Creating Value for Our Customers
Through Innovative Services
to Protect Future Generations
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Annual Report & Accounts
for the year ended 31 December 2016
Stock Code: AUG
Welcome
Augean is one of the UK’s leading waste management
businesses, providing specialist services focused on
managing hazardous wastes.
Getting around this report
For further information within this document
and relevant page numbers
CSR report
We 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 obligations
Investor website
We maintain a corporate website at www.augeanplc.com
containing a wide range of information of interest to institutional
and private investors, including:
{ Latest news and press releases
{ Annual reports and
investor presentations
Overview
Our Value Proposition
Highlights
Our Organisation
Chairman’s statement
Strategic Report
Our Business and Strategy
Marketplace
Our Business Model
Our Strategy
Key Performance Indicators
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
Managing Risk
Corporate Social Responsibility
Our Governance
Board of Directors
Chairman’s Corporate Governance Letter
Our Governance
Risk Management and Control
Audit Committee Report
Nominations Committee Report
Remuneration Committee Report
Directors’ Remuneration Report
Directors’ Report
01
02
04
06
10
14
16
18
22
24
26
28
30
32
36
40
44
50
52
53
54
55
56
57
58
62
Our Financials
Independent Auditor’s Report to the Members
of Augean plc
68
Consolidated Statement of Comprehensive Income 70
Statements of Financial Position
71
72
Statements of Cash Flow
Statements of Changes in Shareholders’ Equity
73
Notes to the Financial Statements
75
Shareholder Information
Notice of Annual General Meeting
Advisers and Company Information
116
IBC
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Our Value Proposition
Specialist
waste expertise
Service solutions
Client focus
Enabled by Our Key Resources
Experienced
Competent and
leadership team
committed people
Unique asset base
Read more in Our Business Model on page 14
Underpinned by Our Values, Beliefs and Behaviours Framework
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
Read more in our CSR section on page 44
01
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Overview
Highlights
Financial
Profit before tax
(£m)
£7.0m
4.4
7.0
5.4
6.0
Earnings per share
(p)
4.42p
3.29
4.65
4.42
4.13
13
14
15
16
13
14
15
16
Operating cash flows
(£m)
£13.5m
13.5
11.1
Return on capital employed
(%)
11.8%
10.7
8.9
11.4
11.8
7.7
6.5
13
14
15
16
13
14
15
16
Operational
Operating cashflow
Operating cash flows, before
exceptional items, increased
from £11.1m to £13.5m.
Earnings visibility
Continued progress on moving
Group revenues to long-term
contracts and frameworks
with 88% of top 20 customers
engaged on this basis.
Strategic Investment
The Board continues to
support investment in
strategic business growth.
£8m invested in capital
expenditure in 2016.
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03
Augean plc Annual Report and Accounts for the year ended 31 December 2016Overview
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
Our Organisation:
Our Business Units
Key services:
{ Soil treatment
{ EfW Ash stabilisation
{ Hazardous waste disposal
{ Energy and mineral resources
Read more on page 24
Key services:
{ Stabilisation
{ Thermal treatment
{ Secure disposal
{ Client site services
Read more on page 26
Key services:
{ Industrial wastewater treatment
{ Industrial services
{ Thermal recovery
{ Secondary Fuels production
Assets: ENMRF, Port Clarence,
Thornhaugh
Assets: ENMRF, Port Clarence,
East Kent
Assets: Avonmouth, Paisley,
Port Clarence WaRP, Hull
Read more on page 28
Assets: Cannock, Corby, East
Kent, Client Sites
Key services:
{ Client solutions
{ Hazardous waste management
{ Support services
{ High temperature incineration
Read more on page 30
Key services:
{ Drilling waste management
{ Water treatment
{ Marine services
{ Hazardous waste management
Assets: Aberdeen (x4),
Lerwick,Great Yarmouth,
Port of Dundee
{ Industrial services
Read more on page 32
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Number of sites
3
Revenue
£35.4m
Number of sites
3
Revenue
£1.2m
Number of sites
4
Revenue
£7.6m
Number of sites
Number of sites
3
Revenue
£18.8m
Number of sites
7
Revenue
£13.0m
Our Locations
Lerwick
Aberdeen
Dundee
Paisley
Waste Recovery Park
Port Clarence
Hull
Thornhaugh
Cannock
Corby
East
Northants
RMF
Avonmouth
Great Yarmouth
East Kent
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05
Augean plc Annual Report and Accounts for the year ended 31 December 2016Overview
Chairman’s Statement
“The Board continues to support
investment in strategic business
growth”
Non-executive Chairman Jim Meredith
During 2016, the Group again produced year-on-year
double digit increases in revenue, adjusted profit before
tax and operating cash flows, compared with 2015. The
Group is currently trading in line with expectations for
2017, evidencing the strategy for growth, developed and
implemented by the executive management team.
Revenue from continuing operations increased by 25% to
£76.0m (2015: £61.0m). Profit before tax from continuing
operations, before exceptional items and amortisation of
acquired intangible assets increased by 18% to £7.1m
(2015: £6.0m). Statutory profit before tax reduced to
£1.3m (2015: £2.5m) after exceptional items of £5.7m.
Operating cash flows, before exceptional items, increased
from £11.1m to £13.5m. Net debt increased by £6.5m during
the year to £10.8m, after capital expenditure of £8.3m.
The Board continues to support investment in strategic
business growth and, in May 2016, £8.9m net was paid
to purchase the share capital of Colt Holdings Limited.
Significant headroom remains on the Group’s banking
facility of £20m, with a further £10m available exclusively
to fund potential acquisitions. All investments are made
with the expectation of acceptable payback periods and
increasing levels of return. The Group’s return on capital
employed1 for the year increased to 11.8% (2015: 11.4%).
Our Energy and Construction business had another
strong year, with input volumes of material into landfill
above initially anticipated levels. Volumes of construction-
related materials, which had the potential to be impacted
by the update to landfill tax guidance, declined on 2015.
As previously announced, volumes of Air pollution control
residues (“APCR”) arising from the Energy-from-waste
sector grew strongly in 2016; maintaining our share of
this growth market is a key strategic imperative in the
short and medium term. It was particularly pleasing to
see the 3x Waste Acceptance Criteria (WAC) derogation
unchanged by DEFRA following almost four years of
review and consultation. This decision validates the
Group’s successful investment in processing solutions to
generate the most environmentally beneficial outcomes
for our customers.
The Radioactive Waste Services business saw a reduction
in volumes in 2016 because of UK Government spending
reviews although we expect to see a modest recovery
in the second half of 2017. Cost in this division remains
under close scrutiny whilst volumes remain depressed.
The Group’s site at East Northants remains a key element
of the UK’s national infrastructure for the disposal of
low-level radioactive waste in the medium and long term.
The Group has made progress in diversifying its range of
treatments to protect its investments in this sector.
The Industry & Infrastructure business has had a pleasing
year, with the turnaround plan at Avonmouth successfully
completed. The addition of the Colt business to the Group
bolsters our specialist Industrial Services capacity and
although this business has had a slower than expected
start there are positive signs of improved performance
and a growing sales pipeline. It is currently trading to plan.
The third year of trading for the Augean Integrated
Services (AIS) business saw further progress, with
revenues increased by 28% and a number of three-
year term total waste management contracts won with
blue-chip customers. The sales pipeline has grown
substantially over the year. This contributed to the growth
seen in the contracted business which increased 65%
over the prior year. The high temperature incinerator
at the Group’s East Kent site continued to experience
challenges during 2016 which has led the Board to take
the decision to impair the asset. Despite this, it does
remain of high importance to AIS and the team continues
to work to improve performance.
Augean North Sea Services (ANSS) responded
positively to changes in its market by securing several
new contract wins during 2016 and delivering the cost
reduction plan announced in the Interim Statement.
This evidences the continued execution of the strategy
to diversify this business away from exploration drilling
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waste management, on which the business was originally
built, to an increased share of revenue generated from
production waste management and onshore industrial
services, maintaining the high proportion of total revenues
generated directly from major Oil & Gas operators.
During the year a strategic investment was made in a
site at Great Yarmouth to support a new contract with
a major operator which has opened up further potential
commercial prospects from the southern North Sea.
Health and safety continues to remain the highest priority
for the Board, management and employees across
the Group. The management team has responded to
an increase in accidents in 2016 by enhancing hazard
recognition, risk evaluation and learning from incidents.
The Board continues to recognise the risks faced by our
people, who work in environments moving, treating and
disposing of hazardous waste.
Protecting the environment is not only a matter of
compliance with permits, but encompasses our broader
responsibilities to society and future generations. The
Group diligently monitors its performance in this regard,
the results of which are regularly reported to the Board.
The majority of our sites in England are ranked by the
Environment Agency as Category A 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.
Following Mark Fryer’s appointment as Group Finance
Director in December 2016, I am delighted to welcome Mark
to the Board of Augean. He is a highly experienced Finance
Director with a strong track record across a number of
sectors and I look forward to working with him as the Group
continues to build on its successful strategy for growth.
Rod Holdsworth joined the Board on 23 March 2016 and
has assumed the Chairmanship of the Audit Committee.
After 11 years with the Group Andrew Bryce has indicated
that he will stand down from the Board at the Annual
General Meeting in June 2017. The Group is meeting
potential replacements and an announcement will be
made at the appropriate time. I would like to thank
Andrew for the legal and environmental expertise he has
brought our Board and for his long service. I offer him
best wishes for the future.
The Group’s balance sheet and operating cash flow
remain robust and the Board has proposed a 54%
increase in the dividend payment to 1.0p 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
covered2 4.4 times (2015: 7.2 times).
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 continues to remain focused on improving
shareholder returns for the Group and building on the
progress delivered to date. I look forward to another year
of profitable growth for the Group.
Jim Meredith
Non-executive Chairman
20 March 2017
1. Return on capital employed (ROCE) is defined as operating
profit divided by average capital employed, where capital
employed is net assets excluding net debt
2. Dividend cover based on earnings per share from continuing
operations and excluding exceptional items
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Overview
08
24612.04 29-2-2016 Concept
Heading Here Strategic Report
Contents
Our Business and Strategy
Marketplace
Our Business Model
Our Strategy
Key Performance Indicators
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
Managing Risk
Corporate Social Responsibility
10
14
16
18
22
24
26
28
30
32
36
40
44
24612.04 29-2-2016 Concept
09
Strategic Report Marketplace
Augean operates in market sectors that have distinct
strategic drivers and these form the rationale for the
focus of the five business units of the Group to develop
the appropriate customer focus and growth strategy
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. 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, the Waste Hierarchy is a simplification of Best
Overall Environmental Outcome, which is the goal of
environmental strategy, policy and regulation, and for
hazardous wastes there is a particular need to consider
the fate of the persistent and toxic pollutants in the
waste.
The hazardous waste market is highly segmented with
a total volume of approximately five 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
WASTE
HIERARCHY
Favoured
option
1
Prevention
2
Minimisation
3
Reuse
4
Recycling
5
Energy
Recovery
6
Disposal
Least
favoured
option
activities, Oil & Gas, energy from waste operators,
specialist manufacturers, clinical and pharmaceutical
waste, and other industrial producers.
Hazardous landfill
Data published by the Environment Agency for 2015
(the most recent data available) on the production of
hazardous waste indicated that approximately 0.9 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 in excess of 40% of the UK’s remaining hazardous
landfill capacity.
5m tonnes
OF HAZARDOUS WASTE
HANDLED IN THE UK
EACH YEAR
16m tonnes
TOTAL UK CAPACITY FOR
HAZARDOUS LANDFILL
SOURCE: ENVIRONMENT AGENCY
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Energy-from-Waste and Biomass Energy
waste market
Augean’s treatment and disposal to landfill includes the
management of certain by products from energy-from-
waste (EfW) plants, required to deliver the UK’s obligation
to significantly reduce the landfilling of municipal solid
waste by 2020, and from biomass energy plants. These
facilities produce air pollution control residues (APCR).
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 111,000 tonnes, representing an
approximate 40% market share (2015: approximate 35%
share). This market, of approximately 300,000 tonnes per
annum excluding EfW operators who treat and dispose
of their own APCR arisings, is expected to grow at 9%
compound average growth rate from 2016 to 2022. The
Group actively monitors technological developments in
the treatment and recycling of this material to ensure its
long-term competitive position in this market.
Construction waste market
Construction soils are a key input to the Group’s landfill
sites. In 2016, the Group 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 activity in the construction sector,
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.
HM Revenue & Customs issued a revised excise notice
in respect of landfill tax in December 2015. Volumes
of these waste streams into the Group’s sites have
reduced compared to 2015 but exceeded the Group’s
expectations for 2016. The Group invested in a trial of soil
washing and treatment equipment to promote recycling
of a proportion of such materials, the results of which will
become apparent during 2017.
Radioactive waste 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 and
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
300,000
tonnes
OF APCR PRODUCED
PER ANNUM
APCR market
EXPECTED TO GROW AT
9% COMPOUND AVERAGE
GROWTH RATE FROM
2016 TO 2022
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11
Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Marketplace continued
low level waste (LLW), very low level waste (VLLW) and
NORM. The NDA publishes regular forecasts on the
volumes of radioactive wastes requiring disposal and
treatment, the latest of which was released in December
2016 and shows 120% year-on-year increase in LLW
volumes from NDA sites to 8,000 cubic metres in
2017/18, albeit from a low base in 2016/17. We do not
expect to see this increase impacting the Group until the
second half of 2017.
Industrial waste market
The waste market has remained stable as a result of
shutdown and maintenance work being carried out
across a broad range of sectors and overall growth in the
UK manufacturing sector.
Conditions in the mainland European recovered oil and
waste organic fuels market have remained similar to 2015
with continued downward pressure on pricing in the
recovered fuel oil market continuing throughout 2016.
As large energy-intensive industries have reduced
production in the UK, the demand for organic waste
derived fuels in the UK market has reduced. The market is
reliant on facilities in mainland Europe for the recovery of
energy from these fuels. The opportunity to send waste to
energy recovery routes within mainland Europe continued
to reduce with capacity being taken up by volume
generated within the region, further displacing UK waste.
This has resulted in an increase in costs and a decrease in
rebates associated with these disposal routes. A resultant
upward price pressure has been experienced in the UK
kiln fuel market.
The waste oil market has experienced an upward price
pressure although a shortage of available routes has
led to stagnation in this market. Activity across both
areas was dynamic as the markets responded to the
fluctuations and the business reacted accordingly.
North Sea Oil & Gas waste services 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.
The southern sector is centred on Great Yarmouth, with
further activities in North West England, for the East
Irish Sea. Augean North Sea Services (ANSS) provides
a full range of services, equipment rental and manpower
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provision for the containment and treatment of offshore
wastes. These include the cuttings and slop waters from
drilling of oil and gas wells, contaminated waters from the
oil production process, production wastes, oil sludges,
including those contaminated with low level naturally
occurring radioactive material (NORM), wellbore and
topside production equipment & water contaminated
with NORM as well as a more general range of industrial
general and hazardous wastes.
The Oil & Gas market has been adversely impacted
since Q3 2015 as a result of significant reductions seen
in oil prices, with Oil & Gas companies cutting capital
expenditure and seeking efficiencies at all levels from the
supply chain. Cost efficiencies are key to the sustainability
of businesses in this area. 2015 saw a downturn in drilling
activity which continued into 2016 and resulted in a
significant reduction in the size of the market for drilling
wastes, while there was an upturn in decommissioning
(DECOM) related plug and abandonment activities and
associated waste containments and treatment.
The market for providing total waste management and
industrial cleaning to Oil & Gas production facilities and
the resultant decommissioning has different drivers, as
the Oil & Gas operators’ assets are already invested,
with stable levels of activity seen compared to drilling
exploration and development since the oil price dropped
in mid-2015. The dependence of the UK’s energy
sector on oil and gas is anticipated to continue over
several decades, leading to an expectation that levels
of demand for specialised industrial service related
waste management for production facilities and onshore
industrial services will be stable. The growth sector of the
market derives from the decommissioning of assets in the
North Sea.
NORM builds up over time, and before maintenance or
decommissioning the downhole production equipment,
processing lines and topside equipment may require
decontamination with specialised industrial cleaning,
resulting in the generation of NORM scale and sludges.
Reliable statistics on the scale of the NORM market
remain limited although the Group estimate that typically
1,000 tonnes of NORM may be released per annum,
requiring specialised decontamination, treatment and
disposal.
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13
Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Our Business Model
The Group’s business model can be summarised as follows:
Specialist
Waste
Expertise
We are known as the ‘go to’
company for waste management
that is fully compliant and resilient
for the future
Service
Solutions
Client
Focus
We are trusted to deliver our
clients’ critical but non-core
operational services
We understand our chosen
market sectors and what
drives value for clients
Enabled by Our Key Resources...
Competent and
committed people
Experienced
leadership team
Unique asset base
Our people are vital to the
Group’s success and we ensure
that as a Group we provide our
employees with the right tools
and culture in order to succeed.
The Group’s experienced
leadership team is responsible
for ensuring the business
decisions taken are achievable
and the best outcomes for
Augean’s stakeholders.
The Group’s strong asset base
ensures that we are in a position
to assist our customers in
achieving their objectives. As a key
enabler of the business, our asset
base is a source of competitive
advantage within the marketplace.
Read more in Corporate Social
Responsibility on page 45
Read more about our Board of
Directors on page 50
Read more in Key Performance
Indicators on page 18
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Sustainable market position:
Specialist
waste
expertise
Specialist
Service
waste
solutions
expertise
{ 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 treatment, recovery and recycling
{ 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 solutions
{ We focus on market sectors which are attractive and where we can
build competitive advantage
Client
focus
{ 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
Growing
shareholder
value
Growth in profit
Growth in
asset base
Growth in returns
{ 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
projects
{ 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
Augean plc Annual Report and Accounts for the year ended 31 December 2016
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Strategic Report
Our Strategy
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.
Strategic focus
Description
Highlights
KPIs
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.
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.
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.
{ During 2016 we have built new relationships with
h Proportion of revenue from contracts or framework
customers and 88% of our top 20 customers (by
agreements
sales revenue) are now serviced through a formalised
agreement, either in the form of a contract or other
framework agreement. This is a small reduction on the
95% reported in 2015 as a result of some large one-off
pieces of work during the year and the increase in
turnover of the Group.
