Companies: AUG   

Augean, the leading manager of hazardous waste named after the stables of Greek mythology, has warned on 2006 profits, though the longer-term prognosis is positive.

In a trading update, the group admitted that total hazardous waste landfill volumes for calendar 2006 would be lower than expected, prompting a downgrade in forecast 2006 ‘adjusted’ pre-tax profits from £5.5m to £3.5m and pulling estimated earnings back from 5.64p to 5.07p a share. For 2007, the numbers were culled from £7.6m to £6m, reducing the earnings estimate from 7.76p to 6.08p a share.

This setback – not the first hiccup from the company – appears to be more about timing issues than anything fundamental, and prospects are underpinned by developments in the market. Augean insists stricter rules defining hazardous waste are to be enforced by the Environment Agency (EA) from 1 November and the EA also plans to get tough with regard to ‘sham treatment’ – the dilution of hazardous waste. Augean claims to be talking to major waste management operators and producers to take burgeoning volumes to its sites, though the real benefits won’t be felt until 2007.

‘Conscious of the impact of the slower rate of growth on shareholder value’, the board is also reviewing strategic options to deliver some shareholder value, with the share price having fallen from highs of around 270p, and with half-time losses having come in at £3.7m on £13.9m turnover.

We still like this story long-term, but we are unnerved by the group's inability to forecast accurately and with sufficient caveats. Reduce.

Augean	AIM	£47.48m	72.50p	1.50p
Click here for interactive charting
Other company articles:
Stable growth at Augean			14/04/2008
How to profit from red tape			09/08/2007
Goals profits from beautiful game			06/11/2006
Augean			24/10/2006
Stockpicking with the experts			08/08/2006