Augean said yesterday its Aberdeen-based North Sea services subsidiary would fall short of previous management expectations this year.
But the waste management group also said it was confident about the outlook for the business unit in 2017 and beyond.
Stewart Davies, the West Yorkshire company’s chief executive, told the Press and Journal the operation was emerging from its spell of “bumping along at the bottom” in the oil and gas cycle downturn.
After a difficult first half, there were strong signs of a pick-up in activity amid efforts to diversify the business, he added.
Mr Davies said: “We are in a year of significant setbacks, in terms of both revenue and profit, due to the impact of the slow-off in exploration activity.”
Augean North Sea Services (ANSS) was successfully diversifying from exploration drilling waste services into areas less impacted by reduced oil prices, he said.
Earlier this year, ANSS invested about £500,0000 in a new site in Great Yarmouth to service a production and onshore waste management contract as it sought new revenue streams.
ANSS operated in the red during the first six months of 2016, Operating losses slid to £200,000 from £1million a year earlier while earnings before interest, taxes, depreciation and amortisation plunged by 89% to £100,000.
Augean said exploration drilling services accounted for 42% of the business unit’s total revenue, compared with 64% a year earlier.
ANSS, which employs 105 people has also undergone a cost reduction programme – shaving £300,000 off annual overheads.
First half pre-tax profits across the group fell to £1.35million, from £2.94million previously, although Augean highlighted a 1% rise to £3.1million after stripping out one-off items.
Mr Davies said: “The group is well-placed to continue to take advantage of growth opportunities and to deliver profit growth for 2016.
“Accordingly, the board remains confident of delivering full year financial results in line with market expectations.”
Augean said ongoing growth in revenue streams from term contracts relating to activities other than exploration drilling waste services and “the reputation of the business in the market and its commercial pipeline” would lead to increased profitability at ANSS in the second half of 2016.
“It is now considered that the ANSS business unit will fall short of previous management expectations for the 2016 financial year, but the group is confident in the outlook for the business in 2017 and beyond,” the firm added.
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