sites
Number of sites
2
Revenue
£6.0m
Number of sites
6
Revenue
£14.8m
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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24612.04 25 April 2016 1:18 PM Proof 6ClientFocusSpecialistWasteExpertiseWe understand our chosen market sectors and what drives value for clientsWe are known as the ‘go to’ company for waste management that is fully compliant and resilient for the futureServiceSolutionsWe are trusted to deliver our clients’ critical but non-core operational servicesOur Business Model06www.augeanplc.com Stock code: AUGOur Business ModelAugean AR2015.indd 625/04/2016 13:25:01 24612.04 25 April 2016 1:18 PM Proof 6ClientFocusSpecialistWasteExpertiseWe understand our chosen market sectors and what drives value for clientsWe are known as the ‘go to’ company for waste management that is fully compliant and resilient for the futureServiceSolutionsWe are trusted to deliver our clients’ critical but non-core operational servicesSpecialist waste expertise {Being close to customers enables us to work with the outcomes they need, not just the specification they have procured to {We deliver services that are critical for our customers’ operations (safety, compliance, time, quality, cost) but are not their core capabilities {Augean has a successful growing track record in service solutionsService solutionsSpecialist waste expertise {The maintenance capex for 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 {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 {Prioritised approach to strategic projects ensures quality of investments {Maintaining hurdle rate > WACC for investment projectsGrowth in profitGrowth in Asset BaseGrowth in Returns {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 {Augean has the know-how, assets and permissions that make us a ‘go to’ company for hazardous and radioactive waste management {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 recyclingClientfocusOverview07Augean AR2015.indd 725/04/2016 13:25:02 Chairman’s Statement
“The Board continues to
remain focused on improving
the returns from capital
employed for the Group”
2015 was another encouraging year for the Group, with
year-on-year increases in revenue, profit, operating cash
flows and return on capital employed, compared to 2014.
The Group is currently trading in line with expectations in
2016.
The strategy for growth, developed and implemented by
Stewart Davies and his team, is delivering tangible results
with further evidence of traction across several areas of the
business both commercially and in financial terms.
Total revenue, from continuing operations, increased to
£61.0m (2014: £55.0m). Profit before tax from continuing
operations and before exceptional items increased by 12%
to £6.0m (2014: £5.4m), with an increase in basic earnings
per share on the same basis of 13% to 4.65 pence (2014:
4.13 pence).
Operating cash flows, before exceptional items, increased
from £7.7m to £11.1m. The Board continues to support
reinvestment in strategic business growth, including
£1.1m paid to purchase the remaining 19% of shares in
Augean North Sea Services in March 2015. The Group
has successfully refinanced its bank facility on improved
commercial terms, increasing the available debt funding to
£20m, with the option of a further £10m exclusively to fund
potential acquisitions. All investments are made with the
expectation of increasing levels of return and acceptable
EBITDA1 payback periods. Our return on capital employed2
for the year increased to 11.4% (2014: 10.7%) and our
total net debt fell by £1.4m during the year to £4.3m, after
total capital expenditure of £7.5m.
Our Energy and Construction business had a strong year,
with levels of material into landfill above initially anticipated
input volumes. In 2016 we anticipate a more normalised
level of inputs, subject to activity in the construction market.
The impact of the revised Landfill Tax excise notice issued
by HMRC in December 2015 on volumes of waste sent
to landfill in England and Wales is not yet fully apparent.
However the level of construction soils received by the
business in 2016 to date has been in line with management
expectations. Air pollution control residues (“APCR”)
arising from the Energy-from-waste sector volumes were
lower than last year, however significant volumes of other
waste streams contributed strongly to the growth in profit
of that business as well as the significant operating cash
flow generation of the Group in the year. There remains
clear management focus on growing contracted APCR
volumes into the business, as maintaining our share of
this growth market is a key strategic imperative in the
short and medium term. We continue to actively tender for
APCR contracts, as they arise, with both existing and new
customers.
The Radioactive Waste Services business saw a reduction
in volumes in 2015 but was able to optimise pricing
and deliver a pleasing increase in revenue and profit.
Through 2015 and early 2016 we have seen reductions
in the level of customer expenditure to treat the waste,
in part due to UK Government spending reviews and
we expect this theme to continue in 2016. However, the
Group’s site at East Northants remains a key element
of national infrastructure for the disposal of low-level
radioactive waste in the medium term. The Group remains
actively engaged with customers to obtain further clarity
regarding their predictions of output for the year. The
Industry & Infrastructure business suffered a setback in the
performance of its Avonmouth site during 2015, however
a turnaround plan is under way to return it to profitability in
2016.
The second year of trading for the Augean Integrated
Services business saw further progress, with increased
revenues and a number of three year total waste
management contracts won with blue-chip customers,
the benefits of which will be seen in future years. This
contributed to the growth seen in the contracted business
which increased 44% over the prior year. The high
temperature incinerator at the Group’s East Kent site
provided further unexpected challenges during the first
half of 2015, which was frustrating. However, equipment
replacement was undertaken in the second half of 2015
and subsequent management actions have been taken
to improve the operational uptime of this asset, which
remains of high strategic importance to the Group as more
contracts are secured.
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Overview
As in previous years, I was pleased to note the addition
of new shareholders to our register during the year and
again I am thankful for the continued support from all of our
investors.
The Board welcomed John Grant as a Non-executive
Director in August 2015. I am pleased to see the Group
benefiting from the extensive experience that John has
brought. Rory Macnamara has declared his intention to
step down from the Board at this year’s AGM. I would
like to thank Rory for his contribution to the Board over a
period of almost ten years and for his diligent Chairmanship
of the Audit Committee. In advance of Rory’s departure,
I also look forward to welcoming Rod Holdsworth to
the Board on 23 March 2016. Rod will also assume
the Chairmanship of the Audit Committee, upon Rory’s
departure, and I am confident that he will also add further
qualities to the Board as a whole, given his current and
past executive experience.
The Group’s balance sheet and operating cash flow remain
robust and the Board has proposed a 30% increase in
the dividend payment to 0.65p per share. This reflects
confidence in the prospects of the Group and the Board’s
ongoing commitment to pay a progressive dividend to its
shareholders, with the dividend being covered3 7.2 times
(2014: 8.3 times).
The Board continues to remain focused on improving the
returns from capital employed for the Group as a whole
whilst being prepared to invest in opportunities for the
future, to build on the progress delivered to date. I look
forward to another year of profitable growth for the Group.
Jim Meredith
Non-executive Chairman
21 March 2016
1. EBITDA means Earnings before interest, tax and depreciation
2. Return on capital employed (ROCE) is defined as operating
profit divided by average capital employed, where capital
employed is net assets excluding net debt
3. Dividend cover based on earnings per share from continuing
operations and excluding exceptional items
Augean North Sea Services (ANSS) responded positively
to changes in its market by securing several new contract
wins during 2015 and early 2016. This evidences the
continued execution of the strategy to diversify this
business away from exploration drilling waste management,
on which the business was originally built, to an increased
proportion of revenue generated from production waste
management and onshore industrial services, while
maintaining the high proportion of total revenues generated
directly from major oil & gas operators. Subsequent to
the year end, a strategic investment was made in a site at
Great Yarmouth to support a new contract with a major
operator. This represents a new location for the Group and
opens up further potential commercial prospects from the
southern North Sea. As previously anticipated, the Board
expects 2016 to be a more challenging year for the ANSS
business than 2015, particularly in light of further reductions
in oil prices during 2015 and reducing drilling activity, but
notes that management is broadening the service offering
to customers and focus on cost control in the current
conditions. The strategic move by ANSS to generate a
lesser proportion of its revenues from exploration drilling
waste management has led the Board to conclude that a
write-down of certain thermal treatment assets on Teesside
was necessary, based on our view of drill cuttings to be
processed by those assets in the short to medium term.
As previously announced, a non-cash impairment loss of
£2.9m has been reflected as an exceptional item in our
income statement for the 2015 financial year.
Health and safety continues to remain the highest priority
for the Board, management and employees across the
Group. Total accident levels remained at the same low level
in 2015 as in 2014, underpinned by further improvement in
positive indicators of safe behaviour. The Board continues
to recognise the risks faced by our people, who work in
environments moving, treating and disposing of hazardous
wastes. In November 2015, the Group celebrated the
achievement by ANSS of its tenth anniversary without a
lost time incident in its offshore activities.
Protecting the environment is not only a matter of
compliance with permits, but encompasses our broader
responsibilities to society and future generations. The
Group diligently monitors its performance in this regard,
the results of which are regularly reported to the Board. All
sites in England are ranked by the Environment Agency as
Category A or B and the Scottish Environmental Protection
Agency rates all of the Group’s sites in Scotland as
Excellent.
The Board recognises that our business success is
dependent on the quality, diligence and hard work of
all Augean’s employees and I would like to take this
opportunity on behalf of the Board to thank everyone who
has contributed to the Group’s continued progress during
the year.
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12
Strategic Report
Contents
Our Business and Strategy
Marketplace
Our Strategy
12
16
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)
Financial performance
Corporate Social Responsibility
(CSR) performance
How the Business Manages Risk
20
22
24
26
28
30
34
38
40
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11
Marketplace
Augean operates in market sectors that have distinct
strategic drivers and this is the rationale for the focus
of the five business units of the Group to develop the
customer focus relevant to each sector. There are certain
regulatory matters that are common for all of the units,
relating to hazardous waste and these are addressed
first below.
Hazardous waste overview
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 adoption of the NPS in June 2013 confirmed the
need for the portfolio of treatment and disposal facilities
and services developed by Augean over the past few
years. Importantly, the Group plays an active part in
five of the eight sectors identified as essential for the
management of hazardous wastes in the UK. The Waste
Hierarchy provides a framework for waste management
and implementation of infrastructure which will allow
sustainable waste management solutions. However, for
hazardous wastes there is a need to consider the fate of
the persistent and toxic pollutants in the waste. In order
to understand levels of opportunity to invest in activities
than are not clearly defined under the NPS, the Group
has asked the Department for Environment, Food &
Rural Affairs (DEFRA) to clarify policy in respect of the
management of these pollutants and the acceptability
of the long term dispersion into the environment of such
contaminants.
WASTE
HIERARCHY
Favoured
option
1
Prevention
2
Minimisation
3
Reuse
4
Recycling
5
Energy
Recovery
6
Disposal
Least
favoured
option
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, clinical and
pharmaceutical waste, and other industrial producers.
Data published by the Environment Agency during 2014
(the most recent data available) on the production of
hazardous waste indicated that approximately 1 million
tonnes are disposed per annum to hazardous landfill
sites and the total UK capacity for hazardous landfill was
approximately 16 million tonnes (source: Environment
Agency). 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.
4m tonnes
OF HAZARDOUS WASTE
HANDLED IN THE UK
EACH YEAR
16m tonnes
TOTAL UK CAPACITY FOR
HAZARDOUS LANDFILL
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Strategic Report
Energy-from-Waste and Biomass market
Augean’s treatment and disposal to landfill includes the
management of certain by-products from energy-from-
waste (EfW) plants, which are being constructed and
operated to deliver the UK’s obligation to significantly
reduce the landfilling of municipal solid waste by 2020,
and from biomass plants. These facilities produce air
pollution control residues (APCR) and also incinerator
bottom ash (IBA). 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 75,000 tonnes,
representing approximately 35% of the total traded
volume during 2015. This market, of approximately
250,000 tonnes per annum, is expected to double
over the period 2013-2020, as the number of EfW and
biomass 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 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. It is not currently
anticipated that the final tranche of derogations will be
removed before the end of 2017. 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 customers in the growing EfW
and biomass market.
Construction waste market
Construction soils are a key input to the Group’s landfill
sites. In 2015, the Group has received high volumes of
this waste into its sites at ENRMF and Port Clarence
where contaminated soils are treated and disposed to
landfill. The volume of these soils available to the Group
is variable and linked to the construction macroeconomic
cycle, including the progress of large-scale infrastructure
projects. The market for these soils, by nature, is not
operated on a long term contracted basis. It is sensitive
to the prevailing market spot price, influenced by haulage
costs and thus proximity to the disposal site.
250,000m
tonnes
OF APCR PRODUCED
BY UK EFW AND BIOMASS
INCINERATORS IN 2015
APCR
market
EXPECTED
TO DOUBLE BETWEEN
2013 AND 2020
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Marketplace continued
HM Revenue & Customs issued a revised excise notice
in respect of landfill tax in December 2015 which may
impact the disposal or treatment route selected by the
customer for contaminated materials including soils. This
has caused market uncertainty and the impact of this
notice on customer behaviour in the market will become
evident in 2016.
Nuclear decommissioning market
The Group’s key radioactive waste market is the nuclear
decommissioning market, relating to the closure and
dismantling of the UK’s redundant nuclear power and
research facilities. This is managed on behalf of the
UK government by the Nuclear Decommissioning
Authority (NDA). The disposal of naturally occurring
radioactive material (NORM) generated principally from
the Oil & Gas industry is the second key radioactive waste
market for the Group. 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. The NDA publishes regular forecasts on
the inventory of radioactive wastes requiring disposal
and treatment, the latest of which was released in
December 2015 and shows 42% year on year increase
in LLW volumes from NDA sites to 3,930 cubic metres in
2016/17, albeit from a low base in 2015/16.
Oil recovery market
The significant reductions in market prices for oil,
seen since the latter part of 2014, impacted upon the
waste oil market throughout 2015. In particular, prices
for processed waste oil reduced to approximately nil
value by the end of 2015. The overall recovered and
processed fuel market suffered from stagnation brought
about by uncertainty surrounding the falling market. This
exacerbated the global position, as trading effectively
ceased for periods whilst markets adjustments took
effect. At the same time, UK based outlets for waste oil
derived heating fuels constricted in response to the falling
price of heating oil. The market became more reliant on
European off-takers, who, given the oversupply, were
able to exert price pressure and be more discerning with
regard to the material quality, which favoured the market
in mainland Europe.
The effect on businesses specialising in waste oil recovery
has been significant, with many facing challenges in
the face of difficult trading conditions continuing for an
extended period. During the course of 2015 and into
2016, there has been some rationalisation in this area
of the industry, with those unable to adapt and diversify
being pushed to exit and further streamlining expected in
response to further reducing demand.
North Sea Oil & Gas market
The markets for waste produced in the exploration,
appraisal, development, production and decommissioning
of 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,
with further activities in North West England, for the East
Irish Sea. The Group provides a full range of services,
equipment rental and manpower provision for the
containment and treatment of offshore wastes, including
the cuttings and slop waters from drilling of oil and gas
wells, contaminated waters from the oil production
process, production wastes, sludges, and equipment
and water contaminated with low level naturally occurring
radioactive material, as well as a more general range of
industrial general and hazardous wastes.
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“Augean can
move up
the supply
chain in the
Oil and Gas
industry”
The oil & gas market has been adversely impacted as
a result of reductions seen in oil prices, with oil & gas
companies seeking efficiencies from the supply chain.
Cost efficiencies are key to the sustainability of businesses
in this area and, as such, Augean can offer the internal
routes for oil & gas wastes, and move up the supply chain
into manpower services and equipment rentals related to
these wastes. This gives Augean North Sea Services a
unique selling point and opportunities in the marketplace.
