Preliminary Results

25th March 2014

Augean plc

("Augean" or "the Group")

Preliminary Results for the year ended 31 December 2013

Augean, one of the UK's leading specialist waste management businesses, announces its Preliminary Results for the year to 31 December 2013.

Highlights

Key Figures

Financial highlights

§ Adjusted profit before tax for the Group of £3.2m (2012: £2.6m)

§ Revenue from continuing operations increased by 19% to £43.5m (2012: £36.7m)

§ Adjusted profit before tax for continuing operations increased by 12% to £4.4m (2012: £3.9m)

§ Earnings per share from continuing operations were 3.13p (2012: 3.20p)

§ Operating cash flows of £5.9m supported capital expenditure and an increased equity stake in Augean North Sea Services (2012: £5.8m)

§ Proposed dividend of 0.35p per share (2012: 0.25p)

Operational highlights

§ Improved performance from continuing operations, driven by growth in key markets:

o Reduction to total landfill volumes within Land Resources, offset by disposal of higher margin waste

o Strong growth at Augean North Sea Services, ahead of Board's original targets

o Oil & Gas Services delivered positive EBITDA and reduced year on year losses

o East Kent incinerator performance impacted by mechanical issues until quarter four

Strategic developments

§ Closure of Waste Network division

§ Creation of Augean Integrated Services business to focus on total waste management

§ Creation of Radioactive Waste Services business to widen radioactive waste disposal opportunities

§ Purchase of a further stake in Augean North Sea Services, taking shareholding to 81%

§ Long term planning permission secured at East Northants Resource Management Facility and Thornhaugh landfill sites

Post Period End

§ Sale of certain Waste Network sites for consideration of £1.2 million

§ Renewal of banking facilities through to July 2017 providing debt funding of £15.0 million

Commenting on the Results, Dr Stewart Davies, chief executive officer, said:

"While Augean underwent a number of operational and strategic changes during 2013, the Group delivered a robust financial performance with increases in revenue and profit from continuing operations. The Board believes that the Group is well placed to benefit from the significant investment it has undertaken in new businesses and assets, the sale and closure of underperforming activities and any increase in the volume of waste management activity, backed by a general UK economic recovery.

The Group has an established position in a number of key waste markets, including hazardous waste treatment and disposal, Air Pollution Control Residues management, low level radioactive waste disposal and North Sea oil and gas. With improving underlying performance across the whole Group and the benefits of lower overhead costs the Board expects further growth in EBITDA, operating profit and cash flows during the year. The newly developed strategy for the business, focused on key markets and a more service-led approach to customers, is expected to provide opportunities to deliver a material improvement to adjusted profit before tax in the coming 12 months."

There will be a meeting for analysts at 09.30am today at the offices of FTI Consulting, 9th Floor, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. For further information please call 020 3727 1203.

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Strategic Report

Chairman's statement

2013 was a year of significant change for the Group, during which the business delivered improved revenues and profit from continuing operations, whilst continuing to grow in key markets.

Net revenue for the year, excluding landfill tax and inter-segment trading, increased by 10% to £40.3m (2012: £36.8m). The total profit attributable to our shareholders before exceptional items (including impairment charges for the write off of assets and goodwill associated with the closed Waste Network division) was £2.4m (2012: £1.7m). Operating cash flows of £5.9m (2012: £5.8m) supported an enhanced level of capital investment and an increase to our stake in the Augean North Sea Services business, taking our holding to 81%.

The year began with the departure of Paul Blackler and the appointment of Dr Stewart Davies as Chief Executive Officer. Stewart is now well established within the business and has brought the fresh thinking and insight the Board hoped for at the time of his appointment. The new strategy for the Group, developed by Stewart and his management team with input from the Board, is outlined below, confirming our belief that Augean has numerous realisable opportunities to support growth of the business in the coming months and years.

During the year the Group continued to be restructured and reshaped to ensure that the business was fully focused on our key markets in hazardous waste, Air Pollution Control Residues (APCR) management, radioactive waste disposal and North Sea oil and gas. These changes included the decision to close the Waste Network division and offer certain sites and assets for sale, a process which is now complete.

As in the previous year there were improvements to health and safety performance during 2013. Health and safety continues to be the number one priority of the Board and management across the Group and we were pleased to note a second consecutive year with a 25% decline in accidents. The Augean North Sea Services business led the way in safety standards, recording eight years without a lost time incident in offshore operations. The Board is well aware of the dangers for our staff working in offshore environments as well as those onshore associated with the handling, treatment and disposal of hazardous wastes. This commitment to high standards of safety was underlined by the activities of the Health & Safety scrutiny committee, led by a non-executive director and reporting directly to the Board, which further enhanced health and safety leadership within the business during the year.

I was pleased to note the addition of new shareholders to our register during the year and continued support from many of our longer-holding investors. The improvement in share price represented another step forward in ensuring that the Group provides growth in the returns for all investors, whilst the Board remains focused on improving the returns from capital employed.

I believe that Augean is stronger now than at any point during the past five years. Reflecting that confidence, the Board has proposed a 40% increase in the dividend payment to 0.35p per share and has agreed to progressively increase the dividend in the coming years, in line with improvements to business performance. With improving economic conditions in the UK, a refreshed strategy and several new opportunities under development I look forward to another year of growth and enhanced returns for shareholders during 2014.

Jim Meredith

Non-Executive Chairman

25 March 2014

Marketplace

The Group operates in three major UK-based markets, being the broad hazardous waste market, waste from nuclear decommissioning and waste from North Sea oil and gas exploration and production.

The market for hazardous waste in the UK is based on a legislative environment underpinned by the implementation of the European Union's Waste Framework Directive and the UK's own hazardous waste National Policy Statement (NPS), which encourage sustainable methods of managing waste and the development of treatment, recycling and recovery facilities as the key focus of future waste management activities. Within this the Waste Hierarchy provides a framework for waste management and implementation of infrastructure which will allow sustainable waste management solutions. The adoption of the NPS in June 2013 confirmed the need for the portfolio of facilities and services developed by Augean over the past five years. Importantly, the Group plays an active part in five of the eight sectors identified as essential for the management of hazardous wastes in the UK.

The hazardous waste market is highly segmented with a total volume of approximately 4 million tonnes of waste handled in the UK each year. Within this arena Augean continues to focus on the treatment and disposal of waste from construction and demolition activities, energy from waste operators, specialist manufacturers and other industrial producers. The Group's high temperature incinerator at East Kent operates within the narrower segment of clinical and pharmaceutical wastes.

Data published by the Environment Agency during 2013 on the production of hazardous waste indicated that approximately 1 million tonnes are disposed to hazardous landfill sites per annum (the most recent data available) (Source: Environment Agency; www.environmentagency.gov.uk) and the total UK capacity for hazardous landfill was approximately 16 million tonnes. Augean's Land Resources division continues to be a leading provider within this market, holding approximately 50% of the UK's remaining hazardous landfill capacity.

Augean's treatment and disposal to landfill includes the management of certain by-products from energy from waste incinerators (EfW). These facilities produce air pollution control residues (APCR) and also a heavier bottom ash. The Group has developed the capability to treat and dispose of APCR at our sites at Port Clarence and East Northants Resource Management Facility (ENRMF), handling approximately 40% of the total traded volume during 2013. This market, of approximately 200,000 tonnes per annum, is expected to double over the next five years as the number of EfW facilities increases.

