Final Results

Shanks Group PLC 28 May 2003 28 May 2003 Company Announcement Shanks Group plc - Preliminary Results 2003 • Trading in line with pre-close statement • Financial highlights were: 2003 2002 Turnover £551m £529m Headline profit (before tax, exceptional items £34.5m £45.3m and goodwill amortisation) Exceptional items £(5.5)m £(8.4)m Goodwill amortisation £(10.6)m £(10.0)m __________ __________ Profit on ordinary activities before taxation £18.4m £26.9m __________ __________ Core business net debt £279m £289m PFI Companies net debt £19m £1m __________ __________ Net Group debt £298m £290m __________ __________ EBITDA (before exceptional items) £100m £113m • Earnings per share: Adjusted basic earnings per share (before exceptional items and 10.2p 3.2p goodwill amortisation) Basic earnings per share 4.0p 6.3p • Proposed final dividend per share 3.8p 3.8p Announcing the Preliminary Results for 2003 Group Chairman Mr I M Clubb made the following statement: In the year to 31 March 2003, the Group's turnover increased by 4% to £551m (2002: £529m), mainly due to the 10% growth achieved in the Benelux region. However headline profit before taxation, exceptional items and goodwill amortisation fell by £10.8m to £34.5m (2002: £45.3m) in line with the Group's pre-close trading statement released on 28 March 2003. The decline in UK Waste Services more than offset improvements in the Group's other three operations, UK Chemical Services, Belgium and the Netherlands. In addition, there were exceptional charges totalling £5.5m (2002: £8.4m) and goodwill amortisation amounted to £10.6m (2002: £10.0m). The resulting profit before tax was £18.4m (2002: £26.9m). The tax rate on headline profit was lower at 31% (2002: 32%). Profit after tax, exceptional items and goodwill amortisation was therefore £9.3m (2002: £14.8m). Earnings per share (eps) before exceptional items and goodwill amortisation fell by 23% to 10.2p (2002: 13.2p). Basic eps was 4.0p (2002: 6.3p). Your Board recommends an unchanged final dividend of 3.8 pence per share which, if approved by shareholders, brings the total dividend for the year to 5.7 pence per share (2002: 5.7p). The exceptional charges of £5.5m arose from a provision of £3.2m relating to the regulatory requirement to reduce historical leachate levels at UK landfill sites, and £2.3m to cover UK restructuring costs and net losses on the disposal of under-performing businesses and non-core assets. The cash generation of the Group remains strong with earnings before interest, taxation, depreciation, amortisation and exceptional items (EBITDA) at £100m (2002: £113m). The Group net debt reduced by £32m, before additional Public Finance Initiative (PFI) companies' debt of £18m and an adverse currency translation effect of £22m. Group consolidated net borrowings therefore increased by £8m to £298m (2002: £290m). Net capital expenditure on the core business was £48m and on PFI companies was £5m. Acquisitions in the core business were £3m and in PFI companies were £7m. Interest expense remained broadly steady at £18.7m (2002: £18.8m) with interest cover before exceptional items at 3 times. DIVISIONAL REVIEW UK Waste Services Trading profits fell by £16.4m to £19.7m (2002: £36.1m). In part this reflects the loss of the £5m benefit last year from wastes arising from the Foot and Mouth crisis. The balance of this disappointing performance mainly resulted from a decline in the landfill activity. Both collections and recycling were also adversely affected by the difficult trading environment. In response, the Division has been substantially restructured with four members of the senior management team changed. The new organisation has a sharper operational focus and, as a result of headcount reductions, a lower overall cost. All underperforming units are in the process of review. Landfill volumes were 13% down due to diversion of special waste as a result of the Landfill Directive and the policy of sacrificing volumes in the pursuit of higher prices. Prices have been increased to recover higher regulatory, insurance and other costs but overall margins declined. The Collections and Recycling unit suffered from lower volumes and recyclate prices. Power, produced from landfill gas, increased profits due to the premium prices now available from the Renewables Order and the installation of new capacity late in the year. The East London Waste Authority (ELWA) PFI contract, worth in excess of £1bn in revenues over 25 years, commenced in December 2002 and is performing according to its business plan, as is the Argyll & Bute PFI contract which started in August 2001. UK Chemical Services Trading losses reduced by £2.8m to £1.2m loss (2002: £4.0m loss). The cessation of operations at the Pontypool high temperature incinerator delivered the expected savings of £4m in the year. This decrease in available UK incineration capacity appears to have stabilised prices in the sector. The first contract to process Bone Meal (MBM) for the BSE crisis expired at the start of the year. The new, fluidised bed plant which processes MBM under a second contract has not been operating as planned. It was extensively modified by the responsible contractor during the last quarter and since then, its performance has been encouraging. Other waste treatment activities have benefited from the diversion of special wastes from landfill with both volume and prices increasing. On site services, including overseas field services delivered an improved performance. Belgium Trading profits in Belgium increased by £1.4m to £14.5m (2002: £13.1m). Profits benefited by £0.6m from the stronger Euro but the enhancement was mainly due to improvements at De Paepe, Gent. As expected landfill volumes reduced and the re-permitting application for additional void at our major site is progressing, albeit slowly. Other operations including electricity from landfill gas have performed well and have more than offset the reduced activity levels in Liege and the start up costs of new municipal collection contracts, including the first in Northern France. The Netherlands Trading profits increased by £0.9m to £25.9m (2002: £25.0m). These results benefited by £1.1m from the stronger Euro but were adversely affected by higher insurance and one-off pension costs totalling £1.2m. The solid waste business performed satisfactorily but in the last quarter felt