The second half of 2015 saw a reduction in the size of the
market for drilling wastes. However, the ANSS business
continues to execute its strategy for diversification, based
upon utilisation of the assets of the whole Group to
provide total waste management and industrial cleaning
capabilities to oil & gas production facilities.
The market for providing total waste management and
industrial cleaning to oil & gas production facilities has
different drivers, as the assets are already invested and
therefore have seen more stable levels of activity than
exploration and development over the period of oil price
falls. The dependence of the UK’s energy sector on
oil & gas is anticipated to continue over several decades,
leading to an expectation of stable levels of demand for
waste management for production facilities and onshore
industrial services. An additional sector of the market
derives from the decommissioning of assets in the North
Sea. NORM arises when various types of processing lines
and equipment are cleaned and takes the form of scale or
sludges. Decommissioning of assets would result in the
need for treatment and disposal of NORM in the medium
and long term. Whilst reliable statistics on the scale of
the NORM market remain limited, we estimate that up
to 1,000 tonnes of NORM may be released per annum,
requiring treatment and disposal.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Our Strategy
“Augean is well positioned in
attractive markets”
Core Strategy
The 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 2015 we have built new relationships
with customers and 95% 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 80% in 2014.
With these customers representing 47% of total Group
sales revenues for the year (2014: 50%), the transition to
a contract-led business model continues and is evident in
all of our business units.
See KPIs on pages 18 to 19
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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.
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 £7.5m was spent on
capital investment in 2015 (2014: £6.9m). The return
on capital employed of the Group, from continuing
operations and before exceptional items, was 11.4%
for the year (2014: 10.7%) from an increased total asset
base, which is consistent with this strategy.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Key Performance Indicators
KPI
Link to
strategy
Applicable area(s)
of the Group
2015
outcome
2014
outcome
Number of accidents(1)
Health & safety is the highest priority of the Group
SMP
E&C, I&I, AIS,
ANSS
Number of near misses reported(2)
Health & safety is the highest priority of the Group
SMP
E&C, I&I, AIS,
ANSS
Compliance scores(3)
Augean operates in a highly regulated environment
and aims to carry on the highest levels of
compliance with relevant regulations and planning &
permitting conditions
SMP
E&C, RWS, I&I,
AIS, ANSS
E&C/
RWS: 8
I&I: 12
AIS: 10
ANSS: 4
E&C/
RWS: 419
I&I: 747
AIS: 289
ANSS:
560
E&C: A
RWS: A
I&I: A/
Excellent
AIS: B
ANSS:
Excellent
E&C/
RWS: 10
I&I: 13
AIS: 5
ANSS: 7
E&C/
RWS: 319
I&I: 670
AIS: 287
ANSS:
522
E&C: C
RWS: A
I&I: B/
Excellent
AIS: D
ANSS:
Excellent
Underlying profit before taxation(4)
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
£6.0m
£5.4m
GSV
Group
£5.6m
£5.0m
GSV
Group
11.4%
10.7%
Proportion of revenue from contracts or
framework agreements(7)
This is a measure of the relative certainty of future
cash flow
SMP,
CFS,
GSV
Group
95% of
top 20
Top 20
47% of
Group
revenue
80% of
top 20
Top 20
50% of
Group
revenue
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KPI
Link to
strategy
Applicable area(s)
of the Group
2015
outcome
2014
outcome
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
E&C:
434,000 t
E&C:
332,000 t
RWS:
3,200 t
RWS:
4,300 t
AIS
£2.3m
£1.6m
ANSS
89% of
ANSS
revenue
75% of
ANSS
revenue
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
SMP,
CFS,
GSV
SMP,
CFS,
GSV
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.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Operating Review
“The Group remains committed to growth
in all of its businesses and markets, through
both organic and acquistive means”
Stewart Davies Chief Executive
As previously announced, during 2015 the Board took
the strategic opportunity to purchase the remaining 19%
of shares in the Augean North Sea Services business
from the minority shareholder, for a cash consideration
of £1.05m. This is equivalent to 2.7 times 2015 EBITDA
and the transaction was accretive to earnings per share
in the year. The business has performed well, despite
challenging conditions in the North Sea oil & gas market.
The Board continues to monitor this market very closely
but remains confident that the market positioning of
that business, including the ongoing execution of its
diversification strategy, leave the business well placed in
the medium to long term.
The Group employed an average of 345 staff (2014: 300)
over the course of the year. The number of employees in
the Group has increased during 2015 as the Group has
continued to invest in high-quality employees who remain
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
2015 and 2014 (Energy & Construction, Radioactive
Waste Services, Industry & Infrastructure, Augean
Integrated Services and Augean North Sea Services). The
performance of each of the five business units in 2015 is
set on pages 22 to 31.
Introduction
The Group delivered a strong set of financial results in
2015.
The results of the Group, from continuing operations and
excluding exceptional items, show that:
{ Total revenue increased by 11% to £61.0m;
{ Profit before taxation increased 12% to £6.0m;
{ Net operating cash flows increased by 45% to
£11.1m;
{ Basic earnings per share increased by 13% to 4.65
pence; and
{ Return on capital employed increased from 10.7% to
11.4%.
During 2015, the Group operated through five business
units.
The operating cash flow of the Group was used to
fund the future growth of the Group, with total capital
expenditure investment of £7.5m. This comprised £5.5m
of maintenance capital expenditure to lengthen the
productive life of existing assets (including £1.3m on
landfill cell engineering and £0.2m of cell capping) and
£1.8m of development capital expenditure for targeted
future growth, along with a £0.2m deferred consideration
payment relating to the purchase of the East Kent site.
The Group remains committed to growth in all of its
businesses and markets, through both organic and
acquisitive means, where appropriate. Aside from
its strong operating cash flows, the Group also had
a £13.25m bank facility in place as at 31 December
2015, compared to net debt of £4.3m, equivalent to 0.4
times EBITDA, from continuing operations and before
exceptional items. The Group has successfully completed
the refinancing of its bank loan facility in March 2016, at
an increased level of £20m, plus a further optional £10m
facility increase exclusively to fund acquisitions. This
facility leaves the Group well placed to take advantage of
investment opportunities that accelerate the strategy and
are value enhancing for shareholders.
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Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Operating Review continued
Energy & Construction (E&C)
“EBITDA increasing
by 15%...
contributed to the
strong operating cash
flow of the Group”
The principal activity of this business unit is the disposal
of air pollution control residues (APCR), incinerator
bottom ash (IBA), asbestos and other contaminated
waste materials and soils, mainly from the Energy-from-
Waste, biomass energy and construction sectors. This is
primarily achieved through treatment and ultimate landfill
in permitted hazardous and non-hazardous sites at Port
Clarence, a permitted hazardous site at East Northants
Resource Management Facility (ENRMF) and a permitted
non-hazardous site at Thornhaugh, near Peterborough.
Revenues, excluding landfill tax and intra-group trading,
increased by 29% to £20.2m (2014: £15.6m), with the
significant increase primarily due to high volumes of
construction soils, which continued through the second
half of the financial year, and compensated for a reduction
in the volumes of APCR treated in 2015 compared to
2014.
The total volume of waste disposed by the E&C business
increased by 31% to 434,000 tonnes in 2015, from
332,000 tonnes in 2014, with APCR volumes decreasing
by 11% from 85,000 tonnes to 75,000 tonnes and other
waste streams increasing by 45% from 247,000 tonnes
to 359,000 tonnes. Average gate fees on APCR streams
increased by 8% and decreased by 1% on soils and other
waste streams with an overall decrease in APCR revenue
of 5% and increase in other waste revenue of 42%, as a
result of the changes in volumes on those waste streams,
compared to 2014. Non-waste revenue streams, from
mineral extraction royalties and energy generation from
landfill gas, totalled £0.7m in the year (2014: £0.7m).
The higher volumes of lower margin contaminated soils
received by the business unit caused the operating profit
and EBITDA of the business unit to grow at a lower rate
than revenue, with EBITDA increasing by 15% to £9.5m
(2014: £8.3m), against the 29% increase in revenue and
this EBITDA growth contributing to the strong operating
cash flow of the Group as a whole during 2015. Operating
profit before exceptional items improved by 3% to £6.5m
(2014: £6.3m), with depreciation in this business unit
primarily driven by the input volume and thus the rate of
engineered landfill cell capacity consumption, rather than
the passage of time.
The high level of construction soils activity during the year
was attributed to high levels of activity in the preparation
of construction sites. It is not anticipated that volumes
of construction soils will be as high in 2016 and beyond.
In December 2015 HM Revenue & Customs issued a
revised excise notice in respect of landfill tax, updating
the landfill tax treatment of various waste streams, which
could potentially impact the amount of landfill tax arising
on the disposal of certain waste materials, including
construction soils, and, in turn, the disposal or treatment
route selected by the customer for those materials.
The impact of the revised excise notice on customer
behaviour in the market is not yet fully apparent. The early
part of 2016 has seen a reduced level of construction
soils received by Augean sites, albeit that the reduction
is from the unusually high level of 2015, back to a
more normalised level which, accordingly, is in line with
management expectations.
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APCR volumes in the second half of 2015 were similar
to those seen in the first half (1% higher). An increase in
the volume of APCR treated by the Group remains a key
strategic objective in the short and medium term, with the
business well positioned to utilise its additional investment
in treatment capacity to service the growth in Energy
from Waste and biomass capacity in the areas of the UK
served by our sites.
Total capital investment in the E&C business was
£3.8m in the year (2014: £2.3m), of which £2.8m was
in respect of lengthening the productive life of existing
assets (maintenance capital expenditure) and £1.0m was
investment in the targeted future growth of the business
(development capital expenditure). The maintenance
capital expenditure included £1.3m in respect of landfill
cell engineering and £0.2m in respect of the capping
of full landfill cells. Excluding landfill cell-related capital
expenditure, total capital spend was lower than 2014,
due to certain one-off site infrastructure projects occurring
in 2014.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Operating Review continued
Radioactive Waste Services (RWS)
“RWS has strategically
sought to reduce its
dependence upon the
disposal of waste from
LLWR...increasing the
average price
per tonne for waste
into Augean facilities”
Throughout 2015, RWS has strategically sought to reduce
its dependence upon the disposal of waste from LLWR,
with actions taken including increasing the average price
per tonne for waste into Augean facilities, diversification
of its customer base, with 49% of revenue in 2015
generated from customers other than LLWR, compared
to 31% in 2014; and widening the range of treatment
options, with the first radioactive wastes received for
thermal processing in late 2015.
LLWR predicts that volumes for the 2016-17 Government
fiscal year (April 2016 to March 2017) will be 42% higher
than the current 2015-16 forecasts, and should, therefore,
lead to an increase in volumes in the second half of 2016
and early 2017, compared to late 2015 and early 2016.
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
(NDA) 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 total revenue from the disposal and treatment of low
level radioactive waste, excluding landfill tax and intra-
group trading, increased by 5% to £1.9m (2014: £1.8m).
Operating profit increased by 9% to £1.1m (2014: £1.0m)
and EBITDA increased 13% to £1.2m (2014: £1.1m). This
was generated from a total volume of 3,186 tonnes, a
decrease of 26% compared to 4,323 tonnes in 2014.
The revenue generated by RWS has historically been
dominated by waste related to nuclear decommissioning,
with revenues steadily increasing as activity on the
Government-owned sites increased. In the final quarter of
2015, LLWR issued a revised projection, which indicated
a 43% reduction in waste volumes for disposal to the
market during the Government fiscal year 2015-16 (April
2015 to March 2016). This significant reduction was due
to two main issues, being the latest status of individual
decommissioning projects, including delays caused by
changes in management companies for various NDA-
controlled sites as previously communicated, and the
outcome of the UK Government Spending Review. In
line with those predictions, Augean has seen significantly
lower volumes of waste from the NDA estate since May
2015 and this is now expected to continue during the first
quarter of the Group’s 2016 financial year.
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Based on the forecast activity of the RWS business,
taking into account the timing of the increased in volumes
between late 2016 and early 2017, as well as the reduced
activity seen in the first quarter of 2016 to date, it is now
considered that this business unit will trade significantly
below management expectations for the year ended 31
December 2016.
Focus remains on the medium term growth strategy for
this business, whilst continuing discussions with key
stakeholders within Government organisations, in an
effort to obtain greater predictability and consistency in
waste volumes for the Group, which operates a number
of essential assets for the delivery of the Government’s
strategy for dealing with radioactive waste.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Operating Review continued
Industry & Infrastructure (I&I)
“Second half of 2015
EBITDA of £0.5m
compared to a negative
EBITDA of £0.1m in the
first half”
The PCWRP site includes certain thermal treatment
and recovery assets that have been substantially used
for the treatment of drill cuttings from the North Sea
in recent years. As explained below, the diversification
strategy of Augean North Sea Services means that
there is now an expectation of reduced activity by those
assets on Teesside. Accordingly, the recoverable value
of the relevant assets was determined to be lower than
their carrying value and, as previously announced, an
impairment loss of £2.9m has been recognised as an
exceptional item in the consolidated income statement of
the Group in 2015.
Industrial Services has been a service line of increasing
importance to the I&I business, with a number of term
contracts secured with customers, providing opportunities
to leverage the Group’s specialist waste knowledge with
support services, in line with Company strategy. With an
increasing scope of opportunity, the optimum means of
resourcing the growth of this part of the business has
been under active consideration during 2015, resulting in
additional targeted sales resource, restructuring parts of
the business to position it for growth in this specific area
and modest capital investment in the business to increase
scope and capability. Focus has been on broadening
the range of services and increasing market penetration
through new and existing customers using downstream
I&I and other Augean-wide assets to support and provide
end-to-end supply chain security. Several term contracts
have been secured in the Infrastructure sector.
A total of £0.6m of capital investment was undertaken
in the I&I business, of which c. £0.4m represented
maintenance capital expenditure and £0.2m related to
development capital expenditure.
The principal activity of this business unit is the recovery
and recycling of oil and solvents and the generation of
secondary liquid and solid fuels from waste, 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 and gas 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 (PCWRP) on Teesside and
providing industrial services on client sites.
I&I total revenue, excluding inter-segment sales, fell by
6% to £11.7m in 2015 (2014: £12.5m) and the business
unit made an operating loss of £0.7m, compared to a
£0.6m operating loss in 2014, although the performance
of the business unit improved in the second half of the
year with an operating loss of £0.2m, compared to a first
half operating loss of £0.5m. The business generated
a positive EBITDA of £0.4m, compared to a positive
EBITDA of £0.5m in 2014, with the second half of 2015
generating a positive EBITDA of £0.5m compared to a
negative EBITDA of £0.1m in the first half.
The disappointing overall outcome for the I&I business
unit is primarily due to performance issues at the
Avonmouth site, with the other areas of the business
performing in line with management expectations for
2015. As noted in the interim results, measures have been
taken at Avonmouth to improve the performance of the
site. This has included the appointment of management
to oversee improvements at the site, in order to execute
an agreed plan to return the site to profitability during
2016. Avonmouth trading in 2016 to date is in line with
management plans.