The landfill market is underpinned by legislation derived from the Landfill Directive, within which certain exemptions (known as 'derogations') were originally allowed for the disposal of wastes to landfill with elevated levels of lead and/or chlorides. These derogations were to be progressively removed as the waste industry developed new treatment methods for the control of these substances prior to landfilling, or indeed their complete diversion from landfill disposal. As the body responsible for the implementation of the Directive in the UK, the Environment Agency (EA) began a consultation process for the removal of the derogations in February 2014. The EA has indicated that the current derogations will be phased out over a two year period. Augean has anticipated removal of derogations and invested in new treatment facilities at the ENRMF and Port Clarence sites, meaning that the business is well placed to deal with the impact of future derogations removals and, with further investment under review, to provide a comprehensive hazardous waste treatment service for the growing EfW market.

The nuclear decommissioning market relates to the closure and dismantling of the UK's redundant nuclear power and research facilities, managed on behalf of the UK government by the Nuclear Decommissioning Authority (NDA). In addition to this, the disposal of naturally occurring radioactive material (NORM) generated in the exploration for and production of oil and gas is also a key radioactive waste market for the Group. The NDA publishes regular updates on the inventory of radioactive wastes requiring disposal, whilst reliable statistics on the scale of the NORM market remain limited. Augean has planning permission and environmental permits in place to dispose of low activity low level waste (LLW), very low level waste (VLLW) and NORM. Based on public information and our own estimates we believe that up to 6,000 tonnes of LLW/VLLW are generated in the UK each year. We also estimate that up to 2,000 tonnes of NORM may be released per annum.

The markets for waste produced in the exploration for North Sea oil and gas are centred on Aberdeen and extend to the Shetland Isles for the northern sector, and for the southern sector are centred on Great Yarmouth, Norfolk. The Group provides services for a range of offshore wastes, including the cuttings from drilling of oil and gas wells, oil-contaminated water (known as Slops) and a more general range of industrial hazardous wastes. Information published by the UK government indicates that the market for drill cuttings represents 36,000 tonnes per annum and for Slops a further 56,000 tonnes per annum. The Group's market share in each of these markets is estimated as 40% and 20% respectively.

Our Strategy

Following his appointment as Chief Executive Officer, Dr Stewart Davies has undertaken a strategy review to further develop the Group's strategy and provide the necessary direction to position the Group for successful growth. The review is now complete and the conclusions are summarised in this Report.

Core strategy

The core strategy of the Group is to grow shareholder value by building market share and developing sustainable market positions. To do this we will increasingly work with customers to provide solutions whereby Augean delivers specialist services focused on hazardous waste.

Develop sustainable market positions

The strategy is to focus on attractive markets for specialist waste, selected based on objective criteria that have been revisited in the business strategy review. This exercise has been undertaken with the expertise within the Group and also made use of independent facilitation and challenge.

The decision to exit from the Waste Network division was made early in the process due to the limited prospects for profitable growth in the medium term.

A key target of the business is enhancing returns and Augean is well positioned in attractive markets, both sectoral and regional, where we have expertise and assets, including treatment technologies that differentiate our service and build entry barriers. Understanding these markets enables us to progressively build the capabilities required to maintain and build our position often against the background of changing environmental or client requirements. These require timely investments that are included in the business planning process.

Moving more of the Group's revenues from the prevalent 'spot' or short term contracts to long-term contracts and frameworks is vital to improve the forward visibility of the order book. The current position is a measure of the opportunity to increase our mutual commitment with customers, with attendant benefits of creating more value.

Vital to sustaining our market positions is further developing Augean's strong reputation and relationships, built by management with 'outside-in' understanding of the sector. Recent Director-level appointments confirm the Group's progress in building a top team with outstanding knowledge of the key market sectors.

Grow through client-focused solutions

As noted above, the Group has further opportunities to work more closely with customers (organisations whose operations produce the hazardous waste) rather than intermediaries and on a longer-term contracted basis.

Working to understand the client's need, and then developing a solution by leveraging the knowledge of sector experts, has been identified as a fundamentally important new focus for the Group. This is an area where we have already seen considerable success with North Sea oil and gas operators and with high value manufacturing companies. We are taking steps to ensure that innovation opportunities arising from customer interfaces are identified and managed effectively.

The business strategy review has highlighted the benefits of combining our hazardous waste management capability with expertise in offering associated support services. Targeting the critical but non-core needs of clients requiring hazardous waste management is where the potential for value-creating support services is highest for the Group. Half of the Management Board directors have significant support service experience, enabling the Group to develop in supporting the solution with integrated service and management capabilities. Selling and delivering one complete Augean capability brings consequent benefits to the client of working with a uniquely capable partner and to the Group of accessing its share of value created through this longer-term, more integrated relationship with customers.

Grow shareholder value

Along with important continuing contributions from the Group's traditional markets in construction and industrial hazardous waste, we see profitable revenue growth from investments which increase our capabilities in our key markets, notably nuclear decommissioning, North Sea oil and gas and ash from Energy from Waste incinerators. Growing the proportion of our revenues that come from service offerings to our hazardous waste customers should further drive profitable revenue growth.

The business strategy review has highlighted the next phase of reduction in end-to-end processing costs, particularly in the processing of oil-contaminated water, drill cuttings and industrial wastes. As these are delivered they will contribute to margin improvement.

The Group is well-positioned to identify potential corporate investments associated with its key market sectors that would accelerate the strategy and provide clear operational and market synergies. We will bring these forward as and when suitable opportunities are identified.

Operating review

Introduction

The Group delivered improved revenues and earnings during the year, with revenue from the combined continuing and discontinued operations rising by 11% from the previous period. This improvement was driven by strong second half performances in the continuing operations of the Group, in particular Land Resources and Augean North Sea Services (ANSS). Exceptional impairment and project charges of £4.0m were required against discontinued operations following the closure and offer for sale of the Waste Network division. Performance improvements were delivered from each of the continuing operations of the Group.

During 2013 the Group operated through three divisions and the North Sea Services subsidiary. The financial results included in this report are based on that structure. The majority of the disposed Waste Network division is included as a discontinued operation, whilst the continuing operations refer to Land Resources, Oil & Gas Services, Augean North Sea Services and the East Kent Waste Recovery Facility and the newly formed Augean Integrated Services.

The Board reported in September 2013 that it had taken the decision to sell or close the underperforming Waste Network division. This business had been formed from waste management facilities purchased by the Group during the period from 2006 to 2008. Despite restructuring, investment in sales resources and latterly cost reduction initiatives, the division and its precursors had sustained consistent losses over the previous five years as waste transfer markets were squeezed during the economic downturn. The assets of the division were offered for sale during the final quarter of 2013 and numerous enquiries were received from prospective buyers. This led to two separate transactions, one involving the sale of the business and site at Hinckley to Greenway Environmental Limited and the other based on the sale of the business at Rochdale and the site at Worcester to Cleansing Service Group Limited. These transactions were completed in March 2014, with combined consideration received of £1.2m.