the effects of a weakening market. Reym industrial cleaning continued to prosper and the results from the Flection computer refurbishment business were steady. ATM, the hazardous waste activity, increased its profits despite difficulties with both the re-permitting of its pyrolysis plant and changes to the Dutch specification of cleaned soil. Its oil/water separation business had an excellent year, which offset these two issues. DEVELOPMENTS United Kingdom The Group continues to bid on a selected number of long term local authority waste disposal tenders based on the mechanical biological treatment (MBT) technology provided by our Italian partner Ecodeco for the ELWA contract. It remains preferred bidder at Dumfries and Galloway, which is expected to financially close later this year. Planning permission has also been granted for a green centre for the pre-processing of municipal waste using MBT at our Bletchley site. The Group intends to build a select portfolio from similar opportunities, mainly through PFI. This will provide a high degree of predictability over long term cash flows and earnings. The Power business will benefit from the recent increase in capacity and is also a dependable source of low risk income. Benelux Three small tuck-in acquisitions were completed during the year which will expand the business base. There are also a number of opportunities in Northern France. The recent State Council decision regarding the ATM pyrolysis plant should result in a permit being granted in the coming months. OUTLOOK The poor performance reported at UK Waste Services is expected to continue although the reorganisation of this division together with the growth in its Power and PFI businesses will partially mitigate the effects. The current Euro/ Sterling exchange rate will benefit the translation of earnings from the Benelux region, where there are signs of a general economic slow down. Successful resolution of the permit problems at ATM should benefit the financial results later in the year. The Group has assembled a wide range of capabilities to meet the changing market conditions resulting from the implementation of European legislation and increases in environmental taxes, especially in the UK. The longer term prospects for the Group remain good but the continuing UK Waste Services difficulties are expected to restrict overall growth in the current year. CHIEF EXECUTIVE'S OPERATING REVIEW 2003 has been a year of contrast with our Continental businesses performing creditably whilst severe trading difficulties have substantially reduced operating profits in the UK. Notwithstanding these difficulties staff throughout the Group have worked hard particularly to ensure a good cash flow result for the year. I thank each one for their individual contribution. Although minimum standards of waste management are governed by the European Union, each country of operation is at a different stage of development. Each business is therefore managed on an individual country basis. Each country management contributes to proposed changes in the rapidly evolving regulatory framework which defines the market for our services. Group Turnover Turnover rose by 4% to £551m. UK Waste Services revenue was static despite the effect of £1/te increment in landfill tax, mainly due to the 13% decline in landfill volumes. In contrast PFI projects and Power showed good growth. As expected, UK Chemical Services turnover declined as the cessation of operations at Pontypool more than offset the growth in other services. Benelux sales increased by 10%, partially as a result of the stronger Euro which contributed 4% with the balance from the organic growth of the businesses in both countries. United Kingdom The UK operations consist of two divisions - Waste Services, which collects and manages municipal, commercial and industrial wastes and Chemical Services, which specialises in the treatment of hazardous chemical waste and related services including recovery. The results at UK Waste Services were disappointing with trading profits falling by £16.4m from £36.1m to £19.7m. Landfill activities with profits down by £16m have fared particularly poorly due to the end of Foot and Mouth inputs (-£5m), steeply rising regulatory costs (-£7m) and lower core business volumes (-£7m) offset by price increases (+£3m). The volume reduction was due to diversion of waste from landfill as a result of the Landfill Directive, lower contaminated spoil inputs and a campaign to increase prices to recover additional costs. Results in the Collection and Recycling sector have also been unsatisfactory with profits falling by £4m. As a consequence, Waste Services has been substantially reorganised. Senior changes have been made and new analytical skills are being brought to bear, particularly, on profitability. More encouragingly the activities which the Group has been developing for the future have performed much better. Profits from the generation of electricity from landfill gas have increased by £3m because of higher prices on 15MW of output under the Renewables Order and capacity increases of 16MW under the old NFFO scheme. The existing PFI project for Argyll & Bute to dispose of its municipal waste continued to perform to its plan and, in December 2002, the Group brought the ELWA contract to financial close. The profit improvement from these two projects amounted to £0.8m. The ELWA project provides a showcase for the new biological treatment technology developed with our Italian partners Ecodeco. The Group is currently examining the longer term prospect of using the output of this process as a fuel to generate electricity. If successful the value of the technology is further greatly enhanced giving it the potential to be the method of choice for the disposal of municipal waste. Already several local authorities are expressing keen interest. Despite recording a loss of £1.2m (2002: £4.0m loss) the Chemical Services division was cash positive in the year. Although these results remain unsatisfactory considerable progress has been made. Savings resulting from the cessation of operations at the Pontypool incinerator amount to £4.1m which more than offset the £2.0m reduction from the expiry of the first contract to process MBM. Prices for the remaining Fawley incineration plant have stabilised and better capacity utilisation has resulted in an enhanced