Investors seemed unimpressed by waste manager Augean’s (AUG:AIM) full year results as its share price plunged by 11% within 10 minutes of the market open on Tuesday.
Augean’s chief financial officer Mark Fryer admits to being ‘surprised’ by the market reaction given the firm’s ‘double digit growth.’ He thinks that large purchases of shares two weeks ago (worth about 16% of the rough 103m in issue) at 47p boosted the stock value, which is perhaps now settling down.
The firm’s results, for the 12 months to 31 December 2016, met analysts’ expectations, showing a continuation of its trend for double digit growth for another year.
But a 150% increase in net debt is never good to see, now standing at £10.8m. As Fryer explains, the vast majority of this money was used for capital expenditure as the firm looks to cement its position going forward, the acquisition of Colt Services costing £8.9m last May.
Augean North Sea Services (ANNS) also purchased a plant in Great Yarmouth and additional equipment accounting for £2m. An additional £2.2m was spent on increasing its landfill operations.
ANNS struck an agreement in November 2016 with Forth Ports. It involves dealing with waste stemming from the decommissioning of offshore equipment at the Port of Dundee. This gives the firm access to a £40bn market over the next two decades, according to Augean’s chief executive Stewart Davies.
Pre-tax profit increased 16% to £7m, revenues rose 25% to £70m but adjusted earnings per share decreased by 5% to 4.42p.
However, the firm incurred a £3.3m non-cash impairment for a facility in East Kent, spent £1.2m to settle a trade dispute and £0.8m of Colt acquisition fees. When these are taken into account, profit before tax is down to £1.3m and earnings per share plunge from 160p to 40p.
Perhaps investors are not following the old adage of ‘where there’s muck, there’s brass’ judging by today’s reaction.
