Last close As at 05/08/2026
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Research: Industrials
Augean has proven to be resilient throughout the pandemic. In particular, the growth in processing incinerator ash residues from energy from waste (EfW) facilities continues unabated and additional new contract wins should drive improved returns in FY21. Management expects FY20 adjusted PBT to be slightly ahead of last year and we have marginally reduced our FY20 adjusted PBT and EPS estimates by 1%. Our FY21 estimates are maintained. Cash flow has been stronger than we expected, underpinning the indication that dividends should resume in FY21.
Written by
Augean |
H220 momentum from EfW growth to continue |
FY20 closing update |
Industrial support services |
18 January 2021 |
Share price performance
Business description
Next events
Analyst
Augean is a research client of Edison Investment Research Limited |
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Augean has proven to be resilient throughout the pandemic. In particular, the growth in processing incinerator ash residues from energy from waste (EfW) facilities continues unabated and additional new contract wins should drive improved returns in FY21. Management expects FY20 adjusted PBT to be slightly ahead of last year and we have marginally reduced our FY20 adjusted PBT and EPS estimates by 1%. Our FY21 estimates are maintained. Cash flow has been stronger than we expected, underpinning the indication that dividends should resume in FY21.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
79.7 |
11.4 |
9.1 |
0.0 |
20.6 |
0.0 |
12/19 |
107.1 |
19.2 |
21.0 |
0.0 |
8.9 |
0.0 |
12/20e |
93.5 |
19.6 |
15.2 |
0.0 |
12.3 |
0.0 |
12/21e |
100.0 |
21.7 |
17.0 |
4.0 |
11.0 |
2.1 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY20: A year of two halves
The effect of COVID-19 was felt by the waste treatment operations in H120 as some waste flows were temporarily curtailed, with a recovery in volumes in H220. The EfW activity continued to see strong growth throughout the year. The North Sea activities were supported by the end of a decommissioning contract in H120 but subsequently succumbed to the weaker activity levels in the oil market. Management has impaired the North Sea assets by £3m as it adjusts to the lower market levels and this will be an exceptional charge in FY20. The adjusted PBT is expected by management to be at least in line with FY19. Cash performance was better than expected, with £6.4m FY20 net cash benefiting from the £3.5m VAT payment deferral due to be paid in March 2021.
Further positive developments in EfW
Since the start of 2020, the company has received six contracts or commitments for incremental EfW ash waste treatment from operators. Four are existing facilities and two are proposed new incinerators and should add £6m to annual revenues when fully operational. Augean has also recently received a revised Environmental Permit for its Port Clarence site that included the grant of a recovery (R) code for specific waste. One of these includes treated EfW ash, which will allow Augean to extend the number of facilities it can service by offering new waste recovery options on a selective basis to customers who desire an R code.
Valuation: Expected return to dividend list
The HMRC issues now appear to be a possible benefit if appeals are successful, which may augment sustainable organic growth driven by the incinerator ash activities. The FY21 P/E of 11.0x appears undemanding. In addition, management has indicated that it expects to resume paying dividends in 2021 and we have included a four-times covered payment, although this could be conservative.
Earnings revisions
The estimates on our income statement remain broadly unchanged, although we have slightly increased our interest charge in FY20, which reduces our adjusted PBT and EPS by 1%. FY21 is unchanged. The major change to the balance sheet estimates comes from a better cash flow than expected, aided by the VAT payment deferral until March 2021. FY20 net cash is indicated by management to be £6.4m, some £2.9m better than we had previously estimated. Our FY21 net cash expectation is slightly reduced, largely due to our assumption that an interim dividend cash out flow should resume in H221.
