11th Sep 2007 07:01
Augean Plc11 September 2007 11th September 2007 Augean Plc Interim results for the six months ended 30 June 2007 Augean PLC ("Augean" or "the group"), one of the UK's market leaders in themanagement of hazardous waste, announces its interim results for the six monthsended 30 June 2007. Financial highlights • 1% increase in revenue excluding landfill tax to £10.7m (2006: £10.6m)• 36% increase in underlying operating profit to £2.5m (2006: £1.9m)• 42% increase in underlying profit before tax to £2.1m (2006: £1.5m)• 39% increase in adjusted earnings per share to 3.1p (2006: 2.2p)• 33% increase in operating cash flow before provisions to £4.6m (2006:£3.4m)• Net debt reduced to £8.8m (2006: £13.4m) Operational highlights • IPPC permit regime implemented across all sites• Full IMS accreditation achieved in Landfill and phase 1 accreditation in Treatment• Opening of Terramundo, first fixed site Ground Remediation Centre in the UK• First phase contract for Olympic site won and long term supply contract secured for a key waste stream• Internal restructure completed to focus on expanding portfolio of services and long term relationships• Extensive consultation on Port Clarence Waste Recovery Park and public exhibition concluded Commenting on the results, CEO, Peter Worlledge said: "I am pleased to report a solid set of results for the six months to 30 June2007. Significant work has been ongoing in 2007 to deliver the next step changein the services the group offers to its clients; this work will deliver enhancedvalue as our investment in planning delivers new, innovative and renewableenergy focused technologies and potential acquisitions come on stream. Trading since the half year has been consistent with previous months and weanticipate the trends of the first half being continued towards the year end.The relatively ungeared balance sheet provides the opportunity to pursuesignificant organic and acquisitive growth plans. We have identified and arepursuing many exciting opportunities for the group, which I believe will delivervalue to our shareholders in the medium and long term." For further information, please contact: Augean PLCPeter Worlledge, Chief Executive 01937 844 980Peter Southby, Finance Director Financial DynamicsJonathon Brill 020 7831 3113Billy Clegg There will be a meeting for analysts at 0930 today at the offices of FD, HolbornGate, 26 Southampton Buildings, London, WC2A 1PB. Chief Executive's review Introduction I am pleased to report a solid set of results for the six months to 30 June2007, having joined the business in March 2007. These results reflect volumegrowth in both divisions which together delivered a 36% increase in underlyingoperating profit to £2.5m (2006: £1.9m) and a 33% increase in operating cashflow before provisions to £4.6m (2006: £3.4m). Strategy The board's priority continues to be the creation of shareholder value throughits strategic focus on providing ever more sustainable solutions to producers ofhazardous waste through a combination of organic growth and targetedacquisition. Whilst landfill remains a key specialist and valuable UK resourcefor many hazardous waste streams, the group is proactively seeking alternativetreatment, pre-treatment, recovery and recycling processes which, whenintegrated, can deliver a highly efficient and sustainable waste resourcesolution thereby supporting a modern UK treatment infrastructure previouslylacking investment. Key to our success is our extensive knowledge andunderstanding of the complex planning and permitting regimes and our timelyinvestment in progressing our plans through that process. In line with our strategy, the business has been restructured to deliver asingle client facing sales entity, capable of selling our entire portfolio ofexpanding services to our clients, whilst being adequately resourced tointegrate organic and acquisition led projects. The emphasis, centred aroundclient service delivery, is on developing long term relationships with clientsfor all of their hazardous waste needs. The hazardous waste market After two years of legislative upheaval, 2007 has seen a period of relativestability although interpretation of some regulation presents challenges to theindustry which continues to look to the Environment Agency for guidance.Nevertheless, we believe that the current and anticipated changes in legislationcreate a very positive