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Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Operating Review continued
Augean Integrated Services (AIS)
“Total revenue, excluding
inter-segment sales,
grew by 44%”
As previously noted, the AIS business has built a
commercial team with sector-specific expertise, which
has enabled the wider AIS business to secure further
TWM contracts with high-value customers in 2015, the
full year impact of which is expected to occur in 2016
and beyond. A number of TWM contracts have been
extended to run until 2019 and all contracts won in 2015
were at least three years in length, with potential for
further in-life revenue growth. The AIS business excluding
East Kent made an operating loss of £0.3m (2014: £0.2m)
as it continues to invest for growth.
Other than payments to purchase the HTI, a total of
£0.8m of capital expenditure was undertaken in the AIS
business in 2015, most of which related to the East Kent
site, to address the plant reliability issues referred to
above.
This business unit operates from a site in Cannock and
a high temperature incinerator (HTI) in Sandwich, East
Kent. It 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 specialist HTI asset in East Kent, which
is designed to incinerate high-value, low volume goods,
such as pharmaceutical or other specialist waste. The
Group purchased the East Kent HTI in 2014, for a total of
£1.9m. The purchase price included a deferred element
of £0.4m, of which £0.2m was paid in 2015 and the
remaining £0.2m was paid in early 2016.
Total revenue, excluding inter-segment sales, grew by
44% to £6.0m (2014: £4.2m). This included £3.9m
from total waste management (2014: £2.5m), of which
£2.3m was from contracted business (2014: £1.6m). The
business reduced its operating loss by 22% to £0.6m
(2014: £0.7m), and cut its negative EBITDA by 56% to
negative £0.2m (2014: negative £0.4m).
The below-expectation profitability of this business unit
was primarily due to the performance at the East Kent
HTI which realised an operating loss of £0.3m (2014:
loss of £0.5m). The disappointing performance of the
HTI resulted from unplanned operational downtime,
particularly in the first half of the financial year, which led
to higher operating costs and a temporary reduction
in processing capacity. Equipment replacement was
carried out, during planned shutdowns in August 2015
and December 2015. This, along with an improved
schedule of planned, preventative maintenance and the
appointment of a new, experienced general manager at
the plant in February 2016, will enable the HTI to deal
with the increased commercial pipeline arising from new
contract wins. The Board remains confident in the long
term strategic value of this asset to the Group.
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“Total revenue, excluding
inter-segment sales,
grew by 44%”
Strategic Report
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Operating Review continued
Augean North Sea Services (ANSS)
“During 2015,
ANSS outperformed
expectations,
despite increasingly
challenging
conditions”
During 2015 and the early part of 2016, ANSS has
achieved the following noteworthy contract wins:
{ As previously announced, in June and July 2015
ANSS was successful in winning three new contracts,
with terms of between three and five years, all of
which are with operators and tier-1 customers.
Those contracts include production platform waste
management, onshore waste management and
decommissioning work, the latter of which includes
NORM wastes and is delivered in conjunction with the
Radioactive Waste Services business;
{ As previously announced, in January 2016 ANSS
entered into a contract to provide production waste
management and onshore industrial services to a
major oil & gas operator. This represents both further
progress on the strategy of diversification and also
a significant entry-point for the Group to the market
which exists in the southern part of the North Sea.
The contract, which is directly with the operator, is for
a period of three years, with the customer having the
option for further annual extensions, up to a maximum
period of seven years. Linked to this contract, in
February 2016, the Group purchased certain freehold
land and assets in Great Yarmouth for £0.5m, plus
associated taxes and fees. The site, which has been
purchased from a waste management company, and
already holds relevant planning and environmental
permits, will enable the Group to supplement those
services already provided to customers in the Northern
and Central North Sea, which will continue to be
mainly delivered from Aberdeen.
The ANSS business unit operates in the North Sea oil &
gas market, primarily from four sites in Aberdeen, a site
at Lerwick, in the Shetland Islands and, since February
2016, from a site in Great Yarmouth. The primary revenue
streams are from drilling waste management, which
includes drill cuttings management and the rental of
offshore engineers and equipment to customers, with
a diversification strategy under way, leading to growth
in production waste management, onshore & marine
industrial services and water treatment. Throughout 2014
and early 2015, the Augean Group owned 81% of the
shares in ANSS. As previously announced, the Group
purchased the remaining 19% of shares in March 2015
such that ANSS became a wholly owned subsidiary of the
Group from that date.
ANSS revenue grew by 2% to £14.8m (2014: £14.5m)
and saw an increase in operating profit of 32% to £1.3m
(2014: £1.0m) and an increase in EBITDA of 34% to
£2.0m (2014: £1.5m). The operating profit margin
increased from 7% to 9% due to adverse weather
conditions in 2014 which adversely impacted the margin
at that time.
During 2015, ANSS outperformed expectations, despite
increasingly challenging conditions in the North Sea Oil
& Gas market which have been evident since the latter
part of 2014. Key to this successful performance has
been the continued strategic traction of the business
in moving up the supply chain and dealing directly with
oil & gas operators and tier-1 customers in this market,
which increases the potential for the business to widen
its service scope directly with those customers. 89% of
total ANSS revenues were directly generated from those
customers during 2015, compared to 75% in 2014.
During 2015, the business maintained incumbency on an
average of 4.6 rigs, compared to 4.3 in 2014.
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{ In February 2016, ANSS entered into a new contract
to provide onshore waste management and industrial
cleaning services to a major oil & gas operator, in the
North West of England. The contract is for a period
of three years, with the option of further annual
extensions, up to a maximum period of five years.
All of the above contract wins are strategically important
in diversifying the ANSS business away from dependence
on exploration drilling and further underpin existing
management expectations for 2016 revenues and profits
from this business. Going forward, it is expected that an
increasing proportion of revenues will be generated from
onshore and offshore waste-related industrial services
work, rather than exploration drilling waste management.
Despite these strategic successes during 2015 and the
early part of 2016, the Board remains mindful of the
prevailing conditions in the North Sea oil & gas market.
As previously stated, management continues to monitor
events closely and ensures that costs are tightly controlled
to match industry demands for cost efficiencies, whilst
sufficient investment is made to allow the business to
pursue its growth strategy and take advantage of the
opportunities that continue to emerge, even in the current
challenging environment. Capital expenditure totalled
£1.6m during 2015 (2014: £1.6m).
ANSS is a support service business, with 2015 operating
expenses comprising 68% of variable costs, 5%
depreciation and 27% 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 has
continued to earn the business increasing recognition
from operators and tier-1 customers in the sector, which
has been key to the successful award of the contracts
referred to above.
The Board remains confident that the ANSS business has
the capability and credibility in its core 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 but the Board continues to
monitor events in the North Sea oil & gas market, given
their potential impact on the ANSS business.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Long Term Contracts
The Group aims to increase the proportion of its customer
base which is served through a formalised agreement,
consisting of either a contract or framework agreement. In
2015, the top 20 customers of the Group made up 47%
of total Group revenue (2014: 50%), of which 95% was
through a formalised agreement (2014: 80%).
Transactions
On 10 March 2015, the Group purchased the 19%
of shares in Augean North Sea Services Limited not
already held by the Group, thereby making the company
a wholly owned subsidiary of the Group at that date.
The consideration paid for the shares was £1,050,000,
excluding applicable stamp duty and fees, which was
paid in cash on the same date.
On 2 July 2015, the Group purchased the entire issued
share capital of ASB Environmental Limited (ASB) for a
total consideration of £40,000, which was paid in cash
on the same date, along with an acquired overdraft of
£51,000. The acquisition of ASB does not have a material
impact on the results of the Group.
Legislative environment
Regulation underpins the demand for Augean’s services
and accordingly the business follows closely the
development of legislation and guidance and engages
proactively with policy makers and regulators.
Of particular interest to the business in 2015 have
been changes to the landfill tax regime, the revised
classification of waste, WM3, and developments on the
derogations for landfill acceptance criteria. The Finance
Act 2015 introduced requirements for determining the
landfill tax rate of screened wastes. From 1 June 2015,
Augean smoothly implemented the transition to using the
Global Harmonised System for classification of chemicals
and the Environment Agency guidance WM3, which
requires a change in the way we classify waste. DEFRA
has recently circulated a discussion paper regarding
the removal of derogations from the landfill acceptance
criteria. A decision will be made later this year but the
removal is considered unlikely until late 2017.
DEFRA is consulting its review of its 2010 Strategy for
Hazardous Waste Strategy for England. Augean was
directly involved in its formulation and has monitored its
implementation since 2010. In general, Augean considers
that, whilst the Strategy is fit for purpose, there are
concerns now apparent regarding the implementation
and application of the Strategy, particularly in respect of
persistent and toxic pollutants, which need addressing
urgently. The application of the strategy does not appear
to substantially consider whether the Best Overall
Environmental Outcome (BOEO) will be achieved, despite
it being a requirement of the Strategy. Clear policy
guidance is being sought from DEFRA to help direct
investment in the sector.
On 16 December 2015, HM Revenue & Customs issued
a revised excise notice in respect of landfill tax, updating
the landfill tax treatment of various waste streams. This
update potentially impacts the market served by the
Energy & Construction business unit, as explained above.
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 2015, we
gained planning permissions and subsequently made
permit applications for the extension of the landfill sites
at Thornhaugh and Port Clarence. The application for
Thornhaugh enables 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.
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At Port Clarence, the previous consent was due to
terminate in 2016 and has now been extended for the
remaining life of the site so we have secured planning
permission for the landfill site for a future period estimated
to exceed 50 years. 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 varied
the Environmental Permits for the incinerator so that our
hazardous and radioactive waste storage activities can be
extended to Bloody Point.
In 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
was undertaken including environmental impact and risk
assessments to ensure that the ongoing development
would not cause harm to human health or pollution of
the environment. Permits for the treatment and disposal
of hazardous waste were granted in 2015 while the
radioactive waste permit is expected to be issued during
the first half of 2016. The business has continued to
actively engage with local communities resulting in general
acceptance of its proposals and no objections.
See Business Unit Performance on pages 22 to 31
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Financial performance
“The post-maintenance free cash flow
of the Group, from continuing operations
and excluding exceptional items, increased
by 12%.”
Richard Laker Group Finance Director
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
2015
61.0
6.8
6.0
4.8
12.1
11.1
4.65p
11.4%
2014
55.0
6.1
5.4
4.3
10.0
7.7
4.13p
10.7%
Exceptional items are detailed below.
On a statutory basis for continuing operations, operating
profit was £3.3m (2014: £6.7m), profit before tax was
£2.5m (2014: £5.9m), profit after tax was £1.7m (2014:
£4.8m), basic earnings per share were 1.60 pence (2014:
4.64 pence) and net operating cash flows were £10.5m
(2014: £8.4m).
Trading, operating profit and EBITDA
Net revenue from continuing operations for the year
ended 31 December 2015 increased by 11% to £61.0m
(2014: £55.0m).
Operating profit before exceptional items from continuing
operations increased by 11% to £6.8m (2014: £6.1m)
and profit before tax increased by 12% to £6.0m (2014:
£5.4m), on the same basis.
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
2015
6.8
5.3
12.1
2014
6.1
3.9
10.0
Exceptional items
Exceptional items in 2015 totalled a net charge of £3.5m
before taxation, of which £2.9m related to the non-cash
impairment of certain property, plant and equipment, as
explained below, £0.5m related to restructuring charges
and £0.1m related to business acquisition and other
costs.
In 2014, 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 costs totalling £0.2m.
Finance costs
Total finance charges were £0.8m (2014: £0.8m) and
include the payment of interest on bank debt and other
financial liabilities, totalling. They also included non-cash
unwinding of discounts on provisions totalling £0.1m
(2014: £0.1m).
Taxation
The Group recognised an accounting tax charge of £0.8m
(2014: £1.1m) for its continuing operations and a tax
credit of £nil (2014: £0.6m) in respect of discontinued
operations. This includes a credit of £0.4m (2014: £nil) in
respect of exceptional items.
The accounting tax charge of £1.2m for continuing
operations and excluding exceptional items (2014: £1.1m)
represents 20.3% of profit before taxation on the same
basis (2014: 20.4%). This compares against the headline
rate of corporation tax of 20.25% for 2015 (2014: 21.5%).
The Group paid corporate tax of £1.1m during the year
(2014: £0.8m), of which £0.4m was in respect of 2015
liabilities and £0.7m in respect of previous years. A current
tax liability of £0.9m (2014: £0.6m) remains in the balance
sheet at the year end.
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A deferred tax asset of £2.3m (2014: £1.7m) is
recognised in the balance sheet, which reflects the
probability that the Board believes that the assets will be
recovered in the short to medium term. A deferred tax
asset of £0.8m is unrecognised (2014: £0.9m) as the
expected usage is not sufficiently predictable. This asset
is expected to eventually be recovered in the ordinary
course of business and will, therefore, be re-recognised
when its recovery is probable.
Earnings per share
Basic earnings per share (EPS), from continuing
operations and excluding exceptional items, increased by
13% to 4.65 pence (2014: 4.13 pence).
Statutory basic EPS, from continuing and discontinued
operations was 1.60 pence (2014: 4.92 pence).
The Group made a profit after taxation, from continuing
operations and excluding exceptional items, of £4.8m
(2014: £4.3m), of which £4.8m (2014: £4.1m) was
attributable to equity shareholders.
The total number of ordinary shares in issue increased
during the year from 101,991,380 to 102,249,083
with the weighted average number of shares in issue
increasing from 100,053,156 to 102,139,647 for the
purposes of basic EPS.
Dividend
The Board has recommended a dividend of 0.65p per
share (2014: 0.50p), payable on or after 10 June 2016,
following an ex-dividend date of 2 June 2016 and a
record date of 3 June 2016, subject to shareholder
approval at the Annual General Meeting. The dividend per
share has increased by 30% 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 7.2 times (2014: 8.3 times) from the
continuing operations of the group, before exceptional
items.
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 remaining shares
in ANSS
Acquisition of ASB
Environmental
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
2015
£’000
11.1
(0.6)
10.5
(5.5)
5.0
(1.8)
(1.1)
(0.1)
(0.2)
—
1.8
(0.5)
0.1
1.4
2014
£’000
7.7
0.4
8.1
(2.7)
5.4
(2.7)
—
—
(1.5)
1.2
2.4
(0.4)
0.8
2.8
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 12% to £5.6m (2014: £5.0m), after
excluding net operating cash flows from exceptional items
and discontinued operations, of £0.6m outflow (2014:
£0.4m inflow).
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Financial performance continued
Underlying net operating underlying cash flows were
generated from continuing trading as follows:
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
2015
£’m
12.1
0.4
(1.8)
0.4
2014
£’m
10.0
(1.3)
(1.3)
0.3
11.1
7.7
Underlying net operating cash flow as a percentage of
EBITDA was 92% in 2015 (2014: 77%).
The Group announced in March 2015 that it had
purchased the remaining 19% of shares in Augean North
Sea Services, not already held by the Group, for a total
consideration of £1.05m.
The Group purchased the assets and site at the East
Kent Waste Recovery Facility during the 2014 for a total
consideration of £1.9m, with £1.5m paid in 2014 and
£0.2m paid in each of January 2015 and January 2016.
During 2014, the Group sold certain residual assets
from the closure of the Waste Network business, for net
proceeds of £1.2m.