Exhibit 1: Augean estimate revisions
Adjusted EPS (p) |
Adjusted PBT (£m) |
EBITDA (£m) |
|||||||
Old |
New |
% chg. |
Old |
New |
% chg. |
Old |
New |
% chg. |
|
2020e |
15.37 |
15.21 |
-1 |
19.8 |
19.6 |
-1 |
29.9 |
29.9 |
0 |
2021e |
17.00 |
17.00 |
0 |
21.7 |
21.7 |
0 |
32.1 |
32.1 |
0 |
Source: Edison Investment Research
Exhibit 2: Financial summary
£'000 |
2018 |
2019 |
2020e |
2021e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
79,749 |
107,137 |
93,453 |
99,999 |
Cost of Sales |
(67,269) |
(73,669) |
(64,304) |
(65,767) |
||
Gross Profit |
12,480 |
33,468 |
29,149 |
34,232 |
||
EBITDA |
|
|
18,944 |
28,848 |
29,868 |
32,071 |
Operating Profit (before amort. and except & SBP.) |
12,244 |
19,948 |
20,862 |
22,522 |
||
Intangible Amortisation |
(58) |
(39) |
(22) |
(22) |
||
Exceptionals |
(322) |
(26,843) |
(2,500) |
0 |
||
Share Based Payments |
(523) |
(7,693) |
0 |
0 |
||
Operating Profit |
11,341 |
(14,627) |
18,340 |
22,500 |
||
Associated company |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Net Interest |
(748) |
(697) |
(1,291) |
(777) |
||
Profit Before Tax (norm) |
|
|
11,438 |
19,212 |
19,549 |
21,723 |
Profit Before Tax (IFRS) |
|
|
10,593 |
(15,324) |
17,049 |
21,723 |
Tax |
(2,043) |
2,568 |
(3,609) |
(3,910) |
||
Profit After Tax (norm) |
9,453 |
21,819 |
15,940 |
17,813 |
||
Profit After Tax (IFRS) |
8,550 |
(12,756) |
13,440 |
17,813 |
||
Average Number of Shares Outstanding (m) |
103.4 |
104.0 |
104.8 |
104.8 |
||
EPS - normalised (p) |
|
|
9.14 |
20.98 |
15.21 |
17.00 |
EPS - normalised and fully diluted (p) |
|
9.14 |
20.98 |
15.21 |
17.00 |
|
EPS - (IFRS) (p) |
|
|
9.61 |
(12.26) |
12.83 |
17.00 |
Dividend per share (p) |
0.00 |
0.00 |
0.00 |
4.00 |
||
Gross Margin (%) |
15.6 |
31.2 |
31.2 |
34.2 |
||
EBITDA Margin (%) |
23.8 |
26.9 |
32.0 |
32.1 |
||
Operating Margin (before GW and except.) (%) |
15.4 |
18.6 |
22.3 |
22.5 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
61,977 |
62,461 |
56,793 |
53,402 |
Intangible Assets |
19,823 |
19,802 |
19,810 |
19,818 |
||
Tangible Assets |
40,373 |
38,309 |
32,483 |
29,234 |
||
Investments & Other |
1,781 |
4,350 |
4,500 |
4,350 |
||
Current Assets |
|
|
33,371 |
62,090 |
50,797 |
66,841 |
Stocks |
277 |
302 |
235 |
245 |
||
Debtors |
18,628 |
40,200 |
34,300 |
36,702 |
||
Cash |
11,162 |
21,588 |
16,263 |
29,894 |
||
Other |
3,304 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(23,585) |
(40,017) |
(30,019) |
(27,897) |
Creditors |
(23,585) |
(33,350) |
(30,019) |
(27,897) |
||
Short term borrowings |
0 |
(6,667) |
0 |
0 |
||
Long Term Liabilities |
|
|
(11,463) |
(39,469) |
(17,962) |
(17,682) |
Long term borrowings |
(2,922) |
(28,123) |
(10,000) |
(10,000) |
||
Other long term liabilities |
(8,541) |
(11,346) |
(7,962) |
(7,682) |
||
Net Assets |
|
|
60,300 |
45,065 |
59,609 |
74,665 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
17,413 |
(16,215) |
32,219 |
27,305 |
Net Interest |
(360) |
(597) |
(1,291) |
(777) |
||
Tax |
(1,063) |
(820) |
(3,754) |
(3,810) |
||
Capex |
(3,413) |
(5,841) |
(5,110) |
(6,030) |
||
Acquisitions/disposals |
6,212 |
3,350 |
(1,100) |
(300) |
||
Financing |
250 |
(1,319) |
(1,500) |
(1,500) |
||
Dividends |
0 |
0 |
0 |
(1,257) |
||
Net Cash Flow |
19,039 |
(21,442) |
19,465 |
13,631 |
||
Opening net debt/(cash) |
|
|
10,799 |
(8,240) |
13,202 |
(6,263) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(8,240) |
13,202 |
(6,263) |
(19,894) |
Source: Company data, Edison Investment Research
|
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