contribution. In aggregate all other activities recorded an improvement of £0.7m. Although the new fluidised bed plant to process MBM from the second contract functioned for most of the year, its operations were characterised by capacity restrictions and frequent stops to address shortcomings. The contractor responsible executed major modifications to the plant in January and February 2003 since when its performance has greatly improved. Providing this improvement is sustained results in 2003/4 should reflect this progress. During the year the Prime Minister's Strategy Unit completed an extensive study of waste management in England and published its findings in late 2002 under the title 'Waste not, Want not'. Several recommendations were made to the Government which has recently responded, both through the Chancellor's annual budget and through a formal response from the Department for Environment, Food and Rural Affairs (DEFRA) published as this report is being written. Crucially it is now known that Landfill Tax will increase from £15/tonne in £3/tonne annual increments commencing in April 2005. This policy will continue until a longer term rate of c.£35/tonne is reached. This charge, coupled with other initiatives, will greatly enhance the opportunity for the technology successfully developed with our Italian partner Ecodeco for municipal wastes, as typified by the ELWA project. Similarly a market will be created for the recycling of industrial and commercial wastes similar to that found in the Netherlands where the current landfill tax rate is already above £40/tonne. The House of Commons EFRA standing committee examined the issue of hazardous waste during the year. As a result of its recommendations a national Hazardous Waste Forum has been established. High among its priorities is to ensure the safe disposal of hazardous waste following the ending of the landfill co-disposal practice in July 2004. This can only further expand the market for Chemical Services. Belgium Belgium operations are similar to those in the UK but include specialist demolition and soil cleaning at De Paepe and an industrial cleaning activity. The management team in Belgium has delivered a creditable performance with trading profit increasing by £1.4m to £14.5m. Better results at De Paepe in Gent and in the Brabant district of Wallonia have been the principal drivers of the underlying improvement of £0.8m. Progress in the re-permitting of the extension to the Mont St Guibert landfill remains slow. Maximum efforts are being made given the value of success to the Group. The division is also having some notable successes in the area of remediation of contaminated land. Several operating units provide synergistic skills critical to the serving of this growing market. Opportunities just over the border in Northern France are also being exploited to good effect. Netherlands Netherland operations are similar to those in Belgium but include a computer refurbishment operation and exclude any landfill activity. Trading profit in year improved by £0.9m to £25.9m which was almost entirely due to the strengthening Euro. However, the operations performed well to substantially recover cost increases in insurance and pension costs, lower soil volumes due to uncertainty regarding cleaned soil specifications and reduced economic activity. The industrial cleaning unit Reym fittingly celebrated its 50th anniversary in 2003 with a strong performance. The Group remain pleased with these acquisitions made in 2000, where the management team continues to build on its strong franchise particularly in the Randstad area of the country. Success in the appeal to the State Council concerning the permits for the ATM hazardous waste processing unit should lead to a regularising of these problems and a resumption of third party waste inputs into the pyrolysis plant in the second half of 2003/4. Recent clarification on the specification for cleaned soils should also lead to an improvement in the ATM soil processing facility. The export of certain waste streams for further processing in Germany has also helped to contain costs. Further initiatives including new waste wood processing capacity and the full year effect of a recent acquisition in the Rotterdam area will further complement the range of activities. Prospects The economies in the low countries are showing definite signs of slowing particularly in the all important construction sector. With full use of the pyrolysis plant and other capacity enhancements at ATM, this downturn should be mitigated. Success in the re-permitting of the Mont St Guibert landfill will ensure the continuation of the service to our important municipal customers in Belgium. Opportunities continue to emerge in Northern France. Improvements in UK performance remain the major challenge. Progress is being made within Chemical Services and it is expected that recent actions taken within Waste Services will begin to bear fruit later in the current year. In the longer term initiatives already outlined in this report provide a strong foundation for market leadership in our chosen sectors. FINANCIAL DIRECTOR'S REVIEW Accounting Policies Given the high level of capital expenditure planned on PFI projects such as ELWA, the Group is amending its accounting policy on capitalisation of interest. With effect from 1 April 2003, the Group will capitalise directly attributable interest on separately identifiable major capital projects. The effect of this new policy on the results under review is not material. The Group continues to defer the expensing of costs relating to the acquisition of long term municipal waste contracts where it has attained preferred bidder status. At the year end, these costs amounted to £1.2m (2002: £1.6m). Accounting for the long term liabilities on landfill sites is governed by FRS 12 - Provisions and Contingencies. A real discount factor of 2% has been used to assess the present value of these long term liabilities, which are expected to be incurred between now and circa 2050. The annual unwinding of this discount is shown in other finance charges. Financial Results The Operating Review covers the background to the Group's trading performance. Interest costs remained steady at £18.7m (2002: £18.8m) reflecting the profile of debt and interest rates during the year. Other finance charges comprise discount unwind on