Adjusted profit before tax (PBT) for the combined continuing and discontinued operations increased to £3.2m in the year, a 22% growth over 2012. For the continuing operations adjusted PBT was £4.4m, an increase of £0.5m from 2012.

During the year an opportunity arose to increase Augean's stake in ANSS, through the purchase of 11% of the equity from our joint-venture partner Scomi Oiltools (Europe) Limited. The purchase was completed during July for a consideration of £0.3m, resulting in Augean owning 81% of the total equity. With the ANSS business continuing to grow and with future opportunities for further development the increased shareholding is expected to improve the returns from the capital employed available from the business.

The operating cash flow generated by the Group during the year was reinvested in new assets and facilities to support generation of future revenues and cash flows. Capital investment of £6.3m included strengthening the Group's capabilities in the growing markets of Energy from Waste and North Sea oil and gas exploration. In addition, two new landfill cells were constructed at the ENRMF and Port Clarence sites, adding 340,000 m3 of void space to the constructed landfill capacity. With the addition of 1.6 million m3 potential future void space following the successful planning permission applications at ENRMF and Thornhaugh, the Group now holds an estimated 9.5 million m3 of potential landfill void. To support working capital and these investments the £10.0m banking facility with HSBC remained in place throughout the year. In March 2014 those facilities were refinanced through to July 2017, extending the available debt funding to £15.0m (see below).

The Group employed an average of 292 staff (2012: 268) over the course of the year. This included 218 staff in the core business and a further 74 in Augean North Sea Services. At the end of the year 293 staff were employed by the Group, but this number fell to 280 in January 2014 following redundancies associated with the sale of the Waste Network division.

Performance

The Group operated through three divisions (Land Resources, Waste Network and Oil & Gas Services) and a subsidiary company, Augean North Sea Services. Waste Network included continuing and discontinued operations. The performance of each of these is reported below.

Land Resources

In the Land Resources division revenues excluding landfill tax and inter-segment trading were £15.2m, a reduction from the previous year (2012: £15.7m). Volumes of waste disposed fell to 295,472 tonnes during the year, from 320,392 tonnes in 2012, reflecting a stable landfill market for hazardous waste disposal but compared against a very strong first quarter during 2012.

The division delivered improvements to the mix of wastes treated and disposed at the sites, enhancing margins as decreased volume of lower value soil remediation work was replaced by APCR ash from incinerators and low level radioactive wastes. The average price for pre-treatment and disposal services also increased, to £50.4/tonne (2012: £44.9/tonne) as the mix of waste continued to move away from traditional hazardous and non-hazardous direct disposal landfill activities towards pre-treatment solutions. Hazardous landfill activities continued to be the largest revenue driver for the business, delivering £8.5m, although this did represent a reduction from 2012 (£10.4m).

The volume of APCR handled by the division rose by 47%, to 86,000 tonnes, as new treatment facilities were commissioned at the ENRMF site. The contribution from APCR sales to the divisional revenues increased by £1.4m over the previous year and with the investment made the division now has the capacity to treat, recycle and dispose of approximately 90,000 tonnes of APCR each year. Market opportunities exist to support further growth of this capacity during 2014.

Disposal of low activity radioactive wastes also increased from the previous year, with £1.6m of revenue generated, an increase of £1.0m over 2012 (£0.6m). The division has continued to work within the NDA-sponsored national supply chain for disposal of VLLW and LLW from the UK's nuclear estate and has also increased its presence as a provider of disposal services to producers of NORM. In November the Group announced the creation of a new Radioactive Waste Services unit, headed by a new director with significant nuclear industry experience. This change is expected to build upon Augean's well established position as a major provider of low level waste disposal solutions to the nuclear and oil and gas sectors.

Other revenue streams, from energy generation using landfill gas and minerals extracted under a royalty agreement at the Cooks Hole site, contributed £0.3m to operating profit, performing in line with expectations.

In total the division delivered improved operating profit before exceptional items of £7.1m during 2013 (2012: £6.7m), driven by increasing volumes of APCR and low level radioactive wastes.

In support of the division's status as the primary profit unit of the Group, investment continued in assets which will provide a medium term return, spending £3.3m, including the construction of two new hazardous landfill cells at Port Clarence and ENRMF. The cells will provide a combined additional 340,000 m3 of landfill void space (capacity for approx. 475,000 tonnes of waste) for use over the next two to three years. Investment also allowed the completion of a new tank farm and treatment plant at Port Clarence, supporting the growth of the APCR business and backed by new contracts for APCR disposal.

Oil & Gas Services

Sales revenues in the Oil & Gas Services division (O&GS), excluding inter-segment trading, fell from £11.1m in 2012 to £9.6m in 2013, but this was driven by the impact of growing inter-company transactions within the Group between O&GS and ANSS, totalling £1.9m in the year. O&GS operates the Port Clarence Waste Recovery Park and provides treatment and disposal services to ANSS for drill cuttings received from offshore oil and gas drilling operators. This pre-existing relationship was internalised following the acquisition of ANSS by the Group in May 2012 and the services provided by O&GS continue to be a core component of the Group's ambition to develop a strong presence in North Sea waste markets.

At Port Clarence Waste Recovery Park the division continued to develop its capabilities during the year for the treatment and disposal of waste from North Sea oil and gas exploration. The Indirect Thermal Desorption unit at the site was upgraded with a new rotating drum, extending the life of the facility by 10 years. In addition a new lagoon was built as a storage facility for drill cutting wastes, enhancing the site's ability to deal with increasing volumes of drill cuttings secured by ANSS. The quality of the assets at Port Clarence and the continuous improvement of the procedures required to operate them were recognised in positive feedback from customer audits undertaken during the year.

Underlying sales for the division, excluding all inter-segment trading, were stable year on year, supported by activity at the Avonmouth and Paisley sites. Paisley benefited from restructuring undertaken during 2012 and a sharper focus on its key markets and customers. The industrial cleaning services provided from the site continued to develop and lower margin transfer work was reduced. At Avonmouth the business was focused on oil and solvent recovery and supported by the addition of transfer station capacity. New disposal routes for oil sludges were sourced and opened, which began to reduce the operating costs of the facility. These benefits are expected to continue into 2014.

Reductions to operating costs and a focus on margin-enhancing activities reduced the operating losses (before exceptional items) of the division by £0.1m to £1.0m. With depreciation costs of £1.0m the division achieved its target of delivering positive EBITDA during the year, at £0.05m. Although small, the positive EBITDA provides a platform for continuing improvements during 2014, particularly through the reduction of waste disposal costs with disposal routes secured under contracts.

Augean North Sea Services

In its first full year of trading ANSS exceeded expectations for revenues, operating profit and EBITDA. The business became well established as a provider of waste management services to North Sea oil and gas operators, with a strengthening presence in the Aberdeen-based market. Revenues, excluding inter-segment sales, increased to £9.3m, from £3.4m during 2012. The volume of activity grew in all the key revenue streams of the business, including the volume of drill cuttings and slops managed on behalf of customers and the presence of ANSS personnel and equipment on drilling rigs to provide offshore waste management services.

