Augean sees good start to 2017 despite challenging conditions

The Augean North Sea Services division traded strongly in the second half

The Wetherby-based firm said that despite some challenging market conditions in 2016, it won new waste management contracts with top tier customers that will diversify its revenue streams.

Augean said its underlying pre-tax profit for 2016 is expected to be in line with market expectations.

The group said it generated strong net operating cash flows during 2016 and as at December 31, net debt was £10.8m which is £2.3m better than expected.

The group's CEO Stewart Davies said: "In view of the opportunities ahead, the board remains confident in the group's delivery of further sustainable growth, in line with our strategy."

The group reported a strong performance at its Energy & Construction division, with further growth in Air Pollution Control Residue (APCR) volumes. Augean's sites saw a smaller than expected reduction in the volume of construction soils following the unusually high level of 2015.

The division reported a significant increase in APCR volumes, underpinned by a number of contract wins in the first half, which has continued through the second half.

The Radioactive Waste Services division said its performance is in line with expectations, but it has been hit by a sharp reduction in volumes from UK nuclear decommissioning.

Augean said its from Industry & Infrastructure division put in a strong performance and produced a record profit. Colt Industrial Services, which was bought in May 2016, had a slower than anticipated start although there are positive signs of an improved performance and a growing sales pipeline

The Augean Integrated Services division saw further success in winning additional Total Waste Management contracts with top-tier customers, typically with terms of three to five years. Strong top-line growth of over 35 per cent was achieved in 2016 and the division said it has an encouraging pipeline of opportunities for 2017.

However The East Kent High Temperature Incinerator did not achieve breakeven in 2016 although the operational improvement programme is expected to ensure increased levels of plant availability.

The Augean North Sea Services ("ANSS") division traded strongly in the second half after a loss-making first half of 2016.

The group said that ANSS is continuing to diversify, with additional contract wins helping to offset reduced market activity in its drilling waste management business.

Augean said its investment at Port of Dundee is attracting substantial interest from the North Sea decommissioning market for ANSS to undertake onshore waste management.

Analyst Jo Reedman at N+1 Singer said: "Augean has confirmed that 2016 underlying pre-tax profit was in line with consensus market expectations of £7.1m.

"Meanwhile year end net debt was £2.3m better than expected at £10.8m. This represents strong year on year growth, albeit below our previous top of the range pre-tax profit forecast of £7.5m due to a slower than expected start from the recent acquisition, Colt."

N+1 Singer has reduced its 2016 pre-tax profit forecast by 5 per cent to £7.1m in line with consensus, while also reflecting the better than expected net debt position.

"Our 2017 PBT forecast is unchanged, as lower assumptions for Colt have net off against stronger than expected momentum from Energy & Construction," said Ms Reedman.

"Augean has had an encouraging start to 2017, with good momentum across its portfolio of businesses. We remain positive on prospects for the group, which we forecast to continue to deliver double digit earnings growth, yet trades on single digit multiples."

Augean said its preliminary results for the year to December 31 are expected to be announced on March 20.