1st Oct 2008 17:36
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
Announcement For Immediate Release
1 October 2008
Augean plc
("Augean" or the "Company")
Statement Regarding Profit Forecast
Introduction
On 26 August 2008 the Board of Augean plc ("Augean" or the "Company") announced that it had received a number of preliminary approaches which may or may not lead to an offer for the Company being made (the "Offer"). As a result, Augean entered an offer period ("Offer Period") under the rules of the City Code on Takeovers and Mergers (the "Code").
On 23 September 2008 Augean made the following statements in its interim results announcement, which were subsequently repeated in the correction announcement on 25 September 2008 (the "Announcement"):
"We spent much energy in the first half laying important foundations for the future sustainable and visible growth of the group. We have a better balance between our landfill business and our treatment business and have secured major contracts which will deliver a strong second half performance. As such, the board is confident that current year market expectations will be achieved."
"Looking forward to the remainder of the year we are seeing a considerable, sustained upturn in activity based on certain large customers delivering strong volumes, into our landfill sites, as shown by hazardous waste inputs of 75,000 tonnes in the first two months of the second half of the year. At the same time we are experiencing a strong performance, in line with expectations, in our enlarged treatment division. As a result of the certainty of these revenue streams, the board is confident that current year market expectations will be achieved."
As Augean was in an Offer Period at the time of the Announcement, the phrase "the board is confident that current year market expectations will be achieved" represents a profit forecast (the "Profit Forecast") for the purposes of the Code and it is a requirement of the Code that the Profit Forecast should be reported on by Augean's auditors and financial advisers in the terms set out in Rule 28 of the Code.
Augean announced the amended unaudited interim results for the six months ended 30 June 2008 on 25 September 2008 which showed profit before tax of £0.959m (2007: £1.722m).
Basis of preparation and principal assumptions underlying the Profit Forecast
The Profit Forecast relates to Augean's expected financial results for the twelve months ending 31 December 2008 and takes into account:
the unaudited interim financial statements of Augean for the six month period ended 30 June 2008 as announced by Augean on 25 September 2008;
the unaudited Augean management accounts for the month ended 31 July 2008; and
an unaudited Augean management forecast for the period ending 31 December 2008.
Market expectations for profit before tax for the year ending 31 December 2008 at the time of issue of the interim statement were £4.13m(1). Market expectations of profit before tax for Augean for the year ending 31 December 2008 are before exceptional items and any other potential non-recurring charges such as impairment of goodwill charges resulting from the utilisation of tax losses. Management have considered their forecast for profit before tax on the same basis.
The Profit Forecast has been prepared on the basis of the expected accounting policies with which the Company will comply in the accounts to 31 December 2008 (as disclosed in the interim financial statements for the six month period ended 30 June 2008) and in accordance with International Financial Reporting Standards.
The Profit Forecast takes into account certain principal assumptions which could have a material effect on the achievement of the Profit Forecast as set out below.
The principal assumptions upon which the Profit Forecast are based are:
contracted landfill volumes are assumed to be at least at the minimum contracted levels for the period;
landfill volumes from other sources are assumed to be in line with those experienced in the six months ended 30 June 2008;
treatment site sales are assumed to be broadly in line with those experienced in the six months ended 30 June 2008;
landfill sale prices are assumed to be in line with current levels per tonne;
landfill site costs for the balance of the year are assumed to be consistent with the run rate as at 30 June 2008;
overheads per month for the balance of the year are assumed to be consistent with the run rate as at 31 August 2008;
(1)The data points upon which the Board of Augean based their statement for the profit before tax are: Altium, 2 June 2008: PBT estimate £4.0m; Landsbanki 12 March 2008: PBT estimate £4.2m; Numis, 11 March 2008: PBT estimate £4.2m. The Board had not taken into account the Finncap profit before tax estimate of £4.7m when reviewing market expectations prior to the Announcement as Augean was notified by FinnCap in May 2008 that it was ceasing coverage of Augean.
treatment site profit for the balance of the year is assumed to be slightly below profit levels for the six months ended 30 June 2008;
losses from the Terramundo joint venture are assumed to decrease from the level experienced in the six months ended 30 June 2008 in line with recent management actions to reduce costs;
there will be no acquisitions or disposals by Augean prior to 31 December 2008 which will have a material impact on profit;
there will be no material restructuring announced by Augean prior to 31 December 2008.
