Preliminary Results

29 March 2011

Augean Plc

Preliminary results for the year ended 31 December 2010

Augean PLC ("Augean" or "the Group"), one of the UK's market leaders in the management of hazardous waste, announces its preliminary results for the year ended 31 December 2010.

Financial highlights

·; Revenue including landfill tax of £34.1m (2009: £31.5m)

·; Revenue excluding landfill tax of £29.0m (2009: £28.1m)

·; Adjusted operating profit of £0.8m (2009: £2.3m)

·; Adjusted profit before tax of £0.4m (2009: £1.3m)

·; Adjusted earnings per share of 0.24p (2009: 1.8p)

·; Profit attributed to equity shareholders £0.4m (2009: loss £54.6m)

·; Cash flow from operations of £5.8m (2009: £4.0m)

·; Net debt reduced to £3.9m (2009: £6.0m)

Operational highlights

·; Gradual market recovery allowing revenue growth

·; Challenges of extreme adverse weather slowed recovery

·; Well established asset, trading and infrastructure platform focused on market alignment

·; Soil treatment & recycling facilities responding to customer needs

·; Cannock incident under review

·; Offshore waste contract showing positive signs of growth

·; Further progress with strategic growth opportunities:

o Low Level Waste decision pending in May following attainment of Article 37 agreement

o Thermal recovery process upgrade in 2010 delivering enhanced capacity in 2011

·; Board strengthened in period

·; Positive start to trading in 2011

Commenting on the results, CEO Paul Blackler said:

"Results for the year were slightly ahead of expectation despite a number of trading challenges we faced due to reduced movements of waste during two periods of extremely adverse weather conditions. With our key markets showing continued signs of recovery we are well positioned to pursue growth in our core business coupled with a focus on delivering the strategic opportunities available to the Group. The Board therefore remains cautiously optimistic about the future trading environment."

For further information, please contact:

Augean PLC

Paul Blackler, Chief Executive Tel: 01937 844 980

Richard Allen, Finance Director

Financial Dynamics

Oliver Winters Tel: 020 7831 3113

Billy Clegg

Latika Shah

There will be a meeting for analysts at 09.30am today at the offices of FD, Holborn Gate, 26 Southampton Buildings, London, WC2A 1PB. For further information please call 020 7269 7183.

Chairman's statement

The year under review was characterised by the achievement first of stability and then the development of some forward momentum for the Group following Board changes, a sustained period of market challenges and a poor start to the year caused by reduced movements of waste from producers.

The renewed team at Augean has worked hard to drive our trading performance and begin to realise several of the strategic opportunities we outlined to you during 2010. We have seen some encouraging signs in the waste markets, particularly in the second half of the year, and these improvements have contributed to the full year results.

Net revenue excluding landfill tax for the year increased to £29.0m (2009: £28.1m). Operating profit before exceptional costs was slightly ahead of our revised expectations at £0.8m (2009: £2.3m) and this allowed us to deliver profit attributable to our shareholders of £0.4m (2009: loss £54.6m). It is particularly pleasing to report the increase in cash flow from operations to £5.8m (2009: £4.0m) and an associated fall in net debt.

Over the past two years Paul Blackler and his team have developed the infrastructure we need to access the specialist waste markets. We now offer a broad range of services to our customers and have a sales force focused on delivering revenue growth. During the coming year we expect these resources will support a return to sustainable profitability.

The nature of the sector we work in does bring inherent risks for the Group and its employees and we have continued to manage these risks during the year. The incident in November at our Cannock site provided renewed evidence of our need to be ever vigilant in the areas of compliance and health & safety and these remain primary areas of focus for the Board.

In 2011 we look forward to a positive decision from our application to dispose of Low Level Waste from nuclear decommissioning at our East Northants Resource Management Facility ("ENRMF"). The Board will also continue to focus on the ongoing strategic evolution of the Group and expect that as we fine tune recent investments we will deliver increasing value to our shareholders.

Finally, I would like to welcome Jim Meredith and Richard Allen to the Board. I am sure that Jim's wealth of experience in the waste sector with Shanks plc and Waste Recycling Group Ltd will prove a valuable asset to the business as we move forward and Richard brings new ideas and a fresh approach. I look forward to working with them.

