Strategy

In October 2006 the directors announced a strategic review to encompass a review of the group’s assets and to set a clear direction for the group’s future. That review is now complete and has confirmed the directors’ belief that the sector provides significant opportunity for growth, both organically and by acquisition.

Within the landfill division, the group owns significant assets in the form of void space at its three operational sites. A full

review of the void space by an external consultancy has confirmed that the currently owned and permitted void space amounts to 8.3 million cubic metres. Moreover, following a successful application to re-designate some of the void at Port Clarence as hazardous, over 85% of the group’s void is now permitted to take hazardous waste which commands a significant price premium over non-hazardous waste in the market. Furthermore, the group currently owns a number of pieces of land adjacent to existing operations which could potentially provide significant additional void in the future. The group continues to take the necessary steps to protect and develop its interests in this area, while maximising the value of the existing void through constant pricing and operational review.

Asset development continues to be at the centre of the group’s strategy. In the context of a tightening regulatory environment, investment in facility upgrades and service enhancement is imperative. While the upgrading of treatment sites is a pre-requisite of the PPC regime, the group believes that there is a strategic benefit to the search for new technologies and their commercial application to the sector. Augean continues to seek out these opportunities.

While the rapid pace of change in the market provides scope for significant organic growth, the board continues to believe that acquisitions will play an important part in the group’s further development. The group’s acquisition strategy is complementary to its drive for organic growth, as acquisitions may bring strategic advantage either by way of location, integration of services or new technologies. The treatment sector in particular is highly fragmented and undergoing considerable change at the current time and the group continues to pursue opportunities actively in this area. However, any acquisitions must demonstrably add value to the group and as it became clear during the course of 2006 that a number of potential targets would not meet the group’s strategic requirements, the directors made the decision not to proceed with those projects. This resulted in exceptional costs being incurred of £0.2m. However, the board continues to believe that the right acquisitions at an appropriate price will deliver shareholder value.     

Our strategy is to increase the value of the business by investing in niche sectors of the UK waste market. Our activities are currently focused on the operation of hazardous waste facilities, but we are also investigating alternative, and cost-effective, methods of treating hazardous and non-hazardous waste.