year ended 31 december 2016 - augean plc · year ended 31 december 2016 march 2017 ... recovery of...
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Preliminary resultsYear ended 31 December 2016
March 2017Presented by:
Dr Stewart Davies, Chief Executive OfficerMark Fryer, Group Finance Director
Specialist services focused on managing hazardous wastes
Agenda
• Financial headlines• Key messages• Strategic and business performance• Financial performance• Outlook
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Specialist services focused on managing hazardous wastes
Financial headlines
• 2016 results in line with market profit expectations• Total revenue increased by 25% to £76.0m• Profit before taxation increased 16% to £7.0m• Net operating cash flows increased by 21% to £13.4m• ROCE increased from 11.4% to 11.8%• Normalised EPS increased to 5.53p from 4.65p • Proposed dividend per share of 1.0 pence, an increase of 54%
(2015: 0.65 pence)• Exceptional costs of £5.7m (2015: £3.5m)
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Results from continuing operations and excluding exceptional items. Normalised eps refers to eps calculated assuming the headline rate of corporation tax was applicable to all profits
Specialist services focused on managing hazardous wastes
Key messages
• Continued strong performance from Energy & Construction– 47% growth in Air Pollution Control Residues (APCR) volumes– Smaller than expected reduction in construction soils
• Strong performance from Industry & Infrastructure with £1.2m increase in operating profit and Colt breakeven
• Continued strategic traction at Augean Integrated Services– Further success in winning additional TWM contracts with top-tier customers and
sales growth of 41% in 2016 – East Kent High Temperature Incinerator operational improvement programme has
increased levels of plant availability and continues to make AIS service proposition unique to customers
• ANSS traded strongly in the second half albeit down on 2015, with further progress on its diversification objective
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Specialist services focused on managing hazardous wastes
2016 profit growth
Operating profit in £’000 from continuing operations, excluding exceptional items
5
-
0.8
0.1 -
0.9
0.2
6.8
1.8
7.8
6,000
6,500
7,000
7,500
8,000
8,500
9,000
2015 E&C RWS AIS I&I ANSS Corporate 2016
1.2
Specialist services focused on managing hazardous wastes
Our strategy
Client focus
Service solutions
Specialist waste
expertise
Growth in profit
Growing profitable business
Improving margins
Growth in asset base
Investments returning
above WACCRetained
profit
Growth in returns
Increasing trading
cashflow
Appropriate funding model
Develop sustainable market positions Grow shareholder valueto
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Respect Integrity Teamwork Excellence
Our aligned vision, values and goals
Creating value for our customers through innovative services that protect future
generations
Respect
‘All Together Better’Customer Focus, Service Solutions,
Specialist Waste Expertise
Increase shareholder value
GREAT CUSTOMER
SERVICE
OUR VISION
OUR VALUES
OUR WORK
OUR GOALS
Integrity Teamwork Excellence
Develop sustainable market positionsGrow through client focused solutions
Respect Integrity Teamwork Excellence
Our strategic development
Past activities Future activities
• Hazardous waste experts, with regulatory know-how
• Entry barriers from development of specialised assets, technology, permits and know how
• Strong reputation with customers and partners
• Top-Tier customer relationships, offering a complete service
• Referenceability as ‘integrator’ in key sectors: Haz Waste + service
• Capability to address waste hierarchy via treatment/TFS
• Extended service scope
• Dependence on brokers
• Lower margin value-destroying activities
• National coverage of transfer stations
Leave Remain Develop Not here
Strategy & plan for getting there
Not here
• Municipal, domestic waste
• Unproven technology
• International (yet)
• Contracts with excessive risk
• Standardise operating processes• Priority BU objectives & projects• Corporate Investments
• Sector growth led by BU Directors• Focus on customer solutions • ‘All Together Better’
Specialist services focused on managing hazardous wastes
Delivering the strategy
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Results from continuing operations and excluding exceptional items
Growth in profit
Growth in asset base
Growth in returns
18% increase in 2016 ROCE 11.8% 21% increase in 2016
Proposed dividend per share of 1.0 pence, an increase of 54%
4.4
5.4
6.0
7.1
2013 2014 2015 2016
Profit Before Tax (£m)
6.57.7
11.1
13.4
2013 2014 2015 2016