investment climate for the group as early adoption of newbut proven technologies is needed to satisfy ever tightening rules on disposalmethods. We believe these stricter controls emerging through the Integrated PollutionPrevention Control (IPPC) regime will see some competitors disengage from themarket as the barriers continue to increase, thus further underpinning thegroup's development programme and strengthening the economics for newtechnologies. The market for hazardous waste is reasonably well defined. Data from theEnvironment Agency estimates the market to be in the order of four milliontonnes per annum, though this figure excludes new waste streams either broughtwithin the definition (e.g. electrical and electronic equipment through the WEEEdirective) or following guidance on the acceptable definition of treatment(which will render certain residues from treatment processes, currently beingdisposed of in non-hazardous landfills, hazardous). The recently announced Waste Strategy 2007 included among its objectives andtargets the need for investment in treatment infrastructure to divert, wherepossible, waste from landfill and to get the most environmental benefit fromthat investment, through increased recycling of resources and recovery of energyfrom residual waste using a mix of technologies. This statement clearlysupports the climate of investment, which we have believed exists for some time,and is precisely in line with our development proposals at Port Clarence onTeesside. Today's priority, whether from within the Environment Agency or societygenerally, continues to be sustainability in the management of waste,underpinned by specialised landfill void, which is becoming an ever rarer andmore valuable asset. Augean's strategy is firmly in line with this priorityensuring it continues to provide, within its portfolio of services, the mostappropriate technique to manage waste streams from an economic, compliance andsustainability view point. This development strategy is supported by theGovernment's Waste Strategy 2007, thus promoting the concept of the wastehierarchy with re-use, recovery and energy recovery prior to disposal. Landfill division Hazardous waste volumes continue to grow into our landfill sites and prices areremaining steady. Tonnages into landfill during the first half were 125,143(2006: 124,480) with a noticeable shift towards construction-related waste. Thistype of waste generates a slightly lower average price into landfill but asignificantly better compaction rate, resulting in lower void consumption andhence improved overall margins. Revenues were therefore down for the period,reflecting the mix, at £6.1m (2006: £7.5m) though operating profit was up to£1.7m (2006: £1.4m) Restoration and remediation of the Olympic site in East London presentssignificant opportunities for the group. I am pleased to announce that we havesecured the work to dispose of treated residue from the first phase ofrestoration works on the site. Further phases will be released in due courseand we shall vigorously pursue these opportunities as they come online. During the period, we achieved certification of our Integrated Management System(IMS) for our landfill operations to internationally recognised managementsystem standards ISO 14001 (Environmental Management), ISO 9001 (QualityManagement) and OHSAS 18001 (Occupational Health and Safety Management). We keep our landfill assets under constant review to ensure that we maximise thepotential of each site; by way of example, we have identified and committed toan opportunity to utilise some of our land situated outside the immediatelandfill perimeter at King's Cliffe to extend our in-house laboratory facilityto provide further client services and introduce new treatment facilities. Terramundo The review process for landfill assets described above is in part what led tothe Terramundo joint venture opportunity with Belgian-based DEC NV. Weidentified a compelling argument, under the developing legislation, for a soiltreatment and recycling centre at the Port Clarence landfill installation. Terramundo launched in June 2007 and is now fully operational. Although this isa startup project and the first of its kind in the UK, the plant has alreadysecured some work though the main benefit of the interest that has beengenerated since launch is expected in 2008 and beyond. Whilst it represents an economic solution to