To ensure that ANSS had the infrastructure in place to grow its presence in North Sea waste management markets the Board took a decision during the year to allow the majority of the EBITDA generated by the business in 2013 to be reinvested in new facilities and assets. EBITDA of £1.0m was generated during 2013 and capital expenditure of £1.0m matched this result. The business invested in new facilities and also equipment to support its offshore waste management activities.

New facilities included the purchase of a long term lease for a permitted waste management site at Tullos in Aberdeen, which was completed during the first quarter, at a cost of £0.1m, and subsequent work to develop the assets into an effective waste transfer station and treatment centre. During the second half of the year the business also purchased a site at Blackdog in Aberdeen, costing £0.2m, providing facilities for the management of drill cuttings prior to transport to Port Clarence and also for establishment of slops treatment. With an existing slops tank farm at Pocra Quay and access to treatment capabilities within the broader Augean Group, ANSS now has the capability to offer a comprehensive range of waste management services to its customers.

During the year the Board reiterated its confidence in the future potential of ANSS by authorising the purchase of a further 11% of the share capital of the business, by way of a debt to equity swap with our partners Scomi Oiltools (Europe) Ltd (Scomi). Augean cancelled debts owed by Scomi valued at £0.3m to acquire an additional £0.4m of the net assets of ANSS. This has increased Augean's ownership to 81%, with Scomi retaining the remaining 19%, and generated a £0.1m credit to the Group's retained earnings.

For the full year ANSS delivered operating profit before exceptional items of £0.7m.

Waste Network

The performance of the Waste Network division is presented in the financial statements contained in this report split between continuing operations and discontinued operations. Continuing operations relate to the East Kent Waste Recovery Facility (EKWRF) and certain waste management activities based at the Cannock site now included in the new Augean Integrated Services business. The discontinued operations relate to former waste transfer stations at Hinckley, Worcester and Rochdale and the associated assets, vehicles and sales and support activities which are no longer owned or operated by the Group.

The continuing operation at the high temperature incinerator at EKWRF experienced breakdowns during the first half of the year, causing significant outages and resulting in throughput of waste for incineration below the levels required to generate positive financial results. Further downtime was incurred while the solid feed handling systems of the plant were refurbished during the third quarter, along with other essential plant modifications and upgrades. The extended period of limited throughput had a significant impact on the results for the year. Revenues for the site were below plan at £1.5m (2012: £1.1m) and resulted in operating losses (before overhead allocations) of £0.9m. Capital investment of £0.4m was required to upgrade the plant during the year and the benefit of this is expected to support delivery of a positive operating profit performance during 2014. The investment allowed throughput to be stabilised by the end of the year and an acceptable level of throughout to be re-established, in line with that planned, during the first quarter of 2014.

The continuing activities retained by the Group from the former Waste Network transfer stations are based on contracts with a small number of key customers to whom the new AIS business will provide a range of waste management services. These customers and activities generated £1.2m of revenue during 2013 at a gross margin of approx. 60%. This margin is significantly higher than the average for the former waste transfer stations and provides a sound platform for the new business.

The discontinued operations of the division generated revenues after inter-segment sales of £3.6m, with an operating loss before exceptional items of £1.3m. The losses included the overhead costs associated with operating the waste transfer sites, including sales, technical and support activities. As part of the sale process for the business based at the sites at Hinckley, Worcester and Rochdale a significant reduction was also made to the overhead costs carried by the Group. This led to a review of support costs across the Group to establish a lower cost base and also resulted in 11 redundancies for those employees associated with the activities of the Waste Network division who did not transfer to new employers. Cost savings of up to £1.0m per annum have been enabled through the overhead reductions.

Planning and permitting

The securing of planning permission and maintenance of appropriate environmental permits at the Group's sites is an essential part of the ongoing operations and future development of the business. On 10 July 2013 the Secretary of State for Communities and Local Government granted a Development Consent Order (DCO) for the extension of the landfill site at ENRMF. This site provides treatment and disposal services for a range of remediated soils and building rubble, APCR and low activity radioactive wastes and is the principal hazardous waste landfill site in the South of England. The planning permission granted through the DCO allows the life of the site to be extended to 31 December 2026, which will result in an increase in the capacity of the existing treatment facility and construction of in excess of 1 million m3 of new hazardous landfill void space.

ENRMF was the first hazardous landfill site in the UK to dispose of LLW from former nuclear power stations and research facilities under the control of the Nuclear Decommissioning Authority (NDA). The site will continue to treat and dispose remediated soils, APCR and low activity radioactive wastes, making a major contribution to the national infrastructure required to manage these specialist waste types (as set out in the UK's Hazardous Waste National Policy Statement, published in June 2013). It is expected to continue to be the largest contributor to the Group's revenue and operating profit, providing a solid platform for the future development of the business with positive returns from the capital employed.

Corporate Social Responsibility (CSR) performance

The Board recognises the important role played by the Group in the environment and communities within which it operates. The health & safety of our employees and compliance with regulations are two of the top three business priorities (profit performance being the third). Augean is committed to conducting its business operations in an open and responsible manner and we recognise the need to continually improve our operations where practical to do so in order to reduce our impact on the environment, to continuously improve assets and processes to ensure the safety and welfare of our employees and to act as a good neighbour, minimizing the impact of our operations on the wider community.

The Group has a commitment to mitigating any adverse effects of its operations and this is explained further in the detailed CSR report published alongside this Report.

The environment

All operating sites and activities are strictly regulated by environmental authorities through a range of regulations set out in the permits for each site. In the context of hazardous waste the principal instruments driving standards are the Waste Framework Directive and the Industrial Emissions Directive which provide an integrated approach to pollution control to prevent emissions into air, land or water. The standards expect the techniques and procedures adopted by the Group to represent the Best Available Technique (BAT). BAT requires a review of each activity and the implementation of the highest standards to minimise emissions, be energy efficient, reduce waste and consumption of raw materials, manage noise, vibration and heat loss and ensure accident prevention is in place.

The Group continues to deliver the objectives of BAT through its operations and works closely with the regulators to ensure that Augean is a leader in compliance in the sector. Activities are delivered subject to well developed environmental controls and compliance systems (as defined in the Integrated Management System), involving suitably competent people in the management of all aspects of its operations. Environmental reporting is prepared and monitored within the Group and supplemented by information from regulators. This includes the Environment Agency's own review of companies operating in the waste sector which are subject to their account management regime, of which Augean is one. The information available for 2013 indicates that the Group's operations do not result in a significant impact on the local environment and in general our environmental performance has improved significantly over the past five years. The KPI table below includes the scores from the Environment Agency (EA) in England and the Scottish Environmental Protection Agency (SEPA) in Scotland and demonstrate a year on year improvement.

As part of our commitment to implement the elements of the waste hierarchy relevant to the hazardous sector the Group continues to take a strong role in the development of regulation and policy for hazardous waste. By engaging with Government departments, local authorities and the regulators, we promote the industry and modernisation of the sector, seeking to establish a positive regulatory and policy framework for the business. In previous years representatives from the Group took a high profile role in the development of the National Policy Statement for hazardous waste (NPS), directly engaging with Government departments and giving evidence at the Parliamentary Select Committee inquiry. The publication of the NPS shows Augean to be strongly aligned with the direction of national policy. The company continues to engage on key policy development and is currently taking an active role in the forthcoming NORM strategy.

