A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
D
e
c
e
m
b
e
r
2
0
1
7
ANNUAL REPORT
& ACCOUNTS
Annual Report & Accounts
for the year ended 31 December 2017
Stock Code: AUG
25959 20-3-18 Proof Six25959 20-3-18 Proof Six
WELCOME
Augean is one of the UK’s leading
waste management businesses,
providing specialist services focused
on managing hazardous wastes.
25959 20-3-18 Proof Six25959 20-3-18 Proof Six CONTENTS
Overview
Welcome
Highlights
Our Organisation
Executive Chairman’s Statement
Strategic Report
Marketplace
Our Business Model and Strategy
Our Performance
Operating Review
Financial Performance
Key Performance Indicators
Managing Risk
Corporate Social Responsibility
Our Governance
Director’s Report
The Board of Directors
Chairman’s Corporate Governance Letter
Risk Management and Control
Audit Committee Report
Nominations Committee Report
Remuneration Committee Report
Directors’ Remuneration Report
Our Financials
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
IFC
02
04
06
10
12
13
14
19
20
24
28
33
35
36
37
38
39
40
46
54
55
56
57
58
Shareholder Information
Notice of Annual General Meeting
Advisers and Company Information
98
IBC
Getting around this report
For further information within this document
and relevant page numbers
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
Augean PLC Annual Report and Accounts for the year ended 31 December 2017
01
25959 20-3-18 Proof Six
Highlights
Financial
Profit before tax
(£m)
£5.5m
6.0
5.4
7.0
5.5
Earnings per share
(p)
4.65
4.23p
4.13
4.42
4.23
14
15
16
17
14
15
16
17
Operating cash flows
(£m)
10.7m
7.7
Return on capital employed
(%)
13.5
11.1
10.7
9.4%
10.7
11.4
11.8
9.4
14
15
16
17
14
15
16
17
Augean has two short term objectives
1
Resolve HMRC position
2
Maximise profitability and
cash generation of business
02
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six 03
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OVERVIEW25959 20-3-18 Proof Six Our Organisation:
Our Business Units
ASSETS: ENMRF, Port Clarence,
Thornhaugh
KEY SERVICES:
{ Soil treatment
{ EfW Ash stabilisation
{ Hazardous waste disposal
{ Energy and mineral resources
Read more on page 14
KEY SERVICES:
{ Stabilisation
{ Thermal treatment
{ Secure disposal
{ Client site services
ASSETS: ENMRF, Port Clarence,
East Kent
Read more on page 14
ASSETS: Avonmouth, Paisley,
Port Clarence WaRP, Hull
KEY SERVICES:
{ Industrial wastewater treatment
{ Industrial services
{ Thermal recovery
{ Secondary Fuels production
Read more on page 14
KEY SERVICES:
{ Client solutions
{ Hazardous waste management
{ Support services
{ High temperature incineration
Waste treatment and
disposal solutions
Specialist treatment
and disposal
Recovery of resources
from wastes
Integrated solutions for
waste-producing clients
ASSETS: Cannock, Corby, East
Kent, Client Sites
Read more on page 15
Complete waste services
for North Sea operators
KEY SERVICES:
{ Drilling waste management
{ Water treatment
{ Marine services
{ Hazardous waste management
ASSETS: Aberdeen (x4), Lerwick,
{ Industrial services
Great Yarmouth,
Port of Dundee
Read more on page 15
04
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six NUMBER OF SITES
3
REVENUE
£31.7m
NUMBER OF SITES
3
REVENUE
£3.1m
NUMBER OF SITES
4
REVENUE
£21.1m
NUMBER OF SITES
3
REVENUE
£10.7m
NUMBER OF SITES
7
REVENUE
£18.2m
OUR LOCATIONS
Lerwick
Aberdeen
Dundee
Paisley
Waste Recovery Park
Port Clarence
Hull
Thornhaugh
Cannock
Corby
East
Northants
RMF
Avonmouth
Great Yarmouth
East Kent
05
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OVERVIEW25959 20-3-18 Proof Six Executive Chairman’s Statement
‘ 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 Energy from Waste (EfW) volumes.’
EXECUTIVE CHAIRMAN JIM MEREDITH
During 2017, the Group profit before tax and exceptional
items decreased 21% to £5.5m because of losses on the
legacy Colt contract and cost increases committed through
the second half of 2016. The legacy contract has now been
completed and settlement reached. The Group has enacted
measures to reduce the cost base by £4m on an annualised
basis which has seen over 50 employees, or over 15% of
the workforce, leave the business. The Group is currently
trading in line with expectations for 2018. A focus on cash
control is reflected in our debt position.
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 Energy
from Waste (EfW) volumes, reaffirming our integrated
waste management proposition with our customers. 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 Groups’ successful investment in processing
solutions to generate the most environmentally beneficial
outcomes for our customers. The investment in these core
assets for the Group remains valid whilst we ensure that
the associated cost base (particularly overheads) has to be
balanced to ensure appropriate cash and profit generation.
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. As such, the number
of accidents resulting in injuries in 2017 has reduced by
37%. 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 a
challenging year.
06
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six As in previous years, I am 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.
I am pleased that we have been able to strengthen the
Board with the appointment of Christopher Mills and Roger
McDowell and thank Andrew Bryce for re-joining the Board
to bring his particular skills to bear in resolution of our
HMRC issue.
I look forward to updating Shareholders on our progress
during the current financial year.
JIM MEREDITH
EXECUTIVE CHAIRMAN
19 March 2018
The Group’s balance sheet and operating cash flow remain
robust but given the HMRC position, described in note 25,
which has been communicated to Shareholders previously,
the Board will not pay a dividend for 2017 (2016 final: 1.0p
per share).
Since our announcement on 27 October 2017, we have
received a further two assessments from HMRC on the
same basis as the previous assessments. We expect
to receive further assessments to be issued in order for
HMRC to protect subsequent periods and we will continue
to provide appropriate and periodic updates without
announcing the receipt of each and every update. The total
number of quarterly assessments received to date is five,
and the value of these assessments received at the date
of this report is £12.0m, including interest of £1.2m. On
19 March 2018, we were advised by HMRC that certain
waste types assessed as standard rated in one of the three
assessments received for Augean South, will be treated
as exempt for the February 2014 quarter. The impact
of this is to potentially remove £1.5m from the February
2014 quarterly assessment when this is formally re-issued.
This represents 53% of that quarter’s £2.8m original
assessment. Whilst this is clearly a welcome development
in proving our case with HMRC, there is still substantial time
and clarification required to fully justify our position. Despite
this, we believe the assessments are without merit, we will
robustly defend the assessments, have not provided for
these and do not expect to make a net cash payment.
07
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OVERVIEW25959 20-3-18 Proof Six Heading Here
STRATEGIC
REPORT
08
24612.04 29-2-2016 Concept
CONTENTS
Strategic Report
Marketplace
Our Business Model and Strategy
Our Performance
Operating Review
Financial Performance
Key Performance Indicators
Managing Risk
Corporate Social Responsibility
10
12
13
14
19
20
24
24612.04 29-2-2016 Concept
09
09
Marketplace
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
(Environment Agency estimate) of waste handled in
the UK each year. Within this arena Augean continues
to focus on the treatment and disposal of waste from
construction and demolition activities, 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 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.
WASTE
HIERARCHY
Favoured
option
1
Prevention
2
Minimisation
3
Reuse
4
Recycling
5
Energy
Recovery
6
Disposal
Least
favoured
option
Energy-from-Waste and Biomass Energy
waste market
Augean’s treatment and disposal to landfill includes the
management of certain byproducts 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
122,000 tonnes, representing an approximate 40% market
share (2016: approximate 40% 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.
Total UK capacity for hazardous
landfill is approximately
16 million tonnes
(source: Environment Agency).
APCR market is expected to grow
at 9% compound average growth
rate from 2016 to 2022
10
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Construction waste market
Construction soils are a key input to the Group’s landfill
sites. In 2017, the Group received lower 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.
The Group has also invested in soil washing and treatment
equipment to promote recycling of a proportion of such
materials, as required by the market.
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 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.
Industrial waste market
The waste market has again 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.
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.
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, extend
to the Shetland Isles for the northern sector, and Great
Yarmouth for the Southern sector. Augean North Sea
Services (ANSS) provides a full range of services, equipment
rental and manpower provision for the containment,
treatment and associated specialised industrial cleaning of
all Oil & Gas offshore and terminal wastes. These include
the cuttings and slop waters from drilling, contaminated
waters from the production process, production wastes,
oil sludges, including those contaminated with low level
naturally occurring radioactive material (NORM), swarf
containment from abandonment activities, as well as a more
general range of industrial general and hazardous wastes.
In addition, ANSS now provide full NORM decontamination
of wellbore and topside production equipment in their new
decommissioning centre in the Port of Dundee.
The dependence of the UK’s energy sector on oil and gas
will continue over several decades, leading to increased
levels of demand for specialised industrial service-related
waste management for offshore production facilities and
onshore terminals, as the sector, depending on economics,
extends the life of, or begins decommissioning, the assets
in the North Sea.
The oil & gas market has been adversely impacted since Q3
2015 because of significant reductions seen in oil prices, with
oil & gas companies cutting capital expenditure and seeking
efficiencies at all levels from the supply chain. These cost
efficiencies were key to the sustainability of business. With
2015 came a downturn in drilling activity which continued
into 2016 and resulted in a significant reduction in the size of
the market for drilling wastes. The market increased slightly
throughout 2017 with the recovering oil price.
The market has seen an upturn in decommissioning-related
plug and abandonment activities. NORM builds up over time
on the downhole production equipment, processing lines
and topside equipment, which requires decontamination
with specialised industrial jetting equipment, resulting in
the generation of NORM scale. The volume of downhole
and topside equipment requiring decontamination is rising
rapidly alongside plug and abandonment decommissioning
activities, requiring specialised decontamination, treatment
and disposal.
11
Augean PLC Annual Report and Accounts for the year ended 31 December 2017STRATEGIC REPORT25959 20-3-18 Proof Six Our Business Model and Strategy
The business currently has two short-term objectives. After significant progress has been made on these a revised long-
term strategy will be presented to Shareholders.
Strategic focus
Description
KPIs
Resolve HMRC
position
HMRC has been discussing with the Group
whether it has paid sufficient landfill tax in relation
to its treatment and disposal of hazardous waste.
Those discussions are ongoing. Based on the
legal and other advice received by the Group
over several years, Augean is very confident that
the Group has met its obligations in respect of
landfill tax, consistent with the law and official
guidance at the time.
h Resolution of issue
Maximise
profitability and
cash generation
of business
The Board has implemented several rounds
of cost reduction, including a management
re-organisation, to save at least a further £4.0m
of cost annually. The one-off cost of this was
£1.0m and is shown as an exceptional cost.
The additional cost savings are expected to be
realised fully in 2018
h Year-on-year profit growth
h Repayment of bank debt
12
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Operating Review
‘ The operating cash flow of
the group was £9.4m before
capital expenditure’
EXECUTIVE CHAIRMAN JIM MEREDITH
Introduction
The adjusted Group profit before tax of £5.5m (2016: £7.0m)
is after intangible asset amortisation of £0.4m (2016: £0.3m),
share option expense of £0.2m (2016: £0.2m) and before
exceptional items of £8.6m (2016: £5.7m) with a loss after
tax and exceptional costs of £3.5m (2016: £0.4m profit).
During 2017, the Group operated through five business
units. To generate the savings made and because of
the need to focus on profitable cash-generative growth
more heavily, the Group has amended the business unit
infrastructure for 2018. Going forward, the Group will
therefore be reported as two segments, with the results of
the North Sea Service business separately disclosed and all
others combined to produce one new segment. The results
for 2017 are therefore shown for the last time under the five
business units, the results of which were:
Energy & Construction
Radioactive Waste Services
Industry & Infrastructure
Augean Integrated Services
Augean North Sea Services
Total
Adjusted revenues
Adjusted operating
profit before interest, tax and
central costs
IFRS basis operating profit
before interest, tax and central
costs
2017
21.0
3.1
21.1
10.7
18.2
74.1
2016
25.3
1.2
18.8
7.6
12.9
65.8
2017
6.6
1.2
(0.8)
(0.4)
0.7
7.3
2016
8.3
0.3
0.5
(0.7)
0.5
8.9
2017
5.3
1.0
(7.4)
(0.7)
0.5
(1.3)
2016
8.1
0.1
0.2
(4.2)
(1.0)
3.2
Adjusted revenues exclude intra segment trading and landfill
tax, adjusted operating profit excludes exceptional items
and intangible asset amortisation.
The operating cash flow of the Group of £9.4m was used
to fund the future growth of the Group, with total capital
expenditure investment of £8.8m. This comprised £4.5m of
maintenance capital expenditure to lengthen the productive
life of existing assets (including £1.7m on landfill cell
engineering) and £4.3m of development capital expenditure
for targeted future growth.
As has been announced previously, the acquisition of Colt
has not met the Board’s expectations. The goodwill and
associated intangible assets of £6.1m has therefore been
impaired to £nil and a further impairment of £0.2m against
Property Plant and Equipment has been recognised. Other
significant exceptional items relate to redundancy costs to
reduce the Group cost base of £1.0m and costs of dispute
relating to Landfill Tax with HMRC of £1.1m.
Business performance
The Group operated through five business units during
2017 and 2016 (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 2017 is set out below.
13
Augean PLC Annual Report and Accounts for the year ended 31 December 2017STRATEGIC REPORT25959 20-3-18 Proof Six The Group has successfully won contracts to maintain
revenue for 2018, subject to expected release rates of the
waste, although these will be more heavily weighted to the
second half of 2018. 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.
The Group operates a number of essential assets for
the delivery of the government’s strategy for dealing with
radioactive waste and will seek to expand the range of our
permits for the treatment of this waste through 2018.
Industry & Infrastructure (I&I)
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 and manufacturing, port and
shipping operations and water treatment.