contaminated soils which fail thecriteria for landfilling, it is also a sustainable solution in its own right andhas generated significant levels of interest on that basis from responsibleorganisations with in-house sustainability targets. Treatment division Treatment revenues increased significantly to £4.6m (2006: £3.1m) with operatingprofit following the same pattern at £0.8m (2006: £0.5m). Nevertheless, thedivision has taken longer to recover from the problems experienced at the tailend of 2006 and this has been particularly noticeable at our treatment site inCannock. Significant time has been spent in re-engaging with former clients ofthe facility with encouraging results. Our strategy to seek longer term relationships with our clients has begun tobear fruit. We have secured a significant contract for the treatment of a keywaste stream and further discussions with other producers are ongoing. I am pleased to announce that our site at Worcester has now received itsoperating permit under IPPC with the result that the entire group is nowgoverned under and compliant with the latest monitoring regime. Phase 1 of the extension and redevelopment of Cannock will be completed in thefinal quarter of 2008 with the resultant increase in capacity and workingefficiency. It is anticipated that phase 2 will begin in early 2008; phase 2 isprimarily the conversion of our treatment processes in readiness for the changein legislation regarding open-air treatment in 2008. In the meantime, the pilotplant at Cannock continues to provide crucial data on the process technologybeing developed to ensure treated residues comply with the various criteria setdown for subsequent disposal. In addition we have invested in new treatmentprocesses at Worcester, including a container washing plant and drum crushingand shredding capacity, thereby further enhancing our in-house capability. The IMS is being progressively implemented within Augean's Treatment Division.Phase 1 of the certification process was successfully undertaken during May 2007with the continued objective of full certification before the end of the currentyear. Acquisitions / Developments We continue to seek and identify acquisition opportunities in the treatmentsector which bring new geographical locations, new markets, strong managementand sites with development potential or a combination thereof. Discussions areongoing with several third parties and I shall be pleased to report more in duecourse. In addition, we continue to invest in waste management processes which supportthe direction new legislation has taken and continues to take, in particular inrespect of energy conservation, resource recovery and protection of humanhealth. In this context, we are pleased to report, following consultation including anexhibition to the public, the imminent submission of a planning application forthe 'Port Clarence Waste Recovery Park', a plan to create a substantial range oftreatment and recovery processes on 13 hectares of our site, using both provenand new, innovative technologies. This will provide an integrated wastemanagement facility that will recover more waste for reuse and recycling,generate electricity from waste and reduce the amount of, and level of hazardouscontamination in, waste disposed into landfill. We believe, if successful, thiswill become a regional and national centre of excellence for the safe,sustainable management of difficult-to-manage wastes. Results Net turnover excluding landfill tax for the six months ended 30 June 2007increased by 1% to £10.7m (2006: £10.6m). With the inclusion of landfill taxcharged to customers of £1.9m (2006: £3.3m), on which the group makes no margin,total group turnover fell by 9% to £12.6m (2006: £13.9m). The increase in operating profit of 42% to £2.2m (2006: £1.6m) was driven inpart by lower costs in the landfill division following the anticipated change insales mix towards better compacting soils. As noted in the group'sInternational Financial Reporting Standards (IFRS) conversion announcement, theoperating result is affected by a charge in respect of tax losses fromacquisitions used in the period which had not previously been recognised. Thischarge amounted to £0.3m (2006: £0.3m) and is excluded from management'sassessment of underlying performance. Adjusted operating profit of £2.5m (2006:£1.9m) represented a 36% increase and an improved operating margin of 