Preliminary Results

27 March 2012

Augean Plc

Results for the year ended 31 December 2011

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 2011.

Financial highlights

·; Revenue including landfill tax; increase of 10% to £37.5m (2010: £34.1m)

·; Revenue excluding landfill tax; increase of 8% to £31.3m (2010: £29.0m)

·; EBITDA increased to £6.5m (2010: £5.6m)

·; Adjusted profit before tax £1.1m (2010: £0.4m)

·; Profit before tax £1.4m (2010: £0.5m)

·; Earnings per share 1.59p (2010: 0.42p)

·; Cash flow from operations £4.7m (2010: £5.8m)

·; Net debt stable at £3.968m (2010: £3.890m)

Operational highlights

·; Increased sales volumes & revenues in both operating divisions

·; Significant increase in volumes treated at remediation centres

·; Improvement to operating margins

·; Restructuring of Cannock site and transfer of assets to Port Clarence Waste Recovery Park

·; Capital expenditure focused on landfill cell engineering and asset development

·; Positive start to trading in 2012

Strategic developments

·; Divisional reorganisation completed to align activities more closely with key markets

·; Strategic opportunities entering delivery phase

o Low Level Waste ("LLW") planning permission upheld and first consignments received

o Framework agreement in place to deliver LLW from licensed nuclear sites

o Planning permission granted for mineral extraction at Cook's Hole

o Extended activities in offshore waste management

·; Group restructuring underway to enable a reduction of share capital

Commenting on the results, CEO Paul Blackler said:

"2011 was a year of considerable progress and achievement for Augean. Despite the on-going challenging macro economic conditions, the Group was able to deliver results marginally ahead of expectations. It was especially pleasing to see an improvement in operating margins, testament to an increasing focus on the pre-treatment, recycling and reuse of wastes."

"While the progress made has been reassuring, the Group is conscious of the need to position itself to best meet the needs of its customers. As a result, we successfully completed our divisional reorganisation which has now been fully implemented across the Group and we have begun to see the positive impact of these changes during the first three months of the year. Whilst the conditions across the sector are expected to remain highly competitive, we are confident that the strategic initiatives that the Group has put place, especially in relation to Low Level Waste and opportunities in the Oil & Gas Services sector, will enable the Group to drive shareholder value in the year ahead."

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 FTI Consulting, Holborn Gate, 26 Southampton Buildings, London, WC2A 1PB. For further information please call 020 7269 3113.

Chairman's statement

The year under review has been characterised by decent progress and although Ogden Nash may have once said that "progress might have been alright once, but it has gone on too long" at Augean we don't subscribe to that maxim. We have had a year of steady development, during which, despite market challenges, we achieved good positive forward momentum both in trading and strategic terms, whilst avoiding banana skins!

In 2011 in the core business we were able to build on the gains made in the later half of 2010 and improve year on year revenues and operating margins. However, market conditions remained challenging and revenue growth in the second half, while positive, was impacted slightly as underlying economic conditions curtailed waste movements from producers.

Net revenue excluding landfill tax for the year increased to £31.3m (2010: £29.0). Operating profit before exceptional costs was in line with our expectations at £1.6m (2010: £0.8m) and, following a net benefit from exceptional items, this allowed us to deliver total profit attributable to our shareholders of £1.6m (2010: £0.4m). Operating cashflows of £4.7m (2010: £5.8m) allowed continued capital investment without causing an increase in net debt, which remained consistent throughout the year.

In my 2010 statement I expressed confidence that the team and resources developed at Augean would support a return to sustainable profitability during this year and I believe that these results do represent a further positive step, but we recognise there remains a lot of work to be done.

We have also continued to focus attention on the improvement of Health & Safety and Compliance performance during the year. Accident reduction initiatives and improvements to near miss reporting have been delivered alongside rolling internal audits of compliance performance. It was particularly pleasing to note that the business delivered upper quartile performance in the Environment Agency's annual report for those waste companies under account management.