{ The transition to a contract-led business model is
evident in all of our business units.
h Level of contracted revenue from Total Waste
Management
h Amount of North Sea Oil & Gas revenue generated
directly from operators and Tier-1 customers
{ Selling and delivering one complete Augean capability
h Proportion of revenue from contracts or framework
brings consequent benefits to the client of working
agreements
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.
{ The group have grown the revenue value of contracted
TWM contracts by 45% during the year.
h Level of contracted revenue from Total Waste
Management
h Amount of North Sea Oil & Gas revenue generated
directly from operators and Tier-1 customers
h Compliance scores
h Number of accidents
{ A total of £8.3m was spent on capital investment in
h Return on capital employed
2016 (2015: £7.5m). The return on capital employed
by the Group, from continuing operations and before
exceptional items, was 11.8% for the year (2015:
11.4%) from an increased total asset base, which
is consistent with this strategy. This return is well in
excess of the Group weighted average cost of capital.
h Underlying profit before taxation
h Post-maintenance free cash flow
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Strategic focus
Description
Highlights
KPIs
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.
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.
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.
{ During 2016 we have built new relationships with
customers and 88% 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 is a small reduction on the
95% reported in 2015 as a result of some large one-off
pieces of work during the year and the increase in
turnover of the Group.
{ The transition to a contract-led business model is
evident in all of our business units.
h Proportion of revenue from contracts or framework
agreements
h Level of contracted revenue from Total Waste
Management
h Amount of North Sea Oil & Gas revenue generated
directly from operators and Tier-1 customers
{ 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.
{ The group have grown the revenue value of contracted
TWM contracts by 45% during the year.
h Proportion of revenue from contracts or framework
agreements
h Level of contracted revenue from Total Waste
Management
h Amount of North Sea Oil & Gas revenue generated
directly from operators and Tier-1 customers
h Compliance scores
h Number of accidents
{ A total of £8.3m was spent on capital investment in
2016 (2015: £7.5m). The return on capital employed
by the Group, from continuing operations and before
exceptional items, was 11.8% for the year (2015:
11.4%) from an increased total asset base, which
is consistent with this strategy. This return is well in
excess of the Group weighted average cost of capital.
h Return on capital employed
h Underlying profit before taxation
h Post-maintenance free cash flow
See Key Performance Indicators on page 18
See Managing Risk on page 40
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17
Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
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.
KPI
Link to strategy
Applicable area(s) of the Group
2016 Outcome
2015 Outcome
Number of accidents(1)
Health & safety is the highest priority of the
Group
Number of near misses reported(2)
Health & safety is the highest priority of the
Group
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
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
E&C
I&I
AIS
ANSS
E&C
I&I
AIS
ANSS
E&C
RWS
I&I
AIS
ANSS
Group
Group
Group
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59
34
2,331
2,015
E&C: A
RWS: A
AIS: B
I&I: B/Excellent
I&I: A/Excellent
ANSS: Excellent
ANSS: Excellent
£7.0m
£6.0m
E&C: A
RWS: A
AIS: B
£9.6m
£5.6m
11.8%
11.4%
www.augeanplc.com Stock code: AUG
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:
Link to strategy
Applicable area(s) of the Group
2016 Outcome
2015 Outcome
59
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E&C: A
RWS: A
I&I: B/Excellent
AIS: B
ANSS: Excellent
E&C: A
RWS: A
I&I: A/Excellent
AIS: B
ANSS: Excellent
£7.0m
£6.0m
£9.6m
£5.6m
11.8%
11.4%
KPI
Group
Group
Number of accidents(1)
Health & safety is the highest priority of the
Number of near misses reported(2)
Health & safety is the highest priority of the
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
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
E&C
I&I
AIS
ANSS
E&C
I&I
AIS
ANSS
E&C
RWS
I&I
AIS
ANSS
Group
Group
Group
Strategic Key
Develop sustainable
market positions
Grow through
client-focused
solutions
Grow
shareholder value
E&C
RWS
AIS
I&I
ANSS
Energy & Construction
Radioactive Waste Services
Augean Integrated Services
Industry & Infrastructure
Augean North Sea Services
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.
2. The total number of incidents reported which could
have resulted in an accident or injury or damage
to property.
3. The average of audit scores notified during the
year by the Environment Agency (EA) in England
or the Scottish Environment Protection Agency
(SEPA) in Scotland. The EA notifies results on the
scale A-F and SEPA notifies on the scale Excellent-
Very Poor.
4. Group profit before taxation, from continuing
operations and excluding exceptional items.
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.
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Key Performance Indicators continued
KPI
Link to strategy
Applicable area(s) of the Group
2016 Outcome
2015 Outcome
88% of top 20
95% of top 20
Top 20 43% of
Group revenue
Top 20 42% of
Group revenue
E&C: 574,000 t
RWS: 2,000 t
E&C: 434,000 t
RWS: 3,200 t
£7.4m
£4.8m
84% of ANSS
revenue
89% of ANSS
revenue
Proportion of revenue from contracts or
framework agreements(7)
This is a measure of the relative certainty of
future cash flow
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
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
Top-Tier 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
Group
E&C
RWS
AIS
ANSS
ANSS
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KPI
Link to strategy
Applicable area(s) of the Group
2016 Outcome
2015 Outcome
Strategic Key
Proportion of revenue from contracts or
framework agreements(7)
This is a measure of the relative certainty of
future cash flow
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
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
Top-Tier 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
Group
E&C
RWS
AIS
ANSS
ANSS
88% of top 20
95% of top 20
Top 20 43% of
Group revenue
Top 20 42% of
Group revenue
E&C: 574,000 t
RWS: 2,000 t
E&C: 434,000 t
RWS: 3,200 t
£7.4m
£4.8m
84% of ANSS
revenue
89% of ANSS
revenue
Develop sustainable
market positions
Grow through
client-focused
solutions
Grow
shareholder value
E&C
RWS
AIS
I&I
ANSS
Energy & Construction
Radioactive Waste Services
Augean Integrated Services
Industry & Infrastructure
Augean North Sea Services
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.
2. The total number of incidents reported which could
have resulted in an accident or injury or damage
to property.
3. The average of audit scores notified during the
year by the Environment Agency (EA) in England
or the Scottish Environment Protection Agency
(SEPA) in Scotland. The EA notifies results on the
scale A-F and SEPA notifies on the scale Excellent-
Very Poor.
4. Group profit before taxation, from continuing
operations and excluding exceptional items.
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.
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Operating Review
“The Group remains committed to
growth in all of its businesses and
markets, through both organic and
acquisitive means”
Chief Executive Officer Stewart Davies
Introduction
The Group delivered a strong set of financial results in 2016.
The results of the Group, from continuing operations and excluding exceptional items, show that:
{ Total revenue increased by 25% to £76.0m;
{ Profit before taxation increased 16% to £7.0m;
{ Net operating cash flows increased 22% to £13.5m;
{ Post maintenance cashflow increased 44% to £7.3m;
{ Basic earnings per share decreased 5% to 4.42 pence; and
{ Return on capital employed increased from 11.4% to 11.8%.
The results of the Group show a profit before tax of £1.3m after exceptional items of £5.7m and a profit after tax of £0.4m.
During 2016, the Group operated through five business units, the results of which were:
Energy and Construction
Radioactive Waste Services
Industry and Infrastructure
Augean Integrated Services
Augean North Sea Services
Adjusted revenues
Adjusted
operating profit
GAAP basis
operating profit
Adjusted EBITDA
2016
25.3
1.2
18.8
7.6
12.9
2015
20.2
1.9
11.7
6.0
14.8
2016
8.3
0.3
0.5
(0.7)
0.5
2015
6.5
1.1
(0.7)
(0.6)
1.3
2016
8.1
0.1
0.2
(4.2)
(1.0)
2015
6.4
1.0
(3.7)
(0.7)
1.2
2016
12.0
0.4
1.5
—
1.3
2015
9.5
1.2
0.4
(0.2)
2.0
Adjusted revenues exclude intra segment trading and
landfill tax, adjusted operating profit excludes exceptional
items and adjusted EBITDA1 represents earnings
before exceptional items, interest, tax, amortisation and
depreciation.
The operating cash flow of the Group was used to
fund the future growth of the Group, with total capital
expenditure investment of £8.3m. This comprised £3.9m
of maintenance capital expenditure to lengthen the
productive life of existing assets (including £1.7m on
landfill cell engineering) and £4.4m of development capital
expenditure for targeted future growth.
The Group remains committed to growth in all of its
businesses and markets, through both organic and
acquisitive means, as appropriate. Aside from its strong
operating cash flows, the Group also had a £20m bank
facility in place as at 31 December 2016, compared with
net debt of £10.8m, equivalent to 0.8 times EBITDA,
from continuing operations and before exceptional items.
The current facility, refinanced in March 2016, allows
application for 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.
1. EBITDA means Earnings before interest, tax and depreciation
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As previously announced, during 2016 the Board took the
strategic opportunity to purchase the entire share capital
of Colt Holdings Limited (“Colt”), a specialist industrial
services provider, for an initial net cash consideration
of £8.9m. This has enhanced Augean’s Industry &
Infrastructure business unit by adding UK-wide industrial
services coverage that complements the Group’s existing
service, treatment and disposal infrastructure. The
acquisition has not traded as expected in 2016 as a result
of the delay in certain contracts which were anticipated.
Colt has traded in line with management expectations
in the first months of 2017 and has developed a strong
sales pipeline.
The Group employed an average of 377 staff (2015: 345)
over the course of the year. The number of employees
in the Group has increased during 2016 by acquisition
and 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
2016 and 2015 (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 2016 is
set out overleaf.
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Operating Review continued
Energy & Construction (E&C)
“The total volume of
waste disposed by the
E&C business increased
by 32% in 2016.”
The principal activity of this business unit is the disposal of
air pollution control residues (APCR), 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 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, increased by 25% to
£25.3m (2015: £20.2m), with the significant increase
being primarily the growth in volumes of APCR treated in
2016 compared with 2015.
The total volume of waste disposed by the E&C business
increased by 32% to 574,000 tonnes in 2016, from
434,000 tonnes in 2015, with APCR volumes increasing
by 48% from 75,000 tonnes to 111,000 tonnes and other
waste streams increasing by 29% from 359,000 tonnes
to 463,000 tonnes. Average gate fees on APCR streams
fell by 3% and decreased by 5% on soils and other waste
streams. The overall increase in APCR revenue was
41% and the increase in other waste revenue was 17%,
compared with 2015.
Volumes of construction soils, which had the potential
to be impacted by the update to landfill tax guidance,
issued by HMRC in December 2015, experienced a 20%
reduction in volumes compared with the high levels in
2015.
The operating profit of the business unit grew at 28%
compared with revenue growth of 25%, with EBITDA
increasing to £12.0m (2015: £9.5m), and this EBITDA
growth contributing to the strong operating cash flow of
the Group as a whole during 2016. Operating profit before
exceptional items improved to £8.3m (2015: £6.5m), with
depreciation in this business unit primarily driven by the
input volume and hence the rate of engineered landfill cell
capacity consumption, rather than the passage of time.
APCR volumes have shown strong growth as a result of
major contract wins for the Group, as announced in April
2016. 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 energy
capacity in the areas of the UK served by our sites.
Total capital investment in the E&C business was
£3.7m in the year (2015: £3.8m), of which £2.6m was
invested to lengthen the productive life of existing assets
(maintenance capital expenditure) and £1.1m was
investment in the targeted future growth of the business
(development capital expenditure). The maintenance
capital expenditure included £1.7m in respect of landfill
cell engineering.
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Case Study:
Infrastructure Project
CONTAMINATED SOIL
MANAGEMENT
The requirement
Augean were engaged to process and cleanse
10,000 tonnes of contaminated soils from a major
infrastructure project in London. Where possible
the customer required recovery of materials from
the soil, ensuring a better overall environmental
outcome.
Our Innovation
The soil treatment technology and operational
infrastructure at the East Northants Resource
Management Facility (ENRMF) enabled the Group
to manage over 50 loads of contaminated soils per
day without disrupting regular deliveries of other
wastes to the site.
Our achievements
The soils from this London based project were
treated in a processing plant at ENRMF which
used a self-contained physico-chemical treatment
process to remove the soil contaminants, leaving
a clean fraction comprising silt and aggregate that
can be re-used. The hazardous treatment residue
is prepared for appropriate landfill disposal. The
project was completed with all contaminated soils
removed from the contractor’s site within the 4
week timeframe.
Augean plc Annual Report and Accounts for the year ended 31 December 2016
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Operating Review continued
Radioactive Waste Services (RWS)
“Further medium-term
opportunities exist for
the RWS business.”
LLWR predicts that volumes for the 2017-18 Government
fiscal year (April 2017 to March 2018) will be 120% higher
than the current 2016-17 forecasts, and should lead to an
increase in volumes in either or both of 2017 and 2018,
dependent on the phasing of release.
Aside from the potential recovery of NDA volumes, further
medium-term opportunities exist for the RWS business
through anticipated growth in the market for treatment
and disposal of naturally occurring radioactive material
(NORM) and low level radioactive waste from other
sectors.
Throughout 2016, RWS has strategically sought to reduce
its dependence upon the disposal of waste from LLWR.
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. The Group
will continue to monitor the investment made in RWS to
ensure appropriate returns are generated.
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 decreased by 37% to £1.2m
(2015: £1.9m). Operating profit before exceptional
items decreased by 72% to £0.3m (2015: £1.1m) and
EBITDA decreased 67% to £0.4m (2015: £1.2m). This
was generated from a total volume of 2,200 tonnes, a
decrease of 31% compared with 3,186 tonnes in 2015.
The revenue generated by RWS has historically been
dominated by waste related to nuclear decommissioning,
with revenues steadily increasing between 2012 and
2015 as activity on the Government-owned sites
increased. Since the final quarter of 2015 there has
been a significant decrease in waste volumes consigned
for disposal to the market. The total volume of waste
disposed by the VLLW framework was 3,600 cubic
metres in 2016 compared with 5,700 cubic meters in
2015. This significant reduction was caused by delays in
changes in management companies for various NDA-
controlled sites, and the outcome of the UK Government
Spending Review resulting in individual planned waste
movements being delayed.
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Case Study:
Low Level Waste Repository
DISPOSAL OF THE
NUCLEAR LEGACY
Introduction
There are currently 17 nuclear sites across the
UK which have reached the end of their active
lives and are being decommissioned. These sites
include nuclear power stations, research centres,
legacy defence-related installations and fuel-related
facilities. During the decommissioning of these
sites, low level radioactive waste (LLW) can be
produced.
The requirement
Augean’s customer, Low Level Waste Repository
Limited (LLWR) coordinate the disposal and
treatment of LLW as part of their responsibility
for the National LLW strategy. This waste stream
requires specialist incineration, as provided by
Augean’s East Kent facility or careful disposal as at
Augean’s ENRMF.
Our achievements
Since 2011 Augean Radioactive Waste Services
have played a pivotal role in the clean-up and
disposal of the UK nuclear legacy, providing
safe disposal and treatment options for LLWR.
Augean’s compliance led approach and additional
engagement with the regulator have been praised
by the client who have also highlighted the Group’s
“excellent customer focus”.
Augean plc Annual Report and Accounts for the year ended 31 December 2016
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Operating Review continued
Industry & Infrastructure (I&I)
“I&I total revenue
increased by 61% to
£18.8m in 2016 and the
business unit made an
operating profit before
exceptional items of
£0.5m.”
the Group’s specialist waste knowledge with support
services. The strategy continues to be broadening the
range of services and increasing market penetration
through new and existing customers using Group
treatment and disposal facilities to support and provide
end-to-end supply chain security.
On 18 May 2016, the Group acquired Colt Industrial
Services, which now forms part of the I&I business unit.
This business improves the Group’s Industrial Services
capacity and expertise as well as bringing new customer
relationships and synergy opportunities into the Group.
The Colt business has had a slower than anticipated start
and contributed £3.5m of sales and broke even in 2016.
Based on recent trading and the strengthened sales
pipeline, management remain confident in the medium-
term prospects for this business and expect the business
to trade in line with expectations at the time of acquisition
during 2017.
Realising the full value of Colt to the Group relies on a
comprehensive integration into the I&I business to benefit
from broader national opportunities and synergies with the
Group to service complex contracts. It is therefore unlikely
that Colt will remain as a separately identifiable financial
entity for the future, although the trading and brand
name will sustain as required. With the financial and legal
integration into the Group, it is not expected that Colt will
be treated as a separate CGU in the future.
A total of £0.4m of capital investment was undertaken
in the I&I business, of which £0.3m represented
maintenance capital expenditure and £0.1m 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. This business
also provides specialist industrial cleaning and other
waste management services to a range of markets,
including refinery chemical processing & manufacturing,
port & shipping operations and water treatment. The
business primarily operates from sites in Avonmouth,
Paisley, Hull, the Port Clarence Waste Recovery Park
(PCWRP) on Teesside as well as providing industrial
services on client sites.
The business continues to pursue an integrated business
model in respect of aligning its treatment and disposal
assets with off-site capability to provide its customers
with value-adding services. This generates waste volumes
for treatment and disposal which are directed through its
existing network of treatment activities. Further integration
in this business unit is facilitated as increased industrial
services work allows the business unit to process more
resultant waste within their infrastructure.
I&I total revenue increased by 61% to £18.8m in 2016
(2015: £11.7m) and the business unit made an operating
profit before exceptional items of £0.5m, compared to a
£0.7m operating loss before exceptional items in 2015.
The improvement in profitability was attributable to good
performances across all of the I&I sites, including the
Avonmouth site where a plan has been successfully
executed to return the site to profitability during 2016.
Industrial Services is a service line of increasing
importance to the growth of the I&I business, with
progress also made in moving away from spot and third
party business to a number of term contracts secured
with customers, providing opportunities to leverage
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Case Study:
Refinery Operator
OIL TANK CLEANING
Introduction
In 2016 Augean were asked to clean two large
contaminated heavy oil tanks for the operator of
the largest refinery in the UK. Both tanks were
to be emptied of the oil they contained and the
contamination was to be removed allowing the
cleaned oil to be returned to the client for further
processing or sale. The tanks were then to be
cleaned prior to inspection and return to productive
use.