long term landfill liabilities of £1.8m and amortisation of bank fees of £0.5m. In addition, an exceptional finance charge of £0.5m arose on the modification of the Group's banking covenants. Goodwill amortisation rose by £0.6m to £10.6m (2002: £10.0m) with £0.3m arising on Benelux tuck-in acquisitions and £0.3m due to currency movements. Taxation The average tax rate on headline profit was lower at 31% (2002: 32%) despite the growing proportion of profits from countries with higher tax rates. The underlying rates of tax for the year under review in the the countries where the Group operates were UK: 30%, Netherlands: 35% and Belgium: 40%. The Group suffers a higher charge on its UK landfill business as expenditure on void does not attract capital allowances. Cash Flow The underlying cash generation on the core business was £32m after net investments of £51m, but before the adverse effect of £22m on the translation of Euro denominated debt into its sterling equivalent. Principal borrowings were therefore reduced by £10m to £279m. The limited recourse debt of the PFI companies which is consolidated into Group net debt increased by £18m to £19m. Details of the Group's cash flow performance are shown in the table below. 2003 2002 Core Business PFI Business Total Total Change _____________________________________________________________________________________________________________________ Operating Profit* 55 1 56 66 (10) Depreciation/Landfill Provisions 44 - 44 47 (3) EBITDA 99 1 100 113 (13) Working Capital 29 (6) 23 (2) 25 Net Capex/Acquisitions (51) (12) (63) (55) (8) Interest, Tax, Dividends and Other (45) (1) (46) (47) 1 _____________________________________________________________________________________________________________________ Underlying 32 (18) 14 9 5 Currency Translation (22) - (22) 3 (25) _____________________________________________________________________________________________________________________ Group Cash Flow 10 (18) (8) 12 (20) _____________________________________________________________________________________________________________________ *before goodwill amortisation and exceptional items Capital Expenditure/Acquisitions The Group spent £60m gross on capital expenditure (2002: £58m) and £10m on acquisitions (2002: £3m). The major capital items in the year were power generation equipment and the replacement of operating assets such as landfill cells, vehicles and containers. Sales of fixed assets, including surplus property raised £7m (2002: £6m). Three small tuck-in acquisitions at a total cost of £3m, of which £2m was goodwill, were completed in the Benelux region. The acquisition of the ELWA business for £7m gave rise to £7m of goodwill which will be amortised over its 25 year life. Treasury and Risk Management Policy The Group treasury policy is to use financial instruments with a spread of maturity dates and sources in order to reduce funding risk. Borrowings are drawn in the same currencies as the underlying investment to reduce cash and translation exposure on exchange rate movements. No other currency hedging mechanisms are used. The Group maintains a significant proportion of its debt on fixed rates of interest in order to protect interest cover. Where underlying interest rates are floating, swaps are used to achieve the desired level of fixed rates. The counterparties to these instruments are all AA rated banks. The core debt is provided by the €346m multicurrency revolving credit facility which is due to expire in March 2005 and the $145m multicurrency fixed or floating interest rate private placement facility from Prudential Insurance Company of America (PRICOA) which has various longer term maturity dates. The Group also has £47m of working capital facilities with various banks. Since the year end, the credit facility has been voluntarily reduced by €20m to €326m in order to save commitment fees. The limited recourse borrowings of the Group's two 100% owned PFI companies, created to finance the investment required to service PFI contracts, are separate from the Group's principal banking facilities. Typically the Group invests approximately 10-20% of the capital requirement from its core borrowings in the form of equity or subordinated debt with the remainder being provided by financial institutions secured on the project with limited recourse to the Group. These borrowings are consolidated into the Group debt as the PFI companies are wholly owned subsidiaries. Insurance The policy on insurance is to secure the maximum cover available in the market at reasonable prices. The Group therefore carries catastrophe insurance, including pollution cover, but self-insures up to a maximum aggregate level of £2m. The current difficult insurance market conditions has resulted in considerably higher costs for the Group's risk management programme, particularly in the Netherlands. Pensions The Group continues to use SSAP24 Pension Costs to account for pensions and has adopted the transitional arrangements permitted by FRS17 - Retirement Benefits. On the snapshot FRS17 basis, the net pension liability has increased to £20m (2002: £4m) due to the general fall in equity values and a substantial increase in the net present value of the liabilities of the UK defined benefit scheme. The assumption on longevity of members and the fall in UK gilt market rates are the major causes for the increase. The UK defined benefit scheme has been closed to new members from September 2002 and new employees are now offered a defined contribution arrangement. The triennial actuarial valuation, which determines the long term funding rate, is currently underway based on the assets and liabilities as at 1 April 2003. However, given the likely deficit arising from the valuation, the Group has decided to increase its pension contributions by approximately £1.5m with effect from 1 April 2003. The Netherlands industry wide pension scheme has already seen increased costs of £1.0m in 2003 of which £0.4m is a one-off charge. There are no current plans for further rate increases. Note: Copies of the Annual Report and Accounts will be posted to shareholders by 20 June 2003, after which they will be available, on request, from the company at Astor House, Station Road, Bourne End, Bucks SL8 5YP. Subject to approval at the AGM, the proposed final dividend of 3.8 pence per share will be paid on 4 August 