In 2012 we look forward to the next stage in the strategic evolution of the Group. Following a sustained effort we now have all necessary permissions in place to allow the disposal of Low Level Waste at our East Northants Resource Management Facility and expect to see the commercial benefits from this during the year ahead. We also have new business opportunities with our partner Scomi Oiltools in the North Sea which dovetails with our disposal capabilities and we are pursuing other opportunities to develop the treatment capabilities of the Group.

I am very excited at the potential of all of the above developments which I believe will prove to be of significant value to the Group. Add to that the minerals exploitation at Cook's Hole and it promises to be another busy year.

The team at Augean have worked with diligence and creativity to position the business for excellent value development which I am confident we have the skills required to deliver; I would like to thank them for their efforts. With stable market conditions I would expect to see a material improvement in performance in 2012.

Lastly, when I took the Chair at Augean I was of the belief that the business and the team would benefit if an industry veteran took the role. Having recruited and then worked with Jim Meredith for over a year I'm confident he will continue the progress we have begun. So with a slightly heavy heart I will be handing over the Chair to Jim at the AGM in June (although staying on the Board to continue to bang the drum for progress!)

Roger McDowell

Non-Executive Chairman

27 March 2012

Business review

Introduction

The Group experienced a return to stability in its core hazardous waste markets during 2011 and opportunities emerged to generate some growth in the core business. Whilst the market recovery was not as significant as we had hoped we were still able to deliver an increase to net revenues of 7.9% and an increase to total operating profit of £1m from 2010's results.

The Landfill division delivered improvements to operating margins through changing the mix of its activities, including a greater use of the remediation centres at Port Clarence and East Northants Resource Management Facility ("ENRMF"), winning work on large projects and absorbing the processing of incinerator ash wastes.

The Treatment division delivered stable trading in a competitive marketplace, making use of the Group's established sales infrastructure. Significant restructuring was also undertaken, with the closure of one site and an evolution in the use of several others to reflect market requirements.

The final quarter of the year also saw a reorganisation of the operating divisions, creating three units from the previous two (Landfill and Treatment). This change will be effective from January 2012 and is expected to align activities more closely with the Group's core markets and provide a platform for further growth. The new divisions are described in the Strategy section below.

The Group continued to demonstrate its ability to generate operating cash flows during the year, allowing us to fund all maintenance capex and capital projects, particularly at the landfill sites. This has not required any associated increase in net debt. The £10m banking facility with HSBC was used to support working capital needs and has subsequently been renewed for a further three year term.

The board is grateful, as ever, for the valuable contribution made by our employees during the year, particularly in demonstrating their ability to solve challenging technical issues and provide a high quality service to our customers. The Group employed an average of 206 staff (2010: 218) over the period.

As in previous years the Group continued to develop several strategic opportunities throughout 2011, all of which are expected to improve profitability and the return available from the capital employed. Significant work was undertaken by the management teams during the year to bring these opportunities into a delivery phase and we were particularly pleased to secure planning permission to dispose of Low Level Waste ("LLW") at ENRMF and begin receiving the first consignments of waste.

The hazardous waste market

Data published by the Environment Agency during 2011 on the production of hazardous waste indicated that the significant market decline seen in 2009 had stabilised, although certain sectors continued to lose volumes and total volumes to hazardous landfill declined by 8% from December 2009 to December 2010 (Source: Environment Agency; www.environmentagency.gov.uk).

The market in 2011 was characterised by a period of relative stability, with limited growth. The market remained competitive and price-sensitive, with sectors such as asbestos disposal and contaminated oils continuing to see softening of prices as capacity remained available in the market. Despite the challenging trading conditions the Group was able to grow its share in the hazardous landfill market and generate revenue and operating margin growth from treatment operations.

From a technical perspective the market has continued the previous trend 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 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. During 2011 representatives from the Group took a high profile role in the development of the Hazardous Waste NPS, directly engaging with government departments and giving evidence at the Parliamentary Select Committee inquiry.