Capital investment in property, plant and equipment and
intangible assets made by the Group totalled £7.3m
(2014: £5.4m), excluding the payments to acquire
East Kent, 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 between maintenance and development,
dependent upon the specific nature of that capital
expenditure:
2015
Maintenance
£’m
2015
Development
£’m
2015
Total
£’m
2014
Total
£’m
Energy &
Construction
Radioactive
Waste
Services
Industry &
Infrastructure
Augean
Integrated
Services
Augean North
Sea Services
Other/
corporate
2.8
—
0.4
0.6
1.3
0.4
5.5
1.0
3.8
2.3
—
—
0.2
0.6
0.2
0.3
0.1
1.8
0.8
1.6
0.5
7.3
0.1
0.5
0.4
1.6
0.5
5.4
During the year, the Group received a total of £0.1m
(2014: £0.8m) 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 borrowings less cash and cash equivalents,
fell to £4.3m at 31 December 2015, from £5.7m at 31
December 2014. This represented gearing, defined as net
debt divided by net assets, of 7.8% (2014: 10.6%). The
ratio of net debt to EBITDA, from continuing operations
and before exceptional items, was 0.4 times (2014: 0.6
times).
Financing
The activities of the Group are substantially funded by a
bank facility, comprising a revolving credit facility and bank
overdraft. That facility was renewed on 21 March 2016
with HSBC Bank plc at a level of £20m with the option
of a further £10m exclusively to fund acquisitions. The
maturity of the facility is October 2020 and the overdraft
is reviewed annually. This facility, along with the underlying
cash generation of the Group, is expected to provide the
required funds to support further growth of the business
over that period. During 2015, the activities of the Group
were substantially funded by a bank facility, comprising
an amortising term loan, revolving credit facility and bank
overdraft. That facility had amortised, in the ordinary
course of business, to £13.25m by 31 December 2015
from an initial level of £15m. As at 31 December 2015, the
undrawn funds available to the group totalled £5.5m, plus
cash of £3.6m.
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Both of the above facilities include the following two
financial covenants, which are tested on a quarterly basis:
Ratio of net debt to EBITDA:
Ratio of operating profit to cash
interest costs (interest cover):
not more than 2.5 times
not less than 3.0 times
As at 31 December 2015, the Group was in compliance
with both covenants, with significant headroom.
Balance sheet and return on capital
employed
Consolidated net assets were £54.4m on 31 December
2015 (2014: £53.8m) and net tangible assets, excluding
goodwill and other intangible assets, were £34.4m (2014:
£33.9m), of which £nil (2014: £1.0m) was not attributable
to equity shareholders of the Group. Net assets and net
tangible assets as at 31 December 2015 are both stated
after the recognition of a £2.9m impairment loss, as
explained further below. 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 11.4% in 2015 (2014: 10.7%). This
outcome is not impacted by the £2.9m impairment loss
recognised by the Group, which is recognised as at 31
December 2015 but does not form part of the calculation
of average capital employed for 2015.
Impairment reviews
In accordance with IAS36 ‘Impairment of Assets’, an
annual impairment review was carried out for each cash-
generating unit (CGU) to which significant goodwill is
allocated and also any other CGU where management
believed there may have been an indication of potential
impairment to the carrying values of assets in those
CGUs.
For the continuing operations of the Group, this exercise
was completed for the 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, the Augean North
Sea Services business, as a result of the declining
macroeconomic conditions seen in the North Sea Oil &
Gas market in late 2014 and during 2015, and the Indirect
Thermal Desorption (ITD) unit at Port Clarence Waste
Recovery Park, due to the high proportion of revenues
that it generates from the thermal treatment of North Sea
drilling muds and the consequent material impact on its
expected future activity as a result of ongoing challenges
in the North Sea Oil & Gas market. Those detailed reviews
indicated that an impairment loss of £2.9m was to be
recognised in respect of the ITD CGU as at 31 December
2015 and 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 2015.
Events since the end of the financial year
On 21 March 2016, the Group completed the refinancing
of its bank loan facilities. Subsequent to this, the Group
has a facility in place to provide a total level of funding
of £20m with the option of a further £10m exclusively to
fund acquisitions, maturing in October 2020.
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 below 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:
See KPIs on pages 18 to 19
Richard Laker
Group Finance Director
21 March 2016
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Corporate Social Responsibility
(CSR) performance
“Augean is committed to conducting
its business operations in an open and
responsible manner”
Stewart Davies Chief Executive
The Board recognises the important
role played by the Group in the
environment and communities within
which it operates. The health & 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 information
available for 2015 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. Scores received 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 2015, 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 metallic 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. However, no general
pay increase was awarded to staff or
Directors in 2016, in view of general
inflationary conditions approximating
to zero in the UK.
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Corporate Social Responsibility
(CSR) performance
Strategic Report
Safety
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 2,000 near misses and 540 safe acts were
reported during 2015 (achieving the target of one report
per operational employee per month) and at the same
time we maintained a low level of accidents causing injury
to a person or damage to property.
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 £0.4m
(2014: £0.4m) 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 Stockton Sea Cadets, local sports teams and local
events.
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.
Training and development activity during the year built
on the progress made during 2014 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.
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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 simplistic 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. In addition, the importance of Best Overall Environmental Outcome (BOEO) in moderating the simplistic
application of the waste hierarchy is being highlighted to policymakers.
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 in-depth quarterly 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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Strategic Report
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 simplistic 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. In addition, the importance of Best Overall Environmental Outcome (BOEO) in moderating the simplistic
application of the waste hierarchy is being highlighted to policymakers.
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 in-depth quarterly 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.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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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 macroeconomic 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, invests selectively in development, 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 and gas investment
With a well-established business focused on providing waste management services to North Sea oil and gas operators,
the Group has some exposure to any fall in investment for oil and 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 production 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.
Mitigation is provided as far as possible by the outsourcing of the majority of their haulage requirement, augmented
with the use of the Group’s own fleet where appropriate. The Group has the ability to accept wastes into sites in
different geographical locations before onward transfer to their final treatment or disposal destinations.
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 standard rate of landfill tax rose
to £82.60 per tonne on 1 April 2015 and will continue to rise in line with 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.
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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Strategic Report
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 macroeconomic 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, invests selectively in development, 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 and gas investment
With a well-established business focused on providing waste management services to North Sea oil and gas operators,
the Group has some exposure to any fall in investment for oil and 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 production 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 standard rate of landfill tax rose
to £82.60 per tonne on 1 April 2015 and will continue to rise in line with 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 by the outsourcing of the majority of their haulage requirement, augmented
with the use of the Group’s own fleet where appropriate. The Group has 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.
Board appointment
Rod Holdsworth will join the Board on 23 March 2016 as
a Non-executive Director.
Outlook
Trading in the early part of 2016 has started positively
for the Group with the exception of Radioactive Waste
Services, where the reduced volumes sent from the
Nuclear Decommissioning Authority for disposal, seen in
the second half of 2015, has continued into early 2016.
Accordingly, the Group as a whole is trading in line with
market expectations.
The Group remains focused on the execution of its
strategy to deliver shareholder value and further direct
contracts with tier-1 producers have been secured
improving forward visibility of earnings. The portfolio effect
of maintaining five businesses in diverse markets and the
continued focus of the Group on increased returns on its
investments means that the Board remains confident of
maintaining its track record of year on year increases in
profitability in 2016.
By order of the Board
Dr Stewart Davies
Chief Executive Officer
21 March 2016
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Our Governance
Contents
Board of Directors
46
Our Governance
48
Chairman’s Corporate Governance letter 49
50
Corporate Governance Summary
51
Audit Committee Report
52
Nominations Committee Report
53
Remuneration Committee Report
54
Directors’ Remuneration Report
58
Directors’ Report
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Board of Directors
Jim Meredith
Chairman, Non-executive
Director and Chairman of the
Remuneration Committee
Dr Stewart Davies
Executive Director and Chief
Executive Officer
Andrew Bryce
Non-executive Director and
Chairman of the Nominations
Committee
John Grant
Non-executive Director
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, became
Chairman in June 2012
and has Chaired the
Remuneration Committee
since 4 June 2015.
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.
John has significant
experience across a number
of sectors. He is currently a
Non-executive Director of
Melrose Industries plc and
MHP S.A. and the Chairman
of The British Racing Drivers
Club Limited and was, until
January 2016, a Non-
executive Director of Pace
plc. He was Chief Executive
of Ascot plc from 1997 to
2000 and Group Finance
Director of Lucas Industries
plc from 1992 to 1996, as
well has holding a number of
senior positions within Ford
Motor Company.
He was appointed to the
Board on 24 August 2015
and appointed as Senior
Independent Director on
19 November 2015. He will
become the Chairman of the
Remuneration Committee in
June 2016.
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Our Governance
Rory Macnamara
Non-executive Director
and Chairman of the Audit
Committee
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. Rory is also a
Non-executive Director
of Mears Group plc and
Alliance Trust plc and has
a number of directorships
and advisory roles with other
organisations.
He was appointed to
the Board of Augean in
November 2006 and has
indicated his intention to
step down from the Board at
the AGM on 2 June 2016.
Rod Holdsworth
Non-executive Director
Richard Laker
Executive Director and
Group Finance Director
Rod has a significant breadth
of financial expertise with
more than 20 years’ of board
level experience gained
in the support services,
construction, manufacturing
and healthcare sectors.
Since 2008, Rod has been
Group Finance Director
of OCS Group, a privately
owned, international facilities
management business
with 94,000 staff across
50 countries and revenue
of approximately £1bn. He
previously served as Finance
Director at Morrison plc, the
construction and support
services division owned by
Anglian Water Group plc,
and has also held senior
financial positions at Acertec
plc, Alfred McAlpine plc and
Smiths Industries plc. Rod
trained as a Civil Engineer
before qualifying as a
Chartered Accountant with
Price Waterhouse in 1990.
He is a fellow of the Institute
of Chartered Accountants in
England & Wales.
He was appointed to the
Board on 23 March 2016 and
will become the Chairman of
the Audit Committee in June
2016.
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 in
September 2014.
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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. 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 ordinarily comprises a Non-executive
Chairman, three further independent Non-executive
Directors, the Chief Executive Officer and a Group
Finance Director. The number of Non-executive Directors,
excluding the Chairman, will temporarily increase from
three to four, as Rod Holdsworth will join the Board on 23
March 2016, ahead of Rory Macnamara stepping down
from the Board at the AGM on 2 June 2016. During 2015,
the Board determined that it was appropriate to appoint
a Senior Independent Director. On 19 November 2015,
John Grant was appointed as the Senior Independent
Director. 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 reappointment 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.
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Chairman’s Corporate Governance letter
Our Governance
“One of my principal concerns is
to maintain excellent relationships
with our shareholders”
Jim Meredith
Non-executive Chairman
I am pleased to introduce the corporate governance
section of our report.
Augean remains committed to high standards of
corporate governance in all of 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
Adviser, and responds as appropriate. During 2015, the
Board has appointed a Senior Independent Director for
the first time.
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 Nominations) 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. During the
year I continued to make myself available to shareholders
to discuss strategy and governance matters and was
pleased to again have individual meetings with some of
the Group’s major shareholders during 2015.
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
21 March 2016
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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.
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;
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Audit Committee Report
Our Governance
Chairman
Rory Macnamara
AUDIT COMMITTEE
“During the year the committee considered the
adequacy and effectiveness of the risk management and
control systems of the Group”
Members
Rory Macnamara
Andrew Bryce
Jim Meredith
John Grant
Meetings
Total number of Committee
meetings: 5
Prior to publication, the annual financial statements for
2014 and other information included in the 2014 Annual
Report, the 2014 full year results and 2015 interim
results announcements 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. Rod
Holdsworth will join the Board on 23 March 2016 and
has agreed to become Chairman of the Audit Committee,
when Mr Macnamara steps down from the Board at
the AGM on 2 June 2016. 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 five 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.
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Nominations Committee Report
NOMINATIONS COMMITTEE
Chairman
Andrew Bryce
“During late 2015 and early 2016, the activities of the
committee focused on the recruitment of two new
Non-executive Directors”
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.
Members
Andrew Bryce
Rory Macnamara
Jim Meredith
John Grant
Meetings
Total number of Committee
meetings: 2
During late 2015 and early 2016, the activities of the
committee focused on the recruitment of two new Non-
executive Directors. The committee chairman worked with
recruitment consultants to identify suitable candidates and
led the interview processes through to the appointment
of John Grant, as announced in August 2015, and
the forthcoming appointment of Rod Holdsworth, as
announced in March 2016.
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Remuneration Committee Report
Our Governance
Chairman and
Non-executive
Director
Jim Meredith
REMUNERATION COMMITTEE
“The principal objective of the committee is to attract,
retain and motivate talented people”
Members
Jim Meredith
Rory Macnamara
Andrew Bryce
John Grant
Meetings
Total number of Committee
meetings: 5
During 2015, the committee also engaged Deloitte LLP
as external advisers to assist in the development of the
new LTIP, expected to be awarded to relevant participants
during mid-2016. This work has continued into 2016
and has included the undertaking by the committee of a
consultation exercise with certain significant shareholders
prior to finalising the details of the scheme.
The Remuneration Committee comprises the Non-
executive Directors and is chaired by Jim Meredith. The
committee was previously chaired by Roger McDowell,
until he stepped down from the Board on 4 June 2015
and subsequently has been chaired by Jim Meredith,
between the departure of Mr McDowell and the expected
appointment of John Grant as committee Chairman in
June 2016. 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 five occasions during 2015,
with business including reviews of the Remuneration for
executive Directors, decisions relating to bonus awards
and the attainment of targets relating to share options
awarded under the 2014 Long Term Incentive Plan
(LTIP). The Directors’ Remuneration Report includes the
outcome of these considerations.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Directors’ Remuneration Report
(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 were 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 were granted at an exercise price of 10
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.
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.
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.
In 2015, an inflationary pay rise of 1.8% was awarded to
both Stewart Davies and Richard Laker, which was in line
with the general inflationary pay rise given to other staff in
the Company on 1 January 2015. The pay rise awarded
to Mr Laker was deferred until 2 September 2015,
being the first anniversary of his joining the Company.
Subsequent to this pay review, it was determined that the
date of annual pay review for Mr Laker should change to
1 January each year, in line with the other employees of
the business.
(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 but the level of profit before
tax achieved by the Group means that no bonuses are
payable in respect of the 2015 financial year.
(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.
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Our Governance
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 definition of LTIP ROCE differs from the 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 2015 was 10.2% compared to
the minimum target of 9.6% set out above.
The actual ROCE of the Group for 2015 was 11.4%, as
set out in the operating review and financial review.
Once minimum LTIP ROCE targets are met, the
performance conditions for the Executive Directors are as
follows:
Total shareholder return relative to the FTSE AIM All-Share
(“Relative TSR”)
—25% weighting
Basic earnings per share, before exceptional items and
intangible amortisation (“Underlying LTIP EPS”)
—75% weighting
In the year ended 31 December 2015, the Company
ranked between the 68th and 69th percentile, meaning
that 93.12% attainment occurs for the Relative TSR
element of the one-third of the 2014 LTIP relating to the
2015 performance.
