Preliminary Results

26 March 2013

Augean Plc

Results for the year ended 31 December 2012

Augean PLC ("Augean" or "the Group"), one of the UK's market leaders in the management of hazardous waste, announces its results for the year ended 31 December 2012.

Financial highlights

·; Revenue including landfill tax; increase of 13% to £42.4m (2011: £37.5m)

·; Revenue excluding landfill tax; increase of 18% to £36.8m (2011: £31.3m)

·; Adjusted EBITDA increased to £6.6m (2011: £6.1m)

·; Adjusted profit before tax £2.6m (2011: £1.1m)

·; Profit before tax £2.8m (2011: £1.4m)

·; Earnings per share 1.97p (2011: 1.59p)

·; Free cash flow £0.6m (2011: £(0.5)m) after £3.6m of capital expenditure

·; Net debt increase to £6.1m following acquisitions (2011: £4.0m)

·; Recommendation of payment of a maiden dividend of 0.25p per share

Operational highlights

·; Group increases sales revenues across all divisions compared to previous year

·; Improved operating margins on key activities

·; Initial disposal of multiple waste streams from radioactive decommissioning

o 2,107 tonnes disposed in 2012, at an average price of £271 / tonne

o Slower than expected release of low level waste (LLW) from the nuclear estate

o Entry into the emerging markets of naturally occurring radioactive material (NORM)

·; Planning extensions secured at ENRMF and Thornhaugh sites

·; ANSS operated successfully in the North Sea market throughout the second half of 2012

·; New high temperature incinerator (HTI) integrated within Waste Network division

·; New industrial cleaning services provided through Oil & Gas Services division

·; Several medium term contracts secured with large customers across all divisions

Strategic developments

·; Move into delivery phase across key strategic markets

·; Continued focus on radioactive decommissioning markets to drive profit growth

·; Planning permission sought to extend the size and life of the ENRMF site to 2026

·; Offshore waste management offering growing through Augean North Sea Services

·; Minerals extraction underway at Cooks Hole, providing royalty stream

·; Energy production available as electricity, heating steam and fuel oils

·; Appointment of Dr Stewart Davies as new CEO from August 2013

Commenting on the results, Chairman Jim Meredith said:

"The successful delivery of our strategic initiatives has led to robust results showing growth in revenue, earnings and profit. While the overall conditions in our core markets have remained challenging, the Group has made excellent progress in establishing new revenue streams that offer significant growth potential.

"The proposed payment of a maiden dividend demonstrates the Board's confidence in the Group's strategic direction and intention to enhance returns for shareholders. Our new businesses and divisional reorganisation have created a stronger and more diversified business closely aligned with our customer requirements and this investment is expected to deliver continued growth to revenues, earnings per share and cash flow in this year and beyond."

- Ends -

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Chairman's statement

In my first statement as Chairman of Augean plc I am pleased to report another year of solid progress for the Group despite the challenges we face in the UK economy. Since joining the Group in 2010 I have focused my attention on the returns available to our shareholders from the established hazardous waste management infrastructure of the business as well as the strategic developments which will allow us to deliver future growth. The action taken over the past year has developed both of these areas, improving year on year performance and providing a platform for more success during 2013.

I took the Chair at Augean after our AGM in June and as such for half of the year the Group continued to be ably chaired by Roger McDowell. Roger remains a key member of our plc Board and I would like to place on record my thanks to him and the other members of the Board for their insight, experience and guidance, which has been invaluable over the past nine months.

In 2012 the Group delivered growth, increased earnings per share and improved the return on capital employed. I believe that we took a large step forward during the year towards our goal of a business which provides sustainable long term returns for our shareholders.

Net revenue excluding landfill tax for the year increased to £36.8m (2011: £31.3m). Operating profit before exceptional costs was broadly in line with our expectations at £3.3m (2011: £1.6m) and the total profit attributable to our shareholders was £2.0m (2011: £1.6m). Operating cashflows of £5.8m (2011: £4.7m) supported continued capital investment and the acquisition of a majority stake in Augean North Sea Services, which I believe will be a vehicle for future growth.

We have worked hard during the year to position the Group as a key supplier of disposal services within the decommissioning supply chain and we expect this to deliver improved results from now on. However, the nuclear decommissioning sector is understandably cautious about the pace of change and the Board recognises the need to encourage an increased pace of material release for appropriate disposal, which to date has been frustratingly slow.

I am pleased to report improvements in health and safety and compliance performance during the year. The Board remains very vigilant in these priority areas and we have recently resolved to further increase the level of scrutiny of Health and Safety (H&S) through the establishment of a new H&S Committee, chaired by a non-executive director and reporting directly to the Board. This committee will provide an independent challenge to directors and suggest areas for improvement.

Throughout 2012 the Board and I have been mindful of both the need for strong corporate governance and also the need to manage and mitigate risks. The economic environment in the UK is challenging, although not without opportunities for businesses like Augean, and recognising this fact the Audit Committee reviewed the risk management framework of the Group at its meetings in March and November. These reviews led to recommendations for certain additions to the framework. In addition, to ensure that governance was entirely appropriate for an AIM listed Group the Board has maintained regular dialogue with investors and sought input from our nomad on specific matters.

Each of the Board's standing committees (Audit, Remuneration, Nominations) were very active during the year, particularly following the resignation of the Chief Executive and the search for his replacement. Paul Blackler will leave the Group at the end of March 2013 and I would like to thank him for his contribution over the past 5 years. We have now appointed Dr Stewart Davies as Chief Executive Officer (CEO) and I look forward to working with him when he joins the Group over the summer. In the meantime I will provide close support to our Finance Director, Richard Allen, as he assumes the role of Interim CEO. In all other respects it is very much "business as usual" as we focus our teams on delivering enhanced targets in 2013.

The Board remain focused on delivering the improvements to performance which will lead to enhanced returns for all our shareholders and the payment of the Group's maiden dividend during this year will be another step on this journey. In 2013 we expect further improvements to revenues and earnings and also a reduction to net debt as the Group continues to generate positive cash flows.