The requirement
In order to scope the requirements of the
job Augean worked closely with the client to
understand the required specification of the
returned product and the operational restrictions
in place on a site which is considered high
consequence.
Innovations
After carrying out on site trials the team determined
the best engineering solution to deal with the
client’s material which was then designed and built
in-house. The process was designed to ensure
all safety and process controls were in place
and the operation complied with the stringent
safety management systems at the site. External
verification and certification was applied where
necessary and the Augean team installed the
process on the client’s site delivering an engineered
process solution which was tailored specifically to
the requirements of the contract scope. In total
10,000 cubic metres of oil was returned to the
client for sale or further refining on site.
Our achievements
Augean carried out the work to the clients’
specification. All separated waste was disposed of
through the Augean treatment network. Materials
identified as having recovery value were directed to
downstream processes where their energy value
could be recovered as a replacement solid fuel.
Augean plc Annual Report and Accounts for the year ended 31 December 2016
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Operating Review continued
Augean Integrated Services (AIS)
“The AIS business has
built a commercial team
with sector-specific
expertise.”
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
total waste management (TWM) contracts with high-
value customers in 2016, the full year impact of which is
expected to occur in 2017 and beyond. New customers
from the manufacturing, life sciences and pharmaceutical
sectors have been won during the year and management
are positive about continuing strong revenue growth
for this business. Headway has been made in the
manufacturing sectors with a number of large international
companies contracting AIS on term contracts (typically
three years) to manage their wastes across the UK. In
addition, work has commenced on building up a prospect
base in the food manufacturing and civil engineering
sectors which represent significant new growth areas. The
first contract wins from these sectors will be rolled out in
early 2017.
The AIS business, excluding East Kent, made an
operating profit before exceptional items of £0.1m (2015:
£0.3m loss) as it continues to invest in the commercial
expertise required for accelerated growth.
Other than the final deferred payment to purchase the
HTI in early 2016 (£0.2m), a total of £1.2m of capital
expenditure was undertaken in the AIS business in 2016,
most of which related to the East Kent site, to address the
plant reliability issues referred to above.
£7.6m
TOTAL REVENUE
This business unit services client sites around the UK,
operating from a site in Cannock and a high temperature
incinerator (HTI) in Sandwich, East Kent. In early 2017
a customer service centre was opened in Corby. AIS
offers a total waste management (TWM) service, through
a team of highly knowledgeable experts who work with
customers on a consultative basis to address their
waste management and compliance needs, as well as
leveraging the specialist HTI asset in East Kent, which
is designed to incinerate high-value, low volume waste,
such as pharmaceutical or other specialist waste.
Total revenue grew by 28% to £7.6m (2015: £6.0m).
This included £5.5m from total waste management
(2015: £3.9m), 41% growth, of which £3.8m was from
contracted business (2015: £2.3m). The operating loss
attributable to this business increased by 17% to £0.7m
(2015: £0.6m), although its EBITDA improved to break
even (2015: negative £0.2m).
The below-expectation profitability of this business unit
was primarily caused by the performance at the East Kent
HTI which realised an operating loss of £0.8m (2015:
loss of £0.3m). The disappointing performance of the HTI
resulted from fixed and variable cost increases during
periods of commissioning and sub optimal operation.
Uptime and throughput increased through the second
half of the year due to the improvement programme and
overall tonnage processed in 2016 increased 12% on
2015.
Although the Group has impaired the East Kent HTI asset
during the year it remains a key point of differentiation in
the pharmaceutical and high tech market segments which
this business unit targets. The Board remains confident in
the strategic value of this asset to the AIS business unit.
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Case Study:
Bombardier Transportation
TOTAL WASTE
MANAGEMENT CONTRACT
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Introduction
Augean provides a total waste management
service for Bombardier at seven of its UK sites. At
two of these, Augean has operatives working to
manage all waste streams. All Bombardier sites
produce broadly similar waste streams which
include: hazardous waste, WEEE (Waste Electrical
and Electronic Equipment), paints, resins, general
waste, recycling and bulk liquids. In addition,
we provide and manage equipment such as
compactors and balers.
The requirement
Augean was awarded the waste contract in 2015
and given a wide range of objectives. These
included the management of existing contractors
to increase their efficiency and reduce costs,
as well as introducing services to increase
recycling, deliver rebates and offer more control to
Bombardier.
In conjunction with the in-house Environmental
Team, Augean were successful in maintaining
compliance and developing a suite of meaningful
management information.
Our achievements
These objectives were achieved at our initial
Bombardier site in Derby within the first two
months of the contract. As a result of this we were
invited to audit other UK locations and deliver site-
specific waste proposals. Augean has been rolling
out bespoke services to Bombardier sites since
the start of the contract with the same standards
and objectives. These locations have challenges in
terms of access, space, restrictions and what we
can and cannot do regarding on-site treatment.
This is a challenge we are facing head on.
Innovations
In order to help with the segregation of waste
streams, we utilise a range of 1100L wheelie bins
with different coloured lids to designate individual
waste streams. We supplied a tug and trailer to
allow our onsite operatives to move waste material
and containers efficiently on site. This solution has
saved hundreds of man hours and has realised a
significant increase in recycling at site.
We have designed and built a dedicated waste
compound at the Derby site. This provides for
increased health & safety for the storage and
handling of all site wastes and has enabled waste
movements to be controlled and coordinated to
meet specific site requirements.
Augean plc Annual Report and Accounts for the year ended 31 December 2016
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Operating Review continued
Augean North Sea Services (ANSS)
“Continued strategic
traction in moving
up the supply chain
increases the potential
for the business.”
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 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, production waste management,
onshore & marine industrial services, decommissioning
and water treatment.
ANSS revenue fell by 13% to £12.9m (2015: £14.8m)
and saw a decrease in operating profit to £0.5m (2015:
£1.3m) and a decrease in EBITDA to £1.3m (2015:
£2.0m). These reductions are partly attributable to
additional central overhead being charged against this
business due to 2016 being the first year of 100%
ownership by the Group. On the prior year basis EBIT
would have decreased 14% and EBITDA decreased 4%
against 2015.
The ANSS business continues to execute its strategic
imperative of diversification to reduce the share of drilling
waste services, towards production-based waste streams
which are less impacted by reduced oil prices. Key to this
has been the continued strategic traction of the business
in moving up the supply chain, dealing directly with Oil
& Gas operators and top-tier customers in this market,
which increases the potential for the business to widen its
service scope directly with those customers. Over 84% of
total ANSS revenues were directly generated from those
customers during 2016, compared with 89% in 2015.
During 2016, the business maintained incumbency on
an average of 3.7 rigs, compared to 4.6 in 2015. This
fall in activity is in line with the North Sea drilling market
contraction from the fourth quarter of 2015.
In January and February 2016 ANSS was successful in
winning two new contracts, with terms of three years plus
options, for major Oil & Gas customers. These are large
total waste management contracts covering drilling and
production platform waste management, onshore gas
terminal industrial cleaning and waste management and
related decommissioning works.
The Group purchased certain freehold land and assets
in Great Yarmouth for £0.5m in February 2017. The site,
which already holds relevant planning and environmental
permits, has enabled the business to provide in the
Southern North Sea those services already provided to
customers in the Northern and Central North Sea from its
Aberdeen and Lerwick sites.
As part of its strategic development, the business has
entered into a partnership with Forth Ports Ltd to establish
a facility at the Port of Dundee for the management
of waste arising onshore from the decommissioning
of offshore assets. This facility will enhance the
opportunity for Augean to service the growing North
Sea decommissioning market, a multi-billion pound
programme decommissioning hundreds of offshore
assets, which is expected to be active for over 20 years.
The business has been successful in broadening scope
in the decommissioning market to encompass offshore
work. A top-tier operator which initially engaged ANSS
to provide plug and abandonment waste management
containment services has now widened the engagement
to provide offshore radiation protection supervision work.
A further framework contract was secured to provide drill
cuttings, industrial services and total waste management
services. The client’s marine logistics are based in
Peterhead and, with their support, ANSS is now operating
in this location for the first time. All these contract wins
represent strategic traction in diversifying the ANSS
business away from dependence on exploration and
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Case Study:
Shell
HIGH PRESSURE
CLEANING SERVICES
The requirement
Shell required Augean North Sea Services to
provide an innovative and supportive approach
to the end of well OBM (Oil Based Mud) clean-up
on-board the Noble Hans Deul drilling rig. Previous
attempts at cleaning the built-up residues inside
the mud pump’s 16” pipework had not resulted
in success. These efforts had been both time
consuming and labour intensive and resulted in
additional rig time.
Innovations
The ANSS offshore team proposed a new
approach utilising high pressure jetting to clean the
built-up residues. Following agreement from Shell,
ANSS quickly planned and mobilised the required
equipment and personnel and the cleaning was
undertaken in a compliant, safe and controlled
manner.
Our achievements
The operation of this equipment by the competent
Augean crew in conjunction with the containment
equipment already on-board saved 12 hours of rig
time for Shell compared with the previous cleaning
times.
This learning was captured by Shell and has
become standard methodology for this activity
during the end of well OBM clean-up on-board
Noble Hans Deul.
development drilling into production waste management,
full scope industrial service work and decommissioning, and
further underpin existing management expectations for 2017
revenues and profits from this business.
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
top tier 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 reputation in its core market to position
the business for continued profitable growth. The Board
continues to monitor events in the North Sea Oil & Gas
market, given their potential impact.
Augean plc Annual Report and Accounts for the year ended 31 December 2016
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Operating Review continued
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 2016, the top 20 customers of the Group made up
43% of total Group revenue at £33.0m (2015: 42%
and £25.8m), of which 88% was through a formalised
agreement (2015: 95%).
Legal case
The Group was involved in a commercial dispute with
a customer during the year, which arose in the ordinary
course of business. The matter was settled in the year,
without a legal claim being made, the detailed terms of
which are subject to a confidentiality agreement. The
total cost of the settlement, including amounts paid
to the customer, adviser fees and other related costs,
is £1.2m and is recognised as an exceptional item in
the income statement of the Group. A cash outflow of
£1.0m occurred during 2016 and £0.1m of cash outflow
has occurred in the first half of 2017 in respect of this
settlement.
Transactions
On 18 May 2016, the Group purchased the entire issued
share capital of Colt Holdings Limited (Colt) for a total
consideration of £13.8m which was paid in cash on the
same date. The consideration was offset by acquired
cash of £4.9m.
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 2016 have
been the implications of Brexit and developments on
the derogations for landfill acceptance criteria. The
Department for Environment, Food and Rural Affairs
(DEFRA) has recently confirmed that there is no clear
justification or environmental benefit for removal of the
derogations supporting the Augean practice for safe
treatment of air pollution control residues.
During 2016 DEFRA undertook a light review of its 2010
Strategy for Hazardous Waste Strategy for England.
Augean was directly involved in consultation on its original
formulation and has monitored its implementation since
2010. In general, the Group considers that, whilst the
DEFRA Strategy is fit for purpose, there are concerns
apparent regarding the implementation and application
of the Strategy, particularly in respect of persistent and
toxic pollutants. The application of the Strategy does
not appear to effectively take into consideration whether
the Best Overall Environmental Outcome (BOEO) will be
achieved, despite it being a requirement of the Strategy.
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use of the DCO it has been 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 on going 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 and the
radioactive waste permit was issued during the first half of
2016. The Group has continued to actively engage with
local communities resulting in general acceptance of its
proposals and no objections.
The current planning permission time limits allow a life for
the Group’s ENRMF site to 2026, Thornhaugh to 2034
and over 50 years for Port Clarence.
HM Revenue & Customs has continued to develop
proposals relating to the application of Landfill Tax. Whilst
these proposals do not directly affect the business, they
seem piecemeal and the Group is seeking a review of
the taxation objectives of these proposals to ensure that
clarity of purpose is apparent.
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 on going operation and
future development of the business. The key permitting
work in 2016 has been development of an Oil & Gas
decommissioning hub and waste transfer station at Port
of Dundee. A suite of applications has been submitted
for a wide range of wastes, including NORM, hazardous
and scrap, specifically to provide total waste management
services to the oil and gas industry working with Forth
Ports Limited. It is anticipated that the permits will be
issued in the first quarter of 2017.
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 make full
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Financial Performance
“Operating profit before exceptional
items from continuing operations
increased by 14% to £7.8m”
Group Finance Director Mark Fryer
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
2016
76.0
7.8
7.0
4.5
14.1
13.5
4.42p
11.8%
2015
61.0
6.8
6.0
4.8
12.1
11.1
4.65p
11.4%
Exceptional items are detailed below
On a statutory basis for continuing operations, operating
profit was £2.1m (2015: £3.3m), profit before tax was
£1.3m (2015: £2.5m), profit after tax was £0.4m (2015:
£1.7m), basic earnings per share were 0.40 pence (2015:
1.60 pence) and net operating cash flows were £11.2m
(2015: £10.5m).
Trading, operating profit and EBITDA
Revenue from continuing operations for the year ended
31 December 2016 increased by 25% to £76.0m (2015:
£61.0m).
Operating profit before exceptional items from continuing
operations increased by 14% to £7.8m (2015: £6.8m)
and profit before tax increased by 16% to £7.0m (2015:
£6.0m), 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
2016
7.8
6.3
14.1
2015
6.8
5.3
12.1
Exceptional items
Exceptional items in 2016 totalled a net charge of £5.7m
before taxation, of which £3.3m related to the non-cash
impairment of the incinerator at East Kent, £0.8m related
to the costs of acquisition of Colt, £1.2m relates to the
settlement of a trade-related dispute, which arose in the
normal course of trade, and £0.4m related to restructures
and other costs.
In 2015, exceptional items 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,
£0.5m related to restructuring charges and £0.1m related
to business acquisition and other costs.
Finance costs
Total finance charges were £0.8m (2015: £0.8m) including
the interest on bank debt and other financial liabilities
of £0.4m (2015: £0.3m). They also included non-cash
unwinding of discounts on provisions totalling £0.1m
(2015: £0.1m).
Taxation
The Group recognised an accounting tax charge of £0.9m
(2015: £0.8m) including a credit of £1.6m (2015: £0.4m)
in respect of exceptional items.
The accounting tax charge of £2.5m for continuing
operations and excluding exceptional items (2015: £1.2m)
represents 35.3% of profit before taxation on the same
basis (2015: 20.3%). This compares against the headline
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rate of corporation tax of 20% for 2016 (2015: 20.25%).
The increase in tax charge in the current year reflects a
higher level of disallowable costs due to acquisition and a
reduction in the recognised deferred tax asset subsequent
to a review of the Group’s non-qualifying asset base.
These factors are not expected to recur.
The Group paid corporate tax of £0.9m during the year
(2015: £1.1m), of which £0.8m was in respect of 2016
liabilities and £0.1m in respect of previous years. A current
tax liability of £0.7m (2015: £0.9m) remains in the balance
sheet at the year end.
A deferred tax asset of £1.1m (2015: £2.3m) 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 potential
deferred tax asset of £0.8m is unrecognised (2015:
£0.8m) 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, decreased by
5% to 4.42 pence (2015: 4.65 pence) due to the high tax
charge in the year.
Statutory basic EPS was 0.40 pence (2015: 1.60 pence).
The Group made a profit after taxation, from continuing
operations and excluding exceptional items, of £4.5m
(2015: £4.8m), all of which was attributable to equity
shareholders.
The total number of ordinary shares in issue increased
during the year from 102,249,083 to 102,748,383
with the weighted average number of shares in issue
increasing from 102,139,647 to 102,420,517 for the
purposes of basic EPS.
Dividend
The Board has recommended a dividend of 1.0p per
share (2015: 0.65p), payable on or after 29 June 2017,
following an ex-dividend date of 15 June 2017 and a
record date of 16 June 2017, subject to shareholder
approval at the Annual General Meeting. The dividend
per share has increased by 54% from the previous year,
which reflects the Board’s confidence in the outlook
and maintains the Board’s commitment to a progressive
dividend policy. The proposed dividend is covered 4.4
times (2015: 7.2 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
Net operating cash flows from
exceptional items
Total net operating cash
flows
Maintenance capital
expenditure
Post-maintenance free cash
flow
Development capital
expenditure
Purchase of remaining shares
in ANSS
Acquisition of businesses
Purchase of East Kent freehold
Free cash flow
Dividend payments
Proceeds from issuance of
equity
Net cash generation
2016
£’000
13.5
2015
£’000
11.1
(2.3)
(0.6)
11.2
10.5
(3.9)
7.3
(4.1)
—
(8.9)
(0.2)
(5.9)
(0.7)
0.1
(6.5)
(5.5)
5.0
(1.8)
(1.1)
(0.1)
(0.2)
1.8
(0.5)
0.1
1.4
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Financial Performance continued
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 70% to £9.5m (2015: £5.6m), after
excluding net operating cash flows from exceptional items
and discontinued operations, of £2.2m outflow (2015:
£0.6m outflow).
Underlying net operating cash flows were generated from
continuing trading as follows:
Capital investment in property, plant & equipment and
intangible assets made by the Group totalled £8.3m
(2015: £7.3m), 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:
2016
Maintenance
£’m
2016
Development
£’m
2016
Total
£’m
2015
Total
£’m
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
2016
£’m
14.1
0.8
(1.7)
0.3
2015
£’m
12.1
0.4
(1.8)
0.4
13.5
11.1
Underlying net operating cash flow as a percentage of
EBITDA was 96% in 2016 (2015: 92%).
The Group purchased the issued share capital of
Colt Holdings Limited (“Colt”) in 2016 for a headline
consideration of £9.2m in May 2016. The associated net
cash outflow was £8.9m.
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 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.