The Strategy for Hazardous Waste Management promotes 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. In 2011 this was underpinned by the implementation in England and Wales of the Waste Framework Directive and the Hazardous Waste Hierarchy Guidance. Anticipating the direction of policy, the Augean business model, developed over the last four to five years, is strongly aligned with the Strategy and the associated guidance. The establishment of stabilisation, recovery by thermal desorption and soil treatment & recycling centres ("remediation centres") are supported by, and contribute significantly to, this critical policy initiative. The final publication of the Hazardous Waste NPS in 2012 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.

Whilst the hazardous waste market is expected to continue its evolution during 2012 once the NPS has been published, further significant legislative developments are not expected in the near term.

Strategy

The Group remains 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. Investment continued during 2011 in the infrastructure and assets required to operate in the waste management sector, based on strict criteria around the expected returns on capital invested.

Divisional reorganisation

The board reported during 2011 that reshaping of the Group's core business divisions in response to emerging market opportunities would take place during the year as we continued the alignment of key services with market needs. A Group reorganisation was undertaken during quarter 4 and from January 2012 sales and operations have been delivered through three divisions (Land Resources, Waste Networks and Oil & Gas Services), utilising the established asset platform and business infrastructure to focus on core business growth within and beyond existing business sectors. Each division is described below.

Land Resources

Within the Land Resources 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. This includes the use of the remediation centres at ENRMF and Port Clarence sites to treat and recycle materials rather than dispose directly to landfill. Land use opportunities are also being unlocked by the Group in the development of renewable energy and mineral extraction at Cook's Hole (see below), whilst delivery of LLW activities fit naturally with the existing skills and assets of the division.

Waste Network

The Waste Network division holds significant strategic value for the Group, providing a broad range of waste management solutions to our customers, supported by a national network of transfer stations. The division has the sales and operational capability to deal with a range of hazardous wastes ensuring that each is transferred to the most appropriate final disposal route, either within the Group or with third party partners. The key objective of the division is growth in sales and market share, improving profitability for the Group.

Oil & Gas Services

The Oil & Gas Services division has expertise in the treatment and disposal of various chemicals and oil-based wastes, including those generated in the offshore oil & gas sector. The division continues to focus on expanding its customer base to offer services which will allow it to fully utilise existing assets and provide thermal, biological and mechanical treatment solutions for domestic and offshore waste streams. The key objectives will be process capacity utilisation and development of technology-led waste management solutions for the evolving oil, gas and offshore markets.

Strategic opportunities

Given the focus of the Group, and the efforts to align with the regulatory framework, strategy has continued to evolve in response to new market information and emerging opportunities, aiming to expand from the core business. During 2010 four strategic growth areas were identified, namely: Low Level Waste; Energy; Offshore; and Minerals. These opportunities are now at varying stages of development and delivery, building on the existing core business, as set out below.

Following a protracted planning and legal process, the Group implemented its planning permission to dispose of LLW at its ENRMF site and commenced the receipt of consignments of waste during December 2011. This was followed by a further legal challenge to the planning permission which was heard in the Court of Appeal during January 2012, resulting in rejection of the appeal, refusal of access to further courts and confirmation that the planning permission was legally granted by the Secretary of State for Communities and Local Government.

Whilst it remains possible that an appeal could be launched in the Supreme Court, the board has taken the view that following several unsuccessful appeals against the permission the legal basis to dispose of LLW at ENRMF is now well established and commercial operations can begin at the site following successful disposal trials. During 2012 the Group will focus on developing the commercial market for LLW disposal and to do so have engaged with a range of potential customers, who we believe will benefit from the disposal route now available at ENRMF. We are also pleased to announce that Augean South Limited has been confirmed as a supplier of disposal services to Low Level Waste Repository Limited, under a framework agreement which will allow lower activity LLW to be disposed at ENRMF on behalf of existing licensed nuclear site operators. This positions the site as a key part of the infrastructure which will allow the decommissioning of redundant nuclear facilities across the UK. An agency agreement has also been signed with two specialist contractors to further develop access to the new markets. Contracted volumes of waste are expected to be received at the site throughout 2012 but particularly from quarter 2 onwards, providing the Group with a valuable revenue stream. Additional activities will be required at the site to meet the obligations set out in the environmental permit and planning consent, including ongoing monitoring, which have all been put in place. From 2012 onwards the LLW business will be operated and managed through the Land Resources division.

