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28th January 2013
("Augean" or "the Group")
Pre-close Trading Update
Augean plc, one of the UK's market leaders in the management of hazardous waste, is pleased to update the market prior to commencement of its close period the ahead of the publication of its 2012 Full Year results on 26th March 2013.
Trading in the second half of the year delivered satisfactory performance despite delays in the delivery of the expected volumes for Low Level Waste (LLW). As a consequence the Full Year results are expected to be at the lower end of the Board's revised forecasts, with revenue expected to be in a range of £42.0m to £43.0m. However, the Board remains confident that the routes to the LLW market remain in place and will continue to develop as the challenges of unlocking volumes are met during 2013.
Revenues during 2012 were supported by the development of new business streams in industrial services, hazardous waste incineration and offshore waste management, whilst the Group's traditional hazardous waste markets were broadly flat throughout the year. Alongside LLW market development these new businesses are expected to continue to enhance shareholder returns during the coming year.
The key strategic opportunities identified during 2010 have all now been delivered and the Group is well positioned for the next phase of its strategic development.
In September the Group announced that two significant contracts had been secured for disposal of LLW at East Northants Resource Management Facility (ENRMF), through the framework managed by Low Level Waste Repository Limited, as well as receiving numerous smaller enquiries. The pace at which volumes have been released from the relevant sites through this framework has been slower than originally planned, with a number of deliveries being delayed until Q1 2013, impacting the total value of LLW revenue secured during 2012. However, thanks to other LLW contracts the Board still expects LLW activities to make a material positive impact on the results for the full year.
The Group has completed the integration of the new businesses announced during the first half of the year and each is now well established in their respective markets and trading in line with management expectations. The activities at East Kent Waste Recovery Facility (incineration and energy recovery), Augean North Sea Services (offshore waste management) and Cooks Hole (minerals extraction) had limited financial impact during 2012 as they were being integrated, but all are expected to deliver profitable returns during 2013.
Strong performance from land remediation activities during the first quarter, followed by stable landfill volumes through the second half, allowed the Land Resources division to deliver year on year improvements to revenues and operating profit. This performance was supported by year on year improvements from the Oil & Gas Services division and stable performance from the Waste Network division in challenging markets.
As part of management efforts to improve the profitability of the Waste Network division, the technical support to the division was restructured during the fourth quarter. In addition, a further project is underway to consolidate the total number of waste transfer sites used by the division from three down to two by the end of March 2013. These changes will result in operating cost savings and a small number of redundancies.
Investment in new businesses, partly offset by positive cash flows from operations and tight control of capital expenditure during the second half of the year, led to an increase in net debt at the end of the year to approximately £6.2m (H2 2011: £4.0m). Excluding the costs incurred for acquisitions of £3.3m the Group generated positive free cash flow of approximately £1.0m in the year, compared against a negative £0.5m in the previous year.
The Board announced in September the completion of a capital reduction, which created the conditions for a dividend payment to be made during 2013. The Board confirms its intention to pay a maiden dividend following announcement of the Preliminary Results on 26th March 2013.
While the general economic outlook for the wider hazardous waste sector remains subdued the Board believes that the Group is well placed to deliver continued growth during 2013. The investments and new business streams delivered during 2012 are expected to lead to improvements to revenues, earnings per share and cash flow during the year.
For further information please contact:
Paul Blackler, Chief Executive
Richard Allen, Finance Director
01937 844 980
020 3205 7500
020 7831 3113
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