Jim Meredith

Non-Executive Chairman

26 March 2013Business review

Introduction

The Group delivered improvements to revenues and earnings during 2012, building upon the divisional reorganisation implemented at the start of the year. Through its three divisions and the North Sea Services subsidiary the Group is now more clearly focused on its key markets and better positioned to provide appropriate waste management solutions to a broad range of customers in sectors including land remediation, construction, manufacturing, decommissioning, pharmaceuticals, oil & gas and energy generation. Earnings per share in 2012 increased to 1.97p, a 24% growth over 2011, and this has paved the way for payment of a maiden dividend during 2013, enabled as a result of the capital reduction approved by the High Court on 4 July 2012.

The Land Resources division delivered revenue growth from its core remediation markets and improvements to operating margins, which were enhanced by the returns available from the newly developed markets in Low Level Waste (LLW), Very Low Level Waste (VLLW) and Naturally Occurring Radioactive Materials (NORM). The trend of previous years continued with greater use of the remediation centres at Port Clarence and East Northants Resource Management Facility (ENRMF), and the volume of incinerator ash treated and disposed grew 24% from the previous year.

The Oil & Gas Services division delivered growth in like for like revenues over 2011, following a review of activities at each of its sites and a focus on margin-enhancing work. Following the divisional restructuring this division operates the majority of the Group's treatment assets and therefore carries a significant depreciation charge. However, improvements in performance over the year delivered a positive EBITDA result and positive cash generation.

The Waste Network division consolidated its position within the hazardous waste transfer market and expanded its operations with the addition of a high temperature incinerator at a new site in East Kent. This new asset allowed the existing network to be leveraged in bidding for new direct contracts with a broader range of customers and the division as a whole delivered revenue growth of 2%.

The Group invested £3.05m during the year to purchase 70% of the equity in the newly formed Augean North Sea Services. This entity provides a vehicle for the Group to provide a range of waste management solutions to customers in the North Sea oil and gas sector. Early results have been encouraging, with positive EBITDA and breakeven profit before tax delivered in the first six months of trading.

Despite the relatively high capital needs of the business, particularly at landfill sites, the Group was able to generate free cash flow during the year, which was subsequently reinvested into new business opportunities. To support working capital and investment needs the £10m banking facility with HSBC remained in place throughout the year and still has a further two years before maturity.

The Group continues to benefit from the valuable contribution made by its employees, all of whom contributed to the improvements in performance during the year. To ensure that the Group had sufficient resources to deliver its key targets there was an increase to the number of staff employed by the core businesses, with an average of 215 staff (2011: 206) over the period. The number of staff in the extended Group increased by a further 52 with the acquisition of Augean North Sea Services and this rose to 59 by the end of the year.

During 2012 the Board has remained focused on delivering improvements to profitability and returns on capital employed. The strategic developments first identified during 2010 were largely implemented during the year and this has created a business with the capability to sustain improvements to shareholder returns into the medium term.

The hazardous waste market

The hazardous waste markets remain highly segmented with numerous opportunities for specialist niche operators within the approximately 400,000 tonnes of hazardous waste handled in the UK each year.

Data published by the Environment Agency during 2012 on the production of hazardous waste indicated the total volumes disposed to hazardous landfill remained stable during 2011 (the most recent data available) (Source: Environment Agency; www.environmentagency.gov.uk). Augean's Land Resources division continued to enjoy a strong position within this market, with an estimated market share of 40% in 2011 and further volume growth during 2012.

The market's legislative environment is underpinned by the implementation of the Waste Framework Directive and the development of the UK's hazardous waste National Policy Statement (NPS), both of which are expected to reinforce the trend towards more sustainable methods of managing waste and the development of treatment, recycling and recovery facilities as the key focus of future waste management activities. The waste hierarchy provides a framework for waste management and there is a clear drive from the major companies in the sector, including Augean, to support this trend and move the UK's waste management infrastructure towards more sustainable solutions.

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 NPS, directly engaging with Government departments and giving evidence at the Parliamentary Select Committee inquiry. During 2012 we continued to monitor the progress of this important policy statement, promoting the development of UK infrastructure.

The Group's business model, developed over the last five years, is strongly aligned with the NPS and the associated guidance. We have already developed several technologies which promote the waste hierarchy, including the establishment of ash stabilisation facilities, oil recovery by thermal desorption, energy from waste incineration and soil treatment and recycling centres (remediation centres). Augean is currently working with the Environmental Services Association (ESA), Department for Environment, Food and Rural Affairs (DEFRA) and the Environment Agency (EA) to ensure ongoing application of the waste hierarchy and the raising of standards to support sustainable investments. The final publication of the Hazardous Waste National Policy Statement (NPS) in 2013 is anticipated to demonstrate the continuing need for the portfolio of facilities and services developed by Augean and the Group is therefore well positioned to take full advantage of the policy as the market responds to the new requirements.

As set out above, in the medium term the hazardous waste market is expected to continue to evolve as new treatment technologies are developed. The publication of the NPS has set the legislative direction of travel in the UK and future significant legislative developments are not expected in the near term. In our view the economic case for substantial development expenditure in the current economic environment may not be sufficiently compelling to justify significant technological developments across the market in the medium term and this may provide a barrier to new market entrants. However, a stable macro-environment for the development of appropriate hazardous waste management solutions does exist in the UK, especially if backed by appropriate enforcement of the legislation, and the Group will continue to explore how these solutions can best be delivered in ways that enhance shareholder returns.

Strategy

The core strategy of the Group remains unchanged, with focus 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. Investment in new waste management infrastructure and assets is based on strict criteria around the expected returns on capital invested, whilst recognising that ongoing capital investment is required to maintain existing facilities at the required capacities and standards.

In last year's Annual Report we set out the key opportunities for 2012, many of which were entering the delivery phase, and over the course of the year the Group has continued to deliver the strategy through the completion of major projects. We expect that each of these opportunities will promote full utilisation of the Group's assets and deliver longer term returns above its cost of capital.