The opportunities anticipated from extraction of up to 3 million tonnes of minerals from the Group's Cook's Hole site in Northamptonshire took a significant step towards operational delivery during the year following confirmation of planning permission to extract minerals from the site. The Land Resources division has since undertaken a tender process and has appointed a minerals extraction partner under a long term agreement (up to 20 years) which will guarantee certain rent of £175,000 per annum plus royalty income based on volumes extracted. Full scale extraction is expected to commence during quarter 2 2012.

In the offshore arena, the Group has also continued to increase its access to these markets for treatment of hazardous wastes. We have extended our relationship with Scomi Oiltools (Europe) Ltd to provide waste management services to North Sea operators at Aberdeen and embed our position as a provider of waste recycling solutions for offshore drilling waste. The offshore markets continue to present future opportunities for the Oil & Gas division, both in disposal of waste generated during the operational phase of exploration and drilling and also in the future as offshore structures are decommissioned. These opportunities were reaffirmed by the proposals outlined in last week's Budget regarding tax relief measures for the decommissioning process.

In addition to the developments outlined above the Group is also activity pursuing other opportunities to develop its treatment capabilities and the range of services it makes available to customers. These opportunities are focused on assets which will require minimal investment and can be funded through existing financial resources.

The board expects strategic development in response to emerging markets to continue as the Group responds to changes in the waste markets and aligns 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, where capacity exists to increase debt. On 2 March 2012 the Group signed a new banking facility agreement with HSBC plc, renewing the previous agreement which was due to expire in November 2012. The new facility is based on commercial terms and covenants similar to those previously in place and will provide access to up to £10m of funding to support the capital needs of the business and the development of strategic opportunities.

2011 divisional review

Landfill division

Revenue excluding landfill tax and inter-segment sales was £14.8m (2010: £11.7m) from total landfill volumes of 340,383 tonnes (2010: 303,261 tonnes), representing a volume increase of 12% year on year. Hazardous volumes increased from the previous year to 252,477 tonnes (2010: 192,910 tonnes) whilst non-hazardous volumes fell to 87,906 tonnes (2010: 110,351 tonnes).

These apparent significant shifts in activity reflected the increasing use of the remediation centres at ENRMF and Port Clarence to provide pre-treatment solutions to hazardous wastes before landfill disposal. These centres treated remediated soils, building rubble, industrial by-products and air pollution control residue incinerator ash ("APCR" or "ash), handling a total volume of 139,138 hazardous tonnes in the year and trebling volumes from those treated in 2010 (45,145 tonnes).

We outlined in the Interim Report 2011 the movement of APCR processing activity from the Cannock site to ENRMF where the necessary resources were put in place during quarter 1. Whilst small volumes of ash were received into the Port Clarence site the vast majority of the 47,000 tonnes of ash treated by the Group were received into ENRMF. The financial impact of the movement of this waste stream from the Treatment to Landfill divisions can be seen in the segmental results shown in Note 2 of the Accounts, on page 19.

Hazardous wastes were disposed at an improved average price of £48/tonne (2010: £45/tonne) allowing the overall gross margin of the division to improve by 4% from the previous year. By contrast non-hazardous revenues fell to £17/tonne (2010: £20/tonne) reflecting the competitive nature of this market, which continues to be based on price with limited scope or need for technical solutions. Asbestos disposal prices fell to an average of £38/tonne (2010: £45/tonne) despite a 47% increase in volumes over the previous year to 54,631 tonnes. Total revenues were based on increased average prices of £40/tonne (2010: £36/tonne) following the change in mix towards remediation centres operations. We expect to sustain pricing, and therefore margins, in the medium term through offering appropriate treatment solutions to customers.