24% (2006:18%), reflecting the group's greater focus on higher margin hazardous waste. Underlying profit before tax increased by 42% to £2.1m (2006: £1.5m). After the£0.3m IFRS tax adjustment and a small loss on the establishment of theTerramundo joint venture, profit before tax increased to £1.7m (2006: £1.2m). Adjusted earnings per share before goodwill tax adjustment increased by 39% to3.1p (2006: 2.2p). Earnings per share after goodwill tax adjustment increasedby 48% to 2.6p (2006: 1.8p). The board does not recommend the payment of adividend at the current time but will continue to review this position in 2008. The group's strong cash flows were maintained in the period, with operating cashflow before provisions at £4.6m (2006: £3.4m). After deducting capitalexpenditure, interest and tax, free cash flow was £2.1m (2006: £0.2m). Net debtat 30 June 2007 was £8.8m (2006: £13.4m), equating to a gearing level of 8%(2006: 13%). IFRS impact The results as presented are the first to be prepared under IFRS and thecomparative figures have been adjusted accordingly. A number of detailedreconciliations are included in note 7 to the interim financial statements andthe impact of the principal changes in the comparative figures for the operatingresult and net assets at 30 June 2006 are summarised in the table below: 30 June 30 June 2007 2006 £'000 £'000 Operating loss under UK GAAP (3,305)Goodwill amortisation written back 5,244Goodwill tax adjustment (291)Employee benefits (59)Amortisation of intangible assets (3) Operating profit under IFRS 2,248 1,586 Net assets under UK GAAP as previously stated 101,704FRS 20 adjustment (note 9) (676) Net assets under UK GAAP as restated 101,028Goodwill amortisation written back 5,244Goodwill tax adjustment (291)Employee benefits (59)Amortisation of intangible assets (3) Net assets under IFRS 108,988 105,919 Management team / People The group has concluded a resource review and has made significant progress inbringing professional and committed people to the business to meet the growthopportunities from both organic developments and acquisition targets. I should like to take this opportunity to thank the management team and all ourpeople for their hard work and dedication in maintaining Augean's position as aleader in the management of hazardous waste. Outlook There is an ongoing need to provide compliant and highly technical services tothe hazardous waste industry. This market has high barriers to entry, largely byvirtue of a complex and costly planning and permitting regime and there remainsa very clear opportunity for consolidation and technological development. Assuch, Augean is well placed as market leader to benefit from these trends. Significant work has been ongoing in 2007 to deliver the next step change in theservices the group offers to its clients; this work will deliver enhanced valueas, on the one hand, our investment in planning delivers new, innovative andrenewable energy focused technologies and, on the other, potential acquisitionscome on stream. Our strategy in developing treatment capabilities demonstrates our commitment toresource sustainability, in particular recovery and reuse, in our overallapproach to waste management. This is evidenced in our plans for Port ClarenceWaste Recovery Park in which, for example, power generation from waste is seenas integral to the design and ongoing operation of the overall development. Trading since the half year has been consistent with previous months and weanticipate the trends of the first half being continued towards the year end.The relatively ungeared balance sheet provides the opportunity to pursuesignificant organic and acquisitive growth plans. We have identified and arepursuing many exciting opportunities for the group, which I believe will delivervalue to our shareholders in the medium and long term. Unaudited consolidated income statementFor the six months ended 30 June 2007 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006* 2006* Note £'000 £'000 £'000 Continuing operationsRevenue 3 12,571 13,868 26,561Operating expenses (10,023) (11,991) (22,630)Goodwill tax adjustment 8e (300) (291) (600) Operating profit 2,248 1,586 3,331 Operating profit before goodwill tax adjustment 2,548 1,877 3,931 Finance charges (490) (424) (1,020)Share of loss of joint venture (36) - - Profit before tax 1,722 1,162 2,311 Profit before tax, goodwill tax adjustmentand