Operating Cashflow (£m)
8.9%
10.7%
11.4%11.8%
2013 2014 2015 2016
ROCE
9.7%
Specialist services focused on managing hazardous wastes
Our sector-focused businesses
▶ Oil & Gas
▶ North Sea support services
▶ North Sea decommissioning
▶ High Value Manufacturing
▶ Life Sciences
▶ Clinical
▶ Refineries & Chemicals
▶ Ports
▶ Waste management operators
▶ Energy from Waste
▶ Construction & Demolition
▶ Nuclear Energy
▶ Oil & Gas waste Intermediaries
▶ Medical scanning & radiotherapy
Radiological waste treatment & disposal
Integrated solutions for waste-producing clients
Complete waste services for North Sea
Recovery of resourcesfrom wastes
Waste treatment & disposal solutions
Energy & Construction
IntegratedServices (AIS)
RadioactiveWaste Services
Industry & Infrastructure
North SeaServices (ANSS)
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Specialist services focused on managing hazardous wastes
Energy & Construction12
• Revenue increased 25% to £25.3m• Operating profit increased 28% to £8.4m • 47% APCR volume growth under framework contracts with typical
term of 3-5 years• 20% reduction in soils volumes due to LFT1 guidance in December
2015, although volumes higher than expected• Continued volume growth in all other waste streams• Certainty over 3 x WAC derogations
Specialist services focused on managing hazardous wastes
Defra decision on APCR – February 2017
“Defra Ministers have taken the decision not to remove the derogation that allows Air Pollution
Control Residues (APCRs) that are three times above Landfill Directive waste acceptance criteria
(3xWAC) to be landfilled. This decision follows several years of work by the Environment Agency and
Defra to assess the availability of suitable alternative treatment technologies. We have worked closely
with UK waste managers to generate an informed picture of UK capacity and costs. While some
alternative treatment options are already on line, and more capacity is planned for the future, the
availability remains limited, the costs uncertain and the environmental gains not strong enough
to support removing the 3xWAC derogation. On the basis of the available information we have
decided to take the decision now rather than to defer again, in order to remove the uncertainty for the
hazardous waste management sector”.
Source: Defra letter to stakeholders, February 2017
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Specialist services focused on managing hazardous wastes
Impact on Augean of 3x WAC decision
• Group investment in APCr treatment is now endorsed by Defra
• Supporting over one third of the developing Incineration and ash
market underpinning a key element of the UK waste strategy
• APCR is a growth market with 9% forecast annual growth to 2022
• Modest capex over next three to five years to maintain our market
leading position in this growing market
• We will continue to investigate recycling options where these can
be demonstrated to be best overall environmental outcome
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Specialist services focused on managing hazardous wastes
Radioactive Waste Services15
• Significant reduction in revenue and operating profit in 2016• Further slowdown in rate of Nuclear Decommissioning Authority
spending on removing Low Level (LL) waste• NDA forecast indicates recovery of LL waste volumes in 2017/8 to
grow 120% on 2016/17 levels
• Expansion of permitting at sites to allow treatment of a wider range of waste
• Focus on medium term growth outside LLWR to justify continued investment
• NORM treatment from North Sea decommissioning supports ANSS
Year Tonnes2014/5 4,3142015/6 5,7672016/7 3,5822017/8 8,001
Actual/expected volumes on VLLW framework. Source LLWR Ltd
Specialist services focused on managing hazardous wastes
Industry & Infrastructure16
• Revenue growth of 61% to £18.8m including Colt acquisition, 31% excluding Colt
• Operating profit growth to £0.5m (2016 £0.7m loss) including Colt at breakeven
• Strong performance across all sites• Improvement initiatives successfully completed at Avonmouth• Focus on broadening Industrial Services capacity including
acquisition of Colt Holdings in line with Group strategy
Specialist services focused on managing hazardous wastes
Colt Industrial Services
• H1 2016 cash outflow £8.9m - net of cash acquired and working capital adjustments
• Provides broad range of industrial services with strong reputation -complements and expands the Group's existing market offering
• Slower than expected start – customer delays and investment in new contracts
• Management plan on track to build pipeline, step up activity and generate returns from new investments
• Expect the business to trade in line with acquisition business case during 2017.