Total throughput for the division during 2011 was driven by an ability to win market share, the capacity to handle a range of wastes and a willingness to support key customers as they undertook large remediation projects. Project work included the disposal of hazardous waste from rail development projects, supporting the decommissioning of redundant gasworks and treatment of wastes from the brownfield remediation required before the development of new housing estates.

To enable the use of the landfill capacity at our three landfill sites planning permission for their operations must be regularly renewed. The renewal process for both the Thornhaugh and ENRMF sites was begun during 2011, requesting extensions to their activities until 2029 and 2026 respectively. Each renewal is expected to conclude during 2012.

Operating profit for the division before exceptional items was £3.9m (2010: £3.0m) after charging central costs and overheads.

Treatment division

Revenue for the division showed a reduction to £16.7m (2010: £18.1m) but this was driven by the transfer of ash revenues out of the Cannock site and into the Landfill division and also the closure of the loss-making Ellesmere Port site in June. After adjusting for these changes, underlying revenue increased by 4.7% from the previous year (2011: £15.6m versus 2010: £14.9m). The second half of the year was also impacted by these operational changes with H2 revenues showing a fall once the Ellesmere activities had ceased (H1: £8.8m; H2 £7.9m). A key feature of the sales activity was the growth in revenues from direct customers, rather than third party waste operators. The mix of direct to third party customers reached a 50/50 share by the end of the year.

The overall performance of the division during 2011 was split between those sites delivering positive contributions and those where work is ongoing to achieve sustainable profit delivery. The Ellesmere Port closure was triggered by underperformance over a 2 year period and no prospect of improvements in the medium term, resulting in 13 redundancies, although certain industrial services assets have been retained to support activities elsewhere in the Group. Restructuring was also undertaken at Avonmouth, leading to a small number of redundancies, delivering positive profit contributions during H2.

Activities at the transfer stations at Rochdale, Worcester, Hinckley and the newly established Port Clarence Waste Recovery Park ("PCWRP") all delivered positive contributions during the year. The Cannock site was transformed from a processing site to a transfer station following the loss of ash activities and the cost base was reduced to align it with the expected revenues available from the revised customer base. The board approved a decision during the year not to reinstate the tank farm and mixing plant at the site following the safety incident in 2010 and instead transfer the assets to PCWRP. The relevant assets were decommissioned and transported to PCWRP during quarter 4, where they will contribute to the site's growing service offering. The Cannock incident remains subject to an ongoing investigation by the Health & Safety Executive and the board remains committed to cooperate fully with this process.

The insurance claim for capital reinstatement of the tank farm and mixing plant, and the associated loss of margin following business interruption, was settled with our insurers in September, resulting in a £1.6m payment to offset the additional operating costs incurred to divert waste during the shut down and conversion of activities at Cannock. The profit performance of the division includes a £1.4m contribution from this insurance settlement.

The closure of loss-making operations and restructuring during the first half of the year allowed gross margins to improve from 40% in H1 to 45% in H2 but this was not sufficient to recover the earlier losses. The operating result was in line with the previous year at a loss of £2.3m (2010: loss £2.2m) before exceptional items and after charging central costs and overheads.

The recent reorganisation of the divisions within the business is expected to allow a keener focus on revenue growth and site utilisation, which remain the key drivers of future profitability, and also promote the changes to performance still required to deliver an acceptable level of return from the capital employed in the treatment sites.

Key Performance Indicators

The board and management teams within the Group regularly reviewed the performance of the Group and the two divisions during 2011 using a balance scorecard of key performance indicators ("KPIs"). 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).

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

(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

Financial review

Trading

Net revenue excluding landfill tax for the year ended 31 December 2011 increased by 7.9% to £31.3m (2010: £29.0m). With the inclusion of landfill tax charged to customers, on which the Group makes no margin, of £6.2m (2010: £5.1m), total Group revenue rose by 10% to £37.5m (2010: £34.1m).