The assumptions that are not within Augean's control are:
weather conditions, which could affect construction works and therefore have an effect on landfill volumes, will not be significantly more severe than those expected for the remainder of the year to 31 December 2008;
there will be no loss of key management personnel by Augean prior to 31 December 2008;
there will be no business interruptions or industrial disputes that materially affect Augean, its key customers or key suppliers prior to 31 December 2008;
there will be no material adverse change in the political and/or economic environment or natural disasters that would materially affect Augean prior to 31 December 2008;
there will be no material adverse change in the financial markets that would materially affect Augean, its key customers or key suppliers prior to 31 December 2008; and
any changes or proposed changes in relevant legislation, government, governmental policy or other regulatory requirements will not materially affect Augean prior to 31 December 2008.
In compliance with Rule 28.7 of the Code, the board also confirms its expectation that corporation tax for the year ending 31 December 2008 will be nil due to the availability of losses going forward and any fees incurred by Augean prior to 31 December 2008 in relation to any potential offer for the entire issued share capital of the Company will be accounted for as exceptional items for these purposes.
The Board confirms that the Profit Forecast has been properly compiled and has been prepared on the basis of the expected accounting policies with which the Company will comply with in the accounts to 31 December 2008 (as disclosed in the interim financial statements for the six month period ended 30 June 2008) and in accordance with International Financial Reporting Standards.
Letters relating to the Profit Forecast
The Directors of Augean, who are solely responsible for the Profit Forecast, have received the following letters from Grant Thornton UK LLP and Landsbanki Securities (UK) Limited relating to the Profit Forecast.
Letter from Grant Thornton UK LLP relating to the Profit Forecast
|
Transaction Advisory Services
Grant Thornton UK LLP No 1 Whitehall Riverside Leeds LS1 4BN
T +44 (0)113 245 5514 F +44 (0)113 246 5055 www.grant-thornton.co.uk |
Our ref: Project Eve/ WMO/ GMS
The Directors Augean plc 4 Rudgate Court Walton Wetherby LS23 7BF
and
The Directors Landsbanki Securities (UK) Limited (In its capacity as Financial Adviser) Bow Bells House1 Bread StreetLondonEC4M 9BF
1 October 2008
Dear Sirs
Augean Plc
We report on the profit forecast comprising of a projected profit and loss account of Augean plc ("the Company") and its subsidiaries (together "the Augean Group") for the period ending 31 December 2008 (the "Profit Forecast"). The Profit Forecast, and the material assumptions upon which it is based, are set out on pages 2 to 3 of the Statement Regarding Profit Forecast (the Statement) issued by the Company dated 1 October 2008. This report is required by Rule 28.3(b) of the City Code and is given for the purpose of complying with that rule and for no other purpose. Accordingly, we assume no responsibility in respect of this report to any potential offeror or any person connected to, or acting in concert with, any potential offeror or to any other person who is seeking or may in future seek to acquire control of the Company (an "Offeror") or to any person connected to, or acting in concert with, an Offeror.
Responsibilities
It is the responsibility of the directors of the Company (the "Directors") to prepare the Profit Forecast in accordance with the requirements of the City Code.
It is our responsibility to form an opinion as required by the City Code as to the proper compilation of the Profit Forecast and to report that opinion to you.
Save for any responsibility under Rule 28.3(b) of the City Code to any person as and to the extent therein provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Rule 28.4 of the City Code, consenting to its inclusion in the Statement.
Basis of Preparation of the Profit Forecast
The Profit Forecast has been prepared on the basis stated on page 2 of the Statement and is based on the unaudited interim financial results for the six months ended 30 June 2008, the unaudited management accounts for the month ended 31 July 2008 and a forecast to 31 December 2008. The Profit Forecast is required to be presented on a basis consistent with the accounting policies of the Augean Group.
Basis of Opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included evaluating the basis on which the historical financial information included in the Profit Forecast has been prepared and considering whether the Profit Forecast has been accurately computed based upon the disclosed assumptions and the accounting policies of the Augean Group. Whilst the assumptions upon which the Profit Forecast are based are solely the responsibility of the Directors, we considered whether anything came to our attention to indicate whether any of the assumptions adopted by the Directors which, in our opinion, are necessary for a proper understanding of the Profit Forecast have not been disclosed and whether any material assumption made by the Directors appears to us to be unrealistic.
We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Profit Forecast has been properly compiled on the basis stated.
Since the Profit Forecast and the assumptions on which it is based relate to the future and may therefore be affected by unforeseen events, we can express no opinion as to whether the actual results reported will correspond to those shown in the Profit Forecast and differences may be material.
Opinion
In our opinion, the Profit Forecast has been properly compiled on the basis of the assumptions made by the Directors and the basis of accounting used is consistent with the accounting policies of the Augean Group.