Roger McDowell

Non-executive chairman

29 March 2011

Business review

Introduction

Following the challenging economic conditions of the previous year 2010 represented a welcome return to stability for the Group's businesses, aided by gradual recovery in the waste markets. Revenues grew by 8% from the previous year as the Group's broad service offering enabled it to source, treat and dispose of a range of largely hazardous wastes from across the waste sector.

The first half of the year was impacted by severe weather conditions during January and February, which hampered trading activity. Whilst the Group was able to keep the majority of its sites open and able to receive waste the challenges experienced across the UK's transport network, along with difficulties at many of our customers' facilities, limited inputs. The remainder of the first half was characterised by improving volumes from the landfill and land remediation business and stability in throughputs at treatment sites as markets began to recover.

The second half of 2010 saw improved trading conditions across the waste sector and this, coupled with ongoing tight control over costs, allowed profitability to improve, delivering positive operating profit in the six month period. A further spell of severe weather during December temporarily reduced trading activity in the final month of the year, but the Group entered 2011 with a well established trading and asset platform.

The established revolving banking facility provided flexibility to support operational cash flows and capital expenditure and with improvements to trading and strict capital expenditure control, allowed reductions of net debt from those experienced in the previous year.

Our staff continued to make a significant contribution towards the success of the business throughout 2010 despite working in periods of challenging operating conditions. We were focused on retaining the majority of the Group's most experienced staff and managers but headcount reductions were made where appropriate to manage operating costs, resulting in a 10% fall in employee numbers over the period, with an average of 218 employees.

Two major capital investments were made during 2010, focused on the upgrade of the Indirect Thermal Desorption ("ITD") plant at our Port Clarence Waste Recovery Park and the ongoing development of the East Northants Resource Management Facility ("ENRMF"), particularly for the future disposal of waste contaminated with low levels of radiation, know as Low Level Waste ("LLW"). The Board believes both of these projects will provide significant opportunities for the Group in the offshore, refinery and nuclear decommissioning markets respectively which we expect to realise during 2011.

The Board has also remained focused on the long term strategic development of the Group and enhancement of return on capital employed. The strategy has continued to evolve during the year in response to emerging opportunities and is set out in the strategy section of this business review.

The following sections of this report contain a number of key performance indicators ("KPIs"), which are used by the Board to review and manage the business. As required by company law these KPIs are intended to provide clear information around the performance of the Group.

The hazardous waste market

Data published by the Environment Agency during 2010 on the production of hazardous waste shows the significant contraction in overall output from 2008 to 2009. Volumes fell in those years by up to one third when compared to those seen before the UK recession. However, we have experienced gradual increases in waste outputs in 2010 and believe that the statistics for the year, to be published later in 2011, will show a slow reversal of the previous trend for waste production declines. 

The market has continued to move towards more sustainable methods of managing waste and the development of treatment, recycling and recovery remains the key focus for future waste management activities. A range of technologies are now available to waste producers to achieve recycling status for their waste, rather than rely on the historic propensity towards disposal. The implementation of the Waste Framework Directive and the development of the hazardous waste National Policy Statement ("NPS") are both expected to reinforce this trend.

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 viewpoint and modernisation of the sector, seeking to establish a positive regulatory and policy framework for the business. Augean served on the Steering Group for the DEFRA Strategy for Hazardous Waste Management published in March 2010 and contributed to the Nuclear Decommissioning Authority's Strategy for Low Level Waste and the Energy NPS. We look forward to engaging with DEFRA on the forthcoming Hazardous Waste NPS.

The Strategy for Hazardous Waste Management is a key policy document promoting the development of a modern hazardous waste management sector based on the waste hierarchy. The Strategy has a strong emphasis on investment and development of new infrastructure for hazardous waste treatment and recovery, in particular for organic waste. It will be underpinned in 2011 by the implementation in England and Wales of the Waste Framework Directive and hazardous waste hierarchy guidance. Anticipating the direction of policy travel, the Augean business model developed over the last four years is strongly aligned with the Strategy. The establishment of stabilisation, recovery by thermal desorption and soil treatment & recycling centres are supported by, and contribute significantly to, this critical policy initiative. Augean is therefore well positioned to take full advantage of the policy as the economic circumstances improve.

Whilst the market is expected to continue its evolution during 2011 further significant legislative developments are not expected in the near term.

Strategy

The Board's priority continues to be the creation of long term shareholder value. The Group is focused on the management of specialist wastes, usually of a hazardous nature and often in niche markets, using proven technology to fully utilise the Group's assets and enhance the return on capital employed.