2003 to shareholders on the register at close of business on 18 July 2003. For further information contact: Ian Clubb; Chairman, Shanks Group plc Michael Averill; Group Chief Executive David Downes; Group Finance Director or John Shaughnessy; Group Head of External Relations On 28 May 2003, telephone: 020 7678 8000 Thereafter, telephone: 01628 524523 Consolidated Profit and Loss Account year ended 31 March 2003 2003 2002 Note Before Exceptional Total Before Exceptional Total exceptional items exceptional items items items £m £m £m £m £m £m ________________________________________________________________________________________________________________________ Turnover: Group and share of joint ventures: Continuing operations 551.8 - 551.8 535.7 - 535.7 Acquisitions 6.7 - 6.7 - - - ________________________________________________________________________________________________________________________ 558.5 - 558.5 535.7 - 535.7 Less: share of turnover of (7.1) - (7.1) (7.2) - (7.2) joint ventures ________________________________________________________________________________________________________________________ Group turnover 2 551.4 - 551.4 528.5 - 528.5 Cost of sales (450.2) (3.2) (453.4) (420.8) - (420.8) ________________________________________________________________________________________________________________________ Gross profit 101.2 (3.2) 98.0 107.7 - 107.7 ________________________________________________________________________________________________________________________ Group operating profit 54.1 (4.4) 49.7 64.8 - 64.8 before goodwill amortisation Goodwill amortisation (10.6) - (10.6) (10.0) - (10.0) ________________________________________________________________________________________________________________________ Group operating profit 3 43.5 (4.4) 39.1 54.8 - 54.8 Share of operating profit 1.4 - 1.4 1.6 - 1.6 of joint ventures ________________________________________________________________________________________________________________________ Total operating profit 2 44.9 (4.4) 40.5 56.4 - 56.4 Non-operating exceptional items: - on disposal of operations 4 - (0.6) (0.6) - - - - on closure of operations 4 - - - - (8.4) (8.4) ________________________________________________________________________________________________________________________ Profit before finance 2 44.9 (5.0) 39.9 56.4 (8.4) 48.0 charges and taxation Finance charges - interest 5 (18.7) - (18.7) (18.8) - (18.8) Finance charges - other 6 (2.3) (0.5) (2.8) (2.3) - (2.3) ________________________________________________________________________________________________________________________ Profit on ordinary 2 23.9 (5.5) 18.4 35.3 (8.4) 26.9 activities before taxation Taxation 7 (10.6) 1.5 (9.1) (14.6) 2.5 (12.1) ________________________________________________________________________________________________________________________ Profit on ordinary 13.3 (4.0) 9.3 20.7 (5.9) 14.8 activities after taxation and profit for the period Equity dividends paid and 8 (13.3) (13.3) proposed ________________________________________________________________________________________________________________________ Retained (loss) profit (4.0) 1.5 transferred to reserves ________________________________________________________________________________________________________________________ Earnings per share • basic 9 4.0p 6.3p • adjusted basic before 9 10.2p 13.2p exceptional items and goodwill amortisation • diluted 9 4.0p 6.3p Dividends per share 8 5.7p 5.7p ________________________________________________________________________________________________________________________ Consolidated Balance Sheet at 31 March 2003 Note 2003 2002 £m £m £m £m ______________________________________________________________________________________________________________________ Fixed assets Intangible assets 198.0 183.6 Tangible assets 324.3 298.6 Investments 1.1 1.0 Investments in joint ventures: Share of gross assets 13.6 13.5 Share of gross liabilities (8.4) (8.9) ____ ____ Share of net assets 5.2 4.6 Loans to joint ventures 2.9 2.6 ____ ____ Total investment in joint ventures 8.1 7.2 ________________________________________________________________________________________________________________________ Total fixed assets 531.5 490.4 Current assets Stocks 7.0 6.6 Debtors 129.6 132.9 Cash at bank and in hand 20.5 3.7 _____ _____ 157.1 143.2 _____ _____ Creditors: amounts falling due within one year Borrowings (4.9) (14.3) Other creditors (159.1) (131.6) _____ _____ (164.0) (145.9) _____ _____ Net current liabilities (6.9) (2.7) ________________________________________________________________________________________________________________________ Total assets less current liabilities 524.6 487.7 Creditors: amounts falling due after more than one year Borrowings (313.1) (278.9) Other creditors (0.2) (0.3) _____ _____ (313.3) (279.2) Provisions for liabilities and charges 11 (68.1) (67.8) ________________________________________________________________________________________________________________________ Net assets 143.2 140.7 ________________________________________________________________________________________________________________________ Capital and reserves Called up share capital 23.4 23.4 Share premium account 93.1 93.0 Profit and loss account 26.7 24.3 ________________________________________________________________________________________________________________________ Equity shareholders' funds 143.2 140.7 ________________________________________________________________________________________________________________________ Consolidated Cash Flow Statement year ended 31 March 2003 Note 2003 2002 £m £m £m £m ________________________________________________________________________________________________________________________ Net cash flow from operating activities 12(a) 120.9 109.0 Returns from investments and servicing of finance Interest paid (20.5) (17.3) Interest received 1.8 0.7 _____________ _________ (18.7) (16.6) Tax paid (11.6) (15.4) Capital expenditure and financial investment Purchase of tangible fixed assets (59.8) (57.7) Sale of tangible fixed assets 6.9 5.8 _____________ _________ (52.9) (51.9) Acquisitions and disposals Purchase of subsidiaries and other businesses 12(b) (9.8) (3.8) Purchase of and movements in loans with investments and (0.4) 0.9 joint ventures Sale of subsidiaries and joint