Final Results

Shanks Group PLC 30 May 2001 Company Announcement 30 May 2001 Shanks Group plc - Preliminary Results * Group grew considerably due to Netherlands acquisition * Profit Before Tax, Exceptional : £45.1 : UP 20% from £37.5m Items and Goodwill Amortisation * Turnover : £502m : UP 60% from £314m * Earnings Per Share (before : 12.8p : UP 11% from 11.5p Goodwill Amortisation) * Final Dividend proposed : 3.7p : UP 6% from 3.5p * Further progress is expected in current year as a whole Announcing the Preliminary Results for 2000/2001 Group Chairman Mr G H Waddell made the following statement: The Group grew considerably in the year to 31 March 2001, mainly as a result of the major Netherlands acquisition completed on the last day of the prior year. Headline profits, before taxation, exceptional items and goodwill amortisation increased by £7.6m to a record £45.1m (1999/2000 : £37.5m), an improvement of 20%. Group turnover rose by 60% to £502m, half of which is now derived from the Benelux. The strong debut performance from the Dutch acquisition was a major success. The UK operations had a mixed year with disappointing results in hazardous waste, Scotland and the North more than offsetting good performanceselsewhere. Belgium did well to improve its trading profits from the prior year's elevated level. The Group's tax rate on profits before goodwill amortisation reduced to 34% from 36%. Profit after tax was £20.5m after goodwill amortisation of £9.4m (1999/2000 : £22.7m and £1.4m respectively). Earnings per share before goodwill amortisation increased by 11% to 12.8 pence (1999/2000 : 11.5 pence) on the greater number of shares in issue. Your Board recommends a final dividend of 3.7 pence per share (1999/2000 : 3.5 pence per share). If approved by shareholders, aggregate dividends for the year will be 5.55 pence per share, an increase of 6%. The Group's financial position remains strong with earnings before interest, taxation, depreciation and amortisation (EBITDA) rising to £106m (1999/2000 : £73m). Net debt has increased to £302m from £273m reflecting the continuing investment in tuck-in acquisitions and major capital projects to enhance long term shareholder value. Interest expense increased from £5.1m to £18.6m but interest cover was a satisfactory 3.5 times. DIVISIONAL REVIEW United Kingdom UK trading profit fell by £1.7m to £30.7m (1999/2000 : £32.4m) as a result of difficult trading conditions in certain markets. It has been a challenging year for Chemical Services with falling volumes and prices coupled with significant cost increases on natural gas and other consumables. Also, no meat and bone meal (MBM) material was received in the first quarter. However, in July 2000, the original MBM processing contract was extended until March 2002. The overseas incineration business remained steady. Faced with these conditions, a cost saving programme was implemented. Waste Services southern operations performed well with higher volumes and prices bolstering landfill profits. However, sludge to land operations were adversely affected by the bad weather and the foot and mouth crisis towards the end of the year. Recycling losses were eliminated and power benefited from new generating capacity. In contrast, lower landfill volumes, particularly contaminated spoil, were experienced in the North and Scotland. Belgium Trading profits from Belgian activities increased by £0.1m to £14.7m (1999/2000 : £14.6m) despite a 5% adverse currency movement. This is a good result in comparison with the prior year which benefited from temporarily enhanced volumes, as a result of various health concerns over food in Belgium. The De Paepe demolition and recycling business, which was acquired in May 2000 for £9m, produced trading profits of £0.8m. The industrial cleaning business remained difficult, but the recycling and landfill operations performed well. Netherlands The first year Dutch trading profits of £24.1m were better than expected. All eight companies showed a material improvement in performance over the prior year. The original acquisition price of £210m represents a six times multiple of first year EBITDA, which compares favourably with similar industry transactions. The solid waste activities traded strongly as a