Interim Management Statement

RNS Number : 5001G

Shanks Group PLC

02 February 2010

 



Shanks Group plc, Europe's largest listed independent waste management business, today issues the following Interim Management Statement.

Trading performance

The underlying trading remains satisfactory. However due, principally, to the exceptionally adverse weather conditions, the outcome for the year is now expected to be slightly below the Board's previous expectations.

Management continues to take effective action to reduce cost and improve free cash flow.

The cost reduction plans remain on track with over £7m of the targeted £10m cost savings now achieved.  Year end net debt is now expected to be below the closing position at the half year and better than our expectations.

Tom Drury, Group Chief Executive of Shanks Group plc, commented:

"In what remain tough trading conditions for the waste industry, we continue to deliver against our priorities of cutting costs, improving free cash flow and investing in our growth strategy of recycling, organic processing and UK PFI. Whilst the outlook for calendar 2010 remains uncertain in some markets, we believe that the effective actions we have taken, our focused strategy together with our strong market positions, proven technologies and compelling regulatory drivers will lead to significant value creation over the medium term."

Netherlands

Underlying performance in the Netherlands was ahead of our expectations. In Solid Waste, despite the impact of lower volumes and the recent extreme weather, the performance was helped by effective management action in reducing disposal and other operating costs. The performance in Hazardous Waste (HW) continued to be ahead of our expectations with particular strength in the water treatment business.  Performance in HW also benefited from strong management action to reduce logistics and disposal costs in the soil business, offsetting front end pricing pressure. Trading at Orgaworld, our high-margin organics' business, remained in line with our expectations. Greenmills, the 300,000 tonnes wastewater and 100,000 tonnes anaerobic digestion (AD) project in Amsterdam scheduled for commissioning in Spring 2010, is on track.

Belgium

Trading conditions continued to be very demanding, particularly in the Foronex wood markets, where our expectations are now lower than at the half year. In landfill, we now expect the impact of the increased tax to be immediate, rather than April as previously assumed. This acceleration by three months will impact upon the outlook for the year.  We continue to take management actions to off-set market pressures. The restructuring of the manual cleaning business has been completed and the cost savings are feeding through as expected.

UK

Overall trading was in line with our expectations.  Our confidence in the UK as a significant area for growth has been further enhanced following the recent announcement by the Government regarding the definition of biodegradable waste under the Landfill Directive which is likely to add to the volume of waste requiring diversion from landfill. 

Shanks remains on the shortlist for seven PFI/PPP opportunities - three Mechanical Biological Treatment (MBT) and four Energy From Waste (EFW) bids -  including the recent success in reaching the shortlist stage for the contracts to provide new infrastructure and services for Peterborough City and the joint bid for Milton Keynes and Northamptonshire Councils.  Given the quality and breadth of our offering, we remain confident of achieving good success in PFI in line with our long term goals.

The Cumbria contract, which closed earlier in the year, continues to perform well and we are making good progress in improving the performance of the ELWA contract. The investments at Blochairn (MRF) and Cumbernauld (AD facility) remain on track and plans for the next stage of our growth programme are well advanced.

Canada

Our Orgaworld composting operation in London, Ontario continued to perform well achieving good margins, albeit overall volumes increased more slowly than anticipated. The Ottawa facility was commissioned in late January as expected.

Borrowings

As a result of the continuing tight focus on cash we remain confident of producing significantly increased free cash flow compared to last year. Group core net debt at 31 December 2009 was £195m and the ratio of net debt to EBITDA remained below two times.

PFI equity sale

Due to the potential offer for the Group referred to below, we have decided to proceed more slowly with the project to sell the equity and subordinated debt in two of our PFI contracts.

Potential offer

On 7 December 2009 the Board announced that it had received an unsolicited approach from a private equity group regarding a preliminary and highly conditional cash offer for the Group. The Company confirms that confidential discussions are taking place which may or may not lead to a formal offer being made. A further update will be made as appropriate.

Enquiries:

Shanks Group plc                                           

Tony McGarahan                                               [phone]

Corporate Communications Adviser                                

Tulchan Communications                                [phone]

John Sunnucks/David Allchurch

A conference call for analysts and investors only will take place at 8am this morning, dial-in details for which can be obtained from Tulchan.

In accordance with Rule 19.11 of the City Code on Takeovers and Mergers, a copy of this announcement will be published on Shanks' website: http://www.shanksplc.co.uk/irol-rns

 

END

 

 

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