Low Level Waste (LLW)

We reported in the Interim Report 2012 that the planning permission required to allow the Group to accept LLW at East Northants Resource Management Facility (ENRMF) had been secured. On 23 July 2012 the Group received notification that the application for permission to appeal to the Supreme Court against the decision by the Secretary of State to allow disposal of LLW had been refused. This concluded the legal process and confirmed that the original planning permission to dispose of LLW was lawful.

The planning permission at ENRMF allows the Group to dispose LLW and VLLW. Whereas LLW has radioactivity levels of up to 200 bq/g, activity of VLLW is typically less than 20 bq/g. The lower activity levels mean that VLLW attracts a lower price on disposal, in the same way that certain hazardous waste streams are also priced below more difficult to handle items.

During the first half of the year the Group secured two contracts for the disposal of LLW and VLLW, through the national framework managed by Low Level Waste Repository Limited (LLWR). Consignments were received from one of these contracts, with Research Site Restoration Limited (RSRL) from their Harwell facility through the second half of the year. The Group also completed numerous bids through the framework for VLLW and LLW from a number of site licenced companies (SLCs) which operate under the guidance of the UK's Nuclear Decommissioning Authority (NDA).The bidding process is designed to comply with EU procurement law and each bid is subject to a technical and price assessment by LLWR. The majority of these bids are expected to be awarded during 2013 and will form the core of the Group's LLW forecast for the year.

While the national framework and bidding process is now active, the pace at which waste volumes were released during 2012 was slower than originally anticipated. There has also been a change in the mix of waste disposed by the Group at ENRMF, with the lower value VLLW dominating early consignments. As a result the average price of all irradiated waste disposed of during 2012 was £271/tonne. The change in the waste mix, and also the lack of volumes from one of the two original contracts, led to 2,107 tonnes of waste being disposed in the year, generating £0.6m of sales revenues.

As previously reported numerous enquiries have also been received from new customers for smaller volumes of LLW, VLLW and also for disposal of NORM. Augean has entered a partnership agreement with Scotoil Limited in Aberdeen, to provide treatment and disposal solutions for customers wishing to dispose of NORM generated from North Sea oil and gas activities. Early signs are that this partnership will deliver revenues up to £0.5m per annum as the volume of NORM released increases.

Despite the delays and mix challenges experienced during 2012 the Board remains confident that the infrastructure investment made to allow disposal of irradiated waste streams has enhanced the value of the Group. With the scaling up of decommissioning activities, the value of this activity is expected to be material to the Group and underpin profitability, cash flows and return on invested capital.

Offshore

During the year the Group completed another stage of its strategic development with the addition of a new business to provide waste management services to North Sea oil and gas operators. As previously reported, on 29 May 2012 we announced the creation of a new company, Augean North Sea Services Limited (ANSS). Augean purchased 70% of the equity in the newly formed company from Scomi Oiltools (Europe) Limited (Scomi) on 30 May 2012 two days after it commenced trading, paying £2.05m for the shareholding and also providing a loan of £1.0m to ANSS, which allowed Scomi to repay existing debt. The loan is secured against the property assets owned by the venture in Aberdeen and is repayable over an 8 year period.

The newly formed company built upon the existing relationship between Augean and Scomi for the treatment of drill cuttings from offshore oil and gas exploration, using Augean's thermal treatment and disposal facilities at Port Clarence, Middlesbrough and Scomi's offshore waste management resources, based in Aberdeen. By combining these activities through ANSS, the business has the capability to source, contain, treat, recycle and ultimately dispose of offshore wastes for its customers through an integrated waste management supply chain.

The new business operated successfully in the North Sea market throughout the second half of 2012, providing services to previous Scomi customers and new customers won over the past six months. Drilling waste management on the offshore platforms, supported by onshore treatment of drill cuttings at Port Clarence, continues to be a key activity for the Group and during the last quarter of 2012 new contracts were secured for drilling wastes. The business also increased its services to Platform Supply Vessels docking at Pocra Quay, Aberdeen, utilising specialist industrial cleaning equipment to remove contaminated slops from their storage tanks and treat these in the tank farm facility located at the quayside. In addition, local sales teams have begun to bid for and secure onshore hazardous waste management contracts, supported by Augean's facilities at Paisley and Port Clarence. This is another important element of the growth plan for the business.

To support its expanding activities ANSS purchased an additional site at Tullos in Aberdeen, with this transaction completing during January 2013. The site, at Greenbank Industrial Estate, will be operated on a long term lease from Aberdeen City Council, using assets purchased from Veolia Environmental Services Limited. The total costs of the transaction were £0.2m, paid for from existing working capital. During 2013 this site will be fully integrated into the local activities and wider Group, providing the flexibility to offer an expanded range of services to local customers.

The Board believes ANSS represents an excellent growth opportunity for the Group. In 2013 we expect EBITDA of at least £0.7m, with the business well placed to take advantage of current oil and gas market activities and also make preparations to participate in the emerging offshore decommissioning market.

Energy

2012 saw further progress in the Group's efforts to develop its capabilities in the production of energy and fuels. During the year electricity continued to be generated from our two landfill gas generation plants at Marks Quarry and Port Clarence. At the new East Kent facility the incinerator produced steam which was exported to the surrounding Discovery Park site for use in heating (this activity also ensures that the wastes incinerated at East Kent are being treated in a recycling process). Within the Oil & Gas Services division work continues to recover oil for use as fuel, with the indirect thermal desorption plant at Port Clarence Waste Recovery Park delivering quality recovered oil from North Sea drilling wastes.

Minerals

Mineral extraction, in the form of limestone and sand, began in June at the Group's site at Cooks Hole, Northamptonshire. The permitted extraction of these minerals is being carried out though a third party, providing a royalty income for the Group of at least £0.2m per annum. This value may increase as extraction volumes rise.

Development activities

Waste Network division developments

The formation of the Waste Network division in early 2012 focused the Group's sales and transfer capabilities into an entity expected to drive sales growth and address the profitability challenges in this area of the business. The strategy for Waste Network includes progressively moving sales activity and revenues towards larger customers, with whom longer term contracts can be signed, creating greater levels of certainty around waste volumes, site utilisation and gross margins.