result of the over threefold increase in Dutch landfill tax in January 2000. The computer recycling operation, Flection International, had an excellent year. The hazardous waste ATM division, has performed satisfactorily and its principal site at Moerdijk is currently being repermitted. The Group still retains an indemnity against costs incurred relating to certain events which occurred under prior ownership. Other Central Services costs rose by £0.6m to £3.8m (1999/2000 : £3.2m), mainly due to tendering costs for local authority contracts. Operating exceptional costs of £0.8m were incurred as the Group restructured UK operations. An exceptional non-operating profit of £0.7m arose in Belgium on the disposal of a joint venture interest. DEVELOPMENTS United Kingdom Preferred bidder status has been granted for the Argyll & Bute 25 year municipal contract. A replacement landfill site will open in Aberdeen during the autumn. However, a £2.5m revenue waste by rail contract was lost in April 2001. The £20m investment programme for further electricity generating stations is progressing. Commissioning of the new £16m MBM plant is expected to start this summer, the full benefit of which will be seen in the 2002/3 year. Benelux The three Dutch tuck-in acquisitions made during the year for an aggregate £10m will supplement the organic growth of the solid waste businesses. In Belgium, the De Paepe acquisition will provide a base to expand the Group's presence in Flanders. DIRECTORATE I am pleased to welcome Mr P Delaunois, a Belgian national, who has today been appointed to the Board as a non-executive director. He was until recently Chief Executive of Cockerill Sambre, the Belgian steel maker, and holds a number of other non-executive posts. He is familiar with the waste management industry and I am confident he will make a significant contribution to the conduct of the affairs of the Group. OUTLOOK The Group now has a substantial presence in continental Europe and will continue to benefit from this geographic spread, and in time, from the adoption in the UK of practices similar to those already in place in the Netherlands. The Group is confident of progress in the current year as a whole and expects a more even performance between the two halves. G H Waddell CHAIRMAN Note: Copies of the Annual Report and Accounts for Shanks Group plc will be posted to shareholders prior to the Annual General Meeting on 26 July 2001 and will be available to the public from the company, on request. Subject to approval at the AGM, the proposed final dividend of 3.7 pence per share will be paid on 6 August 2001 to shareholders on the register at close of business on 13 July 2001. For further information contact: Gordon Waddell; Chairman, Shanks Group plc Michael Averill; Group Chief Executive David Downes; Group Finance Director or John Shaughnessy; Group Head of External Relations * On 30 May 2001, telephone: 020 7678 8000 * Thereafter, telephone: 01628 524523 * www.shanks.co.uk Consolidated Profit and Loss Account Year ended 31 March 2001 2000/2001 1999/2000 Note Continuing Acquisitions Total Continuing Operations Operations £m £m £m £m Turnover: 492.9 16.0 508.9 320.6 Group and share of joint ventures Less: share (6.5) - (6.5) (6.1) of turnover of joint ventures ______ ______ ______ ______ Group 2 486.4 16.0 502.4 314.5 turnover Cost of sales (382.1) (13.0) (395.1) (243.9) ______ ______ ______ ______ Gross profit 104.3 3.0 107.3 70.6 ______ ______ ______ ______ Group 63.3 1.3 64.6 43.0 operating profit before exceptional items and goodwill amortisation Exceptional 3 (0.8) - (0.8) (0.5) costs Goodwill (8.8) (0.6) (9.4) (1.4) amortisation ______ ______ ______ ______ Group 53.7 0.7 54.4 41.1 operating profit Share of 1.1 - 1.1 0.8 operating profit of joint ventures ______ ______ ______ ______ Total 2 54.8 0.7 55.5 41.9 operating profit Exceptional 3 0.7 - 0.7 0.5 profit on disposal of operations ______ ______ ______ ______ Profit before 55.5 0.7 56.2 42.4 finance charges and taxation ______ ______ Finance 4 (18.6) (5.1) charges - interest Finance 5 (2.0) (1.2) charges - other ______ ______ Profit on 35.6 36.1 ordinary activities before taxation Taxation 6 (15.1) (13.4) ______ ______ Profit on 20.5 22.7 ordinary activities after taxation