Employees

The Group's employees are vital to its success and during the year made a significant contribution to the performance improvements outlined in this report. In recognition of their commitment and effort the Board approved a 2.0% pay award for all management and staff from 1 January 2013. This award seeks to balance the inflationary pressures on costs of living with the need for the Group to maintain discipline on cost management, but also recognises the progress made by the business over the past year which would not have been possible without the commitment and hard work of every employee.

The Group is committed to the principle of equal opportunity in employment and to creating a harmonious working environment which is free from harassment and bullying and in which every employee is treated with respect and dignity. Accordingly, well established policies are in place to ensure that recruitment, selection, training, development and promotion procedures result in no job applicant or employee receiving less favourable treatment on the grounds of race, colour, nationality, ethnic or national origin, religion or belief, disability, trade union membership or non-membership, sex, sexual orientation, marital status, age or status as a part-time or fixed-term employee. The Group's objective is to ensure that individuals are selected, promoted and otherwise treated solely on the basis of their relevant aptitudes, skills and abilities.

These equal opportunity policies are set out in the Group's Employee Handbook, of copy of which is provided to each employee on joining the Group and made available electronically. The Handbook is updated periodically for changes in policy and regulations. The Group also operates a clear whistle-blowing policy, providing every employee the opportunity to raise concerns directly with a nominated director, without the intervention of line management. Once an issue is reported the nominated director is required to undertake a thorough investigation and make recommendations.

In order to provide a formal, recorded, regular review of an individual's performance, and a plan for future development, all staff undertake an annual or bi-annual Performance Appraisal with their line manager. Appraisals assist in the development of individuals and establish individual training needs, improve organisational performance, and feed into business planning. Where appropriate the appraisal process establishes specific training plans for each individual.

Training and development activity during the year built on the progress made during 2012 and investment was made to ensure that all employees had the knowledge, qualifications and skills to operate safely and compliantly within their specific role and in the broader waste management sector. A competency framework developed for each role is now used in the recruitment of new employees and also as the basis of a rolling training programme.

To support commitment to health and safety improvements reporting of near miss incidents continued to be a key part of the health and safety programme during the year, supplemented with safe act reporting designed to applaud and encourage safe working practice. Over 2,200 near misses and 250 safe acts were reported during 2013 (achieving the target of one report per employee per month) and at the same time there was a 25% reduction from the previous year in the number of accidents causing injury to a person or damage to property.

The community

Augean recognises the important role that it has within local communities and aims to maintain an open dialogue with its neighbours about its activities and plans. This is achieved through regular liaison committees, newsletters and open days. The establishment of new businesses, changes in the waste streams managed and active planning processes during the year led to a high level of interaction with local communities in some areas. As in previous years the Group maintained a programme of consultation in these localities to ensure that its plans were well known and understood. This included attending liaison meetings and hosting open days at sites, in addition to the more formal submissions to planning authorities.

The Group continued to contribute to the communities around its landfill sites through the Landfill Tax Credit Scheme. A total of £359,000 was contributed through this scheme during the year, providing funds for community projects including a sports centre and a wildlife reserve.

Charitable donations made during the year included ongoing support for the Underground Youth Club at Kings Cliffe, the Cannock Chase Community Centre, local sports teams and the John Clare Cottage project in Helpston, near to Peterborough.

Financial performance

The review of financial performance includes the results from the continuing and discontinued operations of the Group. Where appropriate, these have been combined to indicate the results for the entire business and as such are therefore consistent with Full Year Results for 2012 and the Interim Results for 2013.

Trading

For the combined continuing and discontinued operations net revenue, excluding landfill tax and inter-segment trading, for the year ended 31 December 2013 increased by 10% to £40.3m (2012: £36.8m). With the inclusion of landfill tax charged to customers, on which the Group makes no margin, of £6.8m (2012: £5.7m), combined Group revenues rose by 11% to £47.1m (2012: £42.4m). The continuing operations delivered a 19% increase to revenue of £43.5m (2012: £36.7m).

Operating profit and exceptional items

Operating profit before exceptional items from continuing operations increased to £5.1m (2012: £4.6m) and profit before tax and exceptional items to £4.4m (2012: £3.9m). For the discontinued operations an operating loss of £1.3m was recorded. Before charges for exceptional items the adjusted profit before tax for the combined Group was £3.2m (2012: £2.6m).

Exceptional items included legal and professional fees relating to the sale of the Waste Network assets of £0.1m (2012: £nil), redundancy costs associated with the sale of £0.1m (2012: £nil) and an impairment charge of £3.9m (2012: £nil) representing the difference between the carrying value of the Waste Network assets and goodwill sold and the consideration expected to be received from the sale at 31 December 2013. Total exceptional charges of £4.2m were made during the year.

Finance costs

Total finance charges reflected the payment of interest on bank debt and finance leases, totalling £0.7m (2012: £0.6m). This also included a £0.1m (2012: £0.1m) unwinding of discounts on provisions.

Jointly controlled entity

There was no trading during the year in the Group's Terramundo joint venture with DEC NV. As a result Terramundo delivered a minor loss of £0.01m (2012: £0.02m), relating to loan interest and depreciation charges. The joint venture parties remain in discussions around the future of the venture.

Corporation Tax

The Group paid tax of £0.3m during the year, £0.1m in respect of 2013 liabilities and £0.2m in respect of previous years. A deferred tax asset of £1.1m (2012: £1.2m) was recognised in the statement of financial position, the Board believing that future profits are probable and future tax liabilities will be incurred. A current tax liability of £0.3m (2012: £0.2m) was also recognised. A total corporation tax charge of £0.6m was included in the income statement, split between a charge for continuing operations of £1.0m and a credit for discontinued operations of £0.4m (total 2012: £0.8m).

Profit for the year

Including exceptional charges the combined Group made a total loss attributable to equity shareholders of £1.8m. This was a reduction from the previous year (2012: £2.0m), driven by the losses and impairment charges from the discontinued operations. The continuing operations of the Group delivered improved year on year trading, but this was impacted by movements in exceptional costs (2013: £0.2m charge; 2012: £0.3m credit), resulting in the profit from continuing operations remaining stable at £3.2m (2012: £3.2m).

Dividend

The Board has recommended a dividend of 0.35p per share (2012: 0.25p), payable on or after 13 June 2014 subject to shareholder approval at the annual general meeting. The dividend per share has increased by 40% from the previous year, reflecting increased confidence over future prospects and maintaining the Board's commitment to pay an annual dividend to shareholders.

Earnings per share

For the continuing operations the basic earnings per share (EPS), adjusted to exclude the impact of exceptional costs, were 3.29p (2012: 2.84p) and unadjusted EPS were 3.13p (2012: 3.20p). For the combined continuing and discontinued Group the adjusted EPS was 2.38p (2012: 1.72p) and unadjusted (1.79)p (2012: 1.97p).

The number of shares in issue at 31 December 2013 was unchanged from 31 December 2012, at 99.7m. There were 184,864 outstanding share options at the end of the year (2012: 32,823), but these were considered antidilutive for the purpose of calculating EPS and were therefore not included.