To support the drive for a change in the customer profile of the division, the opportunity to include high temperature incineration in the division's portfolio of services was significant. We were therefore delighted to sign agreements on 16 April 2012 with Pfizer Limited to manage and operate a commercial high temperature incinerator (HTI) at the Discovery Park in Sandwich, Kent. These agreements have since been novated to Discovery Park Limited and the site is operating under the name of East Kent Waste Recovery Facility (EKWRF).

EKWRF was integrated into the Group over the second half of the year, operating under a separate environmental permit issued by the Environment Agency. The HTI has the capacity to process up to 10,000 tonnes per annum of waste and also benefits from its ability to recover energy in the form of steam, making the facility the only commercial HTI in the UK with this capability. Integration into the Waste Network division, aligning the assets with the Group's existing national network of waste transfer stations and providing the sales and support infrastructure to market the new services, has supported recent revenue growth, leveraging our position in key strategic markets, namely pharmaceutical, clinical and secure destruction. Contracts for waste management including the secure destruction of certain materials are now being offered to develop the customer base of the site and the wider division.

With the HTI now fully operational EKWRF is expected to deliver an EBITDA contribution of £0.3m during 2013, rising to £0.5m thereafter.

EKWRF is a key part of the strategy for Waste Network division, but other changes were also made during the latter part of the year to address profitability challenges. The sales and support infrastructure of the division was refocused and the central customer services facility at Cannock was closed. Key roles were transferred to those operating sites requiring commercial support, providing local expertise and short lines for decision-making. As part of this process a smaller bid management team was established, to focus on winning the larger contracts which are essential to the division's future success.

During the first quarter of 2013 management has also taken steps to reduce the operating costs of the division and improve utilisation of its sites. As a result we announced the closure of the Worcester site in January, with existing customers being transferred to the larger site at Cannock. Cannock is the largest transfer station facility within the Group and has the capacity to absorb the Worcester volumes. This change resulted in a small number of redundancies. The Worcester site has been retained by the Group and discussions are ongoing with interested third parties who may lease the site during 2013. There are no current plans to sell the site. The reduction of costs at Worcester is expected to contribute an additional £0.4m to the division's operating profit during 2013.

Planning & 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 Group. During 2012 planning and permitting activities focused on securing extensions to the operational life of two landfill sites, at ENRMF and Thornhaugh and also an extension to the size and life of ENRMF.

Planning permission for the disposal of non-hazardous waste at the Thornhaugh landfill site was schedule to expire in December 2013. An application was submitted to Peterborough City Council during the year to request an extension to the operational life of the site until December 2028. The application was supported by the local planning officers and during the hearing Augean received positive support for its plans. The application was heard on 6 November 2012 and received the unanimous support of the Council's planning committee, confirming extension of the site's operating life to 31 December 2028.

At ENRMF two applications were submitted to extend the life of the site beyond the previous expiry in August 2013. A local application was made to Northamptonshire County Council (NCC) to provide a time extension for the site to remain operational until December 2016, allowing the existing void capacity to be filled and the currently active areas to then be fully restored. This application was approved by the Development Control Committee of NCC on 18 September 2012.

A second application was also submitted during 2012 to the Planning Inspectorate to propose an extension of the capacity and operating life of ENRMF, through the development of land to the west of the existing landfill within the boundary of the entire site. The application anticipates that this development would extend operations at the site to December 2026, including hazardous and low level waste, allowing the Group to increase the capacity of the site by up to 1.2m cubic metres of landfill void and extend the land remediation activities at the remediation centre. The Planning Inspectorate acts on behalf of the Secretary of State for Communities, examining planning applications for projects of national significance. The examination process includes public meetings, evidence from interested parties and site visits. The inspector concluded these stages by January 2013 and must submit his report to the Secretary of State by 22 April 2013, followed by a decision from the Secretary of State within three months. No significant new challenges emerged during the examination and we remain confident of a positive outcome.

Performance

The results for the year show growth in revenues, retained profit, earnings per share and adjusted EBITDA (excluding the impact of exceptional items). This performance was driven largely by growth in the Land Resources division, improvements within the Oil & Gas Services division and stable performance from Waste Network division. ANSS contributed £3.4m to revenues and £0.3m to EBITDA, delivering a breakeven profit before tax.

Land Resources

Total landfill volumes of waste disposed decreased by 5.9% during the year to 320,392 tonnes (2011: 340,383 tonnes). The trend towards greater pre-treatment of waste before disposal, utilising the treatment facilities at our Remediation Centres at ENRMF and Port Clarence, led to remediation volumes growing by 5.4% when compared with 2011. The volumes of traditional hazardous waste disposed directly to landfill decreased 12.1% year on year at 98,787 tonnes (2011: 112,355 tonnes) with prices £46.40 per tonne (2011: £40.50 per tonne).

Despite disposing of lower volumes to landfill, overall profit for Land Resources was £6.7m compared to £4.9m for 2011. This was driven by improvements in margin as a result of lower operating costs.

As explained in the LLW section, volumes of LLW received during the year were slightly ahead of the forecast at 2,107 tonnes, but the mix of wastes was skewed towards the lower value VLLW, leading to revenues of £0.6m, rather than the anticipated £1.0m.This result has not undermined our belief in the value of this activity, but the experience has made forecasting LLW revenues more challenging than originally expected.

Mineral extraction at Cooks Hole and energy generation from landfill gas contributed a further £0.2m to operating profit.

To ensure that the Land Resources can continue to deliver environmentally sound recycling and disposal solutions for its customers the division broadened its range of waste treatment options during the year with the commissioning of a stabilisation plant at the Port Clarence site and the construction of a bio-remediation facility at ENRMF. Further developments are underway at Port Clarence with a tank farm for liquid wastes scheduled for completion in May 2013 and at ENRMF through upgrades to the processing plant at the Remediation Centre.

Waste Network

The Waste Network division saw a £0.2m increase in sales revenues from the equivalent period in 2011. This growth was reduced by the transfer of ash treatment activity out of the division's sites and into the Land Resources division (representing an annual impact of £0.4m). However, underlying sales revenues grew by 10% and the division delivered total revenues in 2012 of £6.6m despite operating in a flat and highly competitive market.