share of loss of joint venture 2,058 1,453 2,911 Tax 4 - - 89Profit attributable to equity shareholders 1,722 1,162 2,400 Earnings per share 5Basic and diluted 2.6p 1.8p 3.7p Adjusted earnings per share 5Basic and diluted 3.1p 2.2p 4.6p * restated under IFRS (see note 7) There were no recognised gains or losses in the period other than the profit forthe period and therefore no statement of recognised income and expenses ispresented. Unaudited consolidated balance sheetAt 30 June 2007 30 June 30 June 31 December 2007 2006* 2006* £'000 £'000 £'000 Non-current assetsGoodwill 93,779 93,628 94,079Other intangible assets 170 260 217Property, plant and equipment 29,212 29,239 28,839 123,161 123,127 123,135Current assetsTrade and other receivables 4,860 7,159 6,034 4,860 7,159 6,034Current liabilitiesTrade and other payables (3,935) (2,401) (4,712)Tax liabilities (2,092) (2,782) (2,306)Debt factoring - (1,785) -Obligations under finance leases and hire purchase contracts (83) (72) (132)Bank overdraft and loans (2,675) (3,155) (3,636) (8,785) (10,195) (10,786) Net current liabilities (3,925) (3,036) (4,752) Non-current liabilities Bank and other loans (6,000) (8,000) (7,000)Provisions (4,139) (5,822) (4,084)Obligations under finance leases and hire purchase contracts (73) (350) (119)Share of losses of joint venture (36) - - (10,248) (14,172) (11,203) Net assets 108,988 105,919 107,180 Shareholders' equityShare capital 6,549 6,549 6,549Share premium account 106,222 106,222 106,222Retained losses (3,783) (6,852) (5,591)Total shareholders' equity 108,988 105,919 107,180 * restated under IFRS (see notes 7 and 9) Unaudited consolidated cash flow statementFor the six months ended 30 June 2007 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Note £'000 £'000 £'000Operating activities Cash generated from operations 6 4,454 1,674 6,269Interest paid (433) (443) (1,026)Tax paid - (131) (82) Net cash generated from operating activities 4,021 1,100 5,161 Investing activities Proceeds on disposal of property, plant and equipment 58 - 171Purchases of property, plant and equipment (2,017) (908) (1,475)Purchases of intangible fixed assets (6) (31) (41)Purchase of subsidiary undertakings - (9,815) (11,112) Net cash used in investing activities (1,965) (10,754) (12,457) Financing activities Repayments of borrowings (1,000) (661) (3,446)Drawdown of loan facilities - 10,000 10,000Repayments of obligations under finance leases and hire purchase contracts (95) (111) (165) Net cash from financing activities (1,095) 9,228 6,389 Net increase / (decrease) in cash and cash equivalents 961 (426) (907) Cash and cash equivalents at beginning of period (1,636) (729) (729) Cash and cash equivalents at end of period (675) (1,155) (1,636) Unaudited consolidated statement of changes in shareholders' equityFor the six months ended 30 June 2007 Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006* 2006* £'000 £'000 £'000 Profit attributable to equity shareholders 1,722 1,162 2,400Share-based payments 86 36 59 Net addition to shareholders' equity 1,808 1,198 2,459 Equity attributable to equity shareholders at beginning of period 107,180 104,721 104,721 Equity attributable to equity shareholders at end of period 108,988 105,919 107,180 * restated under IFRS (see notes 7 and 9) Notes to the unaudited interim financial statementsFor the six months ended 30 June 2007 1. Statutory information These interim financial statements are unaudited and do not constitute statutoryfinancial statements within the meaning of Section 240 of the Companies Act1985. The UK GAAP financial information relating to the year ended 31 December2006 is an extract from the latest published financial statements on which theauditors gave an unqualified report that did not contain statements underSection 237 (2) or (3) of the Companies Act 1985 and which have been filed withthe Registrar of Companies. These are the group's first interim financial statements prepared under IFRS andtherefore IFRS 1 (First-time Adoption of International Financial ReportingStandards) has been applied. An explanation of the transition to IFRS isprovided in note 7. These interim financial statements will be posted to all shareholders and areavailable from the registered office at 4 Rudgate Court, Walton, Wetherby, WestYorkshire, LS23 7BF or from our website at www.augeanplc.com. 2. Accounting policies The interim financial statements