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Specialist services focused on managing hazardous wastes
Colt fit and synergies
• Complementary activities aligned with Group strategy going up the value-chain in service activities associated with waste management
• Technical and capability step-change in Industrial Services (IS)• Critical mass to grow IS activities geographically and sectorally
– New site in Avonmouth serving the South-west– New site on Teeside serving the South-east
• Supports integrated business model – I&I treats waste arising from industrial cleaning by Colt
• Further develops national coverage and reputation in key sectors, notably refineries and process industries
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Specialist services focused on managing hazardous wastes
Augean Integrated Services (AIS)
• Targets customers who generate significant volumes of hazardous waste, have high CSR demands and prefer one trusted provider
• AIS offers broader support services requirements to provide solutions to critical operational needs that are non-core to the client
• AIS service is consultative, value adding and commercial, and encompasses: – Total Waste Management (TWM)– niche sales for High Temperature Incineration at East Kent
• Typical customers are on term contracts of 3+ years• AIS continues to invest in sales and account management staff to
support 30-50% top line growth in TWM
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Specialist services focused on managing hazardous wastes
AIS TWM AIS East Kent
• 41% Growth in revenue in 2015 to £5.5m
• Operating profit of £0.1m vs £0.3m loss in 2015
• Further term contract wins during 2016
• Strong pipeline• Continuing to invest in the
commercial expertise and IT capabilities required for accelerated growth
• Operating loss of £0.8m vs £0.3m in 2015
• Operation improvement plan continues to break even
• 12% increase in tonnages processed year on year
• Impairment at year end minimises ongoing loss
• Strategic importance to AIS customers due to niche service offering
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Specialist services focused on managing hazardous wastes
Augean North Sea Services (ANSS)21
• Strong second half of 2016 – H1(£0.2m) to H2 £0.6m• Rig incumbency share maintained in line with drilling market
conditions• Successful diversification - 38% of revenue generated from
onshore activities vs 17% in 2015• Growth in production / on shore waste management
– Three major TWM contract wins and Great Yarmouth investment– Broadening of scope with existing customers– Port of Dundee and decommissioning opportunities onshore– Offshore decom contracts supporting Plug & Abandonment
Specialist services focused on managing hazardous wastes
Income statement
2016 2015 Change £m £m %
Continuing and excluding exceptional itemsRevenue 76.0 61.0 25%Operating expenses (68.2) (54.2) 26%Operating profit 7.8 6.8 15%Finance charges (0.8) (0.8) 0%Profit before tax 7.0 6.0 16%
Exceptional items (5.7) (3.5)PBT including exceptional items 1.3 2.5
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Specialist services focused on managing hazardous wastes
Operating cash flows
2016£’m
2015£’m
Change%
EBITDA (continuing and before exceptional items) 14.1 12.1 17%Change in debtors (4.1) 1.2Change in creditors 4.8 (0.9)Interest, taxation and other (1.4) (1.3)Net operating cash flows (continuing and before exceptional items) 13.4 11.1 21%Exceptional and discontinued operating cash flows (2.2) (0.6)Net operating cash flows 11.2 10.5 7%
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Specialist services focused on managing hazardous wastes
Total cash flows and net debt
2016 2015 Change £m £m £m
Net operating cash flows 11.2 10.5 0.7 Maintenance capital expenditure (3.9) (5.5) 1.6 Post-maintenance free cash flow 7.3 5.0 2.3 Development capital expenditure (4.3) (1.8) (2.5)Acquisitions (8.9) (1.4) (7.5)Free cash flow (5.9) 1.8 (7.7)Dividends paid (0.7) (0.5) (0.2)Equity receipts 0.1 0.1 -Net cash flow (6.5) 1.4 (7.9)Opening net debt (4.3) (5.7)Closing net debt (10.8) (4.3)
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Specialist services focused on managing hazardous wastes
Key financial measures
2016 2015Profit before tax £7.0m £6.0m
EBITDA £14.1m £12.1m
Normalised earnings per share 5.53p 4.65p
Earnings per share 3.94p 4.65p