As a result of the introduction of East Kent and a focus on minimising disposal costs of waste to external parties, the division was able to deliver year on year improvements to gross margins. In this regard the focus on contracted waste streams began to deliver some benefits. Over the year gross margins improved by 4% to 41% when compared against 2011 (37%).

Despite the above improvements, there is still progress to be made before the division reaches the critical sales threshold to allow operating and overhead costs to be covered. The plans for further growth are outlined in the Development activities section of this report. This resulted in an operating loss of £2.0m. This includes absorbing £0.1m of costs for the set up and initial operation of the new East Kent Waste Recovery Facility and further investment in the transfer stations. The equivalent result for 2011 was a loss of £1.1m.

Given the developments described elsewhere in this Report the Board expects a material improvement to Waste Network performance during 2013.

Oil & Gas Services

Sales revenues in the Oil & Gas Services division increased by 8% to £11.1m. As reported in the Interim Report 2012 activities at the Avonmouth site focused on the utilisation of available assets to generate higher gross margins, which led to delivery of a 7% improvement to margins when compared to 2011. The changes were supported by an external review of activities and the development of a site plan to improve waste treatment performance.

At the Port Clarence Waste Recovery Park (PCWRP) a number of investment projects took place to improve the throughput and oil recovery capabilities of the Indirect Thermal Desorption plant (ITD). The unique status of this plant as the only one of its kind operating in the UK forms an essential part of the Group's development of offshore waste services, supporting ANSS by focusing its activities largely on the treatment of drill cuttings from North Sea oil and gas exploration. Sales revenues at the site are derived largely from North Sea activities, with revenue increasing by £0.5m from the previous year to £3.0m.

This integration between ANSS and the Oil & Gas Services division is also evident at the Paisley site, which began to support ANSS by providing waste treatment and transfer capability during the second half of the year. In its other activities the site underwent a similar customer and margin review to that at Avonmouth and this led to a significant improvement in year on year gross margins to 54%.

The division leveraged its expertise in oil-contaminated wastes and hazardous chemicals to develop its new industrial cleaning services capability during the year, winning a significant contract at a former aluminium production facility.

The division delivered an operating loss in the year of (before exceptional costs) of £1.2m, but this masked an improvement in performance which delivered positive cash generation of £0.2m, after taking account of capital investments.

Key Performance Indicators

The 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 principle targets. Certain KPIs are set out in the table below, relating to the priority areas of profit generation (through revenue delivery and asset utilisation), compliance with regulations (specifically Environment Agency audit results) and health & safety (monitored through near miss incidents and the number of accidents incurred).

Divisional KPI performance in 2012

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

(2) Defined as the average of Environment Agency audit scores notified during the year on a scale from A to E

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

For ANSS local management has adopted a similar balanced scorecard approach, which includes KPIs of particular relevance to the oil and gas industry. These KPIs include FPAL scores, which are based on customer feedback and used to rate performance in service delivery. In 2012 ANSS received fourteen scores, at an average of 8.7 (maximum of 10). Health and safety performance was also very positive throughout the period, with zero accidents and zero lost time incidents.

Financial review

Trading

Net revenue excluding landfill tax for the year ended 31 December 2012 increased by 18% to £36.8m (2011: £31.3m). With the inclusion of landfill tax charged to customers, on which the Group makes no margin, of £5.7m (2011: £6.2m), total Group revenue rose by 13% to £42.4m (2011: £37.5m).

Operating profit and exceptional items

Operating profit before exceptional items increased to £3.3m (2011: £1.6m) and profit before tax and exceptional items to £2.6m (2011: £1.1m), slightly behind the Board's expectation of £2.7m. This improvement reflected consistent trading performance across the year.

Total exceptional items increased profit before tax by £0.2m (2011: £0.3m). Exceptional items included a gain on bargain purchase associated with the deferred tax assets arising from the Augean North Sea Services acquisition of £0.5m (2011:£nil), restructuring charges of £0.1m (2011: £0.3m) and legal and professional fees relating to the acquisition of Augean North Sea Services of £0.2m (2011: £nil). The net benefit of £0.2m (2011: £0.3m) derived from the exceptional items increased profit before tax to £2.8m (2011: £1.4m).

Finance costs

Total finance charges reflected the payment of interest on bank debt and finance leases, totalling £0.6m (2011: £0.6m). This also included a £0.1m (2011: £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 2012. There was no trading during the year and as a result Terramundo delivered a small loss of £0.03m (2011: £0.03m), relating to loan interest and depreciation charges. Both joint venture parties remain committed to this strategic venture and expect a return to trading as markets evolve and the demand for its services become re-established.

Corporation Tax

The Group paid tax of £0.7m during the year, £0.5m in respect of 2011 liabilities and £0.2m in respect of 2012 liabilities. A deferred tax asset of £1.2m (2011: £0.9m) was recognised in the statement of financial position, the board believing that future profits are probable and future tax liabilities will be incurred, as was a current tax liability of £0.2m (2011: £0.5m). There was a corporation tax charge of £0.8m in the income statement (2011: credit of £0.2m).

Profit for the year

The total profit attributable to equity shareholders increased by £0.4m from the previous year to £2.0m (2011: £1.6m), benefitting from improved year on year trading.

Dividend

At the Annual General Meeting on 8 June 2012 shareholders approved the capital reduction of Augean plc (the Company). Subsequent hearings in the High Court on 18 and 27 June led to the capital reduction being confirmed on 4 July. To effect the reduction the share premium account of the Company (valued at £114.9m) was cancelled, creating a special profit reserve in the Company and Group statements of financial position (page 27). Having created the necessary conditions the Board has developed a dividend policy for the Company and considered payment of a final dividend in respect of 2012. The Board has recommended a maiden dividend of 0.25p per share, payable on or after 15 June 2013 subject to shareholder approval at the AGM.

