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Interim results – six months ended 30 June 2020

We are pleased to announce our unaudited interim results for the six months ended 30 June 2020.

The Group has remained fully operational at all sites throughout the year to date.  However, Covid-19 has impacted all the Group’s segments negatively with the exception of the residential EfW ash segment. The most heavily impacted segments include radioactive, biomass EfW and construction which were all placed on hold due to lockdown restrictions. The North Sea service business has been heavily impacted both by the Covid-19 effect on activity levels as well as an unprecedented significant decline in the oil price as a result of Covid-19. The first quarter generated more than two thirds of the half year profits with the second quarter heavily impacted by Covid-19. Trading in the third quarter has picked up significantly over the second quarter.

Financial summary

Adjusted metrics are excluding exceptional items and share based payments

  • Adjusted revenue before landfill tax decreased by 6% to £41.4m (2019: £44.2m)
  • Adjusted profit1 before taxation decreased 11% to £8.5m (2019: £9.6m)
  • Adjusted EBITDA decreased by 6% to £13.3m (2019: £14.2m)
  • Adjusted basic earnings per share decreased by 12% to 6.70 pence (2019: 7.61p)
  • Robust cash generation of £10.5m with net debt of £3.3m (December 2019: £13.2m) excluding lease liabilities
  • Return on capital of 42.0% compared with 37.8% at December 2019


Operational summary

  • All sites have remained fully operational year to date with safe working measures in place to mitigate impact of Covid-19
  • Sales growth of 14% in North Sea due to successful completion of Curlew decommissioning contract
  • Treatment & Disposal sales reduced by 16% due to the impact of Covid-19
  • Strong growth of 25% in residues from Energy from Waste (EfW) and other incinerator plants as a result of contract wins of existing EfW plants from competitors for the first time
  • Trialling several recycling options for EfW ash to obtain R code for customers
  • Business optimisation programme continues with additional cost saving of £0.7m
  • Acquisition of the assets of the Haliburton EcoCentre in Peterhead in August 2020


HMRC

  • As announced on 10th December 2019, the Group paid £40.4m to HMRC to clear all outstanding landfill tax assessments. No new assessments have been received since that date and the first hearing of our appeal against the assessments at a Tax Tribunal will take place at the end of September 2020
  • The Group filed claims for repayment of overpaid landfill tax in relation to engineering material used in the Group’s landfill of £11.1m in May


Outlook

  • Further growth targeted in the core markets of Energy from Waste and construction soils
  • Tough market for North Sea Services with no new significant decommissioning project expected in 2020
  • Full year profit expected to be second half weighted with reducing impact of Covid-19 and lower oil price
  • The Board expects to broadly meet market expectations for the full year maintaining our growth profile assuming no further Covid-19 lockdowns in the second half.

The Group has delivered a robust performance across all areas of the business despite significant headwinds in quarter two. We are working hard to recoup the impact of the lower oil price and Covid-19 over the second half and, assuming no further Covid-19 lockdowns, we anticipate that full year results will be broadly in line with market expectations. The Group’s performance in difficult circumstances (Covid-19 and oil price reduction) demonstrated the resilience of our current portfolio of activities and so maintaining our growth profile.

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