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
Underlying LTIP EPS element
The actual Underlying LTIP EPS result for 2015 was 4.76
pence, meaning that 46.00% attainment occurs for the
Underlying LTIP EPS element of the one-third of the 2014
LTIP relating to 2015 performance.
The overall attainment for the executive Directors, based
on the weighting set out above, was 57.78% for the 2015
element of the 2014 LTIP, meaning that 42.22% of the
share options relating to the 2015 element of the 2014
LTIP lapse.
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 2015 performance,
was 83.80%, comprising 46.00% in respect of LTIP EPS
and 100%% in respect of Group EBITDA.
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.
The expected costs of the scheme are given in note 21 to
the financial statements.
(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 2015.
(vi) Service contracts
Executive directors have rolling service contracts with
notice periods of not more than 12 months.
Minimum
Maximum
Between minimum
and maximum
2014
3.9 pence
4.2 pence
2015
4.6 pence
5.3 pence
Straight line attainment from
30% to 100%
2016
5.5 pence
6.3 pence
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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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 2015
Jim Meredith
Stewart Davies
Andrew Bryce
John Grant
Richard Laker
Rory Macnamara
Beneficial
shares
Number
500,000
155,000
11,419
—
—
15,224
Share
options
Number
—
1,000,000
—
—
—
—
LTIP
Number
—
828,207
—
—
477,630
—
Total
shares
Number
500,000
1,983,207
11,419
—
477,630
15,224
The above LTIP numbers for Messrs Davies and Laker are stated after lapses during the year, as set out below.
Directors’ emoluments
The emoluments of the directors during 2015 were as follows:
Stewart Davies
Richard Laker
Jim Meredith
Roger McDowell (resigned 04/06/2015)
Andrew Bryce
John Grant (appointed 24/08/2015)
Rory Macnamara
Richard Allen (resigned 05/06/2014)
2015
Basic
fee/salary
£’000
228
146
60
14
33
12
33
—
526
2015
Pension
contributions
£’000
23
15
—
—
—
—
—
—
38
2015
Bonus
£’000
—
—
—
—
—
—
—
—
—
2015
Other
emoluments
£’000
13
12
—
—
3
—
—
—
28
2015
Total
£’000
264
173
60
14
36
12
33
—
592
2014
Total
£’000
280
65
46
31
34
—
31
93
580
Fees for Roger McDowell include £1,000 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 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.
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Our Governance
Directors’ share plans
Share Option Scheme
Stewart Davies
2014 LTIP
Stewart Davies
Richard Laker
Earliest
vesting
date
12/08/2013 12/08/2016
Award date
Market
price at
award date
40.25p
Number
of shares
2014
1,000,000
Exercised
in year
Number
of shares
2015
— 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
of shares
2015
963,855
555,859
1,519,714
Granted
in year
Number
Lapsed
of shares
in year
2015
— (135,648)
828,207
—
(78,229)
477,630
— (213,877) 1,305,837
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.
Other than options held by Executive Directors of Augean
plc, set out in the table above, there are also a further
757,003 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 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
1,622,693 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 2015 was 53.25p. The range of the share
price during the year was 38.6p to 61.5p.
On behalf of the Remuneration Committee
Jim Meredith
Chairman of the Remuneration Committee
21 March 2016
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Directors’ Report
The Directors present their report and the audited financial
statements for the Group and Company for the year
ended 31 December 2015.
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 wholly
within the United Kingdom.
The Strategic Report provides a review of the business of
the Group, key performance indicators and an indication
of future prospects.
Results and dividends
The profit after tax of the Group for the year was £1.7m
(2014: £5.1m) from revenue of £61.0m (2014: £55.2m).
The profit included exceptional items totalling a charge
of £3.1m (2014: net credit of £0.9m, of which a credit of
£0.4m related to discontinued operations).
The Board has recommended a dividend for the year of
0.65p per ordinary share, to be paid on or after 10 June
2016 for shareholders on the register at 3 June 2016
(2014: 0.50p).
Environmental policy
The quality of the environment is at the core of 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.
Further identified risks are presented within the Operating
Review.
Employees
The Group’s policy is to ensure the adequate provision
for the health, safety and welfare of its employees and
of 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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Our Governance
Charitable and political donations
During the year the Group contributed £374,000
(2014: £417,000) of its landfill tax liability to registered
environmental bodies as permitted by Government
regulations. No political donations were made during the
year (2014: £nil).
Directors
The composition of the Board of Directors is shown on
pages 46 and 47. Details of the directors’ interests and
remuneration are given in the directors’ remuneration
report on pages 54 to 57. John Grant was appointed as
a Non-executive Director with effect from 24 August 2015
and offers himself for election to the Board at the Annual
General Meeting (AGM). On 21 March 2016, the Group
announced that Rory Macnamara would be stepping
down from the Board and that Rod Holdsworth will join
the Board on 23 March 2016. Mr Macnamara will resign
from the Board and Mr Holdsworth will offer himself for
election to the Board, both at the AGM. In accordance
with the articles of association of the Company, Andrew
Bryce will retire from the Board and will offer himself for
re-election at the AGM.
Substantial shareholdings
The number of shares issued by the Company increased
during the year, from 101,991,380 as at 1 January 2015
to 102,249,083 at 31 December 2015. The Company had
been notified of the following interests of more than 3% in
its shares as at 14 March 2016:
Utilico Investments Ltd
Schroder Investment
Management
JO Hambro Capital
Management
Henderson Group
Charles Stanley
Hargreave Hale
Unicorn Asset Management
Number of
shares
21,164,442
%
of total
20.70%
19,409,000
18.98%
11,370,000
10,184,346
7,447,959
3,875,000
3,173,731
11.12%
9.96%
7.28%
3.79%
3.10%
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 plans, aligning personal performance
with strategic plans and targets and ensuring that
management is incentivised to deliver improving returns
for shareholders.
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Directors’ Report continued
Corporate governance
A separate corporate governance report is included within
the annual report.
the underlying cash generation of the Group, is expected
to provide the required funds to support further growth of
the business over that period.
Qualifying third party indemnity provisions (as defined
in 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
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 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 2015 through an
overdraft and revolving loan facility (the Facility), which
was renewed and increased with HSBC Bank plc in
March 2014, providing access to a term loan and
revolving loan facility for an extended period to July 2017
(the Existing Facility). The overdraft is reviewed annually.
The Existing Facility provided debt funding to the Group
of up to £15.0m at the point of commencement of the
Existing Facility, which had subsequently amortised to
£13.25m in accordance with the New Facility agreement
by 31 December 2015. The provision of the Existing
Facility was subject to certain covenants, focused on
the cover of interest costs and the ratio of net debt to
EBITDA.
On 21 March 2016, the Group renewed its facility with
HSBC Bank plc to provide a revolving credit facility and
bank overdraft to a total level of £20m (the New Facility).
The maturity of the New Facility is October 2020 and the
overdraft is reviewed annually. The New Facility, along with
Cash flow forecasts for the 12 months from the date of
approval of the financial statements indicate the Group’s
ability to operate within these covenants.
During 2015, 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 2015 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
indicated that an impairment was to be recognised
against certain tangible assets as at 31 December 2015,
as set out in notes 10 and 13. The impairment loss was
recognised as an exceptional item in the Consolidated
Income Statement of the Group for the year ended
31 December 2015 but is not considered to materially
impact upon 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
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Our Governance
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 12 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
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. The 2015 financial year is the
second year for the current lead partner, Mark Overfield.
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 (AGM) on 2 June 2016,
Andrew Bryce 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. John Grant
was appointed to the Board on 24 August 2015 and Rod
Holdsworth will be appointed to the Board on 23 March
2016. Being eligible, both will offer themselves for election
as Non-executive Directors at the AGM. Rory Macnamara
will resign from the Board at the AGM. No Director has a
contract with an unexpired notice period of more than 12
months.
By order of the Board
Richard Laker
Company Secretary
21 March 2016
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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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
65
66
67
68
70
64
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63
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 2015 which comprise the
Group and parent Company statements of financial position, the Group statement of comprehensive income, the Group
and parent Company statements of cash flow, the Group and parent Company statement 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 page 61, 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 2015 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
21 March 2016
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Our Financials
Total
2014
£’000
54,993
(48,304)
6,689
(759)
(5)
5,925
(1,125)
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2015
Before
exceptional
items
2015
£’000
Exceptional
items
2015
£’000
Note
Before
exceptional
items
2014
£’000
Exceptional
items
2014
£’000
Total
2015
£’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 for the year and total
comprehensive income
Profit and total
comprehensive income
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
61,005
(54,185)
6,820
(788)
—
6,032
(1,227)
—
61,005
54,993
(3,508)
(3,508)
—
—
(3,508)
390
(57,693)
(48,847)
3,312
(788)
—
2,524
(837)
6,146
(759)
—
5,387
(1,097)
—
543
543
—
(5)
538
(28)
4,805
(3,118)
1,687
4,290
510
4,800
—
—
—
(94)
4,805
(3,118)
1,687
4,196
374
884
280
5,080
4,753
52
(3,118)
—
1,635
52
4,037
159
884
—
4,921
159
1.60p
1.56p
1.60p
1.56p
4.92p
4.78p
4.64p
4.51p
The notes on pages 70 to 110 form an integral part of these financial statements.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Statements of Financial Position
As at 31 December 2015
Non-current assets
Goodwill
Other intangible assets
Investments in subsidiaries
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Current tax asset
Cash and cash equivalents
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Provisions
Net current assets/(liabilities)
Non-current liabilities
Borrowings
Provisions
Net assets
Shareholders’ equity
Share capital
Share premium account
Retained earnings
Equity attributable to owners of Augean plc
Non-controlling interest
Total equity
Group
2015
£’000
Company
2014
£’000
2015
£’000
2014
£’000
Note
10
11
12
13
6
14
16
17
18
17
18
19
20
20
25
19,757
214
—
42,918
2,316
65,205
306
11,829
—
3,553
15,688
(10,838)
(940)
(1,054)
(25)
(12,857)
2,831
(6,764)
(6,874)
(13,638)
54,398
10,225
612
43,561
54,398
—
54,398
19,602
296
—
43,317
1,688
64,903
410
12,785
—
1,502
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
—
202
50,807
1,189
259
52,457
—
697
1,396
103
2,196
(7,227)
—
(4,250)
—
(11,477)
(9,281)
(3,500)
—
(3,500)
39,676
10,225
612
28,839
39,676
—
39,676
—
284
51,478
1,077
80
52,919
—
14,922
797
27
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
The notes on pages 70 to 110 form an integral part of these financial statements.
The financial statements were approved by the Board on 21 March 2016 and authorised for issue on its behalf by:
R S Laker
Group Finance Director
Augean PLC Registered number: 5199719
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Statements of Cash Flow
For the year ended 31 December 2015
Note
23
15
7
Operating activities
Cash generated from/(used in) operations
Finance charges paid
Tax paid
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
Purchase of business (net of overdraft acquired)
Net cash used in investing activities
Financing activities
Dividends paid
Issue of equity
Acquisition of non-controlling interest
Drawdown/(repayment) 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
2015
£’000
12,348
(715)
(1,105)
10,528
—
(7,474)
(51)
—
(91)
(7,616)
(511)
96
(1,050)
626
(22)
(861)
2,051
1,502
3,553
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
Our Financials
Company
2015
£’000
2014
£’000
21,337
(711)
(972)
19,654
—
(389)
(54)
—
(40)
(483)
(511)
96
(1,050)
(17,631)
—
(19,096)
75
28
103
(7,035)
(738)
(801)
(8,575)
—
(474)
(193)
—
—
(667)
(349)
771
—
8,847
—
9,269
28
—
28
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Statements of Changes in Shareholders’ Equity
For the year ended 31 December 2015
Share
capital
£’000
9,970
Share
premium
account
£’000
—
Special
profit
reserve
£’000
36,450
Retained
earnings
£’000
738
Shareholders’
equity
£’000
47,158
Non-
controlling
interest
£’000
796
Group
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
Issue of equity
Reserve transfer
Share-based payments
Tax on items charged to equity
Total transactions with the owners
of the Company
At 1 January 2015
Total comprehensive income for
the year
Retained profit
Total comprehensive income for
the year
Transactions with the owners of
the Company
Dividend
Issue of equity
Acquisition of non-controlling
interest
Share-based payments
Total transactions with the owners
of the Company
At 31 December 2015
—
—
—
229
—
—
—
229
10,199
—
—
—
26
—
—
—
—
—
542
—
—
—
542
542
—
—
—
70
—
—
26
10,225
70
612
Total
equity
£’000
47,954
5,080
5,080
(349)
771
—
286
13
—
—
4,921
4,921
4,921
4,921
—
(771)
(35,679)
—
—
(349)
771
35,679
286
13
(349)
771
—
286
13
159
159
—
—
—
—
—
(36,450)
—
36,400
42,059
721
52,800
—
955
721
53,755
—
—
—
—
—
—
—
—
1,635
1,635
1,635
1,635
(511)
—
(43)
421
(511)
96
(43)
421
(133)
43,561
(37)
54,398
52
52
—
—
(1,007)
—
(1,007)
—
1,687
1,687
(511)
96
(1,050)
421
(1,044)
54,398
During the year, the Group acquired the remaining 19% of the share capital of Augean North Sea Services Limited. As
at 31 December 2015, the Group has no non-controlling interest.
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 determined that this condition was met and
the reserve was deemed distributable at 31 December 2014. Accordingly, the balance on this reserve was transferred
to Retained earnings.
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Statements of Changes in Shareholders’ Equity
For the year ended 31 December 2015
Our Financials
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
Issue of equity
Reserve transfer
Share-based payments
Tax on items charged to equity
Total transactions with the owners of the Company
At 1 January 2015
Total comprehensive income for the year
Retained loss
Total comprehensive income for the year
Transactions with the owners of the Company
Dividend
Issue of equity
Share-based payments
Total transactions with the owners of the Company
At 31 December 2015
Share
capital
£’000
9,970
—
—
—
229
—
—
—
229
10,199
—
—
—
26
—
26
10,225
Share
premium
account
£’000
—
Special
profit
reserve
£’000
36,450
Retained
earnings
£’000
643
Shareholders’
equity
£’000
47,063
—
—
—
542
—
—
—
542
542
—
—
—
70
—
70
612
—
—
(6,324)
(6,324)
(6,324)
(6,324)
—
(771)
(35,679)
—
—
(36,450)
—
—
—
—
—
—
—
—
(349)
771
35,679
286
13
36,400
30,719
(349)
771
—
286
13
721
41,460
(1,790)
(1,790)
(1,790)
(1,790)
(511)
—
421
(90)
28,839
(511)
96
421
6
39,676
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements
For the year ended 31 December 2015
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
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the
entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on
which control commences to the date on which control ceases.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
(ii) Non-controlling Interests
Non-controlling interests are measured at their proportionate share of the acquiree’s indentifiable net assets at the date
of acquisition.
Changes in the Group interest in a subsidiary that do not result in a loss in control are accounted for as equity
transactions.
(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.
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.
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Our Financials
Acquisitions of non-controlling interests are accounted for as transactions with 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.