Equity - (0.1) minority interests ______ ______ Profit for 20.5 22.6 the period Equity 7 (12.9) (12.2) dividends paid and proposed ______ ______ Retained 7.6 10.4 profit transferred to reserves ______ ______ Earnings per share - basic 8 8.8p 10.8p - adjusted 8 12.8p 11.5p basic before goodwill amortisation - diluted 8 8.6p 10.7p Dividends per 7 5.55p 5.25p share Consolidated Balance Sheet At 31 March 2001 Note 2001 2000 £m £m £m £m Fixed assets Intangible assets 185.9 173.8 Tangible assets 289.4 271.1 Investments 0.9 0.3 Investments in joint ventures: Share of gross assets 12.8 12.9 Share of gross (9.3) (10.7) liabilities ______ ______ 3.5 2.2 Loans to joint ventures 3.8 4.0 ______ ______ Total investment in 7.3 6.2 joint ventures ______ ______ 483.5 451.4 Current assets Stocks 6.3 4.4 Debtors 145.8 122.8 Cash at bank and in 2.2 9.3 hand ______ ______ 154.3 136.5 ______ ______ Creditors: amounts falling due within one year Borrowings (31.5) (14.3) Other creditors (131.0) (112.1) ______ ______ (162.5) (126.4) ______ ______ Net current (8.2) 10.1 (liabilities) assets ______ ______ Total assets less 475.3 461.5 current liabilities Creditors: amounts falling due after more than one year Borrowings (272.5) (267.8) Other creditors (0.3) (1.1) ______ ______ (272.8) (268.9) Provisions for 10 (50.1) (50.1) liabilities and charges ______ ______ Net assets 152.4 142.5 ______ ______ Capital and reserves Called up share capital 23.3 23.2 Share premium account 92.3 91.7 Profit and loss account 36.5 27.3 ______ ______ Equity shareholders' 152.1 142.2 funds Equity minority 0.3 0.3 interests ______ ______ Total equity 152.4 142.5 ______ ______ Consolidated Cash Flow Statement Year ended 31 March 2001 Note 2001 2000 £m £m £m £m Net cash flow from 11(a) 96.3 63.0 operating activities Returns from investments and servicing of finance Interest paid (15.5) (5.4) Interest received 0.2 0.3 Finance costs incurred 11(d) - (1.8) when raising debt ______ ______ Net cash flow from (15.3) (6.9) returns on investments and servicing of finance Tax paid (16.2) (15.0) Capital expenditure and financial investment Purchase of tangible (47.1) (33.1) fixed assets Sale of tangible assets 3.2 2.9 ______ ______ Net cash flow from (43.9) (30.2) capital expenditure and financial investment Acquisitions and disposals Purchase of subsidiary 11(b) (27.1) (229.5) undertakings and businesses Cash (overdrafts) 1.7 (1.2) acquired with purchase of subsidiary undertakings and businesses Purchase of and (0.8) (2.5) advances to investments and joint ventures Sale of subsidiaries 11(c) 0.7 0.5 and joint ventures ______ ______ Net cash flow from (25.5) (232.7) acquisitions and disposals Equity dividends paid (12.5) (10.4) ______ ______ Net cash flow before (17.1) (232.2) use of liquid resources and financing Management of liquid resources Amounts returned from - 4.7 deposit Financing Issue of ordinary share 0.7 22.8 capital Debt financing 11(d) (6.8) 205.2 ______ ______ (Decrease) increase in (23.2) 0.5 cash ______ ______ Reconciliation of net 11(e) cash flow to movement in net debt (Decrease) increase in (23.2) 0.5 cash in the year Cash flow from change - (4.7) in liquid resources Debt financing 11(d) 6.8 (203.4) (including financing costs) ______ ______ Change in net debt (16.4) (207.6) resulting from cash flows Financing acquired with (4.2) (3.1) subsidiaries Loan notes issued - (8.8) Amortisation of loan (0.5) - fees Exchange rate (loss) (7.9) 3.8 gain on net debt ______ ______ Movement in net debt in (29.0) (215.7) the year Net debt at 4 April (272.8) (57.1) 2000 ______ ______ Net debt at 31 March (301.8) (272.8) 2001 ______ ______ Reconciliation of Movements in Shareholders' Funds At 31 March 2001 Note 2001 2000 £m £m Profit for the period 20.5 22.6 Equity dividends 7 (12.9) (12.2) ______ ______ 7.6 10.4 Issue of share capital 0.7 59.2 Currency translation gains (losses) 3.2 (4.1) Movements in goodwill: currency translation (1.6) 4.6 adjustment ______ ______ Net addition to equity shareholders' funds 9.9 70.1 Opening equity shareholders' funds 142.2 72.1 ______ ______ Closing equity shareholders' funds 152.1 142.2 ______ ______ Statement of Total Recognised Gains and Losses At 31 March 2001 2001 2000 £m £m Profit for the period 20.5 22.6 Currency