have been prepared in accordance with the AIMRules for Companies and on a basis consistent with the accounting policies andmethods of computation as published by the group in its IFRS conversionannouncement on 5 July 2007, which is available on the group's website. Thesepolicies will also be applied when the group prepares its first set of financialstatements in accordance with IFRS as adopted by the EU for the financial yearending 31 December 2007. The group has chosen not to adopt IAS 34 (Interim Financial Statements) inpreparing these interim financial statements and therefore the interim financialinformation is not in full compliance with IFRS. 3. Segmental information For management purposes the group is currently organised into two operatingdivisions. These business segments are the basis on which the group reports itsprimary segmental information. As the group's business is entirely conductedwithin the United Kingdom, there are no geographical business segments and as aresult no secondary reporting segmental information is presented. The segmental results for the six months ended 30 June 2007 are as follows: Landfill Treatment Group £'000 £'000 £'000RevenueExternal sales net of landfill tax 6,070 4,582 10,652Landfill tax 1,919 - 1,919 External sales 7,989 4,582 12,571Inter-segment sales 672 - 672 Total revenue 8,661 4,582 13,243 ResultOperating profit before goodwill taxadjustment 1,741 807 2,548 Goodwill tax adjustment (300) - (300) Operating profit 1,441 807 2,248 Share of loss of joint venture (36)Finance costs (490) Profit before tax 1,722Tax - Profit attributable to equity shareholders 1,722 The segmental results for the six months ended 30 June 2006 are as follows: Landfill Treatment Group £'000 £'000 £'000RevenueExternal sales net of landfill tax 7,546 3,051 10,597Landfill tax 3,271 - 3,271 External sales 10,817 3,051 13,868Inter-segment sales 891 - 891 Total revenue 11,708 3,051 14,759 ResultOperating profit before goodwill taxadjustment 1,351 526 1,877Goodwill tax adjustment (291) - (291) Operating profit 1,060 526 1,586 Finance costs (424) Profit before tax 1,162Tax - Profit attributable to equity shareholders 1,162 4. Tax No tax charge has been included for the six months ended 30 June 2007. This isconsistent with current projections for the year ending 31 December 2007. 5. Earnings per share Earnings per share is calculated on the profit after tax of £1.7m (2006: £1.2m)and the average number of shares in issue during the period of 65,488,892 (2006:65,488,892). Diluted earnings per share are calculated by taking the earnings as disclosedabove and the average number of shares that would be issued on the full exerciseof outstanding share options of 65,503,088 (2006: 65,499,861). In addition tothe potentially dilutive share options included in this figure there are afurther 3,911,873 share options outstanding but as the average share price hasremained below the level at which the options would be exercised they are notincluded in the above figure. Adjusted basic and diluted earnings per share are based on the same numbers ofshares as above and profit after tax, as adjusted for the goodwill taxadjustment, of £2.0m (2006: £1.5m). 6. Reconciliation of operating profit to net cash inflow from operating activities 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006* 2006* £'000 £'000 £'000 Operating profit 2,248 1,586 3,331Other non-cash charge - goodwill tax adjustment 300 291 600Amortisation of intangible assets 53 31 84Depreciation 1,649 2,899 4,513After-care provisions 109 226 168 Earnings before interest, tax, depreciation and amortisation (EBITDA) 4,359 5,033 8,696(Profit) / loss on sale of property, plant and equipment (4) - 100Share-based payments 86 36 59Decrease / (increase) in trade and other receivables 1,154 (288) 1,012(Decrease) / increase in trade and other payables (1,045) (1,367) 475Provisions spent (96) (1,740) (4,073) Net cash inflow from operating activities 4,454 1,674 6,269 * restated under IFRS (note 7) 7. Explanation of the transition to IFRS The group's financial statements for the year ending 31 December 2007 will bethe first annual financial statements prepared under IFRS. The followingdisclosures are required in the year of transition. The last financialstatements under UK GAAP were for the year ended 31 December 2006 and the dateof transition to IFRS was therefore 1 January 2006. 