Energy &
Construction
Radioactive
Waste
Services
Industry &
Infrastructure
Augean
Integrated
Services
Augean North
Sea Services
Other/
corporate
2.6
—
0.3
0.3
0.1
0.6
3.9
1.1
3.7
3.8
—
—
—
0.1
0.4
0.6
1.1
1.9
0.2
4.4
1.4
2.0
0.8
8.3
0.8
1.6
0.5
7.3
During the year, the Group received a total of £0.1m
(2015: £0.1m) of equity proceeds from the exercise of
share options by current and former employees. As a
result of the above net cash outflow, net debt, defined
as total borrowings less cash and cash equivalents,
increased to £10.8m at 31 December 2016, from £4.3m
at 31 December 2015. This represented gearing, defined
as net debt divided by net assets, of 19.9% (2015:
7.8%). The ratio of net debt to EBITDA, from continuing
operations and before exceptional items, was 0.8 times
(2015: 0.4 times).
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Financing
During 2016, the activities of the Group were substantially
funded by a bank facility, comprising a revolving credit
facility and bank overdraft. That facility was renewed
on 21 March 2016 with HSBC Bank plc at a level of
£20m with the option of a further £10m exclusively to
fund acquisitions. The additional £10m is structured
as an accordion facility and therefore is uncommitted
and would require bank approval to draw down. 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. As at 31 December 2016, the net debt
is £10.8m with headroom available to the Group totalling
£19.2m including the £10.0m undrawn accordion.
The above facility includes 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
not more than 2.5 times
not less than 3.0 times
As at 31 December 2016 the Group was in compliance
with both covenants.
Balance sheet and return on
capital employed
Consolidated net assets were £54.6m on 31 December
2016 (2015: £54.4m) and net tangible assets, excluding
goodwill and other intangible assets, were £28.3m
(2015: £34.4m), of which all was attributable to equity
shareholders of the Group in both years. Net assets and
net tangible assets as at 31 December 2016 are both
stated after the recognition of a £3.3m 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 11.8% in 2016 (2015:
11.4%). This outcome is not impacted by the £3.3m
impairment loss recognised by the Group, which is
recognised as at 31 December 2016 but does not form
part of the calculation of average capital employed for
2016.
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. Reviews were completed for
the Augean North Sea Services business as a result of the
prevailing macroeconomic conditions seen in the market
and the Colt business given its level of performance.
Those detailed reviews indicated that an impairment loss
of £3.3m was to be recognised in respect of the East
Kent CGU as at 31 December 2016. No change was
required to the carrying value of the goodwill, nor were
any other impairment losses or reversals to be recognised
in the consolidated balance sheet, in respect of the
continuing operations of the Group, at 31 December
2016.
The cash flows for all CGUs were discounted using a pre-
tax discount rate of 9.7%.
Outlook
2016 saw the Group deliver double digit growth in
revenue, operating cash flow and EBITDA. At an
operational level, the Group has achieved a number of
key strategic goals, including securing further contracts
with top-tier customers and a significant increase in APCR
volumes, reaffirming our integrated waste management
proposition with our customers.
We have seen good momentum across our portfolio of
businesses and remain well positioned to take advantage
of opportunities across a broad number of sectors. The
Group’s cash generation and balance sheet remain robust
and the Board remains confident of maintaining its track
record of year-on-year increases in profitability in 2017.
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Managing Risk
Risk description
Mitigation
Trend
General Economic 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.
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 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.
{ Diversification of customer base.
{ 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.
{ Employ high quality technical management to interpret the
evolving legislative framework and its potential and current
impact on the Group’s operations.
{ Maintain a presence on a number of industry groups to
influence the shaping of policy and liaise regularly with
relevant regulators and legislative bodies, including the
Environment Agency (EA), the Scottish Environment
Protection Agency (SEPA), the Department for Environment,
Food & Rural Affairs (DEFRA) and the Department for
Business Energy and Industrial Strategy (BEIS).
{ Develop 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.
{ Highlight the importance of Best Overall Environmental
Outcome (BOEO) in moderating the simplistic application of
the waste hierarchy by regulators.
Key
Increase
Decrease
No change
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Risk description
Mitigation
Trend
{ Develop a range of waste treatment solutions for customers.
{ Broaden capabilities to ensure the Group’s sites are able to
accept all those wastes which do require landfill disposal.
{ Maintain specialist testing facilities and seek appropriate
external chemical, engineering, taxation and legal advice.
{ Modelling of the financial impact under different external
legislative positions.
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 risk in
all time horizons. Landfill tax
regulations (LFT1) were last
updated in December 2015.
LFT is not totally prescriptive on
the tax treatment of the many
alternate types of waste received
by the group. This could lead
to differences in opinion on the
treatment and the applicable tax
rate. The standard rate of landfill tax
rose to £84.40 per tonne on 1 April
2016 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.
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.
{ 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.
{ Employment of technical experts who work to well-
established policies and procedures described in the Group’s
Integrated Management System.
{ Provision of training to develop the knowledge and
competence of its staff.
{ Regular monitoring and review of compliance performance.
{ Production of the Group’s corporate social responsibility
(CSR) report.
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Managing Risk continued
Risk description
Mitigation
Trend
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.
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.
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.
{ Health and safety is the first priority for all Directors, managers
and employees across the Group.
{ Investments in relevant assets and resources are made on an
on going basis to ensure that the highest health and safety
standards are applied.
{ 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.
{ Review pricing policies on an on going basis to ensure that
the Group influences and stabilises the market.
{ Respond to emerging trends and customer needs.
{ Specialist in-house resource to assess and price waste
consignments in line with market rates and available disposal
solutions.
{ Regular review of all services to ensure that price changes
in the market do not lead to uneconomic activities being
undertaken by the Group.
{ Develop positions in a range of markets requiring specialist
waste management capabilities and which have high barriers
to entry.
{ 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.
{ Monitor the development and application of the waste
hierarchy vs Best Overall Environmental Outcome.
{ Invest selectively in development.
{ Employ strategic planning to make timely investments in
existing and new equipment.
{ Evaluation of operational costs and market environment is
made before investment.
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Risk description
Mitigation
Trend
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.
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.
Brexit risk
Although the group is focused on
wastes arising in Britain and uses
disposal infrastructure almost
entirely based in the UK, the Group
may fail to anticipate and manage
the potential impact of Britain
leaving the European Union, notably
potential increases in interest rate.
{ Maintain 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.
{ Diversify North Sea activities across a number of revenue-
generating streams, with services provided to production
customers offshore and onshore.
{ Pursue North Sea decommissioning as new market
opportunities for ANSS that would further mitigate risk.
{ Outsourcing of the majority of the Group’s haulage
requirement, augmented with the use of the Group’s own fleet
where appropriate.
{ Maintenance of ability to accept wastes into sites in different
geographical locations before onward transfer to their final
treatment or disposal destination.
{ Engage with trade association (Environmental Services
Association) to anticipate and attempt to influence
Government plans.
{ Monitor market conditions to allow appropriate investment in
infrastructure and management of costs.
{ Maintenance of ability to accept wastes into sites in different
geographical locations before onward transfer to their final
treatment or disposal destinations.
{ Modelling of the financial impact of different scenarios which
could result from this external change.
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.
Key
Increase
Decrease
No change
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43
Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Corporate Social Responsibility
“The Board recognises the important
role played by the Group in the
environment and communities within
which it operates”
Chief Executive Officer Stewart Davies
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
Value 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
Consistently demonstrating these behaviours will deliver our commitment to:
Putting Safety and Compliance before Profit
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 Group‘s
top three business priorities. 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
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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
2016 indicates that the Group’s operations do not result
in a significant impact on the local environment and, in
general, our environmental performance has improved
significantly over the past five years. The results of
inspections and audits received from the Environment
Agency (EA) in England and the Scottish Environmental
Protection Agency (SEPA) in Scotland demonstrate 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 profile of 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 2016, we
engaged actively and extensively in policy development
in a wide range of areas affecting the business, including
Landfill Tax, landfill acceptance criteria and hazardous
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.
A 1.5% general pay increase was awarded to staff
and Directors in 2017, in view of general inflationary
conditions in the UK.
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.
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
Corporate Social Responsibility continued
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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.
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
£0.5m (2015: £0.4m) was contributed through these
schemes during the year, providing funds for community
projects including a sports facilities and a wildlife reserve.
Charitable donations made during the year included
ongoing support for the Underground Youth Club at Kings
Cliffe, local sports teams and local events.
By order of the Board
Dr Stewart Davies
Chief Executive Officer
20 March 2017
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 2015 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. During 2016, in anticipation of the
ongoing growth of the business, we have been preparing
a competency framework underpinned by leadership
development programmes for all levels in the business
which will be rolled out in 2017.
Safety
Health and safety and compliance are priorities for the
business and it is therefore disappointing that there was
a rise in accidents in 2016 compared with 2015. The
management team has responded by enhancing hazard
recognition, risk evaluation and learning from incidents. 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
2,400 near misses and 730 safe acts were reported
during 2016, exceeding the Group’s internal targets.
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Strategic Report
48
48
24612.04 29-2-2016 Concept
www.augeanplc.com Stock code: AUGHeading Here Our Governance
Contents
Board of Directors
50
Chairman’s Corporate Governance Letter 52
Our Governance
53
Risk Management and Control
54
Audit Committee Report
Nominations Committee Report
Remuneration Committee Report
Directors’ Remuneration Report
Directors’ Report
55
56
57
58
62
24612.04 29-2-2016 Concept
49
49
Augean plc Annual Report and Accounts for the year ended 31 December 2016Our Governance Board of Directors
Jim Meredith
Non-executive Chairman
Dr Stewart Davies
Executive Director and
Chief Executive Officer
Andrew Bryce
Non-executive Director and Chairman of
the Nominations Committee
Andrew has had a long career and
established reputation as a leading UK
environmental lawyer 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.
Andrew has extensive experience in both
regulatory and transactional work and was
previously an equity partner and head of
environmental services at City law firm
Cameron Markby Hewitt (now part of CMS
Cameron McKenna). A Founder Member
of the UK Environmental Law Association
(UKELA) and its Chairman for three years,
Andrew is now an Honorary Life Member.
He has continued his involvement with the
UKELA by both leading and contributing to
working parties of the Association and is
Co-Chair of its BREXIT Task Force.
He was appointed to the Board of Augean
in June 2005 and became Chairman of the
Nominations Committee shortly after.
Jim is currently Non-Executive Chairman
of Augean plc and since September 2016
of RiverRidge Recycling, an investment
supported by the Business Growth Fund.
He has also been a non-executive Director
of Mar City Homes since July 2016. Jim
has considerable experience in the waste
sector (since circa 1997) and has also
worked within manufacturing, having held
several senior roles within these sectors.
He was CEO of the UK business of FCC,
a leading Spanish construction business,
following its acquisition of Waste Recycling
Group (WRG) in 2006 from TerraFirma
Capital Partners whom Jim worked with
from 2003 during their initial acquisition
of WRG. Jim was an Executive Director
of Shanks plc and also CEO of SCAID
Capital, whose main business was Willerby
Holiday Homes, a manufacturer of holiday
homes for the leisure sector.
He was appointed to the Board of Augean
in December 2010 and became Chairman
in June 2012.
Stewart joined Augean from Romec Ltd,
where he was managing Director for three
years. Prior to this he held managing
Director roles at Serco, Rugby Cement
and Corus, following ten years at ICI in
operations, commercial and strategic
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
and a Member of the Chartered Institute
of Waste Management. Stewart was
appointed Chairman of the Innovation
Advisory Board (IAB) of the Natural
Environment Research Council (NERC)
in April 2016. The IAB advises NERC on
its strategy for strengthening the delivery
of economic growth and other societal
benefits from its research and innovation
investments. Stewart was elected as
Chairman of the Environmental Services
Association (ESA) in November 2016. ESA
is the trade association representing the
UK’s resource and waste management
industry and is leading the transformation
of how the UK’s waste is managed. From
2009 to 2015, Stewart was a member
of the Governing Board 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. From 2013 to 2016, he was a
Director of Decom North Sea, the industry
forum of Oil & Gas operators and supply
chain companies involved in offshore
decommissioning in the North Sea.
He was appointed to the Board and
became Chief Executive Officer in August
2013.
50
www.augeanplc.com Stock code: AUG John Grant
Non-executive Director and Chairman
of the Remuneration Committee
Rod Holdsworth
Non-executive Director and Chairman of
the Audit Committee
Mark Fryer
Executive Director and
Group Finance Director
John has significant experience across
a number of sectors, including working
for Ford for 25 years, holding a number
of senior positions including Director of
corporate strategy in the USA, and then
Executive Deputy Chairman at Jaguar
after it was purchased by Ford in 1990.
John later joined Lucas Industries plc from
1992-1996 as Group Finance Director
and was Chief Executive of Ascot plc
from 1997-2000. He is currently Senior
Independent Director of Melrose Industries
plc, a FTSE 350 acquisitive international
engineering group and of MHP S.A., a
UK listed Ukrainian agro-industrial group,
and is the Chairman of the British Racing
Drivers Club Limited.
He was appointed to the Board in August
2015, became Senior Independent
Director in November 2015, and became
Chairman of the Remuneration Committee
in June 2016.
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.
Rod was most recently Global Chief
Financial Officer of OCS Group, a privately-
owned, international facilities management
business with 94,000 staff across 50
countries and revenue of approximately
£1 billion. 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, Whitby Bird, 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 in March
2016 and become Chairman of the Audit
Committee in June 2016.
Mark joined Augean in December 2016
and brings a significant breadth of financial
expertise across a broad range of both
listed and private companies, having been
Group Finance Director of Dialight plc
from 2010 to 2014, an innovative LED
technology company, and previously of
Manganese Bronze Holdings plc from
2002 to 2010, the company that built
London taxis. For the past three years
Mark has been Interim Chief Finance
Officer of two private equity-owned
businesses, Bridon International Ltd,
the global technology leader in the
manufacture of wire and fibre rope,
and Nualight Limited, a specialist LED
technology company. Prior to this, Mark
held senior finance positions at GKN plc
and Cable & Wireless plc after qualifying
as a Chartered Accountant with Ernst
& Young in 1991. Whilst at GKN plc,
Mark gained specialist waste experience
having been Finance Director for GKN
Industrial Services division which included
Cleanaway waste management.
He was appointed to the Board and
became Group Finance Director on
14 December 2016.
51
Augean plc Annual Report and Accounts for the year ended 31 December 2016Our Governance Chairman’s Corporate Governance Letter
“The Board has a proactive investor
relations programme and believes
in maintaining good communication
with all stakeholders”
Non-executive Chairman Jim Meredith
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 fully with the UK Corporate Governance
Code. However, the Board recognises the value of the
Code and has regard to its requirements as far as is
practicable and appropriate for a public company of its
size and nature. The Board regularly reviews guidance
from regulatory bodies, supported by its Nominated
Advisor, and responds as appropriate. As a business
traded on the Alternative Investment Market of the
London Stock Exchange and operating in markets based
on regulatory frameworks, the Group is familiar with the
benefits and challenges associated with maintaining
strong and effective governance. In this regard the Board
remains focused on the need for a system of corporate
governance which delivers compliance with regulation
whilst enhancing the performance of the Group. This
includes recognising the need to manage and mitigate the
risks faced by the business across all of its activities.
Each of the Board’s standing committees (Audit,
Remuneration and Nomination) continued to be active
during the year. A report from each committee chairman
follows, and I am grateful to each for their diligence and
skill in ensuring that the Board plays an effective role in
the proper management of the Company and the wider
Group.
As Chairman, one of my principal concerns is to maintain
excellent relationships with our shareholders. 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.
The Board has a proactive 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
20 March 2017
52
www.augeanplc.com Stock code: AUG Our Governance
The Board of Directors
The Board of Directors is responsible for ensuring that
the Group is appropriately governed and to hold the
Executive to account in their delivery of the formulated
business strategy. This includes oversight of relevant
control mechanisms within the business together
with values and behaviours to ensure the business
performance is sustainable within its sector. At 31
December 2016 the Board comprised six members:
a Non-executive chairman; three further independent
Non-executive Directors, including John Grant as
the Senior Independent Director; and two executive
Directors being the Chief Executive Officer and the Group
Finance Director. The Chairman has responsibility for the
overall leadership, effectiveness and governance of the
Board. The Chief Executive Officer is responsible for the
effective leadership and development of the executive
management and strategic and operational running of
the Group. The Senior Independent Director supports
the Chairman and leads the Non-executive Directors in
reviewing the performance of the Chairman. The Non-
executive Directors have been appointed to the Board
for their specific areas of knowledge and expertise, are
considered to be independent of management and
exercise their duties in good faith based on judgements
informed by their professional and personal experience to
provide rigour to Board decisions.
The composition and effectiveness of the Board and
its committees are regularly reviewed to reflect skills
and resources needed to assist the Group in delivering
its strategic plan. Appropriate training, briefings and
inductions are available to all Directors on appointment
and subsequently where necessary, taking into account
the existing qualifications and experience of each
individual Director. All Directors have access to the Group
Company Secretary, who is responsible for ensuring
that Board procedures are followed and that the Group
complies with all applicable rules, regulations and
obligations governing its operations. The Directors also
have access to the advice and services of the Group’s
company secretarial partner, Addleshaw Goddard LLP. In
addition, any Director may take independent professional
advice, where necessary, at the Company’s expense.
The Board meets formally at least eight times a year
and additional meetings are held where necessary to
review and approve specific matters where a decision
is required more urgently. The Board recognises the
recommendations regarding Board diversity and
acknowledges that gender diversity is a key element
to broadening the contribution to Board deliberations.
However, as the Board is small, comprising only six
members, it believes that a strict compliance with quotas
is not appropriate.
Each Director is provided with sufficient timely information
in the form of Board papers, to enable full consideration
of matters in advance of meetings in order to properly
discharge their duties. There is a formal schedule of
matters reserved for the Board which includes strategy
and management, structure and capital, financial
reporting and controls, internal controls, contracts,
communication, Board membership and other
appointments, remuneration, delegation of authority,
corporate governance matters, and policies and
this is displayed on the Company’s website
www.Augeanplc.com. Under the Company’s articles of
association, one third of all Directors is required to retire
from office at each Annual General meeting and may
stand for re-appointment by shareholders. In addition,
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 and therefore Mark
Fryer, having been appointed by the Board during the
year, offers himself for election at the 2017 AGM.
The Board are satisfied that all the Directors standing
for election or re-election perform effectively and have
demonstrated commitment to their roles.
