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The strategy of the Group set out in March 2014 is focused on growing shareholder value by developing sustainable market positions. Augean builds competitive advantage by working with customers to provide solutions whereby Augean delivers specialist services focused on hazardous waste. The three core elements of the strategy are described below.
Develop sustainable market positions Augean is well positioned in attractive markets, both sectoral and regional, where we have expertise and assets, including treatment technologies that differentiate our service and reinforce barriers to entry. Understanding these markets enables us to progressively develop the capabilities required to maintain and build our position, often against the background of changing environmental regulation or client requirements. These capabilities require timely investments that are anticipated through inclusion in the business planning process.
Progressively moving more of the Group’s revenues from ‘spot’ or short term contracts to long term contracts and frameworks is vital to improving the forward visibility of the order book. Growing the proportion of our revenues that come from service offerings to our hazardous waste customers is driving further profitable revenue growth. During 2015 we have built new relationships with customers and 95% of our top 20 customers (by sales revenue) are now serviced through a formalised agreement, either in the form of a contract or other framework agreement. This compares to 80% in 2014. With these customers representing 47% of total Group sales revenues for the year (2014: 50%), the transition to a contract-led business model continues and is evident in all of our business units. Grow through client-focused solutions Instilling a culture of understanding our clients’ needs in order to develop solutions for them, by leveraging the knowledge of sector experts, has been identified as a fundamentally important focus for the Group. Bringing our hazardous and radioactive waste management capability together with expertise in offering associated support services, we can target the critical but non-core needs of clients requiring specialist waste management. Selling and delivering one complete Augean capability brings consequent benefits to the client of working with a uniquely capable partner and to the Group of accessing its share of value created through this longer term, more integrated relationship with customers.
Grow shareholder value The Group is well positioned to identify potential corporate investments associated with its key market sectors that would accelerate the strategy and provide clear operational and market synergies. Any such investments, whether organic or potential acquisitions, are undertaken to grow the asset base of the Group and provide superior returns for shareholders. A total of £7.5m was spent on capital investment in 2015 (2014: £6.9m). The return on capital employed of the Group, from continuing operations and before exceptional items, was 11.4% for the year (2014: 10.7%) from an increased total asset base, which is consistent with this strategy.