Operating profit and exceptional items

Operating profit before exceptional items increased to £1.6m (2010: £0.8m) and profit before tax and exceptional items to £1.1m (2010: £0.4m), slightly ahead of revised market expectations of £1.0m. This improvement reflected consistent trading performance across the year.

Statutory operating profit benefitted from the release of a provision of £0.7m relating to landfill tax liabilities, treated as an exceptional item in the same way as during 2010. Exceptional items also included restructuring charges and project costs relating to development of strategic opportunities, totalling £0.4m (2010: £0.2m). The net benefit of £0.3m (2010: £0.2m) derived from the exceptional items increased profit before tax to £1.4m (2010: £0.6m).

Finance costs

Total finance charges reflected the payment of interest on bank debt and finance leases, totalling to £0.6m (2010: £0.4m). This also included a £0.1m (2010: £0.1m) unwinding of discounts on provisions. The comparable charge for 2010 included a credit of £0.2m following an interest receipt.

Jointly controlled entity

The Group's Terramundo joint venture with DEC NV continued to be on hold during 2011. There was no trading during the year and as a result Terramundo delivered a small loss of £0.03m (2010: £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 £0.1m during the year in respect of 2010 liabilities. A deferred tax asset of £0.9m (2010: £0.004m) 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 £0.5m (2010: £0.004m). This recognition led to a corporation tax credit of £0.2m in the income statement (2010: charge £0.1m).

Profit for the year

The total profit attributable to equity shareholders increased by £1.2m from the previous year to £1.6m (2010: £0.4m), benefitting from improved year on year trading and also the positive impact of exceptional items and the tax credit.

Dividend

The board does not recommend the payment of a dividend for the year ended 31 December 2011. The board announced during 2011 that it had begun a reorganisation of the Group, including striking off dormant subsidiaries and reallocating investment balances, which would ultimately lead to a reduction of capital through the cancellation of the share premium account. This exercise is expected to complete during 2012 and a resolution recommending the reduction of capital has been included in the annual general meeting notice, which will be sent to shareholders during April 2012.

Earnings per share

Basic earnings per share ("EPS") adjusted to exclude the impact of exceptional costs were 1.26p (2010: 0.24p) and unadjusted EPS were 1.59p (2010: 0.42p). The number of shares in issue at 31 December 2011 was unchanged from 31 December 2010, 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 £6.5m (2010: £5.6m) and net cash generated from operations of £4.7m (2010: £5.8m). Net cash used in investing activities increased to £4.2m (2010: £3.4m), which reflect purchases of property, plant and equipment as the Group invested in processing plant at its Port Clarence Waste Recovery Park, three new landfill cells for disposal of hazardous and non-hazardous waste and continued investment in planning and development of certain sites. Net debt was in line with the previous year at £4.0m (2010: £3.9m) and as a result gearing (net debt / shareholders' equity) was unchanged at 9% (2010: 9%). When adjusted for cash due to be collected in December 2011 but not received until January 2012 adjusted net debt fell to £3.4m.

Impairment review

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 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 2011, the undrawn loan facilities available to the Group were £6.7m.

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 and 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.

The Group uses a range of resources to manage and mitigate against its risks, including the adoption of a broad range of internal controls and regularly reviews the risks faced. The risks noted here are the same as those notified in the 2010 Report but this position is kept under continuous review.

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 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 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 expertise, by working to well established policies and procedures, 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

As acknowledged earlier in this review, 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.

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.

Input prices

The Group is subject to the same inflationary pressures as other businesses with the potential impact on local operating costs, transportation and the viability of certain third party waste disposal routes. Any cost increases which could restrict the movement of wastes from producers could subsequently impact revenue streams. This position is closely monitored by management and feeds into decisions around pricing and disposal.

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 £64/tonne on 1 April 2012 and existing landfill tax exemption certificates for contaminated soils will no longer be valid. Landfill tax will 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 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 regulation are two of the top three business priorities (profit performance being the third). 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 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 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 during the year have continued to deliver a high quality service to customers. In recognition of their commitment and efforts the board removed the pay freeze imposed in 2008 during the most challenging economic conditions and awarded a 2% increase to non-management staff from April 2011. The board has also approved a 2% pay increase for all staff from January 2012.