Cash flow

The Group experienced a small decrease (£0.035m) in Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) at £6.2m (2012: £6.3m) and an increase in net cash generated from operations of £4.9m (2012: £4.6m). Net cash used in investing activities increased to £7.0m (2012: £5.7m), based on purchases of property, plant and equipment, including new landfill cells, waste treatment assets, planning and development activities.

Net debt increased to £8.5m at 31 December 2013 (2012: £6.1m), which reflected positive underlying trading offset by investment in new assets and the underperformance of the discontinued operations. As a result gearing (net debt / shareholders' equity) increased to 18% (2012: 13%).

The capital investment in property, plant and equipment made by the Group (excluding acquisition activities) is shown in the table below. This is split between Maintenance investment, focused on upgrading existing facilities, Development investment on new activities and Planning investment to secure permissions to operate.

Capital investment by division in 2013

Impairment reviews

Under IFRS, IAS36 'Impairment of Assets', an annual impairment review must be performed for each cash-generating unit (CGU) to which significant goodwill is allocated and also any assets where management believe there may be indications of impairment to the carrying values. For the continuing operations of the Group this exercise has been completed and determined that no change is required to the carrying value of the goodwill at the year-end date for the Land Resources and Oil & Gas Services CGUs.

For the Waste Network CGU, which is reported as a discontinued operation, impairment did result from the difference between the goodwill and asset values recorded in the statement of financial position and the expected sale proceeds at 31 December 2013. The Group held £2.1m of goodwill for this CGU and, having determined that this was impaired, the entire value was charged to the income statement as an exceptional item.

Note 9 below contains further details of the reviews performed and the results for each CGU.

Financing

The Group continued to use a revolving loan facility of £10.0m, supplemented by finance leases secured on certain plant, as the sources of financing its activities. The facility was subject to covenants on the ratio of Net Debt to EBITDA and the ratio of Net Debt costs to Earnings before Interest and Tax (EBIT). These covenants were tested at the end of each trading quarter and each test was achieved at the relevant dates throughout the year. At 31 December 2013, the undrawn loan facilities available to the Group were £1.5m.

Key Performance Indicators

The PLC Board, Management Board and local management teams regularly review the performance of the Group as a whole and the individual divisions. Management uses a balanced scorecard of key performance indicators (KPIs) to monitor progress towards delivery of the Group's principal targets.

As in previous years management focused on three priority areas in the performance of the Group, these being profit generation (through revenue delivery and asset utilisation), compliance with regulations (specifically Environment Agency and Scottish Environmental Protection Agency audit results) and health & safety (monitored through near miss incidents and the number of accidents incurred). Certain KPIs are set out in the table below, each relating to these priorities and showing the equivalent result for the previous year. Please note that this table excludes all Waste Network sites, which were offered for sale during the year.

Divisional KPI performance in 2013

Notes:

(1) Defined as the total actual throughput of waste at the site in the year compared with the theoretical maximum throughput for O&GS

(2) Defined as the total tonnes of drill cuttings and slops processed by ANSS

(3) Defined as the average of audit scores notified during the year by the EA (in England) or SEPA (in Scotland)

(4) Accidents defined as all accidents, including those resulting in damage to plant or equipment

(5) Shows the total number of incidents recorded which could have resulted in an accident or injury or damage to property

(6) For ANSS results for 2012 relate to the period from June to December only

Events since the end of the financial year

During the first quarter of 2014 two significant events have taken place which are expected to impact on the financial condition of the Group during the coming year:

· Sale of assets previously operated by the Waste Network division

The business and assets based at Hinckley, Worcester and Rochdale were sold in two separate transactions during quarter one. The overheads associated with these activities are no longer used by the Group and those employees employed in each business transferred to new employers under TUPE regulations at the completion of each sale.

· Refinancing of the Group's loan facilities

During March 2014 the Group undertook refinancing of the loan facilities used during 2013. The Group now has access to £15.0m of loan facilities with HSBC bank plc, which is expected to provide the required funds to support further growth of the business over the next four years.

Managing risk

The performance of the business is linked to economic activity in the waste markets it serves, including the manufacturing, construction, nuclear decommissioning, energy from waste and oil & gas sectors. Fluctuations in the UK economy in general and these sectors in particular affect Group performance, as do inflationary and other cost pressures. Risks are mitigated by diversifying the customer base as far as possible and by linking gate fees, wherever possible, to prevailing operating costs and commodity prices, including the costs of waste disposal outside of the Group. In addition to this general economic risk there are a number of risks specific to the markets served by the Group which may have a material impact on activities and results.

The Group uses a range of resources to manage and mitigate its risks, including the adoption of a broad range of internal controls, the use of risk registers and regular reporting, monitoring and feedback of risks through the business.

Environmental legislation

Regulation is a key driver of the hazardous waste market. Changes in legislation (including tax legislation with environmental goals) or its interpretation can have a significant and far reaching impact on waste markets. The Group endeavours to mitigate this risk by employing high quality technical management to interpret the evolving legislative framework and its potential and current impact on the Group's operations. In addition, the Group maintains a presence on a number of industry groups to influence the shaping of policy and liaises regularly with relevant regulators and legislative bodies, including DEFRA, DECC, the EA and SEPA.

The application of the waste hierarchy to the markets in which the Group operates, with its focus on reducing the volume of waste disposed to landfill, could be perceived as a threat to the business in the long term. The Group is mitigating this threat by developing treatment solutions for customers which utilise landfill when this is the most appropriate commercial and environmental solution, but provide alternative approaches whenever they are suitable.

Environmental compliance

All operating sites and activities are regulated by environmental authorities in line with the requirements set out within licences and permits. These licences and permits are required to carry on the business of the Group and compliance with their terms is essential to its success. Withdrawal or temporary suspension could have a significant impact on the Group's ability to operate. Adherence to the highest environmental standards is also important to ensure the maintenance of good relations with local communities and to satisfy customers that the techniques, practices and procedures adopted by the Group are consistent with those of a responsible business. The Group mitigates this risk through the employment of technical experts, by working to well-established policies and procedures described in its Integrated Management System, through the provision of training to develop the knowledge and competence of its staff and through regular monitoring and review of compliance performance. Further details of how the Group monitors and controls environmental compliance are given in the Group's corporate social responsibility (CSR) report.

Health and safety

The activities of the Group involve a range of health and safety risks, from offshore operations to the handling of hazardous wastes. Health and safety is the first priority for all directors, managers and employees across the Group and investments in relevant assets and resources are made on an ongoing basis to ensure that the highest health and safety standards are applied. Health and safety performance is constantly monitored and reviewed, including formal reviews at each PLC Board meeting and monthly reviews by the Group's Management Board. This allows the lessons learnt from incidents to be fed back to local teams to avoid repeat situations.

Price risk

Price pressure remains a key feature of the hazardous waste market, where customers often have a range of options for the ultimate disposal of their wastes and access to several companies competing to service their needs. The Group reviews its pricing policies on an ongoing basis to ensure that it influences and stabilises the market, whilst responding to emerging trends and customer needs. As part of the Group's established sales infrastructure specialist roles exist to assess and price waste consignments in line with market rates and available disposal solutions. All services are kept under review to ensure that price changes in the market do not lead to uneconomic activities being undertaken by the Group.