Revenue relating to services provided, royalties and other types of income is recognised as the right to invoice a
customer for that revenue is met. Landfill Tax revenue is recognised as revenue at the point of acceptance and an
appropriate liability is recognised at the same time.
(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 fixed assets and non-recurring income or expenditure.
(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.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
1 Accounting policies continued
(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.
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
Leasehold land and buildings
Plant and machinery
– 50 years
– 20 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.
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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.
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.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
1 Accounting policies continued
(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.
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 Monte Carlo 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 remeasured 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.
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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 is 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 expense relating to financial
assets are recognised in profit or loss.
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.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
1 Accounting policies continued
(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.
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
12 months are set out below.
Impairment of goodwill and fixed assets
The Group has property, plant and equipment with a carrying value of £42,918,000 (note 13) and goodwill with a
carrying value of £19,757,000 (note 10). These assets are reviewed annually for impairment as described on 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. An impairment loss of £2,888,000 was recorded
in the income statement. Further detail is explained in 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.
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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 2015, the net liability relating to current income tax is £940,000 (2014: £579,000). A deferred tax
asset of £2,317,000 (2014: £1,688,000) 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.
(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 2018)
{ 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 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.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
2 Operating segments
The Group has five reportable segments which are the Group’s strategic business units. In 2014, a sixth business
segment was shown as discontinued. These business units are monitored and strategic decisions are made on
the basis of each business unit’s operating performance. The Group’s business units provide different services to
their customers and are managed separately as they are subject to different risks and returns. The Group’s internal
organisation and management structure and its system of internal financial reporting are based primarily on these
operating business units. For each of the business units, the Group’s Chief Executive Officer (CEO) (the chief operating
decision-maker) reviews internal management reports on at least a monthly basis. The following summary describes the
operations of each of the Group’s reportable segments:
{ Energy and Construction: Augean operates three modern hazardous and non-hazardous landfill operating sites
based at East Northants Resource Management Facility (ENRMF), Thornhaugh in 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.
{ 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 which became a 100% owned subsidiary during
the current year; this business unit provides waste management and waste processing services to offshore oil and
gas operators in the North Sea.
{ Industry and Infrastructure: Augean operates three waste processing sites across the UK, with activities focused on
the management of oil-contaminated waste. The business unit also provides specialist industrial cleaning services.
Information regarding the results of each reportable segment is included below. Performance is measured based on the
segment operating profit, as included in the internal management reports that are reviewed by the Group’s CEO. This
profit measure for each business unit is used to measure performance as management believes that such information is
the most relevant in evaluating the results of each of the business units relative to other entities that operate within these
sectors.
All activities arise solely within the United Kingdom. Inter-segment trading is undertaken on normal commercial terms.
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Information about reportable segments
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
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
2015
Energy and
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry
and
Infrastructure
£’000
Augean
North Sea
Services
£’000
Group
£’000
48,189
1,006
5,237
12,224
8,367
75,023
2,317
3,553
80,893
(11,302)
(163)
(1,333)
(2,578)
(2,429)
(17,805)
(7,750)
(940)
(26,495)
2014
Energy and
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry
and
Infrastructure
£’000
Augean
North Sea
Services
£’000
Group
£’000
53,258
787
5,048
8,254
9,063
76,410
1,688
1,502
79,600
(10,071)
(203)
(1,104)
(3,016)
(3,748)
(18,142)
(7,124)
(579)
(25,845)
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
2 Operating segments continued
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
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)
Net finance charges
Central costs
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
Impairment loss
2015
Energy and
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry
and
Infrastructure
£’000
Augean
North Sea
Services
£’000
12,331
2,048
—
—
65
6,630
—
—
—
21,074
6,357
27,431
(834)
26,597
6,528
(119)
6,409
—
—
—
—
—
—
1,911
—
—
1,911
—
1,911
—
1,911
1,110
(119)
991
—
—
2,356
3,871
—
—
—
—
—
6,227
—
6,227
(245)
5,982
(558)
(144)
(702)
—
—
—
—
14,201
1,323
—
—
—
—
—
—
14,201
—
—
—
—
—
8,400
5,177
14,900
—
14,201
14,900
(2,473)
(113)
11,728
14,787
(695)
(3,007)
(3,702)
1,340
(119)
1,221
4,128
2,976
—
154
113
—
958
380
—
709
1,091
2,888
1,622
676
—
Central costs relate to the costs of operating as a plc and are not allocated between the business units.
Group
£’000
12,331
2,048
17,880
3,871
65
6,630
1,911
8,400
5,177
58,313
6,357
64,670
(3,665)
61,005
7,725
(3,508)
4,217
(788)
(905)
2,524
(837)
1,687
1,635
52
7,571
5,236
2,888
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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
Loss from discontinued operations
Profit for the period and total
comprehensive income
Attributable to: Equity shareholders
of the parent company
Non-controlling interest
Other information
Capital expenditure
Depreciation and amortisation
2014
Energy and
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry
and
Infrastructure
£’000
Augean
North Sea
Services
£’000
8,605
1,550
—
—
141
6,989
—
—
—
—
17,285
6,319
23,604
(1,638)
21,966
6,341
(77)
6,264
—
—
—
—
—
—
1,827
—
—
—
—
—
2,075
2,458
—
—
—
—
—
—
—
—
14,883
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,312
7,416
878
1,827
4,533
14,883
14,606
—
—
—
—
1,827
—
1,827
1,019
(77)
942
4,533
(370)
4,163
(714)
(85)
(799)
14,883
14,606
(2,377)
(75)
12,506
14,531
(597)
861
264
1,016
(79)
937
2,332
1,920
55
62
2,366
314
578
1,101
1,617
485
Our Financials
Group
£’000
8,605
1,550
16,958
2,458
141
6,989
1,827
6,312
7,416
878
53,134
6,319
59,453
(4,460)
54,993
7,065
543
7,608
(759)
(919)
(5)
5,925
(503)
5,422
(342)
5,080
4,921
159
6,948
3,882
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
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:
Impairment of property, plant and equipment (note 10)
Net settlement of legal case
Restructuring charges
Refinancing charges
Acquisition related costs
Other
Exceptional charge/(income) from continuing operations
2015
£’000
63
10
—
73
133
2014
£’000
62
8
34
104
95
5,039
64
3,751
36
243
827
6
2,888
—
474
—
117
29
3,508
290
580
6
—
(939)
214
33
—
149
(543)
Loss on disposal of asset held for sale and other charges (discontinued)
—
218
Exceptional income from settlement of legal case in 2014 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 held for sale in 2014 relates to the closure and sale of the Waste Network business.
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 (note 18)
2015
£’000
682
7
99
788
2014
£’000
643
14
102
759
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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
Our Financials
2015
Number
32
258
55
345
2015
£’000
12,825
1,462
394
14,681
2014
Number
27
225
48
300
2014
£’000
11,401
1,291
431
13,123
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 Company employed 228 (2014: 197) people in the year.
The total remuneration of the Directors of the Company was £592,000 (2014: £580,000). The highest paid Director
received total emoluments of £264,000 including pension contributions of £23,000 (2014: total emoluments of
£280,000 including pension contributions of £22,000).
No Directors exercised share options during the year (2014: none). The Group believes that the Directors of Augean plc
are the only key management personnel under the definition of IAS 24 “Related party disclosures”.
The Directors have identified 15 (2014: 15) 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
2015
£’000
1,237
85
332
1,654
2014
£’000
1,224
105
101
1,430
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
6 Taxation
Group
2015
£’000
Continuing
operations
£’000
Discontinued
operations
—
—
—
—
—
—
—
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
1,463
2
1,465
(430)
(198)
(628)
837
Tax reconciliation for continuing operations
Profit before tax from continuing operations
Tax at theoretical rate
Effects of:
– expenses/(income) not deductible for tax purposes
– change in tax rate
– effect of share options
– adjustments in respect of prior years
– other
Tax charge on results
2014
£’000
Continuing
operations
£’000
Discontinued
operations
£’000
Total
1,463
2
1,465
(430)
(198)
(628)
899
162
1,061
132
(68)
64
837
1,125
(26)
—
(26)
—
(596)
(596)
(622)
2015
2014
£’000
2,524
511
162
169
24
2
(31)
837
%
20.3
6
7
1
—
(1)
33.2
£’000
5,925
1,274
(136)
(80)
(27)
94
—
1,125
£’000
Total
873
162
1,035
132
(664)
(532)
503
%
21.5
(2)
(1)
(1)
2
—
19.0
The main rate of corporation tax in the UK was 21% from 1 January 2015 and fell to 20% on 1 April 2015, such that the
weighted average headline rate for 2015 was 20.25%.
Deferred tax
Group
Deferred tax asset
Company
Deferred tax asset
2015
£’000
2,316
2,316
2015
£’000
259
259
2014
£’000
1,688
1,688
2014
£’000
80
80
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.
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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.
The movement in the net deferred tax asset during the year was as follows:
Our Financials
Group
At beginning of the year
Charged to the income statement during the year
De-recognition of asset
Credited directly to equity
Adjustment in respect of prior years
At end of the year
Company
At beginning of the year
Credited/(charged) to the income statement during the year
At end of the year
2015
£’000
1,688
655
(225)
—
198
2,316
2015
£’000
80
179
259
2014
£’000
1,143
(132)
—
13
664
1,688
2014
£’000
104
(24)
80
The reduction in the main rate of corporation tax from 21% to 20%, effective from 1 April 2015, and 20% to 18% from
1 April 2020 has been substantively enacted at the balance sheet date. Accordingly, deferred tax balances have been
valued at the lower rate of 18% in these accounts to the extent that timing differences are expected to reverse after this
date. £169,000 charge (2014: £80,000 credit) relates to changes in tax rates during the year.
No deferred tax has been recognised during the year in respect of certain temporary differences of £4,400,000 (2014:
£3,615,000). In the judgement of management, it is not probable that taxable income will be generated against which
those deductions may be recovered. 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
2015
£’000
225
567
792
2014
£’000
—
924
924
In 2015 the Group has re-recognised £265,000 of previously de-recognised assets as management’s view of the
probability of recovery of those assets became more certain, and has de-recognised £225,000 of deferred tax asset
arising on the impairment of property, plant and equipment during the year.
There are no unrecognised deferred tax assets in the Company (2014: nil).
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
7 Dividends
Proposed final dividend for the year ended 31 December 2015 of 0.65p pence per share
(2014: 0.5 pence per share)
Total
2015
£’000
665
665
2014
£’000
511
511
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 2015. 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.
8 Earnings per share
The calculation of basic earnings per share (EPS) is based on the profit attributable to ordinary shareholders of
£1,635,000 (2014: £4,921,000) and a weighted average number of ordinary shares outstanding of 102,139,647 (2014:
100,053,156), 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
2015
£’000
1,635
3,118
4,753
—
2014
£’000
4,921
(884)
4,037
94
4,753
4,131
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
2015
£’000
2014
£’000
102,139,647
2,795,165
104,934,812
100,053,156
2,894,941
102,948,097
1.60p
1.56p
4.65p
4.53p
1.60p
1.56p
4.65p
4.53p
—
—
4.92p
4.78p
4.03p
3.92p
4.64p
4.51p
4.13p
4.01p
(0.09)p
(0.09)p
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Our Financials
9 Investment in jointly controlled entity
Terramundo Limited (‘Terramundo’) was a 50:50 jointly controlled entity between Augean plc and DEC NV. No trading
has taken place during the current or previous year. This company was dissolved in September 2015.
The Group’s investment in the jointly controlled entity was considered to be impaired and was written down to its
recoverable amount of £nil in the year ended 31 December 2014. Additionally, a receivable from the jointly controlled
entity was fully provided against. No further gains or losses have been recognised in the year ended 31 December 2015
(2014: £5,000 loss).
During the year ended 31 December 2015 the jointly controlled entity generated £nil profit or loss (2014: £5,000 loss).
At 31 December 2014 the jointly controlled entity held net liabilities of £1,032,000, of which the Group’s 50% share
was £nil.
The cost of investment held by Augean plc, in its 50% interest at 31 December 2015, was £nil (2014: £nil).
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
2015
£’000
—
—
—
—
—
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
2015
£’000
—
—
—
2014
£’000
512
(512)
—
2015
£’000
—
—
—
10 Goodwill
Cost
At 1 January 2014
At 1 January 2015
Acquisition (note 25)
At 31 December 2015
Provision for impairment
At 1 January 2014
At 1 January 2015
At 31 December 2015
Net book value
At 31 December 2015
At 1 January 2015
At 1 January 2014
2014
£’000
—
10
—
(1,042)
(1,032)
2014
£’000
—
—
—
£’000
103,768
103,768
155
103,923
(84,166)
(84,166)
(84,166)
19,757
19,602
19,602
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
10 Goodwill continued
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 (CGUs) which are defined as the Group’s reportable
segments, with the exception of AIS and the Industry and Infrastructure business units which are each considered to
comprise two separate CGUs.
Previously the Group’s Industry and Infrastructure business unit had been considered as a single CGU. The Group
therefore has five reportable segments and seven CGUs as at 31 December 2015. The change in the Group’s
CGUs relates to the decoupling of the Indirect Thermal Desorption plant (ITD) from the remainder of the Industry and
Infrastructure business. The Group’s management has taken this decision as it has concluded that this is a separately
identifiable asset and generator of cash flows for which the associated risks have diverged from the other assets in the
business unit. The conditions antecedent in the North Sea Oil & Gas market during 2015, combined with the ongoing
strategic diversification of the ANSS business, which has recently provided the majority of the plant inputs, has caused
management to make this decision and consider the ITD as a separate CGU in its own right. The ITD was purchased as
an asset, independently of any business combination and consequently there is no goodwill allocated to it.
The increase in goodwill in the year arose on the acquisition of 100% of the issued share capital of ASB Environmental
Limited.
The allocation of goodwill by CGU is as follows:
Energy and Construction business unit
Industry and Infrastructure business unit
Total
2015
£’000
12,575
7,182
19,757
2014
£’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. ASB Environmental Limited is not considered material or a separate CGU.
Value in use calculations have also been carried out for the following assets or investments which do not contain
goodwill and which were carried out in the prior year, with the exception of the ITD plant where a value in use
calculation was not carried out in the prior year:
{ the High Temperature Incinerator at East Kent (EKHTI), 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; and
{ the ITD Plant, due to the deterioration in the North Sea Oil & Gas market, as explained above.
Discounted cash flows have been prepared separately for each CGU tested. The cash flows for all CGUs have been
discounted using a pre-tax discount rate of 10.5% (2014: 10.5%), 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.
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Our Financials
The key assumptions for the Energy & Construction CGU’s cash flows are:
{ based on approved budgets and plans for 2016 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 2017 onwards; and
{ 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 described above there is no indication of impairment with headroom of £7.6m (2014: £10.8m).
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
2015
£3.2m
£1.8m
£0.9m
Impact in
2014
£3.4m
£1.5m
£1.3m
The key assumptions for the Industry and Infrastructure CGU’s cash flows are:
{ based on approved budgets and plans for 2016 and, beyond this period, have been forecast for a total period of
20 years;
{ revenue growth of 3% per annum in 2017, decreasing to 1% in 2022 and remaining constant at 1% from that date;
{ 1% increase in maintenance capital expenditure from 2017 onwards;
{ EBITDA margin growth of 0.3% per annum in 2017, decreasing to nil in 2021 and remaining constant thereafter.