Training and development activity continued throughout the year, equipping employees with the knowledge and skills to operate safely and compliantly within the waste management sector. The Group appointed a Training Manager and undertook a review of the skills matrix required to fully support the Group's activities. Recruitment focused on establishing a workforce with a range of technical qualifications in the fields of chemistry, engineering, project management and general operations.

The board has always regarded the health & safety of employees and all those who come into contact with its operations as a key priority and in 2011 that undertaking was reinforced with safety performance clearly stated as the number one priority for the Group. The Group technical department was strengthened with the recruitment of managers with safety and compliance expertise and ongoing training was undertaken to ensure that all staff have the necessary skills and knowledge to undertake the sometimes difficult work required to safely manage hazardous waste. In addition, safety campaigns and toolbox talks were refreshed each month to highlight key risks.

There was particular focus during the year on the reporting of near miss incidents as part of encouraging all staff to be activity involved in the identification and mitigation of safety hazards. On average each member of staff reported a near miss every 2 months during 2011 and, whilst a good start to the initiative, more needs to done during 2012 when the expected profile will be one report per person per month.

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. 2011 was no exception and the Group invested significant time and resources to explain its plans, particularly for the disposal of Low Level Waste at ENRMF. The Group recognised the concerns raised by local residents around the site and undertook an extensive programme of consultation, including visiting numerous parish council meetings and hosting open days at the site. The board remains committed to maintaining this dialogue in the future as the Group develops its plans for the ENRMF site and at all other locations where changes to business activities may be required.

The Group continued to contribute to the communities around its landfill site through the Landfill Tax Credit Scheme. A total of £367,000 was contributed through this scheme during the year. Donations were also made to local charities and sports clubs, including the Underground Youth Club at Kings Cliffe and the Cannock Chase community Centre near to the Cannock site.

Outlook

As set out in the pre-close trading update on 25 January, the board approaches the year ahead with some optimism. There has been a positive start to trading in 2012, particularly in the Land Resources division. Risks to volumes and revenues may still materialise if general economic conditions worsen in the UK, but the recent changes to the Group are expected to provide some resilience.

The Board's confidence in the core business remains unchanged and we expect to deliver profit before tax of £1.5m in the year. Trading in Low Level Waste is now active and forecasts suggest that new contracts will contribute an additional £1m, with potential for future increases from new volumes, whilst other strategic opportunities will deliver £0.2m. The board has therefore raised its forecast for profit before tax to a total of £2.7m and looks forward to generating higher levels value for shareholders.

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2011

Consolidated Statement of Financial Position

at 31 December 2011

Consolidated Statement of Cash Flows

for the year ended 31 December 2011

Statement of Changes in Shareholders' Equity

for the year ended 31 December 2011

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 2011 will be dispatched to shareholders by 27 April 2012 for approval at the Annual General Meeting to be held on 8 June 2012. 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 2010 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 Segmental information

The Group has 2 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, management structure and its system of internal financial reporting are based primarily on these operating divisions. For each of the operating divisions, the Group's Chief Executive (CE) (the chief operating decision maker) reviews internal management reports on at least a monthly basis. The following summary describes the operations of each of the Group's reportable segments:

·; Landfill division - Augean operates three modern hazardous and non-hazardous landfill operating sites based at East Northants Resource Management Facility (ENRMF), Thornhaugh in Northamptonshire and Port Clarence on Teesside.

·; Treatment division - Augean operates seven waste treatment sites across the UK. Activities include waste recovery, recycling, transfer activities and treatment prior to final disposal.

Information regarding the results of each reportable segment is included below. Performance is measured based on the segment profit before tax and exceptionals, 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 industries.

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2 Segmental information continued

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

3 Earningsper share

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

5 Analysis of changes in net debt