The Group's strategy has continued to evolve during 2010 in response to new market information and emerging opportunities, building upon the four strategic growth areas identified during 2009, namely: LLW; Energy; Offshore; and Refineries. The Group continues to operate two divisions, providing an invested platform and the infrastructure to deliver growth within and beyond the identified areas.

Within the landfill division each opportunity is derived from the effective utilisation of the available land bank, either through the existing landfill assets, or the development of new land uses. LLW has been identified as a key opportunity for the Group in this regard and in May 2009 we began a public consultation process which resulted in an application being made for the ENRMF near King's Cliffe to receive LLW from the Nuclear Decommissioning markets. The Development Control Committee of Northamptonshire Council met on the 16 March 2010 and, despite the planning officer's report strongly recommending approval, the original application was refused. We remain confident that the disposal of LLW at ENRMF represents a significant opportunity for the Group as this would establish the first landfill site permitted to take both non-hazardous and hazardous wastes with low levels of radioactivity in the UK. The disposal of LLW at appropriately permitted landfill sites is, we believe, consistent with government policy for the decommissioning of redundant nuclear facilities and importantly poses no risk to the local community or economy. As a result we announced our intention to appeal against the planning decision in April 2010 and the appeal hearing took place in Corby over three weeks in October. The subsequent report from the planning inspector was submitted to the Secretary of State for Communities and Local Government in February 2011 and we anticipate a final decision from the Minister by 24 May 2011.

Land use opportunities are also being unlocked by the Group in the development of renewable energy and also the extraction of minerals available at our sites. A renewable energy plant was installed during the year at the Port Clarence Waste Recovery Park on Teesside, allowing the generation of electricity using methane gas produced from within the neighbouring landfill site. The plant began operation in February 2011 and is expected to generate royalty income through the year. Minerals exploitation is possible at our Cook's Hole site in Northamptonshire, where significant deposits of limestone and sand are available for extraction adjacent to our existing Thornhaugh landfill site. The planning process for Renewal of Minerals Permission ("ROMP") was concluded during the year and final approval is expected during half 1 of 2011. The Board is currently exploring the most appropriate mechanism for the commercial development of the site.

The treatment division continues to hold significant strategic value for the Group, providing a broad range of waste management solutions to our customers. The division has expertise and capability in the treatment and disposal of contaminated soils and building rubble, incinerator fly ash, various chemicals and oil-based wastes, supported by a national network of transfer stations. The development of the identified offshore and refinery opportunities will be driven through the ITD process at the Port Clarence Waste Recovery Park, which has been designed to treat and recover waste derived from the oil and gas refinery markets. Under the terms of our exclusive contract with Scomi Oiltools (Europe) Ltd ("Scomi") drill cuttings wastes from the North Sea oil & gas sector began disposal at Port Clarence from April 2010. Having reviewed the potential future market for offshore drill cuttings, UK refineries and possible trans-frontier shipment of oil-based wastes the Board took the decision to upgrade the capacity of the ITD plant and this work began in August 2010. The plant upgrade has involved an expansion and reconfiguration of the facility to allow treatment of up to 28,000 tonnes of offshore and refinery waste per annum (increased from the previous 10,000 tonnes capacity). We have taken steps to strengthen our relationship with Scomi as a strategic partner in the offshore waste market and have also recruited staff with the specialist skills and knowledge to optimise the returns from our indirect thermal desorption recovery capabilities.

Strategic development and the shaping of the Group's divisions in response to the emerging markets will continue through 2011 as the Group continues the alignment of its key services with market needs. Where investment is required to realise strategic opportunities the Group will utilise its existing loan facilities in the first instance. The Group has capacity to increase its debt in response to investment needs.

Divisional review

Landfill division

Revenue excluding landfill tax and inter-segment sales was £10.9m (2009: £11.4m) from total landfill volumes of 303,261 tonnes (2009: 257,938 tonnes), representing a volume increase of 18% year on year. Hazardous volumes fell slightly from the previous year at 192,910 tonnes (2009: 195,745 tonnes) although 2009 did include approximately 10,000 tonnes in respect of the one-off Olympics project. Non-hazardous volumes increased significantly to 110,351 tonnes (2009: 62,193 tonnes).