I&I total adjusted revenue increased by 12% to £21.1m
in 2017 (2016: £18.8m) largely due to a full year of Colt
revenues (eight months in 2016) and the business unit
made a loss before exceptional items of £0.8m, compared
with a £0.5m operating profit before exceptional items in
2016. All the loss was generated from a single Colt legacy
contract and the lower I&I performance is attributable to
higher shared business costs in 2017 over 2016 which has
been addressed in the cost reduction programme. Colt
lost £0.8m in 2017 (2016: £Nil). All the Colt losses were
incurred on one tank cleaning contract with a major oil
refiner. This contract dispute is now settled and no other
losses are expected to be generated. Given the Colt loss,
and the rest of the business only being break-even, the
Board has carried out an impairment review and recorded
an impairment of goodwill and associated intangible assets
of £6.3m.
Operating Review
Energy & Construction (E&C)
The principal activity of this business unit is the disposal
of energy from waste including APCR, asbestos and
other contaminated waste materials and soils, mainly from
construction sectors.
Adjusted revenues, excluding landfill tax and inter group
sales, reduced by 17% to £21.0m (2016: £25.3m),
with the reduction primarily caused by lower construction
soil volumes.
The total volume of waste disposed by the E&C business
reduced by 20% to 458,000 tonnes in 2017, from 574,000
tonnes in 2016. APCR volumes increased by 10% from
111,000 tonnes to 122,000 tonnes and all other waste
streams decreased by 27% from 463,000 tonnes to
336,000 tonnes.
The adjusted operating profit of the business unit declined
by 20% to £6.6m (2016: £8.3m) compared with adjusted
revenue decline of 17%.
APCR volumes have shown strong growth as a result of
contract wins for the Group. 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. The Group is committed to obtaining
recycling credit for its treatment of APCR which, after
cost, is important for the operators of the EfW plants, the
municipal authorities and ultimately the British public in
lower Council taxes.
Radioactive Waste Services (RWS)
The principal activity of this business unit is the treatment
and disposal of low level radioactive waste generated from
the UK nuclear estate.
The total adjusted revenue from the disposal and treatment
of low level radioactive waste increased by 258% to £3.1m
(2016: £1.2m) due to a number of new contract awards from
the Nuclear Decommissioning Authority. Operating profit
before exceptional items increased fourfold to £1.2m (2016:
£0.3m). The Group has benefitted in 2017 from reasonable
inputs of radioactive material during the year, however,
the control and contracting environment (not under Group
control) for these materials means volumes released are very
unpredictable, albeit welcome when received.
14
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six The business has been successful in broadening its 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. ANSS secured significant long-term contracts,
encompassing all our segments of business, worth in
excess of £10m with two major North Sea operators,
servicing, integrated waste management and industrial
cleaning, offshore DWM /plug & abandonment / radiological
protection service and specialist cleaning, decommissioning
with decontamination and NORM disposals. These contract
wins further underpin existing management expectations for
2018 revenues and profits from this business.
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. The
Department for Environment, Food and Rural Affairs
(DEFRA) confirmed in 2017 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.
Planning and permitting
The key permitting work in 2017 has been development
of an Oil & Gas decommissioning hub and waste transfer
station at Port of Dundee.
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.
Permit extensions will be sought for the Port Clarence
landfill in 2018.
Augean Integrated Services (AIS)
AIS operates a high temperature incinerator (HTI) in East
Kent and provides a total waste management (TWM) service
at client sites to address their waste management and
compliance needs leveraging the specialist HTI assets.
Total adjusted revenue grew by 41% to £10.7m (2016:
£7.6m). This included £7.5m from total waste management
(2016: £5.5m). Despite the revenue growth the division
lost £0.4m (2016: £0.7m loss). The lack of profitability of
this business unit was primarily caused by continuing high
cost in the TWM business with brokerage margins not
able to sufficiently cover the cost base expansion as new
customers are won. The East Kent HTI almost broke even.
The Board is closely monitoring the performance of the HTI,
which needs to improve in the short term.
The AIS total waste management business was sold
to Regen Holdings on the 16 March 2018 for an initial
consideration of £3.0m with an additional £0.8m on
agreement of completion of accounts and further amounts
expected for delivery of working capital over normalised
levels. The impact of the sale is demonstrated in note 27.
Augean North Sea Services (ANSS)
The ANSS business unit operates in the North Sea Oil &
Gas market. The primary revenue streams are from drilling
waste management (DWM), including the rental of offshore
engineers and equipment to customers, production waste
management, onshore and marine industrial services,
decommissioning and water treatment.
ANSS revenue increased by 41% to £18.2m (2016:
£12.9m) and saw an increase in operating profit to £0.7m
(2016: £0.5m).
The ANSS strategy continues to gain traction as the
business moves up the supply chain, dealing directly with
Oil & Gas operators and top-tier customers, so providing
opportunities to widen its service scope directly with those
customers. Over 89% of total ANSS revenues were directly
generated from those customers during 2017, compared
with 84% in 2016.
The ANSS facility at the Port of Dundee for the management
of waste arising onshore from the decommissioning of
offshore assets opened in June. 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.
15
Augean PLC Annual Report and Accounts for the year ended 31 December 2017STRATEGIC REPORT25959 20-3-18 Proof Six Financial Performance
‘ Revenue from continuing
operations for the year ended
31 December 2017 increased
by 11% to £84.7m’
EXECUTIVE DIRECTOR AND 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
Net operating cash flow
Basic earnings per share
Return on capital employed
(defined below)
2017
84.7
6.4
5.5
4.3
10.7
4.23p
2016
76.0
7.8
7.0
4.5
13.5
4.42p
9.4%
11.8%
Exceptional items are detailed below
On a statutory basis for continuing operations, operating
loss was £2.2m (2016: £2.1m profit), loss before tax was
£3.1m (2016: £1.3m profit), loss after tax was £3.5m
(2016: £0.4m profit), basic loss per share was 3.4 pence
(2016: 0.4 pence earning) and net operating cash flows
were £9.4m (2016: £11.2m).
Trading, operating profit and EBITDA
Revenue from continuing operations for the year ended
31 December 2017 increased by 11% to £84.7m
(2016: £76.0m).
Operating profit before exceptional items from continuing
operations decreased by 18% to £6.4m (2016: £7.8m)
and profit before tax decreased by 21% to £5.5m
(2016: £7.0m), 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
2017
£’m
6.4
6.4
12.8
2016
£’m
7.8
6.3
14.1
Exceptional items
Exceptional items in 2017 totalled a net charge of £8.6m
before taxation, of which the non-cash impairment of Colt
assets is £6.3m, redundancy costs £1.0m, and legal /
professional fees of the HMRC assessment and other costs
£1.3m. The 2016 exceptional items related to £3.3m of the
non-cash impairment of the incinerator at East Kent, £0.8m
related to the costs of acquisition of Colt, £1.2m related to
the settlement of a trade-related dispute, which arose in the
normal course of trade, and £0.4m related to restructure
and other costs.
Finance costs
Total finance charges were £0.9m (2016: £0.8m) including
the interest on bank debt and other financial liabilities
of £0.4m (2016: £0.4m). They also included non-cash
unwinding of discounts on provisions totalling £0.1m
(2016: £0.1m).
Taxation
The Group recognised an accounting tax charge of £0.4m
(2016: £0.9m) including a credit of £0.8m (2016: £1.6m) in
respect of exceptional items.
The accounting tax charge of £1.2m for continuing
operations and excluding exceptional items (2016: £2.5m)
represents 21.1% of profit before taxation on the same
basis (2016: 35.3%). This compares against the headline
rate of corporation tax of 19% for 2017 (2016: 20%).
The increased tax charge in the previous year reflected a
higher level of disallowable costs in the prior year due to
acquisition and a reduction in the recognised deferred tax
asset subsequent to a review of the Group’s non-qualifying
asset base.
The Group paid corporate tax of £0.7m during the year
(2016: £0.9m). A current tax liability of £0.7m (2016: £0.7m)
remains in the balance sheet at the year end.
A deferred tax asset of £1.2m (2016: £1.2m) 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.
16
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Earnings per share
Basic earnings per share (EPS), from continuing operations
and excluding exceptional items, was 4.23 pence (2016:
4.42 pence) due to the lower tax charge in the year.
Statutory basic loss per share was 3.40 pence (2016 EPS:
0.40 pence).
The Group made a profit after taxation, from continuing
operations and excluding exceptional items, of £4.3m
(2016: £4.5m), all of which was attributable to equity
Shareholders.
The total number of ordinary shares in issue increased
during the year from 102,748,383 to 102,948,036 with the
weighted average number of shares in issue increasing from
102,420,517 to 102,808,183 for the purposes of basic EPS.
Dividend
The Board has decided not to declare a final dividend given
the HMRC situation as described in note 25 (2016: 1.0p).
The dividend paid in the year was the 2016 final dividend.
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
Acquisition of businesses
Purchase of East Kent freehold
Free cash flow
Final dividend payments
Proceeds from issuance of equity
Net cash generation
2017
£’m
2016
£’m
10.7
13.5
(1.3)
9.4
(4.5)
4.9
(4.3)
—
—
0.6
(1.0)
—
(0.4)
(2.3)
11.2
(3.9)
7.3
(4.1)
(8.9)
(0.2)
(5.9)
(0.7)
0.1
(6.5)
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.
Underlying net operating cash flows were generated from
continuing trading as follows:
EBITDA from continuing operations
and before exceptional items
Net working capital movements
Interest and taxation payments
Other
Net operating cash flows from
continuing operations and
before exceptional items
2017
£’m
12.8
(1.3)
(1.1)
0.3
2016
£’m
14.1
0.8
(1.7)
0.3
10.7
13.5
Underlying net operating cash flow as a percentage of
EBITDA was 84% in 2017 (2016: 96%).
17
Augean PLC Annual Report and Accounts for the year ended 31 December 2017STRATEGIC REPORT25959 20-3-18 Proof Six Financial Performance continued
Capital investment in property, plant and equipment and
intangible assets made by the Group totalled £8.8m
(2016: £8.3m), split between maintenance of £4.5m and
expansion of £4.3m.
During the year, the Group received a total of less than
£0.1m (2016: £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, was at
£10.8m at 31 December 2017. This represented gearing,
defined as net debt divided by net assets, of 21.6%
(2016: 19.9%). The ratio of net debt to EBITDA, from
continuing operations and before exceptional items, was
0.8 times (2016: 0.8 times).
Financing
During 2017, 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.The
maturity of the facility is October 2020 and the overdraft
is reviewed annually. HSBC has, at 31 December 2017
and through to end of March 2019, waived breach of the
taxation clause of the bank credit facility which requires
potential liabilities associated with tax disputes to be less
than £0.1m. As at 31 December 2017, the net debt is
£10.8m with headroom available to the Group of £9.2m.
Balance sheet and return
on capital employed
Consolidated net assets were £50.1m on 31 December
2017 (2016: £54.6m) and net tangible assets, excluding
goodwill and other intangible assets, were £30.0m
(2016: £28.3m), of which all was attributable to equity
Shareholders of the Group in both years. Net assets and
net tangible assets as at 31 December 2017 are both
stated after the recognition of a £6.3m 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, decreased to 9.4% in 2017 (2016: 11.8%). This
outcome is not impacted by the impairment loss recognised
by the Group, which is recognised as at 31 December 2017
but does not form part of the calculation of average capital
employed.
Impairment reviews
In accordance with IAS 36 ‘Impairment of Assets’, an
annual impairment review was carried out for each cash-
generating unit (CGU) to which significant goodwill is
allocated and also any other CGU where management
believed there may have been an indication of potential
impairment to the carrying values of assets in those CGUs.
For the continuing operations of the Group, this exercise
was completed for the CGUs within the Energy &
Construction and Industry & Infrastructure reportable
segments, which both contain significant levels of goodwill,
as well as Augean Integrated Services and ANSS as a result
of performance levels.
Based on these reviews, an impairment charge of £6.3m
was recorded in respect of Colt (part of the Industry &
Infrastructure reportable segment). No reversal of prior year
impairments was required.
The cash flows for all CGUs were discounted using a
pre-tax discount rate of 9.5% (2016: 9.7%).
Employees
The Group employed an average of 469 staff (2016: 437)
over the course of the year with a closing headcount of
452. The number of employees in the Group has declined
during 2017 to re-position the cost base of the Group and
eliminate the business unit structure.
18
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six 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. These KPIs are consistent with
those reported in 2016.
The focus of the Group is in three priority areas.
1. Health and 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
2017 Outcome
2016 Outcome
Number of accidents (1)
Number of near misses reported (2)
27
2,935
Compliance scores (3)
Underlying profit before taxation (4)
Post-maintenance free cash flow (5)
Return on capital employed (6)
Volumes of waste disposed to our
landfill sites
E&C: A
RWS: A
I&I: B/Excellent
AIS: B
ANSS: Excellent
£5.5m
£4.9m
9.4%
43
2,331
E&C: A
RWS: A
I&I: B/Excellent
AIS: B
ANSS: Excellent
£7.0m
£7.3m
11.8%
458,000 t
574,000 t
APCR Volumes treated
122,000 t
111,000 t
Amount of North Sea Oil & Gas revenue
generated directly from operators and
Top-Tier customers
89% of ANSS revenue
84% of ANSS revenue
E&C
RWS
AIS
I&I
ANSS
Energy & Construction
Radioactive Waste Services
Augean Integrated Services
Industry & Infrastructure
1. The number of total reported accidents, that has resulted in injury, 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
Augean North Sea Services
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.
19
Augean PLC Annual Report and Accounts for the year ended 31 December 2017STRATEGIC REPORT25959 20-3-18 Proof Six Managing Risk
Risk description
Mitigation
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.
20
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Risk description
Mitigation
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 guidance
(LFT1) was last updated in April
2017. 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 £86.10 per tonne on 1 April
2017 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. The Group is in
ongoing discussions with HMRC
with respect to whether it has paid
the correct amount of landfill tax.
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.
{ 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.
{ Specialist legal and environmental advice.
{ Landfill tax internal audits and external assurance on processes.
{ 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.
21
Augean PLC Annual Report and Accounts for the year ended 31 December 2017STRATEGIC REPORT25959 20-3-18 Proof Six Managing Risk
Risk description
Mitigation
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 ongoing 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 ongoing 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.
22
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Risk description
Mitigation
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.
{ 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.
Brexit risk
Although the Group is focused
on wastes arising in UK and uses
disposal infrastructure almost
entirely based in UK, the Group
may fail to anticipate and manage
the potential impact of UK leaving
the European Union, notably
potential increases in interest rate.