Yours faithfully
GRANT THORNTON UK LLP
Chartered Accountants
Letter from Landsbanki Securities (UK) Limited relating to the Profit Forecast
The DirectorsAugean plcHead Office4 Rudgate CourtWaltonNear WetherbyWest YorkshireLS23 7BF
1 October 2008
Dear Sirs,
We refer to the profit forecast of Augean plc ("Augean" or the "Company") announced on 23 September 2008 (and subsequently repeated in the correction announcement on 25 September 2008) for the year ending 31 December 2008 (the "Profit Forecast"), together with the basis and assumptions upon which the Profit Forecast was made.
We have discussed with you the Profit Forecast, together with the assumptions and the basis upon which it has been prepared by you, and you have confirmed to us that all information material to the Profit Forecast has been disclosed to us. We have relied upon the accuracy and completeness of all the financial and other information discussed with us and assumed such accuracy and completeness for the purposes of providing this letter.
We have also discussed the assumptions, accounting policies and calculations adopted in arriving at the Profit Forecast with Grant Thornton UK LLP ("Grant Thornton"), and we have considered the letter which Grant Thornton addressed to yourselves and ourselves on this matter.
On the basis of all of the foregoing, we consider that the Profit Forecast, for which you as Directors of Augean are solely responsible, has been compiled with due care and consideration.
It is the responsibility of the directors of the Company (the "Directors") to prepare the Profit Forecast in accordance with the requirements of the City Code.
Save for any responsibility under Rule 28.3(b) of the City Code to any person as and to the extent therein provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Rule 28.4 of the City Code, consenting to its inclusion in the Statement.
Yours faithfully
James Wellesley Wesley
For and on behalf Landsbanki Securities (UK) Limited
Enquiries:
Augean plc Telephone: +44 (0) 1937 844 980
Paul Blackler, Chief Executive Officer Peter Southby, Finance Director
Landsbanki Securities (UK) Limited
Telephone: +44 (0) 20 7426 9000
(NOMAD and financial adviser to Augean plc)
James Wellesley Wesley
Rashmi Sinha
Financial Dynamics
Telephone: +44 (0) 20 7831 3113
(public relations adviser to Augean)
Jonathan BrillBilly Clegg
Landsbanki Securities (UK) Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Augean and no-one else in connection with the contents of this announcement and will not be responsible to anyone other than Augean for providing the protections afforded to clients of Landsbanki Securities (UK) Limited nor for providing advice in relation to this announcement, the content of this announcement nor any matter referred to herein. Landsbanki Securities (UK) Limited has given and not withdrawn its written consent to the issue of this announcement with the inclusion of its letter concerning the Profit Forecast in the form and context in which it is included with the inclusion of the references to its name in the form and context in which it is included.
Grant Thornton UK LLP have given and have not withdrawn their written consent to the issue of this announcement with the inclusion of their letter concerning the Profit Forecast in the form and context in which it is included.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and business of Augean and certain plans and objectives of the boards of Augean with respect thereto. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could" or other words of similar meaning. These statements are based on assumptions and assessments made by the boards of Augean in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will or may occur in the future and the factors described in the context of such forward-looking statements in this announcement could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although Augean and the persons who have accepted responsibility for the information contained in this announcement believe that the expectations reflected in their respective forward-looking statements are reasonable, they can give no assurance that such expectations will prove to have been correct and Augean and the persons who have accepted responsibility for the information contained in this announcement therefore caution you not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement.
OVERSEAS JURISDICTIONS
The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are located or of which they are citizens. Such persons (including, without limitation, nominees, trustees and custodians) should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdictions. This announcement has been prepared for the purposes of complying with the laws of Northern Ireland, the Code and the AIM Rules for Companies and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of England.
This announcement is not intended to, and does not constitute, or form part of, an offer to sell, purchase, exchange or subscribe for or a solicitation of an offer to sell, purchase or exchange any securities or a solicitation of any vote or approval in any jurisdiction. This announcement does not constitute a prospectus or a prospectus equivalent document.
DEALING DISCLOSURE REQUIREMENTS
Under the provisions of Rule 8.3 of the Takeover Code (the "Code"), if any person is, or becomes, "interested" (directly or indirectly) in 1% or more of any class of "relevant securities" of the Company, all "dealings" in any "relevant securities" of the Company (including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the "offer period" otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an "interest" in "relevant securities" of the Company, they will be deemed to be a single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevant securities" of the offeree company by the offeror or the offeree company, or by any of their respective "associates", must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk.
"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a "dealing" under Rule 8, you should consult the Panel.
Related Shares:
AUG.L