In line with the Companies Act 2006 and the Company’s
Articles of Association, approved at the 2008 AGM, the
Company has strict procedures in place to capture the
disclosure and subsequent consideration and potential
authorisation of any Director’s interest which may conflict
with those of the Company.
53
Augean plc Annual Report and Accounts for the year ended 31 December 2016Our Governance Risk Management and Control
{ 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 are 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
the 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
systems of risk management and internal control
and for reviewing their 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, Group Operating
Officer, the Directors of each of the Group’s operating
business units and an Engineering Director and Corporate
Stewardship Director. 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;
54
www.augeanplc.com Stock code: AUG Audit Committee Report
AUDIT COMMITTEE
“The Committee have reviewed, in depth, the
key assumptions around goodwill impairment
reviews, acquisition accounting, deferred
tax recognition and adoption of the Going
Concern assumption”
Chairman Rod Holdsworth
Members
Rod Holdsworth
Andrew Bryce
Jim Meredith
John Grant
Meetings
Total number of Committee
meetings: 5
During the year the Audit Committee reviewed its own
performance, its constitution and its terms of reference to
ensure it was operating at maximum effectiveness, with
recommendations made to the Board of Directors for any
changes it considered necessary.
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. The committee has requested
that this be reviewed by the Group Finance Director in the
first half of 2017.
The Audit Committee comprises the non-executive
Directors and is chaired by Rod Holdsworth. The external
auditors 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.
The committee monitored the integrity of the financial
statements of the company, including its annual financial
statements for 2015 and other information included in the
2015 Annual Report, the interim financial statements for
2016, all formal announcements relating to results and
all significant financial reporting issues and judgements
contained therein. The committee have reviewed, in
depth, the key assumptions around goodwill impairment
reviews, acquisition accounting, deferred tax recognition
and adoption of the Going Concern assumption.
55
Augean plc Annual Report and Accounts for the year ended 31 December 2016Our Governance Nominations Committee Report
NOMINATIONS COMMITTEE
“During the year the Nomination Committee
kept under review the leadership needs of
the organisation with a view to ensuring
the continued ability of the organisation to
compete effectively in the marketplace”
Chairman Andrew Bryce
Members
Andrew Bryce
Rod Holdsworth
Jim Meredith
John Grant
Meetings
Total number of Committee
meetings: 3
During 2016, following the resignation of Richard Laker,
the activities of the Committee focused on the recruitment
of a new Group Finance Director. The Committee
Chairman worked with recruitment consultants to identify
suitable candidates and led the interview processes
through to the appointment of Mark Fryer, as announced
in December 2016.
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 and for ensuring that there
is a formal, rigorous and transparent procedure for the
appointment of all new Directors to the Board. During
the year the Nomination Committee kept under review
the leadership needs of the organisation, both executive
and non-executive, with a view to ensuring the continued
ability of the organisation to compete effectively in the
marketplace, giving full consideration to succession
planning for Directors and other senior executives in the
course of its work, taking into account the challenges
and opportunities facing the Company, and the skills,
experience, independence, knowledge and diversity
needed on the Board in the future. In 2016 the Committee
engaged Lintstock Limited, a corporate advisory firm that
provides objective and independent counsel to leading
companies, to carry out a Board evaluation to ensure the
continuous improvement of the Board’s effectiveness.
56
www.augeanplc.com Stock code: AUG Remuneration Committee Report
REMUNERATION COMMITTEE
“The principal objective of the
Committee is to attract, retain and
motivate talented people”
Chairman John Grant
Members
Jim Meredith
Rod Holdsworth
Andrew Bryce
John Grant
Meetings
Total number of Committee
meetings: 4
During 2016, the Committee also approved the issuance
of the 2016 LTIP, awarded to relevant participants during
2016. This followed 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 John Grant. 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 shareholders’ interests. The Committee
uses the services of independent external advisers as
required.
The Committee met on four occasions during 2016,
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.
57
Augean plc Annual Report and Accounts for the year ended 31 December 2016Our Governance Directors’ Remuneration Report
Non-executive Directors
Remuneration of the Non-executive Directors, including
base fees and fees for acting as chair of a relevant
committee, is determined by the Board as a whole.
Executive Directors
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 2016, no salary increase was awarded to Stewart
Davies or Richard Laker, in line with the decision not to
award an increase to any staff in the Company on
1 January 2016. As Mark Fryer joined the Company on
12 December 2016, he will become eligible for an
increase in January 2018, being the first anniversary of his
joining the Company.
(ii) Performance related bonus
The executive Directors participate in a bonus scheme
based on the achievement of annual profit targets
approved by the Remuneration Committee, as well as
minimum targets in respect of safety and regulatory
compliance. The achievement of these targets would
result in a bonus of up to 50% of basic salary. Safety and
compliance targets were met during the year and the level
of profit before tax achieved by the Group means that
bonuses will be payable at a rate of 30% of the maximum
achievable in respect of the 2016 financial year.
(iii) Pension provision and other benefits
Pension provision is made at a rate of 10% of basic salary
for each executive Director. Other benefits include a car
allowance, life assurance and private healthcare.
(iv) Long Term Incentive Plan – 2016 LTIP Award
During 2014, a new Long Term Incentive Plan (“2014 LTIP
Scheme”) was prepared in conjunction with Deloitte LLP,
and approved after consultation with major shareholders,
to incentivise delivery of sustained performance over the
longer term and encourage greater shareholder alignment
through personal investment in the Company’s shares.
Under the 2014 LTIP Scheme, an award was made in
2016 (“2016 LTIP Award”).
Under the 2016 LTIP Award, 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
200%
175%
Other senior management
100%
The options were granted at an exercise price of ten
pence, being the nominal value of each of the Ordinary
shares in the Company, with subsequent vesting subject
to the attainment of predetermined financial performance
conditions over the three-year period from 1 January
2016 to 31 December 2018. All financial performance
conditions relate to continuing operations.
No awards to date can vest unless minimum return on
capital employed (“ROCE”) targets are met; however
this may be modified for future LTIP schemes. The
ROCE used in the 2016 LTIP Award calculation (“LTIP
ROCE”) is determined as operating profit, excluding
intangible amortisation and exceptional items, divided by
average capital employed, where capital employed is the
consolidated net assets of the Group, excluding net debt.
58
www.augeanplc.com Stock code: AUG
The minimum LTIP ROCE targets for each of the three
years are as follows:
Minimum LTIP
ROCE target
2016
2017
2018
11.7%
12.0%
12.0%
The overall attainment for the executive Directors, based
on the weighting set out above, was 13.2% for the 2016
element of the 2016 LTIP, meaning that 86.8% of the
share options relating to the 2016 element of the 2016
LTIP lapse.
The LTIP ROCE of the Group for 2016 was 12.4%.
Once minimum LTIP ROCE targets are met, the
performance conditions for the participants are as follows:
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 2018, expected to be no later than
31 March 2019.
Total shareholder return relative to the
FTSE AIM All-Share (“Relative TSR”) — 25% weighting
The expected costs of the scheme are given in note 19 to
the financial statements.
Basic earnings per share, before
exceptional items and intangible
amortisation (“Underlying LTIP EPS”) — 75% weighting
Relative TSR element (in each of the three years)
Below median
Between median and
70th percentile
Above 70th percentile
Nil attainment
Straight line attainment from
30% to 100%
100% attainment
In the year ended 31 December 2016, the Company
ranked between the 43rd and 44th percentile, meaning
that 52.8% attainment occurs for the Relative TSR
element of the one-third of the 2016 LTIP relating to 2016
performance.
Underlying LTIP EPS element
2016
2017
2018
(v) Long Term Incentive Plan 2014 LTIP Award
For the final performance period of the 2014 LTIP
Award 13.2% attainment was achieved based on the
performance targets. This results in an overall attainment
for the three-year period of 56.93% for the 2014 LTIP
Award. The share options under this scheme 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.
(vii) 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 predetermined performance
conditions but this is not an absolute requirement. No
awards were made during 2016.
Minimum
5.19 pence 5.71 pence 6.28 pence
Maximum
5.56 pence 6.67 pence 8.00 pence
(viii) Service contracts
Executive Directors have rolling service contracts with
notice periods of not more than 12 months.
Between minimum
and maximum
Straight line attainment from
30% to 100%
The Underlying LTIP EPS result for 2016 was 4.60 pence,
meaning that the minimum Underlying LTIP EPS target
was not met for 2016 resulting in nil attainment of the
Underlying LTIP EPS element for the one-third of the 2016
LTIP relating to 2016 performance.
59
Augean plc Annual Report and Accounts for the year ended 31 December 2016Our Governance Directors’ Remuneration Report continued
Directors’ interests
The beneficial, family and contingent interests of the Directors in the share capital of the Company are shown in the
table below.
At 31 December 2016
Jim Meredith
Stewart Davies
Andrew Bryce
John Grant
Richard Laker
Mark Fryer
Beneficial
shares
Number
500,000
180,000
11,419
—
—
—
Share
options
Number
—
1,000,000
—
—
—
—
LTIP
Number
—
868,800
—
—
—
—
Total
shares
Number
500,000
2,048,800
11,419
—
—
—
The above LTIP number for Stewart Davies is stated after lapses during the year, as set out below
Directors’ emoluments
The emoluments of the Directors during 2016 were as follows:
Stewart Davies
Mark Fryer
Richard Laker
Jim Meredith
Andrew Bryce
John Grant
Rod Holdsworth
Rory Macnamara
Roger McDowell
2016
Basic
fee/salary
£’000
244
11
148
60
33
33
23
13
—
565
2016
Pension
contributions
£’000
15
—
15
—
—
—
—
—
—
30
2016
Bonus
£’000
34
—
11
—
—
—
—
—
—
45
2016
Other
emoluments
£’000
14
—
12
—
—
—
—
—
—
26
2016
SOS
Vesting
£’000
55
—
—
—
—
—
—
—
—
55
2016
Total
£’000
362
11
186
60
33
33
23
13
—
721
2015
Total
£’000
264
—
173
60
36
12
—
33
14
592
Fees for Andrew Bryce, John Grant and Rod Holdsworth include £3,000 per annum for acting as Chairs of Nomination,
Remuneration and Audit committees respectively.
Other emoluments for Stewart Davies and Richard Laker include a car allowance and other benefits such as medical
insurance. The increase in Stewart Davies’ salary in the table above reflects emoluments previously paid as pension
contributions which are now paid as salary as a result of the pension contribution cap. There is an equivalent decrease
in emoluments paid as pension contributions.
Richard Laker was awarded 50% of his available bonus for 2016 on the basis that he remained in role for the financial
year 2016 and has committed to make himself available to the Company until the end of his notice period in July 2017.
60
www.augeanplc.com Stock code: AUG
Directors’ share plans
Share Option Scheme
Stewart Davies
Earliest
vesting
date
12/08/2013 12/08/2016
Award date
Market
price at
award date
40.25p
Number
of shares
2016
1,000,000
Exercised
in year
Number
of shares
2016
— 1,000,000
2014 LTIP
Stewart Davies
2016 LTIP
Stewart Davies
Earliest
vesting
date
23/09/2014 24/03/2017
Award date
Earliest
vesting
date
31/10/2016 24/03/2019
Award date
Market
price at
award date
49.75p
Market
price at
award date
51.75p
Number
of shares
2016
963,855
Number
of shares
2016
—
Granted
in year
Lapsed
in year
— (414,522)
Granted
in year
424,925
Lapsed
in year
(122,945)
Number
of shares
2016
549,333
Number
of shares
2016
301,980
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 a further 257,703
options held by other participants in the Share Option Scheme, none of whom are Directors of Augean plc.
Options outstanding under the 2014 LTIP and 2016 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 2016 LTIP was based on the mean closing mid-market share price of the
Company in the 30 business days preceding 1 January 2016, being the start of the performance period of the
2016 LTIP.
Other than options held by executive Directors of Augean plc, set out in the table above, there are a further 1,383,361
options held by other participants in the 2014 LTIP and 713,389 held by other participants in the 2016 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 2016 was 57.9p. The range of the share price during
the year was 39.1p to 65.7p.
On behalf of the Remuneration Committee
John Grant
Chairman of the Remuneration Committee
20 March 2017
61
Augean plc Annual Report and Accounts for the year ended 31 December 2016Our Governance Directors’ Report
The Directors present their report and the audited financial
statements for the Group and Company for the year
ended 31 December 2016.
constructive control environment in which all employees
understand their roles and obligations. A risk register is
maintained and regularly reviewed by the Board.
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 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 £0.4m
(2015: £1.7m) from revenue of £76.0m (2015: £61.0m).
The profit included exceptional items totalling a charge of
£4.1m (2015: £3.1m).
The Board has recommended a dividend for the year of
1.0p per ordinary share, to be paid on or after 29 June
2017 for shareholders on the register at 15 June 2016
(2015: 0.65p).
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 12 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
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.
62
www.augeanplc.com Stock code: AUG Charitable and political donations
During the year the Group contributed £450,000
(2015: £374,000) of its landfill tax liability to registered
environmental bodies as permitted by Government
regulations. No political donations were made during the
year (2015: £nil).
Directors
The composition of the Board of Directors is shown on
page 50 to 53. Details of the Directors’ interests and
remuneration are given in the Directors’ Remuneration
Report on pages 58 to 61. On 14 December 2016 Mark
Fryer joined and Richard Laker resigned from the Board.
Rod Holdsworth joined the Board on 23 March 2016.
Rory Macnamara resigned from the Board on 2 June
2016.
In accordance with the articles of association of the
Company, Andrew Bryce will retire from the Board at the
Annual General Meeting on 27 June 2017.
Substantial shareholdings
The number of shares issued by the Company increased
during the year, from 102,249,083 as at 1 January 2016
to 102,748,383 at 31 December 2016. The Company had
been notified of the following interests of more than 3% in
its shares as at 15 March 2017:
Number of
shares
%
of total
Schroder Investment
Management Ltd
Henderson Group plc
Charles Stanley
Hargreave Hale
Harwood Capital
Fidelity International
Close Asset Management
AXA Investment Managers UK
Unicorn Asset Management
16,909,000
14,558,697
8,654,461
8,500,000
6,500,000
5,359,653
5,353,411
4,460,028
3,173,731
16.50%
14.16%
8.42%
8.27%
6.33%
5.22%
5.21%
4.34%
3.09%
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.
63
Augean plc Annual Report and Accounts for the year ended 31 December 2016Our Governance Directors’ Report continued
Corporate governance
A separate corporate governance report is included within
the annual report.
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 24 to the
financial statements.
As highlighted in note 24, the Group met its short-term
working capital requirements during 2016 through an
overdraft and revolving loan facility (the Facility), which
was renewed and increased with HSBC Bank plc in
March 2016, providing access to a term loan and
revolving loan facility to a total level of £20m until October
2020. 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. The provision of
the Facility is subject to certain covenants, focused on
the cover of interest costs and the ratio of net debt to
EBITDA.
Cash flow forecasts for the 12 months from the date of
approval of the financial statements indicate the Group’s
ability to operate within these covenants.
During 2016, 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 2016 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 9 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 2016, as set out
in note 9. The impairment loss was recognised as an
exceptional item in the Consolidated Income Statement
of the Group for the year ended 31 December 2016 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
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.
64
www.augeanplc.com Stock code: AUG Directors’ responsibilities statement
The Directors are responsible for preparing the Strategic
Report, the Directors’ Report, the Remuneration
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). The Directors have elected to prepare
the Company financial statements in accordance with
Financial Reporting Standard 101 (FRS101). 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:
{ 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 2016 financial year is the
third 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 27 June 2017,
Jim Meredith 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. Mark Fryer
was appointed to the Board on 14 December 2016.
Being eligible, he will offer himself for election as a Non-
executive Director at the AGM. Andrew Bryce will resign
from the Board at the AGM and will not offer himself for
re-election as a Non-executive Director.
No Director has a contract with an unexpired notice
period of more than 12 months.
By order of the Board
{ so far as each Director is aware, there is no relevant
audit information of which the Company’s auditor is
unaware; and
Mark Fryer
Group Finance Director
20 March 2017
65
Augean plc Annual Report and Accounts for the year ended 31 December 2016Our Governance 66
66
66
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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
68
70
71
72
73
75
24612.04 6 June 2017 11:19 AM Proof 6
67
67
67
Our Financials 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 2016 which comprise the
Group and parent Company statements of financial position, the Group statement of comprehensive income, the Group
cash flow statement, the Group and parent Company statements of changes in equity and the related notes. The
financial reporting framework that has been applied in the preparation of the Group financial statements is applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting
framework that has been applied in the preparation of the parent Company financial statements is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial
Reporting Standard 101 ‘Reduced Disclosure Framework’.
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 65, 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 2016 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 United Kingdom
Generally Accepted Accounting Practice; and
{ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
{ 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.
{ the Strategic Report and Directors’ Report have been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and parent Company and its environment obtained in the
course of the audit, we have not identified any material misstatements in the Strategic Report and Directors’ Report.
68
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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
20 March 2017
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69
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Before
exceptional
items
2016
£’000
Exceptional
items
2016
£’000
Note
Before
exceptional
items
2015
£’000
Exceptional
items
2015
£’000
Total
2016
£’000
Continuing operations
Revenue
Operating expenses
Operating profit
Net finance charges
Profit before tax
Taxation
Profit from continuing
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 operations
Basic
Diluted
3
4
6
3
8
8
Total
2015
£’000
61,005
(57,693)
3,312
(788)
2,524
(837)
75,959
(68,161)
7,798
(812)
6,986
(2,464)
—
75,959
61,005
(5,719)
(5,719)
—
(5,719)
1,602
(73,880)
(54,185)
2,079
(812)
1,267
(862)
6,820
(788)
6,032
(1,227)
—
(3,508)
(3,508)
—
(3,508)
390
4,522
(4,117)
405
4,805
(3,118)
1,687
4,522
(4,117)
405
4,805
(3,118)
1,687
4,522
—
(4,117)
—
405
—
4,753
52
(3,118)
—
1,635
52
0.40p
0.39p
1.60p
1.56p
The notes on pages 75 to 114 form an integral part of these financial statements.