{ 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.
23
Augean PLC Annual Report and Accounts for the year ended 31 December 2017STRATEGIC REPORT25959 20-3-18 Proof Six Corporate Social Responsibility
The Board recognises the important role played by the
Group in the environment and communities within which
it operates. The health and safety of our employees
and compliance with regulations are two of the 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
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 2017 indicates that the Group’s operations do not
result in a significant impact on the local environment and
in general our environmental performance continues to be
one of the top three in the sector. The results of inspections
and audits received from the Environment Agency in
England and the Scottish Environmental Protection
Agency 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. We have also continued to
engage throughout 2017 on topics such as Best Overall
Environmental Option, substances of concern, radioactive
materials liability insurance, planning and Brexit.
Employees
The Group’s employees are vital to its success during
a period of challenging conditions while the Group was
resizing its cost base.
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, gender, marital
status, age or status as a part-time or fixed-term employee.
The Group’s objective is to ensure that individuals are
selected, promoted and otherwise treated solely on the
basis of their relevant aptitudes, skills and abilities.
These equal opportunity policies are set out in the Group’s
Employee Handbook, a copy of which is provided to
each employee on joining the Group and made available
electronically. The Handbook is updated periodically for
changes in policy and regulations. The Group also operates
a clear whistle-blowing policy, providing every employee
24
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six the opportunity to raise concerns directly with an impartial
Director, without the intervention of line management. Once
an issue is reported the 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 biannual 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 2016 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. In 2017 we delivered a comprehensive
leadership programme to 12 key employees.
Safety
Health and safety and compliance are priorities for the
business and it is therefore pleasing to see a decrease in
accidents leading to workplace injuries of 42% in 2017
compared with 2016. It is considered that this is in response
to a campaign 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.
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
(2016: £0.5m) was contributed through these schemes
during the year, providing funds for community projects
including 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.
The strategic report on pages 10 to 25 of this report was
approved and signed on behalf of the Board.
JIM MEREDITH
EXECUTIVE CHAIRMAN
10 March 2018
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
25
Augean PLC Annual Report and Accounts for the year ended 31 December 201725959 20-3-18 Proof Six
Heading Here
OUR
GOVERNANCE
26
24612.04 29-2-2016 Concept
CONTENTS
Our Governance
Director’s Report
The Board of Directors
Chairman’s Corporate Governance Letter
Risk Management and Control
Audit Committee Report
Nominations Committee Report
Remuneration Committee Report
Directors’ Remuneration Report
28
33
35
36
37
38
39
40
24612.04 29-2-2016 Concept
27
27
Director’s Report
The Directors present their report and the audited financial
statements for the Group and Company for the year ended
31 December 2017.
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 loss after tax of the Group for the year was £3.5m
(2016: £0.4m profit) from revenue of £84.7m (2016:
£76.0m). The loss included exceptional items totalling a
charge of £8.0m (2016: £4.1m).
The Board has recommended no dividend be paid for the
year (2016: dividend of 1.0p).
Environmental policy
The quality of the environment is at the core of the Group’s
operations and the Board recognises its importance to
employees, customers, suppliers and the communities
in which the Group operates. Augean continues to adopt
high standards of environmental practice and aims to
minimise its impact on the environment wherever possible.
To support this the Group publishes a clear Environmental
Policy, which is updated every 12 months. Further details of
the Group’s actions in this area can be found on pages 24
and 25 of this report.
Management of risks
The Group has developed procedures for the management
of risks relating to price, credit, liquidity and cash flow.
The management of the Group’s financial risks and the
related objectives and policies are the responsibility of
the executive Directors. The Directors regularly review the
Group’s financial risk management policies and procedures
to ensure that they appropriately reflect the changing
nature of the market and business. The Group, through
its training and management standards and procedures,
aims to develop a disciplined and constructive control
environment in which all employees understand their roles
and obligations. A risk register is maintained and regularly
reviewed by the Board.
The Group has maintained its policy that no trading in
financial instruments shall be undertaken. The Group’s
principal financial instruments during the period comprised
bank loans, cash and cash equivalents and finance leases.
The main purpose of these financial instruments is to
finance the Group’s operations. The Group’s other financial
instruments include short-term receivables and payables
which arise directly from its operations. There was no
material difference between the fair value of the financial
assets and financial liabilities and their book value.
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or
another financial asset. The Group seeks to maintain a
balance between continuity of funding and flexibility. The
objective is to maintain sufficient resources to meet the
Group’s funding needs for the foreseeable future.
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from
the Group’s receivables from customers. The Group has
a robust customer credit policy in place and the exposure
to credit risk is monitored on a daily basis. The Group’s
standard credit terms are 30 days from date of invoice, with
longer terms granted to certain customers. Invoices older
than agreed terms are assessed.
Further identified risks are presented within the Operating
Review on page 13 to 25.
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.
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.
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.
28
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six 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 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.
Charitable and political donations
During the year the Group contributed £542,000
(2016: £450,000) of its landfill tax liability to registered
environmental bodies as permitted by Government
regulations. No political donations were made during the
year (2016: £nil).
Directors
The composition of the Board of Directors is shown on
page 33 to 34. Details of the Directors’ interests and
remuneration are given in the Directors’ Remuneration
Report on pages 40 to 43.
On 16 October 2017 Stewart Davies resigned from
the Board.
Andrew Bryce was reappointed to the board on
1 September 2017. Roger McDowell and Christopher Mills
were appointed to the Board on 16 October 2017.
All other Directors served throughout the year and since the
Balance Sheet date.
Substantial shareholdings
The number of shares issued by the Company increased
during the year, from 102,748,383 as at 1 January 2017
to 102,948,036 at 31 December 2017. The Company had
been notified of the following interests of more than 3% in
its shares as at 28 February 2018:
Number
of shares
18,600,000
Harwood Capital
Schroder Investment
13,580,500
Management Ltd
8,500,000
Hargreave Hale
6,239,722
Charles Stanley
Close Asset Management
5,339,554
Artemis Investment Management 4,000,000
Lombard Odier Investment
Managers
Fidelity International
Unicorn Asset Management
3,657,947
3,469,335
3,173,731
% of total
18.07%
13.19%
8.26%
6.06%
5.19%
3.89%
3.55%
3.40%
3.08%
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.
29
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR GOVERNANCE25959 20-3-18 Proof Six Director’s Report continued
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 23 to the financial statements.
As highlighted in note 23, the Group met its short-term
working capital requirements during 2017 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.
As a result of the assessment received from HMRC,
previously communicated to Shareholders and detailed in
note 25, a representation required by the facility agreement
which related to a requirement for no tax investigations with
possible liabilities of over £100k to be ongoing in relation
to the Group was not made. A letter of waiver has been
obtained from the lender in relation to this.
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 2017, 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 2017 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
intangible assets as at 31 December 2017, 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 2017 but is not
considered to significantly 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.
The results have been prepared taking into account the
Group’s net debt, available headroom on bank facilities,
the continuing support of the Group bankers HSBC, as
well as noting the significant uncertainty around the HMRC
issue. Reliance is being taken that HMRC has not required
the Group to pay any of the assessments levied to date
and advice received is that this will continue for 12 months
based on professional advice and discussions with HMRC.
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.
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 to prepare the Group’s financial statements
in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs). The
Directors have elected to prepare the parent Company
financial statements in accordance with Financial Reporting
Standard 101 -’The Reduced Disclosure Framework’
30
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six 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 2017 financial year is the fourth year for the
current lead partner, Mark Overfield.
Auditor
Grant Thornton UK LLP has expressed willingness to
continue in office as auditor. 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
The Annual General Meeting (AGM) will be held on 25 June
2018. Andrew Bryce, Roger McDowell and Christopher Mills
were appointed to the Board during the year. Being eligible,
they will offer themselves for election as Non-executive
Directors at the AGM. Rod Holdsworth and John Grant will
resign and offer themselves for re-election as Non-executive
Directors at the AGM.
No Director has a contract with an unexpired notice period
of more than 12 months.
By order of the Board
MARK FRYER
GROUP FINANCE DIRECTOR
19 March 2018
(FRS 101) (UK Accounting standards). 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 Group and
parent Company 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;
{ for the Group financial statements, state whether
applicable IFRSs have been followed, subject to any
material departures disclosed and explained in the
financial statements;
{ for the parent Company financial statements, state
whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed
and explained in the financial statements;
{ prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company 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 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 hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Each of the persons who is a director at the date of
approval of this annual report confirms that:
{ so far as each Director is aware, there is no relevant
audit information of which the Company’s auditor is
unaware; and
{ the Directors have taken all the steps that they ought to
have taken as a director in order to make themselves
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
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.
31
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR GOVERNANCE25959 20-3-18 Proof Six 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 are required to retire
from office at each Annual General Meeting and may stand
for re-election 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.
The Board is satisfied that all the Directors standing for
election or re-election (as appropriate) 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.
The Board of Directors
The Board of Directors is responsible for ensuring the Group
is appropriately governed and led. This includes ensuring
that the Executive has formulated and implemented a
business strategy whilst also holding the Executive to
account in delivering such strategy and results. This involves
maintaining relevant internal control mechanisms and sound
risk management within the business, whilst also establishing
the values and behaviours the Group needs to ensure its
business performance is sustainable within its sector.
At 31 December 2017 the Board comprised seven members:
An Executive Chairman, Group Finance Director and five
further Non-executive Directors, including John Grant as the
Senior Independent Director. The Executive Chairman has
responsibility for the overall leadership, effectiveness and
governance of the Board and of the Executive Management,
along with the strategic and operational running of the Group.
The Senior Independent Director supports the Executive
Chairman and leads the Non-executive Directors in reviewing
the performance of the Executive Chairman. The Non-
executive Directors have been appointed to the Board for
their specific areas of knowledge and expertise 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 the 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 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
nine times a year and additional meetings are held where
necessary to review and approve specific matters where a
decision is required more urgently.
32
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Jim Meredith
Executive Chairman
Mark Fryer
Executive Director and
Group Finance Director
John Grant
Non-executive Director and Chairman of
the Remuneration Committee
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
has been Chairman of RiverRidge Recycling
since September 2016, an investment
supported by the Business Growth Fund,
and a Non-executive Director of Mar City
Homes, since July 2016. 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.
Jim has been Executive Chairman of
Augean PLC since October 2017, having
previously been Non-executive Chairman
from June 2012 and a member of the Board
from December 2010.
Mark joined Augean in December 2016,
bringing 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.
Prior to joining Augean, Mark had 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. Before 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.
John has significant experience across a
number of sectors, including working for
Ford for 25 years, where he held 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
to 1996 as Group Finance Director and
was Chief Executive of Ascot plc from 1997
to 2000. He was, until May 2017, Senior
Independent Director of Melrose Industries
plc, a FTSE 350 acquisitive international
engineering group and is currently Senior
Independent Director of MHP SE, a UK-
listed Ukrainian agro-industrial group, and
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 Chairman of the
Remuneration Committee in June 2016.
33
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR GOVERNANCE25959 20-3-18 Proof Six The Board of Directors
Rod Holdsworth
Non-executive Director and
Chairman of the Audit
Committee
Roger McDowell
Non-executive Director and
Chairman of the Nominations
Committee
Christopher Mills
Non-executive Director
Andrew Bryce
Non-executive Director
Rod has a significant breadth
of financial expertise with
more than 20 years’ of board
level experience gained in the
support services, construction,
manufacturing and healthcare
sectors. Rod is currently
Interim Chief Financial Officer
of The Wates Group, the
leading privately-owned UK
construction, property services
and development company,
having been appointed in
November 2017. Before this,
Rod was Global Chief Financial
Officer of OCS Group, a
privately-owned, international
facilities management business.
He previously served as Finance
Director at Morrison plc, the
construction and support
services group owned by
Anglian Water Group plc, and
has also held senior financial
positions at 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
became Chairman of the Audit
Committee in June 2016.
Roger returned to Augean
having previously been a Board
member of the Group for 11
years between November
2004 and June 2015. Roger
brings valuable experience as
a successful businessman and
entrepreneur, with a strong
record of driving shareholder
value and serving on the boards
of public companies across a
range of sectors. During his
previous tenure on Augean’s
Board, Roger held the position
of Interim CEO from 2006 to
2007 and Interim Chairman
from 2010 to 2012. Roger
was Managing Director of
Oliver Ashworth for 18 years
before its sale to St. Gobain
and he is currently serving
as Non-executive Chairman
of Avingtrans plc and is also
a Non-executive Director of
ThinkSmart plc, Tribal Group
plc, Proteome Sciences
plc, D4t4 Solutions plc and
Swallowfield plc.
Roger was appointed to the
Board in October 2017 and
became Chairman of the
Nominations Committee in
January 2018.
Christopher founded Harwood
Capital Management Group
in 2011 and was the Chief
Investment Officer of its former
parent company J O Hambro
Capital Management, which
he co-founded in 1993. He is
Investment Manager of North
Atlantic Smaller Companies
Investment Trust plc and
Non-executive Chairman of
EKF Diagnostics Holdings plc.
He is also a Non-executive
Director of several publicly
quoted companies, including
Bioquell plc and Goals Soccer
Centres plc. Christopher was a
Director of Invesco MIM, where
he was head of North American
investments and venture
capital, and of Samuel Montagu
International.
Christopher joined the Board in
October 2017.
Andrew has had a long career
and established reputation as
a leading UK environmental
lawyer and until very recently
ran his own law firm, Andrew
Bryce & Co, which specialised
in regulatory defence. He now
runs his own consultancy
providing board level advice
on environmental strategy
and compliance. 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 is Co-Chair of its Brexit
Task Force.
He was originally appointed to
the Board of Augean in June
2005, before stepping down
and being reappointed, and until
recently was Chairman of the
Nominations Committee.
34
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Chairman’s Corporate Governance Letter
‘ Augean remains committed to high
standards of corporate governance
in all of its activities.’
EXECUTIVE CHAIRMAN JIM MEREDITH
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
EXECUTIVE CHAIRMAN
19 March 2018
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 the size and nature
of Augean plc. The Board regularly reviews guidance from
regulatory bodies, supported by its Nominated Adviser,
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 Nominations) continued to be active
during the year. A report from each Committee chairman
follows, and I am grateful to each for their diligence and
skill in ensuring that the Board plays an effective role in the
proper management of the Company and the wider Group.