Hazardous wastes were disposed at an average price of £45/tonne (2009: £48/tonne) reflecting the highly competitive market place and current availability of landfill disposal capacity in the UK. Total revenues were based on lower average prices at £36/tonne (2009: £40/tonne) following the changed mix towards non-hazardous material.

Total throughput for the division benefitted from the current micro-climate created by the availability of landfill tax exemption certificates for certain customers creating an incentive to remediate brownfield sites before these exemptions expire on 1 April 2012. The increase in non-hazardous volumes particularly related to the processing of treated materials utilising the soil treatment centre at our East Northants Resource Management Facility, enhancing the Group's ability to treat and recycle remediated soils and rubble prior to disposal. This has introduced flexibility in our service offering to customers providing a recycling option for their waste as opposed to the traditional disposal route.

Operating profit before exceptional items was £3.0m (2009: £4.6m) after charging central costs and overheads. The comparative performance for 2009 included £2.4m in respect of one off items and adjustments.

Treatment division

Revenue for the division was £18.1m (2009: £16.7m), representing an increase of 8% from the previous year. A gradual recovery in markets saw revenues rise in the second half of the year (H1: £8.6m; H2 £9.5m).

The majority of the division's sites made positive contributions to profit before the allocation of central overheads, with year on year improvements to performance. The division also secured new contracts for the treatment of incinerator fly ash, taking the treated volume up to approximately 50,000 tonnes per annum.

The decision to upgrade the ITD plant at Port Clarence led to performance below original expectations at that site with plant not processing wastes during the period from August to December. The benefits from the upgrade are expected to be seen during 2011.

The Cannock facility improved its performance in the first 9 months of the year, benefitting from increased inputs of incinerator fly ash and the ability to both stabilise and neutralise ash with high value acids sourced from specialist producers. Disappointingly this progress was halted during the final quarter following a safety incident in the tank farm facility at the site on 5 November. The tank farm processes acids and other caustic liquids in preparation for mixing with solid wastes, such as incinerator ash, producing a stable material suitable for disposal to landfill. The incident was caused by an explosion in one section of the tank farm causing damage to certain tanks and associated pipework. Reviews of the causes of the incident have been undertaken by the Health & Safety Executive and the company and the facility remains out of operation at the date of this report. We have engaged with our insurers to progress a claim for the reinstatement of the tank farm and are receiving ongoing financial support for the loss of profit margin from the associated business interruption. As part of this process we are also considering the most appropriate reinstatement programme for the site.

The division made an Operating loss of £2.2m (2009: £2.3m) after charging central costs and overheads. The division is returning towards the revenues delivered in 2008 when local operating profit was sufficient to exceed central and support costs. The performance of each site and the division as a whole will be activity managed during 2011, with a key driver of future profitability being fuller utilisation of available capacity at sites where throughputs were lost during the UK recession.

Financial review

Trading

Net revenue excluding landfill tax for the year ended 31 December 2010 increased by 3% to £29.0m (2009: £28.1m). With the inclusion of landfill tax charged to customers, on which the Group makes no margin, of £5.1m (2009: £3.4m), total Group revenue rose by 8% to £34.1m (2009: £31.5m).

Operating profit and exceptional costs

Operating profit before exceptional costs decreased to £0.8m (2009: £2.3m) and profit before tax and exceptional costs to £0.4m (2009: £1.3m), slightly ahead of revised market expectations of a breakeven performance. This improvement was driven by improved trading conditions in the second half of the year.

Under IFRS, an annual impairment review must be performed for each cash-generating unit ("CGU") in accordance with IAS36 'Impairment of Assets'. The Group has completed this exercise and determined that no change is required to the carrying value of the goodwill at the year end date.

Statutory operating profit benefitted from the release of a provision of £0.4m relating to landfill tax liabilities, treated as an exceptional item and also included restructuring charges of £0.2m (2009: £0.2m) in exceptional items. The exceptional adjustments increased profit attributable to equity shareholders to £0.4m (2009: loss £54.6m).

Finance costs

Total finance charges benefitted from the use of a single loan facility and positive cash flows, reducing to £0.4m (2009: £1.2m). This included a £0.1m (2009: £0.1m) unwinding of discounts on provisions.

Jointly controlled entity

The Group's Terramundo joint venture with DEC NV continued to be on hold during 2010 while the market for its services recovered. There was no trading during the year and as a result Terramundo delivered a small loss of £0.03m (2009: £0.06m). Both joint venture parties remain committed to this strategic venture and look forward to a return to trading as markets recover.