ventures 0.4 - _____________ ________ (9.8) (2.9) Equity dividends paid (13.3) (13.0) ________________________________________________________________________________________________________________________ Net cash flow before use of liquid resources and financing 14.6 9.2 Financing Issue of ordinary share capital 0.1 0.8 Debt financing 12(c) 11.2 (1.2) ________________________________________________________________________________________________________________________ Increase in cash 25.9 8.8 ________________________________________________________________________________________________________________________ Reconciliation of net cash flow to movement in net debt 12(d) Increase in cash in the year 25.9 8.8 Debt financing 12(c) (11.2) 1.2 ________________________________________________________________________________________________________________________ Change in net debt resulting from cash flows 14.7 10.0 Financing acquired with subsidiaries - - Amortisation of loan fees (0.5) (0.5) Exchange rate (loss) gain on net debt (22.2) 2.8 ________________________________________________________________________________________________________________________ Movement in net debt in the year (8.0) 12.3 Net debt at 31 March 2002 (289.5) (301.8) ________________________________________________________________________________________________________________________ Net debt at 31 March 2003 (297.5) (289.5) ________________________________________________________________________________________________________________________ Reconciliation of Movements in Shareholders' Funds at 31 March 2003 Note 2003 2002 £m £m ___________________________________________________________________________________________________________________ Profit for the period 9.3 14.8 Equity dividends 8 (13.3) (13.3) ___________________________________________________________________________________________________________________ Retained (loss) profit transferred to reserves (4.0) 1.5 Issue of share capital 0.1 0.8 Goodwill written off (see below) - (4.6) Currency translation gain (loss) 12.4 (1.6) Tax attributable to currency translation (0.3) - Movements in goodwill: currency translation adjustment (5.7) 0.5 ___________________________________________________________________________________________________________________ Net movement in equity shareholders' funds 2.5 (3.4) Opening equity shareholders' funds 140.7 144.1 ___________________________________________________________________________________________________________________ Closing equity shareholders' funds 143.2 140.7 ___________________________________________________________________________________________________________________ The goodwill written off to reserves in 2002 related to the final determination of the consideration on the Group's acquisition of Page s.a. in 1998. The original goodwill on this acquisition was written off to reserves in that year, before the introduction of FRS 10 - Goodwill and Intangible Assets. Statement of Total Recognised Gains and Losses at 31 March 2003 2003 2002 £m £m ___________________________________________________________________________________________________________________ Profit for the period 9.3 14.8 Currency translation gain (loss) on net investments (including goodwill) 34.6 (4.4) Currency translation (loss) gain on borrowings (22.2) 2.8 Tax attributable to currency translation (0.3) - ___________________________________________________________________________________________________________________ Total recognised gains and losses relating to the period 21.4 13.2 ___________________________________________________________________________________________________________________ Notes to the Financial Statements 1 Status of financial statements The figures and financial information for the year ended 31 March 2003 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 31 March 2002 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. 2003 2002 Continuing Acquisitions Total Total £m £m £m £m ___________________________________________________________________________________________________________________ Turnover by origin and by destination of service United Kingdom: - Waste services 227.5 6.1 233.6 233.5 - Chemical services 36.6 - 36.6 38.7 ___________________________________________________________________________________________________________________ United Kingdom 264.1 6.1 270.2 272.2 Belgium 95.0 0.2 95.2 88.4 The Netherlands 185.6 0.4 186.0 167.9 ___________________________________________________________________________________________________________________ Group turnover 544.7 6.7 551.4 528.5 ___________________________________________________________________________________________________________________ Share of joint venture turnover 7.1 - 7.1 7.2 ___________________________________________________________________________________________________________________ Operating profits Trading profits: United Kingdom: - Waste services 19.4 0.3 19.7 36.1 - Chemical services (1.2) - (1.2) (4.0) ___________________________________________________________________________________________________________________ United Kingdom 18.2 0.3 18.5 32.1 Belgium 14.5 - 14.5 13.1 The Netherlands 25.8 0.1 25.9 25.0 Central Services (3.4) - (3.4) (3.8) ___________________________________________________________________________________________________________________ Operating profit before exceptional items 55.1 0.4 55.5 66.4 and goodwill amortisation Exceptional operating items (4.4) - (4.4) - Goodwill amortisation (10.5) (0.1) (10.6) (10.0) ___________________________________________________________________________________________________________________ Total operating profit 40.2 0.3 40.5 56.4 ___________________________________________________________________________________________________________________ United Kingdom: - Waste services 12.9 0.2 13.1 33.9 - Chemical services (1.6) - (1.6) (4.1) ___________________________________________________________________________________________________________________ United Kingdom 11.3 0.2 11.5 29.8 Belgium 13.9 - 13.9 12.5 The Netherlands 18.6 0.1 18.7 18.2 Central Services (3.6) - (3.6) (4.1) ___________________________________________________________________________________________________________________ Total operating profit 40.2 0.3 40.5 56.4 Non-operating