translation gains (losses) on net 11.1 (7.9) investments (including goodwill) Currency translation (losses) gains on borrowings (7.9) 3.8 ______ ______ Total recognised gains and losses relating to the 23.7 18.5 period ______ ______ Notes to the Accounts 1. Status of financial statements The figures and financial information for the year ended 31 March 2001 are extracted from but do not constitute the statutory financial statements for that year. Those financial statements have not yet been delivered to the Registrar, but include the auditors' report which was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. The figures and financial information for the year ended 4 April 2000 included in the preliminary announcement are extracted from but do not constitute the financial statements for that year. Those financial statements have been delivered to the Registrar and included the auditors' report which was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. 2. Segmental analysis The Group operates in one segment, Waste Management, in the United Kingdom, Belgium and The Netherlands. 2000/2001 1999/2000 Continuing Acquisitions Total Continuing Operations Operations £m £m £m £m (a) Turnover by origin United 259.6 - 259.6 239.0 Kingdom Belgium 75.5 12.7 88.2 75.5 The 151.3 3.3 154.6 - Netherlands ______ ______ ______ ______ 486.4 16.0 502.4 314.5 ______ ______ ______ ______ Share of 6.5 - 6.5 6.1 joint venture turnover ______ ______ ______ ______ (b) Turnover by destination United 256.1 - 256.1 236.7 Kingdom Europe 229.0 16.0 245.0 76.7 Rest of the 1.3 - 1.3 1.1 World ______ ______ ______ ______ 486.4 16.0 502.4 314.5 ______ ______ ______ ______ (c) Operating profits Trading profits: United 30.7 - 30.7 32.4 Kingdom Belgium 13.9 0.8 14.7 14.6 The 23.6 0.5 24.1 - Netherlands Central (3.8) - (3.8) (3.2) Services ______ ______ ______ ______ Operating 64.4 1.3 65.7 43.8 profit before exceptional costs and goodwill amortisation Exceptional (0.8) - (0.8) (0.5) costs Goodwill (8.8) (0.6) (9.4) (1.4) amortisation ______ ______ ______ ______ Total 54.8 0.7 55.5 41.9 operating profit ______ ______ ______ ______ United 27.5 - 27.5 30.9 Kingdom Belgium 13.9 0.3 14.2 14.6 The 17.2 0.4 17.6 - Netherlands Central (3.8) - (3.8) (3.6) Services ______ ______ ______ ______ Total 54.8 0.7 55.5 41.9 operating profit ______ ______ ______ ______ At 31 March 2001 At 4 April 2000 £m £m (d) Net assets United Kingdom 180.6 181.2 Belgium 36.9 25.0 The Netherlands 229.3 216.6 ______ ______ Net operating assets 446.8 422.8 Unallocated net assets (liabilities): Assets under the course of 29.7 16.8 construction Net debt (301.8) (272.8) Other unallocated net (22.3) (24.3) liabilities ______ ______ 152.4 142.5 ______ ______ Other unallocated net liabilities include debtors and creditors relating to taxation and dividends, and an element of capitalised goodwill. 3. Exceptional items 2001 2000 £m £m Operating items: Reorganisation costs (0.8) (0.5) ______ ______ Non-operating items: Profit on sale of operations 0.7 0.5 ______ ______ 4. Finance charges - interest 2001 2000 £m £m Net interest payable: Interest payable on bank loans and overdrafts repayable 16.2 3.8 in five years Interest payable on other loans 2.3 1.8 Share of interest of joint ventures 0.3 - ______ ______ 18.8 5.6 Interest receivable (0.2) (0.5) ______ ______ 18.6 5.1 ______ ______ 5. Finance charges - other Other finance charges relate to the unwinding of the discount on long term landfill liabilities of £1.5m (2000: £1.2m) and the amortisation of bank fees of £0.5m (2000: £Nil). 6. Taxation The taxation charge based on the profits for the year is made up as follows: 2001 2000 £m £m Corporation tax: current year - UK 30% (2000: 30%) 5.5 7.3 - Overseas 10.4 5.9 Deferred tax (1.0) (0.1) Joint ventures 0.2 0.3 ______ ______ 15.1 13.4 ______ ______ 7. Equity dividends 2001 2000 £m £m Interim dividend of 1.85p per ordinary share (2000: 4.3 3.7 1.75p) Proposed final dividend of 3.7p per ordinary share 8.6 8.2 (2000: 3.5p) Additional dividend on shares issued in 2000 - 0.3 ______ ______ 12.9 12.2 ______ ______ 8. Earnings per share Basic earnings per share are calculated by dividing the profit for the period by the average number of shares in issue during the period. 