Earnings per share

Basic earnings per share ("EPS") adjusted to exclude the impact of exceptional costs were 1.72p (2011: 1.26p) and unadjusted EPS were 1.97p (2011: 1.59p). The number of shares in issue at 31 December 2012 was unchanged from 31 December 2011, at 99.7m. There were 32,823 dilutive outstanding share options at the year end (2011: nil). Adjusted diluted EPS was 1.72p and unadjusted diluted EPS was 1.97p.

Cash flow

The Group delivered Earnings before Interest, Tax, Depreciation and Amortisation ("EBITDA") of £6.3m (2011: £6.5m) and net cash generated from operations of £5.8m (2011: £4.7m). Net cash used in investing activities increased to £5.7m (2011: £4.2m), which reflect the purchase of Augean North Sea Services as well as the high temperature incinerator at East Kent, and investments in property, plant and equipment in planning and development of certain sites. Net debt increased to £6.1m (2011: £4.0m) as a result of the refinancing and as a result gearing (net debt / shareholders' equity) was increased to 13% (2011: 9%).

The capital investment 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 2012

Impairment review

Under IFRS, an annual impairment review must be performed for each cash-generating unit ("CGU") to which significant goodwill is allocated 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 and no changes have been required to the statement of financial position. 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 2012, the undrawn loan facilities available to the Group were £4.3m.

Principal risks and their mitigation

The performance of the business is linked to economic activity in the waste markets it serves, including the industrial, construction and oil & gas sectors. Fluctuations in the economy in general and these sectors in particular 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 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 waste industry and increasingly aspects of the oil and gas industry can have a material impact on activities.

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.

Environmental legislation

Regulation is a key driver of the waste market. Changes in legislation (including tax legislation with environmental goals) or its interpretation can have a significant and far reaching impact on waste management 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.

The application of the waste hierarchy to the Group's activities, 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 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. As a result, health and safety is the first priority for all directors, managers and employees across the Group. 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, with the lessons learnt from incidents fed back to local teams to avoid repeat situations.

Price risk

Price pressure remains a key feature of the waste market, where customers often have a range of technological 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. The UK is experiencing a well documented extended period of limited economic growth, with a corresponding impact on output from sectors including construction and manufacturing. This downturn has the potential to restrict the quantum of hazardous wastes available to the Group and therefore its revenues. These macro-economic conditions are mitigated in part by following a strategy of developing niche markets requiring specialist waste management capabilities, which have high barriers to entry, and also through continuing 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.

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 2014 may encourage some customers to divert volumes away from our sites. The full rate of landfill tax will rise to £72/tonne on 1 April 2013 and will reach £80/tonne on 1 April 2014. European and national legislation encourages "zero landfill" solutions for a range of waste streams, although for some hazardous wastes disposal in properly engineered and permitted landfills continues to be the most appropriate waste management solution. Once landfill tax reaches £80/tonne the direction of tax policy is not yet clear, although consultations are currently underway between government and industry groups. 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 include disposal of a range of low level irradiated wastes at its landfill sites.

The environment, employees and the community

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 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 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 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 qualified 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 2012 indicates that the Group's operations do not result in a significant impact on the local environment and general environmental performance has improved significantly over the past five years.

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 2.5% pay award for all management and staff from 1 January 2013. This represents an increase from the 2% award made in 2012 and recognises the progress that the Group has made over the past year.

Training and development activity during the year built on the progress made during 2011 and led to an investment of approximately £0.2m in training to ensure all employees had the knowledge, qualifications and skills to operate safely and compliantly within the waste management sector. The Group's Training Manager developed a competency framework for each role and this is now used in the recruitment of new employees and also as the basis of a rolling training programme.

Training in the priority area of health and safety was supported by every employee undergoing the British Safety Council's level 1 course in health & safety at work during the year and the development of online tools to allow ongoing H&S training into 2013.

Reporting of near miss incidents continued to be a key part of the health and safety programme, leading to a year on year increase in near miss reports. Over 2,200 near misses were reported during 2012 (approaching the target of one per employee per month) and at the same time there was a 25% reduction in the number of accidents causing injury 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 the seeking of planning permission to extend the life of certain sites during the year led to a high level of interaction with local communities in some areas. As in previous years the Group undertook an extensive programme of consultation in these localities to ensure that its plans were well known and understood. This included attending parish council 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 £298,000 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 near to Peterborough.

Outlook

While the general economic outlook for the wider hazardous waste sector remains subdued the Board believes that the Group is well placed to benefit from the significant investment it has undertaken over the past 24 months to deliver continued growth during the year. While traditional hazardous landfill volumes are not expected to grow during 2013, this will be offset by contributions from recently delivered strategic opportunities. Management remains focused on improving the performance of the Oil & Gas Services and Waste Network divisions and alongside the investments made these are expected to deliver continued growth to revenues, earnings per share and cash flow in this year and beyond.

Richard Allen

Interim chief executive officer and Group finance director

26 March 2013

Consolidated statement of comprehensive income

for the year ended 31 December 2012

Statements of financial position

at 31 December 2012

Statements of cash flow

For the year ended 31 December 2012

Statements of changes in shareholders' equity

for the year ended 31 December 2012

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 2012 will be dispatched to shareholders by 29 April 2013 for approval at the Annual General Meeting to be held on 6 June 2013. 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 2011 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 reportable 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 Officer (CEO) (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: Augean operates three modern hazardous and non-hazardous landfill operating sites based at East thants 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: Augean operates waste transfer sites across the UK, transporting, recovering, recycling and disposing of hazardous wastes on behalf of its customers.

Oil & Gas Services division: 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 70%/30% 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 CE. 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. The 2011 operating segmental analysis has been restated based on the segments above. Central costs for the proper governance and resources required to operate the plc board and listing have been separately reported as these are no longer allocated to individual divisions.

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

3 Earnings per share

The calculation of basic earnings per share at 31 December 2012 was based on the profit attributable to ordinary shareholders of £1,966,000 (2011: £1,582,000) and a weighted average number of ordinary shares outstanding of 99,699,414 (2011: 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.

