Augean issues profits warning as recession cuts into its earnings

The Wetherby-based group said profts for the year ending December 31 would be significantly below expectations and said it had also been hit in the first two weeks of January.

It said, however, that it had a strong balance sheet and that it anticpated a boost to its trading as the economy strengthened.

Last year the firm spurned a takeover approach from Irish investment company One51 and raised 13m through a share placing.

Shares in Augean, which is keen to enter lucrative new markets such as waste from nuclear decommissioning and the oil, gas and drilling markets, fell 1.5p to close at 36p following its trading update.

The company said: "As a consequence of the challenging economic conditions, the board reported in September that trading would continue to be extremely difficult in the short term.

"These conditions extended into the final quarter and as a consequence, the profits for the year ending 31 December 2009 are likely to be significantly below the Board's previous expectations.

"The outlook for the New Year remains challenging and the severe weather conditions experienced in the first two weeks of the year have impacted on our operations."

Augean also said its landfill division had been affected by the "difficult" market conditions and the bad weather last month and warned that a decision on its planning application for a waste site could be affected by the General Election.

Land remediation and construction is showing "little sign of recovery" in the short term, it added, citing its falling volume of hazardous landfill for the year of 196,000 tonnes, compared to 324,000 tonnes in 2008.

Analyst Andy Murphy of Singer Capital Markets adjusted forecasts for Augean's profit before tax from 2m to 1.3m, implying a drop in

earnings per share from 1.9p to 1.2p. It revised down its profit estimate from 3.2m to 2.8m, with an earnings per share drop from 2.2p to 2p.

Its report went on: "The weak economic conditions as reported in September did not pick up in November and December and demand has been further hampered by the adverse weather conditions experienced in December and January."

Augean also said it had brought in a new business model at the Cannock plant, treatment division, and it had resolved "process development issues" there.

Its asset development projects have been completed and the Indirect Thermal Desorption (ITD) facility has moved to 24 hour production. Sales teams are now working to add more clients, it added, with "good progress" being made on the gasification project. An update is expected to be when the annual results are announced in March.

The company is applying for permission to take low-level radioactive waste at its East Northamptonshire facility, which could open the doors to a multi-million pound clean-up.

The development hinges on winning planning consent from Northampton County Council and permission from the Environment Agency. Augean had hoped to win planning permission last year but the issue has not been resolved.

It has planned a site visit and presentation to the council's planning committee.

"The timing of any decision is at this stage uncertain with a General Election due, although your board is doing all it can to ensure a positive outcome for shareholders," its statement added.

It expects to provide more on this, and to provide a "positive update" on negotiations with HM Revenue & Customers over a refund of landfill tax, in March. It was well-placed to capitalise on market opportunities, it added.

Nuclear decommissioning programme offers prospects

Augean provides landfill for hazardous waste and treats the waste

before it goes underground.

Plans to dismantle Britain's ageing nuclear power stations could provide a much-needed boost for the Wetherby-based firm, which aims to win a slice of the decommissioning programme.

The company was formed as an acquisition vehicle to buy and build businesses in the UK waste sector in August 2004. It raised a total of 2m through a listing on the London Stock Exchange's Alternative Investment Market.

Four years later it raised 100m through a placing to buy Atlantic Waste Holdings and Zero Waste Holdings.

In 2005 it opened its headquarters at Wetherby in West Yorkshire, and in August that year bought Proactive Waste Solutions, a hazardous waste treatment and transfer business based at Cannock.

By 2006 it had restructured to establish a treatment and landfill division.

The group has since continued on the acquisition trail

In October last year it posted underlying pre-tax profits of 1m in the six months to June 30 2009, down from 1.2m for the same period in

2008, while operating profits were 1.5m against 2.3m last time.