7.1 Reconciliation of equity and net assets as at 1 January 2006 Goodwill As reported Goodwill tax under amortisation adjustment Other As restated UK GAAP (note 8a) (note 8e) (note 8c) under IFRS £'000 £'000 £'000 £'000 £'000Non-current assetsGoodwill 85,812 - - - 85,812Other intangible assets - - - 144 144Property, plant and equipment 29,547 - - (144) 29,403 115,359 - - - 115,359 Current assetsTrade and other receivables 6,871 - - - 6,871Cash and cash equivalents - - - - - 6,871 - - - 6,871 Current liabilitiesTrade and other payables (3,613) - - - (3,613)Tax liabilities (2,969) - - - (2,969)Debt factoring (2,346) - - - (2,346)Obligations under finance leases and hire purchasecontracts (181) - - - (181)Bank overdraft and loans (729) - - - (729) (9,838) - - - (9,838) Net current liabilities (2,967) - - - (2,967) Non-current liabilitiesBank and other loans (100) - - - (100)Provisions (7,336) - - - (7,336)Obligations under finance leases and hire purchasecontracts (235) - - - (235) (7,671) - - - (7,671) Net assets 104,721 - - - 104,721 Shareholders' equityShare capital 6,549 - - - 6,549Share premium account 106,222 - - - 106,222Retained losses (8,050) - - - (8,050) Total shareholders' equity 104,721 - - - 104,721 7.2 Reconciliation of equity and net assets as at 31 December 2006 Goodwill As reported Goodwill tax Other As under amortisation adjustment (notes 8b, restated UK GAAP (note 8a) (note 8e) c & d) under IFRS £'000 £'000 £'000 £'000 £'000 Non-current assetsGoodwill 84,390 10,405 (600) (116) 94,079Other intangible assets - - - 217 217Property, plant and equipment 28,963 - - (124) 28,839 113,353 10,405 (600) (23) 123,135 Current assetsTrade and other receivables 6,034 - - - 6,034Cash and cash equivalents - - - - - 6,034 - - - 6,034 Current liabilitiesTrade and other payables (4,712) - - - (4,712)Tax liabilities (2,306) - - - (2,306)Obligations under finance leases and hire purchasecontracts (132) - - - (132)Bank overdraft and loans (3,636) - - - (3,636) (10,786) - - - (10,786) Net current liabilities (4,752) - - - (4,752) Non-current liabilitiesBank loans (7,000) - - - (7,000)Provisions (4,084) - - - (4,084)Obligations under finance leases and hire purchasecontracts (119) - - - (119) (11,203) - - - (11,203) Net assets 97,398 10,405 (600) (23) 107,180 Shareholders' equityShare capital 6,549 - - - 6,549Share premium account 106,222 - - - 106,222Retained losses (15,373) 10,405 (600) (23) (5,591) Total shareholders' equity 97,398 10,405 (600) (23) 107,180 7.3 Reconciliation of equity and net assets as at 30 June 2006 As restated under Goodwill Goodwill Other UK GAAP amortisation tax adjustment (notes 8b, As restated (note 9) (note 8a) (note 8e) c & d) under IFRS £'000 £'000 £'000 £'000 £'000Non-current assetsGoodwill 88,791 5,244 (291) (116) 93,628Other intangible assets - - - 260 260Property, plant and equipment 29,386 - - (147) 29,239 118,177 5,244 (291) (3) 123,127 Current assetsTrade and other receivables 7,159 - - - 7,159Cash and cash equivalents - - - - - 7,159 - - - 7,159 Current liabilitiesTrade and other payables (2,342) - - (59) (2,401)Tax liabilities (2,782) - - - (2,782)Debt factoring (1,785) - - - (1,785)Obligations under finance (72) - - - (72)leases and hire purchasecontractsBank overdraft and loans (3,155) - - - (3,155) (10,136) - - - (10,195) Net current liabilities (2,977) - - (59) (3,036) Non-current liabilitiesBank and other loans (8,000) - - - (8,000)Provisions (5,822) - - - (5,822)Obligations under finance (350) - - - (350)leases and hire purchasecontracts (14,172) - - - (14,172) Net assets 101,028 5,244 (291) (62) 105,919 Shareholders' equityShare capital 6,549 - - - 6,549Share premium account 106,222 - - - 106,222Retained losses (11,743) 5,244 (291) (62) (6,852) Total shareholders' equity 101,028 5,244 (291) (62) 105,919 7.4 Reconciliation of reported profits for the six months ended 30 June 2006 Goodwill As reported Goodwill tax Other under amortisation adjustment (notes As restated UK GAAP (note 8a) (note 8e) 8b, d) under IFRS £'000 £'000 £'000 £'000 £'000 Continuing operationsRevenue 13,868 - - - 13,868 Operating expenses (17,173) 5,244 (291) (62) (12,282) Operating profit / (loss) (3,305) 5,244 (291) (62) 1,586 Finance costs (424) - - - (424) Profit / (loss) before tax (3,729) 5,244 (291) (62) 1,162 Tax - - - - - Profit / (loss) for the period (3,729) 5,244 (291) (62) 1,162 Earnings / (loss) per shareBasic (5.7p) 8.0p (0.4p) (0.1p) 