4 Dividends

At the forthcoming Annual General Meeting, the Board will recommend that to shareholders a resolution is passed to approve payment of a dividend for the year ended 31 December 2012. This has not been included as a liability in these financial statements.

5 Operating profit for the year

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

Following the incident at the Cannock site in November 2010, the Group received £1.6m in 2011 from its insurers as full and final settlement of the cost of the clean up, asset replacement and refurbishment and any other required expenditure. The mixing plant from Cannock has been relocated to the Port Clarence site and is now fully operational. No further amounts have been received in 2012.

6.Net finance charges

7 Tax

Tax reconciliation

During the year the corporation tax rate reduced from 26% to 24% with effect from 1 April 2012. The theoretical tax rate for the financial year ended 31 December 2012 has been calculated at 24.5% with the impact of the first quarter of the year at 26% being reflected in the change in tax rate of £47,000 (2011: £17,000) shown above.

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..

IAS 12 Income taxes permits the offsetting of tax assets and liabilities within the same tax jurisdiction and the Company has the intention to do so. 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 26% to 24% effective from 1 April 2012 was substantively enacted on 26 March 2012. Since that date legislation has been enacted and this has confirmed the rate of 24% from 1 April 2012 and further reduced the tax rate to 23% as of 1 April 2013. Accordingly, deferred tax balances have been revalued to the lower rate of 23% in these accounts to the extent that timing differences are expected to reverse after this date.

Further reductions to the main rate of corporation tax are proposed, which are expected to reduce the rate by 1% per annum to 21% by 1 April 2014. However, these changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements.

The proposed reductions to the main rate of corporation tax by 2% per year to 21% by 1 April 2014 are expected to be enacted separately each year. If the deferred tax assets and liabilities of the group were all to reverse after 2014, the effect of the changes from 23% to 21% would be to further reduce the net deferred tax asset by £107,000. To the extent that the deferred tax reverses more quickly than this the impact on the net deferred tax liability will be reduced.

No deferred tax has been recognised during the year in respect of certain temporary differences 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:

The result of a detailed review of the unrecognised deferred tax assets in respect of capital allowances in excess of depreciation has resulted in elements of the previous unrecognised deferred tax asset being eliminated during the year.

8 Investment in jointly controlled entity

Terramundo Limited ('Terramundo') is a 50:50 jointly controlled entity between Augean PLC and DEC NV. Terramundo operates a ground remediation facility which uses various proven techniques to clean contaminated soils of both organic and inorganic contamination 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 2012 was £100 (2011: £100).

During the period ended 31 December 2012 the jointly controlled entity generated the following revenue and costs:

At 31 December 2012 the jointly controlled entity held net liabilities of £988,000 (2011: £952,000), of which the Group's 50% share was £494,000 (2011: £476,000). 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 three of the Group's four 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 Following the divisional restructure described in Note 2, the goodwill allocated to the Treatment division was reallocated based on the values attributable to the original businesses acquired and which division these businesses became part of. This resulted in a reallocation of £2.1m to the Waste Network division and £7.2m to the Oil and Gas Services division. The allocation of goodwill by CGU is as follows:

Following the restructuring of the Cannock site during 2011, the APCR processing capabilities, which were acquired with the Cannock operations, have been transferred to the East Northants Resource Management Facility (ENRMF). The revenues and costs of this activity are now reflected in the Landfill division's performance. The goodwill of £857,000 which arose on acquisition, reflecting the APCR capabilities, was transferred to the Land Resources division in 2011.

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, Waste Networks 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 2013 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 £12.8m (2011: £4.1m); 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 Waste Network division's cash flows are:

·; based on approved budgets and plans for 2013;

·; revenue growth over the period to 2015 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 transfer stations as well as increases in volumes through the new incinerator at East Kent. 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, improved treatment techniques and the impact of the introduction of the incinerator waste. 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 £6.9m (2011: n/a); 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 2013;

·; revenue growth over the period to 2015 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 as well as increases in volumes from trading in conjunction 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 £6.6m (2011: n/a); 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 11.0% (2011: 11.0%), which reflects management's best estimate of the current market's assessment of the weighted average cost of capital 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 Other intangible assets

11 Property, plant and equipment

Additions of £1.1m (2011: £1.2m) to freehold land and buildings during the year include £0.7m (2011: £0.2m) in respect of the development of the landfill asset at the East Northants Resource Management Facility. The additions have been made on the expectation of future economic benefits from ongoing planning and permitting development which will support the future extension of the site and also the disposal of low level waste at the facility.

There were no outstanding contractual commitments for acquisitions of property, plant or equipment at 31 December 2012 (2011: £nil).

Plant and machinery includes assets held under finance lease agreements with a carrying value at 31 December 2012 of £1,062,000 (2011: £1,357,000)

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

During 2011 the Group reclassified surplus plant and machinery at the Cannock site, with a net book value of £204,000 as assets held for sale, with a market value of £200,000. The asset is now being utilised within the Port Clarence Landfill site and is no longer held for sale. This asset has therefore been transferred back to property, plant and equipment and depreciation has been charged from the point of transfer.

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 (2011: £124,000) 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 and Company'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 £1,062,000 (2011: £1,357,000). 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.

For more information about the Group's exposure to interest rate, credit risk and liquidity risk,.

15 Provisions

The provision for restoration and after-care relates to closure and post-closure costs for all landfill sites, charged over the estimated active life of the sites. The expenditure is incurred partially on completion of the landfill sites (restoration) and in part after the closure of the landfill sites (after-care) over a period up to 60 years from the site closure dates. After-care expenditure relates to items such as monitoring, gas and leachate management and may be influenced by changes in legislation and technology. The provision is based on managements' best estimate of the annual costs associated with these activities over the 60 year period, using current costs and discounted using discount rate of 3%.

The capping provision reflects the expected costs of capping established and active landfill cells. Capping is required following the end of a cell's useful economic life and the build up of the provision is based on the rate of use of the available void space within each cell. During the year £222,000 has been provided to reflect the cost of capping the cell volumes consumed. This provision is not discounted as the costs are expected to be incurred shortly after consumption of the void, which is due to start in 2013.