Using the discount rate described above there is no indication of impairment with headroom of £1.0m (2014: £1.2m).
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
2015
£0.7m
£1.4m
£1.2m
Impact in
2014
£0.9m
£1.4m
£1.2m
If the assumed revenue growth rate decreased by 0.75%, the recoverable amount for the I&I business unit would be
equivalent to its carrying amount.
The key assumptions for the EKHTI CGU’s cash flows are:
{ based on approved budgets and plans for 2016 and, beyond this period, have been forecast for a total period of
20 years;
{ revenue growth of 3% per annum in 2017, decreasing to 1% in 2022 and remaining constant at 1% from that date;
{ 1% increase in maintenance capital expenditure from 2017 onwards;
{ EBITDA margin growth of 0.3% per annum in 2017, decreasing to nil in 2021 and remaining constant thereafter.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
10 Goodwill continued
Using the discount rate described above there is no indication of impairment with headroom of £0.7m (2014: £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
2015
£0.2m
£0.3m
£0.2m
Impact in
2014
£0.3m
£0.3m
£0.2m
The key assumptions for the Augean North Sea Services CGU’s cash flows are:
{ based on approved budgets and plans for 2016 and, beyond this period, have been forecast for a total period of
20 years;
{ no revenue or operating margin growth from 2017 onwards;
{ 1% increase in maintenance capital expenditure from 2017 onwards.
Using the discount rate described above there is no indication of impairment with headroom of £8.3m (2014: £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
2015
£0.9m
£1.3m
£1.2m
Impact in
2014
£0.6m
£1.4m
£1.2m
The key assumptions for the ITD CGU’s cash flows are:
{ based on approved budgets and plans for 2016 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 2017 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 above, the ITD CGU has a negative value in use. This asset comprises operating equipment,
with a control room and control system. The asset could not be sold without moving it elsewhere, as it is located within
the Port Clarence Waste Recovery Park site, which enjoys the benefits of specific Environment Agency permits and is
operated by the Group.
Further, given the highly specialised nature of the asset, it is not considered practicable to reasonably determine a resale
value for that asset as a discrete chattel. Given current market prices for steel in particular, it is not considered that it
would have a significant scrap value, that would be readily determinable.
Consequently, the Directors have concluded that the fair value less costs of disposal (net resale value) is the nominal
sum of one pound. This is higher than the Value in Use of the asset, which is calculated to be a negative amount.
Accordingly, the net recoverable amount is determined as one pound at the balance sheet date and an impairment loss
of £2,888,000 has been recognised in relation to the asset.
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Our Financials
Based on the assumptions above and consideration of appropriate sensitivity analysis, management is satisfied that
no further 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.
11 Other intangible assets
Cost
At 1 January 2014
Additions
At 1 January 2015
Additions
At 31 December 2015
Amortisation
At 1 January 2014
Charge for the year
At 1 January 2015
Charge for the year
At 31 December 2015
Net book value
At 31 December 2015
At 1 January 2015
At 1 January 2014
Group
Company
Computer
software and
total
£’000
Computer
software and
total
£’000
610
193
803
51
854
412
95
507
133
640
214
296
198
555
192
747
51
798
368
95
463
133
596
202
284
187
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
12 Investments in subsidiaries
Cost
At 1 January 2014
At 1 January 2015
Additions
At 31 December 2015
Provision for impairment
At 1 January 2014
Charge
At 1 January 2015
Charge
At 31 December 2015
Net book value
At 31 December 2015
At 1 January 2015
At 1 January 2014
£’000
132,393
132,393
1,090
133,483
(74,450)
(6,465)
(80,915)
(1,761)
(82,676)
50,807
51,478
57,943
The 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
Augean Integrated Services Limited
ASB Environmental Limited
Tueart Limited
RNA Investments Limited
Hitech Equipment Limited
Country of registration
or incorporation
England and Wales
England and Wales
England and Wales
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
Proportion
held %
100
100
100
100
100
100
100
100
100
Nature of business
Waste treatment
Landfill operations
Landfill operations
Waste treatment
Waste treatment
Waste treatment
Dormant
Dormant
Dormant
These companies are owned directly by Augean plc except for Tueart Limited which is owned by Augean Treatment
Limited. In addition to the above, the Company held 50% of the issued share capital of Terramundo Limited, a jointly
controlled entity with DEC NV (note 9), until the company was dissolved in September 2015.
During 2014 and 2015, impairment charges were recognised by the Company is respect of its investment in Augean
Treatment Limited. There was no impact on the results of the Group. Additions to investments in the year relate to the
purchase of 100% of the share capital of ASB Environmental Limited and the purchase of the remaining 19% of Augean
North Sea Services Limited not already held by the Company at 1 January 2015.
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Our Financials
13 Property, plant and equipment
Group
Cost
At 1 January 2014
Additions
Disposals
At 1 January 2015
Additions
Acquisitions (note 25)
Disposals
At 31 December 2015
Accumulated depreciation
At 1 January 2014
Charge for year
Disposals
At 1 January 2015
Charge for year
Impairment loss (note 10)
Disposals
At 31 December 2015
Net book value
At 31 December 2015
At 1 January 2015
At 1 January 2014
Freehold
land and
buildings
£’000
Leasehold
land and
buildings
£’000
Engineered
cells
£’000
Plant and
machinery
£’000
37,053
3,161
—
40,214
2,871
—
—
43,085
9,272
635
—
9,907
1,136
—
—
11,043
32,042
30,307
27,781
1,120
43
—
1,163
202
—
—
1,365
89
67
—
156
76
—
—
232
1,133
1,007
1,031
10,326
129
—
10,455
1,028
—
—
11,483
8,791
642
—
9,433
1,143
—
—
10,576
907
1,022
1,535
20,941
3,615
(1,404)
23,152
3,470
27
(9)
26,640
11,096
2,443
(1,368)
12,171
2,748
2,888
(3)
17,804
8,836
10,981
9,845
Total
£’000
69,440
6,948
(1,404)
74,984
7,571
27
(9)
82,573
29,248
3,787
(1,368)
31,667
5,103
2,888
(3)
39,655
42,918
43,317
40,192
There were outstanding contractual commitments for acquisitions of property, plant or equipment of £nil at
31 December 2015 (2014: £175,000). Plant and machinery includes assets held under finance lease agreements
with a carrying value at 31 December 2015 of £91,000 (2014: £102,000).
Certain assets are pledged as security for loans as disclosed in note 17.
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
2015
£’000
196
(105)
91
2014
£’000
143
(41)
102
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Notes to the Financial Statements continued
For the year ended 31 December 2015
13 Property, plant and equipment continued
Company
Cost
At 1 January 2014
Additions
At 1 January 2015
Additions
At 31 December 2015
Accumulated depreciation
At 1 January 2014
Charge for year
At 1 January 2015
Charge for year
At 31 December 2015
Net book value
At 31 December 2015
At 1 January 2015
At 1 January 2014
Freehold
land and
buildings
£’000
Plant and
machinery
£’000
778
—
778
—
778
110
11
121
11
132
646
657
668
591
476
1,067
390
1,457
472
175
647
267
914
543
420
120
Total
£’000
1,369
476
1,845
390
2,235
582
186
768
278
1,046
1,189
1,077
788
14 Trade and other receivables
Current assets
Trade receivables
Amounts receivable from subsidiary undertakings
Prepayments and accrued income
Group
Company
2015
£’000
9,691
—
2,138
11,829
2014
£’000
10,937
—
1,848
12,785
2015
£’000
26
—
671
697
2014
£’000
—
10,244
4,678
14,922
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.
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Our 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 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, in the early part
of 2014.
Revenue
Operating expenses
Loss before tax and exceptional items
Exceptional items
Loss before tax
Taxation
Profit after tax
2015
£’000
—
—
—
—
—
—
—
2014
£’000
211
(335)
(124)
(218)
(342)
622
280
During the year the business unit contributed a net cash outflow of £nil (2014: outflow of £342,000) to the Group’s
net operating cash flow. There was no cash flow associated with financing, investing or operating activities (2014:
£1,161,000 disposal proceeds).
16 Trade and other payables
Current
Trade payables
Amounts due to subsidiary undertakings
Other taxes and social security
Accruals and deferred revenue
Group
Company
2015
£’000
2,277
—
2,885
5,676
10,838
2014
£’000
2,021
—
2,544
6,648
11,213
2015
£’000
265
6,064
254
644
7,227
2014
£’000
152
—
343
1,329
1,824
All amounts are anticipated to be payable in the short term. The carrying values are considered to be a reasonable
approximation of fair value.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
17 Borrowings
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 borrowings
Bank overdraft
Bank loans
Obligations under finance leases and hire purchase contracts
Total borrowings 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
2015
£’000
—
1,000
54
1,054
6,750
14
6,764
—
7,750
68
7,818
1,054
6,764
—
7,818
54
14
68
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
2015
£’000
4,250
—
—
4,250
3,500
—
3,500
4,250
3,500
—
7,750
4,250
1,000
2,500
7,750
—
—
—
2014
£’000
18,167
1,000
45
19,212
6,124
45
6,169
18,167
7,124
90
25,381
19,212
1,045
5,124
25,381
45
45
90
The obligations under finance leases and hire purchase contracts are secured against the specific assets financed with
a carrying amount of £91,000 (2014: £102,000). 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.
For more information about the Group’s exposure to interest rate, credit risk and liquidity risk, see note 26.
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18 Provisions
At 1 January 2014
Charged to profit or loss during the year
– unwinding of discount
– provision in the year
Utilised during the year
At 1 January 2015
Charged to profit or loss during the year
– unwinding of discount
– provision in the year
Utilised during the year
At 31 December 2015
Our Financials
Restoration
and after-care
costs of
landfill sites
£’000
2,758
Group
Capping
provision
£’000
3,788
Other
provisions
£’000
76
102
51
(65)
2,846
99
142
(141)
2,946
—
129
—
3,917
—
163
(203)
3,877
—
—
—
76
—
—
—
76
Total
£’000
6,622
102
180
(65)
6,839
99
305
(344)
6,899
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. £25,000 of this provision is expected to be utilised within 12 months of the
balance sheet date.
The other provision relates to a tyre provision which is anticipated to be utilised during the next landfill cell
construction cycle.
19 Share capital
Authorised – 103,000,000 (2014: 103,000,000) shares of 10p
Allotted, called up and fully paid – 102,249,083 (2014: 101,991,380) shares of 10p
2015
£’000
10,300
10,225
2014
£’000
10,300
10,199
During the year, 257,703 shares (2014: 2,291,966) were issued as a result of the exercise of share options. The total
proceeds were £96,000 (2014: £771,000).
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
20 Reserves
At 1 January 2015
Total comprehensive income for the year
Issue of equity
Dividend (note 7)
Acquisition of non-controlling interest (note 25)
Share-based payments
At 31 December 2015
At 1 January 2015
Total comprehensive income for the year
Issue of equity
Dividend (note 7)
Share-based payments
At 31 December 2015
Share
premium
£’000
542
—
70
—
—
—
612
Share
premium
£’000
542
—
70
—
—
612
Group
Retained
earnings
£’000
42,059
1,635
—
(511)
(43)
421
43,561
Company
Retained
earnings
£’000
30,719
(1,790)
—
(511)
421
28,839
Total
£’000
42,601
1,635
70
(511)
(43)
421
44,173
Total
£’000
31,261
(1,790)
70
(511)
421
29,451
21 Share-based payments
At 31 December 2015, 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 2013 – December 2019
May 2011 – 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
39.5p
29p
40.25p
10p
At
1 January
2015
797,466
217,242
1,000,000
2,014,708
3,239,894
5,254,602
22.0p
1,014,708
37.0p
Granted
Exercised
Lapsed
At
31 December
2015
— (202,531)
(55,172)
—
—
—
— (257,703)
—
— (257,703)
37.3p
—
— (311,364)
(311,364)
10.0p
—
594,934
—
162,069
— 1,000,000
— 1,757,005
2,928,530
4,685,535
20.9p
757,003
37.3p
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Our Financials
Granted
Exercised
Lapsed
At
31 December
2014
Outstanding awards at 31 December 2014 were as follows:
Exercise
price
180p
39.5p
29p
40.25p
10p
Exercise date
Augean Share Option Schemes
December 2004 – December 2015
December 2013 – December 2019
May 2011 – May 2021
August 2016 – August 2023
Augean LTIP Scheme
April 2017 – September 2024
Weighted average exercise price
Of which exercisable
Weighted average exercise price
At
1 January
2014
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
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. No performance conditions are attached to these shares.
LTIP Scheme
In 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 method 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:
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
162,070
35%
4 years
2.3%
0.0%
£0.09
2009
Share options
21 December 2009
December 2014 –
December 2019
39.5p
39.5p
594,935
43%
4 years
2.5%
0.0%
£0.14
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
21 Share-based payments continued
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 2015, the weighted average remaining contractual life is 8.1 years (2014: 9.1
years).
The Group recognised a total expense of £421,000 (2014: £286,000) related to equity settled share-based payment
transactions, of which £290,000 (2014: £155,000) related to LTIP schemes.
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
2015
£’000
2014
£’000
780
678
1,458
221
559
791
1,571
511
733
1,244
221
646
803
1,670
The operating lease commitments relating to Land and buildings leases have been discounted at a rate of 3%.
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Our Financials
23 Reconciliation of operating profit/(loss) to net cash generated from/(used in)
operating activities
Group
Company
Operating profit/(loss)
Loss from discontinued operations (note 2)
Amortisation of intangible assets
Depreciation
Impairment charge
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Share-based payments
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
Decrease/(increase) in net receivables from subsidiary
undertakings
(Decrease)/increase in trade and other payables
Decrease in provisions
Loss on disposal of property, plant and equipment
Cash generated from/(used in) operations
Finance charges paid
Tax paid
Net cash generated from/(used in) operating activities
2015
£’000
3,312
—
133
5,103
2,888
11,436
421
105
956
—
(312)
(264)
6
12,348
(715)
(1,105)
10,528
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
2015
£’000
(885)
—
133
278
1,761
1,287
421
—
3,981
16,308
(660)
—
—
21,337
(711)
(972)
19,654
2014
£’000
(5,447)
—
95
186
6,976
1,810
286
—
(3,583)
(6,950)
1,402
—
—
(7,035)
(738)
(801)
(8,575)
The above EBITDA includes a total net cash outflow of £620,000 relating to exceptional items and discontinued
operations (2014: inflow of £201,000).
The above net cash generated from operating activities includes a net cash outflow of £620,000 relating to exceptional
items and discontinued operations (2014: inflow of £416,000).
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
2014
£’000
1,502
(7,124)
(90)
(5,712)
Cash flow
£’000
2,102
(626)
22
1,498
Acquisitions
£’000
(51)
—
—
(51)
31 December
2015
£’000
3,553
(7,750)
(68)
(4,265)
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
25 Non-controlling Interests and business combinations
a) Augean North Sea Services Limited
On 10 March 2015 Augean plc increased its holding in the share capital of Augean North Sea Services Limited from
81% to 100%. The consideration was £1,050,000 and was paid in cash on the same date.
