Shanks delivers mixed performance

Shanks Group, the waste management group, has said that while its Solid Waste business is suffering from challenging market conditions, the Organics, UK Municipal and Hazardous Waste divisions have performed well since April 1st.

In Solid Waste, underlying market conditions have remained challenging, particularly in the Netherlands with volumes and prices continuing on a downward trend. Recyclate prices have also weakened slightly during the period, the firm said.

The business has recently implemented a new management structure for the Netherlands and Belgium, which is more closely aligned with the core activities. The Solid Waste businesses in Netherlands and Belgium have been integrated, with the eight Dutch Solid Waste businesses consolidated into three regions. Work has also started on implementing a shared services model across the Benelux businesses.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

In the Netherlands Hazardous Waste business, volumes and prices have held up well compared with the prior year and the pipeline of future potential orders remains strong. The business will now operate as a standalone business unit, reflecting its contirubtion to profits.

In Organics, the Canadian facilities are operating at good levels and the Amsterdam facility, which is the largest wet AD facility in Europe, is generating record levels of electricity.

In UK Municipal, the actions taken to improve performance continue to benefit this business with margins from the operational contracts in the period in excess of 10%. For the full year the company expects the margins to be 9.0% to 10%. All other projects, either under construction or in the bidding process, are progressing to schedule.

Shanks remains on track to deliver the targeted returns (12-15% post tax return on original invested capital) for the £100m investment programme and is also making progress with the second (£150m) phase of the programme, which it expects to achieve the same targeted returns.

Peter Dilnot, Group Chief Executive of Shanks, said: "While market conditions continue to be challenging, particularly in our Solid Waste businesses, our Organics, UK Municipal and Hazardous Waste businesses are performing well.

"We remain focused on taking the necessary actions to offset these headwinds through delivering returns from our strategic investment programme and driving operational improvements across the group. We have reorganised the business to align with our core activities and deliver synergies. In parallel, we are accelerating actions on improving productivity and minimising back office costs.

"Assuming market conditions do not deteriorate further, we expect to deliver a robust performance this year and strong growth once market conditions improve. Before currency translation we anticipate underlying trading for 2012/13 to be broadly in line with our expectations with the benefits of the cost saving programmes significantly weighted to the second half.

"Although the current weakness of the euro will impact the translation of the results into sterling there is no impact on the underlying business."

The balance sheet remains strong and the ratio of core net debt to earnings before interest, tax, depreciation and amortisation at June 30th was 2.0 times.

NR