As Chairman, one of my principal concerns is to maintain
excellent relationships with our Shareholders. During the
year I continued to make myself available to Shareholders to
discuss strategy and governance matters and was pleased
to again have individual meetings with some of the Group’s
major Shareholders.
35
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR GOVERNANCE25959 20-3-18 Proof Six Risk Management and Control
{ regular visits by the Executive Directors and senior
management to operating locations to meet with
local management and staff and to review business
performance;
{ regular visits by the Group’s technical team to all sites
to identify risks and propose improvements to be
implemented by senior management. This includes
powers to stop activities if they are deemed to represent
a danger, or are inappropriate in the context of proper
compliance;
{ a range of compliance management systems at the
Group’s sites subject to external review, including
certification to ISO 9001:2015; 14001:2015;
18001:2007 and the Publicly Available Specification
of common management system requirements PAS
99:2015;
{ 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 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 Executive Chairman through
the Management Board, whose membership includes:
{ Executive Chairman;
{ Group Finance Director;
{ Group Operating Officer;
{ Corporate Stewardship Director;
{ Operations Director;
{ Technical Supply Chain Director;
{ Managing Director of ANSS;
{ Total Waste Management Director; and
{ Commercial Director of Hazardous Waste.
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;
36
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Audit Committee Report
‘ During the year the Committee
considered the adequacy
and effectiveness of the risk
management and control systems
of the Group’
CHAIRMAN ROD HOLDSWORTH
Members
Christopher Mills
Roger McDowell
Rod Holdsworth
John Grant
Andrew Bryce
Meetings
Total number of
Committee meetings: 7
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.
Recommendations were made to the Board for any
changes it considered necessary.
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 seven 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 2016 and other information included in the
2016 Annual Report, the interim financial statements for
2017, all formal announcements relating to results and
all significant financial reporting issues and judgements
contain therein. The Committee has reviewed, in depth, the
key assumptions around goodwill and other non-current
asset impairment reviews, provisions, accounting landfill
tax assessments, deferred tax asset recognition, key
assumptions around provisioning and adoption of the going
concern assumption.
37
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR GOVERNANCE25959 20-3-18 Proof Six Nominations Committee Report
‘ During the year the
Nominations Committee kept
under review the leadership
needs of the organisation’
CHAIRMAN ANDREW BRYCE
Members
Christopher Mills
Roger McDowell
Rod Holdsworth
John Grant
Andrew Bryce
Meetings
Total number of
Committee meetings: 2
The Nominations Committee comprises the Non-executive
Directors and was chaired by Andrew Bryce until June 2017
and is now chaired by Roger McDowell. 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 Nominations
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.
During 2017, following the resignation of Stewart Davies,
the activities of the Committee focused on the appointment
of Jim Meredith as Executive Chairman and the
appointments of Christopher Mills and Roger McDowell as
Non-executive Directors. The retirement and re-appointment
of Andrew Bryce was also dealt with by the Committee
during the year.
38
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Remuneration Committee Report
‘ The principal objective of the
Committee is to attract, retain
and motivate talented people’
CHAIRMAN JOHN GRANT
Members
Christopher Mills
Roger McDowell
Rod Holdsworth
John Grant
Andrew Bryce
Meetings
Total number of
Committee meetings: 4
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 2017, with
business including reviews of the remuneration for Executive
Directors, decisions relating to bonus awards and Long
Term Incentive plans (LTIP). The Directors’ Remuneration
Report includes the outcome of these considerations.
During 2017, the Committee also approved the issuance
of the 2017 LTIP, and made awards to relevant participants
in the year.
39
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR GOVERNANCE25959 20-3-18 Proof Six 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 2017, a 1.5% salary increase was awarded to Stewart
Davies, in line with the decision to award an increase to all
staff in the Company on 1 January 2016. As Mark Fryer
joined the Company on 12 December 2016, he did not
become eligible for an increase until January 2018, being
the first anniversary of his joining the Company. To reflect
the increased responsibility upon his change in role from
Non-executive Chairman to Executive Chairman, Jim
Meredith’s salary was increased as detailed below.
(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 but the level of profit before tax
achieved by the Group means that bonuses will not be
payable in respect of the 2017 financial year.
(iii) Other benefits
Benefits provided to Directors include a car allowance, life
assurance, private medical insurance, permanent disability
insurance, personal accident insurance and pension
contributions.
(iv) Long Term Incentive Plan – 2017 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 2017 (‘2017
LTIP Award’).
Under both LTIP Awards, participants were eligible to
receive options over shares in the Company, up to the
following maximum percentages of basic salary:
Chief Executive
Group Finance Director
Other senior management
2017 LTIP
100%
100%
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 pre-determined financial performance
conditions over the specified three-year performance
condition period:
Performance
condition period
1 January 2017 to
31 December 2019
2017
LTIP
Expected vesting
The date of the
announcement of the results
of the Group for the year
ended 31 December 2019,
expected to be no later than
31 March 2020.
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 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.
The minimum LTIP ROCE targets for each of the three years
are as follows:
2017 LTIP
2017
12.00%
2018
12.00%
2019
12.60%
40
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six
Once minimum LTIP ROCE targets are met, the
performance conditions for the participants are as follows:
Relative TSR element (in each of the three years)
Directors’ interests
The beneficial, family and contingent interests of the
Directors in the share capital of the Company are shown in
the table below.
Below median
Between median and
70th percentile
Above 70th percentile
Underlying LTIP EPS element
2017 LTIP
Nil attainment
Straight-line attainment from
30% to 100%
100% attainment
2017 LTIP Minimum
2017 LTIP Maximum
Between minimum and
maximum
2017
5.7p
6.0p
2018
6.3p
6.9p
2019
6.9p
7.9p
Straight-line attainment from
30% to 100%
These conditions are subject to the following weighting:
Total Shareholder return relative to the
FTSE AIM All-Share (‘Relative TSR’)
Basic earnings per share, before exceptional
items and intangible amortisation
(‘Underlying LTIP EPS’)
2017 LTIP
25%
75%
The expected costs of the scheme are given in note 19 to
the financial statements.
(v) 2016 LTIP Scheme
For the second performance period of the 2016 LTIP
Scheme (announced in the Annual Report and Accounts
for 2016) 0% attainment was achieved. As previously
announced 13.2% attainment was achieved for the first
performance period of the 2016 LTIP Scheme.
(vi) Share options
Under the share options scheme the Remuneration
Committee may annually grant options of up to 100% of
basic salary, allowing participants to purchase shares in the
Company at a future date. These options may be subject to
the attainment of pre-determined performance conditions
but this is not an absolute requirement. No awards were
made during 2017.
(vii) Service contracts
Executive directors have rolling service contracts with notice
periods of not more than 12 months.
At 31 December 2017
Christopher Mills*
Roger McDowell
Jim Meredith
Mark Fryer
John Grant
Andrew Bryce
Rod Holdsworth
Beneficial
shares
Number
18,600,000
3,000,000
1,500,000
—
100,000
11,419
—
LTIP
Number
Total
shares
Number
— 18,600,000
— 3,000,000
— 1,500,000
203,908
100,000
11,419
—
203,908
—
—
—
* Christopher Mills is a partner and Chief Investment Officer of
Harwood Capital LLP and these shares are held in or managed by
Harwood Capital LLP (shares held through Harwood Capital LLP,
Oryx International Growth Fund Limited and North Atlantic Smaller
Companies Investment Trust).
41
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR GOVERNANCE25959 20-3-18 Proof Six
Directors’ Remuneration Report
Directors’ emoluments
The emoluments of the Directors during 2017 were as follows:
Stewart Davies
Mark Fryer
Jim Meredith
Andrew Bryce
John Grant
Rod Holdsworth
Rory Macnamara
Christopher Mills
Roger McDowell
Richard Laker
2017
Basic
fee/salary
£’000
265
196
80
31
33
33
—
6
6
—
650
2017
Bonus
£’000
37
2
—
—
—
—
—
—
—
—
39
2017
Other
emoluments
£’000
10
12
—
—
—
—
—
—
—
—
22
2017
Total
£’000
312
210
80
31
33
33
—
6
6
—
711
2016
Total
£’000
362
11
60
33
33
23
13
—
—
186
721
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.
During the year Stewart Davies left the Board and Jim Meredith became Executive Chairman. The increase in basic salary
for Jim Meredith relates to the increased scope of the role of Executive Chairman.
Other emoluments for Stewart Davies and Mark Fryer include a car allowance and other benefits such as medical insurance.
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 committed to make himself available to the Company until the end of his notice period in July 2017.
Nil directors (2016: two) are members of a pension scheme and £Nil (2016: £30,000) contributions were paid by the
Company to a pension scheme.
42
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six
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
Lapsed
in year
(1,000,000)
Award date
Earliest
vesting
date
Market price
at award
date
Number
of shares
2016
Granted
in year
Lapsed
in year
23/09/2014 24/03/2017
49.75p
549,333
31/10/2016 24/03/2019
51.75p
301,980
—
—
(549,333)
(301,980)
Number
of shares
2017
—
Number
of shares
2017
—
—
2014 LTIP
Stewart Davies
2016 LTIP
Stewart Davies
2017 LTIP
Stewart Davies
Mark Fryer
28/04/2017 24/03/2020
28/04/2017 24/03/2020
65.00p
65.00p
—
—
428,619
305,862
(428,619)
(101,954)
—
203,908
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, 2016 and 2017 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 2017 LTIP was based on the mean closing mid-market share price of the
Company in the 30 business days preceding 1 January 2017, being the start of the performance period of the 2017 LTIP.
Other than options held by Executive Directors of Augean PLC, set out in the table above, there are a further 1,046,776
exercisable options held by other participants in the 2014 LTIP, none of whom are directors of Augean PLC.
The latest date for exercise of all share options is ten years after the award date.
The mid-market price of the Company’s shares at 31 December 2017 was 29p. The range of the share price during the
year was 23p to 66p.
On behalf of the Remuneration Committee
JOHN GRANT
CHAIRMAN OF THE REMUNERATION COMMITTEE
19 March 2018
43
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR GOVERNANCE25959 20-3-18 Proof Six Heading Here
OUR
FINANCIALS
4444
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six 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
46
54
55
56
57
58
45
45
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six Independent Auditor’s Report to the
Members of Augean PLC
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Augean PLC (the ‘parent Company’) and its subsidiaries (the ‘Group’) for the
year ended 31 December 2017 which comprise the Consolidated Statement of Comprehensive Income, the Statements
of Financial Position, the Statements of Cash Flow, the Statements of Changes in Shareholders’ Equity – Group and
the Statements of Changes in Shareholders’ Equity - Company and the notes to the financial statements, including a
summary of significant accounting policies. 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, including Financial Reporting Standard 101
‘Reduced Disclosures Framework’ (United Kingdom Generally Accepted Accounting Practice).
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 2017 and of the Group’s loss 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the Group and the parent Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Who we are reporting to
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.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
{ the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
{ the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the Group’s or the parent Company’s ability to continue to adopt the going concern basis of accounting for
a period of at least 12 months from the date when the financial statements are authorised for issue.
46
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Overview of our audit approach
{ Overall materiality: £309,000 which was 5% of our estimate of the Group’s profit before tax and exceptional items;
{ Key audit matters were identified as valuation of provisions, accounting for the landfill tax assessments and valuation of
the non-current assets; and
{ We have assessed the components within the Group and performed a combination of comprehensive and analytical
procedures.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether
or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Risk 1 – valuation of provisions
The Group operates a number of landfill sites in
the UK. A legal obligation of doing so requires
the Group to cap the landfill cells, restore the
landfill sites and provide aftercare services
(usually over a 60-year period).
The Group makes provision for these estimated
capping, restoration and aftercare costs in the
financial statements.
There are significant judgements in relation to
the valuation of the provisions. The Group uses
internal and external experts to determine the
level of provision that is appropriate.
We therefore identified valuation of provisions as
a significant risk, and one of the most significant
assessed risks of material misstatement.
Our audit work included, but was not restricted to:
{ Obtaining an understanding of management’s provision model
including supporting calculations and challenging whether the
underlying data and key assumptions are appropriate based on
internal and external data.
{ Recalculating the provision model by reference to model inputs.
{ Reading and evaluating the reports received from experts and
assessing the expert’s competence, capability and objectivity.
{ Assessing whether key assumptions used in the model such as the
discount rate are appropriate by reference to market data.
{ Challenging the reasonableness of forecast costs that are used in
the model and comparing to historical data or external reports.
The Group’s accounting policy on valuation of provisions is shown
in note 1(g) to the financial statements and related disclosures are
included in note 16. The Audit Committee identified provisions as an
area for review in its report on page 37. Provisions were identified as a
significant judgement and key source of estimation uncertainty in note
1(s) to the financial statements.
Key observations
Based on our audit work, we have concluded that the valuation of
provisions was accounted for in line with the Group’s accounting
policies and IAS 37 ‘Provisions, contingent liabilities and contingent
assets’. We consider that the disclosures in note 1(g), note 1(s)
and note 16 to the financial statements appropriately describe
management’s judgements.
47
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six Independent Auditor’s Report to the
Members of Augean PLC
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Risk 2 – Accounting for the landfill tax
assessments
As described in note 25, the Group has received
notices of assessment for landfill tax, from
HMRC, during the year.
The Group is cooperating with HMRC and
has sought professional advice in respect of
this matter.
Management has concluded that the
assessments will result in an estimated cash
outflow of £nil based on the advice received.
No provision has been recorded within the
financial statements, however disclosure
has been made in accordance with IAS37
‘Provisions, contingent liabilities and contingent
assets’. The accounting for this matter required
significant management judgement.
We therefore identified accounting for the landfill
tax assessments as a significant risk, and one
of the most significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
{ Reading the correspondence between HMRC and the Group.
{ Reading the correspondence from the Group’s professional
advisers.
{ Enquiring of management and the Group’s Director of corporate
stewardship.
{ Challenging whether the conclusions included within
management’s paper are consistent with the evidence above.