exceptional items (0.6) (8.4) ___________________________________________________________________________________________________________________ Profit before finance charges and taxation 39.9 48.0 Finance charges - interest (18.7) (18.8) Finance charges - other (2.3) (2.3) Finance charges - exceptional (0.5) - ___________________________________________________________________________________________________________________ Profit on ordinary activities before taxation 18.4 26.9 ___________________________________________________________________________________________________________________ At 31 March At 31 March 2002 2003 £m £m ___________________________________________________________________________________________________________________ Net assets United Kingdom: - Waste services 158.3 162.5 - Chemical services 32.7 36.1 ___________________________________________________________________________________________________________________ United Kingdom 191.0 198.6 Belgium 23.1 34.6 The Netherlands 237.9 220.2 ___________________________________________________________________________________________________________________ Net operating assets 452.0 453.4 Unallocated net assets (liabilities): Assets under the course of construction 18.2 8.0 Net debt (297.5) (289.5) Other unallocated net liabilities (29.5) (31.2) ___________________________________________________________________________________________________________________ Net assets 143.2 140.7 ___________________________________________________________________________________________________________________ Other unallocated net liabilities include debtors and creditors relating to taxation and dividends, and an element of capitalised goodwill. 3 Operating exceptional items The exceptional leachate treatment costs of £3.2m in 2003 relate to the regulatory requirement to reduce historic leachate levels at United Kingdom landfill sites. The exceptional reorganisation costs of £1.2m in 2003 relate to United Kingdom restructuring costs. The tax effect of these exceptional costs is to reduce the current tax charge by £1.3m. 4 Non-operating exceptional items 2003 2002 £m £m ___________________________________________________________________________________________________________________ Loss on disposal of assets (0.6) - Site closure provision - (3.0) Impairment of tangible fixed assets - (5.4) ___________________________________________________________________________________________________________________ (0.6) (8.4) ___________________________________________________________________________________________________________________ The exceptional loss in 2003 arose on the disposal of non-performing assets and surplus property. There is no tax effect arising in respect of this loss. The exceptional costs in 2002 arose on the closure of operations at the Pontypool site in the United Kingdom. The tax effect of these costs was to reduce the current tax charge by £0.4m and the deferred tax charge by £2.1m. 5 Finance charges - interest 2003 2002 £m £m ___________________________________________________________________________________________________________________ Net interest payable: Interest payable on bank loans and overdrafts repayable within five years 12.4 13.6 Interest payable on other loans 7.9 5.6 Share of interest of joint ventures 0.2 0.3 ___________________________________________________________________________________________________________________ 20.5 19.5 Interest receivable (1.8) (0.7) ___________________________________________________________________________________________________________________ 18.7 18.8 ___________________________________________________________________________________________________________________ 6 Finance charges - other Other finance charges relate to the unwinding of the discount on long term landfill liabilities of £1.8m (2002: £1.8m) and the amortisation of bank fees of £0.5m (2002: £0.5m). An exceptional finance cost of £0.5m (2002: £Nil) arose on the modification of the Group's banking covenants. The tax effect of this exceptional cost is to reduce the current tax charge by £0.2m. 7 Taxation The taxation charge (credit) based on the profit for the year is made up as follows: 2003 2002 £m £m ___________________________________________________________________________________________________________________ Current tax: United Kingdom Corporation tax at 30% (2002: 30%) - current year 3.7 3.1 - prior year (1.8) (1.1) Double taxation relief (4.2) - Overseas 11.1 9.5 ___________________________________________________________________________________________________________________ 8.8 11.5 Deferred tax (0.1) 0.2 Joint ventures 0.4 0.4 ___________________________________________________________________________________________________________________ 9.1 12.1 ___________________________________________________________________________________________________________________ 8 Equity dividends 2003 2002 £m £m ___________________________________________________________________________________________________________________ Interim dividend of 1.9p per ordinary share (2002: 1.9p) 4.4 4.4 Proposed final dividend of 3.8p per ordinary share (2002: 3.8p) 8.9 8.9 ___________________________________________________________________________________________________________________ Total dividend of 5.7p per ordinary share (2002: 5.7p) 13.3 13.3 ___________________________________________________________________________________________________________________ The proposed final dividend will be paid on 4 August 2003 to shareholders on the register at close of business on 18 July 2003. 9 Earnings per share Basic earnings per share are calculated by dividing the profit after tax for the period by the weighted average number of shares in issue during the period. 