2001 2000 Calculation of basic earnings per share Profit for the period (£m) 20.5 22.6 Goodwill amortisation (£m) 9.4 1.4 ______ ______ Earnings before goodwill amortisation (£m) 29.9 24.0 ______ ______ Average number of shares in issue during the period 232.8m 209.3m Basic earnings per share (pence) 8.8p 10.8p Adjusted basic earnings per share before goodwill 12.8p 11.5p amortisation (pence) ______ ______ Calculation of diluted earnings per share Average number of shares in issue during the period 232.8m 209.3m Effect of share options in issue 5.0m 1.9m ______ ______ Total 237.8m 211.2m ______ ______ Diluted earnings per share (pence) 8.6p 10.7p ______ ______ 9. Acquisitions The book values of net assets for the five acquisitions made by the Group during the year, and their provisional fair value to the Group, were as follows: Book value at Accounting Fair value Provisional date of policy adjustments fair value acquisition adjustments to the Group £m £m £m £m Tangible assets 8.7 - - 8.7 Stocks 0.3 - - 0.3 Debtors 7.0 - (0.1) 6.9 Other (6.9) (0.7) (0.5) (8.1) liabilities Long term - 0.4 0.1 0.5 provisions Cash 1.7 - - 1.7 Borrowings (4.2) - - (4.2) ______ ______ ______ ______ 6.6 (0.3) (0.5) 5.8 ______ ______ ______ Capitalised 17.5 goodwill ______ Cash 23.3 consideration ______ 10. Provisions for liabilities and charges Group Site Aftercare Onerous Deferred Total restoration leases taxation £m £m £m £m £m At 4 April 15.7 20.9 0.6 12.9 50.1 2000 Utilised (1.5) - (0.2) - (1.7) Acquired - - - (2.4) (2.4) companies Provided: - cost of 1.2 1.9 - - 3.1 sales - finance 0.7 0.8 - - 1.5 charge - taxation - - - (1.0) (1.0) Exchange 0.1 0.1 - 0.3 0.5 rate movements ______ ______ ______ ______ ______ At 31 March 16.2 23.7 0.4 9.8 50.1 2001 ______ ______ ______ ______ ______ 11. Notes to the cash flow statement 2001 2000 (a) Net cash inflow from operating activities £m £m Total operating profit 55.5 41.9 Amortisation of intangible assets 9.4 1.4 Depreciation of fixed assets 37.9 26.3 Provision for aftercare and site 3.1 3.5 restoration ______ ______ Earnings before interest, taxation, 105.9 73.1 depreciation and amortisation (EBITDA) Gain on sale of fixed assets (0.2) (0.3) (Increase) decrease in stocks (1.6) 0.1 Increase in debtors (13.5) (14.0) Increase in creditors 8.5 7.0 Utilisation of provisions (1.7) (2.0) Share of profits of joint ventures (1.1) (0.8) Other non cash movements - (0.1) ______ ______ Net cash flow from operating activities 96.3 63.0 ______ ______ (b) Subsidiary undertakings and businesses purchased during the year Tangible fixed assets (8.7) (108.1) Net liabilities assumed 2.9 6.7 ______ ______ Net assets acquired (including £2.5m net (5.8) (101.4) borrowings (2000: £1.0m net cash) Goodwill capitalised (17.5) (173.3) ______ ______ Total estimated consideration (23.3) (274.7) Consideration in respect of prior year (3.8) - acquisitions Fair value of shares issued - 36.4 Fair value of loan notes issued - 8.8 ______ ______ Net cash consideration (27.1) (229.5) ______ ______ (c) Sale of subsidiaries and joint ventures Proceeds of sale less costs of sale 0.7 0.2 Claims received - 0.3 ______ ______ 0.7 0.5 ______ ______ The settlements comprised cash. (d) Analysis of financing Short term loan repayments (3.8) - Long term loan advances - 261.2 Long term loan repayments (4.9) (55.0) Finance lease net advances (repayments) 1.9 (1.0) ______ ______ Net cash (outflow) inflow from debt (6.8) 205.2 Finance costs - (1.8) ______ ______ Debt financing including finance costs (6.8) 203.4 ______ ______ (e) Analysis of net debt in the balance sheet At 4 Cash Acquisitions Other At 31 April flows non-cash March 2000 movements 2001 £m £m £m £m £m Cash at bank 9.3 (7.1) - - 2.2 and in hand Overdrafts (4.0) (16.1) - - (20.1) ______ (23.2) ______ Debt due (10.0) 3.8 (4.2) - (10.4) within one year Debt due (267.7) 4.9 - (8.4) (271.2) after more than one year Finance (0.4) (1.9) - - (2.3) leases ______ 6.8 ______ ______ ______ ______ ______ Total (272.8) (16.4) (4.2) (8.4) (301.8) ______ ______ ______ ______ ______ Other non cash changes comprise the amortisation of loan fees of £0.5m and exchange losses on translation of long term loans in currencies other than sterling of £7.9m.

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