Tax

The Group has continued to benefit from the utilisation of tax losses in its landfill businesses during the year. A deferred tax asset of £0.1m, released during the year, represented the only tax charge for the Group. Following the use of available tax losses the Group expects that it will begin to pay increased levels of tax from 2011 onwards.

Dividend

The Board does not recommend the payment of a dividend for the year ended 31 December 2010. The Board will continue to review the Group's financial situation in order to ensure that dividends are paid to shareholders at an appropriate point in the Group's development.

Earnings per share

Basic earnings per share adjusted to exclude the impact of exceptional costs were 0.24p (2009: 1.8p). The number of shares in issue at 31 December 2010 was unchanged from 31 December 2009, at 99.7m. There were no dilutive outstanding share options at either year end.

Cash flow

The Group delivered Earnings Before Interest, Tax, Depreciation and Amortisation ("EBITDA") of £5.6m (2009: £5.8m) and net cash generated from operating activities of £5.4m (2009: £3.0m). Net cash used in investing activities fell to £3.4m (2009: £4.4m), with £3.2m spent on purchases of property, plant and equipment as the group continued to invest in the development of strategic opportunities. Net debt fell to £3.9m (2009: £6.0m), based on positive free cash flow of £1.8m (2009: negative £2.6m) and generating a gearing level (net debt / shareholders' equity) of 9% (2009: 13%).

Financing

The Group continued to use a revolving loan facility of £10.0m, due for renewal in November 2012, supplemented by finance leases secured on certain plant, as the sources of financing its activities. The facility is 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 are tested at the end of each trading quarter and each test was achieved at the relevant dates throughout the year. At 31 December 2010, the undrawn loan facilities available to the Group were £7.0m.

Principal risks and their mitigation

The performance of the business is linked to economic activity in the markets it serves, principally the industrial and construction sectors. Fluctuations in the economy in these sectors therefore affect Group performance, as do inflationary and other pressures from the wider economy. Risks are mitigated by diversifying the customer base as far as possible and by linking gate fees, wherever possible, to prevailing commodity prices. In addition to this general economic risk there are a number of risks specific to the waste industry.

The Group uses a range of resources to manage and mitigate against its risks, including the adoption of a broad range of internal controls, which are set out in the Governance section of the Annual Report.

Environmental legislation

Regulation is a key driver of the waste market. This is further complicated by the ongoing change in legislation resulting from the increased profile of environmental issues. Changes in legislation (including tax legislation with environmental goals) or its interpretation can have a significant and far reaching impact on markets. The Group endeavours to mitigate this risk by employing high quality technical management to interpret the evolving legislative framework and its impact on the Group's operations. In addition, the Group maintains a presence on a number of industry Groups to have influence in the shaping of policy.

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. Therefore the negotiation of, and compliance with, their terms is of paramount importance as 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. The Group mitigates this risk through the employment of technical expertise throughout the Group and through the provision of training to develop the Group's staff to understand their role in ensuring compliance is maintained. Further details of how the Group monitors and controls environmental compliance are given in the Group's corporate social responsibility ("CSR") report.

The Group also relies on its principal regulator, the Environment Agency, to ensure that other operators within the industry are adhering to the standards required on a local, regional and national basis. The success of the regulator in achieving this is critical in providing a level playing field and a positive climate for investment in responsible waste management practices. The Group maintains an active dialogue with the Environment Agency to promote the best interests of the industry and of the environment as a whole.

Health and safety

By its nature, the waste industry has inherent risks in the area of health and safety. The Board believes that the Group's employees are its most important and valuable assets and their health and safety is vital to the continued success of the business. The Group continues to invest and resource the business to ensure that the highest health and safety standards are required and applied. Further details of the Group's approach to health and safety can be found in the CSR report.

Price risk

The waste sector has experienced significant changes in the commercial framework for the management of hazardous waste over the past few years. Price pressure is inherent in the sector where a range of technologies and solutions are available to waste producers for the ultimate disposal of their wastes. 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. 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.

Input prices

The Group is subject to the same inflationary pressures as other businesses but we see particular risks from escalating oil and gas prices and the subsequent impact of fuel costs, which could restrict the movement of wastes from producers and subsequently impact revenue streams. This position is closely monitored by management and feeds into pricing decisions.