2003 2002 ___________________________________________________________________________________________________________________ Calculation of basic earnings per share Profit for the period (£m) 9.3 14.8 Exceptional items (net of tax) (£m) 4.0 5.9 Goodwill amortisation (£m) 10.6 10.0 ___________________________________________________________________________________________________________________ Earnings before exceptional items and goodwill amortisation (£m) 23.9 30.7 ___________________________________________________________________________________________________________________ Average number of shares in issue during the period 234.0m 233.4m Basic earnings per share (pence) 4.0p 6.3p Adjusted basic earnings per share before exceptional items and goodwill 10.2p 13.2p amortisation (pence) ___________________________________________________________________________________________________________________ Calculation of diluted earnings per share Average number of shares in issue during the period 234.0m 233.4m Effect of share options in issue 0.2m 0.5m ___________________________________________________________________________________________________________________ Total 234.2m 233.9m ___________________________________________________________________________________________________________________ Diluted earnings per share (pence) 4.0p 6.3p ___________________________________________________________________________________________________________________ 10 Acquisitions During the year the Group made the following acquisitions: Date Activities and Geographical Area ___________________________________________________________________________________________________________________ Watco's Stavelot business June 2002 Waste Management - Belgium De Smul December 2002 Waste Management - Belgium ELWA Limited December 2002 Waste Management - United Kingdom Van Leeuwen February 2003 Waste Management - The Netherlands ___________________________________________________________________________________________________________________ The book values of net assets acquired and the provisional fair value to the Group were as follows: £m ___________________________________________________________________________________________________________________ Tangible assets 1.1 Goodwill 8.7 ___________________________________________________________________________________________________________________ Cash consideration (including costs) 9.8 ___________________________________________________________________________________________________________________ 11 Provisions for liabilities and charges Site Aftercare Leachate Reorgan-isation Onerous Deferred Total restoration leases taxation £m £m £m £m £m £m £m ___________________________________________________________________________________________________________________ At 31 March 2002 22.3 25.3 - 1.9 0.4 17.9 67.8 Provided 2.2 0.6 - - - - 2.8 - cost of sales - finance charges 0.7 1.1 - - - - 1.8 - exceptional costs - - 3.2 - - - 3.2 - taxation - - - - - (0.1) (0.1) Utilised (7.2) (1.0) - (1.3) - - (9.5) Transfer with fixed 0.2 - - - - - 0.2 assets Exchange rate 0.4 0.4 - - - 1.1 1.9 movements ___________________________________________________________________________________________________________________ At 31 March 2003 18.6 26.4 3.2 0.6 0.4 18.9 68.1 ___________________________________________________________________________________________________________________ 12 Notes to the cash flow statement 2003 2002 Before Exceptional Total Total exceptional costs costs £m £m £m £m ___________________________________________________________________________________________________________________ (a) Net cash flow from operating activities Total operating profit 44.9 (4.4) 40.5 56.4 Amortisation of intangible assets 10.6 - 10.6 10.0 Depreciation of fixed assets included in 42.1 - 42.1 43.2 operating profits Provision for aftercare and site restoration 2.8 - 2.8 3.2 ___________________________________________________________________________________________________________________ Earnings before interest, taxation, 100.4 (4.4) 96.0 112.8 depreciation and amortisation (EBITDA) Loss (profit) on sale of fixed assets 0.1 - 0.1 (0.7) (Increase) decrease in stocks (0.4) - (0.4) 1.5 Decrease (increase) in debtors 5.2 - 5.2 3.8 Increase (decrease) in creditors 27.2 0.5 27.7 (1.6) Exceptional provision cost - 3.2 3.2 - Utilisation of provisions (9.5) - (9.5) (5.2) Share of profits of joint ventures (1.4) - (1.4) (1.6) ___________________________________________________________________________________________________________________ Net cash flow from operating activities 121.6 (0.7) 120.9 109.0 ___________________________________________________________________________________________________________________ 2003 2002 £m £m ___________________________________________________________________________________________________________________ (b) Subsidiary undertakings and businesses purchased during the year Tangible fixed assets 1.1 1.0 Net liabilities assumed - (6.3) Buy-out of minority interest - 0.3 Net assets (liabilities) acquired 1.1 (5.0) Goodwill capitalised 8.7 8.8 ___________________________________________________________________________________________________________________ Total estimated consideration 9.8 3.8 ___________________________________________________________________________________________________________________ (c) Analysis of financing Short term loan advances (repayments) 0.1 (9.9) Long term loan advances 17.8 79.8 Long term loan repayments (5.8) (70.4) Finance lease net repayments (0.9) (0.7) ___________________________________________________________________________________________________________________ Net cash flow from debt 11.2 (1.2) ___________________________________________________________________________________________________________________ (d) Analysis of net debt in the balance sheet At 31 March Cash Non cash At 31 March 2002 flows items 2003 £m £m £m £m ___________________________________________________________________________________________________________________ Cash at bank and in hand 3.7 16.8 - 20.5 Overdrafts (12.8) 9.1 - (3.7) ________________ 25.9 ________________ Debt due within one year (0.5) (0.1) - (0.6) Debt due after more than one year (278.3) (12.0) (22.7) (313.0) Finance leases (1.6) 0.9 - (0.7) ________________ (11.2) ___________________________________________________________________________________________________________________ Total (289.5) 14.7 (22.7) (297.5) ___________________________________________________________________________________________________________________ Non cash items comprise the amortisation of loan fees of £0.5m and exchange loss on translation of long term loans in currencies other than sterling of £22.2m. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Renewi (RWI)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today