Economic growth

The Group relies on economic activity in the UK, which in turn leads to production of the hazardous wastes which form the basis of its sales revenues. Recent downturns in the UK economy have restricted the quantum of hazardous wastes produced and therefore constrained the Group's revenues. These macro-economic conditions are mitigated in part by following a strategy of developing positions in a range of markets requiring specialist waste management capabilities and which have high barriers to entry. The Group also continues to identify and invest in the techniques, assets and resources to provide a broad range of services to customers, diversifying the revenue base of the Group.

North Sea oil and gas investment

With a well-established business focused on providing waste management services to North Sea oil and gas operators the Group has some exposure to any fall in investment for oil and gas exploration activity in the North Sea. This may in turn reduce the quantum of waste available for management by ANSS. To mitigate this risk our North Sea activities are diversified across a number of revenue-generating streams, with services provided to customers offshore and onshore. The future growth of North Sea decommissioning volumes will provide new market opportunities for ANSS that will be a further mitigation.

Transport disruption

The Group relies on the delivery of wastes to its sites to secure revenues and any disruption to local or national networks, for example in severe weather conditions, can cause delays or lost revenue for the Group. Mitigation is provided as far as possible through the use of its own fleet of vehicles and the ability to accept wastes into sites in different geographical locations before onward transfer to their final treatment or disposal destinations.

Tax legislation

The use of tax legislation to drive environmental objectives, particularly the diversion of wastes away from landfill disposal and towards greater treatment and recycling, represents a long term risk. The escalation of landfill tax by £8/tonne in each year up to 2014 may encourage some customers to divert volumes away from our sites. The full rate of landfill tax will rise to £80/tonne on 1 April 2014. The UK government announced in the Budget 2014 that the tax rates would not be reduced in the medium term and near term future increases will be based on the retail price index. Whilst European and national legislation encourages "zero landfill" solutions for a range of waste streams, disposal in properly engineered and permitted landfills continues to be the most appropriate waste management solution for many hazardous wastes. To mitigate the risk that the Group will suffer a decline of landfill volumes as environmental taxes rise the Group has developed a range of waste treatment solutions for customers and also broadened its capabilities to ensure its landfill sites are able to accept all those wastes which do require landfill disposal.

Outlook

Following the changes made during 2013 the Board believes that the Group is well placed to benefit from the significant investment it has undertaken in new businesses and assets, the sale and closure of underperforming activities and any increase in the volume of waste management activity, backed by a general UK economic recovery. The Group is well positioned in a number of key waste markets, including hazardous waste treatment and disposal, APCR management, low level radioactive waste disposal and North Sea oil and gas. With improving underlying performance across the entire Group and the benefits of lower overhead costs the Board expects further growth in underlying EBITDA, operating profit and cash flows during the year. The newly developed strategy for the business, focused on key markets and a more service-led approach to customers, is expected to provide opportunities to deliver a material improvement to adjusted profit before tax over the previous year.

Dr Stewart Davies

Chief Executive Officer

25 March 2014

Consolidated statement of comprehensive income

for the year ended 31 December 2013

1 2012 result has been re-presented to show comparative information for operations discontinued in 2013.

2 Group measures represent the sum of results for Continuing and Discontinued operations.

Group Statement of financial position

At 31 December 2013

Statement of cash flow

For the year ended 31 December 2013

Statement of changes in shareholders' equity

for the year ended 31 December 2013

1 Financial information

The financial information set out in this preliminary announcement does not constitute statutory accounts within the meaning of s495(2) or s495(3) of the Companies Act 2006. Statutory accounts for the year ended 31 December 2013 will be dispatched to shareholders by 28 April 2014 for approval at the Annual General Meeting to be held on 3 June 2014. The statutory accounts contain an unqualified audit report, which did not include a statement under s498(2) or s498(3) of the Companies Act 2006, and will be delivered to the Registrar of Companies.

The statutory accounts for the year ended 31 December 2012 which have been delivered to the Registrar of Companies, contained an unqualified audit report and did not include a statement under s498(2) or s498(3) of the Companies Act 2006.

2 Operating segments

The Group has four operating segments, as described below, which are the Group's strategic operating divisions. These operating divisions are monitored and strategic decisions are made on the basis of the division's operating performance.

The Group's operating divisions provide different services to their customers, and are managed separately as they are subject to different risks and returns. The Group's internal organisation and management structure and its system of internal financial reporting are based primarily on these operating divisions. For each of the operating divisions, the Group's Chief Executive (CE) (the chief operating decision maker) reviews internal management reports on at least a monthly basis. The following summary describes the operations of each of the Group's reportable segments, with further details provided in the business review:

Land Resources division (renamed Energy and Waste services post year end): Augean operates three modern hazardous and non-hazardous landfill operating sites based at East Northants Resource Management Facility (ENRMF), Thornhaugh in Northamptonshire and Port Clarence in Teesside, providing waste remediation and disposal services to its customers. The division includes a site at Cooks Hole in Northamptonshire where minerals are extracted and also generates energy from closed landfill cells.

Waste Network division: In 2013, Augean operated waste transfer sites across the UK, transporting, recovering, recycling and disposing of hazardous wastes on behalf of its customers. During 2013 the intention to close this division was announced. The sites at Hinckley, Rochdale and Worcester were sold in March 2014. The site at Cannock, along with certain customers serviced by the division has been retained. This has been used as the basis of a new and distinct business unit, Augean Integrated Services (AIS), focused on Total Waste Management solutions.

In the analysis below, cost relating to the Cannock site which is expected to continue after the divisional change, the trading result from customers Augean expects to service with the AIS division and the trading result for the East Kent incinerator are disclosed as continuing operations. The closed Waste Networks business is disclosed as Discontinued.

Oil & Gas Services division (renamed Industrial Waste services post year end): Augean operates three waste treatment sites across the UK, with activities focused on the management of oil-contaminated waste. The division also provides specialist industrial cleaning services.

Augean North Sea Services Limited: Through a 81%/19% owned subsidiary company with Scomi Oiltools (Europe) Limited Augean provides waste management and waste processing services to offshore oil and gas operators in the North Sea.

Information regarding the results of each reportable segment is included below. Performance is measured based on the segment profit before tax and exceptional items, as included in the internal management reports that are reviewed by the Group's Chief Executive Officer. This profit measure for each operating division is used to measure performance as management believes that such information is the most relevant in evaluating the results of each of the divisions relative to other entities that operate within these sectors. Central costs for the proper governance and resources required to operate the plc board and listing have been separately reported.

All activities arise solely within the United Kingdom. Inter-segment trading is undertaken on normal commercial terms.

3 Dividends

At the forthcoming Annual General Meeting, the Board will recommend to shareholders that a resolution is passed to approve payment of a dividend for the year ended 31 December 2013. This has not been included as a liability in these financial statements.

4 Earnings per share

The calculation of basic earnings per share at 31 December 2013 was based on the profit attributable to ordinary shareholders of £1,787,000 (2012: £1,966,000) and a weighted average number of ordinary shares outstanding of 99,699,414 (2012: 99,699,414), calculated as follows:

The exceptional items have been adjusted, in the adjusted earnings per share, to better reflect the underlying performance of the business, without the impact of one off distorting factors, when presenting the basic and diluted earnings per share. The exercise of the outstanding share options at 31 December 2013 would decrease the loss per share reported. They are therefore antidilutive and not included for the purposes of calculating diluted EPS.