1.8pDiluted (5.7p) 8.0p (0.4p) (0.1p) 1.8p 7.5 Reconciliation of reported profits for the year ended 31 December 2006 Goodwill As reported Goodwill tax under amortisation adjustment Other As restated UK GAAP (note 8a) (note 8e) (note 8d) under IFRS £'000 £'000 £'000 £'000 £'000Continuing operationsRevenue 26,561 - - - 26,561 Operating expenses (33,012) 10,405 (600) (23) (23,230) Operating profit / (loss) (6,451) 10,405 (600) (23) 3,331 Finance costs (1,020) - - - (1,020) Profit / (loss) before tax (7,471) 10,405 (600) (23) 2,311 Tax 89 - - - 89 Profit / (loss) for the year (7,382) 10,405 (600) (23) 2,400 Earnings / (loss) per shareBasic (11.3p) 15.9p (0.9p) - 3.7pDiluted (11.3p) 15.9p (0.9p) - 3.7p 8. Explanation of the reconciling items between UK GAAP and IFRS (a) Under IFRS 3 (Business combinations) annual amortisation of goodwill is no longer required. Instead goodwill must be allocated to each income generating unit acquired and an annual impairment review must be performed for each discrete unit in accordance with IAS 36 (Impairment of assets). The group has elected not to apply IFRS 3 (Business combinations) retrospectively and restate business combinations completed prior to the date of transition. As a result, in the opening balance sheet, goodwill arising from past business combinations of £85.8 million remains as stated under UK GAAP at 1 January 2006. (b) IAS 19 (Employee benefits) requires employers to recognise the total costof all short term employee benefits expected to be paid in exchange foremployee's services in the accounting period. This includes holiday pay (theAugean holiday year runs from 1 January to 31 December and therefore coincideswith the 31 December statutory financial year end but not with the half year)which has previously been accounted for as incurred. This results in a charge of£59,000 for the six months ended 30 June 2006 but has no effect on the yearended 31 December 2006. (c) Under UK GAAP, all capitalised software is included within tangible fixedassets as plant and equipment. Under IFRS, only computer software that isintegral to a related item of hardware should be included as plant andequipment. All other computer software should be recorded as an intangibleasset. Accordingly a reclassification of the total net book value of capitalisedsoftware has been made between property, plant and equipment and intangibleassets. There is no effect on net assets. (d) During the six months ended 30 June 2006 the group acquired the assetsand business of Credential Hazardous. IFRS 3 (Business combinations) requiresthat for all business combinations completed after the date of transition toIFRS, separately intangible assets should be valued and are subject toamortisation. As a result £116,000 of amounts previously classified as goodwill under UK GAAPin relation to acquired order books and contracts has been reclassified as anintangible asset. This will be amortised over a three year period from the dateof acquisition which results in a £23,000 charge to the income statement in theyear ended 31 December 2006 and £3,000 in the six months ended 30 June 2006. (e) IAS 12 (Income Taxes) requires that when deferred tax assets such aslosses have not been recognised on acquisition and are subsequently utilised,both deferred tax assets and goodwill are adjusted with corresponding entries tooperating expense and tax in the income statement. During the year ended 31December 2006 the group utilised tax losses that had previously not beenrecognised on the acquisition of Atlantic Waste Holdings Limited and Zero WasteHoldings Limited. As the related tax credit had already been recorded in the UKGAAP accounts a charge has been recorded as an exceptional operating expense. 9. FRS 20 restatement under UK GAAP FRS 20 (Share-based payments) was implemented for the first time in the resultsfor the six months ended 30 June 2006. Following a further review of the vestingconditions attached to the share options and warrants issued as a result of theacquisitions made in December 2004, it was determined at 31 December 2006 thatthey were not within the scope of FRS20. The balance sheet as at 30 June 2006has been restated accordingly, with net assets and equity reduced by £676,000from the figures previously published at the interim stage in 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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