{ Assessing the adequacy of the disclosure included within note
25 of the financial statements for appropriateness with IAS 37
‘Provisions, contingent liabilities and contingent assets’.
The Group’s accounting policy on provisions is shown in note 1r to
the financial statements and related disclosures are included in note
25. The Audit Committee identified landfill tax assessments as an area
for review in its report on page 37. Contingent liabilities were identified
as a significant judgement and key source of estimation uncertainty in
note 1(s) to the financial statements.
Key observations
Based on our audit work, no audit findings were noted. We consider
that the disclosure in note 25 to the financial statements appropriately
describes this matter.
48
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Key Audit Matter – Group
How the matter was addressed in the audit – Group
Risk 3 – valuation of non-current assets
The Group records goodwill, other intangible
assets and property, plant and equipment of
£66.8m as at 31 December 2017.
Management has undertaken its annual
impairment review based on discounted
cash flows in relation to goodwill and also for
other assets where there are indications of
impairment.
The Group identified eight cash generating units
(‘CGUs’) at 31 December 2017.
There are significant judgements in the
discounted cash flow calculations, including
forecast operating cashflows, capital
expenditure and discount rates.
We therefore identified valuation of non-current
assets as a significant risk, and one of the
most significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
{ Reading management’s paper on impairment and challenging the
methodology used behind the impairment workings.
{ Challenging the assumptions used in the impairment calculations
by reference to forecasts of the Group, historical data and reports
from experts.
{ Challenging the appropriateness of the discount rates used in the
impairment calculations by reference to market data.
{ Assessing the adequacy of the disclosure included within the
financial statements for appropriateness with IAS 36 ‘Impairment
of assets’.
The Group’s accounting policy on valuation of non-current assets is
shown in note 1(h) to the financial statements and related disclosures
are included in note 9. The Audit Committee identified goodwill
impairment reviews as an area for review in its report on page
37. Valuation of non-current assets was identified as a significant
judgement and key source of estimation uncertainty in note 1(s) to the
financial statements.
Key observations
Based on our audit work, we have concluded that the valuation
of non-current assets was accounted for in line with the Group’s
accounting policies and IAS 36 ‘Impairment of assets’. We concur
with the impairment recorded by management and consider that
the disclosures in note 1 and note 9 to the financial statements
appropriately describes the judgements made by management.
49
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
Independent Auditor’s Report to the
Members of Augean PLC
Key Audit Matter –
Parent Company
How the matter was addressed in the audit –
Parent Company
Risk 1 – valuation of investments
The Company recorded investments in
subsidiaries of £57.3m as at 31 December 2017.
Management has undertaken an impairment
review based on discounted cash flows in
relation to investments in subsidiaries where
there are indications of impairment.
There are significant judgements included
in the discounted cash flow calculations,
including forecast operating cashflows, capital
expenditure and discount rates.
We therefore identified valuation of investments
as a significant risk, which was one of the
most significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
{ Challenging the rationale behind key assumptions of the
impairment workings.
{ Challenging the assumptions used in the impairment calculations
by reference to forecasts, historical data and reports from experts.
{ Challenging the appropriateness of the discount rates used in the
impairment calculations by reference to market data.
{ Assessing the adequacy of the disclosure included within
the financial statements against the requirements of IAS 36
‘Impairment of assets’.
The Company’s accounting policy on valuation of investments is
shown in note 1(f) to the financial statements and related disclosures
are included in note 11. The Audit Committee identified impairment
reviews as an area for review in its report on page 37. Valuation of
non-current assets was identified as a significant judgement and
key source of estimation uncertainty in note 1(s) to the financial
statements.
Key observations
Based on our audit work, we have concluded that the valuation of
investments in subsidiaries was accounted for in line with the Group’s
accounting policies and IAS 36 ‘Impairment of assets’. We concur
with the impairment recorded by management and consider that
the disclosures in note 1 and note 11 to the financial statements
appropriately describe management’s judgement.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the
nature, timing and extent of our audit work and in evaluating the results of that work.
50
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six
Materiality was determined as follows:
Materiality measure
Group
Parent Company
Financial statements
as a whole
Performance materiality
used to drive the extent of
our testing
Tolerance for potential
uncorrected misstatements
£309,000 which was 5% of our
estimate of the Group’s profit before tax
and exceptional items. This benchmark
is considered the most appropriate
because the level of earnings is a key
performance indicator of the Group.
Materiality for the current year is
consistent with the level that we
determined for the year ended
31 December 2016.
Materiality is based on 0.5% of total
assets, capped at 75% of group
materiality, which is £232,000. This
benchmark is considered the most
appropriate given that the activities of
the parent Company primarily comprise
being a holding company and its major
activities relate to non-current assets
included in the financial statements.
Materiality for the current year is lower
than the level that we determined for
the year ended 31 December 2016 due
to the reduction in total assets.
75% of financial statement materiality.
75% of financial statement materiality.
25% of financial statement materiality.
25% of financial statement materiality.
Communication of
misstatements to the Audit
Committee
£15,000 and misstatements below
that threshold that, in our view, warrant
reporting on qualitative grounds.
£12,000 and misstatements below
that threshold that, in our view, warrant
reporting on qualitative grounds.
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the Group’s business, its
environment and risk profile and in particular included:
{ evaluation by the Group audit team of identified components to assess the significance of that component and to
determine the planned audit response based on a measure of materiality.
{ Obtaining an understanding and documenting the processes and controls covering all of the significant risks.
{ Substantive testing on significant transactions, account balances and disclosures, the extent of which was based on
various factors such as our overall assessment of the control environment, the design effectiveness of controls over
individual systems and management of specific risks. The components subject to a comprehensive audit approach
cover 100% of the consolidated revenues.
51
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six Independent Auditor’s Report to the
Members of Augean PLC
Other information
The Directors are responsible for the other information. The other information comprises the information included in the
annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
{ the information given in the strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
{ the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which 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
Responsibilities of Directors for the financial statements
As explained more fully in the Directors’ responsibilities statement set out on page 30 and 31, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
52
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
MARK OVERFIELD BSc, FCA
SENIOR STATUTORY AUDITOR
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
19 March 2018
53
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017
Revenue
Operating expenses
Operating profit / (loss)
Net finance charges
Profit / (loss) before tax
Taxation
Profit / (loss)
Profit for the year and total
comprehensive income
attributable to equity
Shareholders of Augean PLC
Earnings per share
Basic
Diluted
3
4
6
3
8
8
Before
exceptional
items
2017
£’000
Exceptional
items
(note 3)
2017
£’000
Note
Before
exceptional
items
2016
£’000
Exceptional
items
(note 3)
2016
£’000
Total
2017
£’000
84,691
(78,329)
6,362
(850)
5,512
(1,164)
4,348
—
84,691
75,959
(8,605)
(8,605)
—
(8,605)
763
(7,842)
(86,934)
(68,161)
(2,243)
(850)
(3,093)
(401)
(3,494)
7,798
(812)
6,986
(2,464)
4,522
—
(5,719)
(5,719)
—
(5,719)
1,602
(4,117)
Total
2016
£’000
75,959
(73,880)
2,079
(812)
1,267
(862)
405
4,348
(7,842)
(3,494)
4,522
(4,117)
405
(3.40)p
(3.40)p
0.40p
0.39p
The notes on pages 59 to 97 form an integral part of these financial statements.
54
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Statements of Financial Position
As at 31 December 2017
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
COMPANY
Note
2017
£’000
2016
£’000
2017
£’000
2016
£’000
9
10
11
12
6
13
14
15
16
15
16
17
18
18
19,757
323
—
46,678
1,243
68,001
440
19,570
—
6,579
26,589
(18,287)
(652)
—
(50)
(18,989)
7,600
(17,378)
(8,118)
(25,496)
50,105
10,295
757
39,053
50,105
23,997
2,265
0
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
—
96
57,346
1,272
—
58,714
—
761
—
699
1,460
(8,080)
—
—
—
(8,080)
(6,620)
(17,378)
—
(17,378)
34,716
10,295
757
23,664
34,716
—
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
The company made a loss of £3,602,000 (2016: loss of £154,000).
The notes on pages 59 to 97 form an integral part of these financial statements.
The financial statements were approved by the Board on 19 March 2018 and authorised for issue on its behalf by:
M FRYER
GROUP FINANCE DIRECTOR
Augean PLC Registered number: 5199719
55
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six Statements of Cash Flow
For the year ended 31 December 2017
Operating activities
Cash generated from operations
Finance charges paid
Tax paid
Net cash generated from operating activities
Investing activities
Proceeds on disposal of property, plant and equipment
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
Drawdown of loan facilities
Repayments of obligations under finance leases
Net cash generated from financing activities
Net increase / (decrease) 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
2017
£’000
2016
£’000
10,530
(429)
(650)
9,451
62
(8,457)
(373)
—
(8,768)
(1,027)
28
3,711
(4)
2,708
3,391
3,188
6,579
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
56
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Statements of Changes in Shareholders’ Equity
For the year ended 31 December 2017
Group
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 1 January 2017
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
Tax relating to transactions with owners of the Company
Total transactions with the owners of the Company
At 31 December 2017
Share
capital
£’000
10,225
—
—
—
50
—
50
10,275
—
—
—
20
—
—
20
10,295
Share
premium
account
£’000
612
—
—
—
136
—
136
748
—
—
—
9
—
—
9
757
Retained
earnings
£’000
43,561
Total
equity
£’000
54,398
405
405
405
405
(665)
—
243
(422)
43,544
(665)
186
243
(236)
54,567
(3,494)
(3,494)
(3,494)
(3,494)
(1,027)
—
194
(164)
(997)
39,053
(1,027)
29
194
(164)
(968)
50,105
57
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six Statements of Changes in Shareholders’ Equity
For the year ended 31 December 2017
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 1 January 2017
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
Tax relating to transactions with owners of the Company
Total transactions with the owners of the Company
At 31 December 2017
Share
capital
£’000
10,225
—
—
—
50
—
50
10,275
—
—
—
20
—
—
20
10,295
Share
premium
account
£’000
612
—
—
—
136
—
136
748
—
—
—
9
—
—
9
757
Retained
earnings
£’000
28,839
Shareholders’
equity
£’000
39,676
(154)
(154)
(154)
(154)
(665)
—
243
(422)
28,263
(665)
186
243
(236)
39,286
(3,602)
(3,602)
(3,602)
(3,602)
(1,027)
—
194
(164)
(997)
23,664
(1,027)
29
194
(164)
(968)
34,716
58
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Notes to the Financial Statements
For the year ended 31 December 2017
1 Accounting policies
(a) Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS),
as adopted by the European Union, 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
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. Therefore these financial statements do not include: a statement of cashflows and related disclosures, IAS 24 related
party disclosures, capital management disclosures and the effect of future standards not adopted.
(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.
59
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six 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 believe 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.
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.
60
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017 (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. Freehold land and buildings are recognised at
historical cost.
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 or on a reducing balance
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, machinery and motor vehicles – two to ten years
– 50 years
– 20 years
Methods of depreciation, residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of
financial position date.
Assets held under finance leases are depreciated over the shorter of their expected useful lives or, where there is no
reasonable certainty that title will be obtained at the end of the lease term, the term of the relevant lease.
The gain or loss arising from the disposal or retirement of an item of property, plant and equipment is determined as the
difference between the net disposal proceeds and the carrying amount of the item and is included in profit or loss.
Finance leases and hire purchase arrangements
Where the Group enters into a lease which entails taking on substantially all of the risks and rewards of ownership of an
asset, the lease is treated as a finance lease and the asset is capitalised. Future instalments under such leases, net of
finance charges, are recognised as a liability. Rentals payable are apportioned between the finance element, which is
charged to profit or loss so as to give an approximate constant rate of charge on the outstanding obligation and the capital
element which reduces the outstanding obligation for future instalments.
The asset and associated liability are recorded in the statement of financial position within property, plant and equipment
and financial liabilities respectively at their fair value or, if lower, at the present value of the minimum lease payments, both
determined at the inception of the lease.
Depreciation is calculated in accordance with the above depreciation policies.
Other leases are treated as operating leases, the rentals for which are charged to profit or loss on a straight-line basis over
the lease term.
61
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six 1 Accounting policies continued
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 or cells to which the provision relates in proportion to the amount of
void consumed at the sites during the period. The costs of restoration and post-closure monitoring are charged against
the provision when incurred. The provision has been estimated using current costs and is discounted. When the effect is
material, the expected future cash flows required to settle the obligation are discounted at the pre-tax rate that reflects the
current market assessments of the time value of money and the risks specific to the obligation.
(h) Impairment of non-current assets
At each statement of financial position date, the Group assesses whether there is any indication that its assets have been
impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment, if any. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount
of the CGU to which the asset belongs is determined.
The recoverable amount is defined as the higher of fair value less costs to sell and value in use at the date the impairment
review is undertaken. Value in use represents the present value of expected future cash flows discounted on a pre-tax basis,
using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset or CGU. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. That reduction is recognised as an impairment loss.
An impairment loss relating to assets carried at cost less any accumulated depreciation or amortisation is recognised
immediately in profit or loss.
Goodwill is tested for impairment on an annual basis. An impairment loss is recognised for CGUs if the recoverable amount
of the unit is less than the carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the
assets of the unit by first reducing the carrying amount of any goodwill allocated to the CGU and then reducing the other
assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.
If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its
recoverable amount but limited to the carrying amount that would have been determined had no impairment loss been
recognised in prior years. A reversal of an impairment loss is recognised in profit or loss. Any impairments of goodwill
cannot be subsequently reversed.
(i) Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct
costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and
recognised on a straight-line basis over the lease term.
(j) Inventories
Inventories are stated at the lower of cost (measured on a first-in first-out basis) and net realisable value and, where
appropriate, are stated net of provisions for impairment.
62
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017 (k) Tax
Current tax
Current tax is provided at amounts expected to be paid (or recovered) using tax rates and laws that have been enacted or
substantively enacted at the statement of financial position date. The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items
of income that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Deferred tax
Deferred tax on temporary differences at the statement of financial position date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes is accounted for using the statement of financial
position liability method.