5 Operating profit for the year

Total operating profit for the year is arrived at after charging/(crediting):

6 Net finance charges

7 Tax

Tax reconciliation

Deferred tax

All deferred tax assets and liabilities have arisen on the temporary timing differences between the tax base of the assets and their carrying value in the statement of financial position as detailed within note 11, Property, Plant and Equipment.

IAS 12 Income taxes permits the offsetting of tax assets and liabilities within the same tax jurisdiction and which the Company has the intention to realise and settle simultaneously. All of the deferred tax assets were available for offset against deferred tax liabilities and as such have been presented net in the statement of financial position.

The reduction in the main rate of corporation tax from 24% to 23% effective from 1 April 2013 was substantively enacted on 2 July 2013. Since the date that legislation was enacted, it has been confirmed the rate of 23% from 1 April 2013 will be further reduced to 21% as of 1 April 2014, with a further reduction to 20% from 1 April 2015. Accordingly, deferred tax balances have been revalued to the lower rate of 20% in these accounts to the extent that timing differences are expected to reverse after this date.

No further reductions to the main rate of corporation tax from 20% have been proposed.

No deferred tax has been recognised during the year in respect of certain temporary differences of £145,000 (2012: £173,000) which arise in Augean PLC as there is uncertainty over the extent and timing of their recovery. The potential deferred tax assets in respect of the temporary differences are analysed as follows:

8 Investment in jointly controlled entity

Terramundo Limited ('Terramundo') is a 50:50 jointly controlled entity between Augean PLC and DEC NV. Terramundo is a ground remediation facility which uses various proven techniques to clean contaminated soils of both organic and inorganic contaminant leading to a by product which can be used in composting. No trading has taken place during the current or previous periods, however both parties have agreed to maintain their interest in the entity and believe that the future trading will support the net liabilities owed to its parent companies.

The cost of investment held by Augean PLC, in its 50% interest at 31 December 2013 was £100 (2012: £100).

During the period ended 31 December 2013 the jointly controlled entity generated the following revenue and costs:

At 31 December 2013 the jointly controlled entity held net liabilities of £1,013,000 (2012: £988,000), of which the Group's 50% share was £507,000 (2012: £494,000). The net liabilities of the jointly controlled entity are analysed below, for information purposes:

The overall position in respect of the jointly controlled entity is as below:

9 Goodwill

The goodwill arose on the acquisition of subsidiary undertakings and businesses, and represents the excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired. The goodwill which arose before the date of transition to IFRS has been retained at the previous UK GAAP amounts.

Goodwill has been allocated to the Group's Cash Generating Units (CGU's) which are defined as the Group's reportable segments, in note 2 and are the lowest level at which goodwill is monitored for internal management purposes. No goodwill arose as a result of the acquisition of North Sea Services. The goodwill previously held against the Waste Network division has been written down as a result of the revaluation of the associated assets held for sale (note 22). The allocation of goodwill by CGU is as follows:

Goodwill is tested for impairment annually at the balance sheet date and as and when other events or changes in circumstance indicate that the carrying amount may not be fully recoverable. The goodwill impairment test is performed by comparing the net book value of the goodwill and other non-current assets for a particular CGU to its value in use estimated on a discounted cash flow basis.

The discounted cash flows have been prepared separately for the Land Resources, and Oil and Gas Services divisions. The key assumptions for the Land Resources division's cash flows are:

· based on approved budgets and plans for 2014 and, beyond this period, have been forecast until expected site closure;

· revenue streams, based on anticipated waste volumes, are expected to remain flat with no change to average price, as the competitive nature of the landfill market leads to ongoing pricing pressures;

· forecast gross margin (GM) has been based upon past performance and the approved budgets and plans. Gross margin has been forecast to improve on a compound basis by 1% of GM per annum from years 1 to 5, where it will become fixed as management focus on maintaining efficient operations. The GM improvements are expected to be delivered through improved and innovative waste treatment processes, continued targeting of margin enhancing waste streams and focus on cost control;

· using the discount rate below there is no indication of impairment with headroom of £7.5m (2012: £12.8m); and

· sensitivity analysis has been performed over the key assumptions which indicate the following impact, meaning reduction or increase in headroom:

The key assumptions for the Oil and Gas Services division's cash flows are:

· based on approved budgets and plans for 2014;

· revenue growth over the period to 2016 is expected to achieve 3% per annum, consistent with the current underlying growth rate of the division. This reflects the impact of improvements to pricing and increasing volumes through the ITD and further increases in volumes from trading with the North Sea Services division. Revenue growth of 2% per annum from 2016 is expected;

· a 1% compound growth in gross margin per annum is assumed from years 1 to 5. This represents the improved waste acceptance procedures which focusing on higher margin waste and improved treatment techniques. From 2016 gross margin is assumed to remain constant as increased process efficiencies are offset by inflationary cost increases;

· fixed costs are anticipated to rise at 0.5% per annum for the life of the site reflecting the impact of cost inflation offset by effective underlying cost control;

· using the discount rate below there is no indication of impairment with headroom of £2.7m (2012: £6.6m); and

· sensitivity analysis has been performed over the key assumptions which indicate the following impact, meaning reduction or increase in headroom:

The cash flows for all CGUs have been discounted using a pre-tax discount rate of 13.0% (2012: 11.0%), which reflects management's best estimate of the current market's assessment of the time value of money and the business, operational and financial risks specific to the CGUs.

Based on the assumptions above and consideration of appropriate sensitivity analysis, management is satisfied that no impairment of goodwill exists at the date of these financial statements.

The principal risks which will apply to future reviews of goodwill continue to include the changes in rate of waste production in the markets in which the Group operates; significant increases to price competition beyond that experienced to date or anticipated and the impact of changes in legislation on operations.

10 Intangible Assets

11 Property, plant and equipment

Group

There were no outstanding contractual commitments for acquisitions of property, plant or equipment at 31 December 2013 (2012: £nil).

Plant and machinery includes assets held under finance lease agreements with a carrying value at 31 December 2013 of £876,000 (2012: £1,062,000) .

The movement in Engineered Cells relating to the revision of the cell capping provision has occurred as the company has revised the cost expected to be incurred in capping landfill cells at the end of their useful life. An equal reduction in cost and accumulated depreciation has been recognised.

Plant and machinery includes the following amounts in respect of assets held under finance leases and hire purchase contracts:

12 Trade and other receivables

Current assets

All amounts are anticipated to be recoverable in the short term. The carrying amount of trade receivables is considered a reasonable approximation of fair value.

All trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables were found to be impaired and a provision of £75,000 (2012: £75,000) has been recorded accordingly.

13 Trade and other payables

All amounts are anticipated to be payable in the short term. The carrying values are considered to be a reasonable approximation of fair value.

14 Financial liabilities

This note provides information about the Group's interest bearing borrowings which are carried at amortised cost.

The obligations under finance leases and hire purchase contracts are secured against the specific assets financed with a carrying amount of £876,000 (2012: £1,062,000). The bank overdraft, bank loan and guarantees are secured by way of a first legal charge over certain freehold properties, debentures, cross guarantees and indemnities across the Group.

15 Provisions