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 delay or possibly lose 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 2013 may encourage some customers to divert volumes away from our sites. The full rate of landfill tax will rise to £56/tonne on 1 April 2011 and reach £72/tonne on 1 April 2013. To mitigate against this risk the group has developed a range of treatment solutions for customers.

The environment, employees and the community

The Group recognises the important role it plays in the environment and communities within which it operates. The health & safety of our employees and compliance with regulation are key business priorities which we believe are complimentary to strong financial performance. Augean is committed to conducting its business operations in a 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 and ensure the safety and welfare of our employees and neighbours.

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 the annual report.

The environment

All operating sites and activities are strictly regulated by environmental authorities through a range of regulations. In the context of hazardous waste the principal instrument driving standards is the Integrated Pollution Prevention and Control directive, which provides an integrated approach to pollution control to prevent emissions into air, land or water. The implementation of the standards continues to move the waste sector from a low technology base to compliance with 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 business 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. The Group operates through well developed environmental controls and compliance systems, involving suitably qualified people in the management of all aspects of its operations. Reported environmental data, both internally used and provided to regulators, continues to show that the Group's operations do not result in a significant impact on the local environment.

Employees

The Group's employees are vital to its ongoing success and over the past year they have continued to support the business, often in difficult operating conditions. The Group wide pay freeze imposed in 2008 in response to the challenging trading environment continued throughout 2010 and the Board continues to appreciate the dedication and support shown by employees despite the recent challenges.

Training and development of employees is vital to the Group, particularly given the highly technical nature of the waste industry and some of the processes it operates. We continue to recruit and provide training to our people with a range of technical qualifications in the fields of chemistry, engineering, project management and general operations, in addition to commercial and support activities.

The health & safety of employees remains a high priority for the Board and the Group continued to conduct safety campaigns at all sites during the year. Campaigns focused on a range of potential hazards and their mitigation.

As part of this commitment to ongoing personal development a new programme was introduced during 2010 for senior mangers focused on enhancing the leadership abilities of the management teams. This will continue into 2011.

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 Group welcomes this interaction with the local community and is committed to listen to feedback and suggestions.

As in previous years the Group contributed to many local initiatives through the Landfill Tax Credit Scheme and this will continue to be an important area of support for the communities in the areas in which the Group operates. In addition, the Group makes contributions to local organisations, particularly in the area neighbouring its landfill sites at Kings Cliffe and Thornhaugh. Initiatives supported during 2010 included the Salthome International Nature Reserve in the Tees Valley, recreational facilities and Youth Club in Kings Cliffe village and investment in Bedford Purlieus Site of Special Scientific Interest.

Outlook

The Board remains cautiously optimistic over the outlook for the year ahead. Trading has been positive during the first quarter, although not significantly ahead of our plans.

The Group's key focus for 2011 will be to improve profitability and fully utilise available assets. The operationally geared nature of the Group should convert improved revenues from recovering waste markets into positive profit and cash flow performance.

The Board will continue to develop the strategic opportunities available to the Group and review further options for growth. We await a positive outcome from the appeal to dispose LLW at ENRMF and hope to activate this operation in the second half of the year.

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2010

Consolidated Statement of Financial Position

at 31 December 2010

Consolidated Statement of Cash Flows

for the year ended 31 December 2010

Statement of Changes in Shareholders' Equity

for the year ended 31 December 2010

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 2010 will be dispatched to shareholders by 29 April 2011 for approval at the Annual General Meeting to be held on 7 June 2011. 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 2009 have been delivered to the Registrar of Companies, contained an unqualified audit report and did not include a statement under s495(2) or s495(3) of the Companies Act 2006. 

2 Segmental information

Management currently identifies that the Group has two operating segments. These operating segments are monitored and strategic decisions are made on the basis of the segment operating results. The group's internal organisation and management structure and its system of internal financial reporting are based primarily on business segments. The business segments comprise the landfill division and the treatment division. Segmental revenue, expense and results include transactions between businesses. Inter-segmental transactions are eliminated on consolidation.

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

Landfill division derives revenues from the disposal of hazardous and non-hazardous wastes at its three permitted landfill sites. Customers are charged gate fees based on the volumes of waste disposed.

Treatment division derives revenues from a range of waste management solutions provided to primary waste producers and other third party waste management companies.

3 Earningsper share

4 Reconciliation of operating (loss)/profit to net cash generated from operating activities

5 Analysis of changes in net financial liabilities