70
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Statements of Financial Position
As at 31 December 2016
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
Total equity
Group
2016
£’000
Company
2015
£’000
2016
£’000
2015
£’000
Note
9
10
11
12
6
13
14
15
16
15
16
17
18
18
23,997
2,265
—
44,475
1,176
71,913
379
18,461
—
3,188
22,028
(17,192)
(658)
(171)
(50)
(18,071)
3,957
(13,833)
(7,470)
(21,303)
54,567
10,275
748
43,544
54,567
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
—
135
64,596
1,260
295
66,286
—
1,647
2,085
624
4,356
(17,519)
—
(2)
—
(17,521)
(13,165)
(13,835)
—
(13,835)
39,286
10,275
748
28,263
39,286
—
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
The company made a loss of £154,000 (2015: loss of £1,790,000).
The notes on pages 75 to 114 form an integral part of these financial statements.
The financial statements were approved by the Board on 20 March 2017 and authorised for issue on its behalf by:
M Fryer
Group Finance Director
Augean plc Registered number: 5199719
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71
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Statements of Cash Flow
For the year ended 31 December 2016
Operating activities
Cash generated from operations
Finance charges paid
Tax paid
Net cash generated from operating activities
Investing activities
Purchases of property, plant and equipment
Purchases of intangible assets
Purchase of business (net of cash or overdraft acquired)
Net cash used in investing activities
Financing activities
Dividends paid
Issue of equity
Acquisition of non-controlling interest
Drawdown of loan facilities
Repayments of obligations under finance leases
Net cash generated from financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
21
23
7
Group
2016
£’000
2015
£’000
12,859
(704)
(941)
11,214
(8,335)
(51)
(8,901)
(17,287)
(665)
186
—
6,208
(21)
5,708
(365)
3,553
3,188
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
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Statements of Changes in Shareholders’ Equity
For the year ended 31 December 2016
Group
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 1 January 2016
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
Share-based payments
Total transactions with the owners of the
Company
At 31 December 2016
Share
capital
£’000
10,199
Share
premium
account
£’000
542
Retained
earnings
£’000
42,059
Shareholders’
equity
£’000
52,800
Non-
controlling
interest
£’000
955
Total
equity
£’000
53,755
—
—
—
26
—
—
26
10,225
—
—
—
50
—
50
10,275
—
—
—
70
—
—
70
612
—
—
—
136
—
136
748
1,635
1,635
1,635
1,635
52
52
1,687
1,687
(511)
—
(43)
421
(511)
96
(43)
421
(133)
43,561
(37)
54,398
—
—
(1,007)
—
(1,007)
—
405
405
(665)
—
243
405
405
(665)
186
243
(422)
43,544
(236)
54,567
—
—
—
—
—
—
—
(511)
96
(1,050)
421
(1,044)
54,398
405
405
(665)
186
243
(236)
54,567
During 2015 the Group acquired the remaining 19% of the share capital of Augean North Sea Services Limited. As at
31 December 2016 and 31 December 2015, the Group has no non-controlling interest.
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73
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Statements of Changes in Shareholders’ Equity
For the year ended 31 December 2016
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 1 January 2016
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 2016
Share
capital
£’000
10,199
—
—
—
26
—
26
10,225
—
—
—
50
—
50
10,275
Share
premium
account
£’000
542
—
—
—
70
—
70
612
—
—
—
136
—
136
748
Retained
earnings
£’000
30,719
Shareholders’
equity
£’000
41,460
(1,790)
(1,790)
(1,790)
(1,790)
(511)
—
421
(90)
28,839
(511)
96
421
6
39,676
(154)
(154)
(154)
(154)
(665)
—
243
(575)
28,263
(665)
186
243
(389)
39,286
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Notes to the Financial Statements
For the year ended 31 December 2016
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 Company has
elected to prepare its parent Company financial statements in accordance with the Financial Reporting Standard 101
(FRS 101). 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. The Company has taken advantage of all available disclosure
exemptions conferred by FRS 101.
(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 identifiable 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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75
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
1 Accounting policies continued
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
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the
ordinary course of business. Revenue is shown net of Value Added Tax and inclusive of Landfill Tax, where appropriate,
and is recognised according to its nature.
Waste revenue is recognised at the point of acceptance of that waste into one of the Group’s facilities, consistent with
the point where the Group’s responsibility for this waste arises. Service revenue is recognised at point of delivery of
each separate service or where the right to invoice a customer for that revenue is met. Rental income from operating
leases is recognised on a straight line basis over the term of the lease. The related assets are recorded as plant and
machinery and are depreciated on a straight line basis over the useful economic lives of the asset. 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, acquisition costs, 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.
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Intangible assets acquired through a business combination such as customer contracts are initially measured at fair
value and amortised on a straight-line basis over their useful economic lives to the profit and loss account which are
taken to be the length of the contract. An intangible asset is considered identifiable only if it is separable or if it arises
from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or
from other rights and obligations. After initial recognition, assets acquired as part of a business combination are carried
at cost less accumulated amortisation and any impairment losses.
Methods of amortisation, residual value and useful lives are reviewed, and if necessary adjusted, at each statement
of financial position date.
(f) Investments
Investments are in respect of subsidiaries. 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.
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77
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
1 Accounting policies continued
Finance leases and hire purchase arrangements
Where the Group enters into a lease which entails taking on substantially all of the risks and rewards of ownership of
an asset, the lease is treated as a finance lease and the asset is capitalised. Future instalments under such leases, net
of finance charges, are recognised as a liability. Rentals payable are apportioned between the finance element, which
is charged to profit or loss so as to give an approximate constant rate of charge on the outstanding obligation and the
capital element which reduces the outstanding obligation for future instalments.
The asset and associated liability are recorded in the statement of financial position within property, plant and
equipment and financial liabilities respectively at their fair value or, if lower, at the present value of the minimum lease
payments, both determined at the inception of the lease.
Depreciation is calculated in accordance with the above depreciation policies.
Other leases are treated as operating leases, the rentals for which are charged to profit or loss on a straight-line basis
over the lease term.
Restoration, capping and after-care provisions
The anticipated total cost of restoration, capping, post-closure monitoring and after-care is capitalised and 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.
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(i) Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased
asset and recognised on a straight-line basis over the lease term.
(j) Inventories
Inventories are stated at the lower of cost (measured on a first-in first-out basis) and net realisable value and, where
appropriate, are stated net of provisions for impairment.
(k) Tax
Current tax
Current tax is provided at amounts expected to be paid (or recovered) using tax rates and laws that have been enacted
or substantively enacted at the statement of financial position date. The tax currently payable is based on taxable
profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because
it excludes items of income that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible.
Deferred tax
Deferred tax on temporary differences at the statement of financial position date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes is accounted for using the statement of financial
position liability method.
Using the liability method, deferred tax liabilities are recognised in full for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against
which deductible temporary differences can be utilised. However, if the deferred tax asset or liability arises from the
initial recognition of goodwill or the initial recognition of an asset or liability in a transaction, other than a business
combination, that at the time of the transaction affects neither accounting nor taxable profit, it is not recognised.
Deferred tax on temporary differences associated with shares in subsidiaries and jointly controlled entities is not
provided if reversal of these temporary differences can be controlled by the Group and it is probable that the reversal
will not occur in the foreseeable future.
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.
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79
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
1 Accounting policies continued
(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 on non-market based elements of these incentives, if
any, is recognised in profit or loss, with a corresponding adjustment to equity, over the remaining vesting period.
(n) Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily
through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held
for sale, the assets, or components of a disposal group, are re-measured in accordance with the Group’s accounting
policies. Thereafter, generally the assets, or disposal group, are measured at the lower of their carrying amount and fair
value less costs to sell. Impairment losses on initial classification as held for sale and subsequent gains and losses on
revaluation are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.
Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or
depreciated.
(o) Cash and cash equivalents
Cash and cash equivalents comprise demand deposits and cash in hand together with short-term highly liquid deposits
with a maturity of three months or less, from the date of acquisition, which are subject to an insignificant risk of change
in value.
(p) Financial instruments
(i) Financial assets
Financial assets are categorised as other loans and receivables. The Group’s trade and other receivables fall in the
‘loans and receivables’ category. Financial assets are assigned to this category on initial recognition, depending on the
characteristics of the instrument and its purpose. A financial instrument’s category is relevant for the way it is measured
and whether any resulting income and expenses 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.
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(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 24.
(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 21.
(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. 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 £44,475,000 (note 12) and goodwill with a
carrying value of £23,997,000 (note 9). 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 in 2015 and £3,348,000 in 2016. Further detail is explained in note 9.
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81
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
1 Accounting policies continued
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 16 for further details of calculation methodology, assumptions used and potential sensitivities to these
calculations.
After-care costs
Provision is made for after-care costs as soon as the obligation arises and is charged to profit or loss as void
usage progresses. After-care costs are estimated using either the work of external consultants or internal experts.
Management uses its judgement and experience to provide for these estimated costs over the life of the site. See note
16 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 16 for further details of calculation methodology, assumptions used
and potential sensitivities to these calculations.
Income taxes
At 31 December 2016, the net liability relating to current income tax is £658,000 (2015: £940,000). A deferred tax
asset of £1,283,000 (2015: £2,136,000) 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.
Business combinations
The acquisitions of subsidiaries are accounted for using the purchase method. The cost of acquisition is measured as
the fair value of assets transferred and liabilities incurred or assumed. Identifiable assets acquired and liabilities and
contingent liabilities assumed, meeting the conditions for recognition under IFRS 3, are recognised at their fair value
at the acquisition date. The fair value of businesses acquired may include waste permits, licences and customer lists
with the value calculated by discounting the future revenue stream attributable to these lists or relationships, which are
recognised as intangible assets and amortised. In the year an intangible asset of £2,262,000 was recognised relating to
customer relationships.
Contingent consideration is recognised as part of the consideration transferred in exchange for the acquiree, measured
at fair value at the acquisition date. The likelihood of payment or receipt for deferred consideration where conditional on
meeting certain performance targets is considered on acquisition or disposal. Any differences between consideration
accrued and consideration paid or received are charged or released to the Income Statement. Contingent consideration
related to the acquisition of Colt Holdings Limited was considered, at the time of acquisition, to have a fair value of £nil.
The Directors have concluded there is no change to this fair value at year end.
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(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.
IASB Effective Date
EU Effective Date
IFRS 9 Financial Instruments (issued on 24 July 2014)
01 January 2018
01 January 2018
IFRS 14: Regulatory Deferral Accounts (issued on 30 January 2014)
01 January 2016
Deferred until final
standard released
IFRS 15: Revenue from Contracts with Customers
(issued on 28 May 2014) including amendments to IFRS 15:
Effective date of IFRS 15 (issued on 11 September 2015)
01 January 2018
01 January 2018
IFRS 16: Leases (issued on 13 January 2016)
01 January 2019
Not yet endorsed
Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture
(issued on 11 September 2014)
Deferred indefinitely
Not yet endorsed
Amendments to IAS 12: Recognition of Deferred Tax Assets for
Unrealised Losses
01 January 2017
Not yet endorsed
Amendments to IAS 7: Disclosure Initiative (issued on 29 January 2016)
01 January 2017
Not yet endorsed
Clarifications to IFRS 15: Revenue from Contracts with Customers
(issued on 12 April 2016)
01 January 2018
Not yet endorsed
Amendments to IFRS 2: Classification and Measurement of Share-based
Payment Transactions (issued on 20 June 2016)
01 January 2018
Not yet endorsed
Amendments to IFRS 4: Applying IFRS 9 financial instruments with
IFRS 4 Insurance Contracts
01 January 2018
Not yet endorsed
Annual improvements to IFRS 2014-2016 Cycle (issued 8 December 2016)
– Relating to IFRS 1: First time adoption of IFRS and IAS 28: Investment in
associates and joint ventures
01 January 2017
Not yet endorsed
Annual improvements to IFRS 2014-2016 Cycle (issued 8 December 2016)
– Relating to IFRS 12: Disclosure of interest in other entities
01 January 2018
Not yet endorsed
IFRIC Interpretation 22: Foreign currency transactions and advance
considerations (issued on 8 December 2016)
01 January 2018
Not yet endorsed
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.
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83
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
2 Operating segments
The Group has five reportable segments which are the Group’s strategic business units. These business units are
monitored and strategic decisions are made on the basis of each business unit’s operating performance. The Group’s
business units provide different services to their customers and are managed separately as they are subject to different
risks and returns. The Group’s internal organisation and management structure and its system of internal financial
reporting are based primarily on these operating business units. For each of the business units, the Group’s Chief
Executive Officer (CEO) (the chief operating decision-maker) reviews internal management reports on at least a monthly
basis. The following summary describes the operations of each of the Group’s reportable segments:
{ Energy and Construction: Augean operates three modern hazardous and non-hazardous landfill operating sites
based at East Northants Resource Management Facility (ENRMF), Thornhaugh in Peterborough and Port Clarence
on Teesside, providing waste remediation, treatment and disposal services to its customers. The business unit
includes a site at Cooks Hole in 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: 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
via the Colt Industrial Services business.
Information regarding the results of each reportable segment is included overleaf. 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
2016
Energy and
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry
and
Infrastructure
£’000
Augean
North Sea
Services
£’000
Group
£’000
50,491
1,392
6,701
20,081
10,912
89,577
1,176
3,188
93,941
(14,871)
(273)
(2,604)
(4,604)
(2,314)
(24,666)
(14,050)
(658)
(39,374)
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)
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85
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
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
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 (note 3)
Operating profit/(loss)
Net finance charges
Central costs
Profit before tax
Tax (note 6)
Profit after tax
Other information
Capital expenditure
Depreciation and amortisation
Impairment loss
2016
Energy and
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry
and
Infrastructure
£’000
Augean
North Sea
Services
£’000
12,354
4,505
—
—
56
9,377
—
—
—
—
26,292
10,091
36,383
(1,005)
35,378
8,349
(242)
8,107
—
—
—
—
—
—
1,205
—
—
—
—
—
2,715
5,470
—
—
—
—
—
—
—
—
19,959
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,313
4,013
3,609
1,205
8,185
19,959
12,935
—
—
—
—
1,205
(26)
1,179
8,185
(547)
7,638
19,959
12,935
(1,117)
(13)
18,842
12,922
308
(162)
146
(656)
(3,512)
(4,168)
457
(280)
177
481
(1,523)
(1,042)
3,819
3,648
—
200
135
—
1,390
655
3,348
844
1,983
1,044
—
792
—
Group
£’000
12,354
4,505
22,674
5,470
56
9,377
1,205
5,313
4,013
3,609
68,576
10,091
78,667
(2,708)
75,959
8,939
(5,719)
3,220
(812)
(1,141)
1,267
(862)
405
8,236
6,274
3,348
Central costs relate to the costs of operating as a plc and are not allocated between the business units.
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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
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
—
—
—
—
2,356
3,871
—
—
—
—
—
—
—
—
—
14,201
1,323
—
—
—
—
—
—
—
—
—
—
8,400
5,177
1,911
6,227
14,201
14,900
—
—
—
—
1,911
—
1,911
1,110
(119)
991
6,227
(245)
5,982
14,201
14,900
(2,473)
(113)
11,728
14,787
(558)
(144)
(702)
(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
—
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
Central costs relate to the costs of operating as a plc and are not allocated between the business units.
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87
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
3 Operating profit
Total operating profit for the year is arrived at after charging
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
Total audit fees
Total non-audit fees
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 9)
Net settlement of trade-related legal case
Restructuring charges
Acquisition-related costs
Other
Exceptional charge from continuing operations
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 16)
2016
£’000
2015
£’000
85
31
9
116
9
125
262
5,970
42
241
1,009
—
3,348
1,162
297
820
92
5,719
2016
£’000
673
9
130
812
63
10
—
73
—
73
133
5,039
64
243
827
6
2,888
—
474
117
29
3,508
2015
£’000
682
7
99
788
88
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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
2016
Number
31
271
75
377
2016
£’000
14,579
1,766
625
16,970
2015
Number
32
258
55
345
2015
£’000
12,825
1,462
394
14,681
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 289 (2015: 228) people in the year. The total employee costs to the company were
£10,400,000 (2015: £9,604,000)
The total remuneration of the Directors of the company was £666,000 (2015: £592,000). The highest paid Director
received total emoluments of £307,000 including pension contributions of £15,000 (2015: total emoluments of
£264,000 including pension contributions of £22,000).
No Directors exercised share options during the year (2015: none).
The Directors have identified 15 (2015: 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
2016
£’000
1,326
85
243
1,654
2015
£’000
1,237
85
332
1,654
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89
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
6 Taxation
Group
Current tax
UK corporation tax on profit for the year
Adjustments in respect of prior years
Deferred tax
Credit in respect of the current year
Reassessment of tax qualifying assets
Adjustments in respect of prior years
Tax charge/(credit) on the result for the year
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
– reassessment of tax qualifying assets
– other
Tax charge on results
The main rate of corporation tax in the UK was 20%.
2016
£’000
1,327
(669)
658
(802)
379
627
204
862
2015
£’000
1,463
2
1,465
(430)
—
(198)
(628)
837
2016
2015
%
20%
13%
8%
5%
(3)%
30%
(5)%
68%
£’000
2,524
511
162
169
24
2
—
(31)
837
%
20.3%
6%
7%
1%
—
—
(1)%
33.2%
£’000
1,267
254
163
107
67
(42)
379
(66)
862
Deferred tax
All deferred tax assets and liabilities have arisen on the temporary timing differences between the tax base of the assets
and their carrying value in the statement of financial position.
IAS 12 (Income Taxes) permits the offsetting of tax assets and liabilities within the same tax jurisdiction and which the
Company has the intention to realise and settle simultaneously. All of the deferred tax assets were available for offset
against deferred tax liabilities and as such have been presented net in the statement of financial position.