During 2011, other provisions included amounts for the disposal of stocks of disused tyres which were incorporated in the engineering of new landfill cells at the East Northants Resource Management Facility (ENRMF). This resulted in the utilisation of £348,000 of the £424,000 provision, of which £200,000 has been used in the construction of new landfill cells and capitalised in line with the Group's accounting policies. The remaining tyre provision is anticipated to be utilised during the next landfill cell construction cycle. There were also releases of other provisions during the year of £1,475,000 reflects the resolution of the review of the Group's landfill tax liabilities. Following appropriate advice, including legal advice, obtained during 2011, it was established that the provisions were no longer needed and were therefore released.

16 Share capital

17 Reserves

At the Annual General Meeting on 8 June 2012, the shareholders approved the capital reduction of Augean PLC (the Company). Subsequent hearings in the High Court on 18 and 27 June led to the capital reduction being confirmed on 4 July 2012. To effect this reduction, the share premium account of the Company was cancelled creating a Special profit reserve in the Company and Group balance sheets. This reduction was transferred to retained earnings to the extent to which it cancelled existing losses. The remaining share premium was transferred to a Special profit reserve. In addition, profits of the Company which were realised prior to 4 July 2012 were transferred to the Special profit reserve.

18 Share-based payments

At 31 December 2012 outstanding awards to subscribe for ordinary shares of 10p each in the Company, granted in accordance with the rules of the Augean share option schemes and the Augean LTIP, were as follows:

Share option scheme (equity settled)

On 21 May 2011 the Group established a share option program that entitled Group's directors and senior management to purchase shares in the Company. These options were granted on similar terms to the 21 December 2009 grant, except for the exercise price.

The fair value of remaining share options has been calculated using the Black Scholes model. The assumptions used in the calculation of the fair value of the share options outstanding during the year were:

Expected volatility was determined by reviewing the historical volatility of the Company's share price since its formation by comparison to the average volatility of comparable listed companies.

The risk-free rate of return is the yield on zero coupon UK government bonds of a term equal to the expected term of the options.

The share options have a vesting period of three years but no market or non-market performance criteria attached to them (with the exception of the December 2004 grant which vested immediately). Rights under the share option scheme are usually forfeited if the employee leaves the Group of his or her own accord before the rights vest.

For options outstanding at 31 December 2012, the weighted average remaining contractual life is 6.66 years (2011: 6.92 years).

LTIP

Under the LTIP senior employees may be granted an award annually of up to 100% of basic salary. The award vests in the form of shares in the Company and is subject to the attainment of pre-determined performance conditions over a three year period. For the 2008 award which vests on 29 April 2011, participants were to receive 100% of the award if the Group's normalised pre-tax earnings for the year ended 31 December 2010 are greater than £7.1m. No award would vest unless the Group's normalised pre-tax earnings for year ended 31 December 2010 are greater than £5.6m, at which level 30% of the award would apply.

For the 2009 award which vests on 21 December 2012, participants would receive 100% of the award if the Group's normalised pre-tax earnings for the year ending 31 December 2011 were greater than £11.3m. No award would vest unless the Group's normalised pre-tax earnings for year ending 31 December 2011 was greater than £3.3m, at which level 30% of the award would apply.

For the 2012 award which vests on 11 June 2015, participants would receive 100% of the award if the Group's normalised pre-tax earnings for the year ending 31 December 2012 were greater than £2.9m. No award would vest unless the Group's normalised pre-tax earnings for the year ending 31 December 2012 were greater than £2.9m.

The performance conditions for the 2008 award, which was due to vest on 29 April 2011, were not met and therefore the options have now lapsed. The performance conditions for the 2009 award, due to vest on 21 December 2012, were not met and have now lapsed. In addition, the performance conditions for the 2012 award were not met and have now lapsed.

Rights under the LTIP scheme are usually forfeited if the employee leaves the Group of his or her own accord before the rights vest. The fair value of rights to acquire shares has been calculated based on the value of the shares on grant adjusted for future dividend streams.

During the year the Group recognised total expenses of £130,000 (2011: £84,000) related to equity-settled share-based payment transactions. No options under either the share option or LTIP schemes were exercised during the year. The 2012 share options vested during the year and are now exercisable.

19 Reconciliation of operating profit to net cash generated from operating activities

20 Business combinations

On 30 May 2012 Augean PLC acquired the controlling stake in Augean North Sea Services Limited (ANSS), purchasing 70% of its share capital from Scomi Oiltools (Europe) Limited.

The business was already operating as part of Scomi Oiltools (Europe) Limited (Scomi). The trade and assets of the business were transferred to a newly incorporated company of which Augean subsequently purchased 70% of the share capital. As a result, purchase accounting has been adopted.

The purchase transaction builds upon relationships already existing between Augean and Scomi, however the transaction did not settle any existing contractual relationships between Augean and Scomi.

ANSS provides a comprehensive waste disposal route for all North Sea Oil and Gas industry operators, specialising in management of drill cuttings and associated waste streams. It is anticipated that the acquisition will complement Augean's core waste disposal business and develop the utilisation of the Group's asset base. The total consideration for the acquisition was £2,050k, settled in cash.

During the seven month period ended 31 December 2012 ANSS contributed revenue of £3,366,000 and operating profit of £47,000 to the Group's results. Management estimates that if the acquisition had occurred on the 1 January 2012, then consolidated revenue would have been £5,525,000, and the consolidated operating profit for the period would have been £154,000. In determining these amounts, Management has assumed that the provisional fair value adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on 1January 2012.

The fair values assumed at 30 June 2012 were provisional subject to information to be provided relating to available capital allowances of the asset base of ANSS. Since the acquisition, circumstances relating to the capital allowances have been finalised resulting in the recognition of a deferred tax asset of £755,000. This has resulted in the fair value of the assets being higher than on the original calculation of goodwill at 31 May 2012. This has resulted on a gain on bargain purchase of £528,000 which has been recognised in full in the statement of comprehensive income for the year ended 31 December 2012.

Identified assets acquired and liabilities assumed

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the acquisition date.