Using the liability method, deferred tax liabilities are recognised in full for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible
temporary differences can be utilised. However, if the deferred tax asset or liability arises from the initial recognition of
goodwill or the initial recognition of an asset or liability in a transaction, other than a business combination, that at the time
of the transaction affects neither accounting nor taxable profit, it is not recognised.
Deferred tax on temporary differences associated with shares in subsidiaries and jointly controlled entities is not provided if
reversal of these temporary differences can be controlled by the Group and it is probable that the reversal will not occur in
the foreseeable future.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply when the asset is realised, or
the liability settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date.
Current and deferred tax are recognised in profit or loss except when they relate to items recognised in other
comprehensive income or equity, where they are similarly recognised in other comprehensive income or equity.
(l) Retirement benefits
Contributions made by the Group to individual money purchase pension schemes are charged to profit or loss during the
period to which they relate.
(m) Equity-settled share-based payments
IFRS 2 ‘Share-based Payments’ requires that an expense for equity instruments granted is recognised in the financial
statements based on their fair values at the date of the grant. This expense, which is in relation to employee share options and
executive LTIP schemes, is recognised over the vesting period of the scheme based on the number of instruments expected
to vest. The fair value of employee services is determined by reference to the fair value of the awarded grant calculated using
the Black Scholes model or Monte Carlo model, excluding the impact of any non-market vesting conditions.
At the statement of financial position date, the Group revises its estimate of the number of share incentives that are
expected to vest. The impact of the revisions of original estimates 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.
63
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six 1 Accounting policies continued
(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.
(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’.
64
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017 (iii) Free cash flow
Free cash flow is a non-IFRS measure used by management 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) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of
the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation
at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those
cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,
a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably.
A contingent liability is disclosed if there is a possible obligation from a past event and the outflow is not probable or is
unable to be measured.
(s) 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.
65
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six 1 Accounting policies continued
Impairment of goodwill, investments and fixed assets
The Group has property, plant and equipment with a carrying value of £46,678,000 (note 12) and goodwill with a carrying
value of £19,757,000 (note 9). These assets are reviewed annually for impairment as described in these financial statements
to ensure that goodwill and property, plant and equipment are not carried above their estimated recoverable amounts. To
assess if any impairment exists, estimates are made of the future cash flows expected to result from the use of the asset
and its eventual disposal. Actual outcomes could vary from such estimates of discounted future cash flows. Factors such
as changes in expected use of property, plant and equipment, closure of facilities, or lower than anticipated revenues could
result in impairment. An impairment loss of £3,348,000 was recorded in the income statement in 2016 and £6,307,000 in
2017. Further detail is explained in note 9. An impairment loss was recorded in the Company income statement in 2017 of
£7,210,000 in respect of the investment in Colt. Further detail is explained in note 11.
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 2017, the net liability relating to current income tax is £652,000 (2016: £658,000). A deferred tax asset of
£1,243,000 (2016: £1,176,000) 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.
Contingent liability
The Group has made no provision (2016: £nil) for assessments relating to unpaid landfill taxes received from HMRC. This is
based on the legal and other advice received by the Group over several years. This is shown in note 25.
66
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
t) New IFRS standards and interpretations not applied
The following new standards, amendments to standards and interpretations will be mandatory for the first time in future
financial years.
IFRS 17 Insurance Contracts
IASB Effective Date
EU Effective Date
01 January 2021 Not yet endorsed
IFRS 16 Leases (Issued on 13 January 2016)
01 January 2019
01 January 2019
IFRIC Interpretation 22 Foreign Currency Transactions and Advance
Considerations (issued on 8 December 2016)
01 January 2018 Not yet endorsed
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 9 Financial Instruments (Issued on 24 July 2014)
01 January 2018
01 January 2018
Annual Improvements to IFRS Standards 2015-2017 Cycle (issued on 12
December 2017)
01 January 2019 Not yet endorsed
Amendments to IAS 40: Transfers of investment property (issued 8 December 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 9: Prepayment features with negative compensation (issued
12 October 2017)
01 January 2019 Not yet endorsed
Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures
(issued 12 October 2017)
01 January 2019 Not yet endorsed
Amendments to IFRS 4: Applying IFRS 9 financial instruments with IFRS 4
Insurance Contracts.
01 January 2018
01 January 2018
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 2018 Not yet endorsed
Clarifications to IFRS 15 Revenue from Contracts with Customers (issued on 12
April 2016)
01 January 2018
01 January 2018
Annual improvements to IFRS 2014-2016 Cycle (issued 8 December 2016) -
Relating to IFRS 12 Disclosure of interest in other entities
IFRS 17 Insurance contracts
01 January 2017 Not yet endorsed
01 January 2021 Not yet endorsed
IFRS 16 Leases (Issued on 13 January 2016)
01 January 2019
01 January 2019
Management are in the process of assessing the impact that the implementation of IFRS 15 will have on revenue
recognition, particularly with reference to the provision of services and other income streams. Other than in respect of IFRS
16 Leases, the application of these standards and interpretations is not expected to have a material impact on the Group’s
reported financial performance or position. IFRS 16 will not come into effect until our 2019 year end, therefore the impact
assessment will be done nearer the time. However, it is likely to result in the current operating leases being recognised on
the Balance Sheet (see note 20).
67
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six 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 Executive Directors (the
chief operating decision-makers) review internal management reports on at least a monthly basis. The following summary
describes the operations of each of the Group’s reportable segments:
{ Energy & 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 & 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 below. Performance is measured based on the
segment operating profit, as included in the internal management reports that are reviewed by the Group’s Executive
Directors. 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.
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 1.
Segment profit represents the profit earned by each segment without allocation of the share of central administration costs
including Directors’ salaries, finance costs, and income tax expense. This is the measure reporting to the Group’s Executive
Chairman for the purpose of resource allocation and assessment of segment performance.
68
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017 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
2017
Energy &
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry &
Infrastructure
£’000
Augean
North Sea
Services
£’000
Group
£’000
53,229
960
4,566
16,866
11,147
86,768
1,243
6,579
94,590
(14,940)
(517)
(3,058)
(6,068)
(1,872)
(26,455)
(17,378)
(652)
(44,485)
2016
Energy &
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry &
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)
69
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six 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
Loss before tax
Tax (note 6)
Loss after tax
Other information
Capital expenditure
Depreciation and amortisation
Impairment loss
2017
Energy &
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry &
Infrastructure
£’000
Augean
North Sea
Services
£’000
8,108
4,890
—
—
52
9,572
—
—
—
—
22,622
10,697
33,319
(1,663)
31,656
6,577
(1,280)
5,297
—
—
—
—
—
—
3,068
—
—
—
3,068
—
3,068
—
3,068
1,207
(162)
1,045
—
—
3,134
7,687
—
—
—
—
—
—
10,821
—
10,821
(156)
10,665
(352)
(313)
(665)
—
—
22,524
—
—
—
—
—
—
—
22,524
—
22,524
(1,471)
21,053
(760)
(6,682)
(7,442)
—
—
—
—
—
—
—
6,657
5,736
5,858
18,251
—
18,251
(2)
18,249
656
(168)
488
4,958
3,465
—
62
173
—
1,273
373
—
1,355
1,377
6,307
1,130
997
—
Central costs relate to the costs of operating as a plc and are not allocated between the business units.
Group
£’000
8,108
4,890
25,658
7,687
52
9,572
3,068
6,657
5,736
5,858
77,286
10,697
87,983
(3,292)
84,691
7,328
(8,605)
(1,277)
(850)
(966)
(3,093)
(401)
(3,494)
8,778
6,385
6,307
70
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
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 &
Construction
£’000
Radioactive
Waste
Services
£’000
Augean
Integrated
Services
£’000
Industry &
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
—
—
—
1,205
—
1,205
(26)
1,179
—
—
2,715
5,470
—
—
—
—
—
—
8,185
—
8,185
(547)
7,638
—
—
19,959
—
—
—
—
—
—
—
19,959
—
19,959
(1,117)
18,842
—
—
—
—
—
—
—
5,313
4,013
3,609
12,935
—
12,935
(13)
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
1,044
—
1,983
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.
71
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
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 assurance 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
2017
£’000
74
33
5
107
5
112
447
5,907
31
296
1,417
2016
£’000
85
31
9
116
9
125
262
5,970
42
241
1,009
Loss on sale of property, plant and equipment
17
—
Exceptional items:
Impairment of property, plant and equipment (note 9)
Net settlement of trade-related legal case
Restructuring charges
Acquisition and disposal-related costs
Costs associated with landfill tax dispute
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)
6,307
—
1,038
137
1,093
30
8,605
2017
£’000
665
2
183
850
3,348
1,162
297
820
—
92
5,719
2016
£’000
673
9
130
812
72
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
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
2017
£’000
31
349
89
469
2017
£’000
17,375
1,639
702
19,716
2016
£’000
31
331
75
437
2016
£’000
14,579
1,766
625
16,970
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 an average of 341 (2016: 289) people in the year. The total employee costs to the Company were
£12,310,000 (2016: £10,400,000)
The total remuneration of the Directors of the Company was £711,000 (2016: £721,000). The highest paid Director received
total emoluments of £312,000 (2016: total emoluments of £362,000 including pension contributions of £15,000).
No Directors exercised share options during the year (2016: none).
The Directors have identified 16 (2016: 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
2017
£’000
2,264
55
194
2,513
2016
£’000
1,326
85
243
1,654
73
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
6 Taxation
Group
Current tax
UK corporation tax on profit for the year
Adjustments in respect of prior years
Deferred tax
Charge / (credit) in respect of the current year
Reassessment of tax qualifying assets
Adjustments in respect of prior years
Tax charge on the result for the year
Tax reconciliation for continuing operations
(Loss) / 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
2017
£’000
737
(100)
637
(121)
—
(115)
(236)
401
2017
2016
£’000
(3,092)
(595)
1,120
47
44
(215)
—
—
401
%
19.25%
£’000
1,267
254
(36)%
(2)%
(2)%
7%
—
—
(13)%
163
107
67
(42)
379
(66)
862
2016
£’000
1,327
(669)
658
(802)
379
627
204
862
%
20%
13%
8%
5%
(3)%
30%
(5)%
68%
The main rate of corporation tax in the UK was 19.25% (2016: 20%).
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.
74
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
The movement in the net deferred tax asset during the year was as follows:
Group
At 1 January 2016
Credited / (charged) to the income
statement
Acquisition of business
Reassessment of tax qualifying assets
Adjustment in respect of prior years
At 1 January 2017
Credited / (charged) to the income
statement
Charged to equity
Impairment of goodwill
Adjustment in respect of prior years
At 31 December 2017
Deferred tax assets
Deferred tax liabilities
At 31 December 2017
Goodwill
intangible
election
£’000
315
Capital
allowances
£’000
1,005
Share
options
£’000
145
Acquired
intangible
asset
£’000
—
Other
provisions
£’000
851
(16)
—
—
—
299
(181)
—
—
—
118
1188
—
118
749
(229)
(679)
(578)
268
(77)
—
—
168
359
924
(565)
359
71
—
—
—
216
5
(164)
—
(8)
49
49
—
49
46
(407)
—
—
(361)
—
—
361
—
—
—
—
—
Total
£’000
2,316
802
(636)
(679)
(627)
1,176
(230)
(164)
361
100
1,243
1,808
(565)
1,243
2016
£’000
259
36
295
(48)
—
—
(49)
754
23
—
—
(60)
717
717
—
717
2017
£’000
295
(295)
—
Company
At beginning of the year
(Charged) / credited to the income statement during the year
At end of the year
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. £47,000 (2016: £102,000 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 £3,814,000 (2016:
£3,282,000). 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
There are no unrecognised deferred tax assets in the company (2016: nil).
2017
£’000
—
663
663
2016
£’000
—
538
538
75
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
7 Dividends
Company
Proposed final dividend for the year ended 31 December 2017 of nil pence per share (2016: 1.0
pence per share)
Total
2017
£’000
—
—
2016
£’000
1,027
1,027
At the forthcoming Annual General Meeting, the Board will recommend to Shareholders that a resolution is passed to pay
no dividend for the year ended 31 December 2017.
8 Earnings per share
The calculation of basic earnings per share (EPS) is based on the loss attributable to ordinary Shareholders of £3,494,000
(2016: profit of £405,000) and a weighted average number of ordinary shares outstanding of 102,808,863 (2016:
102,420,517), calculated as follows:
Earnings for the purposes of basic and diluted EPS
Exceptional items (net of associated tax)
Earnings for the purposes of adjusted basic and diluted EPS
2017
£’000
(3,494)
7,842
4,348
2016
£’000
405
4,117
4,522
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. In 2017 the exercise of share
options would decrease the loss per share and be antidilutive. They have therefore been excluded from the calculation of
the weighted average number of shares for unadjusted 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
2017
£’000
2016
£’000
102,808,863
1,790,587
104,599,450
102,420,517
1,775,783
104,196,300
(3.40)p
(3.40)p
4.23p
4.16p
0.40p
0.39p
4.42p
4.34p
76
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
9 Goodwill
Cost
At 1 January 2016
Acquisition
At 1 January 2017
Acquisition
At 1 January 2017 and 31 December 2017
Accumulated impairment
At 1 January 2016
At 1 January 2017
Impairment charge
At 31 December 2017
Net book value
At 31 December 2017
At 1 January 2017
At 1 January 2016
2016
£’000
103,923
4,240
108,163
—
108,163
(84,166)
(84,166)
(4,240)
(88,406)
19,757
23,997
19,757
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 2017 compared to eight CGUs at 31
December 2016.
The allocation of goodwill by CGU is as follows:
Energy and Construction business unit
Colt Industrial Services CGU
Industry and Infrastructure business unit
Total
2017
£’000
12,575
—
7,182
19,757
2016
£’000
12,575
4,240
7,182
23,997
The increase in goodwill in the prior 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.
77
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
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 2017.
{ The high temperature incinerator at East Kent (EKHTI), which was written down to a net book value of £1 in 2016;
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 9.5% (2016: 9.7%), 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 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 described above there is no indication of impairment with headroom of £64.8m (2016: £35.4m).
Sensitivity analysis has been performed over the key assumptions which indicate the following impact, meaning
reduction or increase in headroom:
Discount factor
EBITDA margin
Revenue growth rate
EBITDA means earnings before interest, tax, depreciation and amortisation.