Return on capital employed 11.8% 11.4%
Net underlying operating cash flows £11.2m £10.5m
Post-maintenance free cash flow £7.1m £5.0m
Cash conversion 95% 92%
Dividend per share 1.0p 0.65p
Dividend cover 3.9x 7.2x
Closing net debt £10.8m £4.3m
Gearing (net debt/equity) 20% 8%
Net debt/EBITDA (covenant < 2.5x) 0.8x 0.4x
EBIT/bank interest charge (covenant > 3.0x) 20x 17xFrom continuing operations, excluding exceptional items
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Specialist services focused on managing hazardous wastes
How we will deliver our growth strategy27
E&C
• Maintain share of high-margin contracted APCR market with 9% CAGR to 2022
• Remain competitive in cyclical construction market• Invest in Best Available Techniques to produce the best environment
solutions for our customers and attractive returns on investment
RWS• Maintain market share of NDA/LLWR framework volumes• Increase revenues from Oil & Gas sector (NORM) and other
commercial customers to reduce dependency on NDA volumes
I&I• Grow industrial services business, with Colt to achieve the business
plan set out at the time of acquisition• Maximise synergies of ‘integrated model’ by internalising waste arisings
AIS• Accelerate growth in contracted Total Waste Management revenues • East Kent HTI to break-even and facilitate new TWM contract wins due
to the unique nature of the service offering
ANSS• Continue diversification into production waste and industrial services• Position business to maximise future opportunities from North Sea
decommissioning
Specialist services focused on managing hazardous wastes
Outlook
• Encouraging start to 2017 with a growing sales pipeline • Continued emphasis on moving Group revenues to long-term
contracts and frameworks• Board focused on further improving shareholder returns• Group is trading in line with market expectations for 2017
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Specialist services focused on managing hazardous wastes
Appendix 1: Revenue
£m Revenue Revenue2016 2015
Energy & Construction 25.3 20.2Radioactive Waste Services 1.2 1.9Industry & Infrastructure 18.8 11.7Augean Integrated Services 7.6 6.0Augean North Sea Services 12.9 14.8
65.9 54.6Landfill tax 10.1 6.4
76.0 61.0
From continuing operations
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Specialist services focused on managing hazardous wastes
Appendix 2: Operating profit
EBIT2016
EBIT2015
EBITMargin
EBIT Margin
£’m £’m 2016 2015Energy & Construction 8.4 6.5 33% 32%Radioactive Waste Services 0.3 1.1 26% 58%Industry & Infrastructure 0.5 (0.7) 2% (6)%Augean Integrated Services (0.7) (0.6) (9)% (9)%Augean North Sea Services 0.5 1.3 4% 9%Business units total 8.9 7.7Central (1.1) (0.9)
7.8 6.8 10% 11%
From continuing operations and excluding exceptional items
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Specialist services focused on managing hazardous wastes
Appendix 3: EBITDA
EBITDA2016
EBITDA2015
EBITDA Margin
EBITDA Margin
£’000 £’000 2016 2015Energy & Construction 12.0 9.5 47% 47%Radioactive Waste Services 0.4 1.2 37% 64%Industry & Infrastructure 1.5 0.4 8% 3%Augean Integrated Services (0.0) (0.2) (0)% (3)%Augean North Sea Services 1.3 2.0 10% 14%Business units total 15.2 13.0Central (1.1) (0.9)
14.1 12.1 19% 20%
From continuing operations and excluding exceptional items
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Specialist services focused on managing hazardous wastes
Appendix 4: Capital expenditure
£’m 2016Maint
2016Develop
2016TOTAL
Energy & Construction 2.6 1.1 3.6Radioactive Waste Services - - -Industry & Infrastructure 0.3 0.1 0.4 Augean Integrated Services 0.3 1.1 1.4 Augean North Sea Services 0.1 1.9 2.0 Other/corporate 0.6 0.1 0.8 Total 3.9 4.4 8.3
Excluding purchase of East Kent HTI
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Specialist services focused on managing hazardous wastes
Appendix 5: Balance sheet
2016 2015 Change£m £m £m
Goodwill and intangible assets 26.3 20.0 6.3 PPE and other non-current assets 45.8 45.2 0.6 Total non-current assets 72.1 65.2 6.9 Net current assets (excluding cash and debt) 0.2 0.4 (0.2)Restoration and capping provisions (7.5) (6.9) (0.6)Capital employed 64.8 58.7 6.1Net debt (10.8) (4.3) (6.5)Net assets 54.0 54.4 (0.4)
Gearing 20% 8% 12%Net debt/EBITDA 0.8x 0.4x 0.7x
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