Augean – really looking forward to next Monday’s AGM statement

Augean is one of the few companies that has been very much open for business over the last few months, and the imminent AGM is likely to see a bullish trading statement, writes Mark Watson-Mitchell. 

The Augean Stables were described in the Greek myth of the ‘Labours of Hercules’.

It is said that the stables, which belonged to King Augeas, housed a large herd of some 3,000 oxen cattle and had not been cleaned for years.

Hercules was ordered to clean them out. He did so by diverting the course of two rivers, one of them being the River Alpheus, so that they flowed through the stables. Hercules, it is claimed, cleaned up the stables in just one day.

However, the AIM quoted Augean (LON:AUG) is about a lot more than going through the motions.

It is one of the few quoted companies that has been very open for business over the last few months.

It is a specialist waste and resource management group serving the hazardous waste management sector, the oil and gas industry and nuclear and radioactives sector, operating at locations across the UK from Avonmouth to Shetland.

The group provides a wide range of services through its treatment, transfer, industrial services, landfill disposal, recovery and recycling capability.

It also has a subsidiary that develops innovative solutions to manage all waste streams derived from North Sea exploration, production and decommissioning activities.

The group specialises in managing the UK’s more difficult to handle wastes and it has over 40% of the country’s hazardous landfill capacity. It is strategically positioned to provide strong commercial and compliance-led solutions in complex and legislation driven markets.

Next Monday the group will be holding its AGM for the 2019 December year-end results.

Those figures were impressive, having shown an increase in revenues from £79.7m in 2018 to £107.1m, with adjusted pre-tax profits leaping from £11.4m to £19.2m and earnings per share almost doubling from 8.5p to 15.2p.

For the current year research analysts are estimating around £118m in revenue and £22.6m pre-tax, worth 17.6p in earnings per share.

Already they are going for a further advance next year to £128m sales, £26.7m profits and 23.5p in earnings per share.

There are 104.5m shares in issue, of which Harwood Capital is the biggest holder (25.9%). One of the company’s directors, Christopher Mills, is a Partner and Chief Investment Officer of Harwood Capital LLP.

Other institutional holders include Canaccord Genuity (10.66%), Schroder Investments (8.73%), Gresham House Strategic (6.97%), Close Asset (6.74%), Sparkasse Bank Malta (3.89%), Artemis Investment (3.76%), FIL Investment (3.58%), Killik (3.17%) and Unicorn Asset (3.05%).

The imminent AGM is very likely to see a bullish trading statement concerning the way it has coped with Covid-19 hassles and just how it sees the current and next year’s trading potential.

In my view these shares at 185p, which advanced 3p yesterday, are undervalued, trading on 12 times historic and a mere 9 times current year earnings. A prospective ratio of just 8 times is far too cheap.

The market average price earnings ratio is 16 times.

I see the shares now ready to jump up to break my previous target price, which it had previously done in January this year when it topped out at 225p.

If we go for just 10 times prospective earnings that would be 235p a share, which could be easily achieved in 2021.

Profile 31.10.19 @ 158.5p set an end 2020 Target Price of 200p.