Sensitivity
1%
1%
1%
Impact in
2017
£7.5m
£2.2m
£1.2m
Impact in
2016
£5.2m
£2.2m
£1.3m
The key assumptions for the Industry & Infrastructure CGU’s cash flows are:
{ based on approved budgets and plans for 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 described above there is no indication of impairment with headroom of £2.4m (2016: £1.9m).
Sensitivity analysis has been performed over the key assumptions which indicate the following impact,
meaning reduction or increase in headroom:
Discount factor
EBITDA margin
Revenue growth rate
78
Sensitivity
1%
1%
1%
Impact in
2017
£0.8m
£1.6m
£1.5m
Impact in
2016
£0.7m
£1.6m
£1.5m
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
The key assumptions for the EKHTI CGU’s cash flows are:
{ based on approved budgets and plans for 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 2% per annum for the first three years before
reducing to 1% per annum for the remaining time horizon;
{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 described above there is no indication of impairment with headroom of £0.0m (2016: £Nil).
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
2017
£0.0m
£0.3m
£0.3m
Impact in
2016
N/A
N/A
N/A
Consideration has been given by the Directors of whether there is a potential reversal of impairment recorded in
previous years. However, given the uncertainty around the future performance of the EKHTI CGU the Directors have
conclude that no reversal of impairment is required.
The key assumptions for the Colt Industrial Services CGU’s cash flows are:
{ based on approved budgets and plans for 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;
{ there is no approved maintenance capex in 2018, therefore capex expenditure of £50k is expected for 2019
onwards, increasing by 1% per annum; 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 Colt Industrial Services CGU has a value in use of £2.0m. The Colt business has
£4.2m of Goodwill, £1.9m of customer relationship, and £2.2m of tangible PPE associated with it.
The Directors have concluded that the fair value less costs of disposal (net resale value) of the PPE is £2.0m.
Therefore the impairment charge has been allocated to the goodwill first and then to intangible customer relationship
assets, with the balance being allocated to tangible fixed assets.
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.
79
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
10 Other intangible assets
Cost
At 1 January 2016
Additions
At 1 January 2017
Additions (note 23)
At 31 December 2017
Amortisation
At 1 January 2016
Charge for the year
At 1 January 2017
Charge for the year
Impairment loss (note 9)
At 31 December 2017
Net book value
At 31 December 2017
At 1 January 2017
At 1 January 2016
GROUP
Computer
software
£’000
Customer
relationships
£’000
Computer
software
and total
£’000
COMPANY
Computer
software
and total
£’000
854
51
905
373
1,278
640
130
770
185
—
955
323
135
214
—
2,262
2,262
—
2,262
—
132
132
262
1,868
2,262
—
2,130
—
854
2,313
3,167
373
3,540
640
262
902
447
1,868
3,217
323
2,265
214
798
63
861
13
874
596
130
726
52
—
778
96
135
202
The addition to customer relationships during 2016 relates to the acquisition of Colt Holdings Limited (note 23).
80
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017 11 Investments in subsidiaries
Cost
At 1 January 2016
Additions
At 1 January 2017
At 31 December 2017
Provision for impairment
At 1 January 2016
At 1 January 2017
Impairment loss
At 31 December 2017
Net book value
At 31 December 2017
At 1 January 2017
At 1 January 2016
The subsidiary companies of the Group are as follows:
2016
£’000
133,483
13,789
147,272
147,272
(82,676)
(82,676)
(7,210)
(89,886)
57,386
64,596
50,807
Name of company
Augean Treatment Limited
Augean North Limited
Augean South Limited
Augean North Sea Services Limited
Augean Integrated Services Limited
Colt Holdings Limited
Colt Industrial Services Limited
ASB Environmental 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 at
balance sheet date
%
100
100
100
100
100
100
100 (indirect)
100
100
100
Nature of
business
Waste treatment
Landfill operations
Landfill operations
Waste treatment
Waste treatment
Industrial Services
Industrial Services
Dormant
Dormant
Dormant
These companies are owned directly by Augean except where noted.
Additions to investments in 2016 relate to the acquisition of Colt Holdings Ltd and its subsidiary Colt Industrial Services Ltd.
The impairment loss of £7,210,000 (2016: £Nil) recognised by the Company in 2017 relates to the investment in ASB
Environmental Limited which is in the process of being closed as at the balance sheet date and the impairment of the
Company’s investment in Colt Holdings Limited. A review of the carrying value of this investment was undertaken in the year
subsequent to the performance of the business falling short of what was expected.
81
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
12 Property, plant and equipment
Group
Cost
At 1 January 2016
Additions
Acquisitions
Disposals
At 1 January 2017
Additions
Revision of provisions
Disposals
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Charge for year
Impairment loss (note 9)
Disposals
At 1 January 2017
Charge for year
Impairment loss (note 9)
Disposals
At 31 December 2017
Net book value
At 31 December 2017
At 1 January 2017
At 1 January 2016
Freehold
land and
buildings
£’000
Leasehold
land and
buildings
£’000
Engineered
cells
£’000
Plant and
machinery
£’000
43,085
2,337
1,138
—
46,560
1,159
—
—
47,719
11,043
1,777
—
—
12,820
615
—
—
13,435
34,284
33,740
32,042
1,365
83
—
—
1,448
8
—
—
1,456
232
95
—
—
327
104
—
—
431
1,025
1,121
1,133
11,483
1,115
—
—
12,598
2,374
(379)
—
14,593
10,576
1,423
—
—
11,999
1,691
—
—
13,690
903
599
907
26,640
4,884
1,386
(63)
32,847
5,237
—
(180)
37,904
17,804
2,718
3,348
(38)
23,832
3,528
200
(122)
27,438
10,466
9,015
8,836
Total
£’000
82,573
8,419
2,524
(63)
93,453
8,778
(379)
(180)
101,672
39,655
6,013
3,348
(38)
48,978
5,938
200
(122)
54,994
46,678
44,475
42,918
There were outstanding contractual commitments for acquisitions of property, plant or equipment of £1,105,000 at 31
December 2017 (2016: £267,000). Plant and machinery includes assets held under finance lease agreements with a
carrying value at 31 December 2017 of £Nil (2016: £31,000).
Certain assets are pledged as security for loans as disclosed in note 15.
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
82
2017
£’000
154
(154)
—
2016
£’000
154
(123)
31
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
Company
Cost
At 1 January 2016
Additions
At 1 January 2017
Additions
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Charge for year
At 1 January 2017
Charge for year
At 31 December 2017
Net book value
At 31 December 2017
At 1 January 2017
At 1 January 2016
13 Trade and other receivables
Current assets
Trade receivables
Other taxes recoverable
Prepayments and accrued income
Freehold
land and
buildings
£’000
Plant and
machinery
£’000
778
—
778
64
842
132
11
143
8
151
691
635
646
1,457
224
1,681
109
1,790
914
142
1,056
153
1,209
581
625
543
GROUP
COMPANY
2017
£’000
15,561
—
4,009
19,570
2016
£’000
15,135
—
3,326
18,461
2017
£’000
—
—
761
761
Total
£’000
2,235
224
2,459
173
2,632
1,046
153
1,199
161
1,360
1,272
1,260
1,189
2016
£’000
73
202
1,377
1,647
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.
14 Trade and other payables
Current
Trade payables
Amounts due to subsidiary undertakings
Other taxes and social security
Accruals and deferred revenue
GROUP
COMPANY
2017
£’000
2016
£’000
2017
£’000
2016
£’000
6,332
—
5,575
6,380
18,287
5,298
—
4,223
7,671
17,192
516
6,704
362
498
8,080
194
15,724
323
1,278
17,519
All amounts are anticipated to be payable in the short term. The carrying values are considered to be a reasonable
approximation of fair value.
83
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
15 Borrowings
This note provides information about the Group’s and Company’s interest-bearing borrowings which are carried at
amortised cost.
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
GROUP
COMPANY
2017
£’000
2016
£’000
2017
£’000
2016
£’000
—
—
—
—
17,378
—
17,378
—
17,378
—
17,378
—
—
17,378
17,378
—
—
—
166
—
5
171
13,833
—
13,833
166
13,833
5
14,004
171
—
13,833
14,004
4
—
4
—
—
—
—
17,378
—
17,378
—
17,378
—
17,378
—
—
17,378
17,378
—
—
—
—
—
2
2
13,833
—
13,833
—
13,833
2
13,835
2
—
13,833
13,835
2
—
2
The obligations under finance leases and hire purchase contracts are secured against the specific assets financed with a
carrying amount of £Nil (2016: £31,000). The bank overdraft, bank loan and guarantees are secured by way of a first legal
charge over certain freehold properties, debentures, cross guarantees and indemnities across the Group.
During the year the Group, following on from the HMRC dispute regarding landfill tax, breached its loan agreement with
HSBC Bank plc in respect of the taxation clause of the bank credit facility which requires tax disputes to be less than
£0.1m. HSBC has, at 31 December 2017 and through to the end of March 2019, waived this breach.
For more information about the Group’s exposure to interest rate, credit risk and liquidity risk, see note 24.
84
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
16 Provisions
At 1 January 2016
Charged to profit or loss during the year
– unwinding of discount
– provision in the year
Utilised during the year
At 1 January 2017
Charged to profit or loss during the year
– unwinding of discount
– provision in the year
Utilised during the year
At 31 December 2017
Restoration
and after-care
costs of
landfill sites
£’000
2,946
GROUP
Capping
provision
£’000
3,877
Other
provisions
£’000
76
130
183
(51)
3,208
183
387
(64)
3,714
—
420
(61)
4,236
—
142
—
4,378
—
—
—
76
—
—
—
76
Total
£’000
6,899
130
603
(112)
7,520
183
529
(64)
8,168
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%. None of this
provision is expected to be utilised within 12 months of the balance sheet date.
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 (2016: £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
Allotted, called up and fully paid – 102,948,036 (2016: 102,748,383) shares of 10p
2017
£’000
10,295
2016
£’000
10,275
During the year, 199,653 shares (2016: 499,300) were issued as a result of the exercise of share options. The total
proceeds were £28,000 (2016: £192,000).
85
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
18 Reserves
At 1 January 2017
Total comprehensive income for the year
Issue of equity
Dividend (note 7)
Share-based payments
Tax relating to transactions with the owners of the Company
At 31 December 2017
At 1 January 2017
Total comprehensive income for the year
Issue of equity
Dividend (note 7)
Share-based payments
Tax relating to transactions with the owners of the Company
At 31 December 2017
Restoration
and after-care
costs of
landfill sites
£’000
748
—
9
—
—
—
757
Restoration
and after-care
costs of
landfill sites
£’000
748
—
9
—
—
—
757
GROUP
Capping
provision
£’000
43,544
(3,494)
—
(1,027)
194
(164)
39,053
COMPANY
Capping
provision
£’000
28,263
(3,602)
—
(1,027)
194
(164)
23,664
Other
provisions
£’000
44,292
(3,494)
9
(1,027)
194
(164)
39,810
Other
provisions
£’000
29,011
(3,602)
9
(1,027)
194
(164)
24,421
19 Share-based payments
At 31 December 2017, 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
price
At
1 January
2017
39.5p
29p
202,531
55,172
40.25p 1,000,000
1,257,703
Granted
Exercised
Lapsed
At
31 December
2017
—
—
—
—
—
—
—
—
— (1,000,000)
— (1,000,000)
202,531
55,172
—
257,703
10p
10p 1,015,369
10p 1,932,694
— 1,580,535
—
— (199,653)
(199,653)
10p
—
(901,606)
— (717,287)
(549,333)
(3,168,226)
19.5p
4,205,766 1,580,535
10p
19.2p
1,257,703
39.6p
678,929
298,082
1,183,708
2,418,422
12.9p
1,441,411
14.9p
Exercise date
Augean Share Option Schemes
December 2013 – December 2019
May 2011 – May 2021
August 2016 – August 2023
Augean LTIP Scheme
April 2020 – September 2027
April 2019 – September 2026
April 2017 – September 2024
Weighted average exercise price
Of which exercisable
Weighted average exercise price
86
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
Outstanding awards at 31 December 2016 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
— 1,388,922
—
1,388,922
10.0p
2,928,530
4,685,533
20.9p
753,003
37.3p
— (416,189)
— (1,046,952)
(1,463,141)
10.0p
(499,300)
37.3p
972,733
1,881,578
4,112,014
19.2p
1,257,703
39.6p
LTIP Scheme
In 2014, 2016 and 2017, 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
Expected volatility
Expected life (years)
Risk-free rate
Expected dividend yield
Fair value per option (pence)
2017
LTIP
28 April 2017
2016
LTIP
31 October 2016
April 2020 –
September 2027
65.0p
10p
25.03%
2.7
0.1%
1.54%
52
April 2019 –
September 2026
52.5p
10.0p
21.18%
2.5 years
0.3%
1.24%
27 – 41
2014
LTIP
23 September
2014
April 2017 –
September 2024
49.5p
10.0p
24.80%
2.6 years
0.8%
0.70%
22 – 39
2011
Share options
20 May 2011
May 2014 –
May 2021
28.9p
29.0p
35%
4 years
2.3%
0.0%
9
2009
Share options
21 December
2009
December 2014 –
December 2019
39.5p
39.5p
43%
4 years
2.5%
0.0%
4
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.
87
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
19 Share-based payments continued
The 2009 and 2011 grants of share options have a vesting period of three years but no market or non-market performance
criteria attached to them.
The 2014, 2016 and 2017 LTIPs have performance conditions associated with it as detailed in the Directors’
Remuneration Report.
For options outstanding at 31 December 2017, the weighted average remaining contractual life is 8.2 years (2016: 9.6 years).
The Group recognised a total expense of £194,000 (2016: £243,000) related to equity-settled share-based payment
transactions, of which £194,000 (2016: £161,000) 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
– after five years
Land and buildings
Payment due:
– within one year
– within two to five years
– after five years
2017
£’000
2016
£’000
1,457
2,319
2
3,778
217
314
899
1,430
688
1,130
—
1,818
221
626
930
1,777
The operating lease commitments relating to Land and buildings leases have been discounted at a rate of 3%.