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The movement in the net deferred tax asset during the year was as follows:
Group
At 1 January 2015
Charged to the income statement
De-recognition of asset
Adjustment in respect of prior years
At 1 January 2016
Credit in respect of the current year
Acquisition of business
Reassessment of tax qualifying
assets
Adjustment in respect of prior years
At 31 December 2016
Deferred tax assets
Deferred tax liabilities
At 31 December 2016
Goodwill
intangible
election
£’000
132
46
—
137
315
(16)
—
—
—
299
299
—
299
Capital
allowances
£’000
517
1,495
(225)
(782)
1,005
749
(229)
(679)
(578)
268
600
(332)
268
Share
options
£’000
83
62
—
—
145
71
—
—
—
216
216
—
216
Acquired
intangible
asset
£’000
—
—
—
—
—-
46
(407)
—
—
(361)
—
(361)
(361)
Company
At beginning of the year
Credited / (charged) to the income statement during the year
At end of the year
Other
provisions
£’000
956
(948)
—
843
851
(48)
—
—
(49)
754
754
—
754
2016
£’000
259
36
295
Total
£’000
1,688
655
(225)
198
2,316
802
(636)
(679)
(627)
1,176
1,869
(693)
1,176
2015
£’000
80
179
259
The reduction in the main rate of corporation tax to 17% from 1 April 2021 has been substantively enacted at the
balance sheet date. Accordingly, deferred tax balances have been valued at the lower rate of 17% in these accounts
to the extent that timing differences are expected to reverse after this date. £102,000 charge (2015: £169,000 charge)
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 £4,269,000 (2015:
£4,400,000). 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
2016
£’000
—
538
538
2015
£’000
225
567
792
In 2016 the Group has re-recognised £29,000 of previously de-recognised assets as management’s view of the
probability of recovery of those assets became more certain, and has de-recognised £59,000 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 (2015: nil).
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91
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
7 Dividends
Proposed final dividend for the year ended 31 December 2016 of 1.0p pence per share
(2015: 0.65 pence per share)
Total
2016
£’000
1,027
1,027
2015
£’000
665
665
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 2016. 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
£96,000 (2015: £1,635,000) and a weighted average number of ordinary shares outstanding of 102,420,517 (2015:
102,139,647), calculated as follows:
Earnings for the purposes of basic and diluted EPS
Exceptional items
Earnings for the purposes of adjusted basic and diluted EPS
2016
£’000
405
4,117
4,522
2015
£’000
1,635
3,118
4,753
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
2016
£’000
2015
£’000
102,420,517
1,775,783
104,196,300
102,139,647
2,795,165
104,934,812
0.40p
0.39p
4.42p
4.34p
1.60p
1.56p
4.65p
4.53p
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9 Goodwill
Cost
At 1 January 2015
Acquisition (note 23)
At 1 January 2016
Acquisition (note 23)
At 31 December 2016
Accumulated impairment
At 1 January 2015
At 1 January 2016
At 31 December 2016
Net book value
At 31 December 2016
At 1 January 2016
At 1 January 2015
£’000
103,768
155
103,923
4,240
108,163
(84,166)
(84,166)
(84,166)
23,997
19,757
19,602
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 be
comprised of two separate CGUs.
The Group has five reportable segments and eight CGUs as at 31 December 2016 compared to seven CGUs at
31 December 2015. The additional CGU in 2016 relates to the acquisition of the Colt Industrial Services business,
which is considered a separate CGU due to its ability to generate cashflows independently of any of the Group’s other
CGUs.
The allocation of goodwill by CGU is as follows:
Energy and Construction business unit
Colt Industrial Services CGU
Industry and Infrastructure business unit
Total
2016
£’000
12,575
4,240
7,182
23,997
2015
£’000
12,575
—
7,182
19,757
The increase in goodwill in the year arose on the acquisition of 100% of the issued share capital of Colt Holdings
Limited.
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.
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93
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
9 Goodwill continued
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 which was written down to a
net book value of one pound in 2015 with no subsequent indicators of impairment reversal noted in 2016.
{ 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 2015 and 2016, leading to an
increased risk surrounding the profitability of this business, in light of those macroeconomic factors.
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 9.7% (2015: 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.
The key assumptions for the Energy & Construction CGU’s cash flows are:
{ based on approved budgets and plans for 2017 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 2018 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 £35.4m (2015: £7.6m).
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
2016
£5.2m
£2.2m
£1.3m
Impact in
2015
£3.2m
£1.8m
£0.9m
EBITDA means earnings before interest, tax, depreciation and amortisation.
The key assumptions for the Industry and Infrastructure CGU’s cash flows are:
{ based on approved budgets and plans for 2017 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.
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Using the discount rate described above there is no indication of impairment with headroom of £1.9m (2015: £1.0m).
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
2016
£0.7m
£1.6m
£1.5m
Impact in
2015
£0.7m
£1.4m
£1.2m
The key assumptions for the EKHTI CGU’s cash flows are:
{ based on approved budgets and plans for 2017 and 2018 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 2019 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 above, the EKHTI CGU has a negative value in use. This asset comprises operating an
incinerator plant, the building which houses it and the land upon which it sits.
Further, given the highly specialised nature of the asset, there are no reasonable comparators and it is not considered
practicable to reasonably determine a resale value for that asset.
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. The
recoverable value of the site net of the costs to close have been determined to be less than £1. Accordingly, the net
recoverable amount is determined as one pound at the balance sheet date and an impairment loss of £3,348,000 has
been recognised in relation to the asset.
The key assumptions for the Augean North Sea Services CGU’s cash flows are:
{ based on approved budgets and plans for 2017 and, beyond this period, have been forecast for a total period of 20
years;
{ No revenue or operating margin growth from 2018 onwards;
{ 1% increase in maintenance capital expenditure from 2018 onwards.
Using the discount rate described above there is no indication of impairment with headroom of £6.1m (2015: £8.3m).
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
2016
£0.9m
£1.4m
£1.2m
Impact in
2015
£0.9m
£1.3m
£1.2m
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95
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
9 Goodwill continued
The key assumptions for the Colt Industrial Services CGU’s cash flows are:
{ based on approved budgets and plans for 2017 and, beyond this period, detailed Board approved forecasts up to
2021.
{ 1% increase in revenue and operating margin growth from 2021 onwards;
{ 1% increase in maintenance capital expenditure from 2021 onwards.
Using the discount rate described above there is no indication of impairment with headroom of £0.8m. 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
Sensitivity
1%
1%
1%
Impact in
2016
£0.7m
£0.8m
£0.7m
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.
10 Other intangible assets
Cost
At 1 January 2015
Additions
At 1 January 2016
Additions (note 23)
At 31 December 2016
Amortisation
At 1 January 2015
Charge for the year
At 1 January 2016
Charge for the year
At 31 December 2016
Net book value
At 31 December 2016
At 1 January 2016
At 1 January 2015
Group
Computer
software
£’000
Customer
relationships
£’000
Computer
software
and total
£’000
Company
Computer
software
and total
£’000
803
51
854
51
905
507
133
640
130
770
135
214
296
—
—
—
2,262
2,262
—
—
—
132
132
2,130
—
—
803
51
854
2,313
3,167
507
133
640
262
902
2,265
214
296
747
51
798
63
861
463
133
596
130
726
135
202
284
The addition to customer relationships during 2016 relates to the acquisition of Colt Holdings Limited (note 23).
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11 Investments in subsidiaries
Cost
At 1 January 2015
Additions
At 1 January 2016
Additions
At 31 December 2015
Provision for impairment
At 1 January 2015
Charge
At 1 January 2016
At 31 December 2016
Net book value
At 31 December 2016
At 1 January 2016
At 1 January 2015
£’000
132,393
1,090
133,483
13,789
147,272
(80,915)
(1,761)
(82,676)
(82,676)
64,596
50,807
51,478
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
Colt Holdings Limited
Colt Industrial Services 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
England and Wales
Scotland
Proportion
held %
100
100
100
100
100
100
100
100 (indirect)
100
100
Nature of business
Waste treatment
Landfill operations
Landfill operations
Waste treatment
Waste treatment
Waste treatment
Industrial Services
Industrial Services
Dormant
Dormant
These companies are owned directly by Augean except where noted.
During 2015, an impairment charge was 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 2016 relate to the acquisition of
Colt Holdings Ltd and its subsidiary Colt Industrial Services Ltd. Additions in 2015 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. Additions in 2016 relate to the acquisition of Colt Holdings
Limited.
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97
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
12 Property, plant and equipment
Group
Cost
At 1 January 2015
Additions
Acquisitions (note 24)
Disposals
At 1 January 2016
Additions
Acquisitions (note 23)
Disposals
At 31 December 2016
Accumulated depreciation
At 1 January 2015
Charge for year
Impairment loss (note 9)
Disposals
At 1 January 2016
Charge for year
Impairment loss (note 9)
Disposals
At 31 December 2016
Net book value
At 31 December 2016
At 1 January 2016
At 1 January 2015
Freehold
land and
buildings
£’000
Leasehold
land and
buildings
£’000
Engineered
cells
£’000
Plant and
machinery
£’000
40,214
2,871
—
—
43,085
2,337
1,138
—
46,560
9,907
1,136
—
—
11,043
1,777
—
—
12,820
33,740
32,042
30,307
1,163
202
—
—
1,365
83
—
—
1,448
156
76
—
—
232
95
—
—
327
1,121
1,133
1,007
10,455
1,028
—
—
11,483
1,115
—
—
12,598
9,433
1,143
—
—
10,576
1,423
—
—
11,999
599
907
1,022
23,152
3,470
27
(9)
26,640
4,884
1,381
(63)
32,847
12,171
2,748
2,888
(3)
17,804
2,718
3,348
(38)
23,832
9,015
8,836
10,981
Total
£’000
74,984
7,571
27
(9)
82,573
8,419
2,525
(63)
93,453
31,667
5,103
2,888
(3)
39,655
6,013
3,348
(38)
48,978
44,475
42,918
43,317
There were outstanding contractual commitments for acquisitions of property, plant or equipment of £267,000 at
31 December 2016 (2015: £nil). Plant and machinery includes assets held under finance lease agreements with a
carrying value at 31 December 2016 of £29,000 (2015: £91,000).
Certain assets are pledged as security for loans as disclosed in note 15.
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Plant and machinery includes the following amounts in respect of assets held under finance leases and hire purchase
contracts:
Cost
Accumulated depreciation
Net book value
Company
Cost
At 1 January 2015
Additions
At 1 January 2016
Additions
At 31 December 2016
Accumulated depreciation
At 1 January 2015
Charge for year
At 1 January 2016
Charge for year
At 31 December 2016
Net book value
At 31 December 2016
At 1 January 2016
At 1 January 2015
2016
£’000
154
(123)
31
Freehold
land and
buildings
£’000
Plant and
machinery
£’000
778
—
778
—
778
121
11
132
11
143
635
646
657
1,067
390
1,457
224
1,681
647
267
914
142
1,056
625
543
420
13 Trade and other receivables
Current assets
Trade receivables
Other taxes recoverable
Prepayments and accrued income
Group
Company
2016
£’000
15,135
—
3,326
18,461
2015
£’000
9,691
—
2,138
11,829
2016
£’000
73
202
1,372
1,647
2015
£’000
196
(105)
91
Total
£’000
1,845
390
2,235
224
2,459
768
278
1,046
153
1,199
1,260
1,189
1,077
2015
£’000
26
—
671
697
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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99
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
14 Trade and other payables
Current
Trade payables
Amounts due to subsidiary undertakings
Other taxes and social security
Accruals and deferred revenue
Group
2016
£’000
Company
2015
£’000
2016
£’000
5,298
—
4,223
7,671
17,192
2,277
—
2,885
5,676
10,838
194
15,724
323
1,278
17,519
2015
£’000
265
6,064
254
644
7,227
All amounts are anticipated to be payable in the short term. The carrying values are considered to be a reasonable
approximation of fair value.
15 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
2016
£’000
166
—
5
171
13,833
—
13,833
166
13,833
5
14,004
171
—
13,833
14,004
4
—
4
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
2016
£’000
—
—
2
2
13,833
—
13,833
—
13,833
2
13,835
2
—
13,833
13,835
2
—
2
2015
£’000
4,250
—
—
4,250
3,500
—
3,500
4,250
3,500
—
7,750
4,250
1,000
2,500
7,750
—
—
—
The obligations under finance leases and hire purchase contracts are secured against the specific assets financed with
a carrying amount of £29,000 (2015: £91,000). 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 24.
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16 Provisions
At 1 January 2015
Charged to profit or loss during the year
– unwinding of discount
– provision in the year
Utilised during the year
At 1 January 2016
Charged to profit or loss during the year
– unwinding of discount
– provision in the year
Utilised during the year
At 31 December 2016
Restoration
and after-care
costs of
landfill sites
£’000
2,846
Group
Capping
provision
£’000
3,917
Other
provisions
£’000
76
99
142
(141)
2,946
130
183
(51)
3,208
—
163
(203)
3,877
—
420
(61)
4,236
—
—
—
76
—
—
—
76
Total
£’000
6,839
99
305
(344)
6,899
130
603
(112)
7,520
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. £50,000 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.
17 Share capital
Authorised – 103,000,000 (2015: 103,000,000) shares of 10p
Allotted, called up and fully paid – 102,748,383 (2015: 102,249,083) shares of 10p
2016
£’000
10,300
10,275
2015
£’000
10,300
10,225
During the year, 499,300 shares (2015: 257,703) were issued as a result of the exercise of share options. The total
proceeds were £192,000 (2015: £96,000).
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101
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
18 Reserves
At 1 January 2016
Total comprehensive income for the year
Issue of equity
Dividend (note 7)
Share-based payments
At 31 December 2016
At 1 January 2016
Total comprehensive income for the year
Issue of equity
Dividend (note 7)
Share-based payments
At 31 December 2016
Share
premium
£’000
612
—
136
—
—
748
Share
premium
£’000
612
—
136
—
—
748
Group
Retained
earnings
£’000
43,561
405
—
(665)
243
43,544
Company
Retained
earnings
£’000
28,839
(154)
—
(665)
243
28,263
Total
£’000
44,173
(97)
136
(665)
243
43,790
Total
£’000
29,451
(154)
136
(665)
243
29,011
19 Share-based payments
At 31 December 2016, 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 2019 – September 2026
April 2017 – September 2024
Weighted average exercise price
Of which exercisable
Weighted average exercise price
Exercise
price
39.5p
29p
40.25p
10p
10p
At
1 January
2016
594,934
162,069
1,000,000
1,757,003
Granted
Exercised
Lapsed
At
31 December
2016
— (392,403)
— (106,897)
—
—
— (499,300)
—
202,531
—
55,172
— 1,000,000
— 1,257,703
— 1,438,043
—
1,438,043
10.0p
2,928,530
4,685,533
20.9p
753,003
37.3p
— (422,674)
— (995,836)
(1,418,510)
10.0p
(499,300)
37.3p
1,015,369
1,932,694
2,273,072
19.2p
1,257,703
39.6p
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Outstanding awards at 31 December 2015 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
2016
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
2016
— (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
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 2014 and 2016, 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
2016
LTIP
31 October
2016
April 2019 –
September
2026
52.5p
10.0p
46,735
21.18%
2.5 years
0.32%
1.24%
£0.27 – £0.41
2014
LTIP
23 September
2014
April 2017 –
September 2024
49.5p
10.0p
2,412,722
24.80%
2.6 years
0.78%
0.70%
£0.22 – £0.39
2013
Share options
12 August 2013
2011
Share options
20 May 2011
August 2016
– August 2023
May 2014-
May 2021
2009
Share options
21 December
2009
December 2014
– December 2019
40.0p
40.25p
1,000,000
35%
4 years
1.87%
0.59%
£0.30
28.9p
29.0p
55,172
35%
4 years
2.3%
0.0%
£0.09
39.5p
39.5p
202,531
43%
4 years
2.5%
0.0%
£0.14
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103
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
19 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 and 2016 LTIPs have performance conditions associated with it as detailed in the Directors’ Remuneration
Report.
For options outstanding at 31 December 2016, the weighted average remaining contractual life is 9.6 years (2015:
8.1 years).
The Group recognised a total expense of £243,000 (2015: £421,000) related to equity settled share-based payment
transactions, of which £161,000 (2015: £290,000) related to LTIP schemes.
20 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
2016
£’000
2015
£’000
688
1,130
1,818
221
626
930
1,777
780
678
1,458
221
559
791
1,571
The operating lease commitments relating to land and buildings leases have been discounted at a rate of 3%.
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21 Reconciliation of operating profit to net cash generated from operating activities
Operating profit
Amortisation of intangible assets
Depreciation
Impairment charge
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Share based payments
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Loss on disposal of property, plant and equipment
Cash generated from operations
Finance charges paid
Tax paid
Net cash generated from operating activities
Group
2016
£’000
2,079
262
6,012
3,348
11,701
243
(58)
(4,121)
4,715
359
20
12,859
(704)
(941)
11,214
2015
£’000
3,312
133
5,103
2,888
11,436
421
105
956
(312)
(264)
6
12,348
(715)
(1,105)
10,528
The above EBITDA and net cash generated from operating activities includes a total net cash outflow of £2,371,000
relating to exceptional items (2015: outflow of £620,000).
22 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
Overdraft
Bank loans
Finance leases
Net debt
31 December
2015
£’000
3,553
—
(7,750)
(68)
(4,265)
Cash flow
£’000
(5,253)
(167)
(6,250)
64
(11,606)
Acquisitions
£’000
4,888
—
—
—
4,888
Other
movement
£’000
—
—
167
—
167
31 December
2016
£’000
3,188
(167)
(13,833)
(4)
(10,816)
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105
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
23 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 2015
Share of profit for year
Adjustment arising from change in non-controlling interest
Balance at 31 December 2015
£’000
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
2016
Book
Value
£’000
76
54
(147)
(17)
2016
Fair Value
adjustments
£’000
(71)
(27)
—
(98)
2016
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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c) Colt Holdings Limited
On 18 May 2016, the Group acquired 100% of the issued share capital of Colt Holdings Limited, the holding company
of Colt Industrial Services Limited, an industrial services business. The acquisition was made to enhance Augean’s
Industry & Infrastructure business unit, adding UK-wide industrial services coverage and complementing the Group’s
existing service, treatment and disposal infrastructure.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table
below:
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Deferred tax liabilities
Trade and other payables
Total identifiable assets
Goodwill
Total consideration
Net cash outflow arising on acquisition:
Cash consideration
Less: cash balances acquired
Total cash outflow
2016
Book
Value
£’000
—
2,524
82
2,625
4,888
(198)
(1,674)
8,247
2016
Provisional
Fair Value
adjustments
£’000
2,262
—
(32)
(78)
—
(438)
(412)
1,302
2016
Fair
Value
£’000
2,262
2,524
50
2,547
4,888
(636)
(2,086)
9,549
4,240
13,789
13,789
(4,888)
8,901
The goodwill of £4,240,000 arising from the acquisition comprises, inter alia, staff expertise, skills and experience,
general reputation of those individuals within their industry and future potential synergies to be realised by Augean.