Non-controlling interest
Balance at 1 January 2014
Share of profit for year
Balance at 1 January 2015
Share of profit for year
Adjustment arising from change in Non-controlling Interest
Balance at 31 December 2015
£’000
796
159
955
52
(1,007)
—
b) ASB Environmental Limited
On 2 July 2015 the Group acquired 100% of the issued share capital of ASB Environmental Limited, a licensed
asbestos removal contractor. The company was acquired in order to create a direct market interface to the asbestos
removal market, the output of which is a direct input into the Group’s landfill sites.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table
below:
Financial assets
Property, plant and equipment
Financial liabilities
Total identifiable liabilities
Goodwill
Total consideration
Satisfied by:
Cash
Net cash outflow arising on acquisition:
Cash consideration
Add: overdraft balances acquired
2015
Book
Value
£’000
76
54
(147)
(17)
2015
Fair Value
adjustments
£’000
(71)
(27)
—
(98)
2015
Fair
Value
£’000
5
27
(147)
(115)
155
40
40
(40)
(51)
(91)
Fair value adjustments were made in respect of the trade receivables and property, plant and equipment of the acquired
assets.
The transaction was accounted for by the acquisition method of accounting. Goodwill relates to the excess of purchase
consideration over the net consideration paid.
Financial liabilities comprise £51,000 bank overdraft, as indicated above, and £96,000 of other liabilities.
ASB Environmental contributed £45,000 revenue and £71,000 loss to the Group’s profit for the period between the
date of acquisition and the balance sheet date.
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Our Financials
26 Financial instruments
The financial assets of the Group and Company are categorised as follows:
As at 31 December 2015
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 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
Group
Non-
financial
assets
£’000
19,757
214
—
42,918
2,316
306
—
—
—
65,511
Group
Non-
financial
assets
£’000
19,602
296
—
43,317
1,688
410
1,848
—
—
67,161
Total
£’000
Loans and
receivables
£’000
19,757
214
—
42,918
2,316
306
11,829
—
3,553
80,893
Total
£’000
19,602
296
—
43,317
1,688
410
12,785
—
1,502
79,600
—
—
—
—
—
—
697
—
103
800
Loans and
receivables
£’000
—
—
—
—
—
—
14,922
—
28
14,950
Company
Non-
financial
assets
£’000
—
202
50,807
1,189
259
—
—
1,396
—
53,853
Company
Non-
financial
assets
£’000
—
283
51,479
1,077
80
—
—
797
—
53,716
Loans and
receivables
£’000
—
—
—
—
—
—
11,829
—
3,553
15,382
Loans and
receivables
£’000
—
—
—
—
—
—
10,937
—
1,502
12,439
Total
£’000
—
202
50,807
1,189
259
—
697
1,396
103
54,653
Total
£’000
—
283
51,479
1,077
80
—
14,922
797
28
68,666
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
26 Financial instruments continued
The financial liabilities of the Group and Company are categorised as follows:
As at 31 December 2015
Trade and other payables – current
Current tax liabilities
Borrowings – current
Borrowings – non-current
Provisions
As at 31 December 2014
Trade and other payables – current
Current tax liabilities
Borrowings – current
Borrowings – non-current
Provisions
Financial
liabilities at
amortised
cost
£’000
7,953
—
1,054
6,764
—
15,771
Financial
liabilities at
amortised
cost
£’000
8,669
—
1,045
6,169
—
15,883
Group
Liabilities
not within
scope
of IAS 39
£’000
2,885
940
—
—
6,899
10,724
Group
Liabilities
not within
scope
of IAS 39
£’000
2,544
579
—
—
6,839
9,962
Balance
sheet
total
£’000
10,838
940
1,054
6,764
6,899
26,495
Balance
sheet
total
£’000
11,213
579
1,045
6,169
6,839
25,845
Financial
liabilities at
amortised
cost
£’000
909
—
4,250
3,500
—
8,659
Financial
liabilities at
amortised
cost
£’000
1,482
—
19,212
6,169
—
26,863
Company
Liabilities
not within
scope
of IAS 39
£’000
6,318
—
—
—
—
6,318
Company
Liabilities
not within
scope
of IAS 39
£’000
343
—
—
—
—
343
Balance
sheet
total
£’000
7,227
—
4,250
3,500
—
14,633
Balance
sheet
total
£’000
1,825
—
19,212
6,169
—
27,206
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.
Group
As at 31 December 2015
Trade and other payables – current
Borrowings – current
Borrowings – non-current
Total
As at 31 December 2014
Trade and other payables – current
Borrowings – current
Borrowings – non-current
Total
Amounts
due in
less than
one year
£’000
10,838
1,054
—
11,892
Amounts
due in
less than
one year
£’000
11,213
1,045
—
12,258
Amounts
due in
second to
fifth year
£’000
—
—
6,764
6,764
Amounts
due in
second to
fifth year
£’000
—
—
6,169
6,169
Total
financial
liabilities
£’000
10,838
1,054
6,764
18,656
Total
financial
liabilities
£’000
11,213
1,045
6,169
18,497
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Company
As at 31 December 2015
Trade and other payables – current
Borrowings – current
Borrowings – non-current
As at 31 December 2014
Trade and other payables – current
Borrowings – current
Borrowings – non-current
Our Financials
Amounts
due in
less than
one year
£’000
7,227
—
—
7,227
Amounts
due in
less than
one year
£’000
1,825
—
—
1,825
Amounts
due in
second to
fifth year
£’000
—
4,250
3,500
7,750
Amounts
due in
second to
fifth year
£’000
—
19,212
6,169
25,381
Total
financial
liabilities
£’000
7,227
4,250
3,500
14,977
Total
financial
liabilities
£’000
1,825
19,212
6,169
27,206
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 euros, and US
dollars not considered significant.
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.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
26 Financial instruments continued
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 2015, the Group carried net debt of £4,265,000 (2014: £5,712,000) and
short term flexibility is achieved through bank facilities comprising of a £13.25m 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
2015
£’000
3,553
9,691
13,244
2014
£’000
1,502
10,937
12,439
2015
£’000
103
26
129
2014
£’000
28
—
28
At 31 December 2015, £4.1m (2014: £2.6m) of the Group’s trade receivables were past due. A provision of £0.3m
(2014: £0.3m) is held to mitigate the exposure to potential bad and doubtful debts.
The ageing of the Group’s trade receivables past their due date but not impaired is as follows:
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)
2015
£’000
3,217
210
3,427
6,463
9,980
(289)
9,691
2014
£’000
2,276
294
2,570
8,621
11,191
(254)
10,937
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.
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Bad debt provision as at 31 December 2014
Amounts utilised
Amounts provided
Bad debt provision as at 31 December 2015
Our Financials
£’000
254
(40)
75
289
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 have 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 borrowings at 31 December 2015 was:
Group
Bank loans
Finance leases
At 31 December 2015
At 31 December 2014
Company
Bank loans
Finance leases
At 31 December 2015
At 31 December 2014
Floating
rate
£’000
7,750
68
7,818
7,214
Floating
rate
£’000
7,750
—
7,750
25,381
Total
£’000
7,750
68
7,818
7,214
Total
£’000
7,750
—
7,750
25,381
The Group met its short term working capital requirements during 2015 through an overdraft and revolving loan facility,
which was renewed and increased with HSBC Bank plc in March 2014, providing access to a term loan and revolving
loan facility for an extended period to July 2017. The facility was structured as a £5m term loan and a £10m revolving
credit facility which attract an interest charge varying between 1.95% and 2.75% above LIBOR. The term loan had
amortised to £3.25m from £5.0m at the balance sheet date.
On 21 March 2016, the Group renewed its facility with HSBC Bank plc to provide a new facility. The new facility was
structured as a £20m revolving credit facility which attracts an interest charge varying between 1.75% and 2.5% above
LIBOR and matures in October 2020. This renewal also makes available an additional £10m facility subject to certain
conditions set out in the agreement. A change in interest rate of 0.5% affects the annual interest cost for both the
Group and Company by approximately £25,000 (2014: £30,000).
The hire purchase agreements of the Group under a floating rate contract have a weighted average interest rate of
3.7% (2014: 3.4%) and a weighted average remaining duration of one year (2014: two years). The Group has no hire
purchase agreements under a fixed rate contract.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
26 Financial instruments continued
The maturity profile of the Group’s financial liabilities is shown in note 17.
The Board has determined 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
Borrowings
Note
19
20
17
2015
£’000
10,225
612
7,818
18,655
2014
£’000
10,199
542
7,214
17,955
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 £1,000,000 (2014: £1,000,000). 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 loan facility, which has £9.0m of headroom at 31 December 2015 (2014: £8.3m).
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.
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.
2015
2015
Target
Actual
<2.5
0.3
>3.5
23.4
7.8% prior year
prior year
3,054
2014
£’000
0.6
24.6
10.8%
1,358
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Our Financials
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
2015
£’000
10,528
(7,474)
3,054
2014
£’000
8,099
(6,741)
1,358
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 £394,000 (2014: £431,000) represents contributions payable to these schemes
by the Group at rates specified in the rules of the schemes. As at 31 December 2015, contributions of £27,000 (2014:
£26,000) 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 £8.2m
(2014: £8.4m). Future site restoration costs for each landfill site have been provided as disclosed in note 18.
The Group is involved in a commercial dispute with a customer, which has arisen in the normal course of business
and relates, in part, to events which took place in 2015. The customer has indicated that it intends to bring a legal
claim against the Group in relation to this matter, although no such claim has yet been received. It is possible that an
obligation may eventually arise in respect of this matter. However, given that no legal claim has been received, it is not
possible to reliably estimate the likelihood or value of any future cash outflows in respect of this issue.
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
Group
Amounts owed by Terramundo Limited:
– more than one year
2015
£’000
—
—
2015
£’000
—
—
2014
£’000
—
—
2014
£’000
512
512
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notes to the Financial Statements continued
For the year ended 31 December 2015
29 Related party disclosures continued
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
2015
£’000
—
—
—
2014
£’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 receivable from 100% subsidiary
undertakings of £6.2m (2014: £14.9m receivables). 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
On 21 March 2016, the Group completed the refinancing of its bank loan facilities. Subsequent to this, the Group has a
facility in place to provide a total level of funding of £20m, maturing in October 2020.
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Shareholder
information
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111
Notice of Annual General Meeting
We are pleased to write to you with details of our 2016 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 2 June 2016 at
10.00am. The formal notice of Annual General Meeting is set out on page 114 of this document.
In addition to the routine business of the AGM, there are three items of other business to be transacted, as summarised
and explained below:
Authority to allot shares (Resolution 8)
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 8, which will be proposed as an ordinary resolution, seeks to renew the allotment authority so that the
Section 551 amount shall be £3,408,302 (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 8 is passed to 30 June 2017 or the conclusion of the Company’s next annual general meeting, whichever is
earlier.
Authority to purchase own shares (Resolution 9)
Article 4.4 of the Company’s Articles of Association provides that the Company may, subject to statutory requirements
and the resolution of the Company’s shareholders in general meeting, purchase its own shares.
Resolution 9, which will be proposed as a special resolution, seeks to grant the directors the authority, for the period
from the date Resolution 9 is passed to the conclusion of the Company’s next annual general meeting (unless such
authority is revoked or renewed prior to such time), to make market purchases of the Company’s own Ordinary shares,
up to a maximum amount of 10,224,908 Ordinary shares, being an amount equal to approximately 10% of the issued
share capital of the Company (as at the 21 March 2016, being the latest practicable date prior to publication of this
document). The directors consider that it is in the best interests of the Company and its shareholders to have the ability
to make market purchases of the Company’s own shares in appropriate circumstances, without the cost and delay of
calling a separate general meeting. The authority will be kept under review and the directors will only exercise the power
of purchase after careful consideration and when the directors are satisfied that the purchase would be in the best
interests of the Company and its shareholders. The Directors intention is to use this facility only to purchase shares to
satisfy the exercise of share options granted under employee share schemes.
Disapplication of pre-emption rights (Resolution 10)
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 10, which will be proposed as a special resolution and which will only be effective if Resolution 8 is
passed, seeks to renew the disapplication authority so that the Section 561 amount shall be £511,245 (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 10 is passed to 30 June 2017 or the conclusion of the Company’s
next annual general meeting, whichever is earlier.
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Shareholder Information
Our Financials
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 114. 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 31 May 2016. 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 (other than in respect of those resolutions in which they are interested).
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Notice of Annual General Meeting continued
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the 2016 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 2 June 2016 at
10.00am for the purpose of considering and, if thought fit, passing the resolutions set out below. Resolutions 9 and 10
will be proposed as special resolutions. 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 2015 be received.
2. THAT Andrew John Bryce be re-elected as a director of the Company.
3. THAT John Albert Martin Grant be elected as a director of the Company.
4. THAT Roderick Antony Holdsworth be elected as a director of the Company.
5. 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.
6. THAT the directors be authorised to determine the auditors’ remuneration.
7. THAT a dividend of 0.65 pence per share be declared.
8. 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 2017 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 £3,408,302.
9. THAT the Company be generally and unconditionally authorised, pursuant to section 701 of the Companies Act
2006, to make market purchases (within the meaning of s693 of that Act) of Ordinary shares of 10p each in the
capital of the Company on such terms and in such manner as the directors may from time to time determine,
provided that:
a. the maximum number of Ordinary shares hereby authorised to be acquired is 10,224,908;
b. the minimum price (excluding expenses) which may be paid for any such Ordinary share is its nominal value of
10p;
c. the maximum price (excluding expenses) which may be paid for any such Ordinary share is an amount equal to
105% of the average of the middle market quotations for an Ordinary share in the Company (as derived from
The London Stock Exchange’s Daily Official List) for the five business days immediately preceding the day on
which such share is contracted to be purchased or, in the case of a tender offer, the terms of the tender offer are
announced;
d. the authority hereby conferred shall expire at the end of the next Annual General Meeting of the Company after
the passing of this resolution unless previously renewed, varied or revoked by the Company in general meeting;
and
e. the Company may make a contract to purchase its Ordinary shares under the authority hereby conferred prior
to the expiry of such authority, which contract will or may be executed wholly or partly after the expiry of such
authority, and which contract will or may require a purchase of its Ordinary shares in pursuance of any such
authority to be completed after such expiry.
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Shareholder Information
Our Financials
10. THAT, subject to the passing of resolution 8, 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 2017 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 £511,245.
By order of the Board
R S Laker, ACA
Company Secretary
21 March 2016
Registered Office
4 Rudgate Court
Walton
Near Wetherby
West Yorkshire
LS23 7BF
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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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 31 May 2016 (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 31 May 2016.
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 of your hard copy proxy form. For an
electronic proxy appointment to be valid, your electronic message confirming the details of the appointment in
accordance with the relevant instructions must be transmitted so as to be received by Computershare Investor
Services plc no later than 10.00a.m. on Tuesday 31 May 2016.
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 31 May 2016. 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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Shareholder Information
Our Financials
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.
(e) 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.
(f) 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.
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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Shareholder Notes
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Advisers and Company Information
Shareholder Information
Our Financials
Secretary
Richard 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)
Augean PLC Annual Report and Accounts for the year ended 31 December 2015
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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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