88
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
21 Reconciliation of operating profit / (loss) to net cash generated from / (used in)
operating activities
Operating (loss) / 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
(Profit) / loss on disposal of property, plant and equipment
Cash generated from operations
Finance charges paid
Tax paid
Net cash generated from operating activities
GROUP
2017
£’000
(2,243)
447
5,938
6,307
10,449
194
(59)
(1,109)
474
520
61
10,530
(429)
(650)
9,451
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
The above EBITDA and net cash generated from operating activities includes a total net cash outflow of £1,602,000 relating
to exceptional items (2016: outflow of £2,371,000).
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
1 January
2017
£’000
3,188
(167)
(13,833)
(4)
(10,816)
Cash flow
£’000
3,391
167
(3,711)
4
(149)
Other movement
£’000
—
—
166
—
166
31 December
2017
£’000
6,579
—
(17,378)
—
(10,799)
The other movement relates to the amortisation of the fees incurred to set up the bank facility.
89
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
23 Financial instruments
The financial assets of the Group and Company are categorised as follows:
As at 31 December 2017
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 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
GROUP
Non-
financial
assets
£’000
19,757
323
—
46,678
1,243
440
4,009
—
—
72,450
GROUP
Non-
financial
assets
£’000
23,997
2,265
—
44,475
1,176
379
3,326
—
—
75,618
Loans and
receivables
£’000
—
—
—
—
—
—
15,561
—
6,579
22,140
Loans and
receivables
£’000
—
—
—
—
—
—
15,135
—
3,188
18,323
Total
£’000
19,757
323
—
46,678
1,243
440
19,570
—
6,579
94,590
Total
£’000
23,997
2,265
—
44,475
1,176
379
18,461
—
3,188
93,941
Loans and
receivables
£’000
—
—
—
—
—
—
—
—
699
699
Loans and
receivables
£’000
—
—
—
—
—
—
73
—
624
697
COMPANY
Non-
financial
assets
£’000
—
96
57,346
1,272
—
—
761
—
—
59,475
COMPANY
Non-
financial
assets
£’000
—
135
64,596
1,260
295
—
1,573
2,085
—
69,944
Total
£’000
—
96
57,346
1,272
—
—
761
—
699
60,174
Total
£’000
—
135
64,596
1,260
295
—
1,646
2,085
624
70,641
The financial liabilities of the Group and Company are categorised as follows:
As at 31 December 2017
Trade and other payables – current
Current tax liabilities
Borrowings – current
Borrowings – non-current
Provisions
Financial
liabilities at
amortised
cost
£’000
6,332
—
—
17,378
—
23,710
GROUP
Liabilities
not within
scope of
IAS 39
£’000
11,955
652
—
—
8,168
20,775
Financial
liabilities at
amortised
cost
£’000
6,375
—
—
17,378
—
26,753
COMPANY
Liabilities
not within
scope of
IAS 39
£’000
1,199
—
—
—
—
1,199
Balance
sheet total
£’000
18,287
652
—
17,378
8,168
44,485
Balance
sheet total
£’000
7,574
—
—
17,378
—
24,952
90
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
As at 31 December 2016
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
GROUP
Liabilities
not within
scope of
IAS 39
£’000
3,326
658
—
—
7,520
11,504
Financial
liabilities at
amortised
cost
£’000
2,413
—
—
13,835
—
16,248
COMPANY
Liabilities not
within scope
of IAS 39
£’000
15,106
—
—
—
—
15,106
Balance
sheet total
£’000
17,192
658
171
13,833
7,520
39,374
Balance
sheet total
£’000
17,519
—
—
13,835
—
31,354
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 2017
Trade and other payables – current
Borrowings – current
Borrowings – non-current
Total
As at 31 December 2016
Trade and other payables – current
Borrowings – current
Borrowings – non-current
Total
Amounts
due in
less than
one year
£’000
18,407
—
—
18,407
Amounts
due in
less than
one year
£’000
17,192
171
—
17,363
Amounts
due in
second to
fifth year
£’000
—
—
17,378
17,378
Amounts
due in
second to
fifth year
£’000
—
—
13,833
13,833
Total
financial
liabilities
£’000
18,407
—
17,378
35,785
Total
financial
liabilities
£’000
17,192
171
13,833
31,196
91
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
23 Financial instruments continued
Company
As at 31 December 2017
Trade and other payables – current
Borrowings – current
Borrowings – non-current
As at 31 December 2016
Trade and other payables – current
Borrowings – current
Borrowings – non-current
Amounts
due in
less than
one year
£’000
8,081
—
—
8,081
Amounts
due in
less than
one year
£’000
17,519
—
—
17,519
Amounts
due in
second to
fifth year
£’000
—
—
18,878
18,878
Amounts
due in
second to
fifth year
£’000
—
—
13,835
13,835
Total
financial
liabilities
£’000
8,081
—
17,378
25,459
Total
financial
liabilities
£’000
17,519
—
13,835
31,354
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.
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 2017, the Group carried net debt of £10,799,000 (2016: £10,816,000) and short-term flexibility is
achieved through bank facilities comprising a £30m revolving credit, accordion and overdraft facility.
92
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
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
2017
£’000
6,579
16,376
22,955
2016
£’000
3,188
15,135
18,323
2017
£’000
699
—
699
2016
£’000
624
73
697
At 31 December 2017, £7.0m (2016: £6.0m) of the Group’s trade receivables were past due. A provision of £0.8m
(2016: £0.1m) 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)
2017
£’000
6,311
1,095
7,406
8,953
16,359
(798)
15,561
2016
£’000
6,277
225
6,502
8,767
15,269
(134)
15,135
The Group’s management considers that all the above financial assets that are not impaired or past due for each of the
reporting dates under review are of good quality.
The Company has no trade receivables.
The movement on the bad debt provision in the year is analysed below. The Group provides for bad debts on a specific
basis with reference to the age profile of the trade receivables held at the year end.
Bad debt provision as at 31 December 2016
Amounts utilised
Amounts provided
Bad debt provision as at 31 December 2017
£’000
134
(45)
709
798
93
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
23 Financial instruments continued
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 2017 was:
Group
Bank loans
Finance leases
At 31 December 2017
At 31 December 2016
Company
Bank loans
Finance leases
At 31 December 2017
At 31 December 2016
Floating rate
£’000
17,378
—
17,378
14,004
Floating rate
£’000
17,378
—
17,378
13,833
Total
£’000
17,378
—
17,378
14,004
Total
£’000
17,378
—
17,378
13,833
The Group met its short term working capital requirements during 2017 through an overdraft and revolving loan facility
with HSBC Bank plc, renewed in March 2016 and 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
£65,000 (2016: £50,000).
The hire purchase agreements of the Group under a floating rate contract have a weighted average interest rate of nil%
(2016: 5.8%) and a weighted average remaining duration of nil years (2016: 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
94
Note
17
18
15
2017
£’000
10,295
756
28,429
2016
£’000
10,275
748
17,378
25,027
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017
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 (2016: £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 £8.9m of headroom at 31 December 2017 (2016: £9.2m).
Management sets targets against the following measures and monitors the Group’s performance against each throughout
the year:
{ bank facility covenants, which include net debt to EBITDA and EBIT to net debt costs;
{ net debt to equity ratio; and
{ free cash flow generated.
The performance against each of these capital measures is shown in the table below:
Net debt to EBITDA*
EBIT* to net bank debt cash costs
Net debt to equity (gearing) (%)
Free cash flow (£’000s)
* from continuing operations and excluding exceptional items
The value of net debt and free cash flow is monitored on a daily basis.
2017 Actual
1.0
9.5
2017 Target
<2.5
>3.5
20.9% prior year
prior year
994
2016 Actual
0.9
11.6
19.9%
2,879
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
2017
£’000
9,451
(8,457)
994
2016
£’000
11,214
(8,335)
2,879
95
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six
24 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 £702,000 (2016: £589,000) represents contributions payable to these schemes by the
Group at rates specified in the rules of the schemes. As at 31 December 2017, contributions of £7,000 (2016: £27,000) due
in respect of the current reporting period had not been paid over to the schemes.
25 Contingent liabilities
In accordance with Pollution, Prevention and Control (PPC) permitting, the Group has to make such financial provision as is
deemed adequate by the Environment Agency to discharge its obligations under the relevant site permits for its landfill sites.
Consequently, guarantees have been provided, by certain subsidiaries of the Company, in favour of the Environment Agency
in respect of the Group’s landfill sites. Total guarantees outstanding at the year-end were £8.9m (2016: £7.7m). Future site
restoration costs for each landfill site have been provided as disclosed in note 16.
In August 2017, the Group announced that it had received an assessment by HMRC for landfill tax for the three months
ended 31 August 2013. The Group has continued to receive further assessments for Augean North and Augean South.
HMRC has been discussing with the Group whether it has paid sufficient landfill tax in relation to its treatment and disposal
of hazardous waste. Those discussions are ongoing. HMRC has not required the Group to make any cash payment
associated with these assessments.
Based on the legal and other advice received by the Group over several years, Augean is very confident that the Group
has met its obligations in respect of landfill tax, consistent with the law and official guidance at the time. We understand
this has been issued in order to protect HMRC against that period falling out of time (a four year look back applies for
landfill tax) whilst they undertake further enquiries and discussion with the Group. The Group believes this assessment to
be without merit and an appeal is ongoing supported by advice from leading counsel and its solicitors. We will robustly
challenge this landfill tax assessment and any other subsequent assessment which may be received from HMRC, through
the tax tribunal system if appropriate. The Group currently intends to account for the legal costs of the dispute with HMRC
as an exceptional item but not to make a provision for this assessment based on the strength of independent legal and
professional advice received. The estimated cash outflow is £nil.
96
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof SixNotes to the Financial StatementsFor the year ended 31 December 2017 26 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 £8.1m
(2016: £15.7m 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.
27 Post balance sheet events
On 16 March 2018, and as separately communicated to Shareholders on that date, the Group completed the disposal of
the entire issued share capital of its subsidiary engaged in total waste management activity, Augean Integrated Services
Limited, to Regen Holdings Limited. This business has previously been reported by the Group as part of the Augean
Integrated Services segment.
The consideration (subject to working capital adjustments) is expected to be in the region of £4.1m and an exceptional gain
on disposal is expected to be recorded in the FY18 half yearly report and full year financial statements.
97
Augean PLC Annual Report and Accounts for the year ended 31 December 2017OUR FINANCIALS25959 20-3-18 Proof Six Notice of Annual General Meeting
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.
Disapplication of pre-emption rights
(Resolution 11)
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 11, which will be proposed as a special resolution
and which will only be effective if Resolution 9 is passed,
seeks to renew the disapplication authority so that the
Section 561 amount shall be £514,740 (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 11 is
passed to 30 June 2019 or the conclusion of the Company’s
next annual general meeting, whichever is earlier.
We are pleased to write to you with details of our 2018
Annual General Meeting (AGM) which will be held at
6 Stratton Street, Mayfair, London W1J 8LD on Monday
25 June 2018 at 12.00pm. The formal notice of Annual
General Meeting is set out on page 99 to 100 of this
document.
In addition to the routine business of the AGM, there
are three items of special business to be transacted, as
summarised and explained below:
Authority to allot shares (Resolution 9)
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 9, which will be proposed as an ordinary
resolution, seeks to renew the allotment authority so that
the Section 551 amount shall be £3,431,601 (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 9 is passed to 30 June 2019 or the
conclusion of the Company’s next annual general meeting,
whichever is earlier.
Authority to purchase own shares
(Resolution 10)
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 10, which will be proposed as a special
resolution, seeks to grant the directors the authority, for the
period from the date Resolution 10 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 10,294,803
Ordinary shares, being an amount equal to approximately
10% of the issued share capital of the Company (as at
the 19 March 2018, 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 per cent above the average of
98
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six Political donations (Resolution 12)
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 12 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 99. To be valid, the proxy appointment must be
received at the address for delivery specified in the notes
by no later than 12.00pm on Thursday 21 June 2018. 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.
NOTICE IS HEREBY GIVEN that the 2018 Annual General
Meeting of Augean plc (the “Company”) will be held at
6 Stratton Street, Mayfair, London W1J 8LD on Monday
25 June 2018 at 12.00pm for the purpose of considering
and, if thought fit, passing the resolutions set out below.
Resolution 10 and 11 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 2017 be received.
2. THAT Roderick Antony Holdsworth be re-elected as a
director of the Company.
3. THAT John Albert Martin Grant be re-elected as a
director of the Company.
4. THAT Christopher Harwood Bernard Mills be elected as
a director of the Company.
5. THAT Roger Steven McDowell be elected as a director
of the Company.
6. THAT Andrew John Bryce be elected as a director of
the Company.
7. 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.
8. THAT the directors be authorised to determine the
auditors’ remuneration.
9. 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 2019 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 £3,431,601.
99
Augean PLC Annual Report and Accounts for the year ended 31 December 2017SHAREHOLDER INFORMATION25959 20-3-18 Proof Six Notice of Annual General Meeting
10. THAT the Company be generally and unconditionally
12. 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
19 March 2018
Registered Office
4 Rudgate Court
Walton
Near Wetherby
West Yorkshire
LS23 7BF
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.
b.
c.
d.
e.
the maximum number of Ordinary shares hereby
authorised to be acquired is 10,294,803;
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.
11. THAT, subject to the passing of resolution 9, 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 2019 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 £514,740.
100
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six 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 12.00pm on Saturday 23 June 2018 (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 12.00pm
on Thursday 21 June 2018.
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
12.00pm on Thursday 21 June 2018.
(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 12.00pm on Thursday 21 June 2018. 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.
101
Augean PLC Annual Report and Accounts for the year ended 31 December 2017SHAREHOLDER INFORMATION25959 20-3-18 Proof Six Notice of Annual General Meeting
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.
102
www.augeanplc.com Stock code: AUG25959 20-3-18 Proof Six 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 8A
Printed on Cocoon Silk 60.
A recycled paper containing 60% recycled waste and 40% 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)
IBC
Augean PLC Annual Report and Accounts for the year ended 31 December 2017SHAREHOLDER INFORMATION25959 20-3-18 Proof Six25959 20-3-18 Proof Six 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.
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
D
e
c
e
m
b
e
r
2
0
1
7
25959 20-3-18 Proof Six25959 20-3-18 Proof Six