None of the goodwill is expected to be deductible for income tax purposes.
The deferred consideration arrangement requires additional payments to the vendor subject to Colt securing certain
contracts within specified timeframes. The potential undiscounted amount of all future payments that Augean plc could
be required to make under this arrangement is £4,750,000.
Acquisition-related costs in exceptional items amount to £800,000.
Colt Holdings Limited contributed £3,500,000 revenue and £nil to the Group’s profit before tax for the period between
the date of acquisition and the balance Sheet date.
If the acquisition of Colt Holdings Limited had been completed on the first day of the financial year, group revenues
would have been £2,200,000 higher.
In addition to the initial consideration, a contingent consideration falls due dependent on the business obtaining certain
commercial contracts in a defined time period. The fair value of the contingent consideration, which has a maximum
potential value of £4,750,000, is estimated as £nil and was estimated by applying likelihood estimates against each
element of the deferred consideration.
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107
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
24 Financial instruments
The financial assets of the Group and Company are categorised as follows:
As at 31 December 2016
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 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
Group
Non-
financial
assets
£’000
23,997
2,265
—
44,475
1,176
379
3,326
—
—
75,618
Group
Non-
financial
assets
£’000
19,757
214
—
42,918
2,316
306
—
—
—
65,511
Total
£’000
23,997
2,265
—
44,475
1,176
379
18,461
—
3,188
93,941
Total
£’000
19,757
214
—
42,918
2,316
306
11,829
—
3,553
80,893
Loans and
receivables
£’000
—
—
—
—
—
—
73
—
624
697
Loans and
receivables
£’000
—
—
—
—
—
—
697
—
103
800
Company
Non-
financial
assets
£’000
—
135
64,596
1,260
295
—
1,573
2,085
—
69,944
Company
Non-
financial
assets
£’000
—
202
50,807
1,189
259
—
—
1,396
—
53,853
Loans and
receivables
£’000
—
—
—
—
—
—
15,135
—
3,188
18,323
Loans and
receivables
£’000
—
—
—
—
—
—
11,829
—
3,553
15,382
Total
£’000
—
135
64,596
1,260
295
—
1,646
2,085
624
70,641
Total
£’000
—
202
50,807
1,189
259
—
697
1,396
103
54,653
108
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The financial liabilities of the Group and Company are categorised as follows:
As at 31 December 2016
Trade and other payables – current
Current tax liabilities
Borrowings – current
Borrowings – non-current
Provisions
As at 31 December 2015
Trade and other payables – current
Current tax liabilities
Borrowings – current
Borrowings – non-current
Provisions
Financial
liabilities at
amortised
cost
£’000
13,866
—
171
13,833
—
27,870
Financial
liabilities at
amortised
cost
£’000
7,953
—
1,054
6,764
—
15,771
Group
Liabilities
not within
scope
of IAS 39
£’000
3,326
658
—
—
7,520
11,504
Group
Liabilities
not within
scope
of IAS 39
£’000
2,885
940
—
—
6,899
10,724
Balance
sheet
total
£’000
17,192
658
171
13,833
7,520
39,374
Financial
liabilities at
amortised
cost
£’000
2,413
—
—
13,835
—
16,248
Balance
sheet
total
£’000
10,838
940
1,054
6,764
6,899
26,495
Financial
liabilities at
amortised
cost
£’000
909
—
4,250
3,500
—
8,659
Company
Liabilities
not within
scope
of IAS 39
£’000
15,106
—
—
—
—
15,106
Company
Liabilities
not within
scope
of IAS 39
£’000
6,318
—
—
—
—
6,318
Balance
sheet
total
£’000
17,519
—
—
13,835
—
31,354
Balance
sheet
total
£’000
7,227
—
4,250
3,500
—
14,633
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 2016
Trade and other payables – current
Borrowings – current
Borrowings – non-current
Total
As at 31 December 2015
Trade and other payables – current
Borrowings – current
Borrowings – non-current
Total
Amounts
due in
less than
one year
£’000
17,192
171
—
17,363
Amounts
due in
less than
one year
£’000
10,838
1,054
—
11,892
Amounts
due in
second to
fifth year
£’000
—
—
13,833
13,833
Amounts
due in
second to
fifth year
£’000
—
—
6,764
6,764
Total
financial
liabilities
£’000
17,192
171
13,833
31,196
Total
financial
liabilities
£’000
10,838
1,054
6,764
18,656
109
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Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
24 Financial instruments continued
Company
As at 31 December 2016
Trade and other payables – current
Borrowings – current
Borrowings – non-current
As at 31 December 2015
Trade and other payables – current
Borrowings – current
Borrowings – non-current
Amounts
due in
less than
one year
£’000
17,519
—
—
17,519
Amounts
due in
less than
one year
£’000
7,227
—
—
7,227
Amounts
due in
second to
fifth year
£’000
—
—
13,833
13,833
Amounts
due in
second to
fifth year
£’000
—
4,250
3,500
7,750
Total
financial
liabilities
£’000
17,519
—
13,833
31,352
Total
financial
liabilities
£’000
7,227
4,250
3,500
14,977
Financial risk management objectives and policies
Overview
The Group has exposure to the following risks arising from financial instruments:
{ liquidity risk;
{ credit risk; and
{ interest rate risk.
The majority of the Group’s transactions take place in Pounds Sterling, with levels of transactions in Euro and US
Dollars not considered significant.
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.
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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 £10,817,000 (2015: £4,265,000) and
short-term flexibility is achieved through bank facilities comprising a £30m revolving credit, accordion 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
2016
£’000
3,188
15,135
18,323
2015
£’000
3,553
9,691
13,244
2016
£’000
624
73
697
2015
£’000
103
26
129
At 31 December 2016, £6.0m (2015: £4.1m) of the Group’s trade receivables were past due. A provision of £0.1m
(2015: £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 13)
2016
£’000
6,277
225
6,502
8,767
15,269
(134)
15,135
2015
£’000
3,217
210
3,427
6,463
9,980
(289)
9,691
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.
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111
Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
24 Financial instruments continued
The movement on the bad debt provision in the year is analysed below. The Group provides for bad debts on a specific
basis with reference to the age profile of the trade receivables held at the year end.
Bad debt provision as at 31 December 2015
Amounts released
Amounts provided
Bad debt provision as at 31 December 2016
£’000
289
(189)
34
134
Interest rate risk
The Group finances its operations through a mixture of free cash flow, overdraft facilities, bank borrowings and hire
purchase leasing. Due to the relatively low level of the Group’s borrowings no interest rate swaps or other forms of
interest risk management has been undertaken. The Group regularly reviews its exposure to fluctuations in underlying
interest rates and will take appropriate action if required to minimise any impact on the performance and financial
position of the Group.
The interest rate profile of the Group and Company’s borrowings at 31 December 2016 was:
Group
Overdrafts
Bank loans
Finance leases
At 31 December 2016
At 31 December 2015
Company
Bank loans
Finance leases
At 31 December 2016
At 31 December 2015
Floating
rate
£’000
166
13,833
5
14,004
7,818
Floating
rate
£’000
13,833
—
13,833
7,750
Total
£’000
166
13,833
5
14,004
7,818
Total
£’000
13,833
—
13,833
7,750
The Group met its short-term working capital requirements during 2016 through an overdraft and revolving loan facility
with HSBC Bank plc renewed in March 2016 consisting of an overdraft, revolving credit facility and accordion facility.
The £1m overdraft and a £19m revolving credit facility attract an interest charge varying between 1.75% and 2.5%
above LIBOR. This facility matures in October 2020. An additional £10m accordion facility is also available to the group
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
£50,000 (2015: £25,000).
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The hire purchase agreements of the Group under a floating rate contract have a weighted average interest rate of
5.8% (2015: 3.7%) and a weighted average remaining duration of one year (2015: one year). The Group has no hire
purchase agreements under a fixed rate contract.
The maturity profile of the Group’s financial liabilities is shown in note 15.
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
17
18
15
2016
£’000
10,275
748
14,004
25,027
2015
£’000
10,225
612
7,818
18,655
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
15) 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 (2015: £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 £9.2m of headroom at 31 December 2016 (2015: £9.0m).
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.
2016
Actual
0.9
20.5
2016
Target
<2.5
>3.5
19.9% prior year
prior year
2,903
2015
£’000
0.3
23.4
8%
3,054
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Our FinancialsAugean plc Annual Report and Accounts for the year ended 31 December 2016
Notes to the Financial Statements continued
For the year ended 31 December 2016
24 Financial instruments continued
The value of net debt and free cash flow is monitored on a daily basis.
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 21)
Purchase of property, plant and equipment
Free cash flow
2016
£’000
11,214
(8,335)
2,879
2015
£’000
10,528
(7,474)
3,054
25 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 £589,000 (2015: £394,000) represents contributions payable to these schemes
by the Group at rates specified in the rules of the schemes. As at 31 December 2016, contributions of £27,000 (2015:
£27,000) due in respect of the current reporting period had not been paid over to the schemes.
26 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 £7.7m
(2015: £8.2m). Future site restoration costs for each landfill site have been provided as disclosed in note 16.
27 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:
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 payables (note 14) are amounts payable to 100% subsidiary undertakings of
£15.7m (2015: £6.1m payable). 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.
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Shareholder
Information
Augean plc Annual Report and Accounts for the year ended 31 December 2016
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Shareholder Information
Notice of Annual General Meeting
We are pleased to write to you with details of our 2017 Annual General Meeting (AGM) which will be held at the offices
of FTI Consulting, 9th Floor, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD on Tuesday 27 June 2017 at
10.00am. The formal notice of Annual General Meeting is set out on pages 118 to 119 of this document.
In addition to the routine business of the AGM, there are four items of special business to be transacted, as
summarised and explained below:
Authority to allot shares (Resolution 7)
Article 4.6(a) of the Company’s Articles of Association contains a general authority for the Directors to allot shares in the
Company for a period (not exceeding five years) (the Section 551 prescribed period) and up to a maximum aggregate
nominal amount (the Section 551 amount) approved by a special or ordinary resolution of the Company.
The existing authority to allot shares granted at the Company’s last annual general meeting is due to expire at the AGM.
Resolution 7, which will be proposed as an ordinary resolution, seeks to renew the allotment authority so that the
Section 551 amount shall be £3,424,946 (being an amount equal to one third of the issued ordinary share capital of
the Company at the date of this document) and the Section 551 prescribed period shall be the period from the date
Resolution 7 is passed to 30 June 2018 or the conclusion of the Company’s next annual general meeting, whichever is
earlier.
Authority to purchase own shares (Resolution 8)
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 8, which will be proposed as a special resolution, seeks to grant the Directors the authority, for the period
from the date Resolution 8 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 10,274,838 Ordinary shares, being an amount equal to approximately 10% of the issued
share capital of the Company (as at 21 March 2017, being the latest practicable date prior to publication of this
document). The maximum price payable for the purchase by the Company of its Ordinary shares will be limited to 5%
above 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. The minimum
price payable by the Company for the purchase of its Ordinary shares will be 10 pence, being the nominal value of an
Ordinary share. 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 authority to purchase shares
to satisfy the exercise of the share options granted under employee share schemes.
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Disapplication of pre-emption rights (Resolution 9)
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 9, which will be proposed as a special resolution and which will only be effective if Resolution 7 is
passed, seeks to renew the disapplication authority so that the Section 561 amount shall be £513,742 (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 9 is passed to 30 June 2018 or the conclusion of the Company’s
next annual general meeting, whichever is earlier.
Political donations (Resolution 10)
Although the policy of the Company is not to make political donations or to incur political expenditure as those
expressions are normally understood, the definitions of political donations, political organisations and political
expenditure used in the Companies Act 2006 are very wide. Shareholder approval is therefore being sought on a
precautionary basis only, to allow the Company (and any companies that are subsidiaries of the Company at any time
during the period for which Resolution 10 has effect) to continue to support the community and participate in public
debate on matters which affect its business without running the risk of inadvertently breaching the legislation. The
authority sought will permit the Company and its subsidiaries to make donations to political parties and independent
election candidates not exceeding £50,000 in aggregate, to make donations to political organisations other than
political parties not exceeding £50,000 in aggregate, and to incur political expenditure not exceeding £50,000 in
aggregate.
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 120. 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 Friday 23 June 2017. 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.
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Shareholder Information
Notice of Annual General Meeting continued
NOTICE IS HEREBY GIVEN that the 2017 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 Tuesday 27 June 2017
at 10.00am for the purpose of considering and, if thought fit, passing the resolutions set out below. Resolutions 8 and 9
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 2016 be received.
2. THAT Jim Meredith be re-elected as a Director of the Company.
3. THAT Mark Rupert Maxwell Fryer be elected as a Director of the Company.
4. THAT Grant Thornton UK LLP be re-appointed auditors of the Company, to hold office until the next meeting at
which accounts are laid before the Company.
5. THAT the Directors be authorised to determine the auditors’ remuneration.
6. THAT a dividend of 1.00 pence per share be declared.
7. THAT the authority to allot shares and grant rights to subscribe for or to convert any security into shares, conferred
on the Directors by Article 4.6(a) of the Company’s articles of association, be granted for the period commencing on
the date of the passing of this resolution and expiring on 30 June 2018 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 £3,424.946.
8. 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 10,274,838;
b.
c.
d.
e.
the minimum price (excluding expenses) which may be paid for any such Ordinary share is its nominal value
of 10p;
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;
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
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.
9. THAT, subject to the passing of resolution 7, the power to allot equity securities as if s561(1) of the Companies Act
2006 did not apply to any such allotment conferred on the Directors by Article 4.6(b) of the Company’s articles of
association be granted for the period commencing on the date of the passing of this resolution and expiring on 30
June 2018 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 £513,742.
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10. THAT the Company and all companies that are its subsidiaries at any time during the period for which this
resolution is effective are hereby authorised to:
a. make political donations to political parties and/or to independent election candidates, not exceeding £50,000
in aggregate;
b. make political donations to political organisations other than political parties, not exceeding £50,000 in
aggregate; and
c.
incur political expenditure, not exceeding £50,000 in aggregate,
in each case, during the period ending on the date of the Company’s next Annual General Meeting. The
aggregate amount of political donations and political expenditure made or incurred under this authority shall not
exceed £150,000.
For the purposes of this resolution, the terms ‘political donations’ ‘political parties’, ‘independent election
candidates’, ‘political organisation’ and ‘political expenditure’ have the meanings set out in sections 363 to 365 of
the Act.
By order of the Board
Angela McGhin
Company Secretary
21 March 2017
Registered Office
4 Rudgate Court
Walton
Near Wetherby
West Yorkshire
LS23 7BF
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Shareholder Information
Notice of Annual General Meeting continued
Notes:
(a) Only those shareholders entered on the relevant register of members (the “Register”) for certificated or
uncertificated shares of the Company (as the case may be) at 10.00am on Sunday 25 June 2017 (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 10.00am on Friday 23 June 2017.
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 10.00am on Friday 23 June 2017.
(e) Appointment of proxies through CREST: CREST members who wish to appoint a proxy or proxies by utilising
the CREST electronic proxy appointment service may do so for the AGM and any adjournment(s) of it by using the
procedures described in the CREST Manual (available from https://www.euroclear.com/site/public/EUI). CREST
Personal Members or other CREST sponsored members, and those CREST members who have appointed a
voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take
the appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a
“CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s
(“EUI”) specifications and must contain the information required for such instructions, as described in the CREST
Manual. The message must be transmitted so as to be received by Computershare Investor Services plc as the
issuer’s agent (ID Reference: 3RA50) by 10.00am on Friday 23 June 2017. For this purpose, the time of receipt will
be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host)
from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed
by CREST.
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CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI
does not make available special procedures in CREST for any particular messages. Normal system timings and
limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member
or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s)
take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system
by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting
service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations
of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of
the Uncertificated Securities Regulations 2001.
(f) Any corporation which is a member can appoint one or more corporate representatives who may exercise on its
behalf all of its powers as a member provided that they do not do so in relation to the same shares. Any such
representative should bring to the meeting written evidence of his appointment, such as a certified copy of a Board
resolution of, or a letter from, the corporation concerned confirming the appointment.
(g) Website giving information regarding the AGM is available from www.augeanplc.com. A member may not use
any electronic address provided by the Company in this document or with any Proxy Form or in any website for
communicating with the Company for any purpose in relation to the AGM other than as expressly stated in it.
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Shareholder Information
Shareholder Notes
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Advisers and Company Information
Secretary
A McGhin
Registered office
4 Rudgate Court
Walton
Wetherby
West Yorkshire
LS23 7BF
Registered number
5199719
(incorporated and registered in England and Wales)
Website
www.augeanplc.com
Broker and nominated adviser
N+1 Singer Capital Markets
One Bartholomew Lane
London
EC2N 2AX
Auditor
Grant Thornton UK LLP
No 1 Whitehall Riverside
Whitehall Road
Leeds
LS1 4BN
Solicitors
Walker Morris LLP
Kings Court
12 King Street
Leeds
LS1 2HL
Bankers
HSBC Bank plc
City Point
29 King Street
Leeds
LS1 2HL
Registrars
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Printed on Cocoon Silk 50.
A recycled paper containing 50% recycled waste and 50% virgin fibre and manufactured
at a mill certified with ISO 14001 environmental management standard.
The pulp used in this product is bleached using an Elemental Chlorine Free process. (ECF)
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Augean plc Annual Report and Accounts for the year ended 31 December 2016Shareholder Information
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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.
25160.04
6 June 2017 11:19 AM
Proof 7
25160.04
6 June 2017 11:19 AM
Proof 7